Increasing the level of Americans' revenues is a worthy goal. However, it does have to be balanced with the need to keep our country's financing on a sustainable footing. Tomorrow, the government could cut all taxes to zero and publicly proclaim their intention of borrowing all future money required by the government. Our ability to borrow that money would likely degrade in a hurry, however.
According to the graph and second table, the GDP reached a high 8-year growth rate of 34.3% from 1982 to 1990. However, the GDP seems to have reaching a similar high about every ten years over the past several decades. It reached a high of 41.57% from 1958 to 1966, 29.20% from 1971 to 1979, and 32.58% from 1992 to 2000. Hence, these figures don't provide any strong evidence that the Reagan tax cuts permanently affected the GDP one way or the other.
This was interesting as well:
The argument that the near-doubling of revenues during Reagan's two terms proves the value of tax cuts is an old argument. It's also extremely flawed. The growth of receipts by source, outlays, and GDP over every 8-year period since 1940 is shown in the graph and tables at recgrow.html. As can be seen in the first table, total receipts increased 75.84 percent from 1980 to 1988. However, this was the slowest 8-year growth rate since a 75.62 percent growth in total receipts from 1963 to 1971. Of course, these results are likely skewed by the high inflation that occurred during the 70's. Hence, it makes more sense to look at the "real" growth rates, that is, the growth rates corrected for inflation. The second table shows that the real growth rate from 1980 to 1988 was 20.72%. The 8-year growth rates increased in the following years to a high of 33.11% from 1983 to 1991. However, the real growth rate of total receipts reached higher highs of 38.15% in 1971 to 1979 and 57.02% from 1992 to 2000.
Now, I don't know if the info from this study is correct, but assuming it is, the first excerpt seems to show that at the very least, the Reagan tax cuts did not cause GDP growth to decrease.
I don't know if you're aware but that "interesting study" was the one that I was soliciting comments on. Anyhow, thanks for reading and commenting on it. I hope that you can see that I did try to be objective. I didn't try to jigger the numbers to make GDP growth under Reagan appear sub-par.
The second excerpt seems to show that even after the huge Reagan cuts in the top rates,from 70% to 50% to 28%, real tax receipts still grew by 33.11% between 1983 and 1991. A non-expert could make the argument that a 60% reduction in the top rate that still increased (rather than decreased) receipts by 33.11% has "paid for itself"
Of course, that "non-expert" would be making a mistake. That real gain of 33.11% was due to much more than the change in the top marginal rate. In fact, the real gain in income tax revenues was a smaller 22.68% (see the first column at recgrow.html). Also, the study points out the tax hikes that were in the Tax Reform Act of 1986, the bill that reduced the top marginal rate from 50% to 28%.
But I won't even make that argument. I'll make the argument that the tax cuts at least partially paid for themselves. I don't think you'll disagree with that, will you?
No, I don't disagree with that. If nothing else, some of the tax cut will be spent and returned to the government in new taxes. That which is invested will likely lead to additional capital gains taxes. In fact, to some degree, the same thing will happen with additional government spending.
And I'll repeat my earlier belief that the purpose of the cuts is to increase the income of Americans. I wonder if you have an analysis of employee compensation for similar 8 years periods before and after the tax cuts. And for corporate income for similar 8 years periods before and after the tax cuts. Thanks in advance.
I don't have that analysis but, if I should run across one, I'll post it.
I don't think the government should cut all taxes to zero. Capital gains though I think could be cut to zero. It would make us more competitive.
I've seen studies that suggest the government cannot realistically collect more than 20% of GDP as taxes over the long term. Sound familiar?
I don't know if you're aware but that "interesting study" was the one that I was soliciting comments on.
Duh! :^) Are you the author?
I didn't try to jigger the numbers to make GDP growth under Reagan appear sub-par.
You would have lost all credibility if you had.
You have any predictions/forecasts on how real receipts are growing/shrinking since 2001? Is the CBO still using static analysis for their tax projections?