Taxes: The hottest domestic issue of the next two years

Dems Want You to Take a Hike

Excerpt:

The tax cuts have also produced substantial tax revenue increases--14.5% growth in 2005 and 11.7% in 2006. For the first seven months of the current fiscal year, total revenues were up 11.3% over last year, and individual income tax receipts were up by 17.5%. Total tax receipts in April were $70 billion higher than in April 2006.

The Congressional Budget Office and the Congressional Joint Tax Commission estimated that a reduction in the capital gains rate to 15% from 20%, which was passed in 2003, would cost the U.S. Treasury some $5.4 billion over three years. But actual revenues exceeded expectations by $133 billion, so the government profited substantially from our strong economy and the tax rate reduction. In fact, the tax cuts have actually expanded revenues as a percentage of gross domestic product. Over the past 40 years, federal tax receipts have accounted for 18.3% of GDP. That figure was 18.4% in 2006, and the CBO projects it at 18.6% in the current fiscal year.

These revenue increases have also had a positive impact on the federal deficit. Since the 2003 tax cuts the deficit has declined from $413 billion (3.5% of GDP) in fiscal 2004, to $318 billion in 2005, then $248 billion in 2006, and an estimated $150 billion to $200 billion (1.1% to 1.5% of GDP) in the current fiscal year.

Lower tax rates have also produced another important economic change: fewer and shorter recessions. As economist Brian Westbury noted in the Wall Street Journal last month, in "the high-tax, highly regulated years between 1969 and 1982 the economy was in recession 32% of the time. Since then, following Ronald Reagan's tax cuts, and deregulation . . . the U.S. economy has only been in recession 5% of the time."

Comment: I'm for lower taxes but I would also like to see government restraint on spending!