Let’s get some facts straight. Predictably, liberals are repeating all kinds of myths and distortions about the Bush and Reagan tax cuts in their baffling effort to ignore the numerous positive aspects of the Trump tax cuts. Of course, our resident liberals are saying next to nothing about the Harding, JFK, and Clinton tax cuts, all of which were followed by sizable increases in federal revenue (and did not result in increased deficits and debt). Anyway, here are some bullet points to refute the liberal falsehoods and distortions that we have been seeing in this forum for the last two weeks (I expand on these points in an article I just web-published: Setting the Record Straight About the Bush and Reagan Tax Cuts).
Bush
* The Bush tax cuts came in two bills, the first signed in June 2001 and the second signed in May 2003. The 2001 bill reduced personal income taxes—however, these cuts were to be phased in over eight years and were not to be fully implemented until 2009.
* The 2003 bill accelerated the personal income tax cuts in the 2001 bill and added several business tax cuts. So by the end of 2002, only a fraction of the Bush personal income tax cuts had taken affect, and the business tax cuts had not yet been passed. Thus, we cannot judge the Bush tax cuts by federal revenue in 2001 and 2002.
* The Bush tax cuts—personal and business—really began in 2003 with the passage of the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) in May 2003. As mentioned, the 2003 bill accelerated the personal income tax cuts in the 2001 bill. Financial expert Kimberly Amadeo explains some of the positive impacts of the JGTRRA:
* Federal revenue rose substantially after the 2003 tax cuts, going from $1.78 trillion to $2.56 trillion from 2003 to 2007, an increase of 43%.
* Total federal revenue for 2008 dropped slightly, down to $2.52 trillion, because a recession started that year, but revenue was still substantially higher than it was in 2003 or 2004.
* During the same period, 2003-2007, personal income tax revenue rose dramatically, going from $925 billion in 2003 to $1.53 trillion in 2007.
* Even in 2009, when the recession neared depression territory and remained severe throughout the year, total federal revenue was $2.10 trillion, which, even adjusted for inflation, was very close to total federal revenue for the boom years of 2005 and 2006.
* If Congress had not gone on a reckless spending spree, we would have kept the budget balanced and continued to pay down the debt.
Reagan
* Reagan did in fact agree to four tax hikes, in 1982, 1983, 1984, and 1986. The 1983 “tax increase” was an increase in the payroll tax (i.e., the Social Security tax) that was part of a bipartisan bill to keep SS solvent. It seems a bit unfair to call this a “tax hike” when it was really just increasing the amount that taxpayers had to contribute to a fund from which they would later draw. The 1982, 1984, and 1986 tax hikes involved business taxes, tax loopholes, and the capital gains tax. Those tax hikes did not affect personal income tax rates, and Reagan cut taxes again in 1986.
* Reagan slashed personal income tax rates and the capital gains tax rate for individuals. My article includes tax tables from tax years 1980 and 1988 so that anyone can look and see for themselves just how much Reagan cut income tax rates.
* Federal revenue rose substantially after the Reagan tax cuts. Revenue rose by over 50% from 1983 to 1988, going from $326 billion to $549 billion. In 1989, the last year that a Reagan budget was in operation, revenue rose a whopping $53 billion, an increase of 10% from the previous year.
* But those huge boosts in revenue were more than offset by staggering spending hikes passed by Congress year after year. The Democrats started bundling spending bills into one giant omnibus spending bill, which left Reagan with two choices: sign them or shut down the government. If the government had restrained spending, the deficit would have been reduced, and the budget could have been balanced by 1986 or 1987.
* Economists William Niskanen and Stephen Moore on the impact of Reagan’s economic policies:
Economist Dr. William Niskanen:
Again, for more information on these issues, see:
Setting the Record Straight About the Bush and Reagan Tax Cuts
The Facts About Tax Cuts, Revenue, and Growth (new edition)
Bush
* The Bush tax cuts came in two bills, the first signed in June 2001 and the second signed in May 2003. The 2001 bill reduced personal income taxes—however, these cuts were to be phased in over eight years and were not to be fully implemented until 2009.
* The 2003 bill accelerated the personal income tax cuts in the 2001 bill and added several business tax cuts. So by the end of 2002, only a fraction of the Bush personal income tax cuts had taken affect, and the business tax cuts had not yet been passed. Thus, we cannot judge the Bush tax cuts by federal revenue in 2001 and 2002.
* The Bush tax cuts—personal and business—really began in 2003 with the passage of the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) in May 2003. As mentioned, the 2003 bill accelerated the personal income tax cuts in the 2001 bill. Financial expert Kimberly Amadeo explains some of the positive impacts of the JGTRRA:
JGTRRA helped the economy out of recession by putting more dollars into the pockets of businesses and investors, and ultimately consumers. It encouraged investment in the stock market by decreasing capital gains and dividend taxes.
By reducing the cost of buying stocks, JGTRRA made them more attractive than bonds. That put $9.2 billion more into the pockets of stockholders in just the first year.
As dividend-paying stocks become more popular, companies issue more of them instead of bonds. Their financing became more reliant on bonds than stocks. That helps companies in a downturn because they are less likely to default on bond payments, which are fixed. It reduces the risk of corporate bankruptcies.
JGTRRA also encouraged companies to increase dividend payment. More than 200 companies, most notably Target, Citigroup, and Walgreen, announced dividend increases by July 2003.
Many companies, most notably Microsoft, started issuing dividends for the first time. Much of executive compensation is paid in stocks and stock options. This form of payment became even more popular when the tax burden on dividends was lessened for high-income earners.
As a result of JGTRRA, total dividend payments increased 20 percent from 2003 - 2012. For the previous 20 years, they had declined. (JGTRRA: The Tax Cut to Help Wall Street After 9/11)
By reducing the cost of buying stocks, JGTRRA made them more attractive than bonds. That put $9.2 billion more into the pockets of stockholders in just the first year.
As dividend-paying stocks become more popular, companies issue more of them instead of bonds. Their financing became more reliant on bonds than stocks. That helps companies in a downturn because they are less likely to default on bond payments, which are fixed. It reduces the risk of corporate bankruptcies.
JGTRRA also encouraged companies to increase dividend payment. More than 200 companies, most notably Target, Citigroup, and Walgreen, announced dividend increases by July 2003.
Many companies, most notably Microsoft, started issuing dividends for the first time. Much of executive compensation is paid in stocks and stock options. This form of payment became even more popular when the tax burden on dividends was lessened for high-income earners.
As a result of JGTRRA, total dividend payments increased 20 percent from 2003 - 2012. For the previous 20 years, they had declined. (JGTRRA: The Tax Cut to Help Wall Street After 9/11)
* Federal revenue rose substantially after the 2003 tax cuts, going from $1.78 trillion to $2.56 trillion from 2003 to 2007, an increase of 43%.
* Total federal revenue for 2008 dropped slightly, down to $2.52 trillion, because a recession started that year, but revenue was still substantially higher than it was in 2003 or 2004.
* During the same period, 2003-2007, personal income tax revenue rose dramatically, going from $925 billion in 2003 to $1.53 trillion in 2007.
* Even in 2009, when the recession neared depression territory and remained severe throughout the year, total federal revenue was $2.10 trillion, which, even adjusted for inflation, was very close to total federal revenue for the boom years of 2005 and 2006.
* If Congress had not gone on a reckless spending spree, we would have kept the budget balanced and continued to pay down the debt.
Reagan
* Reagan did in fact agree to four tax hikes, in 1982, 1983, 1984, and 1986. The 1983 “tax increase” was an increase in the payroll tax (i.e., the Social Security tax) that was part of a bipartisan bill to keep SS solvent. It seems a bit unfair to call this a “tax hike” when it was really just increasing the amount that taxpayers had to contribute to a fund from which they would later draw. The 1982, 1984, and 1986 tax hikes involved business taxes, tax loopholes, and the capital gains tax. Those tax hikes did not affect personal income tax rates, and Reagan cut taxes again in 1986.
* Reagan slashed personal income tax rates and the capital gains tax rate for individuals. My article includes tax tables from tax years 1980 and 1988 so that anyone can look and see for themselves just how much Reagan cut income tax rates.
* Federal revenue rose substantially after the Reagan tax cuts. Revenue rose by over 50% from 1983 to 1988, going from $326 billion to $549 billion. In 1989, the last year that a Reagan budget was in operation, revenue rose a whopping $53 billion, an increase of 10% from the previous year.
* But those huge boosts in revenue were more than offset by staggering spending hikes passed by Congress year after year. The Democrats started bundling spending bills into one giant omnibus spending bill, which left Reagan with two choices: sign them or shut down the government. If the government had restrained spending, the deficit would have been reduced, and the budget could have been balanced by 1986 or 1987.
* Economists William Niskanen and Stephen Moore on the impact of Reagan’s economic policies:
Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years.
Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years.
Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency. (Supply-Side Tax Cuts and the Truth about the Reagan Economic Record)
Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years.
Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency. (Supply-Side Tax Cuts and the Truth about the Reagan Economic Record)
Economist Dr. William Niskanen:
Real GDP per working-age adult, which had increased at only a 0.8 annual rate during the Carter administration, increased at a 1.8 percent rate during the Reagan administration. The increase in productivity growth was even higher: output per hour in the business sector, which had been roughly constant in the Carter years, increased at a 1.4 percent rate in the Reagan years. Productivity in the manufacturing sector increased at a 3.8 percent annual rate, a record for peacetime.
Most other economic conditions also improved. The unemployment rate declined from 7.0 percent in 1980 to 5.4 percent in 1988. The inflation rate declined from 10.4 percent in 1980 to 4.2 percent in 1988. (Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty)
Most other economic conditions also improved. The unemployment rate declined from 7.0 percent in 1980 to 5.4 percent in 1988. The inflation rate declined from 10.4 percent in 1980 to 4.2 percent in 1988. (Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty)
Again, for more information on these issues, see:
Setting the Record Straight About the Bush and Reagan Tax Cuts
The Facts About Tax Cuts, Revenue, and Growth (new edition)
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