Treasury Says 1993 Increase Is Helping Cut the Deficit
President Clinton sold the 1993 income-tax increase as a way to shrink the budget deficit at the expense of the rich.
Republican adversaries predicted it wouldn’t generate much revenue because the rich would work less and take bigger deductions. Now there’s growing, if still tentative, evidence that Mr. Clinton may have been right after all.
The recent flood of revenue pouring into Treasury coffers—enough to push the federal budget to a record $93.94 billion surplus for the month of April—appears to have come mostly from the nation’s biggest earners, indicating that the controversial tax increase may indeed be taking from the rich. "The available data suggest the surge in tax collections has come from the taxpayers with high incomes, who were the only ones affected by the 1993 changes," says Deputy Treasury Secretary Lawrence Summers.
Corporate taxes, which were increased modestly under the 1993 law, also have brought in more revenue, but at about the level the Treasury had been predicting…
The package, part of the 1993 budget agreement, drew harsh criticism from the right. Texas GOP Rep. Dick Armey, who is now the House majority leader, predicted dire results, "Who can blame many second-earner families for deciding that the sacrifice of a second job is no longer worth it?" he wrote...
"The basic fact is that people looked at the 1993 budget agreement and said there’d be a recession, the deficit would go way up and that tax collections would go way down," says Mr. Summers. "What has happened is there has been a boom, the deficit has gone way down and tax collections have gone way up." —WALL STREET JOURNAL, May 22, 1997, A2.
