Did Bush's 2003 tax cut cause higher federal tax reciepts?

I tried to post a poll, but I'm not a donor (yet), so I will just post the question.

Did Bush's 2003 tax cut cause higher federal tax reciepts?

http://www.nationalreview.com/nrof_buzzcharts/buzzcharts200404300829.asp

Laffering all the Way to the Bank
The fiscal 2003 midpoint shows higher tax revenues.

By Jerry Bowyer

Karl Popper said that the validity of a scientific theory is dependent upon its ability to accurately predict the future. If that is so, then the economic data so far this year have been very friendly to the theories of supply-side economics. In particular, the data have been kind to the supply-side’s most controversial provision: the effect of rate cuts on tax revenues.

A keynote aspect of supply-side thought has always been that, at times, cuts in marginal tax rates can actually lead to an overall increase in governmental tax revenues. BuzzCharts thinks this idea can be demonstrated best through an experiment: Would you bother going to work if the government took, say, 150 percent of your income? That is, would you still work if the government took every dollar you made plus fifty cents from your personal savings for each of those dollars? Of course you wouldn’t. In such a situation, you’d have no chance of creating any income, would not work, and the government’s tax receipts would be zero. Conversely, lowering tax rates can increase tax receipts — but only to the point where rates get so low that receipts decrease again.

This concept was introduced in the 1970s by Art Laffer, when he famously sketched his Laffer Curve on a napkin. So, you might ask, where on that curve are we now? Are we above, or below, the most optimal point?

President Bush’s most recent tax cut proves that tax rates were, in fact, too high. This is demonstrated through the simple fact that the first half of fiscal year 2004 is showing higher tax revenues than the same period for fiscal year 2003. Between October 2003 and March 2004 (the first half of FY 2004), tax receipts were at more than $850 billion, which is $25.3 billion higher than receipts for the year-ago period.

This means that federal tax receipts went up rather than down after the Bush tax cuts of 2003. America has just passed the midpoint of fiscal 2003 and so far the data seems to be confirming the supply-side model. The Bush boom is big enough that it has already affected the budget.

— Jerry Bowyer is the author of The Bush Boom and an economic advisor to Blue Vase Capital Management.He can be reached through www.BowyerMedia.com.

That the National Review might as well be the RNC newsletter, right?

And if you look at the author, he has a book called "The Bush Boom" (which is a joke by itself).

But I put this out to see what the DU economists have to say at the notion.

That has little to back it up in the way of proof, research, or logic. There are way too many variables to consider and making ridiculous assumptions is not an educated way to frame any debate. There might be a relationship between lower taxes and higher receipts, but I doubt the likelihood of causality.

And regardless, it usually takes years for economists to go over the numbers and truly determine the causes. I bet the lower mortgage rates are having much more an impact that the tax cuts that primarily went to those make >$200K/year.

the defense spending for the shrub et al's optional war needs to be subtracted from the equation. then show me the numbers.

wage peace---------it's cheaper

I would say the first quarter of 2004 could be higher because more people are working than in the first quarter of 2003. Employment may not be at pre-recession levels, but some jobs were added in the first quarter.

Are the tax receipts from this past quarter higher than say the first quarter of 2000?

If the Clinton Boom was because of Bush 1 and Reagan then this marginal increase if true is because of Clinton. Remember this is in coimparrison to 2003. Let's compare to 2000 when Bush* was elected. How much lower or higher is tax revenue now then when Bush* took office? He should not get credit for destroying the economy and then having a marginmal improvemnet over a disaster. It is all politics.

then why is the deficit climbing?

I've posted many facts on tax cuts and the effects....with real numbers to support what's going on....and have had only modest responses. Please ask me for any specific data to support the following after I write this initial response.

Most people get easily confused when economics is politicized and can't appreciate just how simple the whole thing is and how clearly it supports a democratic call for a "reasonably progressive" tax system.

Our capitalistic system is the most UNPROGRESSIVE in the world, and has propelled more money faster (and at an INCREASING rate) to the top than any other country in the world, and at the expense of the middle and lower classes and much needed programs and infrastructure.

To first answer your question.... OF COURSE MORE REVENUES is recorded from one year to the next because of the fact that you are including overall economic growth.

BUT THE INCREASE IN REVENUES DOES NOT MAKE UP FOR WHAT WAS LOST IN THE TAX CUTS THEMSELVES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

In other words, if I gave you a dollar in tax breaks, did I get back more than a dollar back to the government? The answer is no....this has NEVER historically happened!!!!

The government LOSES money on tax breaks.

What has to occur in any fair tax system is:

a. maintain a balance budget (not possible if giving away tax breaks to the most affluential that have the capacity to pay)

b. provide fairness across the board OVER TIME (our current system has seen the average family LOSE assets since Reaganomics). The progressive tax system allows a capitalistic system to achieve a balance between sending money to the top, paying for programs, and maintaining a vibrant middle class (from which the fruits of capitalism was supposed to nuture in the first place).

Another way to look at this is that during the Clinton administration....some of the biggest tax INCREASES in history (to logically offset Reaganomics and pay down the debt by 500B) ever single year they recorded increases in tax revenues. So how could that be? If you're taxes higher....how can MORE revenues come in?

The effect of both the Reagan and Bush administrations which support tax breaks to the rich and which also support large defenses has been to increase the total national debt to unconscionable levels.

Had these level of tax cuts not been implemented, considerably MORE revenues would have been available to either pay down the debt or pay for much needed social programs.

If you've listened to Kerry recently, you will understand that returning to the modest 39% upper rate under Clinton will raise so much in revenues (skimming off the Trillions which has been heaped on the top of our capitalistic pile) that we could pay for medicare for all and cut the debt in 1/2 in 5 years.

I hope you get this point. During the Reagan years when ENORMOUS tax breaks were given to corporations and the indivdual upper eschelon rate fell an astounding amount from 70% to 31% we DID see the economy doing better and tax revenues increase.

But was this "party" of giving tax breaks to the most affluent in our country really worth the price of a 3 Trillion dollar national debt?

We are largely in the situation we find ourselves because there are many so called scholarly supply siders and other business men with business interests that endorce Reaganomics.

It simply gives THEM more money in their pockets and they will defend it with any BS they can because the average person buys it.

Our country would do fine with Kerry's proposed 39% upper rate, the economy will record INCREASED revenues year after year....and we will pay down the debt, and possibly even get some much needed medical programs.

The only downside is that the guy who just bought the house in your neighborhood for 850K and thought he'd get a boxster for his son might have to consider getting a mustang instead. That's the price we'll just have to pay. Of course this is tongue in cheek. I hope you understand the overall points.

:toast:

Let's go back and look at the 1st half of fiscal 2001, before the Bush tax cuts kicked in. Revenue of 921B Spending of 945B

Thru the first half of 2004, Revenue of 850B Spending of 1.150B.

Spending increased 200B, Revenue decreased 71B. That's some miracle (not).

Let's look at the separate categories. For the first half of 2004. Income tax revenue down 5B, Corporate tax revenue up 23B (a 50% increase!), SS tax revenue up 4B, other up 3B. Corporate tax revenue was up from a very depressed level and also is currently benefitting from the weak dollar. SS tax revenue has grown every year because it's tax rate hasn't changed and in fact the taxable ceiling is raised each year and when that's combined with very modest wage growth means even a slight increase in SS revenue (though far far slower than in the 1990s).

Comparing each subcategory to 2001:

Income tax revenue down 70B
Corporate tax revenue down 14B
SS tax revenue up 14B

The fact is that the revenue picture has yet to improve even with growth in the economy (at least GDP-wise). Furthermore, the impending interest rate hikes are going to awaken the one part of federal spending that hadn't been growing (interest on the debt). That will in turn negate any improvement in revenue and put additional pressure on interest rates. It's quite a box GWB and the boys have gotten us into.

The author must be stuck in Algebra I - he implies that the tax rate is the independent variable and revenue is the dependent variable and that there is some kind of continuous, differentiable function relating the two. If that is true, then the rest of his blather follows and there would indeed be local extrema, etc. But that is an enormous oversimplification and makes unwarranted assumptions. There are actually hundreds of variables involved.

The Bush administration vs. its economists
The Economic Report of the President contradicts President Bush and other top officials.
By Brendan Nyhan (brendan@spinsanity.org)
February 13, 2003

exerpt:
The reality is that almost all economists view these claims (tax cuts create increased revenues) as implausible, and even the most ardent proponents of so-called supply-side economics have disowned their previous claims to this effect, as Jonathan Chait pointed out in The New Republic. The ERP echoes the vast majority of economists in this respect, stating that tax cuts are "unlikely" to recover all lost revenue (much less increase net revenue):

The modest effect of government debt on interest rates does not mean that tax cuts pay for themselves with higher output. Although the economy grows in response to tax reductions (because of higher consumption in the short run and improved incentives in the long run), it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity.

In an administration that almost never deviates from its official message, this is an extraordinary statement from Bush's own hand-picked experts. The ERP likely deviates from the administration's talking points because it is produced by professional economists with a desire to protect their intellectual reputations in a field with virtually unanimous agreement that income tax cuts almost always reduce revenue (there is significant disagreement, however, over the size of these revenue losses, which are reduced by positive feedback effects).

also check out:

http://www.cbpp.org/2-6-01tax2.htm

exerpt:
Conclusion

After adjustment is made for the impact of inflation on the revenue baseline before 1985 and for action that scaled back the 1981 tax cut just one year later, the Reagan tax cut is seen to be only modestly larger than the proposed Bush tax cut