Jay Reding.com

Cutting Taxes, Cutting The Deficit

BizzyBlog notes that the AP is trying to bury the lede on April’s Treasury Department report showing surging government revenues. The Treasury Department recorded record tax collections of $383.6 billion, which smashes previous revenue records by over 15%. The hard evidence shows that the supply-side view that decreasing marginal tax rates increase revenues is being vindicated and some have predicted that the federal deficit could be gone by next year.

Unlike political rhetoric, balance sheets don’t lie. The economy is performing exceptionally well, unemployment is at levels that are both low and sustainable, inflation isn’t a worry, and even with the collapse of the housing bubble and high oil prices, the markets are still going strong. Granted, there could be any number of things that could interfere with that growth from oil scares to Democratic meddling in the economy, but the fundamentals of the US economy remain strong.

Much of that is due to the fact that we have a tax climate that makes that growth possible. There is a direct correlation between the 2003 tax cuts and the current cycle of growth. We wouldn’t be seeing such strong revenue figures had the 2003 tax cuts not fostered business investment and reduced the powerful disincentives for growth in the old tax regime.

The Democratic Party would kill the goose that laid the golden egg by returning this country back to a state in which tax policy discourages rather than encourages economic growth. Tax collections require people to actually make money, which doesn’t happen when every attempt to do so ends up creating more and more tax liability. To undo the 2003 tax cuts would likewise undo the economic growth we’ve seen in the last few years — and would unsure that the deficit doesn’t fade away as it appears set to do.

The fact that the media seems strangely reticent to report on the state of the US economy — except when they can find something bad to say is telling. The supply-side tax cuts in 2003 are doing exactly what they were designed to do — boost the US economy and keep it strong and productive for years to come. The numbers show quite clearly that it’s working — and if it ain’t broke, it makes little sense to try to break it — unless you have a party whose political concerns matter more than understanding the truth.

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