The real tax story buried

One of the assertions made about the U.S. economy is that President Bush's tax cuts didn't do what he promised. But the data clearly show nothing could be farther from the truth, says Investors Business Daily (IBD).

Democrats argue that the government has been starved of revenues and that higher taxes are needed to make up for it. But this is arrant nonsense, says IBD:

  • Tax revenues will be about 18.5 per cent of gross domestic product (GDP) this year – above the average of 18.2 per cent since 1960.

  • As for inflation-adjusted tax revenues – a little-used but equally telling statistic – they'll reach an all-time high of $2.013 trillion.

  • That's higher even than in the last year of the dot-com boom – an astounding 26 per cent gain since 2003 – after inflation.

    Amid a boom in revenues and growth, another myth has been dispelled – that of tax cuts being for the rich:

  • Those with incomes less than $40,000 a year – about 45 million taxpayers – on average, pay no federal income tax.

  • The top 1 per cent of filers in 2004 paid 36.9 per cent of all personal income taxes and the top 5 per cent paid 57.1 per cent – in other words, more than the remaining 95 per cent.

  • The average person reporting income of more than $1 million paid $743,000 in taxes; those in the $500,000 to $1 million range paid an average $164,701.

    But by far the worst misconception of Bush's tax cuts is that they did nothing for economic growth. This is just plain silly, says IBD:

  • Since the last tranche of Bush's tax cuts in May 2003, real GDP has grown 13 per cent – or a bit more than 3.2 per cent a year.

  • Before that, from President Clinton's final year in office, growth averaged 1.5 per cent; it basically doubled after the tax cuts.

    Source: Editorial, The Tax Story Media Invariably Bury, Investors' Business Daily, June 14, 2007.

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    For more on Economic Issues:

    FMF Policy Bulletin/ 19 June 2007
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