One of the major domestic debates over the next few years is bound to be taxes, specifically whether the Bush tax cuts were a good or bad for America. In the Wall Street Journal today, Pete du Pont looks summarizes the consequences of the Bush tax cuts. Despite what you might hear in the New York Times, it’s a pretty picture:
“Economic indicators show that since the 2003 tax cuts the GDP has grown an inflation-adjusted average of 3.3% a year, and eight million new jobs have been created over 44 consecutive months of job growth. Unemployment has fallen 25%, from 6.1% to 4.5%, with strong declines across all ethnic groups. Productivity growth has expanded 2.8% a year since 2001, outstripping the past three decades’ average. So according to all these economic indices, the 2003 tax cuts have strengthened the American economy.
“The tax cuts have also produced substantial tax revenue increases–14.5% growth in 2005 and 11.7% in 2006. For the first seven months of the current fiscal year, total revenues were up 11.3% over last year, and individual income tax receipts were up by 17.5%. Total tax receipts in April were $70 billion higher than in April 2006.
“The Congressional Budget Office and the Congressional Joint Tax Commission estimated that a reduction in the capital gains rate to 15% from 20%, which was passed in 2003, would cost the U.S. Treasury some $5.4 billion over three years. But actual revenues exceeded expectations by $133 billion, so the government profited substantially from our strong economy and the tax rate reduction. In fact, the tax cuts have actually expanded revenues as a percentage of gross domestic product. Over the past 40 years, federal tax receipts have accounted for 18.3% of GDP. That figure was 18.4% in 2006, and the CBO projects it at 18.6% in the current fiscal year.
“These revenue increases have also had a positive impact on the federal deficit. Since the 2003 tax cuts the deficit has declined from $413 billion (3.5% of GDP) in fiscal 2004, to $318 billion in 2005, then $248 billion in 2006, and an estimated $150 billion to $200 billion (1.1% to 1.5% of GDP) in the current fiscal year.”
Read more here.