The Democrats have raised the cry of "tax cuts for the rich" as a way to thwart tax reform broadly outlined by the Trump administration. Why is this a ruse?
In a column headlined "Tax Lies for the Gullible" Thomas Sowell explains what is wrong with this handy response to reform proposals. Sowell argues that it was disproved in the 1920s but is nevertheless still popular.
Opponents of tax cuts put forward the argument that large cuts during the Reagan administration led to huge federal deficits, supposedly giving the lie to the supply side notion that lower taxes would lead to higher tax revenues. Sowell proposes that the facts simply don't bear out this anti-cut argument:
This reduces the whole issue to a question about facts — and the hard facts are available in many places, including a local public library or on the internet.
The hardest of these hard facts is that the revenues collected from federal income taxes during every year of the Reagan administration were higher than the revenues collected from federal income taxes during any year of any previous administration.
How can that be? Because tax rates and tax revenues are two different things. Tax rates and tax revenues can move in either the same direction or in opposite directions, depending on how the economy responds.
Sowell points out that official statistics on tax revenue are available. The annual "Economic Report of the President" can give the statistics for any administration. Notes Sowell:
The truth is readily available, if you want it. But, if you are satisfied with political rhetoric, so be it.
There were deficits during the 1980s but they were caused not by tax cuts (you can't make this argument if revenue tax revenue was actually higher, can you?) but by increased spending. But did the tax cuts nevertheless mean that "the rich" were not paying what President Obama loved to call "their fair share"?
As for "the rich," higher-income taxpayers paid more — repeat, more tax revenues into the federal treasury under the lower tax rates than they had under the previous higher tax rates.
That happened not only during the Reagan administration, but also during the Coolidge administration and the Kennedy administration before Reagan, and under the G.W. Bush administration after Reagan. All these administrations cut tax rates and received higher tax revenues than before.
More than that, "the rich" not only paid higher total tax revenues after the so-called "tax cuts for the rich," they also paid a higher percentage of all tax revenues afterwards. Data on this can be found in a number of places, including documented sources listed in my monograph titled "'Trickle Down' Theory and 'Tax Cuts for the Rich.'"
As a source more congenial to some, a front-page story in The New York Times on July 9, 2006 — during the Bush 43 administration — reported, "An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year." Expectations, of course, are in the eye of the beholder.
It's a little harder to explain this than to use envy-stirring rhetoric about "the rich." But Republicans have an opening now. Democrats are rightly seen as representing rich, coastal elites and the Republicans as standing for a broader range of citizens. So now would be the time to try to explain that the rhetoric employed against tax cuts often starts with this lie for the gullible.