« How much is too much profit? Ask Obama |
Blog Home Page
| Nonie Darwish vs. CAIR »
October 7, 2011
The Bush Tax Cuts: Threat or Menace?
In what year did the federal government of the United States collect the most tax revenue in its history? Would you guess it occurred before, or after, the Bush tax cuts (final round effective in 2003)?
The answer is 2007. The most revenue over collected in our history was $2,568 billion, and that happened in Fiscal Year 2007 - four years after Bush's final round of tax cuts.
Some of you might be thinking that that does not take inflation into account. OK, in what year did the federal government collect the most tax revenue in history, as measured in constant (inflation-adjusted) 2005 dollars?
The answer, again, is FY2007.
Now some of you might be thinking that adjusting for inflation is still not enough, since the whole economy grows just about every year. How much revenue was collected in FY2007 as a percentage of Gross Domestic Product?
The answer is 18.5%. True, that is not the most in history. It is only more than the 1960-2000 average and the 1970-2000 average. The most revenue ever collected, as a fraction of GDP, was 20.9%. That occurred in 1944, the peak of World War II.
FY2007 was the last year under a budget written by a Congress in which both houses were Republican controlled. How have things been since?
From FY2007 to FY2011, federal revenues were down $394 B in current dollars, down $510 B in 2005 constant (inflation-adjusted) dollars, and down 4.1% as a percentage of GDP.
Bush did not cut taxes between FY2007 and FY2011. Bush's "cuts" actually raised more revenue than ever in history.
Then what happened to the revenue? One answer is that the rich got poorer. From 2007 to 2009, the number of million-dollar earners dropped 40%. The income of those earners dropped 48%. And the federal personal income taxes paid by them dropped 43%. (Before you start thinking all incomes dropped, the total income drop from returns with under $200,000 in income was only 1.5%.)
To be clear, the drop in federal revenue after 2007 had nothing to do with the Bush "tax cuts" and everything to do with the destruction of wealth that coincidentally occurred after Democrats took over both houses of Congress.
Not to mention, our deficit problem is mostly due to spending, not revenue. Compared to 2007, revenues in 2011 are down $394 B, but spending is up $1,091 B. That's why the deficit in 2011 is more than ten times bigger than the one in 2007 ($1,645 B vs. $161 B).
Republicans need to speak up and defend the Bush tax rates. The real problems are government spending and the destruction of wealth and wealth-creating opportunities, most of which happened after the country turned domestic policy over to the Democrats.
FOLLOW US ON