Fact check Ryan in the Debate
In the Vice Presidential debate Ryan said that the Kennedy tax cuts generated so much growth that tax receipts increased enough to offset the revenue losses.
When I look at the data it sure looks like this claim is another one of his Any Rand fantasies. The economy did grow rapidly after the Kennedy tax cuts, but the deficit remained high. throughout the JFK-LBJ administration. Moreover, like Reagan, LBJ finally had to raise taxes to recover the lost revenues.
There is something more deeply crazy about claiming that rapid growth with a top income tax rate of 70% proves that we can’t have rapid growth with a top rate of 40% and 30% would be much better than 3%.
Somehow only the change not the level matters (but as you note the opposite is true for the Reagan years when high growth following a tax increase proves that low taxes cause high growth).
Err, if you wanted to talk about tax rates and tax revenues then you would look at tax revenues after tax rate changes. Not the deficit. Because the deficit measures the distance between revenues and spending. Not revenues along.
And JFK and LBJ did rather increase spending I seem to recall. Vietnam and the Wat on Poverty for example.
So I would suggest going and having a look at tax revenues myself….
Here is the data on federal receipts as a percent of GDP.
1960 and 1961 would be the base year with 1961 to 1967 being the years before tax were raised again.
Sure looks to like their was no big surge in receipts after the Kennedy tax cuts as Ryan claimed.
1960….17.8
1961….17.8
1962….17.6
1963….17.8
1964….17.6
1965….17.0
1966….17.3
1967….18.4
1968….17.6
1969….19.7
As Tim says above, looking at annual deficits, but ignoring revenues and spending is totally absurd. Between 1961 (when JFK took office) and 1969 (when LBJ left office), inflation adjusted federal income tax revenues increased from $331.23 billion to $536.52 billion (an increase of 62%) despite significantly lower marginal tax rates.
The problem has, and will always be, a spending issue. No matter how much tax revenue the federal government has taken in, it always finds a way to spend it…and then some.
I’m anxiously awaiting a similar fact check for Biden’s statements from the debate. After all, he did claim to vote against the Afghanistan and Iraq Wars despite actually voting for both of them.
Oh yes…the inflation adjusted numbers were in 2005$.
spencer-
I don’t know that federal receipts as a percent of GDP tells us much, other than the fact that despite taxes being cut, revenues remained fairly constant. And who’s to say that the Kennedy tax cuts didn’t spur GDP growth?
Anonymous — revenues are largely a function of GDP growth. Moreover, the way the tax code was structured in the 1960s inflation pushed people into higher tax brackets so that if their was no change in policy, taxes share of GDP would increase every year. Adjusting for this was part of the Reagan reforms.
Moreover, your comparison of 1961 to 1969 is comparing revenues in a recession year to revenues in the peak year of the business cycle.
Second. as I pointed out in the original comment, LBJ imposed a sur-tax that significantly raised taxes — something you ignore in your comparison. Remember, he raised taxes because his policy of guns & butter was generating too much growth.
I agree that the Kennedy tax cuts did spur growth. The question is did it spur growth enough that the tax cuts paid for them self. That is Ryan’s supply side argument and that has been widely discredited. But your simple minded comparison of revenues in two different years does not demonstrate anything.
Even Ryan realizes that the extreme version of supply side tax arguments have been discredited. I suspect he was just reaching for some point to make in the heat of the debate and that normally he would not have been that careless. Normally he is too sharp to make that type of mistake.
Jefferson to those beholden to Norquist: “Many of the opposition [to the new Federal Constitution] wish to take from Congress the power of internal taxation. Calculation has convinced me that this would be very mischievous.”
Thomas Jefferson to William Carmichael, 1788.
Some tea bag parties in states are looking for constitutional amendmentment against raising taxes. They believe in de Tocqueville more than the founding fathers.
“Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.” Jefferson to Jmes Madison 28 Oct 1785
Progressive taxes!!
Spencer:
Thanks for posting this.
If you get a chance and feel up to it, can you post more on why there was a huge spike this month for employment. To me it appears another one of the BLS adjustments, part perople taking part time or underpaid work, Houshold finally catching up with Payroll,and anything else you can add or change if I am wrong in my assumptions, etc.
Lots of ugly Ohioans and Michigan Repubs who have problems with Obama in The White House. Appreciate anything more yu can add.
You also need to factor in that FICA taxes were steadily rising throughout the sixties. I don’t have time to dig up the data now, but when I did a while back, it was clear that increasing FICA revenues was offsetting loses in income tax and corporate tax revenues.
The Vietnam War was not paid by “supplementals” like the current long war [on the taxpayer] occupying Islam. Since 2009 the US has spent more, in constant dollars, on war than anytime since 1950.
The next lower spike was the war spending peak in 1969. The Vietnam War caused war spending to shift from designing ICBM’s to buying bombs to drop on Asian jungles.
The production workers increased relative to engineers. Production workers paid a bigger part of wages to FICA thna engineers.
Among other reasons…..
Anonymous – you said “I’m anxiously awaiting a similar fact check for Biden’s statements from the debate. After all, he did claim to vote against the Afghanistan and Iraq Wars despite actually voting for both of them.”
In fact he did not say that. Go listen real carefully to an unedited video.
Anna Lee-
I didn’t see the video. I read the transcript on NPR.
spencer-
I understand that tax revenues are largely a function of GDP growth. But the question is, “What is driving GDP growth?” You state that the JFK tax cuts spurred growth. Naturally, the follow-up question is, “How much?” You believe that growth was insufficient to pay for the tax cuts, but provide zero evidence to support this statement (no, providing deficit data is not evidence since it is also dependent on spending and other unrelated revenues).
Maybe I’m missing it, but I don’t see any reference to the LBJ surtax until your Oct 13, 2012 3:33 PM post. Should I assume that this vague statement, “LBJ finally had to raise taxes to recover the lost revenues,” is what you were referring to? When did this surtax expire?
I used 1961-1969 simply because that was the time period you referenced (the presidencies of JFK and LBJ). If we assume 1961 to 1983 (both of which were recessionary troughs), federal income taxes grew by an inflation adjusted 71% (323% in nominal terms). This would appear to be well beyond anything that could be explained simply by population growth and people being pushed into higher tax brackets due to the tax structure.
I’m no supply-sider, but that seems like fairly convincing evidence that it at least plausible that the JFK tax cuts increased revenues enough to pay for themselves. I’m sure there are a multitude of economists that both agree and disagree. But saying it has been discredited seems like a stretch.
I’m sure your readers would prefer you not refer to their posts as “simple minded,” especially since my post contained far more thought and analysis than your blog entry. Both Tim and I already pointed out the glaring flaw in your “simple analysis.”
Look again, in the original post I said:
“like Reagan, LBJ had to raise taxes to recover the lost revenues”
Look again. I said, “Should I assume that this vague statement, “LBJ finally had to raise taxes to recover the lost revenues,” is what you were referring to?”