Comparing Presidents – Tax Cutting

This post looks at tax cuts by Presidential administration. Cutting taxes is one of the key stated platforms of the Republican Party, along with smaller government, faster economic growth, fiscal responsibility, and some social issues such as reducing the number of abortions, cutting the rate of unwed motherhood, maintaining a healthy dislike of homosexuals, and as of late, apparently teaching, um, “the controversy” over the Theory of Evolution.

Of course, words and deeds don’t always go hand in hand. Here at Angry Bear, we’ve shown that the Republicans do not produce smaller government (by most measures even St. Ronald can’t best Bill Clinton), they produced slower economic growth by any number of measures regardless of how one massages the data, they certainly have not been the party of lower debt, or fewer abortions, or less unwed motherhood.

I guess I can make a snide remark at this point about hoping that when I eventually find some data, I can at least show the Republicans are sincere about homophobia and ignorance, but I just don’t have it in me. I will state, even before we start, that cutting taxes is indeed something at which Republican administrations excel.

The approach I took was as follows. I looked at the sum of individual and corporate income taxes, plus excise taxes and other taxes; basically, everything except social security taxes from OMB Table 2.1. Following Milton Friedman’s admonition that any debt must eventually be repaid, I then subtracted added the change in the national debt from the previous year – that data came from OMB Table 7.1.

I then looked at this data… all non-social security taxes plus the change in national obligation two ways. In one case, I looked at it as a share of GDP. In the second case, I adjusted it for inflation (using the CPI, and divided through by the population, obtained from the BEA’s NIPA Table 7.1. When selecting CPI and population, I took into account the fact that the end of the fiscal year changed from the second quarter of the calendar year to the third quarter of the calendar year in 1976.

OK. I think that’s enough blah blah blah. Here’s a picture of non-SS taxes plus changes in debt obligation as a percentage of GDP.

Here’s a summary of taxes plus changes in debt as a percentage of GDP.

Here’s a pic of real non-SS taxes plus changes in the national debt per capita.

Here’s a summary of real taxes plus changes in debt per capita.

A few comments/observations. No doubt you’ll have some of your own.
1. Dems are at the bottom of each table. Even JFK/LBJ. But for them, growth in the first series was negative, and in the second it was positive… in other words… they did cut taxes, and it raised a lot more money afterwards…. basically, the Laffer curve and a situation where the taxes were too high to start with.
2. Following up the Laffer curve… check out the pattern after JFK/LBJ, especially beginning with Reagan. It seems pretty clear that cutting the tax rate (as a percentage of income) leads to less real taxes being collected, and raising tax rates leads to more real taxes being collected… after JFK/LBJ had their tax cuts, we’ve been on the left side of the Laffer curve. Gee… where have I read that before? Oh yeah… both PGL and I have had posts about that right here at Angry Bear.
3. Yes, GHW raised some tax rates, but he cut others. And there are many ways to cut taxes… cut enforcement for one thing.
4. Gingrich’s Republican revolution seems to have allowed Clinton to up tax rates…
5. St. Ronald the Reagan was not the big tax cutter that Republicans believe he was. As a percentage of GDP, he came in third, after GW and Nixon/Ford. In terms of revenues collected, he came in 5th, and GHW came in third. My guess… St. Ronnie’s spending habits… Why hasn’t GW, who has similar spending habits suffered as much? I think it may have something to do with interest on the debt… St. Ronnie had to borrow at a much higher rate of interest. Alan Greenspan literally bent over backward for GW.

For grins, and I do mean grins, I did a means test on the two series. (I only looked at it by administration.) For the test, H0: mean of growth rate in taxes for Dems = mean of growth rate in taxes for Reps

Table 1a for the first series…

Table 2a for the second series…

Conclusion of the tests… we should reject the hypothesis that Dems and Reps have similar policies on taxes with a probability of just under 95% and a probability of just under 98%, respectively. (I don’t expect most of the folks who objected to slightly stronger results showing that Dems and Reps produce different real economic growth rates to object to the results of this test.)

Conclusion of the post… after much searching, we finally stumble on a series where Republican Presidents perform as advertised. They cut taxes. I wonder if that’s enough, in the minds of most Republicans. I imagine for some it is. But ask yourself… if you could get lower taxes at the cost of lower growth rates in real GDP per capita and median income and the like, would you do it? What does your answer, yes or no, say about you?