In my Comparing Presidents series, I’ve looked at tax revenues, federal outlays, and the surplus and/or deficit as a percentage of GDP. But I was thinking of PGL’s post in which we learn that according to GW, “cutting taxes… made a significant difference in dealing with the deficit because the growing economy yielded more tax revenues.” I trust everyone reading this post knows GW is wrong about increased tax revenues. I want to show, though, just how wrong by looking at real tax collections per capita since 1952, and also at real spending per capita over the same time period. Not just to poke fun at GW – it seems there are a lot of misinformed people out there and I figured a picture or two are always nice in a situation like this
Data for this post is as follows:
1. Real receipts and outlays come from OMB table 1.3
2. Population comes from NIPA Table 7.1. I used the population for the quarter in which the fiscal year came to an end… the second quarter until 1976, and the third quarter thereafter.
Here’s a graph of tax receipts per capita.
Hmmmm… Looks like there was, if anything, a drop in real tax revenues per capita. Sure, since revenues bottomed out in 2003, real revenues per person have risen sharply… but in 2006, the last year for which we have data, they still were less than they had been in 2000, and 2001. Now, GW would blame the recession, but that ended in November of 2001. Presumably if the recession was at fault, the bottom would have been in 2001 or 2002 (depending on whether wage earners or those who pay their taxes quarterly got hit the hardest). Regardless, it wouldn’t have been in 2003. Ditto using 9/11 as an excuse. In fact, the most obvious reason why tax receipts stopped falling in 2004 is that 2004 is also the year in which tax rates stopped falling.
Here’s a summary of the percentage change…
One doesn’t even need color coding to spot the difference between Dems and Reps. Now, one might say… well, Reps don’t think collecting more in taxes is a good thing. There are three problems with this… the first is that in most years in this sample, there was a deficit and in every year of the sample, there was a national debt. Big one, too. Now, one could discount this if the group collecting taxes – i.e., Republicans – also produced faster growth as a result. Problem two is that they don’t – in fact, economic growth is slower among those that collect less in tax revenue. And then there’s problem 3 – a number of Republican Presidents (not mention Republican candidates) have promised that cutting taxes would (or, as per the growth above did) lead to faster growth and more taxes being collected.
And so we come back to GW and others who insist over and over and over that cutting tax rates leads to increased tax collections… some are liars, some are buffoonishly ignorant about the topic, and some are both. But every one of them fits into one of these three categories. I don’t see any other options. Do you?