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Monday, September 17, 2012

Where Oh Where Is Bush's Revenue Boom?

The Orwellian Right loves to claim that income tax cuts, especially for the rich, make the rich pay more, and such cuts even bring in more revenue. It's a counter-intuitive claim but the Right makes it all the time. However, if you scratch your head wondering about such claims, then your intuition is right. The claim is untrue. It's the only way to sell irresponsible tax cuts which bring home the bacon to the rich, the only constituency the Right cares about, and secretly sabotaging the US Treasury. To convince the ever-gullible True Believers on the Right, the Orwellian Right disinformation industry has a history of grotesque dishonesty. The Orwellian Right so wants to convince us tax cuts create revenue booms, they routinely include revenue from other presidents, and even have included revenue from other tax hikes. The Right claims there was a revenue boom after the so-called JFK tax cuts LBJ pushed in 1964... thru 1969. They just don't mention the three tax HIKES during that period. In the Reagan years the Orwellian Right swept under the rug two massive tax hikes in 1982 and 1983 and counted that revenue as "proof" the 1981 tax cuts brought in massive amounts of revenue. Yes, that's what they want us to believe. And if there were deficits they lie and blame Democrats for spending the bounty. But there was no revenue boom. In constant, inflation-controlled dollars, even with these tax hikes, Reagan's revenue only increased about 13.5% over his eight years.

If we're to go on a Snipe Hunt looking for such revenue booms we need to look at the specific tax being cut and then look for growth in that area. Since most of the Right's favorite tax cuts are cuts in the federal income tax, it would be unfair to look for revenue in other areas like FICA or corporate taxes. We should at income tax revenues. But since we're looking at revenue effects over time, there are two variables at work here... inflation which is easy to correct for, and % of GDP, that is the size of the economy these revenues represent. That's a topic for another time.

Here's a look at Bush individual income tax revenues compared to Clinton's last year (FY00) correcting for inflation. Numbers are from Table 2.1—RECEIPTS BY SOURCE of the US Historical Budget Tables.

Since this source does NOT correct for inflation in this chart, I used the inflation calculator at to convert to constant 2005 dollars in billions. Using constant 2005 dollars means revenue from years before the target year will inflate in value, those after will deflate. Column one is the fiscal year. Column 2 is income tax revenue in CURRENT dollars collected that year. Column 3 is revenue in billions of 2005 CONSTANT dollars. It could be argued that FY01 is Clinton's last year since the fiscal year began when Clinton was still in office. But Bush's 2001 EGGTRA tax cut was retroactive to Jan 1, 2001.

2000   1004.462 = 1139.206 Clinton's last year.

2001    994.339 = 1096.524

2002    858.345 = 931.822

2003    793.699 = 842.442

2004     808.959 = 836.370

2005    927.222 = 927.222

2006   1043.908 = 1011.285

2007   1163.472 = 1095.899

2008   1145.747 = 1039.299

If my math is correct, what we see is that even after eight years, at the end of Bush's term income tax rates were cut so irresponsibly those income tax revenues NEVER AGAIN EXCEEDED CLINTON'S LAST YEAR. I'm sure some readers will see 8 years of declining income tax revenues as "proof" tax cuts create revenue booms.

But then some people will believe anything.


revised 10-13-12