In our local area, there are some Letter to the Editor types, on the Left hand side of the divide, who keep harping on about "the tax cuts" for the wealthy, insinuating that the tax cuts are responble for the on-going annual deficit. So, I figured I’d look into it.
I actually agree with some of them, that the yearly deficit is large, and the actual debt is still growing. However, when put into historical context, both have been far worse than what they are right now. As per usual, there is the "however" part, and this holds for the effects of the tax cuts.
They keep forgetting: while the Executive branch proposes, it is Congress that spends. And spend they have, especially the formerly frugal-sounding Republicans. This Conservative is beside himself over the profligate manners of the Party that used to stand for smaller government.
However, back to the tax cuts, and to show that these folks are dead wrong. Just as for Presidents Kennedy and Reagan, implementing President Bush’s tax cuts has vastly raised federal revenues due to the effects on the economy (and state revenues have increased as well). Details from the US Treasury (www.fms.treas.gov/mts/index.html) shows the following federal revenues (in trillions of dollars):
Lower Revenue
Year Revenue Months
1999 $1.857
2000 $2.042
2001 $1.994 8
2002 $1.814 9
2003 $1.795 7
2004 $1.926
2005 $2.197
Where "Lower Revenue Months" stand for the number of months in that year where monthly revenues were less than the preceeding year. Notice the drop in incoming funds right after the Internet Bubble burst, followed by the attach of Sept. 11. However, the effects of the tax cuts started to take effect in 2003; that year, April was the last month where revenues were less than in the preceeding year. Down at the beginning of President Bush’s term, rebounding after the tax cuts made a difference.
Thus, 2004 had overall revenues 7.27% than 2003; 2005 was 14.07% better than 2004. For the first three months of 2006, revenues are up 12.3% over those of 2005.
No, the problem is not the tax cuts. In fact, the rich are paying more in taxes, in absolute dollars and as a percentage, than ever before. For 2003 (last available numbers from the IRS), the top 5% of income earners pay 54.36% 34.36% of all income taxes, the top 10% pay 65.84%, and the top 50% pay 96.54%.
In other words, the bottom 50% of wage earners pay just 3.46%.
Tax cuts? Hardly. Rather, the question should not be "should we roll back the tax cuts" (which actually means, "let’s raise taxes!!" but who is paying their fair share? My take is that this lack of balance it is not good for society for a few to be paying for the majority – everyone should have some "skinny" in the game.
It is evident that once again, the tax cuts have stimulated the economy (as designed) and that the federal government has been the beneficiary of it. Now, if we could only get the spending side back in balance…..
