The argument has always been that lower tax rates would stimulate the
economy, adding more tax payers and thus, increasing government
revenue. It was an interesting theory, but every time it's been
tried, it's been unsuccessful.
That is a patently untrue statement. While it is difficult to
differentiate cause and effect from economic cycles, there are plenty
of examples of tax rate decreases followed by revenue increases.
Perhaps there are externalities that
overwhelmed the theory, in which case the boundary conditions need to
I posted an analysis done by one of Obama's economic team a year or so
ago (she's no longer on board). It indicated that tax decreases can
I've also posted graphs showing how revenues hover between 18 and 21%
of GDP, no matter what the rates are. The only way to explain that is
that people are less likely to put their money at risk by investing it
when the penalty for success is higher.
So, rather than a blanket 'lower taxes increase government revenue'
statement, we need to hear about under what circumstances lower taxes
will pay for themselves and more.
How about the inverse? That higher taxes don't necessarily increase revenues.
The greatest indicator of higher tax revenues is economic growth - not
rates - high or low.
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