President Bush receives little credit for the strong US economy, yet it is indisputable that the tax cuts he instituted in 2003 have been overwhelmingly helpful.
“In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters–three full years–since the tax cut passed, growth has averaged a remarkable 4%.”
“In the first nine months of fiscal 2006, tax revenues have climbed by $206 billion, or nearly 13%. As the Congressional Budget Office recently noted, “That increase represents the second-highest rate of growth for that nine-month period in the past 25 years”–exceeded only by the year before. For all of fiscal 2005, revenues rose by $274 billion, or 15%.”
The growth rate is slowing a little bit, which is why the Fed might soon stop raising the interest rates (having already made 17 consecutive increases in an attempt to curb inflation since the economy is doing so well).
Here’s the kicker:
“Individual income tax payments are up 14.1% this year, and “nonwithheld” individual tax payments (reflecting capital gains, among other things) are up 20%. Because of the tax cuts, the still highly progressive U.S. tax code is soaking the rich.”
What this means is that more people are seeing strong gains in their income, which is putting them into higher tax brackets, which is (in part) why tax revenues have gone up so much.
This entire article is an extremely persuasive argument on the benefits of tax cuts. Now if only (a) they could be made permanent, and (b) we could reign in spending!
(HT: Justin Taylor)