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Fred Thompson: Tax Cuts Mean Growth

Fred Thompson, a possible GOP presidential candidate, writes in the Opinion Journal about the positive effects that low tax rates have had on the government's tax revenues:

It's that time again, and I was thinking of the old joke about paying your taxes with a smile. The punch line is that the IRS doesn't accept smiles. They want your money.


So it's not that funny, but there is reason to smile this tax season. The results of the experiment that began when Congress passed a series of tax-rate cuts in 2001 and 2003 are in. Supporters of those cuts said they would stimulate the economy. Opponents predicted ever-increasing budget deficits and national bankruptcy unless tax rates were increased, especially on the wealthy.

In fact, Treasury statistics show that tax revenues have soared and the budget deficit has been shrinking faster than even the optimists projected. Since the first tax cuts were passed, when I was in the Senate, the budget deficit has been cut in half.

Remarkably, this has happened despite the financial trauma of 9/11 and the cost of the War on Terror. The deficit, compared to the entire economy, is well below the average for the last 35 years and, at this rate, the budget will be in surplus by 2010.

Perhaps the most fascinating thing about this success story is where the increased revenues are coming from. Critics claimed that across-the-board tax cuts were some sort of gift to the rich but, on the contrary, the wealthy are paying a greater percentage of the national bill than ever before.

The richest 1% of Americans now pays 35% of all income taxes. The top 10% pay more taxes than the bottom 60%.

The reason for this outcome is that, because of lower rates, money is being invested in our economy instead of being sheltered from the taxman. Greater investment has created overall economic strength. Job growth is robust, overcoming trouble in the housing sector; and the personal incomes of Americans at every income level are higher than they've ever been.

Read the rest of the article; it's a great lesson for those who incorrectly think that only punishingly high tax rates can bring in more revenues.


Comments (33)

The deficit, compared to... (Below threshold)
Steve Crickmore:

The deficit, compared to the entire economy, is well below the average for the last 35 years I don't know about that. Of course the last 3 conservative Republican presidents, including Dubya, have permitted the budget deficit to sky rocket which has set the bar pretty high.

I'm beginning to like this ... (Below threshold)
nikkolai:

I'm beginning to like this Thompson fella...

Fred had this thing if he j... (Below threshold)
UncleZeb:

Fred had this thing if he jumps in.

Only adult in the whole field Dem or Repb.

Of course the last 3 con... (Below threshold)
cirby:

Of course the last 3 conservative Republican presidents, including Dubya, have permitted the budget deficit to sky rocket which has set the bar pretty high.

...and the last Democratic President managed huge cuts in the deficit by cutting way back on the wrong things, which is part of the reason we had to go back in and buy huge amounts of hardware for the military.

Some folks make a big deal about how "Iraq costs so much," while ignoring the fact that a lot of that money (on the military side) is going towards buying hardware that didn't get bought in the 1990s, and enlisting and training soldiers do do things that were underfunded during the same period.

...and let's not forget the... (Below threshold)
metprof:

...and let's not forget the democrat president before the LAST democrat president...you might remember him, nearly destroyed the economy, brought the military to one knee, and started Iran down the road to where they are now, all while kissing up to terrorists (the Arafat's came over every friday night for cribbage) and scolding the american people.

"....hell, the metallurgy a... (Below threshold)
metprof:

"....hell, the metallurgy alone will take months..."

Hunt for Red October

Having a BS in Metallurgical Engineering, I love this line, and admire the guy saying it.

Thompson's theory based on ... (Below threshold)
Steve Crickmore:

Thompson's theory based on the Laffer curve, supply side econmics sounds great in theory; a reduction in individual income tax rates would result in a small increase in the gross national product..However, I still think as "Iraq costs so much" one to 2 trillion dollars. The outcome...Projected shortfalls in revenue in the immediate future (even with a slightly greater GNP, let's say 2%) will not match the increased federal budget because of the war's cost ) which will have to made up by more public borrowing, a further lowering of the rate of the dollar and so on.

Tax Time...hmmmYep..... (Below threshold)
nogo postal:

Tax Time...hmmm
Yep..I am sure feeling sorry for the folks whose income last year was over a million bucks. The hell on earth they are suffering for carrying the load.

Yeah there is a deficit..with 5 billion+ a month sustaining The Clear Bush/Cheney Plan for Victory in Iraq...but ya know the reason for the deficit cannot be blamed on the rich...it is clear they are doing more than their share..

The real slackers are those of us whose family income is less than $100,000. We are not having to suffer like the folks over a million suffer.
For just one day..I pray..my family could live the life of the rich..
Once we walked a mile in THEIR shoes..with the tax burden they carry...
Our family would never whine again..
(I am still grateful that the Republicans bailed out the.credit card companies. They were on the verge of collapse. Plus..it was a consumer bill.)



Ya know, Nogo, if you or yo... (Below threshold)
The Listkeeper:

Ya know, Nogo, if you or your spouse were actually WORTH paying 100k plus a year, you might just be making that much.


We're glad you do have enough skill to hold that flag up on the roadside so we know when it's ok to go past the work site, though.

$100,000 that's not bad ,o... (Below threshold)
Steve Crickmore:

$100,000 that's not bad ,only a little below what Wolfowitz 's girl friend earns at the World bank.. I'm not an economist but Thompson's nostrums for our economy sound supiciously like- the candid David Stockman, President Ronald Reagan's budget director, who agreed that supply-side theory was, "only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects 'trickle down' through the economy to reach everyone else."It's kind of hard to sell 'trickle down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down' .. . Let us hope Thompson ends up better than Stockman who was indicted a couple of weeks ago for defrauding investors.

Fred Thompson for President... (Below threshold)
A:

Fred Thompson for President!

It's from the people who EA... (Below threshold)

It's from the people who EARN the most that the government TAKES the MOST.

The little people are not paying any taxes anyway, but the ol' communistic "redistribution of income" assholes rear their ugly heads again.

Take & spend. Spend on vote buying projects. Pathetic.

/spit

There's nothing wrong with ... (Below threshold)

There's nothing wrong with a having a deficit nogo...

nogo postal, Tell the truth... (Below threshold)
Scrapiron:

nogo postal, Tell the truth. You are paying less of your income in federal taxes than ever before. I just got my refund yesterday and the percentage I had to pay is around 35% less than anytime in my lifetime and I've worked (never drew one unemployment or welfare check) since 1959. Now you lefties have to keep up the lie to make a case since the truth won't fit.
The poor now pay "0" in income taxes, as a fact those poor that work get back more (earned income credit) than they pay in. More income redistribution?

I see a lot of envy of the rich on here from a couple of people. Why aren't you rich? It's out there, you just have to apply yourself 24-7 to get it. If you smoke or sniff it up in dope it's hard to start or keep a business going. 99.99 44/100 % of the hard core druggies are democrats who complain they can't get ahead. Hard to support a $500 a day crack, meth, coke habit and get ahead.

Sadly..both my wife and are... (Below threshold)
nogo postal:

Sadly..both my wife and are teachers..
I do not envy the rich..as I posted...who would want to live a life where you have to carry most of America on your back...

Yep..Scrap..damn if I worked real hard like Wofie's girlfriend..
by the way..
ya gotta double it..
..my crack $500 a day
..my wife $500 a day..

but we already got our huge refund..so we are set..

Ya know..why is all you folks are ignoring Republican Candidates...other than Thompson..Why?
..unfortunately..
there are his cancer issues..
(It appears it is in remission..that is a good thing...and like Elizabeth Edwards it is a good thing that he is not letting him stop him from what he wants to do..)
However..there may be concerns...

gotta go..
gotta light my crack pipe...
Hey...in my drug addled mind..I did not understand when Bush talked about "Surge"...he meant KIA by our brave, overextended fellow Americans.
http://icasualties.org/oif/

Sadly..both my wife and ... (Below threshold)
John Irving:

Sadly..both my wife and are teachers..

I agree, very sad.

I only meant sadly from an ... (Below threshold)
nogo postal:

I only meant sadly from an economic standpoint...

Sadly, that you might be pa... (Below threshold)
Soupy2c2:

Sadly, that you might be passing your lack of education on to our children. Alas, my children are out -- well beyond the reach of those of your ilk.

Ghost-written boilerplate. ... (Below threshold)
bryanD:

Ghost-written boilerplate. And a budget surplus by 2010???
Isn't the budget deficit running at around 10% per year while economic growth is maybe at 3%? Something like that.
And while we're in debt to Red China, we're supposed to sharecrop-to-own via the Service Economy. Strangely, nobody else buys the Service Economy model. Northern Italy, Germany and France have led the EU to surpass the US in GNP. Just last month.
At least Thompson alludes to trouble in the housing sector which puts the lie to his whole Larry Kudlow-type pep talk. If the economy is as strong as he portrayed, housing/construction would be a non-issue.

bryaD[elusional]<e... (Below threshold)
marc:

bryaD[elusional]

Strangely, nobody else buys the Service Economy model. Northern Italy, Germany and France have led the EU to surpass the US in GNP. Just last month.

Funny, Italy, Germany and France aren't above the U.S. on this list of the world's richest countries based on GNP per capita in US$ nor are they listed anywhere within the top five on a list of the EU's richest countries based on GNP per capita.

And once again you star in a sequel to a movie called "clueless in Seattle."

bryanDThis is the ... (Below threshold)
brainy435:

bryanD

This is the US GDP:
https://www.cia.gov/cia/publications/factbook/geos/us.html

This is the EU GDP:
http://www.indexmundi.com/european_union/gdp_(purchasing_power_parity).html


So...it's Bushes fault the the entirety of Europe, 25 countries, finally have an economy similar to that of our ONE country?

And "Northern Italy, Germany and France have led the EU to surpass the US in GNP"?
THIS France: https://www.cia.gov/cia/publications/factbook/geos/fr.html
1.8T GDP and 8.7% unemployment
THIS Germany: https://www.cia.gov/cia/publications/factbook/geos/gm.html
2.6T GDP and 10.8% unemployment
THIS Ireland: https://www.cia.gov/cia/publications/factbook/geos/ei.html
177B GDP and 4.3% unemployment?
and THIS Italy: https://www.cia.gov/cia/publications/factbook/geos/it.html#Intro
1.7T GDP and 7% unemployment?

You seemed impressed by that, but not our 13T GDP and 4.4% unemployment?

Not that I'm surprised...

Crap. I just responded to b... (Below threshold)
brainy435:

Crap. I just responded to bryanD in particular detail...and it got tagged as spam due to the # of links.

I hate those spam bastards.

marc, I guess I muffed GNP/... (Below threshold)
bryanD:

marc, I guess I muffed GNP/GDP, etc.
Restated: the EU is greater than the US economy (GDP).

brainy435, Digiwar test suc... (Below threshold)
bryanD:

brainy435, Digiwar test successful!

(I let marc through because he does my laundry.)

Tax reductions have always ... (Below threshold)

Tax reductions have always resulted in increased revenues to the government. The problem with the GOP is they spent it all and then some. Dubya and his boys outspent LBJ and his great socialist society. Shame on 'em.

Thompson is strictly for th... (Below threshold)
Righty:

Thompson is strictly for the social conservatives. He offers us fiscal conservatives NOTHING despite his false rhetoric:

http://www.ontheissues.org/senate/Fred_Thompson.htm

Voted YES on prioritizing national debt reduction below tax cuts. (Apr 2000)
Voted NO on 1998 GOP budget. (May 1997)
Voted YES on $75M for abstinence education. (Jul 1996)
Voted NO on removing common goods from national security export rules. (Sep 2001)
Voted NO on medical savings acounts. (Apr 1996)
Voted NO on increasing tax deductions for college tuition. (May 2001)
Voted YES on welfare block grants. (Aug 1996)
Voted NO on eliminating block grants for food stamps. (Jul 1996)
Voted YES on banning "soft money" contributions and restricting issue ads. (Mar 2002)
Voted YES on banning campaign donations from unions & corporations. (Apr 2001)
Voted YES on funding for National Endowment for the Arts. (Aug 1999)
Voted YES on favoring 1997 McCain-Feingold overhaul of campaign finance. (Oct 1997)

As Milton Friedman noted so... (Below threshold)

As Milton Friedman noted some twenty-odd years ago, the budget is ALWAYS "balanced" in the economic sense.

If the full cost of spending is paid through taxation, that amount is taken out of the market economy. If part of the cost is paid with debt, that part is taken out of the available credit pool, with the remainder taken directly. From an economic standpoint, it's like the old Fram oil filter commercial: pay me now, or pay me later.

The real test is the total spending. That amount is diverted from its best use - as a free market directs - into particular government functions, which may or may not be worthwhile, but are assuredly inefficient.

Here in Portland, Oregon th... (Below threshold)

Here in Portland, Oregon the Bush tax cuts meant local tax increases averaging over $800 per household to make up for lost federal grants to police, schools, social programs, etc.

Tax cuts usually are like "fool's gold". They offer a temporary boost to the economy until the money's been spent, then the public pays for the tax cut with either higher local tax increases like here in Portland or a bigger federal deficit and more interest on the national debt. Unfortunately there is no such thing as pennies from Heaven as far as Washington goes, where the piper always gets paid later.

The poor now pay "0" in ... (Below threshold)
JGrams:

The poor now pay "0" in income taxes, as a fact those poor that work get back more (earned income credit) than they pay in. More income redistribution?

The EIC offsets FICA/SE taxes.

bryanD[elusional<e... (Below threshold)
marc:

bryanD[elusional

marc, I guess I muffed GNP/GDP, etc.
Restated: the EU is greater than the US economy (GDP).

Oh yea, you blew that out your butt as well.

Country GDP / GDP Real Growth Rate / GDPper Capita
U.S. 11,750 4.4 40,100
E.U 11,650 2.4 26,900

Wanna cry uncle now... or just cry.


ah...am waiting...do... (Below threshold)
nogo postal:

ah...am waiting...
does anyone believe Fred T's cancer is an issue?
I do not think it should be...but anyone have reservations?

Ya all can play all the usual games ya want..
It still come down to this...
Is Mitt your guy? If not who?
Fred?...
So you are admitting that none of the committed Republican Candidates measure up?

I love the irony that for so many years the finger of chaos was pointed at the Dems.(...and rightfully so)...but just look at the Republican field this time around...

Dem's are not waiting for Al Gore..who are you folks waiting for?

Where's the love, ng; or wa... (Below threshold)
kim:

Where's the love, ng; or was that just a Laffer?
=============================

LOL, Paul you are too easy.... (Below threshold)
horse:

LOL, Paul you are too easy. Why should I pay for your overpriced politically correct police force and social programs? Pay for it yourself and maybe you will realize you need to be more efficient in the people's paradise of Portland. Don't steal from my family in another state to support your exesses and poor choices.




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