1) The high INDIVIDUAL tax rates in the period up through Reagan applied to a tiny sliver of earners - less than 1%, but the graph includes revenue from income taxes below that max rate, what the other 99% paid, payroll taxes, corporate income taxes, excise taxes and all other government receipts. If you want to see what happened to individual income taxes, analyze individual income taxes.
2) It ignores inflation.
3) Ignores population growth.
4) Ignores the normal economic growth that has occurred regardless of tax rates.
5) Ignores interest rate changes
6) Ignores changes to the tax base - loophole closures and what not.
7) Finally, the question isn't whether revenues following tax rates will, ignoring all the above, increase or decrease revenues over some period, it's whether tax cuts raise more money than what would be collected without the rate cuts. As I've pointed out elsewhere, GDP grew about 33% under both Reagan and Clinton. Real tax revenues grew about 20% under Reagan (less than GDP growth) but 47% under Clinton, or 2.5 times the growth under Reagan. Clinton RAISED rates, Reagan cut them.
Last edited by Jack Hays; 10-25-14 at 03:01 PM.
"It's always reassuring to find you've made the right enemies." -- William J. Donovan
I'll just address 6 - changes to the tax base. Tax revenues = Tax Rate X Tax base. If you want to explain changes in Tax Revenues, it's NOT OK to ignore changes in the Base. FICA ends a little over 100k. If we eliminate the cap, we'll see a large increase in payroll taxes and total tax collections in that graph above, and it will have NOTHING to do with the top marginal income tax rate. Ignoring the base means F-.
Besides, the premise here is simple. The downside to more spending - e.g. to pay for a war - is MORE TAX CUTS!!! YEAH!!! It's gutless and cowardly and reckless for the GOP to sell that free lunch nonsense as serious fiscal policy. It tells the GOP base that there are no tough choices in government. Tax cuts have no downside. You can't really believe that.....