News Flash: Tax Cuts DON'T Pay For Themselves

Last night I was watching the Republican debate (there was literally nothing else on). Rudy wants to cut taxes again. Obviously he has not seen this chart, which is available free of charge from the St. Louis Federal Reserve. It is a chart of the year over year percentage change in federal tax receipts.

2008-01-11-taxreceipts_hbs.png

Let's look at the data.

Kennedy cut taxes in the early 1960s. What happened? There was a spike in revenue in the late 1960s. Maybe that means the Laffer curve is correct?

Reagan cut taxes in the 1980s. But there was no spike in revenue. Maybe tax cuts don't pay for themselves. But, let's try that experiment again.

Bush cut taxes twice (not once) in the early 2000s. Notice that after the first tax cut revenues dropped. But then tax revenues spiked -- so they must work! Actually, no. Remember this is a year over year chart. That means the spikes in the later 2000s are being compared to the dropping revenue is the early 2000s. In other words -- the tax cuts didn't pay for themselves (again).

The chart is very clear. Kennedy's cuts worked. Reagan's didn't. Bush II's didn't

Can we stop this crap now?