Republican Tax Cuts — Lies & Myths

Bruce Bartlett helped draft the 1981 tax cut while on the staff of Rep. Jack Kemp of New York. The Kemp-Roth tax bill was the basis for this legislation. He is the author of Reaganomics: Supply-Side Economics in Action, published in 1981.

❝ Stymied by Congress’s failure to repeal Obamacare, President Trump hopes to get an easy legislative victory by turning again to the same well that Republicans have drunk from so often in the past—a big tax cut. All thoughts of fundamental tax reform appear to have been abandoned and the tax cut will simply add enormously to the deficit that Republicans railed against continuously when Barack Obama was in office.

❝ Republicans will make grandiose claims for the growth effect of their tax cut—Treasury Secretary Steve Mnuchin has said there will be so much additional growth that federal revenues will not fall because the economic pie will be so much bigger.

❝ We have heard such claims before and they proved to be groundless. Indeed, they are simply lies. The purpose of cutting taxes is not in fact to raise growth but to downsize government, which is an end in itself for Republicans, whether or not it raises growth. They believe there is only so much freedom to go around and when government gets bigger it necessarily comes at the expense of individual liberty. Therefore, cutting government is per se a good thing…

❝ As of 1988, the Economic Recovery Tax Act of 1981 reduced revenues by a total of $264.4 billion, according to Reagan’s last budget. Various tax increases took back $132.7 billion of that. I’ve always wondered how many Republicans who assert that higher growth from the tax cut paid for much of the cost of the tax cut are implicitly counting revenues from legislated tax increases in their calculations? It is my observation that few Republicans today know that Reagan ever raised taxes and most would be shocked to find out that he raised them a lot. The 1982 Tefra bill was the largest peacetime tax increase in American history…

❝ I would not deny that the 1981 tax cut stimulated economic growth to some extent, but Republicans have a tendency to attribute all of the increase in growth after 1981 to the tax cut, when in fact much of it was the normal bounce back from the economic recession that began in July 1981 and ended in November 1982, according to the nonpartisan National Bureau of Economic Research…

❝ Trump may be right that the Republican Congress will once again abandon any semblance of concern for the budget deficit and enact yet another budget-busting tax cut. But no one should be under any illusion that it will do much to raise economic growth or reduce unemployment — certainly not enough for the tax cut to pay for itself. That is a fairy tale at best and a rank lie at worst.

RTFA if you’re an economics geek, too. Lots of alleyways to examine. A forest of concern and craptastic Congressional blather to overcome. Bartlett’s credentials and experience is valuable. He’s not only been down this road before — he worked for the creeps who built it, mostly as an experiment that failed.

Thanks, Barry Ritholtz

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