Bush White House said tax cuts increase revenue

In his column today, Paul Krugman says the White House didn't make unsupported claims about tax cuts increasing revenue:

[E]ven the administration of former President George W. Bush refrained from making extravagant claims about tax-cut magic, at least in part for fear that making such claims would raise questions about the administration’s seriousness.

In reality, however, Bush officials frequently suggested that tax cuts increase revenues despite being repeatedly contradicted by administration economists. Here's a timeline I compiled in 2006:

President Bush, 11/13/02: "Well, we have a deficit because tax revenues are down. Make no mistake about it, the tax relief package that we passed -- that should be permanent, by the way -- has helped the economy, and that the deficit would have been bigger without the tax relief package."

President Bush, 1/7/03: "This growth and jobs package is essential in the short run; it's an immediate boost to the economy. And these proposals will help stimulate investment and put more people back to work, is what we want to have happen. They are essential for the long run, as well -- to lay the groundwork for future growth and future prosperity. That growth will bring the added benefit of higher revenues for the government -- revenues that will keep tax rates low, while fulfilling key obligations and protecting programs such as Medicare and Social Security."

Press Secretary Ari Fleischer, 1/8/03: "The entire [tax cut] package the President does believe will lead to growth, which will over time grow the economy, create additional revenues for the federal government and pay for itself."

Vice President Cheney, 1/30/03: "The President's proposals will reduce the tax burden on the American people by $670 billion over the next 10 years. By leaving more money in the hands of the people who earn it, people who will spend and invest and save and add momentum to our recovery, we'll help create more jobs and ultimately increase tax revenues for the government."

President Bush, 5/7/03: "[T]he other way to deal with the deficit is to put policies in place that increase the revenues coming into the Treasury. And the best way to encourage revenues coming into the Treasury is to promote policy which encourages economic growth and vitality. A growing economy is going to produce more revenues for the federal Treasury. The way to deal with the deficit is not to be timid on the growth package; the way to deal with the deficit is to have a robust enough growth package so we get more revenues coming into the federal Treasury."

President Bush, 8/6/05: "The tax relief stimulated economic vitality and growth and it has helped increase revenues to the Treasury. The increased revenues and our spending restraint have led to good progress in reducing the federal deficit. Last month we learned that the deficit is now projected to be $94 billion less than previously expected. I set a goal of cutting the deficit in half by 2009, and we are ahead of pace to meet that goal."

President Bush, 2/8/06: "One of the interesting things that I hope you realize when it comes to cutting taxes is this tax relief not only has helped our economy, but it's helped the federal budget. In 2004, tax revenues to the Treasury grew about 5.5 percent. That's kind of counter-intuitive, isn't it? At least it is for some in Washington. You cut taxes and the tax revenues increase. See, some people are going to say, well, you cut taxes, you're going to have less revenue. No, that's not what happened. What happened was we cut taxes and in 2004, revenues increased 5.5 percent. And last year those revenues increased 14.5 percent, or $274 billion. And the reason why is cutting taxes caused the economy to grow, and as the economy grows there is more revenue generated in the private sector, which yields more tax revenues."

Vice President Cheney, 2/9/06: The President's tax policies have strengthened the economy, as we knew they would. And despite forecasts to the contrary, the tax cuts have translated into higher federal revenues... Nobody's perfect, but when revenue projections are off by 180 degrees, it's time to reexamine our assumptions and to consider using more dynamic analysis to measure the true impact of tax cuts on the American economy. Recognizing this, the President's recently submitted budget would create a new Dynamic Analysis Division within the Treasury Department to analyze major tax proposals. The evidence is in, it's time for everyone to admit that sensible tax cuts increase economic growth, and add to the federal treasury.

President Bush, 7/11/06: "Some in Washington say we had to choose between cutting taxes and cutting the deficit. You might remember those debates. You endured that rhetoric hour after hour on the floor of the Senate and the House. Today's numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring. That's what's happened."

Krugman's point is that today's Republicans are making more extreme claims about the benefits of tax cuts than during the Bush administration, but I don't think that's correct -- the pattern is consistent over time.

Comments

[David in Cal]

It ain't braggin' if you can back it up. -- Dizzy Dean.

George Bush backed up his claim that his tax rate cuts would lead to increases in taxes collected. After those tax cuts were in force, tax revenues rose sharply in 2005, in 2006, and again in 2007.

It's particularly silly to fault comments made by Bush and Cheney in 2006 about tax revenues soaring; by then the tax revenues had actually soared. Brendan's standard of accuracy seems to be based less on actual results than on forecasts by certain economists -- forecasts that turned out to be wrong.

I wish President Obama had increased tax revenues the way Bush did. Then we wouldn't be facing a debt crisis.

[Boots]

I heard this question (does cutting taxes increase revenues?) put to Alan Greenspan, Ben Bernanke, Hank Paulson and some economist from the Reagan cabinet. They all had the same answer, a simple "NO."

Between 2001 and 2010, the Bush tax cuts added $2.6 trillion to the national debt. But they did make the rich richer and that's all the GOP cares about.

[joe]

David,
You want to talk about results, here you go. In 2000, GDP was 9.821 trillion and individual income tax revenue was 1.004 trillion while corporate tax receipts were 207.28 billion. In 2010, GDP was 14.508 trillion while individual income tax receipts were 898.5 billion and corporate tax receipts were 191.4 billion. The economy is 47% larger yet income tax receipts are more than 10% lower.

You can also look at revenue as a percentage of GDP. At the peak of the business cycle in 2000, tax revenue was 20.6% of GDP. At the peak of the business cycle in 2007, tax revenue was 18.5% of GDP. The tax cuts reduced revenue by 2% of GDP.

You can check that by taking the 2000 nominal number and adjusting for inflation and population growth. From 2000 to 2007, inflation was 2.69% and pop growth was 0.96%. Now compound that for 7 years and multiply that by 2.025 trillion and you get 2.6 trillion. Tax revenue in 2007 was 2.568 trillion. Per capita GDP grew 1.40% during that time so taking into consideration that most of the benefits of that growth went to the people who pay taxes, you can see that reducing revenue by about 2% of GDP is accurate assessment.

Just to finish this up, let's compare economic growth from 2003 - 2007 (the Bush boom years) to growth from 1950 to 2000. The economy grew much slower under the best years of Bush than it had historically.

US 2003 to 2007
Consumer Price Index 3.03%
Unskilled Wage 1.64%
Nominal GDP 5.99%
Real GDP 2.81%
GDP Deflator 3.09%
Nominal GDP per capita 5.00%
Real GDP per capita 1.85%
S&P Composite 14.03%
Population (millions) 0.95%

US 1950 to 2000
Consumer Price Index 4.01%
Unskilled Wage 5.00%
Nominal GDP 7.30%
Real GDP 3.50%
GDP Deflator 3.67%
Nominal GDP per capita 5.97%
Real GDP per capita 2.23%
S&P Composite 13.25%
Population (millions) 1.25%