Senate Minority Leader Mitch McConnell (R-KY) made headlines a year ago with his claim that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.” And in recent weeks, numerous lawmakers and presidential candidates have relied on the false tax-cuts-produce-revenues talking point to justify the GOP’s economic platform.
Presidential candidate and former Minnesota Gov. Tim Pawlenty extended the argument to all tax cuts, telling Fox News that “whether it be the Bush tax cuts, the Reagan tax cuts, or other tax cuts, they always produce an increase in revenue. There’s no dispute about that.” Rep. Joe Walsh (R-IL), presidential candidate Herman Cain, and former Massachusetts Governor Mitt Romney have all made similar remarks.
But Rep. Trent Frank (R-AZ) took the argument a step further by pinpointing an exact figure in the supposed revenue increase enacted by the Bush tax cuts in a July 15 interview with ThinkProgress.
We know that if we grow this economy, that nothing will do more good toward bringing in additional revenues to government. And that’s not to theory; that’s a historical observation. Even the much-maligned Bush tax cuts brought in an additional $100 billion a year to government coffers. We forget that unless someone is out there producing, there’s no tax revenue. There’s no revenue. There’s no nothing for anyone.
The data compiled by the White House’s Office for Budget and Management could not prove Frank to be more wrong. In fact, federal revenues from individual income taxes saw a $136 billion decrease between 2001 and 2002, the year the first round of the Bush tax cuts went into effect.
Although Frank could have been referring to a $97.8 billion increase in federal income tax revenues between 2003 and 2004, such a jump is largely dependent on an unexpected $57.6 billion rise in the corporate income tax revenues. Both rounds of the Bush tax cuts did not apply to the corporate income tax rates and thus had no role in 2004’s larger revenue intake.
Toward the end of the decade, the amount in nominal dollars did begin to increase again, reaching $1.16 trillion at its 10-year apex in 2007. But economists point to revenues as a percentage of national GDP as the true measure of how much federal receipts fluctuate over the years. And according to those figures, the individual income tax revenues never recovered from the blows Bush’s tax policy inflicted in 2001 and 2003, respectively.
During Clinton’s last year in office, the personal tax revenue collected measured up to 10.2 percent of GDP; in 2004, it only came in at 6.9 percent of GDP, the lowest figure seen since 1951 and almost a full percentage point below the lowest figure reported during Reagan’s presidency. Even before the housing bubble burst in 2008, the federal government was not seeing personal income tax revenues close to their pre-Bush tax-cuts levels when measured as a percentage of GDP.
Furthermore, a recent study released by the Economic Policy Institute on the Bush tax cuts’ economic ramifications finds that “the decade of the Bush tax cuts had, on average, lower revenue levels as a share of the economy than any previous decade since the 1950s” and that the two rounds of tax cuts increased the national debt by $2.6 trillion over the course of nine years. Alan Viard, a senior economist from the Bush administration, even admitted in 2006 that there is “really no dispute among economists” that the tax cuts drained federal revenue.
Ironically, in the moments before his defense of the Bush tax rates as good fiscal decision, Frank criticized President Obama as being out of touch “with all mathematical reality” when it comes to stymieing the growth of the national debt.