Tax Cuts Don’t Raise Revenue

I’m so tired of hearing Republicans claim that cutting taxes increases tax revenues and that Reagan’s cut taxes caused revenue to double by the end of his term.

Here’s the numbers. In 1981 the on-budget (not from Social Security) tax receipts were $469 billion which was a 16% increase over the prior year. Then the Reagan tax cuts started. 1982 tax receipts were $474.3 billion, 1.1% over 1981, and the on-budget deficit shot up to $120 billion, an increase of 62% in a single year!. 1983 receipts were $453.2 billion, a DROP of 4.4% creating a deficit of $208 BILLION, an increase of 73%!

Tax Increases – Revenues Went Up (Duh!) This huge jump in deficits panicked Congress enough to pass the 1984 Deficit Reduction Act, the largest tax increase in our history. Tax receipts climbed to $500.3 billion, a 10.4% increase, and the deficit shrank almost 11% to $185.6 billion.

In 1985 Congress passed the Gramm-Rudmann-Hollings Anti-Deficit Act. In 1985 tax receipts were $548 billion, a 9.5% increase. But now the huge military spending increases AND the debt interest were kicking in and the deficit rose to $221 billion, and increase of 19%. That’s another story – the TAX RECEIPTS were climbing again, leading to the doubling Republicans claim was brought about by cutting taxes, conveniently leaving out that the largest tax increase in the history of the world occurred in between.

An Aside. Also during this time Congress passed the huge Social Security tax increase, dramatically increasing a tax ONLY paid by poor and middle class working people. This is the largest tax item in most people’s paychecks and is not counted when we’re told that the rich pay a large share of taxes. In 1984 and 1985 Social Security tax receipts jumped 12%!, and continued to increase through the 80’s, generating huge surpluses which were used to make the huge deficits look lower. This money collected from the poor and middle class workers went out to pay for Reagans’s tax cuts for the rich. (And now it is being used to pay for Bush’s huge tax cuts for the rich.)

See for Yourself. You can look at the numbers here. It’s table 1.1, in Excel file format, so I’m not linking directly to it.

So when they say that Reagan’s tax cuts led to tax revenue doubling, IT’S A TRICK! Why they constantly use tricks to get support for their policies is a good topic for another piece.