During his first term, Donald Trump signed a bill significantly reducing corporate tax rates and lowering personal income tax liability for most Americans. He has promised to further lower income tax rates for corporations and individuals in his forthcoming second term.
This has provided the opportunity for Democrats and other opponents of tax reductions to make the perennial claim that tax cuts signed by Republican presidents have and will continue to blow up the national debt. This claim is demonstrably false.
There are some economic issues that provide room for argument depending upon which economic school one adheres to. However, this issue is not debatable. No tax cut signed by a Republican in the past fifty years has increased the debt more than it would have otherwise increased had the tax cut not been implemented.
It’s easy to understand why the public believes this superficially plausible claim. If the government is running deficit X under the current tax schedule and that tax schedule is reduced, the government will collect less revenue and the deficit will increase to X + less revenue collected. It makes perfect sense.
The only problem is it has never been the case that the government collected less revenue after a Republican tax cut. Never. Ever.
Don’t take my word for it. Just look at tax receipts. Since this tax cut/debt fable began during the Reagan years, look at tax receipts after the tax cuts he signed. They increased so significantly that by his last year in office the government was collecting almost double the amount of taxes it was collecting in Carter’s last year.
While this may seem counterintuitive, it is nevertheless true. The explanation probably lies in what has come to be known as the “Laffer Curve,” named after economist Art Laffer. This theory also has its own little Democratic Party myth built into it. Democrats like to claim Laffer was wrong when he said “tax cuts pay for themselves.” This myth is wrong in two ways.
Read the rest at Tom’s Substack…
administrations. Tom Mullen is the author of It’s the Fed, Stupid and Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty, and the Pursuit of Happiness?
