Sunday, July 16, 2006

Coincidence Or Causation?

You make the call! NYTimes (07.16.06):
"At first blush, the recent jump in tax revenue would seem to validate Mr. Bush and those who believe that tax cuts ultimately generate higher tax revenues because they prompt people to work harder, invest more and take more entrepreneurial risk. But revenues are only up in comparison with how low they had plunged in recent years." Those Wild Budget Swings
Consider this. "Individual income taxes, the biggest component of federal revenue, are barely back to the level that was reached in 2000, $1 trillion. Adjusting for inflation, income tax revenue is still lower than six years ago." "'The idea that tax cuts have led to higher revenues is pernicious,' said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan research group that lobbies for fiscal discipline. 'Tax revenues may be higher, but they are not higher than they would have been if the tax cuts hadn’t occurred.'" Think back a bit. "The unpredictable tax revenues first surfaced almost 10 years ago, as booming economic growth and the dot-com frenzy propelled the stock market to spectacular highs. The result was a tidal wave of tax revenue that far eclipsed projections by both the White House and the Congressional Budget Office. As if by magic, budget deficits disappeared and turned into surpluses." "Few budget analysts would say the jump in revenues is bad news. But if the last decade is any indication, it would be foolish to count on more of the same." "The Bush administration has quietly acknowledged the point. Its latest estimate anticipates that tax revenues will be almost flat in 2007 and that the deficit will widen to $339 billion."


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