Tax Cuts Work

Back when President Bush pushed his tax cuts through Congress we were constantly treated to derisive commentary from his opponents that this was foolish and would only exacerbate the deficit. Well, according to this article in the New York Times, like so many other dire predictions made by Democrats, this one seems to be exactly the opposite of what's happening.

For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion. On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well. Most of the increase in individual tax receipts appears to have come from higher stock market gains and the business income of relatively wealthy taxpayers. The biggest jump was not from taxes withheld from salaries but from quarterly payments on investment gains and business earnings, which were up 20 percent this year.

The tax cuts stimulated economic growth, just as Mr. Bush predicted, and economic growth yields higher tax revenues. Why this is a surprise to anyone is beyond us, but apparently liberal economists don't learn much from history. The same phenomena of increased tax revenues attended John Kennedy's tax cuts in the early sixties and Ronald Reagan's cuts in the '80s.

There are still sourpusses on the Left, however, who refuse to acknowledge the efficacy of cutting taxes:

Democrats, expecting the Republicans to trumpet the good news, said on Tuesday that the long-term fiscal outlook remained almost as grim as before.

Yes, Social Security and Medicare are still threats to our economic well-being down the road. If only the Democrats had a suggestion or two as to how to solve these problems instead of simply whining and stamping their feet at attempts by Republicans to actually do something about them.

See here for more grousing from the NYT's Paul Krugman.