GOP Argues Tax Cuts Increase Government Revenue

Chris Usher

Republican Senate Minority Whip John Kyl was hammered by Democrats earlier this week for backing extending the Bush tax cuts for the wealthy - and insisting they need not be paid for.

Now Senate Republican Leader Mitch McConnell (pictured) is backing up Kyl's position.

"That's been the majority Republican view for some time," McConnell told TPMDC. "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. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject."

McConnell's argument is that even though the government would be forgoing hundreds of billions of dollars in revenue by extending the tax cuts on relatively wealthy Americans, that loss will be more than offset by the growth spurred by keeping the money in taxpayers' pockets. (The Obama administration wants to extend the cuts for Americans making less than $200,000 or $250,000 but let them lapse for those making more than that.)

Yet as the Washington Post's Ezra Klein and others are pointing out, McConnell's position is largely not supported by budget experts, including President Bush's own Congressional Budget Office. (Here are a number of other experts offering a similar perspective.)

Underlying the debate is an economic concept called the Laffer Curve, which shows that revenue can either increase or decrease when taxes are raised, depending on where the tax rate falls on the curve.

It's not as complicated as it first sounds: The basic idea is that when taxes are raised to a high level - say, for the purposes of this example, 99 percent - revenue will suffer because people will have no incentive to work (and there will thus be nothing to tax). When the tax rate is relatively low, however, raising taxes does indeed generate revenue since incentives to work are still significant.

Liberals have been quick to contrast Republicans' position on the Bush tax cuts for the wealthy with GOP efforts to block an extension of unemployment benefits unless they are paid for. If the Bush tax cuts for the wealthy pay for themselves, they suggest, wouldn't putting money in the pockets of the unemployed have the same effect? (In fact, it could be argued money for the unemployed would have an even more significant effect, since that group would seem to have more need to actually spend the money.)

The GOP's position has the left arguing that despite their ostensible fealty to Tea Party-driven concerns about red ink, conservatives don't really care about the deficit, as Matt Yglesias put it.

He cites as evidence McConnell's position as well as deficit increases under Presidents Ronald Reagan and George W. Bush and opposition from conservatives to a pair of deficit reduction packages in the 1990s.

[ctmore]

I am one of the top 1% wage earners. Under Bush my tax return was $80,000 not bad.
The average working man got about $500.00. I didn't go out and buy anything because I already have everything I want. What is wrong with this picture. Wake up people tax cuts for the wealthy do nothing.

[HemiHead66]

Republicans are funny. They've been slamming the Democrats about unemployment benefits being paid for, but when it comes to massive tax cuts for their rich friends, they couldn't care less. Total Hypocrites! And tax cuts don't produce more revenue. We already went through this Laffer curve BS when Bush said it. Look at the reports. It does not produce more revenue. And you're talking about giving tax cuts to these big corporations that shifted almost all their manufacturing overseas, and pay ZERO in taxes. And you wonder why all our jobs are leaving. If they move overseas they get a zero tax rate. How do we compete with that? Republicans with their tax-loopholes are doing wonders for our country. They won't be happy till we're bankrupt.

[realist51]

these guys do aq good job of blowing smoke! Sit there and deny unemployed americans there unemployment benefits then have the gutless balls to sit there and say that we need to continue tax cuts for the wealthy because they create revenues. yea for the wealthy surly not for jobs because were still under the bush taxcuts unemployment is at 9% Under republican't rule when thesecuts were implemented the unemployment rate varied little never dropped below 4% had the worst job creation of any president. Cost the federal govermentat least 1.2 trillion in lost revenues plus interest. if you don't believe me just google the bush tax cuts then google the bureau of labor statisics. this is the republican't leadership showing there true colors any dope foolish enough to vote for such hypocrits deserves what he gets they did it before and will blindly do it again.

[tom7001]

I don't want to hear failed republican policies that have led us into this economic mess we have today. With the top 1% earning almost 25% of income, the middle class disappearing, its time for the big boys to start paying their share! Social security can be saved just by lifting the cap on wages , the more you make, the more you pay. Republicans do not want to continue unemployment benefits, but we are paying farmers in Afganistan not to grow poppies? Real wages have declined under the republican policies, the elite have the money and politcal power, Rubio's is bought and paid for by the system!

Read more: http://www.miamiherald.com/2010/07/14/1730547/rubio-calls-federal-oil-spill.html#ixzz0thHVvwmH

[superdem1]

Yes - and not making deposits increases my checking account ! Working for free increases my paycheck ! Not eating makes me fatter ! What planet do these Republicans live on ? Not Earth. They are like Alice in Wonderland.

[Mortar_29]

Why is it you dont get it?

By cutting taxes, those who own the money spend it on other things. They buy stuff, they invest, the expand their business. Then, that money being spent is taxed. Or their new employees are taxed.

And viola! More money in the Treasury.

I know it is hard to think about complex subjects, but please try.

[renceward-2009]

Economic growth during the Bush years was among the slowest since WWII. The economy started to tank and unemployment rose during the end of the Bush years. All this time the Bush tax cuts were 100% in force. All throughout this recession, the tax cuts have been there. If they do such a great job of spurring the economy then what happened???? Quite simply they DIDN'T WORK!!. Most economists don't back the GOP line on this and the reality of the last 10 years doesn't back the GOP line on this.

[pubsrtoast]

GOP Argues Tax Cuts Increase Government Revenue
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Talk about fuzzy economics, even Reagan and Bush the first understood this and went ahead and raised taxes to close the deficit.

[Lifeson2112]

Here's an idea. Lets cut taxes AND cust spending. Get rid of all the worthless entitlement programs. Pull out of Iraq. No more subsidies for ANYONE. Cut off all foreign aid. We can solve our money problems and we can solve them quickly. It just takes the guts to do it. This is where Republicans and Democrats both fail us.

[Mortar_29]

True dat.

[tsigili]

Not really. However, the GOP doesn't throw away monies on social programs, that do little good. That is the difference.

Dems spend billions on social programs, that accomplish nothing.

[Mortar_29]

Accomplish nothing? There are tens of thousands of dead nutjobs out there. Sounds good to me!

[quietfireII]

And the Bush Tax cuts accomplished exactly what tsigili???