Monday, May 22, 2006

Taxing Talking Points vs. Facts and Figures

Last week at a Wispolitics luncheon, Congressman Paul Ryan tried to justify the $70 Billion in tax cuts which will mostly go to the very wealthy. His claim was the popular talking point that the tax cuts would essentially pay for themselves by growing the economy and bringing in more revenue.

In a previous post I wondered whether this claim was actually true. According to Treasury Secretary John Snow and others, Ryan’s claim is false. This from a Knight Ridder story last week:

Treasury Secretary John Snow conceded Tuesday that the much-touted tax cuts for capital gains and dividend income don't drive today's strong economy.

Asked by Knight Ridder if the tax reductions paid for themselves, Snow acknowledged that they don't. He also acknowledged that economic growth and stock market gains were strong in the late 1990s, when the capital-gains tax stood at 20 percent and dividend income was taxed at rates as high as 38.6 percent.
The same story cites a Harvard study which states that “50 percent of a cut in capital-gains taxes would flow back to the Treasury in new revenues.” That figure might be very impressive to many people but it still means that the Treasury would have a net loss as a result of the tax cuts.

While the wealthy can thank Paul Ryan for hundreds of thousands in extra cash, common folk can thank him for higher deficits, increasing interest rates, and worries of inflation.


Russ said...

I've always been amazed by people that actually believe federal or state revenues can be increased by increasing tax rates. Dr. Arthur Laffer developed the Laffer Curve years to disprove that misconception. In Wisconsin's case, reduced economic activity due the it's "tax hell" reputation has, and will continue to, hold revenue growth down. On the other hand, in states with low tax rates, revenue is growing at brisk rates. The lesson is simple, reduce tax rates and revenue will go up.

Seth Zlotocha said...


Why, then -- if high taxes hold down revenue and Wisconsin is a "tax hell" -- did Republicans make it their signature issue this past year to pass a constitutional amendment restricting the growth of governmental revenue in the state?