Scott R. Sullivan

April 7th, 2007 by Scott

It’s official. The economy is still growing. Probably why the left has dropped the economy as their slogan and switched to ‘global warming’ instead.

For those who may not know, yesterday’s Washington Times (here, reported that the unemployment rate hit a five-year low of 4.4% as 180,000 new jobs were created last month.

The left has made several false claims about why we should get rid fo the tax cuts:

1) It will destroy the economy
2) It balloons the deficit
3) It benefits only the rich

Let’s take them on one at a time.

Myth 1: Tax Cuts Hurt the Economy

First, let’s Just take a look at this nifty little chart I made:

As you can see, during the last recession (the economy began to slow during the fall election in 2000 and became an official recession in March of 2001 and then was devastated even more by the 9/11 terrorist attacts), the GDP was slowed and unemployment rose at a very sharp rate.

However, about the same time, President Bush and the Republican congress passed the tax cuts. As you can see, unemployment began to level off, the economy began to improve and ever since, the economy has seen fantastic growth.

Was this economic growth spurred by the tax cuts or just a coincidence? Allow me to cite an article published by the CATO Institute about state economies:

California: No state has turned around its fortunes as dramatically as California in recent years. In 1990 the legislature and Gov. Pete Wilson enacted a $7 billion tax increase, the largest in the history of the 50 states. The income tax hikes were noteworthy in that they failed to raise any new revenue while sinking the state deeper into recession as upper income families and entrepreneurs moved out. The already ailing economy continued to decline. From 1990 to 1993 the state lost 350,000 jobs. In 1995 the tax hikes were repealed. Since then California has gained 150,000 jobs and the unemployment rate has fallen sharply.

Pennsylvania: Gov. Robert Casey enacted a $2 billion major income tax increase–raising the rate from 2.1 to 2.8 percent–during the 1990-91 recession. From 1990 to 1995 there was virtually no net job creation in Pennsylvania. In his first year in office, 1995, Gov. Tom Ridge pushed through a $200 million business income tax cut and a workmen’s compensation reform measure that is expected to reduce premiums by as much as 10 percent. In 1996 he endorsed a reduction in the franchise tax and a $1,000 tax credit for new hires. He has also been tight-fisted on spending. His 1996 budget allowed spending to grow by just 0.6 percent. In 1997, for the first time in a quarter century, the general fund budget spends less than the year before. That combination of tax cuts and budget restraints has helped lead to a net gain of 100,000 jobs so far in 1996.
Source: CATO Institute

Ok, so now that we can say without a doubt that the tax cuts allowed the creation of jobs and increased economic growth, let’s tackle the next strawman: the deficit.

Myth 2: Tax Cuts Increase The Deficit

We know this to actually be not only false, but the opposite of what actually transpires. Cutting taxes will actually increase revenue for the government.

Ah, but I can hear you now. “Scott, how can cutting taxes RAISE revenue?”

First, if businesses (from large corporations to small businesses) pay less in taxes, they can invest that money in other areas of their business. For example, they can hire new employees or they could give current employees a larger raise.

Now if a business hires, that individual now has a job and now pays taxes. If a business gives a raise, that individual could move up into the next tax bracket and pay a larger percentage of taxes.

More jobs equals more taxes. This, in turn, will pay off the deficit, not increase it.

Here’s a quote from an article in USA Today from 2006:

Ever since the Senate approved the last major tax relief bill, in 2003, revenues have increased every year. In 2004, they went up 5.5%. Last year, they rose 14.5%, the largest increase in nearly 25 years. …
Republicans’ decision to reduce taxes on capital gains and dividends provides a good case study in effective tax policy. When we enacted these measures in 2003, the Congressional Budget Office estimated that revenues would decline by $27 billion over the next two years. Instead, it turned out that the tax cut stimulated investment and increased revenues by $26 billion — a $53 billion difference.
Source: USA Today, Feb 20, 2006

With this information, it can easily be seen why the left is no longer complaining and bickering from about how President Bush’s tax cuts and War on Terror was creating a huge deficit. They knew tax cuts increase revenue and would pay off the deficit much earlier than anyone had thought.

One more reason the left has abandoned the economy in favor of ‘global warming.’

Myth 3: The Tax Cuts Only Favor the Rich

I’m far from rich. I don’t own five vacation houses. I don’t own a private jet. I do, however, own and run two small businesses. Those tax cuts helped me.

Small business owners were able to invest in their company instead of giving that money to the governement.

Just like owning a house and building up equity in that house is better than renting and thowing away that money, owning a business lets you invest in something that is yours.

Many of my clients work at other companies. When their company recieved tax cuts, it allowed them to spend more on advertising and marketing. They spent more on video productions, which is what my one company happens to do.

Finis

In the end, we can clearly see that tax cuts help not just the rich, but everyone. They drive the economy and they help this country run. The Bush Tax Cuts must be made permanant, something the Democrat congress has vowed to fight.