Saturday, July 24, 2010

GOP Tax Myths, As Usual

It's a litmus test for Republicans: Thou must support lower tax rates for the rich. Republicans may disagree on abortion, gay rights, foreign policy, or even Social Security- but they must support tax cuts across the board, which produce greater gains for the wealthy than for the middle class.

So it was no surprise that on Friday Rush Limbaugh would claim

But we all know this. You go to the Reagan years. Reagan reduced tax rates from 70% to 28%, and the revenue to the Treasury doubled from about 500 billion to almost a trillion dollars over eight years. The capital gains reduction to 15% caused more revenue to roll into the Treasury during Bush.

Let's go to a May, 2008 report by the Center for Budget and Policy Priorities:

The claim that tax cuts pay for themselves also is contradicted by the historical record. In 1981, Congress substantially lowered marginal income-tax rates on the well off, while in 1990 and 1993, Congress raised marginal rates on the well off. The economy grew at virtually the same rate in the 1990s as in the 1980s (adjusted for inflation and population growth), but revenues grew about twice as fast in the 1990s, when tax rates were increased, as in the 1980s, when tax rates were cut. Similarly, since the 2001 tax cuts, the economy has grown at about the same pace as during the equivalent period of the 1990s business cycle, but revenues have grown far more slowly. (http://www.cbpp.org/3-8-06tax.htm)

Some argue that, even if most tax cuts do not pay for themselves, capital gains tax cuts do. But, in reality, capital gains tax cuts cost money as well. After reviewing numerous studies of how investors respond to capital gains tax cuts, the Congressional Budget Office concluded that “the best estimates of taxpayers’ response to changes in the capital gains rate do not suggest a large revenue increase from additional realizations of capital gains — and certainly not an increase large enough to offset the losses from a lower rate.” That’s why CBO, the Joint Committee on Taxation, and the White House Office of Management and Budget all project that making the 2003 capital gains tax cut permanent would cost about $100 billion over the next ten years. (http://www.cbpp.org/policy-points4-18-08.htm)


Revenue, then, increased during the Reagan presidency- but at a slower rate than during the Clinton presidency, when taxes were raised. And lowering the capital gains tax rate reduces overall revenue. In fact, the average annual growth in the gross domestic product was higher in the Clinton years than during the Reagan years, when it was the same as during the Carter presidency. Further, it was lower during the presidency of George W. Bush than during any of those administrations. The role of the Reagan and Bush 43 tax cuts in exploding the deficit is simply inarguable and would concern conservative Republicans if their outrage over the national debt were not feigned.

Limbaugh said also:

Now, remember we've been told for the last year and a half (well, actually 2-1/2 years when you count the 2008 campaign) that the reason we are in the dire economic straits that we're in is because of the Bush tax cuts, and Obama and Biden say, "We can't go back! These are the guys, we gave 'em the keys to the car, they drove it in the ditch. We're not going back. Those Bush tax cuts created all these problems."

Democrats do point out that the Bushies "drove the car into the ditch." But of course they do not claim "those Bush tax cuts created all these problems." Democrats recognize the destructive role of deregulation and its primary role in creating the economic catastrophe we're beginning to climb out of. Rush actually was telling the truth until he slipped in a lie at the end.

Rush Limbaugh may (did) hire a prominent gay entertainer for his fourth wedding, but he still wallows in economic fantasy.



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