Facts, fantasy about tax cuts

A letter writer claimed that tax cuts boost the economy (Oct. 20 Letters to the Editor). That position is clear, simple, easy to understand and wrong.

Historical evidence shows that sometimes tax cuts seem to help, at other times they seem to have no effect, and at still other times they hurt the economy.

Consider the Clinton years when taxes were raised. Former Kansas Sen. Robert Dole said it wasn't only the biggest tax increase in the history of the United States, it was the biggest increase in the history of the world. Yet the economy boomed. From 1993 to 2000, the gross domestic product averaged close to 4 percent growth a year. Average hourly wages grew from $16 an hour (inflation-adjusted) in 1993 when President Clinton took office to more than $17 an hour when he left.

President Reagan had cut taxes and watched as wages fell by almost exactly the same amount. During the 12 years when Reagan and President George H.W. Bush sat in the White House, the average GDP growth was a full percentage point lower than under Clinton.

But what about tax revenues? According to the Laffer curve theory, lowering taxes supposedly can increase the revenue collected. That would be a wonderful thing if it were true. History, however, provides precious little to support that claim.

The Congressional Budget Office determined that recent tax cuts are responsible for about half of the budget deficit we face now. "Federal revenue is lower today (October 2006) than it would have been without the tax cuts," said Alan D. Viard of the conservative American Enterprise Institute. In fact, President George W. Bush's tax cuts led to a rare and serious drop in federal tax revenues in 2002, 2003 and 2004. Not until 2005 did tax revenues return to what they had been in 2001.

Nobody likes paying taxes. But to claim that we can stimulate the economy to new highs simply by cutting taxes to new lows is complete fantasy. If cutting taxes resulted in economic paradise, we should be in heaven right now. Common sense requires that tax policy be based on facts, rather than wishful thinking.

BRAD BEACHY

Wichita