Tax Cuts Work

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February 6, 2007

Yesterday, the President sent Congress a $2.9 trebillseptillion dollar budget and it was very warmly received by the Democrats. Today, the media is throwing around a bunch of different numbers but the only one that really matters is this: $1.6 trillion. That's the amount of money we'd all get to keep if the President gets to make his first term tax cuts permanent.

But the Democrats aren't exactly lining up to support it, which is a shame because the Real Story is that virtually every tax cut in history has helped the U.S. economy...and this one is no different. For any Democrat who's too busy to do their own homework, let me do it for you and give you a quick history lesson.

Let's start in the 1920's -- you might know it as the "Roaring 20's". Guess what, they were "roaring" because Congress cut taxes five times during that decade. According to the U.S. Treasury, quote, "As tax rates...declined, the economy was strengthened further." Huh, that doesn't sound logical!

After the stock market crash of 1929, the brainiacs in the Government figured what better way to get us out of this mess then to make everyone pay more in taxes!? So they raised them. Twice. By 1936 the top tax rate had ballooned to -- ready for this? -- 79 percent! Do you still wonder why it took so long to get out of the Great Depression?

By the end of World War Two, taxes had been raised so much that the wealthiest people faced a top marginal tax rate of 94 percent! That's probably about the same time the Grand Cayman's became quite the "offshore" travel destination. And by the late 1960's and early 70's, the economy was --not surprisingly-- underperforming badly.

Enter Ronald Reagan's 1981 tax cuts. They worked so well that the U.S.

Treasury said, quote, "(they) convinced many political leaders of both parties that lower...tax rates were essential to a strong economy." Did you hear that? The people in charge of our money said the evidence was so overwhelming that tax cuts actually become bipartisan!

During Reagan's term in office, our country's Gross Domestic Product had grown an unbelievable 27%. Unfortunately, that pesky twenty-second Amendment got in the way and Reagan had to leave office, giving way to Mr. "Read My Lips" himself - George Bush who promptly signed a, quote, "significant tax increase" into law in 1990. Try not to be shocked, but our GDP actually declined in 1991. Are you starting to see the trend?

Well Bill Clinton apparently didn't, because when he took office he raised taxes again. Fortunately, the collapse of the U.S.S.R., low inflation and interest rates and the advent of a little something called "the Information Age" bailed us out for a while. But eventually, all of that faded away and we faced another downturn.

And that brings us to 2001 and George W. Bush's tax cuts. The Treasury Department says those cuts not only ended the downturn early, but they propelled us into the amazing economy we now have; an economy that is breaking records even in the face of one of the most challenging times in our country's history.

It sounds crazy, I know, but when you give people more money to spend, they spend it -- that means more jobs because more people are needed to make the stuff that we're all buying. It also means more people who now pay taxes. Now we sit here in 2007 with one of the best economies of all time actually debating whether or not to make these cuts, the same ones that created this economy, permanent. I'm all for a good debate in Washington, but when it comes to tax cuts, the only thing we should be debating is the sanity of anyone who's against them.

LINK

US Treasury Fact Sheet

Historical GDP Calculator

GDP Spreadsheet

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Tax cuts do work. As a matter of fact, we should do away with the income tax and replace it with nothing. Find another source for congress' addiction to credit, pork and excessive spending.