Barack obama hopes that by boasting that he will raise taxes on high income individuals and small businesses he will win votes from the ignorant as he obstinately ignores economic truth, demonstrated three times since the sixties: lower income tax rates can and do generate more prosperity and consequently more income tax revenue to the government than higher tax rates.
Revenue increases resulted from three previous reductions in tax rates on high incomes:
- The Kennedy tax cuts of 1963;
- The Reagan tax cuts of 1981 – 84, and now
- The Bush tax cuts of 2003.
Before each tax rate reduction the anti-liberty left warned that revenues would plummet. Each time, the Left was wrong.
Every day in his campaign stump speech Barack Obama thunders:
“For eight long years, our President sacrificed investments in health care, and education, and energy, and infrastructure on the altar of tax breaks…”
Obama and the media herd would like you to believe there has been a big tax revenue problem for several years, since the Bush tax rate reductions. The truth is 180 degrees opposite.
Each data point on the green line in the chart below represents individual income tax revenue for 12 months. The first point shows total revenue for the 12 months ending January, 2001 at just over $1 Trillion Dollars. The second point represents total individual income tax revenue for the 12 months ending February, 2001, and so on.
The chart shows that after the last of the taxes on 2000 income and capital gains were paid in April, 2001, (the fourth data point) income tax revenue began falling, and continued to decline for three years.
Revenue finally began to recover in mid-2004, reflecting the economic stimulus effects of the major tax rate reductions of 2003. Lower tax rates stimulated greater business investment, resulting in higher employment and greater taxable profits. As the chart shows, under the tax rates enacted in ‘03, income tax grew steadily to the highest point in history. Even as tax revenue increased the media-political establishment continuously deceived the people by claiming the government was collecting too little money due to the Bush tax cuts.
As the chart shows, the trend reversed and revenue began declining several months ago. Unemployment is up and taxable business profits are down due to the mortgage and credit crises. The political-media establishment hasn’t yet noted this reversal because to do so would be to acknowledge that they’ve been lying to us for five years as revenue went up.
From this income tax revenue data the following conclusions are obvious:
- For the third time in four decades enacting lower tax rates ultimately generated more income tax revenue than the previous, higher tax rates.
- We’re in a period of declining revenues resulting from mortgage problems and various financial industry contractions that have caused increased unemployment and decreased taxable business profits.
If Senator Obama were guided by the lessons of history, and if he was dedicated to enhancing liberty, he would lower the top tax rates as soon as possible, to encourage new investment and small business expansion to create new jobs to replace the jobs that have been lost. History demonstrates that higher tax revenue will follow.
Instead, Senator Obama’s plan to increase rates on small business profits, capital gains, stock dividends, and upper income earners will shrink business investment and increase unemployment, which in turn would result in reduced taxable income from wages, capital gains, dividends, and profits. The drop in taxable income will mean less, not more, income tax revenue from the higher rates.
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