Economics Tricks

The last three tax cuts in the capital gains rate, 1979-1982, 1997 and 2003 saw government revenues soar, even as Democrats flooded the networks with talk of revenues that would be lost from lower rates, as did the Congressional Budget Office, which has a history of low-balling the yield from tax cuts when proposed, then, each time has to report the higher numbers as they roll in.

Democrats detest tax cuts.

In 1987, the rates went back up and revenues fell off the table. Revenues did not get back up to their 1986 level, until the rates were cut back down in 1997.

Not just in the United States at the federal level and statewide, have economies thrived as government revenues soared; it's been a worldwide phenomenon and one that goes back many decades.

Perhaps, the United States is the only country where such blatant lying about it, goes on.

After WW 2, both Japan and Germany were recovering from the war in stops and starts until enacting major tax cuts. In each case, tax cuts were the catalyst that fired their economies.

The premise is simple enough for grade school students to easily comprehend, yet those who want us dependent on government, ignore the truth as easily as combing their hair.

Tax cuts for business and investors, free up working capital to, among other things, buy new equipment, increase advertising, hire additional employees, take advantage of new technology, computers for example, often increasing productivity, thus increasing profits.

In some cases, companies avoid going out of business, continuing those jobs, already in place.

When the positives of retaining more individual or business earnings, kick in, a broadened employment base plus higher wages and higher profits, yield higher revenues to government.

There is often a lag after the cuts. The increased revenues, may, take time to first replace those lost and eventually surpass the previous amount. All the while, the stimulus puts more people to work, who purchase more goods. Conversely, higher taxes, like higher prices result in less consumption. When the price of computers, for example, came down, millions more bought them.

The 2003 Capital Gains Tax Cuts

Looking at the most recent capital gains cuts, which took place in 2003, revenues from capital gains in 2002 had been $49 billion.

In 2003, the first year of the cut in the tax rate from 20% to 15%, the lower rate yielded slightly higher revenues than in 2002, increasing from $49 billion to $51 billion. By the second year, the lower tax rate saw revenues soar to $101 billion.

Congressional Budget Office (CBO) estimates, not yet finalized, are for revenues of $117 billion for 2006 and $127 billion for 2007, just about triple what they were in the last year of the higher rate.

This time we did not have to wait for higher revenues, the increase took effect in the very first year.

So now promising to pay the additional costs of universal health care by increasing taxes on the very capital that increases revenue, is false and shameless.

Universal Health Care will have a "net final cost" of hundreds of billions, each year, guaranteed to add to the national debt which the Comptroller General is almost begging congress to bring under control, before adding huge new burdens.

The damage done by this kind of populist rhetoric over the centuries has probably been the single biggest destroyer of nations.

Through most of its history, most Americans faced the fact, that hard work and persistence were the true solutions to the American Dream.

Today, reliance on the nanny-state and redistribution through government has far too many believing they deserve the fruits of work done by others.