Theo: If you feel like you aren’t paying enough, please feel obliged to leave a tip on your next return.

Best,
Erik

Don’t come back to this post without an answer to:

That’s a $53 billion swing from minus 27 to plus 26. If that isn’t “paying for itself,” what the bleep is?

I don’t have time to belabor the obvious.

Go here:
http://www.investors.com/editorial/IBDArticles.asp?artsec=20&artnum=1&issue=20060518

From the IBD post referred at the Question 2A post (but not excerpted; I’m remedying that with Update 1 there):
According to Congressional Budget Office data, the reduction in the cap-gains rate to 15% was expected to cost the federal government some $27 billion in revenues. But it didn’t happen that way.

In fact, as [Trend] Macrolytics’ Donald Luskin recently pointed out, the tax cuts ended up bringing in $26 billion in added revenues — exactly the opposite of what was predicted.

That’s a $53 billion swing from minus 27 to plus 26. If that isn’t “paying for itself,” what the bleep is?

The only fallback is “it would have happened anyway.” Please, if that were the case, why didn’t any of these genius Monday morning quarterbacks predict swelling revenues at the time?

Taxes from revenues shot way up during the Clinton years, too. And nary a tax cut for the rich made it happen.

Here is how I see the two “acknowledgments” conveniently not placed into quotes by the KR reporter:
— The truth is that tax cuts dont “just” pay for themselves, they MORE THAN pay for themselves. The tense of the sentence in the KR report is weird — “Asked by Knight Ridder whether the tax reductions paid for themselves, Treasury Secretary John Snow acknowledged that they don’t.” You would have expected to say the “didn’t,” not “don’t.” That tells me they were on another topic, or another kind of tax cut. For the record, the ordinary income-only tax cut of 2001 didn’t pay for itself, because it didn’t shave enough off the top end to change behavior much, and it didn’t do anything for cap gains or dividends.
— Econ growth and stock gains were strong in the late 1990s because the cap gains rate was cut to 20% from something higher in 1997. See blogbud Don Luskin for more on that.

See? Now everything’s consistent, despite KR’s attempts to make it seem otherwise.

The surplus figure cited is not consistent with the annual growth in the national debt cited here, where the national debt went up $18 bil in FY 2000:
http://www.publicdebt.treas.gov/opd/opdpdodt.htm#years

I think there’s a reason, but I would have to investigate to see if my hunch is right. And even if there WAS a surplus, it was largely driven by the cap gains cut in 1997 (NOT the Clinton 1993 tax increases) and massive redemptions of stock options, as those holding them saw the stock market crumbling before their very eyes and saw the need to cash in ASAP.

WASHINGTON — When President Bush signed legislation Wednesday to extend lower tax rates for capital gains and dividend income through 2010, he suggested that his tax cuts are behind a surge of new revenue into the Treasury, and he implied that it’s enough to offset the revenue lost by these reductions.

At a ceremony on the White House lawn, Bush said his tax cuts had helped the economy grow, “which means more tax revenue for the federal Treasury.”

That’s just not true. A host of studies, some written by economists who served in the Bush administration, concluded that tax cuts mean less money for the Treasury.

The cuts Bush extended Wednesday will cost the Treasury $70 billion over five years. They may help spur economic growth, but they still lose more revenue than they generate. And unless they’re matched by lower federal spending, they worsen federal budget deficits.

Tax revenues grew by $274 billion in 2005, a 15 percent increase over the previous year; and receipts are growing this year too.

But does that mean the president’s 2001 and 2003 tax cuts generated enough additional revenue to pay for themselves?

“No,” said Douglas Holtz-Eakin. He was the chief economist for Bush’s Council of Economic Advisers in 2001 and 2002, then the director of the nonpartisan Congressional Budget Office until late last year.

Holtz-Eakin said other factors were behind the surge in tax revenues. Revenues rise as the population grows. Revenues would have risen in the post-2001 economic recovery with or without tax reductions, as they did in the ’90s.

Asked by Knight Ridder whether the tax reductions paid for themselves, Treasury Secretary John Snow acknowledged that they don’t. He also acknowledged that economic growth and stock market gains were strong in the late 1990s, when the capital-gains tax stood at 20 percent and dividend income was taxed at rates as high as 38.6 percent.

Bush and Congress cut both to 15 percent in 2003; the legislation that the president signed Wednesday extended that rate through 2010.

A Harvard University paper last December concluded that up to 50 percent of a cut in capital-gains taxes would flow back to the Treasury in new revenues. It was co-authored by N. Gregory Mankiw, who headed Bush’s Council of Economic Advisers from 2003 to 2005.

But even paybacks of 50 percent still mean a net revenue loss for the Treasury.

That doesn’t mean that economists oppose reducing taxes on capital gains and dividends. They just want them to be balanced so they don’t worsen budget deficits.

The federal budget held a $236 billion surplus in fiscal 2000. After Bush’s 2001 and 2003 tax reductions, it went into annual deficits, peaking at $412 billion in fiscal 2004.