Tax Cuts Are Working

[Gomer Pyle voice on] Surprise, surprise, surprise! [Gomer off] Conservatives said cuts in tax rates would actually generate increased revenues, and lo and behold that's what's happening (from Political Diary):

The July federal tax receipt data was just released and it confirms that a tsunami of revenues just keeps rolling into federal coffers. The new data extends a bullish trend that we reported last month: Uncle Sam's tax revenues are continuing to climb at an annualized rate of about 13%. Even though spending is still up by almost 7% this year, the deficit will fall by about $100 billion because of the surge in tax payments.

Corporate income tax receipts are up an enormous 40% reflecting the joyous turnaround in corporate earnings over the slosh of the past three years. Even more interestingly, non-withheld personal income tax receipts have climbed by about one-third in recent years, largely due to capital gains realizations and increased corporate dividends. This suggests that when George W. Bush cut the tax rate on capital gains and dividends, lo and behold, he managed to collect more revenues from these taxes. The Laffer Curve strikes again! This fits a long-term historical pattern: Every time the capital gains tax has been cut, the revenues increased, and vice versa. We would hope that this message would filter to Capitol Hill where many Democrats wish to raise the capital gains tax back up to 20% from the current 15% -- a guaranteed revenue loser.

Total wage income is up about $75 billion this year over projections, which has meant 8% more payroll and income tax payments. This is partly a result of two million new jobs and partly attributable to a rise in average wages due to productivity gains.

The Chicken Littles who have predicted that the sky will fall thanks to high budget deficits and "reckless" Bush tax cuts will need to lie down now and relax. Economist Michael Darda of MKM Partners predicts a budget deficit this year of 2.5% of GDP. We like Mr. Darda's explanation of what's going on here. He writes that the deficit is falling because "lower tax rates on investment [are] boosting incentives for growth and liquefying the wheels of commerce."

Well put. Congress really should do more of this.

Just like abstinence, it works every time it's tried. And whatever happened to that 'jobless recovery' that John Kerry promised us during the 2004 campaign?