“The claim that tax cuts pay for themselves…is contradicted by the historical record,” reported the Center on Budget and Policy Priorities, which showed that revenues grew twice as fast in the 1990s, when taxes were raised, than in the 1980s, when taxes were cut.
FactCheck.org called the claim that Sen. Kay Bailey Hutchison (R-TX) made--"Every major tax cut we’ve had in history has created more revenue. "--“highly misleading” and stated the obvious fact that “we can’t have both lower taxes and fatter government coffers.”
TAX CUTS: MYTHS AND REALITIES, dated May 2008:
Since 2001, the Administration and Congress have enacted a wide array of tax cuts, including reductions in individual income tax rates, repeal of the estate tax, and reductions in capital gains and dividend taxes.
Nearly all of these tax cuts are scheduled to expire by the end of 2010. Making them permanent would cost about $4.4 trillion over the next decade (when the cost of additional interest on the federal debt is included). (http://www.cbpp.org/1-31-07tax.htm)
Because important decisions about these tax policies must be made in the next few years, it is essential to understand their effects on deficits, the economy, and the distribution of income.
Supporters of the tax cuts have sometimes sought to bolster their case by understating the tax cuts’ costs, overstating their economic effects, or minimizing their regressivity.
Here, we address some of the myths heard most frequently in recent tax-cut debates. (For a discussion of myths specific to the estate tax debate, see http://www.cbpp.org/pubs/estatetax.htm.
For a discussion of issues surrounding the Alternative Minimum Tax, see http://www.cbpp.org/2-14-07tax.htm.)
“You cut taxes and the tax revenues increase.” — President Bush, February 8, 2006
“You have to pay for these tax cuts twice under these pay-go rules if you apply them, because these tax cuts pay for themselves.” — Senator Judd Gregg, then Chair of the Senate Budget Committee, March 9, 2006
Reality: A study by the President’s own Treasury Department confirmed the common-sense view shared by economists across the political spectrum: cutting taxes decreases revenues.
Myth 2: Even if the tax cuts reduced revenues initially, they boosted revenues and lowered deficits in 2005 to 2007.
“Some in Washington say we had to choose between cutting taxes and cutting the deficit… Today’s numbers [the updated 2006 budget projections] show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring.” — President
Bush, July 11, 2006
Reality: Robust revenue growth in 2005-2007 has not made up for extraordinarily weak revenue growth over the previous few years.