Letter: Oversimplified tax analysis


This is a response to Jerry Fowler’s Dec. 12 letter. As can be seen in the second chart on the following website, taxfoundation.org/does-lowering-taxes-increase-government-revenue, using inflation-adjusted and population growth-adjusted figures, per capita federal tax revenues were higher in 1989 (approx. $6,900) than in 1980 ($6,000), but increased by much more than double of that during the Clinton era from 1993 to 2000 ($6,600 to $9,000). The Clinton era had a top marginal tax rate of slightly less than 40 percent and tax revenue increased each year. Tax rates were apparently closer to t* (maximizing government revenue) on the Laffer curve during the Clinton administration than during 1988-1992, which had a lower top marginal rate.

Other things to note on the chart: The top marginal rate went from 70 percent to 50 percent in 1982 and tax revenue dropped from 1981 to 1983.

The “GW Bush tax cuts” were mostly phased in from 2001 (EGTRRA) to 2003 (JGTRRA), but there was negative or negligible tax revenue growth until after 2004.

Some tax cuts, and some tax increases, can cause increased government revenue. In many cases, too many factors are at play to ascertain why. Fowler’s letter is oversimplified, but so is mine.

In any case, the current pending tax cuts are projected to increase the federal budget deficit (source: CBO).

Dan Wood

Prescott Valley