Excellent commentary from Robert Tracinski at TIA Daily 

The Wall Street Journal editorial below points out that the economic growth of the past three years, encouraged partly by tax cuts, has resulted in an increase in government revenues, as rising incomes have increased government’s take, despite the slight decrease in tax rates. The Journal then asks, “Since when do liberals object to a windfall for the government?”

The obvious rejoinder is: since when do conservatives applaud it? Unfortunately, the answer is: for a long time. The Journal is harking back to a long “Supply Side” tradition of evading the fundamental question of the proper role and moral limits on government and instead proposing lower taxes and free markets merely as a “practical” means for achieving the goals of big government.  [emphasis added]

But as Grover Norquist points out (and the Journal concedes), this leaves the rapid expansion of government spending unchecked—creating the conditions for more federal budget crises in the future, no matter how fast America’s producers work to make the economy grow.

The real news, and where the policy credit belongs, is with the 2003 tax cuts. They’ve succeeded even beyond Art Laffer’s dreams, if that’s possible. In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters—three full years—since the tax cut passed, growth has averaged a remarkable 4%….

This growth in turn has produced a record flood of tax revenues, just as the most ebullient supply-siders predicted. In the first nine months of fiscal 2006, tax revenues have climbed by $206 billion, or nearly 13%. As the Congressional Budget Office recently noted, “That increase represents the second-highest rate of growth for that nine-month period in the past 25 years”—exceeded only by the year before. For all of fiscal 2005, revenues rose by $274 billion, or 15%….

Remember the folks who said the tax cuts would “blow a hole in the deficit”? Well, revenues as a share of the economy are now expected to rise this year to 18.3%, slightly above the modern historical average of 18.2%. The remaining budget deficit of a little under $300 billion will be about 2.3% of GDP, which is smaller than in 17 of the previous 25 years….

Individual income tax payments are up 14.1% this year, and “nonwithheld” individual tax payments (reflecting capital gains, among other things) are up 20%. Because of the tax cuts, the still highly progressive US tax code is soaking the rich. Since when do liberals object to a windfall for the government? [“Soaking the Rich,” Wall Street Journal, July 12]

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