Don't buy the liberals' claims about the Clinton tax hikes being harmless
By Rossputin on Economics & Tax Policy
Some liberals try to argue that tax hikes on the wealth are economically OK because the economy didn't crater under Bill Clinton after his 1993 tax hike. However, if you compare the four years beginning with the 1993 tax hike, i.e. 1993-1996, to the next four years, 1997-2001, there is something important to be learned.
From 1993-1997, average GDP growth was 3.225%. From 1997-2000, average GDP growth was a full 1% higher at 4.225%. In case you're not sure, 1% of GDP is a very big number and a very significant difference.
What happened in 1997? Bill Clinton, under pressure from a Republican Congress and with the same political realization that caused him finally to sign welfare reform, cut the long-term capital gains tax rate from 28% to 20%.
Another interesting fact: Comparing the four years after Clinton raised marginal income tax rates (but before he cut capital gains rates) to the prior decade, the 3.225% GDP growth of 1993-1996 is well below the 3.53% growth average of the ten years prior to the Clinton tax cut (1983-1992).
Furthermore, job growth from 1993-1996, as measured by the Bureau of Labor Statistics Nonfarm Payrolls, averaged 2,745,500 workers whereas job growth for the next four years, beginning at the capital gains tax cut, averaged 3,019,250 or 10% more.
A 2001 document prepared for the Joint Committee on Taxation shows something else interesting: From 1993 to 1996, total income tax receipts (tax collected by the government) increased by 28.7% (in total over the four years). Over the next four years, following the capital gains tax cut, total income tax receipts rose by 36.2%, representing more than 25% faster growth of revenue to the government. Now, it's not that I support the government taking more revenue as a goal, the way liberals do. But for those who do support maximizing government revenue to blindly argue that raising tax rates accomplishes their goal flies in the face of the facts.
That's par for the course for "progressives" who are so blinded by their desire to punish the rich that they don't actually care about any other results of their policy suggestions. Don't think for a moment that Obama isn't one of these people. He made it clear in a debate during the primaries when he said he would support raising capital gains tax rates "in the interest of fairness" even if it meant the government took in less revenue. But Obama probably also knows his limitations, including the fact that he knows as little about economics as John McCain does...it's just that McCain was stupid enough to admit it. Therefore, he's probably listening to the experienced economic team he's surrounding himself with. Even though they're Democrats, they're not idiots, and they know that US history has repeatedly demonstrated that tax rate cuts, especially capital gains tax rate cuts, bring in more government revenue.
For me, there's much more to it than that since I see taxes as an attack on liberty, and I see liberty as an end in itself. So, I support cutting tax rates even if (or because) I hope we cut them low enough to reduce government revenue, and then force the government to return to its constitutionally-authorized functions. But, I realize that's a pipe dream for years to come, and maybe forever. Still, I believe that Obama most certainly does not have a mandate from the American people to "soak the rich".
The liberal argument that the Clinton tax cuts were not harmful, or were even beneficial, is belied by the hard data. Yes, maybe the economy didn't crumble, but that's hardly a justification for a policy which is shown by the numbers and obvious to anyone with economic common sense to reduce economic growth.
It is only liberals who believe that people will not change their behavior when the environment changes. Assuming that people will work as hard and take as much risk in a high tax environment as in a low tax environment makes as much sense as assuming that people won't put on coats when summer turns to winter.
One other point, only the most brainwashed of the left believe that the election results were a "mandate Obama created for himself in terms of raising taxes on the rich." That view isn't supported by anything other than the wishful thinking of progressives…not poll data, and, fortunately, it seems not by the behavior of Obama, who to this point seems willing to at least delay any such economically destructive tax increases. |
