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Opinion Editorial
Monday, August 16, 1999
Taxes at Record Levels -- Even With a Tax Cut	One reason why Republicans are having difficulty selling their tax cut is because they have done a very poor job of explaining just how much taxes have gone up during the Clinton Administration. Indeed, even with the proposed $792 billion tax cut, which Bill Clinton has vowed to veto as too large, federal revenues will continue to be at record levels. During the entire postwar period prior to the Clinton presidency, federal revenues averaged 18.6 percent of the gross domestic product (GDP). The highest percentage ever recorded before this administration was 20.8 percent in 1981, just before the Reagan tax cut took effect. The World War II peak was 19.9 percent in 1943 and the Korean War peak was just 19 percent in 1951, according to the Department of Commerce. In 1992, federal revenues consumed 19.2 percent of GDP. In 1993, Clinton's first major act in office was a massive tax increase of about 0.7 percent of GDP, meaning that federal taxes are $62 billion higher this year because of it. According to a recent Treasury study, the Clinton tax increase was the second largest ever enacted during peacetime; only the 1982 legislation was larger. The sole justification for this enormous tax increase, we were told, was the need to balance the federal budget. This implied that once balance had been achieved, the new taxes would no longer be needed. But as in the case of taxes imposed during wars, liberals always fiercely oppose eliminating them even after their reason for enactment is long gone. As a result of the Clinton tax increase and his opposition to tax reduction, federal revenues reached 21.7 percent of GDP in 1998 and have averaged 20.5 percent during his administration thus far (see figure). Since 1995, federal revenues have been at their highest level in American history. Indeed, only in 1981 did federal revenues consume a higher percentage of the nation's income than the average for the first 6 Clinton years. According to the Congressional Budget Office, receipts will stay above 21 percent of GDP for as far as the eye can see unless taxes are cut. In fact, even with the tax cut revenues will stay at record levels and average 20.7 percent of GDP over the next 10 years. At 0.6 percent of GDP, the Republican tax cut that Clinton says is so huge is actually smaller than his 1993 tax increase. And since even with the tax cut the budget will show a $2 trillion surplus and revenues will remain at historical highs, Clinton's argument against a tax cut is pitifully weak indeed. Unfortunately, Republicans have done an extremely poor job of poking holes in it. The facts, however, are on their side. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 16, 1999. The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C. For more information: Julie Hillrichs, Dallas, TX 972-386-6272 Sean Tuffnell, Dallas, TX 972-386-6272 Joan Kirby, Washington, DC 202-220-3082 Internet: http://www.ncpa.org Home |  Support Us |  All Issues |  Social Security Debate Central |  Contact Us