NCPA - National Center for Policy Analysis

Increasing Share Of Output

June 24, 1996

Recently released Commerce Department data confirm that federal taxes, as a portion of gross domestic product (GDP), are still rising under the aegis of the Clinton administration.

  • Last year, taxes consumed 20.4 percent of GDP.
  • In the first quarter of 1996, federal revenues have risen by another 0.1 percent of GDP -- to 20.5 percent.
  • This works out to an increase of just more than 0.1 percent of GDP every quarter Bill Clinton has been in office.
  • On this basis, we can anticipate that by the fourth quarter of 1996 federal revenues will equal their all-time high of 20.8 percent of GDP.

The Congressional Budget Office now estimates that GDP will amount to $7.584 trillion in 1996.

  • Thus, if revenues were simply to return to the levels they were when Clinton took office, taxes would have to be cut by $114 billion this year.
  • And every quarter that tax revenues as a share of GDP rise another 0.1 percent, we must increase the size of the tax cut by another $7.6 billion.

With the sole exception of John F. Kennedy, no Democratic president in history has ever proposed a major tax cut. While Democrats prefer tax credits, Republicans have historically supported tax rate reductions and increases in tax exemptions -- which allow people to keep more of their own money.

When Republicans in Congress proposed the $500 child credit -- which is essentially a Democratic-type tax policy -- they made an error and blurred the tax policy differences between the two parties.

Moreover, the Republicans' obsession with balancing the budget at all costs has blinded them to the need for a cut vastly larger than the minuscule $122 billion over six years they proposed in their latest budget. They should be talking about a tax rate reduction of at least 15 percent across the board.

Source: Bruce Bartlett (National Center for Policy Analysis), "Cuts vs. Credits on the Tax Battlefield," Washington Times, June 24, 1996.


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