NCPA - National Center for Policy Analysis

Myth: Reagan Tax Cut Caused Deficit

April 9, 1996

The latest "Economic Report of the President," prepared by the Council of Economic Advisers, contains some glaring inaccuracies, according to supply-side economist Arthur Laffer.

For example, the CEA sums up the effects of reducing marginal tax rates and the tax system's progressivity 15 years ago by saying that the cuts did not spur economic growth and increase tax revenues -- but rather quadrupled the national debt.

  • In fact, President Reagan's tax cuts were associated with total government revenue growth of $670.6 billion -- a gain of 7 percent a year.
  • By cutting rates in the highest tax brackets, the share of income taxes paid by the top 1 percent of all taxpayers rose from 17.89 percent to 27.58 percent between 1981 and 1988.

Source: Arthur B. Laffer, "Council of Economic Heretics," Investor's Business Daily, April 9, 1996.

 

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