NCPA - National Center for Policy Analysis


February 22, 2006

Many people in Washington have long known a dirty little secret about tax-cut measures: When done right, they actually result in more money for the government, says U.S. Senator Bill Frist (R-Tenn.). Recent tax cuts bear this out:

  • Since the Senate approved the last major tax relief bill in 2003, revenues have increased every year; in 2004 they went up 5.5 percent and last year they rose 14.5 percent, the largest increase in nearly 25 years.
  • Total government collections increased more after President Bush's tax cuts that they did after President Clinton's 1994 tax hikes.
  • In 2003, the Congressional Budget Office estimated that revenues would decline by $27 billion over the next two years; instead, the tax cut stimulated investment and increased revenues by $26 billion -- a $53 billion difference.

When the economy took a turn for the worse after the end of the dot-com bubble and the 9/11 attacks, high taxes limited economic growth and kept receipts down. Although Americans were making some of the largest per-household tax payments in the nation's history, revenues plummeted in 2002 and 2003. The 2003 tax cut restored the economy and resulted in quarter after quarter of strong growth, says Frist.

Frist says if we really want to avoid burdening future generations with debt, we need to reform entitlement programs and set them on a sustainable course. Unreformed, the combined budgets of Social Security, Medicare and Medicaid will consume all federal revenues within the lifetimes of today's college students. Frist believes a sensible low-tax policy that keeps the economy growing will play a major role in confronting our fiscal challenges.

Source: Sen. Bill Frist, "Tax Cuts Make Money," USA Today, February 21, 2006.

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