July 25, 2006
President Bush's personal income, capital gains and dividend tax rate reductions have created economic growth, significantly increased government tax receipts, and reduced the federal deficit by nearly $130 billion. Though surprising to critics, the truth is that when tax rates go down, economic activity goes up, says Pete du Pont, chairman of the National Center for Policy Analysis.
Bush signed the most recent tax cuts into law in the spring of 2003:
- In the past 33 months the size of America's entire economy has increased by 20 percent -- or, as National Review Online's Larry Kudlow put it, "In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy."
- In the 2 1/4 years before the 2003 tax cuts, economic growth averaged 1.1 percent annually; in the three years since it has averaged 4 percent per year, and in the first quarter of this year it was 5.6 percent on an annualized basis; inflation-adjusted per capita gross domestic product (GDP) has grown 7.8 percent from 2003 through the first quarter of this year.
- According to the government's establishment survey, in the 36 months since the tax cuts became law, 5.3 million new jobs have been added to the economy.
- According to its employment survey, 288,000 jobs were added in May and 387,000 in June.
- The unemployment rate dropped from 6.1 percent when the bills were signed to 5.4 percent at the end of 2004 and 4.6 percent today, and the rate has gone down for men, women, blacks and Hispanics.
Tax cuts work, and work well, for individuals, employers and even the government, which sees its revenues increase dramatically when tax cuts are enacted and left in place over time, says du Pont.
Source: Pete du Pont, "Rising Tide: Tax cuts are good for everyone--and everyone knows it but Washington Democrats," OpinionJournal.com, July 25, 2006.
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