Later On

A blog written for those whose interests more or less match mine.

Reagan tax cuts and revenue

with 6 comments

Krugman:

Ah – commenter Tom says, in response to my post on taxes and revenues:

Taxes were cut at the beginning of the Reagan administration.

Federal tax receipts increased by 50% by the end of the Reagan Administration.

Although correlation does not prove causation the tax cut must have accounted for some portion of this increase in federal tax receipts.

I couldn’t have asked for a better example of why it’s important to correct for inflation and population growth, both of which tend to make revenues grow regardless of tax policy.

Actually, federal revenues rose 80 percent in dollar terms from 1980 to 1988. And numbers like that (sometimes they play with the dates) are thrown around by Reagan hagiographers all the time.

But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.

Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.

Written by Leisureguy

17 January 2008 at 4:33 pm

Posted in GOP, Government

6 Responses

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  1. Unless my information is inaccurate, wasn’t the top tax rate under Ronald Reagan 50%?

    Like

    ragnarsbhut

    21 March 2019 at 11:53 am

  2. No, it was 70%. Reagan cut it to 50%, but at the beginning the top rate was 70%.See https://en.wikipedia.org/wiki/Reaganomics

    Like

    LeisureGuy

    21 March 2019 at 11:56 am

  3. My bad. Was it 70% under Jimmy Carter? Then Ronald Reagan lowered the tax rate to 50%?

    Like

    ragnarsbhut

    24 March 2019 at 2:41 pm

  4. Yes, it was probably 50% under Jimmy Carter—I’m a little tired of doing your research for you—and thus it was 50% under Reagan. As it is stated in the article whose link I gave you:

    In 1981, Reagan significantly reduced the maximum tax rate, which affected the highest income earners, and lowered the top marginal tax rate from 70% to 50%; in 1986 he further reduced the rate to 28%.

    Like

    LeisureGuy

    24 March 2019 at 3:02 pm

  5. Great stuff. I was just confused about some of the details.

    Like

    ragnarsbhut

    1 April 2019 at 4:16 pm

  6. In light of our continuing discussion over the GOP sabotage of the IRS, which you once denied, take a look at this post.

    Like

    LeisureGuy

    1 April 2019 at 4:18 pm


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