And despite what some politicians say, not even conservative economists believe tax cuts are self financing. There is no such thing as a free lunch. As James Surowiecki points out:
The top earners pay a bigger share of the government tab than in the past because their incomes have risen so sharply — even more sharply than their tax bills. (Mr. Fleischer was able to claim the opposite by looking only at income taxes.)
The affluent, in short, are paying less in taxes on every dollar they earn but earning many more dollars.
How much of an impact tax rates have—and how high taxes have to get before they have an impact—is a subject of much debate in economics, but it’s inarguable that they do matter. What supply-siders have done is start with that reasonable idea and extrapolate it to unreasonable lengths.I use to call myself a supply sider, but stopped years ago when the tax cut nuts laid claim to the name.
It’s the comparison between actual tax revenue in 2007 and what tax revenue would have been in 2007 had there been no tax cuts in 2001. And studies that make these types of comparisons—including one by Bush’s own Treasury Department that looked at the tax cuts’ impact on economic growth—find that government revenues would be greater had taxes not been cut.