” As it turns out, lower taxes actually increased receipts.”
Lowered them by one third. The cuts were only predicted to recoup 2/3 of each dollar cut and that’s what they did.
Martin Anderson in ‘Revolution’ describes the goals of the Reagan program from the POV of an insider who helped design it and he explicitly rejects the idea that the cuts generated an increase in receipts. They asked Tip O’Neill for spending cuts because they knew receipts would fall off.
Total receipts grew over eight years but that includes factors other than rate cuts. The data can be found in Lawrence Lindsey’s ‘The Growth Experiment’, a sophisticated regression analysis of the effect of the rate cuts. Lindsey is a GOP economist and a fan of Reagan so it’s a friendly study. The sole rate cut that increased revenue was the capital gains cut which ironically was signed by Jimmy Carter.
The impact is sensitive to the years selected. The mishandling of the economy by Carter and the high interest rates (e.g., a prime of 21%) severely dampened the effect of the tax cuts for years. They asked Tip for the cuts for political purposes, not economic ones. The idea was to sell the idea that the tax cuts would cause a deficit if spending wasn’t cut; something that was part of the Reagan plan. Milton Friedman worked closely (albeit secretly) with Reagan on all of this economic plans and he did suggest to Reagan that tax cuts would increase revenues, but it wouldn’t be overnight. Tax cuts versus spending increases is like the difference between pushing or pulling on a string.