I don't argue that there is a one-to-one relationship, and I agree that lower taxes will have a stimulative effect. However, if lower taxes always led to increased revenues, the corollary is that cutting income taxes down to say, 1%, would give the federal government a huge spike in revenue. Do you believe that to be true?
What I would suggest though is that in the current political climate, there is no incentive to cut spending, so the end result of tax cuts is increased deficits, as we are currently seeing. It is unfortunate that we are in this situation when there is so much potential for massive spending cuts.
Of course not. There is a point between 1% and 99% that will maximize government revenue. At the low end, lowering the rate of taxation is not made up for by the increase in economic activity. For instance, cutting the tax rate from 2% to 1% would halve government revenue, but would have a negligible effect on the economy, since taxes are no longer a significant cost at 2%.
It's a curved function with a peak. To suppose that peak just happens to fall at the point of the 1996 tax package is to engage in "magical thinking".
And then you have the political question of the role of government in society, and whether or not maximizing government tax revenue is a good thing. For example, from a human freedom point of view, starving the government is always a good idea. The fewer resources they have, the less trouble they can cause.
If I had to guess, I would say we are on a reletively shallowly sloped portion of the revenue/tax rate curve, and that decreased taxes will be largely recovered through economic acceleration. They may not be fully recovered, but that is not necessarily a problem. Having smaller government and more money left with the earner is a desirable thing, IMHO.
Unfortunately for us all, the spending discipline in Washington, at all levels, leaves a lot to be desired.