Grover Norquist Is Living in Candyland or Daniels is Right About the Need for a VAT

That was the term of the Reagan Administration.

So? We're interested in the revenue impact of a specific policy, i.e. the Reagan tax cuts that took effect in 1983. That means you should be picking dates specific to that policy, not the administration. So by picking 1981 as the base year, you are going back two years before the policy actually was effective.

A problem with 1989 as the end year is that there was the 1986 tax reform act, which raised taxes. That has you potentially attributing to the 1983 cuts a revenue gain that is in reality attributable to the 1986 tax increases.

You do ask an important question which is what is the timeline that you would look at: short run? long run? How long does the feedback of tax rate changes take to manifest itself in revenues? Revenues were done $46 Billion in 1983, by 1988 the increased revenues covered those loses and began to substantially increase afterwards.

I agree the long run effects are as important, if not more so, than the short run effects. But if that's the case, then you need to do the analysis in present value terms. I haven't run the numbers, but I highly suspect that present value of revenues as of 1986 (let's avoid contamination with the effects of the 1986 act, which took effect in 1987) is lower than that of 1982. If you run those numbers, i'd very interested to see your results. I would suggest using the 4-year rate on T-notes as of 1982 as your discount rate.

Apparently Thomas Sowell has done the math.

I looked at the article, and I did not find the kind of analysis I was looking for regarding the Reagan cuts.

BTW, it is a lot more credible that cutting taxes from 70% to under 40% would have a revenue increasing effect than the proposition that you would get the same from cutting from 39% to 34%. Research shows that the maximum point on the laffer curve is somewhere in the 50-60% range.

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