” Any time there has been sustained and significant tax cuts (e.g., Kennedy, Reagan, Bush), gov’t tax receipts increased, not decreased. “
While that has achieved some sort of status as received truth it isn’t accurate. All of these administrations had significant deficit spending which gooses an economy. You have to factor out deficit spending, the natural business cycle, and some other factors to determine the impact of tax rate reductions. Calculating the effects of tax cuts is not as simple as subtracting the gross tax receipts of 1981 from 1989.
Lawrence Lindsey’s study validated the actual predictions of Reagan’s economists, which is that the tax cuts wouldn’t lose as much revenue to the Treasury as static analysis predicted. Economic growth recouped some 60 cents of each dollar cut. The point of the tax cuts was to grow the economy, not to generate increased tax revenue. The optimum tax rate for economic growth is not the same as the optimum tax rate for tax collection. The initial Reagan program included spending cuts for a reason, and that is because the tax rate reductions were expected to result in reduced Treasury revenue.
I think I remember Lindsey’s report, but I’m not sure. I do remember that he was sacked by Bush because of his war cost projections. I also think he has recently come out for tax cuts, saying it’s the only way out of this recession. Finally, what was the time span to recoup the 60% on the dollar tax cut? It would seem to me that a fairly long period of time is needed to assess the full impact on the cut, especially with respect to long term investment.