A Bit of Doodling About a Tax-Cut Danger - New York Times

A Bit of Doodling About a Tax-Cut Danger - New York Times: "In July 2003, Mr. Bolten said this at a press conference: 'All economists, I think, will agree very strongly that when you reduce taxes, put more money back into the economy, that has a feedback effect in the economy that causes growth' and in turn 'increases receipts.' He added that he wanted 'to see how much better the government's fiscal situation is as a result of the tax cuts.'

The recent analysis by Mr. Page at the Congressional Budget Office dismisses the idea that tax cuts may actually improve the government's fiscal situation. Even in his most generous scenario, only 28 percent of lost tax revenue is recouped over a 10-year period. The United States, it seems, is firmly planted on the left side of the Laffer Curve.

Recent experience corroborates this prediction. In the second quarter of 2001, just before the first of President Bush's tax cuts took effect, federal receipts from personal taxes accounted for 10.3 percent of the economy. By the end of the post-recession slump, receipts had dropped to 6.4 percent. But in the third quarter of 2005, with the economy booming, they were still under 7.5 percent - an enormous difference. In dollar terms, federal receipts from personal income taxes, at $802 billion in 2004, "