The proposal by House Budget Committee Chair Paul Ryan is outrageous, not supported by any facts or experience, and nasty and mean to boot. If you don't believe me, read what economist Paul Krugman has to say in Friday's Times.
Although Krugman pretty much says it all, I'd like to ask anyone if there is one shred of proof or empirical evidence that cutting taxes "pays for itself" in increased tax revenue. This is exactly what the senior President Bush correctly referred to as "voodoo economics" (along with the "trickle down" theory). I suspect that it is all part of the Republican Big Lie campaign: say something enough times and people will believe it.
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Changing tax rates can certainly influence individuals decisions on the margin. Would it completely be offset by a larger pie? Probably not. Look what happened when the capital gains tax rate was cut. The revenue inflow was a lot larger than people expected just through static analysis.
ReplyDeleteBut again, I don't think Ryan is saying that cutting taxes will completely pay for itself. But it can kick start things. Look at how GDP growth and jobs picked up after the 2003 tax cuts.