22/08/2005 10:31:08 am
Again: Lower Tax = Higher Growth! In the Financial Times, Amity Shlaes writes about the higher growth, lower unemployment - and higher revenues - that have followed the massive tax cuts in the US by the Bush administration:

"Last year the deficit was a humiliating 3.6 per cent of gross domestic product. The deficit this year, new numbers suggest, will be 2.7 per cent of GDP ? acceptable. The difference? Extra revenues. It seems federal revenues for this year will be $85bn (£47bn) higher than anyone was predicting as recently as March. Growth, too, may be stronger than expected, remaining above 3 per cent. Unemployment? Some forecasters now believe it will dive deep into the mid-4 per cent range. ...

But there should be no surprise. For the inflows are the direct result of the Bush administration?s commitment to a concept: individuals respond to incentives. Not merely targeted ones ? a break, say, for a specific group of manufacturers ? but overall incentives for enterprise. ...

The Bush White House and Congress flattened the steep stair-step progressive rate structure of the income tax, lowering the top marginal rate. They cut the tax on dividends to 15 per cent from 39.6 per cent; 15 per cent became the new (lower) top rate for capital gains. They likewise created a one-time amnesty programme for companies repatriating profits. Corporate tax revenues this year increased 42 per cent upon the year before."

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