29/01/2006 11:52:02 pm
Decrease Taxes and Increase Revenue. In 2003, the US cut the capital taxes substantially. The Congressional Budget Office hence estimated the revenue from that tax to decrease. What happened? It increased. This phenomenon has had many names; the Laffer curve, Reaganomics, dynamic effects. If you raise taxes, the activity in the society might decrease and lead to a fall in revenue. And if you decrease taxes, revenue might actually increase. There are lots of examples from various countries confirming this. In the National Review, Donald Luskin describes this latest piece of evidence:

"Table 3-5 on page 60 in CBO?s Budget and Economic Outlook published in 2003 estimated that capital-gains tax liabilities would be $60 billion in 2004 and $65 billion in 2005, for a two-year total of $125 billion.

Now let?s move forward a year, to January 2004, after the capital-gains tax cut had been enacted. Table 4-4 on page 82 in CBO?s Budget and Economic Outlook of that year shows that the estimates for capital-gains tax liabilities had been lowered to $46 billion in 2004 and $52 billion in 2005, for a two-year total of $98 billion. ...

Now let?s see how things really turned out. Take a look at Table 4-4 on page 92 of the Budget and Economic Outlook released this week. You?ll see that actual liabilities from capital-gains taxes were $71 billion in 2004, and $80 billion in 2005, for a two-year total of $151 billion."

Read the entire article here - >