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Government Study: Tax Cuts Don't Work




Cutting taxes is at the heart of the Taxpayer Bill of Rights (TABOR) and all of its variations. The argument is that less government will result in lower taxes and lower taxes will result in a robust and growing economy. Now, a U.S. Treasury Department study blows that argument out of the water.

On July 25, 2006 the Treasury Department released a study, "A Dynamic Analysis of Permanent Extension of the President's Tax Relief." The Center for Budget Policies and Priorities (CBPP) reported that the study "refutes many of the exaggerated claims about the tax cuts that have been made by the President and other senior Administration officials, the Wall Street Journal editorial page, and various other tax-cut advocates. Contrary to the claim that the tax cuts will have huge impacts on the economy, the Treasury study finds that even under favorable assumptions, making the tax cuts permanent would have a barely perceptible impact on the economy. Under more realistic assumptions, the Treasury study finds that the tax cuts could even hurt the economy."

The Treasury study decisively refutes the President's claim that "The economic growth fueled by tax relief has helped send our tax revenues soaring." Under the study's more favorable scenario, the modest economic impact of the tax cuts would offset less than 10 percent of the cost of making the tax cuts permanent.

CBPP's detailed report is available here at its Web site.