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STIMULATING WEALTH TAX CUTS ACTUALLY MEAN MORE MONEY FOR WASHINGTON.

Byline: Howard P. ``Buck'' McKeon

ONE of the most unfortunate and misleading arguments raised against tax relief is that tax cuts will ``cost'' us money, and that if we want tax cuts, we will have to ``pay'' for them.

In fact, the record shows the exact opposite is true: If we want budget surpluses, we need to cut tax rates. This strategy worked for John F. Kennedy in the 1960s, Ronald Reagan in the 1980s, the Republican-led Congress in the 1990s and it can work for America now.

Many people are aware that since Republicans took control of Congress after the 1994 election, we have gone from $300 billion federal budget deficits and raiding Social Security, to balanced budgets and a projection of $2.17 trillion in non-Social Security surpluses over the next 10 years, according to the nonpartisan Congressional Budget Office.

But what many do not realize is that we achieved these surpluses by restraining spending and by cutting taxes to stimulate the economy, thus producing higher incomes and thus higher income tax revenues.

To some, this may seem counterintuitive. Conventional liberal orthodoxy maintains that a tax cut equals a reduction in tax revenue. Therefore, any tax cuts are ``risky'' because the government will have less money.

However, a look at our tax policies over the last 40 years illustrates the power of tax cuts to provide us with economic security.

One of JFK's first acts was to press for large tax cuts that led to the economic boom of the 1960s and gave us our last balanced budget (Fiscal Year 1968) until FY 1999.

The power of tax cuts was illustrated again in 1981, when President Reagan recognized that the top federal income tax rate of 70 percent was not only confiscatory and immoral but acted as a drag on the economy. Reagan was able to gain support for a 25 percent tax cut that included cutting the top rate by half.

Democrats, of course, assailed Reagan's ``tax cut for the rich'' and predicted it would worsen the federal deficit. What actually happened is something that the news media virtually never reports: Tax revenues actually increased from $599.3 billion in FY 1981 to $991.2 billion by the end of Reagan's tenure, FY 1989.

Liberals love to point to the fact that federal budget deficits increased during the Reagan years. And of course they are right. But they never admit the reason: spending on domestic programs increased even faster than did the increase in tax revenues.

From 1981 to 1989, total federal spending increased from $678 billion to $1.145 trillion. And while we did see big defense spending increases in order to win the Cold War during this era, the largest budget increases were in entitlements; so-called mandatory spending like Social Security, welfare, Medicare and veterans benefits increased from $370 billion to $654 billion from 1981 to 1989.

In other words, Reagan's tax cuts did not cause the deficit to worsen. If anything, had Reagan's tax cuts not been implemented, the economy wouldn't have expanded, tax revenues would have stayed relatively static and our budget deficit by 1989 would have been $546 billion, rather than $154 billion.

The same scenario occurred after the Republican Congress passed two major tax cuts in 1997: a $500 per child tax credit and reducing the capital gains tax from a maximum of 38 percent to 20 percent.

When we proposed this tax relief, the Clinton-Gore administration and Democrat congressional leaders claimed these cuts would cost us revenue and make it harder to achieve a balanced budget.

However, the Clinton-Gore administration didn't anticipate the power of tax cuts to stimulate the economy. And sure enough, total tax revenues jumped from $1.721 trillion in FY 1998 to a projected $2.008 trillion in FY 2000.

The budget, meanwhile, was balanced in FY 1999 - three years ahead of time - without raiding Social Security. Just recently, the CBO projected that we will see a non-Social Security surplus of $102 billion in Fiscal Year 2001. None of this would have happened were it not for Republican- backed tax cuts.

So the next time you hear a Democrat leader saying we cannot afford tax relief, just remember that we cannot afford not to cut taxes. The only risk lies in allowing Washington to keep your money.
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Publication:Daily News (Los Angeles, CA)
Article Type:Editorial
Date:Jul 24, 2000
Words:721
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