TAX RELIEF HAS WORKED
Nobody likes someone who says "I told you so," but I have to admit I am mighty tempted to say it anyway after hearing the latest economic news. Government revenues for April 2005 were 29 percent higher than they were a year ago. As a result, the Department of Treasury will be paying down $42 billion in debt in the April-June quarter.
The good news was compounded with the news that 274,000 jobs were added in April, reducing the unemployment level from 5.5 percent a year ago to 5.2 percent. These Department of Labor statistics showed stronger-than-expected employment growth.
This news is welcome vindication of tax relief passed by Congress and signed by President Bush starting in 2001. When I joined my colleagues in passing tax relief for hard-working Americans, we were accused of busting the budget. Many critics painted a rather dark picture of our economic prospects, even though we had based our legislation on America's long experience of seeing tax reductions spur economic growth and higher government revenues. In fact, according to data collected by the Congressional Budget Office, total federal revenues in 2004 were higher than those for 2002.
The first modern example was the tax relief passed by Congress under President John F. Kennedy in the 1960s. That tax relief sparked a long economic boom. President Ronald Reagan passed substantial tax relief which started an economic expansion which lasted, with one interruption, into the presidency of William Clinton, who signed increases in taxes. President George W. Bush inherited a stalled economy which he believed would benefit from tax reductions.
I supported the tax relief packages because they removed many unfair provisions in the code. I led the fight and authored the legislation to eliminate the Marriage Penalty, which taxed married couples at a higher rate than unmarried couples. We increased the tax deduction for children. Perhaps the most important part of the relief package is that it reduced marginal rates, so every American who pays income taxes got relief.
Economists report that the Gross Domestic Product measurement of the economy has improved as a result of the tax relief. GDP in 2002, the first year relief took hold, increased by 1.9 percent. In 2003 growth accelerated to 3 percent. By 2004, the economy averaged an extremely high annual growth rate of 4.4 percent. The preliminary growth figures for the first quarter of 2005 shows a healthy growth rate of 3.1 percent despite sharply higher energy prices.
President Reagan was fond of saying that a rising tide lifts all boats to illustrate the fact that economic growth provides better jobs, a higher standard of living and more government revenue. He was right. Economic growth, spurred by lower taxes, increases the total government revenues even when taxes have been decreased.
Some may wonder how it can be that the U.S. deficit has increased even though tax relief boosted the economy and thereby raised revenue. The answer is government spending has increased at an even faster rate. After the Sept. 11, 2001 terrorist attacks, our nation has had to invest heavily in improved security as well as prosecute a war against terrorists in Afghanistan and Iraq. I do not begrudge these expenditures. They were necessary to make the United States safer. But we must work to rein in unnecessary spending.
The recent good financial news strengthens my resolve to work to make our tax relief permanent. Much of the tax relief we passed was scheduled to sunset, or end, in 2010. I would like to see tax relief, particularly marginal rate reductions, capital gains tax reductions, abolition of the Death Tax on inheritance and Marriage Penalty tax relief made permanent.
You have heard the old expression, if it ain't broke, don't fix it. I would like to add, when it comes to tax relief, if it ain't broke, and it is working great, then don't end it.
May 13, 2005