SUPPLY SIDE BUFFOONERY….I don’t normally tee off on Wall Street Journal op-eds ? although occasionally I make exceptions ? but today is a special day: it’s Stephen Moore’s maiden outing as a member of the WSJ editorial board. A friend emailed to tell me that “knowing how much you enjoy shooting fish in a barrel,” I should take a look. He was right! Moore’s sermon today is about the wonders of supply side economics:
In the 1980s, President Ronald Reagan chopped the highest personal income tax rate from the confiscatory 70% rate that he inherited when he entered office to 28% when he left office and the resulting economic burst caused federal tax receipts to almost precisely double: from $517 billion to $1,032 billion.
Tax revenue doubled! That does sound like a triumph for the tax cut jihadists, doesn’t it? But this is Stephen Moore, after all, so perhaps we should take a more careful look:
First, we should adjust for inflation, shouldn’t we? In 1980 dollars, $1,032 billion is actually $670 billion.
And of course, population increased over that time too, which naturally increases tax payments. Adjusting for that, tax revenue was $2,283 per person in 1980 and $2,694 per person in 1990.
That’s not double. It’s an increase of 18%. And it’s worth noting that a lot of that is due to consistent tax increases throughout the 1980s (details here). Without that, Reagan wouldn’t have gotten even the anemic growth in tax revenue that he did.
But wait. Is “anemic growth” fair? Why yes. After all, we can play this game with any decade. Annual tax receipts are here. Adjusting for inflation and population growth, the supposedly horrible 70s produced an increase in tax revenue per person of 25%. The Clinton 90s produced growth of 40%. In fact, Reagan produced the slowest growth in tax revenue of any decade since World War II. That’s a real supply side triumph.
Welcome to the Journal, Steve. You guys deserve each other.