Politics & Policy

The Laffer Curve in Action

Can tax receipts rise if taxes are cut? Yes. Here's more proof.

By Jerry Bowyer

Another month, another vindication of the Laffer curve.

The Treasury Department has released its budget report for the month of November. The report shows that federal receipts for the last two months (the first two of fiscal year 2006) amount to $288 billion. This is up from the first two months of fiscal year 2005 ($271 billion), fiscal year 2004 ($254 billion), and fiscal year 2003 ($244 billion). In other words, federal tax receipts have risen over this time period for three consecutive years; a jump of over 17 percent from 2002 to 2005.

Despite growing a remarkable 47 percent in all of fiscal 2005, according to Economy.com, corporate income taxes continued surging upward, hitting $3.31 billion for November. This is almost 19 percent higher than corporate income-tax revenues for the same month of last year, which came in at $2.78 billion.

Once again, empirical data bears out the fact that tax cuts (in this case the broad tax cuts of May 2003) can lead to increases in tax receipts.

– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Independence Portfolio Partners. He can be reached through www.BowyerMedia.com.

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