Well, here is another whopper from one of my favorite conservatard stink tanks. First, they give us these facts.
In 1993, President Clinton ushered through Congress a large package of tax increases, which included the following:
- An increase in the individual income tax rate to 36 percent and a 10 percent surcharge for the highest earners, thereby effectively creating a top rate of 39.6 percent.
- Repeal of the income cap on Medicare taxes. This provision made the 2.9 percent Medicare payroll tax apply to all wage income. Like the Social Security payroll tax base today, the Medicare tax base was capped at a certain level of wage income prior to 1993.
- A 4.3 cent per gallon increase in transportation fuel taxes.
- An increase in the taxable portion of Social Security benefits.
- A permanent extension of the phase-out of personal exemptions and the phase-down of the deduction for itemized expenses.
- Raising the corporate income tax rate to 35 percent.
And these facts.
In 1997, the Republican-led Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton. The 1997 bill:
- Lowered the top capital gains tax rate from 28 percent to 20 percent;
- Created a new $500 child tax credit;
- Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education;
- Extended the air transportation excise taxes;
- Phased in an increase in the estate tax exemption from $600,000 to $1 million;
- Established Roth IRAs and increased the income limits for deductible IRAs;
- Established education IRAs;
- Conformed AMT depreciation lives to regular tax lives; and
- Phased in a 15 cent-per-pack increase in the cigarette tax.
All of which I am going to take on faith.
But the '97 tax cut package so lauded by the HF contains 1 item that might be claimed as helpful to business - the capital gains rate decrease, and 1 item that might be helpful to high income earners, the income limits on deductible IRA's, and one thing that helps your heirs when you die. There are three items that might be helpful to medium or low income earners, one tax increase, one extension, and a depreciation nuance.
They present charts of GDP growth and growth in real wages in years 1 through 4, following the 1993 increases and the 1997 cuts. Well, I know a little bit about GDP growth. Here's a picture.
Do you see anything striking here? Sure, GDP growth was higher from 1997 through early 2000. GDP growth increased throughout Clinton's term - all rather neatly contained in a growth channel that includes most of his term - except for the very end. And wasn't there a dot-com bubble in there somewhere? Note that the liars chose a four year span to look at - justified in a way by the four years between the hike and cut events. But they don't specifically define the starting year for their analysis. Four years after 2007 was 2001 when GDP growth was dismal. They certainly did not include that. Since the Bush tax cuts, the economy has gotten steadily worse. Some how, they forgot to mention that, either.
You'd think the HF liars would favor policies that help business grow, and be against policies that reduced corporate profitability. Here is a look at how the Clinton era tax changes
Cash flow is in blue, after tax profits in red.I've added horizontal lines coming off peaks in July 1997 - the tax cut year. Cash flow immediately dropped by 10%, and didn't make a full recovery until 2000. After tax profits styed down even longer, and didn't fully recover until the middle of '02.
The next peaks with fall-offs occur in '05 for cash flow, and '06 for profits. You can see what's happened since then.
And all of this occurred in an era when corporate profits have been growing at an increasing rate. Their entire line of reasoning is bull shit.
Here's the Truth about the Heritage Foundation, and the fact-free Rethug dogma that they generate. They are about tax cuts -all tax cuts, all the time. They don't care if a tax cut is good or bad for anyone. Their religion is tax cuts and no piece of contrary data will shake their resolve. They cherry pick whatever scant data supports their unfounded claims, and lie because the truth is not on their side.
Update: BTW, unlike the lying liars at The HF, I am not suggesting any specific cause and effect relationships in any of the data presented in this post. Long range, I do believe the low tax era has put us on a bad economic path, due to both primary and second order effects. However, I am not suggesting that the 1997 tax cut, such as it was, caused the immediate decline in CF and profits. Sometimes stuff just happens.