WASHINGTON – The Pulitzer Prize-winning fact-checker PolitiFact took on the Republican claim that reducing tax rates has always produced higher federal revenues, rating it “false.”
“Every time we’ve cut taxes, revenues have gone up, the economy has grown,” Rep. Joe Walsh (R-IL) said Sunday on ABC’s This Week, making the case for keeping taxes low as a way of reducing the federal deficit.
“We should first note that on its face, Walsh’s statement is not accurate,” PolitiFact declared on Tuesday. “There was a small dip in 1983, after President Ronald Reagan signed off on a tax cut in 1981, though tax revenues increased the next year and all through the 1980s. More significantly, income tax revenues fell in 2001, 2002 and 2003, as President George W. Bush successfully pursued tax cuts.”
The fact-checking website said that Walsh’s central justification — that the federal government eventually took in higher revenues years after the Bush tax cuts — was an inappropriate causation, given that revenue increases are typically attributed by economists to economic growth.
“So saying ‘revenues have gone up’ isn’t particularly meaningful in that context,” PolitiFact wrote, noting that the Clinton-era tax hikes also led to higher revenues.
Walsh’s argument reflects a central GOP mantra during a major national debate over taxes, spending and deficits. Party leaders invoked it in their successful push to extend the Bush-era tax cuts for high income earners last December. In recent months, they’ve frequently touted the claim that the U.S. government has a “spending problem, not a revenue problem.”
The economic argument hinges on the theory of the Laffer Curve, which states that up until a certain point, lowering tax rates would increase revenues because it would lift the burden and encourage more output. But after that point, the theory continues, further decreases in tax rates would yield lower revenue.
Last November, PolitiFact took on the assertion by Rep. Mike Pence (R-IN) that “raising income tax rates will likely actually reduce federal revenues” — and also rated it “false.”
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