It is a myth, says Bruce Bartlett, that Ronald Reagan ever said or thought that his tax cut would actually raise revenue. Or that the “Laffer Curve” proposed to do so.
But U.S. taxes have never been so high that there would be no loss of revenue with an across-the-board rate cut.
And the Reagan Administration never claimed that the 1981 tax cut would pay for itself. Every revenue estimate ever put out by the Treasury Department or Office of Management and Budget showed large revenue losses in line with independent analyses (see figure). http://www.ncpa.org/edo/bb/2002/images/bb020402.gif
Budget deficits in the 1980s were larger than projected for two reasons:
Within a few years, at least a third of the revenue loss due to the Reagan tax cuts was recouped from the larger tax base, according to careful academic studies.
Source: Bruce Bartlett, senior fellow, National Centre for Policy Analysis, February 4, 2002.
For text http://www.ncpa.org/edo/bb/2002/bb020402.html
For more on Growth of Government Spending http://www.ncpa.org/pd/budget/budget-5a.html
FMF Policy Bulletin\6 February 2002
