Three myths about the Clinton tax hikes
Out on the campaign trail and in the halls of Congress, liberals are announcing plans to raise taxes—above and beyond the massive hike resulting from the expiration of the 2001 and 2003 tax cuts. They argue that tax hikes can benefit the economy. For evidence, they point to the economic growth in the 1990s after President Clinton’s 1993 tax hike.
This is bad economics, Heritage tax expert J.D. Foster explains in a new analysis.
There are three myths at the center of the liberal argument for tax hikes.
- Myth 1: The economy recovered from recession because of the 1993 tax increase.
Fact: “The tax increase probably slowed the economy compared to the growth it would have achieved” without the hikes, Foster writes. While the economy did grow after 1993, this was hardly due to the tax increases, since “much in the context of the 1990s was conducive to prosperity.”
- Myth 2: The late-1990s boom resulted from the 1993 tax cuts.
Fact: The 1997 cuts to the capital gains tax rate, not the 1993 tax increases, sparked the strong growth of the late 1990s. After the prolonged recovery from the 1992 recession, Foster concludes “it was not a moment when one would expect growth to accelerate.”
- Myth 3: The 1990s show we can raise taxes today without economic consequence.
Fact: The 1990s demonstrate that tax cuts, not tax hikes, are the key to economic growth. Congress should therefore, at a minimum, not allow the 2001 and 2003 tax cuts to expire. They certainly shouldn’t pile more taxes onto an already struggling economy. “Taxes are now above their historical average as a share of the economy, and are rising,” Foster notes.
Second, we have a video of Carla Howell, Chairman for the Committee for Small Government, on her organization's movement to end the Massachusetts income tax.
I recommend taking a look at their website, smallgovernmentact.org, for more information.