January 28, 2006

Laffering All the Way to the Bank

Every year, the CBO estimates how much money is going to come in. It changes those estimates based on changes in the tax law and will also research speculative estimates when legislation is under consideration. Donald Luskin reports that the 2003 capital gains tax cut turned the prior CBO estimate of $125B in revenue for 2004-2005 into one of $98B. The actual figure for capital gains tax revenue is $151B for those two years.

In other words, we have $26B in the US Treasury that we wouldn't have had had we kept prior tax policy. We gained actual money by lowering tax rates on "the rich".

This is a very good thing for the country. It also happens to vindicate standard conservative economic theory, specifically the Laffer Curve. I do wonder if Democrats will take note?

Posted by TMLutas at January 28, 2006 10:31 PM