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CURL: Who says tax cuts kill jobs? Our history sure doesn’t

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ANALYSIS/OPINION:

A statement President Obama made halfway through his news conference last week was so unfathomable, so utterly incomprehensible, that befuddled White House stenographers simply gave up and tacked a "[sic]" next to it.

Here is what the president said: "If the American people looked at this, theyd say, boy, some of these decisions are tough, but they dont require us to gut Medicare or Social Security. They dont require us to stop helping young people go to college. They dont require us to stop helping families who've got a disabled child. They dont require us to violate our obligations to our veterans. And they dont require 'job-killing tax cuts.' [sic]"

That's right, the Harvard graduate said tax cuts kill jobs. But then again, he did study law, not economics. So let's turn to a man who studied the economy, albeit at little ol' Eureka College.

When Ronald Reagan took office in 1981, the top tax rate in America was 70 percent. Reagan cut that to 50 percent in 1982, then to 38.5 percent in 1987, and finally to 28 percent in 1998. What happened? Unemployment dropped from 9.2 percent (exactly what it is today) to 5.3 percent and inflation plummeted from 13.5 percent to 4 percent. At the same time, real income for Americans grew by an average $4,000.

But wait. Mr. Obama said it's better today. "Our tax rates are lower now than they were under Ronald Reagan," he said. "They're much lower than they were under Dwight Eisenhower."

For Reagan, not true. (Mr. Obama knows that. Still, Reagan inherited that 70 percent rate and it took his entire presidency to get it down to 28 percent, so Mr. Obama can technically make the claim.) But for Eisenhower, Mr. Obama's right on. Still, is that really something to brag about? In 1953, the top tax rate was 92 percent! So, yeah, it's lower now.

Nevertheless, Reagan has nothing on another tax-cutting president, whose record is among the very best. He knew what Mr. Obama does not, and enunciated it in the simplest terms: "Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other," he said. "It is increasingly clear that an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits."

"In short," he said, "it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."

Yes, John F. Kennedy — a Democrat! — had the right idea. He slashed the capital gains tax in 1962 and dropped the top tax rate to 70 percent. Federal tax revenues went up 50 percent, from less than $100 billion in 1961 to more than $150 billion in by 1968.

Reducing taxes, historically, has driven up federal revenue. In the 1920s, Warren G. Harding and Calvin Coolidge dropped the top tax rate from 70 percent to 25 percent; revenue rose from just more than $700 million in 1921 to $1.1 billion by the end of the 1920s.

Reagan proved it again. In 1980, Americans paid $517 billion in taxes, but after eight years of cutting taxes, revenue nearly doubled to just shy of $1 trillion — $991 billion. George W. Bush's tax cuts had the same effect: Revenue was $1.9 trillion when he took office and $2.5 trillion when he left in 2008.

Since then, though, it has been stagnant, even as Mr. Obama runs up trillion-dollar deficits. Revenue was $2.1 trillion in 2009, but Mr. Obama spent $3.5 trillion. Last year, $2.16 trillion in, $3.45 trillion out. (Pretty clear here that his Harvard education didn't exactly teach him how to balance a checkbook.)

But Mr. Obama says it'll all get better if he can just get more money from those private-jet owners. Those damn rich are just not paying their share. The facts, though, tell another story. During the Coolidge/Harding years, the "rich," who then made about $50,000, went from paying about 45 percent of all tax revenue to pouring in more than three-quarters of all the cash the federal government collected. During Reagan's years, the top 5 percent paid 37 percent of all taxes; today, they pay 57 percent. (So no, the tax bills for "the wealthy" didn't go down during the Bush years, they went up — by $100 billion in 2005 alone.)

One of the real problems is the tax-paying base. A whopping 43 percent (some say nearly 50 percent) of Americans — 66 million "lucky duckies" out of 151 million taxpayers — don't pay a cent, according to the Tax Policy Center. That's a far cry from the past: From 1950 to 1990, that number averaged 21 percent, dropping to 18 percent in 1986, according to the Tax Foundation.

It's past time to make every American pay his or her fair share. (Isn't that the American Way? You live here, you pay taxes. And really, shouldn't everyone pay the same rate, say, 15 percent, 17 percent? Again, only seems fair.)

So, Mr. President, higher deficits aren't caused by lower taxes, they're caused by higher spending (for instance, $3.45 in spending versus $2.16 in revenue).

And it doesn't take a Harvard degree to know that. Heck, any old guy from Eureka College would see it.

Joseph Curl covered the White House and politics for a decade for The Washington Times. He can be reached at jcurl@washingtontimes.com.

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