Tax & Growth Package Proves Effective

Tax & Growth Package Proves Effective

I was excited to cast my vote for President Bush's Tax & Growth Package early in my first-term as a U.S. Congressman because allowing American families to take-home more of their hard earned salaries to spend or save as they decide is the best way to stimulate the economy, create jobs and ultimately grow government revenues. This recipe proved true all three times it was tried in the 20th century, and I am confident that history will prove it true again, early in the 21st century.

Personal income tax rates were first cut in the 1920s from over 70 percent to less than 25 percent. Despite the reduction in rates, revenues increased substantially from $719 million in 1921 to over $1.1 billion in 1928, an increase of over 60 percent.

Tax cuts have been an effective economic tool for both Democrats and Republicans. President John F. Kennedy said, "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, 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."

President Kennedy pushed for across the board reductions in the marginal tax rates. When the top rate was reduced from more than 90 percent to 70 percent, tax revenues grew from $94 billion in 1961 to $153 billion in 1968, an increase of 62 percent.

Twenty years after President Kennedy, Ronald Reagan ran on a platform of sweeping tax reform, including dramatic across the board rate reductions. When President Reagan left office, the highest personal income tax rate was 28 percent. From January 1983 (when the Reagan tax cuts began) through 1989, income tax revenues climbed by more than 54 percent (28 percent after adjusting for inflation).

According to former Representative Jack Kemp (R-NY), one of the chief architects of the Reagan tax cuts, "At some point, additional taxes so discourage the activity being taxed, such as working or investing, that they yield less revenue rather than more. There are, after all, two rates that yield the same amount of revenue: high rates on low production, or low rates on high production,"

Following the Reagan era, the American people had their taxes raised twice, once in 1991 and once in 1993, and were paying up to 40% in federal income tax before the Bush Tax & Growth package in 2001, as well as the one I voted for in 2003.

There is evidence that those two Tax & Growth packages kept the recession, that was well underway in early 2001, mild.
Further, the President's policies now have the economy growing; during the final two quarters of 2003, the U.S. economy grew at an annualized rate of 6.1%--the fastest in 20 years. Homeownership is at an all time high of 68.6 percent-thanks to all time low interest rates. Over 513,000 new jobs were created in the first quarter of 2004 and we've created 795,000 jobs in the last seven consecutive months. All economic indicators suggest that the United States' economy is among the strongest in the world-despite the challenges we have faced in the past several years.

The Tax & Growth package has started to heal the U.S. economy. To be sure, there are still people hurting from the past several difficult years. I will continue to fight to grow this economy and to provide a level playing field for manufacturers and their employees. We will not be satisfied until everybody who wants a job, can find a job.