Report: Tax Cuts Don’t Pay for Themselves

Center on Budget and Policy Priorities

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In recent statements, the President, the Vice President, and key Congressional leaders have asserted that the increase in revenues in 2005 proves that tax cuts “pay for themselves.” In other words, the economy expands so much as a result of tax cuts that it produces the same level of revenue as it would have without the tax cuts.

President Bush, for example, commented in a February 8 speech, “You cut taxes and the tax revenues increase.”[1] Similarly, Vice President Cheney has claimed, “The tax cuts have translated into higher federal revenues.”[2] Majority Leader Frist wrote that recent experience demonstrates, “when done right, [tax cuts] actually result in more money for government.”[3] The Vice President also has stated, “The evidence is in, it’s time for everyone to admit that sensible tax cuts increase economic growth and add to the federal treasury.”[4]

In fact, however, the evidence tells a very different story: the tax cuts have not paid for themselves, recent economic growth and revenue growth have not been particularly strong, and revenues remain lower than had been predicted before the tax cuts were enacted.

Full report