Corporate tax receipts are up more than 26% over the same period last year, ringing in at $250 billion. Individual income tax collections, at $791 billion, are up 14% over the first nine months of fiscal 2005. The Congressional Budget Office projects corporate tax receipts will total $330 billion by the end of the fiscal year. As a result, the deficit for the year is expected to be about $300 billion, down from $318 billion last year and $412 billion the year before.
What, you ask, has led to this miraculous event? A tax cut, it turns out. Or rather, an array of tax cuts, on corporate income, personal income, and capital gains. These tax cuts, passed in 2001 and 2003, appear to be having the desired effect of spurring economic growth by creating addition incentives for work and entrepreneurship.
Who would have thought?
Oh, maybe Reagan, GW Bush, and every university student with the capability to understand that incentives affect behavior. Back in the early 90's, I actually had an economics professor (yes, full professor, not lecturer/instructor/adjunct, you nit-picking academics) who argued this point with me, and claimed that Reagan's tax cuts caused the deficit, when in fact revenues increased substantially. Don't be surprised to see liberals and dim-witted educators claim this time around that Bush's tax cuts are causing the deficit. It's the spending, stupid.
HT: Decision '08.