Failing to Pass the Laffer Test
The revenue boom of the last few years, which mainly depended on booming corporate profits, is over. Here’s a chart from the Congressional Budget Office:
And a further slowdown is visible within the fiscal 2007 data: revenue in September was up only 2 percent from the previous year.
To put this in perspective, here’s revenue as a percent of GDP since Clinton took office:
So everything you’ve heard about how revenues have boomed since the Bush tax cuts is wrong. What really happened was that revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery. And that recovery seems to have run its course.
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