Congress can reduce income taxes by 30%

In 1996, I first drew attention to the extraordinary rise in federal revenues as a share of gross domestic product (GDP). At that time, federal receipts consumed 20.4% of GDP, an increase of 1.4% since the beginning of the Clinton Administration.

I calculated that we could cut federal income taxes by 15% across the board just to get federal revenues down to where they were when Bill Clinton took office: 19% of GDP. Subsequently, Bob Dole adopted this proposal as a key part of his presidential campaign.

Since then, federal receipts have continued their upward course. By the second quarter of 1996, federal revenues as a share of GDP reached their highest level in American history: 20.8%. The previous high was 20.7%, achieved briefly in 1969, when the Vietnam War surtax was in effect, and again in early 1981 just before the Reagan tax cut took effect.

At the peak of World War II in 1943, receipts only reached 19.9% of GDP, and at the peak of the Korean War in 1951, they only got as high as 20.1%. The postwar average is 18.7% of GDP.

Ever-increasing Tax Revenues

Since reaching an all-time in 1996, federal revenues have continued to set a new record almost quarterly. Revenues reached 21.1% of GDP in the fourth quarter of 1996, rising to 21.3% in the second quarter of 1997. In the third quarter, still another record was set when receipts reached 21.4% of GDP. (All of these data are official Commerce Department figures, which differ slightly from those published by the Office of Management and Budget.)

In no other administration in American history have revenues ever reached 21% of GDP for even a single quarter. We have now been well above that level for four straight quarters. As a result, the average level of federal taxes as a share of GDP during the Clinton Administration has reached 20.2%, far and away the highest average for any presidency in American history. And there appears to be no end in sight.

At this point, we could cut federal income taxes by almost 30% across the board, and all it would do is lower revenues as a share of GDP to their postwar average. We could have cut taxes by more than $200 billion in 1997 alone, and revenues would only have fallen to where they were when Bill Clinton took office.

The pitifully small tax cut enacted earlier this year will barely dent the vast tax increase of the last five years, Congress should take a much more aggressive position on tax reduction this year.

Mr. Bartlett, a nationally syndicated columnist. is a senior fellow at the National Center for Policy Analysis, based in Dallas, Tex.

Copyright Human Events Publishing, Inc. Jan 16, 1998
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