Tax Cuts Don't Help the Budget

For those people who believe that tax cuts increase government revenues (e.g. National Review), Angry Bear provides some more evidence that Bush's "fairy tale economics" is still a dream. Federal real tax collections are down from 2000.

Cactus offers a way of testing the tax issue in the US: compare states with different tax rates.

Here's his conclusion:

the data doesn’t seem to support the idea that lower taxes are associated with faster growth rates. In fact, the opposite is true, especially for the fastest growing states. One way to interpret this is to conclude that taxes are actually below their optimal rates, and therefore, at the margin, the government is actually more efficient than individuals at converting its spending into growth. Society needs a certain amount of public goods (infrastructure, public health, confronting the Canadian menace, etc.) for businesses to thrive, and perhaps we currently have too little provision of public goods rather than too much.