You forgot. McSame has to pander to the CfG crowd. They, along with the fundies, hate McCain the most. Why do you think he flip-flopped on the tax cuts?

I'm no supply-sider, but I fail to see your point as you state it (not to say that McCain is making much sense here, but I don't expect sense from him -- anyway, making sense is bad for politicians 'cause people don't vote for smarty-pants who make sense ... they vote against them and then complain about politicians not talking sense -- but that's another topic entirely).

Anyhoo ... from what I can tell in the graph, the 1997 rate cut really had no effect ... it didn't really change an existing trend in the next year -- neither to increase further nor decrease (even after the first couple of years, pace Fox's point) revenues. And it looks at first glance that the 2003 cuts did increase revenues and haven't decreased them yet (in spite of the bad economy ... or perhaps because of the bad economy -- people are taking capital gains now and bailing out of the markets ... in this way, couldn't one argue that capital gains tax cuts, by making selling off more attractive, might precipitate crashes?) -- but on second glance, again, it seems that the trend was already starting by 2003.

OTOH, "it's not even the sort of wrong with a long and distinguished tradition behind it"? "Even conservatives who believe in supply-side economics wouldn't suggest that raising taxes reduces revenues save at extremely high rates of taxation"? I thought the idea of the Laffer curve was that the optimal (marginal for high earners) tax rate was actually relatively low ... not that the maximum of the curve (above which increasing tax rates would decrease revenues) was extremely high ...

Am I missing something?

This graph would be a lot more helpful if it overlaid the market performance (DOW, s&P, whatever) over it. Obviously, capital gains receipts will go up or down with the market regardless of what tax changes occur. It might also give us some insight into how much the Laffer curve applies to capital gains taxation. That effect might actually be temporarily reversed. That is, a cut in capital gains taxes might actually drive the markets down temporarily due to high selloff. But the anticipation of a tax cut might drive the market up as investors delay their sales until the new rates apply.

Why won't anyone call for the obvious -- a zero tax rate will give infinite revenue!!

W's record deficits are just an anomaly.

But if McCain's capital gains talk is misleading, his comment that "you can't get over the fact that historically when you raise people's taxes, revenue goes down" is economic Scientology. Not only is it wrong, but it's not even the sort of wrong with a long and distinguished tradition behind it.

What Republicans have you been talking to? Among the rank-and-file ideologues that I'm exposed to, it's an article of faith that revenues almost always go up when taxes (of any kind) are cut. No facts can convince them otherwise. And as I recall, Giuliani and a number of other one-time contenders were repeating this crap throughout the GOP primary.

Like DAS, I'm not sure what the graph is supposed to prove, other than "Revenues increase after a rate cut."

Yes, they were already increasing before 1997, and revenues declined without any rate changes in 2000. But McCain's statement on capital gains is true, according to the graph.

A few commenters above are confusing the proposition "tax rates go down, revenue goes up" with the proposition "tax rates go up, revenue goes down." They are similar but not the same. I think what Ezra is saying is that you hear the former often enough, but nobody is claiming the latter until today.

"This graph would be a lot more helpful if it overlaid the market performance (DOW, s&P, whatever) over it."

It would be even more helpful if market volume were shown as well. With those three data sets, we could (in theory) develop a Laffer curve for capital gains taxation and settle the question. Well, ok, it won't settle it. We already have a good idea of what the shape of the Laffer curve is for income taxes, but the Republicans won't believe it. But at least the rest of us would know.

Just so it's kept somewhere, here are the 28 Senators who voted against the final bill.

Akaka, Biden, Bingaman, Boxer, Brown, Byrd, Cantwell, Cardin, Clinton, Dodd, Dorgan, Durbin, Feingold, Harkin, Kerry, Klobuchar, Lautenburg, Leahy, Levin, Menendez, Murray, Reed, Reid, Sanders, Schumer, Stabenow, Tester, Wyden.

You'll notice Obama not on that list - he kept his word to work to vote to strip immunity, and he kept his word to vote for the final bill (as many have noted in the comments, he absolutely did not keep his word from the primaries to filibuster any bill that had immunity included in it). He joins Baucus, Casey, and Whitehouse as the four who voted for stripping immunity, but then for the final bill. (Come on, Whitehouse!)

Anonymous,

That's not the half of the flip flop....Obama managed to have his kids interviewed by Access Hollywood and then flip-flopped and said he opposed letting them being interviewed BEFORE the interview even aired. He can complete a double flip in a single day!

OK, got to go learn my kids some Spainish now before Obama tests them.

I didn't know those sooty Europeans all spoke every language of Europe but Barack says those Europeans are coming over here speaking English and German and French and Italian,,,, apaprently they all know at least 12 languages!!

""Capital gains cuts increase the next year's revenue, but then they decreae revenue the year after that"""

To snooty Barack, I may be an embarrassment, but even I can see the chart doesn't match your words. It should revenue went up for at least 3 years.

In addition, you fail to mention that higher tax rates tend to stunt economic growth and investment; thus that also reduces tax revenues.

But none of that matetrs to Barack, the whole issue is fairness regardless if it kills the economy, that was his point.

What you don't show is the difference. Sure if you raise taxes, revenues can go up with 1-2 percent growth, but they would have increased much more with 4-6 percent growth, that is McCains point. That also helps with lots of other society ills like unemployment, charitable giving, need for government welfare, etc. etc.

You're all wrong...Obamas biggest flip was to go from Iran was no serious threat to Iran is a grave threat...in ONE DAY!

Of course those 9 missiles and threats to close the Straits of Hormuz were them just having a little fun..they kid ya know...those wacky Iranians.
$10.00 a gallon gas anyone??

Perhaps today would be a good day to review Ezras Iran is tiny, no threat to civilized people chart.

The left was so pissed at Obama today over FISA, I heard some liberals wanted to rip Obamas nuts off. Hannity claims to have some prominent liberal on tape making these threats, but we know he probably doctored the tape and it is really a Jesse Helms wannabe rant, not the innocent little harmless lefties...

sweetie, very nice set of theories you have there. too bad actual empirical observation says you're talking through your hat.

the capital gains issues is very straightforward: there are short term responses to changes in cap gains tax rates, but in the long term, everything normalizes and revenue is lower because the rate is lower.

now, the issue of higher tax rates "stunting" growth may possibly (possibly) have some relevance to a discussion, but considering that the economy of the 1950s, with levels of taxation that today's ill-informed rabble would find onerous, outperformed any post-republican-tax-cutting economy.

there are any number of factors that influence economic performance: if, for example, the infrastructure is falling apart because government doesn't have the revenue to repair it, that is a major negative for economic growth.

if, for example, taxes are cut and we nonetheless engage in a pointless war for years on end, then we have to borrow the money to pay for that war, thereby crowding out more productive investment.

the nutcases who run the wsj editorial page, and with whose piffle you seem to agree, claimed, after the 1993 clinton tax hike, that growth would halt, recession was right around the corner, and the proud era of reaganomics was over.

and waddya know: 8 years later, after years of good-to-outstanding economic growth, job creation, real income gain, and an investment-led boom, we finally had that recession.

you would think that the tax hikes hinder growth crowd would simply stfu after that, but as you demonstrate, no such luck.

meanwhile, george bush got every tax cut he wanted and you know how history will judge economic performance on his watch? piss poor.

shall we go on?

For those having trouble understanding how the chart supports what Ezra is saying, it might help to visit the link he provided to Justin Fox. Basically, what I think it shows is that revenue didn't rise any faster after the rate cuts than it did before the rate cuts, and the 2007 peak (at the lower rate) will be lower than the 2000 peak (at a higher rate). Is that about right?

I think it's hilarious that the tax McCain cites immediately is the capital gains tax.

I don't pay that one. Most people I know don't either. Only rich people pay that tax, and that is the only group of people it impacts.

Anyway, just an indication of who McCain thinks are real taxpayers.

Oh, I think a lot of middle class voters aren't strangers to the capital gains tax. But the thrust of your point stands because it's rich people who earn most of their income on investments taxed as cap gains, while most of the middle class will earn most income on wages, except in the occasional extraordinary year when, say, they move to a smaller house or maybe liquidate savings to pay for something big ticket like college.

Interesting article. I need to read it again in order to digest all the information correctly!

The Jackson cover-up shows how complete the media bias is. If Jackson were a Republican, the press would be hounding every major Republic candiddiate and party official demanding they denouce Jackson on camera or the won't stop asking the questions.

With jackson, even Fox news has buried the full Jackson remarks which are actually worse then just the castration comment. Every reporter quickly finds a wat to excuse jackson remark and move beyond the controversy.

Just the same way the excuse and fail to report the racism of Byrd and Cliton etc. and the anti-Jewish Sharpton and Wright, etc.

I'm apparently not reading the chart correctly, because it seems like it repudiates your point. I don't see a "down" a year or two years after the cuts...

while most of the middle class will earn most income on wages - Cliffy

How are earnings from IRAs and similar retirement savings' taxed? There are a bunch of middle class baby boomers about ready to retire who at least think that they will be paying capital gains taxes on their interest (once they start withdrawing from their retirement accounts) -- the fear that if capital gains taxes go up, they'll have to pay more than they bargained for and will be broke in retirement.

There are some massive disinformation campaigns out there as well. Obama needs to ensure (and thanks to his "flip-flopping" he can't) soon-to-be retirees that his tax plans won't screw them over.

"tax rates go down, revenue goes up" with the proposition "tax rates go up, revenue goes down." - jeebus

Unless the first derivative of revenue as a function of tax rate is discontinuous at the tax rate in question, "a small increase in tax rate means revenues go down slightly" is equivalent to "a small decrease in tax rate means revenues go up slightly". Of course, if the second derivative is non-zero, your statement of non-equivalence is correct for large changes in tax rates.

But where your statement is correct is, in particular, at the "top" of the Laffer curve, isn't it? And don't the conservatives claim that the Laffer curve maximum is in a different place than where it is we liberals claim it is?

I certainly agree that John McCain's ideas are "voodoo economics" but to claim, as Ezra does, that even conservatives don't accept John McCain's claims is simply wrong.

Isn't the whole point of cutting taxes 'starving the beast' of government? I don't get, they're trying to play it both ways: say they want to increase revenue because then the public can have its cake and eat it too, but in fact they can advance their goal of starving government.

I'm as disappointed as anyone that Obama didn't stand up for the Constitution. But I don't think it's true that he broke his promise: he said he would "support a filibuster." When the cloture vote was taken 2 weeks ago, he stayed out, not providing a vote for cloture, which had the effect of...supporting the filibuster. It's lame, but he didn't actually promise much.