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Treasury Tax Expert to Bush: Clinton's Increase WASN'T The Biggest.

Study published by Bush's Treasury Department contradicts Bush's campaign.

April 16, 2004

Modified: April 16, 2004

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Summary

 

In speeches and fundraising appeals the Bush campaign keeps making a distorted claim that Clinton 's 1993 tax increase -- supported by Kerry -- was "the biggest in history."

Republicans have been repeating this gross overstatement for more than a decade, but now there's less justification for it than ever. The GOP claim is contradicted by a study published last year by the Office of Tax Analysis of Bush's own Treasury Department.

Analysis

 

On Tax Day, April 15, the Bush campaign was still re-cycling this decade-old claim in an e-mail sent to supporters, asking for more campaign contributions:

Bush's E-Mail

Subj: On Tax Day, another reason to support President Bush

Sent:   April 15, 2004

  • Both Ted Kennedy and John Kerry Voted Against President Bush's Tax Relief in 2001 and 2003.
     
  • Both Ted Kennedy and John Kerry Voted For Bill Clinton's 1993 Tax Increase -- the Largest Tax Increase in History.  

Bush himself said it in his first overtly political speech of the campaign on March 20:

  • Bush: Over the years, he's (Kerry) voted over 350 times for higher taxes on the American people including the biggest tax increase in American history.

    And Vice President Cheney  told the US Chamber of Commerce March 29:

    Cheney:  A career highlight was his  (Kerry's)vote in favor of the largest tax increase in American history .

But that bit of political puffery has always been based on a simplistic tally of the number of dollars the Clinton tax bill yielded, without regard for population growth, rising incomes, or inflation.

Now comes a thorough study of every tax bill enacted since 1940, showing that the Clinton tax increase was indeed large, but not the largest.

A tax increase in 1942 boosted federal revenues by 71%, for example, as the US geared up for war after the Japanese attack on Pearl Harbor. Measured in inflation-adjusted 1992 dollars, Roosevelt's wartime increase amounted to $73 billion a year, while Clinton's increase averaged $35 billion a year (average for the first two years.)

The study said that inflation-adjusted "constant dollars" is probably only the second -best measure of the size of a tax increase. "The single best measure for most purposes is probably the revenue effect as a percentage of GDP." That's Gross Domestic Product, the way we gauge the size of the economy. Clinton's tax increase isn't the biggest by that "best" measure, either. In the period since 1968, the study said, "the Tax Equity and Fiscal Responsibility Act of 1982 was the biggest increase." That was the tax increase signed by Ronald Reagan, rescinding some of the effects of his huge tax cut passed the year before.

That 1982 tax increase only slightly exceeded Clinton's in inflation-adjusted dollars ($37 billion a year vs.. $32 billion) but it was much bigger in relation to the size of the economy. The '82 increase amounted to 4.6% of GDP (average for the first two years) while Clinton's was 2.7%.

Footnote: The study's author, Jerry Tempalski of the Office of Tax Analysis, put the following disclaimer on the cover page: "The views expressed in this paper are those of the author and do not necessarily represent the views of the U.S. Treasury Department." Apparently they are not the views of the President, either. Why let the facts get in the way of a campaign zinger?

Sources

 

Jerry Tempalski, "Revenue Effects of Major Tax Bills " OTA Working Paper 81, Office of Tax Analysis, US Treasury Department, July, 2003.

George W. Bush, "Remarks by the President at Florida Rally," Orange County Convention Center, Orlando, Florida 20 March 2004.

Vice President Richard Cheney, "Kerry's 350 Votes for Higher Taxes Make the Choice Clear ," Remarks to US Chamber of Commerce, 29 March 2004.