Because, lowering tax rates, increases tax revenue…

 

President Reagan economic program 1981 :

1.     Cut tax rates

·        The Reagan Recovery took off once the tax rate cuts were fully phased in. 

·        Reagan Cut tax rates to restore incentives for economic growth.

·        Reagan Reduced the top income tax rate of 70%, down to 50%.

·        Reagan Reduced income tax rates for everyone, across-the-board 25%.

·        Reagan's 1986 tax reform reduced tax rates further, leaving just two rates, 28% and 15%.

2.     Reduce Government spending/size of government

·        Reagan Reduced total federal spending relative to the economy by 10% :

·        23.5% of GDP in 1983 to

·        21.3% of GDP in 1988 and

·        21.2% of GDP in 1989.

·        Despite the Reagan defense buildup.

3.     Anti-Inflation policies

·        Reagan reversed the explosion of inflation during Nixon and Carter years.

·        Reagan restrained the money supply growth, compared to demand.

·        Reagan strengthened the U.S. dollar globally.

·        Reagan stabilized the value U.S. dollar worldwide.

·        Inflation from 1980 was reduced by more than half, to 6.2%, in 1982.

·        Inflation was cut in half again by 1983, to 3.2%.

4.     Deregulation

·        Reagan eliminated price controls on oil and natural gas.

·        Production soared, price of oil declined by more than 50%.

·        Reagan’s saved consumers an estimated $100 billion per year in lower prices. 

The Reagan Recovery

·        Started November 1982 lasted to July 1990.

·        Reagan recovery averaged 7.1% economic growth over the first seven quarters

·        Reagan set the new record for, longest peacetime expansion ever.

·        92 months without a recession.

·        Previous peacetime expansion high in peacetime being 58 months.

·        U.S. economy grew by almost one-third, in seven years.

·        Nearly 20 million new jobs were created during the Reagan Recovery.

·        In 1984 alone, real economic growth boomed by 6.8%, highest in 50 years.

·        U.S. civilian employment increased by almost 20%. 

·        Unemployment fell to 5.3% by 1989.

·        The poverty rate declined every year 1984 to 1989, by one-sixth from its peak.

·        Reagan increased real per-capita disposable income by 18% from 1982 to 1989.

·        The stock market more than tripled in value from 1980 to 1990.

·        American standard of living increased by 20% in seven years, thanks to Reagan.

·        Until, the tax increases of the 1990 budget deal killed the Reagan Recovery expansion of the economy. 

The Reagan recovery was achieved while taming a historic inflation, for a period that continued for more than 25 years

From, The End of Prosperity, Art Laffer and Steve Moore.

"We call this period, 1982-2007, the twenty-five year boom--the greatest period of wealth creation in the history of the planet.  In 1980, the net worth--assets minus liabilities--of all U.S. households and business ... was $25 trillion in today’s dollars.  By 2007, ... net worth was just shy of $57 trillion.  Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years."

Because, lowering tax rates expands the tax base, which increases tax revenue.

Like Reagan proved.