When Congress extended the Bush tax cuts on dividend income and capital gains recently, critics cried foul, blaming these policies for our nation’s budget deficit. It’s a convenient explanation: Lower tax rates, and watch revenue drop, resulting in huge deficits. The problem is that the explanation isn’t true.
The federal government is in the midst of a tax revenue bonanza. Revenue in the first eight months of the fiscal year, October through May, was $1.545 trillion. That’s a 12.9 percent increase from the previous year. The budget gap is closing, too. The eight-month deficit was $227 billion, down 16.7 percent from the previous year, which itself was a pretty good year. Federal revenue in fiscal 2005 reached $2.15 trillion