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There was a common theme among the right wing blogs over the last few weeks. They once again were pushing the "tax revenues are blooming because of Bush's tax cuts" meme. The problem with this argument is tax revenues always increase during economic expansions -- except (oddly enough and totally forgotten by supply-side proponents) during the first two years of this expansion.

Below is information from the National Bureau of Economic Research (which officially dates the business cycle) and the Bureau of Economic Analysis (which provides information on tax revenues from individual tax payers). This will illustrate an economic fact: regardless of tax policy, tax revenues increase during economic expansions.

Each section is headed with the dates of the expansion.

Information on the top tax rate is in this PDF document.

Information on the capital gains tax rate is in this table.

Information on the inflation rate is in this table.

October 1949 - July 1953:

Tax Revenues increased from $15.8 billion to $33.2 billion. This is an overall increase of 110%. There was no change in the top tax or capital gains tax rate during this expansion.

Over this period the inflation level increased from 23.7 to 26.8 or an increase of 13%.

This makes the overall increase in tax revenues from individuals 97%.

May 1954 - August 1957

Tax Revenues increased from $30.0 billion to $39.2 billion. This is an overall increase of 31%. There was a slight decrease in the highest marginal tax rate, but no change in the capital gains tax rate.

Over this period the inflation level increased from 26.9 to 28.3 or an increase of 5%.

This makes the overall increase in tax revenues from individuals 26%.

April 1958 - April 1960

Tax Revenues increased from $37.7 billion to $46.0 billion. This is an overall increase of 22%. There was no change in either tax rate.

Over this period the inflation level increased from 28.9 to 29.5 or an increase of 2%.

This makes the overall increase in tax revenues from individuals 20%.

February 1961 - December 1969

Tax Revenues increased from $46.5 billion to $105.6 billion. This is an overall increase of 127%. The top marginal rate decreased from about 90% to the upper 70s.

Over this period the inflation level increased from 29.8 to 37.7 or an increase of 26%.

This makes the overall increase in tax revenues from individuals 101%.

November 1970 - November 1973

Tax Revenues increased from $101.5 billion to $140.0 billion. This is an overall increase of 40%. There were no changes in the top marginal rate or capital gains tax.

Over this period the inflation level increased from 39.6 to 45.9 or an increase of 16%.

This makes the overall decrease in tax revenues from individuals 24%.

March 1975 - January 1980

Tax Revenues increased from $158.0 billion to $284.2 billion. This is an overall increase of 79%. During this period, the capital gains rate increased from 45% to 50% in about 1977 (I'm eyeballing the chart).

Over this period the inflation level increased from 52.7 to 82.7 or an increase of 30%.

This makes the overall increase in tax revenues from individuals 93%.

November 1982 to July 1990

Tax Revenues increased from $356.0 billion to $598. This is an overall increase of 67%. During this period, the capital gains rate increased from 50% to 18% in the early 1980s. The top marginal rate decreased from 70% to 50% in about 1983. (I'm eyeballing the chart)

Over this period the inflation level increased from 98.0 to 130.4 or an increase of 33%.

This makes the overall increase in tax revenues from individuals 34%.

March 1991 -- March 2001

Tax Revenues increased from $578 billion to $1,296.6. This is an overall increase of 124%. During this period, the capital gains rate decreased from 30% to 20% in the early 1997. The top marginal rate increased from 30% to 40% in the early to mid 1990s. (I'm eyeballing the chart)

Over this period the inflation level increased from 135.0 to 176.2 or an increase of 31%.

This makes the overall increase in tax revenues from individuals 93%.

November 2001 - Present

Tax Revenues increased from $1,230 billion to $1,390.5. This is an overall increase of 13%. During this period, the capital gains rate decreased from 20 to 18% in 2003. The top marginal rate increased from 40 - 35% in the early to mid 1990s. (I'm eyeballing the chart)

Over this period the inflation level increased from 177.4 to 201.8 or an increase of 13.75%.

This makes the overall increase in tax revenues from individuals a little less than 0%.

Starting in 2003 --

Tax Revenues increased from $1,023.7 billion to $1,390.5. This is an overall increase of 35%.

Over this period the inflation level increased from 184.2 to 201.8 or an increase of 9.55%.

This makes the overall increase in tax revenues from individuals a little less than 26%.

So -- what does this tell us about tax policy?

Tax policy is more complicated than a simple marketing slogan. For example, Carter raised the capital gains rate. Tax revenues still increased an inflation adjusted 93%. Clinton raised the top marginal rate while cutting the capital gains rate, yet tax revenue still increased. Total tax revenues from individuals was already $939 billion in the first quarter of 1997, indicating his raising the top marginal rate actually increased revenues.

Reagan's rate cuts obviously weren't the great revenue gusher the supply-side crowd would have you believe, as tax revenues increased 35% -- about 1/3 the amount of Clinton and Carter who each raised taxes at some point.

Bush's revenues for his entire presidency are incredibly low. While the revenue from individual rates are good for the last two year, they are at best on par to tie the Carter and Clinton Presidencies. I would also argue the real estate bubble -- and the large amount of capital gains generated by an asset bubble -- are more than passing factors. The stock market bubble obviously played the same role in the Clinton years. Finally, there is the return to debt financing of government spending, as the total federal debt outstanding has increased nearly $3 trillion under Bush's unique brand of fiscal conservatism.

The short answer to any question about tax policy is there are no short and/or east answers. however, history clearly demonstrates that "tax cuts pay for themselves" is pure fiction as Presidents who raised taxes actually increased government revenue at a faster rate.