IF YOU'RE SURPRISED BY THE SUNRISE:

Surprising Jump in Tax Revenues Curbs U.S. Deficit (EDMUND L. ANDREWS, 7/08/06, NY Times)

An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.

On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.

The Big-Bang Story of U.S. Private Business (Lawrence Kudlow, 7/08/06, Real Clear Politics)

Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland, and Belgium. [...]

Since the 2003 tax cuts, tax-revenue collections from the expanding economy have been surging at double-digit rates while the deficit is constantly being revised downward.

For those who bother to look, the economic power of lower-tax-rate incentives is once again working its magic. While most reporters obsess about a mild slowdown in housing, the big-bang story is a high-sizzle pick-up in private business investment, which is directly traceable to Bush's tax reform. It was private investment that was hardest hit in the early-decade stock market plunge and the aftermath of the 9/11 terrorist bombings. So team Bush's wise men correctly targeted investment in order to slash the after-tax cost of capital and rejuvenate investment incentives.

The move paid off. Investors now keep nearly 50 percent more of their after-tax capital returns -- an enormous increase that has resulted in a remarkably profitable and highly productive business sector. While the overall economy has grown by one-fifth since mid-2003, private business investment has expanded by 37 percent.

The dirty little secret here is that record low tax rates on capital are leading to continued job and income gains as businesses continue to expand.

The rich got tax breaks and all the rest of us got was an economic boom, full employment, millions of new Americans, free government services, and the liberation of Iraq....

Posted by Orrin Judd at July 8, 2006 10:25 AM