Taxes and revenues — another history lesson
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The important thing to realize, when looking at the history of federal revenues, is that they tend to grow over time even if there is no change in policy. One reason is inflation; another is growing population; a third is long-run economic growth
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Overall, the graph suggests that yes, cutting taxes reduces revenue. But it also tells us that stuff happens: the stock bubble inflated revenues in the late 90s, the collapse of that bubble hit revenues thereafter, then the housing bubble did its thing, and so on.

Reagan and revenue
Ah – commenter Tom says, in response to my post on taxes and revenues:


I couldn’t have asked for a better example of why it’s important to correct for inflation and population growth, both of which tend to make revenues grow regardless of tax policy.

Actually, federal revenues rose 80 percent in dollar terms from 1980 to 1988. And numbers like that (sometimes they play with the dates) are thrown around by Reagan hagiographers all the time.

But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.

Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.

Update: For the econowonks out there: business cycles are an issue here — revenue growth from trough to peak will look better than the reverse. Unfortunately, business cycles don’t correspond to administrations. But looking at revenue changes peak to peak is still revealing. So here’s the annual rate of growth of real revenue per capita over some cycles:

1973-1979: 2.7%
1979-1990: 1.8%
1990-2000: 3.2%
2000-2007 (probable peak): approximately zero

Do you see the revenue booms from the Reagan and Bush tax cuts? Me neither.