John McCain and the Economy

John McCain recently said this while campaigning in South Carolina:

Mr. McCain called for cutting the corporate tax rate to 25 percent from 35 percent — which Rudolph W. Giuliani has also called for — as well as making Mr. Bush’s tax cuts permanent, establishing a tax credit for research and development, and repealing the alternative minimum tax.

And Mr. McCain proclaimed himself a believer in the notion that cutting taxes increases revenue for the government by spurring economic growth. “Don’t listen to this siren song about cutting taxes,” Mr. McCain told supporters gathered here under a tent in a driving rain. “Every time in history we have raised taxes it has cut revenues. And is there anybody here that needs to have their taxes increased?”

But nobody at the New York Times bothered to check the accuracy of that statement about cutting revenues. The fact that it seems so counterintuitive should have tipped them off.

Jon Chait looked into this claim, and actually went back to the last tax increase - back in 1993. He found revenues to steadily increase.


The same is true for previous tax increases. Notably during WWII, when taxes were increased and revenues quintupled.

Maybe we shouldn't be too surprised about this, given McCain previous admissions:

Take, for example, John McCain’s admission that economics isn’t his thing. “The issue of economics is not something I’ve understood as well as I should,” he says. “I’ve got Greenspan’s book.”

UPDATE: McCain also claims that tax cuts increase revenue.