"There's no real evidence in the last 20 years tha

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"There's no real evidence in the last 20 years that" growth from tax cuts has made up lost revenue.

— Rana Foroohar on Wednesday, April 26th, 2017 in a CNN interview

Do tax cuts pay for themselves? Evidence is thin

http://www.politifact.com/punditfact/statemen...cuts-real/

"I am not aware of any credible evidence (in the U.S.) over the last several decades of a broad-based tax cut paying for itself," said Alan Auerbach, an economist at the University of California, Berkeley. "I don't think this is at all controversial among actual economists."

Kleinbard was similarly emphatic: "There is no time in modern history where tax cuts could be said to pay for themselves."

According to Kleinbard, the 1981 tax cuts triggered massive federal deficits and were largely reversed within three years. The Tax Reform Act of 1986 was basically revenue neutral, he said, meaning tax cuts were virtually offset by spending cuts. He added that President Bill Clinton’s tax hike was followed by robust growth, while the George W. Bush tax cuts led to anemic growth.

None of the experts interviewed cited evidence that tax cuts under President Barack Obama produced sufficient growth to pay for themselves either.

On the contrary, there’s some evidence that tax cuts can be a drag on the economy -- like the 2005 CBO study mentioned earlier.

When the CBO studied the effects of a hypothetical 10 percent income tax cut for Americans, not all the projections were as rosy as the finding above. Under the CBO’s most pessimistic projection, tax cuts would lead to a 3 percent increase in lost revenue over 10 years.

Indeed, tax cuts can have a number of adverse effects that may actually impede growth, according to Kleinbard.

One example is a phenomenon known as the "crowding out" effect. The basic idea is that tax cuts create deficits that cause the government to borrow more money and therefore enter deeper debt, which can make private sector borrowing more expensive.

Our ruling

Foroohar said, "There's no real evidence in the last 20 years that" growth from tax cuts has made up lost revenue.

We searched high and low and found no economic experts who could point us to evidence of tax cuts fully paying for themselves.

Neither the modern historical record (using fair benchmarks) nor government analyses we looked at supported the claim that tax cuts create enough growth to eventually offset lost revenue. On the contrary, there’s evidence that tax cuts may actually hinder economic growth.

We rate Foroohar’s statement True.

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