The Reagan Information Page:Federal Income Tax Revenues

Critics of Reagan's tax policies contend that revenues "declined during the 1980s". Nothing could be further from the truth. Revenues only declined year to year in 1982 and 1983, due in part to the income tax rate reductions being phased in and in part because of the recession that ended in 1982.

As can be seen from the first chart, year to year Federal income tax revenues in 1984 were slightly higher than 1981. The change for 1985 was as high as the previous peak (1979) and the revenue change for 1987 was larger than any year in the Carter administration by a third.

Demographics is the key to understanding why tax rate reductions can have this affect. By lessoning the burden of paying taxes from those who can least afford it (those who are not rich), we allow them to better provide for themselves. This means that money that used to go to the government to pay for social services are instead spent on retail goods and services, which causes the companies that provide goods and services to hire more people, which means a lot more people are employed, and paying income taxes, though at a lower rate. Overall, the total revenues go up and burden on the government to provide safety net services goes down.

As the below chart demonstrates, the average revenue changes during years after the tax rate reductions were higher than the years prior to the rate reductions.

Of course, there are many factors that influence tax revenues, especially income taxes. One conclusion that cannot be denied, however, is that those who claim tax revenues fell because of the Reagan tax rate cuts are wrong. Revenues went up, and the average revenue collected after the rate cuts was higher than the average collected prior to the rate cut.

Data table:

Source: Federal Budget, Historical Tables. Receipts by Source
Federal Income Tax Revenue Changes, 1978-89
Year	Revenue Change (billions of 1996 dollars)
1978	45.00
1979	61.70
1980	11.10
1981	48.60
1982	-37.20
1983	-68.80
1984	51.80
1985	61.60
1986	22.90
1987	83.80
1988	35.40
1989	59.00

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Federal Income Tax Revenues