One argument for tax cuts I’ve seen a few times, including on Wikipedia, is that the Bush tax cuts were followed by an increase in tax receipts.
[Link] In 2006, the US Treasury reported that monthly tax receipts in April reached their second-highest point in the history of the nation, totalling $315.1 billion, second only to April 2001′s mark of $332 billion prior to the burst of the Internet stock bubble. These results contradicted dire predictions in the wake of enactment of the Jobs and Growth Tax Relief Reconciliation Act of 2003, suggesting that the US was still on the right half of the Laffer Curve.
It’s not particularly surprising that tax receipts are increasing. Nobody has ever said tax cuts reduce economic growth, except in the long run when the debt is crushing. The United States faces a near-crushing debt, but is still in the short run from the vantage point of the Bush tax cuts.
On the other hand, the USA has a GDP of 12.9 trillion. In 2001, a recession year, it was 9.9. In 1995, it was 7.1. In other words, in the mid- and late 90s, the US economy managed to grow more quickly than it does now even though the rich paid an income tax of 40% then compared with 35% now.
The countries that have managed to grow because of tax cuts are typically those that had a booming underground economy. In Georgia, Saakashvili’s reduction of tariffs and other pro-business policies have worked because the government was plagued by corruption and had to deal with a separatist region with a gigantic black market. Instituting similar policies in France or Britain would be a disaster.
Another argument that high taxes reduce economic growth is that the American economy is growing faster than the Eurozone and Japan. But this is not a very good comparison, considering that Japan’s only now emerging from a 15-year depression, and the Eurozone is dominated by France, Germany, and Italy, all of which combine the worst features of capitalism and socialism.
In contrast, Denmark and Sweden don’t suffer from the cumbersome bureaucracy that plagues non-Scandinavian Europe, and have far more generous welfare payments and far higher taxes. They also have more economic growth, and lower unemployment. Maybe it’s bad for the economy to have the marginal income tax rate at 55% but good to have it at 40% or 80%… in which case 80% is better, considering that Scandinavia has rock-bottom poverty rates while the United States has an intolerably high one.