A CUT TOO FAR.(tax cutting)

Photographs of Baghdad the day the American troops took control of the city

A portfolio of photographs of the fight for the Iraqi capital

Photographs of Baghdad taken before the coalition troops entered the city

An archive of NewYorker.com's coverage of the war in Iraq

In the United States, war has traditionally meant higher taxes. During the Civil War, Congress passed the first federal income tax in history, and put levies on all manufactured goods. During the First World War, the top income-tax rate rose to seventy-seven per cent. The Second World War gave us the modern tax system, withholding, and a tenfold increase in the number of Americans who had to write checks to the government. Tax hikes also accompanied the conflicts in Korea and Vietnam.

With the economy in the doldrums and American troops already in Baghdad, it's not surprising that Congress chose not to raise taxes this time around. What's striking is that Congress chose to cut them instead, brushing aside concerns about the war's cost and our four-hundred-billion-dollar budget deficit. House Majority Whip Tom DeLay summed up the prevailing mood when he said, "Nothing is more important in the face of a war than cutting taxes."In Washington these days, tax cuts are the solution to every conceivable circumstance--war or peace, surpluses or deficits, recession or boom.

The current worship of tax cuts dates back, of course, to Ronald Reagan and the so-called supply-side revolution. When Reagan was elected, the American economy was a shambles, and the supply-siders thought they knew why: marginal tax rates--the rates you pay on every additional dollar you earn--were too high. In 1980, the top rate was seventy per cent, and the supply-siders argued that rates like that discourage people from working or investing. When the government takes seventy cents of every dollar of your raise or bonus, you might just give up trying to make more money and hit the beach instead. Cut marginal rates, they said, and people will decide to work harder, and to start new businesses or invest in them. The ensuing boom in economic growth should compensate for any short-term loss of tax revenue.