Bush-Era Tax Cuts

During George W. Bush’s term in office, he proposed two tax cuts, better known as the Bush-Era tax cuts.  Congress eventually passed these tax cuts but had expiration tags attached to them, set to expire in 2010.  During Obama’s term in office, he extended the acts that were passed to expire in 2012.  Now that we are nearing the 2012 Presidential Election Day, each candidate has a different take on whether or not to continue and keep the Bush tax cuts.  Obama wants these tax cuts to expire for the wealthy while Romney wants to renew it for all classes with a low tax rate.  As much as it may sound good to decrease the percentage of tax placed on Americans, all it has done was add to the country’s deficit. 

The 2001 tax cut was known as the Economic Growth and Tax Relief Reconciliation Act. This act made a lot of important changes to income tax rates, real estate, 401k plans and much more.  Those making more than about $312,000 had their taxes cut from 39.6% to 35%.  The next category decreased from 36% to 33%, and so decreasing each bracket by 3% by 2006.  This act also created a new category for those making less than 12,000, cutting their taxes from 15% to 10%.  Under this act, the alternative minimum tax exemption was raised to $49,000 for couples and about $35,000 for singles. The 2003 tax cut was known as Jobs and Growth Tax Relief Reconciliation Act.  This act decreased the capital gains and was made to speed up the process from the 2001 act.  This act also increased the exemption for the alternative minimum tax.

The main goal of these was to reduce the tax rate over the span of several years.  It has not helped the economy grow in any way and is actually considered to be the top U.S. debt contributor.  According to Harry Bradford, of The Huffington Post, if the Bush tax cuts are not renewed, it is projected that over 10 years the deficit would be reduced by about 1 trillion dollars.  

The Democrats want the Bush tax cuts to expire on the wealthy but will renew it for those making less than $250,000. Paul Krugman, a well-known economist, once stated, “Wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.” In reaction to the Democrats’ proposition, the Republicans are threatening to vote against it if it came down to Obama winning and moving forward with that plan.   As we’ve seen from Clinton’s presidency, allowing the wealthy to pay more in taxes will help the economy in the long run because it will lower the deficit and help create more jobs, all in all creating a good economy.  

The Republicans are opposing the Democrats’ view and actually want to renew the Bush tax cuts on all classes. The Republicans believe that if it were to be renewed only for the lower and middle class, like the Democrats want; it would affect economic growth and job creation, referring to the “trickle down”.  As we have seen from past, attempts of placing more money in the hands of the rich in order to create more jobs and get the economy growing has not worked, so what would make it any different now?

Last Edited on November 16, 2012.

References

Bradford, Harry. (2012. Aug. 8) Bush-Era tax cuts will cost U.S. nearly $1 trillion over the next decade.  Retrieved from <http://www.huffingtonpost.com/2012/08/24/bush-era-tax-cuts-revenue-expire_n_1828657.html#slide=1428571>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2001 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2001.cfm>

Gale, William and Harris, Benjamin. (2008. Jan. 23). How did the 2003 tax cuts change the tax code? Retrieved from <http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/2003.cfm>

Garofalo, Pat. (2012. July. 9). Why letting the bush tax cuts for the rich expire will not hurt the economy .  Retrieved from <http://thinkprogress.org/economy/2012/07/09/512741/charts-economy-bush-tax-cuts/?mobile=nc>

Jobs and Growth tax relief reconciliation act of 2003. In Wikipedia. Retrieved from <http://en.wikipedia.org/wiki/Jobs_and_Growth_Tax_Relief_Reconciliation_Act_of_2003>