The Facts About The Bush Tax Cuts

from Human Events:




Posted by Erick Erickson (Profile)



Tuesday, July 27th at 5:00AM EDT



31 Comments

A lot of the media and all of the Democrats seem to forget one simple fact about the Bush tax cuts: they were passed in response to a recession occurring as George W. Bush and Dick Cheney entered office.



Moe Lane wrote an excellent post about the impact of the Democrats not extending the Bush tax cuts, but what about what they actually did.



We should not forget that.



The 2001 Economic Growth and Recovery Tax Act was George Bush’s version of Barack Obama’s stimulus plan. However, instead of creating a bunch of temporary government jobs and subsidizing the expansion of government, it cut tax rates, increased the child tax credit, increased the standard deduction for married couples, and increasing contribution caps for a variety of savings programs. The result? The recession ended in November of 2001. (Source)



But, September 11, 2001, happened as the economy was recovering and throughout 2002, the economy grew at an anemic rate. The Jobs and Growth Tax Relief Reconciliation Act of 2003 revved up the 2001 tax cut package and cut taxes again on dividends and capital gains.



The result?



Under George W. Bush’s “tax cuts for the rich” the rich paid more in taxes in 2005 than any time in the prior 20 years. In fact, as the Wall Street Journal noted, thanks to George W. Bush’s tax cuts for the rich, the richest one percent went from paying 25% of all income taxes in 1990 to 39% in 2005. The richest 5% went from paying 44% of all income taxes in 1990 to paying 60% of all income taxes in 2005.



In 1980, when the top income tax rate was 70%, the richest 1% paid only 19% of all income taxes; now, with a top rate of 35%, they pay more than double that share.



More crucially, after the 2001 initial tax cuts, the annual growth rate went from 0.3% in 2001 to 2.5% in 2002. By 2004, GDP growth was the highest in 20 years. (Source)



Likewise, after the 2003 tax cuts, the unemployment rate fell to the lowest level since World War II. Let me repeat that: the Bush economic program created the lowest unemployment level ever. In fact, economists liken it to full employment given the demographic composition of those who were left on the unemployment line.



This is but a bit of what the Bush tax cuts did.



Why then the collapse? There are lots of reasons for the collapse. For one thing, contrary to what economists would have you believe, they are not scientists and the economy is not a science. There have been upturns and downturns in the economy since economies first developed several millennia ago. But also, massive new regulations in Sarbanes-Oxley and the continuing incursion of the government via Fannie and Freddie into private lending markets forcing private lenders to launch even riskier ventures to stay profitable led to a lot of schemes collapsing in on themselves and taking the economy out too.



That has nothing to do with the Bush tax cuts. The Bush tax cuts, objectively, helped the economy both recovery from the 2000-2001 recession and spur some of the greatest economic activity the nation has ever seen.



In their efforts to end the Bush tax cuts during a prolonged recession, the Democrats risk making the economy worse and introducing greater uncertainty into the market

 
 
From Human Events:
 
Extending Tax Cuts:  Rhetoric And Relaity (referenced above)
 



Posted by Moe Lane (Profile)



Monday, July 26th at 10:00AM EDT



17 Comments

The basic situation? The Democratic party is facing a dilemma of more or less its own doing with the looming end of Bush-era tax cuts. The party generally ran on a program of repealing them for the ‘rich,’ which was rhetorically useful (if not fiscally so); and some Democratic legislators are beginning to worry about the political effects of that. The problem - which the Right has been saying all along - is that raising taxes on the top two tax brackets will affect an indeterminate number of small businesses. Democratic legislators apparently plan to solve this problem by demonizing the Republican party’s position on tax relief while simultaneously coming as close to it as they dare.

While the battle lines at first glance seem straightforward enough, what the NYT carefully did not mention in its article above is that at least some small businesses will see a tax increase (one of almost 5%) under this system; a lot of businesses report their earnings - perfectly legally and openly - as individual income. The effects of changing this? The Wall Street Journal reports ‘doom:’



New data from, of all places, the Democratic-run Joint Committee on Taxation show that in 2011 roughly 750,000 taxpayers with net business income will pay the highest marginal rate of 39.6% or the next highest bracket of 36% (up from 33%). About half of the roughly $1 trillion of total net business income will also be reported on those returns. In a stroke, that will make tens of billions of dollars unavailable to invest or to hire new workers.



It will probably not surprise most of the people reading this that when you take energy out of a system, you end up with a less productive system; conservatives have certainly not been shy about saying so. It will probably also not surprise any of the people reading this that the White House is ignoring fiscal reality. To be fair, their own ideology is getting in the way; they can’t afford to fund our currently bloated government, and the Democratic party is constitutionally incapable of cutting the government down to size. The very idea that you can cut or eliminate an entitlement, once it’s been allocated… is semantic white noise to many on the Left.



But facts are stubborn things.



Moe Lane



Crossposted to Moe Lane