The Truth about the Bush Tax Cuts

Recently, many on the left, instead of proposing a concrete plan to reduce our deficit (the only thing they’ve been specific on is what taxes to hike), have decided to claim that the main reason we have such a massive deficits is because of the Bush tax cuts. As they are on most things, they are wrong.

Their conviction stems from a worldview comprised of:

1) the idea that the government actually owns every penny a person earns and they only allow people to keep so much (basically, they read tax rates in reverse, if someone has a tax rate of 25%, to big-government types, it doesn’t mean that the government gets 25% of their income, rather, it means that the government gives them back 75% of what they earned) and;

2) that the rich should pay progressively more in taxes so that the government has more money (because the government is the only entity that actually creates jobs).

If it were up to liberals, the wealthiest Americans would still be turning over 91% of their income to the federal government (or maybe only 70%, after JFK’s tax rates).

Unfortunately for the left, soaking the rich for more money doesn’t increase revenues:

Moreover, the left has also been claiming that the Bush tax cuts added $1.6 trillion to our national debt. In their world, revenues did not rise by 44% after the Bush tax cuts took effect, as any revenue chart shows. This one is based on White House Office of Management and Budget data:

How can liberals believe tax cuts cost the government and destroy jobs? They believe that government should first take all the money from a person and then give back what is owed from the tax break. If that’s what you think happens, then yes, tax cuts cost the government money. And if you ignore Hurricane Katrina, the housing bubble burst and the financial sector meltdown, then yes, tax cuts also destroy jobs.

But in reality, tax cuts do neither.

Jobs weren’t lost until the recession started in 2007. Until then, tax revenues had increased thanks to the Bush tax cuts. See, when people keep more of the money they earn, they spend it; when businesses pay less in taxes, they hire more people (also, when the price to hire a new employee is less expensive e.g. they don’t have to shell out thousands more per employee for health coverage beyond what they currently provide, they also tend to hire more).

The idea liberals have that we need more revenue from the rich in order to “invest” in the economy is also a falsehood. Government does not create jobs (outside of bureaucracy, government and temporary road construction), the free market does. It is intellectually dishonest to suggest that stable tax cuts made in 2001 and 2003 somehow lead to the fiscal crisis we found ourselves in since late 2008.

Reversing the upper-income tax cuts won’t raise revenues. Especially not in an economy that is struggling. The potential revenue taken from the wealthy will be offset by reduced spending and reduced hiring. If tax hikes further slow our economy, they will actually lower revenue. The best way to increase revenue is to fix the economy.

The current administration keeps saying that jobs are their top priority, but how does raising taxes on job-creators create one single job? Hint: it doesn’t.

Related Links:

Heritage: Top 10 MythsabouttheBushTaxCuts
Heritage: TheBushTaxCutsandtheDeficitMyth

Please Share Your Thoughts

5 thoughts on “The Truth about the Bush Tax Cuts

  1. THE RICH SHOULD PAY THIER SHARE THEY ARE NOT THE ONES WHOM ARE RISKING THIER LIVES IN THE WARS STARTED BY THE WEALTHY .THEY THE RICH ARE NOT THE ONES WHOM BUILD OUR COUNTRY . THE RICH ARE NOT THE ONES WHOM ARE RISKING THIER LIVES AS POLICE . THE MIDDLE CLASS AND LOWER CLASS ARE THE ONES SO PAY UP WEALTHY

    • I know this is an old thread, but I have to vent anyway….So, what do you think the rich do with their money? They build companies and hire people. Hmmmm, sounds like job creation to me…..Sounds like their building our country to me…..Sounds like their taking risks to me. Remember, with any people, anywhere, there will always be a level of corruption. It doesn’t matter whether you are rich or poor, or of what ethnicity you are. When you consider the current tax rates, the rich are paying between 9-15% of their earnings. This is still far more than I currently pay in taxes.

  2. This was clearly written by the 1% of this country that is wealthy. Take your propaganda and shove it. Bobby is right.

    Take away the tax discout from the rich and you would have 4.7 trillion in revenue in the next decade. Bush is the reason for our enormous deficit. The government hd a surplus of money after the clinton administration..he comes in and gives the wealthy an enormous tax cut and starts multiple wars, which costs billions to maintain.

    Now, Obama is stuck with all the problems Bush created and he looks like the bad guy. I’m not an Obama supporter, especially not after gave in and extended the tax cuts…so pathetic.

  3. Quite a poorly written article. But, this is the heritage action foundation so it is to be expected. What this article fails to identify is that real wage growth, unemployment rates, and job growth have historically been unchanged by reducing the taxes of the upper class. This defeats the premise that corporations and “job creators” reinvest their savings from tax cuts into the economy – i.e. job creation or increasing wages. Instead, the only significant change that results from tax cuts on the upper class is the growing wealth disparity between the upper and middle and lower classes. Once upon a time, before Reagan’s famous tax cuts, the middle class had the majority of wealth in the country. Since those cuts took place, the middle class lost and never regained the majority share of wealth in the country. To this day, the wage gap continues to increase. Want to know why this is disturbing? Check up on the first French Revolution of the last 1700’s or the Russian Revolution of the early 1900’s as a couple of examples.

    The type of economics that Heritage Action historically promotes is Supply Side (Trickle Down) Economics. However, for you deniers out there, go do your homework and actually look at the economic data for the past few decades and see the disturbing trend of supply side economics. You will quickly see why every unbiased economist will not defend this type of economic platform to help promote the overall economy. It has NEVER worked, historically, unless of course you count increasing the wealth of only the upper class a success. The Bush tax cuts are no exception.

    Do your own homework and make your own informed judgement. The data is readily available all over the net. Use it.

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