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.