As we go into the next round of budget negotiations, it seems quite clear that the Democrat response to every effort to cut spending will be to propose ways to raise revenue, usually by trotting out their well-worn battle cry "repeal the Bush tax cuts!" That will then be followed by describing them as "tax cuts for the rich" which redistribute wealth from the poorest Americans to the wealthiest. But is this true? Are the rich really the largest beneficiaries of the tax structure implemented in 2001 and 2003 by George W. Bush, and who would bear the brunt of additional taxation if the Bush cuts were repealed?
To find out the answers to these questions, all I needed was the handy calculator on my iPhone and a visit to the Tax Facts archive at the Tax Policy Center, which keeps records of all the tax rates and rules going back to the passage of the 16th Amendment.
The first fact which became clear on looking at the data is that the very rich were not the largest beneficiaries of the Bush tax cuts. In fact, their taxes were cut significantly less than the taxes of those in the lowest tax brackets. The top rate was cut by 4.6%, while the lowest bracket was split into three groups and the bottom two of those saw their taxes cut by a minimum of 5% and in many cases by as much as 18%. Those are far greater cuts than any of the higher brackets, even the top bracket.
In addition, with increased values for exemptions and deductions, many of the working poor and lower middle class saw much of their tax liability just eliminated completely. The Bush structure has raised the standard deductions and exemptions for an individual from $7200 to $9500, protecting an additional $2300 in income, which is a big chunk for someone with a low income, and that is high enough that no one in the lowest income bracket actually has any tax liability at all. If the Bush tax cuts were repealed a significant number of the poorest workers would owe 15% on that $2300 in income. Handing people earning below the poverty level a bill for $345 would be just one of the unpleasant consequences of repealing the Bush tax cuts.
Article comments
— go to most recent comments1 - troll
Dave - the democrat mantra is 'repeal the cuts for the rich - keep the cuts for the poor' for the basic reasons you point out...the rich can afford a repeal while the poor cannot
2 - Troll 2
Dave - The Bush tax cuts were designed by Republicans to have already expired anyway. Can you explain why doing just that would be "Democrats [deciding] to raise taxes". Thx,
3 - Troll 3
Dave - These are some funny numbers you have here. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%.
Where do these increases of 13-18% come from?
4 - Dave Nalle
Dave - The Bush tax cuts were designed by Republicans to have already expired anyway. Can you explain why doing just that would be "Democrats [deciding] to raise taxes"
No, they weren't designed to expire. They were passed with the option of expiring if they were not renewed as a concession to Democrats to get more votes in support of them. The intent of Republicans would be that they would be renewed or made permanent.
Dave - These are some funny numbers you have here. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%.
Where do these increases of 13-18% come from?
The site with the various tax rate schedules is linked to in the article. Those increases result from the difference in rate applied to groups whose tax bracket would change. There are two groups on the low end of the brackets who would be reclassified into higher tax brackets in addition to having the rates for those brackets go up slightly, so rather than just being hit with the 3% increase from 25% to 28% they would be reclassified from either 10% to 28% or from 15% to 28% because many of those currently in the two lowest brackets would be consolidated into a larger bracket at a higher tax rate.
Dave
5 - Dave Nalle
And as far as just repealing the tax cuts for the "rich" then you're not repealing the Bush tax cuts, you're implementing a new set of taxes and you're raising taxes. Let's be honest about it.
Dave
6 - handyguy
OK, no problem, I'll be honest about it: let's raise taxes on the rich. They can afford it, and no serious, fair deficit reduction proposal can set tax increases completely off the negotiating table, as Ryan, Boehner and McConnell want to do.
I'd let all the tax cuts expire, and yes, that would affect some middle class taxpayers. The Dems won't go there, and politically it's an understandable call. But Americans made it through the 90s paying those rates, without harm to the economy or to individuals, and we can do so now.
The president's speech today was a good one. It should become known quickly as the "not while I'm president" speech. That's a phrase that cuts two ways, of course, but in context it showed a Democrat willing to stand for something [the inherent social promise/contract of Medicare and Social Security].
Ryan, looking all "you hurt my feelings, Daddy," of course accused the president of making a campaign speech. It was...and it was also an honest and balanced policy statement. They are not completely incompatible, although one can understand why a Republican accustomed to take-no-prisoners rhetorical hyperbole might not recognize the fact.
7 - Dan(Miller)
Re comment #6 -- It wasn't just a "good" speech. It was a great speech and probably even the highpoint of his presidency. I said so here; credit where credit is due. Even Vice President Biden was mesmerized.
Dan(Miller)
8 - Glenn Contrarian
And that's why I hold Dan M. in high regard - he's one of the few here who's not afraid to give credit to the other side.
9 - RJ
The whole argument about "tax cuts for the rich" or "tax cuts for the wealthy" is a misnomer anyway. We don't have a wealth tax in the United States. We have an income tax. So it's really "tax cuts for high income earners." That's the accurate way to describe cuts to the top marginal tax rate.
10 - Dan(Miller)
Dear me, Glen. I somehow have an intuitive sense lurking somewhere in the deep recesses of what might conceivably pass for my befuddled mind, twisted though it is, that perhaps you may not have read the linked article with the very greatest of care.
But thanks.
Dan(Miller)
11 - handyguy
Whatever words you choose to describe them, the highest-earners have gained enormous ground in the last thirty years, and especially in the last decade, while the middle class and the poor have stagnated or slipped. In other words, there has been a 'transfer of wealth' all right: upward.
Most rich folks and high earners are OK with returning to the Clinton marginal tax rates. Quite a few could even live with a 'millionaire's tax,' a new higher rate for the highest of high earners.
I'm not sure where the conservative rigidity on taxes comes from, but in this case it is way out of step with public opinion.
The Ryan plan -- gigantic tax cuts coupled with forcing the elderly and the poor to pay more for health care -- is politically insane. How could you honestly expect the Dems not to capitalize on this low-hanging fruit?
12 - Dan
"I'm not sure where the conservative rigidity on taxes comes from"---handyguy
It's called principle. It also stifles economic activity thus hurting everyone. Liberals, in their greed and envy have never understood this. Or being principled for that matter.
13 - handyguy
I read Dan's 'article,' if that's the word. His main objection, other than the fact that the president is not now and never will be a conservative ideologue like Dan himself, seems to be to a lack of specificity about defense cuts and Social Security and tax changes.
Has there ever been a presidential speech, by a chief exec from either party, that offered granular specificity in this situation? The idea is to lay out a blueprint: while Paul Ryan avoided defense cuts entirely and was mostly mum on Social Security, the president said he would follow Gates and his own appointed deficit panel from last fall in determining significant Pentagon cuts and Social Security revisions.
By daring to, gasp, defend and propose expanding the Medicare cost-cutting provisions in his own healthcare bill, the president draws only an eye-roll and a giggle from Dan: oh that again? Why, it's just a joke, so unpopular! This is not exactly an argument, just an ideological stance. But that's all the GOP has ever offered about the healthcare bill: it's just so awful, where to begin?
14 - handyguy
I don't usually respond to the writer of #12, but I'll say this: the elder Bush and Clinton both raised taxes, and the booming 90s came immediately after. The younger Bush cut taxes, and the droopy 2000's followed -- turning into a scary panic and recession at the end of the decade.
And yes, JFK and Reagan cut taxes -- from much higher levels than now -- and growth resulted. But it's not a mystical magical formula.
Taxes are just one piece of the puzzle. They are just a tool. Hiding them away and refusing to employ them is foolish. It's putting ideological blinders on, tying a hand behind your back.
A reminder: Obama hasn't raised taxes [yet], he's mostly cut them, both for individuals and small businesses. [A third of the stimulus bill conservatives spit on was composed of tax cuts.] Any tax increases would come in 2013 and after.
If the deficit and debt are such an urgent problem, then stop pretending it can be solved without revenue increases. It certainly isn't just "leftists" who agree with me. About 80% of the public favors a millionaire's tax.
15 - Dan
The Bush tax cuts yielded a flood of increased revenue. Look it up. It's not mystical to anyone who understands the Laffer curve.
One "piece of the puzzle" that hasn't been tried yet is spending cuts. I don't think it would be mystical or magical to expect that spending cuts would reduce the need for revenue.
A bigger problem for spoiled entitlement seekers is that the rich don't have the money. As economist Walter Williams recently pointed out:
"If Congress imposed a 100% tax, taking all earnings above $250,000 per year, it would yield the princely sum of $1.4 trillion. That would keep the government running for 141 days"
But that is a static scenario. In reality, it would wreck the economy and produce less revenue. So 80% of the public favors a stupid solution.
16 - handyguy
The 'flood of revenue' did not prevent the budget surplus from turning into a deficit. If the deficit matters now, it mattered then.
Nor did this magical mystical [and possibly mythical, see below] flood of revenue result in the sustained growth of good-paying jobs, or in increased prosperity for those not in the top 10% of earners.
Inflation-adjusted median household income was flat or slightly down in 2007 compared to 2000 [end of one boom compared to end of previous boom], which had never happened before in the post-WWII era.
Interestingly, when I did look up the Bush tax cuts’ revenue effects, I found two similar articles with opposite conclusions, both set up as debunking the myths from the other side.
They make interesting reading. They also make it clear that if you torture numbers enough, they will tell you exactly what you want to hear, thus reinforcing your pre-existing tunnel vision condition. [Both were written after the 2006 election but before the 2008 financial panic/collapse.]
Pro-tax-cuts [Heritage Foundation]
Anti-tax-cuts [Center on Budget and Policy Priorities]
17 - handyguy
And the kinda-dumb 100% tax hypothetical has a correlative of course: if cutting tax rates always increases revenue, why not cut taxes to zero and get infinite revenue?
Taken together, the two hypotheticals ought to effectively illustrate the limits of cast-in-concrete ideological positions. I'm not holding my breath.
18 - Christopher Rose
It is actually pretty easy for anyone, individual, small business or large company to legally minimise their tax bill by legitimate tax avoidance - not illegal tax evasion - methods.
Given how easy it is, I'm surprised that more people don't do it.
People who are opposed to big government would presumably see it as their patriotic duty to offshore themselves in order to force reductions in government!
19 - Dave Nalle
Handy, I have to say to you what I say to other conspiracy theorists. Show me the causal relationship between raising taxes and economic upswings. You can't, because there isn't one. You've got a couple of anecdotal coincidences and no substance to your argument.
Dve
20 - Glenn Contrarian
Dan -
I guess that's what I get for taking your words at face value.
And btw, exactly how does one balance a household budget by slashing the breadwinner's income?
21 - handyguy
My point was not that tax increases caused growth, but that they did not prevent growth -- and they did help lead to the first budget surplus in decades. [This is not anecdotal, it's what happened.] And the surplus was then squandered by the brilliant tactic of combining two wars with big tax cuts.
[Which did not lead to healthy, sustained growth, just another boom/bust cycle, the worst in decades. Was the dot-com boom/bust 'caused' by Bush Sr's and Clinton's tax hikes? Was the 2005-2008 boom/bust 'caused' by Bush Jr's tax cuts? You can't have it both ways.]
Calling me a conspiracy theorist is pretty rich. I'm allergic to all the conspiracy spinning around here, a prime example being your pasting of "Left's Big Lie" on anything you disagree with.
22 - Dan(Miller)
Glen, re Comment #20, I guess if one views the government as the breadwinner, it all hangs together. That strikes me as a strange way of looking at things, but so be it.
Handy, re Comment #13, I am far from surprised at your reaction. President Obama's speech would have made a fine campaign speech; perhaps that what he intended it to be. He appealed to his ideological base, offended many others and that's about it. Even the Washington Post appears to say so. As a way to move forward on actually reducing the deficit, it was anything but a useful speech. Deficit reduction negotiations will be with the opposition, which now has a significant majority in the House, to at least as great an extent as they will be with his ideological base. Even though former Speaker Pelosi says that elections shouldn't matter so much, they sure did until the 2010 upsets and elephants rarely forget.
President Obama opened his speech with an attack on Republican policies. I haven't done a word count but the linked Washington Post article observes: In the speech, he used as many words to attack the GOP proposal as to lay out his own . . . . Even as he savaged the GOP proposal, Obama was less than specific about his own. He did not say exactly how he would reform how corporations are taxed, what he would do to achieve a simpler tax system or which defense programs he would cut. On Social Security, he not only didn’t announce a proposal but would not say whether one was likely to be included in the final legislation.
Whatever good President Obama may have done during negotiations on a continuing resolution for the remainder of fiscal 2011 he eviscerated through his speech on April 13. As noted by Howard Kurtz of the Daily Beast, In his eat-your-peas speech Wednesday, President Obama excelled at eviscerating the GOP budget plan as slashing away at worthy programs and leading to “a fundamentally different America”--one that would screw everyone from college students to Medicare patients who would get cheapo vouchers. . . . But when it came to his blueprint for slashing the deficit by $4 trillion over 12 years, Obama painted in the broadest strokes. . . . The president closed with an appeal for Reagan/O’Neill bipartisanship and a paean to messy democracy. But by limiting his pitch to general themes, by failing to fill in the blanks, he ensured that it will get even messier. Once again, Obama is taking the high rhetorical ground while largely leaving the details to others.
President Obama hardly set the stage for non-ideological, non-theatrical future negotiations. As Clive Crook of the Atlantic noted, My instant unguarded reaction, in fact, was to find it not just weak but pitiful. I honestly wondered why he bothered. . . . The speech was more notable for its militant--though ineffectual--hostility to Republican proposals than for any fresh thinking of its own. It was a waste of breath.
It's sometimes difficult for me to agree with a bunch of Libruls, but as to the absurdity of President Obama's speech I do.
Dan(Miller)
23 - handyguy
I view it quite differently: Paul Ryan and Pres. Obama have laid out very clear markers for negotiating positions.
If Obama's message was in part a reassurance to his base, was Ryan's an outstretched olive branch to moderates and liberals? Certainly not. It was an ideological shot across the bow ["this is a cause, not a budget"], and answering it in kind was appropriate.
But while the message was clear, the president's tone was far from harsh or abrasive. He outlined his position with crystal clarity and logic, as calmly and reasonably as a first-class law lecture. The specifics, as they always are in this kind of presidential address, were left to negotiating legislators. He set the framework, and he did so brilliantly.
The fact that a few whiny liberals objected only makes his position stronger.
24 - handyguy
James Fallows’s rebuttal to Clive Crook’s bitchy broadside, also in the Atlantic, is worth looking at, highlighting some of the best moments in the speech. Amusingly, they are some of the same sentences that most appalled Dan M. Not surprising: when would Dan ever admit that a “Librul” had made an effective argument? When Panama freezes over, I imagine.
25 - handyguy
Referring to Clive Crook as a liberal is also amusingly off-base. But if you enjoyed the tart-tongued Brit's dismissal of the Obama speech, you might also want to check out his evisceration of Paul Ryan's proposal. Equal opportunity snottiness.