This election year about all Republicans have to boast about seems to be Bush’s tax cuts. They pin all of the economic growth and job creation on these cuts. Democrats, on the other hand, point out that the cuts are unfairly weighted to benefit the top 1% or so of taxpayers, who are receiving 300% of the tax savings as are average middle class taxpayer. This is a percentage not a dollar amount. It means that rich people are getting three times the percentage of tax cut as is the middle class, not just that they pay more taxes. A fair tax cut is the same percentage across the board regardless of how much you earn. This intrigued me, so I went looking for facts. This is what I found. My sources are listed at the bottom of this essay.
Citizens for Tax Justice and the Children’s Defense Fund point out that over the ten-year life of the Bush tax cut (remember congress always intended the cuts to be a temporary boost to the economy) the top 1% of taxpayers will realize nearly half a trillion dollars ($477 billion) in tax savings. This cut is designed so that the very top tax payers receive progressively larger cuts each year until 2011 when the law expires. The first year of the cuts the amount averaged about $12,000 per taxpayer.
By contrast, 75% of families and individuals making less than $73,000 a year (and that’s most of us) received ¾ of all the cuts they will receive in the first year, and those averaged about 350 per taxpayer.
The writers conclude that making the current cuts permanent will reduce Federal revenues by $1.7 trillion through 2014, a figure that includes the added interest on the national debt. They also project added budget deficits of $20 trillion across that time with no clear material benefit to the average middle class taxpayer. The Brookings institution estimates that this would amount to about 1.8% of the GDP.
A second negative is that because of these factors, an additional 44 million people would see their tax bill grow appreciably when they became subject to the Alterative Minimum Tax (AMT) by 2014.
More telling, the Congressional Budget Office estimates the cost of making the costs permanent at $1.6 trillion over ten years. However, people at the Office of Management and Budget point out a buried clause in the budget that hides more than another trillion dollars in lost revenue.
The explanation of why this is so is complicated. At the time these tax cuts went into effect (Bush wanted them to be permanent), Bush also attempted to make a change in bookkeeping methods that would effectively remove the true costs of the cuts from the main budget. In the words of a Washington Post writer this means that “If you tell Congress the cost of making those tax cuts permanent lawmakers might have second thoughts about doing it.” In 2004, 2005, and again this year, Republicans have submitted legislation to make this bookkeeping change. It has been voted down each time.
Another thing the administration lauds publicly is that its tax cuts have resulted in significant job growth. According to a watchdog group called Jobwatch, however, it is increased Federal spending and not tax cuts that have created the bulk of jobs created over the past five years. They point out that if the tax cuts were responsible for job growth, then the bulk of the new jobs would have been created in the private sector with its own funding.
The Department of Defense estimates that since 2001 it has added 1.495 million jobs to the private sector through its own spending. Another 1.325 million jobs were added through increases in non-defense discretionary spending, for a total of 2.2 million new jobs directly attributable to increased government spending, not private enterprise. This does not include jobs created by increases in mandatory government spending and I could find no figures to account for these.
Monthly job growth since 2003 has been approximately 50% of that during the previous administration and real wages are lower by 22 cents an hour since June of 2003. Since March 2001, the
Since November of 2001 the economy has added 1,93,000 jobs in education and health services, and another 1,087,000 in the hospitality industry. These jobs in general pay appreciably less than the jobs we’ve lost. These figures would be appreciably different if the Bush administration had succeeded in a change it proposed to job reporting rules that would have allowed them to mask the enormous decrease in manufacturing jobs by re-classifying burger flipping and other restaurant jobs as manufacturing jobs.
The bottom line is that the Bush tax cut are nowhere as clearly beneficial as Republicans would have us believe, nor are they producing the number of new jobs we have been told once you factor out those jobs created by profligate government spending. The facts certainly open the door to discussion. I would urge people to read the information and to search out more information on their own.
Sources:
http://www.ctj.org/html/gwb0602.htm
http://www.brook.edu/views/op-ed/gale/20040121taxcuts.htm
http://www.brook.edu/comm/policybriefs/pb101.htm
http://www.washingtonpost.com/wp-dyn/content/article/2006/02/17/AR2006021701848.html
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