As Congress and President Obama debate whether and on what conditions to raise the debt ceiling, the nation will mark the tenth anniversary of the policy change that accounts for much of the federal budget gap: the Bush tax cuts.
On June 7, 2001, President George W. Bush signed into law the first of the tax cuts that would turn the budget surpluses of the 1990s into historic deficits. A new analysis from Citizens for Tax Justice explains that making these tax cuts permanent would almost double the long-term budget deficit.
The tax cuts became a signature domestic achievement for the Republican Bush presidency.
The richest 1 percent of taxpayers, with an average income of about $1.4 million in 2013, would get an average tax cut of $68,079 that year if the Bush tax cuts are extended again. The poorest three fifths of taxpayers, with an average income of $29,000 that year, would receive an average tax cut of just $487.
The analysis also finds that the higher a filer’s income, the larger the tax cut as a percentage of income. If the Bush tax cuts are extended again, in 2013 the poorest one fifth of taxpayers would receive tax cuts equal to less than one percent of their income, while the richest one percent would enjoy tax cuts equal to 4.6 percent of their income.
Some in Congress have threatened to cause the federal government to default on its debt obligations unless Obama agrees to major cuts in federal spending to reduce the budget deficit, but they simultaneously demand the Bush tax cuts be made permanent.
Obama late last year agreed to extend the Bush-era tax cuts through 2012 as part of a deal with Republicans. Republicans had threatened to allow tax cuts for middle class Americans to expire unless Obama and his Democratic allies extended the tax cuts for the wealthiest Americans, as well.
Obama subsequently has promised not to further extend the Bush tax cuts for the wealthiest Americans.
Republicans have taken a hard line against any tax increases, including an end to the Bush-era cuts.
Some on the left, including Sen. Bernie Sanders (I-Vt.) wants the president to be much more aggressive in negotiating an end to tax cuts for the rich in exchange for any cuts to the federal budget deficit.
“Will the president demand that any deficit reduction agreement end Bush-era tax breaks for the wealthy? Will he fight to eliminate corporate tax loopholes? Will he end the absurd policies that allow the rich and large corporations to avoid taxes by establishing phony addresses in off-shore tax havens?” Wall Street pressure on Republicans should strengthen President Obama’s hand in budget negotiations, Sanders says. “This gives the president a lot of leverage.”
Individual fact sheets for all 50 states and the District of Columbia along with facts about the costs of the Bush tax cuts nationally are online here.
Scott Nance is the editor and publisher of the news site The Washington Current. He has covered Congress and the federal government for more than a decade.