Americas Unhappy Anniversary Ten Years of The Bush Tax Cuts for the Wealthy

Terrance Heath

Today is an unhappy anniversary for progressives, and for America as a whole. It is the anniversary of a giant step towards the mess we find ourselves in today. It’s the anniversary of the day conservatives set a fiscal trap from which America has yet to extricate itself.

Economic Growth and Tax Relief Reconciliation Act of 2001 SigningIt is a date that should live in infamy. It was ten years ago today that President George W. Bush signed into law the Economic Growth and Tax Reconciliation act of 2001 — the first of two bills that would become known as "the Bush tax cuts." To put it another way, it is the day that conservatives steered American down the road to fiscal peril, and then decided to "floor it."

Telling the Old Story

So, how should progressives deal with this anniversary? Naturally, there’s some debate here. (Would we be progressives if there wasn’t?) On one side, there’s the argument that progressives spend too much time an energy expounding on conservative failures, which can have the effect of reinforcing the opposition’s framing through repetition. Progressive ideas would be better served by telling a new story instead of telling the old story.

Tell Congress: 10 Years Of Bush Tax Cuts Is Enough!

The Bush tax cuts made our tax brackets more regressive, Rep. Jan Schakowsky’s Fairness in Taxation Act makes them more progressive. Tell your representative to support the Fairness In Taxation Act:

There’s some validity to that. But, on the other hand, on the anniversary of the Bush tax cuts it seems impossible to ignore, or just not talk about, the damage done and the dismal failure of what’s now a conservative article of faith. That’s especially true when the right repeatedly injects its favorite failed idea into the political discourse. GOP leadership constant tells Americans that "We’re broke" in one breath, and in the next rule out any discussion or letting the Bush tax cuts for the wealthy expire, let alone rescinding the cuts altogether. The extension of the Bush tax cuts for the wealthy is now one of the major roadblocks in long-term budget talks.

That story’s been told and retold, but some stories bear constant retelling. I’ve retold it a few times myself.

I’ve told it with charts.

I’ve told it as the defining story of a dismal decade.

Uh-Oh! For 99% of us, it was a very taxing decade. From 2000 on conservatives preached the gospel of prosperity through tax cuts. Tax cuts for the very wealthy, that is. The idea was the tax cuts would put yet more money into the hands of the wealthiest Americans, who would then put that money back into the economy, and "spread the wealth" either by spending it on goods and services that create jobs or by investing it in ventures that would create jobs and benefit all Americans. The reality turned out to be something else.

Uh-Oh! We never got the "trickle down" of prosperity the tax cutters promised. Instead, we got a kind of Bizarro World "trickle up" economy, where billionaire Warren Buffet has a lower tax rate than his secretary. Of course it didn’t work. It couldn’t work and we’ve known for years it wouldn’t work. This long, slow grift actually began decades ago, but really began to pay off in the past ten years when conservatives had control of both the White House and Congress, and could finally do a lot of things their way.

I’ve told it as an important part of the story of how we got the current deficit.

Conservatives who squawk about the deficit and Democrats who should know better, but squawk anyway tend to do so selectively. That is, they tend to focus only on spending. But spending is only half of any deficit equation. After all, a deficit is "the amount by which expenditures or liabilities exceed income or assets." When it comes to the government "income" really means "revenue," and that means if we’re going to have an honest discussion about the deficit we have to talk about about taxes.

That half of the deficit equation income or revenue rarely enters the discussion, but the reality is the surest way to create a deficit is to increase spending while deliberately decreasing income or revenue. Who would do something like that? Something so obviously unsustainable?

Part of the answer goes back to the Bush administration’s tax cuts, and the politicians who squawk about deficits and spending now as the Obama administration and Democrats are finally looking for ways to invest the nation’s assets in bailing out the other 99% of us but stayed curiously silent then. Citizens for Tax Justice noted this last year, when it reported that the Bush tax cuts were more expensive than the Democrats health care reform proposal. (Not to mention they’re also more expensive than the president’s $950 billion health care reform proposal.)

Newly revised estimates from Citizens for Tax Justice show that the Bush tax cuts cost almost $2.5 trillion over the decade after they were first enacted (2001-2010).1 Preliminary estimates from the non-partisan Congressional Budget Office show that the House Democrats health care reform legislation is projected to cost $1 trillion over the decade after it would be enacted (2010-2019).2

And yet, many of the lawmakers who argue that the health care reform legislation is too costly are the same lawmakers who supported the Bush tax cuts. 3 Their own voting record demonstrates that health care reform is not a matter of costs, but a matter of priorities. 

Its difficult to see how the Bush tax cuts could provide us with two and a half times the benefits of health care reform. In 2010, when all the Bush tax cuts are finally phased in, a staggering 52.5 percent of the benefits will go to the richest 5 percent of taxpayers. President Bush and his supporters argued that these high-income tax cuts would benefit everybody because they would unleash investment that would spark widespread economic prosperity. There seems to be no evidence of this, particularly given the collapse of the economy at the end of the Bush years.

But wait, tax cuts don’t cost anything? Do they?

That depends.

And most recently, I reviewed what we know about tax cuts for the wealthy.

We now know that:

  1. The wealthy don’t leave when their taxes go up. In fact, not only don’t their numbers dwindle, but you can even end up with more of them than you had before.

We already knew that:

  1. Tax cuts for the wealthy don’t stimulate the economy. Tax cuts can’t jumpstart a flagging economy, because they’re a "supply-side remedy for a problem caused by lack of demand."
  2. The wealthy don’t spend their tax cuts. Tax cuts don’t create demand because the wealthy will save the money instead of spend it. The saving rate among the rich went up after Bush’s tax cuts in 2001 and 2003. The rate fell under Clinton, when taxes went up.
  3. Tax cuts for the wealthy don’t create jobs. Instead of producing job growth and prosperity, the Bush era tax cuts resulted in an era of zero net job creation.
  4. Tax cuts for the wealthy don’t result in higher revenue. In fact, economists say tax cuts do not spur enough growth to pay for themselves.
  5. Tax cuts for the wealthy reduce revenue. The Bush tax cuts reduced revenue significantly.
  6. Tax cuts for the wealthy mostly benefit the wealthy. Their taxes fell and their incomes increased dramatically after the Bush tax cuts, while the gap between rich and poor widened.
  7. The middle class end up paying more taxes. U.S. taxpayers with the very highest incomes pay income taxes worth only 18 percent of their income on average, compared to 25 percent for the typical American.
  8. Tax cuts for the wealthy don’t spread prosperity. Between 1992 and 2007, a time in which income for the average household grew 13% and that of the top 1 percent grew 123%, the income for the top 400 households grew fully 399%.
  9. Taxes are really low for the wealthiest. The average federal income tax rate for the 400 richest Americans was 17 percent in 2007, down from 26 percent in 1992.
  10. The cost of tax cuts for the wealthy exceeds the value of budget cuts. The estimated cost to the government of the tax deal extending the Bush tax cuts for the wealthy, $42 billion this fiscal year, exceeds the stated $38 billion value of the savings from the federal budget cuts lawmakers approved last week.
  11. Some patriotic millionaires want to be taxed. One group of millionaires is saying that they are more than willing to pay more for the good of their country. The Patriotic Millionaires penned a letter to President Obama, Senate Majority Leader Harry Reid and House Speaker John Boehner urging them to increase taxes on incomes over $1,000,000.
  12. Most Americans support higher taxes for the wealthy. A full 72% of adults approve of increasing federal taxes on households making more than $250,000 starting in 2013, according to the latest New York Times/CBS News poll.

As my dad used to say, when making a convincing case for something he thought I should or shouldn’t do, "I’m not telling you what I think. I’m telling you what I know." What he mean was that he was giving me the benefit of his own empirical research, his knowledge gained "by means of direct observation or experience"

By now the empirical evidence on tax cuts what we know based on observation and  experience should make what to do regarding taxes and tax cuts a "no brainer." What we know goes a long way towards proving what progressives have long thought on the subject, and disproving what conservatives have long thought they knew.

I’m a southerner, and like many of my southern brethren I am a story teller. It may be a stereotype, but we generally don’t tell short stories — or when we do, they are loaded with references to the past. Being part of a tribe for whom "the other day" could mean "20 years ago" just as easily as "two days ago," I can’t tell you what’s happening now without telling you what happened before.

Every "new" story is birthed by an "old story," and they need each other. Without the new story, the old story may be forgotten. And without the old story, the new story can lack depth and meaning.

Telling a New Story

The old story needs to be told, and retold. But it shouldn’t be the only story we tell.

The Bush tax cuts is an "old story," but that "old story" is happening now. The Bush tax cuts haunt even the debt ceiling negotiations and long-term budget talks today.

The "old story" is still going on, and it’s not just a story of tax cuts for wealthy, but a story of tax increases for the poor, and the middle- and working-class. The last ten years haven’t just been about tax cuts for the wealthy, but tax increases for low-income, middle- and working-class Americans who end up paying substantial taxes other than income tax.

Who parties and who pays? Tax & spend conservatives have a ready answer, not just in Mississippi and Texas, but in a lot of other states with Republican governors and/or Republican majorities in government. A recent ThinkProgress report says red states that are deep in the red are shifting the burden of budget shortfalls to working- and middle class Americans. Here are just a few examples:

NEW JERSEY: Last year, Gov. Chris Christies (R) budget raised taxes on the working poor and middle-class by cutting the states Earned Income Tax Credit and homestead rebates yet still found money for lucrative corporate tax cuts. This year, Christies budget calls for $200 million in business tax cuts, while cutting mental health services, $540 million from Medicaid, and withholding property tax rebates for seniors until public workers give up many of their health and pension benefits. Many New Jerseyans have said they prefer a tax on millionaires to Christies draconian cuts.

MICHIGAN: Gov. Rick Snyders (R) budget would make Michigans already regressive tax system even more unfair for the states poorest residents. The plan cuts taxes on business by more than 86 percent while slashing $1.2 billion in funding for schools, universities, local governments and other areas. Snyder also wants to raise personal taxes by 30 percent an increase that will fall disproportionately on Michigans lowest income residents.

PENNSYLVANIA: Gov. Tom Corbett (R) presented a budget last week that would cut taxes for corporations, while freezing teacher salaries, cutting dental care for Medicaid recipients, and eliminating more than half of the states universities. Yet the state has lots of revenue potential in northern Pennsylvania, where out-of-state energy companies fracking of natural gas has reaped them hundreds of millions of dollars in profits. Corbett has refused to tax these companies, many of which helped fund his gubernatorial campaign, and has instead opted to lay of more than 1,500 state workers.

WISCONSIN: The tax cuts Gov. Scott Walker (R) signed earlier this year worsened his states fiscal condition, so now Walker is planning to raise taxes on the poor, eliminate $26 million in tax credits for seniors and single mothers and cancel property tax rebates for low-income Wisconsinites making less than $24,000 a year.

SOUTH CAROLINA: Gov. Nikki Haley (R) has proposed ending the states corporate income tax, even while she calls for cutting physical education, K-12 schools, and Medicaid. Haley has received pushback from Republican colleagues: last week the legislature rejected her plan to force state employees to pay more for health insurance. [Ed. Note: During her campaign Haley also supported bringing back South Carolina’s tax on groceries, thus joining Mississippi and Alabama the only other states that tax groceries.]

KANSAS: Facing a $493 million budget shortfall, Gov. Sam Brownback (R) has called for eliminating the corporate income tax while proposing a $50 million cut to education. With majorities in both Houses, Republicans have proposed a cut to the federal Earned Income Tax Credit that would push 6,500 families below the poverty line.

As the saying goes, "they get you coming and going." In each of these states, GOP governors and legislators use their state’s fiscal crisis to justify painful cuts to education and essential services, as well as overt and covert tax increases like those above. The problem is that in many cases, conservative politics went a long way towards creating the very crises Republican say call for "tough decisions" that invariably wind up being toughest on those having the toughest time.

The new story is happening now, too, and the moment is ripe for it. There are progressive alternatives to the non-solutions offered by the right. The People’s Budget, proposed by the Congressional Progressive Caucus, outperforms the Republican budget proposal, reducing the deficit by "shifting the tax burden more fairly to high-income individuals and corporations," instead of low-income, middle- and working-class Americans.

The People’s Budget isn’t the only progressives plan out there. "Our Fiscal Security," an economic blueprint from Demos, the Economic Policy Institute, and the Century Foundation, cuts defense spending amnd targets increases in public investment, while repealing the Bush tax cuts for the wealthy. And, as Dan Marans points out, there are a number of other progressive tax ideas that Washington isn’t talking about.

Washington isn’t talking about these ideas, but there’s a growing hunger in America for a "new story." Republicans claim that preserving the Bush tax cuts for the wealthy is in the interest of small businesses, but small business owners are starting to demand a repeal of the Bush tax cuts.

Its a common complaint from small business owners. While congressional Republicans and entrenched corporate lobbying groups like the U.S. Chamber of Commerce — which is holding a Wednesday meeting on small business priorities — and the National Federation of Independent Business (NFIB) have been pushing hard to preserve the Bush tax cuts for the wealthy by touting the interests of small firms, much of the small business community is demanding that those very tax cuts be repealed. The tax breaks for the wealthy will add $700 billion to the debt over the next 10 years, according to the White House’s Office of Management and Budget. And many small firms say that money would be better spent on direct aid to the middle class.

"We are fed by our consumers, not by our tax breaks," says Rick Poore, owner of Designwear, Inc., a screen-printing business based in Lincoln, Neb. "If you drive more people to my business, I will hire more people. It’s as simple as that. If you give me a tax break, I’ll just take the wife to the Bahamas."

Those small business owners are not alone Patriotic millionaires are calling for the expiration of Bush tax cuts for the wealthy — their own tax cuts. Plus, recent polls show that a majority of Americans support raising taxes on the rich, and oppose shredding safety net programs.

Broke! Rescind Bush TaxcutsAlarmed by rising national debt and increasingly downbeat about their country’s course, Americans are clear about how they want to attack the government’s runway budget deficits: raise taxes on the wealthy and keep hands off of Medicare and Medicaid….

On tackling the deficit, voters by a margin of 2-to-1 support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed.

Independents supported higher taxes on the wealthy by 63-34 percent; Democrats by 83-15 percent; and Republicans opposed by 43-54 percent….

Voters oppose cuts to [Medicare and Medicaid] by 80-18 percent. Even among conservatives, only 29 percent supported cuts, and 68 percent opposed them.

The point is that the "old story" must not be the only story. We can’t effectively discuss where we are now without talking about how we got here. It’s like getting lost on a long journey. It wouldn’t make sense to toss the map aside and declare that talking about where we’ve been isn’t going to get us where we want to go. At some point we have to pull out the map, and pinpoint where we made a wrong turn, before we can find a way to get back on the right path.

The "new story" is the story of where we’re doing and how we’re going to get there. It needs telling when we’ve made progress towards getting back on the right path, and when we need encouragement to keep moving in the right direction. It needs telling to point out the next turn will take us closer to getting back on the right path, to make sure we don’t get lost again.

Progressives need to remember and remind Americans of the "old story" of how we got here, AND tell the "new story" of how we will get back on course to a better destination.

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