A Few Facts on the Deficit

[Mr. Big Dog 10,747]

Percentage of GDP and actual revenue are two different things.

If these tax cuts were paying for themselves - as is often erroneously claimed - the tax revenue should not decrease relative to the GDP. And yet it did. This decrease is the largest single contributor to the deficits. Additional spending on homeland security and the military account for much of the rest. What this means is that - all other things being equal - the deficit would be about half of what it is if were not for the tax cuts enacted in 2001 and 2003.

[one...two...tree 2,762]

If these tax cuts were paying for themselves - as is often erroneously claimed - the tax revenue should not decrease relative to the GDP. And yet it did. This decrease is the largest single contributor to the deficits. Additional spending on homeland security and the military account for much of the rest. What this means is that - all other things being equal - the deficit would be about half of what it is if were not for the tax cuts enacted in 2001 and 2003.

Yep.

from January 31, 2005:

The new Congressional Budget Office budget projections released today show that the nation faces a fourth consecutive year of substantial budget deficits. Some seek to portray "runaway domestic spending" or growth in the costs of entitlement programs as the primary cause of the shift in recent years from sizeable surpluses to large deficits. Such a characterization is incorrect. In 2005, the cost of tax cuts enacted over the past four years will be over three times the cost of all domestic program increases enacted over this period.

The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for nearly half — 48 percent — of this $539 billion in increased costs. [1] Increases in program spending make up the other 52 percent and have been primarily concentrated in defense, homeland security, and international affairs.

The Administration has repeatedly defended its tax cuts as a needed stimulus during the recent economic downturn. But the downturn is behind us, and the cost of the tax cuts is scheduled to increase in the years ahead. Indeed, some of the tax cuts enacted in 2001 that benefit only high-income households have not even started to take effect yet. The repeal of the "personal exemption phase-out" for high-income taxpayers, as well as repeal of the limitation on itemized deductions for high-income taxpayers, do not start to phase in until 2006 and do not take full effect until 2010. Estate tax repeal also does not take effect until 2010.

A growing number of studies from highly respected institutions and economists have concluded that the negative effect on long-term growth of the increased deficits that the tax cuts are generating is likely to cancel out — and quite possibly to outweigh — any positive effects on long-term growth from reductions in marginal tax rates and other tax incentives in the 2001 and 2003 tax-cut packages. Stated simply, the tax cuts are more likely to reduce long-term growth than to increase it.[2]

http://www.cbpp.org/...?fa=view&id=966

Edited July 27, 2010 by El Buscador

[Obama 2012 1,714]

If these tax cuts were paying for themselves - as is often erroneously claimed - the tax revenue should not decrease relative to the GDP. And yet it did. This decrease is the largest single contributor to the deficits. Additional spending on homeland security and the military account for much of the rest. What this means is that - all other things being equal - the deficit would be about half of what it is if were not for the tax cuts enacted in 2001 and 2003.

Wrong. Without the tax cuts, we would not have had the growth we had either. Tax cuts were not a contributing factor to anything along the lines to a loss of revenue until the recession in comparison with 2000 levels of government. The revenue the government took in would have remained the same and the percentage would have been even worse had the tax cuts not taken place. We would have kept spending without a booming economy on the war, homeland security, etc.

The tax cuts were necessary and allowed government to make more money than it ever had before. The problem was the increased government, the excess spending, the war, etc.. Had we just had the tax cuts and not spent anything else, then we would have continued to pay down the debt.

[JohnSmith2007 353]

It looks like we are going to get the chance to find out if higher taxes means more revenue. At the begining of next year when they raise our taxes we will see if the deficit goes up, down or the dems make more excuses. (Blame it on Bush)

[웃 910]

2011: Year of the Tax Man

http://www.ncpa.org/pub/2011-year-of-tax-man

National Center for Policy Analysis

Monday, July 19, 2010

by NCPA

The current personal income tax rates will expire beginning January 1, 2011. If Congress does not act to extend the current tax rates, the tax burden will increase for all income levels, not just the wealthy.

The Disappearing Income Tax Cuts: The 2001 and 2003 Bush income tax cuts lowered tax rates throughout the income range and reduced capital gains taxes. But if the provisions are not made permanent, these reduced rates will expire soon. The tax bracket for the lowest income-earners will rise from 10 percent to 15 percent; the highest earners will face an increase from 35 percent to 39.6 percent. Data from the Joint Committee on Taxation shows that at least 55 percent of the revenue raised by increasing the top two rates would come from small business income. That amounts to an estimated $8.69 billion increase in small business taxes in 2011 alone. (See "Soaking the Rich and Drenching Small Business.")

In addition to federal taxes, states impose income, property and other taxes that raise the total tax burden on small business. As a result of these state levies, if the Bush tax cuts expire:

• A small business in Texas would pay a maximum marginal tax rate of 42.5 percent (the lowest in the nation).
• A small business in Oregon would pay a maximum marginal tax rate of 53.5 percent (the highest in the nation).

The Attack on Capital Gains and Dividends. Under current law, capital gains on assets held more than a year are taxed at a flat 15 percent rate for most taxpayers. The capital gains of taxpayers in the 10 percent and 15 percent federal income tax brackets are not taxed at all. Capital gains on assets held less than a year are taxed at an individual's ordinary income tax rate. In 2011, however:

• Long-term capital gains tax rates will increase from 15 percent this year to 20 percent.
• Dividends will be taxed at marginal income tax rates of up to 39.6 percent.

Thus, for high-income earners the after-tax rate of return on a capital gain (for example, the sale of a stock held for at lease one year) would fall by more than 10 percent, or nearly one percentage point. (See "New Taxes on the Wealthy are Bad News for Everyone").

New Medicare Taxes on the "Wealthy." If the 2011 tax increase are not enough to digest, beginning in 2013, the new health care reform law will impose an additional 0.9 percent Medicare tax on wage income for individuals earning more than $200,000 a year and couples earning more than $250,000. This will be added to the existing 2.9 percent Medicare tax split between employees and employers. In addition, the new law imposes a 3.8 percent Medicare tax on unearned income, such as rent, royalties, dividends and capital gains for the same high-income earners. (See "New Taxes on the Wealthy are Bad News for Everyone").

The Reappearing Estate Tax. The Bush tax cuts gradually lowered the top tax rate from 55 percent to 45 percent for 2007 to 2009. The amount of estate exempted from the tax rose from $650,000 to $2 million in 2007 and 2008, and to $3.5 million in 2009. These rates are scheduled to sunset in 2011, when the estate tax will return and rates will revert to those in effect prior to 2001 - up to 55 percent. Only the first $1 million of an estate will be exempt.

A Second Layer of Estate Taxation: The Generation-Skipping Tax. In addition to the estate tax, there is an added tax - called the generation-skipping tax (GST) - if a bequest goes to a grandchild or other relative more than one generation removed from the decedent. The GST rate is equivalent to imposing a 45 percent tax on the estate (as if it had gone to a child), and then imposing another 45 percent rate on the remaining 55 percent of the estate (as if it had gone from the child to the grandchild).

In 2007, the top rate for the combined GST/transfer tax reached nearly 70 percent. Prior to 2001, the top rate with the GST was just under 80 percent. The GST will return to its pre-2001 levels along with the estate tax in 2011. (See "The High Marginal Cost of the Estate Tax," "The Politics of Estate Tax Reform" and "Estate Tax Myths.")

Penalizing Marriage Again. Prior to the Bush tax cuts, an estimated 25 million couples paid a penalty for being married in 1999, amounting to about $1,141 per couple. However, the Bush tax cuts of 2001 made the income bracket for married couples twice that of single filers for incomes up to the 25 percent tax bracket. That virtually eliminated the marriage penalty for low- to moderate- income workers, and mitigated it for higher-income earners. The marriage penalty will return if the Bush tax cuts are allowed to expire:

• In 2007, a married couple filing jointly with taxable income of $25,000 and $75,000 actually paid about $685 less than if they were single.
• If the couple filed separate returns, they paid about $322 more in taxes than if they were single.
• If the Bush tax cuts expire, a married couple filing jointly in 2011 will pay about $619 more than the two singles; if the couple files separately, the penalty will be $1,280!

In this sense, the marriage penalty is more of a penalty on working than on marriage itself. If the marriage penalty returns and couples face higher tax rates, second-earner spouses will have less incentive to work. Finally, the standard deduction of $11,400 for joint filers will revert to less than twice the deduction for single filers (currently $5,700).

------------------------

-----------------------

Are the Bush Tax Cuts Working?

2003

President Bush has signed into law three tax bills in the past three years; these tax cuts amounted to $1.3 trillion in 2001, $96 billion in 2002, and $330 billion in 2003. Democratic opponents criticized the tax cuts (particularly the first one in 2001) as fiscally irresponsible and weighted primarily toward the wealthy, while Republican supporters claimed that the tax cuts would stimulate economic growth and return money to taxpayers across the board.

Major Provisions of the Tax Cuts

The 2001 Economic Growth and Recovery Tax Act, by far the largest of the three tax cuts, was intended to provide tax relief to individuals, families and businesses, thereby stimulating economic growth enough to recover from the recession (which ended in November 2001). Some provisions of that bill include the following:¹

• Rebate checks were sent to taxpayers in the amount of $300 per individual and $600 per married couple.
• Personal income tax rates dropped from 39.6, 36, 31, and 28 percent to 35, 33, 28, and 25 percent, respectively.
• The child tax credit increased from $500 to $600 (effective 2001), and will increase to $1,000 by 2010.
• The standard deduction for married couples increased to equal twice that of single taxpayers.
• The estate tax would be repealed in 2010.
• Contribution limits for various tax-favored savings accounts (for retirement, education, etc.) were increased.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated many of those provisions and cut tax rates on dividends and capital gains-small-business equipment write-off amounts were also increased:²

• Effective 2003-2008, the maximum tax rate on qualified dividends will be 15 percent (formerly, dividends were taxed at the same levels as ordinary income).
• The rate on long-term capital gains from sales after May 6, 2003, dropped from 20 percent to 15 percent.
• Many small businesses can instantly deduct 100 percent of most new and used business assets (up to $100,000).

How Has the Economy Changed Since the Tax Cuts?

GDP Growth

After the recession in 2001 and the first round of tax cuts, economic growth speeded up and is expected to pickup even faster in 2004:³

• The real annual GDP growth rate increased from 0.3 percent in 2001 to 2.5 percent in 2002.
• In the third quarter of 2003, GDP grew at a 7.2 percent annual rate.
• Forecasters are expecting GDP to grow by 4.6 percent in 2004, the highest in 20 years.
• 2003 and 2004 economic growth levels surpassed Congressional Budget Office (CBO) estimates by 150 basis combined, resulting in $300 billion of additional growth, which is roughly $2,500 per household.

Employment, Jobs, and Productivity⁴

Though job creation was slow immediately following the recession and during the first stages of the recovery, it had increased dramatically by late 2002 and 2003.

• 1.4 million jobs were added in the nine months after August 2003 (the 2003 tax cuts were signed into law in late May 2003).
• The unemployment rate remained steady at 5.6 percent in May 2004, well below its peak of 6.3 percent a year ago.
• The Treasury Department estimates that without the tax relief, as many as 1.5 million more Americans would be out of work right now, and the unemployment rate would be well over 7 percent.

The job growth statistics are particularly noteworthy because of greater-than-expected increases in productivity levels-high rates of productivity tend to mean less employment:

• Productivity grew at a 4.6-percent annual rate in the first quarter of 2004, continuing the trend of large gains in productivity since 2001 due to investments in equipment and technology.
• Higher productivity increases incomes and keeps inflation in check.

Furthermore, unemployment claims are at their lowest since the 2001 recession. The high rates of job growth matched with high rates of productivity point to the overall strength of the economy.

Investment, Spending and Inflation⁵

Consumer spending is on the rise, as is business investment. Economists credit the tax cuts for some of this growth-taxpayers' disposable income rose after receiving their rebates and businesses increased their inventory to meet increased demand.

• Consumers' real disposable income has increased by more than 10 percent during the first 13 quarters of the Bush administration, compared to only 7 percent during the same period of the first Clinton administration.
• Business investment increased at a 5.8-percent annual rate in the first quarter of 2004.

Though inflationary pressures have risen recently in response to increased business and consumer spending, inflation is low by historical standards:

• The personal consumption expenditure index (the Fed's preferred inflation gauge) rose by 1 percent for an annual 3 percent inflation rate, but when volatile food and energy prices are removed from the index, the inflation rate is only 1.7 percent annually.
• However, personal income growth is growing as well, so inflationary pressure is easier for the average worker to bear.

Dividend Payouts

A study on dividend payouts before and after the 2003 tax cut for all Standard & Poor's 500 companies showed a highly positive response to the tax cut:⁶

• Annual dividends paid by S&P 500 companies rose from $146 billion to $172 billion, an increase of $26 billion.
• In addition, special dividends of $7 billion have been paid, raising the total first-year dividend increase to $33 billion.
• Thus, dividends increased 18 percent without special dividends and 23 percent with special dividends.
• About 22 companies that did not previously pay dividends have initiated regular dividends.
• Equity values rose more than $2 trillion after the tax cut.
• Since 2003, nearly 19 companies have instituted a dividend payment for the first time, and almost 9 per­cent more companies paid out dividends after the tax cut than before the tax cut.
• Dividends payments to taxpayers increased from an average of $410 in the second quarter of 2003 to $518 in the third quarter of 2005.
• The overall payout of dividends in 2005 was over 36.5 percent higher than the payout before the 2003 tax cut and dividend income increased by a similar margin after the 2003 cut, from $750 to $1,000.

The large and positive response to the dividend tax cut, which is scheduled to expire at the end of 2008, suggests that Congress should make it permanent.

Capital Gains⁷

• In 1993, 14.5 million Americans claimed capital gains income, by 2003, the number had grown to 21.9 million Americans -- a 51 percent increase -- and the percent of all taxpayers report­ing capital gains income increased from 12.6 per­cent to 16.8 percent, respectively.
• Taxpayers claimed an average of $12,283 in capital gains income in 2003, and shareholder wealth increased by more than $5 trillion.

Taxing the Kiddos. The tax credit for taxpayers with children will fall 50 percent, from $1,000 to $500. (See "Will Congress Penalize Marriage Again?")

Low- and middle-income families will be struck the hardest by these changes in 2011.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Are the Bush Tax Cuts Working?

NCPA

2003

President Bush has signed into law three tax bills in the past three years; these tax cuts amounted to $1.3 trillion in 2001, $96 billion in 2002, and $330 billion in 2003. Democratic opponents criticized the tax cuts (particularly the first one in 2001) as fiscally irresponsible and weighted primarily toward the wealthy, while Republican supporters claimed that the tax cuts would stimulate economic growth and return money to taxpayers across the board.

Major Provisions of the Tax Cuts

The 2001 Economic Growth and Recovery Tax Act, by far the largest of the three tax cuts, was intended to provide tax relief to individuals, families and businesses, thereby stimulating economic growth enough to recover from the recession (which ended in November 2001). Some provisions of that bill include the following:¹

• Rebate checks were sent to taxpayers in the amount of $300 per individual and $600 per married couple.
• Personal income tax rates dropped from 39.6, 36, 31, and 28 percent to 35, 33, 28, and 25 percent, respectively.
• The child tax credit increased from $500 to $600 (effective 2001), and will increase to $1,000 by 2010.
• The standard deduction for married couples increased to equal twice that of single taxpayers.
• The estate tax would be repealed in 2010.
• Contribution limits for various tax-favored savings accounts (for retirement, education, etc.) were increased.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 accelerated many of those provisions and cut tax rates on dividends and capital gains-small-business equipment write-off amounts were also increased:²

• Effective 2003-2008, the maximum tax rate on qualified dividends will be 15 percent (formerly, dividends were taxed at the same levels as ordinary income).
• The rate on long-term capital gains from sales after May 6, 2003, dropped from 20 percent to 15 percent.
• Many small businesses can instantly deduct 100 percent of most new and used business assets (up to $100,000).

How Has the Economy Changed Since the Tax Cuts?

GDP Growth

After the recession in 2001 and the first round of tax cuts, economic growth speeded up and is expected to pickup even faster in 2004:³

• The real annual GDP growth rate increased from 0.3 percent in 2001 to 2.5 percent in 2002.
• In the third quarter of 2003, GDP grew at a 7.2 percent annual rate.
• Forecasters are expecting GDP to grow by 4.6 percent in 2004, the highest in 20 years.
• 2003 and 2004 economic growth levels surpassed Congressional Budget Office (CBO) estimates by 150 basis combined, resulting in $300 billion of additional growth, which is roughly $2,500 per household.

Employment, Jobs, and Productivity⁴

Though job creation was slow immediately following the recession and during the first stages of the recovery, it had increased dramatically by late 2002 and 2003.

• 1.4 million jobs were added in the nine months after August 2003 (the 2003 tax cuts were signed into law in late May 2003).
• The unemployment rate remained steady at 5.6 percent in May 2004, well below its peak of 6.3 percent a year ago.
• The Treasury Department estimates that without the tax relief, as many as 1.5 million more Americans would be out of work right now, and the unemployment rate would be well over 7 percent.

The job growth statistics are particularly noteworthy because of greater-than-expected increases in productivity levels-high rates of productivity tend to mean less employment:

• Productivity grew at a 4.6-percent annual rate in the first quarter of 2004, continuing the trend of large gains in productivity since 2001 due to investments in equipment and technology.
• Higher productivity increases incomes and keeps inflation in check.

Furthermore, unemployment claims are at their lowest since the 2001 recession. The high rates of job growth matched with high rates of productivity point to the overall strength of the economy.

Investment, Spending and Inflation⁵

Consumer spending is on the rise, as is business investment. Economists credit the tax cuts for some of this growth-taxpayers' disposable income rose after receiving their rebates and businesses increased their inventory to meet increased demand.

• Consumers' real disposable income has increased by more than 10 percent during the first 13 quarters of the Bush administration, compared to only 7 percent during the same period of the first Clinton administration.
• Business investment increased at a 5.8-percent annual rate in the first quarter of 2004.

Though inflationary pressures have risen recently in response to increased business and consumer spending, inflation is low by historical standards:

• The personal consumption expenditure index (the Fed's preferred inflation gauge) rose by 1 percent for an annual 3 percent inflation rate, but when volatile food and energy prices are removed from the index, the inflation rate is only 1.7 percent annually.
• However, personal income growth is growing as well, so inflationary pressure is easier for the average worker to bear.

Dividend Payouts

A study on dividend payouts before and after the 2003 tax cut for all Standard & Poor's 500 companies showed a highly positive response to the tax cut:⁶

• Annual dividends paid by S&P 500 companies rose from $146 billion to $172 billion, an increase of $26 billion.
• In addition, special dividends of $7 billion have been paid, raising the total first-year dividend increase to $33 billion.
• Thus, dividends increased 18 percent without special dividends and 23 percent with special dividends.
• About 22 companies that did not previously pay dividends have initiated regular dividends.
• Equity values rose more than $2 trillion after the tax cut.
• Since 2003, nearly 19 companies have instituted a dividend payment for the first time, and almost 9 per­cent more companies paid out dividends after the tax cut than before the tax cut.
• Dividends payments to taxpayers increased from an average of $410 in the second quarter of 2003 to $518 in the third quarter of 2005.
• The overall payout of dividends in 2005 was over 36.5 percent higher than the payout before the 2003 tax cut and dividend income increased by a similar margin after the 2003 cut, from $750 to $1,000.

The large and positive response to the dividend tax cut, which is scheduled to expire at the end of 2008, suggests that Congress should make it permanent.

Capital Gains⁷

• In 1993, 14.5 million Americans claimed capital gains income, by 2003, the number had grown to 21.9 million Americans -- a 51 percent increase -- and the percent of all taxpayers report­ing capital gains income increased from 12.6 per­cent to 16.8 percent, respectively.
• Taxpayers claimed an average of $12,283 in capital gains income in 2003, and shareholder wealth increased by more than $5 trillion.

The Bush Tax Cuts Are Working

The three Bush tax cuts have offered tax relief to every American taxpayer and businesses as well. Individuals and families kept more of their own income and tended to spend it or invest it, which led to impressive economic growth. Tax relief also lowered the cost of capital, making it easier for businesses to expand, increase profits, and hire more workers. Nearly all economic indicators show that we have recovered from the 2001 recession and are in a period of economic expansion.

Unfortunately, many of the Bush tax cut provisions have "sunset clauses" and will expire soon. Nearly all elements of the 2001 Economic Growth and Recovery Tax Act will expire in 2011 if legislators do not make them permanent. If that doesn't happen, taxpayers will face the largest tax increase in the nation's history.

That tax increase raises three legitimate concerns:⁸

• Higher taxes encourage additional spending; there is no fixed relationship between taxes and spending, but history suggests that tax increases almost surely have the effect of loosening the reins on government spending.
• Higher tax rates hurt competitiveness and growth ; all tax increases cause economic harm because they encourage bigger government but some types of tax increases do more economic damage than others, specifically, higher marginal tax rates on work, saving, and investment reduce incentives to engage in productive behavior.
• The tax rates/tax revenue downward spiral ; if the Bush tax cuts are not extended and the economy is hit by a sizeable increase in marginal tax rates, economic performance will falter, and this translates into fewer jobs, lower incomes, and diminished profits, and that means less money for the government to tax.

Even though, H.R. 4297 is a step in the right direction and the tax cuts have spurred investment, job creation, and economic growth, repealing any part of them would be damaging to American taxpayers on an individual level and to the economy as a whole. Even if Congress allows a tax cut to expire in 2011, investors will respond by locking up their money in short-term projects rather than long-term ones. The U.S. economy is strong, but could become stronger if the Bush tax cuts are made permanent.

Moreover, according to the Congressional Budget Office's "Budget and Economic Outlook for 2006":⁹

• Before the 2003 cut was enacted capital-gains tax liabilities were estimated to be $60 billion 2004 and $65 billion in 2005, for a two-year total of $125 billion.
• But after the cut, liabilities were lowered to $46 billion in 2004 and $52 billion in 2005, for a two-year total of $98 billion.
• Actual liabilities from capital-gains taxes were $71 billion in 2004 and $80 billion in 2005, for a two-year total of $151 billion.
• Instead of costing the government $27 billion in revenues, the tax cuts actually earned the government $26 billion extra.

The Heritage Foundation also found that overall payout of dividends in 2005 was over 36.5 percent higher than the payout before the 2003 tax cut, and dividend income increased by a similar margin after the 2003 cut, from $750 to $1,000.¹⁰ Taxpayers also claimed an average of $12,283 in capital gains income in 2003, and shareholder wealth increased by more than $5 trillion.

In May 2006, President Bush signed the Tax Increase Prevention and Reconciliation Act of 2005 (H.R. 4297) into law which extend the current tax cuts. His signing assures that millions of taxpayers and millions more workers and business owners will enjoy low tax rates on capital gains and dividends and a potentially stronger economy through 2010. Overall, extending JGTRRA's preferential rate structure on capital gains and dividend income will have small -- but positive -- effects on both gross domestic product (GDP) and employment. Personal consumption and business fixed investment are also likely to post modest gains as a result of H.R.4297 because it is only a temporary extension of an expiring provision.¹¹

• H.R. 4297's capital gains and dividend provisions are likely to influence economic activity by increasing personal disposable income by lowering federal tax payments and reducing the cost of capital to businesses by raising the value of U.S. equities.
• Most immediately, H.R. 4297's capital gains and dividend provisions will lower income tax payments; extending JGTRRA's rate structure on capital gains and dividend income will reduce federal tax revenues by a total of some $18 billion in fiscal years 2009 and 2010 and over $50 billion between fiscal years 2008 and 2016.
• This will likely boost personal consumption and business fixed investments over the medium term; this effect is also likely to be largest for the extension of JGTRRA's preferential tax rates on capital gains realizations.

Conclusion: Make the Bush Tax Cuts Permanent

In January 2006, the White House economic team began the push to make the 2001 and 2003 tax cuts permanent because the tax policy program has been shown to help the United States economy to thrive, with steady job creation and strong economic growth.

If the tax cuts of 2001 and 2003 are allowed to expire, millions of working families will see their economic prospects dim, their job opportunities diminish and economic uncertainty rise. Moreover, taxes will rise dramatically for most taxpayers. Between now and January 1, 2011:¹²

• Tax rates will rise substantially in each tax bracket, some by 450 basis points and low-income taxpayers will see the 10-percent tax bracket disappear, and they will have to pay taxes at the 15-percent rate.
• Married taxpayers will see the marriage penalty return and taxpayers with children will lose 50 percent of their child tax credits.
• Taxes on dividends and capital gains will increase beginning on January 1, 2009 and federal death taxes will come back to life in 2011, after fading down to nothing in 2010.

However, if Congress makes the tax cuts permanent, the major economic benefits begin in 2011. According to the Center for Data Analysis at the Heritage Foundation:¹³

• Significant economic gains will occur throughout the period from 2006-2014, particularly after 2008.
• For example, making certain that taxes on investment remain low will add about 285,000 jobs per year in fiscal years 2008 and 2009.
• In those two years alone, lower taxes on capital gains and dividends mean an additional $70 billion in economic output and an additional $110 billion in disposable income for households.
• On average, total employment will rise by 1,087,000 jobs per year, and after inflation, annual GDP will be over $111 billion higher.
• Personal savings will grow by $163 billion per year, on average, after inflation.
• After-tax household income will grow by an annual average of $274 billion per year, after inflation.

http://taxesandgrowth.ncpa.org/news/are-the-bush-tax-cuts-working

[mawilson 2,133]

That's not supported by the facts. In 2000, tax revenues were 20% of GDP. In 2005 - after the two rounds of tax cuts - tax revenues were 16.8% of GDP. That's a decrease, not an increase.

Right but the GDP was higher than it otherwise would have been had the tax cuts not been in place.

[mawilson 2,133]

If these tax cuts were paying for themselves - as is often erroneously claimed - the tax revenue should not decrease relative to the GDP.

Why should it? The argument for low taxes is that they help grow the GDP, so the total revenue

is higher in nominal terms, even though it's not higher as a percentage of GDP.

[Mr. Big Dog 10,747]

Wrong. Without the tax cuts, we would not have had the growth we had either.

Funny. You support the notion that the economy grew at a faster pace following the tax cuts but you reject the notion that the stimulus has contained the economic decline - i.e. that the decline and the rate of unemployment would have been worse without it. You sure like having your cake and eat it, too.

Right but the GDP and employment was higher than it otherwise would have been had the tax cuts stimulus not been in place.

Since we're now comfortable talking hypotheticals...

[Aubrey 10]

You can argue all you want about whether the tax cuts are working or not... but it doesn't change the fact that we can't continue to borrow from China, Japan, and other countries without harming our own national security. It's pretty hard to bully them around when we owe them so much money. Our national debt is a train wreck waiting to happen. On our current course, we're headed straight for the inability to pay for anything beyond the interest on our debt, Social Security, Medicare, and other programs we're obligated to pay for. Eventually people have to pay for these government services.

Learn more about this threat to our country. A group of economists have created a wonderful documentary to explain it: I.O.U.S.A. Here's a 30 minute version of it:

Maybe since the top 1% has 50% of the income we should consider taxing them a bit more and paying off our debt. Our "progressive" tax system treats people making ~$350,000/yr the same as those making $1 million a year. Screwy imo.

[Obama 2012 1,714]

Funny. You support the notion that the economy grew at a faster pace following the tax cuts but you reject the notion that the stimulus has contained the economic decline - i.e. that the decline and the rate of unemployment would have been worse without it. You sure like having your cake and eat it, too.

The stimulus is a negative impact. You cannot spend money you do not have to stimulate the economy nor recover. It's the same thing as spending money on the wars. The stimulus is also not helping to create private sector jobs, only public sector jobs and temporary contracts to companies that probably would have gotten the contracts under normal circumstances anyway.

You cannot grow the Federal government, create the federal jobs that are being created, and create at the same time a situation for full economic recovery. The government can only make money when the private sector grows, and nothing that this government is doing/has been doing in this recession has helped with that at all.

All of this is amusing really as well. So many of the problems that led to the recession were policies put in place over the course of the last 15 years or so and the ignorance of people like Alan Greenspan and Larry Summers and others directly involved. When the private sector screws up, they get beaten to death, when the government screws up, we get more government..... Truth of the matter is, Washington is run by the only ones who continue to make money no matter what we do. It's the same people who 'appear' to make a sacrifice of their own and then make record profits after. The same people who have been directly involved in causing the recession and the same who are keeping real recovery from taking place for the benefit of themselves. The same ones who wrote the new Financial sector bill and the same who will continue to benefit. It is and always has been the banks. They have all the marbles and have for quite a long time.

[luckytxn 2,263]

It should be pretty simple. Raise taxes so that we have a balanced budget. Then when the tax payer pays taxes and sees the bill they can decide if the Federal programs are worth it after all. By huge deficit spending and low taxes it makes any program seem like a good deal.

[I AM NOT THAT GUY 5,715]

Funny. You support the notion that the economy grew at a faster pace following the tax cuts but you reject the notion that the stimulus has contained the economic decline - i.e. that the decline and the rate of unemployment would have been worse without it. You sure like having your cake and eat it, too.

Since we're now comfortable talking hypotheticals...

There is a difference between private spending and public spending, but it is all spending. The question is, do you think it is better for politicians to spend the money on what they think is important, i.e. creating more loyal constituents for the next election, or let the public decide how to spent their own money as individuals, on things like LCD TV's and game consoles.

[mawilson 2,133]

Funny. You support the notion that the economy grew at a faster pace following the tax cuts but you reject the notion that the stimulus has contained the economic decline - i.e. that the decline and the rate of unemployment would have been worse without it. You sure like having your cake and eat it, too.

Where did I say that? If you throw a trillion dollars at the wall, of course some of it will stick.

I just don't think that borrowing from the future to prop up the economy in the short term

is a sound long-term economic policy.

[Heracles 417]

There is a difference between private spending and public spending, but it is all spending. The question is, do you think it is better for politicians to spend the money on what they think is important, i.e. creating more loyal constituents for the next election, or let the public decide how to spent their own money as individuals, on things like LCD TV's and game consoles.

So which of the two is better for America? The government uses taxes collected by Americans and American companies to build up America and modernize [invest] in areas like the 20's to 80's infrastructure. Or people pay less tax, only to purchase more and more goods built in China or other foreign countries.

Evidently, when it comes to finances, Republicans are more concerned about themselves than America. Let alone Americans, you known, the most important asset of America. I know amazing right.

This concept is also in the first three words and three times the size of the rest of the text of the United States Constitution: We the people. We as in plural and people as in not one person. What I don't see in that document is lobbyist, corporate, banks, shareholders and so forth.

Edited July 27, 2010 by Heracles

[I AM NOT THAT GUY 5,715]

So which of the two is better for America? The government uses taxes collected by Americans and American companies to build up America and modernize [invest] in areas like the 20's to 80's infrastructure. Or people pay less tax, only to purchase more and more goods built in China or other foreign countries.

Evidently, when it comes to finances, Republicans are more concerned about themselves than America. Let alone Americans, you known, the most important asset of America. I know amazing right.

This concept is also in the first three words and three times the size of the rest of the text of the United States Constitution: We the people. We as in plural and people as in not one person. What I don't see in that document is lobbyist, corporate, banks, shareholders and so forth.

The case has been made it is better to give the investment class the freedom they need to create jobs and expand the economy. Yet, obviously, they are no better equipped than politicians in general, to wisely spend their resources.

What has destroyed the system more than anything, was the New Deal, the notion we have to invest in the present, by borrowing from the future. Thank you, FDR! I can't wait for the last of the "Greatest" generation to take it's final breathe.

I tell you all, I live my life on a cash basis, run my business on net 30, and I breathe a lot easier, knowing that the money I am spending for both, I have already earned.