The Economic Policy Institute (EPI) has just released a new analysis of the impact of Bush tax cuts on the economy. Republicans not only want to make the Bush tax cuts permanent but they actually want to cut the top marginal rate even further from 35% to 25%. As it turns out the Bush tax cuts were very, very bad economic policy-ineffective, expensive, and unfair.
Here are some of EPI’s key findings:
- The Bush tax breaks were heavily weighted toward the wealthy. For example, in 2010 55% of the Bush tax breaks went to the top 10% of earners—38% to the top 1%. The top 0.1% of earners (those making over $3 million) received an average tax break in 2010 of about $520,000, 450 times more than the share received by the average American family.
The Bush 2001-2007 economic expansion, which the tax breaks were supposed to stimulate, was one of the weakest on record:
- Inflation adjusted median weekly earnings DECLINED 2.3%
- Total employment grew at just one-third of the average growth in postwar expansions
- Growth in investment, GDP, and employment all posted their worst performance of any post-war expansion
- Business investment, which the Republicans said the tax cuts would encourage, grew just 2.1% annually—a third of the average increase and less than half of the next poorest post-war year on record.
- Federal tax revenue as a % of GDP fell from 20.6% in 2000 to 18.5% in 2007.
- Between 2001 and 2010, the Bush tax cuts added $2.6 trillion to the public debt, nearly 50% of the total debt accrued during the period.
- The Bush tax cuts produced the lowest level of revenue as a share of the economy than since the 1950s.
EPI has this to say about keeping the Bush tax cuts vs letting them expire:
- Making the changes permanent would cost $4.6 trillion over the 2012-2021 period.
- Letting the Bush tax cuts expire would put public debt on a sustainable trajectory over the decade, maintaining a constant share of the economy through the entire 10-year period.
Bottom line: The Bush tax cuts amounted to very bad economic policy. Keeping them would do little or nothing to grow the economy or create jobs. They would only make the deficit worse.
Read more here: http://www.epi.org/page/-/EPI_PolicyMemorandum_184.pdf