5 Dirty Little Secrets About the Bush Tax Cuts

Investor's Business Daily ^ | 11/29/2012 | John Merline

[IBD editorial writer]

It´s been more than 10 years since President Bush signed his first round of tax cuts into law. And in the years since, those cuts have been the source of constant attacks. [snip] But a decade of debate and discussion has managed to shed little light on what the Bush tax cuts actually did. So as the debate heats up once again as part of the "fiscal cliff" negotiations, it´s worth taking the time to highlight some of the things most people never knew about the Bush-era tax cuts.

[silverleaf]

bookmark

[oust the louse]

It’s tough to refute the CBO, IRS and the Tax Foundation. HEY Mr Politician, why can’t you just speak to us in simple terms like this author did? Instead we get bipartisan bickering...wtf?

[NRA1995]

It’s tough to refute the CBO, IRS and the Tax Foundation. HEY Mr Politician, why can’t you just speak to us in simple terms like this author did? Instead we get bipartisan bickering...wtf?

Because they are all running around with their hands over theior ears screaming "I CAN'T HEAR YOU!" whenever a sensible argument is made.

[OrioleFan]

Why doesn’t Obama demand GM pay back the TARP funds? He’d get more than half of the funds he projects to get off the millionaires tax. Regardless of what they say, GM has never paid back any of the TARP funding they illegally got from Obama. They paid off a small portion of TARP with additional TARP funds. The taxpayers were stiffed by Obama and GM.

[Brooklyn Attitude]

Why does the chart only go up to 2007?
Income inequality is irrelevant, why waste breath on RAT propaganda?
If the Bush tax cuts were only for the rich, why is the middle class expecting a $2000 tax increase when they expire?

[urbanpovertylawcenter]

So Bush raised my taxes and Obama is fighting to lower my share by raising my taxes?

What was I thinking? Thank God and the Chicago Thuggery for Obama’s re-election!

Finally relief is on the way from those burdensome Bush Tax Cuts!

[silverleaf]

“theBushTaxCutsforthe Rich”

isn’t that the term the democrats have used for the past decade?

the good news is taxes will only be raised on the rich

the bad news is.... the obamafairness plan is to make sure you won’t ever be among them

[MinuteGal]

"Hey, Mr. Politician, why can't you just speak to us in simple terms like this author did?"

This remind me of caver-inner Senator Claghorn Saxby Chambliss (R) bloviating last night on Hannity.

If anyone listening could follow his lengthy comments on the current national debt crisis and the budget debate in Congress, I'll eat my "Sandra Fluke for Secretary of State" tee-shirt.

Leni

[wrencher]

Actually, all will be rich soon enough. The Obama plan includes to ensure everyone will be earning 250K plus in the near future. Once the $ tanks and inflation kicks in that is.

[antisocial]

bookmark

[blueunicorn6]

This whole fiscal cliff argument leaves out a couple of very important factors......time and future decisions. If you see Obama’s strategy as being only the increase on those making over $250,000 per year, then you have forgotten that there is a future and he will still be playing in it.

[tentmaker]

thanks!

[A.A. Cunningham]

Tax rate cuts, moron.

[remember]

The IBD editorial concludes:

The tax cuts didn't cause the massive deficits. Critics routinely blame the Bush tax cuts for turning surpluses late in the Clinton administration to huge deficits under Bush. Not true.

In August 2001, after the first round of the Bush tax cuts were in place, the CBO projected a surplus of $176 billion in fiscal year 2002, with surpluses continuing to grow in the following years.

In fact, following is an excerpt from page 5 of the CBO projections mentioned above:

The new tax legislation accounts for most of the change in CBO’s projection of revenues. For example, federal revenues in 2001 are now expected to total just over $2.0 trillion, about $104 billion less than CBO forecast in May. Approximately $70 billion of that reduction is attributable to P.L. 107-16. Projected revenue losses are lower in 2002 because the law shifts some corporate tax payments from 2001 to 2002. After that, revenue losses from the legislation begin growing again, reaching $100 billion in 2005 and $176 billion in 2010. For the entire 2002-2011 period, CBO’s baseline revenue projections have dropped by $1.4 trillion since May, with P.L. 107-16 accounting for nearly $1.2 trillion of the decline.

P.L. 107-16 refers to the Economic Growth and Tax Relief Reconciliation Act of 2001, the first round of the Bush tax cuts. Hence, the CBO study states that "projected revenue losses are lower in 2002 because the law shifts some corporate tax payments from 2001 to 2002" and that the Bush tax cut was projected to cost nearly $1.2 trillion in revenue losses over the entire 2002-2011 period. The projections were obviously too optimistic in estimating a surplus of $3.4 trillion over this period. But they did project that the Bush tax cuts would cost nearly $1.2 in revenues.

In fact, I am yet to find a credible economic study that purports to show that any income tax cut has not resulted in a loss of revenues. I just posted an article on this topic at this link. Following is the table of the studies that I have so far found that project the effect of tax cuts on revenues:

Estimates of the Percent of Revenue Cost Recouped after Tax Cut

Labor  Taxes	Capital  Taxes	Author (s)	Title	Date	Notes
17-25*		Lawrence B. Lindsey	Individual Taxpayer Response to Tax Cuts 1982-1984 with Implications for the Revenue Maximizing Tax Rate	11/86	* 1982-1984
33*		Lawrence B. Lindsey	The Growth Experiment	10/91	* according to  Bartlett
17	50	Mankiw, Gregory  Weinzierl, Matthew	Dynamic Scoring: A Back-of-the-Envelope Guide	12/04
-5 to  32*		Congressional Budget  Office	Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates	12/01/05	* for 2nd 5 years
30*		Foertsch, Tracy  Rector, Ralph A.	A Dynamic Analysis of the 2001 and 2003 Bush Tax Cuts: Applying an Alternative  Technique for Calibrating Macroeconomic and Microsimulation Models	11/22/06	* 295.5 /&nbsp991.9
32	51	Trabandt, Mathias  Uhlig, Harald	How Far Are We From The Slippery Slope? The Laffer Curve Revisited	4/10

As can be seen, none of the studies projected that tax cuts would pay for themselves. At most, they projected that a third of the cost of labor taxes and half of the cost of capital taxes would be recouped. In any case, I am interested in any studies that give estimates for the revenue cost recouped following tax cuts. This especially applies to any studies that suggest that an income tax cut in the United States would pay for itself. As mentioned, I am yet to find such a study.