Who benefits from the Bush tax cuts?

This can’t be said enough. The top 2 percent of income earners benefited overwhelmingly from the Bush tax cuts, which you should remind yourself every day, were WRITTEN BY REPUBLICANS, TO EXPIRE at the end of this year. Now that John Boehner has grabbed a full day’s headlines with a bait and switch call for President Obama to fire his economic team, which was really just a ruse to get oxygen for the resuscitated corpse that is the GOP tax cuts and corporate welfare economic plan, it might be a good time to review “the math,” as Karl Rove might say.  The chart below was produced by the Center on Budget and Policy Priorities. It shows who benefited most from the Bush tax cuts of 2003 and 2004, in terms of the average benefit families in various income groups would receive next year if the tax cuts were to be extended:

As you can see, the Bush tax cuts were a pretty sweet deal for the richest Americans, but not so much for average families. An explanation, from the Joint Committee on Taxation:

  • Households with incomes exceeding $1 million will receive an average tax cut of $6,349 in 2011 if the middle-class tax cuts are extended while the high-income tax cuts are allowed to expire. (They will receive an average tax cut of nearly $104,000 if the high-income tax cuts are extended as well.)
  • The story is similar, if not quite as dramatic, for households that make between $500,000 and $1 million. They will receive an average tax cut of $6,701 if the middle-class tax cuts are excluded (and of $17,467 if the high-income tax cuts are also extended).
  • For all other income categories, by contrast, the size of the tax cuts are about the same whether the high-income tax cuts are extended or not. Even for households with incomes between $200,000 and $500,000, the effects are similar. The Joint Tax Committee figures show that they would receive an average tax cut of $6,743 if only the middle-class tax cuts are extended, and of $7,152 if the high-income tax cuts are extended, as well.
  • And what about the impact of extending the Bush tax cuts on the deficit? For that, we turn to the nonpartisan Congressional Budget Office:

    The Obama administration and Democratic leaders in Congress are seeking to extend tax cuts for Americans earning less than $250,000 a year, while letting expire some of those for wealthier individuals. Democrats say this would help stimulate the economy and cost the government less than if all cuts were extended.

    The CBO’s baseline scenario assumes that the Bush-era tax breaks will expire, as current law provides. In that case, next year’s deficit would fall to $1.07 trillion, or 7 percent of the country’s total economic output, or gross domestic product, according to agency estimates. By 2012, the deficit would shrink to $665 billion, or 4.2 percent of GDP.

    Agency analysts also projected that public debt would rise from 53 percent of GDP last year to almost 70 percent of GDP by 2020, a figure unmatched since the 1950s.

    “It is an extraordinarily high level of debt by the experience of this country over the past 65 years,” Elmendorf said. “Of course, it is also an extraordinarily difficult economic situation in which we find ourselves.”

    Extending the Bush tax cuts would punch a $680 billion hole in the budget deficit, just so the federal government can, as Paul Krugman put it, “cut checks averaging $3 million each to the richest 120,000 people in the country.”  And since I’m quoting him, I’ll let Krugman close it out:

    How can this kind of giveaway be justified at a time when politicians claim to care about budget deficits? Well, history is repeating itself. The original campaign for the Bush tax cuts relied on deception and dishonesty. In fact, my first suspicions that we were being misled into invading Iraq were based on the resemblance between the campaign for war and the campaign for tax cuts the previous year. And sure enough, that same trademark deception and dishonesty is being deployed on behalf of tax cuts for the wealthiest Americans.

    So, for example, we’re told that it’s all about helping small business; but only a tiny fraction of small-business owners would receive any tax break at all. And how many small-business owners do you know making several million a year?

    Or we’re told that it’s about helping the economy recover. But it’s hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren’t likely to spend a windfall.

    No, this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience.

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    10 Responses to Who benefits from the Bush tax cuts?

    1. VJ says:

      With all of this data it is very clear who benefits most from these tax cuts. Yet when you listen to mainstream media, the anchors very rarily ever mention these very facts and generally utilize the republican frame of “Is it a good time to raise taxes during a bad economy?” nonsense.

      Because of misleading information like this, the average Joe or Jane who makes $30k then wounds up thinking that their taxes are going to be raised when in fact their tax burden has been reduced to the lowest rate since President Truman held office.

      The question is why does the “liberal” media deliberately mislead on this issue time and time again? Amazing!

    2. Rupert says:

      You’re right VJ.
      They love to use as examples the Kennedy and Reagan cuts (moreso than the ineffective Bush cuts); but when Kennedy cut taxes, the rates were so high (as high as 90%) they really were a disincentive. Tax rates were in the right place in the ’90s (and the budget balanced), so we should go back to those rates.

    3. April says:

      I am so upset with the DEMOCRATS and the President for the NON-existent message about these TAX CUTS.

      The math is as plain as day to me and to most reasonable people who actually stop to do the math. Why are the Democrats not actually taking these facts and presenting them to the people…? The Repiublicans sure spout as many lies as they can until everyones talking about them like they’re facts.

      And I absolutely hate that everyone is using the term “mainstream media.” Like all media isn’t mainstream… Even FOX is mainstream, although they try to set themselves apart.

      FOX News and the Republicans have brainwashed even the so-called mainstream media into talking about the NON-SENSE that they tend to make up just to cause confusion.

      The Democrats are so divided. That’s why they will lose the House and the Senate in November. Even those DEMs that run against the President now will lose. The Republicans are confused, but the DEMs are weak. And the Republicans will (and I say this sadly), win both Houses of Congress and the country will stay owing CHINA and may soon become one of it’s Republics when CHINA calls to collect the debt.

      DEMs are so STUPID!!

    4. Jeff says:

      This information is very deceiving. You also need to take into account the average amount of income taxes being paid by each group. The first few levels don’t even pay federal income tax! Also, the top tiers pay over 75% of the federal income tax.

      Even if you are going to ignore these facts, look at these numbers as a percentage. If you take the average wage in each category (ie 5k, 15k, 25k, 35k, 45k, 62500, 87500, 350k, and 750k) and divide their average tax benefit by their average salary, you’ll actually see that it favors th 20k-30k group the most by percentage of income.

      Each group as a percentage of tax advantage to average pay (assuming even distribution within each income level):

      0-10k: 1.06%
      10-20k:: 2.58%
      20-30k: 3.08%
      30-40k: 2.56%
      40-50k: 2.04%
      50-75k: 1.81%
      75-100k: 2.17%
      100-200k: 2.5%
      200-500k: 1.93%
      500k-1m: 0.89%
      >1M: cannot calculate, but will be lower than 0.89% as the numerator is smaller and denominator is larger

    5. MK says:

      Oh come on. Dems are stupid VJ??? Anyone who voted for Bush is pretty stupid, I’d say. Bush was the anti Christ. Not once did he ever do anything for the middle class and it is because of Bush that we are in such a deep hole. The country was thriving when Clinton was in office.

      Bush’s tax cuts never helped anyone but the wealthy.

      Give it a rest. I’m so sick of the sour grapes and the whiny Republicans.

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    7. James Eriksen says:

      The article begins with a chart from The Joint Committee on Taxation. The chart states that income over a million dollars will benefit $6349.00 and a person making $50,000 will benefit $916.00 . How is this reconciled when the article quotes Paul Krugman saying that the 120,000 wealthiest Americans will receive $3,000,000 each. Without any detail or supporting facts, this makes the article nonsense.

    8. JBoston says:

      Wow.

      A leftist blog using data from a leftist think tank as proof of their leftist ideas.

      Shocking!

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