The `Bush Tax Cuts` Explained

President George Bush Tax Cuts ExplainedCan I give you the layman’s summary of the ongoing debate over the “Bush era tax cuts”? Most of my readers understand this intuitively, but I offer the following in the unlikely event that an intellectually honest Democrat or “Progressive” might drop by. It really is no more complicated than this:

The U.S. has a progressive income tax system. That means that lower-income taxpayers pay a lower percentage of their income than do higher-income taxpayers. Those with income up to $100,000 might pay 15% of their income; those with income from $100,001 to $250,000 might pay 28%; and those with income over $250,000 pay 35%. Those reporting under $30,000 might not pay any tax at all (not the correct rates and income brackets… just for illustration).

Bush signs tax cutEarly in his term, President Bush and the Congress voted to reduce the tax percentage rates from those of a previous administration. Taxpayers from top to bottom have paid a lower income tax rate for about 10 years. That the Bush administration changed the income tax rates was not unusual; income tax rates have moved up and down numerous times for various reasons under both Democrat and Republican Presidents.

To secure the votes required to pass the tax rate reduction, the Bush administration agreed to a time limit; the rates would remain at the lower level for a specific time period, subject to renewal. The law establishing the lower rates is set to expire at the end of this year. Unless an agreement is reached, the tax rates will return to the levels at which they were prior to the reduction.

(Incidentally, the “Bush tax cuts” are not the only tax benefits expiring on December 31. Unless extended, the so-called “death tax” (a tax on the value of your estate at your death) will return to the prior level of 55% from the current 0%.)

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You should now understand that many of the arguments by the Democrats against extending the tax rates are not valid at all. In fact, some rise to the level of outright deception:

  1. Extending the current tax rates is not a “tax cut for the rich.” It is not “giving more money to millionaires.” It is simply extending the current tax rates– for everybody– for longer than the 10 years that they have been in place.
  2. Extending the current tax rates does not “give more money to the millionaires.” It allows them to keep more of what they have earned. There’s a difference.
  3. There is no definitive, permanent, “official” or even optimal tax rate. For that reason alone, extending the current rates cannot be called a “cut.”
  4. Failing to extend the rates will result in a tax increase; an individual earning $47,000 will see his income tax increase in 2011 by $2,600.
  5. Regardless of whether or not the current tax rates are extended, those with a higher income will continue to pay a higher tax rate than do those earning less. As long as we have a progressive tax system, “the rich” will always pay more (for the same services… unless you include tax credits, welfare and other entitlements. Then “the rich” pay more for less return from the government!).
  6. Republicans want to do nothing more at this moment than maintain the status quo. Democrats want to raise the tax rate for one segment of the population, if not for all.
  7. Extending the current tax rates will not “cost” the government $700 billion. There is no definitive or “official” tax revenue level. The government does not have a right to your money.  It is not first the government’s to “spend,” so there cannot be a “cost.”  Finally, if the tax rates are extended, the government will not receive any less tax revenue than it has in the previous ten years (as a result of the extension).
  8. Extending the current tax rates will not “add $700 billion to the deficit.” As just noted, extending the current rates will not result in any less income tax revenue to the government than was received last year or in any year of the previous decade.
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19 thoughts on “The `Bush Tax Cuts` Explained

  1. #1 and #6 completely contradict each other you have wasted your time writing this article and i have wasted mine reading it.

  2. So you (without sources) bashed a bunch of “common” democrat “beliefs,” but did absolutely NOTHING to explain what it actually is. Congrats

  3. The title of your article should of been “The Bush Tax Cuts Interpreted.”  Less rhetoric. more fact based reporting please. 

  4. ??????  #1 and #6 say the same thing.  
    ” We are NOT spending too much money, we are not COLLECTING enough revenue”  - turn on the TV.
    -  FLAT TAX- the government may tax the people, but it must be done equitably.  15% of less IS less, 15% of more IS still more. How is targeting a segment of the population, making “them” pay their fair share.

    1. “…we are not collecting enough revenue…” presumes that all spending by the government is legitimate and justified. Do you REALLY believe that?

      1. We are not. It’s as simple as that. If we were collecting enough revenue we wouldn’t be 14+ trillion in debt regardless if you think our government spending is legitimate and/or justified or not.

        1. Nathan, are you old enough to have a job? Have you ever been faced with analyzing whether or not the money in your pocket will pay for what you need? Consider this hypothetical, as an illustration:

          You eat at the finest restaurants, travel when you please and own an expensive car. Because your income doesn’t support your lifestyle, you rack up tens of thousands in credit card debt.

          You go to your mom and dad and say, “I can’t work enough shifts at McDonald’s to put gas in my Hummer so that I can take my girlfriend out to dinner to celebrate our 6-month anniversary and the birth of our triplets in three months. Could you please direct deposit part of your retirement check into my account?”

          Should your parents reply:

          [A] “Sure, son, your problem is that we don’t give you enough money. It’s okay that we won’t be able to pay our heating bill and our house is in foreclosure; you obviously need more revenue. Oh, can we sleep in the Hummer while you’re out of the country?” OR…

          [B] “Son, we will not be your enabler. Your spending is out of control. Sell your damn Hummer and walk. Eat discarded Big Macs out of the McDonald’s dumpster or go hungry. Sit your butt at home and figure out how you’re going to earn more money to pay your debts and for your incredible lack of judgment and restraint (your future family). We will not sacrifice what we have worked for decades to achieve to fund your irresponsibility.”

  5. You fail to mention something important about the tax brackets, that they are *marginal* tax rates, so in your example above of someone in a 28% bracket, they would pay 15% on every dollar earned up to 100k, then 28% on every dollar earned over that.

  6. My guess is that Mr. Griggs here is one of “the rich” wanting to keep what he has ‘earned’ by not giving a shit about “the poor.” Mr. Griggs, your #2 is inexplicbly ridiculous. Sure, people deserve to keep what they’ve earned; but, if one is a millionaire I fully believe he or she has ZERO room to complain about how much they are taxed, be it 35% or 50%. There are people that would be willing to do just about anything for even a fraction of that amount of money. Do you not think it is at least slightly skewed that the that 1% of the U.S. population owns more than 40% of the total wealth in the country? And that 80% of our country shares only 7% of the nations wealth? Before anyone complains, NO I am not a socialist. Finally, I fully agree with Ian Ward and Ecspsci; less pushing for or against a particular party and more factual info thanks.

    1. Nathan, I WISH that I was one of the millionaires. I can promise you that being one is my goal. In truth, I am just barely outside of the 48% of Americans who pay NO income tax at all.

      Nathan, does a person making $25K a year deserve to keep all that he earns? If so, why not the millionaire as well? Should he pay more solely because he can? If that’s your position, you’re not a socialist… you’re a communist.

      Being an American citizen does not guarantee equal RESULTS, Nathan. Communism tried that and failed. In America, we have equal OPPORTUNITY. All have the opportunity to become one of the 1%. NO ONE is condemned to remain in the 99%. There have been too many who have moved from the 99% to the 1% (and vice versa) to doubt that we all have the opportunity.

      The rich keep getting richer because they keep doing the things that made them rich. The poor keep getting poorer because they continue to do the things that make them poor. You will never be rich because you would rather spend your time whining (which makes you poor) than working and excelling.

  7. This article was a waste of my time. It not only contradicts itself, but it also states the obvious. 1% has about the same amount of money as 99% (if not more). Therefore their tax rates should be higher. Our country is in deficit, I do not expect our school teachers, police officers, and small business owners to get this country out of turmoil without the help of extremely wealthy and rich, who without the middle class would not even exist in this country.  Soon, there won’t be no “Equal Opportunity”.

    1. Actually, 1% pays 70% of all taxes, at the moment. Most “rich” people today don’t make money on the backs of anyone. They make money investing in companies. Without that investment companies can’t hire anyone. By the way we have the highest paid teachers in the world! But have the 22nd smartest kids. Our poor our fat! What this all comes down to is jealousy. I don’t think anyone should have to pay 35% of income to a federal government.
      BTW, if you took 100% from the rich it wouldn’t pay the interest on the new debt created by Obama! Look it up.

  8. Absolutely unrestrained
    laissez-faire capitalism brings out the best in companies and  really incentivizes them to deal fairly and
    honestly with issues like labor, environment, product quality, and fairness in
    all dealings.  So, once all taxes are eliminated, America will rise out of the Super Great Depression that existed between 1940-2012 and enter a new age of prosperity.

  9. Bob G:
    Even your “death tax” reference is incomplete and misleading: 37%-55% is the range, not a flat 55% as you inferred. http://beginnersinvest.about.com/od/estatetax/f/estatetaxrate.htm

    I published on Bush Tax Cuts yesterday and republished your Post (with editorial comments of my own – it needs that badly). And “It really is no more complicated than this:” is another FALSEHOOD!

    If Right-wingers, Conservatives, Republicans/Tea Partyers or just plain Good Folks, who read this blog, want to read substantiated FACTS and FIGURES, GO TO:
    http://tabacco.t-a-b-a-c-c-o.org/?p=490

    Regards,
    Tabacco (Truth About Business And Congressional Crimes Organization)

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