More
- Classifieds
- Cars
- Deals
- Real Estate
- Rentals
- Photos
- Find&Save
- Obituaries
- Archives
- Topics
- Blogs
- WP Wine Club

Democrats push for tax cuts they once opposed

By Zachary A. Goldfarb,December 25, 2012

(Page 2 of 2)

Although primarily targeted toward households earning less than $250,000, the middle-class component of the Bush tax cuts also benefits those earning above that. The first $250,000 earned by even the wealthiest families is subject to lower rates. For this reason, Obama noted last month that under his proposal, “every American, including the wealthiest Americans, gets a tax cut.”

For instance, an individual taxpayer earning between $200,000 and $500,000 a year would pay an average of $515 more in taxes next year if the Bush tax cuts for the wealthy expire, according to the nonpartisan Tax Policy Center. But if all the Bush tax cuts were to vanish and the rich had to pay higher rates on all their income, their tax bills would shoot up by an average of $6,000. The very richest — the top 1 percent of earners — would pay much higher taxes if solely the upper-income tax cuts expire, because the savings from extending the rest of the rates would be relatively negligible.

In 2001, when Bush proposed the tax cuts, Democrats argued they would benefit the wealthy, create long-term deficits and deprive social programs of needed money. Some Democrats at the time were open to a more modest tax cut, especially one less favorable to the rich. Bush could push his tax cuts through Congress only by agreeing they would expire a decade later.

Under GOP pressure, Obama renewed them in 2010. He has vowed not to extend the upper-income tax cuts again. He is also demanding that at least $400 billion worth of tax breaks for the wealthy be eliminated to further reduce the deficit.

As Democrats warned a decade ago, the benefits of the Bush tax cuts have disproportionately flowed to upper-income earners, according to economists. The tax cuts, however, have also benefited less-fortunate Americans, slashing taxes for many low-income households and creating new credits to lighten the financial load of raising children.

The Democrats were also correct in warning about the effect on the government’s debt. The tax cuts did more to fuel ballooning federal deficits over the past decade than any other Bush administration action — including the wars in Afghanistan and Iraq and the creation of a prescription drug benefit for seniors, according to the Pew Fiscal Analysis Initiative. And in coming years, the Bush-era tax cuts are projected to expand the deficit by trillions more.

“The bulk of the [tax cuts] is baked into the cake, and we don’t talk about that. From a fiscal and economic policy standpoint, it makes no sense,” said Bob Greenstein, president of the left-leaning Center on Budget and Policy Priorities and a White House ally. “I don’t see how you can go into future decades with these tax cuts.”

But it’s not clear whether they took a toll on funding for social programs. Bush, for instance, created the new Medicare prescription drug benefit through increased federal borrowing.

GOP thinking about the tax breaks has also shifted over the past decade. While long the party of tax cuts, Republicans justified the Bush cuts largely in terms of refunding projected budget surpluses that emerged about a dozen years ago. “A surplus in tax revenue, after all, means that taxpayers have been overcharged,” Bush said in 2001. “And usually when you’ve been overcharged, you expect to get something back.”

But today, even though the budget is in far worse shape, Republicans defend the Bush tax cuts as helping the economy.

“It’s completely different today,” said Steve Bell, a former senior GOP budget staffer in the Senate. “Back then, we were thinking we had all this extra money.”

Continued1

2