All the Bush Tax Cuts

[Golden Rocket]

Almost all the taxation discussion you hear associated with the debt fiasco, refer to reversing the infamous "Bush Tax Cuts." Almost 10 years old, you would think these are singlehandedly responsible for our national debt. I'm trying to avoid a political discussion here, but I think it is important that we understand the full breadth of the Bush Tax Cuts that you never hear about.

The Bush Tax Cuts are portrayed as tax cuts for the wealthy. However, in order to sell the plan to Congress, Bush had to give the following additional tax cuts to amass Democrat support:

1) A greatly expanded Earned Income Credit. Nearly half of all EIC taken on returns in the last several years was because of this expansion.
2) Lowering of tax brackets, summarily from the top bracket threshholds downward to the very lowest tax bracket.
3) Creation of a 10% tax bracket. 15% used to be the lowest.
4) Enhanced Std Deduction and Exemptions such that ANY taxation began at a much higher income level. Took 19 million Americans off the tax rolls entirely.

Personally, if they are currently trying to raise revenue, I would support reversing the Bush Tax Cuts. But ALL of them, including the items listed above. Remember, this is not a partisan political message unless the reader perceives it as such. I think we should keep in the back of our minds the full extent of the Bush Cuts because you will never hear the effect on low income portrayed on today's TV messages.

[David1980]

Personally, if they are currently trying to raise revenue, I would support reversing the Bush Tax Cuts. But ALL of them, including the items listed above.

Sounds good to me. I'm not a fan of how the tax system works on the low end of the income range anymore than how it works on the high end.

[Burke]

The one which most jacks certain people's jaws is none of the above, but is the reduction in capital gains tax, and the extension of the same rate on qualified dividends. This most affects higher income persons. We all had instances of the "zero" tax rate this past tax season. Which could be obtained by transferring the stock to a child, then selling. Or to someone who had a low or no tax liability. I would be in favor of a graduated cap gains rate, say 80% after it is held one year, 60% after two, 40% after three yrs, etc.

[joanmcq]

Also bigger child tax credit, education credits, sales tax deduction, etc. These, of course, targeted the middle class as well as the lower classes. But none of them were affordable, and the deficits that were predicted by the GAO at the time didn't even include the unpaid for wars, or the severe economic downturn.

And, of course, none of them 'sunseted' as was in the original legislation. CA's situation is similar in that tax reductions were pushed when we had a huge surplus in 1999. Now reimposing those taxes is considered a tax increase, when the tax reduction was to be temporary if tax collections tanked, which they did.

The whole country seems to have Alzheimer's for tax history.

[erchess]

My two cents

I agree with everything that has been said in this thread. Based on the way the President phrases things, I believe that he means to repeal only those parts of the Bush tax cuts that benefit only millionaires and billionaires.

[JohnH]

Just a clarification on terminology, but necessary.
The Bush Tax Cuts are over folks.
They were designed to sunset, and they did.

They are now the Obama Tax Cuts - Bush was no longer the president when the current extension of the cuts was signed, so whoever is sitting in the seat when pen is put to paper gets the credit. But in the spirit of non-partisanship I'll go along with "Bush-Obama Tax Cuts" just to give credit everywhere it's due.

[arlo]

Taxes

Just a reminder. All the money the government get and wastes is your money. I say shut the government down if it cannot live with the taxes it already gets.

[joanmcq]

The problem is we were almost doing just that. When the Bush admin enacted the tax cuts, the revenues did not increase due to all the boats being lifted, or 'trickle down' or voodoo or however you want to describe the theory. So now we have been running deficits (a couple of wars unpaid for?) and therefore increasing the debt for 10 years. And then the economy tanked due to rampant fraud in the banking/investment industry. So it's kinda like running up the credit cards because you have the credit, even if you don't have that much income, and then losing your job. No savings to tide you through, and a big bill coming due. So do we get another job (raise taxes back to a sustainable level) or just move to the riverbank and start eating out of dumpsters?

[Jiggers]

Anyone else remember the tax surcharge in the late 60's to pay for the Viet Nam war?

[JohnH]

The problem is we were almost doing just that. When the Bush admin enacted the tax cuts, the revenues did not increase due to all the boats being lifted, or 'trickle down' or voodoo or however you want to describe the theory. So now we have been running deficits (a couple of wars unpaid for?) and therefore increasing the debt for 10 years. And then the economy tanked due to rampant fraud in the banking/investment industry. So it's kinda like running up the credit cards because you have the credit, even if you don't have that much income, and then losing your job. No savings to tide you through, and a big bill coming due. So do we get another job (raise taxes back to a sustainable level) or just move to the riverbank and start eating out of dumpsters?

Assuming this is exactly how it played out, ask President Obama what should be done. Part of his solution was to extend the tax cuts. Kinda contradictory (assuming tax increases are the answer).

[David1980]

So it's kinda like running up the credit cards because you have the credit, even if you don't have that much income, and then losing your job. No savings to tide you through, and a big bill coming due. So do we get another job (raise taxes back to a sustainable level) or just move to the riverbank and start eating out of dumpsters?

Well, in this case, the credit limit is entirely within our control so you have a third option: Keep spending. As Alan Greenspan has pointed out, "The debt ceiling problem is synthetic and self-administered." So the third option is to change neither the spending nor the expenses and allow debt to increase. Perhaps not a bad idea given the state of things right now. It ignores the problems, yes, but it doesn't look like we have a congress capable of tackling any problems right now.

I'd much rather they fix this with the proper time to consider what they are doing and not push through legislation that has not had the time for review or proper thought because of a deadline.

[Jiggers]

How much time?

I'd much rather they fix this with the proper time to consider what they are doing and not push through legislation that has not had the time for review or proper thought because of a deadline.

Obama was Inaugurated 1/20/2009.

Harry Reid and the Democrats took over the Senate January 2007.

Nancy Pelosi and the Democrats took over the House January 2007.

John Boehner and the Republicans took over the House January 2011.

[David1980]

Obama was Inaugurated 1/20/2009.

Harry Reid and the Democrats took over the Senate January 2007.

Nancy Pelosi and the Democrats took over the House January 2007.

John Boehner and the Republicans took over the House January 2011.

And the problem is nobody did anything until the deadline came up. Make it a goal for the next year, start early, do research, do economic studies, evaluate all the options, and then make a decision. Regardless of what they did or didn't do with their time up until now, we're now where we are and we have not done the type of research that should be done to make the tough decisions that need to be made.

[JohnH]

Disgusting political jockeying on both sides. I've been fed up with all of them for a long time, but this current kabuki dance is especially disgusting. President Obana can rightfully say "nothing has been sent for me to sign or veto", while he, the Democratic leadership, the Republican leadership all jump in front of the first available camera squawking and posturing. Everybody's doing their best Chicken Little imitation while the markets do what they always do in uncertain times - waver.

I'd like to say it's time for the leaders to lead, but that train has already left the station.

Congress needs to MAKE A DECISION and send something they are willing to take ownership of to the President. He can then declare his position by singing or vetoing. Until that takes place, the only thing that is happening is potential damage to the reputation of this great country - every party involved needs to pay a heavy price for their negligence.

[ttbtaxes]

The one which most jacks certain people's jaws is none of the above, but is the reduction in capital gains tax, and the extension of the same rate on qualified dividends. This most affects higher income persons. We all had instances of the "zero" tax rate this past tax season. Which could be obtained by transferring the stock to a child, then selling. Or to someone who had a low or no tax liability. I would be in favor of a graduated cap gains rate, say 80% after it is held one year, 60% after two, 40% after three yrs, etc.

Let's not forget the corporation paying the dividend is likely paying 35% Federal tax already. Add to that a state corporate tax of ~5+%, Federal individual income tax of 15% and state individual tax of, say, another 5+% and the government is now getting 60%.

If you go back to pre-Bush tax law the total combined tax rate (39.6+5+39.6+5) can be 90+%. The government did not provide the capital, idea, brainpower, hard work, people, effort, time or risk involved in generating the profit by which to pay a dividend. And somehow the government thinks that 60+% isn't enough and they're entitled to 90+%.

If you use pre-Bush tax law, a NYC corporation's dividend could be taxed at a rate of 100% or more!!