Because I have a negative, visceral reaction to any phrase or policy that contains the word “Bush,” I thought I’d better explore my knee-jerk reaction to the latest Republican argument: that all of the Bush tax cuts should be extended or else the economy will collapse even further. It’s an odd gambit, to say the least, with fury at Wall Street bankers still running rather high.
How are Republicans trying to get away with this one? Through their usual and successful tactics of obfuscation and fear. First, they suggest that the possible tax increases on the wealthy equal tax increases for everyone – especially “small businesses” – and then scare the crap out of people with warnings that everyone will be financially gouged come January. The Fox Business Network has featured a huge red and white banner reading “Largest Tax Hike” and then, under it in blood red capital letters between two bright white stars, the word “EVER.”
Republicans are now referring to the expiration of some of the Bush tax cuts as “Democratic tax hikes” that will “drop a $3.8 trillion tax increase on American small businesses and families.” The less scary, but equally bogus, argument is that if you reduce taxes on the wealthy, they will pour more money into creating jobs for the rest of us. Right.
A few things stood out as I researched this subject: Current tax rates on pretty much everyone are some of the lowest in history. Back in the early to mid-1960s, a time of relative prosperity, the marginal tax rate for those at the lowest income brackets was 16 to 18 percent, and at the highest income brackets was 71 to 77 percent! How many people today actually know this?
Under Reagan, tax rates for the wealthiest Americans were cut, first to 50 percent, then to 38.5 percent and finally to 28 percent, on the “trickle down” theory that the rich would reinvest that extra cash in industry instead of McMansions, yachts and caviar. What we got instead was a tripling of the deficit, which President Bill Clinton later had to confront. Tax rates for the wealthiest went back up to 39.6 percent, and what happened? Deficit reduction, a booming economy and prosperity for millions.
Thanks to the Bush tax cuts, today’s wealthiest Americans enjoy marginal tax rates of 33 to 35 percent, which are dirt cheap by historical standards. (Those making anywhere from $16,750 to $68,000 have a rate of 15 percent, which often drops to around 10 percent after deductions.)
And what exactly did the Bush tax cuts do for America? The cuts for the wealthy, by some estimates, accounted for nearly half the budget deficits his administration produced. According to the Center on Budget and Policy Priorities (PDF), if made permanent, the Bush tax cuts would cost $3.1 trillion over 10 years and “contribute more to the national deficit than the Obama stimulus, the TARP program, the wars in Iraq and Afghanistan, and revenue lost to the recession – combined.”
Senate Minority Leader Mitch McConnell has been saying, with a straight face, “There’s no evidence that the Bush tax cuts actually diminished revenue.” Yet the Center on Budget and Policy Priorities estimated that in 2005 alone, the Bush tax cuts effectively increased the federal deficit by $539 billion. The number of jobs created during the Clinton years, when taxes on the rich were increased: 23 million. During the Bush years: no more than 4.8 million. The Washington Post noted, simply, that Bush’s economic performance was the worst of the modern presidency. How is it that Democrats aren’t making sure every American knows this?
Obama and the Democrats propose keeping the Bush tax cuts only for individuals earning less than $200,000 and married couples earning less than $250,000. An August Pew Research poll has good and bad news for them: 27 percent of Americans think the tax cuts for the wealthy should expire, while 31 percent think all cuts should expire; only 30 percent think they should all remain intact. But the numbers have shifted toward the Republican line since last fall.
Once again, unless they get their act – and their rhetoric – together fast, Democrats are in danger of losing on an issue that is an economic and political no-brainer.