The recession had allowed the reduction of the dividend to be framed as an engine of stabilizing, something that the tax reduction was not when it was originally conceptualized. It was these and other brilliant marketing mechanisms that helped Bush succeed in his tax cuts.
For instance in the case of his repeal of the estate tax, Bush framed the issue as a clear cut case of double taxation. His campaign for the repeal centered on the argument that monies in an estate are taxed as capital gains and then become taxed a second time when the estate is settled and bequests are made.
For those uninformed with tax issues this argument made perfect since. In common sense terms, why should money be taxed twice? The estate tax under this line of thinking seemed like pure governmental greed. What was not made public by Bush was that in the vast majority of estates that met the minimum threshold for estate taxes, much of the value would escape being taxed as capital gains.
Capital gains taxes only take effect on the sale of an investment. This means that any capital appreciation that occurs during the life of the owner of the estate, but does not get sold until after the estate is opened would effectively escape capital gains taxes and therefore could be bequest to heir tax free. The argument also supposes that all double taxes are bad and clearly remains ignorant to the many double taxes that are collected in the lives of every American ranging from sales tax to different excise taxes.
This marketing campaign also played on a few common misconceptions. The estate tax would simply never affect the average American and any relief from estate taxes would go to rich with little benefit to the lower and middle classes. The repeal of the estate tax managed a great victory for Bush as the general public believed it would benefit, however the reality was that denied the government an efficient stream of revenue and did more to secure familial wealth than benefit the common man.
Yet again, he managed to create a swell of popular support for a measure that again would be targeted at the upper class. His cut would reduce the dividend tax paid on investments and Bush argued that this increase in shareholder level money would spur increased consumption and investment.
The economic reality was that such a tax cut went to a class of investors that is very much comprised of upper class Americans and the tendency at this level is not to spend this money as Bush had hoped but rather to save 6.
So while this measure was framed to spur economic growth, there is reason to believe it had very little effect on the economy as a whole and denied government another source of much needed tax revenue. What had also changed during this time was the approach by fiscal conservatives.
Traditionally before Bush the general area of focus by fiscal conservatives was on the budget deficit. Being concerned with national debt, the fiscal conservative would enact measures to keep deficits in line.
During times where government spending created a shortfall in revenues fiscal conservatives would enact measures to increase taxes and restore the appropriate fiscal balance. During the late s this tendency was criticize and prominent economists such as Milton Friedman began to propose new approaches. He believed that as soon as the fiscal conservatives restored a balanced budget the big spenders would incur more debt and the process would continue to cycle between increased taxation and increases government spending.
Aside from the proposed goal of cutting the size government, tax cuts offered a number of ancillary benefits as well. Throughout the course of history there have seldom been unpopular tax cuts. Human nature being what it is means that any mention of reducing what one will have to pay will be popular, even if such cuts are very narrow in scope and ultimately benefit a specific section of society more so than the general public.
Additionally, the if the popularity boost that tax cuts would create could be capitalized upon, this would mean the ability elect more Republican members to Congress and could help speed up the process in which the size of government is reduced or so went the thinking of many Republican fiscal conservatives 8.
During its inception the theory of starving the beast seemed sound and perhaps most importantly, it was to be a good mechanism for reducing government that remained popular with the electorate. However, it is not until the closing days of the Bush Administration is there a clear case study to suggest that the theory is flawed, or at least has not lived up to its expectations as of late. While Bush managed to cut taxes, the beast continued its consumption unabated and actually grew.
This seems to stem from a false belief that somehow arose wherein one could be fiscally conservative, regardless of everything, if one was a tax cutter. In reality, taxes can be cut, but a benefit is not derived unless spending is controlled. It would seem that government spending is currently little influenced by tax revenues and that an unbalanced budget is not an effective barrier to the growth or breadth of government spending.
However, most important to this discussion is the negative effects that the tax policy had on the state of the public finances. In , the federal government collected After the Bush cuts this number dropped to In addition to the declining tax revenues, these cuts occurred during a period of increased government spending.
The result of the difference between increasing government spending and declining tax revenue is of course an increase in the national deficit. As Figure 2 illustrates the deficit peaked at roughly 3. This left a huge void in tax revenues and all for virtually a nonexistent potential for growth or increased economic activity The cuts were more handouts to the rich than they were pieces of a coherent and productive economic strategy.
In many ways the rising deficits were a shock to both the Administration and the Congressional Budget Office. First the report acknowledged a recession that struck in and despite being relatively shallow and short-lived still managed to reduced GDP enough to throw off expected tax revenues. The second reason for the discrepancy was a reduced tax base as a result of the Bush cuts. As has been noted by scholars and has been historically documented, budget deficits in themselves are not particularly dangerous.
In fact from time to time, running a budget deficit can provide a Keynesian stimulus to a lagging economy. When deficits become dangerous is when they are carried over from year to year. The effect of such a course of events often begins subtly with cautious economists realizing the dangerous over the long term and then as debts mount real pressures begin to influence the economy.
As deficits increase so to due interest rates and thus the typical payment that services the principle becomes more expensive.
As was the case during the Bush Administration the trade deficit increased and monies that may have gone into private enterprise went instead to the Federal Government, crowding out private business Aside from the long term national debt implication there are also a number of other consequences as a result of the Bush Tax Cuts. The most notable being the narrow section of society that benefited from these cuts.
While not the direct topic of this paper, this information is well in line with additional evidence that suggests income inequality grew substantially during the Bush presidency. It has been theorized that one mechanism for controlling the spending of liberal government could be amassing such an unwieldy national debt that Democrats have no choice but to control spending While there is no evidence to suggest that this was the goal of the Bush Administration the mechanism may very well be relevant.
As a result of the increase in deficits during the Bush Administration and the economic collapse, the public has dramatically changed its attitude on deficit spending. What once was seen as a routine function of government, has become the epitome of fiscal irresponsibility. What this has meant for the Obama Administration is that its option in dealing with the current recession have been severely reduced and made politically unpopular.
Long a stable of the government have been the ability of the government to cut taxes and increase government spending during times of recession in order to help bring an economy back to growth. These Keynesian tactics call for increased government spending during recessionary times in order to prop up GDP and consumer demand.
Through the circular flow of money through the economy, a large boost in government spending could create subsequent waves of increased economic activity which in theory would increase output and government output over a longer period. This multiplier effect would mean that if the economy was returned to growth with this inject of stimulus, the deficit incurred by the maneuver could be retired as government tax revenue increased as a result of increased economic activity, or so the theory held.
What was unique about the economy Obama inherited was that such government spending was seen in very unpopular terms. Whether the product of the many bailouts to corporate America during the Bush Administration, or the early days of the Obama Administration, government spending during recessionary times was not given the traditional exemption that it has normally received. Put in another way, increased government spending during a recession was not traditionally seen as the same as government spending during more stabilized economic times.
For instance a key comparison be drawn between the Bush Tax cuts and the American Recovery and Investment Act of Both measures were designed to provide stimulus to economies in recession, however the economic times could not have been more different. In , an estimated The foreclosures rates were also different at. Despite these numbers and the vast difference in the overall magnitude of their respective recessions, the Bush tax cuts proved to be incredibly popular while the Obama stimulus bill was passed on strictly party lines and was the subject of substantial political backlash.
The paper enumerates the worst results of the tax cuts, which include: widening income inequality by disproportionately benefiting the wealthy and ignoring low-income families; helping destroy budget surpluses; and significantly adding to the national debt.
If made permanent, these tax cuts would still fail to generate strong employment and wage growth, and they would cost many more trillions of dollars, crowding out other budget priorities. In the paper, Shapiro provides the only comprehensive tally of the new major EPA rules and finds that the regulations would have great public health benefits with minimal costs to the overall economy.
George W. Bush had vowed to cut taxes during his presidential campaign in When he took office in amidst a recession, he argued that tax cuts would help stimulate the sluggish economy and that the surplus from the Clinton administration could help pay for them.
The notion that tax cuts promote economic growth is rooted in supply-side economics, which posits that lower tax rates boost productivity, employment, and output. Proponents argue that tax cuts are an easy and quick way to stimulate the economy by putting more money directly into taxpayers' hands. They operate under the belief that all tax cuts increase consumer spending enough to make up for the revenue loss. This assumes that consumers and businesses spend enough of the tax cuts to increase demand and create jobs , spurring so much economic growth that tax revenues ultimately rise.
The theory behind supply-side economics is the Laffer Curve. Developed in by economist Arthur Laffer, the curve depicts how tax cuts affect government revenues. The government can increase rates until a certain point—represented by the peak of the curve—and still increase revenues. But when tax rates are in the so-called "prohibitive range," increasing tax rates can reduce revenues, and conversely, reducing tax rates can increase revenues. But for the tax cuts to have this impact, taxes before the cuts must be in the "prohibitive range" on the curve.
While proponents of the Bush tax cuts argued that the tax burden was onerous in the Clinton era, critics of the Bush tax cuts argue that the government was not in the prohibitive range of tax rates. Indeed, rather than increase revenue, revenue dropped from to as the Bush tax cuts were initially rolled out. They did not rise until the cuts were fully implemented. Some economists theorize that the recession may have played a role in dampening the potential revenue increase of the tax cuts.
But they note that it's difficult to estimate the extent to which the cuts would have increased revenue in the absence of a recession. Both the Bush- and Trump-era tax cuts increased the deficit and debt.
However, President Bush's tax cuts occurred during the recession and the years immediately following. President Donald Trump's tax cut occurred while the economy was solidly in the expansion phase of the business cycle. It cut individual income tax rates, doubled the standard deduction, and eliminated personal exemptions. The plan lowered the top individual tax rate from The corporate cuts are permanent, while the individual changes expire at the end of It will only increase growth by 0.
Urban Institute. Accessed Jan. Library of Congress. The Brookings Institution. University of California Berkeley. Miller Center at the University of Virginia. Bush: Domestic Affairs. The American Economic Review. American Economic Journal. National Telecommunications and Information Administration. Virginia Commonwealth University.
0コメント