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The Bush Tax Increases PDF Print E-mail
Tuesday, 26 July 2011 08:07

Tonight, our President laid out his case for why the Congress should take his approach to solving the deficit with anything approaching seriousness.  To this point, the President has been adamant about not offering any details, just that the rich should pay more taxes, and that if we didn't have the Bush tax cuts we'd be in fine shape.  But that got me wondering - were there ACTUAL Bush tax cuts?


Let us consider, first, what is a tax cut?  Better yet, what is a cut? That is the operative word here...  Well, from Merriam Webster's dictionary, we find cut to be defined as:


2 a : trim, pare <cut one's nails> 
b : to shorten by omissions <cut the manuscript>
c : dilute, adulterate <cut the whiskey with water>
d : to reduce in amount <cut costs>


Clearly we are talking about definition 2d - reduce in amount.  The Bush tax cuts, as so many talk about, supposedly cut revenue to the Federal Government and brought about the deficits we now have.  But if that was the case, then revenues should show a negative trend.  What do we actually find, though?


Well, from the historical record of revenues and spending by the Federal Government, we find the following interesting data:



I plotted the Federal revenues from 1992 to 2010, so we have a good historical trend to look on.  And it includes the "Clinton Boom Years" as we're often told were the best times of all.  Actual revenues, in billions of dollars are plotted on the left vertical axis; the right axis plots the year-over-year change in revenues - a positive number indicates a growth in revenue, a negative number indicates a loss of revenue.


One thing is immediately apparent - the impact of 9/11 - we see that 2001, 2002, and 2003 were down.  Not just the human tragedy, but the economic destruction that vicious attack caused - along with the Clinton recession - caused a definite dip in revenues.  Which brings about the subject of this post: the Bush response.


You see, President Bush claimed that cutting the tax rates would stimulate the economy, and thus bring us out of the funk.  And as a side-note, it would increase Federal revenues.  In 2003, the Congress gave him the tax rate cuts he desired.  and we see the results above: revenues skyrocketed.  In fact, the revenue increases from 2004 to 2005, and 2005 to 2006, as a percent change year over year, were greater than any under President Clinton, and some of the largest in the history of these United States.


What can we conclude?  Far from the "Bush Tax Cuts", they were, in fact, the Bush tax increases!  Actual revenues raised - tax dollars collected - increased consistently.  In fact, if we took the 2003 revenues, and increased them annually at the average rate of the President Clinton years, the Bush tax increases collected $200 billion MORE in revenue.  It increased at a higher rate than the previous boom.


So I contend that the "Bush Tax Cuts" are, in fact, mis-named.  The tax rates were lowered, but the actual taxes collected were raised.  Rather than calling them the Bush Tax Cuts, they would be more appropriately called the Bush Tax Increases, as that is, in fact, what happened - taxes collected were raised, well above historical (including recent) rates of growth.  More revenues flowed into the Federal Treasury as a result of his bill.  They are the Bush Tax Increases, and don't let anyone tell you otherwise.