Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC), and Rep. Carolyn B. Maloney, Vice Chair of the JEC, released a report showing that the Bush tax cuts have not benefitted middle income families and have saddled future generations with tremendous debt. The Bush tax cuts, which disproportionately benefit the top one percent of households, were initially justified with a series of dubious claims about their economic effectiveness. But the JEC paper, entitled Extending the Bush Tax Cuts Is the Wrong Way to Stimulate the Economy, shows that the President's tax policy has done little to stimulate the economy and guard against recession. The Bush tax cuts have had a negligible or negative impact on annual income growth for the vast majority of U.S. households.
"While the economy is running on fumes and Americans are losing their jobs, the first and last words out of this administration on economic policy are tax cuts. Over the last seven years, the Bush tax cuts have benefitted very few at the expense of millions of middle and low income families and future generations. For the last seven years, the President has had his cake and gotten to eat it too - tax cuts for the top one percent paid for with borrowed money," Schumer said. "Democrats want to extend targeted tax relief to the middle class, but permanently extending the Bush tax cuts is not in the cards."
"The evidence is crystal clear: extending Bush's tax cuts is the wrong way to stimulate our troubled economy," Maloney said. "The Bush administration claimed that their tax cuts would drive investment, creating growth in wages and employment, but instead economic performance has been lackluster at best. To make matters worse, the President has mortgaged our children's future by funding the tax cuts using borrowed money. Democrats in Congress want to target tax relief to families who have not shared in the gains from the Bush economy and are now struggling to make ends meet in the face of an economic downturn. Our plan extends middle-income tax breaks, including the child tax credit and relief from the marriage penalty and the Alternative Minimum Tax. I hope the President will join us in focusing on measures that would have a real impact on propelling us out of this recession: extending unemployment benefits and stemming the mortgage crisis to keep people in their homes."
Facts about the Bush tax cuts:
- Through 2008, the government has borrowed $1.6 trillion to pay for the Bush tax cuts.
- Even the Chairman of the President's Council of Economic Advisors said he "would not claim that tax cuts pay for themselves."
- In 2007, one third of the total benefits of the tax cuts went to the top one percent of households.
- Approximately 20 percent of total benefits went to 0.3 percent of households earning $1 million or more per year. These households received an average tax cut 103 times larger than that of middle-income households.
- Investment and economic growth since the 2001 and 2003 tax cuts have been lower than average, indicating that the tax cuts have not had strong economic effects.
If the Bush tax cuts were made permanent:
- It would cost the federal government an additional $3.4 Trillion over the next decade, if the funds were borrowed.
- It would cost the government three times more than the amount necessary to close the Social Security funding gap through 2075.
The President's tax cuts may actually end up reducing low and middle class incomes:
- These tax cuts are financed with borrowed money - a loan from future generations to today's taxpayers. Depending on how this loan is repaid, the net effect of fully-funded tax cuts would likely reduce most middle class incomes.
- Administration estimates of the long-term impacts of the tax cuts assume that in the long run, tax cuts will eventually be paid for through large cuts in government spending. Unlike the tax cuts, Federal spending provides more income to the middle class than the wealthy.
- If this tax cut-related debt is repaid by across-the-board spending cuts, the after tax income for 75 percent of American households will be reduced.