facts and nonpartisan perspectives on the issues

Bush Tax Cuts

President Bush urged Congress to make his tax cuts permanent in a recent speech acknowledging signs of a weakened economy. Those tax cuts are set to expire in 2010. On the campaign trail, candidates from both parties have been wrangling over whether to extend the cuts, pare them back, or make them permanent. Now, with the threat of a recession and deliberations over a stimulus package, the debate over tax cuts will likely remain a divisive campaign issue.

The Urban-Brookings Tax Policy Center provides data and analysis on how the tax cuts affect the economy, how their benefits are distributed, and what will happen if they are extended, as well as a summary of each candidate’s tax positions.

KEY FACTS

• The 2001-2006 tax cuts are actually bigger than budgeted because they do not include the cost of patching the Alternative Minimum Tax.
• The revenue cost of the tax cuts totals approximately $2 trillion over the 2001–2010 period.
• In 2006, the bottom fifth of income earners got an average tax cut of $20, or 0.3 percent of their income.
• In 2006, the top fifth of income earners got an average tax cut of $5,800, or 4.1 percent of income. At the very top, the average tax cut was more than 6 percent of income.
• Combined with a minimal AMT fix, making the 2001 and 2003 tax cuts permanent would add $3.5 trillion to the national debt over 10 years. By 2017, the annual revenue loss would be almost $500 billion.
• Measured over 75 years, making the tax cuts permanent would cost as much as the combined shortfalls in the Social Security and Medicare trust funds.

Additional analysis is available in UI reports:

• 2008 Presidential Candidates’ Tax Proposals
• Economic Stimulus: In Play for '08, Tax Vox blog by Howard Gleckman
• Tax Fairness, the 2001-2006 Tax Cuts, and the AMT: Testimony before the U.S. House Committee on Ways and Means, Leonard E. Burman
• The Distribution of the 2001-2006 Tax Cuts, Greg Leiserson, Jeff Rohaly

Decision Points '08 is published weekly by the Urban Institute, a nonpartisan social and economic research organization.
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