Why didn't the bush massive tax cuts for the rich improve the economy? It did the opposite?
There was 3 major tax cuts for the rich that were supposed to trickle down. Why didn't that happen.
Did you know that most multi-millionaires make their money from stock profits and those are taxed at 15% under the bush cuts, while working class people pay up to 35%.
Fact, if you sell cars for a living and make 150,000 then you will pay a 35% tax rate. If you are a rich stock market trader and you make 150 million, you only pay 15% in tax because of the bush tax cuts. (you have to hold the stock for 6 months)
- Anonymous1 decade agoBest Answer
Because tax cuts do not boost the economy. Typically, they result in budget deficits.
"Since 2001, the Administration and Congress have enacted a wide array of tax cuts, including reductions in individual income tax rates, repeal of the estate tax, and reductions in capital gains and dividend taxes. Nearly all of these tax cuts are scheduled to expire by the end of 2010. Making them permanent would cost about $4.4 trillion over the next decade."
"...when Treasury Department staff simulated the economic effects of extending the President’s tax cuts, they found that, at best, the tax cuts would have modest positive effects on the economy; these economic gains would pay for at most 10 percent of the tax cuts’ total cost. Under other assumptions, Treasury found that the tax cuts could slightly decrease long-run economic growth, in which case they would cost modestly more than otherwise expected."
"After reviewing numerous studies of how investors respond to capital gains tax cuts, the Congressional Budget Office concluded that “the best estimates of taxpayers’ response to changes in the capital gains rate do not suggest a large revenue increase from additional realizations of capital gains — and certainly not an increase large enough to offset the losses from a lower rate.”
"In 1981, Congress substantially lowered marginal income-tax rates on the well off, while in 1990 and 1993, Congress raised marginal rates on the well off. The economy grew at virtually the same rate in the 1990s as in the 1980s (adjusted for inflation and population growth), but revenues grew about twice as fast in the 1990s, when tax rates were increased, as in the 1980s, when tax rates were cut. Similarly, since the 2001 tax cuts, the economy has grown at about the same pace as during the equivalent period of the 1990s business cycle, but revenues have grown far more slowly."
"Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years. Legislation enacted since 2001 added about $3.0 trillion to deficits between 2001 and 2007, with nearly half of this deterioration in the budget due to the tax cuts..."
Responding to Nemo:
"Even taking into account the growth in revenues in fiscal years 2005-2007, total revenues have just barely increased over the 2001-2007 business cycle, after adjusting for inflation and population growth."
"...the non-partisan Congressional Research Service found in a September, 2006 report that “at the current time, as the stimulus effects have faded and the effect of added debt service has grown, the 2001-2004 tax cuts are probably costing more than their estimated revenue cost.”
"Growth rates of GDP, investment, and other key economic indicators during the 2001-2007 expansion were below the average for other post-World War II economic expansions...Growth in wages and salaries and non-residential investment was particularly slow relative to previous expansions... Median income among working-age households, meanwhile, fell during the expansion...$1,300 below its level during the 2001 recession..."Source(s): http://www.cbpp.org/cms/?fa=view&id=692
- 4 years ago
Why are tax cuts not making a big difference? For the same reason the stimulus package didn't. Allow me to elaborate :) If we put more money into the hands of the American people, by tax cuts, stimulus, whatever, that money can go into buying more goods. The United States is the world's biggest importer, China is the world's biggest exporter. When we go to the store and see products on the shelf, where were they made? usually China. So where is the money going that our people spend? To China. We as a nation no longer produce actual products like we once did. So pouring money into products no longer stimulates our own business or our own economy as it once did. It stimulates the economy of China and Germany. No matter what we do to give Americans more money, it won't come back to us until we start to actually produce something again. Tax cuts, stimulus packages, rules and regs. None of it means anything if we have no actual products to sell to people. We're merely surviving off of debt at this point. Or living off the sacrifice of our own people.
- leftcoastlizLv 71 decade ago
Usually I'd agree with you & say it's time to try the trickle up theory instead of the trickle down theory.
However, in this case, working class people would have to be making a pretty good salary to be paying a 35% tax rate. $150,000 is pretty well off to me. Also, it isn't just the wealthy who buy & sell stock. Working class people have 401k's, 403b's, IRA's, & Roth IRA's. When it's time to take it out, we shouldn't have to pay a high tax rate on it. Ditto for people who buy stocks beyond those retirement funds & simply want to make a move from one stock or fund to another & might have to pay taxes on it when selling & then buying again. Also, it may be retired folks who are just trying to hold on to their nest eggs. After all, they may be too old to go back to work if that money runs out. So, there's really not a clear answer on this one.
- Anonymous1 decade ago
Our economy under Bush did well growing at a moderate pace six of the eight years George Bush was in office, it wasn't until 2007 a year after liberal Democrats took control of the congress in 2006 that the economy started to tank, and when it did start to tank, it was a result of the housing crisis which had nothing to do with the private sector producing jobs or Bush tax cuts. God bless.
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- Anonymous1 decade ago
Well not entirely true, the economy was in pretty good shape until democrats like Barney Frank forced businesses to do stupid s h i t they knew would cause problems.
But hey if it makes you feel good ignore the truth and blame Bush, 7 and a half years of the most prosperous and healthy economy the US has ever known destroyed in 6 months by democrats and continuing to be by more democrats.
- 1 decade ago
They had a measurable, positive impact on growth.
Whats more, thanks to that growth the government saw the highest Federal revenues ever.
If you're referring to the current down turn, it has nothing to do with tax rates. The source of the current problem is bad mortgage lending, housing foreclosures, due to loans made to people unable to pay them back. Why weren't they able to pay them back? Because the loans should never have been made in the first place. Then why were they made? Affordable housing. And you're not against affordable housing, are you?
As the mortgage securities flowed through the system, and then the failed, the contraction in the money supply was devastating.
- SailingLv 41 decade ago
When Bush became president he voiced concern about regulating the banks. Specifically Fannie and Freddie. But Barney Frank insisted that they were fine. Go to youtube and search for some of the discussions about regulating the banks. It was all the democrats who fought against it and became sometimes down right rude about it. When Clinton was president there was a push to give more mortgages to minorities. Unfortunately ACORN got involved and went against banks who refused to give mortgages to people who couldn't afford them. It had nothing to do with minorities but they used it as a racial issue. Obama was a lawyer for ACORN through some of those lawsuits. When people stopped paying their mortgages companies like AIG who supplied mortgage insurance couldn't pay off all the debt. So once the mortgages came tumbling down everything came with it. Wall Street buys alot of the mortgages so they also came crashing down.
- 1 decade ago
Bush like every other repub cared about the rich and only the rich. Of course since they represent only about 1% of the population repubs have to attract other non-rich voters so you have to throw them some kind of a bone.
To the tax preparer above; how many wall street fat-cats did you do taxes for? Dont answer I already know.
- Anonymous1 decade ago
Bush's tax cuts were not intended to help the economy. They were intended to do one thing, make the rich richer.
To improve the economy we need to start producing something besides Big Macs.
- Anonymous1 decade ago
Bush cut my taxes