Anonymous asked in Politics & GovernmentOther - Politics & Government · 1 decade ago

Right-wingers: Serious Question: How were Bush's tax cuts supposed to work?

I am very much for small government, However it seemed to me that Bush's tax cuts were mostly for the big businesses, and not the small businesses. I also witnessed gov't grow & grow under him (although Obama has managed to be even worse now). Throughout his almost decade in office I witnessed the economy getting worse and worse until it finally crashed. The big banks and other industries made record profits and YET the job market kept dwindling more and more. And lets not pretend that Obama is the cause of it when he's been in office for less than 2 years so far and the job market was a problem even before he got voted in. So what I want to know is...Why didn't Bush's tax cuts work in your opinion? Is it because he didn't focus on the right industries? Or do you feel he was distracted as a president? What was the reason?

10 Answers

  • 1 decade ago
    Favorite Answer

    The Bush tax cuts were an across-the-board tax reduction for all individual taxpayers. The were not tax cuts for business.

    In fact - the high business tax rates in the US are one of the huge drains on our economy.

    If we had cut business taxes - we would not have seen jobs dwindling as tax cuts would have made it more profitible for companies to make their products in the US vs. overseas.

    IMO, the Bush era tax cuts both worked - and failed at the same time. If you look at the economuic stats your would notice that the 2000 recession never really ended. Instead the Bush tax cuts provided enough stimilus to the economy that it compensated for the underlying economic issues.

    Add to this the 'lose money' policies from the Fed - which created a lot of cash that had not real economic use. Since this cash had to go somewhere - it went into speculation on housing and derivitives instead of really economically productive investment (such as factories and production machinery).

    The problem I have is that Obama is trying to 'stimulate' the economy without addressing our tax policies which are the root cause of our economic issues. We need tax policies that will create a competetive advantage for goods produced in the US on the world market. In effect we want US made goods to be able to go head to head with foriegn made goods - outside our own country.

  • 1 decade ago

    They did work. Try running a country when the "big businesses". Go over seas. You can't. They hire people and make our economy. Trickle down. If they take them away you will really have a mess. When the richest are the ones that pay the taxes and they are taxed to death. You will see them start outsourcing. The economy is getting worse not because of Bush's tax cuts but because of Obama spending money and not making jobs. Government jobs is all he has created. What is wrong with any company making a profit. That is what they are in business for. I don't think anyone would start a business and try not to make a profit. Cut the tax cuts and we will have even more unemployment.

  • 1 decade ago

    Not a righty, so I'll let them explain trickle down to you, I can't tell you about it without making jokes, because it is a joke.

    I would like to note that, depending on what you mean by 'work', the Bush tax cuts did work. A lot of people like to look at the end of Bush's term when the Dow was at 7800 and judge him for that. They usually forget that the Dow climbed to a record-breaking 14000+ under Bush as well. If you want to blame the republicans for our current recession (which I do), you need a reason other than his tax cuts to do it--they didn't kill the economy, it was other factors including financial regulation and the housing market.

    Now, forgive my liberal slant, but the Bush tax cuts did exactly what was intended. They put more money into the hands of the rich, and businesses grew. That is exactly what the republicans wanted. The other half of 'trickle-down' (that when big business grows and gets richer, it's good for everyone in America, see Wizard's answer) is the part that never became reality--that's why people's salaries were stagnant, unemployment was not reduced, and average people never saw a dime of the record-breaking prosperity the nation had under GWB. That's the second time trickle-down has been fed to America by the cons, become part of the tax code, and utterly failed.

    If a politician wants to keep jobs in america (so far neither party has made serious efforts to prevent outsourcing), they need to address that problem directly. Giving away money with no strings attached failed--the people getting the tax cut were still allowed to shop globally for the lowest labor prices. Now, if they give a tax cut for each job they provide, then maybe tax cuts to the rich could work. It's silly to give away money without saying how it should be used.

  • 1 decade ago

    You what to give reasons why you think the Bush tax cuts went to mostly big businesses?

    Sure BIG businesses got a lot. And sure people on the upper end of the tax brackets got more than folks at the lower end. BIG businesses got a lot because they employ more union people (Democrats wanted this). And the people on the upper end of the tax brackets got a lot too, because they pay more in taxes(Republicans wanted this).

    What you may not realize is the top 3% of individual tax payers pay 52% of the income taxes. And there are a lot of small business people whose businesses do not file under corporate income tax codes. They file under individual tax codes. Why? Because if they file corporate they pay more in taxes. And many end up in that top 3%, which goes down all the way to $250K. So that did help a lot of small businesses.

    Those Bush tax cuts were doing pretty well right up to the point where the slack came out of the chain in late 2007. But the reason the financial (aka housing) markets tanked and are still tanking has little to do with tax cuts. It's more to do with people getting cute getting around government regulations and using Fannie and Freddie to cover their bad bets. OBTW Just so you know. There are a lot of people trying to tell Leading Democrats there was trouble with Fannie and Freddie as far back as 2003.

    Actually the Bush tax cuts worked fine. But although up until the housing bubble burst even though tax revenues went up because of the cuts, government spending went up faster.

    Did the Bush tax cuts (which were approved by Congress with the help of Democrats OBTW) do everything they could? NO! But then that's because I'm not Prince of the Planet. If I were, BIG businesses and people making BIG salaries working for BIG companies wouldn't have been included in the bill.

    Since the Bush tax cuts are due to expire, and small business owners will tell you it's going to cost them BIG bucks (over $50 billion annually) do you think Congress passing a bill that will guarantee $30B in small business loans is really going to do much good? I don't think so. It's just a red herring or smoke and mirrors.

    You said it yourself, government under Bush grew, but under Obama it's grown worse. During the last six years of Clinton with a Republican Congress we saw government shrink and a budget surplus. Would you like to have that again? You get your chance in November.

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  • Pfo
    Lv 7
    1 decade ago

    "Why didn't Bush's tax cuts work in your opinion?"

    Define "didn't work". The intention was to lower taxes so that over time, business would expand and the total tax revenue would approach what it was before the tax cut. Every time money changes hands, the government gets a cut; you could either take this up front with income taxes, or leave it in the hands of the people so they can do more, but eventually they spend it and it goes right back to the government. The intention of the tax cuts was not to decrease the size of government, nor decrease federal spending, nor fund the war, nor any of that. The goal of the tax cuts was to cut taxes, but have tax revenue return to where it was before the tax cut. This did happen, so the tax cuts were a success given what they were intended to do.

  • 1 decade ago

    See, in the neo-con fantasy, two men are standing there and you have a million dollars to give away. One guy is a billionaire. The other guy is flat broke. So you give the money to the rich guy so he'll hire the broke guy.

    Only the rich guy invests the money, ships jobs overseas, and whines about how the poor are making a mess of the American economy.

    That's tax breaks for the rich.

  • 1 decade ago

    Bush's tax cuts could not work long term because the economy was redesigned to crash while the mechanism for recovery was eliminted through previous economic social policy signed into law via the bi-partisan effort.

    A a

    B b

    C c

    D d

    E E

    F f

  • 1 decade ago

    Didn't work???

    Even if they were just for "big business" as you claim, those "big businesses" were able to hire more people, pay more salaries, produce more products for consumers, than they would have if they had been required to pay more taxes.

    You'll find out just how well they worked when they are taken away next year.

  • 1 decade ago

    The idea behind tax cuts or low taxes stem in part from the advocacy of what's commonly referred to as supply-side economics. Fiscal conservatives and many libertarians believe in this concept.

    The way it's supposed to work is that when taxable businesses and other income earners are "allowed to keep more of their own money," they will likely spend or invest it in ways that will stimulate or in other ways help the economy remain strong or even grow. This is believed to occur when the saved money is placed in either safe investments such as savings accounts, money-market accounts, short-term bonds or bond funds, or into equity securities (stocks or stock funds) that will enable publicly-traded businesses to expand or at least make purchases of inventory or new capital (investment). And also when consumer purchases are made.

    Also, if the money is placed into savings, it will supposedly be available for lending to consumers or businesses to make economically-stimulative purchases or investments.

    These and other stimulative actions are supposed to increase the tax base by creating more (or higher-paid) tax payers as employment increases and businesses increase or expand.

    At the same time, government is supposed to control spending in order to avoid short-term (or long-term) deficits. If the tax cuts work, government revenue should increase due to the stimulated and expanding economy.

    However, the major flaw in supply-side economics is that the economy with the low (or lowered) taxes may not get the benefit of its tax-payers "keeping more of their own money." Why? Because they need not invest or spend the money in the economy whose government has the low taxes. They could spend it elsewhere. Also, if they have a trade deficit with a foreign country, that country could get much of the benefit. (This is occurring with the U.S. and China, where China gets much of the benefit of economic stimulus in the U.S., due to the U.S. trade deficit with China.)

    Taxpayers can place their saved money off-shore in numerous ways. They can place it into Swiss bank accounts, they can invest it into foreign businesses or make foreign purchases. Quite simply, they can expand or save overseas. Even if they place their saved money into safe investments domestically, however, those who gain access to it may only do so by borrowing rather than earning the money. (This is actually what almost all American consumers had been doing for the last 20 to 30 years since 1980 - borrowing to finance lifestyles that had previously been financed by earnings from work.)

    One of the biggest causes of the failure of American-style supply-side economics of the last 15 years or so has been the fact that American jobs have left the U.S. by the millions (perhaps the tens of millions) without enough new jobs to take their place. Also, many workers with foreign allegiances (such as illegal immigrant workers) have taken many of their earned American dollars and sent them out of the U.S., to the detriment of American businesses and to the benefit of foreign citizens or businesses.

    In other words, perhaps the greatest problem for American workers with supply-side economics is the new global free-trade environment.

  • 1 decade ago

    Bush never proposed or designed any tax cuts, he does not nor ever will have the intellectual capacity to do any kind of reasoning past the number ten. It was his "handlers" who worked in the shadows and allowed Bushio to take center front stage.

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