The Legacy of the 2001 and 2003 “Bush” Tax Cuts
End Notes
[1] For an explanation of the relationship between marginal and average tax rates, see “Policy Basics: Marginal and Average Tax Rates,” Center on Budget and Policy Priorities, updated July 9, 2015, https://www.cbpp.org/research/policy-basics-marginal-and-average-tax-rates.
[2] “Policy Basics: The Child Tax Credit,” Center on Budget and Policy Priorities, updated October 21, 2016, https://www.cbpp.org/research/federal-tax/policy-basics-the-child-tax-credit.
[3] “Policy Basics: The Estate Tax,” Center on Budget and Policy Priorities, updated July 5, 2016, https://www.cbpp.org/research/policy-basics-the-estate-tax.
[4] Chye-Ching Huang, “Budget Deal Makes Permanent 82 Percent of President Bush’s Tax Cuts,” Center on Budget and Policy Priorities, January 3, 2013, https://www.cbpp.org/research/budget-deal-makes-permanent-82-percent-of-president-bushs-tax-cuts.
[5] This figure is based on a compilation of Congressional Budget Office (CBO) cost estimates that includes both the revenue and outlay effects of all major tax legislation enacted during the George W. Bush Administration: the 2001 EGTRRA, the 2003 JGTRRA, the Working Families Tax Relief Act of 2004, and the Tax Increase Prevention and Reconciliation Act of 2005 (enacted in 2006). It also includes the costs of provisions extending these tax cuts in the American Recovery and Reinvestment Act of 2009. Based on analysis in Kathy Ruffing and Joel Friedman, “Economic Downturn and Legacy of Bush Policies Continue to Drive Large Deficits,” Center on Budget and Policy Priorities, February 28, 2013, https://www.cbpp.org/research/economic-downturn-and-legacy-of-bush-policies-continue-to-drive-large-deficits. For a detailed description of methodology used in this analysis, see box “What Did Bush-Era Tax Cuts Cost through 2011?” in Kathy Ruffing and James R. Horney, “Downturn and Legacy of Bush Policies Drive Large Current Deficits,” Center on Budget and Policy Priorities, updated October 10, 2012, https://www.cbpp.org/research/downturn-and-legacy-of-bush-policies-drive-large-current-deficits.
Another methodology for estimating the cost of the Bush tax cuts, which focuses on the initial costs of enacting the original 2001 and 2003 tax bills, finds that EGTRRA and JGTRRA combined decreased revenues by about 2.1 percent of GDP in 2004. See Jerry Tempalski, “Revenue Effects of Major Tax Bills Updated Tables for All 2012 Bills,” U.S. Department of the Treasury, February 2013, https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/WP81-Table2013.pdf.
[6] “Patching” the AMT refers to increasing the exemption level for the AMT, which was necessary in order to prevent a growing number of middle-class taxpayers from falling under the AMT. The rate reductions in the 2001 and 2003 tax cuts would have caused millions more taxpayers to fall under the AMT, undoing a significant portion of the tax cuts within the first ten years. The tax cuts thus increased the cost of patching the AMT each year in order to prevent these taxpayers from falling under the AMT. For more on the interaction between the 2001 and 2003 tax cuts and the AMT, see Aviva Aron-Dine and Bob Greenstein, “The AMT’s Growth Was Not ‘Unintended,’” Center on Budget and Policy Priorities, November 30, 2007, https://www.cbpp.org/research/the-amts-growth-was-not-unintended?fa=view&id=857.
[7] Frank Bruni, “Bush Defends Size of Surplus and Tax Cuts,” New York Times, August 22, 2001, http://www.nytimes.com/2001/08/22/us/bush-defends-size-of-surplus-and-tax-cuts.html, and John M. Berry, “Greenspan Supports a Tax Cut,” Washington Post, January 26, 2001, https://www.washingtonpost.com/archive/politics/2001/01/26/greenspan-supports-a-tax-cut/72f4925a-96d5-4120-8e0a-264a3d1d7476/?utm_term=.efda36f8cb0e.
[8] Ruffing and Friedman. This was our last update of this analysis.
[9] Average tax cuts are expressed in 2017 dollars. Tax change is distributed by percentiles of cash income adjusted for family size. These tax cuts include the full AMT patch, the rebates in the 2008 stimulus (which was passed under President Bush), and the initial phasedown of the estate tax through 2010. They do not include the tax provisions of the 2009 stimulus package (which was passed under President Obama) or the estate tax cuts in 2011 and 2012 that prevented the estate tax from returning to its original level after 2010. Chye-Ching Huang and Nathaniel Frentz, “Bush Tax Cuts Have Provided Extremely Large Benefits to Wealthiest Americans Over Last Nine Years,” Center on Budget and Policy Priorities, July 30, 2012, https://www.cbpp.org/research/bush-tax-cuts-have-provided-extremely-large-benefits-to-wealthiest-americans-over-last-nine.
[10] Tax Policy Center Table T10-0232. Tax change is distributed by percentiles of cash income adjusted for family size.
[11] The Joint Committee on Taxation (JCT) modeled the macroeconomic impact of most of the provisions in JGTRRA in 2003, and found that even under the most aggressive assumptions, economic growth generated by the tax cuts would decrease the revenue loss by less than 30 percent. See Joint Committee on Taxation, “Overview of the Work of the State of the Joint Committee on Taxation to Model the Macroeconomic Effects of Proposed Tax Legislation to Comply With House Rule XIII.3.(h)(2),” December 22, 2003, http://www.jct.gov/x-105-03.pdf.
[12] Jason Furman, “Treasury Dynamic Scoring Analysis Refutes Claims by Supporters of the Tax Cuts,” Center on Budget and Policy Priorities, revised August 6, 2006, https://www.cbpp.org/research/treasury-dynamic-scoring-analysis-refutes-claims-by-supporters-of-the-tax-cuts.
[13] “Chart Book: The Bush Tax Cuts,” Center on Budget and Policy Priorities, December 12, 2012, https://www.cbpp.org/research/chart-book-the-bush-tax-cuts.
[14] William Gale and Andrew Samwick, “Effects of Income Tax Changes on Economic Growth,” Brookings Institution, March 24, 2017, https://www.brookings.edu/wp-content/uploads/2016/07/09_Effects_Income_Tax_Changes_Economic_Growth_Gale_Samwick_.pdf.
[15] Aviva Aron-Dine, Richard Kogan, and Chad Stone, “How Robust Was the 2001-2007 Economic Expansion?” Center on Budget and Policy Priorities, updated August 29, 2008, https://www.cbpp.org/research/how-robust-was-the-2001-2007-economic-expansion.
[16] Danny Yagan, “Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut,” American Economic Review, 2015, https://eml.berkeley.edu/~yagan/DividendTax.pdf.
[17] Congressional Budget Office, “Economic Effects of Policies Contributing to Fiscal Tightening in 2013,” November 2012, https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/11-08-12-FiscalTightening.pdf.
[18] For more on the economic recovery since 2009, see: “Chart Book: The Legacy of the Great Recession,” Center on Budget and Policy Priorities, updated March 30, 2017, https://www.cbpp.org/research/economy/chart-book-the-legacy-of-the-great-recession.
[19] See Chye-Ching Huang, “Recent Studies Find Raising Taxes on High-Income Households Would Not Harm the Economy,” Center on Budget and Policy Priorities, April 24, 2012, https://www.cbpp.org/research/recent-studies-find-raising-taxes-on-high-income-households-would-not-harm-the-economy; and Chye-Ching Huang and Nathaniel Frentz, “What Really Is the Evidence on Taxes and Growth?” Center on Budget and Policy Priorities, February 18, 2014, https://www.cbpp.org/research/what-really-is-the-evidence-on-taxes-and-growth.