I’m hearing a lot of banter about Congress discussing how to deal with the expiring tax reduction legislatures passed by President George W. Bush in 2001 and 2003. To many people, this is all gibberish – a plethora of political garbage being thrown around, topped with relentless partisan criticism. For the most part, however, people understand that tax rates are set to go up this January. But, what exactly will that mean for the average American taxpayer? What may shock some Americans is that the tax increases would actually be beneficial in this economic climate.
To fully comprehend the issue, one must take a look at the timeline. On June 7, 2001, former United States President George W. Bush signed into law the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). Essentially, Bush and fellow Republican Party members in the Congress were making an effort to reduce personal income tax rates for different income brackets. The act was originally intended to be phased out in increments after a period of nine years. But President Bush had, by 2003, a separate agenda. Congressional Republicans and President Bush pushed for a new act that would accelerate the rate of decrease in each tax rate. On May 28, 2003, Bush signed the Jobs Growth Relief and Reconciliation Act (JGRRA), making the EGTRAA a virtual stepping stone.
Commonly known today as, “The Bush Tax Cuts,” these acts effectively cut taxes in just two years. The cuts were designed to spur economic growth, and for a while, the economic growth was tangible. However, after the global economic meltdown beginning in 2007, the economies of the world, not just the United States, collapsed. Critics of the Bush tax cuts have stated that economic growth was insignificant because of the cuts. Such critics, like economists Peter Orszag and William Gale, claim that, “danger exists because the deficit-financed tax cuts are, overall, harmful to the country’s economic growth.” The tax cuts would have to be accounted for somewhere in the Federal government’s budget. Original estimates, dating back to 2003, stated that the Bush tax cuts would add $1.7 trillion dollars to the budget deficit, and the number would exponentially increase if the cuts had been extended beyond 2010. More critics claim that the cuts were deceptively the reverse of a progressive tax system. By cutting the income tax of the upper income brackets, the wealthiest Americans became tremendously richer. True, the middle and lower income brackets received cuts as well, but their percentage of tax decreases were comparable to that of the upper income bracket, meaning that these lower brackets would also get wealthier but at vastly lower rates than the wealthiest taxpayers due to their already lower incomes. Bush and the Republican Party had seemingly swindled the American political system, and the American people, by offering a quick fix for the wealthiest citizens of the United States. Coupled with the fresh War in Iraq, the Bush tax cuts allowed President Bush to maintain a positive Presidential approval rating, ranging from 80% approval to 55% approval from 2001 to 2004.
Fast forward over seven years, and Congress must now come to a decision regarding these cuts. As they were passed, the Republicans had planned for the cuts to expire in January of 2010, conveniently when President Bush’s term would be terminated. Under the current administration, President Barack Obama has been burdened with dealing with Bush’s irresponsible cuts which contribute to a growing federal budget deficit and possibly to the global economic meltdown of 2008. The Bush tax cuts have been reported to cost $2.1 trillion since 2003. Political analysts maintain that extending such cuts for another decade would add approximately $4 trillion dollars to the federal budget deficit.
The fact is that America cannot afford these cuts anymore. The United States holds a current federal budget deficit of about $1.3 trillion. The deficit is currently decreasing at insignificant rates, but it can be assured that the extension of the cuts for all income brackets will add immense levels of debt to the budget. Recent tirades by angered Republican Party members like projected future Speaker of the House, John Boehner, and former Alaskan Governor Sarah Palin, have only been excessively critical of President Obama’s handling of the budget deficit. Palin is correct in asserting that tax cuts have developed economies in the past under Presidents such as John F. Kennedy and Ronald Reagan, but their cuts never brought the rates this low. These tax cuts are nothing less than fiscally irresponsible.
Throwing criticism at both the President and the Congressional Democrats, the Republicans have again managed to corrupt the democracy of the average American. They have neglected to genuinely inform their constituents with just how much their tax cuts cost. Conservatives argue that the tax cuts create economic growth; but, after the disastrous failure of George W. Bush’s cuts, how can they be considered credible? In fact, the cuts have only stimulated economic folly, resulting in an unemployment rate that is too high, a rate of job loss that is too unpredictable, and just under $1.5 trillion in economic stimulus packages.
Republicans can sleep with a decisive eye, however. They succeeded. Their constituents – corporations, big businesses, and special interests – have managed to engineer the corporate takeover of our democracy with these cuts. The wealthiest of citizens are running rampant and more reckless than ever, leaving the middle class and the poor to fend for themselves.
What people do not realize is that their taxes are not necessarily increasing, they are just returning to normalcy. This issue ultimately is a question of sacrifice. Why those who earn millions of dollars each year are so rigidly able to oppose a 3% personal income tax raise is inconceivable. How is it possible that these incredibly wealthy persons are able to get away with this, especially during a time of need for the poor citizens of America? Well, you can thank your Republican representatives and senators, for they were able to convince us that if we do not extend cuts for the wealthiest citizens of America deep economic trouble would ensue.
President Obama had planned on extending the Bush tax cuts for all citizens, except for those in the highest income tax bracket. The Republican Party resisted furiously, eventually forcing President Obama into a compromise which is not ideal for our economic situation. Under the new plan, taking effect next year, all cuts will be extended for at least two years, a time by which Republicans hope they can regain the Capitol and the White House and continue to pass such tax cuts. This will cost our deficit a measly $458 billion, projected by the U.S. Department of the Treasury. This is downright fiscally irresponsible.
If President Obama did not agree to continue the cuts for the highest income bracket, Republican leaders threatened to extend the cuts for the middle and lower income brackets of American taxpayers. Seeing his beloved middle class in danger, he conceded. The president was none too happy to agree to the Republicans’ partisan demands, saying: “I’ve said before that I felt that the middle class tax cuts were being held hostage to the high-end tax cuts. I think it’s tempting not to negotiate with hostage takers, unless the hostage gets harmed. In this case, the hostage was the American people. And I was not willing to see them get harmed.” Obama criticized the conservatives’ antics again, noting that, “the issue is: how do I persuade the Republicans in the Senate? I have not been able to budge them.”
So, go ahead, stick to your guns. It’s not like the country is in debt or anything. Sacrifice is what it takes to put this country in the right direction, not greed. People want results, and they want them now, but this action that was forced by the Congressional Republicans will only plunge us deeper into debt and deeper into division in this country. God bless America.
