Americans' Incomes Sank After Bush Tax Cuts
On Sunday, House Minority Leader John Boehner called Democrats' refusal to hold a pre-election vote on extending the Bush tax cut windfall for the wealthy the "most irresponsible thing that I have seen since I have been in Washington, D.C." And in one sense, he's right. After all, the national debt doubled during Bush's tenure. His was the worst eight-year economic record of any modern president. Worse still, by 2007 the U.S. reached levels of income inequality not since 1929. And now, it turns out, Americans' incomes dropped ominously after the tax cuts Bush bragged "meant people had more money in their pocket."
That latest indictment of the reckless Bush tax giveaway to the rich comes from tax expert David Cay Johnston. Just days after the Census Bureau reported a jump in poverty during even before the start of the December 2007 Bush recession, Johnston reported, "Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels."
After asking, "So how did the tax cuts work out?" Johnston paints a grim picture of economic failure:
Even if we limit the analysis by starting in 2003, when the dividend and capital gains tax cuts began, through the peak year of 2007, the result is still less income than at the 2000 level. Total income was down $951 billion during those four years.
Average incomes fell. Average taxpayer income was down $3,512, or 5.7 percent, in 2008 compared with 2000, President Bush's own benchmark year for his promises of prosperity through tax cuts.
Had incomes stayed at 2000 levels, the average taxpayer would have earned almost $21,000 more over those eight years. That's almost $50 per week.
And to be sure, the Bush tax cuts which have already drained the Treasury of $2.3 trillion were a major contributor to the record U.S. income gap:
In only two of the eight Bush years, 2006 and 2007, were average incomes higher than in 2000, but the gains were highly concentrated at the top. Of the total increase in income in 2007 over that in 2005, nearly 30 percent went to taxpayers who made $1 million or more...
One of every eight dollars of the tax cuts went to the 1 in 1,000 taxpayers in the top tenth of 1 percent, the annual threshold for which was in the $2 million range throughout the last administration.
The horror story hardly ends there. Despite Republican supply-side mythmaking that "every major tax cut we've had in history has created more revenue," Johnston revealed that despite a 10.1% increase in the number of taxpayers, inflation-adjusted individual income tax revenues declined by 11.8% between 2000 and 2008. By then, average adjusted gross income slumped to $58,005 from $61, 517 eight years earlier when, you guessed, the top Clinton-era tax rate was the same 39.6% to which Barack Obama wants to return.
And as Congress - and voters - ponder the Republican pledge to deliver another $700 billion, 10-year windfall for the richest 2% of taxpayers, Johnston highlights the free ride President Bush already gave them:
The number of people reporting incomes of $200,000 or more but legally paying no federal income taxes skyrocketed in the second Bush term. A decade ago it was fewer than 1,500 taxpayers; in 2000 it was about 2,300. This high-income, tax-free group jumped to more than 11,000 in 2007 and then doubled in 2008 to more than 22,000.
In 2008 nearly 1 in every 200 high-income taxpayers paid no federal income tax, up from about 1 in 1,500 in 1998.
The share of high incomes that were untaxed increased more than sevenfold to one dollar of every $166.
As should be clear, the side winning the class war is the only one fighting it. To quote would-be Speaker Boehner, to perpetuate that massive upward redistribution of income is indeed "irresponsible." Or, as David Cay Johnston rightly concluded:
This is economic madness. It is policy divorced from empirical evidence. It is insanity because the policies are illusory and delusional. The evidence is in, and it shows beyond a shadow of a reasonable doubt that the 2001 and 2003 tax cuts failed to achieve the promised goals.
For more background, data and charts, see:
This is a good article, written in more detail.