Bush Tax Cuts

Everyone loves to pay less in taxes, and the Bush tax cuts refer to those enacted during the presidency of the second Bush, George W., in 2001.

Called the Economic Growth and Tax Relief Reconciliation Act, the cuts were meant to stimulate the economy after the “dot bombs” crashed causing the 2001 recession. The 2001 cuts were meant for families, and lowered federal income tax rates, decreased the marriage penalty, lowered capital gains taxes, lowered the tax rate on dividend income, increased the child tax credit, and eliminated the estate tax, among other provisions. The cuts had mixed results on the economy, as consumers had the audacity to save or invest the extra money rather than go out and spend it.

The second wave of changes to the tax code happened in 2003, and was more geared toward helping businesses. Called the Jobs and Growth Tax Relief Reconciliation Act, it reduced taxes on long-term capital gains, real estate investment trusts, qualified dividends, and income from non-foreign corporations. It also increased the amount that companies or individuals can deduct immediately from the cost of business equipment, and increased the amount of income exempt from the Alternative Minimum Tax (AMT).

The Bush tax cuts were scheduled to expire in 2008 and 2010, but by then the Great Recession was raging. Realizing that raising taxes during this time would not be a popular thing to do, the tax cuts were extended to 2012. The cuts were made permanent that year by President Obama for those with incomes less than $400,000 for single taxpayers and $450,000 for married couples.

The Bush tax cuts, along with the war in Iraq, led to a budget deficit of $1.4 trillion in 2009, the largest as compared to the economy since World War II.