Comprehensive Analysis and Chart of Bush Tax Cuts

Considering both the direct costs of the tax cuts and the associated increase in interest payments, the tax cuts would increase deficits by nearly $4 trillion between 2005 and 2014.

Over the next 75 years, the cost of these tax cuts — assuming they are made permanent — would be more than the combined shortfall in the Social Security and Medicare Hospital Insurance trust funds.

With only a small minority of the tax-cut proposals consisting of high “bang for the buck” proposals and only a small percentage of the tax cuts taking effect by the end of fiscal 2004, the President’s 2003 tax-reduction proposal can fairly be characterized as highly inefficient at providing short-term stimulus. Only four percent of the President’s 2003 tax-cut package consisted of high “bang-for-the-buck” tax cuts that would have been in effect by October 2004.

“Regardless of how one views the specifics of the [2003] Bush [tax cut] plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near-term.”

Job growth during this recovery might have lagged behind that of previous recoveries even if the recent economic policies had been better designed. Nonetheless, the exceptionally poor job growth of recent years suggests the Administration’s tax cuts have largely failed to accomplish one of its stated policy goals. The inefficiency of the tax cuts when it came to providing short-term stimulus makes this failure less surprising.

A different policy course can be followed. Instead of pushing to make nearly all of the tax cuts permanent and institute new tax cuts on top, there should be an examination of which tax cuts should be extended, which should not be extended, and which should be rolled back before consideration is given to extending them. The tax code also needs reforms that would make it simpler and fairer, and doing so could raise needed revenues. Revenues could be raised by paring back or eliminating tax breaks that are ineffective or outmoded. Finally, revenue also could be raised by beefing up enforcement efforts aimed at corporations and households engaged in sophisticated schemes to hide their income from taxation.