Turns out, Bush’s tax cuts hurt the economy. Wha…?
And yet, many of the lawmakers who argue that the health care reform legislation is “too costly” are the same lawmakers who supported the Bush tax cuts. Their own voting record demonstrates that health care reform is not a matter of costs, but a matter of priorities.
It’s difficult to see how the Bush tax cuts could provide us with two and a half times the benefits of health care reform. In 2010, when all the Bush tax cuts are finally phased in, a staggering 52.5 percent of the benefits will go to the richest 5 percent of taxpayers. President Bush and his supporters argued that these high-income tax cuts would benefit everybody because they would unleash investment that would spark widespread economic prosperity. There seems to be no evidence of this, particularly given the collapse of the economy at the end of the Bush years.
Details on the Bush Tax Cuts
The tax legislation enacted under President George W. Bush from 2001 through 2006 will cost $2.48 trillion over the 2001-2010 period. This includes the revenue loss of $2.11 trillion that results directly from the Bush tax cuts as well as the $379 billion in additional interest payments on the national debt that we must make since the tax cuts were deficit-financed.
This figure also includes the cost of adjusting the Alternative Minimum Tax (AMT) to prevent millions of additional taxpayers from being affected by it, as would otherwise have happened as a result of the Bush tax cuts.
Reason for Revisions
The projected cost of the Bush tax cuts is slightly less than we projected previously.5 This is mainly because of the economic downturn, which has reduced incomes. The projected distribution of the tax cuts has also changed slightly. Also, we no longer project the effects of the Bush tax cuts without AMT adjustments, since it is clear that Congress will continue to adjust the AMT to limit the number of people it affects.
Stark Contrast Between Congress’s Approach to Health Care Reform and Approach to Bush Tax Cuts
Over the upcoming decade (2010-2019), the costs of the health care proposals approved by three committees in the U.S. House of Representatives are projected to be around $1 trillion. (One committee trimmed the costs of its health care bill below that amount, but an official estimate of the cost reductions was not available at the time of this writing.)
The chairmen of the three House committees have explicitly stated that their goal is a final bill that is deficit-neutral in the decade following enactment. It’s unclear if they have accomplished this yet, since the Congressional Budget Office has not yet issued final cost estimates of the bills, and the legislation is likely to change before the full House votes on a final bill. But President Obama and Democratic leaders have also committed to ensuring that health care reform will not increase the budget deficit.
Under the House bills, roughly half of the costs would be offset with savings in our existing health care programs, while the other half would be offset with a surcharge on the incomes of wealthy taxpayers. A previous analysis by CTJ has shown that this surcharge is a reasonable approach to financing health care reform and would only affect 1.3 percent of taxpayers. Another CTJ analysis concludes that the surcharge will likely have no significant impact on small businesses, despite some of the misinformation that has surrounded this topic.
In contrast, President Bush and his allies in Congress never even attempted to replace the revenue lost as a result of their enormous tax cuts. The Bush tax cuts were deficit-financed, which increased the national debt and resulted in greater interest payments on that debt, as already explained.
Health Care Reform: A Matter of Priorities, Not Costs
These figures make clear that costs cannot be the real concern of lawmakers who oppose the House health care legislation and yet supported the Bush tax cuts. Their position seems to be that showering benefits on the wealthiest five percent of taxpayers and leaving the bill for future generations is preferable to making health care available for all at a much lower cost and paying that cost up front. That demonstrates a different set of priorities than most Americans have, but it doesn’t demonstrate much concern about costs.
Tip of the hat to Crooks and Liars for this post.