Final Word on the Bush Tax Cuts

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DEATH ROW JOE
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Final Word on the Bush Tax Cuts

Post by DEATH ROW JOE »

A decade later, all the numbers are in, crunched and analyzed.

The following article by Bruce Bartlett breaks it down.
http://economix.blogs.nytimes.com/2013/ ... t-failure/
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”
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The Bush Tax-Cut Failure
By BRUCE BARTLETT
May 21, 2013, 12:01 am

Ten years ago this month, Congress enacted the third major tax cut of the George W. Bush administration. Its centerpiece was a huge cut in the tax rate on dividends. Historically, they had been taxed as ordinary income, but the Bush plan, enacted by a Republican Congress, cut that rate to 15 percent. The tax rate on ordinary income went as high as 35 percent.

This initiative originated with the economist R. Glenn Hubbard, who had been chairman of the Council of Economic Advisers when the proposal was sent to Congress. Mr. Hubbard was a strong believer that the double taxation of corporate profits – first at the corporate level and again when paid out as dividends – was a major economic problem.

During the George H.W. Bush administration, Mr. Hubbard had been deputy assistant secretary of the Treasury for tax policy and wrote a Treasury report advocating full integration of the corporate and individual income taxes.

Mr. Hubbard had also spearheaded enactment of big tax cuts in 2001 and 2002 that he said would jump-start the American economy. In an op-ed article in The Washington Post on Nov. 16, 2001, he predicted that the soon-to-be-enacted 2002 tax cut, which President Bush signed on March 9, 2002, would “quickly deliver a boost to move the economy back toward its long-run growth path.”

Mr. Hubbard predicted that it would create 300,000 additional jobs in 2002 and add half a percentage point to the real gross domestic product growth rate.

There is no evidence that the tax cut had any such effect. The unemployment rate remained above 5.7 percent all year, rising to 5.9 percent in November and 6 percent in December. The real G.D.P. growth rate fell each quarter of 2002, and by the fourth quarter growth was at a standstill. Hence the need for yet another big tax cut.

The idea of the 2003 legislation was to raise dividend payouts, thereby bolstering personal income, and raise the prices of common stock, which would improve household balance sheets. As President Bush explained in his signing statement, “This will encourage more companies to pay dividends, which in itself will not only be good for investors but will be a corporate reform measure.” He also said the dividend tax cut would “increase the wealth effect around America and help our markets.”

The Treasury Department issued a fact sheet on July 30 asserting that the decline in dividends had been a cause of the weak stock market and noting that dividend payouts had risen since enactment of the tax cut on May 28.

Subsequent research, however, found that the increase in dividends was a short-term phenomenon and mainly at companies where stock options were a major form of executive compensation. A 2005 Federal Reserve Board study found that the United States stock market did not outperform European stock markets after the dividend cut. Nor did stocks qualifying for lower dividend taxes outperform those, such as real estate investment trusts, that did not qualify for lower dividend taxes. Non-dividend paying stocks slightly outperformed dividend-paying stocks, and many corporations that did pay higher dividends scaled back stock repurchases by a similar amount.

Share repurchases were a common way that corporations returned profits to shareholders. They raised stock prices, which were untaxed as long as shareholders held the stock and were taxed at low capital gains tax rates when sold.

A 2006 Federal Reserve study found that a third of corporations cut share repurchases by the same amount they increased dividend payouts. Hence only the form of shareholder compensation changed, not the amount. A 2010 Federal Reserve study found little change in total dividend payouts after the 2003 rate cut as a percentage of corporate earnings. It concluded that the tax cut had little, if any, effect.

A 2008 study published in the National Tax Journal surveyed investment professionals to see their reaction to the dividend tax cut. It found that the tax cut was less significant than other factors, such as corporate cash flow and cash holdings that were unaffected by the tax change.

A 2011 study by the Treasury Department examined household portfolios. It found no evidence that households shifted their investments from those whose return was taxed as ordinary income into dividend-paying stocks whose income was taxed less.

Finally, a January 2013 study by Danny Yagan of the University of California, Berkeley, examined the impact of the 2003 tax cut on corporate investment. He found zero change.

It is hard to find even a reputable conservative economist willing to say anything good these days about President Bush’s tax and economic policies. In 2009, the Harvard economist Dale Jorgenson said he saw no redeeming features in them.

In 2011, the economist Alan Viard of the conservative American Enterprise Institute told Bloomberg News, “The effects of the Bush tax cuts on growth were ambiguous at best.” He added, “They were not much of a poster child for pro-growth tax policy.”

Even Mr. Hubbard now seems unwilling to defend the tax cuts he shepherded into law. Earlier this year, he was asked by The New York Times what he thought about the repeal of many of the Bush-era tax cuts on Jan. 1. He said many of those tax cuts were no longer relevant to our tax and economic problems.

Mr. Hubbard even suggested that higher revenues, long a Republican no-no, were not a bad thing. “We need a tax system that can promote economic growth and raise the revenue the American people want to devote to government,” he said.

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Re: Final Word on the Bush Tax Cuts

Post by Sheep_Mafia »

Correction--the Bush/Obama Tax Cuts.
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Re: Final Word on the Bush Tax Cuts

Post by DEATH ROW JOE »

Sheep_Mafia wrote:Correction--the Bush/Obama Tax Cuts.
Why the constant need to insert Obama's name into the discussion?

They were designed and signed into law between 2001 and 2003. Obama had zilch to do with them.
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Re: Final Word on the Bush Tax Cuts

Post by Moggio »

DEATH ROW BLOW JOB wrote:
Sheep_Mafia wrote:Correction--the Bush/Obama Tax Cuts.
Why the constant need to insert Obama's name into the discussion?

They were designed and signed into law between 2001 and 2003. Obama had zilch to do with them.
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Without further adieu, BESTOWMENT #7:

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And the ARTIFICIAL economic recovery continues...
ONE NATION UNDER SOCIALISM

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Because of Obamination's spending & socialist BS, America and much of the world will endure one of the worst depressions in history in 5...4...3...2...
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Re: Final Word on the Bush Tax Cuts

Post by Turner Coates »

More straws.

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Re: Final Word on the Bush Tax Cuts

Post by Sheep_Mafia »

DEATH ROW JOE wrote:
Sheep_Mafia wrote:Correction--the Bush/Obama Tax Cuts.
Why the constant need to insert Obama's name into the discussion?

They were designed and signed into law between 2001 and 2003. Obama had zilch to do with them.
Says the guy who blames Bush for pretty much anything despite his being gone from office since January of 2009...

Not to mention, the reality of the situation is that the so called Bush tax cuts expired years ago--years. They have been extended multiple times under Obama and were made permanent for most income brackets. Not to mention, Obama added to them with the payroll tax cut. How you can try and slide out from under that simple truth is beyond me as its indisputable fact.
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Re: Final Word on the Bush Tax Cuts

Post by DEATH ROW JOE »

Sheep_Mafia wrote: Says the guy who blames Bush for pretty much anything despite his being gone from office since January of 2009...
I do not blame Bush for everything. I give him credit for what he took credit for.

He took credit for the housing bubble during the 2004 GOP convention.

He took credit for the Iraq war when he appeared on a bird farm in front of a mission accomplished banner.

Sheep_Mafia wrote: Not to mention, the reality of the situation is that the so called Bush tax cuts expired years ago--years. They have been extended multiple times under Obama and were made permanent for most income brackets.
That does not make them the Obama/Bush tax cuts. The Obama administration did not design the tax cuts. The tax cuts were extended because Bushonomics crashed the economy and the economy was too soft for a tax hike.

Sheep_Mafia wrote: Not to mention, Obama added to them with the payroll tax cut. How you can try and slide out from under that simple truth is beyond me as its indisputable fact.
You completely misunderstand the article. The article is not critical of tax cuts per se. It is critical of the Bush tax cuts because they were poorly designed.

You completely missed the point of the article. You're quite stupid.
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Re: Final Word on the Bush Tax Cuts

Post by Sheep_Mafia »

DEATH ROW JOE wrote:
Sheep_Mafia wrote: Says the guy who blames Bush for pretty much anything despite his being gone from office since January of 2009...
I do not blame Bush for everything. I give him credit for what he took credit for.

He took credit for the housing bubble during the 2004 GOP convention.

He took credit for the Iraq war when he appeared on a bird farm in front of a mission accomplished banner.

Sheep_Mafia wrote: Not to mention, the reality of the situation is that the so called Bush tax cuts expired years ago--years. They have been extended multiple times under Obama and were made permanent for most income brackets.
That does not make them the Obama/Bush tax cuts. The Obama administration did not design the tax cuts. The tax cuts were extended because Bushonomics crashed the economy and the economy was too soft for a tax hike.

Sheep_Mafia wrote: Not to mention, Obama added to them with the payroll tax cut. How you can try and slide out from under that simple truth is beyond me as its indisputable fact.
You completely misunderstand the article. The article is not critical of tax cuts per se. It is critical of the Bush tax cuts because they were poorly designed.

You completely missed the point of the article. You're quite stupid.
Bill Clinton is the unquestionable architect of the housing crisis. Your continued denial of that in the face of all the evidence and reality is tribute to your willful ignorance to the party you support.

Face it, you are far too weak minded to ever blame Obama for anything. The tax cuts are just another example of your lost grasp on reality. The tax cuts either work or they don't you can't slide the scale because you want to sell to the other ignorant party hacks around here that they are good now, bad then. They now belong to Obama, plain and simple. He is the President and has been since 2009. Deal with it.
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Re: Final Word on the Bush Tax Cuts

Post by MegaBeth »

It stuns me that people actually argue in support of higher taxation. To me this is the same as begging someone to repeatedly punch you in the face because it makes money for the E.R. Doctor who is dealing with your broken nose.
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Re: Final Word on the Bush Tax Cuts

Post by KneelandBobDylan »

MegaBeth wrote:It stuns me that people actually argue in support of higher taxation. To me this is the same as begging someone to repeatedly punch you in the face because it makes money for the E.R. Doctor who is dealing with your broken nose.
What's really stunning is that dirtfucks want the services that taxation provides, but don't wanna pay said taxes.
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Re: Final Word on the Bush Tax Cuts

Post by DEATH ROW JOE »

Sheep_Mafia wrote: Bill Clinton is the unquestionable architect of the housing crisis. Your continued denial of that in the face of all the evidence and reality is tribute to your willful ignorance to the party you support.
LMFAO, you're the one in denial. You have Bush taking full credit for inflating the housing bubble and you want to pin the blame on Clinton.

Let's review it again dumb ass.

1) Private Sector sheds 3 million jobs during the first 2 years of Bush's presidency.

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2) Bush tells banking regulators to back off the mortgage industry in early 2003. In July 2003, banking regulators pose for a photo in which they take a chainsaw and hedge cutters to a stack of paper wrapped in red tape to send a message to banks that regulations are not going to be enforced.

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3) Home prices then explode in big bubble cities like Phoenix and Las Vegas
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4) Private sector stops shedding jobs and starts to add jobs

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5) Bush Boom is declared by conservative pundits

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6) Bush takes FULL CREDIT for the housing boom at the 2004 GOP convention.

"Thanks to our policies, home ownership in America is at an all- time high.

Tonight we set a new goal: 7 million more affordable homes in the next 10 years, so more American families will be able to open the door and say, "Welcome to my home."


Hear for yourself in this clip:

http://www.youtube.com/watch?v=w1ag29b_-lg
Sheep_Mafia wrote: Face it, you are far too weak minded to ever blame Obama for anything. The tax cuts are just another example of your lost grasp on reality.
Unfortunately for you, the reality is that I voted for Bush twice. I used to defend Bush's policies on this board. So you are the one who is struggling with reality.
Sheep_Mafia wrote:The tax cuts either work or they don't you can't slide the scale because you want to sell to the other ignorant party hacks around here that they are good now, bad then.
LMFAO, you obviously don't know anything about economics.

The state of the economy matters. A tax cut can do nothing under one set of circumstances and then boost growth under another set of economic circumstances.

You apparently have never looked at a labor supply curve. When tax payers are at W3 on the labor supply curve, a tax cut will reduce the supply of labor and slow economic growth.

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Re: Final Word on the Bush Tax Cuts

Post by DEATH ROW JOE »

MegaBeth wrote:It stuns me that people actually argue in support of higher taxation. To me this is the same as begging someone to repeatedly punch you in the face because it makes money for the E.R. Doctor who is dealing with your broken nose.
You're an imbecile. That is why you are stunned. The deficit is always reduced by a combination of tax hikes and spending cuts. Reducing a deficit from 10% of GDP to 2% of GDP without a tax hike is not possible.
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