Friday, August 16, 2013

The Bush (and Obama) Tax Cuts

One of the things we read all too often on the web is about the gross revenue impact of the "Bush tax cuts."  It's so often said that we pretty much all accept it as a reality.  The point of this post is not to defend the tax cuts of 2001 and 2003 but to try to put them in some type of context.

To start, let's note that the tax cuts of 2001 and 2003 are considered relative to the baseline of not passing them.  Fair enough.  The CBO did an assessment of the impact of these tax cuts and concluded that between 2002 and 2011, the impact was a shade over $1.5 trillion.  Between 2001 and 2009 (fiscal years), the impact was about $1.2 trillion.  It seems very fair to say that the "Bush tax cuts" cost the Treasury between $1.0 and $1.2 trillion.  That's a lot of money for sure.

But, during the course of refuting someone who told me the Bush tax cuts had cost $10 trillion, it occurred to me to look up the cost of the "Obama tax cuts."  In that camp, I'd include the following
  • The $700 billion of cost in continuing the Bush tax cuts (which expired on 1/1/2010) until 2012.
  • The roughly $180 billion cost of the payroll tax holiday
  • The $1.2 trillion cost of continuing almost all of the 2001 and 2003 tax cuts through President Obama's second term.
  • The $250 billion in tax cuts that were in the ARRA
In total then, President Obama has cost the Treasury (using the same baseline as for the Bush tax cuts) on the order of $2.3 trillion during his two terms versus about half that amount for the dreaded "Bush tax cuts."

Please do not interpret this as a defense of the Bush tax cuts, just an attempt to put them in context.

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