by Chye-Ching Huang and Nathaniel Frentz, Center on Budget and Policy Priorities
The tax cuts first enacted under President Bush in 2001 and 2003 have made the tax code less progressive and delivered a large windfall to the highest-income taxpayers.[1] Tax Policy Center estimates for the years 2004 to 2012 (the years for which TPC provides data that are comparable from year to year) give us a sense of the cumulative effect of these tax cuts:
- The average tax cut that people making over $1 million received exceeded $110,000 in each of the last nine years — for a total of more than $1 million over this period.
- The tax cuts made the tax system less progressive. In each of the nine years from 2004 through 2012, the tax cuts increased the after-tax income of the highest-income taxpayers by a far larger percentage than they did for middle- and low-income taxpayers. For example, in 2010, the year in which all of the Bush income and estate tax cuts were fully phased in, they increased the after-tax income of people making over $1 million by more than 7.3 percent, but increased the after-tax income of the middle 20 percent of households by just 2.8 percent.[2]
...
Policymakers need to consider the extension of the Bush tax cuts in this context. If the tax cuts on incomes above $250,000 ($200,000 for single filers) expire, the wealthiest taxpayers will still have enjoyed a decade-long windfall, and the top two tax rates will return to those of the 1990s, when the economy grew robustly, tax rates on high-income taxpayers still were lower than in most prior decades, and both corporations and small businesses thrived.
[Read more.]
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