PAD 510 Public Policy Analysis - Power Point Presentation

Bush Tax Cuts

Delores Blango

Strayer University

Dr. Timothy Smith

PAD 510

May 29, 2020

Bush Tax Cuts

Position in favor of the Policy:

The 2001 and 2003 tax cuts policy was meant to reduce marginal income tax rates and capital gains and dividends. All taxpayers got a reduction in their tax rates depending on their income thresholds. Additionally, the estate tax was completely phased out until 2010. These changes provided significant benefits to the middle class, who got their tax rates reduced by a margin of 3 to 5 percent. This fact means that people in the middle class got to keep a larger share of their salaries and improve their livelihoods. Additionally, all American citizens benefit from a child credit tax rising from $500 to $1000 per child. This change made it easier for low-income families to support their children adequately by providing for their basic needs. Further, there was a marriage penalty relief provision that resulted in the doubling of the basic standard deduction for couples that jointly owned property.

The stated changes lessened the financial burden placed on American citizens. Before the policy, low-income households had to pay a 15 percent tax rate to the government. This condition left a majority of low-income families struggling to meet their financial needs. The Bush tax cuts lowered their tax returns to 10 percent, allowing these families to comfortably budget their overall income (Hungerford, 2010). Additionally, the child credit tax made it easier for parents to meet the basic needs of their children. In the American community, children are a vital asset. Low income and middle-class families benefited from this policy since they could invest the extra $500 in education and sustaining the livelihood of these children. Conclusively, the tax cuts improved the livelihoods of American citizens across the board through better financial planning of their added income.

Position against the Policy:

Despite the good intentions of the policy, it did not deliver as expected. The policy's primary aim was to ensure that Americans were living comfortably, even in times of economic hardships. The policy promised to create new jobs, potentially generate new federal wealth, and allow for the creation of new opportunities for businesses. In the first month of the policy’s implementation, the economy recorded a boost in approximately 132 million jobs. However, in 2004, the number of available jobs had reduced to 131 million (Hungerford, 2010). Additionally, within the first 3 years of its implementation, no new jobs had been added into the market. Further, organizations were required to pay their employees a better income. Instead, more people lost their jobs as a result of the policy. According to research, the labour market became fragile, with the number of people that were unemployed for more than 6 months significantly increasing. The condition grew worse in the 2007 recession with a record 4.3 percent of the labor force being laid off. As a result, by October 2009, the unemployment rate had hit an alarming 10.2 percent. The government did little to stimulate the economy despite the end of the recession.

The American people felt that the tax cuts had done little for their financial position. The promises made by the government were not met, leaving the American citizens in a more difficult position. Loss of employment primarily affected the lower-income homes and part of the middle class. With the loss of income, the poverty rates in the country rose. There was a significant impact on the livelihoods of American citizens. The results reflected on the nation’s GDP. The federal government’s budget got into debts that required taxpayers to give back more in the form of taxes. However, this was impossible since the policy was built to last until 2010.

Response Argument in Favor of the Policy:

The stability and reliability of a government are heavily dependent on the comfort of its citizens. Despite its attempts to allow all citizens to live in comfort, the policy benefited the high-income taxpayers better than it did the lower-income majority. The top 1 percent that made over $374, 000 got tax cuts of approximately $50, 000 annually. By the end of the feasibility of the policy, this population got cuts of approximately $570,000. Ironically, the lower-income households got cuts of up to 5 percent. However, since they are low-income households, this did not accumulate to a significant decrease in the long run. The high-income earners got a 6.7 percent increase in their income, while the middle 20 percent got a 2.8 percent increase (Hungerford, 2012). The lower-income class, which accounts for the larger percentage of American citizens, only got a 1 percent increase in their income. Conclusively, despite the good intentions of the government, the result of the tax cuts became counterproductive for those it was meant to benefit.

Response Argument against the Policy:

The unemployment rates came as a result of the unforeseen consequences of the policy. The Bush administration had over-promised without taking into account the static nature of America’s economy. The tax cuts were supposed to pay themselves through increased economic growth. However, instead of increased economic growth, the country faced a recession that resulted in lower tax revenues. As the government made promises, the treasury estimated that the policy would only make a 10 percent return to the government at best (Ettlinger & Linden, 2013). Additionally, the idea was to ensure that high-income households gave as much as they benefited from the tax cuts. However, the 3 years into the policy’s implementation, the government got into larger economic deficits and debts. The result was an increase in income inequality that led to the larger low-income population losing their jobs in order to sustain businesses.

Evidence suggests that economic expansion during Bush’s administration was less than average. Reports suggest that the impact the policy had was mediocre on the American economy. Literature made a comparison between tax rises of the 1990s and Bush’s tax cuts policies. The tax increases resulted in faster job growth and a significant boost in the economy. Lastly, the decreased dividends rates on businesses had little impact on business investments and employment rates. Employees' compensation after 2003 significantly reduced, and multiple people lost their jobs. Conclusively, the Bush tax cut policy hurt the American citizens' financial position. While it was expected to increase the income range of the vast majority, the population that needed it the most only got a 1 percent raise. Those that already had financial stability got a 6.7 percent increase in their income.

In conclusion, the Bush administration eventually became a liability for American citizens rather than an economic boost. The situation got worse in 2007. The American economy struggled to get back on track in 2009 and 2010. The disappointment posed by this policy was a result of over-optimism in a policy that was dependent on the economy, a factor that is constantly changing.

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