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Obama vs. Bush: Who’s the Bigger Tax Cutter?

Obama vs. Bush: Who’s the Bigger Tax Cutter?

 

Written by Michael Linden and Michael Ettlinger of the Center for American Progress.

If you had to guess whether President George W. Bush or President Barack Obama cut taxes more in his first term, which one would you choose? Probably President Bush, right? After all, the “the Bush tax cuts” were massive. And President Obama is the one calling for the expiration of some of those tax cuts. He’s also pushing for more revenue as we try to address our long-term fiscal imbalance.

Given all that, you could be forgiven for guessing that President Bush is the bigger tax cutter. But you’d actually be wrong. By the end of his first term, President Obama will have signed into law a series of tax cuts that, taken together, exceed the value of those signed into law by President Bush.

President Obama’s tax cuts versus President Bush’s tax cuts

President Bush enacted his tax cuts in 2001 and 2003, and over their 10-year lifespan, they reduced tax revenues by around $2.4 trillion, with $474 billion of that coming in the first four years. The first-term impact of those tax cuts is equivalent to about $574 billion in today’s dollars, or about 1.1 percent of gross domestic product.

President Obama has also signed two major pieces of tax-cutting legislation into law. The first, the American Recovery and Reinvestment Act, included a variety of tax cuts that benefited nearly every single American household. ARRA contained the Making Work Pay tax credit that directly reduced a family’s income tax bill by up to $800, which, overall, reduced tax revenue by about $116 billion. It included expansions of the child, earned income, American Opportunity, and first-time homebuyer tax credits. ARRA patched up the alternative minimum tax, providing $70 billion in tax cuts, and cut a wide array of business taxes, together totaling another $60 billion.

All told, the Recovery Act included $243 billion worth of tax cuts through 2012.

Nearly two years after signing his first big tax cut bill into law, President Obama completely outdid himself by signing the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, commonly known as the December 2010 tax deal. The biggest element of the December deal was the extension, for two additional years, of all the Bush tax cuts and alternative minimum tax relief, at a two-year combined cost of more than $400 billion.

In addition, the deal extended a variety of business tax cuts and incentives, which reduced revenues by some $150 billion, and it cut the estate tax—a tax paid by only a very few super-wealthy, massive estates—by $65 billion. The December tax bill also cut the payroll tax paid by employees by 2 percentage points, delivering more than $110 billion in tax cuts to working Americans.

Put it all together, and in one fell swoop, President Obama cut taxes by $654 billion in 2011 and 2012 alone. In other words, with this bill President Obama cut taxes by more, in raw dollar amounts, in just half of his term than George W. Bush did over his full first term.

With the huge Recovery Act tax cuts and the enormous December 2010 tax cuts combined, President Obama has already signed into law tax cuts amounting to more than $900 billion from 2009 through 2012. Even after accounting for legislation that the president signed that increased revenue during that period, President Obama has cut taxes by more than $850 billion in his first term, or approximately 1.5 percent of GDP.

Just recently, President Obama proposed another $250 billion in tax cuts designed to spur job creation, mostly in the form of additional cuts to the payroll tax. In fact, as the Citizens for Tax Justice noted, President Obama’s proposed payroll tax cuts are essentially equal in size to the total cost of the extended Bush tax cuts for 2012. If Congress passes this next set of Obama tax cuts, his total will rise to well more than $1.1 trillion, or nearly 2 percent of GDP—close to double the size of the tax cuts in President Bush’s first term.


How the cuts differ

Of course, there are two major differences between President Obama’s tax cuts and President Bush’s.

First, President Obama’s tax cuts are much more targeted at the middle class. The Bush tax cuts were heavily skewed toward the wealthy with more than half of the entire benefit going only to the richest 20 percent. President Obama’s tax cuts, on the other hand, are distributed more evenly. Eighty-five percent of the benefits of the Making Work Pay tax credit, for example, went to the bottom 80 percent of households, and because the very wealthy don’t pay payroll taxes on all of their income, the payroll tax cut, too, benefits the middle class much more than the Bush tax cuts did.

Second, the Obama tax cuts are temporary. All of them, from those in the Recovery Act to the newly proposed ones in the American Jobs Act, either already expired or will expire in the next year. The president has proposed making some of them permanent—lower rates on income under $250,000, and a permanent fix to the AMT, among others—but many will eventually disappear. Because of this, and because the president wants to raise some additional revenue to help close the budget deficit, if you compare the entire 10-year cost of the Bush tax cuts to a similar 10-year period predicted for President Obama’s proposals, President Bush is still the bigger tax cutter.

These two differences reflect the important fact that the philosophy behind the cuts differs dramatically even though both presidents signed big tax cuts into law. While President Bush’s tax cuts primarily benefited the wealthy, President Obama’s tax cuts focus on the middle class. While President Bush believed tax cuts were the cure-all elixir for whatever ailed the economy—a belief that was far-fetched even at the time—President Obama uses targeted breaks to businesses and consumers in a time of profound economic weakness designed to spark job creation. And while President Bush was entirely unconcerned about the long-term costs of tax cuts and the resulting debt pile-up, President Obama has consistently made the case for more revenue, especially from those who can most afford it, to help close the budget gap.

The underlying philosophies are different, as are the long-term consequences. But the fact remains that right now President Obama’s tax cuts exceed those of President Bush. By 2012, bills signed into law by President Obama will have reduced tax revenues by about $900 billion, or 1.5 percent of GDP. And if he gets his way, and Congress passes another $250 billion in cuts, the total of all Obama tax cuts will rise to about 2 percent of GDP. That’s close to twice as big as the tax cut tally at the close of President Bush’s first term.

This post was originally published by the Center for American Progress.

 

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Photo from Ethan Hein via flickr creative commons

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27 comments

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12:47AM PDT on Sep 19, 2011

Thanks!

5:27AM PDT on Sep 16, 2011

Lori wrote: "Recall all Republicans". What a great idea!!! Then the government would just grow bigger and bigger and bigger until it would take over the entire economy, just like North Korea. What a great idea!!! And instead of wasting money on a recall (not that libs are so keen on saving money), we could just kill all of the Republicans. Why didn't I think of this!!! Dang!!!

9:49PM PDT on Sep 15, 2011

Who would have 'thunk' it?

7:07PM PDT on Sep 15, 2011

Bush was one of our worst presidents and I'm glad he and his VP are out of office.

6:26PM PDT on Sep 15, 2011

recall all Republicans.

4:27PM PDT on Sep 15, 2011

Actually, Paul, I like the horse analogy. And why should there be consequences for businesses going overseas? Or don't you believe in freedom? But you do believe in demonizing people for being successful and stealing from them when they are successful.

2:11PM PDT on Sep 15, 2011

Roger, the economy is not a horse. It's not like a horse. Your analogy is stupid.

I might as well say the economy is like a lion. Keep it caged, or it kills you. Or I might say it's like a humming bird. Feed it every hour or it dies.

I could compare the economy to any animal I need to to make a point. But that wouldn't make my point any more valid than yours.

Oh, and businesses are shipping jobs overseas because they face no consequences for doing so. Are you really suggesting American workers should go head to head against Chinese workers and try to live on even lower wages?

Was it Ann Coulter who told you the economy is like a horse? Next time, listen a horse instead. They make more sense.

11:47AM PDT on Sep 15, 2011

Ron, GWB has an MBA from Yale University. And I will admit that Obama may be smarter than GWB. But intelligence is ALWAYS the servant of perspective, so IQ is irrelevant when trying to decide who is the better president. Obama wants a state run economy. Bush, less, but still a big government dummy. I'll take a big government dummy any day over an intelligent and well-spoken and charming guy who is trying to push a state run economy.

11:35AM PDT on Sep 15, 2011

Think of the economy as a horse that you want to ride. If you break the spirit of the horse, you have a nag, like North Korea. If you are too heavy, you won't win any races, like Spain. If you don't control the horse at all, you could get killed, like fascist crony capitalism. Just the right touch with the horse and you have a winner.

11:35AM PDT on Sep 15, 2011

Moron - Another word for George W Bush. Someone who lacks one shred of intellectual curiosity. Someone who uses the word 'misunderestimated'
Bush see warmonger see dumbass
Bush - noun: A man who's IQ is less than mayonnaise.

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