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Five Myths about the Bush Tax Cuts

2 min readBy: TF Staff

The TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation’s Gerald Prante and Bill Ahern have a column appearing today on Fiscal Times entitled “Five Myths about the Bush Tax Cuts.” In the article, the authors attack popular myths coming from both sides in the tax cut debate. Here’s a sample:

Myth on the Left: The Bush tax cuts were only for the rich.

For the past ten years, Democrats have convinced a large fraction of the public that the tax cuts only benefited high-income people. The talking point has been repeated so often that it seems as if it must be true. But it never was. Everyone saved, and if all the tax cuts expire at the end of this year, everyone will pay.

Myth on the Right: The Bush tax cuts caused revenues to go up.

Republican spokespeople and other tax-cut enthusiasts have asserted that the tax cuts passed in 2001 and 2003 actually increased revenue. They often point to rising revenues from 2004 through 2007 following the tax cuts in May 2003. Unfortunately, as any Economics 101 student will tell you, correlation doesn’t prove causation. Yes, revenue did rise, but we have to answer the question: Would it have risen anyway?

Myth on the Left: The Bush tax cuts caused the financial crisis and/or the recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. .

Many Democratic leaders like to paint with a broad brush when it comes to the economic policies of the previous administration. They blame the real estate bubble, the financial meltdown and the recession on Bush administration policies generally, and then conveniently lump the Bush tax cuts in as part of the cause. As in the Republican myth above, this is a failure to distinguish correlation from causation. No authority on the economy would say that the banking crisis and the recession could have been averted by holding off on tax cuts in 2001 and 2003.

Myth on the Right: President Obama is proposing the largest tax increase in U.S. history.

As part of their election strategy, Republican spokespeople are pretending that President Obama favors allowing the Bush-era tax cuts to expire for all taxpayers. Often that expiration is called the largest tax increase in U.S. history. Both charges are false.

And finally, a bipartisan myth: Tax changes we like are “tax reform.”

The entire piece is available here.