Retain G.W. Bush tax cuts for
individuals earning over $ 250,000
per year is in the interest of a
Republic
Pro - Economics
1. Argument – Inequality
• Expiring the Bush tax cuts:
o Increase income tax rate
to 39.5% along with add.
State & Local taxes.
o Wealthy
individuals/families with
50%+ in taxes
o Lack effort & settle for
lower paying job to
ensure ↑disposable
income = prevent mobilty
of middle class.
Pro - Economics
2. Argument- Unemployment
•
Tax Cuts for Businesses:
o Start new businesses, launch innovation &
accumulate capital
o Boost businesses
o Increase Investments
o Hire more workers / job creation
o Provide technical & professional skills
needed.
o ↓T => ↑Yd => ↑C => ↑AD
• Tax Reductions in the 1960s
Recession led to an increase of
investments
• The lower cost of capital and the
investment tax credit created a boom
in investments.
Pro - Economics
2. Argument continued...
By increasing taxes, the government affects households’ level of disposable income (after-tax income). If the
Bush tax cuts expire then disposable income decreases because it takes money out of households and it is
the main factor driving consumer demand which account for two-thirds of total demand.
•
•
•
•
•
•
↑Taxes => ↓ Disposable Income
When consumer consumption decreases, we can expect that production no longer needs more
labor which leads to an increase in unemployment.
↓Consumption => ↑Unemployment
The declining income hurts households by decreasing their savings and tax increase would directly cut
job creation.
Pro - Economics
3. Argument- Boost the Economy
• SOLOW GROWTH MODEL Y = A ∙ f( K, L)
Pro - Politics
Background
The Bush Tax Cuts refers to the changed the United States
tax code passed during the presidency of George W. Bush.
• The 2001 and 2003 act significantly lowered marginal tax
on ALL U.S. taxpayers.
o The lowest income tax rate was lowered from 15% to
10%, the 27% rate went to 25%, the 30% rate went to
28%, the 35% rate went to 33%, and the top marginal
tax rate went from 39.6% to 35%
o
The Child Tax Credit went from $500 to $1,000.
Pro - Politics
Background
This combination of income tax rate reductions, a
higher child credit and a reduction in the marriage
penalty will make a difference for families in every
part of this country. A family of four with a total
income of $75,000 will receive a 19 percent
reduction in federal income taxes, saving $1,122 per
year, per family.
www.nationalcenter.org
Allowing families to consume or save more money
Politics - Politics
• Under George W. Bush's tax cuts, "the rich" paid
more in taxes in 2005 than any other time in the past
20 years.
• After the initial cuts in 2001, the annual growth went
from 0.3% to 2.5% in 2002. By 2004, the GDP was at
the highest in 20 years.
Politics - Politics
Pro - Politics
1. Inequality
• Income inequality has been on the rise since 1977.
• Instead of worrying about income inequality, the
government needs to focus on government spending
rather then tax reform (Mark Thomas, 2007).
Pro - Politics
2. Jobs Created
• June 2001: 136,873,000 people employed
January 2008: 146,407,000 people employed
Increase over about six and a half years:
9,534,000 people
www.politifact.com
Pro - Politics
2. Argument
• In this poor economic conditions, the tax cuts
needs to be extened.
Without Bush Tax Cuts
• By 2020, there will be
a loss of 48,000 jobs
and $29 billion lost in
government revenues
(NW Daily Marker,
2011).
With Bush Tax Cuts
By 2020, there will be an
additional ONE MILLION
jobs and government
revenues will increase
by $127 billion (NW
Daily Marker, 2011).
Conclusion
If the tax cuts were to expire, the economy would pick
up for a short time and then due to the ta increases and
budget cuts, the United States would be thrown right
back into another recession. Similar situation occured in
1995-1997 in Japan Schoopa, 331).
The tax cuts should be extended at least until the
economy picks back up and then we can reconsider
either letting the Bush Tax cuts expire or continue with
them.
Income inequality has been on the rise since 1977 and
does not play a major role in how our economy works.
Con - Economics
1. Argument: Increased
• Rise in inequality during
the last decades
• Poverty is also on the
increase
The economy is only
benefiting the wealthy
Middle class will not benefit
enough from the tax cut & the
wealthy will reap unfairly high
benefits
Inequality
Con - Economics
1. Argument: Increased
Inequality
Con - Economics
1. Argument: Increased
Inequality
The Lorenz Curve, L of an income distribution shows for the bottom 100h/H
percent of households, what percentage of the total income they have.
% of income (Y)
% of households
(X)
Con - Economics
2. Argument:
Increased Unemployment
l = Labor
w = Wage
Tax Cuts
Tax Hike
Con - Economics
3. Argument: Economic
Growth is not sufficient
• Economic growth do not generate jobs or prevent rising
unemployment
• Bush’s tax plan = permanent change in tax structure
• No economic growth in the short-term
• Tax plan will reduce financial resources
• Result: tax cuts yield inequalities in after-tax incomes
Con - Politics
1. Argument
• …
• ….
Con - Politics
2. Argument
• …
• ….
Conclusion
Pro econ:
• Top 2 tiers of income earners represent potential investments
capital which is needed to drive up economic activity.
• High taxes causes brain drain, loss of jobs, discourages
savings and investment and promotes tax avoidance.
• Capital flight
• If income is not being invested, it is held in savings account
which allow banks to lend.
Con:
• The government could stimulate the economy more effectively
by letting the high-income tax cuts expire and investing money
the states earn in unemployment insurance and job creation
programs