Tax Cuts for the Rich Don’t Work

THE POLITICS

John McCain and many other conservatives say they would solve our current economic problems by expanding George Bush's tax cuts for the rich. For example, McCain has called for making the Bush cuts permanent and for cutting the corporate income tax rate from 35 percent to 25 percent. This is a recipe for economic disaster. Tax cuts for the rich have not and will not help middle-income Americans.

THE FACTS

Bush promised that his tax cuts would create jobs, but they didn't. A conservative-dominated Congress enacted two sets of Bush tax cuts, in 2001 and 2003. Job creation was a major Bush selling point, especially in 2003, when the administration asserted that the tax cuts would create 5.5 million jobs from July 2003 through the end of 2004. Instead, only 2.4 million jobs were added during that period—1.7 million fewer jobs than the economy was expected to produce without any tax cuts. [Center for American Progress] Today, the impact of the Bush tax program is clear: 8.5 million Americans are unemployed—2.5 million more than when Bush took office. [Joint Economic Committee]

Bush promised that his tax cuts would pay for themselves, but they didn't. Conservatives persistently repeat the myth that, as Bush put it, "You cut taxes, and the tax revenues increase," or as John McCain declared in March, "tax cuts…as we all know, increase revenues." But as Time magazine reported, "Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves—and were never intended to." [Time] In fact, Bush took office with a $236 billion surplus and will leave with a 2008 deficit of more than $400 billion. [The New York Times] The Bush tax cuts, which cost $300 billion last year alone, are primarily responsible for that deficit. [Center for Budget and Policy Priorities]

Bush promised that his tax cuts would help the middle class, but they didn't. During the 2000 campaign, Bush said his tax cuts focus "on low- and moderate-income families," and would provide the "greatest help for those most in need." [The New York Times] But in fact, the Bush tax cuts gave an average tax break of $118,000 to those who make over $1 million per year and only $740 per year to middle-income households. The bottom 20 percent of households received an average tax break of only $20. [CBPP]

THE ARGUMENT

The current tax system is unfair. Middle-class families pay too much while the very richest individuals and corporations pay too little. Now, McCain and other conservatives are pushing proposals that would make taxes even more unfair.

Conservative tax cuts for the rich hurt America's economy. The Bush program, which McCain has vowed to continue, caused our economy to be more sluggish than during any comparable period over the past 60 years. [CBPP] Unemployment has increased, basic costs have skyrocketed, incomes have stagnated, poverty has risen, the number of uninsured has increased and mortgage foreclosures are at record levels. Bush's conservative economics has been a spectacular failure, so why would anyone want more of the same?

By getting rid of giveaways and loopholes for the rich, we can lower taxes and increase benefits for the middle class. It's time to adjust our tax system so that everyone pays their fair share. At the same time, we urgently need to divert some of those wasted revenues toward projects that will make America stronger and more secure.

THE PROGRESSIVE SOLUTION

Balance the tax code. We need to shut down loopholes and roll back tax breaks for the rich. The Bush tax cuts for wealthy individuals and corporations should be eliminated.

Reward companies that create jobs in America. Our current tax system gives incentives for companies to move jobs offshore. We need a tax code that rewards companies for investing in American workers.

Reinvest tax cuts into the economy. After rolling back the top-end tax cuts and closing tax shelters, we need to invest in areas vital to our future—fixing bridges and roads, becoming energy independent, developing new "green" technologies, and providing every child with a high quality education. That way, we will create more jobs, incur less debt and build a stronger future for our nation.