EXTENDING THE BUSH TAX CUTS IS THE WRONG WAY
TO STIMULATE THE ECONOMY
A REPORT BY THE JOINT ECONOMIC COMMITTEE MAJORITY STAFF
CHAIRMAN, SENATOR CHARLES E. SCHUMER
VICE CHAIR, REP. CAROLYN B. MALONEY
APRIL 2008
The Bush tax cuts, which disproportionately benefited the wealthiest Americans, were justified
with a series of claims about their economic effectiveness. Seven years after the first tax cuts
were passed, the evidence is clear that these claims were false, and in reality, these tax cuts
have been bad economic policy. They have done little to stimulate the economy. The economic
expansion earlier in the Bush administration was one of the weakest on record, and the economy
has once again fallen into recession. While having limited economic effect, the tax cuts led
to massive increases in the national debt and created an enormous windfall for the very wealthiest
Americans at the expense of the middle class and future generations. Making the Bush tax
cuts permanent would compound these long-term structural problems while doing nothing to
address the immediate problems of the economy.
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FACTS ABOUT THE BUSH TAX CUTS:
• Through 2008, the federal government has borrowed $1.6 Trillion to pay for the Bush tax cuts.
• Even the Chairman of the President’s Council of Economic Advisors said he “would not claim that
tax cuts pay for themselves.”
• The tax cuts are heavily tilted to the wealthiest Americans. In 2007, one third of the total benefits of
the tax cuts went to the top one percent of households.
• Approximately 20 percent of total benefits went to 0.3 percent of households earning $1 million or
more per year. These households received an average tax cut 103 times larger than that of middleincome
households.
• Investment and economic growth in this business cycle have been lower than average, indicating
that the tax cuts have not had strong economic effects.
IF THE BUSH TAX CUTS WERE MADE PERMANENT:
• Making the cuts permanent would cost the federal government an additional $3.4 Trillion over the
next decade, if they were funded by borrowing.
• Permanent tax cuts would create revenue losses over three times larger than the long-term Social
Security funding gap. The windfall received by the top one percent of taxpayers alone would be sufficient
to close the Social Security funding gap through 2075.
• Using optimistic assumptions, the Administration’s estimates of the possible long-term economic
benefits of the tax cuts find that they would boost economic growth by a negligible four onehundredths
of one percent per year. These long-term growth benefits would only occur if tax cuts
are funded through reductions in Federal spending.
• If tax cuts were funded by spending cuts, they would actually reduce net after-tax income for almost
75 percent of American households, while income among households earning $1 million per
year or more would increase by almost 8 percent.
