Everyone loves to pay less in taxes, and the Bush tax cuts refer to those enacted during the presidency of the second Bush, George W., in 2001.
Called the Economic Growth and Tax Relief Reconciliation Act, the cuts were meant to stimulate the economy after the “dot bombs” crashed causing the 2001 recession. The 2001 cuts were meant for families, and lowered federal income tax rates, decreased the marriage penalty, lowered capital gains taxes, lowered the tax rate on dividend income, increased the child tax credit, and eliminated the estate tax, among other provisions. The cuts had mixed results on the economy, as consumers had the audacity to save or invest the extra money rather than go out and spend it.
The second wave of changes to the tax code happened in 2003, and was more geared toward helping businesses. Called the Jobs and Growth Tax Relief Reconciliation Act, it reduced taxes on long-term capital gains, real estate investment trusts, qualified dividends, and income from non-foreign corporations. It also increased the amount that companies or individuals can deduct immediately from the cost of business equipment, and increased the amount of income exempt from the Alternative Minimum Tax (AMT).
The Bush tax cuts were scheduled to expire in 2008 and 2010, but by then the Great Recession was raging. Realizing that raising taxes during this time would not be a popular thing to do, the tax cuts were extended to 2012. The cuts were made permanent that year by President Obama for those with incomes less than $400,000 for single taxpayers and $450,000 for married couples.
The Bush tax cuts, along with the war in Iraq, led to a budget deficit of $1.4 trillion in 2009, the largest as compared to the economy since World War II.
Related or Semi-related Video
Finance: What is a Tax Bracket?24 Views
finance a la shmoop what is a tax bracket alright taxes maxes who needs
them right well in this country we live under what is called a quote progressive [Map of USA appears]
tax system unquote and yes it is a politically charged name like
progressive sounds like it can't possibly be a bad thing but can it well [Progressive in the fire]
in the taxes sense progressive means that the more money you make the more
you get taxed which can be viewed as a punishment for being financially
successful where's Ayn Rand anyway to help us celebrate mediocrity sloth and [Ayn Rand appears]
socialism hmm okay okay we're just framing tax brackets here don't get all
in a tizzy it's the brackets that set the
incremental rates at which the financially more successful are taxed
and those tax brackets change all the time so we won't even bother with the [Tax bracket transforms into cocoon]
real numbers of today as we're sure they'll be totally different in a few
years but the basic idea is that as in the following completely made-up example
you'll pay federal income taxes of zero tax in bracket one here on the first and
a seven grand that you earn move over to bracket two and from seven grand to 20
grand you'll pay 10 percent tax or ten percent on that incremental 13 grand or
1,300 bucks move to bracket three and from 20 to 50 grand you'll pay 20 [Income tax bracket table appears]
percent or six grand tax on that 30 grand spread from 20 to 50 right here
move to the next bracket which will cleverly named 4 and you pay 30 percent
tax from 50 grand to 120 grand or 0.3 times at 70 grand spread or 21 in
taxes at bracket 5 in this very made-up example you'll pay 40 percent tax from a
hundred 20 grand to infinity so if you made half a million dollars last year
chasing corporate ambulances as a sewer you know a lawyer who sues corporations [Lawyer chasing ambulance in a car]
when their stocks go down then you'll pay 40 percent tax on the last three
hundred 80 grand you earned or point four times three eighty or a hundred
fifty two grand so why do the brackets matter like why do some people whine on
and on about how making that extra 112 dollars
will put them into the next tax bracket and well then they're really screwed why [Man crying in office chair]
oh why because they're idiots or at least they didn't watch this video
because the next tax bracket on its own doesn't mean anything other than the
fact that on the incremental dollars you earned you'll pay taxes at that higher [Earnings bracket highlighted]
rate so in the immortal words of Iran well okay yeah she isn't saying much
these days never mind [Ayn Rand grave appears]
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