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 the Tax Reform Act of 1...4 Views
Finance a la shmoop what is the Tax Reform Act of 1986 ah it was a simpler
time Democrats and Republicans working [Politicians jumping up and down]
together shaking hands across the aisle then sharing mistresses well the tax
reform act of 86 was the on-court - the act of 81 wherein Ronald Reagan moved to [Reagan appears]
dramatically simplify tax codes he cut taxes but somehow these cuts were to be
revenue-neutral to the taxman and go figure that one like cutting taxes would [Revenue forms cut in half]
stimulate business which it did which then generates more income which is then
taxed more something like that that's the logic anyway well a big theme of
these tax cuts was to shift the burden from individuals paying very high
marginal tax rates Thank You comrade Jimmy Carter to corporations many of [Jimmy Carter in office]
which had found loopholes so that billions of dollars were avoided in
paying taxes kind of like today's Apple and Google basing themselves in Ireland
and individuals paid with their liver and lungs in those days comrade Carter [Man holding liver at hospital desk]
had imposed a 50% plus top rate which kicked in at a relatively low dollar
level like you were wealthy if you earned more than a hundred grand a year
today's dollar adjusted Reagan brought that top rate down to 38 percent on its [Man bumps into Reagan]
way over time down to 28% and consolidated 15 different break points
in tax to being just four and yes the people at H&R Block wept they'd had it
great with the complex Carter era accounting gravy train there well a ton [Person dealing cash]
of other things were simplified and codified with the theme being that the
new IRS was gonna go after you if you didn't pay up it's like they're cutting [Woman running in woods screaming]
your fees so you better at least pay the low rates here these days on taxes yeah
and audit volumes increased dramatically why?
well since taxes were now so much easier to pay you'd better stop finding lies in
trickery and other deceitful ways to avoid paying you're legally owed
obligations luckily this tax reform act clarified and finalized resource
allocation debates as driven by taxes forever so that after 1986 while there
were no more debate about tax changes and everything from [Red siren alarm appears]
there forward for the next few hundred years won't need to change a lick oh
wait actually the opposite is happening always [Politicians boxing each other]
Up Next
A tax haven is a nation that offers special tax incentives for corporations doing business there.
Tax brackets set the incremental rates at which the financially more successful are taxed.
