Fwd: Budget Bulletin: The Tax Cuts Didn't Cause the Budget Deficit

Budget Bulletin Your source for federal budget news and analysis Recent Updates SAFE Act Would Cap Growth of Government Obama's "Line-Item Veto" Really Just Tweaking Existing Authority Only VAT Can Fund Leftist Welfare State Featured Research The Tax Cuts Didn't Cause the Budget Deficit By Brian Riedl With the 2001 and 2003 tax cuts scheduled to expire at the end of this year, President Obama and Congress face the prospect of overseeing a historic tax increase. If nothing is done, the $1,000 child tax credit will fall to $500, and the marriage penalty will be re-imposed. Low-income families will see their income tax rate jump five percentage points, while everyone else will see increases of three to 4.6 percentage points. Capital gains and dividends tax rates — currently 15 percent for most investors — will leap to 20 percent and 39.6 percent, respectively. The death tax, which is finally gone, will be re-imposed at a 55 percent rate. Such large tax increases would clearly hammer families and businesses. They would also severely damage the fragile economy. Virtually no economic school of thought advocates raising taxes during a recession, and this massive tax increase could shatter the modest and shaky economic recovery. Yet among tax-increase advocates, it has become an article of faith that President Bush's 2001 and 2003 tax cuts caused the budget deficit. Newsweeks Fareed Zakaria echoed this conventional wisdom recently: "The Bush tax cuts are the single largest part of the black hole that is the federal budget deficit." Similarly, in 2004, when Sen. John Kerry , Massachusetts Democrat, accused Mr. Bush of having "taken a $5.6 trillion surplus and turned it into deficits as far as the eye can see," he focused on "Bush's unaffordable tax cuts for the wealthiest people." These assertions are demonstrably false. >> Click here to read Brian Riedl's full report Chart of the Week Get more charts with Heritage's Federal Revenue and Spending Book of Charts About The Heritage Foundation Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. The Heritage Foundation | 214 Massachusetts Ave NE, Washington, DC 20002 | 202.546.4400