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Ask a Conservative - 'Bush Tax Cuts'

This week's Ask a Conservative answers a question on the Bush tax cuts.


Apologies for being late this week.

In this week's blog, I will be answering 's question about the Bush Tax Cuts.

Larry , "GOP leaders, led by Mitt Romney, oppose the compromise deal to temporarily extend the Bush tax cuts for all but the richest. Some Democratic Senators are now saying they won't back down, and will allow the Bush Tax cuts to expire for everybody if the Republicans refuse to compromise. Now, are you the kind of Conservative who thinks that is a good idea?"

First I have to write about what "compromise" is.

Compromise is "a settlement of differences by mutual concessions; an agreement reached by adjustment of conflicting or opposing claims, principles, etc., by reciprocal modification of demands."

Having either (or both) side(s) saying, "Do it like this or nothing" is not a compromise. What it really is, is an election-time ploy with one side playing the "Class Warfare" card.

Secondly, what about the "Bush Tax Cuts" themselves?

To start out, I want to talk about who would actually be most affected if these tax cuts were to expire.

There are many types of businesses. Most small businesses fall under either Sole Proprietor or Type-S Corporations. Those businesses are too small to file under normal corporate taxes, and file their profits under normal income tax rules.

From this citation...

"Fully 99 percent of all independent enterprises in the country employ fewer than 500 people. These small enterprises account for 52 percent of all U.S. workers, according to the U.S. Small Business Administration (SBA). Some 19.6 million Americans work for companies employing fewer than 20 workers, 18.4 million work for firms employing between 20 and 99 workers, and 14.6 million work for firms with 100 to 499 workers. By contrast, 47.7 million Americans work for firms with 500 or more employees."

By letting the Bush tax cuts lapse (or by letting the over-$250k cuts lapse), we would in effect, be raising taxes on those that directly employ 52.6 million Americans. So who would be most affected? Those 52.6 million people.

If we combine that with the penalties, fees, and taxes added by the PPACA (Obamacare) that will soon be enforced... well, you don't have to think too hard to understand the effect it's going to have on employment in this country. And with an already constant 8.2 percent unemployment rate (though actual unemployment is higher than 20 percent), we can expect that to get much worse.

We seemed to hit our sweet spot under Reagan in the 80s. Then, like now (with the Bush tax cuts in place), the lowest tax bracket had a rate of 10 percent. However, the taxes on those small businesses and others that fell into the top bracket was 28 percent under Reagan, but is 35 percent with the Bush tax cuts in place. Citation

If the Bush tax cuts expire, those rates would revert to the 2001 tax rates of 15 percent for the low bracket and 39.6 percent for those small business owners.

The growth in our economy during the 80s once that tax policy was in effect was the longest sustained growth ever in peacetime. With a mean of around 6 percent. Once those tax rates rose, we soon experienced the same up and downs we had previously.

That being said, there are other influences on our economy than taxes. For instance, the "dot com" boom of the 90s gave our country a lot of growth, while it's bursting lead to a recession. Same with the housing market bubble for this current downturn. That's why I believe the tax rates of the 80s accurately reflect what effect taxes have on our economy, since it was absent both a boom and a burst and just reflected a stable economy running on all cylinders.

So my answer is that I am for keeping the Bush Tax Cuts for now, and as soon as humanely possible, we need to return to the Reagan Tax Cuts of the 1980s.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Jack Baillargeron August 18, 2012 at 04:11 AM
LOL i didnt even see that bryan, I read it as what you wanted to say lol.
Lee August 18, 2012 at 11:50 AM
Paul, were you around when Jimmy Carter was president? The interest rates were so high I was able get a CD at 15% interest, home loans were in excess of that. Unemployment was worse than it is today. President Johnson(LBJ, a Dim) esclated the Vietiam War to where the country rebelled and he would not run for relection. These are just a couple of examples, Paul you should really research history a little better before you make a public statement. By the way Clinton was dragged, kicking and screaming by a Republican Congress to the reforms (money in the bank) he signed.
Lee August 18, 2012 at 12:37 PM
Amy, good points, don't waste to much time on J. Lane McMahon, he will not understand your reasoning. I do belive that liberlisim is a mental disorder.
Lorraine F August 18, 2012 at 01:23 PM
Bryan, A lot of conservatives point to the Regan tax cuts of the 80's, the Laffer Curve, and trickle down economics. The problem is that the Laffer Curve and it's math is one of the most misrepresented "tax cut" issues around. The problem is that everybody loves to show the bottom side of the Laffer Curve, but leave off the top of the curve (the bad side of tax cuts). If you read all of Laffers premise, it shows diminishing returns when certain economic factors are in play such as we have today. I'M NOT PROPOSING TO TAX THE RICH. What I'm proposing is that where we are today with capital gains vs income tax is a distortion that is causing problems in the economy. When Reagan implemented the tax breaks of the 80's, the country was ripe with investment excess. Pension plans were ripe with cash, corporations could be taken over and cut to the bone. All of this produced tax advantage to loot and plunder under the umbrella of "efficiency and productivity". We have now pillaged to the bone and continuation of this false model is creating structural problems in today's economy that didn't exist in the 80's (i.e. the bad side of Laffer economics). Sorry for too much theory, but I wanted some opinions.
Karl Frank Jr. August 20, 2012 at 06:07 PM
Robert, thanks for linking to my post. To make my point further, I said the following today in response to someone questioning job creation after Kennedy's tax cuts, [Second, manageable recessions are the goal. Even after Kennedy's reductions, the highest marginal rates never dropped below 70% until Reagan. They went from 70% to 28% by the end of his term. Now instead of manageable recessions, we have serious crashes, with the last one almost collapsing the free market. As George W. Bush said in December of 2008, "I had to abandon free market principles to save the free market." That's an awfully big statement for an outgoing president. So, is 91% too high? Maybe, but it's funny how everyone's "memory" of the "good ol' days" always point to the 50s. Maybe the magic number is 70%. The bottom line is that it is when income inequality reaches untenable levels, like it does when the marginal rates are as low as they are, the economy for everyone is unstable and susceptible to crashes and bubble bursts. As my friend said above, "That type of concentration has always been dangerous. While higher tax rates on high levels of income are "fair" and "moral" in my view — that's really not the point. The point is that it has been, and still is, sound economic policy."] All of these other issues like Fannie Mae, and Freddie Mac, and China, and other extenuating circumstances are smokescreen, straw-man arguments.

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