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Grassley: Bush tax cuts “reduced the tax burden for virtually every taxpaying American”

This news story was published on December 12, 2012.
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Senator Charles Grassley

From Sen. Charles Grassley –

We have been hearing a lot about the so-called Bush tax cuts from my colleagues on the other side of the aisle.   Given the rhetoric being used by some on the other side to describe this tax relief, I would like to take this time to correct the record.

This tax relief reduced the tax burden for virtual every taxpaying American.  It did this through across-the-board tax rate reductions, marriage penalty relief, and enhancing certain tax provisions for hardworking families, such as doubling the child tax credit.

Since the passage of this tax relief there has been a concerted effort by my colleagues on the other side of the aisle to distort the truth about it.  They have attempted to distort the truth behind its bipartisan support, its benefits for low and middle-income Americans, and its fiscal and economic impact.


As one of the architects of the ’01 and ’03 tax legislation, I would like to correct what I believe have become the three common myths about this tax relief.

The first myth is that this tax relief was a partisan Republican product.  The second is that the tax relief was a giveaway to the wealthy.  The third is that the tax relief is the primary source of our current fiscal and economic problems.

First things first.  We often hear the other side divisively refer to this tax relief as the Bush tax cuts.  Given the rhetoric of the other side, you would think all this tax relief was forced through along a party line vote.  However, the record proves otherwise.

The conference report to the Economic Growth and Tax Relief Reconciliation Act of 2001 passed the Senate by a vote of 58 to 33. In all, 12 Democrats voted for this legislation.  Senator Jeffords, who later caucused with the Democrats, also voted in favor.

As far as major pieces of legislation go, it’s difficult to find such major legislation passed with such broad support since there has been Democratic control of both the Senate and White House.

The President’s 2009 stimulus bill only had the support of 3 Republicans as did the Dodd Frank bill.  And of course there is the health care bill, the President’s signature legislation, which passed with no Republican votes.

Moreover, all the 2001 and 2003 tax relief was extended in 2010 with strong bipartisan support and signed into law by President Obama. In the Senate the vote tally was 81 to 19.

Given this record, instead of the Bush tax cuts, we really should be calling it the Bipartisan Tax Relief.

I now would like to turn to the other side’s criticism of the bipartisan tax relief as “tax cuts for the wealthy” or a “giveaway to the rich.”  This rhetoric demonstrates a difference in philosophy between me and my Democratic colleagues.

First of all, a reduction in tax rates is not a giveaway to anyone.  The income a taxpayer earns belongs to that taxpayer; it’s not a pittance the taxpayer may keep based on the good graces of the government. The burden should not be on the taxpayer to justify keeping their income; instead it should be on us here in Washington to justify taking more away from them.

Secondly, there is a tendency on the other side to view everything as a zero sum game.  In their mind, if someone has more, it means someone else must have less.

In the words of Ronald Regan, too many people in Washington “can’t see a fat man standing beside a thin one without coming to the conclusion that the fat man got that way by taking advantage of the thin one.”

I believe this is what is driving the animus against the so-called “wealthy” on the other side.  They are under the impression the “wealthy” person got rich at the expense of someone less fortunate.

The problem with this view is that in a free economy goods and services are transferred through voluntary exchanges.  Both parties are better off as a result of this exchange, otherwise it wouldn’t occur.  Moreover, wealth is not static; it can be both created and destroyed.

At worst, the government is a destroyer of wealth. At best, the government is a redistributor of wealth.  It is through the force of government that zero sum exchanges occur.  It is the private sector that creates wealth through innovation and providing goods and services we need and want.

The leadership of other side has become fixated on redistributing the existing economic pie.   I believe the better policy is to increase the size of the pie.  When this occurs, no one is made better off at the expense of anyone else.

The constant rhetoric of pitting American against American based on economic status is not constructive.  It also has not been constructive to accuse those of us who support lower taxes for all Americans as agents of the rich.

I do not support tax cuts for the wealthy at the expense of others.  I support pro-growth policies to increase the size of the economic pie. Free market, pro-growth policies are the only proven way to improve the well being of all.

My objection to the other side’s characterization of the bipartisan tax relief is not only a philosophical one, but a factual one.  The truth is, the bipartisan tax relief made the tax code more progressive not less.

Since its implementation, the share of the tax burden paid by the top 20 percent has increased. Conversely, the bottom 80 percent has seen their share of the tax burden decrease.  Additionally, the percentage reduction in average tax rates between 2000 and 2007 was largest for the lowest income groups.

As you can see from this chart, there is a general trend downward from the bottom 20 percent to the top 20 percent.  The bottom 20 percent saw their average tax rate drop by a quarter.  The top 20 percent on the other hand only saw an 11 percent reduction.

The truth about the bipartisan tax relief apparently has been recognized by my colleagues on the other side.  They do not like to admit this. But this must be so since they now claim to support extending 75 percent of the bipartisan tax relief.

You would think that if it really was a tax cut for the wealthy the other side would be advocating letting all this tax relief expire.  Certainly you would not think they would be advocating for more than half of it to be extended.

To get around their seemingly contradictory position they have stopped referring to the majority of the bipartisan relief as the Bush tax cuts. That term is now reserved only for the 25 percent they wish to see expire.  They now refer to the 75 percent they support as middle class tax relief.

I have news for my colleagues.  The middle class tax relief you now claim to support is the same relief you previously demonized as tax cuts for the wealthy.

Finally, it has become en vogue for the other side to blame the bipartisan tax relief for everything from the federal deficit to the state of the current economy.  Neither are based in fact nor sound economic reasoning.

It is undisputed that in 2001 the Congressional Budget Office (CBO) was projecting a ten-year budget surplus of $5.6 trillion.  However, as a June 2012 CBO report shows, the bipartisan tax relief’s role in turning this projected surplus into deficits is dwarfed by other factors.

First off, the June CBO report tells us that their budget surplus projections were simply incorrect.  I know around here we often think of CBO as God because what they say goes.  But unlike God, CBO is not omnipotent; they do not have perfect foresight, and every once in awhile they even make mistakes.

CBO’s surplus projections were based on rosy economic assumptions, as well as faulty technical assumptions, that did not pan out. CBO failed to predict the bursting of the tech bubble that was so beneficial in propping up the economy of the Clinton years.  CBO also could not predict the September 11, 2001, tragedy that wreaked havoc on our economy.

All told these and other economic and technical changes accounted for about $3.2 trillion.  Or as I show here in this chart, these faulty assumptions account for 27 percent of the change from surplus to deficit.

By far the biggest reason for the change from surplus to deficit was an increase in spending.   Some of this spending was justified.  This includes bipartisan support for increased spending to protect our nation against future terrorist’s attacks.

But of course, as has become the custom around here, we spent and spent and spent some more.  This spending not only continued, but escalated with the election of President Obama. His first act was to increase the deficit by $800 billion through his failed stimulus package.  In all, this increase in spending accounts for nearly 50 percent in the change from surplus to deficit.

So how about the tax cuts we hear so much bellyaching about from the other side?  If you look closely at my chart, you will see I have divided the tax relief into two slices.  These two slices add up to about 24 percent.

Eleven percent of this, which I label “all other taxes,” primarily consists of the tax relief provided in President Bush’s 2008 stimulus package, President Obama’s 2009 stimulus, and the payroll tax holiday.  Of course, these provisions had large Democratic support.

That leaves us with the 01’ and 03’ tax relief accounting for a mere 12.9 percent of the change in the projected surplus.  That is a far cry from being the driver of our deficits or even a substantial contributor.

The truth is, even using CBO’s static scoring assumptions, the tax relief did NOT push us into deficits.  In fact, if the only change since CBO’s 2001 projection had been the 01’ and 03’ tax relief, we would still be experiencing sizable surpluses each year.

Along with blaming the bipartisan tax relief for deficits, my colleagues on the other side have alluded to this tax relief as being a cause of our recent recession.   The President even made this claim in an ad during the Presidential election.

The exact logic of this claim escapes me.  Apparently it also escaped the Washington Post’s fact checker Glenn Kessler.  He described the reasoning supporting such a claim as a “Rube Goldberg phenomenon.”  The Post was unable to find any respected academic study supporting this convoluted logic.

There is good reason The Post could not find such a study.  The focus of most economic research in this area focuses the degree to which tax increases lower economic growth and tax decreases increase economic growth.  There is considerable debate within this research, but it’s difficult to find any suggesting tax increases are good and decreases are bad for the economy.

Now that I have corrected these myths, I hope we can have a more constructive discussion on averting the fiscal cliff.  Republicans have already stated they are willing to accept some new revenues.  Speaker Boehner has put $800 billion in new revenues on the table.

However, we still have not heard any substantive ideas from the President about cuts to spending and entitlements.

There are serious concerns on my side of the aisle that any agreement we reach will result in immediate tax hikes, but promised spending cuts will never occur.

We need more than just empty promises from the other side.  The President and my colleagues on the other side of the aisle need to get serious about looking at the spending side. It’s time for the President to make good on his campaign promise of supporting a “balanced” approach to deficit reduction.

I yield the floor.

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7 Responses to Grassley: Bush tax cuts “reduced the tax burden for virtually every taxpaying American”

  1. anonymous Reply Report comment

    December 16, 2012 at 9:53 am

    Just think how great it will be when we get rid of taxes completely. We can just borrow all our money from China.

  2. blog Reply Report comment

    December 13, 2012 at 5:33 am

    The new democratic party I mean dependency party members don’t have time for the truth because their too busy standing at their mailboxes waiting for their checks that they are stealing from the real working class.

    • Sorry Chuck Reply Report comment

      December 13, 2012 at 8:58 am

      Your generalization is appalling. I have some dem. friends. They are had working, go getters. The ones that stay home are waiting on dividend checks from investments because their money does the work for them.

  3. My Voice Reply Report comment

    December 12, 2012 at 10:39 am

    Lol. Choke on that Lefties. @ Sorry Chuck, it’s funny how the truth affects you like that. LMFAO.

    • Sorry Chuck Reply Report comment

      December 13, 2012 at 8:34 am

      First of all, i’m not a Leftie, leftist, or any other derogatory name you want to call me. Hell, I wrote in Ron Paul for president. I’m just sick serial bullish!tters like Grassley AND Harkin. I don’t trust them. I don’t like them.

  4. LVS Reply Report comment

    December 12, 2012 at 8:58 am

    @Sorry-What’s the matter. Can’t stand listening to the truth for a change.

  5. Sorry Chuck Reply Report comment

    December 12, 2012 at 8:51 am

    Hey Chuck,
    I couldn’t care less of what you have to say. It’s all bullsh!t. Go away