Continuing Bush tax cuts would heavily favor the rich, while federal deficit would nearly double
As the 10-year anniversary of the Bush tax cuts approaches tomorrow, a new analysis finds federal tax filers in Colorado's top 5 percent of income earners would get an average tax cut 42 times bigger than the bottom 60 percent if the tax cuts are allowed to continue. Meanwhile, the federal deficit would nearly double.
As Congress and the President debate whether and on what conditions to raise the debt ceiling, America will mark the 10th anniversary of the policy change that accounts for much of the federal budget gap: the Bush tax cuts.
On June 7, 2001, President George W. Bush signed into law the first of the tax cuts that would turn the budget surpluses of the 1990s into historic deficits. A new analysis from Citizens for Tax Justice explains that making the tax cuts permanent would almost double the long-term budget deficit.
The richest 1 percent of taxpayers nationally, with an average income of about $1.4 million in 2013, would get an average tax cut of $68,079 that year if the Bush tax cuts are extended again. The poorest three-fifths of taxpayers, with an average income of $29,000 that year, would receive an average tax cut of just $487.
In Colorado, the richest 1 percent of taxpayers, with an average income of about $1.5 million in 2013, would get an average tax cut of $75,195 that year if the Bush tax cuts are extended again. The poorest three-fifths of Colorado taxpayers, with an average income of $31,369 that year, would receive an average tax cut of just $529.
The analysis also finds that the higher a filer's income, the larger the tax cut as a percentage of income. If the Bush tax cuts are extended again, in 2013 the poorest one-fifth of taxpayers in Colorado would receive tax cuts equal to 1.1 percent of their income, while the richest 1 percent would enjoy tax cuts equal to 4.9 percent of their income.
Some in Congress have threatened to cause the federal government to default on its debt-obligations unless President Obama agrees to major cuts in federal spending to reduce the budget deficit, but they simultaneously demand the Bush tax cuts be made permanent.
A better course would be to let tax rates for the wealthiest return to their 2001 levels while maintaining tax breaks such as the Child Tax Credit for people with low incomes. That would help stabilize federal revenue while stimulating the economy by leaving resources in the pockets working families, who are most likely to spend the money on goods and services.
Individual fact sheets for all 50 states and the District of Columbia along with facts about the costs of the Bush tax cuts nationally are at the Citizens for Tax Justice website.
Colorado Fiscal Policy Institute
303-573-5669, ext. 306
Citizens for Tax Justice
202-299-2066, ext. 27
The Colorado Fiscal Policy Institute, a project of the Colorado Center on Law and Policy, works for changes in public policy through timely, credible and accessible fiscal policy analysis, education, advocacy and coalition-building.
Citizens for Tax Justice, founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. CTJ's mission is to give ordinary people a greater voice in the development of tax laws.
Released June 6, 2011