WV Center on Budget and Policy > Blog > Tax and Budget > Renewing Bush’s Tax Cuts For The Rich: Bad Economic Policy, Especially For West Virginia
Renewing Bush’s Tax Cuts For The Rich: Bad Economic Policy, Especially For West Virginia
The evidence that renewing Bush’s tax cuts for the wealthiest Americans would work against the interest of average Americans is overwhelming. First, renewing breaks for the wealthy would reduce revenues by anywhere from $80 billion to $90 billion over the next two years. Revenue projections in the long-term look bleak, as well, with an estimated revenue loss of almost $830 billion over the next decade.
What’s more, extending special treatment for households with incomes over $250,000 and single filers with incomes over $200,000 would result in deficits and debt $1 trillion higher over the next decade than allowing the high-income tax cuts to expire. As this study from the national Center on Budget and Policy Priorities shows, Bush’s special treatment for the wealthy will be the single biggest contributor to our national debt if we don’t act soon.
Some policymakers and pundits have recommended the “compromise” of renewing the Bush breaks for the wealthy for “just” two more years. This is a transparent political calculation.
Republicans are expected to gain seats in Congress after November’s midterm elections, so “compromising” to temporarily extend high-income tax cuts would merely buy time for more conservative representatives to take office, increasing the chances that special treatment for the rich will be made permanent.
The Daily Mail ran an editorial on Monday, dismissing restoration of Clinton-era tax rates on the rich as “dumb.” It repeatedly refers to the wealthiest two percent of Americans as “the rich,” in quotation marks, as if a couple making $250,000 per year isn’t extremely rich by West Virginia’s standards. Even their first editorial on the subject, which uses $80,000 as a benchmark — misleadingly, since Obama doesn’t want to raise taxes on any but the wealthiest Americans — misses the mark by quite a bit.
The fact is that 89 percent of full-time workers in West Virginia earn less than $75,000 and the state median income is less than $38,000, according to U.S. Census data. If Bush’s tax cuts are made permanent, the bottom 60 percent of West Virginian tax payers will pay $117 more, while the richest one percent will pay $18,069 less, on average, compared to Obama’s alternative. According to the IRS, less than one percent of taxpayers in the state earn the $250,000 necessary to receive a tax increase under Obama’s plan.
Trying to persuade an impoverished state like West Virginia to support such plutocratic tax policy is certainly ambitious, to say the least.
Repealing tax cuts for the wealthy and using the new revenue to fund any of the following would yield more economic “bang” for the taxpayer “buck,” according to a recent report by the nonpartisan Congressional Budget Office:
- A jobs tax credit to reduce payroll taxes on new hires
- Increased state fiscal assistance to cover budget shortfalls or invest in infrastructure
- Extension of unemployment benefits
Increasing taxes for most of West Virginia while trimming taxes for a select, wealthy few is ineffective economic policy, especially during a recession, since the working class is more likely to spend their tax cuts immediately, while the wealthiest one percent is more likely to save theirs.
Renewing the tax cuts for less than one percent of the state will exacerbate the income gap, inflate the national debt, and fail to maximize economic stimulation. West Virginia needs tax policies that promote economic growth by looking out for working class people.
Abolishing Bush’s tax breaks for the rich is a step in the right direction.