Bush tax cuts: Republicans stretch the truth

tax_hikes.top.jpgRepublicans on the House Ways and Means Committee are counting down to "Democratic" tax hikes. And Fox Business is ticking toward "the largest tax hike ever." Neither claim is true. By Howard Gleckman, CNNMoney guest columnist


WASHINGTON (CNNMoney) -- Howard Gleckman is a resident fellow at the Urban Institute and editor of TaxVox, the blog of the nonpartisan research organization Tax Policy Center. The opinions expressed in this commentary are solely those of the writer.

The story goes that when Lyndon Johnson was losing his first congressional election, he put out word that his opponent was having sex with barnyard animals. An aide innocently warned Johnson that this wasn't true. "Make the SOB deny it," LBJ was said to have replied.

So goes the current debate over the Bush tax cuts.

To start, not a single important Democrat favors letting all the Bush tax cuts expire at the end of the year, as the Republicans on the House Ways and Means Committee allege. Ever since his campaign for president, Obama has vowed not to raise taxes for anyone making $200,000 or less -- a pledge I wish he had never made, but one he has nonetheless kept.

Obama's 2011 budget explicitly calls for extending nearly all of those tax cuts (except for the highest-earning 3% of taxpayers).

Leading Democrats Finance Committee chairman Max Baucus, Senate leader Harry Reid, House Speaker Nancy Pelosi and Ways and Means Chairman Sandy Levin all favor continuing the tax cuts, at least for the middle-class. Relative to current law, this would cut taxes by $3 trillion over 10 years.

So to say that "on Jan. 1, 2011, Democrats will drop a $3.8 trillion tax increase on American small businesses and families" is -- not to put too fine a point on it -- a lie.

Then there is the matter of whether allowing all the Bush tax cuts to expire, would, in fact, be "the largest tax hike ever."

By any fair measure, that's not true either. To be sure, it would be a very big tax increase, raising revenues by about 2% of gross domestic product.

But the biggest ever? Not by a long shot. Back in 2006, Jerry Tempalski at the Treasury Department measured the relative size of all major tax bills just since 1940 (which fits pretty well into the definition of "ever").

This is what he found: The Revenue Act of 1941 raised taxes by an average annual rate of 2.2% of GDP, more than the impact of letting all the Bush tax cuts expire. The Revenue Act of 1942 was even bigger. It raised taxes by a whopping 5% of GDP. Remember, we used to pay for our wars in the old days, instead of leaving the bill to our grandchildren.

And, in case you were wondering, the three major tax increase bills signed by President Reagan -- TEFRA of 1982, the Social Security Amendments of 1983 and the Deficit Reduction Act of 1984 -- raised taxes by a combined 1.6% of GDP, not much less than what we are yelling about today.

We've been here before: Now, there is nothing new about this "biggest tax cut ever" canard. Republicans said it about President Clinton's 1993 tax increase, which actually raised taxes by 0.63 percent of GDP. They trotted it out again in their campaign against Obama's health bill.

Myron Ebell at Human Events probably wins the breathless rhetoric award, however. He called last year's House energy bill the "the biggest tax increase in world history." Whew.

This isn't to say Democrats won't stoop to their own overheated hyperbole. Just listen to what some on the left say about efforts to reform Social Security.

But there ought to be limits to this stuff, even in Washington. Words still mean something and just as Republicans went far over the line last year with their accusations about death panels in the health bill, they are doing it again this year with taxes. They should be ashamed. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,265.99 109.14 0.64%
Nasdaq 4,593.43 31.24 0.68%
S&P 500 2,011.36 9.79 0.49%
Treasuries 2.63 0.03 1.12%
Data as of 4:41pm ET
Company Price Change % Change
Bank of America Corp... 17.04 0.27 1.61%
Yahoo! Inc 42.08 -0.50 -1.19%
Apple Inc 101.79 0.21 0.21%
Microsoft Corp 46.68 0.16 0.34%
General Electric Co 26.21 0.16 0.61%
Data as of 4:04pm ET

Sections

Oracle founder Larry Ellison will become chairman of the board after stepping down as its chief executive. More

The Federal Reserve is probably not going to raise interest rates until the summer of 2015 at the earliest. More

Oracle founder Larry Ellison will become chairman of the board after stepping down as its chief executive. More

Immigrant entrepreneurs leverage connections abroad to boost international exports -- and non-immigrants could stand to learn from their tactics. More

Occupy Wall Street offshoot Strike Debt says it has abolished nearly $4 million in private student loan debt for students who attended Everest College, part of Corinthian Colleges. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.