BUSH TAX CUTS 1 BUSH TAX CUTS 6 Bush Tax Cuts Delores Blango Strayer University Dr. Timothy Smith PAD 510 May 15, 2020 Bush Tax Cuts Policy Summary Tax cut policies discussed in George W. Bush and Obama’s presidency are some of the biggest changes in tax policy to occur in the history of the United States. The initial policies were the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003(JGTRRA) enacted during President Bush’s administration (Horton, 2017). These were later followed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and the American Taxpayer Relief Act of 2012 passed under Obama’s leadership. The reasoning behind the Bush Tax Cut was to effectively utilize the budget surplus that came about during the presidential term of Bill Clinton. Additionally, the Americans had a large tax burden that needed to be relieved. More so, the low income earners had to pay a large tax percentage for their low wages. The tax cut were also meant to increase economic growth by ensuring that Americans had a large disposable income that could be used in investment. However, Horton (2017) argues that the tax cuts see to have been more beneficial to the top 1% whose income after tax increased by over 5% per annum. The tax cut discussions continued into President Obama’s era due to the sunset provisions in the Bush Tax Cut. After year 2010, the country was supposed to go back to using the old system but this would place more burdens on the low income households (Wamhoff & Gardner, 2018). The policies passed by Obama tries to create income equality by lowering tax for low income households and increasing taxes for the top 1%. Obama not only concentrated on lower taxes but also on increasing wage rate and productivity through the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act. Stakeholder The Presidents involved in the development of the tax policies are some of the primary stakeholders. President George W. Bush in his campaign had promised the Americans to relief them on the tax burden and, therefore had to fulfill his promise. Additionally, the country, at the time, was experiencing a slower economic growth, which he attributed to the lack of a disposable income among Americans that could be used in investments. Bush’s argument was that the strategy would help release more of the income for the Americans so they would have a little more to save and invest in various sectors of the economy. The U.S Congressional leaders also make up part of the stakeholders in the development of these policies. President Obama felt that the policies should be made through the combined efforts of the Democrats and the Republicans. While the Republicans felt that the Bush Tax Cuts should be extended, the Republicans felt that the tax cuts were creating more problems than solution for the American economy. The Republican brought to light the negative effect of the tax costs such as the increased debt of the country. Furthermore, they took note of the increased income inequality between the low and high income families, requiring that a solution be sought for the matter. The combined efforts between the Republicans and the Democrats led to the success in making of the policies during Obama’s era. President Obama as a key stakeholder opted to increase the tax rates for high income earners, while ensuring that it remains low for the low income families. Additionally, Obama’s role was to ensure that the Americans did not suffer due to the difference in thoughts between the Republicans and Democrats. The acts he enacted would also serve in ensuring that the country did not slip into a recession. President Obama successfully managed to solve the problems with the initial tax cuts enacted in Bush’s administration. The American citizens also have a primary interest in the matter. They are the main group impacted by the tax cut, whereby it would ease the tax burden. As indicated by Ballard-Rosa, Martin, and Scheve (2017), Americans were concerned that the taxes favored the rich, while the poor still hard a large tax burden. There should be difference between the tax rates for the poor and those for the rich. Most people are in agreement with the policies by President Obama, whereby there is a difference in the tax bracket depending on an individual’s income group (Ballard-Rosa, Martin, & Scheve. 2017). Economic groups in America are some of the interest groups lobbying for tax cuts. These groups are interested in ensuring that the economic well-being of the citizens is maintained and that economic development is achieved. While these groups felt that lowering taxes would do well for the citizens, they also worried that the economy would experience a number of setbacks such as increased debts. They also felt that cutting tax by itself would not increase economic development and urged the government to utilize other measures that would encourage investment in American economic sectors. Political Influence of the Players The American citizens have a political influence in the formulation of laws in the United States. Many of the political decisions made within a country have to be acceptable to the citizens as they people determine which leaders they would like in the government (Dermont, Ingold, Kammermann, & Stadelmann-Steffen, 2017). Therefore, in formulating their policies, both presidents had to consider the reactions of the citizens towards the intended policies. The motive of the people is to ensure that the policy favors their well-being and contributes towards the growth of their economy. Furthermore, conflicts in the tax policy development between the people and the government can be seen whereby the tax increases the income inequality. The politicians make up part of the top 1% in the American economy, whereby it seemed as if this group was favoring itself. The reach already benefited from other economic policies, which help them increase their income levels, which means that they were not overburdened by the taxes (Wamhoff & Gardner, 2018). However, during Obama’s administration, a consensus was reached, in which income inequality was reduced. In addition, this administration also made reforms that sort to increase job opportunities for the unemployed and increase the wage rates for the working class, thus ensuring equal wealth distribution. The U.S congress makes the policies alongside the president. The congress members during Obama’s administration argued that the changes to the tax after 2000 resulted to increased debts and unequal distribution of wealth (Wamhoff & Gardner, 2018). The congress is composed of Republicans and Democrats. The two groups were engaged in opposite sides of a political warfare surrounding the sunset provision of the Bush Tax Cuts. Despite their differences in thoughts, they understood that they had to come to an agreement that would ensure that the poor enjoyed more tax breaks as compared to those enjoyed by the rich. Their impact on policy making was to enact the economic recovery legislation, which would minimize the negative effects caused by the Bush Tax Cuts (Wamhoff & Gardner, 2018). The two groups put aside their differences and works towards a better economy, thus gaining the trust of the citizens during this period. References Ballard-Rosa, C., Martin, L., & Scheve, K. (2017). The structure of American income tax policy preferences. The Journal of Politics, 79(1), 1-16. https://www.journals.uchicago.edu/doi/pdfplus/10.1086/687324 Dermont, C., Ingold, K., Kammermann, L., & Stadelmann-Steffen, I. (2017). Bringing the policy making perspective in: A political science approach to social acceptance. Energy policy, 108, 359-368. www.academia.edu/download/55611137/Dermont_etal_2017_EnergyPolicy.pdf Horton, E. (2017). The Legacy of the 2001 and 2003 ‘Bush’Tax Cuts. Washington: Center on Budget and Policy Priorities. https://www.cbpp.org/sites/default/files/atoms/files/3-31-17tax.pdf Wamhoff, S., & Gardner, M. (2018). Federal tax cuts in the Bush, Obama, and Trump years. Institute on Taxation and Economic Policy, 11. https://prosperitynow.org/sites/default/files/event/2018-10/ITEP-Federal_Tax_Cuts_in_the_Bush_Obama_and_Trump_Years-2018.pdf