There is a lot of talk about the Bush tax cuts. The “Bush tax cuts” has this name for the same reason that “Obamacare” has its name. Bush spent a lot of time promoting these tax cuts (even though they were only temporary). It was probably the only significant thing that Bush did during his presidency that libertarians can compliment him on.
The debate now is whether the tax cuts will be extended. They are set to expire at the end of the year. The question is whether they will be allowed to expire or perhaps expire for just the “top one percent”. This will only get more coverage as we get closer to the end of the year.
While the debate is not completely irrelevant, there is too much weight put on it by both sides. The Republicans act as if the economy will be destroyed if they aren’t extended. They might be right, but the economy is in ruins due to many other factors, many of which can be blamed on past spending by Republicans.
The Democrats act as if the budget will all of a sudden be in balance if we can tax the rich. It won’t. It won’t even be close. The supply-siders and the Laffer curve have it right on this point. Raising taxes could actually lead to less taxes collected by the government.
While letting the tax cuts expire (for any group) would be harmful, it is not as significant as it sounds. Tax rates were higher in the 90’s and it didn’t completely destroy the economy. The spending levels and the Federal Reserve are far more significant issues. Tax rates can go up and down like crazy, but as long as the government is spending 4 trillion dollars a year, we are still in trouble. Anything not collected by taxes will be printed or borrowed.
In conclusion, while the tax rates are not irrelevant and we would certainly rather see them lower, it isn’t the big issue. Keep your eye on the ball. Watch overall spending and watch what the Fed does.