The Bush tax cuts are set to expire by law on December 31, 2010. Recently, the Republicans and some moderate Democrats have campaigned to restore the Bush Tax Cuts, especially for the top 2% of taxpayers because they claim that this would help create jobs, or at least prevent more jobs from being eliminated. Most Democrats believe that tax cuts for the rich should be eliminated, but the tax cuts for middle- and lower-income earners and small business should be maintained.
The Democrats argue that because most poor and middle-income families consume their entire income, higher tax rates for those families would indeed deprive the economy of much-needed short-run stimulus. But extending the Bush tax cuts for the wealthiest families would have significantly less impact as a stimulus because these families typically consume much less than their income. Eliminating tax cuts for those who have incomes above the $250,000 threshold would increase federal revenue, help reduce the deficit, and little impact on their quality of life.
Also, the additional revenue from those who benefited the most from a decade of reduced taxes can be used to bolster spending and investment in a host of ways that would be useful even apart from the stimulus effects. Because state and local government budgets are in shambles, hundreds of teachers, police officers, and firefighters are being laid off every week. Federal grants could keep them on the job.
States around the country have also been allowing thousands of miles of asphalt roads to deteriorate back to gravel, even as skilled workers and heavy equipment stand idly by. The eventual bill for repaving those roads will add much more to deficits than if we had maintained them properly in the first place.
Students need to be able to understand the conditions and reasoning that lead to the Bush Tax Cuts and whether or not they were effective in creating a robust and expanding economy. Assign students to write a report of at least 150 words that cites at least three sources and addresses the following examples of essential questions for critical thinking (you may add or substitute others):
- What were the “Bush Tax Cuts” and what were they designed to accomplish?
- What other tax strategies were proposed at that time as an alternative?
- What problems did President Bush have in passing the tax cuts?
- Do you think that they worked in creating more prosperity for the average citizen—why or why not?
- Would extending the Bush Tax Cuts help create jobs and lower the deficit—why or why not?
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