The looming expiration date of the “Bush Tax Cuts” is fast approaching. The tax cuts are set to expire on January 1st, effectively raising income, estate, and investment taxes across the board on all income levels, and thereby spurring debates among politicians on what to do.

President Obama and other Democrats such as Nancy Pelosi are proposing to extend the tax cuts for the middle class only, i.e. to individuals with incomes of less than $200,000 per year or households with less than $250,000 per year.

For starters, there’s an instant red herring that comes to mind here. For years, my liberal friends were telling me that the EVIL, rich, scheming, menacing George W. Bush gave tax breaks to the filthy rich (i.e. his equally evil oil buddies) while leaving the poor and middle class out in the cold, enslaving them even more as they are forced to pick up the slack. So Obama and Pelosi’s proposal is a direct admission that all of this was utterly untrue. (But then again, I’m sure the liberals can find a million ways to re-spin their former spin.)

In fact, the Bush tax cuts skewed the tax burden even further toward the rich than before. How can this be true? It’s simply because the lower tax brackets where cut more than the upper ones.

Another question that comes to mind is why let any part of the tax cuts expire at all. The liberals love to cite the deficit as the reason, however the likely truth is more in line with the liberal ideology of class warfare. That’s because at best, the Bush tax cuts to the “wealthy” can account for only a tiny fraction of the budget deficit.

According to CBO data, Bush’s tax cuts account for 14% of the deficit. And the 14% figure is based on static scoring that assumes people do not change their behavior due to different tax rates.

However, in the real world, whenever there is a tax cut, at least some of it is recovered from an increase in the activity that’s being taxed. A decrease in income tax for example, encourages more income earning and less tax avoidance. And therefore, the actual figure assgning blame to the Bush tax cuts is even lower, if not arguably zero as tax cuts may spur enough new taxable activity to completely compensate for the decrease in tax rate.

At any rate, if we’re just talking about tax cuts to the top earners as defined by Obama, the 14% is cut in four to arrive at 3.5%, since those tax brackets account for only 25% of the cuts in dollar amount.

So eliminating the Bush tax cuts to the walthy can at most help reduce the deficit by 3.5%, a puny amount.

But doesn’t every little bit help?

Yes, it does, but if eliminating the tax cuts for the top brackets helps reduce the deficit, wouldn’t eliminating the tax cuts for the lower brackts help reduce the deficit even more since their share of the cut is 75%? Therefore, shouldn’t we let the Bush tax cuts expire for everyone then?

At this point economically minded liberals are almost certain to reply that raising taxes on the non-wealthy is likely to hurt the economy since they are more likely to spend any extra money they have, and therefore we shouldn’t do it.

But this does not satisfy the question because even if so, the wealthy earners are then the ones who are more likely to invest, expand or start a business, and create jobs. So why is household spending more important than investment and business development for the good of the economy? It’s not!

And in conclusion, that’s why letting the Bush tax cuts expire only for the upper tax brackets is pure hogwash based on class warfare ideology alone.

References (well worth a complete read):
Ten Myths About the Bush Tax Cuts
The Tax Cuts Didn’t Cause the Budget Deficit