Starkly Different Approaches to the Bush Tax Cuts Would Have Very Different Impacts on Oregonians

News Release
April 22, 2010 Download PDF

As Congress begins debate on Bush-era tax cuts set to expire at the end of this year, a new analysis by the Washington, D.C.-based Citizens for Tax Justice reveals a stark difference for Oregonians in the approaches put forward by President Obama and Congressional Republicans.

“The President’s approach gives bigger tax cuts to the majority of Oregonians, while the GOP approach puts more money into the pockets of the wealthiest among us,” said Janet Bauer, a policy analyst with the Oregon Center for Public Policy who reviewed the analysis.

“While President Obama and the Congressional Republicans agree that the tax cuts enacted under President Bush should be made permanent for 98 percent of taxpayers, there are still stark differences,” said Bauer. “A majority of Oregonians will receive bigger tax reductions if Congress follows the President’s lead.”

Low- to middle-income Oregonians would get a bigger tax cut under the President’s approach than they would under the GOP approach, the CTJ study found. On average, low- to middle-income Oregonians — three out of every five Oregonians, representing households with an average income of $26,131 — would get an extra $98 in 2011 under the Obama approach compared to the GOP approach.

By contrast, the top 1 percent of Oregonians (households with average income of about $1 million) would get $33,110 more in tax breaks on average under the GOP approach than President Obama would provide, according to the CTJ report. Wealthy Oregonians would still see a tax cut under the Obama approach.

President Obama recommends extending the Bush income tax cuts for low- and middle-income Americans and allowing those for high-income households — those with $250,000 or more in income — to expire at the end of 2010 as scheduled. The President also proposes setting the estate tax at a modest level rather than allowing it to revert to pre-Bush-era levels. Under policies enacted during the Bush administration, the estate tax was repealed for 2010 but will revert to the level established under President Clinton next year, absent congressional action.

President Obama’s approach would also extend the improvements made in the Recovery Act to the Earned Income Tax Credit (EITC) and Child Tax Credit that help low- and moderate-income households. Those provisions, approved last year, “are at the heart of the stark differences in these two competing approaches to the tax cuts,” said Bauer.

“The Obama approach gives priority to helping working, cash-strapped households and the economy,” stated Bauer. “Recent improvements to the EITC and Child Tax Credit offset regressive payroll taxes typically paid by modest-income workers such as cooks and preschool teachers. In addition, they provide a good economic bang for the buck during this difficult economic recovery.”

Due to improvements made last year in the Recovery Act, an Oregon family with two children working full time at minimum wage currently gets a Child Tax Credit of $2,000. If Congress does not extend the current provisions, that family would receive only $593 after this year.

By comparison, the Congressional Republicans would “help ordinary Americans less and give generously to the wealthy,” said Bauer. They call for permanently continuing all of the Bush tax cuts for all households, regardless of their wealth. In contrast with the President, the Congressional Republicans would permanently repeal the estate tax, a tax cut that would benefit only the wealthiest of the wealthy, fewer than one out of 100 estates. The Republicans would not extend the 2009 improvements to the EITC and Child Tax Credit that help Oregon’s low-income working households.

The Obama strategy would also improve our nation’s balance sheet. By discontinuing the Bush tax cuts for the highest-income 2 percent of Americans, the country would make substantial progress in reducing troubling projected budget deficits.

By contrast, Congressional Republicans take the country down an unsustainable fiscal path. “If they are extended, the Bush-era tax cuts for the wealthy will contribute more to our country’s long-term fiscal problems than either the bank bailout or federal recovery measures or, assuming they are phased out, the wars in Iraq and Afghanistan,” said Bauer. “The Republican proposals are fiscally irresponsible.”

“Congress is now faced with a stark contrast in priorities,” said Bauer. “Reward ordinary working families and confront our fiscal challenges, or help the wealthiest among us, deficits be damned."

The Oregon Center for Public Policy is a non-partisan research institute that does in-depth research and analysis on budget, tax and economic issues. The Center’s goal is to improve decision making and generate more opportunities for all Oregonians.