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* The U.S. Constitution vests Congress with the powers to tax, spend, and pay the debts of the federal government. Legislation to carry out these functions must either be:

passed by majorities in both houses of Congress and approved by the President; or

passed by majorities in both houses of Congress, vetoed by the President, and then passed by two-thirds of both houses of Congress; or

passed by majorities in both houses of Congress and left unaddressed by the President for ten days.

Bush Tax Cuts

* Per the Congressional Budget Office (CBO), "Most parameters of the tax code are not indexed for real income growth, and some are not indexed for inflation." Thus, if tax laws remain unchanged, "average federal tax rates would increase in the long run" (for more detail, see Bracket Creep).[503]

* In 2000, the federal government collected revenues equal to 20.4% of the nation's gross domestic product (GDP). This was the highest level in the history of the United States.[504]

* In 2000, the stock market "dot.com" bubble burst,[505] [506] [507] the NASDAQ lost 39% of its value,[508] and profits for nonfinancial corporations fell by 18%.[509] In the first quarter of 2001, the nation's GDP contracted and a recession began.[510] [511]

* On January 20, 2001, Republican President George W. Bush entered office,[512] and in June of 2001, Bush signed his first major economic proposal.[513] This consisted of a bill with various tax cuts that Congress and Bush accelerated and expanded upon in 2002 and 2003. These laws:

cut tax rates on incomes, estates, capital gains and dividends.

increased the child tax credit (which is also a form of spending).

raised the exemption amount for the alternative minimum tax.

increased certain corporate income tax deductions.

* Collectively, the tax cuts in these laws are known as the "Bush tax cuts." Congress passed these bills as Democratic and Republican support varied as follows:

* In addition to the Bush tax cuts, federal revenues during 2000-2010 were impacted by factors such as:

the burst of the dotcom bubble in 2000 and ensuing recession.

average economic growth of 3.4% above the rate of inflation from 2003-2006.

the burst of the housing bubble in 2007 and ensuing Great Recession.

the rise of unemployment from 5.0% in January 2008 to 9.9% in December 2009.

the economic "stimulus" bill of February 2008.

* From 2000-2010, federal revenues (as a portion of GDP) varied as follows:

* To read facts related to the economic effects of the Bush tax cuts, see the sections of this research on economic effects and government debt.

Obama Tax Cuts

* On January 20, 2009, Democratic President Barack Obama entered office,[536] and in February 2009, Congress passed and Obama signed his first major economic proposal.[537] This consisted of an economic stimulus bill that among other provisions:

created or expanded four temporary tax credits.

created a temporary tax exclusion for unemployment benefits.

created a temporary sales tax deduction for new car purchases.

instituted four business tax benefits and a business tax increase.

* Congress passed the Obama stimulus bill with 97% of Democrats voting for it and 98% of Republicans voting against it.[539]

* In January 2013, Congress passed and Obama signed a bill to make the most of the previous tax cuts permanent for everyone but high-income earners (except for adjustments to the estate, gift, and alternative minimum taxes). Also, the law did not renew the Social Security payroll tax cut.[544] [545]

* In addition to the Obama tax cuts, federal revenues during 2007-2017 were impacted by factors such as:

the Great Recession.

average inflation-adjusted economic growth of 2.2% from 2010-2017.

* From 2007-2017, federal revenues (as a portion of GDP) varied as follows:

* To read facts related to the economic effects of the Obama tax cuts, see the sections of this research on economic effects and government debt.

Obama Tax Increases

* In a campaign speech given on September 12, 2008, Barack Obama stated:

I can make a firm pledge: under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.[555]

a 3.8% tax on income from investments (such as interest, dividends, and rent) imposed on singles with income above $200,00 and couples with income above $250,000. This began in 2013.

an added 0.9% Medicare payroll tax on earnings above $200,00 for singles and $250,00 for couples. This began in 2013.

a 40% excise tax imposed on high-cost health insurance plans. This was initially due to begin in 2018, but a 2016 law pushed it out to 2020.

an annual fee imposed on health insurance providers. This began in 2014.

an annual fee imposed on manufacturers and importers of pharmaceuticals. This began in 2011.

a 2.3% excise tax imposed on manufacturers and importers of certain medical devices. This began in 2013.

* Regarding tax preferences (which are also a form of spending), the Affordable Care Act provides refundable tax credits for individuals who purchase health insurance with incomes up to 400% of federal poverty guidelines (for example, $98,400 for a family of four).[572] [573] The law also eliminates or reduces six other preferences while adding three others.[574] [575]

* The Affordable Care Act also imposes fines on large employers that don't provide full time-employees with health insurance that meets certain requirements,[576] and the law requires most Americans to carry some form of health insurance starting in 2014 or pay a fine.[577] [578] [579] (In 2017, Congress passed and President Trump signed a law that repealed this requirement starting in 2019.[580] [581])

* During a September 2009 interview on ABC News, Obama was asked if such a fine constitutes a tax increase, and he replied, "I absolutely reject that notion."[582]

* In March 2012, the Obama administration's lawyer argued before the Supreme Court that the Affordable Care Act's fine for not buying health insurance is constitutional because it is "justifiable under [Congress'] tax power," it is "fair to read this as an exercise of the tax power," and the "Court has got an obligation to construe it as an exercise of the tax power, if it can be upheld on that basis."[583] The Supreme Court ruled (5 to 4) that the fine is constitutional on the grounds that it is a tax.[584]

* Obama's budget proposal for 2017 contained 45 pages of tax-related provisions.[585] Some of his proposals were:

Impose a one-time 14% tax on the untaxed foreign earnings that U.S. corporations hold overseas.

Increase the tax rate on capital gains and dividends from 20% to 24.2% for upper income individuals (for a total tax rate of 28% when combined with the 3.8% net investment tax).

Enact the "Buffett rule."

Enact, expand, or extend at least 22 different tax credits.

* Per the Joint Committee on Taxation and Congressional Budget Office:

"The complexity of the tax system partly results from tax expenditures [a.k.a. preferences] that are designed to affect behavior by taxing some endeavors more or less than others. Those tax expenditures include tax exemptions for some activities, deductions for various preferred items, and credits for undertaking certain actions."

"Complexity also arises from efforts to achieve certain equity goals."

"Policymakers are not concerned only with efficiency issues in designing a tax system, but are also concerned with establishing an 'equitable' tax code with respect to the distribution of the tax burden. Whether a tax system is viewed as equitable is in the eye of the beholder, and economic analysis cannot define an equitable tax."

"Economists have shown that the efficiency loss from taxation increases as the marginal tax rate increases."

"A less efficient allocation of labor and capital resources leaves society with a lower level of output of goods and services than it would otherwise enjoy in the absence of tax-system induced economic distortions."

"[M]any of the same aspects of the tax system that reduce economic efficiency also increase complexity."

"In general, the goals of equity and efficiency are in conflict. In order to keep rates low for efficiency reasons, the progressivity of the rate schedule should be minimized, but this conflicts with the desire to have more progressive rates for equity reasons."

* To read more facts related to the economic effects of the Obama tax increases, see the sections of this research on economic effects and government debt.

Trump Tax Cuts

* On January 20, 2017, Republican President Donald Trump entered office,[598] and in December 2017, Congress passed and Trump signed his first major economic proposal.[599] Among other provisions, this law permanently lowered the corporate tax rate beginning in 2018 and temporarily (2018-2025):

lowered tax rates in five of seven income brackets.

increased the basic standard tax deduction.

increased the child tax credit.

increased the charitable contributions deduction.

reduced the state and local income, sales, and property tax deductions.

reduced the mortgage interest deduction.

* The bill passed Congress with 95% of Republicans voting for it and 98% of Democrats voting against it.[601]

* In April of 2018, the Congressional Budget Office (CBO) projected that federal revenues will vary as follows under current law:

* Per the Congressional Budget Office, the corporate income tax "reduces capital investment in the United States," and hence:

it reduces workers' productivity and wages relative to what they otherwise would be, meaning that at least some portion of the economic burden of the tax over the longer term falls on workers. ... That reduction in investment probably occurs in part through a reduction in U.S. saving and in part through decisions to invest more savings outside the United States (relative to what would occur in the absence of the U.S. corporate income tax); the larger the decline in saving or outflow of capital, the larger the share of the burden of the corporate income tax that is borne by workers.

* As of October 31, 2018, businesses have enacted at least 750 general pay raises, bonuses, benefit increases, consumer price reductions, charitable donations, and business expansions that they credited to the Trump tax cuts.[605]

* To read more facts related to the economic effects of the Trump tax cuts, see the sections of this research on economic effects and government debt.

* When President Bush proposed tax cuts at the outset of his presidency Newsweek published a cover story that showed pictures of objects that people with various incomes could buy with money from the tax cuts. On the low end, Newsweek showed a bowl of pasta to signify "three weeks' worth of groceries" or $168 that a family of four with a gross income of $20,000 would save on an annual basis. On the high end, Newsweek showed a Lexus GS 430 to signify $47,114 that a married couple with an income of $1,000,000 would save on an annual basis.[606]

* Newsweek did not reveal what these families were currently paying in federal taxes or what they were receiving in cash and other benefits from the federal government. The family with a gross income of $20,000 was paying about $1,600 per year in taxes while receiving $16,000 from the government. In comparison, the family with an income of $1,000,000 was paying $325,000 in taxes and receiving $7,000 from the government.[607] [608]

Debt

* In addition to the actions of current congresses and presidents, other factors impacting the national debt include but are not limited to legislation passed by previous congresses and presidents,[613] economic cycles, terrorist attacks, natural disasters, demographics, and the actions of U.S. citizens and foreign governments.[614]

* During the first session of the 113th Congress (January-December 2013), U.S. Representatives and Senators introduced 168 bills that would have reduced spending and 828 bills that would have raised spending.[615]

* The table below quantifies the costs and savings of these bills by political party. This data is provided by the National Taxpayers Union Foundation:

* The table below quantifies the net agendas of the political parties in previous congresses:

* In February 2001, Republican President George W. Bush stated:

Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years. At the end of those 10 years, we will have paid down all the debt that is available to retire. That is more debt, repaid more quickly than has ever been repaid by any nation at any time in history.

* From the time that Congress enacted Bush's first major economic proposal (June 7, 2001[620]) until the time that he left office (January 20, 2009), the national debt rose from 54% of GDP to 74%, or an average of 2.7 percentage points per year.[621]

* During eight years in office, President Bush vetoed 12 bills, four of which were overridden by Congress and thus enacted without his approval.[622] These bills were projected by the Congressional Budget Office to increase the deficit by $26 billion during 2008-2022.[623]

* In February 2009, Democratic President Barack Obama stated:

I refuse to leave our children with a debt that they cannot repay-and that means taking responsibility right now, in this administration, for getting our spending under control.

* From the time that Congress enacted Obama's first major economic proposal (February 17, 2009[625]) until the time that he left office (January 20, 2017), the national debt rose from 75% of GDP to 105%, or an average of 3.7 percentage points per year.[626]

* During eight years in office, President Obama vetoed twelve bills, one of which was overridden by Congress and thus enacted without his approval.[627] The Congressional Budget Office estimated that this bill "would have no significant effect on the federal budget."[628]

* During the tenures of recent presidents and congressional majorities, the average annual changes in national debt (measured in percentage points of GDP) varied as follows:

* Other factors impacting the national debt include but are not limited to legislation passed by previous congresses and presidents,[633] economic cycles, terrorist attacks, natural disasters, demographics, and the actions of U.S. citizens and foreign governments.[634]

# data[].attributes.attachment_link.description
The U.S. Constitution vests Congress with the powers to tax, spend, and pay the debts of the federal government.

# data[].attributes.attachment_link.authors[].name
Becker Friedman Institute at UChicago - BFI