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Did the Bush tax cuts crash our economy and punished the middle class? (Oldie but Goodie)

Welcome to VoteFacts.  According to a blog post at, it was reduced tax rates that "crashed our economy and punished the middle class".   You should read the blog piece for yourself, but the author appears to be telling readers to believe that it was the lowering of tax rates that led to the crash and the dramatic hit to the middle class.  This definitely warrants some time to focus on facts.

Readers can take the time to go through the reports by the Fiscal Crisis Inquiry Commission (FCIC) in order to gather a really broad range of data on the causes of the economic crisis.  Bullet points from that report will not be posted here because it would make this post far too lengthy.  However, I see no mention of any correlation between the economic crisis and the Bush tax cuts in those reports.  You can also click here to read a VoteFacts post on the economic crisis as well.  

However, right now we can focus on the facts as they pertain to our economy and the middle class prior to the economic crisis in the fall of 2008.  This will help people have an understanding of how the economy and middle class were doing after the tax cuts and before the crash, so they can decide if they believe that it was the Bush tax cuts that crashed our economy and punished the middle class.

Here is the economic growth rate from year to year after the 2001 and 2003 tax cuts and up until the crash.

Gross Domestic Product (size of the economy) percent change from year to year based on chained current and chained 2009 dollars:

Screen Shot 2014-03-24 at 5.25.46 PM

Here is what the unemployment rate looked like during the years following the 2001 and 2003 tax cuts through July 2012.

Here is what happened with real median household income from 2001 to 2009 just after the crash:

• Real median household income declined by 2.2 percent between 2000 and 2001 to a level of $42,228. (2001 report).  Census, Page 1

• Real median household income showed no change between 2002 and 2003.  (2003 report).  Census, Page 1

• Real median household income showed no change between 2003 and 2004. (2004 report).  Census, Page 1

• Real median household income increased between 2004 and 2005, between 2005 and 2006, and between 2006 and 2007 - representing three annual increases. (2008 Report).  Census, Page 1

• Real median household income declined by 3.6 percent (from $52,163 to $50,303) between 2007 and 2008, offsetting the gain in income experienced over the prior 3 years and coinciding with the recession that started in December 2007. (2009 report).  Census, Page 5

• The median household income in 2009 was not statistically different from the 2008 median in real terms (2009 report).  Census, Page 1

What about middle class and their tax rates and total shares paid after 2001?  Here is the data:

The Congressional Budget Office (CBO)

The pattern of average federal tax rates has varied over time. The lowest three income quintiles have seen declines in their average tax rates since the early 1980s. The average tax rate on the fourth quintile changed little over most of the past 30 years, before declining starting about a decade ago. The average tax rate on the top quintile has fluctuated more, with periods of increases and decreases, and was somewhat lower in 2007 than in 1979.  Average federal tax rates on all income quintiles fell noticeably after 2000 as a result of the recession and the tax reductions enacted beginning in 2001. 

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Another way to describe the distribution of the tax burden is to compare different groups’ shares of income before taxes and shares of taxes paid.  Higher-income groups earn a disproportionate share of before-tax income; because average federal tax rates rise with income, they pay an even larger share of federal taxes.  In 2007, households in the highest quintile earned 55 percent of before-tax income and paid almost 70 percent of federal taxes; for all other quintiles, their share of federal taxes was less than their share of income. The bottom quintile earned 4 percent of income and paid less than 1 percent of federal taxes, while the middle quintile earned 13 percent of income and paid 9 percent of federal taxes. The top 1 percent of households, not shown, earned 19 percent of income and paid 28 percent of federal taxes. 

Screen Shot 2014-03-24 at 4.45.37 PM

More the Congressional Research Service (CRS) and Congressional Budget Office (CBO):

The collapse of the housing and stock markets in 2008 and 2009 substantially decreased household net worth, which by the end of the contraction in mid-2009 had fallen $15 trillion below its level in 2007.  This large fall in net worth pushed the household debt burden to what may be an unsustainable level, especially if interest rates rise.  CRS, Page 8

Between 2007 and 2009, households in the middle three quintiles of the income distribution experienced modest declines (1 percent to 2 percent), and after-tax income increased slightly for households in the lowest quintile.   CBO, Page 9

So now you have some bullet points about what things looked like after the tax cuts and before the great recession.  Are the Democrats reporting the facts, or trying to push political fiction?

Resources Links

BEA Table

BLS - Unemployment data

CBO Tax Rates

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It was the Bush tax cuts that crashed our economy and punished the middle class. Fact or Fiction?
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