|Categories:||Policy Economics Tax system Barack Obama|
During the presidential campaigns in America, a candidate is judged on among other things their proposed economic policy. Economic policy primarily entails taxes charged on commodities and services, government expenditures and interest rates. Tax policy is arguably the most important component of the economic policy. A presidential candidate must assure the electorate that his or her tax policy will facilitate a working balance between propelling the economy of the country while at the same time saving their money. A presidential candidate must walk the talk by being tax compliant and have clean tax return records. For instance, Donald Trump, the Republican nominee for 2016 presidential elections was faulted by his opponents for allegedly failing to comply with tax returns and concealing his tax return documents. In a nutshell, the tax policy is an important blueprint for economic growth, and its upon an incumbent administration to develop tax policies that are in line with the national economic policy as well as the needs of the citizens.
In some cases, implementing a tax policy outlined in the campaign manifesto is difficult. The prevalent economic situation, the rate of national expenditure and the situation of the global economy are among the factors that influence the tax policy to be used in the country. Gross Domestic Product is a central measure of economic growth. Tax policy significantly influences the GDP through labor supply, physical capital, human capital and technological innovation. For example, lowering the tax rates on wages increases after-tax income thereby increasing labor supply. At the same time, reducing tax on physical capital raises after-tax business returns thereby promoting businesses in the country. Furthermore, reducing tax on research promotes technological innovation. While taxation can increase economic efficiency, it can also lead to economy-wide distortions and reduce economic efficiency in the long run. The impact of taxation on economic efficiency is two way and largely depends on the nature of the tax and the economic activity being taxed. Any system of raising revenue leaves the consumer with a burden of expensively purchasing goods or labor in the market. The marginal tax rates affect the taxpayers motivation to save money, response to certain tax preferences or go to work. Its the marginal tax rates that affect the allocation capital and labor, which in turn affects the productivity of those resources. While the above situation can lead to market failure, an alternative solution can correct the failure. The government can preferentially promote activities that reduce negative externalities through a tax scheme that increases after-tax prices of goods to consumers and reduces after-tax profits of manufacturers. Additionally, the government can promote activities that lead to positive externalities by raising after-tax prices of goods and after-tax profits. Such practices have been applied in the past, although not evidently in the Bush or Obama administrations
Every government in the history of the United States adopted tax policies in line with global economy and internal labor, capital and technological situations in the country. When George W Bush was elected as the president of the US in 2000, he quickly embarked on a trail of historical tax reforms. Under his stewardship, the Congress passed the Economic Growth and Tax Relief Reconciliation Act in 2001 and Jobs and Growth Tax Relief Reconciliation Act in 2003. These two Acts aimed at offering tax cuts to Americans depending on their relative income and other social considerations. The impact of the 2001 Act was profound changes in the US Internal Revenue Code. The Act simplified retirement plans alongside reducing tax rates. One of the changes in the US internal revenue code was gift tax reduction. The Act proposed income tax cuts in a gradual fashion from 2001 onwards. For example, the 28% bracket was to be lowered to 25% by 2006. The 2003 Act was meant to rejuvenate the 2001 Act in the reduction of income tax for different tax brackets. At the same time, the law increased exemption for individual Alternative Minimum tax and lowered income taxes levied on capital gains and dividends. The provisions of the 2003 Act were meant to remain effective up to 2010, meaning that they spilled over to the first term of President Obama.
On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 into law. The Tax Relief Act of 2010 served as a stimulus to the two Bush Tax cuts. The act was passed to prevent the reversion of tax policy to the Clinton era tax policies. It also provided tax relief to 100 million American Middle class families as well as extending tax exemptions for capital gains and dividends. Another stimulus package for the two Bush tax cuts was the American Taxpayer Relief Act of 2012. It extended many of the provisions of the 2001 Act and 2003 Act. The central provisions of this act were to make permanent the tax relief for low income earners while opening the doors for high income tax for upper class earners. During President Obamas second term, high taxes were levied against the wealthy, while the relatively poor Americans continued to benefit from the extension of Bush tax cut policies. For instance, tax cuts on capital investment were scrapped off, and managers of private equity were supposed to pay 20% of their compensation portion under new tax policies. Observably, Obama tax policies were closely tied to specific governance issues like maintenance of health. For example, he raised taxes on tobacco and cigarettes to generate money to fund the State Children's Health Insurance Program
President George W Bush (2004-2008)
Bush took up the mantle from a regime that was largely unpopular for its tax policies. His predecessor, President Bill Clinton, has signed into law a number of Acts aimed at increasing tax on various sectors of the economy. Clintons initial idea in this tax reforms was to the Federal Deficit budget. From 1993, Clintons tax plan saw generation of $500 billion from individuals and corporate sector. I the same year, he signed the Omnibus Budget Reconciliatory Act of 1993. This act raised the income tax from 28% to 36% for Americans earning more than $115000 and up to 36.9% to those earning more than $250000. Surprisingly, even high earning Social Security beneficiaries were taxed. Tax on corporate tax was raised from 34% to 35%. Clintons era also increase in taxes levied on fuel, domestic consumer goods and capital gains. For example, tax per gallon of gas was raised by 0.43%. By the time he was leaving office in 2001, the taxpayer was under heavy tax burden, and change was required sooner than later.
Perhaps the status quo motivated Bush to come with an apparently lenient tax proposal. Bush popularized his tax cuts policy through his entire campaign. As the governor of Texas, Bush had actualized his proposal with fruitful outcomes. He was therefore certain that the tax policy would correct for the market failure while at the same time offsetting the Federal deficit budget. Bushs campaign for the first time did not differ significantly for the first and second term especially on tax policy. His garnered financial support from the wealthy class, and his promise to hi financiers was that he would work with a favorable tax policy. At the same time, Bush wanted to reprieve the American electorate of the tax burden that has been imposed to them by the former era. Therefore, his tax cut policy cut across the board, benefiting both the poor and the rich.
Among the achievements of the Bush tax cut policies were rebuttal of $300 to single citizens who had filed their taxes on time 2000, $500 for parents and $600 for married couples. In Bushs tax policy, child credit which had earlier been capped at $500 was raised to $1000 for all eligible Americans. Additionally, the tax policy gradually eliminated the death tax, doubles the standard deduction for married couples, Increased individual retirement Account and increased the Alternative Minimum Tax exemption for four years. In 2010, the policy facilitated investment in education, motivated Americans to open savings accounts and created adoption tax credit. Elimination of death tax allowed Americans to inherit wealth from their diseased relatives without high taxation of their properties.
A critique of the bush tax policy shows that the whole idea was targeted at personal gains. President Bush never actually helped the lower and middle class make strides in life. Instead, he promoted the booming businesses of his coterie: the multibillionaire club that owns most of the companies in America. For instance, President Bush met with many economists with who he discussed his tax policy with. All of them agreed to the policy, allegedly because they were Wall Street businessmen. After his re-election in 2004, Bush made a lengthy remark saying that he had gained capital on his campaign, and he was ready to spend that capital on his agenda, that is, the tax reform. A survey conducted soon after this remarks indicated that only 38% of respondents expressed optimism in his tax reforms.
Bush tax reform automatically meant that that the government will run at a deficit. By the time bush was elected as the president, there was budget surplus, which he consumed in his two terms and created a deficit instead. The government was thus forced to borrow to supplement the budget need to run internal affairs. The outcome of appropriateness of the tax reforms survey indicated that two thirds of the populace preferred funding of government projects rather than few coins on top of their gross income. It also shows that majority of the people did not welcome the reforms. Social security program did not benefit the poor as they were targeted to, but instead funneled money into the pockets of the wealth. This postulation that Bush tax reforms benefited only the wealthy is adequately supported by the income tax reductions and reductions on capital and dividends tax. Tax on dividends was reduced from 39.5% to 15 % and tax on capital gains was reduced from 20 per cent to 15 percent. However, income tax on the 10% bracket was not reduced, while that on 39.6 percent bracket was drastically reduced to 35 per cent. Exacerbated by the two wars in Iraq and Afghanistan, government expenditure skyrocketed and the country was pushed further and further into debts. In a nutshell, President Bush succeeded in implementing the tax policies he held during his initial and re-election campaigns, although a close analysis of the reforms shows that the policy had more negative than positive impacts, and lower class and Middle Americans did not consider them very necessary.
President Barack Obama (2008-2016)
In his campaign for presidency in 2008, the then Democratic Illinois Senator Barack Obama expressed adoration of the bush tax cuts that have been in operation since 2001. Obama, however, felt that some clauses of the two tax cuts acts needed to be abolished while others required to be adopted for good. For example, Obama promise to make income tax cuts for Americans earning less than $250000 a year permanent, while scrapping of tax provisions for other income brackets. His main argument was to redistribute wealth through the nation, whereby the poor retained much of what they earned while the rich offset the budget deficits and funded the social security. According to Obama, a new tax will be imposed to income earners over $250000 as a source of funds for Social Security. He also wished to keep the child tax credit, reduction in marriage penalty. McCain, Obamas rival in the presidential campaigns also agreed to Bush cuts policy to a very big extent. The two presidential hopefuls however harb...
Cite this page
Essay Sample on Tax Proposals of Bush and Obama. (2019, Dec 13). Retrieved from https://speedypaper.net/essays/tax-proposals-of-bush-and-obama
If you are the original author of this essay and no longer wish to have it published on the SpeedyPaper website, please click below to request its removal:
- Personal Experience Essay Sample: An Embarrassing Moment at School
- Free Essay Sample on Project Closure
- Essay Sample for Students: Social Developmental Strategy
- Free Essay about Mistreatment of Women in Slavery
- Zika Virus and Prenatal Development, Essay Sample for Every Student
- The Security Problem Essay Sample
- Essay Sample on Population Health Project