IRS Tax Brackets: Understanding the Bush Tax Cuts

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), commonly referred to as the 'Bush tax cuts,' were significant changes in US tax policy enacted during President George W. Bush's presidency. These tax cuts aimed to stimulate economic growth, simplify the tax code, and reduce taxes for middle-class Americans.

One key provision created a new bottom income tax rate of 10 percent for some income previously taxed at a 15 percent rate. The tax cuts also included three components often referred to as 'middle-class' tax cuts. Additionally, the estate tax was phased out, with its repeal in 2010.

To illustrate the impact of these changes on married couples, let's examine the tax brackets for the year 2010, rounded to the nearest $1,000. The top marginal tax rates were reduced, resulting in a lower average tax rate (total tax liability as a share of total income) for all taxpayers with incomes above those thresholds.

The Bush tax cuts reduced the top four marginal income tax rates and the tax rate on capital gains and dividends. However, despite promises that these cuts would improve economic growth and pay for themselves, evidence suggests they instead ballooned deficits and debt while contributing to a rise in income inequality.

High-income taxpayers benefited most from these tax cuts, with the top 1 percent of households receiving an average tax cut of over $570,000 between 2004-2012. This increased their after-tax income by more than 5 percent each year.

In conclusion, the Bush tax cuts were a significant change in US tax policy that aimed to stimulate economic growth and simplify the tax code. While they did reduce taxes for some individuals, they also widened the wealth gap between high-income earners and the rest of the population.

Irs tax brackets