The Washington PostDemocracy Dies in Darkness

The legacy of the Bush tax cuts, in four charts

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With Tuesday’s House vote, the George W. Bush tax cuts, born in 2001, reach a new milestone. Originally scheduled to expire at the end of 2010, they are now permanent (or most of them, anyway). Congress voted to extend the income tax cuts for most families earning under $450,000 a year, while taxing capital gains, dividends and tax breaks at higher rates for upper-income earners.

Here’s the legacy of the Bush tax cuts, in four charts.

1. Drove the deficit : This chart from the Center on Budget and Policy Priorities shows how the Bush tax cuts are likely to continue be a major driver of federal budget deficits 20 years after they were first passed. With Congress raising taxes on the wealthy on Tuesday, the effect on deficits will be somewhat less -- about $600 billion less than shown in this chart. Still, they will remain the largest component of deficits for the foreseeable future.

2. Fueled income inequality:  This chart from the Congressional Research Service suggests that the Bush tax cuts, which significantly reduce top marginal tax rates and capital gains rates, helped widen income inequality in the 2000s. As the report says, “as the top tax rates are reduced, the share of income accruing to the top of the income distribution increases — that is, income disparities increase.” This chart shows how the percentage of income flowing to the top 0.1 percent of earners increases as top tax rates decrease.

4. Increased take-home pay for middle-class workers: While much of the perks from the Bush tax cuts flowed to the top, they also helped middle-class earners, who kept more of their earnings because of reduced tax rates. This was especially important in the last decade, since median wages stagnated, and it may be one reason why Democrats so readily pushed to extend most of the Bush tax cuts. This chart is based on data from the Congressional Budget Office. The red line shows the pre-tax average income of the middle quintile of income earners. As you can see, it is pretty flat in the 2000s. (Median income -- as opposed to average -- actually declined.) The blue line shows, however, that taxes were taking less money out of middle-class paychecks after the Bush tax cuts were put in place, offsetting some of the slow wage growth.