President Obama Is a Bigger Tax Cutter Than George Bush

February 29th, 2012 by 
PK

(... over his first term in office ... if you don't count inflation and population growth ... if you don't consider the whole ten year estimates ... if you count the extended 'Bush Tax Cuts' and AMT Relief in Obama's totals.)

See what I did there? Consider this article a 'choose your own adventure article'. You remember those types of books, right? You read a few pages of a book, then you get to some text which says, "If you want to do Action A, turn to page X. If you want to do Action B, turn to page Y." Well, some articles have made the claim that over his first 4 years, President Obama has been a more prolific tax cutter than President Bush. Is it the truth? It is, yes! However, this political claim (like, well, all political claims) needs to be un-spun so you can see where it comes from. I thank fellow site owner John at Married with Debt for the article idea!

The First Term Bush / Obama Tax Cutting Record

The nice thing about Javascript charts (other than this warning: click through to DQYDJ to use it!) is interactivity. The chart below is primed for you to assign your own biases to it. I have gathered data from that article from the Tax Policy Center and CBO (and included CBO estimate about the two Payroll Tax Extensions... through 2012). I probably missed some revenue raising provisions under Obama as well - the cigarette tax increase and some provisions of the Patient Protection and Affordable Care Act.

Think some categories are dubious? Click the descriptions in the legend... it will remove that tax cut from the chart, and recalculate total tax cutting. To see my thoughts? Just scroll to below the graph! (And if you don't like my data, send me better info on the revenue on these bills).

Temporary Tax Cuts vs. Permanent Tax Cuts

In every sense of the word, every Obama tax cut has been of a temporary nature. The large stimulus tax relief packages, the two years of Payroll Tax Cuts, and the extension of the Bush Tax Cuts all have expiration dates (for the record - after the 2012 election). By a strict definition, so did the Bush Tax Cuts of 2001/2003 - they had 10 year expiration dates (even though they were extended for 2 years under Obama).

One economic argument against temporary measures is from a planning perspective - temporary measures mean that recipients might do anything they can to try to take advantage of current law, while permanent changes allow future plans to target a measure. By this argument, a permanent tax increase is more stimulative than a temporary one - people will adapt their behavior to fit the new taxes. For one example, see this series we did on the Laffer Curve. (This article also gets into dynamic vs. static scoring - basically, dynamic scoring assumes that the economy will shift in reaction to tax cuts while static scoring assumes behavior will stay similar.)

So, Are the Articles Fair?

Articles like the one I linked are accurate but somewhat misleading. One merely has to look at the estimates over a 10 year time-frame to see that the Bush Tax cuts ended up leaving more money in the private economy than the Obama provisions. It also doesn't take federal spending into account.

There are two ways to spin this:

  • President Obama's tax provisions left more money in the economy during his first term.
  • President Bush's tax provisions left more money in the economy over the length the provisions were active.

Your choice... choose your own!

I sent this article back to John at Married With Debt before I posted it to get his reactions. After reading, here's what he got out of the article:

First of all I want to thank PK for tackling this question. I’m not an economist or a “numbers guy” - my background is in politics - so my interest in this topic is purely behavioral.

Though economists often have to unspin political claims, oftentimes economists need to be unspun themselves. Harry Truman once famously said (to paraphrase) - give me an economist with one arm so he can’t tell me “well, on the other hand...” Or as PK likes to say, ask 5 economists for their opinion and you’ll get 6 answers!

Let’s sum up in layman’s terms what PK concluded: President Obama is a bigger tax cutter than George W. Bush.

Now there are a lot of arguments to be made about permanent vs. temporary, and the total value of Bush’s tax cuts over a ten year period, and who did what in how many terms. But to be fair to the original query, which was a Yes or No question, we must simply say yes, Obama cut more taxes than George W. Bush.

I mentioned that I had a behavioral interest in this question. I like to see cognitive biases in action and call them out when they find their way into arguments.

The conclusion of PK’s analysis will cause some of you to suffer from confirmation bias. This is the tendency of people to reject facts that are contrary to their opinions or beliefs.

For those who think that President Obama is the biggest tax and spend liberal in history, finding out that he is a prolific tax cutter (the biggest in history?) can be hard to swallow.

An avowed Obama hater once asked me: “Name one thing Obama did to make your life better?” When I said “he cut my taxes,” the hater was speechless. To watch him fumble around for a retort was priceless. I think he is still muttering to himself in a dark room somewhere.

Please don’t take my remarks as an endorsement of any of Obama’s tax cuts, “stimulus,”or any other policies for that matter. I am simply interested in the truth within a simple question.

And before you crucify me as an Obama campaign worker, let me say this: I voted for him in 2008 but will likely not vote for him this time around. He has been a disappointment to me and his health care law forcing people to buy a product from a private company as a citizenship requirement is an unprecedented power grab and an example of how the Commerce Clause can be used to justify almost any government action or regulation.

So, readers, what do you think? Is there something to dynamic vs. static scoring? Do you see why many economists prefer permanent measures to temporary ones? Do you agree that President Obama is the greater first term tax cutter?

Editor: John has posted a response at Married With Debt. After you leave a comment, head over there and do the same.

      

PK

PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK is in his mid-30s and works and lives in the Bay Area with his wife, two kids, and dog.

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