The Bush Tax Cuts and the Economy
"A series of tax cuts were enacted early in the George W. Bush Administration by the Economic
Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16) and the Jobs and
Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27). These tax cuts, which are
collectively known as the Bush tax cuts, are scheduled to expire at the end of 2010. Beginning in
2011, many of the individual income tax parameters (such as tax rates) will revert back to 2000
levels. The major tax provisions in EGTRRA and JGTRRA that are part of the current debate
over the Bush tax cuts are the reduced tax rates, the reduction of the marriage penalty (and
increase in the marriage bonus), the repeal of the personal exemption phaseout and the limitation
on itemized deductions, the reduced tax rates on long-term capital gains and qualified dividends,
and expanded tax credits. This report examines the Bush tax cuts within the context of the current
and long-term economic environment.

The U.S. economy entered into a recession in December 2007. Between the fourth quarter of
2007 and the second quarter of 2009, the economy shrank with real gross domestic product
(GDP) falling by 4.1%. The unemployment rate increased from 4.9% in December 2007 to 10.1%
by October 2009, and is currently still over 9%. As a result of reduced economic activity and
government efforts to stimulate the economy, the federal budget deficit increased from 1.2% of
GDP in FY2007 to 9.9% of GDP in FY2009. Most economic forecasts suggest the economic
outlook over the next few months is not bright and will likely be characterized by high
unemployment and sluggish economic growth. The long-term fiscal situation is unsustainable..."