I have been debating this with friends, family, and fellow bloggers. I have seen study after study that shows the tax cuts implemented in 2001 set us on a path of record deficits. The non-partisan Tax Policy Center has worked up the numbers.
Distribution of the 2001 – 2008 Tax Cuts
Congress has cut taxes every year since 2001, most importantly with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).
The 2001–2006 tax cuts reduced most individual tax rates including those on capital gains and dividends; expanded the child tax credit; increased incentives to save; phased out the limitations on itemized deductions and personal exemptions for high-income taxpayers; and phased out the estate tax. Virtually all of the cuts end by 2011 when EGTRRA and JGTRRA sunset. Source: Major Enacted Tax Legislation, 1940-2009
The revenue cost of the tax cuts totals approximately $2.2 trillion over the 2001–2010 period. Annual costs will rise if Congress extends the tax cuts beyond 2010 or continues AMT relief after 2009. Source: The Distribution of the 2001-2006 Tax Cuts: Updated Projections, July 2008
The tax cuts have disproportionately benefited high-income taxpayers. In 2010, the tax cuts will raise after-tax income by 0.7 percent for the lowest quintile, by 2.5 percent for the middle quintile, and by 4.0 percent for the top quintile.
Over the long-term, tax cuts must be financed through spending cuts, other tax increases, or a combination of the two. Who bears the cost of that financing will determine the ultimate distribution of the 2001-2008 tax cuts. The more progressive the method of finance, the less regressive the distribution of the tax cuts will be.