The Clinton Tax Hike
In 1993, President Clinton ushered through Congress a large package of tax increases, which included the following:[2]
- An increase in the individual income tax rate to 36 percent and a 10 percent surcharge for the highest earners, thereby effectively creating a top rate of 39.6 percent.
- Repeal of the income cap on Medicare taxes. This provision made the 2.9 percent Medicare payroll tax apply to all wage income. Like the Social Security payroll tax base today, the Medicare tax base was capped at a certain level of wage income prior to 1993.
- A 4.3 cent per gallon increase in transportation fuel taxes.
- An increase in the taxable portion of Social Security benefits.
- A permanent extension of the phase-out of personal exemptions and the phase-down of the deduction for itemized expenses.
- Raising the corporate income tax rate to 35 percent.
According to the original Treasury Department estimates, the Clinton tax hike was to raise federal revenues by 0.36 percent of gross domestic product (GDP) in its first year and by 0.83 percent of GDP in its fourth year, when all provisions were in effect and timing differences associated with near-term taxpayer behaviors had sorted themselves out. In 2007, the fourth-year effect would be roughly equivalent to an increase in the federal tax burden of about $114 billion
.
The 1997 Tax Cut: The Economy Unleashed
In 1997, the Republican-led Congress passed a tax-relief and deficit-reduction bill that was resisted but ultimately signed by President Clinton. The 2007 bill:
- Lowered the top capital gains tax rate from 28 percent to 20 percent;
- Created a new $500 child tax credit;
- Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education;
- Extended the air transportation excise taxes;
- Phased in an increase in the estate tax exemption from $600,000 to $1 million;
- Established Roth IRAs and increased the income limits for deductible IRAs;
- Established education IRAs;
- Conformed AMT depreciation lives to regular tax lives; and
- Phased in a 15 cent-per-pack increase in the cigarette tax.
Comparing the Periods
The Clinton years present two consecutive periods as experiments of the effects of tax policy. The first period, from 1993 to 1996, began with a significant tax increase as the economy was accelerating out of recession. The second period, from 1997 to 2000, began with a modest tax cut as the economy should have settled into a normal growth period. The economy was decidedly stronger following the tax cut than it was following the tax increase.
OMG! the dems raised taxes, the reublicans cut taxes, and the economy was better AFTER the tax cuts than it was AFTER the tax increases from the dems and "sick willy"
http://www.heritage.org/Research/Taxes/wm1835.cfm
