Tax day this year has come and gone, but as Ben Franklin knew, there is simply no escaping taxes. This is especially true if you're John McCain or Barack Obama, who enter the general campaign season with the economy as a key voter concern. Amid record-high gas prices, an ongoing credit crunch, and fears of an impending (or deepening) recession, the candidates are being asked where they stand on taxes. And you can't talk about taxes these days without going on record about the "Bush tax cuts."

The Bush tax cuts have been called everything from a panacea to a disgrace, but we wanted to take a fresh look. What exactly did they do? Here's a quick history.

What are the Bush Tax Cuts?

The Bush tax cuts actually comprise two separate acts of Congress. The first, in grand euphemistic fashion, is titled the Economic Growth and Tax Relief Reconciliation Act of 2001. Two years later, the Act was extended in the more infamous Jobs and Growth Tax Relief Reconciliation Act of 2003. Of course, both Acts come to be known by their acronyms: EGTRRA and JGTRRA, respectively.  

EGTRRA (pronounced "egg-tra" or "eg-terra" by those who actually use this in conversation) spawned from President Bush's campaign promise in the 2000 campaign to "...reduce tax rates for everyone in every bracket."  Apart from normal conservative mantra, the push to cut taxes was catalyzed by the sizeable surpluses in the federal government from 1998 to 2000, totaling approximately $400 billion over that time span. These surpluses were generally expected to continue into the foreseeable future, as economic growth continued at an unprecedented level (nevermind that it was fueled by the dot-com bubble). The tax cuts were proposed as a way to eliminate the surplus by returning it to American taxpayers' pockets. And they worked, in a way. The surplus was erased.

By the time the EGTRRA passed Congress and became law on June 7, 2001, the bubble had burst and the economy had stagnated. The Act was a sweeping revision of the tax code; the sheer volume of alterations filled books. But the main points of the 2001 Act were as follows:

• Lowered personal income tax rates

• Created a new 10% bracket; the previous low was 15%
• Incrementally reduced other tax brackets by 2006:  28% to 25%; 31% to 28%; 36% to 33%; 39.6% to 35%
• Phased out "Pease," a limitation on itemized deductions (e.g. mortgage interest, state and local taxes, charitable gifts, & medical deductions) to be repealed by 2010; this limit was fixed at 2% of adjusted gross income.

• Reduced the "marriage penalty" by increasing size of standard deduction for married couples to twice the deduction for singles
• Increased the Child Credit from $500 to $1,000 by 2010
• Increased the IRA contribution limit from $2000 to $5,000 by 2008
• Increased 401(k) and other tax-deferred limits from $10,500 to $15,000
• Phased out the estate/death tax (call it what you like) by 2010

To put this in real terms, a single unmarried filer earning $66,000 saw his income tax rate drop from a pre-tax cut level of 31% in 2000 to 27.5% the following year after EGTRRA. And it would continue to drop to 27% and then 25% after the 2003 cuts took effect. This individual benefited from shifting tax brackets; most who weren't affected by shifting brackets saw their straight tax rate dip by about 3% (not taking into account the myriad other breaks and deductions.

The Act was structured with a "sunset" provision, meaning the changes were set to expire on January 1, 2011. EGTRRA was specifically structured this way to sidestep one of the many tricky Senate rules and procedures, the Byrd rule. Named after nine-term Senator Robert Byrd (D-WV), the rule essentially allows Senators to block a bill if it creates significant budget deficits beyond a ten-year term. If invoked, the Byrd rule can only be waived by 3/5ths of the Senate, or 60 votes, a number the Republicans did not have. By adding the sunset provision to the tax bill, EGTRRA secured enough votes to pass Congress and be signed into law. But the inclusion of the sunset provision sparked a debate that is still raging over whether to make the changes "permanent."

The absurdity of calling anything in Washington "permanent" showed itself quickly, as the Bush administration and Congress set about in 2003 to update the tax legislation. What was the impetus? A stagnating economy, bearing the burden of falling interest rates, rising unemployment, the war in Afghanistan and the impending invasion of Iraq, needed a boost. So Congress wrote an act that accelerated the phase-in provisions of the 2001 tax cut, effectively skipping the incremental steps and jumping ahead to the phased-in 2006 levels.

The idea was to put money back in the hands of Americans, in hopes they would spend it and jumpstart the economy. Other aspects of the 2001 act were also accelerated in the 2003 JGTRRA bill: "marriage penalty" relief, the child tax credit, and a reduction in long-term capital gains tax rates from 8%, 10% and 20%, to 5% and 15%. JGTRRA included other investment provisions, which increased the amount of purchases that could be tax-deductible.

Congress passed JGTRRA on May 23, 2003 with a tiebreaking vote from Vice President Dick Cheney. It was signed into law by President Bush five days later.

Did it have the desired effect? By the end of 2003 the economy was clearly on the rebound. But deficits were soaring too. Politicians and economists endlessly debated whether the cuts had worked as intended or done what was needed - which was itself a big debate.   

But aren't economists supposed to know this stuff?

Not surprisingly, economists tended to divide along ideological lines when discussing the overall effects of the tax cuts. Liberal-leaning economists generally produced studies that read like this one from the Brookings Institution: "The cuts will reduce the size of the future economy, raise interest rates, make taxes more regressive, increase tax complexity, and prove fiscally unsustainable." Some were more blunt. Paul Krugman called them "irresponsible", "a poison pill", "an outrage", and charged they were sold to the American people under false pretenses. The gist of the liberal argument was that the cuts not only reduced tax revenues, but hurt the economy in the long run.

On the other side, the arguments ran like this: The cuts had a positive net effect on the economy, most of the cuts "paid for themselves" by increasing revenues (particularly capital gains revenues after 2003), and runaway government spending was the cause of the looming budget deficits.

Overall, economists seemed to have a mixed view of the EGTRRA in 2001, but were mostly negative on the 2003 accelerations. On the eve of the passage of JGTRRA, over 450 economists, including 10 Nobel laureates, signed the Economist's Statement Opposing the Bush Tax Cuts, a pointed rebuke of Bush economic policies. More studies continue to be published every year, but the balance seems to be against the cuts at the moment.

What do our (millionaire) politicians say?

Again not surprisingly, most Democrats support "rolling back" the Bush tax cuts, either in the form of legislation or allowing them to expire. The party line is that the cuts benefit the wealthy, the uber-wealthy, and soulless corporations, all traditional Bush and GOP backers. The Republican defense is that the cuts ended the recession and put money back in the pockets of the hardworking American public. Both arguments have at least some merit, and seem to convince each party's respective choirs.  But that is not for whom the preaching is meant.

As the newly minted presidential nominee, Barack Obama leads the charge for the Democrats.  He supports a complete rollback, summing up his attitude against them in the L.A. Presidential debate before Super Tuesday: "I'm not bashful about it."  Hillary Clinton echoed similar themes throughout her campaign, though tax policy was not a focal point during the primaries.

The tax cuts offer the Obama campaign a chance to tie John McCain to President Bush (current approval rating = 29%), despite the fact McCain voted against both the 2001 and the 2003 acts. McCain's distaste for economic issues has been well documented, notably his twice repeated quote that he was "not well versed on" economic matters. But he opposed the EGGTRA mostly on the ground that the plan and its effects on the federal budget were yet unknown. At the time, McCain said, "We are about to enact one of the most massive tax cuts in memory or history, and we do not have any idea how much money is going to be devoted to defense spending and how much is going to be left over for it."  Without at least some spending offsets, McCain worried that budget deficits would balloon out of control, a worry that turned out to be well-grounded. McCain was one of only two Republican Senators to vote against the EGTRRA in 2001.

McCain's opposition to the JGTRRA in 2003 began with the same qualms, but extended to the issues of war-time tax cuts and equitable distribution of those cuts. In 2003, in regards to questions about the wealthy receiving much of the benefits, McCain said, "I cannot in good conscience vote in favor of tax cuts irrespective of their size or to which segment of the population they are targeted." Later that year, he also told Tim Russert, "I would clearly support not extending those tax cuts in order to help address the deficit."

But McCain's tone on taxes has changed since he began his run for President in 2007. He now maintains that he would make the cuts permanent; in fact, his tax plan would cut taxes even more. Depending on your viewpoint, this could be McCain seeing the light or flip-flopping for personal political gain. Whatever the case, the once opposed McCain has taken up the defense of the Bush tax cuts.

McCain's tax plan actually goes far beyond Bush's, according to Jason Furman, an economic advisor to Obama. "People sometimes describe John McCain as a third term of George Bush," he said, being one of those people. "[But] I think when it comes to tax policy, that's actually unfair to President Bush. John McCain's tax policies are far more radical." McCain's plans do include a drastic reduction in discretionary spending, our good friend pork. Whether or not this strategy pays dividends at the ballot box remains to be seen.

Summary

So what can we make out of all of this? The Bush tax cuts, a phrase quickly becoming nothing more than a political sound byte, are complicated. They turned a surplus into a deficit, but were helped by factors completely unrelated. They gave almost all individuals more money in bank accounts, but helped the rich more than the poor. For the shorthand version, if you invest, you are probably better off as a result of these cuts. If you don't, you probably aren't. But is the country better off as a whole? Current conventional wisdom says no, but only time holds the true test.