Question

question 9 of 10

what was one effect of the bush tax cuts?

a. growth of middle class
b. increased income inequality
c. lower stock market
d. lowered national debt

Explanation:

Analyze the economic impact of the Bush tax cuts

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), collectively known as the Bush tax cuts, significantly lowered marginal income tax rates, capital gains taxes, and dividend taxes.

Evaluate the given options

• A. Growth of middle class: The benefits of the tax cuts disproportionately favored high-income earners rather than expanding or strengthening the middle class.
• B. Increased income inequality: Because the largest percentage increases in after-tax income went to the wealthiest households, the tax cuts widened the gap between the rich and the poor, leading to increased income inequality.
• C. Lower stock market: The tax cuts on capital gains and dividends were intended to stimulate investment and did not inherently lower the stock market.
• D. Lowered national debt: The reduction in federal revenue from the tax cuts, combined with increased spending (such as on the wars in Iraq and Afghanistan), significantly increased the national debt rather than lowering it.

Answer:

• (A) Growth of middle class
• (B) Increased income inequality (Correct answer)
• (C) Lower stock market
• (D) Lowered national debt