Bush Signs EGTRRA Tax Cuts - Top Rate Reduced from 39.6% to 35%, Estate Tax Phased Out, Beginning $1.5 Trillion Debt Increase

On June 7, 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) into law, enacting the first wave of the ‘Bush tax cuts’ that would add approximately $1.5 trillion to the national debt over the 2002-2011 decade, excluding interest. The legislation reduced the top individual income tax rate from 39.6% to 35% and lowered rates across multiple tax brackets. The estate tax exemption threshold was gradually increased from $675,000 to $3.5 million by 2009, while reducing the maximum tax rate for larger estates from over 50% to 45%—a dramatic reduction in taxation of inherited wealth that disproportionately benefited the wealthiest dynasties. EGTRRA created expanded tax-advantaged savings accounts and education savings provisions that primarily benefited higher-income families with disposable income to save. The Act was passed through budget reconciliation rules requiring all provisions to sunset after 10 years, with proponents assuming the cuts would either prove so popular or economically beneficial that they would be extended—a strategy that worked. High-income taxpayers benefited most: the top 1% of households received an average tax cut of over $570,000 between 2004-2012, increasing their after-tax income by more than 5% each year. The Congressional Budget Office consistently reported the Bush tax cuts did not pay for themselves, representing a substantial revenue decline that contributed to soaring deficits. EGTRRA was ideologically driven by supply-side economics and politically motivated by Republican desires to reward wealthy donors and ‘starve the beast’—reducing government revenues to force cuts in social spending. The legislation was promoted heavily by conservative think tanks including the Heritage Foundation, American Enterprise Institute, and Cato Institute, organizations funded by the same corporations and wealthy individuals who benefited most from the cuts. By reducing the estate tax, EGTRRA accelerated the formation of hereditary wealth dynasties, undermining the American principle of meritocracy and concentrating economic power across generations.