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Assets of American households have surged

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Tax Cut Led to Boom in Wealth

Assets of American households have surged

There has been a great deal of discussion about recent increases in the debt held by U.S. households, but almost no discussion about the far larger increases in the value of the assets held by U.S. households.

Before the Bush tax cuts, asset values were dropping. But since 2002, the year before the Bush tax cuts took full effect, the assets of American households have surged from $47 trillion to $66 trillion. That is an increase of almost $19 trillion—or an average of roughly $10 million per minute!

Similar increases in American wealth followed the Kennedy tax cuts in the 1960s, the Reagan tax cuts in the 1980s, and even the tax cuts that a Republican Congress forced on President Clinton in the 1990s. When business taxes go down, after-tax profit goes up. Stock market values are based on anticipated future profits. When taxes on investors (like dividends and capital gains taxes) are cut, their assets automatically increase in value. Investments in homes and stocks and bonds become less risky, capital floods back into markets, and asset values explode.

That’s the theory, and, so it appears, the reality as well.

Written By

Mr. Bowyer is author of The Bush Boom and Chief Economist to BenchMark Financial Network. He can be reached through www.BowyerMedia.com.

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