Jobs and Growth Tax Relief Reconciliation Act of 2003
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The Jobs and Growth Tax Relief Reconciliation Act of 2003, Public Law No. 108-27, 117 Stat. 752, was passed by the United States Congress on May 23, 2003 and signed by President Bush on May 28, 2003.
Among other provisions, the act accelerated certain tax changes passed in the Economic Growth and Tax Relief Reconciliation Act of 2001, increased the exemption amount for the individual Alternative Minimum Tax, and lowered taxes of income from dividends and capital gains.
There was considerable controversy over who benefited from the tax cuts. Bush's supporters and proponents of lower taxes claimed that the tax cuts increased the pace of economic recovery and job creation. His opponents, for their part, charged that the cuts favored the wealthy and special interests. Supporters argued that the economy was already slowing down when Bush took office and that little of the economic downturn of 2002 was due to Bush's agendas when considering lag time in the effects of policy changes on the economy. Critics argued that the tax cuts disproportionately benefited the wealthy, although this was also controversial. The tax code remained progressive, although slightly less so, on a rate basis. Income became differentiated into greater categories (such as for "qualified" dividends compared to other dividends, and different types of capital gains), which increased complexity in the tax code.
The Congressional Budget Office estimated that the tax cuts would increase budget deficits by $60 billion in 2003 and by $340 billion by 2008. Supporters of the president argue that this analysis ignores the potential growth that the act could encourage. Supporters also argue that this would be further supported by analyzing the effect of the economic shock of the terrorist events of September 11, 2001. The terrorist fears, resulting reduction in travel and consumer expenditure, and increased security expenditures, they say, are a prime example of an economic cost shock, and they suggest that the recession of 2001 and 2002 would have been drastically worse had no attempts at promoting economic growth by reducing taxes been made, though there is no empirical evidence to support this claim (nor could there be). The lag between policy making and economic impact suggests the possibility to be remote.
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[edit] Description of cuts
JGTRRA continued on the precedent established by the 2001 EGTRRA, while increasing tax reductions on investment income from dividends and capital gains.
[edit] Accelerated credits and rate reductions
JGTRRA accelerated the gradual rate reduction and increase in credits passed in EGTRRA. The maximum tax rate decreases originally scheduled to be phased into effect in 2006 under EGTRRA were retroactively enacted to apply to the 2003 tax year. In addition, the child tax credit was increased to what would have been the 2010 level, and "marriage penalty" relief was accelerated to 2009 levels. In addition, the threshold at which the alternative minimum tax applies was also increased.
[edit] Investments
JGTRRA increased both the percentage rate at which items can be depreciated and the amount a taxpayer may choose to expense under Section 179, allowing them to deduct the full cost of the item from their income without having to depreciate the amount.
In addition, the capital gains tax decreased from rates of 8%, 10%, and 20% to 5% and 15%. Capital gains taxes for those currently paying 5% (in this instance, those in the 0% and 15% income tax brackets) are scheduled to be eliminated in 2008. However, capital gains taxes remain at the regular income tax rate for property held less than one year. Certain categories, such as collectibles, remained taxed at existing rates, with a 28% cap. In addition, taxes on "qualified" dividends were reduced to the capital gains levels. "Qualified" dividends excludes most income from foreign corporations, real estate investment trusts, and credit union and bank "dividends" that are nominally interest.
[edit] Congressional action
Final House vote:
| Vote by Party | Yea | Nay | ||
|---|---|---|---|---|
| Republicans | 224 | 99.6% | 1 | 0.4% |
| Democrats | 7 | 3.4% | 198 | 96.6% |
| Independents | 0 | 0.0% | 1 | 100% |
| Total | 231 | 53.6% | 200 | 46.4% |
| Non-voting: 4 Republicans | ||||
Final Senate vote:
| Vote by Party | Yea | Nay |
|---|---|---|
| Republicans | 48 | 3 |
| Democrats | 2 | 46 |
| Independents | 0 | 1 |
| Vice President (R): Yea | ||
| Total | 51 | 50 |
[edit] Tax brackets for single filers
Ordinary taxable income for tax year 2004 for use in filing returns due April 15, 2005: (1)
| Income level | Tax rate |
|---|---|
| up to $7,150 | 10% |
| $7,151 - $29,050 | 15% |
| $29,051 - $70,350 | 25% |
| $70,351 - $146,750 | 28% |
| $146,751- $319,100 | 33% |
| over $319,100 | 35% |
Ordinary taxable income for tax year 2005 for use in filing returns due April 17, 2006: (2)
| Income level | Tax rate |
|---|---|
| up to $7,300 | 10% |
| $7,301 - $29,700 | 15% |
| $29,701 - $71,950 | 25% |
| $71,951 - $150,150 | 28% |
| $150,151- $326,450 | 33% |
| over $326,450 | 35% |
[edit] See also
[edit] External links
- Summary of the Act(pdf file)
- The President's Agenda for Tax Relief
- The Bush Tax Cuts Are Sapping America's Strength
- Effective Federal Tax Rates Under Current Law, 2001 to 2014
- Special Report: Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), Prof. John Wachowicz at the University of Tennessee.
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