FROM THE OFFICE OF PUBLIC AFFAIRS

April 9, 2004
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April 15th Tax Day Reminder: Millions of Individuals and Families are Benefiting from Tax Relief Plan

As a result of the President’s Economic Growth and Tax Relief Reconciliation Act of 2001 and Jobs & Growth Tax Relief Reconciliation Act of 2003 millions of Americans will see higher refunds or lower tax bills this year. 

Treasury’s data shows that American families are seeing a significant reduction in their tax burden because of the tax relief packages that the President has signed since taking office.  The President’s 2001 and 2003 tax relief plans mean that in 2004, every American who would have paid income taxes before the tax relief was enacted in 2001 will receive a tax cut in 2004.

The President’s Tax Cuts Mean Significant Tax Relief for Working American Families  

• Expanding the 10% bracket and doubling the child tax credit will benefit low income Americans 
• Nearly 5 million taxpayers, including 4 million taxpayers with children, will have their income tax liability completely eliminated in 2004.
• Low-income families will also benefit from provisions that make the child credit refundable for more families and reduce marriage penalties caused by the EITC.

•  111 million individuals and families will receive an average tax cut of $1,586 in 2004 because of the tax cutes of 2001 and 2003.
• 49 million married couples will have an average tax cut of $2,602.
• 43 million families with children will receive an average tax cut of $2,090.
• 14 million elderly individuals will see their taxes fall, on average, by $1,883.
• 25 million small business owners will receive an average tax cut of $3,001.

If Congress Does Not Act, Americans Will Pay Higher Taxes in 2005

•  If the tax cuts that expire after 2004 are not extended for 2005, taxes will increase for taxpayers who otherwise would benefit from these provisions. 
• In 2005, the increased child credit, additional marriage penalty relief, and expanded 10 percent bracket will sunset, increasing the tax burden on a family of four earning $40,000 by $915.
• Taxpayers will face a tax increase of $6.1 billion if the expanded 10 percent rate is not extended.
• Taxpayers will face a tax increase of $9.1 billion in higher marriage penalty taxes.
• Families with children will face a tax increase of $13.4 billion if the child tax credit is not extended. 

•  94 million taxpayers would pay, on average, a tax increase of $538.  
• 70 million women would see their taxes increase, on average, by $662.
• 46 million married couples would pay, on average, an additional $906 in taxes.
• 38 million families with children would incur an average tax increase of $902.
• 8 million single women with children would see their taxes increase, on average, by $368.
• 11 million elderly taxpayers would pay, on average, an additional $383 in taxes.
• 23 million small business owners would incur tax increases averaging $784.
• Nearly 2 million individuals and families who currently have no income tax liability would become subject to the income tax.
• President Bush’s budget extends AMT relief through 2005.  Without these changes, these taxpayers would pay an additional $17.6 billion in tax as a result of the AMT.

In the past three years, President Bush has proposed and signed into law three bills reducing the tax burden on American families and small businesses to spur savings, investment, and job creation.

I.          ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT (Signed into law on June 7, 2001)

• Reduced tax rates, including a new 10 percent tax bracket, for every American who pays income taxes
• Increased the child tax credit to $1,000 by 2010
• Reduced the marriage penalty beginning in 2005
• Phased out the death tax
• Increased education tax benefits
• Expanded pension and saving opportunities

II.        JOB CREATION AND WORKER ASSISTANCE ACT (Signed into law on March 9, 2002)

• Provided 30-percent bonus depreciation for business investment in new equipment
• Provided emergency tax relief to New York and other areas affected by the terrorist attacks of September 11, 2001

III.       JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT (Signed into law on May 28, 2003)

• Accelerated income tax rate reductions effective January 1, 2003
• Expanded the10 percent bracket effective January 1, 2003
• Increased the child credit to $1,000 effective January 1, 2003
• Reduced the marriage penalty effective January 1, 2003
• Quadrupled small business expensing from $25,000 to $100,000
• Increased bonus depreciation for businesses to 50 percent through 2004
• Reduced the top tax rate on dividends and capital gains to 15 percent

Repealing these laws would result in an immediate tax increase on American families and businesses.  For example, if none of the President’s tax relief had been enacted, in 2004:

• 111 million Americans would pay, on average, $1,586 more in taxes;
• 81 million women would pay, on average, $1,878 more in taxes;
• 49 million married couples would pay, on average, $2,602 more in taxes;
• 43 million families with children would pay, on average, $2,090 more in taxes;
• 11 million single women with children would pay, on average, $921 more in taxes;
• 14 million elderly individuals would pay, on average, $1,883 more in taxes;
• 25 million small business owners would pay, on average, $3,001, more in taxes; and
• Nearly 5 million individuals and families who currently have no income tax liability would become subject to the income tax.

The cumulative benefit of these three laws for family budgets and business investment is significant.  Under these laws, last year:

• A family of four earning $40,000 saw tax relief of $1,933;
• 25 million small business owners saved an average of $2,853; and
• 26 million investors saved an average of $798 from lower rates on dividends and capital gains, including 7 million seniors who will save an average of $1,088.

The cumulative effect on the economy is just as strong, laying the groundwork for increased economic growth and job creation. According to the Department of the Treasury, by the last quarter of 2003, the tax relief signed by President Bush had:

• Reduced the unemployment rate by nearly 1 percentage point below where it would have been otherwise;
•  Increased the jobs available to Americans by as many as 2 million; and
• Increased real GDP by as much as 3 percent.

President Bush has called on Congress to act now to prevent tax increases.  Failure to permanently extend these tax cuts would raise taxes on American taxpayers in future years:

• In 2005, the increased child credit, additional marriage penalty relief, and expanded 10-percent bracket will sunset, increasing the tax burden on a family of four earning $40,000 by $915;
•  In 2006, allowable small business expensing will shrink from $100,000 to just $25,000, increasing the cost of capital investments for America’s small businesses;
• In 2009, the top tax rate on dividends will increase from 15 to 35 percent, while the tax on capital gains will climb from 15 to 20 percent, raising the tax burden on retirees and families investing for their future; and
•  In 2011, the rate relief, new 10-percent tax bracket, death tax repeal, marriage penalty relief, and all the remaining tax relief enacted over the past three years will sunset, resulting in tax increase for every American man or woman who pays income taxes.

EXAMPLES:

If the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) were repealed, taxes would be raised on millions of hardworking American families.

Example 1: 

If EGTRRA & JGTRRA were repealed, a married couple with one child and income of $40,000 will see their taxes increase by $1,448 (from $1,435 to $2,883), an increase of 101 percent.

Example 2: 

If EGTRRA & JGTRRA were repealed, a married couple with two children and income of $40,000 will see their taxes increase by $1,948 (from a payment from of the government of $30 to liability of $1,918), an increase of 6393 percent.

Example 3: 

If EGTRRA & JGTRRA were repealed, a married couple with two children and income of $60,000 will see their taxes increase by $1,715 (from $2,805 to $4,520), an increase of 61 percent.

Example 4: 

If EGTRRA & JGTRRA were repealed, a married couple with two children and income of $80,000 will see their taxes increase by $2,326 (from $5,265 to $7,591), an increase of 44 percent.

Example 5: 

If EGTRRA & JGTRRA were repealed, a married couple, both aged 65, with income of $40,000 (of which $2,000 is dividends and $15,000 is Social Security benefits) will see their taxes increase by $705 (from $645 to $1,350), an increase of 109 percent.

Example 6: 

If EGTRRA & JGTRRA were repealed, a married couple, both aged 65, with income of $80,000 (of which $4,500 is dividends and $20,000 is Social Security benefits) will see their taxes increase by $2,262 (from $7,376 to $9,638), an increase of 31 percent.

Attached are detailed charts that show the tax benefits Americans received from the EGTRRA & JGTRRA.

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