FROM THE OFFICE OF PUBLIC AFFAIRS

April 15, 2004
JS-1328

Treasury Secretary John W. Snow
Prepared Remarks
Philadelphia Chamber of Commerce
Philadelphia, Pennsylvania
April 15, 2004

Thank you so much for having me here today.

We’ve gathered on a day that is infamous in America. It’s a day that is dreaded, joked about, and even feared.

As a country, we have a healthy, historic distaste for April 15th. But tax day is actually hurting less this year, for every single American who pays income taxes.

Working families are getting essential relief from cuts in every tax bracket.

The marriage penalty has been reduced; married couples benefited from an increased standard deduction, making it, sensibly, twice the amount allowed for single taxpayers.

Parents received an increased child tax credit – now $1,000 per child, up from $600 – and an increase in the amount of expenses eligible for deduction for child and dependent care.

Americans saving for retirement benefited from expanded limits for IRA deductions.

Retirement savings were also encouraged and assisted through raising the maximum contribution that an individual can contribute to a 401(k), 403(b) or 457 plan to $13,000 in 2004 and $15,000 in 2006. Individuals over the age of 50 can now make catch-up contributions of $3,000 – going up to $5,000 starting in 2006.

American seniors are seeing the benefits specific to the President’s proposal to reduce the over-taxation of dividends.

According to a shareholders association, the President’s tax relief has resulted in a significant positive impact on dividend payments. In the time since the President proposed to reduce the over-taxation of dividends, the number of S&P 500 companies opting to pay out dividends to investors was up 43 percent in 2003 over 2002. Analysts expect dividends paid by S&P 500 firms to rise by over 10 percent in 2004, the biggest increase since 1989.

Investors were given an incentive to keep our markets healthy by the creation of a special tax rate for dividends and a reduction of the rate on long-term capital gains.

More good news: Nearly 5 million taxpayers, 4 million of them with children, will have their income tax liability completely eliminated in 2004.

Altogether, 111 million individuals and families will receive an average tax cut of $1,586 in 2004 because of the tax relief enacted in 2001 and 2003.

America’s job creators, small-business owners, including those of you here in this room today – also got significant relief. An average of $3,001 apiece through rate reductions and an increased ability to expense the cost of business investments like new equipment.

All of this means that April 15th isn’t as gloomy as it has been in years past. But even more importantly, the tax relief has led to an expanding, growing economy.

The good economic news is certainly welcome and widespread. Over three-quarters of a million new jobs were created over the past seven months, 308,000 in March alone. Our unemployment rate remains lower than the average of the 1970s, 1980s and 1990s. Without the President’s tax cuts, by the end of this year the unemployment rate would be as much as 1.6 percent higher and as many as 3 million fewer Americans would be working.

Retail sales numbers recently brought more good news; in March they were up 1.8 percent in, the biggest increase in a year. This certainly bodes well for the overall economy.

Another excellent indicator of our economic growth is the housing market.

Homeownership is at an all-time high of 68.6 percent, with substantial gains among minority homeowners. New and used home sales continue at high levels, and new home construction remains strong after hitting its highest level in 25 years in 2003.

In the last half of 2003, we saw a growth rate of 6.2 percent – that’s the strongest in nearly 20 years. Without the tax relief, it is estimated that real GDP would have been 3.5 to 4 percent lower by the end of this year.

This is all evidence of what happens when the government lets you keep more of your own money… and these are also the reasons why the President has called on Congress to make the tax cuts permanent.

Tax cuts are one of the top reasons why after-tax incomes are up 10 percent since December of 2000 – substantially above levels following the last recession.

Buoyed by the return of the stock market and strong home values, in part because of the tax cuts, household wealth is at a record high. After five consecutive quarterly increases, household net worth is up by almost $6 trillion, reaching over $44 trillion at the end of last year.

It’s important to remember that all of this good economic news has happened on the heels of an extremely difficult time in our nation’s history – both economic and otherwise.

Responding to an unprecedented series of blows to the U.S. economy – including a recession, the bursting of the high tech bubble, terrorist attacks and corporate scandals – with pro-growth policies was essential. As a result, our economy is strong and getting stronger, and our financial markets were given the needed confidence to grow.

The incentives in the President’s tax relief led to a positive response in business investment, which is back to strong growth. Technology investment is climbing rapidly. Following the enactment of the President’s Jobs & Growth Tax Relief Reconciliation Act of 2003, business investment spiked from previously low levels.

From the trough in early 2003, market equity increased more than $4 trillion throughout the year and the S&P 500, Dow Jones, and NASDAQ all posted their first annual gains since 1999.

So tax day this year is replete with good financial news. Another important issue on this day is the issue of tax compliance.

The vast majority of taxpayers are honest and seek to abide by the law… while making sure that they are not over-paying their taxes, giving Uncle Sam money they don’t have to. We need to be vigilant in protecting their rights

I am sorry to say that their task can be difficult, given the complexity of our tax code.

Simplification of the code is a goal for Congress – I know that Senator Specter supports simplification, and I commend his leadership on the issue.

While Congress works on the larger issue of simplification, the Treasury Department and IRS have taken steps to both assist honest taxpayers who struggle with the difficulty of filing their tax forms and crack down on the dishonest who are trying to take advantage of a complicated code by not paying their fair share.

There are several options that can make the burden of paying taxes a little easier.

For example, filing returns electronically. IRS e-file is the fastest, most accurate and a secure way to file a tax return. If a taxpayer is due a refund, the waiting time for e-filers is half that of paper filers. E-filing this year remains well ahead of last year’s pace; overall e-filing reached 48.5 million as of April 2nd, which is more than 5 million ahead of last year’s pace.

Corporations can file returns electronically as well. The Treasury Department introduced software in the first quarter of 2004 that enables corporations to file their tax returns electronically. This modernized platform will improve the IRS' customer service and save significant corporate resources, allowing businesses to allocate more resources for investment to create jobs and boost the economy.

Small businesses like yours can also apply online for an “Employer Identification Number,” which you need to file your returns or open bank accounts. It used to take weeks for businesses to get these numbers, now you can get them in real-time over Internet, saving valuable time and helping new businesses focus on creating business value instead of paperwork.

Millions of taxpayers also qualify for the Free File service accessed through IRS.gov. Free File offers the efficiency of e-filing without having to purchase the software. The Free File web site features private-sector partners that allow most taxpayers to prepare and file their taxes online for free. Treasury, OMB and IRS made this possible through a public-private partnership.

Any taxpayer who is having difficulty navigating the world of tax filing is encouraged to visit the IRS’s award-winning web site. Anyone with Internet access can download tax forms, instructions and publications as well as tax law information and answers to frequently-asked tax questions. A special section of IRS.gov created this year called 1040 Central offers information specifically tailored to individual filers.

Another example of assistance on IRS.gov is “Where’s my Refund?” If a taxpayer wants to know whether his or her refund has been processed or when the refund will be mailed or directly deposited, "Where's My Refund?" has the answers, also available on IRS.gov.

The benefits offered to taxpayers through e-filing and electronic assistance are terrific, and the President really wants to encourage more people to file that way. That’s why his FY 05 Budget includes a proposal to extend the filing deadline by 15 days for all taxpayers who file electronically, including those eligible for Free File. The proposal is pending in Congress.

The bottom line is that we want tax filing to be less painful for honest Americans.

For those who are not playing by the rules, however, no relief will be offered. For those who are abusing the system we are offering increased scrutiny and serious penalties.

As part of a comprehensive strategy to ensure all taxpayers pay their fair share, the Treasury Department and the IRS are moving aggressively to combat abusive tax avoidance transactions. Abusive transactions are being addressed effectively through increased disclosure by taxpayers and promoters, timely response by the Treasury Department and the IRS to transactions that are identified, and, where necessary, targeted legislative changes to the tax laws. The Administration’s actions to carry out each of these principles have been focused, significant and, most importantly, effective.

We are taking vigorous enforcement action against abusive tax shelters by increasing the disclosure of those shelters and shutting them down.

The President’s legislative proposals, if passed by Congress, will shut down specific abusive tax shelters, give the IRS important new tools and strengthen its ability to combat abusive tax shelters, and enhance the IRS’ effectiveness without compromising taxpayer protections.

We are also reining in international tax abuses and are committed to exploring ways in which the IRS can work more effectively without compromising taxpayer protections.

Americans are not accustomed to good news on tax day, but President Bush has delivered it. The news is good for working families, retirees, small business owners… literally every American who pays income taxes.

And if you have any questions about how good the news is… just take a look at the strength of our economy. It’s growing and the world is watching with great respect.

The only bad news today is for those who are trying to get out of paying their fair share… and cracking down on them is good news for the rest of America.

I understand that Americans will never look forward to, or celebrate, tax day – and we shouldn’t. We should always maintain that spirit that turned Boston Harbor into a teapot in 1773. It’s an essential part of what makes us Americans. But this year, tax day doesn’t have quite the sting that it sometimes has, and we should enjoy the good news: benefactors are as small as every individual, and as large as our growing economy.

Thank you so much for having me here today.

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