Wednesday, May 28, 2003

Historic tax cut package will benefit millions this summer

By MAC COLLINS
Congressman

The House and Senate last week agreed on a final bill to ease the tax burden on all Americans. Consisting of a mix of marginal rate reductions, capital gains and dividend reductions, and measures to improve capital and create jobs, coupled with direct aid to states, the measure will help to grow employment, improve consumer confidence, and stimulate investment.

The bill, a result of a conference committee between the House and Senate, makes significant strides toward easing the burden on American taxpayers and encouraging job growth.

Additionally, the bill incorporates portions of four tax bills drafted by me and submitted on the first legislative day of the 108th Congress. These measures provide relief from the Alternative Minimum Tax, reduce the tax on dividends, lower the capital gains tax, and address the treatment of depreciation for capital investments.

Any reduction in taxes paid by Americans who work hard everyday, providing for their families, to contribute to their communities, to contribute to their churches, who pay their taxes and play by the rules is a step in the right direction. The American work force is made up of a wide range of people, from farmers, small business owners, teachers, fire fighters and police officers, small engine mechanics, airline pilots, and a whole host of others, who make up the economy of this nation.

A smaller version of the House-passed bill, many provisions remained intact with minor alterations to their expiration. The bill contains an acceleration of marginal rate reductions, an expansion of the lowest marginal rate to include more lower-income taxpayers, treatment of dividends as capital gains with a lower 15 percent rate and a 5 percent rate for low-income tax payers that will decrease to zero, marriage penalty relief, child credit expansion, and small business expensing incentives.

The bill also contains provisions to aid cash-strapped states. H.R. 2 provides $20 billion in much needed relief to states over the next two years. Of this amount, over the next two years Georgia will receive almost $222 million in Medicaid dollars for purposes such as continued access to rural hospitals, and $278 million in flexible funding that will mean more dollars for first responders, homeland security, education, and other needs in Georgia.

Although several of the measures of the House passed bill remain partially intact, the narrow majority of votes in the Senate doomed the final size of the package to less than half of what the President requested.

Too few votes in the Senate led to too small a package. Half the size means half the effectiveness.

Here's a summary of the Jobs and Growth Tax Relief Reconciliation Act of 2003:

Acceleration of 2001 Bush tax cuts for individuals.

Child credit. Increases child credit to $1,000 for 2003, 2004. Families will receive a "child credit" check this year of up to $400 per child.

10 percent bracket. Accelerates the expansion of the 10 percent bracket for 2003, 2004.

Marriage penalty relief. Accelerates the expansion of the 15 percent bracket and the increase in the standard deduction for married persons filing joint returns for 2003, 2004.

Individual rate cuts. Accelerate the 2006 individual rate cut schedule to 2003. (Rates reduced from 27 percent to 25 percent; 30 percent to 28 percent; 35 percent to 33 percent and 38.6 percent to 35 percent.)

Increase individual AMT exemption amount. Increases the AMT exemption amount by $4,500 for single persons and $9,000 for joint filers for 2003, 2004.

Business and investment incentives include:

Bonus depreciation. Increases bonus depreciation from 30 percent to 50 percent and extends through December 31, 2004.

Small business expensing. For 2003 through 2005, increases the amount that small businesses can expense (immediately deduct) from $25,000 to $100,000.

Increases definition of small business from $200,000 of capital purchases to $400,000. Both amounts are indexed for inflation in 2004 and 2005.

Dividends and capital gains. Dividend and capital gain tax rate reduction 5/15. For taxpayers in the lowest two tax brackets, reduces the tax rate on dividends and capital gains to 5 percent through 2007 and zero percent in 2008. For all other taxpayers, reduces the tax on dividends and capital gains to 15 percent through 2008.

Aid to states: $20 billion of help to states. $10 billion will be delivered to states in 2003, and an additional $10 billion will be provided in 2004. For Georgia $221.71 million for Medicaid and $278.38 in flexible funding.

Quick facts on the Jobs and Growth Tax Relief Reconciliation Act of 2003:

In 2003, 91 million taxpayers will receive, on average, a tax cut of $1,126 under the Jobs and Growth Act of 2003.

68 million women will see their taxes decline, on average, by $1,338.

45 million married couples will receive average tax cuts of $1,786.

34 million families with children will benefit from an average tax cut of $1,549.

6 million single women with children will receive an average tax cut of $558.

12 million elderly taxpayers will receive an average tax cut of $1,401.

23 million small business owners will receive tax cuts averaging $2,209.

3 million individuals and families will have their income tax liability completely eliminated by the Act.

A married couple with one child and income of $40,000 will see their taxes decline by $732 (from $2,235 to $1,503) in 2003, a decline of 33 percent.

Taxes are reduced for 26 million taxpayers with income from dividends and capital gains by an average of $798. Among those with tax cuts will be 7 million elderly taxpayers whose taxes will decline, on average, by $1,088.

This year, a typical family with one child will receive a check for $400. A typical family with two children will receive a check for $800. Eligible taxpayers would receive an average tax cut of $623 each year as a result of the increase in the child tax credit.

Workers will not need to take any action to have their withholding adjusted to reflect the marginal rate cuts. Their paychecks should reflect the tax relief as soon as employers and payroll processors implement the new withholding tables.