Jobs and Growth Tax Relief Reconciliation Act of 2003

The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA", USPL|108|27, USStat|117|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 and is considerable controversy over who benefited from the tax cuts and whether or not they have been effective in spurring sufficient growth. Bush's supporters and proponents of lower taxes claimed that the tax cuts increased the pace of economic recovery and job creation. Further, proponents of the JGTRRA asserted that lowering taxes on all citizens, including the rich, would benefit all and would actually ply more money from the wealthiest Americans as they would avoid tax shelters for their money. According to the conservative Wall Street Journal editorial page, taxes paid by millionaire households more than doubled to $274 billion in 2006 from $136 billion in 2003 upon enactment of the JGTRRA. ["Their Fair Share". Wall Street Journal. July 21, 2008. http://online.wsj.com/article/SB121659695380368965.html]

Critics state that the tax cuts have failed to spur growth, while increasing the budget deficit, shifting the tax burden from the rich to the middle and working classes and further increasing already high levels of inequality.cite web|url=http://www.epi.org/briefingpapers/168/bp168.pdf|title=Price, L. (October 25, 2005). "The Boom That Wasn’t: The economy has little to show for $860 billion in tax cuts".|accessdate=2007-10-13] [cite web
url = http://www.nytimes.com/2007/01/08/washington/08tax.html?ei=5088&en=e1dc830d58c7eacb&ex=1325912400&adxnnl=1&partner=rssnyt&emc=rss&adxnnlx=1168290792-GR0HodSCCzDHPWdgiU8nlg
title = Tax Cuts Offer Most for Very Rich, Study Says
publisher = The New York Times
date = 2007-01-08
accessdate = 2007-01-14] [cite web|url=http://www.time.com/time/magazine/article/0,9171,1692027,00.html|title=Tax Cuts Don't Boost Revenues|accessdate=2007-12-07 |author=Justin Fox |date=2007-12-06 |work="Time"] cite web|url=http://logicizer.townhall.com/g/f48d2bf3-1c51-4592-aa46-191f089d752f?Docid=213|title=Economists on Net Revenue Impact of Bush Tax Cuts. ".|accessdate=2007-11-10] cite web|url=http://www.epi.org/briefingpapers/168/bp168.pdf|title=Price, L. & Ratner, D. (October 26, 2005). "Economy pays price for Bush’s tax cuts".|accessdate=2007-11-10] Before the tax cuts were signed President Bush was urged by 450 economists, including 10 Nobel Prize Laureates, in the Economists' statement opposing the Bush tax cuts not to implement his tax cutscite web|url=http://www.epi.org/stmt/2003/statement_signed.pdf|title=4. Akerlof, G., Arrow, K. J., Diamond, P., Klein, L. R., McFadden, D. L., Mischel, L., Modigliani, F., North, D. C., Samuelson, P. A., Sharpe, W. F., Solow, R. M., Stiglitz, J., Tyson, A. D. & Yellen, J. (2003). "Economists’ Statement Opposing the Bush Tax Cuts".|accessdate=2007-10-13] . Economists Peter Orzsag and William Gale described the Bush tax cuts as reverse government redistribution of wealth, " [shifting] the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes."cite web|url=http://www.brookings.edu/articles/2005/0504taxes_gale.aspx|title=Gale, G. W. & Orzsag, P. R. (May 4, 2005). "The Great Tax Shift".|accessdate=2007-11-11]

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.

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.

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.

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.

Legislative History

Final House vote:

Married filing jointly or Qualifying widow(er)

References

ee also

* Taxation in the United States

External links

* [http://www.natptax.com/taxact2003.pdf Summary of the Act(pdf file)]
* [http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=108&session=1&vote=00196 Senate Roll Call Vote - Jobs and Growth Tax Relief Reconciliation Act]
* [http://www.whitehouse.gov/news/reports/taxplan.html The President's Agenda for Tax Relief]
* [http://www.businessweek.com/magazine/content/03_32/b3845029_mz007.htm The Bush Tax Cuts Are Sapping America's Strength]
* [http://www.cbo.gov/showdoc.cfm?index=5746 Effective Federal Tax Rates Under Current Law, 2001 to 2014]
* [http://web.utk.edu/~jwachowi/hr2.html Special Report: Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)] , Prof. John Wachowicz at the University of Tennessee
* [http://www.dollarsandsense.org/archives/2008/0308drdollar.html article on impact of this Act on US economy] from Dollars & Sense magazine