(Archived Content)
This past May, the President signed the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Act provides a boost to the economy this year, and provides a sound basis for promoting economic growth in the future. The Jobs and Growth Tax Relief Act had an immediate impact on the economy, with 3rd Q GDP growth reaching 8.2%. The Jobs and Growth Tax Relief Act will continue to buoy the economy as taxpayers see increased tax refunds come April 15th from the increased child credit, reduced marriage penalty, and reduced rates, and as businesses invest to take advantage of the increased expensing and bonus depreciation.
- Taxpayers with children received an immediate boost from rebate checks of $400 per eligible child sent out in July and August.
- Because of lower tax rates and less income tax withholding, workers saw higher take-home pay in their paychecks starting in July of this year.
- Married couples benefit from reduction in the marriage penalty from expansion of the fifteen percent rate bracket and increase in the standard deduction for joint filers.
- Families benefit from increased child tax credits.
- Investors benefit from the lower tax rates on dividends and capital gains. These lower rates were a positive step toward the President’s goal of reducing the double tax on dividends, and will help promote capital formation and an ownership society.
- Small businesses are benefiting from a four-fold increase in the amount of new investment they can deduct in one year, from $25,000 to $100,000.
- All businesses are benefiting from the increase in bonus depreciation from 30 to 50 percent, as well as its extension through 2004 (2005 for longer-lived property). This change addressed what had been a weak spot in the economic recovery – low corporate investment.
We see the benefits of these tax cuts in today’s economy and in the outlook for next year:
- Business investment grew at an even faster rate, up 13 percent on an annual basis.
- The outlook for next year is excellent: The most recent survey of business economists showed that they expect growth next year to be a very healthy 4 ½ percent.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created health savings accounts (HSAs) to give individuals more choices, maintain the doctor-patient relationship, promote cost consciousness, and potentially reduce the growth of health care costs.
- Taxpayers can make tax–deductible contributions to an HSA if the individual is covered by high-deductible health insurance. Earnings on, and withdrawals from, the account are tax free if used to cover qualified medical expenses.
- HSAs are an innovative approach to give more choice to individuals and help give them more control over their medical care.
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