JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003
CAPITAL GAINS TAX CUT
The Jobs and Growth Tax Relief Reconciliation Act of 2003 (HR 2), approved by the House and Senate on May 23 and was signed by President Bush on May 28, 2003. The key provisions of the JGTRRA is a dividend and capital gains tax cut. The top rate is reduced from 20% to 15% through 2008. The 10% capital gain rate is reduced to 5% for taxpayers in the lower two tax brackets through 2007 and eliminated for 2008,. Congress will probably extend this tax cut and may ultimately make the tax cut permanent.
2003 -2004 INDIVIDUAL TAX CUTS
For 2003 and 2004, the JGTRRA accelerate some tax reductions previously scheduled for later tax years. The Act:
�œ increases the child tax credit from $600 to $1,000;
�œ accelerates the expansion of the 10 percent tax bracket, thereby lessening the tax rate for some taxpayers;
�œ eliminates the marriage tax penalty by increasing the maximum amount of income included in the 15% income tax-rate bracket for joint returns to twice that for single returns;
�œ accelerates the expansion of the 10 percent tax bracket from $6,000 to $7,000 for single individuals and from $12,000 to $14,000 for married persons filing jointly;
�œ accelerates the tax rate cuts that were scheduled for 2006 to take effect in 2003. The 27 percent tax rate is lowered to 25 percent, the 30 percent rate is lowered to 28 percent, the 35 percent rate is lowered to 33 percent, and the 38.6 percent rate is lowered to 35 percent.
�œ increase the alternative minimum tax amount by $4,500 for single filers and $9,000 for joint filers.
BUSINESS TAX PROVISIONS
JGTRRA contains several business provisions. The bonus depreciation rate established by the Job Creation and Worker Assistance Act of 2002 is increased from 30 percent to 50 percent through December 31, 2004. The amount small businesses can expense under Code Sec. 179 is increased from $25,000 to $100,000 for 2003 through 2005. Qualifying capital purchases also increase from $200,000 to $400,000. These levels for determining the expensing of capital purchase will be indexed for inflation.
Finally, the package sends $20 billion in aid to states for fiscal years 2003 and 2004.
In order to limit the �gprojected�h fiscal impact so that Congress can continue excessive spending, the Jobs and Growth Tax Relief Reconciliation Act of 2003 contains mostly expiring provisions. By having most of the provisions expire between 2004 and 2008, thereby reverting to the current rates, the average 10 year cost is reduced. If tax cuts were extended to 2013, JGTRRA could cost $800 billion to $1 trillion over 10 years, according to the Center on Budget Policy and Priorities (CBPP).far more than the estimated to cost about $350 billion over 10 years.