Congress Enacts $350 Billion Tax Cut

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Congress Enacts $350 Billion Tax Cut

By Stephen L. Owen, Nicholas Minear and Robert Rothman

On May 28, 2003, President Bush signed the Jobs and Growth Tax Relief Reconciliation Act of 2003, containing the third-largest tax reduction in U.S. history, as well as $20 billion in federal aid to states and localities over a 10-year period. This alert outlines the key changes in the Act's tax reduction package, the impact of those changes, and the prospects for future developments on taxes in the wake of this bill.

Key Elements of the Act's Tax Reduction Package

The Act's tax reduction package is targeted primarily at individuals but also includes some business tax breaks, particularly for small businesses. The key elements are:

Tax rate reduction for capital gains and qualifying dividends

Acceleration of 2001 general tax rate cuts

Expansion of 2001 increase in alternative minimum tax (AMT) credit

Increased amount eligible for expensing treatment by small businesses

Increased amount eligible for "bonus depreciation" treatment

Acceleration of 2001 increase in the child tax credit

Acceleration of 2001 "marriage penalty" relief

POLICY BACKGROUND

At the beginning of the year, President Bush proposed a complete exclusion from tax of all dividends received by individuals to the extent such dividends were ...

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