Bush Signs $70 Billion In Tax Cuts Into Law

by Mike Godfrey, Tax-News.com, Washington

19 May 2006

At a ceremony outside the White House on Wednesday, President George W. Bush signed legislation that will enact tax cut legislation thought vital to sustain America's growing economy.

The $70 billion tax cut package agreed by Congress last week after many months of wrangling will ensure that the 15% rate of tax on qualifying dividends and capital gains will remain in place until the end of 2010, preventing its expiry in 2008, which would result in a hefty tax increase for many investors.

The tax cut package will also ensure the continuation of other business-related incentives, such as increased expensing for small firms, as well as a one year 'patch' to prevent more taxpayers having to file under the Alternative Minimum Tax system, which was originally intended to ensure that America's wealthiest individuals paid some tax.

However, it was the investment tax cuts above all that Bush was especially keen to see extended, and he, along with senior administration officials such as Treasury Secretary John Snow, lobbied Congress hard to ensure the passage of legislation contained these tax cuts, arguing that they are central to securing future economic growth.

According to Bush, since the dividend and capital gains tax cuts were first passed in 2003, business investment has been growing at a rate of 9% annually, with spending on equipment and software having hit record levels, reversing several years of declines. The tax cuts have also helped to add $4 trillion in new wealth to the stock market, he told the gathering of lawmakers and administration officials at the signing ceremony.

One of the most important decisions we made was to cut the taxes on dividends and capital gains," stated Bush.

"These cuts were designed to lower the cost of capital and to encourage businesses to expand and hire new workers. And these tax cuts are doing exactly what we expected," he added.

He also countered criticism that the tax cut bill will benefit only a relatively small number of wealthy taxpayers.

"They are wrong. Our pro-growth economic policies are working for all Americans," he asserted.

"Opponents of these tax cuts were wrong when they voted against them the first time. They've been wrong to oppose the extension of tax relief in the face of overwhelming evidence that the tax cuts have helped grow the economy and create millions of new jobs," he went on to add.

Bush now intends to focus his energy on ensuring that an emergency supplemental spending bill currently sitting in Congress does not exceed pre-defined limits.

"I've set a clear limit on spending that I'll accept for this legislation, and if this bill goes over the limit, or includes non-emergency or wasteful spending, I'll veto it," he warned.

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