Tax Cuts Will Save Americans Almost $200 Billion In 2004, Says Treasury

by Mike Godfrey, Tax-News.com, Washington

24 February 2004

According to new figures released by the US Treasury last Thursday, Americans will be wealthier to the tune of $50 billion in the first months of 2004 thanks to the tax cut package passed by Congress last May.

Moreover, higher refunds coupled with lower rates of taxation will leave Americans wealthier to the equivalent of $195 billion through 2004, according to the Treasury's calculations.

Furthermore, the administration claims:

• As a result of the tax cuts in 2003, Treasury expects that a record number of individuals will receive refunds this year.
• The President’s 2003 tax relief will increase refunds paid this spring by an average of $300.
• The President’s 2003 tax relief will increase expected refunds to Americans this spring by about $37 billion, from approximately $158 billion to $195 billion.
• The tax relief will decrease the amount that Americans who must make in tax payments this spring by approximately $13 billion, from $85 billion to $72.5 billion.
• Taken together the higher tax refunds and lower tax payments will put an additional $50 billion in the hands of American taxpayers this spring.

In addition, the Treasury forecasts that as a result of the cumulative effect of the tax cuts passed in 2001 and 2003:

• Americans will receive a total of $232 billion in tax relief in 2004.
• $176 billion in tax relief will stay in the hands of American families and small businesses to help them save and invest.
• Every American who would have paid income taxes before the tax relief was enacted in 2001 will receive a tax cut in 2004.

Nevertheless, the government warned that taxpayers will stand to lose billions in additional income if the tax cuts that expire after 2004 are not extended for 2005, pointing out that:

• Lower income taxpayers will not receive $5.7 billion in relief from the expanded 10 percent rate.
• Taxpayers will not receive $8.9 billion in marriage penalty tax relief
• Families with children will not receive $13.2 billion in relief from the child tax credit. In 2005, the increased child credit, additional marriage penalty relief, and expanded 10 percent bracket will sunset, increasing the tax burden on a family of four earning $40,000 by $915.

In all, the data suggested that 93 million taxpayers would pay, on average, a tax increase of $565.

In addition:

• 70 million women would see their taxes increase, on average, by $697
• 46 million married couples would pay, on average, an additional $960 in taxes
• 37 million families with children would incur an average tax increase of $954
• 8 million single women with children would see their taxes increase, on average, by $357
• 11 million elderly taxpayers would pay, on average, an additional $398 in taxes
• 23 million small business owners would incur tax increases averaging $831
• Nearly 2 million individuals and families who currently have no income tax liability would become subject to the income tax.

The Treasury's statement also warned that the dropping of the President’s proposal to extend Alternative Minimum Tax relief through 2005 would result in an extra $23.2 billion being paid in taxation by many Americans.

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