US Treasury Touts Bush Tax Relief On Anniversary Of Key Tax Cut

by Mike Godfrey, Tax-News.com, Washington

30 May 2008

The United Stated Treasury Department has released two papers which attempt to illustrate the benefits to American families and businesses of the tax relief enacted under the Bush administration over the last seven years.

The papers were released by the Treasury Department on 28th May, the five-year anniversary of President Bush's signing of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which lowered rates on capital gains and dividends.

In "Topics Related to the President's Tax Relief", the Treasury analyzed how the 2001 and 2003 tax relief, along with other tax relief passed over the last few years, has allowed more Americans to keep more money in their pockets.

According to the Treasury, one of the key findings in this paper is that, contrary to the opinions of many of Bush's tax policy critics, the individual income tax is highly progressive.

The analysis suggested that, in 2005, the top 5% of taxpayers paid more than one half (59.7%) of all individual income taxes, and the top 1% paid 39.4%.

Furthermore, it was concluded by the Department that taxpayers who rank in the top 50% of taxpayers by income pay virtually all individual income taxes.

In 2005, they paid 96.9% of all individual income taxes.

Going forward, in 2008, the President's tax relief will reduce marriage penalties by USD22.8bn in 2008, with 6.9 million fewer couples suffering marriage penalties, the paper stated.

In addition, the Treasury pointed out that the personal income tax cuts have benefited the business community by flowing through to business owners.

It said that about 70% (1 million) of the 1.4 million tax returns that benefit from lowering the top two tax brackets from 39.6% to 35% and from 36% to 33% are flow-through business owners.

The President's tax relief has also reduced the marginal effective tax rate on new investment, which, the Treasury argued, encourages additional investment, capital accumulation, and in the long-term, higher living standards for workers.

The Treasury paper also put forward calculations that it argued demonstrate how much taxes will rise for families if tax relief due to expire at the end of 2010 is not renewed. For example:

• A four-person, one-earner family with wage income each year of USD40,000 in 2007 dollars would see a tax increase of USD2,345;
• A four-person, one-earner family with wage income each year of USD80,000 in 2007 dollars would see a tax increase of USD2,000;
• A three-person, one-earner family with wage income each year of USD40,000 in 2007 dollars would see a tax increase of USD1,655; and
• A head of household with two children and wage income each year of USD30,000 in 2007 dollars would see a tax increase of USD1,615.

The analysis of the benefit of tax relief on American families and the economy includes tax legislation enacted from 2001 through 2008, notably: The Economic Growth and Tax Relief Reconciliation Act of 2001, The Jobs and Growth Tax Relief Reconciliation Act of 2003, The Working Families Tax Relief Act of 2004, The American Jobs Creation Act of 2004, The Tax Increase Prevention and Reconciliation Act of 2005, The Pension Protection Act of 2006, and The Economic Stimulus Act of 2008.

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