Terry Everett, June 9, 2003

Approximately three weeks ago the U.S. House and Senate passed the Jobs and Growth Tax Act of 2003 and it was signed into law on May 28 by President George Bush. The approval of this landmark legislation spells good news for many Federal income taxpayers who will see their tax burdens lightened.

The recently enacted tax relief bill is significant. It is the third largest tax reduction in American history, following President Ronald Reagan's 1981 tax cut plan and President Bush's 2001 monumental tax relief.

The Jobs and Growth Tax Relief Act could not come at a better time. It will lower the tax burden for nearly 90 million Americans, including 1.2 million Alabamians. It is expected to generate $200 billion in the national economy and create over a million jobs by the end of 2004 through increased spending and investment.

The cornerstone of the new tax relief bill is its immediate implementation of a lower tax bracket for tax paying Americans. For example, the number of Americans in the lowest Federal income tax bracket (the ten percent rate) will expand. Furthermore, the other Federal tax brackets above the 15 percent level will be down shifted to new rates of 25, 28, 33 and 35 percent.

The expansion of the ten percent tax bracket will benefit married taxpayers with taxable income over $12,000 and single taxpayers with taxable income over $6,000. It is estimated that more than 860,000 Alabama married couples and single filers will benefit from this provision. The resulting reduction of the 27, 30, 35, and 38.6 percent tax rates will positively impact married couples with taxable income greater than $47,450 and single taxpayers with taxable income in excess of $28,400. In Alabama, over 270,000 taxpayers will benefit from the acceleration of the lowering of the remaining Federal tax rates.

But that's not all. The new tax relief bill speeds up the 2001 plan to reduce the marriage penalty by phasing in the reduction in 2003 and 2004, instead of in 2005 through 2009. It would effectively increase the standard deduction for working married couples to double the amount of the standard deduction for single taxpayers. The new tax changes will benefit nearly 500,000 married couples in Alabama.

A provision of the new tax bill which has received much attention lately is the acceleration of the planned increase in the federal child tax credit. The 2001 tax cut law stated that American families paying federal income taxes would see a $1000 a child federal tax credit phased in between 2005 and 2010. The just-passed tax bill again speeds up this relief to 2003, resulting in a $400 refund for each child this year for families who currently pay federal income tax. In Alabama, more than 400,000 married couples and single parents will qualify for this tax refund.

Americans who invest in stocks, including ten million seniors who depend on dividend income in their retirement years, would benefit from the new tax relief law's lowering of the maximum capital gains tax rate to 15 percent this year through 2008. For taxpayers in the ten to 15 percent income tax brackets the dividends and capital gains tax rate is reduced to five percent in 2003 through 2007 and zero in 2008. More than 300,000 Alabama taxpayers will benefit from these rate reductions.

Finally, America's economic engine, our small businesses, will see relief in the form of an increase in the amount of business investment they can deduct. The amount is increased from the current $25,000 to $100,000 beginning this year.

Congressman Terry Everett represents the 2nd Congressional District of Alabama in the U.S. House of Representatives.