Making 2001 Tax Cuts Permanent
December 20, 2002
A new study by the Heritage Foundation recommends making the Bush 2001 tax cut package permanent. The study argues that by making the reductions permanent and fully effective immediately, the cuts would benefit individuals, families, businesses, the economy, and the stock market.
The study also showed the consequences of repealing the Bush 2001 tax plan in 2003:
- Taxes would increase and refunds would be reduced for filers in all income classes in 2004.
- Overall, the rate of increase in income taxes after refundable credits would be greatest for those with incomes between $10,000 and $30,000.
- Many tax filers with incomes less than $15,000 would notice the tax change as a reduction in their refundable tax credits.
- Taxpayers with incomes over $500,000 would have the smallest percentage increase.
Other consequences of repealing the tax cuts in 2003 include:
- All tax filers including those with incomes under $10,000 would lose the benefit of the new 10 percent tax bracket.
- This new bracket lowers the tax rate on the first $6,000 of income for single filers and the first $12,000 of income for married couples filing jointly.
- The new bracket is a major source of tax relief for tax filers with incomes less than $100,000.
- Filers with incomes between $10,000 and $30,000 would also lose the benefits provided by changes in the child tax credit, and repealing the tax cut would reduce the value of the child credit by over 15 percent in 2004.
In addition, many taxpayers who pay little if any tax would no longer qualify for the refundable child credit.
Source: Lawrence H. Whitman, "Make the Tax Cuts Permanent and Fully Effective Now," The Heritage Foundation, November 22, 2002.
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