The 2003 Tax Cut: Proposals and Issues Page: 6 of 36
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provisions were to cut the tax rates applicable to dividends and capital gains;
temporarily increase the "expensing" allowance for small business; temporarily
provide a depreciation "bonus" for investment in machines and equipment;
accelerate, to 2003, several phased-in tax cuts enacted under the Economic Growth
and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16); and temporarily
increase the alternative minimum tax (AMT) exemption for individuals.
A major difference between H.R. 2 and President's proposal was the treatment
of capital gains and dividends. As described above, the President proposed complete
elimination of individual income taxes on corporate-source capital gains and
dividends; H.R. 2 proposed a reduction of rates rather than complete elimination of
tax, and would have applied the reduced rates to most capital gains, not just those on
corporate stock. Another difference between H.R. 2 and the President's proposal was
that several of H.R. 2's accelerations of tax cuts were temporary and would have
expired at the end of 2005, reverting to the phase-in schedule enacted by EGTRRA.
These temporary provisions included widening of the 10% rate bracket, increasing
the child credit, and doubling the standard deduction for married couples. Largely
as a result of these differences, the proposed size of H.R. 2's tax cut was smaller over
10 years than the President's plan: $550 billion compared to the $726 billion
proposed by the President.2 In contrast, the bill's proposed tax cut was larger than
either the total of $422 billion of tax cuts approved by the Senate Finance Committee
on a gross basis, or the Finance bill's net tax cut of $350 billion, after subtracting the
bill's revenue-raising offsets.
The bill's principal provisions were as follows.
" Acceleration, to 2003, of individual income tax cuts enacted but
phased in under EGTRRA, including expansion of the 10% rate
bracket, reduction of marginal tax rates, an increase in the child tax
credit to $1,000, and the expanded standard deduction and 15% rate
bracket for married couples. With the exception of the reduction in
tax rates the House version of H.R. 2 proposed that each of these
provisions would have expired at the end of 2005. The proposal
reverted to the phase-in rules scheduled by EGTRRA after 2005.
" An increase in the exemption amount under the individual
alternative minimum tax (AMT). Under temporary rules enacted by
EGTRRA, the AMT exemption is $49,000 for couples and $35,750
for singles, but was scheduled to fall to $45,000 and $33,750,
respectively, for tax years beginning in 2005 and thereafter. H.R. 2
proposed to increase the AMT exemption to $64,000 for couples and
2 Along with tax cuts aimed at providing economic growth and stimulus, the President's
budget proposal contained tax cuts targeted at specific activities and investments (tax
"incentives") and would have made the 2001 tax cuts - which are scheduled to expire in
2010 - permanent. According to Joint Tax Committee estimates, the President's $726
billion growth package, his proposed tax incentives, and elimination of the 2010 expiration
would together have reduced revenue by an estimated $1,575 billion over 10 years. Neither
the proposed tax incentives nor provisions making the 2001 tax cut permanent werecontained in H.R. 2.
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Brumbaugh, David L. & Richards, Don C. The 2003 Tax Cut: Proposals and Issues, report, July 16, 2004; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc855800/m1/6/: accessed July 17, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.