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Introduction
The U.S. Congress on May 23, 2003, approved the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the Act). The Act was signed into law by President George W. Bush on May 28, 2003. Thus, the date of enactment is May 28, 2003. Individuals are the principal beneficiaries of the Act, which includes income tax rate reductions, marriage penalty relief, child tax credit increases, capital gains tax rate reductions, and dividend relief. Businesses also receive some direct tax relief in the form of an expanded "bonus" depreciation deduction and increased section 179* expensing. The provisions are effective for a limited period as a consequence of the practical need to keep the revenue cost of the legislation below $350 billion* during the 10-year budget measuring period. The following is a description of the Act. Tax Rates The Act accelerates individual income tax rate reductions first enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), Pub. L. No. 107-16, but scheduled to be phased-in through 2008. The prior individual income tax rates of 27%, 30%, 35%, and 38.6%* are reduced to 25%, 28%, 33%, and 35%, respectively, for years beginning in 2003. For most taxpayers, the Act increases the alternative minimum tax (AMT) exemption by an amount intended to prevent any tax savings from the accelerated rate cuts from being offset by AMT. Other Presidential Priorities The Act also addresses four other priorities President Bush set out in his FY 2004 budget: increase in relief from the marriage penalty, doubling the size of the child credit, expanding section 179 expensing, and dividend relief. Marriage penalty relief primarily takes the form of increasing both the upper limit of the 15% tax bracket and the standard deduction applicable to married individuals filing a joint return to twice the amounts allowable for single taxpayers for 2003 and 2004. The child credit is increased to $1,000 for 2003 and 2004. In addition, taxpayers with dependent children may receive a refund check for the 2003 increase in the child credit. With respect to section 179 expensing, both the dollar limits and the eligibility thresholds are increased. With respect to dividend relief, the Act generally reduces the maximum tax rate on dividends to 15% (5% for certain low-bracket taxpayers) for tax years beginning in 2003 through 2008. It also reduces the maximum capital gains tax rate in a similar manner. Other Provisions The Act increases the bonus depreciation deduction to 50% for qualified property that is acquired before 2005 and that meets other requirements. Provisions Not Included As this legislation moved through Congress, many other provisions -- including those to extend the net operating loss (NOL) carryback period and reduce tax rates for repatriated foreign earnings -- were proposed but were not included in the final version of the legislation. The Act does not include revenue offsets. The Senate bill included roughly $72 billion in revenue raisers, including provisions that were intended to:
* All section references are to the Internal Revenue Code of 1986, as amended. $ = USD % = percent |
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