Economic Background For A Tax Reduction Bill

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Download or read book 2001 Tax Cut written by and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A major tax cut was enacted in June 2001 as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA; P.L. 107-16; H.R. 1836). This report summarizes the provisions of the bill, analyzes effects, and considers the development of the legislation. To comply with Senate procedural rules, the Act included a "sunset" provision that rescinds its tax cuts at the end of calendar year 2010. During 2002, the House (but not the Senate) passed several bills making all or some of EGTRRA's tax cuts permanent. There are indications that Congress will return to this issue in 2003. In early 2001, tax cuts were a principal focus of policymakers. In February, President Bush sent Congress the outlines of a proposal to cut taxes by an estimated $1.6 trillion over 10 years; the proposal is based on a plan the President set forth during the 2000 presidential campaign. The principal elements of the plan were a cut in marginal individual income tax rates; a tax cut for many married couples; an increased child credit; elimination of the estate and gift tax; a permanent research and experimentation tax credit; a charitable contribution deduction for non-itemizers; and several tax benefits for health care and education. In March, tax cuts similar to the President's proposal began moving through the House of Representatives. On March 8, the House approved H.R. 3, containing a cut in marginal tax rates; on March 29, the House approved H.R. 6, containing tax cuts for married couples and an increase in the child credit; and on April 4, the House approved H.R. 8, which would phase out the estate and gift tax. On May 2, the House approved H.R. 10, containing tax reductions related to pensions and retirement. On May 15, the Senate Finance Committee approved an omnibus bill including elements of all of these proposals, plus education tax benefits. The bill was reported as an amended version of H.R. 1836, the Economic Growth and Tax Relief Reconciliation Act of 2001 that was passed by the House on May 16; the bill was approved by the Senate with further amendments on May 23. The principal differences between the House, Senate, and Administration plans were a larger tax-rate cut in the President's and House plans than in the Senate bill; a retroactive component in the House and Senate bills designed to provide near-term economic stimulus; effective dates in the Senate bill that were generally somewhat later than those in the President's proposal and the House bills; pension provisions in the House and Senate plans, but not in the President's; and health provisions in the President's plan but generally not in the House or Senate proposals. On May 26, the House and Senate both approved a conference version of EGTRRA. The bill's reduction in marginal individual income tax rates is smaller than proposed by the House or the President and larger than proposed by the Senate, but is closer to the Senate bill than the other proposals. Beyond the rate cuts, the bill's major elements are: tax cuts for married couples, phase-out of the estate and gift tax, an increase in the child tax credit, more generous individual retirement account (IRA) and pension provisions, tax benefits for education, and a number of other items. President Bush signed the tax cut bill on June 7.