Jobs and Growth Tax Relief Reconciliation Act of 2003
Encyclopedia
The Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA", ), was passed by the United States Congress
on May 23, 2003 and signed into law by President
George W. Bush
on May 28, 2003. Nearly all of the cuts—individual rates, capital gains, dividends, estate tax—were set to expire after 2010.
Among other provisions, the act accelerated certain tax changes passed in the Economic Growth and Tax Relief Reconciliation Act of 2001
, increased the exemption amount for the individual Alternative Minimum Tax
, and lowered taxes of income
from dividend
s and capital gain
s. The 2001 and 2003 acts are known together as the "Bush tax cuts
".
" relief was accelerated to 2009 levels. In addition, the threshold at which the alternative minimum tax
applies was also increased.
and the amount a taxpayer may choose to expense under Section 179, allowing them to deduct the full cost of the item from their income without having to depreciate the amount.
In addition, the capital gains tax
decreased from rates of 8%, 10%, and 20% to 5% and 15%. Capital gains taxes for those currently paying 5% (in this instance, those in the 0% and 15% income tax brackets) are scheduled to be eliminated in 2008. However, capital gains taxes remain at the regular income tax rate for property held less than one year. Certain categories, such as collectibles, remained taxed at existing rates, with a 28% cap. In addition, taxes on "qualified dividends" were reduced to the capital gains levels. "Qualified dividends" includes most income from foreign corporations, real estate investment trust
s, and credit union
and bank
"dividends" that are nominally interest
.
Final Senate vote:
were changed.
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
on May 23, 2003 and signed into law by President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
on May 28, 2003. Nearly all of the cuts—individual rates, capital gains, dividends, estate tax—were set to expire after 2010.
Among other provisions, the act accelerated certain tax changes passed in the Economic Growth and Tax Relief Reconciliation Act of 2001
Economic Growth and Tax Relief Reconciliation Act of 2001
The Economic Growth and Tax Relief Reconciliation Act of 2001 , was a sweeping piece of tax legislation in the United States by President George W. Bush...
, increased the exemption amount for the individual Alternative Minimum Tax
Alternative Minimum Tax
The Alternative Minimum Tax is an income tax imposed by the United States federal government on individuals, corporations, estates, and trusts. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold . This exemption is substantially higher than the...
, and lowered taxes of income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
from dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s and capital gain
Capital gain
A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor...
s. The 2001 and 2003 acts are known together as the "Bush tax cuts
Bush tax cuts
The Bush tax cuts refers to changes to the United States tax code passed during the presidency of George W. Bush and extended during the presidency of Barack Obama that generally lowered tax rates and revised the code specifying taxation in the United States...
".
Description of cuts
JGTRRA continued on the precedent established by the 2001 EGTRRA, while increasing tax reductions on investment income from dividends and capital gains.Accelerated credits and rate reductions
JGTRRA accelerated the gradual rate reduction and increase in credits passed in EGTRRA. The maximum tax rate decreases originally scheduled to be phased into effect in 2006 under EGTRRA were retroactively enacted to apply to the 2003 tax year. In addition, the child tax credit was increased to what would have been the 2010 level, and "marriage penaltyMarriage penalty
The marriage penalty in the United States refers to the higher taxes required from some married couples, where spouses are making approximately the same taxable income, filing one tax return than for the same two people filing two separate tax returns if they were unmarried...
" relief was accelerated to 2009 levels. In addition, the threshold at which the alternative minimum tax
Alternative Minimum Tax
The Alternative Minimum Tax is an income tax imposed by the United States federal government on individuals, corporations, estates, and trusts. AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold . This exemption is substantially higher than the...
applies was also increased.
Investments
JGTRRA increased both the percentage rate at which items can be depreciatedDepreciation
Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....
and the amount a taxpayer may choose to expense under Section 179, allowing them to deduct the full cost of the item from their income without having to depreciate the amount.
In addition, the capital gains tax
Capital gains tax in the United States
In the United States, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. Capital gains are generally taxed at a preferential rate in comparison to ordinary income...
decreased from rates of 8%, 10%, and 20% to 5% and 15%. Capital gains taxes for those currently paying 5% (in this instance, those in the 0% and 15% income tax brackets) are scheduled to be eliminated in 2008. However, capital gains taxes remain at the regular income tax rate for property held less than one year. Certain categories, such as collectibles, remained taxed at existing rates, with a 28% cap. In addition, taxes on "qualified dividends" were reduced to the capital gains levels. "Qualified dividends" includes most income from foreign corporations, real estate investment trust
Real estate investment trust
A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors...
s, and credit union
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
and bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
"dividends" that are nominally interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
.
Legislative History
Final House vote:| Vote by Party | Yes | No | ||
|---|---|---|---|---|
| Republicans | 224 | 99.6% | 1 | 0.4% |
| Democrats | 7 | 3.4% | 198 | 96.6% |
| Independents | 0 | 0.0% | 1 | 100% |
| Total | 231 | 53.6% | 200 | 46.4% |
| Not voting | 4 | 0 |
Final Senate vote:
| Vote by Party | Yea | Nay |
|---|---|---|
| Republicans | 48 | 3 |
| Democrats | 2 | 46 |
| Independents | 0 | 1 |
| Total | 50 | 50 |
| Vice President Dick Cheney(R): Yes | ||
Tax bracket comparison
The tax cuts enacted by this legislation were retroactive to January 1, 2003 and first applied to taxes filed for the 2003 tax year. These individual rate reductions are scheduled to sunset on January 1, 2011 along with the Economic Growth and Tax Relief Reconciliation Act of 2001 unless further legislation is enacted to extend or make permanent its changes. This comparison shows how the ordinary taxable income brackets for each filing statusFiling Status (federal income tax)
Filing Status is an important factor when computing taxable income under the Federal Income tax in the United States. The federal tax filing status defines the type of tax return form an individual will use. Filing status is based on marital status and family situation...
were changed.
Single
| Tax Year 2002 | Tax Year 2003 | ||
| Income level | Tax rate | Income level | Tax rate |
|---|---|---|---|
| up to $6,000 | 10% | up to $7,000 | 10% |
| $6,000 - $27,950 | 15% | $7,000 - $28,400 | 15% |
| $27,950 - $67,700 | 27% | $28,400 - $68,800 | 25% |
| $67,700 - $141,250 | 30% | $68,800 - $143,500 | 28% |
| $141,250 - $307,050 | 35% | $143,500 - $311,950 | 33% |
| over $307,050 | 38.6% | over $311,950 | 35% |
Married filing jointly or Qualifying widow(er)
| Tax Year 2002 | Tax Year 2003 | ||
| Income level | Tax rate | Income level | Tax rate |
|---|---|---|---|
| up to $12,000 | 10% | up to $14,000 | 10% |
| $12,000 - $46,700 | 15% | $14,000 - $56,800 | 15% |
| $46,700 - $112,850 | 27% | $56,800 - $114,650 | 25% |
| $112,850 - $171,950 | 30% | $114,650 - $174,700 | 28% |
| $171,950 - $307,050 | 35% | $174,700 - $311,950 | 33% |
| over $307,050 | 38.6% | over $311,950 | 35% |
Married filing separately
| Tax Year 2002 | Tax Year 2003 | ||
| Income level | Tax rate | Income level | Tax rate |
|---|---|---|---|
| up to $6,000 | 10% | up to $7,000 | 10% |
| $6,000 - $23,350 | 15% | $7,000 - $28,400 | 15% |
| $23,350 - $56,425 | 27% | $28,400 - $57,325 | 25% |
| $56,425 - $85,975 | 30% | $57,325 - $87,350 | 28% |
| $85,975 - $153,525 | 35% | $87,350 - $155,975 | 33% |
| over $153,525 | 38.6% | over $155,975 | 35% |
Head of household
| Tax Year 2002 | Tax Year 2003 | ||
| Income level | Tax rate | Income level | Tax rate |
|---|---|---|---|
| up to $10,000 | 10% | up to $10,000 | 10% |
| $10,000 - $37,450 | 15% | $10,000 - $38,050 | 15% |
| $37,450 - $96,700 | 27% | $38,050 - $98,250 | 25% |
| $96,700 - $156,600 | 30% | $98,250 - $159,100 | 28% |
| $156,600 - $307,050 | 35% | $159,100 - $311,950 | 33% |
| over $307,050 | 38.6% | over $311,950 | 35% |
See also
- Taxation in the United StatesTaxation in the United StatesThe United States is a federal republic with autonomous state and local governments. Taxes are imposed in the United States at each of these levels. These include taxes on income, property, sales, imports, payroll, estates and gifts, as well as various fees.Taxes are imposed on net income of...
- Starve the beastStarve the beast"Starving the beast" is a fiscal-political strategy of some American conservatives to cut taxes in order to deprive the government of revenue in a deliberate effort to create a fiscal budget crisis that would then force the federal government to reduce spending...
- Post 1970s taxation/budget policy - Bush tax cutsBush tax cutsThe Bush tax cuts refers to changes to the United States tax code passed during the presidency of George W. Bush and extended during the presidency of Barack Obama that generally lowered tax rates and revised the code specifying taxation in the United States...
External links
- Summary of the Act(pdf file)
- Senate Roll Call Vote - Jobs and Growth Tax Relief Reconciliation Act
- The President's Agenda for Tax Relief
- Effective Federal Tax Rates Under Current Law, 2001 to 2014
- Special Report: Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), Prof. John Wachowicz at the University of TennesseeUniversity of TennesseeThe University of Tennessee is a public land-grant university headquartered at Knoxville, Tennessee, United States...