The bill provides immediate tax relief by reducing the current 15 percent tax rate on the first $12,000 of taxable income for couples ($6,000 for singles). A new 12 percent rate would apply retroactively to the beginning of 2001 and also for 2002. The rate would be reduced even further to 10 percent as follows: 11 percent in 2003 through 2005 and 10 percent in 2006.
In accordance with President Bush's income tax rate reductions, the plan reduces other income tax rates and consolidates rate brackets. By 2006, the present-law structure of five income tax rates (15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent) would be reduced to four rates of 10 percent, 15 percent, 25 percent and 33 percent.
The bill addresses the growing problem of the alternative minimum tax by repealing the current-law provisions that offset the refundable child credit and the earned income credit by the amount of the alternative minimum tax.
The reduction in the 15 percent bracket alone provides a tax reduction of up to $360 for couples in 2001 ($180 for singles), increasing to as much as $600 for couples in 2006 ($300 for singles).
According to the non-partisan Joint Committee on Taxation, savings to taxpayers over ten years would be $958 billion. “No individual or family should ever have to pay more than one-third of their income to Uncle Sam. Lower-income Americans shouldn’t have one-sixth of their paycheck sent right to Washington. This legislation will help everyone,” congressman Michael K. Simpson of Idaho said.
Many are calling the 4 bracket structure of the tax rates much more simplified and comprehensible. The strain on the American wallets won’t increase. The surplus won’t keep getting bigger and bigger until it blows up in everyone’s face. How many more government programs are really necessary? The tax cuts give back to the American people what they took and now when the economy is not doing that well, that money can be really well spent. By filling the pocket of consumers, the government is putting more money into the economy.
“The tax system must reward investment and hard work-- not penalize it,” congresswoman Melissa A. Hart of Pennsylvania said. “In addition to eliminating the marriage tax, doubling the child credit, and other common sense tax reforms, this legislation takes us one step closer to fairness in the tax code.” Keep up the good work, congresswoman.