US Congress Passes $1.5 Trillion Tax Cut
The Congress Passed a $1.5 trillion tax cut which had been proposed by President Bush. The tax cut gave immediate rebates of $500 to single filers and $1000 to joint filers. It lowered almost all rates, dropping the highest rate from 39.6 pct to 35 pct. It dropped the lowest bracket to 10 percent. The tax cuts were set to expire in 2010.
When the Bush administration entered office, the primary fiscal concern was what would happen if the government paid off its debt. The tax increase during the Clinton Administration resulted in the government running a surplus, and that would eventually have paid off the US debt.
However, the new Republican administration had other ideas. They felt the money should be returned to the American people They thus pushed for two tax reduction packages the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The two acts lower all income tax rates. The lowest rates went from 15% to 10%, and the highest rate went from 39.6% to 35% In addition estate taxes were eliminated. The child tax credit was increased from $500 to $1000
Those favoring the tax cut claimed that it would pay for itself in higher growth. In fact that growth never came and instead it is estimated that the tax cuts created $1.5 trillion in debt in the decade after it passed.