The Heritage Foundation

News Releases on Taxes

April 3, 2003

April 3, 2003 | News Releases on Taxes

Analysis: On Jobs, Economic Growth, House Tax Cut Outpaces Senate Tax Cut

WASHINGTON, APRIL 2, 2003-Americans can expect to see hundreds of thousands of jobs created annually over the next five years if the $350 billion tax cut the Senate passed becomes law-but far fewer than they would see under the $726 billion cut the House of Representatives approved, according to a new analysis from The Heritage Foundation.

The Senate tax cut would lead to 449,000 more jobs in 2004, say analysts in Heritage's Center for Data Analysis. That's less than half the number that would be realized under the House version: 997,000. And the differences only widen each year through 2008. By that year, the Senate tax cut generates 226,000 new jobs. The House version more than triples that amount, with 778,000 jobs created.

The contrast between the two tax cuts, says Heritage tax analyst Rea Hederman, isn't merely a result of size. "The House tax cut outperforms the Senate one not simply because it's larger, but because it includes certain features, such as ending the double taxation of dividends, that are designed to change taxpayer behavior in a way that helps the economy," he says. "Under the House tax cut, Americans would see their incomes rise, but-and this is crucial-they would have greater incentives to save, spend and invest their money."

The differences are just as stark when one considers how both budgets would affect economic growth. Over the next five years, gross domestic product under the Senate budget would rise by an average of $31 billion each year, the CDA analysts found-less than half the $71 billion in extra output Americans would see under the House plan.

More information is available online at Heritage's "Reality Check" on taxes.

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