The Heritage Foundation

WebMemo #271 on Taxes

May 7, 2003

May 7, 2003 | WebMemo on Taxes

Jobs and Growth Tax Act of 2003: Highlights of the CDA's Analysisof Chairman Thomas's Tax Legislation

Additional Jobs from Chairman Thomas's Jobs and Growth Act of 2003 (gif)

Additional Growth in Gross GDP from Chairman Thomas's Jobs and Growth Act of 2003 (gif)

Increase in Jobs to each state from Chairman Thomas's Jobs and Growth Act of 2003 (Excel)

The Center for Data Analysis (CDA) at The Heritage Foundation has produced estimates of how much the Jobs and Growth Act of 2003 would boost near and long-term economic activity. CDA economists project that:

  • The Jobs and Growth Act will likely lead private and public sector payrolls to increase by 1.2 million jobs between 2003 and 2004. In 2004 alone, the Thomas legislation will result in 828,000 additional jobs.
  • The Thomas legislation raises the rate of economic growth in 2004 from 3.3 percent to 4.0 percent. This 4 percent rate compares to growth rates in 2001 of .3 percent and in 2002 of 2.4 percent. Many economists expect the growth rate for 2003 to be only 2.7 percent.
  • The U.S. economy will produce an additional $257.7 billion in goods and services between 2003 and 2008. Across the entire 11-year period, the Gross Domestic Product (after inflation has been subtracted) is expected to grow by an additional $483.4 billion.
  • The Thomas legislation leads to a drop in the unemployment rate from a forecasted 5.4 percent in 2004 to 5.0 percent and from 5.2 percent in 2005 to 4.7 percent.
  • After-tax income of American workers is expected to grow by an additional $568 billion (after inflation) between 2003 and 2008. Over the entire budget period 2003 through 2013, disposable income will increase by an additional $749 billion.
  • The Jobs and Growth Act will lead to an increase in personal savings of $125 billion in 2004 and $96 billion in 2005. Over the six-year period 2003 through 2008, personal savings will grow by an additional $308 billion, which nearly doubles the personal savings rate.
  • The growth in taxable income is great enough to reduce the "cost" to the U.S. Treasury by $235 billion, for a revenue feedback of 46 percent. In other words, factoring in the economic growth stemming from this legislation means that the official cost of $549 billion (which does not include economic growth) will decline to $314 billion.

The Jobs and Growth Act of 2003 promises these significant economic results by:

  • Accelerating certain tax provisions enacted in 2001 (such as the child tax credit, marriage penalty relief, rate reductions and the new 10 percent rate);
  • Taxing capital gains and dividend income on the same rate structure (5 percent and 15 percent); and
  • Increasing the bonus depreciation provision of 2002, increasing small business expensing, and extending net operating loss carrybacks for five years.

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