November 3, 2003 | WebMemo on Taxes
(Click here for methodology)
The American Jobs Creation Act of 2003 that was sent to the full House on October 28 is an anemic, willowy version of the original legislation as authored by Ways and Means Chairman Bill Thomas.
If Congress really intends to use this legislation to assist the economic recovery and expand the job market then conferees should fight to include as much of the original language of H.R. 2896 as possible.
Creating Jobs & Growing GDP
The bill addresses a finding by the World Trade Organization (WTO) that current U.S. tax law provides "illegal" tax credits to businesses for the taxes those businesses pay to foreign governments. The American Jobs Creation Act eliminates those tax credits and compensates businesses through new deductions, credits and lower tax rates.
While American Jobs Creation Act does create thousands of jobs, the first version of H.R. 2896 addressed the concerns of the WTO more vigorously and contained a number of pro-growth provisions that disappeared when the final bill emerged from committee.
The original version of H.R. 2896 contained a number of provisions that would boost economic activity if enacted. The Committee dropped or revised:
Although the Committee bill still contains:
To assess the likely effects that these modifications to the original tax bill might have on U.S. economic performance, in the Heritage Foundation's Center for Data Analysis introduced the proposed tax law changes into a model of the U.S. economy. CDA analysts performed two, separate simulations: one for the original proposal and one for the compromise. In both cases, these analysts used the same model of the economy. The results show how important the pro-growth elements were to the original version of the American Jobs Creation Act.
In short, the bill that the Ways & Means Committee sent to the full House could have done much more for job creation and the general health of the U.S. economy than the legislation that is now before the full House. The original version of the American Jobs Creation Act did more for job creation than the Committee version because it cut tax rates more, reduced the taxes on capital more aggressively, provided stronger incentives to bring foreign investments by U.S. companies back to the United States, and more strongly and vigorously supported domestic U.S. research and development.
While both bills represent a step in the direction of broader, fundamental tax reform, what Chairman Bill Thomas originally conceived also was a step toward more jobs and stronger economic growth.
(Click here for methodology)
 CDA used the Global Insight, Inc. U.S. Macroeconomic Model to conduct this analysis. The methodologies, assumptions, conclusions, and opinions in this report are entirely the work of Heritage Foundation analysts. They have not been endorsed by, and do not necessarily reflect the views of, the owners of the model.