Seeker of Truth
05-31-2003, 07:56 PM
Economic Impact Analysis of the Jobs and Tax Relief Reconciliation Act of 2003
by William W. Beach, Alfredo Goyburu, and Rea S. Hederman
May 23, 2003
The Jobs and Growth Tax Relief Reconciliation Act of 2003 that the House and Senate passed on May 23 contains some strong pro-growth elements, specifically accelerating the 2001 marginal rate cuts, lowering the taxation of dividends and capital gains and allowing businesses to accelerate depreciation deductions on their investments. Our analysis shows that these three elements are principally responsible for the increase in economic growth reported below.
Bonus depreciation and the reduction of tax rates on dividends and capital gains will help businesses expand and grow more quickly. This is because the cost of capital will drop and business managers will be able to generate a higher return on their investments. Managers will increase investments if they need fewer funds to pay for a new project. Economists estimate that bonus depreciation would reduce the cost of capital by about four percent[1]. These two measures will provide a needed boost to business investment.
Marginal rate cuts provide economic growth by boosting a taxpayer’s propensity to work more, save more and invest more. Because a taxpayer gets to keep more of their earnings, taxpayers will expand their economic output to maximize their income. Quite simply, as the tax on work decreases taxpayers have a greater incentive to work.
Economists at the Center for Data Analysis (CDA) introduced the tax policy changes contained in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (H.R. 2) into a model of the U.S. economy that is widely used by Fortune 500 companies and government agencies. This model produced the following estimates of how H.R. 2 would likely affect economic performance between 2003 and 2013.
More @ heritage.org (http://www.heritage.org/Research/Taxes/wm281.cfm)
by William W. Beach, Alfredo Goyburu, and Rea S. Hederman
May 23, 2003
The Jobs and Growth Tax Relief Reconciliation Act of 2003 that the House and Senate passed on May 23 contains some strong pro-growth elements, specifically accelerating the 2001 marginal rate cuts, lowering the taxation of dividends and capital gains and allowing businesses to accelerate depreciation deductions on their investments. Our analysis shows that these three elements are principally responsible for the increase in economic growth reported below.
Bonus depreciation and the reduction of tax rates on dividends and capital gains will help businesses expand and grow more quickly. This is because the cost of capital will drop and business managers will be able to generate a higher return on their investments. Managers will increase investments if they need fewer funds to pay for a new project. Economists estimate that bonus depreciation would reduce the cost of capital by about four percent[1]. These two measures will provide a needed boost to business investment.
Marginal rate cuts provide economic growth by boosting a taxpayer’s propensity to work more, save more and invest more. Because a taxpayer gets to keep more of their earnings, taxpayers will expand their economic output to maximize their income. Quite simply, as the tax on work decreases taxpayers have a greater incentive to work.
Economists at the Center for Data Analysis (CDA) introduced the tax policy changes contained in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (H.R. 2) into a model of the U.S. economy that is widely used by Fortune 500 companies and government agencies. This model produced the following estimates of how H.R. 2 would likely affect economic performance between 2003 and 2013.
More @ heritage.org (http://www.heritage.org/Research/Taxes/wm281.cfm)