Tax Cut Bills in 2003: A Comparison

Publication Date: July 2003

Publisher: Library of Congress. Congressional Research Service

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Tax cuts were a major focus of the tax policy debate in the first part of 2003. Initially President Bush proposed a set of tax cuts for economic stimulus and released budget proposals calling for tax cuts totaling an estimated $1.57 trillion over fiscal years (FY) 2003-2013. The Administration characterized $726 billion of the cuts as "economic growth" measures, designed to stimulate the economy and improve its performance. On May 9, the House approved H.R. 2, the Jobs and Growth Tax Act. The bill proposed cutting taxes by an estimated $550 billion over FY2003-FY2013. Previously on May 8, the Senate Finance Committee approved its own tax bill (S. 2, later replaced by S. 1054). The bill included tax cuts estimated at $422 billion over FY2003-FY2013, fiscal assistance for the states of $20 billion, and revenue increases of $90 billion for a net revenue reduction/outlay increase of $350 billion. The full Senate approved a modified version of the bill on May 15 as H.R. 2 (amended). The House and Senate approved a conference committee report reconciling the differences between the two legislative versions on May 23. The final Act, (Jobs and Growth Tax Relief and Reconciliation Act of 2003, JGTRRA, P.L. 108-27), contained $350 billion in tax cuts (and spending increases) over FY2003FY2013, as estimated by the Joint Committee on Taxation.

All four versions (the President's proposal, the House and Senate bills, and P.L. 108-27) proposed to accelerate the tax cuts for individuals scheduled for gradual phase-in by the 2001 tax cut act (Economic Growth and Tax Relief Reconciliation Act of 2001, or EGTRRA; P.L. 107-16), including a gradual reduction of tax rates, an increase in the child tax credit, tax cuts for married couples, and expansion of the lowest (10%) tax bracket.

The Senate, House and final version differed from the Administration proposal on the provisions for dividends and capital gains tax cuts. The Administration plan would have generally eliminated individual income taxes investors pay on dividends received from corporations and capital gains from the sale of corporate stock; the plan would have implemented a form of corporate "tax integration," and would have eliminated the double-taxation of corporate-sector equity income. The House proposal would have reduced (but not eliminated) taxes on corporate dividends and capital gains generally; the Senate bill would have temporarily eliminated the taxation of all dividends, without including the administrative features of the President's proposal designed to identify the portion of the dividends upon which taxes had already been paid. The final law was similar to the House version and expires in 2008.

The business expensing and depreciation provisions of the plans also contained several differences. In addition, the Senate's version included several revenue increasing provisions, which offset some of the tax cuts (and outlays). The final version did not include these measures. Finally, both the Senate version and the final version included a fund of $20 billion in outlays designed to assist state governments.

This report is no longer being maintained but remains available to Congress as a record of the progression of the tax reduction proposals in 2003.