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| Wilson cites Stimulative Effect of Tax Relief |
April 15, 2002 |
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Lawmaker Talks Taxes on Tax Day
Albuquerque, NM-Congresswoman Heather Wilson observed tax day by underscoring her support for tax relief for working families and small business owners. She cited economic reports showing that tax relief passed in Congress in 2001 has had a stimulative effect on our sluggish economy.
Wilson says that the tax relief signed into law last year, with her support, helped create jobs, provided a powerful economic stimulus, helped soften the recession, and laid the foundation for long-run economic growth.
“Reports have shown that tax relief will have helped small business create 800,000 jobs by the end of this year,” said Wilson, who spoke at an Albuquerque Rotary Club today. “That’s 800,000 families who have an income and will continue to contribute to and grow our economy. Leaving money in the hands of working families and business owners can have a remarkable effect. Economic data over the last year has certainly shown that.”
A recently released report by the Council of Economic Advisors showed that:
The tax relief will have helped the private sector create 800,000 more jobs than there otherwise would have been by the end of 2002.
Tax relief has raised the prospects of a solid recovery in 2002 by boosting economic growth by 0.5 percentage point, lifting the expected growth rate from 2.2 percent to 2.7 percent.
Without tax relief, third-quarter growth would have been much worse, contracting at a 2.5 percent annual rate instead of the reported 1.3 percent rate. And, in the fourth quarter, real GDP would have fallen 1 percent instead of the advance estimate of 0.2 percent growth.
· Other Key Facts From the CEA Report
Tax relief has provided powerful stimulus for the future, with reductions in marginal tax rates that improve incentives and leave in the hands of Americans a greater share of their own money to spend on consumption, education, retirement investment, or whatever else they may prefer.
The tax relief has provided valuable stimulus to economic activity in the short run. The quick enactment last year of the President`s tax relief plan softened the recessionary headwinds in 2001 and has helped to put the economy on the road to recovery in 2002.
The tax rebates and the reductions in withholding added significant economic stimulus by boosting consumers` purchasing power during a period of sluggish economic activity-and they came at just the right time.
The 2001 tax rate reductions were just the first step in a series of income tax rate reductions to be phased in by 2006; by that year the 39.6 percent tax rate will have dropped to 35 percent, the 36 percent rate to 33 percent, the 31 percent rate to 28 percent, and the 28 percent rate to 25 percent. The future rate cuts increase expected disposable income.
Tax relief is strengthening families and has reduced the burden of financing education. The marriage penalty was reduced for earned income credit recipients, and the child tax credit increased from $500 to $600 per child in 2001 and will gradually increase to $1,000 by 2010. Adoption credits have been doubled in 2002 from $5,000 per child in 2001; in addition, this credit will apply to more taxpayers because the income threshold at which the credit begins to be phased out is $150,000, up from $75,000. Contribution limits for education savings accounts (formerly called educational IRAs) were raised to $2,000, and distributions were made non-taxable. The law also increased the income phase-out range for student loan interest deductions and made certain higher education costs tax-deductible for households with less than $130,000 in income.
Raising taxes, as some in Congress advocate, would not only lower long-run growth prospects but also jeopardize a recovery. An increase in taxes would sap the economy of demand, as individuals and small businesses would see a decline in their after-tax income. Raising taxes could also adversely affect consumer and business confidence about the future.
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