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| Preventing Tax Increases |
May 19, 2006 |
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Dear Friends,
Last week we reached agreement between the House and the Senate and sent a bill to the President that will prevent a tax increase for a lot of New Mexicans. This week he signed it.
There were a couple of very important pieces of the bill for New Mexicans. Probably the most important part was preventing tax increases for middle income families that were going to have to pay the Alternative Minimum Tax. In 2005, about 4 million Americans were affected by the AMT. Without this bill, over 22 million Americans would have had to pay higher taxes in 2006 because of the AMT.
The Alternative Minimum Tax was created so that people earning a lot couldn’t take advantage of a lot of deductions and tax breaks and pay less in taxes. But the AMT wasn’t indexed to inflation and every year more and more middle income families get caught the AMT. Eventually, I’d like to eliminate the AMT as part of comprehensive tax simplification. But, for now, we have prevented a tax increase for next year.
The bill also extended an important provision that has encouraged small businesses to invest in equipment and create jobs. It’s called the Section 179 provision and it allows small businesses to expense up to $100,000 for equipment and machinery in the year they buy it. The great American jobs machine is fueled by small business. Seven out of ten new jobs in America have been created in small businesses.
When we originally passed this provision, Sparkle Maintenance on Fourth Street in Albuquerque bought a new floor scrubber machine. Someone built that machine, sold the machine, services the machine and the guy operating the machine is more productive and earns more than a guy swinging a mop. And Sparkle Maintenance was able to bid on some jobs that might have been too big for them before because they had some new equipment. Section 179 expensing encourages small businesses to purchase equipment and create jobs.
The bill also extends for two years the lower tax rate on dividends and capital gains. 121,000 New Mexico taxpayers have benefited from this provision. Roughly half of taxpaying senior citizens will benefit from preserving the dividend income rate, while nearly 1 in 3 senior citizens will benefit from continuing the capital gains income rate.
We want good jobs and a strong economy. We’ve got it.
GDP Grew At A Strong 4.8 Percent Annual Rate In The First Quarter. This follows our economic growth of 3.5 percent in 2005 - the fastest rate of any major industrialized nation last year.
More Than 5.2 Million Jobs Have Been Created Since August 2003. The unemployment rate is 4.7 percent, lower than the average of the 1960s, 1970s, 1980s, and 1990s.
Productivity Increased At A Strong Annual Rate Of 3.2 Percent In The First Quarter.
Hourly Compensation Rose At A 5.7 Percent Annual Rate In The First Quarter. Average hourly earnings have risen 3.8 percent over the past 12 months, their largest increase in nearly five years.
Real After-Tax Income Has Risen By 13.8 Percent Since January 2001. Real after-tax income has risen by $2,398 (8.2 percent) per person since January 2001.
The Conference Board Index Of Consumer Confidence Increased In April To Its Highest Level In Almost Four Years.
In the fiscal year that ended last September, tax revenues grew by $274 billion – an increase of nearly 15 percent over the previous year. So far this year, tax revenues are 11 percent higher than at the same point last year, which is better than projected. More than a quarter of these new tax revenues come from corporations, who pay more taxes as they prosper in our growing economy. By growing the economy, we are staying on track to meet our goal of cutting the deficit in half by 2009.
Wish you were here,
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