WICKER: EXTENDING TAX RELIEF WILL CONTINUE ECONOMIC SUCCESS
December 12, 2005
The U.S. House of Representatives approved legislation last week to extend a number of tax relief provisions that have been key to stimulating our growing economy. The bill would prevent a tax increase and keep policies in place that have helped create millions of new jobs and reduced the budget deficit.
The latest economic news is an indication of the success our lower-tax, pro-growth policies have achieved. The total value of goods and services produced, known as the gross domestic product (GDP), grew at a robust rate of 4.3 percent in the third quarter of 2005. It was the 10th straight quarter the GDP has grown by more than three percent.
The economic expansion has led to creation of more than 4.2 million jobs since May 2003. The budget deficit is $94 billion less than in 2004, and increased revenues reduced the deficit projection by $108 billion in the 2006 budget.
CONSUMER SPENDING UP
Consumer spending, another measure of the nation's economic health, was up 4.3 percent in November. The highly-regarded Consumer Confidence Index was also up for the month, exceeding analysts predictions. The increased consumer activity is reflected in retail sales figures showing a 22 percent hike in holiday purchases during the post-Thanksgiving weekend.
Enacting the Tax Relief Extension Reconciliation Act is vital to the keeping this economic activity on track. Small businesses, individuals, and families have benefited from opportunities created through these provisions.
BOOSTING CAPITAL GAINS, DIVIDENDS
The legislation would extend for two years the lower tax rate on capital gains and dividend income. Under current law, this income is taxed at a 15 percent rate. If no action is taken, the capital gains rate would jump to 20 percent in 2009 and the dividend income would be taxed at 35 percent. This extension would provide more certainty in the financial markets and allow millions of Americans to enhance the investments they have made for college tuition costs and retirement. More than 60 percent of Americans who benefit from this provision have incomes of less than $100,000.
The package would extend the deduction of up to $4,000 for college tuition and other higher education enrollment expenses. Classroom teachers would also retain the $250 deduction for out-of-pocket costs for the purchase of books, supplies, and other equipment. Under current law, veterans who served prior to 1977 are eligible for a veterans' mortgage bond program to help make homeownership more affordable. The legislation would make the program available to all veterans, no matter when they served.
INCENTIVES FOR JOBS
Businesses would continue to benefit from continuation of a tax credit for research and development activities. The provision has been a strong incentive for private enterprise to pursue innovations to create jobs and increased economic activity. Small businesses would retain the ability to deduct up to $100,000 in the first year of investments in depreciable assets. Without the extension, the deduction would drop to $25,000.
Over the past two years, the House has passed more than 50 measures focused on stimulating the economy and expanding opportunities for American workers. The tax relief provisions in this package have been an important part of our pro-growth agenda.