Order Code RS21386
Updated April 11, 2003
CRS Report for Congress
Received through the CRS Web
Fact Sheet on Congressional Tax Proposals
in the 108th Congress
Don C. Richards
Analyst in Public Finance
Government and Finance Division
Summary
The President has proposed a tax cut that would cost an estimated $726 billion for
FY2003-FY2013, with $396 billion of the total resulting from a dividend relief proposal
and the remainder primarily due to acceleration of future tax cuts enacted in 2001.
House Democrats have proposed a smaller plan that is limited to temporary provisions
costing an estimated $100 billion over 10 years. Senate Minority Leader Daschle has
proposed a third comprehensive alternative offering several components similar to the
House Democratic plan. In addition, one of the first tax-related measures considered in
both the House and Senate during the 108th Congress would provide tax reductions to
armed services personnel. Congress has also initiated reconsideration of legislation not
completed in the 107th Congress: tax incentives for charitable giving deductions, pension
diversification, energy taxation, and tax shelters.
This report will be updated to reflect legislative developments.
Major Comprehensive Tax Proposals
The President has proposed a tax cut with an estimated revenue effect of $40 billion
in FY2003 and $726 billion over FY2003-FY2013.1 The largest component is a dividend
exclusion proposal that accounts for $7.6 billion in FY2003 and $396 billion, or 54.5%,
of the FY2003-FY2013 cost. This proposal would also eliminate individual taxes on
1 U.S. Congress, Joint Committee on Taxation, Estimated Budget Effects of the Revenue
Provisions Contained in the President’s Fiscal Year 2004 Budget Proposal
, 108th Cong., 1st sess.
(Washington: March 4, 2003). Posted on the Joint Committee on Taxation’s Web site:
[http://www.house.gov/jct/x-15-03.pdf]. Throughout this report, the estimated revenue impacts
of the President’s economic growth proposal are those prepared by the staff of the Joint
Committee on Taxation.
Congressional Research Service ˜ The Library of Congress

CRS-2
retained earnings by increasing the basis of stocks, and classify income to ensure the
benefit is confined to income subject to current corporate income tax. The provisions of
the President’s proposal have been incorporated into legislative form, S. 2, sponsored by
Senator Nickles and Senator Miller, and H.R. 2, sponsored by Representative Thomas,
Chair of the House Ways and Means Committee. On March 21 and consistent with the
President’s economic stimulus proposal, the House passed its version of the budget
resolution, H.Con.Res. 95, which includes $726 billion for tax cuts. The Senate’s version,
S.Con.Res. 23, was adopted March 26. It differs from the House plan by including $350
billion in revenue reductions for economic stimulus from FY2003 through FY2013.
The remaining provisions would accelerate future tax cuts enacted in 2001 to the
current year (2003). In order of decreasing 10-year impacts, and followed by FY2003 and
FY2003-FY2013 cost estimates in parentheses, the President’s proposal would:
(1) Increase the child credit to $1,000 per child. The credit is currently set at $600
through 2004, $700 in 2005-2008, $800 in 2009, and $1,000 in 2010 ($14 billion, $90
billion).
(2) Accelerate the scheduled income tax rate reductions. The current 38.6, 35, 30
and 27% income tax rates that are scheduled to decline to 37.6, 34, 29 and 26%,
respectively, in 2004-2005 and to 35, 33, 28, and 25% in 2006 and after would accelerate
with the 2006 rates becoming effective in 2003 ($10 billion, $74 billion).

(3) Increase the standard deduction and width of the 15% bracket for joint returns to
twice that of singles. While currently the increase in this deduction is phased in over five
years and the increase in the width of the bracket is phased in over four years beginning
in 2005, under the proposal those increases would be accelerated to 2003 ($5 billion, $55
billion).
(4) Expand the10% income tax bracket. Currently $6,000 for singles and $12,000
for married couples and scheduled to rise by $1,000 and $2,000 respectively in 2008, the
expansion of the bracket would be accelerated to 2003 and indexed for inflation thereafter
($2 billion and $45 billion).
(5) Temporarily increase the alternative minimum tax (AMT) exemption by $8,000
for married couples and $4,000 for singles in 2003-2005. Originally, it was temporarily
increased by $4,000 and $2,000 in 2001-2004. As suggested, the acceleration of tax cuts
and temporary AMT provisions are estimated to affect revenues for a limited number of
years ($1 billion and $37 billion).
(6) Increase the amount of equipment that can be expensed (deducted in full in the
first year) for small businesses from $25,000 to $75,000. This amount would then be
indexed for inflation beginning in 2004 ($1 billion and $29 billion).
The purpose of the President’s package is to stimulate the economy and to eliminate
the double taxation of corporate equity income, which causes economic distortions. Some
have suggested that the proposed stimulus is not needed, cannot be appropriately timed
by Congress, is too large, or, to the extent permanent tax cuts increase deficits, may
ultimately harm the economy. The proposal has also been criticized as favoring high-
income taxpayers. Supporters of the package suggest the plan would encourage

CRS-3
investment that could translate into increased jobs, reduce deficits if economic growth is
increased, and provide broad tax relief, particularly for seniors and families.
Additionally, President Bush has proposed new “lifetime savings accounts” (LSAs),
“retirement savings accounts” (RSAs), and “employer retirement savings accounts”
(ERSAs). The total annual contribution limits under the proposal would be substantially
increased over the current tax-advantaged plans these are intended to replace. The
Administration suggests the LSAs and RSAs would increase receipts by an estimated
$10.6 billion in FY2004 but would begin reducing receipts in FY2007 and thereafter.
Administration officials suggest the proposals would provide expanded, simplified, and
universal savings plans. Critics contend the expanded contribution limits of these
sheltered accounts will reduce federal tax receipts in future years. Moreover, critics
claim the proposals will transfer tax revenue from later years to the near future, thus
lowering near-term deficits.
The House Democratic leadership has proposed a stimulus package directed at the
short run, costing an estimated $136 billion the first year and $100 billion over 10 years.2
(Spending increases and revenue reductions are concentrated in the first year, and costs,
particularly those related to depreciation deductions, are shifted to 2003 from later years.)
Chiefly, the House Democratic leadership proposal would:
(1) Impose a one-time refundable tax credit up to $300 for single persons and $600
for couples ($55 billion in 2003 and $58 billion over 10 years).
(2) Amend the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147)
adopted in March 2002 that allows 30% of equipment to be deducted in the first year,
through 2004. Under this alternative, the share expensed for 2003 would be increased to
50% and the share for 2004 would be reduced to 10%. Additional tax relief to businesses
includes an increase in the small business exemption limit from $25,000 to $50,000. The
combined impact of this depreciation “bonus” and equipment investment expensing is
estimated at $32 billion in 2003 and $1 billion over 10 years.
(3) Increase spending, including a retroactive extension of unemployment benefits
($18 billion and $10 billion) and direct increased one-time assistance to state and local
governments ($31 billion in 2003).
In the Senate, Minority Leader Tom Daschle proposed another Democratic
alternative providing for specific tax cuts as well as additional spending. The total
magnitude of the plan is estimated to cost $141 billion in 2003 and $112 billion over 10
years.3 Senator Daschle’s plan would:
2 The revenue estimates and proposal are described on the Democrat’s side of the House Budget
Committee’s Web site:
[http://www.house.gov/budget_democrats/analyses/econ_stimulus/house_dem_stimulus_plan.
pdf].
3 Revenue estimates and the description of the proposal are provided on Senator Daschle’s Web
site: [http://daschle.senate.gov/pdf/democraticplan.pdf].

CRS-4
(1) Provide an immediate $300 tax cut for each adult and an additional $300 for up
to two children. This provision is designed to affect both individuals and families with
income tax liability and those paying payroll taxes, but not income taxes.
(2) Increase the depreciation “bonus” provided in March 2002 (P.L. 107-16, see item
#2 under the House Democratic leadership proposal above) and increase the small
business exemption limit from $25,000 to $75,000.
(3) Provide a 50% tax credit in 2003 for health insurance premium expenditures paid
for by small businesses.
(4) Provide a 20% business tax credit for broadband Internet infrastructure
investment, particularly in rural and under-served areas.
(5) Increase spending, including an extension of unemployment benefits and $40
billion in increased support to state and local governments.
Targeted Tax Proposals
Beyond these comprehensive tax relief proposals, Members have introduced a range
of targeted proposals. Several proposals relate to accelerating, freezing, or making
permanent the provisions of the Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA; P.L. 107-16), the multi-year tax cut enacted in 2001. This Act was
passed with a sunset provision because there were not enough votes to set aside a budget
rule. In the 107th Congress, several bills passed the House in 2002 to make the tax cut or
parts of it permanent (H.R. 586 to make all provisions permanent, H.R. 2143 to make the
estate tax repeal permanent, H.R. 4019 to make marriage tax relief provisions permanent,
and H.R. 4931 to make the retirement and pension provisions permanent). Already in the
108th Congress, numerous bills have been introduced to make the repeal of the estate tax
and other provisions of P.L. 107-16 permanent.
Both the Senate and the House have passed versions of the Armed Forces Tax
Fairness Act, which would provide tax relief for military personnel. Both versions
include targeted tax reductions for military personnel, including deductions for certain
unreimbursed expenses as well as time extensions for the exclusion of capital gains for
a principal residence. In the House, this measure was initially considered by the House
Ways and Means Committee on February 27 and, after markup, included a variety of
narrow tax reductions in addition to tax relief for military personnel. The full House then
considered these issues in two separate pieces of legislation: H.R. 1307, Armed Forces
Tax Fairness Act, and H.R. 1308, Tax Relief and Simplification, and Equity Act,
discussed below. The Senate substituted its own version, S. 351, upon consideration of
H.R. 1307 on March 27. The Senate version of the Armed Forces Tax Fairness Act
includes revenue raising measures (allowing the IRS to enter into installment agreements,
extending IRS user fees, and providing for a mark-to-market tax on individuals who
expatriate) that would offset the tax relief for military personnel. According to the report
of the Joint Committee on Taxation after Senate Finance Committee markup of this
legislation, the revenue enhancements would more than offset the expected reductions by
an estimated $6 million from FY2003 through FY2013. In response, the House passed

CRS-5
a revised version of the Armed Forces Tax Fairness Act, H.R. 1664, on April 9. The Joint
Committee on Taxation estimated the legislation would reduce revenues by $839 million
from FY2003 through FY2013. This new version of the House legislation is similar to
the Senate’s language but, notably, does not include the revenue raising measures.
H.R. 1308, Tax Relief and Simplification, and Equity Act, passed the House on
March 19 and includes enhanced provisions to limit tax abuse by individual expatriates
in addition to a number of narrow tax cuts originally offered during the Ways and Means
Committee markup of the initial legislation, H.R. 878. The Joint Committee on Taxation
estimates the revenue increases associated with H.R. 1308 would nearly offset the revenue
decreases over the 11-year projection period.4
In addition, both the House Ways and Means Committee and Senate Finance
Committee have passed measures relating to energy taxation. On April 2, the Senate
Finance Committee passed its version, “The Energy Tax Incentives Act.” This measure
includes several energy tax cuts including tax credits for producers and consumers of
energy. Prior to markup, the Joint Committee on Taxation estimated that the chairman’s
modification to the proposed measure would reduce revenues by $15.5 billion from
FY2003 through FY2013. On April 3, the House Ways and Means Committee passed
H.R. 1531, the Energy Tax Policy Act.5 Again, prior to markup, the Chairman’s
substitute was estimated by the joint committee to reduce revenues by $18.7 billion.
In other legislation, the Senate Finance Committee marked up the CARE Act of 2003
(now numbered S. 476) on February 5. The CARE Act proposes charitable giving
incentives, which are estimated by the Joint Committee on Taxation to reduce revenue.
However, these reductions are expected to be offset by revenue raising proposals included
in the measure, chiefly curtailing tax shelters. Prior to markup, the Joint Committee on
Taxation estimated the net impact on revenue would be a reduction in receipts of $800
million in FY2003 and an estimated net increase in receipts of $83 million from FY2003
through FY2013.
In the wake of the Enron bankruptcy, Representatives Boehner and Sam Johnson
have reintroduced the Pension Security Act, H.R. 1000. A similar bill passed the House
in the 107th Congress. The proposal would provide employees diversification rights in
401(k) plans. The House Education and Workforce Committee reported the measure on
March 18; the bill has also been referred to the House Ways and Means Committee. The
Joint Committee on Taxation estimates that the revenue provisions in the bill would
reduce revenues by a net of $482 million from FY2003 through FY2013. Just over half
of the decrease would result from a reduction in taxable income for employees, according
to the joint committee. The Senate Finance Committee approved a similar bill in the 107th
4 Among the taxation measures included in H.R. 1308 are targeted components affecting the
taxation of agriculture. For additional information on these components and other legislation
impacting the taxation of agriculture, see the CRS Electronic Briefing Book, Agriculture, "Tax
Changes Affecting Agriculture," by Gregg A. Esenwein, available online from the CRS Web site
at [http://www.congress.gov/brbk/html/ebagr9.html].
5 For additional information regarding the taxation of energy and pending legislation, see CRS
Issue Brief IB10054, Energy Tax Policy, by Salvatore Lazzari.

CRS-6
Congress, S. 1971, which also contained provisions concerning executive compensation
and formally excluded incentive stock options from payroll tax withholding.
Additional Measures from the 107th Congress
Several other tax bills where some action occurred in the 107th Congress may provide
an indication of issues to be considered in the 108th Congress. For example, the Ways and
Means Committee approved H.R. 4946, a bill to provide long-term care relief, costing
$5.5 billion over 10 years. In addition, general concerns about stock market performance
and the slowly growing economy also led to the consideration of an investor relief
package (H.R. 5553, reported out of the Ways and Means Committee), which included
speedups in IRA and pension contribution limit increases, as well as an increase in the age
at which distributions from IRAs must begin.
Finally, Ways and Means Chairman Thomas introduced H.R. 5095, a bill that would
repeal the Extraterritorial Income (ETI) exclusion, restrict tax shelters associated with
international activities, and provide a number of tax benefits for multinational operations.