FY 2004 Tax Revenues Increased Nearly Three Times Faster than Projected After Tax Cut

WASHINGTON – In 2003 President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). The legislation cut income tax rates, reduced the capital gains tax rate by 25 percent and substantially reduced the double tax placed on dividends. Immediately following the tax cut, economic growth, job creation, stock prices, dividends, and personal income skyrocketed. The 2003 tax cut has been an unmitigated success and should be extended.

The Congressional Budget Office forecast made four months after the tax cut passed has turned out to be way off. In fact, CBO/JCT forecasted that total federal revenues would increase at a paltry two percent in fiscal year 2004. The reality is that revenues increased by $100 billion – nearly three times more than CBO projected. Income taxes were expected to decline by $32 billion. In truth, income tax revenue increased by $16 billion. This once again discredits the static models used to predict tax revenues.

Congress needs to extend the lower tax rates on dividends and capital gains.

CBO Revenue Predictions Underestimated Revenue