Tax Cut Led to Largest One-Year Increase of Tax Revenue in History
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.
We have demonstrated that the Congressional Budget Office’s tax revenue predictions for 2003 and 2004 were off the mark. However, the picture becomes even more startling when 2005 is accounted for. As the chart below demonstrates, real federal tax revenues began to rise shortly after the tax cut was implemented, and fiscal year 2005 saw the largest increase in tax revenue ever. As a percentage of GDP, only 1969’s tax increase produced a larger increase in tax revenues than in fiscal year 2005.
Congress needs to extend the lower tax rates on dividends and capital gains.
FY 2005 Witnessed the Largest One-Year Increase of Tax Revenue Ever