President Bush signed a bill on Wednesday that offers $330 billion in tax breaks to families, businesses and investors and $20 billion in state aid -a package less than half the size of the one he initially sought.
The 10-year legislation, which Bush signed with considerable fanfare at a White House ceremony, will within weeks start speeding refunds to parents and fattening paychecks and investor earnings.
The Internal Revenue Service is posting new withholding tax tables so employers can start leaving more money in workers' paychecks starting next month; child tax credits checks of up to $400 per child will begin arriving in the mailboxes of 25 million eligible families in July, the president noted.
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Tax Cut Glance Accelerates several income tax cuts previously scheduled to take effect later in the decade. Highest income tax brackets reduced, reaching back to Jan. 1, from 38.6 percent to 35 percent, from 35 percent to 33 percent, from 30 percent to 28 percent and from 27 percent to 25 percent. The lowest, 10 percent bracket expands in 2003 and 2004. Many of the personal tax reductions expire in 2005, others in later years. The child credit increases to $1,000 per child from the current $600, in 2003 and 2004, with many parents getting an advance refund of up to $400 per child later this summer. Married couples who pay higher taxes than they would if filing as two single taxpayers will see some of that "marriage penalty" disappear, as the 15 percent bracket would be expanded and their standard deduction increased in 2004 and 2005. Prevents more taxpayers from paying alternative minimum tax in 2003 and 2004. Doesn't entirely eliminate taxes on corporate dividends as Bush demanded, but investors will see the tax rates on their earnings drop as the top rates on dividends and capital gains fall to 15 percent. Lower income earners will pay a 5 percent rate on both. The new rates will run through 2007; in 2008, the lower rate will drop to zero. In 2009, taxes on dividends return to rates paid on ordinary income, taxes on capital gains return to a top rate of 20 percent. Small businesses will be able to immediately write off $100,000 in new equipment purchases and all businesses will be able to expense half their investments this year. $20 billion in aid for cash-strapped states.