Americans have a healthy, historic distaste for the 15th of April — tax day. But tax day hurts less this year, for every American who pays taxes.
Evidence of this came recently when the Tax Foundation calculated this year’s “Tax Freedom Day” — the day on the calendar when Americans have earned enough to pay their taxes. This year, Tax Freedom Day was Sunday, April 11 — its earliest arrival in 37 years.
Many Americans may not notice that their taxes are lower as they pay them all year long through employment withholdings. So it is helpful to look at some new totals, and to consider how our economy has responded to President Bush’s tax-cut stimulus. It is also worthwhile to reflect on the past year, and note how we were all able to loosen our belts a little bit once the Bush tax cuts — which touched every tax bracket, top to bottom — took effect.
Working families got relief from rate reductions. Married couples benefited from an increase in their standard deduction, which rose to twice the amount allowed for singles. Parents received an increased child tax credit (now $1,000 per child, up from $600), and also an increase in the amount of child- and dependent-care expenses that are eligible for deduction. Americans saving for retirement benefited from expanded limits on IRA deductions.
Nearly 5 million taxpayers, 4 million with children, will have their income-tax liability completely eliminated in 2004. Altogether, 111 million individuals and families will receive an average tax cut of $1,586 this year because of the tax relief enacted in 2001 and 2003.
Small-business owners — America’s job creators — also received significant relief (an average of $3,001 apiece) through rate reductions and the expanded ability to expense cost-of-business investments such as new equipment.
Finally, the creation of a special lower tax rate for dividends and the reduction of the rate on long-term capital gains have given investors an incentive to keep our markets healthy.
All of this means that this April 15 isn’t as gloomy as tax days of years past. But more important, the recent tax relief has led to an expanding, growing economy.
The good economic news is certainly welcome and widespread. In the last half of 2003, we saw a growth rate of 6.2 percent — the strongest in nearly 20 years.
And then there’s the good news about job creation: More than three-quarters of a million new jobs were created over the past seven months — 308,000 in March alone. Our unemployment rate remains lower than the average of the 1970s, 1980s, and 1990s, and weekly first-time claims for unemployment insurance have dropped to their lowest point in more than three years. Continuing jobless claims are at a 32-month low. Without the president’s tax cuts, the unemployment rate would be as much as 1.6 percent higher by the end of this year, with as many as 3 million fewer Americans working.
Another excellent indicator of our economic growth is the housing market. Homeownership is at 68.6 percent, an all-time high, with substantial gains among minority homeowners. New and used home sales continue at high levels, and new-home construction remains strong after hitting its highest level in 25 years in 2003.
I understand that Americans will never look forward to, or celebrate, tax day. We shouldn’t. In fact, we should always maintain the spirit that turned Boston Harbor into a teapot in 1773. That’s an essential part of what makes us American. But this year, tax day didn’t have quite the sting it has sometimes had in the past, and we should enjoy the reprieve. The beneficiaries of lower taxes come as small as each individual, and as large as our growing economy.
– John W. Snow is Secretary of the U.S. Treasury.