
Missed the tax deadline? Here’s what you should do
If you haven’t filed your taxes yet, don’t panic — but act fast.
You need to understand what the EGTRRA is. Here’s what to know.
The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) was enacted on June 7, 2001 as an amendment to the 1986 tax code. This income tax cut was initiated by the Bush administration to stimulate the economy during the 2001 recession.
EGTRRA made the following tax reductions:
Because the EGTRRA tax cut was retroactive, the IRS mailed one-time tax rebates to taxpayers. The tax cuts and rebates initially provided some economic stimulus, offered tax relief for needy families and incentivized taxpayers to save more.
However, the EGTRRA’s impact on the sluggish economy was limited. The EGTRRA cuts were designed to be phased in from 2001 to 2009. When the economy didn’t grow as hoped, experts argued the tax breaks were being phased in too slowly.
Researchers also found that high-income earners saved rather than spent the money saved from the EGTRRA.
In response to the slowed economic growth, Congress passed the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) in 2003. This accelerated the EGTRRA provisions, reduced rates on dividends and capital gains to 15 percent, and increased tax deductions for small businesses.
Economic growth continued to remain slow while government revenues diminished, increasing the U.S. deficit. The value of the U.S. dollar began to decline in 2006, due to the high U.S. debt.
Over a 10-year period, the tax cuts from EGTRRA and JGTRRA saved taxpayers $1.35 trillion but increased the U.S. debt by $1.35 trillion. The Urban Institute reported the tax cuts provided the most benefit to families with children, making more than $200,000 per year.
The EGTRRA tax cuts were scheduled to expire in 2004 and then again in 2010 but were repeatedly extended. The future of the EGTRRA taxes monopolized tax policy for more than a decade and became a central topic in the 2008 presidential campaign.
Barack Obama advocated for extending the cuts for families, earning less than $250,000. John McCain argued that most of the cuts should become permanent for all earners.
In 2013, the American Taxpayer Relief Act of 2012 was passed and most of the EGTRRA cuts were made permanent as a part of a deal to avoid the so-called fiscal cliff, whereby a series of previously enacted laws would go into effect simultaneously, increasing taxes while decreasing spending
Below is a before-and-after chart that illustrates how the EGTRRA impacted the tax rates in 2003.
Before EGTRRA | After EGTRRA | ||
---|---|---|---|
10% | $0 to $14,000 | ||
15% | $0 to $43,850 | 15% | $14,000 to $56,800 |
28% | $43,850 to $105,950 | 25% | $56,800 to $114,650 |
31% | $105,950 to $161,450 | 28% | $114,650 to $174,700 |
36% | $161,450 to $288,350 | 33% | $174,700 to $311,950 |
39.6% | $288,350 and over | 35% | $311,950 and over |
Note: Bracket thresholds are expressed in nominal dollars of taxable income.
Source: Tax Foundation
Below are the tax brackets for married couples filing jointly after the EGTRRA taxes were permanently adopted in 2013.
Taxable income | Rate |
---|---|
$0 to $17,850 | 10% |
$17,850 to $72,500 | 15% |
$72,500 to $146,400 | 25% |
$146,400 to $223,050 | 28% |
$223,050 to $398,350 | 33% |
$398,350 to $450,000 | 35% |
$450,000 + | 39.6% |
Source: Tax Foundation
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