Economic Growth And Tax Relief Reconciliation Act of 2001 (EGTRRA)

What is the Economic Growth and Tax Relief Reconciliation Act (EGTRRA)?

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 animate the economy during the 2001 recession.

More profound definition

EGTRRA made the accompanying tax reductions:

• Decreased the tax brackets from 39.6 percent to 35 percent, 36 percent to 33 percent, 31 percent to 28 percent, 28 percent to 25 percent, and 15 percent to 10 percent.
• Increased the child tax credit from $500 to $1,000.
• Increased permissible tax deductions for education expenses and savings.
• Increased tax-deductible contributions to IRA accounts.
• Decreased the Alternative Minimum Tax.
• Decreased the marriage penalty by doubling the standard deduction for married couples and doubling the income threshold for married couples in the 15 percent bracket.
• Disposed of the getting rid of personal exemptions for people earning more than $150,000 each year.
• Disposed of the getting rid of itemized deductions of those earning more than $100,000 each year.
• Brought down the gift tax.

Since the EGTRRA tax cut was retroactive, the IRS sent one-time tax rebates to taxpayers. The tax cuts and rebates initially gave some economic stimulus, offered tax relief for poor families and boosted taxpayers to save more.
Notwithstanding, the EGTRRA's impact on the sluggish economy was limited. The EGTRRA cuts were intended to be phased in from 2001 to 2009. At the point when the economy didn't develop as trusted, specialists contended the tax breaks were being phased in too leisurely.
Analysts likewise found that high-income earners saved as opposed to spent the money saved from the EGTRRA.
In response to the eased back economic growth, Congress passed the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) in 2003. This accelerated the EGTRRA provisions, decreased rates on dividends and capital gains to 15 percent, and increased tax deductions for small organizations.
Economic growth kept on excess delayed while government incomes decreased, expanding the U.S. deficit. The value of the U.S. dollar started to decline in 2006, due to the high U.S. debt.
North of a 10-year period, the tax cuts from EGTRRA and JGTRRA saved taxpayers $1.35 trillion however increased the U.S. debt by $1.35 trillion. The Urban Institute reported the tax cuts furnished the most benefit to families with children, making more than $200,000 each year.
The EGTRRA tax cuts were scheduled to terminate in 2004 and afterward again in 2010 yet were over and over extended. The eventual fate of the EGTRRA taxes cornered tax policy for over a decade and turned into a central subject in the 2008 presidential campaign.
Barack Obama supported for broadening the cuts for families, earning under $250,000. John McCain contended that a large portion of the cuts ought to become permanent for all earners.
In 2013, the American Taxpayer Relief Act of 2012 was passed and the vast majority of the EGTRRA cuts were made permanent as a part of a deal to stay away from the supposed fiscal cliff, by which a series of recently enacted laws would come full circle at the same time, expanding taxes while decreasing spending

EGTRRA model

The following is a when chart that illustrates what the EGTRRA meant for the tax rates in 2003.

Note: Bracket thresholds are communicated in nominal dollars of taxable income.
Source: Tax Foundation
The following are the tax brackets for married couples filing jointly after the EGTRRA taxes were permanently adopted in 2013.