Decision Time: The Fiscal Effects of Extending the 2001 and 2003 Tax Cuts

Decision Time: The Fiscal Effects of Extending the 2001 and 2003 Tax Cuts

Decision Time: The Fiscal Effects of Extending the 2001 and 2003 Tax Cuts by the nonpartisan Pew Fiscal Analysis Initiative examines the options being considered as the 2001 and 2003 tax cuts reach expiration.

The income tax cuts of 2001 were enacted when the federal budget was running a surplus. The tax cuts of 2003, designed to boost the economy as it was showing signs of weakness, were approved before the federal debt rose to the top of the national agenda. Both sets of cuts are scheduled to expire at the end of 2010, and in the coming months Congress and the administration will have to decide whether to extend them at a time when the debt is climbing steadily but the economy remains fragile.

As the expiration date looms, several options are on the table. One option is to extend the tax cuts indefinitely, making them permanent for all taxpayers. Another is to limit the extension to individuals making less than $200,000 and married couples earning less than $250,000. In light of the continuing weakness in the economy, some have proposed extending the tax cuts for everybody for another two years. Finally, there is the option of allowing the cuts to expire as scheduled.

Note: An Addendum (PDF) to the report was released on September 2, 2010.

The front facade of the Supreme Court of the United States in Washington, DC.
ian-hutchinson-U8WfiRpsQ7Y-unsplash.jpg_master

Agenda for America

Resources for federal, state, and local decision-makers

Quick View

Data-driven policymaking is not just a tool for finding new solutions for emerging challenges, it makes government more effective and better able to serve the public interest.

Lightbulbs
Lightbulbs

States of Innovation

Data-driven state policy innovations across America

Quick View

Data-driven policymaking is not just a tool for finding new solutions for difficult challenges. When states serve their traditional role as laboratories of innovation, they increase the American people’s confidence that the government they choose—no matter the size—can be effective, responsive, and in the public interest.