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I have spoken with many people in Southern Wisconsin who are worried about losing their jobs. Others have already been laid off and have been struggling to make ends meet. Nearly 23,000 Wisconsin workers have been affected by job cuts, and areas of Wisconsin - especially portions of the First Congressional District - are experiencing unemployment rates that are even higher than the national average.
On the national level, the economy has also been working to return to economic health. According to the U.S. Department of Commerce, the economic growth rate for the nation was 2.75 percent for 2002. Meanwhile, the productivity of American workers increased by 5.6 percent for the last four quarters, the sharpest increase since 1973. The national unemployment rate, however, is 6 percent.
I believe the best way to reverse the economic slowdown is to focus on job creation and retention through increased private investment and economic growth. While consumer spending and government spending remain high, the critical ingredient of our economy that is suffering and causing this downturn is investment. According to the Federal Reserve Bank of Dallas, consumer spending and government spending have gradually increased in the past eight quarters. Investment, however, has declined during this time and the economy has worsened as a result. Two common by-products of investment declines are high unemployment and a weak stock market. These are precisely the problems we are experiencing today. We must do all we can to get our economy growing again and get people back to work. In addition, our sustained global war against terrorists depends strongly on our nation’s economic health. To help us prevail both at home and abroad, Congress must pass laws that strengthen the economy, spur investment, and help create more jobs.
Job creation and retention by stimulating the economy. According to the U.S. Small Business Administration, small businesses create up to three-fourths of new jobs. To grow our economy under the current economic conditions and jumpstart the manufacturing industry, Congress had to move quickly to provide help to those who have lost their jobs and promote job creation and retention.
To do this, the House recently passed, by a bipartisan vote of 416-4, legislation, S. 23, to provide an additional 13 weeks of federal benefits. S. 23 builds upon a law Congress passed in March 2002 that delivered extended unemployment benefits. The March 2002 bill temporarily extended previous unemployment compensation law (Public Law 107-147) and provided a total of up to 26 weeks of extended benefits in Wisconsin and in other states until December 28, 2002. S. 23 helps those hurt by the December 28th cut-off date and extends the March 2002 program for five months (i.e. through May 2002), eventually phasing out in August 2003. In Wisconsin, approximately 16,000 people will benefit from this legislation.
To promote business investment and create jobs, the March 2002 law also provided an additional first-year depreciation deduction for businesses equal to 30 percent on qualified property that is placed in service after September 10, 2001 and before September 11, 2004.
Economic Growth and Tax Relief Act of 2001. Congress passed with bipartisan support H.R. 1836, the Economic Growth and Tax Relief Act of 2001 in May 2001. According to Federal Reserve Chairman Alan Greenspan, the economy would have fallen into a deeper recession if not for this tax relief law. In addition, according to the Congressional Budget Office, without this legislation and the stimulus package more than 1 million more American workers would be out of work today. I voted in favor of this legislation. It included marginal income tax rate reduction, marriage penalty relief, child tax credit expansion, repeal of the death tax, and increased contribution limits for Individual Retirement Accounts and 401(k) plans. In addition, it provides retroactive tax relief and, as a result, taxpayers received tax rebate checks in the mail. The president signed this bill into law on June 7, 2001.
President’s Economic Growth Proposal for 2003. To spur immediate economic growth, earlier this year President Bush put forward a proposal to accelerate the tax relief which was previously scheduled to take effect in later years under the Economic Growth and Tax Relief Act of 2001. These tax relief provisions include the following:
Accelerated 10-Percent Bracket Expansion: The expansion of the 10-percent bracket scheduled for 2008 is accelerated to 2003, and is indexed for inflation beginning in 2004. The endpoint of the 10-percent tax bracket increases from $12,000 of taxable income to $14,000 for married couples (and from $6,000 to $7,000 for single taxpayers). This expansion benefits married taxpayers with taxable income over $12,000 and single taxpayers with taxable income over $6,000.
Accelerated Reduction in Income Tax Rates: The reductions in income tax rates in excess of 15 percent scheduled for 2004 and 2006 are accelerated to 2003, resulting in new rates of 25%, 28%, 33% and 35% (from 27%, 30%, 35% and 38.6%). These reductions benefit married couples with taxable income greater than $47,450 and single taxpayers with taxable income greater than $28,400.
Accelerated Reduction of Marriage Penalty: The standard deduction for married couples is increased to double the amount of the standard deduction for single taxpayers in 2003. The width of the 15-percent tax bracket for married couples is increased to twice the width for single taxpayers in 2003. These provisions were scheduled to phase-in over the period between 2005 and 2009. These reductions benefit married couples who claim the standard deduction or who have taxable income greater than $47,450.
Accelerated Increase in Child Tax Credit: The amount of the child tax credit is increased to $1,000 in 2003 (from $600), accelerating a scheduled phase-in over the period between 2005 and 2010. In 2003, the increased amount of the child tax credit will be paid in advance beginning in July 2003 on the basis of information on the taxpayer’s 2002 tax return filed in 2003. Advanced payments will be made in a manner similar to the advance payment checks that were issued in 2001 to reflect the new 10-percent tax bracket.
Exclusion of Dividends from Individual Taxable Income: Dividends paid by corporations to individuals are excluded from taxable income when paid out of previously taxed corporate income beginning in 2003. Dividends paid by corporations in excess of previously taxed corporate income are included in taxable income. This provision eliminates the double taxation of corporate dividends.
Increase in Small Business Expensing for New Investment: The amount of investment that may be immediately deducted by small businesses is increased from $25,000 to $75,000 beginning in 2003. The amount of investment qualifying for this immediate deduction begins to phase out for small businesses with investment in excess of $325,000 (increased from $200,000). Both parameters are indexed for inflation beginning in 2004.
Congressional action on the President’s proposal is currently underway. At this time, it is too early to foresee what parts of this plan will pass Congress.
In short, our recovery, like all recoveries in the past, must be led by a resurgence of investment and jobs. As such, the bulk of this stimulus package focuses on encouraging job-growing investment. In addition, we need to do all we can to secure the safety of all Americans so consumers can regain not only their jobs, but also their confidence in our economy.