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Analysis of the Four New Tax Laws

1 min readBy: J. D. Foster, Ph.D.

Download Special Report No. 63

Special Report No. 63

Executive Summary Prior to its August recess, the Congress passed four important pieces of legislation with significant taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. elements. The bills, all of which were signed by the President, relate to health care reform (ILR. 3103), providing taxpayers with more effective protections against IRS actions (H.R. 2337), welfare reform (H.R. 3734), and a combination minimum wage increase, small business tax relief, and miscellaneous tax provisions bill (ILR. 3448). Considered individually, the bills’ respective tax elements represent narrow, but important, changes in tax policy. Taken together, however, the tax provisions in the four bills represent an important correction in the direction of tax policy.

In total, the four bills make 170 changes either directly affecting taxes owed or tax administration. In purely dollar terms, the small business tax relief bill is the largest of the four, involving over $25 billion in tax increasing provisions and $21 billion in tax reducing provisions over the 1996 to 2006 time period. Together, the four bills include $52.9 billion in tax increases, $41.5 billion in tax reductions, and represents a net reduction in the budget deficit of $11.4 billion over the period.