Today the president will sign into law $1.35 trillion in tax relief for working Americans. The typical married couple will receive a $600 check this summer, and tax relief will continue each year for 10 years. When the entire tax cut goes into effect, families with children will benefit by an average of $1,463 a year.
That is quite an accomplishment, particularly when you remember how the year began. In January, Washington found itself at a crossroads. Economically, we faced a slowdown that had begun unexpectedly months earlier. Budgetwise, the U.S. faced record tax burdens and surpluses that could fuel new government spending. Perhaps the greatest challenge was political because everyone expected a close election and a nearly evenly divided Congress to resume partisan gridlock. Together these three obstacles easily could have cemented us into the status quo of conflict-induced inaction.
Instead, the president and Congress chose to move forward. By working together, both parties have guaranteed that Americans will now keep more of what they earn. Income tax rates will fall, death will cease to be taxable, the child credit will increase, the marriage penalty will be reduced, and retirement and education savings options will be expanded.
This is the largest tax cut in 20 years. It is also the biggest bipartisan accomplishment in years, and President Bush is signing it into law less than five months into his term. Many people in both parties deserve credit for this quick action. None more than the president himself, who stayed focused on his highest goal--reforming the tax code so millions of Americans could keep more of what they earn and spend it on their own priorities. The president accomplished this feat by uniting members of both parties around these principles:
First, returning surplus tax dollars to the people who sent them is the fair thing to do. The budget surplus was generated by the income tax system and should be returned to payers of income tax.
Second, returning the surplus to the people who earned it is good for families. In the near-term, Americans will begin getting tax relief retroactive to the beginning of this year with further income tax rate reductions taking place in July. When fully in effect, 38 million families with children will see their taxes fall an average of $1,463 per year, and 43 million married couples will see their taxes drop $1,730 per year on average. Almost 4 million taxpayers and their families will no longer owe any income tax.
Third, cutting taxes is sound fiscal policy. During the next decade, we are returning a portion of the surplus to the taxpayers while devoting $2.6 trillion to Social Security and Medicare and paying down the national debt. After assuming above-inflation growth in spending this year, we still have a remaining reserve fund to address priority issues such as prescription drugs for Medicare beneficiaries, bolstering defense and improving education.
Last, cutting taxes is sound economic policy. The new administration was faced with an economy that had been slowing since last September. The president responded, asking Congress in February to speed up implementation of the tax relief plan and make some of it retroactive to provide a stimulus this year. The law the president signs today will put $40 billion into the taxpayers' hands before the end of September. I believe the immediate flow of revenue combined with the permanent reduction in income tax rates will boost gross domestic product growth by half a percentage point.
By forging a bipartisan consensus around these principles, President Bush, together with Congress, overcame defeatist deadlock and delivered tax relief that is fair, family friendly, fiscally sound and economically needed. The effects go beyond the economy and the tax code. The president's approach to tax relief is already changing the tone in Washington and laying the groundwork for further accomplishments.
This tax cut is a promise delivered. It will have a real, positive effect on millions of Americans in all walks and stages of life. With his signature today, President Bush will ease America's tax burden while providing real evidence that building an agenda around common-sense principles is a recipe for bipartisan success.