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Committee on Ways and Means For Immediate Release Tax Relief Blunts Impact of Recession on Middle-Income Families Legislation Helped Boost Income for Lower-Wage Earners WASHINGTON - As a result of the economic slowdown that began in 2000 and became a recession in 2001, the real median household income declined $934 in 2001. However, the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), helped blunt the impact of recession on the budgets of American families, by dramatically reducing taxes. “Despite the recession, the real after-tax income of a household earning the 2001 median income remained virtually unchanged from the previous year. And for a lower-income family the tax cut actually helped boost income relative to 2000,” said Ways and Means Chairman Bill Thomas (R-CA). “The boost to low-income families’ after-tax income was a result of two critical components of the new tax law - the rebate check and the increased child tax credit. This boost helped mitigate the recession significantly,” Thomas added. As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001: A typical household earning the median income, $42,228, in 2001 received a $600 rebate check and an additional $200 reduction in taxes as a result of the increased child tax credit. Since nominal median household income remained virtually unchanged and the standard deduction and the personal exemption increased, taxes were reduced even further. · A typical household earning the median income realized a loss of $934 in real income between 2000 and 2001. However, more than 90 percent of that loss was restored because of the EGTRRA.· A typical household earning at the 40th percentile (approximately $33,500) in 2000 and 2001 saw their income fall $607. However, tax relief helped reimburse these families more than $800, which resulted in a net increase of their real income.“The 2001 tax relief law was delivered at a critical time, providing an important boost to taxpayers’ wallets and pocketbooks. As it continues to phase in over the next few years, additional growth effects will be realized,” Thomas said. Statistic source: The U.S. Census Bureau report, “Money Income in the United States: 2001.” Calculations are based upon a median household income in 2000 and in 2001, assuming a family of two adults and two children. |