New York (CNN/Money) -
President Bush's economic stimulus plan has a long way to go before getting the nod on Capitol Hill, but taxpayers across the country already have dollar signs in their eyes.
The plan, a key component of which would eliminate income tax on stock dividends, would offer 92 million Americans an average tax cut of $1,083 and create 2.1 million jobs over the next three years.
More specifically, the proposal seeks to accelerate to 2003 the tax rate reductions implemented under the Tax Relief Act of 2001. The rates currently are being phased in through 2006. Bush's aggressive plan also would provide extra help for the unemployed, increase the Child Tax Credit to $1,000 from $600 and step up marriage penalty relief.
It's too soon to say, of course, whether the plan will get the green light from Congressional leaders or whether it would achieve it's desired effect - jump starting the sluggish economy. But if implemented as proposed, the White House estimates a family of four with two wage earners making $39,000 would save more than $1,100 in taxes per year.
The Tax Foundation, however, notes that Bush's tax cuts would "affect families in different ways at different income levels." Raising the Child Tax Credit, for example, would have the greatest impact on families earning less than $110,000 per year, while the accelerated rate cuts would benefit families with higher incomes the most. Likewise, the marriage penalty changes, which would increase the standard deduction to $9,500 from $7,950, would offer the most relief to families earning up to about $75,000.
"I'm not thinking [the accelerated tax rate reductions] would have a huge impact," said Cindy Hockenberry, a spokeswoman and enrolled agent for the National Association of Tax Practioners. "They always like to say it's an economic stimulus package because they want to give the illusion that the economy is recovering that people will have more money. But it's only a small drop in the tax rates and I don't think in the grand scheme of things most taxpayers are really going to notice it."
She added, however, the proposed Child Tax Credit increase looks more promising. "If you have two kids, that's an instant tax savings of $800," she said. "That's something that's tangible; that would have an immediate impact."
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Crunching the numbers further still, tax law information firm CCH notes that single filers with no kids making $50,000, would realize smaller savings of $326 as a result of the proposed tax breaks - or $12.54 per bi-weekly paycheck.
Single filers, age 65 with adjusted gross income of $30,000 (including $3,000 in dividend income) would see their taxable income fall to $18,050 from $21,050 thanks to the lower tax rates and dividend tax repeal for an annual savings of $500.
On the other end of the spectrum, married couples making $300,000, with two kids under 17, $10,000 of dividend income and $50,000 of itemized deductions, would save $8,840 over the course of the year - even though they would not qualify for the Child Tax Credit. Their taxable income would drop to $240,367 from $251,643 for a savings of $340 in each of their 26 paychecks.
That's no small chunk of change.
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