RECEIPTS

    The current estimates of receipts for 2003 and 2004 are below the February Budget estimates by $79.9 billion and $124.6 billion, respectively. The current estimates for 2005 through 2008 are below the February Budget estimates, resulting in a downward revision in receipts of $353.6 billion over the five years, 2004 through 2008. These changes in receipts are the net effect of enactment of the 2003 jobs and growth tax cut (Jobs and Growth Tax Relief Reconciliation Act of 2003), modification of the Administration's proposals to reflect enactment of the 2003 jobs and growth tax cut, revised economic projections, and technical reestimates. The technical reestimates include an additional adjustment for revenue uncertainty of -$15 billion in 2003, -$30 billion in 2004 and -$15 billion in 2005. These additional adjustment to receipts are beyond what the economic and tax models forecast and have been made in the interest of cautious and prudent forecasting.

    On May 28th, President Bush signed the 2003 jobs and growth tax act, which provides $252.8 billion in tax relief over the six years, 2003 through 2008. The tax relief provided in this Act includes reductions in individual income tax rates on capital gains and dividends, extension and expansion of bonus depreciation deductions, an increase in expensing for small businesses, and an increase in the exemption amount for the alternative minimum tax. The Act also accelerates to 2003 the following tax reductions provided in the 2001 tax cut (Economic Growth and Tax Relief Reconciliation Act of 2001): (1) reductions in individual income tax rates scheduled for 2004 and 2006; (2) increases in the child tax credit scheduled for 2005, 2009, and 2010; (3) expansion of the 10-percent individual income tax bracket scheduled for 2008; (4) expansions of the standard deduction for married taxpayers filing a joint return scheduled for 2005 through 2009; and (5) expansions of the 15-percent individual income tax bracket for married taxpayers filing a joint return scheduled for 2005 through 2008. Although the tax relief provided in this Act includes the key provisions of the economic growth package proposed by the President in February, the relief is temporary and expires between December 31, 2004 and December 31, 2008. The total tax relief provided by the 2003 jobs and growth tax cut over the six years, 2003 through 2008, is $137.7 billion less than the tax relief provided in the economic growth package proposed by the President in February.

    The Administration's policy initiatives (see Table 13, Receipts Proposals), which have been modified since February to reflect enactment of the 2003 jobs and growth tax cut, are estimated to increase receipts in 2003 and 2004, but reduce receipts in each subsequent year, resulting in a net tax reduction of $165.7 billion over the five years, 2004 through 2008. This is $275.5 billion less than the $441.2 billion net tax reduction proposed in the February Budget over the same five-year period. The Administration's policy initiatives include permanent extension of the increased expensing for small businesses and reductions in taxes on capital gains and dividends provided in the 2003 jobs and growth tax cut. They also include extension through 2010 of the accelerated increase in the child credit, the accelerated expansion of the 10-percent individual income tax bracket, and the accelerated expansions of the standard deduction and 15-percent individual income tax bracket for married taxpayers filing a joint return provided in the 2003 jobs and growth tax cut. In addition, the initiatives include permanent extension of the provisions of the 2001 tax cut scheduled to sunset on December 31, 2010; permanent extension of the research and experimentation tax credit; tax incentives for saving, charitable giving, education, health care, protecting the environment, and renewable energy and conservation; and other provisions proposed by the President in February that have not become law.

    Revised economic assumptions and technical adjustments (including the adjustment for revenue uncertainty) reduce receipts by $75.8 billion in 2003 and $99.4 billion in 2004 relative to the February Budget. These factors reduce receipts over the five-year period 2004 through 2008 by $411.9 billion. Shortfalls in collections of individual and corporation income taxes and employment taxes account for most of the downward adjustment in 2003 receipts. The shortfall in collections of income taxes is attributable to significantly weaker-than-estimated individual and corporation income tax liability for tax year 2002, as reflected in lower-than-expected final payments and higher-than-expected refunds of payments of 2002 tax liability. The shortfall in collections of employment taxes reflects reclassifications of 2002 withheld taxes and lower-than-expected withholding in 2003. The revisions in subsequent years primarily reflect downward revisions in estimated individual income and employment tax collections, attributable in large part to downward revisions in wages and salaries and revisions in estimating models to reflect current collection experience.