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The Bush Tax Cuts: How did the 2004 tax cuts change the tax code?

Two pieces of tax legislation were passed in 2004: the Working Families Tax Relief Act of 2004 (WFTRA) and the American Jobs Creation Act (AJCA). WFTRA extended certain provisions of the 2001 and 2003 tax cuts to various sunset dates; AJCA primarily involved changes in the taxation of business and corporate income that are largely unrelated to the 2001 and 2003 tax cuts.

  • The primary tax change in WFTRA was to extend provisions introduced three years earlier under the 2001 tax legislation. It extended the 10 percent bracket for joint filers through 2010, the higher standard deduction for married filers through 2009, and the doubled child tax credit through 2009.
  • WFTRA also extended the higher alternative minimum tax exemption through 2005 and extended certain ongoing tax provisions, the Work Opportunity Tax Credit and the Welfare to Work Tax Credit, aimed at increasing incentives for business to hire more workers from "vulnerable" populations.
  • The most significant provision of AJCA was a change in the tax incentives for U.S. businesses involved in exporting, to make the U.S. tax code compliant with international trade guidelines. AJCA also increased tax credits for business investment abroad and temporarily increased the business "expensing" provision.
  • AJCA did also change certain provisions of the individual income tax. One notable provision allowed individuals to claim a deduction for state and local sales taxes paid, in lieu of deducting state income taxes. This provision primarily benefited individuals in states that have a sales tax but no state income tax.
 
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   Entry 5 of 7