Last Wednesday, I joined President George W. Bush at the White House as he signed into law the Tax Increase Prevention and Reconciliation Act of 2005 (H.R. 4297). The Tax Increase Prevention and Reconciliation Act prevents several current-law tax provisions from expiring in the near future. Specifically, the bill extends alternative minimum tax (AMT) relief, increased limits on small business expensing, and lower rates on capital gains and dividends. These provisions affect a broad spectrum of taxpayers, including investors, job creators and middle-income families burdened by high taxation.

Thanks to the pro-growth policies and lower taxes Congress passed in 2001 and 2003, our economy is continuing to enjoy one of the longest stretches of positive gain in recent memory. Positive data continues to report strong home sales, increased federal tax revenue, low unemployment and overall job growth even in light of on-going and impending financial obligations to fight terror abroad and restore and revitalize the Gulf Coast.  

Tax relief measures have spurred 32 consecutive months of job growth, creating more than 5.2 million new jobs since 2003. Over two million payroll jobs have been added in the past year alone. Employment has increased in 48 states, including Kentucky, allowing college graduates to enter the strongest job market in five years. The national unemployment rate has dropped from 6.1% in August 2003 to 4.7% in April 2006, lower than the average of the 1960s, 1970s, 1980s, and 1990s.

Other key economic indicators paint an equally promising long term forecast for our economy. Gross domestic product (GDP) for the first quarter of 2006 grew at a robust 4.8%.  Manufacturing industrial production is up 3.8% over the past year and 9.2% over the past 2 years. New home sales are at record high boosting homeownership rates to 69% nationwide and a remarkable 73% in Kentucky. These factors continue to influence impressive increases in consumer confidence, consumer spending, and construction spending.

The Office of Budget and Management estimate that tax relief measures have helped to keep $880 billion in taxpayers' pockets during the past five years, allowing more and more Americans to keep their hard-earned money and to join the workforce and help our economy thrive. As a result, tax cuts are actually bolstering federal tax revenues. The Treasury Department recently reported a nearly 15% increase in tax revenue receipts last year, reflecting a strong economy that is creating jobs, stimulating business investment, and boosting wages.  Bottom line, tax relief is helping to pay down the federal deficit at a faster rate than predicted.

New estimates released by the Treasury Department show that hundreds of thousands of Kentucky taxpayers will enjoy a lighter burden next year thanks to the combined benefit of the Economic Growth and Tax Relief Reconciliation Act Of 2001, The Jobs and Growth Tax Relief Reconciliation Act of 2003 and the extension of relief provided in the Tax Increase Prevention and Reconciliation Act of 2005. An estimated 257,000 taxpayers in Kentucky will receive a reduction in income tax rates above 15% in the next tax season. 453,000 married couples in Kentucky will benefit from the reduction of the marriage penalty, while another 371,000 married couples and single parents will benefit from the increase in the child tax credit. More that 271,000 taxpayers in Kentucky will also benefit from the reduced tax rates on capital gains and corporate dividends.

Tax cuts have also spurred entrepreneurship and new investment by companies. One only has to read the regional newspapers to see the effect it is having in the Commonwealth.  New investments in our local economy are being made by growing local companies, large private corporations, Fortune 500 companies, and numerous foreign-owned industries. The new diversified economy in Kentucky’s Second Congressional District includes new manufacturing facilities; significant expansions of existing manufacturers; expansions at healthcare facilities; and new service operations. Kentucky now ranks fourth in the nation for its ability to attract new employers.

In a major victory for state tax competition, the Supreme Court handed down a ruling last week in the case of DaimerChrysler v. Cuno, overturning a lower court decision against the constitutionality of an Ohio investment tax credit. As someone who has worked on this issue in Congress, I believe this ruling will further our state’s ability to attract new business by protecting the right of state lawmakers to make their tax system more competitive.

After faltering due to an unprecedented combination of recession, terrorist attacks, and corporate scandal, the American economy is bouncing back. The pro-growth policies of the Bush Administration and this Congress are working. We are a strong and innovative people who can handle setbacks and, despite the beliefs of some, our economy reflects the same.