How the Stimulus Package Will Affect You

ByABC News via logo
January 6, 2003, 10:46 AM

Jan. 7 -- Dave and Eileen Dahm are like many American families President Bush says will benefit from his new tax plan.

Dave is a union electrician earning $50,000 a year, while Eileen works at home taking care of their two children. Bush's proposed income-tax cut of 1 percent would save them $133 this year.

But more important for the Dahms is the money they would save through an increase in child tax credits for them: another $800. With a total of $933 in their pocket, that's money they can spend on things like decorating their home.

"Buy another couch, that's all I think about," says Dave.

Spending their savings to stimulate the economy is exactly what the Bush administration is hoping families will do with their proceeds from the president's proposed stimulus package.

Totaling $670 billion over 10 years, the new stimulus package will include a number of tax cuts designed to put more money into the hands of consumers. That would ultimately benefit the struggling economy, since consumer spending represents about two-thirds of the nation's economic output.

Families Could Benefit

For instance, Bush's plan is expected to include an accelerated 1 percent tax cut this year to the current 35 percent, 30 percent and 27 percent income-tax brackets, along with a $400 increase in the child tax credit for parents whose combined income is less than $110,000.

For married couples, President Bush may include in his proposal a complete elimination of the so-called marriage penalty. According to the nonpartisan Tax Foundation, a median family of four would save an average of $532 if such a penalty were eliminated.

Investors would also be big beneficiaries of the proposed stimulus package. A centerpiece of Bush's plan may involve the elimination of taxes paid on dividends.