According to the official Bush tax relief website, the typical household of four will be able to save at least $1,600 of their own money after the tax cut goes into effect. These savings are derived from a plan that can be divided into six components: altering the marginal rate structure, increasing the child tax credit amount, reducing the marriage penalty, eliminated the death tax, expanding charity tax refunds and providing a permanent tax credit for companies for research and development. .
The first part of the plan is to "simplify" the marginal tax rate structure by reducing the number of brackets from 5 to 4. The original brackets were at 15, 28, 31 36, and 39.6 percent as compared to the new tax brackets are established as 10, 15, 25 and 33. This reduction and reorganization results in an overall tax reduction for every taxpayer in America. The new marginal tax rates are designed to supply incentive to the common worker and reduce the diminishing marginal benefit of working. For example, if one was earning a certain amount of money, but would be taxed more on additional wages due to increases in productivity or time at work, then that person would not work in order to avoid paying the higher tax rate that the new earnings put him in. If these employees do not work, then productivity as a whole economy will decrease as a result of non-incentive marginal tax rates.
Bush has also altered the tax system to accommodate for the family structure, as the next two components illustrate. First, the tax credit on children is doubled to $1,000 per child, to update the growing cost of sustaining raising a child in today's society. Also, the third component of the tax plan reduces the marriage penalty, which occurs when spouses file a joint return by reinstating the 10 percent reduction. These benefits are targeted at one-parent households that are struggling to make ends meet by attempting to work as well as raise children.