|Bush Offers Tax-cutting Economic Stimulus Plan|
President Bush today proposed a 10-year, $670 billion legislative package he hopes will bolster the sagging U.S. economy by giving some 100 million taxpayers an average $1,083 tax cut in 2003, plus long-term tax savings to 35 million Americans who earn income from corporate dividends.
"Our first challenge is to allow Americans to keep more of their money so they can spend and save and invest -- the millions of individual decisions that support the market, that support business, and help create jobs," said President Bush in his speech from Chicago. "Today I'm announcing a growth and jobs plan to strengthen America's economy, specific proposals to increase the momentum of our economic recovery."
Calls for total elimination of dividend taxes
The highlight of the plan completely eliminates taxes paid on dividend income. While this change alone would cost the government some $300 billion in tax revenue over the next 10 years, the White House contends it would increase stock prices by at least 10 percent and boost the economy by $20 billion this year alone. On Monday, the stock market responded to rumors of this change by surging to one of its best buying rallies in months.
"We can begin by treating investors fairly and equally in our tax laws. As it is now, many investments are taxed not once, but twice," said the president. "It's not fair to double-tax by taxing the shareholder on the same profits. So today, for the good of our senior citizens, and to support capital formation across the land, I'm asking the United States Congress to abolish the double taxation of dividends."
Examples of proposed tax cuts in 2003
According to the White House, examples of tax cuts for 2003 would play out as follows:
- 46 million married couples would receive an average tax cut of $1,716.
- 34 million families with children would benefit from an average tax cut of $1,473.
- 6 million single women with children would receive an average tax cut of $541.
- 13 million elderly taxpayers would receive an average tax cut of $1,384.
- 23 million small business owners would receive tax cuts averaging $2,042.
A typical family of four with two earners making a combined $39,000 in income would receive a total of $1,100 in tax relief under the plan.
"Taken together, these income tax cuts will put an additional $70 billion to work in the private economy over the next 18 months," said Bush. "And there's no better way to help our economy grow than to leave more money in the hands of the men and women who earned it."
President Bush's plan would also:
- Increase the child tax credit from $600 to $1,000 per child
- Reduce the amount of money withheld from workers paychecks for taxes
- Establish a $3,000 "re-employment account" available to unemployed people to help them find jobs
- Offer tax incentives to small businesses to invest in new equipment
- Extend unemployment benefits
- Decrease the "marriage tax" penalty
- Offer more funding to needy states
"A person with a Re-Employment Account will be able to decide whether to use the funds for job training, or child care, or transportation, or even to cover the costs of relocating to another city for a new job," said Bush, adding that he would ask Congress to provide $3.6 billion to the states to pay for the re-employment accounts.
The so-called marriage penalty of two-income couples would be ended immediately under Bush's plan, instead of in 2009, as currently provided for.
Three main goals: According to the White House, the tax cuts, credits and other features of the plan would stimulate the economy by accomplishing three main goals:
- Encourage consumer spending that will continue to boost the economic recovery.
- Promote investment by individuals and businesses that will lead to economic growth and job creation.
- Deliver critical help to unemployed citizens.
"I worry about people who are out of work. They need our help, both in short-term benefits and long-term opportunity," Bush said.
The President's Council of Economic Advisers has estimated that the plan will result in the creation of 2.1 million jobs over the next three years.
President Bush urged Congress to approve the proposed plan quickly and to make all tax cuts effective this year and to make them retroactive to January 1. "I will ask members of both parties to work with me to secure our economic future. We cannot be satisfied until every part of our economy is healthy and vigorous," said President Bush. "Growth will bring the added benefit of higher revenues for the government -- revenues that will keep tax rates low, while fulfilling key obligations and protecting programs such as Medicare and Social Security."
Online Discussion: What do you think of President Bush's proposal?
- Policy in
Focus: Taking Action to Strengthen America's Economy
White House explanation of how President Bush proposal will help stimulate the economy.
- Complete text of President Bush's speech