- The Washington Times - Wednesday, January 8, 2003

CHICAGO President Bush yesterday called for a halt to the double taxation of dividend income, half of which goes to senior citizens, as part of a sweeping, $670 billion package to stimulate the economy.
"I proposed a bold plan because the need for this plan is urgent," Mr. Bush told the Economic Club of Chicago. "And I urge the Congress to act swiftly and pass this bill."
The president's plan includes an extension of unemployment benefits and an acceleration of Mr. Bush's 2001 tax cuts, allowing 92 million taxpayers to keep an average of $1,083 more of their income this year.
It also raises the child tax credit to $1,000 from $600 and eliminates the so-called marriage penalty by increasing the standard deduction for couples to twice that for single filers.
Democrats called the bill a giveaway to the rich. They said their own economic stimulus package about one-fifth the size of the president's is less likely to exacerbate deficits.
"He's speaking the rhetoric working Americans are so eager to hear but offering only words to distract from his big, new tax breaks for the wealthiest Americans," said Massachusetts Sen. John Kerry, a Democratic presidential hopeful.
The biggest component of the package by far entails ending double taxation of dividends, a move estimated as being worth $364 billion over 10 years to taxpayers.
Seeking to blunt Democratic arguments that the cut is a sop to the wealthy, Mr. Bush said it will help sustain a lot of ordinary senior citizens. He said even Americans who do not receive dividends will benefit because the cut will invigorate the stock market and create jobs, two lagging components of an otherwise growing economy.
"As it is now, many investments are taxed not once, but twice," the president said. "First, the IRS taxes the company who owns the profit. Then it taxes the investors who received the profits as dividends.
"The result of this double taxation is that for all the profit a company earns, shareholders who receive dividends keep as little as 40 cents on the dollar.
"Double taxation is bad for our economy," he said. "Double taxation is wrong. Double taxation falls especially hard on retired people."
Emboldened by the Republican takeover of the Senate, which was sworn in yesterday, Mr. Bush demanded immediate enactment of many aspects of his 2001 tax cuts, which were originally scheduled to phase in over a decade.
For example, he called for acceleration of an income-tax cut scheduled for 2006. It would be retroactive to Jan. 1.
"If tax relief is good enough for Americans three years from now, it is good enough for Americans today," he said, drawing applause from 2,300 business leaders. "By speeding up the income-tax cuts, we will speed up economic recovery and the pace of job creation."
But Mr. Bush was not willing to speed up elimination of the death tax, which is scheduled to linger until 2010. Asked by The Washington Times why this aspect of the 2001 Bush tax cut is not "good enough for Americans today," a senior White House official said Mr. Bush had to prioritize his list of measures to stimulate the economy.
Dozens of Democrats helped pass the 2001 Bush tax cut, but they appeared determined to water down the new economic-stimulus package in the Senate, where Republicans claimed their one-vote majority yesterday. The House, which has been controlled by the GOP for all of Mr. Bush's presidency, is expected to pass virtually every aspect of the new package.
"My key concern is twofold," said Senate Minority Leader Tom Daschle of South Dakota. "There is no stimulus in the stimulus plan, and secondly it is grossly unfair.
"Clearly, what the president has laid out today is wrong," he said.
The Democrats' $100 billion stimulus package includes rebates of $300 per person or $600 per working couple this year, tax cuts on equipment purchases for small businesses and unemployment assistance. It does not cut taxes on stockholders.
The White House does not expect to enact 100 percent of yesterday's package, especially with the 2004 presidential race already heating up and a crowded field of Democratic challengers increasing their rhetoric against Mr. Bush.
That's one reason why Mr. Bush decided last month to propose a larger package than he had been contemplating, when he planned to merely reduce the double taxation of dividends.
"Americans today are paying about a third of their income in taxes," the president said. "All of this puts pressure on [a] family budget and therefore clouds our economic future."
Mr. Bush also proposed to help small businesses by allowing them to write off equipment purchases of up to $75,000, triple the current limit. And he called for a retroactive extension of unemployment benefits that ran out Dec. 28.
Because the Democrats also called for such an extension as well as smaller tax breaks for businesses White House officials do not expect many Americans to view the competing plans as opposites. They consider it a measure of Mr. Bush's influence that Democrats who once talked of rolling back the earlier tax cuts are now pushing cuts of their own.
Mr. Bush also emphasized that the economy began to decline while Bill Clinton was president and has since recovered from one of the shortest and shallowest recessions in history.
In an effort to pre-empt Demo-cratic criticism, he also said his economic stimulus plan will reduce deficits, not enlarge them.
And he tried to put the onus on Democrats by saying they can keep deficits down by reining in spending.
"The Congress must also understand this: The American people deserve and expect spending discipline in Washington, D.C.," he said. "With spending discipline and with pro-growth policies, we will expand the economy and help bring down this deficit."

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