Bush promises new economic plan, not ‘class warfare’
WASHINGTON — President Bush said Thursday the economic-stimulus plan he will detail next week will focus on jobs and the unemployed, aimed at benefiting the overall economy and not just wealthy Americans.
Two of the major elements of the plan are expected to be a reduction in taxes on stock dividends and an acceleration in the cuts in personal income tax rates included in the 2001 tax act — items that would benefit higher income taxpayers the most. Bush, however, rejected criticism that his proposals would be weighted toward the well-to-do.
“Some would like to turn this into class warfare. That’s not how I think,” he said.
The plan, which the president will unveil in a speech in Chicago on Tuesday, is certain to face renewed attacks from Democrats, who contend that Bush’s $1.35 trillion, 10-year tax cut was slanted to benefit the wealthy.
Republican officials, who spoke on condition of anonymity, said Thursday that there was still an intense debate inside the White House over details of the proposal, which is expected to offer about $300 billion in new economic stimulus measures over the next decade. One said the first-year tax relief could amount to around $50 billion.
White House officials, who also spoke on condition of anonymity, said the president’s plan was likely to include acceleration in the reductions in tax rates scheduled to take effect in 2004 and 2006.
While the administration had considered not accelerating the reductions scheduled for the top rate, currently 38.6 percent, to deflect criticism, a senior White House official said late Thursday that the president had rejected this suggestion.
This official said Bush had decided that if he goes ahead with accelerated rate reductions in his proposal, it will include all rates, including the top rate paid by the very wealthiest Americans.
But in an effort to deflect some criticism that the plan is tilted toward the wealthy and to hold down costs, the reduction in taxes on corporate dividends, earned by Americans with enough money to invest in the stocks of companies paying dividends, is not expected to cover a total exemption from taxes.
One possibility would be to exempt just the first $1,000 in dividend payments each year. That would make stocks more attractive to average investors but would do little to relieve the tax burden of the very wealthy, who receive much more in dividend payments each year.
The administration is also studying whether to change the alternative minimum tax for individuals, a system orginally meant to ensure wealthy people do not escape income taxes entirely but which now covers 2.6 million taxpayers and is projected to hit 36 million by 2010.
Repealing the tax outright, however, could cost as much as $750 billion if it is done in the later years of this decade so Bush’s stimulus package was likely to propose at most only a down-payment to addressing this problem.
Bush, answering questions after giving reporters a tour of his Crawford, Texas, ranch, rejected complaints that his economic stimulus plan would be heavily skewed toward the wealthy.
“I’m concerned about all people,” Bush said. “I understand the politics of economic stimulus, that some would like to turn this into class warfare. That’s not how I think. I think about the overall economy and how best to help those folks who are looking for work.”
On the other hand, conservatives are concerned that Bush may be swayed too much by Democratic attacks and will end up presenting Congress with a watered-down stimulus proposal that won’t provide enough in investment incentives for the wealthy and businesses to jump-start the weak economy.
“If Bush did put out a plan that surrendered to the class war critics, he would lose many in his conservative base,” said Stephen Moore, president of the Club for Growth.
Daniel Mitchell, an economist at the conservative Heritage Foundation, said his group was also worried that the administration would trim back too much on tax incentives.
“There is no question that the left will try to drag out the pagan god of class warfare and say this is just a sop to the president’s rich friends,” Mitchell said. “The purpose of making these changes is to get more investment into the economy and create more jobs. That’s what really matters.”
Sen. Max Baucus, the top Democrat on the Senate Finance Committee, last month put out his own stimulus proposal that was much more heavily weighted to increases in government spending. Baucus’ $160 billion package included a one-time $300 tax cut for individuals and $75 billion in block grants to cash-strapped states.
Aides to Baucus said he was willing to look at the president’s proposals and felt that any plan should serve as a starting point for negotiations.
Bush may be forced to make compromises in order to get the 60 votes needed in the Senate to keep opponents from blocking passage of a bill that all agree will have to be passed quickly to ensure that the economy is growing at significantly higher rates by next year.
In addition to accelerating rate cuts and reducing taxes on corporate dividend payments, the president was also considering including an expanded tax break for businesses to encourage more capital investment. He also was considering accelerating tax relief in the 2001 act for child tax credits and helping to deal with the marriage penalty faced by two-earner couples.
Bush said investors should take heart in the new year, given that the economy is still growing — albeit slowly — despite a recession, the terrorist attacks and the rash of corporate scandals.
“That’s very positive,” he said. “I recognize there are some uncertainties.”