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Date Posted: 03:03:28 02/14/03 Fri
Author: Tax credits$600 to $1,000 this yearinstead of in 2010
Subject: Bush stimulus unveiled Jan. 7.92 mill taxpayers would receive an average tax cut of $1,083 in 2003

WASHINGTON, Feb. 13 — New Treasury Secretary John Snow said Thursday that President Bush’s proposal for $1.3 trillion worth of tax cuts would give the lagging economy a quick boost and also provide a number of long-term benefits that would improve American living standards.
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SNOW USED HIS FIRST speech since taking office a week ago to defend Bush’s economic program against charges from Democrats that it is too tilted toward tax breaks for the wealthy, offers too little in short-term economic stimulus and is too costly in light of the administration’s new budget. That document projects record budget deficits this year and next.
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“The president and his economic team have given this plan a lot of thought,” Snow said in remarks prepared for delivery to the Detroit Economic Club. Copies of the text were also released in Washington.
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“Our goal was to do something that would pay off for America long into the future — not here today, gone tomorrow,” he said.
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Snow said the package, which asks Congress to accelerate a number of the tax cuts that Bush got Congress to approve in 2001, would give the economy a quick stimulus by putting more money into consumers’ pockets this year.
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He said it also would provide for greater growth in the future by eliminating the double-taxation of stock dividends, which the administration says discourages investment spending by businesses to boost productivity, the key to raising living standards.



The Bush stimulus plan

Following are proposals from the president’s $674 billion, 10-year economic stimulus package unveiled Jan. 7.
• Dividends • Corporate taxes • Tax rates
• Tax brackets • States • The unemployed

The plan calls for the elimination of double taxation on corporate dividends. This is likely to cost as much as $300 billion over 10 years, according to administration sources. Some economists say it could boost stock prices by 10 percent.
For more information [click here]

Companies would receive tax breaks and would be eligible for write-offs of up to $75,000 on capital investment, a limit that would be adjusted to inflation.
For more information [click here]

The plan would speed up cuts of income tax rates that are currently scheduled to be phased in during 2004 and 2006.
Tax credits for families with children would increase from $600 to $1,000 this year instead of in 2010. The marriage penalty tax would be decreased this year instead of in 2009.
The administration says:
According to the administration:

92 million taxpayers would receive an average tax cut of $1,083 in 2003

46 million married couples would receive average tax cuts of $1,716

34 million families with children will receive average tax cuts of $1,473

13 million elderly taxpayers would receive a $1,384 tax cut.
For more information [click here]

The current 27 percent bracket would be lowered to 25 percent; the 30 percent bracket to 28 percent; the 35 percent bracket to 33 percent; and the top 38.6 bracket to 35 percent. In addition, millions of American workers would be moved to the lowest tax bracket of 10 percent this year instead of in 2008.
The administration will give states a total of $3.6 billion for job retraining and support for at least 1.2 million unemployed workers. Under this program, jobless workers will have up to $3,000 in Personal Re-employment Accounts to spend on job training, child care, transportation, moving costs and other expenses incurred in looking for a job.

The President has proposed spending $3.6 billion on Personal Employment Accounts worth up to $3,000 each to help about 1.2 million unemployed workers. States would have broad flexibility to implement the program, but in general here is how the program would work:

Who would qualify
How the money could be used
The re-employment bonus


Who would qualify?
Unemployed workers considered “somewhat to very likely” to exhaust their benefits.

Unemployed workers who recently have exhausted their benefits and need extra support for training or work in industries or occupations that are declining in their area.


Who would qualify
How the money could be used
The re-employment bonus


How Personal Employment Accounts could be used
Money could be used for training, child care, transportation, employment counseling or other services related to a job search. States also could elect to disburse the money directly to workers who have exhausted all unemployment benefits. Accounts would be administered through the One Stop Career Center system.


Who would qualify
How the money could be used
The re-employment bonus


The re-employment bonus
Workers in the program who find a new job within 13 weeks would be allowed to keep any remaining funds in their account as a re-employment bonus. 60 percent of the bonus would be paid upon employment and the remaining 40 percent after six months on the job. The bonus would be considered taxable income, while other benefits paid out of the account would be exempt from taxes.


Who would qualify?
How the money could be used
The re-employment bonus



Source: Reuters
Printable version

“Today, our tax laws discourage that investment and job creation and needlessly penalize all those investors — especially seniors — by taxing dividends twice,” Snow said. “The net effect of double taxation is that the American economy grows more slowly than it should, because it is more costly than it needs to be for businesses to expand and invest.”
Federal Reserve Chairman Alan Greenspan told House and Senate committees this week that he strongly supported Bush’s call to eliminate the tax on dividend payments but said the proposal, which has a price tag of $385 billion over 10 years, should be paid for either by increasing other taxes or trimming government spending so that it would not add to government deficits.
Asked Thursday if Bush still had confidence in Greenspan, White House spokeswoman Claire Buchan replied, “Yes. The president has a great deal of confidence in Chairman Greenspan. He think he’s doing an excellent job.”
“His term is not even expiring until the middle of next year so it’s sort of silly to begin speculating about that,” said Buchan, talking to reporters as she accompanied the president to Florida aboard Air Force One.


fact file
Will you benefit from the plan?




The White House says its tax proposal, if passed by Congress, would provide 92 million taxpayers an average tax cut of $1,083 in 2003. CCH Inc, a tax and business law consulting firm, estimated how the proposals would affect seven hypothetical households. Select a household icon above to see how you might benefit.
Single, age 65+, $30,000 of AGI including $3,000 in dividend income

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $27,000** $30,000
Std. Deduction $5,900 $5,900
Personal Exemptions $3,050 $3,050
-------- --------
Taxable Income $18,050 $21,050
Tax $2,358 $2,858
Savings under Bush plan $500

**Gross income reduced because dividends are not taxed under Bush plan.

Head of Household – one child under age 17, $30,000 of income

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $30,000 $30,000
Std. Deduction $7,000 $7,000
Personal Exemptions $6,100 $6,100
-------- --------
Taxable Income $16,900 $16,900
Tax $2,035 $2,035
Child credit -$1,000 -$600
Tax after credits $1,035 $1,435
Savings under Bush plan $400


Married couple -- two children under age 17, $50,000 of income

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $50,000 $50,000
Std. Deduction $9,500 $7,950
Personal Exemptions $12,200 $12,200
-------- --------
Taxable Income $28,300 $29,850
Tax $3,545 $3,878
Child credit -$2,000 -$1,200
Tax after credits $1,545 $2,678
Savings under Bush plan $1,133

Single taxpayer -- no children, $50,000 of income

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $50,000 $50,000
Std. Deduction $4,750 $4,750
Personal Exemptions $3,050 $3,050
-------- --------
Taxable Income $42,200 $42,200
Tax $7,360 $7,686
Savings under Bush plan $326

Married couple -- two children under age 17, $100,000 of income, $15,000 of itemized deductions

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $100,000 $100,000
Itemized Deduction $15,000 $15,000
Personal Exemptions $12,200 $12,200
-------- --------
Taxable Income $72,800 $72,800
Tax $11,820 $13,362
Child credit -$2,000 -$1,200
Tax after credits $9,820 $12,162
Savings under Bush plan $2,342

Single individual, no children, $100,000 of income including $3,000 of dividend income, $15,000 of itemized deductions

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $97,000** $100,000
Itemized Deduction $15,000 $15,000
Personal Exemptions $3,050 $3,050
-------- --------
Taxable Income $78,950 $81,950
Tax $16,852 $18,813
Savings under Bush plan $1,961

**Gross income reduced because dividends are not taxed under Bush plan.

Married couple -- two children under age 17, $300,000 of income including $10,000 of dividend income, and $50,000 of itemized deductions

--------------------------------------------------------------------------------


Bush Present Law
Adjusted Gross Income $290,000** $300,000
Itemized Deduction $45,485 $45,185
Personal Exemptions $4,148 $3,172
-------- --------
Taxable Income $240,367 $251,643
Tax $60,767 $69,607
Child credit 0 0
Tax after credits $60,767 $69,607
Savings under Bush plan $8,840

**Gross income reduced because dividends are not taxed under Bush plan.



Printable version

Snow in his prepared remarks did not directly address Greenspan’s comments, which Democrats contend represent a major blow to Bush’s sales effort in Congress.
However, Snow did say that the deficits the administration is projecting — $304 billion this year and $307 billion next year — while record levels in dollar amounts, were still small in terms of their percentage of the overall $10 trillion economy.
“Even without the president’s economic growth and jobs package, improved homeland security and the war on terrorism, we would still have deficits today from the economic slowdown,” Snow said. “Are these deficits welcome? No. Are they understandable? Yes.”
Snow also attacked a major part of some Democratic stimulus alternatives, which would offers billions of dollars in direct aid to states to help them deal with their own budget shortfalls.
He called such proposals hooking states up to “federal life support” and said Bush offered a better approach by devoting his program to tax cuts to get the economy growing at a faster pace, which would provide more revenue to states and the federal government.
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Addressing the charge that too much of Bush’s program is devoted to providing tax cuts for the wealthy, Snow said the proposal offers many benefits for lower income families by eliminating the so-called marriage penalty for two-earner couples, increasing the child tax credit from $600 to $1,000 this year and slashing the dividend tax, which is paid to many senior citizens on fixed incomes.
Snow’s trip to Detroit to sell the president’s plan was part of what Treasury officials are billing as his “heartland tour” to sell Bush’s economic policies.
Snow had breakfast Thursday morning at a diner in Livonia, Mich., a suburb of Detroit. He is scheduled to travel to Philadelphia where he will also begin his day Friday with breakfast at a local diner and then deliver a luncheon speech to the Philadelphia Chamber of Commerce.

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