Bush Plans Tax Cut To Revive Economy

President Bush outlined Tuesday a bold $670 billion, 10-year economic plan intended to speed up economic recovery, aid job creation and work toward the goal of full employment.

Bush presented his economic plan in Chicago amid affirmations that he will ensure Iraqi disarmament with military force if necessary.

At the address, the president said he will continue to cut taxes and proposed to eliminate taxes on dividends, marriage and death.

Bush said these eliminations would reduce citizens' tax burden by $98 billion this year and $670 billion over the next decade. These cuts would allow the economy to recover and expand by allowing greater investment."Our first challenge is to allow Americans to keep more of their money so they can spend and save and invest," he said.

Bush and other key Republicans long have argued that taxing stock dividends is double taxation because the corporations providing the dividends already have paid taxes on their profits. "Double taxation is bad for our economy," he said. "Double taxation is wrong."

But critics said Bush's plan strongly favors the wealthy over the poor.

Michael Salemi, UNC professor of economics, said he thinks that although economic improvements would benefit everyone, it is clear the Bush administration primarily was interested in helping the wealthy. "He will have a heavy task to explain to the American people why this is a fair package," he said. "There is a real risk that the American people will perceive it as helping relatively few. They may think, 'Why should the fat cats get the benefits while we get the crumbs?' even if it helps the economy."

Economics Professor Richard Froyen said 66 percent of the cuts in dividend taxes would go to the wealthiest 10 percent of the population.

He said the Democrats would like to see a Social Security tax cut because individuals in lower income brackets pay more Social Security than other taxes.

Sen. John Edwards, D-N.C., said Bush's proposed tax cuts would not stimulate the economy. "If it looks like a tax cut for the rich, if it walks like a tax cut for the rich, it is, in fact, a tax cut for the rich," Edwards stated in a press release.

Democrats say their budget proposals offer more immediate relief. But Bush urged Congress to apply all proposed tax cuts to the taxes collected since Jan. 1. "(This would) immediately adjust the amount of money withheld for income taxes," he said.

Bush also pledged to end unemployment in the United States. "We will not rest until every business has a chance to grow and every person who wants to find work can find a job."

The president said he would create Personal Unemployment Accounts with up to $3,000 for unemployed people in their job search. If people were to find a job within 13 weeks, they would keep the remaining balance.

Salemi said this incentive will not have the desired immediate effect because $3,000 is a small amount when compared to annual salaries.

He added an individual's decision to become employed largely is based on potential for long-term economic gain. Short-term incentives are likely to be ineffective, as unemployed individuals will choose to wait until they receive a profitable offer of employment.

But Bush said government spending is creating jobs that come with attractive salaries. The conditions are right for economic prosperity, he said.

"The government is spending what is necessary to win the war. ... We have the most productive, creative and promising economic system the world has ever seen."

The State & National Editor can be reached at stntdesk@unc.edu.