Tax cuts among plans for nation's economy
WASHINGTON -- An influential business group urged the Bush administration
Thursday to support an ambitious tax plan that would provide $160
billion in relief for individuals next year, including a reduction
of up to $620 in a worker's Social Security payroll tax.
John Dillon, the groups' chairman and chief executive of International Paper, said executives believed bold action was needed to help the economy, which many economists believe will weaken considerably in the current quarter.
"The Business Roundtable is very concerned that the U.S. economy is not growing close to its potential," Dillon told reporters during a telephone conference call. "We believe that a stimulus package could be a tremendous help, particularly in the short-term to stimulate demand for our products."
Bush said last week that his administration was considering a variety of proposals to bolster growth.
Commerce Secretary Donald Evans said in an interview Thursday that recommendations from the Business Roundtable were part of a range of proposals the administration was reviewing. Bush is considering using his State of the Union address to announce his plan.
"The president is very focused, as he always has been, on the economic security of the country," Evans said. "He has a long sweep of different options that we are actively considering."
The group's recommendations might appeal to the administration because 80 percent of the $160 billion total would be directed to lessening the burden of the Social Security payroll tax, which hits lower income workers the hardest.
The group recommended exempting the first $10,000 in wages next year from the tax. That would mean a $620 tax cut for workers and a similar cut in the amount companies have to pay for each employee; the cost was put at $129 billion.
Also suggested was accelerating the cuts in tax rates that are scheduled to take place in 2004 and 2006. Doing so would mean that rates in effect for 2003 of 27 percent, 30 percent, 35 percent and 38.6 percent would drop to 25 percent, 28 percent, 33 percent and 35 percent.
The result: less income withheld from people's paychecks and a boost to consumer demand. The cost would be $18 billion in 2003, the group said.
Eliminating the taxation of investor dividends would please conservatives, who long have complained about the double taxation of dividends paid by corporations to shareholders. The corporation pays corporate income taxes on the earnings that it pays in dividends, and investors also are taxed on the dividend earnings.
The business group recommends exempting investors' dividend earnings
from taxation, a change that would save $13 billion. While that amount
is the smallest portion of the $160 billion price of the relief in
2003, this reduction would continue in future years.
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