President George W. Bush will unveil a nearly US$670 billion economic plan today calling for the elimination of taxes shareholders pay on dividends, a bold move denounced by Democrats as a windfall for the rich designed to boost stocks and his reelection chances.
The package, which Bush will announce in Chicago, will include the acceleration of across-the-board rate cuts, immediate tax relief for married couples and families with children, and bigger incentives for small businesses to invest in new equipment.
In all, the White House says it will give 92 million taxpayers an average tax cut of US$1,083 this year. Up to 35 million people who get income from dividends could benefit.
The package, which must be approved by the narrowly divided Congress, will cost up about US$670 billion over 10 years -- more than twice the amount initially considered by the White House -- with about US$100 billion in tax cuts this year.
Bush is expected to set aside about US$10 billion for "fiscal relief" to cash-strapped states, according to congressional sources.
Congressional Democrats -- and some economists -- said the plan would have little stimulative effect, would deepen the federal budget deficit and predominately benefit the elite. They estimated that 25 percent of the dividend tax break proposed by Bush would go to people making over US$1 million a year. The vast majority of American stockholders will get less than US$50, Democrats said.
"The president really is investing ... US$600 billion on an old, old Republican theory of trickle down economics," said Representative George Miller, a California Democrat. "We're saying no. Give it to the people who need it."
The White House has made reviving the US economy its top domestic priority besides homeland security.
Bush's re-election chances in 2004 could depend on whether he can get the economy growing, reduce unemployment and break a three-year losing streak for major stock indexes.
As part of a major lobbying campaign aimed at selling the tax cuts to Congress and the American people, Bush will dispatch his chief economic adviser, Stephen Friedman, and other top aides to Wall Street and Capitol Hill.
The centerpiece of the plan will be the immediate elimination of taxes paid on dividends by shareholders. Administration officials believe the change, expected to cost as much as US$380 billion, could boost stock prices by 10 percent or more.
More than 10 million of those poised to benefit are senior citizens, an important voting block in the 2004 presidential election.
"The reduction in taxes on dividends will encourage ... capital flows into the marketplace. It'll encourage investment. And that's what we want, we want to encourage investment activity. Investment means jobs," Bush said on Monday.
Hoping to broaden support for the tax cuts, Bush will ask Congress to quickly extend federal unemployment benefits for more than 750,000 Americans whose benefits expired on Dec. 28.
Bush is also expected to offer some US$10 billion to states. About US$3.6 billion would fund a job-training program for people having a hard time finding work. "Personal reemployment accounts," with up to US$3,000, would pay for job training and services such as child care and transportation.
According to congressional sources familiar with the package, Bush is also expected to call for:
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