US President George W. Bush signaled he's accepted a 25 percent reduction in his 10-year tax cut proposal, shifting his agenda from a wartime footing toward domestic politics.
"We need tax relief totaling at least $550 billion to make sure our economy grows," Bush told small business leaders in the White House Rose Garden.
"American workers and American businesses need every bit of that relief now," he said.
Bush wants to avoid the fate of his father, president George Bush, who led a military victory over Iraq in 1991 and lost re-election the next year as voters blamed him for a recession.
Bush's plan would scrap the taxes investors pay on dividends, reduce individual tax rates and allow small businesses to deduct more of their investment.
Democrats and some Republicans said Bush's original US$726 billion plan was too expensive. The administration estimated that the deficit would be at least US$300 billion this year, without counting war costs.
Bush was scheduled yesterday to sign a war-related supplemental spending measure worth almost US$80 billion.
Bush's retreat from US$726 billion "is a recognition of reality," said Robert Reischauer, a former director of the Congressional Budget Office.
"He's acceded to the wishes of Congress," he said.
The budget Congress approved last week includes the US$550 billion tax-cut cap.
The Senate passed it by one vote only after Finance Committee chairman Charles Grassley promised fellow Republican senators he'd hold the final total to US$350 billion, which Grassley said wouldn't be enough to allow Bush's US$396 billion proposal to eliminate dividend taxes.
Congress reconvenes April 28 after its Easter break.
Grassley's tax-writing panel and its House counterpart will have until May 8 to write the legislation Bush seeks. In the next two weeks, about 25 administration officials, including Cabinet members, will promote the plan in 40 cities in 26 states.
Bush says Americans need a tax break to create growth that will reduce the 5.8 percent jobless rate and stimulate a stock market that declined by about 17 percent over the past year.
Americans need "immediate tax relief so that they have more of their own money to spend or save," Bush said in his remarks, timed to coincide with the April 15 tax-filing deadline.
"Instead of lowering taxes little by little, the Congress should do it all at once and give the economy the boost it needs," he said.
The plan would reduce taxes for 23 million small businesses and "put more money in the hands of investors," he said.
More than half the tax cut benefits would reach US workers and businesses in the next two years, or before next year's presidential elections, he said.
"The issue for Republicans is `Can you get the economy off the front page?' so Democrats don't gain mileage with 2 million fewer jobs than there were at his inauguration," Reischauer said.
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