Reactions to the $100bn economic stimulus package approved last Friday by the House Ways and Means Committee have been mixed, ranging from guarded approval by the President to downright condemnation by Democrats and left-wing pressure groups who see the measure as being tilted too far in the direction of business.
President Bush is urging support for the package assembled by House Republicans, but recognizes he will have to compromise with Democrats on a final plan. "The president is confident that, in the end, this will become a bipartisan product,'' press secretary Ari Fleischer told reporters. "He calls on Democrats to be open-minded about this as well.''
Treasury Secretary Paul O'Neill, bidding to strengthen his fading reputation for memorable one-liners, said that the plan was partly "show business.'' Visiting Memphis, Tennessee, O'Neill said: "It's an opportunity for people to say, 'I voted for the things that you want' with the expectations that we will come out with a package that doesn't do violence to the long-term financial stability of the country.' Treasury officials said O'Neill's statement was not intended to signal administration opposition to the House plan, even though its cost far exceeds the $60bn to $75bn the president requested.
House Majority Leader Dick Armey said pointed out that the package was larger than the President had wanted because of various add-ons, many suggested by Democrats. "We still ended up with a lot of things in the package that did not really have a growth impact on the economy,'' Armey said. "You can never keep politics totally out of any economic stimulus.''
The House Republican plan would enhance business tax write-offs for purchasing equipment, repeal the corporate alternative minimum tax and allow companies to deduct current operating losses against taxes paid five years earlier. It would effectively cut capital gains tax rates to 18 percent for most taxpayers and raise capital loss limits over the next two years. Repeal of the AMT would mean that corporations would be entitled to an immediate rebate of any alternative minimum tax they paid since the tax was established in 1986. In contrast, under current law, a company that pays the AMT can get a refund in a later year only if its regular income tax payments exceed the AMT that year.
The measure also would provide a new round of rebate checks of up to $600 for lower-income workers and cut the current 27 percent income tax rate to 25 percent in 2002, four years earlier than under the just-enacted 10-year, $1.35 trillion tax cut.
Democrats have said the package is too tilted toward business and threatens the long-term fiscal stability of the federal government. The Labor-funded tax research group, Citizens For Tax Justice (CTJ), says the bill will see some of America's most profitable companies receive around $25 billion in tax rebates.
CTJ says that 13 companies will receive more than $100 million in immediate hand-outs alone, and describes them as low-tax companies because they have paid the low-rate alternative minimum tax over the past ten years, while their regular income tax bills come to little or nothing.
The list of the top 13 companies includes IBM, which is expected to receive a higher sum than any other company at $1.4 billion; General Motors will get $833 million, followed by General Electric at $671 million, TXU (Texas Utilities) at $608 million, and ChevronTexaco at $572 million. Of the 13 'low-tax' companies, 5 are in the energy business and 2 are in the airline industry, which is already receiving $15 billion in grants and loans under recently approved legislation.
CTJ claimed that the proposed total of $25 billion in instant rebates for profitable corporations is almost twice as big as the $13.7 billion in added individual rebates that the committee decided to provide to 37 million, mostly low-income families and singles whose 2000 earnings were too low to qualify for the previous round of personal tax rebates.
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