President Bush Says Retroactive US Tax Plans Will Boost Economy

Mike Godfrey, Tax-news.com, Washington

07 February 2001

In a bid to revive the US economy, President George W Bush has called for his sweeping tax cutting plans to take effect from the beginning of this year, saying 'I strongly believe that a tax relief plan is an important part of helping our country's economy recover, and I think expediting money into people's pockets is going to be a key ingredient.'

In an attempt to win over the public and Congress, Mr Bush tried to push his point home earlier this week when he wheeled three typically 'ordinary' families into the White House whose income represented differing tax brackets. The families were showcased as examples of how much of their income they would save if the tax cuts were approved by Congress.

In what could only be described as a rather 'slick' advertising campaign, Mr Bush then held a giant cheque made out to "US Taxpayer" for $1,600 - the average annual tax cut that his retroactive tax plan could give a family of four. He said: 'no American should pay more than a third of his income in tax to the federal government.'

The families represented only the lower three out of the five main tax brackets and when questioned why there were no families present representing the higher tax bands, Mr Bush explained that he represented the highest taxpayers, saying 'I'll be in the top bracket, I got a little pay raise, coming to Washington from Austin.'

Mr Bush's plans, which will cost more than $1.6 trillion over the next ten years, aims at reducing the existing number of five tax brackets to four, cutting the highest rate from 39.6 per cent down to 33 per cent and cutting the lowest rate from 15 per cent to 10 per cent.

In using the state economy as a reason for introducing retroactive income tax cuts, Mr Bush received guarded support from Alan Greenspan, chairman of the Federal Reserve, who has described the plans as a useful stimulus in conjunction with the lowering of interest rates if the economy became more stagnant. However, the prevailing opinion among most analysts appears to be that Congress is expected to deliberate long and hard over the proposals, and by the time any tax reforms are transposed into law, the US economy may even have regained its strength.

Another obstacle in Bush's path is the increasing opposition to the tax cuts from Democrats who argue that they are too expensive and the benefits to the highest taxpayers are unfair. Democrat leader in the Senate, Tom Daschle, said the tax cuts give 43 per cent of the overall cost to 1 per cent of taxpayers, which 'short-changes working families ... the people who need the most help get the least help.'

In response Mr Bush argued: 'I've heard all the talk about class warfare and this only benefiting the rich. But I think when people take a good hard look at the rate reduction and who benefits, [the package] eases inequities in the tax code and the bottom end of the economic ladder receives the biggest percentage cuts.'

.

Recommended

Write a comment