Bush Considers Slashing Taxes on Dividends
Wed Dec 25,10:54 AM ET
URL:http://story.news.yahoo.com/news?tmpl=story2&cid=568&ncid=749&e=3&u=/nm/20021225/bs_nm/bush_taxes_dc
WASHINGTON (Reuters) - President Bush (news - web sites) is considering a proposal to slash taxes on corporate dividends to shareholders as part of a $300 billion tax cut package aimed at shoring up the economy and stock market, Republican sources said on Wednesday.
Many of Bush's aides favor a 50 percent cut in taxes on dividends that could cost more than $100 billion over 10 years. Business leaders say it would provide a near-term stimulus by providing an immediate increase in disposable income and encouraging investment in stocks.
Currently corporate income is double taxed -- once as income and again when it is distributed to shareholders as dividends. Some business groups have urged Bush to eliminate this so-called double taxation. The White House had no immediate comment.
The proposal is likely to be a critical piece of a broader economic stimulus package expected to total as much as $300 billion. Bush, who will unveil the package next month, hopes to spur the ailing economy in time for his 2004 re-election bid.
In addition to reducing taxes on corporate dividends, Bush's package is expected to allow companies to quickly write off more of their investments.
Bush is also expected to accelerate some tax cuts approved last year, particularly for married couples and families with children. Putting money in the hands of middle-class families could help blunt charges that Bush's tax cuts benefit the rich and win Democratic support in the narrowly-divided Senate.
Individual investors are also likely to be allowed to deduct more of their stock losses against regular income.
Some Republicans are pushing for more sweeping -- and costly -- tax changes.
Bush's allies in the House of Representatives are crafting legislation that would slash capital gains taxes on investments for three years. To avoid a sell-off in stocks, the cuts would only apply to equities purchased after the cuts take effect.
"It would be a shot in the arm to investors to move out of money markets and back into equities," one lobbyist said.
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Democrats are crafting competing tax cut plans.
Outgoing Senate Finance Committee Chairman Max Baucus, a Montana Democrat, would allow businesses to write off more of their investments in new equipment and facilities, and eliminate income taxes on the first $3,000 in wages. He would also provides highway construction money and some $75 billion in federal grants to cash-strapped states.
Democratic presidential hopeful Sen. John Kerry has proposed giving people a one-off exemption from paying Social Security (news - web sites) taxes on the first $10,000 of income.
He would also eliminate the tax on capital gains for five-year investments in critical technology companies, and seek to end the double-taxation on corporate profits and stock dividends. |
