Bush Sets Minimum for Tax Cut at $550 Billion

NYTimes ^ | 4/24/03 | DAVID STOUT

[RJCogburn]

President Bush flew today to Ohio, an all-important state for his re-election hopes, to campaign for his package of tax cuts and to put pressure on a rebellious fellow Republican.

"The debate over whether we ought to have tax relief is over," the president told an audience in Canton. "That's positive. Now we're talking about how big the package ought to be and what it ought to look like."

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Of course, Mr. Bush said, he has some ideas about the size of the tax cuts. "The package ought to be at least $550 billion in size over a 10-year period in order to make sure that the economy grows," he told a group of factory workers, who applauded frequently.

"That's not my projection, that's the projection of a lot of smart economists who have analyzed the package," Mr. Bush went on. "They believe that if a package is implemented by the United States Congress of at least $550 billion, more than a million new jobs would be created by the end of '04. And that's good for the American worker. And that's what the whole purpose of the package is, to create the conditions for job growth so people can find work."

The $550 billion figure that Mr. Bush cited today, and which he has mentioned before, was critical. It signaled again that he had retreated somewhat from his original goal of $726 billion in tax cuts over the next decade.

And just as strongly, it signaled that the president had no plans to retreat further, and in particular that he intended to keep pressuring Senator George Voinovich of Ohio, one of several Republicans insisting on much more modest cuts — in the $350 billion area — unless the tax cuts are accompanied by slashes in spending.

Mr. Bush did not mention Mr. Voinovich by name in his Canton appearance, but he did not have to.

"Some in Congress say the plan is too big," the president said. "Well, it seems like to me they might have some explaining to do. If they agree that tax relief creates jobs, they why are they for a little-bitty tax relief package? If they believe tax relief is important for job creation, they ought to join us and join this administration and join many in Congress and have a robust package that creates enough work for the American people."

Mr. Voinovich, who is up for re-election next year, was not present in Canton but was first in the receiving line when Mr. Bush later landed in Dayton. The two shook hands and chatted amiably for several seconds.

"We agree on the stimulus package," Mr. Voinovich told The Associated Press. But he added pointedly that he thought it should be $350 billion, not $550 billion.

The senator's aides said a scheduling conflict had kept him from attending the Canton event. But a Republican senator up for re-election would normally want to be seen smiling broadly at the side of a visiting Republican president at every stop.

Indeed, Senator Mick DeWine, Ohio's other Republican senator, who is not up for re-election until 2006, was present and recognized by the president at Canton, as were several local Republicans.

Mr. Voinovich and Senators Charles E. Grassley of Iowa and Olympia J. Snowe of Maine are the main Republicans resisting tax cuts on the scale envisioned by the president. The senators have said they are wary of cutting taxes too much during a time of soaring budget deficits.

"Tax relief is good for the average citizen," Mr. Bush said in Canton, trying yet again to deflate arguments that his package would help the wealthy at the expense of middle-income and poor families.

The president called again for an end to the "double taxation" on dividends, referring to some dividends's being taxed both at corporate and individual levels. "Ending the double taxation of dividends, according to many economists, will help the stock market," Mr. Bush said. "Ending the double taxation of dividends would be good for our seniors, who receive half of all taxable dividend income."

Mr. Bush repeated his tax cut remarks later in Lima, where he visited a factory that makes the M1A1 Abrams tank, which saw action in Iraq, and praised the workers for building "the most effective armored vehicle in the history of warfare."

Capitol Hill Democrats sought to counter the president's tax-cutting message in advance, issuing a report that they said showed how little Mr. Bush's package would help Ohio residents — and how little his policies had helped the Buckeye State since he came into office.

"Ohio has lost 167,800 jobs, or more than 3 percent of its total work force, since Bush was sworn in," Democrats on the House Government Reform Committee said in a statement. "More specifically, the Canton metropolitan area has lost 6,300 jobs (3.43 percent of its work force) and the Lima area has lost 2,500 jobs (3.18 percent of its workforce) since Bush took office."

Statistics, and what to make of them, will be exhaustively debated on Capitol Hill as the White House and lawmakers negotiate over the size of the tax cuts.

But one thing is beyond debate. Ohio, perhaps the most Republican of the big industrial states, is vital to Mr. Bush's hopes in 2004. In fact, no Republican has ever been elected president without carrying Ohio.

In 2000, Mr. Bush carried the state (and its 21 electoral votes) with about 2.35 million popular votes, to 2.18 million for Vice President Al Gore and about 118,000 for Ralph Nader.

[Lysander]

He is packaging this all wrong. It should presented as a be a trillion dollar tax increase accomplished by reducing tax rates!

[Lysander]

Oops that should say, "It should be presented as a trillion dollar tax increase accomplished by reducing tax rates!"

My bad.

[plain talk]

You watch: the dem line will be - the President is one the that has the explaining to do - how could he propose a tax cut when he needs that money for his warmongering, etc etc blah blah woof woof

[kellynla]

This is such a big joke. Here we have a 10 Trillion dollar a year economy in the United States and they are talking about a cut of 550 Billion dollars over ten years...let's see...that equates to about 5 1/2% of the total GDP spread out over 10 years...and that is taking into account that the GDP stays the same for the next ten years which we all know it will not. Heck this tax cut won't even be around in five years! Quit playing around and eliminate the Federal Income tax altogether and pass a balanced budget!

[Sacajaweau]

Greenspan said that the $726 billion budget would equate to 4% of the GDP and that it should be no more than 3%.

[supercat]

Suppose a shopping mall finds itself losing tenants and losing money. How likely is it to achieve solvency by raising rates.

I don't know if any Democrats have noticed, but a lot of companies have been moving overseas. They do this because the cost of doing business overseas is lower than the cost of doing business here; a fair part of that cost is taxes.

I would suggest that perhaps Republicans need to talk more about attracting businesses. To be sure, this model sometimes fails (e.g. in Harvard, IL) but it's better than driving businesses away.

[kellynla]

Sooooooo what's your point?

[Chairman Fred]

Simpler math. The budget is about 2.5 trillion/year. The tax "cut" is 55 billion/year. That's 55 (billions)/2500 (billions) times 10 gives 2.2 percent of the Federal budget per annum. About TWO POINT TWO CENTS on the dollar.

That's not a tax cut!!! That's a joke!!

[kellynla]

Well that is exactly what I was thinking...so what is the big frigging deal here??? And the truth be known I think the cuts are backloaded so that the majority of the cuts won't be realized for three or four years down the road. Now Lord knows I am no economist but this is all a bunch of horse manure!

[maui_hawaii]

The question I have is how they will structure the tax cut.

Of course everyone wants an accross the board cut. But will that stimulate the economy as hoped?

Here is an idea that crossed my mind. Tell me what you think.

If we cut personal income taxes thats definately a good thing and should be made part of the package.

The jist of the idea I have though is this: The place I work now made around 650,000 pre tax profits last year. That means we paid around $250,000 in taxes.

If the govt cuts taxes on businesses that will be great. But they should have a rider on them.

For current employees, if they are given a raise, the rate for the business goes down. Hence, if I make $25,000 per year, if they get a tax cut to offset the difference and leave the company ultimately better off.

For example, for every $5,000 annual increase in salary, the company gets 2.5% shaved off of their tax bill for that year. In our case it would work out to be, my company pays me an extra $5,000 per year, but 2.5% of $250,000 is $6,250.

Secondly, include a clause where if the company hires more help (to do whatever) and keeps them on the roles for 12 months, ie creates a new position, they will recieve similar tax breaks. Of course there should be limits.

If we formulate it out properly, a $25,000 annual wage being paid out would turn into a 10.5% tax break off of the bill. Hence the actual real dollar tax break would be $26,250. Thats $1,250 left (extra) per new employee for the shareholders of the company.

Like I said, there should be limits.

I think we could combine the three ideas.

Consumer spending is priority #1. We need to seriously create more employment and get more higher paying positions.

It might be some kind of weird 'loss leader' where companies hire people they don't need right now, but with time it would kickstart the economy.

All those millions out of jobs would be soon back to work. When they go back to work, they start spending more.

I think if we did it like that on a 2-3 year, non revokable real tax cut on business it would do wonders.

[Proud2BAmerican]

I think a major factor in going overseas is the vast sources of cheap labor, non-existenece of unions, etc. I think that if we reverted to the early practice of the U.S. in levying tariffs on imported goods so that there was no net gain in moving manufacturing jobs overseas, the companies woudln't bother, and we'd continue to have high-paying manufacturing jobs here.

I read somewhere that prior to the income tax, almost the entire federal budget was provided for via tariffs. And I believe that even up until the early 20th century, a high-school diploma was good enough to qualify an individual for a job that paid enough to support a family.