I think this clarifies it a bit:
Bush Expands Tax Plan; Republicans See Stock Gains
By Adam Entous
WASHINGTON (Reuters) - President Bush is expected to propose the elimination of taxes on dividends paid to shareholders, industry sources said on Sunday, a bold move which Republicans predicted would boost the stock market after three years of losses.
But Democrats called Bush's economic package, expected to cost as much as $600 billion over 10 years, a sop to the rich.
Moderate Republicans could also balk at the new tax cuts and spending measures, which Bush is expected to unveil in a major speech in Chicago on Tuesday.
Republican Sen. John McCain of Arizona told CBS's "Face the Nation" program that he would oppose a stimulus that is "too tilted" toward the well-off and the investor class.
Economists were likewise divided on the plan. Some said it would have little stimulative effect while exacerbating bigger-than-expected budget deficits.
Allen Sinai of Decision Economics Inc. said it was worthwhile given the anemic state of the economy -- possibly adding one-half to three-quarters of a percentage point to growth -- but would not be a cure-all.
Republican sources said the White House sounded out conservatives over the weekend about completely eliminating the tax paid by shareholders on corporate dividends. The change would cost as much as $300 billion and would be the centerpiece of the Bush's economic package.
Bush is also expected to accelerate reductions in income tax rates for all income brackets. It could cost as much $80 billion if he accelerates both the scheduled 2004 and 2006 rate cuts to this year, congressional sources said.
Republicans defended Bush's decision to include the nation's highest income group in the accelerated rate cuts.
"People who are at the top rates right now are paying the disproportionate share, and if we're going to do (something) across-the-board, we should do it fairly and equitably," said Sen. Rick Santorum of Pennsylvania, the third-ranking Republican in the Senate.
"And I think the economic benefits, particularly those at the lower end, are much more profound if you do include the top rates," Santorum told the Fox News Sunday program.
QUICKER CORPORATE WRITE-OFFS
In addition, Bush's package is expected to allow companies to quickly write off more of their investments.
The White House has made reviving the U.S. economy its top domestic priority besides homeland security.
Bush's re-election chances in 2004 could depend on whether he can get the economy growing briskly again, reduce unemployment and break a three-year losing streak for major market indexes.
The White House would not discuss details of the package but sources said Bush favored eliminating taxes paid by investors on dividends.
"The reason why it is important is that if you say you want to abolish the double taxation of dividends, it becomes a matter of principle," said Grover Norquist, president of Americans for Tax Reform.
Currently, corporate income is taxed twice -- once when earned by a company and again when it is distributed to shareholders as dividends.
Some Republican sources said Bush would ask Congress to phase out the tax gradually. Others said Bush would ask Congress to eliminate the tax immediately, and predicted it would result in an immediate increase in disposable income and encourage investment in stocks.
"If you encourage people to invest in the stock market, you're going to have an increase in stock values. That will help everybody," said Sen. Don Nickles of Oklahoma, the outgoing assistant Republican leader. "Most of us would love to see the market make a turnaround."
WIN DEMOCRATIC SUPPORT
To win Democratic support for the tax cuts, Bush will include billions of dollars in aid to cash-strapped states.
Proposals under consideration include $75 billion or more in federal grants to states, whose revenues have been eroded by the soft economy and volatile stock market, and paying a greater share of Medicaid, the joint federal-state health care program for the poor.
Bush will also ask Congress to immediately extend federal unemployment benefits for more than 750,000 Americans whose benefits expired on Dec. 28.
But Democrats, who will unveil their own economic package on Monday, promised a fight.
"I think the president is trying to pull a fast one," Sen. John Edwards of North Carolina told ABC's "This Week" program. The Democratic presidential hopeful said Bush was "trying to use the Bush recession to put money in the pockets of the richest Americans over a long period of time while providing very little help for regular people."
"There's no question the economy's in big trouble," Sen. Harry Reid of Nevada, the No. 2 Democrat in the Senate, told NBC's "Meet the Press" program. "But we have to look at what's good for the average American and getting rid of the dividend certainly isn't one of those priorities."
EZ 2
