|The President's Plans|
|Key Words||Fiscal Policy, Inflation, Tax Burden, Tax Cuts|
With new economic advisors, John W. Snow as Treasury Secretary and Stephen Friedman as the leading White House economist, and Republicans controlling Congress, President Bush appears poised to push for tax policy changes. At the top of the President's agenda are tax cuts for business and individuals. President Bush is expected to propose lower taxes for corporate dividends, an acceleration of scheduled tax cuts, and more generous depreciation write-offs for corporations. Democrats, of course, have a different agenda, and will push the President to provide greater tax relief for the poor and middle class.
Although many are urging the Administration to apply short-term stimulus measures to support the economic recovery, the President's advisors are resisting such efforts. They argue that the economy is already on a path to recovery and tax cuts or other stimulus measures are unlikely to provide a needed push. Business investment, a sector important to the recovery and currently ailing, has not responded to the Federal Reserve's 12 interest rate cuts and is therefore not likely to be responsive to any tax cuts.
The President's proposed tax changes would provide modest stimulus. Lowering the tax on corporate dividends provides some relief and extra pocket money for consumers. It also makes stocks a more attractive investment, while reducing a distortion of the current tax system.
Consistent with his conservative philosophy, the President appears to
be interested in longer-term tax reduction rather than quick stimulus
packages. The expected package of proposed tax changes does not contain
significant modifications of the current tax system. But the President
is interested in greater change and R. Glenn Hubbard, chairman of the
White House Council of Economic Advisors, is anxious to start on a proposal
for a complete overhaul of the $1.8 trillion tax system. A flat tax on
income or one based on sales or consumption, like the value-added taxes
favored by European nations, have been proposed as alternatives. A simpler
system would replace the maze of deductions, tax credits, and loopholes
characteristic of the current system.
(Updated February 5, 2003)
|Source||Edmund L. Andrews, "President's Top Priorities: Tax Cuts, but No Quick Stimulus," The New York Times, December 16, 2002.|
Return to the Fiscal Policy Index
©1998-2003 South-Western. All Rights Reserved webmaster | DISCLAIMER