WASHINGTON (AP) – President Bush will ask Congress to give unemployed Americans up to $3,000 to pay for their job searches as part of a economic revival package that will cut taxes to 92 million Americans, officials said yesterday.
Democrats offered a rival plan and accused Bush of favoring the rich.
“The president really is investing $600 billion on an old, old Republican theory of trickle down economics,” said Rep. George Miller, (D-Calif.) “We’re saying no. Give it to the people who need it.”
With both parties jockeying for political gain, Democratic lawmakers unveiled their economic stimulus package one day before the president travels to Chicago to outline his plans.
The Democratic plan would give all workers a refundable income tax rebate of up to $300 per person or $600 per working couple and offer business tax breaks.
The White House said 92 million taxpayers would get an average tax cut of $1,083 this year under Bush’s plan – a mix of accelerated income tax cuts, child tax credits, business investment incentives and the centerpiece proposal to eliminate taxes on corporate dividends.
“The critics haven’t seen the plan,” Bush said after a Cabinet meeting. “This is a plan that provides tax relief to the working citizens. It’s a plan that is a very fair plan. It’s a plan that recognizes when somebody has more of their own money, they’re likely to spend it, which creates more jobs.”
Word of the Bush’s plans to eliminate taxes on stock dividends helped spur the Dow to an increase of more than 170 points.
In a rare note of agreement, both the White House and Democratic congressional leaders pledged to extend unemployment benefits. Democrats, however, criticized Bush for not prodding GOP lawmakers to extend the benefits last year.
A senior White House official, speaking on condition of anonymity, said Bush wants Congress to create “re-employment accounts” of up to $3,000. Under the $3.6 billion plan, which would be run through states, the unemployed would be able to draw from the accounts to pay for child care, job training, transportation, moving costs and other expenses of finding a job.
A person who lands a job in 13 weeks will be able to keep any money left over in their account, the officials said. The program is designed to give people incentive to find jobs as quickly as possible, White House officials said, adding that Bush’s policy team believes that some Americans rely too heavily and too long on unemployment benefits.
Democrats said their package quickly boosts the economy, gives tax relief to middle-class Americans and does not expand the federal deficit – points on which they said Bush’s plan will fail.
“This Democratic plan stimulates, the president’s plan procrastinates,” said Democratic Caucus Chairman Robert Menendez.
Democrats want to double the amount of investments – from $25,000 to $50,000 – that small businesses can claim as a deduction on their income taxes. They would expand a bonus program for businesses who make large investments, but would require them to make the purchases this year.
Under the Democratic plan, states would get $31 billion for homeland security, highway, Medicaid and unemployment insurance programs.
The package would cost $136 billion this year. The first-year cost of Bush’s $600 billion, 10-year plan was unclear.
Bush’s plan to eliminate taxes on stock profits, would accounts for about half of the package’s $600 billion price tag.
He said the current tax on dividends is unfair because the stock gains are taxed twice – once at the corporate level as profits and a second time as dividend income to shareholders.
“That’s bad public policy,” he told reporters after a Cabinet meeting.
Bush said the proposal will increase investment and help the growing number of Americans, including a large number of senior citizens, who benefit from stock dividends.
Democrats, however, said the plan is aimed at the wealthiest Americans.
“Most Americans who have investments in the stock market have it through their IRA or their 401K so that is tax-free anyway,” said House Democratic leader Nancy Pelosi of California.
The Urban Institute-Brookings Institution Tax Policy Center estimates that exempting dividends entirely from individual income taxes would cost nearly $280 billion over the next decade. The center estimates that 42 percent of the benefits would go to the top 1 percent of taxpayers, a group with incomes starting at $330,000.
The center estimates 41 percent of the benefits would go to the elderly but most of that would go to wealthy retirees. Only 6 percent of the benefits would go to elderly people with incomes below $50,000.
White House officials, speaking on condition of anonymity, said Bush’s plan would:
– Speed up rate reductions scheduled to take hold in 2004 and 2006.
– Expand the child credit to $1,000 next year from the current $600, a change that is now scheduled to gradually take place over the decade.
– Accelerate the planned reduction on the marriage penalty.
– Create “re-employment accounts” that would help pay expenses that a person would encounter when looking for work, like transportation and child care. As an incentive, the proposal would let a worker keep the additional funds once they find a job.
The administration also will try to shield taxpayers from the alternative minimum tax, which was originally meant to ensure wealthy people do not escape income taxes entirely but which now covers 2.6 million taxpayers, many of them middle class.
The tax rate cuts push more taxpayers into the AMT, and Bush will ensure they don’t end up paying more in taxes because of it.