Bush to seek $600 billion economic boost
President to propose $3,000 payments to unemployed
WASHINGTON (CNN) -- President Bush is to unveil an economic stimulus program Tuesday that will call for eliminating taxes on stock dividends as well as providing $3,000 payments to help unemployed people find new jobs, the White House said Monday.
The unemployed will be able to use the money to pay for job training, child care and moving expenses and would keep any balance if they find a job within 13 weeks of becoming eligible.
The White House put the cost of the program, which will cover 1.2 million people and will be administered by states, at $3.6 billion.
Administration officials cast these "personal re-employment accounts" as an innovative way to help unemployed Americans find work -- and said letting people keep the balance if they find work quickly would be an incentive to intensify their job searches.
In a speech in Chicago on Tuesday, Bush is expected to provide details of his stimulus plan, which the White House projects will cost $600 billion over 10 years. About half of that amount will go toward eliminating the tax on dividends -- an idea some congressional Democrats are assailing as a gift to the rich.
In brief comments to reporters Monday, Bush dismissed that criticism.
"The critics haven't seen the plan," Bush said. "This is a plan that provides tax relief to the working citizens. It is a plan that is a very fair plan. It is a plan that recognizes when somebody has more of their own money, they are likely to spend it, which creates more jobs."
On the other side of Pennsylvania Avenue, House Democrats announced a one-year, $136 billion package, which they say will have a more immediate effect.
"What we've done is design a package that is front-loaded and fast-acting, deliberately," Rep. John Spratt, a Democrat from South Carolina, said at a news conference. (Full story)
With Republicans controlling the House, the Democratic plan is unlikely to win approval, but it will serve as a foil to the White House proposal. The competing plans set the stage for a debate in Congress over how best to stimulate the economy, and that battle will likely foreshadow campaign themes sure to emerge in the 2004 presidential race.
Ending taxes on dividends is the most dramatic step in the president's proposal.
Administration officials say the Bush plan includes tax breaks for businesses and individuals, including write-offs for businesses that purchase certain equipment. (Full story)
The package, sources said, would also increase the child tax credit, decrease the so-called "marriage penalty" tax, direct more federal aid to needy states and extend unemployment benefits, which lapsed last month after Congress failed to approve an extension.
"The overall number is that 92 million taxpayers would receive on average a tax cut of $1,083 in 2003, based on everything the president will propose tomorrow," White House spokesman Ari Fleischer said.
The administration hopes that cutting dividend taxes would promote investment and spur growth.
Bush also said the tax on dividends is "unfair" because the government is already taxing corporate profits, which are then sent back to shareholders in the form of dividends.
"The government ought to be content with taxing revenue streams or profits one time, not twice," he said. "And in dividends, we tax the corporate profit and then we tax the money being sent to the shareholder. That doesn't make any sense. That's unfair. That's bad public policy."
Americans with higher incomes would benefit more from a cut in the tax on dividend income because they invest more in stocks and bonds.
Figures from the Internal Revenue Service illustrate that point. About 15 million tax returns with an adjusted gross income of less than $50,000 reported dividend income last year, totaling $26.9 billion, according to IRS figures. About 10 million returns for earnings between $50,000 and $100,000 reported $27.1 billion in dividend income.
The 4.8 million returns with adjusted gross incomes between $100,000 and $200,000 reported dividends totaling $23.8 billion, and the 200,000 filers with more than $1 million in adjusted gross income reported dividends totaling $25.4 billion, the IRS says.
Fleischer said tax cuts should go to people who pay the bulk of the taxes.
"Very often, critics of tax relief described everybody as rich in an effort to stop tax relief," he said. "I think that's been an old tactic by people who wanted to raise taxes on the American people in the first place."
CNN White House correspondents John King and Suzanne Malveaux and Capitol Hill producer Ted Barrett contributed to this report.