House GOP leaders seek reduction in Bush dividend tax cut plan
White House pushes for elimination of dividend tax
From Ted Barrett
CNN Washington Bureau
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WASHINGTON (CNN) -- In a setback for President Bush, House Republican leaders have decided to dramatically scale back his proposal to eliminate taxes on stock dividends, congressional sources said.
House Republican leaders must still sell the plan to rank-and-file Republicans this week, Republican leadership aides said Monday night.
Under the plan, put together by Ways and Means Committee Chairman Bill Thomas, R-California, all but the poorest stockholders would pay an 18 percent tax on dividend income -- a reduction of more than 50 percent for wealthy Americans who pay the highest income tax rate of 38.6 percent.
But President Bush wants to eliminate taxes on dividends as a way of spurring the stock market and the economy. The president's proposal would cost $396 billion over 10 years. The Republican leadership plan would cost $234 billion.
The GOP plan would also lower the capital gains tax paid on most asset sales from 20 percent to 18 percent. Lower income people would pay 8 percent on both capital gains and dividend income.
The plan was described as "pragmatic" by a senior Republican aide who said it was designed to win votes from moderate Republicans who oppose the elimination of the dividend taxes.
And conservatives, who backed the elimination of the dividend tax, will see it as "a good first step," the aide said.
Other portions of the plan -- the acceleration of the income tax rate reduction, the elimination of the marriage penalty, an increase in the child tax credit, and adjustments to the alternative minimum tax -- would bring the total price tag of the House plan to just over $550 billion.
Missing from the plan is a proposal to allow small businesses to write off larger portions of their capital investments.
Congressional aides said the proposal, which is popular with Republican organizations like the National Federation of Independent Business, could become the back bone of a new tax cut package possibly unveiled later this year.
The House cleared room in the budget for $550 billion in tax cuts over the next 10 years while the Senate cleared $350 billion. The differences in those numbers, and the specifics of which taxes are reduced, are being hashed out between the House, Senate and the White House.
