March 20, 2003 | WebMemo on Taxes
A new analysis shows that the difference between two major economic growth proposals -- that Congress will consider -- could not be greater as one plan eschews temporary fixes, and promises greater short- and long- term stimulus, and the other plan proposes initial tax cuts, followed with hefty tax- and spending- increases.
The plans are:
President Bush's proposal, on the other hand, would support an additional:
Between 2004 and 2013, the differences are dramatic and obvious.
The two plans also differ significantly on a number of economic indicators.
The Democrat alternative to President Bush's Economic Growth Package consists of tax cuts, tax increases, and spending increases.The alternative cuts taxes during the third quarter of 2003, principally for small businesses.Over that three-month period, small business owners will see taxes fall by about $34 billion.During the next federal fiscal year, which begins on October 1, 2003, taxes would rise by $33 billion as the provisions expire.
While the plan contains these tax cuts and increases, it principally relies on significant new spending to achieve its economic growth goals.The alternative plan sends $71 billion in federal funds to taxpayers in the form of advance refunds on tax payments, again during the third quarter of the 2003 calendar year.The plan also supplies state governments with an additional $26 billion in subsidies, principally in the form of direct aid and support for state Medicaid payments.Finally, federal unemployment insurance is extended, which adds an additional $10 billion to outlays.
Altogether, the alternative plan increases the federal deficit during 2003 by $141 billion.While some outlays continue during 2004 and subsequent years, the tax increases of 2004 offset spending by $29.5 billion.
The President's plan, on the other hand, is anything but temporary.Key provisions the President's tax plan of 2001 are activated now rather than in 2004 and 2006. These accelerated elements of the 2001 plan include reductions in tax rates, enlargement of the new 10 percent tax bracket, marriage penalty relief, and increases in the child tax credit.
Then, the President proposes an end, presumably permanently, in the double taxation of dividends. CDA estimates show that the President's 2003-tax plan will reduce revenues by $31.4 billion during the 2003 fiscal year, and by an additional $638.4 billion over the next ten years.