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News Releases on Taxes

April 16, 2003

April 16, 2003 | News Releases on Taxes

Iowans Can Expect Fewer New Jobs Under Grassley Deal, Analyst Says

WASHINGTON, APRIL 16, 2003-Sen. Charles Grassley's pledge to block tax cuts totaling more than $350 billion could cost Iowans more than 5,000 jobs annually over the next five years, according to calculations made by The Heritage Foundation's Center for Data Analysis (CDA).

Grassley, who chairs the Senate Finance Committee, last week vowed to pare President Bush's 10-year tax-cut proposal by more than half. A CDA econometric analysis of the Bush proposal shows that it would create, on average, more than 10,000 jobs annually in Iowa over the next five years. It would produce results almost immediately, generating 11,200 jobs next year.

But the smaller tax cuts proposed by Sen. Grassley-which would leave the "double taxation" of dividends intact-would create far fewer new jobs, CDA found. The Grassley approach would yield only about 5,000 new jobs in Iowa next year and create, on average, slightly more than 5,000 annually over the next five years, says Heritage analyst Rea Hederman.

Iowa wouldn't be alone. The impact of the Grassley deal would be felt nationwide. The tax cut he's contemplating would lead to 449,000 more jobs in 2004, CDA has found. That's less than half the number that would be realized under the Bush plan: 997,000. And the differences only widen each year through 2008. By that year, the Grassley deal generates 226,000 new jobs. The Bush version more than triples that amount, with 778,000 jobs created.

The contrast, says Hederman, isn't merely a result of size. "The president's tax cut outperforms the one envisioned by Sen. Grassley not simply because it's larger, but because it includes certain features, such as ending the double taxation of dividends, that are designed to change taxpayer behavior in a way that helps the economy," he says. "Under the Bush tax cut, Americans not only would see their incomes rise, they'd receive greater incentives to save, spend and invest their money productively."

For more information online, go to: heritage.org/research/taxes/taxbriefingroom.cfm.

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