Bush calls for $550 billion in tax cuts On Wednesday, April 16, 2003 President Bush used the backdrop of tax day to urge congress to pass his $550 billion or more in tax cuts that he says will jumpstart our economy. The tax cuts he proposed would create 1. 4 million jobs by the end of 2004. The proposal bush announced was designed to attack specific weaknesses that were slowing down our economy and kept companies from hiring new workers.
Bush's first tax cut proposal was for $726 billion in tax cuts half of which would come from the elimination of taxes paid by shareholders on corporate dividends. The republican controlled Congress minimized Bush's tax cut to $550 billion in new cuts, while a senate proposal would limit the package to $350 billion. In speaking to small business owners on tax day he acknowledged for the first time that his original full proposal was no longer on the table. Bush urged congress to avoid putting arbitrary limits on the tax bill, which he says would create more jobs by raising the level of investment. President Bush believes that we need tax relief totaling at least $550 billion to make sure our economy grows.
Most Democrats believe that the cuts would do little for average taxpayers or to revive the economy. They also believe that the growing budget deficit and the costs of war in Iraq make new tax cuts unwise. The house believes that $350 billion may be the highest number in tax cuts a majority of the senate will support. The Senate thinks that the economy needs a short term stimulus for the economy to grow, and Bush's plan amounts to financing long-term tax changes with deficits. The President's proposed budget shows a deficit of $304 billion for the 2004 fiscal year, not counting the costs of war in Iraq. The president is trying to avoid the fate of his father, Bush Sr.
, who won a war in the middle east only to be voted out of office amid a sluggish economy. Less than a month after the U. S led invasion into Iraq, combat there has decreased dramatically but the Federal Reserve reported that the war slowed U. S. economic activity more than analysts had expected, and unemployment was steady at 5. 8 percent in March.
This article is compliments of CNN. com. Based on large tax cuts in the past, especially Ronald Reagan's tax cut of 1981 and the knowledge that I have attained from my macroeconomics course I believe that President Bush's tax cut proposal will help jump start the economy and create new jobs. A comparison between Bush's tax cut and Ronald Reagan's tax cut will show the growth of the economy during such large tax cuts. The centerpiece of Bush's tax cut is the elimination of taxation on corporate dividends which gives the top tax bracket, the largest tax breaks. Which many democrats are using to criticize the tax cut, because they believe that the tax cuts will only benefit the wealthy and not the average American.
All four tax brackets will see a reduction but the top tax bracket will see the largest reduction because they are the majority who own corporate shares. Many Democrats believe that an already large deficit will continue to rise as a result of the tax cuts, but I believe the government can make up for some of the deficit by reducing government spending. I believe that President Bush's fiscal policy will help jumpstart our economy and will eventually balance the budget in the future. To show the effects that a tax cut can have on our economy I would like to compare President Reagan's low tax policy versus President Clinton's high tax policy.
Reagan's tax cut demonstrates that tax cuts do in fact help our economy. After passing the Economic Recovery Act of 1981, significant effect didn't occur until 1983. When the years of 1983-1988 are examined it is immediately obvious that revenues did not fall. In fact they grew 28.
2% over that period. If you compare revenues of President Clinton's tax increase which increased revenues by 15. 2% to Reagan's tax cut which increased 28. 2% you can see that the cut increased revenues more that a Clinton's tax hike.
Reagan's tax cut spurred growth and resulted in lower unemployment and higher incomes. As more individuals were employed, and as more individuals earned more, they paid more taxes collectively even as they were paying lower rates. Under Reagan the Real Gross Domestic Product increased 3. 9%, employment increased 2. 4%, productivity increased 1. 5%, and per capita income after tax income increased 2.
7%. Compare those numbers to Clinton's which are Real GDP increased 2. 3%, employment increased 2%, productivity increased 0. 6%, and after tax income increased only 1.
3% you can see the larger increases due to a tax cut. The Reagan low-tax, pro growth strategy stands in marked contrasts to the high-tax, low growth Clinton strategy. The pro growth path would allow not only for lower taxes but would produce a revenue increase, which will help balance the budget. This pro growth path is the path that congressional republicans have charted and I believe that President Bush is using the right fiscal policy to put the economy back on this path. The Bush administration's tax cut plan calls for a tax cut across the board on all four tax brackets.
The centerpiece of the tax cut plan is to stop federal taxes on corporate dividends. No taxes on dividends will give the top tax bracket which pays most of the federal taxes anyway the largest tax break because the top tax bracket own most of the percentage of corporate shares. Democrats criticize this plan because they say that the tax cut will only benefit the wealthy and not the average American worker. By giving the top tax bracket a tax cut, it gives them more money. The people in that tax bracket are the most likely to reinvest their money in their own companies and back into the economy ultimately boosting the level of investment and increasing the gross domestic product. One of the things I learned from my Macroeconomics course is that investment is one of the most volatile factors in the levels of Gross Domestic Product.
The Democrats argue that a tax cut of this size will push the deficit higher and could reach record levels. President Bush believes that the tax cut will increase the Gross Domestic Product which in time will help lower the deficit. Bush also believes the that they can make up for some of the deficit if they reduce government spending. To reduce government spending they will have to reduce spending on social programs like welfare. Applying my knowledge that I have learned in Economics I believe that the Bush Administration's tax cut plan is a good way to jumpstart the economy and create jobs. A tax cut will give more people jobs and with more people employed, and as individuals earn more income, they will pay more taxes collectively.
Also tax cuts in our history have proved to help the economy grow. We will have to wait and see what happens to the tax cut bill, hopefully it is passed and our economy and our wealth as a nation grows.