The Bush Stimulus Package :: Essays Papers

The Bush Stimulus Package President Bush has just unveiled his new $674 billion economic stimulus package. The Democrats, although they have little chance of getting it passed in the GOP-controlled Senate, have countered with a plan of their own, with a much lower tab of $136 billion. The centerpiece of the Bush plan is arguably the elimination of the tax on dividends paid by shareholders, which makes up a hefty $364 billion of the entire sum. The reasoning is that it is unfair to tax corporate earnings once and then again tax them when they are paid out as dividends to shareholders. However, the president’s logic is faulty in that there are many instances of so-called double taxation in our society. For example, when one earns a dollar as part of one’s income, it is taxed and then it is taxed again in the form of sales tax when the dollar is spent. Another criticism lodged at the White House is that the repeal of the dividends tax benefits the wealthy in a disproportionate manner. Democrats charge that the wealthiest one percent of Americans would stand to gain over forty percent of the benefits. This is partly due to the fact that the wealthiest generally receive the greatest percentage of their income from dividends. Analysts say Mr. Bush is trying to appeal to the new â€Å"investor class†, which now includes the majority of Americans. Interestingly enough, senior citizens and retirees comprise a significant portion of stockholders who collect on dividends. That is what allows George W. Bush to claim that repeal of dividends tax is designed to benefit seniors, when wealthy investors will reap the most reward. The purpose, in theory at least, of ending double taxation is to put more money in the hands of investors, and to encourage more Americans to invest in the ailing stock market, which is now near an all-time low. Another beneficial effect will be to encourage large corporations to pay dividends, thus giving more money to Americans. If this money goes towards consumption and private and capital investment, the economy will inevitably get a much-needed boost, since GDP=C+I+G+X. In addition to elimination of dividend taxation, the Bush plan proposes to make the 2001 tax cuts permanent. Again, one can argue that the wealthy are the primary beneficiaries of Mr. Bush’s tax cuts. But part of the problem stems from inherent inequities in the tax code.