Helping the economy

Earlier this week, President George W. Bush proposed a new round of tax cuts designed to stimulate the economy, setting the stage for a Congressional battle over the future direction of domestic policy.

Bush's plan consists of several key aspects: It ends the taxation of many stock dividends, reduces personal income tax rates this year, provides tax-break incentives for investment to small businesses and gives many families a $400-dollar-per-child tax credit. Bush's plan will cut taxes by about $670 billion over the next decade and by about $100 billion this year alone.

The two largest parts of Bush's plan are a reduction in dividends and speeding up the reduction of personal income taxes. The dividend reduction seems more to be a proposal that will stimulate long-term economic growth rather than having a large immediate effect. Thus, while reducing dividends will surely improve the economy, it is not so much a short-term stimulus as a policy encouraging long term development.

The reduction of personal income taxes is not a new plan, but rather simply pushing forward tax cuts that would have taken place eventually anywhere. Moving these tax cuts forward is only sensible, which will not only help the economy.

Democrats have responded to this plan negatively, arguing that it is unfair since it gives the largest tax breaks to the wealthiest tax payers. However, the wealthiest taxpayers currently bear a disproportionate share of the tax burden, meaning that any tax cut will benefit the wealthy.

In terms of short-term improvement in the economy, Bush's plan would immediately give $400 dollar checks to families in anticipation of an increase in the per child tax credit at the end of this year. This immediate injection of money into the system will surely help improve the economy. Additionally, the measures encouraging small business investment--tripling the amount to $75,000 of new purchases that businesses can write-off--will also help to stimulate the short term economy by increasing the incentives for businesses to invest.

One other aspect of Bush's plan is his support of extending benefits to unemployed workers. These workers need coverage, and by giving them benefits, the government not only ensures their continued well-being, but it also helps the economy by giving these thousands of workers hope for the future and motivation to find employment.

Altogether, Bush's proposal demonstrates that he is focusing on domestic problems and the economy, even while continuing to fight the war on terrorism. While the debate in Congress over the efficacy of his proposals and what tax structure is just will surely continue for a long time to come, it is encouraging that the government is focusing its energies on improving the situation in America and not being completely wrapped up in foreign affairs.