Strengthening America's Economy: The President's Jobs and Growth Proposals

摘要

The President's proposal targets the areas that are most fundamental to the continued health of the current recovery--investment, consumption, and job growth. Specifically, the proposal will: (1) Accelerate to January 1, 2003 features of the 2001 tax cut currently scheduled to be phased-in: the reductions in marginal income tax rates, additional marriage penalty relief, a larger child credit, and a wider 10 percent income tax bracket. (2) Eliminate the double taxation of corporate income, whether paid to individuals as dividends or retained by firms. Dividend income will no longer be taxable on the individual level, while a step-up in cost basis will reflect the effect of retained earnings on share prices. (3) Increase to $75,000 from $25,000 the amount that small businesses may deduct from taxable income in the year that investment takes place. (4) Provide $3.6 billion to fund Personal Reemployment Accounts. These accounts provide up to $3,000 to assist unemployed workers who are likely to need help in finding or training for a new job. If a new job is found quickly, the unspent balance in the account can be kept as a reemployment bonus. The President's proposals support investment in three ways: ending the double taxation of corporate income, raising the expensing limits for small businesses, and lowering individual marginal tax rates (which are the relevant tax rates for small businesses that pass through their income to their owners). Ending the double taxation of corporate income will make corporate equities more attractive to investors and lower the implicit cost that firms pay for equity-financed investment.