With congressional elections looming, politicians from both
parties are worried about how the stock market's tumble will affect
So when President Bush and Congress return to Washington after
Labor Day, there will be a new item on the economic agenda: whether
to enact tax-law changes intended to rebuild investor confidence.
The president told reporters last Friday at his ranch in
Crawford, Texas, that he was "thinking about all options" for a new
economic package. "When I announce them, it will be well thought
out. It will be part of a long-term plan," he said.
Not to be left behind, Democrats are working on their own
As a result, economists and interest groups are already
marshaling arguments for and against the idea of confidence-
boosting tax cuts. The debate centers on whether government action
is needed, what measures would most effective, and how much the
Treasury can afford.
What could happen
The steps the president said he was considering include:
* Increasing the current $3,000 annual limit on investment losses
that can be deducted from federal income taxes.
* Speeding up planned increases in the amount that workers can
contribute to their individual retirement accounts and 401(k) plans.
* Reducing the double taxation of corporate dividends, which the
taxman clips both as corporate profits and again when they flow into
investor pockets as dividends.
* Lowering the rate at which profits (capital gains) on the sale
of stock are taxed.
Democrats favor their own ideas, which include the possibility of
giving retirees more time before they are required to start taking
minimum withdrawals from their 401(k) plans. This would help
individuals rebuild balances in retirement accounts hard hit by the
stock market's plunge. Another Democratic option is increasing the
length of unemployment insurance.
Confidence-boosting tax-law changes are far from a given. The
schedule is tight for getting new legislation enacted before
lawmakers leave town in advance of the Nov. 5 election. "Congress
has a full plate from now until the election," notes Dorothy
Coleman, vice president for tax policy at the National Association
of Manufacturers. A key concern for the NAM is seeing that any tax-
law changes don't include "any offsetting tax increases."
In addition to scheduling issues, there is the matter of
affordability. This week, the Congressional Budget Office will
release new figures on the federal budget deficit for 2003, which
are expected to show $50 billion more in red ink than the $109
billion the Bush administration is predicting. …