Pass the President’s Economic Package
***** Treasury Secretary John Snow makes strong statement on the President’s plan — text follows:
UNITED STATES TREASURY SECRETARY JOHN W. SNOW REMARKS TO THE DETROIT ECONOMIC CLUB
FEBRUARY 13, 2003 DETROIT, MICHIGAN
Good afternoon. Thank you, Rick [Wagoner, General Motors] for that
kind introduction.
This is my second week on the job, and Detroit is one of my first
stops as Treasury Secretary for a reason: few places better embody the
American spirit of enterprise than this town, and this state. Today,
I’d like to talk about the United States economy, and I’ll focus on
President Bush’s economic growth plan, which promises to create jobs,
accelerate our economic recovery, and increase our growth in the years
to come. I think it’s the right medicine at the right time. And I
think the plan will do a lot for the people of the state of Michigan.
As every American knows by now – whether from losing a job, from
feeling the fear that comes when your job is insecure, or from knowing
someone who has lost a job – our economy took a turn for the worse
beginning in the summer of 2000. By the time President Bush took
office, an undercurrent was running against the economy. The
unprovoked and unprecedented terrorist attacks of September 11, 2001
compounded a recession that was well underway, and the discovery of
serious abuses by some corporate business leaders slowed our recovery
from it.
In response to this convergence of adverse events, President Bush led
decisively. Acting with Congress, he took the steps necessary to
protect a shaken nation and a fragile economy. In 2001, when relief
was needed, he signed the most sweeping tax relief in a generation.
As evidence of the damage became clearer, he acted again in March 2002
to further bolster the economy. The timing was perfect. These
actions made the recession shorter and shallower than it would have
been. In fact, by most measures it was the mildest since World War
II.
In the face of extreme adversity, our economy, like our nation,
remains resilient. Despite an economic slowdown, attacks on our
homeland, war in Afghanistan, and weakened investor confidence, the
economy is recovering. But as the President has stated, we can and
must do better. Too many Americans are out of work today, and too
many Americans feel uncertainty about tomorrow.
We must build on the proven strengths of our economy. We must
continue to move towards policies that enable the private sector to invest in more good jobs that raise living standards for all. As long as there are Americans who want jobs and can’t find them, the economy is not growing fast enough. That’s why President Bush’s jobs and growth package is so important.
Let me describe the package in a little more detail.
The President’s growth plan is especially favorable to working families. The 10% tax rate bracket will expand immediately so that the lowest income earners can keep more of their pay. The marriage penalty will end once and for all, and the child credit will increase to $1,000 per child immediately – double its level in the year 2000.
The President’s plan will accelerate the tax cuts approved in 2001, to accelerate their economic benefits for the American people.
The President’s growth plan also offers new assistance to the unemployed, extending existing unemployment benefits, and creating new personal re-employment accounts. Re-employment accounts grant unemployed workers up to $3,000 to use toward the expense of finding a
new job, such as moving costs, child care, training and
transportation.
The President’s plan also helps businesses create the new jobs that
workers are looking for. For one, the plan offers tax relief to small
businesses that invest in our future. The plan will triple the amount
of equipment that small businesses can deduct rather than depreciate,
which adds incentive for entrepreneurs to invest now. More investment
now means more jobs, and sooner.
But the key job creation provision of the President’s plan is the
elimination of the double taxation of dividends. Companies pay
dividends to their shareholders to attract equity investment, which
allows the companies to expand their businesses and create new jobs.
Yet today, our tax laws discourage that investment and job creation,
and needlessly penalize all those investors — especially seniors —
by taxing dividends twice. The company pays taxes on its profits, and
when it pays out those profits to shareholders as a dividend, the same
earnings get taxed again as income.
Most American would agree that double taxation is unfair. It is also
bad policy. The net effect of double taxation of dividends is that
the American economy grows more slowly than it should, because it is
more costly than it needs to be for businesses to expand and invest.
And double taxation hits seniors the hardest. Of the 17 million
seniors we expect will file tax returns in 2003, 9 million – over half
– have taxable dividend income. In fact, seniors receive over half of
all taxable dividends. It doesn’t seem right to put a higher tax
burden on folks who have already contributed most of a lifetime to
this country.
Under the President’s plan, corporations will still be taxed on their
profits, but when they pay out their profits as dividends,
shareholders will not be taxed on that income a second time. We think
that is fair. It is also smart. And the way we have written the
plan, it will encourage companies to pay the taxes that they owe,
because they can only pay tax-free dividends when pay taxes on their
profits.
Under the President’s proposal, 92 million taxpayers and their
families would receive a tax cut in 2003. A typical family of four
with two earners making a combined $39,000 will receive a total of
$1,100 in tax relief compared to 2002 – not just this year, but in
every year after. And the plan will create jobs. The Treasury
Department estimates that by the end of next year, the Presidents
growth plan will create over 1.5 million new jobs, with much of that
coming from the elimination of dividend double taxation.
The President and his economic team have given this plan a lot of
thought. Our goal was to do something now that would pay off for
America long into the future – not here today, gone tomorrow. The
package will not only help America return to its economic potential,
it will increase it, creating a more abundant future with more good
jobs and rising real wages. I believe that is what everyone in this
room and across America seeks.
Now, I know not everyone agrees with me, and a lot of Americans still
have questions about the President’s plan. I spent most of my first
week on the job testifying to Congress, and while I was up on the
hill, I heard some reasonable questions about the President’s plan.
Let me take those head-on.
First, I was asked about the federal budget deficit. Yes, in the
short term, the President’s plan would increase the deficit – we would
leave more money with the American taxpayers and take less to
Washington. Deficits matter. They are never welcome. But there are
times, such as these, when they are unavoidable, particularly when we
must address critical national needs. Even without the President’s
economic growth and jobs package, improved homeland security, and the
war on terrorism, we would still have deficits today from the economic
slowdown. Are these deficits welcome? No. Are they understandable?
Yes.
The surpluses we enjoyed were the product of a strong economy, not a
weak one. We will not return to economic strength by taxing our
economy when it is struggling. The prescription for returning to
balanced budgets is straightforward: hold the line on government
spending and grow the economy. This is the direction the President
has chosen: a course to create real jobs that last.
We should also remember that current deficits are small relative to
our economy as a whole. Even at their worst, they are expected to
remain considerably below the typical levels following other
recessions in the last 30 years, and they are expected to improve
considerably after next year, as our growth accelerates.
I’ve also been asked how the President’s plan will help states and
municipalities. Some people seem to think the best way to help ailing
state budgets is to hook them up to federal life support. We think
the best way is to administer the medicine that will restore their
economic health. The President’s plan does offer assistance to the
unemployed in every state through re-employment accounts, and the
President’s budget increases state and local grants-in-aid. But the
most important aspect of this plan is that it will create more,
better-paying jobs in your state.
In Michigan alone, the President’s growth package will reduce income
tax bills for 3.2 million taxpayers, and over 800,000 small businesses
will have tax savings to apply toward new jobs and equipment. 2.5
million married and single filers will benefit from the expanded
10-percent tax bracket. 1.3 million couples will benefit from the
elimination of the marriage penalty; 900,000 parents will benefit from
the increased child tax credit, and nearly 1.2 million taxpayers will
gain from the end of double taxation of dividends.
I’ve heard people say that the President’s plan is unfair. Let’s be
real clear about this one. I already explained that the proposal
favors working families because it eliminates the marriage penalty,
nearly doubles the child tax credit, and expands the 10 percent rate
bracket. It also favors seniors by ending double-taxation of
dividends.
Here are the facts: under the President’s plan, taxpayers with income
under $30,000 will get an average tax reduction of about 17 percent.
Taxpayers with incomes over $100,000 will get a reduction of about 11
percent.
Under the President’s plan, families with incomes under $50,000 will
pay a smaller share of the total income tax burden than they do
today. Families with incomes over $100,000 will pay a larger share of
the total income tax burden than they pay today. Under this plan, the
share of income taxes paid by families with income over $100,000 will
rise to 73.3 percent.
I think that’s pretty fair.
Job creation and economic growth are keys not only to our near-term
but our long-term success as well. To the meet the new challenges our
nation faces today, and the unexpected threats of tomorrow, we must
have a strong economy.
We must seek a higher level of prosperity for America than we have
known – one that puts us on a path to ever-greater growth, one which
unlocks the fullest potential and talents of the American people.
That means encouraging hard work, rewarding hard work, and creating
the opportunities for all Americans. These are the values that
brought America to its glory, and these are the values that should
lead us into the future.
President Bush’s Jobs and Growth Package is the right plan at the
right time.
Thank you.