The Impact of the Proposed Tax Cuts in the Economy.
On January 7, 2003, President Bush announced what the Bush Administration is calling a "growth and jobs plan". This "growth and jobs plan" is an economic plan that includes several proposed tax cuts. Among the many tax cuts proposed, three are especially unique. The first such proposed tax cut involves the elimination of the federal tax on corporate dividends. This tax cut pertains to big business. The second of the proposed tax cuts involves removing the marriage tax penalty, which obviously affects married couples. The third and finally cut that I"ll discuss is the Earned Income Tax Credit. This tax applies to working-class families with children. First an in-depth look at the proposed elimination of the federal tax on corporate dividends.
Under current law, corporate income that is distributed to shareholders in the form of dividends is effectively taxed twice by the federal government. The taxation of the same money twice by the federal government has been a controversy for years. The Bush Administration's solution is not as simple as a 100 percent exclusion of all dividends paid to individual investors. Dividends paid by corporations in excess of previously taxed income would be included in taxable income. The proposal is intended to provide corporations shelter from paying double taxes only if the corporation has paid tax on its earnings in order to avoid double taxation. Under the proposal, each corporation will have to set up accounts where they can record only corporate income that has been taxed. This proposal favors corporations that pay federal income tax; the only exception would involve corporations using foreign tax credit. If Congress passes this proposed tax cut than the investors of corporations, who pay federal income tax, will benefit the most. More specifically imagine the government taking 35 percent of a whole pay and then once the remaining pie is divided amongst the people the government takes a percentage of each individual slice.
