WASHINGTON, May 1 (UPI) -- U.S. Treasury Secretary John Snow said Thursday that the House proposal for tax cuts would be a step in the right direction, but he suggested that the White House's plan for bigger cuts would be preferable.
"It's a step in the right direction. We'd like to see it go further. But it's a big step in the right direction," Snow said.
The White House has been pressing for an end to double taxation on share dividends as one of its key tax cut proposals to stimulate the economy. Overall, the Bush administration has called for tax cuts over the next 10 years totaling $726 billion, while the House is pressing for cuts up to $550 billion, and the Senate is calling for cuts to be capped at $350 billion.
Dividend tax cuts remain a sticking point for discussion in tax cut plans that could drastically shift tax revenues over the next decade. The Bush administration has argued that ending double taxation of dividends would ultimately encourage more people to buy equities and buoy not only the financial markets, but also the economy.
But even some Republicans oppose the dividend tax cut for only the wealthy few at a time of increasing government spending and widening budget deficits. The House Ways and Means Committee, chaired by Bill Thomas, R-Calif., has called for lowering the dividend tax to 15 percent for most people and 5 percent for lower-income shareholders.
"We're articulating the case for the president's proposal," the Treasury secretary said following a meeting with members of the ways and means committee.
Some economists are concerned that the political deadlock could harm the domestic economy.
"This kind of delay in economic activity has happened before. The third leg of the Reagan tax cut was scheduled for January 1, 1983. Moreover, in 1982, there was some uncertainty about whether or not the tax cut would be rescinded. As a result the economy struggled in 1982, but exploded upward in 1983," said Brian Wesbury, chief economist at Chicago-based investment group Griffin, Kubik, Stephens, and Thompson.
"The same sort of delayed economic activity is happening today ... while we hope that the president's plan of ending the double taxation of dividends is not left on the committee room floor, the most important factor for the economy now is some resolution to the debate," Wesbury added.
Still, as President Bush's economic team struggles to push through the administration's tax-cut and economic proposals, Treasury is being pressed to support economies overseas as well.
On Thursday, Snow testified before the House Appropriations Subcommittee on Foreign Operations and Export Financing to stress that the job of the United States in Iraq and Afghanistan is far from complete. Indeed, the process of nation-building is only just beginning to be discussed regarding Iraq, as U.S. officials debate how to rebuild a nation hurt by war and nearly three decades under a dictatorship.
Snow told the committee members that Treasury would focus on helping to restore operations of the finance ministry, central bank, commercial banks and the stock market. But he said the U.S. role would be only to guide, rather than to take over the new leadership.
"We start from the premise that our role is to help the Iraqi people rather than to impose changes upon them," Snow said.
Even as the domestic economy sputters, Snow requested the appropriations committee to allocate funds to provide financial aid bilaterally, as well as to give financial support through multilateral development institutions such as the International Monetary Fund and the World Bank totaling nearly $2 billion.
