Martin Sullivan, economic correspondent for Tax Notes magazine analyzes these issues in his article: "Fiscal Stimulus: Are We Fighting the Last War?" which appears in the October 15, 2001, edition of Tax Notes.
President Bush has asked for an economic stimulus package composed of $60-75 billion of tax provisions. The House Ways and Means Committee instead has given him a package of $160 billion worth of tax provisions. But what will happen if the House tax committee's bill is enacted? Will it provide the right mix of short-term and long-term stimulus to help the economy recover? Sullivan's analysis encompasses some of the macroeconomic issues that, ideally, should be resolved before Congress and the Administration design a tax package to fit the current economic situation. And he looks at likely results of tax cuts targeted to lower-income individuals, upper-income individuals, and the business sector.
Sullivan predicts a combination of economics and politics will produce a second tax bill that is likely to include broad-based business tax cuts, probably in the form of increased expensing of capital expenditures. He also sees tax cuts for low-income individuals as a possible centerpiece for the coming legislation -- in part as relief to recently unemployed individuals and in part because low-income individuals are more likely than upper-income individuals to spend the money and to help the economy recover.
Please contact Tax Analysts for the full text of Sullivan's article.
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Media Release 2001-5