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October 15, 2001
Economic Stimulus Package -- Is Congress going Down The Right Road?
Congress already has passed one tax cut this year and they are almost certain to pass another one in the next few months. The second tax bill is part of an economic stimulus package designed to counteract the economic impact that the September 11th terrorist acts have had on the economy. But is another tax cut a good idea? Is it needed? Are there better ways to stimulate the economy? What are the options Congress and the Administration should consider? Which ones are appropriate if the economy needs short-term growth? Which are likely to have long-term effects?

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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