To boost stock prices, Bush is considering an old plan to end double taxation of corporate dividends. It could lift the markets, but the $40 billion-a-year price tag is a budget-buster. Democrats will oppose it as a sop to Big Business. And some companies may balk since ending dividend tax could pressure them to pay dividends.
Bush may embrace a plan to let investors write off more stock market losses. One idea: Raise the current $3,000 cap on deductible losses to $20,000. The cost could be $45 billion over 10 years. The plan would help stockholders but wouldn't defray retirement-account losses. It might also encourage more share selling.
Bush and Dems agree that workers should be able to sell company shares in 401(k) accounts after three years. Bush may seek to move up hikes of tax-deferred contributions to pension accounts, which are to rise from $3,000 to $5,000 in 2008 for IRAs and from $11,000 to $15,000 in 2006 for 401(k)s.
The White House wants to make permanent tax cuts that are set to phase in as of 2004 and expire in 2011. Hill Republicans want the next round of cuts to kick in now. Some Dems agree, but they would cancel other cuts to keep the deficit down. Moving up 2004 rate cuts would add $10 billion to 2003's deficit.
Democrats would stimulate the flagging economy with new federal spending targeted at the less well-off, including moves such as increasing the minimum wage from $5.15 to $6.65 an hour, extending the current 13-week limit on unemployment benets, and subsidizing health care for the uninsured.