Some praise president, others say stimulus bid skewed

toward rich

By John Boyle

POSTED: Jan. 7, 2003 10:43 p.m.

President Bush calls his economic stimulus package a "growth and jobs" initiative

that will provide tax relief to 92 million Americans and put about $1,100 in the

pockets of the typical American family of four.

But Asheville bookstore owner Stephanie Coleman has another name for it.

"Hogwash," she said Tuesday afternoon as she manned the counter at Issues, her

downtown book shop and art space. "The bottom line with me is I don't trust

anything he says. It all looks good on paper, but there's an election coming up,

and he knows that people want to hear from him on the economy."

The president's ambitious plan calls for accelerating income tax rate cuts formerly

planned for later this decade, eliminating federal taxes on investors' stock

dividends and raising the child tax credit by $400 per child. But the proposal also

comes with an ambitious cost - $674 billion over 10 years.

Some local experts and business owners, like Coleman, believe the package is

just more tax breaks for the wealthy. But others believe

it's just what the nation's ailing economy needs right

now.

"If I were the president, this is exactly what I would

do," said Robert Mulligan, an assistant professor of

economics at Western Carolina University.

He's all for tax cuts because they stimulate spending,

and he believes dividends are "double-taxed" anyway -

once at the corporate level and once by the dividend

recipient.

According to a Bush administration fact sheet, 46

million married couples would receive an average tax

cut of $1,716 this year, while 23 million small business

owners would receive tax cuts averaging $2,042. Even

though she owns a small business, Coleman is skeptical

she'll see much benefit.

"Everything he's done has really been to benefit

wealthy people," said Coleman, who opened her store

two years ago.

But Mulligan believes Bush's plan will benefit the entire

economic spectrum.

"What we need to do is cut taxes relatively quickly to

ease the recession, or increase government spending to

ease the recession," Mulligan said. "And it's a lot easier

to cut taxes than increase spending."

Roger Aiken, a vice president and co-manager of A.G.

Edwards Sonsstock brokerage firm in Asheville,

expects the plan to benefit investors.

"I think it could be good for the economy, but I don't

think it's probably going to be as good a long-term

benefit as most people think," Aiken said. "Most of the

impact of the dividend tax cut will be on older, retired

people, and I think that will be a short-term positive. I

think people would be surprised by how many older

people this will benefit."

Mulligan gives an example of someone making $1,000

in dividend income. If that person were in a middle tax

bracket, he would pay about $200 in taxes - a sum that

will be eliminated under Bush's proposal.

"It's going to be a stimulus to consumption spending,

and that's one of the things that's going to help get us

get out of the recession," Mulligan said. "More

importantly it will be a long-term stimulus to the stock

market because it will encourage people to invest there

because they can keep more of what they earn."

But Christopher Bell, an associate professor of

economics at UNC Asheville, suspects the plan, if

passed, could actually lead to more economic woes.

"I think there are a lot of risks to what he's doing," Bell

said. "The consequence of tax cuts is to increase the

magnitude of the national debt, and the debt has to be

financed, which raises interest rates. That makes it

more costly for businesses to expand, which will make

it more costly for people to buy new houses, new cars,

refrigerators, carpet - all of which are going to tend to

offset any benefits that result from income going up."

Although Bush says he does not want to engage in

"class warfare," Bell says the president is "riding the

horse that brought him in" by giving tax breaks to the

wealthy.

"There's no doubt here that the president will say over

half of U.S. households now own stock, which makes it

sound like the tax cut is very democratic," Bell said.

"However, the distribution of ownership of those shares

is extremely skewed - approximately 85 percent of all

stock shares are owned by the wealthiest 10 percent of

the population."

And, Bell says, the top one percent of Americans (by

salary) own 50 percent of all stock.

"Even in terms of benefits to the economy, half of all dividends are not taxed

anyway because they're parts of mutual funds that are exempt or they're owned

by nonprofit institutions," Bell said

Contact Boyle at 232-5847 or JBoyle@CITIZEN- TIMES.com.