News Release

January 7, 2003

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Cato Institute economists respond to Bush's tax proposal
Bush's proposal is a step in the right direction that will give a needed boost to the economy

WASHINGTON -- President Bush today in Chicago revealed his much-anticipated economic stimulus package. Cato Institute economists Chris Edwards and William A. Niskanen made the following comments after reviewing the president's speech:

• Chris Edwards, director of fiscal policy, former senior economist for the Joint Economic Committee:

"President Bush is unveiling a pro-growth tax package today that will include a substantial cut in the taxation of dividends. Such a cut would boost the stock market, lessen the tax code bias against savings, and reduce incentives for firms to take on too much debt and to excessively retain earnings.

"The president also proposes to substantially increase the amount of capital investment small business will be able to immediately write off. That is an important long-term reform that will boost investment by America's 20 million small businesses and simplify the tax rules for many companies."

• William A. Niskanen, chairman, former acting chairman of President Reagan's Council of Economic Advisers:

"The president's proposals to accelerate the reduction in income tax rates, to reduce the taxes on dividends, and to increase the expensing of business investment are important steps toward broader tax reform and will increase long-term economic growth. One important effect of lower taxes on dividends will be to reduce the type of mismanagement that led to the collapse of Enron and several other large corporations. One hopes that this package of proposed tax cuts will be matched by a corresponding reduction of federal spending as the economy recovers."

• Alan Reynolds, senior fellow, columnist, former vice president and chief economist at both Polyconomics and at the First National Bank of Chicago, is also available to comment on the president's proposal.