The conservative Republican Study Committee has presented an alternative stimulus proposal that will be among the plans considered tomorrow morning at the hearing of Rep. Eric Cantor’s (R., Va.) stimulus working group.
Rep. Mary Fallin (R., Okla), who runs communications for the RSC, told me that their plan comes in response to president-elect Obama’s call for bipartisan ideas. “President Elect Obama said he wanted to hear everyone’s ideas, and we wanted to put forth solutions, not just objections. There are some areas of agreement, and we’d like to work across party lines to accomplish many of these things,” she said.
The RSC plan, authored by Reps. Scott Garrett (R., N.J.) and Jim Jordan (R., Ohio), focuses on cutting taxes and cuts spending to make up the difference. Not a huge surprise, coming from a conservative caucus. But Democrats should not simply dismiss this package if they are committed to middle-class tax relief. Among the RSC proposals are:
– An increase in the child tax credit from $1,000 to $5,000.
– An increase in the deduction for college expenses from $4,000 to $6,000, and in the income threshold at which the deduction can be taken.
– An end to mandatory IRA withdrawals at age 70 1/2.
– The plan would also let people of any age draw down their IRA money without taxes or penalties in calendar 2009. “What we hope to do is help individuals and families who are facing foreclosures or some other financial crisis — to give them penalty-free access to their savings as a one time thing,” Fallin said.
Another idea they adopt, which has received bipartisan consideration is a reduction in the top corporate income tax rate from 35 to 25 percent. “That would help stimulate investment and bring us down to the average tax rate in the European Union,” Fallin said. “It would help make American businesses more competitive internationally.”
The proposal also contains many of the more familiar supply-side ideas for reducing the government’s drag on business and job creation, such as:
– A 5 percent reduction in the rates of all six federal income tax brackets.
– Repeal of the alternative minimum tax for individuals.
– Making the current tax rates on capital gains and dividends permanent, and indexing capital gains to inflation. For example, if you bought an investment in 1980 and sold it today, you would be able to measure the profit in constant dollars, so that you aren’t paying taxes on the inflation.
– A cut in the corporate capital gains tax from 35 percent to the 15 percent that individuals currently pay.
The numbers are not available yet from the Congressional Budget Office on how this plan would affect government revenues, but a one percent cut in domestic non-discretionary spending is intended to offset the tax cuts. The good news is that Obama seems intent on including tax relief in his package, even if much of it would be temporary. Republicans will not have much power in the legislative process for the stimulus, but they might be able to get some of these provisions anyway.