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Bear Left!

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Volume III, Number 44 February 2003

Cowboy George

Paul Corrigan

The Bush proposal to eliminate the "double taxation" of dividends is the key component in the tax package sent to Congress by the Administration. The Administration's political spin is that the proposed legislation will unleash billions of dollars of retained corporate earnings into the economy. Critics of the proposal have compared the legislation to the bursting of a dam: some people will be helped, but the majority will be hurt. Don't kid yourself that the administration or our representatives on Capital Hill have thought out the ramifications of the program on the lives of American citizens. The Bush administration is oblivious to the adverse ramifications of the proposed legislation. The cowboy in Bush chooses a course of action and then searches for a marketing spin to justify the action.

If enacted in its present form, the administration's proposal to eliminate double taxation of corporate dividends would have an adverse impact on the federal and state program that is responsible for virtually all of the affordable rental housing stock built or rehabilitated in the United States since 1987. The Low Income Housing Tax Credit (or LIHTC) has produced over 1.5 million rental units since its inception. The support of both Democrats and Republicans in Congress led to its expansion in 2000. Corporations earn federal tax credits in exchange for investing in newly constructed or substantially rehabilitated affordable housing. Each state operates the program under federal guidelines, but determines its own criteria for determining which developments will receive its limited supply of tax credits. Private companies or non-profit organizations develop, construct, and operate most tax credit tax credit housing.

Under the Bush administration's proposal, dividends paid by corporations to shareholders would be excluded from taxable income when paid out of previously taxed corporate income. To the extent that a corporation reduces it taxes with tax credits, it will decrease the tax-free dividends that it can distribute to shareholders. The Bush administration provided an exception under their tax proposal for the Foreign Tax Credit but included no such exclusion for the program that is currently responsible for producing virtually all of the affordable rental housing in the United States. Through this omission, the tax proposal discourages corporations from increasing or even continuing their investments in the LIHTC program. Ironically, the Administration, in the name of economic stimulus, would undermine a program that has successfully generated housing and jobs for the last 15 years.

Do not despair. There is a simple solution to the Bush Administration's indifference. This flaw in the administration's proposal will be corrected in the House Ways and Means and Senate Finance committees. The LIHTC, along with the Foreign Tax Credit, should be treated as income tax paid in the final bill voted by the House and Senate. The administration and Congressional Republicans will then take credit for preserving affordable housing.

Bush, the International Cowboy, decided on military action against Iraq and first justified it based on the Administration's allegations of Iraq's ties to al-Qaeda. Absent credible evidence tying Iraq to al-Qaeda, military action was justified due to Iraq's nuclear weapons program. Absent credible evidence of a nuclear program, the Administration identified a stash of other weapons of mass destruction, namely chemical weapons, as justification. Last week, in the State of the Union speech, Bush listed a litany of atrocities Saddam Hussein has committed against Iraqi civilians as justification for military action. It is true that Saddam has held on to power in Iraq, in large part, through a campaign of terror against civilians and potential political opponents. Alas, the idea that the Administration's proposed military action would be undertaken to improve the living conditions of the Iraqi people is ludicrous. No, Bush is on a mission to win a war against Iraq for control of oil and to complete the unfinished job of removing Saddam from power that stains his father's legacy.

Bush, the Domestic Cowboy, is on a mission to cut taxes. Poppy Bush looked America in the eye and said, "Read my lips, no new taxes." When Poppy raised taxes shortly thereafter, he stained the Bush family legacy as much as President Clinton stained his legacy with his claim that "I did not have sexual relations with that woman, Miss Lewinsky." George W. Bush is in a double bind in his attempt to clear Dad's name. His tax cuts are a constant reminder of Dad's experiment with honesty when he called Reagan's supply-side tax proposals "voodoo economics." George W. learned from his father that the truth gets you second place and lying wins the presidency. Bush wants desperately to win the second term that his father was denied. Alas, we now have a president who is indifferent to the needs of working men and women: tax cuts for the rich, deficits for federal, state and local governments, and war.

We should all be wary of the Bush administration's claims. Its policies are no more aimed at helping the citizens of the United States than they are of helping the people of Iraq.