Bush to Propose Dropping Dividend Tax

WASHINGTON – As the centerpiece of his economic growth package, President Bush will propose wiping out the taxes shareholders pay on dividends, a step that would cost the Treasury more than $300 billion over a decade, a senior administration official said Monday.

Bush was leading a series of policy briefings, capped by an afternoon meeting with his Cabinet to discuss advancing his 2003 agenda amid a changing political landscape in Washington: Republicans are taking over the Senate after 19 months of Democratic control.

Aides to Transportation Secretary Norman Y. Mineta said they expected him to attend Monday's Cabinet meeting, even though he has been hospitalized for most of the last three weeks with back trouble. Hospital officials said he remained at Walter Reed Army Medical Center Monday morning.

White House officials had said in recent days that Bush was considering cutting the dividend tax by 50 percent or more. But the senior administration aide, speaking on condition of anonymity, said Bush will propose eliminating it when he offers his stimulus package Tuesday in Chicago. That plan could cost $600 billion over 10 years.

Bush's growth package probably will also include an acceleration of tax cuts Congress approved in 2001; tax incentives to prompt more spending by businesses; aid to financially strapped states; and extended unemployment benefits.

A half-dozen Democratic lawmakers are jockeying for the right to challenge Bush in 2004, and several have already pledged to fight Bush's plan.

But the White House anticipates that the GOP takeover when the 108th Congress convenes Tuesday will help Bush's initiatives on Capitol Hill, where they often have died at the hands of the Democratic-led Senate. The House remains under Republican control.

Along with other chores, the president will be looking ahead to his Jan. 28 State of the Union address and annual budget request to Congress in early February.

The administration has already started rolling out what is likely to be a series of announcements previewing its budget priorities. Bush used his Saturday radio address to propose a $1 billion increase in education funding directed at poor children.