Bush Pitches Small Business Tax Relief

President Bush headed to a flag manufacturer Thursday to begin the job of selling his $670 billion stimulus plan, challenging critics who say it will cost too much, mainly benefit the rich and not affect the economy very quickly.

"It's a fair plan. It's an important plan and it's a plan that will help people find work," Bush told employees of the National Capital Flag Co. of Alexandria, Va. The company makes state, international and novelty flags, including those that fly on the president's limousines.

Bush defended the biggest and most controversial part of his plan, a proposal to eliminate taxes that shareholders pay on dividends from their stock by saying the current law is unfair since the taxes amount to double taxation since companies already pay taxes on that money.

He showcased a 74-year-old retired budget analyst who gets back about $5,000 a year from dividends as part of a $65,000 a year income. Under the president's plan, the gentleman, Don Lucas, would save about $1,300 in taxes.

Lucas told the president he favored the overall plan but didn't think it was unfair to have to pay taxes on dividends.

"I saw no problem with corporations paying taxes on the income," Lucas said after the session.

One item in the president's 10-year package proposed Tuesday would allow businesses to write off up to $75,000 worth of new technology, machinery or other equipment, a cap that would be indexed to inflation in future years. Now, businesses can exempt just $25,000. The president said the cost would be $16 billion.

"When you reduce the rates on everybody who pays taxes, you are reducing the taxes on small business owners, which gives the small business owner more money to invest in the growth of the business which means its more likely he or she will be able to hire somebody additionally," Bush said.

When you reduce the income tax rates on Americans you are reducing the rates on small businesses," Bush said, referring to the fact that limited partners and sole proprietors file their business income on their personal income tax returns.

The White House has estimated that 23 million small business owners would receive an average tax cut in 2003 of $2,042 from that provision. The company's owner said the savings would allow him to buy a couple more $21,000 embroidery machines and hire two more people to run them.

The president's plan also calls for adding $400 to the child tax credit this year, instead of having the credit gradually grow over the next seven years, as the 2001 tax cut package dictates. It would also move several million people from the 15 percent tax bracket to the 10 percent bracket this year instead of in 2008 and reduce the marginal tax rates that were due to be cut in 2004 and 2006.

Showcasing a family of four making $75,000 per year, the White House said the changes will mean a $900 tax savings.

The president has started selling the plan in what is already a highly partisan atmosphere, just three days into the 108th Congress.

Senate Democratic leader Tom Daschle, D-S.D., called the plan "obscene" and Democrats have argued that it doesn't provide the stimulus to push the economy in the short run as they claim does their $136 billion package that would extend jobless benefits, give small businesses some investment incentives and offer a $300 tax credit.

Congressional aides said there was little or no support for the plan among Democrats in a closed-door caucus on Wednesday. A dozen Democrats defected to Bush's side two years ago when the 10-year, $1.35 trillion cuts were originally passed.

White House press secretary Ari Fleischer said some Democrats took a while to come around last time, and could do so again.

"If you recall in 2001, Democrats didn't support it in the beginning ... but they emerged there toward the end," Fleischer said.

Already, one Republican has also said that he would oppose the plan.

"I can't see giving away any more of our revenues, which we're doing in tax cuts," said Sen. Lincoln Chafee, R-R.I., who stood with Sen. Dianne Feinstein, D-Calif., to announce his opposition.

The president said that there could be "some problems" trying to get the package passed through the Senate, but the administration is making a coordinated effort to promote the bill.

Bush's new chief economic adviser, Stephen Friedman, headed to New York Wednesday to brief several groups of business leaders. On Friday, Vice President Dick Cheney will talk up the proposals in a speech to the U.S. Chamber of Commerce.

The president will also travel across the country to promote the plan before and after his Jan. 28 State of the Union address.

The White House also was arranging audiences for Bush officials with newspaper editorial boards across the country.

Fox News' Wendell Goler and the Associated Press contributed to this report.