Sen. Bob Bennett, R-Utah, came out in strong support of President Bush's tax plan Friday, including a controversial measure that would eliminate taxes on corporate stock dividends.
During a business and economic summit at the Grand America Hotel in Salt Lake City, Bennett argued that Bush's $674 billion tax relief package would help stimulate much-needed business investment, reduce corporate malfeasance, create jobs for Utah's unemployed and lead the way to solid economic growth.
"What will lead the recovery is business investment," Bennett told the Deseret News. "I believe if the president's tax package passes, you will see business investors saying, 'We now can depend on what's going to happen in the tax arena, and we can see that there are structural changes that will benefit us, and we will start making some of those investments.'
"That is why it's important to understand that while the direct tax benefits seem to go only to the rich, the overall benefits to the economy — which would help bring us out of the recession sooner — will benefit everyone."
Bush's tax plan also will help answer investors' concerns about the integrity of the companies in which they invest, by motivating corporations to move from debt financing to equity. There will be less incentive to "fudge" their books, Bennett said. Companies will focus on generating real cash — and real cash will mean real jobs for workers.
"A structural change in the tax laws would produce greater benefits for corporate governance than the congressional regulations that we passed," he said. "I voted for those regulations, but they're not enough.
"The dividend change is obviously the most important change to make. It would make corporate executives change their view of where they get capital. . . . However, as (Federal Reserve chairman) Alan Greenspan has pointed out, everyone would benefit from the structural change, including those people at the bottom of the economic ladder. They may not benefit by receiving a dividend, but they would benefit by receiving a job."
Bennett and Utah Department of Workforce Services senior economist Mark Knold delivered their economic forecasts Friday. Both predicted modest growth, though not without risk. The political and economic unrest in the Middle East and Venezuela may put the brakes on America's fledgling recovery, not to mention Utah's post-Olympic bounce.
While the market corrections after the euphoric 1990s were to be expected, along with the brief expansion prior to the Olympics, Knold expressed concern about the duration of the current recession. Utah saw job losses in 2002, the first period of negative job growth since 1964.
"We're paying for the excesses of the late 1990s," he said. "There was too much production capacity built into the economy, anchored on the rise of technology. . . . I am concerned about the duration of the recession. Technology is a good thing. It will lift us up and take us into the future. But bad management and bad finances brought us down. The question is, how soon will we move out?"
Knold predicted 1 percent growth this year, followed by 2 percent growth in 2004. Better times will come in 2005, which Knold called "the rosy year."
"Long-term, Utah has a good economy and a good economic history," Knold said. "It is still a good place to do business."
The local picture is enhanced by the underlying strength of the national economy, Bennett said.
"The U.S. economy is remarkably resilient. We have had four major shocks to the economy in recent years," he said, citing the effect of overcapacity, the collapse of the stock market after the tech bust, terrorist attacks and corporate governance scandals. "Any one of those four would be sufficient to send the economy into a serious tailspin. But they did not."
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