The battle to stimulate the economy has begun, with both Republicans and Democrats claiming they have the better plan. Each party has tilted its proposal toward individuals, and neither includes much relief for construction.

The White House unveiled a plan centered on eliminating all taxes on corporate dividends. In a speech to the Economic Club of Chicago on Jan. 7, President Bush outlined a 10-year, $674-billion package that would also accelerate the income tax cuts set to be phased in between 2004 and 2006. Business would see the $25,000 cap on write-offs for new equipment purchases jump to $75,000. Bush says his plan will increase consumer spending and promote small business growth. "The need for this plan is urgent," Bush says.

Bill Spencer, vice president of government affairs for the Associated Builders and Contractors, says that while most of the provisions of the White House plan will help individuals rather than companies, he is optimistic about the impact the stimulus package will have on the overall economy. "Historically, an upturn in the economy has resulted in strengthening the construction market. This will allow for more construction and for more job creation," says Spencer.

In contrast, House Democrats, attempting to upstage the president by one day, unveiled their $136-billion economic stimulus package Jan. 6. That 10-year plan would offer tax relief to small businesses, accelerated depreciation to spark plant and equipment investment and $5 billion for highway construction. House Democratic Leader Nancy Pelosi (Calif.) says the proposal would "jump start" the economy in the near term, with most of the impact to occur in 2003. Democrats say that beyond 2003, their proposal contains virtually no spending increases or revenue reductions.

With the GOP controlling both Congress and the White House, Pelosi admits Democrats will face an uphill battle trying to incorporate key elements of their package into compromise legislation. But she says lawmakers from both parties should find common ground. Click here to view charts

The Bush plan makes all of the individual tax rate reductions enacted in 2001 effective this year and retroactive to Jan. 1, 2003. It reduces the marriage penalty this year instead of in 2009 and raises the child tax credit. The measure would extend unemployment insurance benefits and create "re-employment accounts" to help unemployed workers with job training, child care, transportation or other expenses associated with finding a new job.

One big disappointment for construction lobbyists was the absence of a provision to make permanent the repeal of the estate tax that Congress passed last year (ENR 12/ 23/02 p. 9). Under current law the estate tax will be phased out by 2010 and then reinstated in 2011. Permanent repeal of the levy has long been a top priority of the industry.

Stan Kolbe, director of legislative affairs for the Sheet Metal and Air Conditioning Contractors' National Association, says the depreciation changes are "a critical element" for the capital-intensive sheet metal industry, which uses equipment to fabricate everything it puts in place.

But most of the political firefights center on the president's plan to scrap stock dividend taxes. Bush says it will allow taxpayers to exclude dividend payments from their taxable income and would return about $20 billion this year to the economy.

Opponents argue that the plan benefits wealthy stockholders. AFL-CIO President John J. Sweeney says the dividend benefit will primarily help wealthier taxpayers with incomes exceeding $100,000. Adds Sweeney: "The president should shelve the dividend cut and focus instead on a targeted recovery package."