Bush 'to slash tax for shareholders'

Mr Bush: "Some people want to turn [the debate] into class warfare."

The US president's plans to get the economy moving contain a surprise move to abolish tax on corporate payouts to shareholders, the New York Times reported on Monday.

The US is entering a week of intense debate about its economic health as the Bush administration and the opposition Democratic Party both prepare to unveil policy packages intended to stimulate growth.

The Democrats will set out their plans on Monday, followed by Mr Bush on Tuesday, after a run-up that has been characterised by Democrat accusations of "class-war" against the poor, and vigorous denials from the president.

Plans to abolish tax on corporate dividend payments would be the centrepiece of a $600bn package to stimulate economic growth, the New York Times reported.

Election on horizon

The move, if confirmed, would represent a dramatic escalation from earlier plans to halve the tax and could cost the US exchequer $300bn over a period of 10 years.

White House officials have said the change would be introduced immediately, the paper said.

Glenn Hubbard, chairman of the president's Council of Economic Advisors, has reportedly said abolition of tax on dividends could lift share prices by as much as 20%.

Almost half of US households own shares so the hope is that letting them keep dividend payouts will encourage both consumer spending and investments.

President George W Bush will unveil his proposals in a speech in Chicago which is being seen as an important step in his campaign to win re-election in 2004.

Economists and political analysts believe he will also bring forward tax cuts which are currently due to kick in during 2004 and 2006.

Other measures are likely to include an increase in the childcare tax credit; tax changes to benefit married couples and an extension of federal unemployment benefits.

Democrats have charged that Mr Bush's tax plans would help the wealthy, rather than middle-income and poor Americans, whilst increasing the budget deficit.

The former leader or the Democrats in the Senate, Tom Daschle, has said they were "the wrong idea at the wrong time to help the wrong people".