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Bush weighs plan to cut corporate taxes

President Bush appeared with Vice President Dick Cheney (second from left) and other top officials to stress that he thinks the economy is sound. President Bush appeared with Vice President Dick Cheney (second from left) and other top officials to stress that he thinks the economy is sound. (SAUL LOEB/AFP/GETTY IMAGES)

WASHINGTON -- President Bush said yesterday he is considering a plan to cut tax rates for US corporations to make them more competitive around the world -- an initiative that could further inflame a battle with the Democratic Congress over spending and taxes.

Advisers presented Bush with a series of ideas to restructure corporate taxes, possibly eliminating narrowly targeted breaks to pay for an across-the-board rate cut. In an interview afterward, Bush said he was inclined to send a the tax package to Congress, although he expressed uncertainty about its political viability.

The president's comments came as he tried to calm volatile stock and mortgage markets and reassure the country that the economy is fundamentally strong. Despite mounting concern over the housing downturn, he rejected proposals advanced by prominent Democrats to grant government-chartered Fannie Mae and Freddie Mac more freedom to buy mortgages and mortgage-backed securities. And he ruled out any taxpayer bailout of lenders threatened by the subprime home-loan crisis.

Treasury Secretary Henry M. Paulson Jr. briefed Bush Tuesday morning on possibilities for overhauling a corporate tax structure he considers disadvantageous to US business. A paper released by Paulson last month said the corporate tax rate could be reduced from 35 percent to 27 percent by scrapping the research-and-development tax credit, a deduction for domestic production, breaks for interest on state and local bonds, and other special tax breaks.

The administration said the corporate tax rate is second only to Japan's among 30 member states in the Organization for Economic Cooperation and Development. Moreover, officials said, Germany, France, Japan, Britain, and China have all signaled that they will -- or may -- cut their rates.

"Our tax structure makes us less competitive and if we want to be a competitive nation, we've got to analyze a lot of things, including taxes, dependence on oil or good education policy," Bush said. "And so we will work through possible suggestions for Congress."

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