NEW YORK Republican presidential hopeful Rudy Giuliani has proposed what he called a multitrillion-dollar tax cut that would lower the corporate tax rate from 35 percent to 25 percent and reduce the capital gains tax from 15 percent to 10 percent.
The proposal, unveiled by Guiliani's campaign on Wednesday, would preserve the 2001 and 2003 tax cuts enacted by President George W. Bush, eliminate the estate tax and give taxpayers the option of choosing a simplified tax form with three tax brackets with a maximum bracket of 30 percent.
"Giuliani's tax plan makes all the Bush tax cuts permanent, including full repeal of the death tax," the former New York mayor's campaign said in an appeal to fiscal conservatives.
The plan was praised by tax-cutting advocates like Grover Norquist, president of the Americans for Tax Reform.
Yet Giuliani's failure to recommend an immediate strategy for strengthening the economy and offer a plan to pay for the tax cuts was criticized by other economists.
"What we need right now is a very targeted stimulus plan that goes right to the heart of the problems we face, which can all be traced to the distress in the subprime mortgage market," said Ward McCarthy, managing director of Stone & McCarthy Research Associates, in Princeton, New Jersey.
"Quite frankly, these grandiose, broad-based fiscal proposals now being scattered about in shotgun fashion by a variety of politicians are completely off the mark."
Though McCarthy is not one of the economists predicting a recession, he said Congress should now enact legislature to protect people who took out subprime loans for their first residence.
The importance of taking quick action to ward off a recession also was stressed by former U.S. Treasury Secretary Robert Rubin, who said the government should enact a $100 billion fiscal stimulus plan.
Economics professor Matthew Shapiro at the University of Michigan in Ann Arbor said: "Giuliani's plan looks like a tax cut not reform. It's not clear how this would move the budget toward balance."
Giuliani's campaign has promoted him as strong on national security, while Republican opponents vying to be their party's nominee for November's presidential election have questioned his conservative credentials on issues like immigration.
The tax plan seeks to associate Giuliani with tax-cutters Bush and former President Ronald Reagan, who contended that economic growth resulting from lower taxes would increase government revenues.
"This multitrillion-dollar tax cut would easily exceed the level of the Reagan or Bush tax cuts," his campaign said.
One feature would index the alternative minimum tax to inflation and eventually repeal it, the statement said.
The alternative minimum tax was enacted in 1969 to ensure the very wealthy had to pay some taxes. Because of inflation, the tax now threatens to ensnare millions of middle-income families.
The Guiliani statement said the current U.S. corporate income tax rate of 35 percent was the second-highest in the developed world and that a cut to 25 percent would be more in line with European competitors.
The proposed capital gains tax cut would boost the value of 401(k) and IRA retiree savings and investment plans, the statement said, while another feature would replace current tax-advantaged savings accounts with a simplified system.
(Additional reporting by Joan Gralla)
(Reporting by Daniel Trotta, editing by Chris Wilson)