WASHINGTON (AFX) - US Treasury Secretary John Snow said the cost of President George Bush's plan to abolish the double taxation of dividends will only be around half the 370 bln usd originally estimated.

He told the US Chamber of Commerce that the feedback from the proposal will lead to higher consumer spending and more GDP growth, which should increase the receipts going into the Treasury.

"Clearly we overestimated the effects on the deficit," he said, adding that the net cost will only be around half the 370 bln usd estimated under the static scoring system the Treasury uses to assess the impact of tax changes.

"We scored as if there was no feedback," he said.

Snow conceded that the dividend tax cut plan is meeting with some resistance from lawmakers, partly because of the impact it will have on the deficit.

Snow said he will be looking to convince lawmakers this afternoon, when he testifies in front of the House Ways & Means Committee, that the dividend tax plans amount to "good economics".

In any case, Snow stressed again that the budget deficits foreseen over the coming years are "modest and manageable" in terms of GDP. The Treasury is forecasting record nominal budget deficits over the coming two years, even before accounting for the costs of any war in Iraq.

Snow said President Bush's 695 bln usd overall tax cut plan will create 2 mln new jobs by the end of 2004 and add some 2 percentage points to GDP over that time as well.

pan.pylas@afxnews.com

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