Bush Panel Backs End to Most Tax Deductions

WASHINGTON -- President Bush's tax panel on Tuesday endorsed a drastically simplified income tax system that envisions eliminating most deductions, credits, savings incentives and other tax breaks, replacing them with a few simpler benefits, The Associated Press reported.

The plan includes savings accounts for retirement and major family expenses very similar to a proposal put forward by Bush. The panel would shrink the number of income tax rates from six to four and put 75 percent of individuals and families in the bottom 15 percent tax bracket.

The proposal abolishes the alternative minimum tax, and individuals would not pay tax on roughly three-quarters of the capital gains on corporate stock. However, the federal tax deduction for state and local taxes paid would disappear. Myriad personal and family tax breaks would be replaced with one family credit.

Benefits and savings accounts for retirement, health and education would be eliminated in favor of three savings accounts, all funded with taxed income that would be allowed to grow and be withdrawn tax free. One account would let workers save for retirement through their employers. Taxpayers could also put $10,000 every year into each of two accounts, one for retirement and the other for health, education and home-buying expenses. Low income taxpayers could get a savers credit worth up to $500.

It retains the earned income tax credit, a benefit designed to lift the working poor out of poverty, but gives workers' the option of letting the IRS make that complicated calculation.

-- NYSSCPA.org News Staff

Posted on 10/18/05