Bush's Budget Proposal Calls for Permanent Tax Cuts

WASHINGTON -- President Bush's 2007 fiscal year budget calls for $1.7 trillion in tax cuts over the next 10 years, primarily by making his first-term tax cuts permanent law, Dow Jones reported.

Click here to read the full budget proposal.

In addition, although tax reform was a top Bush administration priority in fiscal 2006, the topic only was mentioned in a brief passage deep in the 2007 budget. The budget mentioned Bush's Advisory Panel on Federal Tax Reform, a nine-member panel that produced tax overhaul recommendations last November, "has provided a strong foundation for a national discussion on ways to ensure that our tax system better meets the needs of today's economy."

New initiatives include $136.5 billion in tax incentives for health care, such as the expansion of health savings accounts, a deduction for high-deductible insurance premiums and a tax credit for purchase of health insurance. This is much larger than the $56.2 billion in health-care tax incentives in the fiscal year 2006 budget proposal. Small business expensing would double to $200,000 a year, a benefit worth $18.7 billion through 2016.

Another new feature includes a plan to reduce the "tax gap," a measure of uncollected taxes. The White House plan would raise about $3.6 billion in new revenue through the collection of federal employment taxes from leasing companies and other technical measures.

The Bush administration is proposing $20.5 billion in alternative minimum tax (AMT) relief for individuals in the 2007 fiscal year. The budget said this AMT relief doesn't apply to the child credit, the new saver credit, the earned-income credit or the adoption credit. These tax credits were provided AMT relief until 2011 under the 2001 tax cut, the budget said.

Other major proposals carried over from last year include:

• revamping Individual Retirement Accounts by creating two new tax-deferred savings accounts, Retirement Savings Accounts and Lifetime Savings Accounts;
• making permanent the tax credit for corporate research and development, which expired last year;
• raising $1.6 billion through 2016 by modifying two tax breaks from the 2005 energy bill; and
• hiking by $2.2 billion corporate tax and revenue-raising items, such as limiting related party interest deductions.

-- NYSSCPA.org News Staff

Posted on 2/6/06