Bush Repeats Call For Congress To Extend Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

23 January 2006

President George W. Bush has repeated his call for Congress to pass legislation extending tax reliefs, warning lawmakers that by letting tax cuts expire, they will effectively be sanctioning an increase in tax on businesses and individuals.

In an address delivered in Loudoun County, Virginia, a location chosen for its low rate of unemployment and high concentration of small firms, Mr Bush described the economy as "robust", but cautioned that businesses faced an uncertain future unless Congress acts on tax cuts.

"The fundamental question facing us is what do we do to keep it going. Well, first thing is, Congress needs to make the tax relief permanent," Mr Bush stated.

He continued:

"This relief is set to expire. When you hear people say, well, we're not going to make it permanent - what they're telling you is they're going to run up your taxes, that's what they're saying," he remarked.

"If you're a small business owner, there's got to be certainty in the tax code. Congress needs to put themselves in the shoes of people who are trying to plan. And when there is uncertainty, it makes it harder for this economy to show steady growth."

A tax relief bill approved by the House of Representatives late last year will extend a number of personal, business and investment tax breaks, including the dividend and capital gains tax cuts by two years to the end of December, 2010.

However, the dividend and capital gains tax cut extensions were omitted from a competing Senate bill because they failed to gain enough support from Republican fiscal moderates worried about the impact on the federal deficit. The two chambers are set to begin negotiations soon towards compromise legislation.

But according to Mr Bush, lower taxes will help to reduce the deficit by increasing economic growth, in turn boosting tax revenues.

"There is a myth in Washington, they say all we've got to do is just raise the taxes a little bit and we'll solve the deficit. No, that's not how it works. They're going to run up your taxes, but they're going to find new ways to spend the money and not solve the deficit. That's how Washington works," he observed.

Nonetheless, some economists are of the view that the Bush administration's budget deficit forecast of $341 billion for the fiscal year 2006 remains optimistic, and predict that the deficit is likely to reach at least $350 billion and possibly as much as $400 billion, as the Gulf Coast recovery operations and military spending take their toll on the budget.

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