Bush's 2005 Budget Proposes To Solidify Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

03 February 2004

As expected, President George W. Bush announced in his budget proposals for 2005 that he wants to make permanent the tax cuts passed in 2001 and 2003, in an overall package that will cost over $1 trillion in the coming decade.

"We must sustain the momentum of this recovery by making the tax relief passed in 2001 and 2003 permanent," Bush told Congress whilst delivering his budget speech yesterday.

Among the major tax provisions that the President will attempt to persuade Congress to make permanent are the reduced marginal rates of income tax, the 15% rate of dividend tax and the permanent repeal of inheritance tax.

Bush is also calling for the extension of other tax measures due to expire before 2011, including the increased child tax credit, the widening of the 10% tax bracket and the marriage tax penalty relief, scheduled to expire in 2005.

In addition, some new proposals were announced by the President, notably a revised plan first mooted last year to create two new tax-friendly savings accounts. The Retirement Savings Account and the Lifetime Savings account will allow taxpayers to save and withdraw funds tax-free.

Other measures include: a $7.2 billion package of energy tax breaks designed to help renewable energy; $54.7 billion in healthcare tax incentives; an $18.5 billion plan to encourage charitable giving; and proposals to simplify the tax code.

The President also confirmed the government’s commitment to new enforcement measures designed to crack down on the use of tax shelters, particularly municipal leasing schemes and abuse of patents and intellectual property through over-inflated valuations. This campaign is expected to yield $44.2 billion over the coming decade in additional revenues.

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