Senate Finance Committee Chairman Comments On 2007 Budget

by Mike Godfrey, Tax-News.com, Washington

09 February 2006

Following the publication of President George W. Bush's 2007 Budget this week, Senate Finance Committee Chairman Charles Grassley (R-Iowa) observed that:

“The President’s budget always sets off a good debate on Capitol Hill. I appreciate President Bush’s effort to outline his priorities. I agree with making tax relief permanent. Permanence is important for continued economic growth."

"By encouraging small business investment, and giving consumers more of their money to spend, we’ve helped the economy. Sunsetting the bipartisan tax relief would raise taxes on hard-working taxpayers. Permanence gives taxpayers reliability. They should know that we won’t pull the rug out from under them."

"And it’s good to see the budget include alternative minimum tax relief for millions of middle-income families for one year. It used to be lonely to call for AMT relief. Now there seems to be near-universal agreement in Congress and the executive branch that the AMT is a serious problem."

In his budget proposals for next fiscal year, President Bush called for temporary tax cuts enacted in 2001 and 2003 to be made permanent to allow businesses and families to plan properly for their futures.

"All taxpayers should have the certainty of knowing that the provisions of EGTRRA (the Economic Growth and Tax Relief Reconciliation Act of 2001) will extend beyond 2010," the Bush administration declared in the Treasury Department's General Explanations of the Administration's Fiscal Year 2007 Revenue Proposals, otherwise known as the Blue Book.

"Taxpayers require the certainty that can be provided today by permanently extending the provisions of EGTRRA and JGTRRA (the Jobs and Growth Tax Relief Reconciliation Act of 2003). Permanent extension of the provisions is essential for promoting growth and higher levels of income in the future," the administration added.

The Treasury has calculated that permanently extending the dividend and capital gains tax cuts, both of which are due to expire at the end of 2008, would cost the government $7.74 billion in 2008 and $37.02 billion in 2009. However, short term revenues losses are likely to be offset in the longer term by higher economic growth as a result of the tax cuts, according to the Treasury.

In addition to permanent extension of the President's tax relief enacted in 2001 and 2003, the President's FY 2007 Budget includes several new initiatives, including: increased expensing for small businesses; a set of proposals to improve access to health care and expand Health Savings Accounts (HSAs); proposals to increase compliance, simplify the tax laws and reduce taxpayer burden; and a proposal to create a new 'Dynamic Analysis Division' within the Treasury Department's Office of Tax Policy.

The budget also advocates a further one-year 'fix' to address the rapid rise in the number of taxpayers affected by the alternative minimum tax in the near term.

A temporary provision, effective through 2005, increased the AMT exemption amounts to $40,250 for a single taxpayer, and $58,000 for a married couple filing a joint return.

Beginning in 2006, the AMT exemption amounts decline to $33,750 for a single taxpayer, and $45,000 for a married couple filing a joint return. Another temporary provision effective through 2005, permits nonrefundable personal tax credits to offset both regular tax and the AMT.

Without any change in the tax law, the number of taxpayers subject to the AMT would increase by 20.4 million (from 5.5 million in 2005 to 25.9 million in 2006). However, the Administration has stated its intention to find a longer-term solution to the AMT problem within the context of "fundamental tax reform".

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