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Senate 2008 Budget Plan Sets Stage For US Tax Reform

by Mike Godfrey, Tax-News.com, Washington

16 March 2007


Senate Budget Committee Chairman Kent Conrad (D - ND) said Wednesday that the Fiscal Year 2008 Senate Budget Resolution provides a fiscally responsible budget plan which funds critical national priorities and reaches balance without raising taxes, although Republicans contend that the looming threat of unfunded liabilities continues to pose a "great fiscal challenge."

A key measure of the Senate Budget Resolution is a two-year patch to the Alternative Minimum Tax (AMT) for 2007 and 2008, one year longer than that proposed by President Bush, which will prevent millions more middle class taxpayers from being subjected to the AMT system.

Conrad said that the Budget contains no tax increases and allows for new tax relief and the extension of expiring tax provisions, provided the cost of these measures is offset. "By requiring offsets, the resolution protects the American taxpayer from having to pay the higher interest costs on the debt that would accumulate when tax cuts are not paid for," the Budget Resolution stated.

Conrad added that the resolution also calls for strong new measures to close the tax gap, shut down tax scams, and address offshore tax havens while setting the stage for tax simplification and reform.

According to Conrad, the resolution brings the budget back into balance – reaching a surplus of $132 billion by 2012 with gross debt as a share of GDP beginning to fall after 2009. Spending as a share of GDP will decline in every year after 2008, he claimed. The plan also restores crucial budget enforcement provisions such as a strong paygo rule and allowing reconciliation for deficit reduction only.

On the spending side, the resolution rejects the President’s proposals to cut domestic priorities and provides new resources in areas that Conrad says have been underfunded by the Bush administration, such as child and veteran healthcare, and education.

Conrad said that the resolution also addresses long-term fiscal challenges posed by the coming retirement of the baby boom generation and includes a “comparative effectiveness” reserve fund designed to jumpstart a new initiative to bring down spiraling health care costs. The plan also includes a new point of order against measures that increase the long-term deficit.

"I believe the Chairman’s Mark provides a fiscally-responsible budget plan for our country," Conrad stated in his opening remarks at the Budget Committee mark-up.

"While no single budget resolution can solve all of our budget challenges, this plan will begin to put the nation back on a more sound fiscal path. I believe that is true about this resolution," he argued.

However, ranking member Judd Gregg (R - NH) contended that the proposals will do anything but, and warned that the "looming threat of unfunded liabilities continues to pose our greatest fiscal challenge."

“Over the past five years, the economy has grown and prospered thanks to pro-growth tax policies that have generated more than seven million new jobs and record levels of federal revenues," he observed. “Therefore, I am disappointed that the majority party has presented a budget that contains significant new spending, significant new taxes, significant new debt, and absolutely no attempt to address the long-term problems we face."

“I look forward to working with the majority to make some much-needed adjustments to their proposal. We must work together to keep fair tax policies in place, continue to grow the economy, reduce spending and debt, and leave to our children a government they can afford," Gregg concluded.


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