Bush proposes new tax cuts

updated 1:36 p.m. ET Feb. 7, 2005

WASHINGTON - President Bush proposed new tax cuts Monday for health care, savings and charitable giving, while asking Congress to preserve temporary tax reductions already enacted.

The budget blueprint submitted to lawmakers would reduce money flowing from taxpayers to the federal government by $1.4 trillion over a decade. It includes not only new tax cuts, but also proposals to simplify some tax laws and stem tax evasion.

The single biggest change — making the tax cuts passed during Bush’s first term permanent reductions — would cost $1.1 trillion. Those laws reduced taxes on wages, investment income and inherited estates. The president would also extend, for a 10-year total of $73 billion, various temporary tax breaks for businesses.

The budget does not include any proposal to address the alternative minimum tax, a levy aimed at wealthy individuals that has started to hit some middle-class families. The president has commissioned a panel to report this summer on ways to simplify and improve the nation’s tax laws.

Health insurance refund
In his proposed budget, the president would help low-income families who must purchase their own health insurance with a refundable income tax credit that would cover as much as 90 percent of the cost, according to the Treasury Department. The new benefit would cost $74 billion over 10 years.

The proposals also include tax breaks to encourage wider use of health savings accounts, which allow individuals to save and invest money set aside for medical bills tax free. All the proposed health changes would cost $125 billion over 10 years.

Bush also wants to encourage charitable giving by letting people donate money withdrawn from an individual retirement account, without penalty. The new incentive would cost $3 billion over a decade.

Other tax changes aim to encourage businesses to move into communities that have lost their traditional industries, help teachers pay for classroom supplies, encourage telecommuting and increase affordable housing.

Among items that would increase money flowing into the U.S. Treasury, the president would clarify when siblings count as dependents for various tax benefits.

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