WASHINGTON, (Reuters):
IN ADDITION to a proposed economic stimulus plan that will slash dividend taxes, President George W. Bush's budget includes a broad array of tax cuts, including a health care tax credit, that would total about US$1.5 trillion over the next 10 years.
The White House said in budget documents released on Monday that the tax proposals will among other things encourage saving, strengthen education, invest in health care, protect the environment, and boost incentives for charitable giving.
Many were included in last year's budget but were never enacted into law. Their fate is even more uncertain this year in the face of record level budget deficits.
Democrats have criticised Bush for pursuing what they see as reckless tax cuts that will sharply increase the nation's debt burden as the huge baby boom generation prepares to retire in the next decade.
The cornerstone of his tax proposals is a US$670 billion economic stimulus package that will slash the taxes investors pay on dividends and accelerate income tax rate cuts scheduled for 2004 and 2006. The administration argues the tax cuts will boost growth and improve the long-term economic outlook.
"High tax rates discourage individuals from investing in themselves through training and education since their higher earnings bear higher taxes," the administration said in its budget documents.
"High tax rates discourage entrepreneurship, because the successful small business owner keeps less of any additional amount that is earned," it added. "High tax rates slow the economy, and a slowly growing economy produces fewer jobs for individuals wanting to work."
Democrats argue that Bush's tax cuts are behind record deficits and that when interest costs are taken into account, his proposed tax cuts will total US$1.7 trillion over the next 10 years.
They argue that the increased borrowing needs of the government will push interest rates higher throughout the economy and eventually slow economic growth.
Bush renewed his proposal to increase tax breaks for charitable giving and a refundable tax credit for parents of children in failing schools to help pay the costs of sending them to another school.
Bush also proposed a refundable tax credit to help the more than 40 million uninsured Americans pay for health coverage.
A similar proposal last year received little attention from Congress. It could be overshadowed again this year by an expected debate over reforming Medicare and Medicaid health care programs for the elderly and poor.
Bush proposed a number of energy conservation tax incentives including a tax break for residential solar energy equipment. He also proposed extending tax credit for electricity produced from wind and waste materials.
Bush would also extend a tax credit for the purchase of energy-saving hybrid and fuel cell vehicles. Hybrid vehicles would be eligible for a tax credit of up to $4,000 while fuel cell vehicles would be eligible for up to a $8,000 tax credit.
