So what did President Bush have to say about taxes in his State of the Union speech? The following is an excerpt from the President’s speech:
To build a prosperous future, we must trust people with their own money and empower them to grow our economy. As we meet tonight, our economy is undergoing a period of uncertainty. America’s added jobs for a record 52 straight months.
But jobs are now growing at a slower pace. Wages are up, but so are prices for food and gas. Exports are rising, but the housing market has declined.
At kitchen tables across our country, there is a concern about our economic future. In the long run, Americans can be confident about our economic growth, but in the short run, we can all see that that growth is slowing.
So, last week, my administration reached agreement with Speaker Pelosi and Republican Leader Boehner on a robust growth package that includes tax relief for individuals and families and incentives for business investment.
The temptation will be to load up the bill. That would delay it or derail it, and neither option is acceptable.
This is a good agreement that will keep our economy growing and our people working. And this Congress must pass it as soon as possible.
We have other work to do on taxes. Unless Congress acts, most of the tax relief we’ve delivered over the past seven years will be taken away.
Some in Washington argue that letting tax relief expire is not a tax increase.
Try explaining that to 116 million American taxpayers who will see their taxes rise by an average of $1,800. Others have said they would personally be happy to pay higher taxes. I welcome their enthusiasm. I am pleased to report that the IRS accepts both checks and money orders.
Most Americans think their taxes are high enough. With all the other pressures on their finances, American families should not have to worry about the federal government taking a bigger bite out of their paychecks. There is only one way to eliminate this uncertainty: Make the tax relief permanent.
Members of the Congress should know, if any bill — raises taxes reach — reaches my desk, I will veto it.
What do you think? Are the rebates enough to get the economy going? Is now the time to make the tax cuts permanent? Do you think the speech will affect either the way that Congress or the American public responds to the current economic situation?
I promised to comment on Bush’s proposals for tax reform following his State of the Union address (full text link here).
Well… there’s not much to say. Bush punted on most of the economy issues, saying that he’d talk about them next week. And his health care based tax reform? I don’t anticipate that it will pass Congress but here’s the scoop anyway.
The idea is to allow health care standard deductions of $7500 ($15000 for married couples) on individual income tax returns for those who have health care insurance. If an employer provides your health care insurance, the amount of the health care plan would be includable in your income (though not subject to payroll taxes), and then you would be allowed the standard deduction which should, the theory goes, either result in a wash to you or a bit of a tax savings (Bush uses the example of a $4500 tax savings for a family of four earning $60000 annually). And if you are a self-employed person, you are traditionally subject to the floors and ceilings on Schedule A – this would take that barrier away, producing a tax savings. Tax savings is good, right?
Well, here are the criticisms of the plan (some of them are mine, some of them are the concerns of political gurus):
- The plan might serve as an incentive for employers to not provide health insurance plans to employees. If that happens, health care plans purchased individually are far more expensive than group plans (sometimes 2 or 3 times), which might result in costs that exceed the deduction.
- The plan might cause employers or employees to choose a less expensive plan than previously offered in order to remain below the deduction, thus reducing the overall "choice" factor.
- The plan would not provide a tax savings lower-income families who traditionally do not pay additional taxes (meaning that the extra deduction would be lost).
- The plan would not make health care plans more affordable for lower income families or those who are currently uninsured (in fact, the fear is that health care plans would become more expensive).
What do you think?
Check in after the State of the Union address tonight. I will be posting about Bush’s speech and Congress’ reaction to it.
No, don’t look for anything on Iraq… Remember, nobody likes a partisan blogger.
But I will be interested to hear about Bush’s plan for health insurance, and what those in Congress think about it. Apparently, Bush is proposing to count employer contributions toward health insurance
as taxable income (!) and then establish a standard deduction for individuals with health insurance. If true, it would, in theory, be a wash for those who receive health insurance from an employer – assuming that the deduction is adequate – and would give a boost to those who are currently self-insured but do not itemize. Ironically, what it would also do is complicate the Tax Code, which is already heavily criticized by this administration.
No news yet on whether this will be the only tax issue cited in the speech. Tony Snow told a reporter that the number of drafts for the speech is in the "double digits" so the final speech could yet be a surprise.
