Tax Reform May Wait Until 2007

A rewrite of the tax code, once targeted as a major theme for 2006, may be pushed back by one or two years.

A tax proposal is unlikely to draw Democratic support in a mid-term election year, according to Time magazine, quoting anonymous Republican sources. "No one wants to put something out there that's not going to go anywhere," a White House official told the magazine. Also, sources said there's too little time to create policy and to lay the groundwork for support from the American people.


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President Bush appointed a high-powered panel to recommend changes to the tax code, which he has called “a complicated mess.” The panel made some controversial recommendations, including limiting the deduction on home mortgage interest, and the plan is now in the hands of Treasury Department. The original plan was to unveil a proposal by the end of this year that would be discussed during Bush's State of the Union address.

Sources now say Bush will speak in general terms about tax reform in the address without outlining specific proposals, Reuters reported. "I don't think there is enough time to churn out a policy," said one Republican.

Other proposals of the tax commission: limiting the tax-preferred status of employer-sponsored health insurance, reducing the number of tax brackets, and eliminating the alternative minimum tax.

Meanwhile, Bush continues to tout his first-term tax cuts as a good for economic growth, and he is pushing to extend those cuts.

"This economy of ours is on the move. People are being able to find work, and that's what's important to me. I want Americans working; I want anybody who wants a job to be able to find work - good-paying, steady work - and that's what's happening in America," Bush said in a Monday speech at the Deere-Hitachi Construction Machinery Corp. in Kernersville, N.C.

According to MarketWatch, Bush cited Labor Department figures that show 215,000 jobs were created in November, and he said the capital gains and dividend tax reductions helped create capital that sparked economic growth. Democrats, however, say the tax cuts have mostly benefited wealthy taxpayers and have little connection to the economic recovery.

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