Bush Budget Makes Cuts Permanent, Leaves AMT Fix to Reform Panel

The Bush administration's budget for fiscal year 2006 would make permanent the tax cuts passed in 2001 and 2003, close loopholes, and consolidate the many existing retirement plans into one, but would leave fixing the alternative minimum tax to be considered by the tax reform panel named last month. The proposed budget also includes a refundable income tax credit for the cost of health insurance purchased by individuals under age 65, and an additional $500 million for Internal Revenue Service enforcement measures. For the first time since the Reagan administration, the budget calls for a decrease in non-security-related discretionary spending, furthering the administration's goal of cutting the deficit in half by 2009. "I appreciate President Bush's effort to cut the deficit," said Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance. "We had annual increases in some government programs of as much as 15 percent during the Clinton years. The country can't sustain that kind of spending, and we need to continue ramping down annual increases in congressional appropriations." The proposed budget "holds the growth of discretionary spending to just 2.1 percent, below the expected rate of inflation," Treasury Secretary John Snow told the Ways and Means Committee. "Non-discretionary spending in this budget falls by nearly 1 percent, the tightest such restraint proposed since the Reagan administration." Nevertheless, some observers say the proposed spending cuts are not enough. "The administration is still not serious about cutting spending: Two of the five pages of the budget overview tout 37 new spending initiatives," said Chris Edwards, director of tax policy studies for the Cato Institute. One reason the alternative minimum tax was left to the tax reform panel is because of its revenue-reducing effect, suggested Edwards. "Reform of the alternative minimum tax would reduce revenue," he said. "In addition, the budget includes money for Iraq for this year but not for future years, so it has not included further costs which will almost certainly be needed."