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No fourth Bush tax cut on horizon

by on
in Small Business Tax,Small Business Tax Deduction Strategies

It will soon be springtime in Washington, and for the past three years, that has meant tax breaks spilling forth across the land. But not this year.

With the economy clicking again and deficits mounting, Congress has little incentive to push through a fourth round of big tax breaks under Bush's watch. Expect discussion, but less than a 50/50 chance for passage on these tax topics:

Making Bush tax cuts permanent. Many pieces of the Bush tax cuts will disappear (or "sunset") after two years, three years or more. Bush is urging Congress to make those tax breaks permanent, saying anything else would constitute a "tax increase." While Congress may extend some provisions set to expire after this year, don't expect carte blanche permanent status for the tax cuts.

Expanded savings-account tax breaks. Expect President Bush to push a pair of new tax-advantaged retirement accounts that would allow much more generous tax breaks than 401(k)s, IRAs or Roth IRAs.

Privatizing Social Security. The president is again saying the Social Security system should be changed to allow workers to invest part of their payroll taxes in private retirement accounts.

New health care tax breaks. The new Medicare law created Health Savings Accounts (HSAs), a new "medical IRA"-like account that people can pump money into and make withdrawals to pay for health care. To open an HSA, a person must have a high-deductible catastrophic health plan. The president wants HSAs to allow people to deduct 100 percent of their catastrophic-plan premium.

Another reason for Congress' lowered expectations: the shortened election-year schedule. The House plans fewer than 100 working days this year (and the Senate 120) before an early-October adjournment.

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