NCPA - National Center for Policy Analysis

RETURN OF THE TAX CUTTER: BUSH PART II

November 4, 2004

President Bush has a full agenda of domestic priorities and his re-election is certain to shape, and in some cases perhaps reshape, Americans' tax-planning, health-care and savings strategies, says the Wall Street Journal.

Here's a look at what the election means for individual finances in five areas.

Taxes:

  • The current top tax rate of 15 percent on dividends and capital gains is likely to be maintained, as is the top federal income-tax rate of 35 percent; Bush is likely to push to make those tax cuts permanent.
  • Bush is expected to press for permanent repeal of the federal estate tax, now set to disappear in 2010 but then reappear in 2011.

Retirement:

  • Bush's proposal to revamp Social Security could allow individuals to direct some of their payroll taxes into retirement accounts where they could potentially earn higher returns, in exchange for scaled-back guaranteed benefits.
  • Workers could see their employer-sponsored retirement plans consolidated into a new single plan, known as the Employer Retirement Savings Account.

Health Care:

  • Employers will get more incentives to roll out health savings accounts, which allow consumers to set aside pretax funds for future medical expenses.
  • New policies resulting from last year's Medicare overhaul are likely to continue intact; seniors can expect a new prescription drug benefit in 2006.

College Savings:

  • The tax advantages of 529 college-savings plans are likely to be extended; Bush's 2001 tax law made qualified withdrawals on earnings tax-free, but those benefits are scheduled to expire in 2010.
  • Students who qualify for Pell grants could get an additional $1,000 in their first year of college if they meet certain requirements.

Energy:

  • Expect higher oil prices, at least in the short term, since Bush supports continuing to fill the Strategic Petroleum Reserve.
  • Bush isn't likely to demand strict new fuel-efficiency rules or big new fuel taxes.

Source: "What to Expect In Bush Part II: Agenda Includes Extension Of Tax Relief, Renewed Push For Private Savings Accounts," Wall Street Journal, November 4, 2004.

For WSJ text (subscription required) http://online.wsj.com/article/0,,SB109951788959763993,00.html

 

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