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Bush's Budget Requests Tax Reductions, Breaks

President Bush asked lawmakers Monday to expand health savings accounts and preserve temporary tax reductions that evaporate at the end of the decade.

The entire package of tax proposals contained in the budget blueprint would cut more than $1.7 trillion from money expected to flow from taxpayers to the federal government over the coming decade.

The single biggest piece of the recommendation cements tax breaks passed earlier in Bush's presidency, reducing taxes $1.4 trillion over a decade.

"My administration has responded to major economic challenges by following this vital principle: the American economy grows when people are allowed to keep more of what they earn, to save and spend as they see fit," the president said in a message transmitted with the budget.

Democrats have criticized the effect that some of those tax cuts have had on federal budget deficits. "We're not doing future generations any favors if we cut taxes in a way that busts the budget," said Sen. Max Baucus of Montana, the top Democrat on the Senate Finance Committee.

Bush did not propose a permanent fix for the alternative minimum tax, intended to stop the wealthy from evading taxes but increasingly impinging on the middle class.

The tax proposals touch on charitable giving, education, energy and pensions and include a recommendation that a temporary business research and development credit become permanent, as well as bigger tax breaks for small business investments.

The few new initiatives aim to moderate the rising cost of health care and would reduce taxes about $156 billion over the coming decade.

Those ideas include a broad, $91 billion expansion of health savings accounts, which let workers save and spend money tax-free for medical needs if they purchase high-deductible health insurance policies.

The White House said savings accounts, when used with high-deductible health insurance policies, give users more control over health care spending.

"This combination will also instill a stronger element of cost consciousness among health care purchasers, thereby working to slow the rise in health care inflation for all Americans," the president said in the budget.

To encourage more people to use the savings accounts and purchase high-deductible health policies, the president would establish additional tax breaks for individuals who set up the accounts on their own instead of through employers. He would also make the accounts easier to keep when changing jobs or moving to a new state, among other incentives.

Other proposals would simplify two widely used refundable tax credits, the child tax credit and earned income tax credit. Bush also outlined initiatives to reduce the annual gap between taxes owed and taxes paid.

The Treasury Department said it will continue to study recommendations made by a presidentially appointed panel on tax reform, which issued a report last year on ideas to make tax laws fairer and simpler.

The Treasury Department also announced it wants to establish a new office to study the effect tax proposals could have on future economic growth. That kind of analysis, known as dynamic analysis, has met with some criticism in Congress.