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February 5, 2007
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Treasury Releases FY 2008 Blue Book

Washington, DC – The U.S. Treasury Department today released its General Explanations of the Administration's Fiscal Year (FY) 2008 Revenue Proposals, often referred to as the Blue Book.

The Administration's FY 2008 Budget includes measures to permanently extend the President's tax relief enacted in 2001 and 2003, the President's proposal for a new standard deduction to make health insurance more affordable and a set of proposals to improve compliance with the U.S. tax system. The FY 2008 Budget also includes initiatives to:

• Improve Americans' Competitiveness
• Provide Alternative Minimum Tax (AMT) Relief
• Simplify and Encourage Savings
• Strengthen Education
• Provide Incentives for Charitable Giving
• Extend Various Expiring Tax Provisions

As the President discussed in his 2007 State of the Union Address, the current tax treatment of health care has contributed to the rapid growth in health care costs and generally provides little or no benefit to people whose employer does not offer health insurance coverage. The President has proposed a new standard deduction for health insurance to help make insurance more affordable. The proposal removes the existing tax bias for individuals to purchase overly generous health insurance and also provide a strong incentive for the uninsured to purchase insurance.

Families who choose coverage, whether directly or through an employer, could deduct a standard $15,000; individuals who choose coverage could deduct $7,500. A family or individual that spends less on health insurance than the standard deduction amount would still receive the full $15,000 or $7,500. The deduction would apply for purposes of both the income tax and payroll tax.

Treasury estimates that about 3 to 5 million more people would have health insurance under the proposal.

Click here for more information on President Bush's affordable health care proposal

The Treasury Department released a comprehensive strategy to improve tax compliance in September 2006. The strategy builds upon the demonstrated experience and current efforts of the Treasury Department and IRS to improve compliance with a commitment to taxpayer service.

The Treasury has put forward 16 proposals in the budget to help improve compliance, with an emphasis on additional reporting without creating excessive burdens on compliant taxpayers. The Department also asked for $409 million for the IRS to step up compliance efforts. Additional funding is also provided for more research to study the sources of non-compliance.

Click here for more information on Treasury's September 2006 strategy to improve tax compliance.

The tax system should promote the competitiveness of U.S. workers and businesses in the global economy. The FY 2008 Budget also includes proposals to promote savings for all Americans and encourage investment by entrepreneurs. In the coming months, the Treasury Department will engage in a public dialogue on how our tax system can be improved to make the U.S. more competitive in the global economy.

The Administration is concerned that the individual AMT may impose substantial burdens upon taxpayers who were not the originally intended targets of the individual AMT. The President's FY 2008 Budget proposes to extend for one year through 2007 provisions that address the rapid rise in the number of taxpayers affected by the AMT in the near term. The Administration urges Congress to create a longer term solution to the problems associated with the individual AMT.

The proposal would increase the AMT exemption levels for 2007 to $43,900 for single and head of household filers, $65,350 for married taxpayers filing joint returns, and $32,675 for married taxpayers filing separate returns. In addition, the proposal would allow an individual to reduce 2007 tax liability by the full amount of nonrefundable personal credits even if tax liability is reduced to an amount that is less than the individual's tentative minimum tax.

Without long-term changes, an estimated 25 million Americans will fall subject to the AMT.

Click here to view the FY 2008 Blue Book.