bush's 2004 budget projects record deficits

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    White House - AP

    Bush Budget to Up IRS Funding, Deficits
    Sun Feb 2, 9:10 AM
    By ALAN FRAM, Associated Press Writer

    WASHINGTON - President Bush (news - web sites) would strengthen the Internal Revenue Service (news - web sites)'s ability to pursue tax scofflaws, rich and poor, in a $2.23 trillion budget for 2004 that he will send Congress on Monday. The initiative will be part of a fiscal blueprint that will project federal deficits for each of the next five years, though the shortfalls will decline annually, a Republican familiar with the Bush administration's plans confirmed Satvrday.

    The unbroken string of red ink seemed all but certain since Friday, when administration and congressional sources said Bush's plan envisioned record deficits of $307 billion this year and $304 billion in 2004. The shortfalls already have become a political battleground between Bush and Democrats.

    The president's budget — encased in a white cover bearing a blue-line drawing of the White House — would commence a fresh round of tax cuts, slow the growth of federal agency budgets to an overall 4 percent, and use $400 billion over the coming decade to overhaul Medicare by adding prescription drug coverage.

    Bush would give the IRS a 5.3 percent boost to $10.4 billion for the budget year that begins Oct. 1. That will include $133 million for added audits of businesses and high-income taxpayers, including those who hide their income offshore, the Treasury Department (news - web sites) said.

    "Americans' sense of fairness dictates that all Americans should pay their fair share," Pamela Olson, the Treasury Department's assistant secretary for tax policy, said in a written statement. "The president's budget for the IRS will target the real problem areas in a fair and evenhanded manner."

    To reduce fraud, the IRS would use an additional $100 million to gather added information on people before they qualify for the earned income tax credit, which provides benefits to lower-earning Americans.

    The proposal would seek to let private collection agencies help the IRS pursue people who owe unpaid taxes. Similar plans have failed in the past due to objections that taxpayers' rights might be violated.

    More than $13 billion in unpaid taxes are going uncollected because the IRS lacks the resources to pursue them, the Treasury Department said. In addition, the department believes that up to $9.9 billion in earned income tax credits were paid in error.

    In 2001, only 0.58 percent of all taxpayers' returns were audited, according to IRS data. That included audits of 0.69 percent of those from people earning more than $100,000 annually, and 0.4 percent of those making below $25,000.

    Along with another budget initiative to boost the Securities and Exchange Commission (news - web sites)'s funds, the IRS proposal underlines the ongoing political sensitivity of last year's scandals involving Enron and other major companies found to have used misleading accounting.

    Democrats said they supported the concept of going after people who cheat on their tax returns, but withheld judgment on the plan's details. They predicted the administration will claim the initiative would produce billions in extra revenue and keep federal deficits from appearing even worse — a tactic budget-writers have used before.

    Renewing their charges that Bush has revived huge deficits and done nothing to contain them, Democrats noted that even before Satvrday's crash of the space shuttle Columbia, the White House had not sent any officials to sell the plan on the Sunday news talk shows.

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