Tax Talk at President Bush's Press Conference

Here is the tax discussion at President Bush's press conference this morning:

Pres. Bush: We must reform our complicated and outdated tax code. We need to get rid of the needless paperwork that makes our economy -- that is a drag on our economy, to make sure our economy is the most competitive in the world. ...

Q: Do you feel more free, sir?

Pres. Bush ... You asked, do I feel free. Let me put it to you this way: I earned capital in the campaign, political capital, and now I intend to spend it. It is my style. That's what happened in the -- after the 2000 election, I earned some capital. I've earned capital in this election -- and I'm going to spend it for what I told the people I'd spend it on, which is -- you've heard the agenda: Social Security and tax reform, moving this economy forward, education, fighting and winning the war on terror. ...

Q: Good morning. Sir, does it bother you that there's a perception out there that your administration has been one that favors big business and the wealthy individuals? And what can you do to overcome that, sir?

Pres. Bush: Ed, 70% of the new jobs in America are created by small businesses. I understand that. And I have promoted during the course of the last four years one of the most aggressive, pro-entrepreneur, small business policies. Tax relief -- you might remember -- I don't know if you know this or not, but 90% of the businesses are sole proprietorships or subchapter-S corporations. (Laughter.)

Q: We've heard it.

Pres. Bush: Tax relief helped them. This is an administration that fully understands that the job creators are the entrepreneurs. And so in a new term, we will make sure the tax relief continues to be robust for our small businesses. We'll push legal reform and regulatory reform because I understand the engine of growth is through the small business sector. ...

Q: Mr. President, as you look at your second term domestic priorities, I wonder if you could talk a little bit about how you see the sequence of action on issues beyond Social Security -- tax reform, education. And if you could expand a little bit for us on the principles that you want to underpin your tax reform proposal -- do you want it to be revenue neutral? What kinds of things do you want to accomplish through that process?

Pres. Bush: I appreciate that. I was anticipating this question; that, what is the first thing you're going to do? When it comes it legislation, it just doesn't work that way, particularly when you've laid out a comprehensive agenda. And part of that comprehensive agenda is tax simplification.

The -- first of all, a principle would be revenue neutral. If I'm going to -- if there was a need to raise taxes, I'd say, let's have a tax bill that raises taxes, as opposed to let's simply the tax code and sneak a tax increase on the people. It's just not my style. I don't believe we need to raise taxes. I've said that to the American people. And so the simplification would be the goal.

Now, secondly, that obviously, that it rewards risk and doesn't -- it doesn't have unnecessary penalties in it. But the main thing is that it would be viewed as fair, that it would be a fair system, that it wouldn't be complicated, that there's a -- kind of that loopholes wouldn't be there for special interests, that the code itself be viewed and deemed as a very fair way to encourage people to invest and save and achieve certain fiscal objectives in our country, as well.

One of the interesting debates will be, of course, in the course of simplification, will there be incentives in the code: charitable giving, of course, and mortgage deductions are very important. As governor of Texas, when I -- some time I think I was asked about simplification, I always noted how important it was for certain incentives to be built into the tax code, and that will be an interesting part of the debate.

Certain issues come quicker than others in the course of a legislative session, and that depends upon whether or not those issues have been debated. I think of, for example, the legal issue -- the legal reform issues, they have been -- medical liability reform had been debated and got thwarted a couple of times in one body in particular on Capitol Hill. And so the groundwork has been laid for some legislation that I've been talking about. On an issue like tax reform it's going to -- tax simplification, it's going to take a lot of legwork to get something ready for a legislative package. I fully understand that. And Social Security reform will require some additional legwork, although the Moynihan Commission has laid the groundwork for what I think is a very good place to start the debate.