The panel's report said that without comprehensive reform, the tax system would only grow more byzantine and penalise millions of Americans who now fail to benefit from the complex array of benefits available to them.
The recommendations could give Bush the opportunity to refocus attention on his economic agenda after an unsuccessful drive effectively to privatise portions of the Social Security pensions system.
The administration is battling to pull down a yawning budget deficit at a time when Bush is assailed by domestic headaches, including the fallout from a CIA leak investigation, the mounting death toll of US soldiers in Iraq and controversy over his nominees to fill vacancies on the US Supreme Court.
The nine-member tax panel, outlining the first major look at the US tax system since 1986, admitted that some of its proposals reached over 10 months of debate could prove controversial.
But it warned that "without large-scale changes and continued commitment to avoiding complexity and special tax breaks, the tax code will become even more confusing, unfair and damaging to our economy".
Outlining ways in which its plan would promote savings in a debt-ridden society while also boosting growth, the panel said: "These benefits will follow only from a fundamental reform of the tax code."
To the likely relief of many taxpayers, the panel's recommendations call for repealing the alternative minimum tax, or AMT, a late-1960s addition to the tax code originally meant to target a handful of extremely wealthy Americans.
But the AMT has since grown into a scourge of the middle classes.
According to a study by the Brookings Institution-Urban Institute Tax Policy Center, the number of taxpayers affected by the AMT will grow from around one million in 1999 to almost 31 million in 2010 without reform.
However, repeal of the AMT would leave a hole of 1.2 trillion dollars over 10 years in Treasury revenues.
So the tax panel proposed offsetting measures that would fill that hole, in keeping with Bush's demand that its final proposals be neutral for the overall budget while making the tax code simpler and more transparent.
The panel said it would offer the administration two separate proposals. One is called the Simplified Income Tax Plan, which would replace the current six tax brackets with four, ranging from 15 percent to a top rate of 33 percent.
The other is dubbed the Growth and Investment Tax Plan, which would increase incentives for savings by slashing taxes on capital income.
Both plans would sharply reduce politically popular tax deductions, including those for home-mortgage interest, employer-provided medical insurance, and state and local income tax payments.
The panel shied away from two even more controversial reforms that it debated - introducing a European-style value-added tax or a federal retail sales tax.
The recommendations now go to the White House. Its own proposal must then go through Congress, making the final outcome of the tax overhaul effort hard to predict.