Tax Relief Extension Reconciliation Act of 2005

TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005 -- (Senate - February 13, 2006)

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Mr. SCHUMER. Mr. President, in the Senate-passed tax reconciliation bill, we have recognized the importance of the tax deduction for college tuition, and the bill we are sending to conference extends it for 4 additional years, through 2009. Unless extended by the 109th Congress, the deduction will not be available to taxpayers filing 2006 returns. It is urgent that the provision be extended in this bill, so families can plan for their kids' education.

The House bill, in sharp contrast with the bill that the Senate passed with 66 votes, extends this common-sense, middle-class tax relief for only 1 year. Given that we face choices and budget limitations, and we can't do it all, this motion instructs the Senate conferees to insist that the conference report should include the Senate-passed 4-year extension of the tuition deduction, rather than extending the tax cuts for dividends and capital gains that will not expire for nearly 3 years.

That is the gist of my motion. We simply do not need to take action on dividends and capital gains today, but on issues such as the college tuition deduction and the alternative minimum tax, Congress must act now. If we can not do it all under the reconciliation limits, then the tax cuts for the middle class that have already expired should take priority.

The supply-siders who insist that cutting taxes for millionaires in 2009 is more important than cutting taxes for middle-class families this year argue that low tax rates on investments are central to our economic well-being.

Like many of my colleagues, I agree that lower taxes are generally preferable to higher taxes. That is not a controversial position. The question is, when we have large budget deficits, what are our highest priorities?

We have to make choices. And in today's information-driven economy, a college degree is no longer a luxury, it is a necessity.

In terms of long-term economic growth and developing this country's human capital--which is ultimately the true source of innovation and competitive advantage--we could make few better investments than ensuring that future generations have access to an affordable college education.

And talk about a tax cut that pays for itself over time. According to the Census Bureau, workers 18 and over with a bachelor's degree earn an average of $51,206 a year, while those with a high school diploma earn $27,915, and the disparity has been growing over time. College graduates make more money, and they will pay more in taxes as a result. Making college easier to afford is a real investment, and you don't need so-called dynamic scoring to make the case.

The challenge for American families is that the cost of college tuition has increased faster than any other major consumer item, including health care, over the last 20 years. It has skyrocketed from $5,156 in 1981 to $29,026 in 2005, an increase of 462 percent.

Even in real, inflation-adjusted dollars, the price of a 4-year public or private college education has almost doubled over the past two decades.

While many of my colleagues talk about lower taxes on investment, when a family spends money on college tuition, they are investing too. These families may not have a lot of money in taxable financial investments--more than three-quarters of U.S. households earn less than $1,000 in taxable income from investments, such as capital gains and dividends--but they are investing a lot in their kids' education.

In today's global, interconnected world, who is to say that these investments in human capital are not just as important, if not more so, than the buying and selling of stocks?

I urge each of my colleagues to think about how quickly tuition costs are rising in their States and consider whether the majority of taxpaying families in their States really need an extension of capital gains relief or whether they really need relief from the AMT and college tuition costs.

Here are just a few examples from my State:

At Adelphi University on Long Island, tuition cost $5,114 in 1983 and $17,800 in 2003-2004, a more than three-fold increase.

At SUNY Purchase in Westchester County, tuition increased from $1,005 in 1980 to $4,079 in 2003-2004, or 4 times as much.

At Niagara University outside Buffalo, tuition has nearly quadrupled, from $3,300 in 1983 to $17,380 in 2003-2004.

I am sure each of us has similar stories to tell. I urge my colleagues to support my motion, and keep the college tuition deduction in place for at least 4 more years.

The skyrocketing rise of college tuition is not the only trap ensnaring an unsuspecting, and undeserving, American middle class. The individual Alternative Minimum tax is another, and I would like to speak for a moment on the motion to be offered by the minority leader.

Unless we act, the alternative minimum tax's crushing burden will be felt by 17 million more middle- and upper-middle income taxpayers this year than in 2005, and millions more in the years to come. AMT relief is a critical part of the Senate's version of this bill and we all must do everything we can to ensure that this tax--which affects middle- and upper-middle class taxpayers--is addressed this year.

It would be nearly impossible to overstate the AMT issue in its importance and urgency. By the end of the decade, the AMT will ensnare more than 30 million taxpayers, the majority of which will have incomes below $100,000, and the National Taxpayer Advocate at the IRS has identified the alternative minimum tax as the most serious problem facing individual taxpayers.

Here are a few statistics I want to reinforce for my colleagues, which I mentioned on the floor earlier this month:

The year 2006 is the tipping point for the AMT, as the number of taxpayers affected nationally will explode from 3.6 million to more than 20 million, if the Congress fails to act;

A family with two children will become subject to the AMT at about $67,500 of income in 2006; and a family with five children will start owing AMT at about $54,000 of income this year, if the Congress fails to act;

In 2004, only 6.2 percent of families earning $100,000 to $200,000 a year were subject to the

AMT, and that number will explode to nearly 50 percent this year, if the Congress fails to act; and

Starting in 2008, the average married couple with two children earning $75,000 or more will find that more than half of the tax cuts they have been expecting from the various laws passed since 2001 will be taken back via the AMT, if the Congress fails to act.

If AMT relief is extended through 2006, about two-thirds of the benefits will be realized by families earning under $200,000, with more than half of the total benefits going to families with incomes between $100,000 and $200,000. In New York and many other States, particularly in or near major cities, a combined income of $100,000 or $150,000 does not make you rich.

Contrast this with the tax relief for dividends and capital gains, where more than half of the total benefit goes to families with income over $1 million. This is more than 50 percent of the benefit going to less than one-half of one percent of all taxpayers in the country.

It was for these reasons that 73 Senators voted earlier this month to support a sense-of-the-Senate resolution that AMT relief should be a higher priority for this Congress than a dividend and capital gains tax cut. The American people now expect us, and our conferees, to follow through on that pledge.

When you consider the statistics I mentioned, about who will become subject to the AMT this year if we fail to act, it becomes pretty obvious that addressing the AMT problem--or extending the college tuition tax cut--should be far more important than extending a tax cut on investment income that doesn't expire for nearly 3 more years. That is common sense, and it is an entirely separate question from who benefits from which tax cut, or what your ideology may be.

In conclusion, we need a bill back from conference that mirrors the previous Senate versions of reconciliation. We passed a bipartisan bill that excluded the dividends and capital gains cuts and provided generous AMT relief for 2006. That bill passed the Senate with 64 votes. Two weeks ago, a modified version of the bill received 66 votes. I strongly encourage our conferees to bring a similarly bipartisan bill back from conference.

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