Working Families Tax Relief Act of 2004 - Conference Report

CONGRESSIONAL RECORD
SENATE
Sept. 23, 2004

WORKING FAMILIES TAX RELIEF ACT OF 2004-CONFERENCE REPORT

Mr. GRASSLEY. I yield myself such time as I might consume.

The conference on H.R. 1308 brings to the Senate for consideration the Working Families Tax Relief Act of 2004. This is a product of the cooperative efforts that Senator Baucus and I have had on a lot of legislation, and even though there were some differences of opinion within the conference, for the most part, many parts of this bill are things on which we mutually agree. There are some parts included that we might not agree on, but it doesn't keep us from getting it to finality.

I thank Senator Baucus for his cooperation as the leader of the Democrats on the Finance Committee and helping us get this bill to where it is.

First, we are here in a great part as well due to a determination of the President of the United States and his enunciation of a very clear tax policy that goes back to the year 2001. In fact, it goes back to probably before he was sworn in as President of the United States. This President saw that the economy was in an economic free fall in 2000. As you recall, in March of 2000, the NASDAQ started to lose half of its value, which it did. You also will remember that during that year the manufacturing sector started a 44-month slide.

The President knew these things were going on, so even before he was sworn in as President of the United States, he had a tax policy that was ready to go to stimulate the economy. So we passed that in 2001.

We added to it and sped it up a little bit in 2003 to bring about the rejuvenation of the economy that we now have. As an example, we have had 13 months of economic growth in employment, with 1.7 million new jobs created, and I think it will go on. So we are seeing the impact of the President's tax policies going back to that particular time.

What we are dealing with here is a conference committee report that will ensure that the tax reductions made in 2001 and 2003 stay as tax cuts, and that the benefit that working men and women get from that and the benefit that the economy has gotten from that by being rejuvenated with enhanced employment will not turn sour and our working men and women have to pay higher taxes starting next year because provisions of the Tax Code sunset.

Under that scenario, a sunset of tax legislation means there would otherwise be a big increase in taxes to working men and women starting automatically on January 1 of next year, hence, this legislation, to make sure those sunsets do not occur, and we do not have automatic increases without a vote of Congress on the working men and women.

Those tax increases would be an unacceptable position to take, plus there is the injustice to working men and women, and we might be pulling the plug on the revival of the economy that the tax reductions of 2001 and 2003 brought to the economy.

Raising a family is always a struggle, and the last thing they need to do is to send more money to Washington. That money can certainly be better spent by mothers and fathers closer to home for lots of purposes. It could be helping educate a child, buying a better health insurance program, or allowing a parent to spend more time with their son or daughter at home instead of having to work an extra shift.

This basic package from the conference contains several key elements. One is extending the child tax credit and the marriage penalty relief for the 10-percent and 15-percent bracket. These provisions will now be in effect through the year 2010, accelerating the 15-percent refundability for low-income families starting this tax year. This is of particular importance to low-income families. Without doing this, there would be some disincentive to work.

Our policy in this country since 1996 has been to move people from welfare to work because people on welfare are in a lifetime of poverty, and the only way to move them from that situation is to encourage them into the world of work, and being in the world of work, they have an opportunity to move up the economic ladder. But there are some tax policies that discriminate against that. One of those is the regressivity of the payroll tax and even the hindrance of childcare, as an example.

What we do is reduce, not eliminate, the regressivity of the payroll tax so that is not a disincentive for people to go to work; that they know if they go to work, they are going to have more in the world of work than they may in some other lifestyle.

We also do an important simplification in the administration of the uniform definition of a child. Prior to this conference report, the Tax Code would have several different definitions of a child. Not only doesn't that make good legal and public sense, but it is also complicated. We bring uniformity to public policy, but we also bring some simplification to the Tax Code.

Then we also expand the earned-income tax credit and the child credit benefits for military serving in combat zones. We provide alternative minimum tax relief for millions of Americans in the year 2005. These are people who would be hit by the AMT who were never intended to be affected by the AMT. In fact, already there are more people hit by the alternative minimum tax than was ever intended when it was instituted in 1969.

Remember, in 1969, it was instituted to make sure that some Americans, high-income Americans, and maybe also wealthy Americans who took advantage of every tax loophole they could take advantage of to wipe out any payment of any tax whatsoever, would make some contribution based on their success to the Federal Treasury so that everybody in our society was manning an oar in this effort to make our economy and our Government go.

Mr. President, do you know what is happening with AMT because it was not indexed back in 1969? It is beginning to hit a lot more wealthy people than it was ever intended to hit, hitting people who do not take advantage of every tax loophole and are still paying a lot of tax and being hit by the alternative minimum tax.

We are not doing a heck of a lot to help those people who have already been hit, but we are setting up a situation so that situation does not get worse. But to some extent we are putting off the inevitable. If we do not do something about this-and I take some responsibility for not doing enough, although I do remind people who are watching, and my colleagues, that in 1998, I did vote for a bill that did away with the alternative minimum tax totally. It went to President Clinton, and President Clinton vetoed the bill.

At that time, it would have been the ideal time to take care of it. But soon, instead of hitting 3 or 4 million Americans, it is going to be hitting 20 to 30 million Americans, and pretty soon it is going to be hitting the middle class, and it is going to be punitive to the middle class. Somewhere along the line, we have to adopt a policy that realizes that the consequences of our tax policies are hurting people we never intended to hurt, and if we want a stable society, we never want to hurt the middle class.

I know there are a lot of people in this body who believe if we make any changes in tax policy whatsoever, we have to offset it dollar for dollar. For every reduction we make, there is a $1 increase in somebody else's taxes to make it up.

It is almost impossible to do that with the alternative minimum tax. We ought to decide sometime that something has gone wrong and correct the wrong, save the middle class, and not worry about offsets because people who will be paying the tax were never intended to pay the tax, and it does not make sense to tax them. But that is happening through the alternative minimum tax.

What do we do in this bill? We delay for 1 year finding a permanent fix to this situation. By doing it, we are not hurting any more people at least.

Finally, there is a provision in this bill to extend current law on several expiring tax provisions. In regard to these retiring tax provisions, I know there is frustration for some of my colleagues, particularly in the area of expanding the R&D tax credit. In order to reach agreement, my counterparts on the Ways and Means Committee and I agreed that these extenders should be a clean 1-year extension. This had the solution of making no one happy, either in the Congress or in the economic sectors that are impacted by these tax provisions.

The House of Representatives had to accept extenders they did not want, as did we in this body, but it resolved the issue and allowed us to go forward.

I want my colleagues to know that I am committed to working with them on this issue and on other extender-related issues in the JOBS bill that hopefully now will go to conference.

We are going to be able to turn our full attention to the issue of the JOBS bill, which passed this body 3 or 4 months ago by 92 to 5. With the conclusion of this legislation, we are going to be able to work on that and hopefully complete it prior to leaving this October.

This bill provides great tax relief to millions of working families, and I commend President Bush for his leadership in making these proposals a reality.

One thing I need to explain to my colleagues, the President was hoping to get this done in July. Way back in the early winter, I decided the best time to take up this tax bill was now in September. I thought it would be easier to do, and I think the way it is working out it is easier to do.

I tried to respond to the President's inquiries to me about moving this in July, and I came up at that point not with a 5-year extension but with a 2-year extension because at that point we could get bipartisan movement and move it through. The White House did not want just a 2-year; they wanted the 5-year. I could not get the 5-year in July. So we dropped everything and then went home for our summer break during August and the two political party conventions and now we are back doing this.

Senator Frist and I were called down to the White House in July to visit with the President about this issue. We had a meeting with the President, the Vice President, the chief of staff, and the chief congressional liaison. We discussed all these issues, and I presented the view to the President that I wanted to do this in September. He made the point he wanted to do it in July. I said I will try to do it in July, but, I said: Mr. President, there is also another issue connected as well, and that other issue is the JOBS bill. The JOBS bill is to create jobs in manufacturing. It also corrects a decision that the World Trade Organization made about our export tax laws. Everybody understands we have to do this.

I was presenting to the President at that particular meeting in July the necessity of getting this bill passed and how important it was, but that we had not heard a whole lot out of the White House about the JOBS bill. The President told me in July: Get this extension for me and then we will concentrate on the JOBS bill. We referred to it as FSC/ETI and he referred to it as FSC/ETI as well.

So I hope now that we are delivering on this bill the President asked for, albeit 2 months late, that the President will keep his commitment to me to get the White House behind our JOBS bill, the FSC/ETI bill. That is what I heard him say. I think the President will keep his word to me and we will maybe now hear from the White House on the importance of the JOBS bill.

I yield the floor.