On September 23, the House approved, 339-65, the conference report for a bill (H.R. 1308) that extends a number of tax credits included in the 2001 Economic Growth and Tax Relief Reconciliation Act (P.L. 107-16) that are set to expire on December 31, 2010. The Senate also approved the conference report by a vote of 92-3 on September 23. It will now go to the White House for President Bush’s signature.
In 2003, Congress approved a tax package (P.L. 108-27) that temporarily accelerated the implementation of the tax cuts in the 2001 law (see The Source, 5/23/03).
The conference report extends the $1,000 child tax credit for five years through 2009. The measure also accelerates to 2004 the 15 percent refundability rate.
On May 20, the House approved a bill (H.R. 4359) that would have made permanent the $1,000 child tax credit, but the Senate did not act on the legislation (see The Source, 5/21/04). The measure also would have increased the amount of income a taxpayer could earn before the credit begins to phase out from $75,000 to $125,000 for single taxpayers and from $110,000 to $250,000 for married couples. This provision was not included in the conference report.
The conference report extends tax relief for married couples through 2010. Under current law, the standard deduction for married couples is twice that of single taxpayers.
On April 28, the House approved a bill (H.R. 4181) that would have made permanent the marriage tax penalty relief provisions in the 2001 and 2003 tax laws, but the Senate did not act on the legislation (see The Source, 4/30/04). The measure also would have made permanent provisions in the law that increase the beginning and ending points of the earned income tax credit (EITC) income phase-out for married couples filing jointly by $1,000 in each of years 2002, 2005, and 2008.
The conference report extends through 2010 the 10 percent bracket’s income limits that were included in the 2001 law. Under current law, the 10 percent tax bracket includes the first $7,000 of income for an individual and the first $14,000 of income for married couples filing jointly.
On May 12, the House approved a bill (H.R. 4275) that would have extended indefinitely the 10 percent bracket’s income limits, but the Senate did not act on the legislation (see The Source, 5/14/04).
The conference report extends alternative minimum tax (AMT) relief for one year through 2005. Under current law, the AMT exemption is $40,250 for single taxpayers and $58,000 for married couples.
On May 5, the House approved a bill (H.R. 4227) that also would have extended the AMT relief for one year, but the Senate did not act on the legislation (see The Source, 5/7/04).
The conference report extends a $2,400 tax credit for employers who hire individuals currently receiving welfare or food stamp benefits. The measure also provides a credit for employers of individuals who are recipients of long-term family assistance. Finally, the conference report extends an “above-the-line” tax deduction for teachers for the first $250 of out-of-pocket spending on school supplies.
During consideration of the bill, Rep. Tom Reynolds (R-NY) stated, “We all know the unfortunate hits America’s economy has suffered over the past several years. But through the strength of this administration and the will of this Congress, we have made great strides in recovering from horrific terrorist attacks, corporate scandals and a recession. Time and time again, this Congress has responded to adversity with sound economic policies that continue to grow our economy. Thanks to the Economic Growth and Tax Relief Act and the Jobs and Growth Tax Relief Act, we have given taxpayers in my district and all across America greater control over their hard earned dollars. Not only does this provide greater motivation for savings and investment, but it also protects and creates jobs. The Working Families Tax Relief Act before us today is yet another step in our plan to create a fair and reasonable tax system for hard-working Americans and continue the path of new job creation.”
Rep. Rosa DeLauro (D-CT) disagreed. “Today we prepare to pass what this majority has called ‘The All American Tax Relief Act.’ But that name masks the fact that the Republicans are, in fact, increasing the taxes on 4 million working Americans. If I could make reference to the prior speaker, these are 4 million people who are getting their taxes increased. Because the House Republican leadership refused to lower the income threshold for the child tax credit, 9 million children are being deliberately left out of the tax relief that is included in this legislation.” She added, “The eligibility level for the child tax credit will rise to $11,000 next year. So a family making $10,000 that qualifies now will be in for a rude awakening on April 15. They will not qualify. And because household income has actually declined by more than $1,500 under this administration, many families whose income taxes have gone down in the last 4 years will see their child tax credit shrink or even disappear next year because of this bill. So much for no new taxes.”
Arguing that the conference report will provide tax relief for low- and middle-income working families, Sen. Blanche Lincoln (D-AR) stated, “Workers are concerned about their job, whether they are going to keep their job. Maybe they have lost their job. Workers are certainly looking at what they are responsible for, such as can they pay for what their children’s needs are, the taxes, the cost of gasoline, the expensive cost of health care. They are concerned about the availability of health care, access to it. They are looking at all of those concerns, including the unbelievable increase they have seen in higher education. Are their children going to be able to go to college? Can they put aside enough money for that? Will there be the resources they need?” She added, “Our working families are under unbelievable stress. If we want to strengthen families and, in turn, strengthen the fabric of our Nation, we have to work together to relieve some of that stress through the Tax Code, although lowering the tax responsibility of low- and middle-income working people and giving them the same ability to utilize the Tax Code for the benefit of supporting their families.”
Sen. Olympia Snowe (R-ME) was one of only three Senators to vote against the conference report on H.R. 1308. Explaining her position, she stated, “Let me say I support the policy underlying the tax measures contained in this conference report. What I find regrettable, however, is that we are…faced essentially with a choice between these tax reductions and fiscal responsibility when, in fact, we could have achieved both.” She added, “We have before us a tax package that will directly add $146 billion to the Federal deficit. Why? Because the 2003 tax package sunset[s] after one year rightfully popular measures of benefit to middle-class and lower-income Americans that also provided short-term stimulus. As a result, here we are, about to enact 5 years of $146 billion in tax reductions over and above the $350 billion we passed last year when we could have provided for 5 years of these same, worthy tax cut measures with last year’s $350 billion package…Fiscal responsibility and reducing taxes do not have to be mutually exclusive goals. Yet, unfortunately, what is before us today is a $146 billion bill none of which is paid for.”
