On December 8, the House approved, 234-197, a $55.6 billion tax bill that would extend a number of expiring provisions in the 2003 tax law (P.L. 108-27). The House Ways and Means Committee approved the measure on November 15 (see The Source, 11/21/05). The Senate approved a similar $60 billion tax cut bill (S. 2020) on November 18. A House and Senate conference committee will now meet to work out differences between the two bills.
During consideration of the bill, the House rejected, 192-239, a Democratic substitute offered by Rep. Charles Rangel (D-NY) that would have extended for one year only those tax relief provisions that are due to expire at the end of 2005. They include the welfare-to-work and work opportunity tax credits and the qualified zone academic bonds. The substitute would have eliminated all two-year extensions contained in the bill, including the saver’s credit for low-income workers and the reduced tax rates on capital gains and dividends. In addition, the substitute would have eliminated the individual tax liability under the alternative minimum tax (AMT) for incomes below $100,000 for individuals and $200,000 for married couples.
Arguing that the reduced tax rates on capital gains and dividends would benefit only wealthy Americans, Rep. Rangel stated, “What we [Democrats] refuse to do is to give tax cuts that would extend the deficit. We do not do that to generations that follow. Nor do we hit the poor who are sick or the kids that want to go to school or the foster kids or those kids that are dependent on money from their fathers who have abandoned their mothers. We do not do it in this season, nor do we do it anytime, because there is a difference in what we believe in.” He added, “I am suggesting this: if Members support the substitute, you are supporting deductions for State and local taxes, real estate taxes, the deduction for college tuition, the research credit they [Republicans] talk about that we agree is so important, the work opportunity tax credit, tax incentives for the District of Columbia and for Indian reservations, 15-year depreciation periods for leasehold improvements and restaurant improvements, qualified zone academic bonds, the brownfields cleanups, and several other important, but minor, provisions.”
Rep. Melissa Hart (R-PA) expressed her opposition to the Democratic substitute, stating that the proposal “actually does not continue some very important provisions for low-income Americans. It does not extend a saver’s credit, which actually allows a match for savings for poorer people by the government. Their substitute does not include an expensing provision for small businesses that allows them to use more of their money instead of sending it to the government so that they can grow their business and create jobs. It does not allow a provision that provides tax benefits to those who clean up brownfields sites to encourage new job creation in some of our older towns. It does not include the most important provision, which is the reduced rate on capital gains and dividends that has created all these new jobs.” She presented a chart that showed job growth before and after the 2001 tax bill was enacted, explaining that when Congress reduces the tax rates on capital gains and dividends “businesses save more of their money, reinvest, [and] create jobs…Across the board we created almost 150,000 jobs a month as a result of a provision that the Democratic substitute would cancel.”
Prior to the final vote, Rep. Rangel offered a motion to recommit that would have extended AMT relief for one year through 2006. The House approved an identical bill (H.R. 4096), 414-4, on December 7, but Democrats explained that it was necessary to add the provision to the larger tax bill because it was unlikely that the Senate would consider H.R. 4096 before Congress adjourned for the year. The motion failed, 193-235.
