Baucus Budget Amendment Will Cut Taxes For Families, Remember America’s Military Men And Women
Finance Chairman says budget surplus should provide responsible tax relief to millions
Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) today
detailed his plans to cut taxes for America’s working families, and particularly for the
nation’s military men and women, using surplus funds in the Senate budget proposal. As
the Senate debates the budget, Baucus will advance an amendment totaling more than
$300 billion to extend important tax cuts for working families, including a tax credit
provided for each child in a family and relief from the joint-filing penalty paid by
America’s married couples. Baucus’s amendment also provides several billion dollars in
fully paid-for tax relief to members of America’s military, including a provision allowing
combat pay to count toward eligibility for the earned income tax credit – a refundable
federal income tax credit that puts cash in the hands of low-income working individuals
and families. Additionally, Baucus’s amendment will allow millions more Americans to
deduct property taxes on their Federal returns.
“Any money left over in the budget should go back to America’s working families,
and we should also move now to help the military men and women giving their all
for this country right now,” Baucus said. “This amendment cuts taxes for all
taxpayers – particularly married couples, parents, and soldiers – and ensures that
all American homeowners get the tax relief they need. And we’re paying for it with
funds saved through fiscal responsibility. This tax relief for working families and
for military folks is right for Montana and right for the whole country.”
Baucus’s Finance Committee has jurisdiction over U.S. tax policy. Specifically, his
amendment uses surplus funds to provide:
- permanent extension of the 10 percent income tax bracket
- permanent extension of the increased refundable child tax credit, with additional eligibility for lower-income Americans
- permanent marriage penalty tax relief
- permanent extension of the tax credit for child care expenses
- permanent extension of the increased adoption tax credit
- permanent extension of 2009 estate tax law, including rate and exemption level
To help American homeowners improve their family finances, the Baucus amendment
also provides a first-of-its-kind standard deduction for property taxes for those Americans
who do not itemize on their Federal tax returns. An estimated two-thirds of American
taxpayers do not itemize. This amendment will make homeowners who do not itemize
eligible for a property tax deduction of $500 for single filers and $1000 for married
couples filing jointly.
Also included are the provisions of Baucus’s 2007 “Defenders of Freedom Act,”
• A permanent allowance for soldiers to count their non-taxable combat pay when
figuring their eligibility for the earned income tax credit, a refundable federal
income tax credit that puts cash in the hands of low-income working individuals
• A tax cut for small businesses when they continue paying some salary to members
of the National Guard and Reserve who are called to duty.
• An end to cumbersome rules for reporting of income when companies continue
paying some salary to members of the National Guard and Reserve who are called
to duty. This makes it easier for reservists to file their taxes and simpler for
employers to keep contributing to those employees’ retirement plans.
• The ability for active duty troops to withdraw money from retirement plans, and
an allowance of two years to replace the funds without tax penalty.
• Extension of a provision that gives retired veterans more time to claim a tax
refund on some types of disability benefit payments.
• Authority for the IRS to treat gifts of thanks from states to veterans—such as
payments of excess state revenue—as nontaxable gifts.
• A permanent extension of a provision that gives intelligence service employees a
longer period of time to meet residency requirements necessary to exclude profits
from the sale of their home from capital gains tax, which is often necessary due to
frequent deployment. In the legislation passed today, this provision is also
extended to members of the Peace Corps.
• Permission for a soldier’s basic housing allowance to be excluded when their
income status is being determined for purposes of a developer’s eligibility for
low-income housing credits and tax exempt bonds.
• The ability for families of Reservists killed in the line of duty to collect life
insurance and other benefits provided by the civilian employer (Included in H.R.
• A permanent allowance for all veterans to use qualified mortgage bonds to
purchase their homes.
• The ability for families of soldiers killed in the line of duty to contribute up to 100
percent of survivor benefits to retirement savings accounts or to education savings
• A 180-day period for Reservists called to active duty to use unspent funds in a
health flexible spending account or cafeteria plan.
While surplus budget funds cover the cost of most of the Baucus provisions, military tax
relief is paid for with four additional offsets. The bill makes certain that individuals who
relinquish their U.S. citizenship or long-term U.S. residency pay the same Federal taxes
for appreciation of assets, such as stocks or bonds, which they would pay if they sold
them as U.S. citizens or residents. It also increases the penalty for entities failing to file
required information returns. Another offset allows reservists returning from a tour of
duty to opt back into a civilian employer’s health insurance plan. Finally, the package
allows the Social Security Administration and the Veterans’ Administration to work
together to verify low-income status when distributing veteran’s benefits.
To help families along America’s Gulf Coast continue to rebuild after Hurricane Katrina,
the Baucus amendment also keeps those families from being hit with extra taxes when
they take state grants to help rebuild their lives.
Under the amendment, any surplus budget funds remaining are to be designated for tax
relief as well.
Legislative text and additional information on the Baucus budget amendment will be
posted at http://finance.senate.gov as it becomes available.
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