Grassley-Baucus Tax RELIEF Act Heads to the President
WASHINGTON – The Senate today gave final congressional approval to legislation that willprovide substantial tax relief over the next decade to Americans across the income spectrum. Thelandmark measure provides the biggest tax cut in 20 years; it came from the Committee on Finance,led by Sen. Chuck Grassley, the chairman, and Sen. Max Baucus, the leading Democrat.
“This bill will help struggling families make ends meet,” Grassley said. “It will help parentsand students afford a college education. It will let a son who finally earns a good paycheck afteryears of work to better provide for his aging mother. The ways to use this refund vary as much asthe number of households across America.”
The Senate passed the House-Senate conference report on the Restoring Earnings to LiftIndividuals and Empower Families (RELIEF) Act of 2001 on a vote of 58 to 33. The action camesoon after House approval and cleared the legislation for President Bush’s consideration. The finalmeasure was based on what the Committee on Finance passed on May 15. After days of debate, theSenate didn’t adopt any amendments that substantially changed the legislation.
Over the last few days, a House-Senate conference committee ironed out differences betweenthe Senate- and House-passed tax relief measures. The conference committee agreed on a packagelast night, clearing the way for final votes by the House and Senate. The final action meets Senateleaders’ goal to give President Bush tax cut legislation by Memorial Day.
Grassley said the RELIEF Act was built upon bipartisanship; consultation with manysenators, including all Finance Committee members; and the recognition that nobody in a 50-50Senate can get everything they want, but maybe a majority can get something they can support. Theconference report of the RELIEF Act includes:
< Affordable tax relief. The budget surplus is projected to exceed tax cuts every year coveredin this legislation, from 2001 to 2011, with a comfortable margin. The ratio of surplus to taxcuts gets bigger toward the end.
< Secure funding for national priorities. The budget resolution takes care of this. Thatblueprint provides record levels of funding for education, prescription drugs and defense.It pays down every dollar that is possible to pay down on the national debt over the 10 yearsof the budget resolution.
< Across-the-board cuts of individual income tax rates. It creates a new 10 percent rate andapplies it retroactively to Jan. 1 of this year. The Treasury Department will issue rebatechecks to American taxpayers to remit any excess taxes that have been withheld on their 10percent earnings earlier this year. The rebate checks will amount to $300 for individualtaxpayers, $600 for joint returns and $500 for heads of households.
The 28 percent, 31 percent and 36 percent rates will be reduced by three points over the nextseveral years. The first one point rate reduction will take effect on July 1, one month fromnow.
Grassley said the first rebate checks and immediate rate reductions will provide a stimulusthat the sluggish economy very much needs
In addition, the 39.6 percent top marginal rate will drop to 35 percent. While the bill doesn’tgo as far as the President and Grassley wanted, Grassley said the measure does address thehidden marginal rate increases caused by the current laws that deny deductions for personalexemptions and itemized deductions. Those laws will be repealed, thus eliminating thesehidden marginal rate increases and removing another complexity from the code.
< Marriage penalty relief for families in which both spouses work and in which only onespouse works.
< Death tax relief and eventual death tax repeal. This recognizes that death shouldn’t be ataxable event.
< Expanded child credit. The bill embraces President Bush’s proposal of expanding the childcredit to $1,000.
< Refundable child credit. The bill includes a new proposal that will allow the child credit tobenefit working families that wouldn’t otherwise receive the child credit under current lawbecause they have too little or no income tax liability. It will even go beyond offsetting theSocial Security payroll tax for lower income taxpayers.
< Retirement savings. The legislation includes the Grassley-Baucus legislation that allowsAmericans to save more money in their retirement plans. It provides a special incentive forlow- and middle-income savers. It encourages employers to offer pensions.
< Education savings. These steps include Grassley’s 12-year crusade to remove the limitationon the deductibility of student loan interest. The measure also raises the amount that can becontributed to an education savings account from $500 to $2,000.
< Adoption tax credit. This provision to encourage adoption is extended and expandedeffective 2003.
< Tax incentives for employers to provide child care to their employees.
< An expansion of the dependent care tax credit, which assists families facing the difficultiesof providing care for children and spouses with special needs.
Grassley said President Bush deserves major credit for his leadership on tax relief.“President Bush planted the seed of tax cuts as candidate Bush, months ago,” Grassley said. “Withcultivation in Congress, his seedling has thrived. Today, the Senate took the decisive step to ensurethat Americans will reap a harvest of tax relief.”
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