Roth Opening Statement on the Taxpayer Refund and Relief Act of 1999
WASHINGTON -- The Senate Thursday began debate on the joint conference agreement of H.R. 2488, the Taxpayer Refund and Relief Act of 1999. Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) delivered the following statement on the floor of the Senate:
""Mr. President, the fundamental question before Congress these past few weeks -- as we have debated the Taxpayer Refund Act of 1999 -- is quite simple: Is it right for Washington to take from the taxpayer more money than is necessary to run the government? The issue of tax relief isn't any more complicated than that. And the outcome of the conference between the Senate and House makes it clear that we believe government is not automatically entitled to the surplus that is in large part due to the hard work, thrift, and risk-taking of the American people.
"Individuals and families are due a refund, and that -- Mr. President -- is exactly what we do with this legislation; we give the people a refund. And we do it in a way that is fair, broad-based, and empowering.
"We do it in a way that will benefit nearly every working American, a way that will help restore equity to the tax code and provide American families with the relief and resources they need to meet pressing concerns. This tax refund legislation will help individuals and families save for self-reliance in retirement. It will help parents prepare for educational costs.
"It will give the self-employed and under-insured the boost they need to pay for health insurance. And it will begin to restore fairness to the tax code by addressing the marriage tax penalty.
"How do we accomplish all of this?
"We begin by reducing all marginal income tax rates by a point. In other words, the 15% tax bracket will drop to 14%, and the 39.6% top rate will drop to 38.6. The new 14% bracket will be extended upward to include millions of Americans who are now paying taxes in the 28% bracket.
"These changes will benefit individuals and families across the economic spectrum. For example, an individual with $40,000 of income will save over $700. An individual earning $50,000 will save over $800. And under this bill, a taxpayer with $70,000 of income will save over $1,000. This is significant tax relief, Mr. President. When fully phased in, a middle-class family of four, with an adjusted gross income of $80,000, will save almost $3,000 a year.
"A family of four with an AGI of $130,000 will save almost $3,500 a year. This is real savings, money that can be used by individuals and families to meet the pressing needs and objectives in their lives.
"To restore equity to the tax code, this legislation also meets a bipartisan objective by providing relief for the marriage tax penalty. It does this by doubling the standard deduction and 15% tax bracket for married couples filing jointly. We can all agree on how important this is, Mr. President.
"For too long, husbands and wives who have worked and paid taxes have been penalized by their dual incomes. This plan will address that inequity by giving working married couples greater relief. For example, two individuals -- each making $35,000 a year -- face a penalty of almost $1,500 when they marry. Under this legislation, that penalty will be addressed in two ways -- first, by doubling the standard deduction; and, second by doubling the 15% tax bracket to include their combined income.
"The marriage penalty relief offered in this bill retains the Senate position on the amount of relief received, and it even provides relief for people receiving the Earned Income Tax Credit.
"To help families with their education expenses, the legislation before us allows taxpayers to increase their contributions to Education IRAs, or what will -- under the provisions of this bill -- be called Education Savings Accounts. Allowable contributions will rise from $500 to $2,000 annually.
"And these funds will be available to meet expenses for all students, from kindergarten through college. Beyond increasing the level a family can save for education, this tax relief act also makes interest earned on qualified state and private school higher education tuition plans tax free. It extends employer-provided educational assistance for undergraduate studies, and it repeals the 60-month rule on student loan interest deductions. This will allow individuals to claim tax deductions on interest that they pay on their student loans, without the imposition of a time limit.
"To help families meet health care and long-term care needs, this legislation provides a 100% above-the-line deduction for those who pay more than 50% of their health insurance premiums. This, of course, includes the self-employed. The plan also provides an additional personal exemption for those who care for an elderly relative in their home.
"As you can see, Mr. President, this legislation is empowering; it addresses concerns that are vitally important in the lives of our families, coast to coast. It provides across-the-board tax relief. It addresses the marriage tax penalty.
"It makes education more affordable for all students -- kindergarten through college. And it helps our families meet their health care and long-term care needs. But it doesn't stop here; it does much more.
"The legislation before us phases out the Alternative Minimum Tax. It provides capital gains tax relief, simplifying the rate structure, and reducing the individual capital gains tax rate from 20% to 18%, beginning with the current 1999 tax year. For those individuals taxed at the lowest individual rate, their capital gains tax rate is reduced from 10% to 8%.
"In addition, the tax basis of certain assets may be increased by an "inflation adjustment," so that any capital gain attributable to inflation is not subjected to tax. Also, we have maintained the 2% capital gains rate differential that is imposed on long-term capital gain from depreciable real estate, by reducing that rate from 25% to 23%.
"Another very important measure is the treatment of estate taxes. This legislation completely phases out and ultimately repeals the federal estate, gift, and generation skipping taxes. It also corrects technical problems in the House provision.
"Each of these, Mr. President, will be a powerful tool in the hands of taxpayers and families who will use these changes -- this relief -- to meet the needs that are unique to their situation. However, a couple of major provisions in this bill that I would like to outline in some detail will -- like the across-the-board rate cut -- benefit everyone, enabling individuals and families to prepare for self-reliance and success in retirement. These, of course, include the expansion of Individual Retirement Accounts and pension programs.
"Under the bill, IRA contribution limits will be increased over the next seven years until they reach $5,000. And taxpayers who are close to retiring will be allowed to make catch-up payments in their plans. These changes will be incredibly beneficial. For example, an individual without an employer provided pension plan, who contributes the maximum amount allowable, as it increases over the next seven years -- with the magic of compounding interest -- will be able to put away over $31,000 for retirement. In year seven, and beyond, he or she will be able to put away the full $5,000 annually.
"With the catch-up provision -- applicable for people over the age of 50 -- if those seven years pass just prior to the taxpayer's retirement, the amount he or she could save in those seven years under this bill would be over $44,000. This bill also increases the income threshold for those who can take full advantage of Roth IRA accounts up to $200,000 for a couple filing jointly.
"For employer-provided plans, this bill increases the maximum amount an individual can contribute to a 401(k) plan, a 403(b) plan or a 457 plan. Starting next year, an employee may contribute up to $11,000 to his employer's 401(k) plan. In each year thereafter, he could contribute increasing amounts to his 401(k) and in 2005, he will be able to contribute a full $15,000. To show you how empowering this is, if John, a 35-year-old, contributes the maximum amount allowable over the next 30 years, his 401(k) plan benefit at retirement would increase by over $1.2 million.
"In addition, if John's employer established a newly added Plus Account program under its 401(k) plan, that amount would be non-taxable when John receives it at retirement. The Plus Account program -- as addressed in this bill -- lets an employer establish an account which has the same tax treatment as a Roth IRA. That means that John would have over $1.2 million in non-taxable income!
"Finally, Mr. President, this bill gives small businesses a new incentive to establish a retirement plan for their employees. The contribution limits for a SIMPLE plan -- a defined contribution plan only for small businesses -- have been increased in this bill to encourage small business owners to establish such plans. The incentive to establish a SIMPLE plan is easy to understand. Small business owners who offer SIMPLE plans will be able to save up to $10,000 in the plans they establish.
"This will be a great benefit to them, but in order to save their own money -- as part of the SIMPLE plan -- they will have to provide their employees with a contribution to their own plans of up to 2% of their salary. At the same time, under this plan, the employees could also receive a matching contribution from their employer of up to 3% of compensation if they decide to contribute to the SIMPLE plan.
"This is good policy, Mr. President. It will encourage Americans to take advantage of these opportunities and provide for their retirement futures. As with most every provision in this Taxpayer Refund Act, the catalyst is the individual and family -- using tax relief to meet their needs.
"Every measure I've outlined as part of the Taxpayer Refund Act of 1999 is important, as each rightfully returns resources that Americans can use to meet their needs; and the refund being offered comes from surplus funds.
"In other words, Mr. President, this broad-based tax relief package can be passed, signed into law, and still leave sufficient resources in Washington to take care of Social Security, Medicare reform, and other necessary government obligations. Let me repeat that. This broad-based tax relief package can be passed, signed into law, and still leave sufficient non-Social Security funds available to address comprehensive Medicare reform, including a prescription drug benefit. We can offer this relief and still pay down the debt and keep the budget balanced.
"We can do all this for one simple reason: the work, investment, and job creation achieved by Americans everywhere have succeeded in creating long-term economic growth. And as I have said before, it's not right that the reward for this success is that today our taxes are the highest percent of our Gross National Product than at any other time in post-war history. After paying for the government programs for which Congress has planned and budgeted, a refund from the surplus must now be returned to the taxpayer.
"I know there is wide agreement that Americans deserve relief. Mr. President, this is the bill that will give them relief. And we must support it. We must keep in mind that major tax cuts must be done through the reconciliation process. This is a lengthy -- time-intensive process. We have successfully completed it, and I am proud to say that this bill -- this conference report, as it stands today -- carries no provision that was not in either the House or the Senate bills. In other words, nothing extraneous was added in conference.
"It is clean and representative of the direction received by those who crafted the Senate and House bill. Frankly, I think this is a first in tax history. It represents a tremendous amount of work by our colleagues, members of the House, and the staffs in both chambers.
"Those who believe that we may be coming back to do this again in September are mistaken. This, Mr. President, is the tax bill for this year. We won't have a second chance on this.
"When we come back after recess, our time and attention will focus on Medicare reform -- a vital issue that concerns us all. And for those who are concerned that this major relief package just may be too big, please be reminded that there are important trigger mechanisms included in this bill. If we don't continue to reduce the payment on the interest on the national debt, then the tax relief included here will be reduced to compensate appropriately.
"The bottom line, Mr. President, is that this is tax relief that we can have confidence in. It meets the criteria we established before we began. It is fair; it restores equity to the tax code; it makes education more affordable; and it helps taxpayers prepare for self-reliance in retirement. This legislation will help families keep their homes, farms, and businesses safe from death taxes. And it makes health care more affordable. These are objectives that are shared by everyone. They are objectives that can be embraced by Senators and Congressmen on both sides of the political aisle. And I encourage my colleagues to vote for passage.
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