Senate Approves Grassley-Baucus Tax RELIEF Act
WASHINGTON – The Senate today passed legislation to provide substantial tax relief overthe next decade to Americans across the income spectrum. The landmark measure provides thebiggest tax cut in 20 years; it came from the Committee on Finance, led by Sen. Chuck Grassley, thechairman, 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 father 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 Restoring Earnings to Lift Individuals and Empower Families(RELIEF) Act of 2001 on a vote of 62 to 38. The final bill is nearly identical to the measure passedby the Committee on Finance last Tuesday. After days of debate, the Senate didn’t adopt anyamendments that substantially changed the legislation. A group of non-controversial proposalsidentified through the amendment process and reviewed by Grassley and Baucus were included ina manager’s amendment as part of the final passage.
The bill immediately will go to a House-Senate conference committee that will iron out thedifferences between the Senate- and House-passed tax relief measures. Senate leaders hope to havethe conference committee’s work completed by Friday, with a bill on President Bush’s desk byMemorial 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. TheRELIEF 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. The tax bill refunds only 24 cents of each dollar of theprojected surplus.
< 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. This bill creates a new 10-percent ratethat will apply retroactively to the beginning of this year. This new low rate will apply toincome that is currently taxed at a 15 percent rate. That means people who are hit first bythe 15 percent rate will know that going back to January 1 this year, they’ll pay 10 percent,not 15 percent, on their first taxable dollars after deductions. That will give immediate taxcuts to millions of Americans. It also will provide an immediate stimulus to the economy.
For married persons, the upper end of the 15 percent rate bracket will be expanded to includeincome currently taxed at the 28 percent rate. So for those people being taxed at 28 percent,they’ll see more of their income taxed at the 15 percent rate. The current 28 percent rate willdrop to 25 percent. The current 31 percent rate will fall to 28 percent. The existing 36percent and 39.6 percent rates will be lowered to 33 and 36, respectively.
< Immediate death tax relief and eventual death tax repeal. This recognizes that deathshouldn’t be a taxable event.
< Expanded child credit. The bill embraces President Bush’s proposal of expanding the childcredit to $1,000. It also includes a new proposal that will allow the child credit to benefitworking families that would n’t otherwise receive the child credit under current law becausethey have too little or no income tax liability.
< Marriage penalty relief. The package gives income tax relief to married couples with bothspouses working as well as only one spouse working. This relief will begin in 2005.
< Retirement savings. The legislation allows Americans to save more money in theirretirement plans. It provides a special incentive for low- and middle-income savers. Itencourages employers to offer pensions.
< Education savings. These steps include removing the limitation on the deductibility ofstudent loan interest and raising the amount that can be contributed to an education savingsaccount from $500 to $2,000.
Grassley said the bill’s tax cuts are phased in to accommodate how much budget surplusprojections will allow. He said he would have preferred even deeper cuts. “But the budget blueprintlimits how much we can cut each year,” Grassley said. “And the federal tax burden is a big, meanbeast. It wasn’t grown overnight, and it can’t be tamed in a day.”
Grassley said President Bush deserves credit for his leadership on tax relief. “President Bushplanted the seed of tax cuts as candidate Bush, months ago,” Grassley said. “With cultivation inCongress, his seedling has thrived. Today, the Senate helped to decide whether Americans will reapa harvest of tax relief.”
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