Senate Puts Baucus Tax Cuts in Budget for Families, Homeowners, American Soldiers
Finance Chairman’s amendment extends marriage penalty relief and tax credits for families with children, creates tax cuts for members of military and homeowners, and stops spike in estate tax rates
Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) today won
overwhelming Senate passage of his plan to cut $340 billion in taxes for America’s working
families, and particularly for the nation’s military men and women. A Baucus amendment to
the Senate budget extends a number of 2001 tax cuts that help 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 includes fully paid-for tax relief to members of America’s military, including a provision allowing combat pay to count toward a refundable federal income tax credit that puts cash in the hands of low-income working individuals and families. Baucus’s amendment also makes available a new standard deduction for property taxes to more than 28 million American homeowners.
“Times are tight for a lot of parents, for a lot of homeowners, and certainly for the men and women serving our country overseas. Plain and simple, America’s working families need these tax cuts,” Baucus said. “The tax cuts in my amendment will help married couples, moms and dads, and all our military folks, as well as homeowners who could use some tax help too. With this vote, we’re doing what’s right for Montana and for states across the nation - sending extra budget dollars back to the folks who need them most.”
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, resulting in savings for every taxpayer – average $498
- permanent extension of the increased refundable child tax credit, with additional eligibility for lower-income Americans, saving 31.3 million Americans an average $1,025
- permanent marriage penalty tax relief, saving 29.5 million American couples at an average of $686 per year
- permanent extension of the tax credit for child care expenses
- permanent extension of the increased adoption tax credit
The amendment also provides an extension of 2009 estate tax law, including rate and
exemption levels. This will stop a 2011 spike in estate tax rates and protect tens of thousands
of Americans from paying the estate tax at all. Baucus favors the full repeal of the estate tax.
To help more of America’s 72 million homeowners access tax relief, the Baucus amendment
also provides a new standard deduction for property taxes for those Americans who do not
itemize on their Federal tax returns. Under the Baucus plan, approximately 28.3 million
property taxpayers who do not itemize would be 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 military tax relief bill, the “Defenders of
Freedom Tax Relief Act,” including:
• 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 and families.
• 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. 3997).
• A permanent allowance for all veterans to use qualified mortgage bonds to purchase
• 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 Hurricanes Katrina and
Rita, the Baucus amendment also keeps those families from being hit with extra taxes when
they take state grants. The amendment will ease tax burdens on homeowners who claimed a
casualty loss deduction following the 2005 hurricanes and who have also received a state
Road Home rebuilding grant.
Under the amendment, any surplus budget funds remaining are to be designated for tax relief
For more facts and figures on the Baucus amendment and its help for American taxpayers, see the Senate Finance Committee report, “Tax Cuts for Families, Homeowners, and Soldiers,” at http://finance.senate.gov/.
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