Baucus Floor Statement Regarding Unemployment Insurance
Mr. President, these days, the economy is foremost on Americans’ minds. And well it should be.
Two out of five Americans say that the economy should be our top priority. That’s more than twice as many as cite any other issues.
The unemployment insurance bill before us today helps to address the economy in several ways. In several ways, our legislation would help Americans to get and keep good jobs.
First, our bill would extend much needed unemployment benefits. This unemployment insurance relief would get money into the hands of people who need it. And it would get money to Americans who would spend it right away.
When we help unemployed Americans, we help their communities. When we help our unemployed neighbors, we also help to keep open the neighborhood grocery store, and the neighborhood gas station. When we help our unemployed neighbors, we also help to keep houses out of foreclosure. And when we help our unemployed neighbors, we also help our economy, and ourselves.
According to officials in my home state of Montana, if we do not pass this 14 week extension,then at least 7,000 Montanans will lose their unemployment benefits. That’s a significant number, when you consider the population in my state.
A report prepared in June for the Montana Manufacturing Center showed that nationwide, mmanufacturing employment fell from 13.8 million workers at the end of 2007 to 12.4 millionworkers at the beginning of 2009. That’s a ten and a half percent drop in a little more than ayear. And the decline nationwide was echoed in Montana, where manufacturing employmentfell eight percent.
In south?central Montana, logging and milling have slowed in the Bozeman area, just as they have elsewhere in the state. That means that workers in the logging and milling industry have been losing their jobs.
It’s absolutely essential that we get this aid to those in need, so that they can continue to put food on the table, while they continue to look for work.
A second integral part of this legislative package is the extension of the homebuyers’ tax credit.This tax credit has already helped nearly one and a half million Americans to achieve the dream of owning a home. Without this tax credit, many of these first time homebuyers would have remained on the sidelines. They would have been unable to buy a home in these challenging economic times.
The homebuyers’ tax credit provides up to $8,000 for millions of Americans to purchase their first home. The credit has helped to reduce the excess supply of homes on the market. And in doing so, the credit has helped to stabilize the housing market.
In many places throughout the country, homes are selling and inventories are dropping. The Pending Home Sales Index, a leading indicator of existing home sales, rose again in September for the eighth straight month. Total housing inventory fell 10.8 percent at the end of August.Home prices also appear to be slowly recovering. The Case Shiller Home Price Index increased1.4 percent in June after falling for 35 consecutive months. These encouraging numbers tell us that the homebuyer tax credit is working.
Yet the housing market remains fragile. High unemployment has increased foreclosure rates.Inventories remain well above normal levels. And homes are worth substantially less than they were a year ago.
In May, back home in Montana, I helped with a charity raffle of a new home in Billings. During the event, the homebuilders for this home told me how well the homebuyer tax credit wasworking. They said that it definitely helped to boost their sales.Realtors and home builders across Montana have provided examples of the tax credit workingto get buyers off the fence and into new homes. The Billings Gazette recently reported on one development where 30 homes were sold this year. Homebuyers for 17 of those homes usedthe first time homebuyer tax credit when they bought their homes.
In Bozeman, housing starts and home purchases have dropped off. But it’s clear that the homebuyer tax credit has helped to cushion the blow.
The success of the American economy is closely tied to the success of the housing market. By helping to stabilize the housing market, the homebuyer tax credit has helped to shore up the economy as it begins to recover. It’s important that we temporarily extend the homebuyer tax credit to further support our recovery.
That’s why we have proposed extending the tax credit until April 30 of next year. And because the housing market remains fragile, we propose expanding the credit to include a greater number of potential homebuyers.
As before, the $8,000 tax credit would be available to those buying a principal residence for the first time. But it would also be available to homebuyers who have lived in their current residence for 5 years or more. These homebuyers hoping to move up would be eligible for a$6,500 tax credit.
This strikes a fair middle ground. We would help first time buyers. And we would also helphome owners looking to move up to a new home. But we would exclude from the credit speculators who may have recently purchased a home, intending to flip it for a fast profit. Our amendment would also increase the income limits. This would enable an even greater number of potential homebuyers to take the credit. Those earning less than $225,000 for joint filers and $125,000 for single filers would be eligible.
Increasing this threshold would further stimulate the housing market by bringing a new group of buyers into the market. These days, millions of renters earn more than $75,000 a year.Our new homebuyers’ tax credit would also include a “binding contract” provision. This provision would allow anyone who has entered into a binding contract to be eligible for the credit, so long as they close on the home within 60 days.
And the extended tax credit would continue to allow military personnel to claim the credit for an additional year.
Many more Americans stand to gain from extension of the homebuyers’ tax credit. And with our amendment, they would get help buying a new home during these tough economic times.Homes that are worth more than $800,000 would not be eligible for the homebuyers’ taxcredit. We need to target the credit toward those potential homebuyers who need it most, not those buyers who would have bought a new home even without the credit.
And to address concerns like those raised by the Treasury Inspector General for Tax Administration, we’ve given the IRS additional tools to prevent erroneous credits from being paid.
It’s important that this tax credit does not become a permanent fixture in the tax code. Our amendment would end the credit on April 30 of next year. This extension would get us through the winter — traditionally the worst season for real estate. Our amendment would jump start the housing market as it enters the summer months in 2010.
With the new “binding contract” provision, we would effectively extend this tax credit for 7 months. That’s long enough to encourage homebuyers to buy homes. But it’s short enough to remain fiscally responsible. It’s a fair approach. And it would play an important role to getting the housing market back on its feet.
In addition to unemployment insurance and the homebuyer credit, our amendment would also add needed net operating loss relief for businesses.
Under current law, corporations may carry back net operating losses two years. In the stimulus bill earlier this year, we were able to increase that carry back period to five years — but only for small businesses.
The carryback provision for small businesses has been a great help to struggling small companies. They were able to carry back their losses to profitable years. And then they could file quick refund claims. This gave them much needed cash to meet payroll, invest in new equipment or inventory, or pay for other current expense obligations.
But many businesses did not qualify for the stimulus provision that helped small businesses.Many larger companies are also hurting during this economic downturn.
Senator Snowe and I recognized this during our discussions on the stimulus bill. We introduced a bill to expand the needed relief to all businesses. And now we are including that relief here.The Great Recession has hurt Montana businesses from farming, to retail, to manufacturing. A recent series in the Billings Gazette highlights a number of historically profitable Montana industries that are facing serious losses as a result of hard economic times.
The lumber industry provides an acute example. Pyramid Mountain Lumber is the oldest surviving family owned and family?operated mill in Montana. Loren Rose, the controller of Pyramid Mountain, reports that their mill has faced increased costs on logs and fuel. Order shave dropped because of the slowdown in home building.
The owners have invested everything that they have in the mill. Loren said that the lumbermills are “all in” as far as ownership investment — they have nothing left to invest. Other millowners have had to shut down.
Loren said that an NOL provision like that in our bill would “absolutely” help in “providing working capital to the small, independent mills.” Our NOL provision would directly help this industry and others in Montana that are struggling to survive in these tough economic times.
Let’s expand the help that we have provided for small businesses to all businesses, who need the cash infusion now.
Now the question always arises: How do we pay for these provisions? Our amendment pays for them responsibly.
In 2004, Congress created a new way for American based multinational corporations to allocate interest for purposes of computing their taxes. The implementation of that allocation method was to be effective in tax years beginning after 2010. Our amendment delays the effective date of that provision until tax years beginning after 2017.
Our Amendment also increases penalties for taxpayers that fail to timely file partnership and S Corporation returns.
These two provisions would allow Congress to provide additional incentives for home buyers and implement expanded NOL carry back relief for businesses. Both of these goals are big steps toward boosting our economy.
Our amendment is the right approach. I urge my colleagues to support this legislation.Let us respond to the concern that is foremost on Americans’ minds. Let us pass this legislation to help unemployed Americans and provide tax relief. And let us pass this legislation that will help Americans to get and keep good jobs.
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