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Permanent Extension of 10% Individual Income Tax Rate Bracket

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Location: Washington, DC


PERMANENT EXTENSION OF 10-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET -- (House of Representatives - May 13, 2004)

Mr. RYAN of Wisconsin. Mr. Speaker, pursuant to House Resolution 637, I call up the bill (H.R. 4275) to amend the Internal Revenue Code of 1986 to permanently extend the 10-percent individual income tax rate bracket, and ask for its immediate consideration.

The Clerk read the title of the bill.

The SPEAKER pro tempore. Pursuant to House Resolution 637, the bill is considered as having been read for amendment.

The text of H.R. 4275 is as follows:

H.R. 4275

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. EXTENSION OF 10-PERCENT INDIVIDUAL INCOME TAX RATE BRACKET.

(a) IN GENERAL.-Clause (i) of section 1(i)(1)(B) of the Internal Revenue Code of 1986 (relating to the initial bracket amount) is amended to read as follows:
"(i) $14,000 in the case of subsection (a),".

(b) INFLATION ADJUSTMENT BEGINNING IN 2004.-Section 1(i)(1)(C) of such Code (relating to inflation adjustment) is amended to read as follows:
"(C) INFLATION ADJUSTMENT.-In prescribing the tables under subsection (f) which apply with respect to taxable years beginning in calendar years after 2003--
"(i) the cost-of-living adjustment used in making adjustments to the initial bracket amount shall be determined under subsection (f)(3) by substituting '2002' for '1992' in subparagraph (B) thereof, and
"(ii) such adjustment shall not apply to the amount referred to in subparagraph (B)(iii).
If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.".

(c) EFFECTIVE DATE.-The amendments made by this section shall apply to taxable years beginning after December 31, 2003.

SEC. 2. REPEAL OF SUNSET.
Title IX of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to-

(1) paragraph (1) of section 1(i) of the Internal Revenue Code of 1986, and

(2) the amendments made by paragraphs (1) and (7) of section 101© of such Act.

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Mr. BECERRA. Mr. Speaker, I ask unanimous consent to claim the time of the gentleman from New York (Mr. Rangel), the ranking member of the Committee on Ways and Means, for the managing of the time on this side of the aisle.

The SPEAKER pro tempore (Mr. Linder). Is there objection to the request of the gentleman from California?

There was no objection.

Mr. BECERRA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, we have before us another proposal which in this case I think every single Member of Congress would like to step up to the plate and say we need to do something like this. We have a tax system where oftentimes folks who work very hard, those who are striving and obtaining middle-class status, sometimes find they are paying more taxes than people earning 10, 20, 100 times what they are. That seems very unfair, and it is very unfair.

When we have a tax proposal which actually reduces taxes by starting at the bottom, by taking the lowest tax rate and giving a tax break there, you guarantee giving a tax cut to everyone, not just those who are very wealthy, but those who are middle income and those who are of modest income. If you start at the bottom tax bracket, everyone will fall into that bracket, whether rich or poor.

So when we look at this particular proposal we have before us, H.R. 4275, from the onset we want to say, let us do something like this because it helps all of America. And so we should be able to say let us do this because it helps all of America. The difficulty is while we should do something like this, this bill, H.R. 4275, does not help all of America.

What is worse is if I can tell Members that those who are not helped are those in the middle of America, Members would be most surprised. Members would think perhaps it does not help everyone because we avoid giving the very wealthy, who got tremendous tax relief from previous tax bills that the President proposed, it would be unfair to pile on top of the more than $130,000 in tax cuts they have received in the last couple of years even additional sums; but that is not the case.

The folks who are losing here, and there are millions who would lose, are folks who make between $50,000 and $100,000. In other words, the one-fifth of America that most of us consider middle class is the group of Americans that are going to suffer, millions of them. Within the next 5 or so years, some 33 millions of those households that earn between $55,000 and $100,000 are the households that are not going to get to benefit from this particular tax cut proposal. As unfair as that sounds, that is the reality.

There are ways to cure it, and on this side of the aisle there will be a substitute proposal presented which ensures that every single taxpaying family, including those between $50,000 and $100,000 would qualify for the tax reduction in this particular proposal. It is a simple amendment, it just needs to be paid for; and we have come up with a way to pay for it which is not just fair but fiscally responsible.

Mr. Speaker, we have a proposal here that on its face can be sold to the American public, but in reality and in its implementation, not only is it unfair because it leaves out a good portion of middle America, at the same time it does nothing to cure what is going to haunt the rest of America for many, many years, and that is this growing deficit that we have in our Federal budget.

This year we are being told we will have a budget deficit exceeding perhaps $400 billion. That is more than $1,000 for every man, woman, and child in this country. Think of it as a birth tax. Any child born today automatically is born with that family owing the Federal Government as a result of President Bush's budget for this year over $1,000 to the Federal Government, just on bearing that child.

This proposal, which will cost billions of dollars, and as I said, it has no legitimate purpose behind it to help reduce the taxes for all Americans, if we do the right thing, is not bad because you are reducing taxes on one end, but if you are just raising them somewhere else, you are not getting much of a benefit. We will have an opportunity to get into this later.

I applaud the gentleman from Wisconsin (Mr. Ryan) for his efforts to try to move this forward. I would hope at the end of the day we realize we have not just an opportunity to reduce taxes for all Americans, but we have a way to do it so that the implementation really will reach all Americans, not just some; and we will do it in a fiscally responsible way by paying for the costs of this, rather than add to the costs of the national debt and the growing Federal deficit that we have today.

Mr. Speaker, I reserve the balance of my time.

Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, let me just mention very briefly, the gentleman who just spoke is from California, and the taxpayers just in the State of California who are now only paying that 10 percent bracket, there are 2,605,960 taxpayers in the State of California alone who would experience a huge tax increase relative to their tax burden next year if this legislation is not passed. In fact, there are over 12 million taxpayers in California alone that would experience higher taxes next year if this does not pass.

So each of us represents people who are struggling to make ends meet who are at the bottom rung of the economic ladder who are staying just afloat and paying taxes at that 10 percent bracket who are making $16,000 or less as a couple. Those are the people that we want to help, and we want them to get on the upper trajectory of prosperity. The last thing we want to do is hit them with a big tax increase. If we fail to pass this bill, that is exactly what will happen.

Mr. BECERRA. Mr. Speaker, I yield myself 2 minutes.

Mr. Speaker, I do not disagree with some of what the gentleman just said, but the gentleman has to read the whole book to understand, not just look at certain chapters in the book. What the gentleman from Wisconsin (Mr. Ryan) has excluded from his reading of the book is that we have something approaching 13 million households in America today, today, that by the time they file their taxes for next year will not qualify for the benefits in this proposal. That is 13 million, and that is because of the AMT, the alternative minimum tax.

Remember back in the 1970s, early 1980s when we heard stories of the multibillion dollar corporations, the multimillionaires who at the end of the day when they filed their taxes would pay zero in taxes where the average American was having to give Uncle Sam some money?

Well, there was a law passed to make sure that everyone, not just middle class, but even the super rich and megawealthy corporations paid some taxes. That was the alternative minimum tax legislation. But we have seen incomes creep up some, we have seen inflation creep up some; and as a result, the alternative minimum tax has seen more people creep up into its brackets and now qualify to have to pay taxes under the alternative minimum tax.

There are 13 million households who next year when paying their taxes will not benefit from this proposal because they will fall under the AMT. And by 2010, in 5 ½ years, we will have 33 million households that will have crept up into the AMT world. Therefore, while they may get a tax break under this proposal at first, when they have to switch over to do their calculation for their taxes under the AMT, they will get nothing. This bill does nothing to cure that. The Democratic substitute does.

We do not think it is fair to sell this as a tax cut for everyone when, indeed, middle-class America is the one that is losing out the most, and all at the expense of growing the size of the national debt. Let us be fiscally responsible and let us be fair. We have a way to do that. We would hope our colleagues on the other side of the aisle would join in that effort.

Mr. RYAN of Wisconsin. Mr. Speaker, I yield myself 15 seconds.

Mr. Speaker, on May 5, 2004, the House voted 333-89 to extend the exemption amounts for the AMT, to index them for inflation; and I think the gentleman from California (Mr. Becerra) voted for the AMT relief bill. We passed the bill, making sure that we can go study the problem and figure out how to comprehensively fix it.

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Mr. BECERRA. Mr. Speaker, I yield myself 1 minute to respond to something my friend from Wisconsin mentioned, that last week we passed legislation from this House that would take care of the Alternative Minimum Tax problem. Again, that is one chapter in another book. What he does not mention is the other chapters in the book say that that was relief for 1 year. So all those millions of Americans, the 13 million Americans of the 100 million Americans who are Tax filers would for 1 year, if that legislation takes effect, be saved. But in 2006, 2007, 2008, it jumps right back up.

What the gentleman does not say is that the reason we are in this fix to begin with is because the other side of the aisle, as is proposed in these bills, is not willing to put forth a permanent reduction right away because of the cost. So we are coming back every year doing this piecemeal because it seems to cost less, and the American public does not realize what the ultimate cost of this is. But you can only fool the American public so long.

Let us do things right, be fiscally responsible, and do it fairly. We do not mind doing it. Let us just be fiscally responsible and fair about it instead of cloaking this behind some device and some statement.

Mr. Speaker, I yield 5 ½ minutes to the gentleman from Washington (Mr. McDermott), a member of the committee.

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Mr. BECERRA. Mr. Speaker, I yield 4 minutes to the gentleman from Massachusetts (Mr. Neal), a member of the Committee on Ways and Means.

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Mr. BECERRA. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, as I said before, there is the kernel of a very good idea in this legislation, and I believe that both sides have tried to extract the good idea from the proposal before us today. The difficulty is, as you ask any farmer, it takes time and it takes money and it takes a lot of sweat to have anything grow.

No one in America should believe that we can pass legislation that will cost more than $200 billion and not have it take some sweat and some cost for America. Money does not grow on trees. There is a cost involved. It is a worthwhile idea, because this is a tax cut that everyone can agree to, because it starts from the bottom and everyone would get it, if you corrected the AMT, which, unfortunately, this legislation does not do.

So while there is the kernel of a good idea, it is destroyed by the reluctance or the unwillingness to do what is right, and that is to take care of the 33 million Americans by 2010, in 5 ½ years, who will fall into the Alternative Minimum Tax and will see any savings from this particular tax cut washed out when they have to file their taxes using the Alternative Minimum Tax.

Secondly, when you are facing mounting deficits, the largest this country has ever seen, and you are starting to now see the consequences of it, you have to reflect back on the term used in the late 90s, early 2000, when we talked about this "irrational exuberance" of the stock market, where you kept seeing the stock market just rise and rise and rise, and people could not make sense of it. But everyone kept buying and buying and buying, because that is where we were headed.

All of a sudden the floor dropped out from under us, and people paid the price. Talk to the employees from Enron, who saw their company go bankrupt and saw their entire pension savings washed away not only because of Enron's corruption, but because of the drop in the stock market.

That irrational exuberance is now driving much of what we have seen on the floor this year. A quick example: this year alone in this House we have passed out, and I will say to all of America, I did not vote for these measures, not because I did not want to, but because I did not think it would be fiscally responsible, we passed marriage penalty tax relief, a kernel of a good idea, unpaid for, over $100 billion; the extension that my colleague from Wisconsin mentioned of AMT relief for 1 year only that will cost close to $18 billion to make sure those Americans don't fall into the AMT. Good, but only 1 year.

Three, a flexible spending plan that was on the floor yesterday for debate, which is, again, a good idea, to allow Americans who have health care costs to be able to have a pot of money that they can extend over to the next year if they did not use it up. A great idea. Cost, close to $10 billion, unpaid for.

Extension of the 10 percent tax bracket that we are debating today, about $220 billion, unpaid for.

The child tax credit extension done a few weeks back, again a good idea for families that have children. $161 billion, unpaid for.

Total, more than $500 billion this year alone in unpaid-for tax cuts, most of which have a good idea behind them. To add to the $400 billion-plus deficit for this year alone, which adds to, as you heard my colleague from Massachusetts mention earlier, the more than $3 trillion debt that the Nation owes as a whole.

Irrational exuberance? Take a look at today's paper, business section: "U.S. trade deficit grows unchecked. $47 billion gap in the month of March."

We are on track to have a more than $500 billion trade deficit with other countries. We are going to owe, at the end of this year, just for this year, to foreign interests, more than $500 billion. What they are going to do with those securities they get, that promissory note from us in its place, we do not know. If they dump it all of a sudden, we are in real trouble.

What else should we know? Gasoline prices. Gasoline prices a year ago were 50 cents less per gallon. If you are the average American, that means it has added about $50 a month in your gasoline bill. That is about $600 a year more in gasoline this year you will be paying.

On top of everything I have said before, the $400 billion-plus deficit for this year, that adds more than $1,000 for every man, woman and child. I will call it the birth tax. The $50 a month that you pay, call it a $600 birth tax, because if you have a child, let us put the debt on that child for the gasoline; and on top of that, there is $500 billion more that this House just passed, and, by the way, the Senate has not done it, because they know better, that would be added.

Before you know it, you have got to conclude that this is irrational exuberance. Let us get real. Great ideas. Every single time these proposals have come up, the Democratic alternative has said okay, good ideas; but let us pay for them where we can. Where we cannot, let us pare them down, because we cannot continue to sell the American public a bill of goods.

Someone will pay for this. Good ideas. We would all love to be there. If we had real discussions in committee, we could have hashed this out and come up with a bipartisan bill. But we bypass the committee process. Again, America does not know that. We are coming to the floor without having discussed this in committee. That is okay. That is the way it is going to work. We will live with that. But do not let the American public believe you can do this stuff and pluck it off trees and pay for it.

Let us do it the right way. Let us be fiscally responsible. Let us be fair. Make sure that those from the President's previous tax cuts of a couple of years ago, who received $130,000 in benefits if you were a millionaire in tax cuts, pay their fair share. If a guy in Iraq, one of our soldiers, a man or woman, can sacrifice a little bit, and probably not take advantage of any of these benefits, then certainly those folks who are the millionaires, who are taking home the lion's share of all of these tax cuts, can sacrifice a bit to help us pay.

That is what we do. We have a proposal that would say take the one-fifth of 1 percent wealthiest to help pay for this, for all Americans. We think you can do it. Sure, it hits millionaires; but it helps middle-class Americans. It is fiscally responsible, fair, and something that would get a bipartisan vote that could get signed by the President.

Mr. Speaker, we are going, I guess, to continue to do this in the House and not watch the Senate do any of this whatsoever; and we are going to end again this year without having given people what they keep thinking we are going to give them, and that is what I think damages this institution overall as a whole.

Let us move forward in a bipartisan fashion. We can do it, because there is a kernel of a good idea in these proposals. But we can be fiscally responsible and fair at the same time.

Mr. Speaker, I yield back the balance of my time.

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