STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. PRYOR (for himself, Mrs. LINCOLN, Mr. AKAKA, Mr. BAUCUS, Mr. BAYH, Mr. BINGAMAN, Mrs. BOXER, Ms. CANTWELL, Mrs. CLINTON, Mr. CORZINE, Mr. DASCHLE, Mr. DAYTON, Mr. DODD, Mr. DORGAN, Mr. DURBIN, Mr. FEINGOLD, Mrs. FEINSTEIN, Mr. GRAHAM of Florida, Mr. JEFFORDS, Mr. JOHNSON, Mr. KENNEDY, Ms. LANDRIEU, Mr. LAUTENBERG, Mr. LEAHY, Mr. LEVIN, Mr. LIEBERMAN, Ms. MIKULSKI, Mr. MILLER, Mrs. MURRAY, Mr. NELSON of Florida, Mr. NELSON of Nebraska, Mr. REID, Mr. ROCKEFELLER, Mr. SARBANES, Mr. SCHUMER, and Ms. STABENOW):
S. 2942. A bill to amend the Internal Revenue Code of 1986 to provide that combat pay be treated as earned income for purposes of the earned income credit; to the Committee on Finance.
Mr. PRYOR. Mr. President, I know the hour is late, and I will try to keep my comments fairly brief. I promise I will not take more than an hour or two.
What I am showing tonight is a picture of some American heroes. Oftentimes we look at a person in uniform and say: That's a hero. Certainly, the folks injured and killed in combat we see them as heroes. But you are really just a hero if you serve, if you put on your uniform and do your duty to your country.
The other heroes in this picture are this soldier's family. We can see they are hugging him and supporting him, and that is really part of the definition of a hero as well. Certainly, the folks who are not pictured here-this man's employer because he is probably in the Guard or Reserve, and folks in the community, people in his church or his neighborhood-whatever the circumstances may be-they are heroes in this picture.
We thank all of our soldiers who are serving bravely for our country, wherever they may be tonight. I want to thank the conferees, who worked so hard on the Working Families Tax Relief Act last week, for including the provisions of S. 2417, the Tax Relief for Americans in Combat Act or, as some people call it, TRAC.
One thing that TRAC was designed to do was eliminate the combat pay penalty. I introduced TRAC back in May of this year. The rationale for introducing TRAC was to help our men and women in combat. In fact, in my work on the Armed Services Committee, and with the help of Chairman GRASSLEY and Ranking Member BAUCUS, the committee requested a GAO report. We became concerned in the Armed Services Committee about the tax package that is available to our soldiers, Marines, airmen and seamen. So Chairman GRASSLEY and Ranking Member BAUCUS were gracious enough to request a GAO report.
In essence, what the GAO report found was a glitch in the Tax Code, an unintended consequence. Basically, what they found is that if one is a soldier and receives combat pay, which means they are in theater and they are in harm's way every day, they receive their combat pay and they want to claim their earned income tax credit, which many of these individuals are entitled to under our Tax Code, they actually can lose money on their taxes by receiving their combat pay. That is why I call it the "combat pay penalty," because it really does disadvantage some people on their taxes.
I have a chart that illustrates what I am talking about. If someone is working in a hardware store 12 months out of the year, let's say they were making $16,000 a year annually, under the earned income tax system that we have on our books right now, $4,100 may possibly come back to him under the EITC. If that same person works in a hardware store, say, for 4 months, and he is in the guard or reserve and he gets 8 months for his military service and he makes the same $16,000, by the time he does the math and he fills out his tax form he is only entitled to $2,100 under the earned income tax credit.
What we are doing is, inadvertently we are putting our soldiers at a disadvantage. In other words, this soldier in this example has lost on his taxes about $2,000. Clearly, this is not the intent of Congress.
The way I feel about it-and I know a lot of my colleagues on both sides of the aisle feel about this-is while our brave soldiers are overseas fighting for us, we need to be in Washington fighting for them and their families. I think it is just incumbent upon us to recognize the principle that we need to take care of those who take care of us. There is no one in the world who is doing a better job taking care of us than our men and women in combat.
Under the provisions of a bill that I will file this evening, the provisions are very simple. What it will do is allow men and women in uniform serving in combat to include combat pay for the purpose of calculating their earned income and their child tax credit benefits. If that calculation works in their best interest, it gives them control over their taxes and allows them to make the determination for what is in their best interest on their taxes.
Again, I want to thank the conference, and the Senate, House, and the President for signing it, because we did win a short-term victory on this. We got this provision on the earned income tax credit for 2 years. Everything else in the bill was 5 years, but we did get 2 years. It is a short-term victory, something I hope we will be able to go back and change and make it a long-term solution for these brave Americans.
I do not want to speak to all the intricacies of the earned income tax credit because I have heard Senators in this Chamber say that it is basically a Tax Code for a welfare program. I disagree with that. We may have an honest disagreement about that. Clearly, our men and women in uniform receiving combat pay are working hard. We know this is not a welfare program for them. We know they are not going to abuse this or they are not going to miscalculate it. We have a high degree of confidence that this is going to be good for them and good for all of us.
Anyway, I want to draw the attention of my colleagues to the next chart, which is the earned income tax credit. This chart shows how it is structured. Depending on a person's situation, if they have no child, one child, two or more children, it shows a sort of range of possibilities, depending on what one's income is. Obviously, it is like a formula where the numbers have to be plugged in. It is different for different people.
As we can see, a soldier who is making, say, about $6,300 ought to get about $390 from the earned income tax credit. Whereas a soldier who is down on the income scale, making $1,400, should get about $2,600 in earned income tax credit. So, again, this will change depending on the situation.
What we are proposing would allow our soldiers, our men and women in uniform, to take advantage of an existing provision of the Tax Code and maximize it to their full advantage.
I am not saying that we can get this done this week. We certainly understand that we are out of legislative days, but I hope sincerely that we can come back in the lame duck session or whenever we reconvene and really get serious about helping our men and women in uniform.
We fixed the earned income tax credit for 2004 and 2005.
Here is another chart showing some of the numbers and how it would work, again, depending on how many months one is in combat. Just depending on the various losses that one might have, we can see based on this chart and the numbers here, the soldiers who are impacted the most are the enlisted men. Officers can be penalized under this, but the enlisted men and women are the ones who are probably at the greatest danger of losing their tax benefit.
One reason that Senators have decided to help me on this-we have, I believe 36 cosponsors now who have signed up to help out on this-is because it is a cheap fix. When we look at the numbers for 2 years, 2006 and 2007, we are only talking about $15 million. When we talk about taxes in this country, we talk about billions or trillions, but over 2 years this is only $15 million. Over 10 years it is only $68 million. That is not a lot of money. That is really peanuts in the grand scheme of things when we are talking about our Tax Code and other numbers that we talk about, when we talk about fixing our taxes in this country. This is real money for these soldiers in uniform.
I close with another picture of some heroes to remind us what this is all about, who we are trying to help. These soldiers, most of them, are relatively low-income because one has to be relatively low-income to even qualify for the earned income tax credit. They are leaving their families behind. Many of them are leaving jobs, homes, all kinds of economic security. Like I said, these are the folks who are taking care of us, and I think in the Senate and in the Congress we ought to do our part to take care of them.