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Ms. JACKSON LEE of Texas. Mr. Speaker. I rise in strong support of H.R. 15, and ask my colleagues on both sides of the aisle to come together in support of H.R. 15, the Democratic alternative offered by our colleague from the Ways and Means Committee, Mr. LEVIN.
I have consistently supported and voted for middle class tax cuts, as I did two years ago when I voted for the Middle Class Tax Relief Act of 2010, and the extension of unemployment benefits.
The intelligent Democratic substitute offered by my Ways and Means colleague temporarily extends for one year, through 2013, the reduced tax rates and other tax benefits enacted in 2001 and 2003 that expire on Dec. 31--but only for income levels below $250,000 for joint tax returns and $200,000 for individuals. This is smart tax policy which acknowledges the deficit problem but does not squelch tax benefits for those most in need.
It also extends the expanded education tax credit, child tax credit and earned income tax credit benefits that were included in the 2009 stimulus law and extended in the 2010 tax extension law; those provisions unfortunately are not included in H.R. 8.
On the other hand, the Democratic proposal does the following:
TEMPORARY EXTENSION OF TAX RELIEF
One-year extension of marginal individual income tax rate reductions for middle-class taxpayers.
One-year extension of repeal of the overall limitation on itemized deductions (``Pease'') and the personal exemption phase-out (``PEP'') for middle-class taxpayers.
One-year extension of EGTRRA and ARRA improvements to child tax credit.
One-year extension of marriage penalty relief for middle-class taxpayers.
One-year extension of earned income tax credit simplification and increase.
One-year extension of education tax incentives.
One-year extension of tax benefits for families and children.
One-year extension of reduced maximum rate for capital gains and qualified dividend income for middle-class taxpayers.
One-year extension of the American Opportunity Tax Credit (``AOTC''). One-year extension of enhanced small business expensing.
The measure provides a one-year ``patch'' to prevent the alternative minimum tax (AMT) from affecting millions of additional taxpayers and allows small businesses to deduct an increased amount of their capital expenditures for another year. It does not extend current estate tax provisions, which set a maximum estate tax rate of 35% with an exemption amount of $5 million.
I am deeply saddened that the fate of unemployed, low and middle income Americans has been held hostage by the insistence by Republicans that this legislation include a giveaway to the wealthiest 2% of Americans that is going to irresponsibly expand the already large deficit.
I have spoken to and heard from many fine, patriotic, hardworking middle income Americans from Houston, from the great state of Texas, and all across the nation. Middle class American families and small businesses are deeply concerned about our troubled economy, the skyrocketing national deficit, high unemployment rates, job creation, and sorely needed extension of the tax relief and unemployment benefits set to expire at the end of this month.
The Republican bill temporarily extends for one year, through 2013, all the reduced tax rates and other tax benefits enacted in 2001 and 2003 that are scheduled to expire on Dec. 31. The measure maintains the maximum estate tax rate of 35% while retaining the exemption amount of $5 million, provides a two-year ``patch'' to prevent the alternative minimum tax (AMT) from hitting over 27 million taxpayers and allows small businesses to deduct an increased amount of their capital expenditures for another year.
I feel like we have been down this path before and I recall many of my colleagues staking a claim to fiscal responsibility. Well, I ask in all sincerity, which bill is more fiscally responsible: H.R. 8, which blows a hole in the deficit, or H.R. 15, the Democratic alternative which keeps the Bush Tax rates in place for the people who truly need tax relief.
This is the same Republican Congress which has asked for a balanced budget amendment. It has codified the Joint Select Committee on Deficit Reduction, which is possibly unconstitutional, and has had no impact on jobs and the unemployment problem. Yet today they want us to vote on a tax increase for the top 2 percent. This illustrates what happens when Congress does not work together in a bipartisan manner, laboring for the American people. We must work together and compromise.
The Senate gave us a layup by producing a bill last week which is virtually identical to the Democratic Substitute. All we have to do is act like Olympians and pass it.
The American people are asking the President and Members of Congress to move swiftly and take decisive action to help restore our economy in a fiscally responsible manner. I am disappointed that Republicans have insisted on holding tax cuts for working and middle class families hostage in order to benefit the wealthiest 2% of Americans.
I would like to thank President Obama for his determined leadership, support and commitment to protecting important tax relief issues for middle-income Americans and the nation's small businesses and farmers during these challenging economic times. I would also like to thank all the Members and their staff who worked diligently to bring this essential legislation to the House floor today in an attempt to do all that we can to protect the American people and move this nation toward fiscally responsible economic recovery.
I support those provisions of H.R. 8 which provide relief for middle-class families and small businesses who will see their taxes go down and get much needed certainty. But I cannot in good conscience support tax relief for millionaires and billionaires at a time when others need help just to make ends meet.
Unlike those provisions of H.R. 8 which benefit America's struggling middle class, I do not support the provisions of this legislation which condition that desperately needed relief upon the unconscionably high cost of providing an unnecessary, expensive giveaway to the wealthiest Americans by providing a two year extension of Bush-era tax cuts for the wealthiest 2% of Americans while keeping their estate tax rate at 35% on estates valued at more than $5 million for individuals and more than $10 million for couples.
These giveaways to the wealthiest Americans during these dire economic times needlessly add billions of dollars to our skyrocketing deficit yet create no value for our ailing economy since these tax cuts are not tied to job creation and preservation.
ESTATE TAX AMENDMENT
I offered an amendment that would have set the Estate Tax at reasonable levels. My amendment would have allowed estates valued at $3.5 million or less to pay 35 percent, estates valued between $3.5 million and $10 million to pay a 45 percent rate, and estates over $10 million to pay a 55 percent rate. This commonsense amendment would have restored a sense of fairness to H.R. 8. According to the Center on Budget and Policy Priorities, the 2009 estate tax rules already are extremely generous, tilting in favor of the wealthy. The Tax Policy Center estimates that if policymakers reinstated the 2009 rules:
The estates of 99.7 percent of Americans who die would owe no estate tax at all in 2013. Only the estates of the wealthiest 0.29 percent of Americans who die--about 7,450 people nationwide in 2013--would owe any tax.
Moreover, under the 2009 rules, the small number of estates that were taxable would face an average effective tax rate of 19.1 percent, far below the statutory estate-tax rate of 45 percent. In other words, 81 percent of the value of these estates would remain after the tax, on average. An estate tax that exempts the estates of 997 of every 1,000 people who die and leaves in place an average of 81 percent of the very wealthiest estates is hardly a confiscatory or oppressive tax.
Moreover, only 60 small farm and business estates in the entire country would owe any estate tax in 2013, under a reinstatement of the 2009 rules, and these estates would face an average effective tax rate of just 11.6 percent. Failing to tie tax cuts to job creation is irresponsible since it exacerbates our growing deficit without bolstering job creation.
My amendment does not address the step-up in basis. The exemption level and rate are consistent with parts of the estate tax proposal included in the President's FY2010 and FY2011 Budgets and H.R 16, the intelligent estate tax proposal being put forth by my colleague Mr. LEVIN of the Ways and Means Committee.
CLASSROOM EXPENSE DEDUCTION AMENDMENT
My second amendment would have provided tax relief to school teachers by providing them a deduction for qualified out-of-pocket classroom expenses of $250 dollars, whether or not they itemize their deductions. You may recall Mr. Speaker that the President included this proposal in his Budget for Fiscal Year 2013.
I understand the tremendous personal costs incurred by educators with little or no classroom budget. According to a 2006 National School Supply and Equipment Association Retail Awareness Study, teachers spend an average of $493 out of pocket on school supplies for their own classrooms.
7 percent of teachers surveyed said they plan to spend more than $1,000 of their personal finances on supplies. As education budgets face major shortfalls in the recession, that amount is expected to increase significantly.
Beginning in 2002 the IRS allowed for an above-the-line deduction for classroom expenses of up to $250. The educator expense deduction allows teachers to write off some expenses that they incur to provide books, supplies, and other equipment and materials for their classrooms. I introduced this amendment and would like to acknowledge the work of my colleagues who have put forth legislation advocating this deduction. America's teachers from Texas to Maine to Florida to Washington deserve our renewed appreciation for their commitment to educating future generations.
Our children should not have to suffer because our teachers are given a Hobson's Choice, forced to choose between using their own finances to effectively teach a class or forced to cut corners due to budgetary restrictions. We promote an increased quality of education by lessening the financial burden on them when they are trying to go above and beyond their responsibilities is certainly warranted.
While I am opposed to the portions of H.R. 8 that amount to an expensive giveaway to the wealthiest 2% of Americans, I want to emphasize that I fully support job-creation and job creators. I also support President Obama's vision for change. I share his commitment to fighting for low- and middle-income Americans who are the backbone of this country and our economy.
However, this legislation, H.R. 8, especially as it pertains to tax cuts for the top 2% of Americans and estate tax provisions that are regressive and inflate the deficit, does not comport with this vision. I have serious misgivings about extending tax cuts for the wealthiest Americans at the expense of our deficit, especially if these tax cuts are not targeted towards job creation.
DEFICIT AND TAXATION
You may recall that in the Budget, the Administration calls for individual tax reform that: cuts the deficit by $1.5 trillion, including the expiration of the high-income 2001 and 2003 tax cuts. As a matter of sound fiscal policy, I am supportive of this 15 effort. I recognize the putative economic benefits that many attribute to the Bush Tax Cuts, but we must ask ourselves are they affordable? There is no amount of dynamic scoring that will help penetrate the deficit.
The President's budget also eliminated inefficient and unfair tax breaks for millionaires while making all tax breaks at least as good for the middle class as for the wealthy; and observes the Buffett Rule that no household making more than $1 million a year pays less than 30 percent of their income in taxes.
The individual income tax is a hodgepodge of deductions, exemptions, and credits that provide special benefits to selected groups of taxpayers and favored forms of consumption and investment. These tax preferences make the income tax unfair because they can impose radically different burdens on two different taxpayers with the same income. In essence, Congress has been picking winners and losers.
There is absolutely no justification for huge tax cuts. The wealthiest tax brackets should not profit at the expense of programs keeping struggling families from poverty.
Bear in mind, the Republican's 2012 budget cut $2 trillion dollars more than President Obama's Debt Commission advised, and those cuts come from vital social services and safety nets for low income families, children and seniors.
Tax expenditures also reduce the economy's productivity because decisions on earning, spending, and investment are driven by tax considerations rather than the price signals that a well-balanced, and fair free market economy produces. These expenditures, whether for individuals or corporations, are really no different than the much ballyhooed entitlement programs, but they have cute names and fancy lobbyists.
Moreover, tax expenditures make the tax system excessively complex for honest taxpayers who are trying to comply with the law while seeking the benefits to which they are legally entitled.
The system is so complex that most taxpayers even those with low incomes now use either a professional tax preparer or tax software. A one-page form shouldn't require a tax preparer who earns a percentage of the return, or a fee. It is not justifiable, especially when some commentators like to point out that a number of taxpayers pay no tax--well they somehow conveniently forget to mention that these tax scofflaws making $30,000 dollars a year more than make up for it with a long list of regressive taxes at the state and local level.
The alternative minimum tax, or AMT, was initially designed to ensure that all high-income taxpayers paid some income tax, has become the poster child for the tax system's failure, requiring Congress to enact increasingly expensive temporary patches to prevent the AMT from encroaching on millions of middle class households particularly those with children, in a web of pointless high tax rates, complexity, and unfairness.
On the deficit reduction front it is important to remember the economic crisis that the President inherited. I remember back in 2008 and 2009, when we experienced the worst recession since the Great Depression. The economy actually contracted, it shrunk, at a rate of almost 9 percent in the fourth quarter of 2008.
We lost 800,000 private-sector jobs in January of 2009 alone, and unemployment was surging. Those are the conditions the President inherited--the car was swerving into the ditch. He was not the driver, but he was asked to come in on literally his first day of office, roll-up his sleeves and figure out how to prevent the car from rolling farther down the hill. If you'll recall we also faced a housing market that was in crisis, and we faced a financial market crisis as well that threatened to set off a global financial collapse. We have come a long way since then yet there is more work to be done.
The cloud looming over this Congress is an unintended ``triple-witching hour'' of tax increases and Sequestration measures that will take effect at the beginning of 2013.
The expiration of the Bush Tax Cuts, the end of the recently extended Payroll Tax Cut, and increases in capital gains and dividends taxation will shock the conscience and wallets of the American people. That is why Congress needs to enact bi-partisan legislation that helps lower the deficit but does not wreck havoc on the financial soul of the middle class.
But again, tax reform that lowers the rate, reduces the deficit, and does not pick winners and losers is not easy, but let's not forget, if President Reagan and then-Speaker Tip O'Neill could do it in 1986, anything is possible.
The so-called ``99ers'' have been sincerely looking for work for a very long time and have run out of resources to provide for their families and pay their mortgages, pay their bills and buy food. They simply want and need a job to pay for these obligations. H.R. 8 proposes to give tax cuts to the wealthiest Americans, yet fails to provide for the so-called ``99ers.''
H.R. 8 unfortunately is not ready for prime-time. Let us come together for the American people and pass the Levin Substitute--a bill which has already passed in the Senate.
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