HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT OF 2008 -- (Senate - May 22, 2008)
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Mr. KERRY. Mr. President, today the Senate has passed legislation which will assist military families. I agree with Ways and Means Chairman CHARLES RANGEL that this legislation should be called the ``thank you bill.'' As we approach Memorial Day, I am pleased that the House and Senate have passed this important legislation which will help thousands of military families.
I would like to thank Senators BAUCUS and GRASSLEY for the work they have done on this bill. The HEART Act reflects a compromise reached by the Ways and Means and Senate Finance Committees. Last year, Senator Smith and I introduced the Active Duty Military Tax Relief Act of 2007, which would help those who bravely serve their country and the families that they have left behind.
The HEART Act includes several provisions from the Active Duty Military Tax Relief Act of 2007. It also includes additional provisions to help military families and veterans who often struggle financially.
The best definition of patriotism is keeping faith with those who serve our country. That means giving our troops the resources they need to keep them safe while they are protecting us. And it means supporting our troops at home as well as abroad.
Currently, there are over 160,000 military personnel serving in Iraq. There are approximately 33,000 United States servicemembers in Afghanistan. Many of these men and women are reservists and have been called to active duty, frequently for multiple tours.
Most large businesses have the resources to provide supplemental income to reservist employees called up I applaud the businesses that have been able to pay supplemental income to their reservists, but it is not easy for small businesses to do the same.
In January 2007, the Committee on Small Business and Entrepreneurship held a hearing on veterans' small business issues. A majority of our veterans returning from Iraq and Afghanistan are Reserve and National Guard members--35 percent of whom are either self-employed or own or are employed by a small business.
We heard some disturbing statistics about the impact and unintended consequences the call up of reservists is having on small businesses. According to a January 2007 survey conducted by Workforce Management, 54 percent of the businesses surveyed responded that they would not hire a citizen soldier if they knew that they could be called up for an indeterminate amount of time. I am concerned that long call ups and redeployments have made it hard for small businesses to be supportive of civilian soldiers.
The Active Duty Military Tax Relief Act of 2007 provides a tax credit to small businesses to assist with the cost of paying the salary of their reservist employees when they are called to active duty. A similar provision is included in the HEART Act.
In addition to helping small businesses, the Active Duty Military Tax Relief of 2007 addresses concerns related to differential military pay, income tax withholding, and retirement plan participation. These provisions will make it easier for employers who would like to pay their employees supplemental income, above their military pay, and make pension contributions. Our legislation would make differential military pay subject to federal income tax withholding. In addition, with respect to the retirement plan rules, the bill provides that a person receiving differential military pay would be treated as an employee of the employer making the payment, and allows the differential military pay to be treated as compensation. These provisions are included in the HEART Act.
The Active Duty Military Tax Relief Act of 2007 would make permanent the existing provision which allows taxpayers to include combat pay as earned income for purposes of the earned income tax credit, EITC. Without this provision, some military families would no longer be eligible to receive the EITC because combat pay is currently not taxable. It also would provide tax relief for the death gratuity payment that is given to families that have lost a loved one in combat. This payment is currently $100,000. Our current tax laws do not allow the recipients of this payment to use it to make contributions to tax-preferred saving accounts that help with saving for retirement. Both of these provisions are included in the HEART Act.
Recently, Representatives ELLSWORTH and EMANUEL and Senator Obama and I introduced the Fair Share Act of 2008 which ends the practice of U.S. government contractors setting up shell companies in foreign jurisdictions to avoid payroll taxes. I think that is appropriate that the Fair Share Act is included in the HEART Act. The revenue raised from closing this abusive loophole will help offset the tax relief provided to military families.
On March 6, 2008, Farah Stockman of the Boston Globe reported that Kellogg, Brown and Root Inc.--KBR--has avoided payroll taxes by hiring workers through shell companies in the Cayman Islands. The article estimates that hundreds of millions of dollars in payroll taxes have been avoided a disturbing, yet not all too surprising discovery.
The Fair Share Act of 2008 will end the practice of U.S. Government contractors setting up shell companies in foreign jurisdictions to avoid payroll taxes. The legislation amends the Internal Revenue Code and the Social Security Act to treat foreign subsidiaries of U.S. companies performing services under contract with the United States government as American employers for the purpose of Social Security and Medicare payroll taxes.
Our service men and women need to know that we are honoring their service. These changes to our tax laws will help our military families with some of their financial burdens. It cannot repay the sacrifices they have made for us, but it is a small way we can support our troops and their families at home and abroad.