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Tax Relief
Throughout my four terms as a United States Senator, I have consistently been a strong advocate of reducing every American’s tax liability. Most recently, I supported the Working Families Tax Relief Act, which the President signed into law on October 4, 2004. The bill extends $145.9 billion worth of expiring tax credits. The major provisions of the legislation include a five-year extension of the $1,000 child tax credit, a four-year extension of marriage penalty relief, a six-year extension of the 10 percent tax bracket for the first $7,000 of income for single taxpayers and $14,000 for married couples, one more year of relief from the alternative minimum tax (AMT), and a one year extension of certain business tax breaks, including the Research & Development (R&D;) tax credit.
The Jobs and Growth Tax Relief Reconciliation Act (JGTRRA), which I supported and was passed by the Congress in 2003, provides $349.7 billion in tax relief to Americans. Specifically, this important legislation lowers dividend and capital gains taxes to taxing 15 percent for most taxpayers and 5 percent for those in the lowest brackets, with the 5 percent rate cut to zero in 2008 for one year. The bill also accelerates the tax rate cuts currently scheduled to take effect in future years and accelerates for two years the elimination of the “marriage penalty” and the increase in the child tax credit. Further, the agreement provides $20 billion in direct assistance to states, including $10 billion in state Medicaid assistance. In addition, the legislation reduces taxes for businesses by $10.1 billion over the next 11 years.
JGTRRA also provides targeted relief for taxpayers. The legislation reaffirms the Federal government’s commitment to helping working families by boosting the child tax credit from $600 to $1000 for 2003 and 2004 as well as reducing tax penalties on married couples filing a joint tax return during this same two year period. Additionally, this legislation demonstrates support towards lower-income Americans by expanding the 10 percent tax bracket to taxable income of $7,000 for individuals and $14,000 for couples filing jointly from 2003 through 2004.
For small businesses, JGTRRA provides instant tax relief. Through Section 179 expensing, certain capital equipment will receive increased deductions from $25,000 to $100,000 through 2005. The bill also provides all businesses with a 50 percent bonus depreciation for equipment purchased after May 5, 2003 through the end of 2004. Following the terrorist attacks on September 11, 2001 and amid continued concerns regarding the economy, JGTRRA created a short term stimulus to the economy as well as a long term roadmap to maintaining economic prosperity.
Seeing the positive effects these tax cuts have had on our nation’s economy, I support making these cuts permanent. I voted for the tax cuts because I believed they provided a realistic chance of stimulating the economy. Following the tax cuts, there has been a significant increase in the stock market and job creation. If I conclude that the tax cuts are not aiding the economy, I would consider not making them permanent.
On the issue of the estate tax, I have been a supporter of permanent repeal due to the unnecessary burden this particular tax places on small business owners and family farms. Current tax law provides that the estate tax will be incrementally reduced from 2001-2009, repealed in 2010, and reinstated in 2011. While this does provide some aid for the small business and farming communities, I will continue to work for a lasting solution to this problem and help fortify our nation’s economy.
I have also consistently supported proposals that advocate simplifying the Federal tax system. The current system is a complex tax code with myriad rates, deductions, and instructions. It brings about hours of non-productive time being spent by the taxpayer in compliance with, or avoidance of, the tax code. In March 1995, I introduced the first bill in the Senate that would create a Federal flat tax. This legislation proposes completely replacing current tax provisions with an across-the-board 20 percent Federal tax on the income of individuals and businesses. I also included provisions in this bill that would eliminate the estate tax as well as the tax on dividends. In the 109th Congress, I reaffirmed my commitment to reforming the Federal tax system by introducing similar flat tax legislation.
As the Senate continues to deliberate the reform of the Federal tax system, please be assured that I will continue to work towards enactment of meaningful legislation that benefits taxpayers in Pennsylvania and throughout the nation.
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