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Congressman
Paul Ryan
The economy has been growing at 3.5 percent with nearly 2 million jobs created in the last year alone. But, even though the economy is making progress, the news is not all good. Gas prices have skyrocketed and some businesses have declared bankruptcy, including Delphi Corporation which has two plants in Oak Creek, Wisconsin. The last thing taxpayers need at a time like this is a tax increase.
It is critical that the tax relief enacted in 2003 and 2004 does not expire. This tax relief fueled significant economic expansion and, as a result, the federal government has seen an increase in tax revenues flowing into the Treasury and a reduction in the deficit. After witnessing declines in revenues from 2000 through 2003, revenues surged in 2004 and 2005, and they are surging again in 2006. So far, corporate receipts are about $40 billion higher than last year. In the two and a half years preceding the 2003 tax cuts, our economy lost 2.6 million jobs. And, since the tax cuts, we have gained over 5.2 million jobs.
Preventing Tax Increases
This economic progress, however, is in danger of coming undone because this tax relief is scheduled to expire as a result of outdated parliamentary rules in the Senate. I authored legislation to make this tax relief permanent. To undo the scheduled tax increases, the House and Senate passed H.R. 4297, the Tax Relief Extension Reconciliation Act. I voted in favor of this legislation which was signed into law by the President on Wednesday, May 17, 2006. It would extend some vital current tax relief measures that are important to families and small businesses which, among other initiatives, include the following:
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Alternative Minimum Tax (AMT)
Relief. H.R. 4297 prevents 15 million taxpayers from getting hit by the AMT in 2006 and helps many more by increasing the exemption amounts and allowing nonrefundable personal credits to offset the AMT. It also extends the AMT exemption levels through the end of 2006 at a higher level than in 2005. The new exemption levels for 2006 are $62,550 for joint filers and $42,500 for single filers.
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Extend Section 179 Expensing for Small
Businesses. Through 2007, H.R. 4297 allows small businesses to continue to deduct from their taxes in the first year up to $100,000 of business expenses. The deduction phases out dollar-for-dollar to the extent the business’s annual investments exceed $400,000. Without action, the expensing limit will decline to $25,000 and the phase-out threshold will decline to $200,000 after 2007.
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Extend Reduced Rates on Capital Gains and
Dividends. Prior to H.R. 4297, capital gains and dividend income are taxes at a maximum rate of 15-percent rates through 2008. For taxpayers in the 10 and 15 percent tax brackets, the tax rate was 5 percent through 2007 and zero through 2008. The new tax law extends the rates effective in 2008 through 2010. Without action, these rates would have increased after 2008.
Tax Fairness for Veterans Homeownership
Wisconsin veterans of Iraq, Afghanistan, and other recent military action deserve the same access to homeownership as earlier generations of veterans. I authored legislation included in H.R. 4297 which allows Wisconsin to continue its special mortgage loan program for veterans. Under previous law, Wisconsin and several other states were authorized to issue tax-exempt bonds, the proceeds of which are used to finance mortgage loans to veterans. However, these mortgage loans can be made only to veterans who served on active duty before 1977 and who applied for the loan within 30 years after they left active military service. Therefore, veterans of more recent or ongoing military operations such as Operation Iraqi Freedom, Operation Enduring Freedom, Kosovo, Somalia, and the 1991 Persian Gulf Ware were not eligible, under previous law, for such mortgage loans.
My legislation, which was included in H.R. 4297, repeals the requirement that veterans receiving loans financed by these veterans’ bonds must have served before 1977, enabling Wisconsin’s veterans’ home loan program to stay active and assist Wisconsin veterans of Iraq, Afghanistan and other more recent conflicts. Additionally, the new law provides new state limits for these bonds. The new bonding authority for Wisconsin to provide these loans would be phased in over five years and would sunset in 2010.
Retirement Savings Fairness for Our Troops
Members of the military in combat should be allowed to contribute to an Individual Retirement Account (IRA). Under current law, contributions to an IRA are limited to the lesser of $4,000 (in 2006) or the individual’s taxable compensation. Combat pay, however, is tax free and, as a result, members of the military who receive combat pay as their only source of compensation are not allowed to contribute to an IRA (because their taxable compensation is zero).
H.R. 1499, the Heroes Earned Retirement Opportunities (HERO) Act, would treat tax-free combat pay as taxable compensation for the purpose of making annual IRA contributions. It is effective for contributions made after December 31, 2003, providing our troops with up to $70 million in tax benefits over the next 10 years. I voted in favor of this legislation which passed the House by an overwhelming bipartisan vote of 412 – 0. It is currently pending in Conference where the House and the Senate are finalizing the legislation.
Reforming and Simplifying the Tax Code
Taxpayers spend too much of their time and resources to comply with complex Federal tax laws. The Internal Revenue Code consists of approximately 1.4 million words. And, since 1986, there have been nearly 15,000 changes to the tax code, equal to more than two changes a day. This makes our tax system unpredictable and creates uncertainty for families and businesses. This burden on taxpayers needs to end by simplifying and reforming the tax code.
The President’s Advisory Panel on Federal Tax Reform issued their recommendations to the U.S. Secretary of Treasury. These recommendations include a reduction in the number of individual tax brackets, repeal of the AMT, tax-free purchase of health insurance and full business expensing.
I believe income should be taxed once, and only once, at its source. While I believe some of the Commission’s recommendations carry this out, I have some concerns that the recommendations did not go far enough to reduce the complexity of the tax code, the burden on taxpayers and obstacles in the tax code to job creation and investment.
One of my top concerns continues to be keeping jobs and businesses, particularly in the manufacturing sector, in the United States. I firmly believe Congress must work to make U.S. businesses more competitive abroad in order to keep jobs in the U.S. The House Ways and Means Committee, of which I am a member, is holding hearings exploring options to reform the U.S. tax code. I look forward to working with my colleagues to find the best tax proposal that encourage investment and job creation in the United States and ease the tax burden on all taxpayers.
Additional Information.
For more information on tax issues and priorities, please refer to the following
website.
U.S.
Treasury Department: www.treas.gov
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