August 3, 2012

Tax Cuts

This week the House considered H.R. 8, The Job Protection and Recession Prevention Act. This bill extends the 2001 and 2003 tax cuts passed during the Bush Administration for one year. Those tax cuts are scheduled to expire on December 31st. H.R. 8 extends the tax cuts for everyone, regardless of income. It also keeps the estate tax rate at 35% and exempts the first $5 million of an estate from being taxed. According to the Joint Committee on Taxation, this Republican proposal will increase the deficit by $403 billion in one year.

Democrats offered an alternative to H.R. 8, which I supported. The Democratic proposal extends tax cuts for those earning $250,000 or less. This is not the bill that I would have drafted personally but it is far better than the Republican plan. The Democratic alternative focuses tax cuts on the middle class rather than the wealthy and reduces our debt by $930 billion over ten years.

Consideration of H.R. 8 is nothing more than a political exercise. Like many other bills taken up by the House this year, it won’t be brought up in the Senate and the President has already said he will veto it.

In the weeks ahead, I will work hard to improve the Democratic proposal. I think it’s important that legislation addressing the expiration of these tax cuts is focused on tax equity and on enforcement to ensure that everyone pays what they owe. I do not believe government can function as we all want it to by endlessly cutting taxes — they are the price we pay for a civilized society. Taxes should be used to improve our communities and provide necessary services. They should be levied in a progressive way that does not punish success, but respects the needs of those who are not wealthy.

It’s worth noting that the Republican version of H.R. 8 leaves out some important provisions that directly benefit middle class families. The bill does not include extensions for either an expanded Earned Income Tax Credit or the Child Care Tax Credit. It eliminates the American Opportunity Tax Credit, which is for higher education expenses. By not addressing these three provisions, 25 million families will see an average tax increase of $1,000. The Democratic proposal would extend all these low and middle income provisions.

I voted YES on the Democratic proposal. That vote is recorded below:

I voted NO on the Republican proposal, H.R. 8 and that vote is recorded below:

Disaster Assistance

Yesterday the House passed H.R. 6233: Agriculture Disaster Assistance Act. This bill reauthorizes four agricultural disaster aid initiatives for the upcoming fiscal year. These programs primarily cover livestock, fish, bees and trees. In general, I support the goals of this bill. However, it’s funded by slashing conservation initiatives and cuts $256 million more from these programs than is needed to offset the costs of the bill. As a result, many conservation organizations oppose this bill. H.R. 6233 was taken up instead of a 5 year reauthorization of the farm bill. The Senate has already acted on a farm bill that renews the disaster aid programs noted above. Many programs authorized through the farm bill will start expiring next month. Yet instead of acting on a more balanced and comprehensive bill, the House instead took up a narrowly drawn aid package. Many parts of the country are experiencing the worst drought conditions in decades. Crops will be impacted and as a result, food prices will rise. Instead of delivering legislation that can give farmers some relief and some stability, the House dealt with only 4 disaster aid programs. I voted NO. H.R. 6233 passed and the entire vote is recorded below:

Rewriting the Tax Code

Also yesterday, the House passed H.R. 6169: Pathway to Job Creation through a Simpler, Fairer Tax Code Act. This legislation directs the Chair of the House Ways and Means Committee to present a bill reforming the tax code by April 30th of next year. Any committees of jurisdiction would then have 20 days to consider their portions of the bill. Once that has happened, H.R. 6169 requires fast track floor consideration.

I fully agree that we need tax code reform. But imposing arbitrary deadlines won’t produce a thoughtful bill. Furthermore, H.R. 6169 calls for the existing individual tax brackets to be reduced to two, ranging from 10% to not more than 25%. To achieve this rate reduction, many provisions in the tax code that primarily help the middle class would be reduced and possibly eliminated, such as the mortgage interest deduction, education tax credits and incentives for retirement savings.

According to an analysis by the Joint Economic Committee, millionaires would receive an average tax cut of $331,000 while middle class families will likely see their taxes go up. Most fast track authorities are narrowly drafted and do not allow extraneous provisions outside of the main purpose, but H.R. 6169 has no such restrictions. It would allow any number of additional unrelated provisions to be added. This could be used to repeal healthcare reform or gut our environmental laws without the normal protections that the House and Senate have.

H.R. 6169 also reduces the corporate tax rate to 25% and moves from a worldwide to a territorial tax system. This means that taxes on the foreign earnings of companies would be eliminated and could result in more jobs being shipped overseas. I voted NO. H.R. 6169 passed and the entire vote is recorded below:

What’s Up Next Week

There are currently no votes scheduled for next week.