Grassley said the initiative sends a clear message that the first priority for tax relief this year must be the millions of American couples who are struggling to make ends meet, raise and educate their children, keep affordable health insurance, and plan for long-term care needs. Above all, the federal tax code should not penalize men and women for making a commitment through marriage, Grassley said.
The Tax Relief for Working Families Act advanced by Rep. Nancy Johnson of Connecticut contains "the tax cuts that people really care about," Grassley said. "It says: tax fairness first."
As presented in the House of Representatives, the bill would devote $100 billion of the projected trillion-dollar budget surplus expected over the next five years. It also requires that 62 percent of the surplus be reserved for the Social Security program and 15 percent be reserved for saving Medicare. The plan is modeled after legislation passed by the House last year.
Grassley said he will introduce the bill in the Senate so that middle-income Americans get taken care of first in the tax-cut debate. Grassley said he intends to add additional tax relief measures to this comprehensive plan and, ultimately, support the highest level of tax cuts possible this year. Grassley is a senior member of the tax-writing Senate Finance Committee.
"There is broad, bi-partisan support for the tax cuts in the bill presented today," Grassley said. "By agreeing to make these initiatives the top priority, Congress can ensure that budget surplus dollars get back into the taxpayer's pocket. The public wants this kind of can-do leadership in Washington, not an endless partisan battle between a $700 billion-plus across-the-board tax cut and the President's plan to give very modest tax cuts that are paid for with a tax increase on someone else. We need to put the people's priorities on the front burner."
Specifically, the legislation that Grassley and Johnson advocate would provide:
The bill would double the standard deduction for married couples, putting them on equal footing with single taxpayers. Under current law, a husband and wife filing jointly are taxed at a higher level than an unmarried couple. For 1998, the standard deduction is $4,250 forsingles, or $8,500 for an unmarried couple, versus $7,100 for spouses filing jointly. Theresult is that married couples pay tax on an additional $1,400 in income than they would if they remained two single people filing.
The bill would stop penalizing senior citizens who need to work to make ends meet by accelerating the scheduled increase in the earnings limit to $30,000 in 2000. Right now, if someone between 65 and 69 years old earns more than $15,500 annually, the government takes back $1 in Social Security benefits back for every $3 earned.
The bill would help make health care insurance affordable for millions of Americans who work for employers who do not provide coverage. It would give those individuals who buy their own health insurance the same favorable tax treatment given to those who receive employer-paid coverage.
The bill would empower individuals and families to plan ahead for what can be overwhelming long-term care expenses. It would create tax incentives to help people buy long-term care insurance and it would establish a tax credit to help caregivers with the cost of caring for a dependent relative in their home.
The bill would ensure that families who use the child care and education tax credits are not penalized by the alternative minimum tax (AMT). As it stands, some families who take advantage of the HOPE college credit, Lifetime Learning credit, the $500 child credit, and the dependent care tax credit to help families care for and educate their children are being hurt by the AMT because their taxes are lowered.
The bill would renew the purchasing power of a successful program that provides quality affordable rental housing across the country. It would raise the annual cap on state authority to allocate low-income housing tax credits from $1.25 per capita to $1.75 per capita, and index the cap to inflation. Inflation has eroded the value of the program by almost 50 percent since 1986. Today, the demand for housing credits outpaces supply by three-to-one.
The bill would help clean-up contaminated urban sites and promote the preservation of rural landscapes. It would allow for deductions for demolition costs of unuseable buildings and increase the deduction for land donations from 30 to 50 percent. Together, these provisions encourage the renewal of urban properties and preserve farmland.
The bill would encourage private research and development, as well as provide incentives for employers to help move people off welfare and into the workforce. It would make permanent the Research and Experimentation (R&D) Tax Credit which is set to expire.
Grassley said he also would seek to include his initiatives to expand the deductibility of interest on student loans for college, to provide tax relief for school construction and to extend the wind energy production tax credit, among other possible additions to the bill he will introduce in the Senate.