For only the third time since the second World War, American taxpayers are in store for a long overdue break on their federal income taxes. Despite demagoguery by the big spenders in Washington, President Bush followed through on his campaign promise to let hardworking Americans keep more of their own money. And by fall, taxpayers should see fatter paychecks, as the first in a series of marginal rate reductions begins to take place over the next decade.
With estimates projecting a $5.6 trillion federal budget surplus and signs of a weakening economy serving as another strong impetus, the president and Congress agreed the time was right to return one-quarter of the anticipated surplus to the working men and women who created it in the first place.
For four months, as chairman of the tax-writing Senate Finance Committee, I had an incredible opportunity to shepherd the tax cut through an evenly divided Senate. On May 26, Congress gave final approval to the Restoring Earnings to Lift Individuals and Empower Families (RELIEF) Act.
The bill provides for affordable tax relief within the context of a responsible budget that secures funding for education, agriculture, prescription drugs and defense. What’s more, the federal government will pay down every dollar that is possible to pay down on the national debt over the next 10 years.
Here’s what RELIEF is in store for taxpayers:
Across-the-board marginal rate reductions; (Taxpayers will benefit from a newly created 10 percent rate retroactive to Jan. 1, 2001. The 28, 31 and 36 percent rates will decline three points respectively over the next few years, with the first one point reduction taking effect on July 1, 2001. The top 39.6 percent marginal rate will drop to 35 percent over 10 years.)
Rebate checks up to $300 per individual taxpayer/$600 for married couples;
Marriage penalty relief;
Death tax relief and eventual repeal;
Increased child credit up to $1,000;
Refundable child credit for lower-income families;
Enhanced retirement savings opportunities; (Increases annual contribution limits for 401(k) pension plans -- from $10,000 to $15,000 -- and IRAs -- from $2,000 to $5,000.)
Education savings; (Makes student loan interest deductible for lifetime of loan and raises contribution limit for education savings accounts from $500 to $2,000.)
Expanded adoption tax credit.
In hindsight, the success of my efforts was based on bipartisanship, consensus-building among all members of the committee and hard work. You don’t get everything you want in a Senate split 50-50, but the pieces of the puzzle will fit together if you don’t ram it through and instead work in good faith towards a package that a majority can support. As chairman, I worked to maximize public policy and minimize politics. Taxpayers deserve relief. It was my privilege to guide the bill to final passage.
Despite the very real disappointment caused by a Republican senator’s decision at the end of May to become an independent and thereby tilt the Senate’s majority to the Democrats for the first time since 1994, I know I can serve just as effectively for Iowa and work even harder to meet legislative goals that will make a difference for Iowa farmers, retirees, small business owners, workers and their families. Throughout the summer months, I will work towards enactment of legislation that creates a new Medicare benefit for seniors that need help paying for prescription medicine; fixes the disparity in the Medicare reimbursement formula that mistreats Iowa hospitals, taxpayers and beneficiaries; allows families with special needs children to remain eligible for Medicaid health benefits; and, gives the president trade negotiating authority to broker market-opening trade agreements that would boost sales of Iowa’s raw commodities, goods and services.
As the top Republican on the committee with jurisdiction over health, pension, tax, welfare and trade matters, I also will continue to conduct aggressive oversight over the IRS, U.S. Customs Service, the nursing home industry, and Medicare’s books.
Thankfully, the good working relationship I cultivated with the incoming chairman of the Finance Committee during negotiations on the landmark tax relief package will continue to flourish no matter who holds the gavel. And that’s a key ingredient necessary to unlock future bipartisan initiatives coming out of the committee, especially when the president’s commission on Social Security issues its recommendations in September.
In the meantime, Iowa taxpayers can look forward to a much-deserved rebate from the Federal Treasury. To expedite the process, taxpayers who recently have moved are encouraged to notify the post office of a change of address. Notwithstanding the daunting task of sending out rebates to 11 million taxpayers a week, Iowans can expect their check in the mail by fall’s end.