[Congressional Record Volume 147, Number 28 (Tuesday, March 6, 2001)]
[Extensions of Remarks]
[Page E286]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


 INTRODUCTION OF A BILL TO ELIMINATE THE PERSONAL EXEMPTION PHASE-OUT 
                 AND THE ITEMIZED DEDUCTION PHASE-DOWN

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                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                         Tuesday, March 6, 2001

  Mr. CRANE. Mr. Speaker, today I am introducing three pieces of 
legislation to refine the tax proposal put forward by President Bush. 
Let me state at the outset that I fully support President Bush's tax 
proposal as he laid it out. I think it is appropriate for the times and 
well-designed. Even so, there is no legislation or proposal that cannot 
be improved upon. And so I offer these three bills in this spirit and 
in the belief that the President in all likelihood would and should 
support them.
  This bill takes as its starting point the income tax rate reductions 
proposed by President Bush, phased-in over ten years. I have included 
these rate reductions to provide the context for my proposed 
refinement, which is to repeal the phase-down of itemized deductions 
and the phase-out of personal exemptions contained in the current code. 
These provisions are sometimes known by the names of Pease and PEP, the 
former named for its originator. Congressman Don Pease, a distinguished 
Member of the Ways and Means Committee during the 1986 Tax Reform Act, 
and the latter an acronym for personal exemption phasesout.
  The income tax contains a number of unfortunate provisions that 
phase-out various credits, exemptions, and deductions. For example, the 
amount an individual can take as itemized deductions falls for married 
taxpayers with adjusted gross income (AGI) over a $132,950 threshold. 
These taxpayers see a reduction in their total itemized deductions at 
the rate of 3 percent for every $1,000 earned over the threshold. The 
proportion of a taxpayer's itemized deductions that can be lost due to 
this provision is capped at 80 percent of their otherwise allowable 
deductions. Similarly, for 2001 a taxpayer's allowable personal 
exemptions are reduced by 2 percent for every $2,500 over and above 
$199,450 in AGI. This provision raises the marginal tax rate by .8 
percent for affected taxpayers.
  The itemized deduction phase-down and the personal exemption phase-
out exist for only one reason--to increase taxes on the affected 
taxpayers. Even more troubling, they do so by significantly increasing 
tax complexity. Even worse, they raise taxes by raising marginal rates 
and they do so, not through an explicitly higher statutory tax rate, 
but through a hidden device.
  The reduction of marginal tax rates is a hallmark of the Bush tax 
proposal. High marginal tax rates discourage people form investing, 
saving, creating new businesses, and so forth. Reducing these rates is 
therefore one of the effective things we can do to ensure a stronger 
economy in the future. The bill I am introducing today eliminates two 
hidden marginal tax rate increases and is, therefore, completely 
consistent with the strategy of the Bush tax rate reductions.
   The bill I am introducing today is also fully consistent with sound 
tax policy because it makes the tax code more transparent. Taxpayers 
ought to be able to determine with little effort the tax consequences 
of their economic decisions. Hidden marginal rate increases are 
therefore inconsistent with sound tax policy and ought to be 
eliminated.
  Further, everyone involved in tax policy agrees that the tax code is 
too complex, too costly to comply with, and too costly to administer. 
This bill certainly does not sweep away all the cobwebs of complexity, 
but it will make the code simpler for those affected by these two 
provisions.

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