[Congressional Record Volume 147, Number 53 (Wednesday, April 25, 2001)]
[Extensions of Remarks]
[Page E623]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              TAXATION ON MEMBERS OF THE U.S. ARMED FORCES

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                         HON. CAROLYN McCARTHY

                              of new york

                    in the house of representatives

                       Wednesday, April 25, 2001

  Mrs. McCARTHY of New York. Mr. Speaker, I would like to bring 
attention to the following article by Mr. Dennis Fitzgerald proposing 
an end to taxation on members of the U.S. armed forces.
  George W. Bush has a golden opportunity to effect a meaningful tax 
cut, spark our flagging economy and restore morale and loyalty in the 
military in one fell swoop. He should--immediately--end all taxes on 
members of the armed forces.
  It has always seemed to me mildly absurd that those who are being 
paid by taxes also have to pay them. It would seem that by ending 
military taxation, President Bush could increase the buying power of 
our military and at the same time relieve them from the burden of 
filing federal tax returns. He would also go a long way toward keeping 
the best people in the service.
  Military stationed in a combat zone pay no taxes now. Why should they 
have to pay while training for that mission? Some training is more 
dangerous than some combat. And people who change jeep transmissions in 
a combat zone are often under no more peril than those performing the 
same task stateside.
  It is no secret that re-enlistment rates have reached an all time 
low. The all--volunteer military is woefully short of competent middle 
management. And only the Marines last year filled their enlistment 
quotas. Some have cited the opportunities presented by a booming 
economy as the reason for the best captains leaving the service before 
their time.
  But the real reason for these departures is morale and a lack of 
financial incentive. Thirty years ago a career military person could 
count on a living wage while on active duty, discounted food, gasoline 
and other creature comforts through the PX system and the GI education 
bill amounting to a month of education for each month served up to 36 
months.
  The retirement benefits, if one served 20 or more years, were what 
kept most ``lifers'' going. These were one half to three fourths of the 
highest salary and medical services and PX aid club privileges for 
life. Both retirement and active duty benefits have been severely 
curtailed, leading to a malaise that even George Washington's army 
would recognize.
  The solution is a tax-break--big time. There are approximately 1.4 
million service people on active duty with total salaries of about $42 
billion. Tax revenues from this group currently stand at about $12 
billion. This is a drop in the bucket when one considers total tax 
revenues of $950 billion.
  This move would encourage people both to join and stay in the 
military. In the worst case it would cost the country little, and, if 
the Laffer curve is still operational, perhaps would actually increase 
tax revenues.
  Increasing the disposable income of service people makes good 
economic sense. The newly formed XFL is killing to attract male 
audiences between 18 and 32. Why? Because they have a lot of money to 
spend. It should dawn on this administration that they have a lot of 
that cohort in their employ. And If they freed up their income, they 
might just spend it on stuff.
  Camp LeJeune North Carolina on its web site proudly boasts it 
contributes some $3 billion to the local economy. Fine. With a tax cut 
it might just contribute $4 billion. And with the multiplier effect, 
this would pump tens of billions of dollars into an economy that most 
agree is faltering. And part that increased revenue would find its way 
to the U.S. Treasury through increased income and excise taxes on 
civilians who sell to service people.
  Congress, especially those members from the South, should support 
this measure. Increased revenue from businesses surrounding military 
bases has always warmed their hearts-and filled their campaign chests. 
With the military tax cut adopted, there would be an easier haul 
through Congress for a more far-reaching bill later in the year.
  These practical considerations aside, the major reason for this 
measure would be to put pride back in our military. Those on active 
duty in the armed forces should consider themselves so special that the 
government exempts them from paying taxes.
  In addition to saving administrative headaches, increasing disposable 
income, bumping up total tax revenues and attracting good people for 
the military, a zero tax rate would add a certain all-encompassing 
eclat to serving that medals, decorations or flag ceremonies could 
never replace.

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