[Congressional Record Volume 150, Number 52 (Wednesday, April 21, 2004)]
[Senate]
[Pages S4226-S4227]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD:
  S. 2326. A bill to modify the optional method of computing net 
earnings from self-employment; to the Committee on Finance.
  Mr. FEINGOLD. Mr. President, I rise today to address an injustice in 
the Tax Code that is threatening family farmers and other self-employed 
individuals. A number of my constituents, primarily Wisconsin farmers, 
have requested Congress's assistance to correct the Tax Code so they 
can protect their families. The legislation I introduce today, the 
Farmer Tax Fairness Act of 2004, will solve the problem for today and 
into the future.
  Farming is vital to Wisconsin. Wisconsin's agricultural industry 
plays a large and important role in the growth and prosperity of the 
entire State. Wisconsin's status as ``America's Dairyland,'' is central 
to our State's agriculture industry. Wisconsin's dairy farmers produce 
approximately 23 billion pounds of milk and 25 percent of the country's 
butter a year. But Wisconsin's farmers produce much more than milk; 
they also are national leaders in the production of cheese, potatoes, 
ginseng, cranberries, various processing vegetables, and many organic 
foods. So when the hard-working farmers of Wisconsin need help, I will 
do all I can to assist.
  One concern of Wisconsin farmers is that the Tax Code can limit their 
eligibility for social safety net programs, including old age, 
survivors, and disability insurance, OASDI, under Social Security and 
the hospital insurance HI part of Medicare. There programs are paid for 
through payroll taxes on workers and through the self-employment tax on 
the income of self-employed individuals. To be eligible for OSADI and 
HI benefits an individual must be fully insured and must have earned a 
minimum amount of income in the years immediately preceding the need 
for coverage. Every year, the Social Security Administration, SSA, sets 
the amount of earned income that individuals must pay taxes on to earn 
quarters of coverage, QCs, and maintain their benefits. An individual's 
eligibility requirements depend upon the age at which death or 
disability occurs, but for workers over 31 years of age, they must have 
earned at least 20 QCs within the past 10 years.
  Self-employed individuals can have highly variable income, and, 
particularly for farmers at the whim of Mother Nature, not every year 
is a good year. During lean years, individuals

[[Page S4227]]

may not earn enough income to maintain adequate coverage under OASDI 
and HI. Therefore, the Tax Code provides options to allow self-employed 
individuals to maintain eligibility for benefits. These options allow 
individuals to choose to pay taxes based on $1,600 of earned income, 
thus allowing self-employed entrepreneurs to maintain the same Federal 
protections even when their income varies.
  Unfortunately, both the options for farmers and nonfarmers--Social 
Security Act Sec. 211(a) and I.R.C. Sec. 1402(a)--have not kept pace 
with inflation, and they no longer provide security to families across 
the country. Decades ago, self-employment income of $1,600 earned an 
individual four QCs under SSA's calculations. In 2001, the amount 
needed to earn a QC rose to $830 of earned income, so individuals 
electing the optional methods were only able to earn one QC, making it 
much harder for them to remain eligible for benefits.
  Congress's failure to address this problem threatens the ability of 
self-employed individuals to maintain eligibility for OASDI and HI. I 
have heard from several of my constituent who want these options to be 
fixed so they can make sure their families will be taken care of in the 
event that something unforeseen occurs.
  Therefore, I am introducing the Farmer Tax Fairness Act of 2004 in 
order to provide farmers and self-employed individuals with a fair 
choice. Under this bill, they will continue to be able to elect the 
optional method if they so choose. When individuals do elect the 
option, this legislation provides an update to the Tax Code so farmers 
and self-employed individuals can retain full eligibility for OASDI and 
HI benefits. It indexes the optional income levels to SSA's QC 
calculations, allowing these farmers and self-employed individuals to 
claim enough earned income to qualify for four OCs annually. By linking 
the earned income level to SSA's requirements for QCs, the bill will 
ensure that the amount of income deemed to be earned under the optional 
methods will not need to be adjusted by Congress again.
  In addition to providing security to self-employed individuals and 
farmers across the country, this solution is fiscally responsible. It 
actually provides a short run increase in U.S. Treasury revenues while 
having negligible impact upon the Social Security trust fund in the 
long run.
  Let me take a moment to acknowledge the efforts of the Senator from 
Iowa, Mr. Grassley, to address this problem in the 107th Congress. As 
chairman of the Senate Finance Committee, he included similar 
legislative language in the chairman's mark for the Small Business and 
Farm Economic Recovery Act of 2002. The Senate Finance Committee held a 
markup on the legislation on September 19, 2002, but the changes to the 
optional methods did not become law.
  When incomes fall, the Tax Code provides optional methods for 
calculating net earnings to ensure that farmers and self-employed 
individuals maintain eligibility for social safety net programs. Due to 
inflation, the Tax Code has not kept up and many farmers are losing 
eligibility for some of Social Security's programs. Congress needs to 
provide security to farm families and other self-employed individuals. 
I urge my colleagues to support the Farmer Tax Fairness Act of 2004.
                                 ______