[Congressional Record Volume 150, Number 126 (Thursday, October 7, 2004)]
[Senate]
[Pages S10745-S10747]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

  By Mr. PRYOR (for himself, Mrs. Lincoln, Mr. Akaka, Mr. Baucus, Mr. 
Bayh, Mr. Bingaman, Mrs. Boxer, Ms. Cantwell, Mrs. Clinton, Mr. 
Corzine, Mr. Daschle, Mr. Dayton, Mr. Dodd, Mr. Dorgan, Mr. Durbin, Mr. 
Feingold, Mrs. Feinstein, Mr. Graham of Florida, Mr. Jeffords, Mr. 
Johnson, Mr. Kennedy, Ms. Landrieu, Mr. Lautenberg, Mr. Leahy, Mr. 
Levin, Mr. Lieberman, Ms. Mikulski, Mr. Miller, Mrs. Murray, Mr. Nelson 
of Florida, Mr. Nelson of Nebraska, Mr. Reid, Mr. Rockefeller, Mr. 
Sarbanes, Mr. Schumer, and Ms. Stabenow):
  S. 2942. A bill to amend the Internal Revenue Code of 1986 to provide 
that

[[Page S10746]]

combat pay be treated as earned income for purposes of the earned 
income credit; to the Committee on Finance.
  Mr. PRYOR. Mr. President, I know the hour is late, and I will try to 
keep my comments fairly brief. I promise I will not take more than an 
hour or two.
  What I am showing tonight is a picture of some American heroes. 
Oftentimes we look at a person in uniform and say: That's a hero. 
Certainly, the folks injured and killed in combat we see them as 
heroes. But you are really just a hero if you serve, if you put on your 
uniform and do your duty to your country.
  The other heroes in this picture are this soldier's family. We can 
see they are hugging him and supporting him, and that is really part of 
the definition of a hero as well. Certainly, the folks who are not 
pictured here--this man's employer because he is probably in the Guard 
or Reserve, and folks in the community, people in his church or his 
neighborhood--whatever the circumstances may be--they are heroes in 
this picture.
  We thank all of our soldiers who are serving bravely for our country, 
wherever they may be tonight. I want to thank the conferees, who worked 
so hard on the Working Families Tax Relief Act last week, for including 
the provisions of S. 2417, the Tax Relief for Americans in Combat Act 
or, as some people call it, TRAC.
  One thing that TRAC was designed to do was eliminate the combat pay 
penalty. I introduced TRAC back in May of this year. The rationale for 
introducing TRAC was to help our men and women in combat. In fact, in 
my work on the Armed Services Committee, and with the help of Chairman 
Grassley and Ranking Member Baucus, the committee requested a GAO 
report. We became concerned in the Armed Services Committee about the 
tax package that is available to our soldiers, Marines, airmen and 
seamen. So Chairman Grassley and Ranking Member Baucus were gracious 
enough to request a GAO report.
  In essence, what the GAO report found was a glitch in the Tax Code, 
an unintended consequence. Basically, what they found is that if one is 
a soldier and receives combat pay, which means they are in theater and 
they are in harm's way every day, they receive their combat pay and 
they want to claim their earned income tax credit, which many of these 
individuals are entitled to under our Tax Code, they actually can lose 
money on their taxes by receiving their combat pay. That is why I call 
it the ``combat pay penalty,'' because it really does disadvantage some 
people on their taxes.
  I have a chart that illustrates what I am talking about. If someone 
is working in a hardware store 12 months out of the year, let's say 
they were making $16,000 a year annually, under the earned income tax 
system that we have on our books right now, $4,100 may possibly come 
back to him under the EITC. If that same person works in a hardware 
store, say, for 4 months, and he is in the guard or reserve and he gets 
8 months for his military service and he makes the same $16,000, by the 
time he does the math and he fills out his tax form he is only entitled 
to $2,100 under the earned income tax credit.

  What we are doing is, inadvertently we are putting our soldiers at a 
disadvantage. In other words, this soldier in this example has lost on 
his taxes about $2,000. Clearly, this is not the intent of Congress.
  The way I feel about it--and I know a lot of my colleagues on both 
sides of the aisle feel about this--is while our brave soldiers are 
overseas fighting for us, we need to be in Washington fighting for them 
and their families. I think it is just incumbent upon us to recognize 
the principle that we need to take care of those who take care of us. 
There is no one in the world who is doing a better job taking care of 
us than our men and women in combat.
  Under the provisions of a bill that I will file this evening, the 
provisions are very simple. What it will do is allow men and women in 
uniform serving in combat to include combat pay for the purpose of 
calculating their earned income and their child tax credit benefits. If 
that calculation works in their best interest, it gives them control 
over their taxes and allows them to make the determination for what is 
in their best interest on their taxes.
  Again, I want to thank the conference, and the Senate, House, and the 
President for signing it, because we did win a short-term victory on 
this. We got this provision on the earned income tax credit for 2 
years. Everything else in the bill was 5 years, but we did get 2 years. 
It is a short-term victory, something I hope we will be able to go back 
and change and make it a long-term solution for these brave Americans.
  I do not want to speak to all the intricacies of the earned income 
tax credit because I have heard Senators in this Chamber say that it is 
basically a Tax Code for a welfare program. I disagree with that. We 
may have an honest disagreement about that. Clearly, our men and women 
in uniform receiving combat pay are working hard. We know this is not a 
welfare program for them. We know they are not going to abuse this or 
they are not going to miscalculate it. We have a high degree of 
confidence that this is going to be good for them and good for all of 
us.
  Anyway, I want to draw the attention of my colleagues to the next 
chart, which is the earned income tax credit. This chart shows how it 
is structured. Depending on a person's situation, if they have no 
child, one child, two or more children, it shows a sort of range of 
possibilities, depending on what one's income is. Obviously, it is like 
a formula where the numbers have to be plugged in. It is different for 
different people.
  As we can see, a soldier who is making, say, about $6,300 ought to 
get about $390 from the earned income tax credit. Whereas a soldier who 
is down on the income scale, making $1,400, should get about $2,600 in 
earned income tax credit. So, again, this will change depending on 
the situation.

  What we are proposing would allow our soldiers, our men and women in 
uniform, to take advantage of an existing provision of the Tax Code and 
maximize it to their full advantage.
  I am not saying that we can get this done this week. We certainly 
understand that we are out of legislative days, but I hope sincerely 
that we can come back in the lame duck session or whenever we reconvene 
and really get serious about helping our men and women in uniform.
  We fixed the earned income tax credit for 2004 and 2005.
  Here is another chart showing some of the numbers and how it would 
work, again, depending on how many months one is in combat. Just 
depending on the various losses that one might have, we can see based 
on this chart and the numbers here, the soldiers who are impacted the 
most are the enlisted men. Officers can be penalized under this, but 
the enlisted men and women are the ones who are probably at the 
greatest danger of losing their tax benefit.
  One reason that Senators have decided to help me on this--we have, I 
believe 36 cosponsors now who have signed up to help out on this--is 
because it is a cheap fix. When we look at the numbers for 2 years, 
2006 and 2007, we are only talking about $15 million. When we talk 
about taxes in this country, we talk about billions or trillions, but 
over 2 years this is only $15 million. Over 10 years it is only $68 
million. That is not a lot of money. That is really peanuts in the 
grand scheme of things when we are talking about our Tax Code and other 
numbers that we talk about, when we talk about fixing our taxes in this 
country. This is real money for these soldiers in uniform.
  I close with another picture of some heroes to remind us what this is 
all about, who we are trying to help. These soldiers, most of them, are 
relatively low-income because one has to be relatively low-income to 
even qualify for the earned income tax credit. They are leaving their 
families behind. Many of them are leaving jobs, homes, all kinds of 
economic security. Like I said, these are the folks who are taking care 
of us, and I think in the Senate and in the Congress we ought to do our 
part to take care of them.
  Mrs. LINCOLN: Mr. President, I rise to join my colleagues Senators 
Pryor and Baucus in introducing legislation to ensure members of the 
military who serve in combat are not treated unfairly under the tax 
code. I believe strongly that we have an obligation in Congress to take 
care of the brave men and women in uniform who risk their lives to take 
care of us.

[[Page S10747]]

  As my friend and colleague Senator Pryor mentioned, the provision in 
the Tax Code we are seeking to amend affects the ability of military 
personnel who serve in combat zones to benefit from the Earned Income 
Tax Credit. Due to an unintended consequence in the tax code, those 
affected may loose up to $4,000 in tax relief simply because they have 
volunteered to defend our freedom.
  This is wrong.
  We corrected the problem for 2 years--until 2006--in the Working 
Families Tax Relief Act which Congress recently approved but we didn't 
resolve the matter appropriately in my judgement. I offered an 
amendment during the conference report to bring tax relief for military 
families in line with the other provisions in the bill but that 
amendment was rejected.
  I hope my colleagues will reconsider.
  The men and women in uniform who serve in harm's way and their 
families here at home are the last people we should burden with 
uncertainty in the Tax Code. I think we should fix this problem without 
delay and that is why l am proud to join in this effort.
  I applaud Senator Pryor for his leadership and hard work on this 
issue, and I yield the floor.

                          ____________________