[Congressional Record Volume 151, Number 51 (Monday, April 25, 2005)]
[Senate]
[Pages S4189-S4190]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      BY Mr. FEINGOLD:
  S. 896. A bill to modify the optional method of computing net 
earnings from self-employment; to the Committee on Finance.
  Mr. FEINGOLD. Mr. President, today I am introducing legislation to 
address an injustice in the Tax Code that is threatening family farmers 
and other self-employed individuals. Some 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 2005, is similar to 
legislation I introduced last Congress and 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 that I have heard from 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. These 
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

[[Page S4190]]

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 who are at the whim of Mother Nature, not 
every year is a good year. During lean years, individuals 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 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 per year, 
making it much harder for them to remain eligible for benefits because 
they must average 2 QCs per year to be eligible.

  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 2005 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. In 
addition, 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.
  Along with 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. When 
these provisions were developed, Congress intended self-employed 
individuals to have the ability to pay enough to earn a full 4 QCs. 
Unfortunately the Tax Code has not kept up with the times and due to 
inflation 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 2005.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 896

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Farmer Tax Fairness Act of 
     2005''.

     SEC. 2. MODIFICATION TO OPTIONAL METHOD OF COMPUTING NET 
                   EARNINGS FROM SELF-EMPLOYMENT.

       (a) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--The matter following paragraph (15) of 
     section 1402(a) of the Internal Revenue Code of 1986 is 
     amended--
       (A) by striking ``$2,400'' each place it appears and 
     inserting ``the upper limit'', and
       (B) by striking ``$1,600'' each place it appears and 
     inserting ``the lower limit''.
       (2) Definitions.--Section 1402 of such Code is amended by 
     adding at the end the following new subsection:
       ``(l) Upper and Lower Limits.--For purposes of subsection 
     (a)--
       ``(1) Lower limit.--The lower limit for any taxable year is 
     the sum of the amounts required under section 213(d) of the 
     Social Security Act for a quarter of coverage in effect with 
     respect to each calendar quarter ending with or within such 
     taxable year.
       ``(2) Upper limit.--The upper limit for any taxable year is 
     the amount equal to 150 percent of the lower limit for such 
     taxable year.''.
       (b) Amendments to the Social Security Act.--
       (1) In general.--The matter following paragraph (15) of 
     section 211(a) of the Social Security Act is amended--
       (A) by striking ``$2,400'' each place it appears and 
     inserting ``the upper limit'', and
       (B) by striking ``$1,600'' each place it appears and 
     inserting ``the lower limit''.
       (2) Definitions.--Section 211 of such Act is amended by 
     adding at the end the following new subsection:

                        ``Upper and Lower Limits

       ``(k) For purposes of subsection (a)--
       ``(1) The lower limit for any taxable year is the sum of 
     the amounts required under section 213(d) for a quarter of 
     coverage in effect with respect to each calendar quarter 
     ending with or within such taxable year.
       ``(2) The upper limit for any taxable year is the amount 
     equal to 150 percent of the lower limit for such taxable 
     year.''.
       (3) Conforming amendment.--Section 212 of such Act is 
     amended--
       (A) in subsection (b), by striking ``For'' and inserting 
     ``Except as provided in subsection (c), for''; and
       (B) by adding at the end the following new subsection:
       ``(c) For the purpose of determining average indexed 
     monthly earnings, average monthly wage, and quarters of 
     coverage in the case of any individual who elects the option 
     described in clause (ii) or (iv) in the matter following 
     section 211(a)(15) for any taxable year that does not begin 
     with or during a particular calendar year and end with or 
     during such year, the self-employment income of such 
     individual deemed to be derived during such taxable year 
     shall be allocated to the two calendar years, portions of 
     which are included within such taxable year, in the same 
     proportion to the total of such deemed self-employment income 
     as the sum of the amounts applicable under section 213(d) for 
     the calendar quarters ending with or within each such 
     calendar year bears to the lower limit for such taxable year 
     specified in section 211(k)(1).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
                                 ______