[Congressional Record Volume 153, Number 75 (Tuesday, May 8, 2007)]
[Senate]
[Pages S5733-S5734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 1333. A bill to amend the Internal Revenue Code of 1986 to 
strengthen the earned income tax credit; to the Committee on Finance.
  Mr. KERRY. Mr. President, today I am introducing the Strengthen the 
Earned Income Tax Credit Act of 2007. Congressman Pascrell is 
introducing the companion measure in the House. Since 1975, the EITC 
has been an innovative tax credit which helps low-income working 
families. President Reagan referred to the EITC as ``the best 
antipoverty, the best pro-family, the best job creation measure to come 
out of Congress.'' According to the Center on Budget and Policy 
Priorities, the EITC lifts more children out of poverty than any other 
government program.
  It is time for us to reexamine the EITC and determine where we can 
strengthen it. It should not have taken Hurricane Katrina to show what 
Census data has proven--- some Americans are not benefiting from our 
economic recovery. The poverty rate for 2005 was 12.6 percent, 
basically the same as the rate for 2004. In 2005, there were 37 million 
men, women and children living in poverty. One-quarter of all jobs in 
the United States do not pay enough to support a family of four above 
the poverty level.
  Hurricane Katrina affected many individuals who were already faced 
with difficult economic situations. Mississippi, Louisiana, and Alabama 
are the first, second, and eighth poorest States in the Nation 
respectively. The income of the typical household in these three States 
is well below the national average. In the hardest hit counties, 18.6 
percent of the population is poor, compared with a national average of 
12.5 percent.
  Time after time, the Republican controlled Congress passed tax cuts 
which are skewed towards those with the most. In 2003, some of the 2001 
cuts were phased-in at a faster rate and this did not include 
adjustments to the EITC. The Urban Institute, Brookings Institution's 
Tax Policy Center, reports that households with incomes of more than $1 
million a year, the richest three-tenths of the population, receive an 
average tax cut of $118,000. These individuals do not have to worry 
about how they will have to pay for a roof over their heads or enough 
food for their families. We should not be focused on extending tax cuts 
which help those who do not have to worry about living pay check to pay 
check.
  We need to help the low-income workers who struggle day after day 
trying to make ends meet. They have been left behind in the economic 
policies of the last 6 years. We need to begin a discussion on how to 
help those that have been left behind. The EITC is the perfect place to 
start.
  The Strengthen the Earned Income Tax Credit Act of 2007 strengthens 
the EITC by making the following four changes: reducing the marriage 
penalty; increasing the credit for families with three or more 
children; expanding credit amount for individuals with no children; and 
permanently extending the provision which allows members of the armed 
forces to include combat pay as income for EITC computations. By making 
these changes, more individuals and families would benefit from the 
EITC.
  First, the legislation increases marriage penalty relief and makes it 
permanent. In the way that the EITC is currently structured, many 
single individuals that marry find themselves faced with a reduction in 
their EITC. The tax code should not penalize individuals who marry.
  Second, the legislation increases the credit for families with three 
or more children. Under current law, the credit amount is based on one 
child or two or more children. This legislation would create a new 
credit amount based on three or more children. Under current law, the 
maximum EITC for an individual with two or more children is $4,716 and 
under this legislation, the amount would increase to $5,306 for an 
individual with three or more children. The poverty level for an adult 
living with three children is $20,516. In total, 37 percent of all 
children live in families with at least three children and more than 
half of poor children live in such families. Under current law, an 
adult living with three children who is eligible for the maximum EITC 
with income equivalent to the phase-out income level would still have 
income below the poverty level. Under this legislation, an individual 
with three children and who is eligible for the full credit amount 
would be lifted above the poverty level by the amount of the credit.

[[Page S5734]]

  Increasing the credit amount would make more families eligible for 
the EITC. Currently, an individual with three children and income at 
and above $37,783 would not benefit from the credit. Under this 
legislation, an individual with children and income under $40,582 would 
benefit from the EITC.
  Third, this legislation would increase the credit amount for 
childless workers. The EITC was designed to help childless workers 
offset their payroll tax liability. The credit phase-in was set to 
equal the employee share of the payroll tax, 7.65 percent. However, in 
reality, the employee bears the burden of both the employee and 
employer portion of the payroll tax.
  Under current law, an individual without children and income just 
above the poverty level would owe more than $800 in Federal income and 
payroll taxes in 2007, even with the EITC. This calculation is based on 
just the employee's share of the payroll tax. If you include the 
employer's share this individual would owe more than $1,600 in taxes. 
The decline in the labor force of single men has been troubling. 
Boosting the EITC for childless workers could be part of solution for 
increasing work among this group. Increasing the EITC for families has 
increased labor rates for single mothers and hopefully, it can do the 
same for this group.
  This legislation doubles the credit rate for individual taxpayer and 
married taxpayers without children. The credit rate and phase-out rate 
of 7.65 percent is doubled to 15.3 percent. For 2007, the maximum 
credit amount for an individual would increase from $428 to $855. The 
doubling of the phase-out results in taxpayers in the same income range 
being eligible for the credit.
  Fourth, the Working Families Tax Relief Act of 2004 included a 
provision which would allow combat pay to be treated as earned income 
for purposes of computing the child credit. This provision expires at 
the end of the year. This legislation makes this provision permanent. 
There is no reason why a member of the armed services should lose their 
EITC when they are mobilized and serving their country.
  This legislation will help those who most need our help. It will put 
more money in their pay check. We need to invest in our families and 
help individuals who want to make a living by working. We are all aware 
of our fiscal situation and we should legislate in a responsible 
manner. It is a time for shared sacrifice. We cannot keep adding to the 
deficit, but we cannot leave the poor behind.
  I ask for unanimous consent that the text of the bill be printed in 
the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1333

       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 ``Strengthen the Earned Income 
     Tax Credit Act of 2007''.

     SEC. 2. STRENGTHEN THE EARNED INCOME TAX CREDIT.

       (a) Reduction in Marriage Penalty.--
       (1) In general.--Section 32(b)(2)(B) of the Internal 
     Revenue Code of 1986 (relating to joint returns) is amended--
       (A) by striking ``, 2006, and 2007'' in clause (ii) and 
     inserting ``and 2006'', and
       (B) by striking clause (iii) and inserting the following 
     new clauses:
       ``(iii) $3,500 in the case of taxable years beginning in 
     2007,
       ``(iv) $4,000 in the case of taxable years beginning in 
     2008,
       ``(v) $4,500 in the case of taxable years beginning in 
     2009, and
       ``(vi) $5,000 in the case of taxable years beginning after 
     2009.''.
       (2) Inflation adjustment.--Section 32(j)(1)(B)(ii) of such 
     Code is amended--
       (A) by striking ``$3,000 amount in subsection 
     (b)(2)(B)(iii)'' and inserting ``$5,000 amount in subsection 
     (b)(2)(B)(vi)'', and
       (B) by striking ``2007'' and inserting ``2009''.
       (3) Provisions not subject to sunset.--Title IX of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001 
     (relating to sunset provisions of such Act) shall not apply 
     to section 303(a) of such Act.
       (b) Increase in Credit Percentage for Families With 3 or 
     More Children.--The table contained in section 32(b)(1)(A) of 
     such Code (relating to percentages) is amended--
       (1) by striking ``2 or more qualifying children'' in the 
     second row and inserting ``2 qualifying children'', and
       (2) by inserting after the second row the following new 
     item:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
3 or more qualifying children.....  45..................          21.06.
------------------------------------------------------------------------

       (c) Credit Increase and Reduction in Phaseout for 
     Individuals With No Children.--The table contained in section 
     32(b)(1)(A) of such Code is amended--
       (1) by striking ``7.65'' in the second column of the third 
     row and inserting ``15.3'', and
       (2) by striking ``7.65'' in the third column of the third 
     row and inserting ``15.3''.
       (d) Permanent Extension of Special Rule Treating Combat Pay 
     as Earned Income.--
       (1) In general.--Clause (vi) of section 32(c)(2)(B) of such 
     Code (relating to earned income) is amended to read as 
     follows:
       ``(iv) a taxpayer may elect to treat amounts excluded from 
     gross income by reason of section 112 as earned income.''.
       (2) Provision not subject to sunset.--Section 105 of the 
     Working Families Tax Relief Act of 2004 (relating to 
     application of EGTRRA sunset to this title) shall not apply 
     to section 104(b) of such Act.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______