[Congressional Record (Bound Edition), Volume 148 (2002), Part 1]
[Senate]
[Pages 534-535]
[From the U.S. Government Publishing Office, www.gpo.gov]




                               TAX RELIEF

  Mr. GRASSLEY. Mr. President, I will comment also on the tax relief 
bill signed by the President of the United States on June 7, the tax 
bill that Senator Baucus and I wrote in a bipartisan way, to get passed 
last year. I will concentrate on the stimulative impact on the tax bill 
of last year because now, being in a recession and being on another 
stimulus package, I don't think we ought to lose sight of the fact that 
the tax bill of last year is having some economic good at a time most 
needed, in a time of recession.
  It does contain a significant number of tax reduction and tax relief 
provisions that will go into effect and should help build consumer 
confidence. Part of the economy may be uncertain, but the tax outlook 
is clear: Under the law we passed, Federal income taxes have declined 
and will continue to decline over the next 10 years. Taxpayers can take 
that knowledge to the bank, regardless of Senator Kennedy's suggestion 
that we not allow the remaining provisions of the tax bill to go into 
effect.
  Obviously, I don't think Congress should stop here. Our huge economy 
needs a shot in the arm. The tax bill of last year will help to provide 
that shot in the arm. It contains a generous amount of relief for 
individual taxpayers. Some of the measure's tax cuts went into effect 
last year and many other provisions became effective January 1 of this 
year. Those are the provisions I will address.
  There is a new 10-percent rate bracket. The act created a new 10-
percent regular income tax bracket for a part of taxable income that 
had otherwise been taxed at a higher rate of 15 percent. The 10-percent 
bracket applies to the first $6,000 of taxable income for single 
individuals; $10,000 of taxable income for heads of household; and 
$12,000 for married couples filing jointly. This is effective beginning 
after December 31, 2000. That money is out there to stimulate the 
economy right now, but it will continue this year and next year and 
into the future.
  We had a reduction in other individual tax rates, the regular income 
tax rates phased down over 6 years. So effective July 1 of last year 
through 2003, the 28-percent rate is cut to 27 percent. We hope in this 
economic stimulus package to speed that one rate up, it be reduced to 
25 percent right now to help middle-income taxpayers and to stimulate 
the economy at the same time. However, as written in last year's tax 
bill, the 31-percent rate is cut to 30 percent right now. The 36-
percent rate is cut to 35 percent right now. The 39.6-percent rate is 
cut to 38.6 percent.
  Eventually, all these separate rates, after this phase-in period is 
done, will become 25 percent, 28 percent, 33 percent, and 35 percent, 
respectively.
  An increase and expansion of the child tax credit is surely going to 
help families, particularly middle-income families, particularly those 
in the $30,000-a-year income tax range, with their family needs, 
putting more money in their pockets. It is going to be a stimulus to 
the economy. The child credit was expanded to $600 per child, 
immediately through the year 2004; it goes up to $700 through the year 
2008; $800 through the year 2009; and finally, $1,000 in 2010. But, 
more important, the child credit was made refundable to the extent of 
10 percent of the taxpayer's earned income in excess of $10,000 for the 
years 2001 through 2004, and this is increased to 15 percent after the 
year 2005.
  I emphasize that because of all the people who say the Tax Relief Act 
of last year was for the wealthy. A refundable credit is helping people 
of the lower income tax bracket very much. For example, in the year 
2001, a single mother with two children, making $15,000, received a 
credit of $500. This single mother likely now will receive a bigger tax 
refund check when she files her 2001 tax return by April 15. This 
expansion of the child credit will ensure that millions of low-income 
families, not rich people, will now receive the benefit of this child 
credit. For those people who spend so much of their income, maybe all 
of it in some cases, they are going to have more money to spend, and 
that is going to stimulate the economy.
  Then we have the extension and expansion of the adoption tax credit, 
not so much as a stimulus to the economy but because stable families 
are very important to our society. Moving children out of foster care 
into a home where they can actually have a mom and dad is very 
important social policy. So we move the tax credit from $5,000 to 
$10,000. Today, in the case of the special needs child, that tax credit 
is $6,000. This provision significantly eases the financial burden of 
adoption and encourages adoption. This is in effect for taxable income 
starting this year.
  We have a tax credit, then, for employers who provide child care for 
their employees. In my State of Iowa, 72 percent of the households have 
both spouses working, the highest percentage of any State in the 
Nation. For those families who have children, the need for dependable 
child care is very important. Getting that from the employer is even 
better for those families. So this new tax credit provides an incentive 
for employer-provided on-site daycare facilities. This is effective for 
taxable years beginning right now.
  We have marriage penalty relief, and it relates to the earned-income 
tax credit. That earned-income tax credit, which is available only to 
low-income families, phases out for married couples. We increased that 
phaseout by $1,000 immediately and ultimately increase it to $3,000. So 
those families who would otherwise have that earned-income tax credit 
phased out, not having the money, not being able to stimulate the 
economy, now are going to have up to another $1,000 immediately 
available. Again, being low-income families, that ought to help 
stimulate the economy starting right now for the year we are in.
  Mr. President, I see the Senator from Vermont. Is it possible for me 
to have another 5 minutes?
  Mr. LEAHY. Of course.
  Mr. GRASSLEY. I ask unanimous consent if I may have 5 more minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. If I might then be recognized after the Senator?
  Mr. GRASSLEY. I add that to my unanimous consent request.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. I thank the Chair.
  So, obviously, this is going to help stimulate the economy because 
this $1,000 is going to go to low-income families who do not have very 
much discretionary income and can use it to improve their lot. But at 
the same time it will stimulate the economy--whether it is spent or 
whether they save it.
  We have improvements in the education savings accounts, or what we 
might call education individual retirement accounts, individual 
education IRAs. The annual limit on contributions to the education 
savings account increases from $500 to $2,000. The definition of 
qualified education expenses

[[Page 535]]

that may be paid tax free from the education savings account is 
expanded to include elementary and secondary school expenses. The 
phaseout ranges--for married taxpayers filing joint returns, it is 
increased to become twice the rate of single taxpayers, so more 
families can take advantage of this. Corporations and other entities, 
including tax-exempt groups, are permitted to make contributions to 
education savings accounts. These changes are effective right now, this 
taxable year.
  Then we have expanded consideration of prepaid tuition programs. 
Several provisions will encourage participation in prepaid tuition 
programs for higher education. Investment gains will be tax free, and 
private colleges and universities happen to be offering these plans. 
This provision goes into effect now.
  There is an exclusion for employer-provided educational assistance. 
This extends the exclusion to graduate education and makes the 
exclusion for undergraduate and graduate education permanent, effective 
right now.
  Then we have improvement in the student loan interest deduction. This 
eliminates the 60-month limit on the deduction of interest from a 
student loan. The income phaseout ranges, for eligibility for the 
student loan interest deduction, increasing it from $50,000 to $65,000 
for individuals and from $100,000 to $130,000 for married taxpayers on 
joint returns. We repeal the restriction that voluntary payments of 
interest are not deductible. These provisions are effective right now.
  Then we have tax benefits for governmental bonds for public school 
construction. These benefits are effective for bonds issued starting 
this year.
  There is a deduction for college tuition, a provision allowing above-
the-line deduction for college tuition expenses. It is intended to help 
low- and middle-income families pay for college.
  In the years 2002 and 2003, individuals with adjusted gross incomes 
of $65,000 may deduct $3,000. In the years 2004 and 2005, for those 
same individuals it would be $4,000. In the case of taxpayers with 
adjusted gross income that does not exceed $80,000, the deduction would 
be $2,000.
  I just read a lot of provisions that were taken from the tax bill. I 
started my remarks by talking about the stimulus impact of the tax bill 
we passed 7 months ago, the impact it is going to have at a time of 
recession. People might raise some question about the education 
provisions to which I just referred, of their stimulative impact. In a 
time of recession, obviously beyond the good that education does 
generally to help people in their lives in the future, we have a 
situation where maybe in a recession, families would shy away from 
going to college--their kids going to college, or adults, independent 
adults going to college. As they look at the provisions of last year's 
tax bill and the benefits that come from it, they might see the 
advantage of continuing their education, even at a time of recession.
  Any of that money that is spent as a result of that would obviously 
have some impact as stimulus in the economy. But for the long haul, it 
is a stimulus, too, because as people are better educated, they are 
more productive; they earn more money. It helps the long-term recovery 
of our economy.
  I want to make some reference to the estate and gift tax provisions. 
These have a beneficial impact, but they are not entirely stimulative 
for right now. Again, we have small business people who tend to be the 
most harmed by not being able to pass on the family business to their 
next generation. There is always a lot of anxiety during times of 
recession and during times of economic downturn.
  We ought to do whatever we can to relieve the anxiety of small 
business people who are under very tough constraints because of the 
recession. We ought to relieve that anxiety to the greatest extent 
possible.
  It gives me a chance to say what Senator Kyl said just before I took 
the floor; that is, that we have an opportunity on this economic 
stimulative package to make sure that the estate tax provisions of the 
bill the President signed last June be made permanent.
  I am going to yield the floor at this point. I thank my colleagues 
for their attention to some provisions of an old story--the tax bill of 
last year, a tax bill that is going to have beneficial impacts well 
into the future but, most importantly, has some impact right now as we 
are in a time of recession.
  The PRESIDING OFFICER (Mrs. Clinton). The Senator from Vermont.
  Mr. LEAHY. Madam President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. The Senate is in morning business.
  Mr. LEAHY. I thank the Chair.

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