Republicans Raise Taxes on Millions of Middle Class Families and Businesses by Blocking Democratic Proposal to Extend Tax Cuts

"That's one way of saying they're going to raise your taxes because, you see, if you don't extend the tax cuts, your taxes go up." (President Bush, 9/21/06)

 

These were President Bush’s words at a campaign event last Thursday as he emphasized the importance of extending tax cuts.  The fact is, his own party in Congress is blocking a Democratic proposal to immediately extend tax cuts for millions of middle class families and businesses.  Republicans allowed these tax cuts to expire and precluded their extension in the May tax reconciliation bill so as to make room for expensive capital gains and dividends tax breaks within the limited reconciliation amounts.  At the time, they promised the Republican Chairman on the Finance Committee that extenders would be included in the next tax vehicle.  However, Republicans yanked the tax cuts again when Congress passed pension reform legislation in August so as to use them as a sweetener for controversial estate tax cuts.  Republicans continue to block Democratic efforts to vote on the tax extenders.  In the past two weeks alone, Senate Democrats sought unanimous consent three times for the immediate passage of the “extender package,” a range of tax benefits that includes the college tuition tax deduction, the state and local sales tax deduction, and the R&D tax credit.  Each time Democrats proposed legislation to pass these tax cuts that help middle class families, educators, and businesses, the Republican majority in the Senate refused and repeatedly asked that their objection be heard.  The objection of Washington Republicans to immediately extending these tax cuts has indeed been heard, and millions of Americans will pay the price.

DEMOCRATS PROPOSED IMMEDIATE PASSAGE OF TAX EXTENDERS THREE TIMES; REPUBLICANS OBJECTED EACH TIME

 

Senator Baucus, Ranking Democrat on the Senate Finance Committee, proposed immediate passage of the tax cuts.  Mr. Baucus: “Mr. President, I ask unanimous consent that the Senate proceed to Calendar No. 326, H.R. 4096; that the Senate adopt my amendment that is at the desk, the substance of which is the agreed-upon tax extender package; that the bill be read a third time and passed…” (Congressional Record, 9/13/06, S9491)

 

Majority Leader Frist objected to extending the tax cuts.  Mr. Frist: “Reserving the right to object…I object.”  The Presiding Officer: “Objection has been heard.” (Congressional Record, 9/13/06, S9491)

 

Senator Baucus proposed extending the tax cuts a second time.  Mr. Baucus: “Mr. President, I ask unanimous consent that the Senate proceed to Calendar No. 326, H.R. 4096; that the Senate adopt my amendments Nos. 5003 and 5004, which is the agreed-upon tax extenders package…” (Congressional Record, 9/14/06, S9590)

 

Republican Senator Collins objected to the tax extenders package on behalf of Majority Leader Frist.  Ms. Collins: “Mr. President, on behalf of the leader, I object.  The leader objected yesterday.  This is the same issue.  He has asked I make his objection known.”  The Presiding Officer: “The objection is heard.” (Congressional Record, 9/14/06, S9590)

 

Senator Baucus proposed extending the tax cuts a third time.  Mr. Baucus: “I am again asking my colleagues to support my unanimous consent request to pass the negotiated tax extenders…I repeat, Mr. President, before the Chair in his role as a Senator objects, because he has been instructed to do so by the majority party, I think it is extremely irresponsible for this body not to enact these extenders right away…” (Congressional Record, 9/20/06, S9754)

 

Republican Senator DeMint objected to extending the tax cuts.  Mr. DeMint: “In my capacity as a Senator from South Carolina, I object.” (Congressional Record, 9/20/06, S9754)

 

 

DEMOCRATS URGED IMMEDIATE PASSAGE OF TAX EXTENDERS

 

Senator Reid urged for the opportunity to vote on passing tax extenders.  “If we had an opportunity to vote on these it would be virtually unanimous, Democrats and Republicans, but we are not provided the ability to vote on this.” (Congressional Record, 9/20/06, S9754)

 

Senator Lincoln warned taxes will be raised if extenders are not passed.  “[T]here is no reason these extenders should be held hostage to all of these other things that people want to crowd into one basket.  The bottom line is, by failing to renew these incentives, as Senator Baucus has said, for responsible behavior such as savings and getting a college education, we are raising the taxes on many of our hard-working American families this year.” (Congressional Record, 9/14/06, S9589)

 

Senator Nelson (NE) supported immediate passage of tax extenders.  “I rise to state I support what Senator Baucus has proposed.  It affects a number of Nebraska teachers and Nebraska families.” (Congressional Record, 9/14/06, S9590)

 

 

REPUBLICANS HOLDING MIDDLE CLASS TAX RELIEF HOSTAGE TO WEALTHY SPECIAL INTERESTS

 

“This summer, Republican leaders in both chambers used the tax break extensions to help build support in the Senate for the three-part measure (H.R. 5970) that also included a permanent reduction in the estate tax and an increase in the minimum wage.” (CQ Today, 9/22/06)

 

Republican Senator Gregg says middle class tax cuts needed as hostage for Republican strategy to protect tax cuts for the wealthy.  “[I]f you don't kill the hostage, there's no threat.” (Wall Street Journal, 8/5/06)

 

Republican leadership thwarting vote on tax extenders; Frist undermining effort to extend tax cuts.  “Grassley wants GOP Senators who are up for re-election to encourage Frist to free the popular extenders from the estate tax bill.  Grassley is ‘frustrated that Senate Republican leadership and staff are generating objections to thwart that vote...’  Grassley’s effort to extend the tax cuts “has been undermined by Frist’s quest for permanent estate tax changes.” (CQ Today, 9/22/06)

 

Majority Leader Frist more interested in his political options than in extending the tax cuts.  “[W]hen Baucus tried to bring to a vote a bill focused only on the extension of the tax benefits, Senate Majority Leader Bill Frist (R-Tenn.) blocked him.  Frist said he wanted to preserve the option of a second chance for the full Senate to vote on the estate tax cut, the minimum-wage increase and extension of the tax benefits as a package.” (Los Angeles Times, 9/17/06)

 

Majority Leader Frist promises middle class tax extenders will only be passed if estate tax reform for wealthy families is passed.  ”If the Senate kills the trifecta bill, we will not return to it this year.  That means we would have no permanent death tax reform, no tax policy extenders and no minimum-wage increase…It's now or never.” (National Journal, 8/1/06)

 

House Majority Leader Boehner refuses a vote on middle class tax relief if estate tax reform for wealthy families is not also passed.  “[A]nybody that wants any part of the bill, they get to vote for all of it or none.” (Roll Call, 9/6/06)

 

 

BY REFUSING TO PASS TAX EXTENDERS AS DEMOCRATS HAVE PROPOSED, WASHINGTON REPUBLICANS ARE RAISING TAXES ON MILLIONS OF MIDDLE CLASS AMERICANS AND BUSINESSES

 

Finance Committee Chairman Grassley agrees that Republican refusal to pass tax extenders will cost millions of families.  “A delay of legislative action beyond the anticipated recess date of September 29, 2006, will cause hardship, tax compliance problems and confusion for the millions of taxpayers who claim these widely applicable tax benefits.” (National Journal, 9/14/06)

 

Republican failure to pass extenders risks higher costs and confusion for taxpayers.  “According to a Wednesday memo compiled by Grassley's staff after consulting with IRS officials, the IRS contracts with several printers to produce the 1040 and 1040A income tax return forms. IRS must finalize the information it is to submit to these printers by Oct. 15, in order to ensure that forms will be printed in time to be distributed to taxpayers at the beginning of 2007.  If Congress has not passed extenders legislation by this time, the forms will omit lines instructing taxpayers to compute state and local sales tax, college tuition, or out-of-pocket classroom expenses into their tax liability.  If Congress passes extenders legislation later, the IRS will print supplemental materials, but this will lead to additional expense and taxpayer error, the memo claims.” (National Journal, 9/14/06)

 

Republicans raise taxes on 3.6 million Americans by refusing to extend the college tuition tax deduction.  The average cost of a college education has soared by 44 percent during the Bush Administration (College Board, 10/05), yet the Republican-controlled Congress chose not to extend the popular college tuition tax deduction in this year’s tax reconciliation bill and they continue to refuse extending this tax cut as part of the larger extenders package. 

 

United States	3,642,075		Kansas	39,948
California	475,242		Alabama	39,157
Texas	249,008		Oklahoma	38,421
New York	238,254		Iowa	37,364
Illinois	181,998		South Carolina	36,364
Florida	163,345		Kentucky	35,720
Pennsylvania	147,850		Utah	34,229
Michigan	138,474		Nevada	25,776
Ohio	134,885		New Mexico	25,691
New Jersey	121,775		Nebraska	25,509
Virginia	104,936		Mississippi	21,094
Massachusetts	97,107		Arkansas	18,969
Washington	95,236		Idaho	18,516
Maryland	90,237		New Hampshire	18,336
North Carolina	90,237		Hawaii	17,197
Georgia	90,145		West Virginia	16,929
Wisconsin	84,346		Maine	14,429
Minnesota	82,496		Rhode Island	13,820
Arizona	74,301		Alaska	13,636
Colorado	73,680		Montana	11,411
Indiana	73,093		Delaware	11,291
Missouri	64,506		North Dakota	8,706
Oregon	53,264		District of Columbia	8,518
Connecticut	51,809		South Dakota	8,167
Tennessee	51,587		Vermont	7,970
Louisiana	45,063		Wyoming	7,551

*Number of Americans affected by the lapse of the college tuition tax deduction based on 2003 IRS SOI data.

 

Republicans raise taxes on 3.3 million teachers by refusing to extend educator expenses tax deduction.  Since 2002, teachers have been able to deduct up to $250 a year for money that they spend out of their own pockets to buy supplies for their classrooms.  More than 3 million teachers nationwide have taken advantage of this deduction each year.  The Republican Congress removed a two-year extension of this deduction from the tax reconciliation bill in May and continues to refuse passing an extension along with other vital tax extensions. 

 

United States	3,273,619		Alabama	43,193
California	330,492		Kentucky	37,778
Texas	264,979		Oklahoma	36,273
New York	247,567		Iowa	33,812
Florida	163,202		Oregon	33,171
Illinois	143,509		Kansas	32,704
Pennsylvania	141,776		Mississippi	28,882
Ohio	127,762		Arkansas	23,984
New Jersey	127,597		New Mexico	23,621
Michigan	113,416		Nevada	21,853
Georgia	105,028		Nebraska	21,379
North Carolina	97,654		Utah	21,259
Virginia	90,863		New Hampshire	19,343
Massachusetts	89,840		Maine	17,185
Maryland	72,519		Rhode Island	15,909
Wisconsin	65,161		West Virginia	15,677
Missouri	64,567		Hawaii	15,386
Washington	62,849		Idaho	13,781
Arizona	62,481		Montana	10,342
Indiana	61,132		Delaware	9,928
Minnesota	58,235		Vermont	9,203
Tennessee	55,882		South Dakota	8,515
Louisiana	52,076		Alaska	8,389
Connecticut	50,836		North Dakota	6,582
Colorado	50,618		Wyoming	5,993
South Carolina	43,673		District of Columbia	5,294

*Number of Americans affected by the lapse of the educator expenses tax deduction based on 2003 IRS SOI data.

 

Republicans raise taxes on school districts in every state by refusing to extend bond program to fund school renovations.  The authority for school districts to issue Qualified Zone Academy Bonds (QZAB) also expired last year.  School districts use these bonds as an innovative way to fund school renovation or repairs at a much lower cost.  Investors receive a federal tax credit in lieu of an interest payment, and over the life of the bond, the district can save 50 percent.

 

United States	400,000		Mississippi	4,817
California	48,956		Oregon	4,712
Texas	39,142		Oklahoma	4,648
New York	28,598		Colorado	4,606
Florida	22,693		Minnesota	3,972
Illinois	16,819		New Mexico	3,571
North Carolina	13,618		West Virginia	3,275
Pennsylvania	13,512		Kansas	3,043
Ohio	12,952		Connecticut	2,937
Michigan	11,885		Iowa	2,747
Georgia	10,713		Nevada	2,578
Tennessee	8,758		Utah	2,250
Washington	8,092		Nebraska	1,775
Louisiana	7,923		Maine	1,574
Arizona	7,913		Montana	1,468
New Jersey	7,828		Idaho	1,458
Virginia	7,818		Rhode Island	1,278
Alabama	7,004		Hawaii	1,236
Massachusetts	6,888		South Dakota	1,004
Indiana	6,444		District of Columbia	972
Missouri	6,360		New Hampshire	771
Kentucky	6,223		Alaska	655
Wisconsin	5,578		North Dakota	644
South Carolina	5,451		Delaware	634
Arkansas	5,008		Vermont	549
Maryland	4,986		Wyoming	507

*Allocation for 2005 in thousands of dollars http://www.qzab.org/allocation.asp

 

 

Republicans raise taxes on 12.3 million Americans by refusing to extend the state and local sales tax deduction.  The following states had deductible sales taxes before the provision expired at the end of 2005:  Alaska, Florida, Nevada, Washington, South Dakota, Tennessee, Texas, and Wyoming.  Those Americans living in these states without income taxes will see their taxes increase because of the Republican refusal to extend the deduction for their state’s sales taxes.

 

Republicans raise taxes on thousands of businesses by refusing to extend important tax credits that promote job creation and innovation.  Because Republicans refuse to extend the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WtW) tax credits, 20,000 businesses will lose their tax incentives for hiring individuals from targeted groups such as veterans and families trying to leave the welfare rolls.  Republicans are also blocking the extension of the research and development (R&D) tax credit that helps 16,000 businesses in America innovate and stay competitive.  Last week, a coalition of businesses wrote a letter to Congress warning: “The lapse of the credit and accompanying uncertainty have increased the costs of U.S,-based R&D…Congress should put an end to the tax on American innovation and act swiftly to restore and strengthen the federal R&D tax credit.”

 

The following is a list of some of the tax provisions Republicans are refusing to extend before adjourning for the October recess.  From middle class families to teachers and businesses, Republican refusal to extend these tax cuts will raise taxes for millions of Americans.

• R&D Tax Credit: Provides a tax incentive for businesses performing research and development in the United States. 

• Work Opportunity Tax Credit and Welfare-to-Work Tax Credit: Provides employers with tax incentives for hiring individuals from targeted groups including veterans, and economically disadvantaged Americans such as food stamp recipients, SSI beneficiaries, and welfare recipients. 

• State and Local Sales Tax Deduction: Allows taxpayers to subtract their state and local sales taxes from their incomes when filing their federal taxes.

• Tuition Deduction: Allows parents and students to deduct qualified tuition and related expenses from their taxable income. 

• Teacher Classroom Expenses: Gives teachers an above-the-line deduction of as much as $250 for personal funds spent by them to buy classroom supplies. 

• New Market Tax Credit: Provides tax credits to boost investment in economically underdeveloped areas throughout the country.  

• Earned Income Tax Credit for Combat Pay: Allows America’s military men and women to count combat pay for purposes of qualifying for the earned income tax credit.

• Qualified Zone Academy Bonds (QZABs):  Provides an alternative to traditional tax-exempt bonds for school renovation. 

• Mental Health Parity: Requires group health plans to provide the same coverage for mental health benefits that they provide for medical and surgical health benefits. 

• Computer Donations: Extends an enhanced deduction for computer companies donating equipment to schools and public libraries

• Indian Employment Tax Credit: Extends a business tax credit for employers who hire qualified employees who work and live on or near an Indian reservation. 

• Indian Accelerated Depreciation: Extends special depreciation rules for qualified investments on Indian reservations.  

• Brownfields: Permits the expensing of costs associated with cleaning up hazardous (“brownfield”) sites.  

• D.C. Tax Incentives: Extends a package of tax incentives for the District of Columbia, including a $5,000 first-time home buyer tax credit and four specific tax benefits available to businesses operating in designated D.C. enterprise zones – a 20 percent wage credit, $35,000 of additional small business expensing, tax-exempt bonds, and zero capital gains for property held five years.   

• 15-Year Depreciation for Leasehold Improvements: Extends the accelerated depreciation schedule for certain leasehold improvements and restaurant property from 39 to 15 years. 
• Puerto Rico Rum Cover-Over: Extends reimbursements to Puerto Rico for Federal excise taxes collected on imported Puerto Rican rum.