WASHINGTON, DC-- Senator Susan Collins will vote in support of legislation that will prevent increases on taxes on capital gains and dividends for American individuals and families. It also includes Alternative Minimum Tax (AMT) relief and a provision to benefit small businesses.
Without the AMT relief provided in this bill, the number of middle-income taxpayers subject to AMT would increase to 20 million in 2006, up from just 3 million in 2004.
The tax reconciliation legislation, which is expected to be considered by the Senate later today, includes a two-year extension from 2008 to 2010 of capital gains and dividends tax relief. It also provides for a one-year extension of AMT relief.
“The American economy is back on a strong, growing track, partly because of tax relief provisions that benefit individuals and families. American families and the American economy do not need a tax increase. But without congressional approval, when current law expires, the result will be an increase of taxes on dividends, capital gains, and the AMT.”
Senator Collins pointed out that according to the Congressional Budget Office, capital gains revenue jumped from $49 billion prior to the 2003 tax relief legislation to almost $80 billion last year. This is despite the fact that some had predicted a loss of $3 billion resulting from the tax relief provision.
In addition, since the 2003 tax relief bill, the economy has grown at nearly 4 percent per year, more than 5 million jobs have been created, and the unemployment rate has dropped to 4.7 percent, beneath the average of the past three years.
According to the IRS, in Maine, it is estimated that over 100,000 families benefit from capital gains tax relief, over 140,000 families benefit from dividends relief, and nearly 26,500 benefit from AMT relief.
FACTS ON THIS TAX RELIEF LEGISLATION
- Protects 20 million Americans from being subjected to the Alternative Minimum Tax.
- 500,000 Maine taxpayers benefit from the 2003 tax relief legislation;
- An estimated 135,000 Maine businesses benefit from the business-specific provisions of the bill;
- 100,000 Maine taxpayers benefit from the reduction in capital gains and dividends.
- Maintains the 15 percent reduction in dividend and capital gains taxes enacted in 2003;
- An estimated 28 million taxpayers will receive an average benefit of $989 from the 15 percent dividend and capital gains tax rate, including 8.5 million elderly taxpayers, who will receive an estimated $1,144 per person in relief from these provisions.
*All information provided above was compiled by the U.S. Department of Treasury or the Congressional Research Service. Except where otherwise stated, benefits reflect the cumulative effect of all tax relief provisions enacted since 2001, portions of which are extended in this tax reconciliation package
Following is Senator Collins floor statement on the tax bill:
Mr. President, the Senate is now considering H.R. 4297, the Tax Reconciliation conference report. This bill contains several important tax relief provisions, including relief from the Alternative Minimum Tax, extended expensing provisions for small businesses, and a two-year extension of the 15% tax rate on dividends and capital gains. I will be voting for this bill in order to block tax increases that would be harmful to our economy and to our citizens.
According to the latest data that I have seen, more than 100 million American taxpayers benefit from the various tax reductions that we have passed since 2001. In Maine, 100,000 taxpayers have benefited from the lower Capital Gains and Dividends tax rate, and about 25,500 Maine taxpayers have benefited from AMT relief.
The five-year cost of this reconciliation package is just under $70 billion. Of this amount, nearly half -- $33.4 billion – will go to provide an additional year of relief from the Alternative Minimum Tax.
The AMT was originally enacted to ensure that all taxpayers, especially high-income taxpayers, paid at least a minimum amount of federal taxes. But the AMT is not indexed for inflation, and because of this flaw, each year a larger number of middle-income Americans find themselves subject to this “stealth tax.” In fact, without the relief provided in this bill, the number of taxpayers subject to the AMT will increase to 20 million in 2006, up from just 3 million in 2004.
I believe it is essential to protect middle-income families from the AMT “stealth tax.” I also believe that the 15% capital gains and dividends tax rates have proven their effectiveness, and ought to be extended.
When I voted to support lower capital gains and dividends taxes in 2003, my hope was that this tax policy would help lift our economy out of recession, and restore the healthy growth we need to create good jobs and opportunity for Americans. Since that tax relief became law, our economy has grown at nearly 4% per year, and over 5 million new jobs have been created. The unemployment rate has dropped to 4.7% -- beneath the average of the past three decades.
I am aware of the ongoing debate among economists over whether, and to what extent, tax cuts can “pay for themselves.” Whatever one thinks of that debate, I cannot help but note how far off the estimated cost of this tax relief was. The year before this tax relief became law, the federal government received $49 billion in revenues through the capital gains tax -- at the 20% rate. The Joint Tax Committee predicted that reducing the rate to 15% would reduce revenues by $3 billion from 2003 to 2005. But, in fact, capital gains tax revenues jumped instead -- to $71 billion in 2004, and $80 billion last year -- all paid at the lower 15% rate.
To me, the vote on this bill is not about settling a debate among economists. My focus is on finding the right tax policy to help keep our economy healthy, and growing. It is only with strong economic growth that our nation will be able to meet the needs we currently face – needs that will only become more urgent as our society ages.
Many in this chamber, and many of my constituents, are concerned about our growing national debt. I share this concern. That is why I have been a consistent supporter of the pay-go rules throughout my tenure in the Senate. But I continue to be struck by the difference that even a small change in our economy’s growth rate can make to the deficit, and to the revenues we need to support critical social programs. According to the Congressional Budget Office, a change of just 1/10th of 1% in the GDP growth rate over a 10-year period would change revenues by $224 billion, and spending by $48 billion, for a total net impact of $272 billion on the deficit.
The actual growth rate we have experienced since 2003 has been higher by at least two-tenths of 1% than CBO predicted before the 15% tax rate was enacted. In light of the fact that CBO estimates that a 0.1% change can have a net impact of $272 billion on the deficit, it is so important to maintain policies that maintain a healthy growth-rate.
For all of these reasons, I will be supporting the tax reconciliation bill.
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