89–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 107–7

ECONOMIC GROWTH AND TAX RELIEF ACT OF 2001

MARCH 6, 2001.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. THOMAS, from the Committee on Ways and Means,

submitted the following

R E P O R T

together with

DISSENTING VIEWS

[To accompany H.R. 3]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the

bill (H.R. 3) to amend the Internal Revenue Code of 1986 to reduce

individual income tax rates, having considered the same, report favorably thereon with an amendment and recommend that the bill

as amended do pass.

CONTENTS

Page

I. Summary and Background ........................................................................... 3

A. Purpose and Summary .................................................................... 3

B. Background and Need for Legislation ............................................ 4

C. Legislative History ........................................................................... 4

II. Explanation of the Bill .................................................................................. 4

III. Votes of the Committee ................................................................................. 9

IV. Budget Effects of the Bill .............................................................................. 11

A. Committee Estimates of Budgetary Effects ................................... 11

B. Budget Authority and Tax Expenditures ....................................... 12

C. Cost Estimate Prepared by the Congressional Budget Office ...... 12

V. Other Matters To Be Discussed Under the Rules of the House ................ 16

A. Committee Oversight Findings and Recommendations ................ 16

B. Summary of Findings and Recommendations of the Committee

on Government Reform and Oversight ......................................... 16

C. Constitutional Authority Statement ............................................... 16

D. Information Relating to Unfunded Mandates ............................... 16

E. Applicability of House Rule XX15(b) .............................................. 16

F. Tax Complexity Analysis ................................................................. 17

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VI. Changes in Existing Law Made by the Bill, as Reported ........................... 20

VII. Dissenting Views ........................................................................................... 27

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE; ETC.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Economic Growth and Tax Relief

Act of 2001’’.

(b) AMENDMENT OF 1986 CODE.—Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment

to, or repeal of, a section or other provision, the reference shall be considered to be

made to a section or other provision of the Internal Revenue Code of 1986.

(c) SECTION 15 NOT TO APPLY.—No amendment made by section 2 shall be treated

as a change in a rate of tax for purposes of section 15 of the Internal Revenue Code

of 1986.

SEC. 2. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

(a) IN GENERAL.—Section 1 is amended by adding at the end the following new

subsection:

‘‘(i) RATE REDUCTIONS AFTER 2000.—

‘‘(1) NEW LOWEST RATE BRACKET.—

‘‘(A) IN GENERAL.—In the case of taxable years beginning after December

31, 2000—

‘‘(i) the rate of tax under subsections (a), (b), (c), and (d) on taxable

income not over the initial bracket amount shall be 12 percent (as

modified by paragraph (2)), and

‘‘(ii) the 15 percent rate of tax shall apply only to taxable income over

the initial bracket amount.

‘‘(B) INITIAL BRACKET AMOUNT.—For purposes of this subsection, the initial bracket amount is—

‘‘(i) $12,000 in the case of subsection (a),

‘‘(ii) $10,000 in the case of subsection (b), and

‘‘(iii) 1⁄2 the amount applicable under clause (i) in the case of subsections (c) and (d).

‘‘(C) INFLATION ADJUSTMENT.—In prescribing the tables under subsection

(f) which apply with respect to taxable years beginning in calendar years

after 2001—

‘‘(i) the Secretary shall make no adjustment to the initial bracket

amount for any taxable year beginning before January 1, 2007,

‘‘(ii) the cost-of-living adjustment used in making adjustments to the

initial bracket amount for any taxable year beginning after December

31, 2006, shall be determined under subsection (f)(3) by substituting

‘2005’ for ‘1992’ in subparagraph (B) thereof, and

‘‘(iii) such adjustment shall not apply to the amount referred to in

subparagraph (B)(iii).

If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of

$50.

‘‘(2) REDUCTIONS IN RATES AFTER 2001.—In the case of taxable years beginning

in a calendar year after 2001, the corresponding percentage specified for such

calendar year in the following table shall be substituted for the otherwise applicable tax rate in the tables under subsections (a), (b), (c), (d), and, to the extent

applicable, (e).

‘‘In the case of taxable years

beginning during calendar year:

The corresponding percentages shall

be substituted for the following

percentages:

12% 28% 31% 36% 39.6%

2002 ........................................................................................ 12% 27% 30% 35% 38%

2003 ........................................................................................ 11% 27% 29% 35% 37%

2004 ........................................................................................ 11% 26% 28% 34% 36%

2005 ........................................................................................ 11% 26% 27% 34% 35%

2006 and thereafter .............................................................. 10% 25% 25% 33% 33%

‘‘(3) ADJUSTMENT OF TABLES.—The Secretary shall adjust the tables prescribed under subsection (f) to carry out this subsection.’’

(b) REPEAL OF REDUCTION OF REFUNDABLE TAX CREDITS.—

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(1) Subsection (d) of section 24 is amended by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).

(2) Section 32 is amended by striking subsection (h).

(c) CONFORMING AMENDMENTS.—

(1) Subparagraph (B) of section 1(g)(7) is amended—

(A) by striking ‘‘15 percent’’ in clause (ii)(II) and inserting ‘‘the first

bracket percentage’’, and

(B) by adding at the end the following flush sentence:

‘‘For purposes of clause (ii), the first bracket percentage is the percentage

applicable to the lowest income bracket in the table under subsection (c).’’

(2) Section 1(h) is amended—

(A) by striking ‘‘28 percent’’ both places it appears in paragraphs

(1)(A)(ii)(I) and (1)(B)(i) and inserting ‘‘25 percent’’, and

(B) by striking paragraph (13).

(3) Section 15 is amended by adding at the end the following new subsection:

‘‘(f) RATE REDUCTIONS ENACTED BY ECONOMIC GROWTH AND TAX RELIEF ACT OF

2001.—This section shall not apply to any change in rates under subsection (i) of

section 1 (relating to rate reductions after 2000).’’

(4) Section 531 is amended by striking ‘‘equal to’’ and all that follows and inserting ‘‘equal to the product of the highest rate of tax under section 1(c) and

the accumulated taxable income.’’.

(5) Section 541 is amended by striking ‘‘equal to’’ and all that follows and inserting ‘‘equal to the product of the highest rate of tax under section 1(c) and

the undistributed personal holding company income.’’.

(6) Section 3402(p)(1)(B) is amended by striking ‘‘7, 15, 28, or 31 percent’’ and

inserting ‘‘7 percent, any percentage applicable to any of the 3 lowest income

brackets in the table under section 1(c),’’.

(7) Section 3402(p)(2) is amended by striking ‘‘equal to 15 percent of such payment’’ and inserting ‘‘equal to the product of the lowest rate of tax under section

1(c) and such payment’’.

(8) Section 3402(q)(1) is amended by striking ‘‘equal to 28 percent of such payment’’ and inserting ‘‘equal to the product of the third to the lowest rate of tax

under section 1(c) and such payment’’.

(9) Section 3402(r)(3) is amended by striking ‘‘31 percent’’ and inserting ‘‘the

third to the lowest rate of tax under section 1(c)’’.

(10) Section 3406(a)(1) is amended by striking ‘‘equal to 31 percent of such

payment’’ and inserting ‘‘equal to the product of the third to the lowest rate of

tax under section 1(c) and such payment’’.

(11) Section 13273 of the Revenue Reconciliation Act of 1993 is amended by

striking ‘‘28 percent’’ and inserting ‘‘the third to the lowest rate of tax under

section 1(c) of the Internal Revenue Code of 1986’’.

(d) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made

by this section shall apply to taxable years beginning after December 31, 2000.

(2) AMENDMENTS TO WITHHOLDING PROVISIONS.—The amendments made by

paragraphs (6), (7), (8), (9), (10), and (11) of subsection (c) shall apply to

amounts paid after the 60th day after the date of the enactment of this Act.

SEC. 3. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

The amounts transferred to any trust fund under the Social Security Act shall be

determined as if this Act had not been enacted.

I. SUMMARY AND BACKGROUND

A. PURPOSE AND SUMMARY

The bill, H.R. 3, as amended (the ‘‘Economic Growth and Tax Relief Act of 2001’’) provides income tax relief to American taxpayers.

The bill provides net tax reductions of over $363 billion over fiscal years 2001–2006. This will provide needed income tax relief for

over 100 million American taxpayers, return the tax revenues not

needed to fund government programs, and foster economic prosperity in the 21st century.

The bill creates a new low-rate regular income tax bracket for a

portion of the taxable income that is currently taxed at 15 percent.

The bill reduces the other income tax rates and consolidates rate

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brackets. By 2006, the present-law rate structure of five regular income tax rates (15 percent, 28 percent, 31 percent, 36 percent, and

39.6 percent) are reduced to four rates of 10 percent, 15 percent,

25 percent, and 33 percent. The bill also repeals the provisions that

reduce the refundable child credit and the earned income credit by

the amount of the individual’s alternative minimum tax. The bill

is generally effective for taxable years beginning after December

31, 2000, and is fully effective for taxable years beginning after December 31, 2005.

B. BACKGROUND AND NEED FOR LEGISLATION

The provisions approved by the Committee reflect the need for

tax relief for American taxpayers in a fiscally prudent matter. The

provisions also should serve to improve the economy and return an

appropriate amount of the projected budget surplus to the American taxpayer. The estimated revenue effects of the provision comply with the most recent Congressional Budget Office revisions of

budget surplus projections, and represent a prudent first step in reducing overall levels of Federal taxation.

C. LEGISLATIVE HISTORY

The Committee on Ways and Means marked up the provisions of

the bill on March 1, 2001, and approved the provisions, as amended, on March 1, 2001, by a roll call vote of 23 yeas and 15 nays,

with a quorum present.

II. EXPLANATION OF THE BILL

PRESENT LAW

Under the Federal individual income tax system, an individual

who is a citizen or resident of the United States generally is subject

to tax on worldwide taxable income. Taxable income is total gross

income less certain exclusions, exemptions, and deductions. An individual may claim either a standard deduction or itemized deductions.

An individual’s income tax liability is determined by computing

his or her regular income tax liability and, if applicable, alternative

minimum tax liability.

Regular income tax liability

Regular income tax liability is determined by applying the regular income tax rate schedules (or tax tables) to the individual’s

taxable income and then is reduced by any applicable tax credits.

The regular income tax rate schedules are divided into several

ranges of income, known as income brackets, and the marginal tax

rate increases as the individual’s income increases. The income

bracket amounts are adjusted annually for inflation. Separate rate

schedules apply based on filing status: single individuals (other

than heads of households and surviving spouses), heads of households, married individuals filing joint returns (including surviving

spouses), married individuals filing separate returns, and estates

and trusts. Lower rates may apply to capital gains.

For 2001, the regular income tax rate schedules for individuals

are shown in Table 1., below. The rate bracket breakpoints for marVerDate 23-FEB-2001 07:11 Mar 07, 2001 Jkt 089006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR007.XXX pfrm04 PsN: HR007
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ried individuals filing separate returns are exactly one-half of the

rate brackets for married individuals filing joint returns. A separate, compressed rate schedule applies to estates and trusts.

TABLE 1.—INDIVIDUAL REGULAR INCOME TAX RATES FOR 2001

If taxable income is Then regular income tax equals

Single individuals

$0–27,050 .......................................................................... 15 percent of taxable income.

$27,050–$65,550 ............................................................... $4,057.50, plus 28% of the amount over $27,050.

$65,550–$136,750 ............................................................. $14,837.50, plus 31% of the amount over $65,550.

$136,750–$297,350 ........................................................... $36,909.50, plus 36% of the amount over $136,750.

Over $297,350 .................................................................... $94,725.50, plus 39.6% of the amount over $297,350.

Heads of households

$0–$36,250 ........................................................................ 15 percent of taxable income.

$36,250–$93,650 ............................................................... $5,437.50, plus 28% of the amount over $36,250.

$93,650–$151,650 ............................................................. $21,509.50, plus 31% of the amount over $93,650.

$151,650–$297,350 ........................................................... $39,489.50, plus 36% of the amount over $151,650.

Over $297,350 .................................................................... $91,941.50, plus 39.6% of the amount over $297,350.

Married individuals filing joint returns

$0–$45,200 ........................................................................ 15 percent of taxable income.

$45,200–$109,250 ............................................................. $6,780.00, plus 28% of the amount over $45,200.

$109,250–$166,500 ........................................................... $24,714.50, plus 31% of the amount over $109,250.

$166,500–$297,350 ........................................................... $42,461.50, plus 36% of the amount over $166,500.

Over $297,350 .................................................................... $89,567.50, plus 39.6% of the amount over $297,350.

Alternative minimum tax liability

In general

An individual’s alternative minimum tax equals the excess of the

individual’s tentative alternative minimum tax liability over his or

her regular income tax liability. Tentative alternative minimum

tax liability is determined by applying specified rates (shown in

Table 2., below) to alternative minimum taxable income in excess

of specified exemption amounts. Alternative minimum taxable income generally is the individual’s regular taxable income increased

by certain preference items and other adjustments. The basic structure of the alternative minimum tax (such as exemption amounts

and rate brackets) is not adjusted annually for inflation. The lower

regular income tax rates on capital gains also apply under the alternative minimum tax.

TABLE 2.—INDIVIDUAL ALTERNATIVE MINIMUM TAX RATES

If alternative minimum taxable income in excess of the applicable

exemption amount is Then tentative alternative minimum tax equals

$0–175,000 ........................................................................ 26 percent of alternative minimum taxable income in excess of

the applicable exemption amount.

Over $175,000 .................................................................... $45,500, plus 28% of the amount over $175,000.

LIMITATION ON NONREFUNDABLE CREDITS

Through 2001, an individual generally may reduce his or her tentative alternative minimum tax liability by nonrefundable personal

tax credits (such as the $500 child tax credit and the adoption tax

credit). For taxable years beginning after December 31, 2001, nonrefundable personal tax credits may not reduce an individual’s income tax liability below his or her tentative alternative minimum

tax.

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1 Congressional Budget Office, Congress of the United States, The Budget Economic Outlook:

Fiscal Years 2002–2011, January 2001, p. 56.

AMT OFFSET OF REFUNDABLE TAX CREDITS

An individual’s alternative minimum tax liability reduces the

amount of the refundable earned income credit and, for taxable

years beginning after December 31, 2001, the amount of the refundable child credit for families with three or more children.

REASONS FOR CHANGE

The Committee bill makes the first down payment on President

Bush’s pledge to deliver $1.6 trillion in tax relief to the American

people. The Committee bill provides immediate tax relief to American taxpayers in the form of a new rate bracket for the first $6,000

of taxable income for single individuals and the first $12,000 of taxable income for married couples filing a joint return. This new 10-

percent rate bracket will be phased in, beginning in 2001. In addition, the Committee bill phases in reductions in all individual income tax rates over five years. The Committee bill will provide tax

relief to more than 100 million income tax returns of individuals,

including at least 16 million returns of individuals with business

income.

The Committee believes that providing tax relief to the American

people is appropriate for a number of reasons. The Congressional

Budget Office (‘‘CBO’’) projects budget surpluses of $5.0 trillion

over the next 10 fiscal years (2001–2010). Federal revenues have

been rising as a share of the gross domestic product (‘‘GDP’’). CBO

projects that, during the fiscal year 2001–2010 period, Federal revenues will be more than 20 percent of the GDP annually. By contrast, during the early 1990’s, Federal revenues generally were

only 17–18 percent of the GDP. Individual income taxes account for

most of the recent rise in revenues as a percentage of GDP. Federal

individual income tax revenues rose to over 10 percent of GDP in

fiscal year 2000 for the first time in history and are projected by

the CBO to exceed 10 percent of GDP for each of the fiscal years

2001–2010. The CBO projects that the growth of Federal revenues

will, for fiscal year 2001, outstrip the growth of GDP for the ninth

consecutive year. Moreover, the CBO states that ‘‘[t]he most significant source of the growth of income taxes relative to GDP was the

increase in the effective tax rate.’’ 1

The Federal income tax is intended to collect revenues to fund

the programs of the Federal government. If more tax revenues are

collected than are needed to fund the government, the Committee

believes that at least a portion of the excess should be returned to

the taxpayers who are paying Federal income taxes. A portion of

the surplus can be returned while still retaining enough to pay

down the public debt, fund priorities such as education and defense

and secure the future of Social Security and Medicare. Thus, the

Committee believes that it is appropriate to provide relief from the

high individual income tax rates of present law.

The Committee believes that high individual income tax rates reduce incentives for taxpayers to work, to save, and to invest and,

thereby, have a negative effect on the long-term health of the economy. The higher that marginal tax rates are, the greater is the disincentive for individuals to increase their work effort. In addition,

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the Committee has received testimony from tax experts that high

marginal tax rates lead to reduced confidence in the Federal tax

system and lower rates of voluntary compliance by taxpayers.

Lower marginal tax rates provide greater incentives to taxpayers

to be entrepreneurial risk takers; the Committee believes that the

high marginal tax rates of present law discourage success. The

Committee bill provides a tax cut to more than 16 million owners

of businesses—sole proprietorships, partnerships, and S corporations. The Committee believes that this tax cut will lead to increased investment by these businesses, promoting long-term

growth and stability in the economy and rewarding the businessmen and women who provide a foundation for our country’s success.

In addition, lower marginal tax rates help remove the barriers

that lower-income families face as they try to enter the middle

class. The lower the marginal tax rates for those taxpayers in the

lowest income tax brackets, the greater is the incentive to work.

The new 10-percent rate bracket in the Committee bill delivers

more benefit as a percentage of income to low-income taxpayers

than high-income taxpayers and provides an incentive for these

taxpayers to increase their work effort.

Finally, there are signs that the economy is slowing. The Committee believes that immediate tax relief may encourage short-term

growth in the economy by providing individuals with additional

cash to spend. However, the Committee recognizes that it is important to act quickly so that taxpayers are aware of the commitment

of the President and the Congress to enact this tax cut and to adjust income tax withholding tables. It is important that taxpayers

immediately see the benefits of this tax relief in the form of more

money in their pockets.

The Committee bill also repeals the present-law provision reducing the refundable child credit and the earned income credit by the

amount of the alternative minimum tax. This provision ensures

that no taxpayer will face an increase in net income tax liability

as a result of the interaction of the alternative minimum tax with

the rate reductions in the Committee bill.

The Committee finds it appropriate to ensure that present-law

transfers to the Social Security and Medicare trust funds will not

be reduced as a result of the tax relief being provided under the

Committee bill.

EXPLANATION OF PROVISION

In general

The bill creates a new low-rate regular income tax bracket for a

portion of taxable income that is currently taxed at 15 percent. The

bill reduces other regular income tax rates and consolidates rate

brackets. By 2006, the present-law structure of five regular income

tax rates (15 percent, 28 percent, 31 percent, 36 percent and 39.6

percent) will be reduced to fur rates of 10 percent, 15 percent, 25

percent, and 33 percent. The bill repeals the present-law provisions

that offset the refundable child credit and the earned income credit

by the amount of the alternative minimum tax.

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New low-rate bracket

The bill establishes a new regular income tax rate bracket for a

portion of taxable income that is currently taxed at 15 percent, as

shown in Table 3, below. The taxable income levels for the new

low-rate bracket will be adjusted annually for inflation for taxable

years beginning after December 31, 2006.

TABLE 3.—PROPOSED NEW LOW-RATE BRACKET

Calendar year

Taxable income

Single individualsHeads of

household

Married filing

joint returns

Proposed new

rate (percent)

2001–2002 ..................................................................................... 0–$6,000 0–$10,000 0–$12,000 12

2003–2005 ..................................................................................... 0–$6,000 0–$10,000 0–$12,000 11

2006 ............................................................................................... 0–$6,000 0–$10,000 0–$12,000 10

2007 and later ............................................................................... Adjust annually for inflation1 10

1 The new low-rate bracket for joint returns and head of household returns will be rounded down to the nearest $50. The bracket for single

individuals and married individuals filing separately will be one-half the bracket for joint returns (after adjustment of that bracket for inflation).

Modification of 15-percent bracket

The 15-percent regular income tax bracket is modified to begin

at the end of the new low-rate regular income tax bracket. The 15-

percent regular income tax bracket ends at the same level as under

present law.

Reduction of other rates and consolidation of rate brackets

The present-law regular income tax rates of 28 percent and 31

percent are phased down to 25 percent over five years, effective for

taxable years beginning after December 31, 2001. The taxable income level for the new 25-percent rate bracket begins at the level

at which the 28-percent rate bracket begins under present law and

ends at the level at which the 31-percent rate bracket ends under

present law.

The present-law regular income tax rates of 36 percent and 39.6

percent are phased down to 33 percent over five years, effective for

taxable years beginning after December 31, 2001. The taxable income level for the new 33-percent rate bracket begins at the level

at which the 36-percent rate bracket begins under present law.

Table 4., below, shows the schedule of proposed regular income

tax rate reductions.

TABLE 4.—PROPOSED REGULAR INCOME TAX RATE REDUCTIONS

Calendar year 28% rate

reduced to

31% rate

reduced to

36% rate

reduced to

39.6% rate

reduced to

2002 ............................................................................................... 27 30 35 38

2003 ............................................................................................... 27 29 35 37

2004 ............................................................................................... 26 28 34 36

2005 ............................................................................................... 26 27 34 35

2006 and later ............................................................................... 25 25 33 33

Projected regular income tax rate schedules under the proposal

Table 5., below, shows the projected individual regular income

tax rate schedules when the rate reductions are fully phased in

(i.e., for 2006). As under present law, the rate brackets for married

taxpayers filing separate returns under the bill are one half the

9

rate brackets for married individuals filing joint returns. In addition, appropriate adjustments are made to the separate, compressed rate schedule for estate and trusts.

TABLE 5.—INDIVIDUAL REGULAR INCOME TAX RATES FOR 2006 (PROJECTED)

If taxable income is Then regular income tax equals

Single individuals

$0–6,000 ............................................................................ 10 percent of taxable income.

$6,000–$30,950 ................................................................. $600, plus 15 percent of the amount over $6,000.

$30,950–$156,300 ............................................................. $4,342.50, plus 25% of the amount over $30,950.

Over $156,300 .................................................................... $35,680, plus 33% of the amount over $156,300.

Heads of households

$0–$10,000 ........................................................................ 10 percent of taxable income.

$10,000–$41,450 ............................................................... $1,000 plus 15% of the amount over $10,000.

$41,450–$173,300 ............................................................. $5,717.50, plus 25% of the amount over $41,450.

Over $173,300 .................................................................... $38,680, plus 33% of the amount over $173,300.

Married individual filing joint returns

$0–$12,000 ........................................................................ 10 percent of taxable income.

$12,000–$51,700 ............................................................... $1,200 plus 15% of the amount over $12,000.

$51,700–$190,300 ............................................................. $7,155, plus 25% of the amount over $51,700.

$190,300 ............................................................................ $41,805, plus 33% of the amount over $190,300.

AMT offset of refundable tax credits

The bill repeals the present-law provision that offsets the refundable child credit and the earned income credit by the amount of the

alternative minimum tax.

Revised wage withholding for 2001

Under present law, the Secretary of the Treasury is authorized

to prescribe appropriate income tax withholding tables or computational procedures for the withholding of income taxes from wages

paid by employers. The Secretary is expected to make appropriate

revisions to the wage withholding tables to reflect the proposed

rate reduction for calendar year 2001 as expeditiously as possible.

Transfer to Social Security and Medicare trust funds

Under the bill, the amounts transferred to the Social Security

and Medicare trust funds are determined as if the rate reductions

in the bill were not enacted. Thus, there will be no reduction in

transfers to these funds as a result of the bill.

EFFECTIVE DATE

The provisions of the bill generally apply to taxable years beginning after December 31, 2000, except that the conforming amendments to certain withholding provisions under the bill are effective

for amounts paid more than 60 days after the date of enactment.

III. VOTES OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of the

House of Representatives, the following statements are made concerning the votes of the Committee on Ways and Means in its consideration of the bill, H.R. 3.

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MOTION TO REPORT THE BILL

The bill, H.R. 3, as amended, was ordered favorably reported by

a rollcall vote of 23 yeas to 15 nays (with a quorum being present).

The vote was as follows:

Representatives Yea Nay Present Representatives Yea Nay Present

Mr. Thomas ........................... X ........... ............. Mr. Rangel ........................... ........... X .............

Mr. Crane .............................. X ........... ............. Mr. Stark .............................. ........... X .............

Mr. Shaw ............................... X ........... ............. Mr. Matsui ............................ ........... X .............

Mrs. Johnson ......................... X ........... ............. Mr. Coyne ............................. ........... X .............

Mr. Houghton ........................ X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Herger ............................. X ........... ............. Mr. Cardin ............................ ........... X .............

Mr. McCrery ........................... X ........... ............. Mr. McDermott ..................... ........... ........... .............

Mr. Camp .............................. X ........... ............. Mr. Kleczka ........................... ........... X .............

Mr. Ramstad ......................... X ........... ............. Mr. Lewis (GA) ..................... ........... X .............

Mr. Nussle ............................. X ........... ............. Mr. Neal ............................... ........... ........... .............

Mr. Johnson ........................... X ........... ............. Mr. McNulty .......................... ........... X .............

Ms. Dunn .............................. ........... ........... ............. Mr. Jefferson ........................ ........... X .............

Mr. Collins ............................ X ........... ............. Mr. Tanner ............................ ........... X .............

Mr. Portman .......................... X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. English ........................... X ........... ............. Mrs. Thurman ....................... ........... X .............

Mr. Watkins ........................... X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Hayworth ......................... X ........... ............. Mr. Pomeroy ......................... ........... X .............

Mr. Weller .............................. X ........... ............. .............................................. ........... ........... .............

Mr. Hulshof ........................... X ........... ............. .............................................. ........... ........... .............

Mr. McInnis ........................... X ........... ............. .............................................. ........... ........... .............

Mr. Lewis (KY) ...................... X ........... ............. .............................................. ........... ........... .............

Mr. Foley ............................... X ........... ............. .............................................. ........... ........... .............

Mr. Brady .............................. X ........... ............. .............................................. ........... ........... .............

Mr. Ryan ............................... X ........... ............. .............................................. ........... ........... .............

VOTES ON AMENDMENTS

A rollcall vote was conducted on the following amendments to the

Chairman’s amendment in the nature of a substitute.

An amendment by Mr. Jefferson and Mrs. Thurman, to provide

that if in any year the Secretary of the Treasury determines that

the Social Security and Medicare surplus would be used for anything other than debt reduction, the trigger would be activated,

was defeated by a roll call vote of 16 yeas to 22 nays. The vote was

as follows:

Representatives Yea Nay Present Representatives Yea Nay Present

Mr. Thomas ........................... ........... X ............. Mr. Rangel ........................... X ........... .............

Mr. Crane .............................. ........... X ............. Mr. Stark .............................. X ........... .............

Mr. Shaw ............................... ........... X ............. Mr. Matsui ............................ X ........... .............

Mrs. Johnson ......................... ........... X ............. Mr. Coyne ............................. X ........... .............

Mr. Houghton ........................ ........... X ............. Mr. Levin .............................. X ........... .............

Mr. Herger ............................. ........... X ............. Mr. Cardin ............................ X ........... .............

Mr. McCrery ........................... ........... X ............. Mr. McDermott ..................... ........... ........... .............

Mr. Camp .............................. ........... X ............. Mr. Kleczka ........................... X ........... .............

Mr. Ramstad ......................... ........... X ............. Mr. Lewis (GA) ..................... X ........... .............

Mr. Nussle ............................. ........... ........... ............. Mr. Neal ............................... X ........... .............

Mr. Johnson ........................... ........... X ............. Mr. McNulty .......................... X ........... .............

Ms. Dunn .............................. ........... ........... ............. Mr. Jefferson ........................ X ........... .............

Mr. Collins ............................ ........... X ............. Mr. Tanner ............................ X ........... .............

Mr. Portman .......................... ........... X ............. Mr. Becerra .......................... X ........... .............

Mr. English ........................... ........... X ............. Mrs. Thurman ....................... X ........... .............

Mr. Watkins ........................... ........... X ............. Mr. Doggett .......................... X ........... .............

Mr. Hayworth ......................... ........... X ............. Mr. Pomeroy ......................... X ........... .............

Mr. Weller .............................. ........... X ............. .............................................. ........... ........... .............

Mr. Hulshof ........................... ........... X ............. .............................................. ........... ........... .............

Mr. McInnis ........................... ........... X ............. .............................................. ........... ........... .............

Mr. Lewis (KY) ...................... ........... X ............. .............................................. ........... ........... .............

11

Representatives Yea Nay Present Representatives Yea Nay Present

Mr. Foley ............................... ........... X ............. .............................................. ........... ........... .............

Mr. Brady .............................. ........... X ............. .............................................. ........... ........... .............

Mr. Ryan ............................... ........... X ............. .............................................. ........... ........... .............

A substitute amendment by Mr. Rangel was defeated by a rollcall

vote of 12 yeas to 26 nays. The vote was as follows:

Representatives Yea Nay Present Representatives Yea Nay Present

Mr. Thomas ........................... ........... X ............. Mr. Rangel ........................... X ........... .............

Mr. Crane .............................. ........... X ............. Mr. Stark .............................. X ........... .............

Mr. Shaw ............................... ........... X ............. Mr. Matsui ............................ X ........... .............

Mrs. Johnson ......................... ........... X ............. Mr. Coyne ............................. X ........... .............

Mr. Houghton ........................ ........... X ............. Mr. Levin .............................. X ........... .............

Mr. Herger ............................. ........... X ............. Mr. Cardin ............................ X ........... .............

Mr. McCrery ........................... ........... X ............. Mr. McDermott ..................... ........... ........... .............

Mr. Camp .............................. ........... X ............. Mr. Kleczka ........................... X ........... .............

Mr. Ramstad ......................... ........... X ............. Mr. Lewis (GA) ..................... X ........... .............

Mr. Nussle ............................. ........... X ............. Mr. Neal ............................... ........... ........... .............

Mr. Johnson ........................... ........... X ............. Mr. McNulty .......................... X ........... .............

Ms. Dunn .............................. ........... ........... ............. Mr. Jefferson ........................ X ........... .............

Mr. Collins ............................ ........... X ............. Mr. Tanner ............................ ........... X .............

Mr. Portman .......................... ........... X ............. Mr. Becerra .......................... X ........... .............

Mr. English ........................... ........... X ............. Mrs. Thurman ....................... ........... X .............

Mr. Watkins ........................... ........... X ............. Mr. Doggett .......................... ........... X .............

Mr. Hayworth ......................... ........... X ............. Mr. Pomeroy ......................... X ........... .............

Mr. Weller .............................. ........... X ............. .............................................. ........... ........... .............

Mr. Hulshof ........................... ........... X ............. .............................................. ........... ........... .............

Mr. McInnis ........................... ........... X ............. .............................................. ........... ........... .............

Mr. Lewis (KY) ...................... ........... X ............. .............................................. ........... ........... .............

Mr. Foley ............................... ........... X ............. .............................................. ........... ........... .............

Mr. Brady .............................. ........... X ............. .............................................. ........... ........... .............

Mr. Ryan ............................... ........... X ............. .............................................. ........... ........... .............

IV. BUDGET EFFECTS OF THE BILL

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d)(2) of the rule XIII of the Rules of

the House of Representatives, the following statement is made concerning the effects on the budget of the revenue provisions of the

bill, H.R. 3 as reported.

The bill is estimated to have the following effects on budget receipts for fiscal years 2001–2006:

ESTIMATED REVENUE EFFECTS OF H.R. 3, THE ‘‘ECONOMIC GROWTH AND TAX RELIEF ACT OF

2001,’’ AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS

[Fiscal years 2001–2011, in billions of dollars]

Provision Effective 2001 2002 2003 2004 2005 2006 2001–06

1. Create new bracket for first

$6,000 of taxable income for singles, first $10,000 for heads of

households, and first $12,000 for

married couples; no indexing

bracket for inflation until 2007;

rate set at 12% in 2001 and

2002, 11% in 2003 through

2005, and 10% in 2006.

tyba 12/31/00 ¥5.6 ¥35.7 ¥30.0 ¥32.4 ¥32.3 ¥37.9 ¥174.0

12

ESTIMATED REVENUE EFFECTS OF H.R. 3, THE ‘‘ECONOMIC GROWTH AND TAX RELIEF ACT OF

2001,’’ AS REPORTED BY THE COMMITTEE ON WAYS AND MEANS—Continued

[Fiscal years 2001–2011, in billions of dollars]

Provision Effective 2001 2002 2003 2004 2005 2006 2001–06

2. Reduce the various income tax

rates (39.6% rate reduced to

38% in 2002, 37% in 2003,

36% in 2004, 35% 2005 and

33% in 2006; 36% rate reduced

to 35% in 2002 and 2003, 34%

in 2004 and 2005, and 33% in

2006; 31% rate reduced to 30%

in 2002, 29% in 2003, 28% in

2004, 27% in 2005, and 25% in

2006; and 28% rate reduced to

27% in 2002 and 2003, 26% in

2004 and 2005, and 25% in

2006); repeal the AMT offset to

refundable tax credits.

tyba 12/31/01 (1) ¥13.4 ¥24.4 ¥38.4 ¥48.5 ¥65.2 ¥189.8

3. Transfer to Social Security and

Medicare trust funds.

tyba 12/31/00 No Revenue Effect

Net Total 2 ........................... ¥5.6 ¥49.1 ¥54.4 ¥70.8 ¥80.8 ¥103.1 ¥363.8

1 Loss of less than $50 million.

2 Includes the following effect on fiscal year outlays—2001: (3); 2002: 0.7; 2003: 0.7; 2004: 0.9; 2005: 1.0; 2006: 1.0; 2001–06: 4.2. 3 Less than $50 million.

Legend for ‘‘Effective’’ column: tyba = taxable years beginning after.

Note.—Details may not add to totals due to rounding.

Source: Joint Committee on Taxation.

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee states that the bill involves new or increased budget authority (as detailed in the statement by the Congressional Budget Office (‘‘CBO’’); see Part IV.C.,

below). The Committee further states that the revenue reducing income tax provisions do not involve increased tax expenditures. (See

amounts in table in Part IV.A., above.)

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the

House of Representatives, requiring a cost estimate prepared by

the CBO, the following statement by CBO is provided.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, March 6, 2001.

Hon. BILL THOMAS,

Chairman, Committee on Ways and Means,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3, the Economic Growth

and Tax Relief Act of 2001.

13

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Erin Whitaker, who can

be reached at 226–2720.

Sincerely,

DAN L. CRIPPEN.

Enclosure.

H.R. 3—Economic Growth and Tax Relief Act of 2001

Summary: H.R. 3 would decrease personal income taxes and increase direct spending by reducing statutory income tax rates and

altering the income brackets at which those rates apply. In addition, the bill would reduce taxes and increase direct spending by

repealing certain elements of the alternative minimum tax. The

Joint Committee on Taxation (JCT) has determined that these

changes would reduce revenues by $5.6 billion in 2001, by $359.5

billion over the 2001–2006 period, and by $947.4 billion over the

2001–2011 period. In addition, JCT estimates that the bill would

increase direct spending by $4.3 billion over the 2001–2006 period

and by $10.8 billion over the 2001–2011 period. Because H.R. 3

would affect both direct spending and receipts, pay-as-you-go procedures would apply.

H.R. 3 would establish a new regular income tax bracket for a

portion of taxable income that is taxed at a rate of 15 percent

under current law. In 2001, the new rate would be 12 percent, effective retroactive to the beginning of the year. By 2006, the rate

applied to that bracket would be phased down to a rate of 10 percent. H.R. 3 also would modify the bracket subject to a rate of 15

percent under current law to begin at the end of the new lowest

income bracket and end at the same income level as under current

law. In addition, starting in 2002, the bill would consolidate the

four remaining income brackets (which bear rates of 28 percent, 31

percent, 36 percent, and 39.6 percent) into two income brackets. By

2006, the two lower brackets would bear a rate of 25 percent; the

income level for the 25 percent bracket would begin at the level at

which the 28 percent bracket begins and end at the level at which

the 31 percent bracket ends under current law. Also by 2006, the

two higher brackets would bear a rate of 33 percent; the income

level for the 33 percent bracket would begin at the level at which

the 36 percent bracket begins under current law.

Under current law, individuals also must calculate their income

taxes under the alternative minimum tax (AMT), a parallel system

of taxation with its own set of income items, exclusions, exemptions, and rates. The taxpayer, in effect, pays the greater of the tax

calculated under the AMT structure and regular tax structure. The

AMT reduces the amount of the earned income credit and the

amount of the child credit provided to families with three or more

children. H.R. 3 would repeal the provisions that reduce the

amount of these credits. That change reduces the tax payments of

individuals receiving those credits and increases outlays to the extent that those credits are refundable.

H.R. 3 contains no intergovernmental or private-sector mandates

as defined in the Unfunded Mandates Reform Act (UMRA) and

would not affect the budgets of state, local, or tribal governments.

14

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3 is shown in the following table. All estimates were provided by JCT.

By fiscal year in millions of dollars—

2001 2002 2003 2004 2005 2006

CHANGES IN REVENUES

Estimated Revenues ................................. ¥5,642 ¥48,431 ¥53,650 ¥69,898 ¥79,887 ¥101,977

CHANGES IN DIRECT SPENDING

Estimated Budget Authority ..................... * 700 700 900 1,000 1,000

Estimated Outlays .................................... * 700 700 900 1,000 1,000

*=Less than $500,000.

Source: Joint Committee on Taxation.

Most of the budgetary effects of H.R. 3 are to reduce revenues.

However, H.R. 3 also increases outlays by changing the bracket

amounts and reducing the rates of taxation. By reducing the

amount of taxes owed, these changes would result in a larger portion of tax credits being refundable—and thus recorded as outlays

rather than reductions in revenues. H.R. 3 would also repeal the

provision of current law that reduces earned income and child credits by the amount of the alternative minimum tax. This provision

of H.R. 3 would also increase tax credits, namely the earned income credit and the child credit, that are refundable under the tax

code and counted as outlays in the budget.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up procedures for legislation affecting receipts or direct spending. The net changes in outlays and governmental receipts that are subject to pay-as-you-go procedures are

shown in the following table. For the purposes of enforcing pay-asyou-go procedures, only the effects in the current year, the budget

year, and the succeeding four years are counted.

By fiscal year, in millions of dollars

—

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 

Changes in receipts ......................................................................................................... ¥5,642 ¥48,431 ¥53,650 ¥69,898 ¥79,887 ¥101,977 ¥112,076 ¥114,656 ¥117,473 ¥120,386 

Changes in outlays .......................................................................................................... * 700 700 900 1,000 1,000 1,300 1,300 1,300 1,300 

*=Less than $500,000.

16

Intergovernmental and private-sector impact: H.R. 3 contains no

intergovernmental or private-sector mandates as defined in UMRA

and would not affect the budgets of state, local, or tribal governments.

Estimate prepared by: Federal Costs: Erin Whitaker. Impact on

State, Local, and Tribal Governments: Leo Lex. Impact on the Private Sector: Paige Piper-Bach.

Estimate approved by: G. Thomas Woodward, Assistant Director

for Tax Analysis. Robert A. Sunshine, Assistant Director for Budget

Analysis.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE

RULES OF THE HOUSE

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the

House of Representatives (relating to oversight findings), the Committee advises that it was a result of the Committee’s oversight review concerning the tax burden on individual taxpayers that the

Committee concluded that it is appropriate and timely to enact the

revenue provisions included in the bill as reported.

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance and objectives for which any measure authorizes

funding is required.

C. CONSTITUTIONAL AUTHORITY STATEMENT

With respect to clause 3(d)(1) of the rule XIII of the Rules of

House of Representatives (relating to Constitutional Authority), the

Committee states that the Committee’s action in reporting this bill

is derived from Article I of the Constitution, Section 8 (‘‘The Congress shall have no Power To lay and collect Taxes, Duties, Imposts

and Excises * * *’’), and from the 16th Amendment to the Constitution.

D. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of

the Unfunded Mandates Act of 1995 (P.L. 104–4).

The Committee has determined that the bill does not contain

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental

mandate on State, local, and tribal governments.

E. APPLICABILITY OF HOUSE RULE XXI 5(b)

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not

be considered as passed or agreed to unless so determined by a

vote of not less than three-fifths of the Members voting, a quorum

being present.’’ The Committee has carefully reviewed the proviVerDate 23-FEB-2001 07:11 Mar 07, 2001 Jkt 089006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR007.XXX pfrm04 PsN: HR007
17

sions of the bill, and states that the provisions of the bill do not

involve any Federal income tax rate increases within the meaning

of the rule.

F. TAX COMPLEXITY ANALYSIS

The following tax complexity analysis is provided pursuant to

section 4022(b) of the Internal Revenue Service Reform and Restructuring Act of 1998, which requires the staff of the Joint Committee on Taxation (in consultation with the Internal Revenue

Service (‘‘IRS’’) and the Treasury Department) to provide a complexity analysis of tax legislation reported by the House Committee

on Ways and Means, the Senate Committee on Finance, or a Conference Report containing tax provisions. The complexity analysis

is required to report on the complexity and administrative issues

raised by provisions that directly or indirectly amend the Internal

Revenue Code and that have widespread applicability to individuals or small businesses. For each such provision identified by the

staff of the Joint Committee on Taxation, a summary description

of the provision is provided along with an estimate of the number

and type of affected taxpayers, and a discussion regarding the relevant complexity and administrative issues.

Following the analysis of the staff of the Joint Committee on

Taxation are the comments of the IRS and the Treasury Department regarding each of the provisions included in the complexity

analysis, including a discussion of the likely effect on IRS forms

and any expected impact on the IRS.

1. Reduction in income tax rates for individuals (sec. 2 of the bill)

Summary description of provision

The bill creates a new low-rate regular income tax bracket for a

portion of the taxable income that is currently taxed at 15 percent.

The bill reduces the other income tax rates and consolidates rate

brackets. By 2006, the present-law rate structure of five regular income tax rates (15 percent, 28 percent, 31 percent, 36 percent, and

39.6 percent) are reduced to four rates of 10 percent, 15 percent,

25 percent, and 33 percent.

Number of affected taxpayers

It is estimated that the provision will affect approximately 100

million individual tax returns.

Discussion

It is not anticipated that individuals will need to keep additional

records due to this provision. It should not result in an increase in

disputes with the IRS, nor will regulatory guidance be necessary to

implement this provision. In addition, the provision should not increase individual’s tax preparation costs.

The Secretary of the Treasury is expected to make appropriate

revisions to the wage withholding tables to reflect the proposed

rate reduction for calendar year 2001 as expeditiously as possible.

To implement the effects of the rate cut for 2001, employers would

be required to use a new (second) set of withholding rate tables to

determine the correct withholding amounts for each employee.

Switching to the new withholding rate tables during the year can

18

be expected to result in a one-time additional burden for employers

(or additional costs for employers that rely on a bookkeeping or

payroll service).

2. Interactive effect of the alternative minimum tax rules

Because the bill makes no changes to the computation of the tentative minimum tax or to the tax liability limitation on the use of

nonrefundable credits, additional individual taxpayers will need to

make the necessary calculations to determine the applicability of

the alternative minimum tax rules. It is estimated that for the year

2002, more than two million additional individual income tax returns that benefit from the provision will be required to include a

calculation of the tentative minimum tax and file the appropriate

alternative minimum tax forms. By the year 2011, this number is

expected to rise to approximately 15 million additional individual

income tax returns. For these taxpayers, it could be expected that

the interaction of this bill with the alternative minimum tax rules

would result in an increase in tax preparation costs and in the

number of individuals using tax preparation services.

DEPARTMENT OF THE TREASURY,

INTERNAL REVENUE SERVICE,

Washington, DC, March 5, 2001.

Ms. LINDY L. PAULL,

Chief of Staff, Joint Committee on Taxation,

Washington, DC.

DEAR MS. PAULL: Enclosed are the combined comments of the Internal Revenue Service and the Treasury Department on the provisions from the House Committee on Ways and Means markup of

the ‘‘Economic Growth and Tax Relief Act of 2001’’ that you identified for complexity analysis in your letter of February 28, 2001.

Our comments are based on the description of those provisions in

JCX–03–01, Joint Committee on Taxation, Description of the Economic Growth and Tax Relief Act of 2001, February 27, 2001.

Due to the short turnaround time, our comments are provisional

and subject to change upon a more complete and in-depth analysis

of the provisions.

Sincerely,

CHARLES O. ROSSOTTI.

Enclosures.

COMPLEXITY ANALYSIS OF ECONOMIC GROWTH AND TAX

RELIEF ACT OF 2001

Provision

Create a new regular income tax bracket for a portion of

taxable income that is currently taxed at 15 percent. The

new bracket is phased in over 6 years beginning in 2001:

(1) 12 percent in 2001 and 2002; (2) 11 percent in 2003,

2004, and 2005; and (3) 10 percent in 2006 and thereafter.

The 15-percent bracket would be modified to begin at the

end of the new tax bracket and end at the same level as

under present law.

Reduce the present-law regular income tax rates of 28

and 31 percent to 25 percent and the 36 and 39.6 percent

19

rates to 33 percent. The reduction is phased in over 5

years beginning in 2002.

IRS and Treasury Comments

• The new tax bracket and the reduced tax rates would

be incorporated into the tax table and the tax rate schedules shown in the instructions for Forms 1040, 1040A,

1040EZ, 1040NR, 1040NR–EZ and 1041, and on Forms W– 4V and 8814 for 2001 and later years. Other forms (e.g.,

Form 8752 and Schedule D (Form 1040)) would also be affected. No new forms would be required. • The new tax bracket and the reduced tax rates would

also be incorporated into the tax rate schedules shown on

Form 1040–ES for 2002 and later years. Subsequent to enactment, the IRS would have to advise taxpayers who

make estimated tax payments for 2001 how they can adjust their estimated tax payments for 2001 to reflect the

reduced rates. • Programming changes would be required to reflect the

new tax bracket and rates for tax years 2001 through

2006. Currently, the IRS tax computation programs are

updated annually to incorporate mandated inflation adjustments. Programming changes necessitated by the provision would be included during that process. • The alternative minimum tax (AMT) is projected to

apply to an increasing number of taxpayers over time. The

provision would increase the number of taxpayers, particularly in the later years of the budget period (2006–2011),

whose liability is affected by the AMT, and would also

cause additional taxpayers to perform AMT calculations to

determine whether their liability is affected by the AMT.

Provision

Under present law, the Secretary of the Treasury is authorized to prescribe appropriate withholding rate schedules and computational procedures for the withholding of

income taxes from wages paid by employers. The Secretary

would be expected to make appropriate revisions to the

wage withholding tables to reflect the rate reduction for

calendar year 2001 as expeditiously as possible.

IRS and Treasury comments

• Revised 2001 withholding rate schedules can be developed within one week of enactment. The revised withholding rate schedules and wage bracket tables can be released immediately thereafter, including postage on the

IRS’ web site.

• Printing and distributing physical copies of the revised

2001 withholding rate schedules and tables (in a revised

Publication 15 or an abbreviated version thereof) will take

5 to 6 weeks. Thus, most employers will not receive physical copies of the revised 2001 withholding tables until 6

weeks after enactment.

• Many employees and payroll agents will need to make

programming changes in order to implement the revised

20

2001 withholding rates. IRS staff have been advised that

some employees and payroll agents may not be able to implement the withholding changes for up to 8 weeks. The

additional, mid-year change will represent an additional

burden for employers and payroll processors. • Withholding changes will be implemented so as to

minimize the burdens on taxpayers and the IRS research’ administrative burdens that arise when there is full-year

underwithholding for employees. • IRS will provide guidance to employees on how they

can adjust their withholding via Form W–4 changes in

order to minimize withholding mismatches caused by the

2001 changes. In the past, IRS has included a notice to

employees with the revised withholding publication for employers (Publication 15) and has asked employers to distribute that notice to their employees. Completing the additional Forms W–4 represents an additional burden for

workers. Processing the additional Forms W–4 and the included requests for withholding adjustments represents an

additional cost for employers.

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS

REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

INTERNAL REVENUE CODE OF 1986

* * * * * * *

Subtitle A—Income Taxes

* * * * * * *

CHAPTER 1—NORMAL TAXES AND SURTAXES

* * * * * * *

Subchapter A—Determination of tax liability

* * * * * * *

PART I—TAX ON INDIVIDUALS

* * * * * * *

SEC. 1. TAX IMPOSED.

(a) * * *

* * * * * * *

(g) CERTAIN UNEARNED INCOME OF MINOR CHILDREN TAXED AS

IF PARENT’S INCOME.—

21

(1) * * *

* * * * * * *

(7) ELECTION TO CLAIM CERTAIN UNEARNED INCOME OF CHILD

ON PARENT’S RETURN.— (A) * * *

(B) INCOME INCLUDED ON PARENT’S RETURN.—In the case

of a parent making the election under this paragraph— (i) * * *

(ii) the tax imposed by this section for such year

with respect to such parent shall be the amount equal

to the sum of— (I) * * *

(II) for each such child, ø15 percent¿ the first

bracket percentage of the lesser of the amount described in paragraph (4)(A)(ii)(I) or the excess of

the gross income of such child over the amount so

described, and

* * * * * * *

For purposes of clause (ii), the first bracket percentage is

the percentage applicable to the lowest income bracket in

the table under subsection (c).

(h) MAXIMUM CAPITAL GAINS RATE.— (1) IN GENERAL.—If a taxpayer has a net capital gain for any

taxable year, the tax imposed by this section for such taxable

year shall not exceed the sum of—

(A) a tax computed at the rates and in the same manner

as if this subsection had not been enacted on the greater

of—

(i) * * *

(ii) the lesser of—

(I) the amount of taxable income taxed at a rate

below ø28 percent¿ 25 percent; or

* * * * * * *

(B) 10 percent of so much of the adjusted net capital

gain (or, if less, taxable income) as does not exceed the excess (if any) of—

(i) the amount of taxable income which would (without regard to this paragraph) be taxed at a rate below

ø28 percent¿ 25 percent, over

* * * * * * *

ø(13) SPECIAL RULES.—

ø(A) DETERMINATION OF 28-PERCENT RATE GAIN.—In applying paragraph (5)—

ø(i) the amount determined under subparagraph (A)

of paragraph (5) shall include long-term capital gain

(not otherwise described in such subparagraph)—

ø(I) which is properly taken into account for the

portion of the taxable year before May 7, 1997; or

ø(II) from property held not more than 18

months which is properly taken into account for

the portion of the taxable year after July 28, 1997,

and before January 1, 1998;

22

ø(ii) the amount determined under subparagraph (B)

of paragraph (5) shall include long-term capital loss

(not otherwise described in such subparagraph)—

ø(I) which is properly taken into account for the

portion of the taxable year before May 7, 1997; or

ø(II) from property held not more than 18

months which is properly taken into account for

the portion of the taxable year after July 28, 1997,

and before January 1, 1998; and

ø(iii) subparagraph (B) of paragraph (5) (as in effect

immediately before the enactment of this clause) shall

apply to amounts properly taken into account before

January 1, 1998.

ø(B) DETERMINATION OF UNRECAPTURED SECTION 1250

GAIN.—The amount determined under paragraph (7)(A)(i)

shall not include gain—

ø(i) which is properly taken into account for the portion of the taxable year before May 7, 1997; or

ø(ii) from property held not more than 18 months

which is properly taken into account for the portion of

the taxable year after July 28, 1997, and before January 1, 1998.

ø(C) SPECIAL RULES FOR PASS-THRU ENTITIES.—In applying this paragraph with respect to any pass-thru entity,

the determination of when gains and loss are properly

taken into account shall be made at the entity level.

ø(D) CHARITABLE REMAINDER TRUSTS.—Subparagraphs

(A) and (B)(ii) shall not apply to any capital gain distribution made by a trust described in section 664.¿

(i) RATE REDUCTIONS AFTER 2000.—

(1) NEW LOWEST RATE BRACKET.—

(A) IN GENERAL.—In the case of taxable years beginning

after December 31, 2000—

(i) the rate of tax under subsections (a), (b), (c), and

(d) on taxable income not over the initial bracket

amount shall be 12 percent (as modified by paragraph

(2)), and

(ii) the 15 percent rate of tax shall apply only to taxable income over the initial bracket amount.

(B) INITIAL BRACKET AMOUNT.—For purposes of this subsection, the initial bracket amount is—

(i) $12,000 in the case of subsection (a),

(ii) $10,000 in the case of subsection (b), and

(iii) 1⁄2 the amount applicable under clause (i) in the

case of subsections (c) and (d).

(C) INFLATION ADJUSTMENT.—In prescribing the tables

under subsection (f) which apply with respect to taxable

years beginning in calendar years after 2001—

(i) the Secretary shall make no adjustment to the initial bracket amount for any taxable year beginning before January 1, 2007,

(ii) the cost-of-living adjustment used in making adjustments to the initial bracket amount for any taxable

year beginning after December 31, 2006, shall be deterVerDate 23-FEB-2001 07:11 Mar 07, 2001 Jkt 089006 PO 00000 Frm 00022 Fmt 6659 Sfmt 6603 E:\HR\OC\HR007.XXX pfrm04 PsN: HR007
23

mined under subsection (f)(3) by substituting ‘‘2005’’ for ‘‘1992’’ in subparagraph (B) thereof, and

(iii) such adjustment shall not apply to the amount

referred to in subparagraph (B)(iii).

If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50.

(2) REDUCTIONS IN RATES AFTER 2001.—In the case of taxable

years beginning in a calendar year after 2001, the corresponding percentage specified for such calendar year in the

following table shall be substituted for the otherwise applicable

tax rate in the tables under subsections (a), (b), (c), (d), and, to

the extent applicable, (e).

In the case of taxable years

beginning during calendar

year:

The corresponding percentages shall

be substituted for the following percentages:

12% 28% 31% 36% 39.6%

2002 ........................................... 12% 27% 30% 35% 38%

2003 ........................................... 11% 27% 29% 35% 37%

2004 ........................................... 11% 26% 28% 34% 36%

2005 ........................................... 11% 26% 27% 34% 35%

2006 and thereafter .................. 10% 25% 25% 33% 33%

(3) ADJUSTMENT OF TABLES.—The Secretary shall adjust the

tables prescribed under subsection (f) to carry out this subsection.

* * * * * * *

PART III—CHANGES IN RATES DURING A TAXABLE

YEAR

* * * * * * *

SEC. 15. EFFECT OF CHANGES.

(a) * * *

* * * * * * *

(f) RATE REDUCTIONS ENACTED BY ECONOMIC GROWTH AND TAX

RELIEF ACT OF 2001.—This section shall not apply to any change

in rates under subsection (i) of section 1 (relating to rate reductions

after 2000).

* * * * * * *

PART IV—CREDITS AGAINST TAX

* * * * * * *

Subpart A—Nonrefundable personal credits

* * * * * * *

SEC. 24. CHILD TAX CREDIT.

(a) * * *

* * * * * * *

24

(d) ADDITIONAL CREDIT FOR FAMILIES WITH 3 OR MORE CHIL- DREN.—

(1) * * *

ø(2) REDUCTION OF CREDIT TO TAXPAYER SUBJECT TO ALTER- NATIVE MINIMUM TAX.—For taxable years beginning after December 31, 2001, the credit determined under this subsection

for the taxable year shall be reduced by the excess (if any) of— ø(A) the amount of tax imposed by section 55 (relating

to alternative minimum tax) with respect to such taxpayer

for such taxable year, over

ø(B) the amount of the reduction under section 32(h)

with respect to such taxpayer for such taxable year.¿

ø(3)¿ (2) SOCIAL SECURITY TAXES.—For purposes of paragraph (1)— (A) * * *

* * * * * * *

Subpart C—Refundable credits

* * * * * * *

SEC. 32. EARNED INCOME.

(a) * * *

* * * * * * *

ø(h) REDUCTION OF CREDIT TO TAXPAYERS SUBJECT TO ALTERNATIVE MINIMUM TAX.—The credit allowed under this section for

the taxable year shall be reduced by the amount of tax imposed by

section 55 (relating to alternative minimum tax) with respect to

such taxpayer for such taxable year.¿

* * * * * * *

Subchapter G—Corporations used to avoid

income tax on shareholders

* * * * * * *

PART I—CORPORATIONS IMPROPERLY ACCUMULATING

SURPLUS

* * * * * * *

SEC. 531. IMPOSITION OF ACCUMULATED EARNINGS TAX.

In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the accumulated taxable income (as defined in section 535) of each corporation described in

section 532, an accumulated earnings tax øequal to 39.6 percent of

the accumulated taxable income.¿ equal to the product of the highest rate of tax under section 1(c) and the accumulated taxable income.

* * * * * * *

PART II—PERSONAL HOLDING COMPANIES

* * * * * * *

25

SEC. 541. IMPOSITION OF PERSONAL HOLDING COMPANY TAX.

In addition to other taxes imposed by this chapter, there is hereby imposed for each taxable year on the undistributed personal

holding company income (as defined in section 545) of every personal holding company (as defined in section 542) a personal holding company tax øequal to 39.6 percent of the undistributed personal holding company income.¿ equal to the product of the highest

rate of tax under section 1(c) and the undistributed personal holding company income.

* * * * * * *

Subtitle C—Employment Taxes

* * * * * * *

CHAPTER 24—COLLECTION OF INCOME TAX

AT SOURCE ON WAGES

* * * * * * *

SEC. 3402. INCOME TAX COLLECTED AT SOURCE.

(a) * * *

* * * * * * *

(p) VOLUNTARY WITHHOLDING AGREEMENTS.—

(1) CERTAIN FEDERAL PAYMENTS.—

(A) * * *

(B) AMOUNT WITHHELD.—The amount to be deducted

and withheld under this chapter from any payment to

which any request under subparagraph (A) applies shall be

an amount equal to the percentage of such payment specified in such request. Such a request shall apply to any

payment only if the percentage specified is ø7, 15, 28, or

31 percent¿ 7 percent, any percentage applicable to any of

the 3 lowest income brackets in the table under section 1(c),

or such other percentage as is permitted under regulations

prescribed by the Secretary.

(2) VOLUNTARY WITHHOLDING ON UNEMPLOYMENT BENEFITS.—If, at the time a payment of unemployment compensation (as defined in section 85(b)) is made to any person, a request by such person is in effect that such payment be subject

to withholding under this chapter, then for purposes of this

chapter and so much of subtitle F as relates to this chapter,

such payment shall be treated as if it were a payment of wages

by an employer to an employee. The amount to be deducted

and withheld under this chapter from any payment to which

any request under this paragraph applies shall be an amount

øequal to 15 percent of such payment¿ equal to the product of

the lowest rate of tax under section 1(c) and such payment.

* * * * * * *

(q) EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING

WINNINGS.—

(1) GENERAL RULE.—Every person, including the Government

of the United States, a State, or a political subdivision thereof,

26

or any instrumentalities of the foregoing, making any payment

of winnings which are subject to withholding shall deduct and

withhold from such payment a tax in an amount øequal to 28

percent of such payment¿ equal to the product of the third to

the lowest rate of tax under section 1(c) and such payment.

* * * * * * *

(r) EXTENSION OF WITHHOLDING TO CERTAIN TAXABLE PAYMENTS

OF INDIAN CASINO PROFITS.—

(1) * * *

* * * * * * *

(3) ANNUALIZED TAX.—For purposes of paragraph (1), the

term ‘‘annualized tax’’ means, with respect to any payment, the

amount of tax which would be imposed by section 1(c) (determined without regard to any rate of tax in excess of ø31 percent¿ the third to the lowest rate of tax under section 1(c)) on

an amount of taxable income equal to the excess of—

(A) * * *

* * * * * * *

SEC. 3406. BACKUP WITHHOLDING.

(a) REQUIREMENT TO DEDUCT AND WITHHOLD.—

(1) IN GENERAL.—In the case of any reportable payment, if—

(A) the payee fails to furnish his TIN to the payor in the

manner required,

(B) the Secretary notifies the payor that the TIN furnished by the payee is incorrect,

(C) there has been a notified payee underreporting described in subsection (c), or

(D) there has been a payee certification failure described

in subsection (d),

then the payor shall deduct and withhold from such payment

a tax øequal to 31 percent of such payment¿ equal to the product of the third to the lowest rate of tax under section 1(c) and

such payment.

* * * * * * *

SECTION 13273 OF THE REVENUE RECONCILIATION ACT

OF 1993

SEC. 13273. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL

WAGE PAYMENTS.

If an employer elects under Treasury Regulation 31.3402 (g)–

1 to determine the amount to be deducted and withheld from any

supplemental wage payment by using a flat percentage rate, the

rate to be used in determining the amount to be so deducted and

withheld shall not be less than ø28 percent¿ the third to the lowest

rate of tax under section 1(c) of the Internal Revenue Code of 1986.

The preceding sentence shall apply to payments made after December 31, 1993.

(27)

VII. DISSENTING VIEWS

The Democratic Members of the Committee on Ways and Means

support meaningful tax reductions so long as the tax reductions are

fiscally responsible, fair, and honest. We support an overall budget

framework first, then a tax reduction plan that meets those standards. The bill reported by the Committee does not meet those

standards and we can not support it.

FISCAL RESPONSIBILITY

The last eight years were a period of unprecedented economic

growth. That growth in part was made possible by the deficit reduction efforts of the last 10 years which resulted in lower interest

rates, increased investment and greater productivity growth. Those

deficit reduction efforts began when, in 1990, President George

Bush recognized that the deficits resulting from the 1981 tax legislation were damaging our economy. His 1990 budget agreement

was the first step to reverse those deficits. The 1993 Budget Act

was the vital next step on the road to the surpluses that we now

enjoy. Both of those measures were opposed overwhelmingly by the

Republican Members of the House.

Now the House Republican Leadership is threatening to return

this country to deficits by rushing through large tax reductions

based on uncertain budget projections. An article in the Washington Post on March 1, 2001, laid out the current Republican

strategy. In 1995, the Republican Congress attempted to enact

large tax reductions at the same time as it proposed the spending

reductions necessary to fund those tax reductions. The American

people rejected the strategy of funding tax reductions through cuts

in Medicare and other popular programs. Because that strategy

failed, the Republicans now are following a strategy of enacting the

tax reductions first, saving for later the unhappy news of spending

reductions and lack of funds for prescription drug benefits for older

Americans, education spending, farm programs, defense and other

bipartisan priorities. We saw that strategy succeed politically in

1981, when the Congress enacted large tax reductions based on

promised, but unspecified, spending reductions. The success of that

strategy in 1981 led to unprecedented budget deficits with high interest rates and sluggish growth. We fear that we are about to repeat that experience.

The Republican tax cut plans are based on optimistic budget projections that may never be realized. Budget projections are inherently uncertain because they are an attempt to predict the future.

Even small errors in those projections will create dramatic changes

in projected surpluses. If long-term economic growth is one-tenth of

one percent lower than currently projected, $245 billion of projected

surpluses will immediately disappear. Cutting taxes is easy. Once

the Congress has agreed upon a budget framework, we should

28

enact sensible tax reductions this year. If the projections remain favorable in the future, it will be very easy for the Congress to enact

further tax reductions. If the projections prove to be optimistic and

deficits reappear, our ability to meet our commitments to the Medicare and Social Security system will not be threatened if we have

not been hasty and excessive in our actions.

The Republicans are now following the strategy of enacting

President Bush’s tax proposals on a piecemeal basis because the

sum of the promised tax reductions are far greater than his $1.6

trillion target. The Committee bill includes only the marginal income tax rate reductions proposed by the President. This part of

the President’s overall tax proposal would cost almost $1 trillion

over the next years even before extra debt service costs are added

in, leaving little room for a long list of other tax reductions proposed by the President or supported in the Congress. The list includes—

• $300 billion for phasing out the estate tax proposed by

President Bush.

• $200 billion for the child credit expansion proposed by

President Bush.

• $300 billion of marriage penalty relief passed by the Congress last year.

• $55 billion for repeal of the telephone excise tax passed by

the Congress last year.

• $125 billion for pension legislation.

• $300–$500 billion for structural reform of the Alternative

Minimum Tax, as promised by the Chairman of the Committee.

In addition to revenue costs of specific proposals, less in Federal

debt payment would add billions more in debt service costs.

FAIRNESS

The bill reported by the Committee is unfair. It is the first installment of President Bush’s campaign tax reduction proposals. It

is estimated that 43% of the total benefits of his plan will be provided to the wealthiest 1% of our society. The upper income groups

in recent years have enjoyed greater income growth than any other

segment of our society. There is no reason why they should be further rewarded with a disproportionate share of tax relief.

Secretary of the Treasury Paul O’Neil has disputed the fact that

43% of the Bush tax reductions will go the wealthiest 1% of our society. However, he has refused to provide his own distributional

analysis of those tax reduction plans. In the past, the Treasury Department has done distributional analysis of tax legislation based

on the fully phased-in impact of the legislation and has included

distribution of estate and corporate tax reductions. A distributional

analysis of President Bush’s plan using that methodology would

probably be very unfavorable.

Secretary O’Neill has the resources to prove the critics wrong.

Failure to provide a Treasury distributional analysis using its traditional methodology suggests that the critics are correct.

29

HONESTY

The big print of the bill reported by the Committee Republicans

promises far larger tax reductions than will be delivered to taxpayers after the application of the fine print of the Alternative

Minimum Tax. According to an analysis done by the Joint Committee on Taxation, in the big print the Committee bill promised

$1.25 trillion in tax reductions over the next 10 years. However the

fine print of the minimum tax will deny $300 billion of that promised relief.

According to the Joint Committee, under present law 3.5 million

individual taxpayers will be affected by the minimum tax in 2002

and 20.7 million individual taxpayers will be affected by the minimum tax in the year 2011. Substantially all of those taxpayers will

receive no tax relief from the Committee bill. President Bush and

the Republican Leadership have advertised their tax reduction

plans as benefiting all individual taxpayers. In testimony during

the Committee markup of the legislation, the Chief of Staff of the

Joint Committee made it clear that the advertising is false.

In addition, millions of other individuals will receive some, but

not all, of the promised benefits. The total number of individuals

who either will receive nothing or less than the total promised benefits will be 5.3 million in 2001 reaching 35.7 million by 2011.

Many people assume that only individuals with tax preferences

are affected by the minimum tax. That assumption is erroneous.

The minimum tax does not allow the deduction for State and local

income and property taxes and it does not permit families to claim

personal exemptions, including those for children. The disallowance

of those two benefits accounts for approximately 80% of all minimum tax liability. Taxpayers with children and taxpayers residing

in States with incomes taxes, like California, New York, and Massachusetts, are the ones most likely to suffer because of the decision to use the alternative minimum tax to mask the true cost of

the Committee bill. It is surprising that the Chairman of the Committee would design and defend legislation when the residents of

his own State would be among those most likely not to receive the

promised benefits.

For millions of Americans, the Committee bill effectively repeals

the deduction for State and local taxes and for personal exemptions. The Reagan/Bush Administration proposed repeal of the deduction for State and local taxes as part of its 1985 tax reform

plans. That proposal was met with overwhelming opposition in the

Congress. When people understand the implications of the Committee bill, it is reasonable to expect President Bush’s proposal for

indirect repeal of the deduction for State and local taxes and the

deduction for personal exemptions will be faced with the same

overwhelming opposition that defeated the Reagan/Bush proposal.

The Republicans are not even honest about the rationale for their

tax reduction plans. Last year, when economic growth was strong,

the plan was promoted as a way to return the surpluses created

by that economic growth. Now, that the economy is slowing, the

same plan is being promoted for the opposite reason. The plan has

hardly changed. The Committee bill, which is being advertised as

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30

payers before October 1. No reasonable economist would dare suggest that a stimulus of such a size would have any affect on an

economy like ours, which exceeds $10.3 trillion.

The Republicans use discredited supply-side theories to claim

that their tax reductions will benefit the economy. They fail to

mention that their optimistic projections of the economic benefits of

the Reagan/Bush 1981 tax reduction plan failed to materialize.

They also fail to mention that their predictions that President Clinton’s 1993 Budget Act would create a recession were extraordinarily inaccurate. They have been wrong consistently in the past,

and there is little reason to bet the economic future of this country

on the chance that they might be right this time.

DEMOCRATIC ALTERNATIVE

The Congressional Democrats have united in support of a plan

providing dramatic tax relief for Americans, including working

families with payroll tax liabilities but not income tax liabilities.

The plan would substantially eliminate the marriage penalty for

most couples and it would immediately eliminate the estate tax for

all of the wealthiest of Americans. The substitute offered in the

Committee did not include estate tax relief for parliamentary reasons.

The Democratic plan provides substantial, effective, fiscally responsible, and fair tax relief. As such, it provides more immediate

benefits for working Americans than the larger, riskier Bush proposal. • Substantial.

(1) The Democratic proposal provides a new, lower 12% tax rate

on a couple’s first $20,000 of taxable income ($10,000 on a single return). This would provide a maximum tax cut of $600 annually

for couples and $300 for single taxpayers. Couples who use the

standard deduction also would receive ‘‘marriage penalty’’ relief of

$225, yielding a total maximum tax cut of $825.

(2) The proposal also provides a refund for lower-income working

families worth as much as $320 annually for a couple with two

children. Marriage penalty relief would total $528 for this family,

yielding a maximum tax cut of $848.

(3) Finally, under the plan over two-thirds of all currently taxable estates would no longer owe any Federal estate tax. (While

under current law only 2% of estates are taxed, under the Democratic proposal only .6% of all estates would be taxed.)

• Effective. The income tax provisions of the Democratic plan

begin immediately and are fully effective on January 1, 2003. Unlike the Bush plan, there is no lengthy, five-year phase in, with the

full promised relief not being provided until 2006. Also beginning

January 1, 2002, the Democratic plan provides that estates below

$4 million for a married couple would be exempt from federal tax.

This exemption amount will increase to $5 million over time. Additionally, in contrast to the Bush proposal, none of the reductions

provided in the Democratic proposal would be reduced by the Alternative Minimum Tax.

• Fiscally Responsible. The Democratic plan uses one third of the

projected budget surpluses for tax cuts, after the Social Security

and Medicare trust funds have been protected. This prudent tax

31

cut will allow other urgent national short- and long-term needs to

be addressed in a manner which does not risk pushing our country

back into deficits, if budget projections prove to be inaccurate. • Fair. The Democratic plan focuses its relief on working couples

and families with children by providing an average tax cut over

$500. For upper income couples who itemize deductions, the tax cut

is limited to $600—a fair share of this tax relief. The top 1% (i.e. those making over about $319,000 per year) will not receive a disproportionate share of the cut under this plan, as opposed to the

43% of benefits they would get under the Bush plan. • Honesty. In contrast to the Bush proposal, none of the tax reductions promised by the Democratic plan would be denied through

technicalities such as the alternative minimum tax.

We are hopeful that the Republican Leadership will abandon its

strategy of enacting excessive tax reductions on a partisan basis

before locking in place a long-term budget plan. If it abandons that

strategy, we would be enthusiastic about working together to enact

tax reductions. Working together on a bipartisan basis is the only

way we can quickly enact tax relief.

CHARLES B. RANGEL.

ROBERT T. MATSUI.

BEN CARDIN.

JIM TURNER.

JERRY KLECZKA.

WILLIAM J. JEFFERSON.

LLOYD DOGGETT.

XAVIER BECERRA.

MICHAEL R. MCNULTY.

PETE STARK.

WILLIAM J. COYNE.

JOHN LEWIS.

SANDER M. LEVIN.

KAREN L. THURMAN.

RICHARD E. NEAL.

EARL POMEROY.

JIM MCDERMOTT.

Æ