November 1, 2007

Issue No. 3

Anniversary of Tax Relief Act of 1986

 

October 22, 2007, marked the 21 st anniversary of the signing of the comprehensive Tax Reform Act of 1986 by President Ronald Reagan. The landmark legislation proposed by President Reagan was approved by a Democrat House and a Republican Senate. The tax reform measure was hailed as one of the major accomplishments of the Reagan Administration. The chairman of the House of Representatives’ Ways and Means Committee, Congressman Charles Rangel of New York, lauded the Tax Reform Act of 1986, and promised to initiate legislation to bring about “tax relief to 90 million American families while also helping ensure that our companies remain competitive internationally.”

 

On the other hand, President George W. Bush has consistently requested Congress to make his tax relief program permanent. He argues that his tax relief measures, established during the first three years of his administration, have contributed to the strengthening of the United States economy, by encouraging more business investments and creating new jobs.

Proposed Legislation Seeks to Extend and Expand Tax Credit for R & D

A bill introduced in the United States Senate on October 19, 2007, by Senators Orrin G. Hatch of Utah and Max Baucus of Montana proposes to extend and expand the tax credit for research and development. The Research Credit Improvement Act would permanently extend the credit now available to businesses for investment in research and development. It would also provide a stronger alternative simplified credit that addresses changes in business models and economic circumstances that prevent some businesses from getting full benefit of the current credit.

Extending the credit should help the United States economy develop new technologies to improve existing capital investment and increase workers productivity. Senator Hatch said, “Extending the research credit is an important step for the future economic growth of the United States.” Senator Baucus added: “The research and development credit is all about fostering American competitiveness. Simply, this bill will create and sustain jobs in America.” Both senators cited the success of the existing tax credit in generating thousands of jobs in their respective states.

 

House Moves to End IRS’s Private Collectors Program

 

By a vote of 232 to 173 the House of Representatives, on October 10, 2007, voted to end the practice by the IRS of using private collection agencies to chase delinquent taxpayers. The program was authorized by Congress three years ago with three vendors, who would be allowed to retain 25 percent of the amounts they collect. Two vendors remain under contract with the IRS: Pioneer Credit Recovery of New York and CBE Group of Iowa.

 

It was initially projected that collections from delinquent taxpayers would amount to approximately $1.4 billion in the first ten years of the program’s operation. The IRS claimed that approximately $132 billion in unpaid taxes would be collected if taxpayers were pursued aggressively. The projected amount for 2007 was between$43.5 and $61.8 million. Despite these ambitious projections, so far only about $25 million has been collected in 2007.

 

The vote in the House was pretty much along party lines, with the Democrats supporting the termination of the program and the Republicans urging its continuation. During floor debate, House Majority Leader Steny H. Hoyer said, “the collection of taxes is a core governmental function that should not be contracted out.” Republican Representative Kevin Brady countered by stating that the program “is making money for the government.” The White House weighed in by threatening a veto of the measure, asserting that the private collectors bring in taxes “that are otherwise not likely to be collected by the IRS.”

 

The proposed legislation will now pass to the United States Senate, where it has an uncertain future. Senator Charles E. Grassley (R-Iowa), ranking minority member of the Senate’s Finance Committee, declared the bill “dead on arrival.”

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Ranking Member. In congressional jargon the "ranking member" of a committee of the House or Senate is the most senior member of the committee from the minority party.

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House Speaker, Nancy Pelosi, Presents New Version of Child Health Bill, Previously Vetoed by the President

 

On October 18, 2007, the House of Representatives upheld the President’s veto of the Children’s Health Insurance Program Reauthorization Act. The bill provided for an increase in spending on the State Children’s Health Insurance Program by $35 billion, with a total expenditure of $60 billion over the next five years. (See Issue Number 2 of The Washington Report for more details on this proposed legislation.) The House vote of 273 for overriding the President’s veto and 156 against was 13 votes short of the two-thirds required to pass the measure over the President’s objections.

 

Shortly after the House vote was made official, House Speaker Nancy Pelosi announced that the supporters of this legislation would be sending another children’s health bill to the President “in the next two weeks.” The White House has stated it hopes that Congress puts together a bill that the President can sign. As promised, on October 24 the Speaker sent a new version of the bill to the floor of the House for consideration by the full House. The new version attempts to comply with some of the President’s concerns regarding the proposed legislation.

 

The new bill, for example, would be more strict on the eligibility requirements for the program. It would bar the use of federal funds to cover illegal immigrants, and would max the income requirement for eligibility at three times the poverty level, or $61,950 for a family of four, instead of four times the poverty level, or $83,000, as allowed in the vetoed bill. Other aspects of the bill remain as in the original version.

 

After debate and vote in the House, the bill will be sent to the Senate for its consideration and floor vote. The final version will proceed to the White House for the President’s signature or second veto. The President, who has said that he wants a “compromise bill,” will then have to weigh the potential for a veto override of this new version of the bill. The Washington Report will continue to track the progress of this legislation.

Congress has failed to move on “Affordable Gas Price Act”

 

On May 21, 2007, Congressman Ron Paul, of Texas, introduced in the House of Representatives a bill to, among other things, reduce the price of gasoline. On May 30 th the bill was referred to the Energy and Mineral Resources Sub-Committee of the Ways and Means Committee of the House. It has lingered in committee without any further action by the committee members.

 

The proposed legislation is intended to reduce the price of gasoline by allowing for offshore drilling, eliminating Federal obstacles to constructing refineries and providing incentives for investment in refineries. It also proposes to suspend Federal fuel taxes when gasoline prices reach $3.00 per gallon. The bill is premised particularly on the following considerations: (1) The trucking industry is especially hard hit by high fuel prices; (2) Federal regulations restricting drilling impose prohibitive costs on the development of new sources of energy, artificially inflating the price of gas; (3) Lawsuits under the Environmental Protection Act to delay or halt the construction of new refineries result in the reduction of the supply of gas, thus raising gas prices.

 

The bill is, therefore, geared toward reducing the restrictions on offshore drilling and the construction of new refineries. It also seeks to provide incentives for investment in new refineries and making it more difficult for private parties to delay or stop such construction through litigation under the umbrella of the national environmental protection laws. The committee chairman, Charles B. Rangel of New York, has not scheduled this proposed legislation for consideration by his committee. He may be contacted by e-mail at http://rangel.house.gov

 

Any ACBOA member whose business is impacted by the rising gas prices, and who may wish to voice his/her interest in this legislation should do so by contacting his or her representative. CLICK HERE TO FIND THE E-MAIL ADDRESS OF YOUR REPRESENTATIVE.

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