New Tax Legislation Introduced
Senators Graham (R) and Miller (D) have introduced Senate Bill 35 on January 23, 2001.The Senators say theior bill will do the following:
Reduce Marginal Income Tax Rates
The five current tax rate brackets, which run from 15% to 39.6%, would be replaced with four rate brackets: 10%, 15%, 25% and 33%. The new 10% bracket would provide large percentage cuts in the taxes of those who have small taxable incomes. This phased-in reduction in marginal tax rates across-the-board will promote the saving and investment which is so critical to continued economic growth.
Reduction: $727b
Strengthen Families by Increasing the Child Tax Credit and Reducing the Marriage Tax Penalty
The child tax credit would be doubled, from $500 per child to $1000 per child, phased-in over a five year period. Working families with low or modest income, some of whom now face effective marginal rates of almost 50% because of the interaction of the earned income tax credit phase-out rate with the current 15% marginal tax rate, would obtain significant relief as a result of the increased credit.
Phase-in the restoration of a provision which would permit a married couple to exclude from their taxable income 10% of the lower-earning spouse's income, up to the first $30,000 earned.
Reduction: $250b
Repeal the Death Tax
The current estate, gift and generation skipping transfer taxes, which have a statutory rate of 55% and which under some circumstances can rise to 80%, would be reduced gradually and eliminated in 2009. Ridding the tax code of this onerous provision would prevent the destruction of small businesses and family farms as they pass from one generation to the next.
Under current law, many farms and businesses must be sold every year in order to pay the taxes.
Reduction: $236b
Expand Education Savings Accounts
Increase the current $500 annual contribution limit on Education Savings Accounts to $1000 immediately and further increase the limit by $1000 per year until it reaches $5000 in 2006. As under current law, contributions to such accounts would not be deductible but earnings and distributions from the accounts would not be taxed if used to meet education expenses. Eligible expenses would be expanded to include K to 12 activities, in addition to higher education.
Reduction: $3.5b
Encourage Charitable Donations
The 80 million taxpayers who do not itemize their deductions would be able to deduct charitable donations. Thus, taxpayers who file using the standard deduction would be permitted a separate charitable deduction as well. In addition, individuals age 59 and over would be allowed to make tax- and penalty-free withdrawals from their IRAs for charitable donations.
Reduction: $80b
Permanently Extend the Research and Experimentation Tax Credit
A permanent extension of the Research and Experimentation tax credit, set to expire in 2004, would create an environment that encourages innovation and rewards investment in technology and industry. Permanent extension of this credit would prevent gaps in coverage -- such as the three that have occurred since the credit was created in 1981 -- and ensure the certainty and stability needed for meaningful investment.
Reduction: $24b
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