Tax Simplification for America's Job Creators Act of 2004

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4840) to amend the Internal Revenue Code of 1986 to simplify the taxation of businesses.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, Americans are frustrated. They are frustrated with their current Tax Code, and they should be. The mountains of documents that they face are complicated, confusing, and sometimes contradictory. The effects of this complex code, by the way, are more than just frustration for those of us who are taxpayers. They include decreased levels of voluntary compliance, people cannot figure out the code and they are less likely to comply with it;

increased costs, of course, for the entire taxpayer system; reduced perception of fairness in the Federal tax system; and, of course, increased difficulties at the Internal Revenue Service as they try to administer this unwieldy code. Clearly, we need to make our Tax Code more user friendly, and we should take every opportunity to do so.

Over the last few years, we have done that in some cases, for instance, the expansion of the 10 percent tax bracket, and taking literally millions of taxpayers off the Internal Revenue Code altogether.

But today, Mr. Speaker, I would like to commend my colleague, the gentleman from Illinois (Mr. Crane), for legislation that he has brought to the floor showing his commitment to tax simplification, and particularly focusing on the needs of our small businesses.

H.R. 4840, which is before the House today, the Tax Simplification For America's Job Creators Act, provides provisions that will provide tax relief and simplification for small businesses and small business owners as they plan for the economy, which is now growing.

First, the bill will extend the $100,000 expensing amount provided under what is called section 179 of the Internal Revenue Code. This is an extremely important incentive which was included in the President's 2003 tax relief bill, the Jobs Growth and Tax Relief Reconciliation Act.

It allows small businesses to deduct up to $100,000 immediately, to write that off, not depreciate it over time, as compared to $25,000, which was in law before the 2003 tax relief act. This is for new equipment up to 2006. Therefore, we want to expand that, we want to extend the legislation into 2006 and 2007, and the legislation offered by the gentleman from Illinois (Mr. Crane) does that.

It also expands the definition of who qualifies. Before 2003, those companies who qualified were those that had $200,000 or less of capital purchases per year. We doubled that to $400,000 of capital purchases per year, making this provision something that is more usable for more small businesses.

Expensing, of course, allows small businesses to recover the cost of their investment immediately rather than writing it off over time and rather than requiring them to keep extensive records and track those deductions over several years. This helps reduce the cost of capital, which helps to expand plant and equipment. It also makes it simpler and less costly, less complicated for our small businesses to be able to comply with our Tax Code.

Again, today's bill will provide yet another vehicle that we can use to try to enact this important small business priority that has already passed the House in some other forms, and I commend the gentleman from Illinois (Chairman Crane) for it.

Second, his bill also begins adjusting an important standard which affects small businesses' ability to use the cash accounting system. The cash accounting method is simpler, and it provides under this legislation to convert from the current $5 million threshold to $10 million. So we are expanding the amount that can be indexed for inflation, so that more and more small businesses are not forced into using the accrual method each year.

It is important to understand that forcing businesses into the accrual accounting method has real consequences for smaller companies. Not only must they begin calculating taxes using a different accounting method; they must actually pay tax on the difference in income as measured by the accrual and the cash methods. The bill before us rectifies this situation by indexing the limit so inflation will not force more and more small businesses into the accrual method.

This does not change the $5 million threshold. Mr. Speaker, I correct myself. Rather, it indexes that going forward to inflation to be able to increase that amount. This change will provide $120 million in tax relief to smaller businesses during the coming decade.

Finally, the bill eliminates a number of outdated references in the code. These are so-called ``deadwood provisions.'' This is also very important both because these deadwood provisions that have been identified by the Joint Tax Committee, by the Treasury Department, by others in their reports are important to get out of the code because they do not need to be in it, do not make any sense; but it also creates confusion at the IRS and confusion among taxpayers and has created downstream problems that are difficult to address.

H.R. 4840, in the end, Mr. Speaker, will cut taxes by approximately $1.2 billion for our small businesses, and that figure is over the next decade.

The bill is well within our House-passed budget, and I believe it is very worthy of our support as an important simplification method. I urge my colleagues to support this legislation to help our small businesses, our job creators, our risk takers, who are out there ensuring that this economic recovery continues, and continues strongly.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I appreciate the comments of my colleague from Texas. I agree with them.

Mr. Speaker, I yield such time as he may consume to the gentleman from Illinois (Mr. Crane), the author of this legislation on tax simplification.

(Mr. CRANE asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield myself such time as I may consume.

I appreciate my friend from Washington's discussion on general tax relief. I suppose at the end he would say he supports this legislation before us because it is not a flat tax, it is not a sales tax, it is not even a fundamental reform. Rather, it is simplification and good, common-sense simplification at that, this one focused on small businesses. The next piece of legislation we will take up focuses more on individuals.

But it is hard to defend the current code. Again, my friend from Texas talked earlier about the compliance costs and referenced Professor Joel Slemrod's reports from the University of Michigan. I think the number is somewhere between 50 and 100 billion now. That is the consensus number; 85 seems to be the one most people are using. Mr. Speaker, $85 billion a year in compliance costs, and over 3 billion compliance hours.

Another interesting statistic is that every year now, tax compliance accounts for about 80 percent of the paperwork burden of the Federal Government. So we do need to do something.

Today is not the silver bullet, but it is a start. It is going into the current code and changing some unfair aspects of the code; in the case of section 179, helping businesses to be able to not just write off their purchases more quickly for equipment, but also to be able to reduce their compliance costs, because they do not have to keep those depreciation schedules over time.

It also takes out some deadwood provisions which come from the Joint Committee on Taxation recommendations, as well as Treasury Department recommendations, which say that these provisions of the code that have not been removed over time, and it must be done by statute by the way, not only cause confusion and complexity, but actually cause some taxpayers to make mistakes that then cause tremendous cost to the tax system over time.

This legislation also again helps some smaller businesses to be able to take advantage of cash accounting rather than the accrual method, which is a complexity. Therefore, this is a simplification as well.

So I appreciate the gentleman's comments, and what I would say is what we are doing today is, we are taking a very responsible step towards simplification. We are not providing again for the silver bullet. We need to continue to work on that, as we will every year, and I know as we are going forward in this Congress, should we be here on this congressional floor next year talking about these issues, hopefully we will have a more fundamental reform that we can agree on on a bipartisan basis, as we will agree today, I believe, on a bipartisan basis, on these simplifications.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I appreciate the gentleman yielding.

I certainly never heard anybody say that section 179 expensing was temporary. What we said was that the bonus depreciation provision was temporary. Section 179, on our side, we have always intended to be permanent and we would certainly hope that it will be made permanent.

What we are doing today is, we are extending it for 2 more years, in 2006 and 2007, that is as compared to bonus depreciation, which was meant as a stimulus, just to correct the gentleman on those two depreciation provisions.

Mr. Speaker, I yield myself such time as I may consume just to respond to my friend from Washington.

For him to say, this does not matter and does not help anybody, I hope he will talk to the small business people in the State of Washington as well as in the State of Ohio that I represent. This does help them.

I was with one of those small business people today talking about section 179 expensing and the importance of being able to plan. And he was absolutely delighted that this Congress is going to pass, once again, legislation to be sure that he can plan for being able to immediately write off not $25,000 a year, but $100,000 a year of new purchases in equipment. This is extremely important.

If the gentleman chooses to vote ``no,'' that is his right, but for him to say it does not affect anybody, I think is inaccurate. That is not to mention the other provisions the gentleman from Illinois (Mr. Crane) talked about, which are also important to small businesses.

To say that this is a bill that does not matter and that it is just something that we do around election time, I think, is not consistent with the fact that in 2003, this same legislation was passed by this Congress. We could not do it for as long a period of time as we wanted to, frankly, because of our friends on the other side of the aisle who did not believe that this legislation should be made permanent.

We would like to make it permanent. It is extremely important to our small business community. It is extremely important to the risk-takers, to the entrepreneurs, who, after all, are creating most of the jobs out there right now. And I would hope that on a bipartisan basis we could at least agree to these simplifications.

We can have the debate later as to whether the gentleman would like to defend the current code and continue to have, again, 3 billion hours a year in compliance costs, $85 billion a year in expenses related to compliance; or whether we do want to look at more fundamental reforms. That would be more controversial and they will need, again, the same kind of bipartisan work that has gone into this legislation here.

But at a minimum, let us at least go into the current code and make some responsible changes to make it simpler for small businesses, which is this legislation before us.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I would remind my colleague from Illinois that some of the very issues that he raises are currently under consideration by the Congress, including the definition of a child. As he may know, I have introduced legislation to consolidate those definitions into one definition that is currently in the child tax credit conference between the House and the Senate. I fully expect he will have the opportunity to vote on that legislation in this Republican-controlled Chamber, if not this week, then in September; and that will be a major simplification.

I would also remind the gentleman that this complication of the Tax Code, which I agree with him on, is not just the province of one administration. I can remember when he was in the Clinton administration working on the Hope credit, working on the Lifetime Learning credit, working on many other ways to use the Tax Code to achieve social purposes which further complicated the code dramatically; and I would remind him that one of the pillars of the Bush administration tax relief was not just lowering rates for everybody, which is a simplification, not just lowering rates on capital gains which is a simplification, lowering rates on dividend which is a simplification, but also extending this 10 percent tax bracket.

That has focused exactly on the taxpayers that my colleagues are talking about. Lower-income taxpayers they say have got no benefit. Their benefit is total simplification, because 3 or 4 million Americans who are lower-income Americans now are no longer on the tax roles at all. They do not have to look over their shoulder at the IRS because they are off the Federal tax rolls. They pay no income tax at all, and that is simplification that George Bush put through this House and that most of us voted for on this side of the aisle.

With regard to EITC, I would remind my friend that we have actually, in the 2001 bill, streamlined the EITC, not as much as I would like, as we know, because we have talked about that; but their income tax credit has actually in this administration under this Congress been simplified.

So just to put a little bit of clarity around it and some perspective, today we are talking about section 179. We are talking about the expensing, the need to simplify that. I would remind him that the bonus depreciation provision that his colleague from Washington talked about as being temporary, that was also a simplification and simplification not just for small businesses but for all businesses.

So we have done our part in terms of making the code more complicated, both parties over the years; but if he looks back at the record over this Congress and over this administration, there are a number of items which have been very positive in terms of simplification, the most important of which is to take people off the rolls altogether, not having to worry about income taxes and the legislation before us today, again, bringing us back to where we are, taking us from the abstract to the practical.

We have an opportunity on a bipartisan basis to make some sensible changes to our Tax Code, to make it simpler for small businesses to comply with taxes. These are the risks takers. These are the people we want to help, and I commend my colleague from Illinois for bringing this legislation to the floor today.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I think this has been a helpful debate to talk about the need for simplification. I am glad to see some of my colleagues on the other side of the aisle are agreeing with us with regard to this underlying legislation with regard to small businesses but also with the need to simplify our code. We have taken steps to simplify, and we need to continue to do that.

It is on the heels of major tax relief in 2001, 2002, and 2003 this administration inherited a failing economy, moving into recession. Then the tragedy of 9/11, the shock of the corporate scandals, the stock market boom busting, a lot of challenges to our economy. And our first focus was economic recovery; and, therefore, the stimulus and the economic recovery tax legislation provided needed tax relief to small businesses, to families, and to individuals around this country.

Now we are focused on that, as well as simplification; and it is very important given the fact that we do have an increasingly complex Tax Code and that the burden of compliance with that code is greater and greater, that we on a bipartisan basis focus on this compliance cost and, therefore, on simplifying the code.

Before us today we have a great piece of legislation. It is not the silver bullet, does not do it all; but it helps and it tells small businesses that if they want to go out there and buy new equipment to be able to expand their plant, to hire new people, to keep this economy moving, we are adding jobs, we have economic growth that is the best we have had in 20 years in this country, that we will enable them to write off $100,000 worth of new purchases rather than $25,000 worth of new purchases.

We are telling them that businesses that are a little bit smaller than the very smallest businesses would be able to take advantage of this as well by being sure that the definition of what businesses can qualify is expanded.

Now, this is good legislation. We are also telling small businesses they can use the cash accounting method, which saves them money, which saves them complexity in not having to hire accountants and additional professionals, rather than going to the accrual method. So we are saying we are going to index that to inflation to help small businesses. And, finally, we are saying that our Tax Code has too many provisions that are no longer relevant, deadwood provisions that cause complexity and confusion. We are going to get rid of those provisions in the code, particularly as they affect small businesses.

So, again, I commend my colleague from Illinois for bringing this legislation before us today. This is the first step in a long march towards simplifying our Tax Code, and I would hope that we will have support across the board on a bipartisan basis for this legislation.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I yield myself as much time as I may consume.

I thank my friend from Ohio for his work on this bill. Mr. Speaker, I rise today in support of tax simplification. There can be little doubt that taxpaying individuals and American businesses, particularly small businesses, spend far too much time, not just preparing their tax returns and paying their taxes, but in even figuring out just how to file or which forms to fill out, what tax preferences they qualify for, what they can deduct, and what elections they should make to best serve the interests of the business, its employees, and themselves.

On top of that is the anxiety that many small business owners experience when confronting the daunting complexity of the Tax Code and trying to make sound business and tax planning decisions with the prospect of taking a wrong turn in a numbing maze that makes tax lawyers and accountants shudder. Such complexity is both unnecessary and unhealthy, Mr. Speaker, for small business and our Nation's economy.

So, Mr. Speaker, I wholeheartedly support meaningful efforts to reform our tax system and to reduce an extreme burden on our small businesses and individuals and to ensure efficiency.

Moreover, I am pleased to rise in support of the legislation introduced by the gentleman from Illinois (Mr. Crane). I am pleased to be a cosponsor of the legislation that somewhat eases the burden borne by America's small businesses, truly the engine that drives our economy.

Mr. Speaker, at a very modest cost, H.R. 4840 provides two valuable benefits to our Nation's small businesses.

First, the bill extends enhanced section 179 expensing for small businesses for 2 years. Last year Congress passed and President Bush signed into law legislation that increased the amount of equipment that small businesses may expense from $25,000 annually to $100,000 annually. The 2003 law also increased the phase-out range from $200,000 of capital expenditures to $400,000, significantly expanding the number of small businesses that qualify for section 179 expensing. Both amounts are indexed for inflation.

The bill the House considers today extends these improvements to section 179 for 2 additional years through 2007, thereby providing much-needed relief as our economy continues to recover and to grow.

Second, H.R. 4840 eases the accounting burden on small businesses by preserving the cash accounting method for more small businesses. Generally, under current law, businesses with $5 million or more in gross receipts must switch from the cash method of accounting to the accrual method. The bill offered by the gentleman from Illinois (Mr. Crane) preserves the value of the $5 million limit by indexing it for inflation so that more small businesses will not be forced to use the more complicated accrual method.

Finally, but less directly beneficial, H.R. 4840 cleans up the Tax Code by eliminating outdated, rarely used and unnecessary provisions of the code. Repealing these deadwood provisions certainly has the effect of reducing clutter in our code, but its practical effects and benefits to small business are somewhat limited.

Mr. Speaker, H.R. 4840 is a fine bill. It is a good first step, and I am proud to support it. However, this Congress needs to do more to relieve the burden borne by America's small businessmen and -women and individuals.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

We appreciate the efforts of the gentleman from Illinois (Mr. Crane) and clearly, there is a need for tax simplification. Today, the IRS now prints more than 1,000 publications, forms, and instruction booklets, and while the Tax Code was a mere 500 pages in 1913, financial publisher CCH says its Standard Federal Tax Reporter, which is the guidance for tax preparers, has grown to more than 60,000 pages today. The cost to individuals and business in America of the complexity of our code are staggering.

More than $100 billion a year in accounting fees and the value of taxpayers' time to complete their returns, according to Joel Slemrod of the University of Michigan, are used up each year. This is roughly equivalent to what our Nation spends to operate the Departments of Education, Homeland Security, and the Department of State each year. According to the IRS, small business owners are required to devote 60 hours, almost 8 full work days each year, to prepare their taxes.

While the bill we debate today is a good piece of legislation, it will not do enough to reduce this burden, and we must do more, working together.

Mr. Speaker, I yield 5 minutes to the gentleman from Washington (Mr. McDermott.)

(Mr. McDERMOTT asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield such time as he may consume to the gentleman from Washington (Mr. McDermott).

Mr. Speaker, I yield 4 minutes to the gentleman from Illinois (Mr. Emanuel).

Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from Illinois (Mr. Emanuel).

Mr. Speaker, I yield myself as much time as I consume.

In 1996, then-Speaker Newt Gingrich stated the Tax Code over the years has become increasingly politicized and is seen less as a simple tool for raising revenues than as an instrument for social and economic engineering, exponentially increasing the complexity of the code.

The current system is indefensible. Clearly, the small business community in America has been subject to more tax law complexity year after year. For example, the Small Business Job Protection Act of 1996 makes 657 Tax Code changes which expanded the Tax Code by more than 50 pages. The Jobs and Growth Tax Relief Act of 2003 made 51 Tax Code changes and expanded the Tax Code by 12 pages. The IRS estimates that the average taxpayer with self-employed status has the greatest compliance burden in terms of preparation, 59 hours. And this is about 10 hours longer than in 1994.

Even the House-passed version of the FSC/ETI bill from this year has 109 tax changes. This will encompass at least 200 additional Tax Code lines and at least 50 new pages of statutory language and footnotes.

Mr. Speaker, America's small businesses are the engine powering the largest, most robust and most innovative economy in the world. They deserve a more meaningful effort by this Congress to ensure that valuable time and resources are better invested in the success of their business and not wasted in preparation of returns and to make sure that our business people, entrepreneurs, are not raked over the coals by a Tax Code that requires a lawyer, a CPA and a computer programmer to understand it. We can and must do better by our small business men and women and individuals in this country.

Mr. Speaker, again, I am proud to support and cosponsor this fabulous piece of legislation. I urge my colleagues to join with me in casting a vote for small business owners and their employees across this Nation. At the same time, however, I am hopeful that this legislation is the beginning of meaningful reform and not the end of the line.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, we are getting close to election again. The gentleman from Texas (Mr. DeLay) Congress says it is time for simplifying the Tax Code. But, Mr. Speaker, my colleagues know that ``tax simplification'' is just the term the Republicans use to start talking about the need for a flat tax or a sales tax. Every year at this time it comes up.

The Committee on Ways and Means had a host of hearings about this same issue in the mid-1990s under Chairman Archer. At one point during the hearings in 1995, the chairman said he was convinced that the Tax Code needed to go to a flat tax. He even said he was going to introduce legislation to do it. But, after all the hearings and all of the rhetoric, he never even introduced a bill.

Mr. Speaker, we can do two things with money: We can save it or we can spend it. Now, rich people have more to save than do poor people. If all that we do is impose taxes when people spend money, then poor people are going to spend the larger share of their paycheck on taxes than rich people are. I mean, anybody knows that. Poor people spend every dime of every paycheck; rich people spend some and then they put a whole bunch in the bank or in the stock market or in something else. A system based on consumption taxes hardly is fair at all.

Legislation has been introduced in the past to convert our tax regime to one that relies solely on consumption taxes. The gentleman from Georgia (Mr. Linder) has introduced legislation to abolish the IRS, abolish it, and force the Federal Government to rely on a national sales tax, a proposal that the majority leader supports. This proposal would be a boon to the wealthy elite. His proposal would tax all purchases on goods and services in our economy, including food, health care, home rents, and new home purchases.

The Joint Committee on Taxation did an analysis of the Linder proposal. The study indicated that in order for the bill to be revenue neutral over 10 years, the estimated national sales tax rate would be between 36 and 57 percent. In other words, the price of blood transfusions, prescription drugs, and a pair of sneakers would increase between 37 and 57 percent. Does that sound fair to my colleagues?

How do we sell this proposal to simplify tax structure to the baby boomers of this country who are about to go onto a fixed income? We have this big bulge of people who are just about, in 2008, going to start going onto Social Security. You cannot, and that is why they call it tax simplification. It sounds like a good idea.

The Health Insurance Association of America states that one of the consequences of a flat tax bill is likely to be a rapid increase in the number of people without private health insurance coverage. One economist estimated that there would be 8 million more people without health benefits if a flat tax proposal were enacted.

James Poterba, an economist at MIT, estimated that eliminating the current tax law benefits for purchasing homes could result in a 17 percent decline in the value of the U.S. housing market.

Now, what about the payroll taxes? A flat tax proposal may eliminate the deduction that employers pay for their payroll taxes, amounting to a massive tax increase on businesses of all sizes.

The American public is not naive, Mr. Speaker. They know that when it is election time and the Republicans start talking about tax simplification, it really means they want a flat tax. If you just give us one more chance, we did not simplify it over the last 10 years that we have been in control. Give us another chance and we will get our flat tax in.

Now, when are they going to be honest about these goals for the people? When are they going to be honest and tell the American people that the Tax Code has only become more complex since they controlled the Congress and its tax-writing committees. They have 105 more days to run this charade, but it is coming. There is going to be a change, and not in the Tax Code, but in who runs this House.

Mr. Speaker, I want to thank the gentleman for yielding me a couple more minutes. After listening to the gentleman from Ohio (Mr. Portman), I always can think of things to say.

The gentleman tells us that this bill, that I am probably for it; the gentleman is right. This is nothing. This bill does not do anything except do what the gentleman told us he was not going to do. The gentleman said he was going to make the expensing for a while and then stop it. Now my Republican colleagues are making it permanent. It is just one more of those things.

But the real point here is, you say this is a start. It is not much. It is a start on the way to what?

I yield to the gentleman from Ohio (Mr. Portman).

Mr. Speaker, reclaiming my time, does the gentleman realize he just put everybody to sleep, who is watching this, with that stuff? You guys come out here to pass a bill because you cannot get through the military construction bill, and this is nonsense.

Every time we have had, since 1994 we have Archer talk about simplification, we had the majority leader, Mr. Armey, who campaigned against the tax system and said he was going to rip it out by the roots and have a flat tax. I mean, we have been hearing this stuff, and today we have this little bitty thing, and it does not do any harm, really; it does not do any good, really.

I mean, surely everybody would like to have their taxes cut, whoever they are, but the real issue is the working people of this country. They are paying payroll taxes, and nobody is talking about them. Nobody is talking about the fact that we took the tax structure and gave the bulk of the benefits to people above $1 million, or above $100,000, for that matter. Nobody is talking about that. Why do my Republican colleagues not talk about what you are doing for people on the bottom?

In India they ran a campaign and they said that ``India is shining.'' That was the theme of the campaign in India. And the Congress Party ran one with a symbol that said, ``The hand of Congress is with the common man.'' And, lo and behold, in spite of an 8.2 percent growth rate in India, they threw out the ``India is shining'' because it was not shining on the people at the bottom.

And you people have got to understand that. You can keep doing this kind of stuff and telling people, we are going to simplify, we are going to simplify. They do not believe you. They do not believe you. They have watched what you did for 10 years. So you can say it as many times as you want, but they have to figure out their taxes, and they know that it is not simplification.

So I know it is election time, and I appreciate that you have control of the Committee on Rules and can bring this kind of stuff out, but it is not making it any better for the common man in this country.

Mr. Speaker, I thank the gentleman for yielding me this time.

It is interesting, to my colleague, the gentleman from Ohio, in the last 3\1/2\ years, while they have been in control, they have had 326 changes to the Tax Code, adding 10,000 pages to the Tax Code. So in his effort today at simplification, let us have a rendezvous

with the record: 10,000 new pages to the Tax Code and addendums.

That has been your record; and if you are in the business of being a tax lawyer, a tax accountant, there is a treasure chest out here in George Bush and the Republican majority's Tax Code. For middle-class families, it has become more complicated, burdensome, and unfair; and the complexity of this Tax Code directly relates to the inequities in this Tax Code. And that is what has happened to our middle-class families as we have shifted more and more of the tax burden onto work and people who work for a living rather than people who open up dividend checks for a living.

Let us see what has happened in the last couple of years to typical families. It now takes since 1994, since you have been in the majority, 7\1/2\ hours longer to fill out the tax form. Thanks for the contribution to simplification.

The child tax credits now on the code have five different breaks for families and children, each with a different definition. Now, I have three kids, and I will tell them there is only one definition for a child. We do not need five definitions for what a child is, but their Tax Code has done wonders in complicating the code.

Education tax credits, with a child in college, parents have to choose between two nonrefundable tax credits, the Hope or the Lifetime Learning, all the while in complicated forms that are long and duplicative. But guess what? If you are a corporation and you are filling out the Export-Import Bank loan, a page and a half. A kid filling out the FAFSA form trying to get a Pell grant, 108 questions. Now, what makes a corporation more important to America's future than that child? That corporation on average gets $200 million. That child gets $2,500. That child is as important to America's future, and it should be easier to get a college loan than it is to get an Export- Import loan agreement.

Increased tax preparation costs: as middle-class families struggle with the wage and benefit recession, costs for gasoline and food are going up. The last thing they need to deal with is tax preparation costs. Since 1995, 15 more million Americans have needed to hire a professional tax preparer to deal with the Tax Code and its increased complexity. The average cost is between $100 and $150. It can be a full day's pay for millions of Americans. If someone is an attorney or an accountant in the tax business, the Bush Tax Code is like Christmas every year. The abusive tax shelters used by corporations and the wealthy have increased exponentially in the last few years as the burden on middle-class families have grown increasingly.

The tax gap that is underreported by corporations and wealthy individuals is nearly $311 billion. Underreporting accounted for $249 billion. And that is the majority's refusal to work on this and crack down on this. Even their Treasury Department has asked for new enhancements in the laws.

Tax shelters have a corrosive effect, stacking the deck against ordinary taxpayers. While the special interests win shelters, loopholes, middle-class families have to play by the rules and are buried under a crushing burden by the IRS. The public's distaste for the current Tax Code is a direct result of the inequity.

And now they want towards election time this holy picture by passing this legislation. I will vote for it. It is their first step after adding 10,000 pages to the code and 326 changes to trying to do something for simplification.

I have offered my own piece of legislation to simplify family credit that condenses the child tax credit, the earned income tax credit and the dependent care into a single credit. It takes 200 pages down to 12 questions. It puts the Tax Code on behalf of work, on behalf of middle- class families trying to raise their children, and gives the same energy to those families that you have given to the wealthy and special interest in this country; and that is where we should put the Tax Code on behalf of the working families of our country.

Tax reform is more than a fiscal issue. It is also about our priorities. Our tax system should respect the values and the interests of the middle-class families.

Mr. Speaker, I do want to acknowledge one thing. The gentleman is right. We use the Tax Code to let middle-class families afford college education and lifetime learning so they can go back to community colleges, and the gentleman has used the Tax Code to ensure that people who want to buy Hummers get a tax deduction. The gentleman has used the Tax Code to ensure that a corporate executive gets only $300 for using a plane; and, yet, his corporation writes $30,000 off for using a corporate jet. Which is it, $30,000 that the taxpayers have to pick up, or $300 that the CEO gets to deduct from their taxes?

The gentleman is right. We have had our differences in how we have used the

Tax Code, one for higher education and access to college education, and another for corporate executives who want to discount their corporate jet use. So when it comes to complexity, I am glad that the gentleman is still working on simplification; but since 1995, they have been in control, and they have had many opportunities to reduce and simplify the code; and they have made it more complicated, more difficult for middle-class families, while they have alleviated the burden for the wealthy and the special interests in this town.

Mr. Speaker, I thank my distinguished colleague from the Committee on Ways and Means, the gentleman from Ohio (Mr. Portman), for yielding this time to me and for helping me in getting this bill explained and passed.

Mr. Speaker, I rise in strong support of H.R. 4840, the legislation I have introduced that will simplify the Tax Code for small businesses.

Nearly seven in 10 new jobs are created by small businesses, which are the backbone of our economy. The Tax Simplification For America's Job Creators Act helps small businesses in three ways:

First, it extends section 179, small business expensing, for 2 years, through 2007. This provision allows small businesses to immediately deduct the cost of up to $100,000 in expenditures for new equipment. Failure to extend this provision will result in an effective tax increase of about $1 billion on small businesses seeking to make critical investments that expand their businesses and create jobs.

Second, my legislation will allow small businesses to take advantage of the cash method of accounting. Under current law, subchapter C corporations cannot use cash accounting, which allows them to deduct expenses in the year paid and report income in the year received, if their gross receipts exceed $5 million. H.R. 4840 indexes the $5 million threshold for inflation, which ensures that more small businesses are not forced to use the more complex, costly, and time- consuming accrual method of accounting. This provision saves business taxpayers roughly $120 million.

Third, H.R. 4840 eliminates from the Tax Code a number of dead-letter provisions, which serve no purpose other than to clutter an already overly complex set of laws.

My constituents tell me that passage of this legislation will mean more jobs and increased economic growth in the Chicagoland area. I am also pleased that some of the Nation's leading small business associations, including the National Federation of Independent Businesses, the NFIB, the U.S. Chamber of Commerce, and the Associated Builders and Contractors, strongly support the bill.

Mr. Speaker, my legislation is not a panacea for small business. The government can only do so much. As always, it is the hard work and ingenuity of the American people that lead to expanded growth, job creation, and prosperity. However, taxpayers with business income pay about 55 percent of all income taxes. This bipartisan legislation will not only simplify the Tax Code; but by returning over $1 billion to business taxpayers, it will also let our job creators know that Congress means business when it comes to lowering their tax burden. It is the least we can do.

While I am extraordinarily pleased that we are acting today on much- needed simplification for small business, I want to take a moment to mention the need for greater simplification in the tax laws. I, for one, intend to be dogged in my pursuit of this goal.

To give one example, I have long championed an effort for many years to address a complex and unfair provision in the consolidated return rules. These rules were enacted so that corporate groups could pay tax on the net income of all their affiliated companies. Generally, the rules accomplish this goal, unless one of the affiliated corporations in the group is a life insurance company.

Twenty Members of the Committee on Ways and Means have cosponsored legislation I have introduced, H.R. 2228, that reforms the consolidated returns to address this inequity. Similar legislation passed both the House and Senate in 1999 as part of a larger tax bill that, unfortunately, was vetoed by President Clinton. I would expect that with the appropriate amount of effort, this legislation, as well as other meritorious simplification, can and will be enacted in the near future.

Finally, Mr. Speaker, to continue on the theme of tax simplification, in 2002, the IRS issued Revenue Procedure 2002-28 to allow subchapter S corporations to use cash accounting if their gross receipts do not exceed $10 million. That ruling provided useful clarification for taxpayers. I believe the service should go one step further and make this guidance a formal regulation so that in the future America's small business owners can rely on a simple method of accounting.

Mr. Speaker, I include for the Record a copy of the NFIB's petition to the IRS asking for a final rule to address this issue.

NFIB Legal Foundation,

Washington, DC, July 20, 2004.

Petition for Rulemaking Before the Internal Revenue Service

Hon. Mark W. Everson,

Commissioner, Internal Revenue Service,

Washington, DC.

Dear Mr. Commissioner: The National Federation of

Independent Business Legal Foundation (``NFIB Legal

Foundation'') submits this petition to the Internal Revenue

Service (IRS) pursuant to 5 U.S.C. Sec. 553(e) of the

Administrative Procedure Act, 5 U.S.C. Sec. Sec. 551 et seq.

Petitioners request a rulemaking to incorporate Revenue

Procedure 2002-28, with three requested modifications, into a

formal regulation. Pursuant to 5 U.S.C. Sec. 555(e),

petitioners request prompt consideration and response to this

petition.

The NFIB Legal Foundation, a 501(c)(3) public interest law

firm, is the legal arm of the National Federation of

Independent Business (NFIB), which is the nation's oldest and

largest organization dedicated to representing the interests

of small-business owners throughout all 50 states. The

approximately 600,000 members of NFIB own a wide variety of

America's independent businesses from restaurants to hardware

stores to bowling alleys.