Heroes Earned Retirement Opportunities Act

Mr. Speaker, I want to thank the gentlemen from Texas and Michigan for their eloquent words on behalf of this bill. I am truly honored to be here today, Mr. Speaker. I am honored because the mere consideration of this bill represents the greatness of our republican democracy.

At this time a year ago, I only dreamed of coming to the floor of this House and working for the people of the Fifth Congressional District in North Carolina. Here I am today promoting a bill I wrote to help those very constituents who deserve it most.

Just a few months ago, the father of Army Specialist Michael Hensley from my district in Clemmons, North Carolina, contacted me with a problem that his son and many of our other brave soldiers are facing. My constituent, Specialist Hensley, wanted to do the responsible thing by making the maximum allowable contribution to his individual retirement account, but found out that because of the nature of his wages, he would not be able to contribute to his nest egg this year. Thanks to the Republican leadership of this House and the bipartisan support from the minority, we stand here this afternoon to solve this problem.

Mr. Speaker, our current Tax Code wrongfully prohibits many of our brave men and women serving in combat zones from taking advantage of individual retirement accounts, or IRAs.

Most soldiers serving in these combat zones are paid in wages designated as military hazard pay. As deployment times have grown longer and longer, many soldiers now serve entire calendar years overseas, making their yearly compensation consist of hazard pay exclusively. These wages are not taxed; nor should they be. However, since this compensation is nontaxable, the wages are not eligible for IRA contributions. This is entirely unfair.

As we all know, IRAs are an excellent tool for responsible retirement savings, and responsible retirement savings should be encouraged for everyone, but especially for those who take up arms in war zones and fight for our freedom. The men and women defending America in harm's way overseas should not be excluded from fully participating in the important retirement investment opportunity that IRAs provide because of a glitch in our Tax Code. H.R. 1499, the Heroes Earned Retirement Opportunities, or HERO Act, will correct this serious injustice. The HERO Act simply designates combat hazard pay earned by a member of the Armed Forces as eligible for contribution to retirement accounts.

The legislation, which is endorsed by the Reserve Officers Association and the Military Officers Association of America, would not actually tax these wages, it would merely allow them to be invested in the same retirement accounts available to all Americans.

To quote the Military Officers Association of America in their letter of support for the bill, ``This change makes perfect sense in view of all we are asking our service members to do in the War on Terror in Iraq, Afghanistan, and elsewhere.''

I could not have said it better myself.

Mr. Speaker, our heroes defending America overseas certainly deserve the same access to retirement savings that we receive. In fact, we should be encouraging and even facilitating retirement savings whenever possible. Americans need to take responsibility for and control of their retirement. Those responsible enough to save their hard-earned wages should be rewarded, not burdened with taxes and regulations.

I would like to thank our Republican Majority Leader, the gentleman from Texas (Mr. DeLay), as well as the gentleman from California (Chairman Thomas) for recognizing the importance of this bill and for expeditiously bringing it to the floor of this House.

I would also like to thank the gentleman from California (Chairman Hunter) for his service to our Nation in Vietnam, for his excellent leadership of the House Committee on Armed Services, and for cosponsoring and supporting this great bill. His commitment to our troops is to be applauded.

A special thanks to the gentleman from Texas (Mr. Johnson) for his 29 years of service to our Nation, and for his cosponsorship of this bill and his assistance in the Committee on Ways and Means to bring the bill to the floor. He recognized immediately that this is a common-sense solution.

Lastly, I would like to thank my staff members, especially Bob Honald and Deana Funderburk for their support and effort to get a good idea transformed to good legislation. I urge all of my colleagues to help right this fundamental wrong by voting for this straightforward, common-sense legislation.

Mr. Speaker, I am truly honored to be here today. I am honored because the mere consideration of this bill represents the greatness of our Republican democracy. At this time 2 years ago, I dreamed of coming before this House and working for the people of the Fifth Congressional District of North Carolina. Here I am today promoting a bill I wrote to help those very constituents who deserve it the most.

Just over a year ago, the family of Army Specialist Michael Hensley from my district in Clemmons, North Carolina, contacted me with a problem that his son and many of our other brave soldiers are facing.

Specialist Hensley wanted to do the responsible thing by making the maximum allowable contribution to his individual retirement account, but found out that because of the nature of his wages, he would not be able to contribute to his nest egg this year. Thanks to the Republican leadership of this House, we stand here this afternoon to solve this problem.

Mr. Speaker, our current Tax Code wrongfully prohibits many of our brave men and women serving in combat zones from taking advantage of individual retirement accounts, or IRAs. Most soldiers serving in these combat zones are paid in wages designated as military hazard pay. As deployment times have grown longer and longer, many soldiers now serve entire calendar years overseas, making their yearly compensation consist of hazard pay exclusively. These wages are not taxed, nor should they be. However, since this compensation is nontaxable, the wages are not eligible for IRA contributions. That is entirely unfair.

As we all know, IRAs are an excellent tool for responsible retirement savings, and responsible retirement savings should be encouraged for everyone, but especially for those who take up arms in war zones and fight for our freedom.

The men and women defending America in harm's way overseas should not be excluded from fully participating in the important retirement investment opportunity that IRAs provide because of a glitch in our Tax Code.

H.R. 1499, the Heroes Earned Retirement Opportunities, or HERO Act, will correct this serious injustice. The HERO Act simply designates combat hazard pay earned by a member of the Armed Forces as eligible for contribution to retirement accounts. The legislation, which is endorsed by the Reserve Officers Association and the Military Officers Association of America, would not actually tax these wages. It would merely allow them to be invested in the same retirement accounts available to all Americans.

To quote the Military Officers Association of America in their letter of support for the bill: ``This change makes perfect sense in view of all we are asking our servicemembers to do in the war on terror in Iraq, Afghanistan and elsewhere.'' I could not have said it better myself.

Mr. Speaker, our heroes defending America overseas certainly deserve the same access to retirement savings that we receive. In fact, we should be encouraging and even facilitating retirement savings whenever possible. Americans need to take responsibility for and control of their retirement. Those responsible enough to save their hard-earned wages should be rewarded, not burdened with taxes and regulations.

I would like to thank our Republican majority leader, John Boehner, as well as Chairman Bill Thomas, for recognizing the importance of this bill and for expeditiously bringing it to the floor of this House. I would also like to thank Chairman Duncan Hunter for his service to our Nation in Vietnam, for his excellent leadership on the House Armed Services Committee and for cosponsoring and supporting this great bill. His commitment to our troops is to be applauded.

Lastly, I would like to thank Congressman Sam Johnson for his 29 years of service to our Nation and for his cosponsorship of this bill and his assistance in the Ways and Means Committee to bring the bill to the floor of the House. Congressman Johnson is a

true hero, having served as a prisoner of war. It is an honor to have him as a cosponsor and to have had his strong support throughout the effort to get this bill passed.

I urge all my colleagues to help right this fundamental wrong by voting for this straightforward, commonsense legislation.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1499) to amend the Internal Revenue Code of 1986 to allow a deduction to members of the Armed Forces serving in a combat zone for contributions to their individual retirement plans even if the compensation on which such contribution is based is excluded from gross income, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 1499.

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

Mr. Speaker, I rise in support of backing our troops, of backing them to the hilt, with the Heroes Earned Retirement Opportunities Act, or the HERO Act, H.R. 1499, introduced by the gentlewoman from North Carolina (Ms. Foxx).

As you know, people may contribute to $4,000 a year to the popular individual retirement account, IRA. However, the funds that go into an IRA are supposed to be post-tax money. Well, when you are serving your country in Camp Victory in Iraq or working in Afghanistan, your combat pay is tax-free. That is right, it is tax-free; and it ought to be. The theory behind that is if you are going to volunteer to risk your life, serve your country and protect our great freedom, you should not be taxed.

As a result, some military men and women come home serving in harm's way with money that they would like to put into an individual retirement account, but they cannot. It is against the law. That is wrong. The HERO Act changes that outdated and unintended tax law so that our soldiers, sailors, Marines and airmen can save some of that money for their retirement for their families' golden years.

Crazy as it may seem, right now these men and women come home with much more disposable income, yet they are not allowed to save some of it in an IRA; but they can spend it on cars, new clothes, family vacations. Yes, all of those things are nice, especially when you have been in the desert for 9 months and you just want the creature comforts and luxuries of home for you and your family. But those things are temporary. Retirement savings is about making a better future for yourself and your loved ones, and our troops should have the option of saving for retirement if they want to.

I say it is high time we change that, and that is what the HERO Act is all about. It is about tax simplification, it is about retirement savings, it is about helping our military who are out there fighting for us.

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

Mr. Speaker, I yield such time as she may consume to the gentlewoman from North Carolina (Ms. Foxx), the author of the bill.

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

Mr. Speaker, the Hero Act is going to help our combat troops by modifying a tax law that has unintended consequences, given their situation. Most of us know that IRA contributions are limited to $4,000 this year, and the cap on annual contributions will increase to $5,000 in 2008.

All of this is temporary legislation, but we would like to have it permanent, as well, I say to the gentleman from Michigan (Mr. Levin).

According to the Joint Committee on Taxation, this bill would provide $31 million of tax benefits to military families over the next decade. H.R. 1499 provides meaningful assistance to our troops that we can all support as the House considers ways to improve the retirement security for Americans.

I work on retirement legislation in my membership on both the House Committee on Ways and Means and the House Committee on Education and the Workforce, and I look forward to meaningful legislation moving forward from both committees in the near future.

However, this legislation needs to move on its own as soon as possible. Our troops are earning combat pay in

dangerous situations, and to the extent that they can save some of it for their long-term needs, I think we ought to encourage them to do so.

We will pass this bill with no controversy, and I hope our colleagues in the other body follow suit in the near future. It is the right thing to do.

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

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

Mr. Speaker, I stand today in support of H.R. 1499. This bill is actively supported by my Democratic colleagues. On May 23, 2005, this bill passed the House under suspension of the rules by voice vote. The bill was referred to the Senate and was approved with an amendment to change the effective date. Because of the later effective date as passed by the Senate, the bill is before us again today merely to incorporate a technical change. This change would indeed ensure that our service men and women can make eligible contributions for previous tax years, 2004 and 2005, for which the deadline has passed, but years for which they were eligible to make these contributions.

We acknowledge fully the work of our military personnel who continue to perform so ably for our Nation. We honor their bravery and their sacrifice. Therefore, it goes without saying that we endorse this effort by the Congress to make it possible for these men and women to take advantage of every tax benefit that is available to them, including saving for their retirement.

H.R. 1499, as my colleague and friend, the gentleman from Texas, Mr. Johnson, has said, would allow our service men and women to treat their compensation received while serving in combat as taxable income in order to help them meet the income eligibility requirement for making contributions to an individual retirement account.

At a recent hearing of our committee, two of our five witnesses highlighted the large shortfall in retirement savings many of our workers in this country face. I am sure that many members of the military fall within this group. This bill is a small step in the right direction of closing that gap.

Other larger steps need to be taken. For example, Democratic Members of this Congress are hopeful that we can work with our Republican colleagues to preserve another tax benefit that may be of even greater help to many military families. A provision in current law would permit military families to treat combat pay as taxable compensation for purposes of claiming the Earned Income Tax Credit. This provision, though, is set to expire at the end of this year.

The EITC is a refundable credit many low- and middle-income taxpayers can claim when they file their Federal tax returns. Eligible families may claim a portion of their credit ratably during the year. The EITC helps to relieve the Federal tax burden on many families who are working full-time, yet find themselves at or below the poverty level.

We had hoped that this provision could be included as part of the bill before us today to further help military families. However, we were assured that this provision will be taken up later in the year, and we will continue to press for the extension of this provision before it expires.

Also let me finish by expressing my hope and the hope of so many on my side of the aisle that this Congress and the administration will meet their responsibilities to our veterans on health, on re- employment, and on so many other major needs of those in the military and the veterans of this country.

Mr. Speaker, I would say to my friend, Mr. Johnson, therefore anticipating your remarks, and your remarks indeed reflect your service to this country, I yield back the balance of my time.

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

Mr. Speaker, I move to suspend the rules and agree to the resolution (H. Res. 803) providing for the concurrence by the House with amendment in the amendment of the Senate to H.R. 1499.

Mr. Speaker, this is an important bill that will allow our troops serving in combat zones to contribute some of their tax-exempt combat pay to retirement savings. Because combat pay is exempt from tax, it does not qualify as earned income that is normally allowed in an individual retirement account.

Mr. Speaker, I would now like to yield as much time as she may consume to the Representative from North Carolina (Ms. Foxx).

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

Mr. Speaker, as Mr. Levin pointed out, we passed this legislation before. Our colleagues in the Senate then passed the bill by unanimous consent back in October, but made a change regarding the effective date.

The HERO Act will help our combat troops save for their retirement, as Mr. Levin pointed out, or for first-time home purchases or for education by saving in a Roth IRA.

Currently, all Americans can save up to $4,000 this year in an IRA or a Roth IRA. This cap on annual contributions will increase to $5,000 in 2008. Right now our combat troops are not able to contribute to IRAs because that combat pay does not fit the definition of taxable earned income.

As Mr. Levin pointed out, our combat troops are putting their lives on the line in a very dangerous situation, and to recognize this service, their pay is not subject to tax. This bill is a way for Congress and the American people to say thank you every payday.

There are a lot of young servicemembers who are single who come home at the end of a tour in a combat zone with a nice little nest egg. Once we get this bill signed into law, it will be great for these young men and women to put some of that money into a Roth IRA for the purchase of a home, to spend on school, or just for long-term retirement. While there are plenty of other tantalizing things for these young people to spend their money on, we need to at least give them the opportunity to save some of it in the same way that all other Americans can save.

I am one of the conferees working out the differences between the House and Senate on the pension bill. I look forward to getting that bill completed soon so we can increase the opportunity of all Americans to save and to make their pension plans safer. However, our troops are prohibited from even contributing combat pay to an IRA, and we need to remedy this situation right now.

According to the Joint Committee on Taxation, the bill would provide $70 million of tax benefits to military families over the next decade. We will pass the HERO Act with no controversy, and I hope our colleagues in the other body follow suit in the near future.

Mr. Speaker, I thank Mr. Levin for his comments, and I appreciate Ms. Foxx introducing the bill. It is the right thing to do.

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