Taxing our Armed Forces
By Alfred P. Carlton Jr.,
American Bar Association President
As Americans prepare to express our appreciation to veterans and members of
the armed forces this Veterans Day, Congress has before it an
important opportunity to honor the dedicated citizens who serve
our country around the world. After an election season in which
so many politicians spent so much time and so much money proclaiming
their support for our men and women in uniform, and with hundreds
of thousands of soldiers risking their lives for us every day,
the decision to pass the Armed Forces Tax Fairness Act of 2002
should be an easy one.
In 1997 Congress passed the Taxpayer Relief Act. Among its many
reforms was a tax break for homeowners. Single taxpayers can
now exempt from capital gains tax the first $250,000 of profit
from the sale of a home, while married couples filing jointly
can exclude up to $500,000. To qualify for this exclusion, taxpayers
need only have owned and used the home as their principal residence
for two out of the five years prior to its sale. For most Americans,
this requirement poses no challenge. For members of the military,
however, it’s another story entirely.
As often happens when crafting legislation as complicated and
broad in scope as the Taxpayer Relief Act, mistakes were made.
One such mistake was the omission of provisions that would enable
members of the military the opportunity to enjoy this tax benefit.
When military personnel are deployed, it is often to overseas
locations for extended periods of time. Even when deployed to
bases within the United States, they are sometimes required
to live in government quarters, or need to rent a house other
than the one they own in order to meet the logistical requirements
of their assigned duties. This lifestyle makes it difficult
for many soldiers to live in homes they own for two years in
any five-year period. As a result, many cannot take advantage
of this tax benefit.
This is not a small problem. Of the 1.4 million members of the
armed forces and some 80,000 reservists currently serving on
active duty, more than 350,000 are homeowners. Denying them
a capital gains tax break provided to all other Americans is
unfair. It discourages them from participating in our nation’s
prosperity through homeownership, and it discourages other Americans
from following in their courageous footsteps. As we honor the
immeasurable contributions veterans have made to our nation
over the years, we must also consider the ways in which we can
make it easier for members of the military to continue to serve.
Fixing this mistake is a simple way to do that.
Fortunately, Congress recognizes the importance of this issue
and has begun to act. Before recessing for the elections, the
House and Senate each passed slightly different versions of
the Armed Forces Tax Fairness Act. Five years in the making,
this legislation would suspend the five-year time period for
military homeowners during periods in which they are stationed
to locations away from their principal residences for extended
periods. In other words, the requirement would be suspended
for service members for time spent posted abroad or far from
Unfortunately, however, attempts to reconcile the differences
between the bills became bogged down in Congress before the
recess. And all the while our soldiers continue to wait.
With Congress returning this week for a lame duck session, lawmakers
have a chance to finally finish a job that is nearly done. Congress
should take full advantage of this opportunity to honor the
commitment and contributions of American military personnel.
It should pass the Armed Forces Tax Fairness Act of 2002 and
afford our men and women in uniform the same tax benefits other
Americans enjoy. As we pause on this Veterans Day to recall
those who fought for our way of life, this action can be a small
way for the American people to thanks the brave and self-sacrificing
members of our military who are the safeguards of our freedoms.
Alfred P. Carlton Jr. is the president of the American Bar