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CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995
(House of Representatives - April 05, 1995)

Text of this article available as: TXT PDF [Pages H4213-H4317] CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995 The SPEAKER pro tempore. Pursuant to House Resolution 128 and rule XXIII, the Chair declares the House in the Committee of the Whole House on the State of the Union for the consideration of the bill, H.R. 1215. {time} 1501 in the committee of the whole Accordingly, the House resolved itself into the Committee of the Whole House on the State of the Union for the consideration of the bill (H.R. 1215) to amend the Internal Revenue Code of 1986 to strengthen the American family and create jobs, with Mr. Boehner in the chair. The Clerk read the title of this bill. The CHAIRMAN. Pursuant to the rule, the bill is considered as having been read the first time. Under the rule, the gentleman from Texas [Mr. Archer] and the gentleman from Florida [Mr. Gibbons] will each be recognized for 1 hour; the gentleman from Ohio [Mr. Kasich] and the gentleman from Minnesota [Mr. Sabo] will each be recognized for 30 minutes; and the gentleman from Virginia [Mr. Bliley] and the gentleman from Michigan [Mr. Dingell] will each be recognized for 30 minutes. The Chair recognizes the gentleman from Texas [Mr. Archer]. Mr. ARCHER. Mr. Chairman, I yield myself such time as I may consume. (Mr. ARCHER asked and was given permission to revise and extend his remarks.) Mr. ARCHER. Mr. Chairman, I am proud to support this bill which may be the most concrete sign yet that the voters have ended 40 years of Democrat control over the House of Representatives. Just 2 years ago, the Democrat Congress passed the largest tax hike in history. Under the Democrats, tax increases were the answer to every question. In this bill, we proudly bring to a close the era of raising taxes on the working people of this country. When this bill is passed, the tax raising legacy of President Clinton and his party will officially be over. It gives me great pleasure to look the American people in the eye and say, the days of tax and spend are over. The days of smaller Government and less taxes are at hand. This is a bill to cut taxes. The tax cuts are fully paid for, as we promised they would be--and--in addition--we reduce the deficit by $30 billion more than President Clinton's budget. The baseball strike is behind us, Mr. Chairman, and this bill is the first home run of the new season. We cut spending, we cut taxes, and we reduce the deficit. Washington, DC's old conventional wisdom said it couldn't be done. The mavins of the media were saying just this week, well, you don't have the votes, do you? Well, stand back because we're doing it--just as our Nation's Governors have done it in many States. We signed a contract with the American people pledging to reduce the size of Government and let the American people keep more of their hard- earned dollars. With this bill, we are again keeping our promise. Our tax cuts can be summarized in three words: family, children, jobs. Our tax relief package will help America's families, and it will create better jobs for those families to head off to every morning. Over the next 5 years, the Federal Government will spend $9 trillion. Our cuts--$189 billion--represent just 2 percent of Federal spending. The Federal Government is too big, it spends too much, and it's about time we cut it down to size. These tax cuts coupled with our pledge to get to a balanced budget will mean that when we get there, the government will be 2 percent smaller yet. In our bill, 76 percent of the tax cuts go directly to families and the other 24 percent go towards job creation. We bring tax relief to 42-million families through a $500 per child tax credit, 20-million people benefit from marriage penalty relief, and 7-million Americans will enjoy a new IRA known as the American Dream Savings Account. We provide adoption tax credits and we provide credits for those who take care of their ailing parents. We help 5 million seniors by repealing the punitive 85 percent Clinton tax hike on those who earn as little as $34,000; we increase the earnings limit so seniors--just like the energizer bunny--can go on working, and working and working--for as long as they choose; and we provide long-term care tax relief and accelerated death benefits. Finally, we provide fuel for the engine that pulls the train of economic growth by cutting capital gains taxes, repealing the alternative minimum tax, and by changing and improving expensing for small business. The Democrats, who never met a tax they didn't hike--will again go off the deep end complaining about tax cuts. I have a simple message for the Democrats. It is not your money. It is the taxpayers money. It does not belong to the Government. It belongs to the workers who earned it. When it comes to taxes, the two parties have very different views. Democrats think people work to support the Government. Republicans think people work to support themselves. Democrats think tax money is their money. Republicans think tax money belongs to the taxpayers. Democrats think tax rates should start at 100 percent and anything less than that is through the good graces of the Government. Republicans think tax rates should start at zero percent and anything more than that is through the good graces of the people. The bottom line is this. When the Democrats see someone in the middle of their American dream, they shake them, wake them, and tell them their dream can't come true. Their message is: If you make it in America we're gonna get 'ya. Republicans, on the other hand, want everyone to have an American dream come true. We want to open up opportunities; we want the magic of free enterprise to give every American the opportunity to become a rich American; and we want success to flourish in a million places, unhindered by the heavy hand of big government. Our tax cuts are fair, they are good for families, and they will create jobs. That is why they are the right thing to do and that is why I ask for the support of members today. The Contract With America promised lower taxes and less government. And that's the promise this bill keeps. Every one of you who votes for this bill today is confirming that you meant what you promised to the voters in September of last year. Mr. Chairman, I reserve the balance of my time. Mr. GIBBONS. Mr. Chairman, I yield myself 1\1/2\ minutes. Mr. Chairman, the gentleman from Texas [Mr. Archer] has just had a good time vilifying we Democrats. We believe there are times for tax cuts, we believe there are ways to tax-cut. We believe it is the wrong time to cut taxes now. This is the time to cut the deficit, not to cut taxes. Mr. Chairman, I was here in 1981 and I want to just reminisce for a second and recall some of the things that went on in 1981. In 1981, President Reagan was President, and his Office of Management and Budget Director Mr. Stockman appeared before the Committee on Ways and Means and he said this about the huge Reagan tax cut at that time: The combination of incentive-minded tax rate reductions and firm budget controls is expected to lead to a balanced budget by 1984. [[Page H4214]] Does anybody remember that that is when we began the huge deficit? Not to be outdone on that same day, President Reagan's Secretary of the Treasury Don Regan said this: If I know anything about the investing process at all, and I spent most of my adult career in that, I think we have a tremendous boom facing us as a result of what we are going to do today after we pass this tax bill. Can anybody remember what happened? We had the biggest depression right after that, after that tax bill passed, that we had had since the 1930's. It is deja vu all over again. The same rhetoric, the same people. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio [Mr. Portman], a member of the committee. Mr. PORTMAN. Mr. Chairman, after hearing the debate this afternoon, I think it is important that we back up a little bit and highlight the fundamental purpose of this tax relief bill. We are trying to strengthen the American family and yes, we are trying to encourage economic growth. That is what we are going to do with this legislation if we are able to enact it. As the gentleman from Texas [Mr. Archer] told us moments ago, this new Congress refuses to be stuck in the old thinking, refuses to cling to the tax-and-spend policies of the past. Instead, it is simple. We believe in helping families and we believe in growing the economy through economic growth, not in growing big government. History is a good guide here. In 1948, the average American family of 4 paid just 3 percent of their income to the Federal Government. My 1992 that Federal tax bill had increased to about 25 percent of family earnings. In 1993 Congress added to that by passing the largest tax increase in American history. Common sense tells us that Congress has gone in the wrong direction. I would hope we would all agree on both sides of the aisle that it is fundamentally important for us to have economic growth, increase jobs and increase our global competitiveness. That is what this bill is all about. By eliminating the marriage penalty, by providing tax credits, by expanding IRA's, it encourages savings, savings we desperately need in this country and it encourages economic growth. Because it lowers the capital gains tax, relieves corporations from the obsolete burden of the alternative minimum tax, and permits small businesses to take tax deductions for needed investment, it will create jobs. These and other changes will all enhance U.S. competitiveness, which we have to have in order to survive in the global economy of the 21st century. {time} 1515 For those who argue that cutting taxes is incompatible with our goal of balancing the budget, let me be emphatic: This bill is paid for, more than paid for, with spending cuts. I could not do it without this commitment. As the gentleman from Ohio, John Kasich, said earlier today, this is actually the first step toward a balanced budget. This is the down payment. Mr. GIBBONS. Mr. Chairman, I yield 4\1/2\ minutes to the gentleman from Michigan [Mr. Levin], a member of the Committee on Ways and Means. (Mr. LEVIN asked and was given permission to revise and extend his remarks.) Mr. LEVIN. Mr. Chairman, this bill is not mainstream. This bill is extreme. This bill will not respond to the dreams of Americans. It is going to turn out to be a nightmare if it were to pass. I was not here in 1981. I came here in 1983. I came here when Michigan was in a deep recession. I came here when unemployment rates were climbing to 17 percent in my State, 17 percent. There has been a lot of partisanship in this debate and a lot of rhetoric. I am not saying the 1981 act was the sole responsible cause of that recession. But it was part and parcel of it. And here we go again. Here we go again. The basic thrust of this proposal is you cut taxes mainly for the privileged few, not only, but mainly, and everybody is going to benefit, and the deficit will disappear. That was the assumption in 1981 and now it is the assumption in 1995. But what happened? The deficit skyrocketed. We know that, despite tax increases while I was here, that President Reagan supported to try to counteract what he did in 1981. The gentleman from Florida [Mr. Gibbons] was here then for that experience. The gentleman from Texas [Mr. Gonzalez] I see, and he was here, was forced to vote for tax increases because of the irresponsibility in 1981. Do not say it helped the middle class. This chart shows what happened to incomes from 1973 to 1993, and it was not only because of the mistakes of 1981, but that was an important part of it. What happened? This chart shows it all, it shows it all. Income stagnation for the middle class, income loss for low-income families, and who benefited? In those 20 years, 30 percent increases for the upper fifth percentile. I represent some of the upper fifth percentile. I also represent those who are in the fourth quintile, and the third, and second, and the first. And I am not going to vote to help those in the upper fifth at the sacrifice of those in the lower fifth period, period. It is bad, bad public policy. So why are you doing it? You say the taxes are paid for. The gentleman from Florida [Mr. Gibbons] referred to what was presented in 1982, and I read it. This is what was presented as the budget proposal for the fiscal year 1982. What will the surplus or the deficit be? Just 00.5. When you round it off, zero. That is what was said, and all your bill says is the same pledge has to be made. It is not even a fig leaf, it is nothing. So why are you doing it? I think in part because extremism does not learn by experience. Second, because the moderates in your party on the Republican side have essentially lost their way and there is no such left. This may satisfy the contract, but it sure changes America. This may be this crown jewel, rubies and sapphires for the privileged few. For the rest of America it is costume jewelry at best. Let us reject it. If we do not, I predict it will be dead on arrival in the U.S. Senate, but let us do our job here and vote no. Mr. ARCHER. Mr. Chairman, I yield myself 1 minute just to respond to the gentleman from Michigan. It is the same old story that we have heard. Figures do not lie, but, figures here can be so distorted. In 1981 there was a tax reduction. There were not the precise spending cuts that the gentleman from Ohio [Mr. Kasich] has insisted on and are in this bill. This will be precisely paid for, as confirmed by CBO figures. Not only that, but over and above the tax cuts it will reduce the deficit by $30 billion more than the Democrat President's budget proposal, by CBO numbers. So the gentleman just is not on track with his figures. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from California [Mr. Matsui], a member of the Committee on Ways and Means. Mr. MATSUI. Mr. Chairman, I thank the gentleman from Florida, the ranking member of the Ways and Means Committee, for yielding me this time. I think what both the gentleman from Florida and the gentleman from Michigan said was absolutely correct. I was here in 1981, and I would implore the Members of this House and this body to pick up the book by David Stockman, the Director of the Office of Management and Budget for President Reagan. David Stockman, when he left the Office of Management and Budget wrote a book called ``The Triumph of Politics,'' and he said in that book essentially that they knew that they would not achieve a balanced budget by 1984, 3 years after they passed this massive tax cut; and, you know, Ronald Reagan said we are going to have a tax cut, we are going to increase defense and cut spending and balance the budget in 36 months. That was smoke and mirrors, and everyone now admits it was smoke and mirrors, and we are playing the same smoke and mirrors game again. There is no way in 7 years we are going to achieve a balanced budget from a $350 billion annual deficit today and give tax cuts in excess of $188 billion, and that is what we are talking about, $188 billion over the next 5 years; and over the next 10 years, even with the Republicans' own actuarial studies, it will cost $640 billion over the next decade. There is no way you are going to be able to achieve that result [[Page H4215]] with these tax cuts and balance the Federal budget at the same time. The reason the Republicans feel comfortable and the reason this is probably going to pass today is they know the United States is not going to accept it because it is so extreme. Even Senator Packwood said this is nonsense, they are not going to accept this. And so they have nothing to worry about, they are playing a little figment of imagination on the American public, and they are going to be able to go back home and say they passed these wonderful tax cuts that they know will never become law. Let me tell my colleagues, talking about this being paid for, they have $188 billion over 5 years. We do not even pay for it over 5 years. One of the first things is they have $10.5 billion in spending cuts on pensions. They could not even pass pension reduction out of their committee. That is why that bill did not come to the floor. The committee that has jurisdiction over this issue could not get a majority vote to pass it out. So that is a figment. There is $10 billion that they should subtract; they are unwilling to do that. Then the $100 billion that they have of the $188, what happened there is the gentleman from Ohio [Mr. Kasich] the chairman of the Budget Committee, says he has got some illustrative cuts. Illustrative cuts. They are not in place yet. These are illustrative budget cuts he is talking about. We will not see those maybe until the fall and who knows, let us see how courageous they will be in the fall of this year when they are going to have to cut over the next decade 100 billion dollars' worth of spending. That is the issue. And you know this is not a middle-class tax cut. I tell you, this is unbelievable, to consider this a middle- class tax cut. We have Treasury Department numbers here. A family that makes between $30,000 and $50,000 a year, a family that makes between $30,000 and $50,000 a year under this proposal will get about a buck and one-half a day, about $560 a year. On the other hand, on the other hand, and listen to this, those that make over $200,000 a year, the middle class, will get $11,266 a year as a tax cut under this proposal. That is not a tax cut for working families, that is not a tax cut for middle-class families. And what is really frightening I think to the average citizen when they find this, if in fact this ever becomes law, is if we had huge deficits as a result of this misguided decision today, you will see interest rates go up, and what would you rather have, a $560 a year or buck-and-a-half a day tax break or would you rather have lower interest rates so you can buy a home or maybe your child can buy a home? That is where your savings is, but interest rates will go up. I guarantee interest rates will go up if this ever becomes law. But they know it will not become law. This is a little figment we are playing on the American public, but the reality is we should vote this down just to show we in this Congress, the House of Representatives have discipline, unlike what we are seeing on the other side of the aisle. I urge a ``no'' vote on this particular bill. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. There they go again, there they go again. Figures do not lie, but. Those were Treasury figures. They do not cite the Joint Committee figures that the congressional activities depend upon. The Treasury figures are so distorted that they are not credible. They were exposed as being noncredible in our committee when the Treasury witness was before us. Imputing rental incomes to somebody that owns their own home and saying that is income to you, this is ridiculous. These figures are just not credible. Mr. Chairman, I yield 2 minutes to the gentleman from Minnesota [Mr. Ramstad], a member of the committee. Mr. RAMSTAD. Mr. Chairman, I thank the distinguished chairman for yielding me this time. Mr. Chairman, for the first time in many American voters' memories politicians are keeping their promises. The new House majority promised tax relief, and we are keeping our promise. The new majority promised to pay for our tax cuts and lower the deficit, and we are keeping our promise. The new majority promised to create jobs. And we are keeping our promise. One leading economist told the Committee on Ways and Means that 1.74 million new jobs will be created over the next 5 years from the capital gains tax cut. Economist after economist told the Committee on Ways and Means why we should reduce the capital gains tax. As Allen Sinai put it, the capital gains tax reductions will ``stimulate economic activity, increase jobs, capital spending and capital formation, improve national savings, increase entrepreneurship and raise economic output.'' But, Mr. Chairman, even more impressive than all of these leading economists was the young 17-year-old in my district who came up to me recently after my remarks to his high school assembly. This young man, this young 17-year-old explained to me that he liked what I said about capital gains taxes. And I was a little bit more surprised, not used to this kind of a feedback from a 17-year-old high school student. I looked at this young man and I said, ``Do you mind if I ask you a question? Do you have any capital gains?'' He looked back at me and his eyes got about this big and he said, ``No, not now, Mr. Ramstad, but someday I hope to.'' Mr. Chairman, that is the kind of incentive we need to restore for all American taxpayers. Vote yes on H.R. 1327. Mr. GIBBONS. Mr. Chairman, I yield myself 30 seconds, and hope the gentleman will not leave the floor. I hope that young 17-year-old gets a capital gains tax cut, but he would be better off playing the lottery. Only 8 percent of the American taxpayers ever win anything on the capital gains tax cut. Mr. Chairman, I yield 3 minutes to the gentleman from Virginia [Mr. Payne], a member of the Committee on Ways and Means. Mr. PAYNE of Virginia. Well, Mr. Chairman, here we go again. Fifteen years after George Bush warned the Nation about voodoo economics, my friends on the other side of the aisle are at it again. They are trying to tell the American people that a 5-year, $188 billion tax cut is an important stop along the road to a balanced budget. This time the American people know better. They know, as I do, that this tax cut bill is fiscally and economically irresponsible. They know that you can't get something for nothing. The American people know their history. They saw the national debt climb from less than $1 trillion in 1980 to more than $4.7 trillion today. Americans know that tax cuts did not balance the budget in 1981. And they know that tax cuts will not balance the budget now. Our constituents understand what uncontrolled deficit spending means for the family budget. This year, the typical American family of four will spend $3,100 just to pay interest on the national debt. This is not their total tax bill. Nor is it their share of the total national debt. It is simply the amount of money they will spend to pay off the investors, many of whom are located overseas, who have purchased Treasury bills and other debt instruments of the U.S. Government. The best way to help American families is to cut the deficit and to bring down the crippling interest payments that our constituents have to pay each year. This is the tax cut the American people want. Mr. Chairman, just 2 months ago, Democrats and Republicans came together on this floor and made history when we passed a balanced budget amendment to the Constitution. We did so out of a shared belief that we cannot continue to saddle American families with a national debt that saps our productive capacity, stifles investment, and causes so much of our wealth to be used just to service the national debt. In that debate, we heard a lot of very sincere speeches about fiscal discipline, about the need to make tough choices, and about our shared obligation not to burden our children and grandchildren with an ever increasing national debt. So what happened? Here we are just 2 months later, and the tough choice that we are being asked to make is for a tax cut that will cost $188 billion over 5 years, and that will explode in cost after the year 2000. Mr. Chairman, this bill is not my idea of fiscal discipline. [[Page H4216]] It is not the kind of tough choice that a $4.7 trillion national debt cries out for. And it will do nothing to save our children and grandchildren from the crushing weight of the national debt. All this bill does is to repeat the age-old Washington mistake of borrowing from our children to pay for what seems popular right now. For the sake of deficit reduction, and for the sake of a stronger economic future for all Americans families, I urge my colleagues to reject this poorly timed, irresponsible legislation. {time} 1530 Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from New Jersey [Mr. Zimmer], a member of the committee. Mr. ZIMMER. Mr. Chairman, I thank the gentleman for yielding. It is a sad reality that the average American family is earning no more today than it earned 20 years ago. This reality has led to frustration, it has led to pessimism, it has led to anger among middle- income Americans who are beginning to wonder whether, for the first time in our history, their children will not have a better life than they have had. We Republicans are deeply concerned about the future of working Americans, but unlike the minority, we are willing to attack the cause of this problem. We understand that wages have stagnated in large part because we have a Tax Code that penalizes people who invest, people who save, people who take risks to create new jobs, good jobs. We tax capital gains at a rate that is higher than our competitors, and we tax capital gains that are attributable solely to inflation. Even though it is quite obvious that a capital gains tax cut will help working Americans increase their standard of living, most Democrats hate it, because they are afraid that somebody who is rich might also benefit. To them, I would like to quote a Democratic Senator, Joseph Lieberman, from Connecticut, who said: The argument of some Democrats against a cut in the capital gains tax--that the rich will benefit more than the rest of us--misses the point and is politically divisive. Lower- and middle-income people won't realize most of the tax savings for the obvious reason that they have less capital, but they could get something better: a job, if they have none, or a better job, if they are underemployed. After all, the whole idea of a capital gains tax cut is to induce people who have capital to move it into new investments that will make America more productive and competitive and benefit all of us with greater economic opportunity and security. So said a wise Democrat, Senator Lieberman. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from Maryland [Mr. Cardin], a member of the Committee on Ways and Means. Mr. CARDIN. Mr. Chairman, I thank the gentleman for yielding me this time. I oppose this tax cut at this time. Yes, there are some good provisions in the tax cut proposal that help American families. I support some capital gains relief and AMT relief, but there are some very bad things in this bill as well, including the neutral cost recovery system, the raid on the Medicare trust fund, and the relief tilted toward the wealthiest Americans. But the fatal flaw in the tax bill before us is that we must make deficit reduction our first priority. Whatever tax cut we pass, we have to borrow money in order to give the taxes back to our constituents, and that borrowing of additional money will cost our constituents more money. The Republican bill that is before us will cost the American taxpayer an additional $17.7 billion in debt service over the next 5 years in order to pay for the $188 billion of tax relief. The net impact on the deficit will be an increase in the national debt of $206 billion over the next 5 years as a result of the bill that is before us. So let us look at the results during the first 100 days. If you take a look at the specific spending cuts that have been passed in the House so far and what is in the bill before us, if we assume that the welfare reform bill will pass the Senate without change, which is very unlikely, if we assume that the rescission bill will stay at $12 billion net savings, and that will not change, and that will hold during the entire 5 years, if you assume that the other provisions in this bill will be enacted, and if you take the specific tax cuts that are proposed in this bill, you find that what we are doing is increasing the deficit over this period of time. The spending cuts which are in blue are far less than the tax cuts. Let me just give you 2 illustrative years. In 1998 the tax cut will cost the Treasury $35.6 billion, the spending cuts $29.2 billion, a net increase in the debt of $6.4 billion. But go to the year 2002. See what happens when you get a little bit further out, because of the way the tax provisions are worded. The tax cut will cost $87.7 billion, the spending cuts are $51.5 billion, for a net, a net increase in the deficit in the year 2002 at $36.2 billion. We have a major deficit problem. CBO has projected the deficit by the blue columns that you see here; it is scheduled to increase if we do not take action on deficit reduction. If we pass just the bills that have been passed so far in this Congress, in this House, if that is what we do, we are going to find the deficit larger rather than smaller during this period of time. I do not think that is the record that we want to use. Many of these tax-cut provisions will get worse as time goes on. Let me just give you one example. The neutral cost recovery system that gives businesses extraordinary writeoffs raises $16 billion during the first 5 years, but costs $136 billion during the next 5 years when we do not score it, so we take advantage of revenue even though it is going to cost us billions of dollars and create a major problem for the future. The contingency will not work. It is a gimmick, a sham. There is no question about it. The tax cuts are permanent. The spending cuts are only 1 years. We can come back and change, and do not think we will not. Look at the history. Look at the Emergency Deficit and control Act of 1985; when that was passed, the deficit was $212 billion. In 1985 we were supposed to have a balanced budget. That was supposed to give us a balanced budget by the year 1991 with the sequestration, with enforcement. What was the deficit in 1991? It grew from $212 billion to $269 billion. We have the specific tax cuts. We do not have the specific spending cuts. That is why a bipartisan group today opposed this bill under the Concord coalition. That is why a group of business leaders told me yesterday to oppose this bill, do deficit reduction first. The best present we can give our children and the future generations and the businesses and the growth in our economy is to cut the deficit. Vote against this bill. Vote for deficit reduction. Vote for the future of our Nation. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. Here we go again. Figures do not lie, but--the gentleman talks about deficit reduction. There is no Democrat plan before this House for deficit reduction that I know of. This is the only one, and CBO scores us at $30 billion more in deficit reduction than the President's budget. I hope that the Democrats in their substitute and motion to recommit with instructions will show us a CBO score deficit reduction that is greater than is in this package. Mr. Chairman, I yield 2 minutes to the gentleman from Illinois [Mr. Crane], the ranking Republican of the Committee on Ways and Means. (Mr. CRANE asked and was given permission to revise and extend his remarks.) Mr. CRANE. Mr. Chairman, I want to express appreciation to my distinguished chairman and to our colleagues who are in the process of making real significant, historic strides in turning around the direction that this country has been on in virtually all of the 25 years I have been here. We had a tax cut in 1981, the biggest tax cut in our history at that time, approximately, about $200 billion, and the fact of the matter is that that was the last time we had a tax cut. We have done nothing in the intervening years but raise taxes, and paying taxes to the average middle-income family today accounts for 40 to 50 percent of their budget when you include taxes at all levels, Federal, State, and local. The tax burden has become oppressive. It has had a dampening effect [[Page H4217]] on the economy. I know of no economist who has ever attempted to advance the argument that by raising taxes you are promoting economic growth. Quite the contrary. You lower taxes and you promote growth. The other thing that was significant about that tax cut in 1981 is that it more than doubled revenues to the Treasury in the decade of the 1980's. That one single tax reduction more than doubled revenues. It was the fastest revenue increase in our national experience, and it had a very positive effect in other ways, too, which created almost 20 million new jobs. We have an opportunity here though to address more than just tax relief. it is the question of distribution of taxes. According to the Joint Committee on Taxation, if you look at income brackets after the tax cut, those people in the highest income brackets will be paying a marginally larger component part of the total tax burden, and those people in the lowest income brackets will be paying a marginally lower percentage of the total tax burden. I urge my colleagues to support this legislation and get this country moving in a forward direction. Mr. Chairman, the last time I was on the floor of the House of Representatives to debate and vote on a substantial tax cut for the American taxpayer was in 1981. Since that time, Congress has raised taxes more times than I care to remember. In 1993, President Clinton and a Democrat Congress topped all the previous tax bills by enacting the single largest tax increase in the history of the world--literally. According to the Joint Committee on Taxation, the 1993 tax bill robbed the American taxpayers of a total of $240 billion over a 5-year period. Not surprising, not one Republican in either the House or the Senate voted for Clinton's tax bill. For the American taxpayer, the 1993 tax bill may have been the last straw. And thanks to the American voter, the make-up of Congress was radically altered in the 1994 elections. For the first time in 40 years, the Republicans gained control of the House of Representatives. Republicans campaigned on the Contract With America and promised to change business as usual. We have kept our promises and we certainly have changed this House of Representatives. One of the key components of the contract is to give back to the American taxpayers some of their hard-earned dollars that Democratic Congresses have taken from them over the years. The bill we have before us today would cut taxes by a total of $190 billion over 5 years. Some have called this excessive. In fact, it is rather modest, particularly when one considers that the $190 billion figure falls $50 billion short of cutting the amount of taxes raised in the 1993 tax bill alone--to say nothing of all the other tax increases we have seen in the last 12 years. Unfortunately, my colleagues need to be reminded of an important point--tax dollars do not, by right, belong to our Government. Some of my colleagues in this House seem to think that tax dollars are owned by Congress. Let me remind my colleagues that tax dollars are owned by hardworking taxpayers, and Congress has a responsibility to ensure that any money it takes from the taxpayers is spent wisely. Unfortunately, we cannot say that Congress has spent tax dollars wisely over the last 40 years. Indeed, Congress has squandered billions upon billions of dollars. In my view, the only way to force the Federal Government to become efficient, to force it to return to the essentials, and to force it to eliminate the excesses that exist, is to restrict the flow of tax dollars to Congress--it is time to turn off the spigot. Only then will we be able to force Congress to live within its means. Only then will we be able to force Congress to stop spending money and stop mortgaging the future of our children. what the bill does If you listened to the opponents of this bill you'd think we were increasing taxes. Of course, what this bill does is substantially reduce taxes for both individuals and businesses. The opponents of this bill have been screaming in righteous indignation over even the thought of reducing taxes. When you look at the actual contents of this tax legislation you begin to wonder where the opponents of this tax bill are coming from. This bill does a great many good and necessary things for the overburdened individual and business taxpayers. First of all, this bill helps American families. I have seen estimates that indicate that 40 to 50 percent of the typical American family budget goes toward paying taxes--Federal, State, and local. Specifically, 25 percent of the family budget goes toward paying Federal taxes. That is absolutely outrageous and it is no wonder that families are getting sick and tired of the tax burden they are shouldering, particularly when they see how their money is being spent by Congress. Families have been hit hard over the last few decades by taxes. The exemption amount for dependents, had it been indexed for inflation from the date it was created, should be worth over $8,000 today, instead of the $2,450 allowed in 1994. This bill attempts to modestly help families by providing a $500 per child credit. In addition, the bill creates the American Dream savings accounts which will provide families the opportunity to create an IRA with tax free withdrawals for retirement, education expenses, medical expenses, and first time home purchases. The legislation provides a credit for adoption expenses and reduces the marriage penalty. As a long time proponent of all of these efforts, and as the lead sponsor of the American Dream Restoration Act which contained nearly all of these three proposals, I can assure my colleagues I feel strongly about this portion of the bill. All these things are long overdue and will help families considerably. The bill helps seniors as well. While Democrats have often tried to portray themselves as the protectors of senior citizens, in reality you will find that Democrat tax policies have hit senior citizens very hard. Our seniors have worked hard all their lives and they have paid taxes all their lives. Many live on fixed incomes and can ill-afford the continual tax hikes that have been heaped upon them by an arrogant Congress these past 40 years. Seniors deserve a break. This legislation offers them some hope. The bill repeals the increase in income taxes on Social Security benefits which President Clinton had pushed for in the 1993 tax bill. In addition, the legislation raises the amount seniors can earn before their Social Security benefits are reduced. This is referred to as the Social Security Earnings Limitation issue. Both of these measures will put more money in the pockets of seniors. In addition, the bill provides for a tax credit to taxpayers who provide custodial care of certain elderly family members staying in the taxpayer's home. Finally, the bill gives the American business community a break. Although it is fundamental economics, I believe some of my colleagues need to be reminded of some basic tenets of the marketplace: First, businesses create jobs, and second, without employers you do not have employees. Anything we can do to ease the burden on business community, increase their ability to compete, and encourage investments in new business ventures will help create new jobs in this country. The best way out of poverty is opportunity--a job. This legislation reduces the tax burden on American businesses by eliminating the excessive, complicated, and inefficient section of the Internal Revenue Code referred to as the alternative minimum tax. Scrapping this insane system will go a long way toward putting American businesses on a competitive footing with businesses overseas. In addition, we reduce the rate on capital gains and index capital assets for inflation. I could write a book about the importance of this provision of the bill. I have been advocating reducing the rate on capital gains for years, and I have seen the benefits of doing so based on past experience. By reducing the capital gains rate we will not only encourage more capital to be invested but we also encourage capital to move freely. This will result in job creation. Moreover, the increased number of transactions will actually mean more revenue to the Treasury. In short, this bill will create long term dynamic economic growth that will benefit all Americans. the class warfare debate In the debate over this legislation, there are those in Congress who wish to divide our country and its people. These people wish to create class antagonism, and choose demagoguery over logic and reason. These people want to engage in class warfare. These are the social engineers of our society who still don't understand that socialism died of natural causes. These people think they have the perfect formula for deciding what the proper tax burden ought to be for various income groups. They believe that it is Government's responsibility to redistribute income. They apparently do not understand some of the basic concepts upon which this country was founded--freedom, opportunity, hard work, etc. These people argue that the tax bill before us today caters to the rich--that it does not properly distribute the tax burden. Let me present some hard facts for these social engineers. According to the Tax Foundation, in 1982, the top 1 percent of income earners paid 19 percent of the taxes. In 1992, this group paid 27.4 percent of the taxes. In 1982, the top 10 percent of income earners paid 48.6 percent of the taxes, while in 1992, that figure rose to 57.5 percent. For both 1982 and 1992 the top 50 percent of taxpayers paid over 90 percent of the taxes. All this was before the 1993 tax bill which was specifically designed to take $114 billion from high-income individuals. Isn't this progressive enough? In fact, the tax bill we have before us today does nothing to change these percentages. Indeed, figures from the Joint Committee on Taxation [[Page H4218]] actually indicate that the top 1 percent and top 10 percent will pay a slightly higher proportion of the total tax burden after this bill is passed than they would if it were not passed. That ought to make the social engineers happy and they ought not be complaining. Of course my point is that all this talk of tax/income distribution tables and class warfare is foolishness. This bill gives money back to the taxpayers. It does not discriminate. It is designed to encourage savings and investment. It is about reducing the size of Government. conclusion Mr. Chairman, I could speak on this subject for a long time. However, let me simply say that this legislation is a most critical part of our Contract With America. Yes, we have brought this legislation to the floor of the House as we promised. But let us do even better than that. Let us pass this legislation with the goal of enacting into law real tax relief before the year is over. Mr. GIBBONS. Mr. Chairman, I yield 6 minutes to the gentleman from Washington [Mr. McDermott], a member of the Committee on Ways and Means. (Mr. McDERMOTT asked and was given permission to revise and extend his remarks.) Mr. McDERMOTT. Mr. Chairman, although both sides of the aisle strongly disagree on the merits of this bill, I think both parties will agree that in the last few days we have seen a truckload of statistics, charts, graphs, and surveys arguing for or against this tax cut plan. However, there is one thing that both sides agree upon--that the Republican tax cut plan will increase the deficit by $189 billion. Worse still, the Republican majority is proposing that we pay for over half of this deficit increase with an I.O.U. for $100 billion. Not real money, but a promise to pay in the future. No one knows what will happen in the future when the appropriators actually identify where the cuts will come from to achieve the $100 billion in savings. We have before us a so-called illustrative list of proposed cuts by Budget Committee Chairman Kasich. I am sure that I am not the only Member of Congress who is dubious at best, about anyone's ability to mandate spending cuts. If the Republican majority so firmly believes in this tax cut plan, why have they not come up with the specific spending cuts which they promised to identify for the American people? When President Clinton lowered spending caps 2 years ago, he did it to cut spending, not to give the money to the wealthy. We have been down this road before. In 1981, Congress passed President Reagan's tax cut bill without any accompanying spending cuts. As a result, the deficit soared and we face the budget mess we are in today. How many Members on the other side of the aisle remember that in 1981 the Reagan administration projected a balanced budget by 1984? Sound familiar? As Yogi Berra would say, ``It's deja-vu all over again.'' The Republican leadership is asking for a giant leap of faith. They are implicitly forcing Members to sign a second contract, not with the American people, but with the Republican leadership to vote for a budget reconciliation bill that has not been written and currently does not exist. Unlike the recent rescissions bill which spared projects in key Republican districts, everything--including Social Security--will have to be on the table to find the $100 billion in real cuts. In September you will be asked to vote for a budget reconciliation bill that drastically cuts programs and services in your district to pay for this wasteful tax cut bill. Many of you will have a lot of explaining to do. The agreement by the Republican leadership to link the tax cuts to a balanced budget plan is toothless and misleading. This phony agreement allows the leadership to get their tax bill enacted without having to commit to any guaranteed deficit reduction. There is absolutely nothing in the agreement that even remotely looks like an enforcement mechanism. This agreement makes it all too clear that it is more important to the Republican leadership to keep their political opiate--a promise of tax cuts--no matter how damaging the long-term consequences. The unfairness of who gets what of this bill are too numerous for me to recite. No matter how you analyze this bill, families with higher incomes receive a disproportionate share of the total benefits from these tax cuts. Chairman Archer knows this. That is why he is trying to change the focus of the debate from who receives the majority of the tax bill's benefits to what percentage of total income taxes are paid by the rich. Good try, Mr. Chairman, but it will not work. The real issue today is not the total proportion of income taxes the richest 10 percent of the population pay, but how much of a tax benefit high income families receive under the contract when compared to current tax law. Under the Republican bill, the rich get richer so it is logical that they will pay additional taxes on the extra money they earn. In contrast, a working class family that is not able to take advantage of all of the new tax breaks contained in this bill will simply not benefit nearly as much. The majority of these tax cuts will not benefit working class Americans. Under the Republican theory of ``trickle-down-economics,'' working families will not even get wet. For example, the richest 1 percent of Americans who make more than $267,000 will pay 18.23 percent of the tax burden under the contract, up 2 percent. But what Chairman Archer does not say is that those same families--the top 1 percent--will an average tax savings of more than $11,000 per year under the contract. In contrast, the majority of American taxpayers whose incomes are less than $44,434 will pay 16.1 percent of the tax burden under the contract, a drop of 0.2 percent. But, these families only see an average tax savings of $760 or less. That's right, the rich will get $11,000 in tax savings from this tax plan and the majority of Americans will get $760 or less in savings. Is this what the Speaker means when he talks about the ``opportunity society'' for the American people? By voting for this bill with its fairy tale $100 billion I.O.U., the Republican rank-and-file have given up any remaining shred of independence they so briefly entertained last week. They might as well give their voting cards to the Speaker and allow him to vote yes for them on passage of the budget reconciliation bill in September because after today they have no choice. In September the voters back home will be wondering why they sent you here. Did they want you to vote your conscience or to play the childish game of ``follow the leader?'' Unfortunately, we have so few Members who do the former and far too many who do the latter. {time} 1545 Mr. ARCHER. Mr. Chairman, I yield 3 minutes to the gentlewoman from Connecticut [Mrs. Johnson], the chairman of the Subcommittee on Oversight of the Committee on Ways and Means. Mrs. JOHNSON of Connecticut. I thank the chairman for yielding this time to me. Mr. Chairman, I rise in strong support of this bill. It is a fine and necessary tax bill. First, it will make our economy grow more rapidly. Small business, the creator of most jobs, will gain the right to expense $30,000 worth of equipment, We all know that any small business can expand more rapidly if it can afford the equipment to produce its product. Expensing has long been the No. 1 demand of the small-business community to accelerate the pace at which it will be able to grow. Estate tax law reform, home office deduction reinstatement, capital gains, all will help small business grow, prosper and create the jobs that America needs. Second, this bill helps big businesses that compete in a very tough international market where you can not pass on new costs through higher prices. In Connecticut, one company invested $4 billion over the last few years in capital investment in manufacturing facilities in this Nation and paid higher taxes than other manufacturers who invested not $1 because of the alternative minimum tax. That is wrong. That is bad policy. That is anti-jobs. That is anti a strong economy. [[Page H4219]] Not only will this bill help build economic strength and create jobs, but it also helps families and seniors, and it takes a giant step toward health care reform. Young families are carrying a heavier burden in our society today than they have at any time in our history. Surely we can agree to give them this $500 tax credit per child. Seniors have been disadvantaged by the tax hike we imposed on them a couple of years ago. This bill repeals that; it gives them tax relief, raises the earnings limit, so that those with low pensions can work without penalizing them $1 for every $3 they earn. It also creates the long-term care partnership that protects our seniors and families from the catastrophic costs of long-term care and home care. Is this a perfect bill? Absolutely not. I disagree with the Neutral Cost Recovery section. I want the $200,000 threshold lowered because I think it is better policy, fairer to all Americans. I think the solution in this bill to the underfunded Federal pension plans may not be the best, but there is no problem in this bill that is not entirely solvable as we move along. And this bill is critical. Mark my words, it is critical to achieving a balanced budget. If we are going to achieve a balanced budget by the year 2002, that spending plan must not only enable us to provide the services we need in those years but also the tax policy we need to create jobs, to create economic strength and to assure a fair distribution of burden among the families and the seniors of America. I urge your support of this bill. Mr. GIBBONS. Mr. Chairman, may I inquire as to how much time remains on each side? The CHAIRMAN. The gentleman from Texas [Mr. Archer] has 41 minutes remaining, and the gentleman from Florida [Mr. Gibbons] has 34\1/2\ minutes remaining. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentlewoman from Washington [Ms. Dunn], a respected member of the committee. Ms. DUNN of Washington. I thank the gentleman for yielding this time to me. Mr. Chairman, my State of Washington is home to thousands of entrepreneurs, and home to Microsoft--now an economic giant but once launched by a pair of young entrepreneurs. We also have timber--an industry that once was robust and thriving, but now is facing difficult times. For too long, our Nation's entrepreneurs have been penalized by the tax policy of the United States. Since 1986, when the business capital gains rate was raised to 35 percent, venture capital financing has dropped by two-thirds--from $4.19 to $1.41 billion--and the number of firms receiving venture capital financing has declined every single year. Mr. Chairman, we must correct the current tax policy regarding capital formation. It we don't, we will be directly responsible when the next Microsoft never takes it off the ground. Failure to act could bankrupt 1,200 small timber businesses, who typically own 50 acres and have an income of less than $50,000. For them, the capital gains reduction is a life or death matter. These small timber firms alone represent more than 5,000 jobs threatened by high capital gains rates. Mr. Chairman, cutting taxes on capital is about jobs. Support capital formation, support entrepreneurs, support family businesses, and support more jobs for Americans. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from Louisiana [Mr. McCrery]. Mr McCRERY. I thank the gentlewoman for yielding this time to me. Mr. Chairman, the quote that I am given by my constituents back home is that, ``The Federal Government is too big and spends too much.'' I do not hear, when I go back home, ``I pay too little in taxes.'' Every Republican and many Democrats who were here 2 years ago voted against the Clinton tax increase. If 2 years ago you were against the tax increase, why would you not be now for giving back to the people about two-thirds of that tax increase? Instead of trying to create class warfare in America, let us talk about what is or is not sound tax policy. For example, the House recently passed a historic welfare reform bill. Those who oppose welfare reform rightly asked the question: ``Where will the jobs come from for people who lose their welfare benefits?'' Well, this bill begins to address that question. There are a number provisions in this tax reduction bill which will encourage productive investment and creation of private sector jobs. Chief among them is the reduction in the capital gains tax rate. By reducing the tax on capital gains, we reduce the cost of capital; by reducing the cost of capital, we encourage investment, which increases productivity, which allows economic growth without inflation and which, most importantly for Americans who want to work, creates jobs. This tax cut bill gives us a chance to go back in time 2 years and do now what Americans wanted us to do then: Cut spending first. If you voted against the tax increase 2 years ago, then you ought to vote today to repeal most of it. Now is your chance to make right what you said was wrong 2 years ago. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from California [Mr. Herger]. Mr. HERGER. I thank the gentlewoman for yielding this time to me. Mr. Chairman, this legislation is a crucial step in a tidal wave of reform. Americans are fed up with paying more in taxes than they pay for their families' food, clothing and shelter Americans are fed up with seeing small business drown beneath a suffocating mass of Government regulation, and American taxpayers do not want the Federal Government to be the fastest growing employer in the Nation. Mr. Chairman, in 1993, the Democrats voted for the largest tax increase in history, and they continue to support high taxes today. This legislation pays for all of our tax cuts, and still lowers the deficit by $30 billion. In addition, this bill provides $189 billion in tax relief. Tax relief for families with children, tax relief for young couples beginning to save for their first home, and tax relief for senior citizens living on fixed incomes. Moreover, Mr. Chairman, much of this relief merely gives back to citizens that which was taken away by President Clinton in the 1993 tax bill. The average Californian will save $1,761 a year in taxes if this bill is enacted into law--76 percent of these benefits going to American families. Mr. Chairman, it is time that Washington realizes that income belongs to the worker, not to the Government. Congress must allow American workers to keep more of what they earn--we must also restore the free market incentive which drives our American dream, that same incentive which leads citizens to take risks and create jobs. Vote ``yes'' on this bill. Mr. GIBBONS. Mr. Chairman, I yield 1 minute to the gentleman from Colorado [Mr. Skaggs]. Mr. SKAGGS. Four trillion eight hundred seventy-three billion, four hundred eighty-one million dollars. That is the Federal debt. And we should be doing all we can to keep it from growing. The tax cut we are debating this afternoon will explode the debt by over a hundred billion dollars a year in the year 2005. Enormous tax relief for those who need it least. For hard-working middle class American families earning less than $75,000 a year, a pittance, 35 bucks a month. For a family over 200,000, a thousand dollars a month. Whose sense of equity is not offended by that? Two months ago we were debating a balanced budget amendment. There were pious and sober speeches about the deficit and its burden on our kids. The same people today are supporting this budget buster. Where has their resolve gone? Four trillion, eight hundred seventy-three billion, four hundred eighty-one million dollars. With a debt like that we should not even be considering this bill. Vote against a repeat of voodoo economics. Vote down this bill. Four-trillion, eight-hundred seventy-three billion, four-hundred eighty-one million dollars. That is the size of the United States Federal debt. It's shameful. And we should be doing all we can to keep it from growing. Which is why, as much as I would like to cut taxes, I believe this is the wrong time for any tax cut, and certainly this tax cut. But the tax cut we are debating today would, over the long term, increase that debt tremendously--by almost $100 billion a year in 2005. And it would do so by giving most of [[Page H4220]] the tax cuts to the wealthiest people in America. Speaker Gingrich calls this bill the ``crown jewel'' of his party's so- called Contract With America. I suppose that's an apt label, for this bill surely would finance nice trip to Cartier's for folks who are already in furs. The bill is, plain and simple, irresponsible. It will give enormous tax relief to those in our society who need it least. It will be paid for, however, at the expense of students and the elderly, and hard- working families for whom critical programs are decimated. And it will be at the expense of generations to come, who'll be burdened with an explosion of the deficit that's reminiscent of the early eighties. Most Americans, those who are struggling to get by, would get only a pittance in tax breaks, an average of $35 a month to families making under $75,000 a year. Whose sense of equity isn't offended when you compare that to almost $1,000 a month in tax relief for those making over $200,000 a year? This bill also gives huge tax benefits to big corporations and investors. Not enough attention has been paid to this aspect of the bill, probably because these tax breaks are written in a way that hides their true cost. Over the first 5 years, the big business tax breaks add up to $24 billion. In the next 5 years their cost balloons to $221 billion. Like an iceberg, nine-tenths of the cost hides under the surface of the 5-year budget horizon. What are these tax breaks? Things like the repeal of the corporate minimum tax. This wasn't an original part of the so-called contract, but was slipped in after a successful lobbying campaign by a coalition of large corporations. Never mind that the corporate minimum tax was supported by President Ronald Reagan. In 1985, the Reagan Treasury Department said, ``The prospect of high-income corporations paying little or no tax threatens public confidence in the tax system.'' And avoiding taxes they were. Prior to the corporate minimum tax, most of the country's largest and most profitable corporations often paid no Federal income taxes. How can anyone justify increasing the deficit, as this bill does, just to give the biggest corporation a pass on paying any taxes? You will hear from many people today that this bill is paid for. Do not believe them. It's paid for only over the first 5 years, when the tax breaks are expected to cost $188 billion. What they won't tell you is that this bill was very cleverly written so that the costs are held down over the first 5 years, but nearly triple after that. The Treasury Department estimates that the full 10-year cost of these tax cuts will be $630 billion. That full amount isn't paid for. Any way you count it, this bill add hundreds of billions of dollars to the Federal debt. We can't afford it. With the huge cost of this bill, and with the lion's share of benefits going to the rich, some of the more moderate members of the Republican party have been hesitant to support it. But there was no opportunity for Democrats to work with them to create a bipartisan, more balanced bill, because their leadership had to have it their way-- leadership apparently concerned more with the symbolism and show of the contract than with substance, a leadership that reveals the emptiness of its commitment to deficit reduction. But the moderate Republicans were right. They remember what happened the last time the Congress embraced an economic policy like this. It was 1981, and it was called ``Reag

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CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995
(House of Representatives - April 05, 1995)

Text of this article available as: TXT PDF [Pages H4213-H4317] CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995 The SPEAKER pro tempore. Pursuant to House Resolution 128 and rule XXIII, the Chair declares the House in the Committee of the Whole House on the State of the Union for the consideration of the bill, H.R. 1215. {time} 1501 in the committee of the whole Accordingly, the House resolved itself into the Committee of the Whole House on the State of the Union for the consideration of the bill (H.R. 1215) to amend the Internal Revenue Code of 1986 to strengthen the American family and create jobs, with Mr. Boehner in the chair. The Clerk read the title of this bill. The CHAIRMAN. Pursuant to the rule, the bill is considered as having been read the first time. Under the rule, the gentleman from Texas [Mr. Archer] and the gentleman from Florida [Mr. Gibbons] will each be recognized for 1 hour; the gentleman from Ohio [Mr. Kasich] and the gentleman from Minnesota [Mr. Sabo] will each be recognized for 30 minutes; and the gentleman from Virginia [Mr. Bliley] and the gentleman from Michigan [Mr. Dingell] will each be recognized for 30 minutes. The Chair recognizes the gentleman from Texas [Mr. Archer]. Mr. ARCHER. Mr. Chairman, I yield myself such time as I may consume. (Mr. ARCHER asked and was given permission to revise and extend his remarks.) Mr. ARCHER. Mr. Chairman, I am proud to support this bill which may be the most concrete sign yet that the voters have ended 40 years of Democrat control over the House of Representatives. Just 2 years ago, the Democrat Congress passed the largest tax hike in history. Under the Democrats, tax increases were the answer to every question. In this bill, we proudly bring to a close the era of raising taxes on the working people of this country. When this bill is passed, the tax raising legacy of President Clinton and his party will officially be over. It gives me great pleasure to look the American people in the eye and say, the days of tax and spend are over. The days of smaller Government and less taxes are at hand. This is a bill to cut taxes. The tax cuts are fully paid for, as we promised they would be--and--in addition--we reduce the deficit by $30 billion more than President Clinton's budget. The baseball strike is behind us, Mr. Chairman, and this bill is the first home run of the new season. We cut spending, we cut taxes, and we reduce the deficit. Washington, DC's old conventional wisdom said it couldn't be done. The mavins of the media were saying just this week, well, you don't have the votes, do you? Well, stand back because we're doing it--just as our Nation's Governors have done it in many States. We signed a contract with the American people pledging to reduce the size of Government and let the American people keep more of their hard- earned dollars. With this bill, we are again keeping our promise. Our tax cuts can be summarized in three words: family, children, jobs. Our tax relief package will help America's families, and it will create better jobs for those families to head off to every morning. Over the next 5 years, the Federal Government will spend $9 trillion. Our cuts--$189 billion--represent just 2 percent of Federal spending. The Federal Government is too big, it spends too much, and it's about time we cut it down to size. These tax cuts coupled with our pledge to get to a balanced budget will mean that when we get there, the government will be 2 percent smaller yet. In our bill, 76 percent of the tax cuts go directly to families and the other 24 percent go towards job creation. We bring tax relief to 42-million families through a $500 per child tax credit, 20-million people benefit from marriage penalty relief, and 7-million Americans will enjoy a new IRA known as the American Dream Savings Account. We provide adoption tax credits and we provide credits for those who take care of their ailing parents. We help 5 million seniors by repealing the punitive 85 percent Clinton tax hike on those who earn as little as $34,000; we increase the earnings limit so seniors--just like the energizer bunny--can go on working, and working and working--for as long as they choose; and we provide long-term care tax relief and accelerated death benefits. Finally, we provide fuel for the engine that pulls the train of economic growth by cutting capital gains taxes, repealing the alternative minimum tax, and by changing and improving expensing for small business. The Democrats, who never met a tax they didn't hike--will again go off the deep end complaining about tax cuts. I have a simple message for the Democrats. It is not your money. It is the taxpayers money. It does not belong to the Government. It belongs to the workers who earned it. When it comes to taxes, the two parties have very different views. Democrats think people work to support the Government. Republicans think people work to support themselves. Democrats think tax money is their money. Republicans think tax money belongs to the taxpayers. Democrats think tax rates should start at 100 percent and anything less than that is through the good graces of the Government. Republicans think tax rates should start at zero percent and anything more than that is through the good graces of the people. The bottom line is this. When the Democrats see someone in the middle of their American dream, they shake them, wake them, and tell them their dream can't come true. Their message is: If you make it in America we're gonna get 'ya. Republicans, on the other hand, want everyone to have an American dream come true. We want to open up opportunities; we want the magic of free enterprise to give every American the opportunity to become a rich American; and we want success to flourish in a million places, unhindered by the heavy hand of big government. Our tax cuts are fair, they are good for families, and they will create jobs. That is why they are the right thing to do and that is why I ask for the support of members today. The Contract With America promised lower taxes and less government. And that's the promise this bill keeps. Every one of you who votes for this bill today is confirming that you meant what you promised to the voters in September of last year. Mr. Chairman, I reserve the balance of my time. Mr. GIBBONS. Mr. Chairman, I yield myself 1\1/2\ minutes. Mr. Chairman, the gentleman from Texas [Mr. Archer] has just had a good time vilifying we Democrats. We believe there are times for tax cuts, we believe there are ways to tax-cut. We believe it is the wrong time to cut taxes now. This is the time to cut the deficit, not to cut taxes. Mr. Chairman, I was here in 1981 and I want to just reminisce for a second and recall some of the things that went on in 1981. In 1981, President Reagan was President, and his Office of Management and Budget Director Mr. Stockman appeared before the Committee on Ways and Means and he said this about the huge Reagan tax cut at that time: The combination of incentive-minded tax rate reductions and firm budget controls is expected to lead to a balanced budget by 1984. [[Page H4214]] Does anybody remember that that is when we began the huge deficit? Not to be outdone on that same day, President Reagan's Secretary of the Treasury Don Regan said this: If I know anything about the investing process at all, and I spent most of my adult career in that, I think we have a tremendous boom facing us as a result of what we are going to do today after we pass this tax bill. Can anybody remember what happened? We had the biggest depression right after that, after that tax bill passed, that we had had since the 1930's. It is deja vu all over again. The same rhetoric, the same people. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio [Mr. Portman], a member of the committee. Mr. PORTMAN. Mr. Chairman, after hearing the debate this afternoon, I think it is important that we back up a little bit and highlight the fundamental purpose of this tax relief bill. We are trying to strengthen the American family and yes, we are trying to encourage economic growth. That is what we are going to do with this legislation if we are able to enact it. As the gentleman from Texas [Mr. Archer] told us moments ago, this new Congress refuses to be stuck in the old thinking, refuses to cling to the tax-and-spend policies of the past. Instead, it is simple. We believe in helping families and we believe in growing the economy through economic growth, not in growing big government. History is a good guide here. In 1948, the average American family of 4 paid just 3 percent of their income to the Federal Government. My 1992 that Federal tax bill had increased to about 25 percent of family earnings. In 1993 Congress added to that by passing the largest tax increase in American history. Common sense tells us that Congress has gone in the wrong direction. I would hope we would all agree on both sides of the aisle that it is fundamentally important for us to have economic growth, increase jobs and increase our global competitiveness. That is what this bill is all about. By eliminating the marriage penalty, by providing tax credits, by expanding IRA's, it encourages savings, savings we desperately need in this country and it encourages economic growth. Because it lowers the capital gains tax, relieves corporations from the obsolete burden of the alternative minimum tax, and permits small businesses to take tax deductions for needed investment, it will create jobs. These and other changes will all enhance U.S. competitiveness, which we have to have in order to survive in the global economy of the 21st century. {time} 1515 For those who argue that cutting taxes is incompatible with our goal of balancing the budget, let me be emphatic: This bill is paid for, more than paid for, with spending cuts. I could not do it without this commitment. As the gentleman from Ohio, John Kasich, said earlier today, this is actually the first step toward a balanced budget. This is the down payment. Mr. GIBBONS. Mr. Chairman, I yield 4\1/2\ minutes to the gentleman from Michigan [Mr. Levin], a member of the Committee on Ways and Means. (Mr. LEVIN asked and was given permission to revise and extend his remarks.) Mr. LEVIN. Mr. Chairman, this bill is not mainstream. This bill is extreme. This bill will not respond to the dreams of Americans. It is going to turn out to be a nightmare if it were to pass. I was not here in 1981. I came here in 1983. I came here when Michigan was in a deep recession. I came here when unemployment rates were climbing to 17 percent in my State, 17 percent. There has been a lot of partisanship in this debate and a lot of rhetoric. I am not saying the 1981 act was the sole responsible cause of that recession. But it was part and parcel of it. And here we go again. Here we go again. The basic thrust of this proposal is you cut taxes mainly for the privileged few, not only, but mainly, and everybody is going to benefit, and the deficit will disappear. That was the assumption in 1981 and now it is the assumption in 1995. But what happened? The deficit skyrocketed. We know that, despite tax increases while I was here, that President Reagan supported to try to counteract what he did in 1981. The gentleman from Florida [Mr. Gibbons] was here then for that experience. The gentleman from Texas [Mr. Gonzalez] I see, and he was here, was forced to vote for tax increases because of the irresponsibility in 1981. Do not say it helped the middle class. This chart shows what happened to incomes from 1973 to 1993, and it was not only because of the mistakes of 1981, but that was an important part of it. What happened? This chart shows it all, it shows it all. Income stagnation for the middle class, income loss for low-income families, and who benefited? In those 20 years, 30 percent increases for the upper fifth percentile. I represent some of the upper fifth percentile. I also represent those who are in the fourth quintile, and the third, and second, and the first. And I am not going to vote to help those in the upper fifth at the sacrifice of those in the lower fifth period, period. It is bad, bad public policy. So why are you doing it? You say the taxes are paid for. The gentleman from Florida [Mr. Gibbons] referred to what was presented in 1982, and I read it. This is what was presented as the budget proposal for the fiscal year 1982. What will the surplus or the deficit be? Just 00.5. When you round it off, zero. That is what was said, and all your bill says is the same pledge has to be made. It is not even a fig leaf, it is nothing. So why are you doing it? I think in part because extremism does not learn by experience. Second, because the moderates in your party on the Republican side have essentially lost their way and there is no such left. This may satisfy the contract, but it sure changes America. This may be this crown jewel, rubies and sapphires for the privileged few. For the rest of America it is costume jewelry at best. Let us reject it. If we do not, I predict it will be dead on arrival in the U.S. Senate, but let us do our job here and vote no. Mr. ARCHER. Mr. Chairman, I yield myself 1 minute just to respond to the gentleman from Michigan. It is the same old story that we have heard. Figures do not lie, but, figures here can be so distorted. In 1981 there was a tax reduction. There were not the precise spending cuts that the gentleman from Ohio [Mr. Kasich] has insisted on and are in this bill. This will be precisely paid for, as confirmed by CBO figures. Not only that, but over and above the tax cuts it will reduce the deficit by $30 billion more than the Democrat President's budget proposal, by CBO numbers. So the gentleman just is not on track with his figures. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from California [Mr. Matsui], a member of the Committee on Ways and Means. Mr. MATSUI. Mr. Chairman, I thank the gentleman from Florida, the ranking member of the Ways and Means Committee, for yielding me this time. I think what both the gentleman from Florida and the gentleman from Michigan said was absolutely correct. I was here in 1981, and I would implore the Members of this House and this body to pick up the book by David Stockman, the Director of the Office of Management and Budget for President Reagan. David Stockman, when he left the Office of Management and Budget wrote a book called ``The Triumph of Politics,'' and he said in that book essentially that they knew that they would not achieve a balanced budget by 1984, 3 years after they passed this massive tax cut; and, you know, Ronald Reagan said we are going to have a tax cut, we are going to increase defense and cut spending and balance the budget in 36 months. That was smoke and mirrors, and everyone now admits it was smoke and mirrors, and we are playing the same smoke and mirrors game again. There is no way in 7 years we are going to achieve a balanced budget from a $350 billion annual deficit today and give tax cuts in excess of $188 billion, and that is what we are talking about, $188 billion over the next 5 years; and over the next 10 years, even with the Republicans' own actuarial studies, it will cost $640 billion over the next decade. There is no way you are going to be able to achieve that result [[Page H4215]] with these tax cuts and balance the Federal budget at the same time. The reason the Republicans feel comfortable and the reason this is probably going to pass today is they know the United States is not going to accept it because it is so extreme. Even Senator Packwood said this is nonsense, they are not going to accept this. And so they have nothing to worry about, they are playing a little figment of imagination on the American public, and they are going to be able to go back home and say they passed these wonderful tax cuts that they know will never become law. Let me tell my colleagues, talking about this being paid for, they have $188 billion over 5 years. We do not even pay for it over 5 years. One of the first things is they have $10.5 billion in spending cuts on pensions. They could not even pass pension reduction out of their committee. That is why that bill did not come to the floor. The committee that has jurisdiction over this issue could not get a majority vote to pass it out. So that is a figment. There is $10 billion that they should subtract; they are unwilling to do that. Then the $100 billion that they have of the $188, what happened there is the gentleman from Ohio [Mr. Kasich] the chairman of the Budget Committee, says he has got some illustrative cuts. Illustrative cuts. They are not in place yet. These are illustrative budget cuts he is talking about. We will not see those maybe until the fall and who knows, let us see how courageous they will be in the fall of this year when they are going to have to cut over the next decade 100 billion dollars' worth of spending. That is the issue. And you know this is not a middle-class tax cut. I tell you, this is unbelievable, to consider this a middle- class tax cut. We have Treasury Department numbers here. A family that makes between $30,000 and $50,000 a year, a family that makes between $30,000 and $50,000 a year under this proposal will get about a buck and one-half a day, about $560 a year. On the other hand, on the other hand, and listen to this, those that make over $200,000 a year, the middle class, will get $11,266 a year as a tax cut under this proposal. That is not a tax cut for working families, that is not a tax cut for middle-class families. And what is really frightening I think to the average citizen when they find this, if in fact this ever becomes law, is if we had huge deficits as a result of this misguided decision today, you will see interest rates go up, and what would you rather have, a $560 a year or buck-and-a-half a day tax break or would you rather have lower interest rates so you can buy a home or maybe your child can buy a home? That is where your savings is, but interest rates will go up. I guarantee interest rates will go up if this ever becomes law. But they know it will not become law. This is a little figment we are playing on the American public, but the reality is we should vote this down just to show we in this Congress, the House of Representatives have discipline, unlike what we are seeing on the other side of the aisle. I urge a ``no'' vote on this particular bill. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. There they go again, there they go again. Figures do not lie, but. Those were Treasury figures. They do not cite the Joint Committee figures that the congressional activities depend upon. The Treasury figures are so distorted that they are not credible. They were exposed as being noncredible in our committee when the Treasury witness was before us. Imputing rental incomes to somebody that owns their own home and saying that is income to you, this is ridiculous. These figures are just not credible. Mr. Chairman, I yield 2 minutes to the gentleman from Minnesota [Mr. Ramstad], a member of the committee. Mr. RAMSTAD. Mr. Chairman, I thank the distinguished chairman for yielding me this time. Mr. Chairman, for the first time in many American voters' memories politicians are keeping their promises. The new House majority promised tax relief, and we are keeping our promise. The new majority promised to pay for our tax cuts and lower the deficit, and we are keeping our promise. The new majority promised to create jobs. And we are keeping our promise. One leading economist told the Committee on Ways and Means that 1.74 million new jobs will be created over the next 5 years from the capital gains tax cut. Economist after economist told the Committee on Ways and Means why we should reduce the capital gains tax. As Allen Sinai put it, the capital gains tax reductions will ``stimulate economic activity, increase jobs, capital spending and capital formation, improve national savings, increase entrepreneurship and raise economic output.'' But, Mr. Chairman, even more impressive than all of these leading economists was the young 17-year-old in my district who came up to me recently after my remarks to his high school assembly. This young man, this young 17-year-old explained to me that he liked what I said about capital gains taxes. And I was a little bit more surprised, not used to this kind of a feedback from a 17-year-old high school student. I looked at this young man and I said, ``Do you mind if I ask you a question? Do you have any capital gains?'' He looked back at me and his eyes got about this big and he said, ``No, not now, Mr. Ramstad, but someday I hope to.'' Mr. Chairman, that is the kind of incentive we need to restore for all American taxpayers. Vote yes on H.R. 1327. Mr. GIBBONS. Mr. Chairman, I yield myself 30 seconds, and hope the gentleman will not leave the floor. I hope that young 17-year-old gets a capital gains tax cut, but he would be better off playing the lottery. Only 8 percent of the American taxpayers ever win anything on the capital gains tax cut. Mr. Chairman, I yield 3 minutes to the gentleman from Virginia [Mr. Payne], a member of the Committee on Ways and Means. Mr. PAYNE of Virginia. Well, Mr. Chairman, here we go again. Fifteen years after George Bush warned the Nation about voodoo economics, my friends on the other side of the aisle are at it again. They are trying to tell the American people that a 5-year, $188 billion tax cut is an important stop along the road to a balanced budget. This time the American people know better. They know, as I do, that this tax cut bill is fiscally and economically irresponsible. They know that you can't get something for nothing. The American people know their history. They saw the national debt climb from less than $1 trillion in 1980 to more than $4.7 trillion today. Americans know that tax cuts did not balance the budget in 1981. And they know that tax cuts will not balance the budget now. Our constituents understand what uncontrolled deficit spending means for the family budget. This year, the typical American family of four will spend $3,100 just to pay interest on the national debt. This is not their total tax bill. Nor is it their share of the total national debt. It is simply the amount of money they will spend to pay off the investors, many of whom are located overseas, who have purchased Treasury bills and other debt instruments of the U.S. Government. The best way to help American families is to cut the deficit and to bring down the crippling interest payments that our constituents have to pay each year. This is the tax cut the American people want. Mr. Chairman, just 2 months ago, Democrats and Republicans came together on this floor and made history when we passed a balanced budget amendment to the Constitution. We did so out of a shared belief that we cannot continue to saddle American families with a national debt that saps our productive capacity, stifles investment, and causes so much of our wealth to be used just to service the national debt. In that debate, we heard a lot of very sincere speeches about fiscal discipline, about the need to make tough choices, and about our shared obligation not to burden our children and grandchildren with an ever increasing national debt. So what happened? Here we are just 2 months later, and the tough choice that we are being asked to make is for a tax cut that will cost $188 billion over 5 years, and that will explode in cost after the year 2000. Mr. Chairman, this bill is not my idea of fiscal discipline. [[Page H4216]] It is not the kind of tough choice that a $4.7 trillion national debt cries out for. And it will do nothing to save our children and grandchildren from the crushing weight of the national debt. All this bill does is to repeat the age-old Washington mistake of borrowing from our children to pay for what seems popular right now. For the sake of deficit reduction, and for the sake of a stronger economic future for all Americans families, I urge my colleagues to reject this poorly timed, irresponsible legislation. {time} 1530 Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from New Jersey [Mr. Zimmer], a member of the committee. Mr. ZIMMER. Mr. Chairman, I thank the gentleman for yielding. It is a sad reality that the average American family is earning no more today than it earned 20 years ago. This reality has led to frustration, it has led to pessimism, it has led to anger among middle- income Americans who are beginning to wonder whether, for the first time in our history, their children will not have a better life than they have had. We Republicans are deeply concerned about the future of working Americans, but unlike the minority, we are willing to attack the cause of this problem. We understand that wages have stagnated in large part because we have a Tax Code that penalizes people who invest, people who save, people who take risks to create new jobs, good jobs. We tax capital gains at a rate that is higher than our competitors, and we tax capital gains that are attributable solely to inflation. Even though it is quite obvious that a capital gains tax cut will help working Americans increase their standard of living, most Democrats hate it, because they are afraid that somebody who is rich might also benefit. To them, I would like to quote a Democratic Senator, Joseph Lieberman, from Connecticut, who said: The argument of some Democrats against a cut in the capital gains tax--that the rich will benefit more than the rest of us--misses the point and is politically divisive. Lower- and middle-income people won't realize most of the tax savings for the obvious reason that they have less capital, but they could get something better: a job, if they have none, or a better job, if they are underemployed. After all, the whole idea of a capital gains tax cut is to induce people who have capital to move it into new investments that will make America more productive and competitive and benefit all of us with greater economic opportunity and security. So said a wise Democrat, Senator Lieberman. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from Maryland [Mr. Cardin], a member of the Committee on Ways and Means. Mr. CARDIN. Mr. Chairman, I thank the gentleman for yielding me this time. I oppose this tax cut at this time. Yes, there are some good provisions in the tax cut proposal that help American families. I support some capital gains relief and AMT relief, but there are some very bad things in this bill as well, including the neutral cost recovery system, the raid on the Medicare trust fund, and the relief tilted toward the wealthiest Americans. But the fatal flaw in the tax bill before us is that we must make deficit reduction our first priority. Whatever tax cut we pass, we have to borrow money in order to give the taxes back to our constituents, and that borrowing of additional money will cost our constituents more money. The Republican bill that is before us will cost the American taxpayer an additional $17.7 billion in debt service over the next 5 years in order to pay for the $188 billion of tax relief. The net impact on the deficit will be an increase in the national debt of $206 billion over the next 5 years as a result of the bill that is before us. So let us look at the results during the first 100 days. If you take a look at the specific spending cuts that have been passed in the House so far and what is in the bill before us, if we assume that the welfare reform bill will pass the Senate without change, which is very unlikely, if we assume that the rescission bill will stay at $12 billion net savings, and that will not change, and that will hold during the entire 5 years, if you assume that the other provisions in this bill will be enacted, and if you take the specific tax cuts that are proposed in this bill, you find that what we are doing is increasing the deficit over this period of time. The spending cuts which are in blue are far less than the tax cuts. Let me just give you 2 illustrative years. In 1998 the tax cut will cost the Treasury $35.6 billion, the spending cuts $29.2 billion, a net increase in the debt of $6.4 billion. But go to the year 2002. See what happens when you get a little bit further out, because of the way the tax provisions are worded. The tax cut will cost $87.7 billion, the spending cuts are $51.5 billion, for a net, a net increase in the deficit in the year 2002 at $36.2 billion. We have a major deficit problem. CBO has projected the deficit by the blue columns that you see here; it is scheduled to increase if we do not take action on deficit reduction. If we pass just the bills that have been passed so far in this Congress, in this House, if that is what we do, we are going to find the deficit larger rather than smaller during this period of time. I do not think that is the record that we want to use. Many of these tax-cut provisions will get worse as time goes on. Let me just give you one example. The neutral cost recovery system that gives businesses extraordinary writeoffs raises $16 billion during the first 5 years, but costs $136 billion during the next 5 years when we do not score it, so we take advantage of revenue even though it is going to cost us billions of dollars and create a major problem for the future. The contingency will not work. It is a gimmick, a sham. There is no question about it. The tax cuts are permanent. The spending cuts are only 1 years. We can come back and change, and do not think we will not. Look at the history. Look at the Emergency Deficit and control Act of 1985; when that was passed, the deficit was $212 billion. In 1985 we were supposed to have a balanced budget. That was supposed to give us a balanced budget by the year 1991 with the sequestration, with enforcement. What was the deficit in 1991? It grew from $212 billion to $269 billion. We have the specific tax cuts. We do not have the specific spending cuts. That is why a bipartisan group today opposed this bill under the Concord coalition. That is why a group of business leaders told me yesterday to oppose this bill, do deficit reduction first. The best present we can give our children and the future generations and the businesses and the growth in our economy is to cut the deficit. Vote against this bill. Vote for deficit reduction. Vote for the future of our Nation. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. Here we go again. Figures do not lie, but--the gentleman talks about deficit reduction. There is no Democrat plan before this House for deficit reduction that I know of. This is the only one, and CBO scores us at $30 billion more in deficit reduction than the President's budget. I hope that the Democrats in their substitute and motion to recommit with instructions will show us a CBO score deficit reduction that is greater than is in this package. Mr. Chairman, I yield 2 minutes to the gentleman from Illinois [Mr. Crane], the ranking Republican of the Committee on Ways and Means. (Mr. CRANE asked and was given permission to revise and extend his remarks.) Mr. CRANE. Mr. Chairman, I want to express appreciation to my distinguished chairman and to our colleagues who are in the process of making real significant, historic strides in turning around the direction that this country has been on in virtually all of the 25 years I have been here. We had a tax cut in 1981, the biggest tax cut in our history at that time, approximately, about $200 billion, and the fact of the matter is that that was the last time we had a tax cut. We have done nothing in the intervening years but raise taxes, and paying taxes to the average middle-income family today accounts for 40 to 50 percent of their budget when you include taxes at all levels, Federal, State, and local. The tax burden has become oppressive. It has had a dampening effect [[Page H4217]] on the economy. I know of no economist who has ever attempted to advance the argument that by raising taxes you are promoting economic growth. Quite the contrary. You lower taxes and you promote growth. The other thing that was significant about that tax cut in 1981 is that it more than doubled revenues to the Treasury in the decade of the 1980's. That one single tax reduction more than doubled revenues. It was the fastest revenue increase in our national experience, and it had a very positive effect in other ways, too, which created almost 20 million new jobs. We have an opportunity here though to address more than just tax relief. it is the question of distribution of taxes. According to the Joint Committee on Taxation, if you look at income brackets after the tax cut, those people in the highest income brackets will be paying a marginally larger component part of the total tax burden, and those people in the lowest income brackets will be paying a marginally lower percentage of the total tax burden. I urge my colleagues to support this legislation and get this country moving in a forward direction. Mr. Chairman, the last time I was on the floor of the House of Representatives to debate and vote on a substantial tax cut for the American taxpayer was in 1981. Since that time, Congress has raised taxes more times than I care to remember. In 1993, President Clinton and a Democrat Congress topped all the previous tax bills by enacting the single largest tax increase in the history of the world--literally. According to the Joint Committee on Taxation, the 1993 tax bill robbed the American taxpayers of a total of $240 billion over a 5-year period. Not surprising, not one Republican in either the House or the Senate voted for Clinton's tax bill. For the American taxpayer, the 1993 tax bill may have been the last straw. And thanks to the American voter, the make-up of Congress was radically altered in the 1994 elections. For the first time in 40 years, the Republicans gained control of the House of Representatives. Republicans campaigned on the Contract With America and promised to change business as usual. We have kept our promises and we certainly have changed this House of Representatives. One of the key components of the contract is to give back to the American taxpayers some of their hard-earned dollars that Democratic Congresses have taken from them over the years. The bill we have before us today would cut taxes by a total of $190 billion over 5 years. Some have called this excessive. In fact, it is rather modest, particularly when one considers that the $190 billion figure falls $50 billion short of cutting the amount of taxes raised in the 1993 tax bill alone--to say nothing of all the other tax increases we have seen in the last 12 years. Unfortunately, my colleagues need to be reminded of an important point--tax dollars do not, by right, belong to our Government. Some of my colleagues in this House seem to think that tax dollars are owned by Congress. Let me remind my colleagues that tax dollars are owned by hardworking taxpayers, and Congress has a responsibility to ensure that any money it takes from the taxpayers is spent wisely. Unfortunately, we cannot say that Congress has spent tax dollars wisely over the last 40 years. Indeed, Congress has squandered billions upon billions of dollars. In my view, the only way to force the Federal Government to become efficient, to force it to return to the essentials, and to force it to eliminate the excesses that exist, is to restrict the flow of tax dollars to Congress--it is time to turn off the spigot. Only then will we be able to force Congress to live within its means. Only then will we be able to force Congress to stop spending money and stop mortgaging the future of our children. what the bill does If you listened to the opponents of this bill you'd think we were increasing taxes. Of course, what this bill does is substantially reduce taxes for both individuals and businesses. The opponents of this bill have been screaming in righteous indignation over even the thought of reducing taxes. When you look at the actual contents of this tax legislation you begin to wonder where the opponents of this tax bill are coming from. This bill does a great many good and necessary things for the overburdened individual and business taxpayers. First of all, this bill helps American families. I have seen estimates that indicate that 40 to 50 percent of the typical American family budget goes toward paying taxes--Federal, State, and local. Specifically, 25 percent of the family budget goes toward paying Federal taxes. That is absolutely outrageous and it is no wonder that families are getting sick and tired of the tax burden they are shouldering, particularly when they see how their money is being spent by Congress. Families have been hit hard over the last few decades by taxes. The exemption amount for dependents, had it been indexed for inflation from the date it was created, should be worth over $8,000 today, instead of the $2,450 allowed in 1994. This bill attempts to modestly help families by providing a $500 per child credit. In addition, the bill creates the American Dream savings accounts which will provide families the opportunity to create an IRA with tax free withdrawals for retirement, education expenses, medical expenses, and first time home purchases. The legislation provides a credit for adoption expenses and reduces the marriage penalty. As a long time proponent of all of these efforts, and as the lead sponsor of the American Dream Restoration Act which contained nearly all of these three proposals, I can assure my colleagues I feel strongly about this portion of the bill. All these things are long overdue and will help families considerably. The bill helps seniors as well. While Democrats have often tried to portray themselves as the protectors of senior citizens, in reality you will find that Democrat tax policies have hit senior citizens very hard. Our seniors have worked hard all their lives and they have paid taxes all their lives. Many live on fixed incomes and can ill-afford the continual tax hikes that have been heaped upon them by an arrogant Congress these past 40 years. Seniors deserve a break. This legislation offers them some hope. The bill repeals the increase in income taxes on Social Security benefits which President Clinton had pushed for in the 1993 tax bill. In addition, the legislation raises the amount seniors can earn before their Social Security benefits are reduced. This is referred to as the Social Security Earnings Limitation issue. Both of these measures will put more money in the pockets of seniors. In addition, the bill provides for a tax credit to taxpayers who provide custodial care of certain elderly family members staying in the taxpayer's home. Finally, the bill gives the American business community a break. Although it is fundamental economics, I believe some of my colleagues need to be reminded of some basic tenets of the marketplace: First, businesses create jobs, and second, without employers you do not have employees. Anything we can do to ease the burden on business community, increase their ability to compete, and encourage investments in new business ventures will help create new jobs in this country. The best way out of poverty is opportunity--a job. This legislation reduces the tax burden on American businesses by eliminating the excessive, complicated, and inefficient section of the Internal Revenue Code referred to as the alternative minimum tax. Scrapping this insane system will go a long way toward putting American businesses on a competitive footing with businesses overseas. In addition, we reduce the rate on capital gains and index capital assets for inflation. I could write a book about the importance of this provision of the bill. I have been advocating reducing the rate on capital gains for years, and I have seen the benefits of doing so based on past experience. By reducing the capital gains rate we will not only encourage more capital to be invested but we also encourage capital to move freely. This will result in job creation. Moreover, the increased number of transactions will actually mean more revenue to the Treasury. In short, this bill will create long term dynamic economic growth that will benefit all Americans. the class warfare debate In the debate over this legislation, there are those in Congress who wish to divide our country and its people. These people wish to create class antagonism, and choose demagoguery over logic and reason. These people want to engage in class warfare. These are the social engineers of our society who still don't understand that socialism died of natural causes. These people think they have the perfect formula for deciding what the proper tax burden ought to be for various income groups. They believe that it is Government's responsibility to redistribute income. They apparently do not understand some of the basic concepts upon which this country was founded--freedom, opportunity, hard work, etc. These people argue that the tax bill before us today caters to the rich--that it does not properly distribute the tax burden. Let me present some hard facts for these social engineers. According to the Tax Foundation, in 1982, the top 1 percent of income earners paid 19 percent of the taxes. In 1992, this group paid 27.4 percent of the taxes. In 1982, the top 10 percent of income earners paid 48.6 percent of the taxes, while in 1992, that figure rose to 57.5 percent. For both 1982 and 1992 the top 50 percent of taxpayers paid over 90 percent of the taxes. All this was before the 1993 tax bill which was specifically designed to take $114 billion from high-income individuals. Isn't this progressive enough? In fact, the tax bill we have before us today does nothing to change these percentages. Indeed, figures from the Joint Committee on Taxation [[Page H4218]] actually indicate that the top 1 percent and top 10 percent will pay a slightly higher proportion of the total tax burden after this bill is passed than they would if it were not passed. That ought to make the social engineers happy and they ought not be complaining. Of course my point is that all this talk of tax/income distribution tables and class warfare is foolishness. This bill gives money back to the taxpayers. It does not discriminate. It is designed to encourage savings and investment. It is about reducing the size of Government. conclusion Mr. Chairman, I could speak on this subject for a long time. However, let me simply say that this legislation is a most critical part of our Contract With America. Yes, we have brought this legislation to the floor of the House as we promised. But let us do even better than that. Let us pass this legislation with the goal of enacting into law real tax relief before the year is over. Mr. GIBBONS. Mr. Chairman, I yield 6 minutes to the gentleman from Washington [Mr. McDermott], a member of the Committee on Ways and Means. (Mr. McDERMOTT asked and was given permission to revise and extend his remarks.) Mr. McDERMOTT. Mr. Chairman, although both sides of the aisle strongly disagree on the merits of this bill, I think both parties will agree that in the last few days we have seen a truckload of statistics, charts, graphs, and surveys arguing for or against this tax cut plan. However, there is one thing that both sides agree upon--that the Republican tax cut plan will increase the deficit by $189 billion. Worse still, the Republican majority is proposing that we pay for over half of this deficit increase with an I.O.U. for $100 billion. Not real money, but a promise to pay in the future. No one knows what will happen in the future when the appropriators actually identify where the cuts will come from to achieve the $100 billion in savings. We have before us a so-called illustrative list of proposed cuts by Budget Committee Chairman Kasich. I am sure that I am not the only Member of Congress who is dubious at best, about anyone's ability to mandate spending cuts. If the Republican majority so firmly believes in this tax cut plan, why have they not come up with the specific spending cuts which they promised to identify for the American people? When President Clinton lowered spending caps 2 years ago, he did it to cut spending, not to give the money to the wealthy. We have been down this road before. In 1981, Congress passed President Reagan's tax cut bill without any accompanying spending cuts. As a result, the deficit soared and we face the budget mess we are in today. How many Members on the other side of the aisle remember that in 1981 the Reagan administration projected a balanced budget by 1984? Sound familiar? As Yogi Berra would say, ``It's deja-vu all over again.'' The Republican leadership is asking for a giant leap of faith. They are implicitly forcing Members to sign a second contract, not with the American people, but with the Republican leadership to vote for a budget reconciliation bill that has not been written and currently does not exist. Unlike the recent rescissions bill which spared projects in key Republican districts, everything--including Social Security--will have to be on the table to find the $100 billion in real cuts. In September you will be asked to vote for a budget reconciliation bill that drastically cuts programs and services in your district to pay for this wasteful tax cut bill. Many of you will have a lot of explaining to do. The agreement by the Republican leadership to link the tax cuts to a balanced budget plan is toothless and misleading. This phony agreement allows the leadership to get their tax bill enacted without having to commit to any guaranteed deficit reduction. There is absolutely nothing in the agreement that even remotely looks like an enforcement mechanism. This agreement makes it all too clear that it is more important to the Republican leadership to keep their political opiate--a promise of tax cuts--no matter how damaging the long-term consequences. The unfairness of who gets what of this bill are too numerous for me to recite. No matter how you analyze this bill, families with higher incomes receive a disproportionate share of the total benefits from these tax cuts. Chairman Archer knows this. That is why he is trying to change the focus of the debate from who receives the majority of the tax bill's benefits to what percentage of total income taxes are paid by the rich. Good try, Mr. Chairman, but it will not work. The real issue today is not the total proportion of income taxes the richest 10 percent of the population pay, but how much of a tax benefit high income families receive under the contract when compared to current tax law. Under the Republican bill, the rich get richer so it is logical that they will pay additional taxes on the extra money they earn. In contrast, a working class family that is not able to take advantage of all of the new tax breaks contained in this bill will simply not benefit nearly as much. The majority of these tax cuts will not benefit working class Americans. Under the Republican theory of ``trickle-down-economics,'' working families will not even get wet. For example, the richest 1 percent of Americans who make more than $267,000 will pay 18.23 percent of the tax burden under the contract, up 2 percent. But what Chairman Archer does not say is that those same families--the top 1 percent--will an average tax savings of more than $11,000 per year under the contract. In contrast, the majority of American taxpayers whose incomes are less than $44,434 will pay 16.1 percent of the tax burden under the contract, a drop of 0.2 percent. But, these families only see an average tax savings of $760 or less. That's right, the rich will get $11,000 in tax savings from this tax plan and the majority of Americans will get $760 or less in savings. Is this what the Speaker means when he talks about the ``opportunity society'' for the American people? By voting for this bill with its fairy tale $100 billion I.O.U., the Republican rank-and-file have given up any remaining shred of independence they so briefly entertained last week. They might as well give their voting cards to the Speaker and allow him to vote yes for them on passage of the budget reconciliation bill in September because after today they have no choice. In September the voters back home will be wondering why they sent you here. Did they want you to vote your conscience or to play the childish game of ``follow the leader?'' Unfortunately, we have so few Members who do the former and far too many who do the latter. {time} 1545 Mr. ARCHER. Mr. Chairman, I yield 3 minutes to the gentlewoman from Connecticut [Mrs. Johnson], the chairman of the Subcommittee on Oversight of the Committee on Ways and Means. Mrs. JOHNSON of Connecticut. I thank the chairman for yielding this time to me. Mr. Chairman, I rise in strong support of this bill. It is a fine and necessary tax bill. First, it will make our economy grow more rapidly. Small business, the creator of most jobs, will gain the right to expense $30,000 worth of equipment, We all know that any small business can expand more rapidly if it can afford the equipment to produce its product. Expensing has long been the No. 1 demand of the small-business community to accelerate the pace at which it will be able to grow. Estate tax law reform, home office deduction reinstatement, capital gains, all will help small business grow, prosper and create the jobs that America needs. Second, this bill helps big businesses that compete in a very tough international market where you can not pass on new costs through higher prices. In Connecticut, one company invested $4 billion over the last few years in capital investment in manufacturing facilities in this Nation and paid higher taxes than other manufacturers who invested not $1 because of the alternative minimum tax. That is wrong. That is bad policy. That is anti-jobs. That is anti a strong economy. [[Page H4219]] Not only will this bill help build economic strength and create jobs, but it also helps families and seniors, and it takes a giant step toward health care reform. Young families are carrying a heavier burden in our society today than they have at any time in our history. Surely we can agree to give them this $500 tax credit per child. Seniors have been disadvantaged by the tax hike we imposed on them a couple of years ago. This bill repeals that; it gives them tax relief, raises the earnings limit, so that those with low pensions can work without penalizing them $1 for every $3 they earn. It also creates the long-term care partnership that protects our seniors and families from the catastrophic costs of long-term care and home care. Is this a perfect bill? Absolutely not. I disagree with the Neutral Cost Recovery section. I want the $200,000 threshold lowered because I think it is better policy, fairer to all Americans. I think the solution in this bill to the underfunded Federal pension plans may not be the best, but there is no problem in this bill that is not entirely solvable as we move along. And this bill is critical. Mark my words, it is critical to achieving a balanced budget. If we are going to achieve a balanced budget by the year 2002, that spending plan must not only enable us to provide the services we need in those years but also the tax policy we need to create jobs, to create economic strength and to assure a fair distribution of burden among the families and the seniors of America. I urge your support of this bill. Mr. GIBBONS. Mr. Chairman, may I inquire as to how much time remains on each side? The CHAIRMAN. The gentleman from Texas [Mr. Archer] has 41 minutes remaining, and the gentleman from Florida [Mr. Gibbons] has 34\1/2\ minutes remaining. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentlewoman from Washington [Ms. Dunn], a respected member of the committee. Ms. DUNN of Washington. I thank the gentleman for yielding this time to me. Mr. Chairman, my State of Washington is home to thousands of entrepreneurs, and home to Microsoft--now an economic giant but once launched by a pair of young entrepreneurs. We also have timber--an industry that once was robust and thriving, but now is facing difficult times. For too long, our Nation's entrepreneurs have been penalized by the tax policy of the United States. Since 1986, when the business capital gains rate was raised to 35 percent, venture capital financing has dropped by two-thirds--from $4.19 to $1.41 billion--and the number of firms receiving venture capital financing has declined every single year. Mr. Chairman, we must correct the current tax policy regarding capital formation. It we don't, we will be directly responsible when the next Microsoft never takes it off the ground. Failure to act could bankrupt 1,200 small timber businesses, who typically own 50 acres and have an income of less than $50,000. For them, the capital gains reduction is a life or death matter. These small timber firms alone represent more than 5,000 jobs threatened by high capital gains rates. Mr. Chairman, cutting taxes on capital is about jobs. Support capital formation, support entrepreneurs, support family businesses, and support more jobs for Americans. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from Louisiana [Mr. McCrery]. Mr McCRERY. I thank the gentlewoman for yielding this time to me. Mr. Chairman, the quote that I am given by my constituents back home is that, ``The Federal Government is too big and spends too much.'' I do not hear, when I go back home, ``I pay too little in taxes.'' Every Republican and many Democrats who were here 2 years ago voted against the Clinton tax increase. If 2 years ago you were against the tax increase, why would you not be now for giving back to the people about two-thirds of that tax increase? Instead of trying to create class warfare in America, let us talk about what is or is not sound tax policy. For example, the House recently passed a historic welfare reform bill. Those who oppose welfare reform rightly asked the question: ``Where will the jobs come from for people who lose their welfare benefits?'' Well, this bill begins to address that question. There are a number provisions in this tax reduction bill which will encourage productive investment and creation of private sector jobs. Chief among them is the reduction in the capital gains tax rate. By reducing the tax on capital gains, we reduce the cost of capital; by reducing the cost of capital, we encourage investment, which increases productivity, which allows economic growth without inflation and which, most importantly for Americans who want to work, creates jobs. This tax cut bill gives us a chance to go back in time 2 years and do now what Americans wanted us to do then: Cut spending first. If you voted against the tax increase 2 years ago, then you ought to vote today to repeal most of it. Now is your chance to make right what you said was wrong 2 years ago. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from California [Mr. Herger]. Mr. HERGER. I thank the gentlewoman for yielding this time to me. Mr. Chairman, this legislation is a crucial step in a tidal wave of reform. Americans are fed up with paying more in taxes than they pay for their families' food, clothing and shelter Americans are fed up with seeing small business drown beneath a suffocating mass of Government regulation, and American taxpayers do not want the Federal Government to be the fastest growing employer in the Nation. Mr. Chairman, in 1993, the Democrats voted for the largest tax increase in history, and they continue to support high taxes today. This legislation pays for all of our tax cuts, and still lowers the deficit by $30 billion. In addition, this bill provides $189 billion in tax relief. Tax relief for families with children, tax relief for young couples beginning to save for their first home, and tax relief for senior citizens living on fixed incomes. Moreover, Mr. Chairman, much of this relief merely gives back to citizens that which was taken away by President Clinton in the 1993 tax bill. The average Californian will save $1,761 a year in taxes if this bill is enacted into law--76 percent of these benefits going to American families. Mr. Chairman, it is time that Washington realizes that income belongs to the worker, not to the Government. Congress must allow American workers to keep more of what they earn--we must also restore the free market incentive which drives our American dream, that same incentive which leads citizens to take risks and create jobs. Vote ``yes'' on this bill. Mr. GIBBONS. Mr. Chairman, I yield 1 minute to the gentleman from Colorado [Mr. Skaggs]. Mr. SKAGGS. Four trillion eight hundred seventy-three billion, four hundred eighty-one million dollars. That is the Federal debt. And we should be doing all we can to keep it from growing. The tax cut we are debating this afternoon will explode the debt by over a hundred billion dollars a year in the year 2005. Enormous tax relief for those who need it least. For hard-working middle class American families earning less than $75,000 a year, a pittance, 35 bucks a month. For a family over 200,000, a thousand dollars a month. Whose sense of equity is not offended by that? Two months ago we were debating a balanced budget amendment. There were pious and sober speeches about the deficit and its burden on our kids. The same people today are supporting this budget buster. Where has their resolve gone? Four trillion, eight hundred seventy-three billion, four hundred eighty-one million dollars. With a debt like that we should not even be considering this bill. Vote against a repeat of voodoo economics. Vote down this bill. Four-trillion, eight-hundred seventy-three billion, four-hundred eighty-one million dollars. That is the size of the United States Federal debt. It's shameful. And we should be doing all we can to keep it from growing. Which is why, as much as I would like to cut taxes, I believe this is the wrong time for any tax cut, and certainly this tax cut. But the tax cut we are debating today would, over the long term, increase that debt tremendously--by almost $100 billion a year in 2005. And it would do so by giving most of [[Page H4220]] the tax cuts to the wealthiest people in America. Speaker Gingrich calls this bill the ``crown jewel'' of his party's so- called Contract With America. I suppose that's an apt label, for this bill surely would finance nice trip to Cartier's for folks who are already in furs. The bill is, plain and simple, irresponsible. It will give enormous tax relief to those in our society who need it least. It will be paid for, however, at the expense of students and the elderly, and hard- working families for whom critical programs are decimated. And it will be at the expense of generations to come, who'll be burdened with an explosion of the deficit that's reminiscent of the early eighties. Most Americans, those who are struggling to get by, would get only a pittance in tax breaks, an average of $35 a month to families making under $75,000 a year. Whose sense of equity isn't offended when you compare that to almost $1,000 a month in tax relief for those making over $200,000 a year? This bill also gives huge tax benefits to big corporations and investors. Not enough attention has been paid to this aspect of the bill, probably because these tax breaks are written in a way that hides their true cost. Over the first 5 years, the big business tax breaks add up to $24 billion. In the next 5 years their cost balloons to $221 billion. Like an iceberg, nine-tenths of the cost hides under the surface of the 5-year budget horizon. What are these tax breaks? Things like the repeal of the corporate minimum tax. This wasn't an original part of the so-called contract, but was slipped in after a successful lobbying campaign by a coalition of large corporations. Never mind that the corporate minimum tax was supported by President Ronald Reagan. In 1985, the Reagan Treasury Department said, ``The prospect of high-income corporations paying little or no tax threatens public confidence in the tax system.'' And avoiding taxes they were. Prior to the corporate minimum tax, most of the country's largest and most profitable corporations often paid no Federal income taxes. How can anyone justify increasing the deficit, as this bill does, just to give the biggest corporation a pass on paying any taxes? You will hear from many people today that this bill is paid for. Do not believe them. It's paid for only over the first 5 years, when the tax breaks are expected to cost $188 billion. What they won't tell you is that this bill was very cleverly written so that the costs are held down over the first 5 years, but nearly triple after that. The Treasury Department estimates that the full 10-year cost of these tax cuts will be $630 billion. That full amount isn't paid for. Any way you count it, this bill add hundreds of billions of dollars to the Federal debt. We can't afford it. With the huge cost of this bill, and with the lion's share of benefits going to the rich, some of the more moderate members of the Republican party have been hesitant to support it. But there was no opportunity for Democrats to work with them to create a bipartisan, more balanced bill, because their leadership had to have it their way-- leadership apparently concerned more with the symbolism and show of the contract than with substance, a leadership that reveals the emptiness of its commitment to deficit reduction. But the moderate Republicans were right. They remember what happened the last time the Congress embraced an economic policy like this. It was 1981, and it was cal

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CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995
(House of Representatives - April 05, 1995)

Text of this article available as: TXT PDF [Pages H4213-H4317] CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995 The SPEAKER pro tempore. Pursuant to House Resolution 128 and rule XXIII, the Chair declares the House in the Committee of the Whole House on the State of the Union for the consideration of the bill, H.R. 1215. {time} 1501 in the committee of the whole Accordingly, the House resolved itself into the Committee of the Whole House on the State of the Union for the consideration of the bill (H.R. 1215) to amend the Internal Revenue Code of 1986 to strengthen the American family and create jobs, with Mr. Boehner in the chair. The Clerk read the title of this bill. The CHAIRMAN. Pursuant to the rule, the bill is considered as having been read the first time. Under the rule, the gentleman from Texas [Mr. Archer] and the gentleman from Florida [Mr. Gibbons] will each be recognized for 1 hour; the gentleman from Ohio [Mr. Kasich] and the gentleman from Minnesota [Mr. Sabo] will each be recognized for 30 minutes; and the gentleman from Virginia [Mr. Bliley] and the gentleman from Michigan [Mr. Dingell] will each be recognized for 30 minutes. The Chair recognizes the gentleman from Texas [Mr. Archer]. Mr. ARCHER. Mr. Chairman, I yield myself such time as I may consume. (Mr. ARCHER asked and was given permission to revise and extend his remarks.) Mr. ARCHER. Mr. Chairman, I am proud to support this bill which may be the most concrete sign yet that the voters have ended 40 years of Democrat control over the House of Representatives. Just 2 years ago, the Democrat Congress passed the largest tax hike in history. Under the Democrats, tax increases were the answer to every question. In this bill, we proudly bring to a close the era of raising taxes on the working people of this country. When this bill is passed, the tax raising legacy of President Clinton and his party will officially be over. It gives me great pleasure to look the American people in the eye and say, the days of tax and spend are over. The days of smaller Government and less taxes are at hand. This is a bill to cut taxes. The tax cuts are fully paid for, as we promised they would be--and--in addition--we reduce the deficit by $30 billion more than President Clinton's budget. The baseball strike is behind us, Mr. Chairman, and this bill is the first home run of the new season. We cut spending, we cut taxes, and we reduce the deficit. Washington, DC's old conventional wisdom said it couldn't be done. The mavins of the media were saying just this week, well, you don't have the votes, do you? Well, stand back because we're doing it--just as our Nation's Governors have done it in many States. We signed a contract with the American people pledging to reduce the size of Government and let the American people keep more of their hard- earned dollars. With this bill, we are again keeping our promise. Our tax cuts can be summarized in three words: family, children, jobs. Our tax relief package will help America's families, and it will create better jobs for those families to head off to every morning. Over the next 5 years, the Federal Government will spend $9 trillion. Our cuts--$189 billion--represent just 2 percent of Federal spending. The Federal Government is too big, it spends too much, and it's about time we cut it down to size. These tax cuts coupled with our pledge to get to a balanced budget will mean that when we get there, the government will be 2 percent smaller yet. In our bill, 76 percent of the tax cuts go directly to families and the other 24 percent go towards job creation. We bring tax relief to 42-million families through a $500 per child tax credit, 20-million people benefit from marriage penalty relief, and 7-million Americans will enjoy a new IRA known as the American Dream Savings Account. We provide adoption tax credits and we provide credits for those who take care of their ailing parents. We help 5 million seniors by repealing the punitive 85 percent Clinton tax hike on those who earn as little as $34,000; we increase the earnings limit so seniors--just like the energizer bunny--can go on working, and working and working--for as long as they choose; and we provide long-term care tax relief and accelerated death benefits. Finally, we provide fuel for the engine that pulls the train of economic growth by cutting capital gains taxes, repealing the alternative minimum tax, and by changing and improving expensing for small business. The Democrats, who never met a tax they didn't hike--will again go off the deep end complaining about tax cuts. I have a simple message for the Democrats. It is not your money. It is the taxpayers money. It does not belong to the Government. It belongs to the workers who earned it. When it comes to taxes, the two parties have very different views. Democrats think people work to support the Government. Republicans think people work to support themselves. Democrats think tax money is their money. Republicans think tax money belongs to the taxpayers. Democrats think tax rates should start at 100 percent and anything less than that is through the good graces of the Government. Republicans think tax rates should start at zero percent and anything more than that is through the good graces of the people. The bottom line is this. When the Democrats see someone in the middle of their American dream, they shake them, wake them, and tell them their dream can't come true. Their message is: If you make it in America we're gonna get 'ya. Republicans, on the other hand, want everyone to have an American dream come true. We want to open up opportunities; we want the magic of free enterprise to give every American the opportunity to become a rich American; and we want success to flourish in a million places, unhindered by the heavy hand of big government. Our tax cuts are fair, they are good for families, and they will create jobs. That is why they are the right thing to do and that is why I ask for the support of members today. The Contract With America promised lower taxes and less government. And that's the promise this bill keeps. Every one of you who votes for this bill today is confirming that you meant what you promised to the voters in September of last year. Mr. Chairman, I reserve the balance of my time. Mr. GIBBONS. Mr. Chairman, I yield myself 1\1/2\ minutes. Mr. Chairman, the gentleman from Texas [Mr. Archer] has just had a good time vilifying we Democrats. We believe there are times for tax cuts, we believe there are ways to tax-cut. We believe it is the wrong time to cut taxes now. This is the time to cut the deficit, not to cut taxes. Mr. Chairman, I was here in 1981 and I want to just reminisce for a second and recall some of the things that went on in 1981. In 1981, President Reagan was President, and his Office of Management and Budget Director Mr. Stockman appeared before the Committee on Ways and Means and he said this about the huge Reagan tax cut at that time: The combination of incentive-minded tax rate reductions and firm budget controls is expected to lead to a balanced budget by 1984. [[Page H4214]] Does anybody remember that that is when we began the huge deficit? Not to be outdone on that same day, President Reagan's Secretary of the Treasury Don Regan said this: If I know anything about the investing process at all, and I spent most of my adult career in that, I think we have a tremendous boom facing us as a result of what we are going to do today after we pass this tax bill. Can anybody remember what happened? We had the biggest depression right after that, after that tax bill passed, that we had had since the 1930's. It is deja vu all over again. The same rhetoric, the same people. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio [Mr. Portman], a member of the committee. Mr. PORTMAN. Mr. Chairman, after hearing the debate this afternoon, I think it is important that we back up a little bit and highlight the fundamental purpose of this tax relief bill. We are trying to strengthen the American family and yes, we are trying to encourage economic growth. That is what we are going to do with this legislation if we are able to enact it. As the gentleman from Texas [Mr. Archer] told us moments ago, this new Congress refuses to be stuck in the old thinking, refuses to cling to the tax-and-spend policies of the past. Instead, it is simple. We believe in helping families and we believe in growing the economy through economic growth, not in growing big government. History is a good guide here. In 1948, the average American family of 4 paid just 3 percent of their income to the Federal Government. My 1992 that Federal tax bill had increased to about 25 percent of family earnings. In 1993 Congress added to that by passing the largest tax increase in American history. Common sense tells us that Congress has gone in the wrong direction. I would hope we would all agree on both sides of the aisle that it is fundamentally important for us to have economic growth, increase jobs and increase our global competitiveness. That is what this bill is all about. By eliminating the marriage penalty, by providing tax credits, by expanding IRA's, it encourages savings, savings we desperately need in this country and it encourages economic growth. Because it lowers the capital gains tax, relieves corporations from the obsolete burden of the alternative minimum tax, and permits small businesses to take tax deductions for needed investment, it will create jobs. These and other changes will all enhance U.S. competitiveness, which we have to have in order to survive in the global economy of the 21st century. {time} 1515 For those who argue that cutting taxes is incompatible with our goal of balancing the budget, let me be emphatic: This bill is paid for, more than paid for, with spending cuts. I could not do it without this commitment. As the gentleman from Ohio, John Kasich, said earlier today, this is actually the first step toward a balanced budget. This is the down payment. Mr. GIBBONS. Mr. Chairman, I yield 4\1/2\ minutes to the gentleman from Michigan [Mr. Levin], a member of the Committee on Ways and Means. (Mr. LEVIN asked and was given permission to revise and extend his remarks.) Mr. LEVIN. Mr. Chairman, this bill is not mainstream. This bill is extreme. This bill will not respond to the dreams of Americans. It is going to turn out to be a nightmare if it were to pass. I was not here in 1981. I came here in 1983. I came here when Michigan was in a deep recession. I came here when unemployment rates were climbing to 17 percent in my State, 17 percent. There has been a lot of partisanship in this debate and a lot of rhetoric. I am not saying the 1981 act was the sole responsible cause of that recession. But it was part and parcel of it. And here we go again. Here we go again. The basic thrust of this proposal is you cut taxes mainly for the privileged few, not only, but mainly, and everybody is going to benefit, and the deficit will disappear. That was the assumption in 1981 and now it is the assumption in 1995. But what happened? The deficit skyrocketed. We know that, despite tax increases while I was here, that President Reagan supported to try to counteract what he did in 1981. The gentleman from Florida [Mr. Gibbons] was here then for that experience. The gentleman from Texas [Mr. Gonzalez] I see, and he was here, was forced to vote for tax increases because of the irresponsibility in 1981. Do not say it helped the middle class. This chart shows what happened to incomes from 1973 to 1993, and it was not only because of the mistakes of 1981, but that was an important part of it. What happened? This chart shows it all, it shows it all. Income stagnation for the middle class, income loss for low-income families, and who benefited? In those 20 years, 30 percent increases for the upper fifth percentile. I represent some of the upper fifth percentile. I also represent those who are in the fourth quintile, and the third, and second, and the first. And I am not going to vote to help those in the upper fifth at the sacrifice of those in the lower fifth period, period. It is bad, bad public policy. So why are you doing it? You say the taxes are paid for. The gentleman from Florida [Mr. Gibbons] referred to what was presented in 1982, and I read it. This is what was presented as the budget proposal for the fiscal year 1982. What will the surplus or the deficit be? Just 00.5. When you round it off, zero. That is what was said, and all your bill says is the same pledge has to be made. It is not even a fig leaf, it is nothing. So why are you doing it? I think in part because extremism does not learn by experience. Second, because the moderates in your party on the Republican side have essentially lost their way and there is no such left. This may satisfy the contract, but it sure changes America. This may be this crown jewel, rubies and sapphires for the privileged few. For the rest of America it is costume jewelry at best. Let us reject it. If we do not, I predict it will be dead on arrival in the U.S. Senate, but let us do our job here and vote no. Mr. ARCHER. Mr. Chairman, I yield myself 1 minute just to respond to the gentleman from Michigan. It is the same old story that we have heard. Figures do not lie, but, figures here can be so distorted. In 1981 there was a tax reduction. There were not the precise spending cuts that the gentleman from Ohio [Mr. Kasich] has insisted on and are in this bill. This will be precisely paid for, as confirmed by CBO figures. Not only that, but over and above the tax cuts it will reduce the deficit by $30 billion more than the Democrat President's budget proposal, by CBO numbers. So the gentleman just is not on track with his figures. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from California [Mr. Matsui], a member of the Committee on Ways and Means. Mr. MATSUI. Mr. Chairman, I thank the gentleman from Florida, the ranking member of the Ways and Means Committee, for yielding me this time. I think what both the gentleman from Florida and the gentleman from Michigan said was absolutely correct. I was here in 1981, and I would implore the Members of this House and this body to pick up the book by David Stockman, the Director of the Office of Management and Budget for President Reagan. David Stockman, when he left the Office of Management and Budget wrote a book called ``The Triumph of Politics,'' and he said in that book essentially that they knew that they would not achieve a balanced budget by 1984, 3 years after they passed this massive tax cut; and, you know, Ronald Reagan said we are going to have a tax cut, we are going to increase defense and cut spending and balance the budget in 36 months. That was smoke and mirrors, and everyone now admits it was smoke and mirrors, and we are playing the same smoke and mirrors game again. There is no way in 7 years we are going to achieve a balanced budget from a $350 billion annual deficit today and give tax cuts in excess of $188 billion, and that is what we are talking about, $188 billion over the next 5 years; and over the next 10 years, even with the Republicans' own actuarial studies, it will cost $640 billion over the next decade. There is no way you are going to be able to achieve that result [[Page H4215]] with these tax cuts and balance the Federal budget at the same time. The reason the Republicans feel comfortable and the reason this is probably going to pass today is they know the United States is not going to accept it because it is so extreme. Even Senator Packwood said this is nonsense, they are not going to accept this. And so they have nothing to worry about, they are playing a little figment of imagination on the American public, and they are going to be able to go back home and say they passed these wonderful tax cuts that they know will never become law. Let me tell my colleagues, talking about this being paid for, they have $188 billion over 5 years. We do not even pay for it over 5 years. One of the first things is they have $10.5 billion in spending cuts on pensions. They could not even pass pension reduction out of their committee. That is why that bill did not come to the floor. The committee that has jurisdiction over this issue could not get a majority vote to pass it out. So that is a figment. There is $10 billion that they should subtract; they are unwilling to do that. Then the $100 billion that they have of the $188, what happened there is the gentleman from Ohio [Mr. Kasich] the chairman of the Budget Committee, says he has got some illustrative cuts. Illustrative cuts. They are not in place yet. These are illustrative budget cuts he is talking about. We will not see those maybe until the fall and who knows, let us see how courageous they will be in the fall of this year when they are going to have to cut over the next decade 100 billion dollars' worth of spending. That is the issue. And you know this is not a middle-class tax cut. I tell you, this is unbelievable, to consider this a middle- class tax cut. We have Treasury Department numbers here. A family that makes between $30,000 and $50,000 a year, a family that makes between $30,000 and $50,000 a year under this proposal will get about a buck and one-half a day, about $560 a year. On the other hand, on the other hand, and listen to this, those that make over $200,000 a year, the middle class, will get $11,266 a year as a tax cut under this proposal. That is not a tax cut for working families, that is not a tax cut for middle-class families. And what is really frightening I think to the average citizen when they find this, if in fact this ever becomes law, is if we had huge deficits as a result of this misguided decision today, you will see interest rates go up, and what would you rather have, a $560 a year or buck-and-a-half a day tax break or would you rather have lower interest rates so you can buy a home or maybe your child can buy a home? That is where your savings is, but interest rates will go up. I guarantee interest rates will go up if this ever becomes law. But they know it will not become law. This is a little figment we are playing on the American public, but the reality is we should vote this down just to show we in this Congress, the House of Representatives have discipline, unlike what we are seeing on the other side of the aisle. I urge a ``no'' vote on this particular bill. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. There they go again, there they go again. Figures do not lie, but. Those were Treasury figures. They do not cite the Joint Committee figures that the congressional activities depend upon. The Treasury figures are so distorted that they are not credible. They were exposed as being noncredible in our committee when the Treasury witness was before us. Imputing rental incomes to somebody that owns their own home and saying that is income to you, this is ridiculous. These figures are just not credible. Mr. Chairman, I yield 2 minutes to the gentleman from Minnesota [Mr. Ramstad], a member of the committee. Mr. RAMSTAD. Mr. Chairman, I thank the distinguished chairman for yielding me this time. Mr. Chairman, for the first time in many American voters' memories politicians are keeping their promises. The new House majority promised tax relief, and we are keeping our promise. The new majority promised to pay for our tax cuts and lower the deficit, and we are keeping our promise. The new majority promised to create jobs. And we are keeping our promise. One leading economist told the Committee on Ways and Means that 1.74 million new jobs will be created over the next 5 years from the capital gains tax cut. Economist after economist told the Committee on Ways and Means why we should reduce the capital gains tax. As Allen Sinai put it, the capital gains tax reductions will ``stimulate economic activity, increase jobs, capital spending and capital formation, improve national savings, increase entrepreneurship and raise economic output.'' But, Mr. Chairman, even more impressive than all of these leading economists was the young 17-year-old in my district who came up to me recently after my remarks to his high school assembly. This young man, this young 17-year-old explained to me that he liked what I said about capital gains taxes. And I was a little bit more surprised, not used to this kind of a feedback from a 17-year-old high school student. I looked at this young man and I said, ``Do you mind if I ask you a question? Do you have any capital gains?'' He looked back at me and his eyes got about this big and he said, ``No, not now, Mr. Ramstad, but someday I hope to.'' Mr. Chairman, that is the kind of incentive we need to restore for all American taxpayers. Vote yes on H.R. 1327. Mr. GIBBONS. Mr. Chairman, I yield myself 30 seconds, and hope the gentleman will not leave the floor. I hope that young 17-year-old gets a capital gains tax cut, but he would be better off playing the lottery. Only 8 percent of the American taxpayers ever win anything on the capital gains tax cut. Mr. Chairman, I yield 3 minutes to the gentleman from Virginia [Mr. Payne], a member of the Committee on Ways and Means. Mr. PAYNE of Virginia. Well, Mr. Chairman, here we go again. Fifteen years after George Bush warned the Nation about voodoo economics, my friends on the other side of the aisle are at it again. They are trying to tell the American people that a 5-year, $188 billion tax cut is an important stop along the road to a balanced budget. This time the American people know better. They know, as I do, that this tax cut bill is fiscally and economically irresponsible. They know that you can't get something for nothing. The American people know their history. They saw the national debt climb from less than $1 trillion in 1980 to more than $4.7 trillion today. Americans know that tax cuts did not balance the budget in 1981. And they know that tax cuts will not balance the budget now. Our constituents understand what uncontrolled deficit spending means for the family budget. This year, the typical American family of four will spend $3,100 just to pay interest on the national debt. This is not their total tax bill. Nor is it their share of the total national debt. It is simply the amount of money they will spend to pay off the investors, many of whom are located overseas, who have purchased Treasury bills and other debt instruments of the U.S. Government. The best way to help American families is to cut the deficit and to bring down the crippling interest payments that our constituents have to pay each year. This is the tax cut the American people want. Mr. Chairman, just 2 months ago, Democrats and Republicans came together on this floor and made history when we passed a balanced budget amendment to the Constitution. We did so out of a shared belief that we cannot continue to saddle American families with a national debt that saps our productive capacity, stifles investment, and causes so much of our wealth to be used just to service the national debt. In that debate, we heard a lot of very sincere speeches about fiscal discipline, about the need to make tough choices, and about our shared obligation not to burden our children and grandchildren with an ever increasing national debt. So what happened? Here we are just 2 months later, and the tough choice that we are being asked to make is for a tax cut that will cost $188 billion over 5 years, and that will explode in cost after the year 2000. Mr. Chairman, this bill is not my idea of fiscal discipline. [[Page H4216]] It is not the kind of tough choice that a $4.7 trillion national debt cries out for. And it will do nothing to save our children and grandchildren from the crushing weight of the national debt. All this bill does is to repeat the age-old Washington mistake of borrowing from our children to pay for what seems popular right now. For the sake of deficit reduction, and for the sake of a stronger economic future for all Americans families, I urge my colleagues to reject this poorly timed, irresponsible legislation. {time} 1530 Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from New Jersey [Mr. Zimmer], a member of the committee. Mr. ZIMMER. Mr. Chairman, I thank the gentleman for yielding. It is a sad reality that the average American family is earning no more today than it earned 20 years ago. This reality has led to frustration, it has led to pessimism, it has led to anger among middle- income Americans who are beginning to wonder whether, for the first time in our history, their children will not have a better life than they have had. We Republicans are deeply concerned about the future of working Americans, but unlike the minority, we are willing to attack the cause of this problem. We understand that wages have stagnated in large part because we have a Tax Code that penalizes people who invest, people who save, people who take risks to create new jobs, good jobs. We tax capital gains at a rate that is higher than our competitors, and we tax capital gains that are attributable solely to inflation. Even though it is quite obvious that a capital gains tax cut will help working Americans increase their standard of living, most Democrats hate it, because they are afraid that somebody who is rich might also benefit. To them, I would like to quote a Democratic Senator, Joseph Lieberman, from Connecticut, who said: The argument of some Democrats against a cut in the capital gains tax--that the rich will benefit more than the rest of us--misses the point and is politically divisive. Lower- and middle-income people won't realize most of the tax savings for the obvious reason that they have less capital, but they could get something better: a job, if they have none, or a better job, if they are underemployed. After all, the whole idea of a capital gains tax cut is to induce people who have capital to move it into new investments that will make America more productive and competitive and benefit all of us with greater economic opportunity and security. So said a wise Democrat, Senator Lieberman. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from Maryland [Mr. Cardin], a member of the Committee on Ways and Means. Mr. CARDIN. Mr. Chairman, I thank the gentleman for yielding me this time. I oppose this tax cut at this time. Yes, there are some good provisions in the tax cut proposal that help American families. I support some capital gains relief and AMT relief, but there are some very bad things in this bill as well, including the neutral cost recovery system, the raid on the Medicare trust fund, and the relief tilted toward the wealthiest Americans. But the fatal flaw in the tax bill before us is that we must make deficit reduction our first priority. Whatever tax cut we pass, we have to borrow money in order to give the taxes back to our constituents, and that borrowing of additional money will cost our constituents more money. The Republican bill that is before us will cost the American taxpayer an additional $17.7 billion in debt service over the next 5 years in order to pay for the $188 billion of tax relief. The net impact on the deficit will be an increase in the national debt of $206 billion over the next 5 years as a result of the bill that is before us. So let us look at the results during the first 100 days. If you take a look at the specific spending cuts that have been passed in the House so far and what is in the bill before us, if we assume that the welfare reform bill will pass the Senate without change, which is very unlikely, if we assume that the rescission bill will stay at $12 billion net savings, and that will not change, and that will hold during the entire 5 years, if you assume that the other provisions in this bill will be enacted, and if you take the specific tax cuts that are proposed in this bill, you find that what we are doing is increasing the deficit over this period of time. The spending cuts which are in blue are far less than the tax cuts. Let me just give you 2 illustrative years. In 1998 the tax cut will cost the Treasury $35.6 billion, the spending cuts $29.2 billion, a net increase in the debt of $6.4 billion. But go to the year 2002. See what happens when you get a little bit further out, because of the way the tax provisions are worded. The tax cut will cost $87.7 billion, the spending cuts are $51.5 billion, for a net, a net increase in the deficit in the year 2002 at $36.2 billion. We have a major deficit problem. CBO has projected the deficit by the blue columns that you see here; it is scheduled to increase if we do not take action on deficit reduction. If we pass just the bills that have been passed so far in this Congress, in this House, if that is what we do, we are going to find the deficit larger rather than smaller during this period of time. I do not think that is the record that we want to use. Many of these tax-cut provisions will get worse as time goes on. Let me just give you one example. The neutral cost recovery system that gives businesses extraordinary writeoffs raises $16 billion during the first 5 years, but costs $136 billion during the next 5 years when we do not score it, so we take advantage of revenue even though it is going to cost us billions of dollars and create a major problem for the future. The contingency will not work. It is a gimmick, a sham. There is no question about it. The tax cuts are permanent. The spending cuts are only 1 years. We can come back and change, and do not think we will not. Look at the history. Look at the Emergency Deficit and control Act of 1985; when that was passed, the deficit was $212 billion. In 1985 we were supposed to have a balanced budget. That was supposed to give us a balanced budget by the year 1991 with the sequestration, with enforcement. What was the deficit in 1991? It grew from $212 billion to $269 billion. We have the specific tax cuts. We do not have the specific spending cuts. That is why a bipartisan group today opposed this bill under the Concord coalition. That is why a group of business leaders told me yesterday to oppose this bill, do deficit reduction first. The best present we can give our children and the future generations and the businesses and the growth in our economy is to cut the deficit. Vote against this bill. Vote for deficit reduction. Vote for the future of our Nation. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. Here we go again. Figures do not lie, but--the gentleman talks about deficit reduction. There is no Democrat plan before this House for deficit reduction that I know of. This is the only one, and CBO scores us at $30 billion more in deficit reduction than the President's budget. I hope that the Democrats in their substitute and motion to recommit with instructions will show us a CBO score deficit reduction that is greater than is in this package. Mr. Chairman, I yield 2 minutes to the gentleman from Illinois [Mr. Crane], the ranking Republican of the Committee on Ways and Means. (Mr. CRANE asked and was given permission to revise and extend his remarks.) Mr. CRANE. Mr. Chairman, I want to express appreciation to my distinguished chairman and to our colleagues who are in the process of making real significant, historic strides in turning around the direction that this country has been on in virtually all of the 25 years I have been here. We had a tax cut in 1981, the biggest tax cut in our history at that time, approximately, about $200 billion, and the fact of the matter is that that was the last time we had a tax cut. We have done nothing in the intervening years but raise taxes, and paying taxes to the average middle-income family today accounts for 40 to 50 percent of their budget when you include taxes at all levels, Federal, State, and local. The tax burden has become oppressive. It has had a dampening effect [[Page H4217]] on the economy. I know of no economist who has ever attempted to advance the argument that by raising taxes you are promoting economic growth. Quite the contrary. You lower taxes and you promote growth. The other thing that was significant about that tax cut in 1981 is that it more than doubled revenues to the Treasury in the decade of the 1980's. That one single tax reduction more than doubled revenues. It was the fastest revenue increase in our national experience, and it had a very positive effect in other ways, too, which created almost 20 million new jobs. We have an opportunity here though to address more than just tax relief. it is the question of distribution of taxes. According to the Joint Committee on Taxation, if you look at income brackets after the tax cut, those people in the highest income brackets will be paying a marginally larger component part of the total tax burden, and those people in the lowest income brackets will be paying a marginally lower percentage of the total tax burden. I urge my colleagues to support this legislation and get this country moving in a forward direction. Mr. Chairman, the last time I was on the floor of the House of Representatives to debate and vote on a substantial tax cut for the American taxpayer was in 1981. Since that time, Congress has raised taxes more times than I care to remember. In 1993, President Clinton and a Democrat Congress topped all the previous tax bills by enacting the single largest tax increase in the history of the world--literally. According to the Joint Committee on Taxation, the 1993 tax bill robbed the American taxpayers of a total of $240 billion over a 5-year period. Not surprising, not one Republican in either the House or the Senate voted for Clinton's tax bill. For the American taxpayer, the 1993 tax bill may have been the last straw. And thanks to the American voter, the make-up of Congress was radically altered in the 1994 elections. For the first time in 40 years, the Republicans gained control of the House of Representatives. Republicans campaigned on the Contract With America and promised to change business as usual. We have kept our promises and we certainly have changed this House of Representatives. One of the key components of the contract is to give back to the American taxpayers some of their hard-earned dollars that Democratic Congresses have taken from them over the years. The bill we have before us today would cut taxes by a total of $190 billion over 5 years. Some have called this excessive. In fact, it is rather modest, particularly when one considers that the $190 billion figure falls $50 billion short of cutting the amount of taxes raised in the 1993 tax bill alone--to say nothing of all the other tax increases we have seen in the last 12 years. Unfortunately, my colleagues need to be reminded of an important point--tax dollars do not, by right, belong to our Government. Some of my colleagues in this House seem to think that tax dollars are owned by Congress. Let me remind my colleagues that tax dollars are owned by hardworking taxpayers, and Congress has a responsibility to ensure that any money it takes from the taxpayers is spent wisely. Unfortunately, we cannot say that Congress has spent tax dollars wisely over the last 40 years. Indeed, Congress has squandered billions upon billions of dollars. In my view, the only way to force the Federal Government to become efficient, to force it to return to the essentials, and to force it to eliminate the excesses that exist, is to restrict the flow of tax dollars to Congress--it is time to turn off the spigot. Only then will we be able to force Congress to live within its means. Only then will we be able to force Congress to stop spending money and stop mortgaging the future of our children. what the bill does If you listened to the opponents of this bill you'd think we were increasing taxes. Of course, what this bill does is substantially reduce taxes for both individuals and businesses. The opponents of this bill have been screaming in righteous indignation over even the thought of reducing taxes. When you look at the actual contents of this tax legislation you begin to wonder where the opponents of this tax bill are coming from. This bill does a great many good and necessary things for the overburdened individual and business taxpayers. First of all, this bill helps American families. I have seen estimates that indicate that 40 to 50 percent of the typical American family budget goes toward paying taxes--Federal, State, and local. Specifically, 25 percent of the family budget goes toward paying Federal taxes. That is absolutely outrageous and it is no wonder that families are getting sick and tired of the tax burden they are shouldering, particularly when they see how their money is being spent by Congress. Families have been hit hard over the last few decades by taxes. The exemption amount for dependents, had it been indexed for inflation from the date it was created, should be worth over $8,000 today, instead of the $2,450 allowed in 1994. This bill attempts to modestly help families by providing a $500 per child credit. In addition, the bill creates the American Dream savings accounts which will provide families the opportunity to create an IRA with tax free withdrawals for retirement, education expenses, medical expenses, and first time home purchases. The legislation provides a credit for adoption expenses and reduces the marriage penalty. As a long time proponent of all of these efforts, and as the lead sponsor of the American Dream Restoration Act which contained nearly all of these three proposals, I can assure my colleagues I feel strongly about this portion of the bill. All these things are long overdue and will help families considerably. The bill helps seniors as well. While Democrats have often tried to portray themselves as the protectors of senior citizens, in reality you will find that Democrat tax policies have hit senior citizens very hard. Our seniors have worked hard all their lives and they have paid taxes all their lives. Many live on fixed incomes and can ill-afford the continual tax hikes that have been heaped upon them by an arrogant Congress these past 40 years. Seniors deserve a break. This legislation offers them some hope. The bill repeals the increase in income taxes on Social Security benefits which President Clinton had pushed for in the 1993 tax bill. In addition, the legislation raises the amount seniors can earn before their Social Security benefits are reduced. This is referred to as the Social Security Earnings Limitation issue. Both of these measures will put more money in the pockets of seniors. In addition, the bill provides for a tax credit to taxpayers who provide custodial care of certain elderly family members staying in the taxpayer's home. Finally, the bill gives the American business community a break. Although it is fundamental economics, I believe some of my colleagues need to be reminded of some basic tenets of the marketplace: First, businesses create jobs, and second, without employers you do not have employees. Anything we can do to ease the burden on business community, increase their ability to compete, and encourage investments in new business ventures will help create new jobs in this country. The best way out of poverty is opportunity--a job. This legislation reduces the tax burden on American businesses by eliminating the excessive, complicated, and inefficient section of the Internal Revenue Code referred to as the alternative minimum tax. Scrapping this insane system will go a long way toward putting American businesses on a competitive footing with businesses overseas. In addition, we reduce the rate on capital gains and index capital assets for inflation. I could write a book about the importance of this provision of the bill. I have been advocating reducing the rate on capital gains for years, and I have seen the benefits of doing so based on past experience. By reducing the capital gains rate we will not only encourage more capital to be invested but we also encourage capital to move freely. This will result in job creation. Moreover, the increased number of transactions will actually mean more revenue to the Treasury. In short, this bill will create long term dynamic economic growth that will benefit all Americans. the class warfare debate In the debate over this legislation, there are those in Congress who wish to divide our country and its people. These people wish to create class antagonism, and choose demagoguery over logic and reason. These people want to engage in class warfare. These are the social engineers of our society who still don't understand that socialism died of natural causes. These people think they have the perfect formula for deciding what the proper tax burden ought to be for various income groups. They believe that it is Government's responsibility to redistribute income. They apparently do not understand some of the basic concepts upon which this country was founded--freedom, opportunity, hard work, etc. These people argue that the tax bill before us today caters to the rich--that it does not properly distribute the tax burden. Let me present some hard facts for these social engineers. According to the Tax Foundation, in 1982, the top 1 percent of income earners paid 19 percent of the taxes. In 1992, this group paid 27.4 percent of the taxes. In 1982, the top 10 percent of income earners paid 48.6 percent of the taxes, while in 1992, that figure rose to 57.5 percent. For both 1982 and 1992 the top 50 percent of taxpayers paid over 90 percent of the taxes. All this was before the 1993 tax bill which was specifically designed to take $114 billion from high-income individuals. Isn't this progressive enough? In fact, the tax bill we have before us today does nothing to change these percentages. Indeed, figures from the Joint Committee on Taxation [[Page H4218]] actually indicate that the top 1 percent and top 10 percent will pay a slightly higher proportion of the total tax burden after this bill is passed than they would if it were not passed. That ought to make the social engineers happy and they ought not be complaining. Of course my point is that all this talk of tax/income distribution tables and class warfare is foolishness. This bill gives money back to the taxpayers. It does not discriminate. It is designed to encourage savings and investment. It is about reducing the size of Government. conclusion Mr. Chairman, I could speak on this subject for a long time. However, let me simply say that this legislation is a most critical part of our Contract With America. Yes, we have brought this legislation to the floor of the House as we promised. But let us do even better than that. Let us pass this legislation with the goal of enacting into law real tax relief before the year is over. Mr. GIBBONS. Mr. Chairman, I yield 6 minutes to the gentleman from Washington [Mr. McDermott], a member of the Committee on Ways and Means. (Mr. McDERMOTT asked and was given permission to revise and extend his remarks.) Mr. McDERMOTT. Mr. Chairman, although both sides of the aisle strongly disagree on the merits of this bill, I think both parties will agree that in the last few days we have seen a truckload of statistics, charts, graphs, and surveys arguing for or against this tax cut plan. However, there is one thing that both sides agree upon--that the Republican tax cut plan will increase the deficit by $189 billion. Worse still, the Republican majority is proposing that we pay for over half of this deficit increase with an I.O.U. for $100 billion. Not real money, but a promise to pay in the future. No one knows what will happen in the future when the appropriators actually identify where the cuts will come from to achieve the $100 billion in savings. We have before us a so-called illustrative list of proposed cuts by Budget Committee Chairman Kasich. I am sure that I am not the only Member of Congress who is dubious at best, about anyone's ability to mandate spending cuts. If the Republican majority so firmly believes in this tax cut plan, why have they not come up with the specific spending cuts which they promised to identify for the American people? When President Clinton lowered spending caps 2 years ago, he did it to cut spending, not to give the money to the wealthy. We have been down this road before. In 1981, Congress passed President Reagan's tax cut bill without any accompanying spending cuts. As a result, the deficit soared and we face the budget mess we are in today. How many Members on the other side of the aisle remember that in 1981 the Reagan administration projected a balanced budget by 1984? Sound familiar? As Yogi Berra would say, ``It's deja-vu all over again.'' The Republican leadership is asking for a giant leap of faith. They are implicitly forcing Members to sign a second contract, not with the American people, but with the Republican leadership to vote for a budget reconciliation bill that has not been written and currently does not exist. Unlike the recent rescissions bill which spared projects in key Republican districts, everything--including Social Security--will have to be on the table to find the $100 billion in real cuts. In September you will be asked to vote for a budget reconciliation bill that drastically cuts programs and services in your district to pay for this wasteful tax cut bill. Many of you will have a lot of explaining to do. The agreement by the Republican leadership to link the tax cuts to a balanced budget plan is toothless and misleading. This phony agreement allows the leadership to get their tax bill enacted without having to commit to any guaranteed deficit reduction. There is absolutely nothing in the agreement that even remotely looks like an enforcement mechanism. This agreement makes it all too clear that it is more important to the Republican leadership to keep their political opiate--a promise of tax cuts--no matter how damaging the long-term consequences. The unfairness of who gets what of this bill are too numerous for me to recite. No matter how you analyze this bill, families with higher incomes receive a disproportionate share of the total benefits from these tax cuts. Chairman Archer knows this. That is why he is trying to change the focus of the debate from who receives the majority of the tax bill's benefits to what percentage of total income taxes are paid by the rich. Good try, Mr. Chairman, but it will not work. The real issue today is not the total proportion of income taxes the richest 10 percent of the population pay, but how much of a tax benefit high income families receive under the contract when compared to current tax law. Under the Republican bill, the rich get richer so it is logical that they will pay additional taxes on the extra money they earn. In contrast, a working class family that is not able to take advantage of all of the new tax breaks contained in this bill will simply not benefit nearly as much. The majority of these tax cuts will not benefit working class Americans. Under the Republican theory of ``trickle-down-economics,'' working families will not even get wet. For example, the richest 1 percent of Americans who make more than $267,000 will pay 18.23 percent of the tax burden under the contract, up 2 percent. But what Chairman Archer does not say is that those same families--the top 1 percent--will an average tax savings of more than $11,000 per year under the contract. In contrast, the majority of American taxpayers whose incomes are less than $44,434 will pay 16.1 percent of the tax burden under the contract, a drop of 0.2 percent. But, these families only see an average tax savings of $760 or less. That's right, the rich will get $11,000 in tax savings from this tax plan and the majority of Americans will get $760 or less in savings. Is this what the Speaker means when he talks about the ``opportunity society'' for the American people? By voting for this bill with its fairy tale $100 billion I.O.U., the Republican rank-and-file have given up any remaining shred of independence they so briefly entertained last week. They might as well give their voting cards to the Speaker and allow him to vote yes for them on passage of the budget reconciliation bill in September because after today they have no choice. In September the voters back home will be wondering why they sent you here. Did they want you to vote your conscience or to play the childish game of ``follow the leader?'' Unfortunately, we have so few Members who do the former and far too many who do the latter. {time} 1545 Mr. ARCHER. Mr. Chairman, I yield 3 minutes to the gentlewoman from Connecticut [Mrs. Johnson], the chairman of the Subcommittee on Oversight of the Committee on Ways and Means. Mrs. JOHNSON of Connecticut. I thank the chairman for yielding this time to me. Mr. Chairman, I rise in strong support of this bill. It is a fine and necessary tax bill. First, it will make our economy grow more rapidly. Small business, the creator of most jobs, will gain the right to expense $30,000 worth of equipment, We all know that any small business can expand more rapidly if it can afford the equipment to produce its product. Expensing has long been the No. 1 demand of the small-business community to accelerate the pace at which it will be able to grow. Estate tax law reform, home office deduction reinstatement, capital gains, all will help small business grow, prosper and create the jobs that America needs. Second, this bill helps big businesses that compete in a very tough international market where you can not pass on new costs through higher prices. In Connecticut, one company invested $4 billion over the last few years in capital investment in manufacturing facilities in this Nation and paid higher taxes than other manufacturers who invested not $1 because of the alternative minimum tax. That is wrong. That is bad policy. That is anti-jobs. That is anti a strong economy. [[Page H4219]] Not only will this bill help build economic strength and create jobs, but it also helps families and seniors, and it takes a giant step toward health care reform. Young families are carrying a heavier burden in our society today than they have at any time in our history. Surely we can agree to give them this $500 tax credit per child. Seniors have been disadvantaged by the tax hike we imposed on them a couple of years ago. This bill repeals that; it gives them tax relief, raises the earnings limit, so that those with low pensions can work without penalizing them $1 for every $3 they earn. It also creates the long-term care partnership that protects our seniors and families from the catastrophic costs of long-term care and home care. Is this a perfect bill? Absolutely not. I disagree with the Neutral Cost Recovery section. I want the $200,000 threshold lowered because I think it is better policy, fairer to all Americans. I think the solution in this bill to the underfunded Federal pension plans may not be the best, but there is no problem in this bill that is not entirely solvable as we move along. And this bill is critical. Mark my words, it is critical to achieving a balanced budget. If we are going to achieve a balanced budget by the year 2002, that spending plan must not only enable us to provide the services we need in those years but also the tax policy we need to create jobs, to create economic strength and to assure a fair distribution of burden among the families and the seniors of America. I urge your support of this bill. Mr. GIBBONS. Mr. Chairman, may I inquire as to how much time remains on each side? The CHAIRMAN. The gentleman from Texas [Mr. Archer] has 41 minutes remaining, and the gentleman from Florida [Mr. Gibbons] has 34\1/2\ minutes remaining. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentlewoman from Washington [Ms. Dunn], a respected member of the committee. Ms. DUNN of Washington. I thank the gentleman for yielding this time to me. Mr. Chairman, my State of Washington is home to thousands of entrepreneurs, and home to Microsoft--now an economic giant but once launched by a pair of young entrepreneurs. We also have timber--an industry that once was robust and thriving, but now is facing difficult times. For too long, our Nation's entrepreneurs have been penalized by the tax policy of the United States. Since 1986, when the business capital gains rate was raised to 35 percent, venture capital financing has dropped by two-thirds--from $4.19 to $1.41 billion--and the number of firms receiving venture capital financing has declined every single year. Mr. Chairman, we must correct the current tax policy regarding capital formation. It we don't, we will be directly responsible when the next Microsoft never takes it off the ground. Failure to act could bankrupt 1,200 small timber businesses, who typically own 50 acres and have an income of less than $50,000. For them, the capital gains reduction is a life or death matter. These small timber firms alone represent more than 5,000 jobs threatened by high capital gains rates. Mr. Chairman, cutting taxes on capital is about jobs. Support capital formation, support entrepreneurs, support family businesses, and support more jobs for Americans. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from Louisiana [Mr. McCrery]. Mr McCRERY. I thank the gentlewoman for yielding this time to me. Mr. Chairman, the quote that I am given by my constituents back home is that, ``The Federal Government is too big and spends too much.'' I do not hear, when I go back home, ``I pay too little in taxes.'' Every Republican and many Democrats who were here 2 years ago voted against the Clinton tax increase. If 2 years ago you were against the tax increase, why would you not be now for giving back to the people about two-thirds of that tax increase? Instead of trying to create class warfare in America, let us talk about what is or is not sound tax policy. For example, the House recently passed a historic welfare reform bill. Those who oppose welfare reform rightly asked the question: ``Where will the jobs come from for people who lose their welfare benefits?'' Well, this bill begins to address that question. There are a number provisions in this tax reduction bill which will encourage productive investment and creation of private sector jobs. Chief among them is the reduction in the capital gains tax rate. By reducing the tax on capital gains, we reduce the cost of capital; by reducing the cost of capital, we encourage investment, which increases productivity, which allows economic growth without inflation and which, most importantly for Americans who want to work, creates jobs. This tax cut bill gives us a chance to go back in time 2 years and do now what Americans wanted us to do then: Cut spending first. If you voted against the tax increase 2 years ago, then you ought to vote today to repeal most of it. Now is your chance to make right what you said was wrong 2 years ago. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from California [Mr. Herger]. Mr. HERGER. I thank the gentlewoman for yielding this time to me. Mr. Chairman, this legislation is a crucial step in a tidal wave of reform. Americans are fed up with paying more in taxes than they pay for their families' food, clothing and shelter Americans are fed up with seeing small business drown beneath a suffocating mass of Government regulation, and American taxpayers do not want the Federal Government to be the fastest growing employer in the Nation. Mr. Chairman, in 1993, the Democrats voted for the largest tax increase in history, and they continue to support high taxes today. This legislation pays for all of our tax cuts, and still lowers the deficit by $30 billion. In addition, this bill provides $189 billion in tax relief. Tax relief for families with children, tax relief for young couples beginning to save for their first home, and tax relief for senior citizens living on fixed incomes. Moreover, Mr. Chairman, much of this relief merely gives back to citizens that which was taken away by President Clinton in the 1993 tax bill. The average Californian will save $1,761 a year in taxes if this bill is enacted into law--76 percent of these benefits going to American families. Mr. Chairman, it is time that Washington realizes that income belongs to the worker, not to the Government. Congress must allow American workers to keep more of what they earn--we must also restore the free market incentive which drives our American dream, that same incentive which leads citizens to take risks and create jobs. Vote ``yes'' on this bill. Mr. GIBBONS. Mr. Chairman, I yield 1 minute to the gentleman from Colorado [Mr. Skaggs]. Mr. SKAGGS. Four trillion eight hundred seventy-three billion, four hundred eighty-one million dollars. That is the Federal debt. And we should be doing all we can to keep it from growing. The tax cut we are debating this afternoon will explode the debt by over a hundred billion dollars a year in the year 2005. Enormous tax relief for those who need it least. For hard-working middle class American families earning less than $75,000 a year, a pittance, 35 bucks a month. For a family over 200,000, a thousand dollars a month. Whose sense of equity is not offended by that? Two months ago we were debating a balanced budget amendment. There were pious and sober speeches about the deficit and its burden on our kids. The same people today are supporting this budget buster. Where has their resolve gone? Four trillion, eight hundred seventy-three billion, four hundred eighty-one million dollars. With a debt like that we should not even be considering this bill. Vote against a repeat of voodoo economics. Vote down this bill. Four-trillion, eight-hundred seventy-three billion, four-hundred eighty-one million dollars. That is the size of the United States Federal debt. It's shameful. And we should be doing all we can to keep it from growing. Which is why, as much as I would like to cut taxes, I believe this is the wrong time for any tax cut, and certainly this tax cut. But the tax cut we are debating today would, over the long term, increase that debt tremendously--by almost $100 billion a year in 2005. And it would do so by giving most of [[Page H4220]] the tax cuts to the wealthiest people in America. Speaker Gingrich calls this bill the ``crown jewel'' of his party's so- called Contract With America. I suppose that's an apt label, for this bill surely would finance nice trip to Cartier's for folks who are already in furs. The bill is, plain and simple, irresponsible. It will give enormous tax relief to those in our society who need it least. It will be paid for, however, at the expense of students and the elderly, and hard- working families for whom critical programs are decimated. And it will be at the expense of generations to come, who'll be burdened with an explosion of the deficit that's reminiscent of the early eighties. Most Americans, those who are struggling to get by, would get only a pittance in tax breaks, an average of $35 a month to families making under $75,000 a year. Whose sense of equity isn't offended when you compare that to almost $1,000 a month in tax relief for those making over $200,000 a year? This bill also gives huge tax benefits to big corporations and investors. Not enough attention has been paid to this aspect of the bill, probably because these tax breaks are written in a way that hides their true cost. Over the first 5 years, the big business tax breaks add up to $24 billion. In the next 5 years their cost balloons to $221 billion. Like an iceberg, nine-tenths of the cost hides under the surface of the 5-year budget horizon. What are these tax breaks? Things like the repeal of the corporate minimum tax. This wasn't an original part of the so-called contract, but was slipped in after a successful lobbying campaign by a coalition of large corporations. Never mind that the corporate minimum tax was supported by President Ronald Reagan. In 1985, the Reagan Treasury Department said, ``The prospect of high-income corporations paying little or no tax threatens public confidence in the tax system.'' And avoiding taxes they were. Prior to the corporate minimum tax, most of the country's largest and most profitable corporations often paid no Federal income taxes. How can anyone justify increasing the deficit, as this bill does, just to give the biggest corporation a pass on paying any taxes? You will hear from many people today that this bill is paid for. Do not believe them. It's paid for only over the first 5 years, when the tax breaks are expected to cost $188 billion. What they won't tell you is that this bill was very cleverly written so that the costs are held down over the first 5 years, but nearly triple after that. The Treasury Department estimates that the full 10-year cost of these tax cuts will be $630 billion. That full amount isn't paid for. Any way you count it, this bill add hundreds of billions of dollars to the Federal debt. We can't afford it. With the huge cost of this bill, and with the lion's share of benefits going to the rich, some of the more moderate members of the Republican party have been hesitant to support it. But there was no opportunity for Democrats to work with them to create a bipartisan, more balanced bill, because their leadership had to have it their way-- leadership apparently concerned more with the symbolism and show of the contract than with substance, a leadership that reveals the emptiness of its commitment to deficit reduction. But the moderate Republicans were right. They remember what happened the last time the Congress embraced an economic policy like this. It was 1981, and it was called ``Reag

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CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995
(House of Representatives - April 05, 1995)

Text of this article available as: TXT PDF [Pages H4213-H4317] CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995 The SPEAKER pro tempore. Pursuant to House Resolution 128 and rule XXIII, the Chair declares the House in the Committee of the Whole House on the State of the Union for the consideration of the bill, H.R. 1215. {time} 1501 in the committee of the whole Accordingly, the House resolved itself into the Committee of the Whole House on the State of the Union for the consideration of the bill (H.R. 1215) to amend the Internal Revenue Code of 1986 to strengthen the American family and create jobs, with Mr. Boehner in the chair. The Clerk read the title of this bill. The CHAIRMAN. Pursuant to the rule, the bill is considered as having been read the first time. Under the rule, the gentleman from Texas [Mr. Archer] and the gentleman from Florida [Mr. Gibbons] will each be recognized for 1 hour; the gentleman from Ohio [Mr. Kasich] and the gentleman from Minnesota [Mr. Sabo] will each be recognized for 30 minutes; and the gentleman from Virginia [Mr. Bliley] and the gentleman from Michigan [Mr. Dingell] will each be recognized for 30 minutes. The Chair recognizes the gentleman from Texas [Mr. Archer]. Mr. ARCHER. Mr. Chairman, I yield myself such time as I may consume. (Mr. ARCHER asked and was given permission to revise and extend his remarks.) Mr. ARCHER. Mr. Chairman, I am proud to support this bill which may be the most concrete sign yet that the voters have ended 40 years of Democrat control over the House of Representatives. Just 2 years ago, the Democrat Congress passed the largest tax hike in history. Under the Democrats, tax increases were the answer to every question. In this bill, we proudly bring to a close the era of raising taxes on the working people of this country. When this bill is passed, the tax raising legacy of President Clinton and his party will officially be over. It gives me great pleasure to look the American people in the eye and say, the days of tax and spend are over. The days of smaller Government and less taxes are at hand. This is a bill to cut taxes. The tax cuts are fully paid for, as we promised they would be--and--in addition--we reduce the deficit by $30 billion more than President Clinton's budget. The baseball strike is behind us, Mr. Chairman, and this bill is the first home run of the new season. We cut spending, we cut taxes, and we reduce the deficit. Washington, DC's old conventional wisdom said it couldn't be done. The mavins of the media were saying just this week, well, you don't have the votes, do you? Well, stand back because we're doing it--just as our Nation's Governors have done it in many States. We signed a contract with the American people pledging to reduce the size of Government and let the American people keep more of their hard- earned dollars. With this bill, we are again keeping our promise. Our tax cuts can be summarized in three words: family, children, jobs. Our tax relief package will help America's families, and it will create better jobs for those families to head off to every morning. Over the next 5 years, the Federal Government will spend $9 trillion. Our cuts--$189 billion--represent just 2 percent of Federal spending. The Federal Government is too big, it spends too much, and it's about time we cut it down to size. These tax cuts coupled with our pledge to get to a balanced budget will mean that when we get there, the government will be 2 percent smaller yet. In our bill, 76 percent of the tax cuts go directly to families and the other 24 percent go towards job creation. We bring tax relief to 42-million families through a $500 per child tax credit, 20-million people benefit from marriage penalty relief, and 7-million Americans will enjoy a new IRA known as the American Dream Savings Account. We provide adoption tax credits and we provide credits for those who take care of their ailing parents. We help 5 million seniors by repealing the punitive 85 percent Clinton tax hike on those who earn as little as $34,000; we increase the earnings limit so seniors--just like the energizer bunny--can go on working, and working and working--for as long as they choose; and we provide long-term care tax relief and accelerated death benefits. Finally, we provide fuel for the engine that pulls the train of economic growth by cutting capital gains taxes, repealing the alternative minimum tax, and by changing and improving expensing for small business. The Democrats, who never met a tax they didn't hike--will again go off the deep end complaining about tax cuts. I have a simple message for the Democrats. It is not your money. It is the taxpayers money. It does not belong to the Government. It belongs to the workers who earned it. When it comes to taxes, the two parties have very different views. Democrats think people work to support the Government. Republicans think people work to support themselves. Democrats think tax money is their money. Republicans think tax money belongs to the taxpayers. Democrats think tax rates should start at 100 percent and anything less than that is through the good graces of the Government. Republicans think tax rates should start at zero percent and anything more than that is through the good graces of the people. The bottom line is this. When the Democrats see someone in the middle of their American dream, they shake them, wake them, and tell them their dream can't come true. Their message is: If you make it in America we're gonna get 'ya. Republicans, on the other hand, want everyone to have an American dream come true. We want to open up opportunities; we want the magic of free enterprise to give every American the opportunity to become a rich American; and we want success to flourish in a million places, unhindered by the heavy hand of big government. Our tax cuts are fair, they are good for families, and they will create jobs. That is why they are the right thing to do and that is why I ask for the support of members today. The Contract With America promised lower taxes and less government. And that's the promise this bill keeps. Every one of you who votes for this bill today is confirming that you meant what you promised to the voters in September of last year. Mr. Chairman, I reserve the balance of my time. Mr. GIBBONS. Mr. Chairman, I yield myself 1\1/2\ minutes. Mr. Chairman, the gentleman from Texas [Mr. Archer] has just had a good time vilifying we Democrats. We believe there are times for tax cuts, we believe there are ways to tax-cut. We believe it is the wrong time to cut taxes now. This is the time to cut the deficit, not to cut taxes. Mr. Chairman, I was here in 1981 and I want to just reminisce for a second and recall some of the things that went on in 1981. In 1981, President Reagan was President, and his Office of Management and Budget Director Mr. Stockman appeared before the Committee on Ways and Means and he said this about the huge Reagan tax cut at that time: The combination of incentive-minded tax rate reductions and firm budget controls is expected to lead to a balanced budget by 1984. [[Page H4214]] Does anybody remember that that is when we began the huge deficit? Not to be outdone on that same day, President Reagan's Secretary of the Treasury Don Regan said this: If I know anything about the investing process at all, and I spent most of my adult career in that, I think we have a tremendous boom facing us as a result of what we are going to do today after we pass this tax bill. Can anybody remember what happened? We had the biggest depression right after that, after that tax bill passed, that we had had since the 1930's. It is deja vu all over again. The same rhetoric, the same people. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio [Mr. Portman], a member of the committee. Mr. PORTMAN. Mr. Chairman, after hearing the debate this afternoon, I think it is important that we back up a little bit and highlight the fundamental purpose of this tax relief bill. We are trying to strengthen the American family and yes, we are trying to encourage economic growth. That is what we are going to do with this legislation if we are able to enact it. As the gentleman from Texas [Mr. Archer] told us moments ago, this new Congress refuses to be stuck in the old thinking, refuses to cling to the tax-and-spend policies of the past. Instead, it is simple. We believe in helping families and we believe in growing the economy through economic growth, not in growing big government. History is a good guide here. In 1948, the average American family of 4 paid just 3 percent of their income to the Federal Government. My 1992 that Federal tax bill had increased to about 25 percent of family earnings. In 1993 Congress added to that by passing the largest tax increase in American history. Common sense tells us that Congress has gone in the wrong direction. I would hope we would all agree on both sides of the aisle that it is fundamentally important for us to have economic growth, increase jobs and increase our global competitiveness. That is what this bill is all about. By eliminating the marriage penalty, by providing tax credits, by expanding IRA's, it encourages savings, savings we desperately need in this country and it encourages economic growth. Because it lowers the capital gains tax, relieves corporations from the obsolete burden of the alternative minimum tax, and permits small businesses to take tax deductions for needed investment, it will create jobs. These and other changes will all enhance U.S. competitiveness, which we have to have in order to survive in the global economy of the 21st century. {time} 1515 For those who argue that cutting taxes is incompatible with our goal of balancing the budget, let me be emphatic: This bill is paid for, more than paid for, with spending cuts. I could not do it without this commitment. As the gentleman from Ohio, John Kasich, said earlier today, this is actually the first step toward a balanced budget. This is the down payment. Mr. GIBBONS. Mr. Chairman, I yield 4\1/2\ minutes to the gentleman from Michigan [Mr. Levin], a member of the Committee on Ways and Means. (Mr. LEVIN asked and was given permission to revise and extend his remarks.) Mr. LEVIN. Mr. Chairman, this bill is not mainstream. This bill is extreme. This bill will not respond to the dreams of Americans. It is going to turn out to be a nightmare if it were to pass. I was not here in 1981. I came here in 1983. I came here when Michigan was in a deep recession. I came here when unemployment rates were climbing to 17 percent in my State, 17 percent. There has been a lot of partisanship in this debate and a lot of rhetoric. I am not saying the 1981 act was the sole responsible cause of that recession. But it was part and parcel of it. And here we go again. Here we go again. The basic thrust of this proposal is you cut taxes mainly for the privileged few, not only, but mainly, and everybody is going to benefit, and the deficit will disappear. That was the assumption in 1981 and now it is the assumption in 1995. But what happened? The deficit skyrocketed. We know that, despite tax increases while I was here, that President Reagan supported to try to counteract what he did in 1981. The gentleman from Florida [Mr. Gibbons] was here then for that experience. The gentleman from Texas [Mr. Gonzalez] I see, and he was here, was forced to vote for tax increases because of the irresponsibility in 1981. Do not say it helped the middle class. This chart shows what happened to incomes from 1973 to 1993, and it was not only because of the mistakes of 1981, but that was an important part of it. What happened? This chart shows it all, it shows it all. Income stagnation for the middle class, income loss for low-income families, and who benefited? In those 20 years, 30 percent increases for the upper fifth percentile. I represent some of the upper fifth percentile. I also represent those who are in the fourth quintile, and the third, and second, and the first. And I am not going to vote to help those in the upper fifth at the sacrifice of those in the lower fifth period, period. It is bad, bad public policy. So why are you doing it? You say the taxes are paid for. The gentleman from Florida [Mr. Gibbons] referred to what was presented in 1982, and I read it. This is what was presented as the budget proposal for the fiscal year 1982. What will the surplus or the deficit be? Just 00.5. When you round it off, zero. That is what was said, and all your bill says is the same pledge has to be made. It is not even a fig leaf, it is nothing. So why are you doing it? I think in part because extremism does not learn by experience. Second, because the moderates in your party on the Republican side have essentially lost their way and there is no such left. This may satisfy the contract, but it sure changes America. This may be this crown jewel, rubies and sapphires for the privileged few. For the rest of America it is costume jewelry at best. Let us reject it. If we do not, I predict it will be dead on arrival in the U.S. Senate, but let us do our job here and vote no. Mr. ARCHER. Mr. Chairman, I yield myself 1 minute just to respond to the gentleman from Michigan. It is the same old story that we have heard. Figures do not lie, but, figures here can be so distorted. In 1981 there was a tax reduction. There were not the precise spending cuts that the gentleman from Ohio [Mr. Kasich] has insisted on and are in this bill. This will be precisely paid for, as confirmed by CBO figures. Not only that, but over and above the tax cuts it will reduce the deficit by $30 billion more than the Democrat President's budget proposal, by CBO numbers. So the gentleman just is not on track with his figures. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from California [Mr. Matsui], a member of the Committee on Ways and Means. Mr. MATSUI. Mr. Chairman, I thank the gentleman from Florida, the ranking member of the Ways and Means Committee, for yielding me this time. I think what both the gentleman from Florida and the gentleman from Michigan said was absolutely correct. I was here in 1981, and I would implore the Members of this House and this body to pick up the book by David Stockman, the Director of the Office of Management and Budget for President Reagan. David Stockman, when he left the Office of Management and Budget wrote a book called ``The Triumph of Politics,'' and he said in that book essentially that they knew that they would not achieve a balanced budget by 1984, 3 years after they passed this massive tax cut; and, you know, Ronald Reagan said we are going to have a tax cut, we are going to increase defense and cut spending and balance the budget in 36 months. That was smoke and mirrors, and everyone now admits it was smoke and mirrors, and we are playing the same smoke and mirrors game again. There is no way in 7 years we are going to achieve a balanced budget from a $350 billion annual deficit today and give tax cuts in excess of $188 billion, and that is what we are talking about, $188 billion over the next 5 years; and over the next 10 years, even with the Republicans' own actuarial studies, it will cost $640 billion over the next decade. There is no way you are going to be able to achieve that result [[Page H4215]] with these tax cuts and balance the Federal budget at the same time. The reason the Republicans feel comfortable and the reason this is probably going to pass today is they know the United States is not going to accept it because it is so extreme. Even Senator Packwood said this is nonsense, they are not going to accept this. And so they have nothing to worry about, they are playing a little figment of imagination on the American public, and they are going to be able to go back home and say they passed these wonderful tax cuts that they know will never become law. Let me tell my colleagues, talking about this being paid for, they have $188 billion over 5 years. We do not even pay for it over 5 years. One of the first things is they have $10.5 billion in spending cuts on pensions. They could not even pass pension reduction out of their committee. That is why that bill did not come to the floor. The committee that has jurisdiction over this issue could not get a majority vote to pass it out. So that is a figment. There is $10 billion that they should subtract; they are unwilling to do that. Then the $100 billion that they have of the $188, what happened there is the gentleman from Ohio [Mr. Kasich] the chairman of the Budget Committee, says he has got some illustrative cuts. Illustrative cuts. They are not in place yet. These are illustrative budget cuts he is talking about. We will not see those maybe until the fall and who knows, let us see how courageous they will be in the fall of this year when they are going to have to cut over the next decade 100 billion dollars' worth of spending. That is the issue. And you know this is not a middle-class tax cut. I tell you, this is unbelievable, to consider this a middle- class tax cut. We have Treasury Department numbers here. A family that makes between $30,000 and $50,000 a year, a family that makes between $30,000 and $50,000 a year under this proposal will get about a buck and one-half a day, about $560 a year. On the other hand, on the other hand, and listen to this, those that make over $200,000 a year, the middle class, will get $11,266 a year as a tax cut under this proposal. That is not a tax cut for working families, that is not a tax cut for middle-class families. And what is really frightening I think to the average citizen when they find this, if in fact this ever becomes law, is if we had huge deficits as a result of this misguided decision today, you will see interest rates go up, and what would you rather have, a $560 a year or buck-and-a-half a day tax break or would you rather have lower interest rates so you can buy a home or maybe your child can buy a home? That is where your savings is, but interest rates will go up. I guarantee interest rates will go up if this ever becomes law. But they know it will not become law. This is a little figment we are playing on the American public, but the reality is we should vote this down just to show we in this Congress, the House of Representatives have discipline, unlike what we are seeing on the other side of the aisle. I urge a ``no'' vote on this particular bill. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. There they go again, there they go again. Figures do not lie, but. Those were Treasury figures. They do not cite the Joint Committee figures that the congressional activities depend upon. The Treasury figures are so distorted that they are not credible. They were exposed as being noncredible in our committee when the Treasury witness was before us. Imputing rental incomes to somebody that owns their own home and saying that is income to you, this is ridiculous. These figures are just not credible. Mr. Chairman, I yield 2 minutes to the gentleman from Minnesota [Mr. Ramstad], a member of the committee. Mr. RAMSTAD. Mr. Chairman, I thank the distinguished chairman for yielding me this time. Mr. Chairman, for the first time in many American voters' memories politicians are keeping their promises. The new House majority promised tax relief, and we are keeping our promise. The new majority promised to pay for our tax cuts and lower the deficit, and we are keeping our promise. The new majority promised to create jobs. And we are keeping our promise. One leading economist told the Committee on Ways and Means that 1.74 million new jobs will be created over the next 5 years from the capital gains tax cut. Economist after economist told the Committee on Ways and Means why we should reduce the capital gains tax. As Allen Sinai put it, the capital gains tax reductions will ``stimulate economic activity, increase jobs, capital spending and capital formation, improve national savings, increase entrepreneurship and raise economic output.'' But, Mr. Chairman, even more impressive than all of these leading economists was the young 17-year-old in my district who came up to me recently after my remarks to his high school assembly. This young man, this young 17-year-old explained to me that he liked what I said about capital gains taxes. And I was a little bit more surprised, not used to this kind of a feedback from a 17-year-old high school student. I looked at this young man and I said, ``Do you mind if I ask you a question? Do you have any capital gains?'' He looked back at me and his eyes got about this big and he said, ``No, not now, Mr. Ramstad, but someday I hope to.'' Mr. Chairman, that is the kind of incentive we need to restore for all American taxpayers. Vote yes on H.R. 1327. Mr. GIBBONS. Mr. Chairman, I yield myself 30 seconds, and hope the gentleman will not leave the floor. I hope that young 17-year-old gets a capital gains tax cut, but he would be better off playing the lottery. Only 8 percent of the American taxpayers ever win anything on the capital gains tax cut. Mr. Chairman, I yield 3 minutes to the gentleman from Virginia [Mr. Payne], a member of the Committee on Ways and Means. Mr. PAYNE of Virginia. Well, Mr. Chairman, here we go again. Fifteen years after George Bush warned the Nation about voodoo economics, my friends on the other side of the aisle are at it again. They are trying to tell the American people that a 5-year, $188 billion tax cut is an important stop along the road to a balanced budget. This time the American people know better. They know, as I do, that this tax cut bill is fiscally and economically irresponsible. They know that you can't get something for nothing. The American people know their history. They saw the national debt climb from less than $1 trillion in 1980 to more than $4.7 trillion today. Americans know that tax cuts did not balance the budget in 1981. And they know that tax cuts will not balance the budget now. Our constituents understand what uncontrolled deficit spending means for the family budget. This year, the typical American family of four will spend $3,100 just to pay interest on the national debt. This is not their total tax bill. Nor is it their share of the total national debt. It is simply the amount of money they will spend to pay off the investors, many of whom are located overseas, who have purchased Treasury bills and other debt instruments of the U.S. Government. The best way to help American families is to cut the deficit and to bring down the crippling interest payments that our constituents have to pay each year. This is the tax cut the American people want. Mr. Chairman, just 2 months ago, Democrats and Republicans came together on this floor and made history when we passed a balanced budget amendment to the Constitution. We did so out of a shared belief that we cannot continue to saddle American families with a national debt that saps our productive capacity, stifles investment, and causes so much of our wealth to be used just to service the national debt. In that debate, we heard a lot of very sincere speeches about fiscal discipline, about the need to make tough choices, and about our shared obligation not to burden our children and grandchildren with an ever increasing national debt. So what happened? Here we are just 2 months later, and the tough choice that we are being asked to make is for a tax cut that will cost $188 billion over 5 years, and that will explode in cost after the year 2000. Mr. Chairman, this bill is not my idea of fiscal discipline. [[Page H4216]] It is not the kind of tough choice that a $4.7 trillion national debt cries out for. And it will do nothing to save our children and grandchildren from the crushing weight of the national debt. All this bill does is to repeat the age-old Washington mistake of borrowing from our children to pay for what seems popular right now. For the sake of deficit reduction, and for the sake of a stronger economic future for all Americans families, I urge my colleagues to reject this poorly timed, irresponsible legislation. {time} 1530 Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentleman from New Jersey [Mr. Zimmer], a member of the committee. Mr. ZIMMER. Mr. Chairman, I thank the gentleman for yielding. It is a sad reality that the average American family is earning no more today than it earned 20 years ago. This reality has led to frustration, it has led to pessimism, it has led to anger among middle- income Americans who are beginning to wonder whether, for the first time in our history, their children will not have a better life than they have had. We Republicans are deeply concerned about the future of working Americans, but unlike the minority, we are willing to attack the cause of this problem. We understand that wages have stagnated in large part because we have a Tax Code that penalizes people who invest, people who save, people who take risks to create new jobs, good jobs. We tax capital gains at a rate that is higher than our competitors, and we tax capital gains that are attributable solely to inflation. Even though it is quite obvious that a capital gains tax cut will help working Americans increase their standard of living, most Democrats hate it, because they are afraid that somebody who is rich might also benefit. To them, I would like to quote a Democratic Senator, Joseph Lieberman, from Connecticut, who said: The argument of some Democrats against a cut in the capital gains tax--that the rich will benefit more than the rest of us--misses the point and is politically divisive. Lower- and middle-income people won't realize most of the tax savings for the obvious reason that they have less capital, but they could get something better: a job, if they have none, or a better job, if they are underemployed. After all, the whole idea of a capital gains tax cut is to induce people who have capital to move it into new investments that will make America more productive and competitive and benefit all of us with greater economic opportunity and security. So said a wise Democrat, Senator Lieberman. Mr. GIBBONS. Mr. Chairman, I yield 5 minutes to the gentleman from Maryland [Mr. Cardin], a member of the Committee on Ways and Means. Mr. CARDIN. Mr. Chairman, I thank the gentleman for yielding me this time. I oppose this tax cut at this time. Yes, there are some good provisions in the tax cut proposal that help American families. I support some capital gains relief and AMT relief, but there are some very bad things in this bill as well, including the neutral cost recovery system, the raid on the Medicare trust fund, and the relief tilted toward the wealthiest Americans. But the fatal flaw in the tax bill before us is that we must make deficit reduction our first priority. Whatever tax cut we pass, we have to borrow money in order to give the taxes back to our constituents, and that borrowing of additional money will cost our constituents more money. The Republican bill that is before us will cost the American taxpayer an additional $17.7 billion in debt service over the next 5 years in order to pay for the $188 billion of tax relief. The net impact on the deficit will be an increase in the national debt of $206 billion over the next 5 years as a result of the bill that is before us. So let us look at the results during the first 100 days. If you take a look at the specific spending cuts that have been passed in the House so far and what is in the bill before us, if we assume that the welfare reform bill will pass the Senate without change, which is very unlikely, if we assume that the rescission bill will stay at $12 billion net savings, and that will not change, and that will hold during the entire 5 years, if you assume that the other provisions in this bill will be enacted, and if you take the specific tax cuts that are proposed in this bill, you find that what we are doing is increasing the deficit over this period of time. The spending cuts which are in blue are far less than the tax cuts. Let me just give you 2 illustrative years. In 1998 the tax cut will cost the Treasury $35.6 billion, the spending cuts $29.2 billion, a net increase in the debt of $6.4 billion. But go to the year 2002. See what happens when you get a little bit further out, because of the way the tax provisions are worded. The tax cut will cost $87.7 billion, the spending cuts are $51.5 billion, for a net, a net increase in the deficit in the year 2002 at $36.2 billion. We have a major deficit problem. CBO has projected the deficit by the blue columns that you see here; it is scheduled to increase if we do not take action on deficit reduction. If we pass just the bills that have been passed so far in this Congress, in this House, if that is what we do, we are going to find the deficit larger rather than smaller during this period of time. I do not think that is the record that we want to use. Many of these tax-cut provisions will get worse as time goes on. Let me just give you one example. The neutral cost recovery system that gives businesses extraordinary writeoffs raises $16 billion during the first 5 years, but costs $136 billion during the next 5 years when we do not score it, so we take advantage of revenue even though it is going to cost us billions of dollars and create a major problem for the future. The contingency will not work. It is a gimmick, a sham. There is no question about it. The tax cuts are permanent. The spending cuts are only 1 years. We can come back and change, and do not think we will not. Look at the history. Look at the Emergency Deficit and control Act of 1985; when that was passed, the deficit was $212 billion. In 1985 we were supposed to have a balanced budget. That was supposed to give us a balanced budget by the year 1991 with the sequestration, with enforcement. What was the deficit in 1991? It grew from $212 billion to $269 billion. We have the specific tax cuts. We do not have the specific spending cuts. That is why a bipartisan group today opposed this bill under the Concord coalition. That is why a group of business leaders told me yesterday to oppose this bill, do deficit reduction first. The best present we can give our children and the future generations and the businesses and the growth in our economy is to cut the deficit. Vote against this bill. Vote for deficit reduction. Vote for the future of our Nation. Mr. ARCHER. Mr. Chairman, I yield myself 30 seconds. Here we go again. Figures do not lie, but--the gentleman talks about deficit reduction. There is no Democrat plan before this House for deficit reduction that I know of. This is the only one, and CBO scores us at $30 billion more in deficit reduction than the President's budget. I hope that the Democrats in their substitute and motion to recommit with instructions will show us a CBO score deficit reduction that is greater than is in this package. Mr. Chairman, I yield 2 minutes to the gentleman from Illinois [Mr. Crane], the ranking Republican of the Committee on Ways and Means. (Mr. CRANE asked and was given permission to revise and extend his remarks.) Mr. CRANE. Mr. Chairman, I want to express appreciation to my distinguished chairman and to our colleagues who are in the process of making real significant, historic strides in turning around the direction that this country has been on in virtually all of the 25 years I have been here. We had a tax cut in 1981, the biggest tax cut in our history at that time, approximately, about $200 billion, and the fact of the matter is that that was the last time we had a tax cut. We have done nothing in the intervening years but raise taxes, and paying taxes to the average middle-income family today accounts for 40 to 50 percent of their budget when you include taxes at all levels, Federal, State, and local. The tax burden has become oppressive. It has had a dampening effect [[Page H4217]] on the economy. I know of no economist who has ever attempted to advance the argument that by raising taxes you are promoting economic growth. Quite the contrary. You lower taxes and you promote growth. The other thing that was significant about that tax cut in 1981 is that it more than doubled revenues to the Treasury in the decade of the 1980's. That one single tax reduction more than doubled revenues. It was the fastest revenue increase in our national experience, and it had a very positive effect in other ways, too, which created almost 20 million new jobs. We have an opportunity here though to address more than just tax relief. it is the question of distribution of taxes. According to the Joint Committee on Taxation, if you look at income brackets after the tax cut, those people in the highest income brackets will be paying a marginally larger component part of the total tax burden, and those people in the lowest income brackets will be paying a marginally lower percentage of the total tax burden. I urge my colleagues to support this legislation and get this country moving in a forward direction. Mr. Chairman, the last time I was on the floor of the House of Representatives to debate and vote on a substantial tax cut for the American taxpayer was in 1981. Since that time, Congress has raised taxes more times than I care to remember. In 1993, President Clinton and a Democrat Congress topped all the previous tax bills by enacting the single largest tax increase in the history of the world--literally. According to the Joint Committee on Taxation, the 1993 tax bill robbed the American taxpayers of a total of $240 billion over a 5-year period. Not surprising, not one Republican in either the House or the Senate voted for Clinton's tax bill. For the American taxpayer, the 1993 tax bill may have been the last straw. And thanks to the American voter, the make-up of Congress was radically altered in the 1994 elections. For the first time in 40 years, the Republicans gained control of the House of Representatives. Republicans campaigned on the Contract With America and promised to change business as usual. We have kept our promises and we certainly have changed this House of Representatives. One of the key components of the contract is to give back to the American taxpayers some of their hard-earned dollars that Democratic Congresses have taken from them over the years. The bill we have before us today would cut taxes by a total of $190 billion over 5 years. Some have called this excessive. In fact, it is rather modest, particularly when one considers that the $190 billion figure falls $50 billion short of cutting the amount of taxes raised in the 1993 tax bill alone--to say nothing of all the other tax increases we have seen in the last 12 years. Unfortunately, my colleagues need to be reminded of an important point--tax dollars do not, by right, belong to our Government. Some of my colleagues in this House seem to think that tax dollars are owned by Congress. Let me remind my colleagues that tax dollars are owned by hardworking taxpayers, and Congress has a responsibility to ensure that any money it takes from the taxpayers is spent wisely. Unfortunately, we cannot say that Congress has spent tax dollars wisely over the last 40 years. Indeed, Congress has squandered billions upon billions of dollars. In my view, the only way to force the Federal Government to become efficient, to force it to return to the essentials, and to force it to eliminate the excesses that exist, is to restrict the flow of tax dollars to Congress--it is time to turn off the spigot. Only then will we be able to force Congress to live within its means. Only then will we be able to force Congress to stop spending money and stop mortgaging the future of our children. what the bill does If you listened to the opponents of this bill you'd think we were increasing taxes. Of course, what this bill does is substantially reduce taxes for both individuals and businesses. The opponents of this bill have been screaming in righteous indignation over even the thought of reducing taxes. When you look at the actual contents of this tax legislation you begin to wonder where the opponents of this tax bill are coming from. This bill does a great many good and necessary things for the overburdened individual and business taxpayers. First of all, this bill helps American families. I have seen estimates that indicate that 40 to 50 percent of the typical American family budget goes toward paying taxes--Federal, State, and local. Specifically, 25 percent of the family budget goes toward paying Federal taxes. That is absolutely outrageous and it is no wonder that families are getting sick and tired of the tax burden they are shouldering, particularly when they see how their money is being spent by Congress. Families have been hit hard over the last few decades by taxes. The exemption amount for dependents, had it been indexed for inflation from the date it was created, should be worth over $8,000 today, instead of the $2,450 allowed in 1994. This bill attempts to modestly help families by providing a $500 per child credit. In addition, the bill creates the American Dream savings accounts which will provide families the opportunity to create an IRA with tax free withdrawals for retirement, education expenses, medical expenses, and first time home purchases. The legislation provides a credit for adoption expenses and reduces the marriage penalty. As a long time proponent of all of these efforts, and as the lead sponsor of the American Dream Restoration Act which contained nearly all of these three proposals, I can assure my colleagues I feel strongly about this portion of the bill. All these things are long overdue and will help families considerably. The bill helps seniors as well. While Democrats have often tried to portray themselves as the protectors of senior citizens, in reality you will find that Democrat tax policies have hit senior citizens very hard. Our seniors have worked hard all their lives and they have paid taxes all their lives. Many live on fixed incomes and can ill-afford the continual tax hikes that have been heaped upon them by an arrogant Congress these past 40 years. Seniors deserve a break. This legislation offers them some hope. The bill repeals the increase in income taxes on Social Security benefits which President Clinton had pushed for in the 1993 tax bill. In addition, the legislation raises the amount seniors can earn before their Social Security benefits are reduced. This is referred to as the Social Security Earnings Limitation issue. Both of these measures will put more money in the pockets of seniors. In addition, the bill provides for a tax credit to taxpayers who provide custodial care of certain elderly family members staying in the taxpayer's home. Finally, the bill gives the American business community a break. Although it is fundamental economics, I believe some of my colleagues need to be reminded of some basic tenets of the marketplace: First, businesses create jobs, and second, without employers you do not have employees. Anything we can do to ease the burden on business community, increase their ability to compete, and encourage investments in new business ventures will help create new jobs in this country. The best way out of poverty is opportunity--a job. This legislation reduces the tax burden on American businesses by eliminating the excessive, complicated, and inefficient section of the Internal Revenue Code referred to as the alternative minimum tax. Scrapping this insane system will go a long way toward putting American businesses on a competitive footing with businesses overseas. In addition, we reduce the rate on capital gains and index capital assets for inflation. I could write a book about the importance of this provision of the bill. I have been advocating reducing the rate on capital gains for years, and I have seen the benefits of doing so based on past experience. By reducing the capital gains rate we will not only encourage more capital to be invested but we also encourage capital to move freely. This will result in job creation. Moreover, the increased number of transactions will actually mean more revenue to the Treasury. In short, this bill will create long term dynamic economic growth that will benefit all Americans. the class warfare debate In the debate over this legislation, there are those in Congress who wish to divide our country and its people. These people wish to create class antagonism, and choose demagoguery over logic and reason. These people want to engage in class warfare. These are the social engineers of our society who still don't understand that socialism died of natural causes. These people think they have the perfect formula for deciding what the proper tax burden ought to be for various income groups. They believe that it is Government's responsibility to redistribute income. They apparently do not understand some of the basic concepts upon which this country was founded--freedom, opportunity, hard work, etc. These people argue that the tax bill before us today caters to the rich--that it does not properly distribute the tax burden. Let me present some hard facts for these social engineers. According to the Tax Foundation, in 1982, the top 1 percent of income earners paid 19 percent of the taxes. In 1992, this group paid 27.4 percent of the taxes. In 1982, the top 10 percent of income earners paid 48.6 percent of the taxes, while in 1992, that figure rose to 57.5 percent. For both 1982 and 1992 the top 50 percent of taxpayers paid over 90 percent of the taxes. All this was before the 1993 tax bill which was specifically designed to take $114 billion from high-income individuals. Isn't this progressive enough? In fact, the tax bill we have before us today does nothing to change these percentages. Indeed, figures from the Joint Committee on Taxation [[Page H4218]] actually indicate that the top 1 percent and top 10 percent will pay a slightly higher proportion of the total tax burden after this bill is passed than they would if it were not passed. That ought to make the social engineers happy and they ought not be complaining. Of course my point is that all this talk of tax/income distribution tables and class warfare is foolishness. This bill gives money back to the taxpayers. It does not discriminate. It is designed to encourage savings and investment. It is about reducing the size of Government. conclusion Mr. Chairman, I could speak on this subject for a long time. However, let me simply say that this legislation is a most critical part of our Contract With America. Yes, we have brought this legislation to the floor of the House as we promised. But let us do even better than that. Let us pass this legislation with the goal of enacting into law real tax relief before the year is over. Mr. GIBBONS. Mr. Chairman, I yield 6 minutes to the gentleman from Washington [Mr. McDermott], a member of the Committee on Ways and Means. (Mr. McDERMOTT asked and was given permission to revise and extend his remarks.) Mr. McDERMOTT. Mr. Chairman, although both sides of the aisle strongly disagree on the merits of this bill, I think both parties will agree that in the last few days we have seen a truckload of statistics, charts, graphs, and surveys arguing for or against this tax cut plan. However, there is one thing that both sides agree upon--that the Republican tax cut plan will increase the deficit by $189 billion. Worse still, the Republican majority is proposing that we pay for over half of this deficit increase with an I.O.U. for $100 billion. Not real money, but a promise to pay in the future. No one knows what will happen in the future when the appropriators actually identify where the cuts will come from to achieve the $100 billion in savings. We have before us a so-called illustrative list of proposed cuts by Budget Committee Chairman Kasich. I am sure that I am not the only Member of Congress who is dubious at best, about anyone's ability to mandate spending cuts. If the Republican majority so firmly believes in this tax cut plan, why have they not come up with the specific spending cuts which they promised to identify for the American people? When President Clinton lowered spending caps 2 years ago, he did it to cut spending, not to give the money to the wealthy. We have been down this road before. In 1981, Congress passed President Reagan's tax cut bill without any accompanying spending cuts. As a result, the deficit soared and we face the budget mess we are in today. How many Members on the other side of the aisle remember that in 1981 the Reagan administration projected a balanced budget by 1984? Sound familiar? As Yogi Berra would say, ``It's deja-vu all over again.'' The Republican leadership is asking for a giant leap of faith. They are implicitly forcing Members to sign a second contract, not with the American people, but with the Republican leadership to vote for a budget reconciliation bill that has not been written and currently does not exist. Unlike the recent rescissions bill which spared projects in key Republican districts, everything--including Social Security--will have to be on the table to find the $100 billion in real cuts. In September you will be asked to vote for a budget reconciliation bill that drastically cuts programs and services in your district to pay for this wasteful tax cut bill. Many of you will have a lot of explaining to do. The agreement by the Republican leadership to link the tax cuts to a balanced budget plan is toothless and misleading. This phony agreement allows the leadership to get their tax bill enacted without having to commit to any guaranteed deficit reduction. There is absolutely nothing in the agreement that even remotely looks like an enforcement mechanism. This agreement makes it all too clear that it is more important to the Republican leadership to keep their political opiate--a promise of tax cuts--no matter how damaging the long-term consequences. The unfairness of who gets what of this bill are too numerous for me to recite. No matter how you analyze this bill, families with higher incomes receive a disproportionate share of the total benefits from these tax cuts. Chairman Archer knows this. That is why he is trying to change the focus of the debate from who receives the majority of the tax bill's benefits to what percentage of total income taxes are paid by the rich. Good try, Mr. Chairman, but it will not work. The real issue today is not the total proportion of income taxes the richest 10 percent of the population pay, but how much of a tax benefit high income families receive under the contract when compared to current tax law. Under the Republican bill, the rich get richer so it is logical that they will pay additional taxes on the extra money they earn. In contrast, a working class family that is not able to take advantage of all of the new tax breaks contained in this bill will simply not benefit nearly as much. The majority of these tax cuts will not benefit working class Americans. Under the Republican theory of ``trickle-down-economics,'' working families will not even get wet. For example, the richest 1 percent of Americans who make more than $267,000 will pay 18.23 percent of the tax burden under the contract, up 2 percent. But what Chairman Archer does not say is that those same families--the top 1 percent--will an average tax savings of more than $11,000 per year under the contract. In contrast, the majority of American taxpayers whose incomes are less than $44,434 will pay 16.1 percent of the tax burden under the contract, a drop of 0.2 percent. But, these families only see an average tax savings of $760 or less. That's right, the rich will get $11,000 in tax savings from this tax plan and the majority of Americans will get $760 or less in savings. Is this what the Speaker means when he talks about the ``opportunity society'' for the American people? By voting for this bill with its fairy tale $100 billion I.O.U., the Republican rank-and-file have given up any remaining shred of independence they so briefly entertained last week. They might as well give their voting cards to the Speaker and allow him to vote yes for them on passage of the budget reconciliation bill in September because after today they have no choice. In September the voters back home will be wondering why they sent you here. Did they want you to vote your conscience or to play the childish game of ``follow the leader?'' Unfortunately, we have so few Members who do the former and far too many who do the latter. {time} 1545 Mr. ARCHER. Mr. Chairman, I yield 3 minutes to the gentlewoman from Connecticut [Mrs. Johnson], the chairman of the Subcommittee on Oversight of the Committee on Ways and Means. Mrs. JOHNSON of Connecticut. I thank the chairman for yielding this time to me. Mr. Chairman, I rise in strong support of this bill. It is a fine and necessary tax bill. First, it will make our economy grow more rapidly. Small business, the creator of most jobs, will gain the right to expense $30,000 worth of equipment, We all know that any small business can expand more rapidly if it can afford the equipment to produce its product. Expensing has long been the No. 1 demand of the small-business community to accelerate the pace at which it will be able to grow. Estate tax law reform, home office deduction reinstatement, capital gains, all will help small business grow, prosper and create the jobs that America needs. Second, this bill helps big businesses that compete in a very tough international market where you can not pass on new costs through higher prices. In Connecticut, one company invested $4 billion over the last few years in capital investment in manufacturing facilities in this Nation and paid higher taxes than other manufacturers who invested not $1 because of the alternative minimum tax. That is wrong. That is bad policy. That is anti-jobs. That is anti a strong economy. [[Page H4219]] Not only will this bill help build economic strength and create jobs, but it also helps families and seniors, and it takes a giant step toward health care reform. Young families are carrying a heavier burden in our society today than they have at any time in our history. Surely we can agree to give them this $500 tax credit per child. Seniors have been disadvantaged by the tax hike we imposed on them a couple of years ago. This bill repeals that; it gives them tax relief, raises the earnings limit, so that those with low pensions can work without penalizing them $1 for every $3 they earn. It also creates the long-term care partnership that protects our seniors and families from the catastrophic costs of long-term care and home care. Is this a perfect bill? Absolutely not. I disagree with the Neutral Cost Recovery section. I want the $200,000 threshold lowered because I think it is better policy, fairer to all Americans. I think the solution in this bill to the underfunded Federal pension plans may not be the best, but there is no problem in this bill that is not entirely solvable as we move along. And this bill is critical. Mark my words, it is critical to achieving a balanced budget. If we are going to achieve a balanced budget by the year 2002, that spending plan must not only enable us to provide the services we need in those years but also the tax policy we need to create jobs, to create economic strength and to assure a fair distribution of burden among the families and the seniors of America. I urge your support of this bill. Mr. GIBBONS. Mr. Chairman, may I inquire as to how much time remains on each side? The CHAIRMAN. The gentleman from Texas [Mr. Archer] has 41 minutes remaining, and the gentleman from Florida [Mr. Gibbons] has 34\1/2\ minutes remaining. Mr. ARCHER. Mr. Chairman, I yield 2 minutes to the gentlewoman from Washington [Ms. Dunn], a respected member of the committee. Ms. DUNN of Washington. I thank the gentleman for yielding this time to me. Mr. Chairman, my State of Washington is home to thousands of entrepreneurs, and home to Microsoft--now an economic giant but once launched by a pair of young entrepreneurs. We also have timber--an industry that once was robust and thriving, but now is facing difficult times. For too long, our Nation's entrepreneurs have been penalized by the tax policy of the United States. Since 1986, when the business capital gains rate was raised to 35 percent, venture capital financing has dropped by two-thirds--from $4.19 to $1.41 billion--and the number of firms receiving venture capital financing has declined every single year. Mr. Chairman, we must correct the current tax policy regarding capital formation. It we don't, we will be directly responsible when the next Microsoft never takes it off the ground. Failure to act could bankrupt 1,200 small timber businesses, who typically own 50 acres and have an income of less than $50,000. For them, the capital gains reduction is a life or death matter. These small timber firms alone represent more than 5,000 jobs threatened by high capital gains rates. Mr. Chairman, cutting taxes on capital is about jobs. Support capital formation, support entrepreneurs, support family businesses, and support more jobs for Americans. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from Louisiana [Mr. McCrery]. Mr McCRERY. I thank the gentlewoman for yielding this time to me. Mr. Chairman, the quote that I am given by my constituents back home is that, ``The Federal Government is too big and spends too much.'' I do not hear, when I go back home, ``I pay too little in taxes.'' Every Republican and many Democrats who were here 2 years ago voted against the Clinton tax increase. If 2 years ago you were against the tax increase, why would you not be now for giving back to the people about two-thirds of that tax increase? Instead of trying to create class warfare in America, let us talk about what is or is not sound tax policy. For example, the House recently passed a historic welfare reform bill. Those who oppose welfare reform rightly asked the question: ``Where will the jobs come from for people who lose their welfare benefits?'' Well, this bill begins to address that question. There are a number provisions in this tax reduction bill which will encourage productive investment and creation of private sector jobs. Chief among them is the reduction in the capital gains tax rate. By reducing the tax on capital gains, we reduce the cost of capital; by reducing the cost of capital, we encourage investment, which increases productivity, which allows economic growth without inflation and which, most importantly for Americans who want to work, creates jobs. This tax cut bill gives us a chance to go back in time 2 years and do now what Americans wanted us to do then: Cut spending first. If you voted against the tax increase 2 years ago, then you ought to vote today to repeal most of it. Now is your chance to make right what you said was wrong 2 years ago. Mrs. JOHNSON of Connecticut. Mr. Chairman, I yield 2 minutes to the gentleman from California [Mr. Herger]. Mr. HERGER. I thank the gentlewoman for yielding this time to me. Mr. Chairman, this legislation is a crucial step in a tidal wave of reform. Americans are fed up with paying more in taxes than they pay for their families' food, clothing and shelter Americans are fed up with seeing small business drown beneath a suffocating mass of Government regulation, and American taxpayers do not want the Federal Government to be the fastest growing employer in the Nation. Mr. Chairman, in 1993, the Democrats voted for the largest tax increase in history, and they continue to support high taxes today. This legislation pays for all of our tax cuts, and still lowers the deficit by $30 billion. In addition, this bill provides $189 billion in tax relief. Tax relief for families with children, tax relief for young couples beginning to save for their first home, and tax relief for senior citizens living on fixed incomes. Moreover, Mr. Chairman, much of this relief merely gives back to citizens that which was taken away by President Clinton in the 1993 tax bill. The average Californian will save $1,761 a year in taxes if this bill is enacted into law--76 percent of these benefits going to American families. Mr. Chairman, it is time that Washington realizes that income belongs to the worker, not to the Government. Congress must allow American workers to keep more of what they earn--we must also restore the free market incentive which drives our American dream, that same incentive which leads citizens to take risks and create jobs. Vote ``yes'' on this bill. Mr. GIBBONS. Mr. Chairman, I yield 1 minute to the gentleman from Colorado [Mr. Skaggs]. Mr. SKAGGS. Four trillion eight hundred seventy-three billion, four hundred eighty-one million dollars. That is the Federal debt. And we should be doing all we can to keep it from growing. The tax cut we are debating this afternoon will explode the debt by over a hundred billion dollars a year in the year 2005. Enormous tax relief for those who need it least. For hard-working middle class American families earning less than $75,000 a year, a pittance, 35 bucks a month. For a family over 200,000, a thousand dollars a month. Whose sense of equity is not offended by that? Two months ago we were debating a balanced budget amendment. There were pious and sober speeches about the deficit and its burden on our kids. The same people today are supporting this budget buster. Where has their resolve gone? Four trillion, eight hundred seventy-three billion, four hundred eighty-one million dollars. With a debt like that we should not even be considering this bill. Vote against a repeat of voodoo economics. Vote down this bill. Four-trillion, eight-hundred seventy-three billion, four-hundred eighty-one million dollars. That is the size of the United States Federal debt. It's shameful. And we should be doing all we can to keep it from growing. Which is why, as much as I would like to cut taxes, I believe this is the wrong time for any tax cut, and certainly this tax cut. But the tax cut we are debating today would, over the long term, increase that debt tremendously--by almost $100 billion a year in 2005. And it would do so by giving most of [[Page H4220]] the tax cuts to the wealthiest people in America. Speaker Gingrich calls this bill the ``crown jewel'' of his party's so- called Contract With America. I suppose that's an apt label, for this bill surely would finance nice trip to Cartier's for folks who are already in furs. The bill is, plain and simple, irresponsible. It will give enormous tax relief to those in our society who need it least. It will be paid for, however, at the expense of students and the elderly, and hard- working families for whom critical programs are decimated. And it will be at the expense of generations to come, who'll be burdened with an explosion of the deficit that's reminiscent of the early eighties. Most Americans, those who are struggling to get by, would get only a pittance in tax breaks, an average of $35 a month to families making under $75,000 a year. Whose sense of equity isn't offended when you compare that to almost $1,000 a month in tax relief for those making over $200,000 a year? This bill also gives huge tax benefits to big corporations and investors. Not enough attention has been paid to this aspect of the bill, probably because these tax breaks are written in a way that hides their true cost. Over the first 5 years, the big business tax breaks add up to $24 billion. In the next 5 years their cost balloons to $221 billion. Like an iceberg, nine-tenths of the cost hides under the surface of the 5-year budget horizon. What are these tax breaks? Things like the repeal of the corporate minimum tax. This wasn't an original part of the so-called contract, but was slipped in after a successful lobbying campaign by a coalition of large corporations. Never mind that the corporate minimum tax was supported by President Ronald Reagan. In 1985, the Reagan Treasury Department said, ``The prospect of high-income corporations paying little or no tax threatens public confidence in the tax system.'' And avoiding taxes they were. Prior to the corporate minimum tax, most of the country's largest and most profitable corporations often paid no Federal income taxes. How can anyone justify increasing the deficit, as this bill does, just to give the biggest corporation a pass on paying any taxes? You will hear from many people today that this bill is paid for. Do not believe them. It's paid for only over the first 5 years, when the tax breaks are expected to cost $188 billion. What they won't tell you is that this bill was very cleverly written so that the costs are held down over the first 5 years, but nearly triple after that. The Treasury Department estimates that the full 10-year cost of these tax cuts will be $630 billion. That full amount isn't paid for. Any way you count it, this bill add hundreds of billions of dollars to the Federal debt. We can't afford it. With the huge cost of this bill, and with the lion's share of benefits going to the rich, some of the more moderate members of the Republican party have been hesitant to support it. But there was no opportunity for Democrats to work with them to create a bipartisan, more balanced bill, because their leadership had to have it their way-- leadership apparently concerned more with the symbolism and show of the contract than with substance, a leadership that reveals the emptiness of its commitment to deficit reduction. But the moderate Republicans were right. They remember what happened the last time the Congress embraced an economic policy like this. It was 1981, and it was cal