TAXPAYER REFUND ACT OF 1999--Resumed
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TAXPAYER REFUND ACT OF 1999--Resumed
(Senate - July 29, 1999)
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TAXPAYER REFUND ACT OF 1999--Resumed
The PRESIDING OFFICER. The clerk will report the bill.
The legislative assistant read as follows:
A bill (
S. 1429) to provide for reconciliation pursuant to
section 104 of the concurrent resolution on the budget for
fiscal year 2000.
Pending:
Abraham amendment No. 1398, to preserve and protect the
surpluses of the social security trust funds by reaffirming
the exclusion of receipts and disbursement from the budget,
by setting a limit on the debt held by the public, and by
amending the Congressional Budget Act of 1974 to provide a
process to reduce the limit on the debt held by the public.
Baucus motion to recommit the bill to the Committee on
Finance, with instructions to report back with an amendment
to reduce the tax breaks in the bill by an amount sufficient
to allow one hundred percent of the Social Security surplus
in each year to be locked away for Social Security, and one-
third of the non-Social Security surplus in each year to be
locked away for Medicare; and an amendment to protect the
Social Security and Medicare surplus reserves.
Robb amendment No. 1401, to delay the effective dates of
the provisions of, and amendments made by, the Act until the
long-term solvency of Social Security and Medicare programs
is ensured.
Motion to Waive the Budget Act Amendment No. 1398
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, the pending amendment is not germane. I
raise a point of order that the Abraham amendment violates section
305(b)(2) of the Congressional Budget Act of 1974.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. ABRAHAM. Mr. President, pursuant to section 904(c) of the
Congressional Budget Act of 1974, I move to waive the Budget Act for
consideration of the Abraham amendment.
Mr. GRAMM. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
[[Page
S9652]]
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. There i
s 2 minutes of debate.
Who yields time?
Mr. REID. Mr. President, in a letter dated April 21, 1999, on a
similar provision, then-Secretary of the Treasury Robert Rubin wrote to
Senator Moynihan that this ``provision could preclude the United States
from meeting its financial obligations to repay maturing debt and to
make benefit payments--including Social Security checks--also worsen a
future economic downturn.''
The lockbox in this proposal is potentially destabilizing in a manner
reminiscent of the constitutional amendment to require a balanced
budget.
I remind those who propose rigid 10-year schedules for reducing the
publicly held debt that economics does not follow the agricultural
cycle. There will be periods when surpluses, both on and off budget,
will fall far short of projections. We should not impose a debt
reduction schedule, enforced by a declining debt cycle ceiling, even if
it can be overridden with 60 votes. To do so will risk default every
time the debt ceiling is lowered.
Mr. ABRAHAM. Mr. President, first of all, we have endeavored to and
have modified our amendment to try to address some of these concerns. I
think we have done so. I believe we have given sufficient flexibility
so that there will not be the concerns that were raised in that letter.
This lockbox does not need a lot of debate. Americans have been
hearing us talk about it now for almost 3 months. We will continue to
try to get a straight up-down vote on this. I would note that once
again this morning another procedural roadblock has been put in place
to prevent us from getting a straight up-or-down vote. I regret that. I
was prepared to come today and offer both sides the opportunity to have
straightforward votes. If one side or the other in their various
lockbox proposals got 50-plus votes, they would win and we could give
the American people what I believe they want, and that is protection
for their Social Security dollars sent to Washington. But again, once
more, what we have had is a procedural impediment placed in the way of
getting final action on this legislation.
Mr. President, I urge my colleagues who have previously supported
this lockbox to do so. It is a tougher lockbox that protects Social
Security. If we want to do it, I say vote ``yes.'' Vote to waive the
Budget Act.
The PRESIDING OFFICER. All time has expired. The question is on
agreeing to the motion to waive the Budget Act. The yeas and nays have
been ordered. The clerk will call the roll.
The legislative clerk called the roll.
The yeas and nays resulted--yea
s 54, nays 46, as follows:
[Rollcall Vote No. 227 Leg.]
YEAS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
NAYS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Roth
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
The PRESIDING OFFICER (Mr. Frist). On this vote the yeas are 54, and
the nays are 46. Three-fifths of the Senators present and voting, not
having voted in the affirmative, the motion to waive the Budget Act is
rejected. The point of order is sustained, and the amendment falls.
Mr. ROTH. Mr. President, I ask unanimous consent that the remaining
votes in this series be limited to 10 minutes in length, and I ask that
all the Members of the Senate stay on the floor. We have a full and
busy day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Privilege Of The Floor
Mr. LEAHY. Mr. President, I ask unanimous consent that Peter
McDougall of my staff be given floor privileges throughout the day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion To Recommit
The PRESIDING OFFICER. The question is on the Baucus motion.
Mr. BAUCUS. Mr. President, I understand each side has 1 minute of
explanation.
The PRESIDING OFFICER. The Senator is correct.
Mr. BAUCUS. Mr. President, this is a very simple matter before the
Senate. It is a choice: Do we want to protect Medicare or not. It is
that simple. That is the choice that we are presented with today.
The amendment I am offering is the House lockbox which passed the
House by an overwhelming margin--it only had three or four votes
against it--along with the Medicare lockbox. The Medicare lockbox we
provide sets aside one-third of the on-budget surplus for Medicare. It
can be used in whatever way we want to use it for Medicare, including
to provide an affordable prescription drug benefit or for shoring up
Medicare solvency.
That is the choice before the Senate. Do we preserve Medicare or not.
Our choice here today, however, is nothing compared to another choice.
That is the choice that about 16 million seniors must make every day:
Do I choose to buy my medicine, choose to pay the rent, or choose to
buy food?
We are saying set aside and preserve for Medicare one-third of the
on-budget surplus so that the choices facing seniors are not quite as
abhorrent.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, this is another opportunity on the part
of the other side to propose to the American people that they want
anything but tax relief. This is a motion to recommit. It would do
nothing to protect Medicare. It is the President's proposal, which is a
phony transfer of IOUs to the Medicare trust fund. It does nothing to
help senior citizens. It is just an effort to lock up $300 billion so
you can't give the American people a tax cut, plain and simple. They
don't want to confront the issue of a lockbox for Social Security so
they muddle it up and instead of trying to solve something, they would
like to create an issue instead of a solution.
Frankly, there are hardly any experts in America who look at this
lockbox concept for Medicare and say it helps the seniors or it helps
Medicare. If this is the plan the President is alluding to across this
land, then he has none.
I believe, since the other side did not let us have a vote, we ought
to do ours procedurally also, and I am compelled to do that.
Therefore: The language in this amendment is not germane to the bill
before us, so I raise a point of order under section 305(b)(2) of the
Congressional Budget Act.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, pursuant to section 904 of the Budget Act,
I move to waive the applicable sections of that act for the
consideration of the pending amendment.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Budget Act in relation to the Baucus motion to recommit
S.
1429. The yeas and nays have been ordered.
The clerk will call the roll.
The legislative assistant called the roll.
The yeas and nays resulted--yeas 42, nay
s 58, as follows:
[[Page
S9653]]
[Rollcall Vote No. 228 Leg.]
YEAS--42
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
NAYS--58
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Kerrey
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
The PRESIDING OFFICER. On this vote, the yeas are 42, the nays are
58. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the motion falls.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, I move to reconsider the vote.
Mr. MOYNIHAN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. Mr. President, I ask unanimous consent that all amendments
and motions to recommit to
S. 1429 must be filed by 2 p.m. today at the
desk and with the bill managers.
Mr. STEVENS. Reserving the right to object, what time was that?
Mr. ROTH. Two p.m.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Amendment No. 1401
Mr. ROTH. Mr. President, I think we are ready for the vote on the
next amendment.
The PRESIDING OFFICER. There are 2 minutes equally divided. Who
yields time?
Mr. ROBB addressed the Chair.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ROBB. Mr. President, this amendment simply delays the effective
date of the tax cut that is proposed. There are many who believe that a
tax cut of this magnitude at this time would be ludicrous. But that is
not the issue. The issue is whether or not we ought to go ahead with a
tax cut notwithstanding the fact that we have not protected Social
Security and Medicare.
Most of the people who have spoken so far have talked about their
concern for doing just that. The lockbox provisions were proposing to
do just that.
If you want to save Social Security and Medicare, this is an
incentive. It will delay the implementation of the act, but it will not
negate the effectiveness of the act.
I ask that our colleagues vote to support this particular amendment,
save the one-half of 1 percent of the total which would be expended
this year, and not lock in cuts that would cost $792 billion, which
would be almost impossible to reverse should that prove to be the case.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON addressed the Chair.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, no one in this chamber thinks other than
that we want a real, sound, solid, and solvent Social Security system
and Medicare system. Most of us, however, realize we will only have
that if we have fundamental reforms in those systems, such as that
proposed by the Medicare commission at which the President scoffed.
This amendment will serve to actually make Social Security and
Medicare less sound. It will actually delay the process of real reform.
The solvency dates that are used in this legislation are taken from the
President's proposal and will invariably result in pouring more and
more general revenues into these entitlement programs, delaying the day
when we have to face up to the fact that we have to have fundamental
reform.
Our bill sets aside 75 percent of the surplus for Medicare, Social
Security, debt retirement, and other spending priorities. With regard
to the 25 percent remaining, there is no reason to delay tax cuts.
If we saved every penny of the surplus, put it into Medicare and
Social Security, it would not do one thing toward solving the
fundamental problem.
This language is not germane to the bill now before us; therefore, I
raise a point of order, under section 305(b)(2) of the Congressional
Budget Act of 1974.
Mr. ROBB. Mr. President, pursuant to section 904 of the Congressional
Budget Act of 1974, I move to waive the applicable sections of that act
for the consideration of the pending amendment, and I ask for the yeas
and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Congressional Budget Act in relation to the Robb amendment
No. 1401. The yeas and nays have been ordered. The clerk will call the
roll.
The legislative clerk called the roll.
The yeas and nays resulted--yeas 46, nay
s 54, as follows:
[Rollcall Vote No. 229 Leg.]
YEAS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Snowe
Torricelli
Voinovich
Wellstone
Wyden
NAYS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
The PRESIDING OFFICER. On this vote the yeas are 46, the nays are 54.
Three-fifths of the Senators duly chosen and sworn not having voted in
the affirmative, the motion is rejected.
The point of order is sustained, and the amendment falls.
Mr. MOYNIHAN. Mr. President, I move to reconsider the vote.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1405
(Purpose: To return to the taxpayers a portion of the budget surplus
that they created with their tax payments)
The PRESIDING OFFICER. Under the previous order, the Senator from
Texas is recognized to offer an amendment.
Mr. GRAMM. Mr. President, I send an amendment to the desk in the
nature of a substitute for myself, for Senator Lott, Senator Nickles,
Senator Mack, Senator Coverdell, Senator Craig, Senator McConnell,
Senator Inhofe, Senator Hutchison, Senator Bunning, Senator Kyl,
Senator Bob Smith of New Hampshire, Senator Allard, and Senator Hagel,
and I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Texas [Mr. Gramm], for himself, Mr. Lott,
Mr. Nickles, Mr. Mack, Mr. Coverdell, Mr. Craig, Mr.
McConnell, Mr. Inhofe, Mrs. Hutchison, Mr. Bunning, Mr. Kyl,
Mr. Smith of New Hampshire, Mr. Allard, and Mr. Hagel,
proposes an amendment numbered 1405.
Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
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(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. GRAMM. Mr. President, I have the highest admiration for the
chairman of the Finance Committee. I am supportive of the tax cut he
has crafted in committee. I intend to vote for it on final passage if
this amendment fails.
But I believe we need a clearer vision. I believe we need to define
very precisely what we would like to use this tax cut to do, rather
than running around trying to stick a nickel in everybody's pocket with
a targeted program.
I would prefer to have a tax cut that has clear themes and this is a
very simple substitute because it consists of simply five things. So
this is a tax cut that you can explain to every American, and it
contains basic principles that I believe every American can understand
and support.
The first principle is we ought to have an across-the-board tax cut
of 10 percent. Now, I know our Democrat colleagues are going to jump up
and down and say, first of all, that 32 percent of American families
pay no income taxes, and so if you have an across-the-board tax cut,
they will not get a tax cut. And that is right. Tax cuts are for
taxpayers. If you don't pay taxes and we have a tax cut, you don't get
a tax cut. Most Americans don't get food stamps; most Americans don't
get TANF; most Americans don't get Medicaid because they don't qualify
for those programs. If you don't pay taxes, you don't qualify for a tax
cut.
Our Democrat colleagues are obviously going to jump up and down and
say that Senator Rockefeller, who pays 10 times as much taxes as I do,
with a 10-percent across-the-board tax cut, will get 10 times as big a
tax cut. That is right, but he pays 10 times as much taxes. If you ask
people in your church to take up money to build a new parsonage and it
turned out you had taken up too much money, and you decided to give it
back, isn't the logical way to give it back to simply take how much an
individual gave and take the amount that you didn't need and give it
back to them proportionately?
So the point is, the first principle we believe in is there ought to
be an across-the-board tax cut, so every American who pays income taxes
will get a tax cut. Now, our Democratic colleagues have said they
believe if you are rich, which means you are in the upper half of the
income distribution--and they design that as roughly making somewhere
around $50,000--you don't deserve a tax cut. In their proposal, you
basically don't get one. I want to remind my colleagues that by
excluding people who pay 99 percent of the income taxes in America,
they are excluding from a tax cut 62 percent of all homeowners, 66
percent of all Americans between the ages of 45 and 64, 67 percent of
all families who have children in their homes, 67 percent of all full-
time workers, 68 percent of all Americans who have some college
education, 69 percent of all married couples, and 80 percent of all
two-wage earner families in America.
Our Democrat colleagues love investment, but they hate investors.
They love the benefits of capitalism, but they hate capitalists. An
across-the-board tax cut gives everybody a tax cut, and if people pay a
lot of taxes, they get a bigger tax cut--not proportionately, but they
get the same tax cut. If that offends you, if you believe that somehow
people who make over $50,000 a year are the enemies of the people and
they ought to continue to be punished, you would want to be against
this provision.
The next thing this provision does is it eliminates the marriage
penalty. Most Americans are not aware of that because our Tax Code is
so perverted, if two young people, both of whom work, fall in love and
get married, they, on average, pay the Federal Government $1,400 a year
in taxes for the right to be married. My wife is worth $1,400, but the
point is, she ought to get the money, not the Government. We eliminate
the marriage penalty.
Secondly, we have income splitting. Now, I know some of our Democrat
colleagues are going to get up and say, well, look, if the husband
earns all the money and the wife stays at home and raises the children,
they ought not to get the correction for the marriage penalty. Well, we
do income splitting. We have decided we don't want to inject the Tax
Code in the decision about whether people work outside the home or not.
My mama worked every day that I was a child, and she did it because she
had to do it. My wife has worked every day that our children have been
alive because she wanted to do it. I am not trying to distort the
decision one way or another, or make a judgment. All I am saying is
that people who stay at home and raise their children contribute to
America. They make a big contribution. By allowing a couple, where only
one of them works outside the home, to split their income and attribute
half to each one of them--that is what the partnership of marriage is
about--we are able to give them a substantial reduction in the penalty
they pay for being married.
The next provision is, we repeal the death tax, which is a certain
kind of death penalty. I like the death penalty where we put murderers
to death. I don't like the death penalty when working people die and we
end up forcing their children to sell their business or their farm. All
over America, people work a lifetime to build up a business or a farm,
and then when they die, their children have to sell that business or
sell that farm to give Government 55 cents out of every dollar they
earned in a death tax. This provision repeals the death tax.
Now, I know that our Democrat colleagues are going to get up and say,
well, these are rich people. But I want to give you an example. When I
first met a printer from Mexia named Dicky Flatt, I met him about 25
years ago. He was in business with his daddy, who worked on these old
calculator machines that businesses use. His mama kept all the books,
his wife basically was working in their stationery shop, and Dicky
Flatt did the printing business. They had an old building in Mexia, and
it was cracking right down the middle. They kept putting sand in the
bottom and kept tar-papering over the top. They had one bathroom, and
it didn't have a door on it; it had a curtain on it. So when you went
in to use the bathroom, you pulled the curtain.
Now, they worked hard in that business. So now Dicky Flatt has torn
down that building. He has built a Morton building, a metal building,
and he has a good size print shop and stationery shop. He sent his two
sons to Texas A They have come back and have gone into business with
him. He works every day. He gets in at 6 and leaves about 8. He is
there on Saturday until 6 o'clock. Whether you see him at the PTA, Boy
Scouts, or the Presbyterian Church, try as he may, he never gets that
blue ink off the ends of his fingers.
Now, Dicky Flatt may be rich, for all I know. He doesn't live like a
rich guy. When his brother died of cancer, he took over his school
supply business with his wife. My basic point is that Dicky Flatt and
Linda, his wife, have worked 6 days a week their whole lives. They
built up this business. Every penny they put into it has been in after-
tax dollars. How can it be right to force their two boys, who now work
in that business, to sell that business when Dicky and his wife Linda
die in order to give the Government 55 percent of it, in order to take
the money from Dicky Flatt and give it to people who have been sitting
on their fannies in Mexia, not working on Saturday, and in some cases,
not working at all? I am sure we are going to hear that this is for
rich people. I want to put a human face on it.
When we revolted against King George, he wasn't doing things such as
the death tax. This is an outrage. This is an assault on every value
this country stands for, and I want to repeal it and repeal it
outright.
I want to index the capital gains tax.
That is the fourth provision of this bill.
I want to say that from this day forward, if you buy a house as an
investment and the price doubles and you sell the house for twice as
much as you paid for it, you haven't made any money, you simply kept up
with inflation. But under current tax law, you have to pay the Federal
Government a capital gains tax on the doubling of your house's price
even though that new price will buy only the amount of goods you could
have bought with the money for which you bought the house. So the next
thing we do is index the capital gains tax for inflation.
Finally, we eliminate not the last outrage in the Tax Code but it is
a big
[[Page
S9655]]
outrage. If General Motors buys you health insurance, it is tax
deductible for them, but if you buy it for yourself, it is not tax
deductible. We eliminate that by saying that no matter who buys health
insurance in America, the employer or the employee, a retiree or a
worker, a homemaker or someone who is employed in the economy, that
health insurance is tax deductible.
It is a simple tax cut that you can put on one piece of paper. If you
pay taxes, you are going to get a 10-percent reduction in income taxes
out of this bill. It is easy to figure. If you pay $1,000 in income
taxes, you are going to get $100. If you pay $10,000, you are going to
get $1,000. If that breaks your heart, so be it. I think most people
will like it.
Second, we eliminate the marriage penalty and we allow income
splitting. If you have one parent who stays at home, you are able to
divide the income in half and have each of them claim half that income
that belongs to them. This is endorsed by every family group in America
because it is the right thing to do.
We repeal the death tax outright over a 10-year period--no ifs, ands,
or buts. If you live 10 more years, under this bill, and you build
something with after-tax dollars, it belongs to your family forever.
That is simple arithmetic. I think we can all understand it.
We index the capital gains tax so that you never pay capital gains
tax again on inflation. This is a big issue for every homeowner and for
every investor in America.
Finally, we provide full deductibility of health insurance. This is
an equity issue. It is something that ought to be done.
This is a tax cut you can understand. It represents what I believe is
the vision of the party of which I am proud to be a member. I hope my
colleagues will vote for this substitute. I believe it represents a
dramatic improvement and simplification in the Tax Code.
I reserve the remainder of my time.
The PRESIDING OFFICER (Mr. Allard). Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 1 minute to the Senator from
California and then 10 minutes to the Senator from Wisconsin, off the
bill.
The PRESIDING OFFICER. The Senator from Delaware controls the time in
opposition.
Mr. BAUCUS. The Senator from Delaware delegated that to the Senator
from Montana.
The PRESIDING OFFICER. The Chair thanks the Senator for that
clarification.
The Senator from California is recognized.
Mrs. BOXER. Thank you, Mr. President. I thank Senator Baucus.
My colleague from Texas says the Democrats hate investors and the
Democrats hate capitalism. As a former stockbroker, I deeply resent his
remarks. Maybe when the Senator from Texas was a Democrat he hated
capitalism and he hated investors, but the Democrats around here don't.
One of the reasons we are not supporting his amendment is that we think
it is bad for capitalism and we think it is bad for investors.
I have to say that this amendment, which reflects what the House did,
is a risky and radical amendment. It hurts the middle class. He says he
loves the middle class. He talks about his momma and Dicky Flatt. And I
love to hear him do it. But the bottom line is, the result of his
amendment will hurt the very people he says he wants to help because it
is such an unfair tax cut that would go to the very wealthiest and hurt
the middle class and the working poor.
I say to my friends who may be listening to this debate, the Senator
from Texas is a great debater but he was wrong when he said the Clinton
plan would lead to economic disaster and he is wrong today. I hope we
will vote down his amendment.
I yield my time.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, I thank the Senator from Montana.
Mr. President, I rise to offer some comments on the reconciliation
tax measure we are considering.
First, let me note that we have come a long way in the last seven
years.
When I first came to the Senate, we were facing an actual budget
deficit of $340 million.
That was the real figure--the figure that did not use the Social
Security Trust Fund balances to mask the deficit.
Thanks in large part to the President's deficit reduction package in
1993, and to a lesser extent the bipartisan budget cuts of 1997, we are
approaching a truly balanced budget.
I emphasize `'approaching,'' Mr. President, for we are not there yet.
The budget projections of the Office of Management and Budget, and of
the Congressional Budget Office, are just that--projections.
We do not currently have a budget surplus, not without including the
Social Security Trust Fund balances.
Mr. President, I do not mean to minimize the wonderful budget
turnabout that has been achieved.
But we should not be building massive new commitments on a shaky
foundation of questionable budget assumptions.
And that is just what we have.
The assumptions underlying the tax measure we will debate depend on
Congress making cuts of $775 billion in real spending over the next ten
years compared to current levels.
Let me note that this level of cuts does not include any additional
cuts that might have to be made in order to offset the cost of
unanticipated emergencies.
Let me repeat that, Mr. President.
The $775 billion in real spending cuts over the next ten years does
not include the spending we do to help the victims of hurricanes,
earthquakes, tornadoes, floods, or any kind of international emergency.
But, for the moment, let us suppose that there will be no hurricanes,
or earthquakes, or tornadoes, or floods in the next ten years.
Let us suppose that there will be no international emergencies that
require our assistance.
Will Congress find the political will to cut spending by three-
quarters of a trillion dollars over the next ten years?
Mr. President, Congress has yet to demonstrate it can stay even
within the current spending caps, let alone find an additional three-
quarters of a trillion dollars in cuts.
Last fall, Congress passed an omnibus appropriations bill that busted
the current spending caps by more than $20 billion.
This past winter, even before we passed a budget resolution, the
Senate passed another budget buster,
S. 4, the military pay and
retirement measure, which over the next ten years would add another $62
billion in spending.
And just a few weeks ago, Congress busted the spending caps yet again
with $15 billion in additional spending.
Mr. President, this is not a record of fiscal discipline.
Nor is it the kind of record that should give anyone confidence that
the budget assumptions underlying this tax bill are sound ones.
Mr. President, the assumptions underlying this tax bill are grounded
not in fiscal reality but in political expediency.
But, let us assume that somehow, Congress was able to enact the
three-quarters of a trillion dollars in spending cuts.
And let us further assume, as we did earlier, that there will be no
hurricanes, or floods, or earthquakes, or drought, or any other kind of
natural disaster for the next ten years.
And that there will be no more Bosnias or Kosovos or Iraqs--no
international emergencies of any kind for the next ten years.
Even under all of these assumptions, would this tax proposal be a
sound one?
The answer is no, because even if each and every one of those rosy
scenarios comes true, this bill would use over $75 billion in Social
Security balances to pay for the tax breaks.
Mr. President, I strongly oppose using Social Security to fund tax
cuts; that is why I voted against the 1997 tax cut package.
We simply should not be using Social Security balances--balances
needed to pay future benefits--to fund other government programs, or to
pay for tax cuts.
Of course, some may argue that even more spending cuts will be found
in order to avoid the use of Social Security balances--on the top of
the three-quarters of a trillion dollars in cuts assumed in this
measure.
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Mr. President, granting even this still rosier scenario, would this
tax measure be fiscally responsible?
I regret that it would not, because not only does this tax bill risk
our current budget, it puts future generations at risk as well.
Mr. President, while the revenue impact of any tax cut measure can be
expected to grow over time, the policies outlined in this measure
explode.
Consider that while in the next ten years, the cost of this proposal
is an already whopping $800 billion--if those tax policies are
continued, the cost in the second ten years will be a nearly
unbelievable $2 trillion.
If you add the additional interest payments that will arise from debt
service, the total cost of the tax policies in this bill rise to over
$3 trillion.
For those who may have forgotten, let me remind my colleagues that it
is in that second ten years when the baby boomer generation begins to
retire and put increased pressure on Social Security, Medicare, and the
long-term care services provided under Medicaid.
If ever there were a time to be prudent, now is the time.
As improved as the short-term budget picture is, the longer-term
budget picture is little changed.
We still face serious problems in Medicare, and as I noted, the baby
boomer generation will put enormous pressure on that program, as well
as on the long-term care services, many of which are provided through
Medicaid.
There is also a consensus that we should address the long-term fiscal
health of Social Security, and the sooner the better.
And finally, Mr. President, we still face a mountain of debt that was
run up during the 1980s and early 1990s because of the deficits that
were run up during that time.
In each of these areas, there is a stark choice: we can act now to
address each of these areas; or, we can ignore them, watch the problems
get much worse, and leave the work and cost of reform to our children
and grandchildren.
Mr. President, for me, that's an easy choice.
I do not want my children footing the bill for the failure of past
generations to act responsible.
I want to support a tax cut, but not one that jeopardizes the work we
have done to straighten out the current budget and squanders the
opportunity to reduce our debt and put Social Security, Medicare, and
our long-term care system on sound footing.
Mr. President, let me take a moment to look at the make-up of the tax
measure itself.
One might expect that a tax cut of $800 billion would provide the
sort of broad-based tax benefits that would be politically attractive.
But given the amount of revenue dedicated to this tax cut, the
benefits to the average taxpayer are surprisingly small, and the
overall package is heavily skewed to some of the wealthiest individuals
and corporations in the world.
As was noted by the tax watchdog group Citizens for Tax Justice, the
tax bill gives three-quarters of its benefits to the best-off fifth of
all taxpayers.
By contrast, only 11 percent of the tax bill's benefits go to the
bottom 60 percent of all taxpayers.
While the average tax reduction for the wealthiest 1 percent of
taxpayers--those with incomes over $300,000--is over $23,000 a year
under this bill, those with more average income do not do quite as
well.
The average tax cut for those who are among the middle fifth of
taxpayers will be $279, or about $5 per week.
For those in the bottom three-fifths of all taxpayers, the average
tax cut is even smaller--about $140 per year, or less than $3 per week.
Mr. President, under this $800 billion tax bill, the majority of
taxpayers will have an average tax cut of $3 per week.
Maybe the proponents of this bill are hoping most of America will use
this windfall to buy one of those overpriced cups of coffee.
Well, Mr. President, thanks to this tax bill, once a week, three-
fifths of America will now be able to go to one of those fancy coffee
shops and get a frothy decaf cappuccino latte with skim milk.
This tax bill is a bad tax policy any way you brew it.
Mr. President, I recognize that some may genuinely believe we should
dedicate about $800 billion to tax cuts over the next ten years.
The tragedy is that even in that context, the $800 billion was spent
unwisely, because in addition to Social Security, Medicare, long-term
care, and reducing our national debt, one of our highest priorities
should be significant reform of our tax code.
It was just a few months ago that we heard how critical fundamental
tax reform was to our future.
Flat tax, consumption tax, a national value-added tax--there were a
number of significant proposals that sought to address the inefficiency
of our current Tax Code.
Simplification was the order of the day, and let me add, Mr.
President, that while I did not support many of those proposals, I
think many of the proponents of reform got it exactly right.
Our Tax Code should be simplified.
We should reduce the number of special interest tax breaks and use
that savings to lower the tax rates for everyone.
I participated in just that kind of exercise at the State level as
chair of the Taxation Committee in the Wisconsin State Senate.
As we all know, there will be winners and losers in a reform of our
tax code, and I can tell you from direct experience that the best time
to enact tax reforms is when you have additional resources to help
increase the number of winners and decrease the number of losers.
Mr. President, this tax bill and the House version both squandered
that opportunity as well.
We might have had a significant start on real tax reform.
Instead, we got a grab bag of goodies for special interests added to
a tax code already thick with complexity.
A recent article in the Washington Post listed a number of the
special interest tax breaks in this bill and the House version.
They include tax breaks for: multinational corporations, utility
companies, railroad, oil and gas operators, timber companies, the steel
industry, seaplane owners in Alaska, sawmills in Maine, barge lines in
Mississippi, Eskimo whaling captains, and Carolina woodlot owners.
This bill is a dream come true for business lobbyists.
The Post reported one lobbyist as saying, ``If you're a business
lobbyist and couldn't get into this legislation, you better turn in
your six-shooter.''
Mr. President, in the name of complete disclosure, let me note that I
understand the Democratic alternative, which I may support, suffers
from the same problem, though to a much lesser extent.
And it will come as no surprise to my colleagues that I firmly
believe this kind of pandering to special interests is a direct result
of our campaign finance system.
There's ample evidence to that effect right here in this bill.
The campaign finance system gives wealthy interest an open invitation
to influence legislation in this body, and in this bill it's clear that
special interests accepted that invitation in droves, Mr. President.
For the benefit of my colleagues and the public, I'd like to share
just a few examples of what these interests gave in PAC and soft money,
and what they got in either this bill, the House tax measure, or both.
I do this from time to time; it is known as ``The Calling of the
Bankroll.''
According to the Washington Post, an umbrella organization called the
Coalition of Service Industries, a coalition of banks and securities
firms, won a provision to extend for five years a temporary tax
deferral on income those industries earn abroad. The value of this tax
deferral: $5 billion over ten years.
So we know what Congress has given the Coalition of Service
Industries, but what has the Coalition of Service Industries given to
candidates and the political parties? During the 1997-1998 election
cycle, coalition members gave the following:
Ernst & Young--more than half a million dollars in soft money, and
nearly $900,000 in PAC money.
CIGNA Corporation--more than $335,000 in soft money, and more than
$210,000 in PAC money.
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American Express--more than $275,000 in soft money and nearly
$175,000 in PAC money.
Deloitte and Touche--more than $225,000 in soft money and more than
$710,000 in PAC money.
Of course, as I said Mr. President, this is just a sampling of what
Coalition of Service Industries members have given. I'd be up here a
lot longer if I had a document all the millions of dollars these groups
have given.
But it doesn't stop there. These two tax bills mean Christmas in July
for special interests, Mr. President, with gifts for jut about every
industry in Santa's bag.
The post reports the utility industry got a provision affecting
utility mergers in the House measure, which, if it survives, is worth
more than $1 billion to the utility industry. The provision would
excuse the payment of taxes on the fund that utilities set up to cover
the costs of shutting down nuclear power plants.
Utilities companies that operate nuclear power plans would be
particularly grateful to see this provision passed, Mr. President.
Their depth of their gratitude would be matched only by the size of
their campaign contributions during the last election cycle, including:
Entergy Corporation, which gave $228,000 in soft money and nearly
$250,000 in PAC money;
Commonwealth Edison, which gave $110,000 in soft money and more than
$106,000 in PAC money;
And Florida Power and Light, which gave nearly $300,000 in soft money
and more than $182,000 in PAC money.
As it does so many other issues, our campaign finance system is
preventing real reform to our tax code, and those who doubt that only
need to look at this bill.
Mr. President, the best thing we can say about this tax bill is that
it will not be enacted into law.
The President will almost surely veto it, and he will be right in
doing so.
This bill is fiscally irresponsible.
It depends on budget suppositions that are at best fanciful.
It uses Social Security balances to pay for tax cuts.
It proposes a tax policy that no only jeopardizes our current budget
but our future fiscal health.
It sticks our children and grandchildren with the cost of paying-off
the debt run up over the past two decades, and leaves them the task of
extending the solvency of Social Security, strengthening Medicare, and
reforming our long-term care system.
And it hands our special interest tax breaks galore while providing
little tax relief to the vast majority of taxpayers.
Mr. President, I will vote against this bill, and urge my colleagues
to do so as well.
Mr. President, I yield the floor.
Mr. BAUCUS. Mr. President, I yield 5 minutes to my good friend from
Delaware, Senator Roth.
Mr. ROTH. Mr. President, Senator Gramm has provided Members with a
straightforward alternative to the bipartisan Finance Committee bill. I
compliment him on the clarity of his approach, much of which I favor.
Although provisions of Senator Gramm's substitute have appeal for me,
frankly, I could not have used it as a basis for the Finance Committee.
His proposal contains elements that would not garner a majority of
committee members.
In addition, Senator Gramm's substitute, though popular with many in
the Senate Republican caucus, would not pick up support on the other
side of the aisle. For that reason, his proposal would not be a
blueprint for tax cuts, in the form of a signable bill, that we can
deliver to the American people now.
Finally, although Senator Gramm's amendment is simpler, it leaves out
many bipartisan tax measures that address important tax issues. For
instance, education savings incentives are deleted. This means parents
who want to save for a child's college education would be left out of
the picture. We're talking about millions of parents and students in
every state.
Yet another example is the student loan interest deduction. Under the
Finance Committee bill, at least three million graduates, bearing the
burden of college debt, would be allowed to deduct student loan
interest on their tax returns.
In my legislation I try to focus on matters of need to the American
family. I provide incentives to promote savings, pensions, IRAs. Many
in retirement depend not only on Social Security, which we will
address, but also on personal savings and pensions. My bill addresses
that. There is nothing to correct the problems of AMT, the alternative
minimum tax. Unfortunately, thousands upon thousands of American
families will be hit by AMT and not enjoy the full benefit of many
programs such as the child tax credit.
Finally, nothing is done with respect to charitable giving. We have
proposals that will promote and create incentives.
For these and other reasons, I must oppose Senator Gramm's well-
intentioned amendment.
I reserve the remainder of my time.
Mr. BAUCUS. Mr. President, I yield myself such time as I might
consume.
The Finance Committee has already rejected this provision. The
Finance Committee deliberated this amendment in committee, and, by a
large margin turned it down because it is excessive. It is
irresponsible, in my judgment. It is not the right thing to do. It says
we are going to take the entire on-budget surplus. And because of the
tax cut plus the lost interest on the debt, there is nothing left for
Medicare, discretionary spending or any other programs which will be
cut anyway by a very large margin.
It is excessive, too, compared to the bill passed by the committee
because it is so backloaded. It is so top heavy. By that, I mean the
bulk of the cost of the provisions are at the very end--6, 7, or 8
years from now. No one can predict the future of this country and what
position we will be in 6 to 8 years from now.
I was speaking to the CEO of a major American company a few days ago,
a man we all know, a company we all know very well. He told me they
can't begin to plan for the future. They do have 5-year plans but they
know the 5-year plans are not going to be accurate. So they have to
just do the best they can on virtually a quarterly basis. They have to
go ahead in the areas they think are the areas of the future, but it is
almost impossible to plan in this modern era.
So I say, if we today were to lock in provisions in the law which
will hemorrhage this country's budget surplus based upon ephemeral,
distant projections which are never accurate, that is not responsible.
That is not the right thing to do. And that is what this amendment
does. That is why basically, fundamentally, without going into all the
details of it, why this does not make sense. It has often been stated
during this debate that the time when the baby boomers begin to retire
is when these things really start to kick in and the costs explode.
I think prudence is the watchword here today. History sometimes is a
guide. Look at the 1980s. What happened in the 1980s? There was a huge
tax cut. Congress succumbed to the siren song of supply side economics.
What was supply side economics supposed to do? It was supposed to make
deep tax cuts, spend more on defense, and guess what, folks, that is
going to cause the budget to be balanced. That was what supply side
economics was supposed to do--advocated, by the proponents of this
amendment. It was going to balance the budget.
The theory is the trickle down theory: Cut the taxes of the most
wealthy, they invest a lot more, it trickles down and the economy
starts humming and it balances the budget. That was the Laffer curve.
Guess what, it did not work. We kind of knew it was not going to work,
but it was such a temptation, such a siren song to vote these huge tax
cuts, hoping, hoping, hoping that what the proponents said would come
true. Guess what, it did not. It did not come true at all.
The tax cut was passed in 1981. Then what happened in 1982? This
Congress, a Republican Congress, and President Reagan, had to change
course. They had to raise taxes. The Republican Congress and Republican
President raised taxes in 1982. Then guess what. This tax increase was
not enough because the deficits were just so large. The Republican
Congress and Republican President had to raise taxes again in 1984.
They had to raise taxes more because the deficit was so large. The
national debt in 1980 was roughly about
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$1 trillion; 8 years later it was roughly $3 trillion, maybe close to
$4 trillion. It tripled and quadrupled during that time of the huge tax
cuts. Then we had to add more taxes back again in 1982 and 1984.
So, in many ways this is history repeating itself. Democrats in the
Senate support a tax cut. We support using a third of the on-budget
surplus to pay for a tax cut. But we are just saying don't use all of
the on-budget surplus for tax cuts with virtually all going to the most
wealthy Americans.
Do you know what else is going on here? I do believe the proponents
of this bill are so--not distrustful, but so opposed to Government that
they want these huge tax cuts partly to force down deeper cuts, way
below the baseline in spending. I think they want to cut veterans'
benefits 30 percent; they want to cut health education 20, 30 percent;
want to cut these programs. I think there are really many on that side
who want to make these cuts. They want to. As strange as that might
sound, they want to. That is another reason for this huge tax cut
because it will force cuts in spending later on.
We have already cut spending. Discretionary spending has been cut so
much by this body over the last 10 years it is unbelievable. And the
size of government has gone down, with many fewer federal employees
than there were years ago.
To sum it all up, we have seen this provision in the Finance
Committee. The Finance Committee soundly rejected this amendment. I
urge the Senate to also soundly reject this amendment. It is not good
policy.
I reserve the remainder of our time.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, I yield 10 minutes to the distinguished
Senator from Tennessee.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, I think Senator Gramm is bringing a very
important principle to the table, one that we need to address: If we
are going to have a tax cut, what kind of tax cut should we have? What
is best for the economy, and what is fair?
There was a consensus in this country, 10, 15 years ago, that we
needed to have a tax policy based upon a broader base and lower rates.
That is essentially the tax bill that came out in 1986. We came down to
two tax rates. We had a 15-percent and a 28-percent tax rate. There was
a broader base, where more people were paying taxes, but lower rates.
In the 1990s, we have gotten away from that. We have gotten away from
that principle and gone, instead, toward what has been referred to as
targeted tax cuts. That its basically the Government--we, the
President--that decide, on an individual basis, who deserves the tax
break or tax cut in any particular year. Usually it is based upon how
much clout they have, or some notions of fairness of a particular
congressional makeup at some particular time. So now we have wound up
with higher rates and a narrower base. We now have five income tax
rates instead of the two we had back in 1986 in addition to phaseouts.
The Tax Code, not only do we have additional rates, it has become more
progressive, even in addition to those rates.
I do not think a lot of people are aware of this. I think most
Americans think initially, basically, they can look at tax rates and
see what their tax burden is. But then you look at all the phaseouts
that we have. Congress has decided in its wisdom that people of a
certain income level do not deserve some of the deductions, exemptions,
and benefits that others deserve. So we have a personal exemption
phaseout.
We have an itemized deduction phaseout at basically the $124,000
level for individuals. I am talking about individuals and not couples,
in terms of the dollar amounts I am using. The personal exemption
phaseout; itemized deduction phaseout, limitation of only being able to
deduct that amount over 2 percent of itemized deductions; a 7.5 percent
floor on medical deductions; a 10 percent adjusted gross income floor
on casualty deductions; a $500 child credit that phases out at an
income level of $75,000; a dependent child credit that begins to be
phased out at an income level of $10,000--if you make that much it
begins to be phased out; a deductible IRA, $30,000; an education IRA,
$95,000; the HOPE credit, college credit, begins to be phased out at
$40,000 for an individual. So we want to help you go to college, we
want to help your kids go to college--as long as you do not have a job,
basically is what that amounts to.
We have a life-time learning credit of $40,000; student loan interest
deductions, at $40,000 it begins to be phased out; education savings
bond interest--if you make $52,000 you begin to lose that; elderly/
disabled credit, $7,500; adoption credit/exclusion, $75,000; DC first
time homebuyer--if you make $75,000, you begin to have that phased out
as a taxpaying individual; rental real estate losses; rehabilitation
tax credit--on and on and on.
In addition to continuing to raise the tax rate--the highest one in
1986 wa
s 28 percent and now it is up to 39.6 percent plus the maximum--
plus the limited itemized deductions and phaseout of personal
exemptions, you wind up with an effective rate of over 40 percent. When
you remove the cap on Medicare tax, plus these phaseouts, you are
looking at, in some cases, close to an effective 45-percent tax rate,
something like that.
My only point is that, as we decide how to go forward, we need to
understand that we have a progressive system as far as our income Tax
Code is concerned, and that is the way it ought to be. A lot of people
believe it is that way. But every time we have a tax cut, we cannot say
let's give everybody the same dollar amount back in taxes regardless of
how much they paid in because we have a very progressive system.
We have progressive tax rates up to 39.6 percent, with phaseouts so
that if you are making any money, if people are working hard and making
a pretty good living, they begin to lose the deductions and credits.
That makes it even more progressive.
We come along and say we are going to give a tax cut now, and we say
if the other guy is paying twice as much in taxes as I am, give him a
tax cut. He lost all these exemptions because he is making good money.
He is paying twice as much in taxes. But we come along with a tax cut
and we say they are going to both get the same amount back? I do not
think that makes much sense.
Let's say the economy was good and we were able to have successive
tax cuts over a period of time and we gave the same dollar amount back
to everybody regardless of how much they were paying in taxes. We would
have a narrower and narrower base all the time and fewer and fewer
people paying any taxes at all. We would continually be taking people
off the tax rolls. We already have 43 million people who do not pay
taxes.
As progressive as our Tax Code is, as does the Senator from Texas, I
make no apologies for the proposition that when it comes time for a tax
cut, let's base the tax cut on how much people are paying in.
We have to ask ourselves a fundamental question: Are we interested in
punishing folks who make a good living or are we interested in
collecting money for the Federal Government to pay legitimate
Government expenses? History shows every time we have had a reduction
in tax rates, we have more money. Every time the Government reduces
rates in any appreciable amount, the Government winds up getting more
money.
In the 1920s, it was true. In the 1960s, under President Kennedy, who
said a rising tide lifts all boats, it was true. In the much maligned
1980s, which laid the groundwork for the greatest economic prosperity
this world has ever known, it was true.
Increased revenues in the twenties was 61 percent over a 7-year
period. In the sixties, a revenue increase after inflation was about 33
percent. In the eighties, after cutting the tax rates, revenues
increased 28 percent because it reduced the incentive to hide income,
to shelter income, and to underreport income.
Similarly, the share of the tax burden paid by the rich rose
dramatically as the rates fell. By cutting rates, we get more money out
of the rich.
Do we want to be concerned about how much somebody is making and try
to hold that down or do we want the money for the Federal Government? I
thought the idea was to have a fair Tax
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Code but to raise the money for the legitimate expenses of the Federal
Government.
In the 1920s, they called rich $50,000. I guess things have not
changed that much. But in 1921, the rich paid 44 percent of the income
tax. In 1928, after the rate cut, they paid 78 percent of all taxes.
The gap was not quite as pronounced later on, but in 1963 under
President Kennedy, at the time of the cut, the rich were paying 11.6
percent of all the taxes being paid. In 1966, they were paying 15.1
percent. In the 1980s, we were talking about the top 10 percent----
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON. I ask for another 3 minutes.
Mr. GRAMM. I yield the Senator another 3 minutes.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. In the 1980s--1981--the rich were paying 48 percent of
the taxes. In 1988, they wound up paying 57 percent of the taxes. We do
not get a lot of credit taking up for the rich, but our responsibility
as public servants is to look out for the country and have policies
that are going to get the most money and not try to be too concerned
about who is going to get this share of the economic pie: I am going to
get yours; you are not going to get mine. Our concern should be with
making that economic pie better.
As far as an across-the-board cut is concerned, every serious
observer nowadays thinks it is sound economic policy. Lawrence Lindsey,
former Federal Reserve Board member, George Shultz, former Secretary of
State, and even the oft quoted Chairman Greenspan--there may be some
discussion as to when he thinks a tax cut should come about, but he
says when it comes about, it ought to be an across-the-board rate
reduction. This is sound economic policy.
I know the prospects for this particular amendment, but all of this
business about soak the rich and unfairness, we need to keep a little
balance and keep things in mind. If we want more money, if we want to
be fair--first of all, we have to recognize we have a very progressive
system in this country, so when it comes time for a tax cut, let's pay
some attention to the idea of across the board and not have politic
Major Actions:
All articles in Senate section
TAXPAYER REFUND ACT OF 1999--Resumed
(Senate - July 29, 1999)
Text of this article available as:
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[Pages
S9651-S9737]
TAXPAYER REFUND ACT OF 1999--Resumed
The PRESIDING OFFICER. The clerk will report the bill.
The legislative assistant read as follows:
A bill (
S. 1429) to provide for reconciliation pursuant to
section 104 of the concurrent resolution on the budget for
fiscal year 2000.
Pending:
Abraham amendment No. 1398, to preserve and protect the
surpluses of the social security trust funds by reaffirming
the exclusion of receipts and disbursement from the budget,
by setting a limit on the debt held by the public, and by
amending the Congressional Budget Act of 1974 to provide a
process to reduce the limit on the debt held by the public.
Baucus motion to recommit the bill to the Committee on
Finance, with instructions to report back with an amendment
to reduce the tax breaks in the bill by an amount sufficient
to allow one hundred percent of the Social Security surplus
in each year to be locked away for Social Security, and one-
third of the non-Social Security surplus in each year to be
locked away for Medicare; and an amendment to protect the
Social Security and Medicare surplus reserves.
Robb amendment No. 1401, to delay the effective dates of
the provisions of, and amendments made by, the Act until the
long-term solvency of Social Security and Medicare programs
is ensured.
Motion to Waive the Budget Act Amendment No. 1398
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, the pending amendment is not germane. I
raise a point of order that the Abraham amendment violates section
305(b)(2) of the Congressional Budget Act of 1974.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. ABRAHAM. Mr. President, pursuant to section 904(c) of the
Congressional Budget Act of 1974, I move to waive the Budget Act for
consideration of the Abraham amendment.
Mr. GRAMM. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
[[Page
S9652]]
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. There i
s 2 minutes of debate.
Who yields time?
Mr. REID. Mr. President, in a letter dated April 21, 1999, on a
similar provision, then-Secretary of the Treasury Robert Rubin wrote to
Senator Moynihan that this ``provision could preclude the United States
from meeting its financial obligations to repay maturing debt and to
make benefit payments--including Social Security checks--also worsen a
future economic downturn.''
The lockbox in this proposal is potentially destabilizing in a manner
reminiscent of the constitutional amendment to require a balanced
budget.
I remind those who propose rigid 10-year schedules for reducing the
publicly held debt that economics does not follow the agricultural
cycle. There will be periods when surpluses, both on and off budget,
will fall far short of projections. We should not impose a debt
reduction schedule, enforced by a declining debt cycle ceiling, even if
it can be overridden with 60 votes. To do so will risk default every
time the debt ceiling is lowered.
Mr. ABRAHAM. Mr. President, first of all, we have endeavored to and
have modified our amendment to try to address some of these concerns. I
think we have done so. I believe we have given sufficient flexibility
so that there will not be the concerns that were raised in that letter.
This lockbox does not need a lot of debate. Americans have been
hearing us talk about it now for almost 3 months. We will continue to
try to get a straight up-down vote on this. I would note that once
again this morning another procedural roadblock has been put in place
to prevent us from getting a straight up-or-down vote. I regret that. I
was prepared to come today and offer both sides the opportunity to have
straightforward votes. If one side or the other in their various
lockbox proposals got 50-plus votes, they would win and we could give
the American people what I believe they want, and that is protection
for their Social Security dollars sent to Washington. But again, once
more, what we have had is a procedural impediment placed in the way of
getting final action on this legislation.
Mr. President, I urge my colleagues who have previously supported
this lockbox to do so. It is a tougher lockbox that protects Social
Security. If we want to do it, I say vote ``yes.'' Vote to waive the
Budget Act.
The PRESIDING OFFICER. All time has expired. The question is on
agreeing to the motion to waive the Budget Act. The yeas and nays have
been ordered. The clerk will call the roll.
The legislative clerk called the roll.
The yeas and nays resulted--yea
s 54, nays 46, as follows:
[Rollcall Vote No. 227 Leg.]
YEAS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
NAYS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Roth
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
The PRESIDING OFFICER (Mr. Frist). On this vote the yeas are 54, and
the nays are 46. Three-fifths of the Senators present and voting, not
having voted in the affirmative, the motion to waive the Budget Act is
rejected. The point of order is sustained, and the amendment falls.
Mr. ROTH. Mr. President, I ask unanimous consent that the remaining
votes in this series be limited to 10 minutes in length, and I ask that
all the Members of the Senate stay on the floor. We have a full and
busy day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Privilege Of The Floor
Mr. LEAHY. Mr. President, I ask unanimous consent that Peter
McDougall of my staff be given floor privileges throughout the day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion To Recommit
The PRESIDING OFFICER. The question is on the Baucus motion.
Mr. BAUCUS. Mr. President, I understand each side has 1 minute of
explanation.
The PRESIDING OFFICER. The Senator is correct.
Mr. BAUCUS. Mr. President, this is a very simple matter before the
Senate. It is a choice: Do we want to protect Medicare or not. It is
that simple. That is the choice that we are presented with today.
The amendment I am offering is the House lockbox which passed the
House by an overwhelming margin--it only had three or four votes
against it--along with the Medicare lockbox. The Medicare lockbox we
provide sets aside one-third of the on-budget surplus for Medicare. It
can be used in whatever way we want to use it for Medicare, including
to provide an affordable prescription drug benefit or for shoring up
Medicare solvency.
That is the choice before the Senate. Do we preserve Medicare or not.
Our choice here today, however, is nothing compared to another choice.
That is the choice that about 16 million seniors must make every day:
Do I choose to buy my medicine, choose to pay the rent, or choose to
buy food?
We are saying set aside and preserve for Medicare one-third of the
on-budget surplus so that the choices facing seniors are not quite as
abhorrent.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, this is another opportunity on the part
of the other side to propose to the American people that they want
anything but tax relief. This is a motion to recommit. It would do
nothing to protect Medicare. It is the President's proposal, which is a
phony transfer of IOUs to the Medicare trust fund. It does nothing to
help senior citizens. It is just an effort to lock up $300 billion so
you can't give the American people a tax cut, plain and simple. They
don't want to confront the issue of a lockbox for Social Security so
they muddle it up and instead of trying to solve something, they would
like to create an issue instead of a solution.
Frankly, there are hardly any experts in America who look at this
lockbox concept for Medicare and say it helps the seniors or it helps
Medicare. If this is the plan the President is alluding to across this
land, then he has none.
I believe, since the other side did not let us have a vote, we ought
to do ours procedurally also, and I am compelled to do that.
Therefore: The language in this amendment is not germane to the bill
before us, so I raise a point of order under section 305(b)(2) of the
Congressional Budget Act.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, pursuant to section 904 of the Budget Act,
I move to waive the applicable sections of that act for the
consideration of the pending amendment.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Budget Act in relation to the Baucus motion to recommit
S.
1429. The yeas and nays have been ordered.
The clerk will call the roll.
The legislative assistant called the roll.
The yeas and nays resulted--yeas 42, nay
s 58, as follows:
[[Page
S9653]]
[Rollcall Vote No. 228 Leg.]
YEAS--42
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
NAYS--58
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Kerrey
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
The PRESIDING OFFICER. On this vote, the yeas are 42, the nays are
58. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the motion falls.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, I move to reconsider the vote.
Mr. MOYNIHAN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. Mr. President, I ask unanimous consent that all amendments
and motions to recommit to
S. 1429 must be filed by 2 p.m. today at the
desk and with the bill managers.
Mr. STEVENS. Reserving the right to object, what time was that?
Mr. ROTH. Two p.m.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Amendment No. 1401
Mr. ROTH. Mr. President, I think we are ready for the vote on the
next amendment.
The PRESIDING OFFICER. There are 2 minutes equally divided. Who
yields time?
Mr. ROBB addressed the Chair.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ROBB. Mr. President, this amendment simply delays the effective
date of the tax cut that is proposed. There are many who believe that a
tax cut of this magnitude at this time would be ludicrous. But that is
not the issue. The issue is whether or not we ought to go ahead with a
tax cut notwithstanding the fact that we have not protected Social
Security and Medicare.
Most of the people who have spoken so far have talked about their
concern for doing just that. The lockbox provisions were proposing to
do just that.
If you want to save Social Security and Medicare, this is an
incentive. It will delay the implementation of the act, but it will not
negate the effectiveness of the act.
I ask that our colleagues vote to support this particular amendment,
save the one-half of 1 percent of the total which would be expended
this year, and not lock in cuts that would cost $792 billion, which
would be almost impossible to reverse should that prove to be the case.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON addressed the Chair.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, no one in this chamber thinks other than
that we want a real, sound, solid, and solvent Social Security system
and Medicare system. Most of us, however, realize we will only have
that if we have fundamental reforms in those systems, such as that
proposed by the Medicare commission at which the President scoffed.
This amendment will serve to actually make Social Security and
Medicare less sound. It will actually delay the process of real reform.
The solvency dates that are used in this legislation are taken from the
President's proposal and will invariably result in pouring more and
more general revenues into these entitlement programs, delaying the day
when we have to face up to the fact that we have to have fundamental
reform.
Our bill sets aside 75 percent of the surplus for Medicare, Social
Security, debt retirement, and other spending priorities. With regard
to the 25 percent remaining, there is no reason to delay tax cuts.
If we saved every penny of the surplus, put it into Medicare and
Social Security, it would not do one thing toward solving the
fundamental problem.
This language is not germane to the bill now before us; therefore, I
raise a point of order, under section 305(b)(2) of the Congressional
Budget Act of 1974.
Mr. ROBB. Mr. President, pursuant to section 904 of the Congressional
Budget Act of 1974, I move to waive the applicable sections of that act
for the consideration of the pending amendment, and I ask for the yeas
and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Congressional Budget Act in relation to the Robb amendment
No. 1401. The yeas and nays have been ordered. The clerk will call the
roll.
The legislative clerk called the roll.
The yeas and nays resulted--yeas 46, nay
s 54, as follows:
[Rollcall Vote No. 229 Leg.]
YEAS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Snowe
Torricelli
Voinovich
Wellstone
Wyden
NAYS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
The PRESIDING OFFICER. On this vote the yeas are 46, the nays are 54.
Three-fifths of the Senators duly chosen and sworn not having voted in
the affirmative, the motion is rejected.
The point of order is sustained, and the amendment falls.
Mr. MOYNIHAN. Mr. President, I move to reconsider the vote.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1405
(Purpose: To return to the taxpayers a portion of the budget surplus
that they created with their tax payments)
The PRESIDING OFFICER. Under the previous order, the Senator from
Texas is recognized to offer an amendment.
Mr. GRAMM. Mr. President, I send an amendment to the desk in the
nature of a substitute for myself, for Senator Lott, Senator Nickles,
Senator Mack, Senator Coverdell, Senator Craig, Senator McConnell,
Senator Inhofe, Senator Hutchison, Senator Bunning, Senator Kyl,
Senator Bob Smith of New Hampshire, Senator Allard, and Senator Hagel,
and I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Texas [Mr. Gramm], for himself, Mr. Lott,
Mr. Nickles, Mr. Mack, Mr. Coverdell, Mr. Craig, Mr.
McConnell, Mr. Inhofe, Mrs. Hutchison, Mr. Bunning, Mr. Kyl,
Mr. Smith of New Hampshire, Mr. Allard, and Mr. Hagel,
proposes an amendment numbered 1405.
Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page
S9654]]
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. GRAMM. Mr. President, I have the highest admiration for the
chairman of the Finance Committee. I am supportive of the tax cut he
has crafted in committee. I intend to vote for it on final passage if
this amendment fails.
But I believe we need a clearer vision. I believe we need to define
very precisely what we would like to use this tax cut to do, rather
than running around trying to stick a nickel in everybody's pocket with
a targeted program.
I would prefer to have a tax cut that has clear themes and this is a
very simple substitute because it consists of simply five things. So
this is a tax cut that you can explain to every American, and it
contains basic principles that I believe every American can understand
and support.
The first principle is we ought to have an across-the-board tax cut
of 10 percent. Now, I know our Democrat colleagues are going to jump up
and down and say, first of all, that 32 percent of American families
pay no income taxes, and so if you have an across-the-board tax cut,
they will not get a tax cut. And that is right. Tax cuts are for
taxpayers. If you don't pay taxes and we have a tax cut, you don't get
a tax cut. Most Americans don't get food stamps; most Americans don't
get TANF; most Americans don't get Medicaid because they don't qualify
for those programs. If you don't pay taxes, you don't qualify for a tax
cut.
Our Democrat colleagues are obviously going to jump up and down and
say that Senator Rockefeller, who pays 10 times as much taxes as I do,
with a 10-percent across-the-board tax cut, will get 10 times as big a
tax cut. That is right, but he pays 10 times as much taxes. If you ask
people in your church to take up money to build a new parsonage and it
turned out you had taken up too much money, and you decided to give it
back, isn't the logical way to give it back to simply take how much an
individual gave and take the amount that you didn't need and give it
back to them proportionately?
So the point is, the first principle we believe in is there ought to
be an across-the-board tax cut, so every American who pays income taxes
will get a tax cut. Now, our Democratic colleagues have said they
believe if you are rich, which means you are in the upper half of the
income distribution--and they design that as roughly making somewhere
around $50,000--you don't deserve a tax cut. In their proposal, you
basically don't get one. I want to remind my colleagues that by
excluding people who pay 99 percent of the income taxes in America,
they are excluding from a tax cut 62 percent of all homeowners, 66
percent of all Americans between the ages of 45 and 64, 67 percent of
all families who have children in their homes, 67 percent of all full-
time workers, 68 percent of all Americans who have some college
education, 69 percent of all married couples, and 80 percent of all
two-wage earner families in America.
Our Democrat colleagues love investment, but they hate investors.
They love the benefits of capitalism, but they hate capitalists. An
across-the-board tax cut gives everybody a tax cut, and if people pay a
lot of taxes, they get a bigger tax cut--not proportionately, but they
get the same tax cut. If that offends you, if you believe that somehow
people who make over $50,000 a year are the enemies of the people and
they ought to continue to be punished, you would want to be against
this provision.
The next thing this provision does is it eliminates the marriage
penalty. Most Americans are not aware of that because our Tax Code is
so perverted, if two young people, both of whom work, fall in love and
get married, they, on average, pay the Federal Government $1,400 a year
in taxes for the right to be married. My wife is worth $1,400, but the
point is, she ought to get the money, not the Government. We eliminate
the marriage penalty.
Secondly, we have income splitting. Now, I know some of our Democrat
colleagues are going to get up and say, well, look, if the husband
earns all the money and the wife stays at home and raises the children,
they ought not to get the correction for the marriage penalty. Well, we
do income splitting. We have decided we don't want to inject the Tax
Code in the decision about whether people work outside the home or not.
My mama worked every day that I was a child, and she did it because she
had to do it. My wife has worked every day that our children have been
alive because she wanted to do it. I am not trying to distort the
decision one way or another, or make a judgment. All I am saying is
that people who stay at home and raise their children contribute to
America. They make a big contribution. By allowing a couple, where only
one of them works outside the home, to split their income and attribute
half to each one of them--that is what the partnership of marriage is
about--we are able to give them a substantial reduction in the penalty
they pay for being married.
The next provision is, we repeal the death tax, which is a certain
kind of death penalty. I like the death penalty where we put murderers
to death. I don't like the death penalty when working people die and we
end up forcing their children to sell their business or their farm. All
over America, people work a lifetime to build up a business or a farm,
and then when they die, their children have to sell that business or
sell that farm to give Government 55 cents out of every dollar they
earned in a death tax. This provision repeals the death tax.
Now, I know that our Democrat colleagues are going to get up and say,
well, these are rich people. But I want to give you an example. When I
first met a printer from Mexia named Dicky Flatt, I met him about 25
years ago. He was in business with his daddy, who worked on these old
calculator machines that businesses use. His mama kept all the books,
his wife basically was working in their stationery shop, and Dicky
Flatt did the printing business. They had an old building in Mexia, and
it was cracking right down the middle. They kept putting sand in the
bottom and kept tar-papering over the top. They had one bathroom, and
it didn't have a door on it; it had a curtain on it. So when you went
in to use the bathroom, you pulled the curtain.
Now, they worked hard in that business. So now Dicky Flatt has torn
down that building. He has built a Morton building, a metal building,
and he has a good size print shop and stationery shop. He sent his two
sons to Texas A They have come back and have gone into business with
him. He works every day. He gets in at 6 and leaves about 8. He is
there on Saturday until 6 o'clock. Whether you see him at the PTA, Boy
Scouts, or the Presbyterian Church, try as he may, he never gets that
blue ink off the ends of his fingers.
Now, Dicky Flatt may be rich, for all I know. He doesn't live like a
rich guy. When his brother died of cancer, he took over his school
supply business with his wife. My basic point is that Dicky Flatt and
Linda, his wife, have worked 6 days a week their whole lives. They
built up this business. Every penny they put into it has been in after-
tax dollars. How can it be right to force their two boys, who now work
in that business, to sell that business when Dicky and his wife Linda
die in order to give the Government 55 percent of it, in order to take
the money from Dicky Flatt and give it to people who have been sitting
on their fannies in Mexia, not working on Saturday, and in some cases,
not working at all? I am sure we are going to hear that this is for
rich people. I want to put a human face on it.
When we revolted against King George, he wasn't doing things such as
the death tax. This is an outrage. This is an assault on every value
this country stands for, and I want to repeal it and repeal it
outright.
I want to index the capital gains tax.
That is the fourth provision of this bill.
I want to say that from this day forward, if you buy a house as an
investment and the price doubles and you sell the house for twice as
much as you paid for it, you haven't made any money, you simply kept up
with inflation. But under current tax law, you have to pay the Federal
Government a capital gains tax on the doubling of your house's price
even though that new price will buy only the amount of goods you could
have bought with the money for which you bought the house. So the next
thing we do is index the capital gains tax for inflation.
Finally, we eliminate not the last outrage in the Tax Code but it is
a big
[[Page
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outrage. If General Motors buys you health insurance, it is tax
deductible for them, but if you buy it for yourself, it is not tax
deductible. We eliminate that by saying that no matter who buys health
insurance in America, the employer or the employee, a retiree or a
worker, a homemaker or someone who is employed in the economy, that
health insurance is tax deductible.
It is a simple tax cut that you can put on one piece of paper. If you
pay taxes, you are going to get a 10-percent reduction in income taxes
out of this bill. It is easy to figure. If you pay $1,000 in income
taxes, you are going to get $100. If you pay $10,000, you are going to
get $1,000. If that breaks your heart, so be it. I think most people
will like it.
Second, we eliminate the marriage penalty and we allow income
splitting. If you have one parent who stays at home, you are able to
divide the income in half and have each of them claim half that income
that belongs to them. This is endorsed by every family group in America
because it is the right thing to do.
We repeal the death tax outright over a 10-year period--no ifs, ands,
or buts. If you live 10 more years, under this bill, and you build
something with after-tax dollars, it belongs to your family forever.
That is simple arithmetic. I think we can all understand it.
We index the capital gains tax so that you never pay capital gains
tax again on inflation. This is a big issue for every homeowner and for
every investor in America.
Finally, we provide full deductibility of health insurance. This is
an equity issue. It is something that ought to be done.
This is a tax cut you can understand. It represents what I believe is
the vision of the party of which I am proud to be a member. I hope my
colleagues will vote for this substitute. I believe it represents a
dramatic improvement and simplification in the Tax Code.
I reserve the remainder of my time.
The PRESIDING OFFICER (Mr. Allard). Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 1 minute to the Senator from
California and then 10 minutes to the Senator from Wisconsin, off the
bill.
The PRESIDING OFFICER. The Senator from Delaware controls the time in
opposition.
Mr. BAUCUS. The Senator from Delaware delegated that to the Senator
from Montana.
The PRESIDING OFFICER. The Chair thanks the Senator for that
clarification.
The Senator from California is recognized.
Mrs. BOXER. Thank you, Mr. President. I thank Senator Baucus.
My colleague from Texas says the Democrats hate investors and the
Democrats hate capitalism. As a former stockbroker, I deeply resent his
remarks. Maybe when the Senator from Texas was a Democrat he hated
capitalism and he hated investors, but the Democrats around here don't.
One of the reasons we are not supporting his amendment is that we think
it is bad for capitalism and we think it is bad for investors.
I have to say that this amendment, which reflects what the House did,
is a risky and radical amendment. It hurts the middle class. He says he
loves the middle class. He talks about his momma and Dicky Flatt. And I
love to hear him do it. But the bottom line is, the result of his
amendment will hurt the very people he says he wants to help because it
is such an unfair tax cut that would go to the very wealthiest and hurt
the middle class and the working poor.
I say to my friends who may be listening to this debate, the Senator
from Texas is a great debater but he was wrong when he said the Clinton
plan would lead to economic disaster and he is wrong today. I hope we
will vote down his amendment.
I yield my time.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, I thank the Senator from Montana.
Mr. President, I rise to offer some comments on the reconciliation
tax measure we are considering.
First, let me note that we have come a long way in the last seven
years.
When I first came to the Senate, we were facing an actual budget
deficit of $340 million.
That was the real figure--the figure that did not use the Social
Security Trust Fund balances to mask the deficit.
Thanks in large part to the President's deficit reduction package in
1993, and to a lesser extent the bipartisan budget cuts of 1997, we are
approaching a truly balanced budget.
I emphasize `'approaching,'' Mr. President, for we are not there yet.
The budget projections of the Office of Management and Budget, and of
the Congressional Budget Office, are just that--projections.
We do not currently have a budget surplus, not without including the
Social Security Trust Fund balances.
Mr. President, I do not mean to minimize the wonderful budget
turnabout that has been achieved.
But we should not be building massive new commitments on a shaky
foundation of questionable budget assumptions.
And that is just what we have.
The assumptions underlying the tax measure we will debate depend on
Congress making cuts of $775 billion in real spending over the next ten
years compared to current levels.
Let me note that this level of cuts does not include any additional
cuts that might have to be made in order to offset the cost of
unanticipated emergencies.
Let me repeat that, Mr. President.
The $775 billion in real spending cuts over the next ten years does
not include the spending we do to help the victims of hurricanes,
earthquakes, tornadoes, floods, or any kind of international emergency.
But, for the moment, let us suppose that there will be no hurricanes,
or earthquakes, or tornadoes, or floods in the next ten years.
Let us suppose that there will be no international emergencies that
require our assistance.
Will Congress find the political will to cut spending by three-
quarters of a trillion dollars over the next ten years?
Mr. President, Congress has yet to demonstrate it can stay even
within the current spending caps, let alone find an additional three-
quarters of a trillion dollars in cuts.
Last fall, Congress passed an omnibus appropriations bill that busted
the current spending caps by more than $20 billion.
This past winter, even before we passed a budget resolution, the
Senate passed another budget buster,
S. 4, the military pay and
retirement measure, which over the next ten years would add another $62
billion in spending.
And just a few weeks ago, Congress busted the spending caps yet again
with $15 billion in additional spending.
Mr. President, this is not a record of fiscal discipline.
Nor is it the kind of record that should give anyone confidence that
the budget assumptions underlying this tax bill are sound ones.
Mr. President, the assumptions underlying this tax bill are grounded
not in fiscal reality but in political expediency.
But, let us assume that somehow, Congress was able to enact the
three-quarters of a trillion dollars in spending cuts.
And let us further assume, as we did earlier, that there will be no
hurricanes, or floods, or earthquakes, or drought, or any other kind of
natural disaster for the next ten years.
And that there will be no more Bosnias or Kosovos or Iraqs--no
international emergencies of any kind for the next ten years.
Even under all of these assumptions, would this tax proposal be a
sound one?
The answer is no, because even if each and every one of those rosy
scenarios comes true, this bill would use over $75 billion in Social
Security balances to pay for the tax breaks.
Mr. President, I strongly oppose using Social Security to fund tax
cuts; that is why I voted against the 1997 tax cut package.
We simply should not be using Social Security balances--balances
needed to pay future benefits--to fund other government programs, or to
pay for tax cuts.
Of course, some may argue that even more spending cuts will be found
in order to avoid the use of Social Security balances--on the top of
the three-quarters of a trillion dollars in cuts assumed in this
measure.
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Mr. President, granting even this still rosier scenario, would this
tax measure be fiscally responsible?
I regret that it would not, because not only does this tax bill risk
our current budget, it puts future generations at risk as well.
Mr. President, while the revenue impact of any tax cut measure can be
expected to grow over time, the policies outlined in this measure
explode.
Consider that while in the next ten years, the cost of this proposal
is an already whopping $800 billion--if those tax policies are
continued, the cost in the second ten years will be a nearly
unbelievable $2 trillion.
If you add the additional interest payments that will arise from debt
service, the total cost of the tax policies in this bill rise to over
$3 trillion.
For those who may have forgotten, let me remind my colleagues that it
is in that second ten years when the baby boomer generation begins to
retire and put increased pressure on Social Security, Medicare, and the
long-term care services provided under Medicaid.
If ever there were a time to be prudent, now is the time.
As improved as the short-term budget picture is, the longer-term
budget picture is little changed.
We still face serious problems in Medicare, and as I noted, the baby
boomer generation will put enormous pressure on that program, as well
as on the long-term care services, many of which are provided through
Medicaid.
There is also a consensus that we should address the long-term fiscal
health of Social Security, and the sooner the better.
And finally, Mr. President, we still face a mountain of debt that was
run up during the 1980s and early 1990s because of the deficits that
were run up during that time.
In each of these areas, there is a stark choice: we can act now to
address each of these areas; or, we can ignore them, watch the problems
get much worse, and leave the work and cost of reform to our children
and grandchildren.
Mr. President, for me, that's an easy choice.
I do not want my children footing the bill for the failure of past
generations to act responsible.
I want to support a tax cut, but not one that jeopardizes the work we
have done to straighten out the current budget and squanders the
opportunity to reduce our debt and put Social Security, Medicare, and
our long-term care system on sound footing.
Mr. President, let me take a moment to look at the make-up of the tax
measure itself.
One might expect that a tax cut of $800 billion would provide the
sort of broad-based tax benefits that would be politically attractive.
But given the amount of revenue dedicated to this tax cut, the
benefits to the average taxpayer are surprisingly small, and the
overall package is heavily skewed to some of the wealthiest individuals
and corporations in the world.
As was noted by the tax watchdog group Citizens for Tax Justice, the
tax bill gives three-quarters of its benefits to the best-off fifth of
all taxpayers.
By contrast, only 11 percent of the tax bill's benefits go to the
bottom 60 percent of all taxpayers.
While the average tax reduction for the wealthiest 1 percent of
taxpayers--those with incomes over $300,000--is over $23,000 a year
under this bill, those with more average income do not do quite as
well.
The average tax cut for those who are among the middle fifth of
taxpayers will be $279, or about $5 per week.
For those in the bottom three-fifths of all taxpayers, the average
tax cut is even smaller--about $140 per year, or less than $3 per week.
Mr. President, under this $800 billion tax bill, the majority of
taxpayers will have an average tax cut of $3 per week.
Maybe the proponents of this bill are hoping most of America will use
this windfall to buy one of those overpriced cups of coffee.
Well, Mr. President, thanks to this tax bill, once a week, three-
fifths of America will now be able to go to one of those fancy coffee
shops and get a frothy decaf cappuccino latte with skim milk.
This tax bill is a bad tax policy any way you brew it.
Mr. President, I recognize that some may genuinely believe we should
dedicate about $800 billion to tax cuts over the next ten years.
The tragedy is that even in that context, the $800 billion was spent
unwisely, because in addition to Social Security, Medicare, long-term
care, and reducing our national debt, one of our highest priorities
should be significant reform of our tax code.
It was just a few months ago that we heard how critical fundamental
tax reform was to our future.
Flat tax, consumption tax, a national value-added tax--there were a
number of significant proposals that sought to address the inefficiency
of our current Tax Code.
Simplification was the order of the day, and let me add, Mr.
President, that while I did not support many of those proposals, I
think many of the proponents of reform got it exactly right.
Our Tax Code should be simplified.
We should reduce the number of special interest tax breaks and use
that savings to lower the tax rates for everyone.
I participated in just that kind of exercise at the State level as
chair of the Taxation Committee in the Wisconsin State Senate.
As we all know, there will be winners and losers in a reform of our
tax code, and I can tell you from direct experience that the best time
to enact tax reforms is when you have additional resources to help
increase the number of winners and decrease the number of losers.
Mr. President, this tax bill and the House version both squandered
that opportunity as well.
We might have had a significant start on real tax reform.
Instead, we got a grab bag of goodies for special interests added to
a tax code already thick with complexity.
A recent article in the Washington Post listed a number of the
special interest tax breaks in this bill and the House version.
They include tax breaks for: multinational corporations, utility
companies, railroad, oil and gas operators, timber companies, the steel
industry, seaplane owners in Alaska, sawmills in Maine, barge lines in
Mississippi, Eskimo whaling captains, and Carolina woodlot owners.
This bill is a dream come true for business lobbyists.
The Post reported one lobbyist as saying, ``If you're a business
lobbyist and couldn't get into this legislation, you better turn in
your six-shooter.''
Mr. President, in the name of complete disclosure, let me note that I
understand the Democratic alternative, which I may support, suffers
from the same problem, though to a much lesser extent.
And it will come as no surprise to my colleagues that I firmly
believe this kind of pandering to special interests is a direct result
of our campaign finance system.
There's ample evidence to that effect right here in this bill.
The campaign finance system gives wealthy interest an open invitation
to influence legislation in this body, and in this bill it's clear that
special interests accepted that invitation in droves, Mr. President.
For the benefit of my colleagues and the public, I'd like to share
just a few examples of what these interests gave in PAC and soft money,
and what they got in either this bill, the House tax measure, or both.
I do this from time to time; it is known as ``The Calling of the
Bankroll.''
According to the Washington Post, an umbrella organization called the
Coalition of Service Industries, a coalition of banks and securities
firms, won a provision to extend for five years a temporary tax
deferral on income those industries earn abroad. The value of this tax
deferral: $5 billion over ten years.
So we know what Congress has given the Coalition of Service
Industries, but what has the Coalition of Service Industries given to
candidates and the political parties? During the 1997-1998 election
cycle, coalition members gave the following:
Ernst & Young--more than half a million dollars in soft money, and
nearly $900,000 in PAC money.
CIGNA Corporation--more than $335,000 in soft money, and more than
$210,000 in PAC money.
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American Express--more than $275,000 in soft money and nearly
$175,000 in PAC money.
Deloitte and Touche--more than $225,000 in soft money and more than
$710,000 in PAC money.
Of course, as I said Mr. President, this is just a sampling of what
Coalition of Service Industries members have given. I'd be up here a
lot longer if I had a document all the millions of dollars these groups
have given.
But it doesn't stop there. These two tax bills mean Christmas in July
for special interests, Mr. President, with gifts for jut about every
industry in Santa's bag.
The post reports the utility industry got a provision affecting
utility mergers in the House measure, which, if it survives, is worth
more than $1 billion to the utility industry. The provision would
excuse the payment of taxes on the fund that utilities set up to cover
the costs of shutting down nuclear power plants.
Utilities companies that operate nuclear power plans would be
particularly grateful to see this provision passed, Mr. President.
Their depth of their gratitude would be matched only by the size of
their campaign contributions during the last election cycle, including:
Entergy Corporation, which gave $228,000 in soft money and nearly
$250,000 in PAC money;
Commonwealth Edison, which gave $110,000 in soft money and more than
$106,000 in PAC money;
And Florida Power and Light, which gave nearly $300,000 in soft money
and more than $182,000 in PAC money.
As it does so many other issues, our campaign finance system is
preventing real reform to our tax code, and those who doubt that only
need to look at this bill.
Mr. President, the best thing we can say about this tax bill is that
it will not be enacted into law.
The President will almost surely veto it, and he will be right in
doing so.
This bill is fiscally irresponsible.
It depends on budget suppositions that are at best fanciful.
It uses Social Security balances to pay for tax cuts.
It proposes a tax policy that no only jeopardizes our current budget
but our future fiscal health.
It sticks our children and grandchildren with the cost of paying-off
the debt run up over the past two decades, and leaves them the task of
extending the solvency of Social Security, strengthening Medicare, and
reforming our long-term care system.
And it hands our special interest tax breaks galore while providing
little tax relief to the vast majority of taxpayers.
Mr. President, I will vote against this bill, and urge my colleagues
to do so as well.
Mr. President, I yield the floor.
Mr. BAUCUS. Mr. President, I yield 5 minutes to my good friend from
Delaware, Senator Roth.
Mr. ROTH. Mr. President, Senator Gramm has provided Members with a
straightforward alternative to the bipartisan Finance Committee bill. I
compliment him on the clarity of his approach, much of which I favor.
Although provisions of Senator Gramm's substitute have appeal for me,
frankly, I could not have used it as a basis for the Finance Committee.
His proposal contains elements that would not garner a majority of
committee members.
In addition, Senator Gramm's substitute, though popular with many in
the Senate Republican caucus, would not pick up support on the other
side of the aisle. For that reason, his proposal would not be a
blueprint for tax cuts, in the form of a signable bill, that we can
deliver to the American people now.
Finally, although Senator Gramm's amendment is simpler, it leaves out
many bipartisan tax measures that address important tax issues. For
instance, education savings incentives are deleted. This means parents
who want to save for a child's college education would be left out of
the picture. We're talking about millions of parents and students in
every state.
Yet another example is the student loan interest deduction. Under the
Finance Committee bill, at least three million graduates, bearing the
burden of college debt, would be allowed to deduct student loan
interest on their tax returns.
In my legislation I try to focus on matters of need to the American
family. I provide incentives to promote savings, pensions, IRAs. Many
in retirement depend not only on Social Security, which we will
address, but also on personal savings and pensions. My bill addresses
that. There is nothing to correct the problems of AMT, the alternative
minimum tax. Unfortunately, thousands upon thousands of American
families will be hit by AMT and not enjoy the full benefit of many
programs such as the child tax credit.
Finally, nothing is done with respect to charitable giving. We have
proposals that will promote and create incentives.
For these and other reasons, I must oppose Senator Gramm's well-
intentioned amendment.
I reserve the remainder of my time.
Mr. BAUCUS. Mr. President, I yield myself such time as I might
consume.
The Finance Committee has already rejected this provision. The
Finance Committee deliberated this amendment in committee, and, by a
large margin turned it down because it is excessive. It is
irresponsible, in my judgment. It is not the right thing to do. It says
we are going to take the entire on-budget surplus. And because of the
tax cut plus the lost interest on the debt, there is nothing left for
Medicare, discretionary spending or any other programs which will be
cut anyway by a very large margin.
It is excessive, too, compared to the bill passed by the committee
because it is so backloaded. It is so top heavy. By that, I mean the
bulk of the cost of the provisions are at the very end--6, 7, or 8
years from now. No one can predict the future of this country and what
position we will be in 6 to 8 years from now.
I was speaking to the CEO of a major American company a few days ago,
a man we all know, a company we all know very well. He told me they
can't begin to plan for the future. They do have 5-year plans but they
know the 5-year plans are not going to be accurate. So they have to
just do the best they can on virtually a quarterly basis. They have to
go ahead in the areas they think are the areas of the future, but it is
almost impossible to plan in this modern era.
So I say, if we today were to lock in provisions in the law which
will hemorrhage this country's budget surplus based upon ephemeral,
distant projections which are never accurate, that is not responsible.
That is not the right thing to do. And that is what this amendment
does. That is why basically, fundamentally, without going into all the
details of it, why this does not make sense. It has often been stated
during this debate that the time when the baby boomers begin to retire
is when these things really start to kick in and the costs explode.
I think prudence is the watchword here today. History sometimes is a
guide. Look at the 1980s. What happened in the 1980s? There was a huge
tax cut. Congress succumbed to the siren song of supply side economics.
What was supply side economics supposed to do? It was supposed to make
deep tax cuts, spend more on defense, and guess what, folks, that is
going to cause the budget to be balanced. That was what supply side
economics was supposed to do--advocated, by the proponents of this
amendment. It was going to balance the budget.
The theory is the trickle down theory: Cut the taxes of the most
wealthy, they invest a lot more, it trickles down and the economy
starts humming and it balances the budget. That was the Laffer curve.
Guess what, it did not work. We kind of knew it was not going to work,
but it was such a temptation, such a siren song to vote these huge tax
cuts, hoping, hoping, hoping that what the proponents said would come
true. Guess what, it did not. It did not come true at all.
The tax cut was passed in 1981. Then what happened in 1982? This
Congress, a Republican Congress, and President Reagan, had to change
course. They had to raise taxes. The Republican Congress and Republican
President raised taxes in 1982. Then guess what. This tax increase was
not enough because the deficits were just so large. The Republican
Congress and Republican President had to raise taxes again in 1984.
They had to raise taxes more because the deficit was so large. The
national debt in 1980 was roughly about
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$1 trillion; 8 years later it was roughly $3 trillion, maybe close to
$4 trillion. It tripled and quadrupled during that time of the huge tax
cuts. Then we had to add more taxes back again in 1982 and 1984.
So, in many ways this is history repeating itself. Democrats in the
Senate support a tax cut. We support using a third of the on-budget
surplus to pay for a tax cut. But we are just saying don't use all of
the on-budget surplus for tax cuts with virtually all going to the most
wealthy Americans.
Do you know what else is going on here? I do believe the proponents
of this bill are so--not distrustful, but so opposed to Government that
they want these huge tax cuts partly to force down deeper cuts, way
below the baseline in spending. I think they want to cut veterans'
benefits 30 percent; they want to cut health education 20, 30 percent;
want to cut these programs. I think there are really many on that side
who want to make these cuts. They want to. As strange as that might
sound, they want to. That is another reason for this huge tax cut
because it will force cuts in spending later on.
We have already cut spending. Discretionary spending has been cut so
much by this body over the last 10 years it is unbelievable. And the
size of government has gone down, with many fewer federal employees
than there were years ago.
To sum it all up, we have seen this provision in the Finance
Committee. The Finance Committee soundly rejected this amendment. I
urge the Senate to also soundly reject this amendment. It is not good
policy.
I reserve the remainder of our time.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, I yield 10 minutes to the distinguished
Senator from Tennessee.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, I think Senator Gramm is bringing a very
important principle to the table, one that we need to address: If we
are going to have a tax cut, what kind of tax cut should we have? What
is best for the economy, and what is fair?
There was a consensus in this country, 10, 15 years ago, that we
needed to have a tax policy based upon a broader base and lower rates.
That is essentially the tax bill that came out in 1986. We came down to
two tax rates. We had a 15-percent and a 28-percent tax rate. There was
a broader base, where more people were paying taxes, but lower rates.
In the 1990s, we have gotten away from that. We have gotten away from
that principle and gone, instead, toward what has been referred to as
targeted tax cuts. That its basically the Government--we, the
President--that decide, on an individual basis, who deserves the tax
break or tax cut in any particular year. Usually it is based upon how
much clout they have, or some notions of fairness of a particular
congressional makeup at some particular time. So now we have wound up
with higher rates and a narrower base. We now have five income tax
rates instead of the two we had back in 1986 in addition to phaseouts.
The Tax Code, not only do we have additional rates, it has become more
progressive, even in addition to those rates.
I do not think a lot of people are aware of this. I think most
Americans think initially, basically, they can look at tax rates and
see what their tax burden is. But then you look at all the phaseouts
that we have. Congress has decided in its wisdom that people of a
certain income level do not deserve some of the deductions, exemptions,
and benefits that others deserve. So we have a personal exemption
phaseout.
We have an itemized deduction phaseout at basically the $124,000
level for individuals. I am talking about individuals and not couples,
in terms of the dollar amounts I am using. The personal exemption
phaseout; itemized deduction phaseout, limitation of only being able to
deduct that amount over 2 percent of itemized deductions; a 7.5 percent
floor on medical deductions; a 10 percent adjusted gross income floor
on casualty deductions; a $500 child credit that phases out at an
income level of $75,000; a dependent child credit that begins to be
phased out at an income level of $10,000--if you make that much it
begins to be phased out; a deductible IRA, $30,000; an education IRA,
$95,000; the HOPE credit, college credit, begins to be phased out at
$40,000 for an individual. So we want to help you go to college, we
want to help your kids go to college--as long as you do not have a job,
basically is what that amounts to.
We have a life-time learning credit of $40,000; student loan interest
deductions, at $40,000 it begins to be phased out; education savings
bond interest--if you make $52,000 you begin to lose that; elderly/
disabled credit, $7,500; adoption credit/exclusion, $75,000; DC first
time homebuyer--if you make $75,000, you begin to have that phased out
as a taxpaying individual; rental real estate losses; rehabilitation
tax credit--on and on and on.
In addition to continuing to raise the tax rate--the highest one in
1986 wa
s 28 percent and now it is up to 39.6 percent plus the maximum--
plus the limited itemized deductions and phaseout of personal
exemptions, you wind up with an effective rate of over 40 percent. When
you remove the cap on Medicare tax, plus these phaseouts, you are
looking at, in some cases, close to an effective 45-percent tax rate,
something like that.
My only point is that, as we decide how to go forward, we need to
understand that we have a progressive system as far as our income Tax
Code is concerned, and that is the way it ought to be. A lot of people
believe it is that way. But every time we have a tax cut, we cannot say
let's give everybody the same dollar amount back in taxes regardless of
how much they paid in because we have a very progressive system.
We have progressive tax rates up to 39.6 percent, with phaseouts so
that if you are making any money, if people are working hard and making
a pretty good living, they begin to lose the deductions and credits.
That makes it even more progressive.
We come along and say we are going to give a tax cut now, and we say
if the other guy is paying twice as much in taxes as I am, give him a
tax cut. He lost all these exemptions because he is making good money.
He is paying twice as much in taxes. But we come along with a tax cut
and we say they are going to both get the same amount back? I do not
think that makes much sense.
Let's say the economy was good and we were able to have successive
tax cuts over a period of time and we gave the same dollar amount back
to everybody regardless of how much they were paying in taxes. We would
have a narrower and narrower base all the time and fewer and fewer
people paying any taxes at all. We would continually be taking people
off the tax rolls. We already have 43 million people who do not pay
taxes.
As progressive as our Tax Code is, as does the Senator from Texas, I
make no apologies for the proposition that when it comes time for a tax
cut, let's base the tax cut on how much people are paying in.
We have to ask ourselves a fundamental question: Are we interested in
punishing folks who make a good living or are we interested in
collecting money for the Federal Government to pay legitimate
Government expenses? History shows every time we have had a reduction
in tax rates, we have more money. Every time the Government reduces
rates in any appreciable amount, the Government winds up getting more
money.
In the 1920s, it was true. In the 1960s, under President Kennedy, who
said a rising tide lifts all boats, it was true. In the much maligned
1980s, which laid the groundwork for the greatest economic prosperity
this world has ever known, it was true.
Increased revenues in the twenties was 61 percent over a 7-year
period. In the sixties, a revenue increase after inflation was about 33
percent. In the eighties, after cutting the tax rates, revenues
increased 28 percent because it reduced the incentive to hide income,
to shelter income, and to underreport income.
Similarly, the share of the tax burden paid by the rich rose
dramatically as the rates fell. By cutting rates, we get more money out
of the rich.
Do we want to be concerned about how much somebody is making and try
to hold that down or do we want the money for the Federal Government? I
thought the idea was to have a fair Tax
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Code but to raise the money for the legitimate expenses of the Federal
Government.
In the 1920s, they called rich $50,000. I guess things have not
changed that much. But in 1921, the rich paid 44 percent of the income
tax. In 1928, after the rate cut, they paid 78 percent of all taxes.
The gap was not quite as pronounced later on, but in 1963 under
President Kennedy, at the time of the cut, the rich were paying 11.6
percent of all the taxes being paid. In 1966, they were paying 15.1
percent. In the 1980s, we were talking about the top 10 percent----
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON. I ask for another 3 minutes.
Mr. GRAMM. I yield the Senator another 3 minutes.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. In the 1980s--1981--the rich were paying 48 percent of
the taxes. In 1988, they wound up paying 57 percent of the taxes. We do
not get a lot of credit taking up for the rich, but our responsibility
as public servants is to look out for the country and have policies
that are going to get the most money and not try to be too concerned
about who is going to get this share of the economic pie: I am going to
get yours; you are not going to get mine. Our concern should be with
making that economic pie better.
As far as an across-the-board cut is concerned, every serious
observer nowadays thinks it is sound economic policy. Lawrence Lindsey,
former Federal Reserve Board member, George Shultz, former Secretary of
State, and even the oft quoted Chairman Greenspan--there may be some
discussion as to when he thinks a tax cut should come about, but he
says when it comes about, it ought to be an across-the-board rate
reduction. This is sound economic policy.
I know the prospects for this particular amendment, but all of this
business about soak the rich and unfairness, we need to keep a little
balance and keep things in mind. If we want more money, if we want to
be fair--first of all, we have to recognize we have a very progressive
system in this country, so when it comes time for a tax cut, let's pay
some attention to the idea of across the board and not ha
Amendments:
Cosponsors:
TAXPAYER REFUND ACT OF 1999--Resumed
Sponsor:
Summary:
All articles in Senate section
TAXPAYER REFUND ACT OF 1999--Resumed
(Senate - July 29, 1999)
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TAXPAYER REFUND ACT OF 1999--Resumed
The PRESIDING OFFICER. The clerk will report the bill.
The legislative assistant read as follows:
A bill (
S. 1429) to provide for reconciliation pursuant to
section 104 of the concurrent resolution on the budget for
fiscal year 2000.
Pending:
Abraham amendment No. 1398, to preserve and protect the
surpluses of the social security trust funds by reaffirming
the exclusion of receipts and disbursement from the budget,
by setting a limit on the debt held by the public, and by
amending the Congressional Budget Act of 1974 to provide a
process to reduce the limit on the debt held by the public.
Baucus motion to recommit the bill to the Committee on
Finance, with instructions to report back with an amendment
to reduce the tax breaks in the bill by an amount sufficient
to allow one hundred percent of the Social Security surplus
in each year to be locked away for Social Security, and one-
third of the non-Social Security surplus in each year to be
locked away for Medicare; and an amendment to protect the
Social Security and Medicare surplus reserves.
Robb amendment No. 1401, to delay the effective dates of
the provisions of, and amendments made by, the Act until the
long-term solvency of Social Security and Medicare programs
is ensured.
Motion to Waive the Budget Act Amendment No. 1398
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, the pending amendment is not germane. I
raise a point of order that the Abraham amendment violates section
305(b)(2) of the Congressional Budget Act of 1974.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. ABRAHAM. Mr. President, pursuant to section 904(c) of the
Congressional Budget Act of 1974, I move to waive the Budget Act for
consideration of the Abraham amendment.
Mr. GRAMM. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
[[Page
S9652]]
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. There i
s 2 minutes of debate.
Who yields time?
Mr. REID. Mr. President, in a letter dated April 21, 1999, on a
similar provision, then-Secretary of the Treasury Robert Rubin wrote to
Senator Moynihan that this ``provision could preclude the United States
from meeting its financial obligations to repay maturing debt and to
make benefit payments--including Social Security checks--also worsen a
future economic downturn.''
The lockbox in this proposal is potentially destabilizing in a manner
reminiscent of the constitutional amendment to require a balanced
budget.
I remind those who propose rigid 10-year schedules for reducing the
publicly held debt that economics does not follow the agricultural
cycle. There will be periods when surpluses, both on and off budget,
will fall far short of projections. We should not impose a debt
reduction schedule, enforced by a declining debt cycle ceiling, even if
it can be overridden with 60 votes. To do so will risk default every
time the debt ceiling is lowered.
Mr. ABRAHAM. Mr. President, first of all, we have endeavored to and
have modified our amendment to try to address some of these concerns. I
think we have done so. I believe we have given sufficient flexibility
so that there will not be the concerns that were raised in that letter.
This lockbox does not need a lot of debate. Americans have been
hearing us talk about it now for almost 3 months. We will continue to
try to get a straight up-down vote on this. I would note that once
again this morning another procedural roadblock has been put in place
to prevent us from getting a straight up-or-down vote. I regret that. I
was prepared to come today and offer both sides the opportunity to have
straightforward votes. If one side or the other in their various
lockbox proposals got 50-plus votes, they would win and we could give
the American people what I believe they want, and that is protection
for their Social Security dollars sent to Washington. But again, once
more, what we have had is a procedural impediment placed in the way of
getting final action on this legislation.
Mr. President, I urge my colleagues who have previously supported
this lockbox to do so. It is a tougher lockbox that protects Social
Security. If we want to do it, I say vote ``yes.'' Vote to waive the
Budget Act.
The PRESIDING OFFICER. All time has expired. The question is on
agreeing to the motion to waive the Budget Act. The yeas and nays have
been ordered. The clerk will call the roll.
The legislative clerk called the roll.
The yeas and nays resulted--yea
s 54, nays 46, as follows:
[Rollcall Vote No. 227 Leg.]
YEAS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
NAYS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Roth
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
The PRESIDING OFFICER (Mr. Frist). On this vote the yeas are 54, and
the nays are 46. Three-fifths of the Senators present and voting, not
having voted in the affirmative, the motion to waive the Budget Act is
rejected. The point of order is sustained, and the amendment falls.
Mr. ROTH. Mr. President, I ask unanimous consent that the remaining
votes in this series be limited to 10 minutes in length, and I ask that
all the Members of the Senate stay on the floor. We have a full and
busy day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Privilege Of The Floor
Mr. LEAHY. Mr. President, I ask unanimous consent that Peter
McDougall of my staff be given floor privileges throughout the day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion To Recommit
The PRESIDING OFFICER. The question is on the Baucus motion.
Mr. BAUCUS. Mr. President, I understand each side has 1 minute of
explanation.
The PRESIDING OFFICER. The Senator is correct.
Mr. BAUCUS. Mr. President, this is a very simple matter before the
Senate. It is a choice: Do we want to protect Medicare or not. It is
that simple. That is the choice that we are presented with today.
The amendment I am offering is the House lockbox which passed the
House by an overwhelming margin--it only had three or four votes
against it--along with the Medicare lockbox. The Medicare lockbox we
provide sets aside one-third of the on-budget surplus for Medicare. It
can be used in whatever way we want to use it for Medicare, including
to provide an affordable prescription drug benefit or for shoring up
Medicare solvency.
That is the choice before the Senate. Do we preserve Medicare or not.
Our choice here today, however, is nothing compared to another choice.
That is the choice that about 16 million seniors must make every day:
Do I choose to buy my medicine, choose to pay the rent, or choose to
buy food?
We are saying set aside and preserve for Medicare one-third of the
on-budget surplus so that the choices facing seniors are not quite as
abhorrent.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, this is another opportunity on the part
of the other side to propose to the American people that they want
anything but tax relief. This is a motion to recommit. It would do
nothing to protect Medicare. It is the President's proposal, which is a
phony transfer of IOUs to the Medicare trust fund. It does nothing to
help senior citizens. It is just an effort to lock up $300 billion so
you can't give the American people a tax cut, plain and simple. They
don't want to confront the issue of a lockbox for Social Security so
they muddle it up and instead of trying to solve something, they would
like to create an issue instead of a solution.
Frankly, there are hardly any experts in America who look at this
lockbox concept for Medicare and say it helps the seniors or it helps
Medicare. If this is the plan the President is alluding to across this
land, then he has none.
I believe, since the other side did not let us have a vote, we ought
to do ours procedurally also, and I am compelled to do that.
Therefore: The language in this amendment is not germane to the bill
before us, so I raise a point of order under section 305(b)(2) of the
Congressional Budget Act.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, pursuant to section 904 of the Budget Act,
I move to waive the applicable sections of that act for the
consideration of the pending amendment.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Budget Act in relation to the Baucus motion to recommit
S.
1429. The yeas and nays have been ordered.
The clerk will call the roll.
The legislative assistant called the roll.
The yeas and nays resulted--yeas 42, nay
s 58, as follows:
[[Page
S9653]]
[Rollcall Vote No. 228 Leg.]
YEAS--42
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
NAYS--58
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Kerrey
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
The PRESIDING OFFICER. On this vote, the yeas are 42, the nays are
58. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the motion falls.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, I move to reconsider the vote.
Mr. MOYNIHAN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. Mr. President, I ask unanimous consent that all amendments
and motions to recommit to
S. 1429 must be filed by 2 p.m. today at the
desk and with the bill managers.
Mr. STEVENS. Reserving the right to object, what time was that?
Mr. ROTH. Two p.m.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Amendment No. 1401
Mr. ROTH. Mr. President, I think we are ready for the vote on the
next amendment.
The PRESIDING OFFICER. There are 2 minutes equally divided. Who
yields time?
Mr. ROBB addressed the Chair.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ROBB. Mr. President, this amendment simply delays the effective
date of the tax cut that is proposed. There are many who believe that a
tax cut of this magnitude at this time would be ludicrous. But that is
not the issue. The issue is whether or not we ought to go ahead with a
tax cut notwithstanding the fact that we have not protected Social
Security and Medicare.
Most of the people who have spoken so far have talked about their
concern for doing just that. The lockbox provisions were proposing to
do just that.
If you want to save Social Security and Medicare, this is an
incentive. It will delay the implementation of the act, but it will not
negate the effectiveness of the act.
I ask that our colleagues vote to support this particular amendment,
save the one-half of 1 percent of the total which would be expended
this year, and not lock in cuts that would cost $792 billion, which
would be almost impossible to reverse should that prove to be the case.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON addressed the Chair.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, no one in this chamber thinks other than
that we want a real, sound, solid, and solvent Social Security system
and Medicare system. Most of us, however, realize we will only have
that if we have fundamental reforms in those systems, such as that
proposed by the Medicare commission at which the President scoffed.
This amendment will serve to actually make Social Security and
Medicare less sound. It will actually delay the process of real reform.
The solvency dates that are used in this legislation are taken from the
President's proposal and will invariably result in pouring more and
more general revenues into these entitlement programs, delaying the day
when we have to face up to the fact that we have to have fundamental
reform.
Our bill sets aside 75 percent of the surplus for Medicare, Social
Security, debt retirement, and other spending priorities. With regard
to the 25 percent remaining, there is no reason to delay tax cuts.
If we saved every penny of the surplus, put it into Medicare and
Social Security, it would not do one thing toward solving the
fundamental problem.
This language is not germane to the bill now before us; therefore, I
raise a point of order, under section 305(b)(2) of the Congressional
Budget Act of 1974.
Mr. ROBB. Mr. President, pursuant to section 904 of the Congressional
Budget Act of 1974, I move to waive the applicable sections of that act
for the consideration of the pending amendment, and I ask for the yeas
and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Congressional Budget Act in relation to the Robb amendment
No. 1401. The yeas and nays have been ordered. The clerk will call the
roll.
The legislative clerk called the roll.
The yeas and nays resulted--yeas 46, nay
s 54, as follows:
[Rollcall Vote No. 229 Leg.]
YEAS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Snowe
Torricelli
Voinovich
Wellstone
Wyden
NAYS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
The PRESIDING OFFICER. On this vote the yeas are 46, the nays are 54.
Three-fifths of the Senators duly chosen and sworn not having voted in
the affirmative, the motion is rejected.
The point of order is sustained, and the amendment falls.
Mr. MOYNIHAN. Mr. President, I move to reconsider the vote.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1405
(Purpose: To return to the taxpayers a portion of the budget surplus
that they created with their tax payments)
The PRESIDING OFFICER. Under the previous order, the Senator from
Texas is recognized to offer an amendment.
Mr. GRAMM. Mr. President, I send an amendment to the desk in the
nature of a substitute for myself, for Senator Lott, Senator Nickles,
Senator Mack, Senator Coverdell, Senator Craig, Senator McConnell,
Senator Inhofe, Senator Hutchison, Senator Bunning, Senator Kyl,
Senator Bob Smith of New Hampshire, Senator Allard, and Senator Hagel,
and I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Texas [Mr. Gramm], for himself, Mr. Lott,
Mr. Nickles, Mr. Mack, Mr. Coverdell, Mr. Craig, Mr.
McConnell, Mr. Inhofe, Mrs. Hutchison, Mr. Bunning, Mr. Kyl,
Mr. Smith of New Hampshire, Mr. Allard, and Mr. Hagel,
proposes an amendment numbered 1405.
Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page
S9654]]
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. GRAMM. Mr. President, I have the highest admiration for the
chairman of the Finance Committee. I am supportive of the tax cut he
has crafted in committee. I intend to vote for it on final passage if
this amendment fails.
But I believe we need a clearer vision. I believe we need to define
very precisely what we would like to use this tax cut to do, rather
than running around trying to stick a nickel in everybody's pocket with
a targeted program.
I would prefer to have a tax cut that has clear themes and this is a
very simple substitute because it consists of simply five things. So
this is a tax cut that you can explain to every American, and it
contains basic principles that I believe every American can understand
and support.
The first principle is we ought to have an across-the-board tax cut
of 10 percent. Now, I know our Democrat colleagues are going to jump up
and down and say, first of all, that 32 percent of American families
pay no income taxes, and so if you have an across-the-board tax cut,
they will not get a tax cut. And that is right. Tax cuts are for
taxpayers. If you don't pay taxes and we have a tax cut, you don't get
a tax cut. Most Americans don't get food stamps; most Americans don't
get TANF; most Americans don't get Medicaid because they don't qualify
for those programs. If you don't pay taxes, you don't qualify for a tax
cut.
Our Democrat colleagues are obviously going to jump up and down and
say that Senator Rockefeller, who pays 10 times as much taxes as I do,
with a 10-percent across-the-board tax cut, will get 10 times as big a
tax cut. That is right, but he pays 10 times as much taxes. If you ask
people in your church to take up money to build a new parsonage and it
turned out you had taken up too much money, and you decided to give it
back, isn't the logical way to give it back to simply take how much an
individual gave and take the amount that you didn't need and give it
back to them proportionately?
So the point is, the first principle we believe in is there ought to
be an across-the-board tax cut, so every American who pays income taxes
will get a tax cut. Now, our Democratic colleagues have said they
believe if you are rich, which means you are in the upper half of the
income distribution--and they design that as roughly making somewhere
around $50,000--you don't deserve a tax cut. In their proposal, you
basically don't get one. I want to remind my colleagues that by
excluding people who pay 99 percent of the income taxes in America,
they are excluding from a tax cut 62 percent of all homeowners, 66
percent of all Americans between the ages of 45 and 64, 67 percent of
all families who have children in their homes, 67 percent of all full-
time workers, 68 percent of all Americans who have some college
education, 69 percent of all married couples, and 80 percent of all
two-wage earner families in America.
Our Democrat colleagues love investment, but they hate investors.
They love the benefits of capitalism, but they hate capitalists. An
across-the-board tax cut gives everybody a tax cut, and if people pay a
lot of taxes, they get a bigger tax cut--not proportionately, but they
get the same tax cut. If that offends you, if you believe that somehow
people who make over $50,000 a year are the enemies of the people and
they ought to continue to be punished, you would want to be against
this provision.
The next thing this provision does is it eliminates the marriage
penalty. Most Americans are not aware of that because our Tax Code is
so perverted, if two young people, both of whom work, fall in love and
get married, they, on average, pay the Federal Government $1,400 a year
in taxes for the right to be married. My wife is worth $1,400, but the
point is, she ought to get the money, not the Government. We eliminate
the marriage penalty.
Secondly, we have income splitting. Now, I know some of our Democrat
colleagues are going to get up and say, well, look, if the husband
earns all the money and the wife stays at home and raises the children,
they ought not to get the correction for the marriage penalty. Well, we
do income splitting. We have decided we don't want to inject the Tax
Code in the decision about whether people work outside the home or not.
My mama worked every day that I was a child, and she did it because she
had to do it. My wife has worked every day that our children have been
alive because she wanted to do it. I am not trying to distort the
decision one way or another, or make a judgment. All I am saying is
that people who stay at home and raise their children contribute to
America. They make a big contribution. By allowing a couple, where only
one of them works outside the home, to split their income and attribute
half to each one of them--that is what the partnership of marriage is
about--we are able to give them a substantial reduction in the penalty
they pay for being married.
The next provision is, we repeal the death tax, which is a certain
kind of death penalty. I like the death penalty where we put murderers
to death. I don't like the death penalty when working people die and we
end up forcing their children to sell their business or their farm. All
over America, people work a lifetime to build up a business or a farm,
and then when they die, their children have to sell that business or
sell that farm to give Government 55 cents out of every dollar they
earned in a death tax. This provision repeals the death tax.
Now, I know that our Democrat colleagues are going to get up and say,
well, these are rich people. But I want to give you an example. When I
first met a printer from Mexia named Dicky Flatt, I met him about 25
years ago. He was in business with his daddy, who worked on these old
calculator machines that businesses use. His mama kept all the books,
his wife basically was working in their stationery shop, and Dicky
Flatt did the printing business. They had an old building in Mexia, and
it was cracking right down the middle. They kept putting sand in the
bottom and kept tar-papering over the top. They had one bathroom, and
it didn't have a door on it; it had a curtain on it. So when you went
in to use the bathroom, you pulled the curtain.
Now, they worked hard in that business. So now Dicky Flatt has torn
down that building. He has built a Morton building, a metal building,
and he has a good size print shop and stationery shop. He sent his two
sons to Texas A They have come back and have gone into business with
him. He works every day. He gets in at 6 and leaves about 8. He is
there on Saturday until 6 o'clock. Whether you see him at the PTA, Boy
Scouts, or the Presbyterian Church, try as he may, he never gets that
blue ink off the ends of his fingers.
Now, Dicky Flatt may be rich, for all I know. He doesn't live like a
rich guy. When his brother died of cancer, he took over his school
supply business with his wife. My basic point is that Dicky Flatt and
Linda, his wife, have worked 6 days a week their whole lives. They
built up this business. Every penny they put into it has been in after-
tax dollars. How can it be right to force their two boys, who now work
in that business, to sell that business when Dicky and his wife Linda
die in order to give the Government 55 percent of it, in order to take
the money from Dicky Flatt and give it to people who have been sitting
on their fannies in Mexia, not working on Saturday, and in some cases,
not working at all? I am sure we are going to hear that this is for
rich people. I want to put a human face on it.
When we revolted against King George, he wasn't doing things such as
the death tax. This is an outrage. This is an assault on every value
this country stands for, and I want to repeal it and repeal it
outright.
I want to index the capital gains tax.
That is the fourth provision of this bill.
I want to say that from this day forward, if you buy a house as an
investment and the price doubles and you sell the house for twice as
much as you paid for it, you haven't made any money, you simply kept up
with inflation. But under current tax law, you have to pay the Federal
Government a capital gains tax on the doubling of your house's price
even though that new price will buy only the amount of goods you could
have bought with the money for which you bought the house. So the next
thing we do is index the capital gains tax for inflation.
Finally, we eliminate not the last outrage in the Tax Code but it is
a big
[[Page
S9655]]
outrage. If General Motors buys you health insurance, it is tax
deductible for them, but if you buy it for yourself, it is not tax
deductible. We eliminate that by saying that no matter who buys health
insurance in America, the employer or the employee, a retiree or a
worker, a homemaker or someone who is employed in the economy, that
health insurance is tax deductible.
It is a simple tax cut that you can put on one piece of paper. If you
pay taxes, you are going to get a 10-percent reduction in income taxes
out of this bill. It is easy to figure. If you pay $1,000 in income
taxes, you are going to get $100. If you pay $10,000, you are going to
get $1,000. If that breaks your heart, so be it. I think most people
will like it.
Second, we eliminate the marriage penalty and we allow income
splitting. If you have one parent who stays at home, you are able to
divide the income in half and have each of them claim half that income
that belongs to them. This is endorsed by every family group in America
because it is the right thing to do.
We repeal the death tax outright over a 10-year period--no ifs, ands,
or buts. If you live 10 more years, under this bill, and you build
something with after-tax dollars, it belongs to your family forever.
That is simple arithmetic. I think we can all understand it.
We index the capital gains tax so that you never pay capital gains
tax again on inflation. This is a big issue for every homeowner and for
every investor in America.
Finally, we provide full deductibility of health insurance. This is
an equity issue. It is something that ought to be done.
This is a tax cut you can understand. It represents what I believe is
the vision of the party of which I am proud to be a member. I hope my
colleagues will vote for this substitute. I believe it represents a
dramatic improvement and simplification in the Tax Code.
I reserve the remainder of my time.
The PRESIDING OFFICER (Mr. Allard). Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 1 minute to the Senator from
California and then 10 minutes to the Senator from Wisconsin, off the
bill.
The PRESIDING OFFICER. The Senator from Delaware controls the time in
opposition.
Mr. BAUCUS. The Senator from Delaware delegated that to the Senator
from Montana.
The PRESIDING OFFICER. The Chair thanks the Senator for that
clarification.
The Senator from California is recognized.
Mrs. BOXER. Thank you, Mr. President. I thank Senator Baucus.
My colleague from Texas says the Democrats hate investors and the
Democrats hate capitalism. As a former stockbroker, I deeply resent his
remarks. Maybe when the Senator from Texas was a Democrat he hated
capitalism and he hated investors, but the Democrats around here don't.
One of the reasons we are not supporting his amendment is that we think
it is bad for capitalism and we think it is bad for investors.
I have to say that this amendment, which reflects what the House did,
is a risky and radical amendment. It hurts the middle class. He says he
loves the middle class. He talks about his momma and Dicky Flatt. And I
love to hear him do it. But the bottom line is, the result of his
amendment will hurt the very people he says he wants to help because it
is such an unfair tax cut that would go to the very wealthiest and hurt
the middle class and the working poor.
I say to my friends who may be listening to this debate, the Senator
from Texas is a great debater but he was wrong when he said the Clinton
plan would lead to economic disaster and he is wrong today. I hope we
will vote down his amendment.
I yield my time.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, I thank the Senator from Montana.
Mr. President, I rise to offer some comments on the reconciliation
tax measure we are considering.
First, let me note that we have come a long way in the last seven
years.
When I first came to the Senate, we were facing an actual budget
deficit of $340 million.
That was the real figure--the figure that did not use the Social
Security Trust Fund balances to mask the deficit.
Thanks in large part to the President's deficit reduction package in
1993, and to a lesser extent the bipartisan budget cuts of 1997, we are
approaching a truly balanced budget.
I emphasize `'approaching,'' Mr. President, for we are not there yet.
The budget projections of the Office of Management and Budget, and of
the Congressional Budget Office, are just that--projections.
We do not currently have a budget surplus, not without including the
Social Security Trust Fund balances.
Mr. President, I do not mean to minimize the wonderful budget
turnabout that has been achieved.
But we should not be building massive new commitments on a shaky
foundation of questionable budget assumptions.
And that is just what we have.
The assumptions underlying the tax measure we will debate depend on
Congress making cuts of $775 billion in real spending over the next ten
years compared to current levels.
Let me note that this level of cuts does not include any additional
cuts that might have to be made in order to offset the cost of
unanticipated emergencies.
Let me repeat that, Mr. President.
The $775 billion in real spending cuts over the next ten years does
not include the spending we do to help the victims of hurricanes,
earthquakes, tornadoes, floods, or any kind of international emergency.
But, for the moment, let us suppose that there will be no hurricanes,
or earthquakes, or tornadoes, or floods in the next ten years.
Let us suppose that there will be no international emergencies that
require our assistance.
Will Congress find the political will to cut spending by three-
quarters of a trillion dollars over the next ten years?
Mr. President, Congress has yet to demonstrate it can stay even
within the current spending caps, let alone find an additional three-
quarters of a trillion dollars in cuts.
Last fall, Congress passed an omnibus appropriations bill that busted
the current spending caps by more than $20 billion.
This past winter, even before we passed a budget resolution, the
Senate passed another budget buster,
S. 4, the military pay and
retirement measure, which over the next ten years would add another $62
billion in spending.
And just a few weeks ago, Congress busted the spending caps yet again
with $15 billion in additional spending.
Mr. President, this is not a record of fiscal discipline.
Nor is it the kind of record that should give anyone confidence that
the budget assumptions underlying this tax bill are sound ones.
Mr. President, the assumptions underlying this tax bill are grounded
not in fiscal reality but in political expediency.
But, let us assume that somehow, Congress was able to enact the
three-quarters of a trillion dollars in spending cuts.
And let us further assume, as we did earlier, that there will be no
hurricanes, or floods, or earthquakes, or drought, or any other kind of
natural disaster for the next ten years.
And that there will be no more Bosnias or Kosovos or Iraqs--no
international emergencies of any kind for the next ten years.
Even under all of these assumptions, would this tax proposal be a
sound one?
The answer is no, because even if each and every one of those rosy
scenarios comes true, this bill would use over $75 billion in Social
Security balances to pay for the tax breaks.
Mr. President, I strongly oppose using Social Security to fund tax
cuts; that is why I voted against the 1997 tax cut package.
We simply should not be using Social Security balances--balances
needed to pay future benefits--to fund other government programs, or to
pay for tax cuts.
Of course, some may argue that even more spending cuts will be found
in order to avoid the use of Social Security balances--on the top of
the three-quarters of a trillion dollars in cuts assumed in this
measure.
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Mr. President, granting even this still rosier scenario, would this
tax measure be fiscally responsible?
I regret that it would not, because not only does this tax bill risk
our current budget, it puts future generations at risk as well.
Mr. President, while the revenue impact of any tax cut measure can be
expected to grow over time, the policies outlined in this measure
explode.
Consider that while in the next ten years, the cost of this proposal
is an already whopping $800 billion--if those tax policies are
continued, the cost in the second ten years will be a nearly
unbelievable $2 trillion.
If you add the additional interest payments that will arise from debt
service, the total cost of the tax policies in this bill rise to over
$3 trillion.
For those who may have forgotten, let me remind my colleagues that it
is in that second ten years when the baby boomer generation begins to
retire and put increased pressure on Social Security, Medicare, and the
long-term care services provided under Medicaid.
If ever there were a time to be prudent, now is the time.
As improved as the short-term budget picture is, the longer-term
budget picture is little changed.
We still face serious problems in Medicare, and as I noted, the baby
boomer generation will put enormous pressure on that program, as well
as on the long-term care services, many of which are provided through
Medicaid.
There is also a consensus that we should address the long-term fiscal
health of Social Security, and the sooner the better.
And finally, Mr. President, we still face a mountain of debt that was
run up during the 1980s and early 1990s because of the deficits that
were run up during that time.
In each of these areas, there is a stark choice: we can act now to
address each of these areas; or, we can ignore them, watch the problems
get much worse, and leave the work and cost of reform to our children
and grandchildren.
Mr. President, for me, that's an easy choice.
I do not want my children footing the bill for the failure of past
generations to act responsible.
I want to support a tax cut, but not one that jeopardizes the work we
have done to straighten out the current budget and squanders the
opportunity to reduce our debt and put Social Security, Medicare, and
our long-term care system on sound footing.
Mr. President, let me take a moment to look at the make-up of the tax
measure itself.
One might expect that a tax cut of $800 billion would provide the
sort of broad-based tax benefits that would be politically attractive.
But given the amount of revenue dedicated to this tax cut, the
benefits to the average taxpayer are surprisingly small, and the
overall package is heavily skewed to some of the wealthiest individuals
and corporations in the world.
As was noted by the tax watchdog group Citizens for Tax Justice, the
tax bill gives three-quarters of its benefits to the best-off fifth of
all taxpayers.
By contrast, only 11 percent of the tax bill's benefits go to the
bottom 60 percent of all taxpayers.
While the average tax reduction for the wealthiest 1 percent of
taxpayers--those with incomes over $300,000--is over $23,000 a year
under this bill, those with more average income do not do quite as
well.
The average tax cut for those who are among the middle fifth of
taxpayers will be $279, or about $5 per week.
For those in the bottom three-fifths of all taxpayers, the average
tax cut is even smaller--about $140 per year, or less than $3 per week.
Mr. President, under this $800 billion tax bill, the majority of
taxpayers will have an average tax cut of $3 per week.
Maybe the proponents of this bill are hoping most of America will use
this windfall to buy one of those overpriced cups of coffee.
Well, Mr. President, thanks to this tax bill, once a week, three-
fifths of America will now be able to go to one of those fancy coffee
shops and get a frothy decaf cappuccino latte with skim milk.
This tax bill is a bad tax policy any way you brew it.
Mr. President, I recognize that some may genuinely believe we should
dedicate about $800 billion to tax cuts over the next ten years.
The tragedy is that even in that context, the $800 billion was spent
unwisely, because in addition to Social Security, Medicare, long-term
care, and reducing our national debt, one of our highest priorities
should be significant reform of our tax code.
It was just a few months ago that we heard how critical fundamental
tax reform was to our future.
Flat tax, consumption tax, a national value-added tax--there were a
number of significant proposals that sought to address the inefficiency
of our current Tax Code.
Simplification was the order of the day, and let me add, Mr.
President, that while I did not support many of those proposals, I
think many of the proponents of reform got it exactly right.
Our Tax Code should be simplified.
We should reduce the number of special interest tax breaks and use
that savings to lower the tax rates for everyone.
I participated in just that kind of exercise at the State level as
chair of the Taxation Committee in the Wisconsin State Senate.
As we all know, there will be winners and losers in a reform of our
tax code, and I can tell you from direct experience that the best time
to enact tax reforms is when you have additional resources to help
increase the number of winners and decrease the number of losers.
Mr. President, this tax bill and the House version both squandered
that opportunity as well.
We might have had a significant start on real tax reform.
Instead, we got a grab bag of goodies for special interests added to
a tax code already thick with complexity.
A recent article in the Washington Post listed a number of the
special interest tax breaks in this bill and the House version.
They include tax breaks for: multinational corporations, utility
companies, railroad, oil and gas operators, timber companies, the steel
industry, seaplane owners in Alaska, sawmills in Maine, barge lines in
Mississippi, Eskimo whaling captains, and Carolina woodlot owners.
This bill is a dream come true for business lobbyists.
The Post reported one lobbyist as saying, ``If you're a business
lobbyist and couldn't get into this legislation, you better turn in
your six-shooter.''
Mr. President, in the name of complete disclosure, let me note that I
understand the Democratic alternative, which I may support, suffers
from the same problem, though to a much lesser extent.
And it will come as no surprise to my colleagues that I firmly
believe this kind of pandering to special interests is a direct result
of our campaign finance system.
There's ample evidence to that effect right here in this bill.
The campaign finance system gives wealthy interest an open invitation
to influence legislation in this body, and in this bill it's clear that
special interests accepted that invitation in droves, Mr. President.
For the benefit of my colleagues and the public, I'd like to share
just a few examples of what these interests gave in PAC and soft money,
and what they got in either this bill, the House tax measure, or both.
I do this from time to time; it is known as ``The Calling of the
Bankroll.''
According to the Washington Post, an umbrella organization called the
Coalition of Service Industries, a coalition of banks and securities
firms, won a provision to extend for five years a temporary tax
deferral on income those industries earn abroad. The value of this tax
deferral: $5 billion over ten years.
So we know what Congress has given the Coalition of Service
Industries, but what has the Coalition of Service Industries given to
candidates and the political parties? During the 1997-1998 election
cycle, coalition members gave the following:
Ernst & Young--more than half a million dollars in soft money, and
nearly $900,000 in PAC money.
CIGNA Corporation--more than $335,000 in soft money, and more than
$210,000 in PAC money.
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American Express--more than $275,000 in soft money and nearly
$175,000 in PAC money.
Deloitte and Touche--more than $225,000 in soft money and more than
$710,000 in PAC money.
Of course, as I said Mr. President, this is just a sampling of what
Coalition of Service Industries members have given. I'd be up here a
lot longer if I had a document all the millions of dollars these groups
have given.
But it doesn't stop there. These two tax bills mean Christmas in July
for special interests, Mr. President, with gifts for jut about every
industry in Santa's bag.
The post reports the utility industry got a provision affecting
utility mergers in the House measure, which, if it survives, is worth
more than $1 billion to the utility industry. The provision would
excuse the payment of taxes on the fund that utilities set up to cover
the costs of shutting down nuclear power plants.
Utilities companies that operate nuclear power plans would be
particularly grateful to see this provision passed, Mr. President.
Their depth of their gratitude would be matched only by the size of
their campaign contributions during the last election cycle, including:
Entergy Corporation, which gave $228,000 in soft money and nearly
$250,000 in PAC money;
Commonwealth Edison, which gave $110,000 in soft money and more than
$106,000 in PAC money;
And Florida Power and Light, which gave nearly $300,000 in soft money
and more than $182,000 in PAC money.
As it does so many other issues, our campaign finance system is
preventing real reform to our tax code, and those who doubt that only
need to look at this bill.
Mr. President, the best thing we can say about this tax bill is that
it will not be enacted into law.
The President will almost surely veto it, and he will be right in
doing so.
This bill is fiscally irresponsible.
It depends on budget suppositions that are at best fanciful.
It uses Social Security balances to pay for tax cuts.
It proposes a tax policy that no only jeopardizes our current budget
but our future fiscal health.
It sticks our children and grandchildren with the cost of paying-off
the debt run up over the past two decades, and leaves them the task of
extending the solvency of Social Security, strengthening Medicare, and
reforming our long-term care system.
And it hands our special interest tax breaks galore while providing
little tax relief to the vast majority of taxpayers.
Mr. President, I will vote against this bill, and urge my colleagues
to do so as well.
Mr. President, I yield the floor.
Mr. BAUCUS. Mr. President, I yield 5 minutes to my good friend from
Delaware, Senator Roth.
Mr. ROTH. Mr. President, Senator Gramm has provided Members with a
straightforward alternative to the bipartisan Finance Committee bill. I
compliment him on the clarity of his approach, much of which I favor.
Although provisions of Senator Gramm's substitute have appeal for me,
frankly, I could not have used it as a basis for the Finance Committee.
His proposal contains elements that would not garner a majority of
committee members.
In addition, Senator Gramm's substitute, though popular with many in
the Senate Republican caucus, would not pick up support on the other
side of the aisle. For that reason, his proposal would not be a
blueprint for tax cuts, in the form of a signable bill, that we can
deliver to the American people now.
Finally, although Senator Gramm's amendment is simpler, it leaves out
many bipartisan tax measures that address important tax issues. For
instance, education savings incentives are deleted. This means parents
who want to save for a child's college education would be left out of
the picture. We're talking about millions of parents and students in
every state.
Yet another example is the student loan interest deduction. Under the
Finance Committee bill, at least three million graduates, bearing the
burden of college debt, would be allowed to deduct student loan
interest on their tax returns.
In my legislation I try to focus on matters of need to the American
family. I provide incentives to promote savings, pensions, IRAs. Many
in retirement depend not only on Social Security, which we will
address, but also on personal savings and pensions. My bill addresses
that. There is nothing to correct the problems of AMT, the alternative
minimum tax. Unfortunately, thousands upon thousands of American
families will be hit by AMT and not enjoy the full benefit of many
programs such as the child tax credit.
Finally, nothing is done with respect to charitable giving. We have
proposals that will promote and create incentives.
For these and other reasons, I must oppose Senator Gramm's well-
intentioned amendment.
I reserve the remainder of my time.
Mr. BAUCUS. Mr. President, I yield myself such time as I might
consume.
The Finance Committee has already rejected this provision. The
Finance Committee deliberated this amendment in committee, and, by a
large margin turned it down because it is excessive. It is
irresponsible, in my judgment. It is not the right thing to do. It says
we are going to take the entire on-budget surplus. And because of the
tax cut plus the lost interest on the debt, there is nothing left for
Medicare, discretionary spending or any other programs which will be
cut anyway by a very large margin.
It is excessive, too, compared to the bill passed by the committee
because it is so backloaded. It is so top heavy. By that, I mean the
bulk of the cost of the provisions are at the very end--6, 7, or 8
years from now. No one can predict the future of this country and what
position we will be in 6 to 8 years from now.
I was speaking to the CEO of a major American company a few days ago,
a man we all know, a company we all know very well. He told me they
can't begin to plan for the future. They do have 5-year plans but they
know the 5-year plans are not going to be accurate. So they have to
just do the best they can on virtually a quarterly basis. They have to
go ahead in the areas they think are the areas of the future, but it is
almost impossible to plan in this modern era.
So I say, if we today were to lock in provisions in the law which
will hemorrhage this country's budget surplus based upon ephemeral,
distant projections which are never accurate, that is not responsible.
That is not the right thing to do. And that is what this amendment
does. That is why basically, fundamentally, without going into all the
details of it, why this does not make sense. It has often been stated
during this debate that the time when the baby boomers begin to retire
is when these things really start to kick in and the costs explode.
I think prudence is the watchword here today. History sometimes is a
guide. Look at the 1980s. What happened in the 1980s? There was a huge
tax cut. Congress succumbed to the siren song of supply side economics.
What was supply side economics supposed to do? It was supposed to make
deep tax cuts, spend more on defense, and guess what, folks, that is
going to cause the budget to be balanced. That was what supply side
economics was supposed to do--advocated, by the proponents of this
amendment. It was going to balance the budget.
The theory is the trickle down theory: Cut the taxes of the most
wealthy, they invest a lot more, it trickles down and the economy
starts humming and it balances the budget. That was the Laffer curve.
Guess what, it did not work. We kind of knew it was not going to work,
but it was such a temptation, such a siren song to vote these huge tax
cuts, hoping, hoping, hoping that what the proponents said would come
true. Guess what, it did not. It did not come true at all.
The tax cut was passed in 1981. Then what happened in 1982? This
Congress, a Republican Congress, and President Reagan, had to change
course. They had to raise taxes. The Republican Congress and Republican
President raised taxes in 1982. Then guess what. This tax increase was
not enough because the deficits were just so large. The Republican
Congress and Republican President had to raise taxes again in 1984.
They had to raise taxes more because the deficit was so large. The
national debt in 1980 was roughly about
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$1 trillion; 8 years later it was roughly $3 trillion, maybe close to
$4 trillion. It tripled and quadrupled during that time of the huge tax
cuts. Then we had to add more taxes back again in 1982 and 1984.
So, in many ways this is history repeating itself. Democrats in the
Senate support a tax cut. We support using a third of the on-budget
surplus to pay for a tax cut. But we are just saying don't use all of
the on-budget surplus for tax cuts with virtually all going to the most
wealthy Americans.
Do you know what else is going on here? I do believe the proponents
of this bill are so--not distrustful, but so opposed to Government that
they want these huge tax cuts partly to force down deeper cuts, way
below the baseline in spending. I think they want to cut veterans'
benefits 30 percent; they want to cut health education 20, 30 percent;
want to cut these programs. I think there are really many on that side
who want to make these cuts. They want to. As strange as that might
sound, they want to. That is another reason for this huge tax cut
because it will force cuts in spending later on.
We have already cut spending. Discretionary spending has been cut so
much by this body over the last 10 years it is unbelievable. And the
size of government has gone down, with many fewer federal employees
than there were years ago.
To sum it all up, we have seen this provision in the Finance
Committee. The Finance Committee soundly rejected this amendment. I
urge the Senate to also soundly reject this amendment. It is not good
policy.
I reserve the remainder of our time.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, I yield 10 minutes to the distinguished
Senator from Tennessee.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, I think Senator Gramm is bringing a very
important principle to the table, one that we need to address: If we
are going to have a tax cut, what kind of tax cut should we have? What
is best for the economy, and what is fair?
There was a consensus in this country, 10, 15 years ago, that we
needed to have a tax policy based upon a broader base and lower rates.
That is essentially the tax bill that came out in 1986. We came down to
two tax rates. We had a 15-percent and a 28-percent tax rate. There was
a broader base, where more people were paying taxes, but lower rates.
In the 1990s, we have gotten away from that. We have gotten away from
that principle and gone, instead, toward what has been referred to as
targeted tax cuts. That its basically the Government--we, the
President--that decide, on an individual basis, who deserves the tax
break or tax cut in any particular year. Usually it is based upon how
much clout they have, or some notions of fairness of a particular
congressional makeup at some particular time. So now we have wound up
with higher rates and a narrower base. We now have five income tax
rates instead of the two we had back in 1986 in addition to phaseouts.
The Tax Code, not only do we have additional rates, it has become more
progressive, even in addition to those rates.
I do not think a lot of people are aware of this. I think most
Americans think initially, basically, they can look at tax rates and
see what their tax burden is. But then you look at all the phaseouts
that we have. Congress has decided in its wisdom that people of a
certain income level do not deserve some of the deductions, exemptions,
and benefits that others deserve. So we have a personal exemption
phaseout.
We have an itemized deduction phaseout at basically the $124,000
level for individuals. I am talking about individuals and not couples,
in terms of the dollar amounts I am using. The personal exemption
phaseout; itemized deduction phaseout, limitation of only being able to
deduct that amount over 2 percent of itemized deductions; a 7.5 percent
floor on medical deductions; a 10 percent adjusted gross income floor
on casualty deductions; a $500 child credit that phases out at an
income level of $75,000; a dependent child credit that begins to be
phased out at an income level of $10,000--if you make that much it
begins to be phased out; a deductible IRA, $30,000; an education IRA,
$95,000; the HOPE credit, college credit, begins to be phased out at
$40,000 for an individual. So we want to help you go to college, we
want to help your kids go to college--as long as you do not have a job,
basically is what that amounts to.
We have a life-time learning credit of $40,000; student loan interest
deductions, at $40,000 it begins to be phased out; education savings
bond interest--if you make $52,000 you begin to lose that; elderly/
disabled credit, $7,500; adoption credit/exclusion, $75,000; DC first
time homebuyer--if you make $75,000, you begin to have that phased out
as a taxpaying individual; rental real estate losses; rehabilitation
tax credit--on and on and on.
In addition to continuing to raise the tax rate--the highest one in
1986 wa
s 28 percent and now it is up to 39.6 percent plus the maximum--
plus the limited itemized deductions and phaseout of personal
exemptions, you wind up with an effective rate of over 40 percent. When
you remove the cap on Medicare tax, plus these phaseouts, you are
looking at, in some cases, close to an effective 45-percent tax rate,
something like that.
My only point is that, as we decide how to go forward, we need to
understand that we have a progressive system as far as our income Tax
Code is concerned, and that is the way it ought to be. A lot of people
believe it is that way. But every time we have a tax cut, we cannot say
let's give everybody the same dollar amount back in taxes regardless of
how much they paid in because we have a very progressive system.
We have progressive tax rates up to 39.6 percent, with phaseouts so
that if you are making any money, if people are working hard and making
a pretty good living, they begin to lose the deductions and credits.
That makes it even more progressive.
We come along and say we are going to give a tax cut now, and we say
if the other guy is paying twice as much in taxes as I am, give him a
tax cut. He lost all these exemptions because he is making good money.
He is paying twice as much in taxes. But we come along with a tax cut
and we say they are going to both get the same amount back? I do not
think that makes much sense.
Let's say the economy was good and we were able to have successive
tax cuts over a period of time and we gave the same dollar amount back
to everybody regardless of how much they were paying in taxes. We would
have a narrower and narrower base all the time and fewer and fewer
people paying any taxes at all. We would continually be taking people
off the tax rolls. We already have 43 million people who do not pay
taxes.
As progressive as our Tax Code is, as does the Senator from Texas, I
make no apologies for the proposition that when it comes time for a tax
cut, let's base the tax cut on how much people are paying in.
We have to ask ourselves a fundamental question: Are we interested in
punishing folks who make a good living or are we interested in
collecting money for the Federal Government to pay legitimate
Government expenses? History shows every time we have had a reduction
in tax rates, we have more money. Every time the Government reduces
rates in any appreciable amount, the Government winds up getting more
money.
In the 1920s, it was true. In the 1960s, under President Kennedy, who
said a rising tide lifts all boats, it was true. In the much maligned
1980s, which laid the groundwork for the greatest economic prosperity
this world has ever known, it was true.
Increased revenues in the twenties was 61 percent over a 7-year
period. In the sixties, a revenue increase after inflation was about 33
percent. In the eighties, after cutting the tax rates, revenues
increased 28 percent because it reduced the incentive to hide income,
to shelter income, and to underreport income.
Similarly, the share of the tax burden paid by the rich rose
dramatically as the rates fell. By cutting rates, we get more money out
of the rich.
Do we want to be concerned about how much somebody is making and try
to hold that down or do we want the money for the Federal Government? I
thought the idea was to have a fair Tax
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Code but to raise the money for the legitimate expenses of the Federal
Government.
In the 1920s, they called rich $50,000. I guess things have not
changed that much. But in 1921, the rich paid 44 percent of the income
tax. In 1928, after the rate cut, they paid 78 percent of all taxes.
The gap was not quite as pronounced later on, but in 1963 under
President Kennedy, at the time of the cut, the rich were paying 11.6
percent of all the taxes being paid. In 1966, they were paying 15.1
percent. In the 1980s, we were talking about the top 10 percent----
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON. I ask for another 3 minutes.
Mr. GRAMM. I yield the Senator another 3 minutes.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. In the 1980s--1981--the rich were paying 48 percent of
the taxes. In 1988, they wound up paying 57 percent of the taxes. We do
not get a lot of credit taking up for the rich, but our responsibility
as public servants is to look out for the country and have policies
that are going to get the most money and not try to be too concerned
about who is going to get this share of the economic pie: I am going to
get yours; you are not going to get mine. Our concern should be with
making that economic pie better.
As far as an across-the-board cut is concerned, every serious
observer nowadays thinks it is sound economic policy. Lawrence Lindsey,
former Federal Reserve Board member, George Shultz, former Secretary of
State, and even the oft quoted Chairman Greenspan--there may be some
discussion as to when he thinks a tax cut should come about, but he
says when it comes about, it ought to be an across-the-board rate
reduction. This is sound economic policy.
I know the prospects for this particular amendment, but all of this
business about soak the rich and unfairness, we need to keep a little
balance and keep things in mind. If we want more money, if we want to
be fair--first of all, we have to recognize we have a very progressive
system in this country, so when it comes time for a tax cut, let's pay
some attention to the idea of across the board and not have politic
Major Actions:
All articles in Senate section
TAXPAYER REFUND ACT OF 1999--Resumed
(Senate - July 29, 1999)
Text of this article available as:
TXT
PDF
[Pages
S9651-S9737]
TAXPAYER REFUND ACT OF 1999--Resumed
The PRESIDING OFFICER. The clerk will report the bill.
The legislative assistant read as follows:
A bill (
S. 1429) to provide for reconciliation pursuant to
section 104 of the concurrent resolution on the budget for
fiscal year 2000.
Pending:
Abraham amendment No. 1398, to preserve and protect the
surpluses of the social security trust funds by reaffirming
the exclusion of receipts and disbursement from the budget,
by setting a limit on the debt held by the public, and by
amending the Congressional Budget Act of 1974 to provide a
process to reduce the limit on the debt held by the public.
Baucus motion to recommit the bill to the Committee on
Finance, with instructions to report back with an amendment
to reduce the tax breaks in the bill by an amount sufficient
to allow one hundred percent of the Social Security surplus
in each year to be locked away for Social Security, and one-
third of the non-Social Security surplus in each year to be
locked away for Medicare; and an amendment to protect the
Social Security and Medicare surplus reserves.
Robb amendment No. 1401, to delay the effective dates of
the provisions of, and amendments made by, the Act until the
long-term solvency of Social Security and Medicare programs
is ensured.
Motion to Waive the Budget Act Amendment No. 1398
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, the pending amendment is not germane. I
raise a point of order that the Abraham amendment violates section
305(b)(2) of the Congressional Budget Act of 1974.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. ABRAHAM. Mr. President, pursuant to section 904(c) of the
Congressional Budget Act of 1974, I move to waive the Budget Act for
consideration of the Abraham amendment.
Mr. GRAMM. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
[[Page
S9652]]
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. There i
s 2 minutes of debate.
Who yields time?
Mr. REID. Mr. President, in a letter dated April 21, 1999, on a
similar provision, then-Secretary of the Treasury Robert Rubin wrote to
Senator Moynihan that this ``provision could preclude the United States
from meeting its financial obligations to repay maturing debt and to
make benefit payments--including Social Security checks--also worsen a
future economic downturn.''
The lockbox in this proposal is potentially destabilizing in a manner
reminiscent of the constitutional amendment to require a balanced
budget.
I remind those who propose rigid 10-year schedules for reducing the
publicly held debt that economics does not follow the agricultural
cycle. There will be periods when surpluses, both on and off budget,
will fall far short of projections. We should not impose a debt
reduction schedule, enforced by a declining debt cycle ceiling, even if
it can be overridden with 60 votes. To do so will risk default every
time the debt ceiling is lowered.
Mr. ABRAHAM. Mr. President, first of all, we have endeavored to and
have modified our amendment to try to address some of these concerns. I
think we have done so. I believe we have given sufficient flexibility
so that there will not be the concerns that were raised in that letter.
This lockbox does not need a lot of debate. Americans have been
hearing us talk about it now for almost 3 months. We will continue to
try to get a straight up-down vote on this. I would note that once
again this morning another procedural roadblock has been put in place
to prevent us from getting a straight up-or-down vote. I regret that. I
was prepared to come today and offer both sides the opportunity to have
straightforward votes. If one side or the other in their various
lockbox proposals got 50-plus votes, they would win and we could give
the American people what I believe they want, and that is protection
for their Social Security dollars sent to Washington. But again, once
more, what we have had is a procedural impediment placed in the way of
getting final action on this legislation.
Mr. President, I urge my colleagues who have previously supported
this lockbox to do so. It is a tougher lockbox that protects Social
Security. If we want to do it, I say vote ``yes.'' Vote to waive the
Budget Act.
The PRESIDING OFFICER. All time has expired. The question is on
agreeing to the motion to waive the Budget Act. The yeas and nays have
been ordered. The clerk will call the roll.
The legislative clerk called the roll.
The yeas and nays resulted--yea
s 54, nays 46, as follows:
[Rollcall Vote No. 227 Leg.]
YEAS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
NAYS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Roth
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
The PRESIDING OFFICER (Mr. Frist). On this vote the yeas are 54, and
the nays are 46. Three-fifths of the Senators present and voting, not
having voted in the affirmative, the motion to waive the Budget Act is
rejected. The point of order is sustained, and the amendment falls.
Mr. ROTH. Mr. President, I ask unanimous consent that the remaining
votes in this series be limited to 10 minutes in length, and I ask that
all the Members of the Senate stay on the floor. We have a full and
busy day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Privilege Of The Floor
Mr. LEAHY. Mr. President, I ask unanimous consent that Peter
McDougall of my staff be given floor privileges throughout the day.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion To Recommit
The PRESIDING OFFICER. The question is on the Baucus motion.
Mr. BAUCUS. Mr. President, I understand each side has 1 minute of
explanation.
The PRESIDING OFFICER. The Senator is correct.
Mr. BAUCUS. Mr. President, this is a very simple matter before the
Senate. It is a choice: Do we want to protect Medicare or not. It is
that simple. That is the choice that we are presented with today.
The amendment I am offering is the House lockbox which passed the
House by an overwhelming margin--it only had three or four votes
against it--along with the Medicare lockbox. The Medicare lockbox we
provide sets aside one-third of the on-budget surplus for Medicare. It
can be used in whatever way we want to use it for Medicare, including
to provide an affordable prescription drug benefit or for shoring up
Medicare solvency.
That is the choice before the Senate. Do we preserve Medicare or not.
Our choice here today, however, is nothing compared to another choice.
That is the choice that about 16 million seniors must make every day:
Do I choose to buy my medicine, choose to pay the rent, or choose to
buy food?
We are saying set aside and preserve for Medicare one-third of the
on-budget surplus so that the choices facing seniors are not quite as
abhorrent.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, this is another opportunity on the part
of the other side to propose to the American people that they want
anything but tax relief. This is a motion to recommit. It would do
nothing to protect Medicare. It is the President's proposal, which is a
phony transfer of IOUs to the Medicare trust fund. It does nothing to
help senior citizens. It is just an effort to lock up $300 billion so
you can't give the American people a tax cut, plain and simple. They
don't want to confront the issue of a lockbox for Social Security so
they muddle it up and instead of trying to solve something, they would
like to create an issue instead of a solution.
Frankly, there are hardly any experts in America who look at this
lockbox concept for Medicare and say it helps the seniors or it helps
Medicare. If this is the plan the President is alluding to across this
land, then he has none.
I believe, since the other side did not let us have a vote, we ought
to do ours procedurally also, and I am compelled to do that.
Therefore: The language in this amendment is not germane to the bill
before us, so I raise a point of order under section 305(b)(2) of the
Congressional Budget Act.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, pursuant to section 904 of the Budget Act,
I move to waive the applicable sections of that act for the
consideration of the pending amendment.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Budget Act in relation to the Baucus motion to recommit
S.
1429. The yeas and nays have been ordered.
The clerk will call the roll.
The legislative assistant called the roll.
The yeas and nays resulted--yeas 42, nay
s 58, as follows:
[[Page
S9653]]
[Rollcall Vote No. 228 Leg.]
YEAS--42
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Torricelli
Wellstone
Wyden
NAYS--58
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Kerrey
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
The PRESIDING OFFICER. On this vote, the yeas are 42, the nays are
58. Three-fifths of the Senators duly chosen and sworn not having voted
in the affirmative, the motion is rejected. The point of order is
sustained, and the motion falls.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. ROTH. Mr. President, I move to reconsider the vote.
Mr. MOYNIHAN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. ROTH. Mr. President, I ask unanimous consent that all amendments
and motions to recommit to
S. 1429 must be filed by 2 p.m. today at the
desk and with the bill managers.
Mr. STEVENS. Reserving the right to object, what time was that?
Mr. ROTH. Two p.m.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Amendment No. 1401
Mr. ROTH. Mr. President, I think we are ready for the vote on the
next amendment.
The PRESIDING OFFICER. There are 2 minutes equally divided. Who
yields time?
Mr. ROBB addressed the Chair.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ROBB. Mr. President, this amendment simply delays the effective
date of the tax cut that is proposed. There are many who believe that a
tax cut of this magnitude at this time would be ludicrous. But that is
not the issue. The issue is whether or not we ought to go ahead with a
tax cut notwithstanding the fact that we have not protected Social
Security and Medicare.
Most of the people who have spoken so far have talked about their
concern for doing just that. The lockbox provisions were proposing to
do just that.
If you want to save Social Security and Medicare, this is an
incentive. It will delay the implementation of the act, but it will not
negate the effectiveness of the act.
I ask that our colleagues vote to support this particular amendment,
save the one-half of 1 percent of the total which would be expended
this year, and not lock in cuts that would cost $792 billion, which
would be almost impossible to reverse should that prove to be the case.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON addressed the Chair.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, no one in this chamber thinks other than
that we want a real, sound, solid, and solvent Social Security system
and Medicare system. Most of us, however, realize we will only have
that if we have fundamental reforms in those systems, such as that
proposed by the Medicare commission at which the President scoffed.
This amendment will serve to actually make Social Security and
Medicare less sound. It will actually delay the process of real reform.
The solvency dates that are used in this legislation are taken from the
President's proposal and will invariably result in pouring more and
more general revenues into these entitlement programs, delaying the day
when we have to face up to the fact that we have to have fundamental
reform.
Our bill sets aside 75 percent of the surplus for Medicare, Social
Security, debt retirement, and other spending priorities. With regard
to the 25 percent remaining, there is no reason to delay tax cuts.
If we saved every penny of the surplus, put it into Medicare and
Social Security, it would not do one thing toward solving the
fundamental problem.
This language is not germane to the bill now before us; therefore, I
raise a point of order, under section 305(b)(2) of the Congressional
Budget Act of 1974.
Mr. ROBB. Mr. President, pursuant to section 904 of the Congressional
Budget Act of 1974, I move to waive the applicable sections of that act
for the consideration of the pending amendment, and I ask for the yeas
and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
waive the Congressional Budget Act in relation to the Robb amendment
No. 1401. The yeas and nays have been ordered. The clerk will call the
roll.
The legislative clerk called the roll.
The yeas and nays resulted--yeas 46, nay
s 54, as follows:
[Rollcall Vote No. 229 Leg.]
YEAS--46
Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Bryan
Byrd
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Snowe
Torricelli
Voinovich
Wellstone
Wyden
NAYS--54
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Chafee
Cochran
Collins
Coverdell
Craig
Crapo
DeWine
Domenici
Enzi
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Warner
The PRESIDING OFFICER. On this vote the yeas are 46, the nays are 54.
Three-fifths of the Senators duly chosen and sworn not having voted in
the affirmative, the motion is rejected.
The point of order is sustained, and the amendment falls.
Mr. MOYNIHAN. Mr. President, I move to reconsider the vote.
Mr. ROTH. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1405
(Purpose: To return to the taxpayers a portion of the budget surplus
that they created with their tax payments)
The PRESIDING OFFICER. Under the previous order, the Senator from
Texas is recognized to offer an amendment.
Mr. GRAMM. Mr. President, I send an amendment to the desk in the
nature of a substitute for myself, for Senator Lott, Senator Nickles,
Senator Mack, Senator Coverdell, Senator Craig, Senator McConnell,
Senator Inhofe, Senator Hutchison, Senator Bunning, Senator Kyl,
Senator Bob Smith of New Hampshire, Senator Allard, and Senator Hagel,
and I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Texas [Mr. Gramm], for himself, Mr. Lott,
Mr. Nickles, Mr. Mack, Mr. Coverdell, Mr. Craig, Mr.
McConnell, Mr. Inhofe, Mrs. Hutchison, Mr. Bunning, Mr. Kyl,
Mr. Smith of New Hampshire, Mr. Allard, and Mr. Hagel,
proposes an amendment numbered 1405.
Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page
S9654]]
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. GRAMM. Mr. President, I have the highest admiration for the
chairman of the Finance Committee. I am supportive of the tax cut he
has crafted in committee. I intend to vote for it on final passage if
this amendment fails.
But I believe we need a clearer vision. I believe we need to define
very precisely what we would like to use this tax cut to do, rather
than running around trying to stick a nickel in everybody's pocket with
a targeted program.
I would prefer to have a tax cut that has clear themes and this is a
very simple substitute because it consists of simply five things. So
this is a tax cut that you can explain to every American, and it
contains basic principles that I believe every American can understand
and support.
The first principle is we ought to have an across-the-board tax cut
of 10 percent. Now, I know our Democrat colleagues are going to jump up
and down and say, first of all, that 32 percent of American families
pay no income taxes, and so if you have an across-the-board tax cut,
they will not get a tax cut. And that is right. Tax cuts are for
taxpayers. If you don't pay taxes and we have a tax cut, you don't get
a tax cut. Most Americans don't get food stamps; most Americans don't
get TANF; most Americans don't get Medicaid because they don't qualify
for those programs. If you don't pay taxes, you don't qualify for a tax
cut.
Our Democrat colleagues are obviously going to jump up and down and
say that Senator Rockefeller, who pays 10 times as much taxes as I do,
with a 10-percent across-the-board tax cut, will get 10 times as big a
tax cut. That is right, but he pays 10 times as much taxes. If you ask
people in your church to take up money to build a new parsonage and it
turned out you had taken up too much money, and you decided to give it
back, isn't the logical way to give it back to simply take how much an
individual gave and take the amount that you didn't need and give it
back to them proportionately?
So the point is, the first principle we believe in is there ought to
be an across-the-board tax cut, so every American who pays income taxes
will get a tax cut. Now, our Democratic colleagues have said they
believe if you are rich, which means you are in the upper half of the
income distribution--and they design that as roughly making somewhere
around $50,000--you don't deserve a tax cut. In their proposal, you
basically don't get one. I want to remind my colleagues that by
excluding people who pay 99 percent of the income taxes in America,
they are excluding from a tax cut 62 percent of all homeowners, 66
percent of all Americans between the ages of 45 and 64, 67 percent of
all families who have children in their homes, 67 percent of all full-
time workers, 68 percent of all Americans who have some college
education, 69 percent of all married couples, and 80 percent of all
two-wage earner families in America.
Our Democrat colleagues love investment, but they hate investors.
They love the benefits of capitalism, but they hate capitalists. An
across-the-board tax cut gives everybody a tax cut, and if people pay a
lot of taxes, they get a bigger tax cut--not proportionately, but they
get the same tax cut. If that offends you, if you believe that somehow
people who make over $50,000 a year are the enemies of the people and
they ought to continue to be punished, you would want to be against
this provision.
The next thing this provision does is it eliminates the marriage
penalty. Most Americans are not aware of that because our Tax Code is
so perverted, if two young people, both of whom work, fall in love and
get married, they, on average, pay the Federal Government $1,400 a year
in taxes for the right to be married. My wife is worth $1,400, but the
point is, she ought to get the money, not the Government. We eliminate
the marriage penalty.
Secondly, we have income splitting. Now, I know some of our Democrat
colleagues are going to get up and say, well, look, if the husband
earns all the money and the wife stays at home and raises the children,
they ought not to get the correction for the marriage penalty. Well, we
do income splitting. We have decided we don't want to inject the Tax
Code in the decision about whether people work outside the home or not.
My mama worked every day that I was a child, and she did it because she
had to do it. My wife has worked every day that our children have been
alive because she wanted to do it. I am not trying to distort the
decision one way or another, or make a judgment. All I am saying is
that people who stay at home and raise their children contribute to
America. They make a big contribution. By allowing a couple, where only
one of them works outside the home, to split their income and attribute
half to each one of them--that is what the partnership of marriage is
about--we are able to give them a substantial reduction in the penalty
they pay for being married.
The next provision is, we repeal the death tax, which is a certain
kind of death penalty. I like the death penalty where we put murderers
to death. I don't like the death penalty when working people die and we
end up forcing their children to sell their business or their farm. All
over America, people work a lifetime to build up a business or a farm,
and then when they die, their children have to sell that business or
sell that farm to give Government 55 cents out of every dollar they
earned in a death tax. This provision repeals the death tax.
Now, I know that our Democrat colleagues are going to get up and say,
well, these are rich people. But I want to give you an example. When I
first met a printer from Mexia named Dicky Flatt, I met him about 25
years ago. He was in business with his daddy, who worked on these old
calculator machines that businesses use. His mama kept all the books,
his wife basically was working in their stationery shop, and Dicky
Flatt did the printing business. They had an old building in Mexia, and
it was cracking right down the middle. They kept putting sand in the
bottom and kept tar-papering over the top. They had one bathroom, and
it didn't have a door on it; it had a curtain on it. So when you went
in to use the bathroom, you pulled the curtain.
Now, they worked hard in that business. So now Dicky Flatt has torn
down that building. He has built a Morton building, a metal building,
and he has a good size print shop and stationery shop. He sent his two
sons to Texas A They have come back and have gone into business with
him. He works every day. He gets in at 6 and leaves about 8. He is
there on Saturday until 6 o'clock. Whether you see him at the PTA, Boy
Scouts, or the Presbyterian Church, try as he may, he never gets that
blue ink off the ends of his fingers.
Now, Dicky Flatt may be rich, for all I know. He doesn't live like a
rich guy. When his brother died of cancer, he took over his school
supply business with his wife. My basic point is that Dicky Flatt and
Linda, his wife, have worked 6 days a week their whole lives. They
built up this business. Every penny they put into it has been in after-
tax dollars. How can it be right to force their two boys, who now work
in that business, to sell that business when Dicky and his wife Linda
die in order to give the Government 55 percent of it, in order to take
the money from Dicky Flatt and give it to people who have been sitting
on their fannies in Mexia, not working on Saturday, and in some cases,
not working at all? I am sure we are going to hear that this is for
rich people. I want to put a human face on it.
When we revolted against King George, he wasn't doing things such as
the death tax. This is an outrage. This is an assault on every value
this country stands for, and I want to repeal it and repeal it
outright.
I want to index the capital gains tax.
That is the fourth provision of this bill.
I want to say that from this day forward, if you buy a house as an
investment and the price doubles and you sell the house for twice as
much as you paid for it, you haven't made any money, you simply kept up
with inflation. But under current tax law, you have to pay the Federal
Government a capital gains tax on the doubling of your house's price
even though that new price will buy only the amount of goods you could
have bought with the money for which you bought the house. So the next
thing we do is index the capital gains tax for inflation.
Finally, we eliminate not the last outrage in the Tax Code but it is
a big
[[Page
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outrage. If General Motors buys you health insurance, it is tax
deductible for them, but if you buy it for yourself, it is not tax
deductible. We eliminate that by saying that no matter who buys health
insurance in America, the employer or the employee, a retiree or a
worker, a homemaker or someone who is employed in the economy, that
health insurance is tax deductible.
It is a simple tax cut that you can put on one piece of paper. If you
pay taxes, you are going to get a 10-percent reduction in income taxes
out of this bill. It is easy to figure. If you pay $1,000 in income
taxes, you are going to get $100. If you pay $10,000, you are going to
get $1,000. If that breaks your heart, so be it. I think most people
will like it.
Second, we eliminate the marriage penalty and we allow income
splitting. If you have one parent who stays at home, you are able to
divide the income in half and have each of them claim half that income
that belongs to them. This is endorsed by every family group in America
because it is the right thing to do.
We repeal the death tax outright over a 10-year period--no ifs, ands,
or buts. If you live 10 more years, under this bill, and you build
something with after-tax dollars, it belongs to your family forever.
That is simple arithmetic. I think we can all understand it.
We index the capital gains tax so that you never pay capital gains
tax again on inflation. This is a big issue for every homeowner and for
every investor in America.
Finally, we provide full deductibility of health insurance. This is
an equity issue. It is something that ought to be done.
This is a tax cut you can understand. It represents what I believe is
the vision of the party of which I am proud to be a member. I hope my
colleagues will vote for this substitute. I believe it represents a
dramatic improvement and simplification in the Tax Code.
I reserve the remainder of my time.
The PRESIDING OFFICER (Mr. Allard). Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 1 minute to the Senator from
California and then 10 minutes to the Senator from Wisconsin, off the
bill.
The PRESIDING OFFICER. The Senator from Delaware controls the time in
opposition.
Mr. BAUCUS. The Senator from Delaware delegated that to the Senator
from Montana.
The PRESIDING OFFICER. The Chair thanks the Senator for that
clarification.
The Senator from California is recognized.
Mrs. BOXER. Thank you, Mr. President. I thank Senator Baucus.
My colleague from Texas says the Democrats hate investors and the
Democrats hate capitalism. As a former stockbroker, I deeply resent his
remarks. Maybe when the Senator from Texas was a Democrat he hated
capitalism and he hated investors, but the Democrats around here don't.
One of the reasons we are not supporting his amendment is that we think
it is bad for capitalism and we think it is bad for investors.
I have to say that this amendment, which reflects what the House did,
is a risky and radical amendment. It hurts the middle class. He says he
loves the middle class. He talks about his momma and Dicky Flatt. And I
love to hear him do it. But the bottom line is, the result of his
amendment will hurt the very people he says he wants to help because it
is such an unfair tax cut that would go to the very wealthiest and hurt
the middle class and the working poor.
I say to my friends who may be listening to this debate, the Senator
from Texas is a great debater but he was wrong when he said the Clinton
plan would lead to economic disaster and he is wrong today. I hope we
will vote down his amendment.
I yield my time.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, I thank the Senator from Montana.
Mr. President, I rise to offer some comments on the reconciliation
tax measure we are considering.
First, let me note that we have come a long way in the last seven
years.
When I first came to the Senate, we were facing an actual budget
deficit of $340 million.
That was the real figure--the figure that did not use the Social
Security Trust Fund balances to mask the deficit.
Thanks in large part to the President's deficit reduction package in
1993, and to a lesser extent the bipartisan budget cuts of 1997, we are
approaching a truly balanced budget.
I emphasize `'approaching,'' Mr. President, for we are not there yet.
The budget projections of the Office of Management and Budget, and of
the Congressional Budget Office, are just that--projections.
We do not currently have a budget surplus, not without including the
Social Security Trust Fund balances.
Mr. President, I do not mean to minimize the wonderful budget
turnabout that has been achieved.
But we should not be building massive new commitments on a shaky
foundation of questionable budget assumptions.
And that is just what we have.
The assumptions underlying the tax measure we will debate depend on
Congress making cuts of $775 billion in real spending over the next ten
years compared to current levels.
Let me note that this level of cuts does not include any additional
cuts that might have to be made in order to offset the cost of
unanticipated emergencies.
Let me repeat that, Mr. President.
The $775 billion in real spending cuts over the next ten years does
not include the spending we do to help the victims of hurricanes,
earthquakes, tornadoes, floods, or any kind of international emergency.
But, for the moment, let us suppose that there will be no hurricanes,
or earthquakes, or tornadoes, or floods in the next ten years.
Let us suppose that there will be no international emergencies that
require our assistance.
Will Congress find the political will to cut spending by three-
quarters of a trillion dollars over the next ten years?
Mr. President, Congress has yet to demonstrate it can stay even
within the current spending caps, let alone find an additional three-
quarters of a trillion dollars in cuts.
Last fall, Congress passed an omnibus appropriations bill that busted
the current spending caps by more than $20 billion.
This past winter, even before we passed a budget resolution, the
Senate passed another budget buster,
S. 4, the military pay and
retirement measure, which over the next ten years would add another $62
billion in spending.
And just a few weeks ago, Congress busted the spending caps yet again
with $15 billion in additional spending.
Mr. President, this is not a record of fiscal discipline.
Nor is it the kind of record that should give anyone confidence that
the budget assumptions underlying this tax bill are sound ones.
Mr. President, the assumptions underlying this tax bill are grounded
not in fiscal reality but in political expediency.
But, let us assume that somehow, Congress was able to enact the
three-quarters of a trillion dollars in spending cuts.
And let us further assume, as we did earlier, that there will be no
hurricanes, or floods, or earthquakes, or drought, or any other kind of
natural disaster for the next ten years.
And that there will be no more Bosnias or Kosovos or Iraqs--no
international emergencies of any kind for the next ten years.
Even under all of these assumptions, would this tax proposal be a
sound one?
The answer is no, because even if each and every one of those rosy
scenarios comes true, this bill would use over $75 billion in Social
Security balances to pay for the tax breaks.
Mr. President, I strongly oppose using Social Security to fund tax
cuts; that is why I voted against the 1997 tax cut package.
We simply should not be using Social Security balances--balances
needed to pay future benefits--to fund other government programs, or to
pay for tax cuts.
Of course, some may argue that even more spending cuts will be found
in order to avoid the use of Social Security balances--on the top of
the three-quarters of a trillion dollars in cuts assumed in this
measure.
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Mr. President, granting even this still rosier scenario, would this
tax measure be fiscally responsible?
I regret that it would not, because not only does this tax bill risk
our current budget, it puts future generations at risk as well.
Mr. President, while the revenue impact of any tax cut measure can be
expected to grow over time, the policies outlined in this measure
explode.
Consider that while in the next ten years, the cost of this proposal
is an already whopping $800 billion--if those tax policies are
continued, the cost in the second ten years will be a nearly
unbelievable $2 trillion.
If you add the additional interest payments that will arise from debt
service, the total cost of the tax policies in this bill rise to over
$3 trillion.
For those who may have forgotten, let me remind my colleagues that it
is in that second ten years when the baby boomer generation begins to
retire and put increased pressure on Social Security, Medicare, and the
long-term care services provided under Medicaid.
If ever there were a time to be prudent, now is the time.
As improved as the short-term budget picture is, the longer-term
budget picture is little changed.
We still face serious problems in Medicare, and as I noted, the baby
boomer generation will put enormous pressure on that program, as well
as on the long-term care services, many of which are provided through
Medicaid.
There is also a consensus that we should address the long-term fiscal
health of Social Security, and the sooner the better.
And finally, Mr. President, we still face a mountain of debt that was
run up during the 1980s and early 1990s because of the deficits that
were run up during that time.
In each of these areas, there is a stark choice: we can act now to
address each of these areas; or, we can ignore them, watch the problems
get much worse, and leave the work and cost of reform to our children
and grandchildren.
Mr. President, for me, that's an easy choice.
I do not want my children footing the bill for the failure of past
generations to act responsible.
I want to support a tax cut, but not one that jeopardizes the work we
have done to straighten out the current budget and squanders the
opportunity to reduce our debt and put Social Security, Medicare, and
our long-term care system on sound footing.
Mr. President, let me take a moment to look at the make-up of the tax
measure itself.
One might expect that a tax cut of $800 billion would provide the
sort of broad-based tax benefits that would be politically attractive.
But given the amount of revenue dedicated to this tax cut, the
benefits to the average taxpayer are surprisingly small, and the
overall package is heavily skewed to some of the wealthiest individuals
and corporations in the world.
As was noted by the tax watchdog group Citizens for Tax Justice, the
tax bill gives three-quarters of its benefits to the best-off fifth of
all taxpayers.
By contrast, only 11 percent of the tax bill's benefits go to the
bottom 60 percent of all taxpayers.
While the average tax reduction for the wealthiest 1 percent of
taxpayers--those with incomes over $300,000--is over $23,000 a year
under this bill, those with more average income do not do quite as
well.
The average tax cut for those who are among the middle fifth of
taxpayers will be $279, or about $5 per week.
For those in the bottom three-fifths of all taxpayers, the average
tax cut is even smaller--about $140 per year, or less than $3 per week.
Mr. President, under this $800 billion tax bill, the majority of
taxpayers will have an average tax cut of $3 per week.
Maybe the proponents of this bill are hoping most of America will use
this windfall to buy one of those overpriced cups of coffee.
Well, Mr. President, thanks to this tax bill, once a week, three-
fifths of America will now be able to go to one of those fancy coffee
shops and get a frothy decaf cappuccino latte with skim milk.
This tax bill is a bad tax policy any way you brew it.
Mr. President, I recognize that some may genuinely believe we should
dedicate about $800 billion to tax cuts over the next ten years.
The tragedy is that even in that context, the $800 billion was spent
unwisely, because in addition to Social Security, Medicare, long-term
care, and reducing our national debt, one of our highest priorities
should be significant reform of our tax code.
It was just a few months ago that we heard how critical fundamental
tax reform was to our future.
Flat tax, consumption tax, a national value-added tax--there were a
number of significant proposals that sought to address the inefficiency
of our current Tax Code.
Simplification was the order of the day, and let me add, Mr.
President, that while I did not support many of those proposals, I
think many of the proponents of reform got it exactly right.
Our Tax Code should be simplified.
We should reduce the number of special interest tax breaks and use
that savings to lower the tax rates for everyone.
I participated in just that kind of exercise at the State level as
chair of the Taxation Committee in the Wisconsin State Senate.
As we all know, there will be winners and losers in a reform of our
tax code, and I can tell you from direct experience that the best time
to enact tax reforms is when you have additional resources to help
increase the number of winners and decrease the number of losers.
Mr. President, this tax bill and the House version both squandered
that opportunity as well.
We might have had a significant start on real tax reform.
Instead, we got a grab bag of goodies for special interests added to
a tax code already thick with complexity.
A recent article in the Washington Post listed a number of the
special interest tax breaks in this bill and the House version.
They include tax breaks for: multinational corporations, utility
companies, railroad, oil and gas operators, timber companies, the steel
industry, seaplane owners in Alaska, sawmills in Maine, barge lines in
Mississippi, Eskimo whaling captains, and Carolina woodlot owners.
This bill is a dream come true for business lobbyists.
The Post reported one lobbyist as saying, ``If you're a business
lobbyist and couldn't get into this legislation, you better turn in
your six-shooter.''
Mr. President, in the name of complete disclosure, let me note that I
understand the Democratic alternative, which I may support, suffers
from the same problem, though to a much lesser extent.
And it will come as no surprise to my colleagues that I firmly
believe this kind of pandering to special interests is a direct result
of our campaign finance system.
There's ample evidence to that effect right here in this bill.
The campaign finance system gives wealthy interest an open invitation
to influence legislation in this body, and in this bill it's clear that
special interests accepted that invitation in droves, Mr. President.
For the benefit of my colleagues and the public, I'd like to share
just a few examples of what these interests gave in PAC and soft money,
and what they got in either this bill, the House tax measure, or both.
I do this from time to time; it is known as ``The Calling of the
Bankroll.''
According to the Washington Post, an umbrella organization called the
Coalition of Service Industries, a coalition of banks and securities
firms, won a provision to extend for five years a temporary tax
deferral on income those industries earn abroad. The value of this tax
deferral: $5 billion over ten years.
So we know what Congress has given the Coalition of Service
Industries, but what has the Coalition of Service Industries given to
candidates and the political parties? During the 1997-1998 election
cycle, coalition members gave the following:
Ernst & Young--more than half a million dollars in soft money, and
nearly $900,000 in PAC money.
CIGNA Corporation--more than $335,000 in soft money, and more than
$210,000 in PAC money.
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American Express--more than $275,000 in soft money and nearly
$175,000 in PAC money.
Deloitte and Touche--more than $225,000 in soft money and more than
$710,000 in PAC money.
Of course, as I said Mr. President, this is just a sampling of what
Coalition of Service Industries members have given. I'd be up here a
lot longer if I had a document all the millions of dollars these groups
have given.
But it doesn't stop there. These two tax bills mean Christmas in July
for special interests, Mr. President, with gifts for jut about every
industry in Santa's bag.
The post reports the utility industry got a provision affecting
utility mergers in the House measure, which, if it survives, is worth
more than $1 billion to the utility industry. The provision would
excuse the payment of taxes on the fund that utilities set up to cover
the costs of shutting down nuclear power plants.
Utilities companies that operate nuclear power plans would be
particularly grateful to see this provision passed, Mr. President.
Their depth of their gratitude would be matched only by the size of
their campaign contributions during the last election cycle, including:
Entergy Corporation, which gave $228,000 in soft money and nearly
$250,000 in PAC money;
Commonwealth Edison, which gave $110,000 in soft money and more than
$106,000 in PAC money;
And Florida Power and Light, which gave nearly $300,000 in soft money
and more than $182,000 in PAC money.
As it does so many other issues, our campaign finance system is
preventing real reform to our tax code, and those who doubt that only
need to look at this bill.
Mr. President, the best thing we can say about this tax bill is that
it will not be enacted into law.
The President will almost surely veto it, and he will be right in
doing so.
This bill is fiscally irresponsible.
It depends on budget suppositions that are at best fanciful.
It uses Social Security balances to pay for tax cuts.
It proposes a tax policy that no only jeopardizes our current budget
but our future fiscal health.
It sticks our children and grandchildren with the cost of paying-off
the debt run up over the past two decades, and leaves them the task of
extending the solvency of Social Security, strengthening Medicare, and
reforming our long-term care system.
And it hands our special interest tax breaks galore while providing
little tax relief to the vast majority of taxpayers.
Mr. President, I will vote against this bill, and urge my colleagues
to do so as well.
Mr. President, I yield the floor.
Mr. BAUCUS. Mr. President, I yield 5 minutes to my good friend from
Delaware, Senator Roth.
Mr. ROTH. Mr. President, Senator Gramm has provided Members with a
straightforward alternative to the bipartisan Finance Committee bill. I
compliment him on the clarity of his approach, much of which I favor.
Although provisions of Senator Gramm's substitute have appeal for me,
frankly, I could not have used it as a basis for the Finance Committee.
His proposal contains elements that would not garner a majority of
committee members.
In addition, Senator Gramm's substitute, though popular with many in
the Senate Republican caucus, would not pick up support on the other
side of the aisle. For that reason, his proposal would not be a
blueprint for tax cuts, in the form of a signable bill, that we can
deliver to the American people now.
Finally, although Senator Gramm's amendment is simpler, it leaves out
many bipartisan tax measures that address important tax issues. For
instance, education savings incentives are deleted. This means parents
who want to save for a child's college education would be left out of
the picture. We're talking about millions of parents and students in
every state.
Yet another example is the student loan interest deduction. Under the
Finance Committee bill, at least three million graduates, bearing the
burden of college debt, would be allowed to deduct student loan
interest on their tax returns.
In my legislation I try to focus on matters of need to the American
family. I provide incentives to promote savings, pensions, IRAs. Many
in retirement depend not only on Social Security, which we will
address, but also on personal savings and pensions. My bill addresses
that. There is nothing to correct the problems of AMT, the alternative
minimum tax. Unfortunately, thousands upon thousands of American
families will be hit by AMT and not enjoy the full benefit of many
programs such as the child tax credit.
Finally, nothing is done with respect to charitable giving. We have
proposals that will promote and create incentives.
For these and other reasons, I must oppose Senator Gramm's well-
intentioned amendment.
I reserve the remainder of my time.
Mr. BAUCUS. Mr. President, I yield myself such time as I might
consume.
The Finance Committee has already rejected this provision. The
Finance Committee deliberated this amendment in committee, and, by a
large margin turned it down because it is excessive. It is
irresponsible, in my judgment. It is not the right thing to do. It says
we are going to take the entire on-budget surplus. And because of the
tax cut plus the lost interest on the debt, there is nothing left for
Medicare, discretionary spending or any other programs which will be
cut anyway by a very large margin.
It is excessive, too, compared to the bill passed by the committee
because it is so backloaded. It is so top heavy. By that, I mean the
bulk of the cost of the provisions are at the very end--6, 7, or 8
years from now. No one can predict the future of this country and what
position we will be in 6 to 8 years from now.
I was speaking to the CEO of a major American company a few days ago,
a man we all know, a company we all know very well. He told me they
can't begin to plan for the future. They do have 5-year plans but they
know the 5-year plans are not going to be accurate. So they have to
just do the best they can on virtually a quarterly basis. They have to
go ahead in the areas they think are the areas of the future, but it is
almost impossible to plan in this modern era.
So I say, if we today were to lock in provisions in the law which
will hemorrhage this country's budget surplus based upon ephemeral,
distant projections which are never accurate, that is not responsible.
That is not the right thing to do. And that is what this amendment
does. That is why basically, fundamentally, without going into all the
details of it, why this does not make sense. It has often been stated
during this debate that the time when the baby boomers begin to retire
is when these things really start to kick in and the costs explode.
I think prudence is the watchword here today. History sometimes is a
guide. Look at the 1980s. What happened in the 1980s? There was a huge
tax cut. Congress succumbed to the siren song of supply side economics.
What was supply side economics supposed to do? It was supposed to make
deep tax cuts, spend more on defense, and guess what, folks, that is
going to cause the budget to be balanced. That was what supply side
economics was supposed to do--advocated, by the proponents of this
amendment. It was going to balance the budget.
The theory is the trickle down theory: Cut the taxes of the most
wealthy, they invest a lot more, it trickles down and the economy
starts humming and it balances the budget. That was the Laffer curve.
Guess what, it did not work. We kind of knew it was not going to work,
but it was such a temptation, such a siren song to vote these huge tax
cuts, hoping, hoping, hoping that what the proponents said would come
true. Guess what, it did not. It did not come true at all.
The tax cut was passed in 1981. Then what happened in 1982? This
Congress, a Republican Congress, and President Reagan, had to change
course. They had to raise taxes. The Republican Congress and Republican
President raised taxes in 1982. Then guess what. This tax increase was
not enough because the deficits were just so large. The Republican
Congress and Republican President had to raise taxes again in 1984.
They had to raise taxes more because the deficit was so large. The
national debt in 1980 was roughly about
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$1 trillion; 8 years later it was roughly $3 trillion, maybe close to
$4 trillion. It tripled and quadrupled during that time of the huge tax
cuts. Then we had to add more taxes back again in 1982 and 1984.
So, in many ways this is history repeating itself. Democrats in the
Senate support a tax cut. We support using a third of the on-budget
surplus to pay for a tax cut. But we are just saying don't use all of
the on-budget surplus for tax cuts with virtually all going to the most
wealthy Americans.
Do you know what else is going on here? I do believe the proponents
of this bill are so--not distrustful, but so opposed to Government that
they want these huge tax cuts partly to force down deeper cuts, way
below the baseline in spending. I think they want to cut veterans'
benefits 30 percent; they want to cut health education 20, 30 percent;
want to cut these programs. I think there are really many on that side
who want to make these cuts. They want to. As strange as that might
sound, they want to. That is another reason for this huge tax cut
because it will force cuts in spending later on.
We have already cut spending. Discretionary spending has been cut so
much by this body over the last 10 years it is unbelievable. And the
size of government has gone down, with many fewer federal employees
than there were years ago.
To sum it all up, we have seen this provision in the Finance
Committee. The Finance Committee soundly rejected this amendment. I
urge the Senate to also soundly reject this amendment. It is not good
policy.
I reserve the remainder of our time.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. Mr. President, I yield 10 minutes to the distinguished
Senator from Tennessee.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. Mr. President, I think Senator Gramm is bringing a very
important principle to the table, one that we need to address: If we
are going to have a tax cut, what kind of tax cut should we have? What
is best for the economy, and what is fair?
There was a consensus in this country, 10, 15 years ago, that we
needed to have a tax policy based upon a broader base and lower rates.
That is essentially the tax bill that came out in 1986. We came down to
two tax rates. We had a 15-percent and a 28-percent tax rate. There was
a broader base, where more people were paying taxes, but lower rates.
In the 1990s, we have gotten away from that. We have gotten away from
that principle and gone, instead, toward what has been referred to as
targeted tax cuts. That its basically the Government--we, the
President--that decide, on an individual basis, who deserves the tax
break or tax cut in any particular year. Usually it is based upon how
much clout they have, or some notions of fairness of a particular
congressional makeup at some particular time. So now we have wound up
with higher rates and a narrower base. We now have five income tax
rates instead of the two we had back in 1986 in addition to phaseouts.
The Tax Code, not only do we have additional rates, it has become more
progressive, even in addition to those rates.
I do not think a lot of people are aware of this. I think most
Americans think initially, basically, they can look at tax rates and
see what their tax burden is. But then you look at all the phaseouts
that we have. Congress has decided in its wisdom that people of a
certain income level do not deserve some of the deductions, exemptions,
and benefits that others deserve. So we have a personal exemption
phaseout.
We have an itemized deduction phaseout at basically the $124,000
level for individuals. I am talking about individuals and not couples,
in terms of the dollar amounts I am using. The personal exemption
phaseout; itemized deduction phaseout, limitation of only being able to
deduct that amount over 2 percent of itemized deductions; a 7.5 percent
floor on medical deductions; a 10 percent adjusted gross income floor
on casualty deductions; a $500 child credit that phases out at an
income level of $75,000; a dependent child credit that begins to be
phased out at an income level of $10,000--if you make that much it
begins to be phased out; a deductible IRA, $30,000; an education IRA,
$95,000; the HOPE credit, college credit, begins to be phased out at
$40,000 for an individual. So we want to help you go to college, we
want to help your kids go to college--as long as you do not have a job,
basically is what that amounts to.
We have a life-time learning credit of $40,000; student loan interest
deductions, at $40,000 it begins to be phased out; education savings
bond interest--if you make $52,000 you begin to lose that; elderly/
disabled credit, $7,500; adoption credit/exclusion, $75,000; DC first
time homebuyer--if you make $75,000, you begin to have that phased out
as a taxpaying individual; rental real estate losses; rehabilitation
tax credit--on and on and on.
In addition to continuing to raise the tax rate--the highest one in
1986 wa
s 28 percent and now it is up to 39.6 percent plus the maximum--
plus the limited itemized deductions and phaseout of personal
exemptions, you wind up with an effective rate of over 40 percent. When
you remove the cap on Medicare tax, plus these phaseouts, you are
looking at, in some cases, close to an effective 45-percent tax rate,
something like that.
My only point is that, as we decide how to go forward, we need to
understand that we have a progressive system as far as our income Tax
Code is concerned, and that is the way it ought to be. A lot of people
believe it is that way. But every time we have a tax cut, we cannot say
let's give everybody the same dollar amount back in taxes regardless of
how much they paid in because we have a very progressive system.
We have progressive tax rates up to 39.6 percent, with phaseouts so
that if you are making any money, if people are working hard and making
a pretty good living, they begin to lose the deductions and credits.
That makes it even more progressive.
We come along and say we are going to give a tax cut now, and we say
if the other guy is paying twice as much in taxes as I am, give him a
tax cut. He lost all these exemptions because he is making good money.
He is paying twice as much in taxes. But we come along with a tax cut
and we say they are going to both get the same amount back? I do not
think that makes much sense.
Let's say the economy was good and we were able to have successive
tax cuts over a period of time and we gave the same dollar amount back
to everybody regardless of how much they were paying in taxes. We would
have a narrower and narrower base all the time and fewer and fewer
people paying any taxes at all. We would continually be taking people
off the tax rolls. We already have 43 million people who do not pay
taxes.
As progressive as our Tax Code is, as does the Senator from Texas, I
make no apologies for the proposition that when it comes time for a tax
cut, let's base the tax cut on how much people are paying in.
We have to ask ourselves a fundamental question: Are we interested in
punishing folks who make a good living or are we interested in
collecting money for the Federal Government to pay legitimate
Government expenses? History shows every time we have had a reduction
in tax rates, we have more money. Every time the Government reduces
rates in any appreciable amount, the Government winds up getting more
money.
In the 1920s, it was true. In the 1960s, under President Kennedy, who
said a rising tide lifts all boats, it was true. In the much maligned
1980s, which laid the groundwork for the greatest economic prosperity
this world has ever known, it was true.
Increased revenues in the twenties was 61 percent over a 7-year
period. In the sixties, a revenue increase after inflation was about 33
percent. In the eighties, after cutting the tax rates, revenues
increased 28 percent because it reduced the incentive to hide income,
to shelter income, and to underreport income.
Similarly, the share of the tax burden paid by the rich rose
dramatically as the rates fell. By cutting rates, we get more money out
of the rich.
Do we want to be concerned about how much somebody is making and try
to hold that down or do we want the money for the Federal Government? I
thought the idea was to have a fair Tax
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Code but to raise the money for the legitimate expenses of the Federal
Government.
In the 1920s, they called rich $50,000. I guess things have not
changed that much. But in 1921, the rich paid 44 percent of the income
tax. In 1928, after the rate cut, they paid 78 percent of all taxes.
The gap was not quite as pronounced later on, but in 1963 under
President Kennedy, at the time of the cut, the rich were paying 11.6
percent of all the taxes being paid. In 1966, they were paying 15.1
percent. In the 1980s, we were talking about the top 10 percent----
The PRESIDING OFFICER. The Senator's time has expired.
Mr. THOMPSON. I ask for another 3 minutes.
Mr. GRAMM. I yield the Senator another 3 minutes.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. THOMPSON. In the 1980s--1981--the rich were paying 48 percent of
the taxes. In 1988, they wound up paying 57 percent of the taxes. We do
not get a lot of credit taking up for the rich, but our responsibility
as public servants is to look out for the country and have policies
that are going to get the most money and not try to be too concerned
about who is going to get this share of the economic pie: I am going to
get yours; you are not going to get mine. Our concern should be with
making that economic pie better.
As far as an across-the-board cut is concerned, every serious
observer nowadays thinks it is sound economic policy. Lawrence Lindsey,
former Federal Reserve Board member, George Shultz, former Secretary of
State, and even the oft quoted Chairman Greenspan--there may be some
discussion as to when he thinks a tax cut should come about, but he
says when it comes about, it ought to be an across-the-board rate
reduction. This is sound economic policy.
I know the prospects for this particular amendment, but all of this
business about soak the rich and unfairness, we need to keep a little
balance and keep things in mind. If we want more money, if we want to
be fair--first of all, we have to recognize we have a very progressive
system in this country, so when it comes time for a tax cut, let's pay
some attention to the idea of across the board and not ha
Amendments:
Cosponsors:
