[Congressional Record Volume 141, Number 61 (Monday, April 3, 1995)]
[House]
[Pages H4036-H4039]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
NO NEW TAXES ON FEDERAL EMPLOYEES
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 4, 1995, the gentleman from Virginia [Mr. Wolf] is recognized
during morning business for 5 minutes.
Mr. WOLF. Mr. Speaker, as the first Member of Congress to introduce
the family tax credit in the 103d Congress, I am troubled with the tax
bill we will vote on this week which includes a much-needed $500 tax
credit for families with children on one hand but also includes a
payroll tax increase on Federal employees on the other. Federal
employees are virtually all middle-class taxpayers. We promised no tax
increases on middle-class Americans. And I am personally very
disappointed to be put in such an untenable position.
I was calling for the family tax relief in the 102d Congress and the
103d Congress when Republicans in the White House and many in Congress
would not give it the time of day. Yet my bill for family tax relief
garnered bipartisan support for 263 cosponsors in the 102d Congress.
Raising taxes to fund a tax cut was never part of the picture.
So why sully our tax package now with a tax
increase? President Bush did not balance the budget by raising taxes
and neither did President Clinton. We will be breaking our promise in
the contract not to raise taxes. Therefore, I hope that it will not
only be those Republicans with large numbers of Federal employees in
their districts who will oppose payroll tax hikes own certain groups
but all on our side on the aisle who signed the contract as well as
those Democrats who oppose increasing taxes on the middle class.
We are repealing in this bill the Social Security tax increase which
the Democrats passed to balance the budget because it hit many middle-
class retirees. Why repeat that mistake by picking on another group?
And why repeat the disasters of the past in breaking promises on tax
increases?
A fundamental tenet of the Contract With America is the commitment to
no new taxes. Once we cede the tax issue in any area we will be open to
the argument that it is OK to raise taxes; it just depends upon whose.
We should not be talking about raising anybody's taxes. But this bill
singles out Federal employees for a dramatic increase in payroll taxes.
For example, an FBI agent, who everyone in this body would call if your
wife or husband or children was kidnaped, an FBI agent with two
children earning $50,000 will pay an additional $250 a year to the
Federal Government even with the $500 tax credit. This is a $1,250 hit
without the tax credit.
The provision that was put into the bill is even more onerous than
the provision proposed in the Committee on Government Reform and
Oversight and that was unable to even make it out of committee. There
were only 2 days of hearings on this very complicated issue and, quite
frankly, there was still many issues unresolved. This is not a good
precedent to be setting.
Furthermore, most management experts will tell you that as you are
downsizing it is important not to demoralize the remaining staff. Let
me just say it again. As you are downsizing it is important not to
demoralize the remaining staff. Hitting Federal employees across the
board with a payroll tax like this in conjunction with downsizing
efforts will have a devastating impact on morale at a critical time.
What Federal employees? FBI agents, DEA agents that are keeping drugs
out of schools, CIA agents, Secret Service agents that would stop the
bullet that kills the President of the United States like Timothy
McCarthy who saved President Reagan's life. Cancer research at NIH.
When you downsize you treat the people you keep well and you do not
demoralize them. This issue of unfunded liabilities in the Federal
pension system is still open to considerable debate. The Congressional
Research Service reported that the trust fund balance is adequate to
provide needed budget authority on an ongoing basis. The combined
funded and unfunded liabilities of the old retirement system is the
amount that the Government would have to pay all at one time if
everyone who is or who has ever been a vested CSRS participant could
demand a check for the present value of all the benefits to which they
would be entitled from that time throughout retirement until their
death, taking into account future pay raises they might receive and
cost-of-living adjustments after retirement.
{time} 1300
As the CRS noted, ``This event cannot happen in the Federal
retirement system.'' Federal pension obligations would not just come
due all at once, at one time.
Furthermore, given the large downsizing effort in progress, the
pension liabilities will be dramatically reduced in coming years, and
this is just one more reason why it is particularly unfair that Federal
employees will see the huge jump in their payroll tax. Some of them
will be gone before this pension even vests.
Instead of including this complex issue in this tax bill, perhaps we
need a bipartisan commission to look at it. I am asking that the tax
increase provision be removed and that we complete the final plank in
the contract without any tax increase.
I include for the Record a memorandum and letters to Mr. Darman.
[[Page H4037]] Congressional Research Service,
Library of Congress,
Washington, DC, March 18, 1995.
Subject: Federal Civil Service Retirement: Is There a
Financing or Funding Problem?
From: Carolyn L. Merck, Specialist in social legislation,
Education and Public Welfare Division.
Two questions have been raised recently regarding the
Federal Civil Service Retirement System [CSRS]. First, is the
``unfunded liability'' of the CSRS a problem that needs to be
fixed to avoid steep increases in outlays from the Treasury
or increases in the deficit? Second, is the system now
insolvent, or will it become insolvent in the future? The
answer to both of these questions is ``no.''
background
From 1920 until 1984 the CSRS was the retirement system for
most Federal employees. In 1935, Congress enacted social
security for private sector workers. In 1983, when social
security funding was running low, Congress brought cash into
that system by mandating (among other things) social security
coverage and payroll taxes for all Federal workers entering
civil service employment on or after January 1, 1984. Because
social security benefits would duplicate some CSRS benefits,
Congress closed the CSRS to new participants at the end of
1983 and designed the Federal Employees' Retirement System
[FERS] to coordinate with social security. A primary
objective of Congress in designing a new system was to create
a retirement plan like those commonly found in the private
sector. Congress crafted FERS during 2 years of careful
analysis of alternatives and planned for a smooth funding
transition from CSRS to FERS.
Total annual benefit costs for current Federal retirees and
survivors were about $36 billion in FY 1994. About $9.7
billion in receipts were credited to the retirement trust
fund account of the Treasury from payroll withholding from
current workers along with payments from the U.S. Postal
Service and the Government of the District of Columbia.
These cash receipts are converted to Federal securities and
are deposited in the one retirement trust fund that finances
both CSRS and FERS. Other annual trust fund receipts in the
form of Federal securities total about $53.8 billion and are
deposited according to formulas established in law to prefund
partially future retirement benefits and to pay interest on
the securities in the fund. In total, the trust fund received
$63.5 billion in FY 1994 and spent about $36 billion for
benefits. The deposit of securities in the trust fund is an
``intragovernmental transfer'' between accounts of the
Treasury; it does not constitute an outlay from the Treasury
and has no effect on the budget deficit. Benefit payments and
administrative costs are the only expenditures of the
Treasury for the retirement system. Because the trust fund
receives more income each year than is debited for benefits,
its balance continues to grow.
is the unfunded csrs liability a budget problem?
The liabilities of a retirement system are the costs of
benefits promised to workers and retirees. A retirement
system is ``fully funded'' if a trust fund holds assets
approximately equal to the present value of all future
benefit promises to which retirees and vested employees are
entitled (``vesting'' in the Federal plans requires 5 years
of employment covered by the system). ``Unfunded
liabilities'' are earned benefits for which assets have not
been set aside in a retirement fund. As of the end of FY
1993, the Federal retirement trust fund held $276.7 billion
in assets for the CSRS, or about 34 percent of long-term CSRS
pension liabilities (the fund balance represents ``funded
liabilities''). Thus, the unfunded CSRS liability was $538.3
billion. The unfunded liability developed because the CSRS
funding laws have not required the Government to fund the
system fully. Nevertheless, the primary purpose of the
Federal trust fund is not to provide a source of cash for the
Government, but to provide budget authority to allow the
Treasury to disburse monthly annuity checks without annual
appropriations. The trust fund balance is adequate to provide
this budget authority on an ongoing basis.
The combined funded and unfunded liabilities of the CSRS,
$815 billion in FY 1993, is the amount the Government would
have to pay all at one time if everyone who is or who ever
has been a vested CSRS participant could demand a check for
the present value of all the benefits to which they would be
entitled from that time throughout retirement until their
death (or their survivor's death), taking into account future
pay raises they might receive (which affect the annuity at
retirement) and cost-of-living adjustments after retirement.
This event cannot happen in the Federal retirement system.
Federal pension obligations cannot come due all at one time,
unlike the situation that arises in the private sector when
an employer goes out of business and must pay all promised
pension obligations at once. Some of the Government's
liabilities represent payments due to current retirees, who
receive their benefits 1 month at a time throughout
retirement; others represent payments that will not commence
for years to come because the workers are not yet eligible
for retirement. By the time they become eligible, others
currently retired will have died. Thus, unlike private
employers, the Government need not fully prefund the
retirement system in order to insure against having to pay
off all earned benefits simultaneously.
Some are concerned that the existence of unfunded Federal
pension liabilities has, or will have in the future, an
effect on the budget deficit and/or the need for tax
revenues. The annual budget cost to the Government of CSRS
(or any retirement system) can never be more than the sum of
the checks written to annuitants 1 month at a time. Thus, the
liabilities of the system, funded or unfunded, will never
require payments from the Treasury in excess of the benefits
payable to living, retired workers or survivors. However, the
cash to pay monthly benefits comes from general revenues, and
paying monthly benefits creates an outlay from the budget and
therefore contributes to the budget deficit, as does any
Government spending. Consequently, in times of tight budgets,
Congress often considers benefit cuts in order to reduce
spending. This would be true if the program were fully funded
and had no unfunded liability, or, conversely, if there were
no trust fund and the program were totally unfunded.
The CSRS is an employer-provided defined benefit system,
which is the type of plan provided by many private employers
for their employees and by most State and local governments.
Under all defined benefit pension plans, public and private,
the employer bears the responsibility for financing and
paying most or all of the cost of benefits. Defined benefit
pensions are deferred compensation, meaning the employer
defers paying employees' compensation during their working
years in favor of proving a specified level of compensation
throughout retirement years. Private employers finance
employees' pensions from invested income derived from the
sale of goods or services. Analogously, the employer of
Federal workers is the American taxpayer. The resources the
Government has to meet its employer obligations to finance
the current and deferred compensation of its employees are
Federal tax revenues.
DOES THE CSRS FACE INSOLVENCY?
Currently about half of the Federal workforce participates
in the CSRS and about half participates in FERS. Over the
next two decades or so the number of CSRS workers will
decline as they retire, and the workforce will include mostly
FERS participants. As the number of CSRS-covered workers
declines, the assets credited to the trust fund for CSRS will
decline not because of loss of payroll contributions from
workers, but primarily because the Government's payments will
decline. Employee contributions ``pay for'' only about 12
percent of current annual benefit costs. However, the
formulas by which the Government's share of CSRS costs are
determined are based on projections of long-term benefits; as
long-term benefit projections decline in anticipation of the
demise of the CSRS, the Government's funding will decline,
although there will still be CSRS retirees and survivors
entitled to benefits. According to the Office of Personnel
Management (OPM), CSRS benefit payments will begin to exceed
the amount of assets credited annually to the trust fund for
CSRS in about 2008, and the assets attributable to the CSRS
will be depleted by about 2025.
When Members of Congress wrote the new FERS law in 1986,
they understood that there would have to be a financial
transition from CSRS to FERS in the next century, and they
wrote the law to provide for that transition. First, the law
provides for one trust fund in which CSRS and FERS assets are
combined. Therefore, there is no separate CSRS trust fund
that will be depleted. Second, Congress established a system
whereby benefit payments under the CSRS will be authorized by
FERS trust fund securities as needed until there are no more
CSRS benefits to be paid. Thus, the securities that are
building up for FERS, and that are in excess of the amount
needed to authorize FERS payments for some time, will be
reduced each year by the amount by which CSRS benefits exceed
CSRS assets. This will cause an increase in the FERS
liability, but that liability will be ``paid off'' through a
series of 30-year amortization payments. Using a 75-year
projection period, OPM estimates that the total value of
securities in the trust fund will grow throughout the
projection period, ultimately reaching about 4.2 times
payroll, or nearly 18 times the amount needed to pay annual
benefits. This means that in the next century the trust fund
will reach an ongoing steady state in which it will have a
balance sufficient to authorize 18 years of benefit payments.
In summary, by definition, under the financing arrangements
set out in the current law, the system is not now and never
will be ``insolvent'' or without adequate budget authority
for payment of benefits. Again, because the budget cost of
the systems can never exceed the cost of monthly benefits to
living annuitants, the cash required from the Treasury or
taxpayers will never exceed the cost of those monthly
payments.
____
April 29, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: Since we last corresponded, H.R. 1277 The
Tax Fairness for Families Act of 1991, has garnered the
support of 73 bipartisan cosponsors from across the political
spectrum.
More members of Congress are recognizing that a successful
economic agenda is founded
[[Page H4038]] in policy which strengthens the cornerstone of
a strong and healthy society: the family. H.R. 1277 is a
simple bill. It doesn't require more employees to administer
a program or a new federal building. It simply makes the tax
code more family friendly by raising the personal exemption
from $2050 to $3500 for children under age 18.
I have enclosed a list of the current cosponsors for your
information. This is an issue that is quickly gaining
interest and I would appreciate your support.
Best wishes.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
May 1, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: As you'll recall, when we first spoke
about my legislation to increase the dependent deduction, 52
House members had cosponsored.
Lat week when I wrote you, 73 members had signed on. I
wanted to let you know that today we reached 100 cosponsors
and I have enclosed the list for you.
Bipartisan momentum is building on this bill which will
help the American family and I hope the Bush Administration
will lend its support.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
May 6, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: Just a quick note to let you know that
H.R. 1277, ``Tax Fairness for Families,'' has picked up an
additional 25 cosponsors since I wrote you last week.
We now have 125 cosponsors and I have enclosed an updated
list of the cosponsors for you.
I hope the Bush Administration will support H.R. 1277.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
May 9, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: I wanted to give you a quick update on the
support building in the House for H.R. 1277, ``Tax Fairness
for Families.''
We have picked up an additional 35 cosponsors since I wrote
to you on Monday, May 6. H.R. 1277 now has 160 cosponsors.
I hope the Administration will support this bill.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
May 9, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: We now have 200 cosponsors of H.R. 1277,
``Tax Fairness for Families.''
We need the Administration's support for this legislation.
With warm regards,
Sincerely,
Frank R. Wolf,
Member of Congress.
____
July 7, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: In case you had not already seen it, I
hope you will have a look at the enclosed Allan Carlson piece
in the Wall Street Journal regarding the issue of tax
fairness for families.
We now have 210 cosponsors on H.R. 1277. I hope
Administration will support this bill and avoid repeating the
``swedish mistake.''
Thanks again for your interest in this legislation.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
August 22, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: As the Wall Street Journal reported in the
attached article, tax fairness for families is going to be a
key political issue for the coming year.
I am writing to urge the Administration's support for the
family tax packages that I have put forward to increase the
dependent deduction (H.R. 1277) and expand the Young Child
tax Credit (H.R. 2633). This package already has the
bipartisan support of 248 cosponsors including 101 Democrats.
Unlike other tax packages recently proposed, this package
provides tax relief exclusively for working families, treats
both one-earner and two-earner families in an equitable
manner, and does not propose to create higher tax brackets.
While it appears that many of the family tax package
already proposed will take the dubious route of increasing
taxes to provide a so-called middle class tax relief package,
the Administration has the opportunity to provide a clear
alternative. By working with the majority in Congress who
support family tax relief yet, the Administration can put
forth a program of restrained growth in domestic spending to
provide for significant family tax relief.
As you may know, last year I supported the budget agreement
and believe in the need for responsible fiscal policy. The
combined cost of H.R. 1277 and H.R. 2633 is estimated at
between $12-15 billion per year. I believe it could be paid
for through a unified cap on domestic spending of between 6%-
6\1/2\ percent. A unified cap on domestic spending would
provide a logical extension to the common sense restraints
put on spending in last year's budget agreement. Currently,
approximately $100 billion is spent on programs benefiting
children. These programs could still meet the needs of
families and children if they grew at this reasonable rate.
In addition, the Administration could also put forward the
capital gains tax cut as a revenue raiser for family tax
relief. With the thousands of new jobs that would be produced
with a lower capital gains rate, a dynamic with/win situation
would be achieved by providing revenue for family tax relief
while also spurring the economy and increasing job
opportunities.
With the trust of the American people and the facts on his
side, President Bush and this Administration can provide
strong support to American families by allowing them to keep
more of their own hard-earned money to provide for their
families. All the attention on family tax relief provides an
excellent opportunity for the Administration to advance its
pro-family, pro-growth, policies while distinguishing them
for the failed and tired ``Robin Hood'' politics put forth in
other family tax measures. Thank you for your consideration
of these important issues.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
October 8, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: The American family has never been under
greater attack than it is today. From our inner cities to our
suburbs, families are threatened by disturbingly high rates
of child abuse, spouse abuse, teen suicide, high school drop
outs, drug and alcohol use and most tragically violence and
death among our youth. Today more young males die of gunshot
wounds every year than died in Desert Storm. The wheels are
coming off the American family and clearly, children cannot
steer clear of trouble without the guiding influence of the
family.
These disturbing trends in child and family well-being have
coincided with the dramatically reduced tax benefit for
children. While children today are more at risk from numerous
cultural threats, parents are pushed by financial pressures
to spend less time with their children. Too often either Mom
nor Dad is home to hear the after school trials and
tribulations of troubled adolescents or to help with homework
or to spend relaxed time with their children. The combined
effect of these ``twin deficits'' of time and money create a
downward spiral for family well-being as well as real pain
and suffering for thousands of children and families.
Family tax relief is an important part of a workable
solution for families and is a natural outgrowth of the
following common sense sentiments recently expressed by
President Bush:
We all realize that government has real limits. You can't
replace values with regulations. You can't replace parents
with caseworkers.
The family tax bills we have introduced fit well into the
President's efforts to restore proportion and balance to
government while allowing individuals and families to have
more choices and opportunities. That is why we believe it is
important that the Administration enthusiastically embrace
and endorse family tax relief and make it a legislative
priority in the upcoming year. Already there are 252
cosponsors of H.R. 1277 (a measure to increase the dependent
deducation to $3,.500) and growing support in the Senate for
S. 152 to double the personal exemption.
The Bush Administration has an historic opportunity to
further advance the cause of families. By actively pushing
these family tax relief measures in combination with a
capital gains tax cut, the Administration can forward a
proactive family policy that gives families more money, time
and opportunity for families themselves to promote family
well-being. Domestic policy that focuses on the home and
families instead of more government programs is the true
recipe for nurturing families and children.
We believe this is good legislation that the Administration
can support and Congress can pass. It helps families right
away without adding to big government or mandating
regulations or policies.
Thank you for your consideration of these important issues.
If we can provide you with any additional information please
contact either of us or Barbara Comstock at 225-5136.
Sincerely,
Frank R. Wolf,
Ranking Minority Member, Select Committee on Children,
Youth, and Families.
[[Page H4039]] Dan Coats,
Ranking Minority Member, Subcommittee on Children, Family,
Drugs, and Alcoholism.
____
October 23, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: I would like to emphasize one more time
the importance of including direct family tax cuts in the
Administration's economic growth package. Frankly, I am
disappointed that the Administration has not yet signed onto
the efforts for family tax relief when the support is already
present in the House just waiting for someone to lead the
charge. It is my hope that it will be President Bush leading
this charge and reaping the obvious benefits for both the
American family and the Republican party.
I cannot over emphasize my concern for today's families and
the financial and cultural pressures they face. Families are
clearly overtaxed. By making family tax relief the
centerpiece of the Administration's economic growth package
we could both help American families and garner the political
support for a capital gains tax cut and a true economic
growth package.
I hope you will consider the advantages of making family
tax relief a centerpiece of the Administration's economic
growth package.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
November 18, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
The White House,
Washington, DC.
Dear Mr. Darman: As Wall Street Journal reported in the
attached article, tax fairness for families is going to be a
key political issue for the coming year.
I am writing to urge the Administration's support for the
family tax package that I have put forward to increase the
dependent deduction (H.R. 1277) and expand the Young Child
Tax Credit (H.R. 2633). This package already has the
bipartisan support of 248 cosponsors including 101 Democrats.
Unlike other tax packages recently proposed, this package
provides tax relief exclusively for working families, treats
both one-earner and two-earner families in an equitable
manner, and does not propose to create higher tax brackets.
While it appears that many of the family tax packages
already proposed will take the dubious route of increasing
taxes to provide a so-called middle class tax relief package,
the Administration has the opportunity to provide a clear
alternative. By working with the majority in Congress who
support family tax relief yet, the Administration can put
forth a program of restrained growth in domestic spending to
provide for significant family tax relief.
As you may know, last year I supported the budget agreement
and believe in the need for responsible fiscal policy. The
combined cost of H.R. 1277 and H.R. 2633 is estimated at
between $12-15 billion per year. I believe it could be paid
for through a unified cap on domestic spending of between 6-
6\1/2\ percent. A unified cap on domestic spending would
provide a logical extension to the common sense restraints
put on spending in last year's budget agreement. Currently,
approximately $100 billion is spent on programs benefiting
children. These programs could still meet the needs of
families and children if they grew at this reasonable rate.
In addition, the Administration could also put forward the
capital gains tax cut as a revenue raiser for family tax
relief. With the thousands of new jobs that would be produced
with a lower capital gains rate, a dynamic win/win situation
would be achieved by providing revenue for family tax relief
while also spurring the economy and increasing job
opportunities.
With the trust of the American people and the facts on his
side, President Bush and this Administration can provide
strong support to American families by allowing them to keep
more of their own hard-earned money to provide for their
families. All the attention on family tax relief provides an
excellent opportunity for the Administration to advance its
pro-family, pro-growth, policies while distinguishing them
from the failed and tired ``Robin Hood'' politics put forth
in other family tax measures. Thank you for your
consideration of these important issues.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
November 22, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
Washington, DC.
Dear Mr. Darman: I wanted to share with you a recent letter
sent to President Bush, signed by over 60 House Republicans,
calling for a Special Session of Congress to pass an economic
recovery package which would help American families and
stimulate the economy.
In the brief time this letter was circulated, almost every
member asked signed onto the letter. The American people need
our help now and President Bush has an historic opportunity
to take this bold action and help American families and
businesses.
Sincerely,
Frank R. Wolf,
Member of Congress.
____
November 25, 1991.
Hon. Richard Darman,
Director, Office of Management and Budget,
Washington, DC.
Dear Mr. Darman: I wanted to share with you a copy of a
letter I recently sent to President Bush on the need for the
Administration and the Republican party to be strongly on the
offensive in the area of family policy.
The battle for the middle class and the American family is
on. Family tax relief and ``family friendly'' work issues are
winning issues for the President as well as the right thing
to do. I hope you find this information helpful.
Thank you for your time and consideration of these
important issues.
Sincerely,
Frank R. Wolf,
Member of Congress.
____________________