[Congressional Record Volume 141, Number 63 (Wednesday, April 5, 1995)]
[House]
[Pages H4317-H4319]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                        PARLIAMENTARY INQUIRIES

  Mr. HEFNER. Parliamentary inquiry, Mr. Speaker.
  The SPEAKER pro tempore. The gentleman from North Carolina will state 
his parliamentary inquiry.
  Mr. HEFNER. My parliamentary inquiry is I did not ever get the ruling 
of the Parliamentarian, and my parliamentary inquiry is in the future 
if we have the ruling of the Chair questioned or challenged, is it 
going to become the practice for someone to move to table the motion 
and we will never have a ruling on the ruling of the Chair as it 
applies to House rules?
  The SPEAKER pro tempore (Mr. Dreier). The Chair will respond to the 
gentleman by saying first that it was not the Parliamentarian's ruling, 
and the Chair ruled and the House just addressed the issue of that 
ruling.
  Mr. HEFNER. Further parliamentary inquiry, and I feel this is 
justifiable.
  The SPEAKER pro tempore. The gentleman from North Carolina is 
recognized.
  Mr. HEFNER. If there is no mechanism, if there is going to be no 
mechanism to challenge a ruling of the Chair, if it can be superceded 
by a motion to table, then the majority is going to rule, there will be 
no chance to challenge the ruling of the Chair.

                              {time}  2310

  The SPEAKER pro tempore (Mr. Dreier). The Chair wishes to first 
respond to the parliamentary inquiry of the gentleman from North 
Carolina by stating that the House has just ruled by a vote.
  The gentleman from California is recognized for a parliamentary 
inquiry.
  Mr. THOMAS. Mr. Chairman, under the rules of the House, are there 
procedural motions available to the body, and if moved, voted on, and 
is the motion to table a procedural motion utilized by the former 
majority over and over and over again?
  (The letters referred to by Mr. Moran follow:)

                           U.S. Small Business Administration,

                                    Washington, DC, April 3, 1995.
     Hon. Zoe Lofgren,
     House of Representatives,
     Washington, DC.
       Dear Representative: Given my statutory responsibility (15 
     USC Sec. 634b(4)) to determine the impact of the taxes on 
     small businesses and advise Congress, I have been asked to 
     analyze the impact on small businesses of the ``Contract With 
     America Tax Reform Act of 1995'' which is scheduled to come 
     before the House of Representatives this week for 
     consideration.
       [[Page H4318]] Specifically, section 6301 of H.R. 1327, the 
     Tax Fairness and Deficit Reduction Act of 1995, creates a 50 
     percent capital gains exclusion for individuals but, in so 
     doing, repeals the special small business capital gains tax 
     incentive in the existing law (P.L. 103-66, Sec. 13113). This 
     will have the effect of raising the taxes of future investors 
     in qualifying, high growth, small businesses from the 
     previous maximum rate of 14 percent to the new rate of 19.8 
     percent. This may be the only category of taxpayer to have 
     its taxes raised under the capital gains provisions of the 
     proposal. One change from the original bill added in H.R. 
     1327 that small businesses will appreciate is a provision 
     which allows investors who have already purchased qualifying 
     stock to keep the lower rate they expected under previous 
     law.
       Nevertheless, the repeal is troubling for small businesses 
     for two reasons. First, as a matter of even-handed tax 
     policy, it seems incongruous to raise the tax rates of those 
     who invest in the research, plant and equipment of a high-
     risk, emerging growth company while rewarding non-productive 
     speculation in real estate or the stock market with 
     substantial tax reductions. This is particularly true where a 
     windfall of capital gains treatment is provided to some 
     investors for gains on property held previous to the 
     introduction of the across-the-board proposal where such 
     purchases were made with no expectation of a higher after-tax 
     return.
       Second, there is persuasive evidence that emerging, high-
     growth small businesses are the best choice for investment 
     incentives when measured by return-per-dollar of tax 
     expenditure. Yet historical data suggest that the across-the-
     board capital gains proposal will not significantly help 
     these small businesses seeking investment dollars and 
     repealing the special tax preference will hurt.
       Our estimate is that only 10% of business finance resources 
     currently go to small businesses and most of that is in the 
     form of bank loans and commercial mortgages--not long term or 
     ``patient'' capital that is needed to finance research and 
     growth.
       The across-the-board 50% reduction which would replace the 
     special small business capital gains incentive will do little 
     to improve the situation. Historical data, based on previous 
     across-the-board capital gains treatment, indicate that about 
     two-thirds of the capital gains benefit will flow to 
     appreciated property, such as real estate, and only about 
     one-third will go to corporate equity investment. Most of the 
     corporate equity investment, however, will reward gains 
     generated by the transfer of existing shares of stock in the 
     market which do not result in any new productive investment 
     for businesses. Based on this data and current levels of 
     venture funding, we estimate that less than one per cent of 
     the across-the-board capital gains benefits will flow to 
     venture capital that would help small emerging companies.
       Our research, and research we have reviewed, indicates that 
     growing small businesses are greatly underfunded compared to 
     their contribution to our economy. Small businesses in 
     general provide 54% of all jobs and 50% of total output using 
     only 40% of total business assets. The lion's share of our 
     economy's job growth and innovation is generated by the type 
     of efficient, high-growth, high-tech small business that can 
     qualify for special capital gains treatment under current 
     law. The purposes of the incentive is to persuade 
     ``mainstream'' investors to take the added risk of investing 
     in an emerging firm. Without such an incentive, the ability 
     of these businesses to attract equity investment may be 
     seriously impaired.
       We conclude that the repeal of the special small business 
     capital gains incentive and the resultant increase of the 
     effective tax rate on qualifying small business investors 
     will make it more difficult for these small businesses to 
     compete in highly competitive capital markets. Since small, 
     high growth businesses generally develop the markets and 
     provide the jobs that help to secure our commercial 
     leadership in the future, the repeal may have an adverse 
     impact on our future economic growth.
       I hope that this information is useful to you during the 
     debate. I would be happy to provide any statistics or 
     information that I have. Feel free to call me at 205-6533 or 
     FAX at 205-6928.
           Sincerely,
                                                   Jere W. Glover,
     Chief Counsel for Advocacy.
                                                                    ____

                                   Department of the Treasury,

                                    Washington, DC, April 5, 1995.
     Hon. James P. Moran,
     U.S. House of Representatives,
     Washington, DC.
       Dear Congressman Moran: In response to your request 
     regarding whether the capital gains and indexing provisions 
     of H.R. 9 would increase the tax rate on gains from eligible 
     small business stock, the Administration submitted written 
     testimony to the Committee on Small Business on February 22, 
     1995 which stated the following:
       ``* * * by extending the 50 percent exclusion to all 
     capital assets, H.R. 9 will eliminate the current preference 
     in Section 1202 for small business stock * * * and would 
     actually increase the tax rate on certain gains from 
     investments in eligible small businesses. The current maximum 
     tax rate for individuals on investment in small businesses 
     that qualify for the Section 1202 preference is 14 percent 
     (maximum capital gain rate of 28 percent times 50 percent 
     exclusion).\1\ H.R. 9 would eliminate the 28 percent maximum 
     tax rate on capital gains of individuals. As a result, H.R. 9 
     would impose a maximum tax rate of 19.8 percent (39.6 percent 
     maximum rate times 50 percent exclusion) on investments that 
     currently qualify for the 14 percent preferential rate under 
     Section 1202. A 14 percent rate in a 28 percent rate 
     environment is relatively attractive to investors in small 
     businesses, compared to a flat rate on all gains.''
     \1\Because one-half of the excluded gain is treated as a 
     preference for AMT purposes, the actual rate could be higher 
     for certain taxpayers subject to the AMT, but would never 
     exceed 21 percent.
---------------------------------------------------------------------------
       The Administration remains committed to this positions. 
     Please do not hesitate to contact me if you have any 
     questions on this or any other matter.
           Sincerely,
                                                Leslie B. Samuels,
                                 Assistant Secretary (Tax Policy).
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.


                             recorded vote

  Mr. ENGEL. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 246, 
noes 188, not voting 1, as follows:

                             [Roll No. 295]

                               AYES--246

     Allard
     Andrews
     Archer
     Armey
     Bachus
     Baker (CA)
     Baker (LA)
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bevill
     Bilbray
     Bilirakis
     Bliley
     Boehlert
     Boehner
     Bonilla
     Bono
     Brewster
     Browder
     Brownback
     Bryant (TN)
     Bunn
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clement
     Clinger
     Coble
     Coburn
     Collins (GA)
     Combest
     Condit
     Cooley
     Cox
     Cramer
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Danner
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Doolittle
     Dornan
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fowler
     Fox
     Franks (CT)
     Franks (NJ)
     Frelinghuysen
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Geren
     Gilchrest
     Gillmor
     Gilman
     Gingrich
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (TX)
     Hancock
     Hansen
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Horn
     Hostettler
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King
     Kingston
     Knollenberg
     Kolbe
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Lincoln
     Linder
     Lipinski
     Livingston
     LoBiondo
     Longley
     Lucas
     Manton
     Manzullo
     Martini
     McCollum
     McCrery
     McDade
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)
     Molinari
     Montgomery
     Moorhead
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Oxley
     Packard
     Pallone
     Parker
     Paxon
     Petri
     Pombo
     Portman
     Pryce
     Quillen
     Quinn
     Radanovich
     Ramstad
     Regula
     Riggs
     Roberts
     Rohrabacher
     Ros-Lehtinen
     Rose
     Roth
     Roukema
     Royce
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer
     Seastrand
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Shuster
     Skeen
     Skelton
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Solomon
     Souder
     Spence
     Stearns
     Stockman
     Stump
     Talent
     Tanner
     Tate
     Tauzin
     Taylor (NC)
     Thomas
     Thornberry
     Tiahrt
     Torkildsen
     Torricelli
     Traficant
     Upton
     Vucanovich
     Waldholtz
     Walker
     Walsh
     Wamp
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     White
     Whitfield
     Wicker
     Wilson
     Young (FL)
     Zeliff
     Zimmer

                               NOES--188

     Abercrombie
     Ackerman
     Baesler
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Berman
     Bishop
     Blute
     Bonior
     Borski
     Boucher
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Bryant (TX)
     Cardin
     Chapman
     Clay
     Clayton
     Clyburn
     Coleman
     Collins (IL)
     Collins (MI)
     Conyers
     Costello
     Coyne
     Davis
     de la Garza
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Dooley
     Doyle
     Durbin
     Edwards
     Engel
     Eshoo
     Evans
     Farr
     Fattah
     Fazio
     Fields (LA)
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gibbons
     Gonzalez
     Green
     [[Page H4319]] Gutierrez
     Hall (OH)
     Hamilton
     Harman
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Holden
     Houghton
     Hoyer
     Jackson-Lee
     Jacobs
     Jefferson
     Johnson (SD)
     Johnson, E. B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kleczka
     Klink
     Klug
     LaFalce
     LaHood
     Lantos
     Levin
     Lewis (GA)
     Lofgren
     Lowey
     Luther
     Maloney
     Markey
     Martinez
     Mascara
     Matsui
     McCarthy
     McDermott
     McHale
     McKinney
     McNulty
     Meehan
     Meek
     Menendez
     Mfume
     Miller (CA)
     Mineta
     Minge
     Mink
     Moakley
     Mollohan
     Moran
     Morella
     Murtha
     Nadler
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Orton
     Owens
     Pastor
     Payne (NJ)
     Payne (VA)
     Pelosi
     Peterson (FL)
     Peterson (MN)
     Pickett
     Pomeroy
     Porter
     Poshard
     Rahall
     Rangel
     Reed
     Richardson
     Rivers
     Roemer
     Rogers
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schiff
     Schroeder
     Schumer
     Scott
     Serrano
     Sisisky
     Skaggs
     Slaughter
     Spratt
     Stark
     Stenholm
     Stokes
     Studds
     Stupak
     Taylor (MS)
     Tejeda
     Thompson
     Thornton
     Thurman
     Torres
     Towns
     Tucker
     Velazquez
     Vento
     Visclosky
     Volkmer
     Ward
     Waters
     Watt (NC)
     Waxman
     Williams
     Wise
     Wolf
     Woolsey
     Wyden
     Wynn
     Yates
     Young (AK)

                             NOT VOTING--1

       
     Reynolds
      

                              {time}  2326

  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.
  

                          ____________________