[Congressional Record Volume 141, Number 63 (Wednesday, April 5, 1995)]
[House]
[Pages H4329-H4330]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     THERE SHOULD BE NO NEW TAXES ON FEDERAL EMPLOYEES IN H.R. 1215

  (Mr. WOLF asked and was given permission to address the House for 1 
minute and to revise and extend his remarks.)
  Mr. WOLF. Mr. Speaker, listening to the 1-minutes back in my office, 
I agreed with literally everything that was said by the Members of my 
side, all the help there is for American families in the tax cut bill. 
But if everything they said is true, and I believe it is true, why 
would not the same help be given to Federal employees?
  I have been a leader in the family issues for Federal employees and 
non-Federal employees for the 102nd Congress and the 103rd Congress.
  The FBI agent that everyone here would call if their husband or wife 
or kids were kidnapped is a Federal employee. The cancer researcher out 
at NIH that everyone would call quickly if someone in your family had 
cancer is a Federal employee. The Secret Service agent, Timothy 
McCarthy, that stopped the bullet that saved the live of Ronald Reagan 
is a Federal employee.
  So I say to my side, I agree with everything you have said, because 
the American family is under more pressure today than any other time in 
the history of the country. But if this is good for American families, 
it should be good for the families of Federal employees.
  Mr. Speaker, I urge the leadership of my side to remove the provision 
which increases the payroll tax on Federal employees. it should never 
see the light of day and should not pass.
  Mr. Speaker, as one of the first Members of Congress to call for 
family tax relief, I am 
[[Page H4330]] pleased that this package has as its centerpiece a $500 
tax credit for families with children. This is a much needed tax credit 
to correct the tax inequity for families that has developed over the 
years when the deduction for children was not indexed. The capital 
gains tax cut, and the easing of the marriage penalty are also to be 
commended. It is time that we allow hard working American families to 
keep more of their hard earned money. This bill is a strong package to 
do that.
  However, I come to the floor very troubled and disappointed. In what 
was otherwise a good bill for families and economic growth, the 
leadership has chosen to include a tax on Federal employees in this 
bill. For middle-class Federal employees this is bad news. We are 
making a very hasty decision regarding the largest single employer in 
the United States when the pension system we are supposedly correcting 
faces no shortfall of legally available budget authority to pay 
benefits. There is no crisis here. Yet we are including a tax that will 
hit middle-class Federal employees so hard that it will eliminate for 
most any of the benefits of this legislation. That I believe is unfair 
and a mistake.
  Federal employees are virtually all middle-class taxpayers. We 
promised no tax increases on middle-class Americans; yet we have picked 
on a politically unpopular target. I am frustrated to be put in such an 
untenable situation. This was not in the Contract With America and it 
was rushed into this bill in fundamental violation of our promise of no 
new taxes. If any action in this area were to be taken it should be 
more properly taken in the context of an overall entitlement reform 
effort that objectively looks at the need, if any, to improve the civil 
service system.
  I was calling for family tax relief in the 102d Congress and 103rd 
Congress when Republicans in the White House, on the Ways and Means 
Committee and the Budget Committee wouldn't give it the time of day. 
Many Democrats also opposed it because they wanted the money to fund 
more Government programs. Yet my bill for family tax relief garnered 
bipartisan support of 263 cosponsors in the 102d Congress. Raising 
taxes to fund a tax cut was never part of this picture.
  So why sully our tax package now with a tax increase? Using a tax 
increase to balance is merely a return to failed policies of the past. 
President Bush didn't balance the budget by raising taxes and neither 
did President Clinton. In fact, in raising taxes both broke their 
promise to the American people. To include this tax on Federal 
employees in this bill we will also be breaking our promise in the 
Contract not to raise taxes. We are repealing 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 a 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 shouldn't 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 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 2.5 percent 
increase in Federal payroll taxes represents a 36-percent payroll tax 
increase. If this was being done to any other workers in this country, 
Republicans would never stand for it.
  The Federal retirement system provision that was put into this bill 
is even more onerous than the provision proposed in the Government 
Reform and Oversight Committee, where, by the way, the proposal 
couldn't even make it out of the civil service subcommittee. There were 
only 2 days of hearings on this very complicated issue and quite 
frankly there were many issues
 unresolved. As our Rules Chairman has noted, 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. 
Hitting Federal employees across the board with a payroll tax like this 
in conjunction with massive downsizing efforts will have a devastating 
impact on morale at a critical time.
  The issue of unfunded liabilities in the Federal pension system is 
still open to considerable debate and quite frankly is a debate I would 
be happy to have in a timely and thoughtful manner. When Congress 
originally set up the new retirement system and integrated it with the 
old system in the mid-80s we spent months and months hearing from 
experts. Senator Stevens led the effort in the other body to see that 
this system was reformed in a sound and fair manner.
  To that end, I believe we now have a workable system. The 
Congressional Research Service reported that the Federal retirement 
system 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 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, taking into account 
future pay raises they might receive and cost-of-living adjustments 
after retirement. As CRS noted, this event cannot happen in the Federal 
Retirement System.
  Federal pension obligations will just not come due all at one time. 
Furthermore, given the large downsizing effort in progress, the pension 
liabilities will be dramatically reduced in coming years. And that is 
just one more reason why it is particularly unfair that Federal 
employees will see this huge jump in their payroll tax--many of them 
will be gone before their pension even vests. Rather than include this 
complex issue in this tax bill, perhaps we need to establish a 
bipartisan commission to look at federal pensions as well as the 
potential liabilities in the Pension Benefit Guaranty Corporation.
  Finally, my understanding of the Contract was that we were 
fundamentally rejecting the idea of raising taxes to balance the budget 
and just saying NO to tax increases in all shapes and forms. To include 
a tax increase in this bill fundamentally violates the anti-tax spirit 
of the Contract. To add this payroll tax when there are important 
issues still open to debate is particularly unwise.
  This is bad policy, bad politics and it is a breach of faith to those 
who support a tax break for the American family but can't accept an 
unfair tax hike on middle-class government employees.


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