[Congressional Record Volume 141, Number 63 (Wednesday, April 5, 1995)]
[Senate]
[Pages S5183-S5185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                     THE BILLIONAIRES' TAX LOOPHOLE

  Mr. KENNEDY. Mr. President, I hope that we will soon be able to vote 
in the Senate on the unjustified tax loophole that exists for 
billionaires who renounce their American citizenship in order to avoid 
taxes on the wealth they have accumulated as Americans.
  This reform was first proposed in President Clinton's budget on 
February 6. The Senate Finance Committee closed this loophole as part 
of its action on the bill to restore the health care deduction for 
small businesses.
  The committee took this action to close the billionaires' loophole, 
despite the fact that the revenue gained was not needed to pay for the 
health care deduction in the bill. In fact, the committee recommended 
that these revenues be used for deficit reduction. This is exactly the 
type of action necessary if we are serious about achieving a balanced 
budget.
  According to the revenue estimates in the committee report, closing 
this loophole would raise $1.4 billion over the next 5 years, and $3.6 
billion over the next 10 years. Clearly, substantial revenues are at 
stake.
  Too often, we close tax loopholes only when we need to raise revenues 
to offset tax cuts. In this case, the committee closed this flagrant 
loophole as soon as it was brought to the committee's attention--and 
rightly so, because this loophole should be closed as soon as possible. 
The Senate bill did so, and all of us thought the issue was settled.
  Yet the legislation came back to us from the Senate-House conference, 
and the loophole had reappeared. This outrageous tax break for two 
dozen or so of the wealthiest individuals in the country will remain 
open.
  We have been told that the loophole was preserved because of 
unanswered questions about whether closing it would violate U.S. and 
international laws on human rights. But it certainly does not. All 
citizens of the United States have a basic right to leave the country, 
live elsewhere, and relinquish their citizenship.
  Any and every citizen surely has the right to repatriate. Closing the 
loophole would not prevent any individuals from shifting their assets 
and their citizenship to a foreign country. Rather, it would just make 
sure that those who have amassed great wealth through the U.S. economic 
system pay their fair share of taxes, as the rest of us do. It is a 
provision which a dozen other countries have enacted for the same 
reasons.
  Prof. Detlev Vagts of the Harvard Law School has said,

       The proposed tax does not amount to such a burden upon the 
     right of repatriation as to constitute a violation of either 
     international law or American constitutional law. It merely 
     equalizes over the long run certain tax burdens as between 
     those who remain subject to U.S. tax when they realize upon 
     certain gains and those who abandon their citizenship while 
     the property remains unsold.

  Andreas Lowenfeld, a professor of international law at NYU said,

       I am confident that neither adoption nor enforcement of the 
     provision in question would violate any obligation of the 
     United States or any applicable principles of international 
     law.

  Michael Matheson, a legal advisor at the State Department said;

       This provision does not conflict with international human 
     rights law concerning an individual's right to freely 
     emigrate from his or her country of citizenship . . . a 
     state, in order to protect its interests, may impose economic 
     controls on departure as long as such controls do not result 
     in a de facto denial of an individual's right to emigrate . . 
     . These are comparable taxes to those which U.S. citizens or 
     permanent residents would have to pay were they in the United 
     States 
     [[Page S5184]] at the time they disposed of the assets or at 
     their death.

  Clearly, there is ample support in U.S. law and international law for 
closing this loophole. Yet, the provision was dropped in conference.
  This is all happening, of course, at the same time that we are 
cutting Federal funds for basic investments in the future of children, 
students, and working families. Funds for school lunches, education, 
housing, and other vital social services are all being drastically cut, 
at the very time our Republican colleagues have decided that this tax 
break is not flagrant enough to be terminated immediately.
  In fact, the conference report on this tax legislation was called up 
for debate last Friday, just as the Senate was beginning debate on our 
Democratic amendment to restore some of the harshest cuts in the 
pending appropriations bill.
  Our Democratic amendment contained several key provisions:
  We wanted to restore nearly $800 million in cuts in housing programs 
and in job training programs for young Americans.
  We wanted to restore $210 million in cuts in the program to encourage 
young Americans to participate in national and community services.
  We wanted to restore $100 million in cuts from the drug-free schools 
program.
  We wanted to restore $72 million in cuts from education programs for 
disadvantaged students.
  We wanted to restore $67 million in cuts from the Goals 2000 program 
for local school reforms.
  We wanted to restore $42 million in cuts from Head Start, and $35 
million in cuts from nutrition programs for expectant mothers and 
infants.
  The contrast in priorities is impossible to ignore. Give every 
benefit of the doubt to tax loopholes for a few billionaires. Rush to 
enact spending cuts that jeopardize education, nutrition, and job 
training for large numbers of children, students and working families.
  Yet when it comes to closing a totally unjustified tax loophole used 
by wealthy citizens who renounce their citizenship to avoid taxes, 
House Republicans say, ``Go slow; this needs more study; we shouldn't 
act in haste; perhaps this loophole has some merit we don't know 
about.''
  Nonsense. I wish that our colleagues would show as much solicitude 
for millions of deserving Americans struggling to make ends meet, as 
they are now showing for a handful of undeserving billionaires willing 
to insult America to evade their fair share of taxes.
  This amendment will put the Senate squarely on record in favor of 
closing this gaping loophole in our tax laws. The amendment has two 
clear provisions:
  The first subsection states the Sense of the Senate that Congress 
should act as quickly as possible to amend the Internal Revenue Code to 
close this loophole.
  The second subsection makes clear that the effective date of any such 
action should be February 6, 1995.
  The February 6 date is the effective date in the original Senate 
Finance Committee amendment, and it is also the date of the original 
proposal by President Clinton to close this loophole.
  Clearly, everyone has been on notice since February 6 that this 
loophole is likely to be closed. It would be unconscionable for anyone 
in Congress to attempt to delay the effective date to enable a few more 
wealthy Americans to squirm through this notorious loophole before it 
finally snaps shut.
  Finally, all of us must be vigilant as well to see that this 
important reform is not watered down behind closed doors before it 
reappears in its next incarnation.
  We know what happened last time. We know that the smartest tax 
lawyers money can buy will be quietly undermining this reform in any 
way they can, in order to salvage as much of this billionaires' 
loophole as possible.
  Two good measures of the seriousness with which Congress resists that 
special interest pressure will be maintaining the effective date of 
February 6, and maintaining the revenue gain anticipated from the 
provision in the Finance Committee bill.
  Obviously, the revenue estimates may be refined as the Joint Tax 
Committee and the Treasury Department obtain more information on this 
insidious tax avoidance practice. But refining the estimates is not the 
same as reducing them because the reform has been weakened.
  A useful measure of the strength of this reform is contained in a 
comparison of the revenue estimates prepared by the Treasury for the 
President's February 6 budget, and by the Joint Tax Committee for the 
Senate Finance Committee's report on March 20 on H.R. 831, the small 
business tax bill. I ask unanimous consent that a table containing 
those revenue estimates may be printed in the Record.
  There being no objection, the table was ordered to be printed in the 
Record, as follows:

  TABLE.--REVENUE ESTIMATES FROM CLOSING THE BILLIONAIRES' TAX LOOPHOLE 
                          [Dollars in millions]                         
------------------------------------------------------------------------
                                                 Revenue gain           
                                     -----------------------------------
                Year                                     Senate Finance 
                                          President     Committee report
                                      Clinton's budget   on H.R. 831\1\ 
------------------------------------------------------------------------
1995................................                $0               $47
1996................................                60               144
1997................................               200               197
1998................................               300               257
1999................................               410               322
2000................................               530               392
1995-2000...........................             1,500             1,359
2001-2005...........................             (\2\)             2,274
1995-2005...........................             (\2\)             3,633
------------------------------------------------------------------------
\1\Estimates based on ``modified version of administration's revenue    
  proposal.''                                                           
\2\Estimate not provided.                                               

  Mr. President, it basically summarizes on the revenue gain under 
President Clinton's budget submission from 1995 to the year 2000 some 
$1.5 billion. The Senate Finance Committee is $1.359 billion, and then 
the Senate Finance Committee goes on from 1995 to the year 2005 to be 
$3.6 billion.
  Although the committee's revenue estimates are based on a modified 
version of the administration's proposed reform, the estimates are 
generally similar, and the total revenue gains in the two estimates for 
the period 1995-2000 are within about 10 percent of each other. 
Clearly, it is reasonable to expect that at least this much revenue 
will be gained by closing this loophole.
  The most significant difference between President Clinton's proposal 
and the Finance Committee bill is that President Clinton's proposal 
would close the loophole not only for U.S. citizens, but also for 
wealthy resident aliens who renounce their residency status and leave 
the country to avoid taxes.
  The Senate Finance Committee proposal closes the loophole only for 
U.S. citizens. There is no obvious reason why the loophole should be 
closed for one type of billionaire and not the other. They have amassed 
great wealth in America, and they should not be permitted to escape 
their fair share of taxes by renouncing America. It is time to close 
this loophole tight--no ifs, ands, or buts, and no escape hatches for 
anyone.
  I urge the Senate to approve this amendment, and to send a clear, 
simple message once and for all to any wealthy tax-dodgers who are 
scheming to renounce America--``Good riddance, but you can't take it 
with you!''
  Just a final two thoughts. As I mentioned during my brief remarks, 
this debate is coming at a time when the minority leader is attempting 
to restore the cuts under the rescissions. That means that these moneys 
have already been appropriated. The Appropriations Committee has made a 
recommendation. It has perceived that we are going to cut the Voluntary 
Community Service Program, and the Drug Free Schools Program, which is 
so important to our young people. It also includes funding for safety 
in our schools.
  As I mentioned on previous occasions, we have had long and good 
debates with good bipartisan support. We are trying to do something 
about the increasing incidence of violence that is taking place in our 
schools. We are attempting to restore some $100 million to the program 
that will help and assist schools at the local level to deal with the 
problems of violence and substance abuse in their schools.
  Title I of the education bill, which was debated here, and has strong 
bipartisan support--try to bring some focus and attention to 
disadvantaged children by providing extra help and assistance to them--
we have changed that program, is a good program with 
[[Page S5185]] strong bipartisan support. We want to make sure that the 
funding for that program that was included in last year and which local 
school districts have been depending on will not be pulled out from 
underneath those young children.
  The Goals 2000--again with bipartisan support--each 5 percent of this 
money, or $67 million, will actually go to the local school districts 
which are interested in reform; strengthening the academic achievements 
and accomplishments of young Americans. It has the broad support of the 
education community and of the parents, teachers, the business 
community that are in support of the Goals 2000 program.
  The Head Start Program, which we revamped and rechartered just over 
in the last Congress, and had strong bipartisan support, virtually 
unanimously reported out of our committee and the strong support in 
appropriating the funds, this represents about a quarter of a reduction 
in the increases for the Head Start Program. Only about 38 percent of 
all of our young people get any Head Start Program. We extended the 
Head Start Program from zero to four to recognize that the 
recommendations of the Carnegie Commission report that talked about the 
importance for the nurturing and nutrition, particularly in the early 
years, and the relationship between that kind of a tension and the 
academic achievement of children. Now, as is increasingly apparent, we 
need the kind of support that Head Start provides for that early 
intervention. We have responded to it. There are school districts all 
over the country that are depending upon that funding. We should not 
pull the rug out from the Head Start Program.
  The Women, Infants, and Children's program, the $35 million for 
expectant mothers that do not have the financial resources to get the 
adequate nutrition to make sure that we are going to have healthy 
babies, this program has been tried, tested and reviewed. It should not 
be cut back.
  The School-to-Work program, where we have seen a new basis of trying 
to do something for the 70 percent of our young people that do not go 
on to higher education. They are the ones who have been too often left 
out and left behind. We have a good program that again has bipartisan 
support. This program will be reshaped and adjusted under the 
leadership of Senator Kassebaum and others to be a basis for the whole 
youth training program. We should not abandon that program.
  The child care program, a modest program that only addresses about 4 
or 5 percent of the total needs of child care for working families, 
working mothers primarily, we should not deny that kind of very 
important support system for working mothers, particularly those that 
are in the entry-level jobs and the modest income. We know that child 
care takes up anywhere from a quarter to a third of the income for 
working mothers. This provided some help and assistance on the basis of 
need for mothers primarily, but also for single fathers, primarily for 
single mothers so that they can go out and work and be a part of our 
whole economic system.
  The other programs we have referred to in terms of housing and the 
youth training are mentioned here.
  These are all worthwhile programs that have been tried, tested and 
evaluated, and in which the local communities--primarily the teachers, 
the parents, the students--have been depending upon for support. We 
want to restore education and children's programs.
  Against that, Mr. President, we have $1.4 billion that otherwise 
would be regained for the Federal Treasury, $3.6 billion over a period 
of 10 years. It is extraordinary to me that, if we are attempting to 
try to represent the best of what is in the interest of the working 
families in our society, it is such a compelling case for the support 
for these programs and such a compelling case to capture the legitimate 
responsible resources that should be paid in by these billionaires, it 
is amazing that we have to spend the amount of time that we have had to 
to get a favorable vote on the Daschle amendment or to get the vote on 
the billionaire tax break. We have been trying since last Friday to get 
a vote on that billionaire tax break. We have worked out a procedure by 
which we will be able to, after we conclude to vote on matters which 
have been described as at the majority leader's request. This issue is 
not going to go away. We are going to get a vote on this measure. They 
may be able to frustrate us by 1 day or a few hours. But we will yet 
get a vote on that. I hope it will be overwhelming. I hope it will be 
unanimous. The majority leader has indicated his support for that 
program, the chairman of the Finance Committee, and Senator Moynihan 
has indicated his strong support, Senator Bradley, and others.
  There is no reason in the world why we cannot send the message to the 
House, which evidently is the reluctant partner in this proposal, that 
the Senate of the United States is virtually unanimous in support of 
this proposal. We need to do that. I hope we have the earliest 
opportunity to do so.
  Mr. President, I am sure the American people are wondering why we 
cannot take action on that particular proposal. I am sure they are 
wondering why the proposal was dropped in the conference in any event. 
But they understand what is the issue before us, and hopefully we can 
have clear, resounding, overwhelming support, hopefully universal 
support, for that particular proposal.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SANTORUM. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Abraham). Without objection, it is so 
ordered.
  Mr. SANTORUM. I ask unanimous consent to speak as if in morning 
business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SANTORUM. I thank the Chair.

                          ____________________