[Congressional Record Volume 141, Number 67 (Tuesday, April 25, 1995)]
[Senate]
[Pages S5664-S5676]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DOMENICI (for himself, Mr. Nunn, and Mr. Kerrey):
  S. 722. A bill to amend the Internal Revenue Code of 1986 to 
restructure and replace the income tax system of the United States to 
meet national priorities, and for other purposes; to the Committee on 
Finance.


                              usa tax act

  Mr. DOMENICI.
   Mr. President, today for Senator Nunn and myself, this is a very 
exciting day because--after more than 2 years of study, research, and 
tremendous help from a lot of people and a lot of experts--we are today 
going to introduce a totally new income tax law for this land, both as 
to individuals and corporations.

  Today we are going to introduce a totally new Tax Code. We will 
explain it to the Senate and the American people for the next 40 or 50 
minutes. And it is our hope, since we have gone to extreme lengths to 
develop a totally new tax code in all respects --and indeed we will 
today introduce that totally new tax code--which will replace and get 
rid of the current income tax system in its totality both as to 
corporations, businesses and individuals in the United States.
  We are hopeful that this document will begin a serious debate and 
that this approach, which we will explain today, will find its rightful 
place very high on anyone's list as they look at the needs of the 
United States for the future.
  Before I go to my prepared remarks, let me suggest that for the 
Senator from New Mexico these are very exciting times because I believe 
the vision that most of us have is for a better America, for a better 
America for our children, a more competitive America with more good 
solid high-paying jobs for which we can train and educate our people 
and provide them with an opportunity for a satisfactory and happy life 
from the standpoint of material well-being.
  The two things that haunt us in our efforts as leaders who say we are 
going to do our best to provide that for America are the enormous 
amount of debt that we incur in our Federal budget processes because we 
refuse to find a way to pay for the programs and actions of the Federal 
Government rather than to borrow for them. Thus we gobble up huge 
amounts of savings of U.S. citizens and corporate savings just to pay 
that debt, thus minimizing our future growth potential and increasing 
interest rates dramatically, and in a very real way diminish the 
productivity of our country.
  The second thing is that we have a U.S. Tax Code that instead of 
promoting and prompting savings and investment is actually a 
disincentive to both. Instead of saying to the American people and 
American corporations we want you to invest more, we want you to save 
more, we have a Tax Code that says just the opposite. If you do either 
of those things, you are penalized under the American Tax Code; that 
is, the savings or investment. If you spend your money, in a sense you 
only pay taxes on that money which you spend once.
  We very much hope in our new bill to create a level playing field 
from the date that it is adopted by the U.S. Congress forward, a level 
field in that people have a real choice as between investing and saving 
some of their disposable income and spending it. And as to American 
corporations, we hope we will greatly simplify the process by which 
they pay taxes to their country and at the same time dramatically 
encourage capital investment as compared with a Tax Code today which 
penalizes that.
  So in order to get where we want to go, you have to know how to get 
there. This is common sense. The advice for a traveler seeking a 
destination and for a nation that is in quest of its destiny, and when 
leaders talk about their vision for the future, they invariably speak 
of creating a higher standard of living, better-paying jobs, and 
stronger economic growth. We do not do that or say that just because 
those are nice sounding words, but because they are indeed at the heart 
and soul of what America ought to offer to its people when we say this 
is a land of opportunity. We know where we want to go. But how do we 
get there?
  The challenge facing the American economy, and those who work, those 
who invest, those who start companies, and those who continue companies 
in a prosperous way, the challenge facing them and the best way to 
improve the Nation's prosperity, in almost everyone's opinion, is to 
increase savings and investment.
  When Americans save, they are really investing in America, and our 
Tax Code should reflect that national priority. Our major trading 
partners encourage in their tax codes savings, and so should we. There 
are many causes of inadequate private savings and investment, and I 
have already indicated that our inability to develop a budget year by 
year and over decades, whereby we pay for what we give our citizens 
instead of borrowing to give to them, is one very serious way that we 
do not save, or use our savings to pay for our profligacy.
  The other very serious problem and perhaps most important is the 
disincentive in our Nation's tax policies. The Federal Income Tax Code 
is un-American in spirit and wrong in principle because it levies a 
double tax on dividends and taxes savings. It discourages risk taking, 
entrepreneurship, and 
[[Page S5665]] the creation of jobs. It is hostile to savings and 
investment and tilted toward consumption. It adds one-third to the cost 
of capital. It favors debt over equity financing. It encourages 
corporate management to neglect long-term investment in favor of 
focusing on short-term profits.
  The way a country taxes its people deeply influences its potential 
for economic growth and thus for prosperity.
  Our current code penalizes savings by taxing income when it is earned 
and then taxing interest and dividends that are generated by the 
initial investment. When an activity is penalized in the Tax Code, it 
stands to reason that it influences behavior. Taxpayers do less of 
those disfavored activities, and the current code is doing a good job 
of discouraging savings. Americans are only saving 2.8 percent of GDP.
  This lack of savings leads to a shortage of investment which in turn 
leads to insufficient growth, stagnating incomes, and the loss of high-
wage jobs.
  The Congressional Budget Director, Robert Reischauer, testified 
before the Senate Budget Committee earlier this year. The report 
accompanying his testimony cautioned, and I quote:

       . . . the best way for the nation to prepare for [the] 
     future is to save and invest more now. Greater investment, 
     the main engine of growth, would enlarge the future economic 
     pie. . . Investment in turn, fundamentally depends upon the 
     available pool of saving, whether private (personal and 
     corporate) or Government (federal, state and local).

  Our current Tax Code taxes capital gains far higher than our 
competitors. We have created a ``backdoor'' capital gains differential 
by raising the top personal income tax rate to 39.6 percent but keeping 
the top rate on capital gains at 28. Thus, if we have any capital gains 
differential, it is that, and it is quite by accident and sort of a 
backdoor.
  The differential is subpar when compared to our competitors, be it 
Malaysia, South Korea, Taiwan, or Belgium. They do not tax capital 
gains at all. Germany does not tax capital gains on assets held longer 
than 6 months. Canada, France, and Japan tax capital gains at rates 
from 16 to 20 percent.
  Our current Tax Code is far too complex. The tax industry absorbs 
more resources than the gross domestic product of a country like 
Ireland. Companies complain about the IRS agents being permanently 
housed in their corporate headquarters, and the IRS is years behind in 
their auditing. Others perversely brag about needing supercomputers to 
calculate certain foreign tax computations.
  As our Supreme Court Justice Potter Stewart noted: ``Our economy is 
`tax relevant' in almost every detail.'' Taxes have become an 
increasingly important factor in investment decisions as other barriers 
to international capital flows have disappeared.
  The philosophy of the USA tax Senator Nunn and I introduce today is 
to tax income that is not saved or invested rather than to tax all 
income that is earned.
  The best way to achieve a prosperous destiny for our country is to 
improve the Nation's productivity through sustained investment by the 
private sector. Job creation is especially dependent on new products 
entering new markets, and we all know this. This does not happen 
automatically. It requires hard work and competition, and to a great 
extent investments that must be financed with equity capital.
  Our tax proposal is a quest for the best tax system we can develop, 
one that should vastly expand the pool of savings and achieve 
significant simplicity in the bargain. We estimate that of the 700 
Internal Revenue Code sections, over 75 percent would disappear and be 
eliminated with the adoption of our proposed code.
  The USA tax base is total gross domestic product. The business tax 
and the individual tax are two parts of a single tax on a single tax 
base. The business tax is intended to be the first in a two-step tax 
collection process. The business tax would begin with gross domestic 
product--the sum of all goods and services produced and sold by all 
businesses together, minus, in order to avoid double taxation, those 
things that they have bought from one another.
  The first taxable event would take place when businesses create 
income by producing and selling goods and services; the second taxable 
event, when individuals receive income, net of the business tax, in the 
form of wages, salaries, interest, dividends, and similar distributions 
to the owners of business.
  This is a new Tax Code. This is a totally new approach to taxing 
events in our economic life. It is not a concept. It is a totally new 
Tax Code built on two concepts and greatly simplifies what we have.
  Now, at this point, while I have more to say, Senator Nunn and I have 
ample time and I am going to yield to my friend from Georgia and first 
say thanks to him for all the work he has done and for the people he 
has brought into this fold who have helped us put this together.
  The PRESIDING OFFICER. The Senator from Georgia [Mr. Nunn], is 
recognized.
  Mr. NUNN. Mr. President, I think my friend from New Mexico has 
explained very well the current Tax Code and all of its problems and 
what it is doing to Americans' competitive position in the world and, 
most importantly, what it is doing to the real income of the American 
people.
  This bill that we are introducing today had its origin several years 
ago when the two of us, on a bipartisan basis, one Democrat and one 
Republican, had the privilege of chairing the CSIS Strengthening of 
America Commission. The plan that our Commission released a little over 
2 years ago, and that Senator Domenici and I cochaired with a number of 
other people from around the country as key members of that panel, was 
just that. It was a plan to strengthen our Nation, to strengthen our 
country, to strengthen our people, to strengthen our economy, and to 
strengthen our competitive position in the world.
  That plan had three key elements. The first element was to get our 
fiscal house in order by embarking on a long-term plan to balance the 
budget. And we proposed that plan without using the Social Security 
surplus as we do today, without relying on any kind of dynamic scoring, 
without a constitutional amendment, and without a line-item veto. We 
proposed a plan that would lock in spending restraints first, before 
raising new revenues.
  We have a long way to go to implement that plan. The Senator from New 
Mexico and I have struggled in this Chamber for several years trying to 
get caps on entitlement programs, and I suspect he will be leading the 
charge again this year as chairman of the Budget Committee.
  The key to this part of our plan is controlling the growth of 
entitlement programs, as most of us who have studied it understand, but 
which neither Congress nor any administration, Democratic or 
Republican, has been prepared to do.
  The second element, which my friend from New Mexico and I are here to 
talk about today, and a very important part of this overall plan, was 
to completely replace the individual and corporate income Tax Code of 
this country and create in its place a tax code that promotes savings 
and investment, rather than discouraging savings and investment, as 
does our current Tax Code.
  The third element of our plan was an investment strategy that called 
for improved job training and apprenticeship programs to strengthen the 
workplace; national service; selected investments in infrastructure, 
including the so-called information highway; adequate funding for 
programs to help young children start school ready to learn, such as 
immunizations and Head Start; and a system of national educational 
standards. Some progress has already been made on many aspects of this 
third element of the Strengthening of America plan, thanks to the 
leadership of President Clinton, who has worked very hard on these 
areas, both before and since he became President.
  The Commission was not saying that Government alone can solve our 
Nation's problems. In the final analysis, only the American people--
working through their Government, but more importantly working in their 
own communities--can strengthen America. These three elements, 
however--balancing the budget, reforming the Federal Tax Code, and 
making the needed investments in our future--represent the action items 
for the federal government. Government cannot do it alone, but if 
Government does not do its part, we will never get our economic house 
in order.
  [[Page S5666]] Even though the proposed constitutional balanced 
budget amendment did not pass the Congress this year, I believe the 
Congress will still undertake a serious statutory effort this year to 
begin to balance at least the unified Federal budget. I expect my 
colleague from New Mexico will be one of the real leaders in that 
effort. While that is a laudable goal, and I have supported the 
constitutional balanced budget amendment every time the Senate has 
voted on it, I still believe, and our Commission concluded, that we 
need to do more than that. We need to balance the budget excluding the 
Social Security surplus.
  The constitutional amendment we voted on earlier this year would have 
continued to use the Social Security surplus as an offset to the 
operating deficit in the rest of the budget, which means that this 
surplus would continue to be used to pay current bills rather than to 
prepare to pay for the retirement of the baby boom generation. As my 
colleague from Nebraska, Senator Kerrey, has made abundantly clear, we 
are facing--or rather, we are failing to face up to--a real crisis when 
the Social Security trust fund begins to run annual deficits instead of 
surpluses.
  The two most difficult tasks the Commission identified as the keys to 
putting our Nation's fiscal house in order--balancing the budget and 
reforming the Federal Tax Code--are still awaiting action. Today my 
colleague from New Mexico and I are introducing legislation that has 
been in the works for quite awhile. It has taken a good bit of time, 
more than we originally anticipated, because this legislation would 
implement the most revolutionary part of the Commission's plan, and 
that is the complete replacement of the current individual and 
corporate Federal income tax.


                The Time Has Come for Fundamental Reform

  The House of Representatives, as part of their Contract With America, 
has already passed and sent to the Senate a bill that proposes to 
change several components of the current Tax Code--additional child 
care tax credits; expanded IRA proposals; increased depreciation of 
investments; and a lower tax rate on capital gains--without attempting 
fundamental reform of the Tax Code. This is an incremental, business-
as-usual approach.
  Senator Domenici and I, along with other people on the Strengthening 
Commission, concluded that tinkering with our Tax Code will not get the 
job done. Our fear is that incremental changes, however well 
intentioned, will complicate an already Byzantine Tax Code without 
yielding the increased savings and investment we all seek. Helping 
working families is a worthy goal, but without steady economic growth 
there is little that child care tax credits can do to help the middle 
class permanently raise its standard of living. Unlocking old capital 
is important, but it is crucial that we also create new savings and 
investment.
  My colleague from New Mexico and I believe there is a better way. 
Today, Senator Domenici and I are introducing, along with Senators 
Kerrey and Bennett, the USA Tax Act of 1995, a comprehensive tax reform 
proposal that we believe represents the best way to accomplish 
everything the other reform proposals--both the incremental approach 
the House has passed, as well as the other proposals to replace the 
current income tax--are trying to accomplish, and much more. We welcome 
debate, comments, suggestions, and constructive criticism on this 
legislation.
  Our tax system, Mr. President, needs more than a Band-Aid. It needs a 
transplant. If we are serious about our Nation's future, we have to 
scrap the current tax system and put in its place a system that will 
work for our people and for our country.
  Over the past 2 years, Senator Domenici and I and others have been 
working on the details of such a system, the USA Tax System that we are 
introducing today. We call it the USA Tax System because USA stands for 
unlimited savings allowance, which is the key, fundamental part of this 
proposal. We believe it represents a fundamental change in the way 
America taxes itself, the way America saves, and the way America 
invests.
  What do we mean by a tax system that works? We mean a system that 
encourages savings and investment. We mean a system that is perceived 
to be fair and is fair. We mean a system that is understandable. We 
mean a system that reduces the complexity of paying taxes for ordinary 
Americans by taking less time, fewer forms, and fewer dollars to comply 
with. We mean a system that is attuned to the international competitive 
realities and gives U.S. companies and their employees a chance to 
compete fairly in the global marketplace, which we do not have today.
  We mean a tax system that is fiscally responsible. There is no point 
in creating a system that increases the private sector component of the 
national savings with one hand, while further reducing the public 
sector component of national savings, by increasing the deficit, with 
the other hand. We do not intend to increase the deficit under this 
proposal.
  Our plan is intended to be revenue neutral. And I would say from the 
outset, if the official estimates indicate that this is not revenue 
neutral, one way or another that there will be adjustments made so that 
it will indeed be revenue neutral.
  When Senator Domenici and I began advocating our concept of a 
complete overhaul of the Tax Code 3 years ago, the prospect of 
fundamental reform appeared to be several years off at best. Today, 
however, the clock has moved up. It is clear that, while we are just 
beginning the process of debating how to change the Tax Code, there is 
already a broad consensus in this country and in this Congress that 
fundamental reform is necessary.
  In addition to our USA proposal, there are already two other 
proposals to completely replace the current income tax code being 
discussed--a flat tax and a national sales tax. In the coming months, 
all these proposals, and perhaps others as well, are likely to be 
discussed and examined. I am hopeful that as early as next year, 
Congress will attempt to enact one of these proposals. We welcome this 
debate, and we are introducing this legislation today to make sure that 
our proposal is fully included in this important national debate.


                        The Importance of Saving

  Mr. President, we believe the central goal of any reform of our tax 
system should be to raise the level of national savings. We are 
proposing a tax system that we believe is smarter, and better for all 
taxpayers, because it removes the current bias in our Tax Code against 
the saving and investment that is the key to higher living standards. 
Higher savings, Mr. President, lead to more investment. More investment 
means that we have more productivity from American workers. The more 
productivity we have from our workers, the more competitive we are in 
the international arena. The more competitive we are in the 
international arena, the better jobs we have. The better jobs we have, 
the higher income we have as Americans.
  That is a very important chain. That is the bottom line. The bottom 
line, in other words, is what happens to the real income of the 
American people in the future. There is a direct connection between how 
much we save and the real income of American people. That is the direct 
connection that we have to make sure our country understands. If we 
cannot make that connection in the American mind, there is no point in 
talking about a fundamental reform of the tax system. If they do agree 
that this proposition is true, then I think there is a tremendous 
opportunity here to make the fundamental changes we are proposing.
  There is a direct connection between savings and higher real income 
for our people. That is the essence of our proposed USA Tax System.
  The national savings rate in the United States is lower than that of 
any of our major competitors. In the 1980's, our savings rate dropped 
to an average of 3.6 percent, half the level of the 1960's and 1970's, 
and far below the comparable figures of 10 percent in Germany and 18 
percent in Japan. In the first 5 years of this decade, 1990 to 1994, 
the U.S. savings rate has fallen almost 50 percent from the already low 
levels of the 1980's, to just 2.1 percent.
  Without increased savings and investment, we cannot raise our long-
term standard of living, meet our financial obligations, and build a 
better 
[[Page S5667]] society for today and for the generations that follow. 
The United States cannot continue to be the major competitive force in 
the world if other countries continue outsaving us and outinvesting us. 
It simply cannot happen over a long period of time. That is 
fundamental.
  It is often said that the best way to increase national saving is to 
reduce the Federal budget deficit. I agree with that proposition. The 
Strengthening of America Commission concluded we needed to do just 
that, but that we needed to do more. We not only need to reduce the 
share of our national savings being soaked up by the Federal budget 
deficit--we also need more savings. And we believe our proposal can 
turn the Tax Code from a major roadblock to higher savings into an 
important tool to promote higher savings.
  I do not believe anybody could argue that the Tax Code is not used to 
encourage socially desirable behavior. Would anybody argue that the 
deductions for home mortgage interest and charitable contributions that 
have been in the Tax Code for decades do not encourage home ownership 
and donations to charities? Yet the current Tax Code not only fails to 
encourage private saving, which is vital to our future, it actually 
discourages it. Yet there is no doubt that future generations will not 
have the same level of entitlement benefits from the Government that we 
have today. Our present entitlement programs are not sustainable at 
their current growth rates. That means that Americans are going to have 
to save more, to take more personal responsibility for their own 
futures.
  That is why our Strengthening of America report contained a plan to 
both balance the budget by reforming entitlement programs and to reform 
the Tax Code to promote greater personal savings. We need to get the 
Tax Code working for us, not against us, to get people to once again 
adopt the mentality of savers who think about tomorrow as well as 
today. We need to start an education process in this country to make 
saving a national issue--not just a tax issue. People need to 
understand the fundamental importance of saving, both for their own 
future and for America's future. We literally and figuratively must 
save America.
  The heart of our proposal, Mr. President, is the unlimited savings 
allowance, or USA. That is why we call it the USA Tax System. In 
essence, it allows individuals a deduction for the portion of income 
they save, and allows businesses to expense their new investments when 
they make them rather than depreciating them over a long period of 
time. If Americans want to consume more, both now and in the future, 
then America must save more and invest more. These new deductions for 
savings and investment will provide the impetus for higher economic 
growth, higher productivity, higher paying jobs, and a higher living 
standard for all of us. I think a higher living standard for all 
Americans is the ultimate test of fairness.


            The USA Tax System is a Single Tax in Two Parts

  The USA proposal consists of a single, integrated tax in two parts: a 
progressive tax on individual incomes, and a low, flat rate tax on all 
businesses. These two parts are meant to work together. It is important 
that people not try to consider the two parts separately, because if 
they do they will not grasp the significance of the whole concept. It 
is a single tax levied in two places: at the business level where 
wealth is created and at the individual level where wealth is received.
  This proposal allows an unlimited deduction at the business level for 
capital investment and, more important, it permits all citizens an 
unlimited deduction for the amount of their annual income they save and 
invest. The USA Tax System directly and systematically addresses our 
saving and investment problem.
  To the individual, our system says, ``If you choose to defer some of 
your consumption in favor of saving income for your future and the 
future of your children, the Tax Code will not penalize you for doing 
so.''
  And to the business enterprise, whether very small or very large, 
manufacturing, service, or agricultural, the USA Tax System says, ``If 
you choose to invest your profits in a new machine or a new process 
that will help you grow and put more people to work, the Tax Code will 
help you.'' The USA Tax System, by its very nature, would align the way 
we tax with our common desire to provide our children with a better 
tomorrow.
  Mr. President, I will not go into detail on the individual and 
business component.
  But there are other parts of the proposal that I think need some 
emphasis this morning.


                           The Individual Tax

  Let me describe the key features of the individual part of our 
proposal first. The individual tax would function in a manner similar 
to that of the current income tax. From your gross income, you would 
make subtractions before you figure your tax, just as you do now. You 
would subtract personal exemptions, a new family living allowance, a 
new savings allowance, and a limited number of itemized deductions. 
Gross income would include wages, salaries, interest, dividends, 
earnings withdrawn from unincorporated businesses, proceeds from asset 
sales--basically the same concept of income we have today.
  First, the USA proposal contains a family living allowance that is 
similar to the current standard deduction except that it is in addition 
to any itemized deductions, not an alternative to itemized deductions. 
This family living allowance exempts the first dollars spent on 
consumption from taxation, because we know that people in low income 
brackets spend a higher proportion of their incomes on necessities than 
people in high income brackets.
  In addition to the family living allowance, you would have personal 
exemptions just as you do under current law. A family of four filing a 
joint return would have its first $17,600 of income exempt from 
taxation by adding this family living allowance to its four personal 
exemptions.


                    The Unlimited Savings Allowance

  In addition to these deductions, there would be a new deduction for 
the amount of income that is saved called the unlimited savings 
allowance. We define savings in this proposal as net new savings. That 
is key. If you add to the national savings pool, you would deduct that 
money before you pay taxes. In other words, to make it simple, if 
someone makes $40,000 a year and saves $5,000, they would pay taxes on 
$35,000, instead of today paying taxes before the savings on the entire 
$40,000. That is fundamental. We encourage people to save.
  The unlimited savings allowance is similar to the IRA concept, but it 
is unlimited. It is not limited to $2,000 or any other dollar amount. 
It is not limited to saving for retirement. But it is for net new 
savings. We do not give a deduction for merely shifting savings around. 
That has always been one of the problems with the IRA.
  The unlimited savings allowance is fundamentally different from the 
current Tax Code, which penalizes savings. Under the present Tax Code, 
savings are taxed twice, once when you earn the income that you save, 
and again when you receive a return on those savings; consumption is 
taxed only once.
  The USA Tax System also reflects a fundamentally different philosophy 
in that we do not focus on where your income came from. We do not have 
different rates for wage income or dividends or capital gains. Under 
the USA Tax System, the point is not where the income comes from, it is 
what you do with it. The portion of your income you save, whether you 
are rich or poor, you do not pay tax on. The portion you spend, above 
the level for basic necessities, is subject to tax at progressive 
rates.
  The deduction for individual saving also permits a new perspective 
toward designing a business tax. Because our proposal defers taxes on 
individual saving until they are spent, we can eliminate enormous 
complexities in today's Tax Code. There is no reason to be concerned 
about people sheltering their savings in corporations, which creates a 
huge portion of the complexity in today's Tax Code. We do not need 
elaborate rules to force businesses to distribute sheltered saving.
  I am sure some people say that there is no proof that savings will 
respond to changes in the Tax Code, so how do we know your proposal 
will work? In response to that, I would say that first, you could just 
as easily argue is no 
[[Page S5668]] proof regarding any proposition of economics. Economics 
happens in the real world, with complex interactions that will never be 
exactly repeated, not in a lab.
  Second, it misses the point to compare the USA proposal to the 
experience we had with individual retirement accounts in the early 
1980's. With the IRA, you did not have to save more to get a deduction, 
you merely had to move your savings into an IRA. Since the Government 
was handing out tax deductions for moving savings from your right 
pocket to your left pocket, is it not surprising that those IRA 
provisions did not increase national savings.
  But there is a crucial difference between the unlimited savings 
allowance that Senator Domenici and I are proposing and the IRA's of 
the 1980's. Our proposal rewards true increases in savings and does not 
reward shifting assets from one type of account to another.
  Finally, I would say that a perfect world Tax Code would not affect 
people's economic decisions at all. But we all know we do not live in 
such a perfect world, and it is unlikely we ever will. We all know 
people do things sometimes that do not make a lot of sense, just to 
lower their taxes. To say that people do not respond to economic 
incentives simply flies in the face of everything we know about 
economics and human nature. What the Senator from New Mexico and I are 
saying is, recognizing that it is human nature to respond to incentives 
like tax deductions, let us give people an incentive to do the right 
thing, for our country and our economy, not the wrong thing.


                    Other Deductions for Individuals

  In addition to the family living allowance, the personal exemptions 
and the savings allowance, we propose a limited number of additional 
itemized deductions. The higher the number of deductions, as we all 
know, the higher the marginal tax rates would have to be. So, there is 
a trade-off. We are proposing to retain a deduction for home mortgage 
interest and charitable deductions. We could have more deductions, of 
course, and certainly we welcome debate on which deductions people 
think should be added to, or subtracted from, our proposal--with one 
word of caution. The higher the number of deductions, the higher the 
rates will have to be to avoid increasing the deficit. There is a 
direct tradeoff between the number of deductions and the tax rate.
  Our proposal does have one such additional deduction which I feel 
very strongly about, and that is a deduction for tuition expenses for 
post-secondary education, whether it is college, trade or vocational 
school, or remedial education. We feel it is important that the tax 
system provide a deduction for investment in human capital that 
parallels the deductions on the business side for investments in 
physical capital, since both investments raise the productivity and 
real incomes of workers.


                   The USA Tax System is Progressive

  The USA Tax System is a progressive tax. Our system will have three 
graduated rates. We are proposing a progressive system, not a flat tax. 
We do not believe it is necessary to abandon the principles of fairness 
and progressive taxation in order to get a simpler, more efficient, 
growth-oriented tax code. It is important to keep in mind that the 
graduated rates in the USA Tax System will not create the same 
disincentives on saving and growth as today's tax system, since taxes 
will be deferred on income that is saved and invested.
  There are four main elements that make the USA tax on individuals 
progressive. First, we have progressive rates. Second, we have a family 
living allowance that does not tax the first several thousand dollars 
of consumption for basic necessities. Third, we retain some progressive 
elements of the current code, such as an earned income tax credit--
which we increase--and the tax exempt status of food stamps and other 
safety-net benefits. Finally, we have a new payroll tax credit which I 
will discuss in a moment.
  We would apply progressive tax rates to the amount of income that is 
consumed, after subtracting the family living allowance, personal 
exemptions, and deductions for mortgage interest, charitable 
contributions, and education expenses.
  The tax rates in the USA system are not directly comparable to the 
rates in the current income Tax Code, however. I know people are going 
to find that a little hard to understand at first, but the reason why 
they are not comparable is very important, and that is our payroll tax 
credit.


                         The Payroll Tax Credit

  Under the USA system, after you determine the amount of tax resulting 
from applying graduated rates to your taxable income, as I have just 
described, you would subtract from that income tax the amount withheld 
from your salary for the employee share of your Social Security 
payroll, or FICA, tax. We think that is a very important feature of the 
USA system that would reduce the regressive nature of the present 
payroll tax. The payroll tax, which is absolutely essential to fund 
Social Security, to fund Medicare, also has become the most regressive 
part of our Tax Code--the most regressive part of our Tax Code. It does 
not apply except to the first $60,000 of earnings. Higher income people 
do not pay it above that except a limited portion on Medicare. But low-
income people, medium-income people, are paying a very large percentage 
of their overall taxes on FICA tax.
  In fact, there are literally millions of Americans today that pay 
more FICA tax than they do income tax.
  Our payroll tax credit would be refundable so that if you had more 
withheld in payroll taxes than you owed in taxes, as is the case for 
many people, the difference would be refunded to you. Therefore, people 
with earned income can, in effect, subtract 7.65 percent, the amount of 
pay withheld for the employee's share of the Social Security and 
Medicare payroll taxes, from our tax rates.
  It is very important for people to understand this. When you see a 20 
percent tax rate or 19 percent or 27 percent tax rate under the USA 
proposal, the 7.65 percent credit has to be subtracted to get the real 
tax rate--a 20 percent rate under the USA system is, in effect, equal 
to a marginal rate of 12.35 percent under today's system after you take 
the payroll tax credit.
  The payroll tax is a perfect example of why fundamental tax reform is 
needed. As my colleague from New York, the ranking member of the 
Finance Committee, Senator Moynihan, has so frequently and eloquently 
pointed out, the payroll tax is a very regressive tax. It discourages 
hiring additional workers, especially lower wage workers. Nobody 
designed the system that way, of course.
  The payroll tax started out at a low rate, but that rate has grown 
considerably over the years. In the late 1960's and early 1970's, the 
payroll tax working people paid grew considerably to finance large cost 
of living increases for retirees that were enacted in years of high 
inflation. It was increased again in the 1980's, ostensibly to build up 
a surplus for the retirement of the baby boomers. Unfortunately, as 
Senator Moynihan has also pointed out, that is not what the surpluses 
are actually being used for.
  So we now find ourselves with a combined employer-employee payroll 
tax rate of 15.3 percent a very high rate that adds significantly to 
the cost of labor. The system was set up for one purpose--to provide 
income security in retirement--but it is actually hurting working 
people in ways that I am sure were never intended by the authors.
  Mr. President, our proposal does not abolish the payroll tax. It does 
not affect the operation of the Social Security system in any way. What 
it does do is to offset the unintended negative effects of the payroll 
tax by crediting the payroll tax against an individual's or business's 
tax liability under the USA tax. The employer would also get the 7.65 
percent credit against their taxes --not a deduction, but a tax credit. 
Employees get a credit for the FICA taxes against the individual income 
tax, and employers get a credit for the employer share against the 
business tax.
  So the same amount of revenue will continue to be deposited in the 
Social Security trust fund. We do not affect that, but the payroll tax 
will be integrated into the income tax in a way that offsets its 
regressive nature. This is important for fairness purposes. It is also 
important so that we eliminate one of the major impediments to people 
with low skills being hired. Now 
[[Page S5669]] people with low skills, minimum-wage-type jobs, the 
employer has to look very, very carefully before they hire because they 
are not only paying for the minimum wage, or whatever the wage is, they 
are also paying another, in effect, 15.3 percent because of these very 
high payroll taxes that continue to go up.


                            The Business Tax

  Mr. President, I will take just a moment on the business side of the 
Tax Code because I know that Senator Kerrey from Nebraska, who has been 
very involved in this concept for a long time and has been a major help 
to us, is on the floor and would like to speak. Let me make a few 
comments about the business tax.
  The second component of our new tax code is the business tax. The 
business tax would work like this: Under the USA Tax System the 
business would add up its sales receipts during the year, then add up 
the cost of the goods and services it purchased for use in its 
business. The cost of these business purchases would be subtracted from 
the sales receipts. The difference would be subject to a business tax 
at a flat rate of 11 percent.
  I am sure many people will ask, ``Why is the business rate so much 
lower than current law?'' The answer is that the two rates are really 
not comparable, because our tax would not be applied to corporate 
income as currently defined, but rather to a company's gross profits. 
It is a fundamentally different concept from what we have today, and it 
applies to all businesses, not just those that are incorporated. I 
think everyone who studies this business tax needs to understand we 
have a fundamentally broader base for the business tax so we are 
dramatically lowering the rate but we are producing the same amount of 
revenue. We are not lowering the overall proportion that businesses are 
paying. They are paying the same proportion. But we are able to lower 
the rate because we are greatly broadening the base, and that needs to 
be understood.
  It is important also to understand that under the USA Tax System, the 
cost of investment in plant and equipment and inventory would be fully 
deductible when spent. There would be no need for depreciation 
schedules. Investment would be deducted up front. Investment creates 
jobs. New plant and equipment creates productivity opportunities and 
that increases the income of our people. So that is the behavior we 
should be encouraging rather than discouraging.
  Investment in plant and equipment is what we need in this country, 
and yet the amortization of these investments over a long period of 
time under current law discourages businesses from investing as much as 
they would otherwise.


               The USA Tax Promotes U.S. Competitiveness

  Another very important feature is that our USA Tax System puts U.S. 
companies on the same footing with our competitors. The USA business 
tax is territorial--meaning it applies to all sales on U.S. soil no 
matter where the business is headquartered--and it is border 
adjustable.
  We want to encourage exports, and we do in this proposal. We exclude 
the proceeds from export sales from taxation by rebating the tax on 
goods exported for sale abroad. And when a company, foreign or U.S. 
owned, manufactures abroad and sells to the United States market, the 
company is, through the operations of a new import tax, taxed 
essentially the same as if the factory were located in the United 
States. That is border adjustability, the tax is rebated on exports and 
added to imports, which is exactly the situation American exporters to 
Europe and Japan face today. We believe our business tax will place 
American companies and workers on an equal and level playing field.
  This is no small matter, Mr. President. The share of our economic 
output that is exported, and the share of our national income that we 
spend on imports, have both doubled over the past 25 years. Yet the 
current U.S. Tax Code has not kept pace with the rapidly changing face 
of international competition. While our economy has shifted 
dramatically since this Tax Code was put into effect, our we have not 
made a comparable shift in our Tax Code. We have simply tinkered with 
it year in and year out.
  Our tax system is a holdover from another era, when international 
trade was a small component of our economy, when having a tax rule that 
applied to all American corporations equally was enough. But today 
American companies do not just compete with each other, they compete 
globally. And the U.S. Tax Code puts our companies at a disadvantage.
  Under the rules of the General Agreement on Tariffs and Trade, or 
GATT, certain types of taxes can be levied on imports and rebated on 
exports--border adjustability--while other types of taxes cannot. Our 
competitors in Europe and Japan have business taxes that can be rebated 
under GATT, while we do not. We believe the USA business tax is legal 
under the GATT, since it would work essentially the same way as 
European and Japanese value-added taxes, which are GATT-legal.
  Let me give a simple example of how our business tax applies to 
exports and imports. If a company has $2.5 million in sales, of which 
$500,000 are export sales, for purposes of the business tax its 
receipts would be only the $2 million it had in domestic sales, not 
$2.5 million. But it will not have to go through a lot of complicated 
calculations to allocate its production costs between its domestic and 
foreign sales. All domestic input costs will be deductible regardless 
of whether the sales are domestic or export sales. Under our proposal 
there will no longer be a tax incentive to move production overseas.
  Conversely, if the facilities used for the production of the $2 
million in domestic sales are moved overseas and the $2 million of 
goods are imported into the United States, an 11 percent import tax of 
$220,000 will be collected on those goods.
  In order to comply with the requirements of the GATT, businesses 
would not deduct wages. This is a key point, and I know there will be 
concern about this. But there are two important things to remember. 
First, our rates are much lower--11 percent --than the rates currently 
imposed on corporate profits.
  The second thing that we need to remember is that under our proposal, 
the deduction for wages would be replaced by the credit for the 
employer's share of the Social Security payroll tax--which is 7.65 
percent of its payroll--which is the other half of the credit that 
employees get under the individual tax that I have already described. 
Businesses would get a credit back on that tax up to the maximum Social 
Security wage.


        The USA Tax Is Designed to Be Deficit-Neutral

  Under our proposal, the individual and the corporate shares of our 
total revenue would remain the same. We are not trying to shift the tax 
burden from businesses to individuals, or vice versa. We are not trying 
to shift the burden from the rich to the poor, or from the poor to the 
rich. We are not looking for the fellow behind the tree to tax. We are 
designing this system to produce the same amount of revenue as the 
current Tax Code. It is not a proposal to cut taxes or raise taxes.
  Because of the comprehensive nature of our proposal, and the enormous 
workload the Joint Committee on Taxation has had this year, they were 
not able to perform an official revenue analysis or a distributional 
analysis of this proposal before we introduced it. It is our intention 
that this system retain the progressivity of the current system, and 
that it be revenue neutral compared to the current system. Should the 
official estimates indicate that the bill we have introduced fails to 
completely meet either of those goals, we intend to work with the Joint 
Committee to refine this proposal so that we meet both, because we 
think they are very important.


               The USA Tax Is Simpler and More Efficient

  The USA Tax System also makes great strides in making our Tax Code 
simpler and more economically efficient. The USA tax eliminates the 
need to calculate depreciation year after year, because investments are 
expensed immediately. We also eliminate the complicated, and in many 
cases counterproductive, alternative minimum tax, or AMT.
  The USA business tax puts debt and equity financing on an equal 
footing. We treat all forms of businesses the same--corporations, 
partnerships, and proprietorships.
  [[Page S5670]] One of the greatest contributions the USA system will 
make to simplification is that no longer will people have any reason to 
seek out unproductive, economically wasteful tax shelters in order to 
cut their taxes. If you want to lower your taxes, put your money in 
savings where it can work for all of us--buy a CD, invest in a mutual 
fund. It might take a few minutes to do your net savings calculation 
once a year, but the net savings calculation should result more 
efficient use of our national income, as well as higher economic growth 
as saving and investment increase.
  In an economy with a gross domestic product of over $6 trillion, 
taxation will never be a completely simple affair. But because the USA 
Tax System eliminates the need for rules against sheltering income in 
corporations, and because it is based on cash rather than accrual 
accounting, it promises major advances in simplicity and clarity.
  Under the USA system, we believe whole volumes of Tax Code 
complications would fall away into welcome oblivion. The tax shelter 
industry would shrink and compliance costs would plummet. All income 
would be treated alike. The key is what they would do with their 
income. If it is reinvested, then the taxation on it would be deferred. 
It is not reinvested, if it is consumed, then ordinary tax rates would 
apply. Those rules would be the same for everyone; for the factory 
worker and for the investor.
  There would be no more need for fights over capital gains, investment 
tax credits, individual retirement accounts, and other targeted 
incentives for saving. The USA Tax System eliminates these issues 
because it offers a blanket deduction for personal saving and business 
investment.
  And under the USA system, taxpayers will not have to keep track of 
the basis of their newly purchased savings assets such as stocks and 
mutual funds, the way they do now, and most taxpayers will not have to 
worry about the basis of savings assets they already hold. Finally, the 
USA tax system will not take a whole new bureaucracy to administer.


             The USA Tax System is a Revolutionary Concept

  In a way, the USA Tax System could be described as simply taking the 
current tax system and adding a deduction for savings. That may be the 
major change most people would notice. But the USA Tax System 
represents a much more profound change in its effects than in its form.
  For any given level of income, those who save and invest more will 
pay lower taxes. The taxpayers in the top bracket would pay roughly the 
same total amount of taxes they do now. But within that bracket, there 
will be those who pay less and those who pay more. The same will hold 
true whether you are in a higher or a lower tax bracket. That is the 
essence of our proposal. Those who help our economy, help create jobs, 
and boost productivity by saving and investing, will pay less than 
their neighbors with similar incomes who do not.
  We are basically going to tax people on what they take out of the 
economy--above a tax free level for necessities--rather than what they 
put into the economy by working and saving. Our proposal represents a 
revolution in the philosophy of the income tax system. But we do not 
have to make major changes to the system already in place to administer 
the tax system to make our proposal work.
  By contrast, a consumption or expenditure tax, such as a value-added 
tax, would impose enormous administrative expenses on American 
businesses, without the progressivity, and without creating the same 
incentive to save and invest, that the USA Tax System has.
  The distinguished economist and former chairman of the Council of 
Economic Advisers, Murray Weidenbaum, very clearly summarized the 
benefits of moving to a tax system that, in his words ``puts the fiscal 
burden on what people take from society--the goods and services they 
consume--rather than on what they contribute by working and saving.''
  Professor Weidenbaum argues that we need a Tax Code that promotes 
saving because saving is the seed corn for economic expansion. The 
money you save does not just sit there, it works for all of us by being 
invested. Increased savings and investment generates more production of 
goods and services, more employment, and a higher living standard for 
all of us.
   A tax system that exempts saving raises the same amount of revenue 
as the existing tax system, with far less damage to the economy. We get 
a faster growing economy with more people working, fewer people needing 
public assistance, and the increased revenues that come from a growing 
tax base instead of from raising tax rates.


                               Conclusion

  Mr. President, this is a revolutionary concept. The advantages are, I 
think, very, very important to our country.
  The first advantage: This proposal will increase national savings by 
eliminating the bias in the current Tax Code against savings, without 
increasing the budget deficit. Increasing the pool of private savings 
will in turn allow increased investment at lower cost, which will 
increase the productivity of our workers.
  Second, it will level the international playing field for U.S. 
companies, and promote U.S. exports of domestically produced goods, by 
rebating the business tax on goods sold for export, and it will 
equalize the tax treatment of American-made and imported goods by 
having foreign companies pay their fair share of taxes, just as 
American exports are taxed when they are sold in foreign markets.
  Third, it will make our Tax Code more understandable and more 
efficient which will save, I believe, both millions of dollars and 
millions of hours preparing individual and business tax returns, and it 
will do so without sacrificing the principle of fairness in allocating 
the tax burden.
  Fourth, the USA tax credit for the employer share of payroll taxes 
will help create jobs for workers who might not otherwise be hired by 
reducing the current disincentive to hire low-skill workers that 
results from the regressive payroll tax which applies to the entire 
wage of lower paid workers but to only part of the wage of higher paid 
workers.
  Finally, we believe it will foster greater personal responsibility by 
clearly showing the costs and benefits of saving versus consuming.
  Today, Mr. President, every family in America, if they are saving 
money for a washing machine, an automobile, or a college education, has 
to pay taxes before they save. We would give the people in the lower 
and middle-income brackets who need to save, but who think they cannot 
afford to save--and who do not have any incentive to save under the 
current Tax Code, because any money they do save out of their after-tax 
income is taxed again when it earns interest or dividends--we would 
give them a way to save. I believe our proposal will help all American 
families save, and that as a result, all of us will be better off.
  The current tax system is broken and, in my opinion, it cannot be 
fixed. In a very real way, it has aided and abetted our irresponsible 
tendency to live beyond our means. Our current Tax Code must be 
abolished and replaced.
  We must being anew. The USA Tax System provides a way to eliminate 
the cynical complexities, the special subsidies, the crippling biases 
present in the current Code. By enacting real reform of the tax system, 
this Congress can take a giant step toward securing our future.
  Mr. President, I thank the Senator from New Mexico. Without his 
leadership there would have been no Strengthening America Commission, 
there would have been no tax proposal today. He has been a key player 
in this from the very beginning. He is a pleasure to work with. I look 
forward to working with him on this proposal, as well as on his 
important responsibilities on the other side of our national economic 
challenge, and that is getting our deficit under control, which also 
directly drains our savings.
  Mr. President, I yield the floor.
  Mr. KERREY. Mr. President, it is awfully difficult to estimate the 
economic impact of tax law. I must say, it is a lot easier for us to 
estimate the political impact of tax laws because we hear from a whole 
range of interest groups constantly that are concerned about preserving 
some deduction or perhaps expanding some deduction. So it is genuinely 
difficult to estimate what the economic impact is going to be, 
[[Page S5671]] though it is easy to estimate what the political impact 
is going to be, of various changes in the law.
  What is not difficult with this particular piece of legislation is to 
estimate what the impact is going to be upon American families who 
desire to save and on American businesses who are willing to make job-
creating investments.
  Mr. President, this piece of legislation, though I am quite certain 
there will be critics who will point out defects in it--indeed, there 
may be plenty of room for improvement of this legislation--there is no 
question that this tax law change is allowed, in my judgment, by the 
rather dramatic change in the political situation last November, which 
has permitted us, the Congress, to begin to consider things that had 
previously been off limits. There is no question, in my judgment, that 
this piece of legislation would have the impact of simultaneously 
allowing American families to save more by providing a powerful 
incentive for them to save, and it would enable American businesses to 
make job-creating investments by enabling them to expense off the cost 
of those investments.
  Let me say, Mr. President, as a part of this debate, that I am 
continuing to be one of the diminishing numbers of the Senate that is a 
Member of the Democratic Party and should assert that as a Member of 
the Democratic Party, I do believe that labor is superior to capital. 
By that, I mean you must have people who are willing to work before the 
capital is worth anything; capital without labor is worthless. So I 
believe in the superiority of labor, and I believe in the training of 
labor, and I believe in universal education and the preparation of 
people so that they have the skills needed to compete, so they have the 
skills needed to earn the living that they desire.
  But I do not believe in declaring war on capital, nor do I believe in 
declaring war on the wealthy. Indeed, it seems to me that the heart of 
the Democratic message ought to be that equal opportunity means 
providing every single American, regardless of their status in life, an 
opportunity to become wealthy in this country.
  Unfortunately and regrettably, Mr. President, there is no shortcut to 
becoming wealthy. There is no easy way, no free lunch to do it. In 
order to become wealthy, one must acquire wealth. And in order to do 
that, one must save. Occasionally, there are people who hit the lottery 
or some bonanza of some sort. But, generally speaking, the acquisition 
of wealth occurs as a consequence of people being willing to defer 
gratification to set aside something they would like to purchase today 
in favor of the desire to purchase something later.
  I remember, Mr. President, in 1988, during my first campaign for the 
U.S. Senate--I will not tell the gentlemen's name--standing at a farm 
site at an event thrown in my behalf, standing next to a farmer 
approximately a generation older than I, along with a friend of mine 
who is a salesman. He was talking to this farmer and he said, ``It is 
well known that you are one of the wealthiest men in the country. How 
did you get so wealthy?'' He said, ``It is real simple. I do not spend 
my money.'' And in making an observation about this gentleman who was a 
salesman, he said ``You are wearing very nice clothes that cost you a 
lot of money.'' The salesman said, ``I have to in order to do my 
work.'' The farmer said, ``You will notice that I am wearing a very 
attractive shirt that I bought for a dollar at your garage sale last 
fall.''
  Mr. President, in order to acquire wealth, individuals must be 
willing to save. There is no short cut to it. Senator Simpson and I 
will, in the next few days, I hope, if we can get the bill language put 
together, present legislation that will reform a program that is 
supposed to be a savings program but it is not, and that is our Social 
Security system. One of the things I will do in the process of 
describing the legislation is describe the magic of compounding 
interest rates.
  Mr. President, there are three variables that will determine the 
impact of your savings and your acquisition of wealth.
  Variable number one is the length of time that you contribute to that 
savings account.
  Variable number two is the amount of money you contribute.
  Variable number three is the rate of return.
  The most important variable is number one, the length of time that 
you contribute. An individual that contributes $75 a year starting at 
age 20, over a 50-year period, will have more at the end of that 50-
year period than somebody who contributes $1,500 a year if they wait 
until they are age 50 to start. I am 51 and, generally, it occurs to 
you when you are about 50 that, Oh, my gosh, I am going to retire in 15 
years, I have to start saving money. The dilemma is that if you wait 
until you are 50, you are giving up the significant impact of 
compounding rates.
  Let me give a little mathematics for the listening audience. Mr. 
President, if you got a 10-percent real rate of return by investing in 
equities, which is not that difficult to do, that would mean that you 
would have a compound every 7.2 years. Thus, if your parents took 
$1,000 and opened a savings account for you when you were born, you 
would get 10 compounds on that thousand dollars that would be worth a 
million dollars by the time you reach age 70. This piece of 
legislation, in my judgment, Mr. President, would change the culture 
and attitude of savings in the United States of America.
  Mr. President, to be clear, there are not very many situations where 
the interest of the individual and the interest of the Nation 
intersect, where they are the same. As much as we talk about it being 
the same, there are very few situations where that is the case. With 
savings, there is an intersection. It is in the interest of American 
families to acquire and accumulate wealth. It is in the interest of the 
Nation to do the same. Unless both the individual has an incentive to 
save and the Nation has the discipline to save, then the standard of 
living of the United States of America simply will not rise.
  Mr. President, I will identify four features that I think 
unquestionably will have a dramatic and powerful and positive impact on 
the United States of America.
  First, this piece of legislation permits a full and unlimited 
deferral of the taxation of savings. A clear signal, unequivocal. There 
would be no need to consult with an accountant. You would know 
precisely that if you save money, you can defer taxation on that 
savings.
  Second, it allows wage earners an offset for the employee portion of 
the payroll tax. That is a very powerful incentive. The payroll tax is 
extremely regressive and very often uncalculated when people are 
politicians and are looking at the overall rates of taxation. It is an 
extremely regressive tax, difficult for individuals, and very often a 
barrier for businesses to hire new employees.
  Third, Mr. President, it allows those individuals who are willing to 
roll the dice, to sign their name on the dotted line to put some 
savings into land, building, equipment, which will hire and employ 
Americans. It allows them, in the operation of their business--a risky 
venture in the 1990's--to expense every single one of their real 
investments.
  Fourth, Mr. President, it enables the United States of America to 
exclude export sales from taxation imposed, as well a tax on imports. 
Every single one of our industrial competitors does precisely the same 
thing. They have to be laughing under their breath as they look at the 
taxation system of the United States of America that puts our workers 
at a competitive disadvantage, and puts our businesses at a competitive 
disadvantage as well.
  Mr. President, I am pleased to join the distinguished Senator from 
New Mexico and the distinguished Senator from Georgia as an original 
cosponsor. This is a piece of legislation that has been several years 
in the making. It is a very thoughtful piece of legislation. It has 
been well thought through. I attended a number of these meetings long 
before the issue was popular. The Senator from New Mexico and the 
Senator from Georgia were leading this effort. I hope that, with the 
new permission granted in this new Congress, this kind of legislation, 
serious legislation, will not only be considered but will be enacted as 
soon as possible. Mr. President, it will be good for American families 
and good for American workers, and it will be good for American 
businesses and, as a consequence of all three, good for our country.
  [[Page S5672]] Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I yield myself 5 minutes, and Senator 
Nunn would like 5 to wrap this up, so I will yield 5 to him.
  Mr. President, I would like Members of the Senate and those 
interested in this legislation to know that we set some very difficult 
parameters for those who helped us draft this. We said we want to 
replace the income tax system with a whole new system, and we want to 
replace it both in substance and in dollars. We want the exact same 
amount of revenue to come in from this new code as before. No more, no 
less. We want it to be neutral. It was a pretty hard mandate imposed on 
those who are doing the modeling, the rate making, and other things.
  Second, we said to them that we have a tendency in the United States 
to judge progressivity based on things we understand. So we took 
progressivity to mean that each 20 percent of the American taxpayers--
frequently called quintiles--the low 20 and the high 20 would pay the 
same proportion of the total tax when we were finished with this as the 
current code--another very difficult and onerous instruction, but we 
did those two things because we wanted to prove that you could totally 
overhaul the income tax structure and get the same amount of revenue 
from corporations and businesses and the same amount from each quintile 
--that is, 20 percent of the American taxpayers in a progressive 
manner.
  Now, obviously, we have followed that rule religiously. Thus we have 
some guidelines, some milestones, and proof that it can be done.
  On the other hand, we suggest to the tax writers in the various 
committees, including our Ways and Means Committee, our Finance 
Committee, and the Ways and Means Committee in the House, that they 
might very well, in trying to adopt this major concept changes that are 
incorporated in detail, they might want to look at some variance in 
those. But we wanted to send it to them and say we have living proof 
that it can be done and yet tremendously encourage savings and 
investment.
  The second point. All of the modeling and estimating was done on a 
basis of static economics. That is, we used the conservative--
acceptable to the CBO and everyone else--approach to the tax yields.
  Not for a minute do Senator Nunn and I believe that the savings, that 
the tax yields over time will be precisely the same. As a matter of 
fact, we believe that in the future years--because of the savings and 
investment, we might indeed have slightly less tax receipts in early 
years and very significantly higher ones in future years with better 
jobs.
  We do not take credit for that in the modeling and estimating. We do 
it on this neutral, conservative basis.
  Having said that, I want to say to my friend, and certainly he is 
Senator Nunn's friend, Senator Kerrey from Nebraska actually hit right 
at the heart of our proposal with his four summary items.
  There is no question that this is a totally new concept. We think it 
is better. As I view it, when people sit around and decide what they 
are going to do with their earnings, currently there is no real 
incentive to look at savings and investment because we pay double tax 
on both--the incentive is against it instead of in favor of it.
  We only want a neutral arena. We understand Americans must spend 
their money. We understand we will be asked, ``Are you sure you will 
not hurt the economy by causing Americans to spend less?'' We think, 
over time, the pluses are our way.
  All we want to do is put that on a level playing field. As we sit 
around and talk about disposable income we want people to look at the 
unlimited IRA's that are part of this, or starting your own investment 
money and leaving it there.
  In conclusion, the concept is that the savings and investment pool is 
good for America. The bigger it is, the better for our working people, 
for jobs and for our children. So if the money is left there in the 
savings or investment pool, you do not bring it back into your income 
and spend it, people do not pay taxes. It is deferred.
  This seems to Washington to be rather revolutionary when coupled with 
the corporate advantages with our border adjustable. Clearly, American 
companies will be given a better opportunity to use more of this 
savings pool here in America, which many will ask, if we are going to 
have all these savings and investments, will American companies get a 
fair shot?
  What we will say, I think, is, ``Absolutely yes.'' We cannot keep all 
of our money at home, but when we create the advantages for American 
corporations and take away the disadvantages of engaging in world 
markets, I believe we will keep much of our money here at home under 
this proposal.
  The PRESIDING OFFICER. The Senator from Georgia has 9 minutes 40 
seconds remaining.
  Mr. NUNN. Mr. President, I want to thank a few people, and I 
inadvertently may not name everyone. There have been many people 
involved in this effort.
  On my staff, Mike McCord and Rocky Rief; on Senator Domenici's staff, 
Bill Hoagland and Denise Ramonas.
  I would like to thank David Abshire and his entire team at CSIS--Dick 
Fairbanks, Debbie Miller, and John Yochelson--who worked on the 
Strengthening of America report, and the many people who have worked so 
hard to help us develop the concept we endorsed in that report into the 
detailed proposal we are introducing today.
  Barry Rogstad and John Endean of the American Business Conference 
have helped immensely. Barry was on the commission and we asked him to 
work with us after we came out with this report. Ernest Christian of 
the Center for Strategic Tax Reform, who has been very, very, 
instrumental in helping us turn this overall concept in a working tax 
system, because he has great expertise in the tax area. I also want to 
thank Rudy Penner, the former Director of the Congressional Budget 
Office, who has done a great deal in coming up with rate structure and 
conceptual framework of the USA tax, and Lin Smith and Paul Burnham who 
are part of Rudy's team at KPMG Peat Marwick.
  Barry, Ernie, and Rudy in particular have spent countless hours 
helping Senator Domenici and I develop this proposal. These key players 
deserve great credit. I also want to thank Bob Lutz, Paul O'Neill, 
Barbara North and all the members of Alliance USA for their support.
  While he has not reviewed the legislation we are introducing today, 
and may not necessarily agree with everything in it, this proposal has 
benefited from the pioneering conceptual work in this area over the 
past 20 years by David Bradford.
  The cash-flow business tax component of our proposal has also built 
on the foundation of several years of work by our two distinguished 
friends and former colleagues, Senator David Boren and Senator Jack 
Danforth, and their very able staffers, Beth Garrett, and Mark 
Weinberger, who also served as Chief of Staff of the Kerrey-Danforth 
Bipartisan Commission on Entitlement and Tax Reform.
  I would also like to thank Jim Fransen and Mark Mathiesen of the 
Senate Legislative Counsel's office, and the staffers from the Joint 
Committee on Taxation, especially Jon Talisman, Joe Mikrut, Tom Bowne, 
and Tom Barthold, who have spent many hours working with us on this 
legislation. I know that the Legislative Counsel's office and the Joint 
Committee have both been extremely busy this year, and probably will 
continue to be, given the large numbers of both incremental and 
fundamental tax reform proposals being introduced, marked up, and 
debated this year.
  I have no doubt that if we and they had the luxury of having all the 
time needed to produce a bill that contained every detail necessary to 
implement such a comprehensive reform as the USA Tax System, we would 
be able to improve it still further. While all these individuals have 
shared their time and talents with Senator Domenici and I and our 
staffs, and we have spent hours and days and weeks and months working 
on this proposal, I would be the first to say that the legislation we 
are introducing today is not complete, it is not perfect, it is not the 
last word on tax reform that will ever need to be written.
  [[Page S5673]] But we believe it is important to put our proposal--
which I believe is far more detailed than any of the other reform 
proposals being discussed--before the American people at this time so 
that the American people can learn more about our proposal, and so that 
we can learn from them. We believe our proposal can and will be further 
improved as people study it and debate it. In the end, we believe we 
can make a compelling case why our USA proposal best serves the needs 
of the American people, and addresses the competitive realities of the 
global marketplace, for the next century.
  Let me see if I can summarize the USA tax proposal in a very brief 
time. The fundamental premise is that the United States has a serious 
savings problem. The private savings in this country have continued to 
go down, down, down, while the Federal deficit has eaten up the savings 
by going up, up, up.
  We have the lowest savings rate in the industrial world, as Senator 
Kerrey from Nebraska and Senator Danforth from Missouri pointed out so 
clearly in their study, as we pointed out in the Strengthening of 
America Report, and as many other commissions, including Warren Rudman, 
Paul Tsongas, and Pete Peterson of the Concord Coalition, who have done 
so much work in that area, have reported in the work they have done on 
trying to reduce the Federal budget deficit.
  The fundamental premise is we have much too low a rate of savings, 
and we have to do something about that. The other fundamental premise 
is that higher savings is directly connected with real income, because 
higher savings produces more investment, higher productivity and 
improved competitiveness, better jobs, and a higher standard of living 
for our American workers.
  The goals of our tax reform effort is to promote savings and 
investment; to ensure fairness while we are doing that; to not increase 
the budget deficit, which is enormously important; to strengthen 
America's competitive position--and I have talked about that at length 
this morning on the export/import matter--to make our Tax Code as 
simple and as efficient as possible in a complicated, complex world; to 
give individual Americans at all income levels a chance to save, to 
invest for their future, for their children's future, and to raise the 
standard of living for themselves and their families; and, finally, to 
produce the revenue required for the U.S. Government with the least 
detrimental effect on our economic growth.
  The advantages of the USA tax system are many. I will try to capture 
those very briefly. No. 1, we eliminate the bias against savings in the 
current Tax Code.
  No. 2, we do not increase the budget deficit, we break even if there 
is adjustment required. That is the fundamental premise. We will adjust 
to accommodate whatever tax estimates come forward.
  The third point is increase the national savings and thereby we give 
ourselves an opportunity to increase investment and to increase 
productivity and real income.
  No. 4, we help level the international playing field for U.S. 
business by not taxing exports and by having the same tax on imports as 
on domestically-produced goods.
  This equalizes the tax treatment with our competitors. Both Japan and 
Europe have a value-added tax where they rebate on exports and they tax 
our imports. So we are doing the same thing that they are doing, 
equally, and leveling the playing field. It gives our American 
producers a level playing field with workers abroad. That is enormously 
important.
  Finally, it makes our Tax Code more understandable and more 
efficient.
  The other dimension that I emphasized this morning that I think bears 
repeating, is that this is a major step toward giving unskilled people 
at the bottom end of the economic ladder a chance to get started, to 
get the foot on the bottom rung of the economic ladder, and to get a 
job, because we basically merge the FICA tax, the Social Security, with 
the income tax and we give full credit back to employees for the 
portion of that tax they paid, even if it is refundable. Even if their 
FICA tax exceeds the amount they owe on income tax, they will get a 
refund.
  So this eliminates the most regressive feature of our current tax 
system and removes a very large obstacle to employment.
  Mr. President, we welcome constructive criticism. We know that we do 
not have a perfect Tax Code--there is no such thing. We understand that 
there are going to be changes that need to be made. We understand there 
are things we have overlooked. We welcome suggestions. We welcome 
constructive criticism. I know we will have a lot of debate and 
discussion on this proposal and I am delighted, with my friend from New 
Mexico, as partners, to jointly send this proposal to the desk and ask 
it be reported and properly referred.
  I also ask the cosponsors be listed: Mr. Domenici, introducing the 
bill with myself, Senator Kerrey, and Senator Bennett--so those will be 
the cosponsors. I believe Senator Lieberman has indicated an interest 
and I believe later he would like to be added as a cosponsor, but we 
have not yet heard from him. He has been enormously interested in this 
proposal.
  The PRESIDING OFFICER. The bill will be received and appropriately 
referred.
  The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I thank the Senate for the time it gave 
Senator Nunn and me this morning. Both of us have had opportunities in 
our Senate careers to do some exciting things for our country, but I 
think we both agree that if we can change the tax laws of the land to 
accomplish the goals and purposes described here and get the Federal 
deficit down where in a few years it would be zero, I think we would be 
rather satisfied that these would be major accomplishments in our time 
here in the U.S. Senate.
  Does my colleague not agree?
  Mr. NUNN. I certainly agree with my friend from New Mexico.
  Mr. President, I ask this legislative proposal also be printed in the 
Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. NUNN. Mr. President, I yield the remainder of our time.
  Mr. DOMENICI. Yes, we yield the remainder of our time.
 Mr. LIEBERMAN. Mr. President, I applaud the efforts of the 
Senator from Georgia and the Senator from New Mexico. They have spent 
not weeks, not months, but years in developing this USA tax proposal.
  It should come as no surprise that this proposal was such a long time 
in the making since it replaces our current individual and business 
income tax system. This was an enormous task. But each year, American 
taxpayers face an enormous task of their own--trying to make sense of 
the dazzlingly unwieldy and frighteningly complex U.S. Tax Code.
  In addition to being complicated, our current Tax Code does little to 
encourage savings and investment and this is in a time when real 
incomes are down, making Americans even less certain about their 
economic futures.
  Our current Code discourages the savings that create the savings pool 
from which investments can be made. In fact, our Code penalizes savings 
not once, not twice but three times--first by taxing that money before 
it can be invested, second by taxing it again as corporate profits, and 
third by taxing that money when it is distributed as dividends to 
shareholders. By any yardstick, the savings rate in this country is at 
a near-crisis point. Our falling private savings combined with our 
rising deficits have left our net national saving--the amount available 
for investment in job-creating activities--at record lows. That net 
national savings has fallen from about 10 percent of GDP in 1973 to 
less than 2 percent in 1993.
  As the Senator from Georgia has said, ``by definition what we do as 
individuals to invest in the collective future of our country comes 
from our savings.'' I agree with that observation and I would add to 
that observation by saying that by definition what we should be doing 
as the creators of the Tax Code is to remove the disincentives in our 
Code that discourage that investment.
  The proposal that Senators Nunn and Domenici are introducing today 
clearly provides an incentive for that saving that we as individuals, 
and we as a country, so desperately need. This proposal imposes no 
taxes on savings-- 
[[Page S5674]] until those savings are spent. It also maintains a few 
important deductions like the home mortgage deduction and the 
charitable contribution deduction. In addition the proposal adds a 
critically important deduction to help families pay for the cost of 
higher education--as a way to encourage this all-important human 
investment. And it is significant to note that the proposal allows a 
full credit for the 7.65 percent of wages that workers pay into the 
Social
 Security system.

  This proposal also goes to great pains to ensure fairness and 
progressivity. It allows for a living allowance as well as the 
deductions and credits I have outlined--for a family of four, the 
living allowance would mean that over $17,000 a year in spending would 
be tax exempt. In addition, the figures that have been run on this 
proposal show that it would actually decrease the tax liability for a 
family making less than $50,000 and leave the tax liability for those 
making between $50,000 and $100,000 unchanged. In addition, the tax 
liability of those making between $100,000 and $200,000 would increase 
by 3 percent and would increase by 4 percent for those making over 
$200,000. It also ensures that the great majority of people who have 
been saving all along will not be penalized when they withdraw those 
savings in their retirement.
  On the business side, this proposal encourages capital investment by 
providing for unlimited expensing and encourages the reinvestment of 
capital gains by deferring taxes on those gains if those gains are 
reinvested. And while it increases the overall pool of what is subject 
to the business tax, the proposal also lowers the tax rate overall on 
businesses.
  This proposal holds out real promise and I am grateful that my 
colleagues from Georgia and New Mexico have devoted so much time and 
effort to ironing out the thousands of necessary details and putting 
this proposal into legislative form. I look forward to discussing the 
proposal in greater detail with them and, from what I have seen, their 
proposal certainly moves us a big step forward toward a tax system that 
is simpler and fairer as well as a system that increases our capacity 
as a country to grow and create new jobs.
                                 ______

      By Mr. KOHL (for himself and Mr. Specter):
  S. 724. A bill to authorize the Administrator of the Office of 
Juvenile Justice and Delinquency Prevention Programs to make grants to 
States and units of local government to assist in providing secure 
facilities for violent and chronic juvenile offenders, and for other 
purposes; to the Committee on the Judiciary.


                        juvenile corrections act

 Mr. KOHL. Mr. President, I rise to introduce the Juvenile 
Corrections Act of 1995, which I am proud to sponsor with my friend and 
colleague, Senator Specter. The act dedicates approximately 10 percent 
of the 1994 Crime Act's adult prison resources to the construction and 
operation of State and local juvenile corrections facilities.
  Juvenile violence, as we all know, is at the heart of the crime 
problem in America. Every 5 minutes a child is arrested for a violent 
crime in the United States; every 2 hours a child dies of a gunshot 
wound. Unfortunately, there is good reason to believe that this problem 
may get worse before it gets better. Demographics tell us that between 
now and the year 2000, the cohort of children between the ages of 14-17 
will increase by more than 1 million. The likely result: a serious 
increase in the number of violent juvenile offenders in the coming 
years--above already unacceptable levels.
  Despite this state of affairs, the Federal Government has treated 
juvenile corrections as the poor stepchild of the Federal anticrime 
effort. The 1994 Crime Act contained billions of dollars for policing 
and adult prisons at the State and local level, but no significant 
program to help States alleviate the increasing burdens on their 
juvenile corrections systems.
  These burdens are real and substantial, Mr. President. A recent 
Department of Justice survey indicated that the majority of juvenile 
corrections facilities nationwide are seriously overcrowded and 
understaffed--in short, bursting at the seams. Between 1979 and 1991, 
juvenile detention centers faced a 30 percent increase in daily average 
population--a gain of about 65,000 youthful offenders. As a result of 
the demographic trend we highlighted above, we will probably see even 
worse overcrowding in the future.
  Mr. President, the consequences of overcrowding should trouble us 
all. In part due to the combination of overcrowding and understaffing, 
juvenile offenders attacked detention facility staff 8,000 times in 
1993. In countless U.S. cities, juvenile offenders who require 
detention are nonetheless released into the community because of a lack 
of space. And finally, it is clear that overcrowding breeds violence 
and ever more violent juvenile offenders who, when eventually released, 
are much more dangerous to society than when they were first 
institutionalized.
  For all these reasons, we introduce today the Juvenile Corrections 
Act. Our legislation provides crucial assitance--$770 million in 
funding over 5 years--to State and local governments for the 
construction, expansion, and operation of juvenile corrections 
facilities and programs. And, I should note, the act has no impact on 
the deficit, as it draws its funding from the $8 billion adult 
corrections component of the 1994 Crime Act.
  Mr. President, we cannot afford to turn a blind eye to the juvenile 
corrections problem. So I hope my colleagues will join with me and 
Senator Specter to enact the Juvenile Corrections Act. In light of the 
spiralling juvenile violence problem, we believe it makes good sense to 
dedicate roughly 10 percent of the crime act's adult prison resources 
to State and local juvenile corrections.
                                 ______

      By Mr. ROCKEFELLER (for himself, Mr. Daschle, Mr. Akaka, Mr. 
        Dorgan, and Mr. Wellstone):
  S. 725. A bill to amend title 38, United States Code, to extend 
certain authorities relating to the provision of community-based health 
care by the Department of Veterans Affairs, and for other purposes; to 
the Committee on Veterans' Affairs.


                   veterans' community-based care act

  Mr. ROCKEFELLER. Mr. President, VA, like other Federal departments, 
is taking a hard look at its programs in order to improve the way it 
operates, and in so doing, improve the services it provides to its 
beneficiaries--in the case of VA, veterans and their families. I am 
committed to providing VA with the legislative authorities and 
management flexibility needed to renew its health care system to meet 
the current and the future needs of our Nation's veterans.
  One of the steps VA must take is to revamp its infrastructure to use 
the most clinically appropriate, most effective, and most efficient 
approaches to health care delivery available in this country. VA plans 
to restructure by shifting from a system which is heavily oriented 
toward inpatient hospital care, to a system which provides more care in 
outpatient and noninstitutional settings, such as care in the community 
and in veterans' homes.
  The bill I am introducing today is designed to support VA's 
reengineering efforts by extending existing authorities to provide 
health care to eligible veterans in community settings. I am proud that 
Senators Daschle, Akaka, Dorgan, and Wellstone have joined with me as 
original cosponsors.


                         summary of provisions

  Mr. President, this legislation contains amendments to title 38, 
United States Code, and to various public laws that would:
  First, extend until December 31, 2000, VA's authority to contract 
with non-VA halfway houses for treatment and rehabilitation services 
for veterans with substance abuse problems.
  Second, extend until December 31, 2000, VA's authority to conduct a 
pilot program of noninstitutional alternatives to nursing home care.
  Third, reauthorize until December 31, 2000, VA's Homeless Chronically 
Mentally Ill Program, which provides outreach and contract care in non-
VA facilities for homeless veterans with severe mental illnesses.
  Fourth, reauthorize until December 31, 2000, the Compensated Work 
Therapy/Transitional Residence Program for certain veterans, including 
those who suffer from substance abuse problems and homelessness.
  Fifth, extend until December 31, 2000, VA's authority to enter into 
enhanced-use leases.

[[Page S5675]]

                               background

  Clearly, veterans who are eligible for VA health care services need 
access to a full range of institutional and noninstitutional services 
to meet their medical and health-related needs. Ideally, every patient 
would be provided the most appropriate type and level of care needed, 
and that care would be delivered in the most appropriate and least 
restrictive setting.


     treatment for alcohol or drug dependence or abuse disabilities

  This legislation would extend VA's authority to contract with non-VA 
halfway houses for treatment and rehabilitation services for veterans 
with substance abuse problems. Current law authorizes VA, through 
December 31, 1995, to provide veterans who are suffering from substance 
abuse disabilities with care on a contract basis through community 
halfway houses. Such community facilities provide a supervised, 
substance-free environment, maintain residents' health, and help 
residents improve their independent living and social skills.
  This contract program provides an important step in a veteran's 
transition from inpatient substance abuse treatment and detoxification 
to independent living in a community. The contract program currently 
operates at 106 medical centers; 6,300 veterans were treated through 
the program in fiscal year 1994. First authorized in 1979, the program 
has been an integral step in the treatment of substance abuse for 
veterans.


           noninstitutional alternatives to nursing home care

  This legislation would extend VA's authority to provide health and 
health-related services for veterans needing long-term care. Under 
current law, this program will expire on September 30, 1995.
  Authorized by Public Law 101-366 and expanded by Public Law 103-452, 
the program is targeted to those veterans who, but for the receipt of 
these services, would need to be placed in a nursing home. Homemaker 
and home health aide services furnished under this program provide 
veterans with assistance in performing fundamental activities of daily 
living, such as eating, bathing, dressing, transferring, and other 
personal care activities. VA staff provide the case management, and 
public and private sector agencies deliver the services in veterans' 
own homes. Veterans can continue to live at home and receive, at less 
cost to VA and to the taxpayer, the same type of services that would 
otherwise be provided in a hospital or nursing home.
  With a budget of $10 million in fiscal year 1994, 110 VA medical 
centers purchased homemaker and home health aide services for more than 
3,000 veterans.


               homeless chronically mentally ill program

  This legislation would reauthorize for 5 years the Homeless 
Chronically Mentally Ill [HCMI] program. Under current law, the HCMI 
program will expire on September 30, 1995.
  The HCMI program, one of the two major VA homeless programs, 
authorizes VA outreach workers to contact homeless veterans in the 
community, assess and refer veterans to community services, and place 
eligible veterans in contracted community-based residential treatment 
facilities. The HCMI program was enacted in 1987 as a pilot program 
with a budget of only $5 million. Since that time, the program has 
grown significantly. In fiscal year 1994, it had a $24.5 million budget 
and operated out of 57 medical centers in 31 States and the District of 
Columbia. Similar to the contract program for veterans with chronic 
substance abuse problems, the HCMI program continues to prove its 
worth.


            compensated work therapy/transitional residences

  This legislation would reauthorize through fiscal year 2000 a 
demonstration program that provides veterans with compensated work 
therapy and transitional residence [CWT/TR]. The current authority for 
this program expires on October 1, 1995.
  Currently, section 7 of Public Law 102-54, enacted in 1991, 
authorizes VA to conduct a CWT/TR demonstration program with two 
components. Under one component, VA is authorized to purchase and 
renovate no more than 50 residences as therapeutic transitional houses 
for chronic substance abusers, many of whom are also homeless, jobless, 
and have mental illnesses. Under the second component, VA is authorized 
to contract with nonprofit corporations which would own and operate the 
transitional residences in conjunction with existing VA compensated 
work therapy programs.
  Under both components, veterans pay rent from money earned by working 
for private businesses or Federal agencies which have contracts with VA 
to employ the veterans. Once the residence is fully renovated and 
operational, the rent collected from the veterans participating in the 
program is intended to pay the operating costs of the residence.
  Thirty-six transitional residences run by VA were fully operational 
in 1994. Fourteen additional residences are currently in the process of 
being purchased or of activating operational beds. A preliminary VA 
evaluation of the existing programs indicates that well over half of 
participating veterans complete the program and have enjoyed 
substantially better sobriety, employment, and housing status than 
before entering the program. The analysis notes that, while these 
programs need additional study, they seem to have enjoyed some initial 
success.
  While VA has implemented the first component of the demonstration 
program as originally envisioned by the Congress, I note that VA has 
only implemented the second component of this program, which requires 
VA to enter into agreement with nonprofits to purchase and run the 
transitional houses, as part of its HCMI program. Of the 29 VA 
contracts with nonprofits for the HCMI program, VA provides compensated 
work therapy at 27 of them. I remain concerned that VA has not formally 
implemented the second component of the demonstration program.


                      Enhanced-Use Lease Authority

  This legislation would extend the authority for VA to enter into 
enhanced-use leases for an additional 5 years. This authority will 
expire on December 31, 1995. Under current law, the Secretary has the 
authority to enter into enhanced-use leases under which another party 
can use VA property so long as at least part of the property will 
provide for an activity which contributes to the mission of the 
Department and enhances the use of the property.
  This program was enacted in 1991 as a test program in an effort to 
fund cost-effective alternatives to the manner in which VA 
traditionally acquired and managed its facility and capital holdings. 
The program was based on the concept that by out-leasing underused VA 
property on a long-term basis to non-VA users for uses compatible with 
VA programs, the Department would be able to obtain facilities, 
services, or money for VA requirements that would otherwise be 
unavailable or unaffordable.
  According to VA, the initial results of this program are promising, 
and have significantly reduced costs to the Department and provided 
corresponding benefits to the local community. For example, through 
enhanced-use leasing, a Veterans Benefits Administration regional 
office is scheduled to open at the VA Medical Center in Houston, TX, 
this spring, at 56 percent of the cost initially appropriated for 
traditional acquisition, plus an annual income to VA. This summer, the 
Department is expected to open a new child care facility at the 
Washington, DC, VA Medical Center operated by a private child care 
provider; child care will be provided at a discounted cost to VA 
employees--all at no cost to VA.
  The Department is pursuing other enhanced-use leasing projects, 
including child care projects for nine sites based on the Washington, 
DC, VA Medical Center model; parking garages at VA medical centers in 
St. Louis (John Cochran), Chicago (West Side), and Pittsburgh; training 
on emergency procedures at the West Palm Beach VA Medical Center; a 
Managed Care Clinical Research and Education Center at the Minneapolis 
VA Medical
 Center; new research space, a new outpatient clinic, and added parking 
at the Durham VA Medical Center; a new energy facility at the North 
Chicago VAMC; shared energy agreements at various VAMC's; and 
potentially, a continuous care retirement community at the Murfreesboro 
VAMC.


                               conclusion

  Mr. President, many veterans who have suffered from chronic illnesses 

[[Page S5676]] have, in the past, had little, if no, choice as to where 
they could live and receive the long-term care they needed. 
Fortunately, there are more options today, including receiving care in 
one's own home. A long-term illness is no longer synonymous with 
institutionalization. If medical, health-related, and social services 
are available, it can make the difference between a veteran being able 
to live his or her last years in the comfort of his own home, or having 
to be placed in an institution. Among other goals, the Veterans 
Community-Based Care Act of 1995 will help make this possible for the 
men and women who have worn the country's uniform.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 725

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Veterans Community-Based 
     Care Act of 1995''.

     SEC. 2. EXTENSION OF EXPIRING AUTHORITIES RELATING TO 
                   COMMUNITY-BASED CARE.

       (a) Alcohol or Drug Dependence and Abuse.--Section 1720A(e) 
     of title 38, United States Code, is amended by striking out 
     ``December 31, 1995'' and inserting in lieu thereof 
     ``December 31, 2000''.
       (b) Noninstitutional Alternatives to Nursing Home Care.--
     Section 1720C(a) of such title is amended by striking out 
     ``September 30, 1995,'' and inserting in lieu thereof 
     ``December 31, 2000,''.
       (c) Community-Based Residential Care for Homeless 
     Chronically Mentally Ill Veterans and Other Veterans.--
     Section 115(d) of the Veterans' Benefits and Services Act of 
     1988 (38 U.S.C. 1712 note) is amended by striking out 
     ``September 30, 1995'' and inserting in lieu thereof 
     ``December 31, 2000''.
       (d) Demonstration Program of Compensated Work Therapy.--
     Section 7(a) of Public Law 102-54 (38 U.S.C. 1718 note) is 
     amended by striking out ``fiscal years 1991 through 1995'' 
     and inserting in lieu thereof ``the period beginning on 
     October 1, 1990, and ending on December 31, 2000''.

     SEC. 3. EXTENSION OF AUTHORITY FOR ENHANCED-USE LEASES OF 
                   REAL PROPERTY.

       Section 8169 of title 38, United States Code, is amended by 
     striking out ``December 31, 1995'' and inserting in lieu 
     thereof ``December 31, 2000''.
     

                          ____________________