[Congressional Record Volume 141, Number 71 (Tuesday, May 2, 1995)]
[Extensions of Remarks]
[Pages E919-E920]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


              CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995

                                 ______


                               speech of

                        HON. BENJAMIN L. CARDIN

                              of maryland

                    in the house of representatives

                        Wednesday, April 5, 1995

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 1215) to 
     amend the Internal Revenue Code of 1986 to strengthen the 
     American family and create jobs:

  Mr. CARDIN. Mr. Chairman, looking at the tax bill we have before us 
today, I can't help feeling a bit like the proverbial kid in a candy 
store. The store is full of tempting goodies. But there are two 
problems. The ``goodies'' aren't good for me, and I can't afford them.
  The bill is loaded wall-to-wall with goodies. It provides a fifty 
percent exclusion for capital gains. It greatly expands eligibility for 
Individual Retirement Accounts. It offers needed relief from the 
alternative minimum tax for corporations trapped in a way never 
intended when the AMT was designed.
  In each of these areas, however, the bill's approach is seriously 
flawed. The capital gains exclusion will help unlock assets and 
encourage new investment, especially in venture capital enterprises. 
But the bill also provides indexing of capital gains, which raises 
serious complexity problems, and, because the bill indexes only gains 
and not debt, raises the danger of new tax shelter activities.
  The IRA proposal in the bill is designed to limit the revenue losses 
in the first five years--the so-called budget ``window.'' That concern 
has led to a proposal for ``back-loaded'' IRAs. Under traditional IRAs, 
taxpayers can deduct a contribution, then have earnings accrue on a 
tax-deferred basis until the funds are withdrawn at retirement.
  The American Dream Savings Account invites taxpayers to make non-
deductible contributions. That feature may restrict the attractiveness 
of the proposal. The incentive to contribute to an ADSA IRA is that the 
initial, after-tax contributions, plus all earnings, accrue tax free 
forever.
  The bill also provides relief to corporations beset by the 
alternative minimum tax. I strongly support AMT relief for capital 
intensive corporations. That's why I have introduced H.R. 1092, which 
would eliminate the depreciation preference from the AMT. Under the 
regular tax system, we provide accelerated depreciation to encourage 
companies to modernize and invest in new plant and equipment. Then, 
under the AMT, we turn around and punish them for acting on the 
incentive we have provided. It makes no sense.
  The problem with this bill is that it goes beyond providing sensible, 
moderate AMT relief, and completely repeals the corporate AMT. 
[[Page E920]] We should not send a signal that we are willing to return 
to the days when profitable corporations could
 completely escape taxation.

  One proposal in the bill is so atrocious it requires special mention. 
The so-called ``neutral cost recovery system'' is a potentially 
disastrous idea masquerading as a simple, fair investment incentive.
  NCRS, or ``nickers'', as it is known, aims to help solve a real 
problem for American business. But it is plainly the wrong answer to 
the right question. The question is, ``What can we do to make the 
depreciation rules more simple and more favorable to investment?'' The 
answer provided by NCRS is to add complexity, make depreciation a 
multiple choice game, raise the prospect of tax shelter activities, and 
try to hide $120 billion in lost revenues by pushing it outside the 
budget window.
  Other provisions in the bill pursue worthwhile goals. For instance, 
the bill correctly identifies the ``marriage penalty'' as a problem for 
many American families. Yet the solution it proposes would require 
these families to plow through a complex set of instructions and 
calculations, only, at the end, to qualify for a maximum of $145 in 
relief.
  The centerpiece of the plan is the proposal to provide tax relief to 
beleaguered American families through a child credit. But 
characteristically, the bill goes too far. The bill's sponsors make the 
case that middle class families making thirty to fifty thousand dollars 
a year are hard-pressed and deserve relief. But that argument cannot be 
made with the same force to apply to families making $150,000 to 
$200,000 a year. Yet they will enjoy the full benefit of this child tax 
credit.
  The point here is not that upper income Americans should be punished 
for their success. The point is that the problem with this entire bill, 
and the reason we should defeat it, is that we simply can't afford it.
  Mr. Chairman, the national debt of the United States is fast 
approaching five trillion dollars. We continue to add two hundred 
billion dollars a year to that total.
  This Congress has talked a strong game on deficit reduction. We have 
talked about amending the constitution. We have talked about making the 
hard choices. Today, though, we are not making hard choices. We are 
making easy choices.
  We have before us a bill that provides specific tax cuts. $630 
billion worth, over the next ten years, of very specific tax cuts. 
Every American knows about the $500 child credit. Every business knows 
about the AMT relief. Every investor knows about the capital gains 
exclusion. We have been specific in making the easy choices.
  But when it comes to spending cuts, we have not been
   specific. We have passed a package of rescissions. $12 billion 
dollars. We have passed a welfare reform bill that would, if enacted, 
cut spending by $62 billion over five years. We have in this package 
today Medicare savings and reforms of the pension plans for federal 
employes, Members of the House, and our staff, that will save, 
combined, $21 billion over five years.

  The total spending cuts--specific, identified spending cuts--included 
in this package will save $87 billion over five years. Add in the $12 
billion saved in the rescission, and you have $99 billion. That amount 
is slightly more than half the $189 billion cost of the tax cuts.
  Where is the rest of it? It comes in the form of a promise. The 
sponsors of the bill promise they will save the rest of the money by 
lowering the caps on discretionary spending. They have issued an 
``illustrative list'' of spending cuts.
  But we have no specific cuts. We can tell the American people what 
taxes we are cutting, and how much of their money we are giving back. 
We know how much federal revenue we will give up in the process. But 
when the American people say, ``Thank you very much for the tax cut. 
But I thought the government was deep in debt. How can you afford to 
cut taxes?,'' this bill answers ``Don't worry, we'll tell you later.''
  Mr. Chairman, that is not good enough. To balance the federal budget 
will require $1.2 trillion in savings over the next seven years. This 
bill takes a giant step backwards in achieving that goal. It would add 
$630 billion in red ink over the next decade.
  Let's make this clear--we need deficit reduction now--first. If, 
after we have cut spending and reduced the deficit to the point where 
it no longer acts as a drag on the economy, then we can talk about 
further spending cuts to provide tax relief. But the spending cuts have 
to be specific, not just promises. That's the reason I will vote no on 
this legislation.


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