[Congressional Record Volume 141, Number 183 (Friday, November 17, 1995)]
[Senate]
[Page S17315]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     CUT TAXES: BALANCE THE BUDGET

  Mr. PRESSLER. Mr. President, the American people want and deserve an 
end to shameless, wasteful spending programs. They want a reduction in 
taxes for working middle-class families and a balanced budget so we 
finally live within our means--as people in my home state of South 
Dakota do every day. I feel passionately that we must give the dream of 
America back to our children. That is why I support the Balanced Budget 
Act of 1995.
  The working men and women in America are fed up with politics as 
usual in Washington. They have spoken loudly that they want us to cut 
wasteful spending, reduce taxes for working middle-class families, and 
finally balance the budget. The Republicans in Congress have heard this 
call for change. We, too, are tired of business as usual. That is why 
we have proposed tax relief for working, middle-class Americans so they 
can keep more of what they earn, rather than leave it in the hands of 
Washington bureaucrats.
  Recently, an editorial in the Rapid City Journal praised the current 
Republican tax plan. This editorial is right on target. Mr. President, 
I ask unanimous consent to place this editorial in the Record at the 
conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. PRESSLER. Why do middle-class, working Americans want us to cut 
spending and provide tax relief? The reason is obvious. The Federal 
Government wastes billions of their tax dollars every year on more and 
more programs that do less and less to meet the needs of average 
Americans. Working Americans are paying more and more for less and 
less. Now we have the opportunity to cut taxes and in the process make 
government more efficient and effective, smaller and smarter. It is 
time to give the American people what they want--a balanced budget, an 
end to wasteful spending, and a reduction of taxes for wage-earning, 
middle-class working families.

                               Exhibit 1

                       Wide Appeal in Tax Breaks


The tax breaks included in congressional budget proposals will benefit 
                      middle-income Americans most

       In the great budget debate of 1995, congressional Democrats 
     and President Clinton have continually argued that 
     Republicans are targeting the poor and elderly with spending 
     cuts to pay for tax breaks for the wealthy.
       Hmmm. Tax breaks for the wealthy?
       There are flaws in this argument.
       For one thing, the $500-per-child tax credit under the 
     expected budget compromise would go to families with incomes 
     under about $100,000. That means the wealthiest Americans--
     those with taxable incomes over $100,000--wouldn't qualify 
     for it. And it means most families that pay taxes would pay 
     lower taxes.
       A second tax break included in both the House and Senate 
     budget bills would reduce the top capital gains tax rate from 
     28 percent to 19.8 percent. Although this tax break would 
     result in wealthy taxpayers paying a lower rate, it could 
     very well mean their total tax bills would be higher. The 
     lower tax rate likely would motivate sales of investment 
     assets that otherwise wouldn't be sold and thus wouldn't 
     generate any tax revenue.
       Plus, the increased economic activity that a lower capital 
     gains tax rate would generate would result in increased 
     capital for job-creating small businesses and a healthier 
     economy that produces more tax revenue.
       Besides, a cut in the capital gains tax rate doesn't apply 
     only to wealthy individuals. It applies to everyone who 
     increases their taxable income by selling a home or some 
     other investment. In today's economy, that takes in a lot of 
     people. One study showed that in 1990, when the top capital 
     gains tax rate was lowered from 33 percent to its current 28 
     percent, 70 percent of the tax returns reporting capital 
     gains were from people with taxable incomes below $75,000.
       So, while it may be correct that House and Senate budget 
     proposals include some benefit for the wealthy, it's the 
     middle income taxpayers that benefit most.
       On the other side of the budget's impact on taxpayers are 
     proposed reductions in the Earned Income Tax Credit, a tax 
     break for workers with low incomes. The House bill proposes 
     decreasing planned EITC spending by $23 billion over the next 
     seven years, while the Senate bill proposes $43 billion.
       Some of this reduction is justified. EITC eligibility 
     requirements need to be tightened so people with low taxable 
     incomes but high nontaxable incomes, from sources such as 
     tax-free annuities, don't qualify. And in a program with a 
     high rate of fraud--the Internal Revenue Service estimates up 
     to 40 percent of the tax returns claiming the EITC contain 
     errors or fraudulent claims--the plan to double penalties for 
     fraudulent EITC claims is justified.
       But because the EITC program is, in effect, a reward for 
     people who work rather than rely on welfare assistance, the 
     budget proposals should be scaled back so as not to affect 
     the people the EITC is intended to help.
       Of course, these changes in tax credits and tax rates would 
     increase the complexity of a federal tax code that is already 
     too complicated. We should really be going in the opposite 
     direction, toward a simpler tax code.
       And on the other side of the budget proposals, the 
     decreases in proposed spending, there is room to argue 
     whether the decreases are targeted fairly.
       But the tax breaks included in Republican budget proposals 
     aren't as hideous as they've been made out to be.
       A lot of hard-working, middle-income Americans would 
     benefit.

                          ____________________