[Congressional Record Volume 142, Number 88 (Friday, June 14, 1996)]
[Senate]
[Pages S6261-S6263]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        THE WASHINGTON TAX TRAP

  Mr. KYL. Mr. President, a few weeks ago, I received a letter from 
Jerry Harbin of Phoenix, AZ, one of my constituents. Mr. Harbin works 
two jobs, his wife works another job, and they earn a modest income 
between them. The Harbins, who are in their mid-fifties contacted me 
because they are worried, worried that because so much of their 
earnings are eaten up by taxes, they have been unable to save for 
retirement. They are two, among many people, who I hear from every day 
telling me how difficult their lives are right now and how fearful they 
are about what the future has in store.
  Why is it, Mr. President, that so many families, like the Harbins, 
are struggling just to keep their heads above water? Why is it that 
Americans seem to be working harder and working longer, and yet they 
have less to show for it? Why is it that more people have to take two 
jobs just to make ends meet?
  The answer, I think, can be summarized in three words: The tax trap. 
The tax trap. It is really very simple to explain. The harder you work, 
the more taxes Washington makes you pay; the more taxes you have to 
pay, the longer and harder you have to work. Only Washington ends up 
with more. As Jerry Harbin put it, people are working themselves into 
early graves just to pay for Government programs that are not working.
  Think about what the tax trap has done to society, to families, to 
working parents. As another one of my constituents, Mike Barry, of 
Scottsdale put it, and I quote from a letter:

       We have the greatest nation in the world and probably the 
     highest standard of living, and yet because we don't have the 
     willpower and discipline to make the tough decisions to get 
     our ``checkbook'' in order, we are risking our future and the 
     future of our children.

  Mr. President, Americans were once the most optimistic people on 
Earth, but that seems to be changing. In the America my parents knew, 
if you worked hard and you played by the rules, you had enough money 
left over from your paycheck to put something away for the future and 
still have enough for the little extras in life, and that is what the 
American dream was all about. It was about making a decent life for 
ourselves and securing a prospect for a better life for our children.

  Why is it, then, for the first time in our Nation's history that an 
entire generation seems to be losing confidence in the future? It was 
not that long ago that the largest investment most people ever thought 
about making was buying a home. If they worked hard and saved, they 
could buy a house, live the American dream.
  But today that dream is out of reach for many families. Many people 
are now sending more to the tax collector than they spend on food, 
clothing, and shelter combined. Let me say that again. They are paying 
more in taxes than they spend on food, shelter, and clothing. There is 
nothing left over to save for a new home. Some people, like Margaret 
Bonghi of Phoenix, are really caught in the middle. They cannot afford 
to buy and they do not qualify for assistance of any kind, and yet they 
cannot afford to rent either. After taxes, there is nothing left over 
for her to save.
  Here are the figures, Mr. President. In 1948, Federal taxes took 
about 3 percent of the average family's income. But today, almost half 
of what people earn goes to the Government in one form or another--
half. The tax trap keeps families from buying their own homes. It hurts 
young people, like 18-year-old Jarrod Wilson in Phoenix, who is very 
much upset about how much of his earnings are taken by the Government 
and wasted. He is scared about how much of his paycheck he will be able 
to keep in years to come.
  High taxes are a worry for working women who are trying to balance a 
career with family obligations. Children are put in day care because 
both parents have to work just to have enough left over after taxes to 
pay their bills.
  For decades, now, Washington has assured people that it can solve 
every problem with new spending or some kind of new program. It raised 
taxes, promised more, but few problems were really solved. So it raised 
taxes again, and the Government grew even bigger. We now have a 
bureaucracy that includes 160 different job training programs; 240 
different education programs; 300 economic development programs; and 
500 urban aid programs. Have all of these programs really made 
Americans better off?
  A recent audit of the Labor Department found that about $305,000 was 
spent for each participant placed in a training-related employment 
program in Puerto Rico for about 90 days. The beneficiaries of this 
program were hired to perform the menial tasks that they had wanted to 
escape from by participating in the training program in the first 
place. So the program not only failed to train people for better jobs, 
it wasted millions in tax dollars that hard-working families could have 
spent on real needs.
  Can Washington really afford all of these programs? It can if it 
continues to raise people's taxes. President Clinton was not in office 
100 days before he proposed the largest tax increase in the Nation's 
history, taking more of people's hard-earned incomes, again, to expand 
the size and the scope of the Federal Government.
  By comparison, Republicans spent the first 100 days last year trying 
to cut spending and cut taxes only to have President Clinton veto our 
balanced budget and tax relief bill in the end.
  Did you ever wonder why President Clinton and the Democrats in 
Congress have been asking people to sacrifice a little more so 
Washington could spend a little more? Why? Should we not demand that 
Government be more careful with people's money?
  It should not surprise anyone that more and more families find it 
difficult to make ends meet, that more and more people are forced to 
live from paycheck to paycheck, and that too many Americans want to put 
something away for the future but cannot, that almost everyone feels 
the squeeze from rising prices and higher taxes. Keep in mind that the 
cost of the Clinton administration's policies to the typical family is 
$2,600 a year in higher taxes and lower earnings.
  What then is so wrong about asking Government to live within its 
means so that people can earn more, keep more and do more for 
themselves and their families? What is wrong with fixing problems that 
are broken, dismantling programs that are unnecessary and giving the 
benefit back to working Americans in the form of lower taxes?
  I know there are some in Washington who say we cannot afford a tax 
cut if

[[Page S6262]]

we are serious about balancing the budget. They seem to view the 
economy as a zero-sum game. It is a line of reasoning that says no one 
can ever do better unless someone else does worse. If you cut one 
person's taxes, then they say you have to raise someone else's taxes. 
It is like trying to divide a pie into ever more slices, satisfying no 
one in the process.
  Some of us think that we should try to make every American better 
off; that we want to grow the economy, in effect, to make a bigger pie 
so that all Americans can do better.
  That is what happened during the years that Ronald Reagan was 
President, when income tax rates were cut 25 percent across the board 
for everybody. Real median family income grew every year but one, 
between 1982 and 1989, rising $4,564, or 12.6 percent. That is real 
median family income. It rose over $4,500.
  Inflation virtually disappeared by 1986 which, of course, protected 
all Americans, but particularly senior citizens on fixed incomes. 
Because the economy was so much healthier, tax revenues to the Treasury 
increased between $60 billion and $80 billion a year. So actually lower 
tax rates resulted in higher tax revenues to the Government.
  How can that be? It is the same thing that happens when the manager 
of a local department store schedules a sale and he cuts the price of 
the products that he sells. He does not do it to lose money, he does it 
to sell more goods. The store takes a smaller profit on each item, but 
the increased volume of sales more than makes up for the lower prices 
when the store counts its receipts at the end of the day.
  The same thing happens in taxes. President Reagan cut taxes 25 
percent across the board, something that helped to spawn the longest 
peacetime expansion of our economy in the history of the country. By 
the end of President Reagan's second term in office, real gross 
national product had risen by more than 4 percent. Nearly 19 million 
new jobs were created, over 85 percent of which were full-time jobs in 
occupations with average annual salaries of over $20,000 a year.
  Interest rates fell, and as a result of the healthy and growing 
economy, revenues to the Treasury increased, as I said, between $60 and 
$80 billion every year.
  That kind of growth was not unique to the Reagan years. It was 
typical of the economy's performance during other tax-cutting periods. 
For example, President John Kennedy proposed even bigger proportionate 
tax rate reductions than President Reagan's. Income tax rates were 
reduced in the 1960's from a range of 20 to 91 percent to a range of 14 
to 70 percent. Revenues to the Treasury rose 66 percent by 1969.
  Under Gov. Pete duPont's administration in Delaware in 1979, the top 
State income tax rate was cut from 19.8 percent to 7.1 percent. By 
1993, State revenues had doubled, employment increased 36 percent, and 
welfare caseloads fell by 40 percent.
  The high-tax policies of the 1990's have had just the opposite 
effect. Real median family income has declined $2,108, or 5.2 percent. 
Since the beginning of 1995, the economy has only grown at an annual 
rate of about 1.6 percent. More than a third of the new jobs that have 
been created have gone not to people just entering the workplace or 
just getting off welfare, but to people who had to take an extra job 
just to make ends meet. Interest rates, which had declined during most 
of 1995, are now rising again after President Clinton vetoed the 
balanced budget and the tax relief package that the Congress had sent 
him.
  In fact, until Congress forced President Clinton to get serious about 
limiting Federal spending last year, deficits were forecast at $200 
billion a year in the foreseeable future, despite record-high taxes. 
What that proves is that a sluggish economy and overspending, not a 
lack of revenue, are the real causes of the Nation's deficit problem.
  Mr. President, some economists have proposed yet another round of 
income tax rate cuts to stimulate economic growth and to put more money 
back into people's pockets. Others have suggested that more limited 
relief, like a $500-per-child tax credit or a tax credit for 
educational expenses, would do more good. As Grover Norquist, who is 
head of Americans for Tax Reform, recently said, paraphrasing, I think, 
Mae West, ``All tax cuts are good tax cuts, and even bad tax cuts are 
good tax cuts.'' In other words, just about anything we do to leave 
more money in people's pockets is a good thing.
  But the benefit of an across-the-board tax cut, I think, is that it 
reaches out to all Americans. It treats everyone alike, and everyone 
therefore would benefit. It says to the American people that we trust 
them to spend their money in ways that is best for themselves and their 
families. It would allow people to keep more of every dollar earned 
from their extra effort in the workplace no matter what kind of work 
they do, or from their extra investment, no matter what kind of 
investment they may make.
  The broad nature of such a tax cut applying to all forms of work and 
investment ensures that effort and capital are steered to the most 
productive activities in the economy, instead of other activities that 
the Government deems the most important, through targeted tax credits 
or deductions.
  It also seems to me to provide the fairest kind of tax relief. 
Everyone would be treated the same. Tax rates would be cut 15 percent 
across the board, boosting take-home pay and relieving a major source 
of anxiety among people in middle and low incomes.
  Notably, a 15-percent tax rate would take revenues as a share of 
gross domestic product back to where they were before President Clinton 
took office--to 19.2 percent from the current 20.4 percent--effectively 
repealing the Clinton tax increase.
  Mr. President, I want to conclude by suggesting that an across-the-
board tax cut is probably the best way to stimulate the economy, the 
best way to boost take-home pay, the best way to create new jobs and, 
in turn, the best way to provide more revenue to the Treasury in order 
to balance the budget.
  I hope that Bob Dole and President Clinton will bring this debate to 
the American people during this upcoming campaign so that perhaps a 
consensus can develop among the American people during the next several 
months, so that when the new President takes office, the new Congress 
comes into office next January, we will feel some mandate to put the 
will of the people into action, to provide for an across-the-board tax 
cut that can benefit us all, allow us all to keep more of our income to 
spend as we think best for our family, but also, as a result of the 
increase in economic growth, to provide more revenues to the Treasury, 
to provide for the needs of the people through Government and provide 
for a balanced budget.
  That is the benefit of an across-the-board marginal income tax cut. I 
hope that both candidates and those in public policy positions will 
seriously consider this proposal as perhaps the best single thing that 
we can do for the people that we represent, the people of America.
  Mr. COVERDELL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Georgia.
  Mr. COVERDELL. Mr. President, I commend the Senator from Arizona for 
his very fine remarks. I think he is right on target. You know, it is 
just beyond comprehension that an American family today would work from 
January 1 to July 3 for the Government.
  I said to somebody the other day, and I say to the Senator from 
Arizona, that July Fourth has taken on a new meaning. The irony of it 
is that it is the first day that a working citizen, a laborer, can keep 
their paycheck. All the rest of them they gave away to the policy wonks 
and the government bureaucrats and policymakers, from their own local 
communities to the Federal Government, the Federal Government being the 
big bully on the block.
  Imagine, Thomas Jefferson would be stunned that this situation is 
confronting labor, that over half their wages are consumed by the 
government. That means, in a sense, half their freedom has been----
  Mr. KYL. Will the Senator yield?
  Mr. COVERDELL. Yes.
  Mr. KYL. The Senator said it just exactly right. Independence Day 
takes on a new meaning. We are finally independent. We can keep the 
money we raise and spend it on our own families instead of funding 
government programs.

[[Page S6263]]

  Mr. COVERDELL. The Senator from Arizona is absolutely correct. The 
American people know this is out of balance. They know it. You can ask 
any segment, and they will say that they ought to work from January 1 
to about March 1, about 25 percent. So it is double what the American 
people are paying, which is, of course, why the administration promised 
to lower it.
  But the incredulous thing is, they did the exact reverse and gave us 
the highest tax increase in American history and therefore have created 
this enormous weight, this enormous economic burden on every working 
family, no matter their age or circumstance across our land.

  I do commend the Senator from Arizona and notice we have been joined 
by the distinguished Senator from Tennessee. I yield up to 10 minutes 
to the Senator from Tennessee.
  Mr. FRIST. Thank you, Mr. President.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. FRIST. Mr. President, I come to the floor today to join my 
distinguished colleague from Georgia, and having just heard the 
remarks, which are right on target, from my colleague from Arizona, 
addressing this issue of taxation, where the country is going and what 
we can do about it.
  Mr. President, America was once the most optimistic nation on the 
face of this planet, but that is not the case anymore. Today, thanks in 
large measure, I believe, to the incredible tax burden that is placed 
on the backs of the American people, Americans have lost not only faith 
in Government, but they have lost all hope in the future and that the 
future will be better in some way than the past.
  You know, when my parents were growing up, America was a place where, 
if you worked hard and you played by the rules, you could earn enough 
to support your family and still have a little something left over to 
put away for the future, and maybe even have a little bit to buy those 
little extra special things in life. That was what the American dream 
was all about. But for most American families today, the American dream 
is becoming nothing but a nightmare.
  When I was a child growing up, the largest single expense that family 
had was their home. It is no longer the case. That largest single 
expense is the tax bill. Today, Americans send more each year to the 
tax collector than they spend on food and on clothing and on shelter.
  In 1950, it took just a fraction of our income to go towards our 
taxes. Today, almost half of everything they earn, the American family 
earns, goes to the Government in some form or the other--almost half of 
everything they earn. No matter what they do, they cannot get ahead. 
The harder they work, the more taxes Washington takes out of their 
pockets. The more taxes they have to pay, the harder they work. That is 
what we mean when we say we are caught in a tax trap. Washington ends 
up with more, but American families end up with less.
  Mr. President, the American dream was also about generational 
improvement, about believing that our children would have more 
opportunities, more choices and a better life than their parents. And, 
indeed, in America, they should have. Why is it, then, that for the 
first time in our great country's history, an entire generation of 
Americans have lost hope and lost confidence in the future? Why? How is 
it that we have lost that vision, that belief in unending dreams and in 
limitless possibility? The answer is simple: Taxes.
  Mr. President, for decades Washington has told America that 
everything is OK. But, at the same time, Washington has spent our 
children's inheritance and undermined their future. For decades, 
Government not only spent more than it took in, but spent that money 
unwisely. Just to pay for what? A growing Washington bureaucracy, a 
bureaucracy that has created and encouraged overlapping programs--over 
160 different job training programs, over 240 education programs, over 
300 economic development programs, over 500 urban aid programs.
  How does Washington pay for all of these overlapping programs? By 
raising taxes through the roof. It should not surprise anyone that more 
and more American families find it harder and harder to make ends meet, 
that more and more American families are forced to live from one 
paycheck to the next paycheck, that too many Americans want to put 
something away for the future, but they simply cannot, that almost 
every single American feels squeezed by rising prices, higher taxes, 
and stagnant wages.
  Yet, Mr. President, while in the first 100 days of the new Republican 
Congress we spent our time trying to cut taxes, to give tax relief to 
that American family, Mr. Clinton spent his first 100 days in office 
trying to take more of America's hard-earned dollars. Against unanimous 
Republican opposition, President Clinton imposed the largest tax 
increase in the history of this country--$265 billion, to be exact. 
Yet, he still expects Americans to save more and to give more, in spite 
of this tax increase. No wonder most Americans have lost hope. It is 
the Clinton crunch. It is stagnant wages and higher and higher taxes. 
That is what the American taxpayer feels.
  I repeat, the Clinton crunch is hurting America every day. The 
Clinton crunch is hurting the American citizen every day. The price of 
Mr. Clinton's tax trap is high. It not only costs the typical American 
family $2,600 in higher taxes and lower earnings, but we also pay the 
price of less savings, less investment and a less certain future. That 
is why, as we travel around our various States from community to 
community, we hear that the American people are afraid. They are afraid 
that they are not going to be able to afford that interest on their 
children's college loan. They are afraid they are not going to be able 
to afford to buy that first home. Why? Because interest rates are too 
high. They are afraid they are not going to be able to pay off their 
own accumulating debt. They are afraid that they will have nothing 
saved by the time they retire.
  Well, it is time to end the tax trap, and we can end the tax trap. It 
is time we gave the American people some well-deserved tax relief. It 
is time we return their power, that we return their influence, that we 
return their own earnings over to them and their futures. And it is 
time we, once again, encouraged economic growth, encouraged 
opportunity, encouraged wages, encouraged savings, and returned that 
hope and that optimism that is so characteristic of the American 
people.
  Mr. President, Government and bureaucracies did not make America 
great. People made America great, people who worked hard, who saved for 
the future, who saved and invested for their children, who made the 
world a better place for that next generation, for their children, for 
their grandchildren. That is what made America great.
  Our goal, the Republican goal, is to end the tax trap. Our goal is to 
help Americans not only earn more money but keep more of what they 
earn, so they can do more for themselves, do more for their families, 
do more for their communities, so they can save more for their children 
and their future, and so they can give more to that collection box on 
Sunday.
  Yes, that is the legacy our parents and grandparents left to us. It 
is the legacy that all Americans inherited from our Founding Fathers. 
Let us not be the first generation who fails to pass that legacy on.
  Mr. President, I thank the Chair and yield the floor.
  Mr. COVERDELL. Mr. President, I appreciate the remarks of the Senator 
from Tennessee. He is on target, as usual.

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