[Congressional Record Volume 143, Number 27 (Wednesday, March 5, 1997)]
[Senate]
[Pages S1989-S1990]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FEINGOLD:
  S. 403. A bill to expand the definition of limited tax benefit for 
purposes of the Line Item Veto Act; to the Committee on the Budget and 
the Committee on Governmental Affairs, jointly, pursuant to the order 
of August 4, 1977, as modified by the order of April 11, 1986, with 
instructions that if one committee reports, the other committee have 30 
days to report or be discharged.


                  THE EXPANSION OF LINE-ITEM VETO ACT

  Mr. FEINGOLD. Mr. President, today I am introducing legislation to 
expand the Line-Item Veto Act to cover one of the largest and fastest 
growing areas of the Federal budget, tax expenditures. I am especially 
pleased to be joined in offering this legislation by my good friend, 
Congressman Tom Barrett of Milwaukee who is spearheading this 
legislation in the other body. Both bills expand the Line-Item Veto Act 
which took effect this past January and will remain in force for the 
next 8 years.
  Mr. President, both Congressman Barrett and I supported the new Line-
Item Veto Act that was signed into law last session. Though it isn't 
the whole answer to our deficit problem, I very much hope it will be 
part of the answer.
  However, the new Line-Item Veto Act failed to address one of the 
largest and fastest growing areas of Federal spending--the spending 
done through the Tax Code, often called tax expenditures.
  According to the Senate Budget Committee's most recent committee 
print on tax expenditures, prepared by the Congressional Research 
Service, we will spend nearly half a trillion dollars on tax 
expenditures during the current fiscal year. Citizens for Tax Justice 
estimates that over the next 7 years, we will spend $3.7 trillion on 
tax expenditures, and sometime in the next 2 to 3 years, the total 
amount spent on tax expenditures will actually surpass the total 
discretionary budget of the United States.
  Mr. President, despite making up a huge and growing portion of the 
Federal budget, tax expenditures are beyond the reach of the new 
Presidential line-item veto authority. As currently structured, that 
authority only extends to so-called limited tax benefits, defined in 
part to be a tax expenditure that benefits 100 or fewer taxpayers. As 
long as the tax attorneys can find 101st taxpayers who benefit from the 
proposed tax expenditure, it is beyond the reach of the new 
Presidential authority.
  Mr. President, it may not even be necessary for the tax attorneys to 
find that 101st taxpayer. If a tax expenditure gives equal treatment to 
all persons in the same industry or engaged in the same type of 
activity, it is exempt from the new Presidential authority no matter 
how narrow the special interest spending.
  Further, if all persons owning the same type of property, or issuing 
the same type of investment, receive the same treatment from a tax 
expenditure, that tax expenditure is similarly outside the scope of the 
President's new authority.
  Mr. President, there are still more exceptions that make it even 
harder for a President to trim unnecessary spending done through the 
tax code. For example, if any difference in the treatment of persons by 
a new tax expenditure is based solely on the size or form of the 
business or association involved, or, in the case of individuals, 
general demographic conditions, then the new spending cannot be touched 
by the President except as part of a veto of the entire piece of 
legislation which contains the new spending.

  By contrast, we find none of these elaborate restrictions on the new 
line item veto authority for spending done through the appropriations 
process or through entitlements. The new Presidential authority is 
handcuffed only for spending done through the Tax Code.
  Mr. President, this raises several problems.
  First, and foremost, it shields an enormous portion of the Federal 
budget from this new tool to cut wasteful and unnecessary spending. If 
the authority established by the Line-Item Veto Act is to have meaning, 
it cannot be preempted from being used to scrutinize this much 
spending.
  A second problem raised by the inability of the new Presidential 
authority to address new tax expenditures is that it creates an 
enormous loophole through which questionable spending can escape. We 
have already seen discussions of how special interest spending can be 
crafted to avoid the new Presidential authority. While the current 
Line-Item Veto Act power given the President formally covers 
discretionary spending and new entitlement authority, a special 
interest intent on enacting its pork barrel spending could readily do 
so by avoiding the discretionary or entitlement formats, and instead 
transform their pork into a tax expenditure. As we know from the 
elaborate limits placed on the President's ability to apply the new 
authority to spending through the Tax Code, most special interest pork 
that takes the form of a tax break is beyond the reach of the Line-Item 
Veto Act.
  Mr. President, no matter how powerful this new authority is with 
regard to discretionary spending and entitlement authority, it is 
virtually useless against tax expenditures, and thus invites special 
interests to use this avenue to deliver pork.
  A further problem with the lack of adequate Presidential review in 
this area is the very real potential for inequities in the 
implementation of the new Line-Item Veto Act authority. These 
inequities arise in part from the progressive structure of marginal tax 
rates--as income rises, higher tax rates are applied. In turn, this 
means that many tax expenditures are worth more to those in the higher 
income tax brackets than they are to families with lower incomes.
  In some instances, tax expenditures provide no benefit at all to 
individuals with lower incomes.
  This is not the case with entitlement and discretionary spending 
programs--both areas covered by the Line-Item Veto Act. The benefits of 
those programs often are targeted to those with lower income.
  The net effect is that the scope of the current Line-Item Veto Act 
covers programs that often benefit those with low and moderate income, 
while it is powerless with regard to programs that often benefit 
individuals and corporations with higher incomes.
  Mr. President, tax expenditures have another feature that makes it 
especially important that we extend the new Line-Item Veto Act to cover 
them, namely their status as a kind of super entitlement. Once enacted, 
a tax expenditure continues to spend money without any additional 
authorization or appropriation, and without any regular review. In 
fact, while even funding for entitlements like Medicare or Medicaid can 
be suspended in rare instances such as a Government shut-down, funding 
for a tax expenditure is never interrupted.
  Tax expenditures enjoy a status that is far above any other kind of 
government spending, and as such, it should receive special scrutiny. 
Extending the Line-Item Veto Act to cover them will provide some of 
that needed review.
  Mr. President, as I have noted, tax expenditures make up a huge 
portion of the budget. They will soon exceed the entire Federal 
discretionary budget. Citizens for Tax Justice reports that if all 
current tax expenditures were suddenly repealed, the deficit could be 
eliminated and income tax rates could be reduced across the board by 
about 25 percent.
  Clearly, tax expenditures have an enormous impact on the deficit, and 
we need to pursue two tracks with regard to them. First, we must cut 
some of the nearly half a trillion dollars in existing spending done 
through the tax code. Any balanced plan to eliminate the deficit over 
the next few years must contain cuts to spending in this area.
  And second, with so much of our budget already dedicated to this kind 
of spending, we must bring tax expenditures under the Line-Item Veto 
Act and give the President the authority to act on new spending in this 
area as he does in other areas.
  Our legislation does just that by eliminating the highly restrictive 
language with respect to tax expenditures.

[[Page S1990]]

  Mr. President, as with the recently enacted Line-Item Veto Act 
itself, this bill to extend that new authority is not the whole answer 
to our deficit problems, but it can be part of the answer, and I urge 
my colleagues to support this effort to put teeth into the new 
Presidential authority with respect to the tax expenditure portion of 
the Federal budget.
  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. 403

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

     SECTION 1. AMENDMENT TO CONGRESSIONAL BUDGET ACT.

       Section 1026(9) of the Congressional Budget and Impoundment 
     Control Act of 1974 (2 U.S.C. 691e(9)) (as added by the Line 
     Item Veto Act) is amended to read as follows:
       ``(9) Limited tax benefit.--The term `limited tax benefit' 
     means any tax provision that has the practical effect of 
     providing a benefit in the form of different treatment to a 
     particular taxpayer or a limited class of taxpayers, whether 
     or not such provision is limited by its terms to a particular 
     taxpayer or class of taxpayers.''.
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