[Congressional Record Volume 143, Number 40 (Tuesday, April 8, 1997)]
[House]
[Pages H1311-H1318]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX EQUITY FOR INDIVIDUALS AND CORPORATIONS
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from New York [Mr. Owens] is recognized
for 60 minutes as the designee of the minority leader.
Mr. OWENS. Mr. Speaker, today is April 8. We are just 1 week away
from April 15, the tax day that is dreaded by most Americans. In the
past, my colleagues on the other side have talked about taxes and the
need to lower taxes for American families. I am one Democrat on this
side of the aisle that agrees with those who want to lower taxes for
American families. I agree with any of my colleagues, whether they are
Republicans or Democrats, if they want to lower taxes for families and
for individuals. We need to lower taxes for families and individuals in
the United States. At the same time, we need to have a fair taxation
policy which balances off our revenue-gathering operation by raising
the taxes on corporations that have had their taxes lowered a great
deal.
The problem is that we are taxing families and individuals too
harshly. Families and individuals are paying too much because
corporations are paying too little. We need to maintain certain
services. We need to maintain certain functions of Government. I am all
in favor of downsizing Government, I am in favor of Government getting
smaller, but there are certain basics that must be paid for and we must
tax in order to do that. So let us not oversimplify and determine that
we can lower taxes all over the place. We need to balance off our
revenue-gathering operation by guaranteeing that corporations pay their
fair share.
For example, in 1943, and I have said this before, corporations were
paying almost 40 percent of the total income tax burden in this
country, in 1943. Twenty-seven percent of the total income tax burden
in 1943 was paid by individuals and families. That is quite a
difference. Corporations, as we see, were paying the greater amount. In
1983, however, the amount of taxes being paid by corporations under
Ronald Reagan's administration fell to as low as 6 percent, from 1943's
high of 40 percent to 6 percent in 1983. That is what happened to
corporations in terms of their share of the income tax. At the same
time that corporations fell, went down from this 40 to 6 percent,
individual and family taxes rose from 27 to 48 percent. There was a
swindle there somewhere that the American people really were not aware
of. Corporations went as low as 6 percent. Today corporations are still
paying only 11 percent of the total tax burden.
Individuals went as high as 48 percent in 1983. Individuals and
family taxes are still up there at 45 percent. We have a gross
inequity. The share of taxes paid by corporations is only 11 percent
while the share paid by individuals and families is over four times
that amount, 45 percent.
U.S. tax policy must be reset. Corporations must pay their fair
share. And the special interest tax loopholes must be closed. In
America, the richest country in the world, it is unspeakable that our
families are forced to bear the brunt of the burden of taxation.
What we need to take a close look at is how corporations got from 40
percent of the income tax burden down to 6 percent, and now are at 8
percent. What happened? Public policy made by Members of Congress. The
Members of Congress did that to individuals and to
[[Page H1312]]
families. They raised the taxes on individuals and families while they
were lowering the taxes on corporations.
Some people, of course, will contend that corporations should not pay
any taxes or that rich people should not pay taxes greater than poor
people or corporations or entities which generate profits for rich
people; therefore, we are only persecuting the rich. Well, I am not
going to get into all the theories of taxation, but I think that those
who have the most benefit the most from Government, those that have the
most gain the most from our military, our Army, our Navy, our Marines.
It is all there to defend what we have, and those that have the most to
defend certainly ought not be reluctant to pay a greater share of the
tax burden: Those who own the most, those who have most at stake.
If our society were to collapse, let us say we are not facing any
threat from any outside force, we do not need the Army, the Navy, and
the Air Force to protect us, the danger is not there. The danger may
come from somewhere within. If the society structure collapsed, if
there were no law and order, no rules and regulations, then who would
lose the most? The people who are the greatest beneficiaries of law and
order, of Government, of codes, of laws, they are the ones who are the
richest, they would lose the most. This is not a far-fetched example or
not a far-fetched statement. Take a look at the Soviet Union if you
want to see a failed society. In modern times you had a society totally
collapse, not as a result of any outside force. The Soviet Union was
not conquered by an outside power. The Soviet Union collapsed from
within. And the total of that society, the great majority of the people
were losers as a result of a collapse of what they had and the failure
to rebuild anything else even until today.
One of the big problems in the Soviet Union right now is that they
cannot collect taxes. The big problem right now is that the Government
makes a budget, the Government makes policies, and the Government
cannot pay the pensions of the people who deserve pensions, the old
folks who I guess they would be receiving it in the Soviet Union, it is
not the Soviet Union now, it is Russia; in Russia they will be
receiving the equivalent of Social Security. They do not make the
Social Security payments on time. In fact, they are 3 and 4 months
behind on making Social Security payments and pensions to workers and
other equivalents of Social Security payments. The amounts are very
small, so you have people literally starve as a result of not being
able to receive their money that is due them from the government
because the government is collapsed.
Despite the fact that they have a semblance of a government, one of
the big things they have not been able to do is to collect taxes. The
reason they cannot pay workers who have government jobs on time, they
cannot pay the army, even their military is paid late, they cannot pay
the people who are due their pensions, they cannot maintain their
public facilities like hospitals, because in the collapse of the
society, they have not been able to get back to the point where they
can generate enough revenue to pay for the cost of running the society.
It would be a terrible thing if in America we suddenly could not
collect taxes, if people just decided they are not going to pay their
taxes, the government cannot go and collect taxes. That would be a
terrible thing, I think we would all agree.
I suppose that most of the people listening to me think that is an
absurd notion. How could that ever happen? Americans are obedient
people who care about their government and they care about the law. We
do not care about the IRS. Nobody likes to pay taxes, nobody is going
to pretend that they enjoy paying taxes, but by and large Americans pay
their taxes, especially middle-class Americans, especially low-income
Americans. I would suggest to anybody who wants to see who the IRS
works with most, go to any tax office in the area where people have
been summoned down, summoned down to negotiate or discuss or to be told
about the need for them to pay some more taxes, something was wrong or
something is being challenged. I have been to those offices a few times
and I am always surprised that they are filled up with people who are
obviously poor. The poorest people are always in the Internal Revenue
offices waiting to have something ajusted, waiting to have the summons
explained to them, and they usually end up having to find some way to
pay the small amount of taxes that they owe, relatively speaking,
sometimes quite small in terms of our global economy, in terms of the
income made by middle-class people, but it is a large amount for a poor
person to have to pay; but they are there, and they comply with the
law. The middle class complies with the law.
I do not know which President said it, whether it was Nixon or
Reagan, but there was a memo issued by one of the Presidents at the
time when the Internal Revenue was having some problems with the staff
and they wanted to show that they did not need more staff, I think,
they said that Internal Revenue should not waste so much time with
corporations and the very rich.
{time} 1830
They required a lot of time. You have to negotiate with them. You
have to chase them down. You have to figure out very complex sets of
books and records.
They said, ``Go after the middle class. You ought to improve tax
collection, going to bring the money in. Go after the middle class.
They are obedient, they are compliant, they are patriotic.''
So the middle class pays its taxes, and I am sure that the same thing
applies to poor people.
You know, my father very seldom had to pay taxes. He always filed the
form though. My father never worked on the job where he earned more
than minimum wage, and he had eight children. So eight children and the
deductions for that plus minimum wage, and often he was laid off during
the year. It was a very difficult life, I assure you. Minimum wage at
that time was quite low and still is relatively speaking. So we never
had to pay taxes. We had to file a form. He was always terrified to
make certain that the form got filed on time.
The law impresses poor people, uneducated people, a great deal. They
do not want to disobey the law no matter what the stereotypes might
lead you to believe. The people who have most respect for the law, and
there is fear involved in respect too, you know, are the poorest
people. So they never disobey. If you go to one of those tax offices
where people are sitting waiting to deal with their tax problems, you
will see not the wretched of the Earth, but the anxious of the Earth.
Some of the most anxious people in our society will be there and they
are not middle-class professionals and they are not rich people, but
they are poor people.
So it is a serious matter. April 15, a serious matter in 80 percent
of the American households, taken very seriously.
I am sure that any American citizen would be appalled at the notion
that there are certain people who blatantly refuse to pay their taxes,
certain powerful people in powerful places in powerful institutions who
just refuse to pay their taxes. They disobey the Internal Revenue Code.
I think most Americans would be appalled if I said that they do it and
nobody challenges them. IRS, that pursues some of my poor constituents
for a few hundred dollars, has not bothered to pursue certain
corporations that blatantly refuse to obey the Tax Code.
What am I talking about? Well, I was here a few weeks ago to
introduce a letter that I had written to the Internal Revenue
Commissioner. I wrote this letter and I circulated it and I talked to
my colleagues about it, and I think we have about 30 Members of
Congress who have signed this letter to the Internal Revenue
Commissioner, the Honorable Margaret Milner Richardson.
Now I heard Ms. Richardson is leaving after the tax season is over.
She is resigning, but she is still there. So we addressed the letter to
Commissioner Richardson.
Now that was February 12, 1997. You know March 12 has come and gone.
That is a month. Now April 12 is approaching. That will be 2 months,
and the Commissioner of Internal Revenue Service has not bothered to
answer 30 Members of Congress. We sent her a letter which reads as
follows, and I will just tell you what it is about. It is about
sections 531 to 537 of the Internal Revenue Code. We want to know from
[[Page H1313]]
the Commissioner of Internal Revenue, who will not let most Americans
get away with more than a single dime out there--they will chase down
people who owe taxes, and that is the way it should be. I mean we got a
law, obey the law. It generates the revenue that runs the country.
Nobody wants to be in a position where we contribute to the collapse of
our country by disobeying the laws and having widespread disobedience
that leads to the failure to collect the revenue we need to run the
country.
So why does Commissioner Richardson allow certain corporations to
disobey the law? Section 531 to 537, Internal Revenue Code, says simply
that corporations in America are not allowed to buy back their own
stock except for certain stipulated purposes. If they do not use it for
reinvestment, to give stock options and certain things, they just buy
back their stock and store it away, hoard it. It is illegal. The
corporations are supposed to distribute the dividends of their profits
and not use their profits to buy their own stock.
Now, they say that this originated because there were certain closely
held corporations, family corporations, and they were avoiding the
payment of taxes by buying back their own stock. That was where the
idea originated, and for that reason the notion has been generated that
this only applies to family corporations, closely held corporations,
but it does not.
Congress made that clear in 1984. In 1984 Congress wrote in a
statement in the Internal Revenue Code which says that this provision
applies to all corporations. This provision applies to all
corporations. Section 531 and 537 of the Internal Revenue Code applies
to all corporations. It is very interesting that Congress said you
cannot do this, it is against the law. But they did not say anybody
would be put in jail. After all, you are dealing with America's
powerful corporations, I guess, and they are not like the little guy
out there who can go to jail for not paying his taxes. Corporations
will not be put in jail; there is no penalty written into law. The law
says they will be penalized though; the penalty will be a stiff one:
39.6 percent of the amount that you illegally buy back you must pay to
the Government. That is a pretty stiff penalty; 39.6 percent is the
penalty for buying back your own stock illegally.
Have they invoked that penalty? It could be that they have and we
know nothing about it because the negotiations and the workings of the
Internal Revenue Service are secret. They are confidential. So
there may be corporations that have violated this law and been
penalized and we do not know about it.
But we find a pattern, a pattern in corporate America, which says to
us that they are not being penalized because many, many large
corporations are buying back their own stock illegally instead of
distributing them as dividends to the shareholders. They are buying
back their own stock. The pattern is such that we know they are not
being penalized. Why would they ask for a 39.6-percent penalty?
So we asked the Commissioner of Internal Revenue to tell us what is
happening with section 531, 537.
Dear Commissioner Richardson: My colleagues in Congress who have
joined me in signing this letter are very much concerned about a major
loss of Federal tax revenues resulting from the failure of the Internal
Revenue Service to apply against giant corporations the unreasonable
accumulation of surplus provisions of sections 531 to 537 of the
Internal Revenue Code. We believe that the IRS could and should
immediately assess section 531 penalties on the more than $275 billion
that America's largest corporations have spent to buy their own stock
in 1994, 1995, and 1996. These penalties at 39.6 percent would total
over $100 billion. Total buybacks by corporations are reported to have
risen from $20 to $35 billion per year in 1990 to 1993 to $70 billion a
year in 1994, just under $100 billion in 1995, and probably over $110
billion in 1996.
Stock buybacks by America's largest public corporations are all the
rage these days according to the financial media. These enormous
buybacks demonstrate that America's largest corporations are
accumulating profits and earned surplus far beyond the reasonable needs
of their businesses and in virtually every case they are paying
dividends that are a small fraction of their earnings, often less than
20 percent.
For example, in the 2 years, 1955 to 1956, IBM earned about $9
billion or $21 plus per share. Now this amount is paid out in common
dividends of only $1.4 billion, which is $2.80 per share instead of $21
per share. All of the rest of what IBM profited and then some went to
buy its own stock back. In 1995, $5.5 billion was bought back, $4.6
billion common, and $870 million for preferred stock, and $2.3 billion
in the first half of 1996, with a 2-year total probably of $10 to $11
billion. And it is true IBM has a multibillion dollar capital spending
program, but this is much more than amply covered by its huge
additional cash-flow of $10 to $12 billion for that same 2 years from
sale of capital assets and from items that are deducted on the earnings
statement but do not involve cash outlays, principal depreciation,
amortization, and deferral of income taxes.
Now if you are getting bored then I can understand that, but we are
talking to the Commissioner of Internal Revenue, and these are
statements that are simplified about as much as you can simplify it in
order to explain what we are talking about, and we also at the same
time have to make the Commissioner of Internal Revenue understand we
are serious, we have done our home work, we have done the research.
This is part of a larger program of the Progressive Caucus and the
Congressional Black Caucus of trying to pinpoint corporate welfare.
We have a lot of talk about welfare for poor children and welfare for
poor mothers, and we have been outraged at the pennies that they might
have misspent and we have done something about that. A lot of people
feel happy about it. A lot of people out there are suffering needlessly
because we recklessly wiped out the entitlement for needy children in
the process, and I will not go into that in great detail. Let us just
talk about what corporations are getting away with, what corporate
welfare is all about, and this is just one piece in the corporate
welfare setup.
This is the most outrageous piece because this is a situation where
you do not need any new laws. Congress does not have to go back and
close some loopholes that it made. No, the law already says they have
to pay a penalty if they violate the law, but they are not doing that.
So we asked the Internal Revenue Commissioner, getting back to the
letter, and I quote the letter:
We ask you this: Is there not here and in dozens of similar cases a
clear-cut case for immediate assessment of the 39.6-percent penalty on
all amounts used for stock buybacks? Is there any need to get into an
elaborate discussion of reasonable needs of businesses as envisioned by
sections 533 and 537? To be specific, these corporations are paying
very small dividends amounting to a small fraction of their earnings.
Their capital spending and other cash requirements are amply covered by
their nonearnings cash flow. They are spending a substantial part of
their earnings, in some cases all or more than all, to buy back their
own stock. Therefore, since prima facie, the surplus they have used to
buy their own stock has been accumulated beyond the reasonable needs of
the business, the 39.6-percent penalty should be assessed. Our study of
earnings statements, cash-flow statements and balance sheets leads us
to conclude that in many cases the 39.6-percent penalty might
reasonably be applied to even larger amounts than the stock buyback
amounts, but that would trigger an extended discussion of needs of
business and other considerations.
It seems to us that our suggestion has the virtue of elegant
simplicity. You spend a billion dollars on stock buybacks, your penalty
is 39.6 percent or $396 million. It is that simple. We expect the
Commissioner could do this in a 1-page notice or a 2-page notice. It is
up to the businesses to prove that they have not violated sections 531
to 537. We suggest penalties for 1994 to 1996 because it was during
this period that public company stock buybacks exploded to 12 figure
totals. You know, in 1984 the law was amended and made clear that you
cannot do this. So we had a long period where corporations-- I am sure
they have the best legal advice in the world--when they looked at
[[Page H1314]]
the law and then decided we better not touch this--and that is true now
of many, many corporations. Many of the Fortune 500 are not buying back
their stock, and many corporations are not buying back their stock.
The question is, If it is such a lucrative, desirable venture for
some, why have they not all done it and why are they not all doing it?
My speculated answer is that their legal advisers tell them it is
against the law, you are going to be penalized, and they are watching
to see over the years as they go by whether any of their fellow
corporations, and some cases they are competitors, are going to be
penalized. There is a great, great benefit to the corporation in
accumulating vast hordes of cash.
{time} 1845
One of the things they do, that may also be illegal, because in the
process of buying back their own stock, one could argue that they are
manipulating the market. One could argue that when you buy back your
own stock, you are raising the price, keeping the price artificially
high, and therefore you are manipulating the market, but I will not get
into that. I will leave that for others.
Mr. Speaker, to get back to the letter to the Commissioner, a letter
to the Commissioner of the Internal Revenue Service, we suggest
penalties for 1994 to 1996, because it was during this period that
public company stock buy-backs exploded to 12-figure totals. In
addition, we are not clear as to whether the statute of limitations
would bar these penalties for 1993 and earlier years. Even if it does,
we suspect that many 1993 and earlier corporate returns are still open
while other issues are being discussed and negotiated. In this
connection we ask that you take note of the fact that while the
dramatic surge in stock buy-backs began in late 1994, some very large
amounts were spent many years earlier.
Several giant corporations have been buying back their stocks for 10
years or more, over the last 10 years or more. As you know, the
unreasonable accumulation of service penalties provisions have been in
the income tax law since it was adopted in 1913. It was first put into
law in 1913. Despite the fact that the statute as originally enacted,
and reenacted a couple of dozen times in successive revenue acts, made
absolutely no distinction between publicly owned and private companies,
the practice and the general understanding was otherwise.
As Mr. Justice Harlan put it in 1969, paraphrasing Bittker and
Eustice, and I quote from the decision, in practice, the provisions are
applied only to closely held corporations controlled by relatively few
shareholders. This was a decision that was rendered by a regional court
way back in 1969, which noted that in practice that is what happened.
However, this de facto moratorium, and that decision was never
challenged in the Supreme Court, by the way, but it is of no
consequence now because this de facto moratorium on applications to
public companies ended abruptly in 1985.
Congress, in the Revenue Act of 1984, amended the statute by adding
section 532(c), and I quote section 532(c), which was added in 1984 by
this body. Quote, the application of this part to a corporation shall
be determined without regard to the number of shareholders of such
corporation, end of quote.
Please understand, Commissioner, that this is a simple request from
elected representatives of the American people that your office
immediately take steps to enforce the law. We look forward to an early
response from the Internal Revenue Service. And it is signed by 30
Members of Congress.
Now, if the Internal Revenue Service Commissioner feels she can do
nothing to enforce the law, the least she can do is respond to the
Members of Congress and say, ``I cannot do anything to enforce the
law.''
We have gotten absolutely no response, 30 Members of Congress, in 2
months. We have gotten absolutely no response. We want to put the
Commissioner on notice that we will not accept that, and I want to
submit this letter again in its entirety for the Record:
Congress of the United States,
House of Representatives,
Washington, DC, February 12, 1997.
Hon. Margaret Milner Richardson,
Commissioner,
Internal Revenue Service,
Washington, DC.
Dear Commissioner Richardson: My colleagues in Congress who
have joined me in signing this letter are very much concerned
about a major loss of federal tax revenue resulting from the
failure of the Internal Revenue Service to apply against
giant corporations the unreasonable-accumulation-of-surplus
provisions of sections 531-537 of the Internal Revenue Code.
We believe that the IRS could--and should--immediately
assess section 531 penalties on the more than $275 billion
that America's largest corporations have spent to buy their
own stock in 1994, 1995, and 1996. These penalties at 39.6%
would total over 100 billion dollars. Stock buybacks by
America's great public corporations are all the rage these
days, according to the financial media. Total buybacks by
corporations are reported to have risen from $20-35 billion
per year in 1990-93 to $70 billion in 1994, just under $100
billion in 1995 and probably over $110 billion in 1996.
These enormous buybacks demonstrate clearly that America's
largest corporations are accumulating profits and earned
surplus far beyond the reasonable needs of their businesses,
and in virtually every case they are paying dividends that
are a very small fraction of their earnings, often less than
20%. For example, in the two years 1955-56, IBM earned about
$9 billion, or $21.00 plus per share. Of this amount, it paid
out common dividends of only about $1.4 billion (2.80 per
share). All of the rest--and then some--went to buy its own
stock, $5.5 billion in 1995 ($4.6 billion common and $870
million Preferred) and $2.3 billion in the first half of
1996, with the two-year total probably $10-11 billion. (True,
IBM has a multi-billion dollar capital spending program, but
this is much more than amply covered by its huge additional
cash flow of $10-12 billion for the two years, from sale of
capital assets and from items that are deducted on the
earnings statement but do not involve cash outlays,
principally depreciation, amortization and deferral of income
taxes.)
We ask you this. Is there not here, and in dozens of
similar cases, a clear cut case for immediate assessment of
the 39.6% penalty on all amounts used for stock buybacks? Is
there any need to get into an elaborate discussion of
reasonable needs of the business as envisioned by sections
533 and 537?
To be specific: (1) These corporations are paying very
small dividends, amounting to a small fraction of their
earnings. (2) Their capital spending and other cash
requirements are amply covered by their non-earnings cash
flow. (3) They are spending a substantial part of their
earnings (in some cases, all, or more than all) to buy their
own stock.
Therefore, since prima facie the surplus they have used to
buy their own stock has been accumulated beyond the
reasonable needs of the business, the 39.6% penalty should be
assessed. Our study of earnings statements, cash flow
statements, and balance sheets leads us to conclude that in
many cases the 39.6% penalty might reasonably be applied to
even larger amounts than the stock buyback amounts. But that
would trigger an extended discussion of needs of the business
and other considerations.
It seems to us that our suggestion has the virtue of
elegant simplicity: ``You spent a billion dollars on stock
buybacks. Your penalty is 39.6% or $396 million.'' We suspect
that the Commissioner could do this in a one-page notice--or
two pages at most.
We suggest penalties for 1994-96 because it was during this
period that public company stock buybacks exploded to 12-
figure totals. In addition, we are not clear as to whether
the statute of limitations would bar these penalties for 1993
and earlier years. Even if it does, we suspect that many
1993-and-earlier corporate returns are still open while other
issues are being discussed and negotiated. In this
connection, we ask you to take note of the fact that, while
the dramatic surge in stock buybacks began in late 1994, some
very large amounts were spent many years earlier.
Several giant corporations have been buying back their
stock for ten years or more.
As you know, the unreasonable-accumulation-of-surplus
penalty provisions have been in the income tax law since it
was adopted in 1913. Despite the fact that the statute as
originally enacted (and re-enacted a couple of dozen times in
successive revenue acts) made absolutely no distinction
between publicly-owned and private companies, the practice
and the general understanding was otherwise. As Mr. Justice
Harlan put it in 1969, quoting (or paraphrasing) Bittker and
Eustice, ``In practice, the provisions are applied only to
closely-held corporations, controlled by relatively few
shareholders.'' (U.S. v Donruss, 393 U.S. 297).
However, this de facto moratorium on application to public
companies ended abruptly in 1985. Congress in the Revenue Act
of 1984 amended the statute by adding section 532(c), ``The
application of this part to a corporation shall be determined
without regard to the number of shareholders of such
corporation.''
Please understand, Commissioner, that this is a simple
request from elected representatives of the American people
that your office immediately take steps to enforce the law.
[[Page H1315]]
We look forward to an early response from the Internal
Revenue Service.
Sincerely Yours,
Major R. Owens,
Member of Congress.
And the following additional Members of Congress:
George E. Brown, Bernie Sanders, Donald Payne, Peter A.
DeFazio, Maurice Hinchey, Matthew g. Martinez, Sheila
Jackson-Lee, Juanita Millender McDonald, Lynn C.
Woolsey, Eleanor Holmes Norton, Maxine Waters, Corrine
Brown, Dennis J. Kucinich, Carrie R. Meek, Cynthia
McKinney, John Lewis, John Conyers, Jr., Lane Evans,
James E. Clyburn, Melvin Watt, Ronald V. Dellums,
Bennie Thompson, Patsy T. Mink, Alcee L. Hastings, Earl
F. Hilliard, Elijah Cummings, Danny K. Davis, Chaka
Fattah, Louis Stokes, Eni Faleomavaega,
Mr. Speaker, I want to go a little further today, however, than just
what we did before. We submitted this letter; we submitted a ``Dear
Colleague'' letter before; we also submitted a statement which gives
all the legal background for our contention that section 531 to 537 is
not being enforced. All that has gone before. Now I want to go one step
further and submit for the Record a list of corporations that are in
violation of section 531 to 537:
Many Corporations Are Using Accumulated Profits to Buy Back Stock
Rather Than to Pay Dividends to Stockholders
Hundreds of American corporations are using their
accumulated profits, which apparently are not needed in their
businesses, to buy back their shares rather than to pay
dividends. It is estimated that buybacks in three years 1994,
1995 and 1996 may have totalled $300 billion or more.
Many of these corporations have issued statements
indicating that the purpose of the buybacks was and is to
have shares available for issuance under employee stock
purchase plans, executive stock options, stockholder dividend
reinvestment plans and for conversion of convertible
securities. This is an appropriate and valid reason for stock
buybacks, but many corporations have bought back two times,
or three times, or five times as many shares as they needed
for these purposes. (In one case, 16 times.)
We have not been able to find an authoritative and accurate
tabulation of stock buyback activity, which is being
conducted by hundreds of publicly-owned American
corporations. Reports in the financial media indicate that
buybacks may have totalled $300 billion or more for the three
years 1994-1996.
When the total buyback amount is reduced by subtracting
issuance of shares under option and other programs, it would
appear that net buybacks totalled $150 billion to $250
billion in the three years 1994-96.
If the Internal Revenue Service assessed the 39.6% penalty
(on accumulation of corporate profits beyond the reasonable
needs of the business, as mandated by Sections 531-537 of the
Internal Revenue Code) on this $150-250 billion of net
buybacks, it could produce $60 billion to $100 billion of
additional Federal tax revenue in 1997.
The table that follows shows buyback activity by 40 large
corporations, but note that these are not the 40 largest U.S.
corporations. At the top of the Fortune 500 as published in
April, 1996 are a number that have apparently not bought
stock back yet: Exxon (#3) AT & T (#5), Mobil (#8), Texaco
(#14), and Sears (#15) for example. Ford (#2) is expected to
start this year according to Wall Street rumor.
These figures were generally obtained from each
corporation's published annual and quarterly earnings reports
covering 1994, 1995 and 1996. Figures marked ``EST.'' were
estimated by taking the actual reported figures for 1994,
1995 and the first half or three quarters of 1996 and adding
an estimate for the rest of 1996. The figures are net
buybacks; that is, the dollar amount of total buybacks has
been reduced by the dollar amount of shares issued in the
same year under option and similar programs.
STOCK BUYBACKS BY 40 LARGE CORPORATIONS IN 3 YEARS 1994-96
------------------------------------------------------------------------
IRS penalties @
Net buybacks 39.6 percent
------------------------------------------------------------------------
General Motors \1\--initiated ................
buybacks in 1997.
IBM............................. $9.0-9.5 billion $3.6-3.8 billion
est. est.
duPont.......................... 5.408 billion..... 2.141 billion.
General Electric \2\............ 5.193 billion..... 2.056 billion.
Philip Morris................... 5.0-5.4 billion 2.0-2.16 billion
est. est.
Coca Cola \3\................... 3.8-4.0 billion 1.5-1.6 billion
est and an est.
additional $6.0
billion est in
1984-93.
Wells Fargo Bank................ 3.1-3.3 billion 1.2-1.3 billion
est. est.
BankAmerica..................... 3.0 billion est... 1.2 billion est.
Chrysler \4\.................... 2.930 billion..... 1.16 million est.
Dow Chemical.................... 2.8-3.0 billion 1.1-1.2 billion
est. est.
Citicorp........................ 2.0-2.4 billion 800-960 million
est. est.
Intel........................... 1.856 billion..... 735 million.
Merrill Lynch................... 2.0-2.4 billion 800-960 million
est. est.
Pepsico......................... 1.4-1.7 billion 560-680 million
est. est.
Anheuser Busch.................. 1.5-1.6 billion 600-640 million
est. est.
Merck........................... 1.2-1.6 billion 480-640 million
est. est.
Disney.......................... 1.0-1.5 billion 400-600 million
est. est.
Microsoft \5\................... 1,162 billion..... 460 million.
Hewlett Packard................. 1,076 billion..... 426 million.
Kellogg......................... 1.1-1.3 billion 440-520 million
est. est.
J.P. Morgan..................... 1.0-1.2 billion 400-480 million
est. est.
3M.............................. 1.0-1.1 billion 400-440 million
est. est.
Reebok.......................... 1.0-1.1 billion 400-440 million
est. est.
American Express \6\............ 1.0-1.1 billion 400-440 million
est. est.
Amoco........................... 800-950 million 320-360 million
est. est.
Bank of New York................ 800-900 million 320-360 million
est. est.
Norfolk Southern................ 800-900 million 320-360 million
est. est.
Eastman Kodak................... 800-900 million 320-360 million
est. est.
Caterpillar..................... 700-900 million 280-360 million
est. est.
McDonalds....................... 600-800 million 240-320 million
est. est.
Hershey......................... 400-500 million 160-200 million
est. est.
Keycorp......................... 400-500 million 160-200 million
est. est.
Coca Cola Enterprises........... 400-450 million 160-180 million
est. est.
Campbell Soup................... 296 million....... 117 million.
Kimberly Clark.................. 200-300 million 80-120 million
est. est.
Weyerhauser..................... 200-300 million 80-120 million
est. est.
Xerox........................... 200-300 million 80-120 million
est. est.
Wal-Mart........................ 200 million + est. 80 million + est.
General Mills................... 187 million....... 74 million.
------------------------------------------------------------------------
\1\ General Motors, which had severe financial problems in the early
1990s, has recently seen some improvement. On January 27, 1997, the GM
board authorized a buyback totalling $2.5 billion.
``Some analysts had expected a bigger buyback, but Mr. J. Michael Losh,
[executive vice president and chief financial officer] argued that GM
wanted to carry out its buyback program quickly, and that $2.5 billion
was the biggest buyback it thought it could complete in 12 months or
less.'' (Wall Street Journal, 1/29/97.)
On March 13, 1997, the Wall Street Journal reported, ``. . . Mr. Losh
told analysts that GM was halfway through at $2.5 billion stock
repurchase program. . . . The rapid pace of the stock buyback left
some speculating that GM might announce an additional buyback by the
end of the year.''
According to the New York Times of January 28, 1997, ``While GM
occasionally purchased slightly more shares in the late 1980s than it
reissued, today marks the first time that GM has announced a program
to buy back stock so as to reduce the number of outstanding shares,
said James J. Finn, a GM spokesman. Back in the 1950s and 1960s, when
GM held half the American auto market and was strongly profitable, the
company chose to share the proceeds with shareholders through special
dividends rather than repurchase shares.
\2\ GE said, in its 1996 annual report, ``Record cash flow allowed us to
return more than $6 billion to shareowners: $3.1 billion dividends and
$3.3 billion in the repurchase of GE stock.''
\3\ This company is separate from the Coca Cola Company; although Coca
Cola owns 44% of its stock. This company is a major Coke bottler
accounting for just over 50% of all Coke product sales in the U.S.
\4\ Chrysler said, in its 1995 annual report, ``We're even prouder of
what we've been doing to increase the long-term value of your
investment in Chrysler. After all, as one of our shareholders told us
recently, `We didn't give you our money to have you simply turn around
and give it back to us.' ''
\5\ William H. Gates owns about 24% of Microsoft. The corporation
projected future capital expenditures, as of June 30, 1996, of $293
million. Its net income was $2.2 billion in fiscal 1996 ending June
30, and $1.36 billion in the six months ending December 30, 1996. Its
cash and equivalents increased from $4.75 billion on June 30, 1995 to
$6.94 billion on June 30, 1996 and $9.16 billion on December 31, 1996.
The last figure amounted to 71.6% of assets.
Although it did not need capital, the corporation raised $980 million in
late 1996 through the sale of convertible preferred stock, and it said
that ``proceeds from the offering are expected to be used to
repurchase common shares.'' Wall Street analysts expressed the view
that the real purpose of the offering was to provide a dividend-paying
security for some investors who want dividends, since Microsoft paid
no common dividend.
\6\ In its 1995 annual report, American Express said, ``Some
shareholders have asked why we are repurchasing shares rather than
increasing our dividend as we did in years past. We believe that most
shareholders prefer gains in stock price to receiving dividends
because those payments are taxable annually.
We are coming close to April 15 when all Americans have to pay their
taxes. It is time to take a look at which Americans, which
institutions, which organizations are so powerful that they thumb their
nose at the tax law. Where will this take us if other organizations and
other entities decide they are just not going to obey some provision in
the Tax Code?
There are those who disagree with me, of course. They have the
obvious course of action, asking Congress to change the Tax Code. The
Committee on Ways and Means could go to work and change the Tax Code
tomorrow, next week. If the Tax Code does not make sense, that item in
there which has been in there since 1913, which was revised and made
clear in 1984, it does not make sense, take it out.
Do not ask the American people, 80 percent who are not part of the
corporate elite, to pay their taxes, obey the Code, suffer all kinds of
harassments, in their opinion, and have to deal with living up to the
letter of the law, because if you have an Internal Revenue audit, they
will tell you, the guy sitting there will tell you, ``It is my job to
enforce the law. I do not have any discretion. You can weep if you
wish, but I have to enforce the law. You have to go out and get a third
job? But I have to enforce the law. You cannot pay your mortgage? I am
sorry, I have to enforce the law.''
So what we are talking about here as we approach April 15, tax day,
is a situation where there are several sets of corporations that in
finite, dollar and cents terms, are not obeying the law, are not
obeying the law.
IBM is a major offender. IBM is a major offender. Most of the figures
I am going to quote cover 3 years, 1996, 1995, and 1994. The IBM
figures that we have cover only 2 years because IBM in one year just
decided they would not do it any more. They would not do it, they
skipped a year, so there are no 1995 buy-backs. They resumed in 1996.
So the figures for IBM are 2-year figures. These are net figures.
When I say net figures, I mean a corporation can buy back its stock for
certain purposes. They can distribute stock options. There are certain
things they can do. When we take away those purposes, they have an
amount left that just goes into the treasury of the corporation. It is
hoarded. It is hoarded money that was not distributed to the
shareholders.
I also want to point out, some might have surmised that in our
economy, we talk about the engine of our economy are small businesses,
the engine of our economy are consumers. If the corporations
distributed all of their different dividends as they should to the
shareholders, you would have a much more prosperous economy. You would
have more dynamism in the economy. All of
[[Page H1316]]
those people out there who did not get back their dividends would have
their dividends, and they would either reinvest them themselves or
invest them in some other business or go and spend it.
Our economy is driven by consumer spending, so let us not look down
our noses at consumer spending, but we suspect that people who have
large amounts of dividend returns coming will then reinvest it in some
way, but they will reinvest it in their own way. A monolithic
corporation should not sit there and hold the money, hoard it, hold it
in their treasury chest.
So IBM is a major offender. More than $9 billion, close to $10
billion, $9.9 billion in a 2-year period. That is what their net is.
After you take away the legitimate buy-backs, you have almost $10
billion which yields, in terms of penalties, $3.8 billion, almost $4
billion. The penalties, when you are assessing penalties at the rate of
36.9 percent, that means a lot of money. If the law was enforced, IBM
would owe $3.8 billion or more to the Government, to the taxpayers,
back to the coffers.
Mr. Speaker, think of all of the things we could do in terms of
building schools, putting people to work, building roads, meeting the
needs of our medical community, getting a health care plan that covers
everybody. Think of all of the money, if we collect the total that is
presented here which totals about, conservatively, $70 billion. The
conservative total here is $70 billion. If we let our imaginations go
in terms of corporations that we do not have records on, we are talking
about $100 billion, collecting over a 3-year period, which means if you
collected them all in 1 year or 2 years you would have a windfall
revenue.
We would have, according to our coffers, an unexpected amount of
revenue that could be used for capital expenditures, one-time
expenditures. We could take half of $70 billion and give it over to the
reduction of the deficit. The deficit could be reduced by $35 billion.
We take the other half and put it in projects which relate to
education. Let us have a one-shot deal where we spend a capital budget
expenditure that does not recur to modernize all of the schools that
need to be modernized, to get rid of the lead poisoning, to get rid of
the asbestos, to build new schools so that in a place like New York
City and other inner-city communities you do not have crowding to the
point where 90,000 children last fall had no desks, no place to sit in
New York City schools, 91,000. Ninety-one thousand children had no
place to sit.
This is even after we improvise and we have hallway classes and we
have classes in closets, and we get rid of the library and make it a
classroom, and we have classes in the cafeteria, and we have some
classes, a few classes, in the bathrooms. New York City had 91,000
children that did not have places for them. Now, they got embarrassed
by that, and as we ask questions and time goes on, they claimed well,
that was a statistical mistake or some aberration. They have all kinds
of explanations.
So I have had some colleagues of mine, members of the central
Brooklyn Martin Luther King Commission, which is an organization
dedicated to improving education in central Brooklyn, to go out to the
central Brooklyn schools where my district is located and actually go
around to the schools and check on overcrowding, and they found some
interesting things. The overcrowding is definitely there, but the
principals have been brainwashed into believing it is not there.
They will tell you the school is not overcrowded. Then you ask a
question: ``When this school was built, what was the capacity?'' And
they will give you a figure that is one-half of the number of
enrollment. A school built for 900 youngsters has 2,000, and they say
there is no overcrowding. Well, what kind of arithmetic is that?
They say there is no overcrowding, but if you ask them, ``How many
lunch periods do you have?'' they will tell you they have three lunch
periods. In many New York City schools, elementary schools, children
start to eat lunch at 10:30. They just had breakfast, but they have to
eat lunch at 10:30. Why? Because the lunch rooms are too small for the
large numbers of children and they have to have three lunch periods.
The lunch period begins at 10:30 for one crew and does not end until
2:30, so the last crew eats too late and the first crew eats too early.
The last crew, I am sure the children are really quite hungry, and I am
sure something is being done to their metabolism and their nutrition
and their bodies. This condition exists because there is rampant
overcrowding.
So we need to build new schools. We need to put laboratories in
schools. We need to do a lot of things that you can do with $70
billion.
IBM could cough up $3.8 billion. DuPont, buy-backs, the net buy-
backs, $5.4 billion. Penalties would equal $2.1 billion. General
Electric, $5.1 billion, personalities would equal $5 billion. General
Electric said in its 1996 annual report, ``record cash-flow allowed us
to return more than $6 billion to shareholders, $3.1 billion in
dividends and $3.3 billion in the repurchase of GE stocks.'' They are
saying that the repurchase of stocks is returning the money to
shareholders, so they are aware of the fact that they are doing
something wrong and they need to sort of explain something. Philip
Morris, $5 billion. The penalties would be more than $2 billion.
{time} 1900
Coca-Cola, $3.8 to $4 billion, the penalties would be $1.5 to $1.6
billion.
Wells Fargo Bank, $3.1 to $3.3 billion, the penalties would be $1.2
to $1.3 billion.
BankAmerica, $3 billion, the penalties would be $1.2 billion.
Chrysler, $2.9 billion, the penalties would be $1.1 billion.
Chrysler had a quote in its 1995 annual report. Chrysler said,
``We're even prouder of what we've been doing to increase the long-term
value of your investment in Chrysler. After all, as one of our
shareholders told us recently, `We didn't give you our money to have
you simply turn around and give it back to us.''' That is an
interesting shareholder that does not want the money back. They do not
want a return on their investment.
Dow Chemical, $2.8 to $3 billion in buybacks, $1.1 to $1.2 billion
would be the penalties.
Citicorp, $2 to $2.4. billion, $800 to $960 million would be the
penalty.
Intel, $1.856 billion, the penalty would be $735 million.
Merrill Lynch, $2 billion, the penalty would be $800 million.
Pepsico, $1.4 to $1.7 billion, the penalty would be $560 to $680
million.
Anheuser-Busch, $1.5 to $1.6 billion, the penalty would be $600 to
$640 million.
Merck, $1.2 to $1.6 billion, the penalty would be $480 to $640
million.
Disney, $1 billion to $1.5 billion, the penalty would be $400 to $600
million.
Microsoft, $1.1 billion, the penalty would be $460 million.
Mr. William Gates owns about 24 percent of Microsoft's stock. The
corporation projected future capital expenditures as of June 30 of 1996
of $293 million. Its net income was $2.2 billion in fiscal 1996 ending
June 30 and $1.36 billion in the 6 months ending December 30, 1996.
Its cash and equivalents increased from $4.75 billion on June 30,
1995, to $6.94 billion on June 30, 1996, and $9.16 billion on December
31, 1996. The last figure amounted to 71.6 percent of assets.
Although it did not need capital, Microsoft raised $980 million in
late 1996 through the sale of convertible preferred stock. It said that
proceeds from the offering were expected to be used to repurchase
common shares. They raised the capital to repurchase common shares.
Wall Street analysts expressed the view that the real purpose of the
offering was to provide a dividend-paying security for some investors
who want dividends, since Microsoft had paid no common dividend.
Let us move on to Hewlett Packard, $1 billion, $426 million would be
the penalty.
Kellogg, $1.1 billion to $1.3 billion, the penalty would be $440 to
$520 million.
J.P. Morgan, $1 billion to $1.2 billion, the penalty would be $400 to
$480 million.
I am reading the figures of how much was spent to illegally buy back
stock. They legally bought back stock, but these are the nets, the
illegal amounts that I am quoting.
J.P. Morgan, and 3M, $1 billion to $1.1 billion, the penalty would be
$400 to $440 million.
Reebok, $1 billion to $1.1 billion, the penalty would be $400 to $440
million.
[[Page H1317]]
American Express, $1 billion to $1.1 billion, the penalty would be
$400 to $440 million.
In its 1995 annual report, American Express said and I quote: ``Some
shareholders have asked why we are repurchasing shares rather than
increasing our dividends, as we did in years past. We believe that most
shareholders prefer gains in stock price to receiving dividends because
those payments are taxable annually.''
That is an interesting quote, because that is exactly what Congress
said they did not want to do. They put the provision in there to
prevent people from avoiding the payment of taxes. Here it is in the
statement, they have said we are doing this so you do not have to pay
taxes on the amount we give back to you.
Amoco, $800 to $950 million, estimated, and $320 million would be the
estimated penalty.
The Bank of New York, $800 to $900 million, $320 to $360 million
would be the penalty they would pay.
Norfolk Southern, $800 to $900 million, $320 to $360 million would be
what they would have to pay.
Eastman Kodak, $800 to $900 million, $320 to $360 million would be
the penalty.
Caterpillar, $700 to $900 million, estimated, $280 to $360 million.
McDonalds, $600 to $800 million, buybacks, and $240 to $320 million
would be the amount of penalty they would pay.
Hershey, $400 to $500 million, they would pay $160 to $200 million.
Keycorp, $400 to $500 million, they would pay $160 to $200 million.
Coca-Cola Enterprises, different from the other Coca-Cola, $400 to
$450 million, they would have to pay $160 to $180 million as a penalty.
This company is separate from the Coca-Cola Co., although Coca-Cola
owns 44 percent of the stock. It is a major Coke bottler, accounting
for just over 50 percent of all Coke product sales in the United
States.
Campbell Soup, $296 million in buybacks, they would have to pay a
penalty of $117 million.
Kimberly Clark, $200 to $300 million, they would have to pay $80 to
$120 million.
Weyerhauser, $200 to $300 million, they would have to pay $80 to $120
million.
Xerox, $200 to $300 million, $80 to $120 million.
Wal-Mart, $200 million, they would pay $80 million in penalties.
General Mills, $187 million, they would have to pay $74 million in
penalties.
Why am I bothering to read this list? Because the Internal Revenue
Commission has ignored us. Thirty Members of Congress wrote and they
asked, why are you not enforcing the Code? I would like for other
Americans to hear how the Internal Revenue Code is being blatantly
disobeyed, ignored, and I would like you to know that we cannot get a
response when we ask the Commissioner of Internal Revenue why.
Thirty Members of Congress cannot get a response. Maybe we are
stupid. Maybe we do not understand the technicalities. Maybe we need to
bring our brothers and sisters on the Committee on Ways and Means to a
session and they will explain all this to us, and we will not have a
Member of Congress stand here making a fool of himself about an issue
that is moot, of no consequence.
Maybe there is not a great injustice being done here, and all those
people out there who anxiously are sitting in the offices of the
Internal Revenue Service to deal with their taxes, all those people who
are being forced to go to extraordinary means to pay up what they owe,
according to the law, all of them need not feel that they are being
singled out unjustly. No taxpayer in America should feel that we live
in a society where there is unequal treatment of taxpayers.
We can debate as much as we want the question of whether corporations
should pay any taxes, and that is an esoteric argument among economists
and Members of Congress, but the law is there at this point. It says
you cannot buy back your own stock. If you do this, you have to pay a
penalty of 39.6 percent. The reasoning of the law is that when people,
when corporations buy back their own stock, they are avoiding taxes.
They are helping individuals who get the dividends, who would receive
the income, avoid paying taxes.
I suppose many of those individuals are grateful, but if I was in
their shoes, if I was a shareholder, I would want to have the choice of
give me back my dividends, I might choose to buy back, buy some of your
stock. They rob the shareholders of the choice. They avoid the payment
of taxes in the process.
There is a danger that they are also manipulating the stock market.
This is a form of manipulation, in the final analysis. You keep the
prices artificially high when large amounts of profit from the
corporation are used to buy back the stock. But that is for the lawyers
to take a look at.
I hope you are not bored. I hope that you understand that I am not on
the Committee on Ways and Means. I am just a lowly Member of Congress,
a member of the Progressive Caucus, a member of the Congressional Black
Caucus. Last year, I developed an alternative budget. The year before
that, I developed an alternative budget for the Progressive and the
Congressional Black Caucus.
In the process of doing research for our budget, our aim was to meet
a requirement that was made by the Speaker, the gentleman from Georgia
[Mr. Gingrich], and the Republican majority. Speaker Gingrich and the
Republican majority said to the members of the Black Caucus and the
members of the Progressive Caucus, you cannot bring a budget to the
floor unless you show a balanced budget by the year 2002. That is a
requirement. You must balance the budget by the year 2002.
I think they assumed that we would go away and stop being a nuisance
by bringing an alternative budget to the floor, because we could never
balance the budget by the year 2002 and at the same time maintain the
level of expenditures for programs that are most important to the
poorest people in America, and a lot of the not-too-poor people,
education programs, environmental programs. They thought we could not
do it.
In the process of doing our research, we found that we had the option
in preparing an alternative budget of raising taxes. If you can show a
credible way to increase the taxes, it is acceptable in the budgeting
process. We used only the figures that the Congressional Budget Office
had already certified. We looked at the corporate loopholes. We said,
if you take away this loophole, that loophole, you will raise money. If
you bring corporations up to a level from 11 percent of the total tax
burden, income tax burden, to 16 percent, they would still be way below
the individual tax burden, which is 44 percent.
We learned a great deal. It was a very informative experience,
because liberals and progressives, people who belong to what I call the
caring majority, who care about America and who care about all the
people in America, people who want to see our great wealth and riches
divided in some way which benefits every sector of society, the people
who want to see the best schools in the world, who want world-class
hospitals and who want to see our children grow up in a world where
everybody has a reasonable opportunity to fully develop themselves, all
those people out there we think have ignored studying the revenue side
of the budget.
For years we have let the Committee on Ways and Means dominate the
discussion. For years we have let the lobbyists who line up when the
Committee on Ways and Means meets, there are long lines of people out
there to get in and the Committee on Ways and Means has a major bill
revising the Tax Code.
I remember they revised it under Ronald Reagan and they did some
later correction. In the time that I have been here, 14 years, there
have been two major corrections and revisions of the Internal Revenue.
I watched the PAC contributions of every member on the Committee on
Ways and Means. I sat and heard them talk about how the money was
flowing in. I heard a few say, let us keep the suspense on longer, more
will come in.
This is not to in any way put down my colleagues, but it is a
phenomenon which is in motion and we know it. We have to be naive not
to believe there is a correlation between the fact that this sector
of society has gotten the biggest tax breaks since 1943. They were
paying 40 percent of the tax burden in 1943. Now they are paying 11
percent, so the biggest tax breaks have gone to corporate America.
[[Page H1318]]
There is a correlation between the tax breaks corporate America has
received and the kind of money they contribute. I do not want to get
into a long discussion of the present campaign contribution scandal.
There is enough being said on television, radio, cable television, all
across the board, there is a lot of discussion about the great scandal
of 1996 where more money was raised and spent on political campaigns
than ever before in the history of the Nation. Very interesting. More
money was raised, but we only had 49 percent, less than 49 percent of
the people who came out and voted. It was a record low vote, despite
the fact that large amounts of money were raised.
Mr. Speaker, I assure you, people who were contributing the money,
they all came out and voted. Their friends voted. There is a
correlation between wealth in America and voting. The richest people in
America always vote. Always. Come down the line, the middle class, they
hesitate sometimes. They do not come out large enough. When you get to
the very bottom, they are the ones who do not vote at all. The people
who need government most do not vote. Those who need government are
willing to pay. The Center for Responsive Politics has a chart here in
a report they issued on the PAC, Political Action Committee,
expenditures for the Clinton-Dole campaign and the soft money.
Where did the contributions come from? It is very informative. If you
want to know why one sector of our society feels that they do not have
to, they pay less taxes now than they used to pay, and they do not have
to obey a certain part of the Internal Revenue Code. They are so
powerful, they are going to be taken care of. They have gotten the
green light from somebody, but they do not have to obey the law.
Yeltsin has a problem with the Mafia in Russia. They go to collect
taxes, they are just maybe gunned down. The Mafia has killed members of
the legislature, they have threatened high-ranking officials. Things
are totally out of hand in Russia, so they do not try to collect the
taxes with too much zeal. The people who really have the money also
have the muscle.
That is very crude, that is very savage. That is a failed society. We
are not a failed society. If we allow this to go on, however, if they
get away with disobeying the Code in this case, they will do it
somewhere else. We will have a pattern that will lead other people at
lower levels to say, we are not going to obey the law also.
{time} 1915
We had a savings and loan swindle. They called it the savings and
loan swindle, but it was the banking industrial complex of America
swindle because the amounts of money that regular banks that were not
savings and loans banks lost was pretty great also. The savings and
loans swindle, it is estimated, will cost American taxpayers $500
billion before it is all over.
There was a Stanford University report that I read some time ago. I
do not have the documentation here. But it said that, when you get
through paying back the money through the Federal Deposit Insurance
Corporation and the money that was appropriated directly by Congress to
make up for what had been stolen and you get through with the
administrative costs of all the various bodies we set up to recover the
money, the American taxpayers are going to be out $500 billion.
They got away with that basically. The number of people who went to
jail, the number of people who spent any reasonable time in prison is
minuscule. The amount of money recovered is a tiny amount, a very tiny
amount compared to the amount that was stolen. The biggest thief who
was actually pinpointed and convicted, he became a personification for
the rest, Charles Keating. Charles Keating in California was recently
released on a technicality. They said, we made a mistake. Yes, you did
cost the taxpayers $2 billion. Your Lincoln Savings Bank, your bank,
your operation did cost us $2 billion. That we can document. But on
some technicality, rich Mr. Keating is out. He claims he is penniless,
but none of us were born yesterday. We are certain that a
multimillionaire did not go to jail penniless and he did not come out
penniless, but he is out. Charles Keating is out. And he was the most
celebrated, the most highly publicized.
If he is out, then you know all those other folks that we did not
even know about, they are out, too. Some high placed officials and
their relatives, they were involved. So the savings and loan swindle
was the biggest swindle in the history of mankind of its kind. And
large amounts of people got away with it, became rich, stayed rich.
So you had a precedent there. Do not allow too many of these
precedents to develop, Americans; you are on the road to a collapsed
society. It is possible, if you keep doing this, to have no faith in
law and order, certainly no faith in the regulations of our financial
institutions.
Banks were closely regulated by the Government. They could not have
done this without collusion from public officials, the savings and loan
swindle.
In this chart, the financial sector, they have different sectors
here. For the school children of America, you need to know that our
laws are made by various complexes, industrial complexes. Do not
believe what you read. The simple thing about the House of
Representatives and the Senate and they get together. The most
important thing is not discussed. The various complexes, the defense
industrial, military industrial complex we all know about. President
Eisenhower, when he left office, shook us and woke us up and said be
aware. There is a military industrial complex which will drain large
amounts of money away from the American taxpayers, and it has.
It has a record that keeps going on and on, the war is over, the
excuse for it. The evil empire is defeated but the military industrial
complex is still effective. They do not make the biggest contributions
anymore. It is the financial industrial complex that makes the largest
contributions. Close to $40 million for the Clinton-Dole soft money
campaigns and the regular campaigns, close to $40 million went to the
Republicans. Half that amount went to the Democrats from the financial
sector.
In every other category, except labor, about twice as much was spent
for the party in power in Congress, majority party, than for the
Democrats or for the Republican candidate because these great
industrial complexes, the financial industrial complex, the
agricultural industrial complex, there is the construction industrial
complex, the defense industrial complex, energy industrial complex, the
health industrial complex, the transportation industrial complex.
Only organized labor, which is considered not a business complex, but
it is listed here because it gave large amounts of money, only
organized labor contributed more money to Democrats than to
Republicans. That is interesting. And then of course there are others.
The pattern is pretty clear that the buying of a point of view, the
people advocating cutting corporations even further, they wanted
capital gains cuts, people are advocating a huge tax cut for the
richest Americans, the people who are advocating that we cut only those
programs that go to the poorest people, the people who turned their
back on the welfare, the corporate welfare, those are the people who
get the largest amount of money from the various complexes and the
financial complex where the corporations and the brokers and the whole
set of people who make the most money, they give the most.
In conclusion, Mr. Speaker, we will hear more about corporate
welfare. The gentleman from Ohio [Mr. Kasich] and the Republicans are
also interested in cutting corporate welfare. But here is a piece all
we need to do is tell the Internal Revenue to enforce the law. You
could realize a large amount of money, take some of the burden off
other taxpayers and have the result of making every American
institution as well as individual pay their taxes, April 15 is coming.
We should all pay for taxes.
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