[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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