[Congressional Record Volume 143, Number 45 (Wednesday, April 16, 1997)]
[Senate]
[Pages S3269-S3294]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. CAMPBELL:
S. 587. A bill to require the Secretary of the Interior to exchange
certain lands located in Hinsdale County, CO; to the Committee on
Energy and Natural Resources.
S. 588. A bill to provide for the expansion of the Eagles Nest
Wilderness within the Arapaho National Forest and the White River
National Forest, Colorado, to include land known as the State Creek
Addition; to the Committee on Energy and Natural Resources.
S. 589. A bill to provide for a boundary adjustment and land
conveyance involving the Raggeds Wilderness, White River National
Forest, Colorado, to correct the effects of earlier erroneous land
surveys; to the Committee on Energy and Natural Resources.
S. 590. A bill to provide for a land exchange involving certain land
within the Routt National Forest in the State of Colorado; to the
Committee on Energy and Natural Resources.
S. 591. A bill to transfer the Dillon Ranger District in the Arapaho
National Forest to the White River National Forest in the State of
Colorado; to the Committee on Energy and Natural Resources.
PUBLIC LANDS LEGISLATION
Mr. CAMPBELL. Mr. President, today I introduce five pieces of
legislation affecting Federal lands in my home State of Colorado.
The purpose of these bills is to facilitate the process of
consolidating our Federal lands into contiguous blocks which makes
their management more efficient and less costly.
Much of the land over which the Bureau of Land Management and the
U.S. Forest Service has management authority contains numerous
inholdings which may have been old mining claims or other privately
owned parcels. This patchwork ownership often creates management
problems. For example, a particular parcel may block the public's
access to other Federal lands. The presence of an inholding may limit
the tools which can be used by the Federal agency to manage the land.
If a controlled fire is needed to clear underbrush or stop the spread
of insects, the presence of private land in the midst of the area may
well preclude the use of fire as a management tool. All these
considerations require much more time, and adds to the expense of
caring for Federal lands.
Whenever an owner of these private parcels willingly offers to sell
or exchange their lands, it is important that the Federal Government is
able to accomplish these transactions to increase
[[Page S3270]]
management efficiency and public use. The designated Federal agencies
have reviewed these bills and the legislation reflects their input.
The first bill, the Larson and Friends Creek exchange, directs the
Secretary of the Interior to exchange lands of equal value for several
small parcels within the Handies Peak Wilderness Study Area and Red
Cloud Peak Wilderness Study Area in Hinsdale County, CO. This exchange
will allow the study areas to better fit the definition of a wilderness
area.
The second bill, the Slate Creek addition to Eagles Nest Wilderness,
provides for the expansion of the wilderness area in Summit County, CO.
The current owners of this parcel are willing to convey it to the
United States only if it is added to the existing wilderness area and
permanently managed as wilderness. This addition will increase public
access to the wilderness.
The third bill, Raggeds Wilderness boundary adjustment, is necessary
to correct the effects of earlier erroneous land surveys. Certain
landowners in Gunnison County, CO, who own property adjacent to the
Raggeds Wilderness have occupied or improved their property in good
faith based upon a survey they reasonably believed to be accurate. This
bill is necessary to accomplish an adjustment of the boundary between
the private landowners and the wilderness area. The entire area
involved in this adjustment is less than 1 acre.
The fourth bill, Miles land exchange, authorizes the Secretary of
Agriculture to convey lands of equal value in exchange for the Miles
parcel located adjacent to the Routt National Forest in Routt County,
CO. The purpose of this exchange is to improve on-the-ground management
of public lands which are now isolated and difficult to manage. It will
eliminate the need for long standing special use permits and add
riparian acres to the national forest.
The final bill, the Dillon Ranger District transfer, allows for a
boundary adjustment to transfer the Dillon Ranger District from the
Arapaho National Forest to the White River National Forest. The Dillon
District is already under the jurisdictional management of the White
River National Forest. However, this technical correction is necessary
because any official publications of the U.S. Forest Service references
the district as a part of the Arapaho National Forest and confuses the
public.
I ask unanimous consent that these bills be printed in the Record
with letters of support from various county governments in which these
lands are located.
There being no objection, the bills were ordered to be printed in the
Record, as follows:
S. 587
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. LARSON AND FRIENDS CREEK EXCHANGE.
(a) In General.--In exchange for conveyance to the United
States of an equal value of offered land acceptable to the
Secretary of the Interior that lies within, or in proximity
to, the Handies Peak Wilderness Study Area, the Red Cloud
Peak Wilderness Study Area, or the Alpine Loop Backcountry
Bi-way, in Hinsdale County, Colorado, the Secretary of the
Interior shall convey to Lake City Ranches, Ltd., a Texas
limited partnership (referred to in this section as ``LCR''),
approximately 560 acres of selected land located in that
county and generally depicted on a map entitled ``Larson and
Friends Creek Exchange'', dated June 1996.
(b) Contingency.--The exchange under subsection (a) shall
be contingent on the granting by LCR to the Secretary of a
permanent conservation easement, on the approximately 440-
acre Larson Creek portion of the selected land (as depicted
on the map), that limits future use of the land to
agricultural, wildlife, recreational, or open space purposes.
(c) Appraisal and Equalization.--
(1) In general.--The exchange under subsection (a) shall be
subject to--
(A) the appraisal requirements and equalization payment
limitations set forth in section 206 of the Federal Land
Policy and Management Act of 1976 (43 U.S.C. 1716); and
(B) reviews and approvals relating to threatened species
and endangered species, cultural and historic resources, and
hazardous materials under other Federal laws.
(2) Costs of appraisal and review.--The costs of appraisals
and reviews shall be paid by LCR.
(3) Crediting.--The Secretary may credit payments under
paragraph (2) against the value of the selected land, if
appropriate, under section 206(f) of the Federal Land Policy
and Management Act of 1976 (43 U.S.C. 1716(f)).
____
S. 588
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SLATE CREEK ADDITION TO EAGLES NEST WILDERNESS,
ARAPAHO AND WHITE RIVER NATIONAL FORESTS,
COLORADO.
(a) Slate Creek Addition.--If, before December 31, 2000,
the United States acquires the parcel of land described in
subsection (b)--
(1) on acquisition of the parcel, the parcel shall be
included in and managed as part of the Eagles Nest Wilderness
designated by Public Law 94-352 (16 U.S.C. 1132 note; 90
Stat. 870); and
(2) the Secretary of Agriculture shall adjust the
boundaries of the Eagles Nest Wilderness to reflect the
inclusion of the parcel.
(b) Description of Addition.--The parcel referred to in
subsection (a) is the parcel generally depicted on a map
entitled ``Slate Creek Addition--Eagles Nest Wilderness'',
dated February 1997, comprising approximately 160 acres in
Summit County, Colorado, adjacent to the Eagles Nest
Wilderness.
____
S. 589
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. BOUNDARY ADJUSTMENT AND LAND CONVEYANCE, RAGGEDS
WILDERNESS, WHITE RIVER NATIONAL FOREST,
COLORADO.
(a) Findings.--Congress finds that--
(1) certain landowners in Gunnison County, Colorado, who
own real property adjacent to the portion of the Raggeds
Wilderness in the White River National Forest, Colorado, have
occupied or improved their property in good faith and in
reliance on erroneous surveys of their properties that the
landowners reasonably believed were accurate;
(2) in 1993, a Forest Service resurvey of the Raggeds
Wilderness established accurate boundaries between the
wilderness area and adjacent private lands; and
(3) the resurvey indicates that a small portion of the
Raggeds Wilderness is occupied by adjacent landowners on the
basis of the earlier erroneous land surveys.
(b) Purpose.--The purpose of this section to remove from
the boundaries of the Raggeds Wilderness certain real
property so as to permit the Secretary of Agriculture to use
the authority of Public Law 97-465 (commonly known as the
``Small Tracts Act'') (16 U.S.C. 521c et seq.) to convey the
property to the landowners who occupied the property on the
basis of erroneous land surveys.
(c) Boundary Adjustment.--The boundary of the Raggeds
Wilderness, Gunnison National Forest and White River National
Forest, Colorado, as designated by section 102(a)(16) of
Public Law 96-560 (94 Stat. 3267; 16 U.S.C. 1132 note), is
modified to exclude from the area encompassed by the
wilderness a parcel of real property approximately 0.86-acres
in size situated in the SW\1/4\ of the NE\1/4\ of Section 28,
Township 11 South, Range 88 West of the 6th Principal
Meridian, as depicted on the map entitled ``Encroachment-
Raggeds Wilderness'', dated November 17, 1993.
(d) Map.--The map described in subsection (c) shall be on
file and available for inspection in the appropriate offices
of the Forest Service, Department of Agriculture.
(e) Conveyance of Land Removed From Wilderness Area.--The
Secretary of Agriculture shall use the authority provided by
Public Law 97-465 (commonly known as the ``Small Tracts
Act'') (16 U.S.C. 521c et seq.) to convey all right, title,
and interest of the United States in and to the real property
excluded from the boundaries of the Raggeds Wilderness under
subsection (c) to the owners of real property in Gunnison
County, Colorado, whose real property adjoins the excluded
real property and who have occupied the excluded real
property in good faith reliance on an erroneous survey.
____
S. 590
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE
This Act may be cited as the ``Miles Land Exchange Act of
1997''.
SEC. 2. LAND EXCHANGE, ROUTT NATIONAL FOREST, COLORADO.
(a) Authorization of Exchange.--If the parcel of non-
Federal land described in subsection (b) is conveyed to the
United States in accordance with this section, the Secretary
of Agriculture shall convey to the person that conveys the
parcel all right, title, and interest of the United States
in and to a parcel of Federal land consisting of
approximately 84 acres within the Routt National Forest in
the State of Colorado, as generally depicted on the map
entitled ``Miles Land Exchange'', Routt National Forest,
dated May 1996.
(b) Parcel of Non-Federal Land.--The parcel of non-Federal
land referred to in subsection (a) consists of approximately
84 acres, known as the ``Miles parcel'', located adjacent to
the Routt National Forest, as generally depicted on the map
entitled ``Miles Land Exchange'', Routt National Forest,
dated May 1996.
(c) Acceptable Title.--Title to the non-Federal land
conveyed to the United States under subsection (a) shall be
such title as is
[[Page S3271]]
acceptable to the Secretary of Agriculture, in conformance
with title approval standards applicable to Federal land
acquisitions.
(d) Valid Existing Rights.--The conveyance shall be subject
to such valid existing rights of record as may be acceptable
to the Secretary.
(e) Approximately Equal Value.--The values of the Federal
land and non-Federal land to be exchanged under this section
are deemed to be approximately equal in value, and no
additional valuation determinations are required.
(f) Applicability of Other Laws.--Except as otherwise
provided in this section, the Secretary shall process the
land exchange authorized by this section in the manner
provided in subpart A of part 254 of title 36, Code of
Federal Regulations (as in effect on the date of enactment of
this Act).
(g) Maps.--The maps referred to in subsections (a) and (b)
shall be on file and available for inspection in the office
of the Forest Supervisor, Routt National Forest, and in the
office of the Chief of the Forest Service.
(h) Boundary Adjustment.--
(1) Inclusion in routt national forest.--On approval and
acceptance of title by the Secretary, the non-Federal land
conveyed to the United States under this section shall become
part of the Routt National Forest and shall be managed in
accordance with the laws (including regulations) applicable
to the National Forest System, and the boundaries of the
Routt National Forest shall be adjusted to reflect the land
exchange.
(2) Retroactive application.--For purposes of section 7 of
the Land and Water Conservation Fund Act of 1965 (16 U.S.C.
460l-9), the boundaries of the Routt National Forest, as
adjusted by this section, shall be considered to be the
boundaries of the Routt National Forest as of January 1,
1965.
(i) Additional Terms and Conditions.--The Secretary may
require such additional terms and conditions in connection
with the conveyances under this section as the Secretary
considers appropriate to protect the interests of the United
States.
____
S. 591
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. INCLUSION OF DILLON RANGER DISTRICT IN WHITE RIVER
NATIONAL FOREST, COLORADO.
(a) Boundary Adjustments.--
(1) White river national forest.--The boundary of the White
River National Forest in the State of Colorado is adjusted to
include all National Forest System land located in Summit
County, Colorado, comprising the Dillon Ranger District of
the Arapaho National Forest.
(2) Arapaho national forest.--The boundary of the Arapaho
National Forest is adjusted to exclude the land transferred
to in the White River National Forest by paragraph (1).
(b) Reference.--Any reference to the Dillon Ranger
District, Arapaho National Forest, in any statute,
regulation, manual, handbook, or other document shall be
deemed to be a reference to the Dillon Ranger District, White
River National Forest.
(c) Existing Rights.--Nothing in this section affects valid
existing rights of persons holding any authorization, permit,
option, or other form of contract existing on the date of the
enactment of this Act.
(d) Forest Receipts.--Notwithstanding the distribution
requirements of payments under the sixth paragraph under the
heading FOREST SERVICE'' in the Act entitled ``An Act making
appropriations for the Department of Agriculture for the
fiscal year ending June thirtieth, nineteen hundred and
nine'', approved May 23, 1908 (35 Stat. 260, chapter 192; 16
U.S.C. 500), the distribution of receipts from the Arapaho
National Forest and the White River National Forest to
affected county governments shall be based on the national
forest boundaries that existed on the day before the date of
enactment of this Act.
Summit County,
Board of County Commissioners,
Breckenridge, CO, February 7, 1997.
Hon. Ben Nighthorse Campbell,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Senator Campbell: We are writing in support of
modifying the Eagles Nest Wilderness Area boundary to include
a 160-acre property along the Slate Creek drainage owned by
Scotty and Jeanette Moser. The Board of County Commissioners
understands the Mosers want to transfer their property to the
National Forest and wish to see the property become part of
the wilderness area.
When the boundary for the Eagles Nest Wilderness Area was
created in the 1970's, the Moser's property was not included
since it was private property and could be effectively
``cherry-stemmed'' out of the wilderness area. This boundary,
based on land ownership, has no on-the-ground basis. In fact,
from a land management perspective, the Moser property should
logically be part of the wilderness area.
The Mosers have gone to great lengths over the years to
preserve the wilderness character of their property. The
property contains outstanding riparian habitat, possesses
spectacular views, and has no development on it.
There is strong community support in Summit County to
include the Moser property in the Eagles Nest Wilderness
Area. We are not aware of any opposition to include the Moser
property in the Wilderness.
We respectively request your assistance to modify the
Eagles Nest Wilderness Area boundary during this session of
Congress to include the Moser's property.
Sincerely,
Gary M. Lindstrom, Chairman,
Board of County Commissioners.
____
Hinsdale County,
Lake City, CO, June 20, 1996.
Senator Ben Nighthorse Campbell,
Russell Senate Office Building,
Washington, DC.
Dear Senator Campbell: On behalf of the Board of County
Commissioners and the citizens of Hinsdale County I am
writing to express Hinsdale County's support for the proposed
land exchange between the Bureau of Land Management (BLM) and
Lake City Ranches, Ltd. Under the agreement, Lake City
Ranches, Ltd will receive approximately 560 acres of land
adjoining the existing ranch, while the BLM will acquire long
sought after inholdings in or near the Handies Peak or Red
Cloud Wilderness Study Areas or the Alpine Loop By-way.
Hinsdale County is ninety six percent federally owned and
has always been concerned about land trades that erode the
amount of private property within the county. Loss of
property has unwanted impacts on the local economy and the
local government. Also, Hinsdale County firmly believes that
any federal actions that may impact our county, like land
trades or other policy decisions, must have local public
input and cooperation.
It is our understanding the proposed land trade will assist
the BLM in consolidating their holdings within wilderness
areas and preserve a beautiful and fragile environment. The
acquisition by Lake City Ranches, Ltd, though marginal in
terms of economic impact to the area, should not reduce the
amount of private land within Hinsdale County. Also, the
local BLM office has assured us that no decision regarding
the trade shall be made without full disclosure and local
input into the decision making process. Both of the above are
consistent with Hinsdale County's long-standing political
policy and objectives.
Again let me state that Hinsdale County supports the
proposed land trade between the BLM and Lake City Ranches,
Ltd, as long as the county's policies regarding land trades
and input to the decision making process are respected.
Sincerely,
James Lewis, Chair,
Hinsdale County Commissioners.
____
Open Space and Trails,
Pitkin County, August 29, 1996.
Senator Ben Nighthorse Campbell,
Russell Senate Office Building,
Washington, DC.
Dear Senator Campbell: The Open Space and Trails Board of
Trustees of Pitkin County respectfully requests that moneys
be included in the Interior Appropriations legislation for FY
1997 to enable the U.S. Forest Service to purchase the 158
acre Warren Lakes property southeast of Aspen, Colorado. It
is our understanding that the House version of the bill
contained funds for the purchase since it is one of the top
nationwide priorities for acquisition identified by the
Forest Service, but that the Senate bill, for reasons unknown
to us, did not. We urge that funding be assured in the House-
Senate conference.
Public acquisition of Warren Lakes by the Forest Service
has been a long-term priority for Pitkin County and the Open
Space and Trails Board of Trustees because of the property's
extremely high wetland, wilderness, wildlife and recreational
values. In addition, the property is the only private
inholding in an otherwise solid block of Forest Service land,
making the Forest Service the logical owner for this
property. As you are likely aware, Pitkin County has for many
decades vigorously pursued the protection of open space
throughout the County in cooperation with the Forest Service,
and the acquisition of the Warren Lakes parcel by the Forest
Service is a key element in both entities' plans to protect
important areas of open space.
Because of its proximity to the Town of Aspen (5 miles via
dirt road) and to the Hunter-Fryingpan Wilderness, public
ownership of Warren Lakes will provide important new access
to the wilderness and public lands while ensuring perpetual
public access along the road through the property, and open
up new opportunities for public recreation close to Town.
This, in an of itself, is a very important reason for the
Forest Service to pursue this acquisition. In addition,
Warren Lakes has three large manmade ponds which will provide
new fishing opportunities and pristine breeding areas for
fish species. The wetlands and peat bogs themselves possess
very significant ecological values: they support a unique
ecology of many rare plants and provide habitat for numerous
animals and birds; they act as natural filtration systems and
clean water supplies and replenish ground water; they trap
and store water preventing downstream erosion; and, they help
abate downstream flooding by acting as natural sponges,
absorbing heavy rainfall and snowmelt and then slowly
releasing the water downstream. Mountain peat accumulates in
these wetlands at only 3 to 11 inches per thousand years and
scientists estimate that only 1% of the land in Colorado
supports biological communities found in Colorado's
peatlands. These combined values are
[[Page S3272]]
exceedingly rare to find in just one piece of land, and
explain why both our constituents and the Forest Service are
so anxious to see the land conveyed into public ownership.
The Open Space and Trails Board urges you to do whatever
you can to insure that funding for this Forest Service
purchase is included in this year's appropriations bill.
Sincerely,
William E.L. Fales,
Chairman.
______
By Mr. HOLLINGS (for himself, Mr. Specter, Mr. Biden and Mr.
Robb):
S. 592. A bill to grant the power to the President to reduce budget
authority; to the Committee on Rules and Administration.
LINE-ITEM VETO LEGISLATION
Mr. HOLLINGS. Mr. President, I have just submitted legislation at the
desk to create a separate enrollment version of the line-item veto.
Mr. President, this is the same bill word for word that passed the
U.S. Senate on March 25, 1995, by a bipartisan vote of 69 Senators. It
was introduced at the time by Senator Dole.
It follows a long history of efforts on behalf of the separate
enrollment approach and is different to the enhanced rescission which
has been found unconstitutional by the district court.
Back in 1985, I worked alongside Senator Mattingly, and we got 58
votes for the separate enrollment version.
We passed similar legislation in the Senate in 1995, but lost out in
conference when the conferees endorsed the House approved enhanced
rescission approach rather than the separate enrollment version.
But the courts have now struck down that law. They have ruled that
once a bill is signed into law, under the Constitution, the President
does not have the authority to repeal laws. Such a repeal is a
legislative power which article I of our Constitution reserves for the
Congress.
Mr. President, the line-item veto has a proven track record in
bringing about financial responsibility at the State and local level.
As a Governor, the distinguished Presiding Officer knows that you
cannot print money like we do up here in Washington. And if you do all
of this borrowing and spending and borrowing and spending, before long
you lose your credit rating.
The line-item veto is used at the present time in some 43 States. The
separate enrollment mechanism that this legislation is based upon has
been shown to meet constitutional muster by Prof. Laurence Tribe of
Harvard in a letter to former Senator Bill Bradley back in January
1993. I spoke with Professor Tribe yesterday morning on the telephone
at which time he reaffirmed that legal opinion.
Mr. President, this effort is not meant to fix the blame, but to fix
the problem. We are not enhancing or diminishing Presidential powers.
We are simply changing congressional procedures. We are using the
congressional power under article I, section 5 of the Constitution
which vests Congress with broad authority to set the rules for its own
procedure. And that authority is exercised through changes in the rules
which would require separate enrollment. That was found to be the one
way that a statutory line-item veto could pass constitutional scrutiny.
We are very, very hopeful that this bill can assist us in fixing
responsibility on the one hand and reducing deficits on the other hand.
We all know that we are not here, as lawyer Sullivan said, as ``potted
plants.'' But we are sometimes embarrassed when we see things like
appropriations for Lawrence Welk's home.
In 1992, the Government Accounting Office, [GAO] did a study and
found that over a 5-year period the line-item veto would save some $70
billion.
So we are very hopeful that we can get expedited procedure. It has
been debated for the past 15 years. It has been used by all the
Governors now in some 43 States. And there is no rhyme nor reason for
us to play around and wait for the delay in the courts.
We are in a very serious circumstance. Our debt has so risen that the
interest costs to the Government now are $1 billion a day--$1 billion a
day--increased spending for interest costs on the national debt.
It is the largest spending item in the budget. And so I thank the
distinguished Senator from Florida for yielding, but I wanted to make
sure we introduced this legislation this morning before we got on to
the unanimous consent with the particular measure at hand.
______
By Mr. SPECTER:
S. 593. A bill to amend the Internal Revenue Code of 1986 to impose a
flat tax only on individual taxable earned income and business taxable
income, and for other purposes; to the Committee on Finance.
FLAT TAX LEGISLATION
Mr. SPECTER. Mr. President, I have sought recognition today to
introduce the Flat Tax Act of 1997. This is legislation modeled after
the legislation which I introduced in the 104th Congress, in March
1995, which was the first Senate introduction of flat tax legislation.
This bill is modeled after proposals by two distinguished professors
of law from Stanford University, Professor Hall and Professor Rabushka.
This bill would eliminate all deductions, like the Hall-Rabushka plan,
with the modification in my legislation to allow deductions for
interest on home interest mortgages up to borrowings of $100,000 and
contributions to charity up to $2,500.
The Hall-Rabushka plan would provide for a flat tax rate of 19
percent to be revenue neutral. My proposal raises that rate by 1
percent to 20 percent to allow for the deductions for home interest
mortgages, which would cost $35 billion a year, and the charitable
deduction, which would cost $13 billion a year.
Mr. President, the advantages of the flat tax are very, very
substantial.
First, in the interest of simplicity, a tax return could be filled
out on a simple postcard. And this is a tax return which I hold in my
hand which could take 15 minutes to fill out. It requires simply that
the taxpayer list the gross revenue, list his taxable income, carry
forward the deductions for his family, any deductions on interest, any
deduction on a home mortgage, the balance of the taxable items,
multiplied by 20 percent.
Taxpayers in the United States today, Mr. President, spend some
5,400,000 hours at a cost of some $600 billion a year. The flat tax
taxes income only once and thereby eliminates the tax on capital gains.
It eliminates the tax on estates, eliminates the tax on dividends, all
of which have already been taxed once.
The flat tax is frequently challenged as being regressive, but the
fact of the matter is that a taxpayer of a family of four would pay no
taxes on the first $27,500 in income; and as it graduates up the scale,
a taxpayer earning $35,000 would pay $1,219 less in tax than is paid
under the current plan.
It is frequently thought that the flat tax would be regressive and
place a higher tax burden on lower income families, but that simply is
not true. And the reason that we can have a win-win situation is
because the flat tax provides for savings on compliance in the range of
some $600 billion a year.
This is a very progrowth proposition. And the economists have
projected that over a 7-year period the gross national product could be
increased by some $2 trillion. That is over $7,000 for every man,
woman, and child in America.
The great advantages of simplicity would especially be appreciated,
Mr. President, on this particular day, April 16, because yesterday was
the final day for filing the tax returns without any extension. And I
have chosen the first day of the new tax period for symbolic reasons--
April 16--as a day to reintroduce the flat tax to try to give us some
momentum because it is my firm view that if Americans really understood
the import of the flat tax, its simplicity, its growth, and its
savings, that it would be widely heralded.
Mr. President as I stated, in the 104th Congress, I was the first
Senator to introduce flat tax legislation and the first Member of
Congress to set forth a deficit-neutral plan for dramatically reforming
our Nation's Tax Code and replacing it with a flatter, fairer plan
designed to stimulate economic growth. My flat tax legislation was also
the first plan to retain limited deductions for home mortgage interest
and charitable contributions.
I testified with House Majority Leader Richard Armey before the
Senate Finance and House Ways and Means Committees, as well as the
Joint Economic Committee and the House Small Business Committee on the
tremendous
[[Page S3273]]
benefits of flat tax reform. As I traveled around the country and held
open-house town meetings across Pennsylvania and other States, the
public support for fundamental tax reform was overwhelming. I would
point out in those speeches that I never leave home without two key
documents: My copy of the Constitution and my copy of my 10-line-flat-
tax postcard. I soon realized that I needed more than just one copy of
my flat-tax postcard--many people wanted their own postcard so that
they could see what life in a flat tax world would be like, where tax
returns only take 15 minutes to fill out and individual taxpayers are
no longer burdened with double taxation on their dividends, interest
capital gains and estates.
Support for the flat tax is growing as more and more Americans
embrace the simplicity, fairness, and growth potential of flat tax
reform. An April 17, 1995, edition of Newsweek cited a poll showing
that 61 percent of Americans favor a flat tax over the current Tax
Code. Significantly, a majority of the respondents who favor the flat
tax preferred my plan for a flat tax with limited deductions for home
mortgage interest and charitable contributions. Well before he entered
the Republican Presidential primary, publisher Steve Forbes opined in a
March 27, 1995, Forbes editorial about the tremendous appeal and
potency of my flat tax plan.
Congress was not immune to public demand for reform. Jack Kemp was
appointed to head up the National Commission on Economic Growth and Tax
Reform and the commission soon came out with its report recognizing the
value of a fairer, flatter Tax Code. Mr. Forbes soon introduced a flat
tax plan of his own, and my fellow candidates in the Republican
Presidential primary began to embrace similar versions of either a flat
tax or a consumption-based tax system.
Unfortunately, the politics of the Presidential campaign denied the
flat tax a fair hearing and momentum stalled. On October 27, 1995, I
introduced a sense-of-the-Senate resolution calling on my colleagues to
expedite congressional adoption of a flat tax. The resolution, which
was introduced as an amendment to pending legislation, was not adopted.
In this new period of opportunity as we commence the 105th session of
Congress, I am optimistic that public support for flat tax reform will
enable us to move forward and adopt this critically important and
necessary legislation. That is why I am again introducing my Flat Tax
Act of 1997, with some slight modifications to reflect inflation-
adjusted increases in the personal allowances and dependent allowances.
My flat tax legislation will fundamentally revise the present Tax
Code, with its myriad rates, deductions, and instructions. Instead,
this legislation would institute a simple, flat 20 percent tax rate for
all individuals and businesses. It will allow all taxpayers to file
their April 15 tax returns on a simple 10-line postcard. This proposal
is not cast in stone, but is intended to move the debate forward by
focusing attention on three key principles which are critical to an
effective and equitable taxation system: simplicity, fairness, and
economic growth.
Over the years and prior to my legislative efforts on behalf of flat
tax reform, I have devoted considerable time and attention to analyzing
our Nation's Tax Code and the policies which underlie it. I began this
study of the complexities of the Tax Code 40 years ago as a law student
at Yale University. I included some tax law as part of my practice in
my early years as an attorney in Philadelphia. In the spring of 1962, I
published a law review article in the Villanova Law Review, ``Pension
and Profit Sharing Plans: Coverage and Operation for Closely Held
Corporations and Professional Associations,'' 7 Villanova L. Rev. 335,
which in part focused on the inequity in making tax-exempt retirement
benefits available to some kinds of businesses but not others. It was
apparent then, as it is now, that the very complexities of the Internal
Revenue Code could be used to give unfair advantage to some; and made
the already unpleasant obligation of paying taxes a real nightmare for
many Americans.
Well before I introduced my flat tax bill early in the 104th
Congress, I had discussions with Congressman Richard Armey, now the
House majority leader, about his flat tax proposal. Since then, and
both before and after introducing my original flat tax bill, my staff
and I have studied the flat tax at some length, and have engaged in a
host of discussions with economists and tax experts, including the
staff of the Joint Committee on Taxation, to evaluate the economic
impact and viability of a flat tax.
Based on those discussions, and on the revenue estimates supplied to
us, I have concluded that a simple flat tax at a rate of 20 percent on
all business and personal income can be enacted without reducing
Federal revenues.
The flat tax will help reduce the size of government and allow
ordinary citizens to have more influence over how their money is spent
because they will spend it--not the government. With a simple 20
percent flat tax rate in effect, the average person can easily see the
impact of any additional Federal spending proposal on his or her own
paycheck. By creating strong incentives for savings and investment, the
flat tax will have the beneficial result of making available larger
pools of capital for expansion of the private sector of the economy--
rather than more tax money for big government. This will mean more jobs
and, just as important, more higher paying jobs.
As a matter of Federal tax policy, there has been considerable
controversy over whether tax breaks should be used to stimulate
particular kinds of economic activity, or whether tax policy should be
neutral, leaving people to do what they consider best from a purely
economic point of view. Our current Tax Code attempts to use tax policy
to direct economic activity, but experience under that Code has
demonstrated that so-called tax breaks are inevitably used as the basis
for tax shelters which have no real relation to solid economic
purposes, or to the activities which the tax laws were meant to
promote. Even when the Government responds to particular tax shelters
with new and often complex revisions of the regulations, clever tax
experts are able to stay one or two steps ahead of the IRS bureaucrats
by changing the structure of their business transactions and then
claiming some legal distinctions between the taxpayer's new approach
and the revised IRS regulations and precedents.
Under the massive complexity of the current IRS Code, the battle
between $500-an-hour tax lawyers and IRS bureaucrats to open and close
loopholes is a battle the Government can never win. Under the flat tax
bill I offer today, there are no loopholes, and tax avoidance through
clever manipulations will become a thing of the past.
The basic model for this legislation comes from a plan created by
Profs. Robert Hall and Alvin Rabushka of the Hoover Institute at
Stanford University. Their plan envisioned a flat tax with no
deductions whatever. After considerable reflection, I decided to
include limited deductions for home mortgage interest on up to $100,000
in borrowing and charitable contributions up to $2,500 in the
legislation. While these modifications undercut the pure principle of
the flat tax, by continuing the use of tax policy to promote home
buying and charitable contributions, I believe that those two
deductions are so deeply ingrained in the financial planning of
American families that they should be retained as a matter of fairness
and public policy--and also political practicality. With those two
deductions maintained, passage of a modified flat tax will be
difficult; but without them, probably impossible.
In my judgment, an indispensable prerequisite to enactment of a
modified flat tax is revenue neutrality. Professor Hall advised that
the revenue neutrality of the Hall-Rabushka proposal, which uses a 19-
percent rate, is based on a well documented model founded on reliable
governmental statistics. My legislation raises that rate from 19- to
20-percent to accommodate retaining limited home mortgage interest and
charitable deductions. A preliminary estimate last Congress by the
Committee on Joint Taxation places the annual cost of the home interest
deduction at $35 billion, and the cost of the charitable deduction at
$13 billion. While the revenue calculation is complicated because the
Hall-Rabushka proposal encompasses significant revisions to business
taxes as well as personal income taxes, there is a sound basis for
concluding that the 1-
[[Page S3274]]
percent increase in rate would pay for the two deductions. Revenue
estimates for Tax Code revisions are difficult to obtain and are, at
best, judgment calls based on projections from fact situations with
myriad assumed variables. It is possible that some modification may be
needed at a later date to guarantee revenue neutrality.
This legislation offered today is quite similar to the bill
introduced in the House by Congressman Armey and in the Senate late in
1995 by Senator Richard Shelby, which were both in turn modeled after
the Hall-Rabushka proposal. The flat tax offers great potential for
enormous economic growth, in keeping with principles articulated so
well by Jack Kemp. This proposal taxes business revenues fully at their
source, so that there is no personal taxation on interest, dividends,
capital gains, gifts, or estates. Restructured in this way, the Tax
Code can become a powerful incentive for savings and investment--which
translates into economic growth and expansion, more and better jobs,
and a rising standard of living for all Americans.
In the 104th Congress, we took some important steps toward reducing
the size and cost of Government, and this work is ongoing and vitally
important. But the work of downsizing Government is only one side of
the coin; what we must do at the same time, and with as much energy and
care, is to grow the private sector. As we reform the welfare programs
and Government bureaucracies of past administrations, we must replace
those programs with a prosperity that extends to all segments of
American society through private investment and job creation--which can
have the additional benefit of producing even lower taxes for Americans
as economic expansion adds to Federal revenues. Just as Americans need
a Tax Code that is fair and simple, they also are entitled to tax laws
designed to foster rather than retard economic growth. The bill I offer
today embodies those principles.
My plan, like the Armey-Shelby proposal, is based on the Hall-
Rabushka analysis. But my flat tax differs from the Armey-Shelby plan
in four key respects: First, my bill contains a 20-percent flat tax
rate. Second, this bill would retain modified deductions for mortgage
interest and charitable contributions--which will require a 1-percent
higher tax rate than otherwise. Third, my bill would maintain the
automatic withholding of taxes from an individual's paycheck. Last, my
bill is designed to be revenue neutral, and thus will not undermine our
vital efforts to balance the Nation's budget. The estimate of revenue
neutrality is based on the Hall-Rabushka analysis together with
preliminary projections supplied by the Joint Committee on Taxation on
the modifications proposed in this bill.
The key advantages of this flat tax plan are threefold: First, it
will dramatically simplify the payment of taxes. Second, it will remove
much of the IRS regulatory morass now imposed on individual and
corporate taxpayers, and allow those taxpayers to devote more of their
energies to productive pursuits. Third, since it is a plan which
rewards savings and investment, the flat tax will spur economic growth
in all sectors of the economy as more money flows into investments and
savings accounts, and as interest rates drop. By contrast, there will
be a contraction of the IRS if this proposal is enacted.
Under this tax plan, individuals would be taxed at a flat rate of 20
percent on all income they earn from wages, pensions, and salaries.
Individuals would not be taxed on any capital gains, interest on
savings, or dividends--since those items will have already been taxed
as part of the flat tax on business revenue. The flat tax will also
eliminate all but two of the deductions and exemptions currently
contained within the Tax Code. Instead, taxpayers will be entitled to
personal allowances for themselves and their children. These personal
allowances have been adjusted upward to reflect inflation increases for
1995 and 1996. Thus, the new personal allowances are: $10,000 for a
single taxpayer; $15,000 for a single head of household; $17,500 for a
married couple filing jointly; and $5,000 per child or dependent. These
personal allowances would be adjusted annually for inflation commencing
in 1997.
In order to ensure that this flat tax does not unfairly impact low-
income families, the personal allowances contained in my proposal are
much higher than the standard deduction and personal exemptions allowed
under the current Tax Code. For example, in 1996, the standard
deduction is $4,000 for a single taxpayer, $5,900 for a head of
household, and $6,700 for a married couple filing jointly, while the
personal exemption for individuals and dependents is $2,550. Thus,
under the current Tax Code, a family of four which does not itemize
deductions would pay tax on all income over $16,900--personal
exemptions of $10,400 and a standard deduction of $6,700. By contrast,
under my flat tax bill, that same family would receive a personal
exemption of $27,500, and would pay tax only on income over that
amount.
My legislation retains the provisions for the deductibility of
charitable contributions up to a limit of $2,500 and home mortgage
interest on up to $100,000 of borrowing. Retention of these key
deductions will, I believe, enhance the political salability of this
legislation and allow the debate on the flat tax to move forward. If a
decision is made to eliminate these deductions, the revenue saved could
be used to reduce the overall flat tax rate below 20 percent.
With respect to businesses, the flat tax would also be a flat rate of
20 percent. My legislation would eliminate the intricate scheme of
complicated depreciation schedules, deductions, credits, and other
complexities that go into business taxation in favor of a much-
simplified system that taxes all business revenue less only wages,
direct expenses, and purchases--a system with much less potential for
fraud, ``creative accounting,'' and tax avoidance.
Businesses would be allowed to expense 100 percent of the cost of
capital formation, including purchases of capital equipment,
structures, and land, and to do so in the year in which the investments
are made. The business tax would apply to all money not reinvested in
the company in the form of employment or capital formation--thus fully
taxing revenue at the business level and making it inappropriate to
retax the same moneys when passed on to investors as dividends or
capital gains.
Let me now turn to a more specific discussion of the advantages of
the flat tax legislation I am reintroducing today.
Simplicity
The first major advantage to this flat tax is simplicity. According
to the Tax Foundation, Americans spend approximately 5.3 billion hours
each year filling out tax forms. Much of this time is spent burrowing
through IRS laws and regulations which fill 12,000 pages and which,
according to the Tax Foundation, have grown from 744,000 words in 1955
to 5.6 million words in 1994. The Internal Revenue Code annotations
alone fill 21 volumes of mind-numbing detail and minutiae.
Whenever the Government gets involved in any aspect of our lives, it
can convert the most simple goal or task into a tangled array of
complexity, frustration, and inefficiency. By way of example, most
Americans have become familiar with the absurdities of the Government's
military procurement programs. If these programs have taught us
anything, it is how a simple purchase order for a hammer or a toilet
seat can mushroom into thousands of words of regulations and
restrictions when the Government gets involved. The Internal Revenue
Service is certainly no exception. Indeed, it has become a
distressingly common experience for taxpayers to receive computerized
printouts claiming that additional taxes are due, which require
repeated exchanges of correspondence or personal visits before it is
determined, as it so often is, that the taxpayer was right in the first
place.
The plan offered today would eliminate these kinds of frustrations
for millions of taxpayers. This flat tax would enable us to scrap the
great majority of the IRS rules, regulations, instructions, and delete
literally millions of words from the Internal Revenue Code. Instead of
tens of millions of hours of nonproductive time spent in compliance
with--or avoidance of--the Tax Code, taxpayers would spend only the
small amount of time necessary to fill out a postcard-sized form. Both
business and individual taxpayers would thus find valuable hours freed
up
[[Page S3275]]
to engage in productive business activity, or for more time with their
families, instead of poring over tax tables, schedules, and
regulations.
The flat tax I have proposed can be calculated just by filling out a
small postcard which would require a taxpayer only to answer a few easy
questions. The postcard would look like this:
form 1 Individual Wage Tax 1997
Your first name and initial (if joint return, also give
spouse's name and initial).
Your social security number.
Home address (number and street including apartment number
or rural route).
Spouse's social security number.
City, town, or post office, state, and ZIP code.
1. Wages, salary, pension and retirement benefits.
2. Personal allowance (enter only one):
--$17,500 for married filing jointly;
--$10,000 for single;
--$15,000 for single head of household.
3. Number of dependents, not including spouse, multiplied
by $5,000.
4. Mortgage interest on debt up to $100,000 for owner-
occupied home.
5. Cash or equivalent charitable contributions (up to
$2,500).
6. Total allowances and deductions (lines 2, 3, 4 and 5).
7. Taxable compensation (line 1 less line 6, if positive;
otherwise zero).
8. Tax (20% of line 7).
9. Tax withheld by employer.
10. Tax or refund due (difference between lines 8 and 9).
Filing a tax return would become a manageable chore, not a seemingly
endless nightmare, for most taxpayers.
Cutting Back Government
Along with the advantage of simplicity, enactment of this flat tax
bill will help to remove the burden of costly and unnecessary
Government regulation, bureaucracy and redtape from our everyday lives.
The heavy hand of Government bureaucracy is particularly onerous in the
case of the Internal Revenue Service, which has been able to extend its
influence into so many aspects of our lives.
In 1995, the IRS employed 117,000 people, spread out over countless
offices across the United States. Its budget was in excess of $7
billion, with over $4 billion spent merely on enforcement. By
simplifying the tax code and eliminating most of the IRS' vast array of
rules and regulations, the flat tax would enable us to cut a
significant portion of the IRS budget, including the bulk of the
funding now needed for enforcement and administration.
In addition, a flat tax would allow taxpayers to redirect their time,
energies and money away from the yearly morass of tax compliance.
According to the Tax Foundation, in 1996, businesses will spend over
$150 billion complying with the Federal tax laws, and individuals will
spend an additional $74 billion, for a total of nearly $225 billion.
Fortune magazine estimates a much higher cost of compliance--nearly
$600 billion per year. According to a Tax Foundation study, adoption of
flat tax reform would cut pre-filing compliance costs by over 90
percent.
Monies spent by businesses and investors in creating tax shelters and
finding loopholes could be instead directed to productive and job-
creating economic activity. With the adoption of a flat tax, the
opportunities for fraud and cheating would also be vastly reduced,
allowing the government to collect, according to some estimates, over
$120 billion annually.
Economic Growth
The third major advantage to a flat tax is that it will be a
tremendous spur to economic growth. Harvard economist Dale Jorgenson
estimates adoption of a flat tax like the one offered today would
increase future national wealth by over $2 trillion, in present value
terms, over a 7-year period. This translates into over $7,500 in
increased wealth for every man, woman and child in America. This growth
also means that there will be more jobs--it is estimated that the $2
trillion increase in wealth would lead to the creation of 6 million new
jobs.
The economic principles are fairly straightforward. Our current tax
system is inefficient; it is biased toward too little savings and too
much consumption. The flat tax creates substantial incentives for
savings and investment by eliminating taxation on interest, dividends
and capital gains--and tax policies which promote capital formation and
investment are the best vehicle for creation of new and high paying
jobs, and for a greater prosperity for all Americans.
It is well recognized that to promote future economic growth, we need
not only to eliminate the Federal Government's reliance on deficits and
borrowed money, but to restore and expand the base of private savings
and investment that has been the real engine driving American
prosperity throughout our history. These concepts are interrelated, for
the Federal budget deficit soaks up much of what we have saved, leaving
less for businesses to borrow for investments.
It is the sum total of savings by all aspects of the U.S. economy
that represents the pool of all capital available for investment--in
training, education, research, machinery, physical plant, et cetera--
and that constitutes the real seed of future prosperity. The statistics
here are daunting. In the 1960's, the net U.S. national savings rate
was 8.2 percent, but it has fallen to a dismal 1.5 percent. In recent
international comparisons, the United States has the lowest savings
rate of any of the G-7 countries. We save at only one-tenth the rate of
the Japanese, and only one-fifth the rate of the Germans. This is
unacceptable and we must do something to reverse the trend.
An analysis of the components of U.S. savings patterns shows that
although the Federal budget deficit is the largest cause of dissavings,
both personal and business savings rates have declined significantly
over the past three decades. Thus, to recreate the pool of capital
stock that is critical to future U.S. growth and prosperity, we have to
do more than just get rid of the deficit. We have to very materially
raise our levels of private savings and investment. And we have to do
so in a way that will not cause additional deficits.
The less money people save, the less money is available for business
investment and growth. The current tax system discourages savings and
investment, because it taxes the interest we earn from our savings
accounts, the dividends we make from investing in the stock market, and
the capital gains we make from successful investments in our homes and
the financial markets. Indeed, under the current law these rewards for
saving and investment are not only taxed, they are overtaxed--since
gains due solely to inflation, which represent no real increase in
value, are taxed as if they were profits to the taxpayer.
With the limited exceptions of retirement plans and tax-free
municipal bonds, our current tax code does virtually nothing to
encourage personal savings and investment, or to reward it over
consumption. This bill will change this system, and address this
problem. The proposed legislation reverses the current skewed
incentives by promoting savings and investment by individuals and by
businesses. Individuals would be able to invest and save their money
tax free and reap the benefits of the accumulated value of those
investments without paying a capital gains tax upon the sale of these
investments. Businesses would also invest more as the flat tax allowed
them to expense fully all sums invested in new equipment and technology
in the year the expense was incurred, rather than dragging out the tax
benefits for these investments through complicated depreciation
schedules. With greater investment and a larger pool of
savings available, interest rates and the costs of investment would
also drop, spurring even greater economic growth.
Critics of the flat tax have argued that we cannot afford the revenue
losses associated with the tremendous savings and investment incentives
the bill affords to businesses and individuals. Those critics are
wrong. Not only is this bill carefully crafted to be revenue neutral,
but historically we have seen that when taxes are cut, revenues
actually increase, as more taxpayers work harder for a larger share of
their take-home pay, and investors are more willing to take risks in
pursuit of rewards that will not get eaten up in taxes.
As one example, under President Kennedy when individual tax rates
were lowered, investment incentives including the investment tax credit
were created and then expanded and depreciation rates were accelerated.
Yet, between 1962 and 1967, gross annual Federal tax receipts grew from
$99.7 billion to $148 billion--an increase of nearly 50 percent. More
recently after President Reagan's tax cuts in the
[[Page S3276]]
early 1980's, Government tax revenues rose from just under $600 billion
in 1981 to nearly $1 trillion in 1989. In fact, the Reagan tax cut
program helped to bring about one of the longest peacetime expansions
of the U.S. economy in history. There is every reason to believe that
the flat tax proposed here can do the same--and by maintaining revenue
neutrality in this flat tax proposal, as we have, we can avoid any
increases in annual deficits and the national debt.
In addition to increasing Federal revenues by fostering economic
growth, the flat tax can also add to Federal revenues without
increasing taxes by closing tax loopholes. The Congressional Research
Service estimates that for fiscal year 1995, individuals sheltered more
than $393 billion in tax revenue in legal loopholes, and corporations
sheltered an additional $60 billion. There may well be additional money
hidden in quasi-legal or even illegal tax shelters. Under a flat tax
system, all tax shelters will disappear and all income will be subject
to taxation.
The larger pool of savings created by a flat tax will also help to
reduce our dependence on foreign investors to finance both our Federal
budget deficits and our private sector economic activity. Currently, of
the publicly held Federal debt--that is, the portion not held by
various Federal trust funds like Social Security--nearly 20 percent is
held by foreigners--the highest level in our history. By contrast, in
1965 less than 5 percent of publicly held national debt was foreign
owned. We are paying over $40 billion in annual interest to foreign
governments and individuals, and this by itself accounts for roughly
one-third of our whole international balance of payments deficit. These
massive interest payments are one of the principal sources of American
capital flowing abroad, a factor which then enables foreign investors
to buy up American businesses. During the period 1980-91, the gross
value of U.S. assets owned by foreign businesses and individuals rose
427 percent, from $543 billion to $2.3 trillion.
The substantial level of foreign ownership of our national debt
creates both political and economic problems. On the political level,
there is at least the potential that some foreign nation may assume a
position where its level of investment in U.S. debt gives it
disproportionate leverage over American policy. Economically,
increasing foreign investment in Treasury debt furthers our national
shift from a creditor to a debtor nation, weakening the dollar and
undercutting our international trade position. A recent Congressional
Research Service report put it succinctly: ``To pay for today's capital
inflows, tomorrow's economy will have to ship more abroad in exchange
for fewer foreign products. These payments will be a consequence in
part of heavy Federal borrowing since 1982.'' With a flat tax in place,
America's own supply of capital can be replenished, and we can return
to our historic position as an international creditor nation rather
than a debtor.
The growth case for a flat tax is compelling. It is even more
compelling in the case of a tax revision that is simple and
demonstrably fair.
Fairness
By substantially increasing the personal allowances for taxpayers and
their dependents, this flat tax proposal ensures that poorer taxpayers
will pay no tax and that taxes will not be regressive for lower and
middle income taxpayers. At the same time, by closing the hundreds of
tax loopholes which are currently used by wealthier taxpayers to
shelter their income and avoid taxes, this flat tax bill will also
ensure that all Americans pay their fair share.
A variety of specific cases illustrate the fairness and simplicity of
this flat tax:
Case No. 1--Married couple with two children, rents home, yearly income
$35,000
Under Current Law:
Income........................................................$35,000
Four personal exemptions......................................$10,200
Standard deduction..............................................6,700
Taxable income................................................$18,100
Tax due under current rates....................................$2,719
Marginal rate (percent)..........................................15.0
Effective tax rate (percent)......................................7.8
Under Flat Tax:
Personal allowance............................................$17,500
Two dependents................................................$10,000
Taxable income.................................................$7,500
Tax due under flat tax.........................................$1,500
Effective tax rate (percent)......................................4.3
Savings of $1,219
Case No. 2--Single individual, rents home, yearly income $50,000
Under Current Law:
Income........................................................$50,000
One personal exemption.........................................$2,550
Standard deduction.............................................$4,000
Taxable income................................................$43,450
Tax due under current rates....................................$9,053
Marginal rate (percent)..........................................28.0
Effective rate (percent).........................................18.1
Under Flat Tax:
Personal allowance............................................$10,000
Taxable income................................................$40,000
Tax due under flat tax.........................................$8,000
Effective rate (percent).........................................16.0
Savings of $1,053
Case No. 3--Married couple with no children, $150,000 mortgage at 9%,
yearly income $75,000
Under Current Law:
Income........................................................$75,000
Two personal exemptions........................................$5,100
Home mortgage deduction.......................................$13,500
State and local taxes..........................................$3,000
Charitable deduction...........................................$1,500
Taxable income................................................$51,900
Tax due under current rates....................................$9,326
Marginal rate (percent)........................................... 28
Effective tax rate (percent).....................................12.4
Under Flat Tax:
Personal allowance............................................$17,500
Home mortgage deduction........................................$9,000
Charitable deduction...........................................$1,500
Taxable income................................................$47,000
Tax due under flat tax.........................................$9,400
Effective tax rate (percent).....................................12.5
Slight Increase of $74
Case No. 4--Married couple with three children, $250,000 mortgage at
9%, yearly income $125,000
Under Current Law:
Income.......................................................$125,000
Five personal exemptions......................................$12,750
Home mortgage deduction.......................................$22,500
State and local taxes..........................................$5,000
Retirement fund deductions.....................................$6,000
Charitable deductions..........................................$2,500
Taxable income................................................$76,250
Tax due under current rates...................................$16,130
Marginal rate (percent)........................................... 31
Effective tax rate (percent).....................................12.9
Under Flat Tax:
Personal allowance............................................$17,500
Three dependents..............................................$15,000
Home mortgage deduction........................................$9,000
Charitable deduction...........................................$2,500
Taxable income................................................$81,000
Tax due under flat tax........................................$16,200
Effective tax rate (percent)...................................... 13
Slight Increase of $70
Case No. 5--Married couple, no children, $1,000,000 mortgages at 9% on
2 homes, $500,000 income
Under Current Law:
Income.......................................................$500,000
Personal exemptions at this level................................. $0
Home mortgage deductions......................................$90,000
State and local taxes.........................................$40,000
Retirement deductions.........................................$50,000
Charitable deductions.........................................$30,000
Taxable income...............................................$290,000
Tax due under current rates...................................$91,949
Marginal rate (percent)..........................................39.6
Effective tax rate (percent).....................................18.4
Under Flat Tax:
Personal allowance............................................$17,500
Mortgage deduction.............................................$9,000
Charitable deduction...........................................$2,500
Taxable income...............................................$471,000
Tax due under flat tax........................................$94,200
Effective tax rate (percent).....................................18.8
$2,251 higher taxes
The flat tax legislation that I am offering will retain the element
of progressivity that Americans view as essential to fairness in an
income tax system. Because of the lower end income exclusions, and the
capped deductions for home mortgage interest and charitable
contributions, the effective tax rates under my bill will range from 0
percent for families with incomes under about $30,000 to roughly 20
percent for the highest income groups:
ANNUAL TAXES UNDER 20 PERCENT FLAT TAX FOR MARRIED COUPLE WITH TWO CHILDREN FILING JOINTLY
--------------------------------------------------------------------------------------------------------------------------------------------------------
Personal Marginal tax
Income Home mortgage Deductible mtg. Charitable allowance (w/ Taxable income rate (in Taxes owed
\1\ interest contribution children) percent)
---------------------------------------------------------------------------\1\--------------------------------------------------------------------------
<27,500.......................... ............... ............... ............... ............... 0 0 0
30,000........................... 60,000 5,400 600 27,500 0 0 0
40,000........................... 80,000 7,200 800 27,500 4,500 2.3 900
[[Page S3277]]
50,000........................... 100,000 9,000 1,000 27,500 12,500 5.0 2,500
60,000........................... 120,000 9,000 1,200 27,500 22,300 7.4 4,460
70,000........................... 140,000 9,000 1,400 27,500 32,100 9.2 6,420
80,000........................... 160,000 9,000 1,600 27,500 41,900 10.5 8,380
90,000........................... 180,000 9,000 1,800 27,500 51,700 11.5 10,340
100,000.......................... 200,000 9,000 2,000 27,500 61,500 12.3 12,300
125,000.......................... 250,000 9,000 2,500 27,500 86,000 13.8 17,200
150,000.......................... 300,000 9,000 2,500 27,500 111,000 14.8 22,200
200,000.......................... 400,000 9,000 2,500 27,500 161,000 16.1 32,200
250,000.......................... 500,000 9,000 2,500 27,500 211,000 16.8 42,200
500,000.......................... 1,000,000 9,000 2,500 27,500 461,000 18.4 92,200
1,000,000........................ 2,000,000 9,000 2,500 27,500 961,000 19.2 192,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Assumes home mortgage of twice annual income at a rate of 9 percent and charitable contributions up to 2 percent of annual income.
My proposed legislation demonstrably retains the fairness that must
be an essential component of the American tax system.
Conclusion
The proposal that I make today is dramatic, but so are its
advantages: a taxation system that is simple, fair, and designed to
maximize prosperity for all Americans. A summary of the key advantages
are:
Simplicity: A 10-line postcard filing would replace the myriad forms
and attachments currently required, thus saving Americans up to 5.3
billion hours they currently spend every year in tax compliance.
Cuts Government: The flat tax would eliminate the lion's share of IRS
rules, regulations, and requirements, which have grown from 744,000
words in 1955 to 5.6 million words and 12,000 pages currently. It would
also allow us to slash the mammoth IRS bureaucracy of 117,000
employees.
Promotes economic growth: Economists estimate a growth of over $2
trillion in national wealth over 7 years, representing an increase of
approximately $7,500 in personal wealth for every man, woman, and child
in America. This growth would also lead to the creation of 6 million
new jobs.
Increases efficiency: Investment decisions would be made on the basis
of productivity rather than simply for tax avoidance, thus leading to
even greater economic expansion.
Reduces interest rates: Economic forecasts indicate that interest
rates would fall substantially, by as much as two points, as the flat
tax removes many of the current disincentives to savings.
Lowers compliance costs: Americans would be able to save up to $224
billion they currently spend every year in tax compliance.
Decreases fraud: As tax loopholes are eliminated and the Tax Code is
simplified, there will be far less opportunity for tax avoidance and
fraud, which now amounts to over $120 billion in uncollected revenue
annually.
Reduces IRS costs: Simplification of the Tax Code will allow us to
save significantly on the $7 billion annual budget currently allocated
to the Internal Revenue Service.
Professors Hall and Rabushka have projected that within 7 years of
enactment, this type of a flat tax would produce a 6-percent increase
in output from increased total work in the U.S. economy and increased
capital formation. The economic growth would mean a $7,500 increase in
the personal income of all Americans.
No one likes to pay taxes. But Americans will be much more willing to
pay their taxes under a system that they believe is fair, a system that
they can understand, and a system that they recognize promotes rather
than prevents growth and prosperity. The legislation I introduce today
will afford Americans such a tax system.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
S. 593
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENT OF 1986
CODE.
(a) Short Title.--This Act may be cited as the ``Flat Tax
Act of 1997''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents; amendment of 1986 Code.
Sec. 2. Flat tax on individual taxable earned income and business
taxable income.
Sec. 3. Repeal of estate and gift taxes.
Sec. 4. Additional repeals.
Sec. 5. Effective dates.
(c) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
SEC. 2. FLAT TAX ON INDIVIDUAL TAXABLE EARNED INCOME AND
BUSINESS TAXABLE INCOME.
(a) In General.--Subchapter A of chapter 1 of subtitle A is
amended to read as follows:
``Subchapter A--Determination of Tax Liability
``Part I. Tax on individuals.
``Part II. Tax on business activities.
``PART I--TAX ON INDIVIDUALS
``Sec. 1. Tax imposed.
``Sec. 2. Standard deduction.
``Sec. 3. Deduction for cash charitable contributions.
``Sec. 4. Deduction for home acquisition indebtedness.
``Sec. 5. Definitions and special rules.
``SECTION 1. TAX IMPOSED.
``(a) Imposition of Tax.--There is hereby imposed on every
individual a tax equal to 20 percent of the taxable earned
income of such individual.
``(b) Taxable Earned Income.--For purposes of this section,
the term `taxable earned income' means the excess (if any)
of--
``(1) the earned income received or accrued during the
taxable year, over
``(2) the sum of--
``(A) the standard deduction,
``(B) the deduction for cash charitable contributions, and
``(C) the deduction for home acquisition indebtedness,
for such taxable year.
``(c) Earned Income.--For purposes of this section--
``(1) In general.--The term `earned income' means wages,
salaries, or professional fees, and other amounts received
from sources within the United States as compensation for
personal services actually rendered, but does not include
that part of compensation derived by the taxpayer for
personal services rendered by the taxpayer to a corporation
which represents a distribution of earnings or profits rather
than a reasonable allowance as compensation for the personal
services actually rendered.
``(2) Taxpayer engaged in trade or business.--In the case
of a taxpayer engaged in a trade or business in which both
personal services and capital are material income-producing
factors, under regulations prescribed by the Secretary, a
reasonable allowance as compensation for the personal
services rendered by the taxpayer, not in excess of 30
percent of the taxpayer's share of the net profits of such
trade or business, shall be considered as earned income.
``SEC. 2. STANDARD DEDUCTION.
``(a) In General.--For purposes of this subtitle, the term
`standard deduction' means the sum of--
``(1) the basic standard deduction, plus
``(2) the additional standard deduction.
``(b) Basic Standard Deduction.--For purposes of subsection
(a), the basic standard deduction is--
``(1) $17,500 in the case of--
``(A) a joint return, and
``(B) a surviving spouse (as defined in section 5(a)),
``(2) $15,000 in the case of a head of household (as
defined in section 5(b)), and
``(3) $10,000 in the case of an individual--
``(A) who is not married and who is not a surviving spouse
or head of household, or
``(B) who is a married individual filing a separate return.
``(c) Additional Standard Deduction.--For purposes of
subsection (a), the additional standard deduction is $5,000
for each dependent (as defined in section 5(d))--
``(1) whose earned income for the calendar year in which
the taxable year of the taxpayer begins is less than the
basic standard deduction specified in subsection (b)(3), or
``(2) who is a child of the taxpayer and who--
[[Page S3278]]
``(A) has not attained the age of 19 at the close of the
calendar year in which the taxable year of the taxpayer
begins, or
``(B) is a student who has not attained the age of 24 at
the close of such calendar year.
``(d) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning in a calendar year after 1997, each dollar amount
contained in subsections (b) and (c) shall be increased by an
amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment under section 1(f)(3)
for the calendar year in which the taxable year begins,
determined by substituting `calendar year 1996' for `calendar
year 1992' in subparagraph (B) of such section.
``(2) Rounding.--If any increase determined under paragraph
(1) is not a multiple of $50, such amount shall be rounded to
the next lowest multiple of $50.
``SEC. 3. DEDUCTION FOR CASH CHARITABLE CONTRIBUTIONS.
``(a) General Rule.--For purposes of this part, there shall
be allowed as a deduction any charitable contribution (as
defined in subsection (b)) not to exceed $2,500 ($1,250, in
the case of a married individual filing a separate return),
payment of which is made within the taxable year.
``(b) Charitable Contribution Defined.--For purposes of
this section , the term `charitable contribution' means a
contribution or gift of cash or its equivalent to or for the
use of the following:
``(1) A State, a possession of the United States, or any
political subdivision of any of the foregoing, or the United
States or the District of Columbia, but only if the
contribution or gift is made for exclusively public purposes.
``(2) A corporation, trust, or community chest, fund, or
foundation--
``(A) created or organized in the United States or in any
possession thereof, or under the law of the United States,
any State, the District of Columbia, or any possession of the
United States;
``(B) organized and operated exclusively for religious,
charitable, scientific, literary, or educational purposes, or
to foster national or international amateur sports
competition (but only if no part of its activities involve
the provision of athletic facilities or equipment), or for
the prevention of cruelty to children or animals;
``(C) no part of the net earnings of which inures to the
benefit of any private shareholder or individual; and
``(D) which is not disqualified for tax exemption under
section 501(c)(3) by reason of attempting to influence
legislation, and which does not participate in, or intervene
in (including the publishing or distributing of statements),
any political campaign on behalf of (or in opposition to) any
candidate for public office.
A contribution or gift by a corporation to a trust, chest,
fund, or foundation shall be deductible by reason of this
paragraph only if it is to be used within the United States
or any of its possessions exclusively for purposes specified
in subparagraph (B). Rules similar to the rules of section
501(j) shall apply for purposes of this paragraph.
``(3) A post or organization of war veterans, or an
auxiliary unit or society of, or trust or foundation for, any
such post or organization--
``(A) organized in the United States or any of its
possessions, and
``(B) no part of the net earnings of which inures to the
benefit of any private shareholder or individual.
``(4) In the case of a contribution or gift by an
individual, a domestic fraternal society, order, or
association, operating under the lodge system, but only if
such contribution or gift is to be used exclusively for
religious, charitable, scientific, literary, or educational
purposes, or for the prevention of cruelty to children or
animals.
``(5) A cemetery company owned and operated exclusively for
the benefit of its members, or any corporation chartered
solely for burial purposes as a cemetery corporation and not
permitted by its charter to engage in any business not
necessarily incident to that purpose, if such company or
corporation is not operated for profit and no part of the net
earnings of such company or corporation inures to the benefit
of any private shareholder or individual.
For purposes of this section, the term `charitable
contribution' also means an amount treated under subsection
(d) as paid for the use of an organization described in
paragraph (2), (3), or (4).
``(c) Disallowance of Deduction in Certain Cases and
Special Rules.--
``(1) Substantiation requirement for certain
contributions.--
``(A) General rule.--No deduction shall be allowed under
subsection (a) for any contribution of $250 or more unless
the taxpayer substantiates the contribution by a
contemporaneous written acknowledgment of the contribution by
the donee organization that meets the requirements of
subparagraph (B).
``(B) Content of acknowledgment.--An acknowledgment meets
the requirements of this subparagraph if it includes the
following information:
``(i) The amount of cash contributed.
``(ii) Whether the donee organization provided any goods or
services in consideration, in whole or in part, for any
contribution described in clause (i).
``(iii) A description and good faith estimate of the value
of any goods or services referred to in clause (ii) or, if
such goods or services consist solely of intangible religious
benefits, a statement to that effect.
For purposes of this subparagraph, the term `intangible
religious benefit' means any intangible religious benefit
which is provided by an organization organized exclusively
for religious purposes and which generally is not sold in a
commercial transaction outside the donative context.
``(C) Contemporaneous.--For purposes of subparagraph (A),
an acknowledgment shall be considered to be contemporaneous
if the taxpayer obtains the acknowledgment on or before the
earlier of--
``(i) the date on which the taxpayer files a return for the
taxable year in which the contribution was made, or
``(ii) the due date (including extensions) for filing such
return.
``(D) Substantiation not required for contributions
reported by the donee organization.--Subparagraph (A) shall
not apply to a contribution if the donee organization files a
return, on such form and in accordance with such regulations
as the Secretary may prescribe, which includes the
information described in subparagraph (B) with respect to the
contribution.
``(E) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this paragraph, including regulations that
may provide that some or all of the requirements of this
paragraph do not apply in appropriate cases.
``(2) Denial of deduction where contribution for lobbying
activities.--No deduction shall be allowed under this section
for a contribution to an organization which conducts
activities to which section 11(d)(2)(C)(i) applies on matters
of direct financial interest to the donor's trade or
business, if a principal purpose of the contribution was to
avoid Federal income tax by securing a deduction for such
activities under this section which would be disallowed by
reason of section 11(d)(2)(C) if the donor had conducted such
activities directly. No deduction shall be allowed under
section 11(d) for any amount for which a deduction is
disallowed under the preceding sentence.
``(d) Amounts Paid To Maintain Certain Students as Members
of Taxpayer's Household.--
``(1) In general.--Subject to the limitations provided by
paragraph (2), amounts paid by the taxpayer to maintain an
individual (other than a dependent, as defined in section
5(d), or a relative of the taxpayer) as a member of such
taxpayer's household during the period that such individual
is--
``(A) a member of the taxpayer's household under a written
agreement between the taxpayer and an organization described
in paragraph (2), (3), or (4) of subsection (b) to implement
a program of the organization to provide educational
opportunities for pupils or students in private homes, and
``(B) a full-time pupil or student in the twelfth or any
lower grade at an educational organization located in the
United States which normally maintains a regular faculty and
curriculum and normally has a regularly enrolled body of
pupils or students in attendance at the place where its
educational activities are regularly carried on,
shall be treated as amounts paid for the use of the
organization.
``(2) Limitations.--
``(A) Amount.--Paragraph (1) shall apply to amounts paid
within the taxable year only to the extent that such amounts
do not exceed $50 multiplied by the number of full calendar
months during the taxable year which fall within the period
described in paragraph (1). For purposes of the preceding
sentence, if 15 or more days of a calendar month fall within
such period such month shall be considered as a full calendar
month.
``(B) Compensation or reimbursement.--Paragraph (1) shall
not apply to any amount paid by the taxpayer within the
taxable year if the taxpayer receives any money or other
property as compensation or reimbursement for maintaining the
individual in the taxpayer's household during the period
described in paragraph (1).
``(3) Relative defined.--For purposes of paragraph (1), the
term `relative of the taxpayer' means an individual who, with
respect to the taxpayer, bears any of the relationships
described in subparagraphs (A) through (H) of section
5(d)(1).
``(4) No other amount allowed as deduction.--No deduction
shall be allowed under subsection (a) for any amount paid by
a taxpayer to maintain an individual as a member of the
taxpayer's household under a program described in paragraph
(1)(A) except as provided in this subsection.
``(e) Denial of Deduction for Certain Travel Expenses.--No
deduction shall be allowed under this section for traveling
expenses (including amounts expended for meals and lodging)
while away from home, whether paid directly or by
reimbursement, unless there is no significant element of
personal pleasure, recreation, or vacation in such travel.
``(f) Disallowance of Deductions in Certain Cases.--For
disallowance of deductions for contributions to or for the
use of Communist controlled organizations, see section 11(a)
of the Internal Security Act of 1950 (50 U.S.C. 790).
``(g) Treatment of Certain Amounts Paid to or for the
Benefit of Institutions of Higher Education.--
``(1) In general.--For purposes of this section, 80 percent
of any amount described in
[[Page S3279]]
paragraph (2) shall be treated as a charitable contribution.
``(2) Amount described.--For purposes of paragraph (1), an
amount is described in this paragraph if--
``(A) the amount is paid by the taxpayer to or for the
benefit of an educational organization--
``(i) which is described in subsection (d)(1)(B), and
``(ii) which is an institution of higher education (as
defined in section 3304(f)), and
``(B) such amount would be allowable as a deduction under
this section but for the fact that the taxpayer receives
(directly or indirectly) as a result of paying such amount
the right to purchase tickets for seating at an athletic
event in an athletic stadium of such institution.
If any portion of a payment is for the purchase of such
tickets, such portion and the remaining portion (if any) of
such payment shall be treated as separate amounts for
purposes of this subsection.
``(h) Other Cross References.--
``(1) For treatment of certain organizations providing
child care, see section 501(k).
``(2) For charitable contributions of partners, see section
702.
``(3) For treatment of gifts for benefit of or use in
connection with the Naval Academy as gifts to or for the use
of the United States, see section 6973 of title 10, United
States Code.
``(4) For treatment of gifts accepted by the Secretary of
State, the Director of the International Communication
Agency, or the Director of the United States International
Development Cooperation Agency, as gifts to or for the use of
the United States, see section 25 of the State Department
Basic Authorities Act of 1956.
``(5) For treatment of gifts of money accepted by the
Attorney General for credit to the `Commissary Funds, Federal
Prisons' as gifts to or for the use of the United States, see
section 4043 of title 18, United States Code.
``(6) For charitable contributions to or for the use of
Indian tribal governments (or subdivisions of such
governments), see section 7871.
``SEC. 4. DEDUCTION FOR HOME ACQUISITION INDEBTEDNESS.
``(a) General Rule.--For purposes of this part, there shall
be allowed as a deduction all qualified residence interest
paid or accrued within the taxable year.
``(b) Qualified Residence Interest Defined.--The term
`qualified residence interest' means any interest which is
paid or accrued during the taxable year on acquisition
indebtedness with respect to any qualified residence of the
taxpayer. For purposes of the preceding sentence, the
determination of whether any property is a qualified
residence of the taxpayer shall be made as of the time the
interest is accrued.
``(c) Acquisition Indebtedness.--
``(1) In general.--The term `acquisition indebtedness'
means any indebtedness which--
``(A) is incurred in acquiring, constructing, or
substantially improving any qualified residence of the
taxpayer, and
``(B) is secured by such residence.
Such term also includes any indebtedness secured by such
residence resulting from the refinancing of indebtedness
meeting the requirements of the preceding sentence (or this
sentence); but only to the extent the amount of the
indebtedness resulting from such refinancing does not exceed
the amount of the refinanced indebtedness.
``(2) $100,000 limitation.--The aggregate amount treated as
acquisition indebtedness for any period shall not exceed
$100,000 ($50,000 in the case of a married individual filing
a separate return).
``(d) Treatment of Indebtedness Incurred on or Before
October 13, 1987.--
``(1) In general.--In the case of any pre-October 13, 1987,
indebtedness--
``(A) such indebtedness shall be treated as acquisition
indebtedness, and
``(B) the limitation of subsection (b)(2) shall not apply.
``(2) Reduction in $100,000 limitation.--The limitation of
subsection (b)(2) shall be reduced (but not below zero) by
the aggregate amount of outstanding pre-October 13, 1987,
indebtedness.
``(3) Pre-october 13, 1987, indebtedness.--The term `pre-
October 13, 1987, indebtedness' means--
``(A) any indebtedness which was incurred on or before
October 13, 1987, and which was secured by a qualified
residence on October 13, 1987, and at all times thereafter
before the interest is paid or accrued, or
``(B) any indebtedness which is secured by the qualified
residence and was incurred after October 13, 1987, to
refinance indebtedness described in subparagraph (A) (or
refinanced indebtedness meeting the requirements of this
subparagraph) to the extent (immediately after the
refinancing) the principal amount of the indebtedness
resulting from the refinancing does not exceed the principal
amount of the refinanced indebtedness (immediately before the
refinancing).
``(4) Limitation on period of refinancing.--Subparagraph
(B) of paragraph (3) shall not apply to any indebtedness
after--
``(A) the expiration of the term of the indebtedness
described in paragraph (3)(A), or
``(B) if the principal of the indebtedness described in
paragraph (3)(A) is not amortized over its term, the
expiration of the term of the first refinancing of such
indebtedness (or if earlier, the date which is 30 years after
the date of such first refinancing).
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Qualified residence.--For purposes of this
subsection--
``(A) In general.--Except as provided in subparagraph (C),
the term `qualified residence' means the principal residence
of the taxpayer.
``(B) Married individuals filing separate returns.--If a
married couple does not file a joint return for the taxable
year--
``(i) such couple shall be treated as 1 taxpayer for
purposes of subparagraph (A), and
``(ii) each individual shall be entitled to take into
account \1/2\ of the principal residence unless both
individuals consent in writing to 1 individual taking into
account the principal residence.
``(C) Pre-october 13, 1987, indebtedness.--In the case of
any pre-October 13, 1987, indebtedness, the term `qualified
residence' has the meaning given that term in section
163(h)(4), as in effect on the day before the date of
enactment of this subparagraph.
``(2) Special rule for cooperative housing corporations.--
Any indebtedness secured by stock held by the taxpayer as a
tenant-stockholder in a cooperative housing corporation shall
be treated as secured by the house or apartment which the
taxpayer is entitled to occupy as such a tenant-stockholder.
If stock described in the preceding sentence may not be used
to secure indebtedness, indebtedness shall be treated as so
secured if the taxpayer establishes to the satisfaction of
the Secretary that such indebtedness was incurred to acquire
such stock.
``(3) Unenforceable security interests.--Indebtedness shall
not fail to be treated as secured by any property solely
because, under any applicable State or local homestead or
other debtor protection law in effect on August 16, 1986, the
security interest is ineffective or the enforceability of the
security interest is restricted.
``(4) Special rules for estates and trusts.--For purposes
of determining whether any interest paid or accrued by an
estate or trust is qualified residence interest, any
residence held by such estate or trust shall be treated as a
qualified residence of such estate or trust if such estate or
trust establishes that such residence is a qualified
residence of a beneficiary who has a present interest in such
estate or trust or an interest in the residuary of such
estate or trust.
``SEC. 5. DEFINITIONS AND SPECIAL RULES.
``(a) Definition of Surviving Spouse.--
``(1) In general.--For purposes of this part, the term
`surviving spouse' means a taxpayer--
``(A) whose spouse died during either of the taxpayer's 2
taxable years immediately preceding the taxable year, and
``(B) who maintains as the taxpayer's home a household
which constitutes for the taxable year the principal place of
abode (as a member of such household) of a dependent--
``(i) who (within the meaning of subsection (d)) is a son,
stepson, daughter, or stepdaughter of the taxpayer, and
``(ii) with respect to whom the taxpayer is entitled to a
deduction for the taxable year under section 2.
For purposes of this paragraph, an individual shall be
considered as maintaining a household only if over one-half
of the cost of maintaining the household during the taxable
year is furnished by such individual.
``(2) Limitations.--Notwithstanding paragraph (1), for
purposes of this part a taxpayer shall not be considered to
be a surviving spouse--
``(A) if the taxpayer has remarried at any time before the
close of the taxable year, or
``(B) unless, for the taxpayer's taxable year during which
the taxpayer's spouse died, a joint return could have been
made under the provisions of section 6013 (without regard to
subsection (a)(3) thereof).
``(3) Special rule where deceased spouse was in missing
status.--If an individual was in a missing status (within the
meaning of section 6013(f)(3)) as a result of service in a
combat zone and if such individual remains in such status
until the date referred to in subparagraph (A) or (B), then,
for purposes of paragraph (1)(A), the date on which such
individual dies shall be treated as the earlier of the date
determined under subparagraph (A) or the date determined
under subparagraph (B):
``(A) The date on which the determination is made under
section 556 of title 37 of the United States Code or under
section 5566 of title 5 of such Code (whichever is
applicable) that such individual died while in such missing
status.
``(B) Except in the case of the combat zone designated for
purposes of the Vietnam conflict, the date which is 2 years
after the date designated as the date of termination of
combatant activities in that zone.
``(b) Definition of Head of Household.--
``(1) In general.--For purposes of this part, an individual
shall be considered a head of a household if, and only if,
such individual is not married at the close of such
individual's taxable year, is not a surviving spouse (as
defined in subsection (a)), and either--
``(A) maintains as such individual's home a household which
constitutes for more than one-half of such taxable year the
principal place of abode, as a member of such household, of--
``(i) a son, stepson, daughter, or stepdaughter of the
taxpayer, or a descendant of a son or daughter of the
taxpayer, but if such son, stepson, daughter, stepdaughter,
or descendant is married at the close of the taxpayer's
taxable year, only if the taxpayer is entitled to a deduction
for the taxable year
[[Page S3280]]
for such person under section 2 (or would be so entitled but
for subparagraph (B) or (D) of subsection (d)(5)), or
``(ii) any other person who is a dependent of the taxpayer,
if the taxpayer is entitled to a deduction for the taxable
year for such person under section 2, or
``(B) maintains a household which constitutes for such
taxable year the principal place of abode of the father or
mother of the taxpayer, if the taxpayer is entitled to a
deduction for the taxable year for such father or mother
under section 2.
For purposes of this paragraph, an individual shall be
considered as maintaining a household only if over one-half
of the cost of maintaining the household during the taxable
year is furnished by such individual.
``(2) Determination of status.--For purposes of this
subsection--
``(A) a legally adopted child of a person shall be
considered a child of such person by blood;
``(B) an individual who is legally separated from such
individual's spouse under a decree of divorce or of separate
maintenance shall not be considered as married;
``(C) a taxpayer shall be considered as not married at the
close of such taxpayer's taxable year if at any time during
the taxable year such taxpayer's spouse is a nonresident
alien; and
``(D) a taxpayer shall be considered as married at the
close of such taxpayer's taxable year if such taxpayer's
spouse (other than a spouse described in subparagraph (C))
died during the taxable year.
``(3) Limitations.--Notwithstanding paragraph (1), for
purposes of this part, a taxpayer shall not be considered to
be a head of a household--
``(A) if at any time during the taxable year the taxpayer
is a nonresident alien; or
``(B) by reason of an individual who would not be a
dependent for the taxable year but for--
``(i) subparagraph (I) of subsection (d)(1), or
``(ii) paragraph (3) of subsection (d).
``(c) Certain Married Individuals Living Apart.--For
purposes of this part, an individual shall be treated as not
married at the close of the taxable year if such individual
is so treated under the provisions of section 7703(b).
``(d) Dependent Defined.--
``(1) General definition.--For purposes of this part, the
term `dependent' means any of the following individuals over
one-half of whose support, for the calendar year in which the
taxable year of the taxpayer begins, was received from the
taxpayer (or is treated under paragraph (3) or (5) as
received from the taxpayer):
``(A) A son or daughter of the taxpayer, or a descendant of
either.
``(B) A stepson or stepdaughter of the taxpayer.
``(C) A brother, sister, stepbrother, or stepsister of the
taxpayer.
``(D) The father or mother of the taxpayer, or an ancestor
of either.
``(E) A stepfather or stepmother of the taxpayer.
``(F) A son or daughter of a brother or sister of the
taxpayer.
``(G) A brother or sister of the father or mother of the
taxpayer.
``(H) A son-in-law, daughter-in-law, father-in-law, mother-
in-law, brother-in-law, or sister-in-law of the taxpayer.
``(I) An individual (other than an individual who at any
time during the taxable year was the spouse, determined
without regard to section 7703, of the taxpayer) who, for the
taxable year of the taxpayer, has as such individual's
principal place of abode the home of the taxpayer and is a
member of the taxpayer's household.
``(2) Rules relating to general definition.--For purposes
of this section--
``(A) Brother; sister.--The terms `brother' and `sister'
include a brother or sister by the halfblood.
``(B) Child.--In determining whether any of the
relationships specified in paragraph (1) or subparagraph (A)
of this paragraph exists, a legally adopted child of an
individual (and a child who is a member of an individual's
household, if placed with such individual by an authorized
placement agency for legal adoption by such individual), or a
foster child of an individual (if such child satisfies the
requirements of paragraph (1)(I) with respect to such
individual), shall be treated as a child of such individual
by blood.
``(C) Citizenship.--The term `dependent' does not include
any individual who is not a citizen or national of the United
States unless such individual is a resident of the United
States or of a country contiguous to the United States. The
preceding sentence shall not exclude from the definition of
`dependent' any child of the taxpayer legally adopted by such
taxpayer, if, for the taxable year of the taxpayer, the child
has as such child's principal place of abode the home of the
taxpayer and is a member of the taxpayer's household, and if
the taxpayer is a citizen or national of the United States.
``(D) Alimony, etc.--A payment to a wife which is alimony
or separate maintenance shall not be treated as a payment by
the wife's husband for the support of any dependent.
``(E) Unlawful arrangements.--An individual is not a member
of the taxpayer's household if at any time during the taxable
year of the taxpayer the relationship between such individual
and the taxpayer is in violation of local law.
``(3) Multiple support agreements.--For purposes of
paragraph (1), over one-half of the support of an individual
for a calendar year shall be treated as received from the
taxpayer if--
``(A) no one person contributed over one-half of such
support;
``(B) over one-half of such support was received from
persons each of whom, but for the fact that such person did
not contribute over one-half of such support, would have been
entitled to claim such individual as a dependent for a
taxable year beginning in such calendar year;
``(C) the taxpayer contributed over 10 percent of such
support; and
``(D) each person described in subparagraph (B) (other than
the taxpayer) who contributed over 10 percent of such support
files a written declaration (in such manner and form as the
Secretary may by regulations prescribe) that such person will
not claim such individual as a dependent for any taxable year
beginning in such calendar year.
``(4) Special support test in case of students.--For
purposes of paragraph (1), in the case of any individual who
is--
``(A) a son, stepson, daughter, or stepdaughter of the
taxpayer (within the meaning of this subsection), and
``(B) a student,
amounts received as scholarships for study at an educational
organization described in section 3(d)(1)(B) shall not be
taken into account in determining whether such individual
received more than one-half of such individual's support from
the taxpayer.
``(5) Support test in case of child of divorced parents,
etc.--
``(A) Custodial parent gets exemption.--Except as otherwise
provided in this paragraph, if--
``(i) a child receives over one-half of such child's
support during the calendar year from such child's parents--
``(I) who are divorced or legally separated under a decree
of divorce or separate maintenance,
``(II) who are separated under a written separation
agreement, or
``(III) who live apart at all times during the last 6
months of the calendar year, and
``(ii) such child is in the custody of 1 or both of such
child's parents for more than one-half of the calendar year,
such child shall be treated, for purposes of paragraph (1),
as receiving over one-half of such child's support during the
calendar year from the parent having custody for a greater
portion of the calendar year (hereafter in this paragraph
referred to as the `custodial parent').
``(B) Exception where custodial parent releases claim to
exemption for the year.--A child of parents described in
subparagraph (A) shall be treated as having received over
one-half of such child's support during a calendar year from
the noncustodial parent if--
``(i) the custodial parent signs a written declaration (in
such manner and form as the Secretary may by regulations
prescribe) that such custodial parent will not claim such
child as a dependent for any taxable year beginning in such
calendar year, and
``(ii) the noncustodial parent attaches such written
declaration to the noncustodial parent's return for the
taxable year beginning during such calendar year.
For purposes of this paragraph, the term `noncustodial
parent' means the parent who is not the custodial parent.
``(C) Exception for multiple-support agreement.--This
paragraph shall not apply in any case where over one-half of
the support of the child is treated as having been received
from a taxpayer under the provisions of paragraph (3).
``(D) Exception for certain pre-1985 instruments.--
``(i) In general.--A child of parents described in
subparagraph (A) shall be treated as having received over
one-half such child's support during a calendar year from the
noncustodial parent if--
``(I) a qualified pre-1985 instrument between the parents
applicable to the taxable year beginning in such calendar
year provides that the noncustodial parent shall be entitled
to any deduction allowable under section 2 for such child,
and
``(II) the noncustodial parent provides at least $600 for
the support of such child during such calendar year.
For purposes of this clause, amounts expended for the support
of a child or children shall be treated as received from the
noncustodial parent to the extent that such parent provided
amounts for such support.
``(ii) Qualified pre-1985 instrument.--For purposes of this
subparagraph, the term `qualified pre-1985 instrument' means
any decree of divorce or separate maintenance or written
agreement--
``(I) which is executed before January 1, 1985,
``(II) which on such date contains the provision described
in clause (i)(I), and
``(III) which is not modified on or after such date in a
modification which expressly provides that this subparagraph
shall not apply to such decree or agreement.
``(E) Special rule for support received from new spouse of
parent.--For purposes of this paragraph, in the case of the
remarriage of a parent, support of a child received from the
parent's spouse shall be treated as received from the parent.
``PART II--TAX ON BUSINESS ACTIVITIES
``Sec. 11. Tax imposed on business activities.
[[Page S3281]]
``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.
``(a) Tax Imposed.--There is hereby imposed on every person
engaged in a business activity located in the United States a
tax equal to 20 percent of the business taxable income of
such person.
``(b) Liability for Tax.--The tax imposed by this section
shall be paid by the person engaged in the business activity,
whether such person is an individual, partnership,
corporation, or otherwise.
``(c) Business Taxable Income.--
``(1) In general.--For purposes of this section, the term
`business taxable income' means gross active income reduced
by the deductions specified in subsection (d).
``(2) Gross active income.--For purposes of paragraph (1),
the term `gross active income' means gross income other than
investment income.
``(d) Deductions.--
``(1) In general.--The deductions specified in this
subsection are--
``(A) the cost of business inputs for the business
activity,
``(B) the compensation (including contributions to
qualified retirement plans but not including other fringe
benefits) paid for employees performing services in such
activity, and
``(C) the cost of personal and real property used in such
activity.
``(2) Business inputs.--
``(A) In general.--For purposes of paragraph (1)(A), the
term `cost of business inputs' means--
``(i) the actual cost of goods, services, and materials,
whether or not resold during the taxable year, and
``(ii) the actual cost, if reasonable, of travel and
entertainment expenses for business purposes.
``(B) Purchases of goods and services excluded.--Such term
shall not include purchases of goods and services provided to
employees or owners.
``(C) Certain lobbying and political expenditures
excluded.--
``(i) In general.--Such term shall not include any amount
paid or incurred in connection with--
``(I) influencing legislation,
``(II) participation in, or intervention in, any political
campaign on behalf of (or in opposition to) any candidate for
public office,
``(III) any attempt to influence the general public, or
segments thereof, with respect to elections, legislative
matters, or referendums, or
``(IV) any direct communication with a covered executive
branch official in an attempt to influence the official
actions or positions of such official.
``(ii) Exception for local legislation.--In the case of any
legislation of any local council or similar governing body--
``(I) clause (i)(I) shall not apply, and
``(II) such term shall include all ordinary and necessary
expenses (including, but not limited to, traveling expenses
described in subparagraph (A)(iii) and the cost of preparing
testimony) paid or incurred during the taxable year in
carrying on any trade or business--
``(aa) in direct connection with appearances before,
submission of statements to, or sending communications to the
committees, or individual members, of such council or body
with respect to legislation or proposed legislation of direct
interest to the taxpayer, or
``(bb) in direct connection with communication of
information between the taxpayer and an organization of which
the taxpayer is a member with respect to any such legislation
or proposed legislation which is of direct interest to the
taxpayer and to such organization, and that portion of the
dues so paid or incurred with respect to any organization of
which the taxpayer is a member which is attributable to the
expenses of the activities carried on by such organization.
``(iii) Application to dues of tax-exempt organizations.--
Such term shall include the portion of dues or other similar
amounts paid by the taxpayer to an organization which is
exempt from tax under this subtitle which the organization
notifies the taxpayer under section 6033(e)(1)(A)(ii) is
allocable to expenditures to which clause (i) applies.
``(iv) Influencing legislation.--For purposes of this
subparagraph--
``(I) In general.--The term `influencing legislation' means
any attempt to influence any legislation through
communication with any member or employee of a legislative
body, or with any government official or employee who may
participate in the formulation of legislation.
``(II) Legislation.--The term `legislation' has the meaning
given that term in section 4911(e)(2).
``(v) Other special rules.--
``(I) Exception for certain taxpayers.--In the case of any
taxpayer engaged in the trade or business of conducting
activities described in clause (i), clause (i) shall not
apply to expenditures of the taxpayer in conducting such
activities directly on behalf of another person (but shall
apply to payments by such other person to the taxpayer for
conducting such activities).
``(II) De minimis exception.--
``(aa) In general.--Clause (i) shall not apply to any in-
house expenditures for any taxable year if such expenditures
do not exceed $2,000. In determining whether a taxpayer
exceeds the $2,000 limit, there shall not be taken into
account overhead costs otherwise allocable to activities
described in subclauses (I) and (IV) of clause (i).
``(bb) In-house expenditures.--For purposes of provision
(aa), the term `in-house expenditures' means expenditures
described in subclauses (I) and (IV) of clause (i) other than
payments by the taxpayer to a person engaged in the trade or
business of conducting activities described in clause (i) for
the conduct of such activities on behalf of the taxpayer, or
dues or other similar amounts paid or incurred by the
taxpayer which are allocable to activities described in
clause (i).
``(III) Expenses incurred in connection with lobbying and
political activities.--Any amount paid or incurred for
research for, or preparation, planning, or coordination of,
any activity described in clause (i) shall be treated as paid
or incurred in connection with such activity.
``(vi) Covered executive branch official.--For purposes of
this subparagraph, the term `covered executive branch
official' means--
``(I) the President,
``(II) the Vice President,
``(III) any officer or employee of the White House Office
of the Executive Office of the President, and the 2 most
senior level officers of each of the other agencies in such
Executive Office, and
``(IV) any individual serving in a position in level I of
the Executive Schedule under section 5312 of title 5, United
States Code, any other individual designated by the President
as having Cabinet level status, and any immediate deputy of
such an individual.
``(vii) Special rule for indian tribal governments.--For
purposes of this subparagraph, an Indian tribal government
shall be treated in the same manner as a local council or
similar governing body.
``(viii) Cross Reference.--
``For reporting requirements and alternative taxes related to this
subsection, see section 6033(e).
``(e) Carryover of Excess Deductions.--
``(1) In general.--If the aggregate deductions for any
taxable year exceed the gross active income for such taxable
year, the amount of the deductions specified in subsection
(d) for the succeeding taxable year (determined without
regard to this subsection) shall be increased by the sum of--
``(A) such excess, plus
``(B) the product of such excess and the 3-month Treasury
rate for the last month of such taxable year.
``(2) 3-month treasury rate.--For purposes of paragraph
(1), the 3-month Treasury rate is the rate determined by the
Secretary based on the average market yield (during any 1-
month period selected by the Secretary and ending in the
calendar month in which the determination is made) on
outstanding marketable obligations of the United States with
remaining periods to maturity of 3 months or less.''
(b) Conforming Repeals and Redesignations.--
(1) Repeals.--The following subchapters of chapter 1 of
subtitle A and the items relating to such subchapters in the
table of subchapters for such chapter 1 are repealed:
(A) Subchapter B (relating to computation of taxable
income).
(B) Subchapter C (relating to corporate distributions and
adjustments).
(C) Subchapter D (relating to deferred compensation, etc.).
(D) Subchapter G (relating to corporations used to avoid
income tax on shareholders).
(E) Subchapter H (relating to banking institutions).
(F) Subchapter I (relating to natural resources).
(G) Subchapter J (relating to estates, trusts,
beneficiaries, and decedents).
(H) Subchapter L (relating to insurance companies).
(I) Subchapter M (relating to regulated investment
companies and real estate investment trusts).
(J) Subchapter N (relating to tax based on income from
sources within or without the United States).
(K) Subchapter O (relating to gain or loss on disposition
of property).
(L) Subchapter P (relating to capital gains and losses).
(M) Subchapter Q (relating to readjustment of tax between
years and special limitations).
(N) Subchapter S (relating to tax treatment of S
corporations and their shareholders).
(O) Subchapter T (relating to cooperatives and their
patrons).
(P) Subchapter U (relating to designation and treatment of
empowerment zones, enterprise communities, and rural
development investment areas).
(Q) Subchapter V (relating to title 11 cases).
(2) Redesignations.--The following subchapters of chapter 1
of subtitle A and the items relating to such subchapters in
the table of subchapters for such chapter 1 are redesignated:
(A) Subchapter E (relating to accounting periods and
methods of accounting) as subchapter B.
(B) Subchapter F (relating to exempt organizations) as
subchapter C.
(C) Subchapter K (relating to partners and partnerships) as
subchapter D.
SEC. 3. REPEAL OF ESTATE AND GIFT TAXES.
Subtitle B (relating to estate, gift, and generation-
skipping taxes) and the item relating to such subtitle in the
table of subtitles is repealed.
SEC. 4. ADDITIONAL REPEALS.
Subtitles H (relating to financing of presidential election
campaigns) and J (relating
[[Page S3282]]
to coal industry health benefits) and the items relating to
such subtitles in the table of subtitles are repealed.
SEC. 5. EFFECTIVE DATES.
(a) In General.--Except as provided in subsection (b), the
amendments made by this Act apply to taxable years beginning
after December 31, 1997.
(b) Repeal of Estate and Gift Taxes.--The repeal made by
section 3 applies to estates of decedents dying, and
transfers made, after December 31, 1997.
(c) Technical and Conforming Changes.--The Secretary of the
Treasury or the Secretary's delegate shall, as soon as
practicable but in any event not later than 90 days after the
date of enactment of this Act, submit to the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate a draft of any technical
and conforming changes in the Internal Revenue Code of 1986
which are necessary to reflect throughout such Code the
changes in the substantive provisions of law made by this
Act.
______
By Mr. McCONNELL (for himself, Mr. Graham, Mr. Shelby, Mr.
Breaux, Mr. Coverdell, Mr. Glenn, Mr. Cochran, Mr. Murkowski,
Mr. DeWine, Mr. Mack, Mr. Robb, Mr. Specter, Mrs. Hutchison,
Mr. Bennett, Mr. D'Amato, Ms. Landrieu, and Mr. Warner):
S. 594. A bill to amend the Internal Revenue Code of 1986 to modify
the tax treatment of qualified State tuition programs; to the Committee
on Finance.
THE COLLEGE SAVINGS ACT OF 1997
Mr. McCONNELL. Mr. President, I have come to the floor today to
introduce legislation that addresses an important issue facing families
today--the education of their children. For the past several years, I
have worked to make college more affordable by rewarding families who
save. In both the 103d and 104th Congresses, I introduced legislation--
S. 1787 and S. 386 respectively--to make earnings invested in State-
sponsored tuition savings plans exempt from Federal taxation.
States have recognized the needs of families and have provided
incentives for them to save or prepay their children's education. State
savings plans provide families, a safe, affordable and disciplined
means of paying for their children's education. The College Savings Act
of 1997, will provide Federal tax incentives to provide additional
assistance to the efforts of the States.
According to GAO, tuition at a 4-year university rose 234 percent
between 1980-94. During this same period, median household income rose
84 percent and the consumer price index rose a mere 74 percent. The
College Board reports that tuition costs for the 1996-97 school year
will rise 5 percent while average room and board costs will rise
between 4-6 percent. While education costs have moderated throughout
the 1990's, they continue to outstrip the gains in income. Tuition has
now become the greatest barrier to attendance.
Due to the rising cost of education, more and more families have come
to rely on financial aid to meet tuition costs. In fact, a majority of
all college students accept some amount of financial assistance. In
1995, $50 billion in financial aid was available to students from
Federal, State, and institutional sources. This was $3 billion higher
than the previous year. A majority of this increase has come in the
form of loans, which now make up the largest portion of the total
Federal aid package at 57 percent. Grants, which a decade ago made up
49 percent of assistance, have been reduced to 42 percent. This shift
toward loans further burdens students and families with additional
interest costs.
In response to this trend, the Republican Congress and the President
have developed different proposals to address the rising cost of a
post-secondary education. S. 1, the Safe and Affordable Schools Act,
provides incentives for families to save for their children's college
education through education savings accounts and State-sponsored
savings plans. For those burdened by student loans, this legislation
also makes the interest paid on student loans deductible, The President
has offered two tax provisions, the HOPE scholarship, which is a $1,500
tax credit and a $10,000 tax deduction for tuition expenses.
A provision in S. 1 makes the earnings in State-sponsored tuition
savings plans exempt from taxation. Like the legislation I am
introducing today, this provision recognizes the leadership States have
taken in helping families save for college. In the mid-1980's States
identified the difficulty families had in keeping pace with the rising
cost of education. States like Michigan, Florida, Ohio, and Kentucky
were the first programs to be started in order to help families save
for college. Today, there are 15 States with programs in operation. An
additional four States will implement their programs this year.
According to the College Savings Network every other State, except
Georgia, which has implemented the HOPE Scholarship Program, is
preparing legislation or is studying a proposal to help their residents
save for college.
Today there are 600,000 participants contributing over $3 billion to
education savings nationwide. By year end, the College Savings Plan
Network estimates that they will have 1 million participants. By 2006,
they estimate that over $6 billion will be invested in State-sponsored
programs.
Kentucky established its plan in 1988 to provide residents with an
affordable means of saving for college. Today, 2,602 Kentucky
participants have contributed over $5 million toward their childrens'
education.
Many Kentuckians are drawn to this program because it offers a low-
cost, disciplined approach to savings. In fact, the average monthly
contribution in Kentucky is just $49. This proposal rewards those who
are serious about their future and are committed over the long-term to
the education of their children by exempting all interest earnings from
State taxes. It is also important to note that 58 percent of the
participants earn under $60,000 per year. Clearly, this benefits
middle-class families.
Last year, Congress took the first step in providing tax relief to
families investing in those programs. The provisions contained in the
Small Business Job Protection Act of 1996 clarified the tax treatment
of both the State-sponsored tuition savings plans and the participants'
investment. This measure put an end to the tax uncertainty that has
hampered the effectiveness of these State-sponsored programs and helped
families who are tying to save for their childrens' education.
Already, we can see the result of the tax reforms in the 104th
Congress. Last year, Virginia started its plan and was overwhelmed by
the positive response. In its first year, the plan sold 16,111
contracts raising $260 million. This success exceeded all goals for
this program. While we made important gains last year, we need to
finish what we have started and fully exempt the investment income from
taxation.
The legislation I am introducing today with the support of Senator
Graham and others will make the savings in State pre-paid tuition plans
exempt from taxation. While the measure is similar to the provision in
S. 1, it is a more comprehensive proposal that has been developed in
close consultation with the States. In addition to tax exemption, the
bill expands the definition of qualified education expense to include
room and board costs. This is important since such costs can amount to
50 percent of total college expenses.
It also allows individuals who invested in series EE savings bonds to
contribute these education savings bonds to qualified State tuition
programs.
This is a commonsense provision that will give those who are already
saving the flexibility to invest in prepaid plan if available. It also
clarifies the law to permit States to establish scholarship programs
within the plan. The bill also makes several other minor changes that
will help the programs to operate more efficiently, including
clarification of the transition rule, permitting the transfer of
benefits to cousins and stepchildren, and permitting States to include
proprietary schools as eligible institutions.
This legislation is a serious effort to encourage long-term saving.
It is important that we not forget that compound interest cuts both
ways. By saving, participants can keep pace with tuition increases
while putting a little away at a time. By borrowing, students must bear
added interest costs that add thousands to the total cost of tuition.
During the election the President unveiled his education tax
proposals. There are two primary provisions of the President's
proposal. The first is the HOPE scholarship, which would
[[Page S3283]]
allow a parent or student to claim a $1,500 nonrefundable tax credit
for tuition expenses. The other is a $10,000 tax deduction to be
applied toward tuition expenses.
The most disturbing aspect of this proposal is its cost. It is my
understanding that the President's proposal, if allowed to reach its
fullest potential, will exceed $80 billion over the next 10 years as
estimated by Joint Tax Committee. This contrasts with the modest tax
package included in S. 1, which is estimated to cost $18 billion during
the same period. This can be compared with the $1.6 million cost
associated with the College Savings Act I have introduced today.
The administration has been quick to point out that their tax package
isn't a budget buster because of the tax credit sunset that will be
implemented if the President's budget isn't in balance by 2002.
According to the CBO the President's budget will run a $69 billion
deficit in 2002. With such uncertainty, how does this help families
plan for their childrens' future? Considering the importance of this
issue, I am surprised the President is willing to allow this program to
expire, shortly after it begins.
The President's proposal has also been criticized because it will
also contribute to increased tuition costs. Mr. Chairman, I would ask
that an editorial by Lawrence Gladieux, executive director for the
College Board and Robert Reischauer, the former director of the CBO, be
included with my testimony.
Mr. Gladieux and Mr. Reischauer argue that the President's credit
would be money in the bank, not only for parents, but the schools as
well. This across-the-board tax credit would permit schools to add this
subsidy into the cost of tuition. It was also their assumption that the
tax benefit would benefit primarily wealthy individuals. Therefore the
President's package would be two strikes against low-income families
who won't benefit from the tax credit, yet will still bear the burden
of higher tuition costs.
The authors also point out the President's proposal imposes a new
regulatory burden on schools by requiring the IRS to verify that a
student received a B average in order to be eligible for a second year
of this tax credit. Under the President's proposal we will have the IRS
grading student papers and publishing tax regulations defining B work.
It is simply a mistake to use the Tax Code in this manner.
It is in our best interest as a nation to maintain a quality and
affordable education system for everyone. We need to decide on how we
will spend our limited Federal resources to ensure that both access and
quality are maintained. It is unrealistic to assume that the Government
can afford to provide Federal assistance for everyone. However, at a
modest cost, we can help families help themselves by rewarding savings.
This reduces the cost of education and will not unnecessarily burden
future generations with thousands of dollars in loans.
I urge my colleagues to support this valuable legislation this year
to reward those who save in order to provide a college education for
their children.
Mr. President, I ask the full text of the bill be printed in the
Record. I also ask that the article by Larry Gladieux and Robert
Reischauer be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 594
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. MODIFICATIONS OF TAX TREATMENT OF QUALIFIED STATE
TUITION PROGRAMS.
(a) Exclusion of Distributions Used for Educational
Purposes.--Subparagraph (B) of section 529(c)(3) of the
Internal Revenue Code of 1986 (relating to treatment of
distributions) is amended to read as follows:
``(B) Distributions for qualified higher education
expenses.--Subparagraph (A) shall not apply to any
distribution to the extent--
``(i) the distribution is used exclusively to pay qualified
higher education expenses of the distributee, or
``(ii) the distribution consists of providing a benefit to
the distributee which, if paid for by the distributee, would
constitute payment of a qualified higher education expense.''
(b) Qualified Higher Education Expenses to Include Room and
Board.--Section 529(e)(3) of the Internal Revenue Code of
1986 (defining qualified higher education expenses) is
amended by adding at the end the following: ``Such term shall
also include reasonable costs (as determined under the
qualified State tuition program) incurred by the designated
beneficiary for room and board while attending such
institution.''
(c) Additional Modifications.--
(1) Member of family.--Paragraph (2) of section 529(e) of
the Internal Revenue Code of 1986 (relating to other
definitions and special rules) is amended to read as follows:
``(2) Member of family.--The term `member of family'
means--
``(A) an individual who bears a relationship to another
individual which is a relationship described in paragraphs
(1) through (8) of section 152(a), and
``(B) a spouse of any individual described in subparagraph
(A).''
(2) Eligible educational institution.--Section 529(e) of
such Code is amended--
(A) in paragraph (3), by striking ``(as defined in section
135(c)(3))'' and inserting ``(within the meaning of paragraph
(5))'', and
(B) by adding at the end the following:
``(5) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on the
date of the enactment of this paragraph, and
``(B) which is eligible to participate in a program under
title IV of such Act.''
(3) Technical amendments.--
(A) Subparagraph (B) of section 529(e)(1) of such Code is
amended by striking ``subsection (c)(2)(C)'' and inserting
``subsection (c)(3)(C)''.
(B) Subparagraph (C) of section 529(e)(1) of such Code is
amended by inserting ``(or agency or instrumentality
thereof)'' after ``State or local government''.
(C) Paragraph (2) of section 1806(c) of the Small Business
Job Protection Act of 1996 is amended by striking so much of
the first sentence as follows subparagraph (B)(ii) and
inserting the following:
``then such program (as in effect on August 20, 1996) shall
be treated as a qualified State tuition program with respect
to contributions (and earnings allocable thereto) pursuant to
contracts entered into under such program before the first
date on which such program meets such requirements
(determined without regard to this paragraph) and the
provisions of such program (as so in effect) shall apply in
lieu of section 529(b) of the Internal Revenue Code of 1986
with respect to such contributions and earnings.''
(d) Coordination With Education Savings Bond.--Section
135(c)(2) of the Internal Revenue Code of 1986 (defining
qualified higher education expenses) is amended by adding at
the end the following:
``(C) Contributions to qualified state tuition program.--
Such term shall include any contribution to a qualified State
tuition program (as defined in section 529) on behalf of a
designated beneficiary (as so defined) who is an individual
described in subparagraph (A).''
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1996.
(2) Additional modifications.--The amendments made by
subsection (c) shall take effect as if included in the
amendments made by, and the provisions of, section 1806 of
the Small Business Job Protection Act of 1996.
____
[From the Washington Post, Sept. 4, 1996]
Higher Tuition, More Grade Inflation
(By Lawrence E. Gladieux and Robert D. Reischauer)
More than any president since Lyndon Johnson, Bill Clinton
has linked his presidency to strengthening and broadening
American education. He has argued persuasively that the
nation needs to increase its investment in education to spur
economic growth, expand opportunity and reduce growing income
disparities. He has certainly earned the right to try to make
education work for him as an issue in his reelection
campaign, and that's clearly what he plans to do.
Unfortunately, one way the president has chosen to pursue
his goals for education is by competing with the GOP on tax
cuts. The centerpiece of his education agenda--tax breaks for
families paying college tuition--would be bad tax policy and
worse education policy. While tuition tax relief may be
wildly popular with voters and leave Republicans speechless,
it won't achieve the president's worthy objectives for
education, won't help those most in need and will create more
problems than it solves.
Under the president's plan, families could choose to deduct
up to $10,000 in tuition from their taxable income or take a
tax credit (a direct offset against federal income tax) of
$1,500 for the first year of undergraduate education or
training. The credit would be available for a second year if
the student maintains a B average.
The vast majority of taxpayers who incur tuition expenses--
joint filers with incomes up to $100,000 and single filers up
to $70,000--would be eligible for these tax breaks. But
before the nation invests the $43 billion that the
administration says this plan will cost over the next six
years, the public should demand that policy makers answer
these questions:
[[Page S3284]]
Will tuition tax credits and deductions boost postsecondary
enrollment? Not significantly. Most of the benefits would go
to families of students who would have attended college
anyway. For them, it will be a windfall. That won't lift the
country's net investment in education or widen opportunities
for higher education. For families who don't have quite
enough to send their child to college, the tax relief may
come too late to make a difference. While those families
could adjust their payroll withholding, most won't. Thus any
relief would be realized in year-end tax refunds, long after
families needed the money to pay the tuition.
Will they help moderate- and low-income students who have
the most difficulty meeting tuition costs? A tax deduction
would be of no use to those without taxable income. On the
other hand, the proposed $1,500 tax credit--because it would
be ``refundable''--would benefit even students and families
that owe no taxes. But nearly 4 million low-income students
would largely be excluded from the tax credit because they
receive Pell Grants which, under the Clinton plan, would be
subtracted from their tax-credit eligibility.
Will the plan lead to greater federal intrusion into higher
education? The Internal Revenue Service would have to certify
the amount of tuition students actually paid, the size of
their Pell Grants and whether they maintained B averages.
This could impose complex regulatory burdens on universities
and further complicate the tax code. It's no wonder the
Treasury Department has long resisted proposals for tuition
tax breaks.
Will the program encourage still higher tuition levels and
more grade inflation? While the tuition spiral may be
moderating slightly, college price increases have averaged
more than twice the rate of inflation during the 1990s. With
the vast majority of students receiving tax relief, colleges
might have less incentive to hold down their tuition
increases. Grades, which have been rising almost as rapidly
as tuition, might get an extra boost too if professors
hesitate to deny their students the B needed to renew the tax
credit.
If more than $40 billion in new resources really can be
found to expand access to higher education, is this the best
way to invest it? A far better alternative to tuition tax
schemes is need-based student financial aid. The existing aid
programs, imperfect as they may be, are a much more effective
way to equalize educational opportunity and increase
enrollment rates. More than $40 billion could go a long way
toward restoring the purchasing power of Pell Grants and
other proven programs, whose benefits inflation has eroded by
as much as 50 percent during the past 15 years. Unlike
tuition tax cuts, expanded need-based aid would not drag the
IRS into the process of delivering educational benefits.
Need-based aid also is less likely to increase inflationary
pressure on college prices, because such aid goes to only a
portion of the college-going population.
Economists have long argued that the tax code shouldn't be
used if the same objective can be met through a direct-
expenditure program. Tax incentives for college savings might
make sense; parents seem to need more encouragement to put
money away for their children's education. But tax relief for
current tuition expenditures fails the test.
Maybe Clinton's tuition tax-relief plan, like the
Republican across-the-board tax-cut proposals, can be chalked
up to election-year pandering that will be forgotten after
November. But oft-repeated campaign themes sometimes make it
into the policy stream. That was the case in 1992, when
candidate Clinton promised student-loan reform and community
service that, as president, he turned into constructive
initiatives. If reelected, Clinton again may stick with his
campaign mantra. This time, it's tuition tax breaks. This
time, he shouldn't.
Mr. McCONNELL. Mr. President, it does not take an economics professor
to figure out that compound interest can either work for or against
you. I would think that my colleagues would agree that middle-class
Americans deserve to have their hard-earned dollars working for them
instead of against them. The College Savings Act allows hard-working
Americans to utilize this principle while saving for the college
education of their children.
Option 1 illustrates the average cost of using the Federal loan
program to finance the average instate college tuition in the United
States which is $10,540. Under the Federal loan program, middle-class
Americans end up paying $120 per month after graduation to retire just
the cost of higher education tuition and fees, not to mention room and
boarding costs.
These payments will continue for 120 months, or 10 years after
receiving a diploma. Students end up repaying $14,400 on these loans.
This means that they will end up paying $3,860 in interest to finance a
college education. That is figured at a 6.5-percent interest rate.
Option 2, on the other hand, figures in the same amount of tuition
cost, $10,540, but that is where the similarities end. Under the
College Savings Act, monthly deposits are half as expensive as loan
payments under Federal loan programs. Your monthly deposit over the
120-month, or 10-year period under our legislation would only be $58.
Mr. President, this is possible because under the College Savings Act
total payments are only $6,960. This is simply because you have
compound interest of 6.5 percent working in your favor, instead of
against you, to the tune of $3,580. That totals a whopping difference
of $7,440 from Federal loan programs. That is almost half the cost of
financing an education through Federal loans.
Mr. GRAHAM. Mr. President, I wish to speak this afternoon about an
initiative which has been designed to increase American's access to
college education. Today, Senator McConnell and I, along with numerous
cosponsors, are introducing the College Savings Act of 1997. This bill
would clarify the tax treatment of State-sponsored prepaid college
tuition and savings programs and would clarify them in a manner that
will allow States flexibility to offer their citizens plans to pay for
college on a tax-free basis.
Why are we discussing these programs? We are discussing these State
programs because they have flourished in the face of spiraling college
costs. As shown on this chart, which was produced by the General
Accounting Office, tuition at colleges and universities has increased
234 percent since 1980. During the same period, the general rate of
inflation has increased only 85 percent and household income has
increased only 82 percent. There has been a growing gap between the
cost of higher education, in terms of tuition, and the ability of
families to support their children's desire to continue their education
beyond high school.
Higher education inflation has been almost triple the rate of general
inflation and the increase in Americans' ability to pay for that higher
education. The causes of this dramatic increase in tuition is the
subject of a significant debate. But whether these increases are
attributable to increased costs of colleges and universities, reduction
in State funding for public institutions, or the increased value of a
college education, the fact remains that affording a college education
has become increasingly difficult for American families.
Although the Federal Government has increased its aid to college
students over the years, it is the States that have engineered
innovative ways to help citizens afford college.
One of the most innovative of those measures has been the prepaid
college tuition plan. The first of these plans was adopted in Michigan
in 1986. Since that first program was adopted, today 15 States have
such prepaid college plans, and an additional 4 States have adopted
plans which will be in effect by 1998.
The States shown in green are those which currently offer plans. The
four States shown in yellow will initiate their plans this year. All of
the remaining States shown in red are currently considering legislation
to establish a prepaid college tuition plan. From these State
laboratories, two types of programs have emerged: prepaid tuition
programs and savings programs.
Under either of these two, a family pays money into a State fund. In
future years, the funds which have been accumulating will be
distributed to the college or university of the child's choice and the
child's ability to secure admission under the academic standards of
that institution.
The State pools the funds from all participants, invests those funds
in a manner that will match or exceed the rate of higher education
inflation.
Under a prepaid tuition plan, the State and the individual family
enter into an advanced tuition payment contract naming a student as the
beneficiary of the contract. The amount the family must pay depends on
the number of years remaining before the student enrolls in college. In
most States, purchasers can choose a lump-sum payment or installment
payments. Twelve States currently follow this tuition model. Let me
explain with an example.
Today, if a Florida child is 7 years old and his family enrolls him
in the Florida prepaid tuition plan, they can enter into a contract and
pay a lump sum of $5,900. Then in the year 2008, when the child reaches
the age of 18
[[Page S3285]]
and enrolls in college, the State will transfer the cost of tuition for
120 credit hours of instruction which has a currently estimated value
of $14,350 to the college or university the student chooses to attend.
Under a State savings plan, individuals transfer money to a State
trust which, in turn, invests the funds and guarantees a certain rate
of return. Typically, the earnings on the account are exempt from State
taxation. Three States follow the State savings fund model.
One of the attributes of these programs is that just as States
establish institutions of higher education to meet the educational
needs of their States' citizens, each State program differs in its
emphasis. As an example, the Alaska plan allows individuals to direct a
portion of the State oil revenues to pay for their contracts. In
Alabama, money can be used to take accredited college courses while a
student is still attending high school. The Massachusetts plan allows
nonresidents to enroll in its plan. Louisiana provides matching grants
for certain low-income participants in its plan.
The tax problem that lies before us today, Mr. President, is whether
or not the student should be taxed when the student redeems the funds
upon enrollment. Until 1996, the Federal tax treatment of these plans
remained murky. In the spring of 1996, the Internal Revenue Service
indicated its intent to tax families annually on the earnings of funds
transferred to these State plans.
I thought this was wrong, counterproductive and would discourage what
has been a very positive commitment of American families to save for
their children's college education. So I worked with Senators
McConnell, Breaux, Shelby, and the leaders of the Senate Finance
Committee to address the issue in the Small Business Job Protection Act
of 1996. Provisions we developed were included in the bill that
President Clinton ultimately signed into law.
The four basic provisions in the 1996 reform were, first, any prepaid
or savings entity established by the State is tax exempt. Two, the
earnings on money transferred to these State programs are not taxed
until distribution. Three, upon distribution, the appreciation on the
contracts or accounts will be taxed to the student beneficiary over the
time the student attends college. And fourth, these tax rules apply
only to contracts and accounts used to fund the cost of tuition, fees,
books, and required equipment.
Mr. President, despite the fact I offered the proposal in the Finance
Committee, I have always thought that the right answer was that
participation in these programs should be 100 percent tax free. In
other words, no taxation upon distribution unless the funds were used
for purposes other than qualified educational purposes.
The legislation that Senator McConnell and I are introducing today
will amend section 529 of the Tax Code in two significant respects.
First, the bill provides that if distributions from a State fund are
used for qualified educational purposes, then there will be no taxation
to the student. In other words, there would be no Federal income tax
for participation in these State-sponsored programs.
Second, the bill would expand the definition of qualified higher
education expenses. Last year's legislation provided that tuition,
books, fees and required equipment were tax exempt. Under the new
proposal, we would also include the cost of room and board as qualified
educational expenses.
The bill also makes a number of technical and other changes to assure
that States have sufficient flexibility to manage their successful
programs. There are several policy-related questions in enacting this
legislation, and I will turn to them in a minute. But before doing so,
I would like to offer an example of the positive influence of these
programs from my State of Florida.
I would like, Mr. President, to introduce to you Sean and Patrick
Gilliland who are in the gallery today. Sean and Patrick Gilliland are
respectively a senior and junior at the University of Florida. In 1988,
the first year the prepaid program was offered to Floridians, Mr. and
Mrs. Gilliland purchased prepaid contracts for Sean and Patrick. Two
years after purchasing the plan, Mr. Gilliland tragically died,
unexpectedly leaving Mrs. Gilliland, Sean and Patrick with a single
income.
Mrs. Gilliland is a nurse. As a result of the change of income, she
attests that without the foresight of having purchased a Florida
prepaid college program for her two sons, she would not have been able
to provide a college education for Sean and Patrick.
Sean will graduate in 2 weeks from the University of Florida,
majoring in business administration with an emphasis in Asian studies.
Sean has applied for several overseas positions in Japan, Taiwan, and
Korea, with hopes to enter the field of technology in the business
world.
Patrick is currently a junior at the University of Florida, the
School of Health and Human Performance, majoring in exercise and sports
science. He is a member of Golden Key National Honor Society. He also
holds a dean's list grade point average. Patrick is looking forward to
continuing his education in a graduate program to prepare him for a
profession in cardiological rehabilitation. I wish to both of them the
very best in their future endeavors.
Sean and Patrick Gilliland exemplify the reasons that we need to
encourage the expansion of these State-based prepaid college tuition
programs. Let me outline several of the policy reasons why it is
appropriate and urgent that Congress enact the legislation that we
introduce today to clarify the Federal tax treatment of these programs.
First, Congress needs to support State innovation. Here is an example
of a national problem: how to deal with the escalating cost of higher
education. The States have provided the energy to address that problem.
During the late 1980's and early 1990's, with the Federal Government
responding to spiraling college costs in an inadequate manner, States
experimented and engineered these programs. The Federal Government
should encourage the States by getting the Internal Revenue Service out
of the way.
Second, State plans increase college enrollment, especially among
low- and moderate-income families. Experience demonstrates that the
discipline and the security offered by these prepaid tuition plans
provide the exact incentive that many families need to save for
college.
For example, in Florida, the median income of families with a college
student is $50,000. This chart indicates, in ``Who goes to college in
Florida,'' that 22 percent of the families who have children in our
State college and university system have incomes of less than $30,000;
26 percent between $30,000 and $50,000.
On the question, ``Who buys contracts for Florida's prepaid college
tuition program,'' we find that 8 percent are purchased by families
with incomes of under $20,000; 17 percent by families between $20,000
and $30,000; and 23 percent by families between $30,000 and $40,000;
and 24 percent by families between $40,000 and $50,000. So almost
three-quarters of those families who purchase contracts have an income
which is at or below the median income of all students attending
Florida's colleges and universities.
This program is providing a powerful incentive for moderate- and low-
income Florida families to think about and prepare for their children's
education.
Third, State plans help prepare students psychologically. A family
that regularly sets aside money for a child's college education
converts the focus of their student child from, ``Will I be able to go
to college,'' to ``Will I be sufficiently prepared to be admitted to
college and which college do I wish to attend?''
Fourth, savings is a far superior approach to financing higher
education than incurring additional individual and family debt. A
prepayment or a savings plan is better economically, both for the
family and for the Nation. These programs can also boost the Nation's
savings rate.
For example, Virginia's program has just completed its inaugural
enrollment. It signed contracts of over $200 million for Virginia
families saving for their children's college education.
Finally, an expansion of programs will promote downward pressure on
tuition rates. Increased participation in State tuition programs not
only will provide participants with a guaranteed hedge against
education inflation, but
[[Page S3286]]
it will also produce downward pressure on tuition rates for all
students at all colleges. States sponsoring these programs, in essence,
guarantee that if earnings on the funds do not exceed increases in
tuition rates, then the State will fund the difference when the student
enrolls in college. Thus, a State has an incentive to encourage cost
efficiency throughout its State system. The pressure will also promote
moderate tuition hikes at private schools which must compete with
public colleges for students. This has been true in Florida.
Since the inauguration of the Florida prepaid program in 1988, State
tuition has risen by an average of 6 percent per year. That is 2
percent less than the national average of 8 percent a year.
You may say, Mr. President, that, well, 2 percent difference between
a particular State's average annual rate of increase in tuition and
what is the national average is not a significant amount. Let me put
this in dollar terms.
In 1988, the average tuition in the Nation was $1,827. In Florida, it
was $1,163. That is a difference of $664.
By last year, with the average annual increase of 8 percent, the
national average for tuition at State universities had grown from
$1,827 to $3,358. Florida's tuition increasing at 6 percent per year
had gone from $1,163 to $1,888. That, Mr. President, is a difference of
$1,470 per year between the cost of college education in Florida and
the average for the Nation.
I am not saying that Florida's tuition increases have been less than
the national average solely because of the Florida prepaid program, but
it has been a significant factor.
We need to do everything we can to hold college costs in check. The
expansion of these programs can make a noticeable contribution in that
effort. And clarifying the tax consequences of participation will help
to facilitate additional States beyond the current 19 who have or will
have these programs and increase the number of participating families.
Mr. President, I would like to particularly thank Senator McConnell
for the leadership which he has displayed in making the College Savings
Act of 1997 a reality.
With enactment of this legislation, parents and children will be able
to rest easier knowing that Congress has done the right thing by making
a college education more accessible. I urge my colleagues in the Senate
to join Senator McConnell and me to assure enactment of this important
new opportunity for American families to save and plan for the college
education of their children.
Mr. WARNER. Mr. President, Virginians appreciate the value of
education. The Commonwealth owes its economic success to a strong
university system and an educated workforce. This commitment to
education continues to fuel economic expansion, job growth, and rising
incomes.
Middle-class parents across the country recognize that education is
the key to their childrens' success. But they often struggle to provide
this education, as college tuition increases far outpace increases in
personal income. Tuition savings programs help provide a solution.
Virginia was the first State in the union to launch its program after
the Small Business Protection Act was signed into law last August. This
legislation builds on that success, by making investment earnings in
qualifying State tuition plans entirely tax exempt and by expanding
coverage. This bill will encourage more families to save more money for
higher education.
Virginia's prepaid tuition program is an overwhelming success. During
the first 3-month enrollment period, over 16,000 children were enrolled
in VPEP. The value of these contract total over $260 million, ranking
Virginia fourth in the Nation among States with prepaid education
programs. The Virginia Higher Education Tuition Trust Fund received
over 85,000 telephone calls from around the State seeking information
about the program. I want to commend Governor Allen for his leadership,
as well as Diana Cantor, executive director of the trust fund, and her
team for their tremendous efforts.
As Virginians recognize by their overwhelming support of the state's
plan, education is a critical component of future success. I am pleased
to cosponsor this important legislation and I commend Virginia for
taking the lead.
______
By Mr. BOND (for himself and Mr. Ashcroft):
S. 595. A bill to designate the U.S. post office building located at
Bennett Street and Kansas Expressway in Springfield, MO, as the ``John
Griesemer Post Office Building''; to the Committee on Governmental
Affairs.
THE JOHN GRIESEMER POST OFFICE BUILDING DESIGNATION ACT OF 1997
Mr. BOND. Mr. President, I rise to introduce a bill to designate the
U.S. post office building located at Bennett Street and Kansas
Expressway in Springfield, MO as the ``John Griesemer Post Office
Building.''
John Griesemer was a true example of an American patriot. He loved,
supported, and defended his country.
John Griesemer was born in Mount Vernon, MO, and raised on a dairy
farm in Billings, MO. After he graduated from high-school, he attended
the University of Missouri--Columbia and in 1953 graduated with a
bachelor of science degree in civil engineering. He then entered the
Air Force as a first lieutenant, engineering officer. After being
discharged from the military in 1956, he went back home to Missouri to
work in the family business. He was president and director of the
Griesemer Stone Co. until his death in 1993. John Griesemer didn't just
work for the family business though. He also started two of his own
businesses: the Joplin Stone Co. and Missouri Commercial Transportation
Co. as well as serving as president of Springfield Ready Mix, director
of Boatmen's National Bank, and president of the Springfield
Development Council. In addition to his business interests, John
Griesemer was a devoted family man. He and his wife, Kathleen, had five
children and John took an avid interest in their lives holding various
positions with the Boy Scouts of America and his church.
In 1984, John made his life even busier. He was asked by President
Reagan to serve on the U.S. Postal Service Board of Governors. He even
served as president of the board in 1987 and 1988.
John Griesemer is an example to us all. He possessed the qualities of
perseverance, determination, and strength that allowed him to
successfully manage a busy work and service schedule with a very busy
family life.
I urge my colleagues to act quickly and pass this bill by unanimous
consent.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 595
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. DESIGNATION OF JOHN GRIESEMER POST OFFICE
BUILDING.
The United States Post Office building located at Bennett
Street and Kansas Expressway in Springfield, Missouri, shall
be known and designated as the ``John Griesemer Post Office
Building''.
SEC. 2. REFERENCES.
Any reference in a law, map, regulation, document, paper,
or other record of the United States to the United States
Post Office building referred to in section 1 shall be deemed
to be a reference to the ``John Griesemer Post Office
Building''.
______
By Mr. KOHL (for himself and Mr. Cochran):
S. 596. A bill to authorize the Administrator of the Office of
Juvenile Justice and Delinquency Prevention of the Department of
Justice to make grants to States and units of local government to
assist in providing secure facilities for violent and serious chronic
juvenile offenders, and for other purposes; to the Committee on the
Judiciary.
JUVENILE CORRECTIONS ACT OF 1997
Mr. KOHL. Mr. President, I rise to introduce the Juvenile Corrections
Act of 1997, which I am proud to sponsor with my friend and colleague,
Senator Cochran. The act dedicates approximately 10 percent of the 1994
Crime Act's adult prison resources to the construction and operation of
State and local juvenile corrections facilities.
Juvenile violence, as we all know, is at the heart of the crime
problem in America. Every 5 minutes a child is arrested for a violent
crime in the United States; every 2 hours a child dies of a
[[Page S3287]]
gunshot wound. Unfortunately, there is good reason to believe that this
problem may get worse before it gets better. Demographics tell us that
between now and the year 2000, the number of children between the ages
of 14 to 7 will increase by more than 1 million. The likely result: a
serious increase in the number of violent juvenile offenders in the
coming years--above already unacceptable levels.
Despite this state of affairs, the Federal Government has treated
juvenile corrections as the poor stepchild of the Federal anticrime
effort. The 1994 Crime Act contained billions of dollars for policing
and adult prisons at the State and local level, but no significant
program to help States alleviate the increasing burdens on their
juvenile corrections systems.
These burdens are real and substantial, Mr. President. Department of
Justice surveys have indicated that many juvenile corrections
facilities nationwide are seriously overcrowded and understaffed--in
short, bursting at the seams. As a result of the increasing number of
14 to 17 year olds we highlighted above, we will probably see even
worse overcrowding in the future.
Mr. President, the consequences of overcrowding should trouble us
all. In part due to the combination of overcrowding and understaffing,
juvenile offenders attacked detention facility staff 8,000 times in
1993. In countless U.S. cities, juvenile offenders who require
detention are nonetheless released into the community because of a lack
of space. And finally, it is clear that overcrowding breeds violence
and ever more violent juvenile offenders who, when eventually released,
are much more dangerous to society than when they were first
institutionalized.
For all these reasons, we introduce today the Juvenile Corrections
Act. Our legislation provides crucial assistance--over $790 million in
funding over 3 years--to State and local governments for the
construction, expansion, and operation of juvenile corrections
facilities and programs. And, I should note, the Act has no impact on
the deficit, as it draws its funding from the $10 billion adult
corrections component of the 1994 Crime Act.
Mr. President, we cannot afford to turn a blind eye to the juvenile
corrections problem. So I hope my colleagues will join with me and
Senator Cochran to enact the Juvenile Corrections Act. In light of the
spiraling juvenile violence problem, we believe it makes good sense to
dedicate roughly 10 percent of the Crime Act's adult prison resources
to State and local juvenile corrections.
I ask unanimous consent that a copy of the legislation be printed in
the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 596
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Juvenile Corrections Act of
1997''.
SEC. 2. GRANTS FOR FACILITIES FOR VIOLENT AND SERIOUS CHRONIC
JUVENILE OFFENDERS.
(a) Definitions.--In this section--
(1) the term ``Administrator'' means the Administrator of
the Office of Juvenile Justice and Delinquency Prevention of
the Department of Justice;
(2) the term ``combination'' has the same meaning as in
section 103 of the Juvenile Justice and Delinquency
Prevention Act of 1974 (42 U.S.C. 5603);
(3) the term ``juvenile delinquency program'' has the same
meaning as in section 103 of the Juvenile Justice and
Delinquency Prevention Act of 1974 (42 U.S.C. 5603);
(4) the term ``qualifying State'' means a State that has
submitted, or a State in which an eligible unit of local
government has submitted, a grant application that meets the
requirements of subsections (c) and (e);
(5) the terms ``secure detention facility'' and ``secure
correctional facility'' have the same meanings as in section
103 of the Juvenile Justice and Delinquency Prevention Act of
1974 (42 U.S.C. 5603);
(6) the term ``State'' means a State, the District of
Columbia, the Commonwealth of Puerto Rico, the United States
Virgin Islands, American Samoa, Guam, and the Northern
Mariana Islands; and
(7) the term ``unit of local government'' has the same
meaning as in section 103 of the Juvenile Justice and
Delinquency Prevention Act of 1974 (42 U.S.C. 5603).
(b) Authorization of Grants.--The Administrator may make
grants to States and units of local government, or
combinations thereof, to assist them in planning,
establishing, and operating secure detention facilities,
secure correctional facilities, and other facilities and
programs for violent juveniles and serious chronic juvenile
offenders who are accused of or who have been adjudicated as
having committed one or more offenses.
(c) Applications.--
(1) In general.--The chief executive officer of a State or
unit of local government that seeks to receive a grant under
this section shall submit to the Administrator an
application, in such form and in such manner as the
Administrator may prescribe.
(2) Contents.--Each application submitted under paragraph
(1) shall--
(A) provide assurances that each facility or program funded
with a grant under this section will provide appropriate
educational and vocational training and substance abuse
treatment for juvenile offenders; and
(B) provide assurances that each facility or program funded
with a grant under this section will afford juvenile
offenders intensive post-release supervision and services.
(d) Minimum Amount.--Of the total amount made available
under subsection (g) to carry out this section in any fiscal
year--
(1) except as provided in paragraph (2), each qualifying
State, together with units of local government within the
State, shall be allocated not less than 1.0 percent; and
(2) the United States Virgin Islands, American Samoa, Guam,
and the Northern Mariana Islands shall each be allocated 0.2
percent.
(e) Performance Evaluation.--
(1) Evaluation components.--
(A) In general.--Each facility or program funded with a
grant under this section shall contain an evaluation
component developed pursuant to guidelines established by the
Administrator.
(B) Outcome measures.--Each evaluation required by this
subsection shall include outcome measures that can be used to
determine the effectiveness of each program funded with grant
under this section, including the effectiveness of the
program in comparison with other juvenile delinquency
programs in reducing the incidence of recidivism, and other
outcome measures.
(2) Periodic review and reports.--
(A) Review.--The Administrator shall review the performance
of each recipient of a grant under this section.
(B) Reports.--The Administrator may require a grant
recipient to submit to the Office of Juvenile Justice and
Delinquency Prevention of the Department of Justice the
results of the evaluations required under paragraph (1) and
such other data and information as may be reasonably
necessary to carry out the Administrator's responsibilities
under this section.
(f) Technical Assistance and Training.--The Administrator
shall provide technical assistance and training to each
recipient of a grant under this section to assist those
recipients in achieving the purposes of this section.
(g) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section--
(1) $252,700,000 for fiscal year 1998;
(2) $266,000,000 for fiscal year 1999; and
(3) $275,310,000 for fiscal year 2000.
SEC. 3. COMPENSATING REDUCTION OF AUTHORIZATION OF
APPROPRIATIONS.
Section 20108(a)(1) of the Violent Crime Control and Law
Enforcement Act of 1994 (42 U.S.C. 13708(a)(1)) is amended by
striking subparagraphs (C) through (E) and inserting the
following:
``(C) $2,274,300,000 for fiscal year 1998;
``(D) $2,394,000,000 for fiscal year 1999; and
``(E) $2,477,790,000 for fiscal year 2000.''.
SEC. 4. REPORT ON ACCOUNTABILITY AND PERFORMANCE MEASURES IN
JUVENILE CORRECTIONS PROGRAMS.
(a) In General.--Not later than 6 months after the date of
enactment of this Act, the Administrator shall, after
consultation with the National Institute of Justice and other
appropriate governmental and nongovernmental organizations,
submit to Congress a report regarding the possible use of
performance-based criteria in evaluating and improving the
effectiveness of juvenile delinquency programs.
(b) Contents.--The report required under this section shall
include an analysis of--
(1) the range of performance-based measures that might be
utilized as evaluation criteria, including measures of
recidivism among juveniles who have been incarcerated in a
secure correctional facility or a secure detention facility,
or who have participated in a juvenile delinquency program;
(2) the feasibility of linking Federal juvenile corrections
funding to the satisfaction of performance-based criteria by
grantees (including the use of a Federal matching mechanism
under which the share of Federal funding would vary in
relation to the performance of a facility or program);
(3) whether, and to what extent, the data necessary for the
Office of Juvenile Justice and Delinquency Prevention of the
Department of Justice to utilize performance-based criteria
in its administration of juvenile delinquency programs are
collected and reported nationally; and
(4) the estimated cost and feasibility of establishing
minimal, uniform data collection and reporting standards
nationwide that would allow for the use of performance-based
criteria in evaluating secure correctional facilities, secure
detention facilities, and juvenile delinquency programs and
in administering amounts appropriated for Federal juvenile
delinquency programs.
[[Page S3288]]
______
By Mr. BINGAMAN (for himself, Mr. Craig, Mr. Hollings, Mr. Reid,
Mr. Akaka, Mr. Cochran, Mr. Dorgan, Mr. Inouye, Mrs. Boxer, Ms.
Snowe, Mr. Torricelli, and Mr. Mack):
S. 597. A bill to amend title XVIII of the Social Security Act to
provide for coverage under part B of the Medicare Program of medical
nutrition therapy services furnished by registered dietitians and
nutrition professionals; to the Committee on Finance.
the medical nutrition therapy act of 1997
Mr. BINGAMAN. Mr. President, I rise today to introduce the Medical
Nutrition Therapy Act of 1997 on behalf of myself, my friend and
colleague from Idaho, Senator Craig, and a bipartisan group of
additional Senators.
This bipartisan measure provides for coverage under part B of the
Medicare Program for medical nutrition therapy services by a registered
dietitian. Medical nutrition therapy is generally defined as the
assessment of patient nutritional status followed by therapy, ranging
from diet modification to administration of specialized nutrition
therapies such as intravenous or tube feedings. It has proven to be a
medically necessary and cost-effective way of treating and controlling
many disease entities such as diabetes, renal disease, cardiovascular
disease, and severe burns.
Currently, there is no consistent part B coverage policy for medical
nutrition and this legislation will bring needed uniformity to the
delivery of this important care, as well as save taxpayer money.
Coverage for medical nutrition therapy can save money by reducing
hospital admissions, shortening hospitals stays, decreasing the number
of complications, and reducing the need for physician followup visits.
The treatment of patients with diabetes and cardiovascular disease
account for a full 60 percent of Medicare expenditures. I want to use
diabetes as an example for the need for this legislation. There are
very few families who are not touched by diabetes. The burden of
diabetes is disproportionately high among ethnic minorities in the
Unites States. According to the American Journal of Epidemiology,
mortality due to diabetes is higher nationwide among blacks than
whites. It is higher among American Indians than among any other ethnic
group.
In my State of New Mexico, native Americans are experiencing an
epidemic of type II diabetes. Medical nutrition therapy is integral to
their diabetes care. In fact, information from the Indian Health
Service shows that medical nutrition therapy provided by professional
dietitians results in significant improvements in medical outcomes in
people with type II diabetes. For example, complications of diabetes
such as end stage renal failure that leads to dialysis can be prevented
with adequate intervention. Currently, the number of dialysis patients
in the Navajo population is doubling every 5 years. Mr. President, we
must place our dollars in the effective, preventive treatment of
medical nutrition therapy rather than face the grim reality of having
to continue to build new dialysis units.
Ensuring the solvency of the Medicare part A trust fund is one of the
most difficult challenges and one that calls for creative, effective
solutions. Coverage for medical nutrition therapy is one important way
to help address that challenge. It is exactly the type of cost-
effective care we should encourage. It will satisfy two of our most
important priorities in Medicare: Providing program savings while
maintaining a high level of quality care.
Mr. President, I ask unanimous consent that the text of this bill be
printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 597
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Medicare Medical Nutrition
Therapy Act of 1997''.
SEC. 2. MEDICARE COVERAGE OF MEDICAL NUTRITION THERAPY
SERVICES.
(a) Coverage.--Section 1861(s)(2) of the Social Security
Act (42 U.S.C. 1395x(s)(2)) is amended--
(1) by striking ``and'' at the end of subparagraphs (N) and
(O); and
(2) by inserting after subparagraph (O) the following:
``(P) medical nutrition therapy services (as defined in
subsection (oo)(1));''.
(b) Services Described.--Section 1861 of the Social
Security Act (42 U.S.C. 1395x) is amended by adding at the
end the following new subsection:
``Medical Nutrition Therapy Services; Registered Dietitian or Nutrition
Professional
``(oo)(1) The term `medical nutrition therapy services'
means nutritional diagnostic, therapy, and counseling
services which are furnished by a registered dietitian or
nutrition professional (as defined in paragraph (2)) pursuant
to a referral by a physician (as defined in subsection
(r)(1)).
``(2) Subject to paragraph (3), the term `registered
dietitian or nutrition professional' means an individual
who--
``(A) holds a baccalaureate or higher degree granted by a
regional accredited college or university in the United
States (or an equivalent foreign degree) with completion of
the academic requirements of a program in nutrition or
dietetics, as accredited by an appropriate national
accreditation organizations recognized by the Secretary for
the purpose;
``(B) has completed at least 900 hours of supervised
dietetics practice under the supervision of a registered
dietitian or nutrition professional; and
``(C)(i) is licensed or certified as a dietitian or
nutrition professional by the State in which the services are
performed; or
``(ii) in the case of an individual in a State which does
not provide for such licensure or certification, meets such
other criteria as the Secretary establishes.
``(3) Subparagraphs (A) and (B) of paragraph (2) shall not
apply in the case of an individual who as of the date of the
enactment of this subsection is licensed or certified as a
dietitian or nutrition professional by the State in which
medical nutrition therapy services are performed.''.
(c) Payment.--Section 1833(a)(1) of the Social Security Act
(42 U.S.C. 13951(a)(1)) is amended--
(1) by striking ``and'' before ``(P)''; and
(2) by inserting before the semicolon at the end the
following: ``, and (Q) with respect to medical nutrition
therapy services (as defined in section 1861(oo)), the amount
paid shall be 80 percent of the lesser of the actual charge
for the services or the amount determined under the fee
schedule established under section 1848(b) for the same
services if furnished by a physician''.
(d) Effective Date.--The amendments made by this section
shall apply to services furnished on or after January 1,
1998.
Mr. CRAIG. Mr. President, this morning, I stand to introduce with my
colleague from New Mexico, Jeff Bingaman, legislation that will be
called the Medical Nutrition Therapy Act of 1997. I think we have all
heard of the old adage that ``an ounce of prevention is worth a pound
of cure.'' That is very true in the legislation that we are proposing
today, along with our colleagues from the House.
Simply stated, medical nutrition therapy involves the assessment of
the nutritional status of patients with a condition, illness, or injury
that puts them at nutritional risk. Once a problem is identified, a
registered dietitian can work with the patient to develop a personal
therapy or treatment. Almost 17 million Americans each year, mostly the
elderly, are treated for chronic illnesses or injuries that place them
at risk of malnutrition. But because of medical nutrition therapy, in
many instances, this can be resolved. The only problem today is that
these preventive measures are not covered by Medicare.
Our legislation would simply provide coverage under Medicare part B
for medical nutrition therapy services furnished by registered
dietitians and nutrition professionals. This is necessary so that the
elderly are not denied effective low-technology treatment of their
needs. I had the privilege of touring several hospitals in Idaho where
medical nutrition therapy is now being used, and the results are
dramatic.
As we begin to closely examine our Medicare system, we must focus on
the modernization of a 30-year-old health insurance system for the
elderly. We need to make sure that it is truly modern, not only in its
payment, its application, its style, but in the broad array of health
care services that it responds to. Today, many private health insurance
programs recognize medical nutrition therapy. Now, it is time that
Medicare did.
I hope my colleagues will join with Senator Bingaman and myself, as
we introduce the Medical Nutrition Therapy Act. It is important that we
begin to recognize these services and provide coverage under Medicare
part B.
I yield the floor.
______
By Mr. DOMENICI:
S. 598. A bill to amend section 3006A of title 18, United States
Code, to provide for the public disclosure of court
[[Page S3289]]
appointed attorneys' fees upon approval of such fees by the court; to
the Committee on the Judiciary.
The Disclosure of Court Appointed Attorneys' Fees and Taxpayer Right to
Know Act
Mr. DOMENICI. Mr. President, I rise today to introduce the Disclosure
of Court Appointed Attorneys' Fees and Taxpayer Right to Know Act of
1997.
Mr. President, what would you say if I told you that from the
beginning of fiscal year 1996 through January 1997, $472,841 was paid
to a lawyer to defend a person accused of a crime so heinous that the
U.S. attorney in the Northern District of New York is pursuing the
death penalty? Who paid for this lawyer--the American taxpayer.
What would you say if I told you that $470,968 was paid to a lawyer
to defend a person accused of a crime so reprehensible that, there too,
the U.S. attorney in the Southern District of Florida is also pursuing
the death penalty? Who paid for this lawyer--the American taxpayer.
What would you say if I told you that during the same period, for the
same purpose, $443,683 was paid to another attorney to defend a person
accused of a crime so villainous that the U.S. attorney in the Northern
District of New York is pursuing the death penalty. Who paid for this
lawyer? The American taxpayer.
Now, Mr. President, what would you say if I told you that some of
these cases have been ongoing for 3 or more years and that total fees
in some instances will be more than $1 million in an individual case?
That's a million dollars to pay criminal lawyers to defend people
accused of the most vicious types of murders often which are of the
greatest interest to the communities in which they were committed.
At minimum, Mr. President, this Senator would say that we are
spending a great deal of money on criminal defense lawyers and the
American taxpayer ought to have timely access to the information that
will tell them who is spending their money, and how it is being spent.
That is why today I am introducing the Disclosure of Court Appointed
Attorneys' Fees and Taxpayer Right to Know Act of 1997.
Under current law, the maximum amount payable for representation
before the U.S. magistrate or the district court, or both, is limited
to $3,500 for each lawyer in a case in which one or more felonies are
charged and $125 per hour per lawyer in death penalty cases. Many
Senators might ask, if that is so, why are these exorbitant amounts
being paid in the particular cases you mention? I say to my colleagues
the reason this happens is because under current law the maximum
amounts established by statute may be waived whenever the judge
certifies that the amount of the excess payment is necessary to provide
``fair compensation'' and the payment is approved by the chief judge on
the circuit. In addition, whatever is considered fair compensation at
the $125 per hour per lawyer rate may also be approved at the judge's
discretion.
Mr. President, the American taxpayer has a legitimate interest in
knowing what is being provided as fair compensation to defend
individuals charged with these dastardly crimes in our Federal court
system. Especially when certain persons the American taxpayer is paying
for mock the American justice system. A recent Nightline episode
reported that one of the people the American taxpayer is shelling out
their hard-earned money to defend urinated in open court, in front of
the judge, to demonstrate his feelings about the judge and the American
judicial system.
I want to be very clear about what exactly my bill would accomplish.
The question of whether these enormous fees should be paid for these
criminal lawyers is not, I repeat, is not a focus of my bill.
In keeping with my strongly held belief that the American taxpayer
has a legitimate interest in having timely access to this information,
my bill simply requires that at the time the court approved the
payments for these services, that the payments be publicly disclosed.
Many Senators are probably saying right now that this sounds like a
very reasonable request, and I think it is, but the problem is that
oftentimes these payments are not disclosed until long after the trial
has been completed, and in some cases they may not be disclosed at all
if the file remains sealed by the judge. How much criminal defense
lawyers are being paid should not be a secret. There is a way in which
we can protect the alleged criminal's sixth amendment rights and still
honor the American taxpayer's right to know. Mr. President, that is
what my bill does.
Current law basically leaves the question of when and whether court
appointed attorneys' fees should be disclosed at the discretion of the
judge in which the particular case is being tried. My bill would take
some of that discretion away and require that disclosure occur once the
payment has been approved.
My bill continues to protect the defendant's sixth amendment right to
effective assistance of counsel, the defendant's attorney-client
privilege, the work-product immunity of defendant's counsel, the safety
of any witness, and any other interest that justice may require by
providing notice to defense counsel that this information will be
released, and allowing defense counsel, or the court on its own, to
redact any information contained on the payment voucher that might
compromise any of the aforementioned interests. That means that the
criminal lawyer can ask the judge to take his big black marker and
black out any information that might compromise these precious sixth
amendment rights, or the judge can make this decision on his own. In
any case, the judge will let the criminal lawyer know that this
information will be released and the criminal lawyer will have the
opportunity to request the judge black out any compromising information
from the payment voucher.
How would this occur? Under current law, criminal lawyers must fill
out Criminal Justice Act payment vouchers in order to receive payment
for services rendered. Mr. President, two payment vouchers are the
standard vouchers used in the typical felony and death penalty cases
prosecuted in the Federal district courts. Mr. President, the
information of these payment vouchers describes in barebones fashion
the nature of the work performed and the amount that is paid for each
category of service.
Mr. President, I ask unanimous consent that these two vouchers be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[The vouchers are not reproducible in the Record.]
Mr. DOMENICI. Mr. President, my bill says that once the judge
approves these payment vouchers that they be publicly disclosed. That
means that anyone can walk down to the Federal district court where the
case is being tried and ask the clerk of the court for copies of the
relevant CJA payment vouchers. It's that simple. Nothing more. Nothing
less.
Before the court releases this information it will provide notice to
defense counsel that the information will be released, and either the
criminal lawyer, or the judge on his/her own, may black out any of the
barebones information on the payment voucher that might compromise the
alleged criminals' precious sixth amendment rights.
Mr. President, I believe that my bill is a modest step toward
assuring that the American taxpayer have timely access to this
information. In addition to these CJA payment vouchers, criminal
lawyers must also supply the court with detailed time sheets that
recount with extreme particularity the nature of work performed. These
detailed time sheets break down the work performed by the criminal
lawyer to the minute. They name each and every person that was
interviewed, each and every phone call that was made, the subjects that
were discussed, and the days and the times they took place. They go
into intimate detail about what was done to prepare briefs, conduct
investigations, and prepare for trial.
I am not asking that that information be made available for, indeed,
it might prejudice the way the trial goes to the detriment of the
defendant. Clearly, if all of this information was subject to public
disclosure, the alleged criminal's sixth amendment rights might be
compromised. My bill does not seek to make this sensitive information
subject to disclosure but continues to leave it to the judge to
determine if and when it should be released.
[[Page S3290]]
But the barebones must be released. We must know the amounts, and it
must be made available as the dollars vouchers are paid by the Federal
district court using taxpayers' moneys which are appropriated to them
by us.
In this way, my bill recognizes and preserves the delicate balance
between the American taxpayers' right to know how their money is being
spent, and the alleged criminal's right to a fair trial.
So we need to recognize and preserve the balance between the American
taxpayers' right to know and how much is being spent on these attorneys
and the alleged criminal's right to have a fair trial.
I believe we should take every reasonable step to protect any
disclosure that might compromise the alleged criminal's sixth amendment
rights. My bill does this by providing notice to defense counsel of the
release of the information, and providing the judge with the authority
to black out any of the barebones information contained on the payment
voucher if it might compromise any of the aforementioned interests. I
believe it is reasonable and fair, and I hope I will have my colleagues
support.
Mr. President, I ask unanimous consent that the bill be appropriately
referred.
The PRESIDING OFFICER. The bill will be appropriately referred to the
committee.
______
By Mrs. BOXER (for herself and Mr. Lautenberg):
S. 599. A bill to protect children and other vulnerable
subpopulations from exposure to certain environmental pollutants, and
for other purposes; to the Committee on Environment and Public Works.
THE CHILDREN'S ENVIRONMENTAL PROTECTION ACT OF 1997
Mrs. BOXER. Mr. President, today I introduce the Children's
Environmental Protection Act [CEPA]. This legislation will help protect
our children from the harmful effects of environmental pollutants. The
Children's Environmental Protection Act will do three things:
First, it will require that all EPA standards be set at levels that
protect children, and other vulnerable groups, including the elderly,
pregnant women, people with serious health problems, and others.
Second, it will create a list of EPA-recommended safer-for-children
products and chemicals that minimize potential risks to children.
Within 1 year, only these products could be used at Federal facilities.
CEPA will also require the EPA to create a family right-to-know
information kit that includes practical suggestions on how parents may
reduce their children's exposure to environmental pollutants.
For example, newborns and infants frequently spend long periods of
time on the floor, carpet, or grass, surfaces that are associated with
chemicals such as formaldehyde and volatile organic compounds from
synthetic carpets and indoor and outdoor pesticide applications. EPA
might suggest safer-for-children carpeting, floor cleaning products,
and garden pesticides.
Finally, the bill will require EPA to conduct research on the health
effects of exposure of children to environmental pollutants.
Our children face unique environmental threats to their health
because they are more vulnerable to exposure to toxic chemicals than
adults. We must educate ourselves about environmental pollutants, and
we must improve our scientific understanding about how exposure might
affect our children's health.
We took an important step in this direction when the Safe Drinking
Water Act was passed last year. The new law includes two amendments I
supported and worked to enact. The first requires that safe drinking
water standards be set at levels that protect children, the elderly,
pregnant women, and other vulnerable groups. The second requires that
the public receive information in the form of Consumer Confidence
Reports about the quality and safety of their drinking water.
The Children's Environmental Protection Act [CEPA] will carry the
concept of my Safe Drinking Water Act amendments even further.
Children are not just little adults. According to the National
Academy of Sciences, they are more vulnerable than adults. They eat
more food, drink more water, and breathe more air as a percentage of
their body weight than adults, and as a consequence, they are more
exposed to the chemicals present in food, water, and air. Children are
also growing and developing and may therefore be physiologically more
susceptible than adults to the hazards associated with exposures to
chemicals.
We have clear evidence that environmental pollution has a direct
impact on children's health. Air pollution is linked to the 40-percent
increase in the incidence of childhood asthma and the 118 percent
increase asthma deaths among children and young people since 1980.
Asthma now affects over 4.2 million children under the age of 18
nationwide and is the leading cause of hospital admissions for
children. The incidence of some types of childhood cancer has risen
significantly over the past 15 years. For example, acute lymphocytic
leukemia is up 10 percent and brain tumors are up more than 30 percent.
Children may face developmental risks from the potential effects of
exposure to pesticides and industrial chemicals on their endocrine
systems.
Exposure to environmental pollutants is suspected of being
responsible for the increase in learning disabilities and attention
deficit disorders among children.
What are we doing in response to this evidence? Not enough. We know
that up to one-half of a person's lifetime cancer risk may be incurred
in the first 6 years of life, yet most of our Federal health and safety
standards are not set at levels that are protective of children.
I am very pleased with the Environmental Protection Agency's recent
creation of a new Office of Children's Health Protection in the Office
of the Administrator, and a new EPA Board on Children's Environmental
Health.
We need Federal legislation in order to secure the EPA's
administrative efforts and give EPA support and direction.
Yesterday, I received a letter from EPA Administrator Carol Browner
expressing support for the goals of my bill. I ask unanimous consent
that the letter be inserted in the Record at this point, and I also ask
unanimous consent that the text of the Children's Environmental
Protection Act and a section-by-section analysis be printed in the
Record as well.
I am very honored and pleased that Representative Jim Moran has
decided to introduce the Children's Environmental Protection Act in the
House. I look forward to working with him to get this bill enacted.
Finally, Mr. President, I am pleased to have the Senator from New
Jersey, Senator Lautenberg, as an original cosponsor of the bill.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 599
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Children's Environmental
Protection Act''.
SEC. 2. ENVIRONMENTAL PROTECTION FOR CHILDREN.
The Toxic Substances Control Act (15 U.S.C. 2601 et seq.)
is amended by adding at the end the following:
``TITLE V--ENVIRONMENTAL PROTECTION FOR CHILDREN
``SEC. 501. FINDINGS AND POLICY.
``(a) Findings.--Congress finds that--
``(1) public health and safety depends on citizens and
local officials knowing the toxic dangers that exist in their
homes, communities, and neighborhoods;
``(2) children and other vulnerable subpopulations are more
at risk from environmental pollutants than adults and
therefore face unique health threats that need special
attention;
``(3) risk assessments of pesticides and other
environmental pollutants conducted by the Environmental
Protection Agency do not clearly differentiate between the
risks to children and the risks to adults;
``(4) a study conducted by the National Academy of Sciences
on the effects of pesticides in the diets of infants and
children concluded that approaches to risk assessment
typically do not consider risks to children and, as a result,
current standards and tolerances often fail to adequately
protect infants and children;
``(5) data are lacking that would allow adequate
quantification and evaluation of child-specific and other
vulnerable subpopulation-specific susceptibility and exposure
to environmental pollutants;
``(6) data are lacking that would allow adequate
quantification and evaluation of child-
[[Page S3291]]
specific and other vulnerable subpopulation-specific
bioaccumulation of environmental pollutants; and
``(7) the absence of data precludes effective government
regulation of environmental pollutants, and denies
individuals the ability to exercise a right to know and make
informed decisions to protect their families.
``(b) Policy.--It is the policy of the United States that--
``(1) all environmental and public health standards set by
the Environmental Protection Agency must, with an adequate
margin of safety, protect children and other vulnerable
subpopulations that are at greater risk from exposure to
environmental pollutants;
``(2) information, including a safer-for-children product
list, should be made readily available by the Environmental
Protection Agency to the general public and relevant Federal
and State agencies to advance the public's right-to-know, and
allow the public to avoid unnecessary and involuntary
exposure;
``(3) not later than 1 year after the safer-for-children
list is created, only listed products or chemicals that
minimize potential health risks to children shall be used in
Federal properties and areas; and
``(4) scientific research opportunities should be
identified by the Environmental Protection Agency, the
Department of Health and Human Services (including the
National Institute of Environmental Health Sciences and the
Agency for Toxic Substances and Disease Registry), the
National Institutes of Health, and other Federal agencies, to
study the short-term and long-term health effects of
cumulative, simultaneous, and synergistic exposures of
children and other vulnerable subpopulations to environmental
pollutants.
``SEC. 502. DEFINITIONS.
``In this title:
``(1) Areas that are reasonably accessible to children.--
The term `areas that are reasonably accessible to children'
means homes, schools, day care centers, shopping malls, movie
theaters, and parks.
``(2) Children.--The term `children' means individuals who
are 18 years of age or younger.
``(3) Environmental pollutant.--The term `environmental
pollutant' means a hazardous substance, as defined in section
101 of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. 9601), or
a pesticide, as defined in section 2 of the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136).
``(4) Federal properties and areas.--The term `Federal
properties and areas' means areas owned or controlled by the
United States.
``(5) Vulnerable subpopulations.--The term `vulnerable
subpopulations' means children, pregnant women, the elderly,
individuals with a history of serious illness, and other
subpopulations identified by the Administrator as likely to
experience elevated health risks from environmental
pollutants.
``SEC. 503. SAFEGUARDING CHILDREN AND OTHER VULNERABLE
SUBPOPULATIONS.
``(a) In General.--The Administrator shall--
``(1) consistently and explicitly evaluate and consider
environmental health risks to vulnerable subpopulations in
all of the risk assessments, risk characterizations,
environmental and public health standards, and regulatory
decisions carried out by the Administrator;
``(2) ensure that all Environmental Protection Agency
standards protect children and other vulnerable
subpopulations with an adequate margin of safety; and
``(3) develop and use a separate assessment or finding of
risks to vulnerable subpopulations or publish in the Federal
Register an explanation of why the separate assessment or
finding is not used.
``(b) Reevaluation of Current Public Health and
Environmental Standards.--
``(1) In general.--As part of any risk assessment, risk
characterization, environmental or public health standard or
regulation, or general regulatory decision carried out by the
Administrator, the Administrator shall evaluate and consider
the environmental health risks to children and other
vulnerable subpopulations.
``(2) Implementation.--In carrying out paragraph (1), not
later than 1 year after the date of enactment of this title,
the Administrator shall--
``(A) develop an administrative strategy and an
administrative process for reviewing standards;
``(B) publish in the Federal Register a list of standards
that may need revision to ensure the protection of children
and vulnerable subpopulations;
``(C) prioritize the list according to the standards that
are most important for expedited review to protect children
and vulnerable subpopulations;
``(D) identify which standards on the list will require
additional research in order to be reevaluated and outline
the time and resources required to carry out the research;
and
``(E) identify, through public input and peer review, not
fewer than 20 public health and environmental standards of
the Environmental Protection Agency to be repromulgated on an
expedited basis to meet the criteria of this subsection.
``(3) Revised standards.--Not later than 6 years after the
date of enactment of this title, the Administrator shall
propose not fewer than 20 revised standards that meet the
criteria of this subsection.
``(4) Completed revision of standards.--Not later than 15
years after the date of enactment of this title, the
Administrator shall complete the revision of all standards in
accordance with this subsection.
``(5) Report.--The Administrator shall report to Congress
on an annual basis on progress made by the Administrator in
carrying out the objectives and policy of this subsection.
``SEC. 504. SAFER ENVIRONMENT FOR CHILDREN.
``(a) In General.--Not later than 1 year after the date of
enactment of this title, the Administrator shall--
``(1) identify environmental pollutants commonly used or
found in areas that are reasonably accessible to children;
``(2) create a scientifically peer reviewed list of
substances identified under paragraph (1) with known, likely,
or suspected health risks to children;
``(3) create a scientifically peer reviewed list of safer-
for-children substances and products recommended by the
Administrator for use in areas that are reasonably accessible
to children that, when applied as recommended by the
manufacturer, will minimize potential risks to children from
exposure to environmental pollutants;
``(4) establish guidelines to help reduce and eliminate
exposure of children to environmental pollutants in areas
reasonably accessible to children, including advice on how to
establish an integrated pest management program;
``(5) create a family right-to-know information kit that
includes a summary of helpful information and guidance to
families, such as the information created under paragraph
(3), the guidelines established under paragraph (4),
information on the potential health effects of environmental
pollutants, practical suggestions on how parents may reduce
their children's exposure to environmental pollutants, and
other relevant information, as determined by the
Administrator in cooperation with the Centers for Disease
Control;
``(6) make all information created pursuant to this
subsection available to Federal and State agencies, the
public, and on the Internet; and
``(7) review and update the lists created under paragraphs
(2) and (3) at least once each year.
``(b) Compliance in Public Areas That are Reasonably
Accessible to Children.--Not later than 1 year after the list
created under subsection (a)(3) is made available to the
public, the Administrator shall prohibit the use of any
product that has been excluded from the safer-for-children
list in Federal properties and areas.
``SEC. 505. RESEARCH TO IMPROVE INFORMATION ON EFFECTS ON
CHILDREN.
``(a) Toxicity Data.--The Administrator, the Secretary of
Agriculture, and the Secretary of Health and Human Services
shall coordinate and support the development and
implementation of basic and applied research initiatives to
examine the health effects and toxicity of pesticides
(including active and inert ingredients) and other
environmental pollutants on children and other vulnerable
subpopulations.
``(b) Biennial Reports.--The Administrator, the Secretary
of Agriculture, and the Secretary of Health and Human
Services shall submit biennial reports to Congress on actions
taken to carry out this section.
``SEC. 506. AUTHORIZATION OF APPROPRIATIONS.
``There are authorized to be appropriated such sums as are
necessary to carry out this title.''.
____
CHILDREN'S ENVIRONMENTAL PROTECTION ACT OF 1997--SECTION-BY-SECTION
ANALYSIS
Section 1. Short Title.
The short title of the bill shall be the Children's
Environmental Protection Act of 1997.
Section 2. Findings/Policy/Definitions
Amends the Toxic Substances Control Act by adding a new
Title V--``Environmental Protection for Children.''
Section 501. Findings and Policy
Findings--
(1) Public health and safety depend on citizens being aware
of toxic dangers in their homes, communities, and
neighborhoods.
(2) Children and other vulnerable groups face health
threats that are not adequately met by current standards.
(3) More scientific knowledge is needed about the extent to
which children are exposed to environmental pollutants and
the health effects of such exposure.
Policy--
(1) All standards for environmental pollutants set by the
EPA should be set at levels that protect children's health
with an adequate margin of safety.
(2) In order to help the public avoid unnecessary and
involuntary exposure to environmental pollutants, the EPA
should develop a list of ``safer-for-children'' products.
Only products on this list should be used on federal
properties.
(3) EPA and other agencies should conduct more research,
both basic and applied, on the short and long term health
effects of exposure to environmental pollutants.
Section 502. Definitions
(1) ``Areas that are reasonably accessible to children''
means homes, schools, day care centers, shopping malls, movie
theaters and parks.
[[Page S3292]]
(2) ``Children'' means children ages 0-18.
(3) ``Environmental pollutant'' means a toxic as defined in
Section 101 of the Superfund law or a pesticide as defined in
the Federal Insecticide, Fungicide and Rodenticide Act.
(4) ``Federal properties and areas'' means areas controlled
or owned by the U.S.
(5) ``Vulnerable subpopulation'' means children, pregnant
women, the elderly, individuals with a history of serious
illness, or other subpopulation identified by the EPA as
likely to experience elevated health risks from environmental
pollutants.
Section 503. Safeguarding children and other vulnerable
subpopulations
Directs the EPA to consider environmental health risks to
children and other vulnerable subpopulations throughout the
standard setting process. Requires EPA to set health
standards at levels that ensure the protection of children
and other vulnerable subpopulations with an adequate margin
of safety.
Requires EPA to develop a list of no fewer than 20 public
health standards that need expedited reevaluation in order to
protect children. Within 6 years, EPA must propose the
revised standards. EPA must complete revision of all existing
standards within 15 years, and must issue a progress report
to Congress every year.
Section 504. Safer Environment for Children
Requires EPA, within 1 year after enactment of CEPA, to--
(1) identify environmental pollutants commonly used in
areas reasonably accessible to children;
(2) identify pollutants that are known to be or suspected
of being health risks to children;
(3) make public a list of ``safer-for-children'' products
that minimize potential risks to children from exposure to
environmental pollutants; EPA must update the list annually;
(4) establish guidelines to help reduce exposure of
children to environmental pollutants, including how to
establish an integrated pest management program;
(5) create a family right-to-know information kit that
includes information on the potential health effects of
exposure to environmental pollutants and practical
suggestions on how parents may reduce their children's
exposure.
Within one year after enactment, only products on the
``safer-for-children'' list may be used on federal
properties.
Section 505. Research to Improve Information on Effects on
Children
Requires EPA to work with other federal agencies to
coordinate and support the development and implementation of
basic and applied research initiatives to examine the health
effects and toxicity of environmental pollutants on children
and other vulnerable subpopulations. Requires biennial
reports to Congress.
Section 506. Authorization of Appropriations
Authorizes appropriation of ``such funds as may be
necessary" in order to carry out the purposes of the
legislation.
____
U.S. Environmental
Protection Agency,
Washington, DC, April 15, 1997.
Hon. Barbara Boxer,
U.S. Senate,
Washington, DC.
Dear Senator Boxer: I am writing to thank you for your
leadership to help protect our children from environmental
risks and to congratulate you for the introduction of your
Children's Environmental Protection Act. As you know,
protecting the health of our children and expanding the
public's right to know about harmful pollutants in our
communities are top priorities for this Administration.
Recently I established the Office of Children's Health
Protection to expand and better coordinate our activities to
protect children. This office will review health standards to
ensure they are protective for children and increase our
family right to know activities to expand access to vital
information about children's environmental health.
I look forward to working with you in the future to help
protect children from environmental health threats in their
homes, schools and communities.
Sincerely,
Carol M. Browner.
______
By Mrs. FEINSTEIN (for herself and Mr. Grassley):
S. 600. A bill to protect the privacy of the individual with respect
to the social security number and other personal information, and for
other purposes; to the Committee on Finance.
THE PERSONAL INFORMATION PRIVACY ACT OF 1997
Mrs. FEINSTEIN. Mr. President, today, along with my distinguished
colleague, Senator Charles Grassley, I am introducing the Personal
Information Privacy Act of 1997. This legislation limits the
accessibility and unauthorized commercial use of social security
numbers, unlisted telephone numbers, and certain other types of
sensitive personal information.
In November, the news media reported that companies were distributing
social security numbers along with other private information in their
online personal locator or look-up services.
In fact, I found that my own social security number was accessible to
users of the Internet. My staff retrieved it in less than 3 minutes. I
have the printout in my files.
Some of the larger and more visible companies have now discontinued
the practice of displaying social security numbers directly on the
computer screens of Internet users. Other enterprises have failed to
modify their practices. One problem thwarting efforts to protect our
citizens' privacy is that there are thousands of information providers
on the Internet and elsewhere in the electronic arena--it is impossible
to get a comprehensive picture of who is doing what, and where.
But one fact is clear, distributing social security numbers on the
Internet is only the tip of the iceberg.
Too many firms profit from renting and selling social security
numbers, unlisted telephone numbers, and other forms of sensitive
personal information. List compilers and list brokers use records of
consumer purchases and other transactions--including medical
purchases--along with financial, demographic, and other data to create
increasingly detailed profiles of individuals.
The growth of interactive communications has generated an explosive
growth in information about our interests, our activities, and our
illnesses--about the personal choices we make when we order products,
inquire about services, participate in workshops, and visit sites on
the Net.
A Newsday article titled ``Your Life as an Open Book'' recently
reported that an individual's call to a toll free number to learn the
daily pollen count resulted in a disclosure to a pharmaceutical company
that the caller was likely to have an interest in pollen remedies.
It is true that knowledge about personal interests, circumstances,
and activities can help companies tailor their products to individual
needs and target their marketing efforts. But there need to be
limitations.
Prior to the widespread use of computers, individual records were
stored on paper in Government file cabinets at scattered locations
around the country. These records were difficult to obtain. Now, with
networked computers, multiple sets of records can be merged or matched
with one another, creating highly detailed portraits of our interests,
our allergies, food preferences, musical tastes, levels of wealth,
gender, ethnicity, homes, and neighborhoods. These records can be
disseminated around the world in seconds.
What is the result? In addition to receiving floods of unwanted mail
solicitations, people are losing control over their own identities. We
don't know where this information is going, or how it is being used. We
don't know how much is out there, and who is getting it. Our private
lives are becoming commodities with tremendous value in the
marketplace, yet we, the owners of the information, often do not derive
the benefits. Information about us can be used to our detriment.
As an example, the widespread availability of Social Security numbers
and other personal information has led to an exponential growth in
identity theft, whereby criminals are able to assume the identities of
others to gain access to charge accounts and bank accounts, to obtain
the personal records of others, and to steal Government benefits.
In 1992, Joe Gutierrez, a retired Air Force chief master sergeant in
California became a victim of identity theft when a man used his Social
Security number to open 20 fraudulent accounts. To this day, Mr.
Gutierrez has been hounded by creditors and their collection agencies.
``It is pure hell,'' he said in an interview with the San Diego Union
Tribune. ``They have called me a cheat, a deadbeat, a bum. They have
questioned my character, my integrity, and my upbringing.''
As an additional problem, the unauthorized distribution of personal
information can lead to public safety concerns, including stalking of
battered spouses, celebrities, and other citizens.
There are very few laws to protect personal privacy in the United
States. The Privacy Act of 1974 is limited, and applies only to the use
of personal information by the Government.
[[Page S3293]]
With minor exceptions, the collection and use of personal information
by the private sector is virtually unregulated. In other words, private
companies have nearly unlimited authority to compile and sell
information about individuals. As technology becomes more
sophisticated, the ability to collect, synthesize and distribute
personal information is growing exponentially.
The Personal Information Privacy Act of 1997 will help cut off the
dissemination of Social Security numbers, unlisted telephone numbers,
and other personal information at the source.
First, the bill amends the Fair Credit Reporting Act to ensure the
confidentiality of personal information in the credit headers
accompanying credit reports. Credit headers contain personal
identification information which serves to link individuals to their
credit reports.
Currently, credit bureaus routinely sell and rent credit header
information to mailing list brokers and marketing companies. This is
not the use for which this information was intended.
The bill we are introducing today would prevent credit bureaus from
disseminating Social Security numbers, unlisted telephone numbers,
dates of birth, past addresses, and mothers' maiden names. This is
important because this kind of information is subject to serious
abuse--to open fraudulent charge accounts, to manipulate bank accounts,
and to gain access to the personal records of others.
An exception is provided for information that citizens have chosen to
list in their local phone directories. This means that phone numbers
and addresses may be released if they already are available in phone
directories.
As a second means of limiting the circulation of Social Security
numbers, the bill restricts the dissemination of Social Security
numbers by State departments of motor vehicles. Specifically, the bill
amends certain exemptions to the Driver's Protection Act of 1994.
The legislation would prohibit State departments of motor vehicles
from disseminating Social Security numbers for bulk distribution for
surveys, marketing, or solicitations.
The bill requires uses of Social Security numbers by State
Departments of Motor Vehicles to be consistent with the uses authorized
by the Social Security Act and by other statutes explicitly authorizing
their use.
In addition to the above measures which will limit the accessibility
of Social Security numbers, the Personal Information Privacy Act of
1997 penalizes the unauthorized commercial use of Social Security
numbers.
Specifically, the bill amends the Social Security Act to prohibit the
commercial use of a Social Security number in the absence of the
owner's written consent. Exceptions are provided for uses authorized by
the Social Security Act, the Privacy Act of 1974, and other statutes
specifically authorizing such use.
I believe this bill represents a major step in protecting the privacy
of our citizens, and I urge my colleagues to support it. I ask
unanimous consent that the text of the bill be included in the Record
following our remarks.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 600
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Personal Information Privacy
Act of 1997''.
SEC. 2. CONFIDENTIAL TREATMENT OF CREDIT HEADER INFORMATION.
Section 603(d) of the Fair Credit Reporting Act (15 U.S.C.
1681a(d)) is amended by inserting after the first sentence
the following: ``The term also includes any other identifying
information of the consumer, except the name, address, and
telephone number of the consumer if listed in a residential
telephone directory available in the locality of the
consumer.''.
SEC. 3. PROTECTING PRIVACY BY PROHIBITING USE OF THE SOCIAL
SECURITY NUMBER FOR COMMERCIAL PURPOSES WITHOUT
CONSENT.
(a) In General.--Part A of title XI of the Social Security
Act (42 U.S.C. 1301 et seq.) is amended by adding at the end
the following:
``prohibition of certain misuses of the social security account number
``Sec. 1146. (a) Prohibition of Commercial Acquisition or
Distribution.--No person may buy, sell, offer for sale, take
or give in exchange, or pledge or give in pledge any
information for the purpose, in whole or in part, of
conveying by means of such information any individual's
social security account number, or any derivative of such
number, without the written consent of such individual.
``(b) Prohibition of Use as Personal Identification
Number.--No person may utilize any individual's social
security account number, or any derivative of such number,
for purposes of identification of such individual without the
written consent of such individual.
``(c) Prerequisites for Consent.--In order for consent to
exist under subsection (a) or (b), the person engaged in, or
seeking to engage in, an activity described in such
subsection shall--
``(1) inform the individual of all the purposes for which
the number will be utilized and the persons to whom the
number will be known; and
``(2) obtain affirmatively expressed consent in writing.
``(d) Exceptions.--Nothing in this section shall be
construed to prohibit any use of social security account
numbers permitted or required under section 205(c)(2) of this
Act, section 7(a)(2) of the Privacy Act of 1974 (5 U.S.C.
552a note; 88 Stat. 1909), or section 6109(d) of the Internal
Revenue Code of 1986.
``(e) Civil Action in United States District Court;
Damages; Attorneys Fees and Costs; Nonexclusive Nature of
Remedy.--
``(1) In general.--Any individual aggrieved by any act of
any person in violation of this section may bring a civil
action in a United States district court to recover--
``(A) such preliminary and equitable relief as the court
determines to be appropriate; and
``(B) the greater of--
``(i) actual damages; and
``(ii) liquidated damages of $25,000 or, in the case of a
violation that was willful and resulted in profit or monetary
gain, $50,000.
``(2) Attorney's fees and costs.--In the case of a civil
action brought under paragraph (1) in which the aggrieved
individual has substantially prevailed, the court may assess
against the respondent a reasonable attorney's fee and other
litigation costs and expenses (including expert fees)
reasonably incurred.
``(3) Statute of limitations.--No action may be commenced
under this subsection more than 3 years after the date on
which the violation was or should reasonably have been
discovered by the aggrieved individual.
``(4) Nonexclusive remedy.--The remedy provided under this
subsection shall be in addition to any other lawful remedy
available to the individual.
``(f) Civil Money Penalties.--
``(1) In general.--Any person who the Commissioner of
Social Security determines has violated this section shall be
subject, in addition to any other penalties that may be
prescribed by law, to--
``(A) a civil money penalty of not more than $25,000 for
each such violation, and
``(B) a civil money penalty of not more than $500,000, if
violations have occurred with such frequency as to constitute
a general business practice.
``(2) Determination of violations.--Any violation committed
contemporaneously with respect to the social security account
numbers of 2 or more individuals by means of mail,
telecommunication, or otherwise shall be treated as a
separate violation with respect to each such individual.
``(3) Enforcement procedures.--The provisions of section
1128A (other than subsections (a), (b), (f), (h), (i), (j),
and (m), and the first sentence of subsection (c)) and the
provisions of subsections (d) and (e) of section 205 shall
apply to civil money penalties under this subsection in the
same manner as such provisions apply to a penalty or
proceeding under section 1128A(a), except that, for purposes
of this paragraph, any reference in section 1128A to the
Secretary shall be deemed a reference to the Commissioner of
Social Security.
``(g) Regulation by States.--Nothing in this section shall
be construed to prohibit any State authority from enacting or
enforcing laws consistent with this section for the
protection of privacy.''.
(b) Effective Date.--The amendment made by this section
applies with respect to violations occurring on and after the
date which is 2 years after the date of enactment of this
Act.
SEC. 4. RESTRICTION ON USE OF SOCIAL SECURITY NUMBERS BY
STATE DEPARTMENTS OF MOTOR VEHICLES.
(a) Restriction on Governmental Use.--Section 2721(b)(1) of
title 18, United States Code, is amended by striking ``its
functions.'' and inserting ``its functions, but in the case
of social security numbers, only to the extent permitted or
required under section 205(c)(2) of the Social Security Act
(42 U.S.C. 405(c)(2)), section 7(a)(2) of the Privacy Act of
1974 (5 U.S.C. 552a note, 88 Stat. 1909), section 6109(d) of
the Internal Revenue Code of 1986, or any other provision of
law specifically identifying such use.''.
(b) Prohibition of Use by Marketing Companies.--Section
2721(b)(12) of title 18, United States Code, is amended by
striking ``For'' and inserting ``Except in the case of social
security numbers, for''.
Mr. GRASSLEY. Mr. President, I rise today to join my colleague, Mrs.
Feinstein, in introducing important legislation. This legislation, the
Personal Information Privacy Act of 1997, is a
[[Page S3294]]
solid first step toward keeping our personal information from being
misused.
In this amazing time of technology explosion, new challenges face our
society. New technology makes information more readily available for
many uses. This information helps the college student write a better
term paper, it helps businesses function more effectively, and it helps
professionals to stay better informed of developments in their fields.
The technology that provides this ready access to infinite information
also helps friends and families communicate across continents,
increases the feasibility of working from a home office, and provides
many other advantages.
However, with these advantages come added risk. Dissemination of
information is generally good, but dissemination of all information is
not good. Technology can help people with bad intentions find their
victims. It can also give people access to personal information that we
would rather they not have. With minimal information and a few
keystrokes, virtually anyone could have your lifetime credit history
and personal wages downloaded to their computer. For this reason, it is
important that we work to make sure some personal information stays out
of the hands of people we have never met, whose intentions we don't
know.
One of the most important functions of lawmaking is to make sure that
law keeps up with society, and in this case, technology. The bill that
Senator Feinstein and I are introducing today is a solid first step. I
will soon be introducing additional legislation affecting the Internet
because I believe it is important that we talk about issues related to
new technologies; that we exchange ideas. And at the end of the day, we
must preserve the confidentiality of personal information and the
safety of individuals.
____________________