[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.

                          ____________________