[Congressional Record Volume 143, Number 64 (Thursday, May 15, 1997)]
[Senate]
[Pages S4601-S4602]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MACK (for himself, Mr. Lieberman, and Mr. Brownback):
  S. 753. A bill to amend the Internal Revenue Code of 1986 to provide 
for individuals who are residents of the District of Columbia a maximum 
rate of tax of 15 percent on income from sources within the District of 
Columbia, and for other purposes; to the Committee on Finance.


             the district of columbia economic recovery act

  Mr. MACK. Mr. President, I am pleased to introduce along with my 
colleague Senator Lieberman the District of Columbia Economic Recovery 
Act. The social, administrative, and fiscal problems of our Nation's 
capital are well documented. The District of Columbia is facing its 
greatest economic crisis since its establishment in 1790. Congress has 
taken major steps, including the creation of a financial control board, 
to assist the city during this current financial crisis. Despite 
efforts by the District's Government and Congress to manage these 
problems, the city has a long way to go to achieve economic self-
sufficiency.
  Mr. President, at the root of the District's problems is an 
evereroding middle class. Since 1950, Washington's population has 
declined by nearly 250,000 residents; 68,000 left between 1988 and 1993 
alone. The vast majority of these people were middle-class families 
whose taxes funded the city's operations. Historically, the District of 
Columbia has tried to offset this decline by raising taxes, leading to 
even more residents leaving the city in search of lower tax rates, 
better schools and safer streets.
  We believe that the best way to help the District is to promote 
economic growth, and the best way to promote economic growth is to 
significantly reduce the tax burden on its residents. Economic growth 
will mean more jobs, more opportunity, greater private sector 
investment and ultimately a better quality of life in the Nation's 
capital.
  The DCERA is an important step in luring taxpayers back to the 
District of Columbia. It provides tax incentives, including a 15-
percent flat income tax rate for all District resident and deductions 
of: $15,000 for individual filers; $25,000 for head of household 
filers; and $30,000 for married filers.
  Many critics of the flat rate argue that it is a bonanza for the rich 
and the poor, but does little to address the needs of the middle class. 
We have added several incentives designed specifically to assist the 
middle class. First, the bill includes a $5,000 first time home buyers' 
provision designed to assist middle-class families in purchasing homes 
within the District of Columbia. Second, the bill maintains the current 
home mortgage and charitable deductions. Finally, we have included a 
zero capital gains tax rate to help spur investment by District and 
non-District residents. Middle class residents should benefit 
significantly from this provision because it encourages them to invest 
their earnings and it offers a generous reward if and when a middle-
class resident sells their homes. Besides these incentives we have 
included a brownfields provision that encourages companies to clean up 
environmentally damaged land that is sure to improve the quality of 
life for District residents and their families.
  This bill also provides an opportunity for all Americans to 
participate in the economic stability of the District of Columbia by 
allowing them to have a zero capital gains rate for investments made 
within the District. We believe that Americans everywhere have great 
pride in this city and truly want it to represent all the best aspects 
of this Nation, including a vibrant economy. For too long the city's 
economy has been linked with the growth and declines of the Federal 
Government. I believe that the capital gains provisions will encourage 
nongovernmental economic investment in the District of Columbia.
  Washington, DC is not only home to the people who live here, it is 
truly the Nation's city.
  We believe that these incentives, along with responsible and sensible 
financial management, are just what this great city needs to regain its 
past glory.
  Mr. LIEBERMAN. Mr. President, I am delighted to join with Senators 
Mack, Lott, and Brownback as an original cosponsor of this important 
legislation, the District of Columbia Economic Recovery Act of 1997 
(DCERA).
  The District of Columbia belongs to each and every one of us. As 
citizens of the United States, we have a stake in the successes, and a 
stake in the failures, of Washington, DC. It is America's city. But, 
for a variety of reasons, not all of them easily explained, Washington 
is in desperate financial straits. The here and now financial prospects 
are grim for the city, and the future gets grimmer. This is largely 
because middle-class families, the backbone of any successful 
community, are fleeing the District in alarming numbers.
  The legislation we are introducing today would instantly transform 
our Nation's capital, making it a more appealing place to live, to 
invest, to build, to buy, and to work. This bill is designed to reverse 
the flow of businesses and the middle-class residents who currently are 
fleeing the city for the suburbs. Those still in the District would 
have new incentives to stay. And many others now living elsewhere would 
have a very strong incentive to move into the District with their 
families and with their businesses.
  We cannot make the schools better in the District overnight. We 
cannot promise crime-free streets overnight. We cannot promise a 
revitalized economy overnight. What we can do is provide middle-class 
tax relief in the District, and as a way to lure these middle-class 
taxpayers to the District as a way to reestablish a tax base in the 
District. And once we bring these people back, safer streets and better 
schools can follow.
  This legislation is modeled on legislation that has been introduced 
in the House with broad, bipartisan support, by Representative Eleanor 
Holmes Norton. Both the House and the Senate version of the DCERA 
establish a maximum Federal tax rate of 15 percent. Both bills double 
the personal exemption, which would eliminate Federal income taxes for 
single residents who make up to $15,000 a year and married couples 
filing jointly who make up to $30,000 a year. At the same time, the 
bill retains the mortgage and charitable deductions and would allow a 
taxpayer to file under the old system, if that is what they prefer to 
do. In contrast to Representative Norton's bill, which provides capital 
gains tax relief only to D.C. residents, our legislation

[[Page S4602]]

establishes a zero capital gains rate for D.C. investments held by D.C. 
or non-D.C. residents for 3 years. We believe that the broader 
exemption is necessary to spur as much investment in the District as 
possible. Also in contrast to the House DCERA, our bill includes a 
$5,000 credit for first time District home purchases and includes a 
provision to clean up abandoned brownfields within the District. 
Members of Congress not representing the District could not take 
advantage of the tax incentives in the bill, and the District already 
has enacted legislation ensuring that it would not take advantage of 
the Federal tax incentives in this bill by raising local taxes.

  I very much see this bill as a first step. Some of the urban problems 
Washington faces are unique to Washington because Washington has no 
State, no broader tax base, to draw on. At the same time, many of 
Washington's problems are problems that are faced by cities all across 
this country. If this approach works in Washington, I hope we can try 
it in Bridgeport, New Haven, and Hartford as well.
  I should note that, unlike some proponents of this legislation, I am 
at best an agnostic on a flat tax. I believe progressivity in our tax 
rates is inherently fair and am pleased that the legislation we are 
introducing today has elements of that progressivity by providing such 
a generous personal exemption. At the same time, a good number of our 
cities are facing the loss of their middle-class population and the 
only way to rebuild that base may be through bold measures like a flat 
tax which has clear and compelling benefits for the middle class. The 
people we are really anxious to bring back to our cities are the 28 
percenters. Under the current Tax Code a typical family in the 28-
percent bracket would be a couple with two children who make roughly 
between $39,000 and $95,000 after deductions. Our bill would create a 
very favorable tax incentive for these people to stay in, or move to, 
the District.
  Mr. President, the most important thing there is to say about urban 
policy in this country is that we really do not have an urban policy. 
We know what has not worked; today we are introducing legislation that 
we believe will work and there is no better place to start than in 
Washington, DC, a city that belongs to all Americans. I urge my 
colleagues to join us in cosponsoring this important legislation.
  Mr. BROWNBACK. Mr. President, I am pleased to join with my 
distinguished colleagues today to introduce the District of Columbia 
Economic Recovery Act, a bill which would jumpstart the District's 
economy and set in motion a commercial, social, and cultural 
renaissance that will once again make all Americans proud of their 
Capital.
  I am delighted to find that the District's City Council shares my 
belief that the enactment of this legislation will be very good for the 
city. On May 9, 1997, in a resolution to accompany its qualified 
endorsement of the administration's bailout plan, the Council stated 
that ``. . . the District of Columbia Economic Recovery Act . . . would 
provide the jolt that is desperately needed to expand the District's 
revenue base by reversing the hemorrhaging of residents and jobs from 
the District.''
  Although this legislation represents a good start toward the 
resolution of the city's problems, much more needs to be done. As 
chairman of the Subcommittee on Oversight of Government Management, 
Restructuring and the District of Columbia, I have just concluded 2 
months of oversight hearings on the District's many problems, including 
the poor performance of the schools, the high crime rate, and the 
city's reputation for low quality services. While each of these 
problems are being addressed in some fashion by the Control Board, they 
are far from being solved, and the city remains desperately in need of 
a renewal of its spirit.
  In the coming weeks I will be exploring with my colleagues, with city 
officials, and with the administration a series of additional reform 
options that will help lead to this renewal, and to the recreation of a 
Capital City worthy of a great Nation.
                                 ______