[Congressional Record Volume 143, Number 84 (Tuesday, June 17, 1997)]
[House]
[Pages H3834-H3840]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE REPUBLICAN TAX CUT PLAN AND THE BUDGET BILL
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from New Jersey [Mr. Pallone] is
recognized for 60 minutes as the designee of the minority leader.
Mr. PALLONE. Mr. Speaker, tonight I would like to talk about two
issues which I believe are related. First is the analysis, if you will,
of the Republican tax cut plan, which I believe mainly benefits the
wealthy and how the Democratic alternative is much better for the
average family, the average middle-income family in this country; all
of this, of course, in the context of the budget bill and the efforts
we are now making in committee and eventually on the floor next week to
work out a budget bill and the tax cuts that are a part of that budget
bill.
Second, following up on what I spoke about earlier today during
morning hour, what happened with regard to Medicare in the matter of
MSA's, or medical savings accounts, being incorporated in the Medicare
Program as part of this budget package to the detriment I believe of
the Medicare Program and, at the same time, the Republican leadership's
failure to provide funding for low-income people who currently receive
Medicaid funding to pay for their Medicare part B premium. All of this
is in the overall context of the budget bill.
As my colleagues know, when we passed the budget resolution about a
week or two ago, it was pretty much a bipartisan vote. I voted for the
budget resolution because I am very concerned that we need to balance
the budget, we need to be concerned about spending and we certainly, at
the same time, need to provide some tax cuts or tax breaks to the
average American. And so, as a whole, the budget resolution seemed to
make sense.
However, what happens is that after the budget resolution passes,
both the House and the Senate and eventually the President have to get
together on an implementation bill, if you will, that will show where
spending takes place, where tax cuts take place, what kinds of changes
are going to take
[[Page H3835]]
place with entitlement programs like Medicare and Medicaid.
And essentially what we are doing now is getting down into the
details of how we are going to balance the budget and how we are going
to be fair in our tax and spending policy. This is where now there are
starting to be divergences, or differences I should say, between the
Republicans and the Democrats on a number of these issues.
I wanted to start off if I could by talking about the Republican tax
cut plan. There is a new study that was done by a nonpartisan research
organization called Citizens for Tax Justice, and they basically found
that the Republican tax cut plan that was unveiled by the Committee on
Ways and Means last week overwhelmingly benefits the richest Americans,
while giving little essentially to middle-income families and actually
raises taxes paid by lower-income families.
If my colleagues look at this chart, which I know some of my
Democratic colleagues have been pointing to today during the special
orders, we can see basically what Citizens for Tax Justice is saying.
This graph compares the Republican tax plan and the Democratic
alternative. And if we look at various income brackets, and I will
start on my left, we can see that for the lowest 20 percent, and that
is people whose average income is $6,600 or less, the Republicans
actually provide a tax hike, whereas the Democrats are providing for a
4.2-percent tax cut. Again, for the second lowest 20 percent of
American families average income, $15,900 or less, again the
Republicans would provide for a tax hike, Democrats would have a tax
cut of 11.4 percent.
Now as you get into middle-income brackets, this gap if you will, at
this level the Republicans are starting to provide a tax cut for
middle-income families at 20-percent below the $26,900 average income.
But again, although the Republican tax cut is 4.4 percent, the
Democratic tax cut is 19.1 percent, significantly higher. Same thing
for the fourth 20 percent, those making $44,500 or less, Republican tax
cut 14.5 percent, Democratic tax cut 39.6 percent.
Now, as we get into the higher income categories, we see that there
the Republicans are actually providing a much larger tax cut than the
Democrats. At the 15 percent of the people who are below $75,500, in
other words, between $44,000 and $75,500, the Republican tax cut is 24
percent, the Democratic is 14.4 percent.
Then when you get to the very top 5 percent of American families who
are making $247,200 or above, there is a huge difference, with the
Republicans providing a 57.9-percent tax cut and the Democrats only a
12-percent tax cut.
Now I think this pretty dramatically shows that the Democrats, in
general, are trying to work out these tax cuts so that they benefit the
average person, whereas the Republicans are basically weighting the tax
cuts toward the higher income families in America, which is not the way
this is supposed to be.
Remember, this is being done, Mr. Speaker, in the context of a
balanced budget plan. We are trying to balance the budget. We are
trying to provide fairness here in doing so. It certainly does not seem
fair to me to make most of the tax cuts benefiting people who are of
means, who are in these higher income brackets.
In fact, according to the Citizens for Tax Justice study, 41 percent
of the total tax cut benefits the top 1 percent of the taxpayers. These
people have incomes over $241,000 with an average of $644,000. Under
the Republican tax plan, they would realize a net tax cut averaging
$21,576, particularly when all the capital gains indexing provisions
are fully effective.
I do not want to keep giving my colleagues all these figures, but
just as an example, with the capital gains tax cut, which is, of
course, the one that if you skew it a certain way has the greatest
potential for helping people who are wealthy, according again to this
study by Citizens for Tax Justice, the capital gains tax cut that has
been proposed by the Republicans would be worth $13,976 per year to a
family making over $350,000 per year but only $17 to the average family
in the middle of the income distribution with an income of about
$27,000.
Now some Republicans argue that an across-the-board capital gains
rate cut and indexing are middle-class tax relief because about half of
the tax returns reporting capital gains income are filed by people with
income less than $50,000. But this is wrong because, in fact, because
most liquid financial and other capital assets are held by upper income
people. They realize the most capital gains, and the vast majority of
American families will see very little economic benefit, either direct
or indirect.
One of the things, of course, to look at in all of this is the
capital gains tax cut, because, as I said again, that is where if you
do not frame it specifically for middle-income families, particularly
with regard to giving most of the relief for a sale of a home, they you
can get into a situation where the majority of this tax cut goes to
upper-income individuals.
I would like to now talk a little bit if I could about the Democratic
tax alternative, which I think is a far better alternative and a lot
fairer because it targets the tax cuts on those who need them. More
than two-thirds of the Democratic tax cuts go to the truly struggling
middle class and lower income families making less than $57,500 a year.
It is basically better for working families. It is better for
education. It is better for the deficit.
Just to give my colleagues an example here, which we have cited
before, the typical working family in 1998, under the GOP as opposed to
the Democratic proposals, this is a family who has an average income of
$24,000, the family has one child age 10 and one child age 19. The 19-
year-old is attending his first year of community college with an
annual tuition of $1,200.
Remember, one of the major focuses of the Democratic tax cuts and the
President's plan when this all started during the budget negotiations
was to make sure that we were providing relief for middle-income
families that have to send their kids to college, because that is where
a big bulk of their expenses go when they have kids in college.
Well, under the GOP plan, there is a HOPE scholarship that is for the
first 2 years of college that basically gives the family back $600, and
the child tax credit provision gives them nothing because they do not
qualify due to nonrefundability and the earned income tax provisions.
On the other hand, the Democratic alternative gives them instead of
$600 for the HOPE scholarship $1,100, which is phased up to $1,500 by
the year 2001 toward the end of this 5-year budget cycle. And with
regard to the child tax credit, again, the GOP bill gives them nothing.
The Democratic alternative gives them $300, which is phased up to $500
by the year 2001, which is again toward the end of the 5-year plan.
But there are many other ways in which the relief is concentrated on
families of middle income, and I would like to get into some of those
perhaps later this evening. But I see my colleague, the gentlewoman
from Connecticut [Ms. DeLauro], and I wanted to yield to her if I
could.
Let me just say one thing with regard to homeowner tax relief. The
Democratic alternative provides $5.7 billion of tax relief to
homeowners. It includes the President's proposal to exclude up to
$500,000 of profits, capital gains, on the sale of a home, and the
exclusion would be $250,000 for single taxpayers. It also allows losses
on the sale of a home up to $250,000 to be written off as a deductible
loss against taxes.
Now I mention this because again I want my colleagues to understand
that the Democratic alternative does provide capital gains tax relief,
but it does it primarily to homeowners. And that is where the middle
income, the average person is more likely to benefit from the capital
gains tax cut. Because really, for most of them, the only time they are
paying capital gains tax is when they sell their home.
What we are saying is that rather than the Republican plan, which
basically would provide relief to all kinds of capital gains across the
board, let us focus in on the homeowner because that is where most
middle-income people see a capital gains tax and would most benefit
from some sort of cut or relief on that particular type of tax.
Mr. Speaker, at this point I would yield to my colleague, the
gentlewoman from Connecticut [Ms. DeLauro], who has been a leader
essentially, really the outstanding leader in
[[Page H3836]]
bringing home to the Members of this body why this Democratic
alternative is much preferable to the Republican plan that has been put
forward.
Ms. DeLAURO. Mr. Speaker, I want to thank my colleague from New
Jersey [Mr. Pallone] for his leadership on this issue and am proud to
join with him, and I am hopeful that we will be joined by other Members
this evening.
But I think that it is important to note what my colleague was
talking about and there should be a discussion about the two tax cut
plans and, in fact, who benefits from each. I think it is critical to
note that, while our colleagues on the other side of the aisle are
going to try to make a case that Democrats are not providing tax cuts
for working families, whether, in fact, the Democratic alternative is
precisely focused in on working, middle-class families with education,
with the child tax credit, with estate taxes and inheritance, or the
death tax, as my colleagues on the other side of the aisle like to talk
about it, capital gains, specifically directed to working, middle-class
families, to small businesses, to small farmers, to the people in this
country who have been carrying on their shoulders an enormous tax
burden.
{time} 1830
In addition, these are the folks who are scrambling week to week,
month to month to pay their bills.
I think it is fair to say that a comprehensive tax bill truly in fact
says a lot about our priorities and our values, both as a Congress and
as a Nation, so that in fact the public has the opportunity to look at
both tax plans and to engage in the debate and determine who is on my
side. They should, as that chart makes clear here, when we have a
comparison of the Republican tax plan and the Democratic alternative
tax plan, of who is on the side of working middle-class families in
this country.
If my colleagues might recall also, in the last session of the
Congress, the Republicans talked about the crown jewel of the Contract
With America and they do not these days talk either about crown jewels
or contracts with America, but the cornerstone of that document was a
$245 billion tax cut, essentially for the richest people in this
country, and paid for primarily by a $270 billion cut in the Medicare
program.
They have come up with a new proposal which once again I think when
it is laid out side by side, one can take a look to see that they are
continually to be on the side of the wealthiest Americans. Under the
Republican bill, over half the tax benefits go to the top 5 percent of
Americans, those making over $247,000 a year. An additional quarter of
the tax cuts go to families making between $75,000 and $250,000. The
rest of the American people, those making less than $75,000, have to
share what is left over. That is right. They have to share what is left
over. Under the Republican plan, the 80 percent of the Americans at the
lowest end of the income scale receive less than 20 percent of the tax
benefits.
I know my colleague from New Jersey concurs in this. This is simply
wrong. What we need to be about is to provide tax relief to those
families who could really use it, hardworking, middle-class American
families. As is so often talked about in these debates, this is not my
conclusion or my colleague from New Jersey's conclusion or the
conclusion of the Democrats on the Committee on Ways and Means who all
voted for this Democratic tax cut alternative. These are not my words.
I offer as evidence, if you will, of what we are talking about in
determining who is on the side of the wealthiest 5 percent of this
country or who is on the side of working middle-class families the
Philadelphia Inquirer dated Thursday, June 12, 1997, and the headline,
``Bill Archer's gift horse: The Congressman's tax-cut plan looks good
now, but in the long term, only the rich will benefit.''
``Average Americans would be the biggest winners, say U.S. Rep. Bill
Archer, under his new tax-cut plan. He's got a break out that shows
three-quarters of the tax relief going to households that earn less
than $75,000 a year.
``Sounds nice, but it's bogus. What he unveiled this week ought to be
called the Tax Relief for the Monied Class Act.''
This is the Philadelphia Inquirer.
June 11, 1997, The New York Times. ``A Favor-the-Rich Tax Plan.''
``To finance cuts in capital gains and inheritance taxes, Mr. Archer
has held tax benefits for others to a minimal level. The tax-writing
committee has come up with a proposal that barely eases the strain on
middle-class families while showering the rich with benefits.''
The Washington Post. ``A Bad Tax Bill Gets Worse.''
So that paper after paper after paper indicates in fact that what we
have seen once again is that the focus of attention of this tax cut
proposal is on the richest 5 percent of the people who live in this
country, the wealthiest 5 percent, and those who are working and
struggling as middle-class Americans find themselves in a situation
where they are not going to get any relief. The fact of the matter is
that Democrats have proposed----
Mr. ARCHER. Will the gentlewoman yield on that?
Ms. DeLAURO. I will in a moment. The Democrats have proposed an
alternative tax package whose benefits are targeted to middle-class
families. The message from House Democrats is that in fact we are on
your side, we are on the side of families struggling to try to make
ends meet. We are on the side of families who worry about paying their
bills each month, putting food on the table and still having enough
left over to afford health care for their kids. We are on the side of
families hoping to tuck away a few of their hard-earned dollars each
month for their children's education or for their own retirement. These
are families who truly in fact deserve some tax relief.
This is not a partisan issue, quite frankly. This is an issue in
which we have an opportunity to come together as a Congress in order to
provide much needed tax relief to people in this country. I think when
we have the opportunity on the floor of this House to go through post-
secondary education, K through 12 education, the family credit, total
relief for families in this country, the death tax and capital gains
taxes, that we ought to in fact opt for Main Street instead of Wall
Street.
I want to turn this back over to my colleague from New Jersey who
controls the time in this special order.
Mr. PALLONE. I want to thank the gentlewoman and explain that I have
to yield next to the gentleman from California [Mr. Waxman].
Mr. ARCHER. I was hoping, if the gentleman would just yield briefly,
that we could have some degree of debate on this very important issue
while the time is available. I would like to enter into that debate.
Mr. PALLONE. I yield to the gentleman.
Mr. ARCHER. The gentlewoman has commented that our tax bill would
shower benefits on the rich and yet, interestingly enough, 93 percent
of the tax relief in our bill goes to taxpayers who have under $100,000
in expanded income, not just AGI, but expanded income.
Where does this number come from? This number comes from the Joint
Committee on Taxation, which is a nonpartisan, professional
organization that advises both the Democrats and the Republicans in the
Senate and in the House.
Where do the figures come from in the gentleman's chart? They come
from the Treasury's analysis, which is an arm of the President. The
Treasury's analysis makes you rich because it arbitrarily assigns to
you the imputed value, rental value, of a house that you own, and says
you get income off of it every year. Now, no American would believe
that. No American who is a homeowner would say, ``Gee, I'm rich because
I get rental value on the house that I live in.''
They also assign an arbitrary figure of ``we know you haven't
declared certain income, so we're going to arbitrarily increase your
income by an amount that we think is appropriate.'' They put middle-
income taxpayers into a rich category and then they say these benefits
that go to middle-income taxpayers actually are going to the rich. The
American people will not accept that. The reality is that the Joint
Tax Committee that has distributed our tax bill, where 93 percent goes
to taxpayers under $100,000 and 76 percent goes to taxpayers under
$75,000 is clearly, clearly not showering benefits on the
[[Page H3837]]
rich. It is too bad that the Treasury analyses are used rather than the
commonsense, nonpartisan Joint Tax Committee.
Mr. PALLONE. I yield to the gentlewoman from Connecticut.
Ms. DeLAURO. Mr. Speaker, what is interesting about the Joint
Committee, and I hope the chairman will stay because the Joint
Committee has refused to tell us how they reached the distribution
numbers, and as the Philadelphia Inquirer and other newspapers and
other documents have pointed out, the costs are hidden; because, in
fact, what happens in this charade, if you will, is that the first 5
years we do have people who will be selling off assets and there will
be some revenue to the government, and the other half, the second 5
years, is when this deficit explodes off the chart.
What I would like to do is to yield to my colleague who sits on the
Committee on Ways and Means who has been part of the deliberations and
can address some of these issues.
Mr. PALLONE. I yield to the gentleman from Washington.
Mr. McDERMOTT. Mr. Speaker, I appreciate the gentleman giving us the
opportunity to discuss this tax bill. I think what the gentleman from
Texas has suggested is misleading, because the Joint Tax Committee has
a proposal where they show how the taxes are distributed. But they
never put in the full impact of the taxes unless they are fully phased
in. What is really deceptive about this tax bill and why it is really
bad is that in the outyears, that means beyond the year 2007, this
explodes. What they did was they made very few changes and sort of
said, ``But we'll phase it in 5, 6, 7, 8, 9, 10 years from now.''
Most of the people who voted for this do not expect to be here when
the deficit is re-created, as it was after the 1981 tax bill. The fact
is that if we look at the charts that the gentleman has there, it is
very clear that the bottom 40 percent gets nothing.
I offered an amendment in the committee on an issue that is a very
familiar one and, that is, the marriage tax penalty. Let us say you are
a couple. You make $30,000 between you. You make $15,000 apiece. If you
file together, you pay 10 percent more tax. This was in the Contract
With America. Two hundred some odd Members of this House signed the
Contract on America and said we want to get rid of the marriage tax
penalty because we want to encourage people to get married. We are very
worried that all these children are being born out of wedlock. So we
want people to get married.
But the Tax Code is much more advantageous to you if you do not get
married. If a couple makes $20,000, now, let us say the man makes
$14,000 and his wife who goes out and works, does some baby-sitting or
whatever, makes $6,000, they have got $20,000 of income. They pay a
penalty of 48 percent more taxes if they get married. They are much
better to stay apart. I would recommend on a tax basis, if I were a tax
consultant, to a young couple, ``Don't get married, for heaven's sake.
You're going to pay 48 percent more.''
They put it in the Contract on America and said, ``We're going to go
out there and do what's good for families.'' But looking at this tax
bill, 58 percent goes for people making more than $247,000. That is not
the family making $20,000 trying to get by.
This tax bill is simply those figures up there, that use Treasury
figures or their figures, if they gave the total figure of what the
impact was, it would be clearly skewed to people at the top of the
income bracket.
My view is that amendments like the marriage penalty ought to be what
we give people. That would get people at the bottom end of the scale.
Because people making $20,000, $30,000, are down in those groups at the
bottom of the gentleman's graph.
Another one I offered in the committee, or was going to offer but
nobody wanted to deal with it, is the whole FICA tax. People say,
``Well, they don't pay any income tax; look, we've given them this
earned income tax credit and all this so they don't pay any income
tax.'' But everybody pays FICA. That comes out of everybody's tax. My
view is that we ought to give a break to people on their FICA tax.
{time} 1845
Again, that would put all the benefit down at the level of under
$75,000, but this tax bill they brought to the floor, they are bringing
to the floor next week, is simply neither family friendly nor small
business friendly because another amendment that I offered in the
committee was: ``Why can't you deduct the total cost of your health
care if you purchase it?''
Now a big company, if they buy insurance for you, if Boeing or
General Motors, they deduct it 100 percent. But if you are a small
business person out there, maybe you hire one or two people, you are
running a little catering business or something, and you buy health
insurance, you cannot deduct the 100 percent. Why? Because big people
can and little people cannot? I guess, because they turned that
amendment down on a party line vote, they said, and it was the number 1
issue of the National Federation of Independent Businesses.
The small business people said we want 100-percent tax deductibility.
But it was turned down in the Committee on Ways and Means for this bill
that benefits the rich, and I think that it is very important that you
have these kind of discussions out in public so that the public can
understand and begin to learn what is really here.
When you talk about the estate tax, the so-called death tax,
everybody says, well, gee, I am going to die; I would like to pass a
few things on to my kids. Well, if you have got $600,000 worth of stuff
to pass on to your kids, it goes for free, simply for free. There is
only 1.6 percent of the families in this country that pay the death
tax, 1.6 percent.
Now you think that is the people at the bottom who are making 20
grand or 30 grand? We do not know who they are, but they are folks who
have millions and millions and millions and millions of dollars, and
those people are in here asking for a tax benefit at the same time that
we put a marriage tax penalty on a couple making 20, 25, $30,000.
Mr. Speaker, there is something wrong with a tax structure that does
that, and I think that this bill makes it infinitely worse. So I
commend my colleagues for coming out here and raising these issues.
Mr. PALLONE. I appreciate the gentleman's comments, and I want to
yield, but I just wanted to say I think one of the most important
things that you raised tonight, and I am getting this back from my
constituents, is the fact that the Republican proposal will essentially
explode and cause the deficit to balloon in these outyears, because
after all, the whole premise of this budget debate is to balance the
budget, and when I tell my constituents, and it is not just me; the
gentlewoman from Connecticut read the various editorials in major
newspapers around the country; when they read that and they find out
that this Republican proposal will actually 5 or 6 or 10 years from now
cause an even greater deficit, they are outraged.
And I just briefly, because I am reading just from this document from
the Center on Budget and Policy Priorities, and they say that,
specifically they conclude that although the cost of the GOP bill is
held at $250 billion in the first 10 years, the costs would explode to
between $650 billion and $750 billion in the second 10 years, and
basically they talk about how these provisions, these backloading
provisions, if you will, have a common characteristic that they provide
most of their tax cut benefits to high income individuals and that
essentially they make heavy use of gimmicks delaying effective dates,
slow phasing, and timing shifts and revenue collections to minimize the
revenue losses these tax cuts caused during the first 5 years, but then
beyond they balloon. And to me that is the most outrageous aspect about
this.
Mr. McDERMOTT. One of the things that really is distressing about
that: If you think about when that is, 10 years from now will be 2007.
You add another 5 years, and you are at 2012. That is when the baby
boomers are going to be getting to Medicare and Medicaid, and if the
deficit explodes right as they reach retirement, all these 30 and 40
and 45-year-old people right now who are saying, well, by God when I
get to 2010, I will at least have Medicare and Social Security. If the
tax provisions in this bill explode in our budget in 2012, or
thereabouts, there is going to be another Congress in here looking to
cut
[[Page H3838]]
away on those programs at the very time when those people are depending
on it.
And that is why people around here are saying, well, we are doing
this for our children, we are doing this for our children. You mean we
are laying a bomb for our children in the year 2012 that we are going
to light in here and wait for it to explode out there in 15 years, just
when our kids will be at the point of trying to educate their kids and
they will be looking at us and saying what are we going to do about mom
and dad?
Mr. PALLONE. And that is exactly what most people think that we are
avoiding with this balanced budget bill, that we are talking austerity
measures now to help the people later down the road, the kids, the
grandchildren, and in fact it is just the opposite.
I yield to the gentlewoman.
Ms. DeLAURO. Just a point, because my colleague from Washington
talked about, we had talked about for a number of years here, trying to
provide small businesses with the opportunity for 100 percent
deductibility under health care costs.
In my State of Connecticut, and I am sure in Texas and in Washington
State, the engine of growth has been small businesses. This was an
opportunity to give relief to small businesses, which they on a party
line vote, as I understand, means all the Republicans voted together
against the small business deduction of 100 percent on health care
costs.
In addition, because when we are talking about where their bill is
focused, this is one that I have the hardest time believing. We all
know that in today's economy we have men and women who are in the
workplace, two parents, and not because they both want to work, they
have to in order to make ends meet, and that means that they have to
have their children in child care. And we talk a lot about trying to
make child care affordable, sliding scales, good quality care,
evaluating child care because we know today that parents have to rely
on child care so that they can both work.
I think one of the most egregious things that happened in this bill
that the Republicans have put out, it would just say to the bulk of our
families in this country who have both mothers and fathers in the work
force that what you get in terms of a dependent care credit on your
child care you can claim credit on your taxes for your child care if
you both have to work, that what they are going to do is they are going
to cut that by 50 cents. They are going to cut it in half.
Mr. McDERMOTT. For every dollar that they get, it will now be 50
cents?
Ms. DeLAURO. That is right, for every dollar they get as a credit
they are going to cut that in half. So you are trying to say to people:
We want to try to provide you with some help. You are the folks who
need it, you are struggling. At the same time they offered to eliminate
taxes on the richest corporations in the country, to give them a zero
tax obligation, and at the same time we are going to cut the per child
tax credit for child care. It just gives you a sense of proportion.
Mr. McDERMOTT. It is not very family friendly.
Ms. DeLAURO. As to who is family friendly or not.
Mr. PALLONE. I thank you both, and I would like to yield at this time
to the gentlewoman from Texas.
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman from New
Jersey, and I wanted to pick up where the gentlewoman from Connecticut
and gentleman from Washington were so pointedly focusing on, I think,
the discrepancies between the Democratic alternative and what has been
represented as a tax bill that is supposed to be responsive to all
Americans, and I would just like to add my opposition frankly because I
think one problem is that the pace at which this particular tax bill
moved was a pace that did not allow deliberations and consideration,
did not allow the input of those most needing the positive impact of a
tax cut, and I cannot help but agree in totality, 100 percent.
When I go home to the district, the people that I hear from are small
business persons who every Chamber that you meet with says small
business is the backbone of America. How many times do we have to say
that? Small business is the backbone of America, whether it is two
people, one person, a few people. Small businesses are the ones that
come into our community and hire people to work.
In this instance we had a circumstance where the estate tax does not
respond to small businesses. I just want to highlight the difference in
the funds. The Republican plan offers $3.6 billion in tax cuts. We in
the Democratic side representing and recognizing that we are dealing
with a balanced budget and not trying to blow up--I want to use the
term ``blow up'' the deficit in the outyears--have $2 billion.
Now let me emphasize the difference. We have a situation where you
can get an immediate relief for family-owned businesses for $400,000 in
extra exclusion tax for family business assets. Immediate; let me
underline that: Immediate. On the $3.6 billion side, where you blow up
the deficit in the year 1999, you can get $1 million credit, but not
until the year 2007.
I am speaking to small businesses today, 1997, not 2007, and then to
find out that the deficit will be steadily going up, the one deficit
that all of us have been talking about, the one that the Republicans
have been talking about and indicated that that will go up in 1999.
This estate tax on the Democrats will allow family owned businesses
interest with value up to 2 million plus with no estate tax in the case
of a married couple.
That responds to the major concerns that we have found when we go
home and talk to constituents, every day constituents, and I would like
to follow up as well on the hundred percent deductibility for health
care. The gentlewoman from Connecticut, the gentleman from Washington
mentioned something that you hear all the time. Most of what you hear
is the employees of small businesses saying I wish we could have health
care. You find the owners of small businesses saying, ``You know what?
I like my employees. They do a good job for me. But the overhead is
such that I couldn't pay them a salary if I had to pay for their health
care. But I want to give them health care.''
Now what sense does it make not to support the backbone of America's
job creation over the last decade, small businesses, with not giving
them a hundred percent deductibility? First of all, it allows you to
cut the costs of health care. It allows you further to insure that the
employees, mostly employed by small businesses in contrast to major
corporations, have health care coverage, and the small businesses will
continue that coverage, not get it, stop it, get it, stop it because
they cannot cover it because they get a hundred percent deductibility.
I consider those common sense provisions offered by Democrats and yet
not received by Republicans.
Let me add another point of concern that I have. I am certainly in
support of the alternative that we have offered that says that it
provides and allows the $500 child credit that the administration is
offering, but let me say that there are other aspects of education that
I think is important that the Democratic alternative offers to
Americans, and that is where we most need a lift, the K through 12. You
hear all the time the infrastructure, the support services for
educating our children K through 12. The important issue is that we
must emphasize building from the bottom-up.
Our plan, the Democratic plan, allows for education costs, free
capital for K through 12 schools, tax incentives for enterprise zones
like partnerships between public schools and distressed areas and the
private sector.
All the time you hear chambers and community groups talking about
working with our schools. Well, I think it is important that we give
them the kind of incentive that will allow them and help them to work
with our schools. That does not happen in the Republican bill, and I
think that that chart clearly says it. That chart indicates that most
of the Republican benefits go to the extremely wealthy.
I would like to put that in because I do not want the Democrats to be
perceived as not encouraging the working class, the middle class,
moving upward. We want that. That is what capitalism represents, and
that is not fair to label us as individuals who do not want to see
people get ahead.
[[Page H3839]]
{time} 1900
But it is important to know who we want to get ahead, and to realize
that this economy is a good economy. That is why the large corporations
are doing so well. That is why the Dow is unimaginable. People cannot
even understand what is going on with the Dow.
We are not doing poorly in this country, but we are letting the
middle income, the working people, do poorer. We are taking away from
the working poor the incentive to continue working by eliminating the
EITC, the earned income tax credit. How foolish when it benefits our
economy, because they are not only saving but they are infusing capital
back into the economy as consumers.
Mr. Speaker, I would say to the gentleman from New Jersey, let me
thank him first of all for bringing us together on this very important
issue, and just acknowledging that all of the fine print throughout the
country in terms of newsprint is emphasizing that this Republican tax
plan is a tax plan for the wealthy. It is not Democrats saying it, it
is individuals who have analyzed this in good faith.
Therefore let me just note that this article out of, I believe, the
Wall Street Journal has indicated ``The tax bill's complexities often
aid the wealthy.'' It goes on to recount many instances of where this
bill focuses on helping the wealthy.
Then, of course, the bill seems to go into areas, as I note, that do
not seem to coincide, if you will, with tax relief. It seems to
coincide with tax attack. It says ``Not all of the boomerangs in the
bill are invisible. One would require that labor unions report to their
members on a special form the percentage of the members' dues that are
used for political activities. The unions say this reporting would cost
them more than $20 million.''
This is not necessarily a tax issue, but what we find is that this
bill is all over the lot. I simply say to the Republicans, let us get
back to the business of drafting a bill that works for working America,
middle-income America, that applauds investment in small businesses,
that says good health care is good, that says that elementary school
education, middle school, secondary and high school is good, leads you
into college, and also says that we applaud the American men and women
who have small businesses, we want to give them small business and
estate tax relief, because that family has invested in America.
That is what I think we should be doing. That is the kind of tax bill
that I think the Democratic alternative represents. I think that is the
kind of tax bill that we here are speaking to on the floor this
afternoon. I think it is very important that the American people
understand that and be able to support the right kind of tax relief.
Mr. PALLONE. I want to thank the gentlewoman from Texas, and
particularly emphasize again that in many ways what I think the
Republican leadership is trying to do is to pull the wool over the
American people. They talk about capital gains and estate tax relief.
We know in certain circumstances if it is targeted, that can be very
beneficial to certain middle-income people.
But the problem is that through various gimmicks essentially what
they are doing is having across the board, if you will, changes in
capital gains and estate tax, and then using gimmicks so the amount of
money that is available, particularly after the first 10 years, grows.
What that essentially does is gives most of the relief to wealthy
individuals.
What we need to do, and I think that is what all of us are doing
tonight, we need to point out that we are in favor of capital gains tax
cuts, we are in favor of estate tax cuts, but we want them to be
targeted. We want the capital gains tax cuts to be targeted to the
average homeowner, as the gentlewoman pointed out. We want the estate
tax relief to be targeted to family owned businesses, small businesses,
farmers, those who need this kind of relief.
Mr. Speaker, I just think it is very important for us to continue
this discussion and make our colleagues and the public understand,
because too often people just hear tax relief, capital gains, estate
tax, and they think somehow that is going to benefit them. It does not
unless we do it in a way that benefits and targets so it helps the
average person. That is what the Democratic alternative is really all
about.
Ms. DeLAURO. If the gentleman will continue to yield, Mr. Speaker, I
think the gentleman made the point that it is like the debate about a
balanced budget, and where we have had agreement on both parts of the
Democrats on a balanced budget.
The devil is in the details. It is more than in the details, because
both a budget and a tax bill reflect, as I said earlier, the values and
the priorities that we hold as a Nation and where we want to try to
focus our priorities, where we want to focus limited resources.
No one is saying that we have, and we do not have, all of the money
in the world to do everything that everyone wants. That is not the case
at all. No one is suggesting that. Also, no one is suggesting that
government has to do everything for people. But in fact, government
should be charged with helping people with some tools that they need
when they face difficulties in their lives.
Tax relief is a tool to help people who are struggling to make this
fight. I think there are one or two pieces where we can really see the
contrast in a Democratic focus and a Republican focus. That is, Mr.
Speaker, today employers can offer to employees up to about $5,200 in
educational assistance which is not taxed. This is a provision that
needs to get extended year by year.
What the Democrats do here is they say that they will permanently
extend this expired provision of the Tax Code that says it will allow
employees to accept up to $5,200 in employer-provided educational
assistance which is not taxed. Also what the Democratic proposal says
is that this is good for graduate education as well as undergraduate
education.
The Republican plan only extends the provision until the end of the
year, and does not include graduate education. We are about the
business of trying to provide people with the educational tools that
they need so that in fact they can earn a living, make a living for
their family, progress, be able to pay their taxes, and be productive
and contributing members of society. That is what people want to do. In
the basic issue of the education assistance provided by employers, they
would exclude graduate education and they will not extend this
provision on a permanent basis. This is unfair to people.
At the same time, they will allow for inflation on capital gains and
what they call indexing in the second 5 years of this proposal, which
in fact, as my colleagues have pointed out, gets us right back to a
deficit which we have spent the last several years trying to dig out
of.
Mr. Speaker, I must say one more thing about the deficit. I think one
of the biggest contributions to getting the deficit down to where it is
today has been the Democratic budget of 1993, where in fact it has
allowed for an economy, and I might just parenthetically add that this
was a piece of legislation only supported by Democrats. There was not
one Republican vote for this piece of legislation.
Economists have said that this allowed for interest rates to come
down, this has allowed for the opportunity for the deficit to come
down, and in fact, provided the kind of an economy where we can focus
our time and attention on a balanced budget agreement and where we can
focus our time and attention on a tax plan which can benefit working
middle-class families in this country.
Ms. JACKSON-LEE of Texas. If the gentleman will continue to yield for
a moment, Mr. Speaker, to add another comment, I believe the
gentlewoman has really isolated and highlighted this issue of
distinction, if you will, between the approaches given by both the
Republican plan and the Democratic plan. Let me add a point to expand
on the capital gains.
It is noted that the Republican bill would lower the top capital
gains rate, now 28 percent, to 10 percent for taxpayers with incomes
below $41,200 and 20 percent for those who are better off. The main
beneficiaries of the 10 percent rate, the tax experts say, this is out
of the Wall Street Journal, would not be middle-income taxpayers
selling a modest amount of mutual funds. Instead, it would be wealthy
families who
[[Page H3840]]
are selling stock to pay for their children's tuition.
We are not denying that there should be the opportunity for children
to go to college, but what we want to distinguish is how the middle-
income, the working family, does not get the same equal benefit. I
think that is just key in what we are trying to do here.
There are various loopholes about how this capital gains transfer by
the richer family being able to give the stocks over to the children,
getting a benefit, and then the children being able to sell it and use
it for college, that does not happen when hardworking middle-income
families just want to sell a few mutual funds, they do not get the same
benefit as the richer population.
I think that is extremely important, as well as, let me add, the fact
that this is a 422-page bill. I noted that part of it has reporting
requirements for unions. This is a complex set of new laws that are
coming into being.
I always thought that one of the things that we in Congress wanted to
do was to simplify the Tax Code, to simplify the process, and to allow
those working families and small businesses to be able to pay taxes and
to have taxes cut or tax relief in a simplified process. That is not
the case with this new 422-page proposal offered by the Republicans.
Mr. PALLONE. Mr. Speaker, we do not have much time, but if I could
just summarize, I think we pretty much pointed out first of all why the
Democratic tax cut alternative is fairer, because it essentially
targets tax cuts on those who need them.
As was pointed out by the gentlewoman from Connecticut [Ms. DeLauro],
we are talking about scarce resources here. This is a balanced budget
plan. We want to give tax cuts where they are needed. That is really
essentially what the Democrats are all about: making it fair, making it
primarily for those who need them. It is obviously a lot better for
working families.
We talked about the per-child tax credit. We talked about how it is
better for education, because it gives more money to people who have
the need, whether they are in the first 2 years of college or they are
in 4 years of college, whether they are in graduate education.
Lastly, and certainly no less important, is it is so much better with
regard to the deficit. I think there is the really telling point, if
you will, when I talk to my constituents. When they listen to what the
gentleman from Washington said, if we go through this process and at
the end of this process, 10 years from now, we end up with an even
larger deficit than we have now, basically we are lying to the American
people.
Ms. DeLAURO. Shame on us.
Mr. PALLONE. That cannot be. We just have to keep pointing it out
every day on the floor, as we are doing now, and hopefully ultimately
our colleagues will listen and understand why the Democratic
alternative is better.
Mr. Speaker, I just want to thank the two gentlewomen for
participating, but we are going to have to do this a lot more.
Ms. DeLAURO. I think it is worth doing, and we thank the gentleman
for his leadership on this issue.
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