[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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