[Congressional Record Volume 143, Number 86 (Thursday, June 19, 1997)]
[House]
[Pages H4079-H4082]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  CONCERN ABOUT APPARENT DIRECTION OF UNITED STATES DIPLOMACY IN THE 
                      REPUBLIC OF NAGORNO KARABAGH

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New Jersey [Mr. Pallone] is recognized for half of the 
time remaining before midnight as the designee of the minority leader.
  Mr. PALLONE. Mr. Speaker, I would like to address some of the issues 
related to the tax bill as well as the minimum wage this evening in the 
time

[[Page H4080]]

that remains. I listened to some of the statements that were made by my 
Republican colleagues over the last 45 minutes or so, and I know they 
are sincere, but I also think they are very wrong about the 
implications of this Republican tax bill.
  But before I get into that I would like to spend about 5 minutes 
talking about another issue about a country that is far away from the 
United States but none the less where the United States, I think, can 
make a difference and where there is a great need for the United States 
to play a strong, but neutral, role in trying to resolve a conflict 
that has the potential for creating an even wider conflict if the 
United States does not address it in the proper way.
  Mr. Speaker, I am talking about a region of the world that many of my 
colleagues and indeed most Americans may be unfamiliar with but which 
the United States has identified as an important area of interest, and 
this is the Republic of Nagorno-Karabagh which was established on 
September 2, 1991, and declared its independence on January 6, 1992. 
The State of Nagorno Karabagh is predominantly populated by Armenians 
which was formally part of the Soviet Union and Nagorno Karabagh fought 
and won a war with the neighboring Republic of Azerbaijan to gain its 
independence back in 1991. A ceasefire has for the most part held for 
the last 3 years, but Azerbaijan has refused to recognize the 
independence of Nagorno Karabagh and still insists that Karabagh is a 
part of Azerbaijani territory despite the fact that Karabagh is a 
functioning State with the government and the proven capacity for self-
defense. Negotiations have been brokered by the organization for 
security and cooperation in Europe with the goal of achieving a 
political settlement, but so far those negotiations have failed to 
produce a diplomatic breakthrough.
  And, Mr. Speaker, I wanted to mention this on the floor tonight to 
express my serious concern about the apparent direction of U.S. 
diplomacy in this region. The United States is a cochair of the OSCE's 
Minsk group or Minsk conference which is charged with negotiating a 
political solution to the Karabagh conflict. In this capacity we should 
be working along with our co-chairs, France and Russia, for a 
negotiated settlement that recognizes the self determination of the 
people of Nagorno Karabagh.
  But based on media reports that I have recently been reading and 
recently have surfaced I am fearful that the United States may not be 
pursuing a neutral course and that U.S. negotiators may, in fact, be 
trying to impose unacceptable conditions on Nagorno Karabagh and 
Armenia, and I am calling on the State Department to clarify these 
reports and to confirm that the United States is working for a fair 
solution to this issue.
  Mr. Speaker, earlier this month the House passed the Foreign 
Relations Authorization Act, and that legislation included an amendment 
sponsored by myself and the gentleman from Michigan [Mr. Knollenberg] 
which would help promote U.S. leadership and neutrality for a just and 
lasting peace in Nagorno Karabagh. The legislative language reaffirms 
the current United States position of neutrality, and our rational in 
offering this bipartisan amendment was that the U.S. has identified a 
resolution of Nagorno Karabagh conflict as a vital interest. We 
believed that Congress should play a positive role in jump starting the 
negotiating process by going on record in support of a negotiated 
settlement and by reaffirming U.S. neutrality.
  But while it is ultimately up to the parties directly involved; that 
is, Armenia, Nagorno-Karabagh and Azerbaijan, to agree to a negotiated 
settlement, I believe that the power and the prestige of the United 
States can count for a great deal in moving things forward. But that 
power and prestige has to be accompanied by fairness, by the goal of 
being a honest broker and not impose solutions that one of the parties 
will not be able to accept.
  President Clinton in a letter to the Armenian American community on 
March 26 of this year stated, and I would like to quote, Mr. Speaker; 
he said, quote, I can assure you that our consistent position of 
neutrality on the tragic Nargorno Karabagh conflict has not changed and 
will not change.
  I have to say, Mr. Speaker, though that I am concerned by recent 
reports that have come from the media that suggest that the balance may 
be tilting against the people of Nagorno Karabagh. A report this week 
from Noyan Tapan, an English language newspaper in Armenia, suggests 
that the Minsk group, which again the United States cochairs, may be 
trying to impose on Nagorno Karabagh a unacceptable solution. The 
newspaper reports that the proposed solution would require Nagorno 
Karabagh to withdraw its forces from the Azeri firing posts. These were 
places where the Azerbaijani forces fired on the people of Nagorno 
Karabagh, and basically what these newspaper reports say is that this 
proposed solution by the United States and others would force Karabagh 
to withdraw its forces from these firing posts. I will name them:
  Kelbajar, Aghdam, Fizouli, Dzhebrail, Gubatly, Lachin.
  Lachin is of course the corridor between Nagorno Karabagh and Armenia 
that was neutralized by Karabagh's self-defense forces, and also 
Shoushi, what has historically been part of Nagorno Karabagh for 
centuries, if not thousands of years.
  And ultimately to dissolve the army, this is another one of the 
conditions, to ultimately dissolve the army, which is the only 
guarantee of security for the population of Nagorno Karabagh, and also 
to require that Karabagh remain an enclave within Azerbaijan with the 
danger of the deportation of the native Armenian population, that 
danger will always exist as long as Karabagh is considered part of 
Azerbaijan. The newspaper reports that Karabagh would be granted the 
right to have its own Constitution, symbol, national anthem, flag, and 
national guard. This all sounds very nice, but, Mr. Speaker, these 
trappings, and that is what they are, trappings of nationhood would 
obviously be hollow symbols if the people of Nagorno had no way of 
protecting and maintaining their hard-won freedom and independence.

                              {time}  2300

  Combined with these newspaper reports, there was a news report last 
month on CNN that President of Azerbaijan, President Aliyev, was vowing 
to take control over Nagorno by force if necessary. The United States, 
and I believe very strongly, the United States must not be in the 
position of tacitly supporting, much less openly supporting, any 
government that still advocates the use of force to settle this 
controversy.
  As I indicated, Mr. Speaker, I hope that the State Department will 
clarify its position and respond to these recent media reports. Deputy 
Secretary of State Strobe Talbot and our new special negotiator for 
Nagorno, Ambassador Lynn Pascal were recently in the region. As the 
cochairman of the Congressional Caucus on Armenia Issues, I am working 
to get the State Department to make clear where they stand on these 
negotiations, particularly in light of the fact that this House has 
gone on record in support of continued U.S. neutrality.


                        The Republican Tax Bill

  Mr. Speaker, on another topic, I listened to some of the comments 
made by my Republican colleagues for the last 45 minutes or so about 
the Republican tax bill and also about the minimum wage issue, and I 
feel very strongly that it is necessary to respond. I am not going to 
take up the whole time that has been allocated to me tonight, but I am 
particularly concerned about some of the statements that were made with 
regard to the tax bill.
  As I think my colleagues know, as part of the balanced budget 
resolution, there is a bill that would basically cut taxes and the 
issue is how to do it. Obviously, everyone would like to see a tax cut, 
but there is a major difference between the Republicans and the 
Democrats on who should benefit from these tax cuts. What I have 
maintained and my Democratic colleagues maintain, is that the majority 
of the tax cuts that have been proposed by the Republican leadership, 
and they of course are in the majority and are likely to hold sway, the 
majority of those tax cuts basically either favor the wealthy, either 
individuals who are rather wealthy or corporate interests.
  Just to give some statistics, according to an analysis by the 
Treasury Department, two-thirds of the Republican tax breaks benefit 
those earning more

[[Page H4081]]

than $100,000, and the richest 1 percent would receive an average tax 
break of more than $12,000. More important, the Republican bill uses a 
number of gimmicks to hide the cost of tax breaks benefiting the 
wealthy which explode in costs in the second 5 years. The capital gains 
indexing provision, for example, raises $2.5 billion in the first 5 
years, but costs $35 billion over 10 years.
  Now, I think this is particularly dangerous, because remember, we are 
talking about the balanced budget resolution. The whole reason to come 
up, or the reason why the President agreed and the majority of the 
Democrats, including myself, voted for this balanced budget resolution, 
is because we felt it was going to balance the budget and eliminate 
ultimately the deficit that we have suffered under for a number of 
years.
  Well, if in the course of passing this tax bill, 5 or 10 or 15 years 
from now the deficit starts increasing again and balloons to even 
greater than it is now, then obviously we have not accomplished our 
goal, and that is the fear that many of the Democrats have now, which 
is that simply that in the first few years, there is going to be an 
effort to save money, but in the long run, because of the level of tax 
cuts, particularly those for corporations and wealthy individuals, that 
in fact the deficit will increase once again.
  Just some more information. The Republican bill gives large 
corporations a $22 billion windfall by scaling back the corporate 
minimum tax that consistently denies or limits tax relief for working 
families. A working family with two children earning $25,000 would not 
receive the $500 child credit. Some working families who take a 
deduction for child care expenses would be penalized, losing half of 
every dollar they receive for the child credit. And the value of the 
HOPE education tax credit, this is the tax credit that would help 
families pay for their children's college education, well, that would 
be cut in half and would provide only 50 percent of tuition expenses 
for millions of students attending community colleges and other low-
cost institutions.
  Finally, the Republican bill threatens the security of low-wage 
workers by allowing employers to choose to pay their workers on a 
contract basis. Millions of workers could be reclassified as 
independent contractors so that employers can avoid paying the minimum 
wage and can avoid providing health care and pension benefits to their 
workers.
  I just wanted to talk a little bit about the minimum wage provision, 
because again I listened to my colleagues earlier this evening and they 
seemed to suggest that it was the right thing to do to not require the 
minimum wage for those workers, again workers who are coming off 
welfare and are entering the work force now, because of the welfare 
reform bill that we passed in the last session of Congress. I just want 
to talk a little bit about the ideology, if you will, of getting people 
off welfare.
  The idea was to get people off welfare, off the Government assistance 
programs and to have them work. Well, I think we all know that people 
need an incentive to work. In other words, by staying on welfare they 
do better than if they are working, then why should they work? So when 
we talk about getting people to work, we want to make sure that they 
are getting a decent wage. A minimum wage is not really a decent wage, 
but at least it is something. We want to make sure that if they are 
parents and they have young children, particularly working mothers who 
do not have a spouse, that they have adequate child care, and of course 
we want to make sure that they have health care. Because if they stay 
on welfare and they get those benefits, but then when they work, they 
do not, there is no incentive for them to be working as opposed to 
being on welfare.
  Well, a big part of that is to make sure they have the minimum wage, 
to make sure that they have a decent wage when they are working. In 
addition to that, if we make it more difficult for them to get child 
care because we do not give them the credit to get the child care, then 
again, they do not have the incentive to work.
  So I think that by the Republicans saying that we are not going to 
provide minimum wage for these people coming off welfare or that we are 
going to make it more difficult for them to get child care, we are 
defeating the very purpose of the welfare reform bill.
  The other thing that the Republicans have done, though, in their 
budget proposal is that they have created an exception not only for 
people coming off of welfare or in the workfare program to be exempt 
from the minimum wage, but also they have created this provision, it is 
called safe harbor for independent contractors, that basically expands 
the definition of independent contractors in the Tax Code and allows 
businesses to reclassify millions of workers as independent contractors 
rather than employees.

  Now, what that means is in addition to being denied a number of 
benefits, they would lose the basic worker rights such as minimum wage. 
So here we are creating another big loophole, and I just think that it 
is wrong. If one group of people are entitled to the minimum wage and 
are working, then another group of people who are working and doing the 
same job should also be entitled to the minimum wage.
  I just wanted to talk a little bit, if I could, about this message 
that again some of my Republican colleagues tried to deliver tonight 
where they were suggesting that their bill managed to make sure that 
people who were not paying taxes did not get a credit. Well, the 
reality is, what they are doing is cutting off a lot of people who are 
making under $30,000 a year from getting any tax cut or tax credit, 
even though they are paying a significant amount of taxes. I think we 
have to remember that people pay Federal taxes in a number of ways. 
They may pay taxes on their income, but they also pay what we call the 
FICA, or the payroll tax, which is a significant tax for people at 
almost every level, at every income level.
  In addition to that, people pay all kinds of taxes: State taxes, 
property taxes, local property taxes. So to suggest that there are some 
people who are not paying Federal income tax and because they are not 
paying Federal income tax, that they should not get a tax break is very 
unfair, because they may be paying thousands of dollars in Federal 
payroll taxes, in property taxes, in other kinds of State and local 
taxes.
  I just wanted to give some information in that regard, because I 
think that what my Republican colleagues are trying to do is give the 
false impression that the Democratic tax alternative is simply giving 
money back to people that do not pay taxes. In fact, just the opposite 
is true.
  The tax legislation that I am talking about is the legislation that 
was adopted by the House Committee on Ways and Means and also proposed 
by the Senate Finance Committee. This is the Republican proposal, and 
it makes very significant changes in previous Republican proposals with 
regard to the child tax credit. The new version, this is the new 
Republican version which is different from their prior version, denies 
the credit to 4 million children, this is the child tax credit, in 
middle income families that would have received the credit under 
previous Republican tax proposals. The new version of the credit also 
reduces the size of the credit for several million additional children 
in middle income families. Most of these children live in families that 
owe Federal taxes. Their tax burdens often amount to several thousands 
dollars, even after the effects of the earned income tax credit are 
accounted for, and claims that these families owe no Federal tax are 
not correct. This is from the Center on Budget and Policy Priorities, 
and I just wanted to give a little more information about it.
  Under the child tax credit that Congress passed in 1995, now 
remember, this was the Republican Congress, as well as under the child 
credit contained in the leadership tax package that was introduced this 
year by the Senate majority leader, a family would receive a credit of 
up to $500 per child to be applied against the family's income tax 
liability. The child credit would be applied before the family's 
eligibility for the earned income tax credit is calculated.
  Now, under the more restrictive version of this child credit, the one 
that the Democrats have been criticizing that has been proposed by 
Republicans now in the various committees, the child tax credit could 
be used only to offset any income tax remaining after

[[Page H4082]]

the earned income tax credit is applied. The family has no income tax 
liability left after the EITC is applied, the family would be denied 
the child credit, even if the family owes substantial amounts of other 
Federal taxes, such as payroll taxes.
  What the Republicans are trying to do now is to justify the denial of 
this child credit to 4 million children by arguing that these children 
live in families that owe no Federal taxes. But it is not the case. The 
large majority of the families would either be denied under the child 
credit under the new proposal or have the size of the credit reduced. 
Those families do owe Federal taxes. They have large tax bills.
  I just want to give an example. The families that would be denied the 
child credit or have the credit reduced have incomes between $15,000 
and $30,000. For example, two-parent families of four with incomes 
between $17,500 and $27,000 will receive less under this Republican 
proposal than they would have received under the child credit proposal 
that Congress adopted in 1995, this is the Republican proposal from the 
previous year.
  Just an example here. Under current law, the family's tax bill just 
from the income tax and the employee's share of the payroll tax equals 
$1,700 after the EITC is subtracted. Under the 1995 Republican budget 
bill, this family would receive a child tax credit of $975, which would 
have reduced the family's tax bill from $1,700 to $725. But under the 
new proposal, the family would not receive any child tax credit to help 
offset this tax bill.
  So what we are seeing here is that middle income families, and I 
think families that are in this category between $17,000 and $27,000 
are clearly middle income families, they are not going to be able to 
take advantage of this child tax credit, even though they may owe 
significant amounts of Federal taxes, not to mention the fact that most 
of them are probably paying a significant property tax and possibly 
other State and local taxes as well.
  It is not fair to characterize these people with significant tax 
burdens, including Federal tax burdens, as people who are not paying 
taxes. That is what the Republicans are trying to do, and it is wrong. 
I think we need to constantly bring that up.
  Now, I just wanted to, in the small time that I have left, I just 
wanted to talk about some of the other criticisms that I have of the 
GOP tax plan.

                              {time}  2315

  I think it should be understood that the Democrats have an 
alternative. The Democrats are going to provide tax relief to middle-
income working families, education tax credits, child tax credits, 
capital gains tax cuts for homeowners, a whole list of tax cuts, if you 
will, that will benefit middle-income families.
  Mr. Speaker, if we look at the Republican tax plan, two-thirds of the 
capital gains tax cut in their plan will go to the wealthiest 1 percent 
of families. It would give a windfall of $1 million to many CEOs with 
big stock options, but only $150 to the average working familiy.
  What the Republicans are doing is looking at the capital gains tax 
and cutting it across-the-board for stocks, for bonds, for the whole 
portfolio of assets, if you will, that an individual may have. That 
person can be extremely wealthy.
  What the Democrats are saying is if we are going to have a capital 
gains tax reduction, and we are in favor of it, it should be targeted 
to homeowners, because most people pay capital gains only when they 
sell their home. Under the Republican proposal, the wealthiest 1 
percent of Americans, those making $600,000 or more, would receive 40 
percent of the tax cuts in the plan, nearly as much as the rest of the 
country combined. Two-thirds of the capital gains tax cut in the 
Republican plan would go to people with incomes of more than $600,000 
per year.
  Again, I want to go back to what I was saying from the beginning. 
Compare the Democratic plan, compare the Republican plan. The 
Democratic plan is fair to working families. It is targeted to working 
families. The Republican plan is targeted essentially to the wealthy, 
but the worst part of the Republican tax plan, in my opinion, is that 
ultimately it will explode the deficit and not reached the balanced 
budget, which this is all designed to do.
  The cost of the Republican tax cuts will explode in the same years 
that the baby boom generation starts to retire, and that is going to 
require, in other words, if we have this huge deficit and the costs 
explode, the only way we are going to eliminate it then is to do major 
cuts in Medicare, major cuts even in Social Security. So what the 
Republicans are doing is essentially putting us further into debt and 
causing future generations to have to pay double.
  The Republicans claim that the tax bill would give everyone a $500 
per child tax credit, but millions of families that make less than 
$50,000 would receive no credit at all, this is what I was talking 
about before, and the value of the credit would go down in future 
years. On average, the child credit would be worth only half of what 
the Republicans claim.
  The Republican tax plan has many gimmicks and tricks designed to hide 
its real impact on the future, and disguise who it would really benefit 
the most. The public has not been told about the real long-term impact.
  Many economists are saying that the Republican tax plan would 
undermine the new balanced budget agreement because of the hidden costs 
that would increase the deficit in later years. Essentially what you 
would have under this Republican plan is a $1 trillion tax cut, an 
irresponsible policy which in many ways would hark back to the tax cuts 
that we had in the 1980's, and would put us back on a path of large and 
growing deficits.
  Mr. Speaker, I just want to conclude, if I could, by pointing to the 
two tax cuts that I think are the most contentious here in terms of the 
impact on the wealthy in the case of the Republicans, and the working 
person in terms of the Democrats.
  With regard to the capital gains tax cut, the Republican plan rewards 
the rich with deficit-busting capital gains tax breaks. The Republican 
plan grants massive tax breaks to wealthy people who make money by 
selling their stocks, bonds, and other assets.
  What the Democrats are saying is do not give these huge capital gains 
tax cuts to people with these stock portfolios. Provide a targeted 
capital gains tax break for homeowners, small business owners, and 
farmers, because those are the people that would benefit the most and 
where it would impact the average working familiy.
  With regard to estate taxes, only 1.5 percent of families currently 
pay any estate taxes, and yet the Republican plan would simply expand 
the estate tax exemption to larger and larger estates, providing large 
estate tax breaks to very wealthy families. The Democrats are saying, 
yes, we will reduce the estate taxes, but we are going to target it for 
family-owned businesses. That is where the relief is needed the most.
  So I think whether we look at the education benefits, we look at the 
capital gains cuts, we look at the estate taxes, we look at the child 
tax credit, in each case we have a limited amount of money. The 
Democrats are saying, target those tax cuts to the working people, and 
the Republicans are saying, no, let us give those tax breaks primarily 
to wealthy individuals, let us eliminate the tax burden of the 
corporations. And in the long run, the worst thing of all is that the 
Republican plan will balloon the deficit and be contrary to the very 
purpose of this whole process, which is to achieve a balanced budget.

                          ____________________