[Congressional Record Volume 143, Number 87 (Friday, June 20, 1997)]
[Senate]
[Pages S6030-S6037]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               TAX RELIEF

  Mr. COVERDELL. Mr. President, we are in the midst of a great deal of 
history in the 105th Congress. As most people now realize early out, 
the Congress, the leadership of the Congress and the President of the 
United States and his administration reached an agreement that they 
would work together to produce, finally, after well over a decade, tax 
relief, and that we would produce by the year 2002 a balanced budget 
which would, of course, by definition, produce constrained spending, 
and that we would take steps to protect the solvency of Medicare at 
least for upward to a decade, and begin to reduce spending in order to 
reach these balanced budget goals.
  By and large, I believe the American people are pleased with the 
concept of

[[Page S6031]]

this agreement. I suspect that not all of them realize that was only 
one step in a 1,000-mile journey, and that once those basic parameters 
had been established then you had to begin the business of having the 
committees of jurisdiction produce the actual legislation that would 
produce this effect.
  Mr. President, this has been a long goal of the Republican majority 
of this Congress that came here in 1994, to produce balanced budgets 
and to produce tax relief for America's families and workers that we 
believe are under the most severe economic pressure in contemporary 
history. They are paying more taxes. An average family is paying higher 
taxes today than at any time in contemporary history.
  This agreement comes in the context of a longstanding battle between 
this Congress and the President. I am going to take just a moment or 
two to remind us of the general milestones in that battle. In 1992, 5 
years ago, when the President was first seeking election, he promised 
the American people, particularly the middle class, that he would lower 
their taxes, that if he were elected President, he was going to reduce 
the economic tax pressure on middle-class America. In August of 1993, 
in his first year of the Presidency, that promise to lower taxes 
became, in reality, the largest tax increase in American history. I 
repeat, the promise to lower taxes was fulfilled by raising taxes to 
the highest level in American history.
  Then came the elections of 1994 and the American public said, ``Now, 
wait a minute here. We were told we were going to have tax relief, and 
our tax bill has gone up. We were told that American Government would 
shrink, and we just witnessed the single largest proposal to enlarge 
the Federal Government in American history.''
  So we had the largest tax increase, which passed by one vote--that of 
the Vice President, seated in the very chair that the Presiding Officer 
occupies right now, and that was followed by a suggestion that we 
should expand the Federal Government to take over every aspect of 
health care, which was narrowly defeated.
  So in 1994, the American public sent new leadership to the Congress, 
and they turned the Congress over after three decades of dominance by 
the other party, and they elected a new majority.
  The new Congress, Mr. President, designed a balanced budget, reduced 
the size of the Federal Government, reduced Federal spending, and 
offered to lower taxes by the equivalent amount of money that the 
President had raised taxes. He raised taxes in 1993 by about $250 
billion, and the new Congress came in and lowered taxes by $245 
billion. So what it in effect was was a refund of that galloping tax 
increase that hit the American public in 1993.
  That went to the President and the President took his pen and struck 
it down. He vetoed the tax relief, he vetoed the balanced budget, and 
he vetoed all the constraints that were represented in the balanced 
budget. Now, even though it was vetoed, it was a historic achievement 
because it was the first time in over 30 years that a Congress proved 
that it could, indeed, muster the courage and the muscle to pass a 
balanced budget and at the same time lower working families' taxes. But 
it was vetoed.
  Now we have two major events that have occurred here--in 1993, taxes 
were raised to historical levels; in 1995, the Congress tries to refund 
that and the President vetoes it.
  We have another election. The President is reelected and he is 
reelected under the theme: The era of big Government is over; the era 
of big Government is over. The Congress is reelected in the House and 
the Senate, the Congress that was committed to balanced budgets and tax 
relief. The leadership of this Congress and the newly elected 
President, for his second term, decided to sit down, and they had 
historical meetings, both in the Capitol and at the White House, and 
they announced a historical agreement that both will work for a 
balanced budget, for tax relief and constrained spending.

  Last night, the Senate Finance Committee passed to the full floor of 
the Senate a proposal that honors the agreement for tax relief in the 
range of $135 billion. That tax relief is not enough, but keep in mind 
it is an agreement between an institution--the White House is not all 
that enamored with tax relief per the discussion we just had--and a 
Congress that would like it to be substantially more. At the end of the 
day, the proposal that will be coming to the Senate floor will be about 
a refund equivalent of about 40 percent of that tax increase that was 
put in place by the President in 1993. So it is very meaningful and 
very significant.
  Just to remind the American public--no one can see this chart, but it 
goes from 1950 to 1997, and you can see the trend. The percentage of 
the Nation's wealth consumed by taxes has gone from 23.4 to almost 32 
percent--up, up, up, and up.
  This proposal that we will have coming before us is the first in well 
over a decade that would significantly lower that burden. A little 
later on in my remarks I will talk further about the condition of the 
average family, but we will take a moment and talk about some of the 
details of this tax relief. First of all, Mr. President, it is for 
kids. This is tax relief for children. The $500 per child tax credit 
will help parents--that is per child--will help parents meet the needs 
of children and teenagers. We figure teenagers probably have the 
highest economic impact on the family than even the real little ones, 
and that is the difference between us and the President. The 
President's proposal does not include tax relief for teenagers, but we 
do and this proposal does. So it is a $500 per child tax credit to help 
parents meet the needs of children and teenagers because parents can 
decide their children's needs better than Washington bureaucrats.
  We are leaving the money in their checking account, not dragging it 
up here and then micromanaging it as to what is important in that 
family. Obviously, it is for the parents of these children. We make it 
easier in this tax relief for parents to afford their children's higher 
education by building on the President's Hope education proposal and 
improving it. We make it easier for parents to save and to invest for 
their own future by expanding IRA's and including a homemaker IRA that 
will help either mothers at home or working mothers.
  This is a plan for the grandparents in their retirement years. Those 
who have worked hard and played by the rules and saved for retirement 
should be rewarded, not punished, as is the current law. Some say, on 
the other side of the aisle, you are rich--which is often characterized 
in an uncomplimentary fashion. I am also often amused by what is 
considered wealthy, and you do not have to have much to be targeted as 
being a wealthy person in America around this Washington establishment. 
On the other side of the aisle they say you are rich if you put money 
into mutual funds or contributed to a company retirement plan or built 
a small business with your own sweat and labor, or run your own farm. 
An average farmer would be categorized as rich, according to the other 
side of the aisle.

  More than half of all taxpayers claiming capital gains have incomes 
under $50,000. I want to repeat that. More than half of all taxpayers 
who claim capital gains have incomes of less than $50,000, and most, or 
many, are seniors who live a better life by converting their lifelong 
investments. Over the years, as we have heard argument after argument 
against lowering the tax on capital gains, we have heard time and time 
again that that is just something for wealthy people; that is just 
something for rich people.
  I repeat: More than half of all who claim capital gains earn less 
than $50,000 a year.
  Mr. President, I have noted the arrival of the distinguished chairman 
of the Senate Budget Committee, who has played just a massive role in 
these agreements and has been following the details of their 
fulfillment in great detail. I yield up to 15 minutes of our time--
unless he needs more--to the distinguished Senator from New Mexico.
  The PRESIDING OFFICER. The Senator from New Mexico is recognized.
  Mr. DOMENICI. First, I compliment Senator Coverdell, so soon after 
completion of the tax package and deficit reduction package, for him 
being on the floor encouraging Senators to evaluate it and to speak 
out. I think it is fair to say that no one has had an opportunity to 
review, in detail, the tax bill that was written last night. Sometimes 
people confuse the Budget Committee with the Finance Committee.

[[Page S6032]]

The Finance Committee is the tax-writing committee. It has a lot of 
additional jurisdiction, including Medicare and Medicaid in the Senate. 
The Budget Committee does not write the laws. It writes the budget 
resolution. But we try our best to keep abreast of what is going on.
  The reconciliation bills will be up next week, and there are some 
very technical rules about these bills. We will be careful to advise 
everyone on how to apply those technical rules and the way that is best 
to get the issues framed in the Senate and get the votes proceeding.
  Today, I want to indicate that the package of tax cuts that the 
Finance Committee passed last night, from this Senator's standpoint, is 
a very exciting package. In the Finance Committee package, 
approximately 82 percent of the tax relief is made up of a family tax 
cut that we Republicans have been promoting for almost 5 years, and 
education assistance priorities, which we all share. Let me repeat that 
we are going to hear a lot about some of the other tax proposals in 
this bill. But our American citizens ought to understand that out of 
every dollar in tax reductions in this bill, no matter what is said 
about the remainder of the package, 82 percent of the tax relief is 
made up of the $500 child credit and education assistance in this bill.
  It represents the biggest tax cut in 16 years.
  Now, some complain that it is not big enough. The American people 
should know that, in our efforts to get a balanced budget put together, 
this is not a huge tax cut. In the first 5 years, it is around $85 
billion. To put that into perspective, we spend about $1.6 billion 
every year. Our gross domestic product, the sum of all input into the 
economy, is well over $5 trillion, moving toward $6 trillion. So this 
is a tax cut that permits us to do some good things for the American 
taxpayers, and I repeat that approximately 82 percent of the package 
goes to families that are raising children; they get a tax cut of $500. 
We call it this fancy name, ``tax credit.'' But, essentially, a tax 
credit means that if you owed $5,000 in income taxes, you can take $500 
off of that $5,000. There is no other way to say it than it is a tax 
cut. Most of it is for working men and women in America who are not 
particularly wealthy.
  We are never going to be able to produce a tax cut package that some 
Senators--particularly on the other side of the aisle--are not going to 
moan about. They are going to moan that it goes to the wrong people. 
Well, some of them don't want a tax cut at all. Some just have to find 
something to make sure that the poor in the country believe that the 
other party is serving the poor better than we are. That is just too 
bad, because it is obvious in this American society, to most people 
that look at our economic situation, that we ought to be doing more on 
the capital formation side of this equation.

  So while this bill is finally and firmly tax relief for middle-class 
families, it does include some relief from capital gains taxes, and for 
people with a home. It gives them a very generous $500,000 exclusion 
from capital gains tax for people who sell their house. But it also 
provides some capital gains relief for many millions of Americans who 
sell an asset, be it a few shares of stock, a piece of real estate, a 
family lot that they inherited from their parents, or stock on the 
stock market. And we have not gone wild with reference to this capital 
gains tax. It is a pretty reasonable one, considering that we don't 
have an awful lot of money to spend.
  Obviously, no matter what is done with reference to death taxes, 
there will be some who complain that you ought not change death taxes, 
even though we haven't changed the basic exemption for many, many 
years. While inflation has built up, we have left it just like it was, 
and now millions of Americans--not a few hundred thousand--are looking 
out there saying that 50 to 55 percent of what they have accumulated on 
death is going to go to the Federal Government. We don't think that is 
exactly right--most of us--on our side. We think there ought to be much 
more concern about the energizing of society and this economy that 
comes with people who work hard because they want to accumulate wealth. 
We don't want to take that away by making the death tax so onerous. We 
haven't been able to change it very much in this bill, but there is 
some improvement. It will take 10 years to be fully implemented. 
Frankly, we will hear some more about that, too. It is obvious that it 
is easy to talk about that as if it were something bad for us to try to 
give some relief to these kinds of Americans who worked hard to build a 
business up, who have been smart and accurate on how they have done 
things. We are going to give them some tax relief. It is a small 
portion of this package. It is something we want to do. I am sure there 
are many Democrats that want to do this also, and I am quite sure 
something like the death tax relief in this bill is going to become 
law.
  Now, let me repeat, this bill provides a $500 tax credit per child, 
beginning the day the child is born. By making changes in the order 
that the earned-income tax credit and new child credit are taken, the 
Finance package adds about 900,000 more children who will be eligible 
for this tax relief than the House version of this bill. I believe that 
this change that we now have a bill that we will not be accused of 
being unfair to a very large part of the working people in the country.
  The earned-income tax credit--although it has been dramatically 
increased--was a Republican idea, incidentally, for those who wonder. 
Ronald Reagan was a staunch supporter of saying to those who want to 
work for a living that we want to encourage you to work, even though 
you are not making a lot of money. We want to discourage you from going 
on welfare by giving you this earned-income tax credit. So it is for 
working adults who are not earning enough in the eyes of Congress and 
past Presidents, and so we give them that earned-income tax credit.
  When you look at the rest of this bill--at least the major 
components--the cost of a college education has increased 234 percent 
since 1980. The bill helps families save for college, helps students 
pay for college and pay back certain loans, helps employers pay for 
their employee's education, which many of us have thought for a long 
time is a very prudent thing to do. If you need more education in this 
society for better jobs and for the transition required in today's job 
market, if an employer wants to pay for it, we don't understand why the 
employer should not be able to deduct that and why the employer should 
be paying for that as if they earned money. So we are fixing that, to 
some extent. It includes tax relief for education assistance provided 
by the employer side, which I have just alluded to, and it helps 
employees maintain what many think is a new characteristic of American 
society, which is maintaining a lifelong learning opportunity.

  It provides capital gains to help people generate more incentive to 
invest in U.S. companies that provide jobs and help grow this economy. 
One of the interesting things is that people can be in favor of jobs, 
but oftentimes it is very difficult to make the case that there are a 
lot of ways to create jobs, and they are not singularly--in fact, the 
worst way in terms of cost effectiveness is for the Government to 
provide programs that create jobs. We do that sometimes. In fact, in 
the bill before us, we are going to have a $3 billion, 5-year program 
on welfare jobs. Frankly, we agreed to it. I have very slim hope this 
initiative will succeed. But we agreed on some things that I did not 
believe in and this was one of them.
  When you invest in capital formation and help American companies 
grow, they can build new modern plants, install efficient technology, 
you, as an investor and a citizen, are deserving of an accolade that 
you are helping create jobs. And so a capital gains tax cut should 
recognize that jobs were created and the country benefited from the 
investing and risk taking that the investor was willing to take.
  Actually, the capital gains provisions are pretty good. Last night 
the committee partially corrected the discrimination against real 
estate--real estate that is depreciable, whether it is a building, 
whether it is an office storage, or an office building, we came very 
close to mistreating those investments. Thanks to some amendments last 
night, it is getting closer to at least a reasonable treatment of the 
gain that comes when you sell that kind of an asset. It won't be the 
same as the other

[[Page S6033]]

asset sales, be it stock equity or your home, or other things, but we 
are moving in the right direction.
  So I am pleased that the Senate bill treats capital gains investment 
on real estate better than the House bill. I hope we keep that. It 
lowers the recapture rate to 24 percent. I actually believe that, in 
due course, it ought to be the same as the overall capital gains rate. 
I know my friend from Georgia agrees with that. You only have so much 
money to go around and you can't do everything.
  Now, I understand that one of the things we have problems with in our 
country--and I don't stand here saying that the IRA's in this bill are 
going to solve it. But America is now becoming known, worldwide, as the 
country that doesn't save. We love to spend, but we don't like to save. 
We are very fortunate that, for the last 15 or 20 years, or so, our 
credit has been so great, and our economy so stable, and the country so 
stable, that a lot of foreign money flows into America to pay our 
debts.
  But essentially, so long as we run big deficits--and hopefully we are 
putting a stop to that--and so long as the American people do not save 
otherwise, we are still going to be the world's largest borrower and 
the world's worst saver; that is, as a people and as business and as 
Government goes.
  On the other hand, we are moving in the right direction. I for one 
think that we ought to have universally IRA's. But we are not going to 
get there until we totally reform the Tax Code. But there are some 
powerful IRA provisions in this package. I am not sure that all of them 
will stay through conference, and I am not sure that some won't be 
attacked here on the floor. But, nonetheless, the idea of doing 
something to encourage savings by middle-income Americans instead of 
just those who are at the top of the ladder is very exciting to me. 
Countries with the highest saving rates are moving in the direction of 
greatest economic growth. Greater economic growth translates into 
better jobs, bigger paychecks and higher standards of living. For the 
higher the savings rate--Japan has a high savings rate--some people 
say, ``Well, they don't do it voluntarily.'' It is almost mandated by 
their government. But at least they do, and the government almost tells 
them how much of their paycheck has to go into savings.
  Some of the other countries in the Pacific rim have great savings 
prospects for their people. We have to do better. And we will be doing 
better, if this bill becomes law.
  I alluded earlier to the death tax, and I am not going to say much 
more about that.
  But I do want to comment that I wish today I could tell people of New 
Mexico--and I wish everybody could know in their States--the exact 
impact of this tax bill on their States and their constituents. I 
understand, however, that the Tax Foundation has done that for the 
House bill.
  So, if you want to know what the House bill has done in terms of the 
citizens of your sovereign States, you can get that. It looks to me 
from what I can discern in terms of my State of New Mexico that the tax 
relief numbers attributable to the people of my State from the Ways and 
Means bill are worthy of stating because I think the final package will 
result in bigger tax cuts for New Mexicans. I think the Senate Finance 
package will result in bigger tax cuts than the Ways and Means package. 
So I will be able to say to New Mexicans that we are going to do at 
least this and probably better.
  Let me just recite to show how important it is to a small State like 
mine. New Mexicans will save $388 million over 5 years because of the 
child credit in the House bill. New Mexicans will have $388 million of 
their own money to spend on their families as a result of this tax 
package. We are doing a little better under the Senate version.
  It is common knowledge that, if you look at New Mexico you discover 
that we have a lot of children in the families of the working poor. So 
I would assume for the working people who pay taxes that my State will 
get a higher benefit as a result of the ways the Finance Committee 
``stacked'' the earned income and new child credit. That is a pretty 
good chunk of money that will stay in New Mexico rather than coming to 
Washington because of the $500 credit. That makes it kind of 
understandable. Mr. President, $338 million-plus will never leave our 
taxpayers' pockets in New Mexico and come to Washington. It will stay 
there.
  Mr. President, New Mexicans will also save $229 million in additional 
dollars of their own money to spend on education for their children.
  There are a couple of glitches in the bill. There will be a big 
debate about should there be an IRA for education after the 13th year 
or 14th year. But when it is all taken into account the House bill has 
$229 million that will stay with New Mexico families to use on 
education that they would otherwise send to Washington for us to 
determine how to spend it. And, obviously, we are very convinced on 
this side of the aisle that both the child credit, the education-type 
deductibles, and the like are better determined there in my home 
State--and the Senator's State of Georgia by his people, and our 
people. So as much of that as we can leave there the better we feel and 
the better we think the lives of our people will be.

  So while this bill has a road ahead of it that may be thorny and may 
be contentious--I am not speaking only of the tax bill--I believe it is 
not too soon to come here and say, ``Well, this is what I am going to 
try.'' There will be some additional spending money on child health 
care. And I know that. I have an open mind. I want to hear the 
committee talk about it and report on it. I am of the opinion--and I 
know it doesn't set well with some States--but I think the cigarette 
tax portion of it was inevitable. We could see that coming. And I think 
the committee took 20 cents instead of 43 cents, which was proposed by 
Senator Kennedy and Senator Hatch, or Senator Hatch and Senator 
Kennedy. And then it used that money for very good purposes, I think, 
of the bill. It spent some. And that is why many would like it all to 
have gone for tax cuts.
  But, you know, the bill came out with total bipartisan support. And I 
am not sure we need total bipartisan support on every major measure as 
it goes through the Senate. But I believe we started this budget 
exercise with a strong suggestion that we might get the package 
adopted. Frankly, that was because we recognized that the President was 
not of our party and that we had to work with Democrats here in an 
effort to get something that the President would sign. There is no use 
going through another process as in 1993 where Democrats just passed a 
huge tax increase or 1995 where just Republicans voted for an enormous 
tax reduction plan with reforms in every area only to find that it 
would get vetoed.
  The reality of it is--and Republicans are beginning to understand--
that we have a President who is not of our party. He is the President. 
If we want to make a point, we can make a point. When we want to get 
something done, it is pretty obvious that we have to have him as a part 
in getting it done as a team.
  So I am hopeful. We are moving in that direction.
  I thank the Senator for arranging the time.
  I yield the floor.
  Mr. COVERDELL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Georgia.
  Mr. COVERDELL. Mr. President, I thank the Senator from New Mexico 
for, as usual, his eloquent description of this proposal.
  I would make one comment. And then I am going to yield to the 
distinguished Senator from Utah.
  When you talk about savings, in my judgment, the force that has more 
to do with destroying savings is Uncle Sam. When something marches 
through an average person's checking account and takes over half, as 
they do today--a 45-percent tax is the cost of Government, and higher 
interest rates because of the deficit--there isn't anything left to 
save in an average family. You can look at every data and see exactly 
what has happened as we ratchet up the amount that the Government takes 
out of that checking account. We closed savings accounts all over the 
country. Until we start moving resources, as the Senator described, for 
New Mexico back into their savings accounts, we are never going to have 
them open savings accounts.
  Mr. DOMENICI. The Senator should also add that as the deficit turns 
into

[[Page S6034]]

debt--that is the accumulation of the deficit, the debt--you have to go 
out and borrow that money. And essentially that is not saving. To the 
extent that you have to go borrow the money, you have to get it from 
somewhere. And our biggest activity for not saving has been the 
deficit. It gobbles it up, and it isn't available. It is used for that, 
if nothing else, plus the fact that high taxes prevent you from being 
able to have any left over, which is your premise here today. We are 
not in the greatest shape in just that one area. The economy looks 
pretty good. It looks like we are moving in the right direction in how 
we treat our American business. It seems like they have a little more 
freedom than European companies. We find that they do better for us and 
better for workers that way. That is better than most countries. But 
saving is still something that we are working very hard on. If we can 
get the deficit down to zero, we are surely moving in the direction of 
putting more savings into the total pot of savings for growth, 
prosperity, and other uses.
  I yield the floor.
  Mr. COVERDELL. I thank the Senator from New Mexico.
  I yield up to 10 or 12 minutes to the Senator from Utah, or, if he 
needs 15, I will yield that as well.
  Mr. BENNETT. I thank the Senator from Georgia.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. Mr. President, I have come here because I have seen a 
series of articles that have appeared in the newspapers. I am not a 
believer in a conspiracy theory. But I think there is a movement afoot 
to give us a steady drumbeat of repetition of a particular theme coming 
out of those who are opposed to any kind of tax relief. And I picked 
two examples to show what this drumbeat is.

  The first one appeared in the Washington Post, written by Alan 
Blinder. Alan Blinder, Mr. President, used to be the Vice Chairman of 
the Federal Reserve Board. He is now a professor of economics at 
Princeton.
  He starts his presentation this way:

       I have always opposed cutting the capital gains tax, and 
     still do. The case is simple and compelling. No one has yet 
     produced evidence that lower capital gains taxes will lead to 
     higher savings and investment; claims that they are just 
     hunches. But we do know that a lower capital gains tax will 
     shift some of the tax burden from the haves to the have-nots 
     just when income disparities are at postwar highs.

  Then he goes on to say how terrible the capital gains tax rate is and 
laments the fact that he and others like him have lost the debate.
  A few days later Robert Kuttner wrote the following, again in the 
Washington Post. I would tell you who Robert Kuttner is, if I knew. But 
I am not as familiar with him as I am Alan Blinder.
  He says, referring to capital gains tax:

       . . . with the stock market setting new records, the timing 
     is a bit off.
       It's hard to argue with a straight face that the prospect 
     of paying capital gains tax is deterring much productive 
     investment.

  Again, another drumbeat along the idea that cutting the capital gains 
tax is really nothing more than a way of putting more money into the 
pockets of the rich--that it will not increase investment, that it will 
not increase savings. Those who say that it will are ignoring the 
economic evidence. And these economists make this case over and over 
again. I submit to you, Mr. President, that they are shooting at a 
straw man. Either they do not understand the impact of capital gains 
taxes in the economy, or they don't want us to know what capital gains 
taxes really do to the economy because I am not going to stand here and 
argue with Professor Blinder on his turf. I want to take him to my 
turf, which is the marketplace. I want to take him to the marketplace 
where real people make real economic decisions in real life, and not 
the classroom where people argue about it.
  Let's start out with a little bit of classroom conversation, however, 
to set the context for this. I submit to you this truth, Mr. President: 
All wealth comes from accumulated capital.
  If someone somewhere does not stop spending everything he creates in 
the way of product and saves some of it, accumulates some of it, there 
will never be any wealth. Out of accumulated capital comes factories. 
Out of accumulated capital comes machine tools. Out of accumulated 
capital comes the infrastructure that then produces more wealth.
  The argument in society in the last century or so has not been over 
that truth. It has been over the question of who should own the 
accumulated wealth.
  Karl Marx, and others, said that society as a whole should accumulate 
wealth but that individuals should not. We have already seen one 
society give us an example of what happens when society holds all of 
the accumulated wealth and does not allow individual property 
accumulation. That example was called the Soviet Union, and it is the 
premier economic basket case of this century. It has wreaked absolute 
havoc in the lives of all of its people.
  Still the notion that society should own accumulated wealth has some 
currency in the world, and there are those who call themselves 
Socialists based on their notion that society should own everything and 
that the wealth should be accumulated by society. We have a different 
notion in this country. We go back to the writings of Adam Smith, who 
coincidentally wrote his book, ``The Wealth Of Nations'' in 1776, which 
was a good year for this country: The wealth should be held in private 
hands, that when private people accumulate wealth, they do better 
things with it than when society as a whole accumulates wealth.

  Why is this important? Because the capital gains tax is a tax on 
movement of accumulated wealth. It is not a tax on the wealth itself, 
it is only a tax that is levied when there is a movement of that wealth 
from one entity to another; or, in our circumstance, from one 
individual to another, one private corporation to another private 
corporation.
  I now give you the second great truth that applies in the 
marketplace. All wealth comes from risk-taking. If someone is not 
willing to take a risk and invest his or her accumulated wealth in that 
factory or that machine tool or that plow, with no guarantees that the 
investment is going to pay off, the wealth that comes from the factory 
or the machine tool or the plow will never be there. So these two 
principles guide what we are doing: All wealth comes from accumulated 
capital and all wealth comes from risk-taking.
  So, what happens when a private individual or corporation accumulates 
some wealth, accumulates some capital, takes some risk and creates some 
wealth, and then decides to move that from one investment to another? 
The Government steps in and says we will tax that movement. That is 
what the capital gains tax is all about. We will tax the movement of 
accumulated capital from one investment to another.
  This is what happens--real example, real world, not classroom stuff 
now. I will give you an example of a friend of mine who invested at 
great risk in a new venture. He is that kind of fellow. He is an 
entrepreneur. He takes risks. I'll keep the numbers very simple. 
Obviously there are more accounting details to this, but the 
illustration is accurate. He made, let us say, $100,000, and to keep it 
simple let's rule out the tax base. Let's say he has a cost of zero. In 
fact it was not that, but a gain of $100,000.
  So now he has $100,000 of accumulated wealth, but what has happened 
to his investment? Over the years that it has grown from zero to 
$100,000, it has become what we call a mature investment. That is, it 
is now earning 10 percent a year and that's about the prospect for this 
investment from now on. And this guy, because he is an entrepreneur, is 
restless with a 10 percent return. He wants to take some bigger risks 
and do some other things with his money. He sees an opportunity over 
here that will produce him a 20 percent return. Yes, it has a risk. He 
is willing to take the risk. He is willing to move his accumulated 
capital from company A to company B. And the Feds step in and say, ``We 
want 28 percent of that, or $28,000.'' And the States, of course, 
follow right along. He is going to end up, moving his capital from 
company A to company B, with $65,000 worth of accumulated capital 
instead of $100,000.
  Now, if he earns a 20 percent return on $65,000, for 3 years he will 
not even break even, back up to his $100,000 where he was. And the 
$100,000, if he had left it alone, would have earned an

[[Page S6035]]

additional $30,000. He has to earn a 20 percent return on his $65,000 
investment for 5 years just to get even with where he would be if he 
had left his capital alone.
  Well, you say, so what? This is a rich man, he has $100,000; why are 
you concerned about him? I am concerned--not about him. He can take 
care of himself just fine. I am concerned about the people in company B 
who will not get jobs because they cannot attract investors. Why can't 
they attract investors? Because the entrepreneurs have their money 
locked up in the investment that only earns 10 percent.
  He can find somebody who can buy investment A very easily. There are 
lots of people to say we would be satisfied with a 10 percent return in 
a mature company, absolutely. We will buy your stake and let you go out 
and run the risk to do something else. But, no, the capital, by virtue 
of the capital gains tax, is locked into investment A, because the 
entrepreneur says I can't afford the tax hit to move my investment 
capital from investment A to investment B. Therefore, I will not be 
backing the new rising company that needs funds.
  These people whom I quoted at the beginning say the stock market is 
going through the roof, and what do they offer as proof of that? The 
Dow Jones averages. How many people understand the Dow Jones averages 
are derived from 30 stocks? The Dow Jones Corp. picks 30 companies, 
baskets them together into a single average, and what happens to the 
prices of those 30 stocks is described as what is happening to the 
market as a whole. Yes, they are probably doing a pretty good job of 
picking some representative stocks, but understand they have only 
picked 30 companies. The Standard & Poor's index has 500 companies in 
it, and you know what? It's not going up quite as much as the Dow. Then 
there is the little known, little followed stock index called the 
Russell 2000, and as the name indicates, it has 2,000 stocks. But none 
of the Russell 2,000 stocks are in the Standard & Poor's 500 or even in 
the Dow 30. These are the new entrepreneurial companies where the jobs 
for the next decade are going to be created. Do you know what is the 
story in the Russell index? It is down. It is not up the way the Dow 
is. It is not up the way the Standard & Poor's is. It is down.

  These little companies, struggling along, entrepreneurial efforts, 
need money. Where are they going to get the investment? Are they going 
to get it from the big venture capitalists who like to back them? 
Maybe, if they can make their presentation. But they will find, time 
and again, that the venture capitalists who would otherwise be taken 
with their presentation and give them backing will say to them, ``I'm 
sorry, I am locked in by the capital gains tax. I am locked in with an 
investment that would cost me so much in tax, if I were to sell and 
back you, that I will not make that money available to you.'' I have 
personally seen this phenomenon take place. I have been present when 
discussions of this have gone on, and I know, very differently from the 
way it may appear in a classroom, that in the real market the capital 
gains tax at its present level is stopping entrepreneurs from moving 
their capital from one investment to the other and making capital 
available to the entrepreneurial companies that would create the jobs 
of the future.
  I said on this floor before and I repeat here again, I challenge 
every Member of this body to go home to his or her home State, gather 
the venture capitalists in the home State together, gather the real 
estate investors, if you will, in the home State together, and ask this 
one question: Are there deals that should be done not being done 
because of the capital gains tax? I have asked that question in my home 
State and I am told, almost with a laugh: All over, Senator. Everywhere 
you look there are deals that should be done, certainly could be done, 
but are not being done because of the capital gains tax.
  Now, ask this question: Are the deals that should be done the deals 
that have the greatest potential for job creation in the future? And 
the answer is, once again: Yes. So then I ask the question: What is 
going on? And I am told, look, Senator, there are so many cockamamie 
trade-outs being done, ways to avoid a realization of any kind of a 
gain that are being put together by lawyers and accountants because 
they want to back this in one way or another but they cannot take the 
hit that will come if they move their capital from investment A to 
investment B, so they are jerry-rigging all kinds of deals that will 
ultimately rise up and bite them in ways that will be detrimental.
  I started off by quoting Alan Blinder, with whom I disagree, and 
identifying him as a former Vice Chairman of the Federal Reserve Board. 
I close by quoting the Chairman of the Federal Reserve Board, Alan 
Greenspan. Alan Greenspan has a reputation of his own. He has a 
reputation that has brought him praise from Members of this body on 
both sides of the aisle. I have sat in the Banking Committee and on the 
Joint Economic Committee and heard my Democratic colleagues 
congratulate Mr. Greenspan for the deft and intelligent way he has 
handled monetary policy in this country.
  Mr. Greenspan tells us what the capital gains tax rate ought to be 
for the greatest benefit of the economy. He recommends a capital gains 
tax rate, not of 18 percent, as proposed out of the Finance Committee, 
not of 14 percent, as proposed by the Dole campaign, but zero. Because 
he understands the basic principles that I outlined in the beginning: 
All wealth comes from the process of investing accumulated capital and 
all wealth comes from risk-taking with that capital. The capital gains 
tax is a tax on that process. The capital gains tax by definition is a 
tax that will hold down the creation of wealth.
  Alan Greenspan understands that the greatest boon that can come for 
this country is the creation of more and more wealth and that is why he 
calls for a capital gains tax rate of zero. I think we are being very 
modest when we call for a capital gains tax rate of 18 percent. I hope 
those responsible for these articles and these comments in the 
Washington Post would go back to school at the feet of Professor 
Greenspan and learn again where wealth comes from and what we need to 
do in the Government to foster its creation.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Coverdell). Will the Senator from Utah 
withhold?
  Mr. BENNETT. I withdraw my request.
  The PRESIDING OFFICER. The Senator from Wyoming.
  Mr. ENZI. Mr. President, on behalf of the present occupant of the 
chair, I will yield myself 10 minutes and also ask unanimous consent 
the order be extended by the same amount.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Chair recognizes the Senator from Wyoming.
  Mr. ENZI. Mr. President, I congratulate you and thank you for 
providing this opportunity for us to talk a little bit today about 
taxes to our colleagues and to the American people. I do rise in 
support of the tax reform proposals that have been offered by the 
Republican Congress. Yesterday I presided over the Senate for an hour 
and listened to an hour of Republican bashing on taxes. I am here today 
to proudly say that if it were not for Republicans in this body, we 
would not be debating tax cuts for the American people at all. We would 
only be talking about increased spending--not increased spending that 
the American people helps to decide on, just increased spending. And 
increased spending leads to increased taxes.

  So, I am proud to be working on a tax cut proposal for this Congress. 
The American people have not received serious tax relief for 16 years. 
Earlier this year I had the pleasure of chairing a committee hearing in 
Wyoming on small business. One of the groups that appeared there was 
the Society of CPA's. They asked for tax simplification and tax cuts 
for the American people.
  You might say that's kind of a strange bunch to want tax 
simplification, but I have to tell you it is so complicated that their 
liability is hanging out. It is difficult for them to meet the needs of 
the people. If you call the Internal Revenue Service on successive days 
with a tax question, you will most likely get different answers on that 
tax question. But they were reluctant to ask for the simplification 
because

[[Page S6036]]

every time they have worked on simplification in this country, we have 
wound up with tax increases. That is one of the things we are here to 
guard against, is tax increases. And we are proposing a tax package 
that provides for nearly $85 billion in net tax cuts over the next 5 
years. It is the first step in providing the American people with the 
tax relief they so richly deserve.
  This tax package provides broad-based tax relief for America's 
families. This is just the first step toward peeling back the 
monumental tax hike passed by the Democratic Congress and President 
Clinton in 1993.
  It should come as no surprise that the administration and many of my 
colleagues on the other side of the aisle began bashing the 
Republican's tax proposal almost as soon as it was unveiled.
  A brief review of the last 5 years illustrates that this 
administration believes that a bloated Federal Government knows better 
how to spend your money than you do. President Clinton's tax hike in 
1993 punished the American people by burdening them with more than $240 
billion--billion--in new taxes. The President's tax increase was the 
largest in American history and it came after--after--the President had 
promised that he would offer middle-class tax relief. The Republican 
tax package would give Americans back some of the hard-earned money 
that was taken from them 4 years ago.
  We in Washington must never forget that we are talking about the 
people's money. As an accountant--and I am the only accountant in the 
U.S. Senate, which I like to humorously say probably accounts for the 
difficulty in getting tax cuts and balanced budgets--I hear people talk 
about how happy they are that the Government gave them a tax refund 
this year. I have to remind some of them that that wasn't the 
Government giving them a tax refund, that was them overpaying their 
taxes, the already overexorbitant taxes overpaid, and they were getting 
back their own money. We get confused, particularly in Washington, and 
we have to remember that we are talking about the people's money.
  Some of my friends on the other side of the aisle seem to have 
forgotten this. They apparently believe it is the job of the Federal 
Government to take as much money away from the private citizens as they 
possibly can and then set themselves up as a ``committee of 
Government'' who divides that money up to take care of everyone as they 
see fit.
  Mr. President, this is wrong. We should allow citizens to keep more 
of their own money and make their own decisions on how it should be 
spent. Government often purports to know more about our own needs than 
we do. But you know best how to spend your own money. History has 
demonstrated that the American people will use their money more wisely 
and more efficiently than we in Congress will. While they are doing 
that, they will be very compassionate, as well as constructive.
  The Republican tax package is aimed at providing broad-based tax 
relief for the majority of the American people. The $500-per-child tax 
credit would provide $81 billion in tax relief for America's families 
over the next 5 years. This idea has been championed by the Republican 
Party as a means of helping America's families. The President thought 
it was such a good idea that he has even campaigned on it.
  Many families today have two parents working: one of them works to 
pay the bills, the other one works to pay the taxes. We should be 
working to strengthen our American families in any way that we can. 
Taxes are our tax policy, and we should be disappointed and embarrassed 
by what our tax policy says. We should not be strangling American 
families with a punitive Tax Code that penalizes marriages. It provides 
very little tax relief for families with children. It punishes people 
with a further tax on interest income when they try to save for their 
kids' college educations or for their own retirement. To add insult to 
injury, we even tax people when they die.
  We kind of have this tax policy in the United States that if it 
moves, you tax it, and if it won't move, you tax it; when you buy it, 
you tax it; when you sell it, you tax it; and if you happen to die 
owning something, we're going to tax half of that, too.
  I listened to much of the debate yesterday by my colleagues on the 
other side of the aisle who claim this is a tax cut for the wealthy. 
This claim has absolutely no basis in fact unless you play with 
statistics. I watched the charts yesterday. We should have truth in 
advertising on the Senate floor. We saw charts that indicated that 
people earning $30,000 a year would only get a $50-a-year tax credit. 
That is playing with the truth. They said that people who earned 
$400,000 would get $7,000 in tax relief. That is also lying with 
statistics.
  Take the $500 tax credit all by itself. If you earn $30,000 and you 
have kids, you would get a tax credit of $500 per child, and as I heard 
so eloquently explained earlier by my colleague from New Mexico, that 
is a tax credit. That means you don't take it off the income part of 
your tax statement, you take it off the taxes that you owe. You get to 
fill it out clear down to the balance first, and that is where you get 
the biggest tax cut. You figure your tax bill, and then you get to 
subtract from your tax bill this $500-per-child tax credit.
  I assure you that people who are earning $30,000, as most of you 
know, pay taxes, and if you pay taxes and you have kids, you get the 
tax credit, you get a $500-a-year credit for that child. That is quite 
a bit bigger than the $50 that was claimed here yesterday.
  If you take and lump everybody together, there are a whole bunch of 
people who are earning money who are not even married yet and don't 
have kids. They are looking forward to that tax credit, but they are 
not earning it. If you combine all of those, maybe you can get it down 
to an average of $50 per person who pays taxes in the $30,000 tax 
bracket. I would like to see a lot more detail on the kind of charts 
that we saw.

  We did pass welfare reform. That was the American people saying that 
we do expect people in this country to work and pay taxes. The credit 
would not go to people who do not pay taxes. We are not going to pay 
people not to work. What we are talking about here is the ability of 
the people in the United States to still enjoy the American dream. The 
American dream of owning their own home, their own car, to be able to 
be an entrepreneur; have an idea, go out and start a business and have 
that business grow into one of the biggest in the country. When they 
start that business, they are hoping that they can be doing it for 
their kids as well; that there will be money that can go to their kids.
  They are hoping to be able to pass some money on to the next 
generation. They are worried about their kids. I know a lot of people 
who have homesteaded in the West and spent every dime that they have 
earned off their farm or ranch to buy more land so that they would have 
land to pass on to their kids. Something interesting is happening out 
in the West, and that is, a whole bunch of people are moving into 
Wyoming from other States, and they are willing to pay a lot more for 
land than what the cows will produce on the land. The price of land has 
been increasing greatly. That is what they have to pay an inheritance 
on. They are taking away their ability to pass it on to their kids, a 
way of life, a way their kids anticipated earning money.
  I saw a program the other night about the new millionaires. 
Millionaires, we consider them to be rich. I can tell you--not from 
personal experience I can't--but from looking at people's returns, 
today's millionaires are not nearly as rich as years-ago millionaires. 
It is happening today, and the way it is happening is people who are 
working on assembly lines or in small business are taking a little bit 
of money out of their check--I know it is difficult to do--but they are 
taking that money and investing it, and when they get to retirement 
age, some are now finding because of these investments they have been 
doing for years and years, the business has been successful enough, 
they worked hard enough at their job to make that business successful, 
that the stock they bought is worth over $1 million. And then they die 
just at the time they get to their retirement, and the Federal 
Government says your kids aren't entitled to that, even though you 
worked for it for yourself and your kids all of that time. We, the 
Federal Government, are entitled to almost half of that money. We 
didn't do anything to help it, but we get it.

[[Page S6037]]

  The fact is that the overwhelming majority of the tax cut contained 
in the Senate's tax package go to middle-income families. According to 
the Joint Committee on Taxation, which is Congress' official tax 
estimator, 74 percent of the benefits of the tax relief bill will go to 
individuals and families making $75,000 or less. Moreover, 82 percent 
of the benefits would go to families with educational needs, these 
middle-income families who were hardest hit by the Democrats' radical 
tax hike in 1993, and this is the group that is in most need of serious 
tax relief.
  What many of my colleagues on the other side of the aisle really want 
to return to is welfare. They want to raise the taxes on people who are 
now paying taxes to give more money to those who aren't paying any 
taxes at all. That is not tax relief, it is welfare. Moreover, the 
budget proposal already provides for $1\2/10\ trillion in spending for 
the next 5 years. The tax proposal would be a good first step in 
allowing families and small businesses and those who save to keep more 
of their own.
  We need to get beyond the misstatements and distortions and give the 
American people meaningful tax relief. As we prepare for the debate on 
the tax package next week, I ask my colleagues to join me in this 
endeavor.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Chair recognizes the Senator from Alaska.
  Mr. MURKOWSKI. I thank the Chair and wish the Chair a good afternoon.

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