[Congressional Record Volume 143, Number 91 (Wednesday, June 25, 1997)]
[House]
[Pages H4618-H4624]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX RELIEF FOR AMERICANS
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from Missouri [Mr. Hulshof] is
recognized for 60 minutes as the designee of the majority leader.
Mr. HULSHOF. Mr. Speaker, obviously the topic of choice is the
upcoming vote. I have been sitting here patiently for about an hour and
a half waiting our turn for this special order and have consistently
heard on the other side of the aisle about these tax breaks which we
will have a chance to visit about and hopefully get the rest of the
story out there, because I think unfortunately, too much rhetoric has
been spewing out and we want to set the record straight.
I want to start this time that we have, Mr. Speaker, and relate to my
colleagues something that happens on a regular basis when I go back to
the Ninth Congressional District of Missouri. Hardly a day goes by,
when I make it back every weekend, when I am not stopped at the
supermarket or at the church or at some function back in Missouri, and
a constituent comes up and says, Mr. Hulshof, I am working longer, I am
working harder than ever, and yet I barely have anything left over in
my checkbook at week's end. When is Washington going to give me a
break?
Well, Mr. Speaker, I am happy to announce that if tomorrow goes as we
hope, we want the American people to know that tomorrow is the day they
get a break. Tomorrow is the day that we let the American people know
that we have been listening to them. We have heard them loud and clear.
I want to take these few minutes that we have, and some other
colleagues in the Republican freshman class, and others to talk about
some of the specifics. It is easy to paint pictures with a broad
paintbrush. I think we need to talk about more specifics in this tax
package and why it is good for middle America, why it is good for small
business, why it is good for family farms.
For too long, Mr. Speaker, Washington has continued to spend and
waste billions of dollars of Americans' tax money. From midnight
basketball to dance lessons for convicts to $500 toilet seats for the
Pentagon, Washington's spending has been out of control for too long.
It is time for us here in Washington to spend less and to tax less.
That is right. It is time for Washington to give hardworking Americans
some much-needed tax relief.
{time} 2000
Mr. Speaker, we have over a dozen colleges and universities in the
Ninth District, and a lot of times, Mr. Speaker, I am invited to
address or speak to some of the political science classes at the
universities; in fact, some of the middle schools, elementary schools,
and high schools that I have had the great opportunity to address.
One simple question that I get, oftentimes, is what is the difference
between the two parties? What is the difference between the Democrats
and the Republicans? I think the answer is somewhat simple. I have been
here almost 6 months, and I tell those young people, soon to be voters,
that both parties believe very passionately in democracy. Both parties,
I believe, honestly are trying to achieve a better America.
I just think oftentimes, though, our vision on what will get us to a
better America, that is what is the difference. Probably the single
greatest difference between the two parties is the fact that we
Republicans deeply believe that America is an overtaxed Nation. We
believe it is a matter of principle that hard-working men and women in
this country should be able to keep more of what they earn. We believe
it is time for Americans who happen to be tuning in tonight, that they
should not have to work so hard for the government to spend so much. We
believe in tax relief for every stage of one's life.
For instance, do the American people really understand that they pay
more in taxes than they do for food, clothing, and shelter combined? Do
the American people understand that almost half of their income goes to
a government tax of some kind?
Think about that, just for a minute. In your normal daily activities,
when you wake up in the morning, grab that quick cup of coffee on the
way to work, you have paid a sales tax on that cup of coffee. When you
drive to work, you pay a gas tax. When you are at work, you are paying
an income tax. Flip on a light and you are paying an electricity tax.
Flush the toilet, there is a water tax. Get home at night, you pay a
property tax. If you turn on television, sometimes you are going to pay
a cable tax. When you die, many of us are going to have to face a death
tax. It is just too much, and it has to stop. If we have this vote
tomorrow, Mr. Speaker, we will have a much-needed step in the right
direction.
Why is it, when anybody talks about allowing working families to keep
more of their money--in fact, earlier tonight colleagues on the other
side of the aisle said, when we were talking about keeping more of
their money, they talk about ballooning the deficit, or wrecking the
economy. Why is it that we never hear ``It just can't be done'' when it
comes here in Washington to spending less of Americans' tax money? Why
is it always unwise or risky if you want to keep what is rightfully
yours, but it is never unwise or risky if Washington wants to spend
more?
That is, Mr. Speaker, what I think we have accomplished today, and
what we are going to accomplish tomorrow in this much-needed tax relief
package.
I see that some of my colleagues are here, especially my friend, the
gentleman from New Jersey [Mr. Pappas], who has been a champion
particularly as it relates to tax relief for those who are trying to
make a go of it in their homes, particularly with the home office
deduction. I am not sure if that is specifically what he wants to talk
about tonight, but I am happy to yield to my friend, the gentleman from
New Jersey [Mr. Pappas].
Mr. PAPPAS. Mr. Speaker, I thank the gentleman for yielding to me,
and for focusing on this special order and focusing on such a
fundamental issue for the people of our country.
No, I want to talk about the death tax. Why I want to talk about the
death tax, Mr. Speaker, is yesterday I received almost 30 letters from
farmers in the Twelfth District of New Jersey, central New Jersey. Some
of them, as Members can see, Mr. Speaker, were handwritten, some of
them were typed, some of them obviously used laser printers, some used
rather old typewriters.
But I would like to just briefly read a few of the sentences from
some of them, without using any names, but I think really it describes
very, very vividly what so many people in our country are feeling about
their hope for the future of their farm and the opportunities that
their children would have to continue the tradition of the family farm
in the United States.
This is addressed to me:
Dear Congressman Pappas: My wife and I own a farm in
Hopewell Township. We were originally a dairy farm, but now
raise crops such as wheat, corn, and hay. Seventy years ago I
was born on this farm and have been working on it all my
life. It has been in our family for almost 100 years, and is
our major source of inheritance to give our children.
Please repeal the Federal estate tax so all our hard work
of keeping this farm will not be in vain. We want our
children to have a better life without worry than we have
had, because when we inherited the farm we had to pay heavy
estate taxes. This should not be taxed again.
Another letter states:
[[Page H4619]]
We own a farm in Pittstown which we have worked hard to
maintain. We have paid the taxes on our land. We have paid
income tax on the profits we have made, on improvements, and
on the farm machinery necessary to keep it running. It is
unfair to impose yet another tax on the value of our property
when we die. This should not be legal.
Please consider this letter as our vote to do away with the
death tax. We do not wish our heirs to have to sell the
family farm in order to send more money to Washington. If our
farm were to be sold, it would undoubtedly become just
another housing development in our already overcrowded State.
Please do not let this happen. Vote to abolish the estate
tax.
There are two more, if I may.
I have been a dairy farmer in Hunterdon County for over 60
years. During the past several decades I have witnessed the
near extinction of family farms in the State of New Jersey
and their replacement with hundreds of residential
developments. Many reasons exist for the decline in farming,
but a major obstacle to the continuity of farming from one
generation to the next is the Federal estate tax. Family
farms are being forced to sell off major portions of their
land to pay these taxes.
I am writing to request your support for the repeal of the
Federal estate tax. I would like to be able to keep my farm
in the family and to offer my son and my grandson the
opportunity to continue to farm into the next century.
Dear Congressman Pappas: This letter is asking for a repeal
of the Federal estate tax. This is unfair to families like
myself, where the farm has been in the family for 200 years.
It is a break-up of the mom and pop farm which has made this
country what it is. Entire families have helped, from
children who put stones on fences, as my husband did, who
picked potato bugs off potato plants, as my uncle did, who
put corn husks in hired hands' bedding, as I did.
The last one, which is just two sentences I would like to refer to,
is from a lady who says, ``Dear Congressman, I write this letter to you
in memory of my husband. Our farm is located in Tewksbury Township,
Hunterdon County, New Jersey. My husband was a dairy farmer and crop
farmer for 50 years. He devoted his entire life to farming.
Please repeal the Federal estate tax. Our son has the hope
in his heart to continue farming. To repeal the Federal
estate tax will make this hope a reality. Thank you so much
for your consideration of this letter.
I would just like to hold this letter up, without showing the name,
but she has a photocopy of her late husband as a young man sitting on
his tractor, with a poem about him and what the farm meant to him.
Mr. Speaker, my colleague from Missouri, and now I see my colleague
from Kansas, this is absolutely critical to allow family farms to
continue to exist in our country.
Mr. HULSHOF. Mr. Speaker, in addition to the letters and support of
relief from this punitive estate tax, has the gentleman received any
letters urging us to continue the estate tax? Has the gentleman
received any letters from his district in New Jersey urging us to put a
heavier tax burden on family farmers or family businesses?
Mr. PAPPAS. If the gentleman will continue to yield, Mr. Speaker,
absolutely not. This is, I believe, the single most important thing we
can do to see the American dream a reality be continued, to have
family-owned businesses, family-owned farms to be passed from one
generation to the next.
The American dream for many people has become the American nightmare.
Decisive action by this Congress to work towards incrementally raising
the exemption but to eventually eliminate this estate tax, we owe it to
the American people.
Mr. HULSHOF. Mr. Speaker, I appreciate the gentleman's comments, and
I look forward to moving toward repeal. I know that the tax package
that we have tomorrow, Mr. Speaker, does not accomplish the entire
repeal of this very punitive tax.
Early in this Congress, as Members know, I introduced a bill with the
gentleman from Illinois [Mr. Crane] to repeal the death tax. We are
moving in the right direction. What I want to do, I see my friend, the
gentleman from Kansas, here, but before yielding to him, I know, and I
cannot recall which speaker on the other side of the aisle misspoke,
and I am sure it was an inadvertent misspeak, regarding what this tax
package actually does. We phase up the exemption.
Right now the $600,000 exemption that precludes estates from being
taxed was first instituted, I think, in 1987, and has not been indexed
for inflation. What we are going to do is increase the exemption with
tomorrow's tax relief package up to $1,000,000, not in 17 or 20 years,
as I think the gentlewoman from Carolina mentioned, but actually over
the next 10 years. We will phase it in, $650,000 in 1998 up to $750,000
in 1999, and then eventually up to $1 million by the year 2007.
I know the Federal death tax is something my friend, the gentleman
from Kansas, is interested in. I am happy to yield to the gentleman
from Kansas [Mr. Moran].
Mr. MORAN of Kansas. Mr. Speaker, I appreciate the gentleman from
Missouri yielding time to me. I did not necessarily know what I was
going to speak about tonight, but I can certainly join in the remarks
of the gentleman from New Jersey, because estate taxes are clearly a
problem in our economy.
As I have listened over the last 6 months as a new Member of
Congress, as I listened in 6 months of campaigning for this office to
the people who live in the 66 counties of the western three-fourths of
the State of Kansas, taxes are at the top of the list. They are at the
top of the list because we have sapped the possibility of growing this
economy, of creating new jobs, of creating a family lifestyle that is
conducive to mom and dad both being at home.
So much of our effort as parents now goes into making ends meet, and
so tomorrow when we debate and vote and hopefully pass a significant
tax reduction, this may be the vote on the House floor that in the 6
months that I have served in this Congress may actually cause me to
feel the best about my voting, because it is so important to us. It is
so important to America, to its families, to its individuals, to our
workers, to our business, to send a message that we hear loud and clear
what the tax and regulatory environment created by Washington, D.C.
does to America.
The death tax that the gentleman from New Jersey mentions is a
perfect example. It destroys the hope, the hope of many American small
business men and women, the hope of the family farmer, to pass on that
farm or that small business to the next generation. It destroys the
hope that the next generation can continue to earn a living,
particularly in rural America.
My district is composed of people just like that, people whose
incomes are not very high, but who have worked hard to develop each and
every business and farm into as successful an operation as it can be,
and to develop and to create wealth for the next generation.
Where I come from people are not knocking on our doors to take over
that family business or that family farm. They are hoping that they can
scrimp and save and create enough wealth that the next generation, that
son or that daughter, has the opportunity to continue that farming
operation or that small business, and unfortunately for Kansans and for
Americans, for farmers and small business men and women, the death tax
makes that very difficult.
Mr. Speaker, I did not realize until I got to Congress that the death
tax raises only 1 percent of the Federal revenue. For all the havoc it
creates on businessmen and women, on families, and on farmers, it is
amazing to me that it only generates 1 percent. We go through so much
pain and agony for $16 billion.
I come from Kansas, where $16 billion is still a heck of a lot of
money, but in the overall scheme of this Federal budget we have created
a nightmare for next to nothing. Worse than that, 65 percent, Mr.
Speaker, of every dollar that we raise in estate taxes goes to collect
and enforce the tax.
In fact, the Small Business Administration in 1992 actually estimated
that 75 cents of every dollar collected went to collect and enforce the
tax. What a crazy system, that would suggest we are going to spend 75
cents to collect $1. This tax really does need to be abolished. I know
tomorrow we do not accomplish that, we do not accomplish everything we
want in this regard, but it is a step in the right direction.
Who would think that we would be talking about reducing taxes? As I
sat at home in Kansas and watched Congress over the last decade, we
have talked about tax reductions year after year after year, we have
talked about capital gains tax rate reductions, and increasing the
exclusion for estate tax. We have talked and we have talked and
[[Page H4620]]
we have talked. Now, for the first time in 16 years, we actually have
the possibility of making a difference, and it will be more than talk
hopefully after tomorrow.
This tax is so deadly, it kills business. Seventy percent of all
family businesses do not survive the second generation. Eighty-seven
percent of all businesses, small businesses, are not passed on to the
third generation. Clearly, the $600,000 exemption is outdated. That
exemption has been in place for 10 years, since 1987. If it was indexed
for inflation, we would be talking about an exemption of $840,000.
{time} 2015
This tax is bad for business. Sixty percent of businesses say they
would add jobs in the coming year if it were not for the death tax. The
economy would be $11 billion more productive without death taxes,
according to the Heritage Foundation. And unfortunately this tax is
good for attorneys and accountants. We certainly want them to have
success in their businesses as well but think of the amount of
resources and energy that goes into trying to avoid this tax. We spend
almost $11,200 on the average, people do, in order to avoid this death
tax by estate planning. So people who have access to professionals,
people who plan their affairs, they fare better perhaps, having spent
all that money to succeed. But think of all the people who do not know
that is an option. Think of how inefficient it is that we spend money.
So many people in this country do not have the opportunity to do what
they know is right for them, for their personal finances, for their
business success because they have to worry about estate taxes.
We need to get a tax system, we need to eliminate taxes that create
so many impediments to people just doing what they know in commonsense
everyday judgment would be good for them, their families and their
businesses.
Forty-three percent of death taxes are paid on estates that are less
than a million dollars. This is not a tax reduction that benefits the
wealthy. And like the gentleman from New Jersey, I selected at random
comments from my constituents. These are not people who are paid
lobbyists who presumably sit outside the door and tell us how to vote
on tax issues. These are people from home who face every day problems
in trying to make ends meet and trying to pass on assets to the next
generation, to their own sons and daughters. Many of them are farmers,
many of them are small businesses.
Dear Jerry. This is a letter to the President, Mr. President,
consider that 2,000 acres of farm ground in our family farm is worth
about $500 an acre. You add in equipment and cattle, you are already up
to a million dollars. After talking to a couple of implement dealers,
they discovered that in 1986, a combine cost $139,000. Today it costs
$14,000. A tractor that went for $45,000 just about 10 years ago is now
$105,000. Take into account all those things and how do you save enough
money to pay the estate tax upon your death? The answer is, it cannot
be done and, therefore, the land, the cattle and the equipment will be
sold in order to pay the taxes, leaving my son, my daughter, without
the opportunity to continue in what already is a very difficult and
risky business.
These people say, since the time that the $600,000 exemption was put
into place, the costs to get in and stay in the farm business have
greatly increased. This makes it very difficult for a father who wants
to let his son continue the family farm after his death to leave him
enough land, machinery and capital to continue to operate. We have
watched young farmers have to sell their land to pay the taxes after
their fathers die and not have enough money for a viable farming
operation.
This person understands that the tax only raised 1 percent of Federal
revenue. One percent of tax revenue flowing into the Treasury causes
more trouble and grief to family business owner survivors than it is
worth. Amen. That is true. The tax remains a burden on the family for
years after death. Many farms have enough difficulties managing the
loss of the primary owner, and then to have to pay taxes at a marginal
rate of 55 percent, which when this tax was started the marginal rate,
the highest rate was only 10 percent, today it is 55 percent, this
violates the fundamentals of capitalism on which this country was
founded.
With three generations actively farming, the repeal of the estate tax
would allow us and other family farms and businesses to spend our time
dealing with the challenges of the changing competitive world market
instead of limiting our abilities due to the uncertainty of future tax
burdens. Please repeal this cancer that cripples also the
entrepreneurial spirit exhibited by small businesses across this great
country.
This lady: Why should one work most of her life in building up her
farm business and other assets to have it taken by the estate tax? The
amount allowed today is too low, because with the inflated prices one
is still subject to paying large taxes.
These are letters from Smith Center, Kansas; Elkhart, Kansas;
Jamestown, Kansas; Jetmore, Kansas. These are people who understand on
a day-to-day basis how difficult it is to succeed in business, to
succeed on the farm and it is time that we move forward toward making
their lives a better life for them and future generations.
I worry, Mr. Speaker, that we have not done what we need to do to
convince the American people. We hear their problems, we understand
that if we do not make changes today, they and their children will not
have the opportunities that I and my parents had because they lived in
a different world where government did not take the tax bite, time and
time again, from birth to death.
Mr. Speaker, I rise in support of elimination of the death tax. I
rise in support of our efforts tomorrow to begin the process. I hope
that before the day is over, we could have smiles on our faces and the
American people will know that we heard their message loud and clear.
Mr. HULSHOF. Mr. Speaker, the letters that you have with you and I
think probably each of us have received from our individual
constituencies typical letters of that; this is America, the backbone
of our economy, small business, family farms who are crying out for
relief. I had a unique experience today, running out of the office for
our last vote and I bumped into a very nice woman, not a constituent
but from Indiana, who had come 600 miles simply because we were getting
ready to vote on this tax package tomorrow. She hand-delivered to me a
letter. She is hand-delivering letters to almost all the
Representatives and Senators here in Washington. And she visited with
me a little bit about her plight. She retired as a court reporter to
take care of her mother who needed some care, retired from her business
and then her mother unfortunately passed away, I think in September of
1996, and then suddenly she had to face the reality of coughing up
additional moneys to pay this heavy tax burden, this very punitive tax.
The letter that she gave me, and I would love to read it, but in the
interest of time, I see my friend from Montana here as well, this
sentence sums up everything when it comes to the Federal death tax.
Quote, the time has come when death should not be a taxable event.
Amen.
Mr. Speaker, I yield to the gentleman from Montana [Mr. Hill].
Mr. HILL. Mr. Speaker, I thank the gentleman from Missouri. I want to
echo the comments of the gentleman from Kansas about the estate tax. I
have had over 40 meetings since January in Montana. At every one of
those town meetings people asked me about the death tax. The death tax
today is the largest single threat to the family farm or ranch. What is
happening in Montana, families are having to sell or liquidate their
farm and ranch. In many instances they are being forced to subdivide
those family farms and ranches in order to pay this tax. We have to
keep in mind that this is not a tax on the heirs. This is a tax on the
deceased. As the gentleman mentioned, it is time that death was not an
event that created a tax burden.
I also want to point out that there is a link between the estate tax
reform and capital gains tax. Because one of the things that many
people do in planning their future, planning their estate is to in some
combination give the property to their children, leave it in an estate
or sell part of it in order to secure their own retirement. That is
[[Page H4621]]
why it is so important for us to start with the capital gains tax
reduction, which of course is part of the tax reform package that we
are going to pass tomorrow.
I would just like to point out to my friends here in the hall and our
colleagues that there are some arcane parts of this tax reduction
program tomorrow, too. There is one that was particularly important to
me because it was the first bill that I introduced as a Member of the
Congress. That is to deal with the unfair alternative minimum tax
calculation on deferred payment contracts for people in agriculture. I
know that the gentleman from Missouri is familiar with that because he
is on the Committee on Ways and Means. The IRS determined that those
people who sell grain, for example, on a deferred payment contract were
going to be obligated to pay the tax even though they had never
received payment. And not only did they decide that they were going to
have to do that, they decided that they were going to have to
retroactively have to do it to 1986.
What in the world can a person do today to control their income that
they received in 1986? It was an incredibly unfair decision on the part
of the IRS. The first bill I introduced was a bill to rescind that
decision. That is part of the House package on tax reform. There are
other provisions, too. One of the unique provisions of this is that
small businesses who invest in plant and machinery, who have a high
depreciation because they are aggressively trying to have their
business grow, can run into an alternative minimum tax problem. That
is, they could be losing money and have to pay taxes under the
alternative minimum tax because of the amount of depreciation, because
they are too aggressively investing in their business, because they are
too aggressively trying to create opportunities for people to go to
work.
This bill helps deal with that problem, too. It eliminates the use of
depreciation as triggering the alternative minimum tax. Those are small
provisions, but they are all part of what we are trying to accomplish
here, and that is to create an incentive for people to invest in
creating new jobs, to increase the rate of growth in our economy and to
raise the living standard of Americans and American workers.
Before I leave this subject, I also want to point out, it was
important to me throughout my campaign and throughout my service here
that we have got to help working families. Today, as the gentleman
pointed out earlier, the gentleman from Missouri, the average working
family is spending 40 percent of their income in taxes. They have one
job in the family to support the government and a second job to support
the family.
We make a down payment in reducing taxes for those working families
with the $500-per-child family tax credit as well as some tuition tax
credits. That will mean that a child born today under the provisions of
this bill that we are going to vote on tomorrow, their family will save
about $10,000 in taxes if they decide to go to higher education after
graduating from school.
I am proud to be a part of the effort to pass this legislation. From
my perspective, this is only a down payment on tax reduction. I know
also that we are going to see more economic growth. We are going to see
more opportunities. We are going to see a rising living standard, and
the result of that is more revenues for government that are going to
allow us to even reduce taxes further in the future.
I thank the gentleman from Missouri for allowing me to join him in
this discussion this evening.
Mr. HULSHOF. Mr. Speaker, I appreciate my friend from Montana and his
eloquent words, particularly with the AMT provision as it was
penalizing farmers, the IRS, as you pointed out, changing rules in the
middle of the game. I know that this actually occurred in a case up in
Washington State where a farm family was audited. And because the IRS
decided that if you defer your contract payments, in other words, when
you take your grain to market and you get the check at the grain
elevator, normally that is when income is derived according to the cash
basis accounting system; that the IRS decided, no, not when you deliver
your grain to market but when you enter into the contract in the
preceding calendar year, that is when that deferred payment is subject
to income.
Mr. HILL. Mr. Speaker, the gentleman is absolutely correct.
As a matter of fact, in 1986, Congress asserted in the law that
agriculture would retain the cash basis accounting method. That meant
that when you got the cash you paid the tax in that year. But the IRS
determined by executive action, I guess, if you would call it, that
Congress did not know what it was talking about. So it decided they
would use the alternative minimum tax method of determining whether or
not that was income or not.
The result was people were having to pay taxes on income they did not
receive, clearly unfair. And I am proud of the fact that this measure
that you worked so hard on in the committee is going to deal with this
problem.
Mr. HULSHOF. Mr. Speaker, I appreciate the gentleman's comments.
Certainly we tried to, in this package, not only help families, which
we will have some time to visit with here in a minute, I see my friend
from Texas is here as well.
The farm community is getting much-needed relief in tomorrow's tax
package. We talked about the AMT provisions. We fought very hard to
make sure that the pro-ethanol tax incentives, they are intact in
tomorrow's package. There will be no anti-ethanol provision. That was
quite a battle we had in our Committee on Ways and Means.
But fortunately, the package tomorrow that we have will not have any
anti-ethanol provisions. I know we talked about the death taxes, which
will help family farms. I was fortunate to have a farm co-op bill that
will actually help the sale of processing facilities to farmer-owned
co-ops, so that is in this tax package as well. So agriculture is
getting some help in tomorrow's relief bill.
Mr. HILL. Mr. Speaker, I think it is important also to understand
that this bill is going to restore the home office deduction, which is
something that I fought for, another bill that I was a cosponsor on.
Also it begins the process of helping us redefine independent
contractors. That has been an issue in Montana, because we have so many
self-employed people who offer services to others as an independent
contractor. And the tax law is so confusing between State and Federal
tax law.
This is an effort to simplify that and allow both the person offering
those services and the person accepting those services to know that
they are truly an independent contractor. So they are not going to have
the IRS come out later and determine that there was some other status.
The important provision there is what we call a safe harbor
provision; that is, that if you entered into an agreement with a person
or offered your services in agreement with a person and there was a
reasonable expectation that that was done in concurrence with the law,
then there is a safe harbor. The IRS cannot come out and later say, no,
we will reinterpret this and impose penalties and fines.
{time} 2030
The record is clear. When the IRS does that, it usually puts the
people out of business because the penalties can be so severe. It is
not fair to people who employ independent contractors, and it deters
people from starting a business where they are going to offer services.
I pointed out before to my colleagues that we have some unique kinds
of people offering services in Montana. We have farriers, and we have
ditch riders, and in agriculture and around, I have sheep shearers in
Montana, people that go from ranch to ranch or from farm to farm
offering their services; and there is a question whether or not those
people are independent contractors.
This will create a safe harbor and makes the test so much simpler, so
that is an important provision. It has not been reported widely in the
press, But it is important to the people, the people of my State and
the State of the gentleman from Missouri [Mr. Hulshof] as well.
Mr. HULSHOF. Mr. Speaker, reclaiming my time, I am glad the gentleman
from Montana [Mr. Hill] mentioned home office deduction.
A couple months ago I was able to participate in a field hearing that
was actually conducted by the gentleman
[[Page H4622]]
from Missouri [Mr. Talent], who is the chairman of the Committee on
Small Business. This was a field hearing in St. Charles, Missouri.
We had testimony at that field hearing from four women just regarding
the home office deduction and why it was so essential that we give them
some help. Right now, the IRS takes a very dim view of those who take a
deduction that have offices in their homes, and I think this tax
package tomorrow will help those women or those families and just
restore some fundamental fairness.
For instance, if the gentleman had an office that he rented in his
next door neighbor's home and he had a telephone line and fax machine
and had some other things, and he paid rent in his next door neighbor's
home for an office in that home, he could take that as a fully
deductible expense. But if he had those same things in his home, the
telephone line, the fax machine, he cannot in most instances take that
deduction.
Of course, many women who want to rejoin the work force, their
families have grown or their kids are going to school, they like to
have the flexibility to stay home and yet be able to rejoin the work
force, or start businesses and run them from their homes. So I think
this tax package is very friendly to those individuals, men and women,
that seek to use their homes and put offices in their homes.
Mr. HILL. If the gentleman would yield, I think it is important for
us to remember that Henry Ford built the first Model A in his garage
and Bill Gates started Microsoft in his garage. People start many small
businesses today in their home or in their garage, and one of the
things they need more than anything is cash flow in order to grow their
business.
We are not talking here about providing people a deduction, a
loophole. We are talking about people being able to deduct a legitimate
expense in the conduct of their business. But by virtue of the fact
that they operate it in their home, they may not be allowed that. Under
this bill that would change. The people that start these businesses in
their home would be able to be protected, not to pay taxes that others
would have to pay.
Why is that important? Well, it is important because today most
people start a business in their home. As the gentleman started out,
most of the people starting these businesses today are women. This is
one of the ways that we are creating more entrepreneurial opportunities
for women, is by allowing them to have this deduction. It is extremely
important.
It does not have a lot of impact on the budget, but it is going to
have a lot of impact on our communities and on the future of this
country, because many of those businesses also grow into very
prosperous enterprises employing a lot of people. That is what this is
about.
Mr. HULSHOF. Reclaiming my time, I appreciate the work of the
gentleman on that home office deduction and the other tax measures that
he visited about.
Our friend, the gentleman from Texas [Mr. Brady], has been apparently
waiting in the well. I will be happy to yield to him.
Mr. BRADY. I thank the gentleman from Missouri [Mr. Hulshof] for
yielding and for his leadership of our Republican freshmen class; and I
appreciate the gentleman from Montana [Mr. Hill] talking about tax
relief and how it is so needed for our family farms and independent
businesses, who, I think it is genuinely agreed, bear the brunt of
taxes and regulation in this country but are, in fact, the backbone of
them.
In Texas we have a very proud entrepreneurial spirit, and we also
have a very proud spirit of agriculture production and processing. We
believe that for our State and for job creation for our families, that
we have an opportunity this week of making two major improvements that
will leave more money in the pocketbooks of our families and our
communities.
I was thinking that I was 14 years old the last time we balanced the
Federal budget in America. I am not that old today necessarily, but I
do not want to wait until I am 114 years old or my grandkids are 14
years old before we see a balanced budget again. Like many of us, I
would love to see it balanced right now. I would like to see double the
tax cuts and double the spending cuts. But, in fact, we are making real
improvement over where we are today.
My goal is to produce a balanced budget for America that is a true
balanced budget, which does not borrow from the Social Security trust
fund, does not take from highway trust funds or aviation trust funds or
the military retirement trust fund, but stands on its own as a balanced
budget just like our businesses or our families have to do.
In this country we have been, unfortunately, running deficits for
decades. And today, if you talk about balancing the budget without
using any of those funds, people look at you like you are crazy. It
just seems to be too far distant a vision.
This 5-year balanced budget agreement gets us to the first step, gets
us within sight of a true balanced budget. And from there we have the
opportunity to balance our budget, as our businesses and our families
do, to look our constituents in the eye and let them know that we are
living within our means and we are not taking from our retirement
programs to do so.
And if we balance the budget, we have an opportunity for real savings
for people. The average American family, as I understand it, if we
balance the budget and continue to balance the budget, will realize a
savings of about $1,200 a year off their mortgage. Just about $100 a
month less, then, they will be paying in their mortgage. Their auto
loan will be about $180 a year less, and their student loan that they
are paying off, $216 a year less. So just by living within our fiscal
means and bringing about a balanced Federal budget, we have a chance of
giving people tax relief.
When we add that onto tax relief from this bill that we are voting
tomorrow, we have the opportunity to give families the $500 tax credit
that they desperately need. We do need to eliminate the death tax
because it is truly the most un-American tax we have today.
It is remarkable that, in a country built upon our heritage, hard
work, entrepreneurship, that those families and businesses who risk the
most, who work the hardest of any group, whether they are wealthy or
poor, who put together a nest egg for their family so that they can
pass it down to the next generation, that they would be prevented from
doing so by our American tax laws. Whether it is independent business
competing in the marketplace over decades to build that nest egg, or a
family farm as stewards of the land for centuries to build that nest
egg, we ought to be encouraging that type of behavior, not punishing
it.
So while this tax bill is a good start on the inheritance tax and
capital gains, we all, I believe, know that this is the first step and
that we are going to continue to work to eliminate the death tax, to
try to encourage more jobs and more investment, and that is going to
produce results for us.
Today it also seems incredible that in Missouri, in South Dakota,
Kansas and Texas, across this country, that most of us, our tax burden
is such in America that in a two-parent family we have one parent
working full time just to put food on the table and pay the electric
bill, and we have another parent working full time just to pay their
taxes. It is a process that, if we allow it to go unchecked, will
damage and destroy this country.
Finally, too, we have an opportunity in this tax relief to also
preserve Medicare, which, as my mom grows older, as your mom grows
older, as our population ages, we do not have a choice anymore about
preserving Medicare and making those changes. We have to do that or it
will go bankrupt.
We have an opportunity, through the Republican proposal, to give our
seniors choice, the same type of health care supermarket that Members
of Congress, the President, that our Federal employees and their
retirees receive, the same type of flexibility and an opportunity to
root out the fraud and abuse that is running the cost of our health
care up. We have an opportunity this week through these tax cuts and
through our continued efforts on balancing the budget to make a real
difference in this country.
I, for one, am committed to it. And I know, Representative Hulshof,
that in your leadership in the freshmen class you have been constantly
pushing on deeper cuts. More spending and tax cuts move us quicker to a
balanced
[[Page H4623]]
budget and make all our efforts directed that way, and I am hopeful in
the end that we will prevail.
Mr. HULSHOF. Mr. Speaker, reclaiming my time, I thank the gentleman
from Texas [Mr. Brady], and especially for his remarks and his work
here in this body.
As we were awaiting this special order, I know there were at least
half a dozen colleagues on the other side of the aisle who, again, were
trying to turn this whole debate into class warfare. The facts are
simple.
Mark Twain, his birth place is Hannibal, MO, which is in my district,
I think Mark Twain once said that ``There are lies. There are damn
lies. And then there are statistics.''
Rather than just give some vague percentages with bar charts, what I
have got here, Mr. Speaker, is not on a percentage but the actual
amount of money, of tax relief that is going back to certain income
classes.
As my colleagues can see, if we will consider for those under $20,000
up to $75,000, clearly almost $90 billion in tax relief; 76 percent of
this tax relief package is going to those who make less than $75,000 of
annual income.
In fact, if you want to take a look at the amount of relief going to
those under $20,000, over $5.5 billion. And those at the upper end of
over $200,000 adjusted gross income get $1.4 billion. Clearly, we are
trying to focus and target the relief to those on the lower end of the
scale.
Now our friends on the other side talk about how it is that we are
helping the wealthy. Well, it happens that part of this package is a
capital gains relief targeted specifically to lower-income people. For
instance, those that are in the 15-percent income tax bracket will see
capital gains cut down to 10 percent.
This will help 5 million Americans. Two million Americans are senior
citizens, like Don and Carnetta in my district. Don worked for 30 years
for Wal-Mart and accumulated stock over the 30 years he worked for Wal-
Mart; and he cannot afford to pay right now, under current law, the tax
hit he is going to get if he sold those capital assets. We are giving
him and his wife some relief, and they are not wealthy by any stretch
of the imagination.
We have a $500-per-child tax credit. Heritage Foundation ran the
numbers on this, and it happens that in the Ninth District of Missouri
alone there are 89,493 children whose parents are going to benefit with
this phased-in $500-per-child tax credit, nearly 90,000 kids whose
parents are going to get to keep more of their money. That is almost
$40 million that is going to stay in the Ninth District, that is going
to stay in the pockets of those constituent parents that are trying to
do best for their kids.
How is that, I ask anybody, how is that, by allowing that relief to
go to those whose incomes are under $75,000, how is that a tax break
for the wealthy? I submit to my colleagues it is not.
I am happy to yield to the gentleman from South Dakota [Mr. Thune].
Mr. THUNE. Mr. Speaker, I want to thank the gentleman from Missouri,
[Mr. Hulshof] and my friend from Texas, [Mr. Brady] as well, who has
ties in South Dakota, I might add. So even though he has moved out of
our fair State, we still accept him as part of our South Dakota family,
so to speak.
But I would like to pick up on what he was just talking about. We had
a former President who once said, ``Facts are stubborn things.'' I
think sometimes when we have these discussions about this particular
subject, balancing the budget and tax relief for American families and
individuals and businesses, we lose sight of the facts.
But if we look very simply at what some of those facts are, fact No.
1, it has been mentioned earlier: 76 percent of the tax relief in this
agreement goes to people who are making less than $75,000. In fact,
$254 billion over a 10-year period goes to bring relief to families in
this country who have been overtaxed.
A second point I would make is, and I think this is one that gets
lost sometimes, too, and that is, in order to have tax relief, you have
to be paying taxes. Now we have we had people on the other side who
have suggested that somehow this is tilted toward people on wealthy end
of the spectrum. But the fact of the matter is, you cannot have tax
relief unless you are paying taxes.
Now there are those who would suggest that, under our particular
proposal, the per-child tax credit is not added on as an additional
payment to the earned income tax credit that people are already
receiving. Eighty percent of the earned-income tax credit is a payment,
it is not a credit.
{time} 2045
I think if we are going to say that you are going to get the $500 per
child tax credit, it is important to note that you have to have income
in order to have credit, to offset that income, to get the credit. It
would be like if my 10-year-old daughter, if I told her there was going
to be a $500 per child tax credit for people with red hair, and because
she has red hair, she would be eminently qualified for that. But the
fact of the matter is she does not pay taxes, so you cannot get a tax
credit until you pay taxes. That is a fundamental misnomer that is
being spread around here, and I think it is something that we all need
to set straight.
The other thing I would say, this is a historic day, and I think we
ought to be just bubbling with enthusiasm about what is happening
around this place. This is the first time in 30 years that we have had
a balanced Federal budget. This is the first time in 16 years that we
are lowering taxes on American families and individuals. I think that
as we go toward Independence Day, this ought to be a joyous occasion
for the people in this country because for the first time in a long
time, we are going to be able to declare independence for them from the
shackles of big government.
I think it is very important that we make clear as well not only what
we are for, but why we are for it. I think when we start talking about
why we are for what we are for, it comes down to the fundamental issue
that everything we are doing here, balancing the budget, lowering
taxes, saving Medicare for the next generation, comes back to the basic
premise that we want to see less power in Washington, D.C., and more
power back on Main Streets in South Dakota, in Missouri and in Texas,
and in the living rooms of the families of this country, so they have
the freedom to make the decisions about their futures. I happen to
believe that if they have the freedom to make those decisions that they
will exercise those freedoms responsibly.
We have a lot of people in this country who would like to teach that
you can have freedom from responsibility, but the fact of the matter is
in order to have freedom, you have to have responsibility. We have a
lot of hardworking men and women in America today who deserve the
freedom to be able to exercise responsibly that freedom in a way that
allows them to keep more of what they earn, in a way that puts more
power and control, more decision making in their hands and less in
Washington, DC, and that is why we are for what we are for.
That is the point I think that we need to make to the American people
and why I hope that as this Independence Day rolls around, they have an
opportunity to declare independence in this country and to hopefully
enjoy the benefits of tax relief that is coming their way.
We have talked a lot as well about entitlement programs. I think it
is important in this discussion, too, that we talk about what is being
done to preserve and protect Medicare for another 10 years. How do we
do that? Again by taking the power out of the government bureaucracy in
Washington and putting it back in the hands of our senior citizens, by
enabling them to choose medical savings accounts, by enabling them to
get into provider sponsored organizations, managed care, not just
health maintenance organizations but provider sponsored organizations,
by giving more options, more choices.
That is what this is all about. It is about putting more power and
more freedom in the hands of individuals in this country. I think that
as we conclude this debate tomorrow, today we passed the entitlement
reform side of it, the spending side, tomorrow we will pass the tax
part of it, I think it is incredible what we are achieving here. I came
here to do most of these very
[[Page H4624]]
things, as did the gentleman from Missouri, as did the gentleman from
Texas [Mr. Brady], to accomplish things that we think are meaningful to
the future of this country: Balancing the Federal budget, lowering
taxes, saving Medicare, and putting more power back in the hands of the
people in this country and less power in Washington, DC.
We have done all this. These are things that are incorporated. These
are the principles upon which all the things that we voted on today and
we will vote tomorrow, those are the principles on which we stand. I
think it is important that the American people know not only what we
are for, lower taxes, a balanced budget, but why we are for it, and
that is to give them more freedom, more power, more control, more
decision-making.
This is an incredibly historic occasion for us in this country, and I
would hope that it is not lost on the American public what is happening
in this institution for the first time in 30 years. It is amazing. It
is good for my kids and for your future kids and grandkids and for the
people in America who have held the promise for a long time that we
would come down here and do something that is meaningful, about
protecting their future and making sure that they have access and are
not deprived of the American dream. As we continue to pursue this, this
is the first step, but I hope it is the first step on a long journey to
putting more power back in the hands of individuals and not in
Washington, DC.
Mr. HULSHOF. I think the gentleman has enunciated very eloquently
what it is we stand for and why it is that we sought office and what we
are doing to accomplish the goals that many of us stood for and
campaigned on. It is especially poignant, I think, when we look just a
couple of years ago when we had a President who, with the liberals in
control of this body, passed a tax hike.
There was a discussion about ever-expanding government bureaucracy,
universal health care, and then suddenly the stark contrast, that we
are returning power to the people, getting it out of this city and
giving it back to the Main Streets and the local chambers of commerce
and civic clubs all across this great land. I agree with the gentleman
that this Fourth of July will certainly be a day to celebrate.
Mr. BRADY. If the gentleman will yield, as I was listening to the
gentleman from South Dakota [Mr. Thune], I was reminded of a quote
attributed to your former famous constituent Mark Twain, who said
``Nothing makes liars out of more honest citizens than the income
tax.'' It is not simply because it is so complicated and people do not
think it is fair. It is because when they are struggling so hard to
make ends meet in South Dakota and make ends meet in Missouri, they do
not believe the Federal Government is doing the same. Every dollar that
we can cut taxes is a dollar we have not sent to Washington, that we
are leaving back in our States and our communities. I am convinced most
Americans are not seeking a safety net under them. They are objecting
to the tax net that we have thrown over them. If we will provide them
the relief that we have scheduled for this week, that they so
desperately need, I am convinced we are going to get support across
this country for deeper tax cuts and less spending and more local
control, as the gentlemen have both stated so eloquently.
Mr. HULSHOF. I especially appreciate the comment the gentleman made
earlier because again waiting for the special order to begin, barrage
after barrage from our friends on the other side, particularly our
Democratic colleague from Arkansas who talked about the earned income
tax credit and how it was that the family that he mentioned, he had a
nice portrait, a beautiful portrait of this family that was struggling,
but yet who bore no tax liability because the earned income tax credit
eliminated any tax liability. In other words, that family in Arkansas
did not have to pay taxes to the Federal Government. And because we do
have limited resources, this targeted tax relief is going to those
people that have tax burdens. I think the gentleman pointed that out a
few moments ago.
Mr. THUNE. If the gentleman will yield on that, I think it is
incredibly important to make the distinction here that we are trying to
bring tax relief to people who pay taxes and not increase payments for
people who do not. That is a fundamental distinction that needs to be
made.
Mr. HULSHOF. Our colleague from Arkansas further pointed out that
this family in the portrait that he had, that they paid the payroll
taxes and certainly paid taxes toward Medicare and somehow that that
ennobled the family to receive these income tax credits. But the fact
is that paying Medicare taxes and paying the payroll taxes entitles
that family to reap the benefits of Medicare down the road or to reap
the benefits of Social Security. So the fact that that family is paying
those payroll taxes and Medicare taxes, those benefits will come and
inure to that family at the appropriate time. But because we have
limited resources and tax relief, we are trying to give tax relief to
those Americans who most need it.
Mr. THUNE. If the gentleman will yield further on that, it is
interesting again to see the irony here in that we are talking about
not counting Social Security and Medicare payments toward a future
benefit and yet when it comes to computing income to declare someone as
being wealthy, we add retirement benefits, capital gains and imputed
income from rental payments and everything else. There are a lot of
things being done here with the numbers which I think we need to
continue to put the facts out, and if we do, the people will agree with
us.
Mr. HULSHOF. Mr. Speaker, I recognize we are down to our final minute
or so. Let me just sum up that what we believe and especially in this
vote tomorrow and the debate that we have on this tax relief package,
letting Americans keep more of their money sounds like common sense to
most of us, especially those of us who are newly elected Members. That
seems to be a pretty radical idea here in Washington, DC. People in
Washington should never ever forget that tax money belongs to the
taxpayers and not to the government. It would be a big change from how
things used to operate, but that change which comes tomorrow is long
overdue. It is true and we have already heard it. We have gone back to
the old divisive style of debate, this class warfare politics. I would
hope and pray that we are beyond that. Instead of dividing Americans
and pitting groups against each other, we should be working together to
face our national challenges. We have a moral responsibility to
ourselves and to our children not to tolerate such acts. We have a
moral imperative to make it possible for everyone to climb the ladder
of success.
Mr. Speaker, let me say to the parents who are struggling to make
ends meet, the parents that are burning the candle at both ends to put
food on the table and keep a roof overhead, the parents that are
sacrificing their own needs and giving everything they have got to make
sure that their children have every opportunity for a brighter future,
we hear you. For those who believe that we spend too much in
Washington, we agree. For those who believe that we tax too much in
Washington, we agree. For those who believe we must balance the budget,
cut wasteful Washington spending and provide permanent, real,
meaningful tax relief, we agree. And for those that demand that we here
in Washington do better than we have done in the past, we agree. If we
can pass this tax package, Mr. Speaker, the next week and the Fourth of
July will truly be a day that we can all celebrate our independence.
____________________