[Congressional Record Volume 143, Number 92 (Thursday, June 26, 1997)]
[Senate]
[Pages S6393-S6399]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   REVENUE RECONCILIATION ACT OF 1997

  The PRESIDING OFFICER (Mr. Coats). Under the previous order, the 
clerk will report S. 949.
  The assistant legislative clerk read as follows:

       A bill (S. 949) to provide revenue reconciliation pursuant 
     to section 104(b) of the concurrent resolution on the budget 
     for fiscal year 1998.

  The Senate resumed consideration of the bill.
  Pending:

       A motion to waive the Congressional Budget Act with respect 
     to consideration of Section 602 of the bill.
       Dorgan motion to refer the bill to the Committee on the 
     Budget, with instructions.
       Dorgan Amendment No. 515, to authorize the Secretary of the 
     Treasury to abate the accrual of interest on income tax 
     underpayments by taxpayers located in Presidentially declared 
     disaster areas if the Secretary extends the time for filing 
     returns and payment of tax (and waives any penalties relating 
     to the failure to so file or so pay) for such taxpayers.
       Dorgan Amendment No. 516, to provide tax relief for 
     taxpayers located in Presidentially declared disaster areas.

[[Page S6394]]

       Dorgan Amendment No. 517, to impose a lifetime cap of 
     $1,000,000 on capital gains reduction.
       Bumpers Amendment No. 518, to repeal the depletion 
     allowance available to certain hardrock mining companies.
       Durbin Amendment No. 519, to increase the deduction for 
     health insurance costs of self-employed individuals, and to 
     increase the excise tax on tobacco products.
       Roth Amendment No. 520, to provide for children's health 
     insurance initiatives.
       Jeffords Amendment No. 522, to provide for a trust fund for 
     District of Columbia school renovations.
  The PRESIDING OFFICER. Who yields time?


                           Amendment No. 518

  Mr. BUMPERS. I yield 5 minutes to my coauthor of this amendment, 
Senator Gregg.
  The PRESIDING OFFICER. The Senator from New Hampshire is recognized 
to speak for up to 5 minutes.
  Mr. GREGG. Mr. President, just to recap where we are, basically, the 
Senator from Arkansas has authored an amendment to end the ability to 
take the depletion allowance for mining companies for that part of 
their mining activity which occurs on public land.
  Now, let's understand the facts here. A mining company comes along 
and it buys the right to mine on public land for the value of, I think, 
$2.50 an acre. For example, in 1995, ASARCO bought 349 acres for 
$1,745, which had 3 billion dollars' worth of assets on it. Public 
land, public land. And then a Danish company came along, and for $275 
bought 110 acres, which had 1 billion dollars' worth of assets on it. 
Then a Canadian company came along and spent $9,000 for 1,800 acres 
which had 11 billion dollars' worth of assets on it.
  That, in and of itself, is a bit of an affront to the American 
taxpayer. That is not what we are debating here. We are debating an 
even greater affront--an even greater affront--because after they 
bought this land for $2.50 an acre, they then go out and take a 
depletion allowance against that land. Now, it is not against the 
equipment they are using to mine the land. They can deduct that. They 
have a right to do that. No, it is a depletion allowance against land 
which is publicly owned, taxpayers' land. It is not their land. It is 
taxpayers' land which they bought for $2.50 an acre, and now they get 
to take a depletion allowance which costs $400 million over the next 5 
years.
  Excuse me, what dinner party am I at? Is the Mad Hatter here? Is the 
Queen of Hearts here? What is this? We have the taxpayers first 
subsidizing an $11 billion, a $1 billion, and a $3 billion asset 
purchase which flows to these companies, and then we have the taxpayers 
subsidizing a depletion allowance which flows to these mining 
companies. And what does the taxpayer get back for all of this? $2.50 
an acre. It is corporate welfare, corporate pork. The term can be 
applied at a variety of different levels.
  What it is, is wrong. It is wrong that the depletion allowance should 
be available for land which is public land that is purchased at these 
outrageously low prices. It doubles up the insult. It doubles up the 
insult to the American taxpayer.
  I strongly support the initiative of the Senator from Arkansas. I 
cannot understand how anyone who would believe that the American 
taxpayer deserves some modicum of respect would not also support this 
proposal. It simply is an attempt to try to correct just a small sliver 
of what is a very significant and inappropriate affront to the American 
taxpayer. It is costing us a lot of money, money that we should not 
have to pay.
  I heard somebody say, well, this is a tax increase. My goodness, how 
could you argue that? A tax increase? What we are doing is hammering 
the taxpayers, expecting the American taxpayer to pick up a depletion 
allowance on top of having already picked up a loss for having sold 
this property at a ridiculously low price in light of what the value of 
the asset being conveyed is. It is not a tax increase. What it is is an 
attack on the taxpayer. It should not occur any longer.
  The Senator from Arkansas is right in his amendment. I am happy to 
join him.

  I yield back the remainder of my time.
  Mr. REID. Does the Senator from Alaska yield?
  Mr. MURKOWSKI. I am happy to yield to my friend from Nevada 3 
minutes.
  Mr. REID. Mr. President, last evening we talked about the price of 
gold based upon a Wall Street Journal article earlier this year. Let me 
advise all my friends here in the U.S. Senate that last Friday gold hit 
a 4-year low, $336 an ounce, which basically means companies are laying 
people off and some companies are going out of business. That is a 
fact.
  Mr. President, as I stated last night, this amendment is an ill-
conceived and ill-advised attempt to circumvent congressional efforts 
to reform the current mining law.
  The U.S. mining industry is in agreement that the mining law is due 
for some changes. Serious efforts to accomplish such a result have 
taken place over the last several years.
  In 1990 and 1991, efforts were made here to have a patent moratorium. 
That failed. Following that, though, Senators Domenici and Reid offered 
an alternative to a patent moratorium. We required payment of fair 
market value for the surface of the land. We said any land that was 
patented that was not used for mining purposes would revert to the 
Federal Government. We also required compliance with state reclamation 
laws. This was in an amendment offered here that passed this body by a 
vote of 52 to 44.
  It went to the House, and they knew their argument that they use here 
every day, about the patents being offered for nothing, would be taken 
away. They rejected this good-faith effort of the U.S. Senate to reform 
the mining law. It was rejected in conference. We tried.
  We came back later on, Mr. President, in 1993, and imposed a 
maintenance fee on unpatented claims of $100 per claim. The Government 
collected over $50 million in 1 year for that. It is not as if we have 
not sought change.
  In the Senate and the House, in 1993, bills passed. They were killed 
in conference because it was not perfect. There is now in effect and 
has been since 1995 a moratorium on the issuance of further patents. 
The only ones that patents could be issued upon were those that were in 
the pipeline. That has been in effect since 1995. There has been reform 
of the mining law.
  In 1995 and 1996, there was legislation offered to reform the law. We 
have run into roadblocks from people who want to kill the good because 
they want the perfect.
  I suggest this amendment unfairly targets the Western mining 
industry. We have sought reform. There has been reform that has taken 
place. This amendment is an attempt to do mining law reform, and this 
is not the place or time for such an effort. It should go through the 
committee process that is led by the able chairman of the committee, 
the Senator from Alaska.
  If this Congress wants to change the current mining law, then it 
should begin its efforts in the Energy and Natural Resources Committee 
and not in the reconciliation bill.
  Mr. MURKOWSKI. I yield 1 minute to the Senator from Utah.
  Mr. HATCH. Mr. President, I rise today to oppose the amendment by my 
colleagues, Senator Bumpers and Senator Gregg. This amendment would 
repeal the percentage depletion allowance for mineral extraction. It 
would, however, only repeal this allowance for minerals extracted from 
any land obtained pursuant to the provisions of the mining law of 1872. 
This amendment is discriminatory and bad policy.
  Minerals are not free for the taking or inexpensive to mine just 
because they are on land obtained from the 1872 mining law. In truth, 
significant capital is invested during the development of a mine. 
Capital costs often reach close to $400 million to develop a major 
mine.
  In addition, there is a lot of time invested in the development of 
any mine, and it has increased even more in recent years. Just getting 
a permit for a new mine on Federal lands has increased from a 1-year 
time frame to 3 or 5 years over the last 4 years.
  The rationale for the depletion allowance provisions in the Tax Code 
are not just targeted to mineral extraction. They are the same for oil 
and natural gas, coal, and metals extraction as well. This allowance 
recognizes the unique nature of resource extraction. It is designed to 
provide a practical method of measuring the decreasing value of a 
deposit as the materials are

[[Page S6395]]

extracted. It recognizes that the replacement cost of new mines are 
always higher in real terms. This allowance helps the mining industry 
to generate the capital needed to bring new mines into production.
  Mr. President, mines mean jobs. They are not just vacuums sucking our 
minerals out of the land at a low cost. They are economic entities that 
extract valuable resources for circulation in the economy and provide 
millions of jobs for American citizens. These are direct jobs. But, 
mining produces essential raw materials for manufacturing in other 
industies. Think about the untold number of jobs that are indirectly 
linked to mining.
  Moreover, jobs in the mining industry are not just minimum wage jobs, 
either, Mr. President. The Bureau of Labor Statistics tells us that the 
average mining wage is $45,270 per year. This is significantly higher 
than the average national wage of $27,845.
  This amendment would have a severe effect on the mining industry. It 
means thousands of lost jobs. These jobs are high-paying jobs that 
raise the standard of living of millions of workers.
  This amendment means a significant reduction in mining activities all 
over the Nation. This will have a corresponding effect on the tax base 
and economies of the areas dependent on a sound and viable mining 
industry.
  The effects of this amendment will not only be felt in Western 
States, where mining is abundant, but will be felt across the Nation.

  This amendment destroys more than just the economics of mining 
communities. It also harms the stewardship of our national mineral 
wealth. Companies will be encouraged to spend their scarce exploration 
and development funds in an atmosphere more favorable to them. The 
political and regulatory climates overseas already beckon to our mining 
companies. By making our tax climate so unfavorable for these mining 
companies, we are practically giving them the push they need to move 
overseas.
  Make no mistake about it, this amendment will have an effect on our 
national production. Imports will replace the loss of domestic 
production, moving high-paying jobs and economic activity to other 
countries. This is not the way to ensure a stable economy in the United 
States.
  Mr. President, let's put aside the fact that this is such bad tax 
policy. This amendment is an administrative nightmare. Most mining 
projects consist of land and rights obtained from a variety of sources. 
For example, a large open pit mining operation may include private 
property acquired through homestead laws, patented mining claims, 
unpatented claims, State lands, and 1872 mining law land. How is a 
company supposed to figure out where a mineral comes from?
  This amendment would require mining companies to find some way of 
tracing the ore extracted just from the mining rights obtained from the 
1872 mining law. This would often mean that the depletion allowance 
would apply to a shovel of ore from one location, but not to a shovel 
of identical ore from 10 feet away. This is ridiculous.
  This amendment does not appear to be an attack on the percentage 
depletion allowance for mineral extraction. It is only targeted at a 
specific segment of this industry relating the 1872 mining law.
  I do not disagree that this mining law should be debated and 
reformed. I do not agree that it should be reformed using a piecemeal 
approach through the Tax Code. If we are going to reform the 1872 
mining law, let us do it in a thoughtful, comprehensive manner.
  I urge my colleagues to join me in opposing this amendment.
  The PRESIDING OFFICER. Who yields time?
  Mr. MURKOWSKI. I yield 1 minute to the Senator from Idaho.
  The PRESIDING OFFICER. The Senator from Idaho is recognized for 1 
minute.
  Mr. CRAIG. Mr. President, several assertions have been made on the 
floor this morning that this is not a tax increase if we repeal this 
depletion allowance. It was also suggested that mining companies don't 
pay taxes. Wrong, wrong, and wrong again.
  The average mining company pays 32 percent tax with minimum 
alternative. This would increase it to over 42 percent. I would like to 
inform the Senator from New Hampshire that mining companies invest 
about $400 million in each mining operation. He is raising taxes on 
mining companies that employ thousands of people, in one of the highest 
paid wage industries in the Nation. He is also attacking the very 
industrial base of our country. When you come from a State where you 
have to pledge not to raise taxes, I guess you can raise them if there 
is some political advantage to do so. That appears to be the case here 
this morning.
  It is all politics, with no sensitivity toward the strength of the 
industrial base of this country and the opportunity to continue to 
provide strong high-paying jobs in the public land States of our 
Nation.
  Mr. MURKOWSKI. Mr. President, I yield 2 minutes to the Senator from 
Nevada.
  The PRESIDING OFFICER. The Senator from Nevada is recognized for 2 
minutes.
  Mr. BRYAN. I thank the Chair. Mr. President, this is the wrong place 
and the wrong time to be considering an amendment of this nature. This 
would make a fundamental change in the tax law with respect to the 
percentage depletion for the recovery of mineral deposits, a provision 
that has been in the Tax Code for more than six decades. It would 
discriminate against only one type of mining activity--that which 
occurs on the public lands.
  The proponents of this amendment really are debating today changes 
they want to seek in the mining law of 1872. I do not disagree that 
changes need to be made. We are prepared, in representing a State in 
which this is such an important industry, to provide for royalty 
provisions, fair market value of the surface, as well as reclamation 
efforts. The ore body itself is a wasting asset. So a depletion 
allowance for mineral recovery is analogous to depreciation permitted 
on the improvements on real property. So this is not some exotic 
provision in the Tax Code. It recognizes that the ore body itself will 
be exhausted in a finite period of time, and it seeks to provide that 
kind of tax coverage.
  Finally, I want to point out, as my colleague from Utah pointed out, 
that this would be an administrative nightmare. At least one particular 
mining activity in my own State is derived at the source of title or 
possession of the land from six different sources. So you would have to 
identify where the minerals recovered are from six different sources in 
order to apply the provisions of the law.
  I urge its rejection.
  The PRESIDING OFFICER. Who yields time?
  Mr. BUMPERS. Mr. President, I yield myself such time as I may use.
  The PRESIDING OFFICER. The Senator from Arkansas has 5 minutes 45 
seconds remaining.

  Mr. BUMPERS. Mr. President, I have never heard so many stale 
arguments in my life. This is like saying we will give General Motors 
the steel to build cars if they will hire some people to do it. This is 
a simple question of giving the biggest mining companies in the world 
the taxpayer's resources. That is who we are talking about. This 
doesn't belong to the 10 Senators from the Western States. This gold 
and silver belongs to the taxpayers--the people I have heard talk about 
so many times on this tax bill, that ``we are going to give a tax cut 
to the long-suffering taxpayers'' and, at the same time, give away 
billions of dollars worth of gold, silver, platinum, and palladium that 
belongs to the taxpayers.
  This amendment has nothing to do with the gold companies' depletion, 
even on private lands. It has nothing to do with depletion on State 
lands. It has to do with the lands they got from the U.S. Government 
for nothing. And we are paying them to take it. We are giving them a 
depletion allowance to mine gold that we gave them.
  There is a lot more mining that goes on on private and State lands 
than goes on on Federal lands. They are not going offshore. They are 
not going broke. Here is the big ad by Barrick Mining Co. in the Mining 
World News: ``Developing Your Gold Property to its Full Potential.''

       Work with a new partner, Barrick Gold. You may not have 
     dealt with us before, but you should know we are the world's 
     most profitable gold producer.

  And well they should be; they don't pay anything for it. This means 
$400

[[Page S6396]]

million to the taxpayers of this country over the next 5 years. They 
are perfectly willing to pay an 18 percent royalty on private lands. 
They are perfectly willing to pay 5 to 18 percent on State lands. They 
pay severance taxes, reclamation fees, and royalties to everybody under 
the shining Sun--except the taxpayers of the United States, who own it.
  Let me say to my colleagues. Each one of you who are defending this 
proposition, let me ask you this: You go home and tell your friends, 
your supporters--I am not talking about the mining companies, I am 
talking about the taxpayers--I want you to tell the people back home 
that if you had 500 acres of land and had $18 billion or $11 billion 
worth of gold under it--or in the case of Stillwater Mining Co. in 
Montana, $38 billion worth of palladium and platinum on 2,000 acres--if 
you owned it, and I came to you and I said that I am going to relieve 
you of all these billions of dollars worth of gold, I will get rid of 
it for you, what would you pay me? We can't pay you for it. We are just 
going to get rid of the gold for you. You would say, get thee hence to 
the nearest psychiatrist for a saliva test. I cannot believe that, year 
after year, we listen to these stale arguments about how people are 
going offshore, and they create jobs. So does some small struggling 
businessman that hires 10 people in your State, but you don't give him 
all of his resources to produce something with.
  Mr. President, it is time that this body stood up to its duty. This 
is not about the mining law. This is simply saying, in those narrow 
cases, where we gave them the land, and they are mining it and not 
paying a dime to the taxpayers of this country in any kind of a fee, we 
are saying, for God's sake, let's not pay them to take it. At least 
take the depletion allowance from them.
  I reserve the balance of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. MURKOWSKI. I yield myself the balance of the time on our side.
  Mr. President, is there any question about whether this is a tax 
increase or not? Let's recognize what the Joint Tax Committee has said. 
They said it is a tax increase. It raises $686 million. If that isn't a 
tax increase, I don't know what is. What we have here, Mr. President, 
is not a new proposal, but a punitive proposal that was offered earlier 
this year and rejected by the Finance Committee, rejected by the House 
Ways and Means Committee, and it should be rejected by the full Senate.
  When you strip away all the rhetoric, this issue boils down to 
whether or not we are going to place a $700 million tax increase on the 
domestic mining industry. This proposal, as it stands, will speed up 
the departure of the mining industry from our shores.
  Let's look at this chart briefly. It shows what is happening with 
employment in the mining industry for metal, iron ore and copper. Let's 
look a little more closely at metal mining, which includes gold, 
silver, lead, and zinc from 1980 to 1995. In 1980 there were 98,000 
jobs; by 1995 that had dropped to 51,000 jobs. In copper, it went from 
30,000 jobs in 1980 to 15,000 in 1995. These numbers show what is 
happening to the mining industry in this country. What will happen if 
we place an additional $700 million in tax burden on them? They have to 
sell their gold, silver, copper, lead, and zinc at the world prevailing 
price, not the price in the United States. So where are the good-paying 
jobs going to go? They are going to go to Canada, Latin America, and 
Indonesia.
  We pride ourselves on cutting taxes and yet this amendment would 
throw a $700 million tax increase at the American mining industry. That 
is what the Bumpers amendment would do. It adds $700 million to the 
cost of producing minerals in the United States. Every Member of this 
body can figure out for themselves what effect this would have on the 
American mining industry. If you can't produce your product for a 
profit, for the price that is offered, you are out of business, that is 
what happens.
  Finally, Mr. President, let's make no mistake about it, this 
amendment is not about depletion on lands obtained under the Mining Act 
of 1872. The amendment is about the law itself. This is just an overt 
attempt to gain negotiating leverage on the industry. The U.S. mining 
industry agrees with Senator Bumpers, as do I, that this law is long 
overdue for overhaul. Let's sit down with the administration and reform 
the 1872 mining law, but let's not impose a punitive $700 million tax 
on the industry merely to gain negotiating leverage at the bargaining 
table. As a consequence, I urge my colleagues to oppose this punitive 
tax and vote against waiving the Budget Act.
  Mr. President, at the conclusion, I am going to raise a point of 
order that the amendment is not germane under section 305 (b)(2) of the 
Budget Act.
  The PRESIDING OFFICER. The Senator from Alaska has 6 seconds. The 
Senator from Arkansas has 40 seconds.
  Mr. MURKOWSKI. I yield back our time.
  The PRESIDING OFFICER. The Senator from Alaska yields back his time.
  Mr. BUMPERS. Mr. President, I ask unanimous consent that Senator 
Akaka and Senator Feingold be added as cosponsors of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BUMPERS. Mr. President, this is the ninth year I have stood on 
this floor and tried to prick the conscience of the Members of this 
body about this last remaining egregious scam on the American people. 
Next year, when some of you are up for reelection, I expect you are 
going to see some 30-second spots on this. What is it your opponent 
will say? What is it that makes you want to give away billions and 
billions of dollars of the taxpayers' money and us get nothing in 
return? Why do you tell your Chamber of Commerce you will handle their 
money like it was your own? Anybody in this body would be disqualified 
from being a Senator if he answered the question I posed a moment ago, 
``Yes, I will let them come and take gold off my property for 
nothing.'' Why, of course, you would not.

  This is a very narrowly drafted amendment. It is crafted not to 
discriminate. It simply says that if you mine gold on private lands, 
fine, get a depletion. Oil companies, coal companies, and gas companies 
are entitled to a depletion. But when you give resources of the U.S. 
taxpayers away for nothing, and then allow them to take a 15 percent 
depletion, which is worth $400 million of the taxpayers' money, and you 
turn around here in this tax bill and say we are going to give it back 
to you, don't give it away in the first place. For God's sake, 
colleagues, do your duty.
  I yield the floor.
  The PRESIDING OFFICER. All time has expired.
  Mr. MURKOWSKI. Mr. President, I raise a point of order that the 
amendment is not germane under section 305(b)(2) of the Budget Act.
  Mr. GREGG. Mr. President, I move to waive the Budget Act and ask for 
the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.


                 Vote on Motion to Waive the Budget Act

  The PRESIDING OFFICER. The question is on agreeing to the motion.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Kansas [Mr. Roberts] is 
necessarily absent.
  The yeas and nays resulted--yeas 36, nays 63, as follows:

                      [Rollcall Vote No. 131 Leg.]

                                YEAS--36

     Akaka
     Biden
     Boxer
     Bumpers
     Chafee
     Coats
     Collins
     Dodd
     Durbin
     Feingold
     Feinstein
     Glenn
     Graham
     Gregg
     Harkin
     Jeffords
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moseley-Braun
     Murray
     Reed
     Robb
     Rockefeller
     Sarbanes
     Smith (NH)
     Snowe
     Torricelli
     Wellstone
     Wyden

                                NAYS--63

     Abraham
     Allard
     Ashcroft
     Baucus
     Bennett
     Bingaman
     Bond
     Breaux
     Brownback
     Bryan
     Burns
     Byrd
     Campbell
     Cleland
     Cochran
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Domenici
     Dorgan
     Enzi
     Faircloth
     Ford
     Frist
     Gorton
     Gramm
     Grams
     Grassley
     Hagel
     Hatch
     Helms
     Hollings
     Hutchinson
     Hutchison
     Inhofe
     Inouye
     Johnson
     Kempthorne
     Kyl
     Landrieu
     Lott
     Lugar
     Mack
     McCain
     McConnell

[[Page S6397]]


     Moynihan
     Murkowski
     Nickles
     Reid
     Roth
     Santorum
     Sessions
     Shelby
     Smith (OR)
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                             NOT VOTING--1

       
     Roberts
       
  The PRESIDING OFFICER. The Senate will be in order.
  On this vote, the yeas are 36, the nays are 63. Three-fifths of the 
Senators duly chosen and sworn not having voted in the affirmative, the 
motion is not agreed to. The point of order is sustained. The amendment 
falls.
  Mr. MOYNIHAN. Mr. President, I move to reconsider the vote.
  Mr. CRAIG. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.


                           Amendment No. 517

  The PRESIDING OFFICER. The pending issue, under the previous order, 
is amendment No. 517.
  Mr. MOYNIHAN. Mr. President, may we have order.
  The PRESIDING OFFICER. The Senate will be in order.
  Under the previous order on amendment No. 517, time is 20 minutes 
under the control of the Senator--time is equally divided on the 
amendment of the Senator from North Dakota. No. 517 is the pending 
business. Who yields time?
  Who yields time?
  Mr. DORGAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. MOYNIHAN. Parliamentary inquiry, Mr. President.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. MOYNIHAN. Is it the case that we have agreed to 20 minutes 
equally divided so that the time is automatically provided Senator 
Dorgan?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. MOYNIHAN. I thank the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I have offered an amendment that is 
relatively simple and it deals with the issue of capital gains. Capital 
gains, as most of us know, has long been a controversial issue here in 
the Congress.
  Some will remember, if they relate back to the good old days of the 
Tax Code--I call the good old days those old days in which there were 
people in this country who would do things not because the market 
system suggested they should do them, but because the Tax Code provided 
incentives to do them. I do not think they were good old days, but 
there was created in this country an army of people whose lives were 
devoted to figuring out how you can convert ordinary income to capital 
gains and make money off the Tax Code, and how you can decide to build 
what the market system says you should not build but still make money 
because the Tax Code provides the incentives to build it.
  Well, we got rid of that army of accountants and lawyers and others 
in the tax shelter industry with the 1986 Tax Reform Act.
  The proposal for a capital gains tax preference in the bill that 
comes to the floor of the Senate has no limitation. I did not take 
Latin so I don't know if ``totus porcus'' means whole hog, but I 
certainly think the term applies to this capital gains tax proposal. 
You can convert unlimited amounts of ordinary income to capital gains 
and have the tax break that is imbedded in this bill forever.
  I propose the following. If a capital gains tax break truly is 
proposed in order to help those families who save for their kids' 
college education, to help a small business, to help a family farm that 
might sell the business or the farm, then let us have at least some 
reasonable limitation on the capital gains tax benefit.
  It is interesting; in this country we have two different philosophies 
of taxation. One says let us tax work. If you are on a payroll 
someplace and working, let us tax work. And nobody worries much about 
the consequence of that. Nobody worries about the impact of inflation 
on the wage and says let us index work salaries for inflation. Nobody 
says that.
  If you work and you take a shower at the end of the day after you 
work because you worked hard and you sweat, you earned an honest wage, 
you pay a tax up here and nobody is running around this Chamber saying, 
gee, let's index that for inflation. Let's talk about a work gains 
index. Nobody talks about that.
  But then others say let us tax work, but let us exempt investment. 
Somebody else is an investor, takes a shower in the morning, does not 
get dirty during the day, does not sweat, sits in a chair someplace and 
invests, we have all kinds of folks running around the Capitol saying, 
oh, we have to do something to provide incentives for people who get 
their income that way.
  Let us tax the income from work and let us exempt the income from 
investments, that is what is at the root of this debate. Now, the 
question is, who gets what and who has what?
  Here is a chart that describes very well why I have offered this 
amendment. The bulk of the capital gains go to those in the very upper 
income bracket. One-half of 1 percent of the taxpayers of this country 
have gains of $200,000 or more, and they get fully half of the capital 
gains that people get in this country. So when you say let us give a 
tax benefit through capital gains and have no limit on it, what you are 
saying is let us provide an enormous benefit to the upper income folks. 
Eighty-nine percent of the taxpayers that have capital gains have very 
small capital gains, under $10,000. And all of that in aggregate, 90 
percent of the taxpayers have 15 percent of the dollar amount of the 
capital gains in this country.
  So, to repeat, one-half of 1 percent of taxpayers get half of the 
Nation's capital gains, the bulk of the capital gains. And nine-tenths 
of the taxpayers get about one-sixth of the capital gains. It is clear 
that any attempt to give a tax break to capital gains income will 
disproportionately benefit folks in the very upper income bracket.
  My proposal is very simple. It says let us limit the capital gains 
tax preference in this bill to $1 million in a taxpayer's lifetime, $1 
million. We will give you a tax preference on capital gains for a 
million dollars. Isn't $1 million enough? Should there not be some 
limitation? Is there no end? Is there no bottom to this pot? Or do we 
just insist that somehow investment has greater merit than work and we 
will continue to fight and struggle to reward investment and penalize 
work by saying let us tax work and exempt investment.
  This is a painfully simple amendment. I have offered it previously 
here in the Congress. I hope that as we now begin this effort to 
restore a capital gains preference, we at least will have the good 
sense to limit it.
  So that is the amendment I have offered. I reserve the remainder of 
my time. I would like to respond to some of the comments that are made, 
but, Mr. President, this amendment will have a significant impact on 
the construction of a capital gains tax preference. I do not propose we 
abolish it. I propose instead we limit it to $1 million per taxpayer in 
the taxpayer's lifetime.
  I yield the floor and reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. Mr. President, I yield myself 3 minutes.
  The PRESIDING OFFICER. The Senator from Delaware is recognized for 3 
minutes.
  (Mr. GREGG assumed the chair.)
  Mr. ROTH. Mr. President, I rise in strong opposition to the amendment 
that is offered by my good friend and colleague from North Dakota, but 
I do first want to commend him for his perseverance on this issue. I 
know it is a matter of great interest to him, a matter that he feels 
very strongly about. As he said in yesterday's statement, he has been 
sponsoring this type of legislation for many years.
  Mr. President, I must oppose this amendment for several reasons. 
First of all, let me point out that the principle purpose for reducing 
the capital gains tax is to encourage more investment. In this 
competitive world of today and in this global economy, it is critically 
important that we make the best utilization of the capital we have so 
that we are in a strong competitive position. A lower capital gains tax 
will encourage greater investment. It will encourage better utilization 
of our assets.
  Why would we want to impose some kind of arbitrary limit that will 
have the effect of limiting investments? We

[[Page S6398]]

are trying to free up hundreds of millions, if not billions, of dollars 
to the best investment available to help ensure that we are creating in 
this country an environment of growth, jobs, and opportunity.
  Let me just look at this matter from another point of view; from the 
standpoint of small business. I know my distinguished friend from North 
Dakota is, indeed, a friend of small business. The tax laws currently 
provide a 50 percent capital gains exclusion from investments in 
qualifying small business stock. Currently, the tax laws provide that 
an investor who has gained from qualifying small business stock can 
exclude up to $10 million of capital gains from a single investment--10 
times more than the $1 million cap. I understand that in the Democratic 
substitute amendment that is ultimately going to be offered, it is 
provided that we should double this limit; this $10 million limit 
should become $20 million from a single investment. So the question I 
must ask my friends on the other side of the aisle who argue a $20 
million capital gains exclusion is appropriate from a single small 
business investment yet, at the same time, argue to limit capital gains 
from all other investments to only $1 million over a taxpayer's 
lifetime--the two provisions are totally inconsistent, in my judgment 
they make no sense, and I hope the Senate will agree with my concern.
  Let me make one further observation. This amendment also raises some 
very significant administrative problems. Under the amendment, 
individuals will have to keep track of all their investment gains, not 
for 1 year, not for 5 years or 10 years, but for decades--a 
tremendously burdensome matter. Think of how this amendment would 
affect the Internal Revenue Service. I doubt the IRS has adequate 
resources to administer the voluminous information that would have to 
be maintained if this amendment becomes law. It would be an 
administrative nightmare for the IRS to have to try to enforce this 
provision.
  But let me go back to the first point which I think is most 
important, that the reason we are reducing the capital gains tax is to 
encourage more investment. To try to limit it to $1 million makes no 
sense and is in conflict with the basic purpose of the agreement that 
was reached by the Senate Finance Committee. It makes no sense. It is 
inconsistent with the provisions now contained in the law for small 
business stock, which can be excluded for up to $10 million of capital 
gains; and, as I already pointed out, it is proposed in the so-called 
Democratic substitute that this limit be doubled to $20 million.
  So I oppose this legislation and hope the Senate agrees with this 
opposition.
  Mr. President, at this time I am happy to yield 7 minutes to the 
Senator from Utah.
  The PRESIDING OFFICER. The Chair will advise the Senator from 
Delaware that he only has 2\1/2\ minutes remaining on the amendment, 
and the Senator from North Dakota has 4 minutes 42 seconds.
  Mr. BENNETT. In that case, Mr. President, I ask I be recognized for 
2\1/2\ minutes.
  Mr. ROTH. Mr. President, I yielded myself, I think it was 3 minutes. 
Is it not normally the practice to advise the speaker when he has come 
to that?
  The PRESIDING OFFICER. Regrettably, the Chair did not hear the 
reference to 3 minutes. We will restore the time if the Senator so 
desires.
  Mr. DORGAN. Mr. President, the Senator did ask to be notified after 3 
minutes. I have no objection to that.
  Mr. ROTH. I thank the distinguished Senator from North Dakota for his 
courtesy. I yield such time as is remaining to the Senator from Utah.
  The PRESIDING OFFICER. The Senator from Utah is recognized for 7 
minutes.
  Mr. BENNETT. Mr. President, I have addressed this issue before and do 
not want to spend a great deal of time in repetition. But I think we 
should focus on what we are really talking about when we talk about 
capital gains tax. There are many who say, ``Well, the people who have 
a capital gain are wealthy and we are letting them off the hook if we 
do not tax that wealth.'' What we are really talking about, in 
accumulated capital, is where will that capital be deployed?
  Recently there have been studies as to the number of millionaires in 
the United States and how they got their money. Overwhelmingly, the 
money comes from one of two sources: They inherit it or they start 
businesses. You do not become a millionaire by saving your wages. You 
become a millionaire by creating something in the form of a company and 
then seeing it grow. When you die your children inherit it, and then 
they fall into the first category. That has to do with death taxes.
  But millionaires come from risk-taking, millionaires come from 
entrepreneurial activity. Where do jobs come from? They come from risk-
taking, they come from entrepreneurial activity. As I have said here on 
the floor, in the real world as opposed to the classroom, millionaires 
who are the result of entrepreneurial activity have an itch to stay 
entrepreneurial. Once they have seen their investment become what they 
call on the market a mature investment, many, many times they want to 
move on. They want to take their money out of a mature investment and 
put it into another entrepreneurial activity. But the present level of 
capital gains taxation prevents them from doing that, at least 
psychologically.
  Again, on the floor I have given examples of people who have seen 
their investment grow tremendously in a high-risk circumstance. They 
got the rewards that came from taking that risk and now they want to 
move on and take another risk, create more jobs and accumulate capital 
and wealth in this country. When they calculate what happens to them 
under the capital gains tax they say, ``I am not going to do it. I 
can't afford it.'' And they leave their money tied up in a mature 
investment, whereas the opportunity in an entrepreneurial investment is 
denied them by the capital gains tax.
  There is one thing that they do, and I have seen this--indeed, if I 
may, Mr. President, I have done this myself, to my sorrow. With the 
entrepreneurial itch saying let's put some money in a new startup 
circumstance, but feeling that your own money is locked up because of 
the capital gains tax, the itch becomes so strong that you put money 
into the entrepreneurial activity anyway, only you borrow it. And now 
the entrepreneurial activity has to carry not only the responsibility 
of a fair return, but enough money to pay the interest.
  I will not belabor it because I have given major speeches on this 
issue before. But I think the cap proposed by my friend from North 
Dakota, while well-intentioned, would in fact impede the flow of 
capital, it would move us in a direction that would ultimately redound 
to the disadvantage of the economy. I remind you once again, the 
Chairman of the Federal Reserve Board, who is concerned with watching 
money move around the economy and would like to see as much money as 
possible into entrepreneurial activity, has recommended to us that the 
ideal capital gains rate for this country should be zero. I am not bold 
enough to propose that on the floor because I know it would not pass. 
But I always remind people of that because that is the direction in 
which I think we ought to go.

  For that reason I oppose this amendment.
  The PRESIDING OFFICER. Who yields time? The Senator from North 
Dakota.
  Mr. DORGAN. Mr. President, I was staying right with the Senator from 
Utah until he mentioned the Chairman of the Federal Reserve Board. In 
ancient Rome they used to have augurs, and the practice of augury was 
to read the flight of birds and the entrails of dead cattle in order to 
predict the future.
  I have said perhaps the Fed could use some augurs, given their recent 
performance. They indicated that if unemployment ever fell below 6 
percent we would have a brand new wave of inflation. Unemployment has 
been under 6 percent for 38 months and of course inflation is down, way 
down. But that is another subject for another day.
  The folks at the top of the income structure in this country already 
have a 30-percent tax differential on capital gains. They pay 30 
percent less on capital gains than ordinary income tax rates. My 
proposal to limit to $1 million for a lifetime the capital gains tax 
benefits in this bill will effectively relate to about 1 percent of the 
taxpayers.

[[Page S6399]]

  I do not disagree with the comments by the Senator from Utah about 
the germ of an idea and the spark of interest to own a business and 
that is where success is developed and that is where millionaires come 
from. I do not disagree with that at all.
  I would make this point, however. There are people out here working 
today who have that same instinct inside of wanting to own their own 
business and wanting to build a business. Their only stream of income 
is a wage, and they pay a higher tax on that wage than is being 
proposed for capital gains. Because of that higher tax they may not be 
able to accumulate the capital to invest in the business and become the 
entrepreneur and become successful and make a lot of money.
  So my suggestion is this. We have other streams of income in this 
country which we measure for tax purposes. We have rents, we have 
salaries, we have capital gains, we have a range of interests, we have 
a range of incomes. And there are those who take out one stream of 
income, one kind of income called capital gains and say let's give a 
tax break to capital gains.
  I am not opposed under any circumstance to a tax break for capital 
gains. We now have one, the 30 percent tax preference. What I oppose is 
a circumstance where the bulk of the tax preference goes to such a few 
in the population. I am saying we ought to do this differently, and I 
have felt that way for 10, 15 years. I think it would be good for the 
country to do it differently.
  I say this finally. If we go back to the ``totus porcus'' approach 
for capital gains--buy a share of stock, hold it 6 months and 1 day and 
get a tax preference--go back to the broad approach, much of which is 
proposed here, we will resurrect the tax shelter industry, resurrect an 
army of people in the tax shelter industry, and we will rue the day we 
do it.
  The tax shelter industry is to productive enterprise like 
professional wrestling is to the performing arts. I defy anyone to tell 
me one good thing that comes from the tax shelter industry in this 
country. We largely got rid of it in 1986 with the 1986 bill, and I am 
worried very much we create now a new set of circumstances to allow 
taxpayers of this country to hire the best minds in America, not for 
productive enterprise but to tell them how can they create, from their 
stream of income, capital gains by which they can make money off the 
Tax Code. That is my great concern. So I propose we limit the capital 
gains treatment for a taxpayer to $1 million during the taxpayer's 
lifetime.
  Mr. BENNETT. Mr. President, will the Senator yield for a question? 
Does the time permit that?
  Mr. DORGAN. How much time do I have?
  The PRESIDING OFFICER. The Senator from North Dakota has 1 minute.
  Mr. BENNETT. I shan't intrude further. I thank the Senator.
  Mr. DORGAN. We will have an opportunity to discuss this further. I 
respect the views of the two Senators who spoke in opposition to this 
amendment. I would say we are talking in the outyears about $4 billion 
to $5 billion a year without my limitation. That $4 billion to $5 
billion I would like to use to reduce taxes on wages to the extent we 
can.
  The tax increases in this country have come from payroll taxes now. 
Two-thirds of the American workers pay more in payroll taxes than they 
do in income taxes, and I would have structured the tax bill completely 
differently than it is now structured. I would have addressed the issue 
of burgeoning payroll taxes which tries to be a clothes hanger on all 
of the acts of creating a job to say, ``By the way, we are going to 
hang all of these social obligations on the act of creating a job.''
  I am very concerned about that in terms of the disincentive it gives 
to someone in business to create new jobs. I don't want to go far 
afield, but there is no social program we discuss in Congress that is 
as important or effective as a good job to cure what ails this country.
  So this $1 million limitation makes good sense. I hope Members of the 
Senate will consider it and hope that we will have a chance to vote on 
it.
  The PRESIDING OFFICER. The Senator's time has expired. The Senator 
from Delaware has 2 minutes and 55 seconds.
  Mr. ROTH. Mr. President, I yield back the remainder of the time and 
ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to amendment No. 
517. The yeas and nays have been ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Kansas [Mr. Roberts] is 
necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 24, nays 75, as follows:

                      [Rollcall Vote No. 132 Leg.]

                                YEAS--24

     Akaka
     Boxer
     Byrd
     Conrad
     Daschle
     Dorgan
     Durbin
     Feingold
     Ford
     Harkin
     Hollings
     Inouye
     Johnson
     Kennedy
     Lautenberg
     Leahy
     Levin
     Mikulski
     Murray
     Reed
     Robb
     Rockefeller
     Sarbanes
     Wellstone

                                NAYS--75

     Abraham
     Allard
     Ashcroft
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Campbell
     Chafee
     Cleland
     Coats
     Cochran
     Collins
     Coverdell
     Craig
     D'Amato
     DeWine
     Dodd
     Domenici
     Enzi
     Faircloth
     Feinstein
     Frist
     Glenn
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Kempthorne
     Kerrey
     Kerry
     Kohl
     Kyl
     Landrieu
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Moseley-Braun
     Moynihan
     Murkowski
     Nickles
     Reid
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Torricelli
     Warner
     Wyden

                             NOT VOTING--1

       
     Roberts
      
  The amendment (No. 517) was rejected.
  Mr. ROTH. I move to reconsider the vote.
  Mr. MOYNIHAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. MOYNIHAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York.

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