[Congressional Record Volume 143, Number 92 (Thursday, June 26, 1997)]
[Senate]
[Pages S6401-S6437]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                   REVENUE RECONCILIATION ACT OF 1997

  The Senate continued with the consideration of the bill.
  Mr. ROTH. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

[[Page S6402]]

  Mr. DASCHLE. Mr. President, prior to the vote, it was my 
understanding that the Democratic amendment would now be in order. Is 
that correct?
  The PRESIDING OFFICER. The Senator from South Dakota is correct.


                           Amendment No. 527

 (Purpose: To provide tax relief for working families, to increase the 
    rate and spread the benefits of economic growth, and for other 
                               purposes)

  Mr. DASCHLE. Mr. President, I have the amendment at the desk, and I 
ask for its consideration.
  The PRESIDING OFFICER (Mr. Brownback). The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from South Dakota (Mr. Daschle), for himself, 
     Mr. Bingaman, Mr. Conrad, Ms. Mikulski, Mrs. Boxer, Mr. Dodd, 
     Mr. Kerry, Ms. Landrieu, Mr. Cleland, Mr. Durbin, Mr. 
     Kennedy, Mr. Ford, and Mr. Lautenberg, proposes an amendment 
     numbered 527.

  Mr. DASCHLE. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. DASCHLE. Mr. President, this debate today and tomorrow is not 
about whether to cut taxes but how to cut them. Democrats support a tax 
cut, but we want them to be the right kind. We want them to be fair, 
especially to working families.
  I congratulate Senator Roth and Senator Moynihan and the Members on 
both sides of the aisle for the bipartisan effort to improve the House 
bill. In many ways it is a substantial improvement of the bill passed 
by the House Ways and Means Committee. But in the view of many 
Democrats, problems still remain in the version that is now before us.
  Under both the House and the Senate plans, the top 1 percent of 
taxpayers, people making over $350,000 a year, receive more than the 
bottom 60 percent put together, people making under $50,000.
  This chart depicts very well what the circumstances are. In the 
Archer bill, 67 percent of all the benefits in the tax bill go to the 
highest 20 percent. In the Roth bill, 65 percent of all the benefits go 
to the top 20 percent. In the bill that we are presenting as an 
alternative today, 20 percent of the benefits go to the top 20 percent, 
but 75 percent of the benefits go to the middle 60 percent.
  So the distribution, the progressivity of the alternative plan that 
we are presenting today, is a significant improvement for working 
families across this country.
  The people who have yet to share fully in the economic recovery are 
in the bottom 60 percent, the bottom four quintiles of income 
distribution, not in the top 1 percent. They ought to be the ones to 
largely benefit from the plan that this Congress and ultimately that 
this country enacts into law.
  But instead of helping identify middle-class families, the House and 
Senate bills shortchange them--9.2 percent in the middle 20 percent, 
2.4 percent in the next to the bottom quintile, 2.3 percent under Roth, 
and a very small percentage of the benefits actually go to middle-class 
working families as the Finance Committee bill is written today.
  We can do better than this. We owe the American people better than 
this, and our bill attempts to do that.
  We recognize that we are in the minority, and many Democrats, 
recognizing that, have worked closely with our Republican colleagues to 
do the best we can to reflect a better distribution. Many of us will 
support the final passage if we are not successful in passing this 
version because we don't want the perfect to be the enemy of the good.
  But it is important for the American people to know what we could 
have done and what we would have done were we to be in the majority.
  So we are offering this comprehensive alternative but with an 
expectation of having a good debate and contrasting the Finance 
Committee-passed bill, which is dominated by the Republican majority, 
with our Democratic alternative.
  Our Democratic alternative really has four objectives.
  First and foremost, what I have just described, we want to ensure 
that there is fairness for working families.
  Second, we want to target the growth incentives to those companies 
and those activities where we can do the most good.
  Third, we want to ensure that we put an emphasis on education.
  And, fourth, we don't want a tax time bomb. We don't want to explode 
the deficit at some point in the future given the terrific effort that 
has been put forth in recent years to bring the deficit down and 
ultimately to balance the Federal budget.
  So our goal is to do all of those things and stay within the bounds 
and the confines of the budget agreement that was agreed to by the 
administration and leadership in both the House and the Senate.
  Our plan then delivers on all counts. We provide a fair, targeted 
approach to middle-class families, and we do that in a number of ways.
  Most importantly, we recognize that it is an income tax that working 
families are most concerned about. They don't pay as much Federal 
income tax as they pay other forms of taxes that affect them directly.
  Middle-class families are faced with a substantial tax liability that 
falls outside the realm of income tax today. In fact, 99 percent of all 
working families who earn less than $21,000 pay more in payroll taxes 
than they do in income taxes; 97 percent of those who make between 
$21,000 and $41,000 pay more in payroll taxes than they do in income 
tax; 90 percent of those who make $41,000 to $62,000 actually pay more 
in payroll tax than they do in income tax. Even in the category that we 
would call middle-class families, $62,000 to $94,000, 65 percent, well 
over half, almost two-thirds of them, pay more payroll tax than they do 
income tax. It is only in the top fifth, those making more than $94,000 
that actually pay, the majority of them, more income tax than they do 
payroll tax.
  So one of the key features, one of the centerpieces of our bill, is 
to ensure that we recognize where the tax liability is for working 
families.
  So we apply the child tax credit against the payroll tax as well as 
against the income tax because it is the payroll tax where we can do 
the most good for most working families.
  We have a chart that really depicts the circumstances for working 
families today--families, in this case, making somewhere between 
$22,000 and $41,000. After they take their deductibles, after they get 
down to their net income, they pay an average of $252 in income taxes 
and over $3,828 in payroll taxes. So their liability for payroll tax is 
substantially higher. Not only do 99 percent of them pay more in 
payroll tax than income tax, what they pay is so much more--$3,828 
versus $252 in income tax.
  So our bill provides an opportunity for those who are saddled with a 
far greater degree of liability for payroll tax to be able to address 
it in the most effective way. That child tax credit would be made 
applicable to both the payroll tax and the income tax.
  We also do something else. As the current Finance Committee bill is 
written, the earned-income tax credit is calculated first. And then, if 
there is anything left, they are eligible for the child tax credit.
  Mr. President, we stack them in just the reverse fashion. We provide 
the child tax credit first so that they have the full use of that 
credit against either payroll tax or income tax, and then we allow the 
earned-income tax credit to kick in.
  So we provide working families an opportunity first to use the child 
tax credit against the payroll tax, and second to be sure that they 
have the full opportunity to use it by stacking it ahead of an EITC, 
the earned-income tax credit, if they are indeed eligible for it.
  So we make the bill fairer, and from those fairness proposals that we 
provide that distributional analysis that so clearly slows the 
contrast--I will just put this chart up briefly again to clarify it 
again. That is how we get this great distributional breakdown--75 
percent of the benefits going to the middle 60 percent of all income 
brackets.
  That is why there is such a difference between the 25 percent and 10 
percent and 9 percent in this case or 32 percent and 21 and 19 in the 
case of the fourth 20 percent. So we really provide a far

[[Page S6403]]

better distributional opportunity for working class families than 
anything else.
  But that is what our first goal was, to ensure fairness, to ensure 
that those who need it the most have the most opportunity to benefit 
from a bill like this.
  Our second goal, as we said, was to ensure that we provide the 
maximum degree of opportunity to businesses that really need the kind 
of help that these tax tools can provide. In order to do that right, 
what we want to be able to do is target the capital gains and the other 
tax features in ways that will ensure that we provide the most bang for 
the buck. We eliminate the huge capital gains windfall for the top 1 
percent. In the currently drafted Senate Finance Committee bill, we 
change their flat 20 percent capital gains rate, which benefits the top 
bracket most, to an equal 30-percent capital gains exclusion for all 
income brackets.
  Let me explain what we are attempting to do in this case. Right now, 
because of the flat cap of 28 percent on capital gains taxes, those in 
the top income tax bracket actually get a benefit of about 30 percent 
in capital gains exclusion because of the cap. What we do is apply that 
capital gains exclusion, that 30 percent, across all income brackets, 
thereby giving working families, those who are making $60,000 or 
$80,000 or $100,000, the same opportunity to use the 30 percent 
exclusion that the upper income bracket currently has available to 
them.
  So we expand that 30 percent across the entire array of income 
brackets in order to assure that people who want to invest in this 
country, who want to benefit from the tremendous economic opportunity 
and the growth that we would like to continue here will benefit--that 
is, will benefit those who can use it the most. So we provide more 
opportunities for that to happen.
  We also try to do a number of things that will target small 
businesses and family farms. We cut the capital gains rate nearly twice 
as deeply for most small businesses. What we provide is a 50-percent 
exclusion for investment into companies with assets of under $100 
million, startup companies--a 50-percent exclusion across all income 
brackets. Startup companies which need that investment, that cannot 
compete with General Electric or cannot compete with Westinghouse or 
IBM, these are companies that really need the additional incentive, and 
we provide it to them. And then we say if you are really a startup 
company with assets under $25 million, we are going to allow you to 
roll over your capital gains taxes entirely if you reinvest within 6 
months. So there is no capital gains on an investment in a company with 
assets under $25 million.
  When it comes to targeting the benefits to the businesses where we 
could do the most good by having the 30-percent exclusion for all 
working families, by including a 50-percent exclusion for businesses 
under $100 million and a complete rollover of taxes for those companies 
with assets under $25 million, in addition to the $500,000 exclusion on 
all households, on the sale of all houses, we provide, in my view, the 
best package that has yet been proposed to the Senate with regard to 
how to use the capital gains tools most effectively.
  We also do something that the NFIB, the National Federation of 
Independent Business and many business organizations that said 
is their No. 1 priority. We make health insurance fully deductible for 
the self-employed--fully deductible. That is not in the Finance 
Committee bill, but it is in the Democratic alternative.
  So, Mr. President, when you look at all the different ways in which 
we try to help small, Main Street businesses, we provide a substantial 
degree of additional assistance to those families who need it the most. 
But we do not limit ourselves just to small business. We also address 
the problem of inheritance tax with farmers today.
  Currently, small businesses and farmers who want to keep a business 
or a family farm in the family are finding it exceedingly difficult to 
do that. You cannot do that if you have to pay the inheritance taxes, 
in many cases, on small businesses or family farms that you want to 
keep in the family. So we increase by $900,000 the exemption for those 
businesses and family farms which are truly kept in the family. We will 
provide a $1.5 million inheritance tax exemption for those businesses 
and family farms that want to be kept in the family as generations move 
on.
  So, Mr. President, I think this is a very significant array of tax 
tools to help those across this country, whether they are workers, 
businesses, or farmers, in an effort to do as much as possible to help 
business succeed in this increasingly competitive and yet optimistic 
economic outlook that we face in the country today.
  That is the second goal--providing the greatest degree of capital 
growth to those areas where we can do the most good.
  The third goal is education. And, again, I will say what I said at 
the beginning. I think the Finance Committee deserves great credit for 
a lot of the things they did in that bill to try to advance education 
through our Tax Code, to do a number of things that will be very 
helpful and beneficial not only to students but to working families and 
to schools themselves. We just think you can do a lot better. We think 
that instead of just 2 years for the HOPE credit, we ought to be 
providing 4 years of HOPE credit opportunities. Instead of just 
ensuring that we provide the KIDSAVE option, bonus credit for education 
IRA savings, we ought to ensure that we provide for a complete Pell 
grant eligibility. We do not penalize Pell grant recipients. We provide 
the full KIDSAVE option, but we do not say you can have one or the 
other. We are not going to penalize those who take out the Pell grant, 
as well. So we want to do as much as we can to ensure through the HOPE 
credit, through the KIDSAVE, through Pell grants the full opportunity 
to use the benefits that the Federal Government provides to ensure that 
people have a chance to go to school. We do not think that the limited 
funding for crumbling schools in the bill is going to be adequate 
enough. We provide additional funding for crumbling schools, as well.

  So, Mr. President, when it comes to education, these tools are going 
to go a lot further in ensuring that every single student has the 
opportunity to go to school and to take full advantage of the 
opportunities that we provide in this tax bill to help offset the 
increasing costs of going to college today.
  Finally, Mr. President, we think it is very important that we be 
fiscally responsible. That was our fourth goal. We are concerned about 
the tax time bomb. The Senate bill currently is very heavily 
backloaded. The billions of dollars in additional cost in the year 2017 
cause us great concern; $830 billion is what has been estimated by the 
Joint Tax Committee as the cost in the year 2017 for the Senate bill 
today. The cumulative cost in the year 2007 is $250 billion; in the 
year 2002, 5 years from now, $85 billion. So while we live within the 
confines of the budget agreement in 5 and in 10 years, we are not so 
sure that we do that in the outyears, in the years beyond 10 years. 
What happens in the year 2017 when we have to face the prospect of a 
loss of revenue of some $830 billion?
  Mr. President, we can do better than that as well. I think it is very 
important that we try to maintain the fiscal discipline that we have 
acquired in recent years, that has brought so many great economic 
dimensions to our country and to our future as a result of the 
discipline and the wise decisions that we made as far back as 1993.
  So, Mr. President, in summary, our Democratic alternative is truly a 
families first tax plan, providing the greatest degree of relief to 
middle-class families across this country regardless of whether they 
are laborers or business people or farmers. We have shown it is 
possible to be progrowth, profairness and profiscal responsibility at 
the same time. Our bill provides help for working class families, 
provides good help for those businesses and industries that want to 
continue to grow in this rapidly growing economy in a competitive way. 
We provide the greatest degree of assistance to education of any tax 
bill available in the Congress today. And we do it all in the context 
of fiscal responsibility, our fourth goal.
  Mr. President, I HOPE our colleagues will take a good look at this 
plan. I am excited about it. I believe in it. I think a lot of people 
would like to see this legislation passed over and above what has been 
proposed by the Finance Committee in spite of the good work they have 
done in many areas.

[[Page S6404]]

  I might add that the Secretary of the Treasury has just sent a letter 
that is very laudatory of the effort made by our Democratic caucus, and 
I ask unanimous consent at this time that a letter dated June 26 sent 
to me by the Secretary of the Treasury, Robert Rubin, be printed in the 
Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                    Department of the Treasury

                                    Washington, DC, June 26, 1997.
     Hon. Tom Daschle,
     Minority Leader, U.S. Senate,
     Washington, DC.
       Dear Tom: I want to commend you and the other Senate 
     Democrats for your tax proposal.
       Any tax-cut package must meet four basic tests to reflect 
     sound policy. First of all, the tax cuts must be fiscally 
     responsible by avoiding an explosion in out year costs. 
     Second, the tax cuts must provide a fair balance of benefits 
     for working Americans. Third, the tax cuts must encourage 
     economic growth. Fourth, the tax package must reflect the 
     terms of the bipartisan budget agreement including a 
     significant expansion of educational opportunities for 
     Americans of all ages. We believe that your overall package 
     meets each of these tests.
       We are particularly pleased that your proposal gives 
     American families the help they need to make investments in 
     education and life-long learning. The decision to include a 
     HOPE scholarship proposal mirrors our initiative to make 
     education more affordable and to make the 13th and 14th 
     grades universal. You have improved our initial proposal by 
     allowing students who receive Pell Grants and still pay 
     tuition to receive the HOPE scholarship. We fully endorse 
     that change. Although our tuition deduction plans differ in 
     some particulars, we are pleased that your proposal 
     incorporates the full $10,000 tax benefit for tuition paid--
     regardless of its source. Like our proposal, your tuition 
     plan will help families who are not wealthy enough to pay for 
     the entire amount of tuition out of savings and are therefore 
     forced to borrow. It will also help Americans undertake 
     lifelong learning so that they can take advantage of the 
     opportunities--and meet the challenges--of the new economy.
       We are pleased that your proposal includes a child tax 
     credit that can be offset against payroll taxes, thereby 
     helping millions of working families raise their children. In 
     contrast to the Senate Finance Committee bill, this feature 
     will help ensure that many low-income families receive the 
     full benefit of the child credit.
       At the same time, your proposal includes several of the 
     President's priorities that were part of the budget 
     agreement--including an expansion of Empowerment Zones and 
     Enterprise Communities, and the Brownfields tax incentives. 
     Your proposal also addresses many of the President's other 
     priorities--including a permanent extension of the exclusion 
     for employer-provided educational assistance.
       In sum, your tax-cut plan is a welcome and important 
     proposal. While we continue to analyze specific provisions, 
     we support the overall structure of the plan. We hope that 
     members of both parties will give it careful consideration 
     and will work with us to enact a tax-cut package that meets 
     our four tests.
           Sincerely,
                                                  Robert E. Rubin.

  Mr. DASCHLE. I yield the floor.
  Mr. ROTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. Mr. President, I yield myself such time as I may take.
  The PRESIDING OFFICER. The Senator is recognized.
  Mr. ROTH. Mr. President, I rise in opposition to the substitute 
amendment proposed by the distinguished minority leader. The proposal 
that passed the Senate Finance Committee with overwhelming bipartisan 
support is simply a better package. The Taxpayers Relief Act of 1997 is 
fair, it is bipartisan, and, most importantly, it provides long overdue 
tax relief for middle-income families.
  It makes clear that the consensus which is, indeed, developing on 
Capitol Hill is that the days of big, intrusive, overbearing Government 
are coming to an end. I am, indeed, pleased by the work and cooperation 
exhibited by the members of our Finance Committee. Our bill contains 
the best thinking and the most workable policies from both sides of the 
political aisle.
  Mr. President, from the very beginning, I asked for ideas from all 
members of the Finance Committee, Republican and Democrat alike. We 
asked that they put their ideas in writing, and these were reviewed 
carefully and many incorporated into the initial draft. Again and 
again, we consulted with each other, met informally and discussed, and 
I can say I think the end product, our bill, was, indeed, the best 
thinking and most workable policies from both sides of the political 
aisle, and I might add, as well, from both ends of Pennsylvania Avenue, 
because we carefully reviewed and considered the proposals of the White 
House as well as those of the Congress.
  It was put together constructively with an eye to providing American 
families the tax relief they need to encourage education, something 
that everybody wants for their children, and, most importantly, 
creating economic conditions that will promote jobs, opportunity, and 
growth for all the American people. Finally, let me point out the 
Finance Committee proposal meets the guidelines of the budget 
agreement.
  The substitute amendment introduced by the distinguished minority 
leader today is not, in my humble opinion, a reflection of the growing 
consensus and bipartisan spirit that is reflected in the Finance 
Committee proposal. And it contains several major flaws which I would 
like to address. It does not--and I emphasize the word ``not''--provide 
immediate tax relief for middle-class American families. It does not. 
Again, I emphasize the word ``not,'' it does not effectively address 
the need to promote and improve educational opportunities for American 
youths. It does not promote meaningful savings, investment, economic 
growth.

  The Chairman of the Federal Reserve said that the most important need 
of this country is to encourage savings, savings on the part of the 
American people. I regret that the substitute amendment was not drafted 
in such a way that draws the best each party has to offer in the debate 
over tax relief.
  Let me address each of these concerns a little more specifically. A 
major distinction between the child credit in the proposed Daschle 
amendment and the Finance Committee bill is the way the credit is 
phased out. The minority leader's amendment would phase the child 
credit out over a fixed dollar amount. The way he does this, families 
earning over $70,000 would actually see an increase in their share of 
the tax burden. While these families under current law have a marginal 
tax rate of 28 percent, Senator Daschle's amendment would increase 
their rate up to 41 percent. That is a tax increase, not tax relief.
  Beyond this, the Senate Finance Committee child credit gives a larger 
credit sooner, whereas the minority leader's credit phases in over 
time. Let's ask the American families, which one do they prefer?
  Another major concern that I have with the minority leader's 
amendment is that it makes the child tax credit refundable. In other 
words, individuals who pay no income tax will receive a check from the 
Government. The Senate Finance Committee, in a bipartisan effort, 
considered and rejected the idea of making the credit refundable. Even 
the credit included in the administration's budget proposal was 
nonrefundable. Frankly, there are, indeed, very, very serious 
compliance problems associated with trying to administer a refundable 
tax credit. This was shown clearly by the administration in the package 
of reform proposals they released earlier this year to address fraud 
and error rates with respect to the Earned Income Tax Credit program. 
Frankly, it has been estimated that the fraud and error in that program 
is as high as 20 percent. It is obvious from the performance of IRS in 
this area that they are not equipped, at least at this stage, to 
administer a refundable program, at least another one, since they are 
already having such difficulties with the one already on the books. Our 
tax system works much more effectively when we reduce the amount of 
taxes people have to pay, rather than when the Government tries to give 
money back to Americans.
  These are just a few of my concerns with the Daschle amendment 
regarding the child tax credit. There are other major concerns with 
this alternative proposal. For example, concerning education, the 
minority leader's alternative will result in tuition inflation, the 
last thing parents need. The education tax proposals contained in the 
Finance Committee tax bill represent the very best ideas from both ends 
of Pennsylvania Avenue. In studying the administration's HOPE 
scholarship tax credit, frankly the Finance Committee was very 
concerned about tuition inflation. In the past 15 years, college 
tuition has increased 234 percent--234 percent. For this reason, we 
carefully, and

[[Page S6405]]

again in bipartisan cooperation, Republicans and Democrats working 
together, crafted a proposal that will help keep tuition costs down. 
The Finance Committee proposal provides a 50-percent tax credit for the 
first $3,000 of tuition expenses; 75 percent of the first $2,000 of 
tuition expenses for students attending a community college. This will 
not encourage tuition inflation.
  I cannot emphasize too much the importance of discouraging tuition 
inflation. In the Finance Committee we had a number of hearings where 
young people came and testified about the problem they had in paying 
for college tuition and expenses. One young lady, who was the daughter 
of a single parent, put herself through dental school with the help of 
her mother, and ended her college with a debt of something like 
$90,000. There is something wrong when our hard-working young students 
have to end their college careers and start their adult careers with 
that kind of debt overhanging them. So I cannot emphasize too much the 
importance of discouraging tuition inflation.
  In addition to the HOPE scholarship tax credit and the education tax 
proposals contained in the Finance Committee bill, our design is to 
help families through all stages of education. These proposals include 
a permanent extension of employer-provided education assistance for 
undergraduate and graduate education. This is a proposal that has long 
been endorsed, sponsored jointly by my distinguished colleague Senator 
Moynihan and myself. Our proposals include a student loan interest 
deduction as well as tax-free savings for graduate and undergraduate 
education. Our proposal also provides penalty-free IRA withdrawals for 
postsecondary and graduate education, a deduction for teacher training 
course work, a repeal of the tax exempt bond cap for new construction 
projects, and it helps in the construction of elementary and secondary 
school building.
  As I have said, the educational proposals in the Finance Committee 
bill were crafted carefully. They had strong support on both sides of 
the political aisle as well as throughout the education community. A 
letter I received from the Association of American Universities and the 
National Association of Independent Colleges and Universities 
demonstrates this strong support. In part, that letter reads:

       The higher education related tax provisions being 
     considered by the Senate Finance Committee will make higher 
     education more accessible for undergraduate and graduate 
     students.

  Let me repeat that. The Association of American Universities and the 
National Association of Independent Colleges and Universities wrote the 
committee that our education-related tax proposals ``will make higher 
education more accessible for undergraduate and graduate students.'' 
And it goes on to say it will ``help ensure that the Nation has the 
highly educated, well trained work force it will need for the 21st 
century.''
  Speaking of the 21st century, an analysis of the alternative plan 
introduced by my distinguished colleague, Senator Daschle, shows it 
does not contain nearly the kind of policies that are needed to keep 
America's economy strong. The incentives to save and invest that are 
contained in the Finance Committee bill are seriously weakened if not 
abandoned in the Daschle alternative. In the area of capital gains, for 
example, the Finance Committee tax relief bill was a bipartisan measure 
that passed by the overwhelming majority of 18 to 2. It received this 
broad support because of its fairness and the understanding by Members 
on both sides of the aisle that America needs capital for a bright and 
prosperous future.
  The capital gains proposal in the Finance Committee bill is fair. 
According to recent IRS statistics, about 13.2 million individual 
taxpayers reported capital gains in 1994. Over 11 million of these 
taxpayers had gross incomes of less than $100,000, and over 7 million 
had incomes of less than $50,000. In other words, 50 percent of 
individuals with capital gains had incomes of less than 50,000 and 
reducing the capital gains tax to 20 percent will represent a real and 
significant tax break for millions of middle-income taxpayers.
  It will create capital formation for jobs, opportunity and growth, 
most important objectives for the future. This, after all, remains our 
objective. It reflects what the American people have asked us to do. I 
am proud of the way Members of the Senate have come together from the 
right and from the left to give their best efforts to the Taxpayer 
Relief Act of 1997. Let us not undermine such a positive consensus with 
an amendment that does not reflect the bipartisan spirit we achieved 
with the Finance Committee legislation.
  Mr. President, the bottom line is that the Daschle amendment does 
not--does not spell relief. The incentives to save and invest that are 
contained in the Finance Committee bill are seriously weakened, if not 
abandoned, in the Daschle alternative.
  Let me say in conclusion, again, that we urge the Senate to reject 
the Daschle amendment and support the Senate Finance Committee bill 
which was endorsed by a vote of 18 to 2.
  I yield the floor.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KERRY. Mr. President, I ask unanimous consent that I be permitted 
to yield 2 minutes to the Senator from California without losing my 
right to the floor, and then I will proceed on our time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KERRY. I yield 2 minutes to the Senator from California.
  Mrs. BOXER. That was going to be my request. I ask for 3 minutes.
  Mr. KERRY. I yield 3 minutes.
  Mrs. BOXER. Mr. President, there is something that the chairman said 
that calls for a response. I am pleased to stand here today endorsing 
the Democratic leader's proposal. The way we should cut taxes in this 
country should be a fair way, it should be good for children, it should 
be good for working families, it should be good for small business, and 
that is what this proposal offers.
  I say to my colleagues on both sides of the aisle, in 1993, we had 
two ways to approach the issue of economic recovery: the Democratic 
way, which passed by one vote, I might say, and the Republican way, 
which failed. Here we stand being able to cut taxes for the American 
people because we were right, because the kind of economic policy we 
put into place in 1993 has worked.
  We have seen deficit reduction that has surpassed our imagination. We 
are down to $70 billion from a high of $290 billion when President 
Clinton took over as President. We have seen 11 million or 12 million 
new jobs created. We have seen an economic recovery finally hitting my 
State that is making this day possible.
  So I say to the American people, they ought to look at the two plans. 
Again, we have a Republican plan, and we have a Democratic plan. Many 
of us may wind up voting in the end for the Republican plan. We will 
vote for amendments to change it, and if they are not adopted, we may 
well do that. But I think the Democratic leader's plan is the fair way, 
and let me say why.
  Deloitte & Touche did an analysis of the Republican plan in the 
Senate, and in terms of hard, cold dollars--and they are a very 
incredible accounting firm, objective--they go through the taxes that 
would be owed under the Republican plan by a married couple with two 
children, one in college and one under the age of 18. What they come up 
with is that the household with an income of $20,000 will get a $375 
break. The very highest break goes to people--listen to this--earning 
over $1 million a year. They would get $2,400 back. That surpasses the 
people in the entire middle class. They get more money if they earn $1 
million back than any other part of this economic spectrum.
  So in fairness, the Democratic plan has got it. It changes that. It 
doesn't give the most to the most wealthy, to those who earn over $1 
million.
  Second, children. My colleague talks about how children are going to 
be helped by the Republican plan, but in the Democratic plan, we help 
all the children.
  Under this particular plan, only 50 percent of the children in 
California, Mr. President, get help, because this child care credit is 
not refundable off your payroll taxes. What we have to understand in 
this Senate is that people pay more in income tax. They pay

[[Page S6406]]

payroll taxes. We say you shouldn't be denied a child credit if you 
fall into that category.
  Mr. President, I want to help all the children. I want to help small 
business by gearing capital gains cuts to them. That is what we do on 
our side.
  Finally, I thank the chairman of the committee for helping me with 
the Computer Donations Act and the 401(k) protection plan that he has 
agreed to look at for us. I just want to say, it is a good moment for 
us because the economic recovery is so strong, we are in a position to 
give something back to the American people, and I am pleased about 
that.
  I yield to my colleague from Massachusetts and thank him for his 
generosity.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KERRY. Mr. President, I yield myself such time as I may use.
  Mr. President, as I listened to the distinguished chairman of the 
committee talk about the virtues of this bill, I kept hearing language 
trying to describe the bill saying it is bipartisan, it meets the 
demands of all the people, it has followed the guidelines, somehow 
suggesting that merely by saying these things, it is true, that these 
are the things that are in this bill. But when you look behind each of 
those descriptive adjectives, there is a different reality.
  First of all, with respect to the bipartisanship, everybody 
understands that the Republicans control the committee. The Republicans 
could have reported out whatever they wanted to do, and that the only 
way there would be any capacity to improve it somewhat from what people 
viewed as a very draconian position was to become involved and play 
along.
  Everybody in the Senate and every observer understands that just 
because people vote for it to come out of the committee and have played 
a role in helping to bring it back from a precipice doesn't mean it is 
where it ought to be, or that it represents the best that we could 
achieve or the fairest that we could achieve.
  Indeed, a number of people who voted to send it out of the committee 
will vote for the Democratic alternative because it really represents 
much more of what they would have liked to have gotten but couldn't get 
because of the dynamics of how things work in a committee.
  It isn't enough to say that this is good for all the people. The 
charts, the statistics just contradict it. It is so obvious that it 
almost defies imagination, and we really have to spend a lot of time on 
it. The fact is that the bottom 20 percent of Americans under the House 
plan, the Archer plan, got 0.5 percent of the savings of the tax bill. 
Under the Roth bill, originally they come up with 0.4 percent, but 
under the Democratic alternative, they did better than either, with 5.1 
percent, not an enormous difference. The reason for the lack of the 
enormous difference is that you have the earned income tax credit and 
you don't have earnings sufficient on an income tax form to be able to 
provide credit savings that go to people at the lowest end because of 
the way the tax structure works. We understand that.
  But when I hear the chairman say that middle Americans do the best, 
that is where the statistics tell a contrary story. No matter how many 
times our colleagues on the other side of the aisle try to say this is 
good for middle America, this is for all Americans. All Americans, just 
look at the facts.
  Under the Archer bill, it was 9.2 percent that went to the next 20 
percent of income earners; the second to the lowest 20 percent. Under 
the Roth bill, 2.3 percent. Under the Democratic alternative, it is 
16.3 percent--16.3 percent versus 2.3 percent. You can ask any child in 
the fifth or sixth grade, or almost any grade, if they know the 
difference, whether 16.3 percent is more than 2.3 percent. But under 
the Democratic alternative, the second 20 percent of income earners in 
America will get 16 percent versus the Roth 2.3 percent. That is a very 
significant difference.
  But then I move up in the income scale to the third 20 percent of 
income earners. Under the Archer bill, it was 9.2 percent. Under the 
Roth bill, it is 10 percent. But under the Democratic bill, it is 25 
percent--25 percent versus 10 percent. It is very clear on its face 
that the average American income earner does better under the 
Democratic alternative than they will under the Republican bill.
  In the fourth 20 percent, and we are moving up in income now, we are 
talking in the $50,000 to $75,000 range, that is a considerable amount 
above the mean earnings of most Americans. That 20 percent in the Roth 
bill would get 21 percent; in the Democratic bill they would get 32.3 
percent. What you have here, Mr. President, is just a stark difference, 
but here is the most significant difference, and I ask Americans to 
focus on this. It is a very significant difference.
  Under the Archer bill and under the Roth bill, the highest 20 percent 
of income earners in America, the people earning more than $100,000, 
the millionaires, the billionaires, they would get 67 percent--67.9 to 
be precise--under the Archer bill, 65.5 under the Roth bill--65.5 
percent. But under the Democratic bill, they get only 20.8 percent. So 
there is an enormous difference in the distribution in what people will 
get.
  Mr. President, I know that our colleagues on the other side of the 
aisle will say, well, that's what happens automatically, that people 
with the money are going to get the capital gains tax cut, they are 
going to put their capital into investments, it is automatic that if 
you have a specific percentage of reduction, those people are going to 
get the lion's share of the break.
  It is automatic if that is the break you write into law, but there is 
nobody here whose arm is being twisted or who is being forced to write 
that into law. We have the prerogative of deciding how we are going to 
divide up the benefits of this tax break.
  I listen to my colleagues say that the Democratic alternative is 
really terrible when it comes to capital investment and savings because 
it isn't as generous in the capital gains tax cut. Ask most Americans 
what they think the economy in America is doing today? Why has the 
stock market doubled in the last few years? Why is the stock market at 
a record high? Why are so many businesses reporting profits that are at 
record level? Why are so many chief executive officers now earning 223 
times the earnings of the average worker when 20 years ago it was only 
about 25 times the earnings of the average worker? Corporate America is 
doing very well today, very well, and I am glad. I voted for a bill in 
1993 that helped corporate America to do pretty well today. And it has 
resulted in 4\1/2\ straight years of deficit reduction.

  But you have to ask yourself, if capital gains tax difference between 
28 and 20 percent is so great, why is America doing so well today? It 
hasn't stopped some of the greatest mergers and acquisitions in 
American history from taking place. I don't think any economist in the 
Nation believes fundamentally--will we release some capital? The answer 
is yes. I happen to be for a capital gains tax cut, and I think it is 
beneficial to release some capital. But I think there are ways to do it 
that spread the fairness and that respect a sort of evenhandedness and 
a playing field that is more fair than what we are going to witness 
here.
  Mr. President, the Finance Committee has given us a list of tax 
breaks, the benefits of which flow chiefly to the wealthiest Americans. 
Nearly 43 percent of all the benefits will go to the wealthiest 10 
percent of American income earners. I want to say that again. Forty-
three percent of the Republican proposal goes to 10 percent of 
Americans, and under their proposal, 60 percent of the hard-working 
middle class of America and the poorest of Americans will share 12.7 
percent.
  So 60 percent of America is going to be fighting for 12 percent of 
the tax benefits, while 10 percent of America gets 43 percent of the 
tax benefits. I can't believe that any American really believes that 
that is fair distribution of the benefits of this, Mr. President. I 
think it sets a new standard of unfairness. It is a transfer of wealth, 
a transfer of wealth from hard-working middle Americans, middle-income 
earners to the wealthiest and to the people who have done the best over 
the last few years.
  If you do not believe that these are the people who have done the 
best in

[[Page S6407]]

the last few years, just take a look at the charts. Take a look at the 
statistics which come from every single one of our Government agencies 
and analysts in the private sector.
  The bottom 20 percent of income earners in America in 1975 were 
earning $18,947, on average. In 1985, they were earning $18,816. They 
lost income. And in the year 1995, 20 years later, they were earning 
$19,070, which was an increase of about $110 or so over 20 years.
  The next 20 percent of income earners went from a $30,701 average in 
1975, to $32,415 in 1985, to $32,895 in 1995. So they had about a $380 
gross increase, on average, in 10 years; and they had a $2,000 increase 
before that. When you factor in inflation, it is a loss. They lost 
income over those 20 years.
  You know who did not lose income over those 20 years? The people who 
are being rewarded the most in this tax bill. The only people in 
America who grew in that period of time were the top 20 percent of 
income earners. And they grew more than 100 percent. Yet people are 
finding a wonderful rationale to come to the floor and suggest that in 
1997 there is a new standard of fairness which is prepared to give to 
those who got the most even more. It is extraordinary.
  Mr. President, we have the ability to write a different distribution. 
It is up to us. And in the Democratic alternative that Senator Daschle 
has proposed, the poorest 60 percent of Americans receive 46 percent of 
the tax cuts. Some people could make an argument that the poorest 60 
percent ought to earn 100 percent of the tax cut or maybe 75 percent of 
the tax cut or 60 percent.
  We have tried to respect the notion that we do want to spread it out 
and we do want to respect the notion of savings and growth and 
encourage a capital gains tax. So we settled on the notion that those 
60 percent--rather than scrambling for 12.7 percent of the total tax 
cut--would get 46 percent of those tax cuts.
  In the Finance Committee proposal, people earning between $30,000 and 
$85,000 get only 30 percent of the tax cut, Mr. President. That is what 
I call and most people look at as middle class in America--$30,000 to 
$85,000. And they receive only 30 percent of the tax cut. So when the 
chairman says, under our bill we are spreading this evenly among 
everybody, look at what the middle class gets. The very people he said 
are the best beneficiaries are getting only 30 percent of this, the 
vast majority going to those who have done the best in recent years.
  By any measure, Mr. President, I think the Democratic alternative is 
sound economically, and I think it is fair because it helps those who 
actually need a tax break to raise a child or to go to college or to 
start a business or to generate one of those high-wage 21st century, 
high-value-added jobs. And this is one of the crucial differences 
between our parties and, I think, between these two measures.
  For us, deficit reduction and the tax cut is a policy. I think for 
the Republicans it is an end in and of itself. For us, it is a means to 
an end, not the objective to be achieved, but a means of achieving the 
larger objective, which is creating more jobs, making sure our human 
resources are attended to; whereas, for them, I think that just getting 
that cut somehow has become a goal and a target.
  The problem is, that in doing so, our friends on the other side of 
the aisle are offering America a choice that I am confident most 
Americans are not aware of. This tax bill is backloaded with a time 
bomb, because while in the beginning it does not have all of the 
negative impact of the massive tax cut to the wealthy and shares some 
at the front end so they can say, look how you are going to do well at 
the first part of this, at the back end you balloon the amount of lost 
revenue, which will have a very significant impact under any 
circumstances, but obviously particularly if there were to be a 
downturn in the current revenues or in the economy.
  So you have a tax cut that for the first 5 years is $85 billion going 
back to the American people. But the second 5 years, it is going to 
cost $250 billion. And 10 years after that, when baby boomers are 
retiring and when Medicare and Social Security are being strained at a 
much greater degree than they are now, you are going to have a cost in 
this tax bill of $650 to $700 billion.
  Our policy, on the other hand, in my judgment, lays out the right set 
of priorities, Mr. President. We have cut capital gains in the past at 
times in America's history where the economy really mandated it. But I 
find it hard to understand, given how well the stock market is doing 
and how well investments are doing generically and how extraordinarily 
competently the corporate sector has moved to deal with some of the 
competitive issues that we faced during the 1980's and the early part 
of the 1990's--I think they deserve enormous credit for having done 
so--but having done so, one has to ask the question, what is there in 
today's economic indices that suggest sound economic policy in having 
such a broad loss of revenue for the capital gains tax, which in itself 
is so broad that you are making a choice not to give more revenue back 
to the middle class?

  I mean, that is the tradeoff here. If you are going to give the full 
breadth of the capital gains tax cut to the higher end, you have less 
money available to give to the middle end. I think most Americans would 
join me in asking a very simple question. Why should somebody be 
rewarded for the sale of their Persian rugs or their art or their 
yachts, which do not contribute significantly to the kind of economic 
activity that we are talking about? Certainly it accrues capital to 
them, I understand, and they will spend some of that capital and invest 
some of that capital, but what is the justification for expanding the 
capital gains reduction from a 28 percent tax only to a 20 percent tax 
or lower in order to encourage that kind of transaction?
  So in the Democrat alternative, what we have done is I think 
sensible. We want to reward the risk-taker and the entrepreneur who 
creates new jobs and who put their money on the line in an 
entrepreneurial effort to try to broaden the tax base of this country. 
I think that ought to be rewarded.
  I think I am the only U.S. Senator who introduced a zero capital 
gains tax, which I would like to see for new investments in 1 of the 25 
or so critical technologies which are the areas where we will fastest 
create the most high-value-added jobs that will raise the income of our 
workers and indeed raise the standard of living of our Nation. And just 
like Japan or other countries that did not have any capital gains tax, 
I think it would behoove us to take some of this money from the rugs 
and the collectibles and the other assets people will get a windfall 
from and provide a zero capital gains tax in the long run on 
investments up to $100 million in a new issue of stock, help for 5 
years in one of those kinds of companies.
  In our bill we do not go to zero. But we do have a 50-percent 
exclusion on the capital gains tax for that kind of qualified 
investment up to $100 million, the stock held for 5 years. In doing so, 
Mr. President, I am confident that we will do what is really necessary, 
which is provide venture capital with the kind of incentive to move to 
the kinds of ventures that will truly create jobs and kick the economy. 
And in doing so, it allows us to provide more money to the middle class 
to help them send a kid to college, help them be able to pay for child 
care, help them be able to do some of the fundamentals that we think 
are so important in terms of spending time with family or raising a 
family, and indeed puts much more money into the pockets of the people 
we truly consider to be middle America.
  Mr. President, the Finance Committee has also tried to suggest that 
its child care provision is better than the child care provision that 
is put forward in the Democrat alternative. And I would like to just 
assert that again the facts do not bear that out.
  The Democrat alternative does more for more people than the Finance 
Committee proposal. It does more for precisely those families who need 
the help the most, and those are young families with young children 
where this will provide them the opportunity to do much better for the 
future of the country.
  The reason is, Mr. President, because I heard the chairman talking 
about how their tax credit, the tax credit in the Finance Committee 
proposal, goes to families earning up to $150,000 of income, and, 
therefore, it reaches more people. But the truth is, when you look 
underneath the figures, it does not reach more people.

[[Page S6408]]

  The reason it does not reach more people is that most Americans today 
who are with young families who need help pay most of their income 
through the payroll tax. Their money is taken out of their paycheck at 
work. And it goes to the Social Security system and they are, 
therefore, mostly not able to take advantage of the tax credit because 
too many families in America do not have enough income that is taxable 
to wind up getting the credit, and the payroll tax winds up penalizing 
them even more.
  The vast majority of families in America pay most of their tax in the 
payroll tax. And what the Finance Committee does not do is provide an 
offset against the payroll tax, the result of which is that very little 
of the credit is available to a family earning $30,000 or less under 
their credit.
  Whereas, under the Democrat proposal, the credit would be available 
because of the offset against the payroll tax, it would go right down 
to families earning $15,000. And that encompasses many more families 
who are in need of the child tax credit.
  So there is a very simple truth here, that they give the credit all 
the way up to $150,000; our credit fades out between $70,000 and 
$85,000. The result of that is we are able to give more credit to the 
people who are most in need.
  So, Mr. President, I believe that a dispassionate analysis, a fair 
analysis of these two proposals is very clear about who benefits and 
who does not.
  I want to emphasize that many of us on the Democrat side support a 
capital gains tax reduction. I am one of them. Some do not; some do. 
But I am convinced that you can target that capital gains reduction 
when you have a limited amount of resources to deal with, as we do, and 
we are forced to make the hard choices we are making so that you spread 
out the benefits in a fairer way. And that is precisely--precisely--
what the Democrat alternative does.

  I wish in many ways we could have gotten to this point in a different 
way. We might have, had we not been forced into the strictures of this 
deal where the deal became almost more important than some of the 
policies that were contained within it. By definition, the deal being a 
compromise, it is a bit of this and a bit of that. In the end, 
regrettably, Mr. President, I think it has come out with a 
disproportionate, imbalanced allocation or shift of resources in 
America.
  Most Americans, when they are given a chance, if they were to be or 
could really take note of the differences between these proposals, 
would obviously applaud the education benefits that the chairman talked 
about--of course they would--but the Democrats would support those 
benefits, also. That is not at issue here. What is at issue here is the 
difference between how you get money to the families that really need 
it versus how much you ought to provide in incentive for increased 
savings or investment out of the proposals that are in both measures.
  I think on balance, the proposal of the Democratic leader, Senator 
Daschle, is both fairer and steeped in greater economic sense, and in 
the end I believe most Americans will come to that judgment.
  Mr. President, how much time remains for the Democrat side?
  The PRESIDING OFFICER. Seventy-one minutes.
  Mr. KERRY. I reserve the remainder of my time.
  Mr. GORTON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Washington.
  Mr. GORTON. Mr. President, I have been delegated to manage our time 
by the distinguished Senator from Delaware, and as such, I yield myself 
10 minutes.
  The PRESIDING OFFICER. The Senator from Washington is recognized for 
up to 10 minutes.
  Mr. GORTON. Mr. President, meet Bill and Vivian Loomis from Lind, WA. 
The Loomises farm, in eastern Washington, wheat and potatoes. The 
Loomises, under the present tax law, have been dunned by the Bureau of 
Internal Revenue to pay an alternative minimum tax on income they have 
not even received. That is to say, they are supposed to pay, this year, 
taxes that will not accrue until next year because the income will not 
come in until next year.

  Now, they have had to spend $20,000 of their hard-earned money in 
fighting the Bureau of Internal Revenue, the IRS, on that subject. We 
have, in a bipartisan manner, gotten the IRS to lay off of many other 
farmers who are in the same position.
  This bill, this Republican bill, this bill reported almost 
unanimously by the Senate Finance Committee, takes care of that 
situation. It rights that wrong. It says to Bill and Vivian Loomis, 
``You don't have to pay taxes until you've received your income.'' 
Simple justice, Mr. President.
  But what else does the Republican proposal before the Senate do for 
people like Bill and Vivian Loomis who have worked hard all their lives 
as farmers in eastern Washington? Mr. President, it says to them, when 
they pass away, their farm will not be taken away by the Internal 
Revenue Service with a punitive and overwhelming death tax. It gives 
them a bit of a break in their ability to pass that on to their 
children and grandchildren.
  Now, Mr. President, Bill and Vivian Loomis have 7 children and 11 
grandchildren. Their children are too old to give them the tax credit 
that is included in the Republican proposal. But their sons and 
daughters who are raising kids, who are struggling on limited incomes 
that they are earning and paying taxes on will get a $500 break for 
each of those 11 grandchildren of the Loomises' who are under the age 
of 17 years old. Real people, real benefits. And when those 
grandchildren are ready to go to college or university, there will be 
tax credits to help pay for that tuition.
  Mr. President, we are talking here, today, about real people who work 
hard, who earn an income, and who pay taxes on that income. Our 
Taxpayer Relief Act is to provide relief for those taxpayers. It is not 
designed to add to the welfare system. It is designed to provide relief 
for real taxpayers. It is designed to say that the Loomises, should 
they decide to sell their farm, will not pay an overwhelming and 
punitive capital gains tax; that if they have managed to save and 
invest in some stocks, they can sell them to go into a better 
investment without an overwhelming and punitive capital gains tax.
  Mr. President, the best single line I can give is, 75-75--75 percent 
of the benefits of this Taxpayers Relief Act go to families with 
incomes of $75,000 and less per year, who are actually paying taxes 
today. That is what this is all about.
  We really hear a great deal from the other side, a side that really 
was not at all happy about reducing taxes on hard-working Americans at 
all. I am delighted they have an alternative that at least provides 
some tax relief. But until we came along we heard about nothing other 
than tax hikes, not tax reductions.
  My constituents, Mr. President, in the State of Washington, pay the 
fifth highest income taxes per person in the United States of America--
almost $7,000 a year. They will get almost 2 billion dollars' worth of 
real tax relief, to real taxpayers, out of this bill. The benefits of 
our bill as against the other that attempts to target everything, that 
attempts to adjust society again through the Tax Code, our tax relief 
will go to real people, real people, like Bill and Vivian Loomis, who 
have worked hard all their lives, who have put something away, who want 
to help their children and grandchildren, who want to help build their 
country and who want to pass something of what they have done on to 
their children.
  It is much the superior proposal. It does not depend on gimmicks, 
like saying that the rental value of the house they own and live in is 
part of your income--as if you could live on the street and rent your 
house out. It is based on providing real tax relief to real working 
people who are overtaxed in the United States today, who have worked 
hard and deserve to keep what they have earned, like Bill and Vivian 
Loomis.
  The PRESIDING OFFICER (Mr. Enzi). The Senator from Illinois.
  Ms. MOSELEY-BRAUN. Mr. President, I yield myself 3 or 4 minutes. I 
want to make a general statement about the tax bill.
  I serve as a member of the Senate Finance Committee and was part of 
the deliberations. Last night, I commended the chairman of that 
committee as well as our ranking member for the efforts they made to 
try to craft a tax bill that addressed the concern that all of us had 
in achieving fiscal responsibility and in achieving fairness.

[[Page S6409]]

  In the first instance, the bill as a whole does achieve fiscal 
responsibility because it is a balanced budget bill. That is a good 
thing. The deficit under President Carter years ago was $73 billion. 
Under President Reagan, it ballooned to $221 billion. It reached $290 
billion under President Bush. When President Clinton took office, he 
inherited a $290 billion deficit. Our national debt at the time was 
$4.4 trillion.
  Now, since that time, President Clinton's bill in 1993 to give us a 
budget agreement that would head us toward budget balance has proved to 
be successful, and it proved to be the right thing to do. That bill, at 
the time, was very controversial, but the fact is that it has worked 
and we are now in our fifth year of deficit reduction. The deficit now 
is at the lowest level that it has been since President Carter. I think 
that is something we all can celebrate and applaud. This bill continues 
in that direction.

  The reason why having a balanced budget is important is not just that 
it is a matter of a sound bite. Quite frankly, some of the economists 
tell us it is not the most critical thing, that you can function in 
terms of the budget overall without it being in balance. However, for 
me, and I am a strong supporter of achieving a balanced budget, to me, 
the issue is one of fairness, of generational fairness, of making 
certain that our decisions in our time do not foreclose the decisions 
that the next generation, these young people sitting here, that they 
will be able to make for their time, when they move into leadership and 
have the opportunities to make decisions. So as not to pass on our old 
bills, so as not to foreclose their opportunities, it is an important 
thing to achieve a balanced budget. This bill does that.
  However, as was pointed out by speaker after speaker, the way the 
bill is structured, the budget deficit does explode in the outyears, 
and that means that while it looks on the surface that we will have a 
balanced budget, at the same time we are setting ourselves up for a 
huge fall by allowing it to explode beyond the 5- to 7-year window. 
That is not a good idea. It seems to me if we are going to be really 
fiscally responsible, we have an obligation to balance the budget and 
then to keep it balanced.
  So this Democratic alternative cures that defect. It cures that 
defect by achieving fiscal responsibility by seeing to it that we do 
not balloon the deficit in the outyears.
  The other thing about this alternative is it is also fair. There are 
those of us who believe this is not a time to cut taxes, that we would 
be better off achieving complete balance before we got into tax 
cutting. And we could have cut the deficit quicker had we not cut taxes 
at this time. It is not a matter of being against tax cuts, just a 
matter of timing, whether or not it makes sense to go and give up your 
second job, if you will, while you are still trying to pay off your old 
bills. That is the equivalent, if it were a family making a decision, 
we are making a decision to give up the second job, although we still 
have old bills.
  There is consensus around the tax cuts that are in this bill. Capital 
gains--I do not think too many would argue that capital tax cuts are a 
bad idea. The estate tax cuts--again, my colleague across the aisle a 
minute ago talked about the importance to family farmers. I come from a 
State that is largely agricultural, and I know how important having the 
estate tax reform that is in this bill is to people who own farms. The 
help for people who have children is another good thing and will help 
struggling families--and the support for education in this bill.
  All of these things are good news, and that is why this alternative, 
I think, should be supported by both sides of the aisle, because this 
alternative says we are going to take the principles of fairness and 
make certain there is balance in terms of the whole American family, in 
terms of who gets what from the tax cuts. Right now the tax cuts are 
heavily stacked in favor of the wealthiest Americans. People who need 
help the most--the working people, the middle class--get less from this 
tax cut and less from this agreement than do those who are clipping 
coupons. This is not to set up a class conflict, because, if anything, 
if you learned anything in these times, it should be that as Americans 
we are all in this together and it cannot be rich versus poor. If 
anything, we all have to come together and make certain that we allow 
our economy to grow and to build and to tap the talents of everybody. 
But that, I think, begs the question of whether or not we are being 
fair in giving working families their due with regard to this tax bill. 
It does not reach that.
  Last evening, I spoke about the fact that such a vast majority of the 
benefits of this tax cut that go to the wealthy as opposed to the 
middle class or the working poor, that we can change that. Well, the 
Democrat alternative does change it. The Democrat alternative suggests 
that we do more for people who are struggling, that we do more for 
people who spend more of their payroll, more on payroll taxes than on 
income taxes, that we help those families that are just trying to get 
by and to make it. We help them a little more. That is what the 
Democratic tax alternative does.
  As a member of the Senate Finance Committee, again, part of the 
process here is the compromise. We worked together, and I voted along 
with many of my colleagues for the Senate Finance bill, and I will vote 
for it on final passage. I urge my colleagues to take a good look on 
both sides, take a good look at this alternative, and see in your own 
minds whether or not it does not strike you as being fiscally 
responsible, which we all want to do, but being more fair. You consider 
the number of people in this country and the interests and the wide 
range of income; we do not want to do anything at this time that will 
exacerbate that income gap that we all know is widening. If anything, 
what we want to do is try to keep the country on an even keel with 
regard to policies that we come out with here.
  For that reason, again, I support this Democratic alternative. I will 
support the bill on final passage. I hope this amendment is part of it.
  I thank the Chair, and I yield the floor.
  Mr. ABRAHAM. Mr. President, on behalf of the majority, I yield myself 
such time as I may need to speak to the bill and, really, as well, to 
this amendment. I think the bill that the Finance Committee has brought 
us today is a very good bill. I look forward to supporting it against 
some of the amendments that would seek to undercut the basic thrust and 
to see it to final passage.
  Obviously, this bill doesn't reflect what any single Member of the 
Senate would have drafted had they total control over the legislation 
and the agenda here. It reflects, as so many speakers have indicated, a 
strong bipartisan effort--something we have talked a lot about in this 
Chamber over the years, but do not always deliver--a strong bipartisan 
effort to find common ground behind a sensible strategy for providing 
tax relief for the working families of our country who pay taxes, a 
chance for those families to keep more of what they earn. So, to that 
end, I am here to speak on behalf of the legislation.
  Mr. President, tax cuts are long overdue. In 1992, President Clinton, 
while running for election, promised a tax cut. Unfortunately, in 1993, 
that tax cut was replaced by the largest tax hike in American history. 
Today, we stand 16 years away from the last tax cut for the working 
families of our country. Four tax increases have transpired since 
Americans last received tax relief.
  Today, Federal taxes are consuming 21 percent of our Nation's gross 
domestic product, or our country's national income. Mr. President, that 
is more than at any time in the past 200 years. Let me put that in 
perspective because I think the argument that we have heard here for so 
long is that Americans don't need a tax cut. Well, Mr. President, they 
do. Not during World War II, not during the Vietnam war, not during the 
Depression or during any time in the last 200 years of our country's 
history have taxes consumed such a high percentage of the American 
income. And for that reason, this legislation must pass, must be signed 
into law, and must provide relief for the American people. Today, in 
our country, taken together, Federal, State, and local taxes cost the 
typical American family more--more, Mr. President--than food, clothing, 
and shelter combined. Food, clothing, and shelter

[[Page S6410]]

typically cost approximately 28 percent of a families income; taxes 
take up to 38 percent. To me, that is simply too much.
  After several tries and one veto from President Clinton, Congress is 
working this week to give hard-working American families fair and 
overdue tax relief. I would like to speak about some of the provisions 
in this legislation, Mr. President, that I think are especially 
noteworthy, which will help taxpayers through all stages of their 
lives. Children will benefit from a $500-per-child tax credit that will 
increase their family's ability to care for them and plan for their 
futures. Teens and young adults will be helped by sensible, targeted 
education tax breaks that will help finance their schooling. Those who 
have finished their educations will benefit from progrowth tax cuts, 
including the capital gains tax cut, that will stimulate economic 
expansion and provide more good jobs at good wages. Americans working 
to start small businesses also will benefit from the flood of new 
venture capital that will result from cutting capital gains taxes. 
Those looking toward retirement will benefit from expanded individual 
retirement accounts, IRA coverage, including the new full spousal IRA, 
and from the capital gains tax cut. More than 40 percent of American 
families own stocks directly or indirectly, Mr. President. American 
seniors currently constitute 12 percent of the population and realize 
30 percent of America's capital gains.
  Americans considering their legacy to their children--especially 
small family business owners and farmers--will benefit from a 
substantial cut in the effective death tax. All Americans will benefit 
from a cleaner environment, thanks to this bill. Urban families, in 
particular, too often must live near contaminated sites because the 
owners of those properties have abandoned them and no one else can 
afford to clean them up.
  That is why I worked with a number of other Members of this Chamber 
to include in this bill a provision allowing those who clean up these 
environmentally contaminated brownfield sites to expense their cleanup 
costs on an accelerated basis. This will not only encourage business to 
clean up and put to productive use areas that now contaminate our 
cities, but it will also create unlimited numbers of potential job 
opportunities for people who, today, are searching for a chance to get 
on the economic ladder.
  I want to focus on that for another minute, Mr. President, because I 
believe this part of the legislation, which hasn't received as much 
attention as some of the other sections, really is very pivotal to the 
future of this country. We can address environmental problems and we 
can address the problems that we see in too many economically 
distressed areas, in terms of trying to generate opportunities, because 
of those brownfields provisions that have been included in this 
legislation.
  Mr. President, this tax bill that we offer today, this tax relief 
plan, is fair. As the Senator from Washington indicated just a few 
moments ago, 75 percent of the tax relief provided in this plan goes to 
those families who make $75,000 of income or less. Now, obviously, a 
lot of people can use statistics to make their argument, and we do on 
the Senate floor. But one thing that is irrefutable, Mr. President, is 
that if you are making $75,000 or less, you are going to receive 75 
percent of the tax cuts in this legislation. Now, obviously, there are 
ways people can argue to get around it, and I will comment on some of 
those, perhaps, in a minute here. But unless people want to now call 
those in the $75,000 income category the richest Americans and the 
wealthy Americans, then, Mr. President, this tax bill clearly is one 
aimed at providing fairness to working middle-class families.

  Let me talk about what this means to my State of Michigan for just a 
moment. Under our tax proposal, the family tax relief provisions will 
provide over $3 billion of tax relief for working families in my State, 
thanks to the $500-per-child tax credit. That means that literally 
hundreds of thousands of Michigan children, over the next 5 years, are 
going to be receiving a $500 tax credit on an annual basis, Mr. 
President. That means more dollars available for young families to help 
feed and clothe and advance their children's learning. In addition, 
families in my State will be receiving $1.3 billion over the next 5 
years from this tax relief plan in order to help finance college 
education.
  Mr. President, the average American family should not have to go 
bankrupt, nor should a college graduate have to be in debt for decades 
just to be able to have a degree of higher learning. Yet, that is too 
often the choice confronting American families these days.
  Mr. President, our bill, in my State alone, will provide over a 
billion dollars of support to those working families. In addition, we 
have incentives for the creation of new jobs and opportunities--
approximately $69 million in capital gains tax relief, approximately 
$124 million in terms of IRA expansions for the families in my State, a 
substantial increase in order to stimulate the kinds of job 
opportunities that we want for our citizens.
  Michigan is a State with a lot of small businesses, and a lot of 
family owned farms, Mr. President. Every time I travel back in the 
State and talk to those in the small business or the farming community, 
I am told time after time, ``You have to do something to make it 
possible for us to keep the family business and the family farm in the 
family,'' because when the family that is running the business or the 
farm--when the last member of that family passes away, the death taxes 
are so much, they have to sell the property, or they have to sell the 
business in order to pay the taxes, and their children will not be able 
to inherit their rightful claim. This legislation addresses that very 
effectively, as well.
  So for my State, Mr. President, it means a great deal. There are a 
variety of additional tax incentives for Michigan. When they are all 
added up, it results in over $3 billion in tax relief over the next 5 
years for the folks that I represent, the folks in my State, who are 
paying the bills, playing by the rules, and sending their tax dollars 
to Washington. It is a bipartisan piece of legislation.
  I was extraordinarily impressed by the fact that the Finance 
Committee was able to come together and pass this legislation on an 18-
to-2 vote. That indicates the extent to which our tax cut plan makes 
sense.
  So for all of those reasons, Mr. President, I am proud to come here 
today in support of this legislation. I want to just comment on one or 
two of the points made in opposition during recent speeches that have 
taken place here. The first is the argument that, somehow, 70 percent 
of the benefits go to the upper income groups in this country. Well, as 
the Senator from Washington already indicated, that only works if you 
impute income to the families of this country for everything from 
fringe benefits to unrealized capital gains to even the imputed rent on 
a home that you own. As the Senator from Washington said, that is fine 
if you are going to live on the street. Then you can take credit for 
those imputed rental dollars. If you are staying in the house, you 
can't. To use that kind of calculation to try to make this tax bill 
seem less fair, to me, Mr. President, is going way beyond the limit. I 
mean, the fact is, if we are going to start thinking about these sorts 
of things as income, it will only be a matter of time before somebody 
stands up in the Senate and wants to tax that income. Pretty soon, we 
will be asking people to pay taxes on the imputed rent of the house 
they own. That is a precedent we don't want to start here. The fact is, 
if you can't spend it, you can't be treated as having earned it.
  Mr. President, the bottom line is that that argument does not hold 
water; nor does the argument that suggests that we should not pass this 
tax bill because the median income of working families has not changed 
during the last 20 years. The facts are, Mr. President, that it has not 
been stagnant. The average income of families in this country have 
changed dramatically over the last 20 years. Unfortunately, they 
have gone down; then they went up, and now they have been coming back 
down again. The interesting correlation between those changes, Mr. 
President, is what we have done in Washington. In the late 1970's, the 
average median income went down, when we had high tax policies coming 
out of Washington. Following the 1981 tax cuts that gave working 
American families a chance to keep more of what

[[Page S6411]]

they earned, median incomes went up and stayed up, and they kept going 
up for about 8 years. And then we started the tax policies again, first 
in 1990, then 1993 and, yes, those incomes have come down. If anything, 
that argues for cutting taxes, as we are attempting to do today.

  For all of these reasons, Mr. President, I think the bill brought by 
the Senate Finance Committee deserves our support. I look forward to 
working with members of that committee as we finish our work here 
today. I compliment them on both sides of the aisle for a job well 
done. This is not an easy task. I especially thank Chairman Roth for 
his leadership. I think it is a great package, and I look forward to 
supporting it.
  I yield the floor.
  Mr. CONRAD addressed the Chair.
  The PRESIDING OFFICER. The Senator from North Dakota is recognized.
  Who yields time?
  Mr. CONRAD. I yield myself such time as I might consume.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. Mr. President, I rise as a member of the Finance 
Committee who voted to send this bill to the floor, and to speak about 
its merits and demerits and about the alternative that is being offered 
by the Democratic leader.
  Mr. President, I voted to send this bill to the floor because I 
thought that we should have a chance to improve it here on the floor of 
the U.S. Senate. As I indicated in the committee, I don't believe the 
distribution of the benefits in the bill that was done in the Finance 
Committee is fair. I find it very difficult to justify the distribution 
of the benefits in the bill that has come out of the committee. 
Hopefully, we will improve it here on the floor of the Senate. This is 
our first chance to improve it, with the comprehensive alternative 
being offered by the Democratic leader.
  I have just heard several on the other side say that, under this 
bill, 75 percent of the benefits go to those earning under $75,000. 
That is just not the case. They have entirely left out payroll taxes in 
the calculation. Seventy-three percent of the American people pay more 
in payroll taxes than they pay in income taxes. But they only want to 
construct the distribution table that deals with income taxes. They 
don't want to talk about payroll taxes, despite the fact that 73 
percent of the American people pay more in payroll taxes than they pay 
in income taxes. What kind of a comparison is that?
  Second, they are only dealing with the first 5 years of the major 
components of this bill that favor the wealthiest among us. This bill 
is back-end loaded with respect to the benefits from those provisions.

  So what they are doing is comparing only a part of the package and 
they are leaving out the part of the package that has the 
disproportionate share of the benefits going to the wealthiest among 
us. Mr. President, this is not a package just for the next 5 years. 
This is a package that creates permanent law.
  If we are going to be honest with the American people about the 
distribution of the benefits, we can't just look at the first 5 years. 
Mr. President, I think we have to review a bit of history as to why we 
are here today.
  How is it that we can be talking about tax reductions after we have 
been through a period of deficits that are out of control?
  Mr. President, I believe we are here because Democrats made some very 
tough choices in 1993. As a result, as you can see from this chart, the 
unified budget deficit has fallen dramatically from $290 billion in 
1992 to $67 billion this year.
  I might add that this is a projection of the deficit this year. But 
that is the best evidence that we have of what the deficit will be this 
year. So let's remind ourselves how we got here. We got here because 
Democrats passed an economic plan that has led to a dramatic reduction 
in our deficit.
  This, again, is the unified budget deficit. That counts all income 
and all outgo.
  Let me just go to the next chart to show people a little different 
way of looking at it.
  The line I just showed is the same as this blue line on the chart 
that I titled ``the real budget deficit'' that shows that there is 
really more deficit reduction that is needed for true balance. The 
point is when you talk about the unified budget deficit, the blue 
line--you can see it has come down just dramatically. But you see this 
red line right above it. That represents the true budget deficit 
because that counts the Social Security surpluses that are being used 
to mask the real size of the deficit.
  One can see that, although this is called a balanced budget plan--
and, in fact, on the unified deficit you get to a balance in 2002--if 
you look at the Social Security surpluses, what you find is that in the 
year 2002 you have a $109 billion budget deficit. In fact, all of the 
documents disclose that there is a $109 billion budget deficit in the 
year 2002.
  I say this to try to be objective about what is happening here. There 
is no question we have made dramatic progress on reducing the unified 
budget deficit. It is also, I think, undeniable that more needs to be 
done. That has to be thought of as we evaluate this entire budget 
package.
  Mr. President, because the Democrats did vote for a dramatic economic 
plan in 1993, we did get the deficit going down on either measure. 
Whether we are looking at the so-called unified deficit, or whether we 
are counting Social Security surpluses, on either count the deficits 
have gone down dramatically. That has kicked off one of the strongest 
economic recoveries in our history with 12 million new jobs since 
1993--a peacetime record. We have seen the unemployment rate go down to 
the lowest level since 1973--a dramatic improvement in unemployment. 
The inflation rate is under 3 percent since 1993. You can see dramatic 
improvements in the inflation rate of this country as a result of the 
economic plan that was put in place in 1993.
  Not only do we see dramatic improvement on new jobs and dramatic 
improvement on unemployment, the inflation level at its lowest level in 
31 years, but we also see real business fixed investment growing at a 
9-percent annual rate for the last 4 years. In fact, it is by far the 
best rate of real business fixed investment in about 20 years.
  Mr. President, the fact is that the economic plan passed in 1993 has 
worked and has worked extraordinarily well. If we look at the 10-year 
period from 1992 to 2002, the savings from the 1993 deficit reduction 
plan will total in that 10-year period $2 trillion.
  The budget plan we have before us now in that same time period--
because it is only effective the last 5 years and it is a much smaller 
package--will contribute $200 billion to deficit reduction, about one-
tenth as much as was provided by the savings from the 1993 deficit 
reduction plan.
  Mr. President, the fact is this economic plan works and has worked 
extraordinarily well. It is the reason that today we are able to 
consider tax reductions.
  Mr. President, when we consider tax reductions, it seems to me that 
we ought to apply four tests:
  First of all, does the tax reduction fairly distribute the benefits?
  Second, does the plan keep the deficit under control for the long 
run, or do we blow a hole in the deficit after making all of the 
progress that we have made since 1993?
  Third, it seems to me the test should be, do the tax reductions 
promote educational opportunities?
  Fourth, will the tax cuts benefit the economy and promote higher 
economic growth?
  Again, I go back to the 1993 plan. The fact that deficits were really 
reduced by either measure has meant lower interest rates, has meant 
stronger investment, has meant greater economic growth, and has meant 
an incredible resurgence in the U.S. economy. In fact, today the United 
States is rated the most competitive economy in the world.
  Mr. President, when we look at the plans before us with respect to 
how to cut taxes, we can start to evaluate how they rate on the four 
tests that I have applied.
  The first test: The fairness of the distribution of the benefit. Mr. 
President, I direct your attention to this chart, the Democratic 
alternative versus the plan out of committee. For the top 1 percent, 
the yellow shows the plan out of the Finance Committee, the red shows 
the Democratic alternative. Under the plan out of the Finance

[[Page S6412]]

Committee, the top 1 percent get 13 percent of the benefits. 
Interestingly enough, under that plan, the bottom 60 percent get about 
13 percent of the benefits. It does not strike me as a fair 
distribution of the benefits.
  The alternative before us, the Democratic plan, shows a much more 
fair distribution of the benefits. The Democratic plan has the top 1 
percent of the income earners in the country getting 1.4 percent of the 
benefits. The bottom 60 percent get 46 percent of the benefits.
  Again, I would say it is a far more fair distribution of the benefits 
of the tax plan than under the committee alternative.
  This is a little different way of looking at it. This looks at the 
American economy in terms of the top 20 percent of the income earners 
in our country and the benefits that they get. This is the plan out of 
committee, the yellow bar. The red bar is the Democratic alternative. 
You can see under the plan out of committee that the top 20 percent of 
the income earners in our country get 65 percent of the benefits. Under 
the Democratic alternative, they get about 21 percent of the benefits.
  In the next quintile, the committee alternative gives them 32 percent 
of the benefits, the Democratic plan gives them 21 percent.
  Again, Mr. President, I think it is clear that the Democratic plan 
provides a more fair distribution of the benefits when we start cutting 
taxes.
  One of the key reasons for the differences between the distribution 
of the plan is because the Democratic alternative makes the child care 
credit effective against payroll taxes. The reason for that, as I 
indicated in my opening, is 73 percent of the American people pay more 
in payroll taxes than they pay in income taxes. In fact, payroll taxes 
have been going up dramatically since 1950. This chart shows from 1950 
to 1996. Here is what has happened to individual income taxes in terms 
of a percentage of tax receipts. Here is what has happened to payroll 
taxes. Individual income taxes have stayed about flat in terms of their 
percentage of our tax receipts. Payroll taxes have jumped dramatically.
  Mr. President, this chart shows who is paying the tax bill and how 
the distribution has changed over the years. This shows from 1960 to 
1996. Individual income taxes, you can see, 44 percent. Now they are at 
45 percent. Payroll taxes were providing 16 percent of the revenue base 
in the country in 1960. Now they have gone up to 35 percent--35 percent 
of the tax receipts in the country are coming from payroll taxes; 
regressive payroll taxes.
  Corporate income taxes: Their share has changed dramatically as well. 
In 1960, they provided 23 percent of our receipts. They are now down to 
12 percent. And excise taxes have gone from 17 percent in 1960 down to 
8 percent.
  Mr. President, this I believe is one of the real flaws in the bill 
before us. Because the child care credit does not credit against 
payroll taxes, even though 73 percent of the people in this country pay 
more in payroll taxes, people at the lower end of the income scale 
don't get the benefit of the so-called child tax credit. In fact, this 
chart shows in the lowest 20 percent of income earners in this country, 
99.5 percent of them are ineligible for the child tax credit under the 
committee proposal. Nearly 100 percent of the lowest 20 percent of the 
income earners in our country aren't eligible.
  In the next 20 percent, nearly 90 percent of them are ineligible for 
the credit.
  Mr. President, how is that fair? How is it fair that we have a tax 
credit for children but 40 percent of the people in America don't get 
the benefit of it because it is not refundable?
  I would remind my Republican colleagues that in the Contract With 
America they made it refundable against the payroll tax and in the 
initial draft of this bill they made it refundable against the payroll 
tax. They were right. They have made a change that is a mistake, in my 
judgment, in terms of fair distribution of the past tax.
  That goes to the question of distribution.
  The second question is, Does this plan blow a hole in the deficit in 
the outyears?
  This chart shows the outyear costs of what we call backloading. That 
is, certain tax types with certain tax plans explode in terms of their 
cost in the second 5 years of this 10-year plan.
  Mr. President, this chart shows what happens to the IRAs that are 
included in this plan, the alternative minimum tax, and the capital 
gains tax cuts. In the first 5 years they cost $12 billion. But look at 
what happens in the second 5 years. The cost mushrooms to $84 billion, 
seven times as much in the second 5 years.
  If I had a chart that showed what happens in the next 10 years, you 
would see these things explode, even further endangering the fiscal 
responsibility that we have taken on since 1993 in the effort to 
dramatically reduce the budget deficit.
  Mr. President, I think that is a mistake. If we look at some of the 
elements of the backloading, we look at the alternative minimum tax, 
and you can see in the first 5 years there is no cost. Then it takes 
off like a scalded cat. In fact, in the second 5 years that costs $15 
billion. No cost the first 5 years, $15 billion the second 5 years. But 
it is not just the AMT tax that has that characteristic. We see the 
same thing with capital gains. The capital gains provision goes from $3 
billion in the first 5 years to $24 billion in the second 5 years. It 
explodes. I think we have to ask ourselves, does that make sense? Does 
that endanger the deficit reduction that we have worked so hard to 
achieve?

  The IRA proposal is even more dramatic. It costs $9 billion in the 
first 5 years; it costs $45 billion in the second 5 years.
  I think all of us would like to do these things. The question is, 
what do we lose? What happens if, because we have taken this kind of 
approach, the deficit reduction is in danger? I say to my colleagues 
the best tax cut is the tax cut we get from the lower interest rates by 
having deficit reduction. The very best tool for economic growth is 
getting the deficit down, which lowers interest rates, which helps 
spark investment, which helps spark the economic growth that has made 
such a dramatic difference in this country since the 1993 economic plan 
was approved.
  The other test I apply that I think is a commonsense test is, are we 
promoting educational opportunity? I say the Senate package certainly 
has very good measures with respect to encouraging education, but I 
think the Democratic alternative is better. According to Citizens for 
Tax Justice, the top family income levels receive the largest education 
credit per family under the committee bill. Over 43 percent of families 
would be eligible for only a small part of the credit and an estimated 
30 percent of American families under the committee bill have 
insufficient tax liability to receive any benefit from the HOPE credit. 
The Democratic alternative addresses that shortcoming.
  Finally, it seems to me we should look to the economic incentives of 
the competing proposals. The Democratic alternative targets tax cuts to 
small businesses, farmers, and those who take risks in investing in 
small startup companies.
  I believe that is where we should target the benefits. A recent 
Congressional Budget Office study found that 89 percent of tax returns 
reporting capital gains in 1993 had gains of $10,000 or less with the 
average gain being $2,000. By contrast, the 3 percent of returns 
showing gains of $200,000 or more accounted for 62 percent of the total 
value of capital gains.
  It seems to me this is clearly a case where greater targeting to 
small business, small farmers makes good sense. We can get more bang 
for the buck by targeting these dollars than by giving them to those 
who are at the top of the income ladder, the very wealthiest among us, 
those who need it the least of all. The Democratic alternative provides 
nearly twice as deep a capital gains tax cut for owners of small and 
startup businesses. Most small businesses and farms will enjoy a 14-
percent rate under the Democratic alternative rather than the 20-
percent rate in the committee bill. That is because 75 percent of small 
businesses and farmers are proprietorships, partnerships or S 
corporations that will have much better and stronger benefit under the 
Democratic alternative.
  Mr. President, I conclude by saying there is no question that the 
chairman of the Finance Committee treated us

[[Page S6413]]

fairly in the Finance Committee. He was as fair as one could ever ask a 
chairman to be. I have commended him publicly. I have thanked him 
privately as well. He conducted himself as a real gentleman. I want to 
say that again publicly here today.
  The question is not whether or not we worked together in the Finance 
Committee. The question is whether we could do better with an 
alternative.
  I sincerely believe the Democratic alternative offered by Senator 
Daschle earlier today is better. It is more fair in its distribution. 
It protects the future by making certain we do not blow a hole in the 
deficit in the out years. It provides more targeted education benefits 
to all of the American people so that we make certain no one is left 
behind. And it is better for long-term economic growth because it 
focuses the dollars on those small businesses and those farms that are 
really at the heart of the American entrepreneurial revolution.
  I end as I began. In 1993, many of us took a stand with respect to a 
plan to reduce the deficit. Our friends on the other side of the aisle 
said that the plan would not reduce the deficit, that it would increase 
unemployment and that it could crater the economy. They were wrong. The 
facts are clear. That plan dramatically reduced the deficit, reduced 
unemployment, and we have seen dramatically increased economic growth, 
dramatically increased business investment. That plan worked.
  Now, today, we have another choice to make on an alternative of tax 
relief. The question is, who will benefit? Are we going to give the 
lion's share of the benefits to the wealthiest among us, or are we 
going to seek to spread the benefits more broadly throughout the 
American society?
  I do not think there is any question but that the Democratic 
alternative is a more fair distribution of the benefits. I hope my 
colleagues could support it. I thank the Chair and yield the floor.

  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. The Chair recognizes the Senator from New 
Mexico.
  Mr. DOMENICI. I understood the distinguished manager of the bill was 
going to give the Senator from New Mexico 20 minutes, and I note the 
presence of Senator Bennett. He asked me if he could have 5 minutes of 
my time to address the issue just presented, so I would ask that he be 
given 5 minutes of my time.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BENNETT. Mr. President, I thank the Senator from New Mexico for 
his courtesy, and I thank the Senator from North Dakota for his 
presentation. I think it is a very thoughtful presentation, and there 
are many parts of it with which I agree. There are a few, however, with 
which I disagree, and I appreciate the opportunity to put this 
disagreement close to it in the Record.
  The Senator is justified in talking about the difference between 
things as they are now and things as they were 4 years ago when we were 
debating the 1993 tax package from the President. I am not sure he is 
entirely correct in saying that the program voted on this floor in 1993 
is responsible for the tremendous growth we have had in the economy. I 
would remind him and other Senators that during that same 4-year 
period, we constantly heard how terrible Alan Greenspan and the Federal 
Reserve were behaving and that if, indeed, Alan Greenspan did not open 
up and make tremendous changes in monetary policy, the economy could 
crater, that jobs would be lost, that we would have tremendous 
deficits, and all of these other things would happen.
  At some other time we can debate whether the tremendous growth we 
have had is the responsibility of the Clinton administration or the 
Greenspan Fed. The fact is, no one is really quite sure. The fact is, 
we have a booming, wonderful economy, and we should be grateful for it, 
however we apply blame or credit, which brings us to the issue that the 
Senator is addressing.
  Will the tax program that we are talking about continue to stimulate 
that growth and allow it to burgeon, or will it in some way provide 
brakes on that growth in the name of income redistribution? The Senator 
says the issue is wealth distribution and how do we distribute the 
wealth in the fairest possible way. That is the portion with which I 
would argue.
  Wealth distribution is not a static question. You do not have the 
wealthy at the top and the poor at the bottom. You have constant 
movement up and down the ladder. I always use the example of Donald 
Trump, who at one time was in the wealthiest 1 percent, and then he 
made a few bad mistakes and he was bankrupt. Then he made a few smart 
moves, and he is back up again.
  Read the list of the people who are the richest people in the United 
States and you find the list is constantly changing. If I may be 
personal, there was a time not many years ago when I was clearly at the 
bottom in this country. I had a year not that many years ago where my 
earnings were zero and my wealth was going down because I was living on 
savings, and then when they were gone, I was going deeply into debt. 
Fortunately, one of my business ventures worked out, and now I would be 
listed up in that rarefied area that the Democrats seem to want to 
complain about. My point being that you cannot say you have a static 
group at one area that is going to be benefited and a static group at 
the other area that is going to be hurt; you have constant movement 
going back and forth.
  The responsibility of the Senate is not to redistribute wealth among 
these supposed static groups in a way to create fairness. It is to 
create a program that will stimulate the growth so that there will be 
more money for everybody. John F. Kennedy said a rising tide lifts all 
ships. That is not always true in terms of skill problems and 
educational problems, but I think it is true in terms of economics. We 
want a tax program that will continue the dramatic growth that we have 
had in this country, and I respectfully suggest that that which is 
coming out of the committee is more geared to produce that result.

  I thank the Chair.
  Mr. DOMENICI. Mr. President, I thank the Senator from Utah for his 
very pointed remarks.
  I think I would just say also that I thought the Senator made a good 
presentation. Senator Conrad is always a contributor here. In fact, he 
voted for this Republican plan that he does not like here today, as I 
understand it. All Democrats on the committee voted for the bill in 
committee, I asked Senator Gramm, and he confirmed that Senator Conrad 
voted for the package. So I assume what we have going right now is 
something like this: A good bill was reported out of the committee. It 
had bipartisan support. It had Democrat support as well as Republicans. 
Now the Democrats have decided to bring back onto the American 
political scene the rich versus the poor issue.
  I want to say something about the President because the distinguished 
Senator attributed the entire growth for the last 4\1/2\ years to the 
deficit package that increased taxes in 1993, and I will not go through 
what I believe caused it, and I will give the President some credit. I 
think the two things that economic historians will write are that the 
Federal Reserve Board for the first time in history has found out how 
to control interest rates in a very simple way, and they are doing it 
on a gradual up-and-down basis and they have kept this economy from 
going into cyclical downturns.
  That is No. 1. No. 2, I give the President of the United States 
credit for one thing. Once his deficit package went in, frankly, the 
President listened more to probusiness advisers in his Cabinet, 
probably led by his Secretary of the Treasury Rubin, than all the rest 
combined. And I think history will reveal that the President did great 
things by nonaction. In fact, he is not a typical President in that he 
did not take significant steps to hurt business during a regime of a 
Democrat President--to put on more regulations, to make it more 
difficult to beat them up and talk about business. He was the other 
way. And I think he deserves some credit for what he did not do that 
one might have expected from a Democratic President.
  You combine the two. The Federal Reserve is taking care of inflation 
and the President leaving the economy alone. This strong economy may 
still last for a few more years and defy some of the rules, although I 
doubt whether the ups and downs are finally done away with. I see a 
great economist in the Chamber. I am referring to the Senator from 
Texas. Maybe someday

[[Page S6414]]

when we have the time he could talk about the economic cycle.
  But I come here today for two other reasons. First, Mr. President, I 
really do not believe it is fair to the American people for the other 
side of the aisle and the White House to continue to talk about this 
package as if it helps the rich and hurts the poor.
  First of all, Mr. President and fellow Senators, the only odd game 
out is the White House and the Treasury Department, who are furnishing 
the Democrats with the evaluation of the distribution of this tax cut 
package. No other institution of significance and broad acceptance is 
using that broad definition of income to evaluate the distribution of 
these tax cuts. And that is because the Treasury Department does not 
use the income that average people make to determine what bracket 
people are in.
  It might shock you to know, Mr. President, and millions of Americans, 
that what the Democrats are talking about magically turns into $65,000 
income family out of a $40,000 actual-income family.
  Let me repeat. The Treasury Department's approach says, fellow 
Americans, taxpayers, what you are earning--and then you look at it and 
I am paying $6,000 in taxes--they are saying that is not your income.
  They take income, add the value of the rent of your house, the value 
of fringe benefits, the value of all your assets if you were to sell 
them--unrealized capital gains--plus the value of our pension and life 
insurance. That is why a family who thinks they earn $40,000 appears on 
the Treasury's charts as a family earning $65,000.
  Your income under the Treasury definition assumes that you are out on 
the street and you rent your own house. So they add about $8,000 or 
$10,000 to your income. Believe it or not, if you have any stock in any 
American corporation, even 10 shares, they have gone through the 
difficulty of imputing to you, the stockholder, the earnings of the 
corporation in which you have stock, even if they did not declare a 
dividend. Won't that be a shock to Americans, if they thought they were 
earning all that much money every year.
  Let me make our case on this side. Actually, we rely upon the Joint 
Tax Committee. They are bipartisan and professional.
  We did not use the White House's very strange way of calculating 
income called the family economic income approach which counts all of 
this phantom income I just outlined.
  I put a credit card up here just to show you about it. I call it the 
Family Economic Income credit card. This is what the administration 
would give to an American taxpayer as the White House's credit card. 
But like the familiar add campaign for other credit cards, if you want 
to really buy something, you better have a Visa card because the 
country's shop keepers don't take the Family Economic Income Card.
  Interestingly enough, Senator Gramm, if you took this Family Economic 
Income card to a store to buy something, it's no good. If you took it 
somewhere to pay your college kid's tuition, it's no good.
  This card inflates your income between 50 percent and 65 percent. It 
creates paper income. Or said another way, it counts phantom income as 
real income. So you can throw it away, just as you ought to throw away 
the evaluation of this tax package made on these kinds of evaluations.
  It is absolutely plain and simple, and I defy anyone anywhere, 
including editorial boards, those who are commenting on the news--you 
just go ask, ask the Treasury Department, ``Is a $40,000 income earner 
who, under this package that the Republicans have, if that person, that 
family is going to get back a certain amount of taxes and you apply 
that to the taxes they paid before, and if the difference is a savings 
of $3,000 in income taxes, you ask them are they giving you credit for 
that? Or do they have some other process to evaluate what you got by 
way of a tax cut?'' I assure you they will not give you credit for the 
tax cut you got, because they started out by figuring you were in a 
different income bracket. Isn't that amazing? That is absolutely 
amazing.
  How can somebody come to the floor and say this package is 
predominantly for the rich when one simple fact disposes of it?
  Mr. President, 78.8 percent of the benefit under this bill goes to 
families earning $75,000 or less. Senator Gramm, isn't that what you 
understood when the bill was reported out of committee? Isn't that what 
the Joint Tax Committee said to you?
  Because we put income earning limitations on the $500 child credit we 
designed the credit to target the middle class. The $500 child credit 
is a huge portion of this tax cut. And the next component that is 
significant is for middle-income Americans, is the $1,500 education tax 
credit. It likewise has income limitations.
  If you take those two together pieces of the package it constitutes 
over 82 percent of the tax cuts, how can it be that the charts used by 
the other side of the aisle are right?
  It is because some of the Democrats are not using the income that 
Americans earn. They are using an imputed income calculation called 
family economic income. Imputed means we count it as income if you did 
not earn it. It is as if your earnings include what you could have 
earned, rather than what you have earned.

  We want to make the point today. We are going to try very hard, 
against very difficult odds to rebut the media reports that this is a 
tax cut for the rich. The fact is this: 78 percent of the tax benefit 
goes to middle-class families earning less than $75,000.
  Mr. President, for those who want to look up here, this is the way 
the Joint Tax Commission of the United States, a bipartisan group, says 
these tax cuts are spread. Less than $10,000 gets .06 percent tax cut 
because they are not paying much taxes. Let's go down this chart. For 
people earning $10,000 to $20,000 the percent of the tax cut goes to 
4.8; for people earning between $20,000 and $30,000 their taxes are cut 
by 15 percent; and for those earning between $30,000 to $40,000 their 
taxes are cut by 32 percent; those earning $40,000 to $50,000 their 
taxes are cut by 48 percent.
  That means families earning $75,000 of real income or less, 78.7 of 
this tax cut goes to them.
  If you want to report that the tax cut goes to the rich you ought to 
report that 75 percent of the benefits goes to American wage earners 
who are earning $75,000 or less.
  Having said that I want to move on quickly. There will be a little 
obfuscation because the White House will say this family income 
approach is not theirs, it was done in the Reagan White House.
  This is a way to figure out how much people are worth. And they did 
that as a model for tax reform. Does it mean that on income tax and 
other taxes that you are paying currently, that this is a true model of 
what your income is? Of course not. Because it assesses to you income 
you never earned, you probably will not earn, and it says it does not 
matter, we are ``imputing'' it to you anyway. That is the way you are 
distributing this money pursuant to those kinds of tables.
  Let me move, for a minute, to a couple of more facts. We are on the 
threshold of passing the largest tax cut in 16 years. It will help 
Americans of all ages and all brackets. Again, I commend the chairman 
and I commend the Democratic Senators who voted for the package. I 
thought it was an exemplary example of bipartisanship. As I said, 
apparently some of them if not all of them have decided to produce a 
new package today, just to prove a point and try to make a point based 
on White House Treasury analysis rather than those analyses done by the 
experts that represent us.
  Let's put this in perspective. Parents of 43 million children will 
pay $500 per child less in taxes; 4.8 million parents with kids in 
college and taxpaying students will have $1,500 more to spend; and 7.2 
million recent job entrants will be able to deduct their student loan 
interest. That is a pretty big percentage of Americans, and a huge 
portion of Americana, and essentially all of them are, for all intents 
and purposes, all of them are middle-class Americans if you use $75,000 
as the definition of middle class.
  Mr. President, the $500 child care credit will help the working poor 
and the middle class. The value of the personal exemption has been 
eroded over time, and the cost of raising a family has become more 
expensive. The credit in this bill will totally eliminate the

[[Page S6415]]

Federal income tax burden for tens of thousands of families in New 
Mexico. I am particularly pleased that the Finance Committee decided to 
design the credit so that the working poor would also see the benefit 
of the $500 credit. Of the 718,850 families who file tax returns in New 
Mexico, 175,087 of them claim an earned-income credit. I applaud the 
Finance Committee's approach. It is a logical sequel to the new welfare 
reform law with its emphasis on moving from welfare to work.
  I want to speak for a minute and I hope every Senator avails himself 
or herself of this, the $500 credit will save New Mexico families $454 
million over 5 years.
  A $500 per child credit is significant tax relief. According to the 
Heritage Foundation, a family with two kids eligible for two $500 
credits would have an extra $1,000 a year in the family budget, and 
this amount would be enough to pay the mortgage for 1.5 months or pay 
for 15 months of health insurance or buy gas for the family automobile 
for 8 months.
  In New Mexico, about 78 babies are born every day. In fact, I just 
was looking at a list. I have it here. I ask unanimous consent that 
their names be printed in the Record, just to show that on the day they 
are born they earn for a parent a $500 child care tax credit reduction. 
If they are too poor and eligible for an earned income tax credit, they 
still get $250 of that, under the bill the committee reported out.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

              [From the Albuquerque Tribune, June 2, 1997]

                                 Births

       Here are the recent births at Albuquerque hospitals. Unless 
     otherwise indicated, the parents live in Albuquerque.


                         presbyterian hospital

     Feb. 5
       Velda and James Harrison of Grants, boy, Stephen Jordon.
       Tess and Tom Kerstetter of Tijeras, boy, Justin Lawrence.
       Tonija and Jim Pitts, girl, Sara Nicole.
       Geneva and Rogue Tena, girl, Dannion Lee.
       Cindy Weatherford, boy, Xavier Michael Dax.
     Feb. 6
       Selina and Scott Burt of Rio Rancho, boy, Michael Duncan.
     Feb. 7
       Mary and Christopher Andres of Bemalillo, boy, Christopher 
     James.
       Rhonda and George Buffet II, girl, Rachael Michelle.
       Delilah and Bruce Langston, boy, Jeremiah Edward.
       Zoyla and George Nuanez, boy, Antonio Andres.
       Jessica Small and Gregory Foster, girl, Ryleigh Madison.
     Feb. 8
       Kathryn and Rick Carnes, girl, Theresa Jordon.
     Feb. 9
       Joyce and Lorenzo Barela of Belen, boy, Michael Andrew.
       Genevieve and Michael Gomez, girl, Savannah Renee.
       Karla Vallo and Christopher Sarracino of Acoma, girl, 
     Raquel Elaine.
     Feb. 10
       Amy and Dan Conley, boy, Gunnar Ty.
       Brenda and Mark Edwards, boy, Eligah Jordon.
       Roberta and Carlos Gutierrez, girl, Samantha Dawn Elaine.
       Paula and David Jackson of Belen, twins, Kaitlyn Joann and 
     Ashley Nichole.
       Denise and Donnie Tapia, girl, Savannah Adeline.
     Feb. 11
       Kalynn and John Kemaghan of Los Lunas, girl, Bryanna Marie.
       Lisa and Bill Nesbitt, girl, Kathryn Anne.
       Loretta and Thomas Mordstrand, girl, Angela Michelle.
       Dolores Sanchez and Antonio Alire, boy, Antonio Jose Jr.
       Carolyn and David Torres, boy, Nicholas Antonio.
     Feb. 12
       Jamela Eudora Antone of Torreon, girl, Emain Fawzi Gadri.
       Tracie Asenap and Lorenzo Bemal, boy, Jakob Matthew.
       Renee and David Samora, girl, Desiree Alexis.
       Amber Woods and Christopher Lucero II, girl, Sierra Rae.
     Feb. 13
       Annie and Andrew Chavez, boy, Andrew Steven.
       Jodi and Andy Darnell of Bernalillo, girl, Rachel Emily.
       Monica Garcia and Alfred Baca of Los Lunas, boy, Alfred 
     Gene Jr.
       Annette Gurule and Lee Acosta, girl, Desiree Annette.
       Brenda and Kevin Judd, boy, Brandon Lee.
       Ann Michelle Nelson, boy, Taylor Emory.
       Michelle and Juan Tena of Grants, boy, Armando Alberto.
     Feb. 14
       Angelique and Steven Garcia, girl, Elena Merced.
       Monica Monroe and Michael Smith, boy, Clayton Steward.
       Yvonne and Antonio Berni of Los Lunas, girl, Jasmine 
     Danielle.
     Feb. 15
       Evangeline and Ricardo Duran of Los Lunas, boy, Ricardo.
       Freda Billie and Ronald Begay of Gallup, girl, Fershaylynn 
     Ervin Percy.
       Victory and Michael Brohard, boy, Michael Matthew.
       Kristin and Christopher Johnson, boy, Luke Nakaya.
       Brigida Leyba and Wallace Jackson, girl, Jazmine Jacklyn.
       Kristine Pineda, boy, Adrian Tomas.
       Dana and Johan Resediz, girl, Vanessa Annette.
       Danielle Stebleton and Dartanian Benson, girl, Dajour 
     Tanae.


                        lovelace medical center

     May 14
       Jennifer Duran and Anthony Hernandez of Albuquerque, twin 
     boys, Marlano and Martino.
     May 18
       Bobbie Jean Leach and James Gonzales of Albuquerque, boy.
     May 19
       Daniel and Paula Vasquez of Albuquerque, boy.
     May 20
       Bill and Dianna Matier of Albuquerque, girl.
       Roy L. Wade and Elizabeth Shoats of Albuquerque, girl, 
     Jessie Daniel.
       Antoinette and Marco Lovato of Albuquerque, girl.
       Chad and Nancy Mills of Albuquerque, girl.
     May 21
       Ronald and Theresa Sanchez of Albuquerque, girl.
       Daniel and Julie Sandlin of Albuquerque, boy, Eric Matthew.
     May 22
       Marvin and Frances Dominguez of Albuquerque, boy.
     May 23
       Jim and Deanna Fafrak of Albuquerque, girl, Tatiana Marie.
       Maurice and Anna Ortiz of Albuquerque, boy.
     May 24
       Paul and Yvette Baca of Albuquerque, boy.
     May 27
       Jay Hale and Kyona Lucero of Albuquerque, boy.
       Randy and Kelly Irwin of Sandia Park, boy.
     May 28
       Patric and Erin Carabajal of Albuquerque, girl.
     May 29
       Martha Jane Cavic and Paul Burdette Tilyou of Albuquerque, 
     girl.
       Camille and Larry Vigil of Albuquerque, boy, Kyle Anthony.
     May 30
       Bibiana Gower and James Kaminski of Albuquerque, boy.
     June 1
       Eric and Samantha Clark Rajala of Albuquerque, girl.
       Louie Apodaca and Cynthia Mendoza of Albuquerque, boy.
     June 3
       Rick and Kathleen Emmert of Farmington, boy.
       Quentin and Mary Doherty of Edgewood, girl.


                 st. joseph northeast heights hospital

     April 28
       Ernie and Laura Manzanares of Albuquerque, boy.
     April 29
       Ross and Gloria Tollison of Albuquerque, girl.
     April 30
       Angle West and Casey Hamblin of Albuquerque, girl.
     May 1
       Mike and Charla Smith of Albuquerque, boy.
       Monique Rawinsky and Getty Litts of Albuquerque, girl.
       Scott and Katie Jacobson of Albuquerque, girl.
     May 2
       Kenneth Schafer and Siobhan Martin-Schafer of Albuquerque, 
     girl.
       Craig and Angie Parr of Albuquerque, boy.
     May 3
       Bryan and Betty Bareia of Albuquerque, boy.
       Jeff and Evelyn Coleman of Albuquerque, girl.
     May 4
       Joseph and Sheri Tafoya of Albuquerque, girl.
     May 5
       Larry Davidson and Angela Archibeque of Albuquerque, boy.
       Mark Bigoni and Catherine Gragg of Albuquerque, boy.

[[Page S6416]]

     May 7
       Jeffrey and Andrea Ehlert of Albuquerque, girl.
       Mark and Judith Neuman of Albuquerque, girl.
     May 8
       Jon Ira and Cheryl Robertson of Albuquerque, girl.
       Herman Wilson and Shryl Benally of Albuquerque, boy.
       Gilbert and Morayma Sanchez of Albuquerque, boy.
     May 9
       Loren and Debra Cushman of Albuquerque, girl.
       Antoinette Barela and Eric Lopez of Albuquerque, girl.
       Bill and Liz Montgomery of Albuquerque, boy.
       Nilufar and Anwar Hossain of Albuquerque, girl.
     May 10
       Arturo and Yeavette Andujo of Albuquerque, boy.
     May 11
       Maria Elena Vargas and Phillip Lopez of Albuquerque, girl.
     May 14
       Marnie and Omar Sadek of Albuquerque, boy
       Lianne Patterson of Albuquerque, boy.
       Karen and Steve Lillard Albuquerque, girl.
     May 15
       Ryan and Victoria Fellows of Albuquerque, girl.
     May 18
       Hal Byrd and Mary Dewitt-Byrd of Albuquerque, boy.
     May 19
       Luisa Lara and Ben Lucero of Albuquerque, girl.
       David and Theresa Spinarski of Albuquerque, girl.
     May 20
       Toby Avalos and Maranda Pugh of Albuquerque, boy.
       Wendy and Eugene Garcia of Albuquerque, boy.
       Jim and Elaina Freesc of Albuquerque, girl.
       Thomas and Tina Rowland of Alburquerque, boy.
     May 21
       Cabot and Patricia Follis of Albuquerque, boy.
       Eddie Salas and Silvia Valencla of Albuquerque, girl.
     May 22
       Melanie Herrera and Christian Dunn of Albuquerque, girl
       Orlando and Marie Encinias of Albuquerque, boy.
     May 29
       Amanda and Aaron Tucker of Albuquerque, boy.


                          University Hospital

     Feb. 26
       Kathleen and Juan Arellano of Albuquerque, boy, Alonzo 
     Luis.
     Feb. 27
       Ana and Mario Rivera of Albuquerque, girl.
     Feb. 28
       John and Mary Matthews of Albuquerque, girl, Anna Kathleen.
     March 8
       Jason and Maria Cordova of Albuquerque, boy, Vincent 
     Layson.
       Cameron and Lois Cole of Albuquerque, girl, Rebecca 
     Elizabeth Marie.
     March 9
       William and Livia Treat of Albuquerque, girl, Alejandra 
     Maria.
       Albert and Laura Carrasco of Albuquerque, boy, Albert Jr.
       Cang Phan and Dat Nguyen of Albuquerque, girl Donna Nguyen 
     Tan.
       Jeremy and Michelle Lee of Albuquerque, girl, Ashley 
     Nicole.
       Vincent and Tracey Everett of Albuquerque, girl, Christina 
     Isabelle.
     March 11
       Sonia Gutierrez and Anthony Martinez of Albuquerque, girl, 
     Elena.
       John and Emily Loucks of Albuquerque, boy, Thomas Edward.
     March 16
       Tim and Kathleen Newell of Albuquerque, girl, Emily 
     Allison.
       Mary Ann Vasquez of Albuquerque, boy, Mark Anthony.
     March 18
       Doug and Terry Lengenfelder of Albuquerque, girl, Hayley 
     Shannon.
       Julie Lopez and Damion Jenkins of Albuquerque, girl, Jenaya 
     Neshae.
     March 20
       Juanita Carrillo and Charles Orona of Albuquerque, girl, 
     Allcia Maria
     March 21
       Virginia Garcia of Albuquerque, girl, Stephanie Amanda.

  Mr. DOMENICI. This bill provides some very, very good deductions and 
credits for going to college. So a tax cut, as I view it, is long 
overdue. In 1948, American families sent about 3 percent of their 
income to Washington for taxes. Today it is closer to 25 percent. I 
believe it is much better to leave more money in the hands of our 
families and our parents and our people.
  This bill provides eight separate provisions that help finance 
college. The most significant is a $1,500 tax credit for 50 percent of 
the tuition for the first 2 years of a 4-year college; 75 percent of 
the tuition paid at a community technical school. I believe the 
committee designed these right and I believe they make good sense.
  There is the deductibility of student loan interest. This provision 
automatically shifts the benefit toward children of low- and middle-
income families. The $2,500 deduction of student loans and the interest 
on them is well designed, and it will produce some powerful incentives 
as students graduate for them to get on with their lives and get out 
from under the debt burden as soon as possible. This bill makes an 
exclusion of $5,525 worth of education assistance.
  Mr. President, I have additional remarks that analyze my State but I 
close by once again repeating: This is the chart of the Joint Committee 
on Taxation of the United States, that says this is the distribution of 
our tax cut based on income the American people are making. It has a 
few imputed things in it but nothing like the White House, and people 
will be surprised how much they are allegedly earning under the 
Treasury of the U.S. evaluation of their earnings.
  I yield the floor.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. Who yields time?
  Mr. CONRAD. Mr. President, I yield such time as the Senator from 
North Dakota will consume.
  Mr. DOMENICI. Mr. President, I believe we have a lot more time left. 
Could we ask how much time is left?
  The PRESIDING OFFICER. The Senator has an hour left and the other 
side has 39 minutes left.
  Mr. DOMENICI. I wonder if we could start to equalize it a little bit 
by going on our side.
  Mr. DORGAN. I ask the manager, my understanding of the process was we 
were going back and forth on the presentations.
  Mr. DOMENICI. I was not here. Is that correct?
  Mr. CONRAD. That was the agreement.
  The PRESIDING OFFICER. There was an agreement to that effect, 4 hours 
equally divided.
  Mr. GRAMM. Mr. President, let them go ahead if they want to. We have 
over an hour and they have 39 minutes. What we were going to do is try 
to run ours down. But I always am interested in being informed by our 
colleagues. Let them go ahead and respond and then, if I could be 
recognized, I will speak.
  The PRESIDING OFFICER. The Senator from North Dakota yields how much 
time to the Senator from North Dakota?
  Mr. CONRAD. So much time as he shall consume.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. CONRAD. I ask if the Senator from North Dakota will yield to me 
for a question?
  Mr. DORGAN. I will be happy to yield to the Senator for a question.
  Mr. CONRAD. We have heard from our friends on the other side with 
respect this question about imputed income in charts that have been 
used. I would just ask the Senator from North Dakota if he is aware, if 
you take imputed income out--take it out--it does not change this chart 
an iota, it does not change it at all; not a whit? It would change the 
income amounts for each of these categories, it does not change the 
relationships at all. The reality is, if you compare these two plans, 
the top 20 percent of the income groups in the United States under the 
Finance Committee plan gets 65 percent of the benefits. Under the 
Democratic plan, they get 20 percent of the benefits.

  The fourth quintile gets 21 percent of the benefits under the 
Democratic plan and gets 32 percent of the benefits under the plan out 
of the Finance Committee. You take imputed income, put it aside, you 
don't want to use that, although it has always been used here as the 
measurement for distribution under Republicans and under Democrats. 
That's the way it has been done.

[[Page S6417]]

 I happen to agree, you ought to leave imputed income out of it. But if 
you take the cash income, this is the same distribution that you get on 
these two plans. You have five quintiles, and those five quintiles bear 
the same relationship. What changes is the income categories attached 
to each. That is a fact.
  The relationship between the quintiles does not change. Under the 
plan that is being advocated by our friends on the other side, the 
biggest benefits go to the wealthiest among us. It is undeniable. That 
is the case. They want to quote Joint Tax. Let's talk about what is 
wrong with the Joint Tax proposal.
  Rather than assess the effect of the tax cuts when fully implemented, 
Joint Tax tables, cited by our friends on the other side of the aisle, 
cover only the years up to 2002. I ask my colleague from North Dakota 
if he is aware, as a result, the Joint Tax Committee's tables ignore 94 
percent of the combined $82 billion of capital gains tax changes, 
estate tax changes and IRA tax cuts contained in the Roth bill. Is the 
Senator from North Dakota aware?
  Mr. DORGAN. Senator Conrad is exactly correct. And, if I might 
reclaim my time, let me add to Senator Conrad's presentation something 
that is not from us, but something from the New York Times. Let me read 
an editorial from the New York Times, because I know anyone can bring 
anything to this floor. You can bring a chart to this floor that says 
shrimps whistle, pigs fly, and the Moon is made of green cheese. You 
can bring a chart that shows anything you want. Will Rogers said it 
best about this debate. He said: ``It's not what he knows that bothers 
me. It is what he says he knows for sure that just ain't so.''
  Let me read you the New York Times editorial about this discussion we 
are having:

       Before Congress votes on anything, it should get its facts 
     straight. The Republicans present bogus tables suggesting 
     their tax package is fair. The tables stop at the year 2002, 
     before the cuts that favor the wealthy on capital gains, 
     inheritance and retirement accounts take hold. Also, the GOP 
     treats as burdens the tax payments that the investors will 
     voluntarily make as they sell stocks and bonds to take 
     advantage of a lower capital gains rate. The bizarre 
     implication is that investors are hurt by a rate cut. These 
     tables suggest that the middle class reaps most of the 
     benefits. Independent analysts say that about 50 percent of 
     the cuts will go to the richest 5 percent of the taxpayers.

  That is not me saying it, it is a New York Times editorial.
  Is the New York Times correct? Yes, they are correct. Why? Here is 
the reason. The chart that we have just seen illustrated on the floor 
of the Senate about burdens is a chart that covers only the years up to 
2002, and it ignores 94 percent of the costs of capital gains, estate, 
IRA tax cuts in the Senate bill. When the tax cuts proposed in this 
bill are fully phased in, there is no question what the distribution of 
this tax cut is. By far, the preponderance of the tax cuts offered in 
this bill will go to the richest Americans.
  This chart that we have just seen, the burden table that is offered 
on the floor of the Senate, portrays capital gains tax cuts as 
increasing the tax burden on upper income taxpayers, and it also 
excludes the estate tax cuts, which total $35 billion in the Senate 
bill. That is why you have a table that is simply wrong.
  Is it right in the context of what it proposes to tell people in a 
snapshot of time? Sure, but what it proposes to tell people is 
something that doesn't include all of the facts. It says, take a look 
at this little slice, and then we are going to give you the conclusion 
about this little slice of facts, but it is not real.
  Mr. President, we are having a discussion about whether the proposed 
tax cut can be improved. The answer is, yes, it can; it can be 
improved. One of the things that traps everyone in this Chamber and I 
think everyone in Congress is the minute you start talk about cutting 
taxes, we rush immediately to the corner and begin to talk about taxes, 
and then we begin immediately to talk about capital gains. Let me 
describe another approach that makes more sense.
  Two-thirds of the American people pay higher payroll taxes than 
taxes. The tax that has increased in this country in recent years has 
been the payroll tax. The folks who go to work, work hard, sweat, get 
dirty, take a shower after work are the folks who earn a wage. They 
don't sit home clipping coupons. They don't get big dividends. They 
don't have big stock gains. They work for a wage. And then someone who 
showers before work and sits on the front porch and never raises a 
sweat and never gets dirty because they are simply cashing in their 
dividend checks and watching the stock market go up, and so on, they 
get capital gains. But we are told that stream of income somehow is 
preferable to the income from work.

  So we have a philosophy in this Chamber that says let us tax work, 
but let us exempt investments. Why? Why tax work and exempt investment? 
And if you do that, what is the consequence? The consequence is easy to 
understand. Who has the investments and, therefore, who gets the tax 
break if you exempt investment? Who works and who pays the higher 
payroll taxes because they work? Then who is largely left out of this 
equation when it comes time to talk about cutting taxes?
  The other side says to us, ``Well, except we propose a per-child tax 
credit, and that's going to help all those families with children,'' 
except they propose the tax credit not go to nearly 40 percent of the 
children in this country because the folks don't make enough money to 
qualify for it. Why? Because they measure it only against the income 
those folks earn as opposed to measuring it against the payroll tax 
they pay--and, I might add, a higher payroll tax at that.
  Can this be improved? Absolutely. Should it be improved? You are darn 
right it should be improved. Has Senator Daschle proposed something 
that will dramatically improve this tax relief proposal so when you 
pass around the largess of tax cuts, you go around that table and you 
see the income earner sitting at the table, those at the bottom fifth, 
those at the second fifth, on and on, each of them are going to get a 
significant part of the tax relief? Is that what Senator Daschle has 
proposed? I think so. If we don't pass this substitute, we will end up 
with a tax bill that goes around that table and passes out tax cuts in 
a way that is fundamentally unfair. Oh, there are some at the table who 
will get almost nothing, some just a few crumbs, some a few tiny little 
slices, and some at the other end of the table will sit there with a 
huge platter and three-fourths of the cake. All we are suggesting is 
there are other ways to measure proposals for tax cuts that provide a 
fairer distribution.
  I find interesting this discussion we have about the economy and 
where we are and where we are headed. The economy is doing better in 
this country. Some wouldn't give this administration credit under any 
set of circumstances. But this economy rests not on the shoulders of 
the Federal Reserve Board, the last American dinosaur that sits down 
there in that concrete temple; this economy rests on the confidence of 
the American people that we and others will do the right thing to keep 
this economy on track.
  Doing the right thing in 1993 meant a Deficit Reduction Act that 
brought down the Federal budget deficit in a serious way. It was not 
fun to vote for that because it wasn't politically smart to vote for 
that, and my party paid a significant price for passing it. I can 
recall--and I won't mention names--I can recall those who stood up and 
said, ``You pass this and this country will be in a recession.'' ``You 
pass this and this country will be in a depression.'' ``You pass this 
and you will throw the economy completely off track.''
  We passed it. We indicated to the American people we were serious 
about reducing the deficit. Guess what? The American people took hope 
and confidence from that, and the result is when you have confidence, 
you buy cars, houses, you make decisions about the future based on that 
confidence. When you lack confidence, you defer those purchases and you 
have an impact on the economy that is negative. When you have 
confidence, you have an impact that is positive. I am pleased we did 
what we did in 1993, and the economy is better because of it. Inflation 
is down, the deficit is down, unemployment is down, economic growth is 
up.

[[Page S6418]]

  So, in that context, while we balance the budget, or attempt to 
balance the budget, with a series of decisions now and attempt to 
provide some tax relief, the question today is, who will receive the 
relief? And we get these burden sharks that give us a vision of who 
gets the relief that is simply wrong.
  Again, I refer to the New York Times editorial. You can't give us a 
description of who gets tax relief by leaving out the bulk of the tax 
relief that is going to go to the upper income folks.
  Let me finish on one additional point. One of my concerns about what 
we are doing is we will create a tax shelter industry if we go the 
totus-porcus route of capital gains. I believe very much that 
recreating the tax shelter business in this country is unhealthy for 
America.
  Senator Daschle is proposing something that makes sense. Let's 
measure against payroll taxes paid; let's measure against that an 
ability to receive tax relief based on the refundable child care tax 
credit. That makes great sense to me. If we don't make that child care 
tax credit refundable against payroll taxes paid, which are the taxes 
that have increased in recent years, then we will not have done working 
families a great favor with this bill.

  So I stand today and hope that colleagues will support the substitute 
offered by Senator Daschle, cosponsored by myself and others. I think 
it is substantially more fair, and I think it substantially improves 
the tax relief bill the Senate is now considering.
  Mr. President, I know others wish to speak. I appreciate the courtesy 
of the Senator from Texas. My understanding was we were going back and 
forth, and I appreciate very much the courtesy of the Senator from 
Texas.
  I yield the floor.
  Mr. GRAMM. Mr. President, I yield myself 10 minutes.
  The PRESIDING OFFICER. The Chair recognizes the Senator from Texas 
for 10 minutes.
  Mr. GRAMM. Mr. President, this is not a debate about taxes, this is a 
debate about class warfare. I do not understand how people can love 
jobs and yet hate the process that creates those jobs. If America is 
going to be saved, it is going to be saved at a profit, and I am not 
going to apologize for trying to provide incentives to create jobs, 
growth, and opportunity in America.
  We can stand here and shout back and forth with our colleagues who 
are saying, ``Well, if you make $30,000 a year but you own your own 
home, if you rented your home, you would get another $8,000 of income, 
so you make $38,000. And if you own a life insurance policy, it is 
building up internally, and so while you think you are making $30,000, 
but you actually have $8,000 from your home and another $6,000 from 
your insurance policy, and your retirement is going up, and, really, 
you are making $45,000 a year--you only think you are making $30,000 a 
year, but really you are rich.''
  Let me tell you, I can cut through all that stuff. There is a simple 
code that if you understand, you will understand everything they are 
saying: If you pay taxes, then you are rich under the Democrats' plan.
  Their basic program is very simple: Never cut taxes, because taxes 
are only imposed on rich people. Always raise taxes, because taxes are 
always imposed on rich people. So, as a result, they always want to 
raise taxes, but never want to cut them.
  It is interesting to note that the average tax burden on working 
Americans today is at the highest level in the history of the United 
States of America.
  We have heard a lot of talk about their great bill in 1993. Might I 
remind my colleagues that the word then was that this bill only taxes 
rich people.
  Who were those rich people? Everybody who buys gasoline. Who were 
those rich people? People on Social Security in the President's 
original bill who made $25,000 a year, if you counted what they would 
get if they moved out of their own homes and rented it for income.
  But, look, this is not a debate that is worthy of America. What we 
should be debating is, will this tax cut create jobs? Our objective 
should not be trying to spread the misery or redistribute the wealth. 
It ought to be to try to create wealth.
  We hear our colleagues say, ``Can you believe that the tax cut before 
us does not cut taxes for the lowest 20 percent of all income earners 
in America?'' Did you hear that? ``This bill does not cut taxes for the 
lowest 20 percent of income earners in America. How could that possibly 
be so?'' Well, the reason it is possibly so is because the lowest 20 
percent of income earners in America pay no income tax.
  This is not a welfare bill. This is a tax-cut bill.
  The top 20 percent of income earners in America pay 78.9 percent of 
all the income taxes in America. The bottom 40 percent, on balance, pay 
no income taxes at all. Is anybody surprised that the top 20 percent, 
who pay almost 80 percent of the income taxes, will get a tax cut when 
you are cutting taxes and that the bottom 20 percent, who do not pay 
any income taxes, will not? Why is that supposed to be a revelation? Do 
we have to increase welfare every time we try to help working families?
  In the bill that is being proposed, we have yet another massive 
increase in a welfare program. It has a wonderful name, EITC, the 
earned-income tax credit. What it has become is an unearned-income tax 
credit. This is a program which pays people who do not pay taxes but is 
called a tax cut.
  The last time taxpayers got a tax cut was in 1981. In 1981, the 
average amount we were giving away in EITC, this welfare program the 
Democrats call a tax cut, was $285. Today, that average beneficiary is 
getting $1,395. The average American who does not pay income taxes but 
who is getting an earned-income tax credit to offset taxes--in many 
cases when they have no tax liability--has had their subsidy increase 
from $285 a person to $1,395; while working families who do pay taxes 
have not gotten a dollar of tax cuts. In fact, their after-tax income 
has actually declined.
  Now we are here trying to give a $500 tax credit per child for every 
working family in America, so that Americans who make $30,000 a year 
and have two children will be off the income tax rolls. What is the 
complaint from our Democratic colleagues? Their complaint is that we 
are not giving money in our tax cut in large enough amounts to people 
who are not paying taxes.
  This is a tax-cut bill. This is not a welfare bill.
  We pass a lot of welfare bills around here--too many of them--but 
this is not one of them. This is a tax-cut bill. We should ignore all 
this malarkey about the bottom 20 percent not getting any income tax 
cut, they do not pay any income taxes.
  Our colleagues have lamented the payroll tax. They claim that they 
are really worried about the payroll tax. Well on May 22, 1996, John 
Ashcroft, the Senator from Missouri, offered an amendment to allow 
moderate-income people to deduct their payroll tax from their income in 
calculating their income tax.
  Every person who has spoken in favor of this amendment, who has 
criticized the underlying bill for not giving tax cuts to people who do 
not pay income taxes, and who has lamented the payroll tax--every one 
of them voted against Senator Ashcroft when he tried to cut taxes for 
people who are paying big payroll taxes.
  Let me also say that all of those who I have heard today speak in 
favor of this amendment also supported the Clinton health care bill 
that would have raised the payroll tax by 8.9 percent to pay for 
socialized medicine. Of course, today they are terribly upset about the 
payroll tax and they want to give income tax cuts to people who are not 
paying income tax.
  What is their program? Their program is tax cuts for people who do 
not pay taxes, capital gains tax cuts for people who do not own 
capital.
  Our program is to cut taxes for people who actually pay taxes. I am 
not going to apologize for the fact that when 20 percent of the people 
pay 80 percent of the taxes, when you are going to do a tax cut, that 
20 percent is going to get a bigger tax cut.
  Listening to all this talk, you would think that every year the tax 
burden is getting heavier and heavier on lower income people. It is not 
true. The tax system has become more progressive every day since Ronald 
Reagan became President. In fact, his tax cut made the system more 
progressive, as does our tax cut.
  We really should not even be talking about this because it just 
smacks of us

[[Page S6419]]

pitting one group of people against another based on their income. Many 
of the people in the Senate today grew up in families that were low- or 
moderate-income families. You are not stuck being poor your whole life 
because your parents are poor.
  Neither of my parents graduated from high school, but they did not 
resent people who made money, nor did they feel the Government should 
come along and take it away from somebody else to give it to them.
  Now, maybe this sells. Maybe this sells politically to say, ``Twenty 
percent of the income earners get no tax cut.'' Maybe it sells. But 
remember, they do not pay any income taxes either.
  This is a tax-cut bill.
  In 1993, taxes were increased by $250 billion in the Clinton tax-
increase bill. We are cutting it by $74 billion in our bill and 75 
percent of it is going to families that make $75,000 a year or less. 
Maybe those families are rich to the Democrats. Maybe a working couple 
making $75,000 should be taxed into poverty. I do not think so. I want 
them to be able to keep more of what they earn.
  I thank the Chair for its indulgence.
  Mr. BINGAMAN addressed the Chair.
  The PRESIDING OFFICER. Who yields time?
  Mr. BINGAMAN. Mr. President, I yield myself up to 10 minutes.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. Mr. President, I want to change the subject just 
slightly in this debate and talk about a different aspect of why I 
believe the Democratic alternative being proposed here is preferable to 
the bill which was reported by the Finance Committee. That is because, 
as I see it, the Finance Committee bill has in it what have been 
referred to as fiscal ``time bombs,'' which would explode the size of 
the revenue loss as we move into the next century.

  Our bill, our alternative, the Democratic alternative, tries to 
eliminate those fiscal time bombs, and in doing so is more fiscally 
responsible for the long-term future of the country.
  Let me talk about that aspect of it slightly. I do so first with this 
chart that I have here. This chart shows tax cuts--the Senate bill; 
this is the bill we are debating and getting ready to vote on here 
either late tonight or tomorrow--shows that the tax cuts in this Senate 
bill are heavily backloaded.
  What that means is that, although the budget agreement calls for $85 
billion in tax cuts in the next 5 years, through the year 2002, it 
calls for $250 billion in tax cuts up through the following 5 years, up 
to 2007, and if you take the next 10 years and look at what happens in 
that period so that you have the full 20-year period in mind, it goes 
to $830 billion in tax cuts and lost revenue to the Treasury. That is 
what we mean by backloaded.
  You say, why are we losing that much revenue? What is there in this 
tax bill that is costing that much revenue? Here are three of the main 
reasons why we are losing that revenue.
  Of course, this chart only goes through the year 2007, but it shows 
that the alternative minimum tax, of course, the change there is losing 
$15 billion, the change in the capital gains is losing $24 billion in 
this second 5-year period, and the change in the IRA's is losing $45 
billion.
  I want to talk a moment about the provisions in this bill related to 
IRA's and how we are going about losing that much money.
  We are losing it primarily because of a provision in this bill that 
is called the IRA Plus--the IRA Plus. People need to understand a 
little bit about the IRA Plus.
  Mr. President, there are two kinds of IRA's that are available to any 
of us today in America. One is a deductible IRA where you are able to 
deposit into your individual retirement account money before you pay 
tax on it. That is deductible money, deductible from your tax return.
  The other, of course, is a nondeductible IRA. You can deposit up to 
$2,000. If you do not use the deductible IRA, you can deposit up to 
$2,000 in a nondeductible IRA. That is money that you have already paid 
tax on.
  You can have either under current law.
  Let me just talk a moment about the deductible IRA. Under current 
law, all taxpayers with incomes below $50,000--that is joint filers--so 
a family that earns less than $50,000 or reports income of $50,000 may 
make a deductible contribution to an IRA. They can put up to $2,000 in 
an IRA every year without paying tax on that money. That can be saved 
by them for their retirement into the future. They do not have to take 
it out, do not have to begin taking it out until they are over 70 years 
old. That is a very good benefit.
  All ratepayers who are not covered by an employer-sponsored plan may 
make deductible contributions regardless of their income level. So we 
are saying that if you are not covered by any kind of employer-
sponsored plan, you can go ahead and deposit your $2,000, take the tax 
deduction under current law, and you are not penalized. This covers 
over 70 percent of all of those who are eligible, so that 70 percent of 
the people filing tax returns today can take this $2,000 deductible 
contribution if they so choose.
  Under the proposals in this bill on deductible IRA's, all taxpayers 
then with incomes below $100,000--we are essentially doubling or 
increasing by twice the income level for joint filers--and any family 
with an income up to $100,000 can make a deductible contribution to an 
IRA. All taxpayers who are not covered by an employer-sponsored plan 
may make deductible contributions regardless of the income level.
  The estimate here is that we are now talking, under the proposed 
bill, of 90 percent of all taxpayers, 90 percent of all families will 
be eligible to make deductible contributions.
  We are going next, Mr. President, to the real clincher in this so-
called IRA Plus.
  An IRA Plus is a nondeductible IRA. It is not a deductible IRA. It is 
not the kind of IRA that is available to people who have $100,000 or 
less in income or who are covered by an employer-sponsored retirement 
plan. This is aimed primarily at those who earn over $100,000 in income 
and who have employer-sponsored retirement plans already.
  Current law says that you can go ahead and deposit your $2,000 each 
year. That money compounds, that money gains interest or capital gains 
of whatever kind until such time as you start drawing the money out, at 
which time you pay tax on it.
  The proposal in here, IRA Plus, says that not only can you have this, 
you can have it in a particularly attractive way.
  First of all, we are going to let you take any IRA you have now and 
convert it into an IRA Plus if you want to and pay the tax that is due 
up to January 1, 1999. You have to pay it during the 5 years that it is 
covered by this budget plan so we can take full credit of those funds 
in deciding whether we have balanced the budget, but you can pay that, 
and then once you have set that up, the nondeductible IRA is no longer 
taxable.
  There is no tax owed when you realize a gain. There is no tax owed 
when you distribute money out of that IRA. There is no tax owed when 
you spend the money. We are setting up essentially, Mr. President, our 
own version of a Swiss savings account or a Swiss bank account.
  We have all read about people with lots of money who go to 
Switzerland and set up a bank account so they can avoid taxes that way. 
They will not have to do that anymore. They can just set up an IRA 
Plus, put money in there, and then any gain they realize on that for 
the rest of their life is not taxable.
  This is the only place in our tax law, as far as I know--I am not an 
expert on tax law--but as far as I know there is no place else in our 
tax law where we set up this kind of a provision, where we say if you 
put money in one of these accounts we will no longer charge you any tax 
on that or on the gains from that money for the rest of your life. This 
is what the IRA Plus is. This is why this bill is so heavily 
backloaded.
  Clearly, this is a fiscal time bomb. There is no other way to look at 
it. There is no justification, in my view, for us putting this kind of 
a benefit in for individuals who have over $100,000 in income and who 
are also covered by another employer-sponsored retirement plan. This is 
a provision which is not, as I understand it, in the House bill that is 
being considered on the House side.

[[Page S6420]]

  I hope very much later in the debate today I can offer an amendment 
to try to strike this provision from our own bill. If we do strike this 
provision, we will deal with a great deal of the problem that exists in 
the Finance Committee bill in the backloading of this provision. It 
will be much more fiscally responsible to eliminate this provision, and 
clearly it will be fair to working Americans at all income levels.
  I still want all Americans to have the right to deposit the $2,000 
after tax into an IRA, just as they can under present law. That is 
entirely appropriate. But they ought to have to pay tax on the earnings 
from that as they do today.
  Mr. President, I hope this amendment is seriously considered when I 
do get a chance to offer it later in the evening. I also believe that 
the fact that we are eliminating this IRA Plus in the alternative that 
the Democrats are offering today is a major reason why I am planning to 
support that alternative.
  I commend Senator Daschle for putting it forward today, and I yield 
the floor.
  Mr. NICKLES. Mr. President, I yield myself 10 minutes.
  Mr. President, first, I wish to urge my colleagues to vote no on 
Senator Daschle's substitute. I started to call it the Democratic 
substitute. I hope that is not the case. I really truly hope that is 
not the case, because we passed a bipartisan bill, one that had 
Democrats and Republicans supporting it.
  For those people that are saying this bill that was passed is for the 
wealthy and so on, that is absolutely hogwash. This bill that we passed 
in the Finance Committee is very family friendly. The bulk of the 
benefits, over 80 percent of the benefits, are for families with kids 
and/or education. The child tax credit, for example, starts phasing out 
with families or individuals that have incomes above $75,000. 
Personally, I think it should be for all families, but we did not make 
it that way. I think we should make it for all families. Upper-income 
people will not get it.
  So this idea that we are just benefiting upper-income people is 
absolutely not true. Upper-income people, the highest-income people, do 
not get the family tax credit. Everybody else does. I think we should 
make it apply to everybody, but we didn't. There are income limits on 
that.
  There are income limits on the education tax incentives. They start 
phasing out with individuals at $40,000 and couples at $80,000. A lot 
of times we will not be able to tell our constituents that everybody 
gets this. People with incomes up to $40,000 will get it if they are 
individuals or couples at $80,000, but above that they might not. We 
cannot brag about this too much because not all Americans get the 
education incentive. Not all Americans get the child tax credit. I tell 
you, a lot more Americans will get these tax benefits under the package 
that is before the Senate, the bipartisan finance company, than under 
Senator Daschle's alternative.
  Senator Daschle's alternative is redistribution of wealth. It is not 
a tax cut for taxpayers. It is using the tax system so we can channel 
more money to people that do not pay taxes in the first place. It is 
kind of complicated because he says we want people to get the child 
care tax credit, and then we also want them to get the earned-income 
credit in addition to that. Wait, what is he doing? On the child care 
tax credit, that is only $250. Ours is $500. Now, there is a little 
difference here. Ours is for $500, his is for $250. Ours apply to 
children up to age 18 and below age 13 everybody gets $500. In Senator 
Daschle's approach, they get $250. If they put it in an IRA, they get 
$350. That is the Government telling people what to do. Nobody gets any 
benefit under Senator Daschle's proposal if they are between ages 13 
and 18 until the next century--until the year 2000. That does not make 
a lot of sense. He says he has a child credit, but it is only $250; but 
if you are 14 years old, you do not get anything under their proposal.

  Why? Well, the reason why he did that is to have the credit be 
refundable. I urge my colleagues when they say tax ``credit 
refundable,'' really what they mean is we want to have a spending 
program. This is not a program to cut taxes. It is a program for Uncle 
Sam to spend money through the tax credit.
  President Clinton likes this. There is a big increase in the so-
called earned-income credit. I hope we change the name of that section 
of the Tax Code later on today or tomorrow. But they use that Tax Code 
as refundable tax credit to write people checks.
  My colleagues on the Democrat side said we want to give whatever 
child tax credit and earned-income credit on top of that so Uncle Sam 
can continue writing more checks. I ask unanimous consent to have 
printed in the Record at the conclusion of my statement, a chart 
showing how much the earned-income credit has expanded in the last 
several years.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. NICKLES. In 1990, the maximum benefit was $953 for a family with 
2 or more children. In 1993 it was $1,511. This year, the maximum 
benefit for two children is $3,680, and 90 percent of that is not a tax 
credit. It is Uncle Sam writing a check. It is not reducing somebody's 
tax liability. In most cases these are not Federal income tax 
liabilities, but Uncle Sam writing a check. Somebody said that is to 
make up for payroll taxes. They pay Social Security taxes, yes, 7.65 
percent, but the tax credit is 40 percent, far and above what they pay 
in Social Security taxes.
  I just mention to my colleagues, this is the welfare program, and our 
colleagues supporting Senator Daschle's amendment want to expand it. 
They want to give a child care tax credit and expand the earned-income 
credit, give both, so they can say we are giving money to low-income 
people. The Tax Code should not be for redistribution of wealth. If we 
are going to have a tax cut, it should be for taxpayers.
  They say this plan that passed the Finance Committee is unfair 
because it advantages upper income. Absolutely false. Eighty-two 
percent of this package in the first 5 years falls to families with 
incomes less than $75,000 or $80,000; 75 percent of the whole package 
falls to families less than $75,000.
  Then a couple of comments, well, it benefits the wealthy. They do 
well because we have capital gains. Absolutely false. I ask unanimous 
consent to have printed in the Record another chart, showing the 
highest 10 percent of the taxpayers pay 47 percent of the tax.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. NICKLES. How much of the benefit do they get out of this tax 
bill? The highest 10 percent pay almost half the tax. How much benefit 
do they get out of this bill: 13 percent. The highest 1 percent, the 
wealthiest people in this country, what percentage of the tax do they 
pay? They pay 18 percent. How much benefit do they get out of this 
bill? They pay 18 percent. Of the total tax bill of this cup, the 
highest 1 percent pay 18 percent of the total income tax. How much 
benefit do they get out of this bill: Two percent. Mr. President, the 
wealthy are not making away like bandits on this.

  This is a family-friendly tax bill. If one believes that we should 
put the majority of this money in to help families, we have done it in 
the Finance Committee package. We have done it with the tax credit that 
says if you have 3 children you get $1,500 that you get to keep, that 
you get to save, and if you pay $1,500 in income tax, a little over 
$100 a month, you get to keep it. It is yours. You decide how to spend 
it. That is in the bill that passed the Finance Committee.
  You can go to your constituents, as long as their incomes are less 
than $75,000 and say, what is your income tax, look at your W-2. If you 
have two kids, that is $1,000 a year you get to keep. If you have four 
kids, that is $2,000 of your money that you get to keep. That is in our 
proposal. It is not in the Democrat proposal. Senator Daschle's 
proposal is $250 for the first couple of years, $350 maybe if you put 
it into an IRA.
  Mr. President, there is no comparison between these two packages. 
Unfortunately, Senator Daschle's proposal is really redistribution of 
wealth. It is not a tax cut. The Finance Committee proposal that we 
have is not perfect, but at least it is very family friendly. The $500 
tax credit is real. It will apply to all families up to incomes of 
$75,000, where we start phasing it out, $110,000 for couples on the 
child tax credit.
  I urge my colleagues to reject the Daschle amendment, have bipartisan

[[Page S6421]]

support and overwhelmingly vote for passage of this bill and 
overwhelmingly reject another income redistribution scheme that is 
propagated by my colleagues on the other side.
  I might mention, as well, Mr. President, most of the people who have 
spoken out in favor of Senator Daschle's amendment, one, voted for the 
1993 tax bill which was not a tax cut, it was a tax increase. They 
really have not been interested in tax cuts. They have been interested 
in tax increases. If you look at this proposal that they have, it is 
really trying to figure out how can we take more money from some people 
and give to somebody else. It is redistribution.
  Mr. President, I urge my colleagues to vote no on their proposal and 
to support the proposal that was reported out of the Finance Committee.
  I yield the floor.

                               Exhibit 1

               EARNED INCOME CREDIT--TWO OR MORE CHILDREN
                              [Historical]
------------------------------------------------------------------------
                                              Min.      Max.
                         Credit    Maximum   income    income   Phaseout
         Year            percent   credit   for max.  for max.   income
                                             credit    credit
------------------------------------------------------------------------
1976..................     10.00      $400     4,000    $4,000    $8,000
1977..................     10.00       400     4,000     4,000     8,000
1978..................     10.00       400     4,000     4,000     8,000
1979..................     10.00       500     5,000     6,000    10,000
1980..................     10.00       500     5,000     6,000    10,000
1981..................     10.00       500     5,000     6,000    10,000
1982..................     10.00       500     5,000     6,000    10,000
1983..................     10.00       500     5,000     6,000    10,000
1984..................     10.00       500     5,000     6,000    10,000
1985..................     11.00       550     5,000     6,500    11,000
1986..................     11.00       550     5,000     6,500    11,000
1987..................     14.00       851     6,080     6,920    15,432
1988..................     14.00       874     6,240     9,840    18,576
1989..................     14.00       910     6,500    10,240    19,340
1990..................     14.00       953     6,810    10,730    20,264
1991..................     17.30     1,235     7,140    11,250    21,250
1992..................     18.40     1,384     7,520    11,840    22,370
1993..................     19.50     1,511     7,750    12,200    23,049
1994..................     30.00     2,528     8,425    11,000    25,296
1995..................     36.00     3,110     8,640    11,290    26,673
1996..................     40.00     3,564     8,910    11,630    28,553
1997..................     40.00     3,680     9,200    12,010    29,484
1998..................     40.00     3,804     9,510    12,420    30,483
1999..................     40.00     3,932     9,830    12,840    31,510
2000..................     40,00     4,058    10,140    13,240    32,499
2001..................     40,00     4,184    10,460    13,660    33,527
2002..................     40,00     4,320    10,800    14,100   34,613
------------------------------------------------------------------------
Source: Joint Committee on Taxation.
 
 Provided by Senator Don Nickles, 06/26/97.

                               Exhibit 2

               DISTRIBUTIONAL EFFECTS OF FINANCE TAX BILL
------------------------------------------------------------------------
                                     1997-2002            1997-2002
                              ------------------------------------------
                                  Total     Percent     Cumm     Percent
------------------------------------------------------------------------
                       CHANGE IN TEXES IN MILLIONS
 
Income Category:
  Less than $10,000..........          73        -0          73       -0
  $10,000 to $20,000.........      (6,408)        5     (6,335)        5
  $20,000 to 30,000..........     (13,667)       11    (20,002)       15
  $30,000 to 40,000..........     (22,241)       17    (42,243)       33
  $40,000 to 50,000..........     (20,309)       16    (62,552)       48
  $50,000 to 75,000..........     (39,676)       31   (102,228)       79
  $75,000 to 100,000.........     (20,217)       16   (122,445)       94
  $100,000 to 200,000........      (5,386)        4   (127,831)       98
  $200,000 and over..........      (1,965)        2   (129,796)      100
                              --------------
      Total..................    (129,800)      100  ..........  .......
                              ==========================================
Income quintile:
  Lowest.....................        (539)        0       (539)        0
  Second.....................      (9,173)        7     (9,712)        7
  Third......................     (29,261)       23    (38,973)       30
  Fourth.....................     (46,437)       36    (85,410)       66
  highest....................     (44,390)       34   (129,800)      100
                              ==========================================
      Total..................    (129,799)      100  ..........  .......
 
  Highest 10%................     (16,430)       13  ..........  .......
  Highest 5%.................      (4,087)        3  ..........  .......
  Highest 1%.................      (2,066)        2  ..........  .......
 
                         TAX BURDEN IN BILLIONS
 
Income Category:
  Less than $10,000..........          30         0          30        0
  $10,000 to $20,000.........         191         2         221        3
  $20,000 to $30,000.........         442         5         663        8
  $30,000 to $40,000.........         622         8       1,285       16
  $40,000 to $50,000.........         654         8       1,939       24
  $50,000 to $75,000.........       1,578        20       3,517       44
  $75,000 to $100,000........       1,281        16       4,798       59
  $100,000 to $200,000.......       1,639        20       6,437       80
  $200,000 and over..........       1,638        20       8,075      100
                              ------------------------------------------
      Total..................       8,077       100
                              ==========================================
Income Qunitile:
  Lowest.....................          60         1          60        1
  Second.....................         340         4         400        5
  Third......................         874        11       1,274       16
  Fourth.....................       1,614        20       2,888       36
  Highest....................       5,190        64       8,078      100
                              ------------------------------------------
      Total..................       8,077       100  ..........  .......
                              ==========================================
  Highest 10%................       3,782        47  ..........  .......
  Highest 5%.................       2,756        34  ..........  .......
  Highest 1%.................       1,436        18  ..........  .......
------------------------------------------------------------------------

  Mr. LAUTENBERG. Mr. President, I rise as a cosponsor of the Daschle 
amendment, which would provide significant tax cuts for ordinary, 
middle-class families, without leading to exploding deficits in the 
future.
  Mr. President, throughout this Nation, millions of middle-class 
families are struggling simply to live the American dream. They love 
their children, but they don't see them very much. They work long 
hours. They're trying to save for their retirement, and their kids' 
education. But they're having a hard time just paying their bills, and 
making ends meet.
  Mr. President, these are the people who most need tax relief.
  And yet, Mr. President, those are not the people who get the bulk of 
the relief in the underlying bill, as reported by the Finance 
Committee. The committee's bill provides more benefits to those in the 
top 1 percent of the population than to the entire lower 60 percent, 
combined. That's not right. And this amendment would correct the 
problem.
  Mr. President, this amendment provides many of the same types of tax 
cuts that are included in the Republican plan. And the total amount of 
tax relief is roughly the same. But the provisions are structured 
differently, to give most of the benefits to ordinary Americans.
  The Democratic alternative provides a $500 tax credit for children. 
But, unlike the Republican version, it makes the credit available for 
working families with little or no tax liability.
  The Democratic alternative provides significant tax relief to help 
Americans handle the costs of higher education. And it provides 
substantially more benefits for those attending lower-cost community 
colleges than the Republican legislation.
  The Democratic alternative would cut the capital gains tax rate. But, 
unlike the Republican version, it gives most of its benefits to the 
middle class, not the very wealthy.
  The Democratic alternative also reduces estate taxes. But instead of 
lavishing huge breaks on the heirs to multimillion dollar estates, it 
focuses benefits on small businesses.
  Mr. President, another advantage of the Democratic alternative is 
that it costs do not explode in the out years. The underlying bill has 
several provisions the costs of which increase substantially in the 
future, such as the so-called backloaded IRA and capital gains breaks. 
This problem is addressed in the Democratic alternative, which is much 
more fiscally responsible.
  So, Mr. President, in many ways the Daschle amendment is a far 
superior alternative to the underlying bill, and I would urge my 
colleagues to support it.
  Mr. President, while I have the floor, I wanted to take just a few 
minutes to discuss the first reconciliation bill that the Senate 
approved yesterday.
  Mr. President, as one of the principal negotiators of the bipartisan 
budget agreement, it pained me to have to vote against the first 
reconciliation bill. Unfortunately, that bill went far beyond the 
bipartisan budget agreement, to a point that I felt I could not support 
it in good conscience.
  I am especially concerned, Mr. President, that the first 
reconciliation bill includes substantial changes in Medicare--changes 
that have not been adequately considered, and that could be very 
harmful to the program, and to the millions of Americans whose health 
will depend upon it in the future.
  For example, the bill would eliminate Medicare coverage for 
individuals aged 65 and 66. Yet it provides no alternative for these 
people. This could leave millions of older Americans without access to 
affordable health insurance. And that's not right.
  The bill also would encourage higher income beneficiaries to leave 
the program, by completely eliminating all subsidies of their premiums. 
That could undermine Medicare's universal support, and lead to a two-
tier system in which sicker, less wealthy seniors would be forced to 
pay more for less. And that's not right.
  Finally, the bill would create a substantial economic burden for many 
frail and sick elderly Americans, by establishing a new copayment for 
home health benefits. This copayment could cost up to $760 per year--a 
substantial percentage of many seniors' income. And that copayment 
would come on top of an already substantial increase in premiums called 
for under the bill.
  Mr. President, that's just not right.
  Mr. President, none of these provisions was included in the 
bipartisan budget agreement. And none have really been seriously 
debated in the 105th Congress. The public has had little opportunity 
for input on this, and most Americans probably don't even know what's 
being considered in the Senate.
  Mr. President, let me make one thing clear. There is no question that 
we will have to make changes to the Medicare program as the baby 
boomers reach retirement age. However, changes like these are too 
important to rush through Congress as part of a reconciliation bill 
that must be considered

[[Page S6422]]

under very expedited procedures. These are serious issues that deserve 
serious attention and public input.
  Mr. President, I am hopeful that the final version of the first 
reconciliation bill will not include most of these problematic 
provisions. The President, and many in the House of Representatives, 
share many of my concerns about the Medicare changes. And so I continue 
to hope that these provisions will be eliminated in the final version 
of the legislation, and that I will be able to support it.
  Mr. ABRAHAM. Mr. President, I have spoken previously about the 
problems associated with the Treasury Department's use of the concept 
called family economic income in assessing the distributional impact of 
the Taxpayer Relief Act. Under this controversial approach, the 
Treasury Department artificially inflates income by adding to it the 
value of fringe benefits, retirement benefits, unrealized capital 
gains, and the imputed rent on homes. The effect of this is to make 
middle-income wage earners appear to be richer than they really are. So 
if you get a tax cut under the Taxpayer Relief Act, the Treasury 
Department classifies you as ``rich.''
  Under normal methods of measuring income used by the Joint Committee 
on Taxation, the CBO, and most private sector forecasters, this tax cut 
overwhelming by benefits middle-class families. Under this bill, 75 
percent of the tax cut goes to people making $75,000 or less. And 82 
percent of the tax relief goes directly to families with children. 
Those are the facts.
  Mr. President, I ask unanimous consent that a study by economist 
Bruce Bartlett, which debunks the Treasury's use of this flawed 
concept, be printed in the Record.
  There being no objection, the study was ordered to be printed in the 
Record, as follows:

              Treasury's Distribution Tables Don't Add Up

                          (By Bruce Bartlett)

       One of the most important factors in evaluating tax 
     legislation is the distributional impact of the tax changes. 
     Toward this end, the Treasury Department and Congress's Joint 
     Committee on Taxation (JCT) produce tables \1\ showing the 
     effects of tax cuts and tax increases on people with 
     different incomes. The purpose of these tables is to help 
     give legislators a sense of how a given tax bill will 
     actually affect the well-being of their constituents. As a 
     result, distributional tables have enormous political 
     importance and often are critical in determining both the 
     size and shape of tax legislation.
---------------------------------------------------------------------------
     \1\ Tables in this article are not reproducible in the 
     Congressional Record.
---------------------------------------------------------------------------
       Unfortunately, the process of producing distributional 
     tables is fraught with difficulty. There are serious 
     conceptual problems in determining what is income, what is 
     the appropriate tax unit for analysis, and the incidence of 
     taxation. there are no clear-cut answers to these questions, 
     and thus there is a great deal of arbitrariness in choosing 
     what to include or exclude in putting together a 
     distributional table. However, different assumptions can lead 
     to wide differences in how tax legislation appears to impact 
     on taxpayers. These assumptions are seldom spelled out 
     explicitly either to policymakers or the general public.
       In recent days, the Treasury Department has been highly 
     critical of the tax bills being considered by Congress. The 
     Treasury alleges that the benefits of the tax legislation 
     approved by the House Ways and Means Committee and the Senate 
     Finance Committee are skewed too heavily toward the rich and 
     too little toward the poor. As Treasury Secretary Bob Rubin 
     told the House Ways and Means Committee Chairman Bill Archer 
     on June 11: ``We think this package disproportionately 
     benefits the most well off in society at the expense of 
     working families.'' According to the Treasury analysis, 67.9 
     percent of the Ways and Means bill and 65.5 percent of the 
     Finance Committee bill would go to the richest 20 percent of 
     families.
       There are serious problems with the Treasury analysis, 
     however, that cast grave doubt on its validity. Much of this 
     relates to the concept of income as ordinary people 
     understand it, or even to the concept of income everyone uses 
     on their tax returns. For this reason, the Treasury analysis 
     offers a very misleading picture of how pending tax 
     legislation will actually impact on people.
       The basic concept of income most people are familiar with 
     is Adjusted Gross Income (AGI), because that is what the 
     Internal Revenue Service uses to determine tax payments. AGI 
     includes wages, salaries, taxable interest, dividends, 
     alimony, realized capital gains, business income, pensions 
     and other familiar forms of income. Treasury starts with AGI 
     but adds to it many forms of income that are not included on 
     tax returns and that most taxpayers would not consider to 
     be income at all. These include the following:
       Unreported income. This includes the incomes of people 
     whose incomes are too low to require them to file tax returns 
     as well as income that taxpayers fail to report. These 
     adjustments increase AGI by about 13%.
       IRA and Keogh deductions. These are normally deducted from 
     gross income before AGI is calculated. However, Treasury 
     treats them as if they are not deductible. Treasury also 
     counts as income the return to previous IRA and Keogh 
     contributions that remain undistributed.
       Social Security and AFDC. For most taxpayers, Social 
     Security benefits are not taxable. However, Treasury treats 
     everyone's benefits as if they are taxable. AFDC (Aid to 
     Families with Dependent Children) is the Federal Government's 
     principal welfare program. It is also treated as if it is 
     taxable income.
       Fringe benefits. These include such things as employer-
     provided health benefits, life insurance and pensions that 
     are presently tax-exempt.
       Tax-exempt interest. Most interest on municipal bonds is 
     free of federal income tax, however Treasury treats such 
     income as if it were taxable.
       Imputed rent. This is the ``income'' homeowners allegedly 
     receive in the form of rent they pay to themselves. In other 
     words, all taxpayers living in their own home are treated as 
     if they were renters who rent out their home to someone else.
       Unrealized capital gains. Capital gains are only taxed when 
     realized. But Treasury counts unrealized gains as if they 
     were realized annually.
       Retained earnings. Owners of corporate stock are assumed to 
     receive 100% of corporate profits, even though much of that 
     profit is never paid out to them in the form of dividends but 
     is retained by the corporation.
       The result of all these changes is to increase AGI by about 
     50%. In other words, in the aggregate, all taxpayers are 50% 
     richer than their tax returns say they are. The effect of 
     this is to make many taxpayers of relatively modest means 
     appear to be rich in Treasury's distribution table. For 
     example, the number of taxpayers with incomes over $100,000 
     is three times higher under Treasury's definition of income 
     than under the normal definition used on tax returns.
       Although FEI generally increases income far beyond what 
     most taxpayers would recognize by including unfamiliar forms 
     of income, Treasury also excludes much income that taxpayers 
     do find familiar. For example, pensions and dividends are not 
     treated as income. Since pension contributions and all 
     corporate profits are already attributed to taxpayers, 
     including pension and dividend payments as well would 
     constitute double-counting.
       The effect of Treasury's methodology is to make many people 
     with very low incomes appear to pay a lot of taxes. For 
     example, any retired person living on pensions and dividends 
     pays taxes on such income currently. But under Treasury's 
     distribution table their income completely disappears. 
     However, since their tax liability is unchanged, they appear 
     to be paying an extremely high effective tax rate when they 
     actually are not. Thus FEI not only makes many people with 
     modest incomes appear to be rich, it also makes many people 
     with modest incomes appear to be poor.
       Another anomaly is that capital gains on corporate stock 
     are excluded from income because all gains are assumed to 
     result from retained earnings. Since such earnings are 
     already attributed to shareholders, counting capital gains 
     would constitute double-counting. The problem is that when 
     shareholders sell stock it may represent many years of 
     earnings, leading to a large tax liability. The effect, is to 
     make people realizing capital gains appear to be much more 
     heavily taxed than they actually are.
       Finally, although Treasury includes imputed rent from 
     homeowners, it does not make the same adjustment for those 
     living in public housing. In fact, all non-cash welfare 
     benefits except food stamps are excluded from FEI. Yet such 
     benefits are economically very significant. According to the 
     Census Bureau, in 1995 non-cash benefits reduced the number 
     of people living in poverty from 36.4 million to 27.2 
     million. The effect of excluding non-cash benefits from FEI 
     is to make many poor people appear to be utterly destitute.
       Although Treasury's unusual definition of income is the 
     main reason why its distribution tables make the Ways & Means 
     Committee and Finance Committee tax bills appear to largely 
     benefit the rich, there are also other reasons. The most 
     important is that Treasury assumes that the tax bill is fully 
     effective in 1998. However, many provisions of the tax 
     legislation do not take effect for many years. This makes the 
     tax cut appear much larger than it actually is.
       Thus Treasury's distribution table is based on a tax cut of 
     $71.2 billion in the case of the Ways & Means Committee bill 
     and $60.8 billion in the case of the Finance Committee. Yet 
     according to the JCT, the Finance Committee bill would 
     actually increase federal revenue slightly in 1998. Even in 
     the year 2007, when the tax cut is fully phased-in, it would 
     only lower federal revenues by $40.2 billion. Thus Treasury's 
     distribution table implies a tax cut between 50% and 100% 
     larger than it actually is.
       A major reason for this anomaly is capital gains. Under 
     current law, capital gains are only taxed when realized. But 
     Treasury assumes that all capital gains, even those that are 
     unrealized, should be taxed annually. Thus any reduction in 
     the capital gains tax

[[Page S6423]]

     rate automatically reduces federal revenue, regardless of its 
     effect on realizations and actual government receipts.
       However, experience shows that capital gains realization 
     are highly sensitive to changes in the capital gains tax 
     rate. Reductions in the tax in 1978 and 1981, as well as the 
     rate increase in 1996, had enormous effects on realizations 
     and, hence, revenues. Even Treasury admits that lowering the 
     capital gains tax rate, as proposed by both congressional tax 
     bills, would temporarily increase federal revenue by 
     increasing capital gains realizations. Yet despite the fact 
     that actual federal revenues rise, Treasury's distribution 
     table still shows owners of capital assets getting a big tax 
     cut. In effect, Treasury assumes that all capital gains--
     including those induced by the lower tax rate--would have 
     been realized anyway.
       The JCT uses this same methodology, which has the effect of 
     making those paying more in capital gains taxes appear to be 
     paying less. Professor Michael Graetz of Yale Law School has 
     been very critical of this methodology. He points out that in 
     1990 the JCT's distribution table showed President Bush's 
     proposed cut in the capital gains tax giving taxpayers a 
     $15.9 billion tax cut, although its own estimate showed 
     that federal revenues would be lower by at most $4.3 
     billion. Based on this contradiction, Graetz constructed 
     the chart shown in Figure II. As one can see, those with 
     incomes about $200,000 appear to be getting a tax cut four 
     times larger than their actual reduction in tax liability 
     could possibly be.
       In short, Treasury's distribution tables bear no 
     relationship to reality. While they may serve some purely 
     academic purpose, they fail to convey to policymakers any 
     sense of how real people are actually affected by proposed 
     tax changes. They make some people appear to be much 
     wealthier than they actually are and others poorer. Any 
     ordinary persons looking at one of these tables will have no 
     real idea of where they themselves stand, and will have a 
     very distorted picture of how the proposed tax changes will 
     affect them.
       Professor Graetz believes that the methodology for creating 
     distribution tables is so deeply flawed that they should be 
     abandoned altogether during the legislative process. As he 
     writes, ``The information transmitted to policymakers through 
     the current practice of producing distributional tables is 
     simply bad information.'' Instead, it would be better to 
     stick to known concepts of income, such as AGI, that 
     taxpayers are familiar with and produce illustrative 
     examples of how taxpayers in different circumstances will 
     fare under proposed tax changes. This will at least convey 
     an accurate picture of how such changes will affect 
     specific taxpayers. If distributional tables are produced, 
     it should only be after the fact, showing the true impact 
     of a tax change on actual taxpayers.
       Another reason to abandon distributional tables because 
     they have a tendency to dominate the tax legislative process 
     to the exclusion of everything else. Sound principles of tax 
     policy are routinely cast aside, the impact of taxes on the 
     economy gets short shrift, and the tax code is made even more 
     complex just to make the tables look right.
       A good example of this is the Earned Income Tax Credit 
     (EITC). The ETIC gives low-income workers a credit against 
     their taxes of up to $3,556. However, if their actual income 
     tax liability is less than this, they get a refund of the 
     difference. Thus if a worker qualifies for $2,000 in EITC but 
     only owes $800 in taxes, she get a check from the Treasury 
     for $1,200.
       This year the EITC is expected to cost the federal 
     government $26 billion. Of this amount only $3.6 billion 
     actually offset peoples' tax liability. The rest, $22.4 
     billion, will be ``refunded'' to taxpayers who have no tax 
     liability and get a check from the government instead. In 
     other words, although it is a provision of the tax law, the 
     EITC essentially is a welfare spending program.
       Although it is in fact a spending program, the EITC is 
     important for tax policy because it allows politicians to say 
     they are cutting taxes for the poor even though they pay no 
     taxes. Indeed, some Democrats are in effect now trying to 
     expand the EITC so that even more people will get government 
     checks from the program. The way they propose to do this is 
     by saying that taxpayers will be allowed to use the proposed 
     child credit before calculating the EITC.
       Under the Republican tax bill, all families with children 
     would receive a credit against their income taxes of up to 
     $500 per child. However, the credit would not be refundable. 
     Families owing no taxes due to the EITC or other tax 
     provisions would not be able to use the credit because they 
     have no liability to offset. Under the Democrats' plan, if a 
     family uses the child credit to eliminate their income tax 
     liability before calculating the EITC, they will get a larger 
     EITC check from the government.
       Since those with low incomes pay no income taxes to begin 
     with, the only way they can get a tax cut is by making it 
     refundable. That is why the Democrats appear to offer a 
     bigger tax cut to those with low incomes.
       Republicans respond that expanding the number of people 
     getting a check from the government is no way to conduct tax 
     policy. They are right. But the bigger problem is the 
     obsession with the distributional effects of tax legislation, 
     to the exclusion of all other considerations.
       In conclusion, the debate over the distributional effects 
     of Congress's proposed tax cut is highly misleading. Because 
     the measure of income and which Treasury's distribution 
     tables are based has no relation to the average person's 
     concept of income--or the IRS's--many of the ``rich'' are in 
     fact people with middle incomes, as are many of those who 
     appear to be ``poor'' in its analysis. This insofar as they 
     purport to tell taxpayers how the tax bills would actually 
     affect them, they are utterly worthless.
  Mr. DODD. Mr. President, I rise today in support of the Daschle 
alternative tax cut amendment. First, let me commend the Finance 
Committee on the job it's done. Chairman Roth and Senator Moynihan 
should be commended for their efforts to craft a bipartisan bill, 
something that the other body failed to achieve in their tax-writing 
committee.
  Clearly, the Finance bill is better than the bill offered in the 
House in several respects. However, I believe we can do better, and we 
must do better to assist America's working families. And that is what 
the Daschle substitute is all about. It offers families fair and 
equitable tax relief.
  And let's be honest: even in the midst of the strongest economic 
recovery of the century, many families at the lower income levels are 
still struggling. They worry about job security, pensions, meeting the 
costs of higher education, and finding good quality child care. 
Appropriate, targeted tax relief for these families can help them meet 
these challenges.
  The House and Senate bills, regrettably, shower most of their tax cut 
benefits not on working families, but on those who least need relief. 
They deny relief to taxpayers and small businesses in the middle and at 
the bottom of the income scale. The Finance Committee bill grants 65 
percent of its tax cuts on the wealthiest 20 percent of the population.
  Mr. President, the Daschle amendment seeks to right these wrongs by 
bringing relief to working Americans and small businesses. Unlike the 
competing proposals, the Daschle amendment promotes fairness and puts 
working families first. In contrast to the Finance Committee bill, our 
amendment provides 65 percent of tax relief not to the most affluent 20 
percent, but to the middle 60 percent. That's about twice as much tax 
relief for the middle class as the Republican Finance Committee 
proposal.
  Under the Daschle amendment, the affluent would get their fair share 
of the tax cuts, but no more. The top 1 percent of taxpayers would only 
receive 1 percent of the tax cut, compared to the Archer and Roth 
proposals which give 19 percent and 13 percent, respectively, of their 
tax cut to the top 1 percent of income earners.
  But fundamentally this debate isn't about statistics. It's about 
meeting vital family needs and providing additional resources to meet 
the many challenges they face. The Daschle amendment strengthens 
families and puts working families first. It provides payroll tax 
relief by making the child tax credit refundable against all payroll 
taxes, not just income taxes. An average family of four earning $35,000 
pays $2,700 in income taxes, and another $5,300 in payroll taxes. These 
are the families who desperately need tax relief, and these are the 
families who would benefit from the Daschle amendment. This provision 
alone would extend the child tax credit to 10 million more children and 
families.
  The House Ways and Means and the Senate Finance bills deny credit to 
many working families. Families making less than $25,000 would receive 
no credit due to their negligible income tax liability. Further, these 
bills would cut the child credit for families qualifying for the Earned 
Income Tax Credit.
  There are few issues more critical to American families than 
education. The Daschle amendment recognizes this and provides $10 
billion more in education benefits to working American families. The 
Daschle amendment provides more for school construction, more for Pell 
grant recipients, and more for tax credits for families to send their 
children to college. The Ways and Means and Finance bills provide 
less--less for school construction, less for Pell Grant recipients, and 
less for tax credits for families to send their children to college. I 
think we can all agree that unless we tap and nurture the talents and 
energies of all our people, we won't be able to meet the challenges of 
the 21st century.
  The Daschle amendment also offers fair and equitable relief to middle 
class

[[Page S6424]]

investors, small businesses, and family farms. Under the Daschle 
amendment, all investors would get the same 30 percent capital gains 
break that the top 1 percent of income earners already have. This 
proposal cuts the capital gains rate nearly twice as deeply for most 
small businesses and provides much needed relief.
  Under the Ways and Means and Finance bills, however, primarily the 
wealthiest taxpayers would reap the benefits of an across-the-board 
capital gains tax cut. For example, a person who makes $45,000 would 
receive an average capital gains tax cut of $255, while one who makes 
$200,000 or more would receive an average cut of $11,520. Clearly, 
these bills are skewed to benefit the wealthiest income earners and 
disadvantage those who most need tax relief--working families.
  Further, the Democratic alternative targets all estate tax cuts to 
family businesses and family farms, in an effort to relieve the tax 
burden felt by many. Again, however, the Ways and Means and Finance 
bills favor the wealthy by providing $35 billion in estate tax cuts to 
the wealthiest 1.4 percent of estate owners. Clearly, Mr. President, we 
must do better to bring relief to a much larger percentage of estate 
owners in America.
  Finally, Mr. President, in the midst of providing tax relief that is 
fair and equitable, it is imperative that we not lose sight of our 
obligation to enact legislation that is fiscally responsible. The 
Daschle amendment allows us to maintain the fiscal discipline we have 
worked so hard to achieve in recent years, dating back to the wise 
decisions we made in 1993.
  The Finance Committee bill is heavily backloaded. The Joint Tax 
Committee estimates that the cost of that measure will explode in the 
out years, costing $830 billion by the year 2017. I have grave concerns 
about facing the prospect of losing some $830 billion in revenue. And 
that is why I offered an amendment during the budget reconciliation 
negotiations which demanded that we adhere to our budget agreement in 
which we agreed to a net tax cut of $85 billion through 2002, and not 
more than $250 billion through 2007.
  Mr. President, we must be committed to preserving the integrity of 
the balanced budget agreement and adopt a tax package that is fair and 
responsible. The American people will not be served by a budget that 
reaches balance briefly in 2002 and then veers back out of balance 
afterward. The Daschle amendment balances the budget by the year 2002, 
and does not threaten to push the budget out of balance beyond 2002.
  Mr. President, Senator Daschle's alternative plan is fair, it puts 
families first, and it stimulates jobs and growth. And not least, it is 
not a ticking time bomb that threatens to push the budget out of 
balance, blowing a hole in the deficit in later years. And that, Mr. 
President, is why I urge my colleagues to support this fair, equitable, 
and modest measure.
  The PRESIDING OFFICER. Who yields time?
  Mr. WELLSTONE. Mr. President, I yield myself 15 minutes. I say to my 
colleagues I will probably take 10 minutes.
  How much time remains?
  The PRESIDING OFFICER. Fifteen minutes and thirty seconds.
  Mr. WELLSTONE. Mr. President, I will try and take 7\1/2\ minutes and 
leave 7\1/2\ minutes for my colleague.
  Mr. President, I have more than enough to say but just in response to 
my good friend from Oklahoma, there was a quote--and maybe this is the 
same argument he is making--from Speaker Gingrich, ``When you take out 
billions of dollars in tax cuts for working people and put in billions 
of dollars for people who pay no taxes, that's increasing welfare 
spending.'' We are talking about the child credit.
  Mr. President, let me just remind the Speaker and my good friend from 
Oklahoma, looking at CBO numbers, this is the percentage of working 
families who would not be eligible for the majority party's child tax 
credit, whose payroll taxes exceed their income taxes. The bottom 
fifth, 0 to $21,700, 99.6 percent; second fifth, $21,000 to $41,000, 97 
percent.
  There are a lot of working families in the State of Minnesota and all 
across this country who are not going to be eligible for this child tax 
credit who pay payroll taxes, who work hard, pay taxes, and are, quite 
frankly, resentful of this argument that is being made. As a Senator 
who represents those families, I am especially resentful of such an 
argument.
  I only need to know one thing about this tax proposal, this 
reconciliation bill. In the State of Minnesota, the tax bill excludes 
41 percent of the children. Mr. President, 607,463 children of the 1.5 
million children in Minnesota would not receive a benefit from the 
child tax credit. I repeat, 607,000 children of 1.5 million children 
will not receive the benefit of the child tax credit. Those are working 
families.
  I say to Democrats, every Democrat, every single Democrat, and as 
many Republicans as possible, ought to be out here advocating and 
fighting for those families. It is outrageous to make the argument that 
they do not pay any taxes or they are ``just on welfare.'' Absolutely 
outrageous.
  Mr. President, you have heard the figures presented out here so I do 
not need to go through that again except to say I am telling you, in 
the cafes in Minnesota, when people get a close look at this 
reconciliation bill they are going to be amazed.
  They are going to be really teed off because they are going to say, 
wait a minute, I thought there was going to be tax relief for us, the 
small business people, and us, working families. They are going to find 
out that the lion's share of the benefits go to the very top, the folks 
that are the CEO's, the multinational corporations who are raking in, 
on the average, $3 million a year.
  You know, Mr. President, I sometimes think that my colleagues believe 
that if you make $100,000 a year, you are middle class. I would be 
surprised if more than 10 percent of the people in this country make 
over $100,000 a year. What about these working families?
  Well, we have a proposal here that targets these tax benefits to 
working families, to small businesses, to family farmers. I am telling 
you, this is one of these moments where the differences between the two 
parties make a difference. My gosh, I think a lot of people in 
Minnesota are scratching their heads and saying: Has there been a 
hostile takeover of the Government process in Washington, DC? We have 
been hearing about all this money in elections, and we are now starting 
to believe that the only folks that sit down at the bargaining table 
and get their way are people who have the economic resources, because 
we sure are getting the short end of the stick.
  And they are right. I hope we will get a huge vote for this 
alternative.
  Mr. President, let me just summarize a couple of amendments. How much 
time do I have left?
  The PRESIDING OFFICER (Mr. Kempthorne). There are 10 minutes, 14 
seconds remaining on the amendment.
  Mr. WELLSTONE. I have about 3 minutes, I guess. Let me just mention a 
couple of amendments that fit in with this whole idea of tax fairness.
  One amendment that I hope to do, with Democrats and Republicans, is 
to make sure we take the HOPE scholarship program and make these tax 
credits refundable. It is the same issue. Think about the community 
college students; many are older, going back to school and with 
children. If we want to make sure that we are really providing help to 
them--they are not going to be able to take advantage of this $1,500 
because they are not going to have that liability. If we want higher 
education to be affordable for many of these working families, we 
simply have to do that. A higher education is so important to how our 
children and grandchildren will do that I hope we will be able to pass 
that amendment.
  The second amendment that I want and hope to do with Senator Bumpers 
takes the tax cuts and puts it into a Pell grant program. We simply 
make the Pell grant $7,000 a year, and that is the most efficient, 
effective way of making sure that higher education is affordable.
  The third amendment I want to mention is the amendment I want to do 
with Senator Carol Moseley-Braun, which has to do with tax credits and, 
again, for school infrastructure. I say, what are we doing with all of 
these tax benefits mainly going to wealthy people and we are not 
investing 1 cent into rebuilding rotting schools across America? What 
kind of distorted priorities are out here?

[[Page S6425]]

  Finally, I want to mention--in case I don't have a chance later on as 
we run out of time--that I have an amendment I think is real 
interesting, which goes like this. If you have a company--and please 
remember that average wages rose 3 percent in 1996. Salaries and 
bonuses of American CEOs rose 39 percent to $2.3 million. So what I say 
to a company is: Look, if you want to pay your CEO over 25 times what 
the lowest wage worker makes, go ahead and do it, go ahead and do it. 
Right now, we say you can do it up to a million dollars. But don't do 
it on the Government's tax tab. You can pay your CEO anything you want 
to, but when it is above 25 times what the lowest wage worker makes, 
you don't get any tax breaks for doing that, just as we don't end up 
getting tax breaks when someone mows our lawn. We don't get to deduct 
that. What are we doing here, if we are talking about fairness?

  Well, Mr. President, the differences make a difference. This is an 
outrageous argument that working families paying a payroll tax are only 
receiving welfare payments. This is an outrageous proposition that over 
600,000 children are not going to benefit in the State of Minnesota 
from this tax credit. We are talking about a tax bill out here that 
provides the lion's share of benefits to those people least in need of 
the assistance.
  Mr. President, there is no reason in the world for Senators to be 
quiet on this issue. I hope we get a very strong vote for our 
amendment. I yield the rest of my time to the Senator from--
  Mr. ROTH. Mr. President--
  Mr. WELLSTONE. Are we going to rotate?
  Mr. ROTH. That is correct.
  Mr. President, I yield 7 minutes to the distinguished Senator from 
Montana.
  The PRESIDING OFFICER. The Senator from Montana is recognized for 7 
minutes.
  Mr. BAUCUS. Mr. President, in the last couple of hours, in my 
judgment, this debate has turned into a rather partisan matter, with 
Republicans lining up on one side and Democrats lining up on the other. 
That is fine. I mean, each Senator has his right to say what he or she 
thinks. That is why we all ran for office and why we are here doing our 
very best for our constituents.
  But I also think that our people at home want us to, as much as 
possible, work together. Sure, some of us have differences, but, as 
much as possible, they want us to work together for the best interests 
of the American people. That, I think, is why the President worked with 
the Congress to try to fashion, and did fashion, a budget agreement--an 
agreement which will reduce the budget deficit by the year 2002; an 
agreement which contains provisions that the President, the chief 
Democrat in our country, wanted; and provisions which the Republican 
leadership in the Congress wanted. It is not the best agreement in the 
world, but we are a democracy and democracies sometimes are messy and 
uneven. But it was a pretty good agreement, by most Americans' 
standards.
  The House then attempted to put together its portion of the 
agreement. I might say that the Ways and Means Committee got pretty 
partisan. Democrats on the Ways and Means Committee fought vociferously 
with Republicans on Ways and Means. But the Republicans have a majority 
of the votes, so they won. Democrats lost, and from the Democrats' 
point of view, the bill that came out of House Ways and Means Committee 
is a pretty bad bill.
  I take my hat off to the chairman of our Finance Committee and our 
ranking member. The chairman of our committee took a different tack. 
His view is to work together. The chairman of the Finance Committee, 
the Senator from Delaware, Senator Roth--I have never seen anyone as 
fair with both sides of the aisle, in trying to come together with a 
solid agreement that made sense, near unanimous sense, to the members 
of that committee. It is wonderful. I have served with other chairmen 
of the Finance Committee. I know Senator Moynihan knows of when I 
speak. Sometimes that did not happen in other Congresses. In other 
Congresses, sometimes it was all Republicans this and all Democrats 
that. When the other side has the votes, you can make a statement, but 
you lose.
  In this case, Chairman Roth worked with the Democratic side of the 
aisle, and, as a consequence, we came up with a lot better bill--
better, I say, than what is produced in the House pursuant to the 
budget agreement, agreed to by the President and congressional 
leadership. Why is it better? It is better because he worked with us. 
It is also better for these reasons: It has a cigarette tax, which I 
think most Americans want; it gave a big chunk of dollars to child 
care, to health insurance, which people want in this country; there is 
a big emphasis on education, which I think most people in this country 
want.
  There are many provisions which are very good. Now, in return for 
Chairman Roth working so hard with Senator Moynihan to put an agreement 
together, Chairman Roth asked a very reasonable question with respect 
to six key points, in the final hours of putting this bill together. 
The six key points, very simply, dealt with a ticket tax, cigarette 
tax, with unified credit, and there are a couple others. But there are 
six key points. He asked us, would all the members of the committee 
agree to support that agreement? He asked for a show of hands. Every 
hand went up. Every member of the committee raised his hand to support 
the agreement.

  Now, here we are on the floor today, Thursday afternoon, and my party 
leader has come up with a very good substitute. In many respects, I 
think it is better than the bill that came out of the committee. But I 
made an agreement. I pledged my honor to support the six terms that 
Senator Roth asked us to support, so that we would come up with a 
better bipartisan bill. That is not to say I support or am bound to 
support every provision of the bill. But with respect to those six key 
points, I feel duty-bound to honor that commitment, and I will do so 
here today.
  Now, if we could find a Democratic substitute which did not 
contravene any of those six points, I would probably support it. But 
the substitute before us does contravene those six points. I feel, as a 
matter of honor, that I cannot support the Democratic substitute.
  I must say that the bill before us--the Finance Committee bill--is 
not that bad. Remember, we are operating under the agreement that the 
President and congressional leadership agreed to. Given those 
parameters, this is not that bad a bill. It reduces the budget deficit, 
it does reduce taxes, it gives a child tax credit, it helps education, 
and it is good--not perfect, but it is good.
  Now, on down the road, we will have opportunities to still improve 
upon the bill. The President, after all, has the authority to sign or 
not sign the bill. I very much pledge to work with all Members of 
Congress, with my constituents at home, and with the President and the 
conferees, whoever they may be, to keep improving upon this bill.
  I must say, Mr. President, that this is a very difficult position to 
take because I do not like to be taking a position contrary to the 
leader of my party. But I do believe that it is the right position to 
take. After all, we are elected to do what's right. In my judgment, 
what is right is to support the agreement I reached with the chairman 
of the committee and also work to continue to improve upon this bill as 
it reaches different stages of this progress. I, therefore, will not 
vote for the substitute.
  Mr. MOYNIHAN. Mr. President, I yield myself 2 minutes to say to the 
Senator from Montana that his was an immensely honorable and accurate 
statement. You raised your hand, as did we all, for $24 billion of 
child health. I have been 21 years on the Finance Committee and there 
has never been such a moment or such a provision. And that happened in 
a compromise in which the Republican majority agreed to a large tax 
increase we could use for the child health care.
  Senator Roth was remarkable throughout, and no words of praise are 
too great. In our world, your word is all you have. We gave our word. I 
think we did it responsibly and I think we will be seen to have done 
such.
  Mr. BAUCUS. If the Senator will yield for 30 seconds, the choice we 
had in the Finance Committee was to either work with the chairman for a 
better bill or not work with the chairman and make a statement and get 
a worse bill.

[[Page S6426]]

  Mr. MOYNIHAN. Precisely.
  The PRESIDING OFFICER. Who yields time?
  Mr. NICKLES addressed the Chair.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. Mr. President, I wish to compliment my colleague from 
Montana for his statement. I will yield the Senator from Missouri 5 
minutes.
  Mr. KENNEDY. Mr. President, I thought we were rotating between those 
who supported and those who opposed. If I am correct, the Senator just 
spoke on the Democratic side in support of the Republican position. Are 
we rotating?
  Mr. MOYNIHAN. Mr. President, the Senator from Massachusetts is 
correct. That is fine.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KENNEDY. Mr. President, I yield myself the 7\1/2\ minutes that 
remain.
  The PRESIDING OFFICER. The Senator may proceed.
  Mr. KENNEDY. Mr. President, I wish my good friend and colleague from 
Montana had been on our side, and it would have been appropriate, 
obviously, for the other side to move ahead. But he made his decision 
and made his presentation, and now I would like to respond.
  Mr. President, I will have the opportunity later on this evening to 
talk about really where we are in terms of the child care program.
  The fact of the matter is that $16 billion that was put in the bill 
was suggested by the administration's proposal which had a $14 billion 
cut. The Finance Committee added $8 billion. I commend my colleague and 
friend, Senator Hatch, for making that effort and for making that 
fight. Without his efforts, that would not have taken place. So we are 
farther down the road than we were prior to the time of that particular 
markup.
  But the fact of the matter is--and later on this evening I will have 
a chance to talk about where we really are in terms of the funding that 
has been allocated for children and the number of children that still 
remain. I find it interesting that this provision that the members of 
the Finance Committee took and accepted deals with accelerated 
depreciation, deals with airline tickets, a small amount of EITC, and 
the child care. I find it interesting that the Finance Committee was 
willing to accept the cigarette tax but use it for those non-child-
related issues, even though the Republican leadership had opposed our 
cigarette tax.
  I tried, with all respect, to understand this enormous sense of unity 
and deep moral commitment to this particular proposal when on its face 
it is difficult to really understand, given the fact that the 
originators of the tobacco tax were those Senators--Senator Hatch and 
myself--devoted toward addressing the needs of children in this 
country, the sons and daughters of working families who can't afford 
it. We got a part of it. But evidently the members of the Finance 
Committee swore in blood that depreciation on buildings as well as 
airline tickets was basically more important than the children. I am 
always interested in why that should be such a high moral issue and 
purpose. I have difficulty in understanding it.
  But, Mr. President, the issue today with the particular 
recommendation before the Senate is whether this proposal really meets 
the test of fairness for all Americans. That should be the test. Will 
this really be fair to the taxpayers in this country, or are we tipping 
the scales in a very important and special way to the wealthier 
individuals and corporations of this country?
  Senator Daschle has taken an enormous amount of time and painstaking 
diligence to fashion a proposal that fundamentally meets the agreement 
that was reached with the President in terms of what would be the tax 
adjustments. Senator Daschle has put forward a proposal that will be 
much fairer for all Americans.
  We sometimes rail in this body about how the particular proposal 
really is fairer and more just, but I do think in any fair examination 
the overwhelming evidence shows that the proposal of Senator Daschle is 
fairer to the working families of this country, and decisively so. This 
should to be the test.
  It is interesting, as we come closer and closer to the final 
conclusion, that the overwhelming majority of Americans understand 
this. Even prior to this debate on the various surveys--and I just saw 
this morning on the early morning shows--the American people understand 
the difference. They have not seen this debate or heard about this 
debate. They are out there working even while we are in the debate and 
discussion. But they understand fundamentally who is going to be on 
their side and who is going to be on the side of the working families. 
They are correct.
  Senator Daschle, I believe, deserves great credit for his leadership 
in offering to the Senate a proposal that is fairer for working 
families and for many Americans who have in too many instances been 
left out farther and farther behind in the period of the last 20 years. 
Sixty or sixty-five percent of Americans are farther behind and are 
working harder. Their family members are working harder, and they are 
working longer in terms of total hours of the week, in terms of 
families and just being able to keep their heads above water. The 
reason is the increase in the payroll taxes they have been paying, as 
described by my friend and colleague, Senator Wellstone.

  So we have an opportunity--one of the few opportunities that we 
have--for the 65 to 70 percent of the American families who have been 
working longer, who have really been the ones who have brought this 
economy back. We have a stronger economy today because working families 
have been out there working harder, longer, and smarter in terms of the 
American economy. They have benefited very little in terms of their own 
standard of living.
  We have an opportunity this afternoon and tomorrow to make some 
difference in that. The real issue is, are we going to make that kind 
of a commitment to those working families, whether it is on the child 
credit programs, or whether it is the education programs, or whether it 
is basically the overall rate programs, or whether we are going to 
reward the smaller enterprises that are going to be innovative and 
creative and expand employment by giving them some adjustment in terms 
of capital gains? Yes; and whether we are going to make sure that those 
who are going to get some break in terms of estate planning are going 
to be those who are going to continue to work the farms and be a part 
of the American primarily heartland of this nation in terms of 
producing the food and fiber which we eat.
  Those are the issues, Mr. President, and the issue is which way will 
the Senate of the United States go? Are we going to say to those 60 or 
70 percent of the Americans, ``We care about your kids, we care about 
education. We fashioned the particular program in terms of the HOPE 
scholarship, and we are going to arrange the other provisions of the 
Tax Code so that you have a better opportunity, middle-income families, 
lower-income families, with a modest expansion of the Pell 
provisions''? Are we going to do that? Our answer is yes, and the 
Daschle proposal does so.
  Are we going to really look out for the sons and daughters of working 
families? To Senator Daschle's credit, it is more expansive and more 
targeted in reaching the sons and daughters of working families.
  So, if we are talking about fairness, if we are talking about equity, 
if we are talking about how we are adjusting the various rates, 
including the children's tax credit and the payroll tax, and adjusting 
those in ways so that we are saying, ``While you may not have been 
paying a great deal more out of your income tax, you surely are in 
terms of your payroll tax. We are going to provide some degree of 
relief.''
  So that is the issue. We need to understand that. We can all say, 
``We are for education.'' However, you have to look at the proposal. 
Whose proposal really meets the central challenge that working families 
and middle-income families are facing in sending their kids to school? 
It is the Daschle proposal. Whose proposal really does the most in 
terms of the children? It is the Daschle proposal. Who does the most in 
terms of trying to make sure that we are going to provide important 
incentives to smaller, modest, middle-income families who are trying to 
get started with smaller new businesses by providing enhanced job 
opportunities? It is the Daschle proposal.

[[Page S6427]]

  So, Mr. President, I am just proud to support this proposal. It 
doesn't incorporate all of the kinds of factors that perhaps some of us 
would like to have. However, it is a serious and very important 
proposal that deserves the overwhelming support of the Members of this 
body.
  Let me just finally point this out: On the overall issue of tax 
equity, the Democratic alternative is clearly fairer. More of the 
benefits of the Republican plan go to the top 1 percent of taxpayers 
than go to the bottom 60 percent of taxpayers--13.1 percent versus 12.7 
percent.
  In the Democratic alternative, only 1.4 percent of the benefits go to 
the top 1 percent of taxpayers and the top 20 percent of taxpayers only 
receive 20 percent of the benefits. The vast majority of the benefits 
go to taxpayers who have incomes in the middle 60 percent of the income 
distribution; 71 percent of the benefits. The Democratic alternative is 
vastly preferable to the regressive Republican bill because it is 
fairer to lower and middle-income taxpayers.

  Mr. President, this Republican proposal is going to give a green 
light to all those individuals who have been doing extremely well--
extremely well in terms of the stock market. We have seen that go right 
up through the roof. But who has been out there making those stocks go 
up, making those businesses work? It is hard-working men and women.
  If we accept the Republican proposal, we are saying to all of those 
who have been able to make very substantial amounts of money that they 
are going to provide additional kinds of opportunities for them to be 
able to keep that money while we are saying to those who are working 
and have worked hard that you are going to get the crumbs. That is what 
the distribution issue is really all about.
  I am not the only one making these observations. We have seen the 
Center on Budget and Policy Priorities estimate that the cost of the 
Republican proposal will increase by between $500 and $600 million in 
the 10 years following the current budget period.
  I was 1 of 11 Senators who voted against the economic proposal in 
1981 because we were going to balloon the deficit. Only 11 of us at 
that time voted against it. We are going to see the same kind of 
balloon now in the outyears.
  Who is going to be out here at that time to try to make those 
adjustments and make those changes when Members of the Senate are going 
to say, ``Well, we had better close some of those tax loopholes?'' You 
know what will happen. They will cut back further in education. They 
will cut further back in children's program. They will cut further back 
on day care support--on all of the programs that have been continually 
cut back, or at least attempted to be cut back, in these past 3 years.
  The Democratic alternative does not engage in these accounting tricks 
to balance the budget. The Democratic alternative is honest with the 
American people, fair to American taxpayers, and it deserves to be 
adopted.
  Republicans make many arguments in favor of their proposal, and many 
of their concerns are valid. The current system is not perfect. There 
are many things to improve. We need to give tax relief to families, we 
need to encourage investment in education, and we need to grant relief 
from the hardships that are sometimes caused by the estate tax.
  On all these general points, Republicans and Democrats agree.
  However, the Republican plan uses these arguments as excuses to give 
enormous tax cuts to the well-heeled and the powerful and it does so as 
far as the eye can see. It therefore violates the fundamental 
principles that any tax bill must meet: tax fairness and fiscal 
responsibility.
  The Democratic alternative, on the other hand, is true to both of 
these principles. It allocates the tax relief fairly among all income 
brackets. And it guarantees that the amount of the tax relief is 
responsible, so that we will have a balanced budget not only in the 
year 2002, but in the years after as well.
  Both, the Republican proposal and the Democratic alternative have a 
child tax credit. On their face, the two proposals appear similar. 
However, the Republican credit will not benefit lower and many middle 
income people, while the Democratic proposal will. The Republican 
proposal will not benefit families who do not earn enough income to 
claim the full credit. This cut-off applies not only to the extremely 
poor, but also to families earning up to $30,000 a year.
  Under the Democratic alternative, the credit is refundable against 
both income taxes and payroll taxes. Many more working families will be 
able to obtain the full benefit of the credit under the Democratic 
plan. This point is critical for those who earn less than $30,000 a 
year because their payroll taxes are larger then their income taxes. 
They deserve tax relief too.
  In addition, the Democratic tax credit for children has another 
significant advantage. It is calculated or stacked prior to the earned 
income tax credit. Under the Republican plan, the credit is stacked 
after the earned income tax credit. This means that the working poor 
who are eligible for the earned income tax credit many not be able to 
obtain the full benefit of both credits.
  If their income tax after taking the earned income tax credit is too 
small, then they will not benefit from the Republican child credit.
  The Democratic alternative will enable these working families to 
benefit from the child credit too. 47 percent of American children 
would not be eligible for the child credit under the Republicans 
proposal. An additional 8 million children would be eligible for only a 
partial benefit. Clearly, the Republicans have gerrymandered their 
credit to save money by denying it to as many working families as 
possible.
  Because the Democratic plan allows the credit to be offset against 
both payroll and income taxes, and allows families the full benefit of 
both the earned income tax credit and the child tax credit, the 
Democratic plan will reach 7 million more children than the Republican 
proposal.
  In addition, the Republican child credit is not indexed for 
inflation. The effect of the credit will drop every year as inflation 
decreases its value. The Democratic alternative will index the child 
credit for inflation. We are serious about giving tax relief for 
families. The Republican proposal is designed to appear generous, but 
in reality it offers little to lower and middle income persons. Even 
those middle class and upper income families who receive the credit 
under the Republican version are better off in the long run under the 
Democratic version, because their credit is indexed for inflation as 
well.
  The Democratic plan is not welfare. If a family does not work, and 
does not pay any federal taxes, they will not get the benefit of the 
credit.
  The Democratic alternative gives the credit only to working families. 
It will help those who need this credit the most, the working poor. The 
Republican proposal will not help them at all. The Democratic 
alternative offers an honest tax break. The Republican proposal is a 
let-them-eat-cake tax break.
  The Democratic proposal also does a better job of encouraging 
investment in education.
  The education provisions of the Republican bill are skewed toward 
higher-income taxpayers. The bill provides only $20 billion for the 
HOPE scholarship and nothing at all for the tuition deduction. But it 
provides over $7 billion for other savings provisions that help higher 
income families.
  The bill's allocation of only $20 billion to HOPE scholarship falls 
far short of the commitment made under the budget agreement to provide 
$35 billion for tax benefits for higher education. The letter signed by 
Newt Gingrich and Trent Lott on the budget agreement specifically 
states that tax relief of roughly $35 billion will be provided over 5 
years for post-secondary education, and that the education tax package 
should be consistent with the objectives put forward in the HOPE 
scholarship and tuition tax proposals contained in the Administration's 
fiscal year 1998 budget to assist middle-class parents.
  The administration's proposal had two goals: to help middle class 
families during the critical years while students are in college, and 
to encourage lifelong learning.
  Students and families across the nation are concerned about 
escalating tuition, and this bill does not do enough to help them. The 
Republican bill is flawed in other major respect in this area--it 
utterly fails to address

[[Page S6428]]

the need to help workers expand their skills and education.
  The Daschle alternative addresses these problems. It provides a 
broader HOPE scholarship, and a valuable tuition tax credit for 
lifelong learning. This credit will enable taxpayers to recover 20 
percent of their tuition costs up to a maximum of $10,000, for learning 
after the HOPE credit expires. This provision can give real benefit to 
teachers, nurses, auto mechanics and all others in jobs that need 
continual upgrading of skills. The workplace depends more and more on 
highly trained workers. To sustain a strong economy, we must invest in 
ongoing education throughout life.
  The bill also provides a disproportionate education benefit to high 
income families. It contains three separate provisions to encourage 
savings for college, at a total cost of over $7 billion over the next 5 
years. Lower income families do not have the luxury to save as much as 
higher income families do, and will not be able to take advantage of 
these provisions.
  The Democratic alternative provides some additional benefits for 
students that are also in the bill, and I support these provisions. 
Specifically, I support the permanent extension of section 127, the 
provision for employer-provided tuition, including graduate students. I 
also support the elimination of the $150 million cap for institutions 
of higher education, and the restoration of the deduction of student 
loan interest.
  I also strongly support funding for crumbling schools. The 
deterioration of hundreds of schools across the United States is a 
disgrace. But this bill offers only a token help on this problem. This 
bill allocates only $360 million over 5 years by making changes in bond 
rules. The Democratic bill, on the contrary, will result in a real 
commitment to improving our schools. It also encourages States to 
allocate that money to school districts with the greatest needs. The 
Republican bill offers only band-aids to put over leaking roofs. The 
Democratic bill provides real relief for school districts to repair 
their crumbling schools.
  The Democratic bill provides for these benefits--the crumbling 
schools, the section 127 aid, the student loan interest--in addition to 
HOPE and a tuition tax credit.
  In contrast, the Republican bill provides the additional benefits by 
taking away from HOPE and eliminating a tuition tax break. It pits 
student against student, giving these additional benefits to some 
students only at the expense of students who could benefit from HOPE 
and the tuition credit.
  Investing in education is investment in the future. We must do more 
to help all needy students. The tax benefits need to be targeted to 
those who need them, and not wasted on those who can afford to save and 
pay for college on their own.
  The Democratic proposal also better addresses the problem with the 
current estate tax, without creating a give-away to the rich.
  In the current tax system, the estate tax often creates real 
hardships for families who have just lost a loved one. When the owner 
of a family business or farm dies, there can be a large estate tax bill 
at one of the worst times possible. There may well be many other 
expenses such as funeral costs and legal bills. The estate tax could 
force the family to sell the business or farm.
  Relief is appropriate in these situations, and the Democratic 
alternative provides it. There would be special estate tax treatment 
when 50 percent or more of an estate consists of a family business or 
farm. In these cases, the first $900,000 of the estate is exempt from 
estate tax, as long as the children or grandchildren continue to 
actively operate the business or farm for 10 years.
  The Democratic alternative is targeted to cases where families may 
not be able to easily liquidate their holdings to pay the tax. The 
Republican bill gives relief to all estates. Even if the estate is that 
of a rich person who invested in stocks and other investments which are 
easily liquidated, the Republicans still give tax relief. The problems 
that deserve to be addressed occur only in approximately 1.4 percent of 
all estates. Instead of extending justifiable relief to these 1.4 
percent of estates, they extend relief to all estates. Clearly the 
Republicans are using rare cases of hardships for family farms and 
businesses as a fig leaf to cover a massive estate tax break for the 
wealthy.
  Finally, the 20-cent increase in the tobacco tax contained in this 
amendment is a critical element in tax fairness--and for achieving 
priority public health goals as well. I am pleased that it is not only 
a feature of this amendment but of the bill reported by the Finance 
Committee with a strong bipartisan vote.
  Tobacco is one of our most undertaxed industries. Even with the 20 
cents per pack cigarette tax increase, the tobacco industry remains 
grossly undertaxed--whether the standard is historical tax levels, 
comparison to other countries, or the costs that smoking inflicts on 
our society and on non-smoking taxpayers.
  In 1965, Federal and State tobacco taxes accounted for 51 percent of 
the retail price of a pack of cigarettes. By 1996, the figure had 
fallen to just 31 percent. Even with the 20-cents per pack increase, 
the share of the cost of a pack of cigarettes going to federal and 
state taxes will be 39 percent--still far below the 1965 level.
  Raising the cigarette tax by 20 cents will being our tobacco taxes 
more in line with the rest of the industrialized world. Our current 24 
cent per pack cigarette tax is one of the lowest among all 
industrialized nations--and it will still be one of the lowest, even 
with the 20 cent per pack increase in the bill.
  The costs that smoking inflicts on our society and on non-smoking 
taxpayers are immense. It kills more than 400,000 Americans a year. It 
costs the nation $50 billion a year in direct health costs, and another 
$50 billion in lost productivity. The average pack of cigarettes sells 
for $1.80 today--and it costs the nation $3.90 in smoking-related 
expenses.
  It is time that the tobacco companies paid a fairer share of these 
costs--and this bill is the time to start. Not only is a higher tax on 
tobacco products the fair thing to do, it is the most important single 
step we can take to stop the epidemic of youth smoking--an epidemic 
that will ultimately claim the lives of 5 million of today's children 
if we do nothing. One million young people between the ages of 12 and 
17 take up this deadly habit every year--3,000 new smokers a day. The 
average smoker begins smoking at age 13, and becomes a daily smoker 
before age 15. Raising the tobacco tax by 20 cents a pack will save the 
lives of 400,000 of these children. The fact is that a twenty cent a 
pack increase is only a starting place. We should do more--much more.
  Eight billion dollars of the funds raised by the tobacco tax increase 
over the next 5 years are earmarked for children's health insurance. 
Here, too, we need to do more. Even with the combination of these funds 
and the $16 billion in the budget agreement, at least four and a half 
million uninsured children will still be left out and left behind. 
Without the tobacco tax funds, 6.7 million children will remain 
uninsured. A tobacco tax increase devoted to children's health is the 
right policy at the right time.
  These facts are bad enough. But the problem is growing worse.
  According to a Spring 1996 survey conducted by the University of 
Michigan Institute for Social Research, the prevalence of teenage 
smoking in America has been on the increase over the last five years. 
It rose by nearly one-half among eighth and tenth graders, and by 
nearly a fifth among high school seniors between 1991 and 1996.
  Once children are hooked on cigarette smoking at a young age, it 
becomes increasingly hard for them to quit. Ninety percent of current 
adult smokers began to smoke before they reached the age of 18. Ninety-
five percent of teenage smokers say they intend to quit in the near 
future--but only a quarter of them will actually do so within the first 
eight years of beginning to smoke.
  If nothing is done to reverse this trend in adolescent smoking, the 
Centers for Disease Control and Prevention estimate that five million 
of today's children will die prematurely from smoking-caused illnesses.
  Increasing the federal cigarette tax is one of the most effective 
ways to reduce teenage smoking. Study after study has shown that the 
cigarette tax is the most powerful weapon in reducing cigarette use 
among children, since they have less income to spend on tobacco.

[[Page S6429]]

  Philip Morris, the nation's largest tobacco company, conceded as much 
in an internal memorandum as far back as 1981, which noted that ``it is 
clear that price has a pronounced effect on the smoking prevalence of 
teenagers, and that the goals of reducing teenage smoking and balancing 
the budget would both be served by increasing the federal excise tax on 
cigarettes.''
  Frank Chaloupka, an economist at the University of Illinois at 
Chicago, found that an increase in the federal cigarette tax by 20 
cents will reduce teenage smoking by 7 percent, saving the lives of 
almost 400,000 children.
  Finally, on the overall issue of tax equity, the Democratic 
Alternative is clearly fairer. More of the benefits of the Republican 
plan go to the top 1 percent of taxpayers than go to the bottom 60 
percent of the taxpayers (13.1 percent vs. 12.7 percent). In the 
Democratic alternative, only 1.4 percent of the benefits go to the top 
1 percent of taxpayers, and the top 20 percent of taxpayers only 
receive 20 percent of benefits. The vast majority of the benefits go to 
taxpayers who have income in the middle 60 percent of the income 
distribution (71.6 percent of the benefits). The Democratic alternative 
is vastly preferable to the regressive Republican bill, because it is 
fair to lower and middle income taxpayers.
  The Democratic alternative is honest to the American people. The 
Republican bill states that it will result in a balanced budget by the 
year 2002. In fact, it might accomplish this.
  But in future years, the amount of Republican tax cuts will explode, 
and the deficit will increase enormously. The Center on Budget and 
Policy Priorities has estimated that the cost of the Republican 
proposal will increase by between $500 billion and $600 billion in the 
10 years following the current budget period. It will be nearly 
impossible to balance the budget in those years if this Republican tax 
giveaway is enacted into law.
  The Democratic alternative does not engage in these accounting tricks 
to balance the budget. The Democratic alternative is honest with 
American people and fair to American taxpayers, and it deserves to be 
adopted.
  I withhold the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. BOND addressed the Chair.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. Mr. President, I yield the distinguished Senator from 
Missouri 7 minutes.
  The PRESIDING OFFICER. The Senator from Missouri is recognized for 7 
minutes.
  Mr. BOND. Mr. President, I thank the distinguished chairman of 
committee and the manager of the bill.
  Having been enlightened by quite a few minutes of debate on the 
floor, I asked for 2 additional minutes.
  First, I want to emphasize that what we are talking about here is a 
bipartisan bill. My friend from Massachusetts characterized it as a 
Republican bill.
  I particularly appreciated the kind comments by the Senator from 
Montana. As I listened to his praise of the measure, I was reminded of 
those immortal words of Mark Twain. When asked about the music of 
Wagner, he said, ``It is not as bad as it sounds.'' There was some of 
that in the praise that the Senator from Montana heaped upon this 
measure. I appreciate his support and his good words.
  When I listened to my colleague from Massachusetts, I found out why 
this music sounds so much better than the alternative because, Members 
of the Senate, I agree that we are looking for saving and protecting 
the working men and women of America, the small business owners. As 
chairman of the Small Business Committee, I have had the opportunity to 
listen to those people who are struggling to make a living for 
themselves and provide jobs for others through small business.
  I can tell you that after we dealt last year with some of the 
significant problems in regulatory reform, it was clear that the small 
businesses of America are overtaxed and overburdened by the Federal 
Government's desire for more money. They are the ones who are pulling 
the wagon. They are moving the economy. And they are paying the tariff 
for this Government.
  This measure, the bipartisan agreement reached between leaders of 
Congress and the President, provided that there would be spending 
reforms and that there would be tax reductions--tax reductions in the 
process of getting to a balanced budget. Those tax reductions are 
absolutely essential if we want to continue the dynamic engine that 
moves this country forward.
  I rise in strong opposition to the Daschle amendment because, No. 1, 
the Daschle amendment only provides $68.1 billion in net tax cuts-- a 
20-percent reduction from the bipartisan plan. It goes back on the 
agreement reached between the leaders of Congress and the President on 
what we need to do to get this economy moving again.

  The Daschle plan provides $14 billion less to American families than 
the bipartisan plan would in the child tax credit. Families under it 
would only receive $350 per child instead of $500 per child, and 
children aged 13 and over would not even be eligible.
  The Daschle plan, moreover, is a bad deal for seniors. Seniors get 
about one-third of the capital gains realized in this country. They 
would have to pay 10 percent more in capital gains taxes under the 
Daschle scheme.
  But it is a particularly bad deal for small business owners and 
farmers. It contains less than half the death tax relief contained in 
the bipartisan plan, and on capital gains taxes, seniors, small 
business owners, farmers, and self-employed would pay 10 percent more.
  As I said, the Daschle plan is a deal-breaker. The Daschle plan is 
outside of the scope of the agreement under which we are working.
  Mr. President, in saying that, I want to emphasize that there is one 
important element which must and will be added to the measure pending 
before us. One of the top priorities for farmers, ranchers, 
truckdrivers, and small business men and women across this country is 
getting fairness in tax treatment of the money paid for health 
insurance premiums. For too long people who are self-employed have 
suffered because they have not gotten the same breaks that a large 
corporation or institution gets in being able to deduct 100 percent of 
what is paid for health insurance.
  Now, I fought long and hard in 1995, and I included an amendment in 
the Balanced Budget Act, unfortunately, vetoed by President Clinton, 
which would have increased the health insurance deduction for the self-
employed to 50 percent from 25 percent. In 1996, I worked with Senator 
Kassebaum to include in the Health Insurance Portability and 
Accountability Act an increase in the self-employed health insurance 
deduction incrementally to 80 percent. That is not far enough and that 
is not fast enough. Today, while the self-employed can deduct 40 
percent of their health insurance costs, they are still not on a level 
playing field, and very few of them can wait until 2006 to get sick.
  The budget resolution reported out of the Budget Committee includes 
an amendment I offered that was cosponsored by every member of the 
Budget Committee present, which calls for a portion of the resources 
available in this legislation to be set aside for an immediate 100-
percent deductibility of health insurance for the self-employed. As I 
said, it was cosponsored by all members, Democrat and Republican.
  Earlier this month, I originated a letter to the Senate Finance 
Committee urging full deductibility for the self-employed. That letter 
was signed by 53 Senators. I believe that is a majority.
  Now, an immediate deduction of 100 percent would make health 
insurance more affordable and accessible to some more than 5.1 million 
self-employed who lack health insurance, almost a quarter of the self-
employed work force. In addition, full deductibility of health 
insurance by the self-employed will also help insure 1.4 million 
children who live in households headed by self-employed individuals.
  Coverage of these self-employed and their children through the self-
employed health insurance deduction will enable the private sector to 
address these health care needs. I am proud to cosponsor the amendment 
put forward by my colleague and neighbor from Illinois, Senator Durbin, 
which would pay for the cost of this deductibility with a 10-cent 
increase in the tax on cigarettes. This is one way we can pay for this 
measure. We know that 3,000 children become regular smokers every day 
and start down that dangerous

[[Page S6430]]

road at 13. By enacting this amendment, we cannot only pay for health 
insurance, we can provide a deterrent against children smoking and thus 
help save lives. In addition, the revenues raised will be used for a 
directly related purpose, reducing the cost of health care coverage for 
the self-employed and their families.
  Last week, with my colleague and neighbor from Arkansas, Senator 
Bumpers, I introduced a measure, the Pregnant Mothers and Infants 
Health Protection Act, to set up a fund to discourage smoking among 
pregnant women and among parents with small children because of the 
tremendous impact of birth defects from smoking and because of the 
danger of SIDS for those who smoke.
  In any event, I believe that this amendment will improve the measure. 
I urge defeat of the Daschle amendment. The budget resolution calls for 
full deductibility of health insurance. I look forward to working with 
my colleagues to include that measure in the final bill as reported 
out.
  I thank the Chair, and I thank the chairman of the committee.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. Mr. President, I yield 5 minutes to the Senator from New 
Hampshire.
  The PRESIDING OFFICER. The Senator from New Hampshire is recognized 
for 5 minutes.
  Mr. GREGG. I thank the Senator from Delaware. I wish to join with the 
many Members of this Senate who have congratulated the Senator from 
Delaware and the Senator from New York for bringing forward this 
bipartisan initiative, which is really rather extraordinary when you 
think about it. It is obviously an outgrowth of the fact that the 
President and the leadership of the Congress have gotten together on 
how to balance the budget and give a tax cut to working Americans.
  This bill is a product of that initial agreement which occurred in 
May. The fact it came out with almost unanimous support out of the 
Finance Committee is something that we should take very seriously as a 
Congress and especially as a people, in recognition of the fact that 
this is a bipartisan initiative.
  Now the leader of the Democratic Party has come forward, even though 
a large--well, the entire Finance Committee membership of the Democrat 
Party voted for the underlying bill--the leader of the Democrat Party 
has come forward with a proposal as an alternative. I think a couple of 
comments need to be made about the specifics of that because it has 
some problems in the way it handles children and families with 
children.
  To begin with, it is a phased-in child credit. So, under Senator 
Daschle's proposal, it is not until the year 2000 that families get the 
$500 credit. In fact, if you have a child who is over the age of 12, 
you do not get any credit, any credit at all until the year 2002.
  Well, the practical effect of that is that there are going to be a 
lot of kids who outgrow the credit; the kids grow up; they get older. 
The credit will not be available. The families will not have a credit 
between now and the year 2000 if their children are under 12. It will 
be a phased-in credit. And if their children are over 12, they won't 
get it until 2002. If you have a child who happens to be a 12-year-old 
today, you are never going to get this credit under the--not the 
Democrat proposal, because the Democrats are supporting the underlying 
bill--under the Daschle proposal.
  It is pretty outrageous, really, to claim that that bill is more 
effective in addressing kids than the bipartisan proposal when it does 
not even cover kids. It does not even cover kids who are over 12 years 
old until the year 2002.
  Equally significant is the practical effect of the way that they 
recover the credit from working families. Under the Daschle proposal, 
the effective tax rate of families earning between $70,000 and $80,000 
that have a number of kids in the family would be 58 percent not 
counting the FICA tax. So the actual tax rate under the Daschle bill is 
73 percent--73 percent for those folks in that income bracket.
  Now, there are a lot of working Americans today who have a fair 
number of kids who have to have both parents work to support them. And, 
in fact, unfortunately, one of the facts of America today is that many 
parents have to work simply to pay taxes. One of the spouses works 
full-time simply to pay the taxes on the family and the other spouse 
works to try to take care of the family. One is working to take care of 
the Government; the other one is working to take care of the family.
  If you have a number of kids and you are getting hit with a 73-
percent tax rate, even though you may have a fairly high income with a 
fair number of kids, that tax rate essentially wipes out your income, 
wipes out not only the income of the spouse working for the Government, 
but it does a pretty good job on that spouse who is out there trying to 
earn for the family.
  Mr. DOMENICI. Will the Senator yield for a question?
  Mr. GREGG. I am delighted to yield.
  Mr. DOMENICI. Will you explain for the Senate one more time what that 
73 percent is?
  Mr. GREGG. If you happen to have a large number of kids, and I think 
the Senator from New Mexico may have a few children----
  Mr. DOMENICI. They are already gone, but, yes, I do.
  Mr. GREGG. When we were coming up through the ranks, if you had seven 
to eight kids, which is a lot of kids, you would need an income 
probably of $70,000 to $80,000. Both parents would have to be working 
to maintain those families. In that bracket, you would be paying an 
effective rate of 58 percent on your income tax. And another FICA tax 
on top of that works out to be an effective rate of 73 percent on the 
additional earnings.
  Mr. DOMENICI. And that is under the Daschle proposal?
  Mr. GREGG. That is under the Daschle plan.
  Mr. DOMENICI. Do they raise taxes in those areas?
  Mr. GREGG. That is exactly what happens, because the manner in which 
they recover the tax credit from people after they start to phase down 
the tax credit is a tax increase of significant proportions, well above 
the base rate of 28 percent.
  The PRESIDING OFFICER. The Senator has used his 5 minutes.
  Mr. DOMENICI. I thank the Senator.
  Mr. GREGG. I thank the Chair.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. I yield 5 minutes to the Senator from Pennsylvania.
  Mr. SANTORUM. I thank the Senator.
  The PRESIDING OFFICER. The Senator from Pennsylvania is recognized 
for 5 minutes.
  Mr. SANTORUM. I thank the Chair.
  Mr. President, I rise in very strong support of the bill that came 
out of the Finance Committee, the tax bill that provides tremendous tax 
relief for all Americans, because what this bill is aimed at doing is 
creating jobs, creating opportunities, getting an infusion of capital 
so we can increase our productivity.
  Those are the kinds of things I thought we were going to be debating 
on the floor of the Senate. I thought we were going to talk about how 
we can create economic growth, how we can create better jobs for 
people, how the people at the bottom end of the economic strata can 
rise as a result of the opportunities that are available in the United 
States. And now what the Senate has evolved into today has been a bunch 
of charges that this isn't fair, that we should not look at economic 
opportunities or growth or jobs, a tune that is heard often here--jobs, 
jobs, jobs. We shouldn't look at job creation; we shouldn't look at 
economic growth; we should look at what is fair, who is getting the 
benefit, and we should draw class warfare lines in the sand here.
  I just want to, if I can--I hate to even sort of get down, though, to 
that level, but that has really been the focus of this debate. I want 
to throw out--I hesitate to do this because we just get numbered to 
death in the Senate, but let me throw out a couple of numbers that I 
think are very easy to understand.
  The top 20 percent of income earners in this country, the rich, the 
top 20 percent pay 79 percent of all income taxes. The top 20 percent 
pay 79 percent of all income taxes.
  Now, they pay 79 percent of all taxes. What percentage of the tax 
cuts in this bill do the ``rich'' get? Twenty-two percent. In other 
words, the group that pays three-quarters of the tax get one-fifth of 
the benefit. And this is being

[[Page S6431]]

charged as a tax break for the rich. If I were rich, I would say you 
are ripping me off. I am paying all the taxes and everybody else is 
getting all the benefit.
  But, no, they come here to the floor and they charge this is unfair; 
these people who are poor need tax cuts. Well, let me just straighten 
this out a little bit. Thirty-seven percent, the ``bottom 37 percent,'' 
of income earners in this country pay no taxes net. In other words, 
with the tax credits and the EITC and the other things that are out 
there, they pay no Federal income taxes.
  Now, I do not know how you give tax cuts to people who do not pay 
taxes, but that is what the other side wants to do. In fact, if you go 
deeper into the analysis, you find that not only does the bottom 37 
percent pay no Federal income taxes, the bottom 20 percent pays no 
payroll taxes net. In other words, all that money, the FICA that you 
have to pay out for Social Security and Medicare, if you are in the 
bottom 20 percent of income earners in this country, you get more back 
in earned-income tax credit than you pay out in payroll taxes.
  But that isn't good enough. So people are getting--not only do they 
pay no income taxes, they pay no payroll taxes. In fact, they get more 
back than they pay. The other side wants to give them even more money. 
I am not opposed to helping people out, but where is this money coming 
from? It is coming from people who are paying taxes, people who are in 
the middle class who have been paying taxes for the last 16 years at 
very high rates, who deserve a break.
  I am really about up to here with people running around saying we are 
for tax breaks for the middle class, but what they propose is welfare 
for people who pay no taxes. So let us get it straight. I am going to 
offer a resolution, a sense of the Senate, that says Federal income tax 
relief should go to people who pay Federal income taxes.
  Now, you would think that that would be a joke, that everybody would 
vote for that--anybody who pays Federal income tax would be the only 
ones eligible to get tax relief--but, unfortunately, you are going to 
find a whole bunch of people who are not going to vote for that.
  That is how far we have come. This is ``Washingtonspeak.'' For those 
of you who have not been in Washington very long, welcome, and this is 
what it is like. People actually stand around here and talk about 
giving tax breaks to people who do not pay taxes. While people who do 
pay taxes, anybody, is rich. Anybody who pays taxes in this country, by 
definition of what the Democratic plan is, is rich.
  If that is where we have come in America, then I think the Founding 
Fathers will be turning over in their graves because they thought they 
created the land of opportunity where people were rewarded for working 
hard, for taking care of their families, for providing for themselves. 
What we are saying here is you are the bad guys, you are the ones who 
have to pay more.
  The PRESIDING OFFICER. The time of the Senator has expired. Who 
yields time?
  Mr. ROCKEFELLER. Mr. President, I yield myself 5 minutes off the 
bill.
  The PRESIDING OFFICER. The Senator from West Virginia is recognized 
for 5 minutes.
  Mr. ROCKEFELLER. Mr. President, I have talked with Senator Moynihan 
and with Chairman Roth about what I am now going to say. That is, I am 
going to vote for the Daschle alternative. It is a more difficult 
decision if you have been on the Finance Committee, because of what the 
others who have spoken of which has been referred to as the oath that 
we took, to support the bill. I view my oath as being upheld, and I say 
so for the following reasons.
  This is a moral issue with me as well as a political philosophy 
issue. The piece of paper that we bound ourselves to, I will stick by. 
I was not satisfied, for example, with the earned income tax credit/
child tax credit relationship that came back. I read it to be a certain 
thing. It did not turn out to be that way. On the other hand, for those 
eight pieces on that piece of paper--Finance Committee members will 
know what I am talking about--I did say that I would uphold those on 
the floor. And I will continue to uphold those. If, for example, a 
Democrat offers an amendment which would bring the EITC, child care 
credit, or child tax credit--bring it more in my direction, the way I 
would like it to be, then I will oppose that even though it is in the 
best interests of the country, and, I think, the right policy in our 
country. I will do that because that is what I consider I took my oath 
of loyalty to. It was not an oath of loyalty in some military sense. It 
was simply a matter of the way a very complex and difficult, bipartisan 
committee like the Finance Committee works. If you are bound together 
and you bind yourself together through the act of raising your hand, et 
cetera, that has an implication; it expects a response and that 
response will be forthcoming from me if individual amendments are 
offered which are related to the deal.
  On the other hand, we have Democrats and we have Republicans in this 
body and I do think that the Democratic alternative being offered by 
Leader Daschle--and I greatly respect him and the work he has done on 
this, in a very trying period in his personal life--is a better 
alternative. Because I think it is a better alternative, it becomes--
although I think that most people would understand it is probably not 
going to prevail--I think it becomes very important to say this is a 
better alternative. If we were doing it, if the Democrats had control 
of this body, this would be more likely the way we would do it. That is 
the kind of statement I wish to make in making my vote.
  I care very much about what happens to the people of West Virginia. 
The economy of West Virginia is more fragile, the individual incomes in 
West Virginia are more fragile, especially as they are particularly 
young or particularly old, and I have a strong responsibility to that, 
as I do to my own sense of honor and my own word, within my work in the 
U.S. Senate and the particular nature of the Finance Committee.
  So I gladly say I am going to be supporting the Daschle amendment 
because it is the better approach to solving our country's problems. 
Just as I was very glad, back in 1993 when Chairman Moynihan turned to 
me and said I want you to cut $59 billion out of Medicare in order to 
ensure its solvency--I did not say slow the rate of increase, I said 
cut--and I went ahead and did it. And I helped put our economy in a 
position where we have been able to do things like provide a tax credit 
to hard working American families, and a number of other things which 
have been talked about on the floor.
  But I want to make the reasons for my vote clear. It is something 
important and delicate because of my respect not only for my Ranking 
Member Moynihan and Chairman Roth, who has been eminently fair and 
bipartisan in the way he has conducted the Finance Committee, and his 
fine staff, all of them have been very fair. I want to make it clear I 
think the Democratic approach is a better one and I will be voting for 
it for that reason.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. Mr. President, I yield 5 minutes to the distinguished 
Senator from Indiana.
  The PRESIDING OFFICER. The Senator from Indiana is recognized for 5 
minutes.
  Mr. COATS. Mr. President, I thank the Senator for yielding, and I 
also commend the Senator for some extraordinary work in putting 
together a real tax cut package for the American people.

  There are items in this tax package that we have been attempting to 
incorporate, to give relief to American taxpayers, for many, many 
years. The Senator has been a leader and a champion of these. I am 
pleased to see we have arrived at a point where we can make substantial 
progress towards achieving these goals. The $500 tax credit for 
children is something that parents desperately need. It is something 
that has been far too long in coming. Parents have been put at 
tremendous disadvantage over the years under our Tax Code, if they are 
raising children, trying to pay for their expenses. This $500 tax 
credit is a big step in the right direction, in terms of redressing 
that.
  I have some concerns about the designation, the mandate that 
designates

[[Page S6432]]

the credit is only received for children 13 and older if it is put into 
an education savings account. I will be speaking to that later, when 
the Senator from Texas introduces his amendment to make that optional. 
But I do support the other items in this package. It is far superior to 
the package that is being offered by Senator Daschle and some 
Democrats.
  I say ``some Democrats,'' because this is a bipartisan package. There 
will be a number of Democrats supporting us in this because they know 
families need tax relief, because they know that capital gains spurs 
investments, creates jobs, and more important, goes to seniors and to 
people, small business owners and others who are not rich but who have 
saved and accumulated over a lifetime, assets that are taxed away by 
the Government because of appreciation of those assets or, more 
important, because of inflation. One-third of the capital gains 
available today under this tax package goes to seniors. So the Daschle 
bill is an antisenior bill. A clear understanding of capital gains will 
demonstrate that.
  The changes in inheritance tax don't go to the rich, they go to the 
farmer who has been working on his land for his entire lifetime and 
would like to leave it to his children. They go to the small business 
owner who maybe started in his basement or garage and built up his 
business to a certain degree of asset level only for his family to see 
it taxed away and sold when that taxpayer dies, instead of passing on 
to his children. It goes to a large percentage of people who have every 
right to claim those assets. To suggest that we need an income 
redistribution, above what we already have, I think is a disservice. So 
I am in strong support of the Senator's position in opposition to 
Senator Daschle's proposal.
  The PRESIDING OFFICER. Who yields time?
  The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, how much time do we have?
  The PRESIDING OFFICER. The Senator from New Mexico controls 9 minutes 
and 30 seconds.
  Mr. DOMENICI. I yield 4 minutes to Senator Chafee.
  The PRESIDING OFFICER. The Senator from Rhode Island is recognized 
for 4 minutes.
  Mr. CHAFEE. Mr. President, I wish to take a few minutes this 
afternoon to urge support for the tax bill reported out of the Finance 
Committee last week, and the bill that is before us today. Obviously I 
am not referring to the substitute, I am talking to the basic bill that 
came out of the Finance Committee with the support of 18 members in 
that committee.
  That vote, 18 to 2 in the committee, more than anything else is a 
clear indication of the bipartisan process in which the chairman of the 
Finance Committee crafted the legislation. Others have talked about the 
major provisions of this bill, all of which are extremely important. I 
would just like to touch on some lesser known provisions, if I might, 
briefly.
  The bill before us includes a permanent extension of the orphan drug 
credit. This provision encourages drug companies to conduct clinical 
research on rare, what they call orphan diseases, diseases that do not 
occur very often and thus there is not a large market for the drugs 
that are produced to care for that particular situation. Drug companies 
are reluctant to risk the investment or research dollars with such a 
small patient population, as, for example, exists for cystic fibrosis 
or hemophilia or Lou Gehrig's disease or Tourette's syndrome. This bill 
encourages and provides tax credits for those drug companies that spend 
the research money in these particular areas.

  The bill also includes an extension of the work opportunity tax 
credit, which is an important tool to encourage businesses to hire 
individuals on public assistance. We passed, last year, the Welfare 
Reform Act. We want opportunities for those coming off welfare to find 
a job. The work opportunity tax credit does this. Currently, under the 
law, it is required that the individual work 400 hours in a job before 
the tax credit is available to his employer. Under this legislation, 
the 400 hours is reduced to 120 hours--with a reduced credit, but 
nonetheless something that will encourage employers to hire these 
individuals.
  Another provision that is included in this particular section says 
that the work opportunity tax credit extends to disabled individuals, 
those receiving SSI benefits. This is a separate group from those 
coming off from welfare.
  Another provision in the bill, which I think is very significant, 
small though it is, is the estate tax incentive for the preservation of 
open space. America is losing 4 square miles a day to development, 4 
square miles. In my State, over 11,000 acres of farmland have been lost 
to development since 1974. It is a small State. Think of that, 11,000 
acres gone to development from farmland. What this does is provide that 
those individuals who currently, if they keep their open spaces, are 
subject to stiff estate taxes--thus either they have to go into 
development to pay the taxes or, when they have to, sell it to 
developers--this provides a lower estate tax for land, as long as the 
owner is willing to keep the land undeveloped in perpetuity. In other 
words, he has to sign a conservation easement, keeping the land open in 
perpetuity, so there will be some open spaces around our major cities, 
places where there can be habitat for wildlife and plants and fish. 
This is a very, very significant piece, this section that is in the 
bill, that Senator Roth was good enough to give us leadership on.
  Mr. President, I yield to the chairman the remainder of my time.
  Mr. ROTH. Mr. President, how much time do I have?
  The PRESIDING OFFICER. The Senator has 5\1/2\ minutes.
  Mr. ROTH. I yield the remaining time I have to the distinguished 
Senator from North Carolina.
  The PRESIDING OFFICER. The Senator from North Carolina is recognized.
  Mr. FAIRCLOTH. Thank you, Mr. President. How much time do I have?
  The PRESIDING OFFICER (Mr. Hutchinson). The Senator has 5 minutes, 18 
seconds.
  Mr. FAIRCLOTH. Mr. President, I rise in strong opposition to the 
tobacco tax in this revenue bill. I am also troubled by this amendment 
to further increase tobacco tax. Make no mistake, these are flat-tax 
increases, plain and simple. This is no extension or loophole closure, 
it is a tax increase. That is what it is.
  I didn't think that we were here to raise taxes on American families. 
I didn't think we were here for that purpose, but, obviously, that is 
what we have done.
  The tobacco tax is the most regressive tax on the books today. We 
will drive up taxes on the working people more than anything, up to 
$100 or more per year.
  The people who earn $30,000 a year pay 1.2 percent of the income tax 
in this country, but the people who earn $30,000 a year pay 47.2 
percent of the tobacco tax. It is the most regressive tax on the books.
  I find it a bit odd that some of the big tobacco tax supporters are 
the same people preaching the need for greater equality in the tax 
relief package. You just cannot have it both ways.
  Mr. President, I say to my colleagues, is your talk about tax 
fairness anything more than talk? Is it airy persiflage, or do you mean 
what you are saying? Would you come to the floor to defeat a tax 
increase on the common man who smokes?
  This bill raises tobacco taxes by 20 cents a pack. The Durbin 
amendment would raise taxes by 10 cents a pack. This will hurt the 
18,000 tobacco farmers in North Carolina and thousands more throughout 
the Southeast. It will cost them, literally, their jobs and their 
livelihood. Sure, it will let politicians tell the news media that we 
really took a shot at ``Big Tobacco.'' Well, ``Big Tobacco'' can look 
after itself, but the people who are growing it, the farmers, who they 
are really taking a shot at, cannot. The companies will not be bothered 
by this. The people who are going to be hurt are farmers, families, and 
communities.
  It will hurt the 77,000 working people in North Carolina who grow 
tobacco and manufacture cigarettes. Just the tobacco sales bring in 
over $1 billion in cash receipts to the farmers of my State. The entire 
tobacco sector employs 150,000 people. It is a $7 billion business in 
North Carolina alone.
  These are the fundamental core people of this State--hard-working 
men, women, and their families. Can you imagine the joy that they 
expressed when I went home and told them that they were going to be 
thrown out of

[[Page S6433]]

business but that we had cut the cost of international air travel? 
Tobacco pays the mortgages, the grocery bills, and sends the children 
to college. These people don't do international air travel. Tobacco 
builds and has built the hospitals, it builds the churches, and it 
builds entire towns and communities.
  So, Mr. President, you be the judge. Is to say the tobacco tax is 
about politics not correct?
  The other side points to this tax and says this is about children's 
health insurance. They say it is about underage smoking, and they say 
it is about changing people's behavior.
  But it is not about children's health insurance. The settlement that 
the tobacco industry just signed clearly addresses this issue. There is 
$18.5 billion over 6 years for children's health insurance in the 
settlement that is now working its way through the process. The tobacco 
companies have already signed on the dotted line that they will pay 
into a fund for children's health insurance. There is already $16 
billion in the bill for children's health insurance, and now we are 
going to vote another $8 billion for children's health insurance when 
the President only asked for $8 billion in the original bill and said 
that would be enough. Now we are going to $24 billion, and he only 
asked for $8 billion. I have never known him to ask for too little.
  It is not about underage smoking. The industry just agreed to a 
sweeping package of changes to prevent underage smoking. The agreement 
virtually bans all advertising. The industry even agreed to massive 
fines if underage smoking did not drop drastically over the next 8 
years. I don't know how they are going to stop people from smoking, but 
that we will have to work on when it gets here.
  Mr. President, I ask unanimous consent for 2 additional minutes.
  The PRESIDING OFFICER. The manager may yield time off the bill. All 
time on the amendment has expired.
  Mr. ROTH. I yield 2 minutes off the bill.
  Mr. FAIRCLOTH. Mr. President, if this were it, the bill would include 
favors for a variety of special interests. The liquor tax would get 
special breaks, even skydiving would get a special break. No, no one 
ever caused an accident on the road after a night of smoking, and I 
never heard anyone being attacked after a cigarette binge.
  My point is, this bill isn't about public health, it is about the 
easy politics of attacking tobacco. The politics may be easy for 
Senators outside the Southeast, and particularly North Carolina, but 
this point reaches beyond politics. It reaches to the men and women in 
North Carolina and throughout the Southeast, hard-working people 
wondering why the U.S. Congress and their elected representatives are 
determined to throw them out of business and out of a job.

  Everyone in Washington talks about the small farmer. We hear it 
daily. North Carolina is made up of small farms. The size of an average 
U.S. farm is over 450 acres, and in North Carolina, it is around 150 
acres. We are small farms.
  Tobacco pays the bills. An acre of tobacco will yield roughly $1,200 
a year in net profit. Nothing else compares, and there really isn't 
anything else they can grow that begins to fit into the pattern and 
growth and lifestyle of the area.
  Tobacco keeps eastern North Carolina and Southeastern United States 
farmers on the land, and that is the simple bottom truth line. Tobacco 
keeps the family on the family farm. Washington politicians are driving 
families off the farm just to score political points back home.
  I want every Senator to understand what this tobacco tax means to 
real people. These farmers have names. They are good people. They are 
sending their children to school, and they are being driven out of a 
job to score political points. I hope that all Senators think about the 
people and the jobs that they are destroying when they next take a vote 
on a tobacco tax.
  And another question, who is next on the hit list from the tax 
increase crowd? Tobacco today, tomorrow who knows what product they 
have decided to tax out of existence. I hope my colleagues will vote 
against any other tax increase. It is time to stand up for the people 
who are in the business working for families. Mr. President, I yield 
the floor.
  The PRESIDING OFFICER. All time on the amendment has expired.
  Mr. MOYNIHAN. Mr. President, I yield the distinguished Senator from 
Louisiana such time as he may require from the bill.
  Mr. BREAUX. Mr. President, I thank the ranking member. I won't be 
that long. I rise to commend the Democratic leader on our side, Senator 
Daschle, and others who have put together a major effort in trying to 
offer a package of democratically oriented tax cuts which, in great 
sincerity, many, many people feel would be, by far, the better way to 
proceed--a more balanced, more honest package of tax cuts and how those 
tax cuts should apply to society.
  I think that what he is offering is yeoman's work in terms of 
fairness and making sure that if there is going to be a tax cut, people 
who need them the most will benefit the most from those tax cuts.
  While I praise my Democratic leader, I rise to say that I will not be 
able to support that package when it is called to be voted. I say that 
because we do not live in a perfect world. Neither is the Congress a 
perfect place. Neither is the Finance Committee a perfect group of 
individuals who have the wisdom of Solomon to craft a perfect bill. But 
what we have crafted in the Senate Finance Committee, because of the 
work of both Democrats and Republicans working together, I think is a 
package that merits our support.
  It is a better package from many perspectives, but let me concentrate 
just on the Democratic perspective of why the bill, in fact, is better 
than when it started.

  First of all, there is $24 billion more money which is directed at 
children for health care, for young children who today do not have 
health care. That is a major, significant achievement. That was 
achieved in a bipartisan fashion with major input from Democrats who 
insisted that whatever money we are able to generate should be used for 
children who need help and need assistance. That is in this package 
which is before us today.
  There is $8 billion of additional assistance that was achieved 
because, in a bipartisan fashion, we agreed to raise the cigarette tax 
on tobacco products and use a portion of those revenues for insuring 
the most vulnerable among us, the children, for one of the most 
important things that we can help children with, and that is their 
health care, both now and in the future. That is the result of a 
bipartisan working arrangement in the Senate Finance Committee.
  In addition, I think that we have taken what was originally a 
Republican proposal to give everybody a $500-per-child tax credit that 
you could use for whatever purpose. You could use it to take care of 
your children, but you could also use it to buy alcohol, you could use 
it to go to the racetrack, you could use it for whatever purpose. In a 
bipartisan fashion, we worked to craft an amendment that said you will 
have these additional tax credits if you use a portion of it to educate 
your children. I suggest that there is not a better thing that we can 
do for families with children than to help those parents educate those 
children for the future so they can be successful members of our 
society.
  We, as Democrats, I think, argued against indexing of capital gains 
saying we can't afford it. Let's take a capital gains reduction, we 
hope it will increase jobs and increase expansion in business, but also 
don't take the next step of indexing it. Because of working it in a 
bipartisan fashion, that in fact is in the bill.
  Again, working in a bipartisan fashion, we made some tough decisions 
on Medicare and Medicaid, as a result of what we did, to try and bring 
about competition, to try and say we will make the tough decisions now 
and no longer will we have to say to people who tell us to fix 
Medicare, no longer will we say not now, not with us and not with this 
program. We have taken the tough decisions, and we have accepted them. 
When people say fix Medicare, this Finance Committee can say that we 
did what was necessary when we were called upon to make those 
decisions.
  So I think as you look at the total package, it is better than when 
it

[[Page S6434]]

started. I, for one, as a person who participated in that process would 
feel less than totally honest if I was able to get the things that make 
it better in the package, and then when it came to vote for that 
package, walk away and say, ``No, I am going to vote for something 
else.'' That is not, I think, the way things should operate in a 
democratically elected body which is a divided Government. But while we 
have a divided Government, we do not have a divided Finance Committee. 
I think because of that bipartisan spirit and what we were able to do, 
today we have a better package before us.
  Again, I commend our Democratic leader for offering something that I 
think if we were in control would be the bill that would be before this 
committee. But that is not the case. But what is the case is a fairly 
arrived at package that makes this bill much better. I think it 
deserves our support.

  Mr. MOYNIHAN. Well said.
  Mr. BREAUX. I yield the floor.
  Mr. DASCHLE addressed the Chair.
  The PRESIDING OFFICER. The distinguished Democratic leader.
  Mr. DASCHLE. I will use my leader time, whatever time I may consume, 
to close the debate on the amendment.
  I think it has been a good debate. We have had the opportunity to 
exchange views. I think perhaps there has been some misinformation 
about what the amendment does and does not do. I have heard that it is 
antisenior. I have heard that it raises taxes. There are a lot of 
concerns that perhaps at times like this we ought to spend time 
rebutting, but let me just get down to the basics.
  The basics are that we want to provide as much help to middle-class 
families as we can. We want to provide as much growth and opportunity 
for expansion to startup companies, to companies that really need the 
help as we can.
  Our view is that those companies that are in the multi-multibillion-
dollar category, multinational companies that have extraordinary assets 
ought to be viewed differently than those companies that are just 
beginning, those startup companies that need all the help they can get 
to be able to survive and compete. We want to help those. We realize 
that our resources are not unlimited. So if they are not unlimited, we 
have to target the best we can those companies that indeed need the 
greatest degree of assistance.
  We provide that in capital gains. We provide that in a number of 
investment incentives that allow those companies the opportunity to do 
all the things that they can to be competitive, be the next Microsoft 
or the next IBM.
  Third, we feel it is as important as anything we do in this bill to 
target as many of our resources to education as possible.
  And fourth, we want to do it in a fiscally responsible way. We are 
very concerned about the tax time bomb that could occur in 10 or 15 
years, as we watch this explosion with great dismay, having worked so 
hard now to balance the budget and to bring this budget into balance 
within the next couple of years.
  So, Mr. President, that is what we do, those four things. We provide 
more targeted assistance to those families who need it the most. I 
respect immensely the work done in the Senate Finance Committee. I 
respect the effort made in particular by the chairman and the ranking 
member in working in a bipartisan way. I respect Members who have made 
decisions on either side of this amendment for whatever agreements may 
have been consummated and the interpretation of the agreement as it 
relates to this amendment. I respect that.
  I intend to vote, if we are not successful with this amendment, for 
the final package. But I do believe we can do better. I believe that 
when we provide 65 percent of the benefits to the highest 20 percent of 
incomes in this country, we can do better in distributing benefits 
across the board more effectively. I believe that our bill, which 
provides 75 percent of the benefits to the 60 percent in the middle, 
does a better job of using limited resources where they can do the most 
good.
  Mr. President, that is what this amendment does. That is why I feel 
so enthusiastic about supporting it. That is why I am hopeful we can 
get a good vote this afternoon.
  I yield the floor 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 occurs on agreeing to the 
amendment No. 527 offered by the Democratic leader. 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 38, nays 61, as follows:

                      [Rollcall Vote No. 134 Leg.]

                                YEAS--38

     Akaka
     Biden
     Bingaman
     Boxer
     Bumpers
     Cleland
     Conrad
     Daschle
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Ford
     Glenn
     Harkin
     Hollings
     Inouye
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moseley-Braun
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Sarbanes
     Torricelli
     Wellstone
     Wyden

                                NAYS--61

     Abraham
     Allard
     Ashcroft
     Baucus
     Bennett
     Bond
     Breaux
     Brownback
     Bryan
     Burns
     Byrd
     Campbell
     Chafee
     Coats
     Cochran
     Collins
     Coverdell
     Craig
     D'Amato
     DeWine
     Domenici
     Enzi
     Faircloth
     Frist
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Hagel
     Hatch
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Kempthorne
     Kerrey
     Kyl
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Moynihan
     Murkowski
     Nickles
     Roth
     Santorum
     Sessions
     Shelby
     Smith (NH)
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                             NOT VOTING--1

       
     Roberts
       
  The amendment (No. 527) was rejected.
  Mr. MOYNIHAN. I move to reconsider the vote.
  Mr. CHAFEE. I move to lay it on the table.
  The motion to lay on the table was agreed to.


                     Amendment No. 520, As Amended

  Mr. ROTH. Mr. President, I ask that the Senate now resume 
consideration of amendment No. 520, the committee amendment.
  The PRESIDING OFFICER. The Senator has that right. The pending 
amendment now is amendment No. 520.
  Mr. ROTH. Mr. President, this amendment includes the $8 billion 
additional funds for the children's health initiative. As we have 
discussed earlier, the children's health initiative is a critical piece 
of the legislation before the Senate. Members on both sides of the 
aisle, both ends of the political spectrum, and everyone in between are 
committed to addressing the issue of reaching our Nation's children.
  Each morning, more than 10 million children wake to face a day 
without health insurance. Clearly, this situation has weighed heavily 
upon us.
  Throughout the first quarter of the 105th session of Congress, a 
number of Members have contributed to various proposals for reaching 
these children. I thank all my colleagues for their hard work and 
effort. At this hour, we have now reached a bipartisan agreement on the 
structure of how to help the States reach more of these uninsured 
children. Now that we have a structure, we must also ensure that it is 
adequately funded.
  The committee amendment will provide an additional $8 billion for the 
children's health initiative, will secure that final necessary piece to 
make this bipartisan agreement work. Some Members may argue that $16 
billion is too much money for the children's health initiative. Other 
Members will argue that $24 billion is not enough. The Finance 
Committee, which has carefully considered this issue, has agreed on a 
bipartisan basis that it is just right, and with this committee 
amendment we will inject $24 billion into reaching the goal of 
providing health insurance to more children.
  Let me remind my colleagues that the States will also be required to 
provide matching funds. So the total amount will rise even higher. Of 
the 10

[[Page S6435]]

million children without health insurance, about 60 percent are either 
eligible to be enrolled into the Medicaid Program or they live in 
families with incomes about 250 percent of the poverty level. For a 
family of four, that is more than $40,000.
  We do not, of course, want to displace the role of the private sector 
in providing health insurance for children. So this new initiative is 
really meant to be targeted for those approximately 3.8 million 
children who live in families who earn too much to qualify for Medicaid 
but not enough to pay for private insurance. The committee amendment 
will ensure that there are sufficient funds to meet the goal of 
reaching these children, and I urge all of my colleagues to support the 
Finance Committee provisions on this critical issue.
  Mr. MOYNIHAN. Mr. President, in brief, sir, in the history of child 
health care, in the U.S. Congress there has been no measure equivalent 
in size and range to the measure the distinguished chairman brings 
before you. We spent much of the 103d Congress on this subject and did 
not add a penny to child health care. In 2 days, the Finance Committee 
added $24 billion, which we bring to you in this amendment, which I am 
sure will be supported on both sides.
  Mr. KENNEDY. Will the Senator yield for a question? Will the chairman 
yield for a question?
  The PRESIDING OFFICER. The Senator from Delaware controls the time.
  Mr. ROTH. I am happy to yield for a question.
  Mr. KENNEDY. Thank you very much. As I understand it, by accepting 
this proposal, the cigarette tax, which will be used to fund the Hatch 
proposal on child care, will actually terminate as a funding stream 5 
years from now, and the revenues that will be raised by that tax will 
be used to offset the increased expenditures in the IRA's--just so that 
we all have an understanding of the final decision made by the Finance 
Committee.
  Mr. ROTH. Mr. President, I say to my distinguished friend and 
colleague that the cigarette tax is permanent; it is not limited to 5 
years.
  Mr. KENNEDY. But the funding stream for the Hatch proposal----
  Mr. ROTH. The funding stream is a 5-year plan.
  Mr. KENNEDY. At the end of the 5 years, the funds that would be 
provided by the tobacco tax will be terminated for the children's 
health insurance proposal. So, effectively, we are saying to the 
States, as I understand it, that they are going to get a funding stream 
for 5 years. At the end of that, at least in this proposal, there will 
be no further funding.
  Mr. ROTH. I will yield to the distinguished Senator from Utah to 
comment on that.
  Mr. HATCH. Mr. President, I will respond to my colleague 
from Massachusetts. Because of the unique situation in which we were 
able to add this spending provision to the tax bill, this is the way it 
is written.

  Mr. ROTH. I point out that the tobacco tax was for all purposes in 
the bill, not just for the children's health insurance.
  Mr. KENNEDY. Well, I thank the Senators. As I understand it, then, 
the tax will be permanent, but those revenue streams that will fund the 
children's health insurance--the $8 million --will terminate after 5 
years, and those revenues that would be created by the cigarette tax 
will be used for the offset, either on the IRA's, or the capital gains, 
or the estate taxes. I think I understand it correctly.
  Mr. ROTH. I point out that what we have here is a 5-year plan, as I 
think was originally the case for the distinguished Senator from 
Massachusetts. Obviously, the plan can be renewed at the end of the 5 
years.
  Mr. KENNEDY. I just wanted to clarify the limitations on this funding 
stream. But I am grateful for the chairman's answer.
  Mr. ROTH. I yield to the Senator from Utah.
  Mr. HATCH. The original Hatch-Kennedy bill proposed a $20 billion 
health insurance program for children, plus it contributed $10 billion 
for deficit reduction. It was a 5-year authorization. Both of the 
sponsors assumed--and I believe properly so--that this program will 
work well, that children will benefit from it, and that it will be 
reauthorized at the end of 5 years. I have no doubt that is the case 
here as well.
  But the provision the Finance Committee adopted continues the tax 
beyond the 5-year period, and the revenues may be used for other 
purposes.
  To be clear, I assure my colleague from Massachusetts that, should 
this program work well, we will be revisiting it in 5 years.
  And there is an additional point I wish to make for those of my 
colleagues who believe the additional funding is not needed. It seems 
fairly clear that the $24 billion, as important a sum as it is, will 
not cover all of the 10 million children who lack insurance. If we are 
very, very lucky, or if the Congressional Budget Office is smiling on 
us that day, it will cover at most about 8 million children. These 
figures are obviously subject to the way the States craft their 
programs, their cost-sharing requirements, and whether the States 
choose block grants or Medicaid.
  For example, if all of the States chose Medicaid, which I do not 
believe would happen based on conversations I have had with Governors, 
I estimate that the most children we could cover with the $24 billion 
is around 5 million.
  The other point I feel compelled to raise is that the CBO estimates 
are coming in very meager. I am not sure why, but they have been 
consistently scoring the major children's health proposals as helping 
very few children.
  For example, I am told their preliminary estimate for the CHIPS 
proposal was that it would cover 2 million kids. Their initial estimate 
on the House-passed block grant was that it would help around 500,000 
children, although that was later revised to 860,000.
  As a simple gauge, I use the figure of $1,000 per child to measure 
coverage. This is more than the Federal share of an average Medicaid 
child, and equal to or slightly less than the average high-quality 
group health plan. This is also the rough measure that Dr. Bruce 
Vladeck at HCFA uses.
  Based on that rough calculation, $24 billion over 5 years would cover 
just short of 5 million kids per year. That assumes that the funding 
were equal each year, and it assumes that there would be absolutely no 
inflation.
  But to those who express concern about the shelf-life of the $8 
billion figure we are considering today, the bottom line is that we are 
going to see how this program works.
  I assure my friend and colleague and partner on this effort, a 
legislator who has been a tireless advocate for children for decades, 
that if this program works and it is benefiting children, we are going 
to reauthorize it five years from now.

  It is that simple. I give my assurances that I intend to do 
everything in my power to live up to that promise. And I hope that our 
colleagues will support that.
  This particular amendment has been brought up separately--not as part 
of the overall bill--because it is a spending amendment on the tax 
bill.
  Because a point of order has been lodged, we need 60 votes in order 
to retain my provision in the bill.
  I believe I am not overstating it--and I would like my colleagues to 
correct me if I am wrong--when I say that resolution of this issue as 
part of the total tax spending package was the critical juncture in 
bringing us together in the Finance Committee. That is a key reason why 
we have had so much support on both sides of the aisle.
  So, it is critical that we pass this as part of the overall plan. I 
hope our colleagues will take that into consideration.
  The tobacco tax is considerably less than that embodied in the Hatch-
Kennedy bill, S. 526. But because of the $16 billion already in the 
spending bill we passed last night--which most would agree was placed 
there largely in response to the original Hatch-Kennedy filing--and 
because of the $8 billion we are adding today, we should have an 
adequate amount to take care of a substantial number of uninsured 
children in the foreseeable future.
  If we approve this proposal and then retain the full $24 billion in 
the final conference agreement that is signed by the President, it 
would be a terrific thing for our society.
  Adoption of this amendment can only help bring a larger bipartisan 
vote on the tax bill. And, in the end, I think we could all walk away 
feeling that we had accomplished the most significant

[[Page S6436]]

advance in children's health for decades.
  I yield at this point.
  Mr. CHAFEE addressed the Chair.
  The PRESIDING OFFICER. The Senator from Rhode Island is recognized.
  Mr. CHAFEE. Mr. President, this is a very important measure that the 
distinguished chairman of the Finance Committee is advancing here this 
evening. What we are doing is, as he mentioned, our very best to care 
for the maximum number of low-income children with health care. There 
is a prescribed or suggested package of benefits that includes 
eyeglasses and hearing aids for these children from very, very low-
income families. So, Mr. President, I urge my colleagues to support 
this measure.
  I want to commend the chairman of the Finance Committee, the 
distinguished Senator from Utah, and, of course, the ranking member, 
Senator Moynihan, for everything they have done to advance this 
proposal.
  Mr. KENNEDY. Mr. President, I am certainly going to support the 
proposal that is recommended by the committee itself. I want to commend 
my friend and colleague, Senator Hatch, for his perseverance and 
persistence and tough-mindedness in moving us as far down the road as 
we are. But I think we are receiving numbers, even as we are here, 
about those that will be covered and, also, for example, by CBO--the 
number that they believe will be covered is considerably less than has 
been estimated by the Finance Committee.
  It just seems to me that the great concerns that have been so well-
articulated by the chairman of the committee and my friend and 
colleague from New York, Senator Moynihan, Senator Chafee, and Senator 
Hatch, about the numbers of uninsured, and the fact that they are at 
the margin in terms of their income, being able to have to provide 
approximately after-tax income of almost maybe $800 or so, in that 
range, it is still a very heavy burden. I certainly hope that we can 
find--with the strong health implications of raising the tobacco tax 
and the importance of this particular national need, we welcome the 
fact that now it is an accepted Senate position that we are going to 
have a 20-cent increase, but that we can get about the business of 
assuring that all of those children are going to be covered. So I want 
to thank those Senators, Senator Hatch in particular and our other 
colleagues, for being willing to accept the concept and framework of 
the Hatch proposal. I also indicate that I think we have an opportunity 
to take care of the other remaining uninsured children. I don't know 
why we would take care of one child and not take care of another when 
they are all basically the sons and daughters of working families.

  So I hope the Senate will accept this proposal. I want to make it 
very clear that we are preserving our right to make sure we are going 
to get coverage for the other children as well.
  Mr. ROTH. I yield 3 minutes to the Senator from West Virginia.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. ROCKEFELLER. Mr. President, I thank both my ranking leader and 
the chairman of the committee. I say to my good friend, Senator Kennedy 
from Massachusetts, that having witnessed this process, Senator Hatch 
fought like a tiger, would not yield in very close quarters, in order 
to get the additional $8 billion added on for children's health 
insurance, along with Senator Chafee, myself, and others. I think that 
ought to be very clear.
  As Senator Chafee said when Senator Chafee and this Senator's bill 
failed, we managed to raise the standards of the bill to pass to such a 
degree to being very effective. As for not covering all children, that 
will be a matter of debate because of the uninsured already eligible 
and how to get to them.
  I urge support of the committee amendment.
  Mr. MOYNIHAN addressed the Chair.
  The PRESIDING OFFICER. The Senator from New York is recognized.
  Mr. MOYNIHAN. Mr. President, this is one of the finest moments the 
105th Congress will know. It could not have come about without the 
courage and the conviction of the Senator from Utah. I would like to 
affirm everything he has said about the support on both sides of the 
aisle. It would be nice to have a unanimous vote. Let us hope we do 
have that, or near thereto.
  Mr. CHAFEE. Mr. President, I would like to contribute regarding the 
work that the Senator from West Virginia did. But for the groundwork he 
laid in connection with what type of benefits there would be, what kind 
of assurances there would be for these children, I don't think we would 
be where we are.
  So I want to pay tribute to the Senator from West Virginia.
  The PRESIDING OFFICER. Who yields time?
  Mr. ROTH. I yield 5 minutes to the Senator from Utah.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, this morning we started the first of a 
series of hearings in the Judiciary Committee on the tobacco global 
settlement. I have to say that the funding for this $8 billion, as well 
as a number of other provisions that will be in the tax bill, happens 
to come from the 20-cent-per-pack tax on cigarettes.
  The reason that Senator Kennedy and I originally put into our 
original bill a 43-cent tax on cigarettes is because tobacco is the 
number one preventable cause of death in this country today.
  It is particularly important in this instance because of these 10 
million children who are without health insurance, 5 million of them it 
is estimated will ultimately wind up smoking if we do not find some way 
to make smoking less attractive for them. It is also a proven fact that 
every time smoking goes up 10 percent in cost that 7 percent of these 
kids will never attempt to smoke, which is a very wise thing here. It 
is a spinoff benefit that we get in adding the cigarette tax.
  I might also add that 50 percent of all smokers began before the age 
of 14, and 90 percent began before the age of 18.
  So this particular amendment and this particular aspect of this 
particular bill has many, many good reasons for its adoption.
  I hope our colleagues will support this because I think it is 
critical, and I think my colleagues on both sides who are really 
familiar with this will say that it is critical in the overall binding 
together in a bipartisan way of Democrats and Republicans in the best 
interest of our country and in support of these major, major two pieces 
of reconciliation legislation.
  If you stop and think about it, this is one of the most just taxes 
that we have ever passed, and we have limited it to 20 cents rather 
than 43 cents. The advantage of that is that we will raise enough money 
to help not only children but help with some other serious problems on 
the committee.
  It was a very difficult discussion because we always have revenue-
raising problems, we always have offset problems, and we always have 
problems of differences on the Finance Committee. But here basically 
everybody was brought together. Ultimately this side of the equation 
passed 18 to 2. The spending side passed 20 to zero.
  I hope our colleagues will support this amendment because it is 
critical to the overall passage of this matter.
  It is also critical to these children. I don't know of a better thing 
we can do. We spend an awful lot of time around here doing an awful lot 
of good for people who can't help themselves, and here is a case where 
we have children 90 percent of whom live in families with at least one 
parent who works who can't help themselves but would if they could. 
This is the way to solve that.
  It is a reasonable compromise. It is something that will work. It 
gets enough money out there in comparison to Hatch-Kennedy that I think 
it will work. It does it in a thrifty savings way.
  I want to personally compliment the chairman and the ranking member 
of this committee and other members of this committee for their 
willingness to see through the solution of these problems with this 
amendment. I hope my colleagues on our side will support this 
amendment. I hope our colleagues on the Democrat side will support it 
because in doing so we will be pushing this process greatly forward.
  I thank all of those who have participated and who will participate 
in helping us to do so.
  I yield the floor.
  Mr. HATCH. Mr. President, why do we need 8 billion on top of the 16 
billion already appropriated?
  We learned earlier that the House Commerce block grant may be scored

[[Page S6437]]

as reaching only 860,000 uninsured children. I understand that this is 
a complicated matter because some funds will be used for direct 
services and not to purchase insurance. But it just shows you that this 
whole area is not cheap.
  We heard from Bruce Vladeck it costs about $1,000 or so for a good, 
solid insurance policy. We also know that the Federal share of Medicaid 
this year averages about $860 per child.
  In the first year of the CHILD Program there will be an even 50/50 
split between health care and deficit reduction so that $3 billion will 
be used for program costs. In year five, this program component will 
grow to $5 billion.
  Using these numbers as a guide, it seems reasonable to expect that, 
depending a great deal how states chose to implement this program that 
our bill will be able to cover about 3.5 million or so children in the 
early years of the program and about 5 million children in the fifth 
year.
  There are many variables such as which States chose to participate, 
what their State matching requirement is, what coinsurance and 
copayments they require, and so on. We must also take into account 
inflation which will erode the purchasing power of the yearly 
allocation.
  Another way to look at the problem is to see how many children the 
$16 billion in the budget agreement could cover. This $16 billion 
amounts to an average of $3.2 billion per year. If we used all of this 
money to buy Medicaid coverage at $860 per child, it would cover about 
3.7 million children.
  This would still leave 1 million children under 125% of poverty with 
no health insurance.
  Twenty-four billion dollars is about $4.8 billion per year spread 
over 5 years.
  Depending on how States implement the program, cost-sharing 
requirements and so forth, I think that would cover between 5 and 6.5 
million, perhaps 7 million children.
  The PRESIDING OFFICER (Mrs. Hutchison). Who yields time?
  Mr. ROTH. Madam President, I don't see anyone requiring further time 
to debate this issue.
  So I yield whatever time I have remaining.
  Mr. DOMENICI addressed the Chair.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. DOMENICI. Is all time yielded?
  The PRESIDING OFFICER. All time has been yielded.
  Mr. DOMENICI. Madam President, I raise the point of order under 
section 302(f) of the Budget Act that amendment No. 520 results in the 
Finance Committee exceeding its spending allocations under section 
602(a) of the Budget Act.
  Mr. ROTH. Madam President, I move to waive all points of order 
against the committee amendment language for consideration of this 
provision now, and also for the language, if included at later stages, 
of the revenue reconciliation process such as in a conference report.
  Mr. McCONNELL. Madam President, I 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 occurs on agreeing to the motion 
to waive the Budget Act. The yeas and nays have been ordered. The clerk 
will call the roll.
  The bill 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 
who desire to vote?
  The yeas and nays resulted--yeas 80, nays 19, as follows:

                      [Rollcall Vote No. 135 Leg.]

                                YEAS--80

     Abraham
     Akaka
     Allard
     Baucus
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bryan
     Bumpers
     Burns
     Byrd
     Campbell
     Chafee
     Cleland
     Cochran
     Collins
     Conrad
     D'Amato
     Daschle
     DeWine
     Dodd
     Domenici
     Dorgan
     Durbin
     Enzi
     Feingold
     Feinstein
     Frist
     Glenn
     Gorton
     Graham
     Grassley
     Hagel
     Harkin
     Hatch
     Hollings
     Hutchison
     Inouye
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Reed
     Reid
     Robb
     Rockefeller
     Roth
     Santorum
     Sarbanes
     Shelby
     Smith (OR)
     Snowe
     Specter
     Stevens
     Thomas
     Torricelli
     Warner
     Wellstone
     Wyden

                                NAYS--19

     Ashcroft
     Coats
     Coverdell
     Craig
     Faircloth
     Ford
     Gramm
     Grams
     Gregg
     Helms
     Hutchinson
     Inhofe
     Kyl
     McConnell
     Nickles
     Sessions
     Smith (NH)
     Thompson
     Thurmond

                             NOT VOTING--1

       
     Roberts
       
  The PRESIDING OFFICER. On this vote the yeas are 80, the nays are 19. 
Three-fifths of the Senators duly chosen and sworn having voted in the 
affirmative, the motion is agreed to. The Budget Act is waived.
  Mr. ROTH. Madam President, 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. ROTH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. Madam President, I ask unanimous consent that the next two 
first-degree amendments in order to S. 949 first be an amendment by 
Senator Domenici regarding budget enforcement, to be followed by an 
amendment by Senator Byrd regarding the budget.
  Mr. KERRY. Reserving the right to object.
  The PRESIDING OFFICER. Is there objection?
  Mr. KERRY. Reserving the right to object. I will not object.
  Mr. DURBIN. Reserving the right to object, if I might ask the 
chairman before this unanimous consent is considered, I have an 
amendment pending, which I believe is the regular order, that I would 
like to have called up.
  Mr. ROTH. I would say to the distinguished Senator from Illinois that 
we want to move ahead on a few amendments that I had mentioned here on 
a unanimous-consent basis. We will discuss with the Senator later his 
amendment.
  Mr. DURBIN. Do I have the chairman's assurance that this amendment 
will be protected, there will be time for debate on it this evening?
  Mr. ROTH. Yes. There will be time to debate it this evening. That is 
correct.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                     Amendment No. 520, As Amended

  THE PRESIDING OFFICER. The question now occurs on amendment No. 520, 
as amended, offered by the Senator from Delaware. If there be no 
further debate, the question is on agreeing to the amendment.
  The amendment (No. 520), as amended, was agreed to.
  Mr. ROTH. Madam President, 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.

                          ____________________