[Congressional Record Volume 143, Number 92 (Thursday, June 26, 1997)]
[Senate]
[Pages S6475-S6476]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          TAXING SEVERANCE PAY

  Mr. TORRICELLI. Mr. President, throughout the course of this day, 
Members of the Senate have offered amendments which on occasion were of 
considerable benefit to people of great wealth, to encourage them to 
make investments for the benefit of our economy. As we have just 
witnessed, on occasion during the day, Members of the Senate have 
offered amendments for people of modest incomes, to encourage their 
savings, help them with the high cost of living and raising children. 
Indeed, many segments of society will find in this tax legislation 
various forms of benefits--to help with retirement and health and the 
rearing of children.
  Tomorrow, I will offer an amendment to the bill, not designed for 
those of high income and not specifically for those of moderate income. 
More particularly, it is designed for those of no income.
  The leading cause of unemployment in America for the last decade 
remains large-scale corporate downsizing. Even in a healthy economy, 
because of the introductions of new technologies, requirements of new 
skills, changes in trading patterns, acquisitions, mergers, people who 
are competitive, people who get up every day and work hard and are 
devoted to their communities, their families and their professions, 
their jobs, through no fault of their own, can find themselves in a 
situation without employment.
  Indeed, in the last decade 20 million Americans have been excused 
from their employment because of a large-scale corporate downsizing. 
But, in a considerable and rising tide of corporate responsibility, 
many of these companies have adopted the modern practice of giving 
severance pay to their employees. It is a chance, by the corporation, 
to give to the employee modest amounts of money upon their departure to 
reorganize their lives, seek new skills, move to a new location, start 
a business or go into retirement.
  Indeed, in a recent experience in my own State of New Jersey, one of 
the largest corporations in America, AT&T, only a year ago laid off 
40,000 employees in a single announcement. A third of those employees 
decided to start their own businesses. A third went into retirement. 
Indeed, only a minority ever found employment in the short term under 
similar circumstances, and they were all offered severance pay.
  The problem, and it is the subject of my amendment tomorrow, is that 
while corporate America is offering this severance pay for people to 
continue and reorganize their lives in this competitive economic 
environment, the Government responds by taxing the severance pay up to 
a third, as if it were income. Imagine the circumstances. You have 
worked in a company all of your life and because of a merger or 
acquisition, a skill you may no longer possess, a change in the 
economy, even in good times you are excused from your employment, given 
$5,000 or $10,000, which you think goes best to continuing your 
education or opening a small business. Yet, when it is time to pay your 
Federal taxes, the Government takes a third of it from you, money that 
can make the difference in whether or not you can reorganize your life, 
move to a different place in the country to seek new employment, pay a 
tuition, or start your business.
  The amendment I offer tomorrow is as simple as it is important. The 
first $3,000 of any severance package offered to any employee in 
America whose severance package is less than $150,000, if that person 
does not get reemployment in 6 months, up to 95 percent of their 
previous compensation, that $3,000 is tax-free. The person should use 
it for what is best for themselves, their own families and their own 
future.
  I know at a time when our economy is growing, unemployment is low, a 
time of relative economic prosperity, few people are thinking about 
those who are without employment. In which State in this country, in 
what community have we not witnessed, through these extraordinary 
economic changes that indeed are the signature of our time, the 
dislocations of the marketplace? The times when many Americans would 
gain employment at the age of 18 or 22 or 25 or 30 and remain with a 
corporation most of their lives, those

[[Page S6476]]

times have passed. The times when you gain skills in high school or 
college, and sought and obtained and retained employment all of your 
life with those skills, those times have passed. Even in good economic 
times, the length of employment with a single employer is shrinking. 
The consistency of employment with any employer is being reduced.
  What I offer is a response, a chance to make this tax bill relevant 
to those 20 million Americans who may in the next decade find 
themselves in similar circumstances. There is not a Member of this 
Senate who faces this amendment tomorrow who does not have a chance to 
address the people of their own State in a critical way, not just the 
40,000 people of AT&T in my native State of New Jersey, but the 2,000 
employees of IBM in New York State who are suing at this moment, trying 
to establish by law that their severance package is not income.
  In the State of Alaska, 1,200 people in the fourth quarter of 1996 
were laid off; 88,000 people in the State of California; 22,000 people 
in the State of Illinois; 5,700 people in the State of Minnesota; 2,800 
people in the State of Montana; 27,000 in Pennsylvania; 11,000 in West 
Virginia. In every State, in thousands of communities across this 
Nation, these dislocations have become a part of American life.
  I am very proud that tomorrow this Senate will adopt a tax bill, one 
that I am proud to vote for, that addresses so many different economic 
concerns of this country. It has a reduction in capital gains taxes for 
middle- and high-income people that is needed to encourage investment. 
I am for it. I am going to vote for it. It has a change in the 
inheritance tax to allow families to retain family businesses in higher 
incomes, upper-middle-class families; IRA's to encourage families to 
save for education for their children's welfare. Each and every one a 
legitimate response to a real problem.

  Mr. President, this is a problem, too. What is it we say to these 
people who want only to keep the money given them to reorganize their 
lives but are forced to share it with the Federal Government?
  Tomorrow I will offer this amendment and ask for the support of my 
colleagues. Thank you for the time, Mr. President, and I yield the 
floor.
  Mr. FRIST addressed the Chair.
  The PRESIDING OFFICER. The Senator from Tennessee.

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