[Congressional Record Volume 143, Number 98 (Friday, July 11, 1997)]
[House]
[Pages H5171-H5174]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 DEMOCRATS AND REPUBLICANS SHOULD USE THE SAME NUMBERS TO COMPUTE THE 
             BENEFITS OF THEIR RESPECTIVE TAX RELIEF PLANS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Minnesota [Mr. Gutknecht] is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. GUTKNECHT. Mr. Speaker, I rise today to talk about tax relief, 
tax relief which, in my opinion, and I think in the opinion and view of 
the vast majority of American families, is long overdue.
  We were talking earlier with some of my colleagues about college 
commencement addresses. Some of us are asked to give a commencement 
address during the late spring and early summer of the year, and most 
of us do not remember who the commencement speaker was at our own 
commencement, particularly our college commencement.
  I am one of the few who probably does remember, because the director 
of the United States Census was there to give our commencement address 
when I was in college. It was interesting to look back about what it 
was like growing up then, and the difference then. I was a baby boomer. 
I was born in 1951.
  The Speaker that spoke at our commencement address, the director of 
the United States Census, told us on that day that there were more kids 
born in 1951 than in any other year. I represent the peak of the baby 
boomers. I remember, we were talking about what it was like to grow up 
in the 1950s.

[[Page H5172]]

  One of the important things when we talk about taxes is to remind 
ourselves of how much has changed since I was growing up and since the 
baby boomers were growing up, because when I was a child I was 
fortunate enough, my father worked in a factory, I am a blue collar 
guy, and my folks were able to raise three boys on one paycheck. Part 
of the reason they could do that, Mr. Speaker, was because the largest 
single payment they made was their house payment.
  Today, unfortunately, the average family pays more in taxes than they 
do for food, clothing, and shelter combined. Let me say that again, 
because I do not know if most people really, I think they know that 
down in their bones, but I do not know if they have really internalized 
what that all means. But the average family in America today spends 
more for taxes than they do for food, clothing, and shelter combined. 
So this Congress has been working very hard to balance the budget, to 
save Medicare, and to provide tax relief to working families.
  We are having a rather interesting debate here the last several weeks 
over who would really benefit from these tax cuts. Frankly, I think we 
need to spend some time talking about how relatively intelligent people 
can reach entirely different conclusions about who benefits most from 
this tax relief.
  I would like to talk a little bit today about our tax plan, our 
method of coming to these conclusions, how we actually do the 
arithmetic to come to some of these conclusions, and compare it to 
exactly how our friends on the left are doing the calculations. We are 
talking about real income for real families and real tax relief.
  What some of our friends on the left are using is imputed income, 
potential taxes, and potential tax relief. I think if we could all use 
the same set of numbers, whether we are going to use one set or the 
other, if we use just the same set; if we want to use their set of 
numbers let us go ahead and do the calculations that way, and then let 
us do the calculations our way, and let the public decide for 
themselves who is right, who is telling the truth, and whose tax relief 
will benefit them the most.

  Let us go through what the tax relief package that the House has 
passed and sent to conference is. First of all, the centerpiece of our 
tax relief package is a $500 per child tax credit. A lot of people get 
confused between the tax credit and a tax deduction. A credit is money 
that you get to keep. If you pay taxes you get a credit. That is money 
that will be yours at the end of the process. So this is a credit. It 
starts out at $400 next year, and it would go to $500 ever year 
thereafter. Generally now the President agrees with this formula.
  There is also nearly $35 billion in post-secondary education 
incentives. Again, as a baby boomer, and I have one who just graduated 
from high school, I have one in college and one who is just starting 
into high school, and I can understand more than anybody the high cost 
of higher education. I think a lot of families that have children my 
age understand how difficult and how expensive it is to send kids on to 
post-secondary education. I think that is a great benefit to working 
families.
  There is broad-based capital gains tax relief. Again, what we want to 
do is make it easier for families to save and invest for themselves. 
This is where sometimes our friends on the left get a little upset, 
because they say, well, this is tax cuts for the rich.

                              {time}  1445

  The truth of the matter is there would be some wealthy people who 
would benefit from it. I will get down in a later chart to show you 
just how much benefit the Congressional Budget Office and the Joint 
Committee on Taxation say there really is for that group of people. 
Cutting capital gains is not about helping the wealthy. It is about 
helping middle-class families become wealthy because the only way that 
you can save and invest for your future is if you in fact put some of 
that money away. What we want to do is make it easier for people to do 
that. Unfortunately, what Washington has done for the last number of 
years is they have operated under a sort of an unwritten rule that no 
good deed goes unpunished.
  If you work you get punished. If you save you get punished. If you 
invest you get punished. What we are trying to do is reverse some of 
those perverse incentives.
  We also want to make it easier for people to use IRA's and to 
withdraw from those IRA's for educational expenses. There is also a 
significant reduction in the death tax. This is a tax that is 
particularly onerous to people who own a farm, who own a small 
business. They would like to leave that farm or that small business to 
their families.
  So those are the cornerstones of the tax relief package that passed 
the House and is currently in conference committee. I would like to 
talk a little bit about what this tax relief package means and how the 
various points actually are scored and who benefits.
  According to the Committee on Ways and Means, and I think these 
numbers have been scored both by the Congressional Budget Office as 
well as the Joint Committee on Taxation, which are the official 
scorekeepers on matters like this, this package is aimed directly at 
Americans in the middle-income brackets.
  In fact, we say, and I think we can prove that over 75 percent of the 
benefit in this tax plan goes to families earning less than $75,000. I 
want to talk about real earnings because that is also one of the 
problems we have in this debate because we are talking about real 
earnings, real taxes, real tax relief for real families. We will get 
into that in just a few minutes.
  The way this thing has been scored and, if you break it out, those 
families under $20,000 a year will benefit to the tune of about $5.5 
billion in this tax relief package. Those between $20,000 and $75,000 
will get about $83.5 billion worth of tax relief in this package. 
Families earning between $75,000 and $100,000 will get about $19 
billion worth of the benefits, and those earning between $100,000 and 
$200,000 would benefit to the tune of $6.7 billion, and those earning 
over $200,000 would only get $1.4 billion worth of savings under this 
plan.
  As I said earlier, over 75 percent of the tax relief in this package 
goes to families earning less than $75,000. I am not saying that. That 
is what the Joint Committee on Taxation has said. So why do we hear so 
often from our friends on the left that this tax package is designed to 
benefit those that they call rich?
  Part of the reason I think is they use something that is called 
imputed income or family economic income. Let me try to explain how 
that works. This all started a number of years ago; I think the 
Treasury Department even under the Bush administration was trying to 
figure out a way to calculate family income in a different way. Why 
they do this, I have no idea. I want to read a quote from someone most 
of you who are watching and most of my colleagues that are here, 
watching back in their offices will recognize. I will do this first. I 
will read the quote, and then I will tell you who it is from.
  ``Finally, a few words about Federal taxes and what some of the great 
minds at the U.S. Treasury are thinking about. The Treasury likes to 
calculate the American people's ability to pay taxes based not on how 
much money we have but on how much we might have or could have had. For 
example, a family that owns a house and lives in it, the Treasury 
figures if the family didn't own the house and rented it from somebody 
else, the rent would be $500 a month. So they would add that amount, 
$6,000 a year, to the family's so-called imputed income. Imputed income 
is income you might have had but do not. They don't tax you on that 
amount. The IRS doesn't play this silly game. Instead, the Treasury 
calculates how much they could take away from us if they decided to. If 
that were the system, consider the possibilities. How about being taxed 
on Ed McMahon's $10 million magazine lottery? You didn't win it, you 
say, but you could have. The Treasury Department must have something 
better to do. If not, there is a good place for Clinton to do some 
spending cuts.''
  Now, that is what David Brinkley said on ``This Week With David 
Brinkley'' on February 28, 1993. And as our friend Ronald Reagan would 
say, former President Ronald Reagan, there they go again. We are 
starting to use imputed income or family economic income to calculate 
how many people are wealthy. That is why the difference between what 
the Census says and what

[[Page H5173]]

the Treasury Department says are so is so different. The Census 
Department says there are about 11 million American families that are 
above $100,000 in income. The Treasury Department says that number is 
22 million. Americans sitting at home wonder how in the world could two 
Federal agencies come to such incredibly different answers.
  The reason is, and the answer is, family economic income or imputed 
income that David Brinkley talked about.
  Now, some of the people have said, again you have probably heard it 
on the House floor, again, tax cuts for the rich. But as the chairman 
of the Joint Economic Committee, the Joint Committee on Taxation has 
said, currently if you divide the population of the United States, all 
of the taxpayers into five groups of 20 percent each, the lowest 20 
percent right now of the economic group in the United States pay 1 
percent of all the taxes paid in America. After this tax relief is 
calculated, they will still pay only 1 percent of all the taxes paid.
  The second quintile currently pay 4 percent of all the taxes paid in 
the United States and after this tax relief goes into effect, they will 
still pay 4 percent.
  The third quintile, it is 11 percent. It remains 11 percent. The 
fourth quintile, 21 and 21, and finally that top 20 percent of income 
earners, the top 20 percent of taxpayers in the United States currently 
pay 63 percent of all the taxes paid in America.
  The interesting thing is, according to these calculations done by the 
Joint Committee on Taxation, if this tax cut plan that passed the House 
were to go into effect signed by the President, there would be no 
change. The top 20 percent would still pay 63 percent of all the taxes 
paid in America.
  I think it is important, and I will come back to this chart in a 
minute, I want to talk about this whole notion of imputed income. If 
you take that calculation, if you take a family, in fact we did a quick 
calculation of a family in my district. If you put that all together, 
and you can take a typical family and let us call them the Joneses who 
live in my district that earn approximately $32,500 per year. The 
Jones' mom works, dad works. They have a youngster that is in high 
school and they have one who is just entering college. They make 
$32,500 a year. That is what they really make. But if you use this 
imputed income, you literally can take that family from $32,500 a year 
and you can easily get that over $50,000 a year. That is not money that 
they have. That is money that they might have if they sold all their 
interest in their IRA's, if they converted their pension funds to cash, 
if they rented their house, if they had a sale lease back on their 
house and could get the rent on their house somehow back to them; it is 
a convoluted way to go.

  The interesting thing is, if you take that to its logical conclusion, 
you literally could raise that family into a much higher tax bracket. 
So if our friends on the left want to use imputed income to calculate 
people's income and push more people into the wealthy brackets, we are 
doing some calculations to find out what would they pay in terms of 
taxes under their tax plan with imputed income.
  The answer is, over half of the families in America, if you used 
their calculations and their imputed income statistics, over half the 
families in the United States of America would actually see a tax 
increase under the Democrat tax plan.
  That is interesting, is it not? That is a side of the story that has 
not been told.
  The other side of the story is, and we have tried to mention this, 
but if you use imputed income to do those calculations, the only people 
in the United States of America who may be guaranteed under their plan 
to get a tax cut are people who pay no taxes.
  Mr. Speaker, I submit that that is not my definition of fairness. I 
doubt if it is the definition of fairness that most Americans have.
  Mr. Speaker, I know that there is a lot in this business, there is a 
lot of using statistics and so forth to justify a particular point of 
view. I do not expect the American people necessarily to believe me. In 
fact I think the American people are cynical and they should be cynical 
because politicians down through the years have not always told the 
truth, the whole truth and nothing but the truth. But I would encourage 
people to calculate the tax cut for themselves.
  Any of you who would like to get a copy of this worksheet, there is 
one on a Worldwide Web page so that people can actually, through their 
computer, do their calculations themselves. If you do not have access 
to a Worldwide Web page, if you do not have access to the computer and 
the Web, we will actually mail one out to you. If people call us or 
write we will send them a worksheet so they can calculate it for 
themselves. They can decide for themselves how much the tax relief is 
worth to their family.
  It is a fairly simple calculation. First of all, how many children do 
you have in your family that are under the age of 17? You fill in the 
blank. In 1998, you multiply that times $400. In every year thereafter 
you multiply it times $500. That is how much you will get to keep of 
your tax money.
  Line 2, amount of capital gains. If you have a capital gains, if you 
have a gain, if you have sold a stock or a bond, if you have income, if 
your family income is more than $41,200, you multiply that times 8 
percent because that is going to be your savings under the plan that 
passed the House.
  If your family income is less than $41,200 per year, you multiply 
that times 5 percent. That is the capital gains tax relief and that is 
how much you will get to keep with this plan.
  Finally, how many children do you have in their first 2 years of 
either college or vocational school? Those children are worth $1,500 in 
tax credits to you.
  We have done some calculations for different families in our district 
and the differences range anywhere from obviously, one child that is 
under 17, it is worth $400 next year, but for the average family in my 
district, this calculation works out to over $1,000 a year that that 
family will get to keep and spend on their family to invest and save 
for their future.
  That is what this tax relief is about. That is why I think it is 
important for America. In the end, one of the goals is to make certain 
that we have a strong economy on into the next century.
  We have been very fortunate; 2 years ago this Congress when we passed 
our budget resolution, we said that in fiscal year 1997, I am going 
back 2 years, in 1995, this Congress said that we would spend no more 
than $1,624 billion dollars in the fiscal year 1997.
  The good news is, we are actually going to spend this year $1,622 
billion. So for the first time in my memory, the Congress is actually 
going to end up spending less than it said it was going to spend just 2 
years ago.
  The news gets even better because in that same time frame, because 
the economy has been stronger, there is more consumer confidence, there 
is more confidence in the business community, the economy has been much 
stronger than anyone would have predicted just 2 years ago; as a result 
of that, we have produced an additional over $100 billion in revenue to 
the Federal Treasury. We have spent less. We have taken in more and as 
a result, we projected just 2 years ago the Federal Government would 
have a deficit this year of over $174 billion. The truth is, according 
to our estimates, it would be about $70 billion. There was a published 
report earlier this week that shows that the deficit could be as low as 
$50 billion or even less. That is good news. We want to make certain 
that that keeps going in that direction and by offering some tax 
relief, by allowing families to keep more, to spend more, to save more 
of their money, we in fact can keep this strong economy, we think, long 
into the future. One of the other benefits of a strong economy is that 
we are moving families off welfare rolls and onto payrolls.
  I think one of the greatest accomplishments of the 104th Congress was 
the welfare reform that we passed that requires work, that requires 
personal responsibility and gives the States an awful lot more latitude 
in how they can work to encourage people getting off the welfare rolls 
and onto payrolls. The good news is since that welfare reform plan 
passed, and the President talked about this a couple of weeks ago in 
his Saturday radio broadcast, the good news is there are 1,023,000 
fewer families who are trapped in the welfare cycle, that have moved 
off welfare and

[[Page H5174]]

onto payrolls; 1,023,000 fewer families are on welfare today than just 
1 year ago.

                              {time}  1500

  That is a huge benefit to all of us. And I have said before that the 
real goal of welfare reform was not about saving money, even though we 
will save money to the Federal Government, to the State governments and 
everyone else, but the real goal was not about saving money. The real 
goal was about saving people. It was about saving families. And most 
importantly it was about saving children from one more generation of 
dependency and despair. And that is really what the welfare system was 
about.
  But if we are to keep the strong economy growing, we are going to 
have to encourage more investment, we are going to have to encourage 
more saving, and we are going to have to allow families to keep and 
save and spend and invest more of their own money.
  I just want to talk briefly, too, about the progress we are making, 
because sometimes it is easy to forget in the heat of the battle. If we 
look at all of the red bars here, that is how much we said that the 
budget would be out of balance in each of the next 7 years. When we 
passed our original 7-year budget plan in 1995, we said that the 
deficit, for example, this year, would be $174 billion. Right now it 
looks like it will be less than $70 billion; it could be less than $50 
billion.
  Now, when we update this, we will probably change these numbers 
slightly. But the good news is if we look at the blue bars in each of 
the years, we are clearly now running well ahead of schedule and, 
frankly, I think if we can keep the economy going at anywhere near the 
economic growth rate that we have today, we will balance the budget not 
by the year 2002, but, in fact, we will balance the budget probably by 
the year 2000 or maybe even earlier.
  And when we get to that point, what we have to really talk about, in 
fact we need to begin that debate today, and I congratulate my 
colleague, the gentleman from Wisconsin Mr. Mark Neumann, who has 
offered the National Debt Repayment Act, because I think that should be 
our next goal. It is not just about balancing the budget. It has to be 
about paying off that $5.3 trillion worth of debt we have accrued and 
will fall on the shoulders of our children and our grandchildren.
  Frankly, if we are willing to exercise the fiscal discipline that 
this Congress has been willing to discipline itself to over the last 
several years, not only could we balance the budget ahead of schedule, 
but I think we can begin the process of actually paying off the 
national debt. I think that that is a goal that is worth fighting for, 
I think it is a goal that the American people can understand, and I 
think they will recognize we can ultimately set a goal and stay on that 
course of actually paying off that debt so that we do not have to pay 
over $200 billion a year in just interest on that debt.
  And I tell an awful lot of people back in my district when I give 
speeches that if we actually do all the calculations, we find that all 
of the personal income taxes, all of the personal income taxes, 
collected west of the Mississippi River, now goes to pay the interest 
on the national debt. That is a very scary statistic. The tragedy is, 
before we got to Congress in 1994, the elections of 1994, that line was 
moving further west every single year. Now we are at least beginning to 
push that line backward.
  And I think we should have a goal of actually paying off that debt. 
Because I think there is nothing better that we could leave our kids 
than a debt-free future. So I encourage my colleagues from both sides 
of the aisle to join us in that great effort.
  I would hope they would cosponsor the legislation of the gentleman 
from Wisconsin, the National Debt Repayment Act, because what it does 
is, very simply, it says as we begin to reach a surplus in the 
Treasury, which we think we can no later than 2002. But, frankly, we 
think if things continue to go anywhere near where we are right now, it 
could actually be before that, but when we have reached that goal and 
disciplined ourselves to restrict the growth in spending at 1 percent 
less than the growth in revenues, and that does not require draconian 
cuts, we will still see spending at the Federal level growing faster 
than the inflation rate, but it will not be growing as fast as it has 
in the past.
  So if we slow the rate of growth in spending and get control of 
entitlements, we cannot only balance the budget, but we can pay off the 
national debt and, at the same time, take a third of those surpluses 
and apply them to additional tax relief so that American families can 
keep and spend more of their own money.
  Mr. Speaker, I know a lot of my Republican colleagues are headed for 
airplanes and it is a getaway day, and we are all eager to get home, 
but I want to close by saying that I am very proud of the work that is 
being done in this Congress. I know that sometimes the American people 
see some of the debates and some of the arguments here on the House 
floor and they sometimes miss the big picture. But the big picture is 
that before 1994 the United States and this Congress was headed in the 
wrong direction. We were spending more than we took in.
  In fact, from 1975 to 1995, for every dollar that Washington took in, 
it spent $1.22. Today, now, we are still not quite to a balanced 
budget, we are still spending more than we take in, but we are down to 
$1.04.
  If we stay on the path we have set over the last several years, we 
will get to that balanced budget ahead of schedule, we will do it under 
goal, and we are going to allow families to keep more of what they 
spend and earn. Because for 40 years Washington had it wrong. For 40 
years Washington believed that Washington knew best; that somehow they 
could spend money smarter than American families; that a Federal 
department of housing was better than a family department of housing; 
that a Federal department of human services was better than a family 
department of human services.
  Now, there are still legitimate needs of the Federal Government, and 
there are still people who are dependent on the Federal Government, and 
we are not talking about pulling the rug out from under people. But we 
are talking about people getting a little gentle nudge so that we 
reinforce some of those time-tested principles, things like faith, 
family, work, thrift, and personal responsibility. Those are the things 
I think Americans want us to underscore, but for too long under the 
liberal agenda what we did was we undermined those values.
  The good news is I think the tide is turning. The tide is clearly 
turning. We are on our way to a balanced budget, we are saving 
Medicare, and for the first time in 16 years we are going to allow 
families to keep and save and invest and spend more of their own money. 
That is the direction I think the American people want us to go, that 
is the direction we are going, and with the help of the American 
people, we are going to win that fight.

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