[Congressional Record Volume 143, Number 99 (Monday, July 14, 1997)]
[House]
[Pages H5179-H5181]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE MORAL CASE FOR TAX CUTS

  The SPEAKER pro tempore (Mr. Pease). Under the Speaker's announced 
policy of January 7, 1997, the gentleman from Georgia [Mr. Gingrich] is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. GINGRICH. Mr. Speaker, I wanted to start by talking about the 
moral case for tax cuts, because I think we don't talk often enough 
about why tax cuts matter and why we are attempting to not just balance 
the budget, but to balance the budget with a smaller Government so we 
can reduce taxes and offer tax relief for the American people.
  We start with the premise that taxes are too high, that the Tax Code 
is too complicated, that it takes too much of the average American's 
time to earn the money to pay taxes, that it takes too much of the 
average American's time to fill out their tax forms, to keep the tax 
records, possibly to pay for an accountant or a tax attorney; and that 
the effect of our current very complicated Tax Code is to make life 
harder, particularly harder for small business men and business women 
who are particularly hard-hit by the complexities.
  My older daughter, Kathy Lubbers, runs a little company called the 
Carolina Coffee Co. in Greensboro, NC, and she called me recently and 
said that they estimate that they have to have 7 days of sales just to 
pay their Federal, State, and local taxes, and that does not count the 
cost of redtape and the cost of filling out all the forms and keeping 
all the records.
  So if we start with the notion that we are very committed to 
increasing the freedom of the American people, increasing the power 
that the American people have by allowing them to spend more time 
working for themselves and their families and less time working for the 
Government and working to fill out complicated tax forms, I think there 
is a strong moral case to be made.
  I want to make it at three levels: Our role as parents and as 
children who might have older parents, our role as citizens in our 
local community, and our role in the economy in helping encourage 
economic growth. In all three areas, I believe one can make a moral 
case for reducing taxes to increase the ability of citizens to do their 
job as parents, as citizens, and as job creators.
  Let us start with the role of parents. As recently as President Harry 
Truman's time, in 1998 dollars, the tax deduction per child was $7,500. 
So if one was married with two children, one had to actually have a 
$30,000 income before one paid any income tax. The program was designed 
to strengthen families and strengthen parents by giving them the take-
home pay so that they could take care of their children.
  One of the reasons we feel so strongly about the $500 per child tax 
credit and about the educational tax breaks that will help people get 
more education, is that these tax credits and tax breaks put more money 
in the hands of parents so that they can make decisions about the lives 
of their children.
  It is a very simple choice. We believe that parents are better as 
providers for their children's future than are bureaucrats, and so we 
believe that there should be more resources in the parents' hands after 
taxes, whereas some of our friends believe in higher taxes with more 
money going to the bureaucracy. That is a very clear-cut choice of two 
very real differences in approaches.
  Second, we believe in an America described by de Tocqueville in 
``Democracy in America,'' an America in which voluntarism, charities, 
private activities, play a major role in the lives of our communities. 
For example, I wear two pins, a Habitat for Humanity pin and an Earning 
by Learning pin. Both of those are charities that are engaged in 
helping the poor.
  Earning by Learning helps poor children learn how to read, and 
Habitat for Humanity is a worldwide organization in 53 countries 
founded in America's Georgia, committed to the idea that if we help 
people build a home and we help grow their family, that they will be 
dramatically better off and be in a better position to lead a fuller 
life.

[[Page H5180]]

 They have to participate also, and in the Habitat model, the person 
who is going to be helped has to be worthy of being helped. They have 
to have worked, they have to have proven that they are trying, they 
have to be prepared to work 100 hours on somebody else's house and 300 
hours on their own house, and they have to be prepared to take a 20-
hour course on how to be a homeowner, so that they have truly earned 
the right to move into their Habitat house, and when they move in, they 
pay a mortgage, it is a no-interest mortgage, but for 20 years they pay 
every month, just like everybody else does, so that they truly have 
bought and earned their house. That creates dignity, 
independence, self-respect, and a sense that they are participating, 
and it is done by a private charity, which has been a great American 
contribution to how people organize themselves.

  Well, if one has to spend all of one's time working at a second job 
to pay one's taxes, or as in many families, if the second member of the 
family has to go to work largely to pay the taxes, then that is time 
one cannot spend being a volunteer, that is time one cannot spend in a 
local charity, that is time one cannot spend helping people locally.
  So we believe that high taxes, by both taking up one's income and 
taking up one's time, makes it harder for one to be involved in 
charitable work, harder for one to be involved as a volunteer, and 
harder for one to be involved in one's local community.
  Third, not only do we believe lower taxes can make one a better 
parent and lower taxes can help one be a better volunteer, we believe 
that lower taxes increase economic growth. We think the real engine of 
economic growth is small business.
  Small business is not helped by big government and big bureaucracy. 
Small business is helped when local people are able to be involved in 
creating jobs, in going to one's local store or one's local business, 
and we believe that the smaller the government, the more after-tax 
take-home pay one has, the greater one's chance to be involved in a 
small business.
  We think this is particularly important to emphasize economic growth 
through small business at a time when we have welfare reform, because 
the fact is that our proposal for welfare reform, which is to move 
people from poverty to prosperity by moving them from welfare to work, 
that that proposal is very, very important, because it creates an 
environment in which people can improve their lives by getting off of 
welfare and working. It requires if one is going to move from welfare 
to work that one has work to move to.
  The largest provider of work in America is small businesses. Small 
businesses hire far more people than do large businesses. So if we 
truly want to create a better future for America, we want to increase 
the number of small businesses, and that is where people get hired, 
that is where jobs get created. Remember that companies like Microsoft 
may start very small, but those baby businesses can grow very rapidly 
into major creators of wealth and major creators of jobs for Americans.
  So we want to have tax reduction, which encourages small business and 
which encourages people to feel comfortable in leaving a job in a 
corporation or in government to go out on their own, to be an 
entrepreneur, to create the next generation of jobs, and the next 
generation of opportunity.

                              {time}  1515

  We think that is another argument for cutting taxes, and in 
particular we are committed to trying to triple the number of black- 
and Hispanic-owned small businesses, because we think nothing would do 
more to improve the quality of life in minority communities than to 
have a dramatic expansion of the number of people who are out creating 
jobs, earning a living, meeting the marketplace, serving the customer 
and, therefore, coming to understand the realities of free enterprise.
  In that setting, we believe that it is very, very important that we 
go through with this process that we are negotiating this week of 
cutting taxes and that we emphasize that the tax cuts be focused on 
people who pay taxes.
  We do not think it is appropriate to have this begin to be primarily 
a bill which raises welfare payments to people who are not paying 
taxes. I think there is a very big difference here, and I want to 
emphasize this, we do not think it is appropriate for a tax cut bill to 
be used to increase money to people who are not paying taxes. That 
would be a welfare bill, and we are perfectly prepared to look at a 
welfare bill on its own merit. But a tax cut bill should be dedicated 
to cutting taxes for people who pay taxes, so the tax cut bill should 
be aimed at the taxpayers of America.
  In particular, we think that when it has been 16 years since the last 
time we had a tax cut, that it is particularly appropriate that we have 
a tax cut on behalf of the taxpayers who, after all, have seen several 
tax increases in the last 16 years and have not had any tax relief.
  Mr. Speaker, that is why we are committed to negotiating a tax cut 
bill that we believe will be helpful to working Americans, with a $500 
per child tax cut, and will be helpful to Americans who are going to go 
to college or graduate school or vocational-technical school, with tax 
credits and tax deductions; and helpful to family farms and small 
businesses by cutting the tax on estate when you die; and it will be 
helpful to creating jobs, to savings and investment, by cutting the tax 
on capital gains, so we are encouraging people to invest in creating 
jobs for the future.
  All of those steps we think are in the right direction and all of 
those steps relate to cutting taxes for taxpayers. But I think that is 
a very, very important thing to realize.
  The President for some reason has sent up a proposal which would 
actually give some people more money than they pay in taxes. Now that 
is clearly not a tax cut. That is clearly, in fact, a very different 
situation.
  I found it fascinating that last week they had three people that were 
down at the White House in a press conference about the earned income 
credit. All three of these folks already are getting money. One was 
getting $1,713 from the taxpayer. Another was getting $1,291 from the 
taxpayer. The third was getting $871 from the taxpayer.
  Now, it seemed to us in that setting that it was inappropriate to 
talk about somebody who is already getting, as I said a minute ago, 
$1,700 from the taxpayers to now give them more money in a tax cut 
bill, because they are not paying taxes. In fact, two of the three 
people, they actually are paying zero taxes at this point in a 
situation where we felt that it was just not correct.
  Conversely, we think that people who are paying income taxes and who 
have been working hard paying income taxes deserve a chance to have a 
tax break. We are generally talking about people who are not getting 
any government money. So on the one hand we have folks who are already 
getting a thousand or more dollars in the earned income credit. On the 
other hand, we are talking about people who are not getting any money, 
but who are paying the taxes, carrying the load in the income tax, and 
that is why we favor focusing on cutting the income tax for people who 
are paying income taxes.
  But let me make one other point about the earned income credit, 
because I think it is the largest example of fraud and error in the 
Federal Government; at least the largest I know of. There was a report 
by the Internal Revenue Service, which administers it, that the earned 
income credit had a 26-percent error in 1994. Think of this number. The 
earned income credit which is a program where if Americans are of very 
low income, they file a report and the Government sends them a check. 
So it is pure cash.
  The earned income credit, according to the Internal Revenue Service 
which administers it, in 1994 had a 26-percent-error rate. Now, they 
have since had a series of reforms and they have improved the program, 
so today it is their estimate that they have a 21-percent-error rate. 
This is the reformed version, 21 percent mistakes, either fraud or just 
plain error. That means that every fifth dollar, $1 out of every $5 in 
the earned income credit program, is either fraud or error. Now, can we 
ask the taxpayers of America to subsidize a program which is so badly 
run by the government that it is 21 percent error or fraud?
  Mr. Speaker, to put it differently, the current estimate is that $4 
billion a

[[Page H5181]]

year of the earned income credit program is fraud or error. That is, 
literally, we are throwing away $4 billion a year. That is, over a 5-
year period, over $20 billion in fraud and error just in the earned 
income credit program.
  I had hoped that the President was going to send up a reform proposal 
to help us get the fraud rate down to what should be the acceptable 
level, which is 1 or 2 percent. But to suggest that in a program where 
we have 21 percent fraud and error that we should actually increase the 
amount of extra money we are sending strikes me as just plain wrong, 
and it is wrong for the taxpayer.
  Why should the taxpayer have to pay higher taxes just to be in a 
position to transfer money to people in a program where $1 out of every 
$5 that is transferred is going either to somebody committing fraud; 
that is, they are claiming they should get more money than they should 
get, or someone who has simply made a mistake?
  We think that the earned income credit program needs to be 
overhauled, reformed, and improved before there is any conversation 
about shipping more money to people who are currently getting money 
under that program. But, in addition, we think it is particularly wrong 
in a tax cut bill to be transferring money to people who are, in 
effect, getting welfare, when the focus of the tax cut bill should be 
in cutting taxes.
  Let me make one final point about this year's tax cut. There is 
pretty good reason to believe that because we have been very firm in 
our position on cutting spending, and because we have been very firm in 
our position on moving to a balanced budget, that we have had much 
lower interest rates than people expected. And, as a result, we have 
had more economic growth, and the result has been that we have more 
revenue coming into the Government. The more the economy grows, the 
more people go to work, the more take-home pay there is, the better off 
people end up being.
  In that setting, I think it is very important that we look forward to 
next year. Not just this year's tax cut, but next year. And I simply 
want to propose that if the economy continues to grow, and if the 
Government gets more revenue than the budget agreement calls for, that 
the first claim on that additional revenue is to return it to the 
American people who earned it. That is, we should have next year, in 
1998, an additional tax cut proposal to further lower taxes, to give 
tax relief to the American people, and to begin to simplify the Tax 
Code so that it is easier for small businesses and easier for 
individuals to fill out their tax forms with fewer regulations, less 
redtape, and less paperwork.
  Mr. Speaker, I believe if we start down that road, that we can have a 
very dramatic effect and we can begin to set up a pattern where the 
more the economy grows, the more we lower taxes, the more free time 
people have at home, the more time they can spend as parents, the more 
time they can spend as volunteers, and the more resources they have to 
invest in local small businesses to create even more jobs to then 
continue the same cycle.
  So I hope we will complete this week, maybe by Friday or Saturday, 
the tax cut bill, the first tax cut in 16 years. I hope we will focus 
that tax cut bill on cutting taxes for taxpayers, and I hope that we 
will then be in a position to turn and begin to prepare for another tax 
cut and tax simplification bill starting next year to begin a series of 
annual tax cuts so that as the economy grows and jobs grow and take-
home pay grows and revenue grows, we are then able every year to have 
one more step toward tax relief and tax simplification.
  Mr. Speaker, I go back to the beginning. I think there is a moral 
case for cutting taxes that allows people to spend more time and 
resources as parents. It allows people to spend more time and more 
resources as volunteers in local charities. It allows people to spend 
more time and more resources helping create new jobs and new 
businesses. And for those three reasons, I think controlling the 
spending of the Government and returning money back home in tax cuts 
and having tax simplification and tax relief are morally correct for 
the country and will make America a better and a more prosperous 
society.

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