[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.
____________________