[Congressional Record Volume 143, Number 101 (Wednesday, July 16, 1997)]
[House]
[Pages H5386-H5393]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE REPUBLICAN TAX PLAN
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from Missouri [Mr. Hulshof] is
recognized for 60 minutes as the designee of the majority leader.
Mr. HULSHOF. Mr. Speaker, this week there is much discussion, there
is much speculation about the negotiations that are ongoing between the
President and congressional leaders in the House and Senate. Hanging in
the balance, Mr. Speaker, are the prospects of a bipartisan balanced
budget plan. Hanging in the balance are the prospects of staving off
the impending bankruptcy for Medicare, our health care system for
senior citizens. And hanging in the balance through these negotiations
are the prospects for permanent tax relief for men and women all across
this country, essentially whether or not we want to let moms and dads
across this great land keep more of what they earn.
With the recent debate, Mr. Speaker, about tax relief centering more
and more around detailed numbers and percentages and Treasury
Department calculations, perhaps I should say Treasury Department
miscalculations, it is easy to lose sight of what our tax relief
package is all about, what it means to working families who have not
had tax relief in nearly two decades.
I know that I am but a single voice crying out on behalf of hard-
working men and women across this country, but I hope to include the
pleas and the statements of those who came to Capitol Hill. Some
working mothers in fact who came to Capitol Hill this month who quickly
reminded us, gave us a reality check that tax relief is more than just
abstract numbers. It is about take-home pay. It is about purchasing
power. It is about freedom to make choices in raising a family.
For example, it is about Debra from Dale City, VA. Debra is the
divorced mother of a 17-year-old, an 11-year-old and a 10-year-old.
Keeping more of her money means being able to help her three children
reach their dreams. The dream of Debra's college-bound daughter is to
attend college and become a doctor. For Debra's middle daughter, she
aspires to be a teacher. And although Debra is determined to help bring
her daughters' dreams to fulfillment, it is not going to be an easy
task.
Mr. Speaker, the House-passed version of the Taxpayer Relief Act a
couple of weeks ago will make things a little bit easier for Debra and
for her family. With the child and the education tax credits, for
instance, Debra will get to keep more of what she earns, making it
easier to send her kids to college and to fulfill their dreams. In
fact, just with the child tax credit, the Republican version of the
child tax credit, in calendar year 1998 Debra will get to keep $800
more of her own money next year and $1,000 more in the following years.
She can save for her kids' education, putting money way in a dream
savings account.
Our House plan also allows Debra to participate in education
initiatives like the education credit for college deduction which helps
defray the expenses, the out-of-pocket expenses for Debra's college age
or college bound kids for tuition, for books and for fees.
That is what this tax relief is about. It is not about numbers; it is
about real people. It is about Don and Carnetta from my home town of
Columbia. Don and Carnetta are both in their senior years. Don recently
retired from a career at Wal-Mart. Part of the compensation package
that Don had during his career at Wal-Mart was that he was given shares
of Wal-Mart stock as incentive to build for his pension, to put his
nest egg away for he and Carnetta. He fervently hopes, anxiously is
awaiting whether or not the President will sign our tax package into
law because what it means to 2 million seniors that are in the 15-
percent income tax bracket across this country is a capital gains cut
from the 28-percent margin all the way down to 10 percent, if the
President would enact and sign into law this much-needed relief effort.
It is not about numbers. It is about people.
I happened to receive a letter in the last 2 weeks that I want to
paraphrase just a bit, Mr. Speaker, if I can. It says, ``Dear Mr.
Hulshof, I am a star-ranked scout in Troop 50. I will be a 7th grader
at St. Peter's in Fulton, MO. I am 12 years old. I am in favor of the
tax cut,'' says Michael, ``because if taxes are cut, people will have
more money. When they have more money, they spend or invest more. Then
if they spend more,'' Michael writes, ``more needs to be produced. This
increased demand means more people are needed to produce and then
employment goes up. Increased employment means people are working more
and paying more taxes which increases revenue to the Government, which
means fewer people collect entitlements from the government resulting
in less expense to Government.''
Michael goes on to write, keep in mind, Mr. Speaker, Michael is a 7th
grader, 12 years old at St. Peter's in Fulton, MO. Michael says,
``Every time I hear the Democrats or certain members of the press talk
about tax cuts, they say, how will the Government pay for the tax cut?
But they never ask how the employed taxpayers are going to pay for the
tax increases. Thank you for all the hard work you do. Thanks for
considering my input.'' Signed, Michael.
Well, Mr. Speaker, I think sometimes suffer ye unto the little
children and out of the mouths of babes sometimes come pretty poignant
points. I think Michael has somehow grasped something that we here in
Washington from time to time forget. It is not our money. It is the
American people's money. We are not giving it back to them. We are
letting people keep it in the first place.
For instance, in my congressional district, in the 9th Congressional
District of Missouri, if the President will sign into law the
Republican-passed tax relief package, the child credit alone, there are
84,000 children in the 9th Congressional District of Missouri whose
parents will qualify for the $500 per child tax credit. What that means
is nearly $39 million get to stay in the 9th District of Missouri and
do not have to be collected by the Government and sent here to
Washington where oftentimes we spend it very unwisely. This is just one
way that this tax relief package will help all Americans. It is not
about numbers. It is about people.
I see my friend and colleague from Missouri, from the 7th
Congressional District of Missouri, is in the well of the House.
[[Page H5387]]
Mr. Speaker, I yield to the gentleman from Missouri [Mr. Blunt].
Mr. BLUNT. Mr. Speaker, I thank the gentleman for yielding to me.
I saw that same report, I think it was from the Heritage Foundation,
about children in our districts. I was amazed that in the 7th District
in southwest Missouri, the southwest corner of Missouri, 74,533
children, by that moment's count, and there are probably a few more
children than that now that will benefit, would benefit, 74,533, over
$34 million in one year alone will go back into our economy because of
just the $500 per child tax credit. That does not count the other tax
benefits in our economy and our district.
We do not understand, I think, how this process works as well as
Michael, who you were referring to from St. Peter's at Fulton, a 7th
grader who already understands that taking this money off of tax rolls
may not reduce taxes because things happen in the economy when you let
people keep their money. We constantly want to talk here in the
Congress about giving people money, giving them a tax break. What we
are really just doing is we are deciding not to take as much of their
money. It is their money. They work for it.
We have an obligation as Members of Congress to do all we can to keep
the money that working families have in their family checking account,
in their family savings account, in their savings account for college,
in their savings account to buy a home or buy a new car. We have an
obligation to manage their money like they have to manage their money,
where every penny has to count.
I think with this kind of new responsibility of leaving money with
families, we are understanding again that they can spend their money on
their behalf better than we can. Forty-one million children will
benefit from the tax cut, the $500-per-child tax credit that the House
has sent over to the Senate, 41 million children.
One of the things we did in our tax bill that I am particularly proud
of is we expanded the children that would benefit. In the original
package that came down from the President, you only got that tax credit
until kids were 12. My children are beyond the range of this tax credit
right now. They are 26 and 24 and 21. I do not recall that they got a
whole lot less expensive when they moved from 12 to 13. In fact it
might have been just the opposite. And we are covering millions more
children than was originally proposed. Millions of families will
benefit that would not have benefited otherwise.
Children born this year, between now and the time of their 18th
birthday their family would have a $10,309 tax benefit to go toward
college, to go toward expenses while they are growing up, $10,309 per
child. You have got three kids in your family, that is $31,000 which
you have over the life of those children between the time they are born
and the time that they are 18, that you otherwise would not have,
$31,000.
We heard earlier this evening here on the House floor about people
who would get a benefit from this tax break. The tax break we have sent
for the mother with a daughter who is 14, a son who is 16, she gets
$1,000, who is working, she gets a $1,000 tax break. That is almost
$100 a month. Under the President's proposal we want to remember that
that mother may possibly, that single mother with the 14-year-old and
the 16-year-old and all kinds of expenses and all kinds of life stress
got no break because those kids were over 12. And so this is a
significant thing for American families.
The first tax cut in 16 years. How great that the first tax cut in 16
years would have such a focus on families. We have a lot of ways in our
country to say families either are not important or they are important.
And in our welfare policies and our tax policies we really can take
some massive steps to say again to Americans, young Americans and
Americans who already have families, that this Government and this
country value families.
We think families are important, and that is why the family tax
credit for kids up to their 18th birthday and then help for college
beyond that is such a focal point of what we are doing here. I want to
say to the gentleman, I think this focus on families is such an
incredibly important focus, this first tax break in 16 years. We are
going to do better than that. If we did not do better than that, this
would be the last tax break, based on our history, for that child born
this year who is going to save $10,000 in money they send to the
Government by the time they are 18. If we go back to the last 16 years
of history, they would not have any other tax relief but this.
We are going to be looking I think in the future for what we can do
to help families in greater ways, but a cornerstone of this Republican
tax package that we got Democrats in the House voting for, too, so it
is really a bipartisan tax package that we have sent to the Senate, the
cornerstone is a cornerstone that says families matter and we are not
going to take money from families because we know families can spend
their money better than the Government can spend money on their behalf.
Mr. HULSHOF. Mr. Speaker, I appreciate the gentleman's comments. The
fact is that even way back in the early part of this Congress, the
first couple months as the negotiations were just beginning, as they
were trying to hammer out this budget proposal, to establish the
parameters of the balanced budget agreement, the numbers we were
provided, an $85 billion net tax cut, a $125 billion gross tax relief
over 5 years, with that amount of money then we were required in our
committee on the Committee on Ways and Means then to fashion some sort
of tax relief. This child credit is an income tax credit.
I know there has been a lot of discussion about whether or not we
should expand this income tax credit, that is a credit for those
families that pay Federal income taxes, whether or not we should expand
that income tax credit to other families who pay no income taxes. I
know the gentleman from South Dakota who joins us has been very
outspoken on this point.
Mr. Speaker, I yield to the gentleman from South Dakota {Mr. Thune].
Mr. THUNE. Mr. Speaker, I thank the gentleman from Missouri. I would
simply say that in the context of this debate this evening, that this
is in basketball what you would think of as the great three point play.
It is historic. It is exciting. It is a win-win for everybody.
When you look at what is happening, for the first time in 30 years we
are balancing the country's budget. For the first time in 16 years we
are bringing tax relief to working men and women in America. And for
the next 10 years we are restoring and saving the Medicare system, an
important program on which many people in this country rely. Leave it
to the liberals, leave it to liberals to try and rain on the parade.
{time} 2200
But this is historic, and the people of this country should be
jumping up and down for what we have accomplished here in the last few
weeks and that we are in the midst of trying to bring to finality in
the next couple of weeks. It is good for South Dakota, it is for
America, and the folks the gentleman represents in Missouri.
And when we look at all the things being said on the other side of
the aisle, they have been hacking away again at the old same stilted
and stale class warfare argument that has been drug out time and time
again to create this perception of a bunch of haves and have-nots. But
that is not what this is about. This debate is about improving the
quality of life for all Americans.
Now, it has to be an honest debate, and the problem we are running
into I think in this Chamber, as I have listened to the debate since
this subject got underway, is that we are not having an honest debate
because some people are using different numbers, phony bookkeeping.
We have heard a lot of claims about what the Treasury says about
income, and our friend from Colorado, who is here, is going to I think
point out very quickly here how we can find out if we are rich. But the
Treasury has been suggesting that this is skewed towards people in the
upper income levels because they have used a calculation of income
which is very clearly phony.
I want to point out how they get at that, because the Treasury
Department says there are 21.2 million families in America who make
more than $75,000. Now that is double, double the number
[[Page H5388]]
that the census department uses. They have doubled the number. The
reason is they add in all kinds of things, like pension funds, even
unreported income.
They assume that there are dishonest people out there who are not
reporting income. So when they factor in their calculation for income,
they include unreported income.
But the biggest winner of all is imputed rental income. Think about
this. For those of us who live in houses, the last time that I talked
to somebody when they paid their rent, they thought of it as an
expense, not as income. The Treasury Department is suggesting that
people who own a home, if they rented it out, would have income from
that, and so they factor that in as part of their income.
Now, what that tells me is if we want to be really, really rich, we
should just keep buying a bigger house and the Treasury will impute
more and more income to us.
So they are using this false calculation on income to skew these
numbers and to skew this debate and to create the discussion of haves
and the have-nots and class warfare. I think that is counterproductive
to where we need to go in terms of the policy in this country.
Mr. HULSHOF. Mr. Speaker, reclaiming my time for a second on that
point. I find it somewhat ironic that the administration, through this
debate and through these negotiations, this conference to balance the
budget, to save Medicare and provide tax relief, they will accept the
Census Bureau's numbers of adjusted gross income when it comes to the
child credit, that is for phasing out the child credit for the upper
income families. They will also accept the Census Bureau's numbers when
it comes to those individuals that are seeking a modest reduction in
capital gains. They are willing to accept and embrace that number, that
very bottom line number when it comes to who is unable to qualify. But
then when it comes to this distribution table, and when they start to
skew the results with who is benefiting from this tax package as a
whole, then suddenly they push away the adjusted gross income, the 1040
number that the gentleman and I fill out on our tax forms, and suddenly
go to this family economic income model.
Mr. THUNE. The gentleman is exactly right. It is a classic case of
people trying to use the numbers to get the result that they want to
get. When it is convenient for them, they will use the census numbers,
yes.
The point simply is when we hear this debate, and the American people
who are listening to this debate about tax relief, it is important for
them to know that this sort of shenanigan is going on and that this
phony bookkeeping, this funky accounting system being used by the
Treasury Department is totally unfair in terms of its characterization
of people in this country and how the tax relief is distributed. I
think that that is a point that needs to be made over and over and over
again.
But I would simply say this evening that we are moving in the right
direction. We are winning this debate. And my colleagues who are on the
floor today, most of them came here like I did, because we were
interested in things like balancing the budget, lowering taxes and
making government smaller, and saving Medicare. Look at how far we have
moved this administration.
The reason the President's approval ratings are where they are today
is because he is operating on our agenda. The things he is doing,
talking about balancing the budget and lowering taxes, are things that
we believe in and are values that we share.
I think it does come down to a basic fundamental value that all of us
here in the Chamber tonight share, and that is this, that we believe
that individuals are in a better position to make decisions about their
future when given the freedom and the opportunity to do so than is the
government.
We believe as a fundamental premise as well that bigger is not
necessarily better when it comes to government. We want a government
that is responsive and effective, and we also want to make sure the
people in this country who work hard get to keep more of what they
earn.
South Dakota is filled with a lot of hard-working people. We have a
lot of farmers, small business people. And as I travel, and I put on
2,200 miles in South Dakota over the 4th of July recess driving across
my State, I never once heard somebody say this is about the rich and
the poor, this is a class warfare argument that is trying to be used by
their side. Their questions are very simple. They are, are we going to
pass estate tax relief so we can keep the family farm; are we going to
pass estate tax relief so we can keep the small business in the family?
Are we going to do something in the area of capital gains for people
who are in the farming business and small businesses, the people who
comprise the rich heritage that is my State of South Dakota?
Those are the kinds of things that they are interested in, and those
are the kinds of things that we are interested in trying to achieve for
them so that we can encourage the very best in our society; things like
self-sufficiency and independence and family and thrift and hard work.
We have a work ethic in South Dakota. People understand when they
work hard they will see the fruits of their investment, and they do not
want the heavy hands of government interfering and taking that
away from them. So this debate is really about who do we want to
control our future; do we want that control in the hands of individuals
and families and people in their living rooms and on Main Street making
their decisions about their family farms, or do we want the government
to do it?
That, on a fundamental level, is what we are talking about in this
debate, and that is why I believe we are winning the debate because
what we are saying is resonating with the American people.
Mr. HULSHOF. I appreciate the gentleman's comments. And before we
leave the part of the discussion about how the administration,
specifically the U.S. Treasury, calculates one's income to determine
whether one is well off or not, I see my friend from Colorado is here.
There is some chart next to him, and I would be happy to yield to the
gentleman from Colorado, [Mr. Bob Schaffer].
Mr. BOB SCHAFFER of Colorado. Mr. Speaker, I thank the gentleman for
yielding to me.
This chart on my right is one I have used on the floor here on a
number of occasions. I usually use it in a way that pokes fun at this
whole notion of the Treasury Department inflating the actual income of
the American family so that our tax cuts for middle-class families
somehow appear to be tax cuts for the rich.
That is the claim that the Democrats frequently make here on the
floor. It is the claim we see coming out of the White House. So I made
this chart really to show the absurdity, I think, of this family
economic income definition that they use. And I made this look like one
of those cheesy get-rich-quick ads, or get-rich-quick schemes. And it
simply says that we can learn the amazing secrets of the White House
and get rich quick if we call the Treasury Department now, and the
number, and this really is the Treasury Department's phone number, 202-
622-0120. And I tell folks that operators are standing by.
Well, the reason I ask people to do this is because when I tell
people back home how the Treasury Department has manipulated the
numbers to make a $45,000 a year family, a family earning $45,000 a
year all of a sudden become rich, in the rich category, people do not
believe it. I walk them through the numbers and I ask them to call this
number to find out how the Federal Government, the Democrats, the
liberals here in Washington, believe that an average family gets rich
quick overnight only when we talk about tax relief here on the floor of
the House.
The gentleman from South Dakota mentioned the biggest way they do
this, and let me just kind of walk everybody through this for a moment.
If we take an average family making, let us say, for example, $45,000
a year, this is their gross income. This is before they take out all of
their payroll taxes and other sorts of deductions that they have on
their paycheck. And they add to this something called imputed rent,
that the gentleman from South Dakota mentioned.
Now, imputed rent is not anything that we receive. It is not cash we
have. It is not really income tax. What imputed rent is is the rent
that an individual could receive if they moved out
[[Page H5389]]
of their house and rented their home to someone else.
Now, the Treasury Department really did not consider where an
individual might live, whether in a tent, in the park, or whether they
would move into the Treasury Department offices. I do not know where
they would go, but they assume that the rent that the individuals could
earn on their homes is part of their income.
So we can see for a family of $45,000 that imputed rent can be as
high as $12,000 a year annually added to their rent. So we can see how
we are taking an average family, that really is the object of our tax
relief package, and slowly moving them up over the $75,000, $76,000,
$77,000 range, because in addition to imputed rent, the Treasury
Department also adds things like the benefits that an individual may
receive at work; $600 for the parking space that they may have in the
parking lot outside of their office building is also added to imputed
rent.
They include several other things. They assume, as the gentleman from
South Dakota mentioned, that we are just simply not reporting all of
our income; that as Americans we somehow lie every year when we report
our income to the Federal Government and comply with the tax law. So
they just throw in a few thousand dollars to the family economic income
to further bump the income up for the purposes of this debate here on
the floor.
They also add the income that a child might earn in a summer job or
the job that they may have after school. They figure that that has some
kind of value to the average family. So they throw that in.
There are several other things. The anticipated income that an
individual may receive on capital gains. Not for the capital gains that
an individual achieves in one year, but for those assets that they
might have and sell some year off in the future. They bring that to
today and throw that into the family economic income.
This is how they bump the family income up so that they say the
average American family is in fact rich. And since the average American
family are the beneficiaries of our tax package, that is how they make
the wild claim that our tax relief package is tax cuts for the rich.
Well, this is a bunch of baloney over here, this chart to the right.
But I do urge people to call the Treasury Department at 202-622-0120
and ask them for the rundown on this calculation. It is called family
economic income. That is the dirty little secret of the Democrats here
in Washington. And I urge Americans to find out all about it and ask
how it might apply to them.
I would point out that the fact of the matter is that American
families have been overtaxed for too long. Back in 1950, this was the
tax bite out of the American family budget. Six percent of our family
budgets went to taxes in 1950. This is when my parents were starting
out and trying to make a go of it as a brand-new family.
Well, over here on the right we can see that in 1994, the Federal tax
burden on the family budget was 23 percent. Now, that is just the
Federal burden. We also pay State taxes and we pay local taxes and all
sorts of other taxes that go along with that. In 1995, the total tax
burden was 39 percent. Almost 40 percent of a family's annual budget is
confiscated in taxes of one sort or another.
This is what we really care about here in Washington as a Republican
Party, and it is the object of our tax plan, and this is what we are
trying to address. We are trying to get back to the days of 1950, when
the tax burden was much, much less, much, much friendlier, and much
more oriented toward liberty and freedom in our great country.
Mr. HULSHOF. If the gentleman would leave that chart up, the one
entitled ``Family Tax Burden.'' I had a question at one time during a
radio town hall meeting regarding tax relief and was taking a variety
of calls. I mentioned that the average family in America today pays
more in taxes than they do for food and for clothing and for shelter
combined. And the gentleman on the phone asked me how is it that I
could make this claim. And as the gentleman mentioned, the total tax
burden is nearly 40 percent, 40 cents out of every dollar goes to the
government.
Think about a typical day. When we wake up in the morning and grab
our first cup of coffee, we pay the sales tax; when we drive to work,
we pay a gas tax; when we get to work, we pay an income tax; when we
flip on a light, we pay an electricity tax; when we flush the toilet,
we pay a water tax; if we have cable TV, we pay a cable tax; if we
drive home and we happen to have one of these homes the gentleman was
talking about with imputed rent, we pay property tax. As the gentleman
from South Dakota mentioned, when we die, the government is there
taking up to 55 percent of the family farm or family business in death
taxes.
Now, that is how it is that clearly we are paying much more in taxes
than we should. The problem is not that we do not tax enough. The fact
is that we here in Washington spend too much, and we are trying not to
give back, but letting people keep more of their money.
Mr. BLUNT. If the gentleman would yield before we get away from the
whole topic of how we calculate wealth in Washington. This is not the
first time we have done this this way.
{time} 2215
The first time was 1993, when supposedly the biggest tax increase in
the history of the country was only a tax increase on the very wealthy.
Working Americans all over the country found out suddenly how wealthy
they were when this massive tax increase hit them, hit their paychecks,
this wealth that the gentleman from Colorado [Mr. Bob Schaffer] has
talked about.
I call it stealth wealth because it is so stealthy they do not even
know they got it. It is out there somewhere and they do not know it is
there, they do not know they have that money to spend, but suddenly
they become very rich Americans. And, in fact, if we look at the
Treasury Department calculations, the kind of calculations that were
used in 1993, if we look at those calculations, more than 50 percent of
the people who have a school teacher in the family or an auto mechanic
in the family or a construction worker in the family are among the very
wealthy.
Now, if we want, if we will accept that as our definition, we very
well may be having a tax increase for the wealthy if the wealthy
includes school teachers and auto mechanics and construction workers.
Not only this imputed value of their home, but if they have got a
health care benefit, any benefit that they have got that their employer
gives them, the capital gains calculated back over the time that they
might average those out over 20 years.
I got to tell my colleagues, that does not help their budget much if
they are the janitor at school and they mess around with a rental house
every Saturday of their life to try to hold their money together, and
suddenly someone says really this rental house some day is going to be
worth, they paid $30,000 for it, 20 years from now with inflation it is
probably worth $60,000. We need to take that $60,000 and divide it back
up over these 20 years, and really they have got another $3,000 or so a
year of wealth right there that they do not know anything about. All
they know is that they are under that house on the coldest day of the
winter trying to thaw out the water pipe.
And those are people that pay capital gains tax, another element of
this tax. This is not stealth wealth for them. It is trying to hold the
money together in an economy that has had too much inflation. It is
trying to make something for their children that they did not have for
themselves.
Forty percent of the capital gains taxes in America are made by
families who have a total family income of less than $50,000. Now under
the Treasury Department calculations they may have a total family
income of $80,000. I do not know. But all they know is their checks add
up, before the taxes are taken out, to $50,000. Those are the families
that pay 40 percent of the capital gains taxes. They have absolutely no
mechanism to avoid it. They do not have expensive accountants or
lawyers. This is a tax break for them, as well.
The taxes that we talk about are taxes that really give a break to
work and productivity and families. And what should we be encouraging
in America? Work, productivity and families. And we ought to be at
least talking about the right numbers. We ought
[[Page H5390]]
to be talking about numbers that when we ask our neighbors, or maybe
not our neighbors, maybe our son, maybe somebody that would tell us
what they are making, probably should be willing to talk about that
when we say, ``What do you make?'' they tell us that that is the number
that we would look at in Washington.
Instead we come up with some number that nobody in their wildest mind
would believe, and then we say and that means that this is a tax break
for the wealthy because they are a school teacher and they are married
to an auto mechanic or they are an auto mechanic and they are married
to a construction worker, and they are now one of the wealthy Americans
according to the way we calculate in Washington.
They do not calculate income that way anywhere else in America, maybe
not anywhere else in the world. And we are trying to fool the hard-
working people of America into believing that everybody else who works
beside them at the job is rich. Because they know they are not rich.
This stealth wealth issue is an issue we have to deal with. But if we
only would deal with numbers that Americans have confidence in, they
would have more confidence in the Congress.
Mr. THUNE. If the gentleman would yield, that is a wonderful point,
and he did I think an excellent job in elaborating on why people are so
confused about this argument. I think it is totally unfair to the
people of this country, most of whom are going to benefit from this, to
try and confuse the issue.
What happens is the other side is losing. And, so, in being crushed,
in losing, they are dragging out the class warfare thing again. It is
not fair when we start talking about the types of things that we have
alluded to, and the gentleman from Colorado [Mr. Bob Schaffer] and his
numbers. If my colleagues want to find out all those things and what
they are, call the Treasury Department.
But we cannot have an honest debate on this issue unless we are
dealing with the same set of numbers. And we are not doing that, and it
is not fair to the people of this country.
One other point I would like to make before we leave this subject,
because again the way this is being pitted, it is playing this tax
relief for the wealthy type thing, which is an absolute misnomer. We
just talked about some statistics earlier this evening with respect to
family tax credit.
The people in this country who are eligible for it, and by the way,
there are 136,000 kids in the State of South Dakota who are eligible
and will qualify for the family tax credit, the families who qualified,
are eligible, there will be 1.9 million, almost 2 million taxpayers in
this country will have their income tax liability entirely wiped out
simply because of the family tax credit.
These are hard-working people on the lower end of the income scale
who are paying income taxes today, who because of the family tax credit
are going to have their tax liability wiped out, almost 2 million
people in this country. That is what we are talking about here. We are
talking about helping people who are working hard, trying to make a
living, people like in my State of South Dakota when I think, given the
opportunity to understand the arguments that are being made here and
understand clearly the types of numbers that are being used and the way
that they are being inflated by the Treasury Department, when people
understand what the issues are, they are hugely in favor of what we are
doing. They are on our side.
We are on the right track and moving in the right direction. And
hopefully, again, we have the opportunity and in future years will be
able to come back again and say, ``We want you to keep even more of
what you earned,'' because Washington, DC does not make very good
decisions when it comes to spending money, and it is proven by the way
they calculate income.
In this country, and only in a country where we have $5\1/2\ trillion
in debt, and we are talking about different degrees, can we double
someone's income just like that out of thin air; and that is what is
happening.
I yield back.
Mr. HULSHOF. If the gentleman would yield, because I think there is
also a lot of misinformation being distributed, originating from right
here in the well of this House, about the $500 per child income tax
credit and whether or not that income tax credit should be applied to
those individuals in our country who are working that receive an earned
income credit but that pay no income tax liability.
If we could take just a minute to explain the difference, because
this is exceedingly important and I think the issues are being framed
up, even as we speak, among the conferees. This is an extremely
important debate.
The income tax credit, as my colleagues know, was first enacted back
in 1975; and the purpose of the earned income credit was to provide
public assistance in the form of an income supplement to low-income
workers, something that the Republican side has continued to support.
In fact, the earned income credit I think has been modified and
expanded. Back in 1993, the earned income credit was expanded even
more. It has been indexed to inflation. We cannot get capital assets or
estates indexed to inflation, but we indexed the earned income credit
for low-income working families to inflation to make sure that their
pay checks would keep pace with the rate of inflation.
So we got nearly 19 million Americans that have qualified and will
qualify for the earned income credit, almost $28 billion in public
assistance going to individuals that will not have to pay Federal
income taxes. In fact, I think the gentleman pointed out a couple weeks
ago when we were discussing this issue, 20 percent of the earned income
costs actually are a refund of income tax that are paid by low-income
people, but 80 percent of the $28 billion, 80 percent is in the form of
supplemental public assistance that goes to working low income
families. Eighty percent is a cash assistance program in excess of
Federal taxes paid.
Now the other side talks about, well, what about the payroll taxes
and what about taxes going to social security and to Medicare? And the
fact is, when each of us at all ends of the income spectrum are working
and paying payroll tax, that is for a future benefit. We are investing
in social security, we are investing in Medicare that we are hoping to
save for future generations.
So the fact is that we have to decide, within the very narrow
parameters that we were given by the White House and congressional
leaders, where are we going to target our tax relief? And right now we
are trying to focus our tax relief on middle-income families with kids
that are trying to make ends meet, that this tax burden, as the
gentleman from Colorado, Mr. Bob Schaffer, mentioned, that are sending
nearly 40 cents out of every dollar here to Washington. Those are the
people that we are trying to aim and rifleshot this tax relief to.
Mr. KINGSTON. If the gentleman would yield, I know we were talking
about this earlier, and I wanted to give an example of a woman, say
Susan, she makes $20,000 a year. She has a 14-year-old and a 16-year-
old.
Now under the Republican plan she would be getting $1,000 tax credit
for those children. Under the Clinton plan she would get zero. But who
would get the money instead is somebody who is not paying income taxes.
And that person who is not paying income taxes may be already receiving
public housing assistance, free health care for the kids, Medicaid,
food stamps for the family, WIC for the children, supplemental security
income, possibly the earned income tax credit, public assistance/
welfare benefits, worth anywhere from $10 to $18 an hour. In addition
to all those public assistance benefits, under the Clinton liberal
Democrat plan they would get another $1,000 check because of having two
children or children under 12 years old. And it is not punitive to say
let us give the income tax credit to those who earn income, rather than
let us just make it one more welfare benefit.
It was interesting, in the Washington Times today, it did say on the
front page, Clinton admits that it is an expansion of welfare. So I
think my colleague raised a good point. This tax relief proposal, the
intent of it is not to expand welfare. The intent of it is to give tax
relief to middle-income Americans.
Mr. HULSHOF. If the gentleman would yield, one additional point, and
I think it is dead on with what the gentleman says.
[[Page H5391]]
One of the subcommittees that I serve on is the Subcommittee on
Oversight of the Committee on Ways and Means, and we recently had
testimony from the IRS, the Internal Revenue Service, about the earned
income credit. Unfortunately, the earned income credit is rife with
fraud and waste and abuse.
In fact, the IRS even estimates that the rate of fraud and error was
over 20 percent. Essentially, out of every $5 then in the earned income
credit that IRS that the Federal Government was giving to these
families, $1 out of every $5 should not have been paid out because this
error rate is so extremely high due to in some instances to fraudulent
reporting but some instances just error in reporting.
The question I have is, given this high level of fraud and error rate
found by the IRS, is it wise at this point to expand, to seek an
expansion of this earned income practice until we can at least get a
handle on or solution to the fraud and the waste and abuse in this
program?
I yield to the gentleman from South Dakota [Mr. Thune].
Mr. THUNE. We had this discussion on the floor before, as my
colleagues know, and I think that the point that my colleague made
earlier, 80 percent of that $28 billion is going out not in the form of
a credit against taxes that are currently being paid but as a
government check. The question that we are faced with, I think, in
terms of this debate is whether or not we want to add to that
government check $500 per child.
Now we talked a lot about statistics in this whole debate, and I
would again mention that 75 plus, 76 percent of the tax relief in this
proposal goes to people who are, families who are making less than
$75,000. Now just by comparison, the taxes that are currently being
paid in America today, 37 percent of the tax burden, the taxes being
paid, are being paid by people making less than $75,000, and yet we are
giving 76 percent of the tax relief to that group of people.
This is very targeted toward hard-working men and women, middle-class
Americans in this country, and families. Sixty-three percent of the tax
burden in America, according to IRS figures, is paid by people who are
making more than $75,000, and yet, under our proposal, they would get
somewhere in the neighborhood of 24 percent of the tax relief.
{time} 2230
We look at who is paying the taxes today, who gets the relief and I
think again we are faced with this question as to whether or not it
makes sense, fiscal sense, to the taxpayers of this country for people
who are already receiving 80 percent of the $28 billion in earned
income credit going as a payment to people who are not currently paying
income taxes. Do we add on to that payment $500 per child?
I think what we have said in our plan is that we want to apply the
tax relief to people who are paying income taxes, and particularly
given what the gentleman has just mentioned about the amount of fraud
in the EITC. The earned income tax credit program is a program that is
seriously in need of reform. I think it would be in our best interests
and in the taxpayers' best interests to reform that program before we
ever look at adding a $500-per-child tax credit.
Mr. BOB SCHAFFER of Colorado. This really defines the classic debate
that we see here in Washington or the classic differences, I should
say, between Democrats and Republicans, or liberals and conservatives.
It is the difference between the entitlement mentality that the
Democrats fight for every day here, which if one is a Democrat makes
perfect sense to them, versus our model of encouraging honest hard
work, which if one is a conservative or a Republican, that of course
makes sense to us. Because on one hand what the Clinton administration
is proposing is within that entitlement mentality, that entitlement
framework, where we just send cash. The cash actually comes to
Washington and it is redistributed by politicians here in Washington.
We take from some families, we take that cash and give it to the
charity of the government's choice, which in this case would be the
individuals who would qualify under the Clinton entitlement tax credit.
Again, contrasting that with our model which suggests that the harder
you work, the more you contribute to our economy, the more you are
willing to try to work hard to strive for self-sufficiency and provide
for your family, the more we want to encourage you. We want to help
that. We want to take less away from you. We want to take less cash out
of your family budget and allow you to keep it, not just so you can
spend it on things, but also so you can be charitable.
This is the point that I think is frequently missed here. President
Kennedy and President Reagan and many Presidents before that have shown
us very directly that when you in fact reduce the tax burden on
American families, charitable giving continues to climb. In fact, under
the Reagan administration, charitable giving reached an all-time high.
It was not until we undid the Reagan tax cuts under the Bush
administration, and even taxed families more under the Clinton
administration, that we saw charitable contributions begin to decline.
These dollars, allowing families to keep more of their cash, to keep
that cash within their family budget for their own discretion under
their own judgment, to put toward their children, their schools, their
communities, their churches, their synagogues, the charities of their
choice is far better, I believe, and we all believe, than the liberal
Democrat model of the entitlement mentality which suggests that
everyone should send their cash to Washington and politicians here will
spend it on the charity of the government's choice.
Mr. BLUNT. I have got a chart here that follows up on what the
gentleman from South Dakota [Mr. Thune] was saying and the gentleman
from Colorado, Mr. Bob Schaffer, was talking about that shows exactly
where these tax cuts are distributed. This is your income on this side.
Under $20,000, almost 5 percent of the tax breaks are for those
taxpayers. Between 20,000 and $75,000, almost 72 percent. Over 76
percent of the tax breaks are for people that make less than $75,000.
We believe that to be a real add-your-paycheck-up figure, add your
check stub up and see what you are making.
When families think about that, where I am from, $75,000 is still
quite a bit of money. But if somebody in your family is making $2,000 a
month and somebody else is making $41,000 a year, you are at $65,000 in
your family income. This is a family income. This is your total family
income. Seventy-six percent of the tax benefits here are for people who
make less than $75,000, 5 percent are for people who make less than
$20,000. These are real numbers. These numbers count.
As the gentleman from South Dakota [Mr. Thune] has pointed out, the
tax breaks are very much in disproportion in terms of the taxes being
paid today, but they are in proportion to what the Members of this
Congress think ought to happen right now to make American families
work.
The gentleman from Missouri [Mr. Hulshof] has talked about from the
minute the alarm clock goes off until you set it again that night, you
are paying somebody some kind of taxes. We are saying that is too much.
We are going to have conservative Democrats, we are going to have
Republicans voting again for this issue if we get to vote on this kind
of issue again. Certainly we had those kind of votes when the
Republican majority, helped by conservative Democrats, sent this tax
bill over to the Senate.
Mr. HULSHOF. I think a point that needs to be made regarding the
numbers on the chart that the gentleman from Missouri [Mr. Blunt] has
before him is that these numbers, this is not sham accounting. This is
not cooking the books, as the gentleman from Colorado, Mr. Bob
Schaffer, talked about the Treasury likes to do with this nebulous
concept called family economic income. These numbers have come from the
Joint Committee on Taxation, which is a bipartisan group that takes the
effects, the true effects of any tax law and determines what is going
to be the effect.
These numbers are what will happen over the next 5 years if the
President will sign into law the measure, the tax relief measure that
we have passed here in the House by an overwhelming majority. These
numbers are good numbers. They are solid numbers of the Joint Tax
Committee.
[[Page H5392]]
It might even be that those who come after us this evening, after our
time is up, as it draws to a close, will talk about, well, 10 years
from now these Republican tax cuts are going to explode the deficit,
are suddenly going to balloon the deficit, and use these terms. I would
challenge anybody that makes these spurious arguments. It is difficult
enough for us to try to project a balanced budget plan for the next 5
years and to try to fashion some modest tax relief for the next 5
years. Certainly when we start looking in a crystal ball and predicting
the future of what is going to happen 10 years down the road, I just
think it is somewhat disingenuous to make an argument that these tax
proposals in the next 10 years or in the next 15 years are going to do
this or do that.
I do not think this House, if we look at its track record, those that
have been in control of this House, I do not think necessarily that we
can go to the bank, so to speak, on the numbers of the predictions that
previous Congresses have had regarding the economic forecasts.
Mr. BOB SCHAFFER of Colorado. Mr. Speaker, I would like to point out
for one minute, before we close here, I just want to reiterate what has
been said over and over again, and I do not think we can make the point
too often, that the real numbers that we have been working with and
that we rely on show us that 76 percent of the tax relief that the
Republicans are providing go to families earning between $20,000 a year
and $75,000 a year. Again, that is 76 percent.
For those people who want to find out the real numbers for what the
impact of this tax plan is going to be on their families, the
Republican Party has provided a Web site that I would encourage people
to visit. The address is right here. It is hillsource.house.gov. You
can call there or visit us here. It is a GOP tax calculator. You impute
your income, and the service here will help figure out what the impact
on your family will be once this tax package is agreed to, is signed by
the President.
The reason we do this is because we are very proud of it. We are
convinced that when real families make contact with us and figure this
out for themselves and apply our tax relief package to their family
income, their average family income, they will see a dramatic reduction
in the amount of cash which the Federal Government confiscates from
your family budget. For that reason, we really encourage people to
call.
This is a winning strategy for us as Republicans. The Democrats are
scared to death because they know when the American families realize
that this really does affect them and helps them, that it is to our
advantage politically but, moreover, economically and for the country.
That is what we care about most. Please visit us. We would love to show
how our relief package is going to help you.
Mr. THUNE. I notice the gentleman made the comment there as he was
pointing that out, that you impute your income. I was wondering if that
was just a slip.
Mr. BOB SCHAFFER of Colorado. That was a slip of the tongue, right.
You compute your income.
Mr. THUNE. I am glad to hear that. You input your income and it will
give you the real number, not the imputed number.
Mr. BOB SCHAFFER of Colorado. Right.
Mr. BLUNT. The other thing to remember here, too, is that as hard as
we have worked on that and as much debate as we have had about the
dangers of giving this money back to the American families and the
American people, we are only managing to give back in this tax cut a
third, one-third, of the dollars that we increased taxes by in 1993,
the biggest tax increase in the history of the country. I do not recall
nearly this much concern in the Congress about taking three times as
much money away from the American people as now we have letting them
keep a third of their money.
We hear about giving them money, giving them a tax break. We are just
again letting them keep their money, and still we have got a long way
to go just to get the tax burden, the Federal tax burden back to where
it was in 1993.
This is the first step, it is a big step, but I just remind people of
the country who are thinking about this debate, how much debate did you
really hear in 1993 as that big tax bill passed about how much money we
were taking away from Americans, or whether we were going to explode
the deficit at some mythical point in the future or what was going to
happen? Were we going to explode the American family at some mythical
point in the future, at a time when we were taking three times this
much money away?
We are working very hard, I think we have taken a very important
first step. We are just giving a third of that tax cut that is in very,
very recent memory back to the people and the families of the country.
Mr. THUNE. I would just add because we are coming to a close here,
but I am proud to be a part of this effort. I think most of us, I know
our colleagues in our freshman class, the people with whom we joined
the Congress, came here for a specific reason. It was because we
believe profoundly and fundamentally that the people in this country,
if given the freedom and the opportunity to make decisions that affect
their lives, will do a better job than the government will. It is all
about allowing people to keep more of what they earn, allowing
government to become smaller and allowing people to be able to do more
because government is doing less.
The gentleman from Colorado [Mr. Bob Schaffer] very aptly pointed out
that when people have more of what they earn, they are willing to
contribute more into their communities. That again is something that we
want to encourage in this country because we have fostered a culture
that has become very dependent upon government. We have an expectation
in this country that government will do all things for you. That is, I
think, a mentality that we need to get away from. I believe that this
debate is moving us in that direction.
I would just make one point in closing, because we look at the
breadth of this thing and the many component parts of it. In lowering
the taxes on saving and job creation, investment, the capital gains
tax, I had people when I was in my State last week ask me, when are you
going to do something in capital gains; we want to sell the farm but we
cannot afford to do it.
You look at the estate tax, the death tax. We believe that people in
this country, when they die, should not have to see the undertaker and
the IRS at the same time. Those are just fundamental values. Those are
things that we stand for and believe in.
I am delighted to be a part of this effort and a part of this class
and the commitment that we have to accomplishing the things that are
good for the future of this country, for my kids and for the kids and
grandkids in South Dakota and throughout America.
Mr. HULSHOF. Mr. Speaker, I appreciate my colleagues joining me this
evening. I appreciate very much their eloquence and the sincerity with
which we have approached this debate. Again, because of the parameters
of the budget agreement, we are trying to focus tax relief, income tax
relief to those families who pay income taxes. Certainly we want to
help those on the lower income scales, to help pull themselves up; but
because of the earned income credit, and especially because of the
disturbing news from the IRS about the fraudulent rate or the error
rate, I should say, regarding the earned income credit, the fact that
of the $28 billion that nearly $6 billion next year will be wasted and
paid out to individuals that perhaps do not qualify or who fraudulently
apply for the earned income credit, again my question to those on the
other side is, is this the time for us to be expanding that credit?
Because of the parameters of the budget agreement, should we not be
looking to those individuals that are paying more in taxes than for
food and for clothing and for shelter combined?
Again, Mr. Speaker as our time is drawing to a close, this is more
than about numbers, this is about choices. It is about people. We want
men and women across this country to be able to earn more so that they
can keep more, to do more. It is about improving the quality of life,
as the gentleman from Colorado [Mr. Bob Schaffer] mentioned, as the
gentleman from Missouri [Mr. Blunt] mentioned, as the gentleman from
South Dakota [Mr. Thune] mentioned. The fact is that
[[Page H5393]]
many couples right now, in order to make ends meet, have no other
choice than to have both spouses working in order to put food on the
table and a roof overhead.
{time} 2245
We believe, the newly elected Members on the Republican side believe,
that taxpayers should reap the rewards of their efforts and our efforts
to shrink the size of the Federal Government. As we force Washington to
balance its books, and as we hold government programs like the earned
income credit accountable, and as we shape and force a smaller,
smarter, more effective government, Washington does not need as much of
the American people's money. The money should stay in the pockets of
hard-working men and women across this country, not into this bloated
bureaucracy or into any schemes to redistribute income. It is the
American people's money. They have earned it, they should keep more of
it. That is what this tax debate is all about. That is why it is so
important.
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