[Congressional Record Volume 143, Number 101 (Wednesday, July 16, 1997)]
[House]
[Pages H5393-H5399]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE TAX CUT DEBATE

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from New Jersey [Mr. Pallone] is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. PALLONE. Mr. Speaker, I wanted to start out this evening by 
pointing out that I believe most Americans now realize that the 
Republican tax cut strongly favor the rich, and when I hear my 
colleagues on the Republican side of the aisle constantly try to say 
that that is not true, I think it is because they realize that the word 
is getting out that the average American understands that this 
Republican tax plan is basically favoring the rich, and the media, the 
newspapers, are obviously making that point as well because they 
understand it.
  In fact, two-thirds of the Republican tax cuts in the House bill go 
to households with incomes of more than $100,000, and I believe it is a 
disgrace that those Americans in the bottom 40 percent of the income; 
in other words, these are still working Americans paying taxes, 
essentially get nothing. The Republican tax scheme would deny the child 
tax credit to taxpaying working families but give big business and 
their country club buddies a tax break windfall.
  Now I listened to what some of my colleagues on the Republican side 
said tonight in the last hour, and it was really interesting because 
basically what they were saying is that the more money you make, the 
bigger tax cut you should get, and they short of justify this by 
suggesting that the harder you work the more you earn; in other words, 
somehow that people who earn more work harder.
  The problem is that is simply not true. Many middle-income people 
work harder than wealthy people. Some wealthy people do not work at 
all. They have just basically inherited their wealth in some cases. And 
what the Democrats are saying is that middle-income families should get 
the largest share of the tax cuts because they need it the most, and we 
have a limited amount of money to give back in tax relief because I 
would remind my colleagues on the other side that our basic goal with 
the budget bill is to eliminate the deficit.
  So why should we not give the tax cuts to middle income working 
families primarily? That is all the Democrats are essentially saying. 
We put forth a plan basically that would truly benefit middle-income 
families. We are advocating a tax cutting plan that is fair and that 
helps the majority of Americans as promised in the original budget 
agreement that was reached this past May.
  I believe very strongly that what the Republicans are doing here is 
reneging on the promise that they made when they signed with the 
President and said that as part of this balanced budget agreement most 
of the tax cuts would go to middle income working families, and 
unfortunately the Republican leadership is not honoring this agreement 
made on behalf of the American people. They are basically breaking the 
promise that was made to middle-income people.
  Now, what we have tried to do as Democrats is to illustrate in human 
terms the implications of this Republican tax scheme, and I just wanted 
to mention, I have mentioned it before, but I wanted to mention an 
individual, a family from New Jersey, that wrote to me about a month 
ago now and also talk about this family and others in terms of the 
education benefits of the Democrat versus the Republican bill.
  I have a chart here that talks about how a typical working family 
fares in 1998 under the GOP versus the Democratic proposals. This is a 
family that has an annual income of $24,000. The family has 1 child, 
age 10, and another child, age 19. The 19-year-old is attending his 
first year of community college with an annual tuition of $1200. Under 
the Republican bill the scholarship that would go to the student, to 
the child, that is in the community college basically is $600. Under 
the Democratic alternative it is a lot more, $1,100 phased up to $1,500 
by the year 2001.
  Even more or just as important is what happens with the child tax 
credit. This is this credit that the Republicans promised many times 
before would go to all working families if they had dependent children, 
but what they have done in their Republican tax plan is basically say 
that many families, including this one, which again is making an income 
of $24,000 a year, would receive no child tax credit because they do 
not qualify because of the earned income tax credit which some of my 
colleagues talked about tonight. Under the Democratic plan they would 
get the family $300 phased up to $500 by the year 2001.
  Now that is the general statement that explains, I think, what the 
Democrats are complaining about when we say that the average person, in 
this case a working middle income family, are not getting a benefit of 
a child tax credit under the Republican plan and a reduced amount of 
money that is available for higher education.
  But I just wanted to illustrate my New Jersey case again, if I could, 
and then I would like to yield to some of my colleagues who are joining 
me here this evening.
  This is a woman, Deborah Hammerstrum, who is a resident of Toms 
River, NJ. She is a divorced mother of 2 children living on a single 
income, and she wrote to me, and I quote, ``to stress the importance of 
how a child tax credit would help to offset some of the financial 
burdens that come with raising a family on a single income.'' Ms. 
Hammerstrum earns $21,500 in her job as the benefits coordinator for 
Visiting Home Care Services of Ocean County, NJ. She pays $105 a week 
for child care, actually $5,460 a year, so that she can work. She is 
working.
  Now, to quote again from her letter, she says, ``Unfortunately, the 
Republican child tax credit proposal is targeted against those who need 
it most, those who are just one step away from falling into the welfare 
system.'' She works, she pays for child care, she pays for food, a roof 
over her family's head, and nothing more.
  The child tax credit should be given to financially benefit the 
child, and I think a child from a middle income family would benefit 
greatly by receiving this credit. She would get nothing under the 
Republican proposal, and the reason for this is because the Republican 
bill denies the $500 child tax credit to more than 15 million working 
families because it does not let them count the credit against their 
payroll taxes.
  I heard my colleagues over and over again on the floor tonight say 
that the only people who should qualify for this child tax credit are 
people who pay income taxes; in other words, if the child tax credit, I 
mean, if with the earned income tax credit which we have on the books 
now, that person, in effect that earned income tax credit, goes above 
what their income tax liability is, that they should not be able to 
take advantage of the child tax credit that we are proposing. And that 
is simply unfair, Mr. Speaker, because basically what it says is that 
we are not going to count for this working family the fact that they 
pay payroll taxes, Federal payroll taxes, the fact that they pay 
Federal excise taxes or might pay local property taxes. These families, 
including Ms. Hammerstrum, are paying a lot of taxes, and it does not 
make sense to me to say that they should not get this extra $500 child 
tax credit.

  I have other examples, but I do not want to use them right now 
because I wanted to have some of my colleagues

[[Page H5394]]

talk about some of the same issues and possibly use some other 
examples.
  But I really feel very strongly that the Republicans are pulling the 
wool over the average American's eyes, so to speak, because they are 
suggesting that people who are working are somehow on welfare and 
should not have the benefit of this child tax credit. And that is 
unfair, and it breaches the promise and the commitment that was made 
when we started working on this balanced budget agreement.
  I yield now to the gentlewoman from Connecticut.
  Ms. DeLAURO. Mr. Speaker, I thank the gentleman from New Jersey for 
taking this time so that we can have a debate and discussion about one 
of the most important issues that we are facing in this Congress, and 
that is who is benefiting from these tax proposals that are on the 
table today, and I think you make the point working families today 
understand the sham that the Republicans are trying to pull on them. 
They do understand it. I tell you because it is evident in the data, 
and just a couple of points.
  Sixty-one percent of Americans think the Republicans are out of touch 
with the American people, and they are right. Fifty-two percent of 
Americans think the rich would benefit most from the GOP tax plan, and 
they are right. Americans prefer the democratic tax plan over the GOP 
plan by a 2 to 1 margin, 60 to 31 percent, and Americans strongly 
prefer Democrats' education child tax breaks over the GOP's capital 
gains and estate tax breaks 63 to 32 percent.
  It is important to mention those because the American public is truly 
seeing through what the Republicans in this House are trying to do.
  The most disingenuous part of this debate is that there were several 
people on the floor here tonight. Now a number of them are new Members 
so that they were not here for the signing of the Contract With 
America. As my colleague will recall, this was done with great fanfare 
on the steps of the Capitol with the Speaker of the House, [Mr. 
Gingrich] and the majority of the Republicans in this body. There was 
one gentleman on the floor tonight who did sign the Contract With 
America, and I would bet that those new Members here campaigned on the 
Contract With America.
  Now they may never have read the Contract With America, or they have 
put it aside and want to forget what it is that they signed, what they 
talked about, because let me talk about the child tax credit that was 
contained in the Contract With America, and this is from a third party 
association, Center on Budget and Policy Priorities. This is not 
something that is a document of a Democratic organization or a group. 
This is an independent organization.
  The child tax credit proposal included in the contract would have 
allowed the 500 per child credit to be applied against a family's net 
tax burden from the combination of the income tax, the earned income 
tax credit and the payroll tax. The contract included both the employer 
and the employee share of the payroll tax in determining a family's 
child credit. The contract proposal would have allowed many families 
that owe no income tax after the EITC is considered but pay hefty 
payroll taxes to receive the child credit.
  The point in fact is that those who signed and those wannabees who 
wish they would have signed have walked away from the Contract With 
America. In fact, to put it in the vernacular, they welched on the 
deal, and now what they want to do is to claim that those families, 
teachers, waitresses, policemen, nurses, people who are working hard 
for a living, raising their families, scrambling to pay the bills, 
people who are paying taxes, working and paying taxes, are now all of a 
sudden, with my Republican colleagues, people who are on welfare.
  Mr. Speaker, it is a disgrace, and they demonstrate their 
insensitivity and their lack of understanding of what working families 
are all about in today's society.
  My colleague from New Jersey made a point earlier that people are 
paying taxes, property taxes, excise taxes, payroll taxes, and they pay 
a heftier chunk of those taxes than those who are at the upper end of 
the scale. And in fact those are the families who for the last 20 years 
have watched their incomes either stagnate or decline, and their tax 
burden increase, who now our Republican colleagues are saying these are 
folks who are on welfare. And they welched on this deal because what 
they want to do is to squeeze these folks in order to make it possible 
to index capital gains so that in the second 10 years of this tax 
proposal we would see an explosion of the deficit. And in addition to 
that, they would provide a $22 billion windfall tax break to the 
richest corporations in this country, the Boeings, the Exxons.

                              {time}  2300

  They would scale back the alternate minimum tax so that these 
corporations could in some instances wind up without any tax obligation 
at all. They will stand in the well of this House and they will talk 
about the Contract With America. I watched as the Speaker of this House 
punched the ticket as each item in the contract, he said, was being 
voted on on the floor of this House.
  Yet, they would now either choose to forget what they signed, refuse 
to believe what they signed, lie about what they signed, walk away from 
what they signed, and talk about those folks who pay income taxes, who 
pay payroll taxes, and call them welfare recipients. It is a disgrace 
and it is outrageous.
  As a point of fact, the President's proposal would only allow the 
child tax credit to those families who are working and who are paying 
taxes. Otherwise, you do not receive a child tax credit. You only 
receive the credit up to the amount of payroll taxes that you in fact 
pay.
  My colleagues on the other side of the aisle have a lot of explaining 
to do. They are dealing in a lot of double-talk these days. But I go 
back to my earlier point, which is that the American public is not 
buying it, because the point of fact is that our Republican colleagues 
in fact do not understand and are insensitive to the lives or the needs 
of working middle-class families in this country.
  The public has seen them for what they are and is going to reject 
this tax proposal they are making, and in fact we are going to reject 
it in this House and in the Senate, and the President is going to 
reject it as well.
  I thank my colleague for allowing me to participate in this 
discussion tonight.
  Mr. PALLONE. Mr. Speaker, I thank the gentlewoman for her comments. 
It was amazing, listening to the other side, to the Republicans tonight 
criticize the very concept of the earned income tax credit. They said 
we should not have it at all, and somehow suggested this was strictly a 
Democratic, liberal, or welfare proposal.
  The bottom line is that President Reagan, who is their biggest 
ideological champion historically, I guess, was a big supporter of the 
earned income tax credit, and thought it was a great way for middle- 
and lower-income people who were working to get some kind of a tax 
break. As the gentlewoman mentioned, it was in the Republicans' 
Contract With America.
  Earlier this year Senator Lott, the Senate majority leader, in his 
proposal for tax cuts proposed that individuals who received the earned 
income tax credit would still be able to get the child tax credit. So 
this is a last-minute thing.
  The reason it is happening, and it goes back to what I said before, 
is that we have a very limited pot of money here. If you are not going 
to balloon the deficit, if you are actually going to balance the budget 
with this bill, which is what supposedly we are doing, then you have a 
limited amount of money available for tax cuts.
  If Members want to give these tax breaks, the capital gains tax 
breaks the way they have figured it out, the estate tax breaks the way 
they have figured it out, and the corporate tax breaks to the wealthy 
individuals, the wealthy families and the corporations, then you cannot 
take this limited amount of money and give it to middle-income people 
who are working. You have to find some way, as the gentlewoman said, to 
squeeze them so you can give this money to the wealthy corporations or 
individuals.
  Of course, the other thing they do is at the end of the 10-year 
period, they start giving these breaks even more so with the capital 
gains indexing and the other things. As a result, they in fact

[[Page H5395]]

do balloon the deficit and the deficit starts to grow again. So it is 
totally an effort, a scam, essentially, on the basic purpose of this 
balanced budget bill.
  Ms. DeLAURO. Mr. Chairman, I have just one more point, if my 
colleagues would indulge me. The fact is they made a lot of promises. 
They made a lot of promises to their rich friends. They are squeezing, 
as the gentleman has said and as the other gentleman said, the lower 
end of the scale, because with that limited pot of money they cannot 
make the commitments that they want to do. They have been waiting a 
very long time to do a tax bill that in fact would reward the richest 
folks in this country.
  The one final comment I want to make, which is what the gentleman 
said, is that there are some people who make an awful lot of money in 
this country, who do not do a lot of work for it. They do not do a lot 
of work for it. That is okay. That is okay. Maybe their parents or they 
inherited wealth, or whatever it was. That is okay.
  But not when we have limited resources do we have to be in the 
business of providing the richest people in this country, the 
wealthiest corporations in this country, with an opportunity for tax 
relief which is deserved by hardworking middle class families.
  Mr. PALLONE. Mr. Speaker, I thank the gentlewoman for her comments.
  Mr. Speaker, I yield to the gentleman from Michigan [Mr. Stupak].
  Mr. STUPAK. Mr. Speaker, I thank the gentleman from New Jersey for 
once again organizing and participating in this special order, and also 
the gentlewoman from Connecticut [Ms. DeLauro] and our friend, the 
gentleman from Massachusetts [Mr. Olver].
  I would like to pick up a little bit on this earned income tax 
credit. In my district, the First Congressional District of Michigan, 
the northern half, actually the earned income tax credit, when we 
passed the deficit reduction bill in 1993, over 3,200 families in my 
district benefited from an expansion of the earned income tax credit.
  The median income, median family income, in my district is only 
$27,482. That is the median income. These are the folks, if you had a 
husband and wife and two children, they would be entitled to an earned 
income tax credit at that median income. It is quite large in my 
district. Like I said, over 3,200 families could take advantage of it.
  So what the Republican proposal said is if you are getting the earned 
income tax credit, you are not allowed to take the $500-per-child tax 
credit that is offered. When we look closely at their legislation, it 
is not just people on the earned income tax credit but other people who 
would not benefit from the $500-per-child tax credit.
  The gentlewoman from Connecticut [Ms. DeLauro] said they may be 
welching, but according to the Center for Tax Justice and Policy, 45 
percent of the young people under the age of 18 in Michigan would not 
be allowed to even take advantage of the $500-per-child tax credit 
because of the earned income tax credit or their family income or for 
some reason.
  Look what we did in 1993. When we came here, and I came in 1993, I 
was elected in 1992, if Members take a look at what happened, we had an 
economy, and if Members take a look at Mr. Bush's economic adviser, Mr. 
Boskin back then, a week before President Bill Clinton took office Mr. 
Boskin projected the budget deficit to be $332 billion. Three hundred 
thirty-two billion dollars.

  So the President came in, and after getting a grip on what was going 
on around here, we proposed the largest deficit reduction package ever 
seen in this country. In that deficit reduction package we expanded the 
earned income tax credit, because we knew those folks were playing by 
the rules, working hard, trying to stay off public assistance, needed a 
little extra help. We gave it to them in that vote, in that deficit 
reduction package.
  It kept their heads above water, it kept them off public assistance. 
Every piece of income they received, whether it is an earned income tax 
credit or a per-child credit, because of their limited means, they 
spent it. They put money back into the economy. So that was sort of the 
plan that we did in 1993.
  Look what we did since 1993 to reach a balanced budget. Why are we 
here in July of 1997, 4 years later, talking about giving tax breaks 
because we are on the verge of balancing the budget? We have already 
done so much of the hard work to reach a balanced budget.
  Before President Clinton took office the deficit was a record number. 
In 1992 it was over $290 billion projected and headed up to $332 
billion. In 1993 we worked with the Congress, the President did. We 
enacted his economic program to lower deficits and put more investment 
in people, in our own economy. The plan passed the Congress with only 
Democratic support. Members will remember, the Vice President had to 
break the tie in the Senate. But the Democrats, we stood by it and we 
paid for it. In the 1994 elections some people did not like the plan 
and we lost the majority of the House, but we did what was right for 
this country.
  Since then, since that vote in August of 1993, the deficit has fallen 
by 63 percent. We are now looking at a deficit of somewhere around $60 
billion. Some are saying it may even be $35 or $20 billion when we 
close our books on September 30. We have the smallest deficit since 
1981, and it is the smallest percentage of our gross domestic product. 
It is the smallest since 1974.
  So in fact the percentage of the deficit of our gross domestic 
product is going to be less than 1 percent of our gross domestic 
product here in 1997. Our friends that were out here an hour earlier, 
they were talking about how their budget is going to do this and that.
  They came to power here in 1995. Guess what? They have not passed a 
budget yet. We have not had one budget passed yet. It has been 
continuing budget resolutions, continuing budget resolutions, of what? 
The Democratic plan to reduce the deficit, balance the budget, invest 
in people, and invest in our economy.
  That is what happened because they have not passed their own budget. 
It has been, well, Members remember they could not pass their budget, 
so what did they want to do? Shut down the government. They did that. 
Just like on the disaster aid they did for the Dakotas, they got their 
own way.
  But because of what we Democrats did, we approached the task and we 
are in better shape from a fiscal point of view than any other of the 
major industrial nations in the world. Both our deficit and our public 
sector are substantially smaller. We have the smallest Federal 
Government since the days of John F. Kennedy, back in the 1960's, even 
though the country has doubled. We have less people than back then, we 
have less people providing more service to this country, over 260 
million people in this country.
  We are clearly reaping the benefits of the success of cutting the 
deficit. We stand on the verge of it. So we are saying, if we are going 
to give tax credits, if we are going to give a $500-per-child tax 
credit, let us give it to the folks who really need it.
  Those folks who get the earned income tax credit still pay their 
Social Security taxes, still pay State taxes. In fact, all year while 
they are working they are still taking income taxes out of their check. 
At the end of the year if their income falls below a certain level and 
they have so many dependents and people making up their family, then 
they get an earned income tax credit. It is a benefit at the end, but 
we are going to deny them a per child credit?
  I have to share this with the Members. Just before I came down, I got 
a call. We were out here last week too, talking about this issue. A 
person from Marquette, Michigan, where I represent, was not happy with 
this idea of the earned income tax credit.
  I got to talking with this lady. She did admit that at one time she 
had the earned income tax credit. It was okay for her, and she assured 
me she was only on it for a year, but what was it there for? She needed 
a helping hand. It was not a handout, we gave her a helping hand.
  She got back on her feet, she was doing quite well. Now she wants a 
big capital gains tax. I am pleased she is looking at a capital gains 
tax, but at the same time, I am not going to leave behind those folks 
who are playing by the rules, working hard, trying to get ahead. They 
should get that $500-per-child tax credit and they should keep their 
earned income tax credit, because we will save money in public 
assistance, we will save money in education

[[Page H5396]]

and in other ways, and give them some hope, give them some future.
  The earned income tax credit, we should expand it. We should put the 
$500-per-child tax credit in there. Those are the folks who should get 
it. Those are the folks we are trying to help out. Clearly, clearly, 
because of the Democratic plan that came forward in 1993, we are on the 
verge of balancing the budget right now. We are reaping the benefits of 
our success in cutting the deficit. We have an economy that in 4 
years--before the President got here, there were very few jobs. Our 
deficits were at record levels. Business investments only grew, savings 
investments were all down, interest rates were up. Members remember 
those bleak old days.
  Now there is almost euphoria because we stand on the verge of doing 
it. We are saying, as Democrats, let us give that $500-per-child tax 
credit to those people who really need it, and let us reinvest not only 
in our country, but also in the people who helped to make it.
  Mr. Speaker, that is why I was very pleased to come down here 
tonight. To the lady that called me from Marquette, Michigan, I 
appreciate her call. I appreciate her honesty that even she at one time 
had to use the earned income tax credit. We should continue. Again, if 
we cannot reach out and help out our neighbor and the people who are 
providing the services, like the police officers and nurses, and even 
people who may work for city government or people who are disabled, 
remember, they pay taxes every day, in every shape and in every form, 
whether it is their Social Security tax, their FICA, their sales tax, 
their gasoline tax. We hear a lot about that. They are paying those 
taxes.
  I think we as a country, the richest country in the world, the most 
powerful country in the world, a country that has their deficit under 
control, thanks to the Democrats, we certainly should reach out and 
help out those folks.
  I was pleased to come down here tonight and join the gentleman in 
this special order. I appreciate all the hard work the gentleman has 
put in. Not only do we have the $500-per-child tax credit, but we have 
the education tax credit to help folks go to school.
  The Democratic plan is well balanced. It helps out those who need it, 
people whose earned family income is less than $75,000. I told Members, 
in my district it was $27,482.
  We look forward to passing the Democratic plan. I ask the President 
to stand firm with us. We will work this thing through. We will invest 
in people, we will invest in our economy. We will put consumer and 
business confidence back and continue it in this economy.
  As we have shown over the last 4 or 5 years, the Democratic plan has 
been the plan that has lifted this country out of its doldrums, and we 
are now on the verge of balancing this budget. We are going to finish 
the job and at the same time invest in those people.

                              {time}  2315

  Mr. PALLONE. I was listening to the gentleman's comments and then 
comparing some of the comments that were made by some of our Republican 
colleagues earlier.
  If the gentleman listened to them, what they were basically 
suggesting was that somehow what their proposal did, their Republican 
tax cut proposal, was to give money back to Americans but somehow ours 
did not. And the reality is that we are talking about the same pot of 
money here.
  The question is, who is going to get it back? The individual who is 
middle income, who is making $20, $25,000 a year, gets the $500 tax 
credit back from the child tax credit, they are going to go out and 
spend it. And the wealthy individuals that the Republicans want to give 
the tax money back to, the tax cut back to, they are going to spend it 
as well, so in both cases the money is coming back to Americans. They 
are going to spend it, and that hopefully will fuel the economy.
  But the question is, who is going to spend it? I think what you are 
pointing out is that the people that receive the earned income tax 
credit who should also get a child tax credit, they are spending it in 
many cases on basic necessities, food, housing, clothing, whatever. So 
there really is no difference between our points of view, other than 
who we are giving it to. We want to give it to middle-income working 
people.
  Mr. STUPAK. Mr. Speaker, if the gentleman will continue to yield, the 
gentleman mentioned who is going to get it. Under their proposal, 
verified by Treasury and CBO and others, if you make more than 
$250,000, under the Republican plan they are going to get back $27,000. 
That is equal to the median income of the people in the First 
Congressional District of Michigan, which is $27,482. So they are going 
to give the wealthiest $27,000, which is equal to the median income in 
my district. And then those folks who are at the bottom 20 percent of 
the economic ladder, the people who depend on the earned income tax 
credit, who need the $500 per child, according to the same folks they 
are going to pay $63 more.
  So I think we have it reversed. That was the difference back in 1993 
between the Democrat proposal and the Republican proposal. Which one 
worked? Ours did.
  We are now within striking distance of balancing the budget, first 
time since 1969. It is not the time to abandon the responsible, 
effective strategy of cutting the deficit and investing in our people 
that has resulted in the very strong economy we have today.
  That is the Democrat proposal. That is the President's proposal. I 
urge all my colleagues to stand with us. We have done it. We should 
take some credit for it, but at the same time let us be smart about it. 
Give the break to those who need it. Let us invest in our people, 
because they put it back in our economy.
  We have a strong, robust economy. And my colleagues know all the dire 
predictions: If we passed the Democrat plan back in 1993, there would 
be a great depression, massive unemployment. The deficits would be $700 
billion. Just never materialized.
  So we stand here tonight proud as Democrats of what we have done. We 
have more to go, and we are not going to give up this fight because our 
strategy is sound. We invest in people, and that is where it has to be.
  Mr. PALLONE. Mr. Speaker, the gentleman pointed out, as did the 
gentlewoman from Connecticut [Ms. DeLauro] that a lot of promises and a 
lot of agreements are being broken here.
  The gentlewoman from Connecticut [Ms. DeLauro] talked about the 
contract and the promise to give the child tax credit to everyone who 
was working and paying taxes. But this promise to reduce the deficit 
and balance the budget is also a major one that is being broken here. 
And the analysis that our colleagues on the other side kept bringing up 
tonight by the Joint Committee on Taxation, I believe was basically 
looking at the first five years of their proposal, and most of these 
tax breaks for the wealthy are coming at the end of the 10 years.
  The Treasury Department and the other nonpartisan analyses that we 
have used and the Democrats have mentioned all look at this over the 10 
years. What they point out is that with these big tax breaks at the end 
of the 10 years, this deficit, which as you know, Mr. Speaker, everyone 
here has been working so hard to try to bring down, now all of a sudden 
it will start to go up again and balloon and have the negative impact 
on the economy that we have been so concerned about.
  So they are breaking another major promise there with regard to the 
deficit.
  Ms. DeLAURO. Mr. Speaker, if the gentleman will continue to yield, 
sometimes people think that some of the things that are said here at 
this hour are just something that is created out of whole cloth.
  In terms of what you were saying about the second five years and the 
statistics being cited by our Republican colleagues, the Joint 
Committee on Taxation, I mean their work, quite frankly, has been 
debunked, what they have done, because they only look at the first five 
years.
  In today's Washington Post, the people who wrote this bill, to quote, 
are not defending its distributional consequences; that is, how this 
money lays out to various groups in the economy. They are denying them. 
The plain facts are that the bill over time would not just mainly 
benefit the better off but would cost the government revenues it cannot 
afford. The bill is carefully written in such a way as to make the 
revenue loss look small at first. Then it soars. It is not just the 
Treasury that says so. Using accepted methods

[[Page H5397]]

and conventions of analysis, the Congressional Research Service and the 
vast majority of other analysts do so as well.
  Congress's Joint Committee on Taxation says otherwise. The JCT was 
once the great redoubt of integrity in such matters. It has been 
converted into a political parrot. This is not only just the Washington 
Post but distinguished and reputable people are talking about the 
analysis done by the Joint Committee on Taxation as just now being a 
political tool and a political arm of the Republican majority.
  Mr. PALLONE. Mr. Speaker, I think it is abundantly clear. If you 
listened, every reference tonight was to the Joint Committee on 
Taxation which, as you point out, every major newspaper and every 
nonpartisan analyst has said that this has just become totally 
politicized in only looking at the first five years.
  Mr. Speaker, I yield to the gentleman from Massachusetts [Mr. Olver].
  Mr. OLVER. Mr. Speaker, I thank the gentleman for yielding. I 
certainly want to thank him for taking the leadership, as he has 
continued to do, to bring these groups together to discuss this time 
after time after time.
  I wanted to comment on exactly where he was going in one of his very 
recent comments there, wondering how do the people, how do people make 
a decision as to who to believe in a situation like this. In very 
hotly contested, controversial issue like this, there are claims and 
counterclaims that are laid down by different people.

  I have been in the Congress, now in my 7th year, and it is easy to 
become quite cynical. I often wonder how it is that people do make 
those, reach those conclusions.
  In this particular year in the tax debate that we have been going 
through, it seems to me it has been particularly difficult for the 
Republicans to sustain their deliberate misinformation, deliberate 
misinformation here about exactly who it is that is going to benefit 
from their tax cut plan. Because, as you pointed out, the Democratic 
House and the Republican House and the President and the Senate, which 
seems to have one plan all its own, but at least those four plans, 
there are four different plans, all of them are intended to give, 
because it was an agreement along those lines, exactly the same total 
amount of tax reduction in a period.
  So my colleague from Connecticut points out that the opposite side 
only counts the portion, because it makes their point, that it is going 
to be done in the first five years; whereas the agreement that had been 
reached between the President and the congressional leadership was to 
cover a whole 10-year period and to make certain that they would not 
cause a return of deficits in the longer haul.
  So it is much easier in this term, in this case to look at what the 
totals are. Economists from the conservative think tanks, economists 
from the progressive think tanks have all looked at the different plans 
and totaled up exactly how they are distributed over the period of 
time. Very easy to do. Hundreds and hundreds of columns have been 
written and editorials have been written in newspapers of every stripe 
all over the country.
  Somehow out of all of this, out of all of these columns, people have 
listened. They have watched programs like this. They have read the 
editorials and the columns, and out of it all there is now the returns 
as to how people are thinking about it coming back in the polling that 
has been done.
  A majority of Americans think and believe that the rich would benefit 
more from the Republican plan than from the Democratic plan. Of course, 
that is right. And Americans are very wise that way ultimately because 
they have come to understand that a Republican tax plan is going to 
benefit the rich. That is just a given about politics.
  And then out of this they also have shown in the polling that they 
prefer the Democratic tax plan over the Republican plan by at least a 
2-to-1 margin. That is very understandable, too.
  One thing that comes out, however you cut it, slice things up, I want 
to use kind of an example and take my hand and use as the example 
cutting all of American families into five parts. The 20 percent of the 
wealthiest families over here, then down the line to the 20 percent who 
have the lowest income over at this end.
  And the statisticians who have looked at this show quite clearly that 
the 20 percent wealthiest Americans under the Republican plan get two-
thirds. Two-thirds of all of that equal amount total of tax reduction 
goes to this group.
  In the Democratic plan, as it came through the House of 
Representatives, in the Democratic plan and in the President's plan, it 
turns out that two-thirds of all of the tax reduction goes to these 
three groups of families that represent 60 percent of all American 
families which are the American middle class.
  So it is perfectly clear why 60 percent of Americans ought to prefer 
the Democratic plan, because at least that 60 percent of the families 
do better, do twice as well at least, all of the families in that 
middle income area do at least twice as well as they would under the 
Republican plan, whereas under the Republican plan of course it is only 
the very wealthiest 20 percent who get the vast majority of the tax 
reduction.
  So there is a great deal of wisdom that comes through and people pick 
up out of all of what has been said and listening to it all very 
carefully. They come through with the right answer, that they should 
prefer the Democratic plan because the Democratic plan gives the vast 
majority of the money to the great middle class, that group of families 
in the center.
  Then I would like to note one other thing that shows up from the 
polling, and that is that Americans prefer very strongly, by better 
than a 2-to-1 margin, the way the Democratic plan deals with cuts, tax 
cuts attributed to education benefits and those that relate to child 
tax benefits.
  The Americans, by more than a 2-to-1 margin, prefer the Democratic 
plan on education and for child tax breaks over the Republican plan, 
which puts more of the money into capital gains tax cuts and estate tax 
cuts.
  Now, why do they prefer the Democratic plan on education, for 
instance? Well, part of the President's proposal here has been that he 
is demanding and he is going to defend the idea that there is going to 
be $35 billion of tax reduction to provide benefits for people to be 
able to send their kids to college. That was part of the agreement that 
was reached between the President and the leadership here in the 
Congress from the majority party.
  The difference is that the President, in his plan for giving 
education tax cuts, would allow a HOPE scholarship to provide up to 
$1,500, when it is fully phased in, for families in the first 2 years 
of college. And then in the second 2 years of college, he would allow 
20 percent of their tuition costs, up to tuitions of $10,000, to be 
given in the way of a tax credit.

                              {time}  2330

  The Republicans cut those benefits that would go to families that are 
trying to send their kids to college; would cut those deeply.
  The gentleman's chart up there shows that it is almost in half for 
the HOPE scholarship, in the instance that the gentleman had done, but 
then to top it off, to top it off, really to add to the insult of 
cutting the education benefits in half essentially from what the 
President agreed to, they then raised taxes on graduate students, who 
also are going to school.
  They raise taxes on the families who work for colleges and 
universities, whose kids are going to those same colleges and 
universities where they work. They would see an increase in taxes for 
them. And there are hundreds of thousands of them. And they would raise 
taxes on the men and women who teach in our colleges and universities 
by changing and increasing the taxes that they would pay on their 
retirement plans.
  So what we have here is a situation where an agreement was reached to 
provide $35 million of tax reduction that would help people. And it is 
particularly middle income families who would be helped here, to help 
families put their kids through college.
  The Republicans have been trying to weasel out on that agreement that 
they had reached. So that what they are doing is cutting the tax 
reduction less than what the President has asked for and, in fact, 
applying taxes to those groups that I mentioned, to the graduate 
students, to the families who

[[Page H5398]]

work at the different colleges and universities, and to the people who 
teach at those colleges and universities.
  That is a pretty weasely thing to do and it is very much against the 
agreement that had been reached.
  On the other hand, if we look at what the proposals are in terms of 
capital gains, the Republican way of dealing with the capital gains 
reduction is to give a large tax break to the super rich. Because it is 
the super rich who have the greatest amount, by a vast majority, by a 
vast margin of the capital gains in this country anyway. It is the 
people who have made their vast amount of money on the runup in the 
stock market and so forth, the very wealthy, who have large amounts in 
the stock market. They would get a huge benefit out of the capital 
gains tax reduction that has been proposed.
  In the Democratic proposal, middle income families who, yes, some 
people have a few stocks, I even have a few stocks, but I am not one of 
those who plays around in the stock market, but I do have a few stocks. 
But for most middle income families, that three out of five families in 
the middle, whose income probably lies somewhere between $17,000 a year 
and somewhere around $75,000 or $80,000 a year, for those families the 
main thing that they would get or ever see a capital gain on would be 
their home.
  Under the Democratic plan we provide for that capital gains tax 
reduction on an individual's home, so middle income families get that. 
But we would not give it for speculations on stock or for the sale of 
collectibles, stamp collections and coin collections and things of that 
sort. We would not do that because that is something that would benefit 
only the super rich.
  We would prefer, on the Democratic side, to give the tax breaks to 
lower income working families in ways of allowing their kids to go to 
college and giving it on homes and small businesses and the transfers 
of small businesses, where most of the jobs in this country are 
provided anyway. That is how the Democratic plan would give out the 
capital gains tax reductions.
  So people, again, prefer or they have shown by a better than 2 to 1 
margin that they prefer the Democratic plan on the tax reductions and 
the President's plan on the education tax reductions over the way the 
Republicans deal with the education breaks, and would prefer our plan 
for its education cuts over the Republican plan which has those capital 
gains tax cuts that I have described as going very much to the very 
wealthy in this vote.
  Again, they are showing the wisdom that Americans ultimately show in 
these sorts of situations. They have picked up exactly what it is that 
is going on out of all the rhetoric, out of all the claims and 
counterclaims, out of all the columns written and all the analyses 
being done on this, and clearly understand quite clearly which of these 
plans would be to their greater benefit.
  Mr. STUPAK. If the gentleman would yield, on the capital gains tax, I 
think a very important aspect we should point out here is that 
underneath the Republican plan, the capital gains drops from 28 to 20 
percent, then there is a 26 percent tax on the previously declared 
depreciation. It is called depreciation recapture, and it is a rather 
complex formula they have in their bill.
  Underneath the Democratic plan, the gentleman is correct that ours 
goes from 28 percent to 18 percent, and it is for those on their home, 
small businesses, family-owned businesses transferred within the family 
members and farms. The point being that we can drop our capital gains 
greater, from 28 percent to 18 percent, because it is targeted to the 
middle class and, therefore, we can give a larger aggregate tax break 
to more people.
  Underneath the GOP plan, they go from 28 to 20 percent then a 
recapture of 26 percent, and it costs us more money because it is 
geared towards the high income items; collectibles, intangibles, not 
real things like farms and homes and small businesses.
  So I wanted to make the point that underneath the Democratic plan, 
actually people make out better underneath the Democratic plan, just 
from 28 to 18, where the Republican plan is 28 to 20 plus a 26 percent 
recapture tax.
  So it is pretty interesting how it all breaks out, because it is all 
who is it geared for. Is it for the upper 20 percent of the middle 
class, to use the gentleman's five elements there. I have to go back to 
the old saying here, here is the upper 20 percent, and it goes to the 
old saying the rich get richer, the poor get poorer and those of us in 
the middle get squeezed. And I think the five fingers work pretty good 
for that.
  And that is why under the capital gains, the HOPE scholarship, or 
even just the earned income tax credit, the $500 per child credit, that 
is how the Democratic plan works out so much better and reinvests in 
people and back in this country.
  Mr. PALLONE. If I could just say, I am really pleased that the 
gentleman from Michigan [Mr. Stupak] pointed out the capital gains 
difference, because I think the Republicans would like the public to 
believe that the Democrats are not reducing capital gains. In fact, 
they are reducing them, in many cases even more, but they are targeting 
them primarily to homeowners. Whereas as the gentleman mentioned, under 
the Republican plan it is basically across the board and, therefore, it 
means with stocks, bonds, collectibles, and all these other things that 
it is primarily going to the wealthy families.
  I would yield back to the gentleman again.
  Mr. OLVER. The crux is that we can look at the education tax 
proposals, we can look at the child tax proposals, and we can look at 
the capital gains tax proposals and the estate tax proposals and all 
the others. And each one of them has to be looked at and analyzed, and 
they have been analyzed by the economists both on the left and the 
right, and by those columnists and editorialists. And, ultimately, when 
we put it all together, ultimately when we put it all together, it just 
turns out that the Democratic plan gives these 60 percent of families 
in the middle, out of the combination, more than twice as much of the 
total tax reduction.
  And it is equal in the different plans. The total is the same in the 
different plans. But the Democratic plan and the President's plan gives 
more than twice as much of that money to these middle income families, 
the 60 percent in the middle, whereas the Republican plan gives four 
times as much actually than the Democratic plan to that wealthiest, 
that wealthiest one out of five families in this country.
  That is the major difference. That is what people understand about 
this. In its gross overall form, that is what I think people understand 
this year.
  Mr. PALLONE. The other thing the gentleman from Massachusetts 
mentioned, that I think is so important and goes back again to what we 
were saying in the beginning, is that on the education tax cuts, again 
the Republicans are breaking the deal.
  A commitment was made that a certain percentage of this tax cut plan 
in dollars was supposed to go to education tax cuts and it was 
primarily to be targeted to middle income people. And the President was 
the person who pushed the most for that because President Clinton 
believed very strongly that we needed a well educated America if we are 
going to compete in the global economy; that education was the most 
important thing for the future of the country.
  His biggest criticism, and I even have some statements here from 
Secretary Rubin criticizing the Republican tax incentives with regard 
to education, is because he says it breaks the deal on the budget, it 
does not give enough money for education, and it particularly does not 
help people who are working people at the lower end of the spectrum, so 
to speak.
  If I could just mention briefly some statements from Secretary 
Rubin's letter to the conferees, he says

       Both the House and Senate bills are inconsistent with the 
     bipartisan budget agreement because they fall far short of 
     meeting the specific agreement of providing roughly $35 
     billion over 5 years of higher education incentives along the 
     lines of the President's HOPE scholarship credit and tuition 
     deduction proposals. Each bill significantly reduces the 
     value of education benefits for millions of students 
     attending low cost institutions by cutting the percentage of 
     expenses covered by the credit, 50 percent in the House bill, 
     50 to 75 percent in the Senate bill.

  So it is those very students at the low cost institutions of higher 
education, the community colleges and the other low cost State 
colleges, that will get less tuition tax credit, which absolutely 
breaks the deal and makes no

[[Page H5399]]

sense, because they are the ones that needs it the most.
  So that breaking the deal, I think the gentleman used the term 
weaseled on the deal, is exactly what we are getting here at every 
level. But most importantly, and that is what aggravates, I think, 
President Clinton the most, is on the education tax cuts, because that 
was the part of the balanced budget agreement he was most concerned 
about because of his concern about the future of the country.
  Mr. OLVER. If the gentleman would yield further for just a moment. I 
think the President has made it absolutely clear what he will require 
in order for him to sign this legislation. He wants very badly to sign 
legislation for a tax reduction, but he is going to make certain that 
it goes chiefly to the middle class.
  He is going to make certain that it does not explode deficits in the 
outyears so that we do not go through what we went through in the 
1980's with the deficits reaching as high as $330 billion a year, as 
they would have been in fiscal year 1993 if we had not, as the 
gentleman from Michigan said earlier, if we had not gone through that 
very tough exercise in 1993.
  And thirdly that it must encourage education, because that is the way 
that our people are going to grow in their opportunities, in their 
capacities to contribute to America and to their families.
  Mr. PALLONE. And the amazing thing, too, going back to these higher 
education tax credits, is that under the Republican bill, after the 
first 2 years, because again remember we are trying to get and help 
people who are at the lower end of the spectrum pay for college 
education, still working people, though. And I wanted to read again 
from Secretary Rubin's letter, he says ``Neither bill, House or Senate, 
offers low income students and students who work to pay tuition 
meaningful help beyond the first 2 years of higher education. Instead, 
the bills require taxpayers to have the funds available to put into 
savings in order to be entitled to any assistance other than for the 
first 2 years.''
  So not only do they take these working students and give them less 
for the first 2 years than the Democratic plan would, but unless they 
are in a position to have an IRA or some sort of special savings 
account, they would not get any help at all in the last 2 years of 
college. And we of course do the opposite and extend that credit, that 
education credit, through the whole 4 years of college.
  And my colleagues know today that many students need the 4-year 
degree if they are going to be able to get into the work force. So 
again it makes no sense. It is geared to the wealthy, not to the middle 
income people.
  And, obviously, this is not over yet, the budget negotiators are 
still at this, the President is weighing in, and I think all of us here 
joining in this special order tonight are only doing it because we hope 
that the people involved in these budget negotiations on the Republican 
side will wake up, come to their senses, so to speak, and try to help 
the average working American. This is not too late. This can still be 
done if they heed their constituents and the will of the American 
people.
  I want to thank the gentlemen for participating in this special 
order.

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