[Congressional Record Volume 143, Number 101 (Wednesday, July 16, 1997)]
[Senate]
[Pages S7513-S7515]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
WHO GETS THE BENEFIT OF A TAX CUT?
Mr. DORGAN. Mr. President, I want to talk today about a debate that
is going on in a conference committee on who gets what portion of the
tax cut that is now proposed by the Congress. It is, I suppose, a
debate that one would expect if the Congress decides there shall be a
tax cut, and the Congress has decided that taxes shall be reduced in
some measure for the American people.
The obvious question is, for whom and for how much? Who gets the
benefit of the tax cut?
We had a generous discussion on the floor of the Senate with an
enormous amount of data and charts, with each side demonstrating that
it is right and the other side is wrong, and each side using economists
and all of the research groups that say this side is right, that side
is wrong, or that side is right, this side is wrong. I suspect people
watching this do not have the foggiest understanding of how you
manufacture all these numbers. It is like making sausage, I assume--
somebody over there, huddled over a bowl, is throwing all kinds of
things in a bowl, and they grind it out and say, ``Here's our
sausage.''
I come from a farm State, so I suppose I talk a lot about
agriculture. I was thinking about an old story that a fellow in my
hometown told me years ago about the chicken and the pig. It reminds me
a little of this debate about the tax issue, who gets what. A chicken
and a pig were prancing around the farmyard and they were talking about
the upcoming birthday for the farmer and deciding what they would give
the farmer for his birthday. The chicken said, ``Why don't we give him
ham and eggs,'' and the pig thought about that for a long time, and
said, ``Well, gee, for you, that's terrific, because for you that's
just a contribution, but for me that requires real commitment.''
Well, commitment or contribution, this is the kind of chicken-and-pig
issue on who gets what in the Tax Code, who contributes what taxes in
this country.
I want to talk just for a moment today about this commitment or
contribution issue, and when it comes time to providing tax relief,
then who gets some help. There is a discussion in this Congress that
occurs almost every year around something called tax freedom day. The
Tax Foundation, in fact, puts out a little publication. This year it
was May 9, I believe, and it says tax freedom day is May 9. We have
someone dutifully coming to the floor, and they hold it up and say,
``Here is the day in which we are free. Up until this day, all of the
things we earn have to go to pay taxes, and beyond this day we are
free.''
It has always been curious to me that the amount of money I pay for
my children to go to school is somehow considered a burden. It is not
to me. I consider it an opportunity to put my kids in a good public
school system, and the taxes I pay to help that public school system is
not a burden to me. But some people feel every dollar they pay is an
enormous burden and a waste. They say, ``Here is tax freedom day, May
9, this year.'' When they talk about tax freedom day, the same people
that come to the floor and do that say tax freedom day is the
accumulation of taxes that people have to pay, including income taxes
and payroll taxes. And, incidentally, payroll taxes are a big chunk of
the taxes people have to pay in this country. When they talk about tax
freedom day, they include payroll taxes.
When they talk about who gets what in terms of tax cuts, guess what
happens? The Congress then says we are only going to measure income
taxes. We are only going to measure the income taxes you pay, and that
is the basis on which you get a tax cut. So you have a situation in
this country where over two-thirds of the American people now pay a
higher payroll tax than they pay in income tax. Two-thirds of the
American people pay higher payroll taxes than income taxes. Payroll
taxes have grown, and rather substantially.
So when it comes time to give a tax cut, we are told that the tax cut
shall go to people based on the income taxes they pay, and if you don't
pay substantial enough income taxes, you do not get a tax cut.
Some of us feel that the working families toward the bottom of the
ladder, those working families somewhere between the 50th percentile
and down who are paying more in payroll taxes than income taxes, they
are working, they are paying taxes. It is a different kind of tax--
payroll tax--they ought to get a tax cut, as well.
Here is the dilemma. We have a tax cut that is proposed in part of
this package that is a per child tax credit of $500, and we are told
that the per child
[[Page S7514]]
tax credit will go to only those people who pay enough income taxes to
earn the credit. What does that mean? It means 4 million to 6 million
American kids will not get a per child tax credit, despite the fact
their folks are working and their folks are paying substantial
payroll taxes, sufficient payroll taxes to earn this tax credit. But
they will be denied any tax benefit under this plan because they pay
payroll taxes and not enough income tax.
Why is it their fault? Because they are not earning enough money,
they are at the bottom of the economic ladder. They are told in this
plan, payroll taxes don't count. So, therefore, these 4 to 6 million
children, the parents of those children, are not going to get a tax
cut, because they only work and they only pay payroll taxes. That makes
no sense at all. It does not make any sense.
Why would we prevent the parents of 4 to 6 million children, the
parents of those 4 to 6 million children who are working, from getting
a tax credit of $500 per child, as all other Americans will get?
We were told last week by a Member of the majority who believes we
should not provide a child tax credit to those people who are working
and paying payroll taxes, that if we did, it would be welfare. Why
welfare? These are people who are working, these are people who are
paying taxes, and these are people who also deserve a tax cut.
It is always interesting to me that every time we talk about a tax
cut in this Chamber, if you get way into the upper end of the income
scale--an area, incidentally, where they have had enormous increases in
income--that somehow the most generous portions of the tax cut always
go to those folks.
I want to read some information that was in a piece yesterday in the
Washington Post about what has happened to incomes in this country.
According to the Congressional Budget Office, the Americans in the
bottom one-fifth of the income distribution, the lowest 20 percent of
income earners in the work force, saw their after-tax incomes drop by
16 percent between 1997 and 1994. When you adjust all that for
inflation, they have 16 percent less purchasing power in a 20-year
period. The next-to-the-bottom fifth lost 8 percent. The middle fifth
stayed about even.
The members of the wealthiest 20 percent saw their incomes rise by 25
percent, and the top 1 percent of the income earners in this country in
the same 20-year period saw their income rise in real terms by 72
percent. So if you look at who has benefited substantially in the last
20 years, you conclude that the top 20 percent of income earners,
especially the top 1 percent, have benefited enormously.
Why is it, then, when we talk about providing tax cuts, that we say
to those who have not benefited at all, those who are in the work force
who have not received any substantial increase in income, in fact, who
have lost ground, we say to them, ``You are working, you are paying
taxes, but we're sorry, you don't get a tax cut.'' What kind of logic
is that? This does not make any sense to me.
I will read a couple of other things that have been written recently.
Today, in the Washington Post, with respect to this debate about who is
providing what benefit to which income group in this country, the
Washington Post editorial says:
The Republicans have written a tax bill tilted heavily
toward the better-off * * *
The Republicans in turn have adopted a new technique.
Rather than argue as they might have done in the past about
the virtues of the bill, they engage in distortion.
They are talking now about the numbers that are bantered back and
forth.
The people who wrote this bill aren't defending its
distributional consequences; they're 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 can't afford.
I want to talk about this issue of better off, however, because if we
have a proposal passed by both the House and the Senate to reduce the
tax burden in this country, it seems to me it ought to be targeted to
those families who have faced an increasing tax burden.
Which taxes have increased in recent years in this country? Does
anybody know the answer to that? Which taxes have increased? I guess
most people would say the payroll taxes, and they would be right.
Payroll taxes in the last decade have increased, increased again, and
increased again. The income tax rates have come down, except for one
circumstance. But the payroll taxes have increased.
So the result is, when the discussion of the Congress is about giving
a tax cut, I think we ought to talk about providing tax relief to those
who are paying higher payroll taxes. But some say they want to prevent
those people who are paying higher payroll taxes from receiving any of
the significant benefits of the tax cut. Frankly, that is just wrong.
The piece in the Washington Post, written by E.J. Dionne, called
``The Tax War,'' is an interesting piece that appeared a day or two
ago, and it says the following:
The Republicans are missing a chance to make their best
case for a tax cut. For years, they argued that government
should not tax people into poverty or make life tougher for
the pressed middle class. They were right about this,
especially since regressive payroll taxes take a much bigger
chunk from the incomes of the middle class and the working
poor than from the wealthy.
That's why it is incomprehensible that Republicans have so
fiercely resisted Clinton's proposal to give the $500-per-
child tax credit to families who owe no income taxes but pay
substantial payroll taxes. Most of these families earn
roughly $17,000 to $30,000 a year.
People at the middle and bottom of the income strata need
tax relief for another reason: For nearly two decades--until
the last 2 or 3 years of the current economic recovery--they
have lost ground or barely kept up.
Now, the point I come to the floor today to make is this. We are in
conference between the House and the Senate on the question of what
kind of tax cut and who receives the benefits of this tax cut. The
chart I have here shows the percentage of working families in this
country whose payroll taxes exceed their income taxes. You will see
this by quintile.
The bottom fifth, 99 percent of them, pay more payroll taxes than
income tax. These are people who work. They get up every day, go to
work, work hard, try to take care of their families. The second
quintile, 97 percent, pay more in payroll taxes than they do in income
tax, and right on down, until you get to the top fifth, and they pay 16
percent in payroll taxes. Sixteen percent have payroll taxes that
exceed their income tax.
You can see the import of this chart. It shows the folks in the
bottom 60 percent of the income strata in this country who are out
working, are paying higher payroll taxes than income taxes. Any
proposal that says that does not count, that does not matter, the
payroll taxes you pay are not part of our concern, is just plain wrong.
Now, we have an opportunity to fix it, and we can fix it in this
conference committee. The House and the Senate conferees can decide to
consider payroll taxes paid as a measurement against who gets the $500
child tax credit. They can do that. Some don't want to do it because it
means they will not be able to get their special little deal in the Tax
Code. They have lots of special trunks in cases that have been put in
this bill. Some want to have their special deal, so they don't want to
do this because it costs money.
If you want a fair tax cut and you want to be fair to working
Americans and working families, you must say to those out there in the
work force, ``We will give a tax cut based on a $500-per-child tax
credit and we will measure it against the taxes you pay--all taxes,
including payroll taxes.'' The failure to do that means that this
Congress is not doing right by middle-income families. This Congress is
not doing right by nearly 4 million to 6 million children and the
parents of those children who will be denied a reduction in their taxes
only because the taxes they paid, the higher taxes they paid, were
payroll taxes rather than income taxes.
So we have an opportunity to do this right. Most people look at the
Congress and they think, if you cut taxes, guess what Congress will do?
It will cut tax and give people at the higher income levels, at the
upper end, the biggest tax cut.
Congress has two ways of doing things. It deals with cakes and
crumbs. The folks at the bottom get the crumbs and the folks at the top
get the cake with lighted candles on it. That is the way people think
Congress behaves because too often that is the way they do behave. We
have an opportunity in constructing a tax bill in this conference
[[Page S7515]]
to do it the right way, which would be to say to all Americans we are
going to give a $500-per-child tax credit, which the Republicans
proposed and which the President proposed, which the Democrats and
Republicans voted for, but that tax credit will not be denied the
people just because they paid a payroll tax rather than an income tax.
This conference in the next couple of days can do this right or it
can do it wrong. I hope they will listen to the voices of some in this
country who say, if you are going to give a tax cut, pay some attention
to the needs of the middle-income earners in this country who deserve a
tax cut, yes, based on income taxes paid, but also based on the higher
sales tax they pay every day as they go to work and work hard to
support their families.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Hutchinson). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCONNELL. Mr. President, what is the pending business?
____________________