[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?

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