[Congressional Record Volume 143, Number 105 (Wednesday, July 23, 1997)]
[Senate]
[Pages S7885-S7886]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   A TAX CUT FOR PEOPLE WHO PAY TAXES

  Mr. GRAMM. Mr. President, I understand our Democratic colleagues have 
been out today to proudly unfurl the banner proclaiming ``redistribute 
the wealth.'' They have been looking at the tax cut that has passed the 
House and Senate, and they have discovered something that, to them, 
seems miraculous. I would like to take a few minutes this morning to 
address the issue. Our Democratic colleagues have discovered that the 
bottom 20 percent of all income earners in America do not get a tax cut 
under the tax bill that passed the U.S. Senate with 80 votes, and 
further that the top 20 percent of all income earners get a substantial 
tax cut. Our Democratic colleagues believe that this is grossly unfair 
and they want to do something about it.
  Well, let me first set the record straight. It is true that, in our 
tax bill--at least the version that passed the House--the bottom 20 
percent of income earners in America do not get much of a tax cut. It 
is also true that the top 20 percent of income earners will get a 
substantial tax cut.
  But as Paul Harvey would say, let me tell you the rest of the story. 
The rest of the story is that, as a group, the bottom 20 percent of 
income earners in America pay no income taxes. The top 20 percent of 
income earners in America pay 78.9 percent of all the income taxes paid 
in America. So I do not understand why our Democratic colleagues are so 
shocked to learn that people who do not pay income taxes do not get an 
income tax cut when we are cutting income taxes. Nor can I understand 
why they are so shocked to learn that when 20 percent of the workers in 
America are paying 78.9 percent of all income taxes, it is that 20 
percent which will benefit from a tax cut when we are talking about 
cutting income taxes.
  Now, what our colleagues on the left would like to do, in following 
the President's proposal, is to take the tax cuts away from a working 
couple, both of them working full time, making a total of $54,000 a 
year, and instead give it to people who do not pay any income taxes. 
Their argument is, if you are a working couple in America and you make 
a total of $54,000 year, then you are rich and, therefore, you ought 
not to get a tax cut. Our colleagues on the left believe that we ought 
to take away your tax cut and give it to people who pay no income 
taxes.
  I reject that. I reject it because it is not fair. It is not fair 
because a tax cut is for taxpayers. If you do not pay income taxes, 
then when we are cutting income taxes you should not expect to get a 
tax cut. Let me make it clear that I have voted for a lot of programs 
that provide benefits to people--over the past 15 years, we have 
substantially increased benefits to the very group that our Democratic 
colleagues have argued on behalf of here today. Let me just give you 
some figures. In 1981, the average payment that we were making to low-
income workers--we actually give them money to work--was $285. Today, 
that figure has risen to $1,395. This is relevant because the last time 
we cut taxes on working families was in 1981. So our Democratic 
colleagues who have been out this morning talking about redistributing 
wealth say, look, we ought to take the tax cut away from families 
making $54,000 a year as a joint income, and we ought to raise this so 
called earned income tax credit.
  My point is that the last time working families who pay taxes got a 
tax cut, the earned income tax credit, on average, was just $285.
  Today the average beneficiary of this so-called earned income tax 
credit is getting $1,395. In other words, we have had almost a 500-
percent increase in subsidies for low-income workers since the last 
penny of tax cuts was provided for people who actually pay income taxes 
in America. The best data we have on the refunded portion of the earned 
income tax credit and after-tax income of taxpaying families is the 
following: Since 1986, the paid out portion of what we call earned 
income tax credit, a direct Government subsidy to low-income workers--
which, by the way, I have supported--has risen by 860 percent since 
1986.
  Do you know what has happened to the after-tax income of working, 
taxpaying families since 1986? It has fallen .2 percent--from $28,302 
to $28,249. So, while this subsidy to low-income workers has exploded--
the paid-out portion has risen by 860 percent in the last 11 years--we 
have not had a tax cut in the last 11 years for taxpaying families, and 
during that time the after-tax income of working families has actually 
gone down.
  What we have heard all morning is that we should take money away from 
taxpayers and give more subsidies to people who are not paying income 
taxes.
  I believe that it is not unreasonable once every 16 years to have a 
bill that helps people who pay income taxes. What we are trying to do 
is to give a modest tax cut--$85 billion in a $7 trillion economy--and 
we are trying to give it to people who are actually paying income 
taxes.
  I can not think of a more reasonable proposition.
  Finally, let me say that we have this game going on where the White 
House wants to make everybody appear richer than they are so that in 
the process they can claim that it is only rich people who they would 
deny the tax cuts. Let me tell you how it works.
  According to the Joint Committee on Taxation and according to the 
Census Bureau, the top 20 percent of income earners have a threshold 
income of about $54,000 per family. But what the administration has 
done is they have inflated that income by over 70 percent. You think 
you are making $54,000 a year, but the administration says, ``Now, wait 
a minute. Do you not live in your own home? And you know, if you did 
not live in your own home, you could move out, live in a tent, and rent 
that house out.'' So they take what you could rent it for, and they add 
that to your income. They take unrealized gains, the cash buildup of 
your insurance policy, the value of your retirement program, private 
retirement programs, and they add all of that to your income. So your 
paycheck says, when you add yours and your wife's, that you made 
$54,000. You did not feel too rich, quite frankly, making $54,000. You 
are working hard to make ends meet. But the administration says your 
income is not $54,000. They say if you moved out of your house and 
rented it out, and if you looked at the buildup of your life insurance 
policy, if you looked at the internal buildup value of your retirement 
program, you would have found that actually your income was over 
$93,000, and that you are actually rich. Then they say, because you are 
rich, you do not deserve a tax cut so we are going to take it away and 
give it to someone who does not pay taxes.
  Let me make two more points because I see several of my colleagues 
here who want to speak.
  This whole debate pains me. I do not understand why, in America, 
anyone would try to pit people against each other based on their 
income. There is nothing more un-American, in my opinion, than trying 
to divide people up in classes based on how much money they make. We 
probably provide more generously than any society in history for people 
who are incapable of earning a living or people who are having trouble 
doing it. We are not debating those issues today.
  What we are debating is when we finally, for the first time in 16 
years, can afford to give reductions in income taxes, should those 
reductions go to people who pay income taxes, or do we have to pay 
tribute every time we try to help working families who pay income taxes 
by taking part of their tax cut and giving it to people who are not 
paying income taxes? That is the real debate.

  Final point: If you are making $54,000 a year, husband and wife 
working, maybe somebody at the White House thinks you are rich. Maybe 
there are people in Congress who think you are rich. But basically we 
are talking about middle-class, working Americans struggling to make a 
mortgage payment, struggling to pay for food and shelter, struggling to 
try to lead a quality life. It is just outrageous and

[[Page S7886]]

totally unacceptable for us to be talking about taking that working 
families' tax cut away to give more subsidies to people who are not 
paying income taxes.
  To me, that is what this whole issue is about. It never ceases to 
amaze me when we look at these polls to see that people believe that 
the President is right, and that, in fact, we are talking about 
redistributing wealth to the wealthy.
  The Tax Code in America is more progressive today than it was the day 
Ronald Reagan was elected President. Higher income Americans are paying 
a larger percentage of the tax--bearing more of the burden of taxes 
today than they were the day Ronald Reagan became President. Lower 
income Americans are bearing a lower share of the tax burden.
  For those who want to complain about payroll taxes, let us remember 
who made a proposal 3 years ago to almost double payroll taxes to pay 
for national health insurance. It sure was not me. I am happy to count 
myself among the number who killed that proposal. That proposal was 
made by the same President who today laments the burden of payroll 
taxes when in fact 3 years ago he wanted to almost double it.
  I do not like engaging in these kinds of debates, I do not think they 
are very productive. We should be talking about creating wealth rather 
than redistributing it. But since some of our colleagues spent an hour 
this morning talking about redistributing wealth, I felt obliged to 
come out and join others in trying to set the record straight.
  I yield the floor.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.

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