[Congressional Record Volume 143, Number 109 (Tuesday, July 29, 1997)]
[House]
[Pages H5993-H5996]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1745
                           ACCORD ON TAX CUTS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 1997, the gentleman from Maryland [Mr. Ehrlich] is 
recognized for 60 minutes as the designee of the majority leader.
  Mr. EHRLICH. Mr. Speaker, I rise today with my good friend, the 
gentleman from Indiana [Mr. McIntosh], who will be joining us shortly 
on the floor. The gentleman from Indiana [Mr. McIntosh] and I certainly 
extend an invitation to our colleague, the gentleman from Washington 
[Mr. Metcalf] as well to join us in a very important day, Mr. Speaker.
  We have an agreement. We just came off the steps of the House of 
Representatives and told the American people a lot of the things that 
we have been debating over the last 3 years in this town.
  I notice I am joined now by my colleague, the gentleman from Indiana 
[Mr. McIntosh], my good friend.
  Mr. Speaker, days like today get us thinking about where we came from 
and where we are and where we are going. Because in politics, Mr. 
Speaker, you cannot always get what you want. Sometimes you can get 
what you need, to paraphrase the rock and roll song.
  Today, people of different political philosophies came together and 
signed an accord. Included in that accord are many things we have 
debated on this House floor over the last 3 years, many items in the 
Contract with America, many items that brought the last couple of 
freshman classes to this town, particularly the 104th freshman class, 
of which the gentleman from Indiana [Mr. McIntosh] and I are members.
  I cannot help but thinking about President Reagan and President Bush 
today, tax cuts from President Reagan. President Bush was the victim of 
some demagoguery of such class warfare rhetoric about cutting capital 
gains for rich people and the class warfare we see on this floor time 
and time again on a daily basis. Yet, we bring the American people a 
significant capital gains tax cut.
  Is it zero? No. Should it be zero? In my view, and in the view of 
many of us, yes. But is 28 down to 20 a step in the right direction? 
You better believe it. And that is the nature of dividing government. 
The folks that control this Congress are pretty much to the right of 
center philosophically. The folks that control that big house down the 
street are to the left of center.
  We have vastly different views of the role of government in our 
lives. We have a vastly different philosophical orientation. Yet today, 
we have come before the American people with an agreement.
  I am really happy to be joined by my really good friend, the 
gentleman from Indiana [Mr. McIntosh], one of the leaders of this 
Congress, 105th Congress. I keep thinking of the 104th Congress. And we 
are going to talk about a few specific items, a few specific 
initiatives in this particular package.
  I know my friend from Indiana [Mr. McIntosh] wants to make a few 
words of introduction, as well.
  Mr. McINTOSH. Mr. Speaker, today is a tremendous day. We have seen 
people from all generations of politics come together for an agreement 
where the American people are the winners.
  The gentleman from Maryland [Mr. Ehrlich] and I were fortunate enough 
to come in in the 1994 elections with that freshman class, now 
sophomore class. The gentleman from New York [Mr. Solomon], chairman of 
the Committee on Rules, has been here quite a bit longer. But all of us 
can celebrate.
  Frankly, I think we do need to say thank you to President Clinton for 
agreeing to sign this legislation, thank you to Speaker Gingrich, thank 
you to leader Trent Lott, and thank you to the gentleman from Texas 
[Mr. Archer] and the others who have worked to negotiate out this bill.
  It is the American people who are the winners in the bottom line. We 
came here with the promise to cut taxes and shrink Government. We came 
here with the promise to change the way Washington does business. I do 
not want to tell my colleagues that we have accomplished everything in 
this bill. But we have made a tremendous step forward. In particular, I 
was delighted to see that we are now going to have the $500 tax credit 
for children become part of the law in this land so that families who 
need that money will be able to benefit from that.
  I would like to share with my colleagues, if I may, Mr. Speaker, an 
example of a family that I know from my hometown of Muncie. It is a 
young man and his wife who have worked hard to get ahead in this 
country, Gerald Hunt and Debra Darnall. They make about $30,000 a year. 
Gerald and Debra work in their own independent business. He is a 
contractor. They will benefit from this plan because they have two 
daughters and their daughters will qualify them to get $1,000 more each 
year in their take-home pay because the Government will not be taking 
it in taxes.
  What does that mean for the Darnalls? It means a lot, I will tell my 
colleagues that. It means six bags of groceries each week will be paid 
for by this tax cut that we are going to pass this week, 2 months' 
worth of groceries in all, real dollars to fill their gas tanks. At 
about 20 bucks a week, that is 50 weeks, the whole year, that they can 
put gas in their gas tanks because the Government is not taking that 
money out the Darnalls' paycheck; new school clothes for Kellie and 
Ashlee, who will grow out of their school clothes every year and need 
that $1,000 in order to help them. Or if the Darnalls decide to start 
saving today in order to send their two daughters to college, we now 
have a new savings plan that will allow them to put aside money for 
those two girls to go to college and not have to pay taxes on the 
interest that that money earns in that savings account.
  This new IRA for education will mean that literally millions of 
Americans can afford to send their children to college who may not have 
had any hope to do that for a better future. I am very proud of what we 
have done today. Those are just a few of the details in our tax bill.
  I look forward in the next hour to working with the gentleman from 
Maryland [Mr. Ehrlich] in explaining to the American people what all of 
us, Democrats, Republicans, all Americans can be proud of the work that 
is being done today in Washington to finally cut taxes for working 
families in this country.
  I look forward to having a discussion with the gentleman from 
Maryland [Mr. Ehrlich] now about the details of that.
  Mr. EHRLICH. It is easy to discuss these issues with the gentleman 
from Indiana [Mr. McIntosh] because we agree and it is nice.
  Mr. McINTOSH. If the gentleman would yield, the great thing, though, 
is that President Clinton is going to sign this bill and our colleagues 
across the aisle are going to help us pass it. So it is not going to be 
a partisan rancor. We won the day, I think, on some of these issues. We 
are going to have a tax cut finally, but we won by joining together and 
all sides agreeing to go do that for the American people.
  Mr. EHRLICH. Reclaiming my time, could we have received odds on this 
tax cut being signed 6 months ago, I think the odds would have been 
very long. I think the American people will wake up tomorrow somewhat 
surprised that this deal got done, and not only that there was an 
agreement made, but that the agreement was made with numbers that are 
not phoney, real numbers and real tax cuts and real entitlement reform 
and real policy initiatives, not the phoney stuff we see coming out of 
this town so often.
  There are two taxes that I know are near and dear to the heart of my 
friend from Indiana [Mr. McIntosh], and they have been near and dear to 
my heart. We have campaigned on these taxes, as two Members who pride 
themselves on

[[Page H5994]]

championing the merits of small business people, small business men and 
small business women, who, it is a cliche these days but it is a fact, 
they are the backbone of the American economy. We create jobs, small 
business people.

  What two tax issues, what two tax initiatives have been so important 
to that small business group? Capital gains and estate taxes. As I said 
earlier, President Bush, and I hope he is on the golf course today, it 
is a great day and he probably is, and he deserves it. But I hope he is 
smiling, Because he has been vindicated.
  When I think back to all the class warfare and negative ads and all 
the silly stuff that had been brought out in President Bush in his 
elections, against the Republican freshmen, against the Republican 
conference in the 1996 elections, against the conservative Democrats, I 
think back to all that sort of rhetoric and I am no longer frustrated 
today because we are making progress.
  A few facts for the gentleman from Indiana [Mr. McIntosh]. As he 
knows, we are cutting capital gains from 28 to 20 for upper income 
taxpayers, 10 percent for lower income taxpayers, 10 percent. Housing 
exemptions, I know the gentleman wants to talk about this in a bit, 
$500,000 for joint filers, $250,000 for single filers. No longer will 
they be punished for making a good economic decision in life, buying a 
house.
  But I have a few facts I want to run by the gentleman from Indiana 
[Mr. McIntosh]. First, as of 1995, American households have more equity 
invested in stock markets than their homes. Think about that. Americans 
now put more of their savings into stocks than into their savings 
accounts.
  According to the Federal Reserve, about 70 cents of every dollar 
saved by American households in the first 6 months of last year went 
into mutual funds. Stock ownership has doubled in the last 7 years. 
Listen to this, 43 percent of all adults in this country today are now 
investors; 47 percent of those folks are women and the clear majority 
are under 50 years of age.
  With respect to the class warfare demagoguery, of which I am tired, 
my colleague is tired, the country is tired, let us get over it. Two-
thirds of individuals reporting capital gains had incomes of less than 
$50,000, incomes of less than $50,000.
  Mr. McINTOSH. If the gentleman would yield, two points that he just 
made need to be repeated. First of all, over 40 percent of the 
investors are women. This is not a tax cut for the white male club in 
this country, for the rich male club. This is a tax cut for the average 
American person who is trying to save and get ahead and save for their 
family, save for their future investment, save for their retirement, 
and take advantage of a stock market that is just skyrocketing, without 
having to fear that they are going to be punished by the tax man if 
they actually succeed in investing and get a return on the investment.
  I think my colleague's point is that 40 percent of the investors who 
benefit from tax cuts are women; 50 percent of the investors make less 
than $50,000 a year. This is a tax cut for the middle class. And I am 
glad that the gentleman from Maryland [Mr. Ehrlich] is pointing out 
that the demagoguery that this is a tax cut for the rich just does not 
stand up under the scrutiny of the examination of the facts.
  Mr. EHRLICH. Mr. Speaker, reclaiming my time, but it is not just the 
middle class. It is a tax cut for every stage of life.
  Getting back to capital gains for just a moment. The elderly realize 
a disproportionate amount of capital gains. In 1993, think about this, 
those over age 65 realized 40 percent of all capital gains. All those 
folks make up just 12 percent of the population. Tax relief for every 
stage of life. It is a cliche, it is a theme, but it is real when it 
comes to this tax package.
  I know there is another tax initiative near and dear to the heart of 
my friend, the gentleman from Indiana [Mr. McIntosh], family-owned 
small businesses and farms, estate taxes, the death tax, or, as we like 
to call it around here, the tax-on-success tax.
  I know my colleague is very familiar with the history of estate taxes 
in this country. Only 3 years ago, the minority leader in this House 
was talking about lowering the threshold from $600,000 to $300,000. 
That was actually debated in this House.
  Today, we stand before the American people and we talk about an 
immediate exclusion up to $1.3 million for small businesses and family 
farms, those folks who are not surviving to the second generation, let 
alone the third generation. And that is un-American. It is very un-
American, in my view, and in the view of the majority of folks in the 
Second District of Maryland, that the Federal Tax Code penalizes folks 
because they happen to be successful small business people. They are 
the backbone of the economy, as we have discussed. They are the folks 
that should not be punished for our Tax Code.
  My friend, the gentleman from Indiana [Mr. McIntosh] knows very well 
of the estate tax. It came about early on to get at the very wealthy in 
this country. Today, it serves as a disincentive for folks to pass on 
their small businesses and their farms through their own family. That 
is not right. Third generation small businesses in this country have a 
survival rate of 10 percent in this country. That is wrong. That is 
immoral. This bill has, at least, a pretty good start toward a real 
remedy.
  Mr. McINTOSH. If the gentleman would yield further, let me talk a 
little bit more about those death taxes and the reforms that we are 
going to have as a result of this compromise with President Clinton.
  Two provisions are very important for family farms, for family farms 
and small businesses. There is an immediate exclusion of $1.3 million 
from their estate. The people might say that sounds like a lot of 
money. But when somebody has worked 50 years in their life farming a 
farm that they inherited from their parents and they find that land 
prices have gone up, they will often discover that, although they do 
not have a lot of cash on hand, they are considered to be millionaires 
by the government when they pass away and try to hand on the family 
farm to the next generation.

                              {time}  1800

  I wanted to share with the gentleman and my colleagues a story about 
a family in my district. Gerald Hunt of Hagerstown, IN, is a family 
farmer. He owns 160 acres of land that was purchased in 1948. He is 
getting ready to retire, starting to think about passing on that farm 
to the next generation. He has a son Niles and a daughter Claudia. But 
he is afraid that under the current law, if he tries to pass on the 
farm to that generation, they will have to sell it just to pay the 
taxes, the death taxes that are in our Tax Code. Fortunately our reform 
will help Gerald Hunt with immediate tax relief so that he can pass on 
the family farm to his 2 children. This is another step in tax relief 
for the average American that is in this tax bill.
  Mr. EHRLICH. The gentleman raises a great point. I think we need to 
talk about this to the American people because they hear numbers like 
$600,000, $1.3 million. ``My God, they're rich people.'' But he made 
the point, and it needs to be repeated time and again, many of these 
small businesses have no cash, no liquidity. They literally have to 
take apart what their parents have built up in order to pay Uncle Sam 
just to pass the business on from one generation to another. It is not 
fair. It is immoral.
  Mr. McINTOSH. Oftentimes the community is the loser. If it is a small 
business and they have to sell the assets to pay the tax bill, then we 
lose the jobs. That business goes out of business. People who worked 
with them, maybe 10, 12, 20 people who worked in that family business, 
are out on the street looking for a new job.
  Mr. EHRLICH. What is also a potential loser is open space, because 
when farmers sell, that land gets developed. We need farmers in this 
country. I know we both represent a lot of farmers. We need farmers to 
stay in business. We have to stop punishing them for being successful 
in life.
  Mr. McINTOSH. Frankly, I like the fact that people want to pass on to 
the next generation the rewards of their hard work. Families are the 
institutions that have made this country great, and we should reward 
families who work and stay together and try to do that.
  If I could interject a minute on another part of the tax cuts that I 
find very, very important, I live in the town

[[Page H5995]]

of Muncie, IN. We have a State university there, Ball State University. 
Most of the students who go there are first generation college 
attendees. Their parents have to scrape and save in order to pay the 
tuition, on average about $2,000 a year, plus room and board and books, 
and they are quite frankly a lot of times having to really struggle in 
order to stay in college. I have talked to a lot of those students when 
I go up to campus and visit with them about their concerns.
  This tax bill, and again I think we do have to give credit where 
credit is due on this one, President Clinton proposed the HOPE 
Scholarships. He campaigned on it in the last election. We were not 
quite sure what it meant on the Republican side of the aisle, but we 
have come together to write the HOPE Scholarships into law, and I think 
it is a good provision for those college students and for their 
families.
  Here is the way it would work. Up to 50 percent of the first $3,000 
of tuition will be a tax credit for people who are paying taxes and 
paying that tuition. That means effectively the first $1,500 of that 
tuition will be paid out of the money that would otherwise go to Uncle 
Sam. That helps a lot in a family budget when they are trying to send 
one, two, maybe three students to college at the same time.
  I think it is also important that we have been able to extend that to 
vocational school, where 75 percent of the first $2,000 will be 
credited in taxes, and for people who extend that beyond the first 2 
years to their third and fourth year of education.
  The other aspect of this that I find very appealing is the tax-free 
IRA that parents can now establish and take benefit of the fact that 
they will be saving their money in advance of sending their children to 
college, without having to pay taxes on those savings and the return on 
that investment. My State recently passed a bill that would encourage 
parents to do that in order to send students to the State colleges in 
Indiana.
  I have to brag about them. IU has a great basketball team, also a 
great liberal arts school, Purdue has one of the best engineering and 
science schools in the country. Ball State, that I mentioned earlier, 
is a great teachers' training college and architecture school. These 
are fine institutions.
  But unfortunately more and more people are struggling in order to be 
able to attend those institutions. Today if you find yourself with 
having a new baby arrive and thinking, ``Gosh, in 18 years, I'm going 
to have to pay out a lot of money to send that child to college,'' we 
want to increase the incentive for parents to start saving right now to 
send their children to school. These new college tuition IRA's, which 
will allow them to save over time, build up the cost of that tuition 
and then deduct it in order to pay for the tuition without having to 
pay taxes, are a tremendous way to allow families to plan to send their 
children to college.
  As you and Kendel know, Ruthie and I are expecting our first child 
this October. I have to tell the gentleman it has already started to 
change my thoughts on how things should be done in the McIntosh 
household. But one thing I can tell the gentleman we are going to do is 
start up one of these IRA's so that our young child will have a chance 
to go to school and we will be able to afford to pay it without asking 
for a pay increase here in Congress.
  Mr. EHRLICH. I hope that does not get the gentleman a negative ad in 
his next campaign, by the way. As the gentleman knows, his wife is a 
special person to us. I congratulate him prematurely. She is a 
wonderful lady.
  I know that there is so much in this agreement we would like to talk 
about, and time is short. We have reform of the earned income tax 
credit, very important. We have the alternative minimum tax relief, 
very important for capital-intensive small businesses. I work with the 
printers a lot in my district and they need to invest so much in 
capital, in new machines, in a very competitive industry. We have 
exempted small corporations from the alternative minimum tax, a very 
important provision. Welfare privatization, an experiment in Texas, 
very important.
  But there is one thing I think we really need to talk about before we 
leave today, and I know my friend from Indiana has something else he 
wants to say, but I just cannot resist talking about entitlement 
reform.
  The gentleman saw the ads. How many ads were run in the 1996 
campaign?
  Mr. McINTOSH. Hundreds of millions of dollars of ads.
  Mr. EHRLICH. Hundreds of millions of dollars of ads were run to scare 
seniors, with one purpose, to get votes. Forget facts, forget what the 
Medicare trustees had told the Congress and the American people. Forget 
what people knew about how in trouble the system was at the time and is 
today. But in order to generate resentment for votes, let us scare 
seniors. That was a very important tactic in some campaigns in the 1996 
elections.

  Here we come today, in late July of 1997, a mere, what, 7 months 
later, 8 months later, and the President is signing a package 
containing almost all of the provisions in the package from 1995 that 
gave rise to those negative ads. I congratulate AARP, I congratulate 
the Seniors Coalition, I congratulate the over 60 folks, I congratulate 
all the senior groups who had the guts and the determination to be 
honest with the American people and their membership, which sometimes 
does not pay, as we know in politics, but to be honest with the 
American people about the problems with Medicare and particularly in 
the trust fund, part A.
  Here we have $115 billion in savings over 5 years. We have extended 
the trust fund, the part A trust fund to the year 2007. We have MSA's. 
We remember how horrible MSA's were and all the ads about medical 
savings accounts. We have PSO's giving freedom to physicians and 
hospitals to form their own networks to compete in the private 
marketplace. Freedom of choice is breaking out for our seniors. We are 
saving Medicare. I do not see one ad on TV today. Why?
  Mr. McINTOSH. Nobody seems to want to benefit politically from 
telling the truth at this point.
  Mr. EHRLICH. That is the right answer.
  Mr. McINTOSH. I wanted to share with the gentleman a story that 
happened to me over the summer. Ruthie and I were at a family reunion 
with her family, the McManis family, and her grandmother Ruth McManis 
stopped me and said, ``I'm reading things about Medicare again. Can you 
tell me what's happening?'' They are in their eighties, they are 
retired, they are in good health, thank God, but they are worried that 
if something should happen and they need to go to the hospital or they 
need to see their doctor, will Medicare be there for them?
  I could reassure Ruth at that point that we are going to save 
Medicare. We are going to put it on a sound financial footing by 
getting rid of the fraud, by getting rid of the excess payments, and by 
giving seniors more choice, so that if they want to keep Medicare 
exactly as it is now, they can do that. If they want to go into an HMO 
or some other managed care unit where they do not have to pay the 
monthly payment because they cannot afford it, they can do that. If 
they want to go outside Medicare and hire their own doctors and take 
out their own insurance plan, they can now do that with this bill.
  But we are going to make sure that senior citizens like Ruth and 
Lester McManis, my wife's grandparents, and senior citizens all over 
this country, are going to be able to count on Medicare being there so 
that they can have their health care needs taken care of.
  The gentleman is right. We do need to point out that it was used 
politically in the last election. But I think we also, and this is 
becoming a recurring theme, my constituents will wonder what happened 
to me, because I have criticized President Clinton a lot. But now that 
he has agreed to do what I think is right, I do think we ought to say 
thank you to him as well.
  Mr. EHRLICH. I agree.
  Mr. McINTOSH. That he did put politics aside in order to pass this 
bill.
  Mr. EHRLICH. I congratulate the President as well, and I join my 
colleague in that. I just hope that the American people do not have 
such a short memory that the stuff that we saw, and I do mean stuff 
that we saw in 1996, is not repeated anytime again. Because it is one 
thing to engage in real debate about real policy with legitimate 
philosophical differences between the parties. I love that, I know the 
gentleman loves that. That is why we do this.

[[Page H5996]]

  But to have to contend with a lot of the stuff that we saw, some 
people tried to sell the American people last campaign in order to 
create class warfare and generational, and that is what we are talking 
about, generational warfare here, turning grandparents against 
grandchildren. It does not work.
  I think that was one of the lessons in the 1996 campaign. I think the 
White House learned it, we learned it, the folks on the other side of 
the aisle learned it, that when we stop that stuff and actually 
negotiate for the common good of the American people, we can make 
progress. That is what this budget agreement represents.
  That is why I am happy to join with my good friend from Indiana today 
to talk about this. I am not going to use the term ``historic,'' but I 
am going to use the term ``important budget agreement,'' and I leave 
the last word to the gentleman from Indiana.
  Mr. McINTOSH. Mr. Speaker, a lot of people have asked me the 
question, where do we go from here, what happens next? I would like to 
mention one thing that I think is critical in this, and that is, as we 
look at these tax cuts, and I have been a strong advocate of these tax 
cut provisions in the Contract With America from the very first day, 
they are not everything that we would want.
  The gentleman from Maryland [Mr. Ehrlich] mentioned we would like to 
go to a zero capital gains tax on investment and savings. One other 
issue that I want to just mention because I think it is important, and 
I have gotten assurance from the Speaker and the gentleman from Texas 
[Mr. Archer], we will bring another tax bill forward in this Congress. 
One issue that I am going to really beg that we put on the table 
because I think it is so important for American families is the 
marriage penalty in our Tax Code.
  One of our classmates, the gentleman from Illinois [Mr. Weller] sits 
on the Committee on Ways and Means. He told me today he is going to 
make abolition of that marriage tax one of his top priorities on that 
committee. But I wanted to share with the gentleman a letter that I 
got, and I have talked on this floor before about this letter. It moved 
me and it is something that I will never forget in my career here in 
Congress. It is a letter from Sharon Mallory and Darryl Pierce.
  ``Dear Representative McIntosh, my boyfriend Darryl Pierce and I 
would very much like to get married.'' Sharon goes on to explain she 
works for about $8 an hour at the Ford electronics plant in 
Connersville, IN, and then she says, ``I can't tell you how disgusted 
we both are over this tax issue. If we get married, not only would I 
forfeit my $900 refund check, we would be writing a check to the IRS 
for $2,800 in taxes. This amount was figured for us by an accountant at 
the local H and R Block office in New Castle.''
  She then says, ``Now there is nothing right about this. After we 
continually hear the government preach to us about family values. I 
don't understand how the Government can ask such questions as single? 
Married? Dependents? Darryl and I would very much like to be married 
and I must say it broke our hearts when we found out we can't afford 
it. We hope someday the Government will allow us to get married by not 
penalizing us.''
  I wanted to share with folks today at home a picture of Sharon and 
Darryl, because they are the American people who will not benefit as 
much from this tax cut because they are not yet married, they do not 
have children.

                              {time}  1815

  So our next tax cut has to help them overcome that marriage penalty 
so that we can strengthen families in this country and they can have 
their fondest dream of once finally becoming a couple come true.
  So our work is still ahead of us, but today is a day to celebrate 
because this is a very, very important tax bill for the American 
people, and I thank the gentleman from Maryland for allowing me to 
participate in this time with him. It is very important that we get 
this message out.
  Mr. EHRLICH. The bottom line is, my friend, when you empower 
families, when you return money to people, when you stop the ability of 
government to always, always, always grow, you hardly ever go wrong, 
and that is the bottom line to this package. I thank my friend from 
Indiana, Mr. McIntosh.

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