[Congressional Record Volume 144, Number 44 (Tuesday, April 21, 1998)]
[House]
[Pages H2106-H2111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  CORRECTION TO THE CONGRESSIONAL RECORD OF THURSDAY, MARCH 26, 1998, 
                         PAGES H-1626 TO H-1631

                                 ______
                                 

                   GOP NATIONAL SALES TAX IS BAD IDEA

  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 majority leader.
  Mr. PALLONE. Mr. Speaker, this evening the Democrats plan to discuss 
the Republican plan to abolish the Tax Code and replace it with either 
a flat tax or a sales tax.
  I yield at this point to the gentlewoman from Connecticut (Ms. 
DeLauro).
  Ms. DeLAURO. Mr. Speaker, I thank the gentleman from New Jersey and I 
also thank my other colleagues who were on the floor and those who are 
coming tonight to join in this special order to talk about the need to 
cut taxes for working middle-class families and to reveal the true 
cost, as my colleague from New Jersey pointed out, the true cost of a 
dangerous Republican proposal to impose a national sales tax on the 
American people.
  We have heard quite a bit lately from our Republican colleagues about 
tax reform. But behind the rhetoric and the calls to ``scrap the 
code,'' that mantra, if you will, repeated over and over again to scrap 
the code, behind the rhetoric of that phrase lie some very radical and 
some dangerous proposals that will actually raise taxes on working 
families and cut taxes for the wealthiest 1 percent of taxpayers.

[[Page H2107]]

  I think we all agree that that is not reform, that is not what we are 
about. Abolishing the Tax Code, replacing it with a sales tax is one of 
those kinds of easy-listening proposals that Republicans are famous 
for. If you will, it is the legislative equivalent of elevator music; 
we might find ourselves humming along. But when we snap out of it, we 
realize that we hate the song. We have all had this happen to us.
  The Republican national sales tax is a very bad idea. My Republican 
colleagues argue that a national sales tax would be simple and it would 
be fair. But take a closer look at it and we find that there is nothing 
simple or fair about it.
  A national sales tax is not simple. In fact, several renowned 
economists have declared a national sales tax as unworkable. Even the 
conservative Wall Street Journal has panned the proposal and 
highlighted concerns about administration and about enforcement.
  A national sales tax is not fair. The Brookings Institute says that 
of the GOP sales tax, ``The sales tax would raise burdens on low- and 
middle-income households and sharply cut taxes on the top 1 percent of 
taxpayers.'' That is not fair.
  The GOP national sales tax proposals call for replacing all 
individual and corporate taxes with a 23 percent sales tax. But there 
is a new analysis by Citizens for Tax Justice that shows that the 
actual rate would be at least 30 percent. That means the American 
people would pay 30 percent more for everything, 30 percent more for 
everything. They would pay a 30 percent tax every time they opened 
their wallet. Talk about being nickeled and dimed to death.
  What does that mean to the average middle-class family? Let us take a 
look. This week U.S. News and World Report did a cover story on the 
cost of raising a child in today's world. It is an astounding piece. 
According to U.S. News, for a child born in 1997, a middle-class family 
will spend $1.4 million to raise that child to age 18. This is the 
cover of U.S. News and World Report this week, ``The Real Cost of 
Raising Kids.'' Would my colleagues believe it is $1.4 million apiece? 
Put a 30 percent tax on top of that and we are looking at life for 
working families under a GOP national sales tax.
  Let us take a look at a few examples of what a 30 percent tax means 
in real life. This is a box of diapers. It costs $23 today. Add a 30 
percent GOP tax of $6.90 and we have the GOP price of $29.90. Let us 
take a look at what it costs for a pair of children's shoes. They cost 
about $20. Add the GOP sales tax, which is about $6, and we are paying 
$26 for the same pair of shoes.
  Let us take a look at a box of cereal, and we all want to give our 
kids cereal. We want to make sure that they are healthy. The price is 
$2.99 today. The GOP tax of an additional 90 cents would bring the 
price of a box of Kellogg's Raisin Bran, Two Scoops of Raisin Bran 
here, up to $3.89.
  Let us take a look at a loaf of natural grain bread. Price $2.59. GOP 
tax, 78 cents. GOP price, $3.37.
  And what about baby food? Price 45 cents. GOP tax, 14 cents. GOP 
price, 59 cents.
  This gives my colleagues some idea of the reality of a national sales 
tax and a 30 percent increase in that tax. Of course, we all know that 
children's shoes get more and more expensive. We saw here. So if they 
take a look at what happens as they grow up and they have a child that 
is a teenager, his or her shoes could cost $120. Add a 30 percent sales 
tax, and they are looking at a $36 tax, bringing the cost to $156. It 
is no wonder that, according to U.S. News and World Report, the cost of 
clothing a middle-class kid to age 18 costs $22,063.
  My colleagues will see on this chart that the GOP sales tax would 
increase that cost significantly. I think it is important to take a 
look at this chart. This is the GOP 30 percent sales tax list for 
working families, the cost of raising a child.
  If my colleagues will bear with me, housing, today's cost is $97,549. 
The GOP 30 percent sales tax would add $29,000. We are looking at a 
price tag from the GOP of $126,000.
  Food, $54,795. Add to that the 30 percent sales tax of $16,400. We 
are talking about $71,000 to provide food for our kids.
  Transportation costs, $46,000. Add $13,000 from the GOP tax, bringing 
it up to $60,000 to provide transportation for their child.
  Clothing, $22,000; an additional $6,600, $28,600 in providing 
clothing for their child.
  Health care, $20,700; $6,200 additional from the GOP tax; 26,000, 
almost $27,000 to provide health care for their child.
  Day-care, $25,600; an additional $7,700; $33,300 to provide day-care 
for their child while they are working and trying to make ends meet and 
scrambling every month to pay the bills.
  Miscellaneous costs, whatever it costs to raise kids, and we know 
that they are not all set and pat, we never know what is going to come 
up, $33-, almost $34,000. An additional $10,000 is what we would have 
to pay because of the 30 percent sales tax that the Republicans are 
talking about, bringing the total up to $44,000.
  The cost of a college education, every family wants to be able to 
send their children to college if they can afford to do that. And if a 
child can get into a college today, it is $158,000 to send a child to 
college.

                              {time}  2100

  You would have to add a 30 percent sales tax to that, another 
$47,000, making it $205,000 to get your kid to school. What are working 
families in our country to do today? It is incredible what they are 
talking about with this 30 percent sales tax. That is what the 
Republican sales tax would mean in real terms to real families in this 
country.
  Let me just take one other group, because there is one group that 
would be hit harder than others by the Republican sales tax, and that 
is the senior citizens in this country. Senior citizens would gain 
nothing, nothing from the elimination of income taxes since most are 
retired and many pay no income tax. But a 30 percent sales tax would 
hit seniors on a fixed income right between the eyes. That is where it 
hits these folks. One of the most burdensome expenses that is faced by 
senior citizens is the price of medication. All of us when we go to 
senior centers, when we go to senior housing, that is what we hear 
about, is what they are paying for medication and for their 
prescription drugs which many of them need to lead productive and 
healthy lives. We have taken a look at five of the most common 
medications used by seniors and looked at how the 30 percent Republican 
sales tax would impact those prices. Bear with me. These are monthly 
costs. For blood pressure medication, $110 now, the sales tax would add 
an additional $33, GOP price tag, $143 a month for blood pressure 
medication. Arthritis, it is now $75 a month for medication, add 
another $22.50, bringing that cost to almost $100 a month for senior 
citizens, again people on fixed incomes. Diabetes, $125 today, $37.50 
through an additional 30 percent sales tax, bringing the total cost per 
month to $162.50. It is incredible what we would be doing to senior 
citizens in this country. Heart disease, $90, $27 additional in sales 
tax, $117 is the final cost to them per month for again seniors, 
elderly, people who are on fixed incomes. Our mothers, our fathers, 
paying this cost per month. An inhaler, $80 a month today, the tax 
would add another $24, bringing the cost per month to senior citizens 
to $104. This is really incredible and outrageous of what they would 
add to the cost of people who are frightened to death that these later 
years, instead of being the golden years, are the lead years, when they 
are most vulnerable and we are going to add these kinds of costs to 
medications that they need.
  We need to have a real debate about reforming our tax system. I 
believe everybody here believes that. We need to cut taxes for working 
middle class families. We are for cutting taxes for working middle 
class families. This proposal moves us in the wrong direction. In fact, 
the Brookings Institute study of the GOP sales tax found that taxes 
would rise for households in the bottom 90 percent of the income 
distribution while households in the top 1 percent would receive an 
average tax cut of over $75,000. Millionaires get tax breaks and 
working families and senior citizens will be paying more. That is not 
reform. That is just so blatantly unfair to working families today.
  Let me open the conversation to my colleagues. I am sorry I took so 
long, I truly am, but it is important to put this in context. We need 
to be doing this every single day and every single

[[Page H2108]]

night in this body to make the people of this country understand what 
our Republican colleagues and the Republican majority are talking about 
with a national sales tax. A bit later we can talk about some of the 
things that the Democrats have done and would like to do to cut taxes 
for working families. Let me yield now to the gentleman from Michigan 
(Mr. Bonior), the whip of this House.
  Mr. BONIOR. I thank my colleague for her comments and for laying this 
out. I tell the gentleman from New Jersey (Mr. Pallone) and the 
gentlewoman from Michigan (Ms. Stabenow), who were here before me, that 
I will not take a lot of time but I thank them for being here and for 
participating in these remarks this evening. I think the gentlewoman 
has really demonstrated quite well and quite vividly the inequity here 
with the GOP 30 percent sales tax hike, which hits particularly hard 
those on fixed incomes, our senior citizens, as she has so well 
demonstrated, with the cost of medication for those who are suffering 
from blood pressure, arthritis, diabetes, heart disease or those who 
have lung problems.
  This is really a loony idea, this whole sales tax thing. There is no 
other way to describe raising the sales tax 30 percent on American 
working men and women in this country, particularly those on a fixed 
income. I think the figure that the gentlewoman from Connecticut 
mentioned earlier with respect to the Brookings Institute and Mr. 
Gale's study is very interesting. William Gale of the Brookings 
Institute, a wonderful scholar, said taxes would rise for households in 
the bottom 90 percent. That means 90 percent of those people who are 
paying taxes today in America would have their taxes go up as a result 
of this. The top 10 percent would probably do okay. The top 1 percent 
would get about a $75,000 a year tax reduction out of this plan. This 
is so skewed, so regressive, so top heavy to the wealthy that it is 
sad. It is very tragic and it is very sad. The gentlewoman has given 
some very wonderful examples there. I liked the raisin bran 
particularly. I like raisin bran. I eat it in the morning. What else 
has she got there? Some bread.
  Ms. DeLAURO. Natural grain. We have children's shoes. Kids grow out 
of shoes very, very quickly.
  Mr. BONIOR. In my district and in the district of the gentlewoman 
from Michigan (Ms. Stabenow), we have automobiles. It is a big thing in 
our districts. Under the plan, an economy car that now costs about 
$12,000, there is another example here, I am giving one that costs 12, 
would cost about $14,600. Under the proposal that the gentlewoman from 
Michigan has, you take a family car priced at $21,000, the GOP tax is 
about $6,500 and that price goes up to $28,000, which is out of the 
range of many, many families today. In addition to that, you are 
talking about a modest home that would cost $100,000 today, you add 
$30,000 onto it, you are up to $130,000 with a home purchase with this 
tax.
  I would like to just, if I could, for one second move to another, 
this is loony tune number two, this is the flat rate tax that my 
colleagues on the other side of the aisle seem to be in love with. Let 
us just take a look at what this does.
  This is the Armey flat tax. It is going to raise taxes on working 
families. The green marker right here is what is paid percentwise in 
taxes now for people who make 25, 50, 100, 250,000 and 1 million a 
year. Under the Armey tax plan, flat tax plan, those who make $25,000 a 
year or more will have this much of a jump, from roughly less than 4 
percent almost up to 12 percent for their tax increase. Those who make 
$50,000 a year will have a tax increase, roughly about 12.5 percent, 
their tax increase will go up to maybe 16, 17 percent. Those who make 
$100,000 a year will even have a tax increase under the Armey plan, not 
very much, but about a 1 percent increase. But those who make a quarter 
of a million dollars a year, you get a tax cut and a big one. If you 
make a million bucks a year, you get an even bigger tax cut under the 
Armey flat tax plan. Basically what this plan does, it raises taxes 
substantially for the middle income people, between $25,000 and 
$100,000 a year, substantially, and then it gives a huge bonus to the 
very people at the top, those who need it the least, turning over the 
whole concept of progressive taxes.
  I just wanted to come to the floor today to thank my friends for 
their concern on this issue and to raise some of these concerns with 
the American people today. Tax day is coming up, in terms of our income 
taxes. They ought to know that there are some very strange proposals 
that are being taken seriously out there and they ought to be leery of 
them and look at them very carefully.
  Ms. DeLAURO. Let me just ask my colleague from Michigan, with the 
Armey flat tax, what happens to unearned income?
  Mr. BONIOR. Unearned income, under the Armey proposal the last time I 
saw it, is not taxed.
  Ms. DeLAURO. These are stocks and bonds.
  Mr. BONIOR. It is not taxed. If you make your money off the stock 
market or off of bonds, you do not have to pay a tax on that. That has 
got to be made up somewhere, so we can pay for the roads and for the 
military and for our national parks and the other things we do. Of 
course that is going to be taken out by who, well, these people here, 
the 25, the 100,000, here they go, up the red markers go, more taxes.
  This is a huge tax shift, from working people to the wealthiest 
people in our society. What is so disturbing about this is that when we 
look at what happened to incomes over the last 20 years, it is the top 
25, 20 percent in our country that have done extremely well. But 
everybody else below that have either stayed level in terms of their 
income ability, earnings, or they have fallen. Of course those at the 
bottom have fallen tremendously, over 25, 30 percent over the last 
decade or so.
  The whole progressivity of what we are about as a party in terms of 
helping working, middle income families who are squeezed every day is 
being turned upside down by these regressive sales tax and flat tax 
proposals that the GOP is offering.
  Mr. PALLONE. If I could point out another thing that is very unclear, 
it seems to me, and maybe the gentleman would respond to that right 
now, because he mentioned sale of a home, which is included in this 
proposal for the sales tax. We have people, homeowners that rely very 
heavily on mortgage interest deductions and also in my State, and I 
think many States, you can also deduct your local property taxes from 
your income tax. It is not at all clear to me that this would continue.
  Mr. BONIOR. It would not under the Armey plan. Maybe the gentlewoman 
from Michigan who really knows these tax issues extremely well might 
want to comment on that.
  Ms. STABENOW. If I might, just to add to what really is the burden 
under these proposals, not only would we lose the home mortgage 
deduction but on top of the price, and to continue with the charts, if 
we are looking at a $155,000 house, not only would the GOP price be 
$201,000, but under the sales tax proposal, this also taxes the 
insurance premium you pay every month, it taxes the electric bill that 
you have in your house, it taxes all services. I wanted to add that on 
top of what you have talked about, which is so important, in health 
care and so important as it relates to manufactured goods and so on, we 
are talking about every time we do something. So not only for the blood 
pressure medicine or the arthritis medicine, it is going to the doctor 
that will add 30 percent. We are now going to make doctors sales tax 
collectors, 30 percent. They have to now collect it.
  We will be creating a whole new group of tax collectors, shifting the 
burden on to small businesspeople and professionals. We will see a wide 
range of services that will now be taxed. If you go to the barber shop, 
add 30 percent, if you go to the dry cleaner, add 30 percent, if you 
come home to your house, not only is your house payment up 30 percent 
but again everything related to your home is up 30 percent. We are 
talking about a use tax literally on everything.
  Let me mention a couple of other things that I think are very 
critical to this. As we look at higher education, we have all worked 
very hard to provide tax breaks so that more people can go to college, 
more people can go back to school, get job training. Tuition and fees 
are exempt from the retail sales tax, but room and board is not. My 
daughter starts school at

[[Page H2109]]

Michigan State University next fall. She will live in the dorm. Under 
this proposal, I would be paying 30 percent more for her dorm room, 30 
percent more for her books, 30 percent more for her food. If she lived 
off campus, 30 percent more for her rent. So we are not just talking 
about goods, we are talking about literally everything that we do.
  Let me add something else, because there are several other things, 
very interesting, in this proposal. This proposal eliminates a number 
of different taxes. It eliminates all of the excise taxes on alcohol 
and tobacco, right at a time when we are saying that we ought to be 
doing more to discourage, particularly children, from smoking.

                              {time}  2115

  Mr. BONIOR. So you are saying that this eliminates the taxes on 
tobacco and on alcohol, and it raises by this amount the taxes on 
prescription drugs for blood pressure and arthritis and diabetes and 
heart disease, and all of that it raises it to a huge 30 percent.
  Ms. STABENOW. Absolutely. Which makes no sense whatsoever.
  Ms. DeLAURO. I think your point, and please, you have got some 
wonderful data and personal experiences here, but the point you were 
making about we are in the midst here of trying to reduce smoking 
amongst youngsters, kids.
  Ms. STABENOW. That is correct.
  Ms. DeLAURO. Middle school kids. And we found, all the studies have 
found that you add $1.50 a pack, it reduces the smoking. So, really, we 
are running at cross purposes here.
  Ms. STABENOW. It is really crazy.
  Another thing that we found today in analyzing this bill is that it 
also eliminates the funding for the highway trust fund.
  Now, this is particularly crazy, because we are in the process right 
now of passing a very important bill, one that we fought for hard in 
Michigan to be able to increase our fair share. We have not in Michigan 
over the years received our fair share, and we worked very hard to do 
that. But in the middle of this, it eliminates a wide variety of excise 
taxes and trust fund taxes, one being the highway trust fund.
  So in so many ways, this particular bill makes no sense. It 
eliminates those taxes, it raises taxes on seniors, middle-income 
people. I do not know where we get the dollars then for the highway 
trust fund; I think that is an important question to ask.
  Mr. PALLONE. Is it not also true, the way I understand this sales 
tax, this national sales tax, that the 30 percent sales tax will also 
be attached to goods and services that local and State governments 
purchase? So is it not likely that my local property taxes or even my 
local--you know, my State taxes are also going to go up another 30 
percent because of the fact that this national sales tax is added.
  Ms. STABENOW. The other part that I might add that also adds on top 
of that, my city of Lansing will pay, for instance, 30 percent more for 
a police car. But this proposal also counts the wages of public 
employees as taxable, as value in terms of the sales tax. So the police 
officer in that car will pay 30 percent more on top of their wages. 
Either the local unit will pay it, or they will have a new income tax 
essentially on the wage of that police officer, that firefighter, that 
school teacher, because it taxes wages of government employees.
  So we are going to see the taxes go up for people who serve us in 
local communities at the same time local units will have to pay 30 
percent more to provide the service.
  Mr. BONIOR. We are likely to see huge property tax increases in this 
because the local community, in order to afford the EMS, the ambulance, 
the police car and the wage structure that you just talked about, is 
going to have to come up with the resources, and that means property 
tax.
  So this is a huge shift, not only from income, but it is a huge shift 
on sales tax and on property taxes as well.
  Mr. PALLONE. You know, I have to say another thing too. It is very 
difficult for me to trust the fact that these other taxes are going to 
go away and this new sales tax is going to take their place. I mean we 
do not have a national sales tax, we never had a national sales tax, 
and I would be very reluctant to suggest that somehow now all of a 
sudden we are going to allow this door to open where this whole new 
Federal tax is going to come into play, but we are going to assume that 
the Federal income tax and all these other taxes somehow are going to 
disappear.
  So it bothers me to think that a precedent is even being set of 
establishing a new type of national tax that we have not had before, 
because it opens up a Pandora's box essentially, and I would be fearful 
of that in itself, just based on historical precedence.
  Ms. STABENOW. And I would add, I know that the small business 
community is extremely concerned about that issue. Today we have been 
debating various issues related to small business, paperwork reduction, 
and so on, but the reality is that every small business, professional 
or retailer or manufacturer, will now become a tax collector for that 
sales tax.
  And on top of that, the National Retail Federation, and I would 
quote, based on the last session's bill, this bill was put in last 
session, it has been put in in the same form this session. So last 
session when this bill was in front of us, in front of the Congress, 
the National Retail Federation said between 1990 and 1994 the retail 
industry created 708,000 new jobs. A study by Nathan Associates shows 
that a national sales tax would destroy 200,000 retail jobs over a 
similar period. Adding these jobs lost with the 708,000 that will not 
be created, we could result in a net impact of almost 1 million fewer 
jobs. This is the National Retail Federation talking about small 
business loss because there will be fewer people buying at 
Christmastime.
  What are the headlines we always read? What are the retail sales, the 
concern of retailers that people be purchasing? This cuts down on 
purchasing, it eliminates jobs.
  So this is a job killer on top of everything else.
  Mr. PALLONE. You know the amazing thing to me, because you started to 
talk about implementing this, is that we have--you know, I understand 
we do a fairly good job compared to what would happen with the sales 
tax in terms of collecting taxes now, but it seems to me you are 
talking about a 30 percent sales tax. You are going to get a lot of 
cheating, it is going to be difficult to enforce. And you know here the 
Republicans and Democrats alike have been talking about trying to 
reform the IRS, and we have actually made some significant changes 
because we do not want them becoming like a police force cracking down.
  Would you not have to do a tremendous amount of enforcement? Would 
not the IRS become even more, have to have more money and a larger 
budget in order to enforce this kind of a sales tax?
  Ms. STABENOW. And on top of that. I would just indicate that one of 
the things we have heard over and over again from the other side of the 
aisle is that we are going to eliminate the IRS under this proposal. We 
will eliminate the IRS as we know it. In the bill it transfers all the 
powers of the IRS to a new Sales Tax Bureau. So the name is gone, but 
the powers are still there. So then we have to talk about reforming a 
sales tax bill.
  I mean what we need to be doing is talking about ways to reform the 
system for taxpayers, not just playing around with the name, and that 
is what this does. It changes the name, and then it drops down and 
requires every businessperson now and every person that has never 
collected sales tax, like a doctor, like attorneys, accountants, anyone 
in any kind of business on their own that is providing service, a 
plumber, electrician, and so on, they now become a tax collector and 
have to report that to the government.
  So this is certainly anti-small business.
  Ms. DeLAURO. I think it also, as our colleague from New Jersey 
pointed out, I mean it leaves you turning everybody, if you will, into 
a tax collector. You then have an enormous amount of room here for 
error, for fraud, for all kinds of things that are happening. It seems 
to me to be a multiplier effect here.
  And I think the point you made before, that Mr. Pallone made before, 
about folks are so skeptical about, you know, what taxes are going away 
before you begin to impose another 30 percent on whatever they are 
doing. And you know the public is smart. They are getting hammered, 
especially

[[Page H2110]]

working families are getting hammered, and they have no guarantee over 
what is going to go away ultimately and what is going to be imposed on 
them.
  I think the point that you made is so--really about the wage earner, 
the government wage earner; what happens with the property tax, in 
addition to which what happens to your own wages. So you are going to 
get hammered several times over on tax issues when people are feeling 
choked today by taxes, working people are.
  I know in my State of Connecticut, I mean that is the cry that I hear 
about all the time, you know, that wherever they turn, there is another 
tax that they are paying.
  Ms. STABENOW. Well, they certainly will feel that even more under 
this particular proposal, and right at a time when we have just passed 
a series of tax cuts, $95 billion in tax cuts. We have been able to 
focus more cuts on education. The ability for people to be able to go 
to school, all of those things would be gone.
  In Michigan when I was a State senator, I sponsored the State's 
largest property tax cut. I am not interested in seeing this shift back 
and seeing property taxes go back up in the State of Michigan or in any 
State.
  And so we are talking about those taxes that the average person pays. 
It is very easy for a wealthy individual to pick and choose what extra 
things they are going to buy, but the average person who is buying the 
house, sending the kids to school, needing to buy the clothes, the 
food, the car and so on, most of our income goes back out again in 
purchasing things, and that is why we see that shift that has been 
talked about onto middle-income and lower-income people, because we do 
not have as much discretionary income with which to decide whether or 
not to purchase items. Most of what we bring in, we are turning around 
and we are purchasing something with it.
  Ms. DeLAURO. I think it is worth pointing out what our colleague, Mr. 
Bonior, talked about in terms of the flat tax proposal and people who 
are dealing in stocks and bonds and unearned income, and they are not 
paying any taxes on that. So what you are saying is that those people 
who work in the workplace day in and day out, they are the folks who 
are getting socked with the additional taxes, in addition to which you 
are going to take away with the mortgage deduction and some of the 
other tax relief, if you will, that middle-class families have been 
counting on, relying on, surviving on.
  So you are really hitting them again twice. You know, they are 
picking up the slack for the folks who are holding the stocks and 
bonds, and then getting hammered again on things that they have counted 
on, that American dream and owning that home, and not being able to 
take the mortgage deduction.
  Mr. BONIOR. I am flabbergasted. I do not know what more to say. I 
mean, I just cannot believe these things are being offered. It really 
is quite staggering. The problem is that we have unfortunately let them 
get away with portraying this as an innocent, wonderful thing for the 
American working family, when in fact it is just the opposite. And I 
think as it gets more exposure and people understand the regressivity 
and the inequities in it, I think it falls flat on its face, pardon the 
pun, and I do not think it is going anywhere.
  I mean. It is just like this other proposal that my colleagues on the 
other side of the aisle have had now to do away with--have a drop-dead 
date on the Federal income tax. I think it is going--it just goes out 
of business in X year. Well, what does that do to the small business 
person or the businessperson in terms of planning, when they do not 
know what it is going to be substituted with; whether they are going to 
substitute it with this 30 percent sales tax; are they going to 
substitute it with this regressive flat tax? I think not.
  When the American people figure this all out, they are not going to 
want either of these provisions. I think they want our present code to 
be leaner and trimmer and slimmer, and they want us to focus in on the 
things that the gentlewoman from Michigan mentioned: education, as we 
did in the last tax bill; they want us to focus in on tax credits for 
child care; they want us to be selective; and they want us to help 
average working families.
  And I think that you could go overboard, and certainly these two 
proposals, the sales tax 30 percent increase and the flat tax by Mr. 
Armey, way overboard.
  Ms. STABENOW. If I might also add that I do believe that the people I 
represent want to see a less complicated tax system, want to see it 
fairer. And I do, too. And they also want to see IRS reformed, which we 
passed in the House. It has not yet been taken up in the Senate, very 
important IRS reforms, changing the burden of proof from the taxpayer 
to the IRS in Tax Court, very significant changes that need to be 
moving quickly.
  One of the things I am concerned about is that we have passed IRS 
reform in the House, it has not been taken up yet in the Senate, and 
that needs to happen, so that we can--we need to be calling on the 
majority in the Senate to be bringing that up, because while we talk 
about the proposals that do not make sense for middle-class families 
and working people, we do know that there needs to be change and that 
there needs to be positive things.
  It is a question of where our values are, who it is that we believe 
needs to see tax cuts and tax reform. And my vote goes with small 
business people, family-owned farms, middle-class families working hard 
to make ends meet. Those are the folks who have not seen the same wage 
gains and have felt the burden, too much of the burden, on taxes.
  And so those are the folks I want to see helped, not the kinds of 
proposals that have been submitted on the other side of the aisle that 
will just increase their taxes.

                              {time}  2130

  Mr. PALLONE. Maybe we could talk a little bit, because I know the 
gentlewoman from Connecticut mentioned about how Democrats have fought 
for tax relief, in the time that we have left this evening. We have 
been basically fighting for families that really need the relief, those 
with children who are trying to save for their kids' education and 
their own retirement. As the gentlewoman from Michigan mentioned, 
thanks in large part to Democratic efforts, the Federal tax burden on 
families in the middle-income distribution and below has fallen since 
1984.
  There is an analysis by the Treasury Department that found that the 
average Federal income tax rate for a median family of four in 1988 
will only be 7.8 percent, down from 10.3 percent in 1984. This is the 
lowest income tax burden for a median family since 1966.
  These historically low income tax rates are as a result of Democratic 
policies. If I can mention a few, some of them have already been 
alluded to, and that is the expansion of the earned income credit in 
1993 that cut taxes for millions of families with children; the $500-
per-child credit the Democrats ensured would be available to moderate-
income families. In addition, Democrats proposed the HOPE education 
scholarship tax credit to help families afford postsecondary education 
for the children. And in 1988, Democrats had proposed expansion of the 
child care tax credit to increase the amount of the credit from 30 
percent to 50 percent of expenses and make it available to more 
families. So Democrats also support efforts to reduce the marriage 
penalty.
  We are trying to reduce and we have been successful in reducing the 
tax burden for families in middle-income families with children who 
have to pay for education expenses, who have to pay for child care 
expenses. These are the kinds of tax reforms and tax cuts that we need 
to continue with.
  I am very proud of the fact that we, as Democrats, have emphasized 
those targeted tax credits rather than the kind of crazy schemes that 
we are hearing from the other side.
  Mr. Speaker, I yield to the gentlewoman from Connecticut.
  Ms. DeLAURO. I think that it is so important because not only can we 
not let folks get away with passing off these programs as a savior to 
working middle-class families, but when you go beneath the surface, you 
find out how seriously they are going to hurt working families. We 
should not let them get away with that, ``the fact is that Democrats 
are not for tax cuts.''
  We have started that process over the last several years. It 
continues so that people can take advantage of a Tax

[[Page H2111]]

Code and the tax credits to get their kids to school; to be able to 
afford the child care; that that small business that you speak so 
eloquently about has the opportunity for reducing health care costs; or 
for expanding their business and being able to get the tax relief on 
equipment that they might buy, and raising those percentages.
  There were a whole series of capital gains tax cuts that went into 
effect for small businesses who ought to be able to take advantage of 
that, and farmers. And those continue. The benefits continue as pieces 
of these things get phased in, because I would venture to say today 
that people are not seeing, immediately, the results of some of these 
things, so that it is ongoing. We need to be working at that, 
increasing those opportunities and those targeted tax cuts. That is 
where they ought to be going. Those are the folks we ought to be 
helping at this point.
  We ought to be helping seniors cope with fixed income, with a higher 
rate of illness, perhaps, so that these costs do not skyrocket for 
them. That is the way we bring some opportunity in folks' lives to be 
able to raise their standard of living, if you will.
  Those who are at the upper end of the scale have these opportunities. 
Nobody is denying that. They can also be more selective in which taxes 
they are paying. They have different kinds of shelters, different kinds 
of opportunities within the Tax Code. I will not even call them 
loopholes, they are opportunities in the Tax Code, to take advantage of 
in some way. Working middle-class families do not have those 
opportunities.
  Ms. STABENOW. If I might give just an example.
  Ms. DeLAURO. Sure.
  Ms. STABENOW. In the last tax debate, when the original bill came to 
the floor, that was basically the Republican tax bill, we did not see 
an immediate increase in the exemption for the State tax for small 
businesses, family-owned businesses, and family-owned farms. It was a 
phased-in amount that you could exempt that was over 10 years. It 
really was not very much.
  I have been hearing, particularly from my family-owned farmers, and 
also family-owned businesses, about the need it be exempting more of 
that income when there is a death and be able to protect that income. 
We fought hard. I voted no on that original bill because it did not 
have that in it. We have worked very, very hard.
  When the final bill was written as a result of our initiatives, we 
have now exempted $1.3 million for family-owned farms, started this 
January, $1.3 million for family-owned farms or family-owned 
businesses. This is the amount of money you do not now have to pay 
taxes on in your estate. And this was a value that we had about family 
business and family-owned farms. We fought hard for it, and we were 
able to make the change.
  So we have been moving. We have been taking the proposals and making 
them better and working very, very, very hard to make sure that we are 
focusing on families, we are focusing on middle-income people, small 
businesses, and so on.
  I would mention one other thing that we are now working on, and that 
is, in working with the President in his new pension proposals for 
small business, I am very pleased to have introduced a bill that will 
give a tax credit over 3 years for small businesses that set up pension 
plans for their employees, another important use of the Tax Code in 
terms of tax relief.
  We have now 51 million people working hard every day for small 
businesses, working full time, no pension; 40 million of those in small 
businesses with less than 100 employees. So we now are working on an 
effort to allow that small business to write off the cost of setting up 
a pension plan so that those people working hard every day, who need 
that pension when they retire, will have the opportunity to do that.
  Mr. PALLONE. Reclaiming my time, I just wanted to mention, I 
appreciate the comments that the gentlewoman from Michigan and the 
gentlewoman from Connecticut made, because I think the bottom line is 
that you are talking about targeted tax cuts that help the average 
working family.
  I wanted to say, though, you know, that just for those who think that 
perhaps the Democrats do not have an alternative, we really have the 
only new tax system, if you will, new proposal out there that sweeps 
away the old Tax Code, but at the same time provides fairness. This is 
the one that was introduced by our Democratic leader, the gentleman 
from Missouri (Mr. Gephardt).
  It is the only major tax reform proposal that retains the progressive 
rate structure and ensures that this new system is fair. It is a 10 
percent tax plan that has been offered by our House Democratic leader, 
the gentleman from Missouri (Mr. Gephardt), recognizing that the Tax 
Code is too complex and filled with special interest tax breaks that 
result in higher tax rates for middle-income families.
  So what the gentleman from Missouri (Mr. Gephardt) has proposed is 
basically ratifying and simplifying the system and cutting taxes for 70 
percent of families with children, with income between $20,000 and 
$75,000. Under his plan, more than 70 percent of all taxpayers would 
have a tax rate of 10 percent or less.
  This proposal by the gentleman from Missouri also eliminates the 
marriage penalty by making the standard deduction in tax brackets for 
couples double those for single people. It eliminates special interest 
tax breaks. Very important.
  You keep reading on a regular basis, particularly around April 15, 
about all these special interest tax rates. It eliminates them. It 
eliminates the role of the army of lobbyists who now dominate tax 
policy discussions. We see them around here. Every one of us has seen 
these people. This is the time of year when we see them the most.
  It calls for a commission to identify and recommend elimination of 
wasteful and unwarranted corporate tax and spending subsidies. I think 
this is something we should look at. This is a Democratic proposal by 
our leader. It stands for a tax system that is fair and simple, in the 
event you want to look at an alternative.
  Ms. DeLAURO. I think what is important to mention there, it also 
maintains that home mortgage deduction, again, which is so critical to 
families today. As I say, that is part of the American dream. I just 
wanted to point out, because I know the gentlewoman from Michigan, if 
you will, she is a technology maven, you know, and is there all the 
time pushing as how we need to move families and so forth to take 
advantage of technologies, the way our kids are going to get ahead and 
so forth.
  I think it is interesting in terms of this sales tax here, in every 
family, kids are coming home today, ``Why can't I have a computer? I 
would like a computer. Why don't have one? You know, Mary has one. 
Jessica has one. Freddie has one. What about us?''
  Well, hold up the chart. I think it is important to note that chart. 
Family computer, today's price is almost $2,000. It would add an 
additional 30 percent, another $600, bringing the cost of a family 
computer to almost $2,600, you know, for the most part, trying to put 
it out of the reach for working families. They are trying to respond to 
their kids to allow their kids to get ahead.
  It is wrong. This is not what we ought to do. Let us target our tax 
credits to working families, to small businesses, to small farmers. Let 
us take a look at that Tax Code. Let us make it simpler. Let us make it 
easier. These catchwords scrap the code. They are radical. They are 
dangerous.
  We are going to make it our mission here to continue to have these 
conversations so that the American public knows that they are being 
sold a pig in a poke. We are going to bring it to their attention so 
that they do not get fooled by this dangerous and extreme rhetoric.
  Mr. Speaker, I think we will be up on our feet again on this issue.

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