[Congressional Record Volume 144, Number 74 (Wednesday, June 10, 1998)]
[Senate]
[Pages S6012-S6018]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        NATIONAL TOBACCO POLICY AND YOUTH SMOKING REDUCTION ACT

  The Senate continued with the consideration of the bill.


                Amendment No. 2686 to Amendment No. 2437

 (Purpose: To eliminate the marriage penalty reflected in the standard 
 deduction, to ensure the earned income credit takes into account the 
elimination of such penalty, and to provide a full deduction for health 
             insurance costs of self-employed individuals)

  Mr. GRAMM. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Texas [Mr. Gramm], for himself, Mr. 
     Domenici, Mr. Roth, Mr. Faircloth and Mr. Bond, proposes an 
     amendment numbered 2686 to amendment No. 2437.

  Mr. GRAMM. Mr. President, I ask unanimous consent that the reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the amendment, insert:

     SEC. ____. ELIMINATION OF MARRIAGE PENALTY.

       (a) In General.--Part VII of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to additional 
     itemized deductions for individuals) is amended by 
     redesignating section 222 as section 223 and by inserting 
     after section 221 the following new section:

     ``SEC. 222. DEDUCTION FOR MARRIED COUPLES TO ELIMINATE THE 
                   MARRIAGE PENALTY.

       ``(a) In General.--In the case of a joint return under 
     section 6013 for the taxable year, there shall be allowed as 
     a deduction an amount equal to the applicable percentage of 
     the excess (if any) of--
       ``(1) the sum of the amounts determined under subparagraphs 
     (B) and (C) of section 63(c)(2) for such taxable year 
     (relating to the basic standard deduction for a head of a 
     household and a single individual, respectively), over
       ``(2) the amount determined under section 63(c)(2)(A) for 
     such taxable year (relating to the basic standard deduction 
     for a joint return).
       ``(b) Limitation Based on Modified Adjusted Gross Income.--
       ``(1) In general.--No deduction shall be allowed under 
     subsection (a) if the modified adjusted gross income of the 
     taxpayer for the taxable year exceeds $50,000.
       ``(2) Modified adjusted gross income.--For purposes of this 
     subsection, the term `modified adjusted gross income' means 
     adjusted gross income determined--
       ``(A) after application of sections 86, 219, and 469, and
       ``(B) without regard to sections 135, 137, and 911 or the 
     deduction allowable under this section.
       ``(3) Cost-of-living adjustment.--In the case of any 
     taxable year beginning in a calendar year after 2007, the 
     $50,000 amount under paragraph (1) shall be increased by an 
     amount equal to such dollar amount multiplied by the cost-of-
     living adjustment determined under section 1(f)(3) for the 
     calendar year in which the taxable year begins, except that 
     subparagraph (B) thereof shall be applied by substituting 
     `calendar year 2008' for `calendar year 1992'. If any amount 
     as adjusted under this paragraph is not a multiple of $5,000, 
     such amount shall be rounded to the next lowest multiple of 
     $5,000.
       ``(c) Applicable Percentage.--For purposes of this section, 
     the applicable percentage shall be--
       ``(1) 25 percent in the case of taxable years beginning in 
     1999,
       ``(2) 30 percent in the case of taxable years beginning in 
     2000, 2001, and 2002,
       ``(3) 40 percent in the case of taxable years beginning in 
     2003, 2004, and 2005,
       ``(4) 50 percent in the case of taxable years beginning in 
     2006,
       ``(5) 60 percent in the case of taxable years beginning in 
     2007, and
       ``(6) 100 percent in the case of taxable years beginning in 
     2008 and thereafter.''
       (b) Deduction To Be Above-the-Line.--Section 62(a) of the 
     Internal Revenue Code of 1986 (defining adjusted gross 
     income) is amended by adding after paragraph (17) the 
     following new paragraph:
       ``(18) Deduction for married couples.--The deduction 
     allowed by section 222.''
       (c) Earned Income Credit Phaseout To Reflect Deduction.--
     Section 32(c)(2) of the Internal Revenue Code of 1986 
     (defining earned income) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Marriage penalty reduction.--Solely for purposes of 
     applying subsection (a)(2)(B), earned income for any taxable 
     year shall be reduced by an amount equal to the amount of the 
     deduction allowed to the taxpayer for such taxable year under 
     section 222.''
       (d) Full Deduction for Health Insurance for Self-
     Employeds.--The table contained in section 162(l)(1)(B) is 
     amended--
       (1) by striking ``and 1999'',
       (2) by striking the items relating to years 1998 through 
     2006, and
       (3) by striking ``2007 and thereafter'' and inserting 
     ``1999 and thereafter''.
       (e) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 of such Code is amended by 
     striking the item relating to section 222 and inserting the 
     following new items:

``Sec. 222. Deduction for married couples to eliminate the marriage 
              penalty.
``Sec. 223. Cross reference.''

       (f) Reduction in Transfers to National Tobacco Trust 
     Fund.--
       (1) In general.--Except as provided in paragraph (2) and 
     notwithstanding any other provision of this Act, the amount 
     credited to the National Tobacco Trust Fund under section 
     401(b) of this Act for any fiscal year shall be reduced by 
     the amount of the decrease in Federal revenues for such 
     fiscal year which the Secretary of the Treasury estimates 
     will result from the amendments made by this title. The 
     Secretary shall increase or decrease the amount of any 
     reduction under this section to reflect any incorrect 
     estimate for any preceding fiscal year.
       (2) Limitation on reduction after fiscal year 2007.--
       (A) In general.--Except as provided in subparagraph (B), 
     with respect to any fiscal year after fiscal year 2007, the 
     reduction determined under paragraph (1) shall not exceed 33 
     percent of the total amount credited to the National Tobacco 
     Trust Fund for such fiscal year.
       (B) Special rule.--If in any fiscal year the youth smoking 
     reduction goals under section 203 are attained, subparagraph 
     (A) shall be applied by substituting ``50 percent'' for ``33 
     percent''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

  Mr. GRAMM. Mr. President, I apologize to my colleagues that it took 
so long to get this amendment together. We were trying to do several 
things, to bring together several provisions of different Members into 
one amendment. We also were trying to deal with a concern that the 
authors of the bill have

[[Page S6013]]

about their trust fund and how much money we will take out of the trust 
fund in each ensuing year as a result of the amendment. We are still 
looking at some of those provisions.
  The net result is that we have the amendment together. What I would 
like to do in offering it is to outline the problem with the existing 
bill in terms of the impoverishment of blue-collar workers who dominate 
the ranks of smokers in the country.
  I would like to talk about the need to rebate some of the tax money 
we are getting, in an effort to raise the price of cigarettes, to the 
very people who are going to be impoverished by this confiscatory tax. 
I would like to talk about why the marriage penalty is a good choice 
for that tax rebate. I would like to then talk about how this marriage 
penalty repeal works and how the numbers work out in terms of the 
budget. And that will constitute the relevant information in offering 
the amendment.
  First of all, the problem. We have heard now for weeks and weeks a 
running debate about tobacco companies and their conspiracy to induce 
people to smoke. With just cause, those tobacco companies have been 
denounced on the floor of the Senate over and over again. However, 
people have become so fixed on these tobacco companies, they have 
totally lost sight of the fact that a giant bait and switch has 
occurred. In reality tobacco companies are not paying taxes under this 
bill, consumers are paying taxes under this bill. In fact, the 
provisions of this bill make it illegal for a tobacco company to refuse 
to pass the price through to the consumer. So they are held harmless in 
terms of the tax, but blue-collar Americans who smoke are devastated 
economically by this tax.
  So the problem with the bill is that, in the name of raising the 
price of cigarettes to discourage smoking, we are, if this bill goes 
unamended, imposing one of the most regressive taxes in American 
history. And ``regressive tax'' means that poor people pay an 
increasing share of the tax burden.
  Why do I say that? Well, I say it basically because in America 
smoking is primarily a blue-collar phenomenon. Obviously, people at all 
income levels smoke, but if you look at who will pay this tax, it 
really brings home the fact that in our country most of the people who 
smoke are moderate-income, blue-collar workers.
  Of all of the tax collection that will occur under this bill, in an 
effort to drive up the price of cigarettes, 34 percent of those taxes 
will be paid by Americans who make less than $15,000; 47.1 percent of 
these taxes will be paid not by tobacco companies but by Americans who 
make $22,000 a year or less; 59.1 percent of these taxes will be paid 
for by Americans in families with incomes of $30,000 a year or less.
  So whether it is the intent of the underlying tobacco bill or not, 
the net result is that this bill imposes no taxes on tobacco companies 
whatsoever. It shields tobacco companies by requiring that they pass 
the tax through to their consumers, and it squarely hits moderate-
income, blue-collar workers right in the wallet and in the pocketbook.
  Those who favor this bill have said over and over again that their 
objective in this bill is, not to raise money so they can spend it, but 
their objective in the bill is to drive up the price of cigarettes to 
discourage smoking. So recognizing the problem, that while the 
proponents of the bill vilify the tobacco companies, in reality they 
are taxing blue-collar workers. While they say they are not imposing 
the tax to get money to spend, in truth they are spending all the 
money. I have offered this amendment with Senator Domenici, Senator 
Roth, and others, to achieve what the bill proponents claim they want 
to do. My amendment gives a part of the money that is collected in this 
tax back to the very people who are going to bear the burden of this 
tax.
  Let me give some examples. In my State of Texas, we have 3.1 million 
Texans who smoke. If this bill drives the price of a pack of cigarettes 
up by $2.78, which is the general estimate that is given, a Texan who 
smokes one pack of cigarettes a day would pay $1,015 in new Federal 
taxes and would see their Federal tax burden grow by over 50 percent as 
a result of this tobacco tax.
  Under this bill if a moderate-income family made up of two blue-
collar workers, one might be a local delivery person and one might be a 
waitress, each smoke a pack of cigarettes a day and are earning less 
than $30,000 a year, they are going to pay $2,000 in additional Federal 
taxes.
  So Senator Domenici, Senator Roth, other Senators and I, have offered 
an amendment that says: Let us target people who make $50,000 or less 
because they are going to pay some 75 to 80 percent of these taxes, and 
let us take a portion of the taxes, roughly a third, and give that 
money back to the people who will be paying the taxes in the form of 
repealing the so-called marriage penalty.

  Mr. KERRY. Would the Senator yield for a question?
  Mr. GRAMM. I would be happy to yield.
  Mr. KERRY. I agree with the Senator that some people who pay the 
marriage penalty will also buy cigarettes, but I am sure the Senator 
has to acknowledge, and would acknowledge, would he not, that some 
people who will buy cigarettes, who are called sort of the ``victims'' 
here, will not get a benefit by this necessarily and some people who do 
not smoke will get a benefit by this? Is that a fair statement?
  Mr. GRAMM. Let me reclaim my time to say it is true that moderate-
income Americans who do not smoke will benefit from this tax cut, if 
they are married. It is true that high-income people who smoke will 
bear a burden from the bill, and they will not get a benefit from this 
tax cut. But it is also true that Americans who pay 80 percent of the 
tax that will be imposed in the name of discouraging smoking, they are 
in families who earn less than $50,000 a year, and they will get a 
benefit from this bill. There is no way we can target it just to 
smokers, nor does anybody want to.
  The point that we are making is, if we are trying to raise the price 
of cigarettes to discourage consumption, that is one thing. But many of 
the critics of the bill have viewed this as a tax and spend bill, and 
with great justification, in my opinion. Therefore if we are raising 
the price of cigarettes to fund tens of billions of dollars of new 
Government spending, then why not give part of it back? There is no 
perfect tool in giving it back. The best we have found is to repeal the 
marriage penalty and to make health insurance tax deductible for the 
self-employed.
  Let me explain how the marriage penalty works and how our amendment 
will work.
  Many Americans are surprised when they learn that we have roughly 31 
million families in this country who pay higher taxes because they are 
married than they would have paid had they remained single. In fact, 
the average tax burden that is incurred by these couples is about 
$1,400 a year higher. They pay the Federal Government $1,400 a year for 
the privilege of being married rather than continuing to file as single 
individuals. In fact, during a Finance Committee hearing, we actually 
had the startling testimony from a young woman who said she was living 
with her boyfriend and would like to get married but, because of the 
burden of the marriage penalty, they had delayed that decision.
  I think we all understand that the family is the most powerful 
institution for progress and happiness in history. Strong families, I 
think we would all agree on a bipartisan basis, represent the solution 
to everything from drugs and gangs and violence, and for the 
perpetuation of the basic values that we all treasure as Americans. And 
so I think anyone would want to get rid of a provision of tax law that 
discourages people from getting married.
  Our amendment does not try to get into a position of discriminating 
for or against couples based on the decisions they make about whether 
both parents or just one of them work outside the home. Some people 
have criticized our amendment, and perhaps will do it today, by saying 
that this marriage penalty provision will benefit families where only 
one of the couple works outside the home. But our objective is to have 
a provision that corrects the marriage penalty but doesn't do so in 
such a way as to discriminate against stay-home parents. A vast 
majority of the time, that is stay-home moms. We don't believe the Tax 
Code should treat people differently based on whether they decide to 
stay home and raise

[[Page S6014]]

their children or whether they decide to work in the marketplace.
  My mama worked my whole life because she had to. My wife has chosen 
to work the whole life of our children because she wanted to. But we 
believe, those of us who are authors of this amendment, that it is not 
the business of the Government to try to dictate through the Tax Code 
that very important personal family decision. We want to be sure that 
for those who do choose to give up the income by having one parent stay 
at home and raise the children, that we don't see them discriminated 
against in the Tax Code.
  So here is how our provision works: What our provision will do is 
give every couple who makes less than $50,000 a year relief from the 
marriage penalty. We chose $50,000 a year because we really are 
rebating part of the revenue from the cigarette tax back to those 
people who pay 80 percent of the taxes. It is my goal, in the tax cut 
that I believe will flow from the budget, to repeal the marriage 
penalty for every American, no matter what their income. But we have 
targeted $50,000 and below here because that is where the smokers in 
America are, in the middle- and moderate-income range. We are using 
this to rebate part of the money collected in this bill due to the 
increase in the price of cigarettes to them.
  What we will do for every married couple is, compared to the tax 
return they filed last year, they will get a $3,300 deduction above the 
line, before they calculate what their income is for taxation purposes. 
This will repeal the marriage penalty. In addition, it will save the 
average family about $1,400 a year in taxes. For low-income people who 
are still working to try to get ahead and trying to become self-
sufficient, we will let them deduct this $3,300 from their income 
before they calculate their eligibility for the earned-income tax 
credit. As Senator Domenici knows, some of the heaviest tax penalty 
burden falls on moderate-income people who are getting an earned-income 
tax credit if they stay single, but if they get married, which is part 
of the solution to their problem in terms of helping to put together a 
strong family, they end up losing their earned-income tax credit. So 
under our amendment we will give a substantial tax cut to the very 
Americans who are bearing the burden of this increased price of 
cigarettes.
  Finally, we deal with a problem related to the self-employed by 
immediately making health insurance deductible for the self-employed. 
If I work for General Motors and they buy my health insurance, it is 
fully tax deductible. But if I quit working for General Motors and go 
into business for myself, not only do I have to pay both sides of my 
payroll tax, but my insurance is not tax deductible and I have to pay 
it with after tax money. We have started the process of phasing this 
out over an extended period of time. What this bill will do is it will 
immediately give full tax equity to those Americans who are self-
employed.
  So the net result of our amendment will be to give back $16 billion 
in the first 4 years, to give back $30 billion over the ensuing 5 
years, to the very people who pay 80 percent of the cigarette tax under 
this bill. We will give about a $1,400 tax break to working couples in 
that income category by repealing the marriage penalty, and we will 
make health insurance fully tax deductible for the self-employed.
  We have crafted the bill carefully so that we take about a third of 
the revenues that flow from the tax that is collected on cigarettes. 
Quite frankly, in the final bill I believe this number should be 
bigger. This is a number we picked when we introduced the amendment. We 
have tried to structure it to stay with that through the end of the 
budget cycle, which will terminate in 2007, and we tried to stay 
faithful to that agreement in the drafting of the amendment.

  I think this is an important amendment. I believe that it does 
provide some degree of tax relief for the people who are going to pay 
this confiscatory tobacco tax. I hope my colleagues on both sides of 
the aisle will support this amendment. I do believe that we have gone 
to great lengths to try to make the amendment fair. We have listened to 
the concerns that have been raised by our colleagues who are in support 
of this bill. I think this is a good amendment. I commend it to my 
colleagues.
  It does not correct the many wrongs in the bill that is before the 
Senate. It does not eliminate the marriage penalty for all Americans. 
It is a major step in that direction. This is not the end of the 
marriage penalty debate. This is the beginning of it.
  By the end of this year we will have repealed the marriage penalty 
for every American family. This will allow us to do it immediately in 
this bill for those in moderate-income areas who pay the bulk of the 
cigarette tax. We will do it for the rest of Americans in the budget, 
in my opinion. I commend this amendment to my colleagues.
  I want to thank Senator Domenici for his leadership in this area.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I don't intend this afternoon to repeat 
much of the explanation which was made by the distinguished senior 
Senator from Texas but I just will emphasize it as I see it.
  First of all, it is very important to me that when we articulate an 
American policy and say we are for this or we are for that, that 
sooner, rather than later, we look at what our laws are and see if we 
can make them match the policy that we would like for our country.
  No. 1, everybody on the Senate floor, it seems to me, from time to 
time has been concerned about families in America. Obviously, the 
marriage tax penalty works against families, because if a married 
couple with two or three children are penalized to the extent of $1,400 
a year in taxes that they pay--just because they are married, which 
they would not pay if they had their exact same earnings and filed 
separately or were not married--that is clearly an American policy out 
of step with a profamily position of the United States and certainly of 
this Senator and most Senators I associate with in the U.S. Senate.
  Secondly, maybe it isn't articulated as precisely as the previous one 
tenet of philosophy, but I say we, as a nation, ought to espouse 
marriage and we ought to look with favor upon the relationship that is 
called marriage historically and traditionally.
  As my friend from Texas says, of all the institutions around, it 
seems to be that marriage is the one that has endured. It also seems to 
be one that when marriage does not endure or work properly it causes a 
lot of other problems within a family and throughout society. So to put 
an extra tax on that institution is wrong.
  In the United States of America, 24 million married couples have 
endured and paid through the nose because of this marriage penalty.
  I don't think they really thought when they said, ``I do,'' that they 
were also saying, ``and we shall pay.'' I don't believe that is what 
they thought they were doing when they took their marriage vows.
  The average penalty is about $1,400. I think everybody knows what an 
average means. Plenty of couples are paying much more. Obviously, there 
are plenty paying somewhat less.
  In my State of New Mexico, 203,00 New Mexican families will be helped 
by this change. We are a State with just a little bit over 1,600,000 
people. That is a pretty significant benefit we are passing on to 
people who are married and raising families, and both spouses are 
working.
  By way of an aside, the second portion of our bill has to do with 
businesses that are self-employed people. Let me just give you that 
number. In New Mexico, 222,000 businesses are going to find that health 
insurance is going to be available to them now and be more affordable 
because under this provision they are going to be able to deduct the 
entire health cost, as do corporations and as do many others that are 
not self-employed.
  So if anybody is interested in how we got into this mess with the 
marriage penalty, I will put in some facts about it later.
  Obviously, this has come about with each major change we have made in 
the Tax Code, either to phase something out or to phase something in. 
There are about 63 provisions in the code, where couples are penalized 
for being married. The standard deduction and the progressive tax 
brackets are two of the major contributors to the marriage

[[Page S6015]]

penalty. So many of these provisions in the code vary, as I indicated, 
with marital status. The provision that primarily is responsible for 
the marriage penalty, the standard deduction for married filing 
jointly, is not two times the standard deduction for filing if you are 
single. That is the major reason that we have a problem.
  Having said that, I want to relate this proposal to the bill that is 
before us. Every time we discuss a budget of the United States, or the 
economy of the United States, somebody talks about--and quite 
properly--what the level of taxation on the American people is. It is 
relevant to America's future, in my opinion and in the opinion of most 
economists looking at our country, that our tax on the American people, 
the total tax, be at the lowest possible level. Now, this bill before 
us, whatever its other interests are, is a very large tax imposition on 
the American people. Although it is not paid by everybody, you add it 
to the myriad of other taxes, and then you find out America is paying a 
higher total tax level than it was before this bill was passed.
  So, to me, it is very simple. If this is a tax bill--and clearly 
there are many people who want to spend every penny of it on some kind 
of program. In spite of a budget that said we would not spend any more, 
there are scores of programs on which people would like to spend money. 
It seems to me that the forgotten people would be the taxpayers who 
would get no benefit unless we reduce taxes and charge the reduction to 
the tax income coming under this bill.
  I think it is very logical and very reasonable--$16 billion in the 
first 5 years, $30 billion in the second 5 years, coming from the taxes 
raised in this bill from cigarettes. It will ultimately come from 
consumers. People think the tobacco companies are paying, but actually 
it will be added to the price of cigarettes and consumers will pay it.
  We are saying give $16 billion back to the taxpayers and $30 billion 
back in the form of these two tax reductions over ten years. That is a 
third of the tax take in the first 5 years and about 37 or 38 percent 
in the second 5 years. Under the bill, about 40 percent of the program 
goes to the States. I am not sure I favor that much going to the 
States, but we are not amending that provision here. That is to be 
considered at another time if the Senate wants to consider it. But so 
long as the states are expected to get 40 percent of the overall trust 
fund, Senator Gramm and I have agreed we won't offer any more tax cuts. 
But if indeed that 40 percent is reduced and we attempt to take some of 
that money back to the Federal Government and spend it, then obviously 
we reserve the right to offer some additional tax rebates or reductions 
or reforms at that time.

  I am hopeful that the Senate will adopt this amendment. There may be 
other tax measures, but I think essentially we are going to be 
separating Senators into two groups--Group One: Those Senators who want 
to spend all the money and group two who are Senators who want to give 
some of it back to the people. That is the issue. Do you want to give 
some of this back to the people, or do you want to spend it all for one 
program or regime or another that costs money, or a series of programs 
by which we give money back to the States for them to spend it?
  I think the American people are going to judge us very, very 
precisely on this and I don't think the judgment is going to be a 
difficult one. They are pretty astute. When we have just crowed about a 
balanced budget with caps on expenditures and we come and say now we 
found a new source of revenue, all those ideas about keeping Government 
under control can go out the window. We will spend all of this on new 
programs. I think they will understand very easily. They will focus 
quickly that those who vote no on this amendment will be saying they 
want to spend all the money; those who vote yes on this amendment are 
saying we ought to give some of it back to the American taxpayer--in 
this case, to that huge number of Americans who are married, with both 
couples working, wherein they are being penalized by the adverse effect 
of our tax laws, and that they must pay a penalty for being married and 
for earning a living and filing jointly.
  I am rather confident this is the right approach. Why do we stop at 
$50,000 worth of wage earnings? I will agree that is just an arbitrary 
number. But we can't fix everything in one bill. If there is a tax bill 
this year--and there probably will be one--I would think high on the 
list would be to repair the marital tax problem so the higher brackets 
of earners are entitled to receive that benefit also. I thank Senator 
Gramm for his untiring efforts on behalf of this. It is a privilege to 
work with him. I believe we will have a victory today.
  I yield the floor.
  Mr. KERRY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KERRY. Mr. President, let me begin with some comments about where 
we find ourselves, and then I will come back a little bit later and go 
into greater detail about it.
  At the outset of the presentation of the amendment as originally 
filed by the Senator from Texas to repeal the marriage penalty, I and 
Senator McCain and others said at that time that we were prepared, 
because we are supportive in principle of the notion of reducing the 
marriage penalty--we said we are prepared to embrace in this bill a 
component of marriage penalty reduction, provided that it doesn't strip 
away so much money that we are unable to accomplish the other purposes 
of the bill. And we have gone through a long week now--maybe a little 
bit more than a week--and the Senate has essentially been in a 
stalemate position as we have negotiated around the concept of how much 
is appropriate and how do you arrive at how much is appropriate.
  During the course of that week, the Gramm amendment as originally 
filed has undergone several changes. We are very pleased with that. I 
think there has been a bona fide effort here to try to arrive at some 
kind of sensible approach to the marriage penalty issue. The original 
Gramm amendment presented us with an estimated cost of $113 billion 
over 10 years. That would have represented over that 10-year period 80 
percent of the costs of all of the tobacco revenues. In other words, 
all of the tobacco revenues that would have come in, 80 percent of them 
under Gramm I, as we should call it, would have gone out to the 
marriage penalty rebate as he had designed it at that time.
  Last week, at the end of the week, Senator Gramm revised his proposal 
to what we would call Gramm II. Gramm II made mostly some sort of 
cosmetic changes that took the full measure of the cost, the $113 
billion I have just described, the 80 percent of the revenues, and 
rather than have them all show up within the first 10 years, it took 
those revenues and pushed a significant portion of them outside of the 
10-year budget window. In other words, we look at the budget of the 
country in these 5-year periods, and we are looking at a 10-year budget 
window within which we have an ability to measure what we are doing. 
Beyond that, it becomes relatively more speculative.
  Under Gramm II, the Senator from Texas would have still spent nearly 
80 percent of the tobacco revenues in years 11 through 25 of the bill. 
So there would have been a reduction for the years 1 through 10 within 
the budget process, and outside of that, knowing that we are looking at 
a 25-year revenue stream as we measure the tobacco bill, that would 
have then taken the better part of the 80 percent. So you would have 
taken funds that were intended for public health, research, farmers, 
and the States, and that would have been significantly reduced. That 
clearly was also unacceptable. So we stayed locked in sort of a status 
of essentially negotiating with not a lot happening.
  We then responded. We responded with an alternative that would have 
reduced the marriage penalty for most families. But it would have been 
done at a fraction of the cost of both Gramm I and Gramm II, which 
brings us now to Gramm III. Gramm III is what we were presented with 
just a few moments ago as we began this debate when the Senator filed 
this particular amendment. Under Gramm III, there is now an expenditure 
of approximately one-third of the funds under the tobacco funding. So 
it has been significantly reduced in the road that we have traveled as 
to tobacco funding.
  In other words, from the revenues raised, if and when this bill 
passes, no

[[Page S6016]]

more than a third of that can be taken for the purposes of reducing the 
marriage penalty. But that is only half the story, because what the 
Senator from Texas does is maintain a level of benefits. In other 
words, he has geared his marriage penalty reduction in a way that there 
are still significant resources necessary in order to fund the benefits 
that he wishes to give, and he chooses not to take them all as part of 
our negotiating process from the tobacco bill.
  But the question then has to be asked, Where does the Senator from 
Texas take them from? I respectfully submit that as a result of the 
fact that he has left in the breadth of generosity of benefits that he 
seeks to return in the form of the marriage penalty, while not taking 
it from the tobacco bill, he nevertheless seeks to fund it and take it 
from the other available funds of the Federal Government. That means 
that he will have to tap a new source of revenue; i.e, the general 
budget surplus of the country.

  That means that the Senator from Texas will now look to Social 
Security, which is where we had originally designated that those funds 
would go. We have said as a matter of budget policy that we are going 
to preserve the budget surplus to take care of Social Security. But 
since the Senator is agreeing that only one-third of this revenue will 
come from the tobacco bill, the rest of it can only come from the 
surplus, unless, of course, the Senator has a bunch of offsets he is 
willing to offer up to suggest where that funding is going to come 
from.
  A vote for the Gramm amendment in its current form, Mr. President, is 
a vote to take $90 billion to $125 billion of surpluses away from 
Social Security. This is $90 billion to $125 billion that will not be 
available for the long-term reform of Social Security, because once 
this tax cut of the Senator becomes law, assuming it does, it is law 
outside of the budget process. The Tax Code is not part of the budget 
process. That is then a right that has been created, an expectation as 
to what people will pay. And it has to be funded. The only place you 
can turn to fund it is to the general revenues and, therefore, to the 
surplus.
  That is one side of what is being offered here. But I want to speak 
about another side.
  I would like to ask my colleagues whether or not it is possible to 
take away the label ``Democrat and Republican,'' take away the 
contentiousness of this bill, and just look at these two alternatives 
as a matter of good public policy and of common sense in terms of the 
budgeting of the country. The alternative that Senator Daschle and 
others of us on our side are offering, and we would hope with good 
common sense apply to the analysis that a number of colleagues on the 
Republican side of the aisle would say is really better policy--and I 
will say why I believe it is better policy--the fact is that the 
alternative we will offer provides a greater marriage penalty relief 
than the Senator from Texas, but it does so with less cost to the 
Federal Treasury and to the tobacco bill. I want to repeat that. The 
alternative that we offer will give more marriage penalty relief than 
the Senator from Texas, but it will do so with less damage to the 
capacity of the tobacco legislation to be able to provide for public 
health for research for the States, and so forth.
  The question is obviously, How do you do that? How do you avoid--is 
that some kind of a shell game and flimflam artistry, or is it real? I 
will tell you why it is real. The Senator from Texas, by his own 
admission, has agreed that he will reward those people who do not 
smoke. Or let's talk about the targeting. He says it is impossible to 
target this to accomplish a goal where you would actually wind up 
targeting nonsmokers versus smokers. I would agree with that. He is 
absolutely correct. That is pretty hard to do. But you can easily 
target this marriage penalty reward so that it is actually dealing with 
the marriage penalty. If the purpose of this is to fix the marriage 
penalty, then it is possible to target this benefit in a way that it 
goes to the people who pay a penalty, not paid to the people who get a 
bonus.
  The Congressional Budget Office will tell you that 51 percent of 
American married taxpayers get a bonus. And there is absolutely nothing 
in the approach of the Senator from Texas that limits them from getting 
rewarded above the bonus. There is no practical policy here given the 
difficulties we face of taking from the Social Security surplus, or 
taking from the tobacco bill, which we have now agreed we don't want to 
take more than a third from--there is no rationale for coming in and 
rewarding those people who already get a bonus. So what we have done is 
guarantee that we are going to give the tax relief to the people who 
are actually penalized. Senator Gramm's amendment costs 50 percent more 
than the Democrat alternative, and it gives less marriage penalty 
relief.
  The reason is that we have focused on giving about 90 percent of our 
tax cut to those families that are actually penalized, whereas Senator 
Gramm is only 40 percent--90 percent versus 40 percent. Sixty percent 
of the people who are going to get a reward under Senator Gramm's 
approach don't even pay a marriage penalty. It is not even fixing the 
marriage penalty. It seems to me as a matter of public policy what we 
ought to do is guarantee that we reach the maximum number of people who 
pay the penalty with the maximum amount of dollars back to those 
people.
  Our alternative would provide a 20-percent deduction against the 
income of the lesser-earning spouse. The way the marriage penalty 
works, as I think most people know by now, is that either on a standard 
deduction or on the earned-income tax credit or on the marginal rate 
you pay more or less according to what the income of both members of 
the household, both married partners pay. But it depends. The vagaries 
of the Tax Code are such that you could be a married couple with one 
person working, earning a big salary, one person not working at all, 
and you won't be affected the same way; you would actually have a bonus 
versus the two married partners who are both working, both earning sort 
of a similar amount of money. So if you have two income earners each 
earning about $25,000, they wind up paying a penalty versus the high-
income earner, single earner within the family and the other partner 
who is not, and there are other aberrations like that as you go through 
the various levels of income earning.
  It makes no sense to jeopardize this legislation and to place 
pressure on the surplus, which we have now decided we ought to reserve 
to save Social Security in order to reward people who are already 
rewarded. There is simply no matter of public policy of common sense in 
doing that, and that is why there is a very significant difference 
between the two approaches here.
  Let me give as an example a couple making $35,000. Let us split the 
$35,000, $20,000 to the husband or vice versa, $15,000 between the two 
spouses--you have 20 to one and 15 to the other, making $35,000. Under 
the Gramm approach, that couple would receive an average additional 
deduction of about $1--$1. By comparison, under the 20-percent, second-
earner deduction alternative that we propose, the couple would receive 
an additional deduction of $3,000--$3,000 deduction versus $1 under 
Senator Gramm, 20 percent of the $15,000. That represents about twice 
as large a tax deduction, and it would provide twice as much actual tax 
relief without any of the negative downside that is carried with the 
proposal of the Senator from Texas.
  Let me give you another example. For a couple making $50,000, let's 
split it evenly between both spouses--$25,000 husband, $25,000 wife. 
And that is a very realistic, very realistic division in the kind of 
two-person income of the families that we are trying to reach. Again, 
under Gramm, the couple would receive an average additional deduction 
of $1.
  By contrast, under the 20-percent, second-earner deduction 
alternative that we propose, the couple would receive an extra $5,000 
deduction representing more than three times as much tax relief.
  So that is the choice here, Mr. President. You can have a reward to 
people who are already getting a benefit by getting married, which is 
not a marriage penalty fix at all; you can structure it so that you 
wind up having to take the money from the general revenues, from the 
surplus; or you can come in with much greater tax relief that goes to 
the people who really need it, and you can do so without the negative 
impact on Social Security and

[[Page S6017]]

without the negative impact on the tobacco bill itself.

  I think the choice is very clear. The difficulties presented to the 
overall budget situation by Senator Gramm's current approach are very 
significant. It was the understanding, we thought, that we were not 
going to take more than one-third of the revenues in total, in whatever 
form they were going to come, that the Senator was going to structure 
his benefits so that no more than a third was represented in them.
  What is happening here is the Senator is giving the guarantee that no 
more than a third comes out of the tobacco bill, but he goes elsewhere 
to look for the rest of the larger sum of money that he is going to 
give back by not structuring the benefits downwards. So, in other 
words, it is essentially outside of the notion that you have an 
agreement that is going to restrict the total benefits of the marriage 
penalty to one-third of the level of the tax bill.
  Now, he can come back and argue: Wait a minute; we are just taking 
one-third of the tax bill.
  Well, that is true, except that in total for the marriage penalty 
they are looking to one-third, significantly more than one-third from 
these other sources, which is a very different consideration from that 
with which I think most of us thought we were going to be presented.
  The bottom line is that the amendment proposed by the Senator from 
Texas costs 50 percent more in the first 10 years than the Democrat 
alternative--that is $46 billion total in the first 10 years--versus 
about $31 billion. But it delivers far less in marriage penalty tax 
relief.
  Finally, at this point--I would reserve some time later--but at this 
point in time, if you have $30 billion taken out of this bill in the 
first 10 years--9 years, 10 years--added to the 40 percent that goes to 
the States, and add to that the component of the drug plan that came 
through yesterday, which takes 50 percent of the public health money, 
and we all know this bill is not leaving the floor of the Senate unless 
there is some kind of fix for the farmers, and we are going to look at 
somewhere between $9 and $18 billion--that is what you have, $9 
billion; $18 billion, Senator Lugar, I believe; $9 billion, the Senator 
from Kentucky.
  All of a sudden the question has to be asked: Where is the money to 
stop kids from smoking? Where is the fundamental notion that this is a 
bill directed at children in order to stop those kids from smoking? And 
everyone has come to understand that you need counteradvertising, 
cessation, professional training, and other kinds of things in order to 
do that. So it is simply unacceptable that suddenly all of the 
fundamental purpose of the legislation could be stripped away in a 
manner that would be unacceptable.
  Now, obviously, if this were to pass, I think everyone knows it is 
not going to be able to stay that way. There is no way. So the choice 
before the Senate is very clear: Do we want to make good policy about 
the marriage penalty, which I support fixing, but I have said all along 
it has to be done within the confines of reasonableness as to how much 
is available in this overall package so that we can still accomplish 
the fundamental purposes of the legislation. We are going to have to 
clearly visit that a little more over the course of the afternoon.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. ROTH. Mr. President, the pending amendment begins to address tax 
relief in two important areas. The first is the marriage penalty that 
exists in the code. The second is health care costs. This amendment 
begins to give back to the people some of the money that is raised 
through the tobacco tax in the bill. And for these reasons I intend to 
support the pending amendment.
  Personally, I think the spending is still too high in the tobacco 
bill. More of the revenue should be returned to the taxpayer.
  In addition, there are many measures that the Finance Committee 
recommended which are not adequately included in the final bill. For 
example, the tobacco bill is inconsistent with the work of the Finance 
Committee, which has jurisdiction over the Medicaid program. The 
tobacco bill also re-opens the Balanced Budget Act by increasing 
spending beyond the $24 billion we have already provided for the State 
Children's Health Insurance Program. Another aspect of the overall bill 
which concerns me is the way that the international trade provisions 
are drafted.
  Mr. President, there have been media reports that the tobacco bill is 
in trouble because the managers have to accommodate so many factions 
within the Senate and that today they have to accommodate the tax-
cutters to make progress on the bill. I take exception with the 
suggestion that tax relief is just another nuisance to be accommodated. 
My perspective on this bill is quite different.
  It is repeatedly asserted that this bill's purpose is to reduce teen 
smoking. That is a very desirable goal. I support that goal. However, 
in the bill I find only two policies that bear on that goal.
  The first one--the tax increase--is said to bring in $65 billion over 
5 years. The second one--under $1 billion in the President's budget--is 
a cessation program for teenagers.
  In my opinion, we have accomplished the goal with $64 billion left on 
the table. That money should be returned to the people, not be used as 
a slush fund to make government bigger. Making government bigger is not 
the goal of this legislation. But it seems to be the effect.
  In my opinion, the debate on this bill should center on how we rebate 
excess revenues to the people not on how we can fund government 
spending increases that cannot survive the traditional discipline of 
the budget and appropriations process. I support this amendment because 
it is philosophically the only legitimate course, in my opinion, for 
the Senate to take.
  The pending amendment provides tax relief in two specific ways. 
First, it partially reduces the inequity of the marriage tax penalty.
  As my colleagues know, this penalty places an unfair burden on two-
earner married couples.
  According to a recent Congressional Budget Office study, a married 
couple filing a joint tax return in 1996 could face a tax bill more 
than $20,000 higher than they would pay if they were not married and 
could file individual tax returns. The same study estimated that 
according to one measure of the marriage penalty more than 21 million 
married couples paid an average of nearly $1,400 in additional taxes in 
1996 because they filed jointly. Marriage tax penalties totaled $29 
billion in 1996.
  Let me take a few minutes to describe the history of the penalty--
which has been around for almost 30 years. Before 1948, all taxpayers 
filed as single individuals. In that year, Congress gave taxpayers the 
ability to file jointly--meaning that a couple had the benefit on 
income splitting. The tax bracket for married couples was double the 
bracket for single individuals. Because of complaints that singles were 
being unfairly penalized, in 1969, Congress devised a special rate 
schedule and standard deduction amounts for singles. This new rate 
schedule created a marriage penalty for some taxpayers.
  Because of changing demographics and the prevalence of two-earner 
couples in America, the marriage tax penalty has become an even greater 
concern. Moreover, after being reduced during the 1980s, the tax 
increases and creation of additional tax brackets in 1990 and 1993 have 
made it much worse today.
  In the current tax code, there are over 65 examples of provisions 
causing the marriage tax penalty. The most obvious and dramatic one is 
the rate structure itself.
  But there are numerous others, all of which can have a significant 
effect on the pocketbook of a married couple. The penalty provisions 
are built into deductions, exemptions, credits, and other facets of the 
code.
  What the pending amendment does is take a step toward providing some 
relief for this inequitable condition. It provides a deduction, up to 
an amount of roughly $3,400, for married couples. This deduction is 
phased in over 10 years. It will partially alleviate the burden, and 
toward doing this, I am a strong advocate. However, I regret that this 
relief does not go far enough.
  The phased-in deduction is only available to couples with an adjusted 
gross income of less than $50,000. In other words, Mr. President, 
someone

[[Page S6018]]

who works in the Chrysler or GM plant in Delaware and whose spouse is a 
school teacher would have too high an income to qualify for marriage 
penalty relief. That doesn't seem fair. I would have liked to see us 
give relief from the marriage penalty to many more Americans. Frankly, 
I would like to see us get rid of the marriage penalty altogether.
  The second major component of tax relief in this amendment is in the 
area of health care. The amendment provides self-employed individuals 
next year with a 100 percent deduction for their health insurance. This 
is long over-due. It will help farmers, small business people, and 
others who buy their own health insurance. Because of this amendment, 3 
million taxpayers and their families will have more affordable health 
care, and you cannot overstate how important this is.
  This is a good first step. But I want to be clear that I do not 
consider it to be everything we must do. There are 18 million other 
Americans who lack health insurance, some are unemployed, others are 
elderly, and many have jobs. Simply put, I would like to see these 
individuals receive an above-the-line deduction for the cost of their 
health care. This is something I have worked on for some time.
  When the Finance Committee marked up the tobacco legislation I placed 
before the committee a two-part proposal in the area of health care.
  The first part was an immediate increase to 100 percent deductibility 
for health insurance for the self-employed. The second part provided 
the same benefit to the other 18 million Americans who need health 
insurance. This attempt was a natural follow-on to my successful 
efforts in 1995 to raise the deductible percentage from 25 to 30 
percent and to make it permanent. Unfortunately, this time my tax cut 
proposal was not approved by the Finance Committee.
  I intended to offer the same tax cut amendment on the floor, and I 
was pleased that several members--Republicans and Democrats--agreed to 
support it.
  This proposal was also supported by farmers and small business, and I 
am pleased that it is reflected in the amendment before us now. Though, 
again, I want to go further. This is a good start, but I hope that in 
the future we revisit this with a mind to making health insurance more 
affordable for millions more of American workers.
  It is the same with the marriage penalty. It is egregious that 
married couples are penalized by our tax code. I believe this sends the 
wrong message in more ways than one, and it must be addressed. We have 
attempted to do this in the past. For example, in 1995, in the Balanced 
Budget Act, Congress approved a proposal to phase out the marriage 
penalty in the standard deduction. Our legislation was vetoed by 
President Clinton.
  I realize that at this point we are constrained by financial 
limitations and other priorities, and I compliment my colleagues for 
moving as far as they have with this bill. But I want all of my 
colleagues to agree with me that this should be seen as only the 
beginning. There is no justification for a married couple to be 
penalized just because they are married.
  Mr. President, though it is not perfect, and while it does not go as 
far as I would like, I intend to support this amendment. It sends the 
right message.
  It does provide partial relief. And it is a step in the right 
direction. I encourage my colleagues to support this effort.
  Mr. MURKOWSKI addressed the Chair.
  The PRESIDING OFFICER (Ms. Collins). The Senator from Alaska is 
recognized.

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