[Congressional Record Volume 145, Number 30 (Thursday, February 25, 1999)]
[Senate]
[Pages S2031-S2033]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 490. A bill to amend the Internal Revenue Code of 1986 to provide 
that the conducting of certain games of chance shall not be treated as 
an unrelated trade or business; to the Committee on Finance.


           Federal unrelated business income tax legislation

  Mr. GRAMS. Mr. President, at the beginning of this session, I, along 
with Senator Roth and others, introduced S. 3, the Tax Cuts for All 
Americans Act, which calls for a 10 percent across-the-board tax cut on 
the federal income taxes of hard-working Americans.
  If enacted, this will be the largest middle-class tax relief since 
President Ronald Reagan's 1981 tax cuts. I believe this legislation is 
imperative for our economic security and growth in the new millennium. 
I will address this issue more fully later this week.
  But today I also rise to introduce four bills representing some other 
tax relief priorities on which I hope we can also focus in this 
Congress. These bills will help reform our tax system and will help to 
terminate some unfair and unjust tax provisions in the Tax Code, again, 
with the aim and the goal of allowing working Americans to keep a 
little bit more of their own money rather than sending it to 
Washington.
  Mr. President, the first bill I am introducing today, the National 
Tax Rebate Act, requires the Government to refund taxes collected to 
taxpayers when Federal revenue grows faster than the income of working 
Americans.
  The rationale for this legislation is simple: and that is, the 
Federal Government's taxes should not grow faster than working 
Americans' income. Our

[[Page S2032]]

growing tax burden should not reduce the standard of living that we 
work hard to achieve. This legislation will ensure that it does not.
  Eighteen of the last 19 Democrat-controlled Congresses passed tax 
increases. President Clinton's whopping $241 billion tax increase in 
1993 was the largest tax hike we have had. We had only two Federal 
personal income tax rates at that time. They were 15 and 28 percent, 
those under President Ronald Reagan.
  Today, after President Clinton has been in office for 6 years, we 
have five Federal tax brackets. The top one has reached nearly 40 
percent. More hard-working, middle-income families have been pushed 
into higher tax brackets because of an unfair tax system. So we have 
gone from two brackets of 15 percent and 28 percent to now five tax 
brackets, the highest being nearly 40 percent. No wonder Washington's 
income is growing and growing much faster than the income of the 
taxpayers. That is one reason why we have a surplus in Washington 
today, because incomes have gone up for Americans, and Washington has 
taken a larger share of that in the form of taxes.
  Thanks to our exceptionally strong economy, more Americans are 
working today, and are earning more than ever before as a result. 
Government data show that real median family income is now at a near-
historic high and per capita income is at a record $19,241.
  We should not be here penalizing those who work long and hard to 
achieve the American dream of higher earnings and better jobs by 
slapping higher taxes on them.
  Unfortunately, a large share of the newly earned income of hard-
working Americans has not been spent on family priorities but siphoned 
off by Washington.
  The progressive Federal tax system created by Washington allows 
Federal Government income to grow faster by taking a larger bite from 
any newly earned income increases. That is because it pushes us into 
one of these higher tax brackets.
  According to Scott Hodge, a leading economist at Citizens for a Sound 
Economy, total personal income since 1993 has grown by an average of 
5.2 percent a year, while Federal taxes have grown by 7.9 percent a 
year--so taxes have grown 52 percent faster than personal income 
growth.
   In fiscal year 1998 alone, federal taxes grew 70 percent faster than 
personal income.
   Mr. President, this is not justifiable. Uncle Sam's income should by 
no means grow faster than the income of the people who earn it.
   While broad-based tax relief for every American, such as S.3, would 
certainly correct the unfairness of the tax system, we need a mechanism 
that ensures Washington's income will never grow faster than the income 
of taxpayers.
   This is all my legislation does. It limits federal taxes by 
prohibiting the growth rate of federal revenues collected for any 
fiscal year from exceeding the average growth rate of personal income 
of working Americans.
  Set a guidepost. Set a marker as to how fast Washington should grow 
in the money it collects and spends.
  It requires a two-thirds vote of both the House and the Senate to 
waive this limit. Whenever Washington's tax revenues grow faster than 
the personal income of working Americans, an automatic national tax 
rebate will be triggered as a result.
  The federal government must refund taxpayers the excessive taxes pro 
rata based on liability reported on federal income tax annual returns 
filed in the previous tax year.
  The national tax rebate is not a new idea. A number of states, such 
as Florida and Missouri, have either statutory laws or constitutional 
amendments requiring state governments to give back tax money if the 
revenue exceeds these limits.
  My own State of Minnesota is currently deciding how best to refund 
excess tax collection to Minnesota taxpayers.
  If it works at the state level, there is no excuse for the federal 
government not to adopt a similar mechanism.
  By passing this simple tax limitation and rebate legislation, 
taxpayers will be fully protected and better represented in Washington.
  Mr. President, this piece of legislation would repeal taxation of our 
senior citizens' Social Security benefits.
  As you know, Mr. President, Social Security benefits were exempt from 
the federal income tax since the creation of the program.
  They were never taxed by the Federal Government. Retirement benefits 
shouldn't be.
  But as Social Security encountered a financial crisis in early 1980s, 
Congress began taxing Social Security benefits, and thus causing 
financial hardship to many seniors.
  The amount of taxable benefits was the lesser of one-half of Social 
Security cash benefits or one-half of the excess of the taxpayer's 
provisional income over the thresholds of $25,000 per single person and 
$32,000 for couples.
  In 1993, when President Clinton needed more money to fund his new 
spending programs, he increased the taxable proportion of Social 
Security benefits from 50 to 85 percent for Social Security recipients 
whose threshold incomes exceed $34,000 for singles and $44,000 for 
couples.
  These two tax increases have seriously injured a significant number 
of senior citizens. In fact, a quarter of recipients are affected by 
this provision, creating enormous financial hardship for them as well.
  I believe taxation on Social Security benefits is wrong and unfair 
because Social Security benefits are earned benefits for many senior 
citizens. Federal income tax is paid when Social Security contributions 
are made to the program. Taxing Social Security benefits is clearly 
double taxation.
  In other words, those benefits are paid when the money is put into 
Social Security, and now the government wants to tax them again as it 
takes the money out.
  In addition, Congress never intended to tax Social Security benefits 
when it first established the program. In fact, for half a century 
Social Security benefits were exempted from federal taxes.
  Millions of senior citizens who planned for their retirement based on 
their understanding of the Social Security law were penalized. As the 
tax rate continues to grow, the incomes of more and more senior 
citizens are falling along with their standard of living.
  This tax hurts seniors who choose or must work after retirement to 
maintain their standard of living or to pay for costly health insurance 
premiums, medical care, prescriptions and many other expenses which 
increase in retirement years.
  It also discourages today's workers to save and invest for the 
future. It won't help protect Social Security for our children and 
grandchildren.
  I believe this is not acceptable.
  Repealing all taxation on Social Security benefits would reverse this 
trend, and help responsible senior citizens. The federal government has 
entered into a sacred covenant with the American people to provide 
retirement benefits once contribution commitments are made.
  It is the government's contractual duty to honor that commitment. The 
government cannot and should not change the covenant without consent of 
the people whom these changes would affect.
  Mr. GRAMS. Mr. President, this bill deals with a relatively smaller 
tax matter. This bill calls for exemption of additional charitable 
gambling activities from the Federal unrelated business income tax 
(UBIT).
  As you know, Mr. President, the fundamental difference between 
charitable gambling and regular gambling is where and how the profit is 
spent.
  Most of the income derived from charitable gambling games is spent in 
communities to fund charitable activities such as the Boy and Girl 
Scouts, Head Start, and many city and school programs that help local 
residents and students.
  In my State alone of Minnesota, more than 1,500 local charities 
conduct a variety of games such as bingo and pull tabs, and in doing so 
contribute some $75 million per year to their local communities.
  Beneficiaries include youth recreation and education, as well as 
organizations serving the sick and disabled, and many other community 
programs, as well.
  My state leads the nation in charitable non-profit gaming, but some 
35 other states are involved in similar activities.
  In 1978, President Carter signed into law a bill that classified 
bingo income as related business income.

[[Page S2033]]

  As a result, this charitable game is not subject to the Federal UBIT. 
But the law did not include other forms of charitable gambling. 
Consequently, the income of these charitable gambling games is taxed 
under the UBIT.
  Taxes take a big bite out of charitable gambling income and seriously 
undermine the ability of nonprofit organizations to provide charitable 
assistance.
  Now, while the IRS has not collected UBIT on these charities as they 
anticipate Congressional action, without my legislation, the IRS could 
begin collections in the near future. My legislation would remove this 
uncertainty as charities attempt to go on with their good works.
  This legislation is not controversial. It should have bipartisan 
support. In the last Congress I introduced a similar bill with Senator 
Wellstone which the Senate adopted. I hope we can pass it again in the 
106th Congress.
  The last bill I am introducing today would provide a tax incentive 
for small business employers to set up pension plans for their workers.
  Working Americans' retirement security is based on Social Security, 
private pensions, and personal savings. But even though Social Security 
is fast approaching a financial crisis, our national savings rate 
remains among the lowest, and many workers do not have company pension 
plans to help make up the Retirement Benefits.
  Despite recent congressional action to improve private pension plans, 
the complexity of qualification requirements under current law and the 
administrative expenses associated with setting up retirement plans, 
including the SIMPLE plan, remain significant impediments to widespread 
implementation of employer-based retirement systems, especially for 
small business.
  This is particularly true for small employers with less than I 00 
employees, for whom the resulting benefits do not outweigh the 
administrative costs.
  Consequently, only 42% of individuals employed by small businesses 
now participate in an employer-sponsored plan, as opposed to 78% of 
those who work for larger businesses.
  To address this problem, I am introducing the Small Employer Nest Egg 
Act of 1999. This legislation will create a new retirement option for 
small business owners with 100 or fewer employees.
  It would allow the same level of benefits both to employers and 
employees as larger employers who maintain traditional qualified plans. 
Upon retirement or separation of service, employees would receive I00% 
of their pension account value.
  To offset the high costs associated with starting a pension plan, my 
proposal calls for a tax cut equal to 50% of the administrative and 
retirement education expenses incurred for the first five years of a 
plan's operation.
  Mr. President, small businesses are the lifeblood of our communities, 
providing millions of jobs nationwide. Small business owners want to 
help their employees save for their retirement.
  Yet, because of the costs, many are unable to do so and, also, 
because of the rigid Government policies and, again, the administrative 
costs that go with it.
  This legislation, I believe, will help millions of workers begin 
building their retirement security. I urge the support of my colleagues 
for the four bills I have offered today.

                          ____________________