[Congressional Record Volume 147, Number 16 (Tuesday, February 6, 2001)]
[Senate]
[Pages S1031-S1038]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX CUTS
Mr. DORGAN. Mr. President, last Friday morning we had an issues
conference with the Democratic caucus at the Library of Congress, just
across the street from this building. Those of us in the Democratic
caucus in the Senate--and there are 50 of us in a 100-person Senate--
spent the day talking about the issues we want to raise during this
Congress.
We invited President Bush to come by this issues conference, which I
believe was unprecedented. As chairman of the Democratic Policy
Committee, I recommended we invite the new President. He came and made
a very short presentation to us--very general and very cordial. We
asked a series of questions, and then he departed. We were very pleased
he did come by to our issues conference.
One of the things he said in discussing issues with the Democratic
caucus was that when he campaigned for the Presidency, he campaigned on
certain issues, and he said: I intend to pursue those issues as
President, and there will be time when we disagree, but we should be
able to do that without being personal and without being disagreeable.
He understands that there are times we will disagree as a matter of
public policy, and that is the way democracy works.
There is an old saying that when everyone in the room is thinking the
same thing, no one is really thinking very much. That is certainly true
in public policy. The ability in this kind of a setting to have a good
aggressive debate on public policy issues, especially controversial
issues, benefits the American people. Then we get the best of what
everyone has to offer. So let's begin this debate.
The President has proposed that we have a $1.6 trillion tax cut in
this country over the next 10 years. That was not a surprise to us. He
campaigned on that throughout this country. That election ended in a
dead-even tie, but the members of the electoral college cast their
votes, and he is now President. There is not necessarily a mandate for
this tax cut, at least one for $1.6 trillion.
I make the point that this President campaigned on it and yesterday
he announced it, and we will in this Congress now begin to discuss and
debate the advantages or disadvantages of that particular plan.
There are a lot of reasons for us to say that now is the time to
offer a tax cut to the American people. We do have a budget that is now
in surplus, and that surplus exists in a measure that will allow some
of that money to be sent back to the American taxpayers. That is the
way it should happen. There are other uses for that money as well, and
we ought to include them.
We ought to pay down the Federal debt with part of it. If during
tough times we run up the Federal debt, during good times we ought to
pay it down. Not all of that surplus ought to go to tax cuts; some
ought to go to reduce the Federal debt. Yes, some ought to go to tax
cuts, and then some ought to be used to improve life in this country--
invest in education, invest in health care, prepare for the needs of
Social Security and Medicare in the future. There is a range of needs
and a range of priorities, and that is what I want to talk about today.
Twenty years ago, we had a new President come to this office,
President Ronald Reagan. He proposed in 1981 a very large tax cut. In
fact, one of the contestants for the Presidency was Republican Senator
Howard Baker who called the economic plan that President Reagan brought
in 1981 a ``riverboat gamble.''
President Reagan said we should cut taxes substantially and double
the defense budget, and the concurrence of those two policies--cutting
taxes and doubling the spending on defense--would result in a balanced
budget. In fact, the plan backfired. It did not result in a balanced
budget. It resulted in long-term, abiding, deep Federal budget deficits
that kept growing and growing. And $3 trillion was added to the Federal
debt in a very short period of time because the plan did not add up--
with annual budget deficits of hundreds of billions of dollars.
I make that point only because it has taken years of struggle to try
to deal with those annual budget deficits that kept growing like a
cancer in our budget. But we did deal with it. Through a
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series of public policies and private initiatives, those budget
deficits are gone and replaced now by surpluses.
How did they disappear? One, we changed the direction of fiscal
policy early in the last decade. We cut some spending and increased
some taxes. Some did not like it. It was very controversial. Some of my
colleagues said, if we do this, it will throw the country into a
recession and throw people out of work. Of course, it did not. It gave
the American people confidence that we were going to be on the right
track and that finally Washington was serious about getting rid of
Federal budget deficits. The result: We had unprecedented economic
growth. We then had, as well, diminishing Federal budget deficits to
the point where deficits turned into surpluses.
So finally, after 20 years, the accumulated deficits are gone. But we
still have a substantial amount of Federal debt that resulted from
those annual deficits.
President Bush says, let us decide to cut the Federal tax load by
$1.6 trillion over the coming 10 years. What is wrong with that? Aren't
tax cuts always good? Don't the American people always want tax cuts--
the bigger the better?
Let me read something written by Allan Sloan, who is a thinker and a
journalist that I really respect. This was in today's paper. He
describes what is wrong with it, from my perspective. I am quoting
Allan Sloan:
There are weeks when you have to wonder whether the
American economic attention span is longer than a sand
flea's. Consider last week's two big economic stories: The
Congressional Budget Office increased the projected 10-year
budget surplus by $1 trillion, and the Federal Reserve Board
cut short-term interest rates another half-percentage point
to try to keep the economy from tanking.
To me, the real story isn't either of these events; it is
their connection. The Fed is cutting rates like a doctor
trying to revive a cardiac patient because as recently as
last fall, Fed Chairman Alan Greenspan didn't foresee what
today's economy would be like. Meanwhile, although it is now
clear that even the smart, savvy, data-inhaling Greenspan
couldn't see 4 months ahead, people are treating the 10-year
numbers from the Congressional Budget Office as holy writ.
Hello? If Greenspan missed a 4-month forecast, how can you
treat 10-year numbers as anything other than educated
guesswork? Especially when the CBO has for years devoted a
chapter in its reports to ``The Uncertainty of Budget
Projections''?
Should we really be talking about 10 years, $1.6 trillion?
Abe Lincoln once gave a speech, and he said that an Eastern monarch
once charged his wise men to invent for him a sentence to ever be in
view and which would be true and appropriate in all times and
situations. Working on the problem, they finally presented the
following words: ``This, too, shall pass away.'' Abe Lincoln said:
``How much that expresses. How chastening in the hour of pride and how
consoling in the depths of affliction, this, too, shall pass away.''
Because we have turned deficits into surpluses, what has happened in
this town is that we have people who believe that this kind of economic
growth and opportunity will continue for 10 years unabated.
I thought the definition of a conservative was to be reasonably
cautious about things. That, apparently, is not the case. Let's lock in
very large tax cuts that have the danger of throwing us right back into
the same deficit ditch we were in for so very long.
Let me say this. I believe there is room for a tax cut. I do not
believe we ought to lock in large tax cuts for the next 10 years. I do
not happen to believe the kind of tax cuts proposed by this President
are the kind of tax cuts that we should lock in, in any event. I do not
happen to believe that you ought to just say, the tax burden in this
country represents the income tax burden people pay, and whatever else
they pay is irrelevant. The fact is taxpayers paid over $600 billion in
payroll taxes in this country last year, and that is relevant because
three-fourths of the American people pay more in payroll taxes than in
income taxes.
But this plan proposed by President Bush says: Ignore that. That is
not a tax burden that counts. All we are concerned about is giving back
some income tax. And, by the way, we will give it back on the basis of
who paid it, and so our giveback plan is that the largest payers get
back the largest refunds.
I do not think that is good policy. I do not think it is
conservative. I do not think it is good for this country.
Let me go through just a couple of charts that describe the choices
we are going to make.
These are budget choices and tax choices: Should we risk slipping
back into big deficits or should we move forward and build on recent
economic successes? I think almost everyone would say that is a choice
which is very simple: Let's build on these economic successes.
If that is the case, then what are the risks of the fiscal policy we
choose? What are the risks of deciding that we can see 10 years out?
Everyone here knows that is not the case. That is foolhardy. We cannot
see 6 months, 2 years, 3 years, 5 years, or 7 years out. We can't see
that far. We do not know what is going to happen.
Does anyone in their own family budget think they have the
opportunity to understand what is going to happen 7 years or 10 years
from now? They don't. Yet that is exactly what we are being told by the
President and his economic advisers: Lock in a $1.6 trillion tax cut
because we know what is going to happen for the next 10 years. That is,
in my judgment, very risky for this country.
The Congressional Budget Office does an analysis of what might or
might not happen.
Let's look at the difference in optimistic versus pessimistic
presumptions. If you want to take an optimistic view of things, if you
want to always look for a pony in a manure pile--you always think there
is good news just around the corner--you can ride on this top line. But
what if it is wrong? What if it is this bottom line? What does that
mean for the country? What does it mean for kids going to schools in
disrepair? What does it mean for kids going to school in classrooms
where there are 32, 34 kids in a classroom? What does it mean for a
woman who has diabetes or heart trouble and can't pay for her medicine
because Medicare does not cover it?
If you make the wrong choice--and we have a huge tax cut that lasts
10 years, when the economy is soft, and we are back into deficits, it
means there is no money for education, no money for prescription drugs
in Medicare, and no money for health care.
The President proposes that we can see 10 years out, and with the
surplus that we expect for 10 years out we can propose massive tax
cuts. Eighty-five percent this is the $2.2 trillion that people say
really is the cost of what the President says his tax cut is--and there
is very little money left for debt reduction, which, in my judgment,
ought to be a priority. It seems to me, one of the things that ought to
rank high here is reducing the Federal debt during better times. If you
run it up during tough times, reduce it during good times.
Prescription drugs in Medicare, we ought to do something in that. We
know of the challenges in education. They say that defense is going to
need more money. This administration has talked about substantially
more money for defense. You also have agriculture, Medicare reform,
Social Security reform. And how about a rainy day fund. Should there be
something set aside in case something goes wrong with our economy? Yes,
I believe so.
Those are some of the considerations. And President Bush's plan is a
tax cut that has a relatively small cut in the first year but
permanently is backloaded with huge tax cuts in the 10th year. What
that does is, it puts us right back in the same circumstances that we
found ourselves in in to the 1980s, in my judgment.
Some say, this public debt is all coming down. Let me take a look at
this chart. We have a long way to go to reduce public indebtedness, and
it ought to be a priority. What better gift to America's children, to
remove that yoke of indebtedness around their shoulders. It ought to be
a priority. It is, in my judgment, a conservative ethic to decide one
of the priorities is to reduce debt.
Finally, let me make the point that we are going to discuss this at a
time following the longest economic expansion in this country's
history, when we see a weakening of the economy.
Let me hasten to add, this is not a surprise. Seven months ago, Alan
Greenspan decided the American economy was too strong. He and his
brethren at the Federal Reserve Board
[[Page S1033]]
locked their door because they are the last place in town that locks
their door to keep the public out. It is the last American dinosaur in
our Government. They locked their door. They make secret decisions. And
7 months ago they said: Our economy is too strong. It is growing too
fast. We have to slow it down. We are going to increase interests
rates.
Seven to eight months later, where are we? Planned job cuts at
Montgomery Ward, Daimler Chrysler, Lucent Technologies, Sara Lee, and
General Electric--potentially 80,000. This morning EToys is broke. This
economy is softening far beyond the imagination or expectation of the
Federal Reserve Board. But no one should be surprised by that. The Fed
insisted that the economy was growing too rapidly, and they wanted to
slow it down some. Don't call this economic slowdown anything other
than Federal Reserve Board strategy.
Having both studied economics and taught economics in college, it is
useful to ask the question, notwithstanding the Federal Reserve Board
action, has anyone really repealed the business cycle, that cycle in
which you have economic expansion and contraction? It is inevitable. We
have economic stabilizers to try to even it out a bit more, but has
anyone been able to repeal the business cycle? The answer is no. As a
result of that, we have economic contractions, notwithstanding what the
Fed does. When those contractions exist, we will hope they are minor.
But the point of all of that is, we should not decide to lock in very
large tax cuts for a 10-year period when we can't see out 2 years. The
Fed can't see out 7 months. It is risky for this country, risky for our
economy and our children, to do that.
Some, I suppose, can't help it; it is just habit forming. There is a
story about how elephants with circuses are able to be tied to the
little metal posts. If you ever to go to a circus, you see the
elephants. They have a metal cuff around their leg and a chain. The
chain goes to a little metal stake pounded into the ground. You wonder,
how can that stake hold an elephant that weighs thousands and thousands
of pounds?
The answer is that in Thailand, when they catch the elephants, what
they do is they put that cuff around the elephant's back leg with a
chain, and they tie the other end to a big banyan tree. That elephant,
for a week or two or more, will pull with all of his might and all of
his energy to get away. But he can't shake that banyan tree. Finally,
the elephant simply discovers: With that cuff on my leg and that chain,
I can't move. They take the other end off the banyan tree and put a
little stake in the ground, and the elephant never moves. He is chained
by his habit. He can't move, so he doesn't move.
There is a lot of that in this policy we see these days. This is a
policy born of habit. The minute you have some good economic news, you
decide you are going to offer a very big tax cut and it doesn't matter
what the consequences are.
I mentioned when I started that there are a lot of ways to provide a
tax cut. I happen to believe there is room to have a tax cut in this
country now. But people pay income taxes, and they pay payroll taxes.
They pay a range of taxes, income and payroll being the two largest.
The President's proposal, like a lot of others, says the only taxes
that really count are the income taxes and we will give you a portion
of them back.
What about the people at the bottom of the economic ladder who pay
payroll taxes? Three-fourths of the American people pay more in payroll
taxes than in income taxes. Yet no one ever talks about giving them
something back. Why not? How about those who work at the bottom rung of
the economic ladder, many of whom pay no income taxes because they
don't earn enough income? How about giving them something back in terms
of the heavy payroll taxes they pay? How about making sure that when
you provide a tax cut, the tax cut is fair across the board, not just
provide very large tax cuts to the people making three, four, five
hundred thousand, and more, millions a year, and then just small crumbs
to the people at the bottom, if any at all.
This economic engine of ours works because a lot of people are out
there working, some at the top, some at the bottom. Don't diminish the
efforts of those at the bottom. They pay taxes, too. They get up in the
morning. They work hard all day. They pay taxes. They pay the same rate
of payroll taxes as the richest Americans pay on their salaried income.
So how about some help for those folks.
What I would prefer we do in a tax cut plan would be to propose a 2-
year tax cut plan for this country, and, at the end of 2 years, to
evaluate: Do we have continuing surpluses? Is our economy good and
strong? And if so, then we should continue those tax cuts. What I would
suggest is that we provide a tax cut over the next 2 years that
represents a percentage cut in income taxes paid, plus payroll taxes
paid. Add those burdens together and take a percentage of that and
provide a tax cut for 2 years based on that. That recognizes then that
people at the bottom who are paying payroll taxes also ought to get a
percentage of that back.
I am not saying we should eliminate money from the trust fund. Let
that go into the trust funds. I am saying that when you measure the
burden of taxes, measure the Federal income taxes paid and the payroll
taxes paid and provide a percentage of that and give it back. And I
would have a maximum of perhaps $1,000. That is a way to give a tax cut
in a manner that is fair and in a manner that makes sense.
Second, as we talk about taxes, there is one other thing we ought to
do. I have been working on this for a couple years. I have introduced
it with a couple of my colleagues. It is called the FASST plan--the
Fair and Simple Shortcut Tax plan. Over 70 million Americans can pay
income taxes in the future, if we adopt this plan, without ever having
to file an income tax return. Your withholding at work is your actual
tax liability. Check a few additional boxes on your W-4, one of which
says I am a homeowner, yes or no, and your actual withholding becomes
your actual tax liability. No waiting in line on April 15 at the post
office. No more audits. Over thirty countries have return-free tax
filing systems for most of their taxpayers. We could, and we should.
Seventy million Americans can avoid having to file income tax returns
in the future if we pass the Fair and Simple Shortcut Tax plan I
propose. That also can be done in a way that reduces taxes, because in
order to do that, you would eliminate taxes on the first increment of
interest, dividend and other investment income that families have.
I won't go into all of the details of my plan, but it makes sense, if
we are talking about substantial changes in our Tax Code, to consider
simplifying the Tax Code at the same time. Those are a couple of things
I think we should do. We ought to recognize that payroll taxes count as
well. That is part of the tax burden. We ought to do something that
recognizes that.
Finally, let me talk for a moment about the alternatives. If we
decide to lock in a 10-year tax cut, a very sizable proportion, there
will not be any money left to pay down the Federal debt, which, as I
said, I think ought to be a priority, and, second, to make needed
investments which we know are necessary.
I have talked before about a couple of people. I will do it again. We
know it is a priority to provide a prescription drug benefit in
Medicare.
I was in Michigan, ND, one evening. A woman came up to me after a
town meeting, and she grabbed hold of my arm. She was perhaps in her
late seventies, early eighties. She began to speak to me about the
prescription drug medicine she had to purchase. Then her chin began to
quiver, her eyes filled with tears, and she said: I can't afford to buy
these prescription drugs. I don't have the money. I know I need them.
The doctor says I must take them, but I don't have the money. Her eyes
were filled with tears, and she turned away from me. That goes on all
across this country, people who need prescription drugs, living on
Medicare, but they don't have the money.
Do we have needs to respond to in those areas? You bet your life we
do. That ought to be a priority.
I have talked about Rosie Two Bears, a third grader in a school that
is dilapidated, in a school where kids sit at desks 1 inch apart in
crowded classrooms in a school, part of which has been condemned, in a
school that has
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classrooms where they have to evacuate because the sewer gas comes up a
couple times a week. And little Rosie Two Bears says to me: Mr.
Senator, are you going to build me a new school?
I can't build her a new school. I don't have the money to build her a
new school. She and so many others around this country need a school
that is renovated and modern and capable. When she walks through that
classroom door, we do her and others a disservice by not having a
first-class facility for her to be educated in. Is that a need for us?
Yes, that is a need.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. DORGAN. I ask unanimous consent to proceed for an additional
minute.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. We have many needs and many priorities, one of which is,
yes, let's provide a tax cut. Let's make it fairer.
Second, let's not have a 10-year tax cut locked in so that we put
this country's economy at risk and throw us back into Federal deficits.
Third, let's also pay down the Federal debt while we have some
surpluses. What better gift to our children than paying down the
Federal indebtedness we ran up during tougher times.
Fourth, let's not provide a tax cut that is so large, the bulk of it
will go to the upper income people, in a way that would prohibit us
from having the resources we need for education, health care, and other
areas that we know need additional investment in this country. Those
ought to be our priorities.
I say to the new President, I am interested in working with him and
others. Having an aggressive, good debate about fiscal policy is not
personal, and it shall never become personal. We have different ideas
about the priorities in this country. We need to debate that in the
coming months. I intend to talk about that because I believe so
strongly that we ought to do all of the things I have described in
order to give us an economy that will continue to grow, prosper, and
provide opportunities for all Americans.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Enzi). The Chair recognizes the Senator
from Idaho.
Mr. CRAPO. Mr. President, I have been here on the floor listening to
the debate. I am very pleased that we are engaging in a real debate
about the possibility of meaningful tax relief. I have worked since I
was elected to Congress, about 8\1/2\ years ago, to try to reform the
Tax Code. I hope our debate over reducing taxes does not cause us to
lose sight of the fact that we have to ultimately reform our Tax Code.
Taxes are not only too high but too complicated, and the cost of simply
complying with the Tax Code is a burden the people must see removed.
Tax relief. Why are we debating so much about tax relief right now?
What is the thing that caused us to come together? It is the fact that
President Bush has been elected and has followed through on his
campaign commitment to propose a $1.6 trillion tax cut to the American
people.
I want to go through what it is President Bush has proposed. We have
had a lot of debate about whether it is good or bad to have a tax cut,
but not a lot of details about what President Bush is proposing we do.
The President's tax relief proposal is fair and responsible. It
provides a typical American family at least $1,600 in relief. They get
to keep at least $1,600 of their own money that they are now sending to
Washington with these skyrocketing surpluses, which I will talk about
in a moment, which are growing. The typical American family is defined
in this context as a family of four with one wage earner who earns
$50,000 annually. I will give you more statistics about what this means
for other types of situations.
For example, the President's proposal gives a tax cut to every single
family in America who pays income taxes. What does it do? It reduces
the current five-rate tax structure to a four-rate tax structure and
reduces every tax rate. Every taxpayer who is in any tax rate--in any
tax bracket--will receive relief. Right now, he is proposing that we
move to a 10-percent, a 15-percent, a 25-percent, and a 33-percent tax
bracket.
For those of you who don't follow tax brackets, currently the lowest
is 15. So if you are in the lowest income category, paying the lowest
rates of income taxes, you will see your tax rates go from 15 percent
to 10 percent--a 33-percent reduction for that tax bracket alone. The
tax reductions are lower as the rates go higher, in terms of percentage
of income.
It doubles the child tax credit to $1,000. It reduces the marriage
tax penalty.
I think we ought to eliminate the marriage tax penalty. I have
cosponsored legislation which does that. Many of us will be trying to
see if that total elimination of the marriage tax penalty can be worked
into this package.
It eliminates the death tax and expands the charitable tax deduction.
What does this mean? It means that one in five families with children
now who are paying taxes will no longer pay any tax at all. Six million
families, those at the lower income levels, will be totally eliminated
from the tax rolls. A family of four making $35,000 would get a 100-
percent tax cut. A family of four making $50,000 would receive about a
50-percent tax cut. A family of four making $75,000 would receive about
a 75-percent tax cut. The marginal income tax rate on low-income
families will fall by over 40 percent.
The current Tax Code is unfair to a single mom paying $25,000 a year.
She pays a higher marginal tax than somebody making $250,000 a year.
That will be changed under this tax proposal. Federal taxes today are
the highest they have ever been in peacetime America. Americans pay
more now for taxes than they spend on food, clothing, and housing
combined. Americans work more than 4 months out of every year just to
pay their tax bills. The current high tax rates are keeping low-income
taxpayers out of the middle class.
Recent business layoffs show that the economy needs a boost quickly.
Those layoffs are not a reason not to have tax relief; they are a
reason we need tax relief.
The critics--and there are always critics--are throwing everything
they can at this tax relief proposal. I am in my ninth year in
Congress, with 6 years in the House and almost 3 years in the Senate.
During the entire time I have served in Congress, we have fought for
tax relief. We have put forward bill after bill. We have put forward
every kind of idea you can think of to get the President and the
administration and those who oppose tax relief in this city to support
something.
Every time in the last 8\1/2\ years, whatever we have proposed,
whatever it is, has been attacked as a ``tax cut for the wealthy.'' I
start to wonder if anybody who pays taxes is defined as wealthy. When
we get a proposal such as this one that benefits everybody in America
and gives higher percentages of relief for those at the lower income
level, it is attacked as what? A tax cut for the wealthy.
It seems there is not ever going to be a tax cut that is acceptable
to those in this country who want to keep taxes high so they can keep
spending high. That is what this debate is about. Make no mistake about
it; We are now seeing that the record levels of spending by this
Federal Government are not enough to those who want to see spending
increased even more. We have projections of $5.6 trillion of surplus in
the next 10 years, and that is not enough.
We have to say that a $1.6 trillion tax cut is going to threaten our
country. The reason it is a threat is that there are those who believe
that from cradle to grave this Federal Government must take care of
you. In order to do so, it has to have your tax dollars. Spending at
the Federal level is the ultimate objective.
Let's talk about that surplus. The latest projections are for a $5.6
trillion surplus. One of the battles we have won in the last 8 years
since I have been in Congress is that we have stopped the Federal
Government from robbing the Social Security surplus and spending Social
Security dollars, masking excess spending. We don't allow that to
happen anymore, and we won't here.
If you take out the Social Security part of the surplus and the other
off-budget portions of the surplus, that is about $2.5 trillion,
leaving somewhere in the neighborhood of $3.1 trillion of non-Social
Security on budget surplus
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over the next decade. President Bush is proposing that we give tax
relief for $1.6 trillion of that.
You have heard the argument made that it is risky; we can't project
10 years and be accurate. That is true. In the 8 or 9 years I have been
here, I can't remember a year when we got it exactly right. But I can
remember that every year we got it low. We used conservative estimates.
We have built in downturns in the economy. Frankly, if we find that
even these conservative estimates are not too low--and I will note that
they are upgraded every month now, showing that they are low--we can
adjust things as we move along. To scare people out of a tax cut by
saying we don't know for sure is simply another argument by those who
never want to see taxes cut.
We have an opportunity to reduce taxes in a significant way, and we
ought to take it.
Let's talk a little bit about what the positive effect of tax relief
will be. Tax relief is going to have the immediate effect of helping
families, businesses, and communities save and invest more while moving
in a direction toward reforming the Tax Code. Prompt action will also
improve the economic environment and strengthen consumer confidence.
By the way, those projections we use are what we call static
projections. As we project, we are not allowed to assume reduced taxes
will stimulate economic activity. We have to assume that every dollar
of taxes that we cut is a dollar of lost revenue to the Federal
Government.
Experience shows us that in many of the areas where we reduce taxes
the increased stimulation to the economics of the country actually
generate increased revenues. Every time so far that we have cut the
capital gains tax, the revenues from the capital gains tax have gone
up--not down--because it has allowed more capital transactions to take
place in this country. We are not allowed to take any of that into
consideration. But tax relief will--mark my words--allow for more
investment, will allow for more safety, will strengthen consumer
confidence, and will stimulate and strengthen our economy.
Recently Alan Greenspan was emphatic about the superiority of tax
cuts to spending increases. He said: If long-term fiscal stability is
the criterion, it is far better, in my judgment, that the surpluses be
lowered by tax reductions than by spending increases.
That is what the debate is about. This debate is not about whether to
pay down the debt or to reduce taxes. This debate is about whether to
keep taxes high so this Government can continue its increasing appetite
to spend Federal dollars and pull control over the economy and over
people into Washington. The argument is made that we should reduce the
Federal debt first. Frankly, I agree with that.
I strongly believe that our highest priority should be to pay down
the Federal debt. Alan Greenspan pointed out that with the surpluses we
are seeing now we are paying down the Federal debt at a rate about as
fast as we can.
There are certain instruments out there that go beyond the 10-year
timeframe with which we are dealing--public debt instruments--and if we
buy those down early, we will actually have to pay a premium in order
to do so.
His point was that if we continue our current rate of paying down the
national debt, we can do so and have this tax relief.
We have already reduced the national debt by $360 billion. We reduced
it last year by $224 billion. Even assuming this tax relief package
goes into place, in 5 years we will have paid off more than half the
Federal debt, and in 10 years we can pay off most of it--still working
on both areas where we have debt instruments that are out there beyond
the 10-year time cycle.
Make no mistake about this either. We are committed to paying down
the national debt, and we will pay down the national debt. But stopping
a tax relief package is not going to accelerate that process. Stopping
the tax relief package is simply going to accelerate the opportunity
for Federal spending sprees as we go into our appropriations cycles in
this Congress.
I think it is important that we get this debate in its proper
perspective. Our goal here is to improve the quality of life for all
Americans. The argument has been made about this tax package that,
well, it is going to stop us from being able to make needed investments
in areas that we have to invest.
Remember those budget surplus numbers I talked to you about earlier.
Even if they are not adjusted up anymore, we are going to have
somewhere in the neighborhood of $1.5 trillion over the next 10 years
after the tax relief package; after saving all the Social Security
surplus and other off-budget surplus dollars to use for strengthening
things where we have legitimate needs for Federal spending.
For example, America's failing schools still fail to deliver a world-
class education; and President Bush has proposed to make sure not one
student is left behind.
Our national security needs some strengthening. We can assure that we
have an effective defense against ballistic missile attacks; that our
military's aging equipment and personnel shortages are addressed; Our
health services and programs for the elderly are out of date and need
reform and strengthening.
Those things can happen. We can address the needs of this country
without being caused, by the politics of fear, to think we don't have
an opportunity for tax relief right now. That is what it ultimately
gets down to.
This time, as well as every time in the last 8 years, we will try to
talk America out of a tax cut. They will use what I call the politics
of fear. They will say we can't protect you if you do not let us have
these tax dollars; that we can't do what is needed to make sure that
your life is made safe; and that if you allow this tax relief package
to go through, then all kinds of terrible things are going to happen to
the economy.
The truth is, this is a modest tax relief proposal given the
potential surpluses we see growing; and as we move forward this country
will be strengthened--not weakened--by a resolve to reduce the tax
burden paid by the American families.
Again, we pay the highest rates of taxes today than we have paid in
peacetime America. We have some of the highest surpluses ever. We can
protect Social Security and strengthen our country, and we can do so if
we will properly address the issue of tax relief.
I encourage us to move forward quickly to pass this tax package.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, I yield myself such time as I might
consume up to 15 minutes. I may not use all 15 minutes, if there are
other speakers waiting to come to the floor.
I have been asked by the manager of this bill to accommodate Senator
Durbin by adding 11 minutes at the end of the time of morning business
for Senator Durbin, and in the process of my doing that for Senator
Thomas, I need to apologize to the Senator from Louisiana, Ms.
Landrieu, because she asked to do the same thing. I guess we weren't at
that point so accommodating because I said I would accommodate her at 3
o'clock this afternoon. I apologize to Senator Landrieu.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, this morning, and a lot of times during
this debate over the next 4 or 5 months on tax legislation, we will
hear a lot of economic arguments. I don't want to detract from those
economic arguments as not being good arguments, but I think they are
tailored to fit the pattern of people who have a political philosophy
that believes more money running through the Federal budget, and
through the Federal Treasury, as a percent of our gross domestic
product is a better thing to do.
They believe that a political decision made by Senators and
Congressmen and a President on the distribution of goods and services
within our country is better than leaving the money in the pockets of
the men and women who are working in America to pay those taxes to
decide how that money should be spent. We may not talk about it enough,
but our philosophy for those of us who are fighting for tax relief for
every taxpayer in America is that we believe there is more economic
good done for America--and creating jobs in America and having a better
life in America--if the money does not come through the Federal
Treasury; or at least if less of it comes through the
[[Page S1036]]
Federal Treasury and more is spent and invested by individual working
men and women, entrepreneurs, and people who create jobs; or even if
the money is spent by consumers. We believe that by having the
marketplace and willing buyers and sellers make that determination of
how the money should be divided creates more jobs, and turns over many
more times in the economy than if the money comes through the Federal
Treasury, and there is a political decision on how it should be
distributed.
Those are honest political and philosophical differences between our
political parties. They are honest differences, but one has great faith
in government to make decisions; the other one, mine, has great faith
in individuals to make decisions. My philosophy will create more jobs.
Since government does not create wealth, government distributes wealth
or expends wealth, there aren't as many jobs created in the process.
When the government actually creates a job, it is a job that consumes
taxpayers' money, not creating wealth.
These economic arguments are very good, but I feel more comfortable
applying a little basic common sense to the whole argument of a tax
cut; a little common sense to offset a lot of Washington nonsense. It
is common sense that we have a tax surplus. We haven't had a tax
surplus except in the last 4 or 5 years. Before that, I have to admit,
Congress was very fiscally irresponsible with budget deficits. We had
some tax surplus in the Social Security account, and we still have it,
but it was meant to cover up irresponsible spending on the other side.
That is behind us now that we have had a new Congress for the last 6
years, going on 7. We have not only budget surpluses, but surpluses
beyond budget surpluses; those are tax surpluses.
It has reached a point, because of automatic bracket creep, where
people earn more and they are put in higher brackets. That money is
coming in at historically high levels of taxation. Automatic bracket
creep comes because people get put in a higher bracket and there isn't
enough reduction in the tax brackets through the inflationary
adjustment to offset that. Consequently, we have automatic tax
increases on people without a vote of Congress. As a result of bracket
creep as well as other enacted tax increases, taxes are now at 20.6
percent of gross domestic product, whereas over a 50-year period of
time it was somewhere between 18.5 and 19.5. Historically, the economy
has adjusted itself to that level of taxes. I think the people have
accepted it as a reasonable rate of taxation. But they don't accept
this historical high of 20.6 percent. That is why we are having the
demand for tax relief for every taxpayer.
Common sense dictates if we are going to keep this level of taxation
up, that it is going to be burning holes in the pockets of Senators,
Congressmen, and even Presidents to get spent. Those expenditures are
generally on a continuing basis and an obligation always on the Federal
Treasury. We want to discourage the level of expenditures growing as it
did over the last 3 years, an average of 6 percent, twice the rate of
inflation; or last year, 11.9 percent, three times the rate of
inflation. That is not sustainable because taxes aren't coming in at
that level. Even if they were coming in at that level, we would not
want to have the level of expenditures that high because sometime there
will be a downturn in the economy, and when that income goes down,
expenditures don't go down to adjust to the income of the Federal
Treasury.
Common sense dictates we have to take some money out of Washington,
DC, and leave it in the pockets of the taxpayers of America so we
aren't the overtaxed nation that we are, that we are more where the
historical level of taxation has been for 50 years.
Now is the time to do that, to make up for the real bracket creep we
have had, these automatic tax increases we have had, where we have
reached the point where the average taxpayer is spending more on food,
clothing, and shelter than they are spending on taxes. We will give tax
relief to working men and women, to taxpayers in America, because of
this high level of taxation, because we don't want money burned up in
Washington, DC. We want to keep the money out of Washington, DC,
leaving it in the taxpayers' pockets.
There is 50 years of common sense behind that because that has been
the level of taxation, 18 to 19 percent of the gross national product.
We need to understand the taxpayers trust themselves with the money
more than they trust the Internal Revenue Service. We will hear the tax
relief that I am talking about is labeled a risky scheme. The only
scheme is Washington's insatiable appetite for more and more of the
working men and women's hard-earned tax dollars.
There is a threat, we are told, that we can't continue to pay down
the national debt. We can continue to pay down the national debt. We
will continue to pay down the national debt. We are going to continue
to pay down the national debt until we get to that point where Chairman
Greenspan has advised that you can't pay down any more national debt
because there is about $1 trillion of the national debt that is held by
individuals who want the security of the Federal Treasury for their
savings. They have bought 30- year Treasury bonds, and about $1
trillion of those are not callable. In about 6 or 7 years, we are going
to reach the point where there is money coming into the Federal
Treasury, that if these bonds are not callable, you don't pay down the
national debt anymore, you start having the Federal Government invest
in the stock market, buying other bonds, buying other stock, or at the
very least, as the law requires now, to invest in federally insured
financial institutions and then have an inordinate political impact
upon the economy when that enormous transfer of billions and billions
of dollars is put into the private banking system. That caution is not
urged by Senator Grassley. That caution is urged by Chairman Greenspan.
I assure people we are going to continue to pay down on the national
debt. Taxes are so high we have reached the point where a two-wage-
earner family, particularly if they are middle-income or below, one-
wage earner is working to put food on the table and a roof over the
head and just to provide for the family; the other one is working to
pay for the Washington bureaucracy. That isn't how a family gets ahead.
For a family with a $50,000-a-year income--this will probably be a
two-wage-earner family; it wouldn't have to be but it could be--but for
a $50,000 income family of four, their taxes now are about $4,000, on
average. Under the President's proposal they drop down to $2,000.
Consequently, that will leave in the pockets of those working men and
women income for them to decide on their own how that money can be
better used, whether it is saved for college education, pay more down
on credit card debt, pay more down on the house mortgage. They may want
to spend it, but that family making a determination of how to spend it
is going to do more good for the entire U.S. economy than anything
else.
We have also been urged this morning: Don't get locked into a tax
cut--this is where the trigger mechanism comes in--and that maybe we
ought to have automatic increases in taxes for 4 or 5 years down the
road in case something unpredictable happens.
We do not need to worry about that. Common sense tells me that it is
easier for Congress to increase taxes than to decrease taxes. We do not
have to have an automatic trigger. It is not good for the economy to
have it anyway because working men and women are going to perform
according to the predictability of the Tax Code, and we should make
sure it is predictable.
My time is up. I assure my colleagues, we do not have to worry about
triggers because we have only had two tax decreases in 20 years, but we
have had Congress vote tax increases in 1982, 1984, 1986, 1990, and the
biggest tax increase in the history of the country under President
Clinton in 1993. So we do not need an automatic trigger. If we need to
increase taxes, Congress can do it, and common sense tells me that we
will do it. I yield the floor.
The PRESIDING OFFICER (Mr. Thomas). The Senator from Wyoming.
Mr. ENZI. I thank the Chair. Mr. President, it is always an exciting
day when an accountant gets to talk about taxes.
The American people have had some concerns over taxes for a long
time. If you were to throw that into a list of things about which they
are concerned,
[[Page S1037]]
it would probably come out at the top. Do they think there is going to
be tax relief?
I ran into a song written by a guy named Roger Miller that sums up
the trust people have in the Federal Government giving them some tax
relief, and it goes something like this:
Well, you dad-gum gov'ment
You sorry so 'n' so's
You got your hands in every pocket of my clothes
Well, you dad-gum, dad-gum, dad-gum gov'ment.
Well, you dad-gum gov'ment
You sorry rackafratchits
You got yourself an itcha
And you want me to scratch it
Well, you dad-gum, dad-gum, dad-gum gov'ment.
The President is coming through with relief on the burden of every
taxpayer--every taxpayer. I am in support of President Bush's relief
proposal. It is time to ax the tax and cut the burden down to size.
I applaud President Bush in acknowledging that surplus revenue is a
tax overcharge. It is time to stop the overcharge. It is time to return
the money to the American people. It is time to relieve the burden on
all the taxpayers.
Americans deserve tax relief. Right now Federal taxes are the highest
they have been in America during peacetime. Americans pay more in taxes
than they spend on food, clothing, and housing combined. Most people
work more than 4 months each year just to fund their government. It is
time for the Federal Government to get its hands out of the pockets and
allow them to keep more of their own money.
President Bush has proposed tax relief for every taxpayer. That is
right; if you pay taxes now, you will receive tax relief under
President Bush's proposal. As an example, a family of four who earns
$50,000 a year will receive tax relief of $1,600. That is a 50-percent
reduction for those families.
Right now I can tell you $1,600 will go quite far in my home State of
Wyoming. For most folks, that will pay for 1 or even 2 months of
mortgage payments. It will cover a year's worth of gasoline for two
cars. It will cover the cost of a year's tuition at many of the
community colleges. It will cover the cost of groceries for 4 months
for many people in my State.
Most importantly, President Bush and the Republican Congress trust
the American people themselves to spend their own money as they see
fit.
President Bush's tax relief will simplify the code while providing
relief for all Americans. That is another place where we have a huge
burden: The amount of time that it takes to get the information
together to see if you owe or if the country is going to give you back
some of what you paid.
This plan replaces the current five rates with four lower rates of
10, 15, 25, and 33 percent. As such, this tax rebate legislation takes
an important step in simplifying our terribly complex code, while
allowing all taxpayers to keep more of their own money.
Instead of attempting to pick winners and losers--beware of the tax
plan that starts out with: Don't give any money to the rich; just give
it to the poor. You will find that under the definition of ``rich,''
anyone who pays taxes is considered rich and will not get money back.
Watch the wording. Watch the details.
We cannot have a bill that attempts to pick winners and losers and
makes tax relief a lottery, particularly including those who do not
pay.
The President's tax plan honors the contribution of all Americans and
recognizes they can spend their own money better than the Federal
Government.
In addition to a simplified lower tax structure, President Bush's tax
proposal will benefit families by doubling the child credit from $500
per year to $1,000 a year. It lowers the marriage penalty. It kills the
death tax.
This is a tax policy that puts its money where its mouth is. The
current Tax Code punishes marriages and savings. The Bush proposal
rewards marriage, rewards parents, rewards savings. This plan
recognizes the enormous burdens that many parents are under and
provides some hard-earned relief for each and every taxpaying family in
the United States by returning to them part of the tax overcharge that
has made this historical surplus possible.
While this tax relief proposal will benefit all taxpaying Americans,
it especially helps middle-class families who are the backbone of our
economy. Those receiving the largest percentage reduction in their
Federal income taxes will be those in the middle class.
For example, a family of four earning $75,000 a year will see their
Federal taxes reduced by 25 percent. The same family of four earning
$50,000 a year will benefit from a 50-percent reduction. If a family of
four earns $35,000 a year, they will pay no Federal income taxes under
President Bush's proposal.
This tax proposal is part of a three-prong strategy to save Social
Security, pay down the debt, and return a portion of the tax
overpayment to the people responsible for it: the American taxpayers.
For decades, the Democrat-controlled Congress spent the Social
Security surplus on a variety of programs. Under a Republican-
controlled Congress, the Social Security surplus is being protected so
that it will be there for present and future retirees. It is now time
to return a portion of the non-Social Security tax overcharge to the
American people.
There are those on the Democratic side of the aisle who say we cannot
afford tax relief for Americans because we need to spend the money to
pay down the Federal debt. If I really thought they were serious about
this, I would be more inclined to listen. The problem is, in the 4
years I have been here, I have not seen their actions back up this
rhetoric.
I have been working with my colleagues, primarily Senator Allard and
Senator Voinovich, to actually implement a policy that ensures we pay
off the entire publicly held debt regardless of whether all the budget
surplus numbers materialize. We have tried at least six different
approaches. Guess how many Democratic cosponsors we have had on any of
those proposals? Zero.
Our Democratic friends love to talk about debt reduction, but when it
comes time to vote on a tax cut, when it comes time to vote on debt
reduction, their enthusiasm disappears as soon as the next
appropriations bill hits this floor; and they envision 1,000 ways to
spend that same surplus. They say: Don't lock us into $1.6 trillion of
tax relief. Don't lock us into that.
Do you know what spending does? Spending locks the American taxpayer
into an eternal debt. Do you ever see us stop a program? Do you ever
see us hold a program at the same level? Every program continues; every
program gets an increase.
We talk about how the cost of living is going up, and we better spend
more on that program to cover the additional costs of that program for
the cost of living. Then we expect to increase it on the basis of
whether it is a good program. The evaluation isn't whether it is good
or bad. We lock things in. Every time a dime of the American taxpayer's
money is spent on a new program, that dime is obligated, year in and
year out, for their generation and generations to come.
Tax relief isn't locked in quite that well, as people have noticed
when they have had their taxes raised in previous years.
A tax raise can happen. Tax raises happen more often than spending
cuts. So don't talk about locking in a tax cut, particularly with the
hope of being able to put it into new programs.
There is also talk about the need to reduce payroll taxes. The Bush
plan reduces payroll taxes. It reduces that portion of the payroll
taxes that are income taxes. It does not yet deal with that portion of
the payroll tax that is Social Security or Medicare. Those are two
programs funded separate from the Federal income tax. Those are two
programs that must be reformed. To make statements on the floor that we
are going to reduce those payroll taxes without putting reform in place
says that we do not care about the future of Social Security and
Medicare. We do. We need the reform. The payroll taxes that are
involved with Medicare and Social Security have to be taken into
consideration as part of that reform.
And the rich versus poor: That is an attempt to start class warfare.
The idea is to relieve the tax burden of every taxpayer.
You will see things thrown into the rhetoric that will give tax
relief to those who do not pay taxes. To me, the surplus is a tax
overcharge. That is like going to the store and buying something and
being overcharged.
[[Page S1038]]
When that happens--and somebody discovers it, and somebody is honest
enough to pay that back--I kind of expect them to pay it back to me. I
do not expect them to pay it back to somebody who just happened to walk
through the store. That is what we are talking about with some of the
proposals that are being put out there.
We need to remember that the surplus is not some magical pot of money
created by those in Washington. It is an overpayment of taxes by the
American people. It is only fair that we return a portion of that
overcharge to those who gave us this surplus in the first place.
My experience has been that if we do not give a large portion of this
surplus back, we will see it disappear in the waning days of this
Congress, as we feed the unquenchable appetite of the ravenous
appropriations bills. How does that affect you? When we are voting on
appropriations, we are spending a very small part of the American
taxpayer's money on each and every proposal. I think the American
taxpayer realizes, if you spend enough quarters, you have used all of
their tax money. That is about what they put into a program--25 cents.
Some people are more than willing to put 25 cents into a new program.
But they ought to be able to pick which programs themselves and not
rely on the beneficence or the unique knowledge that 100 of us have
here and 435 have on the other end of the building. If they want to
give, they should be able to give. They should get credit for giving,
but they should be able to select what they want to give. They should
be able to select what they want to buy. That is what the tax package
does.
We also have a unique opportunity to simplify. Complexity is a tax
burden. It is a tax burden for individuals. That is the No. 1 thing the
National Taxpayer Advocates have pointed out: Complexity is the No. 1
problem. The No. 2 problem is complexity for small business, where a
lot of individuals are trying to earn a living out there.
It is time to ax the tax and cut the burden down to size. We do need
tax relief, and we need it now. President Bush's tax proposal is fair,
responsible, and will benefit all American taxpayers. This tax plan
will create jobs, it will spur economic growth, it will mean jobs for
us and our kids, and it will support families in the essential task of
raising children.
Let's return the tax overcharge and give the American people tax
relief now.
I yield the floor.
Mr. HUTCHINSON addressed the Chair.
The PRESIDING OFFICER (Mr. Enzi). The Senator from Arkansas.
Mr. HUTCHINSON. Mr. President, I commend my colleague from Wyoming
for his very strong, clear, and forceful statement supporting tax
relief for the American people. It was well reasoned. I applaud him for
making his statement and associate myself with it.
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