[Congressional Record Volume 147, Number 18 (Thursday, February 8, 2001)]
[Senate]
[Pages S1167-S1170]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE SURPLUS
Mr. TORRICELLI. Mr. President, in these times of extraordinary
budgetary wealth, it is easy to forget it was less
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than a decade ago that a now famous comment was made that the U.S.
Government would have deficits as far as the eye could see. Indeed, in
1992 when the Clinton administration began, the annual deficit was $290
billion and was projected to grow to $455 billion this year. Today, not
only has that annual deficit been eliminated but the budget surplus is
$237 billion, for the first time in generations, 3 successive years of
budget surpluses, leading to the extraordinary ability of the U.S.
Treasury by next year to have reduced the aggregate historic debt of
the United States by $600 billion.
It is now realistic to discuss the elimination of all outstanding
U.S. Government debt--not in another generation, perhaps not even in
another decade, but in our own time, on our own watch.
This extraordinary change of the national finances has led to the
recognition that the Federal Government could generate a $3.1 trillion
surplus, even while excluding the accumulating Social Security surplus
that we mutually agree needs to be held in reserve. This is clearly a
once-in-a-lifetime opportunity. Any generation of Members of the Senate
only could have dreamed of the chance to reorganize the finances of the
Federal Government with surpluses that were even a fraction of these
magnitudes.
The choices before the Senate are obviously considerable. We arrived
at these massive surpluses for a combination of reasons: Our taxes,
extraordinary work by the American people, rising productivity and
technology, but also because for a long time our people simply went
without some benefits. Like a company that improves its bottom line by
not investing in its personnel, our country cast a blind eye for some
time to real human needs and human investments in order to balance our
budget.
First and foremost among those things that the country simply ignored
for a period of time was the medical needs of our people. Modern
medicine is obviously revolutionizing health care. Despite the fact
that prescription drugs are an integral part of the health care of any
citizen, 35 percent of Medicare beneficiaries, or 15 million senior
citizens, have no prescription drug coverage and are either choosing
between their rent and food or paying their prescription drug bills or
simply doing without at the cost of compromising the quality of their
lives, or life itself. It remains first on the national objectives to
be corrected in these new circumstances.
Second, arguably, the United States has the finest system of higher
education in the world. But no one could defend the current quality of
our elementary or high schools. They are literally bursting apart at
the seams: Aging schools, postponed improvements in their
infrastructure, the need for higher standards, to retain good teachers,
and get even better teachers.
It is axiomatic that in this time of revolutionary technology and
international competition, it will be impossible to maintain the
standard of living in the United States or our national strength or
even democratic character without improving the quality of instruction
in our schools. Mr. President, 2,400 schools will need to be rebuilt by
the year 2003 to accommodate rising enrollments alone, and 130,000
teachers will need to be hired over the next decade. This, too, was
postponed.
Third, until most recently, this generation postponed its obligation
to maintain the quality of life by maintaining the quality of the land
of our country. What began with Theodore Roosevelt in preserving our
national monuments and lands and open space for our generation was
postponed as we fought to balance our budget. No State in the Nation is
a better example of this phenomenon than my own native State of New
Jersey. Forty percent of the land is already developed; 10,000 acres
are lost per year. There is an epidemic of sprawl. America is losing 50
acres of open space every hour of every day, all year long.
These three, from my own personal perspective, are on top of a long
list of postponed national ambitions that need to be debated in the
context of broad and meaningful tax reduction, which I support.
Prescription drug benefits, new teachers and schools, preserving of
open space, and the quality of our environment--they are a part of this
debate. The resources that go to one are not available for the other.
This Congress, unlike many that came before us that dealt with the
question of comprehensive tax relief, must commit itself to balance, to
balance the resources that are necessary for national goals and the
resources that are required for comprehensive and meaningful tax
relief.
The question of tax relief itself also involves issues of balance. I
begin this discussion with a profound belief that tax relief is not
only affordable, it is owed to the American people. There are many
contributors to the national surplus. This Congress and President
Clinton deserve considerable credit for reducing spending and some
enhanced efficiencies. The American people deserve most of the credit
for the new productivity of this economy and its efficiency through
their hard work.
But it is also true--indeed, it is inescapable--that a significant
portion of the Federal surplus is a direct result of high tax rates
that have produced increased revenue, and the American people deserve a
dividend on their high taxes of all these years.
Rates were increased and they were too high, and now they are simply
not necessary. The projection of a $3.1 trillion surplus should end
forever the argument about whether the U.S. Government can afford
broad-based tax relief. It is right, it is necessary, and it is
affordable.
The question becomes the character of this Congress; whether we not
only have the judgment to balance our educational, environmental, and
medical needs against the need for broad-based tax relief but whether
the tax relief itself can be comprehensive and balanced to a variety of
national objectives.
President Bush has proposed a $1.6 trillion restructuring of the tax
brackets. It is largely a reflection of the broad-based tax relief
offered by Senators Coverdell, Breaux, Kerrey, and myself in the last
Congress. It is deeper and it is broader, but it is based on the
principle of lowering rates generally and specifically moving middle-
income American families into the lowest bracket possible. That is
simple but it is direct and it is right.
But the tax debate must include more than simply lowering rates in
the broadest fashion possible for most Americans. There are other
specific national objectives to be achieved through the Tax Code. I was
pleased to see that Senator Lott has joined in my efforts to include in
this tax reduction a further cut in capital gains rates. The business
community has made clear its own desire to see the R&D tax credit made
permanent and reform of the international tax laws.
Those in my State of New Jersey, home of the pharmaceutical industry
and increasingly of high technology, and involved in a disproportionate
amount of international trade, are grateful for the help of our economy
and growing employment base. Both political parties have pledged
themselves to end the marriage penalty and to eliminate the estate tax
for at least small businesses, family farms, and to fix the alternative
minimum tax, which is a rising burden on middle-income people.
Indeed, with a surplus of this magnitude, there is no shortage of
legitimate ideas. All of these concepts for tax reform and tax
reduction have one thing in common: They are justifiable, they have a
rationale, and they should be considered. But they also have this in
common: None should be considered to the exclusion of other ideas, and
each should be balanced.
This is a moment the country is not going to visit again for a long
time. This should be considered at length, seriously, and done right.
Let me begin with several ideas that I believe are critical, in
addition to the clear objective of restructuring the tax brackets
themselves.
First is the affordability of higher education. There is no greater
burden on middle-income families, on working couples, than the
prospect, the daunting challenge of a college education for their
children. With the possible exception of buying a home, it is the
principal financial burden in life for most Americans. For those less
fortunate, there are a variety of scholarship and loan programs. The
very wealthy will never have to be concerned. But most Americans find
themselves in neither situation, and we are
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facing the prospect where the middle class will simply be out of range
of a quality graduate education or even a college education. Both our
sense of fairness and our economic prospects as a nation are going to
be radically altered if a quality college education is the province
only of the upper middle class and the privileged. We will destroy the
engine of our economic growth while taking basic fairness and social
mobility out of our society.
As this chart indicates, over the last decade the cost of sending a
child to college has increased by 40 percent, two and a half times the
basic underlying inflation rate, for public universities and for
private universities. It is not tolerable and there is something that
this Congress can do about it. If we were to add one single deduction
to this new Tax Code that this Congress is going to write in the coming
weeks, in addition to the broad-based relief in the lowering of tax
brackets for all Americans, it would be 100-percent deductibility of
college tuition. It makes sense and it should be done now, and nothing
would add more to the finances of middle-income families.
Long ago this Congress recognized the need for deductibility of basic
investments by business to add to its capabilities of productivity and
efficiency. As a nation, that same investment strategy is reflected by
average Americans every day when they seek the financial security of
their families and their productivity as a people by educating their
children.
I recognize, because of the variety of deductions and rate
alterations that are going to be suggested in this Congress, that 100-
percent deductibility for Harvard or Yale or Princeton might not
initially be possible.
Because we cannot do everything does not mean we cannot do anything.
If 100-percent deductibility for the most expensive schools in the
Nation is not possible, 100-percent deductibility for the cost of going
to a State university or a more moderately priced school is affordable
and should be in this legislation.
Second, the national crisis of savings and retirement: There is no
arguing that these are extraordinary economic times by almost any
measure--national competitiveness, efficiency, employment, and quality
of life. In this panoply of good news, there is at least a single
measure of a mounting national problem: the national savings rate.
As this chart demonstrates, from only 20 years ago, when Americans
were saving 10 percent of their income, for the first time since the
Great Depression, the Nation now has a negative savings rate.
The consequences of this are very clear. American families are
maintaining their standard of living by going into debt further and
further every year. In the last 23 years, the debt burden on American
families has quadrupled. We are now last in the developed world in the
amount of money available to every family in their personal savings.
Nearly two-thirds of Americans have no stake in the society, no
accumulated wealth but the value of their home. The consequences of
this on society are very clear. Most Americans are no more than a
sickness, a natural catastrophe, a divorce, or the loss of a job away
from losing a home and everything they have worked for all of their
lives. A stable society that is prosperous and confident must have
broad-based savings by its people.
There is a reason why Americans have stopped saving money. This
Government has made savings an irrational economic act. A working
family on a modest income, who puts a few dollars in the bank or in the
stock market every year hoping for a dividend, a small capital gain,
some appreciation, faces the prospect of paying taxes on it every
April. This denies people not only security from the vagaries of
everyday life, it also denies them the ability to save appropriately
for their own retirement and ultimately makes them dependent upon
Government to an extent that should not be necessary.
Let me be clear because I believe this is so fundamental to this tax
bill. The Federal Government, in its current circumstances, does not
need tax revenues from taxing the dividends, interest, or capital gains
of working-class families who decide to have modest savings and make an
investment in the country for themselves, their children, or their
future. We not only do not need their money, we should be encouraging
them to every extent possible to participate in the growth of the
country and save their own money: Buy a mutual fund, put money in the
bank, get in the stock market, make a family investment, and keep your
money.
If we provide a $500 exclusion for dividends, savings on interest in
bank accounts, $2,000 or $3,000 exclusion for capital gains, we can
eliminate all taxes on savings for 20 million Americans; 20 million
Americans would be eliminated from the tax rolls with regard to their
savings account or their brokerage account.
This Congress could make saving money and getting financial security
to be a rational economic act again.
For most Americans, this would translate into the ability to have
$10,000 in the bank or in the stock market, knowing it is theirs and it
will not add to their tax liability every April. I believe this second
element, in addition to a broad-based rate reduction, is a critical
component of comprehensive tax reform.
Third, the elimination of the estate tax for small business and
family farms: There is clearly a general agreement in this Congress by
Democrats and Republicans that we can eliminate all taxes as we now
know them on estates for small businesses and family farms. The
question is whether we can afford to do this for everybody or only for
90 percent of those Americans who would be eliminated from the estate
tax rolls if we simply increased the threshold to $5 million or $7
million.
We all agree there is a problem. Seventy percent of small business
owners choose to sell their businesses rather than pass that business
on to their children and pay the estate tax. The estate tax is
destroying small business in America, family businesses, the continuity
of ownership and pride within a business inside a family. As a result,
only 13 percent of small businesses in existence today will survive to
the third generation.
With the loss of family farms, it is even worse, adding not only to
the loss of continuity of ownership of a family farm but in a State
such as mine, in New Jersey, more importantly, the destruction of the
land. People who want to be in farming and want their children to be in
farming have to sell the farm to a developer and divide the acreage
because upon their death, their children cannot afford to pay the tax.
The better alternative, if we cannot afford to eliminate the estate
tax entirely, is to increase the exemption to such a level that every
small business and every family farm, for all practical purposes, is
excluded from the tax.
Under current law, there is a $2.6 million exemption for qualified
family farms and small businesses. But in a State such as New Jersey--
indeed, much of the country--if you have significant acreage, you may
not be a wealthy person--indeed, you may have no cash available at
all--but your land may be worth more than that, and you cannot afford
to give it to your child on your death. Therefore, the more effective
alternative to repeal may be to increase the threshold to $8 million or
maybe even $10 million. This would deal with the practical problems of
destroying small businesses and family farms.
Four, rate reduction. I began this discussion by conceding the
point--and, indeed, conceding it gladly--that every American deserves a
tax break regardless of their income because every American, regardless
of their position, has contributed to the surplus and the new national
prosperity.
I say this because my hope is that this discussion of tax reduction
cannot become a debate about different sections of the country any more
than it should about different stratums of wealth, a fight of region,
or class warfare. All Americans helped produce this prosperity, and
everyone should share in its benefits. But I also want this
congressional debate to begin with the idea that we all do come from
different sections of the country and have different concepts of the
tax burden.
The issue becomes that we all want these tax reductions to go to
primarily middle-income people, which begs the question: What is a
middle-income family? Is a family of four making $40,000 or $50,000
middle income? There
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are regions of the country where the answer to that might be
affirmative.
In the State of New Jersey--indeed, I suspect in New York,
California, southern Florida, or northern Illinois--the answer most
decidedly is no. A family of four earning $40,000 to $50,000 a year is
struggling every single day to pay their mortgage, educate their
children, feed their children, and clothe them. That is not a life of
prosperity and ease. It is only marginally sometimes middle income.
Indeed, in my State, a family earning $70,000 a year is probably a
police officer married to a nurse or a schoolteacher. This is a family
of middle-income status that deserves these benefits. So I hope we can
avoid a discussion of broad-based tax relief that focuses most tax
benefits significantly below this level of income.
I want to be accommodating to my colleagues. I want this to be a
bipartisan and broadly based tax plan, but I will fight to the end to
assure these levels defining ``middle-income families'' are realistic
for these police officers, nurses, teachers, and small business people
who have modest incomes and high expenses in our urban and suburban
areas of the country.
Last year, when Senator Coverdell and I introduced the first
bipartisan broad-based expansion of tax brackets for lower rates, the
center of our plan--largely now adopted by President Bush--was to
expand the 15-percent tax bracket to a family of four earning $75,000.
This would move 7 million taxpayers into the lowest Federal bracket,
recognizing that no one in this bracket, as I earlier suggested, should
be paying 28 or 31 percent. This is the centerpiece, in my judgment, of
any rate reduction.
Finally, I leave my colleagues with two other concepts that I hope
will be considered, recognizing that in addition to the education and
health care and open space agendas of the Nation, and the need for
broad-based rate reductions, there are two other issues Congress has
addressed previously where we are not succeeding that could be impacted
by the tax break.
First is our urban agenda. We have tried Empowerment Zones and HOPE
VI grants and a variety of measures to deal with our urban problems.
Some have succeeded. Indeed, I am proud of many. But my sense is that
our cities are now at the point where private investment could largely
follow these Federal initiatives in an urban renaissance. If we could
change, even marginally, the profitability of urban investment, such
as, in wide areas of Newark and Jersey City--I recognize private
housing is beginning to be built, but what is a tentative beginning
could be an explosion of investment if we could marginally change the
tax status of the developers.
So I propose, for home ownership and investment in our urban areas,
we take these areas of urban Empowerment Zones and do an exclusion on
capital gains for those who will invest in new housing or new
investment. Allow the developer to keep $25,000 of capital gains on
every house they build in an urban enterprise zone as their money, if
they will take the risk and change the economics of that investment.
Second, and finally, on brownfields, brownfields is an important
concept to recycle urban polluted lands into vital economic resources.
It has been successful, but it must move more quickly.
Mr. President, I conclude simply by suggesting I want to accelerate
and increase the tax deductibility for investment in brownfields. I
leave my colleagues with the thought that I hope this is a good debate
on tax reduction. I hope it is comprehensive. I hope it is balanced. I
hope we seize this extraordinary moment to impact the lives of as many
Americans as possible while assuring our economic future.
I yield the floor and thank the Presiding Officer for his indulgence.
The PRESIDING OFFICER (Mr. Allen). I thank the Senator from New
Jersey.
The Chair recognizes the Senator from Connecticut, Mr. Lieberman.
Mr. LIEBERMAN. I thank the Chair and thank my colleague.
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