[Congressional Record Volume 147, Number 68 (Thursday, May 17, 2001)]
[Senate]
[Pages S5028-S5100]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RESTORING EARNINGS TO LIFT INDIVIDUALS AND EMPOWER FAMILIES (RELIEF)
ACT OF 2001
The PRESIDING OFFICER (Mr. Allen). Under the previous order, the
Senate will proceed to the consideration of H.R. 1836, which the clerk
will report.
The assistant legislative clerk read as follows:
A bill (H.R. 1836) to provide for reconciliation pursuant
to section 104 of the concurrent resolution on the budget for
fiscal year 2002.
The PRESIDING OFFICER. Under the previous order, the Senator from
West Virginia, Mr. Byrd, is recognized to speak for up to 30 minutes,
with the time not being charged to the reconciliation bill.
Mr. KENNEDY. Mr. President, may we have order so the Senator from
West Virginia can be heard. This is an enormously important issue and
the Senator has thought long and hard about it. The Senator is entitled
to be heard.
The PRESIDING OFFICER. The Senate will be in order. Senators will
take their conversations off the floor.
The Senator from West Virginia.
Mr. BYRD. Mr. President, I thank the very distinguished Senator from
Massachusetts for his thoughtfulness, his consideration. I thank the
Chair. I also thank those Senators who are listening, even though they
may not be in this Chamber. I thank the majority leader for arranging
for me to have this time without its being charged against the time on
the reconciliation bill.
Mr. President, the day before yesterday, Americans turned on their
television sets to see live coverage of a runaway freight train
traveling through northwestern Ohio. I saw it. Many of you saw it.
Nobody was at the controls and officials were failing in their attempts
to stop the train. To make matters worse, the train was carrying toxic
chemicals. News stations were bracing for disaster. The safety
mechanisms put into place to prevent such a scenario were not working.
Local and emergency personnel were left simply to block highway
intersections, to issue warnings, and to let the runaway train rumble
through, endangering the environment, endangering the infrastructure of
whatever cities or small towns happened to be in the way, and
endangering the lives of citizens.
Mr. President, the Senate, today, faces its own runaway train. These
tax cuts have been on the fast track since they were first proposed in
the snows of New Hampshire during last year's campaign. A budget
resolution was rushed through this body to authorize this tax cut bill,
bypassing the Budget Committee, and without the benefit of the
President's detailed budget, or any analysis from the Joint Tax
Committee, or the Congressional Budget Office. Senate Democrats were
then excluded from the conference committee to further expedite the
process.
Mr. President, I was talking with one of our new Members about the
concurrent resolution on the budget, and about the fact that the
members of the Budget Committee representing the minority were
excluded. This was a relatively new Member in this Senate. He said, ``I
was disturbed by that.'' But he said, ``The Democrats did it when they
were in power. That is what they tell me.''
Mr. President, not a word by those who say that was done by the
Democrats when they were in control--not a word--is true. The
Democrats, when they were in control, never excluded the then minority
from the conferences or from the committees with respect to the budget.
I was majority leader and it was not in my makeup; it would be totally
alien to me to exclude the minority, when I stand up so many times, as
I have over the years, to say that the Senate is the protector of
minorities, the Senate protects the minority's rights.
I have read about those tales told by some Senators--often, the aides
of the minority--who are presently in the minority who said: Well, Byrd
did this; Byrd did this. Those Members were not even in the Senate when
Byrd was majority leader. They were not here. Three-fifths of the
Senate makeup today were not here when Byrd was majority leader, were
not here when Senator Mansfield was majority leader, were not here when
Lyndon Johnson was majority leader. So much for that.
The safety mechanisms that the Senate put into place to prevent such
a reconciliation disaster have been disabled, and there seems little
anyone can do but issue warnings, and watch the train rumble through,
endangering our Nation's infrastructure investments and our Nation's
fiscal soundness.
The tax cuts that are involved here--and let me say parenthetically
that I like to vote for tax cuts. Over the 55 years I have been in
public office, I have voted for a several tax cuts, and it is always a
great pleasure to do that.
Let me say this. I respect every Senator in this body, no matter if
he disagrees with me, no matter if he votes for this tax cut. I respect
his or her decision on that matter. I found when I was majority leader,
that the Senator who hurt me today by his vote saved me tomorrow. I say
what I say today with great respect.
I am not against all tax cuts, but I am against this one, this
colossal tax cut that is based on projections over 10 years away when
we cannot even project the economy 1 year away or 6 months away. It is
like the weather. These things are really unpredictable.
This is a tax cut that threatens to ignite an explosion in the
national debt and blow up the economy as resources are squandered and
long-term problems are ignored.
Mr. President, a few days ago, the Senate passed the FY 2002 budget
resolution, and even before Senators had voted, there was little reason
to believe that this body would abide by the revenue levels set forth
in that budget resolution. Senators were openly talking about how tax
cuts would exceed those authorized in the budget resolution.
In other words, Mr. President, that budget resolution was a sham. Its
primary purpose was to authorize a reconciliation bill by which this
body would pass a massive tax cut bill that could not be passed as a
free standing bill. This $1.35 trillion tax cut could not be passed in
this Senate as a freestanding bill.
Section 103 of the FY 2002 budget resolution allows the Republican
leadership to bring this massive $1.35 trillion tax cut bill to the
floor as a reconciliation bill. And why is it so important to that
leadership? Because section 103 permits the Republican leadership to
bring the tax cut bill to the floor with, at most, 20 hours of debate.
And reconciliation allows time to be yielded back on a nondebatable
motion. Section 103 makes sure that the bill cannot be filibustered. So
section 103 makes sure that 51 votes will be enough to pass the tax cut
bill.
In other words, Mr. President, the most important feature of the
budget
[[Page S5029]]
resolution for the Republican leadership was the provision that allows
the leadership to muzzle debate on a bill that will change the fiscal
landscape of this Nation for a generation and by so doing, to thwart
the will of the minority in this Senate.
Under our Constitution, under our Senate rules and precedents, under
our laws, it is the Senate that is supposed to ensure that complex
bills have a thorough debate. The people are entitled to that. Yet,
this tax bill will not get the debate that it so richly deserves. In
all likelihood, it will be passed before midnight of this black day.
Under the Congressional Budget Act, reconciliation bills are limited
to 20 hours of debate. The 20 hours can be reduced by a nondebatable
motion. We have a $5.6 trillion gross debt, $20,062 for every man,
woman, boy, and girl in this country; to put it another way, it
represents $929 for every man, woman, boy, and girl in the world; $929
for every man, woman, boy, and girl in the world! The budget resolution
and this $1.35 trillion tax bill will result in an increase in that
gross debt to $6.7 trillion in 2011, or over $22,000 per person in this
country.
Was that budget resolution a disciplined plan for tax policy? No. It
squandered potential surpluses on a $1.35 trillion tax cut that is
conveniently drafted to have exploding costs in the outyears.
I probably will not be here. Many of us will not be here when that
time comes in the outyears. Some Senators will be defeated--mark my
word--because of the votes they will cast on this bill.
Over 61 percent of the revenue losses contained in the tax cut bill
will come in the second 5 years of the 10-year plan. Tax reductions
grow from $10 billion in fiscal year 2001 to $186 billion in fiscal
year 2011. The Center on Budget and Policy Priorities estimates that in
the second 10 years--get this--in the second 10 years, from 2012 to
2021, the key years when Social Security will be in jeopardy--hear me
now, you elderly citizens; hear me, you young people whose parents will
become elderly, who may be already elderly and when you, too, will
become elderly, if God blesses you to live long enough--the key years
when Social Security and Medicare will be in jeopardy, the revenue
losses will total $4.1 trillion.
How long does it take to count a trillion dollars at the rate of $1
per second? Thirty-two thousand years!
This is a bear trap. This bill could just get 10 hours of debate. If
the majority wishes to yield back its time, the minority will have 10
hours. It is that plain and simple. So why do we have a reconciliation
bill process that limits debate? What was the common good that
warranted our sacrificing our tradition of full debate in this Senate?
I helped to craft the Congressional Budget Act of 1974. I can assure
Senators that the authors of that act did not intend the reconciliation
process to be used for a large tax cut. That was called the Budget
Reform Act of 1974. Well, if it was called, as it was, the Budget
Reform Act, surely it did not intend to be used to pass colossal tax
cuts.
The intent in creating the House and Senate Budget Committees, the
Congressional Budget Office, and the budget and reconciliation process
was to assert Congress' prerogatives in the budget process. The
Constitution vests in the Congress the power over the purse. That is a
power for which our English forbears fought and spilled their blood at
the point of the sword, to wrest from tyrannical monarchies the power
of the purse and place it in the hands of the people's elected
representatives in the House of Commons.
Yet, in the recent years before the passage of this Budget Act--I was
here. I was here. I didn't just read about it; I was here; Senator
Kennedy was here; a few other Senators were here--in the recent years
before the passage of the Budget Act, the power of the purse was being
usurped more and more by the executive branch. There were deferrals of
appropriations; there were rescissions of appropriations. Made by whom?
The Chief Executive. And so Congress got its belly full of that and
passed the reconciliation process. The Budget Reform Act was
established.
The reconciliation process was established as a mechanism to make
sure that the goals set out in the budget resolution were implemented
through the spending and tax bills that followed. It allowed the
Congress to establish enforceable reconciliation instructions on the
authorizing committees so that both spending and revenue targets would
be achieved. The reconciliation bill was intended to be a tool to
reconcile any differences between those goals and the final bill. Most
importantly, reconciliation provided a tool to deal with persistent
budget deficits.
As a deficit-fighting tool, reconciliation has proved to be quite
effective. Since 1980, reconciliation bills have been passed and signed
into law 14 times, resulting in trillions of dollars of savings.
Regrettably, in recent years the Senate Republican leadership has
chosen to take a course that has fostered political polarization. In
1999, a reconciliation bill was used to consider a $792 billion omnibus
tax cut, targeted to the wealthy, that would have slowed the progress
on reducing the debt. It was vetoed. In 2000, the reconciliation
process was again used for huge tax cuts and, again, the bill was
vetoed.
The desire to limit the rights of Senators--and when we limit the
rights of a Senator in the chair or the Senator from Massachusetts or
the Senator from Georgia or the Senator from New Jersey or the Senator
from Nevada or other Senators--we limit the rights of the people they
represent. Limit my rights in this body and you limit 1.8 million West
Virginians' rights in this body.
In both 1999 and 2000, the appropriations process ended with large
omnibus appropriations conference reports that were unamendable and
contained bills and issues that had never been before the Senate.
What are we doing to the Senate process? What are we doing to the
legislative process? What are we doing to the rules and precedents of
the Senate? We are ignoring them. We are making them irrelevant.
In the Consolidated Appropriations Act for fiscal year 2000, five
appropriations bills were included, along with numerous non-
appropriations bills such as a State Department Authorization bill,
arms control compliance legislation, and Superfund recycling rules.
Last year, three bills were included in the Consolidated Appropriations
Act for Fiscal Year 2001 along with Medicare and Medicaid reforms and
new tax legislation establishing new tax expenditures. One of those
Appropriations bills, the Treasury/General Government Appropriations
Bill had never been taken up in this Senate.
Now this is no way for the Senate to take care of the Nation's
business. We should do better. All of us, majority and minority alike,
should seek to protect the institution of the Senate. This Senate is
going to be here long after the Presiding Officer has served his tenure
here. The Senate will be here long after the Senator from West Virginia
has been forgotten. This Senate will be here, it will stand. We should
remember that the Senate is for the people, all the people, the people
who are yet unborn. We hold their rights in our hand. We should not
bend our rules to promote the partisan political goals of the moment.
In the 107th Congress, this Congress, we should insist on our rights
as Senators for a full debate. Last year we took direct action to
address the issue of omnibus appropriations containing matters that had
not been before the Senate by reasserting rule XXVIII. I thank the
majority leader and the minority leader and Senator Stevens for joining
with me in reasserting, reinstituting, rule XXVIII last year.
This year the Senate approved my amendment to the budget resolution
to extend debate on the reconciliation bill to 50 hours and to limit
the so-called vote-aramas by ensuring that amendments were printed in
the Congressional Record for all Senators to see. Sadly, my amendment
was dropped during the closed-door conference between the two Houses.
Senators should have an opportunity at length to debate and to amend
the tax cut legislation.
Why is the Republican leadership insisting on using the
reconciliation process for tax cut legislation? What are they afraid
of? The Republican leadership did not hide behind a reconciliation bill
for President Reagan's tax cut. Senator Howard Baker was the
[[Page S5030]]
majority leader at that time. They didn't hide behind a reconciliation.
They brought it up as a freestanding bill.
In 1981, President Reagan sent to Congress a large tax cut proposal
and numerous proposals to cut spending. The Congress used the
reconciliation process, the Omnibus Budget Reconciliation Act of 1981,
to debate the spending cuts. The tax cuts, however, were fully debated
as a freestanding bill, the Economic Recovery Tax Act, without
depending on reconciliation. There were 118 amendments debated over 12
days. What a difference.
The American people elect their representatives to come to Washington
to debate the issues that affect their daily lives. They did not elect
Senators to be rubberstamped. That is why I say to every Senator, every
new Senator: Remember one thing. You don't serve under any President.
You serve with the President.
I have served with 11 of them, counting the current one. The Senate
is not a quivering body of humble subjects who must obey. They only
must obey the people who send them here. We should not short circuit
debate on a bill that will hit home in the pocketbook for decades to
come.
In the Federalist No. 10--there were 85 Federalist Papers, I urge
Senators to read these Federalist Papers again. Let me read from the
Federalist No. 10 by Madison. Listen to what he said and apply it to
today's Senate:
Complaints are every where heard from our most considerate
and virtuous citizens, equally the friends of public and
private faith, and of public and personal liberty; that our
governments are too unstable; that the public good is
disregarded in the conflicts of the rival parties; and that
measures are too often decided, not according to the rule of
justice, and the rights of the minor party; but by the
superior force of an interested and over-bearing majority.
That was James Madison speaking, and it sounds as if it were written
only yesterday.
After 6 years of divided government, President Bush promised that he
would be a unifier. The President has said that he wants
bipartisanship. He has said that he has faith in his plan. If those
statements are true there is no need to hide behind the iron wall of
reconciliation. Webster defines reconciliation as a restoration of
friendship or harmony. Let us not use the reconciliation process to
divide and polarize this Congress. Now is the time to hear all the
voices and build consensus among ourselves and among our people. The
American people expect and deserve a full debate.
How much time do I have remaining, Mr. President?
The PRESIDING OFFICER. The Senator has 2 minutes 45 seconds.
Mr. BYRD. Mr. President, if this tax cut is such a good idea, why
don't we take the time to debate it? Why don't we debate these tax cuts
at length, if this is such a good idea?
I say to you, Senators, your votes are going to have consequences. We
don't even know yet what the review of the military services and the
Defense Department will cost. We don't yet know the cost. That is still
out there to be heard from. We don't have an energy policy in this
country. We haven't done anything to shore up Social Security. We have
crumbling schools. We have dangerous highways. We have unsafe airports.
Our people don't have pure drinking water in many of the rural areas.
Now is the opportunity for us to do something about those things.
What are we going to tell our old people, our senior citizens?
This is a red letter day for the American people. Here is the
calendar. I will say it is a black day. I remember Black Tuesday,
October 29, 1929, which marked the beginning of the Great Depression--
Black Tuesday.
This is Black Thursday, May 17, 2001. Remember it--Black Thursday.
This is a Black Thursday for the American people, a day on which we
will have squandered the unalienable right of our elderly citizens to
the pursuit of happiness mentioned in our Declaration of Independence.
We will have squandered the unalienable right of our elderly citizens
to the pursuit of happiness by bartering it for a mess of tax pottage.
Mr. President, when Aaron Burr in 1805 addressed the Senate before
his departure through the Senate doors of the old Chamber for the last
time, he uttered these prophetic words:
This House is a sanctuary; a citadel of law, of order, and
of liberty; and it is here--it is here, in this exalted
refuge; here, if anywhere, will resistance be made to the
storms of political phrensy and the silent arts of
corruption; and if the Constitution be destined ever to
perish by the sacrilegious hands of the demagogue or the
usurper, which God avert, its expiring agonies will be
witnessed on this floor.
Mr. President, we are witnessing the demise of the U.S. Senate as our
forefathers knew it and as I knew it when I came to this body. We are
witnessing the demise on this day--Black Thursday--and in these times.
Burr's prophetic words are being borne out before our very eyes.
History will not be kind to us, nor will our children and grandchildren
rise up to call us blessed.
Remember, my colleagues, May 17, 2001--Black Thursday!
I yield the floor.
The PRESIDING OFFICER. I thank the Senator from West Virginia. Who
yields time on the pending bill? The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The senior assistant bill clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Ensign). Without objection, it is so
ordered.
Mr. GRASSLEY. Mr. President, there is, at the desk, a committee
amendment. I ask unanimous consent that it be adopted, the motion to
reconsider be laid upon the table, it be considered original text for
the purpose of further amendments, and all points of order be
considered preserved.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The amendment (No. 650), in the nature of a substitute, was agreed
to.
(The text of the amendment is printed in today's Record under
``Amendments Submitted and Proposed.'')
Mr. GRASSLEY. Mr. President, we will start consideration right now,
and there will be up to 20 hours of debate and action on the bill that
is before us under the reconciliation provisions of the Budget Act on
what will be the largest tax cut that has been given to the American
people in the past 20 years. In this process, we are going to take a
considerable and substantial sting out of the Federal tax bite. This is
the third-largest tax reduction in the last 50 years, to put it in some
other perspective as well.
Before I get to the issues that are before us, I will say a little
bit about the process of putting this legislation together.
I know we are all going to be thinking about what kind of tax bill we
have, how much taxes are going to be reduced, the fairness of it all,
and the equity of it all. But I would like to have my colleagues spend
a little bit of time thinking in terms of how we got here.
First of all, almost 12 months ago, the President of the United
States gave a speech saying that one of the foundations of his campaign
was going to be a very substantial tax reduction because taxes have
reached the highest point they have ever been in the peacetime history
of the United States.
He campaigned on that and did not back off one iota when pundits made
fun of it, when economists maybe took exception to it. It was very well
thought out and intellectually honest. He pursued full steam ahead
through the highs and lows of the campaign--through times when you
might be depressed with the campaign going against you, through times
when you were on a high in the campaign, and right through that
campaign--through the election, through the period of time when there
was some sort of question as to who might be the next President because
of what was going on in Florida and the counting of ballots, and from
the time he was announced the winner to the time he gave his inaugural
address on the day of swearing in.
So we are here today because we have a President who wants to make a
difference, a difference for the taxpayers in this country, a
difference for the economic advancement of our people, the creation of
jobs, and the encouragement of investment.
Without this Presidential leadership, we would have tax bills before
the Congress this year but they would not be
[[Page S5031]]
as substantial as what we now have before us. For the President of the
United States, it is not substantial enough because, as we know, he
proposed almost 20, 25 percent more than we are dealing with. Here
again, the President must accept the will of the people expressed
through the Congress. There was a compromise, a necessary bipartisan
compromise on a level somewhat less than what the President proposed,
but the $1.35 trillion we are dealing with in this bill.
The bill we have before us is a product of the process: The
Presidential election, the extremely important leadership of a
President who is committed to principle and performing in office what
he said he would do during the campaign--and that is a rarity in
politics, but this President is doing it--and the legislative process
in the Congress.
Compromise is always necessary in any Congress, whether it is
overwhelmingly controlled by one party or the other party or whether it
is evenly divided, as it is now in the Senate--absolutely evenly
divided, 50 Democrats/50 Republicans--or in an almost evenly divided
House of Representatives with the Republicans being the clear majority.
Process is pretty important. I want people to think of this process
as we debate very controversial amendments over the next 2 days. The
Senate Finance Committee is kind of a microcosm of the entire Senate,
and perhaps people will think of the hard work Senator Baucus and I,
and my colleagues on the Republican side and almost half of the
Democrats, have put into crafting this legislation. It didn't happen in
one 10-hour meeting on Tuesday, when we considered all the amendments
that were in dispute, about the product Senator Baucus and I put
together. It didn't happen in 10 hours. It happened over a long period,
starting about mid-January. I will refer to some of the substantial
things that happened to get us where we are today from where we were
last January.
That is not to detract from what I said about the President of the
United States contributing greatly to where we are today as well, maybe
not in the specifics of the bill but the overall questions--are taxes
too high, and should they be reduced--the President winning on the
process that they should be reduced, and now going through the process
of actually giving the American working men and women the tax relief
they deserve.
People will get tired of my saying it, but this is a bipartisan tax
bill. My friend Senator Max Baucus, ranking Democrat on the Finance
Committee, worked with me to put together a package of tax cuts that
would receive solid support on both sides of the aisle. We knew this
would not be easy, getting the people's business done, unless it was a
bipartisan product. That, again, is a reality of a 50/50 Senate.
This bill came together after the Senator from Montana and I heard
from our respective caucus members about their priorities. You don't
put together the biggest tax cut in two decades without considering all
points of view. As we start this debate now, it is not just Senator
Baucus and Senator Grassley who are at the table--where maybe that was
the situation from time to time over the last several months--every
Senator, all 100, is at the table as we now consider the product of the
Finance Committee and its bipartisan cooperation. That is the nature of
the Senate.
We talked to our members about their priorities, and then we put this
product together. Two days ago, our efforts yielded the results we
hoped for when we started out 4 months. ago. This bill was approved by
the Senate Finance Committee by a 14-6 margin, a clear demonstration of
solid bipartisan support.
I hope the work that has gone into this product over the last 4
months is respected. Even though Members might not agree with it, could
they do better? Each time people are down here casting a vote--and they
are going to vote yes or no--I ask my colleagues, particularly on the
Republican side, to think in terms not that they like everything that
is in here but could they have done better. If they can't do better, I
hope they will show respect for the bipartisan approach we used.
More importantly, I hope they will respect the transparency that has
been the hallmark of the Finance Committee's work throughout the first
4 months and the communication that has gone into this by individual
Members communicating with others to say, ``What do you think about tax
legislation,'' to get specific points of view from specific Members
and, most importantly, the people on this committee as well as others
outside the committee.
It was not easy to arrive at a final agreement. Among the Finance
Committee's 20 members, there were many opinions on what is important.
In the end, no one got everything he or she wanted, including this
chairman. Most of us got something we can support. We got a bill that
will reduce taxes, will bring about tax relief for American working men
and women in a meaningful way, in a way that taxpayers are going to
notice and notice soon--by this summer--and they then will see it in
fatter wallets.
I am very pleased Senator Baucus and I and other members of the
Senate Finance Committee have been able to put together this truly
bipartisan package. It is a testament to the Finance Committee that
within 1 week after the budget resolution was passed, we now are on the
Senate floor to vote on comprehensive tax relief for everyone who pays
income taxes in America. I hope the Senate will express--not to me, not
to Senator Baucus, but to other members of the committee--the
cooperativeness and the spirit of cooperation that was evident
throughout that process Tuesday. I want Members to know that I am proud
of the Finance Committee in this process as well as the substance of
this legislation.
Now I will turn to what is in the bill. The heart of the bill is
across-the-board tax cuts in individual income tax rates.
Again, a little bit about the process: Senator Baucus and I have met
at least weekly for a long period of time since January. I met with
individual members of the committee in their office--not in my office,
in their offices--throughout the month of January and February, both
Republicans and Democrats. I have had my staff meet with other staff on
an ongoing basis, but very intensively, during and since the Easter
break.
I have also had an opportunity to visit with Members outside of my
caucus and also Democrat Members outside of the committee as well. And
you always wonder when you go down this process--it takes over 3 or 4
months--whether it is time well spent. I wondered, as I would go to the
next meeting, whether it was really worth my time.
Let me say, in looking back to all the time I have put in on this,
and I think of my background as a farmer; you put the seed in the
ground, as we are doing in Iowa, to grow the biggest corn crop that any
State produces--because we are No. 1--and for the first period of time
before it emerges above the ground, three-fourths of that growth that
first month is below the ground. You don't see it unless you dig in
there with your fingers and inspect it.
And so Senator Baucus and I sowed that seed in January and that seed
sprouted. I know now it sprouted; I didn't know then that it would
sprout. It sprouted for those days between the middle of January and
last Friday at 1:30, when we finally had an agreement.
So I conclude that whatever time I spent on this--and I am going to
conclude for Senator Baucus, and maybe I should not do that--and
whatever time he spent on that process was time well spent. Even though
we are going to have honest disagreements, I hope we can be cordial and
polite in this process of debate. I will have to remind myself of that
from time to time as well.
Now to the process. The heart of this bill, as I said, is across-the-
board tax cuts of individual income tax rates. This bill creates a new
10-percent rate that will apply retroactively to the beginning of this
year. This new low rate will apply to income that is currently taxed at
a 15-percent rate. So people who are hit first by the 15-percent rate
now can already count going back to January 1 this year, that on their
first dollars made they are not going to pay 15 percent; they are going
to pay 10 percent. It will give immediate tax cuts to millions of
American taxpayers and provide an immediate stimulus to the economy.
[[Page S5032]]
For married persons, the upper end of the 15-percent rate bracket
will be expanded to include income currently taxed at the 28-percent
rate. So for those people being taxed at 28 percent, they are going to
see more of their income taxed at the 15-percent rate. The current 28-
percent rate will drop to 25 percent. The current 31-percent rate will
fall to 28 percent. The existing 36-percent and 39.6-percent rates will
be lowered to 33 and 36, respectively.
This legislation also includes immediate death tax relief and its
eventual repeal.
This bill expands the child credit and earned-income credit, enhances
pension protection and incentives to save, and creates over $30 billion
in educational incentives--full deductibility of interest on student
loans, deductibility on college tuition, and on educational savings
accounts. It provides marriage penalty relief and relief from the
individual alternative minimum tax.
Everyone in America will share in this tax cut. It is across-the-
board relief for those who pay income taxes. That means that this tax
cut will flow to every wallet on every Main Street in America. Over 100
million individuals and families will have their tax relief; 14 million
elderly individuals will receive tax reduction, resulting in 12 million
paying less tax on Social Security benefits; over 40 million couples
will benefit from the marriage penalty relief; 3 million couples will
no longer itemize deductions as a result of the standard deduction
increase; 9 million individuals and families will benefit from the
increased individual retirement account contribution limits from $2,000
to $5,000; 30 million families will benefit from the increased child
credit.
This is a tax bill for everyone, regardless of income level, size of
family, your age, your marital status. I will give you a few examples
of what we expect next year.
A married couple with two children and $15,000 in income will pay no
income tax because we expanded the earned-income credit and per-child
credit. This family will receive an additional $1,000 from the
Government. A married couple with two children and a $90,000 income
will receive an additional tax reduction of $1,050. A couple, age 65,
married and filing jointly, with a $30,000 income, will have a $600
reduction. A single mom with one child and a $25,000 income will
receive a tax cut of $400.
Keep in mind, these examples are for the year 2002, which is just the
beginning of these tax savings. The tax rate cuts, child credits, and
other benefits will greatly increase as they are phased in over the
next several years.
I know most of us in this Senate also have personal stories about
what this tax relief for working men and women will do for those same
people back home. I will tell you about some of the people in Iowa and
what this tax cut will mean for them.
Maurice Colby, Vinton, IA, retired after processing waste water for
the Navy for 28 years. He works part time for his neighbor, a family
farmer, during planting season. I will bet he works there during
harvesting season as well. He does that to earn extra money.
As retirees, Mr. Colby and his wife worry about expenses. Their total
tax bite is tough, especially when heating fuel and high gasoline
prices are considered. The Colbys usually take a driving vacation most
summers but not this year. Mr. Colby said this to me: ``It's time for
relief. It has been a long time.''
Ronald Harless, 76, and his wife Jean, 72, of West Des Moines, are
retirees on a fixed income. Mr. Harless worked as a printer making
telephone books. Mrs. Harless was an office worker. Mr. Harless says he
lived frugally and saved his money for retirement. Despite a series of
heart surgeries, he has never used the Veterans' Administration's
health services, even though he is a Navy veteran who landed at
Normandy during World War II.
Mr. Harless says he paid taxes all of his life, has never been a
drain on the taxpayers and wants to keep it that way. Mr. Harless of
West Des Moines, IA, wants to support himself and stay out of the
taxpayer-funded nursing homes as long as he can. However, he says he
and his wife are, in their words, ``barely getting along'' on their
retirement income and, hence, would welcome the tax provisions of this
bill to give them some needed relief.
Joseph McBride, Jr., of Fort Dodge, IA, works in sales and marketing
for a food service company. His wife is a registered nurse. They have
four children, ages 14, 12, 10, and 8. Mr. McBride says he would
welcome a tax cut because he would like to have more money in his
pocket to secure his children's future.
He is very interested in saving money for his children's college
tuition and will see that increase from $500 up to $2,000. The tax cut
will be very beneficial.
He also wants to put a little extra money in the local economy. Fort
Dodge's economy is not as good as he would like, and he wants to do his
part to help it get better.
Another concern is energy costs. Mr. McBride in Fort Dodge says he
remembers the recession and gas shortages during the Presidency of Mr.
Carter. Mr. McBride said he paid more money in taxes last year than he
ever has. Mr. McBride is right; he did pay more taxes last year than he
ever has. That is because the Federal Government's collection of
individual income taxes is now at its highest level in history.
As I have said many times, today's tax surplus in our Federal
Treasury is caused by excess collections of individual taxes.
During the height of World War II, the tax collection from
individuals was 9.4 percent of gross domestic product. Today income tax
collection from individuals is an astounding 10.2 percent of GDP,
nearly a full percentage point above World War II. More importantly,
not just a little bit above World War II, but we have seen a 50-percent
increase in individual tax collections in the last 6 years, from about
just a little over 7 percent of gross national product to 10.2 percent
now.
I might have a chart during the debate, but I can show where the
revenues into the Treasury from the estate tax have been about level
for the last decade. Corporate taxes have been level for the last
decade. Taxes from fees and services have been about level. But we see
a great spike in the individual income taxes coming into the Federal
Treasury in the last 6 or 7 years.
It is beyond belief in a time of unprecedented peace and prosperity
that individual tax collections exceed the level required to defend the
entire world, which is what the United States did 56 years ago. That is
why we must move decisively to give working men and women this tax
relief. We must not keep the money in Washington where there is a
tendency for it to burn a hole in the pockets of Members of Congress to
a point where they have to spend it.
This will help in several ways. It will not build up Government
spending to a level that is unsustainable so that if we ever go into a
recession, income goes down but spending does not go down, and then we
again have a deficit.
Also, since the Federal Government does not create wealth--it only
provides an environment for working men and women of America to create
wealth--we move the money from Washington back to the individual
taxpayers of America, and there it is going to turn over many more
times, because of the freedom of the marketplace, than it will if it is
left in the Federal Treasury. There is a political decision of what
ought to be done with it. There is a lot of efficiency with a political
decision, but it does not have the potential for economic growth that
it will have if my constituents in Iowa spend it and/or invest it.
Too often Members of Congress think this is not the people's money;
this is the Government's money. It is the taxpayers' money, and
Washington has simply collected too much of it, particularly too much
from the income tax. There has been a 50-percent increase of gross
national product over the last 6 years. So we are going to return this
money. It is even wrong for me to say that because there is some
implication that it is my money. We are going to let the American
people keep more of the money they earn by passing this tax bill.
Over the next few days, we are going to hear a lot of talk about
population demographics and about how this tax relief for American men
and women is going to compromise our national priorities.
Let me set the record straight at the very beginning. This tax relief
for American working men and women in no way endangers our national
priorities. The President has said that. I
[[Page S5033]]
have said it. It is a fact. A majority of the Congress said that when
they adopted our budget last week. We are here because a majority of
the Congress, and a bipartisan majority of the Congress, said we ought
to put more money in the pockets of working men and women than into the
Federal Treasury.
The budget resolution did that. It did it through a blueprint for how
the Government will fund its priorities. That blueprint provides record
levels of funding for education, prescription drugs, and defense. I
want to make very clear that we pay down every dollar that is possible
to pay down on the national debt over the 10 years of this budget
resolution.
That blueprint also says we have more than enough surplus to enact
the tax relief for working men and women that is before us in this bill
today. In fact, the bill before us refunds only 24 cents of each dollar
of projected surplus.
How many people who are listening now or who will read this in the
paper are going to say: How come you can't do better than that? The
only answer I can give them is, it is part of the process of compromise
by which we work in a bipartisan way to do the people's business.
Twenty-four cents out of each dollar is hardly what I would call a
risky tax measure. We are going to hear this from a lot of our
colleagues: Risky, risky. We are going to hear people say that the
projections in the budget for the next 10 years are so uncertain that
we should not be giving a tax cut. This caution by my colleagues is
perfectly legitimate. We ought to always be cautious on almost every
public policy decision we make. But check with those same Members to
see that when they want to spend more money, do they worry about
whether the budget projections are accurate for the next 10 years? No,
it is only when we want to let the American people keep their hard-
earned money that this issue arises.
For those who want to use the word ``risky,'' those who want to say
the projections could change and want us to be cautious, the only thing
I ask--it is perfectly legitimate for them to say that, but as they are
talking about a new spending program that is going to spend out over
the next 10 years, I encourage that same caution before people vote on
that issue.
This is a responsible tax cut. We are at the highest level of
individual taxation in history. It is a time to end that.
Let's also get another thing straight. This bill in no way touches
the Social Security or Medicare trust fund. This is a bipartisan tax
bill that represents the best thinking from both sides of the aisle. It
is a victory for the process of the Senate. The problem we now face is
that some people around here preach bipartisanship but then turn around
and attack the bipartisan compromise reflected in this bill. They will
work to obstruct this bill's enactment, and they will demean the great
efforts and political risks that Republicans and Democrats alike take
to reach this bipartisan agreement.
I imagine we are going to see plenty of this sort of thing on the
Senate floor over the next few days. I don't think it will work because
today we are about doing the President's business. This bill only
contains tax relief for individuals. It is not larded with favors for
special interests. You cannot draft bipartisan legislation such as that
very easily. I think there is some purity of cause and purity,
consequently, of content.
This bill before the Senate is a historic opportunity to prove we can
join together, on a bipartisan basis, as common Senators, with a common
purpose, to relieve a heavy burden from the people who sent us here.
The Finance Committee has shown this can be done. Our committee has
done what the Constitution and the rules of the Senate require. We have
led the way. I am very proud of our Members and their efforts.
I urge all Senators to be vigilant in our deliberations, circumspect
in rhetoric. The relief ordered by this bill is too needed by too many
to be demagogued by the few. America is watching. America is waiting.
What America is going to see over the next 3 or 4 days in this Senate
is a product of a process that started about the second or third week
of January when the Senator from Montana, then for a short period of
time chairman of this committee, as the Democrats controlled this body
for 17 days back then, said: I would like to meet with you and talk
with you about the functioning of the committee.
That was an hour and a half discussion. But some important few words
were said by Senator Baucus on that day, which were that we could have
a bipartisan tax bill if we worked at it. I thank Senator Baucus for
that suggestion. I thank Senator Baucus for spending so many hours with
me since then to make it happen. Most importantly, I thank him for his
handshake at 1:30 last Friday when we had an agreement.
I thank the Senator.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alaska.
Mr. STEVENS. The Senator from Montana has graciously agreed to let me
make a short statement, and I ask for recognition.
The PRESIDING OFFICER. The Senator is recognized.
(The remarks of Mr. Stevens are located in today's Record under
``Morning Business.'')
Mr. BAUCUS. Mr. President, I ask unanimous consent that the clerks at
the desk, with legislative counsel's assistance if needed, be
authorized to correct the drafting of any Members' amendment that may
be affected by changes in the committee amendment which the Senate just
adopted.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I rise to enthusiastically support the
committee bill. This has not been an easy bill to write. These have
been tough negotiations, a lot of give and take, as almost always is
the case in any matter of significant consequence. The same is
certainly true now.
I might say the Senator from Iowa and I, along with other members of
the committee, had many meetings. We took a lot of time to get
comfortable with the various provisions of the bill, just to understand
what they are. There was a lot of to and fro, but I might say it was
all done in good faith.
This is not easy. When there are so many moving parts and it is so
complicated, by definition, people have to act professionally in order
to get something accomplished and that is what happened. I have the
highest respect for the chairman of the committee, who has done a
yeoman's job, as well as the other members of the committee who worked
hard to make this a workable bill.
As we all know, when all is said and done, we must have a balanced
compromise. We have to reach some agreement because we all cannot have
our way in the constitutional way we as a country organize ourselves.
We have to have some organization. That is basically majority rule.
Let me explain why I think this is a good bill. In the first place, I
believe this is a significant improvement, from my perspective, over
the bills that were proposed by the President and passed by the
Congress. Most significantly, the committee bill provides a much better
distribution of tax cuts. That is a matter that I think is lost upon a
lot of people. The committee mark has a better, more progressive
distribution of the tax cut than either the bill suggested by the
President or by the House. In fact, this might raise some eyebrows.
According to the Joint Tax Committee analysis, the committee we all
look to as the best independent analysis, the bill before us today will
make the tax system more progressive than under current law--not only
compared with the President's proposal, not only compared with the bill
that passed the House, all the various bills that passed the House, but
also compared to current law; that is, this bill is more fair in the
distribution of tax cuts to payers of income taxes than current law.
That is not to say this bill is better than the President's. I would
not ask Senators to vote for a bill just because it is better than it
could have been. Instead, I believe the standard we should apply on a
tax bill is whether on its merits, taking everything into
consideration, the bill makes positive changes that improve our tax
system and are better for most Americans. By that standard, I suggest
this bill passes with flying colors.
Let me explain why. First, we create a new 10-percent bracket. This
is the
[[Page S5034]]
single biggest piece of the bill--$438 billion over 10 years, by far
the single largest component. There is a new 10-percent tax bracket
which has the effect of benefitting every single American who pays
income taxes. Most of the benefit goes to low- and middle-income
taxpayers. In fact, about 75 percent of the benefit goes to people who
earn less than $75,000 a year. Let me repeat that statement. Seventy-
five percent of the benefit under the 10-percent bracket, the new
bracket, goes to people who earn less than $75,000 a year.
One other thing. Unlike most of the other tax cuts in the bill, this
one takes effect immediately--better yet, retroactively to the first of
the year. This will not only help average taxpayers but it also
provides an economic stimulus because it puts more money in the hands
of consumers.
We also expand the tax credit for families with children from $500 to
$1,000 per child. And we do more. We increase the amount of the credit
that is partly refundable so lower income families can benefit from the
credit as well. We do this along the lines suggested by Senators Snowe,
Lincoln, Kerry, Jeffords, and Breaux. It is a very important new
contribution that they have authored. It is a good idea of theirs. I
commend particularly Senator Snowe, who is the lead sponsor of the
group to get more refundability under the child tax credit.
This is a big improvement over the current law. Why? Because it means
we will increase the tax credit for 16 million more children, I might
say, compared with the President's bill; that is, this bill provides a
benefit to 16 million more American children than the proposal of the
President and the House.
But that is not all we do for lower income working families. We make
important reforms that expand and simplify the earned-income tax credit
so it is available to many more low-income working families than it is
today. In fact, the bill contains the most significant expansion of the
EITC, earned-income tax credit, in many years. We also simplify the
EITC--make it much easier for eligible families to qualify. These are
huge simplification provisions.
And there is more. We create new incentives for education. For
example, we help parents set money aside for their children's future
education. We encourage employers to help their employees attend
classes and earn degrees, and we help college students pay off their
student loans--a big improvement.
Because of the leadership of Senator Torricelli and Senator Schumer,
we create a new provision in the Tax Code that allows a deduction for
college tuition payments. Many American families have a hard time
meeting their children's higher education expenses. This provision is
of significant help. It is not a total solution, but it goes a long way
toward helping families provide for their children's higher education.
All in all, I think it is an education tax incentive package of which
we can all be proud.
There is more. We include a pension tax incentive package that has
strong bipartisan support in the Senate. We all know the problem. Our
personal savings rate is at rock bottom, having gone from 11 percent of
GDP 30 years ago to zero or even negative savings today, meaning, among
other things, that people are not putting enough money away for their
retirement, thereby increasing the potential burden on Social Security.
The pension provisions of the bill will help address this problem,
taking another step forward to addressing the baby boomer problem that
we know is coming in about 10 years.
We make it easier for workers to take their pension plans with them
when they change jobs. We strengthen pension security and enforcement.
We enhance pension fairness for women. We increase the contribution
limits for IRAs and 401(k)s so people can put more money into them.
On top of that, we create two new incentives that will dramatically
expand pension coverage for lower income workers. One helps small
businesses establish pensions for their employees. It is very hard
today for small businesses to set up pension plans for their employees,
much more difficult than it is for big business. In this bill, we help
them do that.
The other incentive is a new matching plan to help employees save
their own money for retirement--again, an incentive to help employers
match their contribution.
We reduce the marriage penalty. We address the estate tax. These are
not Republican priorities; they are not Democratic priorities. They are
bipartisan priorities, important to virtually every single Member of
the Senate.
Those are the main provisions of the bill. Putting them all together,
I believe the bill represents a very significant improvement over
current law. That is the standard I think we should use. Is it perfect?
No. Of course, it is not. Is it the bill that I would write, that any
Senator would write? Of course not.
That is not really the question. That is not the basic point. Rather,
taken as a whole, does this bill represent a significant improvement
over current law? I think it clearly does.
At this point, I will address some of the key arguments that have
been made against the bill. First, the process.
Some will say that we should not be railroading this bill through the
Senate on a reconciliation fast track which limits debate and
amendment. I agree. To my mind, it is unnecessary, it is inappropriate,
to use reconciliation instructions for a tax cut.
I very much agree with the statements made earlier today by the
senior Senator from West Virginia, Mr. Byrd. I believe he is right. He
argued for a process that is much more open, that is more expansive, so
that tax bills have a lot more time in this Chamber, and many more
opportunities for amendment.
I remind my colleagues, President Reagan's tax cut in 1981 was not
under reconciliation, it was not under this constrained process;
rather, it was outside reconciliation. The bill was considered here for
2 weeks. There were hundreds of amendments. That is democracy.
I might say--it is a bit of a stretch here, but I think it is an
important point--Thomas Jefferson once said: A country is only as
strong as that bond and that nexus between the people and the people's
representatives. Representatives cannot do it alone. People cannot do
it alone. But it is that bond between the people and the people's
representatives which, by and large, determines the strength of a
country.
If we rush a tax bill through too quickly--one of the most important
bills that is going to be before this body perhaps in several years--
clearly, we need that process, that bond to work. And for it to work,
we have to have the opportunity to offer many amendments, to debate
them very thoroughly, to get the people engaged in what we are doing.
By rushing this through, people do not know what is in this bill.
There are problems as a consequence of that, but the deeper problem is
people become disconnected from the process, and they care less about
what we are doing because they do not know what we are doing, and they
do not know how we got to where we are. They are going to start to
become more cynical, less engaged. That is not good.
And just as we all know in running for office, you cannot satisfy--I
think as President Lincoln said--all the people all the time, but we do
the very best we can. We want to fully engage people so they are more
involved in getting a better product, but also because in engaging
people, they understand the reasons for what we are doing much more
clearly.
That is fundamentally why I think this tax bill should not be in
reconciliation but, rather, should be in an expanded process. That is
why I voted and spoke against, I might add, the amendment of the good
Senator from New Mexico some while ago to add reconciliation
instructions to the budget resolution. It is really not good
Government.
Despite our best efforts, I must say, though, that dye has been cast.
That decision has been made. So we have to work within the process that
the Senate has chosen to employ. We have to work with what is given to
us. We have to play the hand that is dealt. And that hand,
unfortunately, means reconciliation for the tax bill.
In any event, I might say, the chairman of the Finance Committee,
Senator Grassley, has provided, I think, the best process possible
under these
[[Page S5035]]
circumstances. He has been totally open. He has been totally
bipartisan. He has been equally fair. In light of the fact that I
oppose the process, it should not compel us to oppose the bill.
Let me turn to the substantive criticism of the bill. One criticism
is the tax cuts are back-loaded. The bill does, in fact, cut taxes more
in later years than in earlier years. That is true. In large part, this
is because of the constraints of the budget resolution. But there are
several points to keep in mind.
First, the bill is significantly less back-loaded than the
President's plan. I do not have the chart here. I think I will ask to
have that chart put up. But the point is, the bill is significantly
less back-loaded than the President's plan. That means these tax cuts
come earlier, and the bill costs 36 percent less in the last year, in
2011, than in the President's plan.
That is significant. Yes, there is still some back-loading. Yes,
back-loading is a problem we should address. But the point is, we
cannot let perfection be the enemy of the good. This is better than the
President's proposal.
As the chart shows--this is in the last year of the bill we are now
considering, the last year being 2011--the administration's bill, which
is similar to the House-passed bills, would cut taxes close to $300
billion in that last year. The bill before the Senate, which is shown
in the blue on the right, indicates it is about half, a little more
than half, about $186 billion, cut in the last year. So it is an
example of less back-loading than the President's.
I will show you another chart as well. This chart shows over the 10-
year period of the bill--it is hard to see; I apologize; I am not the
best color-contrast guy in the world in putting this chart together--
the red line going up is the administration's proposal, which shows
that each year the tax cuts in the President's bill are greater. That
is the red line that slopes upwards.
It is hard to see, but the blue line that is underneath it shows,
particularly beginning in the year 2004, the cuts in later years are
much less.
You will also notice that the blue line, though it is not really
horizontal, is much more horizontal than the red line, again, showing
that although there is some back-loading, there is much less back-
loading in this bill.
In addition, the most significant back-loading problem comes from
repealing the estate tax in the year 2011. For that, and other reasons,
I hope we can replace repeal of the estate tax with reform of estate
tax.
Third--and this is in explaining why there is this back-loading
problem--under the Byrd rule, provisions that lose revenue during the
second 10 years must be sunset; that is, they must be terminated.
So if we do that--and this bill does do that--we can assure that the
changes that are scheduled to be made in later years can be
reexamined--and must be reexamined--down the road, in light of future
budgets and future priorities.
Another argument that has been made against the bill is that it is
unfair. Critics say that too much of the tax cut goes to people at the
upper end of the income scale.
I might say, both sides bring passion to this argument. Critics of
the bill rail against cutting taxes for millionaires. On the other
hand, there are those for whom the top rate of 33 percent, down from
39.6, is a holy grail.
Let's step back for a minute and just look at the facts.
First, our Nation does have a progressive Federal income tax system.
According to the Joint Committee on Taxation, the top 10 percent of
taxpayers today pay about 70 percent of all Federal income taxes. The
top 1 percent pay about 36 percent of all Federal income taxes. Our tax
system is, therefore, very progressive today. In fact, essentially in
each of the years since 1993 up through today it has consistently been
more and more progressive.
Given this progressive system, a tax cut that applies across all
income classes is, by definition, going to result in a larger tax cut
for upper income Americans because they pay more taxes. That is just
simple mathematics. That, in part, is what happens under this bill. We
cut taxes across all income groups, so everyone who pays income tax
today benefits, and those who pay a large amount of income taxes do, in
fact, receive a larger benefit--larger, I might add, than I would
prefer.
But remember, the bill does more than just cut income taxes. On that
distribution point, let's take taxpayers with incomes of $25,000 or
less, taxpayers with incomes of $50,000 or less, taxpayers with incomes
of $75,000 or less, and taxpayers with incomes of $100,000 or less. In
each of those categories, the percentage of tax reductions under the
committee bill is much greater than under the administration's bill.
And they vary; on average it is about 12 to 10 percent greater.
Contrast that with taxpayers with incomes of $100,000 to $200,000, and
taxpayers over $200,000. In both of those categories, the proportion of
benefits under the committee bill is less for those taxpayers than
under the President's plan.
Again, to make the basic point: This bill is more progressive because
it shifts tax cuts in a greater proportion to those Americans with
incomes under $100,000. What it does is slightly decrease the
proportion of tax cuts for higher income Americans compared with the
President's and/or the House bill. This bill makes the tax system more
progressive.
We have also tried to cut taxes for people whose primary tax burden
is not income taxes but payroll taxes. After all, about 80 percent of
Americans pay more in payroll taxes than income taxes. Our bill doesn't
leave these people out; it brings them in.
These are the provisions that accomplish this: We expand and simplify
the earned-income credit which may be the best program ever created to
help low-income working families. We double the child credit and make
it partly refundable, covering 16 million more children. We create new
incentives to help low-income savers save for retirement.
I have mentioned a lot of the provisions. So what is the practical
effect? Take a married couple with two children earning $15,000. Under
the President's proposal, they wouldn't get any tax cut at all. Once
our bill is fully in effect, they will get a tax cut of $1,152, very
significant for lower income Americans with kids.
Putting it all together, I believe the bill we are considering today
is one of the best bills ever written for lower and middle income
families. I will say it again: This bill is one of the best ever
written for lower and middle income families. So when we talk about
fairness, let's keep our eye on the ball.
Does this bill give wealthy people a tax cut? Yes, it does. But that
is not the only question we should ask. There are other questions that
might be more important. For example, does the bill help those who are
struggling to feed their families and to pay their bills? Yes, it does.
Does it help the single mom, the construction worker, the two-earner
couple trying to put money away for their children's education? Yes, it
does, and it helps them a lot.
So with respect, I suggest to those who say the bill is unfair, just
step back a bit, take a look at the whole picture. If they do, I am
confident that many, not all, will conclude that the bill deserves
their strong support.
As I said at the beginning, this is not a perfect bill, but it is
balanced. It is bipartisan. It is good for taxpayers. It is good for
working families. It is good for the economy, and it is good for the
country.
I urge Senators to support the bill.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Mr. President, I yield to the Senator from North Dakota.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, I thank the chairman and the ranking
member for the way they have conducted the business of the Finance
Committee. It has been, within the Finance Committee, a fair process. I
publicly commend them for it. The chairman and the ranking member have
both reached out to Members. They have visited us. They have asked us
for our opinions. We didn't necessarily agree, but they certainly
listened.
The markup itself was a model of fairness. I salute the chairman for
the way he conducted the markup. I was saying to my wife I don't
remember a more fair markup in terms of the way it was handled. I thank
the chairman for that as well.
With that said, I strongly disagree with this proposal. It is a
profound
[[Page S5036]]
mistake for the country. It is a profound mistake because it is part of
a larger budget package that threatens our economic security.
This tax cut is part of a budget proposal that has concealed more
than it has revealed. This is part of a budget proposal that is not the
real budget. As a result, it misleads Members and it misleads the
American people. Ultimately, it leads us into a fiscal trap that will
be a trap for all of us.
When I say this budget--of which this tax cut is one part--conceals
more than it reveals, I mean by that, whole chunks of Federal spending
that we all know are going to occur have been left out. The President
is about to propose a major defense buildup. It is not in this budget.
The President has said education is the No. 1 priority, but there is no
new money for education in the budget. The President has said we must
strengthen Social Security for the future, but there is no money in
this budget for that purpose.
The reason those things have been left out is quite clear: If they
were included, what one finds is that the budget, with this size tax
cut, would not add up. What one finds is that when you put in the
funding for education, if we really believe that is the top priority
and we fund it as we have voted if we follow the President's proposal
for a major defense buildup and put that money in the budget, if we
follow the President's suggestion to strengthen Social Security and put
that money in the budget, and we put it all in one place where people
can see whether it adds up or it does not, what one sees is that it
simply does not.
The result is a massive raid on the Medicare trust fund and the
Social Security trust fund, and that will create serious problems for
this country going forward.
The New York Times said it well in an editorial on May 12. They
commended the chairman and ranking member for improvements they have
made in the bill over what the President proposed, but their conclusion
was:
But over all it amounts to another gross abdication of
fiscal responsibility.
I believe that is true. This bill, in the larger budget context, is a
gross abdication of fiscal responsibility.
Part of the problem is that all of this is based on a forecast that
even the forecasters warn us is uncertain. Those who did the forecast,
the Congressional Budget Office, have said to us: You have to
understand, this is a 10-year projection. Looking back at our previous
forecasts, we can tell you there is enormous variance. In fact, over
the last 10 years they have been off by an average of 100 percent a
year. That is how far off they have been in their previous forecasts.
Some people want to believe this projection is cast in concrete. It
is not. It is built on quicksand. That threatens the economic security
of our country.
Those who made the forecast prepared this chart. It shows in the
fifth year we could have anywhere from a $50-billion deficit to more
than a trillion-dollar surplus. That is the variance they project,
looking back at their previous forecasts and seeing how far off they
were. Then they projected those variances to this projection. They
warned us in an entire chapter of their forecast how uncertain any 10-
year projection is. That is the backdrop for what we do here over the
next several days.
To me, it counsels caution. It counsels caution on spending, on tax
cuts. Let's not bet the farm that any 10-year forecast is going to come
true. No company would do it; no private concern would do it; no
American family would do it; but we are about to do it here in the
Congress.
The second critical fact people need to know: The Senator from Iowa
said we are paying down all the debt there is to pay down. That is just
one part of debt. He is talking about the publicly held debt. The
publicly held debt, as we meet here today, is $3.4 trillion.
Unfortunately, that is not the total debt of our country because in
addition to that publicly held debt--that is debt held by the public--
we also have debt that the general fund of the United States owes to
the trust funds of the United States. That debt is every bit as much
debt as the debt held by the public. That has the same legal claim on
the assets of our country as the publicly held debt.
What has been missing from this debate is that the debt held in
Government accounts, the debt owed by the general fund of the United
States to the trust funds, is going to increase. It is going to
increase from about $2 trillion in 2000 to nearly $6 trillion during
this same period. In fact, when one puts the two together--the publicly
held debt and the debt to the trust funds of the United States--what
one learns is the overall debt, the gross debt of our country, is not
going down; it is going up. The gross debt of our country is going from
$5.6 trillion today--that is a combination of the publicly held debt
and the debt owed to the trust funds of our country, which is $5.6
trillion today--to $6.7 trillion at the end of this 10-year period of
this tax cut. That is the hard reality. The debt of our country is not
going down; the debt of our country is going up.
When they described this as fiscally irresponsible, the New York
Times made the case that this tax bill is badly backloaded. That means
the true cost is hidden in the first 10 years. The cost explodes in the
second 10 years because many of the provisions don't take effect until
late in the decade, so their full cost is masked. The cost in the first
10 years is $1.35 trillion, as advertised. But that is the tip of the
iceberg because the cost in the second 10 years goes up to nearly $4
trillion, right at the time the baby boomers are retiring, at the time
the number of people eligible for Social Security and Medicare will
double. This ticking timebomb is put right in the middle of that
demographic timebomb.
As the Comptroller General has warned us, we are headed for a
circumstance we have never seen in our Nation's history, a circumstance
in which the number of people eligible for Medicare and Social Security
will double, and double in very short order. That changes the budget
circumstance of our country very dramatically: In this decade, we enjoy
substantial surpluses; in the next decade, we face massive deficits.
What I proposed, what colleagues on this side of the aisle favored,
was to take a substantial part of these surpluses now, reduce the size
of the tax cut, cut it about in half, and use that money to prepare for
what is to come, to reduce this long-term debt. That would be a wiser
course, a more fiscally responsible course, a more conservative course.
The back loading is in page after page of the tax bill before us. The
marriage penalty and standard deduction provisions don't take effect
until 2006 to 2011. The marriage penalty, 15-percent bracket, doesn't
take effect--I am told that may have been changed overnight. There are
so many changes, and that is one reason some of us thought we ought to
at least wait a couple of days to know what we are amending. I am a
member of the Finance Committee, and I just learned this morning that
apparently this is being moved up a year. It doesn't take away the
point that it is backloaded.
The indexation of the 10-percent bracket doesn't take effect until
2007. The final rate cut in the upper brackets takes effect in 2007.
The pushback on the Pease limit on itemized deductions doesn't take
effect until 2009. Repealing the phaseout of personal exemptions takes
effect in 2009. The full phase-in of IRA contribution limits doesn't
take effect until 2011. The full phase-in of the child credit doesn't
take effect until 2011. The repeal of the estate tax doesn't take
effect until 2011. This is totally backloaded. That means the total
cost is hidden from view in this 10-year period.
The Philadelphia Inquirer looked at this plan and wrote this
editorial entitled ``Tax Slashers At Work. Once started, they can't
seem to stop.'' They made this observation about the Finance Committee:
Like 20 frat brothers trying to cram themselves into a
Volkswagen, U.S. Senators are overstuffing their tax bill.
They pointed out:
Remember the outrage over the marriage penalty that affects
many two-income couples? The Senate bill would only start to
address this problem five years from now. By that time, the
Bush Presidency--and a lot of marriages--may be over.
Mr. President, I am told this may have been moved up and it may not
take effect for 4 years instead of 5. I have not seen the details. It
doesn't take away from the point that it is backloaded. The
Philadelphia Inquirer said:
With other tax breaks, the bill does the opposite trick:
providing tax relief right away,
[[Page S5037]]
then supposedly ending it a few years down the road. A tax
break for college tuition is slated to die after 2005. Relief
for some of those hit by the alternative minimum tax would
end after 2006.
Their commentary was:
Sure, Congress is really going to let a popular tax break
for the upper middle class die in an election.
The Philadelphia Inquirer says:
That is dishonest and cynical.
They go on to point out:
Another slow phase-in is the repeal of the estate tax over
10 years. If Congress weren't so intent on being generous to
billionaires, it could afford to get more relief sooner to
the parties sometimes genuinely injured by the inheritance
tax: family farms and small businesses.
Unfortunately, much of what the Philadelphia Inquirer says is exactly
right. Here is the marriage penalty relief delayed under the bill that
came out of the committee until 2006. No relief for those married
couples who suffer the penalty of the Tax Code that is imposed on some
who are married. There was no relief--nothing--for the first 5 years.
Then it is phased in. That is the kind of back loading the Philadelphia
Inquirer was talking about.
Then they talked about sunsetting some provisions. Alternative
minimum tax relief is one of them. The alternative minimum tax is
something that will affect a dramatically increased number of taxpayers
under this proposal. Currently in this country, only 1 and a half
million taxpayers are affected by the alternative minimum tax. But
under this bill, by the end of the period, nearly 40 million people
will be caught up in the alternative minimum tax.
Boy, are they in for a surprise. They thought they were getting a tax
cut. Nearly one in every four taxpayers in America is going to be
caught up in the alternative minimum tax--a complex calculation
designed to keep the super-rich from getting by without paying any
taxes, because they used excess depreciation, excess deductions, excess
exclusions. They were getting, in cumulative total, unfair benefits.
That only applies to 1.5 million people today.
Under the tax bill that is before us, that is going to mushroom to
nearly 40 million people. Does anybody really believe we are going to
allow this to happen? I do not. It should not happen. It does happen
under this bill, and it is another reason I believe it is misleading.
What does this bill do in terms of addressing that issue? It offers
some help initially, but then it ends it later in this decade. It is
going to stop providing that additional assistance for the alternative
minimum tax right at the time the number of people affected by it
explodes.
This does not pass any kind of test. It does not pass a credibility
test. It does not pass a fiscal responsibility test. It does not pass a
fairness test. It does not pass any kind of test. But that is what is
right in the guts of this bill before us.
It does not stop there because with the estate tax, it is the same
thing. They hide the true cost because they put off its elimination
until the 10th year. That is when they eliminate the estate tax, and
then the cost explodes, but they do not capture that explosion because
they do not put it in this bill. That is why the New York Times says
this is fiscally irresponsible. And they are right. It does not pass
the fiscal responsibility test.
That is what happens to the estate tax. Under the bill from 2002 to
2011, it costs $145 billion. But what happens in the second decade that
is right beyond what is captured in this bill? The cost explodes to
$790 billion, right at the time the baby boomers start to retire, right
at the time the Federal Government has new responsibilities and
obligations that are going to be very costly to meet. And we are going
to give a $790 billion cut to the wealthiest 2 percent? Is that fair?
We are going to shift that obligation on to all the American people and
off the wealthiest 2 percent? It does not strike me as very fair.
That is not the only thing that is unfair about this bill. This bill
says to the bottom 20 percent of the American people: You get 1 percent
of the benefits. Those who have the lowest income in this country, the
lowest 20 percent, we say to you: You get 1 percent of the benefits.
The top 20 percent, the wealthiest 20 percent, we say: You get 70
percent of the benefits. That does not strike me as fair.
I know our Republican friends will say the wealthy people pay more in
taxes. They do. That is certainly true. But this bill gives 33 percent
of the benefits to the wealthiest 1 percent, the wealthiest 1 percent
who, on average, in this country earn $1.1 million a year. I am glad
they do. I hope very much that every American has the chance at some
point in their life to receive $1.1 million a year in income. That is
terrific.
That is one of the great things about the American dream. You can
start with nothing in this country and you can become a person of means
and do great things. You can help people through your own private
resources. You can help your family. I am all for that.
When it comes to the people's money--we have heard a lot about this,
the people's money, let's give it back to the people. To which people
are we giving it back? We are giving 70 percent to the wealthiest 20
percent. We are giving 33 percent to the wealthiest 1 percent. Is that
really fair? I do not think so. I can tell you, the wealthiest 1
percent do not pay 33 percent of the taxes; they pay about 20 percent
of the taxes.
Our friends on the other side want to talk about only income taxes,
but people do not pay just income taxes. They also pay payroll taxes.
And the truth is, the fact is, 80 percent of the people in this country
pay more in payroll taxes than they pay in income taxes. Yet this is
just an income tax cut, and it is heavily weighted to the wealthiest
among us, and it is not fair.
There has been a lot of talk that it is more fair than what President
Bush proposed, and that is true; it is modestly better than what the
President proposed. The President gave 72 percent of the benefits to
the top 20 percent. This bill gives 70 percent of the benefits to the
top 20 percent. I guess we can say it is better than what the President
proposed, but the larger truth is, it is not much better, and it is
still not fair.
I do not think there is anything that shows the unfairness of this
proposal better than what happens to rate reduction at the various tax
brackets.
In our country, we currently have a 15-percent bracket. Those are
couples who earn up to $45,000 in taxable income. That means they are
earning $60,000 or $65,000 a year in gross income. Then we have a 28-
percent bracket, a 31-percent bracket, a 33-percent bracket, and we
have a 39.6-percent bracket.
All of these brackets will be benefited by a new 10-percent rate. The
new 10-percent rate simply says that a couple on their first $12,000 of
income will be taxed at a rate of 10 percent. That is on their first
$12,000. So everybody's first $12,000--everybody's--will be taxed at a
rate of 10 percent instead of 15 percent, as current law provides. That
is a benefit to every single tax bracket because everybody's first
$12,000 will be taxed at a lower level.
Interestingly enough, this bill also provides rate relief to the
various brackets. It gives a 3.6 percentage rate reduction to those who
are in the 39.6-percent bracket. In other words, the biggest percentage
reduction goes to the wealthiest group, and each of the other brackets
gets 3 percentage points of rate relief. Those in the 33-percent
bracket, 31-percent bracket, 28-percent bracket, they get 3 percentage
points of rate relief, or about 10 percent of their overall tax burden.
What happens to those in the 15-percent rate bracket? They get no
rate relief. They get none. Everybody else, every other bracket gets
rate relief, but not the people in the 15-percent bracket. Is that
fair? I do not think so.
How many people are in that 15-percent rate bracket? This is where
the real unfairness of this bill is revealed because that is where 70
percent of the American taxpayers are. They get no rate relief. That is
where 69 percent of the small businesses are. They get no rate relief.
All of the talk that we are going to give marginal rate relief because
it is the key to encourage savings and investment, but it only applies
to the top rates. It does not apply to the 15-percent rate because this
bill does not give them rate relief. It does not give the 70 percent of
the American taxpayers rate relief. It does not give the 67 percent of
small businesses rate relief. It reserves rate relief for those in the
highest brackets.
[[Page S5038]]
There is something wrong with this bill, and what is wrong is it is
not fair.
This bill has been sold repeatedly as an economic stimulus bill, one
that can provide some lift to our economy in this period of weakness.
That is an interesting theory and one I support. I believe we ought to
give economic stimulus in this year, and we passed it in the Senate. We
voted for $85 billion in tax relief in the year 2001. What is in this
bill is not the $85 billion for which we voted. Oh, no, the stimulus in
this package, this $1.350 trillion tax cut, is $10 billion. There is
almost no stimulus out of this big package for this year.
For those who told people we are going to stimulate the economy by
giving people money back in their pocket this year, this bill doesn't
do it. We voted for $85 billion of stimulus this year in the Senate by
an overwhelming vote. That is not what is in this bill. They cut that
back down to $10 billion in relief this year.
I go back in history and look at the record. We had the same theory
at work in the 1980s. That theory was we could have massive tax cuts,
we could have massive buildup in the defense spending, and it would all
add up. It did not add up. The result was an explosion in debt and
deficits. We quadrupled the national debt, saw a dramatic increase in
budget deficits, and under President Bush it got totally out of hand.
We had a budget deficit of $290 billion the last year of his
administration, and in 1993 we passed a package that raised income
taxes on the wealthiest 1 percent and cut spending.
That package brought us back to balance. That brought us back to
fiscal sanity. That brought us back to getting our fiscal house in
order. That kicked off the longest economic expansion in our Nation's
history.
We are about to go back to this theory. We could have a massive tax
cut, coupled with a massive buildup in defense expenditure, and somehow
it will add up.
History tells a great deal. This chart shows the trends in spending
and revenues from 1980 to the year 2000, a 20-year snapshot. The red
line is the total outlays, the blue line is the total revenues. We can
see what happened the last time we had this theory at work. In 1981, a
massive tax cut was passed, massive increase in defense expenditure, as
this President is proposing. That is what happened to the expenditure
line. It went up. Here is what happened to the revenue line with the
massive tax cut: It went down. The deficits that were already too large
exploded; the national debt exploded. It was only in 1993 when we
passed a plan to reverse these lines, to reduce outlays, to increase
revenues, that we were able to balance the budget and start reducing
the national debt, that we were able to get our fiscal house in order
and to put our country on a course to strong economic growth--the
greatest, strongest, economic growth in our Nation's history.
And now we are going to retest the theory that was tried in 1981: a
massive tax cut combined with massive increase in defense expenditure.
I pray we don't have the same result. Back in the 1980s, we had time
to recover. But now we don't. We had time to recover in the 1980s
because the baby boom generation was still relatively young. But now
the baby boom generation is aging and they will retire in this next
decade. Then everything changes. These surpluses turn to deficits. That
is what, to me, counsels caution, that counsels a smaller tax cut, one
that is more fairly distributed, one that passes the fiscal
responsibility test, one that passes the fairness test, one that does
not put America in jeopardy of exploding this debt.
Here is where we are on the growth of Federal debt. In 1980, we had a
gross Federal debt of $909 billion. Today, as I said earlier, we are up
to $5.6 trillion. Under this plan, the debt is going to continue to go
up. It will go up to $6.7 trillion. I believe that is a mistake. At
this time of surplus we ought to devote more of these resources to debt
reduction. We ought to have a tax plan that is smaller, that takes the
difference and puts it into strengthening our future economic position
by reducing debt now when we have the opportunity, when we have the
chance.
I believe the tax bill before the Senate flunks every test. It flunks
the fiscal responsibility test because it is badly backloaded and
because the national debt will grow. It flunks the fairness test
because it gives the overwhelming part of the benefit to the wealthiest
among us. I can't justify it. I don't think it is fair.
We are going to vote on this, perhaps on Monday, maybe as late as
Tuesday. This is going to be a defining vote. It is an important vote.
It will make a real difference to the future of this country. I regret
very much the budget resolution passed by a slim vote in the Senate,
53-47, that put this scenario in place. But it did pass. That is where
we are.
The great thing about our country is we are a democracy. We decide by
votes. The votes of the elected Representatives of the people have
decided this will be the course we pursue. I believe this bill is a
profound mistake, that it would be far wiser to reduce the size of the
tax cut initially, by about half as much as what is proposed, maybe a
little more than half, and then wait to see how events unfold.
This is an uncertain time. We can see it in the markets; we can see
it in unemployment; we can see it in productivity growth not being as
strong as we have previously seen. All of that, to me, counsels
caution.
I hope my colleagues seriously consider opposing this plan. I think
it is a risky plan, that it is a dangerous plan. Does that mean it
wouldn't work out under any circumstances? No. I think we have to be
very direct and very clear. It may work out just fine. It may. Things
may turn around. Things may improve. We may have more revenue than we
are anticipating and that this tax cut is fully justified--not the
fairness of it, but the amount of it.
No one can know that. No one can know what the next 10 years hold. We
ought to be more cautious. We ought to be more conservative. We ought
to reserve more of this forecasted surplus for debt reduction. We ought
to reserve more of it to strengthen Social Security for the future. We
ought to prepare for the baby boom generation. Then if things work out
as forecasted, or if they are better than forecasted, which we all hope
will be the case, we can have a tax cut of this size, maybe even
bigger. But we shouldn't lock it in now based on an uncertain forecast
at a time when the economy is shaky. And we ought not to put in place a
tax cut that doesn't give a lift to this economy when it is weak.
We ought to provide stimulus now. We can afford to provide a $85
billion tax cut this year and get that money into the pockets of the
American people now to strengthen the economy. That is not what this
bill does. That is what we voted for in the Senate, but that is not
what this bill does. Only $10 billion of this tax cut is effective this
year, the year we are in, the time when we know we have economic
weakness.
I thank my colleagues for this time. I say to the chairman of the
committee, thank you for the fairness with which you have conducted the
debate. That is the strength of America. We have different points of
view. That doesn't mean we don't respect each other. I have great
respect for the Senator from Iowa. I work with him frequently. I have
great respect for the Senator from Montana. We work together
frequently. But on this question we have a principled and profound
difference. The great thing about America is we have a chance to
express those differences and to vote on them. When we are done, when
that is finished, we will go on and again work together on measures
that are important to our country and to our individual States.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I will take the opportunity to address
some of the issues the Senator from North Dakota addressed. I accept
his graciousness about how we have run this process, and also confirm
that on many things we work together--and I think of two: agriculture
and rural health care. Those are two very important issues for our
constituents.
The Senator from North Dakota has heard me speak on this point, and I
mentioned it in my opening remarks. We did hear him say, as one Member
who will probably say this several times today and throughout this
debate, that this is a very risky road we are going down. There again,
I think that caution is the responsibility of every Member of this
Senate. I do not regret that he makes that caution.
[[Page S5039]]
On the other hand, we also appropriate a lot of money. We pass a lot
of programs that obligate this Congress and the taxpayers of this
country to pay a lot of money several years down the road based on the
same Congressional Budget Office projections of what the future income
of this Treasury is going to be.
All I would say is, if it is risky to consider this when we have tax
cuts, then we ought to use the same adjectives and implore the Senate
of the United States to use the same caution as we are adopting other
programs down the road.
We never hear that. It is OK to pass spending bills and not worry
about what the future holds; can we meet those obligations? But if we
incur obligations letting the people of the country keep their tax
money and decisions relating to them, then obviously that is an
entirely different story and we hear the word ``risky'' used.
Another point of contention with the Senator from North Dakota deals
not with the statistic he used, or not with the point he is trying to
make, but when he says 2 percent of the wealthiest Americans are going
to benefit by the repeal of the death tax--this is such a complicated
issue to deal with, who benefits from the death tax. Our own
nonpartisan Joint Tax Committee does not even figure estate tax and who
benefits and who loses in the distribution tables they put out. That is
because, for the death tax, the person who benefits has died. So it is
ridiculous to talk about the death tax benefiting 2 percent of the most
wealthy in America, because the people who made the money are gone from
the face of this Earth.
There is an assumption here that may be partly correct--but I bet you
would never prove if it were correct--that the people who inherit from
the person who died happen to be wealthy. There is some effort by some
think tanks in this town to figure that equation into the distribution
tables of whether we are benefiting the wealthy or the not so well off.
I think it is intellectually dishonest--the Senator is not
intellectually dishonest, but the people who do this figuring. If our
own professional people who are nonpolitical can't do it, why should we
listen to some think tank that is politically oriented to make that
judgment for us? It is wrong. You cannot trace the money.
One other thing I ask the Senator from North Dakota to consider is
that his picture of America, of the rich and the poor, just does not
exist. Dividing America into the rich and the poor, as if somehow you
are born poor and you stay poor all your life; you are born rich and
you stay rich all your life--that America does not exist. It is a
never-never land.
Mr. President, 150 years ago the French nobleman, De Tocqueville, who
came to our country to study democracy--he was here about 3 years and
wrote a lot about it--wrote:
The rich are constantly becoming poor. The rich daily rise
out of the crowd and constantly returneth thither.
That was 150 years ago, and it has not changed now. All you have to
do is look at the University of Michigan studies on this point and you
will find economic status in this country is always transient. We do
not have two distinct, unchanging groups in America, the rich and the
poor. These are generally, as was in these graphs divided here--you
know, the lowest income one-fifth, the next highest income one-fifth,
the middle income one-fifth, and then the next highest income fifth,
and then the very wealthy fifth, 20 percent.
Only one-half of 1 percent of the American people--year after year--
are in the lowest one-fifth. So when he talks over here on the lowest
20 percent benefiting in so minuscule a fashion from this tax bill, he
could be talking about one-half of 1 percent of the people. The people
who are in that bottom one-fifth today, most of them in 1 year are
going to be in other levels of income, who are going to benefit from
our tax bill. Only one-half of 1 percent, I want to repeat, are in the
lowest one-fifth year after year.
One-third of the lowest one-fifth rise to the second, third, fourth,
or fifth quintile by next year--just 1 year away from being in that
lowest 20 percent. Mr. President, 80 percent move out of the bottom
one-fifth--80 percent of the bottom one-fifth move to the middle class
and above, and 30 percent of those people who were in that lowest one-
fifth rise to the highest one-fifth; in other words, the wealthiest
one-fifth in America.
This is America. That is what America is all about, the ability to
move up as you use your talents.
The other end of the scale is probably even more surprising. If you
take the very wealthiest one-fifth of America at any one time, the rich
do not always stay rich.
That is another way of saying what De Tocqueville said 150 years ago:
If you take the top 1 percent of Americans, 10 years later more than
one-half had dropped out of the top 1 percent and also dropped out of
even the top one-fifth.
So what we have here is an America that has always existed, never an
America of people who were always poor, and never an America of people
who were always rich, but people who were moving up the economic
ladder, and some who had the misfortune of moving down the economic
ladder even if they were at one time in the top 1 percent of the most
wealthy.
So when you see a chart that says the lowest one-fifth and the top
one-fifth, remember, that is today; tomorrow, that picture will not be
the same. As people move up that ladder, they are going to benefit from
the tax reduction regardless of the fact that there is a lot in this
bill for the lowest income people.
We have a very dynamic society, an America that is ever-changing, an
America where the poor, except for one-half of 1 percent, are much
better off at various times in their life. Then, for those who are very
fortunate to be born in wealth or to grow wealthy, very few of them
always stay wealthy.
So I hope these things are taken into consideration as we hear about
the ``winners'' and the ``losers'' because with this tax bill there are
not any losers. Everybody is a winner.
I yield the floor.
Mr. President, I yield the Senator from Oklahoma whatever time he
wants to consume.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. First, I compliment my friend and colleague from Iowa
for the comments he just made, but also for his management of the bill,
as well as Senator Baucus from Montana.
They have worked well together to produce a good product.
I was disappointed to hear the comments made by my friend and
colleague from North Dakota criticizing the bill. I happen to disagree
with many of the statements he made about this bill benefiting the rich
and wealthy, and so on. I just disagree with it. He is entitled to his
own opinion; he is not entitled to his own facts.
I want to talk a little bit about the facts and talk a little bit
about what is in this bill because I think it has been mischaracterized
in this Chamber. I think it is important that we know what is in the
bill.
Again, I compliment Senator Grassley and Senator Baucus for bringing
us this bill today. I think this bill is a giant step in the right
direction. It is not perfect. Maybe it can be made better. But I think
it is important that we look a little bit at the facts. I believe the
facts will show that this bill does not just benefit the wealthy. I
think it is a fair tax cut and weighted very much toward low-income
people.
I want to speak a little bit about the statement that this is a
repetition of the Reagan tax cut, and are we going to see deficits as a
result of this because that is what we saw when Ronald Reagan cut taxes
in 1980?
I came to this body on January 3, 1981, but I looked at the record.
In 1980, total revenues to the Federal Government were $517 billion.
Ten years later, total revenues to the Federal Government were double
that amount: $1.032 trillion--almost exactly double. So if Ronald
Reagan had these massive tax cuts, revenues to the Federal Government
doubled in that 10-year period of time. He was President 8 years of
that time. Certainly, you could say he was responsible for that.
The fact is, spending grew fast, so revenues grew, and grew rather
substantially, doubling in that 10-year period of time. The problem
was, spending grew faster. Maybe we should blame Ronald Reagan; maybe
we should blame the Democrats and the
[[Page S5040]]
Republicans who were running Congress; there is plenty of fault to go
around. My point is: Revenues grew.
What Ronald Reagan did was, he made a significant reduction in rates,
but revenues continued to grow. He reduced the maximum rate from 70
percent to 28 percent. He had broad bipartisan support for those tax
bills, I might mention. The first bill brought it down from 70 to 50
percent, and a couple years later we passed another bill that brought
the rate from 50 percent to 28 percent. I remember Senator Bradley was
supportive of that bill. My point is: we brought rates down but
revenues continued to grow.
I think that is also evidenced by the fact that when we reduced rates
in 1997, when we reduced the capital gains rate from 28 percent to 20
percent, revenues grew.
So some people react: Wait a minute, you can't cut rates when you
reduce revenues. I disagree with that. We reduced the capital gains
rate and revenues have grown substantially.
I want to talk a little bit about the bill before us. Does it benefit
primarily the wealthy? I think not. I think it is weighted way toward
the low-income groups. I will just give you a couple facts. The facts
are that we take the 15-percent bracket, the people who make $12,000 or
less adjusted gross income, and they pay 10 percent. That is a
reduction of 33 percent. That is not stretched out over 7 years but
retroactive to January 1. That is today. That is real. That is $600 per
family for every family who pays taxes. That will make a difference.
That is weighted toward the low income. People who make $12,000 or less
get the full $600.
People who make $1 million, they get the same $600. Percentagewise,
that is going to eliminate a lot of people's tax liability, period.
Millions of people will pay no income tax as a result of that change.
That change is made immediately, retroactive.
I heard my colleague say there are only $10 billion of outlays or
scoring for this fiscal year and that we only have a few months left in
this fiscal year. But as a result of the changes we are making, a lot
of people will get refunds that will have smaller withholding for the
last couple months of this fiscal year; they will get a refund in April
of next year. They are going to get a tax cut. It will be a tax cut for
taxpayers.
What about the rest of the brackets? The rest of the brackets do not
get anything as far as a rate change. All the brackets get a 1-point
reduction in the rate change effective January of next year. If you
figure percentagewise, that is a much greater percentage reduction in
taxes for the lower income brackets than it is for the higher income
brackets. Again, I think some people are trying to score points and
have political class warfare, but that is ridiculous. And that does not
even count the other changes that are made in the tax bill.
We have the $500 tax credit per child which is made refundable,
against my advice. I do not think that is good tax policy, but it is in
this bill. So if anyone is saying we are benefiting the wealthy, there
is a $500 tax credit that is refundable. Under this bill, we are giving
people money back who did not even pay taxes. That certainly is
weighted toward the low-income people.
How can someone say we are not even benefiting this one group? That
is just not right. Or that this tax bill benefits the wealthy? That is
just not right. I was one of the principal sponsors of the $500 tax
credit per child that we passed in 1997. That did give people tax
credits. It reduced their tax liability when having kids. If they have
four kids, that is $2,000 more they get to keep this year as a result
of what we passed in 1997. We expand that now to make that $1,000 per
child. We phase that in. The first $100 is effective immediately. So if
a family has four kids, that would be four times $600. That would be
$2,400 they would get to keep this year, that they would have reduced
in their taxes. Most of it would show up in a large refund for next
year. But that is a tax cut benefiting primarily low-income people.
Higher income people do not get that. So I just wish people would be
factual.
Let's take, again, the upper income group. All the upper income rates
get a 1-point reduction effective January of 2002--next year. When do
they get another reduction under this bill? Not until 2005. So the low-
income people who make $12,000 or less adjusted gross income get a 33-
percent reduction effective immediately, but those in the higher income
are going to have to wait another 3 years--until the year 2005--for
another reduction. They get 1 point in 2002--next year, in January--and
then they have to wait another 3 years to get another point. I think
that is way too slow. Then they have to wait until the year 2007 to get
1 more point for all the rates. I think we are way too timid in getting
the rates effective.
Then some people still criticize the bill, saying the upper income is
really benefiting. That is hogwash. How does that compare to the tax
increase that passed in 1993? Did we phase in the tax increase that
passed in 1993 and President Clinton signed? We had a tie vote. Vice
President Gore broke the tie twice in the Senate. Did we phase that in
when we took the maximum rate from 31 percent to 39.6 percent? No. It
was not phased in. It was made retroactive to January 1, 1993.
Was that the only increase we did on upper income people? No. In
addition to that, we said there won't be a cap on Medicare taxes, so an
individual pays 1.45 percent of payroll on all payroll now. It used to
be capped at the Social Security base. At that time it was--last year
it was $75,000. Now that goes up.
So you pay 1.45 percent of Medicare on all income and actually your
employer does it, too, so in effect that was a 2.9-percent increase on
top of the 39.6. So President Clinton increased the maximum tax rate
from 31 percent to 39.6 to actually 42.5 percent. The package we have
before us today will reduce that by one point next year. President
Clinton raised the rate from 31 percent to 42.5 percent. This bill is
going to reduce it from 42.5 percent to 41.5 percent, still over 33
percent higher than it was in 1993.
When it is all said and done, it is still 20-some-odd percent higher
than it was in 1993. The bill we have before us phases it down over 6
years to 36 percent. Maybe it must be higher for some individuals. I
don't know. How much do you want the Government to pay? How big a
percent should the top 1 percent pay? They now pay 35.9 percent of all
income taxes, and evidently some people think it should be 50 percent
or more. Is that good policy? I don't think so.
Then they say: You had a tax cut. If they pay 100 percent of the
taxes, and you give a tax cut, I guess they get 100 percent of the tax
cut, and that would be wrong.
That same rhetoric is employed on the death tax. We have increased
the exemptions over the years and, therefore, only the top 2 percent
pay the death tax. Therefore, if you cut the death tax, you are really
benefiting the wealthy. What is right about the Federal Government
taking over half of what somebody has worked their entire life for and
they want to pass on to their kids? What is right about the Government
saying, we want 60 percent of it; we want 55 percent of it? That is
present law. Only the top 1 percent does or only the top 5 percent. So
who cares? Our job in the tax policy is to redistribute wealth. We want
to rob Peter to pay Paul. We have a lot more Pauls. We are going to
make them happy. We are going to take Peter's money and give it to lots
of people.
Some people think the primary purpose of the Tax Code is to
redistribute income so we have all these distributional charts. We have
to make sure this percentile gets their fair share of the money. They
didn't pay their fair share of the taxes, but we want to make sure they
get their fair share of the money. We don't do that with spending
programs. Some people are trying to turn the Tax Code into aid for
families with dependent children. I disagree. We should not use the Tax
Code for spending purposes.
The Tax Code should be fair and equitable. There is nothing right
about somebody working their entire life and building up a business, a
farm, a ranch, or a company of some kind and they die and all of a
sudden the Government says: Hey, we want half. Move over. We don't care
if you have to sell the company. We don't care if it bankrupts the
company. We want half. The Government is entitled to take half.
I think that is absolutely, fundamentally wrong.
[[Page S5041]]
What we are trying to do eventually in this bill is repeal the
taxable event on death and say the taxable event would be when somebody
sells the property. If they inherit the property and they don't sell,
they continue operating the farm, the business, whatever, as long as
they are operating it, fine. If they sell it, then they pay tax, and
the tax will be at the capital gains rate. It won't be at 55 percent.
It won't be at 60 percent.
Somebody said, we don't have the death tax rate at 60 percent. Yes,
we do. If you have a taxable estate on death between 10 million and 17
million, the taxable rate is 60 percent. We get rid of that 5 percent
kicker right off the bat. That is one of the things we should do in
this bill. We ought to get the death tax down. We ought to get marginal
rates down. Marginal rates are too high. So we have gradually reduced
them. I think we are way too gradual in reducing them. But for some
people to say, wait a minute, we are doing too much for this group
because we are really benefiting them, when all they get under this
bill, all they get if this bill was law, and this is all we passed for
the next 3 years, all the wealthy would get would be basically a 1
percentage point reduction next January in their rate, from 39.6 to
38.6, or correspondingly the other rates, 28 to 27, and that would be
it until the year 2005. I think that is pretty pathetic. We can do
better. I hope we will do better.
For some people to say that really benefits the wealthy just because
a few years ago we raised your rate from 31 percent to 42.5 percent,
forget about that. To reduce it by 1 percentage point, when you
increased it 11.5 percent--11\1/2\ points, not percent, 11\1/2\
points--now we are going to give you a great big 1 point reduction,
give you one-tenth of that back in 4 years, that is a massive tax cut?
I beg to differ with you.
If we passed the Bush tax plan as it is, it is still much higher than
it was under President Clinton.
I make these points. I think people need to look at the tax
legislation in total. They need to look at the tax credit, the
refundability of the tax credit, maybe the wisdom of that. I think that
should be considered. We finally start making some real inroads on
marriage penalty relief. I wish we did more, and I wish we did it
earlier. But, unfortunately, some people reduce the size of this tax
bill.
Some people say: Wait a minute, why can't you do marriage penalty
more immediately? Because some people voted on the budget resolution to
reduce the size of this package from 1.6 trillion to 1.35. OK, they
won. So now we have the budget resolution, and we are doing the best
job we can with 1.35. We should work to pass the best bill we can with
1.35. If we had the 1.6, maybe we could do more with the marriage
penalty. Maybe we could do more with the rates; we could accelerate
more the rates. But we didn't win on the budget.
A lot of rhetoric I have heard says: I want to redo the budget,
fighting the budget battle. The budget battle, you lost that one. Now
we are fighting the tax battle: Should we have a tax cut or not? Should
we eliminate the death tax or not? Should we cut rates any? Is a 1
point reduction in the next 4 years too much for all income brackets? I
don't think so.
Let me refer a little bit on this. We didn't cut the 15-percent rate.
I mentioned in the Finance Committee, I would be happy to consider
alternatives. Right now, we have weighted a lot of the tax cut. You
have different rates. You have a zero rate which we are expanding
substantially. We have the 15-percent rate, the 28-percent rate, 31-
percent rate, 33, 39.6. We have reduced all those rates. Somebody said:
You didn't reduce the 15-percent rate. What you did is you took a chunk
of it out and made it 10 percent.
There is another way of doing it. We could reduce the 15-percent
rate, take that same amount of money, we took half the tax cut. By
adjusting that, putting in the new 10-percent rate, we could reduce the
15-percent rate to 13.5. That would be a 10-percent reduction in the
15-percent rate and probably do that for the same amount of money we
did by creating the 10 percent.
We would cut rates for everybody in the 15-percent bracket. That
might be a better tax policy than going to 10 percent. I am willing to
consider that.
In other words, there are different ways of doing this. It might come
out the same dollarwise for the total bill, and it is more equitable.
There are some things we can do.
This bill is not perfect. But to slam it and say we are not doing
anything over here and ignoring the child credit, to ignore the fact
that we are expanding the 15-percent bracket substantially for married
couples, which means a lot of married couples will be paying 15 percent
instead of 28 percent, almost a reduction of one-half on a lot of their
income--that is a big change--to ignore those kinds of things would be
a mistake.
I urge my colleagues to support this package. I hope we don't have a
lot of amendments. It has been pretty well balanced, if you want to
look at it like that, from a political perspective. I hope we can
improve the bill as we go forward. I hope we don't engage in a lot of
class warfare rhetoric nonsense. It seems that that has been coming out
lately. I don't think it is justified. It is not becoming to the
Senate.
Taxpayers are entitled to tax relief. They haven't had it for the
last couple years. Congress passed, in 1999, tax relief. President
Clinton vetoed it. Congress passed a couple bills last year to
eliminate the death tax and eliminate the marriage penalty. President
Clinton vetoed them. Taxpayers are overdue in getting relief. It is
time we give them some relief. This bill is the first good news the
taxpayers have had, certainly since 1997, and the first significant,
real relief they have had in decades.
I am very hopeful and pleased that we will put this on the
President's desk, hopefully, by next Friday.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, the great thing about our country is we
can have honest differences of opinion, and we do. The Senator from
Oklahoma says he is against redistributing income through the Tax Code.
That is exactly what this bill does. Only this redistributes it up.
We have a circumstance in which the wealthiest 1 percent are getting
a greater share of the tax reduction provided in this bill than they
pay in Federal taxes. Now the Senator wants to talk just about income
taxes. People don't only pay income taxes; they pay income taxes,
payroll taxes, and other taxes. The wealthiest 1 percent don't pay 33
percent of Federal taxes--they don't. They pay 23 percent to 26 percent
in Federal taxes, but they get 33 percent of the benefit in this plan.
That is not fair. It is not fair.
The Senator talks about the estate tax. The fact is, the estate tax
is paid by the wealthiest 2 percent of the estates in America. We agree
there is a problem with the current estate tax because it bites at much
too low a level--$675,000 for an individual, $1.3 million for a
couple--before you start paying any tax. That is too low given what has
happened to the value of financial assets, real estate and other
assets.
I have supported increasing the estate tax to $5 million for an
individual, $10 million for a couple, but eliminating the estate tax is
fiscally irresponsible given the cost the Federal Government is going
to face when the baby boomers retire. It costs $750 billion the second
10 years. From where is the money going to come? The Senator from
Oklahoma is going to shift that burden on to everybody else.
The tax policy is fundamentally a question of, what is the fairest
way of distributing the burden in society? What is the fairest way? The
Senator from Oklahoma apparently has a difference with this Senator, at
least on what is fair. I don't think it is fair to take the people's
money and give 33 percent of the benefit of this tax cut to the
wealthiest 1 percent. I don't think that is fair. I don't think it
demeans the Senate one bit to have that debate. I think it is exactly
the debate the people of this country, who sent us here, expect us to
have. What is the fiscally responsible thing to do? What is the fair
thing to do? That is exactly what we ought to be debating.
We also have a difference on what the historical record is. The
Senator goes back to the 1980s and talks about a doubling of tax
receipts. But I think that is misleading because it doesn't take
account of inflation. The way to best compare what happened to revenue
and expenditure in different historical periods is by looking at
revenue
[[Page S5042]]
as a percentage of gross domestic product and outlays as a percentage
of gross domestic product. When you do that, it is very clear what
happened in the 1980s. The spending went up with the big defense
buildup the President proposed and Congress enacted. The spending went
up as a percentage of GDP. The revenue went down sharply as a
percentage of GDP. That opened up this massive chasm, which was
deficit. The yearly difference between what we took in and what we
spent multiplied the debt. The debt quadrupled, putting this country in
a deep hole. And the same folks who designed that package are coming
back with the one we see today.
The question is, what is the fiscally responsible thing to do? I
don't believe it is responsible to pass this package. I don't think it
is a fair thing to do, either.
I rise to offer an amendment to deal with one of the issues that I
think is most unfair in terms of the bill that is before us. Every
Senator has talked about the need to fix the marriage penalty. Indeed,
we should fix it because some couples pay more taxes simply because
they are married. That is not right. That is not fair. I think we all
agree with those propositions. But this bill doesn't do anything about
it for 4 years. There is no marriage penalty relief in this bill for
this year. There is no marriage penalty relief in this bill for next
year. There is no marriage penalty relief in this bill for the year
thereafter. There is no marriage penalty relief for 4 years. I don't
think we can leave this legislation without addressing the marriage
penalty now.
The amendment I am offering would simply say, let's put in place
those elements of this legislation that address the marriage penalty
now. Let's do it this year. Let's put it in place immediately. I
believe marriage penalty relief should begin as soon as possible--not 4
years from now, not 5 years from now, but now.
Under my amendment, the two key components of this legislation
dealing with the marriage penalty would be put into place immediately:
One, the standard deduction for married couples would double the
deduction for single individuals; two, the top income limit in the 15-
percent bracket for married couples would be double the limit for
single individuals. This does not solve the marriage penalty, but they
are the provisions that are in this bill. These are the provisions in
this bill that do not take effect for 4 years. I am simply saying let's
move them up and have them take effect immediately.
By providing marriage penalty relief more quickly, we are helping
middle-class Americans, strengthening families, and removing tax
disadvantages to marriage. I think we can all agree on that. We also
help simplify tax filing for the many families who will no longer have
to itemize their deductions. We are improving the fairness of the
package.
The bottom line is, without this fix, a couple who got married last
year will have to wait until their eighth wedding anniversary to get
full marriage penalty relief. I don't believe that is right or fair. We
can do better. This amendment is an attempt to do that.
My amendment is paid for by delaying the rate reductions for the top
two brackets, so that the rates will drop to 35 percent and 38 percent
in 2009, and to 33 and 36 percent in 2010. In essence, we are saying,
put marriage penalty relief as a top priority.
Amendment No. 654
Mr. CONRAD. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from North Dakota [Mr. Conrad], for himself and
Mr. Johnson, proposes an amendment numbered 654.
Mr. CONRAD. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To accelerate the elimination of the marriage penalty in the
standard deduction and 15-percent bracket and to modify the reduction
in the marginal rate of tax)
On page 9, strike all after line 11 and before line 15 and
insert the following:
------------------------------------------------------------------------
The corresponding percentages
``In the case of shall be substituted for the
taxable years following percentages:
beginning during -----------------------------------
calendar year: 28% 31% 36% 39.6%
------------------------------------------------------------------------
2002, 2003, and 2004.. 27% 30% 36% 39.6%
2005 and 2006......... 26% 29% 36% 39.6%
2007 and 2008......... 25% 28% 36% 39.6%
2009.................. 25% 28% 35% 38%
2010 and thereafter... 25% 28% 33% 36%
------------------------------------------------------------------------
``(3) Adjustment of tables.--The Secretary shall adjust the
tables prescribed under subsection (f) to carry out this
subsection, and in any fiscal year in which such adjustment
results in an on-budget surplus smaller than the medicare HI
trust fund surplus, the Secretary shall further adjust such
tables to ensure that in such fiscal year the on-budget
surplus is not less than such account.''.
Beginning on page 19, strike line 8 and all that follows
through page 20, line 12, and insert the following:
(1) by striking ``$5,000'' in subparagraph (A) and
inserting ``twice the dollar amount in effect under
subparagraph (C) for the taxable year'';
(2) by adding ``or'' at the end of subparagraph (B);
(3) by striking ``in the case of'' and all that follows in
subparagraph (C) and inserting ``in any other case.''; and
(4) by striking subparagraph (D).
(b) Technical Amendments.--
(1) Subparagraph (B) of section 1(f)(6), as amended by
section 103(b), is amended by striking ``(other than with''
and all that follows through ``shall be applied'' and
inserting ``(other than with respect to sections 63(c)(4) and
151(d)(3)(A)) shall be applied''.
(2) Paragraph (4) of section 63(c) is amended by adding at
the end the following flush sentence:
``The preceding sentence shall not apply to the amount
referred to in paragraph (2)(A).''.
(c) Effective Date.--The amendments made by
Beginning on page 20, strike line 21 and all that follows
through page 22, line 4, and insert the following:
``(8) Elimination of marriage penalty in 15-percent
bracket.--
``(A) In general.--With respect to taxable years beginning
after December 31, 2001, in prescribing the tables under
paragraph (1)--
``(i) the maximum taxable income in the 15-percent rate
bracket in the table contained in subsection (a) (and the
minimum taxable income in the next higher taxable income
bracket in such table) shall be twice the maximum taxable
income in the 15-percent rate bracket in the table contained
in subsection (c) (after any other adjustment under this
subsection), and
``(ii) the comparable taxable income amounts in the table
contained in subsection (d) shall be \1/2\ of the amounts
determined under clause (i).
``(B) Rounding.--If any amount determined under
subparagraph (A)(i) is not a multiple of $50, such amount
shall be rounded to the next lowest multiple of $50.''.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BAUCUS. The Senator can offer an amendment in his own right.
The PRESIDING OFFICER. The Senator from North Dakota controls 1 hour
on the amendment.
The Senator from North Dakota is recognized.
Mr. CONRAD. Mr. President, I say to the managers I have no desire to
take an hour on this amendment, considering the other amendments
Senators desire to offer. I am prepared to go to a vote very quickly on
this amendment. Perhaps others want to speak. I understand that.
I ask unanimous consent that Senator Johnson be shown as an original
cosponsor of the amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, perhaps others would like to speak. I am
happy to work with the manager in whatever way he thinks is most
appropriate in order to move things along. If the manager on our side
wants to delay consideration and have other amendments considered or
have others speak on other subjects, that is fine with me.
Mr. BAUCUS. Mr. President, as the Senator from North Dakota knows, we
are trying to negotiate out a sequence and order of amendments. I very
much appreciate the graciousness of the Senator from North Dakota. At
this point, since I do not know what the Senator from Texas, who has an
amendment on the subject, desires, I suggest that the Senator proceed
with his amendment, and that after a reasonable period of time we will
be in a much better position to know about how to sequence this. I urge
the Senator to proceed.
Mr. CONRAD. I thank the Senator very much. I have made my initial
remarks. I see the Senator from South Dakota, Mr. Johnson, now in the
Chamber. He is an original cosponsor of the amendment. I think he would
like time to speak on the amendment as well.
[[Page S5043]]
The PRESIDING OFFICER. The Senator from South Dakota.
Mr. JOHNSON. Mr. President, I thank my colleague from North Dakota. I
will be very brief.
I applaud the work Senator Conrad has done on the marriage penalty
amendment by accelerating the marriage penalty relief to begin
immediately. One of the great disappointments of the pending
legislation is that the marriage penalty is not phased out until
beginning the year 2005.
There are many of us who thought this was going to be one of the
high-priority items we would be taking up in a tax cut bill, and yet we
find nothing happens relative to getting rid of the marriage penalty
for half a decade.
The offset Senator Conrad has proposed is a delay in the phase-in of
the marginal tax rates for the top two brackets, the 39.6 and 36-
percent brackets. Those are families who are making roughly $300,000 a
year for the 39.6-percent bracket and about $161,000 for the 36-percent
bracket. This would be delayed. They would ultimately get the bracket
reduction, the same as was initially proposed.
The question is, who has to wait? The people with the marriage
penalty or the highest tax bracket? Somebody has to wait to fit into
the tax plan, and it seems to me we ought to accelerate the marriage
penalty, which benefits everyone who is married, regardless of what
their income might be, and move forward with that.
Again, under this amendment, we will allow the phased-down reductions
of those two top tax brackets just as was in the original bill. It is
not a matter of eliminating bracket reduction, but it is a matter of
having to choose, having to make a decision. We have to decide right
here and now whose tax relief ought to come first. Should it be people
who are, under Federal policy, being penalized for their marital
status, or should the highest income people in America get their relief
first and people who are being penalized for being married have to
wait? To me, that is an easy decision. To me, public policy ought to
encourage family stability. Public policy ought to encourage marriage,
not discourage it, and in the course of trying to come up with a more
equitable Tax Code, it ought to be among the very first items we
address.
To delay tax relief on the marriage penalty in order to continue to
quickly reduce the tax brackets on the wealthiest upper percentiles of
the American public does not make a lot of sense to me.
This change would be a great benefit to married families all across
South Dakota. It would affect, by slowing down the phase-in, fewer than
3 percent of the citizens of my State, but in exchange for that, they
would get their marriage penalty relieved as well regardless of income
levels.
This is a sensible, commonsense amendment being offered by Senator
Conrad. It does nothing to the overall scope of the tax cut. It does
nothing to eliminate the reductions in brackets for the top income tax
brackets, but it does say, with an exclamation point, right here and
now that we will make elimination of the marriage tax penalty
immediately one of our priorities. We should not be phasing it in over
the course of 5 years simply to allow the immediate reduction of tax
payments by the wealthiest upper percentiles in America. That is the
tradeoff. That is the balance and choice we have to make.
I applaud Senator Conrad for his work on this amendment and hope my
colleagues on both sides of the aisle will support the immediate
elimination of the marriage penalty. I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield to the Senator from Colorado
what time he might consume.
The PRESIDING OFFICER. The Senator from Colorado is recognized.
Mr. ALLARD. If I may have 15 minutes.
Mr. GRASSLEY. I yield 15 minutes.
Mr. ALLARD. Mr. President, first I commend Chairman Grassley for his
hard work in putting this tax bill together. He has done a great job as
chairman of the Finance Committee, and we all appreciate how quickly he
was able to get this tax cut out of his committee. He has provided
critical leadership in the battle to provide tax relief to the American
people.
I reiterate, as I have time and again, the budget surplus is the
people's surplus, it is not the Government's surplus, and it is time to
refund a portion of this surplus to the people who pay the bills. They
are being overtaxed, and they deserve a refund.
This bill provides that refund in the form of lower income tax rates.
It repeals the death tax. There is an increase in the child tax credit.
There is relief on the marriage penalty provisions and tax relief for
education expenses. That is a good start. I am one of those Senators
who thinks there could be more done and should be more done as far as
the size of the tax cut, but this is a good start.
My hope is that we can continue to improve this bill in the Senate
and in conference, and that we can work for more tax cuts in a second
tax bill later this year.
I have two concerns with this bill. First, the bill does not cut the
income tax rates far enough. There should be no higher rate, in my
view, than 33 percent. All of the tax brackets should be lowered so
that we have only four rates: 10 percent, 15 percent, 25 percent, and
then the final level would be the 33 percent.
In my view, no one should pay more than a third of their income in
Federal income taxes. This is what the President and the House have
proposed, and I am hopeful we can move to that in the conference.
The second concern I have is that this bill contains no reduction in
the capital gains tax rate. I will, therefore, be offering an amendment
to add this tax cut to the bill. My amendment will reduce the top
capital gains rate from 20 percent to 15 percent with those in the
lower brackets paying only a 7-percent rate on capital gains.
I have two versions of this amendment. One is a permanent rate cut.
The other is a 2-year rate cut that should clearly raise revenue even
under the Joint Tax Committee scoring.
I cannot understand why we do not have a capital gains cut in this
bill. Both parties have come together in support of immediate tax
relief to stimulate the economy, and, in my view, there is no tax that
could do more to stimulate the economy than a further reduction in the
capital gains rate if we could cut that further. If we want to pull the
economy out of its slump, if we want to revive the stock market, if we
want to return to full economic growth, we should cut the capital gains
tax.
The greatest irony is we could cut this tax with no loss of revenue.
In fact, a capital gains tax cut will actually raise revenue. This
occurs for three reasons. First, a reduction in the tax on capital
gains will, purely and simply, increase economic growth. Second, it
will increase the value of capital assets held by taxpayers. Three,
when the tax is cut, people will sell more capital assets. We open up
the gates of commerce.
Remember, the capital gains tax is a voluntary tax. It is only paid
when the assets are sold and investors are much more willing to sell
capital assets when the tax rate is lower. This is not a theory. It has
been proven time and again by history. Let me reflect on a few of those
historical moments.
In 1997, we reduced the capital gains tax from 28 percent to 20
percent, and many of you, I think, in this Chamber will recall the
debate over whether this would raise or lower revenues. We now have the
answer. Revenue from capital gains increased dramatically after the tax
rate cut. In fact, in just the 4 years since the rate cut, 1997 through
2000, the Government has received $200 billion more capital gains
revenue than forecast before the tax rate. I repeat, $200 million in
added revenue in just 4 years.
I call my colleagues' attention to this chart. I have placed a copy
on each Member's desk. The chart shows for the years 1997, 1998, 1999,
and 2000 the orange-yellow bars, what would have been the projected
revenue from capital gains if we had not reduced the capital gains
rate. The amount of growth that has occurred during this same period is
phenomenal. This reflects the increase in capital gains revenue, and
this projected what it would have been if we had not cut capital gains.
It is substantial. It is $200 billion in added revenue in 4 years.
Each time we have cut the capital gains tax rate, revenues have gone
up.
[[Page S5044]]
This happened after the 1978 cut from 40 percent to 28 percent. It
happened again in 1981 when the rate was cut from 28 percent to 20
percent.
By contrast, after the 1986 tax increase, revenues actually declined.
Then finally in 1997, after the most recent reduction in the tax
rate, we experienced a huge capital gains revenue increase.
This added revenue has been a big factor in the budget surpluses of
recent years. In fact, this $200 billion of added revenue exceeds the
entire non-Social Security surplus since 1997.
I refer my colleagues specifically to the four years since the 1997
rate cut from 28 percent to 20 percent. In each year you can see the
revenue that was forecast before the rate cut, and then next to it the
revenue that we actually received.
The revenues are virtually double the forecast after the rate cut--as
I noted, $200 billion in new money in just 4 years.
The increase in revenues should make this tax cut an easy sell, but
that is not the main reason that we should cut the tax.
The main reason is that this tax cut immediately increase savings,
capital investment, and stock values.
All of this is pointed out in Monday's Wall Street Journal op-ed by
Arthur Laffer, Lawrence Kudlow, and Stephen Moore.
At this time I ask unanimous consent that this Journal article be
printed in the Record at the close of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See Exhibit 1.)
Mr. ALLARD. Let me just quote from the final paragraph of this
article:
The last capital-gains cut in Washington led to higher
productivity and capital investment, a spectacular surge in
stock values, and a new age of federal surpluses. Isn't that
exactly what is meant by a fiscal stimulus?
That is what is meant by fiscal stimulus. We should add this
provision to our tax bill for the simple reason that it will get this
economy moving again.
The American people are overtaxed.
Tax Freedom Day was May 3, this year. This is the latest it has ever
been.
This means that average American families will work the first 123
days of the year to pay the combined tax bill from all levels of
government--Federal, State, and local.
It is time for a tax cut.
We frequently discuss the budget surplus, but I believe that it is
more accurate to refer to it as the tax surplus. The tax surplus
represents an overpayment by taxpayers and should be refunded to those
who overpaid.
Tax cuts will benefit all Americans by making the economy stronger.
Low taxes reward work, saving, and investment. Low taxes provide the
fuel for our economy to create new jobs and raise our standard of
living.
Allowing people to keep their own money simply makes the most sense.
People are in a better position than the government to know what they
need. I believe in the people's priorities, not Washington's
priorities.
This tax cut is real money that can be used for the downpayment on a
home, college tuition, or a family vacation.
While I want to add a capital gains tax cut, I know that this tax
bill contains many important provisions.
All taxpayers will get immediate relief when the 15 percent rate is
lowered to 10 percent on a significant portion of income.
The tax bill also increases the child tax credit, provides tax relief
for education expenses, and eliminates the death tax.
I am particularly pleased to support repeal of the death tax. It is
the one tax cut issue that comes up consistently.
The United States retains among the highest estate taxes in the
world, and top estate tax rates can reach over 55 percent. This is
money that was already taxed when it was earned.
The estate tax can destroy a family business. This is the most
disturbing aspect of the tax. No American family should lose its
business because of the estate tax or death tax.
Similarly, more and more large ranches and farms are facing the
prospect of break-up and sale to developers in order to pay the estate
tax.
Americans are spending more than ever on taxes. In fact, we now pay
more in taxes than we do for food, shelter, and clothing combined.
Since when did the Federal Government become more important than life's
essentials?
It is time to reverse this trend by cutting taxes across the board.
Low taxes will help our economy and will also help America's families.
I ask my colleagues to support my amendment to reduce the capital
gains rate to 15 percent.
This addition will make the bill even stronger than it is now.
Adding this will stimulate the economy, increase saving and
investment, and boost Federal revenues.
We should not let this opportunity pass without adding the tax cut
that will do the most to restore the prosperous 4 percent to 5 percent
economic growth that we experienced in the late 1990's.
There is no reason why our economy cannot sustain high levels of
economic growth.
This is in fact the best way to ensure that we can continue tax
relief, pay off the national debt, improve education opportunities, and
finance the Social Security and Medicare commitments that have been
made to the baby boom generation.
We need a strong and vibrant economy to fully achieve our goals and
realize our dreams for all Americans.
A capital gains tax cut will help us to quickly restore that strong
economy.
I ask for the support of my colleagues as we move to cut the capital
gains tax rate.
Exhibit 1
[From The Wall Street Journal, May 14, 2001]
Real Relief: A Capital-Gains Tax Cut
(By Arthur Laffer, Lawrence Kudlow, and Stephen Moore)
The budget deal reached last week between the White House
and Congress calls for a $100 billion tax-cut stimulus in
2001-02. Yet to be decided is the nature of those cuts.
Congress, increasingly jittery about the sagging economy,
will likely seek rate cuts that offer growth-enhancing tax
relief quickly.
That makes a lot of sense. What doesn't is the tax-rebate
plan that many in Congress wish to enact. The tax rebate is
intended to send checks out to American workers to stimulate
consumer spending. But more spending is not what the economy
needs most now.
personal savings
This has always been an investment-led downturn, not a
consumer slump. The huge federal tax overpayments have badly
drained personal savings and undermined capital investment
and risk-taking. The one tax cut that would immediately boost
savings, capital investment and stock values is a reduction
in the capital-gains tax.
Consider what has happened to Americans' wealth over the
past several months. The Federal Reserve Board reported that
Americans lost nearly $2 trillion in wealth in just the last
quarter of 2000 as a result of the stock-market decline. This
is the equivalent of a $20,000 evisceration in wealth and
capital for each household in America. It is the lack of
capital formation that poses such a tall barrier to resuming
the prosperous 4% to 5% growth of the late 1990s.
Oddly enough, a capital-gains cut is not now part of the
Bush tax plan or the congressional agenda. It should be. The
capital-gains cut has the added political attraction that it
is self-financing and, properly scored, would actually
increase revenues.
The best course would be a permanent reduction in the
capital-gains tax from 20% to about 15%. But if the rules of
the budget agreement only allow a stimulus tax cut through
2002, Congress should still cut the capital-gains tax for the
next two years. (We doubt any Congress would be foolhardy
enough to raise the rate again, mortally wounding the economy
just before the next elections.)
Any capital-gains cut would instantly be capitalized into
the value of stocks. Stock values are determined by the
discounted present value of the after-tax rate of return
on the asset. So, capital-gains tax relief would
immediately raise investment return and lower capital
costs. This isn't just speculation. The past two capital-
gains tax rate cuts--in 1981 and in 1987--were both
followed by riptide gains in the stock market and the
economy.
Reducing this tax will encourage investors to unlock
cumulative gains of the past, liberating capital and freeing
these funds to be reinvested in more future-oriented,
entrepreneurial, growth-generating enterprises. In
particular, it would spur venture-capital investment, which
rocketed upward after the 1997 rate cut but has recently
sagged badly. This pool of high-risk investment capital is
essential to finance technological innovation, itself vital
to productivity advances that will increase real wages and
expand the economy's growth potential.
Moreover, this growth effect would be multiplied if the
arbitrary one-year holding period for the long-term capital-
gains tax rate were eliminated entirely.
Skeptics will accuse us of ``voodoo economics'' when we say
that a capital-gains tax cut will raise revenue. But those
skeptics--Dick Gephardt and Tom Daschle, in
[[Page S5045]]
particular--are just as wrong now as they were back in 1997
when the capital-gains rate was chopped to 20% from 28%.
Congressional Budget Office data confirms a stunning gain in
tax revenues from the lower capital-gains tax rate. Receipts
more than doubled to $118 billion in 2000 from $54 billion in
1996.
In fact, revenues generated after the 1997 cut, compared
with revenues predicted at the time, tell an amazing story.
Before the tax rate was cut to 20% from 28%, the Joint
Committee on Taxation predicted that we would collect $209
billion from 1997 to 2000 from capital-gains payments.
Instead, the capital-gains tax raised $372 billion over this
period. In other words, the lower tax rate yielded 80% more
revenue over the four-year period than was projected if the
rate had remained at 28%--a $166 billion windfall. In fact,
the capital-gains tax cut was a contributor to the big and
unexpected budget surpluses that emerged in the late 1990s.
We aren't suggesting this capital-gains cut as a substitute
for the George W. Bush's tax-cut plan. It's imperative that
the White House stick to its guns on its planned reduction of
the top tax rate to 33%, down from 39.6% today. The income-
tax rate cuts are desirable because they will increase
individual and small-business incentives that will raise the
long-term growth potential and investment attractiveness of
the U.S. economy.
Rate Cuts
But the income-tax rate cuts in the president's plan are
far too backloaded (the top rate would only fall to 38% in
2002) to provide much juice for the economy right now. In
fact, if the capital-gains cut raises more revenues, as
expected, then it will help finance the Bush income-tax rate
reduction plan.
The last capital-gains cut in Washington led to higher
productivity and capital investment, a spectacular surge in
stock values, and a new age of federal surpluses. Isn't that
exactly what is meant by a fiscal stimulus?
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I yield myself such time as I may consume.
My purpose for rising is to discuss the amendment before the Senate,
an amendment from the distinguished Senator from North Dakota, Mr.
Conrad.
Mr. REID. Will the Senator yield?
Mr. GRASSLEY. I yield.
Mr. REID. Just so the managers of the bill understand, Senator
Rockefeller indicated a willingness to speak on the bill itself. He
will be over in 10 or 15 minutes.
Mr. GRASSLEY. We will do everything we can to accommodate Members of
both parties. That is perfectly legitimate, particularly considering
the fact that Senator Rockefeller has many amendments to the bill and
has strong feelings about the bill, and we have a responsibility to let
the American people hear that point of view.
I think, in visiting about the marriage penalty, it is good to talk
about tax relief for married families in the mark that goes beyond just
the marriage penalty. The bill provides specific relief for married
families. This is at all income levels. First, we expand the earned-
income credit. That is a program for married families with children.
The phasing in of the earned-income credit, which targets assistance to
low-income families, is expanded in our legislation by $3,000.
I want to give Senator Jeffords from Vermont the credit for working
so hard on this provision. He believes very strongly in a tax bill
being equitable between different income levels. He tailored it so this
relief happens immediately. This is not one of the portions of the bill
that phases in. The next tax year, this provision of $3,000 earned-
income credit will take effect. So we are providing, in this section,
something that is of immediate impact. In addition to Senator Jeffords,
I should give appropriate credit to Senator Snowe from Maine and
Senator Lincoln from Arkansas for this provision as well.
We are providing part of our relief for married families right away.
I might add, it is a hallmark of this bill that the benefits provided
to low-income families are immediate, while benefits to other income
levels are phased in, as you have been told so many times over the
course of this debate thus far. The income tax relief for married
families is phased in over 4 years and completed in the year 2008. It
provides for doubling of the standard deduction for those married
filing jointly, and it makes the 15-percent rate bracket for married
filing jointly two times that of someone filing single.
Income tax relief is provided for both one-earner and two-earner
families. For those who want to start providing targeted income tax
relief for married families earlier, where were these folks a few weeks
ago when we were debating the size of the tax cut, particularly during
the period on the budget? What happened when we went from $1.6 trillion
down to $1.35 trillion--that was a desire more from the other side of
the aisle than just a few on this side of the aisle. That is what makes
it difficult to squeeze all these different, very important tax equity
provisions into this bill. So anybody who complains about having to
phase some of these things in more slowly, they could have taken hold
much more quickly if we were dealing with a $1.6 trillion package
rather than a $1.35 trillion package. The phase-in of the marriage
relief reflects the realities of a budget resolution, then, that is
down about $300 billion.
I think, also, there is a certain amount of intellectual questioning
that is legitimate in this process of a well-tailored bipartisan bill
out of the Senate Finance Committee, that the Senate Finance Committee
had to fit into a $1.35 trillion package, and then complaining about
the phase-in being so slow.
Somehow, I doubt my colleagues who mention these things would join me
in offering an amendment that would increase the tax reduction by the
amount necessary to provide immediate tax relief on the marriage
penalty.
So we get back to something that is a familiar part of this debate
today, and will be until we get done on Monday, and that is this bill
is balanced. It is balanced in fairness and equity. It is also balanced
in a political way. This is a bipartisan bill.
I hope when this amendment comes up, we have strong bipartisan
opposition to changing a very carefully crafted portion of the bill,
the marriage penalty.
The bill also provides immediate tax reduction for all marginal tax
rates as a means of helping to strengthen our economy and balances that
with good tax policy of supporting the institution of marriage. If the
economy is not strong, everyone, whether it is families, children, the
elderly, or other groups of Americans, suffers.
The economy comes first, although I will say again, we do provide
benefits for low-income married people with children right now. This is
a figleaf amendment to cover up the fact that many people did not
answer the call when the Senate was considering marriage penalty relief
last year. This amendment harms our efforts to strengthen the economy.
That is why I am urging its defeat.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. I would like to hear an explanation of how it harms the
economy of the country to address the marriage penalty this year rather
than wait 4 years. How is that? How does that hurt the country? How
does it hurt the country to address the marriage penalty now instead of
waiting 4 years?
Just the opposite is true. It strengthens the country to address the
marriage penalty now and not wait 4 years. The fact is, on this side I
offered a budget plan that had half as big a tax cut, but it dealt with
the marriage penalty. In fact, it had more money to address marriage
penalty than is in this bill. So it is not a question of since you
supported a smaller tax cut that you were then preventing addressing
the marriage penalty. There are other choices to be made.
How much you provide at the top end of the income spectrum is a key
issue. Here is the problem with this bill. The top 1 percent get twice
as much of the benefits as the bottom 60 percent. That is the problem
with this bill. If you didn't design the tax proposal in this way, you
would have no problem doing what I am doing with this amendment, which
is to provide marriage penalty relief starting now, not waiting, as the
legislation before us does, for 4 years to do anything. The problem
they have is summed up very well in this chart. The top 1 percent get
33.5 percent of the benefit of this bill. The bottom 60 percent get 15
percent of the benefit. So the top 1 percent, people on average who
earn in this country $1.1 million a year--and that is great; I am all
for them. I am pleased they are successful. It is a great thing about
America. But when we are talking about taking the people's money and
giving it back to
[[Page S5046]]
people, I am not for taking the people's money and giving a third of it
to people who are on average earning $1.1 million. That doesn't strike
me as fair. That doesn't strike me as equitable. That doesn't strike me
as balanced. That doesn't strike me as the way to strengthen the
economy.
In this amendment I say let's address the marriage penalty beginning
now. We do not have to wait 4 years to begin to address the marriage
penalty. The marriage penalty is not right. It is hurting those who are
in a circumstance in which the Tax Code penalizes them for being
married. That is not right. Nobody supports that. I do not suggest
anybody does.
The Senator from Iowa said some of us on the other side last year did
not support a proposal on marriage penalty. You bet we did not support
that because it did not solve the marriage penalty. It dealt with three
of the provisions in the code that create marriage penalty, that impose
a marriage penalty. There are over 60 provisions in the code that
impose marriage penalty. On our side, we proposed giving taxpayers a
choice. They could file as individuals, they could file as a couple,
whichever benefited them the most. That is the only way to solve all of
the 60 places in the Tax Code that impose a marriage penalty. That was
not accepted. It was not passed.
In this bill, we have a different approach. It is a useful approach.
It helps. But it is delayed. It is deferred. It is drawn out. What we
are saying is: Look, let's address the marriage penalty now. Let's not
wait 4 years before we start. And let's not wait until 2008 to fully
phase it in. Let's start dealing with the marriage penalty now. I think
that is fair and it does no harm to the country. It strengthens the
country to do so.
I thank the Chair and yield the floor.
Mr. GRASSLEY. Mr. President, I yield myself such time as I consume.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. This legislation is a commonsense approach.
Politically, it is bipartisan. In order to get anything through the
Senate, you have to have that commonsense approach, something where we
produce legislation that will get at least 51 votes. We have
legislation here that will get a lot more than 51 votes. So the common
sense is that there is a balance here: One, politically it is
bipartisan. The other one is that it is balanced between short-term
stimulus, immediate help for lower income tax rates, and helping those
at the outer income. In the outer years, that is phased in to lower the
top marginal tax rate.
The Senator's marriage penalty amendment upsets the balance that we
have in this bill between short-term, immediate help and the long-term
stimulus to the economy. This bill is balanced between a short-term
stimulus of $100 billion and then the changes in the higher marginal
tax rates which will have a long-term impact on the economy. He pays
for his amendment by damaging the balance we have in this bill between
short-term stimulus and long-term stimulus because, even though these
rates are phased in over the next few years, by reducing the marginal
tax rates, we have economic studies that show people will change their
investment habits based upon the prospects and known changes of tax
law. Even though the money is not in the pockets of the taxpayers, we
know there is going to be changes of investment and spending habits,
based upon the prospects of the marginal tax rates coming down that are
going to be a long-term benefit to this economy--creating jobs, keeping
inflation down, and strengthening the economy.
I plead with my colleagues, as they consider this legislation--it is
fair to look at the equity of the bill, but the equity is between long-
term stimulus, short-term stimulus, between partisanship or bipartisan.
We have a balance through bipartisanship, and we have a balance between
long-term stimulus and short-term stimulus.
So what is wrong with the amendment by the Senator from North Dakota?
It isn't that he wants to do more about the marriage penalty. We all
would. But this is a carefully crafted compromise, both for the
political need to get a bill through and for the good of the economy.
And we try to be fair in the process. That is why it upsets this very
delicate balance.
We should keep our eye on the ball, and keeping your eye on the ball
means: Where do we want to go? We want to be fair and equitable. We
want short-term stimulus. We want long-term improvement to the economy.
This bill does all that.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, when my colleague, who I respect and
admire and like and work with frequently, makes these points, I just
profoundly disagree. I do not think this is a balanced package. I
showed the chart as to why I do not think this is balanced. He is
talking about upsetting the balance. This is not my idea of balance.
The top 1 percent get 33 percent of the benefits, and the bottom 60
percent get 15 percent of the benefits. Half as much for the bottom 60
percent as the top 1 percent? And this is called a carefully crafted
balance?
Looking at it a different way, the bottom 20 percent get 1 percent of
the benefits, the top 20 percent get 70 percent of the benefits. And
this is a carefully crafted balance? There is no balance. The top 1
percent get 33 percent of the benefits, twice as much as the bottom 60
percent.
When we look at rate reduction, it is very interesting. These are the
rates that are in the current code: For the 15-percent rate, they do
not get any rate reduction, none, zip. Interestingly enough, that is
where the vast majority of the American taxpayers are. That is where 70
percent of the American taxpayers are. They get no rate reduction.
For the 28 percent, they get 3 points, about a 10 percent on rate
reduction; the same is true at 31 percent; the same is true at 36
percent.
The very top, the very wealthiest who pay a rate of 39.6 percent, get
the biggest rate reduction of all, but the bottom rate, where 70
percent of the American taxpayers are, gets nothing.
They call this balanced? I do not see any balance. They call this
fair, carefully calibrated? Carefully calibrated if you are at the top.
But if you are one of the 70 percent of the American people who are
down here in the 15-percent bracket, you get no rate relief.
It does not seem carefully calibrated to me. It does not seem fair to
me. It does not seem balanced to me. When there are five rates in the
current Tax Code and only one rate gets no rate relief, and it just
happens to be the rate where 70 percent of the American taxpayers are,
that does not strike me as balanced. And the biggest rate reduction
going to the very top bracket does not seem balanced to me.
I do not think it is going to seem balanced to the American people
when they have a chance to review it. I do not think it is going to
seem balanced to them when they have a chance to find out the details.
I do not think the 70 percent of the American people who find out
they get no rate relief are going to think they have been treated very
fairly. This thing is weighted to the very top, the very wealthiest
among us. That is what this is. It is not balanced. It is not fair.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I have two charts as well. I am not sure I enjoy this
battle of the charts.
Mr. REID. I say to Senator Grassley----
Mr. GRASSLEY. Yes.
Mr. REID. I wonder if the Senator would like to enter into this
unanimous consent agreement?
Mr. GRASSLEY. I yield to the Senator from Nevada.
Mr. REID. Mr. President, I ask unanimous consent that the pending
Conrad amendment be temporarily set aside following the remarks of the
Senator from West Virginia, and that Senator Hutchison be recognized in
order to offer an amendment relating to the marriage tax penalty. I
further ask consent that there be a total of 2 hours equally divided in
the usual form for debate on both amendments concurrently. I further
ask consent that following the use or yielding back of time the Senate
proceed to a vote in relation to the Conrad amendment, to be followed
by a vote in relation to the Hutchison amendment, with no amendments in
order to the amendments prior to the votes.
[[Page S5047]]
I would say that the Senator from West Virginia has asked for 10
minutes.
The PRESIDING OFFICER. Is there an objection?
As a Senator from the State of Kentucky, I object.
Objection is heard.
Mrs. HUTCHISON addressed the Chair.
Mr. REID. The Senator from Iowa has the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. The charts behind me contradict what the President----
Mrs. HUTCHISON. Will the Senator yield?
Mr. GRASSLEY. Yes.
Mrs. HUTCHISON. I want to ask about the process. I am able to do
whatever I need to do, but I am not sure what the previous objection
was regarding. So I do not know if it was to the offering of my
amendment after Senator Conrad's amendment, and then the votes, or if
it was to the 10 minutes for the Senator from West Virginia. But if we
could clarify it, then I would be able to plan, if the Senator from
Iowa would help me clarify this situation.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, we could resolve this very quickly if the
Senator from Iowa would allow us to go into a very brief quorum call.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, I renew my unanimous consent request that I
propounded before the quorum call.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, there may be honest differences of
opinion between the Senator from North Dakota and I, but when he makes
the claim that this tax bill is not fair, I refer to the chart behind
me.
When our legislation is passed, this bill will make the income tax
system more progressive. We have heard the other side say that the
upper income gets more out of the tax cuts. First, the people paying
the taxes will get more tax reductions. But after this bill is enacted,
the wealthy will be paying more of the taxes than they are paying now.
As we can see specifically, where the Senator from North Dakota said
that the top group would be getting 33 percent of the benefit, take
into consideration that they are paying 35.9 percent of the total taxes
today.
I have a second chart. This chart shows that the tax relief share is
greatest in families earning less than $50,000. It is all because of
our bill. More than half of the $750 billion that we have in rate cuts
in this bill go to the new 10-percent rate. We can see here that we
have very carefully tried to craft a bill that is progressive and
retains the progressiveness of the present tax system.
About the President's proposal, we are not dealing with the
President's proposal on the floor today, as the President would like to
have it. With the reality of the makeup of the Congress, it never will
be. But let's just say that we were debating today the President's
proposal that he announced in the campaign and behind which he still
stands as his policy. If it were carried out, the top income people in
America would be paying a higher percentage of the total income tax
take of the Federal Treasury than they do today. So I don't want to
hear anybody talk about the progressiveness of our tax system being
diluted at all because of either this bill or the President's bill.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, the Senator from Iowa put up some very
interesting charts.
The one he has there now says: Tax Relief Act Makes Tax Code More
Progressive. Then under that it says: First Year Tax Relief.
This isn't a 1-year bill. This is a 10-year bill. That is the
problem.
I displayed a chart earlier about all the measures that are phased
in, all the things that come in later on, that benefit the wealthiest
people in our country. He puts up a chart that talks about the first-
year tax relief. That is not a fair measurement of what this bill does.
That is what is wrong with the analysis.
This is what the bill does over the 10 years. It gives 70 percent of
the benefits to the top 20 percent, and gives 1 percent of the benefits
to the bottom 20 percent. It gives 33 percent of the benefits to the
top 1 percent, twice as much as the bottom 60 percent receive. There is
no way of disputing this. This is what the bill does. That is exactly
what it does. I am not putting up a chart that just has the first year.
This is not a 1-year bill.
The fact is, this bill is heavily weighted to the highest income
people in the country. That is a fact. The chairman of the committee
showed a previous chart that talked about how much people pay in income
taxes. There is something missing from that chart, too. What is missing
is payroll taxes.
The fact is, 80 percent of the taxpayers of this country pay more in
payroll taxes than they pay in income taxes. Our friends on the other
side just want to talk about income taxes. They want to forget about
the fact that 80 percent of the people pay more in payroll taxes. It is
when you put the full picture in front of people that you see the
results and the unfairness of this proposal. That is what reveals the
top 1 percent get 33 percent of the benefit but only pay 20 percent of
Federal taxes. That is when you include the estate taxes, the payroll
taxes, the income taxes. But they don't want to talk about all the
taxes people pay. They just want to talk about income taxes because
that is the only thing that is being cut here--income taxes.
If we were going to be fair, we would be talking about all the taxes
people pay. When we look at all the taxes people pay, we find this tax
cut measure: 33 percent of the benefit goes to the wealthiest 1 percent
and the bottom 60 percent only get 15 percent of the benefit. They
justify it saying, the top 1 percent pay more income taxes. Yes, they
do. Absolutely, I will stipulate to that. They do pay more income
taxes. But they don't pay 33 percent or 35 percent of all Federal
taxes. No. They pay about 20 percent of all Federal taxes. Yet they are
getting 33 percent of the benefit here. It is not fair.
That is why it flunks the fairness test. That is why it ought to be
opposed. That is why we ought to defeat this, make it go back to
committee and come out with something that is more fair to the American
taxpayer.
I represent a State where half the people make less than $20,000 a
year. They aren't going to get any benefit. They are not going to get
any rate reduction--none, zero. Are they going to be surprised. The
alternative minimum tax that currently affects 1.5 million people, when
this gets in place, it will affect nearly 40 million people. Boy, are
they going to be in for a big surprise.
I don't think this passes the fairness test.
I yield the floor.
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. ROCKEFELLER. Mr. President, in the State this Senator represents,
we are of moderate means. We can't afford a lot of charts. So when
Senator Byrd and this Senator come to the floor, we don't usually use
charts. We use whatever words we have.
I don't mean to make any big point of that. But sometimes I think
charts are helpful; sometimes I think they are not. I will say this. I
agree with the Senator from North Dakota that the bill is not fair. I
voted for all the amendments which were defeated, but I do think the
chairman of the Finance Committee, Senator Grassley from the State of
Iowa, was very fair in the way he conducted the hearing. I didn't agree
with the result, but I thought his personal demeanor and the way he
handled himself in the general disposition of the tax bill--that the
Senator himself was personally very fair, and I respect that. I wanted
to so say.
I am baffled, also, by what the fairness concept is. One of the
things that amazes me--and I am here to talk for the marriage penalty,
and I will--but when they talk about the rich, this is
[[Page S5048]]
sort of a mantra: If the rich make a lot of money, then they should get
a tax credit because they did make a lot of money, which goes somehow
on the idea that they really struggled their way through life and stock
options and other things didn't help them.
The point, of course, is that during these last years, the pretax
income of the very wealthy has been so enormous that, obviously, they
have paid more taxes. But the reason is that their pretax income was so
much higher. Even after they did pay their taxes, their resulting net
income was much higher than it had been previously. I think that is a
very important point.
I think another important point to be made, before I get to Senator
Conrad's amendment, is that one of the things that, it seems to me,
people have not focused on either in the press or, as I find it, in
general conversation, is that once the Senate and the Congress, with
the encouragement of the President, cut taxes to the extent that I
believe we may, that is revenue forgone, not for a period of 10 years
but probably 10, 15, or 20 years.
There was a time when you could come in and say, well, we are at a
certain crisis and, for a certain reason, we have to raise taxes. I
think those times have passed. The American people are not going to
stand for it if we lower their taxes and then come back in 3 years, as
we did after a year and a half with the balanced budget amendment with
the hospitals and other health care facilities, and say we made a
mistake; we want to change the rules. The American people won't stand
for that, nor should they.
If we want to take a stand, now is the time we need to do that. The
stand should be for fairness, and this bill doesn't meet any of those
tests that I can find. I look upon the future of the country and upon
the future of my State, West Virginia, and I worry about whether or not
we are all going to make this. I think we are going to be back in very
substantial double-digit deficits--triple digit, quadruple digit,
multiple digit. I also think that the markets are going to take a very
bad signal from this. They are going to think Congress has acted, as we
are acting, in a very hasty manner. The Joint Tax Committee hasn't even
scored a lot of the costs of this bill, even as we discuss this matter.
The 20 hours is running, and we are going to vote on Monday, I
presume. We really don't know what we are voting on. Very few Senators
outside of the Finance Committee, and maybe not many on that committee,
are enable to tell you that. So we have our votes and we think we are
making substantial points, but most of this is flowing underneath the
radar screen, under our feet, and the cost of it is going to be
enormous.
I fear for that because eviscerating the Federal budget may be
attractive if one wants to diminish the size and role of Government in
America, but there are, after all, some things the private sector
cannot do and there are things the public sector does have to do--in
Medicare, health care, FAA, FBI, and border control; all kinds of
programs are a part of that.
The Presiding Officer wants to see a third airport built in the State
of Illinois. I happen to share his view. I also happen to share the
view that there should be another runway built at O'Hare. Neither the
Presiding Officer nor I are going to see that happen, unless there is
money to make it happen.
So having divested myself of those particular thoughts, I want to say
that I strongly support the Conrad amendment and I think we need
marriage penalty relief now.
The proposal the Senator is making would make the marriage penalty
available to couples in 2002. The way we did it in the Finance
Committee was to make it available in 2006 and then, because of certain
problems of scoring, et cetera, it was brought back to 2005. The point
is, we are playing a budget gimmick and we are withholding something
which people all over this country--couples--think they absolutely are
going to have as soon as this bill passes, if indeed it does.
So, in a sense, we are misleading them. We are grossly distorting
what we have said to them, and they don't know it. It is only on
occasions such as this when one has a chance to say it, but it is not
usually reported because it is not considered newsworthy. But it will
be very newsworthy to the American people when they discover they do
not get marriage penalty tax relief until the year 2005. That is wrong.
On the other hand, we can change it by simply saying we will take the
two top tax brackets and put those off a little bit and make it
available in the year 2002. That is what we promised we would do. That
is what we campaigned on. That is what we discussed we would do, and we
ought to do that. That is what the Conrad amendment, in fact, does--
charts or no charts. It does that. I think that is right and fair.
I think the amendment is fiscally responsible because it is paid for;
it is offset by delaying the reductions in the two top tax brackets. So
we are leveling with the American people, but we are also doing
something that they expect to happen. They know gasoline prices are
going up and we are not doing anything about that. We told them we were
going to give them marriage penalty relief, and we are not going to do
that. Through this amendment, we can do that. I think it is something
we should proceed to expeditiously, so that if we take our word to the
American people about 2002 and marriage penalty tax relief, and doing
it in a very good manner, then it would seem to me one would vote yes.
If one values that less than the so-called sanctity of the two top tax
brackets, then I suppose one would vote no. I intend to vote yes. I
think it is a rather easy decision.
I thank the Presiding Officer, and I yield the floor.
The PRESIDING OFFICER (Mr. Fitzgerald). The Senator from North
Dakota.
Mr. CONRAD. Mr. President, I yield 5 minutes to the Senator from
Florida.
The PRESIDING OFFICER. The Senator from Florida is recognized.
Mr. NELSON of Florida. Mr. President, I compliment the Senator from
West Virginia for his insight and tell him that apparently there is a
lot of similarity in the thinking of the people of West Virginia and
the thinking of the people of Florida. Indeed, they take for granted
that if we are saying we are going to eliminate the marriage penalty so
that it doesn't penalize married people, so that it promotes family--
that if they take for granted that we are going to do that, they expect
to have that tax benefit immediately instead of having to wait 5 years
into the future.
It is common sense to me, if we have made this promise to the people
of America, and I have made this promise to the people of Florida, that
we should have that tax benefit--in other words, that you are not
penalized in the Tax Code if you are married--instituted immediately.
I thank the distinguished Senator from West Virginia for his
comments.
The PRESIDING OFFICER. Who yields time?
Mr. CONRAD. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, this is clearly a very important debate,
and we very much want to reduce taxes for the American people. We want
to do it fairly. Different Senators have a different perception of what
fair is. It generally reflects their States. States are different. For
some, it reflects different ideological points of view. It is America.
We all have different points of view, and we are all trying to do the
best we can.
There is an old saying about statistics: Anybody can do what they
want with statistics. When Senators are arguing their points, they are
going to find facts and figures and use statistics that make their case
better, the basic problem being in most cases Senators do not give the
full picture because, correctly, they are advocating their point of
view.
That must be very frustrating to the American public. Who is right?
Somebody makes one set of claims; somebody else makes another set of
claims. The tax legislation is confusing enough as it is, but when
people hear different sets of numbers, they seem to be juxtaposed to
one another. Who is right?
[[Page S5049]]
It is basically, for the reasons I indicated, because Senators tend to
choose statistics that make their case, but are not broad brush and do
not give a fair picture.
I begin with complimenting the Senator from North Dakota. I do not
know anybody in this body who has a greater command of the budget, the
effects the different proposals in the budget have on the American
economy, tax distribution, and all the components that go into a
budget. He has charted us out in many respects, particularly in our
conference luncheons on Tuesdays. We saw a lot of good charts. They are
very informative. It pretty much helps the debate. It is very hard for
people to hear statistics, and it is a little easier if they see
charts, particularly if they can see not just a bunch of numbers but a
graph which shows trends. The Senator from North Dakota has done a
super job in helping to educate this body, and particularly the
American public.
I want to point out a little broader picture of the lay of the land.
Basically, the statistics presented by the Senator from North Dakota
about the distributional effect of the bill before us, particularly the
top 1 percent--and his argument that the bill gives a greater
proportion of benefits to the most wealthy compared with current law--
is accurate if you include estate tax provisions. But there are lots of
analyses that show it is not accurate if you do not those provisions.
Most Senators do want to include Federal estate tax reform and/or
repeal. That is a fact. I know the Senator from North Dakota does.
Let me talk about the Joint Tax Committee analysis. They are the
group we look to for honesty and integrity in this process.
Unfortunately, they only do analyses for 5 years. They rank income
categories according to groups. Their analysis is a little different
than the so-called Citizens for Tax Justice, a privately funded
organization, which tends to do analyses in quintiles, rather than
income brackets, like the Joint Tax Committee.
According to the Joint Tax Committee, taxpayers with incomes of
$200,000 or more--that is the top 4 or 5 percent of taxpayers--do not
receive 33.5 percent of the benefits of this bill, as my good friend
from North Dakota says. Instead, they will receive 22.5 percent of the
benefits of the bill. Those are taxpayers who pay about 32 percent of
all Federal taxes, not just income taxes.
In fact, if you use the same analysis used by my good friend from
North Dakota, the top 1 percent of taxpayers pay 26 percent of all
Federal taxes and would receive 19 percent of the tax cuts in the bill
if you take out the estate tax provisions.
We have to be honest with ourselves: Are we or are we not going to
include estate tax provisions? Those making the case that the
distributional effect helps upper income Americans more, are not saying
they prefer that because they favor Federal estate tax reform and/or
repeal.
I am pointing out that when you include Federal estate tax, the
analysis is more accurate, but almost every Senator wants to include
estate tax reform and/or repeal. The results work out that way because
clearly the most wealthy Americans get the benefit of estate tax reform
and/or repeal.
In summation, the top 1 percent of taxpayers, according to the
analysis by the Citizens for Tax Justice, are those with incomes of
$373,000 or greater, and the argument is these taxpayers receive 33
percent of the benefits of the bill.
If you look again, more deeply at the argument, the analysis
presented includes estimates of the distribution of the estate tax
provisions of the bill. Again, both parties, and nearly every Member of
this body, support estate tax reform and/or repeal, and no matter how
you do estate tax reform, nearly all the benefits go to the wealthiest
Americans, and that is why there is that result.
If I were writing this bill, it would be different. But I wanted to
make it clear that the statistics--if we are honest with ourselves, we
have to indicate whether or not we are for estate tax reform and/or
repeal, and if we are--and most Senators are--then the statistics tend
to have the result that people who also want estate tax reform complain
about.
I hope that clarifies things a bit, so we at least know what we are
doing. I yield the floor.
The PRESIDING OFFICER. The Senator from Texas.
Amendment No. 659
Mrs. HUTCHISON. Mr. President, I send an amendment to the desk and
ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Texas [Mrs. Hutchison], for herself and
Mr. Brownback, proposes an amendment numbered 659.
Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To begin the phase-in of the elimination of the marriage
penalty in the standard deduction in 2002 and to offset the revenue
loss)
On page 19, beginning with line 21, strike all through the
matter preceding line 1 on page 20, and insert:
``(7) Applicable percentage.--For purposes of paragraph
(2), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning in calendarThe applicable percentage is--
2002.........................................................170
2003.........................................................175
2004.........................................................180
2005.........................................................185
2006.........................................................190
2007.........................................................195
2008 and thereafter.......................................200.''.
On page 20, line 14, strike ``2005'' and insert ``2001''.
On page 29, line 4, strike ``$2,000'' and insert ``the
applicable amount''.
On page 29, line 7, strike ``$2,000'' and insert ``the
applicable amount (as defined in section 530(b)(6))''.
On page 29, between lines 7 and 8, insert:
(3) Applicable amount.--Section 530(b) is amended by adding
at the end the following:
``(6) Applicable amount.--The applicable amount shall be
determined in accordance with the following table:
``In the case of taxable years beginning in cThe applicable amount is--
2002 or 2003................................................$500
2004 or 2005................................................$750
2006 or 2007..............................................$1,000
2008 or 2009..............................................$1,500
2010 and thereafter....................................$2,000.''.
On page 35, strike lines 21 through 23, and insert:
(h) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxable years beginning after December 31,
2005.
Strike section 412 and insert:
SEC. 412. INCREASE IN INCOME LIMITATION ON STUDENT LOAN
INTEREST DEDUCTION.
(a) Increase in Income Limitation.--Section 221(b)(2)(B)
(relating to amount of reduction) is amended by striking
clauses (i) and (ii) and inserting the following:
``(i) the excess of--
``(I) the taxpayer's modified adjusted gross income for
such taxable year, over
``(II) $50,000 ($100,000 in the case of a joint return),
bears to
``(ii) $15,000 ($30,000 in the case of a joint return).''.
(b) Conforming Amendment.--Section 221(g)(1) is amended by
striking ``$40,000 and $60,000 amounts'' and inserting
``$50,000 and $100,000 amounts''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 2001.
On page 53, line 12, strike ``$3,000'' and insert ``$2,000
($1,500 in the case of 2002)''.
On page 53, line 21, after ``$5,000'' insert ``($3,000 in
the case of 2004.)''
On page 311, line 10, strike ``$49,000'' and insert
``$48,000''.
On page 311, line 16, strike ``$35,750'' and insert
``$35,250''.
Mrs. HUTCHISON. Mr. President, first, I respect the distinguished
chairman, Senator Grassley, and his ranking member, Senator Baucus, for
crafting the tax reduction bill. I know and understand in order to get
a complicated and very important bill through a committee that is
evenly divided, many compromises must be made. I know Senator Grassley
would not have written the bill exactly this way, nor would Senator
Baucus, had they been able to write it by themselves.
It is with great respect I offer my amendment that somewhat changes
the order of the bill, although it is not a huge deviation.
[[Page S5050]]
Looking at their timetable, I realize how difficult it was for them
to say which tax relief comes in the early years and which comes in the
later years. When I decided I wanted to try to move the marriage
penalty up, it was hard to find something to trade. It was hard to find
the offset. Everything in the early years is a very important tax cut
and it represents very important tax relief for every American family.
I agree with Senator Conrad, we should bring the marriage penalty up
earlier, but I disagree with his offset. I think the cut in the tax
rates for every working American is the very highest priority. I am
going to offer an amendment that would bring the marriage penalty
relief up to 2002, rather than beginning in 2006 as in the underlying
bill. My offsets are the deductions for some of the education expenses
being streamlined over a longer period of time.
In the bill before the Senate, the marriage penalty relief starts in
2006 and ends in 2010; my marriage penalty standard deduction doubling
starts in 2002 and ends in 2008. It is fully effective in 2008. We have
the full doubling of the standard deduction by 2008, starting in 2002.
In order to achieve that, it was necessary to streamline the phasing in
period of the education IRA and the education expenses that have the
added deduction. The deduction maximum for the education expenses under
my bill in 2002, would be $1,500; 2003, $2,000; 2004, $3,000; and in
2005, $5,000. Under the underlying bill, all of the deductions end in
2005. My amendment does the same.
There would be a phasing in difference and it does chip away at the
phase-in of the deduction for education expenses. The tradeoff is we
double the standard deduction, starting immediately in the 2002 year.
These are tough choices. There is no doubt about it. I understand
that. I have been working on marriage penalty relief for the last 4
years. We have passed it in the Senate twice, but it was vetoed by
President Clinton. Today we have a chance to finally begin the process
of relieving the marriage penalty.
The marriage penalty came about as an accident. Congress doesn't mean
to tax married people more than two single people living together
individually would be taxed. But it did happen that the Tax Code has
evolved so that there is not a doubling of the standard deduction when
two people who are single get married; there is not a doubling of the
15-percent bracket or the 28-percent bracket or the 33-percent bracket
or the 39.6-percent bracket or any other bracket. There is no doubling.
In the underlying bill, the relief for the 15-percent bracket, the
full doubling, which gives every working American that doubling
capability, is there. The doubling of the standard deduction is there.
But it doesn't start until 2006.
I am trying to double the standard deduction beginning in 2002, to at
least start the relief from the marriage penalty tax.
Fifty million couples in this country are affected by the marriage
penalty. We received a census report in the last 10 years, and we see a
dramatic 77-percent rise in the number of single people who are living
together, unmarried. I am not trying to tell anybody how to live. But I
think the marriage penalty has something to do with that. I have had
people tell me they are delaying getting married until we fix the
marriage penalty. Whether or not that should be a factor is not for us
to judge, but nevertheless we should not have a Tax Code that penalizes
people who get married.
Generally, people who get married need more help, not less, because
their expenses are more. They may have to have a house on which they
want to make a downpayment, whereas before they lived in an apartment.
They may need another car. There are any number of added expenses. Of
course, if the couple starts having children, we know there are more
expenses.
We want to encourage the family. It is the stability in this country
that gives people the infrastructure they need to get through life. We
want to encourage that. We certainly don't want to do something in
government policy that discourages families.
I understand how hard it was for the committee to make the tough
choices, but I address the marriage penalty relief earlier in the bill.
Although I like all of the education deductions, I phase them in at a
slower rate in order to move the doubling of the standard deduction up
to the front.
I think the significant tax relief that the American people are going
to get from this bill is a tribute to those who wrote it and to the
President of the United States, who made it his priority. I think it is
very important we give tax relief. I am so pleased we are giving tax
relief in the form of a tax bracket reduction for every single working
American. That is why I could not go along with Senator Conrad's
approach to doubling the standard deduction and relieving the marriage
penalty in lieu of the rate cuts. Single people get the rate cut and
married people get the rate cut and that is the way it should
be. Everyone should get the biggest tax relief, and that will come from
the rate cuts. So I would not put the marriage penalty in front of the
rate cuts. But I do put it right after the rate cuts, which is why I
have chosen to go a different route from Senator Conrad.
I am very proud that we will be giving a rate reduction to every
single working American. I am proud that we are going to take away the
onerous burden of the death tax so a family-owned business or a family-
owned farm or family-owned ranch will not have to be sold, putting all
the people who work for that family-owned business out of work, because
passing our family businesses from generation to generation will keep
small business strong.
It is small business that is the economic engine of America. It is
not big international conglomerates that are the economic engine of
America. I want to preserve our family-owned businesses and farms and
ranches as much as we can. The elimination of the death tax is the best
way to preserve family-owned businesses and farms and ranches. All the
people who work for those family-owned businesses should have job
stability and not worry about being taken over by some big
international conglomerate that is going to eliminate their jobs. I
certainly favor the elimination of the death tax.
Doubling the child tax credit is another facet of this bill that I
support fully. Everyone who has children knows how expensive it is to
do for them all the things that you want to do, that would give them a
better chance: The music lessons, the dancing lessons, the clothes, the
soccer uniforms, the baseball uniforms--all the things you want to give
them so they learn team spirit and sportsmanship, seeing what talent
they might have and nurturing that. All those things cost money. We
know that. We want to give relief through the child tax credit.
The bottom line is this is really a good bill. It is a good bill
because it gives tax relief to every working American: Single, married,
parents, not. It gives relief to every working American, and it
promotes job stability. That is important.
My amendment is not meant to in any way say the committee did not do
its job. The committee did a great job. I just want to make it a little
better. I hope we can bring the marriage penalty up and streamline the
education deductions and thereby add more relief from the marriage
penalty and try to increase the capability for those in our country who
have chosen not to get married because they really need that extra
$1,400 a year that they get.
Mr. President, I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, first of all I thank the Senator from
Texas for supporting the fundamental idea of moving up marriage penalty
relief. I would just differentiate our proposals in this way.
The proposal I am offering would give the full marriage penalty
relief starting immediately. The Senator from Texas would provide the
relief starting immediately but phase it in over an extended period of
time; we would not get the full phase-in until 2008. That would just be
on one of the provisions dealing with marriage penalty. As I understand
it, she does not deal with the other provisions at all.
In addition, there is a difference in the pay-for. The pay-for on our
side is to ask those at the highest income levels, the highest tax
brackets, to simply
[[Page S5051]]
have their tax cut deferred for a number of years. We get to the same
level over the period of the 10 years in tax rates, tax brackets. We
ask the fewer than 1 percent of the people who are in the very top tax
bracket and the approximately 2 percent of the people who are in the
next tax bracket to defer additional reductions so we can provide
marriage penalty relief starting immediately.
The Senator from Texas has a totally different pay-for. She goes
after student loan money; she goes after the education IRA money; she
goes after the alternative minimum tax money. I do not think that is
the way we want to pay for this. I don't think we want to pay for
moving up marriage penalty relief by going after the student loan
interest money. I don't think we want to pay for marriage penalty
relief by going after the education IRA money that allows people to
save for the education of their children. I don't think we want to go
after the alternative minimum tax money that we already know is totally
inadequate in this bill, and under this bill we are going to go from
1.5 million people being affected by the alternative minimum tax to
nearly 40 million people, nearly 1 in every 4 taxpayers who think they
are going to get a tax cut and are in for a big surprise: They are
going to get a tax increase under this bill.
I hope Members will look very carefully at the fundamental
differences between what I am offering to speed up marriage penalty
relief--do it immediately, do it now--versus what the Senator from
Texas is proposing, which is to start now but to dribble it out until
the year 2008.
Is the Senator from Michigan seeking time?
I yield 5 minutes to the Senator from Michigan. Then I announce my
intention to yield 10 minutes or whatever he will consume to the
Senator from North Dakota.
Ms. STABENOW. I thank the Senator.
The PRESIDING OFFICER. The Senator from Michigan.
Ms. STABENOW. Mr. President, I commend our Democratic leader from
North Dakota, Senator Conrad, for his outstanding advocacy for fairness
in this tax bill, for fiscal responsibility, for really coming to the
heart of the issue before us, and that is: How do we make sure the bulk
of the tax relief in this bill goes to hard-working middle-class
families, goes to the people who are working hard every day and need
the relief in order to be able to translate that into more
opportunities to put money into those items that are important for
their families? How do we make this more fair for the majority of
Americans?
I rise as someone who was a Member of the House of Representatives
for 4 years, who supported the elimination of what is called the
marriage tax penalty. I was a cosponsor of the Republican bill in the
House of Representatives and voted consistently to eliminate this
penalty for reasons that have been raised by colleagues on both sides
of the aisle. It makes no sense whatsoever for us to tell a married
couple that they will somehow be penalized under the Tax Code for being
married. That makes no sense. It affects over 25 million couples in
this country.
At a time when we are saying an important value for our country is to
be supporting marriage and family, and to make sure we are giving every
opportunity for couples to succeed and families to succeed, it is
crazy, in my opinion, and makes no sense whatsoever, to have this
provision in place. It should have been done away with a long time ago.
My colleague from North Dakota is saying it is time to do it right
away. By 2002 we need to fully provide relief for couples. We ought to
say it is time to end it. It is past time to end it. We ought not say
to them we are going to phase it in over several years, but we are
going to place families and couples as a top priority and end this
penalty now.
I think it is fair to say to the fewer than 3 percent of the
taxpayers at the highest levels, we are going to ask you to delay full
tax relief for yourself, those who have done extremely well. We want
them to do well, but certainly those who are best able to wait awhile
for a delay in their full tax relief, we are going to ask them, the
fewer than 3 percent: Delay, in order for over 25 million couples in
this country to receive the relief that is long overdue. It is an issue
of fairness.
I believe that when we look at what we are talking about in terms of
the number of people who would benefit by this amendment, and those who
are asking for a small delay, it is a question of fairness.
I also say to my colleague from Texas on the other side of the aisle,
who spoke so eloquently, while I share her desire to eliminate the
marriage tax penalty, I am very concerned about the tradeoff that she
is suggesting we make because another important value for all of us,
and for our families, is the ability to educate our children, to be
able to send them to college. I am very concerned about trading off the
marriage tax penalty and paying for it through a lessening of student
loan interest deductions or the education IRA because, again, this is
about how do we best support families who are having to make tough
choices every day.
Let's not penalize them for being married. Let's make sure they have
every opportunity under the Tax Code to be able to send their children
to college, to job training, to be able to give their children every
opportunity to succeed, and to be educated adults.
So that tradeoff does not make sense. What does make sense is
eliminating the marriage tax penalty now. We can do that this next
year. We need to do that now. Families have waited long enough. Couples
have waited long enough. It seems reasonable to ask for a small delay
for less than 3 percent of the taxpayers in order to allow the majority
of couples in this country to be able to get the relief that is long
overdue.
Mr. President, I yield back any time I have remaining.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, I yield 10 minutes to the Senator from
North Dakota.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I thank my colleague for the time.
This issue, as it has been described, is about the marriage tax
penalty. There cannot be anyone left in the Senate who does not
understand this issue. We have debated it and debated it and debated
it. Everyone stands up, almost automatically, in the Senate, and says:
I am for getting rid of the marriage tax penalty. Count me in. I want
to vote for getting rid of the marriage tax penalty.
We have a tax bill that has now been brought to the floor of the
Senate, and it says: Do you know what. We have written a bill that gets
rid of the marriage tax penalty. It is similar to an employee being
called into an office and the employer says: Good news. Do you know
what. We are giving you a raise.
Then the employee says: When does this raise start?
The employer says: 5 years from now. But we aren't going to give it
to you all at once. We'll phase it in. It starts in 5 years, and it
takes 8 years to get the full amount.
Look, if we want to get rid of the marriage tax penalty as we have
advertised for so many years, why would we not decide that as a part of
this tax bill we are going to give real tax relief right now to middle-
income taxpayers who are paying a marriage tax penalty? Why would we
wait some 5 years?
I ask the Senator from North Dakota, Mr. Conrad, in his proposal in
which he says, let's make the marriage tax relief available now--and,
incidentally, that is tax relief that principally affects middle-income
taxpayers who have a penalty under the marriage tax--let me ask him how
he would pay for moving up that tax relief so it becomes effective next
year, almost immediately.
How does the Senator pay for his amendment?
Mr. CONRAD. The pay-for in my amendment is to delay the rate cuts for
the top two rates, the 39.6-percent rate and the 36-percent rate.
As the Senator knows, there are about 3 percent of the American
people who are in those very top rates. We still give them the full
rate reduction included in this legislation; we just delay it so that
we can affect a significant number of people who are in the marriage
penalty situation. As you know, there are 50 million couples who
[[Page S5052]]
have filed a joint return for the most recent year for which the full
details are available, and 25 million of them experienced the marriage
penalty. That is 25 million couples. That is 50 million people.
The legislation I am offering says: Let's allow those people to have
relief from the marriage penalty and do so immediately, and have the
full benefits of this legislation that addresses the marriage penalty
effective in the next year.
Mr. DORGAN. If I might ask an additional question, Mr. President, my
understanding is that the beginning of tax relief for the top 1 percent
of the income earners in this country starts immediately, but the
beginning of trying to deal with the marriage tax penalty starts about
5 years from now. Is that correct?
Mr. CONRAD. Yes. Actually, overnight they changed it. It was not
going to take affect for 5 years. In other words, this chart says,
marriage penalty relief for middle-income taxpayers was going to be
delayed until 2006; it did not do anything for 5 years. Now it has been
changed and moved up 1 year. So it does not do anything for 4 years in
terms of marriage penalty relief.
What we are saying is, let's do it next year. Let's make it a
priority.
Mr. DORGAN. One additional question.
When will the marriage tax relief be fully effective?
Mr. CONRAD. Under the bill that is before us, not until 2008. Under
my proposal, there would not be any phase-in. We would do it all the
first year.
Mr. DORGAN. I know my colleague has studied economics. I have studied
economics and actually taught a little economics but was able to
overcome that experience.
When you study economics, you will learn about John Maynard Keynes'
saying: In the long run, we're all dead. Right. So it is interesting
this tax bill says: Look, here is what we are going to do. We are going
to get rid of the marriage tax penalty, and we are going to do this and
that and the other thing; and then you look at the fine print and find
out that for the marriage tax penalty, they do not start getting rid of
it until 2004 or 2005. I guess you say now it has been altered. It does
not complete until 2008.
So we are really talking about the long run, aren't we? But, yes, if
you happen to be earning $10 million a year in income, you are going to
get immediate tax relief by a rate reduction right at the start. Right
at the get-go, right at the starting line, you at the top are going to
get a rate reduction. But there is not enough money to provide relief
for the marriage tax penalty right away, so that is deferred 4 years, 6
years, 8 years, or, as Keynes would say, in the long run.
One wonders if there is not a short run and a priority that allows us
to say, look, the hard working families who are paying a marriage tax
penalty, shouldn't they be moved right to the front of the line.
Almost everyone jumps up instantly around here the minute you mention
the marriage tax penalty and say: I am for getting rid of it. Count me
in. I want to vote right now--except this tax bill does not do that.
Remember, John Mitchell once said: Don't listen to what we say. Just
watch what we do. That might be good advice for this marriage tax issue
as well. People say: We are going to get rid of the marriage tax
penalty. Not now we aren't, not unless we adopt this amendment offered
by Senator Conrad.
Of course we ought to adopt this amendment. Of course this is the
right priority. Senator Conrad is not saying everyone should not get a
tax cut. He is not saying the top rates should not get a tax cut. That
is not what he is saying at all. He is saying, the priority ought to be
to provide marriage tax penalty relief now--not in 2004 or 2005, not in
2008, but now, for the American people.
That makes eminent good sense to me. He is not suggesting that
further rate reductions should not occur at the top level. He is not
suggesting we defer tax relief for anyone else up or down the chain. He
is simply saying, use, as a priority, the money that he has in his
amendment to provide marriage tax penalty relief now.
If everyone in the Senate is true to the votes they have cast in the
last 3 or 4 years on this subject, Senator Conrad will receive 100
votes for this amendment. If so, I will congratulate him and say: Well
done. I hope when the vote is cast, we will have people voting the way
they have voted in the past 3 or 4 years on this issue to say: Let's
provide marriage tax penalty rate relief right now.
Mr. CONRAD. I think it is important to point out the differences
between my amendment and the amendment of the Senator from Texas. As
you know, in terms of marriage penalty relief, there are two
provisions. One is to double the standard deduction for a married
couple from what is provided single taxpayers. The second is to deal
with the fix on the 15-percent bracket so that we also are providing
relief that way.
The Senator from Texas would start the standard deduction relief in
2002, which is more quickly than what is provided for in the underlying
legislation, but she would then string it out to 2008. Her amendment
does nothing to speed up the fix on the 15-percent bracket. There is no
improvement there.
My amendment takes both provisions that are designed to deal with the
marriage penalty and puts them into place next year and pays for it by
deferring the reductions for the very top brackets, the top 3 percent
of earners in the country. They get their full relief, but it is
delayed so that we can give relief to 25 million couples--50 million
people--who are affected by the marriage penalty.
Mr. DORGAN. Mr. President, the reason I mentioned that everyone in
the Senate supports this, no one stands up in the Senate these days and
says: I think it is perfectly appropriate for us to have a penalty in
the Tax Code for married couples. I don't know of anyone who supports
that. The question remaining for the Senate is, Shall we fix that now
or shall we wait until later? Senator Conrad says: Let's fix it now.
Let's make adjustments to this proposal that is on the floor. If we all
agree that the marriage tax penalty should be fixed, the Senator says,
let's fix it now rather than much later.
That makes sense to me. I am pleased he offered the amendment. I will
be pleased to vote for it. I hope every one of my colleagues will do
the same.
I yield the floor.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I find it a little bit interesting. I
will be very brief.
Mrs. HUTCHISON. Mr. President, parliamentary inquiry: How much time
does my side have remaining?
The PRESIDING OFFICER. Forty-three minutes, 19 seconds.
Mr. NICKLES. I find it very interesting that a couple of the
proponents on the Democrat side are saying, let's repeal the marriage
penalty relief, when they had a chance to do that last year on July 21
and they voted no. The Senate passed, by a vote of 60-34, a bill to
eliminate the marriage penalty. We did basically the proposal that my
friend and colleague, Senator Conrad, is promoting. We passed it.
Unfortunately, President Clinton vetoed it.
It is interesting to note--and I will insert in the Record the vote
on that--but the Senator from North Dakota voted no last year on July
21.
Mr. CONRAD. Will the Senator yield?
Mr. NICKLES. I am happy to yield.
Mr. CONRAD. The Senator from North Dakota voted against that proposal
because it didn't fix the marriage penalty. We had an alternative
proposal that gave couples the choice. The only way to eliminate the
marriage penalty----
Mr. NICKLES. Mr. President, I have control of the time. The Senator
can make a point, not a speech.
Mr. CONRAD. If I may conclude, the only way to eliminate all of the
60 places the Tax Code imposes the marriage penalty is to give couples
a choice. That is what I supported.
Mr. NICKLES. Mr. President, to correct my colleague, the amendment he
has proposed today doesn't fix it for every category. It does what we
did last year, in that we expanded the 15-percent bracket. We doubled
the deduction.
My point is, there is a real inconsistency between the arguments made
on the floor today and the amendment they propose on the floor today
and the position they took last year.
[[Page S5053]]
Last year we had a chance to eliminate the marriage penalty and my
colleagues voted no. Now they are proposing basically the same
amendment we passed and sent to the President. They are trying to put
it on this bill. They had a chance to pass it last year and have it
become law. That is my point. I wish they would have had this position
last year.
One other final comment: I wish we could do more on the marriage
penalty in this bill today. And we could have, if we had $1.6 trillion
to work with. The same colleagues who say we want to do more on the
marriage penalty were the same ones saying we want less of a tax cut.
Now they are saying, we want to get rid of the marriage penalty. But
last year, unfortunately, they voted in opposition to repeal the
marriage penalty.
I ask unanimous consent to print the material to which I referred.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Rollcall Vote No. 226, July 21, 2000
(H.R. 4810 Conference Report)
YEAS--60
Abraham
Allard
Ashcroft
Bennett
Biden
Bond
Brownback
Bunning
Burns
Byrd
Campbell
Chafee, L.
Cleland
Cochran
Collins
Craig
Crapo
DeWine
Domenici
Enzi
Feinstein
Fitzgerald
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kohl
Kyl
Landrieu
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Warner
NAYS--34
Akaka
Baucus
Bayh
Bingaman
Breaux
Bryan
Conrad
Daschle
Dodd
Dorgan
Durbin
Edwards
Feingold
Graham
Harkin
Hollings
Johnson
Kennedy
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Moynihan
Reed
Reid
Robb
Rockefeller
Sarbanes
Schumer
Voinovich
Wellstone
Wyden
NOT VOTING--5
Boxer
Inouye
Kerrey
Kerry
Murray
Mr. NICKLES. I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I will make some general comments to help
put this debate in context.
First of all, under this bill, who are the winners and who don't win
quite so much? Under this bill, the big winners are married couples
with kids. By far, they receive a greater share of the benefits of this
bill, not only absolutely but proportionately.
Who does not do quite so well? Singles. Single taxpayers do not do
nearly as well in receiving benefits under this bill. Who else does not
do quite so well under this bill? The elderly. The elderly do not do
quite as well compared with married couples under this bill. Who else?
Students. Students do not do quite so well compared with married
couples under this bill.
In the broad brush of things, the bill already gives very significant
tax relief, in fact, disproportionate tax relief, to married couples
already.
We on the floor can decide to do still more. But if we do, it is at
the expense of others. The others will necessarily be those nonmarried.
Who are the nonmarrieds by definition? They are singles. And some of
them are elderly and some are students. So it will be a shift away from
people already not receiving nearly as many benefits absolutely and
proportionately as married couples. That is a decision we can make
here. Life is full of decisions. But that is the effect of what these
amendments do.
I mention one group: students. The amendment offered by the Senator
from Texas will cut education to help married couples even more. These
are important provisions. Let me mention what they are: expansion of
education savings accounts, increasing contributions from $500 to
$2,000 and also permitting withdrawal of funds for K-12 expenses; that
is, kindergarten through high school, elementary and secondary
expenses. That would be delayed under the amendment offered by the
Senator from Texas.
What else? The bill already eliminates the 60-month limit on
deductibility of student loan interest. That is a big benefit for
students. Students graduate from college, most have student loans. I
have forgotten the figure. The average student loan is in the
neighborhood of $15,000. It is not right that we cut off interest
deductibility on those loans after 60 months. This bill says, OK, we
are going to eliminate that 60 months. You can deduct the interest on
student loans after 60 months. That is in the bill.
The Senator from Texas, in order to pay for more relief to married
couples, eliminates that 60-month deletion. It is still current law, up
to 60 months.
In addition, the amendment offered by the Senator from Texas would
reduce significantly the above-the-line deduction for college tuition
expenses of up to $3,000 in 2002 and 2003, and under the bill, above
the line. She would limit it also for 2004 and 2005.
I think for the purposes of the Senate, it is important to know that
the bill, as I said, doesn't give a lot of help to students. It is fair
to married couples already. I don't think it is a good idea to take
even more away from students in education expenses generally and shift
it over to married couples.
I might also add, generally, there have been comments about this
bill. People take potshots at the provisions of the bill dealing with
solving the marriage penalty. Let me remind all of us again that this
is the context of what is going on here, so we don't get wrapped around
the axle and forget the bigger picture.
Currently, more taxpayers today receive a marriage bonus than are
inflicted a marriage penalty. Many more American taxpayers get a
benefit under the tax law on account of being married than they receive
a penalty on account of being married. What am I saying? American
taxpayers, as couples, where the income of one spouse is, say, at least
60 percent of the income of the other spouse, receive a bonus because
their incomes are combined. That automatically gives them a bonus
compared to filing separately.
The couples who receive a penalty today--not always--tend to be
couples where one spouse earns approximately the same income, within
about 20 or 30 percent.
There is a marriage penalty, no doubt about it. We should do all we
can to fix it, and we will. We are moving in that direction. But as we
move in that direction, I remind my colleagues that we can't do
everything at the same time. We know that is an impossibility. We have
a limit here of about $1.35 trillion over 11 years. That is a limit. We
would like to repeal the marriage penalty. We would like to give all
the money back to the taxpayers so taxpayers don't have to pay income
taxes. We want to have everything.
But life is choices. We in the committee, working together, have made
choices that are a tradeoff of different requests by Senators telling
us what they want in this bill. If you put that together, we have tried
to fashion a marriage penalty provision that is geared toward middle-
income taxpayers. That is why the provision is doubling the standard
deduction for married couples and also doubling the 15-percent bracket
amount for married couples. We could have done more. We could have gone
to upper brackets, more wealthy Americans. We wanted the distribution
to be fairer to low- and middle-income Americans. That is why this is
in the bill.
I urge Senators to remember we can't just take these amendments in
isolation. They are in context. They are in the context of the bill, of
larger issues and of choices we have to make today, knowing that
tomorrow, next month, in future years, we will make other choices and
we will be able to make up for what we may not have done today. We will
do what the American people want on the basis of trying to put these
pieces together in a reasonable manner.
This provision also has been sharply criticized by Senators who say
it takes effect later, not right away. It has been ridiculed by those
saying: ``Now you have it, now you don't have it''; it's a shell game.
Those Senators conveniently don't point out other provisions in the
bill that do take effect right away, which they support and which are
expensive. They make it more difficult for everything in this bill.
[[Page S5054]]
One is the creation of a 10-percent bracket, which is effective
retroactively, I might add, to January 1 of this year. That in and of
itself costs about $425 billion. That is not small change. That is
immediate tax relief. A large percentage of the taxpayers who are in
the 15-percent bracket will get that benefit. It is effective now and
it helps the distribution for middle and lower income Americans. It is
a very positive provision, which I know the Senators who complained
about the delay of the marriage penalty really like--this 10
percent. They don't talk about it. You have to look at the whole bill
and, I might add, too, the distributional effect of this bill is better
significantly than the House-passed bill. It is better significantly
than the proposals offered by the President.
I believe when you add it all together, it is a bill that we can--a
lot of us but not all--support. The marriage penalty provision is not
perfect. I wish it were made effective earlier. I wish it could apply
to all the marriage penalty provisions that are currently in the code,
and they number about 65. This only deals with about 3 or 4 of them.
The EITC provision I know the Senator from North Dakota likes. That is
really good. But we don't deal with the other roughly 58 marriage
penalties in the code, which have a little less effect because we don't
have the money to eliminate them. They are a little less politically
demanding than the ones with which we dealt with in this bill.
I respect my colleagues for their amendments. I remind them there is
already a disproportionate relief for married couples in this bill,
compared with singles, elderly, and students. I don't know if we want
to make that worse.
The PRESIDING OFFICER. The Senator from Nevada is recognized.
Mr. REID. Mr. President, for those who made inquiries to both
Cloakrooms as to when we are going to vote, the Senator from Montana,
the manager of the bill, spoke on the time allotted. Senator Conrad has
16 minutes left on his side and Senator Hutchison has 40 minutes left.
If all time is used without the managers using more time off the bill,
we would vote at approximately 4:50 or 4:55. Just so people know that.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. I yield 20 minutes to the Senator from New Mexico off
the bill.
The PRESIDING OFFICER. The Senator from New Mexico is recognized.
Mr. DOMENICI. Mr. President, I thank Senator Grassley. First, I want
to take a couple of minutes on history. Some Senators, clearly led by
Senator Byrd, have spoken to the issue of should we be reducing taxes
in a reconciliation bill. I want to remind everyone that Congress
passed, in 1974, a new law which had to do with the congressional
budget process. I want to quote from it and tell you three historical
events which would indicate that we are doing what we have done on a
number of occasions with reference to the Budget Act and reconciliation
instructions that apply to taxes.
First of all, 1 week ago today, exactly, this body of Senators
adopted a fiscal year 2002 budget resolution. Now, as in many things,
all Senators didn't agree. But that resolution, with an instruction to
reduce taxes by a total of $1.25 trillion over 10 years, with $100
billion available for the first 2 years to be spent by the Committee on
Tax Relief has to do with stimulating the economy for a total of $1.35
trillion over 11 years. Within 1 week, the Committee on Finance--again
in a bipartisan manner--I might say to the Senate, you might recall
that the budget resolution, with an instruction on the taxes, passed
the senate with 15 Democrats voting along with all Republicans, except
2. So it was a very bipartisan instruction to reduce taxes.
Within 1 week, the Committee on Finance has complied with this
reconciliation instruction and has presented to the full Senate a bill
that reduces revenues or increases outlays for a total of $1.347
trillion over the next 11 years. Remarkably good work. Obviously, when
you set these kinds of annual and multiyear mandates with reference to
taxes, you can't do everything you want, and you can't do every one as
clean as you would like. But the policies included in this bill will be
discussed shortly.
Let me first talk about the criticism we should not be using
reconciliation, that is, the fast-track procedures permitted under law,
for tax reductions.
First, I want to read the Budget Act of 1974:
Inclusion of Reconciliation Directives in Concurrent
Resolutions on the Budget.--A concurrent resolution on the
budget for any fiscal year, to the extent necessary to
effectuate the provisions and requirements of such resolution
shall--(1) specify the total amount by which revenues are to
be changed and direct that the committees having jurisdiction
do determine and recommend changes--
To accomplish that--
Continuing to read:
and resolutions to accomplish a change of such amount to
comply with the policies of the resolution.
I note this section of the act says ``changes.'' It does not say that
the only thing reconciliation can be used for is to raise taxes, nor
does it say the only thing it can be used for is to cut taxes. It
simply says ``effectuate'' the policies of the underlying resolution.
Over time, yes, we were faced with deficits and used reconciliation
for tax increase instructions and for spending cut instructions, but
times have changed, and since fiscal year 1997, budget resolutions have
passed the Senate that have considered tax reconciliation bills on
three separate occasions. One was signed by President Clinton, one was
vetoed by President Clinton, and one was never presented to him because
he said he would veto it. But the Senate and the Congress, after a
conference, actually passed tax bills that were the result of an
instruction in a budget resolution that such be done to carry out the
policies of the budget resolution.
There are some who say they wish it were not so. I do not know if I
am prepared to debate that today. All I am prepared to say is those who
criticize it should know it has its genesis in this Budget Act which
was passed by all Senators, except one, voting for it years ago. I have
read the operative language, and I am absolutely comfortable with the
fact that we have not in any way exceeded what the Senate of the United
States has heretofore indicated can be done in a budget resolution
regarding reduction of taxes by an instruction.
In the FY 1997 budget debate, on a rollcall vote, the Senate
established the precedent for including tax cut reconciliation
instructions in a budget resolution under expedited procedures of the
Budget Act.
That year the Congress presented the President with a $122.5 billion
six-year tax cut reconciliation bill. The President vetoed that
reconciliation bill.
In the FY 1998 budget debate, the Congress adopted instructions for a
tax cut reconciliation bill for $85 billion over a 5-year period. The
Finance Committee and the Congress complied with the instruction. The
President signed that tax cut reconciliation bill.
In the FY 1999 budget debate there were no reconciliation
instructions.
In the FY 2000 budget debate, a 10-year reconciliation tax cut of
$778 billion was included in the budget resolution. The Finance
Committee and the Congress once again complied with the instruction,
and the President vetoed that tax cut reconciliation bill.
Finally in last year's budget debate the budget resolution permitted
two separate tax cut reconciliation bills. The Senate considered and
passed the first tax cut reconciliation bill, but it was never
presented to the President. The second tax cut reconciliation bill was
never considered.
The bottom line--there is nothing untoward about a tax cut
reconciliation bill. There is nothing unprecedented about a tax cut
reconciliation bill. Indeed, I believe the Budget Act is working as it
should--it permits Congress to work its will and to implement its
fiscal policy once it adopts a budget resolution.
What is unprecedented is a budget surplus estimate of $5.6 trillion
over the next decade.
Even when with the tax reductions included in this bill, total taxes
will still grow annually nearly 4.3 percent over the next decade. Total
taxes will still increase from $2.135 trillion today to over $3.256
trillion in FY 2011. We will collect over $26.6 trillion in taxes these
next 10 years even with the tax cuts included in this reconciliation
bill.
Federal revenues as a percentage of the size of the economy, will
only modestly be reduced from its historic high
[[Page S5055]]
today of 20.7 percent to 19.2 percent in 2011.
Finally, all tax provisions are fully phased in by 2011. Those who
come here to the floor and suggest somehow the tax cuts are going to
explode over the next 10 years after 2011, are misleading.
When fully phased in 2011--everything--the tax reductions in 2011
will be about $185 billion in that year. Number games can be easily
played.
Yes, extending the fully phased in tax cuts in this bill over the
period 2011-2022--20 years from now--could mean $2 trillion in tax cuts
beyond the $1.350 trillion in this bill. That is not an explosion, that
is simple arithmetic.
I want to quickly go through what is in this bill as I see it. I
compliment the Republicans and the Democrats who got it through
committee and are in the Chamber defending it.
First, retroactive to January 1, 2001, it creates a new 10-percent
bracket for the first $12,000 of adjusted gross income for couples.
It reduces all marginal rates effective January 2, 2002. The top rate
is reduced to 36 percent by 2007. For those who think that is done
quickly and costs an enormous amount in the early years, it is not so.
It doubles the child tax credit from $500 to $1,000 over 10 years and
makes the child credit generously refundable. I repeat, it makes the
child credit generously refundable.
There were many in our respective States who heard the first tax
proposals, and they did not have any refundability for the tax credit
and indicated that for poor States and populations in poor States, it
might be better if we had refundability. However that occurred, I thank
the committee in behalf of my State. It is important we have that.
We are debating marriage penalty relief, whether we should do more or
change it, but it sets a standard deduction for couples at two times
the single level. It sets the 15-percent bracket for couples at two
times the single level.
Incidentally, it also increases the EITC, earned-income tax credit.
Some thought over time that was not a good approach to tax law, but it
has been increased all the way up, in some instances, to as high as
$35,000. It includes, with which everybody should be pleased, a $33
billion educational tax relief that is spread throughout this bill, and
it reduces the estate tax over time, not immediately but it increases
the exemptions rather quickly in increments of a million dollars, and
over a full 2011 cycle it will eliminate the tax; it will impose a
capital gains tax of sorts on the beneficiaries of large estates.
I single out Senator Kyl of Arizona for his complete commitment and
dedication to changing this estate tax. I can see as a member of the
committee where Senator Kyl has had a very big impact on the committee.
The next item is IRA tax relief. Everybody has become familiar with
pensions and IRAs. It includes a $40 billion increase in the tax
reductions that can occur by changes in pensions and IRA relief. It is
a pretty good law.
It changes the alternative minimum exemption by $2,000 single and
$4,000 joint. It obviously does not do the entire alternative minimum
adjustment necessary, but it does more than many people thought
because, indeed, it does not affect any more people and starts changing
a little bit with reference to the alternative minimum as it applies to
others rather than those who would have been affected by this
legislation.
In essence, it makes the Tax Code more progressive. That is difficult
for some to believe in a tax package that also reduces marginal rates
from top to bottom. Every marginal rate will be reduced. It makes the
Tax Code more progressive. Wealthy taxpayers will pay a larger share of
the income tax than they do now.
Whoever wants to argue about whether the top levels should have had a
marginal rate cut, the entire package is more progressive, and when you
are finished and add up the income tax, the higher tax payers will pay
a bigger percentage now than they were paying before the marginal rates
were reduced.
I close by talking about my State. I have done my best, with the best
people I have, to give a rough estimate of what happens to people in
New Mexico with this bill.
First, every New Mexico taxpayer gets a tax cut. In our little State,
539,000 families filed returns; 113,000 small businesses; 534,000
children will be eligible for the child tax credit. That has been
doubled and made refundable over time; 304,000 couples in New Mexico
who file jointly will benefit over time from the marriage penalty
relief, and 179,000 families claimed the earned-income credit. With the
expansion of the family earnings up to $35,100, they will be able to
claim this credit. It is a major help to the families in New Mexico who
are not in the high brackets, and since we have so many in the middle-
and low-income brackets, this bill, because of the bipartisan nature of
it, as I see it, has taken a giant step to be helpful to them.
I close by saying it was not too long ago that a new President was
sworn in and went to the White House. He said: I am going to try to
keep my campaign commitments. One of his commitments was he was going
to reduce taxes. He was talking about a dollar number of $1.6 trillion.
Some people think that was over 11 years, some over 10 years. Some
think it was really $1.3 trillion adjusted for something.
In any event, I say, Mr. President--not the Presiding Officer, but
President Bush down the road on Pennsylvania Avenue--when this finally
becomes law, and it will not be too long when the House and Senate get
this bill and do their final work, you can look at the American people
and say: Here is another commitment made, a commitment that I achieved.
With the help of Congress, and in this case bipartisan out of
committee, hopefully bipartisan when we pass it, we have said to the
President: We agree with you. The commitment to give back some of this
enormous surplus to the American people so that it is not on the table
to spend but, rather, it is committed back to their pockets, to their
pocketbooks, to their checking accounts, that will have been achieved.
I believe there will be plenty of money to pay down the debt in about
as rapid a fashion as we can, and I believe there will be about a $500
billion to $600 billion contingency fund over this decade that can
still be used in addition to what we plan for tax cuts and what we plan
for the appropriations process.
For those who had in mind large new programs for the Federal
Government and had their eye on this surplus, what we are saying is we
are not going to wait to deal tax relief at the bottom of the deck of
cards.
We are going to deal, then, right upfront. We will say to people who
pay: This Government receives more than it needs; we will give it back
to you over time. That means it won't be there on the table, as we look
at budgets, to spend on just anything because we will have spent it on
a very good purpose; that is, we will have given it back to the
American people to spend, for them to plan, for them to use.
It is a pretty good conclusion to a very difficult budget process
which took many hours and a lot of energy. For this Senator, as
chairman, it was difficult. We had to do some difficult things that I
wouldn't like to do every year.
I hope we get bipartisan support for this use of the surplus. I think
it is an appropriate use. We come back down to reality, with a big
surplus plan expected. What should we do with it? Let it sit around to
spend on making government bigger or should we first give some back? We
have adopted as a policy giving back some of it, yet leaving enough for
the realistic approach to government and growth in government that
might be needed.
I close by saying that the same President who made that proposal has
had the best people in the country work with our Vice President to
produce a real effort to place before the American people a practical,
realistic proposal with reference to our energy future--I should not
say of America, I should say to the people of America. A realistic
energy proposal is the next thing the President has on the table. I
predict to all those who are critical upfront, realism will set in, in
the next couple of months, and something similar to what the President
asked for in his realistic energy approach will be on the floor.
Members will be saying: Mr. President, you made a commitment to make
America energy sufficient with reference to electricity in the future,
and also sought to conserve and make
[[Page S5056]]
us as independent as possible in the area of refined products from
crude oil. I believe we will be saying: Congratulations, Mr. President.
The second big commitment accomplished. Unless there is a real,
realistic, practical alternative that is not something like price
controls on everything in the area of gasoline refined products and the
like, which will do nothing but share the shortages, we will be right
back in the muddle. We will do something that will do credit to this
new leader and do credit to ourselves as Americans who have to get
something done.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. Mr. President, I ask for 4 minutes.
Mr. REID. Senator Conrad is yielded 4 minutes off the bill.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, in response to the Senator from New
Mexico, I don't think the choices he has presented are the full choices
before the American people and before the Congress.
The Senator from New Mexico refers to the choice of either giving the
tax cut back to the American people or the money being spent here. I
don't think those are the choices. Those are two of the choices. There
is a third choice. The third choice is to pay down more of the people's
debt. When we refer to the people's money, that is exactly right. This
is the people's money. I think everybody here is acutely aware of that.
We have, fundamentally, three choices. One is tax cuts, and certainly
that ought to be part of what we do. The second choice is spending. I
think most people on both sides of the aisle say we need to increase
spending on education and national defense. The third choice is how
much do we use to pay down our debt.
The President says we should only pay down $3 trillion of the $3.4
trillion publicly held debt we currently have. There is another debt
that the President is not dealing with and that we are not dealing
with. That is the gross debt of the United States. That is the
combination of the publicly held debt and the debt owed to the trust
funds of the United States. The gross debt of the United States is not
going down; it is going up. As we sit here today facing a debt of $5.6
trillion, at the end of the 10-year-period the gross debt of the United
States will be $6.7 trillion. We are not paying off the national debt
around here, not by a long shot. The national debt is increasing.
Interestingly, it is increasing by about the amount of the tax cut we
are providing.
I yield 4 minutes to the very distinguished Senator from New York,
Mr. Schumer, who has a great commitment to the education issues that
are in part addressed by the Senator from Texas.
Mr. SCHUMER. I thank my colleague for yielding.
First, I fully support his amendment. If we are going to expand the
marriage penalty and do it, we are going to have to take the money from
somewhere. The contrast between the amendment of the Senator from North
Dakota and the amendment of the Senator from Texas is the philosophical
difference in this debate.
The bottom line is simple: The amendment of the Senator from Texas
robs Peter to pay Paul. It says: You want to expand the marriage
penalty? Don't make it any easier to help middle-class people send
their kid to college. Do the American people want us to make that
choice?
I later will have an amendment to increase the deductibility of
tuition. There has been a good start in the bill from my colleague and
friend from New Jersey. We will seek to expand it. It has been a
passion of mine for 2 years to get this done. As I go around my State
and around our country, I find person after person saying: we can't
afford to send our kid to college, or, more likely, we are sending him
to a junior college rather than the college he or she deserves because
tuition is so expensive. I will talk more about that later.
Make no mistake about it, the amendment of the Senator from Texas
makes it far harder for people to send their kids to college. In fact,
after she gets done with it, because she takes the money out of the
education portion of this bill, the tuition deductibility level is only
$1,500. With all due respect, that is not worth the paper on which it
is written. Already in the law is a tax credit, the lifetime learning
credit that adds a $2,000 tax credit by 2003. There is not a single
person in this country who prefers a $1,500 deduction to a $2,000
credit. There is nothing left. In effect, the Senator from Texas
eviscerates tuition deductibility. We all know how important and how
vital it is to the future of this country.
Why, when the top 1 percent are getting 33 percent of the benefits,
does the Senator from Texas want to expand the marriage penalty? Why
doesn't she touch that, instead of taking the small amount we have in
this bill to help the middle class pay tuition? That is an example, in
my judgment, of what is wrong with the thinking of some in this body:
First, give the rich their cut, and then let the middle class fight
over the crumbs. It should be the opposite. Someone making $50,000 or
$60,000 is in far more need of help than someone making $350,000 or
$3.5 million. I don't believe in class warfare. To be people who make a
lot of money, God bless them. But when you have a limited pie and you
say you want to expand the marriage deduction, help remove the marriage
penalty, why in God's name do you take it from one of the few things
that benefits the middle class in this bill?
The President gets up and talks about the family making $50,000. I
would bet my bottom dollar, if you asked the family making $50,000 if
they would prefer a small rate decrease or would they prefer to make
the tuition deductible, 90 percent of them would choose the latter.
What is going on in this bill? We are talking about the middle class
but then we are not helping them. The amendment of the Senator from
Texas is indicative of that malady which transcends this whole debate.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. CONRAD. I yield 5 minutes to the Senator from New Jersey. The
Senator from New Jersey has been very active on these education issues.
I think he has been critically interested in providing incentives for
parents paying for college. I yield 5 minutes to him.
The PRESIDING OFFICER. The Senator from New Jersey is recognized for
5 minutes.
Mr. TORRICELLI. Mr. President, I thank the Senator for his kind
remarks and join Senator Schumer in what is an important moment in this
debate. Indeed, I believe this moment defines whether or not there is a
chance for this tax legislation to genuinely be bipartisan.
In the Finance Committee, Democrats joined with Republicans to
attempt to moderate the tax reduction, to assure it was affordable,
would protect the surplus, but would also make a difference, having
revenue for prescription drugs and education.
Within the committee a balance was achieved that, while rates were
being reduced for taxpayers, there were other objectives also being
met. The amendment offered by Senator Hutchison is a threat to that
balance. It raises the question about whether or not bipartisan tax
reduction can survive in the Senate. Like Senator Hutchison, I would
like to see the marriage penalty eliminated. Indeed, in a variety of
ways, through considerable means, over a period of a decade this
legislation deals with the marriage penalty. It simply was not possible
to eliminate the marriage penalty immediately any more than it was
possible to lower rates immediately or deal with the inheritance tax
immediately. This is a decade-long process of reducing the tax burdens
on Americans.
We do that to married couples as we have done it in other means. But
part of this plan was that, as we reduced taxation on many Americans,
we would look specifically at the issue of education. There isn't a
Member of this Senate who has not come to this floor and argued that
the future of the Nation depends upon our investment in education, the
quality of education. The simple truth is, a college education for
middle-income Americans is increasingly out of reach. The average
student graduating from an American university owes $20,000 on the day
he or she graduates. It is affecting the quality of their lives, their
career choices.
[[Page S5057]]
Middle-income parents, wanting to do the best for their children, are
taking second mortgages on their homes, postponing retirement, putting
themselves into financial jeopardy, anything to get their child a
college education.
Among the many balances in this bill is a provision upon which I
insisted in the committee, a fight Senator Schumer has led for several
years on the floor, the deductibility of college tuition from income
taxes. Under this legislation, it will rise to $5,000 during the
decade. For many students, that makes all the difference. We will
eliminate the marriage penalty, but we can both eliminate the marriage
penalty and get deductibility of college tuition under this plan.
Finally, there is the question of education savings accounts. Ever
since I came to the Senate, for many years, with Senator Coverdell, I
led the fight for education savings accounts. More than two-thirds of
this Senate has voted for education savings accounts to allow parents
to put aside their own money for their own child for public or private
education. In large measure, through the amendment of Senator
Hutchison--well intentioned though it may be--we lose the sum and
substance of education savings accounts by the reductions of the
amounts available. I hope not only these education provisions can be
retained but the bipartisan nature of the bill can be retained.
I yield the floor.
The PRESIDING OFFICER. The time of the Senator has expired.
The Senator from Kansas.
Mr. BROWNBACK. Mr. President, I ask to speak on the bill for 15
minutes, off the time of the Senator from Texas.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BROWNBACK. Mr. President, I rise in strong support of the Baucus-
Grassley tax bill. I say to my colleagues from Iowa and Montana, thank
you for bringing the bill here on the floor. This is a great day. This
is a great debate. I appreciate what you are doing putting this
forward.
I also want to say thanks for including a great number of provisions
that work on the marriage penalty. We have been pushing for several
years now to get rid of this ridiculous marriage penalty, the tax you
pay for the privilege of being married. Marriage Penalty tax relief has
been a long time coming, and with this bill, we can actually do
something about it.
I am delighted to hear as well from my colleague from Iowa that last
night they added an additional year in which the marriage penalty
relief would be in effect. That is a very positive step. It is a good
thing.
What we are seeking to do with this amendment, and I join my
colleague from Texas, Senator Hutchison from Texas, in this amendment,
is to speed up that marriage penalty relief, making it fuller because
the marriage penalty is at several places within the Tax Code. It still
remains, even after this bill. We need to take care of those places,
and this amendment is a positive step toward this.
Tax relief is long overdue for the American taxpayer. We are at
record high levels of tax collection during one of the longest eras of
peace ever known in America. Does that make sense? It is unreasonable
for the Federal Government to continue collecting taxes from hard-
working Americans at a rate that rivals wartime rates of tax
collection. Americans deserve relief.
However, I think some of the tax relief in this proposal is delayed
too long, specifically that of the marriage penalty tax relief. Almost
half of America's working families experience the ill-effects of the
marriage penalty tax. In my State alone, 260,000 married couples
experience this penalty. To put the burden of the marriage penalty tax
in some perspective, every one of us knows somebody who is being forced
to pay, on average--this is on average--about an additional $1,500 of
taxes every year simply for being married.
Requiring Americans to pay more in taxes for being married defies
common sense. Families are the bedrock of a Civil society. Between
carpools to soccer games and putting food on the table, American
families do not need this added tax burden.
Marriage tax penalty relief needs to be one of the first priorities
in this bill. Making Americans wait until the year 2005 to receive a
break from this onerous burden of the marriage penalty is unnecessary.
We clearly have the resources to provide the American people with much
needed marriage penalty relief sooner rather than later.
At a minimum, we should eliminate the marriage penalty in the
standard deduction sooner rather than later. I believe with some
adjustments in the tax bill we can provide marriage penalty relief next
year rather than making America's families wait until 2005 for the
Federal Government to recognize the negative effects of the tax we
place on the institution of marriage and the people who are married.
America's families deserve a break from the marriage penalty.
Alleviation of the marriage penalty tax will allow married couples
greater freedom to raise the quality of life for their families.
Freedom will mean different things for different couples, of course.
For some it may mean the ability to make a downpayment on a home. For
others it may mean an investment in their children's education. The
options are as numerous as the people of our great Nation. Married
Americans deserve to be free from this unjust penalty.
Make no mistake about it, however, those who will benefit the most
from the correction of the marriage penalty are children. Study after
study has shown that children do best when they grow up in a stable
home, raised by two parents who are committed to each other through
marriage. Newlyweds face enough challenges without paying punitive
damages in the form of a marriage tax. The last thing the Federal
Government should do is penalize the institution that is the clear
bedrock of a civil society.
The amendment I am cosponsing along with my good friend, colleague,
and fellow warrior of the past 5 years, Senator Hutchison of Texas
would eliminate the marriage penalty in the standard deduction
effective in the year 2002, rather than later in 2006 and would be
offset by small modifications in other areas of the bill.
I am hopeful that this amendment will receive the full support of the
Senate and be included in the conference report that we will hopefully
send to the President before the Memorial Day Recess.
Our amendment recognizes the need to provide American families with
relief from the marriage penalty and the need to do it now, rather than
5 years from now. For our children, for strong marriages, for almost
half of America's working families, I urge my colleagues to support
this important provision.
I understand, along with everybody else, the number of tradeoffs
involved to get this done. I think that if we were to ask the American
public to prioritize the tax cuts and the tax relief we are putting
forward, they would clearly say, we need tax relief to stimulate the
economy, and we need tax fairness, particularly in the area of the
marriage penalty tax.
I point out to my colleagues a number of surveys that have been done
showing that 70 percent of the American public support eliminating the
marriage penalty tax. They are aware of this tax. I now have people who
come up to me and tell me, for example: My marriage penalty this year
was $1,478--that their accountants calculate their marriage penalty
they are going to be paying on a yearly basis. People are aware of it.
They know it is there. They know it is not fair.
We have been telling them for years we are going to do away with it,
that we are going to get it out of there. I think the Finance Committee
has done a good job on starting to address this, but it is phased in
awfully late.
This amendment, I think, does something the American public would
widely support. In looking at the tax cuts, they would say this should
be one of the top ones that we need for fairness and for the future of
a civil society.
So I urge my colleagues to support the Hutchison amendment when the
vote comes up in this Chamber.
With that, Mr. President, I yield the floor and yield back the time
to Senator Hutchison that may be remaining on the 15 minutes.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Mr. President, maybe we are ready to vote. Have the
Senators used their time?
Mrs. HUTCHISON addressed the Chair.
[[Page S5058]]
The PRESIDING OFFICER. The Senator from Texas.
Mrs. HUTCHISON. Mr. President, I will be brief and close on my
amendment, after which I understand we can go ahead and have the vote.
I understand what the committee did. I understand how the committee
had to accommodate so many interests. I do not eliminate the deductions
for the education expenses; I just draw them out over a longer period.
I had to find someplace to offset the cost of moving the marriage
penalty to the top. Phasing in the deductions for the education
expenses was the only thing I could find that would be a viable
alternative. Because I think the tax rate cuts are so important, I did
not want to upset that balance. That is why I cannot support Senator
Conrad's amendment. But I certainly intend to try to continue to look
for offsets.
Frankly, I am going to offer it without offsets if this is not
adopted because I think moving the marriage penalty up is every bit as
important as rate reduction and death tax relief and doubling the child
tax credit.
We are trying to give relief to American families. How much more do
we need to be told than that the census shows us that 77 percent more
people are living together unmarried than there were 10 years ago? I
think we should value marriage, and I think we should encourage it. I
certainly do not think we should have policies that discourage it. So I
am going to do everything I can to move it up and make it the top
priority that I think it is. That is what my amendment does.
I ask the support of my colleagues. I think this is a warranted
priority: Eliminating the marriage penalty in this country. It is
essential that we do so.
Thank you, Mr. President. I yield the floor.
Mr. CONRAD. Does the Senator yield back her time?
Mrs. HUTCHISON. Mr. President, I yield back my time.
Mr. GRASSLEY. Which is the first amendment we vote on, Mr. President?
The PRESIDING OFFICER. The Senator from North Dakota still has 7
minutes.
Mr. CONRAD. I will try to take the same amount of time the Senator
from Texas just took to conclude. If the Presiding Officer could inform
me when I have used the same amount of time that the Senator from Texas
just used so it is fair, I will yield back the remainder of my time.
The PRESIDING OFFICER. The Senator will have 3 minutes.
Mr. CONRAD. I thank the Presiding Officer, and I thank my colleague
from Texas, who is a respected colleague.
Let me just say we agree that the marriage penalty relief ought to be
moved up. We strongly agree on that proposition. Mine does it faster
than the offering of the Senator from Texas. Mine deals with both
elements of marriage penalty relief that are in the bill, both the
standard deduction--doubling it for couples over what is provided a
single individual--and also providing a fix on the 15-percent bracket.
The Senator from Texas starts hers earlier than the underlying bill
but does not complete the phase-in until the year 2008 on the standard
deduction. And she does not speed up the fix on the 15-percent bracket
at all over what is in the current bill. My amendment would provide
that relief next year as well.
In addition, we have a different way of paying for it. I ask those in
the very top rates--the 3 percent who are in the top two rates--to
defer so that we can give this relief immediately.
That seems to me to be a fair way to proceed. It seems to me to be
the priority of the American people. We have 50 million people who are
affected by the marriage penalty. Under the current bill, nothing is
done, nothing for 4 years. Then it is phased in, and it is not
completed until 2008.
My amendment says, if we say it is a priority, let's make it a
priority. Let's put in place marriage penalty relief next year. Let's
do the job.
I hope very much my colleagues will give close consideration. We do
not change where the rates ultimately wind up. We do delay the
reduction for the top rates, the two top rates that affect only 3
percent of America's taxpayers, so that we can give 50 million people
relief from the marriage penalty now, something I think every Senator
in this Chamber has spoken for at one time or another.
Mr. President, how much time do I have remaining?
The PRESIDING OFFICER. Thirty seconds.
Mr. CONRAD. Mr. President, I am happy to yield back that time.
Mr. President, I ask unanimous consent that Senator Kennedy be added
as an original cosponsor of the amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the Conrad amendment No. 654.
The clerk will call the roll.
The result was announced--yeas 44, nays 56, as follows:
[Rollcall Vote No. 112 Leg.]
YEAS--44
Akaka
Bayh
Biden
Bingaman
Boxer
Byrd
Cantwell
Carnahan
Chafee
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
McCain
Mikulski
Murray
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Stabenow
Wellstone
Wyden
NAYS--56
Allard
Allen
Baucus
Bennett
Bond
Breaux
Brownback
Bunning
Burns
Campbell
Carper
Cleland
Cochran
Collins
Craig
Crapo
DeWine
Domenici
Ensign
Enzi
Fitzgerald
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Lincoln
Lott
Lugar
McConnell
Miller
Murkowski
Nelson (NE)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
The amendment (No. 654) was rejected.
Mr. GRASSLEY. I move to reconsider the vote.
Mr. BROWNBACK. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Vote on Amendment No. 659
The PRESIDING OFFICER (Mr. Smith of Oregon). Under the previous
order, the question is on agreeing to amendment No. 659.
Mr. BREAUX. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
The assistant legislative clerk called the roll.
The result was announced--yeas 27, nays 73, as follows:
[Rollcall Vote No. 113 Leg.]
YEAS--27
Allard
Bennett
Brownback
Bunning
Burns
Campbell
Carnahan
Cochran
Domenici
Enzi
Fitzgerald
Frist
Gramm
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Kyl
Landrieu
Murkowski
Roberts
Santorum
Shelby
Smith (NH)
Thomas
Thurmond
NAYS--73
Akaka
Allen
Baucus
Bayh
Biden
Bingaman
Bond
Boxer
Breaux
Byrd
Cantwell
Carper
Chafee
Cleland
Clinton
Collins
Conrad
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Dodd
Dorgan
Durbin
Edwards
Ensign
Feingold
Feinstein
Graham
Grassley
Gregg
Hagel
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Mikulski
Miller
Murray
Nelson (FL)
Nelson (NE)
Nickles
Reed
Reid
Rockefeller
Sarbanes
Schumer
Sessions
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Thompson
Torricelli
Voinovich
Warner
Wellstone
Wyden
The amendment (No. 659) was rejected.
Mr. GRASSLEY. I move to reconsider the vote and I move to lay that
motion on the table.
The motion to lay on the table was agreed to.
Mr. BYRD. Mr. President, I am deeply concerned with that anomaly in
the
[[Page S5059]]
tax code known as the ``marriage penalty.''
However, I opposed the Hutchison amendment No. 659 because it would
accelerate the marriage penalty relief in this bill at the expense of
those education provisions that would benefit students who borrow money
to attend college. In particular, the Hutchison amendment would
eliminate the provision that would allow student loan interest to be
deductible 60 months after graduation.
While I support marriage penalty relief, I do not believe that it
should be provided at the expense of these education tax benefits.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. On behalf of Senator Baucus, I ask unanimous consent that
the time go now to Senator Schumer. His time will begin charging
against his amendment, which he will offer before he completes the
hour.
The PRESIDING OFFICER. Is there objection?
The Chair hears none, and it is so ordered.
The Senator from New York is recognized.
Amendment No. 669
Mr. SCHUMER. Mr. President, how much time do I have?
The PRESIDING OFFICER. One hour.
Mr. SCHUMER. One hour. Thank you, Mr. President.
Mr. President, first, I ask unanimous consent that the following
Senators be added as cosponsors: Senators Lieberman, Biden, Bayh, and
Clinton.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. I thank the Chair.
The amendment I am about to offer is one of the most significant that
we can debate in this tax bill. As you know, Mr. President, since I
have come here, I have felt it extremely important that we help middle-
class people with the biggest financial nut they face, barring ill-
health in their families, and that is paying tuition. The cost of
tuition has skyrocketed. Family income has not kept up. Often in our
tax proposals we help the very poor with their college tuition, as we
should. And the wealthy do not need much help in terms of paying
tuition. If you are making a half million dollars, you can afford that
$10,000, $20,000, $30,000. But if you are solidly into the middle
class, if you are make $40,000 or $50,000 or $60,000 or $70,000, that
tuition bill is almost impossible to pay.
As a result, three things happen: First, all families struggle.
Second, many students do not go to the college that their records would
allow them to extend. Some do not go to college at all simply because
financially it is so expensive. The number of New Yorkers who have told
me that they are going to junior college because they can afford it, as
opposed to a 4-year school in a specialty they very much want to
achieve, is enormous. And, third, what happens is that America is
greatly deprived of our greatest resource: the minds of our young
people.
So it has been my contention, along with many of my colleagues,
including the Presiding Officer, the Senator from Maine, the Senator
from Illinois, and the Senator from Georgia--the Senator from Delaware
has been our leader in this--that college tuition, or a large chunk of
it, if not all of it, should be made tax deductible; that if a family
is making a sacrifice to send their child to school, then Uncle Sam
ought not to take a cut; that it is every bit as important for
Government to encourage that activity through a deduction as it is
owning a home or other activities for which we give deductions.
For 2\1/2\ years we have been pushing this. Now the opportunity is
nigh to make it happen.
I thank my colleague from New Jersey, Senator Torricelli. He and I
have talked about this issue at length. He has been able to get a first
start into the bill of up to $5,000. That $5,000, yes, is a start. It
does not meet the bills of most people, but it is a good start. I am
appreciative of his efforts and of him joining the crusade in which
many of us have been involved. But it simply is not enough.
So what we propose today is to make $12,000 deductible for each
person--for a single person $65,000, for a couple $130,000. It goes
well up into the middle class. The very people who come to us and say
the Government never gives them a break, the Government never cares
about what they need, are now going to get the best thing they could
imagine.
We have not touched the rate cut in our offset because I know so many
feel strongly about it. But my guess is, if you ask the average family
in America making $50,000, $60,000, $70,000, would they rather have the
rate cut of a few percent or would they want to make college tuition
tax deductible, 90 percent would say the latter. So the time is nigh to
do this.
This chart shows it all. Since 1980, college tuition has gone up over
300 percent in its cost. Health care, which is always used as the area
where prices have gone up so much, has only gone up a little more than
250 percent. Of course the Consumer Price Index lags way behind.
So this vote presents us with the opportunity. This bipartisan idea,
which I hope will stay a bipartisan amendment--because this issue
should not be a party issue; this issue should not deal with how much
of a tax cut, but simply is, should we give it to the middle class in
the place where they need it most--is on the table.
I know there are a lot of considerations, but very simply this is
vital to families. It is also vital to America. The bottom line is
simple: That is, here in America we need to educate our people as best
we can. If we continue to have young person after young person not go
to college or not go to the college that they desire, we will be
hurting our opportunity to stay the leading country in the world
because our education system is more important than just about anything
else that we can do in this country.
So, Mr. President, I will have a lot more to say, but I know there
are some of my colleagues who wish to speak.
I would like, if no one on the other side wishes time on this
amendment, to yield 4 minutes to the Senator from Indiana, who has been
a sponsor for a very long period of time and has worked diligently on
this effort.
The PRESIDING OFFICER. The Senator from Indiana.
Mr. BAYH. Mr. President, I salute our colleague, Senator Schumer from
New York, for his tenacious support of this very worthy endeavor. I say
to the Senator, I would particularly like to congratulate you for the
bipartisan nature of the support you have gathered for this very worthy
undertaking.
With Senator Smith, Senator Snowe, and others on the other side of
the aisle, it is a cause that every American, regardless of party, can
support.
I rise in support of the Schumer amendment because it is good for the
taxpayers of America, it is good for the children of America and their
education, it is good for America's economy, and it is true to our
values.
It is good for the taxpayers of America because, in my State and in
yours and others, one of the most pressing needs that American families
face, after paying the mortgage and saving for retirement, is putting
money away for the cost of a college education. The cost of that
education has been rising faster than the rate of inflation now for
many years, far outstripping the ability of many Americans,
particularly those in the middle class, to afford it. So this tax cut
will be good for American taxpayers and families because it helps them
in a very significant way--$12,000 when fully phased in--in alleviating
the tax burden each and every year.
It is good for America's students because a college education today
is no longer a luxury. It is a necessity to have many of the good
paying jobs in areas involving information technology, communication
technology, biotechnology, and the other rapidly growing parts of our
economy. Those with a college degree earn substantially more than those
without.
This is good for America's children and America's students. It is
also important for the long-term health of our
[[Page S5060]]
economy. America's competitive advantage lies in those areas that
require greater degrees of knowledge, expertise, and learning. So as we
enable our children to do better, we also empower our economy to do
better.
Finally, this effort, thanks to Senator Schumer, is true to America's
values. We are saying to the families of New York and Indiana and
Oregon, and the other 47 States, that if your children work hard, if
they dream the dream of a college education, we will stand by them. If
you want to work hard and be self-sufficient, get a good job, we will
help to make that dream become a reality. There is no more important
American value than that.
In conclusion, I again salute my colleague, Senator Schumer. This tax
cut is good for taxpayers. It is good for our children and their
education. It is good for America's economy, and it is true to our
values.
I ask my colleagues to support this very worthy endeavor. I yield the
remainder of my time back to my colleague and friend, the Senator from
New York.
The PRESIDING OFFICER. Who yields time to the Senator from Illinois?
The Senator from Illinois seeks recognition.
Mr. SCHUMER. Mr. President, on behalf of the Senator from Montana, I
yield 5 minutes to the Senator from Illinois.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I supported this effort from the
beginning. I believe that when you ask American families about tax
cuts, their highest single priority is this amendment.
This is a rather substantial proposal in reference to cutting the
taxes of America's families. I am sure there are some very important
and popular provisions in here, but when we literally ask families, if
we could do one thing in the Tax Code to help you and your family in
the future, what would it be, it is this amendment, this amendment
which would allow families to deduct the expenses of a college
education.
We all know the problem. Some of the brightest young people in
America either have to delay their education or change their plans
because they literally cannot afford the cost of higher education or
they find themselves in a position where they graduate from college
with an extraordinarily high debt. With that student loan debt, a lot
of choices in life are already made for them. They may not be able to
become a teacher, which could have been their life's dream, because
instead they have to make more money to pay off the college loan. They
may not be able to become a nurse or a doctor, or whatever, because of
the expense of education.
What the bipartisan Schumer amendment does, which I am happy to
support, is address this problem and give to American families the
ability to deal with the cost of higher education.
Ask yourself: How important would it be? When a young child is born
into a family, a new baby, it is usually kind of a rite of passage that
you say to the new parent: How is mom? How is the baby? Is the baby
sleeping at night? Have you thought about the cost of college
education? Those are natural questions because people seem to think, as
they should, this is a major obstacle to the success of my child. I
better be thinking ahead. Is it reasonable to ask that question?
Let me give an example in my State of Illinois. In a 20-year period,
the rough period between the birth of a child and their heading to
college, in Illinois, between 1980 and the year 2000, the average
tuition and fees at college went up 395 percent at public universities,
344 percent at private 4-year institutions, and 236 percent at
community colleges. So asking the new parents about how they are going
to pay for their kid's college education is not an unreasonable
question. It is going to be substantial. If they want their kids to
have a chance, they ought to think ahead.
The Schumer amendment thinks ahead. It says: We are going to give you
the opportunity to deduct up to $12,000 of the cost of a college
education. It also provides a tax credit, I believe, for the payment of
interest on student loans, so if you have a loan and you are paying on
it, you can deduct up to $1,000, which doubles the amount in the bill.
What the Senator's amendment does is help families realize the
American dream. Could there be a better investment for the 21st century
than to help families pay for the cost of college education? We know
that kids who get a college education are going to make more money in
life, probably realize their dreams. We have census statistics that
suggest that the value of a college diploma means a 76-percent increase
over a high school diploma in the amount of money one is likely to
earn. So a young child who is thinking about where they want to go with
their future understands it is important to go to college; it is
expensive to go to college; but it creates great opportunities as well.
We have done a lot at the Federal level over the last several years
to provide a helping hand. We passed a proposal of President Clinton's
which was enacted as part of the Taxpayer Relief Act of 1997 to
establish HOPE scholarships, lifetime learning tax credits, and these
help to pay, but the Schumer amendment goes to the heart of it. It
says: You get to make the choice where your son or daughter goes to
college, working with them, the best school they can get into, and we
will help you pay by making the tuition tax deductible.
It is targeted to working families. It starts to phase out for joint
filers with a taxable income of over $105,000. I don't think that is an
unreasonable level to be speaking of because if you had, for example,
two public schoolteachers in the city of Chicago or in the State of
Illinois, their combined income as mother and father might be in that
range of $105,000. They are not wealthy people. If their son or
daughter is going to a university that costs $20- or $25,000 a year, it
is a great sacrifice on them and certainly on the children, once they
have graduated. The value of this deduction, which can be up to $3,360,
depending on the taxpayer's tax bracket, is significant and meaningful.
This is available to taxpayers, their spouses, and their dependents.
I am going to yield back my time by urging my colleagues on the
Republican side of the aisle to join us, as some already have, to show
good, strong, bipartisan support. And if they value, as we do,
education in America, if they value the needs of American families to
pursue that education, supporting the Schumer amendment is a good vote.
Mr. SCHUMER. Mr. President, I ask unanimous consent to add Senators
Torricelli and Stabenow as cosponsors of my amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. I yield 5 minutes to the Senator from Michigan.
The PRESIDING OFFICER. The Senator from Michigan is recognized.
Ms. STABENOW. Mr. President, I thank my colleague from New York on
behalf of the families of Michigan for his leadership on this critical
issue. This amendment goes to the heart of what is driving the economy
and what is good for our families.
On the one hand, as a member of the Senate Budget Committee, I had
the opportunity in numerous hearings to hear over and over again from
Chairman Greenspan and our own Congressional Budget Office that what is
driving this economy is increased labor productivity. Increased labor
productivity is a combination of new innovations and technology and a
skilled workforce that can work in this new economy, a skilled
workforce that allows the productivity to increase in our economy.
Everyone has told us that to keep the economy going, to keep our
jobs, to keep the improvements in the quality of life we have seen in
recent years, we have to maintain this increased labor productivity.
That means education. That is why this is such an important amendment.
I also speak as a parent. I have a son who recently graduated from
college, and I am sure I own one of the buildings at that university. I
have a daughter in college now. I can speak as a parent, as one who
understands the cost we go through --we want our children to have the
very best--and the challenges that face parents as we look at making
sure our children are able to have the very best higher education.
This particular amendment, by allowing up to $12,000 in deductibility
of college tuition, is very important to allow families to give their
children
[[Page S5061]]
the American dream that we all have for our children.
We know that in today's world you have to go beyond high school to
some kind of higher education if you are going to be successful. We
also know that we will continue to learn throughout our lives and that
part of what we are doing is encouraging young people to learn to love
to learn, so that they can continue beyond not only 4 years but
possibly at some other point coming back in life.
We have older workers who are now coming back and changing careers,
developing new skills, and going into new parts of the economy. The
question of access to higher education is important to all of our
families, and it is particularly important to where we are as a country
and how we need to move in terms of the challenges in a new world
economy.
I hope we will have the opportunity to give every child who is
starting kindergarten, every child in preschool, every child going into
high school the ability to work hard and make the grades, and that we
are going to make sure they have the opportunity to go on to college to
be the best they can be. This amendment gives the tools to parents to
help make that happen. It is important, it is long overdue, and I urge
my colleagues to support the Schumer amendment. I am extremely pleased
to be a cosponsor.
I yield back my time, Mr. President.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, how much time does the Senator from
Illinois want?
Mr. FITZGERALD. I thank my friend and colleague.
Mr. President, I have an amendment----
Mr. SCHUMER. Will the Senator from Illinois yield?
Mr. FITZGERALD. Yes.
Amendment No. 669
Mr. SCHUMER. Mr. President, I ask that our amendment, which was
debated, be reported before the Senator puts his amendment forward.
The PRESIDING OFFICER (Mr. Sessions). The clerk will report the
amendment.
The assistant legislative clerk read as follows:
The Senator from New York [Mr. Schumer], for himself and
Mr. Biden, Mr. Bayh, Mr. Lieberman, Mr. Durbin, Mr.
Torricelli, Mrs. Clinton, Mr. Daschle, and Ms. Stabenow,
proposes an amendment numbered 669.
Mr. SCHUMER. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To increase the deduction for higher education expenses for
certain taxpayers and to increase the tax credit for student loan
interest)
On page 54, between lines 4 and 5, insert the following:
``(C) 2006 through 2011.--
``(i) In general.--In the case of a taxable year beginning
in 2006, 2007, 2008, 2009, 2010, or 2011, the applicable
dollar amount shall be equal to the applicable dollar amount
determined in the table contained in clause (ii), reduced
(but not below zero) by the amount determined under clause
(iii).
``(ii) Applicable dollar amount.--
``Taxable year begin- Applicable
ning in: dollar amount:
2006......................................................$10,000....
2007.......................................................10,000....
2008.......................................................12,000....
2009.......................................................12,000....
2010.......................................................12,000....
2011......................................................12,000.....
``(iii) Amount of reduction.--The amount determined under
this clause for any taxable year is the amount which bears
the same ratio to the applicable dollar amount determined in
the table contained in clause (ii) for such taxable year as--
``(I) the excess of--
``(aa) the taxpayer's adjusted gross income for such
taxable year, over
``(bb) $65,000 ($90,000 in the case of return filed by a
head of household (as defined in section 2(b)), and $130,000
in the case of a joint return), bears to
``(II) $10,000 ($20,000 in the case of a joint return).
On page 59, line 3, strike ``$500'' and insert ``$1,000''.
Beginning on page 64, line 21, strike all through page 66,
before line 2, and insert the following:
(a) Maximum Rate of Tax Reduced to 53 Percent.--The table
contained in section 2001(c)(1) is amended by striking the
two highest brackets and inserting the following:
$1,025,800, plus 53% of the excess over $2,500,000.''..................
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c)
of section 2001 is amended by striking paragraph (2).
On page 68, strike lines 1 through 3.
The PRESIDING OFFICER. The Senator from Illinois.
Amendment No. 670
Mr. FITZGERALD. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Illinois [Mr. Fitzgerald], for himself,
Mr. Schumer, Mr. Jeffords, Mrs. Clinton, Mr. McCain, Mr.
Torricelli, Mr. Domenici, and Mr. Allen, proposes an
amendment numbered 670.
Mr. FITZGERALD. I ask unanimous consent that further reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide that no Federal income tax shall be imposed on
amounts received by victims of the Nazi regime or their heirs or
estates, and for other purposes)
At the end of subtitle A of title VIII, add the following:
SEC. __. NO FEDERAL INCOME TAX ON RESTITUTION RECEIVED BY
VICTIMS OF THE NAZI REGIME OR THEIR HEIRS OR
ESTATES.
(a) In General.--For purposes of the Internal Revenue Code
of 1986, any excludable restitution payments received by an
eligible individual (or the individual's heirs or estate)--
(1) shall not be included in gross income; and
(2) shall not be taken into account for purposes of
applying any provision of such Code which takes into account
excludable income in computing adjusted gross income,
including section 86 of such Code (relating to taxation of
Social Security benefits).
For purposes of such Code, the basis of any property received
by an eligible individual (or the individual's heirs or
estate) as part of an excludable restitution payment shall be
the fair market value of such property as of the time of the
receipt.
(b) Coordination With Federal Means-Tested Programs.--
(1) In general.--Any excludable restitution payment shall
be disregarded in determining eligibility for, and the amount
of benefits or services to be provided under, any Federal or
federally assisted program which provides benefits or service
based, in whole or in part, on need.
(2) Prohibition against recovery of value of excessive
benefits or services.--No officer, agency, or instrumentality
of any government may attempt to recover the value of
excessive benefits or services provided under a program
described in subsection (a) before January 1, 2000, by reason
of any failure to take account of excludable restitution
payments received before such date.
(3) Notice required.--Any agency of government that has
taken into account excludable restitution payments in
determining eligibility for a program described in subsection
(a) before January 1, 2000, shall make a good faith effort to
notify any individual who may have been denied eligibility
for benefits or services under the program of the potential
eligibility of the individual for such benefits or services.
(4) Coordination with 1994 act.--Nothing in this Act shall
be construed to override any right or requirement under ``An
Act to require certain payments made to victims of Nazi
persecution to be disregarded in determining eligibility for
and the amount of benefits or services based on need'',
approved August 1, 1994 (Public Law 103-286; 42 U.S.C. 1437a
note), and nothing in that Act shall be construed to override
any right or requirement under this Act.
(c) Eligible Individual.--For purposes of this section, the
term ``eligible individual'' means a person who was
persecuted for racial or religious reasons by Nazi Germany,
any other Axis regime, or any other Nazi-controlled or Nazi-
allied country.
(d) Excludable Restitution Payment.--For purposes of this
section, the term ``excludable restitution payment'' means
any payment or distribution to an individual (or the
individual's heirs or estate) which--
(1) is payable by reason of the individual's status as an
eligible individual, including any amount payable by any
foreign country, the United States of America, or any other
foreign or domestic entity, or a fund established by any such
country or entity, any amount payable as a result of a final
resolution of a legal action, and any amount payable under a
law providing for payments or restitution of property;
(2) constitutes the direct or indirect return of, or
compensation or reparation for, assets stolen or hidden from,
or otherwise lost to, the individual before, during, or
immediately after World War II by reason of the individual's
status as an eligible individual, including any proceeds of
insurance under policies issued on eligible individuals by
European insurance companies immediately before and during
World War II; or
(3) consists of interest which is payable as part of any
payment or distribution described in paragraph (1) or (2).
(e) Effective Date.--
[[Page S5062]]
(1) In general.--This section shall apply to any amount
received on or after January 1, 2000.
(2) No inference.--Nothing in this Act shall be construed
to create any inference with respect to the proper tax
treatment of any amount received before January 1, 2000.
Mr. FITZGERALD. Mr. President, I thank my colleagues, Senator Schumer
and Senator Clinton, both of whom are here, and Senators Torricelli,
Bingaman, Domenici, Jeffords, McCain, and Allen, who are cosponsors of
this amendment.
This amendment simply seeks to ensure that any reparations received
by victims of the Holocaust--reparations or settlement payments
received by those victims not be subject to Federal income taxes.
Actually, our tax law provides that if money is stolen from somebody,
or if property is stolen from somebody, and that is later recovered,
that person should not have to pay income tax on getting their own
money back. However, there have been a number of conflicting revenue
rulings in this area, and the victims of the Holocaust, which occurred
at the hands of the Nazis in the 1930s and 1940s, are concerned that
the reparations they are receiving from a variety of settlement funds,
from banks and insurance companies in Germany, Switzerland, and
elsewhere--that under the current revenue rulings of the IRS, there
might be some confusion as to whether those settlement payments are
taxable income.
This amendment simply seeks to ensure that the IRS would not treat as
taxable income any Holocaust reparations or payments. The Joint Tax
Committee scored this amendment as costing $31 million over the next 10
years. It is a very small amount.
There are 100,000 survivors of the Holocaust in the United States,
approximately 10,000 of them from my State of Illinois. The average age
of Holocaust survivors is over 80 years. Recently--just a few weeks
ago--I had the opportunity to be at a Holocaust memorial service in
Skokie, IL. Skokie is a village to which a large number of Holocaust
refugees and survivors of the Holocaust came after World War II, and
they kept coming well into the late 1950s. After appearing at that
ceremony, I had the opportunity to meet many individuals who were, in
fact, Holocaust survivors. I heard from their own mouths the stories of
the horrors they endured at the hands of the Nazis. I saw several of
the survivors with the tattoos that the SS agents had put on their
arms.
One woman told me she went into one of those concentration camps--I
believe it was at Auschwitz--with both her parents and also with her
younger brothers and sisters. As soon as she got into that camp, the
Nazis killed her parents and subsequently killed her younger brothers
and sisters. They kept her alive because she was a teenager and they
believed that they could put her to work. Obviously, all of the assets
of her family and tens of thousands, millions of others like hers were
confiscated by the Nazis.
There are several settlement funds that have been created to finally,
56 years after the end of World War II, pay some modest compensation to
these families and Holocaust survivors and their heirs for all the
sufferings they endured. In fact, the compensation is really just the
return of their own money or property that rightly belonged to them.
I hope we can adopt this amendment. It has the support of the
administration, I am told. The previous administration also supported
this measure. It was included in tax bills that were passed in the last
session of Congress. Unfortunately, those overall tax bills were vetoed
for other reasons. I would appreciate the support of all of my
colleagues, and I certainly appreciate the willingness of Senator
Grassley and Senator Baucus to work with us as we try to find a
possible means of replacing that slight $31 million in tax revenue that
would be lost over the next 10 years.
Mr. President, again, I thank my colleagues. I am going to add, at
this point, Senator Gordon Smith as a cosponsor to the amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from New York.
Mr. SCHUMER. Before the Senator yields, I would like to say a word on
his amendment. I think it is an excellent amendment. As the Senator
knows, I had a similar amendment. There are slight differences, which I
hope we work out when the time comes. This amendment is important, and
I thank the Senator for his leadership in making this happen. As he
said, to tax these payments which are but small compensation for the
suffering endured by the few survivors of the Holocaust would be
inhumane. The Senator is exactly right to make sure that they are tax
free.
Mr. FITZGERALD. I thank my colleague in New York. I agree with him. I
think it would be beneath the dignity of this great country to actually
assess a Federal income tax on those payments of compensation to the
victims of the Holocaust.
I thank the Senator. Both of my colleagues from New York have been
very helpful.
There is one other point I want to make.
This bill also would ensure that payments received by Holocaust
survivors not be counted in any calculation for eligibility for any of
our Federal programs such as Medicaid. We would not want someone tossed
out of a nursing home because they were receiving one of these
payments. That is one of the benefits of this bill.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I tell the Senator from Illinois that I
appreciate his good efforts to address an injustice. This injustice is
regarding the victims of the Holocaust. I pledge to work with him on
this amendment. I ask that he temporarily set aside the amendment to
give us time to consider exactly how to do this.
Mr. FITZGERALD. Mr. President, I will be happy to do that. I have
been working with Senator Grassley and Senator Baucus. I look forward
to working with them into the evening. I appreciate their efforts to
accommodate this amendment.
Mr. GRASSLEY. I yield the floor.
The PRESIDING OFFICER. Without objection, the amendment is set aside.
The Senator from New York.
Amendment No. 669
Mr. SCHUMER. Mr. President, I yield 5 minutes to the Senator from New
Jersey. As I mentioned earlier in my remarks, our long crusade to get
college tuition made deductible took a giant step forward with his work
on the Finance Committee to get the first step, the $5,000, in the
bill. That has made it possible for us to offer this amendment as well.
I salute him for the great work he has done, and I yield him 5
minutes.
Mr. TORRICELLI. Mr. President, I thank the Senator from New York for
his very gracious comments and for the place in which we find ourselves
at this moment. The long fight to allow parents and students to deduct
the cost of college tuition is now at a critical moment.
It is not a usual moment in the life of the Senate when a Senator
arises with the intent of having his own work replaced by a
colleague's. That is exactly where I find myself.
The Finance Committee, with the considerable help of Senator Grassley
and Senator Baucus, has brought to the Senate Chamber for the first
time the deductibility of college tuition from income taxes.
Senator Schumer has built upon this work by expanding our $5,000
deduction to a full $12,000. It is, in my estimation, a more realistic
approximation of the financial burden before American families. I
therefore support the Schumer amendment.
American families are mortgaging their futures. Parents are literally
taking second mortgages on their homes. Families are postponing
retirement. They are using retirement savings. They are borrowing
against inheritance. They are doing anything and everything to get a
college education for their child. Students themselves are working
night jobs and borrowing endlessly to get themselves a college
education.
The average student graduating from an American university, on the
day they graduate, owes $20,000. It is not uncommon for a business
student, a law student, or a medical student to owe $50,000, $100,000,
or $200,000. It is an enormous tragedy.
[[Page S5063]]
The options in life that many of us enjoyed that allowed us to go
into public service are not available to American students. If you come
out of college owing $20,000, $50,000, $100,000, your chance to be a
schoolteacher, your chance to run for public office, your chance to go
into the Peace Corps, your chance to go into an American city or a
small town and make a difference in American life is lost before your
career begins. You begin life under a mountain of debt.
It may not be in our reach to eliminate that problem today, but we
have a chance to reduce it. Over the years, from Stafford loans to HOPE
scholarships to student loans, again and again, every time there was a
chance to reduce this financial burden and help American education, we
have risen to the occasion, and that is where we are again tonight.
With this amendment, we can make fully deductible $12,000 worth of
college tuition.
I will concede this is a national problem, but in my State of New
Jersey, as in some other States, it is particularly acute. My State
exports more students to colleges in other States than any other State
in the Union per capita. We do not have a huge State university. The
middle-class families of New Jersey are having to face, with no choice
and through no fault of their own, massive private tuition costs.
It is the deciding point about whether or not these families can keep
their families in the middle class, and they are holding on by their
fingertips, knowing that if they cannot pay these tuitions, they may be
the first generation in American history whose kids will be less
educated, have less of a financial future, less of a quality of life
than they have. And Americans do not give that up easily. That is why
this mountain of debt. That is why the frustration. But that is also
why I stand here tonight.
We have a chance to fight back. In the last decade, the cost of a
college education has risen by 40 percent. There is no end in sight. In
a free economy, with free institutions, there is no way to legislate to
control that cost or stop it, nor am I proposing we do so. We simply
have to allow families to fight back, and it has to be more than loans.
We have to offer more than debt. We have to let families help meet this
cost.
I am very grateful to Senator Grassley and Senator Baucus. Without
their support, we would not even be having this debate, Senator Schumer
would not be able to offer this amendment. The committee took a stand,
and I am proud of every member of the Finance Committee for doing so.
But now we can take a good provision and we can make it better.
I urge my colleagues to support the amendment. I think it is a vote
in which we can all take great pride. I thank the Senator from New York
for yielding me the time.
Mr. SCHUMER. I thank the Senator from New Jersey.
I ask unanimous consent that Senators Durbin and Dayton be added as
cosponsors to this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SCHUMER. Mr. President, how much time has our side consumed?
The PRESIDING OFFICER. The Senator has consumed 28 minutes.
Mr. SCHUMER. Mr. President, I ask the Senator from Iowa, do the
opponents of this amendment intend to use all of their hour?
Mr. GRASSLEY. Probably not, but we are going to use some time; yes.
Mr. SCHUMER. Maybe we can begin now. Does the Senator from New York,
my friend and colleague, wish to speak now?
Mrs. CLINTON. I will be happy to speak now.
Mr. SCHUMER. I call on my colleague, the Senator from New York, who
has been a leader on this issue and has worked with me side by side to
make college tuition deductibility a reality. I yield to her 5 minutes.
The PRESIDING OFFICER. The Senator from New York.
Mrs. CLINTON. I thank the Chair.
Mr. President, I rise in support of this amendment which has been a
passion of my senior Senator from New York. It arises out of the real-
world experiences he and I have every day in New York where we meet
parent after parent who is troubled by the rising costs of college
tuition and other expenses associated with going to college.
I wish we would all recognize that going to college has become not
just a luxury, but in many respects a necessity. There are so many jobs
today which are on the leading edge of the economy that require the
advanced education that can only come in a higher education setting.
The fastest growing occupations, all of them in the field of
technology, require at least a bachelor's degree, and they pay much
higher than average for full-time workers. The Senator has recognized
that we have to do more to make college affordable for our families.
The saddest statistic I am aware of is as hard as it is to believe
after all the work this body has done over the last years to make
college more affordable, with the HOPE scholarships, with increasing
Pell grants for worthy students, with the life-long learning tax
credit, with all of that work, there are still so many children whose
families cannot afford to send them to college or for whom the college
tuition stretch is so great it requires mortgaging homes, it requires
tremendous sacrifice from many working and middle-class families, and
it often leads to a student having to drop out because the dollars just
don't keep coming and there is not enough financial support.
In New York, for example, more than 80 percent of New York students
go on to some form of higher education. Nearly 1 million students
attend college in New York, yet not that many finish. And the No. 1
reason given is financial hardship. The combination of the debt load
that so many of our youngsters and their families have to carry, and
the fact that sometimes that credit is just not available, makes the
dream of college just beyond the reach of too many of our children and
their families.
As we debate this overall tax bill, which has many features that are
not, in my view, going to make us richer and stronger and smarter, I
hope we will try to support this amendment which I think will do all of
those. I think this amendment, Senator Schumer's college opportunity
tax credit, is the single most important amendment we could pass in
this entire debate. It not only will provide much needed financing, it
will send a clear message that we in this Chamber have heard the
students, the parents, the families, the businesses, and the colleges
of America, we have heard their requests and we try to help make
college affordable for all Americans.
The college challenge now of paying has become absolutely out of
reach because average tuition has doubled in the last 20 years. Family
incomes and financial aid have not doubled in a comparable period. It
is time to give families in New York, families across America, the kind
of tax cut they can really count on and that will mean something for
everybody--the people who are the bulk of the taxpayers in this
country. This amendment, when fully phased in, will give families a tax
deduction of up to $12,000 in tuition costs, which will provide as much
as $3,360 in tax relief.
I commend my colleague, my senior Senator, for his passion, his work,
his persistence. I hope that work will finally culminate in a positive
outcome today and we will pass the college opportunity tax cut, the
kind of sensible, affordable tax cut that makes sense for America's
families and especially for the young people for whom we, after all,
have to think most clearly about trying to create a better future.
There is no better investment we can make. I commend my colleague and
thank him for his work on this critically important amendment.
Mr. GRASSLEY. Mr. President, I yield myself such time as I might
consume.
Mr. NICKLES. Will the Senator yield?
Mr. GRASSLEY. I yield whatever time the Senator wants.
Mr. NICKLES. I am trying to get a copy of the amendment. Has the
amendment been sent to the desk?
The PRESIDING OFFICER. Yes.
Mr. GRASSLEY. Mr. President, I know the Senator from New York wants
to help people who need it. We all understand the importance of
education. I go back to my opening statement and refer to the process
by which this bill was brought about and the balance that is in it.
I know the Senator from New York doesn't mean to be selfish. And I
don't
[[Page S5064]]
mean ``selfish'' for the college students he is trying to help, but the
Senator is somewhat selfish in what we can do in one bill. For
instance, he wants me to consider his point of view in spending more
for college tuition. This may even be bipartisan; I don't know whether
it will end up partisan or bipartisan. But either way, the Senator is
asking us to consider his point of view being presented before the
Senate while trying to undo a very carefully crafted, bipartisan
compromise that was worked out between people such as Senator Kyl on
the one hand and Senator Lincoln on the other dealing with the estate
tax.
Maybe if you think the super rich in New York don't need anything
done about the estate tax, that is perfectly legitimate. Maybe that is
not being selfish, if you think about the small businesspeople of
America who live moderately throughout their entire working career
because they have to pour everything back into the business and they
want to leave it to their kids, and we are raising the threshold,
raising the unified credit so that doesn't have to happen, and this
isn't even talking about doing away with the estate tax 10 years from
now. We are only talking about raising unified credit and preserving
the small businesses and the small farms, or you might say large
businesses and large farms that are affected by it, but you are taking
away from that to do what you want.
It is carefully crafted politically. It is crafted to look at as many
interests as we can.
What is ludicrous about the approach is that for the last 2 months
during the budget debate the Senator was one who was voting we should
not have a $1.6 trillion tax cut, should not have a $1.35 trillion tax
cut. I don't know about the $950 billion bill that the Democrats put
in, but 12 months ago people of the Senator's party didn't want any tax
cuts at all. I hope Members are thanking President Bush that he ran on
a program to cut taxes and got elected and he is performing in office
the way he ran the campaign, keeping his campaign promise. We wouldn't
even have a tax bill before us so that you could do what you want to do
for your college students.
I wonder if the Senator has thought this through? We have Senator
Lincoln on your side, working with Senator Kyl, for a very carefully
crafted provision that is in this bill that, quite frankly, was a major
problem for your ranking member, Senator Baucus. He didn't want to do
as much as I wanted to do in this area or Senator Kyl or Senator
Lincoln. But, as a matter of compromise, he went along with this so we
could have a bill, a bipartisan bill, and make the process of
bipartisanship work.
I am a little frustrated about the process. I am not even talking
about the merits of your bill. I want to deal with the merits. I wonder
if the Senator has thought about the condition in which you put Senator
Lincoln and Senator Kyl, how you can intellectually approach this sort
of a deal on a $1.3 trillion tax cut, and the Senator didn't even want
any tax cuts.
Mr. SCHUMER. Will the Senator yield?
Mr. GRASSLEY. I yield because I need some answers.
Mr. SCHUMER. I thank the Senator. I would like to answer, since my
name was used repeatedly.
First I want to say this. I have great respect for the Senator. I
even share his frustration. It is not very easy to put together a tax
bill. But I am sort of aghast at his implication, that because, however
carefully the 20 members of the Finance Committee put together a
compromise, which was supported--I would not call this bipartisan. As
great respect as I have for Senator Baucus, it was not Democrats and
Republicans coming together and meeting in the middle.
Mr. GRASSLEY. How many Democrats do you have to have to be
bipartisan?
Mr. SCHUMER. I would say it should be a lot more than four or five,
to answer the Senator's question.
If you look at the reconciliation vote, it was four or five. That is
not bipartisan in my judgment.
I respect each Senator's right to make their decision. They come from
different States.
But what I am aghast at is the implication of my good friend from
Iowa that anyone who offers an amendment to the grand creation that he
has put together has either not thought it through or is derelict in
their duty.
Just the opposite, good sir. I am doing my duty to the people of New
York by doing what they think is right. I daresay if they were asked
should the estate tax, only on estates of over $3 million, get a
smaller reduction so the families who are making $100,000 and $80,000
and $120,000 and $50,000 and $60,000 can get a break on tuition, my
guess is, good sir, that 90 percent of the people of New York--and I
would guess, although I do not want to second-guess the Senator from
Iowa--but my guess is the people from his State would support this
amendment.
Mr. GRASSLEY. Do you mind if I reclaim my time?
The PRESIDING OFFICER. The Senator from Iowa has the floor.
Mr. GRASSLEY. You told me you feel very strongly about it and you
told me you thought this through and you are willing to present your
view, regardless of the compromises on the other portions of the bill.
You have every right to do that.
Mr. SCHUMER. I appreciate that.
Mr. GRASSLEY. I accept that.
Mr. SCHUMER. Will the Senator yield for a question?
Mr. GRASSLEY. I will yield for a question. I am not sure I will
answer it.
Mr. SCHUMER. OK. My question is, Does he think his grand compromise
is beyond improvement? Is it perfection itself?
Mr. GRASSLEY. I do not think it is perfect.
Mr. SCHUMER. All I can say to my good friend, Charles S. Grassley,
from Charles S. Schumer, is I am trying to make your wonderful
compromise a little bit better.
Mr. GRASSLEY. I hope you respect my right, that we have worked hard
to put this together and I want to protect it as much as I can.
Mr. SCHUMER. I sure do.
Mr. GRASSLEY. Not because of the substance of the bill as much as the
process by which this has come together and what that says about the
Senate's workings and the bipartisanship that is necessary to getting
it done around here.
Mr. SCHUMER. If the Senator will yield, and I am glad we are having a
debate, in all respect I think there are a lot of us in this Chamber
who are not enamored with this process.
Let me give you my little example. I received great help from the
Joint Tax Committee. But they frenetically rushed in the last few hours
to get me estimates and put together the bill.
We are trying to debate this most significant tax legislation in 2
days, with 20 hours of debate. I was here, it was my first year, for
Gramm-Latta. There were heated debates, but there was no effort to cut
off amendments. There was no effort to stretch--one of the reasons our
amendment is crafted as it is, good sir, is because the reconciliation
process that was used does not allow many other amendments.
I am not enamored with this process. I respect bipartisan compromise.
I think, in good faith, the Senator from Iowa has taken some flak from
his side. My friend, the Senator from Montana, for whom I have enormous
respect and do not begrudge him one iota for his views and what he has
done, has taken a good deal of flak from his side. I respect that. I
try to come up with bipartisan compromises whenever I can.
But I have to tell you I do not respect the process here. It is a
rushed process. It is a hurried process. It is a process that does not
allow deliberation. It is a process that is not the Senate at its
finest.
So, yes, it is nice to have a bipartisan compromise. But if that
bipartisan compromise is worth much----
The PRESIDING OFFICER. The Senator from Iowa has the floor.
Mr. SCHUMER. If I can just finish?
Mr. GRASSLEY. I think we have had discussion enough on this.
Mr. SCHUMER. Okay. I thank the Senator.
Mr. GRASSLEY. Does the Senator from Montana want me to yield for a
minute?
Mr. BAUCUS addressed the Chair.
Mr. GRASSLEY. I yield some time off my time to Senator Baucus.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, this is not an easy matter, of course. We
want every child to have the opportunity to
[[Page S5065]]
attend college, to get a higher education. That is a given. It is
particularly important in these days, as the economy gets more and more
complex, the world economy more globalized. I think the major advantage
we have in the United States of America is our education system. When
we talk about value-added, it is knowledge-based, value-added America
through education that is going to give us the competitive advantage
compared to other countries around the world. Education is key. It is
Head Start. It is pre-head Start. It is all that goes into children,
from the instant they are born, creating a family environment and
community environment to help kids be excited about life--not be put
down, but excited--Head Start, kindergarten, all the way through
elementary, secondary and, of course, higher education. That is a
given.
We are doing what we can to help make that happen. Rome was not built
in a day, but we are doing all we can to help make that happen.
I might have a couple or three points here. One, I would like to
remind Senators what we provide for in this bill that helps kids get a
better education. There are the provisions which help elementary and
secondary students. The amendment offered by my good friend from New
York is directed more toward higher education.
Let me just go through what we have for education. Essentially, it is
about $35 billion in this bill, over 10 years, for education. About $11
billion of that is for higher ed; it is to add something new in this
legislation which has not existed in prior law. What is that? That is
to provide a deduction for college tuition. In the bill it starts at
lower amounts, $2,000 or $3,000, and gets up to a $10,000 deduction for
tuition for education. That is new. We have never done that before in
the U.S. Congress. That is new in America. That is in this bill. It is
a start.
Is it everything? No. It is clear tuition in some colleges is a lot
more than that, but it is a start. It will help students get a break
when they go to college and other loans are available. In fact, this
bill, I remind my good friend from New York, actually deletes the
limitation on interest deduction for student loans so students will
always have their interest deduction on student loans.
Does that solve all the problems? No. It is a help, it is a start. We
know in life there are no free lunches. There are none. We have to work
sometimes in life for what we want to attain. We can't just give gifts
to everybody. We want to help. We want to help kids go to college, do
the very best we can to create conditions to make that possible. In
addition, private institutions have availability for prepaid tuition
programs. That has not been available in the past.
I mentioned the modification of the student interest deduction; that
is, the limitation is eliminated. IRAs, for education IRAs, that is
expanded from a $500 contribution to $2,000. There are several other
provisions in here which will help education. They total, as I said,
about $35 billion over 10 years. It is $10 billion, the program
suggested by my good friend from New York.
I join in the frustration of my good friend from New York at the
difficulty in getting amendments scored by Joint Tax. Why do we face
that? It is because this bill is being rushed. There is no doubt about
it. Because this bill is being rushed, we are bound to make mistakes.
We are bound to not have the information we should have. That is very
unfortunate.
I personally believe we should not be working on a tax bill in the
context of reconciliation which has very constricting limits on debate
and amendments. But we are. I had hoped we would not be on this bill
until Monday of this week. But others with so-called pay grades higher
than mine had a different view than mine and we are here now. We have
to deal with what we have. That is unfortunate, but that is where we
are.
I would like to have a lot more in here for education. I have a soft
spot for education. I think most of us have a soft spot for
education. But we cannot do it all at once. I wish we could, but we
cannot. But we have a terrific--just think of it--start with the
deduction of college tuition provided for in this Senate bill of up to
$5,000. That is not small change. Mr. President, $5,000 toward tuition
is a start. Students can make up the difference in various other ways,
either through families or jobs or scholarships. There are ways to get
things done, and certainly $5,000 is going to help a lot.
But I want to make a point to my good friend from New York. He does
have a very good point: Gee, this so-called grand compromise, this
grand perfect bill, and so forth, can be made better. Of course it can.
I would like it to be made better.
I know my good friend from New York and other Senators realize that
all things are not equal. And what is a little bit different here is
that there happens to be a different body down thataway. That other
body down the hall has a different view on this tax proposal. They are
going to want to change this dramatically in conference. This tax bill
is going to change dramatically in a direction, I might suppose, that
is contrary to the wishes of the Senator from New York.
So what I am trying to do, in getting a package together--and working
with the chairman of the committee, for whom, I might add, I have the
utmost respect--is to get an agreement that is better than what would
otherwise pass in this Chamber, because if we did not have this
bipartisan compromise, I guarantee you we would have a tax bill in this
Chamber which would be much less to the liking of the Senator from New
York and virtually every one of my colleagues on my side of the aisle.
But now we can go to conference in a better position and come back
with a result which is better than it otherwise might be. Were it not
for that context, I would probably be here arguing, yes, we should
change this; we should add more for tuition deduction; we should do
that. But there is no free lunch here. We have to deal with the deck we
were dealt. In that context, it is a better bill from the perspective
of the Senator from New York, so we can go to conference and come back
with a result that is better than it otherwise would be for the Senator
from New York and for other Senators. That is really where we are.
So for all those reasons--and basically it is the last reason--I have
the utmost respect, I must say, for my very good friend from New York.
New York has two super Senators, and one of them is Senator Schumer.
The other is Senator Clinton. I must say I don't know of a Senator
around here for whom I have a higher regard than Senator Schumer; I
might say Senator Clinton, but certainly Senator Schumer from New York.
He is on the right track. I have the utmost respect for him, but I
cannot support his amendment because I want and I believe, in the end,
when the conference report comes back through this process, we can come
up with a better product.
The PRESIDING OFFICER (Mr. Ensign). The Senator from Iowa.
Mr. GRASSLEY. I yield such time as he might want to the Senator from
Arizona.
What time does the Senator wish to have?
Mr. KYL. Ten minutes.
The PRESIDING OFFICER. The Senator from Arizona is recognized for 10
minutes.
Mr. KYL. Mr. President, let me first echo what the Senator from
Montana has just been saying with respect to support for education. As
he noted, this bill already has substantial benefits for education.
Unfortunately, the amendment of the Senator from New York, in order
to provide the money for those benefits, has to get money from
someplace else in the bill. It is called an offset.
What I want to talk about is the offset here because in order to try
to help education, he is pitting one group against the other. The group
that would be the big loser here is all the small businesses, all the
entrepreneurs, the small family farmers, and the others who were
looking forward to some death tax relief, to a reduction in the rates
of the estate tax. That would be gone under this amendment.
All of the rate relief that was provided for in this bill would be
eliminated. So instead of the rates going from 60 percent, which is the
effective death tax relief rate, down to 45 percent under the bill
here--which is still far too high--this would take all of that and put
it back up to the effective 60-percent rate.
It is morally wrong. I think everybody on the committee who voted for
[[Page S5066]]
the bill agrees that it is morally wrong for the U.S. Government to
take more than half in any tax. And I don't think we have another tax
that taxes people at the rate of 50 percent. This would be the highest
rate in the world except, I believe, for the country of Japan.
Most Americans believe it is morally wrong to take more than half of
all of the assets that somebody has saved in their life, assets that
could be passed on to their children. The American dream in this
country has always been to leave the next generation better off than
your generation, to do a little bit to pass on for the next generation.
Especially that has been true of the small entrepreneurs, more than
half of whom are women in the United States of America.
That is why in the committee we decided to use some of the tax relief
available for us to reduce the rate that estates were charged. What
this amendment by the Senator from New York would do is wipe out all of
that rate relief for which we provided. That is an unfair tradeoff. It
is an improper tradeoff. Regardless of how much more someone might want
to do for more education, it should not be paid for in this way.
Mr. SCHUMER. Will the Senator yield for a question?
Mr. KYL. I am happy to yield.
Mr. SCHUMER. Does the Senator know or dispute the fact that the only
people who would be hurt by this amendment are those with estates worth
over $3 million, where the rate will no longer be 55 percent but 53
percent?
Mr. KYL. The Senator does dispute that because as the Senator from
New York should be aware, under the relief in the tax bill that is
before us right now, the exemption he is speaking of, or the unified
credit, does not take full effect until the final year of the
legislation. So it is not true what the Senator from New York has just
said. The rate relief provided in this bill currently before us takes
the rate from the current level down to 45 percent.
It does that over a period of time. We do not even do that
immediately, nor does the unified credit lock into effect immediately.
Mr. SCHUMER. But does the Senator dispute the top rate is only paid
by estates worth over $3 million?
Mr. KYL. The top rate----
Mr. SCHUMER. We only change the top rate in our amendment.
Mr. KYL. The Senator from New York has decided to pay for the benefit
in his amendment by taking the top rate, which is an effective rate of
60 percent, and leaving it right there.
Is the Senator from Arizona incorrect in what the Senator from New
York just said?
Mr. SCHUMER. Yes. We do not leave it there. We reduce it from 55
percent to 53 percent. But the only people affected are those with
estates worth over $3 million.
Mr. KYL. I stand corrected--from 55 percent to 53 percent. So we are
still taking more than half. More than half of the value of the estate
is going to be taken by the U.S. Government rather than passed on to
the heirs. I stand corrected. It is not 55 percent; it is 53 percent.
But because of the bubble effect, I am sure the Senator from New York
would agree that the effective rate is closer to 60 percent, the result
of which is that the rate relief that we have provided people--which
caused a lot of people to vote for this bill--will be wiped out if this
amendment is adopted.
Death tax or estate tax relief is very popular in this country. In
one poll, it is supported by 89 percent of the people. A Gallup poll
last year had one of the lowest percentages of support I have seen: 60
percent. In that poll, over three-fourths of the people acknowledged
they would not even benefit from the relief but they understood it to
be fair. Anytime more than half of your assets are being taken by the
Government, Americans understand that is unfair. Even if they are not
going to benefit from the relief, they realize there should be some
relief from that.
Let me note a couple of the studies that demonstrate the pernicious
effect of the rates as they exist today and why we decided to bring
them down in this bill.
A February 2000 study by the National Association of Women-Owned
Businesses, the Independent Women's Forum, and the Center for the Study
of Taxation found that the death tax costs female entrepreneurs nearly
$60,000 on death tax planning, money obviously they could be using in
their own businesses. They report that 39 jobs were lost per business
due to the cost of death tax planning over the last 5 years and that
the cost of death tax planning will prevent the creation of 103 new
jobs per business in the next 5 years.
There is study after study after study that demonstrates the effect,
not only in the macroeconomic sense in terms of gross national product
lost, capital formation reduced, and the like, and jobs lost, but the
effect for the average small business which, as I pointed out, is a
woman-owned business in this country. That is why groups as diverse as
the National Federation for Independent Businesses, the Hispanic
Chamber of Commerce, the National Black Chamber of Commerce, the
National Association of Women-Owned Businesses, and the National
Association of Neighborhoods--and on and on and on--50-some
organizations have all joined in urging the Congress to enact death tax
relief.
Mr. SCHUMER. Will the Senator yield for a question?
Mr. KYL. The Senator from Arizona might need to ask for a little more
time.
Mr. SCHUMER. Mr. President, I will be happy to yield a couple minutes
of my time.
Mr. KYL. I yield to the Senator from New York.
Mr. SCHUMER. Does the Senator dispute that our amendment continues
the repeal of the estate tax in the exact time as the committee bill,
in the year 2011, and that the only thing affected in our amendment--we
can read a long list of everyone who is for repeal of the estate tax;
that is not affected--the only thing that is affected is estates of
over $3 million whose top rate goes down not from 55 to 45, but 55 to
53? With that change alone, we make college tuition up to $12,000 tax
deductible.
Mr. KYL. I will not yield to the Senator to give a speech.
Mr. SCHUMER. Does the Senator dispute that?
Mr. KYL. I am fully aware of the effect of the Senator's amendment.
Let me ask the Senator this question, if he would like to respond to my
question. The Senator asked if I was aware that his amendment did not
affect the repeal of the estate tax in the final year of this bill. I
am aware of that. Does the Senator from New York agree with me that the
estate tax repeal should be permanent and should not terminate at 9
months? Would the Senator from New York support the Senator from
Arizona in attempting to make permanent the repeal of the estate tax?
Mr. SCHUMER. The Senator from Arizona is well aware of my record. I
voted against that. But that is not this amendment.
Mr. KYL. I reclaim my time. The point the Senator from New York was
trying to make was that his amendment didn't affect the repeal of the
estate tax. That is true. The repeal of the estate tax is only in
existence for 9 months because of Senators such as the Senator from New
York who won't agree to make it permanent. So the relief is very
tenuous here for people, and that is why I am fighting very hard to
retain the rate relief. The repeal of the estate tax is going to go
away 9 months after it goes into effect, which is in the 10th year of
this bill. That is why we need the rate relief that is built into the
bill, and that is what is taken away by the amendment of the Senator
from New York.
I am happy to yield.
Mr. SCHUMER. I thank the Senator.
The PRESIDING OFFICER. The Chair will remind both Senators to address
each other through the Chair.
Mr. SCHUMER. I thank the Chair.
I will simply say to my good friend from Arizona, with whom I have
worked on many issues and who is a fine man of great integrity, that my
vote is not needed for repeal. Very simply, I say to the Senator, the
reason they didn't put repeal in the bill had nothing to do with the
Senator from New York or the 45 Senators who have not been part of this
process. The reason they didn't put it in is it is so darned expensive
that they wouldn't have been able to do all the other things. So that
is a bugaboo. That is not a fair characterization.
Again, whether you are for or against repeal of this estate tax has
nothing to
[[Page S5067]]
do with this amendment. What has to do with this amendment is whether
you believe that estates of over $3 million should get less of a
reduction, although still a reduction, so that families making $40,000,
$50,000, $60,000, $70,000 can get some break in paying college tuition.
That is what the amendment does.
Does the Senator disagree about the amendment, regardless of my view
or anyone else's view of whether the estate tax should be repealed?
Mr. KYL. Mr. President, reclaiming my time, it is evident that the
Senator from New York does not want to see a permanent repeal of the
estate tax. He does not want to see a reduction in the rates except by
2 points, from 55 to 53. He apparently agrees with me that because of
the bubble effect, the effective rate is closer to 60 percent. As a
result of his amendment, and as a result of his opposition to making
the repeal of the estate tax permanent, albeit with other Senators as
well--I am not suggesting that my friend from New York is the only one
who may oppose that--opposing that and then also wiping out the rate
relief that we are providing here leaves very thin any opportunity for
us to go back to the American people and say we have done anything
meaningful with respect to death tax relief. Yet that, according to
public opinion surveys, is among the most popular of the features of
the bill which we passed out of committee and which is on the floor.
That is why I say to my good friend from New York, as laudable as it
is for the Federal Government to assist families sending their kids for
education--Heaven knows, I could have used some of that assistance a
few years ago--as laudable as that is, we need to recognize, No. 1,
that the bill already has education relief in it, and, No. 2, if we
take out this rate relief, we are effectively gutting the bill's
effective help for people with respect to the estate tax because of the
fact that the 53-percent rate would still be in existence and that that
rate, because of the bubble effect, is actually closer to 60 percent.
The PRESIDING OFFICER. The time yielded to the Senator from Arizona
has expired.
Who yields time?
Mr. SCHUMER. Mr. President, I will yield to my friend from Delaware
next, but I just make one point to my friend from Arizona. This is on
my time.
This bill is about choices. No one wants anyone to pay any taxes on
anything. The reason the estate tax repeal is lower on my list than
helping middle-class families with college tuition is, it is my
judgment--and we will see the judgment of every Senator in this
Chamber--that a family making $50,000 and paying $10,000 or $15,000 in
tuition deserves relief more quickly than an estate that is worth over
$3 million. In an ideal world, we would do both.
But I don't think the Senator from Arizona is correct. The reason the
committee did not put the estate tax in had nothing to do with
opposition. They have the votes to pass this. They could have put it in
the bill and had the votes to pass it. But they made some choices. They
wanted rate reduction and marriage penalty and other things before they
wanted the estate tax, having nothing to do with the 45 of us or so who
are against the estate tax. But they had to say they were repealing it,
so they went through the sham of doing it in 2011.
I repeat to my friend: Choices, choices, choices. Do you believe the
family making $50,000 deserves help with tuition before the estate over
$3 million gets a rate drop bigger than the one I am proposing? That is
what this is all about. This is not a debate on the estate tax. It is
not a debate on the estate tax because most of the folks on the side of
the Senator from Arizona didn't want to do it because it cost so much
and went to so few people.
With that, I yield 10 minutes to the Senator from Delaware.
Mr. BIDEN. Mr. President, I have been standing here for a long while.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. BIDEN. Mr. President, I wanted to make a statement before I
yield.
The PRESIDING OFFICER. The Senator from Delaware has been yielded
time.
Mr. KYL. I have a question for the Chair.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. My understanding was the Senator from New York was willing
to yield time to me for the time he took on my time. What I am asking
is, is there a minute of time that my friend from New York took that
was in fact included in my time?
The PRESIDING OFFICER. The time was charged to the Senator from New
York. So the Senator from Arizona did in fact have the full 10 minutes.
Mr. KYL. I thank the Chair.
Mr. BIDEN. Mr. President, I would be happy to yield, if he wants.
I find this the single most fascinating debate I have been involved
in in 28 years. I sincerely do. It is not a joke. I am not being
facetious. I find this absolutely fascinating.
This isn't just about choices. This is about values. My friend from
Arizona says ``morality.'' Give me a break. Morality? This is about
values. This is about what you value. Is it of a higher value to you to
make sure that the fewer than one-tenth of 1 percent of the people in
America, numbering literally in the thousands, who will have to pay an
estate tax over $3 million--the first 3, no tax--will have their rate
dropped from 55 to 53 instead of 55 to 50--is that of greater value and
moral content than paying for tens of thousands of Americans, sitting
in this gallery, listening to this debate, being able to send their kid
to school?
Talk about morals. Talk about morality. Talk about values. You have
just summarized the fundamental difference between that side and this
side. This is about values. I have never had it so starkly and honestly
stated on this floor. This is about values: What do we value as
Americans? Given the fact we just received a beautiful speech from both
the managers of the bill about how we can't do everything; it has to be
done gradually, my Lord, values, values, values, values.
I will tell you what my values are. My values come from the middle-
class family in which I was raised. There are three things a parent can
give a child: They can give them faith, they can give the child an
education, and they can give the child character. We want to talk about
values. Is it better that I see to it that if I am lucky enough to have
a $4 million estate left, that on $1 million of that, I leave to my
heirs several thousands dollars less than they would otherwise get
because they won the genetic pool or that somebody in the State of
Nevada, or in Delaware, or New York is busting their neck working two
jobs, both parents trying to send their kids to school and can't get
them to college.
Tell me about values. Where I come from, that is an easy call. That
is not even close. It would be viewed by most where I come from as
immoral to give the kid who won the genetic pool $3,000 more than the
million they already get and to allow the person who is working two or
three jobs in one family to not be able to send their kid to school.
I am glad my friend raised it in moral terms. I didn't quite think of
it that way before.
Look, let's talk about the morality of what we are considering here--
whether it is immoral to charge someone over 50 percent after they are
dead so their heirs will receive $10,920,000 instead of $14,110,000, or
whatever the numbers would come out to.
Everybody in this Chamber acknowledges what my friend from New York
has been saying. College tuition is skyrocketing beyond the means of
most of us. When we talk about the minimum wage and say that kids
should work their way through college--I worked; they flirted with me
about football scholarships, a grant in aid, and I got a job making a
dollar an hour. Guess what. The tuition for the whole year was $800. A
dollar an hour helped. It is true. The staff looks at me as if I am a
fossil. We are paying now $5, $5.50. We can raise the minimum wage to
$6. Tell me how many hours you would have to work to pay at a State
university such as mine, where room and board and tuition is somewhere
around $17,000.
At the University of Iowa, it is $10,000 or more. Tell me how many
hours you would work for that. Tell me how you can work your way
through school today. You just work your way through school. How many
families do you men and women know--maybe I lived in a different
neighborhood, came from a different place--who both work and some have
two jobs? How many do you
[[Page S5068]]
know? I know lots of such people. Lots of people. Talk about values.
Look, everything is relevant. The question here is, What do you value
the most?
I would like to point out another thing, without going into all the
statistics. There are a couple of points I want to make to you. By the
time this kicks in--the Schumer-Biden amendment--it makes $3,000 of
college tuition and fees tax deductible.
Let's talk about what this giant tax bill is going to do for middle-
class families, OK. When all is said and done, if we don't put anything
in here at all, nothing at all about tuition--let's talk about what
helps the people making up to $120,000 in joint income--you are going
to get $1,400 back when it kicks back. OK, that is great. I am all for
that. Guess how much you get back by the time ours kicks in for your
tuition. It is $3,306. Our tuition tax proposal is bigger than the
whole tax cut you get. Come on.
We all stand here and say, because most of us come from middle-class
roots, middle-class backgrounds, we care about the middle class. No
matter how you cut this, in terms of raw dollars, in terms of what you
value, in terms of education, this is a bigger bump for the average
middle-class family with a kid in school or somebody trying to put
themselves through school than the entire tax break you get.
I don't know where you guys live. I don't know where you live. Quite
frankly, I thought it was brilliant of my friend from New York. He and
I have been doing this for over 2 years in our different capacities. He
said, OK, we have to find an offset because of the stupid process we
have. He put in the least innocuous offset you could find. If this
would offend you, my Lord--this goes to permanent 11 years out. We are
slowing up 3 percent to give tens of thousands of Americans a chance to
send their kids to school.
This is not the place I joined 28 years ago. Do we have our values
upside down? Do we have our priorities backwards? It is similar to my
saying, you know, the guy who lives in that $4 million estate down
there, because the county has raised the sewer fees and because he has
seven bathrooms, he is going to end up paying $120 a year more, so we
should give him relief. The guy living in the place where he has a two-
bedroom bungalow, trying to figure out how to pay the electric costs
and the heat because of the energy prices going up, we will rip our
hair out to decide whether or not, my God, do we continue this relief
we have for people----
The PRESIDING OFFICER. The Senator's time has expired.
Mr. BIDEN. May I have 2 more minutes?
Mr. SCHUMER. I can yield the Senator 1 more minute.
Mr. BIDEN. I thank the Senator.
Mr. President, the bottom line is that this is a vote about values.
This is a way to define, very simply, what you value most. If you value
giving 5-percent relief to people with estates over $3 million, instead
of 3 percent, more than you value allowing tens of thousands of
Americans to get up to $3,300 in relief on their taxes, which can be to
do everything from paying tuition to paying the light bill, middle-
class families, then vote against us.
Make no mistake about it. My friend from Arizona is right. This is a
moral question. This is about value. I know where I stand. I am
interested to see where the Senate stands.
The PRESIDING OFFICER. Who yields time?
Mr. GRASSLEY. Mr. President, while I am waiting to yield some time to
Senator Nickles, there is a certain unfairness about the death tax that
I will present to my colleagues for consideration. Based on the recent
speeches, though, I am not sure it is going to make much difference.
You can have two people who, throughout a lifetime, make the same
amount of money. They are all taxed when they make it at the income tax
levels. You can have this family over here living very conservatively,
moderately--you might even say miserly--and leave a big estate. You can
also have this family over here that spends their money as quickly as
they get it, buying a big boat, a big camper, partying every night,
womanizing every night, not leaving one penny to their heirs.
This family has been taxed once throughout their lifetime on that
money. This family over here has been taxed exactly the same way when
it was made, and then, just because they were very careful how they
lived, they are going to be taxed again when they die. What is the
fairness about that sort of taxation?
We ought to reward thrift. We ought to discourage this sort of
activity over here where people are living for today and forgetting
about tomorrow and reward the people who look to the future and are
concerned about their children and grandchildren. It seems to me there
ought to be some reward for that.
As long as I have been in Congress, my belief is that no American
family should be forced to pay up to 60 percent of their savings, their
business, or their family farm in taxes when they die. No taxpayer
should be visited by the undertaker and the tax collector at the same
time. No tax should be greater than 50 percent.
I have heard from hundreds of American taxpayers saying that all
their lives they had saved for their children and grandchildren's
college education. They have worked overtime and saved all their money,
and now the death tax is going to take over 50 percent of their savings
that was going to pay for other college tuition for relatives.
Remember that the 50-percent tax rate starts at $2 million. You can
pay a lot of college education on that kind of savings.
Let our American taxpayers keep their savings and pay their
grandchildren's tuition. Do not steal the American dream from these
families that have lived conservatively and worked just as hard as
other people who leave nothing and pay taxes once.
Remember, a $3 million estate will pay the Government in death taxes
over $1 million. That will pay a lot of tuition as well.
This amendment will control the lives of Americans by only reducing
the death tax to 53 percent. Let American parents and grandparents keep
their savings. No tax should be greater than 50 percent.
Once again, how much tax is too much for people who want to tax
income and estates at a higher rate? It is obvious Senator Schumer
thinks that 53 percent on the estate of these people who have not spent
all their money and who save it is legitimate. I do not happen to think
so.
I do not understand how a person who talks about fairness can say
that a family who has had good income throughout their lives and has
not saved one penny should only be taxed once, and another family that
has the same income and paid the same income tax on it as this other
family, but because they wanted to live carefully, moderately, miserly,
and save their money for whatever they wanted to save it for, they
should be taxed again. There ought to be some reward for not living
just for today and forgetting about tomorrow. I will vote no on this
amendment, and I urge my colleagues to do the same.
I need to tell my colleagues that I have received hundreds of phone
calls and letters from people who are particularly in the World War II
generation. Only this morning we were reminded by Senator Stevens that
these World War II veterans are dying by the thousands every day, and
they cannot wait 10 years for death tax reform.
They tell me they have been morally responsible citizens, and they
are angry that the last 40 or 50 years of their savings, having lived
carefully and having worked hard, will be stolen. They are angry that
the Federal Government will not let them educate their children and
grandchildren so they are not forced for yet another generation working
60 hours a week. The World War II generation wants to help their
grandchildren stay in the middle class without mountains of debt.
Mr. SCHUMER. Will the Senator yield?
Mr. GRASSLEY. College education is a good goal, but let the American
taxpayers make their own decisions. No tax should be greater than 50
percent. I yield the floor.
Mr. SCHUMER. Will the Senator yield for a question?
Mr. GRASSLEY. I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. SCHUMER. I yield myself 30 seconds. That was a very good speech,
and
[[Page S5069]]
I believe it, too. The number of estates in the Senator's State of Iowa
that paid an estate tax of more than $5 million--we are debating $3
million, so this is probably a little low--is 23. That speech was given
for approximately 35 families a year in Iowa, the very wealthiest,
instead of the tens of thousands of grandparents of World War II
veterans, such as my father, who have to struggle to put their kids and
grandkids through college. Thirty families in Iowa, estate tax
reduction; tens of thousands, college tuition reduction. Choices.
We would all like to reduce every tax. Which do you choose?
I yield 4 minutes to my friend from North Dakota.
Mr. DORGAN. Mr. President, we have every right to come to this
Chamber and change this tax bill. It was written in the Finance
Committee. We as Members of the Senate have a right to say we have
better ideas.
I will talk about this so-called death tax. The term ``death tax''
was created by a Republican pollster. It is a wonderful moniker for the
estate tax. Mr. President, I am going to give my colleagues a chance to
vote on something that solves all their problems.
Talk about family farms and small businesses, I am going to offer an
amendment that repeals the estate tax for all family farms and all
family businesses regardless of size as long as they are passed along
to descendants and continue to operate as an enterprise. Total repeal.
My amendment also would increase the general unified estate credit that
is available to everyone to $8 million for a husband and wife; $4
million each.
The only estates we are talking about will be over $8 million. And if
one comes out and talks about family farms and family businesses. It
does not apply. They are already repealed.
The question before my colleagues now is the amendment offered by
Senator Schumer, and it is about choices. Regrettably, it is about
selfish choices. It is about choosing to allow families to deduct
tuition expenses for their children versus a choice that was made in
the Finance Committee to repeal the estate tax and reduce the rate.
They said, no, holding on to that repeal is more important than
providing the full tuition deduction.
Look, there are a lot of families in this country who scrape and
struggle trying to figure out how to send their kids to college. It may
not be true with some Members of the Senate, but it is true with almost
every family in this country. They are struggling to figure out how to
send their kid to college. What do they mortgage? Often they mortgage
everything they have to find the money to send their kid to school
because they are not going to say no to a kid who deserves the
opportunity to get a higher education.
What Senator Schumer says, what I say, and what my colleagues say is
the value of deciding that we ought to allow the deduction for college
tuition is something that enhances our children; it invests in our
future. It is the right choice, not the selfish choice.
He is weighing it against the issue of a top rate reduction in the
estate tax for only the wealthiest estates in the country.
Guess what. We have people who stand in this Chamber and say: If you
want to know whose side I am on, count me in on the side of the people
with the largest estates in America, and do not count me as standing
with the folks who are struggling to scrape money together to find a
way to send their kids to school.
Yes, this is about choices. It is about for whom you stand. Whose
side are you on? No, that is not class warfare. We have already chosen
what class here. The Finance Committee chose the class way up here with
assets where they do not have to worry about where they get the money.
That money was banked years ago to send their kids to the best colleges
in the world. And God bless them, good for them.
Senator Schumer says--and I say, too--there are millions of families
out there who do not have the resources. They worked hard, struggled
hard, and they want a good education for their family, too. They want a
good education for their kids. They want an opportunity for their
children.
One way to help them provide that opportunity is to allow them to
deduct the cost of their tuition expense of sending their children to
college. Gosh, I do not understand sometimes, I guess, when people say:
We have written this bill. This is our choice. We do not appreciate you
coming up here requiring us to make votes on tough choices.
That is exactly what politics is. That is what this process is about.
I say to the Finance Committee: You made the wrong choice. We have a
right to ask the Senate to make the right choice on behalf of America's
families and on behalf of America's children.
This is not going to stop. We have a lot of amendments. A number of
people have amendments. I have amendments that I think will
dramatically improve this bill. This amendment is among the most
important amendments on which we will vote. I hope we have a strong
vote in support of the Schumer amendment.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. How much time remains?
The PRESIDING OFFICER. There are 7 minutes for the sponsor, and the
opponent has 22 minutes.
Mr. DORGAN. Will we be expecting a vote at the conclusion of the time
on this amendment?
The PRESIDING OFFICER. That would be anticipated.
Mr. BAUCUS. I don't know. Perhaps the Senator from Nevada and others
know what the leadership's view is on the timing of the vote of the
next amendment. Perhaps the Senator from Nevada can shed some light.
Mr. REID. I was going to wait until the time expires to ask the same
question. We would like to have a vote. Senator Byrd indicates he does
not want the votes stacked. We would like to vote and move on.
Mr. DORGAN. Further parliamentary inquiry: Have the yeas and nays
been ordered on the amendment?
The PRESIDING OFFICER. They have not been ordered.
Mr. SCHUMER. Mr. President, I ask that the yeas and nays be ordered.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second. The yeas and nays are ordered.
Mr. NICKLES. Mr. President, I thank my colleagues and urge strong
opposition to this amendment. It guts the effort to reduce the so-
called estate tax, the tax on death. Some people say let's see if we
cannot do more for providing for interest deductibility on student
loans. I am happy to do it. But this is not the way to pay for it.
Maybe we can do it without an offset. Maybe we can find another offset.
I am happy to try to find a different offset--or maybe no offset
altogether.
Why do we do this? We are at $1.35 trillion. I guess the cost is $11
billion or $12 billion. Maybe we can add to the cost of the bill--that
is one way--or find an offset. I can think of things in the bill that
are not quite as meritorious as an estate tax deduction. I believe it
is unconscionable we will take over half of somebody's estate because
they die.
In many cases, in an estate there is a business or operation and
someone wants to continue operations, and we will say: We don't care;
we want half of it. Somebody died but give the Federal Government half.
The bill we have is rather timid in what it does. I remember the
former Senator from Illinois, Carole Moseley-Braun, agreed we should
not have a death tax exceeding the maximum tax rate on personal income
tax, which is 39.6. We didn't even do that in this bill. We didn't even
do that. President Clinton said maybe we shouldn't have death taxes
exceeding the personal income tax rate. For all the talk about the
grand estate tax reduction and all the benefits, all we do is, the tax
presently starts at 60 percent and we get it to 45 percent, and then
for a grand 9-month period we get it repealed.
But my colleague's amendment says let's stop and keep the tax at 53
percent. As soon as you have a taxable estate, it is taxed at 53
percent. There will be no tax once you reach that $2 million exemption;
the Federal Government gets half.
Let's just assume you have a restaurant in New York City and that
restaurant is worth $5 million and somebody passes it on, maybe to a
third generation, and the grandson wants to continue operating the
restaurant worth $5 million. Uncle Sam says, no, we want half.
[[Page S5070]]
I think that is wrong. I urge my colleagues to vote against this
amendment when and if we get to a vote on it. I urge Members to vote no
because the pay-for is wrong. We can perhaps work together to find
another vehicle or another way to pay for it. It is not that expensive
an amendment. The effect of the amendment is to gut the estate tax
reform we have in this bill. It guts it. This is a whole lot of the
bipartisanship we have, where we have Democrats and Republicans who
have come together to say let's reduce the estate tax.
Mr. SCHUMER. Will the Senator yield?
Mr. NICKLES. I will yield in a moment.
Mr. SCHUMER. I appreciate that.
Mr. NICKLES. Last year we passed a bipartisan bill, with 59 votes in
the Senate, to repeal the death tax. This amendment says let's not do
that; stop at 53 percent; the Government is entitled to take over half.
I think this is a terrible pay-for. It is a terrible offset. It is
class warfare rhetoric at its worst. It is not the way to do it or to
pay for it. My colleague from New York would work with us, like our
colleague from New Jersey. Let's work together, and maybe we can figure
out a way to do this to expand the interest deduction for all
Americans. I am happy to work with our colleagues to do that. I think
you will find bipartisan support for doing it. But not at the expense
of gutting the reduction we have in one of the most unfair taxes on the
books, the so-called death tax.
It is absolutely unconscionable we will tell people who are farming
that their farm or ranch happens to be worth $3 or $4 or $5 million and
the Federal Government is entitled to take half. I think it is wrong.
I urge my colleagues, because somebody asked for the yeas and nays on
the Schumer amendment, vote it down. Then we can come back. I will be
happy to support an amendment that will increase the interest deduction
and have a different pay-for than what is in here. The way this
amendment is paid for is grossly unfair to millions of small businesses
all across the country that are trying to build and pass on their
business to their kids. This amendment is unfair, and it should be
defeated. Let's find a different pay-for or offset it in a different
way, in a different manner, not in the manner proposed by my colleague
from New York.
I will be happy to yield.
Mr. SCHUMER. I thank the Senator. I appreciate our difference of
opinion.
My question to my friend from Oklahoma is this: Since the framers of
the bill who are largely from his side chose not to repeal the so-
called death tax until 2011, how the heck--and his main speech was
aimed at repeal, the restaurant in New York City, et cetera. Whether we
tax at 45 percent or at 55 percent, they are going to have to do
something bad for their business when the estate occurs.
How the heck does reducing that top rate on estates over $3 million,
instead of from 55 to 45, but from 55 to 53, while we keep the same
date of repeal as the framers of this compromise chose--how the heck
does it gut the estate tax?
One other question: In the State of Oklahoma, the number of estates
that would be affected on an annual basis--I don't know the exact
number. I know the numbers that are valued over $5 million. This would
be over $3 million. Affected by this amendment for estates over $5
million, there are 28. That is it.
Mr. NICKLES. Is the Senator on my time or your time?
Mr. SCHUMER. Your time.
Mr. NICKLES. Then I will answer. My colleague could not be more
wrong. The Senator does not understand the essence of estate if you
think there are only 28 Oklahomans who have estates over $5 million.
There are millions of estates, millions of estates in this country
right now, that are effectively wasting a lot of time, energy, and
resources to avoid paying this unfair, punitive tax. There are probably
millions in your home State, millions in your State alone.
Let me give an example. I used to own and operate a small business.
It wasn't in this valuation, but it comes out on occasion when someone
suffers a death and finds Uncle Sam wants a third or half. You don't
want to have that happen again. You go to great lengths to make sure it
doesn't happen again. So if you think this only applies to a few, you
are sadly mistaken--absolutely mistaken.
There is more energy and effort used in spending to avoid this tax
than probably any other tax in America because it is unfair. I was
third generation in the company I managed, Nickles Machine Corporation.
I managed it for several years and am proud of it. I had nephews
managing until recently. It is difficult to pass on a business to
succeeding generations if Government comes in and takes half every time
one person in a generation passes away. It is next to impossible.
To think we have calculated that there are only so many taxable
estates misses the whole point. There are millions of businesses,
farms, ranches, and so on, where people are working aggressively to
build, maybe get in that category, maybe they are not. But they do not
want to be caught. They do not want to be stuck. They do not want their
children to have to sell to pay taxes to the Federal Government.
Mr. SCHUMER. Will the Senator yield?
Mr. NICKLES. I am happy to yield.
Mr. SCHUMER. I just asked a different hypothetical. The 28 is a
number per year--obviously there would be some more; it is hard to
believe it would be millions in the State of Oklahoma, when there are
only 28 a year. My question is a different question.
I sympathize with what the Senator says, in terms of people having to
sell a business to pay for the tax. That is a different issue. That
deals with repeal.
Our amendment does not address repeal. It simply says, instead of
lowering the rate from the top rate, which is for estates over $3
million, from 55 percent to 45 percent, we lower it from 55 percent to
53 percent, still a lowering, because we have to make choices. We would
rather help the family making $80,000 send their kids to college.
How does the tax change deal with that?
Mr. NICKLES. I will reclaim my time. I am not waiting for my
colleague to make a speech. I think it is absurd for someone to say: We
are just going to reduce the rate to 53 percent; we are going to reduce
the tax 2 percent for the upper end estates and, oh, sure, at end of
that time we are going to repeal it. I don't think so. I don't think
that is credible.
For someone to suggest we are still really for repeal but we are
going to keep the rate at 53 percent, I do not think is credible. It is
not going to happen.
Back to this idea of how many estates, you might say in 1 year there
were 28 taxable estates above $5 million, but I tell you there are
thousands of estates that are subjected to this tax that are trying to
avoid this tax, trying to minimize this tax; thousands in my State,
millions in your State--millions? Surely a million. There are thousands
in Northern Virginia. You don't have to go very far. You are talking
about taxable estates around this area, if you look at high priced
neighborhoods where the Government comes in: Oh, the Government is
entitled to take half of that house or half of that property or half of
that business because somebody passes away? What right does Government
have to get 53 percent of somebody's estate? It is just absurd. It
should be unconscionable.
I go back to our friend, who is not the most conservative Senator
with whom we had the pleasure of serving, the Senator from Illinois,
Carol Moseley-Braun. We agreed we should not tax estates more than we
have on personal income tax. I believe President Clinton said the same
thing. That rate is 39.6. The amendment of my colleague from New York
says, let's keep it at 53. And 53 is too high. I urge my colleagues, if
you think the amendment is laudable for the deduction of student loan
interest, I may well agree with you but not at this offset, not to gut
the estate tax, not when the estate tax is one of the pillars of this
bill, both for this President and this Congress and the past Congress.
So let's not gut the bill. Let's find another way. Again, we are
going to find out if people want to legislate or people want to try to
defeat the bill. I urge my colleagues, work with some of us who want to
see a bill enacted and signed into law. We will work to find a way to
have greater student loan deductibility. We can do that. We can do
[[Page S5071]]
it with 60 votes. And you will not have half the Senate going berserk.
But I tell you this amendment, to gut the estate tax reduction, will
not finally be successful. We are going to figure out a way to have a
significant reduction in estate taxes. That is part of what a lot of us
have been working on for decades. It is what we passed last year. We
are going to get it done this year.
I urge my colleagues, let's find another offset. If we have to, let's
defeat the Schumer amendment and then we can come back and do something
more on student loan deductions without gutting the estate tax
deduction we have in the present bill.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. SCHUMER. How much time is there on each side, Mr. President?
The PRESIDING OFFICER. Nine and a half minutes on this side and about
7 minutes on the Senator's side.
Mr. SCHUMER. Does the proponent of the amendment have the right to
conclude?
The PRESIDING OFFICER. There is no such right.
Mr. SCHUMER. I would like to conclude.
Mr. BAUCUS. The Senator can ask unanimous consent that he have the
last statement, whatever he wants to do.
Mr. SCHUMER. I ask unanimous consent I have the last word on this
amendment, at least until the vote.
The PRESIDING OFFICER. Is there objection?
Mr. NICKLES. Reserving the right to object, what was the request?
The PRESIDING OFFICER. The Senator will restate his request.
Mr. SCHUMER. I simply asked--there are 9 minutes left on the
opponents' side, 7 minutes for the proponent--unanimous consent I have
the right to conclude.
Mr. NICKLES. I object.
The PRESIDING OFFICER. Objection is heard. Who yields time? Who
yields to the Senator from New Hampshire?
Mr. GRASSLEY. I yield to the Senator from New Hampshire whatever time
he might want right now.
The PRESIDING OFFICER. The Senator from New Hampshire.
Mr. GREGG. I ask unanimous consent to set aside this amendment,
reserving the time in its present position, so I may call up my
amendment and speak to it for 5 minutes and ask for the yeas and nays.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Reserving the right to object, I want the time to run on
the amendment that is now here. We want to be able to vote now.
If the Senator from New Hampshire wants to set this aside and offer
his amendment for 5 minutes and have the time count off those who
oppose the Schumer amendment, that is fine. But otherwise I object.
Mr. GREGG. I withdraw my request. I don't want to prejudice either
side as to their time, 9 minutes and 7 minutes that I know is going to
be consumed with brilliance.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. Without objection, the request is withdrawn.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceed to call the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Is there objection?
Mr. GREGG. I object.
The PRESIDING OFFICER. Objection is heard.
The assistant legislative clerk continued the call of the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Is there objection?
Mr. GREGG. I object.
The PRESIDING OFFICER. Objection is heard.
The assistant legislative clerk continued the call of the roll.
Mr. REID. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
Mr. GREGG. I object.
The PRESIDING OFFICER. Objection is heard.
The assistant legislative clerk continued the call of the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the pending
amendment by Senator Schumer be laid aside and that a vote occur in
relation to the amendment at 7:45 p.m. with no second-degree amendment
in order prior to the vote. I further ask unanimous consent that the
amendment be laid aside following the 5 minutes for Senator Schumer in
order for Senator Gregg to offer an amendment and, following that time,
the Gregg amendment be laid aside and Senator Carnahan be recognized to
offer her amendment.
Mr. REID. Reserving the right to object, I think we have agreement,
but in speaking to my friend from Oklahoma, it is my understanding that
Senator Schumer's 5 minutes would be at 7:40, 5 minutes before the
vote, the same amount of time.
Mr. NICKLES. I would ask that both sides would have 5 minutes prior
to the vote.
Mr. REID. No problem.
Mr. KERRY. Reserving the right to object, may I ask: Is the Carnahan
amendment under any kind of time agreement at this point? I ask the
Senator from Iowa.
Mr. GRASSLEY. Under the rules, it would be 1 hour on each side on the
Carnahan amendment.
Mr. REID. Mr. President, reserving the right to object, I didn't mean
to interfere. Did the Senator from Massachusetts finish his
reservation?
Mr. KERRY. The question has been answered.
Mr. REID. Mr. President, one thing that we want to accomplish, if
Senator Gregg lays down his amendment, I hope we don't need his consent
every time someone wants to offer an amendment. I don't think that is
the intent of the Senator from New Hampshire.
Mr. GREGG. Mr. President, as I understand it, reserving the right to
object, my amendment would then be the pending amendment. At some time
I would have the right to return to my 2 hours of debate on the
amendment, but I would not ask for consent for people to set it aside.
Mr. BAUCUS addressed the Chair.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Reserving the right to object, I don't think that is a
tenable position for the committee to be in because any time we want to
go to another amendment, the Senator from New Hampshire would have the
right to object. I think it is all right, if we can agree to an
agreement that the amendment of the Senator from New Hampshire could be
next but not that it be laid aside in a manner where he could object to
any subsequent amendment that might be offered.
Mr. GREGG. If the Senator would allow me to suggest, the way to
resolve this would be to amend the unanimous consent request so that we
could return to my amendment at some point during the furtherance of
debate for a period of an hour equally divided, and then I would waive
my rights that the Senator wishes to have waived.
(Mr. ALLEN assumed the chair.)
Mr. REID. Mr. President, speaking for someone who is not managing the
bill, and with the consent of Senator Baucus, if the Republicans want
to make that as one of their amendments, that would be fine. We have no
problem with that. We believe the two managers should be managing the
bill. If your side agrees you should be one of the next amendments, we
have no problem with that.
Mr. BAUCUS. Reserving the right to object, Mr. President, if the
Senator wants his amendment to be the next amendment under consent,
that would be fine but not to be laid aside, which puts the Senator in
the position to be able to object any time another amendment might
arise.
Mr. REID. Reserving the right to object, we have no objection if the
Senator wants a vote prior to the Carnahan amendment. The Republicans
have a right to be next.
Mr. GREGG. I would like to get it in the queue, and I would like to
be recognized for an hour at some point, and I don't have to have the
preferential status in order to accomplish that. I
[[Page S5072]]
would be willing to work out a way to accomplish that.
Mr. NICKLES. Mr. President, I think we can agree to this and have the
agreement be that the manager of the bill, Senator Grassley, will
determine in which order the amendment will be considered.
Mr. BAUCUS. Mr. President, reserving the right to object, I will
object if the effect of the consent is that an objection can be raised
to laying aside the Senator's amendment whenever a subsequent amendment
might be offered.
Mr. NICKLES. Mr. President, might I suggest that the amendment be
laid aside subject to recall by the manager of the bill, Senator
Grassley.
Mr. BAUCUS. Reserving the right to object.
Mr. NICKLES. Subject to the discretion of the two managers.
Mr. BAUCUS. Subject to the discretion of the two managers.
Mr. GREGG. We will have an opportunity to debate the amendment at
some point?
Mr. BAUCUS. At some point, yes. Mr. President, reserving the right to
object again, the Senator well knows the clock is ticking. He may not
have the time to debate his amendment if he is at the end when the
clock has finally ticked down.
Mr. GREGG. That is, quite obviously, my concern.
Mr. BAUCUS. Mr. President, I do not object, with the understanding
that if the Senator wishes to bring up his amendment, it is in
consultation with the Senator from Iowa as well as myself.
Mr. REID. Mr. President, if I could, I think it is the intention of
everyone here that you would be one of the next Republican amendments
in order.
Mr. GREGG. I take that representation from the Democratic leader that
I would be the next Republican amendment in order, or one of them.
Recognizing his credibility on that point, I will accept that.
The PRESIDING OFFICER. Is there objection to the request as modified?
Without objection, it is so ordered.
Amendment No. 656
Mr. GREGG. Mr. President, I send up my amendment No. 656.
The PRESIDING OFFICER. The clerk will report.
The senior assistant bill clerk read as follows:
The Senator from New Hampshire [Mr. Gregg], for himself,
Mr. Ensign, Mr. Allard, Mr. Kyl, Mr. Bunning, and Mr.
Allen, proposes an amendment numbered 656.
Mr. GREGG. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide a temporary reduction in the maximum capital gains
rate from 20 percent to 15 percent)
At the end of subtitle A of title VIII, add the following:
SEC. __. TEMPORARY REDUCTION IN CAPITAL GAINS RATE.
(a) Reduction in Maximum Rate.--The following sections are
each amended by striking ``20 percent'' and inserting ``15
percent'':
(1) Section 1(h)(1)(C).
(2) Section 55(b)(3)(C).
(3) Section 1445(e)(1).
(4) The second sentence of section 7518(g)(6)(A).
(5) The second sentence of section 607(h)(6)(A) of the
Merchant Marine Act, 1936.
(b) Transition Rules for Taxable Years Which Include June
1, 2001.--For purposes of applying section 1(h) of the
Internal Revenue Code of 1986 in the case of a taxable year
which includes June 1, 2001--
(1) The amount of tax determined under subparagraph (B) of
section 1(h)(1) of such Code shall be the sum of--
(A) 10 percent of the lesser of--
(i) the net capital gain taking into account only gain or
loss properly taken into account for the portion of the
taxable year on or after such date (determined without regard
to collectibles gain or loss, gain described in section
(1)(h)(6)(A)(i) of such Code, and section 1202 gain), or
(ii) the amount on which a tax is determined under such
subparagraph (without regard to this subsection), plus
(B) 10 percent of the excess (if any) of--
(i) the amount on which a tax is determined under such
subparagraph (without regard to this subsection), over
(ii) the amount on which a tax is determined under
subparagraph (A).
(2) The amount of tax determined under subparagraph (C) of
section (1)(h)(1) of such Code shall be the sum of--
(A) 15 percent of the lesser of--
(i) the excess (if any) of the amount of net capital gain
determined under subparagraph (A)(i) of paragraph (1) of this
subsection over the amount on which a tax is determined under
subparagraph (A) of paragraph (1) of this subsection, or
(ii) the amount on which a tax is determined under such
subparagraph (C) (without regard to this subsection), plus
(B) 20 percent of the excess (if any) of--
(i) the amount on which a tax is determined under such
subparagraph (C) (without regard to this subsection), over
(ii) the amount on which a tax is determined under
subparagraph (A) of this paragraph.
(3) For purposes of applying section 55(b)(3) of such Code,
rules similar to the rules of paragraphs (1) and (2) of this
subsection shall apply.
(4) In applying this subsection with respect to any pass-
thru entity, the determination of when gains and loss are
properly taken into account shall be made at the entity
level.
(5) Terms used in this subsection which are also used in
section 1(h) of such Code shall have the respective meanings
that such terms have in such section.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to sales or
exchanges made--
(A) on or after June 1, 2001, and
(B) in taxable years beginning before January 1, 2004.
(2) Withholding.--The amendment made by subsection (a)(3)
shall apply to amounts paid on or after June 1, 2001.
Mr. GREGG. Mr. President, I offer this amendment on behalf of myself,
Senators Ensign, Allard, Kyl, and Bunning.
This amendment is a capital gains cut over a 2\1/2\-year period. I
think there has been a great deal of discussion about the stimulus
effect of this tax cut and whether or not this economy, which is
beginning to slow, is going to be effectively boosted by the economic
activity that will be generated by this tax cut.
Clearly, the frontloading of the $85 billion in tax cut assistance
into this year is going to be a very positive event. But a capital
gains cut has been shown historically to be the most positive unlocker
of the economic vitality and energy of the American economy. A capital
gains cut frees up the capital of the marketplace that is being locked
down because of people concerned about the cost of selling their
assets--it frees up that capital to be reinvested in the marketplace
and to multiply the economic activity of the country, and to create
energy and therefore prosperity in the markets and in our country.
This sunsets effective December 31, 2003. The reason this is a 2\1/
2\-year capital gains rate cut, from 20 percent to 15 percent, is
because a 2\1/2\-year rate cut actually generates positive income to
the Treasury. For those 2\1/2\ years, money will actually be flowing
into the Treasury in a positive way. It is not a tax loser. It is not a
revenue loser during that period.
In fact, historically, there is very strong evidence--specific
evidence--that a capital gains cut is never a revenue loser for the
Treasury and, in fact, always generates so much more economic activity
than it does in lost revenue that the additional economic activity has
historically generated more tax revenues than the revenues that might
have been lost as a result of the rate cut.
So cutting the capital gains rate is a double winner. It will
energize significant economic activity in the marketplace. Therefore,
by unlocking assets that have been held down because people have been
concerned about having to pay extraordinary taxes to free them up, it
will allow people to then take those moneys and reinvest them into the
economy, which means you will have more capital out there, more
activity, more jobs, and more prosperity.
Secondly, it is a winner because it energizes revenue into the
Federal Treasury. Therefore, it is positive for us as a Government
because we will have those revenues to be used in order to benefit the
citizenry through other activity of the Government, whether it happens
to be other tax cuts which we can put in place, or ideas such as the
one the Senator from New York is trying to pass at this time.
So this concept of a capital gains cut makes a great deal of sense,
and the reason we have put it under a short timeframe, under a
sunsetted provision, is to accomplish it in a way that absolutely
guarantees that people are going to take advantage of this opportunity
quickly. And that will immediately generate economic activity within
the American economy.
[[Page S5073]]
So I appreciate the support of my fellow Senators, Senators Ensign,
Allard, Kyl, and Bunning on this point. I understand we are going to be
able to come back to this issue and debate it at some length.
At this time, I ask for the yeas and nays on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. GREGG. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada is recognized.
Mr. BAUCUS. Mr. President, I don't see any Senators who want to
speak. We have an order that there will be a vote at 7:45.
Mr. GREGG. Will the Senator from Montana yield so I might add an
additional cosponsor?
Mr. BAUCUS. Yes.
Mr. GREGG. I ask unanimous consent that Senator Allen be added as a
cosponsor of my amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, the Senator from Missouri is on her way. She
was just notified. She is in the order to offer the next amendment. In
fairness and in an effort to move this along, I ask unanimous consent
that the time during the quorum call run against her amendment, and I
suggest the absence of a quorum.
The PRESIDING OFFICER. Without objection, it is so ordered. The time
will be so charged. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, my fellow Senator from the State of Nevada
wishes to speak on Senator Gregg's time, so the time is not running
against Senator Carnahan.
The PRESIDING OFFICER. The Senator from Nevada, Mr. Ensign.
Mr. ENSIGN. Mr. President, I rise in strong support of the amendment
offered by Senator Gregg to cut the capital gains tax rate from 20
percent to 15 percent. I truly believe of all of the economic stimulus
that needs to happen through a tax cut, there is none more important
that we can do as a Senate than to cut the capital gains tax rate from
20 percent to 15 percent and the lower rate from 10 percent to 8
percent.
If any of our colleagues had read the Wall Street Journal this
Monday, not only was there an excellent op-ed by several authors that
illustrated how much revenue would be produced if we cut the rates at
which capital gains are taxed, but also on the front page of the Wall
Street Journal there was an article talking about the various States
whose revenues are going to have serious shortfalls, including the
State of California, simply because of the problems in the stock
market.
The State of California probably is going to suffer worse than any
other State because many of the high-tech companies in these States are
paying in stock options. When those stock options are exercised, their
employees actually pay ordinary income taxes. Those income taxes also
usually have a State income tax, as is the case in California, and
because the stock market has been depressed for the past 6 months, and
it looks like for quite a bit of this year, none of these stock options
is worth anything, so the employees cannot exercise the stock options.
Therefore, States such as California are having serious budget
shortfalls.
Not only to stimulate the economy is a capital gains tax rate
reduction absolutely necessary, but it is also important to many of the
States' budgets, including the Presiding Officer's home State, the
State of Virginia, which has a similar problem. We can help State
budgets not suffer serious shortfalls this year by cutting the rate on
which capital gains are taxed.
I truly believe it is going to be an incredibly important tax cut for
us to enact. Over 10 years it only scores, as far as what it will cost
the Federal Government, about $10 billion, and I believe, with all
deference to the Joint Tax Committee, the bean counters over there who
actually score these various provisions, historically if one looks at
the economic activity that happens with a capital gains tax rate
reduction, that $10 billion it says is going to cost the Treasury, it
is going to actually produce more revenue over the next 10 years than
it costs the Treasury.
Cutting the rate at which capital gains are taxed is one of the most
important things in the short term and in the long term. It makes no
sense at all to even have a capital gains tax, and the least we can do
is to cut the rate. Most industrialized countries around the world do
not tax capital because they understand this simple formula, and I talk
to high school students about this all the time. In order to have
employees, there first have to be employers. Most people in America
understand that. I am not sure how many in Congress do but most of the
people in America get that.
In order to have employers, there first has to be capital. To tax the
formation of capital hurts the ability to have employers, which hurts
employees, thus hurting jobs in America or wherever capital is taxed.
That is the reason we should someday eliminate the capital gains tax,
but for sure we should at least decrease the rate to incentivize people
to invest.
Investing creates jobs, and that is really what it is all about. If
we want to stimulate the economy, this is the best thing to do.
I yield the floor and ask other Senators to support this critical
amendment.
The PRESIDING OFFICER. I thank the Senator from Nevada.
The Senator from Nevada, Mr. Reid.
Mr. REID. Senator Carnahan is now here and ready to proceed. Mr.
President, I say to Senator Carnahan, at 7:35 p.m. the Parliamentarian
will, if the Senator is still speaking, interrupt her because pursuant
to the order there are 10 minutes prior to the 7:45 p.m. vote. The
Senator has her hour.
The PRESIDING OFFICER. The Senator from Missouri, Mrs. Carnahan.
Amendment No. 674
Mrs. CARNAHAN. I thank the Chair.
Mr. President, Americans have clearly expressed that they want a tax
cut, and I favor a tax cut as do all Democrats but one that benefits
all Americans.
The focus of this tax cut debate has been on marginal rates, which
are the tax rates paid on the final dollar of an individual or family's
income.
One of the best provisions of the President's proposal and the tax
cut constructed by the Finance Committee is the creation of a new 10-
percent marginal rate that covers taxable income up to $12,000 for
couples. All income-tax payers receive a $600 tax cut from this change
in the law, whether they make $50,000 or $500,000.
I come to the Senate Chamber this evening, however, to correct a
serious inequity in the bill before us. This bill contains a marginal
rate cut for each group of income taxpayers but one: couples who have
taxable income between $12,000 and $45,000. This omission is so glaring
that it is worth reviewing precisely what this bill would do.
Couples with taxable income between $45,000 and $109,000 would get a
marginal tax rate cut of 3 percent.
Couples with taxable income between $109,000 and $167,000 would get a
marginal tax rate cut of 3 percent.
Couples with a taxable income between $167,000 and $297,000 would get
a marginal tax rate cut of 3 percent.
Couples with a taxable income of over $297,000 would get a marginal
tax rate cut of 3.6 percent.
But couples with a taxable income between $12,000 and $45,000 would
get absolutely no rate cut for the final dollars of income earned.
Who are these families who are singled out for virtually no tax cut
in this bill? They have gross incomes of between $30,000 and $65,000.
This is the heart of the American middle class. They are Americans who
are working the late night shift at the factories, they are cops on the
beat, and they are American moms and dads working two jobs to send
their kids to college. They are family farmers waking up early to tend
their chores.
Mr. President, 72 million American taxpayers pay a 15-percent tax on
their last dollar of income; 1.7 million Missouri taxpayers fall into
this category. This is 44 percent of all Missouri taxpayers. These are
the folks who work
[[Page S5074]]
hard, play by the rules, struggle to make ends meet, but then get left
out when it is time to get relief. They do not have high-priced
lobbyists or groups running television commercials on their behalf. Why
is it that they are passed over to give such large tax cuts to couples
with taxable income over $300,000? This is the forgotten American
middle class.
The amendment I propose tonight on behalf of Senator Daschle and many
of my colleagues would correct this oversight by cutting the 15 percent
rate to 14 percent. This can be accomplished and still cut every other
rate by 1 percent.
The top 1 percent of American taxpayers would still receive
substantial tax relief under this amendment. On average, our wealthiest
taxpayers would still receive a rate cut of $9,000. But by adjusting
the 15 percent bracket, we would be providing middle-class families
$332 in tax relief in addition to the $600 cut from the creation of the
10-percent bracket.
Mr. President, Americans expect tax relief, but they also expect
fundamental fairness. My amendment would make this bill fairer. I
commend it to the Senate.
I send the amendment to the desk and ask for its immediate
consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Missouri [Mrs. Carnahan], for herself and
Mr. Daschle, proposes an amendment numbered 674.
Mrs. CARNAHAN. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 9, strike lines 5 through 12 and insert the
following:
``(2) Reductions in rates after 2001.--
``(A) In general.--Each rate of tax (other than the 10
percent rate) in the tables under subsections (a), (b), (c),
(d), and (e) shall be reduced by 1 percentage point for
taxable years beginning during a calendar year after the
trigger year.
``(B) Trigger year.--For purposes of subparagraph (A), the
trigger year is--
``(i) 2002, in the case of the 15 percent rate,
``(ii) 2003, in the case of the 28 percent rate,
``(iii) 2004, in the case of the 31 percent rate,
``(iv) 2005, in the case of the 36 percent rate, and
``(v) 2006, in the case of the 39.6 percent rate.
``(3) Adjustment of tables.--The Secretary''.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, the main point I make is those who say
this bill does not give any relief to those in the 15-percent bracket
have not read the bill: That is, the argument that the 15-percent
statutory rate should be reduced to 14 percent; otherwise nobody in the
15-percent bracket benefits. They say the taxpayers in the 15-percent
rate bracket are shorted because the statutory rate itself is not
reduced as in this amendment from 15 to 14 percent. This argument fails
to take into consideration the benefits in this bill that are given to
the 15-percent taxpayers.
Simple math will show how wrong they are. This 1-percent decrease in
the 15-percent rate is less than a 7-percent reduction of the rate
itself. It is simple. Just divide 1 percent by 15 percent and come up
with the 7-percent reduction I stated.
In contrast, and to show there is a reduction in taxes for people in
the 15-percent rate, the Joint Tax Committee of the Congress--remember,
these are the professionals who are nonpartisan; they are advising
Republicans and Democrats alike--say the bill before the Senate
provides between 9 percent for some in the 15-percent bracket and 33
percent of relief for the 15-percent bracket taxpayer.
It happens that taxpayers in the lower end of the 15-percent bracket
received the greatest reduction. That would be 33 percent; those at the
upper end received the 9-percent reduction.
Of course, this relief is created by the various benefits in the bill
targeted toward taxpayers falling within the 15-percent rate bracket.
Look at the choice. The amendment on the other side provides a 7-
percent decrease. Our bill provides 9 percent to 33 percent of relief.
This ought to seem like a very simple decision unless you take the
position that we can still do more. Their amendment provides a mere
thimbleful of tax relief for 15-percent taxpayers. Their amendment
creates a smokescreen to try to fool these Americans into believing
they are getting substantial tax relief.
Under our across-the-board tax relief package, everyone gets
substantial tax relief. No one is left behind. The average benefit is a
9-percent reduction in tax burdens. Those at the lower end income
levels get far more than 9 percent. Senator Baucus has said 75 percent
of the benefits go to taxpayers making less than $75,000. These are
reasons why I hope Members will vote against this amendment.
I suggest the absence of a quorum and ask the time be applied equally
to both sides.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I yield myself such time as I may consume
from the bill.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I will address another matter while we are
waiting for Senator Schumer and Senator Nickles to speak with respect
to the Schumer amendment. That will begin in about 8 minutes. I will
make remarks about another part of this bill, the provisions of the
bill comprising title XI, the pension provisions.
First, some background. The American people, we all know, have many
wonderful qualities but one of them, unfortunately, is not personal
savings. People in other countries save more personally than do
Americans. It is a concern many Members have. A lot of Members want to
use the Code to encourage personal savings, and many provisions do so.
During the last 20 years, personal savings rates in our country have
consistently declined from a peak of under 11 percent of gross domestic
product in the 1970s and the 1980s to zero or negative today.
Why does this matter? A low savings rate means people are not putting
their own money away for retirement. Social Security is helpful. We
have other private savings provisions such as IRA accounts which are
helpful, but the third leg of the retirement stool is pensions. The
more people have in pensions that they can rely on for retirement, the
more it will help. That means, importantly, less dependency on Social
Security, which many Americans are too dependent upon.
Sixteen percent of today's retirees rely exclusively on Social
Security benefits for their retirement income. Two-thirds of all
retirees today rely on Social Security for over one-half of their
retirement income, yet Social Security only replaces an average of 40
percent of a worker's income because the program was never designed to
be a retiree's sole source of support. Retirees continue to rely so
heavily on Social Security there will still be far too many Americans
spending their retirement years one step away from poverty.
On top of that, a low savings rate means less capital is available
for new investment.
America will continue to grow more if we have capital available for
investment. That is not only physical capital, it is human capital.
Increased capital for investment is an essential element to our
international competitiveness. Particularly now, at a critical time,
where economic growth is slowing down a bit, something we want
desperately to turn around, helping more Americans to save for their
retirement would be a long-term economic stimulus for our country.
Mr. President, I will have further remarks. I understand the minority
leader is on the floor now and would like to speak on the amendment
offered by the good Senator from Missouri. So I yield the floor.
The PRESIDING OFFICER. The Democratic leader, Mr. Daschle.
Mr. DASCHLE. I thank the ranking member for yielding. Let me inquire
of the Chair how much time remains under the unanimous consent
agreement?
[[Page S5075]]
The PRESIDING OFFICER. The Senator from Missouri has 51 minutes
remaining on her amendment. However, the amendment will be set aside at
7:35 for the Schumer amendment.
Mr. DASCHLE. I thank the Chair.
Mr. REID. Mr. President, if the Senator from South Dakota, the
leader, wishes 10 minutes or so I am sure we can put the vote off for
however much time the Senator needs.
Mr. DASCHLE. I thank my dear friend for his willingness to
accommodate. I think others have probably made decisions with regard to
schedule. I do not want to adversely affect their schedules. I will
accommodate the unanimous consent agreement and just take a couple of
minutes now. We can come back to the debate following the vote on the
Schumer amendment.
Mr. President, I do not know if this chart has been used so far in
the debate, but this chart really says it all. There are 72 million
middle-class taxpayers who have been skipped over in this bill. Of all
the problems many of us have with regard to this particular bill other
than its overall size, I think it is this.
There is no rate cut for those who fall in the income brackets of
most Americans. I know in South Dakota this represents about 90 percent
of the people in my State. From $12,000 to $45,000 net, $12,000 to
$65,000 gross, there is no rate cut. There is a rate cut in the sense
we establish a new rate, cut from 15 percent to 10 percent, and that 10
percent goes into effect. But it is for all of these different
categories, the different rates that we have in our income tax schedule
today.
Everybody gets the value of that new 10 percent rate. The only people
who do not get anything beyond that are those who fall in this income
category, $12,000 to $45,000. That is the largest single group of
income taxpayers in the country.
I applaud the distinguished Senator from Missouri for her amendment
and thank her for offering it because I think she provides the fix for
what is one of the most glaring inequities in the entire tax bill that
is before us. What she simply says is, let's give those who fall into
this rate a tax cut like everybody else. Let's reduce their taxes from
15 percent to 14 percent. And to pay for it we will accommodate all of
the other cuts as well. But we will reduce all of those rates by 1
percent. We will reduce the top rate by 1 percent, we will reduce the
second rate by 1 percent, the third and fourth rate by 1 percent, but
everybody then gets a rate cut of 1 percent.
I think it was President Bush who said there ought to be no winners
and losers here. You have real losers under this bill as it is
currently written.
What we are trying to say is, if you really mean what you say about
not having winners and losers, why in the world would you leave out the
15-percent rate taxpayers? The Senator from Missouri makes an excellent
point. I think, on a bipartisan basis, overwhelmingly, Republicans and
Democrats would want to fix this Achilles' heel in the bill.
There is a lot of fixing that needs to be done. But if you are going
to start at the top, at least you would want to say we cannot accept
this. We cannot tell 72 million Americans they are not going to get a
rate cut like everybody else. We are not going to say to 72 million
Americans, you get zero rate cut, but when you are up here you get a 3
or maybe even a 4 or 5 percent rate cut, if some of our colleagues have
their way. How does that make sense?
That is really the essence of the whole approach to this amendment. I
know my time has expired. I yield the floor for now.
Amendment No. 669
The PRESIDING OFFICER. I advise the Senate that under the previous
order, there are 5 minutes reserved to each side for final remarks on
the Schumer amendment.
Who yields time?
Mr. BAUCUS. I ask the Chair, under the consent agreement, is there
any provision as to whether the Senator from New York or the Senator
from Oklahoma go first?
The PRESIDING OFFICER. There is none, I say to the Senator from
Montana.
Mr. BAUCUS. I yield the floor.
The PRESIDING OFFICER. The Senator from New York, Mr. Schumer.
Mr. SCHUMER. Mr. President, I thank my colleagues for what was an
excellent and spirited debate.
This amendment is simple. Let's reiterate just what it does. It
allows all families whose incomes go up to $130,000 to deduct up to
$12,000 of their tuition costs. It is revenue neutral because it takes
an offset from the highest rate of the estate tax, which under the bill
goes down from 55 percent to 45 percent and instead makes it go from 55
percent to 53 percent.
My colleagues, I make two points here. First, this is desperately
needed by middle class families. American families who make $40,000 or
$50,000 or $60,000 are up late at night, talking about how they are
going to pay for their kid's college. They know college education is
essential to their kid's future. Yet they do not know how they are
going to pay for it.
As a result of the high cost of tuition, which is escalating quicker
than any cost in America, millions of young American men and women do
not go to college who could, or they go to the junior college instead
of the 4-year college for which they are qualified. They downgrade.
That hurts them, that hurts their families, and that hurts America.
I haven't heard much debate on the other side about this being a bad
idea. In fact, the Senator from Oklahoma and the Senator from Arizona
had the good grace to say it is a good idea. But they say it destroys
the estate tax.
Hogwash. All it does is this: It keeps the same date for the repeal
of the estate tax as in the bill, 2011. If the people on the other side
were so eager to get the estate tax taken down, they could have done it
earlier. They did not. We leave that decision to them.
All it does, very simply, is lower the top rate, which is paid only
by estates of $3 million. In every one of our States, with perhaps the
exception of mine and California, there is no more than a handful of
people who are affected--in mine it is a little more than a handful
each year--and it lowers their rate. We are not raising any rate. But
it doesn't lower it as much as was done in the bill.
This is an issue of choice. It is not a choice whether or not to
repeal the estate tax. Anyone who says that is misstating this
amendment, probably by design. It is, rather, a choice of who needs
more help. The heir of an estate worth at least $3 million--and it has
nothing to do with whether you can sell the business or not because
whether you tax it at 45 percent, 53 percent, or 55 percent, that is
such a high rate that you will have to sell the business at one rate as
well as the other. But it says to that estate, only over $3 million, a
handful in each State, that your tax reduction is not going to be quite
as great as in the proposal.
Choice. Who do you stand with, my colleagues? The middle class family
who gets very little relief on the rate, who has to pay $10,000 or
$15,000 for their children's college education or the estate worth more
than $3 million in terms of getting a greater reduction rather than a
lesser reduction?
It is a choice. With whom are you standing? It is not a debate on
eliminating the estate tax. That is the only argument we heard from the
other side--with good reason. Because when they debate the amendment,
there is no good argument.
Repeal of the estate tax is popular. It is done in the bill. Making
college tuition tax deductible is also popular. A portion of it is done
in the bill but a rather small portion. This amendment makes college
tuition deductible for middle-class families.
In conclusion, I say to my colleagues in this Chamber, we tend to do
a lot for the rich. They have influence, and they run businesses, and
those are important for America. We also do a lot for the poor, maybe
not enough in some of our opinions, but we do a lot because they need
help.
The people we do virtually nothing for--or too little for--are the
people who make $40,000, $50,000, $60,000, $70,000. They do not ask for
much. But the one thing they are asking us for is not even a 3-percent
or 4-percent reduction in their tax rate. They are asking us to help
them put their kids through college. The choice is every one of ours.
We can do that right now.
The PRESIDING OFFICER. The Senator's time has expired.
The Senator from Iowa.
[[Page S5076]]
Mr. GRASSLEY. I will yield myself such time as I consume, and the
remainder of the time I will yield to the Senator from Arizona.
The Schumer amendment, as I said so many times, fractures the spirit
of the bipartisan compromise that occurred in the Senate Finance
Committee, which is the reason we can be here doing things in the
tradition of the Finance Committee in a bipartisan way.
Of course, Senator Schumer has no interest in this bipartisan
agreement. It is curious that Senator Schumer would want to work so
hard in offering an amendment to improve, in his mind, a bill he is
going to end up voting against.
Senator Schumer's amendment guarantees that the Federal Government
gets to take over 50 percent of the assets a parent wants to pass on to
a child. That does not sound like taxation; that sounds like
confiscation to me.
Senator Schumer claims that his amendment improves the education
components in this bill, but in fact the bill's underlying education
provisions are sound. Student loan interest deduction, prepaid tuition
plans, employer-provided educational assistance, an increase in the
education IRA--these are all important measures that will improve
access to education.
Senator Schumer's amendment will undo a very delicate compromise upon
which these provisions rest. It is unwise, it is destructive, and it
also should be defeated.
I yield to the Senator from Arizona.
The PRESIDING OFFICER. The Senator from Arizona has 2 minutes, 50
seconds.
Mr. KYL. Thank you, Mr. President.
Let me correct a couple things the Senator from New York said
earlier. To be accurate, the Senator from New York said his rate kicked
in for estates of $3 million. The truth is that according to section
2001 of the IRS Code, his amendment would affect the estates if they
were one penny over $2.5 million.
The committee had testimony from a variety of witnesses to talk about
what $2.5 million was. A grocer from Duncan, OK, talked about why the
independent grocers support the rate relief in our bill--because it
takes over $3 million just to put together the average-size grocery
store. So when he dies, that estate is going to be denied relief
because of the amendment of the Senator from New York.
There is already, as we said before, $33 billion in this bill. By the
way, I was in error because I said it was $10 or $11 billion. There is
already $33 billion of relief for education in the bill. This amendment
would add an additional $37 billion.
We do not need to pit one group against the other. In fact, the bill
is delicately balanced because we have relief for education and for
those small businessmen and farms that would benefit from the rate
reduction we provide for in the estate tax.
The bottom line here is, we are not just talking about 32 such
estates or some number such as that. In my own State of Arizona,
according to the Internal Revenue Service statistics for 1998, there
are over 250 estates that would be adversely affected by this. In the
State of New York, I counted up over 900. The number may be quite a bit
higher than that.
So we are talking about a significant number of estates that are over
$2.5 million that would be denied the rate relief because of the
amendment of the Senator from New York.
The bottom line is this: We tried to put a bill together that was
fair. Most Americans believe that nobody should have to pay more than
50 percent in a tax rate. In fact, if you ask them, most of them say
the highest rate anybody should pay is 25 percent. We tried to bring
the estate tax--the highest rate of which, because of a bubble effect,
is at about 60 percent--down to 45 percent. That is at least below 50
percent.
No, the Senator from New York says we can't give that kind of relief;
we are going to hold the rate at 53 percent.
It is all about fairness. I urge my colleagues to vote against the
Schumer amendment, to follow the advice of the committee, which gives
relief both for education and for these small businesses that would get
modest rate relief under our bill. If we do that, then I think we will
be fair to everybody. If we do not do that, we are hurting one group of
Americans in order to try to help a different group of Americans. That
is not what this bill is all about. That is not what we should be all
about.
I urge my Senate colleagues to reject the amendment.
The PRESIDING OFFICER. All time has expired.
The question now is on agreeing to the Schumer amendment No. 669. The
yeas and nays have been ordered.
The clerk will please call the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from Kentucky (Mr. Bunning)
is necessarily absent.
Mr. REID. I announce that the Senator from Wisconsin (Mr. Kohl) is
necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 43, nays 55, as follows:
[Rollcall Vote No. 114 Leg.]
YEAS--43
Akaka
Bayh
Biden
Bingaman
Boxer
Breaux
Byrd
Cantwell
Carnahan
Carper
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerry
Leahy
Levin
Lieberman
Mikulski
Murray
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Snowe
Stabenow
Torricelli
Wellstone
NAYS--55
Allard
Allen
Baucus
Bennett
Bond
Brownback
Burns
Campbell
Chafee
Cleland
Cochran
Collins
Craig
Crapo
DeWine
Domenici
Ensign
Enzi
Fitzgerald
Frist
Gramm
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kyl
Landrieu
Lincoln
Lott
Lugar
McCain
McConnell
Miller
Murkowski
Nelson (NE)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
Warner
Wyden
NOT VOTING--2
Bunning
Kohl
The amendment (No. 669) was rejected.
Mr. GRASSLEY. I move to reconsider the vote.
Mr. GRAMM. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. REID. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. LOTT. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. Mr. President, Senator Daschle, Senator Reid, Senator
Nickles, the managers, and I have been working to try to come up with
an agreed to process to complete action for tonight and complete action
on this legislation by the close of business on Monday. I think we have
come to an agreement on a very fair proposal.
I ask unanimous consent that when the Senate resumes consideration of
the reconciliation bill at 9:30 on Monday, there be 6 hours equally
divided for amendment debate and 2 hours equally divided between each
leader or designee for general debate and closing remarks. I further
ask consent all remaining first-degree amendments be limited to 1 hour
instead of the 2 we had been having, and second-degree amendments be
limited to 30 minutes. I further ask consent that a vote occur in
relation to the Carnahan amendment beginning at 6 p.m. on Monday, that
no second-degree amendments be in order, and there be 2 minutes for
explanation prior to the vote. I further ask consent when the Senate
resumes consideration of the bill on Monday, the Senate immediately
resume consideration of the Gregg amendment numbered 656.
The PRESIDING OFFICER. Is there objection?
Mr. REID. Reserving the right to object.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. It is my understanding that amendment and the rest of the
[[Page S5077]]
amendments will have 1 hour rather than the regular half hour.
Mr. LOTT. That is right, one; so there will be 30 minutes on each
side. The 1 hour is equally divided. I also note that we will continue
tonight--but with this agreement, the vote we just had would be the
final vote--and we go to the following amendments: Collins for 30
minutes; Carnahan for 20 minutes; Rockefeller for 30 minutes; Bayh for
30 minutes; and Harkin for 30 minutes, if they wish to come and offer
their amendments.
The PRESIDING OFFICER. Is there objection?
Mr. DASCHLE. Reserving the right to object, Senator Landrieu would
like to be added to those offering an amendment tonight.
Mr. LOTT. Senator Hatch has an amendment to do tonight.
Mr. HATCH. Next, if I can, on tax credit. I will wait until Monday.
Mr. DASCHLE. Mr. President, is it the understanding of the Chair the
amendments would be laid aside as they are offered, then, on Monday,
and tonight, and that the votes happen in the sequence in which they
were offered, tonight and Monday?
Mr. LOTT. Mr. President, I believe that is the intent; they would be
laid aside and voted in sequence in the order they are offered. And
Senator Landrieu is added to the list for tonight, 30 minutes.
Mr. DASCHLE. If the majority leader could repeat the list.
Mr. LOTT. After we get this agreement, we can continue tonight. The
amendments we have arranged tonight are Collins, 30 minutes; Carnahan,
20 minutes; Rockefeller for 30 minutes; Bayh for 30 minutes; Harkin for
30 minutes; Landrieu for 30 minutes; and Senator Graham tonight also
for 30 minutes after Senator Landrieu.
I ask unanimous consent Senator Hatch be the next Republican
amendment on Monday after the Gregg amendment. So it is the Gregg
amendment, a Democrat amendment, and then Senator Hatch.
Mr. WELLSTONE. Reserving the right to object, I wonder if I could be
locked in.
Mr. DASCHLE. I was going to ask consent that Senator Wellstone follow
the Gregg amendment on Monday.
Mr. LOTT. So I amend the agreement, and I am sure we will get all
this straight momentarily, that the Wellstone amendment comes after the
Gregg amendment, and that is followed by Hatch on Monday.
The PRESIDING OFFICER. Is there objection?
Mr. BYRD. Reserving the right to object, if we are listing
amendments, I would like to be on the list for an amendment before we
complete action on the bill, with 30 minutes.
Mr. DASCHLE. I ask that we amend the request to include Senator Byrd
and Senator Dodd.
Mr. LOTT. I certainly amend the request to that extent. Let me say to
all of our colleagues, we are not closing up shop. Members will have an
opportunity to offer these amendments Monday at a time that hopefully
will be convenient. Senator Byrd will be added to the list, I believe,
after Senator Hatch, if that is what he is asking, but I don't think
Members will be excluded if they are not on the list now.
Are the managers around?
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. BYRD. I know we will not be excluded, but I want to make sure I
have 30 minutes.
Mr. LOTT. You have it.
Mr. DODD. Reserving the right to object, I ask for 30 minutes on
Monday.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. LOTT. Mr. President, if we could get this agreement entered into,
we have additional time that Senators have, thankfully, agreed to for
tonight.
Let's get the manager and look at the time and get with the Senators
and get this order lined up. I know Senator Baucus and Senator Grassley
will find a way to accommodate the Senators who want to offer
amendments. We need to have some flow in terms of getting amendments on
this side among the others. If we get this agreement, we will ask
Senator Reid and Senator Nickles to work with these other Senators to
make sure Senators are on the list.
The PRESIDING OFFICER. Is there objection?
Mr. DORGAN. Reserving the right to object, I observe to the majority
leader the reason for the anxiety is we are bringing this bill to the
floor under reconciliation. As the majority leader knows,
reconciliation limits the amount of time for debate. So there are many
people on this side of the aisle who have amendments and want to have
the amendments offered and debated. I think that is why hands are being
raised requesting time. If this were not brought under reconciliation
we would not have to do that. Every Senator would have the right to
offer an amendment and the right to have it debated. I ask I be put in
the lineup for Monday for 30 minutes.
Mr. LOTT. Mr. President, I want to make sure we have this list lined
up. I would like to have the managers work with us on this. I feel
uncomfortable trying to arrange all the amendments. But a request has
been made we put Senator Dorgan on that list for Monday. I think we
need to see if there is a Republican amendment to come after Senator
Byrd before Senator Dorgan. We will continue to alternate.
Senator Dodd, we will accept him now and be done with it. Senator
Dodd will be on the list.
Mr. GRAHAM. I request 30 minutes on Monday.
Mr. LOTT. I believe your request was for tonight.
Mr. GRAHAM. Tonight, and I also ask for 30 minutes on Monday.
Mr. KERRY. Reserving the right to object, before colleagues get a
second bite of the apple, some Members would like a first. I ask
unanimous consent to be added to the order. I think it would be fair
for colleagues who have not had a first bite, before others get second
bites of the apple.
Mr. DASCHLE. For the information of Democratic Senators the order
Monday includes Senators Wellstone, Byrd, Dodd, Dorgan, and Kerry.
The PRESIDING OFFICER. The Chair advises the Parliamentarian has
Senator Graham today and Monday.
Mr. DORGAN. Mr. President, might I inquire, the list that was just
read, are those 30-minute amendments?
Mr. DASCHLE. That is correct.
Mr. LOTT. It is 30 unless you would like to have less.
Ms. LANDRIEU. Could the majority leader clarify the order for us
tonight?
Mr. LOTT. Senators Collins, Carnahan, Rockefeller, Bayh, Harkin,
Landrieu, and Graham if offered.
The PRESIDING OFFICER. Is there objection to the order as modified?
Without objection, it is so ordered.
Mr. LOTT. In light of that agreement, then, as enjoyable as it was--
--
Mr. DASCHLE. Will the majority leader yield?
The PRESIDING OFFICER. The Democratic leader.
Mr. DASCHLE. Senator Graham was kind enough not to demand that he be
put into the list on Monday. He would like to have the opportunity to
offer two tonight. I assume if he is willing to wait, he can offer both
of them back to back. He is the last in order.
Mr. LOTT. I don't see any problem with that. That will be fine. And I
would like the managers to come back and take it from here.
The PRESIDING OFFICER. Without objection, it is so ordered.
The majority leader.
Mr. LOTT. In light of this agreement, there will be no further votes
this evening. There will be 8 hours remaining for debate on the
reconciliation bill during Monday's session. A series of votes is
anticipated at 6 p.m. on Monday. The last in the series will be final
passage. Senators should make their plans accordingly.
I thank all for their cooperation.
The PRESIDING OFFICER. Under the previous order, the pending
amendment is set aside and the Senator from Maine is recognized.
Amendment No. 675
Ms. COLLINS. Mr. President, on behalf of myself and Senator Warner, I
send an amendment to the desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Maine [Ms. Collins] for herself and Mr.
Warner, Mr. Cochran, Ms. Landrieu, Mr. Allen, Mr. Smith of
Oregon, Mr. Harkin, Ms. Mikulski, Mr. Reed, and Mr.
Hutchinson, proposes an amendment numbered 675.
Ms. COLLINS. I ask unanimous consent the reading of the amendment be
dispensed with.
[[Page S5078]]
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the end of title IV, add the following:
Subtitle E--Miscellaneous Education Provisions
SEC. 441. SHORT TITLE.
This subtitle may be cited as the ``Teacher Relief Act of
2001''.
SEC. 442. ABOVE-THE-LINE DEDUCTION FOR QUALIFIED PROFESSIONAL
DEVELOPMENT EXPENSES OF ELEMENTARY AND
SECONDARY SCHOOL TEACHERS.
(a) Deduction Allowed.--Part VII of subchapter B of chapter
1 (relating to additional itemized deductions for
individuals), as amended by section 431(a), is amended by
redesignating section 223 as section 224 and by inserting
after section 222 the following new section:
``SEC. 223. QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES.
``(a) Allowance of Deduction.--In the case of an eligible
educator, there shall be allowed as a deduction an amount
equal to the qualified professional development expenses paid
or incurred by the taxpayer during the taxable year.
``(b) Maximum Deduction.--The deduction allowed under
subsection (a) for any taxable year shall not exceed $500.
``(c) Qualified Professional Development Expenses of
Eligible Educators.--For purposes of this section--
``(1) Qualified professional development expenses.--
``(A) In general.--The term `qualified professional
development expenses' means expenses for tuition, fees,
books, supplies, equipment, and transportation required for
the enrollment or attendance of an individual in a qualified
course of instruction.
``(B) Qualified course of instruction.--The term `qualified
course of instruction' means a course of instruction which--
``(i) is--
``(I) directly related to the curriculum and academic
subjects in which an eligible educator provides instruction,
``(II) designed to enhance the ability of an eligible
educator to understand and use State standards for the
academic subjects in which such educator provides
instruction,
``(III) designed to provide instruction in how to teach
children with different learning styles, particularly
children with disabilities and children with special learning
needs (including children who are gifted and talented), or
``(IV) designed to provide instruction in how best to
discipline children in the classroom and identify early and
appropriate interventions to help children described in
subclause (III) to learn,
``(ii) is tied to--
``(I) challenging State or local content standards and
student performance standards, or
``(II) strategies and programs that demonstrate
effectiveness in increasing student academic achievement and
student performance, or substantially increasing the
knowledge and teaching skills of an eligible educator,
``(iii) is of sufficient intensity and duration to have a
positive and lasting impact on the performance of an eligible
educator in the classroom (which shall not include 1-day or
short-term workshops and conferences), except that this
clause shall not apply to an activity if such activity is 1
component described in a long-term comprehensive professional
development plan established by an eligible educator and the
educator's supervisor based upon an assessment of the needs
of the educator, the students of the educator, and the local
educational agency involved, and
``(iv) is part of a program of professional development
which is approved and certified by the appropriate local
educational agency as furthering the goals of the preceding
clauses.
``(C) Local educational agency.--The term `local
educational agency' has the meaning given such term by
section 14101 of the Elementary and Secondary Education Act
of 1965, as in effect on the date of the enactment of this
section.
``(2) Eligible educator.--
``(A) In general.--The term `eligible educator' means an
individual who is a kindergarten through grade 12 teacher,
instructor, counselor, principal, or aide in an elementary or
secondary school for at least 900 hours during a school year.
``(B) Elementary or secondary school.--The terms
`elementary school' and `secondary school' have the meanings
given such terms by section 14101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 8801), as so in
effect.
``(d) Denial of Double Benefit.--
``(1) In general.--No other deduction or credit shall be
allowed under this chapter for any amount taken into account
for which a deduction is allowed under this section.
``(2) Coordination with exclusions.--A deduction shall be
allowed under subsection (a) for qualified professional
development expenses only to the extent the amount of such
expenses exceeds the amount excludable under section 135,
529(c)(1), or 530(d)(2) for the taxable year.''.
(b) Deduction Allowed in Computing Adjusted Gross Income.--
Section 62(a), as amended by section 431(b), is amended by
inserting after paragraph (18) the following new paragraph:
``(19) Qualified professional development expenses.--The
deduction allowed by section 223.''.
(c) Conforming Amendments.--
(1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3)
are each amended by inserting ``223,'' after ``221,''.
(2) Section 221(b)(2)(C) is amended by inserting ``223,''
before ``911''.
(3) Section 469(i)(3)(E) is amended by striking ``and 221''
and inserting ``, 221, and 223''.
(4) The table of sections for part VII of subchapter B of
chapter 1, as amended by section 431(c), is amended by
striking the item relating to section 223 and inserting the
following new items:
``Sec. 223. Qualified professional development expenses.
``Sec. 224. Cross reference.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 442. CREDIT TO ELEMENTARY AND SECONDARY SCHOOL TEACHERS
WHO PROVIDE CLASSROOM MATERIALS.
(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to other credits) is amended by adding at
the end the following new section:
``SEC. 30B. CREDIT TO ELEMENTARY AND SECONDARY SCHOOL
TEACHERS WHO PROVIDE CLASSROOM MATERIALS.
``(a) Allowance of Credit.--In the case of an eligible
educator, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year an amount equal
to 50 percent of the qualified elementary and secondary
education expenses which are paid or incurred by the taxpayer
during such taxable year.
``(b) Maximum Credit.--The credit allowed by subsection (a)
for any taxable year shall not exceed $250.
``(c) Definitions.--
``(1) Eligible educator.--The term `eligible educator' has
the same meaning given such term in section 223(c).
``(2) Qualified elementary and secondary education
expenses.--The term `qualified elementary and secondary
education expenses' means expenses for books, supplies (other
than nonathletic supplies for courses of instruction in
health or physical education), computer equipment (including
related software and services) and other equipment, and
supplementary materials used by an eligible educator in the
classroom.
``(3) Elementary or secondary school.--The term `elementary
or secondary school' means any school which provides
elementary education or secondary education (through grade
12), as determined under State law.
``(d) Special Rules.--
``(1) Denial of double benefit.--No deduction shall be
allowed under this chapter for any expense for which credit
is allowed under this section.
``(2) Application with other credits.--The credit allowable
under subsection (a) for any taxable year shall not exceed
the excess (if any) of--
``(A) the regular tax for the taxable year, reduced by the
sum of the credits allowable under subpart A and the
preceding sections of this subpart, over
``(B) the tentative minimum tax for the taxable year.
``(e) Election To Have Credit Not Apply.--A taxpayer may
elect to have this section not apply for any taxable year.''.
(b) Clerical Amendment.--The table of sections for subpart
B of part IV of subchapter A of chapter 1 is amended by
adding at the end the following new item:
``Sec. 30B. Credit to elementary and secondary school teachers who
provide classroom materials.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
Ms. COLLINS. Mr. President, I also take this opportunity to ask that
the yeas and nays be ordered on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Ms. COLLINS. Mr. President, may I have order, please?
The PRESIDING OFFICER. The Senate will please come to order.
Ms. COLLINS. Mr. President, I rise this evening with my good friend,
the distinguished senior Senator from Virginia, Mr. Warner, to offer an
amendment providing tax relief to our Nation's teachers. We are very
pleased to be joined by several cosponsors including Senators Cochran,
Landrieu, Allen, Harkin, Reed, Gordon Smith, Mikulski, Hutchinson, and
Dodd.
It would be difficult to script a more appropriate time for us to
offer this important amendment. We stand now at the intersection of two
debates, one on a bill to modernize and reauthorize the law that will
define the Federal Government's role over the next 7 years in educating
our Nation's children, the other a landmark tax relief bill of which we
are beginning consideration today.
Our amendment joins some of the best elements of each. It is good
both for tax policy and for education policy.
[[Page S5079]]
In the midst of the education and tax debates, we are asking our
colleagues in the Senate now to overlook the selfless efforts of
teachers and the financial sacrifices they make to improve their
instructional skills and the classrooms in which they teach.
Senator Warner deserves enormous credit for focusing the Senate's
attention, through a sense-of-the-Senate resolution to the education
bill, on the need to provide tax relief for our teachers.
Our teachers serve such a critical role in the education and the
development of our children. This amendment, the amendment Senator
Warner offered to the education bill, expressed the sense of the Senate
that the Congress should pass legislation providing teachers with tax
relief in recognition of the many out-of-pocket, unreimbursed expenses
they incur to improve the education of our children.
The amendment we offer tonight is the legislation Senator Warner's
sense-of-the-Senate resolution contemplated, and which I was proud to
cosponsor. It earlier passed by a vote of 95-3.
Our proposal is targeted to support the expenditures of teachers who
strive for excellence beyond the constraints of what their schools can
provide. Our amendment enjoys the bipartisan support of several of our
colleagues, as well as the endorsement of the National Education
Association and the American Association of School Administrators.
Let me briefly describe the provisions of our amendment. First, it
would allow teachers, teacher's aides, principals, and counselors to
take an above-the-line tax deduction for their professional development
expenses.
Second, the bill would grant educators a tax credit of up to $250 for
books, supplies, and equipment they purchase for their students. The
tax credit would be established at 50 percent of such expenditures, so
for every dollar in supplies a teacher spent, the teacher would receive
50 cents of tax relief.
According to a study by the National Education Association, the
average public school teacher spends more than $400 annually on
classroom materials. This sacrifice is typical of the dedication of so
many of our teachers to their students. Oftentimes, teachers in Maine
and throughout the country spend their own money, even though they are
paid very limited salaries, because they want to improve the classroom
experience for their students.
Recently I met with one such teacher, Idella Harter, the president of
the Maine Education Association. She told me of the many books,
supplies, rewards for student behavior, and other materials she just
routinely purchases for her classrooms. One year, Idella Harter decided
to save all of her receipts for these purchases. She started adding up
the total, and she was startled to discover that it exceeded $1,000. At
that point, she decided to stop counting. But it is indicative of the
kind of selfless financial sacrifice so many of our teachers make.
Idella Harter is not alone. Maureen Marshall, who serves in my office
as my education policy adviser, taught public schools for 8 years in
Hawaii and Virginia. In her first year as a teacher, she spent well
over $1,000 of her own money on educational software, books, pocket
charts, and other materials. Yet because of her tax situation, she
could not deduct these expenses from her taxable income.
When we help our Nation's teachers, the ultimate beneficiaries are
their students. Other than an involved parent, a well-qualified teacher
is the single most critical element to predict a student's success.
Educational researchers have demonstrated time and again the close
relationship between highly qualified teachers and successful students.
Moreover, educators themselves understand just how important
professional development is to maintaining and extending their levels
of competence. When I meet with teachers from Maine, they repeatedly
tell me of their need for more professional development. Yet there is a
scarcity of financial support for this worthy pursuit.
I greatly admire the many educators who have voluntarily reached deep
into their pockets to pay for additional training and course work for
themselves, and also to finance additional supplies and materials for
their students. By enacting these modest changes to our Tax Code, we
can encourage educators to continue to take the formal course work in
the subject matter which they teach and to avail themselves of other
professional development opportunities.
The relief that our Tax Code now provides to teachers is simply not
sufficient. By and large, most teachers do not benefit from the current
provisions that allow for limited deductibility of professional
development and classroom expenses. A new report by the American
Federation of Teachers places the average national teacher's salary at
about $42,000. In Maine, the average yearly starting salary for a
public school teacher is just a little over $23,000. Yet these
teachers, out of their own generosity, are reaching deep into their
pockets to improve their teaching.
Now, under the current law, the problem is that teachers do not reach
a sufficient level to be able to deduct the costs of their professional
development and classroom supplies.
By allowing teachers to take the above-the-line deduction for
professional development expenses and a credit for classroom expenses
paid out of pocket, our amendment takes a fair, progressive approach
that will provide a modicum of relief to our Nation's schoolteachers.
I should note that most of our colleagues have already voted for very
similar legislation. Last year, Senator Kyl, Senator Coverdell, and I
offered a similar amendment to the Affordable Education Act, which was
adopted unanimously.
President Bush has eloquently stated:
Teachers sometimes lead with their hearts and pay with
their wallets.
Our amendment makes it a priority to reimburse educators for just a
small part of what they invest in the futures of our children.
I hope our colleagues will join us in support of this important
legislation. The NEA says it well:
Teacher quality is the single most critical factor in
maximizing student achievement. Ongoing professional
development is essential to assure that teachers stay up to
date on the skills and knowledge necessary to prepare
students for the challenges of the 21st century.
Thank you, Mr. President.
I would like to recognize the leadership of the senior Senator from
Virginia whom, I believe, will be speaking next in favor of our
amendment.
The PRESIDING OFFICER. I thank the Senator from Maine.
The senior Senator from Virginia, Mr. Warner.
Mr. WARNER. Mr. President, there are moments in your Senate career
you shall not forget, and this is one, when I am privileged to join
with our distinguished junior Senator from Maine. She pioneered this
effort. And let no one be mistaken about that fact. I think Senator
Jeffords and Senator Kyl and others have also been at the early stages
of this issue, some years more ago.
I joined them last year. We recognized we had two bills, and the time
came for a consensus to elect a leader. The unanimous choice was the
junior Senator from Maine. I am, as we say in the military, one step
behind her dutifully following. But together we have crafted an
amendment that every Senator in his or her heart and conscience can
accept. I am optimistic that this will become law.
Mr. President, I ask unanimous consent to have printed in the Record
a letter from the National Education Association. While addressed to
me, it really is addressed to both of us.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
National Education Association,
Washington, DC, May 16, 2001.
Senator John Warner,
U.S. Senate,
Washington, DC.
Dear Senator Warner: On behalf of the National Education
Association's (NEA) 2.6 million members, we would like to
express our support for your amendment to the Senate tax bill
to provide tax benefits for educators' professional
development and classroom supply expenses.
As you know, teacher quality is the single most critical
factor in maximizing student achievement. Ongoing
professional development is essential to ensure that teachers
stay up-to-date on the skills and knowledge necessary to
prepare students for the challenges of the 21st century. Your
proposed tax
[[Page S5080]]
deduction for professional development expenses will make a
critical difference in helping educators access quality
training.
We are also very pleased that your amendment would provide
a tax credit for educators who reach into their own pockets
to pay for necessary classroom materials, including books,
pencils, paper, and art supplies. A 1996 NEA study found that
the average K-12 teacher spent over $400 a year out of
personal funds for classroom supplies. For teachers earning
modest salaries, the purchase of classroom supplies
represents a considerable expense for which they often must
sacrifice other personal needs.
We thank you for your leadership in introducing this
important amendment and look forward to continuing to work
with you to support our nation's educators.
Sincerely,
Mary Elizabeth Teasley,
Director of Government Relations.
Mr. WARNER. The letter, in part, states:
On behalf of the National Education Association's (NEA) 2.6
million [teachers], we would like to express our support for
your amendment to the Senate tax bill to provide tax benefits
for educators' professional development and classroom supply
expenses.
Our great President sent to the Congress the message--which is the
title of his education reform blueprint--``No Child is Left Behind.''
We cannot hope to achieve the goals in this guide, and the goals across
our Nation, which every town, village, and city wish to have to improve
education, leaving no child behind, if we leave our teachers behind. We
will not leave any child behind if we do not leave teachers behind.
That is the point. You cannot have one without the other. They go hand
in hand.
I stopped to think how hard we work on our individual careers. Yes,
we work on our careers. But teachers work to create--to create--the
possibilities for others, the younger generation, to develop those
careers.
My colleague from Maine has, in great detail, gone into the various
parts of this bill, our President, on page 13 of his education reform
blueprint, has a provision which says as follows:
. . . provides tax deductions for teachers. Teachers will
be able to make tax deductions of up to $400 to help defray
the costs associated with out-of-pocket classroom expenses
such as books, school supplies, professional enrichment
programs, and other training.
We accepted that challenge of our President in this bill. We not only
accepted it; we listened carefully to the teachers association, and we
have enhanced it in a modest way. We have enhanced the goals set out by
our President and the same goals that are really in the hearts and
minds of our people all across America today.
So I am honored to join with my distinguished colleague.
Mr. President, just last week, on May 8, 2001, the Senate
overwhelmingly adopted amendment that I offered with Senator Collins to
the education bill. This amendment, which passed by a vote of 95-3,
stated:
the Senate should pass legislation providing elementary and
secondary level educators with additional tax relief in
recognition of the many out of pocket, unreimbursed expenses
educators incur to improve the education of our Nation's
student.
I note that both the chairman and ranking member of the Finance
Committee supported this sense-of-the-Senate amendment.
Senator Collins and I have pursued the goal of providing much needed
tax relief for our teachers for sometime. However, despite sharing the
same goal, in the past, we each have had our own bill and each had our
own approach towards achieving this shared goal.
Senator Collins has truly been a leader on the issue of tax relief
for teachers. I commend her for her work in highlighting this issue and
for her tireless efforts to improve education in this country.
I am so glad that Senator Collins and I had the opportunity to sit
down and discuss teacher tax relief legislation in greater detail. As a
result of these discussions, we have joined forces and agreed on an
approach to achieve our shared goal.
Today, I am honored to be joining with Senator Collins in offering
the teacher tax relief amendment to the tax bill currently before the
Senate.
This Collins-Warner amendment is cosponsored by a bipartisan group of
Senators, including Senators Landrieu, Cochran, Allen, Harkin, Gordon
Smith, Mikulski, Reed and Hutchinson of Arkansas. The National
Education Association has also endorsed this amendment.
The Collins-Warner teacher tax relief amendment has two components.
First, the legislation provides a maximum $250 tax credit to teachers
for classroom supplies. This credit recognizes that our teachers dip
into their own pocket in significant amounts to bring supplies into the
classroom to better the education of our children.
Second, this legislation provides a maximum $500 above the line
deduction for professional development costs that teachers incur. This
deduction will particularly help low-income school districts that
typically do not have the finances to pay for professional development
costs for their teachers.
Mr. President, our teachers in this country are overworked,
underpaid, and all too often under-appreciated.
In addition to these factors, our teachers expend significant money
out of their own pocket to better the education of our children. Most
typically, our teachers are spending significant amounts of money out
of their own pocket on: classroom expenses--such as books, supplies,
pens, paper, and computer equipment; and professional development
costs--such as tuition, fees, books, and supplies associated with
courses that help our teachers become even better instructors.
These out of pocket costs place lasting financial burdens on our
teachers. This is one reason our teachers are leaving the profession.
Little wonder that our country is in the midst of a teacher shortage.
Estimate are that 2.4 million new teachers will be needed by 2009
because of teacher attrition, teacher retirement and increased student
enrollment.
While the primary responsibility rests with the states, I believe the
federal government can and should play a role in helping to alleviate
the nation's teaching shortage.
On a Federal level, we can encourage individuals to enter the
teaching profession and remain in the profession by providing tax
relief to teachers for the costs that they incur as part of the
profession. This incentive will help financially strapped urban and
rural school systems as they recruit new teachers and struggle to keep
those teachers that are currently in the system.
Our teachers have made a personal commitment to educate the next
generation and to strengthen America. While many people spend their
lives building careers, our teachers spend their careers building
lives.
The teacher tax relief amendment goes a long way towards providing
our teachers with the recognition they deserve by providing teachers
with important and much needed tax relief.
At this point in time, I think I should yield the floor for purposes
of such other remarks as other Senators may wish to make.
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. Mr. President, I wish to thank the Senator from Virginia
for his usual eloquent and gracious remarks. He is a terrific Senator
with whom to work. The people of Virginia are very fortunate to have
him representing them. He has also been an extremely strong advocate
for education his entire time in the Senate. It has been a pleasure to
work with him.
Mr. President, I ask unanimous consent that the Senator from Rhode
Island, Jack Reed, another very strong advocate for education, be added
as a cosponsor of our amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WARNER. Mr. President, I thank my distinguished colleague for her
very thoughtful remarks. She is a pillar today in this Senate, and she
will always be a pillar of strength and wisdom in this institution.
Now, Mr. President, we will be anxious to hear from the managers of
the bill.
I note, again, that both managers voted for the Warner-Collins sense-
of-the-Senate amendment on the education bill endorsing this concept. I
will quote again the amendment for the benefit of the managers. The
amendment was adopted on May 8, 2001. The amendment passed by a vote of
95-3. And I quote it:
The Senate should pass legislation providing elementary and
secondary level educators with additional tax relief in
recognition of the many out of pocket, unreimbursed expenses
educators incur to improve the education of our Nation's
students.
[[Page S5081]]
Mr. President, it is remarkable, as I travel about our State, the
great State of Virginia; you cannot go to a school, and particularly
the elementary schools, without hearing of teachers, although they will
not tell you, who reach into their own pockets and take out their
funds--after paying taxes--and quietly buy, here or there, various
necessities which they, in their judgment, believe are necessary to
enable them and their students to learn. I wish to emphasize, it is
voluntary.
The PRESIDING OFFICER. The Chair will advise, with great trepidation,
the time of the senior Senator from Virginia has expired.
Mr. WARNER. I appreciate my junior colleague, the Presiding Officer,
advising me, but if I could have 15 seconds.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WARNER. Without hesitation, if you asked the question, they will
then say: Yes, but I do it voluntarily out of the goodness of my heart.
And they will say: Look at the walls, Senator. Look at the drawers.
Look at the desks. And they can point to object after object they have
purchased with their own funds--after taxes.
I thank the Chair and yield the floor.
Ms. COLLINS. Mr. President, will the Senator yield very quickly for a
unanimous consent request?
The PRESIDING OFFICER. The Senator from Maine.
Ms. COLLINS. Mr. President, I ask unanimous consent that the Senator
from Connecticut, Mr. Dodd, also be added as a cosponsor of our
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Montana.
Mr. BAUCUS. Mr. President, it is with great reluctance that I feel
constrained to say a few words, urging my colleagues, as meritorious as
this is and as wonderful as the Senator from Maine is in representing
her State, that this is just regrettably not good policy.
I appreciate the remarks of my good friend from Virginia pointing out
the sense-of-the-Senate resolution. I think Senators tend to vote for
sense-of-the-Senate resolutions because that is our sense, that it
would be a good idea. But when, as the Senator well knows, we have to
decide what is within the parameters of how much we can spend and when
it comes down to crafting something that is particular and specific,
that is where the rubber meets the road and we have to decide whether
the specific idea is really good tax policy or not.
There is a lot of money here for education generally. It is about $35
billion, for higher ed and elementary and secondary ed. I am not going
to list it all. I know that it doesn't directly help teachers.
Teachers, I might say, in my State are probably some of the lowest
paid teachers in the Nation. I might add to my good friend from Maine,
I am afraid that some teachers are going to leave Montana to seek a
better salary in other States. We are in a tough spot. If I didn't have
the responsibility of managing this bill, I could very well support
this. But I feel a responsibility to say a few words about it.
First, it singles out for credit one group and one group only. If we
start going down this road, then we are going to offer credits for
expenses for every meritorious public service profession that exists. I
know many teachers dig into their pockets to help their students. It is
just awful, the things they have to go through to help their students.
We don't begin to pay our teachers nearly enough, in my judgment. Given
all that, I just don't know if it is wise to single out teachers as
opposed to other professions.
Second, the responsibility for teachers' salaries really is the
school districts in the States. We are helping school districts
tremendously in many ways by giving more IDEA money, more ESEA money,
title I money, and all of these different categories that allow school
districts to then spend more money in salaries for teachers. Districts
will have a lot more money in total, so in addition to what they raise
with property taxes, these programs will provide a lot of relief to the
school districts.
Third, this provision adds more complexity to the code. If there is
anything we hear, it is that people want simplicity. They don't want
more complexity. I know that doesn't sell very well when you are
standing in front of schoolteachers or the NEA. We want to give a lot
more to our teachers. Believe me, I am one of the strongest advocates
in the State of Montana to give more money to our teachers.
We should not be helping school districts in this way with
responsibilities that are theirs when we have a better way, by giving
more dollars to the other programs that I mentioned: IDEA, ESEA, and
title I, et cetera. I wish we could support this, but as much as we
would like to help, this is not a good policy to adopt.
Mr. WARNER. Will the Senator yield for a question?
Mr. BAUCUS. I am glad to yield.
Mr. WARNER. I have served for many years with the distinguished
Senator from Montana on the Environment and Public Works Committee and
other avenues in the Senate. I know him well and the strength of his
voice. But as he addressed the Senate tonight, I see pain in his heart.
When he said there is no policy, I refer the Senator--of course, I
realize he doesn't know every provision in the Federal Tax Code; this
is awesome; I wish we had some provisions in here to simplify this--to
page 47, section 62. The subsection is (a), which covers adjusted gross
income defined, and I read (b), certain expenses of performing artists.
The deductions allowed by section 162, which consist of expenses paid
or incurred by qualified performing artists in connection with the
performances by him--and I presume ``her'' although it is not written--
of services in the performing arts as an employee.
There it is. There is tax policy. My distinguished colleague said
there is no policy. Here is the policy, given to artists. Somehow,
having some modest familiarity with performing artists, I take note
that their salaries are somewhat larger than those who are down at the
very foundation of our Nation, educating our young people.
Mr. BAUCUS. I was going to ask the Senator a question. He asked me a
question.
Mr. WARNER. I think I have answered it, but you may go right ahead,
sir.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. I would like to answer that question. I didn't say that
there is no policy. Those were not the words I used. I did say, though,
that I don't think we should start going down this road, which
basically implies that, whether the provision you mentioned is
meritorious or not, I don't know if it is wise to keep going down that
road.
I want to share a line that kind of struck me about this whole
subject. When my wife and I got married about 18 years ago, we went on
a honeymoon. On the honeymoon, we stopped off on the first night at a
bed and breakfast. The next morning we were sitting down and having
breakfast, and the lady who ran the bed and breakfast was serving
breakfast. She knew, for some reason, I was in the Senate. I did not
broadcast that. I did not, frankly, want her to know that. I was on a
honeymoon with my bride. And this lady walked up to me right away after
she served us part of the breakfast and she started insisting that the
red dress she was wearing should be tax deductible because it wasn't
fair.
Here I am on my honeymoon, and I couldn't get away from it. I
thought, first of all, it is in poor taste to be asking for that, but,
second, it is clear that some people, with the jobs they have, need
legitimate expense deductions for the expenses they have. She is not
entitled, this lady, to a deduction for the dress she wears.
We have to draw lines. We have to make choices. I think this is not a
road we want to continue going down. We do not want to further
complicate the code with even more complexities.
The Senator is right, it is with a heavy heart that I must stand up
and say I don't think this is good tax policy. Even with a heavy heart,
I think this is not the wise way to go. There are better ways to
accomplish the objective the Senator is so correctly seeking.
Mr. WARNER. I thank my colleague for his very courteous reply.
Mr. DODD. Mr. President, is there any time remaining?
Mr. BAUCUS. How much time do we have remaining?
The PRESIDING OFFICER. The opposition has 6 minutes 18 seconds.
[[Page S5082]]
Mr. BAUCUS. I yield whatever time the Senator needs.
Mr. DODD. I thank the distinguished ranking member of the Finance
Committee. I commend our colleague from Maine. I know my friend from
Montana will appreciate these remarks. I also thank my friend from
Virginia who, once again, has enlightened us with a little history on
the importance of a provision such as this.
From a personal standpoint, we all have personal stories. My older
sister Carol is a teacher, has been for 35 years. She has taught over
the last 15 years or so in the public schools of Connecticut. I was
telling my friend from Maine, the author of the amendment, who is so
committed to education, almost on a yearly basis I go with my sister to
literally buy from Home Depot and other places the planks to make the
little bookcases in her classroom, literally buy pencils, paper, and
other items.
I say this coming from the most affluent State in the country on a
per capita income basis. She teaches in the city of Hartford which has
had serious problems. They do not have the resources, and she goes and
buys them out of her own pocket each year.
This is not some abstract idea. I have literally gone with her to do
this. I was shocked when I first discovered it. I couldn't believe she
was actually doing it. I thought there must be some pool of resources
that would allow for the accommodation of things such as pencils and
boards and toilet paper, literally, for classrooms in a public school
in the United States of America. I was stunned to discover she
literally dipped into her own pocket each year to buy the supplies.
Mr. BAUCUS. May I reclaim some of my time?
Mr. DODD. This is a modest amendment. We can't do enough with the
ESEA bill. I wish we could to make up the difference. This small little
piece, when we so value education and those who commit themselves to
this, to say there is a small line here for $250, that we are going to
provide some relief to you for doing what you are doing, for those
reasons I am a cosponsor and applaud my friend from Maine and my friend
from Virginia for their eloquence and their support of this modest
proposal.
(Mr. ENZI assumed the Chair.)
Mr. BAUCUS. Mr. President, I have such reactions when I hear my
friends from Connecticut speak. There is no greater champion for kids
than the Senator. I am surprised he doesn't have a kids tie on because
often he does wear one.
A couple points. Connecticut is one of the highest per capita income
States in America. My response is, let them try to pay teachers a
little bit more.
Mr. DODD. No argument there.
Mr. BAUCUS. I am sure teachers agree with that. Another point, Mr.
President, is that teachers can, today, deduct unreimbursed expenses.
It is in the law today. Just as any employee, they can deduct
unreimbursed expenses. They can deduct them. If it were your sister
buying supplies, she can deduct all that. It is already deductible
today, as my good friend from Virginia mentioned, as professional
expenses. We are not talking about another deduction but adding a
credit. It is something in addition to what teachers can already do.
They can deduct their professional expenses today, buying paper, and so
forth. It is true they don't have the world's highest tax bracket, so
the value of the deduction isn't as much as it otherwise might be, but
it helps a lot.
I think we should keep the policy of deducting unreimbursed expenses,
but let's not, on top of that, add a credit. I think we should just
hold the line.
Mr. WARNER. I ask unanimous consent that we may have a minute and a
half so our colleague from Maine can wrap up.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Maine.
Ms. COLLINS. Mr. President, I want to respond to the legitimate point
the Senator from Montana has raised. It is true teachers can deduct
unreimbursed expenses--theoretically.
The problem is, most teachers don't make enough money to itemize. So
most of them do not get the benefit of the itemized deduction that
would allow them to write off unreimbursed expenses.
In addition, even those who itemize have to reach a 2-percent floor
of their income in order to claim the deduction. So for the vast
majority of our Nation's teachers, these are unreimbursed expenses for
which there is no tax deduction at all.
We have to remember that we are talking about teachers who are not
well paid. I agree with the Senator from Montana that we should pay our
teachers better. But we in the Senate can take a modest step by
adopting this proposal to help our teachers who reach deep into their
pockets to pay for classroom supplies and paper materials and pay for
course work. Can't we take the small step to say thank you for their
investment in our Nation's children? I think we can, Mr. President. I
hope the Senate will adopt this amendment.
Mr. WARNER. Mr. President, we yield on that. I commend my
distinguished colleague from Maine.
The PRESIDING OFFICER. The Senator from Montana has 2 minutes
remaining.
Mr. BAUCUS. I yield back the remainder of my time.
The PRESIDING OFFICER. Under the previous order, the Senator from
Missouri is to be recognized.
The Chair recognizes the Democratic leader.
Amendment No. 674
Mr. DASCHLE. On behalf of the Senator from Missouri, I will not take
the full amount of time because I know the Senator from West Virginia
wants to offer his amendment. We didn't have as much of an opportunity
as I had hoped earlier to talk about the Carnahan amendment. Let me
again compliment the Senator from Missouri for her effort in calling
attention to one of the major concerns we have with the pending
legislation.
The pending legislation, of course, purports to provide tax relief to
all Americans. But there is a glaring exception to the equity with
which they attempt to provide that tax relief. That exception refers to
the fact of all the different tax rates and the reductions within those
rates.
The one that is entirely left out is that 15-percent rate affecting
72 million taxpayers. The largest percentage of income-tax payers in
the country pay at the 15-percent rate--72 million taxpayers pay the
remaining 15-percent rate. Yet this bill completely skips over any rate
reduction for those who fall in that category. There is a 3-percent
rate reduction for those at the very top. There are rate reductions for
those at every other level. But the rate reduction for those who fall
in the remaining 15-percent class has been omitted.
Now, what the bill does do, of course, is to provide a new rate of 10
percent for that income below $12,000. But everybody is entitled,
across the board, to the benefits of that new rate of 10 percent, and
so those income levels, at $109,000, $166,000, and $297,000 all benefit
from the 10-percent rate cut, as does the 15 percent. But over and
above that, those income levels beyond the 15-percent rate cut, beyond
$65,000 gross, or $45,000 net, they all get substantial additional
reductions in their rates.
But this bill leaves out the 72 million taxpayers who pay at the 15-
percent rate.
Senator Carnahan's amendment says we think everybody ought to have a
rate cut. So Senator Carnahan would reduce the 15-percent rate to 14
percent. It would provide for a rate cut, then, in every classification
of income-tax payer. The way she pays for it is simply to provide for a
1-percent rate cut in all the other classifications. So those making
incomes at levels above $297,000 would get a 1-percent rate cut; those
making incomes at $166,000 would get a rate cut of 1 percent; those
making incomes of $109,000 would get a rate cut of 1 percent; and those
making incomes of $45,000 would get a rate cut as well.
I can recall hearing vividly the President say there should not be
winners and losers as we cut taxes, that everybody ought to get a tax
cut. Well, if he holds that philosophy, it would be hard for him to
support this bill because this bill does create winners and losers. If
you fall in that 15-percent rate cut--if you are one of those 72
million taxpayers who fit into that income level between $12,000 and
$45,000 net, you don't get a rate cut. They don't want
[[Page S5083]]
you to know that, apparently, because there hasn't been much discussion
about it. But that rate was omitted. I don't know why it was omitted. I
can't understand how anybody could argue that it should be omitted. But
it was omitted. So you are left out; you have no opportunity to
benefit.
So I am really hopeful, Mr. President, that we can solve that
problem. The only way I know to solve the problem is to address the
issue as Senator Carnahan would address it--providing that the rate cut
go from 15 percent to 14 percent. One half of all South Dakotans fit
into this category. I would guess that between 40-50 percent of just
about all of our constituents fall into this category. We know that 72
million taxpayers fall into this category. It is so critical, it seems
to me, in the interest of fairness. It is critical in the interest of
attempting to provide the help to those middle-class working families
who probably need it as much as anybody in the upper income scales to
provide them some relief as well. That is what this amendment does.
Let's give them that benefit of the new 10-percent bracket like all
other rates are provided, but let's do what we are doing for all other
rates as well, by providing them with at least some reduction. One
percent may not be much to some, but 1 percent is a whole lot better
than absolutely nothing, which is what they get in this bill. That is
what the amendment does.
In the interest of time, I will yield the floor. I just hope people
will take this into account, and, at the appropriate time on Monday,
support the Carnahan amendment.
I yield the floor.
The PRESIDING OFFICER. Under the previous order, the Chair recognizes
the Senator from West Virginia.
Amendment No. 679
Mr. ROCKEFELLER. Mr. President, I have an amendment that I send to
the desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from West Virginia [Mr. Rockefeller], for
himself, Mr. Graham, Mr. Wellstone, Mr. Kennedy, Mr. Harkin,
Mr. Johnson, Mr. Kerry, Mrs. Clinton, Mr. Dayton, and Ms.
Stabenow, proposes an amendment numbered 679.
Mr. ROCKEFELLER. Mr. President, I ask unanimous consent that the
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To delay the reduction of the top income tax rate for
individuals until a real Medicare prescription drug benefit is enacted)
On page 9, between lines 14 and 15, insert the following:
``(4) Delay of top rate reduction.--
``(A) In general.--Notwithstanding paragraph (2), with
respect to a calendar year, no percentage described in that
paragraph shall be substituted for 39.6 percent until the
requirement of subparagraph (B) is met.
``(B) Medicare outpatient prescription drug benefit
enacted.--Legislation is enacted that adds an outpatient
prescription drug benefit to the medicare program established
under title XVIII of the Social Security Act, without using
funds generated from any surpluses in any trust fund
established under the Social Security Act, that is--
``(i) voluntary,
``(ii) accessible to all medicare beneficiaries,
``(iii) designed to assist medicare beneficiaries with the
high cost of prescription drugs, protect them from excessive
out of pocket costs, and give them bargaining power in the
marketplace,
``(iv) affordable to all medicare beneficiaries and the
medicare program,
``(v) administered using private sector entities and
competitive purchasing techniques, and
``(vi) consistent with broader reform of the medicare
program.''.
Mr. ROCKEFELLER. Mr. President, this is an amendment regarding
Medicare prescription drug benefits. Senators Graham of Florida,
Wellstone, Kennedy, Harkin, Johnson, Kerry, Clinton, Dayton, and
Stabenow are all listed as cosponsors, and I am sure there will be
more.
The amendment is an extraordinarily serious amendment. It was the
amendment in the Finance Committee which got the second most votes of
any of the amendments we did, and which I think should have passed.
This amendment takes the top rate reduction of our income tax as
proposed under the compromise bill and makes it contingent upon the
passage of a prescription drug bill, a prescription drug benefit that
would, in fact, be voluntary, accessible, affordable. This amendment,
therefore, is in the most immediate terms about priorities. It is a
classic choice that Senators are going to have to make that will say a
lot to the American people.
It is clearly saying the Medicare prescription drug benefit that
every single political person on this Hill and those at the other end
of the avenue who promised to the American people is just as important
as a tax reduction for the wealthiest of our people.
This amendment does not preclude the tax cut--I wish that to be
clear--but, rather, shifts the debate back to the promise we have made
and about which we have been very firm and talked about endlessly at
hearings and years of fora.
The amendment basically says the reduction in the top tax rate will
not go into effect until and unless an accessible, comprehensive,
universal prescription drug benefit is enacted. A vote for this
amendment is not a vote against the tax cut. It is a vote in favor of
the prescription drug amendment. The doing of the one does not preclude
the doing of the other. It is just that you have to do the prescription
drug benefit to get to the top rate.
A vote in support of this amendment says you believe it is just as
important that all Medicare beneficiaries who suffer all over this
country in various ways and various forms against the devastating and
ever-growing cost of prescription drugs, some of whom have to make
terrible choices in their lives about this, that their plight is as
important as those who are the wealthiest among us getting their top
tax rate reduction.
A vote in support of this amendment says you believe the drug
benefits should take precedence over a tax cut. It does not say you
cannot have a tax cut; it just says it should take precedence over a
tax cut with a prescription drug benefit and you do not think seniors
should be forced to make the choices they do now.
We have made some progress. The budget resolution, thanks to the
leadership of the Senator from the State of Iowa, the chairman of the
Finance Committee, explicitly rejects President Bush's prescription
drug benefit as being insufficient and accepts the principle that a
prescription drug benefit should be available to all beneficiaries
universally--not national in that sense, not nationalize, not
socialize, just universal; everybody.
It says that 39 million Americans who are Medicare beneficiaries and
those who are disabled should have this benefit. It is a proposal that
provides a premium subsidy to all Medicare beneficiaries, a proposal
that ensures true catastrophic coverage against drug costs, a proposal
that incorporates a new benefit into the Medicare Program. So it is
just as reliable as all of the other benefits in the Medicare Program,
a proposal that does not completely rely on private insurance because
private insurance has failed Medicare beneficiaries in terms of
delivering that benefit.
I will close with this because there is little time and others want
to speak. One group, which is bipartisan, says:
We agree with you we cannot enact a tax break for the
wealthiest Americans. We should be sure our vulnerable
citizens receive the lifesaving drugs they must have.
This is an absolutely classic choice that Americans need to make
about prescription drugs. We are doing it on their behalf in this
amendment.
I hope my colleagues will support this amendment, and I hope there
are other colleagues in the Chamber at this time who will speak for
this amendment.
I yield to the Senator from Florida.
Mr. NICKLES addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from
Oklahoma.
Amendment No. 674
Mr. NICKLES. Mr. President, I yield myself 5 minutes to speak in
opposition to the Carnahan amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NICKLES. Mr. President, we heard the minority leader say there
are 72 million people who do not get anything out of the bill; they do
not get a rate reduction because we do not reduce the 15-percent
bracket.
[[Page S5084]]
There are different ways of cutting taxes. The way we have done it is
to put in a significant percentage of income. People were saying 15
percent. We said we are going to tax that at 10 percent. The net result
is we cut everybody's individual taxes. If they make up to $12,000 as
an individual, they get a tax cut of $300. If it is a couple, they get
a tax cut of $600. That boils down to an across-the-board cut, if you
want to look at that, for people who are in the 10-percent bracket; if
they are married, it is a 10-percent tax cut.
You can do that one of two ways. You could say let's reduce the 15-
percent bracket to 13.5 percent. I have suggested that. It might make
that simpler policy. That way we can say we reduced every bracket a
similar amount. But the other brackets we reduced by 1 point. I
suggested 1.5 points. In other words, reduce the 15-percent bracket 10
percent so we can say we reduced every bracket by the same amount. I
will be happy to reduce upper brackets by 10 percent. We do not do
that, certainly not retroactively.
For people to assume we are not helping the lower or middle income is
not factually correct. The rate reduction we have in the bill reported
out of the Finance Committee exceeds 1 percent. It exceeds what we have
done in every other bracket. It exceeds it for a couple reasons. One,
it is retroactive to January 1 of this year. All other rates have to
wait until January 1 of next year and get a 1-point reduction.
On the least income rate, we give them a 33-percent reduction on
their first taxable income of $12,000. That is a $600 savings, and that
is over a 1-percent reduction for everybody who is in the 15-percent
bracket going all the way up to $44,000, $45,000 for a joint couple.
My point is there are different ways of doing it. For people to
demagog and say they do not get a rate reduction, well, they get a
bigger tax cut by the way we have done it.
If you want to change the way we have done it and say for the 15-
percent bracket we reduce it to 14 or 13.5, we could easily do that. It
ignores that we give a $500 tax credit per child, which benefits that
income category substantially, and ignores the fact the income tax
credit is refundable over my recommendation.
There is a lot of tax policy direction. I believe about $450 billion
of the entire rate reduction, which is only $850-some billion, is
directed on this 10-percent bracket, on the lowest income. For people
to make this allegation that 72 million people are ignored is hogwash.
That is not correct. We could redo it by rate reduction, we could redo
it in any number of different ways, but this group gets the biggest
percentage of reduction of anybody in this tax bill. Upper income
people, anybody else at a 28-percent rate, 31-percent rate, 33-percent
rate, 36-percent rate, 39-percent rate, get a 1 point reduction for 4
years. We are giving a great percent or point reduction for low income
retroactive to January 1 of this year.
I urge my colleagues to vote no on the Carnahan amendment.
Mr. GRAHAM. Will the Senator yield?
Mr. NICKLES. I am happy to yield.
Mr. GRAHAM. I obviously was mistaken. I did not realize the people at
the higher income brackets did not also get the benefit of the $600
reduction which comes by inserting the 10-percent bracket at the
commencement of the tax table.
Mr. NICKLES. I never said they didn't.
Mr. GRAHAM. People in the 39.6-percent bracket, do they get the same
tax reduction as the people in the 10-percent bracket in dollar terms?
Mr. NICKLES. To answer my colleague's question, yes, the $600 applies
to all taxpayers. The percent reduction did not happen for upper income
taxpayers. The fact is they only get 1 point reduction in taxes in the
first 4 years of this bill, and that is January 1 of next year.
Percentagewise, lowest income people get a 33-percent reduction
retroactive back to this year.
My point is you can do taxes different ways. Maybe a better way is to
take the 15-percent rate and make it 14 percent, not to do it in
addition to the 10-percent rate.
So if colleagues want to change the policy we have, not do the 10-
percent rate, and move the 15-percent rate to a 14-percent rate, if
they like that, I am happy, but they do not get as significant a
reduction as provided in the bill before the Senate.
Mr. GRAHAM. Will the Senator yield?
Mr. NICKLES. There are only 20 minutes on the amendment. We have 10,
and I know I have used 8, so I reserve the remainder of my time.
Mr. GRAHAM. At the appropriate time, I will ask a question about what
is the logic behind giving a 1-percent cut to the people at the 39.6-
percent bracket but not any cut at all to the people in the 15-percent
bracket, but I cannot at this time.
Amendment No. 679
Mr. ROCKEFELLER. I yield 4 minutes to the Senator from the State of
Florida.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. There are a lot of ways in which we can determine what
our real priorities are. One of those is not what we say. I imagine
virtually every Member of this Senate at some point has said they favor
a comprehensive prescription drug benefit for older Americans.
What really counts is not what we say because we can say all things
to all people. What really counts is things such as how do we spend our
money--that is a true indicator of one's priorities--or how do we spend
our time--that is a true indicator of one's priority--or what things we
do first.
We had a period when we lived by the slogan ``Social Security
first.'' We were supposed to fix Social Security to deal with that big
wave of baby boomers as our first priority. We obviously didn't accept
that because we didn't deal with that, and we are not dealing with it
tonight.
What we are saying is our first priority is to cut the tax rates for
the wealthiest among us. The people who earn the largest amount of
income in our society are about to get somewhere in the nature of 30
percent of this $1.35 trillion tax cut.
We are saying with this amendment there is another thing that needs
to be first. That is to be faithful to our commitment to provide a
prescription medication benefit to our older Americans. This is the
opportunity to express the sincerity of that commitment.
I urge my colleagues to vote for this amendment. We have been talking
about it for years and years and years. Mr. President, 2001 is the time
to deliver a prescription drug benefit for older Americans.
We have learned a number of things during the years we have debated
this issue. We know prescription drugs are often the best, sometimes
the only, way to treat many of the diseases faced by the elderly. To
deny these drugs is essentially to sign a death warrant.
We have also learned that many Medicare beneficiaries have no access
to any prescription drug benefit, that many others are finding the
benefits they have to be inadequate, unstable, and evaporate. We have
learned the majority of seniors are faced with a difficult choice of
paying extremely high prices at the retail outlets or forgoing
medically necessary prescription drugs. We have learned those who are
able to purchase medicines are seeing an ever-increasing share of their
fixed incomes going toward drugs as prices continue to increase. We saw
it last year for many of the most significant drugs for older
Americans. That increase was in the range of 15 to 20 percent.
The time is long overdue for the Senate to say first things first.
And first is going to be to prepare our older citizens for a life of
quality and dignity and affordability. The most fundamental step we can
take to achieve that goal is to include prescription drugs as a basic
benefit under the Medicare program available to all beneficiaries. Over
40 million Medicare beneficiaries should not have to continue to wait
for Congress, to wait for Congress to get around to recognizing the
importance of something as basic as their health care and the central
role of prescription drugs in protecting their health.
I hope my colleagues will join me in supporting this amendment and
saying first things first, prescription drugs for older Americans are
of equal importance to reducing the tax on the most wealthy of our
citizens.
The PRESIDING OFFICER. Who yields time?
[[Page S5085]]
Mr. ROCKEFELLER. If I might ask the Presiding Officer how much time
remains.
The PRESIDING OFFICER. Four minutes 52 seconds. The other side has 15
minutes.
Mr. ROCKEFELLER. Mr. President, the Senator from West Virginia is
happy to yield 4 minutes to the junior Senator from the State of
Michigan.
Ms. STABENOW. Mr. President, I thank my colleague from West Virginia.
I appreciate his strong and consistent leadership on this critical
issue. Thank you for proposing this amendment. I am proud to be a
cosponsor and proud to join with our Senator from Florida, Mr. Graham,
to talk this evening about what is the most urgent, critical issue
facing our seniors and many of our families.
I wish we had the same sense of urgency about updating Medicare to
cover modern medicine, which is prescription drugs, as we do with the
sense of urgency about the underlying tax bill.
I support tax cuts. I consistently supported tax cuts. But I know
this, when we set the priorities for our country, just like when we set
the priorities in our own family, if we need to ask the top 1 percent
of the wage earners of this country to be able to wait just a little
bit until we can modernize Medicare for our seniors, I think that is a
fair request. I think it is fair and reasonable for us to be placing a
sense of urgency on the senior citizen who is going to get up tomorrow
morning, sit down at the breakfast table and decide, do I eat today or
do I get my medicine; the seniors who are going to decide tomorrow
whether or not to cut their pills in half so they stretch a little bit
longer or whether they are going to take them every other week.
I have had doctors approach me, greatly concerned because they have
elderly patients who are trying to self-regulate so they can last just
a little bit longer with their medications because they know they are
not going to be able to afford to buy that prescription.
I guess each and every one of us have spoken about this issue and
certainly we have had people in our States speaking to us. I only wish
we would have the same sense of urgency about this issue as the
campaign television commercials of last year. Many of us talked about
this, on both sides of the aisle, on both sides of the building. We
have talked and talked about this issue. We know we have to address it.
We have that opportunity tonight through this amendment. I urge my
colleagues on both sides of the aisle to do just that.
This is a question simply of priorities. This does not change the tax
cut other than to ask less than 1 percent of the population to defer
until we can update prescription drug coverage under Medicare. This
does not change the tax cut for any of the taxpayers, but it asks one
group of taxpayers if they can wait just a little bit in order for our
seniors, who have been waiting so long, to be able to have us address
what is their most pressing issue.
I commend my colleague again. I cannot think of anything more
important, in terms of addressing priorities of our country, than to
keep the full promise of Medicare that was made over 35 years ago.
We said at that time that we would provide health care for anyone
over age 65 or the disabled. If we do not update this system to cover
prescription drug coverage, we are not keeping the promise.
I encourage my colleagues to support this important amendment, and I
will yield any remaining time.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I am going to address the Rockefeller
amendment that is before us, and I think I can speak to what the
Senator from Michigan, the Senator from Florida, and the Senator from
West Virginia have raised as legitimate concerns.
I will start over here with the Senator from Michigan. There is as
much urgency about taxes as there is prescription drugs and Medicare.
We probably haven't had as many hearings this year on Medicare and
prescription drugs as we have taxes, but over the last 12 months we
have had a lot more hearings in the Senate Finance Committee on
Medicare and prescription drugs than we have on taxes.
The reason we are having taxes up before prescription drugs is simply
that the Tax Code was written in 1916 and there have been a lot of
changes to it since then. For the most part, it is a matter of just
changing a few words here or there. On the other hand, I have to admit
it is complicated by adding a lot of new language. But when you are
dealing with the legislation we are dealing with on this tax bill, it
is not a complicated item to change the Tax Code to some extent. Maybe
a little bit on the estate tax provisions we have here, but otherwise
it is a matter of fine-tuning.
When it comes to prescription drugs, we are writing a whole new
program. The Democrat staff and Republican staff are working on it
right now. They are charged from Senator Baucus and me that we want to
bring this up by the latter half of July. My staff tells me that it is
quite a job for them to do that. I am convinced they will meet that
deadline.
So it is a matter of doing what we can do now and taking the
necessary time to do what is new and to do it right. That is our
commitment, to doing it right.
There is not a greater urgency in my committee for taxes over
prescription drugs. It is just a case of when you can get each done.
That is true of a lot of other things we are going to be dealing with
as well, trade and Social Security.
In the case of being all things to all people, in Iowa you can't be
all things to all people. I don't know about Florida. But if I were
speaking about all those things you said, the people of Iowa would know
I was not telling the truth. Maybe there is something about me; I can't
cover up very well. But I have been telling people in Iowa that we are
going to have prescription drugs legislation when we hope to get it out
of the committee. I have even suggested there are some people in my
party who maybe would rather not do anything, put it over to next year,
get an election year, get it all caught up--we want to do that on the
floor of this Senate this October or November and get it out of the way
so it doesn't come into the election cycle.
The other thing is resources are part of what the Senator from
Florida is talking about and the Senator from West Virginia is talking
about. Remember, we are not very far apart on the resources, at least
in the budget resolution. My colleague supported and offered--I don't
know whether he offered it, but you at least spoke for a $311 billion
pot of money that is put aside for Medicare. My amendment was $300
billion. My amendment carried; yours did not carry. It wasn't because
the $11 billion one carried or the other did not carry, it was where
the source of money was. Mine was from the contingency; yours was from
some reduction of the taxes. But you cannot say the resources are not
set aside.
Is that enough? I don't know. But it is what we have set aside--$11
billion separate from what you thought was enough from what I thought
was enough. Frankly, we don't know. It depends on how good you want to
do it. If you want to do it the way most of the bills are introduced to
make sure there is no less than a 50-percent subsidy, it is very
expensive. But if you start it with the idea you are going to have
universal access and in the universal access have some ability to pay,
there is no reason why you have to have free pharmaceuticals. You ought
to have it based on the ability to pay. We will start it with the
amount of money we can and start at the bottom of the economic ladder
and move up and cover as many people as we can and do it in a way that
brings the forces of the marketplace in, some bulk purchasing.
There are probably a lot of things I can tell you that ought to be
brought into the program to make it so we can provide more prescription
drugs at a lower level of cost, both to the taxpayers and to the
consumer as well. But we are involved in this. So I think we do not
need, either from the standpoint of legislative priorities, from the
standpoint of the resources that are set aside, or a commitment on the
part of both political parties--maybe not everybody in both political
parties--but the commitment of people in political parties to get this
job done.
I want to make sure everybody understands you do not have to adopt
Senator Rockefeller's amendment to make sure prescription drugs are
going
[[Page S5086]]
to get the attention that the last election brought to it. The
economics of it are enough, but let's say the ultimate is when both
political parties are campaigning on something, it is an issue in the
campaign, that that is a commitment to getting something done.
So I ask rejection of the Rockefeller amendment based upon what is a
commitment on the part of many people in this Congress to move ahead on
this issue.
I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, how much time remains?
The PRESIDING OFFICER. The proponents have 1 minute, the opposition
has 8 minutes.
Mr. BAUCUS. Mr. President, there are parts of this job that are not
fun, and one of them is standing up and saying: I cannot agree with my
good friend from West Virginia. Believe me, he is a good friend. There
is no stronger advocate for seniors and prescription drug benefits than
Senator Rockefeller.
In many respects, we are here because of a man named Brian
Schweitzer. Who is Brian Schweitzer? Brian Schweitzer is a man from the
State of Montana who ran for the Senate. He mobilized this Nation, or
at least got this Nation to realize that we need to provide a
prescription drug benefit under Medicare.
He took busloads of seniors to Canada, where seniors could buy
prescription drugs for much less than they cost in the United States.
He took busloads of seniors to Mexico, where seniors bought drugs for
much less than they could buy the same drugs, manufactured by the same
drug companies, in the United States. He basically started a kind of
popular ``prairie fire'' for the right reasons.
As a consequence, this issue probably was a major component in about
five Senate elections this last year. It could have been determinative
in a couple, but it was certainly a major issue. And for good reason.
Last year, the 50 most popular prescription drugs used by seniors
rose by twice the rate of inflation. Fifteen of those 50 drugs
increased by three times the rate of inflation, and eleven of the 50
most popular drugs used by seniors increased by three times the rate of
inflation. Utilization--a fancy term for ``use''--is increasing. Costs
are increasing.
We all know that if we were to write a Medicare bill today--not as we
did in 1965--we would include outpatient drug coverage under Medicare.
That is a given. We also know that it is a very expensive proposition.
We have to write a prescription drug benefit bill that is fair, that
makes sense, that is responsible, and that helps seniors.
Let's take a drug that is very popular among seniors, Prilosec.
Prilosec is a prescription drug that relieves ulcers and similar
gastrointestinal illnesses. The out-of-pocket expense for Prilosec is
about $1,400 a year. The average Social Security benefits are $10,000 a
year. So that means that more than 10 percent of Social Security
benefits would go toward buying Prilosec for a senior with an ulcer.
And we know that seniors take a lot more prescriptions than Prilosec,
which helps them so much. We all know the importance of prescription
drug therapies. That is a given. I do not think anybody disagrees with
that in this Chamber.
The real question is, how do we design a benefit, and when? I tell
you, I will work as hard as I can to get a prescription drug benefit
passed this year, working with my good friend from Iowa, Senator
Grassley. But I do not think it is wise to condition the enactment of
major legislation upon other legislation. In fact, I believe it is
unconstitutional. The Supreme Court has ruled that you cannot condition
enactment of legislation upon a contingency. It is unconstitutional. It
would not stand constitutional scrutiny.
Although the constitutional issue is one reason, the second reason I
speak in opposition to this amendment is a public policy reason. It
does not make sense to condition passage of one major bill upon passage
of another major bill. We should take up issues as they come up, one at
a time. It is perhaps a bit simplistic, but you take each event as it
comes. We cannot condition hour 6 against hour 8 or 11, and so forth.
It cannot be done.
So I say to my very good friend from West Virginia--I mean, he bleeds
for these issues, and correctly so, because it is the right thing to
do. But there is a time and place for everything. One can question,
what is the right time? The right place? There is a proper time and
place. According to Ecclesiastics, there is a time and place for
everything.
I urge us to resist the Siren song of contingency and, rather, to
take up the issue of prescription drugs when the time comes--and that
time is after the passage of this tax legislation, which I suspect will
pass.
In relation to the conference report, I am not sure the conference
report is going to be agreed to. That is a very real concern that I
have. But certainly in the next three months or so, we can sit down and
work hard to get a prescription drug benefit, a universal benefit,
along the principles we all know we need and want, passed this year.
And we can do it.
Let's do that, and pledge to do that. But I do not think it is wise
public policy to condition passage of one major piece of legislation on
another. Besides, I believe it is unconstitutional. So why are we are
going to do something that is going to be ruled unconstitutional? Let's
just do our tax business now and then get the prescription drug
business done. Let's aim for it.
The PRESIDING OFFICER. The Senator from West Virginia.
Mr. ROCKEFELLER. Mr. President, I have a minute remaining.
I would simply say, I think the point is that the words that have
been spoken are good and encouraging. There is a time and a place for
everything, but there is not necessarily the money for everything. It
is this Senator's view--and I think anybody who does the mathematics of
this bill, much less the tax cut bills which will come later on--we
will be depleting the revenue available for us to spend on anything.
There will simply not be the money to pass a prescription drug benefit
in July or in August or at any time unless we adopt this amendment. The
money will not be there. You have to have the $300 or $311 billion, and
it will not be there.
I strongly, therefore, for 39 million Medicare beneficiaries and for
those who are disabled and on a voluntary basis want to make use of
this, urge my colleagues to adopt this amendment. Because if they do
not, there will not be a prescription drug benefit.
I yield the floor.
The PRESIDING OFFICER. The Senator's time has expired.
The manager has a minute and a half.
Mr. GRASSLEY. Can we reserve our time, Mr. President?
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 685
The PRESIDING OFFICER. Under the previous agreement, the Senator from
Indiana is recognized and is in control of time for 15 minutes.
Mr. BAYH. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
The Senator from Indiana [Mr. Bayh] for Ms. Snowe, for
herself, Mr. Bayh, Mr. Chafee, Ms. Landrieu, Mrs. Feinstein,
Ms. Collins, Ms. Stabenow, Mr. Jeffords, Mr. Kohl, Mr.
Carper, Mr. Nelson of Florida, and Mrs. Clinton, proposes an
amendment numbered 685.
Mr. BAYH. I ask unanimous consent reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To preserve and protect the surpluses by providing a trigger
to delay tax reductions and mandatory spending increases and limit
discretionary spending if certain deficit targets are not met over the
next 10 years)
At the appropriate place, insert the following:
SEC. __. ENSURING DEBT REDUCTION.
(a) Trigger.--
(1) In general.--Notwithstanding any other provision of
this Act or any other law, the effective date of a provision
of law described in paragraph (2) shall be delayed as
provided in paragraph (3).
(2) Provision described.--A provision of law described in
this paragraph is--
(A) a provision of this Act that takes effect in fiscal
year 2005 or 2007 and results in a revenue reduction; or
(B) a provision of law that--
(i) is enacted after the date of enactment of this Act; and
[[Page S5087]]
(ii) takes effect in fiscal year 2005 or 2007 and causes
increased outlays through mandatory spending.
(3) Delay.--If, on September 30 of 2004 and 2006, the
Secretary of the Treasury determines that the limit on the
debt held by the public in section 253A(a) of the Balanced
Budget and Emergency Deficit Control Act of 1985 will be
exceeded in the fiscal year beginning October 1 of the
following year, the effective date of any a provision of law
described in paragraph (2) that takes effect during that
fiscal year shall be delayed by 1 calendar year.
(4) Discretionary spending limitation.--Notwithstanding any
other provision of law, in any fiscal year subject to the
delay provisions of paragraph (3), the amount of
discretionary spending in each discretionary spending account
shall be the level provided for that account in the preceding
fiscal year plus an adjustment for inflation.
(5) Reports to Congress.--On July 1 and September 5 of 2003
and 2005, the Secretary of the Treasury shall report to
Congress the estimated amount of the debt held by the public
for the fiscal year beginning on October 1 of that year.
(6) Congressional Action.--
(A) Trigger.--
(i) Modification.--In fiscal year 2005 or 2007, if the
level of debt held by the public for that fiscal year would
be below the level of debt held by the public for that fiscal
year in section 253A(a) of the Balanced Budget and Emergency
Deficit Control Act of 1985 due to the provisions of
paragraph (3) and (4), any Member of Congress may move to
proceed to a bill that would make changes in law to increase
discretionary spending and direct spending and increase
revenues (proportionately) in a manner that would increase
the debt held by the public for that fiscal year to a level
not exceeding the level provided in section 253A(a) of the
Balanced Budget and Emergency Deficit Control Act of 1985.
The motion to proceed shall be voted on at the end of 4 hours
of debate. A bill considered under this clause shall be
considered as provided in section 310(e) of the Congressional
Budget Act of 1974 (2 U.S.C. 641(e)). Any amendment offered
to the bill shall maintain the proportionality requirement.
(ii) Waiver.--The delay and limitation provided in
paragraphs (3) and (4) may be disapproved by a joint
resolution. A joint resolution considered under this clause
shall not be advanced to third reading in either House unless
a motion to proceed to third reading is agreed to by three-
fifths of the Members, duly chosen and sworn.
(B) Other fiscal years.--
(i) In general.--In fiscal year 2003, 2005, 2007, 2008,
2009, or 2010, if the level of debt held by the public for
that fiscal year would exceed the level of debt held by the
public for that fiscal year in section 253A(a) of the
Balanced Budget and Emergency Deficit Control Act of 1985,
any Member of Congress may move to proceed to a bill that
would defer changes in law that take effect in that fiscal
year that would increase direct spending and decrease
revenues and freeze the amount of discretionary spending in
each discretionary spending account for that fiscal year at
the level provided for that account in the preceding fiscal
year plus an adjustment for inflation (all proportionately)
in a manner that would reduce the debt held by the public for
that fiscal year to a level not exceeding the level provided
in section 253A(a) of the Balanced Budget and Emergency
Deficit Control Act of 1985. The motion to proceed shall be
voted on at the end of 4 hours of debate. Any amendment
offered to the bill shall either defer effective dates or
freeze discretionary spending and maintain the
proportionality requirement.
(ii) Consideration of legislation.--A bill considered under
clause (i) shall be considered as provided in section 310(e)
of the Congressional Budget Act of 1974 (2 U.S.C. 641(e)).
(b) Public Debt Targets.--The Balanced Budget and Emergency
Deficit Control Act of 1985 is amended--
(1) in section 250(c)(1), by inserting `` ` debt held by
the public' '' after ``outlays', ''; and
(2) by inserting after section 253 the following:
``SEC. 253A. DEBT HELD BY THE PUBLIC LIMIT.
``(a) Limit.--The debt held by the public shall not
exceed--
``(1) for fiscal year 2002, $2,955,000,000,000;
``(2) for fiscal year 2003, $2,747,000,000,000;
``(3) for fiscal year 2004, $2,524,000,000,000;
``(4) for fiscal year 2005, $2,279,000,000,000;
``(5) for fiscal year 2006, $2,011,000,000,000;
``(6) for fiscal year 2007, $1,724,000,000,000;
``(7) for fiscal year 2008, $1,418,000,000,000;
``(8) for fiscal year 2009, $1,089,000,000,000; and
``(9) for fiscal year 2010, $878,000,000,000.
``(b) Adjustments to Debt Targets for Inability to
Redeem.--
``(1) In general.--The debt held by the public targets may
be adjusted in a specific fiscal year if the Secretary of the
Treasury certifies that the target cannot be reached because
the Department of the Treasury will be unable to redeem a
sufficient amount of securities from holders of Federal debt
to achieve the target.
``(2) Certification.--The certification shall--
``(A) be transmitted by the President to Congress;
``(B) outline the specific reasons that the targets cannot
be achieved and the estimated amount of excess reserves that
will accumulate due to an inability of the Treasury to redeem
Federal debt; and
``(C) not be the result of a lack of surplus revenues being
available to redeem debt held by the public.
``(3) Congressional action.--The adjustment provided in
this subsection may be disapproved by a joint resolution. A
joint resolution considered under this paragraph shall not be
advanced to third reading in either House unless a motion to
proceed to third reading is agreed to by a majority of the
whole body.''.
(c) Congressional Budget Process.--
(1) Point of order.--Section 301 of the Congressional
Budget Act of 1974 is amended by adding at the end the
following:
``(j) Debt Held by the Public Point of Order.--It shall not
be in order in the Senate to consider any bill, joint
resolution, amendment, motion, or conference report that
would--
``(1) increase the limit on the debt held by the public in
section 253A(a) of the Balanced Budget and Emergency Deficit
Control Act of 1985; or
``(2) provide additional borrowing authority that would
result in the limit on the debt held by the public in section
253A(a) of the Balanced Budget and Emergency Deficit Control
Act of 1985 being exceeded.''.
(2) Supermajority waiver and appeal.--Subsections (c)(1)
and (d)(2) of section 904 of the Congressional Budget Act of
1974 are amended by striking ``305(b)(2),'' and inserting
``301(j), 305(b)(2),''.
(3) Additional amendments to the budget act.--The
Congressional Budget Act of 1974 is amended--
(A) in section 3, by adding at the end the following:
``(11)(A) The term `debt held by the public' means the
outstanding face amount of all debt obligations issued by the
United States Government that are held by outside investors,
including individuals, corporations, State or local
governments, foreign governments, and the Federal Reserve
System.
``(B) For the purpose of this paragraph, the term `face
amount', for any month, of any debt obligation issued on a
discount basis that is not redeemable before maturity at the
option of the holder of the obligation is an amount equal to
the sum of--
``(i) the original issue price of the obligation; plus
``(ii) the portion of the discount on the obligation
attributable to periods before the beginning of such
month.'';
(B) in section 301(a) by--
(i) redesignating paragraphs (6) and (7) as paragraphs (7)
and (8), respectfully; and
(ii) inserting after paragraph (5) the following:
``(6) the debt held by the public; and''; and
(C) in section 310(a) by--
(i) striking ``or'' at the end of paragraph (3);
(ii) by redesignating paragraph (4) as paragraph (5); and
(iii) inserting the following new paragraph;
``(4) specify the amounts by which the statutory limit on
the debt held by the public is to be changed and direct the
committee having jurisdiction to recommend such change; or''.
Mr. BAYH. Mr. President, I also ask unanimous consent that I be
permitted to modify my amendment prior to the vote in relation to the
amendment on Monday. Let me assure the managers that this modification
will not substantially change the effect of the amendment. It is to
make some minor technical corrections to the current draft.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. BAYH. Mr. President, I yield the floor to my colleague from the
great State of Maine and, in doing so, would like to thank her for her
courage and steadfast support of this amendment. Without her support,
we would not be where we are today.
The PRESIDING OFFICER. The Senator from Maine.
Ms. SNOWE. Mr. President, I thank the Senator from Indiana for his
leadership on an issue in which we share a mutual goal that we wish to
advance and address in this Congress with respect to this legislation.
I thank him for his commitment and persistence in bringing this to the
attention of our colleagues in the Senate and in the Congress.
Mr. President, the amendment we are offering today in conjunction
with our colleagues is on a bipartisan basis. In fact, Senator Bayh and
I have worked together since early March in addressing this issue, in
which 11 of our colleagues have offered this legislation with us, to
address the potential for ensuring that surplus projections are
realized over the next 10 years with respect to this tax package, as
well as all the other spending proposals that will be considered by
this Congress and future Congresses.
This legislation really came to us as a result of Chairman
Greenspan's testimony back in January before the Senate Budget
Committee. I think all of us
[[Page S5088]]
understand--and Senator Bayh and I have had many conversations in this
respect--that we want to ensure that our hard-fought effort to
eliminate deficits and buying down the debt is not undone because our
current surplus projections do not materialize in the future.
That is why this amendment specifically will establish a trigger,
based on the recommendations that were proposed by Chairman Greenspan,
that links the tax cuts and spending increases to actual fiscal
outcomes over the next 10 years.
The bottom line is, it is absolutely imperative that we make tax
relief and spending increases work, not only for American families but
also for the future well-being of this country.
We have a projection of $5.6 trillion in surpluses over the next 10
years. Those are projections that have been made by the Congressional
Budget Office. We have an obligation to be responsible stewards of that
surplus so we can address a variety of pressing national needs.
We are setting aside money for prescription drugs, an issue just
mentioned in this Chamber. We are setting aside money for education
which we are also concurrently debating in the Senate. We are also
setting aside money to bring down the debt over the next 10 years so we
can reduce the debt and, indeed, eliminate the national debt. We are
also setting aside all the surpluses that belong to the Social Security
as well as the Medicare trust funds. We also understand that these
burgeoning surpluses are predicated on certain assumptions upon which
the tax cuts as well as our spending policies are being developed. We
have no idea whether or not these surpluses are going to materialize
over the next 10 years.
While undoubtedly these projections are predicated on some very sound
assumptions and the best available economic and budgetary estimates,
the fact is they just happen to be estimates. Indeed, if the past is
prologue, there is a 50-percent chance that CBO's projection of a
surplus over the next 5 years will actually miss the mark by more than
1.8 percent of the GDP. That is $245 billion in the fifth year alone,
with an estimated on-budget surplus in 2006 of over $276 billion which
includes a surplus in the Medicare trust fund of $44 billion. The
impact of such an error would be disastrous as Congress would be forced
to dip into the Medicare surplus in that year alone, even absent any
changes in tax and spending policies.
It also bears noting, as it shows on this chart I have behind me of
the 10-year projection, nearly two-thirds of the projected surplus will
not accrue until after the fifth year. In fact, only $2 trillion, or 36
percent of the surplus, will accrue over the coming 5 years, while 64
percent of the surplus will materialize in the final 5 years. So if
surpluses prove to be substantially lower in the fifth year alone, the
impact on subsequent years will likewise be substantial.
Any long-term cuts in spending policies premised on the higher
estimates could quickly force us to use our Social Security surpluses,
put our budget back in the red, or use Medicare surpluses, all of which
are not options available to this Congress or future Congresses.
That is why we came to this point in terms of developing a trigger
mechanism: How best do we address this problem in a most prudent
fashion. That is why I commend the Senator from Indiana and the Senator
from Michigan, who is here, an ardent supporter of making sure we
adhere to these surpluses and these projections over the next 10 years,
as any State in the country has to do with their constitutional
amendments to balance the budget.
In fact, many of us have been ardent supporters of a constitutional
amendment to balance the budget. We did so and thought so because we
knew we had to adhere to a bottom line. So our principle is very
simple. We are saying that in the years 2004 and 2006, we will have to
take a window, we will have to look at whether or not we are adhering
to our debt reduction goals.
In the event the Secretary of the Treasury indicates that we will not
meet those goals in the years 2005 and 2007, then Congress obviously
will have to take immediate action to cut back, to stop the next phase
of the tax cut or the next phase of spending increases over the rate of
inflation.
We have laid out the debt targets. They are laid out in this
amendment, according to the Congressional Budget Office economic
outlook. We make sure we have the ability to respond to the Secretary
of the Treasury's report that will be made initially in July and then
immediately after Labor Day on the status of our progress towards
achieving this debt reduction goal for the year. If the Secretary
reports that the goal will not be met, Congress will then know, very
clearly, that steps must be taken to get us back on track.
As I said, if the debt targets are not met in the years 2005 and
2007, the scheduled phase-in of the new tax cuts and the mandatory
spending, which is additional mandatory spending, new phased-in
discretionary spending above the rate of inflation will be delayed for
1 year or until the target is met in future years.
In all of the other years in this 10-year window, we will have what
is called the midcourse correction review. Again, it will give us the
opportunity to analyze our progress made towards debt reduction,
ensuring that we are still on track each and every year for the
specified targets that will be laid out in this amendment, the ones
that have been established in the Congressional Budget Office report
for each and every year.
In the event that any Member of the House or Senate chooses to raise
a privileged motion to address the spending for the next year or
mandatory spending or the new tax cuts, they will have a privileged
resolution on the floor of the House for consideration. And amendments
can be offered to adjust, during the course of the midcourse correction
review, the tax cut and spending that would be adjusted. Any subsequent
amendment of that kind would have to be proportionate so that it could
not be adjusted just from the tax cut side of the equation or just from
spending alone.
We think this is an effective mechanism because it gives us an
opportunity to be able to analyze, as any business does in this
country, any family does, any State that has to abide by its
constitutional requirements to balance the budget, as to whether or not
we are proceeding on track with the surpluses, with these projections,
and with the debt reduction. It will give us the opportunity in 2 of
the years over the next 10 years for an automatic trigger in which we
will have the opportunity to respond to the next phase-in of a tax cut
or new spending policies.
It is not a retroactive tax increase, as many have said. We are not
going to be doing anything retroactive either with respect to spending
or with tax cuts. It would all be prospective. It gives us an ability
to look forward to make sure we are being prudent so we do not repeat
the past with respect to deficits in accruing the kind of national debt
that has been a burden to this country.
As I said, I hope my colleagues who worked so hard over the years for
the passage of a constitutional amendment to balance the budget will
see this as an effort to maintain similar fiscal responsibility. We
cannot afford to see the hard work that went into reaching the desired
goal of balancing the budget that we have made a reality today be
undone by the adoption of either tax or spending policies that are
allowed to move forward unchecked.
For those who believe that the assumptions on which this budget and
this specific tax bill are based are sound, the trigger poses no threat
as it would never be turned on.
May I ask the Senator for additional time?
Mr. BAYH. Yes, absolutely.
The PRESIDING OFFICER. Is the Senator asking to use Senator Bayh's
time? The Senator's 10 minutes allotted from the Senator from Indiana
have expired.
Mr. GRASSLEY. If we want to speak and raise any questions, that is
the only time we have.
The PRESIDING OFFICER. The Senator from Indiana may yield time.
Mr. BAYH. I am happy to yield time to my colleague from Maine.
Ms. SNOWE. I appreciate the time of the Senator from Indiana. I will
defer and wait towards the end. I thank the Senator.
The PRESIDING OFFICER. The Senator from Indiana.
[[Page S5089]]
Mr. BAYH. Mr. President, I again thank my colleague from Maine who so
eloquently outlined the case for this amendment. I am grateful to her
and others on her side of the aisle who have joined with us in this
cause. It is truly a bipartisan effort in an institution that all too
often is characterized by too much partisanship and divisiveness.
I thank my colleague, Senator Stabenow from Michigan, from whom we
will hear in a few moments, who has been a steadfast supporter of
fiscal responsibility in this effort.
I also echo what Senator Snowe mentioned, that Alan Greenspan,
Chairman of the Federal Reserve, endorses this approach. The Concord
Coalition, one of the foremost institutions dedicated to fiscal
responsibility and rectitude, endorses this initiative. The Progressive
Policy Institute, also dedicated to sound economic policies and fiscal
policies, endorses this approach.
I rise because I support tax cuts. I rise because I support tax cuts
that are fiscally responsible, that do not put our Nation on a path to
return to the days of debt and deficit from which we have so recently
extricated ourselves.
I support tax cuts that accommodate our other important priorities,
especially Social Security and Medicare, ensuring that our Nation will
keep that commitment to our parents and our commitment to our children
that we will fulfill our own obligations in supporting the retirement
system of our parents and grandparents.
I support tax cuts that honor our Nation's most cherished enduring
values: thrift, personal responsibility, self-reliance, and not asking
our children to pay the bills that we today incur, but, instead, taking
care of our own obligations.
That is why I, along with my colleagues on both sides of the aisle,
am honored to support this amendment. This amendment will put tax
cuts--meaningful tax cuts--for the American people into place
immediately and irrevocably. It will pay down the debt more rapidly
than the approach suggested by the administration and the one reported
from the committee. This amendment dedicates the surpluses in Social
Security and Medicare trust funds to the cause of debt reduction,
thereby not only paying down the Nation's debt more rapidly, but
ensuring the integrity and solvency of Social Security and Medicare.
This amendment will strengthen our economy by paying down the debt
more rapidly, to keep interest rates low, investment and productivity
growth high, perpetuating the virtuous cycle of the last several years
that has seen unprecedented economic expansion across our country--22
million new jobs and 2 million new businesses.
I have supported tax cuts throughout my career, first as Governor,
signing the largest tax cut in the history of our State; and I have
previously supported tax cuts in this body. Indeed, I can support the
tax cuts before us. I speak not only for myself but for many Americans
when I say the uncertainty inherent in 10-year projections disturbs me
because it raises a very real and present danger of returning to
sizable debts and deficits.
This would be a great problem for our country. It is something I
believe we must address in a responsible way if we are going to have
tax cuts that truly serve all of the priorities of the American people.
The approach we have suggested is a commonsense approach. In the early
years, when the surpluses are most reliable, the tax cut will go into
effect immediately and be irrevocable. In future years, we will ensure
the surplus that makes the tax cuts possible actually materializes, and
that we don't dip into Social Security or Medicare, jeopardizing those
systems, to make the tax cut possible. That needs to be our top
priority.
Again, we need to remind ourselves of the inherent uncertainty in 10-
year projections. As the Secretary of the Treasury, Mr. O'Neill,
suggested, 10-year projections ``aren't worth the paper they are
written on.'' And they are not. We owe it to the American people to
take prudent steps to ensure the actions we take today, in fact, lead
to the results that we promise tomorrow.
Finally, two brief observations. Let me counter some of the
criticisms offered with regard to our approach. First, the issue of
uncertainty. In fact, a trigger amendment in the tax cut creates
greater certainty. It creates greater certainty in the bond market by
ensuring that interest rates can be low because the debt will actually
be paid down and deficits will not return.
There was a headline in the Wall Street Journal Friday saying that
interest rates were beginning to rise because of concern that we might
return as a nation to the time of deficits again. The trigger creates
greater certainty by ensuring that we do not return to deficits and
thereby reassures the bond market. It also ensures that we won't have
future tax increases--one of the greatest causes of uncertainty that we
can have.
Following the tax cut of 1981, we had six separate tax increases in
this country for the American people. That is real uncertainty. A
trigger amendment will avoid that. As my colleague from Maine
suggested, there is nothing in the trigger amendment that will lead to
a tax increase. On the contrary, the phases of the tax cut that go into
effect, because we can afford them, will be irrevocable. There is
nothing that will repeal any tax cuts that have been put into place in
this trigger amendment. On the contrary, it merely delays future phases
of tax cuts until the surpluses that make them possible arrive.
The only counterargument to that would be to suggest that we dip into
Social Security and Medicare to pay for tax cuts--something I am sure
the majority of my colleagues do not support.
This will not go into effect should we run the risk of entering a
recession. First of all, the greatest risk of deficits and a return to
debt is not that we have a significant recession, but that estimates
are merely wrong and the errors compounded over a 10-year period lead
to a sizable error in our projections. For example, a mere four-tenths
of 1 percent difference in GDP and productivity growth would lead to a
trillion-dollar difference in the surplus estimates, running a real
risk of returning to deficits and increasing the national debt.
In case we do face the prospect of a recession, we have included a
provision that would waive the trigger in the event the blue-chip
forecast of the most prominent private sector economists predicts 4
consecutive months where the growth rate in this country will slow to
an unacceptable level.
Finally, regarding criticisms, let me say that this does not favor
spending at the expense of tax cuts. On the contrary, as my colleague
from Maine so ably pointed out, spending increases are held to the rate
of inflation--half the rate of spending increases contained in the
budget bill voted on last week, and much lower than rates in increased
spending in recent years. If this had been the fact, spending would be
much lower than today.
Let me conclude by saying this. Let us go forward and enact
significant tax relief for the American people. Let us enact this tax
relief in a way that is fiscally responsible and would hold sure that
our children and grandchildren do not live to rue the day of unintended
errors that we made that could have been avoided. Let us enact these
tax cuts in ways to preserve Social Security and Medicare. Let us enact
these tax cuts in ways that will be true to the enduring values of
self-reliance and self-sufficiency that have always made our Nation
great.
Finally, let me say we must learn the lesson of history. The last
time this Chamber was called upon to make decisions of this magnitude,
we, frankly, didn't do a very good job. The decisions that were made
and the votes that were cast led to the largest deficits in the history
of our country, the largest increase in the national debt in the
history of our country, to a lower rate of economic growth and a lower
standard of living for the American people. Let that not happen again.
This amendment and the fiscal responsibility that it will bring to
these tax cuts will ensure that all of the elements of prosperity for
the American people will be put into law and that, it seems to me, is
our responsibility.
I will now be pleased to yield to my colleague and friend from the
great State of Michigan, Senator Stabenow, who has been a steadfast
supporter of this effort. She is new to this body, but she is already
making a tremendous impact.
[[Page S5090]]
Ms. STABENOW. Mr. President, I thank my colleagues, Senator Bayh and
Senator Snowe, for their leadership on this important issue. We joined
together back in the beginning of March with colleagues on both sides
of the aisle to come together and lay out the concept that had been
presented in the Budget Committee by Chairman Alan Greenspan. Both
Senator Snowe and I have the opportunity to serve on that committee,
and we heard the chairman talking about the need to, in some way, phase
in tax cuts as we continued to pay down the debt. He cautioned us that
we should maintain our focus on paying down the debt and fiscal
responsibility and, if we did it right, we could do both; we could pay
down our debt, we could protect Social Security and Medicare by doing
it, and we could provide meaningful tax relief.
After listening to him and being a part of that process, I was
pleased to join with my colleagues in working to put together an
approach that puts into place the guarantees for fiscal responsibility,
protecting Social Security and Medicare, and ensuring that we maintain
the track we are on economically as a country, which has brought us to
this wonderful time of low interest rates, low unemployment,
opportunity for our workers, our small businesses, our farmers, and all
of our families who have benefited from the last 8 years of prosperity.
As Senator Bayh was speaking about not returning to the past, I
thought about when I was in Michigan as a State legislator in the time
of the 1980s and we went through some extremely difficult times.
Michigan is one of those States where if someone sneezes across the
country, we get a big cold, because the fact is, we had high
unemployment, high interest rates, and deficits at the State as well as
the national level. Many tough decisions were made to get us to this
point.
I was honored in 1997 to be in the U.S. House of Representatives and
cast a vote to balance the budget. I know there were those who came
before me who had to make very difficult decisions to get us to that
point.
I believe it is my responsibility and urge all of us to join together
in accepting the responsibility of maintaining the fiscal course we are
on--fiscal responsibility and guaranteeing that we do not use the
Medicare and Social Security trust funds for either spending or tax
cuts.
This particular proposal will put in place the mechanisms to
guarantee that does not happen. The tax cuts proceed, the phase-ins
proceed unless we find we are dipping into Medicare and Social Security
to pay for them or for spending. We are saying it does not matter what
Social Security and Medicare are used for; if it is not for Medicare or
Social Security, it is not OK.
This trigger puts in place the mechanism to guarantee we continue to
pay down our debt, that we are, in fact, keeping the promise of
Medicare and Social Security, and that we are providing tax relief in a
responsible way.
I am very proud to have joined my colleagues. I joined Senators today
in voting for tax relief. I have in the past throughout my time of
public service, and I intend to do that again, but I also intend to
make sure that whatever I am doing in terms of my votes, I keep first
and foremost the value of fiscal responsibility at the forefront and
that I am keeping the promise of Medicare and Social Security as we do
that.
If, in fact, we do not take the time to pay down our national debt,
about which we have all been talking for so many years, if we do not
take this time to eliminate as much of that debt as possible so that
our children do not have to bear that burden in the future, then when
will we? If we do not do it during this opportunity of fiscal
surpluses, when will we?
I urge my colleagues to join us. The bipartisan amendment that is
before us is one that I hope we will enact.
The PRESIDING OFFICER. The Senator's time has expired.
The Senator from Montana.
Mr. BAUCUS. Mr. President, we do not have a lot of time, so I cannot
go into great detail. I believe we have 5 minutes; is that correct?
The PRESIDING OFFICER. That is correct.
Mr. BAUCUS. Mr. President, with all due respect to my very good
friends, this is an uncertainty layered upon an uncertainty. The
uncertainty is whether the surplus target will be met. The uncertainty
layered on top of the uncertainty is whether the trigger will be
pulled.
We cannot legislate certainty. We can only exercise good judgment.
We, as a Congress, in these next years, have to decide what to do
according to the circumstances at the time and exercise good judgment
as to what we should do.
Unfortunately, nobody has discussed the substance of this amendment.
It is because we are in this time constraint where everything is
rushed, and we are in message amendment time. Nobody has looked at the
substance. There have been no hearings on this.
Let me tell you what this thing does. I am all in favor of the
intent, but if this is enacted, we are making a mockery of the
Congress--a mockery. First, you cannot and should not limit public debt
management. The Treasury Secretary has to have discretion in debt
management. Right off the top, we are tying the hands of the Treasury
Secretary, for whatever reason he or she may want to borrow more, sell
more securities, sell more bonds for domestic reasons or for
international reasons.
Secretary Rubin has said consistently that we should not tie debt
management to fiscal policy. You should not do it. It is wrong.
I understand why the Senator from Indiana is offering this amendment,
and I understand why the Senator from Maine is offering the amendment.
Let me talk about the uncertainties in this amendment. I do not know
if Senators know what is in the amendment. This amendment essentially
provides--I will summarize it--scheduled debt reduction targets, in
even numbered years, and the Treasury Secretary will certify whether
these targets are being met.
If they are not being met, then what happens? What is triggered is
that reductions in taxes are automatically stopped, the growth rates
for discretionary spending are automatically held at the rate of
inflation, and entitlement spending increases are automatically
stopped.
What about a Medicare drug benefit? I heard that entitlement
increases will be stopped. No, I will stand corrected because I see the
Senator from Indiana shaking his head. But the way it is drafted, new
entitlement spending, as I understand it, is included in the trigger.
But I stand to be corrected if that is not the case, but that is how I
read this amendment now.
What happens in odd-numbered years? Things are not automatic. But any
Member can stand up in this Chamber and say the targets have not been
met and set a trigger process in motion. Boy, is that uncertainty.
Do we really want to tie our hands like that? Do we want to limit our
discretion in future years as to what is best by putting this automatic
provision in the law? Do we want to tie the hands of our Treasury
Secretary in debt management? Do we really want to do that? What are
other countries going to think watching us do this?
Talk about the steepness of the yield curve. Why is the yield curve
steep? It is steep because the bond market today believes in the
outyears that interest rates are going to rise. Why? Because the
Federal Reserve has just lowered interest rates by 50 basis points. And
because this tax cut is going to pass. The market thinks there is going
to be growth because of the stimulus of this tax cut and because of the
lowering of short-term interest rates. As a result, the market believes
there will be inflation in the outyears; therefore, long-term interest
rates are going to be higher. That is what is going on.
And I will tell you something else. The markets will not believe a
trigger which is not real. This is not real. This is a message
amendment. It is a message amendment. It is not real legislation. We
should not be standing here--I am getting tired of message amendments,
Mr. President. I want to legislate. I do not want to give messages. I
want to legislate, and this is a message amendment. It is not
legislation, serious legislation. I believe we should not adopt it.
Mr. GRASSLEY. Mr President, Senators Bayh and Snowe have a sincere
concern over the long-term fiscal situation of the country.
The fiscal discipline of the country's budget is important. I share
that goal--fiscal discipline first. The budget
[[Page S5091]]
approved by a bipartisan majority of the Congress meets the test of
fiscal discipline.
The trigger is unwise because it undermines the long-term stimulative
effect of the tax cut. It makes the tax cut uncertain.
The trigger is unnecessary because the pattern of the tax cut follows
the pattern of the projected surplus.
The lion's share of the revenue loss occurs after 5 years.
Finally, if things go south on the projections, you can be sure
Congress will raise taxes:
Over the last 20 years we have raised taxes in 1982, 1984, 1990, and
1993. Only twice has Congress pushed through a tax cut that became
law--1981 and 1997.
Conditional tax cuts are not desirable--they do not stimulate
workers, investors, and businesses behavior. Let us have certainty in
tax relief. The American people, who are taxed at record post war
levels, deserve no less.
The PRESIDING OFFICER. All time has expired.
Under the previous order, the Senator from Iowa, Mr. Harkin, is to be
recognized.
The Senator from Maine.
Ms. SNOWE. Mr. President, I ask unanimous consent for an additional
10 minutes on this amendment.
The PRESIDING OFFICER. Is there objection?
Mr. BAUCUS. Mr. President, I do not think I can agree to that unless
there is an equal opportunity to respond.
Ms. SNOWE. If there is no objection.
Mr. BAUCUS. Also, we have a lot of other amendments lined up this
evening, and I do not know whether those Senators really want to move
to their amendments or not. There was a time agreement. I see Senator
Landrieu is here. Senator Landrieu may want to offer her amendment at
this time.
Ms. LANDRIEU. Mr. President, I do intend to offer my amendment, but I
will be happy to wait for a few moments, so I have no objection.
The PRESIDING OFFICER. The Senator in the Chair has some concern
about extending the evening considerably longer. There are about 2
hours of debate remaining.
Mr. BAUCUS. Mr. President, I ask consent that 5 additional minutes be
evenly divided on this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. SNOWE. I thank the Senator from Louisiana for her consideration.
I address several of the issues raised by the ranking member, Senator
Baucus, with respect to this trigger mechanism. I think they are
important issues. I remember so often during my 16 years in the House
of Representatives where we had to have a vote every year to raise the
debt ceiling before we could move further in additional spending. I can
also recall the number of times that was postponed.
I am not suggesting that is what we should do. The Secretary of the
Treasury has considerable flexibility. In fact, we have these
established debt reduction targets, ones that come out from the CBO.
They are targets to be adhered to by the Secretary of the Treasury and
give the flexibility to reduce further debt and be able to redeem that
debt and also, in the mid-course correction, it gives Members the
ability to raise the issues. But it would be upon a vote of the House
and the Senate before any other changes could occur.
This does provide a measure of certainty that is very critical to
ensure we stay on track. That is what a balanced budget is all about.
We make the adjustments each and every year. I hope we intend to make
those adjustments each and every year in the event our debt reductions
are not met. That is what this trigger is all about.
Mr. President, the bottom line is that we need to make tax relief and
spending increases work--not only for American families, but for the
future economic health and well-being of this nation. With a $5.6
trillion surplus projected by CBO for the next ten years, we have an
obligation to be responsible stewards of that surplus, so that we can
seize the opportunity to address a variety of pressing national needs
like buying-down the debt, increasing funding for shared priorities
like education and health care, and providing meaningful tax relief as
this tax bill provides.
At the same time, we need to be sure that the burgeoning surplus
assumptions on which our tax cut and spending decisions are made
actually materialize--not disappear as quickly as they materialized.
Because while the projected surplus is undoubtedly based on the best
available economic and budget estimates, they are still just that--
estimates.
Indeed, if past is prologue, there is a 50 percent chance that CBO's
projection of the surplus only five years from now will miss the actual
mark by more than 1.8 percent of GDP--that's $245 billion in the fifth
year alone. With an estimated on-budget surplus in 2006 of only $267
billion--which includes a surplus in the Medicare HI Trust Fund of $44
billion--the impact of such an error would be disastrous, as Congress
would be forced to dip into the Medicare surplus in that year alone,
even absent any changes in tax or spending policies today.
It also bears noting that for the ten year projections, nearly two-
thirds of the projected surplus will not accrue until after the fifth
year. In fact, only $2 trillion--or 36 percent--of the surplus will
accrue over the coming five years, while 64 percent--or $3.6 trillion--
will materialize in the final five years. If surpluses prove to be
substantially lower in the fifth year alone, the impact on subsequent
years would likewise be substantial--and any long-term tax cuts and
spending increases premised on the higher estimates could quickly force
us to use Social Security surplus or even put the budget back ``in the
red.''
Given CBO's acknowledged potential for error--and the devastating
impact it would have on our surpluses--I believe we should follow the
advice that Federal Reserve Chairman Alan Greenspan gave the Budget
Committee on January 25. Specifically, Chairman Greenspan stated:
In recognition of the uncertainties in the economic and
budget outlook, it is important that any long-term tax plan,
or spending initiative for that matter, be phased in.
Conceivably, it could include provisions that, in some way,
would limit surplus-reducing actions if specified targets for
the budget surplus and federal debt were not satisfied.
In fact, in response to Chairman Greenspan's recommendation, I joined
Senator Bayh, Senator Torricelli, and eight other bipartisan colleagues
in crafting and introducing a bipartisan resolution that outlined the
principles of a ``trigger'' mechanism that would be based on Chairman
Greenspan's advice.
Specifically, our principles included the fact that, pursuant to
Chairman Greenspan's advice, tax cuts and spending increases adopted
during the 107th Congress should include a trigger mechanism that links
the phase-in of these proposals to actual fiscal outcomes. Furthermore,
we stated that the trigger should outline specific legislative or
automatic actions that shall be taken if specific levels of public debt
reduction are not achieved, and should only be applied prospectively--
not repeal or cancel any previously implemented portion of a tax cut or
spending increase.
Mr. President, the amendment we are offering today turns those
bipartisan principles into an actual legislative mechanism.
Specifically, it creates an automatic trigger mechanism that links the
phase-in of new tax cuts and new spending to debt reduction goals in
2004 and 2006. In addition, it includes a ``Mid-Course Correction''
mechanism that ensures the Congress has both an incentive--and an
expedited means--to get back on track during all other years in which
the debt reduction targets are missed.
First, the amendment lays out debt targets that must be achieved at
the close of upcoming fiscal years. These targets--which are taken
directly from CBO's ``Budget and Economic Outlook'' report issued in
January--assume that the Social Security and Medicare HI Trust Fund
surpluses are used for debt reduction.
Besides laying out debt targets for the end of each fiscal year, it
also requires that the Secretary of the Treasury make additional
reports to the Congress--on both July 1 and the first Tuesday after
Labor Day (when Congress returns from the August recess)--on the status
of our progress toward achieving the debt reduction goal for the year.
If the Secretary of the Treasury reports that the goal will not be met,
Congress will know that steps must be taken to get back on track.
[[Page S5092]]
Next, the amendment creates the automatic ``trigger'' that links the
phase-in of tax cuts, mandatory spending, and discretionary spending to
the achievement of the debt reduction goals in 2004 and 2006.
If the debt targets are not met, then--at the start of the following
fiscal year (2005 or 2007)--the scheduled phase-in of tax cuts would be
delayed for one year, or until the target is met in a future year. Of
importance, this tax trigger--if implemented--would in no way lead to a
tax increase. Rather, it would simply delay the next scheduled phase-in
of any tax cuts that included a phase-in during those years.
In the same manner, the phase-in of new mandatory spending programs
would be delayed, with no impact on any provision that had already been
implemented.
[Of note, based on the package before us, the tax cuts that would be
affected by the trigger would include the phase-in of marginal rate
reductions (2005 and 2007); the per child tax credit (2007); marriage
penalty relief (2007); and estate tax rate relief (2007). Because no
new mandatory spending programs have been enacted this year, there
would be no impact on such programs--at least at this time.]
In addition, the trigger would hold discretionary spending at the
level of the previous year, adjusted for no more than the rate of
inflation.
Why allow for growth with inflation? Put simply, these programs--
which include education, defense, and health--are funded on an annual
basis. In contrast, mandatory spending--such as the Social Security and
Medicare programs--is not controlled on an annual basis and can
fluctuate from year-to-year depending on how many individuals are
eligible for the program, the rate of inflation, and other factors.
When considering the critical importance of many discretionary spending
programs, we should ensure that these programs are treated no worse
than mandatory spending. By simply allowing them to grow with
inflation, we are at least ensuring that the benefit of these programs
is not eroded simply due to a rise in the cost of living.
Ultimatley, if the combined impact of stopping the phase-in of tax
cuts and mandatory spending, and of holding discretionary spending to
the rate of inflation, is more than is necessary for meeting the debt
reduction goal, the impact can be mitigated through the consideration
of legislation that would lessen the impact. To ensure that tax cuts
and spending are treated equally, such legislation must increase tax
cuts and overall spending in a proportionate manner, and any amendments
to the legislation must maintain this balance.
The amendment also includes a ``Mid-Course Correction'' mechanism
that would be available to the Congress in all other years that the
debt reduction targets are not met.
Specifically, if the debt reduction target is not met at the end of a
fiscal year--or the Treasury Secretary reports in July or September
that the debt reduction target will likely not be met--any member of
the House or Senate would have the ability to call up privileged
legislation that would immediately block all scheduled phase-ins of tax
cuts and new mandatory spending for the coming year, and hold overall
discretionary spending at the rate of inflation over the previous
year's funding level. During the floor consideration of the
legislation, amendments could be offered to adjust the impact of the
Mid-Course Correction legislation if it would generate more savings
than are necessary, but such amendments must affect tax cuts and
overall spending in a proportionate manner.
Ultimately, it will be up to the Congress and the President to decide
if Mid-Course Correction legislation will be passed and enacted--and it
will also be on their shoulders to explain why they did not act in the
face of debt reduction targets not being achieved. Ultimately, if
Congress continually ignores violations of the debt reduction targets
during these years, the automatic ``trigger'' in years 2005 and 2007
will almost inevitably be enforced.
As with the Mid-Course Correction, this amendment also allows
provides for the consideration of privileged legislation that would
make adjustments to the automatic trigger if its impact would be more
severe than is necessary. In the same manner, amendments to adjust the
trigger's impact would need to ensure that a proportionate balance is
retained between tax cuts and spending.
In response to concerns that a trigger may actually lead to tax cuts
and spending being turned off at the ``wrong time''--such as during an
economic downturn or national emergency--the amendment would allow the
House and Senate to waive the trigger with a three-fifths vote at any
time, just as the requirements of the Balanced Budget Amendment would
have been waived with a supermajority vote. And if we are actually in
the throes of a recession or a declaration of war is in effect, the
trigger would be waived with a mere majority vote--a margin that would
be easily attainable.
Finally, in deference to the fact that there are legitimate
differences of opinion about how quickly the publicly held debt can be
redeemed, the amendment allows the debt targets to be adjusted in a
given year if the Secretary of the Treasury certifies that the target
cannot be reached because the Department of the Treasury will be unable
to redeem a sufficient amount of securities from holders of federal
debt to achieve the target.
Of note, such certification--which must be transmitted by the
President to the Congress--must outline the specific reasons that the
targets cannot be achieved, and the estimated amount of ``excess
reserves'' that will accumulate due to an inability of the Treasury to
redeem federal debt. Under no circumstances would such a waiver be
allowed if the reason for the shortfall is simply a lack of surplus
revenues being available to redeem federal debt. And to ensure that
``checks and balances'' are maintained, Congress can override the
decision of the Secretary of the Treasury with a majority vote.
Mr. President, just as the tax bill is the type of ``insurance'' that
Chairman Greenspan recommended to lessen the impact of an economic
downturn, I believe this amendment would serve as a critically needed
``insurance plan'' within this tax bill and in subsequent spending
legislation. While I believe the surplus estimates on which our budget
and this tax bill are based are sound, we simply cannot take the chance
that our estimates will prove to be wrong or that future Congresses
will over-utilize the surplus and imperil debt reduction.
Furthermore, I would hope that my colleagues who worked so hard over
the years for the passage of a constitutional amendment to balance the
budget would see this as a similar effort to maintain fiscal
responsibility. We simply cannot afford to see the hard work that went
into making the desired goal of the Balanced Budget Amendment a reality
today be undone by the adoption of tax or spending policies that are
allowed to move forward un-checked.
Ironically, for those who believe that the assumptions on which the
budget and this tax bill are based are sound, the trigger poses no
threat as it would never be turned on. Likewise, for those who are
concerned about the assumptions, there is every reason to support the
trigger as it would serve as a strong line of fiscal defense if today's
surplus estimates prove to be tomorrow's ``pipe dream.''
Nevertheless, I'm sure that some of my colleagues will simply argue
that triggers are doomed to failure, and cite the Gramm-Rudman-Hollings
deficit control mechanism as a case in point. I would argue that
although some may dispute the value of the trigger, arguing that Gramm-
Rudman-Hollings may not have been successful at reigning in deficits,
it did serve as a strong incentive for Congress to control spending. In
fact, discretionary spending grew at an average annual rate of eight
percent leading up to Gramm-Rudman-Hollings, and only two percent in
the five years after.
The bottom line is that I can't think of any event that has ever had
such a profound impact on congressional spending--short of the
watershed Congressional elections of 1994--and I believe that this
trigger could have the same profound impact both tax cuts and spending
during the coming 10 years.
Mr. President, this amendment is just the type of fiscally
responsible proposal that I believe the American people are hoping we
in the Congress will embrace as we pursue tax cuts and spending
increases in the months
[[Page S5093]]
ahead, and I urge my colleagues to support it accordingly.
Mr. BAUCUS. I have stated my reasons why I think this is not a good
idea. I stand by what I said, on the entitlements, which is an
additional reason why the provision isn't firm, to say the least. It is
more than infirm; it is beyond infirmity.
I urge that the Senate not approve it. I yield back the balance of my
time.
The PRESIDING OFFICER. Under the previous order, the Senator from
Louisiana is recognized for 15 minutes.
Amendment No. 686
Ms. LANDRIEU. Mr. President, let me begin by sending an amendment to
the desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Louisiana [Ms. Landrieu], for herself and
Mr. Craig, and Mrs. Lincoln, proposes an amendment numbered
686.
Ms. LANDRIEU. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 18, between lines 14 and 15, insert the following:
SEC. 202. EXPANSION OF ADOPTION CREDIT AND ADOPTION
ASSISTANCE PROGRAMS.
(a) In General.--
(1) Adoption credit.--Section 23(a)(1) (relating to
allowance of credit) is amended to read as follows:
``(1) In general.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
chapter--
``(A) in the case of an adoption of a child other than a
child with special needs, the amount of the qualified
adoption expenses paid or incurred by the taxpayer, and
``(B) in the case of an adoption of a child with special
needs, $10,000.''.
(2) Adoption assistance programs.--Section 137(a) (relating
to adoption assistance programs) is amended to read as
follows:
``(a) In General.--Gross income of an employee does not
include amounts paid or expenses incurred by the employer for
adoption expenses in connection with the adoption of a child
by an employee if such amounts are furnished pursuant to an
adoption assistance program. The amount of the exclusion
shall be--
``(1) in the case of an adoption of a child other than a
child with special needs, the amount of the qualified
adoption expenses paid or incurred by the taxpayer, and
``(2) in the case of an adoption of a child with special
needs, $10,000.''.
(b) Dollar Limitations.--
(1) Dollar amount of allowed expenses.--
(A) Adoption expenses.--Section 23(b)(1) (relating to
allowance of credit) is amended--
(i) by striking ``$5,000'' and inserting ``$10,000'',
(ii) by striking ``($6,000, in the case of a child with
special needs)'', and
(iii) by striking ``subsection (a)'' and inserting
``subsection (a)(1)(A)''.
(B) Adoption assistance programs.--Section 137(b)(1)
(relating to dollar limitations for adoption assistance
programs) is amended--
(i) by striking ``$5,000'' and inserting ``$10,000'', and
(ii) by striking ``($6,000, in the case of a child with
special needs)'', and
(iii) by striking ``subsection (a)'' and inserting
``subsection (a)(1)''.
(2) Phase-out limitation.--
(A) Adoption expenses.--Clause (i) of section 23(b)(2)(A)
(relating to income limitation) is amended by striking
``$75,000'' and inserting ``$150,000''.
(B) Adoption assistance programs.--Section 137(b)(2)(A)
(relating to income limitation) is amended by striking
``$75,000'' and inserting ``$150,000''.
(c) Year Credit Allowed.--Section 23(a)(2) (relating to
year credit allowed) is amended by adding at the end the
following new flush sentence:
``In the case of the adoption of a child with special needs,
the credit allowed under paragraph (1) shall be allowed for
the taxable year in which the adoption becomes final.''.
(d) Repeal of Sunset Provisions.--
(1) Children without special needs.--Paragraph (2) of
section 23(d) (relating to definition of eligible child) is
amended to read as follows:
``(2) Eligible child.--The term `eligible child' means any
individual who--
``(A) has not attained age 18, or
``(B) is physically or mentally incapable of caring for
himself.''.
(2) Adoption Assistance Programs.--Section 137 (relating to
adoption assistance programs) is amended by striking
subsection (f).
(e) Adjustment of Dollar and Income Limitations for
Inflation.--
(1) Adoption credit.--Section 23 (relating to adoption
expenses) is amended by redesignating subsection (h) as
subsection (i) and by inserting after subsection (g) the
following new subsection:
``(h) Adjustments for Inflation.--In the case of a taxable
year beginning after December 31, 2002, each of the dollar
amounts in subsection (a)(1)(B) and paragraphs (1) and
(2)(A)(i) of subsection (b) shall be increased by an amount
equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2001'
for `calendar year 1992' in subparagraph (B) thereof.''.
(2) Adoption assistance programs.--Section 137 (relating to
adoption assistance programs), as amended by subsection (d),
is amended by adding at the end the following new subsection:
``(f) Adjustments for Inflation.--In the case of a taxable
year beginning after December 31, 2002, each of the dollar
amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of
subsection (b) shall be increased by an amount equal to--
``(1) such dollar amount, multiplied by
``(2) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2001'
for `calendar year 1992' in subparagraph (B) thereof.''.
(f) Limitation Based on Amount of Tax.--
(1) In general.--Section 23(c) (relating to carryforwards
of unused credit) is amended by striking ``the limitation
imposed'' and all that follows through ``1400C)'' and
inserting ``the applicable tax limitation''.
(2) Applicable tax limitation.--Section 23(d) (relating to
definitions) is amended by adding at the end the following
new paragraph:
``(4) Applicable tax limitation.--The term `applicable tax
limitation' means the sum of--
``(A) the taxpayer's regular tax liability for the taxable
year, reduced (but not below zero) by the sum of the credits
allowed by sections 21, 22, 24 (other than the amount of the
increase under subsection (d) thereof), 25, and 25A, and
``(B) the tax imposed by section 55 for such taxable
year.''.
(3) Conforming amendments.--
(A) Section 26(a) (relating to limitation based on amount
of tax) is amended by inserting ``(other than section 23)''
after ``allowed by this subpart''.
(B) Section 53(b)(1) (relating to minimum tax credit) is
amended by inserting ``reduced by the aggregate amount taken
into account under section 23(d)(3)(B) for all such prior
taxable years,'' after ``1986,''.
(g) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
Ms. LANDRIEU. Mr. President, the amendment I propose has to do with
the adoption tax credit. Before I get into the specifics of that
amendment, I will make some general remarks about the previous
amendment briefly, about the overall bill, and a few other points
before I get into specifics of this amendment.
Let me congratulate my colleagues from Maine, Indiana, and Michigan,
Senators Snowe, Bayh, and Stabenow, for offering their amendment, which
I am proud to be a cosponsor of, the trigger mechanism just presented
to this body and explained so beautifully.
I want to add my voice to say that I intend to support that
amendment. I think it will bring discipline to this process, it will
bring some more certainty, and it will help us to stay the course of
fiscal discipline which has served this country and this economy so
well over the last 8 years.
To reiterate, it is not just giving us a caution about the tax cuts,
but it is cautioning us about spending too much. I think that is a very
good balance. The mechanisms have been worked out. Chairman Greenspan
has indicated support of this concept. That debate will be left for
another day, with more debate on Monday. I express my support.
Second, I express my compliments to the Senator from Iowa and the
Senator from Montana for the way they have handled the debate. I
especially appreciate the way the chairman has been open to listening
to different ideas, to considering all as thoughtfully and as seriously
as he could, given there would literally be 100 ways to write this
bill. But we can only have one bill and all 100 Members have to have
some input into shaping it. We could all write it our special way, but
the fact is this body and our democracy mandates we do this together.
It is not a simple process. I thank the chairman for his patience and
the ranking member for his graciousness in listening to me on many
issues, particularly this amendment.
Since I am not going to speak very long, I make a public comment and
compliment also my colleague from North Dakota, Senator Conrad, a
member of the Finance Committee. He has been a tremendous leader in
this whole debate. Although Members may
[[Page S5094]]
disagree with some of his positions, I think he has gained such respect
in this debate, explaining these very complicated matters in ways
people in my State, most certainly, have expressed to me, and I
appreciate his efforts. I thank him publicly tonight for his hard work
and dedication.
The amendment I send to the desk tonight is a very important
amendment. This underlying tax reduction bill has some very good
provisions in it. I mention a few. The refundability of the child tax
credit and the doubling of the child tax credit is very important to
the people of Louisiana and to many working families around the Nation.
Marriage penalty relief is something I have supported, along with
Members on both sides of the aisle. It is time that we make adjustments
to this particular problem in the Tax Code.
I also am pleased to see the estate tax reform and repeal as a part
of this tax package. And particularly for Louisiana and for so many
States, the college savings plan withdrawals, making them tax free,
gives a lot of hope and encouragement to help people in Louisiana and
all through this Nation begin early to set aside money for their
children's education. A good, solid education through college is an
excellent way to give the foundation for someone's success in life. In
this new global economy with new technologies and the importance of
skills, having a good, solid education is important. We have been
debating many different aspects of education. I think the college
savings plan is a very good feature in this bill.
There are some serious problems with it. It is backloaded. I wish the
15-percent tax bracket could have been reduced and addressed. There is
a smaller amount of stimulus than I think is wise, given the slowdown
in the economy. I will make a decision about how I am going to vote on
this bill, based on the pros and cons, on Monday when we have the final
vote. But I want to suggest tonight that there is one amendment that
really should be added. It should be included. It is somewhat glaring
that it is not. The chairman knows this, and the ranking member. The
amendment I am speaking about is the renewal and doubling extension and
fixing of the adoption tax credit, a tax credit that has been so
broadly accepted and enthusiastically supported by many Members of this
body.
Just today, in fact, over 300 Members of the House of Representatives
voted affirmatively for the Hope for Children tax credit relief. I
offer this amendment on behalf of myself and the Senator from Idaho,
Mr. Craig. There are a number of other cosponsors. I would like to
mention Mrs. Clinton, the Senator from New York, and others who have
supported this particular provision.
This amendment would extend the $5,000 tax credit, doubling it to
$10,000. One of the things we must remember is, if we do not fix this
tax credit now, it expires, not next year, not 2 years from now, as
some of the other tax measures we are speaking about, but it expires in
December of this year. So in 7 months this tax credit that has done so
much good for people in this country is set to expire.
The other reason to support it is there is overwhelmingly
enthusiastic bipartisan support for it.
The third really good reason is that it is so cost effective. It is
such a small amount of money relative to the overall package that I am
certain we can find a way, if we find the will to include this in this
package.
There were over 125,000 children adopted last year; 15,000 children
came to this country from another place in the world. Those places were
quite grim. I have been to many of them. Some of these children were
taken off hospital floors. Some of these children were found starving.
Some of these children were found sick. Some of these children were
found with an inability to walk, some could not see, some could not
hear. But a family, a mother, a father in this country said: I will
take that child, at great expense, and I will raise that child and do
something good for the world and do something good for our family and
do something wonderful for this child.
There were over 100,000 children who were adopted by American
families. Some of these children were healthy. All of these children
were beautiful. All children are beautiful and should be loved and
cared for and nurtured.
Some of these children have great and special needs. I have seen
children who have been adopted who have no limbs, who cannot see.
Children have been adopted who have a very short lifespan. But because
the heart of people is so great and their generosity so tremendous,
homes and hearts have been opened, families have been built, children
have been given hope, and parents who were desperate for children and
could not have them have had their dreams come to reality.
The least we can do in this body, as we debate this $1.35 trillion
tax cut, is to add one-third of 1 percent to make this tax credit real,
to extend it so it does not just go away, and to double it so it really
can help as these expenses rise, and to fix it so it works for children
who are being adopted out of foster care.
I know my time is coming to an end. I say in closing, there are today
500,000 children--a half a million children--who have been removed from
their homes because of abuse and neglect. There are 100,000 of those
500,000 whose parental rights have been terminated. If we don't work a
little harder and a little better to fix our court system, to support
our social workers, to give our judges the support they need, and to
help where we can--and this is one way to build in our Tax Code an
incentive to help some of these children get adopted and to help
parents bear the tremendous expenses associated--I think we will be
making a grave mistake and missing a wonderful opportunity.
I urge Members of this body to consider this carefully. It doesn't
cost a lot. It will bring a great deal of joy and hope and happiness to
children and families everywhere. It is something we can do, and as Mr.
Gramm, the Senator from Texas, said when we discussed this last year,
it really is a shame that this tax cut is scored in a way that costs
us, because if you think about it, this is a great savings to the
taxpayer, because when children are adopted out of foster care, or when
children are adopted who are for some reason not wanted, or their
families want them but they cannot raise them so someone else takes
that child and raises that child and nurtures that child, I promise you
there is $100,000 or more savings to the taxpayer by the little $10,000
we give in the credit.
We save hundreds of thousands of dollars because these children do
not end up in special education or in the hospital or in jail or in a
mental health ward. Why? Because they have parents to love them and
care for them. So while the committee has given me a score on my tax
credit, I have argued, and I think I could be supported in a court of
law, this tax credit is a great savings to this Government. For every
child we can get adopted, we don't have to pick up the expenses for
them. I think it is what God wants us to do. I am positive it is the
right thing to do. I thank my colleagues for giving me this time to
offer it. I hope we can find a way to do this.
I yield my time.
Mr. CRAIG. Mr. President, I am glad to join my colleague and cochair
of the Congressional Coalition on Adoption, Senator Landrieu, in
offering this amendment to the tax relief bill.
Our amendment will renew two expiring provisions of the Tax Code that
are critically important to American families: the adoption tax credit
and the exclusion for employer-provided adoption benefits. It will also
modernize and improve these provisions, in response to what we have
learned families really need and want in this area.
Not a week goes by that I don't get a call, or an e-mail, or a visit
from someone telling me what a help the adoption tax credit is to them,
and how important it is for Congress to renew it. As my colleagues all
know, this credit was added to the Tax Code in 1996, following years of
effort. The idea was to allow families to keep a little more of their
own hard-earned money to help absorb the extraordinary costs of
adoption.
Since these adoption tax benefits have gone into effect, tens of
thousands of families have claimed it. More important, that means tens
of thousands of children have, in part because of this tax credit,
found loving, permanent adoptive homes.
[[Page S5095]]
Yet there are many, many children still waiting for that happy
outcome--more than 100,000 in America, and more around the world, and
the adoption tax credit will expire at the end of this year.
Furthermore, in looking at how the credit has worked since 1996, we
have discovered that not all families are equally able to use the tax
credit to help them cope with the true costs of adoption.
That is why at the beginning of this Congress, we introduced S. 148,
the Hope For Children Act, to extend and improve the tax credit so that
it can continue to help Americans form families through adoption. That
bill is cosponsored by seventeen of our colleagues, representing a wide
political and geographic spectrum; the House of Representatives
unanimously passed their version of the bill earlier today; and the
bill has won the support of all segments of the adoption community. It
is this bill, the Hope For Children Act, that is reflected in the
amendment we are offering today.
There are families who are sitting at the kitchen table today, trying
to figure out if they can afford to open their hearts and homes to a
child through adoption. Let us send a strong message of hope to those
families, and to the thousands of waiting children, by passing this
amendment.
The PRESIDING OFFICER. The Chair recognizes the Senator from Iowa.
Mr. GRASSLEY. Mr. President, adoption is the right thing, at least as
opposed to foster care. As I have been working on adoption issues for a
long period of time, there is one thing I hear from kids who have been
floating from one foster home to another, who have been in the system
for a long period of time. What they want is a mom and a dad. What they
really are saying is they want some permanency.
One of the greatest sins of governmental policy is in the adoption
and foster care area, where people grow all the way through their
teenage years and get to be 18 and are adults and never have a mom and
a dad.
Every child has a right to grow up in a safe and loving home. I hope
my work on the Adoption and Safe Families Act, which succeeded in
shortening the time lines for children in foster care, is a major
effort towards this goal that we all seek.
Included in the Adoption and Safe Family Act was a provision I
authored to break down barriers when a family living in one
jurisdiction wants to adopt a child in another jurisdiction.
I compliment Senator Landrieu. She has been steadfast in her advocacy
for adoption. Senator Craig has joined her to make adoption tax
incentives a very strong bipartisan objective. I have been pleased to
join these two distinguished Senators in the past on efforts they have
made in this direction. I don't know what the future holds exactly, but
I promised the Senator from Louisiana I would work with her and Senator
Craig on their amendment and see what, if anything, we can do. We will
have the weekend and Monday to work on that. Hopefully, we can
accommodate in some way.
Ms. LANDRIEU. Thank you, Mr. Chairman.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I very much appreciate the comments of
both the Senator from Louisiana and the Senator from Iowa. This is a
very fine amendment for lots of reasons, as has already been
articulated here. I think we can find a way to get this done. I
compliment the Senators.
We know lots of families who would love to adopt a child. How
wonderful it is for the families to be able to adopt a child. It means
a great deal for the parents to have those children. So many people
want to have children and just cannot. I thank the Senator for what she
is doing.
Ms. LANDRIEU. I thank the Senator very much.
The PRESIDING OFFICER (Mr. Grassley). I thank the Senator.
The Senator from Florida, Mr. Graham, is the next Senator to be
recognized to offer an amendment.
Mr. BAUCUS addressed the Chair.
The PRESIDING OFFICER. If the Senator from Florida will withhold, the
Senator from Montana is recognized.
Mr. BAUCUS. Mr. President, I would just like to say that on an
earlier amendment I got a little carried away in being critical of it.
In fact, I even suggested the amendment was more of a message
amendment. I do recognize that, frankly, it was a very good-faith
effort to meet a real concern; namely, whether we can meet our fiscal
responsibilities as we look to see whether these budget surpluses
materialize or not.
I do still think the amendment is not a good one, but not because it
is not well intended. It is very well intended. The authors have worked
very long and hard to try to figure out a way to make it work. But I
think it is too complicated. It is more in the nature of a Rube
Goldberg solution. But it is very well intended.
I compliment the Senators who offered that amendment and tell them I
respect their effort efforts. I just apologize to those Senators if
they took personal offense at my earlier comments.
The PRESIDING OFFICER (Mr. Hutchinson). The Senator from Florida.
Mr. GRAHAM. Mr. President, I request that I be notified when I have
used 3 minutes of my time.
The PRESIDING OFFICER. The Chair will do so.
Amendment No. 687
Mr. GRAHAM. Mr. President, this is the first of two amendments I will
offer this evening. This amendment goes to the basic structure of the
kind of approach Congress should take to reducing our Nation's taxes. I
support a significant tax bill. I do not support the bill that is
before us this evening.
The second amendment I will offer will go to one of the reasons I do
not support the bill, a specific defect which I think is illustrative
of other defects within this legislation.
The amendment we offer first raises two basic questions: Should we
have a single tax bill that will absorb all of the funds which this
Congress has determined are appropriate to allocate to tax cuts for the
next 11 years? And are we so prophetic that we can decide in May of
2001 what our total tax policy should be through the year 2011?
As smart as we might be, I do not think we can meet that test.
So I, with my colleague, Senator Corzine, will argue that we should
have a series of tax bills: A bill today, yes--a pause, a time for
reflection, a time for examination of our economic circumstances, a
time to reevaluate our surplus for the future--and then a thoughtful
determination as to whether, for what purpose, and in what amount we
should have a second tax bill.
Why is this approach of one-at-a-time, rather than one, period, a
more appropriate direction? First, there is the unreliability of an 11-
year projection of surpluses. That issue has been discussed at length
in several other contexts today. Second, there will be needs, some seen
and some unforeseen, which will emerge in the next 11 years, that will
justify tax cuts. But if we have already committed all of the resources
available for that purpose, we will not be able to attend to those.
One of those needs we have learned about in the last few hours, as
the President and the Vice President have announced a new energy
strategy for America, much of which is based upon tax reductions in
order to create incentives for Americans in various enterprises to act
in ways that will be advantageous to the Nation.
And third, one-at-a-time gives us greater assurance that we will not
drift into deficits, that we will not repeat in 2001 what we did in
1981.
The PRESIDING OFFICER. The Senator has used 3 minutes.
Mr. GRAHAM. Mr. President, with that introduction, I would like to
turn to my colleague and partner in this effort to discuss, if we have
a series of tax bills, what should the first tax bill, the tax bill of
May 2001 encompass.
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. CORZINE. Mr. President, I rise to support my friend and
colleague, the senior Senator from Florida.
I very much agree and concur that we would be better served by a
series of tax cuts that would provide for understanding where we are in
the economy. As we move along in this process, we could fit
circumstances much more effectively into that process.
I have some trouble with the overall tax program we are considering.
I have trouble with the issues with regard to
[[Page S5096]]
how this is formulated for debate. I compliment Senator Byrd for his
truly remarkable comments this morning with regard to reconciliation.
That said, there is trouble with the size, trouble with the structure
and distribution, but maybe most importantly, as Senator Graham and I
are addressing, trouble with the timing.
This tax structure we are about to vote on does too little at a time
when we have real needs in a weakening, slowing, and, I think, very
fragile economy. Seventy percent of this tax cut comes in the second 5
years, the outyears, and only $10 billion in the current year, and that
is in a $10 trillion economy. It is one-tenth of 1 percent. It is like
throwing a coin in an ocean. It will have little, if any, significant
impact on the current state of our economy.
There are real reasons to believe that there is a need for the
current stimulus. With the actions and words of the Federal Reserve
just this week, with a remarkable additional 50-basis-point cut in
interest rates, that is five times this year, with a total 250-basis-
point cut, because of their serious concern. And their concern is
demonstrated not only by what they have done but by their words when
they have reviewed current economic conditions--seeing a decline in
employment, a rise in the unemployment rate, weakness in productivity
numbers, which have been so much a part of suggestion that we have this
great surplus.
There has been a real undermining of one of the major sectors of our
economy in technology, but also it has moved very substantially into
our manufacturing sector. And there are concerns about overseas
economic growth, which will have a very important impact on our
external accounts. There are many signs in our economy that give one
great pause for concern about the fragility of our economy and its
direction. We need a stimulus now.
I think the program that the senior Senator from Florida has talked
about in the Finance Committee, and we have discussed in this Chamber
for now 2 months, is an insurance policy that is fundamental to working
hand in hand with the Federal Reserve to make sure we have a strong
economy going forward.
Those rising tides do lift all boats. A strong economy is the best
way to make sure all Americans benefit from our fiscal policy and how
we manage our economic affairs.
So I stand strongly in support of the approach Senator Graham will
outline.
Thank you very much, Mr. President.
Mr. GRAHAM. Mr. President, how much time remains?
The PRESIDING OFFICER. Seven and a half minutes remain.
Mr. GRAHAM. Mr. President, I will briefly outline the plan that the
Senator from New Jersey and I have developed which we think meets the
test of an economic insurance policy. We underscore the words
``insurance policy.''
No one, frankly, knows what is over the horizon for the American
economy. As the Senator from New Jersey just outlined, there are enough
signs of concern, signs that would raise apprehension, that a prudent
family would say this is a time to buy an insurance policy that will
protect us, that will begin to shift the risk, to the degree possible,
of a possible economic decline. We are suggesting what the elements and
the specifics of that economic insurance policy should be.
We think it needs to be immediate. We are proposing that our bill
take effect as of January 1, 2001, and that the benefits in this
calendar year would be fully available in this calendar year.
Second, it needs to be frontloaded. One of my criticisms of the bill
before us, which talks about being an economic stimulus bill, is that
the total amount of tax relief that will be distributed in the form of
marginal rate reductions in this fiscal year 2001 is less than $10
billion, in an economy approaching $8 trillion--in my judgment, a
clearly inadequate commitment if we are serious about buying an
economic insurance policy.
We think it needs to be a substantial commitment. We have suggested
that the substantial commitment would be in the range of $60 billion in
the year 2001 and in every year into the future.
Economic experts from some of the most prestigious governmental and
nongovernmental agencies in the country have told us they believe that
a $60 billion stimulus this year would increase gross domestic product
by between one-half and three-quarters of 1 percent, everything else
being unaffected. We think that is a significant amount of economic
growth at a time when that growth has substantially declined.
We believe this should be placed in the hands of those Americans most
likely to spend it. So we build upon a concept that is in the
President's budget or the President's tax bill, and that is the
addition of a 10-percent rate. But we alter the President's proposal in
two critical regards. First, his 10-percent rate doesn't go fully into
effect until the year 2006. Ours is fully in effect as of January 2001.
Second, his 10-percent rate covers the first $6,000 of taxable income
for a single person; $12,000 for a married couple. We would increase
those numbers to $9,500 for a single American, and $19,000 for a
family.
What would that mean for an American family, every American family
that is earning $19,000 or more up to the richest American in the
country? It would mean a $950 savings in their income tax. We think
that is a significant amount of money, $35 every biweekly pay period,
$35 that would be going into the pocket of that American family to buy
clothes for their children, to make a downpayment on a refrigerator,
all of the things they might want to use that money for, which is
exactly what we need them to do in order to stimulate a demand starved
economic decline.
We also believe this plan needs to be simple. Complexity works
against being able to get these funds into the hands of the Americans
quickly enough to make a difference. We believe the critical quarters
are going to be the last quarter of this fiscal year and the first
quarter of 2002. That is the last 6 months of calendar 2001. That is
the 6-month period we need to impact. That is the 6-month period in
which we will be putting $60 billion into the pockets of American
families. We think that is a true economic insurance policy.
If you believe the principle of let's go one step at a time in
prudently shaping our tax policy, as opposed to feeling that we have to
throw a 100-yard-pass tax bill tonight that will govern us for the next
11 years and that the prudent first tax bill should be one that would
relate to the primary challenge facing Americans today, which is the
concern of a declining economy, an economy that might drift into a
recession or a recession which could be deep and prolonged, then we
have the opportunity today in this tax bill to play a positive role to
ensure against those negative events.
I urge the amendment be adopted, and I send the amendment to the
desk.
The PRESIDING OFFICER. The clerk will report.
The senior assistant bill clerk read as follows:
The Senator from Florida [Mr. Graham], for himself, Mr.
Corzine, and Mr. Dayton, proposes an amendment numbered 687.
Mr. GRAHAM. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide for a substitute amendment which amends the
Internal Revenue Code of 1986 to provide for a 10-percent income tax
rate bracket)
Strike all after the first word and insert the following:
1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Economic
Insurance Tax Cut of 2001''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Section 15 Not To Apply.--No amendment made by this Act
shall be treated as a change in a rate of tax for purposes of
section 15 of the Internal Revenue Code of 1986.
SEC. 2. 10-PERCENT INCOME TAX RATE BRACKET FOR INDIVIDUALS.
(a) Rates for 2001.--Section 1 (relating to tax imposed) is
amended by striking subsections (a) through (d) and inserting
the following:
``(a) Married Individuals Filing Joint Returns and
Surviving Spouses.--There is hereby imposed on the taxable
income of--
``(1) every married individual (as defined in section 7703)
who makes a single return jointly with his spouse under
section 6013, and
[[Page S5097]]
``(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table:
``If taxable income is: The tax is:
10% of taxable income..................................................
$1,900, plus 15% of the excess over $19,000............................
$5,830, plus 28% of the excess over $45,200............................
$23,764, plus 31% of the excess over $109,250..........................
$41,511.50, plus 36% of the excess over $166,500.......................
Over $297,350..........................................................
$88,617.50, plus 39.6% of the excess over $297,350.
``(b) Heads of Households.--There is hereby imposed on the
taxable income of every head of a household (as defined in
section 2(b)) a tax determined in accordance with the
following table:
``If taxable income is: The tax is:
10% of taxable income..................................................
$1,425, plus 15% of the excess over $14,250............................
$4,725, plus 28% of the excess over $36,250............................
$20,797, plus 31% of the excess over $93,650...........................
$38,777, plus 36% of the excess over $151,650..........................
$91,229, plus 39.6% of the excess over $297,350........................
``(c) Unmarried Individuals (Other Than Surviving Spouses
and Heads of Households).--There is hereby imposed on the
taxable income of every individual (other than a surviving
spouse as defined in section 2(a) or the head of a household
as defined in section 2(b)) who is not a married individual
(as defined in section 7703) a tax determined in accordance
with the following table:
``If taxable income is: The tax is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$3,582.50, plus 28% of the excess over $27,050.........................
$14,362.50, plus 31% of the excess over $65,550........................
$36,434.50, plus 36% of the excess over $136,750.......................
$94,250.50, plus 39.6% of the excess over $297,350.....................
``(d) Married Individuals Filing Separate Returns.--There
is hereby imposed on the taxable income of every married
individual (as defined in section 7703) who does not make a
single return jointly with his spouse under section 6013, a
tax determined in accordance with the following table:
``If taxable income is: The tax is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$2,915, plus 28% of the excess over $22,600............................
$11,882, plus 31% of the excess over $54,625...........................
$20,755.75, plus 36% of the excess over $83,250........................
$44,308.75, plus 39.6% of the excess over $148,675.''..................
(b) Inflation Adjustment To Apply in Determining Rates for
2002.--Subsection (f) of section 1 is amended--
(1) by striking ``1993'' in paragraph (1) and inserting
``2001'',
(2) by striking ``1992'' in paragraph (3)(B) and inserting
``2000'', and
(3) by striking paragraph (7).
(c) Conforming Amendments.--
(1) The following provisions are each amended by striking
``1992'' and inserting ``2000'' each place it appears:
(A) Section 25A(h).
(B) Section 32(j)(1)(B).
(C) Section 41(e)(5)(C).
(D) Section 42(h)(3)(H)(i)(II).
(E) Section 59(j)(2)(B).
(F) Section 63(c)(4)(B).
(G) Section 68(b)(2)(B).
(H) Section 132(f)(6)(A)(ii).
(I) Section 135(b)(2)(B)(ii).
(J) Section 146(d)(2)(B).
(K) Section 151(d)(4).
(L) Section 220(g)(2).
(M) Section 221(g)(1)(B).
(N) Section 512(d)(2)(B).
(O) Section 513(h)(2)(C)(ii).
(P) Section 685(c)(3)(B).
(Q) Section 877(a)(2).
(R) Section 911(b)(2)(D)(ii)(II).
(S) Section 2032A(a)(3)(B).
(T) Section 2503(b)(2)(B).
(U) Section 2631(c)(2).
(V) Section 4001(e)(1)(B).
(W) Section 4261(e)(4)(A)(ii).
(X) Section 6039F(d).
(Y) Section 6323(i)(4)(B).
(Z) Section 6334(g)(1)(B).
(AA) Section 6601(j)(3)(B).
(BB) Section 7430(c)(1).
(2) Subclause (II) of section 42(h)(6)(G)(i) is amended by
striking ``1987'' and inserting ``2000''.
(d) Additional Conforming Amendments.--
(1) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15
percent'' and inserting ``10 percent''.
(2) Section 1(h) is amended by striking paragraph (13).
(3) Section 3402(p)(1)(B) is amended by striking ``7, 15,
28, or 31 percent'' and inserting ``5, 10, 15, 28, or 31
percent''.
(4) Section 3402(p)(2) is amended by striking ``15
percent'' and inserting ``10 percent''.
(e) Determination of Withholding Tables.--Section 3402(a)
(relating to requirement of withholding) is amended by adding
at the following new paragraph:
``(3) Changes made by section 2 of the economic insurance
tax cut of 2001.--Notwithstanding the provisions of this
subsection, the Secretary shall modify the tables and
procedures under paragraph (1) through the reduction of the
amount of withholding required with respect to taxable years
beginning in calendar year 2001 to reflect the effective date
of the amendments made by section 2 of the Economic Insurance
Tax Cut of 2001, and such modification shall take effect on
the first day of the first month beginning after the date of
the enactment of such Act.''
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2000.
(2) Amendments to withholding provisions.--The amendments
made by paragraphs (3) and (4) of subsection (d) shall apply
to amounts paid after December 31, 2000.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I wonder if I could reserve the time on this amendment.
The Senator had another amendment he was going to offer.
Mr. GRAHAM. Yes.
Mr. GRASSLEY. Would the Senator proceed to that right away.
Amendment No. 688
Mr. GRAHAM. Mr. President, the second amendment I have is not of the
broad sweep of the amendment we have just been discussing, but it
points out, maybe as a metaphor, some of the problems in this
legislation. This bill proposes to repeal the estate tax in the year
2011. That same proposal was made by President Bush with a big
difference.
The estate tax is a shared source of income. The States get
approximately 20 percent of the estate tax which is collected at the
Federal level; 80 percent stays in the National Treasury. What
President Bush had suggested was that there be an equal phase-out of
the State share and of the Federal share. That is not what is in the
bill before us tonight, unfortunately.
What we have before us tonight is a bill which would say that
beginning January 1, 2002, just a little more than 7 months from now,
the State share would be cut in half. Then it says that there will be
gradual further reductions and then January 1, 2005, the State share
would be zero.
The Federal share, on the other hand, continues in effect until the
year 2011. So effectively, what we are saying, with apparently no
consultation with our brethren in the States, is that they are going to
take the hit first because we are the ones who decide who has to carry
the burden first. I think that is egregiously unfair in our Federalist
system. It also is going to put States in this position.
I was talking earlier today with the former Governor of Ohio, our
colleague, Senator Voinovich. Ohio is one of a number of States which
has a biennial budget; that is, they develop a budget, and it lasts for
24 months. They will be starting their next 24-month period on July 1
of this year.
What we are going to say is they are going to build a 2-year budget
predicated on receiving their share of the Federal estate tax. They are
going to find that 6 months into a 24-month period half of that money
has evaporated because we have elected to make them our friends and
fellow colleagues in this wonderful Federal system. We have made them
have their share of the estate tax cut occur, in this case, 10 years
before the Federal share of reduction really begins to kick in and
totally 6 years before the Federal reduction becomes fact.
What policy rationale can there be for us to treat the 50 States in
the way that this bill purports to do?
The amendment I have offered will get to exactly the same
destination. The estate tax will be repealed. There will be zero income
for the States. There will be zero income for the Federal Government
because there won't be any tax to produce any income. But it does what
the President has suggested--that we do it fairly; that both sides of
this partnership, both husband and wife, share equally and
proportionately in the decline of their revenue.
There are many of us who pride ourselves on being Jeffersonian
Federalists. We believe in local government. We vote to send more
responsibilities down to local governments. We are about to change our
labels. We are becoming situational Federalists. We want the States to
have more local control when it is to our benefit. But now that we have
this opportunity to essentially raid their income, because
[[Page S5098]]
they are not going to be up here voting, other than those of us who
represent our constituents in the States--of course, the U.S. Senate
was peculiarly established to be the representatives of the interests
of States, so we ought not to be the body leading this way. We should
not be the body fighting the recommendation of President Bush to be
fair and equitable. We should be the body which is expressing its
recognition of the importance of the States and the relationship with
the National Government.
This proposal, in my judgment, goes 180 degrees in the opposite
direction. So my amendment is simple. It says, yes, we are going to
repeal the estate tax; yes, we are going to do it in the same number of
years as has been suggested; but we are going to treat both sides of
this partnership--the States and the Federal Government--equally and
proportionately as we do so.
I urge adoption of this amendment.
Mr. President, I send the amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Florida [Mr. Graham] proposes an amendment
numbered 688.
Mr. GRAHAM. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To provide a reduction in State estate tax revenues in
proportion to the reduction in Federal estate tax revenues)
Beginning on page 64, line 17, strike all through page 66,
before line 2, and insert:
Subtitle B--Reduction of Gift Tax Rate
SEC. 511. REDUCTION OF GIFT TAX RATE AFTER REPEAL.
On page 66, line 2, strike ``(d)'' and insert ``(a)''.
On page 67, line 1, strike ``(e)'' and insert ``(b)''.
Beginning on page 67, line 12, strike all through page 68,
line 6, and insert:
(f) Effective Date.--The amendments made by this section
shall apply to gifts made after December 31, 2010.
On page 68, strike the table between lines 14 and 15, and
insert:
``In the case of estates of decedentThe applicable exclusion amount is:
2002 and 2003.........................................$1,000,000
2004, 2005, and 2006..................................$2,000,000
2007, 2008, 2009, and 2010.........................$3,000,000.''.
Beginning on page 70, line 20, strike all through page 79,
line 6.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, the State death tax credit is one of the
last vestiges of revenue sharing. The State has a luxury of not having
an estate tax and just waiting for a portion of the Federal estate tax
to be allocated to the State treasury.
What we have tried to do in this mark is, in a fair way, allow the
States to review the concerns of their citizens, and if they want to
have their own death tax, then any tax paid to the States will be fully
deductible on the final return. This will be phased in over the next 5
years, and it will be phased in over the next 5 years until repealed.
In fact, the tax money will be paid out over the next 7 years.
The States will have plenty of time for their legislatures to meet
and decide on a State-by-State level if they want to maintain the death
tax.
Unlike the House amendment by Congressman Rangel, we did not repeal
the credit immediately. But if the Federal Government does not collect
the money, it is not ours to share. State death tax credit current law
states up to $2.5 million. The rate is 8 percent. Total tax is
$146,800. Our relief act before us--the act of 2001--is identical. The
top rate of 16 percent is only collected on estates over $10 million.
The number of Florida estates, for example, over $10 million is 126.
The number of Iowa estates over $10 million is 22.
In addition, at the expense of the American taxpayers, the Senator
from Florida is taking care of State governments. He postpones the
unified credit increase for years. The act before us gives a $3 million
credit by the year 2005. The Senator postpones $3 million until the
year 2007, and he never reaches $3.5 million or $4 million at the
expense of the American taxpayers.
So I think it is very important that we take a good look at this.
Again, I want to remind everybody that we have tried to--in this estate
tax provision of this bill, the phasing out of the estate tax is a
controversial issue, even with those of us who have agreed to this
bipartisan agreement. But what is not controversial is the way in which
this bipartisan portion of our overall legislation, the estate tax
provision, was worked out--very carefully, in a nonemotional,
nonpolitical way, between Senator Lincoln on the one hand--she is a
Democrat--and Senator Kyl on the other hand, being a Republican--
working these things out. And except for those who do not believe there
should be any total repeal of the estate tax, even in the year 2001,
this was a well-accepted compromise that is in this mark.
Obviously, this provision by the Senator from Florida detracts from
that. That is why we ask that it be defeated when we vote on it Monday.
I yield the floor.
The PRESIDING OFFICER. The Senator from Florida is recognized.
Mr. GRAHAM. How much time remains?
The PRESIDING OFFICER. Nine minutes, 20 seconds.
Mr. GRAHAM. Parliamentary inquiry: If we do not use all of our time
this evening, will we have any of that time available on Monday prior
to the actual consideration of these amendments or do we use it or lose
it without using it tonight?
The PRESIDING OFFICER. Under the unanimous consent agreement, there
is no provision for additional time. However, there is time for debate
on the bill.
Mr. GRAHAM. So the answer is, if we don't use the time available
tonight, it will not be carried over until Monday.
The PRESIDING OFFICER. The Senator is correct.
Mr. GRAHAM. That is not a threat to use all 9 minutes but a small
sliver.
The PRESIDING OFFICER. The Senator has that right.
Mr. GRAHAM. Mr. President, I have great regard for Senator Grassley.
I know how hard he has worked on this bill, as he has on other issues.
As he said earlier tonight, he is prepared to work on issues such as
prescription drugs for Medicare. I appreciate that, and I have enjoyed
the many times we have been colleagues to achieve public policy
objectives.
I just say I think this is one of those issues on which maybe we have
to agree to disagree. This is not a new relationship. Since 1924, the
States have been participating with the Federal Government in the
estate tax, and 35 States have no other estate tax than the share they
get through their participation in the Federal tax. In fact, in my
State, it is in the State constitution that the only estate tax that
can be collected is that which comes as a State credit on the Federal
estate tax.
So while it might appear to be easy for the States as we are
repealing the estate tax, it is obviously not going to be easy and for
some States virtually impossible.
I go back to the example Senator Voinovich gave to me earlier today
of his own State, which is a binding budget situation. They had written
their budget, or are about to, for 24 months beginning July 1 of this
year, and now they are going to lose approximately half--we do not have
the exact State-by-State numbers, but a significant percentage of this
source of revenue. That is a very difficult fiscal position for us to
put our friends and colleagues in the 50 States in and I think
unnecessarily.
President Bush had recommended this reduction be done
proportionately. I, frankly, assumed it was being done proportionately
until someone pointed out that we were deviating from what the
President had recommended. I believe this is kind of a ``gotcha''
approach to the States as they are so deep into already committing
themselves for at least 1 and maybe 2 fiscal years. In the case of my
State, our legislature finished its business on May 4 or 5, with the
budget to go into effect on the first of July. It has in it
approximately $775 million as our State's share of the estate tax.
Almost half of that is going to evaporate as of the first of January,
halfway through the fiscal year.
The irony of this is that we talk about we want to do something for
the American taxpayer. The American taxpayer pays taxes at all levels
of government. If we take a substantial share of
[[Page S5099]]
this source of revenue away from the States in a precipitous move for
which they have been unable to plan, what are the States going to do?
Are they going to have to raise property taxes to fill the gap? Are
they going to have to raise sales taxes to fill the gap? Are they going
to have to find some other source of revenue or begin well into their
fiscal year to make significant cuts in services? And what is the
service that States provide?
For my State and most States, half or more of the total State revenue
is spent on one function. What is that function? We ought to know it
well because we just spent the last 2 weeks talking about how committed
we were to it. What is the function? Education. That is what States do
with over half of their money.
If we think it is important for us to spend 2 weeks debating the 7
percent of public education which is financed from Washington, we
certainly deserve to spend some time discussing the approximately 55
percent of education which is paid by the States. The balance between
the Federal 7 and the State's 55 is what is paid at the local level,
largely through property taxes.
We seem to be, at least in the amount of attention that is being
given to this, indifferent to what we are doing to our American
taxpayers in terms of their State responsibilities and what we are
doing to American education by destabilizing the primary source of
financing for American education, which is the 50 States.
Mr. President, hoping that I have not used all of the 9 minutes, I
will conclude by saying I think this is going to be a test of whether
we really are serious, committed Federalists and think that respect and
dignity across levels of government is an important part of the oil
that makes this very intricate Federal system work and that
indifference, bordering on rudeness, toward the States is what could
cause it to begin to grind the gears.
I believe the adoption of this amendment, which is the proposal made
by President Bush, which is a proposal that gets to exactly the same
destination as the advocates of repeal of the estate tax would do but
do it in a fair and equitable manner as between our 50 States and our
Federal Government, is an extremely important statement of our
commitment to federalism. I urge the adoption of this amendment when it
comes for a vote on Monday.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I will take a couple minutes, and then I
believe we are done.
To respond in a short fashion to what the Senator from Florida said,
we have 14 States that have a separate inheritance tax. In addition,
the tax due to the State will continue to be paid through the year
2007.
The repeal basically happens because we increase the unified credit
so rapidly, and this is a direct result of the American taxpayers
having spoken by the thousands that they want immediate relief.
The President of the United States in his proposal did his death tax
repeal with $260 billion. The bill before us does it with $145 billion.
The President does not increase the unified credit. So, yes, his plan
is a proportionate reduction, but the Senate and the taxpayers wanted
immediate relief, and that is why we end up where we are.
Obviously, there are problems for some Senators. I respect their
objection, but we did it in the best way we could in a compromising
fashion, trying to do as much as we could with a lesser amount of money
than what the President was trying to do in his tax program, and do it
in a bipartisan fashion.
As we end this evening's debate, and we will continue it Monday with
votes well into Monday evening to finish this bill, I hope I can speak
for people who have wanted to see a tax bill passed, and that includes
Senator Baucus and me, that we have defeated amendments that have come
before this body to change this legislation.
If we had taken the second alternative of bringing this bill before
this body, that second alternative would have been perhaps--if we had
been fortunate--a Republican-only measure that would have been voted on
in committee 10-10. I believe a lot of the amendments we defeated today
would have been adopted.
We brought a bipartisan bill out of committee 14-6. We have had quite
a few bipartisan votes today. I hope people who are reflecting upon
what they want in a tax bill, if they have what they want without the
bipartisan cooperation--when I say ``what they want,'' again I remind
everybody this is a work of compromise--more importantly, bipartisan
compromise--so nobody has really gotten what they want. But I know
there is more of an urgency on my side for the reduction of marginal
rates than there is maybe on the other side.
It could be that people on my side do not like the 36 percent that I
agreed to with Senator Baucus, but looking at some of these votes, and
particularly how hard Senator Baucus was working to make sure this
bipartisan position won, without that, some of these amendments, and
maybe a lot of others, would have been adopted.
I say that because there is Friday, Saturday, and Sunday to think
about this before we adopt a final bill, and then there is Tuesday and
Wednesday--and maybe not even that much time--to work on a conference
report with which Senator Baucus is going to be involved. We have to
think in terms of what is possible to get through here when it comes
out of conference.
I don't really know how to end this except to say that we worked hard
for 4 months to get where we are. I hope people realize what we have
put together has been sustained. We ought to think about that as people
who may not be totally satisfied with what we are going to pass in the
Senate try to use the rest of the process to gain something that is not
doable in the final analysis.
I would like to have everybody think between now and when that
conference committee has to end sometime not too far down in the
future, to be a little bit realistic. I think I have been realistic. I
think Senator Baucus has been realistic or we wouldn't be here in the
first place. For sure, we wouldn't be here sustaining this mark the way
we have.
I ask my colleagues, particularly on my side of the aisle, to think
of this for the next few days.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I urge the Senate to heed the wise words
of the chairman of the committee. They were important. That is, in the
final analysis, this will come down to whether there are 51 votes to
adopt the conference report. This is an evenly divided Senate, 50/50,
for all intents and purposes. I am sure the Vice President can break
the tie, but it is basically 50/50 and it comes down to whether there
are 50 or 51 votes.
I do believe very strongly that the bill we are working on today is a
very significant improvement from my point over what we otherwise would
be passing in this body and that it is a bill very similar to that
offered by the President and passed by the House.
This bill before the Senate today is much better in terms of
distribution, child tax credit, refundability, more for education,
tuition deduction provided for, a whole host of provisions. It is a lot
better from my point of view and the point of view of the vast majority
of Members of this side.
I urge Members, as our very wise chairman has said, to think about
this over the next several days, because when we do come back from
conference, the conferees are going to have to come up with the result,
to sustain not only in the House, which is very easy, but to sustain in
the Senate, which is more difficult.
I urge the conferees and I urge Senators to be prudent, wise, and to
remember there must be 51 votes in the Senate to adopt a conference
report. I commend the chairman of our committee, but particularly
Members on my side of the aisle who have offered amendments. There have
been good amendments, very well intended, and I wish I could have
ordered more of them. I could not, in the view to get a better bill for
all Senators, Democrats and Republicans.
I think it is important for all Senators to vote for a tax cut that
they think is better than otherwise we would be facing. Some Senators
are not going to vote for a tax vote that the conferees will bring
back. It will not happen. But I think it is my responsibility to bring
back a conference report
[[Page S5100]]
for which some Senators on my side of the aisle can vote. It is my hope
we can bring back a conference report that does have the support not
only of 51 Senators but significantly more than 51 Senators so it truly
is bipartisan. That very much depends on the conferees.
I thank my good friend from Iowa who has been so decent and
straightforward and honest as the day is long, a very wonderful person.
We have more miles to travel, and my expectation is we will travel
those in the same spirit of cooperation.
I see my good friend from New Jersey standing ready to leave. I say
to my good friend from New Jersey, I appreciate his efforts,
particularly on the stimulus amendment. There will be another day when
we can adopt very good amendments as proposed by my friends from
Florida as well as New Jersey.
____________________