[Congressional Record Volume 148, Number 5 (Tuesday, January 29, 2002)]
[Senate]
[Pages S206-S219]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
HOPE FOR CHILDREN ACT--Continued
Amendment No. 2718
Mr. BAUCUS. Mr. President, there was a vote earlier on a small
business amendment offered by the Senator from Missouri, Mr. Bond. It
was adopted. That shows we are starting to make progress toward an
agreement on a bill to stimulate economic recovery. That was the small
business expensing amendment which increased the ceiling amount
available for business as to expense.
We now have an opportunity to make even more progress by adopting the
Baucus-Smith amendment. This amendment makes two important
improvements: First, it strikes a balance on the bonus depreciation
issue with a 2-year compromise provision. Second, it will help States
by increasing the Federal matching payments for Medicaid. As a bonus
depreciation, this assistance will be provided for 2 years.
Essentially, I am offering an amendment, joined by my good friend
from Oregon, Mr. Smith, to provide for a 2-year bonus depreciation, as
well as a 2-year FMAP payment. I will speak first about bonus
depreciation.
I think we all agree that a strong stimulus bill must create tax
incentives for business to invest in new equipment. I do not think
there is much doubt about that. This amendment creates jobs, lifts the
economy, and also increases productivity in the long run. Chairman
Greenspan and others have talked a lot about productivity. There is not
much doubt that this amendment will help us move in that direction.
Everyone agrees on the concept. The debate, however, has been over
the details. The proposal before us is a 10-percent bonus. We have
agreed to increase that to 30 percent. The question now is how long
should the incentive last.
The Democratic proposal was 1 year; the Republican proposal was 3
years. Our bipartisan compromise amendment, that is the amendment of
Senator Smith from Oregon and myself, is 2 years. This is not simply an
effort to split the difference. Instead, if one steps back and thinks
about it, a 2-year incentive makes good sense. Three years is too long.
It will not encourage business to invest quickly enough. As a result,
it will not stimulate businesses to act when we most need them to act.
On the other hand, in the debate last week, Senator Smith and others
made a very good point. They said that a 1-year bonus period might not
be long enough because it does not give businesses enough time to make
sound investment decisions. Let's not forget the investment to qualify
has to be in place, in service within the requisite period.
We have to assume this legislation will not be enacted before March.
If we were to stick to the 1-year period, companies would only have a
few months left at that point to make purchases and get assets in
place, as we are dealing with the calendar year. That is not time
enough, especially if we think about the kinds of investments we want
to encourage, which is airplanes, heavy machinery, equipment used in
manufacturing, locomotives, pipelines, and refineries. In many cases,
these assets may take longer to build than 1 year, or the contracts for
purchase may take some time to negotiate. This is a legitimate concern.
To address it, our amendment gives companies until December 31, 2003,
to make their purchases and get assets in place. Even after that,
companies would have an extra year to put the assets in place if they
take more than a year to build, so long as they meet a binding contract
test.
The amendment will provide economic stimulus. It will work quickly,
and it recognizes business realities and gives companies the time they
need to make sound investment decisions. That is the first part of the
amendment.
The second part relates to the States. The technical term is FMAP.
What it is about is helping States by temporarily increasing the rate
at which we match State payments under Medicaid. Let me explain why
this is important.
Rising Medicaid costs are already contributing to the States' fiscal
crisis. Health care costs are increasing rapidly, while rising
unemployment is increasing the number of people eligible for Medicaid
services. Medicaid spending grew by 11 percent last year. It is likely
to increase even faster this year if current economic and budgetary
conditions persist.
Many States have already implemented or are now considering
implementing significant cuts in Medicaid and the State Children's
Health Insurance Program, otherwise known as CHIP, in 2003.
These cuts would affect thousands of children, elderly, and disabled
people. For example, Oklahoma and New Mexico may eliminate their CHIP-
funded Medicaid expansions to children entirely.
CHIP--that is the State Children's Health Insurance Program--has been
very popular. It helps low-income kids get health insurance, health
insurance they did not previously have. I think it would be very
unfortunate if, due to State budget constraints, they either choose to
or believe they are forced to cut back and, in some cases, eliminate
those programs that provide health insurance for children.
Tennessee has proposed cutting Medicaid eligibility for 180,000 low-
income people in its TennCare Program. Other States will no longer
cover disabled workers returning to work or low-income women with
breast and cervical cancer. These budget cuts and these tax increases
are based on revenue forecasts that do not assume enactment of bonus
depreciation provisions. Because most States tie their own tax
collections to the Federal tax system, the additional loss of revenues
in 2003 that would result from a lengthy bonus depreciation period
would increase the likelihood and severity of State actions to cut
programs and raise taxes.
The underlying amendment would address this problem by providing a
temporary 1-year increase in the Federal matching rate under Medicare.
Our amendment goes a bit further by extending the period for 2 years to
match the depreciation period.
By doing so, the amendment ensures the amount of aid provided both to
States generally and to individual States in particular, will grow if
the recession proves deeper than currently projected. That is the
second part of the amendment.
All told, the amendment will help businesses, it will help workers,
it will help States, and it will help families maintain Medicaid
coverage.
The PRESIDING OFFICER. The Senator from Utah.
[[Page S207]]
Mr. HATCH. Mr. President, I have not fully read the FMAP part of the
distinguished Senator's amendment, but I am interested in helping the
States at this particular time because many of them are experiencing
budget crunches, and it is really causing them a lot of difficulty.
With regard to the CHIP program, which was a Hatch-Kennedy bill that
was enacted over 4 years ago, my home State of Utah has now achieved
the goal of insuring 27,000 children of people who work but do not have
enough money to pay for their children's health insurance. In Utah, we
have covered 27,000 kids, but there are at least 3,000 more who need to
be covered. Due to State budget concerns, Utah has had to cap its CHIP
program at 27,000.
Now that is not right. I cannot blame my State leaders. They have to
balance the budget, but it is not right that any child in our society
should go without basic health care. The very poor in our society are
covered by Medicaid. What we did with the CHIP bill was try to take
care of those 7 million young people in the country who are children of
the working poor. The parents of these children work but do not earn
enough money to pay for health insurance but make too much money to be
eligible for the Medicaid program. CHIP has worked immensely well. It
has been one of the most successful health care programs in the
country.
I have worked on a number of important issues throughout my Senate
career, and I think that passage of the CHIP program was one of my top
achievements as a United States Senator. Providing access to affordable
and quality health coverage to the medically uninsured continues to be
a high priority for me. So while I have to read the amendment language,
I believe it is an important amendment, and I intend to support it as
of this juncture.
With regard to bonus depreciation, I was the first Senator to file a
bonus depreciation bill. My bill provided for a 50-percent bonus
depreciation deduction rather than the 30 percent in this amendment.
But remember, some of the other bills were only at 10-percent bonus
depreciation, and I am pleased to see that this amendment would now
bring it to 30 percent. I am very happy to see the work of Senator
Smith and the distinguished chairman of the Finance Committee, whom I
call a friend, in bringing this bonus depreciation percentage to a
reasonable level. I would prefer it to be even higher because that
would be even more stimulative over this 2-year period, but this is a
good move compared to where we were. If we had gone with the Daschle
amendment, as I understand it, it would have been effective only from
last September until next September. It would have barely had time to
work. So this amendment does bring the bonus depreciation more into the
realm of workability.
Bonus depreciation is one of the few things we are doing in this
legislation that literally provides for an economic stimulus. It is a
very good economic stimulus because a lot of companies are
understandably nervous about the economic slow-down and are hesitant to
invest in their equipment. With a bonus depreciation incentive, they
may be able to pull out of some of their difficulties with this
additional help that will be provided.
With regard to the FMAP increase included in this amendment, these
provisions will assist those who are suffering in our society today due
to the economic downturn. In addition, there are States that are having
tremendously difficult times meeting the needs of their citizens. The
FMAP increase will provide these States with valuable resources so they
can meet these demands more easily.
So I want to commend the distinguished Chairman of the Finance
Committee for calling up this amendment. I particularly want to commend
him for working with Senator Smith of Oregon, who brought up the
original bonus depreciation amendment but who wanted the incentive to
last for 3 years. We compromised on 2 years, which I believe is a
decent compromise. I want to pay my respects and compliment both of
them for the work they have done on this particular amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from New Hampshire.
Mr. SMITH of New Hampshire. Mr. President, I direct a question to the
distinguished chairman of the Finance Committee. I have four amendments
on which I will be very brief. My intention is, if there is no
objection, to offer the four amendments, debate one of them at a time,
and if someone else comes and wants to offer another amendment, they
can put my amendment aside.
What is the position of the chairman on that suggestion?
Mr. BAUCUS. Mr. President, the Senator from Nevada, Mr. Reid, is
organizing the sequence of amendments. I think it is fine for the
Senator from New Hampshire to offer his package of amendments with the
understanding they come up one at a time, and if there is an amendment
on this side in the interim, that amendment would be offered and we
would go back to one of Senator Smith's amendments. That is fine.
Mr. SMITH of New Hampshire. I thank the chairman.
Amendments Nos. 2732 through 2735, En Bloc
Mr. SMITH of New Hampshire. Mr. President, I send four amendments to
the desk, and I ask unanimous consent that they be called up and
temporarily set aside for consideration at the appropriate time.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report the amendments, en bloc.
The assistant legislative clerk read as follows:
The Senator from New Hampshire [Mr. Smith] proposes
amendment Nos. 2732 through 2735, en bloc.
The amendments (Nos. 2732 through 2735), en bloc, are as follows:
AMENDMENT NO. 2732
(Purpose: To provide a waiver of the early withdrawal penalty for
distributions from qualified retirement plans to individuals called to
active duty during the national emergency declared by the President on
September 14, 2001, and for other purposes)
At the appropriate place in the bill, insert the following:
SEC. __. WAIVER OF EARLY WITHDRAWAL PENALTY FOR DISTRIBUTIONS
FROM QUALIFIED RETIREMENT PLANS TO INDIVIDUALS
CALLED TO ACTIVE DUTY DURING THE NATIONAL
EMERGENCY DECLARED BY THE PRESIDENT ON
SEPTEMBER 14, 2001.
(a) Waiver For Certain Distributions.--
(1) In general.--Section 72(t)(2) of the Internal Revenue
Code of 1986 (relating to 10-percent additional tax on early
distributions from qualified retirement plans) is amended by
adding at the end the following:
``(G) Distributions to individuals performing national
emergency active duty.--Any distribution to an individual
who, at the time of the distribution, is a member of a
reserve component called or ordered to active duty pursuant
to a provision of law referred to in section 101(a)(13)(B) of
title 10, United States Code, during the period of the
national emergency declared by the President on September 14,
2001.''.
(2) Waiver of underpayment penalty.--Section 6654(e)(3) of
such Code (relating to waiver in certain cases) is amended by
adding at the end the following:
``(C) Certain early withdrawals from retirement plans.--No
addition to tax shall be imposed under subsection (a) with
respect to any underpayment to the extent such underpayment
was created or increased by any distribution described in
section 72(t)(2)(G).''.
(3) Effective date.--The amendments made by this subsection
shall apply to distributions made to an individual after
September 13, 2001.
(b) Catch-up Contributions Allowed.--
(1) Individual retirement accounts.--Section 219(b)(5) of
the Internal Revenue Code of 1986 (relating to deductible
amount) is amended by adding at the end the following:
``(D) Catch-up contributions for certain distributions.--In
the case of an individual who has received a distribution
described in section 72(t)(2)(G), the deductible amount for
any taxable year shall be increased by an amount equal to--
``(i) the aggregate amount of such distributions (not
attributable to earnings) made with respect to such
individual, over
``(ii) the aggregate amount of such distributions (not
attributable to earnings) previously taken into account under
this subparagraph or section 414(w).''.
(2) Roth iras.--Section 408A(c) of such Code (relating to
treatment of contributions) is amended by redesignating
paragraph (7) as paragraph (8) and by inserting after
paragraph (6) the following:
``(7) Catch-up contributions for certain distributions.--
Any contribution described in section 219(b)(5)(D) shall not
be taken into account for purposes of paragraph (2).''.
(3) Employer plans.--Section 414 of such Code (relating to
definitions and special rules) is amended by adding at the
end the following:
``(w) Catch-up contributions for certain distributions.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title
solely because the plan permits an applicable participant to
make additional elective deferrals in any plan year.
[[Page S208]]
``(2) Limitation on amount of additional deferrals.--
``(A) In general.--A plan shall not permit additional
elective deferrals under paragraph (1) for any year in an
amount greater than the lesser of--
``(i) the applicable dollar amount, or
``(ii) the excess (if any) of--
``(I) the participant's compensation (as defined in section
415(c)(3)) for the year, over
``(II) any other elective deferrals of the participant for
such year which are made without regard to this subsection.
``(B) Applicable dollar amount.--For purposes of this
paragraph, the applicable dollar amount with respect to a
participant shall be an amount equal to--
``(i) the aggregate amount of distributions described in
section 72(t)(2)(G) (not attributable to earnings) made with
respect to such participant, over
``(ii) the aggregate amount of such distributions (not
attributable to earnings) previously taken into account under
this subsection or section 219(b)(5)(B).
``(3) Treatment of contributions.--Rules similar to the
rules of paragraphs (3) and (4) of subsection (v) shall apply
with respect to contributions made under this subsection.
``(4) Definitions.--For purposes of this subsection, the
terms `applicable employer plan' and `elective deferral' have
the same meanings given such terms in subsection (v)(6).''.
(4) Conforming amendment.--Section 414(v)(2)(A)(ii)(II) of
such Code (relating to limitation on amount of additional
deferrals) is amended by inserting ``(other than deferrals
under subsection (w))'' after ``deferrals''.
(5) Effective date.--The amendments made by this subsection
shall apply to contributions in taxable years ending after
December 31, 2001.
____
AMENDMENT NO. 2733
(Purpose: To prohibit a State from imposing a discriminatory tax on
income earned within such State by nonresidents of such State)
At the appropriate place in the bill, insert the following:
SEC. __. PROHIBITION ON IMPOSITION OF INCOME TAXES BY STATES
ON NONRESIDENTS.
(a) In General.--Chapter 4 of title 4, United States Code,
is amended by adding at the end the following:
``Sec. 116. Prohibition on imposition of income taxes by
States on nonresidents
``Except to the extent otherwise provided in any voluntary
compact between or among States, a State or political
subdivision thereof may not impose a tax on income earned
within such State or political subdivision by nonresidents of
such State.''.
(b) Conforming Amendment.--The table of sections for
chapter 4 of title 4, United States Code, is amended by
adding at the end the following:
``116. Prohibition on imposition of income taxes by States on
nonresidents.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of
enactment of this Act.
____
AMENDMENT NO. 2734
(Purpose: To provide that tips received for certain services shall not
be subject to income or employment taxes)
At the appropriate place in the bill, insert the following:
SEC. __. TIPS RECEIVED FOR CERTAIN SERVICES NOT SUBJECT TO
INCOME OR EMPLOYMENT TAXES.
(a) In General.--Section 102 of the Internal Revenue Code
of 1986 (relating to gifts and inheritances) is amended by
adding at the end the following new subsection:
``(d) Tips Received for Certain Services.--
``(1) In general.--For purposes of subsection (a), tips
received by an individual for qualified services performed by
such individual shall be treated as property transferred by
gift.
``(2) Qualified services.--For purposes of this subsection,
the term `qualified services' means cosmetology, hospitality
(including lodging and food and beverage services),
recreation, baggage handling, transportation, delivery, shoe
shine, and other services where tips are customary.
``(3) Annual limit.--The amount excluded from gross income
for the taxable year by reason of paragraph (1) with respect
to each service provider shall not exceed $10,000.
``(4) Employee taxable on at least minimum wage.--Paragraph
(1) shall not apply to tips received by an employee during
any month to the extent that such tips--
``(A) are deemed to have been paid by the employer to the
employee pursuant to section 3121(q) (without regard to
whether such tips are reported under section 6053), and
``(B) do not exceed the excess of--
``(i) the minimum wage rate applicable to such individual
under section 6(a)(1) of the Fair Labor Standards Act of 1938
(determined without regard to section 3(m) of such Act), over
``(ii) the amount of the wages (excluding tips) paid by the
employer to the employee during such month.
``(5) Tips.--For purposes of this title, the term `tip'
means a gratuity paid by an individual for services performed
for such individual (or for a group which includes such
individual) by another individual if such services are not
provided pursuant to an employment or similar contractual
relationship between such individual.''
(b) Exclusion From Social Security Taxes.--
(1) Paragraph (12) of section 3121(a) of such Code is
amended to read as follows:
``(12)(A) tips paid in any medium other than cash;
``(B) cash tips received by an employee in any calendar
month in the course of his employment by an employer unless
the amount of such cash tips is $20 or more and then only to
the extent includible in gross income after the application
of section 102(d).'';
(2) Paragraph (10) of section 209(a) of the Social Security
Act is amended to read as follows:
``(10)((A) tips paid in any medium other than cash;
``(B) cash tips received by an employee in any calendar
month in the course of his employment by an employer unless
the amount of such cash tips is $20 or more and then only to
the extent includible in gross income after the application
of section 102(d) of the Internal Revenue Code of 1986 of
such month.''; and
(3) Paragraph (3) of section 3231(e) of such Code is
amended to read as follows:
``(3) Solely for purposes of the taxes imposed by section
3201 and other provisions of this chapter insofar as they
relate to such taxes, the term `compensation' also includes
cash tips received by an employee in any calendar month in
the course of his employment by an employer if the amount of
such cash tips is $20 or more and then only to the extent
includible in gross income after the application of section
102(d).''.
(c) Exclusion From Unemployment Compensation Taxes.--
Submission(s) of section 3306 of such Code is amended to read
as follows:
``(s) Tips Not Treated as Wages.--For purposes of this
chapter, the term `wages' shall include tips received in any
month only to the extent includible in gross income after the
application of section 102(d) of such month.''.
(d) Exclusion From Wage Withholding.--Paragraph (16) of
section 3401(a) of such Code is amended to read as follows:
``(16)(A) as tips in any medium other than cash;
``(B) as cash tips to an employee in any calendar month in
the course of his employment by an employer unless the amount
of such cash tips is $20 or more and then only to the extent
includible in gross income after the application of section
102(d).''
(e) Conforming Amendment.--Sections 32(c)(2)(A)(i) and
220(b)(4)(A) of such Code are each amended by striking
``tips'' and inserting ``tips to the extent includable in
gross income after the application of section 102(d))''.
(f) Effective Date.--The amendments made by this section
shall apply to tips received after the calendar month which
includes the date of the enactment of this Act.
____
AMENDMENT NO. 2735
(Purpose: To allow a deduction for real property taxes whether or not
the taxpayer itemizes other deductions)
At the appropriate place in the bill, insert the following:
SEC. __. REAL PROPERTY TAX DEDUCTION ALLOWED WHETHER OR NOT
TAXPAYER ITEMIZES OTHER DEDUCTIONS.
(a) In General.--Section 62(a) of the Internal Revenue Code
of 1986 (defining adjusted gross income) is amended by
inserting after paragraph (18) the following:
``(19) Real property taxes.--The deduction allowed by
section 164(a)(1).''.
(b) Effective Date.--The amendment made by this section
shall apply to any payment due after December 31, 2000.
Mr. SMITH of New Hampshire. Mr. President, these amendments I have
offered encompass a number of important issues, including property
taxes, commuter taxes, tip taxes for those who work as waiters and
waitresses for the most part, and Reservists. Those are the four
categories.
Mr. President, I thank my colleagues for their courtesy in allowing
me to offer four amendments. I will have a very brief discussion of
each of these amendments.
Amendment No. 2735
The amendment No. 2735 is an amendment dealing with property taxes.
It provides an above-the-line deduction for State and local property
taxes. Right now, these taxes are only deductible for those who itemize
their taxes. The nonitemizers are at the lower income levels.
Therefore, this will help stimulate the economy by encouraging home
purchases and home ownership for those at the lower income levels that
do not itemize their taxes.
As we all know, property taxes tend to fund local education. So
providing this tax deduction makes it easier for a local taxpayer to
afford the quality education. As a former teacher and a parent, I
believe it is very important to our economy.
It is important to understand, if a citizen makes enough money to
have enough deductions to itemize taxes,
[[Page S209]]
they can deduct property taxes. But what about the senior citizen who
has property that has gained in value, they don't want to sell their
home, and they are on a fixed income? They could be forced to sell
their home to pay the property taxes--which go up every year, usually
because of the schools or other costs in the community.
This gives immediate tax relief to every working American or senior
citizen or anyone else who owns property, pays property taxes, but does
not get a tax deduction because they do not itemize. There is a direct
stimulus to the economy. Imagine being able to deduct $2,000 or $3,000
in property taxes and having that cash on hand to be used for something
else, whether the purchase of a refrigerator or whatever.
If we want to stimulate the economy and help those who need it most,
this is the kind of legislation that does it. I hope my colleagues will
look seriously at this matter and pass it as an amendment to the
stimulus package.
Amendment No. 2733
The second amendment I will speak to, No. 2733, involves a commuter
tax. This prohibits the imposition of a nonresident income tax unless
two States agree to a compact permitting that tax. It happens in New
Hampshire; it happens in other States. A State does not have an income
tax and a person who lives in a State with no income tax works in
another State. That State taxes their income. It is taxation without
representation. It is not fair.
This prohibits this tax from being implemented. In the long run, it
is fair, and it is best for all people, no matter in what State you
live. Even if you are in a State that collects those taxes, it is the
issue of fairness. Is it fair for you to collect an income tax from a
person who works in your State who gets no benefit? It does not mean
only the interstate exchange of goods and services, it also means the
exchange of labor.
One of the best ways to stimulate economic growth is allow people to
work wherever they want in whatever State they want. Why make it a
disincentive for the person living on the border of one State to go to
another State. That is what we are doing. It is especially unfair in
States such as New Hampshire, where there is no income tax, and there
is no reciprocating. In the State of New Hampshire, $2 or $3 million
goes out of that State into several of the surrounding States.
We all have constituents who work in neighboring States. In most
cases, these constituents pay income taxes to those States; they are
called commuter taxes. This is called taxation without representation,
where I went to school. This is one of the issues that the colonists in
our country fought over when they began to remove themselves from the
authority of the King. The Declaration of Independence lists the
reasons our country broke away from the Crown, and one of them was
imposing taxes without our consent. That is exactly what happens in
every State in America where there is an income tax for a person, say,
living in Montana, who works in a neighboring State, and they have to
pay the tax of that neighboring State.
It is not fair. I understand where politically it is easier for a
State legislator to support an income tax on citizens who cannot vote
them out of office. There is no way you can vote these people out of
office for imposing these taxes, but it goes against the very
principles on which our country was founded.
My amendment says if the State consents to allow its citizens to be
taxed by a neighboring State, that is OK because now the constituents
have an opportunity to either support or not support the legislators
who imposed that. It is a very important distinction as to this
amendment. If a State consents to allow citizens to be taxed by a
neighboring State, fine. But right now that is not the case. They could
sign an interstate compact, which would be fine, but it should be up to
the States. My amendment preserves the right of citizens to be governed
by their own States, not by the tax-hungry legislators of another
State.
If you examine this issue, it is a States rights issue, and I urge
its adoption.
Amendment No. 2734
Mr. President, the attacks of September 11 have left a great deal of
devastation in their wake. Thousands perished during the attacks while
tens of thousands of friends and family members are left to grieve for
their loved ones. But the economic impact of those attacks continue to
be felt throughout the Nation. With more than 1.6 million working men
and women laid off last year, we need to look for ways to provide
assistance to working individuals and their families.
The business community, particularly the travel industry, are bearing
the brunt of the burden. With airline travel and hotel bookings down
sharply, communities which largely depend on tourism and travel as
their chief source of revenue will soon, if not already, be in the red
and may soon be forced to cut vital services. It is, therefore,
imperative that we pass a strong, sensible economic stimulus plan that
will provide immediate relief to all Americans and stimulus to local
businesses to help them weather this storm and expand employment.
However, we must not overlook those who need help the most. The working
poor.
Many of the these hardworking Americans supplement their often,
minimum wage incomes, with tips received for their excellent service.
However, this discriminatory tax is levied against those who can least
afford it. Therefore, I am offering an amendment to address this
unfairness in the tax code and provide direct relief to hardworking
Americans. My amendment is very simple. It recognizes a tip for what it
is: a gift. All tips, not exceeding $10,000 annually, would be tax-
free. Result: hundreds of dollars a month remains in the pocket of hard
working individuals. By exempting these monies from both income and
FICA taxes, more money will be returned to the pockets of both
employees and employers.
Under current law, service employees who typically receive tips are
assumed to have made at least 8 percent of their gross sales in tips.
Taxes are applied regardless of the actual level of the tip. The end
result for these employees is that they may have to pay taxes on income
they didn't receive.
By passing my amendment, the Federal Government will provide direct
relief to at least 2.3 million low to middle income individuals who
depend on tips to make ends meet. Industry statistics show that most of
the employees that will be helped by my amendment are either students,
single mothers, or employees at the beginning of their careers. My
amendment will benefit millions of Americans directly, substantially,
and quickly, while lifting some of the heavy burden of Government off
of thousands of small businesses. My amendment eliminates the current
cumbersome system under which tips cannot possibly be reported
accurately. Hard working, law-abiding citizens who are given tips as a
result of their extra effort do not wish to be labeled cheaters by the
IRS which does not understand the realities of their work. It is time
to change the tax law covering income from tips. My amendment caps the
tax-free earnings at $10,000 for the small percentage who make a career
of waiting on tables in high-end restaurants and resorts. For States
that have a tip credit rule, this bill will not impact the employee's
and employer's obligations and contributions up to the minimum wage.
Congress should show the hard working men and women of America that
the Federal Government is not out of touch, and that it has some
compassion for the struggle facing the millions of citizens in the
service industry. By passing my amendment, we pass a common sense
proposal that will directly help millions of hard-working Americans.
To reiterate, the third amendment is No. 2734, known as the tip tax.
This amendment would consider tips to be gifts for income tax purposes.
This would provide a great amount of much needed relief and stimulus to
the hospitality and other service sectors of our economy by eliminating
the tax burden imposed on these tips.
Think about the types of people who hold these jobs. There are many
single mothers, working women, working hard. You have all been to
restaurants and you see how hard waiters and waitresses work.
Frequently these are single-income mothers who have children at home.
They are working hard. This would exempt the first $10,000 of those
tips from Federal income tax. That is a pretty good incentive and would
help
[[Page S210]]
every waitress, every waiter, every person who receives gratuities as
the primary source of their income. It would help them tremendously to
exempt the first $10,000.
We treat the tip income the same way--the first $10,000 a year tax
free. It is good policy and good stimulus, and I urge its adoption.
In summary, again, if you work as a waitress or waiter, the first
$10,000 of the money you earn in tips would be exempted from Federal
taxes.
Amendment No. 2732
After the treacherous attacks of September 11, the need to increase
security around the country was and continues to be imperative.
Much of the security needs were filled by National Guard and Reserve
units. Many were forced to leave high or higher paying jobs than the
military was able to pay. In some cases, this caused a financial burden
on the men and women who were called to duty.
In order to help the Guard and Reserve units who were called up as a
result of the terrorist attacks, my amendment would allow those units
to access their retirement plans without paying the 10 percent penalty
for early withdrawal.
The legislation would also allow them an underpayment waiver as well
as a catch-up contribution without caps up to the amount they withdrew
from their retirement fund.
While we have rightfully provided tax relief to the business and
families involved in the September 11 attacks, we must also look for
ways to provide relief to those brave men and women who have been
called up to protect us from further attacks.
I ask the Senate to support the members of our National Guard and
Reservists and agree to my amendment.
In conclusion--I may want to speak to these amendments a little bit
later--these are four opportunities for us to help people who need help
and stimulate the economy at the same time. These are working women,
for the most part, single mothers, working women who have children at
home, to exempt that first $10,000 in tip income; to help the reservist
who is called up on active duty who has a tough time now making
payments on the home; third, to help those who work in one State and
have to pay taxes in that State even though they do not get any vote on
it; and finally, the property tax where with the above-the-line
deduction, if you don't itemize, you can deduct your property taxes.
That will help mostly seniors, those people who are on fixed incomes
who are basically property poor. They do not want to sell their house.
They don't want to mortgage their house. Why should they have to? They
have worked all their lives for it. They can't pay the taxes on it.
This will give them a chance to deduct it right off their income.
My amendment will provide tax relief to low income homeowners who do
not have enough in deductions to itemize.
Giving low income working Americans an above the line tax deduction
for their family home will encourage home ownership and provide a much
needed economic stimulus in financially challenged neighborhoods.
School districts depend, in large part, on property taxes.
Encouraging home ownership will increase greater tax dollars to these
school districts and provide greater learning opportunities for our
children.
As a former teacher, I believe it is very important to our children
and our economy.
I ask that the Senate consider the working poor and agree to this
amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, what is the pending business?
The PRESIDING OFFICER. The amendment offered by the Senator from New
Hampshire is the pending business.
Mr. SESSIONS. I ask unanimous consent to lay aside the pending
amendment in order that I might introduce my own amendment, along with
Senator Allen.
The PRESIDING OFFICER (Mr. Carper). Is there objection?
Mr. REID. Reserving the right to object, what is the consent request?
The PRESIDING OFFICER. The Senator will repeat his request.
Mr. SESSIONS. That we lay aside the pending amendment and I and
Senator Allen be allowed to offer an amendment.
Mr. REID. I object to that.
The PRESIDING OFFICER. Objection is heard.
Mr. REID. Mr. President, I announce to Members that we are trying to
have a consent agreement entered into within the next few minutes to
have a vote on or about a quarter to 4 today on the Harkin amendment.
We have an agreement that was formalized last night to alternate
amendments. And that is what we have been doing. We have a formal
agreement that during this stimulus package we are alternating
amendments. The next two that were to be in order were two Democratic
amendments. We are going to dispose of these. We are going vote on the
Harkin amendment and vote on Senator Allen's and work our way through
this matter. Senator Smith offered four amendments. The manager on the
other side can decide how to handle those. We will do what we have been
doing. Unless Senator Smith combines those into one amendment, we will
spread those out, having four amendments on the other side.
I have no objection at this time to Senator Sessions offering the
amendment in keeping with the agreement that was entered. His amendment
would be offered in the normal course of the alternating amendments.
Does the Senator from Iowa agree with me?
Mr. GRASSLEY. Mr. President, if what the Senator is saying is that
when it comes to a Member who offered four amendments, we would only
vote on one of his amendments and alternate back and forth. Is that
your goal?
Mr. REID. Yes. It doesn't matter to me how the manager of the bill
handles that. It is strictly up to him.
Mr. GRASSLEY. Since we started the other day with an agreement to go
back and forth with one Democratic amendment and one Republican
amendment, we will stick with that.
Mr. REID. We entered into that agreement yesterday.
I withdraw my objection to Senator Sessions' amendment.
I ask unanimous consent that the Senate vote at 3:45 on or in
relation to the Harkin amendment, there be no amendments in order prior
to that time, and the time be equally divided.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Alabama.
Amendment No. 2736
Mr. SESSIONS. Mr. President, I thank the Senator from Nevada for his
courtesy which he displays so often.
The American Family Security and Stimulus Act is a stimulus package
that I offered along with Senator Allen and Senator Smith. Several
other Senators also support it. It is designed to provide a stimulus to
this economy and to middle-class working Americans, by emphasizing help
to families who tend to be hurt most in an economic slowdown and by
trying to get money into this economy in a way that can move us out of
here. It is time to blast out of this recession--not ease out of it.
When we look at our budget numbers and our hopes for the future and
jobs in America, what we know is that the sooner we get this economy
humming again the better. It will even benefit the politicians because
we will have more money in our Government Treasury. But, most
importantly, it will help create jobs and income for American families
and workers.
It is time for us to quit dawdling about and get moving on something
that can be reached. I know the great leadership on both sides of the
aisle has worked really hard. Sometimes I have been wont to call them
masters of the universe, as they told us they were going to work out
something. Sooner or later, they were going to get an agreement. But
time has gone by and no agreement has been reached. So I suggest the
plan that we would offer today--Senator Allen and I--is a bipartisan
plan that can include much of what is in other people's plans. It also
includes some items that would provide stimulus to the economy that are
not special interest oriented but family oriented. So everybody should
be able to rally behind them.
I will make a few brief remarks and then I will allow Senator Allen
to
[[Page S211]]
make some comments. I hope I might be able to speak on it as the day
goes by.
The components of this plan include a number of items. I believe one
of them that has not been given sufficient thought in this process is
the requirement that we advance payment of the earned-income tax
credit--a $31 billion program for low-income workers. They get that
earned-income tax credit the year after they work as a refund on their
tax return. If we could begin to put it on their paychecks now--it is 5
percent--they would receive maybe a 60-cent, 80-cent, or 90-cent-an-
hour increase in their pay. It would advance payment maybe $10 billion
or $15 billion in this fiscal year's economy when we need that advanced
payment, and it would reduce next year's payment. It would be a one-
time infusion of cash for hard-working Americans with low income with
no cost to the budget over a 2-year period. In fact, I think that is
the right approach.
I do not believe I sent my amendment to the desk. I send it at this
time.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Alabama [Mr. Sessions] for himself, Mr.
Allen, Mr. Smith of New Hampshire, and Mr. Hutchinson
proposes an amendment numbered 2736 to the language proposed
to be stricken by amendment No. 2698.
Mr. SESSIONS. 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 printed in today's Record under ``Amendments
Submitted.'')
Mr. SESSIONS. Mr. President, the cost is $15 billion this year, but
it saves the Treasury $15 billion next year because that money would
have been paid out earlier than would otherwise have been the case.
I ask that we accelerate the 25-percent individual income tax rate
reduction that is now set at 27 to go to 25 by the year 2002, instead
of 2006. We would accelerate that to this year providing families a
break on their tax return. For example, an individual making $27,000 to
$67,000 would receive a 2-percent break on their tax return.
We would allow penalty-free IRA withdrawals for health insurance
premiums for unemployed workers. That has the potential to help people
who are hurting and need health insurance. We would increase the child
tax credit from $500, as it is today for the year 2001, to $1,000 per
child, allowing families to receive an additional $500 tax credit on
their tax returns for this year. We would do that just for 1 year
because it is my belief that we need a stimulus in the economy now. It
is going to phase into a $1,000 tax credit for families over 10 years,
but for 1 year we would accelerate that in these economic times to
provide relief for families.
We would increase from $3,000 to $5,000 the capital loss deduction. A
number of plans have had that--both Democrat and Republican.
We provide a 3-month $500 tax credit for the purchase of computers
for elementary and secondary students, for which Senator Allen is such
a passionate proponent, and who will explain in detail.
We will extend the unemployment benefit by 13 weeks and provide the
option for States to provide unemployment, if they choose, for part-
time workers.
I think that goes beyond Senator Daschle's proposal and, I believe,
would be very much a compromise that would be acceptable across the
aisle.
We would provide $5 billion for national emergency grants to States
for people who are hurting and provide temporary business relief by
allowing an additional 2-year depreciation deduction of 30 percent of
the adjusted basis of certain qualified properties. That is projected
at an approximate $38 billion cost, and it would have a cost this year
when the money is pumped into the economy. But by allowing people to
take that depreciation deduction early, it would be something not
available to them in the future, thereby saving Government expenditures
or costs in income in the future.
That is a good package. I know Senator Allen wants to talk about it.
I believe it is a step in the right direction. There is nothing in this
that is not bipartisan. There is nothing in this that is special
interest. Every bit of it is fair and just, which stimulates the
economy, over $100 billion worth, without creating a bureaucracy,
without creating a welfare program, and actually doing the things we
want it to do.
I thank the Chair and yield the floor.
The PRESIDING OFFICER. Who yields time? The Senator from Virginia.
Mr. ALLEN. Mr. President, I commend Senator Sessions for his
leadership and echo all of the comments he made in support of this
measure. I strongly support, as a cosponsor, this amendment which is
entitled the American Family Economic Security and Stimulus Act.
This amendment, due to the great leadership of Senator Sessions, as
well as his ingenuity, has provided us with what I believe to be a very
common sense, compassionate, pro-family package that will help
stimulate the economy and help American families and businesses get
through the current economic recession.
When one thinks of stimulus or stimulus policy--I know the Presiding
Officer remembers the discussion on the concept of stimulus--it should
be a change in policy which will induce or spur economic activity,
whether it is investment or whether it is spending, that would
otherwise not occur but for the change in policy.
This amendment represents a very worker-oriented, pro-family economic
aid and stimulus package that will provide immediate financial relief
to working families. It will ensure more of their hard-earned money
stays in their wallets, and they spend it as they see fit. There is the
additional $150 a month in the hands of working Americans through
advanced payment on the earned-income tax credit. That is really an
immediate 50 to 60 cents per hour pay raise for workers in the lowest
income levels.
It increases the child tax credit to $1,000 for the current fiscal
year, and it accelerates the rate reduction for the 28 percent tax
bracket to 25 percent.
I thank Senator Sessions for including the educational opportunity
tax credit in this important legislation. This is a concept that I ran
on in my campaign. It is one many have heard me discuss. What I am
doing in adapting this idea, the education opportunity tax credit, to a
stimulus package is to create an immediate incentive for families,
parents of children who are in kindergarten through 12th grade, to buy
computers, educational software, or computer peripherals. It is a
technology-related amendment.
Specifically, what this amendment, the Sessions-Allen amendment,
would do is provide parents who have children in kindergarten through
12th grade with an immediate $2,500 tax credit to buy computers,
educational software, or peripherals. It would be for only 3 months. It
would provide those families with the financial means necessary to
provide their children with greater educational choice and
opportunities best suited to their individual needs.
Parents know the needs of their children better than anyone. We know
in studies about the digital divide that youngsters who have computers
at home do better in school. They stay in school. They don't drop out.
This is an important way of empowering parents to provide computers and
educational software and peripherals to their children.
As far as the economic stimulus of it, if the idea of education and
empowering parents is not sufficient to convince my colleagues, let's
recognize what this will do for the economy. We can look at the States
as our laboratories for a lot of good ideas.
Experience shows in the States that even a small temporary reduction
in taxes can bring about huge increases in computer sales. In South
Carolina, they had a sales tax holiday on computers for only 3 days.
What was the result? Computer sales increased more than tenfold, over
1,000 percent, in those 3 days. In Pennsylvania, they eliminated the
sales tax on computers for 1 week. CPU sales increased sixfold in that
time.
The PRESIDING OFFICER. All time controlled by the minority has
expired.
Mr. ALLEN. Mr. President, I hope the Senate will support this idea of
empowering parents, helping with technology, and helping out our
economy
[[Page S212]]
as well. It is a good, commonsense approach. I thank the Presiding
Officer for giving me the additional 30 seconds.
The PRESIDING OFFICER. Who yields time? The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I believe we have consent from the other
side to let the Senator from Virginia speak longer.
Mr. ALLEN. I would appreciate that, Mr. President.
Mr. GRASSLEY. I ask unanimous consent to give the Senator 3
additional minutes, Mr. President.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Virginia is recognized for an additional 3 minutes.
Mr. ALLEN. Mr. President, as I was stating, the educational
opportunity tax credit, empowering parents with a $500 tax credit for a
3-month period to buy computers and educational software and
peripherals for their children, as we see from the States, works very
well. It is not just the computers themselves. Again, South Carolina
realized about a 664 percent increase in monitor sales and a 700
percent increase in printer sales, with only a 5 percent tax break.
Pennsylvania had a similar experience.
The impact of this will be at least $5 billion of stimulus into this
sector of the economy while also helping out the education of children
in this country.
We know that this will have much more of an impact than that because
whoever is fabricating the chips, the semiconductor chips, whoever the
contractors and vendors may be, whoever the sales folks are, all of
them, the computer software writers, all of those people will benefit
from more business investment, more sales in the tech sector. This idea
is supported by Information Technology Industries; Global Learning
System; ITIC, which is the Information Technology Industry Council;
John Chambers with CISCO, who is well known for his efforts in
education and technology, Gateway Computers, who have seen the impact
of this in the States, the Consumer Electronics Association, Radio
Shack, and Circuit City.
This is a good, balanced, pro-family, pro-taxpayer, pro-jump
starting, and ``stimulating this economy to create more jobs" idea. I
hope we will find bipartisan support for this idea that will really
allow families to keep more of their money, help educate their
children, and also provide the job placement and financial assistance
needed to workers during this economic downturn while also making sure
that businesses have the capabilities to make investments with
accelerated depreciation.
I look forward to working with my colleagues as we move this country
forward in a way of trusting free people and free enterprise.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. ALLEN. Mr. President, if I may, I ask unanimous consent to add as
cosponsors of the Sessions-Allen amendment Senator Tim Hutchinson of
Arkansas and Senator Bob Smith of New Hampshire.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. Without objection, the clerk will call the
roll.
The legislative clerk proceeded to call 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
amendment of the Senator from Virginia be set aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 2700
Mr. GRASSLEY. Mr. President, on behalf of Senator McCain, I call up
amendment No. 2700, and I ask unanimous consent that it be explained
and then laid aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report.
The legislative clerk read as follows:
The Senator from Iowa [Mr. Grassley], for Mr. McCain, for
himself, Mr. Allard, Mr. Lieberman, Ms. Snowe, Mr. Levin, Mr.
Murkowski, Mr. Cleland, Mr. Inhofe, Ms. Landrieu, Mr. Burns,
Mr. Durbin, Mr. Sessions, Mr. DeWine, Mr. Thurmond, Mr.
Shelby, Mr. Hagel, Mr. Lugar, Mr. Kennedy, Mr. Warner, Ms.
Collins, Mr. Hatch, Mr. Helms, Mr. Allen, Mr. Kerry, Mr.
Fitzgerald, Mr. Stevens, Mr. Reid, Mr. Miller, Mr. Roberts,
Mr. Bayh, Mr. Ensign, Mr. Bunning, Mr. Campbell, Mr. Nelson
of Nebraska, Mr. Dodd, Mr. Jeffords, Mr. Brownback, Mr.
Biden, Ms. Stabenow, and Mr. Cochran, proposes an amendment
numbered 2700 to the language proposed to be stricken by
amendment No. 2698.
The amendment is as follows:
(Purpose: To amend the Internal Revenue Code of 1986 to provide a
special rule for members of the uniformed services and Foreign Service
in determining the exclusion of gain from the sale of a principal
residence)
At the appropriate place insert the following:
SEC. __. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND
FOREIGN SERVICE IN DETERMINING EXCLUSION OF
GAIN ON SALE OF PRINCIPAL RESIDENCE.
(a) In General.--Section 121(d) (relating to special rules)
is amended by adding at the end the following:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--The running of the 5-year period
described in subsection (a) shall be suspended with respect
to an individual during any time that such individual or such
individual's spouse is serving on qualified official extended
duty as a member of a uniformed service or of the Foreign
Service.
``(B) Qualified official extended duty.--For purposes of
this paragraph--
``(i) In general.--The term `qualified official extended
duty' means any period of extended duty during which the
member of a uniformed service or the Foreign Service is under
a call or order compelling such duty at a duty station which
is a least 50 miles from the property described in
subparagraph (A) or compelling residence in Government
furnished quarters while on such duty.
``(ii) Extended duty.--The term `extended duty' means any
period of active duty pursuant to a call or order to such
duty for a period in excess of 90 days or for an indefinite
period.
``(C) Definitions.--For purposes of this paragraph--
``(i) Uniformed service.--The term `uniformed service' has
the meaning given such term by section 101(a)(5) of title 10,
United States Code.
``(ii) Foreign service of the united states.--The term
`member of the Foreign Service' has the meaning given the
term `member of the Service' by paragraph (1), (2), (3), (4),
or (5) of section 103 of the Foreign Service Act of 1980.''.
(b) Effective Date.--The amendment made by this section
shall apply to sales or exchanges on or after the date of the
enactment of this Act.
Mr. McCAIN. Mr. President, I, along with 39 cosponsors, am proud to
sponsor amendment 2700 to H.R. 622 to allow members of the Uniformed
and Foreign Services, who are deployed or are away on extended active
duty, to qualify for the same tax relief on the profit generated when
they sell their main residence as other Americans. I am pleased to
announce that Secretary of State Colin Powell fully supports this
legislation and this legislation enjoys overwhelming support by the
senior uniformed military leadership--the Joint Chiefs of Staff--as
well as the Office of Management and Budget Director Mitch Daniels, the
31-member associations of the Military Coalition, the American Foreign
Service Association, and the American Bar Association.
The average American participates in our Nation's growth through home
ownership. Appreciation in the value of a home because of our country's
overall economic growth allows everyday Americans to participate in our
country's prosperity. Fortunately, the Taxpayer Relief Act of 1997
recognized this and provided this break to lessen the amount of tax
most Americans will pay on the profit they make when they sell their
homes.
The 1997 home sale provision unintentionally discourages home
ownership among members of the Uniformed and Foreign Services, which is
bad fiscal policy. Home ownership has numerous benefits for communities
and individual homeowners. Owning a home provides Americans with a
sense of community and adds stability to our Nation's neighborhoods.
Home ownership also generates valuable property taxes for our Nation's
communities.
This amendment will not create a new tax benefit. Let me say that
again: this bill will not create a new tax benefit, it merely modifies
current law to suspend the time members of the Uniformed and Foreign
Services are away from home on active duty. In short, this amendment
treats service members and foreign service officers fairly, by treating
them like all other Americans.
[[Page S213]]
The Taxpayer Relief Act of 1997 delivered sweeping tax relief to
millions of Americans through a wide variety of important tax changes
that affect individuals, families, investors, and businesses. It was
also one of the most complex tax laws enacted in recent history.
As with any complex legislation, there are winners and losers. But in
this instance, there are unintended losers: service members and Foreign
Service Officers.
The 1997 act gives taxpayers who sell their principal residence a
much-needed tax break. Prior to the 1997 act, taxpayers received a one-
time exclusion on the profit they made when they sold their principal
residence, but the taxpayer had to be at least 55 years old and live in
the residence for 2 of the 5 years preceding the sale. This provision
primarily benefitted elderly taxpayers, while not providing any relief
to younger taxpayers and their families.
Fortunately, the 1997 act addressed this issue. Under this law,
taxpayers who sell their principal residence on or after May 7, 1997,
are not taxed on the first $250,000 of profit from the sale; joint
filers are not taxed on the first $500,000 of profit they make from
selling their principal residence. The taxpayer must meet two
requirements to qualify for this tax relief. The taxpayer must, first,
own the home for at least 2 of the 5 years preceding the sale; and,
second, live in the home as their MAIN home for at least 2 years of the
last 5 years.
I applaud the bipartisan cooperation that resulted in this much-
needed form of tax relief. The home sales provision sounds great and it
is. Unfortunately, the second part of this eligibility test
unintentionally and unfairly prohibits many of our men and women in the
Armed Forces and Foreign services from qualifying for this beneficial
tax relief.
Constant travel across the United States and abroad is inherent in
the military and Foreign Services. Nonetheless, some service members
and Foreign Service Officers choose to purchase a home in a certain
locale, even though they will not live there much of the time. Under
the new law, if a service member does not have a spouse who resides in
the house during his or her absence or the spouse is also in the
military and also must travel, that service member will not qualify for
the full benefit of the new home sales provision, because no one
``lives'' in the home for the required period of time. The law is
prejudiced against dual-military couples who are often away on active
duty, because they would not qualify for the home sales exclusion
because neither spouse ``lives'' in the house for enough time to
qualify for the exclusion.
This amendment simply remedies an inequality in the 1997 law. It
amends the Internal Revenue Code so that the 5-year time period is
suspended while the service member or Foreign Service Officer is
ordered, I underscore ordered, away from their primary home of
residence. In short, active and reserve service members will still be
required to live in their primary residence for 2 years, but the 5-year
time period is suspended while they are stationed to such places like
Afghanistan, the Philippines, Bosnia, the Persian Gulf, in the ``no
man's land,'' commonly called the DMZ between North and South Korea, or
anywhere else on active duty orders.
In 1998 alone, the United States had approximately 37,000 men and
women deployed to the Persian Gulf region, preparing to go into combat,
if so ordered. There were also 8,000 American troops deployed in
Bosnia, and another 70,000 U.S. military personnel deployed in support
of other commitments worldwide. That is a total of 108,000 men and
women deployed outside of the United States, away from their primary
home, protecting and furthering the freedoms we Americans hold so dear.
Since the September 11th attacks on the United States we have asked
well over 110,000 service members to deploy abroad to seek out and
destroy the terrorists and their supporting organizations responsible
for this barbaric deed.
We cannot afford to discourage military service by penalizing
military personnel with higher taxes merely because they are doing
their job. Military and Foreign service entails sacrifice, such as long
periods of time away from friends and family and the constant threat of
mobilization into hostile territory. We must not allow the Tax Code to
heap additional burdens upon our men and women in uniform.
In my view, the way to decrease the likelihood of further inequities
in the Tax Code, intentional or otherwise, is to adopt a fairer,
flatter tax system that is far less complicated than our current
system. But, in the meantime, we must insure that the Tax Code is as
fair and equitable as possible.
The Taxpayer Relief Act of 1997 was designed to provide sweeping tax
relief to all Americans, including our men and women in uniform. It is
true that there are winners and losers in any tax code, but this
inequity was unintended. Enacting this narrowly-tailored remedy to
grant equal tax relief to the members of our Uniformed and Foreign
Services restores fairness and consistently to our increasingly complex
Tax Code.
I ask unanimous consent that the letters of support from the American
Foreign Service Association, the Joint Chiefs of Staff, American Bar
Association, the Military Coalition, the Office of Management and
Budget, and the Secretary of State be printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
The Secretary of State,
Washington, DC, November 30, 2001.
The Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: I am writing in support of the
legislation you have introduced to provide members of the
Foreign Service, as well as military personnel, the same
relief extended to other Americans in the sale of their
principal residence. Your efforts on behalf of the men and
women of the Foreign Service are very much appreciated.
The Tax Relief Act of 1997 has acted to the disadvantage of
many members of the Foreign Service by requiring that they
must live in their principal residence for two of the five
years prior to sale. Much of a Foreign Service member's
career is spent serving his or her country far away from that
residence, thereby making it impossible for many of them to
utilize the capital gains tax exclusion. Not counting the
time on extended duty away from the principal residence as
part of the five-year period will give to our Foreign Service
personnel and their military colleagues the same tax
treatment enjoyed by their fellow Americans.
Sincerely,
Colin L. Powell.
____
Joint Chiefs of Staff,
Washington, DC, November 27, 2001.
The Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: I join the Service Chiefs and strongly
endorse the Military Homeowners Equity Act. This legislation
would correct an inequity in the Internal Revenue Code of
1997 and would afford Service members the same opportunity to
build equity in a home that most other Americans enjoy.
One of the most effective ways to maintain outstanding
combat capability in our military personnel is to allow them
to concentrate fully on their mission without worrying
excessively about the home front. This Bill would be a major
step in the right direction.
Thank you for the opportunity to review the legislation,
and for your efforts on behalf of our soldiers, sailors,
airmen, marines, and coastguardsmen.
Sincerely,
Richard B. Myers,
Chairman.
____
Chief of Naval Operations,
November 21, 2001.
The Hon. John McCain,
Senate Russell Office Building, Washington, DC.
Dear Senator McCain: Thank you for your efforts on behalf
of our service members to correct the disparity created by
the Tax Relief Act of 1997. I would like to extend my support
for your legislative tax relief proposal, S. 1678 which would
help relieve the hardships experienced by military homeowners
and encourage more members to purchase homes.
Many military homeowners who sold their homes after the Tax
Relief Act of 1997 have been unable to meet the two-year
residency requirement. I ask that you also consider adding
language to your proposal to make the tax relief retroactive
to sales and exchanges that occurred after the 1997 act,
adding a specific exception to the statute of limitations
period for filing refund claims.
Please let me know if I may be of further assistance.
Sincerely,
Vern Clark,
Admiral, U.S. Navy.
[[Page S214]]
____
October 31, 2001.
The Hon. John McCain,
U.S. Senate, Washington, DC.
Dear Senator McCain: Your efforts to improve the quality of
service enjoyed by our Navy-Marine Corps team are greatly
appreciated. I would like to extend my support for the
legislation that you intend to introduce to correct the tax
disadvantage created by The Tax Reform Act of 1997.
The Marine Corps has been tracking several bills intended
to correct this tax disadvantage. As you know, The Tax Reform
Act repealed certain portions of the existing law that
allowed military members to maintain the status quo with
other taxpayers for exclusion of capital gains. The Act
provided for an exclusion, obviously not intended to
disadvantage military service members or members of the
Foreign Service. In order to qualify, a taxpayer must ``own
and use'' the property for two of the five years preceding
the sale. Since our personnel seldom remain in one location
for over three years, it is difficult to qualify for the
exclusion.
Please let me know if there is any way in which I can be of
assistance or service.
Semper Fidelis,
J.L. Jones,
General, U.S. Marine Corps,
Commandant of the Marine Corps.
____
Department of the Army,
Office of the Chief of Staff,
Washington, DC, November 27, 2001.
The Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: I strongly support the legislation you
have introduced, S. 1678, to correct the inequitable tax
consequences suffered by many soldiers when they sell their
principal residence.
As you are aware, under the 1997 Tax Relief Act, a
homeowner who sells a principal residence can exclude gain of
$250,000 ($500,000 for joint fliers) if the taxpayer owned
and used the residence for two of the five years immediately
preceding the date of sale. Unlike the previous law, the 1997
Tax Relief Act does not recognize an exception for military
service. Accordingly, service members making frequent
military moves are often unable to meet the two-year
residency requirement required for the home sale exclusion.
Your legislation would correct this inequity by permitting
service members to apply time served on extended active duty
toward the use of a principal residence to qualify for the
home sale exclusion. This change would allow many more
service members and their families to take advantage of the
home ownership tax incentives enjoyed by other Americans.
I greatly appreciate your commitment to enhance the quality
of life for service members and their families. Thank you for
your continued support.
Sincerely,
John M. Keane,
General, United States Army,
Vice Chief of Staff.
____
HQ USAF/CC,
1670 Air Force Pentagon,
Washington, DC, November 28, 2001.
The Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: Your consistent commitment to
improving the quality of life of our Airmen is greatly
appreciated. The Air Force fully supports your Military
Homeowners' Equity Act--S. 1678. This bill will correct the
tax disadvantaged created by the Tax Reform Act of 1997 by
allowing members of the Uniformed Services who are deployed
or are away on extended active duty to qualify for the same
tax relief on the profit generated when they sell their main
residence as other Americans. Ideally, this legislation would
be retroactive to the effective date of the Tax Reform Act.
The 1997 Tax Reform Act repealed certain portions of the
existing law that allowed military members to maintain the
status quo with other taxpayers for exclusion of capital
gains. The Act provided for an exclusion, obviously not
intended to disadvantaged military service members or members
of the Foreign Service. In order to qualify, a taxpayer must
``own and use'' the property for two of the five years
preceding the sale. With the frequent moves required by
military service, it is often times difficult for our service
members to qualify for the exclusion. Your bill corrects that
inequity.
Thank you again for your continuing support and leadership.
Sincerely
John P. Jumper,
General, USAF, Chief of Staff.
____
Executive Office of the President, Office of Management
and Budget,
Washington, DC, November 15, 2001.
The Hon. Grant S. Green, Jr.,
Under Secretary for Management, Department of State,
Washington, DC.
Dear Grant: Thank you for your letter regarding Senator
McCain's tax relief proposal. After careful review, there is
a case to be made that the current capital gains tax system
poses a burden on servicemen and women and foreign service
officers. These men and women spend much of their careers
being assigned overseas and moving from post to post. We
should not penalize these Americans in effect for serving
their country.
The Office of Management and Budget supports Senator
McCain's proposal which would allow military and foreign
service personnel equitable capital gains tax treatment. I
appreciate your persistence on this matter as we continue to
ensure that our Foreign Service Officers and Military service
men and women enjoy such benefits especially during these
difficult times.
Sincerely,
Robin Cleveland,
Associate Director,
National Security Programs.
____
The Military Coalition,
Alexandria VA, November 6, 2001.
The Hon. John McCain,
U.S. Senate,
Washington, DC.
Dear Senator McCain: The Military Coalition, a consortium
of nationally prominent uniformed services and veterans
organizations, representing more that 5.5 million members,
plus their families and survivors, is grateful to you for
introducing The Military Homeowners Equity Act--a bill that
would restore capital gains tax equity for military
homeowners.
Your legislation is essential to correct a serious
oversight in the Taxpayer Relief Act of 1997, which
inadvertently penalizes servicemembers who are assigned away
from their principal residence for more than three years on
government orders. Very often, servicemembers keep their
homes while reassigned overseas or elsewhere in the hopes of
returning to their residence. On occasions when this proves
impossible, and the home must be sold to permit purchase of a
new principal residence, servicemembers find themselves
subjected to substantial tax liabilities--all because
military orders kept them from occupying their principal
residence for at least two of the five years before the sale.
The 1999, both the House and Senate passed corrective
legislation (H.R. 865) as part of the Taxpayer Refund and
Relief Act of 1999, but the President vetoed this bill over
an unrelated issue. Your new bill will be important to
resurrect this fairness issue and allow servicemembers to
comply with government orders and leave home to serve their
country without risking a large capital gains tax liability.
The Military Coalition pledges to work with you to seek
inclusion of your bill in the pending economic stimulus
package so military members can once again enjoy the same
capital gains tax relief already provided to all other
Americans.
Sincerely,
The Military Coalition.
____
American Foreign Service Association,
Washington, DC, November 5, 2001.
The Hon. John McCain,
Senate Russell Building,
Washington, DC.
Dear Senator McCain: On behalf of the 23,000 active-duty
and retired members of the Foreign Service which the American
Foreign Service Association (AFSA) represents, thank you for
your leadership and support with your soon-to-be introduced
bill extending to the Uniformed Services and Foreign Service
the tax treatment enjoyed by all other Americans when they
sell their principal residence.
As you know this is an important active-duty issue for the
Uniformed Services and the Foreign Service. Your bill,
amending section 121(d) of the Internal Revenue Code of 1986,
addresses an inequity faced by our members because of the
particular nature of our profession. As you are well aware,
our careers require us to live for years at a time away from
our homes in duty posts around the world in service to our
nation. In the case of the Foreign Service, our duty
assignments range from 2-4 years. Back-to-back assignments
abroad are common. It is no unusual for a member of the
Foreign Service to spend six or more years abroad before
returning to Washington for an assignment here. With the
current two-in-five year occupancy test, many of our members
in both the Uniformed Services and the Foreign Service find
that we do have the same flexibility in selling our homes as
enjoyed by our fellow Americans. After several years abroad,
there are many reasons why we may with to sell our homes upon
returning home. As with other Americans, we would like our
homes to reflect and be suited-to the changes in our lives--
the increase or decrease in the size of our families,
divorce, retirement, promotions and the ability to pay more
for a house, the schools our children would attend, etc. Yet
because of current law, we cannot sell our principal
residences without living in them again for two years or else
pay a serious tax penalty. Your bill, gratefully, addresses
these problems.
The members of the Uniformed Services and the Foreign
Service have been faced with this problem since the change in
the tax code in 1997. We hope that your provision can become
law soon. If we can be of any assistance, please do not
hesitate to contact me or Ken Nakamura, AFSA's Director of
Congressional Relations at (202) 944-5517 or by e-mail at
[email protected].
Sincerely,
John K. Naland,
President.
[[Page S215]]
____
American Bar Association,
Governmental Affairs Office,
November 7, 2001.
The Hon. John McCain,
Russell Senate Office Building,
Washington, DC.
Dear Senator McCain: On behalf of the American Bar
Association, I would like to commend you for your leadership
in developing a proposal on the issue of the military
homeowners capital gains exemption. Such legislation is
needed to correct an inequity that occurred as a result of
the Taxpayer Relief Act of 1997 (Public Law No. 105-34).
As you know, Section 121 of the Internal Revenue Code
permits a single taxpayer to exclude up to $250,000 of the
capital gains on the sale of a principal residence and
permits a married couple filing jointly to exclude up to
$500,000 on such a sale. Yet in order to qualify for such an
exclusion, a taxpayer must have owned and used the home as a
principal residence for two out of the five years prior to
its sale. Otherwise, a taxpayer must pay taxes on all or a
pro rata share of the capital gains on the sale of the home.
Unfortunately, this provision penalizes service members who
are unable to use a principal residence for two out of the
five years prior to its sale, because they are deployed
overseas or required to live in military housing. The ABA
urges Congress to amend Section 121 of the IRC to either: (1)
treat time spent away from a principal residence while away
from home on official active duty as counting towards the
ownership and use requirement, or (2) suspend the ownership
and use requirement for time spent away from a principal
residence due to official active duty. Earlier this year, the
ABA submitted comments to the Internal Revenue Service on
proposed regulations regarding Section 121. A copy of our
comments is enclosed for your review.
We want to thank you for your plans to rectify the inequity
created for service members by Section 121. We look forward
to working with you to establish a military homeowners
capital gains exemption.
Sincerely,
Robert D. Evans.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the
amendment be set aside.
The PRESIDING OFFICER. Without objection, it is so ordered. The
amendment is set aside.
Amendment No. 2719
Mr. BAUCUS. Mr. President, what is the regular order?
The PRESIDING OFFICER. The time has arrived for the vote with respect
to the amendment of the Senator from Iowa.
Mr. BAUCUS. Is the Chair about to put the question for a vote?
The PRESIDING OFFICER. The Senator is correct.
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I raise a point of order under section
302(f) of the Congressional Budget Act against the pending amendment,
which is No. 2719, for exceeding the spending allocations of the Senate
Committee on Finance.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, pursuant to section 904 of the
Congressional Budget Act of 1974, I move to waive the applicable
sections of the act for purposes of the pending amendment, and I ask
for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The question is on agreeing to the motion. The clerk will call the
roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from Hawaii (Mr. Akaka) and the
Senator from Connecticut (Mr. Dodd) are necessarily absent.
Mr. NICKLES. I announce that the Senator from Montana (Mr. Burns),
the Senator from New Hampshire (Mr. Gregg), and the Senator from Nevada
(Mr. Ensign) are necessarily absent.
I further announce that if present and voting the Senator from
Montana (Mr. Burns) would vote ``no.''
The yeas and nays resulted--yeas 54 nays 41, as follows:
[Rollcall Vote No. 8 Leg.]
YEAS--54
Baucus
Bayh
Biden
Bingaman
Boxer
Breaux
Byrd
Campbell
Cantwell
Carnahan
Carper
Cleland
Clinton
Collins
Corzine
Daschle
Dayton
Dorgan
Durbin
Edwards
Feinstein
Graham
Harkin
Hollings
Hutchinson
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Reed
Reid
Rockefeller
Sarbanes
Schumer
Sessions
Shelby
Snowe
Stabenow
Torricelli
Warner
Wellstone
Wyden
NAYS--41
Allard
Allen
Bennett
Bond
Brownback
Bunning
Chafee
Cochran
Conrad
Craig
Crapo
DeWine
Domenici
Enzi
Feingold
Fitzgerald
Frist
Gramm
Grassley
Hagel
Hatch
Helms
Hutchison
Inhofe
Kyl
Lott
Lugar
McCain
McConnell
Nelson (NE)
Nickles
Roberts
Santorum
Smith (NH)
Smith (OR)
Specter
Stevens
Thomas
Thompson
Thurmond
Voinovich
NOT VOTING--5
Akaka
Burns
Dodd
Ensign
Gregg
The PRESIDING OFFICER (Mr. Edwards). On this vote the yeas are 54,
the nays are 41. Three-fifths of the Senators duly chosen and sworn not
having voted in the affirmative, the motion is rejected.
The point of order is sustained and the amendment falls.
The Senator from Colorado.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, for the information of Members, we are in
the process of arranging a unanimous consent request to have a vote on
or about 4:45 p.m. today on the Allen amendment, and the second would
be on the Baucus amendment.
While we are doing that, 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. REID. I ask unanimous consent the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. I say to my friend from Virginia, if he could start his
remarks, I ask his permission we be allowed to interrupt him to enter
the unanimous consent agreement when that is ready.
Mr. ALLEN. You have my agreement.
The PRESIDING OFFICER. The Senator from Virginia.
Amendment No. 2702
Mr. ALLEN. Mr. President, I wish to speak to my amendment, the
Terrorist Zone Tax Exemption Act, which I believe will be the next
measure on which we will be voting.
Last fall the attack on our country represented the worst of mankind,
but at the same time it demonstrated the best of the American spirit.
While we as a nation are united and resolved to combat terrorism,
unfortunately other things have changed as a result of these attacks.
As my colleagues know, this war on terrorism has changed our definition
of combatants. For terrorism targets not only military personnel and
equipment but innocent men, women, and children at work in office
buildings and, as we have seen, on civilian aircraft. So it is also
with those tasked to respond to these attacks. Under the threat of
terrorism, not only are military personnel tasked to locate and
eradicate potential terrorist threats, but civilian fire, police, and
rescue personnel are charged with maintaining public safety after a
terrorist attack. We read about and heard about the heroic acts of
firefighters, rescue personnel, and police officers--whether at the
Pentagon or at the World Trade Center--who risked their lives with
burning debris, toxic gases and fumes who tried and indeed did save
hundreds if not thousands of lives. And like their military
counterparts, they too are subject to attack and risks themselves.
As my colleagues know, our tax laws recognize that the income of
those brave men and women in military uniforms fighting overseas and
serving in a zone designated as a combat zone is exempt from taxation.
Recognizing that the war on terrorism has sadly changed the way we look
at war, and recognizing that our local and State fire police and rescue
personnel are now pressed into homeland defense, we ought to similarly
change our tax laws to reflect this new reality.
My Amendment would allow the income of those who are working in
designated terrorist attack zones--for example, at the World Trade
Center or at the Pentagon, if so designated by the President--to be
exempt from Federal taxes.
The fiscal implication of this is about $205 a month for the
September attack--a cost of a little over $7 million to the federal
government. And it is retroactive to September 11, although we pray we
will never need to use this again.
[[Page S216]]
It is supported by many groups--from the International Association of
Fire Chiefs, the Fraternal Order of Police with nearly 300,000 members,
the National Association of Police Organizations which represents over
220,000 police officers, the Detectives' Endowment Association which
represents 7,500 City of New York Detectives, and other organizations,
including the Capitol Police Labor Board.
These firefighters and police and rescue personnel are heroes. They
are super heroes. Let us give them this recognition to boost their
morale and show our appreciation to them as they protect us here in our
homeland.
I hope in a bipartisan nature we can work and vote in favor of this
logical, commonsense amendment and I ask for my colleagues' support.
Mr. NICKLES. Mr. President, will the Senator yield for a question
concerning the cleanup at the Pentagon or at the World Trade Center?
They are still cleaning up. Under the Senator's amendment, would that
still be classified as a terrorist center, and, therefore, they would
still be exempt? If the cleanup lasted a year, would the cleanup crews
be exempt from taxation for a year?
Mr. ALLEN. The designation of a terrorist attack zone would be made
by the President. Once you get past the rescue mission, the immediate
response, and when the zone is designated a recovery scene, the tax
exemption ends. The intent is for this to benefit those who rush in
when there is still an opportunity to save a life; those first
responders who themselves are endangered by the initial attack. I would
not imagine that would last for anymore than a month. And again, it is
validated on a monthly basis, like the combat zone tax exemption.
Mr. NICKLES. I thank my colleague.
Mr. REID. Mr. President, I appreciate the Senator from Virginia
rushing through with his presentation. It was very articulate. I
appreciate his recognizing that we are trying to get this agreement
before the vote.
Mr. President, I ask unanimous consent that the time until 4:45 p.m.
today be equally divided with respect to the Allen amendment No. 2702
and the Baucus amendment No. 2718, that no second-degree amendments be
in order to either amendment prior to the vote in relation to each
amendment; that the first vote be in relation to the Allen amendment;
and that regardless of the outcome there be 4 minutes equally divided
prior to the vote in relation to the Baucus amendment.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ALLEN. Mr. President, I ask unanimous consent that Senator Helms
be added as a cosponsor of amendment No. 2702.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALLEN. Mr. President, does the Senator from Montana wish to
discuss this amendment? I only have maybe 30 seconds, and I would be
happy to yield to the Senator from Montana.
Mr. BAUCUS. I thank my good friend. I have looked at the Senator's
amendment. It is a good idea. I support it. There are a few little
wrinkles that I want to look at to make sure the definitions coincide
with the definitions for income taxes excluded for combat zones and
make sure all those declarations are the same and equitable. That is
just a minor matter. We will work that out.
I commend the Senator for offering this amendment. It is a good idea.
Mr. ALLEN. Mr. President, I thank the Senator from Montana, Mr.
Baucus, for his support. I look forward to further discussion. If there
are some amendments that need to be made in the definitions, we have
been working on this for several months, but nevertheless we will
continue to work together on it. I conclude by saying very strongly
that we need to adapt our tax policy and properly and logically provide
similar tax benefits for the fire, rescue, and police personnel who are
serving here in our homeland. This is where these terrorist attacks
have occurred and we all agree that these heroes have responded in the
true spirit of America. Please stand with our heroes, our firefighters,
and police and rescue workers.
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. BAUCUS. Mr. President, we have two amendments pending and at
least two votes at approximately 5:45. We have discussed the amendment
offered by the Senator from Virginia, which I support.
I don't know whether the Senator wishes to discuss the amendment. If
he doesn't, that is fine. Otherwise, I was going to ask my friend from
Oregon, Senator Smith, if he wishes to say a few words before the other
votes that will occur following the vote on the amendment offered by
the Senator from Virginia. That, of course, is up to my good friends
from Virginia and Colorado.
Mr. ALLEN. Mr. President, I would rather make sure there is adequate
discussion on the other votes. I believe there is complete agreement on
my amendment.
I yield my time to the Senator so he may explain his amendment.
Mr. BAUCUS. I haven't heard anybody speak in opposition to the
Senator's amendment. I think he is pretty close to his goal.
Mr. ALLEN. Ok. I had better sit down.
Mr. BAUCUS. Mr. President, I see my friend from Oregon in the
Chamber.
The PRESIDING OFFICER. Who is yielding time?
Mr. BAUCUS. I yield such time as my friend from Oregon would desire.
The PRESIDING OFFICER. The Senator from Oregon.
Amendment No. 2718
Mr. SMITH of Oregon. Mr. President, I thank the Chair and I thank the
chairman of the Finance Committee for yielding time.
I learned as a little boy from my mother that if you at first don't
succeed you should try and try again.
I come to the Chamber to try again on the issue of accelerated
depreciation. I am proud to be joined by Senator Baucus. This is the
Baucus-Smith amendment now. The point is simply to try and bridge the
difference between the two sides on the whole idea of how best to give
a meaningful stimulus to business to take advantage of this accelerated
depreciation, this bonus depreciation over a period of time that on the
one hand will stimulate in a timely way the economy and in another way
will help the States to be able to afford this action.
I believe the Baucus-Smith amendment is the compromise that will
provide real stimulus to the underlying package that is offered by the
majority which, I respectfully say again, is just simply too short a
period of time to be meaningful to our economy.
The point was made that my amendment over 3 years was too much time.
Then surely 2 years is enough. I believe Senator Baucus and I have
provided a compromise that will give business people time sufficient--I
wish it were more--to be able to buy the equipment, do the planning, do
the environmental studies, and make the investments that will allow
employers to call employees back to work.
In addition, we are doing something that is very much needed by the
States. That is, we will provide an increase in the Federal Medical
Assistance Percentage known as FMAP. Most States, mine included, are
struggling with how to continue to provide the resources for Medicaid.
I understand that very well in my own State. Our State has a budget
shortfall that approaches $1 billion. I have been reminded by people in
my State that accelerated or bonus depreciation would only make that
situation worse. I am not unmindful of that, and Senator Baucus and I
have a way in this amendment to fix that, not just for my State but for
every State.
Senator Harkin's amendment was just defeated. I suggest that what
Senator Baucus and I are proposing is in the same spirit of that but
within the realm of financial responsibility. It is the moderate view
that I believe will find over 60 votes in the Senate. I certainly hope
it will.
What this does specifically, the FMAP increase will provide immediate
fiscal relief to States such as Oregon which are increasingly cash
strapped in the current recession as the demand for State social
services rises but State revenues drop.
[[Page S217]]
For example, this provision would bring an additional $97 million to
Oregon in the first year. Depending on certain factors, they may get in
excess of an additional $105 million in the following year, for a 2-
year total of more than $205 million.
I can imagine that my State, as well as the State of the Presiding
Officer, could use that assistance in this time of recession. Again, I
remind both sides that whether it is former Treasury Secretary Robert
Rubin or Chairman Greenspan, they have both said this will be helpful
to stimulate the economy. It doesn't go too far. It is not too long. I
think for business people who are on their toes and trying to make
plans, it will be enough time to have the economic incentives to
improve our Nation's economy.
America, moreover, is hungering for a sense that the Senate can get
something done. Our proposal is that middle ground that allows us to
make progress and to go to the State of the Union tonight well on the
way to passing a stimulus package. There is something for both sides.
But more importantly, there is something for the American people that
provides real health care dollars to people in need in States with
shortfalls and real business stimulus to employers so that the best
social welfare we could possibly foster will be available, and that is
a private sector family wage job.
Again, I believe Senator Baucus and I have come upon the right
formula to make better the underlying proposal and to find the
bipartisan support which will ultimately be essential if we are to get
beyond 60 votes and get something to conference and then to the desk of
the President. The American people deserve that. We should do no less.
I yield back my time to the manager of this bill.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, this is a good example of how we should
pass legislation; that is, working together. Senator Smith from Oregon
and I have come together and crafted an amendment which directly meets
concerns of Senators. We have done it together. Is it perfect in the
minds of everyone on one side of the aisle? No. Is it perfect in the
minds of all Senators on the other side of the aisle? No. But is it
good? Is it basically a good idea? I believe the answer is yes.
Essentially, we are going to provide for bonus depreciation for
capital investment at 30 percent over a period of 2 years. The big
question, I remind the Chair, is, should it be 1 year, 2 years, or 3
years? We have agreed on 30 percent for all intents and purposes.
During private conversation on the floor on both sides of the aisle,
somewhat presumptuously I will say that I heard, I believe, it should
be 2 years. That is what it should be. We debated 3 years. That did not
pass. We, in effect, debated 1 year. It did not quite reach fruition,
but that certainly is not going to pass.
The PRESIDING OFFICER. The time controlled by the majority has
expired.
Mr. BAUCUS. I thank the Chair. Might I ask who controls the remaining
time?
The PRESIDING OFFICER. The Senator from Virginia or his designee.
Mr. GRASSLEY. Mr. President, I grant the Senator from Montana 2 more
minutes.
The PRESIDING OFFICER. The Senator from Colorado.
Mr. ALLARD. Mr. President, I have about 4 minutes to comment on
Senator McCain's amendment. I was giving a speech and I could not be
here when he brought it up. I would like to be able to use that time,
if you don't need all the time. Otherwise, I will wait.
Mr. BAUCUS. That would be fine. I just have 2 minutes. That would be
fine with me.
Mr. ALLARD. I would like to have 4 minutes whenever it works out.
Mr. BAUCUS. Mr. President, again, to remind all Senators, this is a
compromise. It is an effort on the part of Senator Smith of Oregon and
myself to find the proper number of years of bonus depreciation. It is
an effort to find the proper amount of reimbursement to States for lost
Medicaid dollars. All Senators agree this is not only in the ballpark,
it is probably so close to filling up the ballpark that it really
cannot be improved upon a heck of a lot. I think it is a good
amendment.
Further, I remind my colleagues, with the split in this body
basically 50-50, this is the only way we are going to accomplish
anything of consequence. That is, by sitting down and not engaging in
rhetoric and preaching to people through the cameras, making them feel
good, but, rather, working together to pass legislation that makes
people's lives better and significantly better. That is what we are
charged to do.
If you were to ask voters, do you want your Senator to make speeches
just for the sake of making speeches or do you want your Senator to get
something done that really makes sense for us in the State, it may not
be all we want but he has done a pretty good job, clearly the answer is
the latter. They want us to do something that makes sense. That is what
the Senator from Oregon and I are doing.
I strongly urge my colleagues to take a good, strong look at it. It
is a bipartisan amendment. It has bipartisan support. More than that,
it has the support of the people of the country.
I yield back the remainder of my time.
Mr. HATCH. I rise in support of this amendment, recognizing the need
for Congress to undertake immediate corrective measures to help those
who have suffered the adverse effects of the recent economic downturn.
And while I do support this amendment, there are issues associated with
it that are of serious concern, issues which I hope will be addressed
in conference.
As we have heard throughout this debate, most states are experiencing
serious budget shortfalls. In fact, in my own state of Utah, many vital
state programs are slated for reductions this year. I am very concerned
about that situation, and sympathetic to the need to work with the
States to alleviate these concerns where we are able.
But it is also true that the Federal budget is under severe pressure
because of the economic slowdown, and we must be very careful when we
move to authorize what amounts to new spending, especially in an
entitlement program.
Obviously, we must carefully examine our budget constraints and
balance the need to address the economy with the need to restrain the
growth of spending.
But as I have said, I share the States' concern about the budgetary
impact of the economic downturn. Many important programs are being cut-
back, a serious concern to those of us who have worked so hard to weave
a strong safety net.
In fact, the Utah CHIP program is no longer enrolling new children
because it is running out of money. I cannot tell you how disappointed
I am about this situation. Seeing the CHIP program become federal law
in 1997 was probably one of my proudest accomplishments as a U.S.
Senator.
And, as one of the principal authors of CHIP, it has been my hope
that we can expand the program, not scale it back. However, my
discussions with our Governor, Mike Leavitt, have made it perfectly
clear that the State feels it has no alternative, and I respect that
decision, however painful. But, perhaps if we are giving additional
funds to the States to assist with the health care needs of the low
income, those funds would be better used if they were provided to the
CHIP program as well, or instead, since in many cases a CHIP dollar can
go so much further than a Medicaid dollar.
I would also point out that increasing the Federal matching
percentage for Medicaid is only a short-term solution to a long-term
problem. Again, I heartily support efforts to provide greater
assistance to families, especially low-income families, who are feeling
the ill effects of the economic downturn. That being said, I do
question whether expanding this entitlement program is absolutely the
best way to address the health care needs of people who have been hurt
by the economy. There are literally millions of persons who have no
access to health care at all, and their needs must also be factored in
to our overall spending plans.
Let me take a moment to address the FMAP funding formula itself.
The FMAP formula is an attempt to direct Federal resources to the
States based on their populations in need. It is not a perfect formula,
as many of us have widely acknowledged. These structural flaws must be
addressed by
[[Page S218]]
Congress, and I would not like to see action today which would lock
into concrete, in reality or politically, a formula which needs to be
reexamined.
As a related issue, we need to look at the effect of providing a 1\1/
2\-percent across the board FMAP increase to States for a program which
is certain to have a disproportionate impact in the various States
given their differing matching percentages. For example, some States
have a Federal matching percentage which is relatively high, as high as
76 percent. Others have a percentage as low as 50 percent. Obviously, a
1.5 percent increase is a substantially greater proportion of the 24
percent a State with the highest FMAP has to contribute, compared to
1.5 percent of the 50 percent a ``richer'' State must contribute.
The GAO has produced several reports which make recommendations on
how this formula may be improved. Therefore, I believe that it would be
prudent for Congress to carefully review the recommendations of the GAO
before taking any final actions affecting FMAP policy.
In fact, I believe it might be prudent for the Finance Committee to
hold a hearing on this important issue, and I would hope that the
chairman might schedule one in the near future.
In addition, while I have not seen any figures on areas which are the
most hard hit by the recession, I want to make certain that the areas
in which we are targeting the greatest assistance under this amendment
are the areas of greatest need during the downturn. Because of the way
the formula is structured, these additional FMAP dollars may not be
targeted to those whose access to health care was affected by the
recession and the events of September 11.
Finally, it is my hope that this amendment does not follow the long
tradition whereby Congress authorizes an extension for an entitlement
program which for all intents and purposes becomes permanent. I
certainly support the intention of this amendment, which is to provide
temporary assistance to those who have suffered great hardships due to
the recession and the terrorist attacks of last September. However,
making these FMAP increases permanent would be a terrible mistake,
especially since I believe that we would be, in essence, taking away
dollars from other deserving Federal programs.
The PRESIDING OFFICER. The Senator from Colorado is recognized.
amendment no. 2700
Mr. ALLARD. Mr. President, I am pleased to join Senator John McCain
in sponsoring amendment No. 2700, the military homeowners tax equity
amendment, to H.R. 622. This amendment will correct a serious,
inadvertent oversight in the Taxpayer Relief Act of 1997 and provide
much needed tax equity to our members of the uniformed services and the
Foreign Service. The content of this amendment is the exact language as
S. 1678, which Senator McCain and I introduced last year.
The Taxpayer Relief Act of 1997 exempted up to $250,000-$500,000 per
couple in capital gains from federal income taxes for homes occupied as
a principal residence for at least 2 of the last 5 years.
Unfortunately, Uniformed and Foreign Service members may have
difficulty meeting the 2 year requirement. Service members are directed
to move to meet the needs of the U.S. Government and may be directed to
move prior to owning a residence for 2 full years. Many service members
keep their homes while reassigned overseas or elsewhere in hopes of
returning to their residence. On occasions when this proves impossible,
the members are subjected to substantial tax liabilities.
Prior to the 1997 law, service members who were assigned overseas or
otherwise away from their principal residence on military orders for an
extended period of time had a special provision that allowed them to
``rollover'' capital gains. The 1997 Taxpayer Relief Act made many
improvements to the tax code by replacing the capital gain ``rollover''
rules with the tax exclusion, but failed to provide for those on
military orders. This amendment will correct this oversight by
providing that absences from the principal residence due to serving on
a qualified official duty as a member of a uniformed service or the
Foreign Service be treated as using the residence in determining the
exclusion of gain from the sale of such residence.
In 1999 both the House and Senate passed the Taxpayer Refund and
Relief Act which included language to correct this oversight, but that
act was vetoed by then-President Clinton.
S. 1678, which as I stated earlier mirrors our amendment, has support
from all four service chiefs, the Chairman of the Joint Chiefs of
Staff, the 31 organization members of the Military Coalition, the
American Bar Association, the American Foreign Service Association.
Our service men and women face enough challenges today. They should
not have to face additional tax liabilities in return for serving their
country.
Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. Without objection, the clerk will call the
roll.
The assistant legislative clerk proceeded to call the roll.
Mr. ALLEN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Vote on Amendment No. 2702
Mr. ALLEN. Mr. President, I yield back whatever time remains so we
can proceed with the vote on amendment No. 2702.
The PRESIDING OFFICER. The question is on agreeing to amendment No.
2702. The yeas and nays have been ordered. The clerk will call the
roll.
The assistant legislative clerk called the roll.
Mr. REID. I announce that the Senator from Hawaii (Mr. Akaka), the
Senator from Connecticut (Mr. Dodd), and the Senator from New Jersey
(Mr. Torricelli,) are necessarily absent.
Mr. NICKLES. I announce that the Senator from New Hampshire (Mr.
Gregg), the Senator from Nevada (Mr. Ensign), and the Senator from
Montana (Mr. Burns) are necessarily absent.
I further announce that if present and voting the Senator from
Montana (Mr. Burns) would vote ``yea.''
The PRESIDING OFFICER (Mr. Dayton). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 92, nays 2, as follows:
[Rollcall Vote No. 9 Leg.]
YEAS--92
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Byrd
Campbell
Cantwell
Carnahan
Carper
Cleland
Clinton
Cochran
Collins
Conrad
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Domenici
Dorgan
Durbin
Edwards
Enzi
Feingold
Feinstein
Fitzgerald
Frist
Graham
Gramm
Grassley
Hagel
Harkin
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Kyl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Nickles
Reed
Reid
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Thomas
Thurmond
Voinovich
Warner
Wellstone
Wyden
NAYS--2
Chafee
Thompson
NOT VOTING--6
Akaka
Burns
Dodd
Ensign
Gregg
Torricelli
The amendment (No. 2702) was agreed to.
Mr. ALLEN. Mr. President, I thank my colleagues for their support of
the amendment. I ask unanimous consent that Senators Collins, Helms,
and John Warner be added as cosponsors.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 2718
The PRESIDING OFFICER. There are now 4 minutes equally divided prior
to a vote in relation to amendment No. 2718. Who yields time? The
Senator from North Dakota.
Mr. CONRAD. Mr. President, could I have order in the Chamber?
The PRESIDING OFFICER. The Senate will be in order. The Senator from
North Dakota.
Mr. CONRAD. Mr. President, I support bonus depreciation. I support
Medicaid assistance to the States. But I do
[[Page S219]]
not support 2 years of bonus depreciation. I do not support 2 years of
additional spending on Medicaid for the States.
The reason is very simple. On the question of bonus depreciation, the
whole purpose of this package is to encourage economic recovery,
additional economic activity now. A 2-year provision reduces the
stimulus, reduces the incentive to act now. That is not only my
opinion, that is the opinion of the Congressional Budget Office that
examined the various options before us and said: Don't do multiple
years; you reduce the incentive to act now. This is the time we need
additional economic activity.
Second, the history of fiscal stimulus is always that we have acted
too late. We are on the brink of doing that again. A 2-year provision
falls right into that trap.
The cost of this provision is $45 billion this year; $37 billion next
year. That is digging the hole deeper when we have just been informed
by the Congressional Budget Office that every penny of these resources
will come out of the Social Security trust fund. For that reason, I
will raise a budget point of order against this provision.
The PRESIDING OFFICER. Who yields time? The Senator from Montana.
Mr. BAUCUS. Mr. President, on behalf of myself and also Senator Smith
of Oregon, let me make a couple of quick points.
No. 1, we know our country needs a boost, a shot in the arm. It is
not totally clear, but it is far better to provide a little insurance
because the economy might go south in the next couple of months or
years--more than it has now. Various companies are going bankrupt. We
all know about Enron, Kmart, and there will be other companies down the
road. Many people are being laid off, particularly in the financial
services industry, which we are going to find out about in February
because they have 2- or 3-month contracts and they will be laid off a
lot later. This is very important.
Second, many States are losing revenue because their economies are
down. They will also lose more revenue as a consequence of the 2-year
bonus depreciation. It is only proper with the passage of the Medicaid
reimbursement amendment States are made whole so they do not have to
cut Medicaid payments, so they do not have to cut payments to
hospitals, to providers.
This amendment will allow States to refrain from making those cuts to
doctors, to hospitals, other providers, and to Medicaid beneficiaries,
and also prevent them from having to otherwise cut their budgets.
At the same time, we get a 2-year shot in the arm with bonus
depreciation. It is a very modest provision. We all know bonus
depreciation should be somewhere between 1 year and 3 years. This is
where we all know it makes the most sense, 2 years. It should
definitely be enacted.
I yield the remainder of my time to my friend from Oregon.
The PRESIDING OFFICER. The Senator has 11 seconds.
Mr. SMITH of Oregon. I am proud to cosponsor this legislation. If you
want the middle ground, we are talking about it right now. This
actually does stimulate the economy; it is insurance.
The chair of the Budget Committee, my friend, clearly is concerned
about the budget. But if you want to help the budget get back into
surplus, let's get our economy going. That is the most sure way to make
this happen. What Senator Baucus and I have done is make sure that we
do not leave the States high and dry.
The PRESIDING OFFICER. The time of the Senator is exhausted; 22
seconds remain.
Mr. NICKLES. I yield my colleague the remainder of my time, the 22
seconds in opposition to the amendment.
Mr. SMITH of Oregon. My last point was you can make these arguments
against any expenditure. The point is, we can't leave the States high
and dry as we try to stimulate the economy.
This is about real people needing jobs and health care. It is a win-
win for Republicans and for Democrats. I urge the overwhelming passage
of the amendment.
Mr. NICKLES. I compliment my colleague for making the point of order,
and I wish to join him in that point.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, Senator Daschle has asked me to announce to
the Membership that this will be the last vote of the evening prior to
the State of the Union Message.
The leader has indicated there will be votes next Monday.
Mr. CONRAD. Mr. President, I raise a point of order that the pending
amendment violates section 311(a)(2)(B) of the Congressional Budget Act
of 1974, and I ask for the yeas and nays.
Mr. BAUCUS. Mr. President, on behalf of myself and Senator Smith of
Oregon, pursuant to section 904 of the Congressional Budget Office Act
of 1974, I move to waive the applicable sections of the act for the
purposes of the pending amendment, and 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 motion. The clerk will call the
the roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from Hawaii (Mr. Akaka) and the
Senator from Connecticut (Mr. Dodd) are necessarily absent.
Mr. NICKLES. I announce that the Senator from New Hampshire (Mr.
Gregg), the Senator from Nevada (Mr. Ensign), and the Senator from
Nebraska (Mr. Hagel) and are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The yeas and nays resulted as follows--yeas 62, nays 33.
[Rollcall Vote No. 10 Leg.]
YEAS--62
Allen
Baucus
Bayh
Bennett
Biden
Breaux
Brownback
Burns
Cantwell
Carnahan
Carper
Cleland
Clinton
Cochran
Collins
Corzine
Craig
Crapo
Daschle
DeWine
Domenici
Durbin
Edwards
Feinstein
Fitzgerald
Grassley
Harkin
Hatch
Hollings
Hutchinson
Hutchison
Inouye
Jeffords
Johnson
Kerry
Kohl
Landrieu
Lincoln
Lugar
McCain
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Reid
Roberts
Rockefeller
Schumer
Sessions
Shelby
Smith (OR)
Snowe
Specter
Stabenow
Stevens
Torricelli
Voinovich
Warner
Wellstone
Wyden
NAYS--33
Allard
Bingaman
Bond
Boxer
Bunning
Byrd
Campbell
Chafee
Conrad
Dayton
Dorgan
Enzi
Feingold
Frist
Graham
Gramm
Helms
Inhofe
Kennedy
Kyl
Leahy
Levin
Lieberman
Lott
McConnell
Nickles
Reed
Santorum
Sarbanes
Smith (NH)
Thomas
Thompson
Thurmond
NOT VOTING--5
Akaka
Dodd
Ensign
Gregg
Hagel
The PRESIDING OFFICER. On this vote, the yeas are 62, the nays are
33. Three-fifths of the Senators duly chosen and sworn having voted in
the affirmative, the motion is agreed to. The point of order falls.
The question is on agreeing to amendment No. 2718, as modified.
The amendment (No. 2718), as modified, was agreed to.
Mr. BAUCUS. Mr. President, 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.
The PRESIDING OFFICER. The Senator from South Carolina.
____________________