[Congressional Record Volume 148, Number 106 (Tuesday, July 30, 2002)]
[Senate]
[Pages S7509-S7514]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ONE-YEAR ANNIVERSARY OF BIPARTISAN TAX RELIEF
Mr. GRASSLEY. Madam President I rise today to discuss the one year
anniversary of the bipartisan tax relief package. On June 7, 2001,
President Bush signed the legislation. On Friday, June 7 of this year,
the President marked the first anniversary of that event in Des Moines,
Iowa. I was pleased to join the President for that anniversary
celebration.
One year ago this week, the Treasury Department started sending out
rebate checks to every American taxpayer. I ask unanimous consent to
have printed in the Record an announcement from the Treasury Department
dated July 26, 2001.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Office of Public Affairs]
Treasury To Mail Out 8.1 Million Checks On Friday
(July 26, 2001)
Tomorrow the Treasury Department will send out 8.1 million
advance payment checks to taxpayers for more than $3.4
billion in tax relief. These checks will be sent to taxpayers
whose last two digits of their Social Security numbers are
10-19.
Week Two (July 27) Social Security Numbers 10-19
Number of Checks 8.1 million
Amount of Relief $3.4 billion
Week One (July 20) Social Security Numbers 00-09
Number of Checks 7.9 million
Amount of Relief $3.3 billion
The Treasury Department will announce every week the number
of checks that are being mailed out for that week, and the
amount of tax relief that is being sent to taxpayers. Checks
will be mailed over a ten-week period, according to the last
two digits of the taxpayers Social Security number. Notices
from the Internal Revenue Service that tells taxpayers the
amount of their check and when they should expect it have
been mailed. Single taxpayers will get a check up to $300,
head of household up to $500 and married couples filing
jointly will get up to $600.
Because the Social Security number determines when checks
are mailed, taxpayers may receive their checks at different
times than their neighbors or other family members. On a
joint return, the first number listed will set the mailout
time.
------------------------------------------------------------------------
If the last two digits of your Social You should receive your
Security number are check the week of
------------------------------------------------------------------------
00-09..................................... July 23.
10-19..................................... July 30.
20-29..................................... August 6.
30-39..................................... August 13.
40-49..................................... August 20.
50-59..................................... August 27.
60-69..................................... September 3.
70-79..................................... September 10.
80-89..................................... September 17.
90-99..................................... September 24.
------------------------------------------------------------------------
Mr. GRASSLEY. Those checks represented the first broad-based tax
relief in nearly a generation. Generally, single taxpayers got a $300
check and married couples got a $600 check.
What I would like to do today is first put the tax cut in historical
context. Second, I would like to set the record straight in terms of
the progressivity of the tax relief and its budget effects. Finally, I
would like to illustrate what the tax relief legislation means in terms
of typical families across America.
I am going to use a series of charts as I move through the
discussion.
Let's start with historical context. In the last 20 years, there have
been several pieces of major tax legislation. When I use the term
major, I am referring to net tax hikes or net tax cuts in the
neighborhood of $100 billion or more.
In the last generation, frankly, the American taxpayer has come out
on the short end of the deal. By and large, the tax-and-spend
Washington crowd prevailed. There have been four major tax increase
bills. There have been three major tax cut bills, with one of those,
the 1997 tax relief package, barely breaking into the major category.
Let's take a look at the tax increase bills first. There were No. 1,
``TEFRA'' in 1982, No. 2, ``DEFRA'' in 1984, No. 3, ``OBRA'' in 1990,
and, as then Finance Chairman Pat Moynihan said, No. 4, the ``world
record tax increase'' of President Clinton's 1993 tax package. Senator
Moynihan's description was verified by a Joint Committee on Taxation
estimate. It showed the 1993 tax increase raised taxes by over $1
trillion.
In the same generation, taxpayers have received net tax cuts three
times. The three events occurred in 1981, in 1997, and last year. In
1981, the Reagan tax cuts brought down the top rate of 70 percent to 50
percent. In 1997, modest bipartisan tax relief, had, as its
centerpiece, the $500 per child tax credit. Of course, last year, all
taxpayers received a tax relief.
When you look over the last generation, the bipartisan tax relief of
last year, in effect, helped tip the balance back a little bit toward
the American taxpayer. I say a little bit, because, by any reckoning,
even when fully in effect, last year's bill still leaves the balance
toward higher taxes and more government. More on that in a minute.
For another point of historical context, take a look back at the
fundamental tax reform of 1986. You will recall that effort was a grand
compromise between liberals, led by Congressman Rostenkowski, and
conservatives, led by President Reagan. We came up with a revenue
neutral package by broadening the tax base by shutting down tax
shelters. The revenue raised was used to create two rates--15 percent
and 28 percent. In addition, millions of low income families ceased
paying income tax.
[[Page S7510]]
During the tax reform debate, today's House Democratic Leader,
Congressman Gephardt, pursued a tax reform plan with former Senator
Bradley. The Bradley-Gephardt plan contained three rates of tax. The
three rates were 35 percent, 25 percent, and 15 percent. Former Senator
Mitchell, who would become the Democratic Leader and a great champion
of the liberal wing of the Democratic Caucus, supported a top rate of
35 percent as well. Indeed, the House, at that time controlled by
Democrats, passed a tax reform bill with a top rate of 35 percent.
So, at the watershed event of 1986, the leaders of the Democratic
Caucuses, said individual income tax rates should not exceed 35
percent. As everyone knows, 35 percent is the top rate when the
bipartisan tax relief package is in full effect in 2006. I guess I find
it a bit ironic that today the Democratic Leadership says individual
tax rates must be above 35 percent.
It makes you wonder why today's Democratic Leadership, in historical
context, is so fixated on higher taxes. Why is Congressman Gephardt,
the House Democratic Leader, insisting on tax rates at higher levels
than his 1986 era plan? Why is Senator Daschle, today's leader of the
Democratic Caucus, insisting on tax rates at higher levels than his
predecessor, Senator Mitchell?
Isn't 35 percent of a person's income enough of a contribution for
their share of the burden of the Federal Government?
That is where the Democratic Leaders were during tax reform. That is
where the bipartisan tax relief plan leaves us when fully in effect in
2006. Unfortunately, that's not where the Democratic Leaders are today.
The question of why 35 percent isn't enough leads in the second part
of my discussion. What I would like to do is set the record straight on
the progressivity and budget effects of the bipartisan tax relief plan.
It seems to me that the Democratic leadership has moved its tax
reform target away from tax relief for a very simple reason. The reason
is to provide resources to grow the Federal Government by increasing
spending.
It is part of a larger of agenda of moving a society, America the
engine of capitalism, to look more like European socialism. It means
more Government and less individual responsibility. It means less
reward for work and more money from the pockets of working people for
the Federal Government. It means opportunity defined less by a dynamic
market and more by political criteria.
Now, a lot of inaccurate information has been spread about the
bipartisan tax relief package. At the head of this campaign, is the
Democratic Leadership. Perhaps unwittingly, perhaps by design, much of
the media has worked hand in glove with this partisan campaign.
The misinformation comes forward in three bogus assertions. The first
incorrect assertion is that the bipartisan tax relief was a partisan
Republican product. The second is that the bipartisan tax relief
package is the source of our current budget problems. The third
incorrect assertion is that the tax relief favored the wealthy over low
and middle income taxpayers.
I would like to turn to the first incorrect assertion. Often we hear
the phrase Republican tax cut or partisan tax cut. In fact, the tax cut
was bipartisan. Twelve Democratic Senators voted for the conference
report. Senator Jeffords also voted for the conference report. That is
over one-fourth of the Democratic Caucus.
The tax relief legislation was bipartisan by design. In a Senate
divided down the middle, the tax relief had to be bipartisan to pass.
There was no other way.
Democratic members of the Finance Committee played a key role in
crafting the bill. LEd by our current Chairman, Max Baucus, they
insisted on a bill that reflected their priorities. Senators Breaux,
Torricelli, Lincoln, all contributed to the formation of this bill.
Republican moderates like Senator Snowe also played a key role. Without
these Senator's input and support, we would not have the tax relief in
place.
Anyone who characterizes the tax relief as partisan is flat out
wrong.
I would like to move on the second incorrect assertion. How many
times have we heard on this floor or seen written in the media the
charge that the bipartisan tax relief caused the current and projected
deficits. If I have a dollar for every time I've heard or read this
point, I could put the budget in balance.
Cold hard numbers tell a different story. Cold hard numbers from the
Congressional Budget Office, the Office of Management and Budget, and
private sector sources reveal the truth.
Here is what the numbers say. You can check it out on the CBO
website.
According to CBO's January baseline, for the current fiscal year, the
tax cut represents barely 14% of the total change in the budget since
last year. For instance, for the same period, increased appropriations
outranked the tax cut by $6 billion. So, spending above baseline,
together with lower projected revenues, accounted for 89 percent of the
change in the budget picture. Let me repeat that. Bipartisan tax relief
was a minimal, 11 percent factor, in the change in the surplus.
Over the long-term, the tax cut accounts for 45 percent of the change
in the budget picture. Stated another way, the 10 year surplus declined
from $5.6 trillion to $1.6 trillion. Of that $4.0 trillion change, the
tax cut represented about $1.7 trillion of the decline. That is less
than one-half of the change. Let me repeat that for our friends in the
Democratic Leadership and their allies in the media. The tax relief
package accounts for less than 45 percent of the decline in the
surplus.
The second incorrect assertion, that the tax cut ate the surplus, is
incorrect, according to CBO.
I would like to turn to the third incorrect assertion about the
bipartisan tax relief package. That assertion is that the tax relief
package was a tax cut only for the wealthiest Americans.
How many times have we heard the statistic that 40 percent of the
benefits of the tax cut went to the top 1 percent of taxpayers?
Where did the statistic come from? Did it come from the non-partisan
Joint committee on Taxation? The answer is no. The statistic cited by
the media and the Democratic Leadership came from the liberal think
tank known as the Center on Budget Policy and Priorities. How do they
get their numbers? Here's an example. Let us talk about how they
distribute the benefits of the death tax. The liberal think tank
assumes that the person benefitting from death tax relief is the dead
person. Imagine that. Only in Washington, D.C. do they assume you can
take the benefit of tax relief with you to the grave.
It takes these kinds of distortions in methodology to get the
conclusion the liberal think tank wants. That's why our friends in the
Democratic Leadership rely on the Center for Budget Policy and
Priorities. Unfortunately, some in the media accept these statistics at
face value.
Once again, facts can be ugly things for harsh critics of the
bipartisan tax relief package. According to the Joint Committee on
Taxation, Congress' official non-partisan scorekeeper, the tax code is
more progressive with the tax relief package. Let me repeat that fact.
Joint Tax, not a liberal or conservative think tank, says the
bipartisan tax relief package made the Tax Code more progressive.
I ask unanimous consent to place in the Record a distribution
analysis, prepared by Joint Tax.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[[Page S7511]]
DISTRIBUTIONAL EFFECTS OF THE CONFERENCE AGREEMENT FOR H.R. 1836\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change in Federal taxes Federal taxes \3\ under Federal taxes\3\ under Effective tax rate\4\
\3\ present law proposal -------------------------
Income category\2\ ------------------------------------------------------------------------------ Present law Proposal
Millions Percent Billions Percent Billions Percent (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------CALENDAR YEAR 2001-------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -$75 -1.0 $7 0.4 $7 0.4 8.7 8.6
10,000 to 20,000................................ -2,989 -11.5 26 1.5 23 1.4 7.5 6.7
20,000 to 30,000................................ -5,790 -9.4 62 3.5 56 3.3 13.4 12.2
30,000 to 40,000................................ -5,674 -6.4 89 5.1 83 4.9 16.1 15.1
40,000 to 50,000................................ -5,490 -5.4 102 5.9 97 5.7 17.4 16.4
50,000 to 75,000................................ -11,546 -4.5 256 14.6 244 14.4 19.1 18.3
75,000 to 100,000............................... -8,488 -3.5 244 13.9 235 13.9 21.7 21.0
100,000 to 200,000.............................. -10,488 -2.6 408 23.3 397 23.5 24.2 23.6
200,000 and over................................ -6,997 -1.3 555 31.7 548 32.4 27.8 27.4
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -57,536 -3.3 1,748 100.0 1,690 100.0 21.4 20.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -75 -1.0 7 0.4 7 0.4 9.2 9.1
10,000 to 20,000................................ -3,596 -13.3 27 1.5 23 1.3 7.6 6.6
20,000 to 30,000................................ -7,124 -11.3 63 3.4 56 3.2 13.5 12.0
30,000 to 40,000................................ -6,849 -7.6 91 4.9 84 4.8 16.1 14.8
40,000 to 50,000................................ -6,198 -5.8 106 5.8 100 5.7 17.5 16.5
50,000 to 75,000................................ -13,251 -5.0 267 14.5 254 14.4 19.0 18.0
75,000 to 100,000............................... -10,227 -4.0 255 13.9 245 13.9 21.7 20.8
100,000 to 200,000.............................. -14,416 -3.3 442 24.1 427 24.3 24.2 23.4
200,000 and over................................ -16,557 -2.9 578 31.5 562 32.0 27.9 27.1
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -78,294 -4.3 1,836 100.0 1,758 100.0 21.5 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -83 -1.1 8 0.4 8 0.4 9.7 9.6
10,000 to 20,000................................ -3,516 -12.9 27 1.4 24 1.3 7.6 6.6
20,000 to 30,000................................ -7,135 -11.0 65 3.3 58 3.1 13.6 12.1
30,000 to 40,000................................ -6,946 -7.5 93 4.8 86 4.6 16.0 14.8
40,000 to 50,000................................ -6,155 -5.7 108 5.6 101 5.5 17.4 16.4
50,000 to 75,000................................ -13,554 -4.9 279 14.4 266 14.3 18.9 18.0
75,000 to 100,000............................... -10,553 -4.0 265 13.7 255 13.8 21.7 20.8
100,000 to 200,000.............................. -15,487 -3.2 479 24.8 464 25.1 24.2 23.4
200,000 and over................................ -17,453 -2.9 609 31.5 591 31.9 28.1 27.3
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -80,882 -4.2 1,933 100.0 1,852 100.0 21.5 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -69 -0.9 8 0.4 8 0.4 10.0 9.9
10,000 to 20,000................................ -3,429 -12.6 27 1.3 24 1.2 7.6 6.6
20,000 to 30,000................................ -7,121 -10.8 66 3.3 59 3.1 13.6 12.2
30,000 to 40,000................................ -6,964 -7.3 96 4.7 89 4.6 16.0 14.8
40,000 to 50,000................................ -6,320 -5.8 110 5.4 103 5.3 17.4 16.4
50,000 to 75,000................................ -15,049 -5.2 288 14.2 273 14.2 18.7 17.8
75,000 to 100,000............................... -12,913 -4.6 279 13.8 266 13.8 21.5 20.5
100,000 to 200,000.............................. -22,095 -4.3 512 25.2 490 25.3 24.1 23.0
200,000 and over................................ -21.671 -3.4 642 31.6 620 32.1 28.2 27.3
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -95,630 -4.7 2,028 100.0 1,932 100.0 21.6 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -76 -1.0 8 0.4 8 0.4 10.1 10.0
10,000 to 20,000................................ -3,867 -14.0 28 1.3 24 1.2 7.6 6.5
20,000 to 30,000................................ -7,937 -11.6 68 3.2 60 3.0 13.7 12.1
30,000 to 40,000................................ -7,720 -7.9 98 4.6 90 4.4 16.0 14.7
40,000 to 50,000................................ -6,945 -6.2 112 5.3 105 5.2 17.2 16.2
50,000 to 75,000................................ -16,630 -5.5 303 14.2 286 14.1 18.7 17.6
75,000 to 100,000............................... -14,709 -5.1 287 13.5 273 13.5 21.4 20.3
100,000 to 200,000.............................. -24,654 -4.5 547 25.7 522 25.8 24.0 22.9
200,000 and over................................ -21,182 -3.1 678 31.9 657 32.4 28.3 27.4
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -103,720 -4.9 2,129 100.0 2,025 100.0 21.6 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -76 -0.9 8 0.4 8 0.4 10.4 10.3
10,000 to 20,000................................ -3,789 -13.6 28 1.2 24 1.1 7.6 6.6
20,000 to 30,000................................ -7,853 -11.4 69 3.1 61 2.9 13.7 12.2
30,000 to 40,000................................ -7,839 -7.9 99 4.4 91 4.4 16.0 14.7
40,000 to 50,000................................ -7,570 -6.5 116 5.2 108 5.2 17.2 16.0
50,000 to 75,000................................ -18,755 -6.0 313 14.0 294 14.0 18.6 17.5
75,000 to 100,000............................... -17,212 -5.8 297 13.3 280 13.3 21.3 20.0
100,000 to 200,000.............................. -30,208 -5.1 588 26.3 558 26.6 23.9 22.7
200,000 and over................................ -44,177 -6.1 719 32.1 675 32.1 28.3 26.6
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -137,476 -6.1 2,238 100.0 2,100 100.0 21.7 20.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes provisions affecting the child credit, individual marginal rates, a 10% bracket, limitation of itemized deductions, the personal exemption
phaseout, the standard deduction, 15% bracket and EIC for married couples, deductible IRAs, and the AMT.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus: [1] tax-exempt interest, [2] employer
contributions for health plans and life insurance, [3] employer share of FICA tax, [4] worker's compensation, [5] nontaxable Social Security benefits,
[6] insurance value of Medicare benefits, [7] alternative minimum tax preference items, and [8] excluded income of U.S. citizens living abroad.
Categories are measured at 2001 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of the EIC), employment tax (attributed to employees), and excise
taxes (attributed to consumers). Corporate income tax and estate and gift taxes are not included due to uncertainty concerning the incidence of these
taxes. Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis. Does not include indirect
effects.
\4\ The effective tax rate is equal to Federal taxes described in footnote (3) divided by: income described in footnote (2) plus additional income
attributable to the proposal.
Source: Joint Committee on Taxation. Detail may not add to total due to rounding.
TAX CODE BECAME MORE PROGRESSIVE--1979-2000
[In percent]
------------------------------------------------------------------------
Income category 1979 2000 Change
------------------------------------------------------------------------
$0-$10,000............................. 0.6 0.4 -0.2
$10,000-$20,000........................ 2.3 1.5 -0.8
$20,000-$30,000........................ 5.4 3.6 -1.8
$30,000-$40,000........................ 7.8 5.1 -2.7
$40,000-$50,000........................ 10.2 6.4 -3.8
$50,000-$75,000........................ 24.6 16.8 -7.8
$75,000-$100,000....................... 14.8 13.0 -1.8
$100,000-$150,000...................... 12.5 14.4 -1.9
$150,000-$200,000...................... 5.1 6.9 -1.8
$200,000-Over.......................... 16.7 32.0 -15.3
--------------------------------
Total............................ 100 100 .........
------------------------------------------------------------------------
Source: CBO, October 2001, Table H-1b.
BIPARTISAN TAX RELIEF MADE TAX CODE MORE PROGRESSIVE--2001
[In percent]
------------------------------------------------------------------------
2006 w/o 2006 w/
Income category tax cut tax cut Change
------------------------------------------------------------------------
$0-$10,000............................. 0.4 0.4 0.0
$10,000-$20,000........................ 1.2 1.1 -0.1
$20,000-$30,000........................ 3.1 2.9 -0.2
$30,000-$40,000........................ 4.4 4.4 0.0
$40,000-$50,000........................ 5.2 5.2 0.0
[[Page S7512]]
$50,000-$75,000........................ 14.0 14.0 0.0
$75,000-$100,000....................... 13.3 13.3 0.0
$100,000-$200,000...................... 26.3 26.6 0.3
$200,000-Over.......................... 32.1 32.1 0.0
--------------------------------
Total............................ 100 100 .........
------------------------------------------------------------------------
Source: JCT, May 2001, JCX 52-01.
Mr. GRASSLEY. Madam President, some might ask how does Joint Tax
conclude that the bipartisan tax relief made the tax code more
progressive.
The answer is that the bipartisan tax relief returns to taxpayers, on
a progressive basis, a small portion of the record level of Federal
taxes.
Take a look at this chart. It shows that the largest tax cut went to
taxpayers in the lower and middle income brackets. For instance,
taxpayers with incomes between $10,000 and $20,000, will see their
taxes reduced by almost 14 percent when the tax cut is fully in effect.
Taxpayers with over $200,000 will see their taxes reduced by barely 6
percent.
The Democratic Leadership and many in the media, will focus, not on
the burden taxpayers bear, but on the benefits of the tax cut. In other
words, they will try to ignore the progressive nature of our current
system and use isolated examples. For instance, they will say that a
taxpayer at $50,000 of income gets more of a tax cut than a taxpayer at
$10,000 of income. In fact, a taxpayer at $50,000 of income, pays
considerably more tax than a taxpayer at $10,000 of income. Comparing
two different taxpayers' tax relief benefits without looking at the
burden is comparing apples to oranges.
Let us compare apples to apples. That is, the burden born by groups
of taxpayers before and after the tax relief bill.
What I showed you before was the change in the tax burden for
different categories of taxpayers. This chart allows you to see how
progressive the current system is and how the tax relief bill made the
tax system even more progressive. Keep in mind that this table includes
all taxes. That's income taxes, payroll taxes, excise taxes, and
corporate income taxes.
Let us compare the same two groups I talked about before. Taxpayers
with incomes between $10,000 and $20,000 bore 1.2 percent of the
Federal tax burden before the tax relief bill and 1.1 percent after the
tax relief bill. Taxpayers with over $200,000 maintained their burden,
32.1 percent, before and after the tax relief bill.
You can see the bipartisan tax relief bill lightened everyone's
Federal tax burden but did it in a progressive way.
What the tax relief bill aimed to do was send back to the American
people a portion of the record-high levels of taxation. But the
bipartisan tax relief bill sent the money back in a progressive manner.
Let us take a look at where we were early last year. You'll see the
Federal Government was taking in record-high levels of individual
income taxes. For instance in 2000, Federal taxes were taking 20.5% of
GDP and individual income taxes were taking 10.2 percent of GDP.
According to CBO, those upward record-high level trends were going to
continue throughout this decade. In fact, even when fully in effect,
the bipartisan tax relief bill leaves both Federal and individual
income taxes at near record levels.
Chairman Greenspan gave us a green light to provide broad-based tax
relief because he foresaw a long-term economic problem. The record
level of taxation, if left on track, would have been a drag on economic
growth.
As a matter of fact, there is substantial agreement that the tax cut
came at just the right time. The rebate checks and other relief arrived
just as the recession started to hit home. According to the Department
of Commerce, the tax relief boosted personal incomes by the highest
amount in almost 10 years.
You can now see that those three widespread incorrect assertions
about the bipartisan tax relief package have been countered. One, the
tax relief package was bipartisan; not partisan as its critics claim.
Two, the tax relief package did not cause either the short-term or
long-term budget problems we face. Three, the tax relief package
provides broad-based relief in a progressive fashion.
I would like to turn to the final part of my discussion. This is the
most important part because it describes what the tax relief package
means to typical taxpayers.
We took as a starting point President Bush's efforts to provide
income tax relief to all Americans. This legislation includes the four
main elements of President Bush's goals of providing tax relief to
working families.
These goals are to: No. 1, provide tax relief for working families
through reducing marginal rates; No. 2, reduce the marriage penalty;
No. 3, expand the child tax credit; and No. 4, eliminate death taxes.
Let's look at each one.
First, this legislation reduced marginal rates at all levels and
creates the new 10 percent level proposed by the President. We also
began to address the hidden marginal rate increases such as PEPS and
PEASE that complicate the Code.
The 10 percent bracket means a tax cut for every American taxpayer.
It was the source for the rebate checks that every taxpayer received
last year. That's $600 for every family and $300 for every single
person.
America is a society of opportunity. Over 60 percent of all families
will at one time or another be in the top fifth of income in this
country. A man will make more at 55, after 30 years of hard work, than
he did at 25. A family should not face a crushing marginal rate tax
burden when they finally get a good paycheck for a few years as a
reward for years of hard work.
For those that have worked hard over the years, there is some
marginal tax rate relief. Here, I am referring to small business. Small
business generates 80 percent of the new jobs in this country. Small
business owners receive 80 percent of the benefits of the marginal rate
reductions. When fully phased in, the marginal rate paid by a
successful small business will be the same as that paid by General
Motors. I don't know how Senators can argue that 35 percent is an
appropriate top rate for General Motors, but too low for Joe's Garage.
While I am on the topic of marginal rate relief one political
development continues to surprise me. Those on the other side most
opposed to the marginal rate relief come from the higher income states,
the so-called high-tax or ``blue states'' that tend to be on each coast
and around the Western Great Lakes. Taypayers in those states, in
particular, bear the brunt of higher marginal rates.
It continues to surprise me that Senators from those high-tax paying
states attempt to obstruct tax relief that is most meaningful to their
constituents.
Federal taxes squeeze harder in those states where incomes are higher
and the cost of living is higher. To this day, I do not understand the
virgourous opposition these members have to relieving the high tax
burden their constituents face. Instead, members from these states tend
to focus on those who don't pay income tax. Maybe members from the
other side of the aisle and who are from these states seem oblivious to
this disproportionately heavy tax burden. Or maybe they think Federal
taxes should be higher. Maybe it's liberal guilt. I cannot figure it
out. One has to wonder what the folks in those states who work hard and
pay high taxes would think if they took a look at these charts. One has
to wonder what they'd think about higher taxes those on the other side
seem to yearn for.
The first part of the package provides progressive income tax relief
to every American that pays income tax. Let's move on to the second
part.
The second part provides income tax relief for married families--for
families where both spouses work and where only one spouse works. In
addition, thanks to the advocacy of Senator Jeffords, we expanded the
Earned Income Credit for married families with children. Further, there
was wide bipartisan agreement to simplify the Earned Income Credit
which will mean that hundreds of thousands of more children will
receive the EIC benefits.
This package contains the first marriage penalty relief in 33 years.
Let me repeat that. For the first time in 33 years, we're delivering
marriage penalty relief.
Third, the President's desire to expand the child credit to $1000 was
met
[[Page S7513]]
in the bipartisan tax relief package. And in response to the concerns
of Senators Snowe, Lincoln, Breaux, and Jeffords the child credit was
expanded to help millions of children whose working parents do not pay
income tax.
Let's take a look at an example. For a single mother with two
children at $16,000 of income, this tax relief package means $600 more
in her pocket for this year. That's an increase of almost 4 percent in
this single mother's budget. I'm sure she can use the money.
The fourth part of the package dealt with the death tax. The death
tax is reduced and finally eliminated--as called for by President Bush.
We were successful in this effort due to the work of many Senators but
I would particularly note the efforts of Senators Kyl, Phil Gramm, and
Lincoln.
Thus, this legislation contained the four main elements of President
Bush's efforts to provide tax relief for working families--marginal
rate reduction, relief for married families, the expansion of the child
credit and the reduction and ultimate elimination of the death tax.
I would remind my colleagues again that the hallmark of this
legislation is that relief for low income families comes first. The
marginal rate drop to 10 percent was immediate, the child credit
expansion to low income families was immediate, the expansion of EIC
was immediate.
The greater progressivity of the tax relief legislation is certainly
due in no small part to the work of Senator Baucus.
Everyone knows Senator Baucus and other Democrats who crafted this
package took a lot of heat from the liberal core of the Democratic
Caucus. His objective, like mine, was a bipartisan tax relief package.
It seems that while many are happy to talk about bipartisanship they
can't stand to see bipartisanship practiced.
In addition to President Bush's proposals to provide tax relief to
working families, the tax relief package included legislation that had
been considered by the Finance Committee previously.
I believe that not all good ideas come from just one end of
Pennsylvania Avenue. Thus, we included the Grassley/Baucus pension
reform legislation which probably would not have made it in the bill
without the longtime support of Senators Hatch and Jeffords.
That package means $50 billion in tax benefits for enhanced
retirement security. That figure will be compounded many times over in
retirement assets. A lot of folks like to play political football with
retirement security issues. The bipartisan tax relief package actually
moved the ball forward on retirement security.
Let's take a look at an example. Under the tax relief legislation,
workers will be able to raise their IRA contributions to $5,000
annually. Workers will also be able to put away up to $15,000 annually
in their 401(k) accounts.
In addition, the legislation contained over $30 billion in tax
benefits targeted for education. Elements of this package included
language to expand the prepaid tuition programs to help families pay
for college--long advocated by Senators Collins, McConnell, and
Sessions. In addition, the package provided a college tuition deduction
thanks to Senators Torricelli, Snowe, and Jeffords, private activity
bonds for school construction in response to Senator Graham's concerns,
as well as an expansion of the education savings accounts--in honor of
Senator Coverdell--thanks to the work of Senator Torricelli and Senator
Lott.
Let's take a look at an example. Under this legislation, a young
couple can contribute $2,000 per year per child to an education IRA.
The account enjoys inside buildup tax-free and is available to pay
tuition and other college costs.
None of us should forget the great winners of this legislation--the
American taxpayer. We provided the American taxpayer the greatest
amount of tax relief in a generation. And they deserve it.
With the bipartisan tax relief legislation in place, all taypaying
Americans have a little bit more of their money in their pockets.
Struggling families will have more money to make ends meet; parents and
students will be able to more easily afford the costs of a college
education; a successful business woman will be able to expand her
business and hire more people; a father finally getting a good paycheck
after years of work will be able to better provide for his aging
mother; and, a farmer can pass on the family farm without his children
having to sell half the land to pay estate taxes.
As an illustration of the breadth of this relief, I ask unanimous
consent to have printed in the Record a State-by-State analysis of the
per taxpayer benefits, prepared by the Tax Foundation.
There being no objection, the material was ordered to be printed in
the Record, as follows:
BUSH 2001 TAX REDUCTION BY STATE FY 2001-2002
------------------------------------------------------------------------
Total
(Dollars in Per capita Per
millions) household
------------------------------------------------------------------------
Alabama.......................... $1,151 $257 $663
Alaska........................... 233 363 939
Arizona.......................... 1,689 320 826
Arkansas......................... 603 224 578
California....................... 15,539 451 1,165
Colorado......................... 2,044 463 1,196
Connecticut...................... 2,558 750 1,938
Delaware......................... 309 388 1,003
Florida.......................... 6,532 400 1,032
Georgia.......................... 2,928 350 903
Hawaii........................... 336 272 703
Idaho............................ 330 247 638
Illinois......................... 5,789 465 1,201
Indiana.......................... 2,003 327 845
Iowa............................. 852 291 752
Kansas........................... 899 333 859
Kentucky......................... 1,033 254 656
Louisiana........................ 1,112 249 642
Maine............................ 337 263 678
Maryland......................... 2,354 438 1,130
Massachusetts.................... 3,611 567 1,465
Michigan......................... 3,860 388 1,001
Minnesota........................ 2,045 411 1,063
Mississippi...................... 584 204 527
Missouri......................... 1,785 317 818
Montana.......................... 209 228 589
Nebraska......................... 547 318 823
Nevada........................... 913 436 1,127
New Hampshire.................... 615 488 1,261
New Jersey....................... 4,953 585 1,511
New Mexico....................... 420 227 586
New York......................... 9,392 496 1,283
North Carolina................... 2,534 310 800
North Dakota..................... 159 248 641
Ohio............................. 3,788 333 860
Oklahoma......................... 819 236 611
Oregon........................... 1,123 322 833
Pennsylvania..................... 4,566 372 960
Rhode Island..................... 363 344 890
South Carolina................... 1,081 267 689
South Dakota..................... 228 299 772
Tennessee........................ 1,820 316 816
[[Page S7514]]
Texas............................ 7,719 362 936
Utah............................. 595 260 673
Vermont.......................... 197 320 828
Virginia......................... 3,069 426 1,102
Washington....................... 3,169 527 1,362
West Virginia.................... 363 201 518
Wisconsin........................ 1,888 349 902
Wyoming.......................... 207 411 1,061
District of Columbia............. 317 559 1,445
--------------------------------------
Total...................... 111,571 392 1,013
------------------------------------------------------------------------
Notes. Includes provisions that only affect individual income tax
liabilities.
Source. Tax Foundation.
Mr. GRASSLEY. Madam President, this chart illustrates the benefits of
the income tax rate reductions State by State. As you can see, all
taxpaying families in all States benefit. The examples are endless of
the great benefits that we realize when we give tax relief to working
families.
While I am pleased about the first anniversary, I won't be satisfied
until we make these bipartisan measures permanent.
Let's tell every taxpayer they can count on the 10 percent bracket 10
years from now. Let's tell the small business owner that, after 10
years of hard work, they won't face a tax rate of 39.6 percent. Let's
tell the single mother with two children that her taxes won't rise by
$1,200. Let's tell the newlyweds that 10 years from now they don't have
to face a marriage penalty. Let's tell family farmers they won't face
the death tax 10 years from now. Let's tell workers saving for
retirement that they can put away $5,000 in their IRA 10 years from
now. Let's tell a young couple that 10 years from now they will
continue to be able to save $2,000 each year per child for college
savings.
I would like to sum up. In historical context, the tax relief package
provides a modest refund to all taxpayers at a level previously
supported by the Democratic leadership. Over time, the Democratic
leadership's notion of what the top rate of tax should be has moved up.
Three assertions about the tax relief package, repeated almost daily
by its critics, are incorrect. I will correct them once again. The tax
relief package is bipartisan. The tax relief package did not cause our
current or long-term budget problems. The tax relief package is
progressive.
Finally, and most importantly, the tax relief package provides
important resources for families, small businesses, retirement
security, and education. These resources are valuable and should be
available to the American people on a permanent basis.
The PRESIDING OFFICER. The Senator has used his 20 minutes.
Mr. GRASSLEY. I yield the floor.
The PRESIDING OFFICER. The Senator from Louisiana.
____________________