[Congressional Record Volume 149, Number 1 (Tuesday, January 7, 2003)]
[Senate]
[Pages S21-S23]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE ECONOMY

  Mr. NICKLES. Mr. President, I spoke earlier today on unemployment 
compensation, and I am not going to repeat those statements. I think it 
is really unfortunate that some people maybe want to play politics with 
this issue. I don't know. I am concerned. I am pleased we were able to 
pass a bill that will help a lot of Americans. I had resisted in the 
past and will continue to resist efforts to double the Federal program 
from 13 weeks to 26 weeks for every State. This is a Federally financed 
program--financed entirely by the Federal Government. In other words, 
people who participate in this program have already exhausted State 
benefits which are 26 weeks. Last year in March or April we passed a 
Federal program for 13 weeks of benefits. Some people are saying that 
13 weeks should be 26 weeks. In other words, an unemployed person would 
be able to receive 1 full year of unemployment compensation benefits 
regardless of whether or not they are in the high unemployment State. I 
disagree with that. If you continue to expand unemployment benefits for 
a longer duration, in some cases you are going to expand unemployment. 
It will create disincentives for people to go to work.
  I believe a fact of interest is that 70 percent of people receiving 
unemployed benefits are living in a household with an employed worker.
  I just mention these facts not really to debate it but just to say 
there is a real concern trying to turn a Federal program which is to be 
temporary into a permanent program and to take a temporary program of 
13 weeks for all States and make that 26 weeks. That is very expensive. 
I have strong reservations about it. I opposed that several times last 
year for months and will continue to do so if persons try to pass that 
proposal.
  I might also mention there are several other expansions of 
unemployment compensation in the bill that was promoted last year. I 
brought that to individuals' attention who were sponsoring it because I 
think it had fatal flaws. I think, more importantly, rather than just 
trying to figure out ways in which we could expand unemployment, we 
should be figuring out ways to expand employment. How can we grow the 
economy? How can we expand jobs? How can we create more jobs, and not 
reward people for not working but reward them for working? Let's create 
greater incentives for work.
  The President's speech today in Chicago outlined a growth package. I 
compliment him for it. It is different. In many cases, it is very good 
tax policy. I really hope when we work on tax issues that will work for 
things that are good tax policy. There are a lot of things under the 
present code that need to be changed and that need to be corrected that 
are wrong and that are real disincentives to grow, build or expand--one 
of which is double taxation of dividends.
  I used to run a corporation. Why in the world would a corporation or 
somebody who runs a corporation want to pay dividends? The corporation 
has to pay a 35-percent tax on the earnings. And dividends come out 
after tax. So you have already paid a 35-percent rate. Then they are 
paid out to individuals. They also have to pay tax. The individual in 
all likelihood would be at a 27-percent rate, or a 30-percent rate, or 
a 38-percent rate. So you had the 37 percent plus the 35 percent. You 
are already at a 73-percent tax rate. If a corporation makes $100, $73 
of the $100 goes to taxation. That is not very good use of resources 
from a corporate manager's position. It is not very encouraging of 
investment. A lot of us would like to eliminate that unfair penalty of 
double taxation.
  The President proposed that today. There are different ways of doing 
it. He proposed one. I compliment him for it. I also believe the 
President had a provision to allow greater use of what we call 
expensing--allowing individuals--I believe in this case small 
companies--to expense items, I believe up to $75,000.
  I used to run a small business. I have run a corporation. As I say, I 
have also run a small business. But if you allow small business to 
expense, they are going to be able to recoup the investment they make 
that year. They make the investment that year, they expense it, and 
they recoup that investment. That would greatly increase their 
incentives to make another investment. I think that is very positive 
for job creation, maybe the most positive as far as getting jobs for 
the dollars that we are talking about.
  So I am pleased the President has that in his proposal. I hope this 
Congress will aggressively pursue expensing and/or accelerated 
depreciation or more realistic depreciation schedules over the life of 
these properties.
  Far too many properties, under current tax laws and current 
regulations, require depreciation over a long period

[[Page S22]]

of time, much longer, in some cases, than the actual lives of the 
property. That discourages investment. So I encourage our colleagues, 
if we want to create jobs, let's work on accelerating depreciation or 
allow people to expense items or at least allow a shorter depreciation 
cycle for a lot of goods and services.
  One example is software. A year ago, I believe, or 2 years ago, the 
depreciable life of software was 5 years. It was the same thing for 
computers and equipment. But we all know software is obsolete in a 
couple years, and hardware, for the most part, is probably obsolete in 
2 or 3 years, certainly not 5 years. So allowing for a more realistic 
depreciation schedule makes sense.
  Another example is improvements that you would make for apartments 
and homes if you are in the rental business. Right now, you have to 
depreciate these improvements over 39 years. If you have an apartment 
complex, and you want to make some investments to upgrade that 
apartment, you should be able to depreciate those improvements over a 
much shorter period of time than 39 years. It should be more like 15 
years, maybe even 10 years. If we made that change, a lot of people 
would make those investments. A lot of jobs would be created in the 
process.
  The President's proposal also says that we should have acceleration 
of the tax cuts that are already on the books. I agree with him 
wholeheartedly. Tax cuts, some of which are now scheduled for 2004, 
some of which are scheduled for 2006, in my opinion, should be made 
immediate, January 1, 2003.
  If we want to have any positive economic impact from them, it does 
not do a lot of good knowing that they are going to come in a couple of 
years. Let's make them immediate. I know some people want to play class 
warfare and say: Wait a minute, that is a tax cut for the wealthy. If 
we did it immediately, the maximum tax rate would be 35 percent. When 
President Clinton was elected, the maximum tax rate was 31 percent. So 
it is still almost 20 percent higher than it was when President Clinton 
was elected. Now, 35 percent--why should the Federal Government be 
entitled to take over a third of what an individual makes? I believe 35 
percent is a little over a third.
  So why is that such a bad deal? We have to look at taxation policy, 
what is right, what is fair. Should the Federal Government be entitled 
to automatically take that amount?
  I talk about marginal tax rates a lot because high marginal tax rates 
inhibit individuals, investors, entrepreneurs, small businesspeople, 
farmers, and ranchers from building and expanding if they have to work 
for the Government the majority of the time.

  I used to be self-employed. Self-employed individuals pay the highest 
marginal tax rates of anybody. And guess what they create: about 70 or 
80 percent of the jobs in America. You do not have to be very wealthy 
before you find out you are working as much for Uncle Sam as for 
yourself.
  I will give you an example. A self-employed individual who has a 
taxable income of $30,000 is in a 20-percent marginal Federal income-
tax bracket. I believe any additional dollar they make above $27,000, 
$28,000 is taxed at a 27-percent rate. That individual also has to pay 
what are commonly called FICA taxes, Social Security, and Medicare tax. 
That tax totals 15.3 percent. If you add 15.3 percent, plus the 27 
percent, you get to 42.3 percent. So any additional dollar of income 
profits that the painter makes--I used to be a janitor--or a janitor 
makes, or someone who has some type of business, any profit they make 
above that $30,000, the Federal Government gets 42.3 percent of it.
  If they are working in most States, they end up paying a State income 
tax. There are a few States that do not have an income tax. Most States 
have an income tax of 6 or 7 percent.
  If you add 7 percent on top of the 42.3 percent, you are already 
right at 50 percent in taxes on any additional dollar of income 
generated from their work. That is a real disincentive to build, grow, 
or expand. I have been there. I was there with a janitorial service, so 
it did not take me very long to realize, wait a minute, why should this 
business grow if we are going to be working more for the Government 
than we work for ourselves?
  The President, talking about trying to accelerate the existing tax 
cuts that are on the books, is exactly right. It is a small reduction 
in marginal rates. Even at that, the rates are still much higher for 
upper income people, far higher than they were during the Clinton 
administration.
  The President has also proposed making the child tax credit effective 
immediately. Several years ago, we passed, as part of the 1997 bill, a 
$500 tax credit per child. I was one of the sponsors of that. We passed 
that. That became law. That was good. In 2001, President Bush's first 
tax bill, we passed another $500 tax credit per child, but we phased it 
in over several years. In the first year, we gave a $100 tax credit. 
There is still $400 that becomes effective in the outyears.
  What the President has proposed is, let's make that effective this 
year. I have heard some say: Wait a minute. The President's proposal 
doesn't do anything for people making $35,000 or $40,000 a year.
  That is not true. If they have one child, it is $400. If they have 
three children, that is $1,200 more per year they get to keep.
  So I urge my colleagues to look at the President's proposal because I 
think it is a positive change. Let's make that $1,000 tax credit per 
child effective this year, not $600, as is present law. Let's make it 
$1,000 this year. That will help families. That will help individuals 
who have children as dependents.
  The President, as well, has also proposed making the marriage penalty 
elimination, that is now spread out over several years, effective 
immediately. The net impact of this is a great positive change for 
married couples, particularly married couples who have incomes in the 
range from $30,000 to $40,000 to $50,000, $55,000. They will be the 
biggest beneficiaries of this proposal because the changes that we made 
in 2001 in the Tax Code say that really what we should do, for 
a married couple, is double the 15-percent bracket for an individual.

  I believe the figures are something like, an individual pays 15 
percent on their taxable income up to about $27,750. But a couple pays 
15 percent up to an income of about $46,400. So an individual pays 15 
percent up to $27,750, but a couple pays--or another way of saying that 
is, anything above $27,750, an individual pays 27 percent, anything 
above $46,400, a couple has to pay 27 percent. So if they were taxed as 
individuals, they could have a combined income of $55,500 before they 
would go into the 27-percent tax bracket. What we did in eliminating 
the marriage penalty relief was, over some period of time, double that 
individual 15-percent bracket. So the couple would not have to pay 27 
percent until they had income above $55,500. Right now, they pay about 
$10,000 or $12,000 of that at the 27-percent bracket instead of the 15-
percent bracket. The net result is, you are talking about $1,200 in 
savings, tax savings for couples who have taxable incomes of $40,000 to 
$50,000. That is a pretty good change. If they have a couple kids, they 
get another $400 tax credit per child. So if you have four kids and a 
taxable income of $54,000, the way I am thinking, that is $1,600 and 
$1,200, so $2,800. It is a pretty significant reduction and savings for 
a married couple with four kids with a taxable income of $50,000 or 
$60,000. And it happens to apply to a lot of middle-income Americans.
  So I compliment the President for his combination of changes where he 
wants to grow the economy. It helps married families. It helps families 
with kids. It helps taxpayers. And it helps eliminate a well-known 
double taxation in the Tax Code, the double taxation of dividends that 
are really at exorbitant rates, which discourages investment, which 
discourages corporate ownership, which discourages equity, and 
encourages debt, which is not a very good policy--present law.
  The President says, let's correct it. I think he is right in doing 
so. I look forward to working with my colleagues to see if we can't 
work in a bipartisan fashion to put together a real package that will 
help grow jobs this year.
  I think that should be our challenge, not to say, here is the 
Democrat package, here is the Republican package. I say let's work 
together as we have

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done historically in the Finance Committee to see if we can't pass 
something good for America, good for American taxpayers and good for 
American families and good for our economy.
  We should have our economy grow. Revenues declined last year by 7 
percent. Somebody said, why is there a deficit? There is a deficit 
because of the tax cut?
  The deficit is not because of the tax cut. It is because there has 
been a real recession. Revenues have declined because the stock market 
started declining dramatically in March of 2000. The Nasdaq index was 
at 5,000. It is around 1,500, 1,600 now. So you see there has been a 
real decline in markets. That has caused a real decline in revenues to 
the Government.
  We need to do some positive things that will increase equity values 
and increase ownership in America's companies, that will create jobs, 
that will create real growth in the economy. The President has outlined 
a constructive package. I look forward to working with the President 
and my colleagues to enact a positive package for America this year.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Ms. LANDRIEU. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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