[Congressional Record Volume 149, Number 67 (Wednesday, May 7, 2003)]
[House]
[Pages H3747-H3748]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1715
               DEMOCRATS EXAMINE WAYS AND MEANS TAX PLAN

  The SPEAKER pro tempore (Mr. Hensarling). Under the Speaker's 
announced policy of January 7, 2003, the gentlewoman from Ohio (Mrs. 
Jones) is recognized for 60 minutes as the designee of the minority 
leader.
  Mrs. JONES of Ohio. Mr. Speaker, I came here to talk about the 
proposed tax cuts, but as I sat here on the floor and listened to my 
colleagues, I would be remiss if I did not respond to a couple of 
issues that they raised. One of them was that they accused the 
Democratic Party of wanting the economy to stay in the dumps just so 
that we could be successful. I dare either of the gentlemen that just 
finished speaking to find any member of the Democratic Party that would 
want this economy to stay in the dumps just so we can be successful. 
But the Democratic Party is going to be successful on the issues and 
that is what I want to talk about.
  Let me do one more thing, though. One of the things that was 
discussed, and this is called misrepresentation. One of my colleagues 
who spoke before me said that the Democrats were holding up the 
appointment of Justice Estrada at a time when justice needed to be 
dispensed in the District of Columbia and at a time when law and order 
was out of place and that he could be there trying cases. I just want 
to remind my colleague that Justice Estrada was being considered for an 
appellate court, not a trial level court and that justices on the 
appellate court do not do trial of fact. So that is again a 
misrepresentation that people make when they are trying to make one 
party different than the other. But I am not going to spend my time 
today in response to some of those things. I would just suggest that 
everyone needs to pay attention and listen to the real words that 
people are saying.
  Mr. Speaker, I rise today to express my concerns about the Chair of 
the Committee on Ways and Means' plan that was unveiled this week, 
marked up in a lively session of the Committee on Ways and Means 
yesterday and will be considered on this floor shortly. In my own city, 
the City of Cleveland, 53,900 people have lost their jobs since this 
President took office. That is 4.7 percent of the workforce. In my 
State, the State of Ohio, 167,000 people have lost their jobs since 
this President took office. That is 3 percent of the workforce. The 
Committee on Ways and Means considered over the past couple of days the 
plan of Chairman Thomas. Unlike the Democratic stimulus plan that will 
be fast acting, fair and fiscally responsible, let me say those three 
Fs again, fast acting, fair and fiscally responsible, the Republican 
plan is another in a series of GOP tax plans that is economically 
irresponsible, narrowly tailored to benefit the wealthiest percentage 
of the population, and will not provide the immediate stimulus our 
economy needs in the form of job creation and productivity growth.

  The chairman's bill has been referred to as a compromise to the 
President's so-called economic stimulus plan, perhaps with the hopes 
that Democrats would respond favorably to any compromise to the 
President's fiscally reckless plan. While Chairman Thomas' bill does 
indeed have a different approach to some of the proposals offered by 
the President, the end result is still the same. It is poorly timed, 
shortsighted and narrowly designed to benefit only a small percentage 
of the population.
  This compromise reminds me of an old witticism: You can hang a sign 
on a pig saying that it is a horse but it is still a pig. The gentleman 
from California has hung a sign on a bad economic policy and proclaimed 
it to be a fix that our economy needs. But just like the pig with the 
sign around its neck proclaiming it to be a horse, this plan has 
problems.
  Let me talk about just a few of them. The treatment of dividends and 
capital gains. The GOP plan is not fair. The President's proposal for 
exempting dividends from being taxed was the centerpiece of his 
economic stimulus plan. While the Thomas bill does not contain that 
proposal and I believe it does not contain that proposal because in 
committee meeting after committee meeting, I kept saying to members of 
the committee and witnesses before the committee, do you understand the 
impact that the dividend tax cut will have on low-income housing 
credits? Do you understand the impact that a dividend tax cut will 
have, in fact, on annuity programs? And I think he finally got it. 
While the Thomas bill does not contain the same dividend tax cut 
proposal that was presented by the President, it revolves around 
reducing the tax on capital gains and dividends as the cornerstone to 
sound economic policy.
  Under current tax laws, capital gains are taxed at 20 percent. 
Dividends are treated and taxed as income at the applicable tax rate. 
The Thomas plan will lower the capital gains tax rate to 15 percent and 
also provides that all dividends be taxed at the same rate. Unlike the 
President's plan, the Thomas plan provides dividend tax relief 
regardless of how much Federal income tax is paid by a corporation. In 
this regard, the Thomas plan does not have as great an adverse impact 
on low-income housing tax credits and other corporate tax benefits that 
would have resulted under the President's plan. But this is the least 
egregious aspect of the plan and it is overshadowed by so many more 
unwise proposals.
  The chairman's dividend capital gains proposal will cost 
approximately $300 billion of the total $500 billion cost of the plan. 
He boasts that this is less than the nearly $400 billion cost of the 
President's dividend proposal. But he is relying on accounting gimmicks 
and unrealistic expiration dates. Many of the aspects of his plan are 
set to expire in 2006. But will these provisions really be allowed to 
expire? Most likely not. The more realistic outcome is that they will 
become a part of the ever-increasing number of tax provisions that are 
extended every few years. A more realistic estimate of the Thomas 
plan's economic impact on the Treasury must assume that its provisions 
will be extended beyond 2005. Under this realistic assumption, the $550 
billion cost of the Thomas plan not only exceeds the $726 billion cost 
of the Bush plan but suddenly results in a total cost of about $1 
trillion through 2013, as indicated in the chart that I am about to 
show my colleagues.
  This chart breaks down certain elements of the Thomas plan as 
compared to the Bush plan and concludes with the result of the Thomas 
plan being even more expensive than the Bush plan. For example, under 
the Bush plan, the dividend and capital gains tax cut would have been 
$396 billion. Under the Thomas plan, $296 billion of the tax cuts do 
not expire. However, the top bracket rate reductions effective only for 
2003 will be the same and the child tax credit increases will be the 
same. But here is where we have to take a look and go further. Under 
the Thomas plan, we widen the 10 percent bracket effective 2003. It is 
$45 billion. Under the Thomas package, it is $18 billion. But if the 
tax cuts do not expire, it will go back up to $45 billion as proposed 
in the President's plan.
  Tax breaks for married couples. Under the Thomas proposal, it expires 
in 2005. The impact under the Bush proposal is $55 billion. The Thomas, 
$45 billion. But if this 2005 date is extended, the tax break for 
married couples will cost us $55 billion.
  Again, let us take a look at the business expensing. Proposed to 
expire in

[[Page H3748]]

2005, it would only cost $9 billion under the Thomas plan but if in 
fact these cuts do not expire it will be $29 billion.

  I could go on. I know people get tired of a lot of numbers but I need 
to show the comparison of the tax cut packages.
  Let us put up chart 2. IRS data shows that households with incomes 
over $500,000 get, on average, 41 percent of their income from capital 
gains and dividends. On the other hand, households with incomes between 
40 and $75,000 get only 4 percent of their income from those sources. 
The gentleman from California's claims will not be the panacea for our 
struggling economy. For example, if you make over $500,000, according 
to this, 40 percent of your income comes from capital gains and 
dividends. If you make only between zero and $20,000, your income from 
capital gains or dividends is only 4 percent. So clearly the package as 
proposed by the gentleman from California is going to benefit folks who 
make over $500,000. I do not know where many of you come from, but 
clearly this is not a package that will benefit the bulk of Americans.
  The same IRS data shows that the $500,000 income and higher 
households enjoy average capital gains and dividends of $70,000 while 
the 40 to $75,000 households have average capital gains and dividends 
of $2,000. Under the GOP plan, millionaires will receive over $100,000 
from the new tax structure. But if you make $50,000, you will receive 
about $400. Or if you are in the lowest income strata, the new tax 
structure will give you back just $53. We heard the earlier speakers 
talk about the benefit of putting the money back in the taxpayer's 
pocket. How much is $53 going to buy? Especially when you think about 
collectively if we took all of our $53 and left them in the pot, 
perhaps our senior citizens might have an opportunity to get a 
prescription drug benefit. Perhaps we might be able to fund the No 
Child Left Behind program. Perhaps we might be able to fund health care 
for more Americans. And perhaps we might be able to extend the 
unemployment compensation to Americans across this country.
  Let me go to this chart very quickly. For example, taxpayer year 
2003, if you made between 10 and $20,000, you are getting $53. If you 
made between 75 and $100,000, you are going to get $1,600. But if you 
are part of that fortunate few that this tax plan favors, you will get 
probably $105,000 from this particular tax cut. Those taxpayers who 
will reap the highest gains from the Thomas plan account for .5 percent 
or one-half of 1 percent of taxpayers. Let me say that again. Those 
taxpayers who will reap the highest gains from the Thomas plan account 
for just .5 percent or one-half of 1 percent of taxpayers. Yet they 
will receive over 57 percent of all of the capital gains and dividends.
  When we talk about a plan being fair, this plan is not fair. Quite 
the opposite is true for taxpayers in the 45 to $75,000 income bracket 
who comprise 21 percent of all taxpayers and account for 24 percent of 
income from all sources. Yet they will only receive 7 percent of the 
capital gains and dividends.
  Let us try chart 4. Finally, the Thomas plan will benefit the 
wealthiest one-half of 1 percent of taxpayers nearly universally, as 94 
percent of that group of taxpayers receives dividends or capital gains 
whereas just one-third of the 45 to $75,000 income range taxpayers have 
investments that yield dividends or capital gains. For example, if we 
look at chart 4, we can see how much income is derived from capital 
gains and dividends based on income levels. It is a little different 
orientation from the chart I showed you that was chart 2. For example, 
if in fact you make over $500,000, you are coming above almost 100 
percent, you will receive that amount from your capital gains or 
dividend income as compared to people at the lower bracket.
  The Republican Party will claim that the majority of senior citizens 
will benefit from dividends and capital gains taxes being reduced, but 
only 26 percent of seniors in this country receive dividend income that 
would be affected by this proposal. Let me say that again. Only 26 
percent of seniors in this country receive dividend income that would 
be affected by this proposal. Republicans cite the fact that more and 
more people have a vested interest in the stock market. Yeah, we sure 
had a vested interest in the stock market and look what happened: 
Enron, Global Crossing, WorldCom, the list goes on, and that they would 
now benefit from this proposal. Maybe this proposal should have come 
around before all of us lost the money we lost in the stock market. 
While they are correct in the assertion that over 50 percent of the 
population is in the market, Republicans distort or ignore the manner 
by which people do participate in the market.

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