[Congressional Record Volume 149, Number 72 (Wednesday, May 14, 2003)]
[Senate]
[Pages S6233-S6248]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page S6233]]

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                                 Senate

    JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003--Continued


                           Amendment No. 619

  Ms. LANDRIEU. Mr. President, I send an amendment to the desk on 
behalf of myself, Senator Corzine, and Senator Schumer.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu], for herself, Mr. 
     Corzine, and Mr. Schumer, proposes an amendment numbered 619.

  Ms. LANDRIEU. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under ``Text 
of Amendments.'')
  Ms. LANDRIEU. Mr. President, I will take such time as I may need to 
explain the amendment. I estimate it to be around 10 or 15 minutes for 
myself and for Senator Corzine who joins me on the floor. I know there 
are no time constraints, but I know there are other Members with 
amendments and the hour is late. I just want to let them know 
approximately how much time it will take for us to offer the amendment.
  We offer this amendment in good faith because many of us are firmly 
convinced and feel very passionately that the direction the President 
is leading us with his proposal is the wrong direction.
  Times have been much worse in this country over the course of our 
long history. In many ways, things are moving along pretty well. We are 
making a tremendous amount of progress on many fronts. But it is in 
some ways a very crucial time. We are trying to transform our military. 
We are moving into a technological age for which this particular type 
of economy needs some special framework. We are fighting terrorism 
worldwide. We are engaged in conflicts because of the recent attack on 
our Nation. I wouldn't say this is the calmest of times, but yet we are 
not in a depression; some would argue not in a recession. But it is an 
important time to do the right thing.
  For the 4.5 million people I represent in Louisiana, it is very 
important that we get this tax package right. Their livelihoods depend 
on it. Their children's futures depend on it. Their small businesses 
depend on it. The health of their parents depend on it. We can't get it 
wrong, and we are about to.
  This plan the President has laid down will not create jobs. The plan 
the President has laid down will raise taxes. The plan the President 
has laid down will increase deficits. It will disappoint thousands of 
parents, teachers, and students who actually believed him when he said 
he would not leave a child behind. They actually believed him. And they 
voted for him. This plan does not fund Leave No Child Behind.

  This plan says no to so many small businesses that trusted him, that 
came here to Washington and said: Mr. President, if you get a little 
more money, could you please help us with our health care premiums? He 
told them, yes. But this plan doesn't have a deduction for health care 
premiums. It is the No. 1 issue for the small businesses in Louisiana 
and across the Nation. You won't find it in the President's plan. It is 
not in there. He said no to small business.
  I know I can't use profanity on the floor of the Senate, so let me 
just say: It is a darn shame that when he had a chance, when the 
Republican leadership had a chance to do the right thing at an 
important time in our Nation, for some reason, that some of us can't 
figure out, I can't even go where they are going. I don't understand 
it.
  I don't understand a plan, when we need jobs, that doesn't create 
jobs; when we are trying to fix the deficit, it makes the deficit 
worse. For what?
  So Senator Corzine and I have worked, along with Senator Schumer and 
many of our colleagues, to come up with something that would actually 
take the President at his word, which we are continuing to hope we can 
do. I am getting personally unsure of that, but I am trying to take him 
at his word that he really wants to create jobs; he wants to get the 
economy moving again; he wants to have a stimulus package; he wants to 
make it generally fair to everybody, or as many people as possible.
  He wants to honor the military, which he continues to say is one of 
his No. 1 priorities. We have something in here, a tax credit for the 
Guard and Reserve. I don't know if anyone in America could say that 
there is a group of people that deserve a tax credit more than the 
people who have left their spouses, left their children, left their 
jobs, put up a temporary sign ``gone to war'' on the front of their 
building, but we are sitting on this floor tonight giving tax credits 
to everybody in the world--the double taxation to corporations, many of 
which don't pay taxes anyway--but we can't find space in the bill to 
give it to the 400,000 guardsmen and reservists who are being called up 
to protect us.
  That is why I am standing on the floor late at night to try to 
explain it. At least in Louisiana, people don't understand it. They 
just don't understand it. So our amendment has something in here for 
the Guard and Reserve.
  You could argue we are in a recession or we are close to recession. 
It is not booming times out there. I will not stand here and try to 
argue whether we are technically in it or not. People who don't have 
jobs really don't care about that. What they care about is having a 
job. Jobs are hard to come by. We have a record high unemployment rate.
  The people who are unemployed in the country are saying: Mr. 
President, if you have a little extra money, could you please allow us 
to use the money

[[Page S6234]]

in the compensation fund that we paid into to extend our benefits, 
modest benefits? In Louisiana, it is $196 a week. The average benefit 
is $250 a week. These are people who have worked, many of them, since 
they have been teenagers. They find themselves out of work. They are 40 
and 50 years old. They came here to ask the President: Could you please 
extend the benefits? The President doesn't put them in his package.

  But he puts in the package corporations that don't pay taxes, and he 
won't put in his package unemployed people who paid taxes their whole 
life since they have been teenagers.
  I am offering the amendment because our amendment tries to take some 
things the President put in his package, and the Finance Committee has 
put in their package, that is sort of modeled on what the President had 
originally planned, that does do some of the things that will stimulate 
and that we generally agree on and there seems to be a consensus. And 
there are some good things in it.
  One is the marriage penalty which we recognize is a real penalty. It 
is taken care of in this amendment.
  We accelerate the child tax credit, which is something we all, 
Republicans and Democrats, agree would be a good thing, if you had some 
extra money, to give that thousand dollars to people. But instead of 
the dividend tax, which has been argued by the likes of Alan Greenspan 
and others that it is not the right time to do, instead of that, we 
have placed in our $350 billion package wage tax relief.
  If we want to create jobs in the Nation, I would maintain that 
removing the tax on jobs would be the best way to encourage jobs to be 
created. If you remove the tax from something, people are likely to 
move toward whatever you remove the tax on. So people are paying a lot 
of money on their wages, and our amendment would give an immediate $765 
rebate to every worker. For two parents, it is almost $1,530, for two 
workers in a family.
  And the way we have structured the amendment, every business would 
also be able to take that immediate rebate for every worker up to their 
$10,000 in earnings. So every small business, every corporation would 
be able to take that benefit of thousands and thousands and thousands 
of dollars now.
  As several of the Senators from the other side have said, that money 
will go into their pockets, and they will have flexibility to spend it 
however they want. We are not telling them how to spend it. They could 
give bonuses. They could invest in property. They could invest in 
equipment.
  But it is putting money in their pockets--real money, not pretend 
benefits from a dividend they won't get, or would not get anyway 
because of the system that we have now.
  So we offered this amendment--$350 billion. The centerpiece of it is 
wage tax relief that will benefit every worker, particularly those two-
wage-earner families who make up the majority of our American 
population because this economy demands two wages, basically, to carry 
the burdens and responsibilities of family life.
  It also helps small business in terms of stimulating for plant and 
equipment expensing up to $100,000, small business health care, Guard 
and Reserve, unemployment compensation, and a very important component 
of this is helping the States. People have talked about this as aid to 
undeserving recipients. It is as if there is something wrong because we 
are giving aid to undeserving recipients. I like to think of States--
and I served in the State legislature for 8 years, and as treasurer for 
8 years--as partners, good partners, hard-working partners. My Governor 
is a Republican, and I do not consider him an enemy. I do not consider 
him an undeserving aid recipient. I consider him a partner. Together, 
with the senior Senator, our Governor, and our legislature, every day 
we try to give kids a good education, give our teachers a decent 
salary. We try to keep our hospitals open. When a child is born sick, 
we try to help their family take care of them, to see that the garbage 
gets picked up, that the sanitation is done, that highways are built. 
We do this in partnership. They are not my enemies.
  I have heard comments on the floor, and from the White House, that 
they don't deserve it. Let me tell you something. They work hard, local 
elected officials--mayors, county council members, and school board 
members--trying to balance their budgets. They cannot run up deficits 
like we do. Half of their problem is caused by the fact that we get 
here day after day and put one unfunded mandate on them on top of 
another. When it comes down to balancing their budgets, do you know 
whose backs they balance them on? The schoolchildren get cut, teachers 
get cut, firemen and policemen get cut, so the President can give a 
dividend tax cut to corporations that don't even pay taxes.
  I am not voting for the plan. I would not vote for it if it was the 
last plan offered, because I am not raising taxes on police officers, 
firefighters, teachers, and closing libraries. If you think I am making 
this up, just go to any Nexus search. I went today and looked up 
Maine--a billion-dollar deficit. The Maine Legislature considers itself 
in a crisis mode. This is the State of Senators Snowe and Collins. So 
far, this is what President Bush is asking the residents of Maine to 
do--this is his plan, so the President is asking the residents of Maine 
to cut library services, and one community began to lobby its residents 
to reject a proposed health care center because the State could not 
afford it.
  Now, you can put up a sign at the libraries in Maine saying ``book 
sale'' because the proceeds are going to a dividend cut. I don't want 
to hang that sign on my library in Louisiana, and I don't intend to. If 
this bill passes, fine, it will pass by one vote, maybe a tie vote. It 
will not have Landrieu's vote.
  People say: Senator, are you opposed to tax cuts? No. I voted for the 
last tax cut proposal of $1.3 trillion. But, of course, then people 
came to my State during the election and tried to convince people I 
didn't when I did. Nonetheless, I am a Democrat who has voted for tax 
cuts. I am not opposed to them. But if we are going to do them, let's 
do them right, and fair, and in a way that stimulates the economy and 
actually creates jobs and honors our States as the partners they are, 
and respects those who are unemployed, not as charity cases but as 
people who work and deserve a break, particularly when times are tough.

  So we offer this amendment. Senator Corzine will speak because he 
understands the intricacies of economics in a way that is harder for me 
to explain. I hope he will explain why the plan that has been laid out 
does not create jobs in a country that is desperate for jobs and needs 
a boost so that we can put people back to work and meet the challenges 
that are before us, and standing up for our military and fighting a war 
on terrorism at home--that we might have the strength to do that.
  The amendment will be voted on tomorrow with a list of amendments. It 
is offered as a good-faith effort, an alternative, one that is 
stimulative and will create jobs, is fair, and will hopefully get this 
economy moving again.
  I reserve the right to speak for another few minutes to offer 
additional amendments.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. CORZINE. Mr. President, I must say I am very proud to join with 
Senator Landrieu in sponsoring this substitute amendment for the 
underlying bill we are debating. She put the passion into what it is 
that we have tried to accomplish with respect to coming up with a 
powerful job-creating initiative, a powerful economic growth 
initiative--one that sticks to the $350 billion budget level that we 
have agreed to in the Senate. The size is the same.
  Some of us might argue we should not be doing that at all, based on 
what we think the economy might need or the nature of it. But if we are 
going to have a $350 billion tax relief program, stimulus program, 
let's make it one that people know has efficacy and will work and is 
not designed to go to the elite few but to all of America's families 
and businesses, to everybody in America regardless of their economic 
position.
  Our proposal is designed to work for the person who makes the very 
least, and also for those who make whatever they are blessed with to 
make in our great country.
  It also deals with an issue that I heard the Senator from Louisiana 
talk about in what I think were clearly more forceful terms, about 
dealing

[[Page S6235]]

with the libraries, prisoners, schools, and everything that our State 
and local governments are trying to deal with, by putting $50 billion 
into our State and local governments so they can continue to service 
the American people the way they are expected to. We have a $100 
billion budget deficit cumulative across the States in the upcoming 
year. That is coming on top of about $80 billion this year. We are 
raising taxes and cutting services at the local level faster than we 
are cutting taxes here at the Federal level. That makes no sense.
  So we have put together a package that works to give tax relief to 
every single American, working American, and also to help our State and 
local governments so they are not out there chopping away at children's 
health insurance programs, educational programs, and all the other 
issues that are so important and so positively delivered by our State 
and local governments.
  If you go back and look at CBO looking at the individual pieces of 
what we call the ``multiplier effect'' with regard to initiatives, you 
will find that the package we put together, because of the breadth of 
participation of the population and because of the benefits that are 
offered, will contribute more to growth and jobs than anything on the 
table that has been talked about. This is truly a pro-growth proposal. 
If we are sincere about putting Americans back to work, about getting 
growth going in our economy, then we ought to be doing those things 
that work and where people know they work.
  Mr. President, $350 billion is a lot of money. We ought to be using 
it in absolutely the most effective and efficient way. That is what our 
package is about. I will go through some of the details of it. I think 
it is essential that we try to use our money and our efforts most 
effectively. This substitute, which will stimulate jobs and will create 
growth, will do so without irrevocably undermining the long-term budget 
and fiscal position of the Federal Government.
  It will avoid creating a debt burden for our children and their 
children. By contrast, some of the various proposals that are 
contemplated here force Americans to pay taxes to pay the interest on 
the debt: $2.4 trillion, if you add it up with regard to the two tax 
cuts, the one in 2001 and the one we are talking about which will 
increase the debt burden for every family in America for a family of 
four $30,000.
  That is a debt tax. That is a tax because you are going to be paying 
the interest on that $30,000. One can say we are cutting taxes on one 
hand, but if we are creating interest expense for the Federal 
Government on $2.4 trillion, we are raising taxes, and it is a debt 
tax.
  Deficits do matter, particularly in the long term, and the debt tax 
that is being proposed will burden the financial health of every 
working American for the long term, every bit as great or greater than 
those tax cuts that we are talking about that are embedded in these 
proposals.
  Even the person nominated to be President Bush's top economist has 
agreed that deficits matter. At least he did before joining the 
administration. For example, this is what the nominee for Chairman of 
the President's Council of Economic Advisers, Greg Mankiw, said in his 
recently published textbook, appropriately named ``The Essentials of 
Economics.'' I want to read a phrase:

       The most basic lesson about budget deficits follows 
     directly from their effects on the supply and demand for 
     loanable funds.

  He says specifically:

       When the Government reduces the national savings by running 
     up a budget deficit, the interest rate rises and investment 
     falls.

  That is very clear. It could not be clearer--Economics 101, the most 
popular textbook in America, the President's Chairman of the Council of 
Economic Advisers. When you run up deficits, you reduce the economy's 
growth rate.
  The underlying bill, like the House proposals and most egregiously, 
actually, the $726 billion proposal by the President, grows the 
deficits, will push up interest rates, will reduce investment in the 
long run, and, thereby, reduce growth. I thought this was a jobs and 
growth package.
  That is the reality. It is tied together with some of the best 
thoughts in the White House, and it certainly fits what we hear the 10 
Nobel Prize winning economists talking about, and other folks, but this 
is the President's economist. That is why the package Senator Landrieu, 
Senator Schumer, and I are presenting tonight will provide a real boost 
to the economy without destroying long-term fiscal discipline.
  The heart of our amendment, as was described by Senator Landrieu, is 
the wage tax credit. This is relief that would give each working 
American a tax cut on their earned wages of up to $765. That is the 
equivalent of the payroll taxes an individual paid on the first $10,000 
of their earnings in 2001.
  Under our proposal, a married, working couple--we can all add--would 
receive tax relief up to $1,530 regardless of their income. Regardless 
of whether you make $20,000, where it is a hard-working blue-collar 
job, or $50,000 where you are a technician, computer programmer, or $1 
million if you work on Wall Street, everybody gets this same $765 and 
$1,530.
  We need to remember that four out of five Americans pay more in wage 
taxes, payroll taxes than they pay in income taxes. That is why this 
does provide broad-based tax relief to everyone. People across America, 
regardless of their overall income level, pay payroll taxes, and that 
is why the benefit is so broadly distributed and allows for real growth 
in the economy because you put money in the pockets of people who will 
go out and spend it.

  I remind my colleagues, this is a 1-year tax cut in which all 
payments and tax credits would come out of the General Treasury. We 
made that very clear so we did not get into this hyper conversation 
about raiding Social Security trust funds or Medicare trust funds. This 
is a tax cut coming out of the General Treasury, just as any of the 
other proposals we see.
  Every working American and business owner would benefit from our 
proposal. As I said, the $1,530 cut for a couple would help American 
families make ends meet and generate immediate growth in our economy. 
For low- and moderate-income families, this payroll relief would pay 
for 5 weeks' worth of groceries for a family of four, more than 2 
months of childcare, 3 \1/2\ months of utility bills, and 7 months of 
gasoline. By the way, if you were a millionaire, with this money you 
could buy 50 shares of GE stock or any other $30 stock. You can get 
involved in the marketplace.
  The payroll tax relief has been scored among the most stimulative 
cost-effective tax relief proposals evaluated by the CBO and private 
economists. It has a high-multiplier effect by anybody who looks at it. 
If we are serious about getting our economy moving--and I think people 
are sincere in their belief that we need to put some stimulus in--this 
is the place where we can get the maximum bang for our buck, the 
maximum bang for $350 billion.
  Our proposal is $188 billion of the total $358 billion. In addition 
to helping working Americans, our wage tax credit would provide 
business owners, small and large, a tax credit for up to $765 on each 
of their employees. Our wage credit for business owners would put 
immediate cash into the hands of employers to spur investment, new 
jobs, plant, and equipment. They can do what they need to do to boost 
their business.
  America's businesses, bottom line, by the way, would grow by the 
amount in this tax credit. The last time I looked at stocks, growing 
earnings on America's publicly traded companies gets reflected in stock 
values. That is what price times earnings means. It really will boost 
the value of the stocks as much as the kinds of things we are talking 
about with regard to the dividend.
  By reducing payroll taxes, which many view as a tax on labor, we 
would encourage more employers to hire more people and keep those they 
already have.
  I point out this is one of the reasons I think the Business 
Roundtable, which represents 150 of the country's largest corporations 
with over 10 million employees, along with many other business groups 
around the country, have endorsed the concept of payroll-based tax 
relief.
  It is pretty simple. It is fair. It is an affordable economic 
stimulus, if we believe $350 billion is affordable. It will put money 
into the hands of consumers

[[Page S6236]]

and businesses that will get immediately reinvested in our economy.
  In the past few years, the concept of payroll tax relief has been 
supported by people on both sides of the aisle. A year ago, Senator 
Domenici and I introduced a similar bill, and in December 2001, the 
distinguished majority leader, Senator Frist, expressed strong support 
for payroll tax relief. As he put it then:

       A payroll tax holiday is truly a stimulative, temporary tax 
     cut that would be welcome news for most Americans. . . .As 
     economic growth stagnates and unemployment numbers increase, 
     putting additional money in consumers' pockets will provide a 
     much needed economic boost.

  Senator Frist was right on the mark then, in my view, about the need, 
and he is right on the mark with respect to the stimulative impact of 
payroll tax relief.
  I hope my colleagues tomorrow will stand behind those words and 
support this proposal to help reinvigorate the economy.
  Beyond the centerpiece of the wage tax credit which I talked about, 
again $188 billion, the Landrieu-Corzine-Schumer amendment includes 
other provisions which are part of the underlying bill, such as 
marriage penalty elimination, and acceleration of an expanded child tax 
credit. We tried to take the best parts, the most powerful pieces of 
the stimulus, and put them in the proposal. We are looking at high-
multiplier, high-return elements with regard to policies that we think 
will get this economy going.
  Maybe most importantly, I will not go into this because Senator 
Landrieu did such a great job of it and we have heard a lot of 
discussion on it, and I compliment the Finance chairman because he has 
recognized the need for us to help out our cash-strapped State and 
local governments in supporting an amendment--I believe it should be 
more, but reasonable folks can differ about the degree. We need to make 
sure we put real dollars into our State and local governments. We have 
talked about it from our point of view, that that should be $52 
billion.
  We have things that take advantage of advanced refunding, of the low 
financing rates, the lowest in 40 years. We put in here about 
refinancing debt, just like the American consumer has with their 
mortgages over the last year, having our State and local governments 
take advantage of that same thing.
  We have worked with Medicaid, where there is truly a lot of hurt. We 
have talked about unfunded mandates with Leave No Child Behind, also 
the issue of child care assistance. We have $3 billion in this program 
for those purposes because if people are going to work, they have to be 
able to take care of their kids. It is a kind of simple concept. Also, 
general block grants for homeland security, education, and other 
priorities.
  Beyond the assistance provided to State and local governments, our 
amendment provides for a variety of tax cuts for business. We believe 
in those. We are supportive of those. We include in this an increase in 
the expense from $25,000 to $100,000 a year for small business. We 
repeatedly hear that 50 percent of the jobs in America come out of 
small business, which 99 percent of businesses are. We are trying to 
recognize that, and we are also trying to help small business with a 
50-percent credit for health care premiums. It is one of those things 
that holds back the economy most forcefully in New Jersey in other 
communities I work with.
  Finally, our $350 billion package includes the nearly $13 billion in 
unemployment benefits that a number of folks have talked about. This is 
a soggy economy, as Secretary Snow describes it. It is so soggy that we 
have lost 2.7 million private sector jobs, including over 500,000 in 
the last 3 months alone. We only have about 75 percent capacity 
utilization in the country. So there are needs.
  While some of us might not agree on size, myself included, we might 
not even agree we need a serious proposal on tax cuts, if we are going 
to do it, as we have decided to do it, we ought to make it as powerful 
as we can possibly make it. I think we should be responsible fiscally 
over a long period of time. I think deficits do matter. But if we are 
going to have a $350 billion tax cut, we ought to design it in a way 
that will create jobs and promote growth, without undermining our long-
term fiscal health. Our amendment does that, and I am proud of this 
amendment which I am offering, along with Senators Landrieu and 
Schumer. I very much appreciate their help and I hope our colleagues 
will give serious consideration to a proposal that I think has real 
meaning concerning job creation and economic activity.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. I yield myself such time as I may consume.
  Ms. LANDRIEU. Mr. President, I think I still control the time.
  The PRESIDING OFFICER. The Senator from Iowa controls time in 
opposition.
  Ms. LANDRIEU. But I reserved as much time as I would consume to 
present the amendment. I said I would speak for 15 minutes and then 
Senator Corzine, and if the Senator from Iowa would allow us to present 
our amendment, then we would be happy to yield to the opposition.
  The PRESIDING OFFICER. The Senator's time is reserved, but the 
Senator from Iowa has the right to seek recognition in opposition.
  The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, a number of misleading and just flat out 
wrong statements have been made by the proponents of this amendment. 
They said this package does not help the military. I wonder where they 
have been the last few months. We have already passed the military tax 
cut bill in the Senate and we are trying to work it out with the House. 
That is the situation. So do not tell me we have not dealt with the 
problems of the people in the military.
  They argue we do not deal with unemployment benefits. I guess they 
were not paying much attention when just a few hours ago we were 
talking about extending unemployment benefits. I offered a unanimous 
consent agreement at that time, but what happened? The other side, 
which is now complaining, rejected my offer to make that the top 
priority just as soon as we are done with this bill.
  We also put together a strong bipartisan State aid package, which the 
other side has cried crocodile tears over. So I hope no one is misled 
by some of the previous rhetoric we have heard. The amendment is 
nongermane and violates the Budget Act. So obviously later on there 
will be a point of order made on it.
  To relieve any concern that the underlying bill is only concerned 
about giving more money to corporations, I want to point out how this 
legislation helps families. I will make a couple of points regarding 
the distribution of tax benefits in our package. As I stated 
repeatedly, the package fairly balances investment and consumption 
incentives within the plan and benefits families at all levels of 
income.
  Now, this is quite contrary to much of the rhetoric we have heard on 
the proposal's distributional benefits. I have heard repeatedly that 
the typical family receives only $217 of benefits under the bill, while 
millionaires receive tens of thousands of dollars of such tax breaks. 
One response to this is to note the progressivity of our system. A 
simple example, however, is an effective way to demonstrate the bill 
does in fact provide benefits to families at all income levels. For 
illustrative purposes, I have analyzed the tax benefits of accelerating 
the $400 increase in the child tax credit combined with the increased 
refundability for single mothers of two children at various income 
levels under the bill.
  The example does not account for additional benefits that are also 
provided in this bill with expanding the 10 percent bracket.
  The charts I have with me demonstrate the tax benefits to that single 
mother with $15,000, single mother with $20,000, single mother with 
$30,000 of wage income during the 2003 tax year. As we can see, the 
first chart demonstrates a single mother of two with $15,000 of wage 
income will receive an additional $250 of refundable tax credits under 
this bill. This increased $250 comes from a combination of increasing 
the tax credit amount and reducing the limits on refundability. With 
her refundable earned income credit of $3,823, her total refundable tax 
credits would increase by $250 all the way up to $4,573.

[[Page S6237]]

  The second chart is for a family of $20,000 wage income, which 
demonstrates a significant increase in benefit to the same single 
mother. At a slightly higher income level, she receives an additional 
$710 of benefits under the Finance Committee plan for a total 
refundable credit of $4,270.
  Finally, at $30,000, we can see this single mother receives the 
entire benefit of $800 increased child tax credit in the form of 
refundable payments.
  I ask my colleagues to consider these examples as further evidence of 
the impact this bill will make on hard-working families in this country 
at different income levels, and I might say at all income levels. I 
hope the informed judgment will be made based upon fact and not upon 
the statements previously given about this bill.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, I first want to thank my colleagues, 
Senator Landrieu and Senator Corzine, for their sponsorship of this 
important amendment.
  I also want to recognize Senator Grassley, the distinguished Chairman 
of the Finance Committee, and Senator Baucus, the distinguished ranking 
member, for their leadership. Democrats and Republicans may disagree on 
our economic priorities, but we all appreciate the contribution 
Senators Grassley and Baucus have made to the debate.
  There is something else we all agree on. By any measure we are in the 
midst of a very tough economy. Our long-term prospects are very bright, 
but right now times are tough. We are all familiar with the 
statistics--rising unemployment, choppy markets, low growth. These are 
real problems that require real solutions.
  But too often we hear economic theory and ideology as the rationale 
for what we should do.
  I believe that equitable tax relief can be very good short-term and 
long-term policy. If we can find the means to afford it, hard-working 
families and successful entrepreneurs should keep more of what they 
earn. And at this time of low economic growth and high economic 
uncertainty, there is an important role for the Federal Government to 
play in reigniting our economy.
  My concern with the legislation before us, and the reasons I support 
a complete replacement of that bill, is quite simply that it does not 
work as advertised. We all recognize that the bill is not a short-term 
response to the economic downturn. It is a back-door attempt to 
fundamentally change the tax code.
  We may need to take up that debate at some point. But our first 
priority should be getting the economy moving.
  We need to unite behind an economic plan that is based on the 
practical needs of our country for jobs and growth, not on an ideology 
of how the world works.
  It is time to replace the centerpiece of the President's plan--the 
dividend tax cut--with something that both Democrats and Republicans 
can rally behind, a one-time reduction in Federal payroll taxes, wage 
taxes, for every working American. That is the heart of this amendment. 
And it is time we put in place real aid to State and local governments 
so that we don't undo the very economic recovery we are trying to 
start.
  Let me briefly review the key elements of wage tax relief.
  Every working American is subject to taxes on his or her wages which 
are used primarily to fund Social Security and Medicare. Under the wage 
tax cut in this amendment, every American worker would receive a rebate 
for the amount of these taxes they have paid on their first $10,000 of 
earnings, about $800 for each working American.
  In addition, every employer would be eligible to receive a tax credit 
for the payroll taxes they have contributed on behalf of their 
employees. This tax relief would take effect as soon as possible in 
2003.
  The cost of a payroll tax reduction would be paid out of the general 
funds of the Treasury, so that there would be no impact on the Social 
Security trust fund.
  The benefits of a payroll tax cut are numerous. First, a payroll tax 
cut gets money in the hands of people who need it and will spend it--
the litmus test for most economists of a good stimulus program.
  While we can have a long debate about the merits of a dividend tax 
cut, in the real world an additional $800, or $1,600 in the case of two 
working parents, would have a big impact on the average family's 
budget.
  Second, it is good economic policy. The problem with our economy 
today is that there is not enough demand for products and services. The 
administration's supply-side approach, in fact, has it backwards. 
Capacity is not the problem, as illustrated by the fact that inflation 
has dropped during this downturn from 2.8 percent in 2001 to 1.6 
percent in 2002.

  We need to encourage consumption so that businesses will have the 
confidence to invest in new plants and equipment and hire more workers. 
Before the debate was politicized, the Business Roundtable, which 
represents the CEOs of major U.S. corporations, wrote the President 
that an immediate reduction in the payroll tax would be more effective 
than ``any other proposal'' to stimulate demand and productivity.
  Third, a payroll tax cut is equitable. It would benefit the many 
Americans who work, not just the few who receive taxable dividends. The 
Congressional Research Service estimates that 40 percent of all 
dividends are received by the wealthiest 2 percent, or those with 
incomes of $200,000 or greater. By contrast, the majority of American 
households now pay more in payroll taxes than Federal income taxes.
  Fourth, a payroll tax reduction removes a large disincentive to 
creating jobs. In our present economy output is flat with GDP running 
at an annualized rate of only 1.6 percent, but productivity is 
increasing. The result is that since 2000 the economy has lost over 2 
million jobs, and Americans are remaining out of work longer. A payroll 
tax reduction will lower the cost of labor for an employer by about 15 
percent, making it more likely that employers will keep workers on the 
payroll and hire more people.
  Finally, a payroll tax cut is affordable. The $188 billion estimated 
cost of a one-time payroll tax reduction is about one-half the cost of 
the President's dividend tax cut plan. While it costs less, a payroll 
tax reduction provides more immediate stimulus. By contrast, the 
President's dividend tax cut delivers only $2.5 billion in stimulus in 
2003--50 times less impact.
  If we want to grow the economy today, it makes sense to put money to 
work now, not ten years from now. Most importantly, since a payroll tax 
cut is a one year plan, it does not create structural deficits in our 
economy which drive up our national debt and undermine our long term 
growth.
  Let me now turn to the issue of State aid.
  We have had bi-partisan agreement to provide $20 billion in direct 
Federal aid to the States and localities on a one-time basis. I commend 
Senator Grassley for his leadership in getting this done. It is a very 
good start, but it is not enough.
  This amendment provides a bigger boost to our States and locals. They 
clearly need the money.
  According to estimates provided by the National Conference of State 
Legislatures, the total budgetary shortfall for all States in fiscal 
year 2004 was in the range of $80 billion, and an approximate $22 
billion gap still remains from fiscal 2003. Many believe these figures 
remain significantly understated.
  Almost every State is running a significant, multi-hundred million 
dollar deficit. In many States the figure runs into the multi-billions 
of dollars. In several States the deficit's percentage of the total 
State budget is estimated to be in the range of 25 percent or more. New 
York State's budget shortfall alone is $12 billion.
  The situation at the local level is just as dire.
  According to the National Association of Counties, nearly 72 percent 
of counties are facing budget shortfalls, 37 percent are reducing 
services and 17 percent are increasing taxes--all at a time when the 
demand for services and the need for tax cuts is rising given the sour 
economy.
  This is not a regional issue. It is a national crisis.
  I have heard some argue that State aid is not good economic policy. 
But numerous reports indicate that most economists believe that aid to 
the States is, in fact, an extremely effective means of providing 
fiscal stimulus,

[[Page S6238]]

as it quickly puts money in the hands of people who need it and will 
spend it.
  State and local aid also alleviates the need for States to cut more 
jobs, cut more programs, and raise taxes, which acts as an ``anti-
stimulus'' on the economy.
  Without any State aid, an individuals' or family's decrease in 
Federal taxes could be surpassed by an increase in State and local 
taxes.
  We should not support policies where, ``What one hand giveth the 
other taketh away.'' We should not ``rob Peter to pay Paul.''
  This modest increase in the amount of aid is a 1-time shot in the arm 
for the States. It is not an enormous, multi-year change that threatens 
to build more deficits. It is a short-term proposal in response to a 
crisis that threatens to further drag down our economy and further 
increase the tax burden on our citizens.
  Some argue that States and cities have dug their own fiscal graves, 
and should now lie in them. I could not disagree more. Our States and 
cities face the same economic forces as the Federal Government. As the 
economy has forced a dramatic reversal in fiscal health in our Federal 
budget, so has it wreaked havoc on local budgets.

  Why should we hold states and localities to a different standard than 
we hold ourselves?
  And if we want to teach states a lesson, why should we force citizens 
to bear the brunt of that discipline through higher taxes on their 
income, bigger class sizes for their children, and less services for 
those in need?
  The money we are discussing is not a bailout. Nowhere close. States 
and locals will still need to make painful cuts and possibly raise 
taxes. But we can help alleviate the pain which will fall not on 
lawmakers, as we all know, but on our citizens.
  At a time when we are struggling to find funds for homeland defense, 
public education, health services, and the environment, it is 
unacceptable to many of us to push through massive, multi-year tax 
cuts.
  On behalf of the many citizens and business leaders who play by the 
rules and quietly shoulder the burden of financing our government, it 
is time for a new approach.
  This amendment gives us an opportunity for that new approach.
  Ms. LANDRIEU. I thank my colleagues for their comments. I will speak 
an additional 2 or 3 minutes to wrap up, as I stated when I began.
  First of all, I have a great deal of respect for the Senator from 
Iowa, who has been under a great deal of pressure to try to provide a 
plan for the Senate to consider. If we are given a fair hand, we could 
have actually designed a plan that could have been more stimulative, 
more fair, more equitable than the one we will be considering tomorrow.
  No. 1, the dividend proposal--and I could say scheme--tries to 
convince people this will create jobs in America when it will not 
create jobs, and it will raise taxes because of the way it is designed 
in the big picture, taxes at the local level. That is happening now.
  If people think that is not going to happen, look at Arkansas. The 
State of Arkansas just raised income taxes across the board by 3 
percent. That is why they have a zero deficit, because they just raised 
income taxes.
  This plan, if it does not create jobs, will actually raise taxes at 
the local level. In Louisiana, only 18 percent of filers even file for 
a dividend tax. The average is $450 in earnings, so we are saving them 
$100.

  The plan that Senator Corzine, Senator Schumer, and I offer will give 
relief to every worker. It gives help to the creation of jobs in 
America. It gives a check to every businessperson, every small 
business, every large business. It puts money in the economy in a 
significant amount. For a two-wage-earner family, it is $1,500--not 
next year, not in 2004. The checks go out within a few months--two 
checks this year.
  Averages can be extremely misleading. One of the best examples of 
this was an article written recently that said if Bill Gates--assume he 
was worth $20 billion--happened to walk into a homeless shelter and sat 
down at a table with 19 homeless men, and one of the guys from the 
other side walked in and said, What is the average income of the people 
in this homeless shelter, the average income would be $1 billion. But 
that average is not reflective of the reality, which is one guy has $20 
billion and 19 guys have zero. But the average would be $1 billion.
  So beware of averages. I am not fighting for averages. I am fighting 
for the 4.5 million people who live in Louisiana who deserve a break. 
If we are going to give out $350 billion on this floor, then give them 
a fighting chance to get a portion of it, to keep their job, to send 
their kid to college, to pay their house note. And stop confusing them 
with these charts and these averages that do not mean a hill of beans. 
Talk the truth to people. That is what we need. We need to speak the 
truth and keep our promises and be disciplined in what we do.
  I offer this amendment with a great deal of passion. A great deal of 
study has gone into this because we want to work with the President. I 
want to work with the President. I want to work with the Republican 
leadership. I have demonstrated that time and time again.
  But I can't vote for a package that doesn't make sense, that will not 
create jobs, and will raise taxes, all the time promising people it is 
going to do the opposite.
  Like I said on the television, it is hogwash. We are going to offer 
our amendment tomorrow. Hopefully, we will get some votes.
  I ask to send two other amendments to the desk. I am not going to 
debate them tonight, but I offer them now and ask to have the clerk 
report them. I offer them for consideration but not until tomorrow.


                           Amendment No. 620

  The PRESIDING OFFICER. Is there objection to laying aside the pending 
amendment? The Chair hears none, and it is so ordered. The clerk will 
report.
  The legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu] proposes an 
     amendment numbered 620.

  Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To provide pay protection for members of the Reserve and the 
                National Guard, and for other purposes)

       At the end of subtitle C of title V add the following:

     SEC. ____. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED 
                   TO GENERAL BUSINESS CREDIT.

       (a) Ready Reserve-National Guard Credit.--Subpart D of part 
     IV of subchapter A of chapter 1 (relating to business-related 
     credits) is amended by adding at the end the following:

     ``SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.

       ``(a) General Rule.--For purposes of section 38, the Ready 
     Reserve-National Guard employee credit determined under this 
     section for any taxable year is an amount equal to 50 percent 
     of the actual compensation amount for such taxable year.
       ``(b) Definition of Actual Compensation Amount.--For 
     purposes of this section, the term `actual compensation 
     amount' means the amount of compensation paid or incurred by 
     an employer with respect to a Ready Reserve-National Guard 
     employee on any day during a taxable year when the employee 
     was absent from employment for the purpose of performing 
     qualified active duty.
       ``(c) Limitations.--
       ``(1) Maximum period for credit per employee.--The maximum 
     period with respect to which the credit may be allowed with 
     respect to any Ready Reserve-National Guard employee shall 
     not exceed the 12-month period beginning on the first day 
     such credit is so allowed with respect to such employee.
       ``(2) Days other than work days.--No credit shall be 
     allowed with respect to a Ready Reserve-National Guard 
     employee who performs qualified active duty on any day on 
     which the employee was not scheduled to work (for reason 
     other than to participate in qualified active duty).
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified active duty.--The term `qualified active 
     duty' means--
       ``(A) active duty, other than the training duty specified 
     in section 10147 of title 10, United States Code (relating to 
     training requirements for the Ready Reserve), or section 
     502(a) of title 32, United States Code (relating to required 
     drills and field exercises for the National Guard), in 
     connection with which an employee is entitled to reemployment 
     rights and other benefits or to a leave of absence from 
     employment under chapter 43 of title 38, United States Code, 
     and
       ``(B) hospitalization incident to such duty.
       ``(2) Compensation.--The term `compensation' means any 
     remuneration for employment, whether in cash or in kind, 
     which is paid or incurred by a taxpayer and which is 
     deductible from the taxpayer's gross income under section 
     162(a)(1).

[[Page S6239]]

       ``(3) Ready reserve-national guard employee.--The term 
     `Ready Reserve-National Guard employee' means an employee who 
     is a member of the Ready Reserve or of the National Guard.
       ``(4) National guard.--The term `National Guard' has the 
     meaning given such term by section 101(c)(1) of title 10, 
     United States Code.
       ``(5) Ready reserve.--The term `Ready Reserve' has the 
     meaning given such term by section 10142 of title 10, United 
     States Code.''.
       (b) Credit To Be Part of General Business Credit.--
     Subsection (b) of section 38 (relating to general business 
     credit) is amended by striking ``plus'' at the end of 
     paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``, plus'', and by adding at the 
     end the following:
       ``(16) the Ready Reserve-National Guard employee credit 
     determined under section 45G(a).''.
       (c) Conforming Amendment.--The table of sections for 
     subpart D of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 45F the 
     following:

``Sec. 45G. Ready Reserve-National Guard employee credit.''.

       (d) Revision of Partial Exclusion of Dividends Received By 
     Individuals.--Section 116(a)(2)(B) of the Internal Revenue 
     Code of 1986, as added by section 201, is amended by striking 
     ``2007'' and inserting ``2008''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.


                           Amendment No. 621

  Ms. LANDRIEU. I waive any debate. I send another amendment to the 
desk.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
set aside and the clerk will report.
  The legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu] proposes an 
     amendment numbered 621.

  Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To amend the Internal Revenue Code of 1986 to allow employers 
in renewal communities to qualify for the renewal community employment 
  credit by employing residents of certain other renewal communities)

       At the end of end of subtitle C of title V add the 
     following:

     SEC. ____. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR 
                   EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF 
                   CERTAIN OTHER RENEWAL COMMUNITIES.

       (a) In General.--Section 1400H(b)(2) (relating to 
     modification) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) subsection (d)(1)(B) thereof shall be applied by 
     substituting `such renewal community, an adjacent renewal 
     community within the same State as such renewal community, or 
     a renewal community within such State which is within 5 miles 
     of any border of such renewal community' for `such 
     empowerment zone'.''.
       (b) Reduction of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar year 2003, 35.1% shall be substituted for such year.
       (c) Effective Dates.--
       (1) The amendments made by subsection (a) shall take effect 
     as if included in the amendment made by section 101(a) of the 
     Community Renewal Tax Relief Act of 2000.
       (2) Subsection (b) shall take effect on the date of 
     enactment of this Act.

  Ms. LANDRIEU. I waive any debate until tomorrow.
  Mr. GRASSLEY. I yield such time as he might consume to the Senator 
from Nevada.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. ENSIGN. Mr. President, I ask unanimous consent the pending 
amendment be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 622

  Mr. ENSIGN. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Ensign] proposes an amendment 
     numbered 622.

  Mr. ENSIGN. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To encourage the investment of foreign earnings within the 
  United States for productive business investments and job creation)

       On page 281, between lines 2 and 3, insert the following:

     SEC. ____. TOLL TAX ON EXCESS QUALIFIED FOREIGN DISTRIBUTION 
                   AMOUNT.

       (a) In General.--Subpart F of part III of subchapter N of 
     chapter 1 is amended by adding at the end the following new 
     section:

     ``SEC. 965. TOLL TAX IMPOSED ON EXCESS QUALIFIED FOREIGN 
                   DISTRIBUTION AMOUNT.

       ``(a) Toll Tax Imposed on Excess Qualified Foreign 
     Distribution Amount.--If a corporation elects the application 
     of this section, a tax shall be imposed on the taxpayer in an 
     amount equal to 5.25 percent of--
       ``(1) the taxpayer's excess qualified foreign distribution 
     amount, and
       ``(2) the amount determined under section 78 which is 
     attributable to such excess qualified foreign distribution 
     amount.

     Such tax shall be imposed in lieu of the tax imposed under 
     section 11 or 55 on the amounts described in paragraphs (1) 
     and (2) for such taxable year.
       ``(b) Excess Qualified Foreign Distribution Amount.--For 
     purposes of this section--
       ``(1) In general.--The term `excess qualified foreign 
     distribution amount' means the excess (if any) of--
       ``(A) dividends received by the taxpayer during the taxable 
     year which are--
       ``(i) from 1 or more corporations which are controlled 
     foreign corporations in which the taxpayer is a United States 
     shareholder on the date such dividends are paid, and
       ``(ii) described in a domestic reinvestment plan approved 
     by the taxpayer's president, chief executive officer, or 
     comparable official before the payment of such dividends and 
     subsequently approved by the taxpayer's board of directors, 
     management committee, executive committee, or similar body, 
     which plan shall provide for the reinvestment of such 
     dividends in the United States, including as a source for the 
     funding of worker hiring and training; infrastructure; 
     research and development; capital investments; or the 
     financial stabilization of the corporation for the purposes 
     of job retention or creation, over
       ``(B) the base dividend amount.
       ``(2) Base dividend amount.--The term `base dividend 
     amount' means an amount designated under subsection (c)(7), 
     but not less than the average amount of dividends received 
     during the fixed base period from 1 or more corporations 
     which are controlled foreign corporations in which the 
     taxpayer is a United States shareholder on the date such 
     dividends are paid.
       ``(3) Fixed base period.--
       ``(A) In general.--The term `fixed base period' means each 
     of 3 taxable years which are among the 5 most recent taxable 
     years of the taxpayer ending on or before December 31, 2002, 
     determined by disregarding--
       ``(i) the 1 taxable year for which the taxpayer had the 
     highest amount of dividends from 1 or more corporations which 
     are controlled foreign corporations relative to the other 4 
     taxable years, and
       ``(ii) the 1 taxable year for which the taxpayer had the 
     lowest amount of dividends from such corporations relative to 
     the other 4 taxable years.
       ``(B) Shorter period.--If the taxpayer has fewer than 5 
     taxable years ending on or before December 31, 2002, then in 
     lieu of applying subparagraph (A), the fixed base period 
     shall mean such shorter period representing all of the 
     taxable years of the taxpayer ending on or before December 
     31, 2002.
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Dividends.--The term `dividend' means a dividend as 
     defined in section 316, except that the term shall also 
     include amounts described in section 951(a)(1)(B), and shall 
     exclude amounts described in sections 78 and 959.
       ``(2) Controlled foreign corporations and united states 
     shareholders.--The term `controlled foreign corporation' 
     shall have the same meaning as under section 957(a) and the 
     term `United States shareholder' shall have the same meaning 
     as under section 951(b).
       ``(3) Foreign tax credits.--The amount of any income, war, 
     profits, or excess profit taxes paid (or deemed paid under 
     sections 902 and 960) or accrued by the taxpayer with respect 
     to the excess qualified foreign distribution amount for which 
     a credit would be allowable under section 901 in the absence 
     of this section, shall be reduced by 85 percent.
       ``(4) Foreign tax credit limitation.--For all purposes of 
     section 904, there shall be disregarded 85 percent of--
       ``(A) the excess qualified foreign distribution amount,
       ``(B) the amount determined under section 78 which is 
     attributable to such excess qualified foreign distribution 
     amount, and
       ``(C) the amounts (including assets, gross income, and 
     other relevant bases of apportionment) which are attributable 
     to the excess qualified foreign distribution amount which 
     would, determined without regard to this section, be used to 
     apportion the expenses, losses, and deductions of the 
     taxpayer under section 861 and 864 in determining its taxable 
     income from sources without the United States.


[[Page S6240]]


     For purposes of applying subparagraph (C), the principles of 
     section 864(e)(3)(A) shall apply.
       ``(5) Treatment of acquisitions and dispositions.--Rules 
     similar to the rules of section 41(f)(3) shall apply in the 
     case of acquisitions or dispositions of controlled foreign 
     corporations occurring on or after the first day of the 
     earliest taxable year taken into account in determining the 
     fixed base period.
       ``(6) Treatment of consolidated groups.--Members of an 
     affiliated group of corporations filing a consolidated return 
     under section 1501 shall be treated as a single taxpayer in 
     applying the rules of this section.
       ``(7) Designation of dividends.--Subject to subsection 
     (b)(2), the taxpayer shall designate the particular dividends 
     received during the taxable year from 1 or more corporations 
     which are controlled foreign corporations in which it is a 
     United States shareholder which are dividends excluded from 
     the excess qualified foreign distribution amount. The total 
     amount of such designated dividends shall equal the base 
     dividend amount.
       ``(8) Treatment of expenses, losses, and deductions.--Any 
     expenses, losses, or deductions of the taxpayer allowable 
     under subchapter B--
       ``(A) shall not be applied to reduce the amounts described 
     in subsection (a)(1), and
       ``(B) shall be applied to reduce other income of the 
     taxpayer (determined without regard to the amounts described 
     in subsection (a)(1)).
       ``(d) Election.--
       ``(1) In general.--An election under this section shall be 
     made on the taxpayer's timely filed income tax return for the 
     taxable year (determined by taking extensions into account) 
     ending 120 days or more after the date of the enactment of 
     this section, and, once made, may be revoked only with the 
     consent of the Secretary.
       ``(2) All controlled foreign corporations.--The election 
     shall apply to all corporations which are controlled foreign 
     corporations in which the taxpayer is a United States 
     shareholder during the taxable year.
       ``(3) Consolidated groups.--If a taxpayer is a member of an 
     affiliated group of corporations filing a consolidated return 
     under section 1501 for the taxable year, an election under 
     this section shall be made by the common parent of the 
     affiliated group which includes the taxpayer, and shall apply 
     to all members of the affiliated group.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary and appropriate to carry out 
     the purposes of this section, including regulations under 
     section 55 and regulations addressing corporations which, 
     during the fixed base period or thereafter, join or leave an 
     affiliated group of corporations filing a consolidated 
     return.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart F of part III of subchapter N of chapter 1 is amended 
     by adding at the end the following new item:

``Sec. 965. Toll tax imposed on excess qualified foreign distribution 
              amount.''.

       (c) Effective Date.--Except as otherwise provided, the 
     amendments made by this section, other than the amendment 
     made by subsection (d), shall apply only to the first taxable 
     year of the electing taxpayer ending 120 days or more after 
     the date of the enactment of this Act.
       (e) Termination of Rehabilitation Credit.--Section 47 
     (relating to rehabilitation credit) is amended by adding at 
     the end the following new subsection:
       ``(e) Termination.--This section shall not apply to 
     expenditures incurred after December 31, 2003.''.

  Mr. ENSIGN. Mr. President, I send a second-degree amendment to the 
desk.
  Mr. BAUCUS addressed the Chair.
  The PRESIDING OFFICER. The amendment is not in order while time 
remains on the first-degree amendment.
  Mr. ENSIGN. Mr. President, I withdraw the second-degree amendment.
  I want to speak on the first amendment I sent to the desk. The 
amendment I have sent to the desk is a fairly simple amendment. It was 
one of those ideas you find when you go around and listen to real 
people. When you do that, you can come up with ideas that will lead to 
good policy that will actually help real Americans get back to work.
  It has been said that we are in a sluggish economy right now. I agree 
with that. Certainly, the American economy is the strongest economy in 
the world. It has been incredibly resilient, but it is not nearly as 
strong as what we would like to see. So when you talk to various 
people, there are all kinds of ideas of how to get the economy started.
  While I support what the President is trying to do, I have talked to 
a lot of people in small businesses and large businesses who support 
the elimination of the double taxation on dividends. They support the 
acceleration of the cuts in the marginal tax rates and several of the 
other small business expensing items and the like in the bill that the 
President had sent up here, parts of which are in the Finance 
Committee's mark. Those provisions will stimulate the economy.
  I have a provision we sent to the desk that, for a very little cost, 
as far as the people who score these budgets ascertained, for very 
little cost will put a tremendous amount of money into the U.S. 
economy.
  Right now, we encourage businesses to go overseas. We encourage that 
through our Tax Code, and actually it is beneficial a lot of times for 
companies to relocate overseas. But if they do that and make money and 
pay taxes in those other countries, when they try to bring the money 
back here to invest in this country, they pay a 35 percent tax rate on 
that money. So if a company is faced with bringing the money they have 
made overseas back here or investing that money overseas, they say to 
themselves: Do I want to invest $100 out of every $100 overseas or do I 
want to invest $65 out of every $100 back here in the United States? 
The obvious answer is they keep that money overseas, and they invest 
that overseas.
  I appreciate the support of both the ranking member and the chairman 
of the Finance Committee. This amendment was brought up in the Finance 
Committee. They both voted for it. I appreciate their vote on it. It 
narrowly lost, by one vote. That is why we are taking another run at 
this.
  Our amendment says we will give companies that have invested overseas 
and have made money overseas 1 year's time to bring that money back to 
the United States and, instead of paying a 35-percent tax rate, they 
will only pay a 5.25-percent tax rate.
  J.P. Morgan and Associates just did a study to find out how much 
money would actually come back into the United States if this amendment 
is adopted within 12 months, the next 12 months. It is estimated $300 
billion will come back into the United States--$300 billion.
  Compare that with all the other plans that have been talked about 
around here. For a cost of only $4 billion over 10 years, as far as 
what the budget people score it, as far as loss of tax revenues, to get 
a $300 billion boost in the economy--there is nothing else in the 
stimulus package that gives you as much bang for the buck.
  While I support the rest of it, and I am voting for the rest of it, 
this is something that needs to be included in a stimulus package 
because this will truly bring the money back into the United States.
  This is money that is not going to be here any other way. This is not 
taking money away from Government and putting it in the private sector, 
or taking it away from the private sector and putting it in the 
Government. This is money outside the United States that will come back 
here and create U.S. jobs.
  This is a bipartisan amendment. We have done a couple of things to 
make sure it not just comes back here. It cannot go for executive pay, 
for one thing. It has to come back here and be invested in the United 
States, in their companies in the United States.
  We have gone around and talked to people in business, instead of 
relying on a study. I went around talking to a lot of businesses. I was 
talking to some people the other day. They said they have $2 billion in 
cash sitting overseas that they would bring back here in a heartbeat if 
this passed. That is $2 billion in high-tech industry. A big part of 
the sluggish part of our economy has been in the high-tech industry--$2 
billion in just one company that will come back here to the United 
States in the next 12 months. You can clearly see this would have a 
very strong stimulative effect on our economy.
  I thank the cosponsors of the original bill that we introduced--
Senator Boxer, Senator Gordon Smith, and Senator Allen--for joining as 
original cosponsors of this bill. It is bipartisan in nature. Several 
other Members from the other side of the aisle have approached us.
  We think this amendment will be a significant part of this stimulus 
package. Most people aren't aware of this amendment. Most people aren't 
aware of the impact it will have on the economy. But I encourage all of 
our colleagues to learn about this before we vote on it tomorrow. It is 
very obvious that there are upsides to this. I just do not see any 
downside. The upsides are tremendous. A huge amount of money

[[Page S6241]]

will come back into the United States to create American jobs.
  If you ask yourself whether to vote for this amendment, you just have 
to ask yourself whether you want to create jobs overseas or do you want 
to create jobs in the United States? We are talking about $300 billion 
coming back into the United States in the next 12 months to create 
jobs. That is a lot of capital. We have heard about the lack of capital 
and business investment being part of the recession. This would be a 
significant addition to our economy.
  I encourage our colleagues to vote for this amendment.
  I ask for the yeas and nays, and I yield the floor.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, in regard to the statement just made by 
the Senator from Nevada, I voted for the amendment that he speaks about 
in committee. It lost by a 1-vote margin. I don't know whether Members 
have had a chance to give it the thorough thought it ought to have when 
it is brought up on the floor. I hope Members will take a good look at 
it. If there is evidence to back up what has been said about the 
amendment bringing money home, it is something that would give a shot 
in the arm to the economy. It ought to be something we look at. I think 
there has been some talk about it, but not enough at this point. I am 
not suggesting the amendment should not be voted for tomorrow. I am 
just suggesting it is something I am taking a very good look at.
  Mr. ENSIGN. Mr. President, will the Senator yield?
  Mr. GRASSLEY. I yield for a short statement and then I want to 
continue.
  Mr. ENSIGN. The only comment I would make is that a couple of years 
ago when this was introduced, the Joint Tax Committee scored this as 
bringing about $150 billion back into the economy. J. P. Morgan's--a 
private institution--latest study estimated it would be $300 billion. 
They have the latest figures. That is where we would come up 
conservatively. Even if you do not go with the new study, the old study 
said $150 billion. It puts a lot of money back into the economy.
  The PRESIDING OFFICER (Mr. Grassley). The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that all pending 
amendments be temporarily set aside so that the Senator from New York 
can offer an amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from New York.


                           Amendment No. 557

  Mr. SCHUMER. Mr. President, I send amendment No. 557 to the desk and 
ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from New York [Mr. Schumer] proposes an 
     amendment numbered 557.
  Mr. SCHUMER. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

  (Purpose: To amend the Internal Revenue Code of 1986 to make higher 
                       education more affordable)

       At the end of subtitle C of title V, insert the following:

     SEC. ____. EXPANSION OF DEDUCTION FOR HIGHER EDUCATION 
                   EXPENSES.

       (a) In General.--
       (1) Amount of deduction.--Subsection (b) of section 222 
     (relating to deduction for qualified tuition and related 
     expenses) is amended to read as follows:
       ``(b) Limitations.--
       ``(1) Dollar limitations.--
       ``(A) In general.--Except as provided in paragraph (2), the 
     amount allowed as a deduction under subsection (a) with 
     respect to the taxpayer for any taxable year shall not exceed 
     the applicable dollar limit.
       ``(B) Applicable dollar limit.--The applicable dollar limit 
     for any taxable year shall be determined as follows:

                                                             Applicable
``Taxable year:                                          dollar amount:
  2003......................................................$8,000 ....

  2004 and thereafter......................................$12,000.....

       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--The amount which would (but for this 
     paragraph) be taken into account under subsection (a) shall 
     be reduced (but not below zero) by the amount determined 
     under subparagraph (B).
       ``(B) Amount of reduction.--The amount determined under 
     this subparagraph equals the amount which bears the same 
     ratio to the amount which would be so taken into account as--
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $65,000 ($130,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).
       ``(C) Modified adjusted gross income.--For purposes of this 
     paragraph, the term `modified adjusted gross income' means 
     the adjusted gross income of the taxpayer for the taxable 
     year determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after the application of sections 86, 135, 137, 219, 
     221, and 469.

     For purposes of the sections referred to in clause (ii), 
     adjusted gross income shall be determined without regard to 
     the deduction allowed under this section.
       ``(D) Inflation adjustments.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, both of the dollar 
     amounts in subparagraph (B)(i)(II) shall be increased by an 
     amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 2002' for 
     `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any amount as adjusted under clause 
     (i) is not a multiple of $50, such amount shall be rounded to 
     the nearest multiple of $50.''.
       (2) Qualified tuition and related expenses of eligible 
     students.--
       (A) In general.--Section 222(a) (relating to allowance of 
     deduction) is amended by inserting ``of eligible students'' 
     after ``expenses''.
       (B) Definition of eligible student.--Section 222(d) 
     (relating to definitions and special rules) is amended by 
     redesignating paragraphs (2) through (6) as paragraphs (3) 
     through (7), respectively, and by inserting after paragraph 
     (1) the following new paragraph:
       ``(2) Eligible student.--The term `eligible student' has 
     the meaning given such term by section 25A(b)(3).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to payments made in taxable years beginning after 
     December 31, 2002.
       (b) Slower Acceleration of Top Income Rate.--
       (1) In general.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001), as 
     amended by this Act, is amended to read as follows:

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                              The corresponding percentages shall be substituted for the following percentages:
 ``In the case of taxable years  beginning ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           during calendar year:              28%      31%      36%                                                                                                                                              39.6%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2001......................................   27.5%    30.5%    35.5%                                                                                                                                             39.1%
2002......................................   27.0%    30.0%    35.0%                                                                                                                                             38.6%
2003......................................   25.0%    28.0%    33.0%                                                                                                                                             38.6%
2004......................................   25.0%    28.0%    33.0%                                                                                                                                             37.6%
2005......................................   25.0%    28.0%    33.0%                                                                                                                                             37.6%
2006 and thereafter.......................   25.0%    28.0%    33.0%                                                                                                                                            35.0%''.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2002.
       (c) Application of EGTRRA.--The amendment made by 
     subsection (b) shall be subject to title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 to the same 
     extent and in the same manner as the provision of such Act to 
     which such amendment relates.

  Mr. SCHUMER. Mr. President, I will be brief.
  This amendment would continue the work we made in the last tax bill a 
few years back to further increase the deduction for college tuition. 
The bottom line is a simple one: College is a necessity today for young 
people. Good jobs are hardly available without a college education. 
They are getting rarer and rarer. Yet the cost of college is very, very 
expensive.
  If you are wealthy, you can afford it. If you are poor, we often pay 
for your tuition, as we should. I fully support that. But if you are in 
the middle class, that tuition bill every year is a fright. My wife and 
I make good salaries, and we are up late at night trying to figure out 
how we are going to pay for our two daughters' college education. One 
is a freshman in college. One is in the 8th grade. So we know, because 
our salary is better than the average American, what the average 
American does: They struggle in terms of thinking of how they are going 
to pay for tuition.
  This amendment, cosponsored by Senators Biden, Boxer, Durbin, 
Cantwell, and Lieberman, takes the current deduction and makes it 
permanent, because now it expires at the end of 2005. It increases the 
eligible tuition amount to $8,000 for the tax year 2003

[[Page S6242]]

and $12,000 for the tax year 2004 and thereafter. It now is $4,000 for 
the tax year 2003 and thereafter.
  The deduction is available to joint filers with taxable income up to 
$130,000, with a phase-out up to $160,000; and single filers with 
taxable income up to $65,000, with a phase-out up to $80,000.
  The bottom line is simple: This helps middle-class people with 
perhaps the greatest problem they struggle with. It also can be taken 
by parents or grandparents who pay the tuition of a dependent child or 
grandchild. It applies to any student enrolled at least half time, 
including graduate students. It is per student, so if you have two 
students in college or graduate school, you get the deduction for each 
of them.
  It would cost about $26.3 billion for the 10-year period of 2003 to 
2013. The cost of the amendment would be offset by slowing the 
acceleration of the top tax rate reduction so that the top rate would 
become 37.6 percent in 2004 and 35 percent in 2006.
  Now, again, we are dealing with choices. It would be nice to get that 
top rate down quickly, but if you ask me, the future of America depends 
on kids who deserve to go to the best college being able to afford to 
go to the best college. That is probably more important than quickly 
accelerating the top rate.
  This amendment, as I said, applies to the solid, middle class who get 
very, very few tax breaks and yet sweat and struggle to send their 
children to college.
  Mr. President, when a young man or young woman either does not go to 
college, even though they have the grades to get in, or goes to a 
lesser college than the one they deserve to go to, they lose. Their 
lifetime productivity will be lower. Their families lose, but we lose. 
America loses, because in this new ideas-oriented economy, we need the 
best educated labor force possible.
  So I can hardly think of a better investment for America than tuition 
deductibility. We made a good step in the tax bill of 2001, as I said.
  For the first time, I, Senator Snowe of Maine, and then-Senator 
Torricelli of New Jersey managed to get this into the tax bill for up 
to the $4,000 level. This will bring it up to $8,000 and make sure it 
does not expire in 2005.
  Mr. President, as I said, in today's information-driven economy, a 
college degree is no longer a luxury, it is a necessity.
  In terms of long-term economic growth and developing this country's 
human capital--which is ultimately the true source of innovation and 
competitive advantage--we could make a few better investments than 
ensuring future generations have access to an affordable college 
education.
  The challenge is that the cost of college tuition has increased 
faster than any other major consumer item including health care over 
the last 20 years, skyrocketing from $5,156 in 1981 to $21,768 in 2001, 
an increase of 322 percent.
  Even in real, inflation adjusted dollars the price of a 4-year public 
or private college education has almost doubled over the past two 
decades.
  As currently written, this bill does everything except invest in 
people. We have incentives for plants, property, and equipment. Let's 
take this opportunity to invest in the next generation.
  As I said, the amendment makes the current tax deduction permanent 
and increases the eligible tuition amount to $8,000 for tax year 2003 
and $12,000 for tax year 2004 and thereafter.
  The deduction is available to joint filers with taxable income up to 
$130,000, with a phaseout up to $160,000, and single filers with 
taxable income up to $65,000, with a phaseout up to $80,000. For 
example, for a joint filer with an income of $105,000, the legislation 
would mean a savings of as much as $3,240.
  The legislation would allow families to choose the Hope Scholarship 
instead of the deduction, depending on which is more beneficial to 
them.
  I know the hour is late. I heard my colleague from North Dakota got 
out of his lovely home to come to the floor because he was so eager to 
speak, and I am eagerly awaiting his remarks. I hope he did not have to 
get out of his pajamas and back into his nice suit and tie. I don't 
know what his status was while he was at home.
  Mr. President, I ask for the yeas and nays on my amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. SCHUMER. Mr. President, I ask that my remaining time be ceded 
back to the Senator from Montana.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, under our informal agreement, we had been 
switching back and forth. The Senator from South Carolina is now 
recognized.
  The PRESIDING OFFICER. The Chair recognizes the Senator from South 
Carolina.
  Mr. BAUCUS. Mr. President, I urge the Senator, at this late hour, to 
speak briefly so everybody who wants to speak can. The bewitching hour 
arrives at about 10 minutes after midnight tonight.
  Mr. GRAHAM of South Carolina. With that in mind, I will be very 
brief.
  Mr. President, I do appreciate the opportunity to be recognized very 
briefly. The reason I want to speak is to recognize the Finance 
chairman's great job, taking a pretty bad situation and making the best 
of it. It got off to a rocky start in the Senate about how to craft a 
tax package to help stimulate the economy. But I am very impressed by 
what has happened.
  Almost everyone has some view of how to cut taxes. That is good for 
the American public. I am not here to criticize my colleagues on the 
other side who have put forward tax packages. I think we all see the 
economy soggy--whatever adjective you want to use--but both parties 
have a view of getting money back into the economy. That is good.

  I congratulate those who have stepped up to the plate to put money 
back into the economy. I may disagree with your approach. But also I 
would like to congratulate those Senators who took the road less 
traveled; that is, saying: We do not need a tax cut. We cannot afford a 
tax cut. We are in deficits. Now is not the time to take money out of 
the revenue stream. We should be retiring the debt. To those Senators, 
I say, you are absolutely right in terms of having a philosophy that 
makes sense.
  The problem is, if we do not cut taxes, we have shown a propensity, 
particularly our friends on the other side, to spend the money. That is 
an overarching thing that I think is well-documented.
  It is not a debate as to whether we will take the $350 billion, the 
$152 billion, the $550 billion, or the $726 billion, and put it on the 
debt. That is not going to happen. That should happen, but it is not 
going to happen.
  So now the debate becomes, how do we take whatever money we are going 
to set aside for taxes to create jobs? Because if it does not create 
jobs, I am not going to vote for it.
  Twelve Democratic Senators joined with the President and members of 
the majority party to cut taxes in 2001 in a very comprehensive manner. 
A lot has happened since that tax cut: America has been attacked, the 
defense spending needs have gone up, the Iraq war has come, and a lot 
of money has been spent. But I would argue that everything we have done 
to make America stronger, to free the people of Iraq, making us 
stronger, is money well spent. Let's keep that same theme of spending 
our money wisely.
  The one thing that disappoints me about my friends on the other side 
is that every amendment they have to offer or every approach to taxes 
goes after the dividend tax cut. That is the centerpiece of the 
President's view of how to stimulate the economy. Every amendment being 
offered takes money from the dividend tax cut to pay for that 
amendment.
  The best example of what is going on here is Senator Dorgan's 
amendment about repealing the Social Security tax. A month ago we had a 
chance to do that, and our friends on the other side en masse voted no. 
We had a chance to expand the budget resolution by doing away with the 
tax on senior citizens at the 85-percent rate on their Social Security. 
This tax was put in in 1993 by our friends on the other side. I would 
argue that offering this amendment now is the best evidence one could 
point to as to what is going on here. Everything this President is 
asking for in terms of job stimulus and economic activity beyond 
helping people put money in their pockets goes to

[[Page S6243]]

the dividends, double taxation exclusion.
  The Senate Finance Committee has produced a bill that addresses that 
problem. There will be an amendment on this floor that will basically 
mirror what the President has asked for. It will take taxation 
dividends to zero for a 3-year period.
  I honestly believe that is the best way to create jobs simply because 
if you could buy stock and receive a dividend without paying taxes, 
more people would be likely to buy stock. People say the stock market 
would go up 10 or 20 percent. I don't know if that is right or not, but 
that makes sense to me.
  The $350 billion tax proposal by Senator Landrieu I disagree with. 
But you have to understand that the difference between Senator 
Daschle's plan of $152 billion, the Finance Committee's of $350 
billion, and Senator Landrieu's amendment of $350 billion is negligible 
in terms of the money it takes out of the economy to help people 
receive tax benefits. So this argument that our President's plan 
doubles the national debt has to give way to facts. Everybody is 
wanting to cut taxes.
  The point I am trying to make is the American people have to choose 
between these competing plans. We will have to choose. Here is what I 
am going to do. I am going to make a choice to take the tax package 
that was passed in 2001 and accelerate the benefits. Because the reason 
we haven't received the full benefit of the 2001 tax package is we put 
everything off in terms of rate reductions. Let's take the money we are 
putting on the table now and accelerate the rates. Let's accelerate the 
child tax credit so people will have more money to spend. But let's do 
something we didn't do in 2001. Let's create a system so that jobs can 
be created by economic activity.
  You will never convince me that if you make an investment in the 
stock market more attractive, people will not have better jobs, and 
there will be more jobs for people. That is why I will follow the lead 
of the President.
  I am pleased that I am a Member of the Senate at a time when both 
parties want to cut taxes.
  I yield the floor.
  Mr. REED. Mr. President, we find ourselves here, yet again, 
confronted with the third tax cut package in 3 years from the 
President. As a recent Washington Post article pointed out, President 
Bush seems dead set on ramming through tax cuts every year he is in the 
Presidency---regardless of the economy, regardless of the budget 
deficit, regardless of its competition with much-needed programs like a 
universal and comprehensive prescription drug benefit for Medicare.
  In fact, after years of harping on budget deficits, the Republican 
Party has now jettisoned its sense of fiscal responsibility, but only 
after President Clinton adopted that same fiscal responsibility and 
successfully delivered budget surpluses. Now, Republicans are silent on 
the issue.
  But only when we put all of these concerns aside do we get to the 
most fundamental question---the question of fairness. President Bush 
has taken great strides to launch preemptive rhetorical attacks, 
claiming Democrats are engaging in class warfare with opposition to tax 
cuts. But when we consider the facts, it is the President who is 
engaging in class warfare by pushing through a package that steals from 
the poor and then gives to the rich. His preemptive rhetorical attacks 
will not measure up to the facts.
  So, with all the challenges we have ahead, we are being asked to vote 
on another tax cut that will not help the average American family. It 
is incumbent on us to separate the myth of Republican rhetoric from 
reality in how this tax cut will affect our constituents, our families, 
and our country. It is time to set the record straight.
  Myth 1: The Republican tax proposals are best at generating new jobs 
and promoting a strong sustainable recovery. The reality is that the 
Republican tax proposals are poorly targeted to the problems facing the 
economy. They generate fewer jobs and less economic growth this year 
when they are needed most than does the Democratic alternative.
  The economy is in a slump now, with 2.7 million fewer private sector 
jobs than in March 2001, and even the Fed's outlook for the near future 
is weak.
  Economic forecasters expect that the economy will eventually bounce 
back, but they have been expecting a recovery ``soon'' for over a year 
and it has not come yet. With the economy still in a slump, with excess 
unemployment and underutilized factories, the policy we need now is 
job-creating stimulus that restores full employment quickly.
  Republicans still insist that long-term tax cuts for the wealthy 
somehow create jobs, despite the poor track record that 1.7 million 
jobs have been lost since passage of the 2001 tax cut. Their program is 
so backloaded that it doesn't take effect until past the time when it 
is needed. Such a policy is not just ineffective but counterproductive, 
because it creates large deficits and an increase in the public debt 
that is a drag on long-term growth.
  Additionally, most of the Republicans' proposed capital income tax 
cuts reward capital owners without directly encouraging new capital 
formation or higher output. Such tax cuts can't be expected to create 
new jobs if they don't encourage output. In fact, to the extent that 
the tax cuts effectively reduce the cost of capital facing businesses, 
some businesses may be encouraged to substitute capital for labor 
without increasing their output, so that jobs are lost rather than 
gained. If the goal of the tax cut is really job creation, the tax cuts 
should be designed to directly encourage businesses to hire more 
workers.
  The Democratic proposal adheres to the basic principles of sound 
policy: it provides a boost to job creation and economic growth now 
when it is needed and does not create large future deficits or 
increases in debt that are a drag on growth. The Democratic plan just 
has ``more taste'' and is ``less filling.''
  When the JEC Democratic staff compared the impact on jobs and growth 
of the President's $726 billion ``Jobs and Growth Initiative'' and a 
much smaller but more targeted Democratic alternative, they found that 
the Democratic proposal generated roughly twice the additional jobs and 
growth by the end of this year than the President's plan but at one-
seventh the cost. The Republican proposal provides less growth and 
fewer jobs in the first year when they are really needed than the 
Democratic proposal.
  Myth 2: The Republican tax proposals are good for economic growth. 
The reality is that the Republican tax proposals hurt economic growth 
and depress national income in the long run.
  An analysis by the JEC Democratic staff found that because of its 
long-run budgetary costs, the President's plan had adverse long-run 
supply-side effects that lowered national income in 2013 by 0.4 to 0.6 
percent. In their most recent analysis of the President's budget, the 
CBO found adverse macroeconomic effects if tax cuts are not paid for--
that a proper ``dynamic scoring'' would raise, not lower, the costs of 
the administration's tax proposals.
  Economic theories that claim that private saving should fully make up 
for drops in public saving are unsupported by experience. What did we 
learn from the Reagan era and the fiscal discipline of the 1990s? The 
Reagan tax cuts pulled down both public saving and national saving; the 
tax cuts failed to generate the large supply-side responses that had 
been claimed by the proponents of the cuts.
  Myth 3: The Republican proposals are fair and are aimed at the middle 
class. In reality, the Republican proposals are unfair and are heavily 
tilted toward the very top of the income distribution.
  The lion's share of the tax cuts enacted in 2001 already went to the 
very richest of households, particularly the tax cuts scheduled to take 
effect after 2002. Before the 2001 tax cut, the justification for large 
tax cuts for the wealthy was that we were simply ``returning the 
people's money'' and getting rid of surpluses that were too big, and 
the wealthy were the ones who paid the most in taxes. But that is 
clearly not the case because now we have no surpluses.
  By 2010 when the tax cut is fully phased in, over a third of the tax 
cut goes to the richest 1 percent of households, while less than one-
fourth goes to the entire bottom 60 percent. Despite this, the 
administration has proposed additional tax cuts that would clearly 
benefit only high-income households: the dividend tax exclusion and the 
new savings incentives. As part of their growth and jobs package, the

[[Page S6244]]

administration also proposes to accelerate the portions of the 2001 Tax 
Act that highest-income households benefit the most, while leaving 
unchanged, continuing to phase in slowly, elements of the 2001 tax cut 
that most benefit lowest income families with children. The plan truly 
keeps the spirit of the administration's proposals--``leave no 
millionaire behind.''
  In advertising just how ``fair'' their growth package is, the 
administration has repeatedly relied on the average tax cut statistic, 
stating that households will ``on average'' receive a tax cut of over 
$1,000 in 2003. But this is far greater than what a typical household 
near the middle of the income distribution would receive; in fact, 
four-fifths of households would receive less than this amount. 
According to the Urban-Brookings Tax Policy Center, the middle 20 
percent of households would get tax cuts averaging only $200 in 2003 
from the President's plan. Meanwhile, households in the top 1 percent 
would enjoy an average tax cut of over $20,000, and millionaires would 
get tax cuts averaging about $90,000.
  The compromise tax cut package crafted by Senator Grassley limits the 
dividend exemption to the first $500 of a family's dividends in fiscal 
year 2003, increasing by 10 percent of dividend income above $500 from 
2004 to 2007, and 20 percent above $500 from 2008 to 2012. Still, even 
in the first year with the $500 limit, the great bulk of the dividend 
tax cuts will go to highest income households simply because they are 
most likely to have dividend income, and among those with dividend 
income are the most likely to have at least $500 of dividend income. In 
later years as the tax break for higher dividend income increases, the 
share of the dividend tax cut benefiting highest income households will 
increase. Overall, the Grassley plan would still provide a 
disproportionately large tax cut to the highest income households.
  But most importantly, even though the low- and moderate-income 
families need the most help in this troubled economy, Republican 
proposals assist them the least.
  Myth 4: The Republican tax plan is the best way to address the 
problems of long-term unemployment. The reality is that the Republican 
tax plan ignores the plight of the unemployed and the long-term 
unemployed.
  Although the temporary Federal unemployment insurance program will 
expire at the end of May for workers exhausting regular state UI 
benefits, currently the Republican plan does not extend the program. 
Nor does the plan provide any further assistance to the approximately 
1.1 million workers who have exhausted all of their unemployment 
benefits and still have not found work.
  The unemployment rate today is 6.0 percent, higher than when the 
temporary Federal UI program was created in March, 2002, or extended in 
January, 2003. During the last 3 months, over 540,000 private-sector 
jobs have been lost and the economy has lost 2.7 million private-sector 
jobs since the recession began. On average, job losses in a recession 
bottom out after about 15 months and are erased within 2 years. The 
persistence of job losses at the 25-month mark in this recession is the 
most severe since the 1930s. These workers have carried the brunt of 
this recession, there are simply no jobs out there for them.
  Myth 5: The Republican tax plan is fiscally responsible, but the 
reality is that the Republican plan leads to deficits as far as the eye 
can see and exacerbates the fiscal pressures posed by the imminent 
retirement of the baby boom generation.
  What was a $5.6 trillion 10-year surplus when the President took 
office has virtually disappeared, even without counting any current 
proposals. The administration has repeatedly claimed that the 
deterioration was largely out of their control, but the fact is that 
even including the effects of the recession and other technical changes 
to the CBO budget forecast, the tax cuts already passed are responsible 
for over a third of the deterioration in the budget. Enactment of the 
President's new budget proposals would result in a $2.1 trillion 10-
year deficit--a turnaround of an astounding $7.7 trillion.
  A particularly large bias in administration estimates comes from 
assuming that expiring tax provisions will indeed expire and that the 
alternative minimum tax will continue to affect a larger and larger 
segment of the population without any fix.
  Deficits reduce national saving, reduce the resources available for 
productive investments, and hence reduce future economic growth. Even 
Chairman Greenspan recently warned of the danger to our nation's long-
term economic health: ``I support the program to reduce double taxation 
on dividends and the necessary other actions in the federal budget to 
make it revenue-neutral . . . it should be done in the context of paygo 
rules, which means that the deficit must be maintained at minimal 
levels.''
  Myth 6: States will benefit from the Republican tax plan. The reality 
is that the Republican tax plan ignores the fiscal crisis of the States 
and probably makes it worse.
  The Senate Republican plan established a $20 billion fund to be 
equally divided between State governments and local governments, to be 
used for education and job training, health care including Medicaid, 
infrastructure, law enforcement, and other essential services. However, 
at the same time, the Federal tax changes will reduce State revenues by 
approximately $10 billion, leaving States on net with no additional 
funds.

  The recession that began in March 2001 has hit State budgets from 
both sides. Income and sales tax revenues have fallen with reduced 
economic activity, while the demands on social services have grown as 
joblessness has increased and family incomes have declined. Every week 
brings a new headline--or two--announcing another State's proposed 
cutbacks in services or program eligibility as it responds to a 
worsening budget crisis. Numerous spending cuts in social programs, 
including Medicaid, have been announced by States as they work to close 
their widening funding gaps. Some 22 States have proposed or adopted 
cuts in Medicaid and the SCHIP that would drop coverage for at least 
1.7 million people if all the proposals were adopted. Prospects for 
2004 are worse: the National Conference of State Legislators estimates 
that 41 States will face a cumulative budget shortfall of $78 billion.
  The Democratic proposal requires that the Federal Government provide 
twice as much money to help States mitigate the negative impacts of the 
recession on poor and working families. This will also aid job 
creation.
  Myth 7: The congressional Republican tax plans adhere to the limits 
set in the budget resolution. The reality is that the Republican tax 
plans are full of ``smoke and mirrors'' gimmicks that hide their true 
costs.
  The true cost of the 2001 tax cut is much greater than the official 
cost because of the gimmicks of phase-ins and sunsets and because the 
tax cut allowed the alternative minimum tax to pick up additional 
revenue from more and more over time--a situation that is not likely to 
be tolerated for too long. The official cost ignores interest costs as 
well. As a result, a more realistic estimate of the cost of the 2001 
tax cut is much greater than the official cost--nearly $2.5 trillion 
over the first 10 years, not the $1.35 trillion as officially scored. A 
fully phased in version of the tax cut would cost even more over 10 
years, over $4 trillion, even before counting interest payments.
  Myth 8: Republican tax and budget proposals are no threat to Social 
Security and Medicare. In reality the Republican tax and budget 
proposals break our promises on Social Security and Medicare.
  Tax cuts now mean even bigger tax increases later. The Bush tax cut 
agenda gambles away the income security of future generations, and for 
what? Current tax cuts to the wealthy, which Republicans claim will 
ultimately benefit everyone. Instead, those tax cuts will ultimately 
cost everyone.
  Our country's impending demographic challenge and corresponding 
fiscal pressures are a certainty. We were already faced with tough 
decisions ahead about how the retirement of the baby boomers would be 
made ``affordable'' to our Government budget: either taxes will have to 
rise in the future, spending cuts, or some combination of both. The 
Bush tax cut agenda is not responsible for that situation, but it 
surely and dramatically has made the tough problem even tougher. It 
makes the fiscal hole even deeper, and it unjustly pushes off most

[[Page S6245]]

of the financial responsibility for the tax cuts and government 
programs we now enjoy, onto our children and grandchildren. We're 
putting our tax cuts on a credit card that our kids will have to pay 
off.
  In the end, tax reform should be considered in a time of surpluses 
and not in a time during record budget deficits. Most importantly, we 
as a Congress have responsibility to act fairly and effectively to 
combat our Nation's economic crises. The Republican plans do not live 
up to that responsibility and I can only hope that my words today have 
separated the rhetorical myths from the facts.
  Mr. ENZI. Mr. President, once again we have a challenging task before 
us. We have to draw a road map that will lead to economic growth, 
development, and future sustainability. We have to come up with a 
package that is fair to all taxpayers. One that eliminates complexity 
instead of creating more of it. Unfortunately, this is much easier said 
than done. So far, we have all been talking about it. In fact, as I 
have listened to my colleagues speak throughout the day, I have been 
struck by the unusual tenor of this debate. We have Democrats claiming 
they want to eliminate tax increases and Republicans saying we need to 
use tax increases to offset other provisions. While I have serious 
reservations about voting for a package that appears to rob Peter to 
pay Paul, I believe the Finance Committee has crafted a bill that will 
lead to the creation of new jobs. And, that is what this debate should 
be about.
  In April, the number of unemployed people in this country rose to 8.8 
million--8.8 million. That is 8.8 million Americans without jobs and 
without paychecks--but still with plenty of bills to pay. That kind of 
economic chaos sends ripples throughout the economy. It affects more 
and more people until we do something to stop it. Until we take action 
to stem and control the problem so that the economy can regain its 
strength.
  The strength of our economy lies in our workforce, so we have to put 
into place a plan for growth that will actually encourage the creation 
of new jobs. I think this plan is a good step toward that goal, and I 
believe the tax relief provided in this plan will put money back into 
the pockets of taxpayers and provide much needed resources for 
businesses to draw on in order to create more jobs for those who need 
them.
  That is what I would like to talk about for a moment--the employers, 
the small business owners, the entrepreneurs. I am a strong supporter 
of the President's dividend proposal, and I am extremely disappointed 
we have been forced to reduce it in the Senate. I would hope we could 
eventually reach an agreement here and with our colleagues in the House 
to restore that proposal.
  Nearly every week, I go back to Wyoming, and small business owners 
and local residents from around my State want to talk about the 
unfairness of our tax policy when it comes to the double taxation of 
dividends. In fact, I have a stack of over 300 letters from 
constituents representing different age groups and different income 
levels supporting the full elimination of the double taxation on 
dividends.
  Although some of my colleagues continue to misrepresent to the 
American people that this provision would only help the rich, I think 
it is important to remind everyone that families, single people, 
married couples, college students, working mothers, single dads, senior 
citizens, and everybody in between are all unfairly burdened by the 
loss of spendable cash that results from the double taxation of 
dividends. We should not be surprised by that. After all, it is not 
just corporate executives who receive dividends.
  If we eliminate the double taxation on dividends we will put money 
back into the pockets of hardworking taxpayers, and we will also create 
jobs for working Americans across the country. Studies have shown that 
the President's dividend proposal could create as many as 400,000 new 
jobs. That would provide enough jobs for over four-fifths of Wyoming's 
population. That is a lot of jobs.
  I would prefer we pass a dividend proposal that completely eliminates 
this unfair double taxation, but I understand why my colleagues on the 
Finance Committee had to come up with a new dividend plan. They were 
faced with a tough problem--staying within the budgetary constraints 
set forth by Congress while still providing real, economic growth. I 
believe they came up with a workable compromise that will provide some, 
if not all, of the relief necessary to encourage short and long-term 
investment by individuals and corporations. Under this plan, 
individuals will have more money to reinvest in their portfolio, and 
companies will be more likely to use equity financing to fund future 
growth.
  Other important components of this bill are the small business and 
agricultural provisions, as well as the section that will increase the 
allowable amount for small business expensing from $25,000 to $75,000. 
Small business is truly the backbone of our economy, the engine that 
makes it go, and we have to create an environment that encourages 
rather than discourages growth. As corporations struggle to meet income 
projections and cost reductions, small businesses are the ones 
providing jobs and putting food on the tables for our working families.
  As many as 22.4 million small businesses could directly benefit from 
provisions like the increase in small business expensing. Other 
employers will benefit from provisions like the repeal of the Special 
Occupational Tax and the extension of the applicable period for a 
taxpayer to replace livestock sold on account of drought, flood, or 
other weather-related conditions. These provisions mean thousands and 
thousands of employers will have more money to reinvest in their 
company, hire more people, and create more jobs. That means putting 
more Americans back to work.
  This package should be about jobs; and I support the tax relief 
provisions, because I think they will create the jobs that will 
increase the flow of revenues that will bring this economy out of its 
current slump.
  However, I want to make it clear that I am concerned about the high 
number of revenue provisions that are included in the bill. An economic 
growth package should not simply shift the tax burden from one person 
to another. That is not the way to create a more fair tax system. 
Despite my concerns, I will vote for this package because we need an 
economic growth package now. I encourage my colleagues to join me in 
supporting this plan to put more Americans back to work and help our 
families get back on their feet again.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 10 minutes off the remaining time 
on the bill to the Senator from North Dakota.
  Mr. CONRAD. I thank the manager of the bill, the ranking member of 
the Finance Committee.
  The Senator from South Carolina has just been talking about this 
scheme to give the President all that he wants on dividends, but to do 
it within the limits of the $350 billion tax bill that is before the 
Senate.
  A prominent Republican economist commented on this scheme today, 
calling it, ``The Dividend Fiasco.'' This scheme would exempt exempt 
one-third of dividends this year, two-thirds the next year, and all of 
them in the third year, and then sunset the whole proposal after that. 
Again, this is an economist whom Republicans have called before the 
Congress repeatedly to testify on their behalf. Here is what he says 
about that scheme:

       Think, for a moment, of the likely wacky effects of such a 
     plan. If a firm pays you a dividend next year as opposed to 
     this year, then you will save 33 percent on your taxes. With 
     rates falling so sharply, it would be positively 
     irresponsible for a firm to pay any dividends at all until 
     the rates are at their lowest. Then, in 2005, the rate is 
     zero for only one year. Thus, a firm will have an incentive 
     to pay dividends that it might have planned to pay in 2006 in 
     2005 as well. So under the administration's proposal, 
     dividends would go as close to zero as firms could manage for 
     a few years, spike to their highest level in history, then 
     drop sharply for some time.
       Administration sources admit that dividends will likely 
     decline relative to today under this plan between now and 
     2005. How can that be a harmless event given that increases 
     in dividend payments are viewed to be so wonderful? Clearly, 
     this proposal is one of the most patently absurd tax policies 
     ever proposed.

  That is from a prominent Republican economist. He has it exactly 
right. That is patently absurd.

[[Page S6246]]

  It is a hoax. It is an absolute hoax. The principle behind this bill 
is to limit the total tax cut to $350 billion. The reality of the 
proposal advocated by the Senator from South Carolina is that it would 
never be sunsetted, and the cost would turn out to be even more than 
the President's original proposal.
  While I was gone, my colleague from Arizona on the Finance Committee, 
and for whom I have a great deal of respect, suggested that corporate 
taxes are high compared to other nations. That is just not true. If you 
look at the effective tax burden--not the nominal tax burden, the 
effective tax burden--what companies really pay, the United States is a 
relatively low tax jurisdiction. Look at where the OECD places the 
United States in its international ranking of corporate income taxes as 
a percentage of GDP. This is where the United States ranks. We are way 
down the list, nowhere close to being high up on the list.
  Another thing I have heard repeatedly is that this plan is a jobs 
growth package. Let's do the math. If this is a jobs package, it is one 
of the most poorly designed in economic history. They say it is going 
to produce a million jobs. Actually, the models that have been done say 
from 230,000 to 900,000 jobs. Let's say it is a million jobs. It costs 
$350 billion. Let's divide 1 million jobs into $350 billion. Do you 
know what the cost of this program is per job? Three hundred fifty 
thousand dollars a job. Let's say that one more time. The cost of this 
program to create a job is $350,000. Now, that is patently absurd. What 
a ridiculous way to create jobs. The cost is $350,000. What are the 
jobs going to be--$50,000 jobs, if they were pretty good jobs. So it 
would cost $7 for every $1 you would produce in jobs? That makes no 
sense.
  My colleague said that consumer demand is not the problem in the 
economy. That is absolutely the problem. Consumer demand in the last 2 
months has been 1.4 percent and 1.7 percent. That has been the growth. 
That is mighty tepid growth. That is right at the heart of what is 
wrong in this economy.
  My colleague from South Carolina said Senator Dorgan's amendment on 
the Social Security tax is an example of what is wrong here. No. It is 
an example of what is right here. The Senator from South Carolina said 
we had a chance on the budget resolution to do something about the 
previous increase in income subjected to Social Security tax. No, the 
budget resolution doesn't decide those things. It has nothing to do 
with that--nothing, zero.
  This is the place where you can do something about repealing a 
previous tax increase. The budget resolution doesn't change the tax 
code. This is the bill that determines the specifics. Our colleagues 
will have a chance tomorrow to indicate whether they are going to 
repeal the previous tax increase that involved Social Security 
recipients.
  One other thing I heard my colleague from Arizona say was that the 
dividend proposal would be such a tremendous benefit to the elderly. 
That's true, if you are wealthy. If you are an elderly person earning 
more than $500,000 a year, this plan gives you an average benefit of 
$24,000. If you are an elderly person earning less than $50,000 a year, 
your average benefit is just $90. If you are earning $50,000 or less, 
and you are elderly, you get $90. If you are earning over half a 
million dollars, this dividend tax cut gives you $24,000. I don't think 
that is equitable. I don't think it is fair. I don't think it does much 
to stimulate the economy.
  Let's remember the context within which we are making these 
decisions. The budget deficits have skyrocketed. All of this money, 
everything being proposed here, is with borrowed money. This is not 
being offset by spending reductions. This is all borrowed money.
  The Senator from South Carolina says that at times you need to do 
that to give a boost to the economy. I agree with that entirely. That 
is absolutely the right economics. But do you know what? The deficit 
this year on an operating basis is going to be between $500 and $600 
billion.
  Should we do more? I believe we should. In fact, I think we should do 
more than what is in this plan, because this plan doesn't do much. This 
plan doesn't do much in the first year or the second year. This plan is 
very tepid in terms of what it does. In the first year, this plan gives 
$44 billion of stimulus in a $10.5 trillion economy.
  Frankly, that is not going to do much of anything. That is exactly 
what we see when you analyze this proposal in terms of what it is going 
to do to grow the gross domestic product. Senator Daschle's plan is the 
only plan that has much stimulus--$125 billion this year. Only $44 
billion is in the plan before us.
  Here is an analysis of what the various plans would do in terms of 
stimulus. The President's plan, which is even more costly than the one 
before us, would increase GDP by less than half of 1 percent. The 
Democratic plan is significantly more, seven-tenths of 1 percent. In 
the second year, the Republican plan is half of 1 percent, and the 
Democratic plan nine-tenths of 1 percent.
  But what is most interesting is that the Republican plan, over the 10 
years, is actually negative. It actually hurts economic growth. How can 
that be? Very simply, because it is going to explode deficits and debt.
  Here is what happens under the Republican plan: The debt of $6 
trillion in 2002 will go to $9 trillion by 2008, and to $12 trillion by 
the end of this budget period. It explodes the deficits and debt.
  The Chairman of the Federal Reserve, Mr. Greenspan, has told us:

       With a large deficit, you will be significantly 
     undercutting the benefits that would be achieved from the tax 
     cuts.

  He also said:

       New academic evidence had strengthened his opinion that 
     budget deficits led directly to higher interest rates, and 
     that those higher interest rates choke off economic growth.

  It is not just Chairman Greenspan. Here are 10 Nobel laureates in 
economics.
  The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator has 
used 10 minutes.
  Mr. CONRAD. I will conclude by saying the tax cut plan proposed by 
President Bush is not the answer to these problems of weak economic 
growth.
  I ask unanimous consent for an additional 30 seconds to call up my 
amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CONRAD. Mr. President, I ask unanimous consent to set aside the 
pending amendments.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 611

  Mr. CONRAD. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from North Dakota [Mr. Conrad] proposes an 
     amendment numbered 611.

  Mr. CONRAD. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To make the child tax credit acceleration applicable to 2002)

       Strike page 14, line 8 through page 15, line 11, and insert 
     the following:
       ``(d) No Interest.--No interest shall be allowed on any 
     overpayment attributable to this section.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter B of chapter 65 is amended by adding at the end 
     the following new item:

``Sec. 6429. Advance payment of portion of increased child credit for 
              2003.''.

       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2002.
       (2) Subsections (a) and (c).--
       (A) The amendment made by subsection (a) shall apply to 
     taxable years beginning after December 31, 2001.
       (B) The amendments made by subsection (c) shall take effect 
     on the date of the enactment of this Act.
       Strike the first table on page 8 and insert the following:

------------------------------------------------------------------------
                                     The corresponding percentages shall
                                      be substituted for the following
  ``In the case of taxable years                percentages:
  beginning during calendar year:  -------------------------------------
                                      28%      31%      36%      39.6%
------------------------------------------------------------------------
2001..............................   27.5%    30.5%    35.5%     39.1%
2002..............................   27.0%    30.0%    35.0%     38.6%
2003..............................   25.0%    28.0%    33.0%     38.6%
2004..............................   25.0%    28.0%    33.0%     37.6%
2005..............................   25.0%    28.0%    33.0%     37.6%
2006 and thereafter...............   25.0%    28.0%    33.0%    35.0%''.
------------------------------------------------------------------------

  Mr. CONRAD. The amendment increases the child tax credit from $600 to

[[Page S6247]]

$1,000 and makes it retroactive to the beginning of 2002 instead of 
2003, as called for in the bill. To offset the cost, the amendment 
would delay the rate reduction for the 1 percent of taxpayers in the 
top income tax bracket from this year to 2005. I hope my colleagues 
will give it close consideration.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending 
amendments be temporarily laid aside so I might call up amendment No. 
612.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 612

  Mr. BAUCUS. Mr. President, I send the amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Montana [Mr. Baucus], for Mr. McCain, 
     proposes an amendment numbered 612.

  Mr. BAUCUS. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. BAUCUS. Mr. President, this is the Military Fairness Act. I am 
offering it, and it is being cosponsored by Senator McCain.
  Very simply, this is the amendment that is Ping-Ponging back and 
forth between the House and Senate. We did pass, at one point, 
provisions that allow National Guard, Reservists, and other military 
personnel to have a level playing field and not be unfairly taxed, 
particularly while serving in our Armed Forces. One is the death 
benefits gratuity and another is the travel expenses. There are similar 
provisions like that.
  It is only fair, particularly as we are winding down the war in 
Iraq--and the hostilities there are not over--about 80 percent of the 
benefits of this amendment are to our Reservists and National Guard who 
will always be serving our country. This amendment makes very good 
sense. It is paid for by slightly reducing the rate reduction at the 
top rate. It is a very modest change. I think it is only fair and 
proper.
  Again, the major cosponsor of this amendment is the Senator from 
Arizona, Senator McCain. I urge adoption of the amendment at the 
appropriate time.
  Mr. McCAIN. Mr. President, I am proud to sponsor with my colleague 
Senator Baucus this important amendment to S. 1054, the Jobs and Growth 
Tax Act of 2003. This amendment would simply add the Armed Forces Tax 
Fairness Act of 2003, as previously passed by this body, to the growth 
bill. This amendment is much needed tax relief for our men and women in 
uniform whose sacrifice and commitment are the foundation upon which 
the freedom we all enjoy is built. There are a number of provisions to 
this amendment that many of us have worked on for several years.
  One of the provisions I would particularly like to highlight today is 
section 601. The Military Home Owners equity Act has passed this body 
previously on a 97-to-0 vote. This legislation would allow service 
members, who 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 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 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. Unfortunately, the 1997 home sale 
provision unintentionally discourages home ownership among service 
members and Foreign Service Officers.
  This provision will not create a new tax benefit, it merely modifies 
current law to include the time service members are away from home on 
active duty when calculating the number of years the homeowners have 
lived in their primary residence. In short, this provision is narrowly 
tailored to remedy a specific dilemma.
  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, and 
unfortunately our service men and women were left out of this critical 
tax relief act.
  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 taxpayers had to be at least 55 years old and live 
in their 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 (1) own 
the home for at least 2 of the 5 years preceding the sale, and (2) 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 the women and men who 
serve this country overseas from qualifying for this beneficial tax 
relief.
  Constant travel across the United States and abroad is inherent in 
the military and Foreign Service. 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 they do not have a spouse who resides in the home during their 
absence, they 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 families who serve our 
Nation abroad. 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. The 
bill amends the Internal Revenue Code so that service members and 
Foreign Service officers will be considered to be using their house as 
their main residence for any period that they are assigned overseas in 
the execution of their duties. In short, they will be deemed to be 
using their house as their main home, even if they are stationed in 
Bosnia, the Persian Gulf, in the `no man's land,'' commonly called the 
DMZ between North and South Korea, or anywhere else they are assigned.
  In the wake of September 11 and operations in Iraq and Afghanistan, 
our Armed Forces are now deployed to an unprecedented number of 
locations, in very significant numbers. They are away from their 
primary homes, protecting and furthering the freedoms we Americans hold 
so dear. We cannot afford to discourage military service by penalizing 
military personnel with higher taxes merely because they are doing 
their job. Military 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 use the Tax Code to 
heap additional burdens upon our women and men in uniform.
  In my view, the way to decrease the likelihood of further 
inequalities 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 ensure that the Tax Code 
is as fair and equitable as possible.
  The Taxpayer's Relief Act of 1997 was designed to provide sweeping 
tax relief to all Americans, including those who

[[Page S6248]]

serve this country abroad. Yes, 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 consistency to 
our increasingly complex Tax Code.
  I would like to thank Senator Baucus and the chairman of the Finance 
Committee, Senator Grassley, for their superb effort on behalf of our 
soldiers, sailors, airmen, marines, and Foreign Service officers. As I 
stated earlier, the provisions in this amendment are issues we have 
needed to fix for a long time. Let's get it passed this year and 
finally enacted into law.
  Mr. GRAHAM of South Carolina. I rise today to tell you about an 
urgent issue in my State that could benefit from the same relief this 
bill provides for Arkansas schools. The relief is known as ``advance 
refunding.''
  Just like homeowners, municipally owned utilities are able to 
refinance or ``refund'' their bonds. But the Tax Code permits them to 
do this only once. Imagine if you had refinanced your home at 7.5 
percent a few years ago. Having taken that one opportunity, now that 
rates are at 5.15 percent, you would not be permitted to do another 
refinancing. You would miss out on this opportunity to refinance.
  There is a utility in my State that finds itself just in this 
position and all of the utility's consumers suffer the consequences. 
Without an additional advance refunding, it customers face significant 
rate increases as the utility struggles to remain competitive in the 
restructured marketplace while paying off debt it incurred to bring 
electricity to many customers in my State. I want my constituents to 
enjoy stable rates just as I know yours do, Mr. Chairman. I ask if you 
would work with me in this conference to provide additional advance 
refunding relief to meet this urgent need in my State.
  Mr. GRASSLEY. I agree that an additional advance refunding 
opportunity would be helpful and practical in your situation and in 
others. I will work with you in conference to see if there is an 
opportunity to accommodate you.
  Mr. BAUCUS. Mr. President, tomorrow, an amendment will be offered--I 
am not sure by whom; it may be Senator Nickles from Oklahoma--which 
accelerates the dividend exclusion provisions considerably beyond the 
provisions that are in the Finance Committee bill. Our understanding is 
it is a 50 percent exclusion in the first year, 2003, and 100 percent 
up through 2006, and after that the provision will be sunsetted.
  I will make a couple of comments because we will not have time to 
comment on it tomorrow at any length. One is that this is a significant 
increase from the committee bill, which costs $80 billion. My 
understanding is that this amendment will cost in the neighborhood of 
$124 billion. How is the $40 billion difference going to be paid for?
  Clearly, there is going to have to be cutting back on other tax 
cuts--whether it is the marriage penalty or whatever--to bring that to 
the attention of Members who may believe it is better to have a child 
tax credit or a marriage penalty and whatnot.
  And I have not seen the amendment, so I am not exactly sure of the 
provisions, but from all indications, it will eliminate the provisions 
in the President's dividend exclusion, which will require that before a 
dividend can be paid, a company would have to pay income taxes in the 
prior year. If that provision is eliminated, that is going to mean that 
we are not only ending double taxation of dividends, in many cases we 
will be ending single taxation of dividends, which, in a sense, will 
mean dividends will be tax-free. All American wages will be taxed, 
interest income will be taxed, and other ordinary income is going to be 
taxed. But if a company did not pay taxes in the prior year, then the 
company will be basically giving dividends to shareholders, and there 
will be no tax on them, not at the individual level or the corporate 
level. That, I think, is a gross miscarriage of justice.
  For that additional reason, I hope the Senate does not adopt that 
provision when we vote on it tomorrow.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.

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