Congressional Record, Volume 149 Issue 73 (Thursday, May 15, 2003)

[Congressional Record Volume 149, Number 73 (Thursday, May 15, 2003)]
[Senate]
[Pages S6451-S6475]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

[[Page S6451]]
JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003--Continued

The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, is it in order to continue now on the
growth package?
The PRESIDING OFFICER. The regular order is the growth package.

Amendments Nos. 567, 571, 580, 593, 613, 625, 626, 627, 644 As
Modified, 646, 649, 651, 654, 657, 659 As Modified, 661, 665, 673, and
680, En Bloc

Mr. GRASSLEY. Mr. President, I have a series of amendments that both
sides have cleared. I send the amendments to the desk, ask that they be
considered, as modified, ask that they be agreed to en bloc, and that
the motion to reconsider be laid upon the table.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendments were agreed to, as follows:

Amendment no. 567

(Purpose: To require group health plans to provide coverage for
reconstructive surgery following mastectomy, consistent with the
Women's Health and Cancer Rights Act of 1998)

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

SEC. ____. CONFORMING THE INTERNAL REVENUE CODE OF 1986 TO
REQUIREMENTS IMPOSED BY THE WOMEN'S HEALTH AND
CANCER RIGHTS ACT OF 1998.

(a) In General.--Subchapter B of chapter 100 (relating to
other requirements) is amended by inserting after section
9812 the following new section:

``SEC. 9813. REQUIRED COVERAGE FOR RECONSTRUCTIVE SURGERY
FOLLOWING MASTECTOMIES.

``(a) In General.--A group health plan that provides
medical and surgical benefits with respect to a mastectomy
shall provide, in a case of a participant or beneficiary who
is receiving benefits in connection with a mastectomy and who
elects breast reconstruction in connection with such
mastectomy, coverage for--
``(1) all stages of reconstruction of the breast on which
the mastectomy has been performed,
``(2) surgery and reconstruction of the other breast to
produce a symmetrical appearance, and
``(3) prostheses and physical complications of mastectomy,
including lymphedemas,

in a manner determined in consultation with the attending
physician and the patient. Such coverage may be subject to
annual deductibles and coinsurance provisions as may be
deemed appropriate and as are consistent with those
established for other benefits under the plan. Written notice
of the availability of such coverage shall be delivered to
the participant upon enrollment and annually thereafter.
``(b) Prohibitions.--A group health plan may not--
``(1) deny to a patient eligibility, or continued
eligibility, to enroll or to renew coverage under the terms
of the plan, solely for the purpose of avoiding the
requirements of this section, and
``(2) penalize or otherwise reduce or limit the
reimbursement of an attending provider, or provide incentives
(monetary or otherwise) to an attending provider, to induce
such provider to provide care to an individual participant or
beneficiary in a manner inconsistent with this section.
``(c) Rule of Construction.--Nothing in this section shall
be construed to prevent a group health plan from negotiating
the level and type of reimbursement with a provider for care
provided in accordance with this section.''
(b) Clerical Amendment.--The table of sections for chapter
100 of such Code is amended inserting after the item relating
to section 9812 the following new item:

``Sec. 9813. Required coverage for reconstructive surgery following
mastectomies.''

(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to plan years beginning on or after the
date of enactment of this Act.
(2) Special rule for collective bargaining agreements.--In
the case of a group health plan maintained pursuant to 1 or
more collective bargaining agreements between employee
representatives and 1 or more employers, any plan amendment
made pursuant to a collective bargaining agreement relating
to the plan which amends the plan solely to conform to any
requirement added by this section shall not be treated as a
termination of such collective bargaining agreement.

Amendment no. 571

(Purpose: To amend the Internal Revenue Code of 1986 to expand the
combat zone income tax exclusion to include income for the period of
transit to the combat zone and to remove the limitation on such
exclusion for commissioned officers, and for other purposes)

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

SEC. ____. EXPANSION OF INCOME TAX EXCLUSION FOR COMBAT ZONE
SERVICE.

(a) Combat Zone Service To Include Transit to Zone.--
Section 112(c)(3) of the Internal Revenue Code of 1986
(relating to definitions) is amended by adding at the end the
following new sentence: ``Such service shall include any
period (not to exceed 14 days) of direct transit to the
combat zone.''.
(b) Removal of Limitation on Exclusion for Commissioned
Officers.--
(1) In general.--Subsection (b) of section 112 of the
Internal Revenue Code of 1986 (relating to certain combat
zone compensation of members of the Armed Forces) is
repealed.
(2) Conforming amendments.--
(A) Section 112(a) of such Code is amended--
(i) by striking ``below the grade of commissioned
officer'', and
(ii) by striking ``Enlisted Personnel'' in the heading and
inserting ``In General''.
(B) Section 112(c) of such Code is amended by striking
paragraphs (1) and (5) and by redesignating paragraphs (2),
(3), and (4) as paragraphs (1), (2), and (3), respectively.
(c) Effective Date.--The amendments made by this section
shall apply to months beginning after December 31, 2002.

SEC. ____. AVAILABILITY OF CERTAIN TAX BENEFITS FOR MEMBERS
OF THE ARMED FORCES PERFORMING SERVICES AT
GUANTANAMO BAY NAVAL STATION, CUBA, AND ON THE
ISLAND OF DIEGO GARCIA.

(a) General Rule.--In the case of a member of the Armed
Forces of the United States who is entitled to special pay
under section 305 of title 37, United States Code (relating
to special pay: hardship duty pay), for services performed as
a member of the Joint Task Force Guantanamo at Guantanamo Bay
Naval Station, Cuba, or for services performed on the Island
of Diego Garcia as part of Operation Iraqi Freedom, such
member shall be treated in the same manner as if such
services were in a combat zone (as determined under section
112 of the Internal Revenue Code of 1986) for purposes of the
following provisions of such Code:
(1) Section 2(a)(3) (relating to special rule where
deceased spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain
combat pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of
Armed Forces on death).
(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred
wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat
pay for members of the Armed Forces).
(6) Section 4253(d) (relating to the taxation of phone
service originating from a combat zone from members of the
Armed Forces).
(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
(8) Section 7508 (relating to time for performing certain
acts postponed by reason of service in combat zone).
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), this
section shall take effect on January 1, 2003.
(2) Withholding.--Subsection (a)(5) shall apply to
remuneration paid after December 31, 2002.

amendment No. 580

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

Amendment No. 593

(The amendment is printed in the Record of May 14, 2003 under ``Text
of Amendments.'')

[[Page S6452]]

amendment no. 613

(Purpose: To clarify that water and sewerage service laterals qualify
as contribution in aid of construction)

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

SEC. ____. CLARIFICATION OF CONTRIBUTION IN AID OF
CONSTRUCTION FOR WATER AND SEWERAGE DISPOSAL
UTILITIES.

(a) In General.--Subparagraph (A) of section 118(c)(3)
(relating to definitions) is amended to read as follows:
``(A) Contribution in aid of construction.--The term
`contribution in aid of construction' shall be defined by
regulations prescribed by the Secretary, except that such
term--
``(i) shall include amounts paid as customer connection
fees (including amounts paid to connect the customer's water
service line or sewer lateral line to the utility's
distribution or collection system or extend a main water or
sewer line to provide service to a customer), and
``(ii) shall not include amounts paid as service charges
for starting or stopping services.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to contributions made after the date of the
enactment of this Act.

amendment no. 625

(The text of the amendment is printed in today's Record under ``Text
of Admendments.'')

amendment no. 626

(Purpose: To amend the Internal Revenue Code to simplify certain
provisions applicable to real estate investment trusts)

At the approprite place, add the following:

TITLE I--REIT CORRECTIONS

SEC. 101. REVISIONS TO REIT ASSET TEST.

(a) Expansion of Straight Debt Safe Harbor.--Section 856
(defining real estate investment trust) is amended--
(1) in subsection (c) by striking paragraph (7), and
(2) by adding at the end the following new subsection:
``(m) Safe Harbor in Applying Subsection (c)(4)--
``(1) In general.--In applying subclause (III) of
subsection (c)(4)(B)(iii), except as otherwise determined by
the Secretary in regulations, the following shall not be
considered securities held by the trust:
``(A) Straight debt securities of an issuer which meet the
requirements of paragraph (2).
``(B) Any loan to an individual or an estate.
``(C) Any section 467 rental agreement (as defined in
section 467(d)), other than with a person described in
subsection (d)(2)(B).
``(D) Any obligation to pay rents from real property (as
defined in subsection (d)(1)).
``(E) Any security issued by a State or any political
subdivision thereof, the District of Columbia, a foreign
government or any political subdivision thereof, or the
Commonwealth of Puerto Rico, but only if the determination of
any payment received or accrued under such security does not
depend in whole or in part on the profits of any entity not
described in this subparagraph or payments on any obligation
issued by such an entity,
``(F) Any security issued by a real estate investment
trust.
``(G) Any other arrangement as determined by the Secretary.
``(2) Special rules relating to straight debt securities.--
``(A) In general.--For purposes of paragraph (1)(A),
securities meet the requirements of this paragraph if such
securities are straight debt, as defined in section
1361(c)(5) (without regard to subparagraph (B)(iii) thereof).
(B) Special rules relating to certain contingencies.--For
purposes of subparagraph (A), any interest or principal shall
not be treated as failing to satisfy section 1361(c)(5)(B)(i)
solely by reason of the fact that the time of payment of such
interest or principal is subject to a contingency, but only
if--
``(i) any such contingency does not have the effect of
changing the effective yield to maturity, as determined under
section 1272, other than a change in the annual yield to
maturity which either--
``(I) does not exceed the greater of \1/4\ of 1 percent or
5 percent of the annual yield to maturity, or
``(II) results solely from a default or the exercise of a
prepayment right by the issuer of the debt, or
``(ii) neither the aggregate issue price nor the aggregate
face amount of the issuer's debt instruments held by the
trust exceeds $1,000,000 and not more than 12 months of
unaccrued interest can be required to be prepaid thereunder.
``(C) Special rules relating to corporate or partnership
issuers.--In the case of an issuer which is a corporation or
a partnership, securities that otherwise would be described
in paragraph (1)(A) shall be considered not to be so
described if the trust holding such securities and any of its
controlled taxable REIT subsidiaries (as defined in
subsection (d)(8)(A)(iv)) hold any securities of the issuer
which--
``(i) are not described in paragraph (1) (prior to the
application of paragraph (1)(C)), and
``(ii) have an aggregate value greater than 1 percent of
the issuer's outstanding securities.
``(3) Look-through rule for partnership securities.--
``(A) In general.--For purposes of applying subclause (III)
of subsection (c)(4)(B)(iii)--
``(i) a trust's interest as a partner in a partnership (as
defined in section 7701(a)(2)) shall not be considered a
security, and
``(ii) the trust shall be deemed to own its proportionate
share of each of the assets of the partnership.
``(B) Determination of trust's interest in partnership
assets.--For purposes of subparagraph (A), with respect to
any taxable year beginning after the date of the enactment of
this subparagraph--
``(i) the trust's interest in the partnership assets shall
be the trust's proportionate interest in any securities
issued by the partnership (determined without regard to
subparagraph (A)(i) and paragraph (4), but not including
securities described in paragraph (1)), and
``(ii) the value of any debt instrument shall be the
adjusted issue price thereof, as defined in section
1272(a)(4).
``(4) Certain partnership debt instruments not treated as a
security.--For purposes of applying subclause (III) of
subsection (c)(4)(B)(iii)--
``(A) any debt instrument issued by a partnership and not
described in paragraph (1) shall not be considered a security
to the extent of the trust's interest as a partner in the
partnership, and
``(B) any debt instrument issued by a partnership and not
described in paragraph (1) shall not be considered a security
if at least 75 percent of the partnership's gross income
(excluding gross income from prohibited transactions) is
derived from sources referred to in subsection (c)(3).
``(5) Secretarial guidance.--The Secretary is authorized to
provide guidance (including through the issuance of a written
determination, as defined in section 6110(b)) that an
arrangement shall not be considered a security held by the
trust for purposes of applying subclause (III) of subsection
(c)(4)(B)(iii) notwithstanding that such arrangement
otherwise could be considered a security under subparagraph
(F) of subsection (c)(5).''

SEC. 102. CLARIFICATION OF APPLICATION OF LIMITED RENTAL
EXCEPTION.

Subparagraph (A) of section 856(d)(8) (relating to special
rules for taxable REIT subsidiaries) is amended to read as
follows:
``(A) Limited rental exception.--
(i) In general.--The requirements of this subparagraph are
met with respect to any property if at least 90 percent of
the leased space of the property is rented to persons other
than taxable REIT subsidiaries of such trust and other than
persons described in paragraph (2)(B).
(ii) Rents must be substantially comparable.--Clause (i)
shall apply only to the extent that the amounts paid to the
trust as rents from real property (as defined in paragraph
(1) without regard to paragraph (2)(B)) from such property
are substantially comparable to such rents paid by the other
tenants of the trust's property for comparable space.
``(iii) Times for testing rent comparability.--The
substantial comparability requirement of clause (ii) shall be
treated as met with respect to a lease to a taxable REIT
subsidiary of the trust if such requirement is met under the
terms of the lease--
``(I) at the time such lease is entered into,
``(II) at the time of each extension of the lease,
including a failure to exercise a right to terminate, and
``(III) at the time of any modification of the lease
between the trust and the taxable REIT subsidiary if the rent
under such lease is effectively increased pursuant to such
modification.

With respect to subclause (III), if the taxable REIT
subsidiary of the trust is a controlled taxable REIT
subsidiary of the trust, the term `rents from real property'
shall not in any event include rent under such lease to the
extent of the increase in such rent on account of such
modification.
``(iv) Controlled taxable reit subsidiary.--For purposes of
clause (iii), the term `controlled taxable REIT subsidiary'
means, with respect to any real estate investment trust, any
taxable REIT subsidiary of such trust if such trust owns
directly or indirectly--
``(I) stock possessing more than 50 percent of the total
voting power of the outstanding stock of such subsidiary, or
``(11) stock having a value of more than 50 percent of the
total value of the outstanding stock of such subsidiary.
``(v) Continuing qualification based on third party
actions.--If the requirements of clause (i) are met at a time
referred to in clause (iii), such requirements shall continue
to be treated as met so long as there is no increase in the
space leased to any taxable REIT subsidiary of such trust or
to any person described in paragraph (2)(B).
``(vi) Correction period.--If there is an increase referred
to in clause (v) during any calendar quarter with respect to
any property, the requirements of clause (iii) shall be
treated as met during the quarter and the succeeding quarter
if such requirements are met at the close of such succeeding
quarter.''.

SEC. 103. DELETION OF CUSTOMARY SERVICES EXCEPTION.

Subparagraph (B) of section 857(b)(7) (relating to
redetermined rents) is amended by striking clause (ii) and by
redesignating

[[Page S6453]]

clauses (iii), (iv), (v), (vi), and (vii) as clauses (ii),
(iii), (iv), (v), and (vi), respectively.

SEC. 104. CONFORMITY WITH GENERAL HEDGING DEFINITION.

(a) Definition.--Subparagraph (G) of section 856(c)(5)
(relating to treatment of certain hedging instruments) is
amended to read as follows:
``(G) Treatment of certain hedging instruments.--Except to
the extent provided by regulations, any income of a real
estate investment trust from a hedging transaction (as
defined in clause (ii) or (iii) of section 1221(b)(2)(A))
which is clearly identified pursuant to section 1221(a)(7),
including gain from the sale or disposition of such a
transaction, shall not constitute gross income under
paragraph (2) to the extent that the transaction hedges any
indebtedness incurred or to be incurred by the trust to
acquire or carry real estate assets.''.

SEC. 105. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

Clause (i) of section 857(b)(5)(A) (relating to imposition
of tax in case of failure to meet certain requirements) is
amended by striking ``90 percent'' and inserting ``95
percent''.

SEC. 106. PROHIBITED TRANSACTIONS PROVISIONS.

(a) Expansion of Prohibited Transaction Safe Harbor.--
Section 857(b)(6) (relating to income from prohibited
transactions) is amended by redesignating subparagraphs (D)
and (E) as subparagraphs (E) and (F), respectively, and by
inserting after subparagraph (C) the following new
subparagraph:
``(D) Certain sales not to constitute prohibited
transactions.--For purposes of this part, the term
`prohibited transaction' does not include a sale of property
which is a real estate asset (as defined in section
856(c)(5)(B)) if--
``(i) the trust held the property for not less than 4 years
in connection with the trade or business of producing timber,
``(ii) the aggregate expenditures made by the trust, or a
partner of the trust, during the 4-year period preceding the
date of sale which--
``(I) are includible in the basis of the property (other
than timberland acquisition expenditures), and
``(II) are directly related to operation of the property
for the production of timber, or for the preservation of the
property for use as timberland,

do not exceed 30 percent of the net selling price of the
property,
``(iii) the aggregate expenditures made by the trust, or a
partner of the trust, during the 4-year period preceding the
date of sale which--
``(I) are includible in the basis of the property (other
than timberland acquisition expenditures), and
``(II) are directly related to operation of the property
for the production of timber, or for the preservation of the
property for use as timberland,

do not exceed 50 percent of the net selling price of the
property,
``(iv)(I) during the taxable year the trust does not make
more than 7 sales of property (other than sales of
foreclosure property or sales to which section 1033 applies),
or
``(II) the aggregate adjusted bases (as determined for
purposes of computing earnings and profits) of property
(other than sales of foreclosure property or sales to which
section 1033 applies) sold during the taxable year does not
exceed 10 percent of the aggregate bases (as so determined)
of all of the assets of the trust as of the beginning of the
taxable year,
``(v) in the case that the requirement of clause (iv)(I) is
not satisfied, substantially all of the marketing
expenditures with respect to the property were made through
an independent contractor (as defined in section 856(d)(3))
from whom the trust itself does not derive or receive any
income, and
``(vi) the sales price of the property sold by the trust to
its taxable REIT subsidiary is not based in whole or in part
on the income or profits of the subsidiary or the income or
profits that the subsidiary derives from the sale or
operation of such property.''.

SEC. 107. EFFECTIVE DATES.

(a) In General.--Except as provided in subsection (b), the
amendments made by this title shall apply to taxable years
beginning after December 31, 2000.
(b) Sections 103 Through 106.--The amendments made by
sections 103, 104, 105 and 106 shall apply to taxable years
beginning after the date of the enactment of this Act.

TITLE III--REIT SAVINGS PROVISIONS

SEC. 301. REVISIONS TO REIT PROVISIONS.

(a) Rules of Application for Failure To Satisfy Section
856(c)(4).--Section 856(c) (relating to definition of real
estate investment trust), as amended by section 101, is
amended by inserting after paragraph (6) the following new
paragraph:
``(7) Rules of application for failure to satisfy paragraph
(4).--
``(A) De minimis failure.--A corporation, trust, or
association that fails to meet the requirements of paragraph
(4)(B)(iii) for a particular quarter shall nevertheless be
considered to have satisfied the requirements of such
paragraph for such quarter if--
``(i) such failure is due to the ownership of assets the
total value of which does not exceed the lesser of--
``(I) 1 percent of the total value of the trust's assets at
the end of the quarter for which such measurement is done,
and
``(II) $10,000,000, and
``(ii)(I) the corporation, trust, or association, following
the identification of such failure, disposes of assets in
order to meet the requirements of such paragraph within 6
months after the last day of the quarter in which the
corporation, trust or association's identification of the
failure to satisfy the requirements of such paragraph
occurred or such other time period prescribed by the
Secretary and in the manner prescribed by the Secretary, or
``(II) the requirements of such paragraph are otherwise met
within the time period specified in subclause (I).
``(B) Failures exceeding de minimis amount.--A corporation,
trust, or association that fails to meet the requirements of
paragraph (4) for a particular quarter shall nevertheless be
considered to have satisfied the requirements of such
paragraph for such quarter if--
``(i) such failure involves the ownership of assets the
total value of which exceeds the de minimis standard
described in subparagraph (A)(i) at the end of the quarter
for which such measurement is done,
``(ii) following the corporation, trust, or association's
identification of the failure to satisfy the requirements of
such paragraph for a particular quarter, a description of
each asset that causes the corporation, trust, or association
to fail to satisfy the requirements of such paragraph at the
close of such quarter of any taxable year is set forth in a
schedule for such quarter filed in accordance with
regulations prescribed by the Secretary,
``(iii) the failure to meet the requirements of such
paragraph for a particular quarter is due to reasonable cause
and not due to willful neglect,
``(iv) the corporation, trust, or association pays a tax
computed under subparagraph (C), and
``(v)(I) the corporation, trust, or association disposes of
the assets set forth on the schedule specified in clause (ii)
within 6 months after the last day of the quarter in which
the corporation, trust or association's identification of the
failure to satisfy the requirements of such paragraph
occurred or such other time period prescribed by the
Secretary and in the manner prescribed by the Secretary, or
``(II) the requirements of such paragraph are otherwise met
within the time period specified in subclause (I).
``(C) Tax.--For purposes of subparagraph (B)(iv)--
``(i) Tax imposed.--If a corporation, trust, or association
elects the application of this subparagraph, there is hereby
imposed a tax on the failure described in subparagraph (B) of
such corporation, trust, or association. Such tax shall be
paid by the corporation, trust, or association.
``(ii) Tax computed.--The amount of the tax imposed by
clause (i) shall be the greater of--
``(I) $50,000, or
``(II) the amount determined (pursuant to regulations
promulgated by the Secretary) by multiplying the net income
generated by the assets described in the schedule specified
in subparagraph (B)(ii) for the period specified in clause
(iii) by the highest rate of tax specified in section 11.
``(iii) Period.--For purposes of clause (ii)(II), the
period described in this clause is the period beginning on
the first date that the failure to satisfy the requirements
of such paragraph (4) occurs as a result of the ownership of
such assets and ending on the earlier of the date on which
the trust disposes of such assets or the end of the first
quarter when there is no longer a failure to satisfy such
paragraph (4).
``(iv) Administrative provisions.--For purposes of subtitle
F, the taxes imposed by this subparagraph shall be treated as
excise taxes with respect to which the deficiency procedures
of such subtitle apply.''.
(b) Modification of Rules of Application for Failure to
Satisfy Sections 856(c)(2) or 856(c)(3).--Paragraph (6) of
section 856(c) (relating to definition of real estate
investment trust) is amended by striking subparagraphs (A)
and (B), by redesignating subparagraph (C) as subparagraph
(B), and by inserting before subparagraph (B) (as so
redesignated) the following new subparagraph:
``(A) following the corporation, trust, or association's
identification of the failure to meet the requirements of
paragraph (2) or (3), or of both such paragraphs, for any
taxable year, a description of each item of its gross income
described in such paragraphs is set forth in a schedule for
such taxable year filed in accordance with regulations
prescribed by the Secretary, and''.
(c) Reasonable Cause Exception To Loss of REIT Status If
Failure To Satisfy Requirements.--Subsection (g) of section
856 (relating to termination of election) is amended--
(1) in paragraph (1) by inserting before the period at the
end of the first sentence the following: `unless paragraph
(5) applies', and
(2) by adding at the end the following new paragraph:
``(5) Entities to which paragraph applies.--This paragraph
applies to a corporation, trust, or association--
``(A) which is not a real estate investment trust to which
the provisions of this part apply for the taxable year due to
one or more failures to comply with one or more of the
provisions of this part (other than subsection (c)(6) or
(c)(7) of section 856),
``(B) such failures are due to reasonable cause and not due
to willful neglect, and
``(C) if such corporation, trust, or association pays (as
prescribed by the Secretary in

[[Page S6454]]

regulations and in the same manner as tax) a penalty of
$50,000 for each failure to satisfy a provision of this part
due to reasonable cause and not willful neglect.''.
(d) Deduction of Tax Paid From Amount Required To Be
Distributed.--Subparagraph (E) of section 857(b)(2) is
amended by striking ``(7)'' and inserting ``(7) of this
subsection, section 856(c)(7)(B)(iii), and section
856(g)(1).''.
(e) Expansion of Deficiency Dividend Procedure.--Subsection
(e) of section 860 is amended by striking ``or'' at the end
of paragraph (2), by striking the period at the end of
paragraph (3) and inserting ``; or'', and by adding at the
end the following new paragraph:
``(4) a statement by the taxpayer attached to its amendment
or supplement to a return of tax for the relevant tax
year.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after date of
enactment.

amendment 627

(Purpose: To exclude certain punitive damages received by the taxpayer
from gross income)

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

SEC. ____. EXCLUSION OF CERTAIN PUNITIVE DAMAGE AWARDS.

(a) In General.--Section 104 (relating to compensation for
injuries or sickness) is amended by redesignating subsection
(d) as subsection (e), and by inserting after subsection (c)
the following new subsection:
``(d) Exclusion of Punitive Damages Paid to a State Under a
Split-Award Statute.--
``(1) In general.--The phrase `(other than punitive
damages)' in subsection (a) shall not apply to--
``(A) any portion of an award of punitive damages in a
civil action which is paid to a State under a split-award
statute, or
``(B) any attorneys' fees or other costs incurred by the
taxpayer in connection with obtaining an award of punitive
damages to which subparagraph (A) is applicable.
``(2) Split-Award Statute.--For purposes of this
subsection, the term `split-award statute' means a State law
that requires a fixed portion of an award of punitive damages
in a civil action to be paid to the State.''.
(b) Effective Date.--The amendment made by this section
shall apply to awards made in taxable years ending after the
date of the enactment of this Act.

amendment no. 644, as modified

(Purpose: To extend certain expiring provisions)

At the end, insert the following:

TITLE VII--EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

Subtitle A--Extensions of Expiring Provisions

SEC. 701. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO
MENTAL HEALTH BENEFITS.

(a) In General.--Subsection (f) of section 9812 is amended
by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to plan years beginning after December 31, 2002.

SEC. 702. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST
REGULAR AND MINIMUM TAX LIABILITY.

(a) In General.--Paragraph (2) of section 26(a) is
amended--
(1) by striking ``rule for 2000, 2001, 2002, and 2003.--''
and inserting ``rule for 2000, 2001, 2002, 2003, and 2004.--
'', and
(2) by striking ``during 2000, 2001, 2002, or 2003,'' and
inserting ``during 2000, 2001, 2002, 2003, or 2004''.
(b) Conforming Amendments.--
(1) Section 904(h) is amended by striking ``during 2000,
2001, 2002, or 2003'' and inserting ``during 2000, 2001,
2002, 2003, or 2004''.
(2) The amendments made by sections 201(b), 202(f), and
618(b) of the Economic Growth and Tax Relief Reconciliation
Act of 2001 shall not apply to taxable years beginning during
2004.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.

SEC. 703. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN
RENEWABLE RESOURCES.

(a) In General.--Subparagraphs (A), (B), and (C) of section
45(c)(3) are each amended by striking ``2004'' and inserting
``2005''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to facilities placed in service after December
31, 2002.

SEC. 704. WORK OPPORTUNITY CREDIT.

(a) In General.--Subparagraph (B) of section 51(c)(4) is
amended by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2002.

SEC. 705. WELFARE-TO-WORK CREDIT.

(a) In General.--Subsection (f) of section 51A is amended
by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2002.

SEC. 706. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR
OIL AND NATURAL GAS PRODUCED FROM MARGINAL
PROPERTIES.

(a) In General.--Subparagraph (H) of section 613A(c)(6) is
amended by striking ``2004'' and inserting ``2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2002.

SEC. 707. QUALIFIED ZONE ACADEMY BONDS.

(a) In General.--Paragraph (1) of section 1397E(e) is
amended by striking ``2000, 2001, 2002, and 2003'' and
inserting ``2000, 2001, 2002, 2003, and 2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to obligations issued after the date of the
enactment of this Act.

SEC. 708. COVER OVER OF TAX ON DISTILLED SPIRITS.

(a) In General.--Paragraph (1) of section 7652(f) is
amended by striking ``January 1, 2004'' and inserting
``January 1, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to articles brought into the United States after
December 31, 2002.

SEC. 709. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER
TECHNOLOGY.

(a) Extension of Deduction.--Section 170(e)(6)(G) (relating
to termination) is amended by striking ``December 31, 2003''
and inserting ``December 31, 2004''.
(b) Effective Date.--The amendments made by this section
shall apply to contributions made after December 31, 2002.

SEC. 710. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

(a) In General.--Section 30 is amended--
(1) in subsection (b)(2)--
(A) by striking ``December 31, 2003,'' and inserting
``December 31, 2004,'', and
(B) in subparagraphs (A), (B), and (C), by striking
``2004'', ``2005'', and ``2006'', respectively, and inserting
``2005'', ``2006'', and ``2007'', respectively.
(2) in subsection (e), by striking ``December 31, 2006''
and inserting ``December 31, 2007''.
(b) Conforming Amendments.--Clause (iii) of section
280F(a)(1)(C) is amended by striking ``2007'' and inserting
``2008''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2002.

SEC. 711. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN
REFUELING PROPERTY.

(a) In General.--Section 179A is amended--
(1) in subsection (b)(1)(B)--
(A) by striking ``December 31, 2003,'' and inserting
``December 31, 2004,'', and
(B) in clauses (i), (ii), and (iii), by striking ``2004'',
``2005'', and ``2006'', respectively, and inserting ``2005'',
``2006'', and ``2007'', respectively, and
(2) in subsection (f), by striking ``December 31, 2006''
and inserting ``December 31, 2007''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to property placed in service after December 31,
2002.

SEC. 712. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

(a) In General.--Subparagraph (D) of section 62(a)(2) is
amended by striking ``during 2002 or 2003'' and inserting
``during 2002, 2003, or 2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2002.

SEC. 713. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

(a) In General.--Paragraphs (2) and (3)(B) of section
220(i) (defining cut-off year) are each amended by striking
``2003'' each place it appears and inserting ``2004''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 220(j) is amended by striking
``1998, 1999, 2001, or 2002'' each place it appears and
inserting ``1998, 1999, 2001, 2002, or 2003''.
(2) Subparagraph (A) of section 220(j)(4) is amended by
striking ``and 2002'' and inserting ``2002, and 2003''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2003.

SEC. 714. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

(a) Extension of Termination Date.--Subsection (h) of
section 198 is amended by striking ``2003'' and inserting
``2004''.
(b) Effective Date.--The amendments made by this section
shall apply to expenditures paid or incurred after December
31, 2002.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2003.

amendment no. 646

(Purpose: To allow a credit for distilled spirits wholesalers and for
distilled spirits in control State bailment warehouses against income
tax for the cost of carrying Federal excise taxes prior to the sale of
the product bearing the tax)

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

SEC. ____. INCOME TAX CREDIT FOR DISTILLED SPIRITS
WHOLESALERS AND FOR DISTILLED SPIRITS IN
CONTROL STATE BAILMENT WAREHOUSES FOR COSTS OF
CARRYING FEDERAL EXCISE TAXES ON BOTTLED
DISTILLED SPIRITS.

(a) In General.--Subpart A of part I of subchapter A of
chapter 51 (relating to gallonage and occupational taxes) is
amended by adding at the end the following new section:

``SEC. 5011. INCOME TAX CREDIT FOR AVERAGE COST OF CARRYING
EXCISE TAX.

``(a) In General.--For purposes of section 38, the amount
of the distilled spirits credit

[[Page S6455]]

for any taxable year is the amount equal to the product of--
``(1) in the case of--
``(A) any eligible wholesaler--
``(i) the number of cases of bottled distilled spirits--

``(I) which were bottled in the United States, and
``(II) which are purchased by such wholesaler during the
taxable year directly from the bottler of such spirits, or

``(B) any person which is subject to section 5005 and which
is not an eligible wholesaler, the number of cases of bottled
distilled spirits which are stored in a warehouse operated
by, or on behalf of, a State, or agency or political
subdivision thereof, on which title has not passed on an
unconditional sale basis, and
``(2) the average tax-financing cost per case for the most
recent calendar year ending before the beginning of such
taxable year.
``(b) Eligible Wholesaler.--For purposes of this section,
the term `eligible wholesaler' means any person which holds a
permit under the Federal Alcohol Administration Act as a
wholesaler of distilled spirits which is not a State, or
agency or political subdivision thereof.
``(c) Average Tax-Financing Cost.--
``(1) In general.--For purposes of this section, the
average tax-financing cost per case for any calendar year is
the amount of interest which would accrue at the deemed
financing rate during a 60-day period on an amount equal to
the deemed Federal excise tax per case.
``(2) Deemed financing rate.--For purposes of paragraph
(1), the deemed financing rate for any calendar year is the
average of the corporate overpayment rates under paragraph
(1) of section 6621(a) (determined without regard to the last
sentence of such paragraph) for calendar quarters of such
year.
``(3) Deemed federal excise tax per case.--For purposes of
paragraph (1), the deemed Federal excise tax per case is
$25.68.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Case.--The term `case' means 12 80-proof 750
milliliter bottles.
``(2) Number of cases in lot.--The number of cases in any
lot of distilled spirits shall be determined by dividing the
number of liters in such lot by 9.''.
(b) Conforming Amendments.--
(1) Subsection (b) of section 38 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 new paragraph:
``(16) the distilled spirits credit determined under
section 5011(a).''.
(2) Subsection (d) of section 39 (relating to carryback and
carryforward of unused credits) is amended by adding at the
end the following new paragraph:
``(11) No carryback of section 5011 credit before january
1, 2003.--No portion of the unused business credit for any
taxable year which is attributable to the credit determined
under section 5011(a) may be carried back to a taxable year
beginning before January 1, 2003.''.
(3) The table of sections for subpart A of part I of
subchapter A of chapter 51 is amended by adding at the end
the following new item:

``Sec. 5011. Income tax credit for average cost of carrying excise
tax.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.

amendment no. 649

(Purpose: To provide tax relief to growers affected by citrus canker)

At the appropriate place insert the following:

SEC. . CITRUS CANKER TREE RELIEF.

(a) Ratable Inclusion.--
(1) In general.--Part I of subchapter Q of chapter 1
(relating to income averaging) is amended by inserting after
section 1301 the following new section:

``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE
PAYMENTS.

``(a) In General.--At the election of the taxpayer, any
amount taken into account as income or gain by reason of
receiving a citrus canker tree payment shall be included in
the income of the taxpayer ratably over the 10-year period
beginning with the taxable year in which the payment is
received or accrued by the taxpayer. Such election shall be
made on the return of tax for such taxable year in such
manner as the Secretary prescribes, and, once made shall be
irrevocable.
``(b) Citrus Canker Tree Payment.--For purposes of
subsection (a), the term `citrus canker tree payment' means a
payment made to an owner of a commercial citrus grove to
recover income that was lost as a result of the removal of
commercial citrus trees to control canker under the
amendments to the citrus canker regulations (7 C.F.R. 301)
made by the final rule published in the Federal Register by
the Secretary of Agriculture on June 18, 2001 (66 Fed. Reg.
32713, Docket No. 00-37-4).''
(2) Clerical amendment.--The table of sections for part I
of subchapter Q of chapter 1 is amended by inserting after
the item relating to section 1301 the following new item:

``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE
PAYMENTS.''.

(b) Expansion of Period Within Which Converted Citrus Tree
Property Must Be Replaced.--Section 1033 (relating to period
within which property must be replaced) is amended by
redesignating subsection (k) as subsection (1) and by
inserting after subsection (j) the following new subsection:
``(k) Commercial Trees Destroyed Because of Citrus Tree
Canker.--In the case of commercial citrus trees which are
compulsorily or involuntarily converted under a public order
as a result of the citrus tree canker, clause (i) of
subsection (a)(2)(B) shall be applied as if such clause
reads: `4 years after the close of the first taxable year in
which any part of the gain upon conversion is realized, or
such additional period after the close of such taxable year
as determined appropriate by the Secretary on a regional
basis if a State or Federal plant health authority determines
with respect to such region that the land on which such trees
grew is not free from the bacteria that causes citrus tree
canker'.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning before, on, or after
the date of the enactment of this Act.

amendment no. 651

(Purpose: To amend the Internal Revenue Code of 1986 to allow for the
expansion of areas designated as renewal communities based on 2000
census data)

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

SEC. ____. EXPANSION OF DESIGNATED RENEWAL COMMUNITY AREA
BASED ON 2000 CENSUS DATA.

(a) Renewal Communities.--
(1) In general.--Section 1400E (relating to designation of
renewal communities) is amended by adding at the end the
following new subsection:
``(g) Expansion of Designated Areas.--
``(1) Expansion based on 2000 Census.--At the request of
the nominating entity with respect to a renewal community,
the Secretary of Housing and Urban Development may expand the
area of a renewal community to include any census tract--
``(A) which, at the time such community was nominated, met
the requirements of this section for inclusion in such
community but for the failure of such tract to meet 1 or more
of the population and poverty rate requirements of this
section using 1990 census data, and
``(B) which meets all failed population and poverty rate
requirements of this section using 2000 census data.
``(2) Expansion to certain areas which do not meet
population requirements.--
``(A) In general.--At the request of 1 or more local
governments and the State or States in which an area
described in subparagraph (B) is located, the Secretary of
Housing and Urban Development may expand a designated area to
include such area.
``(B) Area.--An area is described in this subparagraph if--
``(i) the area is adjacent to at least 1 other area
designated as a renewal community,
``(ii) the area has a population less than the population
required under subsection (c)(2)(C), and
``(a) the area meets the requirements of subparagraphs (A)
and (B) of subsection (c)(2) and subparagraph (A) of
subsection (c)(3), or (b) the area contains a population of
less than 100 people.
``(3) Applicability.--Any expansion of a renewal community
under this section shall take effect as provided in
subsection (b).''.
(2) Effective Date.--The amendment made by this subsection
shall take effect as if included in the amendments made by
section 101 of the Community Renewal Tax Relief Act of 2000.
(b) Change 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 section 102 of this Act, is amended by striking
``35.0%'' in the last column and inserting ``37.6%''.
(2) Effective date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
(3) Application of EGTRRA.--The amendment made by this
subsection 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.

amendment no. 654

(Purpose: To amend title XIX of the Social Security Act to temporarily
increase the floor for treatment as an extremely low DSH State and to
provide for an allotment adjustment for certain States)

At the end of subtitle F of title III, add the following:

SEC. ____. MEDICAID DSH ALLOTMENTS.

(a) Temporary Increase in Floor for Treatment as an
Extremely Low DSH State Under the Medicaid Program.--
(1) In general.--Section 1923(f)(5) of the Social Security
Act (42 U.S.C. 1396r-4(f)(5)) is amended--
(A) by striking ``In the case of'' and inserting the
following:
``(A) In general.--In the case of''; and
(B) by adding at the end the following:
``(B) Temporary increase in floor for fiscal year 2004.--
During the period that begins on October 1, 2003, and ends on
September 30, 2004, subparagraph (A) shall be applied--

[[Page S6456]]

``(i) by substituting `fiscal year 2002' for `fiscal year
1999';
``(iii) by substituting `Centers for Medicare & Medicaid
Services' for `Health Care Financing Administration';
``(ii) by substituting `August 31, 2003' for `August 31,
2000';
``(iv) by substituting `3 percent' for `1 percent' each
place it appears;
``(v) by substituting `fiscal year 2004' for `fiscal year
2001'; and
``(vi) without regard to the second sentence.''.
(2) Effective date.--The amendments made by paragraph (1)
take effect on October 1, 2003, and apply to DSH allotments
under title XIX of the Social Security Act only with respect
to fiscal year 2004.
(b) Allotment Adjustment for Certain States.--
(1) In general.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(A) by redesignating paragraph (6) as paragraph (7); and
(B) by inserting after paragraph (5) the following:
``(6) Allotment adjustment for certain states.--
``(A) Tennessee.--Only with respect to fiscal year 2004, if
the statewide waiver approved under section 1115 for the
State of Tennessee with respect to the requirements of this
title (as in effect on the date of enactment of this
paragraph) is revoked or terminated, the Secretary shall--
``(i) permit the State of Tennessee to submit an amendment
to its State plan that would describe the methodology to be
used by the State (after the effective date of such
revocation or termination) to identify and make payments to
disproportionate share hospitals, including children's
hospitals and institutions for mental diseases or other
mental health facilities (other than State-owned institutions
or facilities), on the basis of the proportion of patients
served by such hospitals that are low-income patients with
special needs; and
``(ii) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the State for
fiscal year 2004 that provides for the maximum amount
(permitted consistent with paragraph (3)(B)(ii)) that does
not result in greater expenditures under this title than
would have been made if such waiver had not been revoked or
terminated.
``(B) Hawaii.--The Secretary shall compute a DSH allotment
for the State of Hawaii for each of fiscal year 2004 in the
same manner as DSH allotments are determined with respect to
those States to which paragraph (5) applies (but without
regard to the requirement under such paragraph that total
expenditures under the State plan for disproportionate share
hospital adjustments for any fiscal year exceeds 0).''.
(2) Treatment of institutions for mental diseases.--Section
1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
4(h)(1)) is amended--
(A) in paragraph (1), in the matter preceding subparagraph
(A), by striking ``Payment'' and inserting ``Subject to
paragraph (3), payment''; and
(B) by adding at the end the following:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of Tennessee with respect to fiscal
year 2004 in the case of a revocation or termination of its
statewide waiver described in subsection (f)(6)(A).''.
(3) Effective date.--The amendments made by this subsection
shall take effect as if enacted on October 1, 2002.

amendment no. 657

(Purpose: To exempt certain sightseeing flights from taxes on air
transportation.)

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

SEC. ____. CERTAIN SIGHTSEEING FLIGHTS EXEMPT FROM TAXES ON
AIR TRANSPORTATION.

(a) In General.--Section 4281 (relating to small aircraft
on nonestablished lines) is amended by adding at the end the
following new sentence: ``For purposes of this section, an
aircraft shall not be considered as operated on an
established line if such aircraft is operated on a flight the
sole purpose of which is sightseeing.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to transportation beginning on or
after the date of the enactment of this Act, but shall not
apply to any amount paid before such date.

amendment no. 659, as modified

(Purpose: To modify the involuntary conversion rules for businesses
affected by the September 11, 2001, terrorist attacks)

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

SEC. ____. MODIFICATION OF INVOLUNTARY CONVERSION RULES FOR
BUSINESSES AFFECTED BY THE SEPTEMBER 11TH
TERRORIST ATTACKS.

(a) In General.--Subsection (g) of section 1400L is amended
to read as follows:
``(g) Modification of Rules Applicable to Nonrecognition of
Gain.--In the case of property which is compulsorily or
involuntarily converted as a result of the terrorist attacks
on September 11, 2001, in the New York Liberty Zone--
``(1) which was held by a corporation which is a member of
an affiliated group filing a consolidated return, such
corporation shall be treated as satisfying the purchase
requirement of section 1033(a)(2) with respect to such
property to the extent such requirement is satisfied by
another member of the group, and
``(2) notwithstanding subsections (g) and (h) of section
1033, clause (i) of section 1033(a)(2)(B) shall be applied by
substituting `5 years' for `2 years' with respect to property
which is compulsorily involuntarily converted as a result of
the terrorist attacks on September 11, 2001, in the New York
Liberty Zone but only if substantially all of the use of the
replacement property is in the City of New York, New York.''.
(b) Effective Date.--The amendments made by this Act shall
apply to involuntary conversions occurring on or after
September 11, 2001.
On page 19, line 13, strike ``2007'' and insert ``2008''.

amendment no. 661

(The text of the amendment is printed in today's Record under ``Text
of Amendments.'')

amendment no. 665

(Purpose: To amend the Internal Revenue Code of 1986 to restore the
deduction for the travel expenses of a taxpayer's spouse who
accompanies the taxpayer on business travel)

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

SEC.____. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF
SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS
TRAVEL.

(a) In General.--Subsection (m) of section 274 (relating to
additional limitations on travel expenses) is amended by
striking paragraph (3).(A)
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act, and on or before December 31, 2004.

amendment no. 673

(Purpose: To amend the Internal Revenue Code of 1986 to provide for the
treatment of certain imported recycled halons)

At the appropriate place insert the following:

SECTION 1. TREATMENT OF CERTAIN IMPORTED RECYCLED HALONS.

(a) In General.--Section 1803(c) of the Small Business Job
Protection Act of 1986 (Public Law 104-188) is amended by
striking ``1997'' and ``1998'' and inserting ``1994''.
(b) Waiver of Limitations.--If refund or credit of any
overpayment of tax resulting from the amendment made by this
section is prevented at any time before the close of the 1-
year period beginning on the date of the enactment of this
Act by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefore is filed before the close of such
period.

Amendment No. 680

(The text of the amendment is printed in today's Record under ``Text
of Amendments.'')
Mr. GRASSLEY. Mr. President, I ask unanimous consent to add Senator
Murkowski as a cosponsor to amendment No. 594 on rural equity, and
amendment number 596, the Collins amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.

Limitation on Tax Deductions

Mr. SANTORUM. Mr. President, I rise today to engage the distinguished
chairman of the Finance Committee in a colloquy regarding subtitle E,
section 364, of the Jobs and Growth Tax Reconciliation Act of 2003, S.
1054.
This section would limit the deduction for charitable contributions
of patents and similar properties. It is my understanding that this
provision would include a limitation on tax deductions for donation of
the following items: any patent, copyright, trademark, trade name,
trade secret, know-how, software, or similar property, or applications
or registrations of such property. The effective date of this
limitation would apply to contributions made after May 7, 2003.
I have a specific concern about this provision.
I understand the intent behind this change is to eliminate abuses
associated with deductions claimed under IRC 170(e)(1)(B). What has
resulted, however, is the unintended consequence of capturing
legitimate and pending contributions that were in the process of being
formalized, but not enacted by the effective date.
Specifically, I am concerned about the impact of a pending
transaction between two organizations in the Commonwealth of
Pennsylvania. The process to formalize the referenced donation began in
December 2002, with the targeted date of April 21, 2003, for a signed
and completed transfer.
In an effort to clarify the impact of S. 1054 on this specific
pending transaction, the involved organizations have

[[Page S6457]]

worked with your staff to provide adequate background and substantial
documentation to verify the legitimacy of the concern.
I inquire of the chairman of the Finance Committee if he would
comment on Section 364 of the bill, and my stated concern about a
pending transaction?
Mr. GRASSLEY. Mr. President, I thank my colleague from Pennsylvania
for raising this issue. He is correct that my staff has been working
with these organizations to obtain a fuller understanding of their
transaction. We have learned that there is widespread abuse involving
donations of patents and similar property. We made this provision
effective May 7, 2003, so that abusive donations could not be rushed to
completion if a later effective date was chosen.
We will continue our discussion with these organizations, and will
objectively consider their concerns and whether further clarifications
are appropriate as the bill moves to conference.
Mr. SANTORUM. Thank you, Chairman Grassley, for your willingness to
work with me on this issue as the Jobs and Growth Tax Reconciliation
Act of 2003 moves forward.

Limitation Provision

Mr. LEAHY. Mr. President, I see the distinguished majority leader,
Senator Frist, and wonder if I could ask him to address a concern I and
other Senators have about a provision entitled ``Limitation'' which is
located on page 62, line 13 of the bill.
Mr. FRIST. I would be happy to.
Mr. LEAHY. This provision says that no funds made available to carry
out this act may be used to provide assistance to any group or
organization that does not have a policy ``explicitly opposing''
prostitution and sex trafficking. On its face, this provision appears
harmless. No one here supports prostitution or sex trafficking. In
fact, we abhor these practices, which are demeaning and degrading
towards women, and also extremely dangerous. The rate of HIV infection
among prostitutes in Cambodia is estimated to be 40 percent. India is
facing a similar catastrophe. It is no secret that commercial sex
workers and sex trafficking are a major cause of HIV transmission in
Asia and in parts of Africa. We all want to see these practices end.
But the reality is that they exist. Prostitution and sex trafficking
are rampant, not only in parts of Africa and Asia, but in Eastern
Europe and the former Soviet republics, the Caribbean, and parts of
Latin America. Any effective strategy to combat HIV/AIDS must include
programs to reduce its spread through prostitution and sex trafficking.
As difficult as it is, this reality cannot be ignored.
There are organizations who work directly with commercial sex workers
and women who have been the victims of trafficking, to educate them
about HIV/AIDS, to counsel them to get tested, to help them escape if
they are being held against their will, and to provide them with
condoms to protect themselves from infection. This work is not easy. It
can also be dangerous. It requires a relationship of trust between the
organizations and the women who need protection.
I am concerned that this provision, which requires such organizations
to explicitly oppose prostitution and sex trafficking, could impede
their effectiveness. In fact, some or many of these organizations may
refuse to condemn the behavior of the women who trust they need in
order to convince them to protect themselves against HIV. I would ask
the Majority Leader how we can avoid that result, because we need to be
able to support these organizations.
Mr. FRIST. I thank the Senator from Vermont for his question. I agree
that these organizations who work with prostitutes and women who are
the victims of trafficking play an important role in preventing the
spread of HIV/AIDS. We need to support these organizations, because HIV
transmission through this type of behavior is widespread in many parts
of the world. At the same time, we do not want to condone, either
directly or indirectly, prostitution or sex trafficking. Both are
abhorrent.
I believe the answer is to include a statement in the contract or
grant agreement between the U.S. Government and such organization that
the organization is opposed to the practices of prostitution and sex
trafficking because of the psychological and physical risks they pose
for women. Such a statement, as part of the contract or grant
agreement, would satisfy the intent of this provision.
Mr. LEAHY. I thank the majority leader. I think that is important,
because we do not want to impose requirements which have the unintended
result of impeding the ability of these organizations to do their work,
or interfering with our ability to support them.

section 333

Mr. SHELBY. Mr. President, I would like to take this opportunity to
ask the Chairman of the Finance Committee about the Committee's intent
with respect to Section 333, the section entitled ``Denial of Deduction
for Certain Fines, Penalties, and Other Amounts.'' As currently
drafted, Section 333 eliminates tax deductions for amounts paid or
incurred at the direction of a governmental entity in relation to the
violation of any law or the investigation or inquiry into the potential
violation of any law.
Although I appreciate the Chairman's intent, I am concerned that this
provision is drafted too broadly and applies to fees and compliance
expenses that are mandated by regulators and that depository
institutions must pay. For example, banks and thrifts are subject to
routine, as well as special, examinations as part of supervisory
reviews by State regulators, the FDIC, the Office of Comptroller of the
Currency, the Federal Reserve Board and the Office of Thrift
Supervision. The purpose of these supervisory examinations is to ensure
that depository institutions are operating in a safe and sound manner
and in full compliance with regulations. Institutions are then required
to correct any deficiencies.
Currently, Section 333 could be interpreted to eliminate the
deductibility of these fees because they relate to examinations, which
are, to some extent, inquiries into potential violations. Also, this
Section could be interpreted to preclude tax deductions for remedial
measures undertaken pursuant to a regulator's order, or to address
concerns raised in an examination. As a result, we could be in a
situation where the regulators are requiring audits or imposing other
compliance-related costs, but the companies are prohibited from taking
deductions for the required payments.
Mr. GRASSLEY. I appreciate the concern of the Senator from Alabama
with respect to Section 333. It was not the Committee's intent to
prohibit deductions for amounts paid by companies as a condition to
their operation in a regulated industry.
Mr. SARBANES. Mr. President, I too am concerned that the language of
Section 333 could have unintended consequences. It was my understanding
that Section 333 was intended to exclude certain payments.
Mr. GRASSLEY. The Senator from Maryland is correct. The Committee
addressed this issue in its publication entitled: ``Technical
Explanation of Provisions Approved by the Committee on May 8, 2003.''
Footnote 164 of this publication states:

The bill does not affect amounts paid or incurred in
performing routine audits or reviews such as annual audits
that are required of all organizations or individuals in a
similar business sector, or profession, as a requirement for
being allowed to conduct business. However, if the government
or regulator raised an issue of compliance and a payment is
required in settlement of such issue, the bill would affect
that payment.

Mr. SHELBY. I would ask that the Chairman clarify the text of Section
333 in order to specifically exclude such payments.
Mr. GRASSLEY. It is my intention to amend and clarify Section 333 in
the conference report in order to reflect the Senators' comments and to
carve-out certain fees and expenses paid by companies operating in
highly-regulated industries.
Mr. SHELBY. In addition we have received letters from Chairman
Greenspan of the Federal Reserve Board, Director Gilleran of the Office
of Thrift Supervision and Chairman Powell of the FDIC expressing their
concern regarding the breadth of Section 333. At this time, I would
like to incorporate these letters into the Record. Mr. Chairman, thank
you for your attention to an issue that is of great importance to many
companies in a variety

[[Page S6458]]

of industries. I look forward to working with the Chairman to amend the
text of Section 333 in the conference report.

syndication

Mr. SMITH. Mr. President, I want to bring to the Chairman's attention
a matter that has arisen regarding the bonus depreciation provision
that was enacted last year in the Job Creation and Worker Assistance
Act of 2002. When the House developed this provision, it wanted to
ensure that the provision would stimulate the production of new, as
opposed to ``used'', equipment and other products. Thus, the additional
depreciation deduction was restricted to those taxpayers who first
``used'' the product. Inadvertently, the ``original use'' requirement
of this provision excluded many of the transactions in heavy equipment
that the provision was intended to stimulate. Specifically, the
provision inadvertently excluded multi-unit sales of equipment that
were placed in service by manufacturers over a period of time and then
sold to the ultimate purchaser of the equipment.
Mr. GRASSLEY. That is correct. The Senator from Oregon refers to a
common form of financing transportation and other equipment that
involves the production of numerous units, all subject to a common
lease. We refer to this form of financing as ``syndication''.
Mr. SMITH. I have language that would correct this oversight in the
original 2002 Act. My language would ensure that sales of equipment
which involve numerous units of the same good, subject to the same
lease, would not inadvertently be excluded from the bonus depreciation
benefits of the 2002 Act, simply because the manufacturer was placing
the goods into service as they were being manufactured, prior to his
ultimate sale of the goods, subject to the master lease, to the
ultimate purchaser. My language would ensure that no abuse of the bonus
depreciation could occur and that the final sale of the products occurs
within a short period of time. I would ask the Chairman to reassure the
many heavy manufacturers of the United States and the purchasers of new
equipment that this oversight in the 2002 Act will be rectified when
the House and Senate meet in conference to iron out the differences in
our respective tax legislation.
Mr. GRASSLEY. I can assure the Senator from Oregon that I support the
effort to clarify this situation in conference and ensure that the 2002
bonus depreciation provision is available to purchasers of equipment
pursuant to this method of financing multi-unit sales of heavy
equipment. I thank the Senator for bringing this inadvertent error in
the original 2002 Act to my attention.
Mr. SMITH. I thank the Senator. I propose that the conference adopt
language to clarify this unfortunate oversight.
Mr. GRASSLEY. I appreciate the Senator from Oregon providing me with
this information. This is a serious oversight in the original language
and I will work closely with the Senator to ensure that this is
corrected in conference with the House.
Mr. SMITH. I sincerely appreciate the Chairman's support and the good
work he is doing as Chairman of the Senate Finance Committee.

income forecast method

Mr. BREAUX. Mr. President, I would like to engage in a brief colloquy
with the distinguished chairman and ranking member of the Finance
Committee, Senator Grassley and Senator Baucus, regarding a provision
in the bill that provides needed clarification and helps to insure an
accurate reflection of taxpayers' income.
The provision I refer to resolves certain uncertainties that have
arisen recently regarding the proper application of the income forecast
method, which is the predominant cost recovery method for films,
videotapes, and sound recordings. The provision merely reinforces the
continued efficacy of existing case law and longstanding industry
practice. For example, the provision clarifies that, for purposes of
the income forecast method, the anticipated costs of participations and
residuals may be included in a property's cost basis at the beginning
of the property's depreciable life. This was the holding of the Ninth
Circuit in Transamerica Corporation v. U.S. (1993). The provision also
clarifies that the Tax Court's holding in Associated Patentees v.
Comm., 4 TC 979 (1945), remains valid law. Thus, taxpayers may elect to
deduct participations and residuals as they are paid. Finally, the
provision clarifies that the income forecast formula is calculated
using gross income, without reduction for distribution costs.
I would like to confirm my understanding with Senator Grassley and
Senator Baucus that by providing these clarifications and eliminating
uncertainty the provision was intended to put to rest needless and
costly disputes.
Mr. GRASSLEY. I am happy to confirm the understanding of the
distinguished Senator from Louisiana. The provision was adopted to
provide needed clarifications in order to eliminate the uncertainties
that have arisen regarding the proper application of the income
forecast method. I believe the disputes that have arisen regarding the
mechanics of the income forecast formula are extremely unproductive and
an inefficient use of both taxpayer and limited tax administration
resources. By adopting these clarifications, I believe the committee
intended to end any disputes and prevent any further waste of both
taxpayer and Government resources in resolving these disputes. Any
existing disputes should be resolved expeditiously in a manner
consistent with the clarifications included in the bill.
Mr. BAUCUS. I agree with the distinguished chairman of the Finance
Committee, Senator Grassley. The disputes resulting from any
uncertainty regarding the proper application of the income forecast
method are extremely unproductive and wasteful. To avoid further waste,
resolution of any disputes must be resolved in a manner consistent with
the clarifications contained in the bill.
Mr. BREAUX. I thank both of my distinguished colleagues for this
important clarification. I hope this puts to rest any uncertainty and
wasteful disputes regarding the proper application of the income
forecast method.

dividends

Ms. COLLINS. I would like to engage the distinguished chairmen of the
Senate Budget and Finance Committees in a colloquy on the Budget
Committee chairman's dividends amendment. As my colleagues are aware,
no provision of the economic growth package is more important to me
than my amendment providing $20 billion in short-term fiscal relief to
States and localities. If we are to kick-start our economy through
Federal tax relief, we must help our States avoid raising taxes and
slashing spending. And in the process of passing this bill, the last
thing we can afford is to exacerbate the States' fiscal woes.
I am therefore concerned that the language of the Budget Committee
chairman's dividends amendment does not adequately protect States from
revenue loss. As you know, I cannot vote for a dividends amendment that
would lessen the benefits of my fiscal relief provision without an
assurance that it would be fixed in conference. I therefore seek the
assurances of the distinguished Budget and Finance Committee chairmen
that they will do all they can in conference to protect States from
revenue loss associated with any dividends provisions in the final
bill.
Mr. NELSON of Nebraska. I, too, believe that there is no more
important component of this bill than its fiscal relief provisions, and
I have serious reservations over any dividends language that would
further hurt the States that we are trying to help. I join my colleague
from Maine in asking my colleagues, the distinguished chairmen of the
Senate Budget and Finance Committees, for assurances that they will do
all they can in conference to prevent States from losing revenue as a
result of any dividends language.
Mr. NICKLES. I thank the distinguished Senators from Maine and
Nebraska for raising this issue again. They have carried the torch for
the States throughout the debates on the budget and an economic growth
package.
I am pleased to provide the assurances that my colleagues seek. The
intent behind my amendment is not to add to the fiscal plight of
States, and I will do all I can to ensure that any dividends language
that emerges from conference does not cause States to lose tax
revenues.

[[Page S6459]]

Mr. GRASSLEY. I would echo the comments of my colleague from
Oklahoma. I, too, will do all that I can in conference to ensure that
States revenues are not reduced by any dividends provisions that are
included in the final product.
Ms. COLLINS. I thank my distinguished colleagues, both for their
assurances and for their leadership in putting together a growth
package that can stimulate the economy and create new jobs.
Mr. NELSON of Nebraska. I, too, thank my colleagues for their
assurances.

Colloquy between Senator Ensign and Chairman Grassley on the
Depreciation Treatment of Hospitality Business

Mr. ENSIGN. Mr. President, I rise to engage in a colloquy with the
distinguished Senator from Iowa, the Chairman of the Finance Committee.
First of all, I want to commend my distinguished colleague for his
strong leadership in crafting the tax cut package before us today that
is so critical to creating new jobs and building economic growth for
the citizens of my State of Nevada and across the country.
I would say to my distinguished colleague that I am very concerned
about recent efforts by the IRS to carve up integrated hotels,
restaurants, and casino businesses into different pieces subject to
different depreciation treatment.
Equipment, furniture, and similar personal property used in the
hospitality business, and in the retail industry more generally, have
long been depreciable over a 5-year period. However, the IRS is now
asserting on audit that the tables, chairs, carpeting, and other
furniture and equipment used in the gaming portion of such hospitality
facilities must be depreciated over a longer 7-year period used for
miniature golf courses and bowling alleys, while the same table, chair,
and carpeting 10 feet away in the hotel portion of the facility
continue to be depreciated over 5 years.
The IRS has promulgated no regulation on this point and is unable to
cite any applicable statutory or judicial authority for its assertion
on audit.
In the face of this uncertainty, I would ask the chairman of the
Finance Committee to clarify whether these efforts by the IRS are
consistent with the congressional intent of the depreciation provisions
of the Internal Revenue Code.
Mr. GRASSLEY. If the Senator will yield, I would say to my
distinguished colleague from Nevada that I share his concerns and that
it may not properly reflect congressional intent for the IRS to
separate an integrated hotel, restaurant, and casino business into
different pieces subject to different depreciation treatment.
Equipment, furniture, and similar personal property used in a such a
business should be depreciable in accordance with the current law
treatment of the hotel industry and the retail industry generally. I
will be happy to work with the Senator to provide appropriate
clarification for depreciation of assets used for gaming in the
hospitality industry.

amendment no. 545

Mr. KENNEDY. Mr. President, this Republican tax bill provides lavish
support for the wealthy, but it gives only the back of its hand to
America's senior citizens. This amendment changes those backward
priorities. It eliminates the dividend tax cut and the cut in the top
rate bracket, and uses the funds to pay for a Medicare prescription
drug benefit for the elderly.
The two tax cuts my amendment eliminates will primarily benefit the
rich. Prescription drug coverage under Medicare will benefit 40 million
senior citizens and the disabled individuals, who are overwhelmingly of
modest means and typically have high medical costs. These men and women
have stood by our country through war and depression. Giving them the
medical care they deserve is a higher priority than giving the wealthy
even greater wealth. When Republicans side with the wealthy, they call
it free enterprise. When senior citizens ask for fair treatment,
Republicans call it class warfare.
Medicare is not class warfare. It's a solemn promise between
government and the American people. It says, ``Play by the rules,
contribute to the system during your working years, and you will have
health security in your retirement years.'' Because of Medicare, the
elderly have long had insurance for their hospital bills and their
doctors bills. But the promise of health security at the core of
Medicare is broken every day because Medicare does not cover the
soaring price of prescription drugs.
Too many elderly citizens must choose between food on the table and
the medicine they need. Too many elderly Americans are taking only half
the drugs their doctor prescribes--or none at all--because they can't
afford them. Today, the average senior citizen has an income of
$14,000--and prescription drug bills of $1,500, and many senior
citizens pay far more than that.
Every day, senior citizens face the harsh fact that prescription drug
costs are going through the roof, while their incomes are stagnating.
Over the last four years, prescription drug costs have gone up by 16
percent a year, while the Social Security benefits on which senior
citizens depend have gone up only 2.3 percent a year. Hard-pressed
employers are cutting back on retiree prescription drug coverage--and
some retirees are losing their coverage altogether, because their
former employers are now bankrupt.
While millionaires receive huge tax breaks they do not need under the
Republican tax plan, the Republican budget shortchanges senior citizens
who desperately need prescription drug coverage. Prescription drug
spending for senior citizens will total $1.8 trillion over the next
decade but the Republican budget allocates only $400 billion for
Medicare.
Even worse, the Republican budget's $400 billion for Medicare isn't
even reserved for prescription drug coverage. The President wants to
spend tens of billions of this amount on so-called reforms to force
senior citizens to give up Medicare and join HMOs or other private
insurance plans. Relief for hard-pressed doctors, hospital, home health
agencies, and nursing homes is also supposed to come out of this
minimal allocation.
It is important for every Senator to understand who it is that
Medicare protects--and who it is that the Bush administration would
force into an HMO or other private insurance plan. The typical Medicare
enrollee is a 75-year-old widow, living alone. Her total income is just
$11,300 a year. She has at least one chronic condition and suffers from
arthritis. In her younger years, she and her husband worked hard. They
raised a family. They stood by this country through economic hard
times, the Second World War, the Korean war, and the cold war. They
sacrificed to protect and build a better country--not just for their
children but for all of us.
This is the woman Republicans want to force to give up her doctor and
join an HMO. This is the woman they say should give up her freedom to
go to the physician and hospital of her choice, so that HMOs can
profit. This is the woman who would be victimized if Congress allows
the GOP plan for Medicare to become law.
Senior citizens deserve prescription drug coverage--no ifs, ands, or
buts. Republicans say Medicare is a failed program--but millions of
senior citizens know better. Republicans believe that the private
sector does a better job of controlling costs than Medicare--but
studies show the reserve is true. Republicans say senior citizens
should be forced to give up the doctors they trust, so that HMOs and
private insurance plans can enjoy higher profits--but the American
people don't agree; and the U.S. Senate shouldn't agree either.
Senior citizens are faced with a deadly double whammy. Prescription
drug costs are out of control, and private insurance coverage is drying
up. Last year, prescription drug costs soared by a whopping 14 percent.
They have shot up at double-digit rates in each of the last five years.
Whether we are talking about employee retirement plans, Medigap
coverage, or Medicare HMOs, prescription drug coverage is skyrocketing
in cost, and becoming more and more out of reach by the elderly.
It used to be that the only seniors with reliable, adequate,
affordable coverage were the very poor on Medicaid. Today, because of
the state fiscal crisis created by the recession and the let-them-eat-
cake attitude of the Republican party, even the poorest of the poor can
no longer count on protection.

[[Page S6460]]

States are now facing the largest budget deficits in half a century--an
estimated $26 billion this year, and $70 billion next year.
The result is that States are cutting back on prescription drug
coverage for those least able to pay. Thirty-nine States expect to cut
their Medicaid drug benefit this year. In Massachusetts, 80,000 senior
citizens were about to lose their prescription drug coverage under the
State's Senior Advantage program on July 1. Emergency action by the
State legislature saved the program, but only after making substantial
reductions in coverage.
Tax cuts in this Republican bill will make the States' fiscal
situation even worse. Because State taxes are often pegged to the
Federal system, the dividend tax cut alone will cost States $11 billion
over the next 10 years.
Ten million of the elderly enjoy high quality, affordable retirement
coverage through a former employer. But retiree coverage is plummeting
too. In just 8 years--from 1994 to 2002--the number of firms offering
retiree coverage fell by a massive 40 percent.
Medicare HMOs are also drastically cutting back. Since 1999, more
than 2 million Medicare beneficiaries have been dropped by their
Medicare HMOs. Of the HMOs that remain in the program, more than 70
percent limit drug coverage to a meager $500 a year or less, and more
than half only pay for generic drugs. Medigap plans that offer drug
coverage are priced out of reach for most seniors--and even the
coverage offered is severely limited.
Thirteen million Medicare beneficiaries have no prescription drug
coverage at all. Only half of all senior citizens have coverage
throughout the year.
Previous Republican proposals have shown what happens to senior
citizens when funds are inadequate. High deductibles, gaps in coverage,
demeaning asset tests, and incentives for employers to drop retiree
coverage are just some of the unacceptable features of programs that
give crumbs to the elderly and plums to the wealthy.
This amendment strikes two provisions of the tax bill that primarily
benefit the rich, in order to provide funds to give the elderly the
prescription drug benefit they deserve. The first provision the
amendment strikes speeds up the reduction of the top tax rate from 38.6
percent to 36 percent. Virtually all the benefits of this Republican
tax rate reduction go to people earning more than $310,000 a year.
People earning a million dollars a year or more will receive a tax cut
of $60,000. I ask Members of the Senate: Do persons with a million
dollars in income a year really need another $60,000 in tax cuts?
Surely, our values and priorities have not become so warped that we
think it is more important for millionaires to be richer than it is for
senior citizens to have life-saving prescription drugs.
The second provision the amendment strikes is the dividend tax cut.
That cut does virtually nothing for senior citizens and everything for
the wealthy. The provision in the bill is only a partial elimination of
the tax on dividends, but its intention is clearly to set the stage for
full repeal of the tax. The full repeal would certainly be welcomed by
millionaires. They will get an average tax break of $52,000. But a low-
income elderly person with $8,600 in income will get a tax cut
averaging $1. And the average elderly person with an income of $14,000
will get a tax cut of $26. Do the Members of the Senate really believe
this is the right priority for our country?
The funds saved from this amendment--$115 billion over 10 years--will
be used to provide a better prescription drug benefit than will be
possible if this tax bill passes in its current form. Passing this
amendment will be a clear statement by the Senate that mending the
broken promise of Medicare is more important than lavishing unneeded
and undeserved new tax breaks on millionaires.
Mrs. MURRAY. Mr. President, I rise in strong support of the amendment
offered by Senator Kennedy to extend unemployment benefits for millions
of Americans. These fellow citizens are out of work through no fault of
their own. They need our help, and by extending their benefits, we will
also help stimulate our struggling economy.
In my own State of Washington, we have lost over 80,000 jobs since 9/
11. The Kennedy amendment would help some 102,000 workers in my state
who will exhaust their benefits over the next few months. It will help
nearly 4 million workers nationwide.
These are people who want to work and who are looking for jobs but
can't find them in our slow economy. It is not easy to find a job in
this economy. Just listen to these statistics. The average number of
jobs for which unemployed adults have applied is 29. The average for
those who have been unemployed for 9 months or more is 39, and
unemployed adults over 44 years old apply for an average of 42 jobs
before they find work.
Despite these efforts, these workers are now being threatened with
mortgage foreclosures and repossession of their vehicles. One in four
unemployed workers has had to move to other housing or move in with
friends or relatives.
They are facing problems in health care. For instance, one-third of
the unemployed were once covered by health insurance, but now they have
lost these benefits because they have lost their jobs.
They are spending less on food, medical care and clothing for their
children.
I know these workers will help provide a real and immediate stimulus
for our economy because they will buy groceries, pay their utility
bills, make house payments and pay for other essential needs for their
day to day existence. Nearly 80 percent of these workers say that
unemployment benefits have been very important in helping their
families meet their basic needs.
In fact, a recent study by Economy.com found that the single most
effective stimulus measure would be an extension of unemployment
compensation benefits. The study also found that each dollar dedicated
to extending the program would boost the economy by $1.73, while each
dollar connected to reducing the taxation of dividends would boost the
economy by just nine cents.
So I urge my colleagues to extend unemployment benefits for these
workers. They need and deserve our help, and helping them will directly
help our economy.

Amendment No. 557

Ms. CANTWELL. Mr. President, I rise today in support of Senator
Schumer's amendment to expand the higher education tax deduction. This
amendment would make the higher education tax deduction permanent and
increase the amount that taxpayers can claim for a deduction. The
higher education tax deduction helps families afford a college
education at a time when tuition increases are outpacing the cost of
inflation. Families need help to be able to give their children the
opportunities and support needed for a good solid education.
In our information-based economy, the value of a good education is
the key to success. I know this from personal experience. When I left
the House of Representatives, I went to work for a high technology
company in Seattle, WA. I did not have any expertise or knowledge in
this area, but because I had a solid education that gave me the
foundation to learn on the job, I was able to learn quickly and thrive
in my new environment. That is the value of a good education.
My experience is hardly unique. According to the Department of Labor,
the typical worker will change jobs nine times during his or her
career.
When workers change jobs, they will find that more and more
employment opportunities require a college degree. Eight of the 10
fastest-growing occupations require at least a bachelor's degree. At
the same time, jobs for people who have not attended college are
quickly disappearing. Twenty-three of the 25 fastest-declining careers
do not require a degree.
A college degree is no longer a luxury--it is an imperative.
There is a ``perfect storm'' brewing at colleges across this country
that is making it increasingly difficult for families to afford a
college education. First, endowment earnings are down, significantly
reducing revenue for colleges and universities. Second, the economy has
been sluggish for so long that corporate and individual charitable
giving has been reduced across the country. Third, the sluggish economy
has put State budgets across the country in crisis. All of these
factors are contributing to the skyrocketing costs of college tuitions.

[[Page S6461]]

In Washington State, the legislature has significantly cut funding
for higher education and that means tuition is going up. In just the
last 2 years, tuition at 4-year universities and two-year colleges has
increased by 12 percent each year. Over the past decade, tuition at the
University of Washington has shot up an astounding 103 percent.
This trend is not limited to my State.
The vast majority of American families rely in part on federal aid to
help finance their children's college education. A recent General
Accounting Office report illustrated this point. It found that more
than 75 percent of all undergraduate students receive some form of
federal financial assistance. In addition, more than 40 percent of all
undergraduate students benefit from a higher education tax credit.
With the cost of tuition on the rise, we can expect that even more
families will require aid to send their kids to college.
We cannot let the opportunities of higher education slip out of
reach. Expanding access to federal financial aid is a critical long-
term investment in our workforce, and in our economy.

amendment no. 575

Mr. SPECTER. I voted to sustain the point of order against the Kyl
amendment because there needs to be more analysis as to its ultimate
effects. The amendment is very complicated. I tried to determine the
effects of the legislation in the absence of hearings, and could only
begin to scratch the surface due to the many conflicting
representations from various parties. We have not had the necessary
foundation established as to the effects of this amendment.
There are many facts that should be developed before we embark on
this course of action. Either the Finance Committee or the Judiciary
Committee should hear from the parties involved, including the States,
and develop a factual record as to what occurred during the course of
the litigation. Senators should have access to the record on these
issues through the hearing process. After the facts have been
developed, then a determination should be made on the issue. It is not
a timely decision absent the development of such a record.
I am prepared to participate in hearings, find the facts and make an
informed judgment on whether sound public policy would be served by a
mechanism, through the tax code or otherwise, to limit compensation for
anyone in the marketplace.

Amendment No. 575

Mr. BIDEN. Mr. President, I rise to speak in opposition to the
amendment of the Senator from Arizona. This amendment would
retroactively breach the contracts entered into by States and their
attorneys, and the settlement agreement reached in the tobacco-related
Medicaid expenses litigation.
Let me remind my colleagues of the context in which this historic
tobacco settlement came about. There were over 40 years of law suits
brought against tobacco companies, occurring over three different time
periods.
When these attorneys brought this litigation, cases against tobacco
companies would go on for years and years, almost always with little or
no favorable results. In order to catch the deception and subterfuge of
these companies, these cases needed staying power. The attorneys
bringing these cases needed the ability to withstand significant losses
while they uncovered the facts needed to make the damning case that the
tobacco companies had been hiding from the public.
The plaintiffs' attorneys undertook this riskiest of cases against
daunting odds, with a high likelihood of never getting paid at all. In
the first phase of tobacco litigation, no one was able to muster the
resources needed to bring these cases. Then a group of attorneys in the
public interest pooled over $100 million of their own money in order to
withstand the onslaught put up by tobacco companies bent on hiding the
truth from the public.
The tobacco companies spent approximately $700 million a year in
legal fees to their lawyers during this period. Thanks to their
tenacity, their legal skill, and the righteousness of their cause, in
the end the attorneys who brought this action prevailed. They secured a
settlement that returned $246 billion to the States. That is
``billion'' with a ``b.'' To put it in perspective, that is almost as
large as our entire budget deficit.
Let me say that again the tobacco settlements resulted in a huge
windfall for the States and for the American people. I daresay that, in
this day and age when State budgets are more squeezed than ever as a
result of Federal cuts and unfunded mandates, if the States were
offered this deal again, including the attorney's fees, they would take
the deal in a heartbeat. In a heartbeat.
And the money collected by the States under this settlement is only
the beginning. The settlement funds a new public education program to
reduce youth tobacco use; it provides money every year for tobacco-
related research; it dissolves the organizations that have historically
served as the tobacco companies' propaganda machines; and it prohibits
tobacco advertising aimed at children, such as the use of cartoon
characters.
Supporters of this amendment would have you believe that its
provisions somehow make the existing system fairer. Nothing could be
further from the truth.
The American way is to reward those who take a risk and succeed. We
grant patents that protect inventions for 17 years. We give copyright
owners exclusive rights to their works for their entire life, plus
another 70 years. More importantly, we don't punish people who come up
with a great idea and turn it into a success. To the contrary we let
them keep the fruits of their labor. But under the logic of this
amendment, we would seek to penalize Bill Gates' $40 billion net worth,
simply because he started with little more than a great idea and a
vision to make it happen, took the risk, and prevailed. Just like these
attorneys who brought the tobacco cases.
Supporters of this bill would also have you believe that it is only
the trial lawyers and their supporters who oppose this amendment.
Nothing could be further from the truth. Among others, consumer
advocates people who look out for the little guy strongly oppose this
amendment.
I also find it ironic that this amendment, which would abrogate a
settlement entered into by the States, is being offered by some of the
very same Senators who have made a career of advocating for States
rights. This amendment, which would abrogate the contractual rights of
private parties, is being offered by some of the very same Senators who
have made a career of upholding the right to enter into contracts
without undue regulation.
Just to be clear my colleagues refuse to interfere in the right of
States to send defendants to execution without competent counsel, but
insist on interfering to undo an agreement where the States reap $246
billion from the tobacco companies. Quite simply, they have got their
priorities backwards.
I might also remind my colleagues of one other historical fact: Some
of the Senators who are pushing this amendment today are the same folks
who, just a few years ago, were doing everything in their power to
defeat Federal attempts to force the tobacco companies to pay for the
huge damages they have inflicted on the American people. Fortunately
for the American people, and for the 50 States, they failed. Now,
however, they are trying to undo this successful settlement after the
fact.
Ladies and gentlemen, this is America. We make deals and we stick to
them. We do not go back on our word. I urge you to oppose this
amendment.

amendment no. 594

Mr. BINGAMAN. Mr. President, I am pleased to cosponsor and support
amendment No. 594 being offered by the chairman of the Finance
Committee with respect to the Medicare Program.
The amendment provides approximately $25 billion over 10 years to
reduce the inequity in the Medicare Program between urban and rural
areas and between the States that has so penalized health care
providers in New Mexico and includes language from four bills that I
have either introduced this year or introduced last year.
First, I am pleased the Grassley amendment includes the language from
S. 379, the Medicare Incentive Payment Program Improvement Act of 2003,
which I introduced with Senator Thomas and makes automatic the 10
percent bonus payment intended to physicians

[[Page S6462]]

in rural, medically underserved areas. Under current law, physicians
must go through a cumbersome application process, if they even know
they are eligible and can apply, and subject themselves to increased
scrutiny for audits if they do apply. Consequently, few doctors are
receiving the payment intended to provide physicians incentives to
treat Medicare patients in medically underserved areas and to retain
those doctors already providing services in those areas.
Second, the Grassley amendment includes language that significantly
reduces the geographic inequities that are a part of the current
Medicare physician payment system and disadvantages New Mexico
physicians. This language is similar to that in S. 881, the Rural
Equity Payment Index Reform, REPaIR, Act of 2003, which I introduced
with Senator Cochran and is a companion bill to H.R. 33, introduced in
the House of Representatives by Representative Bereuter. Reducing the
inequity in just the work component of the physician payment schedule
will increase payments to New Mexico physicians by an estimated $3
million annually.
Third, this amendment includes language from legislation I introduced
late last year entitled the Medicare Hospital Outpatient Department
Fair Payment Act with Senator Snowe to extend the hold harmless for
rural hospitals in outpatient departments, and adds a 5 percent add-on
payment for clinics and emergency room visits in rural hospitals.
And fourth, the amendment lifts the rural cap in the Medicare
disproportionate share hospital, DSH, program, which comes from the
Medicare Safety Net Hospital Improvement Act that I introduced last
year with Senator Roberts. This provision will add an estimated $4
million annually to New Mexico rural hospitals.
In addition, I would like to applaud the chairman for including
language from legislation, S. 816, introduced by Senator Conrad that I
was an original cosponsor of and entitled the Health Care access and
Rural Equity Act. Among other things, the language eliminates the
disparity in hospital payments caused by the differential paid to rural
and small urban hospitals compared to large urban hospitals and
significantly reduces the disparity caused by the wage index in the
hospital payment formula. Although rather arcane provisions in the
hospital payment formula, they result in significant disparities in
payments and the changes will have an important impact on hospitals
throughout New Mexico.
Before closing, I would like to express profound concern with respect
to the offsets used by the amendment, which include the addition of
copayments for clinical services and the impact the change in payments
for outpatient department prescription drugs will have on oncology
physicians. However, Chairman Grassley has committed to work to address
the need for a revision in payments to oncology doctors and we will
work to change the language with respect to copayments for clinical
laboratory services as this language moves forward.
Mr. NELSON of Florida. Mr. President, I would like to take this
opportunity to explain my vote against the Grassley amendment during
consideration of the tax bill.
Since joining the Senate in 2001, I have been an avid and consistent
supporter of rural health care and Medicare providers.
It was a hard decision to vote against this amendment. However, I
could not in good conscience, support an amendment that as an offset
would increase out-of-pocket expense for our Nation's seniors.
Medicare beneficiaries are already coping with having to choose to
buy their medicines or put food on the table. They are struggling to
pay for their share of health care costs, and even increased health
plan premiums. It is unconscionable to think that we would ask them to
meet deductibles and make copayments on outpatient lab services--
something they have not had to pay for in the past. At this point, no
concrete analysis is available showing the impact this would have on
seniors and their out-of-pocket costs.
At a time when we are growing increasingly concerned about how much
seniors are having to spend to access the care they need, how can we
ask them to pay more? We have not even delivered the promise of a
comprehensive outpatient prescription drug benefit.
I was prepared to support Senator Harkin's amendment--which he
withdrew. That amendment, which included many of the provisions in the
Grassley amendment, would have resulted in over $870 million to
Florida's hospitals over the next 10 years. That amendment, however,
eliminated the dividend tax cut beyond the initial $500--an offset I
could support.
Last year, I was a cosponsor of the Beneficiary Access to Care and
Medicare Equity Act of 2002. This bill, by Senator Baucus, included a
myriad of provisions benefiting rural health care providers, and as a
result, beneficiaries residing in rural areas.
Furthermore, earlier this year, during consideration of the budget
debate, I supported an amendment by Senator Harkin to help rural health
care providers and hospitals receive a fair reimbursement for services
under Medicare. That amendment reduced tax cuts to the wealthiest
income brackets--an offset I could support.
I am committed to improving the state of health care in our rural
communities and will continue looking for ways to do so, but not on the
backs of our Nation's seniors.

amendment no. 596

Mr. CRAIG. Mr. President, I regret that I was detained in my effort
to return to the floor, from another appointment, to vote on the
Collins amendment, No. 596. Had I been present, I would have voted in
favor of the amendment. I have been speaking again this week with our
Governor of Idaho about the current fiscal difficulties faced by State
and local governments. In both his role as Governor of our State and as
the incoming chairman of the National Governors Association, Governor
Kempthorne has eloquently argued the case for Congress to work with the
States to address this situation. I am pleased that the Senate today
could come to bipartisan agreement in its approach to temporary fiscal
relief.

amendment no. 654

Mr. GRASSLEY. Mr. President. I commend my colleagues for their work
on this important amendment, which injects much needed flexibility and
funding for safety net hospitals that treat especially vulnerable
populations. This amendment alleviates pressure on those hospitals and
allows ``extremely low-DSH States'' to increase Medicaid DSH allotments
to 3 percent in Fiscal Year 2004. Currently, Federal law restricts
Medicaid DSH allotments to ``extremely low-DSH States'' to only 1
percent of Medicaid Program costs.
I thank Senators Bingaman and Domenici for their work and for their
dogged commitment to the cause. I have supported low DSH improvement
legislation in the past, and I am thankful for their leadership on this
important issue this year.
Mr. BINGAMAN. Mr. President, I would like to thank the chairman and
ranking member of the Finance Committee, Senators Grassley and Baucus,
for agreeing to accept the language in the amendment being offered by
me and Senators Enzi, Lincoln, Smith, and Nelson of Nebraska, that
would increase the Federal allotment to States for Medicaid
disproportionate share hospital, or DSH, payments to what are called
``extremely low-DSH States'' from 1 percent of overall Medicaid
spending in each State to 3 percent. The language comes from
legislation, S. 204, that I introduced with Senators Enzi, Lincoln,
Baucus, Smith Harkin, Domenici, Johnson, Nelson of Nebraska, and
Dayton, and was cosponsored by Senators Pryor, Dorgan, and Daschle,
entitled the Medicaid Safety Net Improvement Act of 2003.
This amendment is important to the continued survival of many of our
Nation's safety net hospitals that provide critical health care access
to a number of our Nation's 41.2 million uninsured citizens, including
373,000 in New Mexico, through the Medicaid disproportionate share
hospital, or DSH, program.
At a time of growing numbers of uninsured and increased financial
strain on our Nations' safety net, we need to increase the ability of
``extremely low-DSH States' to address the problems facing their safety
net and to reduce

[[Page S6463]]

the current inequity in funding among the States. In fact, many
hospitals have resorted to cutting services or eliminating jobs to deal
with the growing uncompensated care problem, and it threatens the
health care safety net across this country.
At Memorial Medical Center in Las Cruces, NM, the hospital recently
announced the elimination of its maternity and mental health care
services due to the rapidly growing burden of uncompensated care. While
the elimination of those services has been temporarily forestalled, the
uncompensated care burden and bottom line deficits at that hospital
remain and the personnel layoffs of over 100 staff members in that
community has already occurred.
Indeed, the stories about the growing burden on hospital emergency
rooms across the country are well known. This is completely and
directly related to the economic recession facing our country and makes
this amendment directly relevant to this legislation.
It is also why the amendment has the support of the American
Association, the National Association of Public Hospitals and Health
Systems, the National Association of Children's Hospitals, the
Federation of American Hospitals, the Association of American Medical
Colleges, and the Catholic Health Association of the United States. As
they write, ``Today, safety net hospitals face a confluence of
challenges--including increased uncompensated care as more Americans
find themselves without health insurance--that put critical pressure on
hospitals' ability to serve their entire communities.''
The 20 States that would benefit from this amendment include: Alaska,
Arkansas, Delaware, Hawaii, Idaho, Iowa, Kansas, Maryland, Minnesota,
Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South
Dakota, Tennessee, Utah, Wisconsin, and Wyoming. I would add that the
legislation does not impact the Federal DSH allotments in other States
but only seeks to give ``extremely low-DSH States'' the ability to
respond to the growing burdens of uncompensated care in their States.
I would note that Hawaii and Tennessee have been included in their
amendment because their respective States currently do not have DSH
programs and are prohibited from making such payments. The amendment
provides them that authority under certain circumstances.
I would like to once again thank Senator Grassley and his staff
members, Ted Totman, Colan Roskey, Jennifer Bell, and Leah Kegler,
Senator Baucus and his staff members, Bill Dauster, Liz Fowler, Kate
Kirchgraber, and Andrea Cohen, for their help in getting this amendment
passed. In addition, this would have never come to fruition without the
strong support by Senators Enzi, Lincoln, Smith, Nelson of Nebraska,
and the other cosponsors of S. 204.

Amendment No. 666

Mr. SARBANES. Mr. President, I am in support of the Dorgan amendment
to the reconciliation tax cut bill that would strike a provision in the
bill to privatize tax collection by the Internal Revenue Service.
The proposal to privatize tax collection is misguided. Privatizing
tax collection will hurt both Federal employees, by contracting out
Federal jobs, and taxpayers, who could be subject to the abuse and
mismanagement of a private company. Privatization of tax collection has
already been tried by the IRS in a 1996 pilot project. The pilot
project was such an extraordinary failure that a further 1997 pilot
project was cancelled. The contractors who conducted the project did
not protect the sensitive information of taxpayers, and the project
ultimately did not save the Federal Government any money.
The proposal would allow private companies to engage in collection
activities without providing adequate safeguards for taxpayers against
abusive activities. It is my understanding that the Fair Debt
Collections Practices Act, known as FDCPA, which provides the most
important protections for consumers from abusive or unfair actions by
debt collectors, would not fully apply to the activities of the private
tax collectors. I am particularly concerned that a taxpayer's ability
to recover certain damages from an abusive private tax collector may be
severely limited under this proposal.
In addition, the privatization of tax collection is a major change to
the way our Government works. To make such a change without holding any
hearings on the matter, and without considering all aspects of the
proposal, particularly the failed pilot project and whether or not the
plan will actually save money, is irresponsible.
Ms. SNOWE. Mr. President, I rise to speak to the critical issue of
State fiscal relief, which I believe adds tremendous value to this
economic growth package. As I have discussed on numerous occasions, I
believe that one of the best stimulants for the economy is providing
assistance to our State and local governments, which is why I have
fought for its inclusion in this package.
Since December, when I first identified elements that I believed
would stimulate the economy, I insisted on a State and local fiscal
relief component. Today, I am pleased that the Senate is taking action
through this floor amendment to further refine both the agreement and
language that Senator Smith and I insisted must be included in the
growth package as passed by the Senate Finance Committee.
The growth package that the Senate Finance Committee reported
establishes a $20 billion trust fund in S. 1054, the Jobs and Growth
Tax Relief Reconciliation Act of 2003, to provide critical, flexible
relief for both State and local governments. Also, I would like to
thank Chairman Grassley for his willingness to work with me to identify
appropriate offsets that ensured this proposal would not increase the
net cost of the growth package, and also that the relief provided was
not only flexible, but helped to meet the challenges faced by our
communities.
By securing support to include a $20 billion fiscal relief trust fund
in this package, I was able to ensure that States and localities
received the help they need in balancing their fiscal year 2004
budgets. Fiscal relief to State and local governments is vitally
important to the health and strength of our economy, which is why I
fought to ensure that half of the $20 billion would be modeled after my
bill, S. 201, and would be flexible and divided between State and local
governments with 40 percent going to localities and 60 percent to
States.
The floor amendment under consideration will provide $20 billion in
State and local aid to be distributed in fiscal years 2003 and 2004.
Ten billion dollars in flexible funding will be distributed between
state and local governments, with the remaining $10 billion provided to
States through a temporary increase to the Federal Medical Assistance
Percentage, known as FMAP, to help alleviate the short-term spike in
Medicaid costs.
Because I thought it was important, we are providing $4 billion in
flexible funding to local governments. While I know a number of my
colleagues have questioned the necessity and importance of providing
relief to local governments, I strongly believe that local governments
have all the more pivotal and increasing responsibilities at a time
such as this, when they face decreasing revenues. And a large
percentage of this increased burden has come from unfunded federal
mandates related to education, homeland security and election reform.
By including $10 billion in flexible funding, distributed between state
and local governments, we will ensure that essential government
functions are performed.
As we all know, our states and local communities are struggling. For
the past 3 years, while the economy has been in a downturn, they have
worked to meet the needs of residents, while 49 out of 50 States
including Maine are also required to balance their budgets. In fact,
the National Conference of State Legislatures reports that since fiscal
year 2001, the combined budget shortfall in states has totaled more
than $200 billion. And the outlook for fiscal year 2004 is not proving
different. In January, 36 states reported budget gaps totaling more
than $68 billion for this year alone. In Maine, the Governor and
Legislature were forced to trim $1.2 billion from their biennial budget
in the wake of a $150 million shortfall in fiscal year 2003.

Some argue State budget shortfalls result from overspending--yet a
report issued by the National Governors Association shows that State
spending from 1995 to 2001 increased 6.5 percent per year, a rate
identical to spending from

[[Page S6464]]

1979 to 2003. Rather, it has been a drop in the stock market and the
economy concurrent with increased costs associated with necessities
like elementary and secondary education, programs under the Individuals
with Disabilities Education Act, or IDEA, homeland security, and
Medicaid--that has been the real culprit in burdening State and local
budgets.
The National Conference of State Legislatures has reported a
substantial decline in projected revenue, including drops in income,
sales and property tax receipts, and user fees. Indeed, data suggest
that over three-fourths of the combined State budget shortfall is due
to declines in State revenues. Again, unlike the Federal Government,
States don't have the option of running deficits--and after 3 years,
most practical belt-tightening measures have already taken effect.
On the spending side, the NCSL estimates that unfunded mandates for
the policy areas I just mentioned account for up to $82 billion in
increased expenses. And States rightly argue that the vast majority of
their increased cost burden comes from the growing unfunded Federal
mandate for providing care to the elderly and disabled. Medicaid
provides access to health care for almost 43 million of America's poor,
elderly and disabled citizens and it alone is a program for which costs
have grown by 11.1 percent from 1990 to 2000.
Because of benefit shortfalls in the Medicare program--such as a
prescription drug benefit--Medicaid ends up providing more vital
services. Indeed, while seniors and the disabled represent only one-
quarter of the Medicaid population, they account for almost three-
fourths of all Medicaid expenses. For example, in fiscal year 2002
States provided $6.9 billion in prescription drug assistance to
Medicare beneficiaries, and another $5.5 billion in copayment and
premium assistance.
That is why providing fiscal relief is so critical--because while
there is no question this population needs to be served, there should
also be no doubt we can't leave States to be the last line of defense
in footing the bill.
It is the same with issues like education--and that is why I also
support providing flexible funding for States and localities to use as
they see fit. In California 20,000 teachers are at risk of being laid
off, in New York local districts are raising property taxes to offset
the expected 4 percent cut in State education aid, and in Nebraska
officials have told 1,000 students that their academic scholarships to
state universities are being canceled and 431 college positions were
eliminated. We are making such great advances in education--and we all
know that education is the key to our future economic success. By
providing fiscal relief, the Federal Government is continuing its
commitment.
Of course, the level of assistance that Congress is providing would
not eliminate any State or local governments' total budget shortfall.
But it will provide vitally important assistance and has the support of
the largest State and local associations that represent our country's
local elected representatives and leaders. Moreover, providing this
State and local fiscal assistance within the tax package is entirely in
keeping with our efforts to stimulate the economy.
According to a recent Wall Street Journal article, ``Analysts at
Goldman Sachs figure State and local belt-tightening will shave as much
as a half-point from the economy's growth so that overall fiscal policy
will be no more than neutral next year.'' After all, dollars spent on
education, health care and transportation have an economic value today
and tomorrow.
In fact, the U.S. Chamber of Commerce reports that for every $1
billion invested in transportation, 47,500 new jobs are created. And
let us not forget that State and local governments account for more
than 15 million jobs nationwide. As we take steps to put more money
into the hands of consumers, we must also make sure that those who are
employed by a State or local government, either directly or through a
government service contract, are able to stay employed.
Providing short-term fiscal relief to help State and local
governments balance their budgets is vitally important to the long-term
viability of our economy. I thank Chairman Grassley for his leadership
on this issue, and I urge my colleagues to support this amendment.
Mr. REED. Mr. President, today I joined 49 of my colleagues in voting
to waive the Congressional Budget Act in support of Senator Dorgan's
amendment to restore the pre-1993 tax treatment of Social Security
benefits.
In 1993, I joined a majority of Congress in voting for the Omnibus
Budget Reconciliation Act, which combined with subsequent similar laws,
eliminated the deficits of the early 1990s and the debt that had grown
exponentially under Presidents Reagan and Bush. Included in this 1993
Act was a provision that changed the way Social Security benefits for
individuals making over $25,000 and couples with income over $32,000
were taxed. Like many of my colleagues at that time, I believed there
were more appropriate ways to eliminate the deficit, but budget
procedures prevented them from being considered, and, while there were
partisan amendments offered at later dates to reverse this policy, they
did so by increasing the deficit, so I and a majority of my colleagues
opposed these proposals.
Today's vote was different. It was different because the President
and the Republican majority have brought about a striking reversal in
our Nation's fiscal policies. In the span of less than 3 years, the
government's fiscal situation has deteriorated from budget surpluses to
near record budget deficits. We have gone from concerns that we would
retire our mountains of public debt too quickly to considering the
President's request to increase our debt limit to its highest level
ever. And, today we are voting on a tax bill that will only exacerbate
both of these problems. Indeed, it appears that the majority is
resolutely determined to cut dividend taxes for the most affluent in
our society. These actions are being taken without regard for fiscal
soundness and without any consideration of the impact and the burden
decisions we make today place on future generations.
In this environment, Senator Dorgan's amendment to aid senior
citizens rather than the wealthiest 1 percent of Americans, is the
appropriate policy because at the very least if we are going to deficit
spend, we should direct those resources to those individuals who have
already contributed in so many ways to this great Nation.
It would be my hope that we can find a way to address 1993 OBRA in a
manner that aids deserving seniors while protecting the long term
solvency of Social Security and restoring some sense of discipline to
the Federal budget process.
Mr. JOHNSON. Mr. President, I rise today to share my thoughts on the
tax measure before us. Few issues touch more Americans than the
economy. Now that hostilities with Iraq are winding down, we need to
focus on our own economy. Economic discussions tend to take on an
unfortunate partisan tone, and I know that this bitterness is on
display on the floor of the Senate today as we debate the President's
latest tax cut proposal.
Regrettably, we often forget that we share a common goal: Every
single member on this committee wants America to succeed. We all want
Americans to find good jobs, to have access to affordable health care,
to educate our children, and to retire with dignity and comfort. While
we have sharp divisions on how to achieve that common goal, I hope we
can remember at the end of the day that all of our intentions are good.
Despite all of our best intentions, we are facing nothing short of a
budget crisis in America. CBO has revised its deficit projections
upward yet again to reflect an end-of-year deficit of $300 billion.
Federal revenues are on track to fall to the lowest level since 1959,
even without more tax cuts, and we are about to vote on whether to
raise the debt ceiling by almost another $1 trillion.
At the same time, we must make good on our commitments to the Iraqi
people to help rebuild that country. We need to follow through on
commitments here at home: to fund education and water projects and
transportation and veterans' programs. Let's not forget that we will
run right through the Social Security trust fund without setting aside
so much as a dime for the young men and women who are paying into that
system today, nor have we

[[Page S6465]]

taken any steps to address the imminent Medicare crisis.
Now, I admit that I went to college quite some time ago, and I
understand that economic theories come and go, but I do not believe
that basic math has changed. If you spend more than you have, you run
up a deficit.
Yesterday in the Banking Committee we considered the nomination of
Dr. Gregory Mankiw to become chairman of the Council of Economic
Advisors. Given the health of this economy, we are certainly in need of
some good advice. On reviewing some of Dr. Mankiw's work, I was
especially interested in a passage from his 1998 book ``Principles of
Economics,'' which talks about the dangers of short-term policies:
``People on fad diets put their health at risk but rarely achieve the
permanent weight loss they desire. Similarly, when politicians rely on
the advice of charlatans and cranks, they rarely get the desirable
results they anticipate. After Reagan's election, Congress passed the
cut in tax rates that Reagan advocated but the tax cut did not cause
revenue to rise. Instead, tax revenue fell. . . and the U.S. federal
government began a long period of deficit spending.''
On several occasions, I have expressed concern that this
administration is sacrificing the long-term health of this Nation for a
popular, short-term political measure. And the President's own nominee
for the Council of Economic Advisors appears to share my concern.
I voted in 2001 for the President's tax cut plan. While I would have
preferred to see more of that $1.3 trillion go to working Americans, I
nevertheless agreed with a majority of my colleagues that a projected
surplus of $5.6 trillion over 10 years was too high, and that we needed
to refund some of that money. We face a starkly different picture
today, and I simply do not understand how my distinguished colleagues
can reverse course so completely with respect to their long-standing
stated principles.
For example, the majority leader of this body, Senator Bill Frist,
said back in 1996 that ``we have a moral obligation to balance the
budget.'' Senator Santorum, back in 1995, said that ``the American
people are sick and tired of excuses for inaction to balance the
budget. The public wants us to stay the course towards a balanced
budget, and we take that obligation quite seriously.'' And Senator
Lott, just last year, said that ``the most important thing really does
involve . . . keeping a balanced budget, not dipping into Social
Security, and continuing to reduce the national debt.''
I would like to focus on Majority Leader Frist's statement that
running budget deficits is a moral issue. What he meant by that was
that when we run a deficit, we defer the hard decisions for our
children and grandchildren.
In February, a group of 10 Nobel Prize-winning economists spoke out
against the President's latest plan: ``Passing these tax cuts will
worsen the long-term budget outlook, adding to the nation's projected
chronic deficits. This fiscal deterioration will reduce the capacity of
the government to finance Social Security and Medicare benefits as well
as investments in schools, health, infrastructure, and basic research.
Moreover, the proposed tax cuts will generate further inequalities in
after-tax income.''
And just a few weeks ago, Fed Chairman Greenspan appeared before the
Banking Committee and said, in as many different ways as he possibly
could, that tax cuts should only take place in the context of fiscal
discipline. In other words, don't cut taxes if you can't pay for the
cuts.
To quote once again from Dr. Mankiw: ``Prosperity tomorrow calls for
sacrifice today. It is the rare politician that is willing to call for
that.'' In a radio address on March 3, 2001, when we still had record
surpluses and we were on a course to pay down the debt, President
George W. Bush proclaimed, ``Future generations shouldn't be forced to
pay back money that we have borrowed. We owe this kind of
responsibility to our children and grandchildren.'' At the time, this
was an easy statement to make. Now, however, fiscal discipline requires
sacrifice, and we need President Bush to follow through on the promise
of leadership through hard economic times. I call on President Bush to
exercise leadership and put an end to this tax cut mania. No one likes
to deliver hard messages, but that is the price of true leadership.
Every time I talk to someone from South Dakota, I hear the same
thing: Our schools need more funding; our water projects need more
funding; our veterans need more funding; the list goes on and on. But
the simple fact is, we just don't have the money anymore. And we
certainly won't have the money if we continue on this reckless course
of tax cuts that will fill the pockets of those who already have more
money than they can spend in a lifetime. I agree that we shouldn't let
government grow too big. But we shouldn't destroy it either.
Mrs. BOXER. Mr. President, I am voting against this bill because I
came to the Senate to represent California families and this tax cut
for the wealthy elite is not in their interest. It contradicts the
basic American values of fairness, responsibility, and opportunity.
We are now in the longest period of continued job losses since the
Great Depression. In the first 3 months of this year alone, America
lost another half a million jobs. As result, 8.8 million people are
unemployed today. That is 2.8 million more than when President Bush
took office. Most troubling, 1.9 million of those workers have been out
of work for more than a year and a half. But instead of targeting the
majority of the benefits to a majority of the people, this bill targets
its benefits to the very top.
There is not a single responsible economist I know who thinks this
tax package will get us out of the terrible economic condition we are
in. In fact, 11 Nobel laureate economists and hundreds of others have
published an open letter saying that passing these tax cuts ``will
worsen the long-term budget outlook, adding to the Nation's projected
chronic deficits. This fiscal deterioration will reduce the capacity of
the Government to finance Social Security and Medicare benefits as well
as investments in schools, health, infrastructure, and basic
research.''
Those Nobel laureates also added that the tax cuts would generate
further inequalities in after-tax income. The reason for that is that
this package is skewed to those who do not need it.
That kind of windfall for the wealthy is bad policy. That is why I
supported the Democratic alternative and other amendments that would
have spread the benefits of the bill to more Americans.
The Democratic Plan for Jobs, Opportunity and Prosperity would put
over 1 million people back to work by the end of 2004. The Democratic
plan would provide three times more economic boost right now than the
Republican plan. At the same time, the Democratic plan would put us
back on the path to fiscal responsibility.
The Democratic plan would have cut taxes for every working American,
providing an average benefit of $1,630 to a family of four making
$50,000 a year. And it would have provided real assistance to the 8.8
million Americans who are currently unemployed. Our plan would have
created a new credit for every working American, which will provide
$300 for each adult in a family and $300 for the first two children. We
wanted to accelerate the refundability of the child tax credit,
accelerate the elimination of the marriage penalty, and extend and
expand unemployment insurance for those looking for work, including the
1 million people who have already exhausted their benefits.
Also, the Democratic plan would have sparked growth by helping the
States sustain vital services during the economic downturn and
encouraging small businesses to invest. As part of the Democratic
proposal, we proposed a 50 percent tax credit in 2003, worth $8
billion, to help small businesses pay their share of insurance
premiums. And very important for California, our plan would have
provided $40 billion in immediate aid to State and local governments.
We also proposed tripling the amount of investments small businesses
can write off immediately from $25,000 to $75,000 in 2003.
I was deeply troubled that my colleagues cared so much for the elite
few that they voted against a number of amendments that would have
helped working Americans. They rejected an effort to cut taxes on
social security benefits for middle-income seniors. They rejected
expanding the child tax

[[Page S6466]]

credit. They supported raising taxes on Americans working abroad. They
fought efforts to increase tax benefits to help families pay for higher
education. And they fought every effort to get more meaningful
assistance to the States in this time of crisis.
There were two bright spots during the Senate consideration of this
legislation. First, the Senate passed the Invest in the USA Act
amendment that Senator Ensign and I introduced. It will create a one-
time incentive for U.S. companies to bring $140 billion dollars in
funds earned abroad back to the U.S. for job creation, investment in
plants and equipment, and for other economically stimulative uses.
The Senate also adopted an amendment offered to crack down on
delinquent parents who do not pay child support. My amendment, which is
based on bipartisan legislation that I introduced, penalizes those who
do not pay the child support that they owe.
Despite these two improvements, the bill--and some destructive
amendments, such as an expansion of the dividend exclusion--is deeply
flawed, unfair, and fiscally dangerous--creating massive deficits,
which will hurt economic growth.
Mr. SARBANES. Mr. President, I rise today in opposition to the
pending legislation, S. 1054.
Our economy today is in a precarious position. It was reported
yesterday that retail sales in April fell. Initial unemployment claims
remain well above 400,000, the level typically associated with a weak
labor market. This morning we learned that industrial production
decreased by one-half of 1 percent last month and that capacity
utilization fell to 74.4 percent, and is now at the lowest level in 20
years. Our industrial base is producing less, we have more plants and
equipment idle which has led to fewer jobs, reduced consumer spending
and increased economic insecurity for the vast majority of Americans.
The unemployment rate has risen to 6.0 percent, the highest level sine
1994 and our economy has grown only at rate of 1.5 percent over the
past 6 months, far below its potential. This growth rate is far too
slow to create enough jobs for the nearly 9 million unemployed American
workers who want to find work but can not because there are not enough
jobs to be had.
The facts indicate the serious nature of the problem facing the
economy in the short run. Our economic growth is not strong enough to
even maintain our job base, much less create the jobs needed for those
who lost their jobs during the recession.
Unfortunately, the legislation before us today will not help solve
these serious problems. The administration's proposal would create very
little stimulus this year, when it is needed the most. Two economic
consulting firms used by the administration reached this conclusion.
One estimate, performed by Economy.com, calculated that the President's
proposal will add only 0.4 percent to our gross domestic product this
year. The President's proposal will not create enough jobs this year,
when people are out of work and can not find a job because there are
none to be had. Macroeconomic Advisers issued a report, entitled `A
Preliminary Analysis of the President's Jobs and Growth Proposals'
which concluded that the plan would create only 242,000 jobs by the end
of this year. That is less than half the 525,000 jobs that we have
already lost this year alone.
The President's proposal falls far short of what the economy truly
needs. Instead the administration proposal focuses on large permanent
structural tax reduction aim at providing the maximum benefit to the
wealthiest few. This will have very little stimulative effect while
costing a great deal in both the present and the future. Far from
stimulating the economy, the President's tax cut will create a large
structural deficit which will slow future economic growth and result in
fewer jobs. That is not just my conclusion. The Committee for Economic
Development, CED, found that the President's proposal, ``would raise
the cumulative 2004-2013 deficit by about $920 billion (including
interest) and raise the annual deficit ten years from now by about $100
billion.
Large structural deficits have real consequences. They reduce
national savings and investment, raise real interest rates and reduce
economic growth. The costs of the President's plan over the long run
are so substantial that the President's plan would actually reduce
future economic growth. Macroeconomic Advisers concluded that ``as
interest rates rise, the initial increase in the stock market and
decline in the cost of capital are reversed. Weakening investments
leads to a sustained decline in labor productivity and hence potential
GDP.'' They found that the President's plan will reduce economic growth
in the long run. Economy.com reached a similar conclusion. It estimated
that the President's plan would actually shrink the economy over the
next 10 years.
In his April 26 radio address, the President stated: ``Some Members
of Congress support tax relief but say my proposal is too big. Since
they already agree that tax relief creates jobs, it doesn't make sense
to provide less tax relief and, therefore, create fewer jobs.'' In
regard to that statement, the Washington Post reported, ``Asked to
evaluate Bush's new argument, one Republican economist with close
administration ties quipped, `I suppose it matters whether you think
economics matters.'' '
I believe that economics matter. I also believe that when you pursue
economic policies based on ideology instead of sound economic
principles you end up hurting the lives of millions of Americans and
threatening our economic future and prosperity. Look at the record of
this administration: Since the President took office, the economy has
lost 2.7 million private sector jobs. That is the largest job loss
under any one President since we began keeping such statistics. This
administration is on track to become the first administration since the
Great Depression to witness a decrease in the number of jobs in
America. When the President took office, what he, in effect, inherited
was a 10-year surplus estimated at $5.6 trillion. That was a projection
out for 10 years: a surplus of $5.6 trillion. Now with the policies
that he has enacted and the policies that he is proposing, in
particular, of course, this very heavily weighted tax cut for the
benefit of upper income people, we will go from projecting a $5.6
trillion surplus over the 10-year period to projecting a $2.1 trillion
deficit. That is a seismic shift in our position.
Many of my colleagues in the Senate as well as the President have
argued that these deficit estimates are inaccurate because they fail to
take into account the so-called dynamic effects from the President's
proposed tax cuts. In a recent speech the President said that, ``in
order to get rid of the deficit, you boost revenues coming into the
Treasury by encouraging economic growth and vitality'' through his
proposed tax cut. Yet when the Congressional Budget Office analyzed
these dynamic effects under nine different models, it found that these
dynamic effects made little difference on net and that under five of
the nine models theses effects actually increased the deficit. That is
under all of the various assumptions used by the CBO the so-called
dynamic effects that the President has argued would help the tax cut
pay for itself will not only fail to deliver on that promise but may
actually increased the deficit. This is yet another example of engaging
in a policy driven by political ideology instead of sound economics.
This bill is modeled on the failed economic policy that this
administration has advanced: vast tax cuts for the extremely wealthy.
The administration's proposal as estimated by the Brookings Institution
creates a tax giveaway of over $89,000 to the average millionaire while
providing only $482 to the average family with an income of $50,000.
This truly represents the priorities of `Leave No Millionaire Behind'
instead of `Leave No Child Behind.'
This does not have to be the case. The Congress could enact sensible,
prudent policies which provide a real, substantial boost to our
economy, create many more jobs now when they are needed, maintain our
economic strength and security over the long run. Senator Daschle
presented an alternative that would create real jobs, grow the economy,
help unemployed workers, and assist State and local governments that
are facing their worst fiscal crisis since WWII. Extending unemployment
insurance benefits serves to stimulate the economy immediately as those
receiving the benefits

[[Page S6467]]

are almost by definition sure to turn around and spend what they
receive. Providing aid to State and local governments will allow them
to forestall cuts to vital programs or tax increases, either of which
would only exacerbate our current economic problems.
Comparing the Democratic alternative and the administration's
proposal, the conclusions are the same using almost any economic model:
The Democratic plan would create over 1 million jobs at by the end of
this year, which is twice as many jobs as the administration's own
estimate of their plan; the Democratic plan would provide more stimulus
to the economy this year leading to higher economic growth; and the
Democratic plan is temporary and far less costly than the President's
proposal.
Mr. President, I oppose this legislation and I urge my fellow
colleagues to vote no on this bill.
Mr. BIDEN. Mr. President, our economy is in a slump unlike any in
recent memory. In fact, we are experiencing a downturn with features
unseen since the days of the Great Depression.
In the last 2 years, we have lost over 2.6 million jobs in the
private sector. That is the longest continous decline in the number of
jobs in over 50 years. It has almost doubled the number of Americans
who are stuck in long-term unemployment--out of a job for over half a
year.
The unemployment rate has just risen to 6 percent, with 8.8 million
Americans out of work.
The stock market has lost value by more than ten percent each of the
last 3 years. The last time that happened was, again, the Great
Depression of the 1930's. A drop of almost 30 percent in the value of
the stock market has decimated the retirement savings of millions of
Americans, and drained over $5 trillion in wealth from their net worth.
That is why we are here today, to debate how to respond to this
crisis. This crisis is real, it is affecting millions of families
directly and indirectly across this country. In addition to the
thousands of jobs lost with every new report, millions more families
are concerned about the security of their own jobs.
In fact, the situation is so precarious that the Federal Reserve,
under the leadership of Alan Greenspan, has shifted its historical
concern about inflation to a worry we haven't seen since the 1930's--
deflation. Despite a series of 12 interest rate cuts in a row, that
thave pushed interest rates to forty-year lows, the Federal Reserve's
meetings are now focused on keeping us out of the kind of deflation
trap that Japan has been stuck in for more than a decade.
When the Fed is more worried about deflation than inflation, you know
you have a probiem.
And while we ended the last century with the Federal budget in
balance for the first time in a generation, we now begin the new
century facing deficits bigger that we have ever seen. The
Congressional Budget Office has just raised its estimate of this year's
deficit to $300 billion, and that doesn't even count this $350 billion
tax cut before us today.
Wall Street analysts expected the actual deficit to be closer to $400
billion or even more for this year--the biggest dollar figure ever.
This kind of budget policy is the reason why we will soon be voting
to raise the national debt ceiling--to allow us to borrow enough money
to pay the bills we have already incurred.
This will be the single largest increase in the national debt in our
history, adding almost a trillion dollars to the debt limit, raising it
to over $6.7 trillion.
Just a few short years ago we were paying down the national debt.
We have gone from a projected surplus of $5.6 trillion to a $1.8
trillion deficit. This is a record of economic bad news that has not
been equaled in most American's lifetimes.
Now we are piling up additional debt, and adding heavy new interest
charges to the spiraling costs of this administration's irresponsible
budget policy. Over the next 10 years, we will add an additional $1.7
trillion in interest costs on that Debt--$1.7 trillion that will not be
available for homeland defense, for health care, for education, for law
enforcement.
How well I remember. How the men and women in the business community
would come to me in the decades of deficit and tell me, ``Balance the
budget, stop borrowing money like nobody else needs it. Get the
government out of the credit markets so we can invest and grow.''
Where are those voices we used to hear on the Senate floor, imploring
us to reverse decades of borrowing and return to the straight and
narrow of balanced budgets?
We need a strong dose of those principles now. We need an economic
stimulus that works. And we need an economic policy that does not
mortgage our future, that does not dump the bill on our children and
grandchildren.
We need a plan that we can afford, that treats the very real,
specific problems that average families in Delaware and around the
country are facing today. Unfortunately, the bill before us is the
wrong plan, at the wrong time, at the wrong price.
We need an economic policy that has an impact right now, in the very
short term--an impact on consumer spending, on the demand side, to give
employers a reason to bring those workers back.
That means tax cuts for the vast majority of American families who
need some relief, and who can be counted on to go out and spend that
money--to create demand for more products, create more jobs.
But in addition to the very real and very serious problems we are
facing today, in the very near future, just around the corner, the
retirement of the baby boom generation will stretch our Social Security
system to the breaking point.
Just a decade from now, surpluses in the Social Security system--
extra funds that help to cover some of our current deficits--those
surpluses will disappear. Then the drain on our resources will
accelerate until--according to the Social Security System's trustees--
by 2030 Social Security and Medicare will be a third of every Federal
income tax dollar, and by 2040, almost half of every Federal income tax
dollar.
That is clearly an impossible situation that we cannot permit to
occur. We must act now to makes sure that we have the resources to keep
the promises we made to the millions of Americans who have paid their
Social Security taxes over the years.
But every dime of the $350 billion tax cut before us today is
borrowed from Social Security--it breaks our promise to those who
depend on Social Security, and sends the bill to our children and
grandchildren.
The solution we are seeking today, for the ongoing loss of millions
of jobs, must not ignore the crisis in federal finances that is
beginning now and crests just a decade away.
It is not just that it is unfair and irresponsible to put the burden
of our choices off on our children. That should be reason enough to
reject this policy out of hand.
But a moment's reflection tells us that if we borrow $350 billion, or
$550 billion, or--if the President had his way, $726 billion--if we
borrow that money from the same capital markets where our corporations
and home buyers get their money, that policy is self-defeating.
It raises the cost of money, and slows the economy down, while
handing out windfall tax breaks that people will get without any change
in the behavior.
That policy is indeed unfair. It is irresponsible. And it is
ineffective.
But a kick-start that gets people spending and businesses hiring--and
that has a reasonable cost--that kind of policy can work.
First, we all know that the real price of this bill is not $350
billion. We have already heard that key members of the Republican
leadership do not expect that the tax increases in this bill, that keep
the cost of the tax cuts down, will survive a conference with the
House. If those tax increases go, the cost of this bill goes up.
And key provisions in the bill--like the dividend exemption--phase in
slowly and then are supposed to expire after ten years. Even if you buy
the idea--which I don't--that giving a tax break to the small
percentage of Americans who receive dividends can somehow turn the
economy around, how can you expect that change to happen if businessmen
know they should wait a few years until the exclusion is phased in?

And what kind of permanent change in corporate behavior can we expect

[[Page S6468]]

when we know that the door is going to slam shut on this deal 10 years
out?
One answer is that they don't expect that door to close. They expect
the dividend provision and others to be extended. Or more and more
dividends could be excluded--that creeping expansion and acceleration
has been the pattern since we passed the 2001 tax cuts.
Full exemption of dividends, if it were in place at the end of this
decade, would cost $750 billion over the next 10 years.
For that and many other reasons, this tax cut, as big and
irresponsible as it is, is just a place holder for even more
reductions, and even more deficits, even more debt.
But designed this way, to get ten pounds of tax cuts into a five
pound bag, so to speak, has resulted in a tax cut that even a
conservative economist who supports the administration has called, and
I quote from yesterday's Washington Post, ``one of the most patently
absurd tax policies every proposed.''
But maybe if this bill offered the average American family some real
tax relief, maybe if we could expect a little help for the millions of
jobless men and women stuck in long-term unemployment, some of the cost
would be worth it.
Tragically, there is no reason to expect this legislation to do
anything to stimulate the economy this year or next. The way this tax
cut is designed, there is no reason to expect any benefit to the
economy, and every reason to believe that the deficits it creates will
cause harm.
Estimates by Congressman Henry Waxman, who examined corporate
statements, show that the top three executives at Fortune's largest 100
companies would get a tax cut of $118 million if dividends were totally
excluded from taxation, the goal that administration officials admit is
the real aim of the partial exclusion in this bill. Under full
exclusion, twenty one executives would get a tax cut of $1 million.
That is for doing nothing. Just for doing what they already do. That
is not corporate tax reform, it is simply a windfall. I trust that
those men and women earn every dime they already make. But no one can
argue that a $118 million personal windfall into the already large pay
packages of those executives is going to create a single new job.
I you really wanted to fix the problem of dividend taxation, even
Republican economists--indeed, especially Republican economists--will
tell you that you should eliminate the tax at the corporate level. That
at least has the potential of changing the behavior of firms that now
must choose between borrowing that is not taxed and dividends that are
taxed.
That could be part of an honest debate about tax reform and job
creation.
And when Alan Greenspan endorsed the idea of reforming dividend
taxes, he said it should be done in a way that does not add to the
national debt, and that it should be part of a bigger plan of reform.
This proposal flunks all of those tests.
Only 13 percent of the impact of this bill will be felt in this year,
Mr. President--and less than half in its first 2 years. And the vast
majority of the revenue losses come in the future, as the crisis in
Social Security approaches. This plan turns economic logic on its head.
This is not designed to stimulate the economy--if it were, it would
provide a quick, short-term boost to family incomes, and would give
businesses incentives to act right now to increase investment and
create jobs.
Under this bill, the one-tenth of one percent of Americans who have
an income of over $1 million will receive an average tax cut of
$64,000. But those Americans in the middle 20 percent of the income
spectrum would get an average tax cut of $233.

That's right, the average American gets a tax cut of $233, under this
bill.
That is not fair. But it is not good economic policy either. Those
good men and women fortunate and hard-working enough to make over a
million dollars a year are not going to change their behavior, they
aren't going to create any new jobs, just because they get an
additional $64,000.
But getting money to the families who will go out tomorrow and spend
it, getting money to those who are about to lose long-term unemployment
benefits, getting money to the states to prevent further state tax
increases or spending cuts--that has the best hope of giving the
economy the stimulus it needs.
The tax cut program that makes sense and that I supported would
provide a tax cut for every American taxpayer--for example, $300 for
every adult, $300 for the first two children. It increases the child
tax credit to $700 this year and $800 next year. And for middle class
and working families, this tax cut plan that I supported accelerates
relief from the marriage penalty.
Altogether, a middle class family of four would have gotten a tax cut
of $1630 this year under the Democratic tax cut plan.
And if you add to that my proposal to allow parents to deduct the
cost of college tuition a family with kids in college could get an
additional $3000 tax break. That is real help, for real families, to
deal with a real problem, and frees up real money to stimulate the
economy.
Incredibly, this so-called ``Jobs'' bill makes no provision to extend
the life of the long term unemployment program that expires in just two
weeks. With the number of long-term unemployed at record levels and
growing, this bill simply ignores their needs.
Equally astounding, the bill provides almost nothing for the states
whose fiscal crisis is dragging the economy down. State budget cuts in
education, health care, law enforcement--even homeland security--slow
the economy as workers lose jobs and businesses lose customers.
While there appears to be $20 billion in aid to the states in this
bill, in reality, the reductions in federal dividend and income
taxation will cut as much as $11 billion from state taxes based on
those sources.
Under the tax cut plan I support, small businesses would get three
times the tax write off for investments--$75,000 worth--this year, and
a tax deduction for 50 percent of the cost of new equipment, along with
help getting health insurance for their employees.
The tax cut I support would get $20 billion in real help to the
states to confront the fiscal crisis that is compounding the national
economic slump.
And the tax cut program I voted for would extend unemployment
benefits to help those looking for work sustain that search in a time
of record job losses.
Finally, the plan I supported is affordable. Its effects take place
immediately, and it would not leave a hole in our finances for our
children to repair.
That's the plan I supported, and it is the plan our country needs. I
cannot vote for this bill that is now before us because it fails to do
so.
Mr. LEVIN. Mr. President, I cannot support this fiscally
irresponsible and unfair tax cut package.
Our economy is struggling right now. Eight-and-a-half million
Americans are out of work, and we now have about 2.7 million fewer
private sector jobs than were in existence at the beginning of this
administration. No President since the Great Depression has ended a
term with fewer jobs than when his term began. Michigan has an
unemployment rate of 6.7 percent, among the highest in the Nation.
According to the Bureau of Labor Statistics, Michigan lost 17,700 jobs
just last month, the most of any State in the country. That brings the
total number of Michigan jobs lost since the Bush administration took
office to over 178,000, and the total number of unemployed in Michigan
to 344,000.
We are also back into a deep deficit ditch. As recently as January
2001, the Office of Management and Budget projected a 10-year surplus
of $5.6 trillion. Now, under the recently passed budget resolution, we
face an estimated deficit of $1.95 trillion over the same time period,
including record deficits of over $300 billion for this year and the
next. Federal Reserve Chairman Alan Greenspan recently reiterated that
the bigger the deficits, the higher the long-term interest rates, which
means higher home, car, college and credit card payments for us all.
Our economy needs a lift now. It needs real jobs and real growth now,
not a rehash of the same policies that were tried and failed in the
recent past.

[[Page S6469]]

Unfortunately, this bill only provides more of the same failed
policies.
While the bill purports to cost $350 billion over 10 years--an amount
which already is fiscally irresponsible given our current deficit--this
number is arrived at by using a budget gimmick that masks the true cost
of the bill, which in reality is upwards of $660 billion over 10 years.
The bill would completely exclude dividend income from individual
taxation in 2004 through 2006, a policy that is expensive, not very
stimulative to our economy and sharply slanted towards upper income
folks. But then the bill ``sunsets'' the dividend exclusion so that it
disappears beginning in 2007. Not only is that bad policy, it is also
disingenuous and deceptive to the American people.
This bill also is too generous to those who need it the least. The
top 10 percent of taxpayers would receive well over 50 percent of the
tax benefits, and in 2003, those with incomes above $1 million would
receive an average tax cut of $64,400, while those in the middle of the
income spectrum would receive an average tax cut of only $233.
Providing large tax cuts to the wealthy in the hopes that the benefits
will trickle down to everybody else hasn't worked before, and there is
little reason to think that it will work now. Following the same
approach that failed time and again just doesn't make sense.
This plan provides no unemployment benefits to any of our 8.7 million
unemployed Americans. It is ironic that in a bill that is based on the
President's so-called ``Jobs and Growth'' package, the Republican
majority is not addressing the immediate need for job assistance for
millions of Americans. It is elementary economics that providing
additional unemployment benefits is an excellent way to jump start a
stagnant economy. The money we are talking about is money that will be
spent. According to a 1999 Department of Labor study, every $1 invested
in unemployment insurance generates $2.15 in Gross Domestic Product.
That is what our economy needs, not wildly expensive tax cuts that do
little in the short term at a huge long-term cost.
While I am pleased that this bill contains funds to assist our
struggling State and local governments, it does not do enough. Our
States currently are facing their worst fiscal crisis in over 50 years,
with many being forced to raise taxes or cut vital services like
Medicaid in order to balance their budgets. Instead of doing all that
we should to assist them, this bill includes a dividends exclusion
provision that will actually strip States of revenues, something which
will stimulate neither jobs nor growth.
I supported and voted for a tax package that was about creating jobs
now, when we need it, in a way that did not mortgage our future.
The plan I supported was estimated to put more than 1 million people
back to work by the end of 2004 at a fraction of this bill's costs. It
would have cut taxes for every taxpaying American, providing a tax cut
of $1,630 to a family of four through a wage credit, an acceleration of
the child tax credit, and an elimination of the marriage penalty. It
would have helped small businesses by providing them with a 50 percent
tax credit to help employers maintain health coverage for their
workers, and would have provided large and small companies with
incentives to invest and create jobs by allowing small businesses to
immediately write-off more investments and providing bonus depreciation
to all companies. It also would have provided unemployment benefits for
nearly 4 million laid-off workers, including those who have already
exhausted their benefits. What our sagging economy needs right now is
immediate jobs, growth, and stimulus, and that is what the plan I
supported offered.
Instead, what passed is a package that is the wrong medicine for our
ailing economy. It will create fewer jobs than what is needed. It will
slight middle-class families in favor of the wealthy. And it will
dramatically increase the deficit and national debt and drive up
interest rates, which will make it more expensive to buy a house, pay
for college, or pay off credit card debt. That is just not a plan that
I can vote for.
Mr. KOHL. Mr. President, I rise today to express my deepest
disappointment in the actions of the Senate today. Today, across the
country, States face a fiscal crisis as State legislatures attempt to
close an estimated $17.5 billion budget gap. Today, more than 2 million
American workers have been unemployed for more then 6 months. Today,
families across the county are struggling to make ends meet. Today, our
country is seeing steadily increasing deficits, now projected at over
$300 billion this year alone. And today, in the Senate, we passed a
hugely expensive tax package that will overwhelmingly benefit the
wealthy.
It is for that reason I voted against the Finance Committee's jobs
and growth package. I have consistently argued that the best way to
meet the needs of our Nation is to find a balance between cost and
benefit, and the votes I have taken today are a reflection on this
desire. I voted to double the amount of funding that would go to
struggling State legislatures and local governments. I supported
efforts to get more money into the hands of working families. I also
supported amendments that would assist small businesses with the cost
of health insurance and new equipment. These initiatives are the most
effective, as well as the most cost effective, means of stimulating the
economy.
I would like to take a moment to applaud the pieces of the Finance
Committee's package that were actually beneficial to working families.
Marriage penalty relief and accelerating the increase in the child tax
credit are both worthy proposals that would benefit millions of
families. In addition, the small business expensing provision is an
excellent way of helping small businesses with startup costs thereby
providing a significant boost to the economy. However, we could, and
should, have done more--more help for the struggling economy and
struggling families at less damage to our bottom line. I was
disappointed to see proposals fail today that would have expanded on
all of these provisions; proposals that would have gotten more money
into the hands of families who would spend it and could have provided a
larger, faster boost to our failing economy.
My greatest disappointment, however, was with an amendment that was
able to pass. Since the administration announced its support for a
complete elimination of the taxation on dividends, I have voiced my
opposition to this proposal. Forty-two percent of the benefits under
this proposal would go to the richest 1 percent of taxpayers. Those are
inexcusable figures for a provision to be included under a so-called
growth package. The dividend proposal will not spur the economy, will
not help working families, and will not help States with their budget
shortfalls. These are the goals we should be working towards, and I
believe that we have fallen severely short in passing this legislation
today.
Mr. BUNNING. Mr. President, I am pleased that the manager's of the
Jobs and Growth Tax Relief Reconciliation Act of 2003, Chairman
Grassley and ranking member Baucus, have agreed to included in their
manager's amendment my provision, which is supported by many members in
this body, that addresses the issue of the tax burden that is faced by
wholesalers of domestic distilled spirits.
I want to take this opportunity to express my support for this
legislation and also to share my broader concern about how the current
Federal Excise Tax, FET, system places an undue burden on distillers
that must, at a minimum, not be increased to fund this legislation or
for any other reason.
I introduced this amendment because I believe that the existing FET
system for domestically produced distilled spirits penalizes spirits
wholesalers across the nation. These are mostly family businesses that
create high wage jobs. Yet spirits wholesalers often find themselves in
the position of, in essence, having to float Uncle Sam a loan when they
purchase U.S. made spirits from their distillers.
Let me briefly explain how this situation comes about in the
marketplace. Under Federal law, spirits produced in the United States
may not leave the distillery premises until the FET is collected. Thus,
the cost of the FET is factored into the price of the goods that is
paid when the wholesaler accepts possession from the distiller. The
wholesale, in turn, may wind up having to warehouse these products for
a considerable time before they are sold to a

[[Page S6470]]

retailer. The fundamental issue here is the time value of the FET--
valuable working capital for these businesses--while the wholesale
warehouses products without realizing any income from their sale.
This amendment would create a tax credit available to the wholesalers
in order to offset these FET carrying costs. I believe this is
fundamentally fair and will help protect and create good jobs in the
wine and spirits wholesale tier across the nation.
However, in introducing this amendment and supporting its inclusion
in the Jobs and Growth Tax Relief Reconciliation Act of 2003, I want to
make one thing perfectly clear. In supporting this bill, I want the
Administration, and officials at the Treasury Department and the Bureau
of Alcohol, Tobacco and Firearms to understand that by doing so I
reject the connection that some have tried to make between this issue
and Section 5010 of the tax code, the wine and flavors tax credit. In
past years, the suggestion has been made that any revenue loss to the
U.S. Treasury caused by the provisions of my amendment be offset by
repealing Section 5010. I reject that notion because there is no
logical link between the two issues.
Section 5010 is a component-based tax provision allowing distillers
to claim a credit for wines and other flavoring components that are
added to their products. Thus, a distiller will pay the full spirits
FET for that portion of a product that is derived from distilled
spirits. However, many products sold as spirits contain wine and other
non-spirits flavorings, which are subject to tax at lower rates. Under
Section 5010, the distiller is entitled to a credit for the difference
between the wine and the spirits tax for that portion of the product
that is not derived from spirits.
Section 5010 is important. It has the added policy virtues of being
on the side of common sense, economic competitiveness and fundamental
fairness. All of this is why I have fought hard to protect 5010 from
several serious threats over the years.
I am pleased that, with the inclusion of my amendment in this bill,
the Senate has once again shown its support for solving this problem
which penalizes spirits wholesalers of domestically produced distilled
spirits. I am also pleased that the Senate has seen fit to address this
important issue without harming Section 5010 or otherwise increasing
the tax burden on distillers.
Mr. DOMENICI. Mr. President, I rise today to thank my colleague from
Iowa, Senator Grassley, for his leadership in providing much needed
assistance to our Nation's hospitals and doctors. Specifically, I would
like to thank him for his support of the disproportionate share
hospitals--DSH--program, and for his support of fair and equitable
Medicare reimbursement for America's doctors.
The Medicaid DSH program is an essential program that provides relief
to many of our Nation's safety net hospitals; hospitals that experience
financial difficulty because they treat larger numbers of the
uninsured, low-income, and Medicaid patients. By raising payment rates
to these hospitals, the DSH program helps to alleviate the
disadvantaged financial situation suffered by many of these hospitals,
and helps to ensure that all who need access to hospital care are able
to receive that care.
Under current rules, a state's DSH payments may not exceed an
allotment amount that is set in law for that state. In my home state of
New Mexico, DSH payment adjustments are set at less than 1 percent.
This 1 percent is far less than the national average of 8 percent, thus
classifying my state as an ``extremely low DSH state.'' This lack of
funding has seriously threatened the viability of many New Mexico
safety net hospitals, and it puts at risk the care of some of our
neediest citizens.
Today however, as a result of the work done by this body, Medicaid
DSH allotments for States like New Mexico that have extremely low
payments will be raised from 1 percent to 3 percent. This additional
funding will help to ensure that our hospitals can continue to treat
Medicaid and other low income or uninsured patients, and it will help
relieve some of the pressure on our State's budget.
In addition to the assistance provided to the DSH program, this
Congress has also taken a proactive approach to resolving another issue
of great importance to me, fair and equitable Medicare reimbursement
for America's doctors.
In many Medicare payment localities, current Federal policy
undermines a doctor's ability to see Medicare patients by establishing
disparity in reimbursement levels. Rural physicians are among the
lowest Medicare dollar reimbursement recipients in the country, and I
submit that this is the reason these areas cannot effectively recruit
and retain their physicians.
This practice is unfair and it is discriminatory. There is not reason
doctors in Albuquerque, NM should be paid less for their time than
doctors in New York City. Doctors should be valued equally,
irrespective of geography.
Today, Congress has agreed to fix many of these inequities, and has
provided for a more balanced reimbursement formula. By increasing
Medicare physician reimbursement, we will improve patient access to
care and increase the ability of states to recruit and retain
physicians. When Medicare physician reimbursement rates are raised,
patients are the ultimate beneficiaries.
I have enjoyed working with my colleagues, including Senator
Bingaman, on these very important issues.
Mr. NICKLES. Mr. President, pursuant to section 313(c) of the
Congressional Budget Act of 1974, I submit for the Record a list of
material in S. 1054, the Jobs and Growth Tax Relief Reconciliation Act
of 2003 reported by the Finance Committee on May 13, 2003, considered
to be extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E)
of section 313. The inclusion or exclusion of material on the following
list does not constitute a determination of extraneousness by the
Presiding Officer of the Senate.
To the best of my knowledge, S. 1054, the Jobs and Growth Tax Relief
Reconciliation Act of 2003, contains no material considered to be
extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) of
section 313 of the Congressional Budget Act of 1974.
Ms. SNOWE. Mr. President, I rise today to speak regarding the jobs
and growth package that was reported by the Senate Finance Committee
and that has been considered on the Senate floor. It was a long and
often arduous journey that brought the bill here for consideration, and
I especially thank the majority leader and Finance Chairman Grassley
for their extraordinary and tireless efforts in ensuring we were able
to pass a package in committee and consider this economic stimulus bill
in the full Senate.
Let us remember, this debate began when the President rightfully and
forcefully made the case that we have an obligation to help jump-start
an economy that was already in the doldrums even before the tragedy of
September 11. Over the past few months--as we worked to pass a budget
for the first time in 2 years and as the tax cut package moved through
the respective House and Senate committees--some said the reductions
should be smaller--some said larger--and others even believe that no
cuts were warranted. Last week, the House passed a very different tax
bill than the one the Senate is considering today, further reflecting
the diversity of deeply held beliefs as to our appropriate course of
action in Congress.
I have believed since last fall that the American people must know we
are serious about creating jobs with a plan that can be effective now.
We have lost 2.3 million jobs since March 2001, and with 48,000 jobs
lost in April alone, we have reached the highest level of unemployment
in 8 years at 6 percent. In the last quarter of 2002, the economy was
growing at a languid 1.4 percent annual rate, and the Commerce
Department's latest report showed the economy was still at a weak
growth rate of 1.6 percent. Consumer spending has increased more slowly
than at any time since the 2001 recession, and capacity at the Nation's
factories is at a low of 72 percent--meaning that demand can and must
be increased.
So the President is absolutely right to make passage of a robust
growth package central to his agenda, and I applaud his unflagging
leadership in rejuvenating our economy. At the same time, I have also
held throughout this debate that to deficit-finance too high

[[Page S6471]]

a level of tax cuts would be to risk condemning future generations to
the corrosive economic effects of unsustainable deficits--and tying
hands of future Congresses in addressing our most pressing domestic
challenges.
With a net $350 billion for stimulus, the package reported by the
Finance Committee is consistent with these principles, and those that
are embodied in a letter I signed along with Senators Voinovich,
Baucus, and Breaux before consideration of the budget resolution. In
that letter, we stated our belief that ``our nation would benefit from
an economic growth package that would effectively and immediately
create jobs and encourage investment.'' But we also expressed our
belief that ``any growth package that is enacted through reconciliation
this year must be limited to $350 billion in deficit financing over 10
years and any tax cuts beyond this level must be offset.''
So how did I arrive at 350? It was not by simply splitting the
difference. It was by making a clear, bright-line distinction as to
which measures were truly effective, short-term stimulus and which were
not. The $350 billion package approved by the Finance Committee
provides for all of the President's proposals that can truly have the
immediate, stimulative effect our economy requires in their entirety.
Indeed, as economist William Gale of the Brookings Institute has said,
within that $350 billion figure, we would likely get most of the short-
term job boost.
To pay for dividend tax cuts that could create long-term growth, the
Finance Committee package employs genuine offsets. With all the
provisions of the committee plan in effect for the full 10 years--
accelerating policy that was already passed by the Congress in 2001--it
creates the kind of continuity and stability for both markets and
consumers that is critical in making investment and spending
strategies.
While some undoubtedly believe we should pass a significantly larger
tax cut, let us remember that $350 billion in net tax cuts is by no
means inconsequential. In fact, if enacted it may be the third largest
tax cut in history--and is being considered just 2 years following the
largest tax cut in history. Moreover, the Finance Committee bill is a
responsible bill that recognizes the lessons learned from past debates
on economic stimulus--that boosting both consumer purchasing power and
business investment is vitally important to economic growth.
For example, the package would cut the marginal tax rates across the
board--impacting workers' paychecks by increasing their take-home pay
this year. The bill also accelerates tax relief for families with
children, including a provision not in either the President's plan or
the House bill to accelerate the increase in the amount of the child
tax credit that is refundable for working families with low incomes--
building on my inclusion of refundability in the 2001 tax package.
Married couples would also receive tax relief from the unfair marriage
penalty through the expansion of the standard deduction and the 15
percent tax bracket.
To spur investment, the Finance Committee bill triples the amount a
small business can write off for investments in new business assets--
and with small businesses representing 99 percent of all employers--
contributing to 51 percent of private-sector output--and providing
about 75 percent of net new jobs, that is exactly the kind of policy
that can help create jobs soon. It would also provide needed capital to
small businesses by expanding the ability of pension plans and other
tax-exempt entities to invest in the securities of Small Business
Investment Companies. This provision alone is expected to create an
additional 16,000 jobs due to the additional investment capital
available for small businesses.
Furthermore, the State fiscal relief provision in the Finance
Committee plan can provide additional economic stimulus. With States
facing combined shortfalls of more than $68 billion in fiscal year 04,
I thank Chairman Grassley for working to include a ``trust fund'' in
the package of $20 billion in relief for the States and local
governments to use as they see fit to address increasing
Medicaid costs, transportation needs, homeland security infrastructure,
education, and other critical functions.

I know some have argued State budget shortfalls result from
overspending. Yet, as a report issued by the National Governors
Association shows, State spending from 1995 to 2001 increased 6.5
percent per year, a rate identical to spending from 1979 to 2003, and I
would like unanimous consent to print that report in the Record.
I also have here a letter from the heads of the Conference of State
Legislators, the Council of State Governments, the U.S. Conference of
Mayors, the National Association of Counties, the National League of
Cities and the International City/County Management Association
documenting that States and localities are experiencing their worst
fiscal conditions since World War II. I ask unanimous consent this
letter also be printed in the Record along with my statement.
Moreover, according to a recent Wall Street Journal article,
``Analysts at Goldman Sachs figure state and local belt-tightening (in
their budgets) will shave as much as a half-point from the economy's
growth. . .'' By providing State fiscal relief, we have the opportunity
to return that half-point of growth to our economy. And let us
remember, dollars spent on education, health care, and transportation
have an economic value today and tomorrow.,
Indeed, should State decide to use a portion of the assistance on
transportation, it is worth nothing that, according to the U.S. Chamber
of Commerce, for every $1 billion invested in transportation, 47,500
new jobs are created. And let us not forget that State and local
governments account for more than 15 million jobs nationwide. As we
take steps to put more money into the hands of consumers, we must also
make sure that those who are employed by a State or local government,
either directly or through a government service contract, are able to
remain employed.
On that note, I am pleased an amendment was included here on the
floor to further refine the agreement and language that Senator Smith
and I included in the growth package reported by the Senate Finance
Committee.
After working to generate strong bipartisan support for this issue,
the Senate Finance committee established a $20 billion trust fund in S.
1054, the Jobs and Growth Tax Relief Reconciliation Act of 2003, to
provide critical, flexible relief for both State and local governments.
I also want to thank Chairman Grassley again for his willingness to
work with me to identify appropriate offsets that enured this proposal
would not increase the net cost of the growth package.
By securing support in committee to include a $20 billion fiscal
relief trust fund, I was able to ensure that States and localities
receive the help they need in balancing their fiscal year 2004 budgets.
The subsequent amendment we passed on the floor, with my support
included my proposal which requires half of the $20 billion to be
distributed between State and local governments--with States receiving
$6 billion and localities receiving $4 billion. The remaining $10
billion goes to States through a temporary increase to the Federal
Medical Assistance Percentage, known as FMAP, to help alleviate the
short-term spike in Medicaid costs. The assistance would be distributed
in fiscal years 2003 and 2004.

So, again, the Finance Committee bill fully provides for the
appropriate range of short-term stimulus measures. At the same time,
for me--as I have stated--the net $350 billion cost of that package
strikes a balance in keeping with the requirements imposed by my
allegiance to the principles of fiscal responsibility. Because I came
to this debate as one deeply rooted in the idea that perhaps the issue
that best demonstrates our commitment to the generation of tomorrow is
balancing the Federal budget. I have said time and again that there is
not goal more critical to the economic future of our Nation--and that
is not just my view.
As Chairman Greenspan recently testified, ``(The deficit) does affect
long-term interest rates, and it does have an impact on the economy.''
And he has also warned that, ``If . . . you get significant increases
in deficits which induce a rise in long-term interest rates, you will
be significantly undercutting the benefits'' of tax cuts. If you
consider that the two sectors that are keeping the economy afloat right

[[Page S6472]]

now--housing and automobiles--are also two of the most interest rate
sensitive--just imagine where we would be in the future with high
unemployment and high interest rates.
And it is not just our future economy at stake--if that by itself
isn't reason enough for fiscal prudence. I will recall the years we
fought to arrive at balanced budgets and surpluses--and reaching that
fiscal ``holy grail'' in the late 1990s was supposed to open a window
of opportunity to address the domestic challenges of the coming
decade--most significantly, strengthening Social Security and Medicare.
Yes, even then, many of us were mindful that projections of future
surpluses were just that--projections. That is why even as I supported
the tax cuts in 2001--to provide, in Chairman Greenspan's words--an
``insurance policy'' against the effects of a recession, and to provide
relief at a time when Americans were suffering under the highest tax
burden since World War II--I proposed and I championed a trigger
linking the level of spending and taxes to the level of surpluses
actually realized.
Of course, none of us could have foreseen that so many challenges
would soon arrive, as the President has said, ``In a single season.''
September 11, the war on terrorism, and the necessity of disarming the
Iraqi regime, the costs of bolstering our homeland security--all those
shook an already fragile economy and sparked a return to deficits. In
fact, CBO attributes fully 68 percent of the evaporated $5.6 trillion
in surpluses to the recession and economic downturn.
So here we are, with CBO having projected just this month that the
deficit will be $300 billion--which is 22 percent higher than their
projection from only 3 months ago and about 92 percent more than last
year! Keep in mind that is without accounting for the approval of
additional tax cuts or additional costs of pressing national priorities
like the war in Iraq, homeland security costs, and passing a Medicare
prescription drug benefit. And Citigroup economic forecasters have
recently predicted that the 2003 deficit could be as high as $500
billion.

Even optimist projections that assume higher-then-expected
productivity growth anticipate substantial long-term deficits. And if
growth remains just ``average'', the Nation will fact unsustainable
budget deficits. Just this month, economists with Goldman Sachs
expressed alarm about projections that Federal debate will grow from 33
to 49 percent of gross domestic product--a circumstance they say will
undermine the economy, instead of spurring economic growth. And as we
face a true cumulative deficit through 2013 projected to be nearly $4.5
trillion--not counting the $2.7 trillion in surpluses from Social
Security that are currently being sued to mask the size of the
deficit--we cannot tolerate the confluence of burgeoning deficits in
perpetuity with the retirement of 77 million baby boomers beginning in
2013.
That is why it was critical that--in establishing a policy on the
taxation of dividends that could be built on as we assess the reaction
of, and overall impact on, the financial and business sectors--the
Finance Committee package pays for it with offsets. As Chairman
Greenspan has said, cutting taxes on dividends will ``bolster the
economy's long-term ability to grow''--but they should also be paid
for.
As reported by the Finance Committee, the bill includes real offsets,
scored by the Joint Committee on Taxation, to fully compensate the
approximately $80 billion cost of the provision. Moreover, in providing
a capped exclusion of $500 for the taxation of dividends, with an
additional exclusion for dividend amounts above $500 that goes from 10
percent to 20 percent over 10 years, the proposal would benefit all
taxpayers who receive dividends, eliminating the tax entirely for 84.7
percent of all taxpayers.
One of the arguments that proponents of eliminating the tax on
dividends use to tout the proposal's benefits is that it will reduce
the cost of capital for business over the long term. I agree. However,
cutting taxes on dividends affects the financial markets as well.
I am concerned that enacting a shorter term provision with a sunset
would have negative consequences and potentially harm the economy.
Kevin Hassett, a scholar at the American Enterprise Institute, has
commented on such a dividend plan, saying that, ``Since the eliminate
of dividend taxes is only temporary, investors must evaluate the risk
that dividend taxes will come back. If they do, then the cash flows to
investors from owing stock will plummet, as will the value of shares.
Under such circumstances, it is undeniable that government policy
significantly increases the fundamental risk of stocks. It would be
hard to imaging that this would be good for the stock market or the
economy.''
Moreover, the benefits of cutting taxes on dividends cannot be viewed
in isolation--the effect on the budget must be factored in the
analysis. A key point is that, as the Federal budget goes further in
the red, the associated mounting Federal debt will ``crowd out''
private capital in the marketplace--having a damaging impact on the
economy. This will become more and more evident as we approach the end
of this decade, with the pressures of the very large increase in baby
boomer retirements.
The bottom line is that, while deficits have supplanted surpluses due
to war costs and the lingering effects of recession, we have a
fundamental responsibility to ensure they are a temporary phenomenon--
not a perpetual cycle ``as far as the eye can see.'' The years of
balanced budgets in the late 1990s should be no brief fiscal interlude,
but rather the rule--so lowering taxes and containing deficits until we
return to balanced budgets must not be mutually exclusive goals.
Again, the tax bill that was reported out by the Finance Committee
provides the right balance of tax relief that would stimulate both
consumption and investment. The fiscally responsible growth policies
contained in that package meet the dual, critical challenges of
immediate, stimulative economic growth without further inflating budget
deficits and returning to a perpetuity of red ink. And, as I have said,
the dividend plan in the Finance bill is a long-term policy that takes
an important, but incremental step to eliminating that ax on dividends.
Regrettably, however, the temporary dividend proposals in the final
bill, I believe, is not good long-term tax policy. If we assume a
future Congress will extend this provision permanently, then the true
cost would be over $300 billion--adding further to ballooning deficits
well above the $350 billion net cost of the Finance Committee bill. On
the other hand, if Congress does not extend the policy, it could have
dire implications on the financial markets and companies.
Finally, it must be noted the way in which this provision is paid for
dilutes the important benefits of the section 179 expensing by
sunsetting its expansion and cutting short marriage penalty relief
proposed by the President. Therefore, for the reasons I have just
detailed, I regret I am unable to support the final package, as
amended.
Mr. President, I ask unanimous consent that the letter I referred to
earlier be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows::

U.S. Senate,

Washington, DC, March 13, 2003.
Hon. Bill Frist,
Majority Leader, U.S. Senate, Washington, DC.
Hon. Tom Daschle,
Minority Leader, U.S. Senate, Washington, DC.
Dear Majority Leader Frist and Minority Leader Daschle:
With the international challenges our Nation faces, including
a possible military engagement with Iraq, continuing tension
on the Korean Peninsula, and the ongoing war on terrorism,
coupled with sluggish economic growth, we believe it is
critical a budget resolution for Fiscal Year 2004 (FY2004) be
enacted this year. We are committed to working in a
bipartisan manner to this end.
We believe that our nation would benefit from an economic
growth package that would effectively and immediately create
jobs and encourage investment. We appreciate President Bush's
leadership in identifying this need and beginning this
important debate with his economic growth proposal.
Given these international uncertainties and debt and
deficit projections, we believe that any growth package that
is enacted through reconciliation this year must be limited
to $350 billion in deficit financing over 10 years and any
tax cuts beyond this level must be offset. All signatories to
this letter are committed to defeating floor amendments that
would reduce or increase this $350 billion amount.

[[Page S6473]]

We look forward to working with you on a bipartisan budget.
Sincerley,
John Breaux.
Max Baucus.
Olympia Snowe.
George V. Voinovich.
National Conference of State Legislatures, Council of
State Governments, National Association of Counties,
U.S. Conference of Mayors, National League of Cities,
International City/County Management Association,
May 8, 2003.
Hon. Charles Grassley,
Chairman Senate Finance Committee,
U.S. Senate Washington, DC.
Re Reconciliation, State and Local Fiscal Assistance.

Dear Senator Grassley: On behalf of state and local
officials, we appreciate and support your proposal to provide
$20 billion in fiscal assistance to state and local
governments in reconciliation legislation pending before your
committee.
The nation's economic recovery is essential. We believe a
partnership among the federal, state and local governments
and the private sector is necessary to expeditiously achieve
this recovery. With state and local governments experiencing
their worst fiscal conditions since World War II, we are not
positioned to help stimulate the economy. Additionally,
states and localities continue to deal with the excessive
inflationary costs of certain state-federal partnerships,
such as Medicaid. Finally, state and local governments
continue to fill gaps in unfunded federal mandates and
underfunded national expectations. Instead, state and local
governments are reducing workforces, deferring capital
projects, cutting programs and imposing fee increases and
raising income, sales and property taxes. These activities
work against economic recovery and the partnership we feel is
critically needed.
We are very pleased with the Senate's past response to and
action on our request for fiscal assistance and partnership
in economic recovery. We are eager to work with you to
develop reconciliation and economic recovery legislation.
Thank you for your consideration of our concerns. Please have
your staff contact each of our organizations for assistance
and information.
Sincerely,
William T. Pound,
Executive Director National Conference of state
Legislatures.
Larry E. Naake,
Executive Director National Association of Counties.
Donald J. Borut,
Executive Director National League of Cities.
Daniel M. Sprague,
Executive Director Council of State Governments.
J. Thomas Cochran,
Executive Director U.S. Conference of Mayors.
Robert O'Neill,
International City/County Management Association.

TABLE 2.--STATE NOMINAL AND REAL ANNUAL BUDGET INCREASES, FISCAL 1979 TO
FISCAL 2003
[Amounts in percent]
------------------------------------------------------------------------
State General Fund
-------------------------
Fiscal year Nominal Real
increase increase
------------------------------------------------------------------------
2003.......................................... 1.3 0.4
2002.......................................... 1.3 0.4
2001.......................................... 8.3 4.0
2000.......................................... 7.2 4.0
1999.......................................... 7.7 5.2
1998.......................................... 5.7 3.9
1997.......................................... 5.0 2.3
1996.......................................... 4.5 1.6
1995.......................................... 6.3 3.2
1994.......................................... 5.0 2.3
1993.......................................... 3.3 0.6
1992.......................................... 5.1 1.9
1991.......................................... 4.5 0.7
1990.......................................... 6.4 2.1
1989.......................................... 8.7 4.3
1988.......................................... 7.0 2.9
1987.......................................... 6.3 2.6
1986.......................................... 8.9 3.7
1985.......................................... 10.2 4.6
1984.......................................... 8.0 3.3
1983.......................................... -0.7 -6.3
1982.......................................... 6.4 -1.1
1981.......................................... 16.3 6.1
1980.......................................... 10.0 -0.6
1979.......................................... 10.1 1.5
1979-2003 average............................. 6.5 2.1
------------------------------------------------------------------------
Notes.--The state and local government implicit price deflator, as cited
by the Bureau of Economic Analysis on October 2002, is used for state
expenditures in determining real changes. Fiscal 2001 figures are
based on the change from fiscal 2000 actuals to fiscal 2001
preliminary actuals. Fiscal 2002 figures are based on the change from
fiscal 2001 preliminary actuals to fiscal 2002 appropriated.
Source: National Association of State Budget Officers.

Mr. CHAMBLISS. Mr. President, I rise today to speak on S. 1054, the
Jobs and Growth Reconciliation Tax Act of 2003.
This debate on the tax reconciliation bill is necessary and long
overdue. I think it is clear that Members on both sides of the aisle
agree that our economy is struggling and a growth package is
desperately needed. However, there are wide differences of opinion on
the contents of the best package and the best way to implement it.
I am, and always have been, a proponent of the President's original
growth package of $726 billion. Implementing the President's proposed
bill would create millions of jobs, increase the gross domestic
product, GDP, and personal income, and in the process, stimulate
overall growth of our Nation's economy.
My home State of Georgia would reap overwhelming benefits from the
President's proposal if enacted into law. For instance, between 2004
and 2008, 26,720 additional Georgia citizens would secure jobs; Georgia
taxpayers would average $4.2 billion more in disposable income per
year; and Georgia taxpayers would average $2.2 billion more in personal
saving per year.
Between the President's proposal, the House-passed bill and the
Senate bill, the Senate bill of $413 billion, which is loaded with tax
hikes in the form of offsets, is by far the weakest of the three bills.
This bill will do little to stimulate the economy and provide almost no
tax relief to the millions of Americans who seek it. While many of the
tax reducing provisions contained within this bill are worthwhile and
sound, now may not be the best time to go forth with them given the
state of our economy and the increasing budget deficit.
Tax cuts will significantly improve the American economy, but only if
Congress makes wise decisions about which taxes to cut and how to cut
them. Addressing the double tax on dividends is a big step in the right
direction, but the economy will not reap major benefits unless the tax
is reduced in an economically beneficial manner.
Several proposed amendments will strengthen this bill, but it has a
long way to go for it to be in a form that will truly stimulate the
economy and create jobs.
I will vote for the passage of this bill, but only for the sake of
advancing the process and moving the bill to conference so that it can
be improved. Should this bill come out of conference looking much like
it does now, I will most likely oppose final passage of the growth and
economic stimulus bill.
Mr. LEAHY. Mr. President, I rise today to oppose the tax
reconciliation bill being considered by the Senate today. This tax cut
bill is not fiscally responsible. When President Bush entered the White
House our country enjoyed a record budget surplus. The fiscal
irresponsibility of this administration quickly turned that surplus
into record deficits. Now this bill will bring our country further into
debt, cause more hard working Americans to lose their jobs, and put a
greater share of the tax receipts in the pockets of our country's most
privileged.
I have several concerns about the bill before us. First, these tax
cuts are tilted even more heavily to the very wealthy than the tax cuts
the President championed in 2001. Just look at the rate reductions. For
three income brackets, rates would drop by 2 percentage points, but the
top rate falls by 3.6 percentage points. While the 2001 bill calls for
marriage penalty relief beginning in 2004, the Senate rejected an
amendment offered by Senator Jeffords to provide immediate marriage
penalty relief to those who qualify for the earned-income tax credit.
Sadly, this administration has chosen to support tax policies where
people making over $1 million will reap enormously, while working
families will receive very little tax relief.
Second, these plans have taken tax gimmickry to a whole new level by
pretending that most of the provisions will expire after just 3 years,
at the end of 2005. By doing so, this bill attempts to jam in as much
of the President's dividend tax proposal as they can into the Senate's
$350 billion limit at the expense of more reasonable tax cut provisions
aimed at low- and middle-income working families. It is obvious that
proponents of these tax cuts have no intention of allowing any of these
provisions to expire and in fact will come back to this floor again and
again asking for them to be made permanent. Instead of acting in a
fiscally responsible manner, they are masking from the American people
the true, astronomical costs of this bill.
Third, these cuts will push our country deeper in debt. The
nonpartisan

[[Page S6474]]

Congressional Budget Office has estimated that the President's full tax
cut would add $2.7 trillion to the deficit through 2013. At the same
time the administration is pushing for Congress to pass a $1 trillion
increase in the Federal debt limit that does not account for additional
tax cuts. I do not think we can afford another large tax cut at this
time until we get our own fiscal house in order.
Clearly, this tax cut plan is not about growing the economy or
creating jobs. It is about starving the Government and wooing some
voters. In fact, leading economists have stated repeatedly that the
elimination of taxes on dividends paid to investors--the centerpiece of
the President's tax cut proposal--would do very little to spur economic
growth or reduce the Nation's jobless rate.
In 2001, I voted against the Bush tax cut bill because it was too
skewed toward the wealthiest Americans and too fiscally irresponsible.
Since then, we have gone from record surpluses to record deficits, and
the economy is still floundering. Passing another enormous tax cut this
year will only continue this trend and increase the economic problems
that our children and grandchildren will inherit.
Earlier this year, the President said we should not pass our fiscal
problems onto future Presidents, Congresses, and generations. I agree
with him. Unfortunately, this tax cut bill will drive us deeper into
debt and will do exactly what the President says we should avoid,
burden our children.
While the promise of another tax cut sounds great, I am not going to
ask my children and grandchildren and everyone else's children and
grandchildren to pay for it. It is not right. It is not fair. And it is
not the American way.
Mr. GRASSLEY. Mr. President, it has come to my attention that certain
provisions of S. 1054 have engendered concern in the equipment leasing
industry. I recognize that assets used by vital American industries are
often lease-financed. It is not the intention of the Senate or
Committee on Finance to impede legitimate leasing transactions. I wish
to assure the markets that in any final legislation, the tax incentives
utilized in leases that are considered appropriate under current law
will be maintained.
Mr. BAUCUS. Mr. President, earlier today my colleague on the Finance
Committee, Chairman Grassley, offered an amendment to S. 1054, the
pending tax bill, to improve Medicare funding for rural patients and
providers. I supported the amendment, which passed, 86-12.
Many of the Grassley amendment's provisions were taken from S. 3018,
Medicare legislation Senator Grassley and I introduced legislation last
year. Many of those provisions were also included in the Senate Rural
Health Caucus bill, which I support. And several of the provisions have
been recommended by the Medicare Payment Advisory Commission (MedPAC),
which advises Congress on Medicare payment policy.
Taken together, these changes--including an equalization of the
hospital base payment amount, changes to the Critical Access Hospital
program, and language to improve access to physician care in rural
areas--will go a long way toward ensuring greater geographic equity in
Medicare reimbursement.
That said, I believe the way in which the Senate passed these
provisions--as an amendment to tax legislation--is far from perfect. A
Medicare bill, debated in the Finance Committee, is the proper vehicle
for changes to the Medicare law, and I would have preferred that these
provisions be considered in that manner.
A full debate in the Finance Committee will allow senators to
exchange views and advocate changes they believe are important for
Medicare. A debate in the Finance Committee will allow Medicare
stakeholders an opportunity to share their views as well. Whether with
respect to spending or offsets, the Committee should have the
opportunity to consider all of those views fully.
For example, while the provisions in the Grassley amendment are
important, they do not represent a full list of Medicare changes I
would like to see. Most notably, the amendment does not address
Medicare's most severe inadequacy: the lack of an outpatient drug
benefit. Further, the amendment does not address many concerns facing
Medicare's various payment systems, including payments for physicians,
nursing homes, teaching hospitals and hospital outpatient departments,
to name a few.
As for offsets, the Grassley amendment included three: a freeze in
Medicare DME payments; establishment of copayments and deductibles for
Medicare outpatient laboratory services; and reductions in payment for
Medicare Part B-covered drugs. These offsets are not without
controversy.
For example, while independent experts agree that Medicare overpays
providers for Part B drugs, agreement is less apparent on the proper
payment providers should receive for the administration of these drugs.
And while it is true that lab services are nearly unique in not
requiring coinsurance under Medicare, it's also true that lab services
are less discretionary than many other Medicare-covered services.
Debate in the committee--as we recently had on the tax bill--is
important to the legislative process. I urge Chairman Grassley to hold
a markup on Medicare legislation, so that changes to Medicare--
including enactment of a Medicare drug benefit--can be considered in
the appropriate manner.
The PRESIDING OFFICER. Under the previous order, the clerk will read
the bill for the third time.
The bill was ordered to be engrossed for a third reading and was read
the third time.
The PRESIDING OFFICER. Under the previous order, the Senate will
proceed to the consideration of H.R. 2 which the clerk will report.
The legislative clerk read as follows:

A bill (H.R. 2) to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for
fiscal year 2004.

The PRESIDING OFFICER. Under the previous order, all after the
enacting clause is stricken and the text of S. 1054, as amended, is
inserted in lieu thereof.
The clerk will read the bill for the third time.
The amendment was ordered to be engrossed and the bill to be read a
third time.
The PRESIDING OFFICER. The bill having been read the third time, the
question is, Shall the bill, as amended, pass?
Mr. BAUCUS. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
The result was announced--yeas 51, nays 49, as follows:

[Rollcall Vote No. 179 Leg.]

YEAS--51

Alexander
Allard
Allen
Bayh
Bennett
Bond
Brownback
Bunning
Burns
Campbell
Chambliss
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeWine
Dole
Domenici
Ensign
Enzi
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Kyl
Lott
Lugar
McConnell
Miller
Murkowski
Nelson (NE)
Nickles
Roberts
Santorum
Sessions
Shelby
Smith
Specter
Stevens
Sununu
Talent
Thomas
Voinovich
Warner

NAYS--49

Akaka
Baucus
Biden
Bingaman
Boxer
Breaux
Byrd
Cantwell
Carper
Chafee
Clinton
Conrad
Corzine
Daschle
Dayton
Dodd
Dorgan
Durbin
Edwards
Feingold
Feinstein
Graham (FL)
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
McCain
Mikulski
Murray
Nelson (FL)
Pryor
Reed
Reid
Rockefeller
Sarbanes
Schumer
Snowe
Stabenow
Wyden
The bill (H.R. 2), as amended, was passed.
(The bill will be printed in a future edition of the Record.)
Mr. GRASSLEY. I move to reconsider the vote.
Mr. ENSIGN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
with respect to S. 1054 be modified to allow for the following
conferees: Senators Grassley, Hatch, Nickles, Lott, Baucus,
Rockefeller, and Breaux.
The VICE PRESIDENT. Without objection, it is so ordered.

[[Page S6475]]

Under the previous order, the Senate insists on its amendment,
requests a conference with the House on the disagreeing votes of the
two Houses, and the Chair appoints conferees as specified on the part
of the Senate.
Thereupon, the Vice President appointed Mr. Grassley, Mr. Hatch, Mr.
Nickles, Mr. Lott, Mr. Baucus, Mr. Rockefeller, and Mr. Breaux
conferees on the part of the Senate.

change of vote

Mr. BIDEN. Mr. President, on rollcall vote No. 162, I voted nay. It
was my intention to vote yea. I ask unanimous consent that I be
permitted to change my vote to yea, which was the Landrieu amendment,
since it will not affect the outcome of the vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The tally has been changed to reflect the above order.)

____________________