[Congressional Record Volume 152, Number 17 (Monday, February 13, 2006)]
[Senate]
[Pages S1079-S1121]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005
The ACTING PRESIDENT pro tempore. Under the previous order, the Chair
lays before the Senate the House message to accompany H.R. 4297.
The Acting President pro tempore laid before the Senate a message
from the House of Representatives disagreeing to the amendment of the
Senate to the bill (H.R. 4297) entitled ``An Act to provide for
reconciliation pursuant to section 201(b) of the concurrent resolution
on the budget for fiscal year 2006,'' and asks a conference with the
Senate on the disagreeing votes of the two Houses thereon.
The ACTING PRESIDENT pro tempore. Under the previous order, the
Senate insists on its amendment and agrees to the request of the House
for a conference.
Who yields time?
Mr. LOTT. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. LOTT. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. LOTT. Mr. President, I yield myself such time as I may consume
off of the time that has been designated on the pending issue.
The ACTING PRESIDENT pro tempore. The Senator is recognized.
Mr. LOTT. Mr. President, it is Monday at noon and I think the
people's business needs to be attended to sooner rather than later, in
the daylight rather than at night, so I rise to point out my concern
that the Senate continues to fiddle while Rome burns. I have no idea
why there is a justification for up to 10 hours of debate and multiple
motions to instruct on this tax reconciliation. We have been through
this already multiple times. This convoluted procedure is, in my
opinion, very unhelpful for the legislative process and for the
relationship between the two sides of the aisle. There is no need for
this. The Senate has voted twice already on this and 66 Senators are
for this bill--or 68, 66 and 68. Go back and look at the Record. So we
are going to go to conference.
We can't let these motions to instruct prevail. By the way, they are
outrageously ridiculous, anyway. Nobody pays any attention to that. I
hope to be a conferee. Do you think I am going to pay any attention to
any motions to instruct me? Baloney.
The Senate leadership that is responsible for the way we do our
business and the way we appear to the American people needs to get a
grip on this situation. The very idea that there would be even 3
motions to instruct, let alone 8, 9, 10--we have to stop this. We have
had our chance to make our speeches. We don't need to eat up 3, 5, 10
hours of debate on this bill. What in the heck are we going to say? Are
we going to talk about the snow event this weekend? Nobody is going to
be snowed by what is going on here. This is delay and obstruction. We
need to find a way to get over this. I realize Senators have their
rights to have motions to instruct. But how can we move this process
forward?
That leads me to my next point, in terms of fiddling while there is a
problem that is getting worse. If you talk to the American people, an
awful lot of
[[Page S1080]]
people are concerned about the future and their retirements. Will the
retirement benefits be available to them and to their children? Will
they be there when they need them? Will they be portable? We need
pension reform. We need certainty in pensions. People need to know what
the law is going to be. We need to know it is going to be actuarially
sound. How are we going to pay for all these benefits people are
expecting in their pensions when they retire?
Of course, an important part of this pension bill is what are we
going to do about aviation pensions? Airlines are having a difficult
time. They are teetering in the balance. At least a couple of them are
prepared, if they have to, to enter into bankruptcy and walk away from
their pensions. But they don't want to. They want to do the right
thing. They don't want the taxpayers to be saddled with these pensions
that airlines unfortunately quite often agreed to in the past. They
want some way to make sure those pensions are protected.
I urge my colleagues on both sides of the aisle, and the leadership,
to find a way to move forward, to appoint conferees on the pension
bill, so we can step up to this issue that worries people. Why should
it take days or weeks to appoint conferees on a bill that is broadly
supported, is going to be bipartisan, and is important to the working
men and women of America?
I know there is a lot that goes on in making these appointments. You
have to decide on the numbers and you have a lot of Senators who would
like to be conferees. But I plead with our leadership to find a way to
get the conferees appointed--not tomorrow, not Wednesday--today,
because we are fiddling while people's pensions are burning. It
concerns me.
I am glad to be here. I am here. I am perfectly willing to be a pain
in everybody's neck as the day and the week progresses so we can find a
way to get to a conclusion on two conference issues. These are issues
we can get into in conference. These are issues on which we can get a
result.
I urge our leadership to find a way to appoint these conferees as
soon as possible on the pension bill and to get into conference on the
tax bill.
I yield the floor.
Mr. REID. Mr. President, first, I agree we should be moving forward
on the pension conference. It is very important. We are ready to do
that.
I would also suggest that this budget reconciliation could already
have been finished. We over here didn't choose what the majority leader
brought to the floor. Instead of bringing to the floor the conference
report dealing with taxes, he decided to bring asbestos, a bill that
wasn't ready to come to the floor. We were ready to move on this any
time last week.
I say to my friend, the distinguished Senator from Mississippi, whom
I have so enjoyed working with over the years, if we were truly trying
to delay this legislation, we could do that. Under the rules, which I
think should be changed, instead of having the 8 motions to instruct
which we have, we could have 80 or 800. The rule is not good. We need
to change this whole budget setup.
Again, if this legislation had been brought to the floor last week
rather than the asbestos legislation, we could have finished it.
Also, I think we have been fairly direct in our amendments which we
have on the conference report. They are not on subjects that are
outside of the scope of this bill. We have one, which will be a motion
to instruct, to not raise the debt ceiling. There will be another one
regarding the need to replenish the military--which all experts say is
$50 billion--and replace vehicles and other such things because of the
war in Iraq; both Guard and Reserve, $50 billion; to take some of the
tax cuts and give it to our military; and the same with veterans health
benefits. There is a very important amendment dealing with energy to
help make us a little more energy independent.
I am not going to go through all of the motions to instruct other
than to say they are important, and also, frankly, we haven't been much
of a participant in the conference, anyway. We might as well give the
conferees some idea of what we are thinking since they do not invite us
to the meetings.
I agree with the Senator from Mississippi; it is important that the
budget process be changed. I think it is right--if we had wanted to, we
could stop this thing from ever moving forward. Rather than spending a
few hours on it, we could spend weeks on it. That would be wrong.
I hope we can have a bipartisan group of Senators take a look at how
we can change this whole budget process in the Senate. It is subject to
a lot of abuse, no matter who is in power.
I suggest that on our motions to instruct we are willing to move
forward on those quickly. We complained about the 8 o'clock votes. We
are willing to finish the votes tomorrow, but it will take a little bit
of time.
Further, it is my understanding that maybe the Republicans have some
amendments they want to offer. We have eight. I don't see our side
having more. Under the rule we could have more, but I think that would
be all.
I look forward to working with my friend from Mississippi to make
sure we can move forward on this legislation, particularly the pension
reform, which is so important to the country.
The ACTING PRESIDENT pro tempore. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that all quorum
calls which we might have on the pending issue be equally charged to
both sides.
The ACTING PRESIDENT pro tempore. Is there objection?
Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, earlier this month we began and finished
the second floor debate on the tax relief reconciliation bill. At that
time, I spoke in recognition of Groundhog Day because it was just
around the corner. I have next to me that portrait of Punxsutawney
Phil. Phil is the groundhog.
In thinking of Phil and his unique form of weather reporting, I
thought about that popular film entitled ``Groundhog Day'' starring
Bill Murray in which a man relives the same day, Groundhog Day, over
and over again. This film has taken on even greater significance for me
as I seem to be in a similar situation for the third time. More than
just the sense of deja vu, I feel as though I am reliving a couple of
past experiences, and before these several votes tonight or tomorrow, I
think everybody will agree with me.
I have before you another chart. The chart shows a scene from the
Bill Murray movie ``Groundhog Day.'' From this movie is a picture of
Phil, the groundhog, driving the car and Bill Murray is there with him.
Bill Murray is in this case the copilot. Phil is driving the car. You
see Phil with his paws on the steering wheel, and you see the copilot
seated behind him.
As I said just now, I feel like the Bill Murray character in the
movie. It seems we are reliving the same events over and over again. We
are going through the same debates over and over again.
For those who watch C-SPAN regularly--probably not too many
Americans--they know what I am talking about because it was 2 weeks ago
we were debating the tax reconciliation bill, the same tax
reconciliation bill we were debating back in November, and the same
debate we had a couple of weeks ago.
I will summarize the floor process we have been going through on this
bill.
At 11:08 a.m. on Wednesday, February 1, 2006, I opened the second
Senate floor debate on this bill. The rollcall vote on final passage
occurred at 9:42 p.m. on Thursday, Groundhog Day, 2006. All the time
permitted for debate under reconciliation--20 hours--was used in the
second floor debate--again, Groundhog Day.
Three Senators were not here for the final vote. There was a total of
eight rollcall votes that day, including the vote on final passage.
You will recall that, as I said, this was the second time. I hope you
will recall I said then that we actually had debate earlier in November
on the very same bill. The very same bill is this bill right here, S.
2020, the Tax Reconciliation Act.
We started that debate at 3:35 p.m. on Wednesday, November 16, 2005.
For 20 hours on Wednesday, Thursday, and into Friday we debated this
bill, S. 2020. A total of 80 amendments was filed, and 7 of those
amendments were agreed to. The liveliness of the legislation culminated
in 18 rollcall votes.
[[Page S1081]]
The final vote on passage came at 12:05 in the morning of Friday, the
18th of November, 2005. According to the Secretary of the Senate, 97 of
us were there for that vote. I must not be the only one who is reliving
this experience of Groundhog Day over and over again.
There is one Senator whom I can't speak for, so I have to clarify
that the new Senator, Senator Menendez, was not a Senator during the
first debate back in November. He has been appointed to the Senate
since then. He was here for the second debate because he joined the
Senate after the first bill passed. Maybe the second debate would not
be old hat to him, but for the other 99 Senators it would be more or
less old hat.
Here are the two bills. Technically, right now we are on the House
bill, H.R. 4297, but between these two publications, I guess it would
be fair to say they are 95 percent the same.
This bill, S. 2020, was first debated in November last year and
passed then as the Tax Relief Act of 2005. The Senate passed the second
bill, after we amended the provisions of this to it, as H.R. 4297. The
first bill, S. 2020, is 417 pages long, and the second bill, H.R. 4297,
as amended, is 363 pages long. The bills are very close to the same
length. What happened in between was between November and February, the
Senate removed the Hurricane Katrina provisions and interest suspension
provision because those proposals became law in a separate piece of
legislation in November 2005. Removing the Katrina provisions and the
interest suspension provision accounted for a reduction of 63 pages
from this bill. The five amendments agreed to during the second floor
debate added 14 pages to H.R 4297.
Again, except for those five amendments that were put in, plus the
Katrina provisions taken out, most all of this bill is pretty much the
same.
So why are we debating this for a third time, November of last year,
3 days, 2 days this year, on February 1 and February 2, and now back
here again this very day, February 13?
My point is these two bills are virtually the same. The Senate
basically debated the same popular, bipartisan bill twice, and we are
going through another one of these purposeless delays at the insistence
of the Democratic leadership again today, and it may take much more
than 1 day.
As we consider what they are going to offer--we refer to them as
motions to instruct the conferees--to the bill, we are going to go to
conference on H.R. 4297 to work out the differences between the House
and Senate. I have to ask my colleagues: Why are we still doing this?
Didn't we already go through this exercise? Shouldn't we be finished
with the Senate debate? For me, the answer to those questions is there
is no reason to be here. All you have to do is in 5 seconds appoint
conferees and get to work ironing out the differences between the House
and the Senate.
Without a doubt, we have gone through this exercise twice. When is
debate on the same subject enough for the Senate? In the face of the
multitude of other important issues this body needs to deal with, does
the Democratic leadership want to reenact recent debates and
resuscitate old talking points? The tax reconciliation bill already
passed with the support of 64 of us the first time. The second time we
passed this bill, the bill garnered the support of 68 Members. Included
in the first count were 15 Democrats. I am pleased we picked up two
more Democrats the second time we debated the bill. Maybe if we keep up
this exercise enough times, we will have a bill that will get 100
Senators for it.
What is the purpose of that? If we do that, we will not be passing
this bill in the year 2006; we will be passing this bill in the year
2007. Do not think that the millions of taxpayers expecting us to act
would be very happy about running the Senate through that many
Groundhog Days. Even Phil, the groundhog, might even be a bit
irritated. Phil, wouldn't you be irritated if you had to go through all
of this?
This legislation is extremely important. We will debate it as long as
necessary. I question the necessity of going through a process that
resulted in bipartisan passage of the same bill almost 3 months ago. We
often think bipartisanship is when we get to 60. You are lucky to get
to 60. That is what you have to do in the Senate to get anything done.
To get to 64 or 68 is almost a landslide in the Senate. Why the
continued debate? I doubt if the people who are stalling this want to
continue the debate long enough to convince even more Democrats to vote
for this bill. I don't think that is their motive.
That is my first point. This is a very curious exercise. It is an
exercise with no apparent purpose other than delay. Is the delay on the
part of the Democratic leadership important? The answer is, yes. Ask
American tax-paying families and you will get an answer, but you get a
different answer. The answer is, yes, if you are 1 of 20 million
families waiting for certainty that you are not caught in the clutches
of the alternative minimum tax with which this bill deals.
We hear a lot of talk about the alternative minimum tax. We will hear
about it in the debate over the next few hours. This bill does
something about the AMT. It holds harmless 20 million Americans so they
will not be hit by a tax that they were never supposed to pay in the
first place.
I will use some charts that describe different provisions of this
legislation and how it affects the constituents of each of the
Senators, on a State-by-State basis. The data is from the Internal
Revenue Service. It is the latest available in terms of State-by-State
impact. The data comes from the year 2003, so it understates the tax
problems of citizens in the various States for taxes in the year 2006.
I apologize for not having more up-to-date information. I suggest to
people who are considering the figures on the charts to more than
double the figures; that will be a rough State-by-State idea.
We will look at a chart dealing with the alternative minimum tax.
This tax will hit 20 million Americans if we do not pass this
legislation. It is not on the taxes they will file for 2005 because we
are talking about income earned during the year 2006. They will be hit
by the alternative minimum tax 12 months from now, when people file
their taxes, if we do not pass this legislation.
When you start a tax year, you ought to have some idea what the tax
laws are going to be for the next 12 months and into the future. That
is why this legislation should have been passed in conference last fall
to get a permanent law so people earning money on January 2, 2006,
would know they would not be hit by the alternative minimum tax.
The basis of the bill the Senate passed and the bill that is once
again before the Senate is an extension of the AMT hold harmless, so
that no additional number of people will be hit by the alternative
minimum tax. Every Member who is participating in this deliberate
strategy of delaying our entry to conference to work out the difference
between the House and the Senate is delaying the certainty these
millions of American families deserve. Again, it affected 8 million in
2003. That figure now is 20 million in 2006. For my State of Iowa, it
is 65,000 taxpayers. It is probably tens of thousands more now. In
Nevada, there are 68,000, with a lot more than 68,000 being hit in
2006.
Those are the facts on the alternative minimum tax. Look it up in the
Internal Revenue Code. The AMT relief provisions expired December 31,
2005. I ask my friends and the Democratic leadership to look at the
calendar: 1\1/2\ months have passed, and the alternative minimum tax
hold harmless has not been extended to prevent 20 million Americans
from being hit by a tax on income earned in 2006; earning the same
income in 2005, they would not have had to pay that tax. The AMT hold-
harmless provisions are the cornerstone of this legislation. It is the
cornerstone of a bill that the Democratic leadership is delaying. I
don't want to hear people talk about the alternative minimum tax
problem and at the same time delay real action to help those millions
of tax-paying families. I suggest we may hear that.
This bill also includes another provision, broadly popular and
broadly applicable in its tax benefits. I will talk about them beyond
the alternative minimum tax.
This chart shows deductibility of college tuition, first inaugurated
in the tax bill of 2001. This is a benefit for families who send their
kids to college. By definition, this benefit goes to middle-income
families. A lot of these families are not low income so their kids
[[Page S1082]]
possibly do not qualify for Pell grants. They are not high income
either. All they have to do is have mom and dad write out a check, and
they go to college. These are families that get the full benefit of the
deduction if they make up to $65,000 as a single person or up to
$130,000 as a couple.
The reason I say it is conservated on the middle income is because
above those figures the benefit phases out. A lot of these families are
paying significant Federal, State, and local taxes, and they get no
help in defraying the high costs of their kids' college tuition. This
tax deduction provides help for these hard-pressed, middle-income
families with a benefit and furthers a very important national goal
that we try to give attention to, the support for higher education.
This deduction runs out at the end of this year, 2006. These families
next year will face tax increases if we do not act on this bill. We
ought to act on it now, although it does not phase out until the end of
this year. During the spring, people anticipate their capability of
sending their kids to college. If they cannot count on this, they have
to dig up money someplace else for their kids to start college in
September, which carries over into 2007.
The chart before the Senate shows the number of families, on a State-
by-State basis, that benefit from this deduction. I emphasize that
these are 2003 figures. I don't know exactly how much more we increase
them because we are now in 2006, but it would be significant. In Iowa,
more than 37,000 families are affected by this legislation, 37,000 in
Iowa who do not know for sure if the tax deduction will be available
when their kids go to college next year.
Now I will pick out another State. Nevada has 25,000 families. If we
do not pass this legislation, 25,000 families will not know whether
their kids are going to get the advantage of this tax for the next
school year.
It seems to me the perpetuation of support for higher education,
particularly for middle-income families, that their families cannot
qualify for Pell grants, we ought to be reenacting this legislation now
so these families can plan on sending their kids to college next
September.
Another benefit addressed in this bill is the small savers credit.
This gets back to the problem we are always talking about, that
Americans are not saving enough. Lower income people, spending most of
their disposable income on the necessities of life, do not have money
left over to save. They may not have an ethic to save. Through the Tax
Code, we try to give incentive to save and some help to save. This
happens to be the tax credit for low-income people to save through an
individual retirement account or a pension plan. Saving money is
important. We all want all Americans to be part of the effort to save
for the future.
This chart shows the number of low-income savers who benefit from
this bill, on a State-by-State basis, from the small savers tax credit.
Again, more than 5.5 million people take advantage of this. How many
more for the 2006 figures, I don't know, but in Iowa 95,000 people take
advantage of saving money through the small savers tax credit. And I
will also take Nevada: 36,000, almost 37,000 people 3 years ago were
saving through this program. That needs to be reenacted or there will
not be incentive to save.
The bill before the Senate also extends another needed tax deduction.
This is for teachers who buy their own supplies for their students.
This provision was developed by Senators Warner and Collins. It makes
whole teachers who go that extra mile to pay out of their own pocket
classroom expenses. Who is going to argue with a devoted teacher whose
school district does not provide enough supply if she wants to spend
out of her own salary, his or her own salary, to buy supplies? That
proves the dedication of our teachers.
I will point to the number of teachers included on the chart, on a
State-by-State basis, who take advantage of this deduction. This
deduction needs to be reenacted for these teachers to have the
certainty that money they will spend today will be deductible from the
taxes they file 12 months from now. Again, in my State of Iowa, almost
34,000 Iowa teachers benefit from this. Another State we could look at
would be Nevada, where 22,000 families benefit.
Is there any reason this help to teachers--who are good teachers but
want to make better use of their talent, to make sure their students
have adequate supplies--why that should not be reenacted, and why, this
very day, in classrooms across America, teachers have to be worrying
about whether they are going to have this benefit to reimburse them for
going that extra mile?
Now, there is another item in this bill which is very popular which I
do not have shown on a chart. But this bill extends what we call small
business expensing, so that anything which is depreciable, on an
increased amount of money of up to $100,000, can be expensed in 1 year
rather than spreading it out over a period of 5 to 10 years. Many small
businesses use this benefit to buy equipment on an efficient, after-tax
basis.
This is very good for small business. Small business creates 70 to 80
percent of the new jobs in America. So it is a job-creation tax
incentive. It is good, then, for workers in these small businesses.
Obviously, if you employ more people, you end up with greater economic
growth for our entire country.
The final chart I have deals with the tax deductibility of the State
and local sales tax deduction. This applies to the States of Alaska,
Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and
Wyoming.
This bill helps 12.3 million taxpayers in your States. Tennessee is
one of these States. It is the home State of our majority leader. He
has worked hard to get this bill to the floor. For the third time now,
our majority leader, Senator Bill Frist, has worked hard to move this
bill into conference. I want the good people of Tennessee to know that.
Now, another State that could benefit when we get this passed is
Nevada, the home State of our Democratic leader. Unfortunately, this
bill is going through another process of holding it up for another day
of debate, meaning the people in these States who have deductibility of
their State taxes do not know whether, come 12 months from now when
they are filing their income tax on income earned in 2006, it will be
deductible.
So I would ask them to focus on the taxpayers of these respective
States. I still hold out hope that the Democrat leadership will see the
light. I hope they will work with me to guarantee that the folks in
their States will be able to deduct their sales taxes this year. This
is the third time, then, this bill has been delayed.
This is a bipartisan bill with a bipartisan consensus. This needs to
pass. Maybe the third time will be a charm. Maybe we will finally get
this bipartisan bill to conference because you do not get bills to
conference around here that are not bipartisan because when you only
have 55 Republicans in the Senate, there is no way, even when all of us
vote alike--and we do not vote alike--we can move a bill to conference.
So it has to be bipartisan. You have to have Democratic support. So in
this particular instance, we have 15, 16, 17, roughly, of the Democrats
voting for it.
Every Senator ought to help us pass this bill because of the
provisions I just went through on these charts which are included in
the bill. But there are also other reasons for supporting this bill.
Our bill addresses expiring business and individual provisions that
are known as extenders. These provisions include items such as the
research and development tax credit and the work opportunity tax
credit. This bill also includes many of the charitable incentives
introduced in what we call by the acronym the CARE Act and which
provisions have previously passed the Finance Committee and passed the
entire Senate.
In this regard, in regard to the CARE Act, in regard to the R&D
credit, I have to give particular applause to Senators Santorum and
Baucus in working with me to balance these incentives with several of
the much-needed reforms that are supported by the charitable sector,
the Treasury Department, the IRS, and donors and taxpayers to make sure
charitable giving is not abused.
Last, but not least, this bill contains loophole closers and tax
shelter-fighting provisions that raise revenue.
This bill is bipartisan.
[[Page S1083]]
I thank my friend and working partner and ranking member, Senator
Baucus, for his cooperation. He and I were not always partners on this
bill, at least in the beginning, but we teamed up in the Finance
Committee. We teamed up in the first Groundhog Day floor debate. We
teamed up in the second Groundhog Day debate. I look forward to working
with him today and hope we can team up in the conference working out
the differences between the House and the Senate. As always, his
cooperation and, in tense times, his good humor make a big difference
in this body.
Let me also thank those Democratic Senators who joined us in this
bipartisan effort on our first floor journey. Most of them repeated
through the second time on February 1 and 2 of this year. I ask them to
help me persuade their leaders to let this bill proceed. I ask them to
ask their leaders to focus on taking care of tax legislative business,
bringing certainty to the tax policy of this country for the benefit of
our taxpayers and the benefit of investment because investment creates
jobs. I ask that the political games be cut out. I ask that we roll up
our sleeves and get down to the people's business.
I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. KENNEDY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Motion To Instruct Conferees
Mr. KENNEDY. Mr. President, I send to the desk a motion to instruct
conferees and ask for its immediate consideration.
The ACTING PRESIDENT pro tempore. The clerk will report the motion.
The bill clerk read as follows:
Mr. Kennedy moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendments to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to reject the extension of the capital
gains and dividends rate reduction contained in section 203
of the bill as passed by the House of Representatives.
Mr. KENNEDY. Mr. President, Americans are wondering what has happened
to their Government. They are working hard to raise strong families and
to live the American dream. But with each passing day, they find the
American dream farther and farther out of reach as they juggle just to
make ends meet. Over the past 5 years, the cost of health insurance has
jumped 73 percent. Gasoline is up 74 percent; college tuition, 45
percent; housing, 44 percent. The list goes on and on and up and up.
Working families do not ask for much. Low- and middle-income families
are doing their part. But they could use a little fair play from their
Government as they are facing such hard times.
But that is not what is going on in Washington today. Again and again
and again, under this Republican President and this Republican
Congress, they have seen trillions of their tax dollars given away in
tax breaks to the wealthy and to corporations while the rest of America
is asked to sacrifice. And this bill and the budget President Bush sent
to Congress last week are yet another example.
The House version of the bill before us provides tax breaks on
capital gains and dividend income that will take $50 billion over the
next 10 years and give it to people who are already wealthy. At the
same time, the President's budget cuts almost $50 billion from Medicare
and Medicaid for the next 5 years, harming health care for our seniors,
for the disabled, and for the poor. And it robs key funds from other
health priorities as well.
Those are the wrong priorities for America, and the motion I offer
today gives the Senate a chance to set things right. My motion says it
is wrong to give away $50 billion in tax breaks for the wealthy while
cutting $50 billion from Medicare, Medicaid, and other health care
needs.
If we are honest about reducing the deficit and strengthening the
economy, we need to stop lavishing tax breaks on the rich and start
investing in the health and well-being of all families. Nowhere is the
crisis facing working families more apparent than in health care.
Overall costs are soaring. Families have been losing their health
insurance at the rate of 4,000 people per day--per day--since President
Bush was elected. Close to 2 million Americans in 2001 were involved in
medical bankruptcy--an increase of 2,200 percent from 1981. Around 50
percent of all bankruptcies in America today are caused, at least in
part, by illness or medical debts, and of those, 60 percent were caused
by high medical bills. High drug costs were responsible for half. Most
involved had some health insurance but suffered from coverage gaps.
Out-of-pocket medical costs averaged $11,854. For cancer patients, out-
of-pocket costs averaged $35,878.
These are not people trying to game the system. In the 2 years before
filing for medical bankruptcy, 22 percent of filing families went
without food, 30 percent had a utility shut off, 50 percent failed to
fill a doctor's prescription, and 61 percent went without needed
medical care.
Let's look especially at what Republicans are doing to Medicaid and
Medicare. The Medicaid Program is key to promoting a real culture of
life in America. A third of all mothers giving birth receive their care
through Medicaid. The Medicaid Program provides the prenatal and
pediatric care their children need to be healthy. The Medicaid Program
is our statement that we will do everything we can to help women bring
their babies to term and give them the health care they need as they
grow up. That is the way it should be in a true culture of life.
But rather than stand by women in their time of need, Republicans are
abandoning this culture-of-life program. Mere hours after the President
had declared in the State of the Union Address that the Government
would meet its responsibility to provide health care for the poor and
the elderly, the House of Representatives sent to the White House a
bill to impose draconian cuts on the Medicaid Program.
Did the President stand up for this culture of life program and veto
the House bill? No. He signed it. According to the Congressional Budget
Office, under the Republican Medicaid bill, the poor and the disabled,
those with mental illness, will lose: 45,000 enrollees will lose
coverage over 5 years; 65,000 enrollees will lose coverage over 10
years; 60 percent of those losing coverage will be children; 13 million
of the poorest Americans will have to pay more for prescriptions by
2010; and 20 million will have to pay more by 2015.
You may ask where we get these numbers; do they represent what is
going to happen? All you have to do is look at the examples. It is
already happening in States across the country. In Maryland, a quarter
of the families subject to increased premiums disenrolled, and those
premium increases were extremely modest. In Oregon, higher costs caused
disenrollment, and 67 percent of those who disenrolled became
uninsured. The list goes on. In Rhode Island, nearly one in five
families subject to the new premiums lost coverage. In Vermont, 11
percent disenrolled for nonpayment 1 month after the premiums
increased. This is what is happening. This is an attempt to destroy the
Medicare and Medicaid systems, make no mistake about it.
Not satisfied with the cuts in Medicaid already enacted, the
President's budget proposes another $14 billion in reductions in the
program that meets the health needs of the poorest Americans. Some will
try to say this does not have any effect on a family's health, but the
facts say otherwise. When copayments rise for the poorest, health
declines. This chart reflects a study of the Journal of the American
Medical Association. It shows that increased copayments for medication
for poor families caused an 88-percent increase in adverse events. This
is from a study by the American Medical Association. The reference is
printed in JAMA, the Journal of the American Medical Association. This
is what happens with copays: a dramatic increase in serious adverse
events. You almost have a doubling of adverse events when individuals
have a nominal copay of $2 to $3.
Look at what happens in this chart: A 78-percent increase in
emergency room visits when a copay is required. This represents
emergency visits with
[[Page S1084]]
no copay, and this is with a nominal copay. With $3 to $4 for the
copay, we see a significant increase in emergency visits.
What is the result? It is going to cost the system a great deal more
money. This is dollar foolish and, from a health point, a disaster for
individuals adversely impacted. It will fall on the States and local
communities to pay for this. It is a transfer of obligation. The people
who will get hurt are going to be those who have the potential for an
adverse event or who need prescription drugs in order to prevent a
disease from continuing to disable them.
This debate isn't about statistics. It is about the real harm these
severe cutbacks will do to the most vulnerable Americans. A single
mother with two children who makes $8 an hour currently pays $3 when
she visits the doctor, and she does not have any cost sharing when her
children go to the pediatrician. Under the new law, when her child goes
to the pediatrician with an ear infection, she may be charged $20. When
she goes to a doctor for treatment and tests for diabetes, she will be
charged $50, and she will have to pay as much as $832 a year. That is
what you are going to get as a result of Medicaid cuts, as the chart
before showed us. A single mother with two children earning $25,000 a
year now pays no premiums or cost sharing for her children's medical
care and pays $3 copayments for herself under the existing system.
Under the new law, she will now be charged monthly premiums for
Medicaid coverage for herself and her children. Even if she manages to
pay the premiums, she may now have to pay $40 for a pediatric visit.
And she will have to pay as much as $1,250 for Medicaid.
This is the wonderful Republican scenario. We've had no increase in
the minimum wage; it has been 9 years and no increase in the minimum
wage. And we are going to put more pressure on that mother, who is
making $25,000 and has two children, for her family's health care. Why?
Because we want some $50 billion more in tax breaks for the wealthiest
individuals. That is what this is all about. Being in the Senate is a
question of voting on priorities. The Senate will have a chance to say
whether they want to give $50 billion more to the wealthiest
individuals, or take that $50 billion and put it right back in the
Medicare and Medicaid Programs which this President has cut, now and
into the next several years.
The President's policies, if enacted, will cause serious hardship for
the most vulnerable Americans. But the administration's cuts to
Medicaid are not the only assault on our health plans. The botched
Medicare drug plan and the President's Medicare cuts further harm
working families. When it comes to the new prescription drug benefit in
Medicare, we had a good Medicare bill in the Senate, supported by a
broad, bipartisan majority. Over 70 votes supported it. But that bill
was hijacked once the White House entered the negotiations. Ideology
trumped common sense. Instead of building on the Medicare Program that
seniors know and trust, the drug bill was turned over to HMOs and
private insurance plans enticed to participate by massive subsidies,
funds that should have gone to strengthen benefits. The result has been
a disaster.
But that is not how the administration's spin machine sees it.
According to the budget the President submitted to Congress, the
Medicare drug program is off to a good start:
The Medicare prescription drug benefit program is off to a
good start.
I wish those in the administration who thought so had the opportunity
to visit with seniors in Massachusetts trying to figure their way
through this. My office is filled with letters of the sadness and grief
from individuals who are confused and can't find their way through the
45 different alternative programs. And as they search, they ask: ``Why
couldn't they just give us the prescription drug benefit under the
Medicare Program? I know the Medicare Program. It takes care of
hospitalization. It takes care of doctor's fees. I know it. I trust it.
I support it. I wonder, in these 45 programs, where the Medicare
Program is?'' They can search and search and search, and they won't
find it because this administration is opposed to it. So the seniors in
my State are going to have to fight their way through those 45
different programs to find out which one suits them and then, after
they sign it, they find out that the program can change the formulary
and raise the premium. That is quite a deal, isn't it? Once you are
enlisted, the program can change like that. And if the senior doesn't
get involved in one program or another, they will pay an extraordinary
penalty for not becoming involved. Some deal.
This is off to a good start? This is how it has been described:
``Prescription for Disaster; Medicare Mess Cuts Cash Flow to
Pharmacists,'' The Washington Times, February 6; ``Medicare Drug
Mess,'' New York Times, January 22; ``Pharmacists Decry Medicare
Chaos,'' the Tennessean, January 17; ``New Medicare [Prescription
Drugs] Causes Numerous Headaches,'' Chicago Sun Times. This is what is
happening: cuts in Medicare, refusing to build on the solid Medicare
system which is tried and tested and proven and would give the greatest
advantage to our seniors. That is what the administration is doing.
Across the country, seniors and disabled individuals facing the
challenge of mental illness have been denied the medications they need
to maintain their health. They have been forced to pay massive fees for
the drugs they counted on. States, cities, and many pharmacies have
stepped into the breach and incurred millions of dollars in expenses to
fill the gaps left by the administration.
The reality is that 15 million seniors lose under the Republican
Medicare law. This chart shows what is happening across America today.
Retirees are being dropped. Low-income seniors are paying more in
premiums. The dual eligible is also losing. Premiums are costing more
than the benefits. This represents another 6 million who will lose
under the Republican Medicare law. You add those together, and you have
15 million beneficiaries who are somehow going to lose. That is the
reality.
Who is going to gain? If all of these seniors and disabled Americans
are losing, we have to ask: Who wins from the Republican drug plan?
Someone must win. The answer is clear. The drug companies and the
insurance industry win. The Republicans turned Medicare into the
``sugar daddy'' for the insurance industry by dolling out $67 billion
in subsidies. Here is the latest chart: $67 billion, with a $10 billion
slush fund built in. You also have the overpayment and the risk
inflator. We know that any individual that is in an HMO program is 15
percent healthier than the average Medicare recipient. That is a given.
CMS knows that. And what did we do? We gave the HMOs the inflator,
close to 7 percent, representing an advantage of more than more than 15
percent. I thought the private sector was supposed to be more
competitive and was supposed to save money. But instead, we have given
$67 billion to the insurance industry. Those are the sweeteners in the
Medicare prescription drug benefit.
People back home in Massachusetts ought to understand why they are
paying more in their copays--because a sweetener was needed for the
insurance industry, for the HMOs. Those are the figures.
Now what about windfall profits for the drug companies? This chart
represents the difference between the money that is being paid now in
this particular Medicare program and what would have been paid to drug
companies if they had negotiated with the administration, similar to
the VA system. So now we have to pay $67 billion to the HMOs and $139
billion to the drug companies. That makes over $200 billion, adding the
$67 billion and the $140 billion, $200 billion, Mr. Senior Citizen. We
could have lowered your premiums, lowered your copayments, and gone a
long way toward closing what they call the donut provisions in here.
Even with all of these sweeteners, we have a disaster. Why? Because
the bill blocked Medicare from negotiating the same kind of discounts
for seniors that the VA is able to get for veterans. In order to
promote competition under this part, and in carrying out this part, the
Secretary may not interfere with the negotiations between the drug
manufacturers and the pharmacies and the Prescription Drug Providers.
There it is. That effectively prohibited the administration from being
involved. They pay effectively almost what the companies want.
Does the administration propose to make things right? Does President
[[Page S1085]]
Bush propose to kick the insurance industry and companies out of
Medicare and provide a real benefit? The answer is ``no.'' Instead of
strengthening Medicare, the new budget proposes $36 billion in Medicare
cuts over the next 5 years and $105 billion over the next 10.
The Medicare cuts will mean higher premiums for seniors and the
disabled. This will result in reductions in the quality of care at
hospitals and at home health agencies. In my State of Massachusetts,
President Bush's Medicare cuts will mean that our hospitals will have
to cut their budget by $213 million, home health agencies by $50
million, nursing homes by $150 million.
Cuts in public health programs mean that our State program to screen
newborns as early as possible for hearing loss will be eliminated.
Seventeen rape crisis centers across the State would face significant
financial hardship. Our programs on violence prevention and suicide
would effectively be eliminated. Over 35 programs that train health
care providers who deliver care in underserved areas and that support
diversity in the health professions will be eliminated. Why should
patients pay the price while this bill gives away billions in tax
breaks to people who don't need them?
But, of course, Republicans have never liked Medicare and Medicaid.
Even though retirees and the poor were hurting, Republicans fought
against Medicare and Medicaid tooth and nail when Democrats fought to
create those two important programs in the 1960s. I was here on the
Senate floor in 1964 when Medicare was defeated. I was here in 1965
when the Medicare Program was enacted. Republicans defeated Medicare
when it was debated in Congress in 1964. When Republicans came under
fire for their opposition in the 1964 election, enough crossed over to
join Democrats in passing the Medicare and Medicaid Programs in 1965.
Republicans never gave up their opposition. When they gained control
of the White House and Senate in the 1980s, they tried to break
Medicaid's promise of health care to poor families. They proposed
converting the program into a block grant, and Democrats in Congress
stopped them only after a pitched battle.
Once again, in the 1990s, House Speaker Newt Gingrich and his
Contract With America wanted to eliminate Medicare. Even though seniors
and Americans with disabilities relied on the program and Americans
respected it, Gingrich said Medicare should just ``wither on the
vine.'' Democrats stopped them again.
More recently, Glenn Hubbard, who was President Bush's chairman of
the Council of Economic Advisers in his first term, said Medicare and
Medicaid should be replaced by so-called health savings accounts, which
would primarily benefit the healthy and the wealthy. He said:
There is no reason to have a separate Medicare and Medicaid
arrangement if you had these souped-up HSAs.
That is the architect of President Bush's health savings
account, Glenn Hubbard, proposing to abolish Medicare and
Medicaid. That is what this is really focused on, Mr.
President. We ought to understand that.
Meanwhile, the Bush administration and Republicans in Congress
continue to chip away at Medicare and Medicaid. Now they are at it
again.
In the budget the President just submitted to Congress, no health
priority is safe. Medicare, Medicaid, cancer research, newborn
screening, trauma services for children, and many other essential
programs will be severely reduced or even eliminated.
Look at this, Mr. President. Here is how these cuts affect the budget
and undermine medical progress. This is how much they would need to
have current services, to keep the inflator in the Medicare
prescription drug benefit. Take the National Cancer Institute. Right
now, we are in the age of the life sciences--with the human genome
project, the sequencing of the genome, potential stem cell research,
and a whole range of different opportunities. Right now, under the
human genome project, researchers are sequencing genes from cancers,
which are the greatest danger to families, using computers and other
kinds of advanced technology. Those who are involved in this research
believe that it is going to open up such hope and opportunity for the
families affected and impacted by cancer. Yet we are cutting those
programs $208 million.
The National Heart, Lung and Blood Institute: we are cutting that
$123 million.
What are the reasons for this? To provide additional tax breaks for
the wealthiest individuals. This is your choice. Do you think we ought
to have the investment in cancer research and the Heart, Lung, and
Blood Institute? At the National Institute of Diabetes and Digestive
and Kidney Diseases, which funds diabetes research, we are cutting
back. Yet $1 out of $4 from Medicare is now spent to try to deal with
diabetes, along with $1 out of $10 Medicaid dollars. That makes a lot
of sense, doesn't it? Of course it does not make sense.
Then there are neurological disorders and stroke and mental health,
and we are cutting back on understanding these challenges, even as so
many young people in this country are suffering with increased rates of
youth suicide. We're also cutting back on Child Health and Human
Development, which is so important.
All of this money should go into programs at the National Institutes
of Health, but instead it is coming out and going right into additional
tax breaks for the wealthiest individuals in this country.
Under the President's budget, NIH will receive $1 billion less than
is needed to keep up with inflation. Its budget will be flat for 2
years running. That has not been allowed to happen in more than half a
century. Mr. President, 18 of the 19 NIH institutes will lose funding,
which means that NIH will fall behind in the race for new cures. At the
time when we are in the life science century, we are cutting back on
those opportunities for individuals and families who are affected by
cancer and Parkinson's and Alzheimer's. Is that what we want to do in
the Senate? Is that the vote we want to cast? Senators will have that
opportunity later on, but I believe it is the wrong priority for our
Nation. The amount saved by these dangerous reductions is dwarfed by
the payouts that the tax bill now under consideration in the Senate
gives to the wealthy.
The tax break is particularly unfair because more than 75 percent of
the tax benefits will go to people with incomes above $200,000 a year.
Over half of the benefits--53 percent--will go to people with incomes
over $1 million a year.
This amounts to a $35,000 gift each year from Uncle Sam to the
average millionaire, but it is highway robbery for the millions of
seniors, disabled Americans, and poor families who will see a cut in
Medicaid and Medicare services.
The Republicans cynically claim that capital gains and dividend
income deserve special treatment because they will stimulate
investment. The facts do not substantiate that claim. The stock market
grew more rapidly in the early and mid-1990s when investors' income was
taxed at the same rate as wages. President Bush cut taxes on capital
gains and dividend income in 2003. More tax cuts that America cannot
afford will hurt the economy, not help it.
There are some provisions in the Senate bill that we need to address.
The alternative minimum tax was never intended to apply to middle-class
families, and they deserve tax relief. In a truly outrageous move,
House Republicans took AMT relief for the middle class out of their
reconciliation bill so they could fit in more tax breaks for the rich.
The research and development tax credit is important to our
international competitiveness and should be retained. However, those
worthwhile tax cuts should be paid for by rolling back some of the
extravagant tax breaks that this Republican Congress has already given
to the Nation's wealthiest taxpayers. We simply cannot afford more tax
breaks at a time when we are facing record deficits.
If we are honest about reducing the deficit and strengthening the
economy, we need to stop lavishing tax breaks on the rich and start
investing in the health and well-being of all families.
The economic trends are very disturbing for any who are willing to
look at them objectively. The gap between the rich and the poor in this
country has been widening in recent years. Thirty seven million
Americans now live in poverty, up 19 percent during this Bush
administration. One in five American children lives in poverty; 14
million children go to bed hungry every night. Wages are stagnant while
[[Page S1086]]
inflation drags more and more families below the poverty line. Mr.
President, 2.8 million manufacturing jobs have been lost, and long-term
unemployment is at historic highs.
The bill before us has the wrong priorities for the Nation. The
Senate should instruct our conferees to reject any House proposal to
extend the capital gains and dividend tax cuts. The funds those cuts
would consume would be much better spent on Medicare and Medicaid and
the Nation's other health needs. The Senate should instruct our
conferees to follow the right priority and the right course.
I know the point will be made at some time during the discussion
that, while this is a nice instruction, under the Senate rules we
cannot really instruct, even if we were able to carry the vote. Even
though it involves $50 billion, we can not reallocate funds in this
particular way. It is interesting that the $50 billion giveaway for
capital gains and dividends is exactly the amount of the cuts for
Medicaid and Medicare--$36 billion cut from Medicare and $14 billion
cut from Medicaid.
Effectively, what you are doing is continuing the extension of the 2-
year dividends and capital gains tax cuts over the period of the
following 5 years, reaching up to 10 years. This is the $50 billion
that we are talking about here.
So we know what is really going on, Mr. President. This is an
opportunity for choice and for making a decision about what priorities
you want. We know the continued assault on the Medicare Program, which
is happening by undercutting that program, is going to mean that our
seniors are at greater risk. Our children and expectant mothers are
going to be at greater risk with cuts in Medicaid. And by failing to
deal effectively with the Medicare prescription drug program, our
seniors are going to be more poorly served.
In 1965, the Medicare prescription drug program was not included for
a very simple reason; that is, 97 percent of private plans at that time
didn't have a prescription drug program. Now they do. I was there when
President Johnson signed the Medicare Program. He said: Pay your dues
in Medicare and your health care needs will be attended to. That is
what the Medicare prescription drug legislation did, right? Wrong. Our
seniors are not attended to unless they have an effective prescription
drug program. They are not getting it with this legislation, Mr.
President.
To at least give our seniors the same alternatives for prescription
drugs that they have for medical services in the hospital and for
doctor's fees under Medicare--to say that we are going to give you
these same alternatives under the Medicare prescription drug program--
is effectively what over 70 Senators voted for in the Senate in a
bipartisan way. Then that program was effectively hijacked by the
industry, as well as by AARP, I might add, which poorly served our
seniors and now regrets it. We have an opportunity to do something
about it. But, Mr. President, without an expression by our colleagues
here in the Senate, we are going to see that the rush will be on to
continue the kind of expenditures that will increasingly threaten the
most vulnerable in our society: the elderly, the disabled, those who
are facing challenges with mental health, and the children of the
Nation. Those are not the priorities, I know, for my State. I hope that
at the time we vote later this evening, they won't be the priorities
for the Senate as a whole.
I yield the floor.
Mr. GRASSLEY. Mr. President, on Medicare--and I know the debate here
is not about Medicare, but Senator Kennedy spoke to one part of the new
prescription drug program to which I wish to make reference. He
referred in his remarks to the dual eligibles. He spoke about a problem
that is real--the problem of signing up people who were dual eligibles
into the new Medicare Part D prescription drug program.
I do not find fault with his explanation. I will say, however, that
our committee which has jurisdiction over this, the Senate Finance
Committee, has been working with Secretary Leavitt and Administrator
McClellan of CMS to work through these problems. They pointed out seven
problems they have identified. They have assumed responsibility for
those problems, and they are giving us a program to work through those
problems so they will not be repeated and enrollment will by easier and
work more smoothly.
But the Secretary has told us about dual eligibles, that with 50
different States having 50 different ways of handling dual eligibles,
frankly, merging the information technology system at the Federal level
with the information which came out of 50 different States has been
difficult to do.
Several of us in the Senate knew this was going to be a problem in
2003. That is why, in the Senate bill, along with the White House, we
wanted to leave the dual eligibles just as they were--covered by
Medicare and Medicaid. It happens that most of the Democrats in the
Senate, along with Republicans in the House, felt we should end up with
just 1 national Medicare Program so all of the 50 different States'
dual eligibles ought to be merged into the national program.
We had a debate on the Senate floor on that issue, and my point of
view won on a very narrow margin. Let me see if I can find it exactly--
a very narrow margin of 47 to 51. We defeated an amendment on the
Senate floor to bring them together.
What bothers me is Senator Kennedy is bringing up all these problems.
If he had listened to us 2 years ago, we would not have ended up where
we have because we would not be integrating dual eligibles into the
national Medicare Program. But people on his side of the aisle were
just totally insistent that was the wrong way to go, that we ought to
have them integrated into the prescription drug Part D Program.
So, without embarrassing any Senator, I wish to quote a Democratic
Senator who was in the middle of this debate. I am not going to give
the name. Comments like this came out about how gung-ho they were to
have dual eligibles in the Medicare Program. It says:
It's not a frequent day that Chairman Thomas--
I assume that refers to Chairman Thomas of the House Ways and Means
Committee.
and I are in full agreement. But he does say such a shift
``ensures that all seniors across the country will have
access to affordable prescription drugs, while alleviating
much of the burden that states now confront.'' I say to my
colleagues, as I indicate, I am not always in agreement, but
we are going forward directly on this policy, I hope.
Continuing to quote:
Fully integrating a key benefit for prescription drugs into
Medicare is a critical first step toward improving the
current system's flaws. Not only is it unfair to exclude the
poorest seniors from part of the Medicare program, it is a
raw deal for some of our neediest seniors. For seniors who
have worked all their lives, paid into the Medicare system,
it is not fair for them to be at the mercy of State coverage
decisions. All Medicare beneficiaries deserve to receive
Medicare benefits. There should be no exception for drugs. It
would be a very bad precedent to make Medicaid pay for items
that are clearly the responsibility of Medicare except at the
present and in this bill for one particular discrete
population.
I think that--i.e., coverage under Medicaid--puts the dual
eligibles, 74 percent or less of poverty, at terrible risk,
and that is not something I associate with my understanding
of the values of the Senator from Iowa--
Meaning me, I believe--
whom I so much respect.
That was on January 23, 2003.
On June 26, 2003, this quote was given by the same Senator:
Never in the history of Medicare have we precluded Medicare
beneficiaries from being Medicare beneficiaries. In the
underlying bill, for the very first time, we do.
In that rollcall of 47 to 51, to leave the dual eligibles as they
were, which presumably we would not have the problem Senator Kennedy is
complaining about now--that we have a hard time integrating them into
the program--he was one of those 47 Senators who thought they ought to
be put into the prescription drug program.
The reason we left them out is because we wanted to solve a problem
for people who did not have prescription drugs, people who were dual
eligibles, already had their prescription drugs through a State/Federal
program, probably to a better point than maybe their having it through
our bill where they pay some copay. At least in some States, they
probably didn't have to pay a copay. We wanted to take care of the
seniors who didn't have any prescription drug program, and by leaving
the dual eligibles as they were, it would free up money to take care of
more seniors.
[[Page S1087]]
As I said, we lost out in the final analysis. In conference, we
agreed to include the dual eligibles in this program. Now I hear all
this complaint about how it is working to the detriment of seniors
because of the integration of 50 different State programs into 1
national program. It will be worked out. It will be worked out. The
Secretary of HHS, Mr. Leavitt, says it will work out. He is working on
it. He has identified a solution to it, and every day the signup is
getting better as we sign up 94,000 people each day into the Part D
prescription drug program.
The ACTING PRESIDENT pro tempore. The Senator from Montana is
recognized.
Mr. BAUCUS. Mr. President, today, we debate this tax reconciliation
bill for a third time.
We last debated this bill on February 2, Groundhog Day. My friend
from Iowa, the chairman of the committee, Senator Grassley, last week
compared this repeated debate to Groundhog Day. That is true. This
debate does remind us of the wonderful film ``Groundhog Day,'' where
Bill Murray is forced to live the same day over and over again. But at
the risk of giving away some of the plot of the film, let me remind my
colleagues of the lesson of the film. In the film, providence dooms
Bill Murray to repeat the same day--Groundhog Day, that is--until he
learns to live it right. One might say that is where we are. We are
doomed to debate tax policy over and over again until we get it right.
In November, when we first debated this bill, the Senate voted 64 to
33 to pass the bill to support AMT relief to middle-income families.
Again, last week, the Senate voted 66 to 31 to again pass the bill and
support the alternative minimum tax, otherwise known as AMT, relief for
middle-income families. In particular, the Senate last week voted 73 to
24 to support the Menendez amendment to express the sense of the Senate
that protecting middle-income families from the alternative minimum tax
should be a higher priority in 2006 than extending capital gains and
dividends tax cuts that do not expire until the end of 2008 or the
beginning of 2009.
So the same question keeps popping up over and over again and the
same answer keeps coming back: Let's make sure the relief from the
onerous and family unfriendly AMT happens now. We must defer on
extending expensive tax breaks for investors until a later date.
Yet I keep reading in the papers that Senate leaders have promised
that capital gains and dividends tax cuts will still be in this
reconciliation bill. The Senate position, by an overwhelming vote of 73
Senators, is providing immediate relief to more than 17 million middle-
income families that otherwise would see a tax increase this year.
Since that is so, it seems to me we should accept that position, accept
that view, and work toward its enactment.
Statements that we will provide AMT relief to working families
separately and later in the year undermine this Senate position. It is
statements such as those that have led us to this Groundhog Day. It is
statements such as that that call into question the Senate's votes and
cause the Senate to have to vote once again to deliver that same
message. Today, we will debate several motions to instruct, and the
first one will be Groundhog Day for AMT.
For 17 million American families, 2006 came with an unwelcome
surprise--a stealth tax. The temporary protection from alternative
minimum tax, or AMT, expired December 31. That means that 17 million
more American families will be subject to it this year. That is an
increase from 3 million to 20 million taxpayers in one year alone.
Once again, the Senate will debate whether to support our position,
where AMT relief is a priority. In contrast, the House position was to
prefer extending capital gains and dividends cuts, which expire in
2009; that is, over AMT protection, which expired 6 weeks ago. I think
the answer to that is clear.
If the House position prevails in conference, working families will
lose. If we do not extend the AMT protection, a family with three kids
earning $63,000 will be hit by the AMT this year. The AMT is family
unfriendly. The AMT creeps deeper and deeper into working families each
year. Protection from the AMT should be a priority for both sides of
the aisle and both sides of the Capitol.
Instead, the House has passed a separate alternative minimum tax bill
without the procedural protections of this bill. And while this other
House bill purports to protect families from the alternative minimum
tax, there will still be 600,000 additional taxpayers paying higher
taxes for this year 2006 due to this stealth tax. The House AMT patch,
or otherwise known as the hold-harmless provision, as some have called
it, does not really hold anyone harmless. Last year, 2005, there were
3.6 million American taxpayers paying this AMT stealth tax. Under the
House bill, there would be 4.2 million taxpayers paying the AMT stealth
tax in 2006; that is, this year.
So as we debate this issue once again, let us remember our priority:
that millions of working families now subject to a tax increase
courtesy of the AMT are a priority we should address. Once we accept
that priority, the decision whether to allocate $50 billion to
extending capital gains tax cuts becomes much more clear. So let us do
what is urgent first. Let us do what working families expect and need.
Doing so will be the only way to move on to better days for these
families.
I want to expand on that last point. The capital gains and dividends
tax cuts contained in the House bill, as I mentioned, are among matters
most in dispute in this legislation, so let me take a couple of moments
to discuss why Congress does not need to extend them in this bill.
Under current law, taxpayers who earn money in capital gains and
dividend income pay taxes on that income at a lower rate than they do
on their ordinary income; for example, wages. In 2003, we passed
legislation that set the current law for the taxation of capital gains
and dividend income. For taxpayers in most income brackets, capital
gains and dividend income are taxed at 15 percent. Taxpayers in the
lower two tax brackets do not receive a great deal of capital gains and
dividend income. But for taxpayers in those two brackets, what capital
gains and dividend income they receive is taxed at 5 percent now and
will be tax free in 2008. Prior law, before 2003, taxed long-term
capital gains at 20 percent or 10 percent. Prior law taxed dividend
income similar to any other ordinary income, so there is a split in
capital gains. The House bill would extend the lower tax rates Congress
enacted in 2003 to the end of 2010.
The first question before us, therefore, is when does Congress need
to act on capital gains and dividend income tax rates? Those rates do
not expire this year. Those rates do not expire next year. Those rates
do not expire the year after that. Rather, those rates expire on
January 1, 2009, about 3 years from now, after the next Presidential
election.
So the first thing we need to note is that extension of capital gains
and dividends tax rates is far from an urgent matter.
The second question we need to ask is: Is it fiscally responsible to
extend those tax cuts right now?
According to the Joint Committee on Taxation, the cost of a 2-year
extension of those tax rates amounts to $50 billion over a 10-year
budgetary horizon. Some who like lower capital gains and dividends tax
rates will cite a lower 5-year cost of $20 billion, but that masks the
full cost over the decade to come.
Perhaps we should be a little more frank with the American people
because it is no secret that many who like lower capital gains and
dividends tax rates would like to make those lower rates permanent.
This is the position the administration takes. So we ought to look at
the cost of making those rates permanent. According to the President's
new budget request, making these tax cuts permanent would cost more
than $200 billion over 10 years.
Mr. President, $200 billion is a lot of money. Two hundred billion
dollars is about what we spend on fighting crime, combating drugs, and
the entire administration of Justice for 5 years. Two hundred billion
dollars is about what the Federal Government spends on highways,
airports, and the entire Transportation budget for 3 years. And $200
billion is about what we spend on
[[Page S1088]]
veterans' retirement and disability benefits for 6 years. So extending
capital gains and dividend tax cuts costs real money.
The third question we need to ask is: Are capital gains and dividends
tax cuts the best use of the money set aside for tax cuts in the
budget? For there is a far more pressing need for tax relief before us
in this bill and that is relief from the onerous alternative minimum
tax.
Millions of working families are beginning their annual ritual of
filling out their tax returns. It takes more time than most of us would
like, and millions of taxpayers are being forced to fill out their
returns twice. They have to do so if they owe money under the
alternative minimum tax. The need for relief from the alternative
minimum tax is not some faraway possibility, several years down the
road. Relief from the alternative minimum tax expired for the tax year
2006. That is the more pressing tax relief need before us.
Treasury Secretary Snow testified before the Senate Finance Committee
last Tuesday. He told the committee:
Tax increases carry an enormous risk of economic damage.
And I can tell you today that the President will not accept
that risk. He will not accept a tax increase on the American
people.
That is exactly why we need to prevent a tax increase on those
working American families who would be subject to the alternative
minimum tax, unless we act. In the same vein, the popular research and
development tax credit expired at the end of last year. Businesses have
argued for years that the annual 1-year extension provides no certainty
for business planning and investment. We need to extend the R&D tax
credit.
Some will make breathless arguments that capital gains and dividends
tax cuts are necessary. Why are they necessary, they say? They say they
are necessary to prevent dire consequences in the stock market. They
say that the stock market will plunge if we don't enact this in 2
years. It doesn't need to be enacted. They want to enact it because the
current law is in existence until January 1, 2009. But they say the
stock market is going to fall.
Let us look at the time period starting in May 2003, when Congress
reduced the dividend and capital gains tax rates. Since then, the stock
market has seen a 14-percent growth. Furthermore, let us look at the
time when Congress first cut the capital gains tax rate in August of
1997. Between then and the time the further cuts were made in May of
2003, the market grew by 13 percent. Now let us look at the time before
either the capital gains or dividends tax cuts. Before the 1997 tax
cuts, capital gains were taxed at 28 percent, much higher than the
current law, and dividends were taxed as ordinary income, higher than
under current law. In those times of higher capital gains and dividend
tax rates, between the time the Clinton administration took office and
August 1997, did the market grow by 13 percent or 14 percent? No. The
market grew by a whopping 236 percent, far more than the 13 percent and
14 percent when the lower rates were in existence.
So the evidence is not there that lower capital gains and dividends
tax cuts will lead to increased stock prices. Indeed, one would make
the case that other economic factors are much more important to stock
market returns than are capital gains and dividends tax rates.
One of those factors is the fiscal responsibility of the mid-1990s.
After President Clinton took office in 1993, Congress and the President
enacted meaningful, I mean meaningful deficit reduction. We reduced the
Government's demand for scarce capital. We freed up savings to finance
productive business investments. And we put the Nation on a path to
economic growth. In contrast, financing tax cuts by running greater
deficits increases the Government's demand for scarce capital. Deficit-
financed tax cuts take away savings that could be available to finance
productive business investments. Increasing the deficit detracts from
economic growth.
To encourage economic growth, we need to get deficits under control,
and the first step we can take down that road is to stop making the
deficit worse by enacting more tax cuts than we can afford.
Capital gains and dividends tax cuts do not expire for 3 years.
Capital gains and dividends tax cuts cost a lot of money. Capital gains
and dividends tax cuts are a less-pressing priority than relief from
the alternative minimum tax. And the evidence is simply not there that
capital gains and dividends tax cuts contribute to market strength.
That is not the evidence. It may be somebody's theory, but that is not
the evidence.
So that is why we do not need to extend capital gains and dividends
tax cuts today. We can face this issue later. Rather, let us address
the more pressing need to extend relief from the alternative minimum
tax. Let us act responsibly. Let us save capital gains and dividends
tax cuts for another day.
I yield the floor.
The PRESIDING OFFICER (Mr. Sessions). The Senator from Iowa.
Mr. GRASSLEY. Mr. President, Senator Kennedy repeats the old
demagogic saw about capital gains and dividends being only tax benefits
for the wealthy. The facts are very different. I have two charts here
which will show how wrong he is. One of these charts deals with capital
gains. The other one deals with dividends.
Dividends is the first one to which I make reference because, in the
State of Massachusetts, you can't have all these wealthy people
benefiting from the 15-percent dividend tax instead of what he would
prefer, the 20-percent dividend tax. Don't forget, again, as I referred
in my opening remarks, these are year 2003 figures, so it could be a
lot more than that right now, but these are the most up-to-date
Internal Revenue Service figures we have.
In Massachusetts, we have 589,897 taxpayers who benefit from the 15-
percent capital gains dividend. Don't tell me that all 589,000 of those
are millionaires. Massachusetts may be a very wealthy State, but it
doesn't have that many millionaires in it. So somewhere along the line,
Senator Kennedy ought to wake up to the fact that there are a lot of
middle-income and common folks in his State who are benefiting from the
15-percent tax on dividends instead of having a 33-percent increase in
that tax and having it go back to 20 percent.
My friend from Montana did make a correct judgment that this is not
running out right now. But the point is that when you are asking people
to invest to create jobs in America, they have to have the long-term
view of that investment. If you want to encourage investment to create
jobs, people have to know what the tax law is for the long term, not
for the short term.
The point is, in order to persecute a few millionaires, Senator
Kennedy wants to punish the many. And the many are the 589,000 people
in his State who benefit from the 15-percent tax on dividends.
Let's go to the number of people in that State who benefit from the
15-percent capital gains tax. There are 212,000 people in
Massachusetts--again, I remind you these are 2003 tax year figures
because that is the most up-to-date we have from the IRS. There are
more today, probably. But there are 212,000 people in Massachusetts,
taxpaying families and individuals, benefiting from the 15-percent
capital gains tax. Those are not wealthy people.
Again, you get back to the point of whether we ought to persecute the
few, the few millionaires he is talking about, persecute them and at
the same time punish 212,000 people in the State of Massachusetts. I
don't think so. I don't think it is good policy.
I hope this Congress is able to have a sensible tax policy that not
only includes sensible levels of taxation, but if you look at all the
dividends that are being paid out today that wouldn't have otherwise
been paid out, you think you would come to a conclusion that is a
sensible policy because we have tens of millions of taxpayers deciding
how the profits of a corporation are going to be spent instead of a few
thousand chief executive officers of those same corporations deciding
how it is going to be spent. When millions of taxpayers are making
those decisions, it is going to respond to the dynamics of our economic
system and create more jobs and important prosperity than when a few
corporation executives keep all those profits internal in a corporation
making those decisions.
I don't think we ought to be persecuting a few to punish the many.
[[Page S1089]]
When it comes to these motions to instruct, we may have some motions
to instruct on this side of the aisle that will set the record straight
on what we are trying to accomplish and give people opportunities to
vote on good economic policy and good tax policy as well as bad
economic policy and bad tax policy that we are getting from some on the
other side of the aisle.
In 2003, a bipartisan Congress lowered the top tax rate on dividends
and capital gains to 15 percent through December 31, 2008, and for low-
and middle-income taxpayers to 5 percent through 2007 and zero percent
through 2008.
I filed six motions to instruct conferees to report back a conference
report that includes the extension of these tax rates through 2009 and
through 2010, the same as the House of Representatives has.
Critics of this policy claim these are tax cuts for the rich that
make a budget deficit worse because they want to persecute the few and
in the process punish the many. But I filed these motions that are
going to tell the other side of the story; that when you have sound tax
policy which encourages the economy to grow, we are also going to
reduce the deficit.
Besides, let me suggest to you that I don't know how it is in other
States, but I don't run into very many in my State who are saying I am
undertaxed, tax me more. But I run into people day after day in almost
every one of my town meetings where they are complaining about the
overspending of the Congress of the United States.
In regard to the other side of the story and the motions to instruct
that I filed, the lower rates of capital gains and dividends have
produced several positive effects. They benefited low- and middle-
income families in a meaningful way.
Can't you see that when you have a very low tax rate for certain low-
income people, as one example? For low- and middle-income taxpayers, it
will be 5 percent through 2007 and zero percent through 2008. This is
going to encourage people to save to a greater extent, particularly
people who have a lower income and don't have the ability to save.
These lower tax rates have reduced the tax burden on senior citizens
who rely on their investment incomes during retirement. They have
contributed to our economic recovery and continue to help the economy
grow. They have made capital investments in America more competitive
with the capital investment in other countries. With the globalization
of the economy, that is something we always have to be cognizant of in
this Congress, that you can't have a tax policy that makes our
corporations, particularly in manufacturing, uncompetitive with
manufacturing overseas.
Finally, these tax rates have helped impose transparency and
discipline on corporate managers which is critical to protecting
investments and workers.
I may or may not seek a vote on these motions to instruct, but I want
to go through each one of these points which I made so that when
Members come over to vote tonight, they will know some of the rationale
behind Republican motions.
The lower rates on dividends and capital gains have benefited low-
and middle-income families in a meaningful way. That is the third time
I have said that in the last 5 minutes. But we have to get away from
this attitude of persecuting a few and in the process punishing the
many.
I don't know whether they on the other side of the aisle realize it,
but when they want to persecute a few millionaires, they are punishing
hundreds of thousands of people--I guess it is millions of people, if
you take all 50 States, but I was making reference to the State of
Massachusetts.
According to the Internal Revenue Service estimates for 2003 tax
return data, about 10 million low- and middle-income taxpayers have $34
billion of income taxed at the 5-percent rate and saved at least $1.7
billion, or about $170 per taxpayer on average.
I know what I am going to hear from the other side. Well, $170 is
nothing. Why don't we let the taxpayers of this country decide whether
they would rather spend that $170 or that we ought to spend it for
them?
I can guarantee if they invest it, or if they spend it, it is going
to do more economic good than if I spend it for them as a Member of
Congress. That is the way the dynamics are and the way society works.
Money spent by the Government doesn't turn over as many times in the
economy as it does if it is spent in the private sector.
At these 2003 levels, these taxpayers I have referred to save a heck
of a lot of money. Don't forget, in 2008 that rate drops to zero
percent.
My motion would instruct the conferees to ensure that Congress won't
raise the annual tax bill on low- and middle-income taxpayers at the
2003 levels. That tax increase would be at least $3.4 billion. That is
an average of $340 per taxpayer.
Senior citizens benefit from lower tax rates on dividends and capital
gains. They have reduced the tax burden for senior citizens who rely
more than working people do on investment income, and they need this
particularly during retirement.
According to IRS estimates for 2003 tax return data, about 57 percent
of the tax returns for taxpayers age 65 and older had taxable dividends
income. That is over 6.5 million tax returns. These taxpayers rely on
investment income, and particularly dividend income in their
retirement. Low- and middle-income seniors pay tax on this dividend
income at the 5-percent rate instead of 20 percent or 15 percent. That
rate for these low-income seniors is going to drop to zero in 2008.
Other taxpaying citizens, those with higher incomes, paid at the 15-
percent rate, but that was instead of paying at the 35-percent rate.
We need to instruct the conferees that Congress won't impose a new
tax on low- and middle-income seniors and more than double the tax on
other taxpaying seniors in 2009 and 2010. In other words, we need to
tell the other side to quit persecuting a few because in the process
you punish the many.
In this particular case, why would they be crying about what we might
be doing to senior citizens in one of the recent speeches and then
stand there and want to increase the tax rates from zero percent to 35
percent for some of these people who are senior citizens?
Also these reduced tax rates on dividends and capital gains have
contributed tremendously to our economic recovery and continue to help
our economy grow. They reduce the cost of capital for American
businesses and increase return on investment, enhancing economic
growth, creating more jobs, and expanding the tax base.
Companies are responding to shareholder demand created by the lower
15-percent rate on dividends by paying record levels of dividends.
According to the Congressional Budget Office, capital gains
realizations increased significantly in 2003, 2004, and 2005, causing
capital gains tax revenues to be $62 billion higher over those years
than were projected before we changed this law.
Don't tell me that $62 billion more coming in, according to the CBO--
not a partisan like me; they are nonpartisan--$62 billion more didn't
benefit the Treasury and reduce the deficit by reducing taxes. You know
what you get out of this--a growing economy. That means more jobs, and
44.7 million jobs have been created since this tax policy has been in
effect. The unemployment rate has dropped during the same period of
time from 6.1 percent to 4.7 percent.
I feel very strongly, just as the other side wants to persecute the
few to punish the many by going after what they call millionaires, that
we ought to state the reality: that is, my motion to instruct the
reality of keeping these tax rates so the economy continues to grow.
The progrowth policy will not expire at the end of 2008 or at the end
of 2009 because investors who need the long-term view of investing know
what the law is going to be and are going to make decisions.
The lower rates have done another thing--they have made our
businesses more competitive with the global economy. And other
countries around the world, having lower tax rates than we have, have
jumped ahead of our businesses. Even with the United States at 50.8
percent, we still have the eighth highest tax rate on corporate income
among the 30 nations in the OECD. For every dollar an American
corporation makes on its U.S. investments, more than half of it ends up
in Federal and State governments. Without the lower
[[Page S1090]]
dividend tax rate, it would have been nearly 63 cents of every dollar,
ranking second only behind Japan.
High taxes on capital investment make the United States less
attractive compared within investment opportunities in other countries.
That costs us jobs. In today's global economy, we should do everything
we can to ensure the competitiveness of our businesses.
In this process of persecuting a few, the few millionaires, punishing
everybody, you are punishing the people who need jobs, and who lose
jobs because our businesses can't be competitive because our cost of
capital is higher than global competition. Also, there is a benefit to
a motion to instruct for transparency of how a corporation works. The
lower rates have helped impose transparency and discipline on corporate
managers. That is very important to protecting investors and,
particularly, jobs for our workers.
The high tax on dividends causes corporations to favor debt financing
over equity financing, leaving more highly leveraged businesses
vulnerable to economic downturns. High dividend taxes reduce the demand
to receive and thus the incentive to pay dividends, leading corporate
managers to invest in wasteful and unprofitable projects and to hide
the results from their investors and their workers.
On the other hand, the reduced tax rate on dividends lessens the
disparity between debt and equity financing, thus heightening demand
for dividends, thus contributing to more transparency and more
accountability of corporate managers for their decisions.
It seems to me in this post-Enron era, we need to instruct the
conferees to ensure that the transparency and the discipline imposed on
corporate managers by lower dividend taxes and critical to protecting
investors and workers is not threatened by this expiration date in 2009
and 2010.
I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, we next expect to hear from the Senator
from Connecticut, Mr. Dodd, to have a motion to instruct on veterans
and military personnel. We anticipate thereafter we will hear from the
Senator from Rhode Island. He will have a motion to instruct on defense
needs.
I yield the floor so the Senator from Connecticut may send his motion
to the desk.
The PRESIDING OFFICER. The Senator from Connecticut.
Motion to Instruct Conferees
Mr. DODD. Mr. President, I send a motion to the desk and ask for its
immediate consideration.
The PRESIDING OFFICER. Without objection, the pending motion is laid
aside.
The clerk will report the motion.
The assistant legislative clerk read as follows:
Mr. Dodd moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to insist on the inclusion in the final conference report of
the funding to support the health needs of America's veterans
and military personnel contained in section 315 of the Senate
amendment instead of any extension of the tax breaks for
capital gains and dividends for individuals with annual
incomes greater than $1,000,000.
Mr. DODD. I thank the clerk for reading the full motion. Normally, I
would interrupt the reading by the clerk, but I thought it important
that those interested in the debate would understand what the motion
is. This is a motion to instruct the conferees to support an amendment
this body passed 2 weeks ago.
That evening, my good friend from Iowa, the chairman of the
committee, in an awkward moment--it was a rather complicated moment
involving an amendment--offered a substitute that took the heart of my
amendment without the offsets that were included in my amendment, which
this body adopted unanimously on a voice vote.
I am offering a motion to instruct the conferees to support that
amendment. I also hope they will reconsider some of the offsets we
suggested in the amendment I offered when this matter was debated by
the full Senate. I would like to remind my colleagues that the proposal
I offered the other evening was strongly endorsed and supported by the
American Legion, a group that certainly understands the importance of
providing the support and backing our veterans deserve, particularly
those who are returning from theaters of conflict today in Afghanistan
and Iraq.
I ask unanimous consent this letter from the American Legion be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
The American Legion,
Washington, DC, February 2, 2006.
Hon. Christopher J. Dodd,
Hon. Edward M. Kennedy,
U.S. Senate,
Washington, DC.
Dear Gentlemen: On behalf of the 2.8 million members of The
American Legion, I would like to offer our support of the
proposed amendment to the Tax Relief Extension Reconciliation
Act of 2005 that would provide for the unbudgeted costs of
health care for veterans returning from Iraq and Afghanistan.
The amounts offered by this amendment would be in addition
to any other amounts provided for medical care under other
statutory provisions and would help to avoid funding
shortfalls, such as what took place last year or other
problems that arise due to the discretionary funding model
currently in place for VA health care. This amendment would
also establish a ``Veterans Hospital Improvement Fund'' to
provide for improvements in health care facilities treating
veterans, including military medical treatment facilities, VA
facilities and other facilities (state, local and private)
that provide medical care and services to veterans.
Again, we appreciate your efforts on behalf of our nation's
veterans. Your amendment acknowledges the need for adequate
funding to ensure our nation's veterans receive the
healthcare and other benefits to which they are entitled.
Sincerely,
Steve Robertson,
Director,
National Legislative Commission.
Mr. DODD. I will have additional inclusions for the Record further in
the debate as I lay out the arguments for this motion.
This is about priorities and choices. Those involved in public life
are constantly asked to make choices and establish sets of priorities.
It is not easy in many cases. Sometimes the choices are very difficult
to make. In this case, the choice is a rather easy choice, it seems to
me, given the facts presented by this motion. The amendment we offered
2 weeks ago and the substitute offered by the chairman of the Committee
on Finance that this body adopted, provides for $12.9 billion for
disability payments to veterans, $6.9 billion for veterans medical
care, and $1 billion for veterans health facilities. I will explain
those particular items in more detail in a few minutes. Basically, that
was the amendment to which this body agreed.
The offset proposed in my amendment would have sunset the capital
gains and dividends tax breaks for only those people making more than
$1 million a year--which amounts to two-tenths of 1 percent of all
taxpayers--99.8 percent of all other taxpayers under our proposal would
not have been touched, only those making more than $1 million a year.
We suggested that the money saved by not providing the tax break for
people in that small group be used to pay for the veterans benefits I
have described. The House bill proposes to raise to $64.8 billion the
amount we spend on tax benefits for the income group I have just
described. We asked instead to reduce that amount in order to
adequately provide for these veterans benefits.
I noticed earlier our friend and colleague, the chairman of the
Committee on Finance, referred to today's proceedings as being akin to
the movie ``Groundhog Day.'' He stated that this is the third time the
Senate has debated this bill in one form or another. I appreciated his
discussion. Certainly, I can understand his frustration as the chairman
of the committee that deals with such an important matter in this tax
legislation. He and my colleague from Montana, Senator Baucus, have
worked very hard on this legislation and would like to see it moved to
conference. I agree. In fact, his reference to that movie is apt, and I
endorse it.
The movie ``Groundhog Day'' reminds us sometimes in life we get
another chance to get it right. That is what we are going to try to do
this evening. That is why we are here today, to hopefully get it right
when it comes to paying for urgent priorities
[[Page S1091]]
such as the health and safety of our troops and our veterans.
I don't know of another constituency group in America--maybe some of
my colleagues might argue with what I am about to say, but I don't
think there is another group of Americans who deserves as much of our
attention as people who put their lives on the line for the United
States of America every day. Those young men and women who are
returning from theaters of conflict, broken individuals, at least in
body--amputees, scarred, burned, and suffering tragic injuries of war--
deserve every bit of thanks, verbally, we can provide for them. But
beyond that, they deserve our support and backing when it comes to the
priorities of this Nation. I don't think it is asking too much, at a
moment like this, to say to two-tenths of 1 percent of taxpayers: How
about a break; how about not taking that extra tax break and providing
for the veterans benefits that are needed for these young men and women
who are coming back from the theaters of conflict.
When this bill last came to the Senate 2 weeks ago, I offered an
amendment that would have provided crucial health funds in a fiscally
responsible manner to our wounded troops coming home.
Tax legislation passed in 2003 calls for spending $43 billion over
the next 5 years on capital gains and dividend tax breaks for
individuals making more than $1 million a year. The bill proposed by
the House of Representatives would raise this number much higher--by
this chart I am showing--to $64.8 billion. Instead of spending this
money on the wealthiest two-tenths of 1 percent of the population of
the United States of America, my amendment would have used the
resources to meet our veterans health needs--estimated by Nobel Prize-
winning economist Joseph Stiglitz to be $18.9 billion over the next 5
years--establish a $1 billion trust fund for health facilities treating
wounded and disabled veterans returning home, and reduce the deficit by
approximately $23 billion. That was the amendment I offered 2 weeks
ago.
Regrettably, this Senate did not approve my amendment. We did,
however, unanimously adopt, as I mentioned earlier, a substitute
offered by my colleague from Iowa, the chairman of the Committee on
Finance, that still provides these needed funds--just without paying
for them, as I and many other colleagues would have preferred. We
believe you ought to pay for it.
Once again we are coming back. I regret the need for a ``Groundhog
Day,'' but because of the procedures we operate under, I am getting a
second chance. In effect, I am giving my colleagues a second chance to
get this right. Do you believe it is that difficult a choice to make to
reduce that $64.8 billion that we are about to provide to two-tenths of
1 percent of the wealthiest Americans, to provide for the basic needs
of our veterans returning from the theaters of conflict? That is the
choice we will make when this vote occurs later today or this evening.
The House of Representatives has proposed not only keeping in place
the scheduled dividends and capital gains tax breaks enacted in 2003
but adding 2 more years of them. My motion makes no statement about
these tax breaks for the 99.8 percent of Americans who will get them.
But for the two-tenths of 1 percent of the population that I am talking
about, I think, frankly, they could do without this. I will tell you
why.
Over the last number of years, we have provided $125 billion in
benefits for this very narrow group of individuals. Between the 2001
and 2003 tax breaks alone, individuals in this narrow group--the top
two-tenths of 1 percent of the population of our great country--have
received more than $125 billion in benefits under the Tax Code.
Meanwhile, our soldiers and veterans are being told to go without
essential items such as body armor and the health care they need and
deserve.
Again, politics is often about choices. In fact, in most cases it is
about choices. What I am offering my colleagues tonight is a choice on
whether we continue to underscore what the House has done or what we
are doing by not paying for the benefits, or do we do what all of us
would like to see done; that is, do we properly take care of these men
and women coming back from the theaters of war.
The motion does not ask for the return of any of the $125 billion we
have given between the 2001 and 2003 legislation. It simply
acknowledges the reality that in a time of record budget deficits we
need to make some different choices. Do we provide more tax breaks for
a small group that has already received so much since this
administration took office, as the House of Representatives proposes to
do, or do we meet the needs of a nation at war in properly taking care
of our wounded and disabled veterans as the funding approved by this
Senate would do?
Over 2,200 men and women in uniform have died in combat in Iraq. Over
16,000 have been severely wounded in that conflict. But instead of
addressing their needs fully and adequately, this administration has
underfunded veterans medical health care.
Let me go back and make a point on tax, so everyone knows what I am
talking about. Under the House bill, this is the choice: If we adopt in
the conference the House bill and drop this amendment--some suggest it
would not make it 10 feet down the hall between this Chamber and the
House--we will be left with the wealthiest benefiting the most by
extending the capital gains and dividends tax breaks.
The average tax cut in 2009, if this bill is agreed to, if you make
$50,000 or less, will be $11. If you make between $50,000 and $100,000,
your tax break is $77. If you make between $100,000 and $200,000, you
get a $228 tax break. If you make between $200,000 and $1 million, you
get a little more than $1,300 in a tax break. If you make $1 million or
more, you get $32,111 in tax breaks. That is from the Urban-Brookings
Tax Policy Center, their analysis of what would happen under this bill.
All we are suggesting is to take care of this by reducing that tax
break for the people making over $1 million a year. I also want to see
us beef up what could happen for the other individuals in the tax
categories. The people making $100,000 and less, to receive $75 or $85
in a tax break is hardly what I call a windfall for people in this
category.
I come back again to the beneficiaries under the motion I am making
today and how they benefit. In fact, last year the administration
devised its fiscal year 2006 VA budget that could only handle 23,000
veterans returning from Iraq. This number was drastically too low and
the Veterans' Administration had to scramble to meet the needs of over
103,000 Iraq veterans on top of its already existing patient
load. Imagine that. They submitted a budget that only provided for
23,000, and yet over 103,000 actually came back from that theater
alone, to be added to the already overburdened patient flow.
Congress was forced, of course, as my colleague may recall, to
intervene in the middle of the year, and in June of last year we
approved an emergency spending bill that provided an additional $1.3
billion to address shortfalls in the VA health budget.
Now, I must stress that I have the greatest respect and admiration
for former VA Secretary Tony Principi and the current occupant of that
post, Jim Nicholson. I do not envy their jobs, particularly when they
have an administration that does not seem to want to step up to the
plate and provide the kind of backing at the budget office they
deserve. They have led their Department with great distinction and have
continued to do the best they can under the circumstances. But they
have had a difficult task since the current occupants of the White
House have repeatedly provided them with very, very limited resources.
I would like to show as well this article which appeared in the
Washington Post. I will not read all of it, but I wish to point out a
particular commendation for a Republican Member of the House, Steve
Buyer, a Republican from Indiana, because it was from his insistent
questioning at the time of the VA Under Secretary for Health that they
were able to determine the $1 billion shortfall existed. Had it not
been for the efforts of Steve Buyer, we may not have been able to
correct the shortfall which existed at the time. From the beginning,
our colleague, Senator Patty Murray, as a member of the Senate
Appropriations Subcommittee covering veterans and a lead sponsor of
Democratic efforts to restore this amount, also led the charge, later
joined by Larry Craig of
[[Page S1092]]
Idaho and others in her efforts. That is how the money got back in. But
if it had not been for these Members, we might still be arguing about
the shortfalls that were needed to provide for those people.
Mr. President, I ask unanimous consent that the Washington Post
article be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, June 24, 2005]
Funds for Health Care of Veterans $1 Billion Short
(By Thomas B. Edsall)
The Bush administration, already accused by veterans groups
of seeking inadequate funds for health care next year,
acknowledged yesterday that it is short $1 billion for
covering current needs at the Department of Veterans Affairs
this year.
The disclosure of the shortfall angered Senate Republicans
who have been voting down Democratic proposals to boost VA
programs at significant political cost. Their votes have
brought the wrath of the American Legion, the Paralyzed
Veterans of America and other organizations down on the GOP.
``I was on the phone this morning with Secretary of
Veterans Affairs Jim Nicholson, letting him know that I am
not pleased that this has happened,'' said Sen. Larry E.
Craig (R-Idaho), chairman of the Senate Veterans Affairs
Committee. ``I am certain that he is going to take serious
steps to ensure that this type of episode is not repeated.''
The $1 billion shortfall emerged during an administration
midyear budget review and was acknowledged only during
lengthy questioning of Jonathan B. Perlin, VA undersecretary
for health, by House Veterans Affairs Committee Chairman
Steve Buyer (R-Ind.) at a hearing yesterday.
``We weren't on the mark from the actuarial model,'' Perlin
testified. He said that the department has already had to use
more than $300 million from a fund that had been expected to
be carried over to the fiscal 2006 budget, and that as much
as $600 million for planned capital spending will have to be
shifted to pay for health care.
At a noon news conference yesterday, Sen. Patty Murray (D-
Wash.), a member of the Senate Appropriations subcommittee
covering veterans affairs and the lead sponsor of Senate
Democratic efforts to add $1.9 billion to the VA budget,
accused the Bush administration of unwillingness ``to make
the sacrifices necessary to fulfill the promises we have made
to our veterans.''
In a rare display of bipartisanship on the polarized issue
of veterans spending, Craig appeared with Murray at the news
conference and said he agreed with many of her comments.
Murray cited an April 5 letter written by Nicholson to the
Senate in a bid to defeat her amendment: ``I can assure you
that VA does not need emergency supplemental funds in FY2005
to continue to provide timely, quality service that is always
our goal,'' he had said.
Mr. DODD. We cannot and should not address veterans' needs on the
cheap again. According to some experts, this year, the VA health system
is likely to face another shortfall of $2.6 billion due to the
administration's drastically low veterans budget. And for all of the
President's rhetoric about supporting our troops--and I do not in any
way doubt he means it when he says it, but I remain concerned that the
administration fails to back up the rhetoric with the kind of actions
needed to see to it that these troops are going to get the support they
deserve.
On the whole, I commend the President for finally proposing an
increase of $1.9 billion in the VA budget for 2007. But as in previous
years, the administration's priorities are wholly misplaced. In spite
of the proposed increase, the President's 2007 request cuts the VA
hospital construction budget by $576 million. To make matters worse,
the administration's proposed budget would impose a doubling of
veterans' prescription drug copays and assess a new $250 enrollment fee
for thousands of veterans across our country.
As I mentioned on the floor before, the situation has gotten so dire
that now our military personnel and veterans are having to rely on the
charity of private citizens to build critical health facilities to meet
their needs. According to the Departments of Defense and Veterans
Affairs, our military personnel are suffering inordinate numbers of
injuries resulting in brain damage, spinal injuries, and amputations.
About 20 percent of those injured have suffered major head or spinal
injuries and an additional 6 percent are amputees. Without financial
support, our veterans are actually having to depend on the charity of
private citizens to finance the construction of major rehabilitation
centers for the most seriously wounded.
The Bush administration is simply not meeting its obligations to
those wounded in Iraq--a war that has returned home amputees at twice
the rate of Vietnam. And so, instead, the Intrepid Fallen Heroes Fund
is raising $37 million to build the Intrepid Center at Fort Sam Houston
next year. It will be manned and operated by VA and Army personnel, but
it is currently not expected to receive a dime from the U.S. Treasury
for its construction because the White House would rather dole out
scarce resources to the wealthiest of our fellow citizens who have
already received so much. What kind of a choice are we making when we
do that?
I remind my colleagues that the funding approved by this body--which
without the support of this motion I fear will be wiped out in
conference--will allow critical facilities such as this one to receive
the investments they deserve from our Nation's Government.
Moreover, it will create a trust fund to allow private and State
facilities that provide medical treatment to veterans to receive
Federal funds as they meet our veterans critical health care needs. In
addition to facilities such as the Intrepid Center, it will allow vital
hospitals and veterans residences, such as the Connecticut State
veterans home at Rocky Hill, the opportunity to tap into vital Federal
resources as they strain to meet the increasing demands of caring for
our veterans--young as well as old.
I cannot stress the importance of these programs enough. Our veterans
need the critical care provided at our State veterans nursing homes
and, regrettably, this administration is choosing to put scarce
resources into more high-income tax breaks rather than address our
veterans' essential living needs.
As a matter of fact, last year, the President actually proposed
cutting off States' access to Federal funds to build and maintain State
veterans homes. I did not make that up. That is what they proposed. It
took an act of the Congress to reverse the President's budget proposal.
This year, although the Department has a list of 129--I am going to
put these in the Record, Mr. President; I want my colleagues to see
them--although the Department has a list of 129 State veterans projects
approved for receiving Federal grants for new construction and
improvements, 2006 allocations only provided enough for 13 of these 129
State projects around our country.
I will guarantee my colleagues, every one of your States is included
in projects that will not be funded. These are your State veterans
facilities, and these are good people out there doing a Herculean job
of trying to provide for veterans from your States. Here they are, with
129 requests for projects they need, and only 13 of them will be funded
because we are going to provide a huge tax break for people who have
received $125 billion in tax breaks and are now about to get almost $70
billion more.
I would hope my colleagues would just, on this alone, be willing to
support this motion. The proposed 2007 budget would flat-line this
program of State construction at $85 million, providing funding, as I
said, for 10 to 13 projects--it may not even be 13--and still leaving
over 100 State veterans facilities looking for additional resources.
The funding approved by this body and supported by this motion I am
offering this afternoon would address these shortfalls.
Mr. President, I ask unanimous consent that this Priority List of
Pending State Home Construction Grant Applications--it lists the State,
the facility in your State; and only the top 13 will be approved; maybe
13, maybe 10 next year--I ask unanimous consent that this list be
printed in the Record so my colleagues can determine whether their
State facility is on the list.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[[Page S1093]]
PRIORITY LIST OF PENDING STATE HOME CONSTRUCTION GRANT APPLICATIONS FOR FY 2006
----------------------------------------------------------------------------------------------------------------
Priority Est. VA
FY 2006 list rank FAI No. State Description group (PG) grant cost
(locality) ranking (000)
----------------------------------------------------------------------------------------------------------------
Applications Suject to 38 CFR 59 Priority Group 1
----------------------------------------------------------------------------------------------------------------
1................................. 31-014 NE (Bellevue)*. L/S 120-Bed NHC/DOM 1, 1, 2 13,658
(Repl.).
2................................. 13-008 GA Life Safety/HVAC and 1, 1, 2 991
(Milledgeville Upgrades at the
). Russell Bldg..
3................................. 50-008 VT (Bennington) L/S Geothermal HVAC, 1, 1, 4 1,716
Phase 1.
4................................. 13-010 GA Life Safety/HVAC at 1, 1, 4 955
(Milledgeville the Vinson Bldg..
).
5................................. 44-010 RI (Bristol)... L/S Fire Safety 1, 1, 4 625
Improvements.
6................................. 36-009 NY (Oxford)**.. L/S 242-Bed NHC 1, 1, 5 39,215
(Replacement).
7................................. 26-014 MI L/S Replace 1, 1, 5 801
(Marquette)**. Emergency Gen. And
Fire Safety.
8................................. 09-012 CT (Rocky L/S General 1, 1, 7 2,990
Hill)**. Renovations--DOM.
9................................. 26-013 MI (Grand L/S Code 1, 1, 7 913
Rapids). Renovations, etc.
10................................ 47-008 TN L/S Renovations..... 1, 1, 7 748
(Murfreesboro).
11................................ 33-006 NH (Tilton).... L/S Facility 1, 1, 7 1,822
Upgrades--Backup
Generator, Fire
Alarm.
12................................ 09-011 CT (Rocky 125-Bed NHC (New)... 1, 2 20,300
Hill)**.
13................................ 06-044 CA (Greater LA 520-Bed NHC/DOM 1, 3 125,883
Complex). (New).
14................................ 06-052 CA (Redding)... 150-Bed NHC/DOM 1, 3 17,572
(New).
15................................ 06-053 CA (Fresno).... 300-Bed NHC/DOM 1, 3 25,864
(New).
16................................ 55-025 WI (Union Adult Day Healthcare 1, 4, 1 586
Grove). (Renov).
17................................ 27-018 MN Adult Day Healthcare 1, 4, 1 1,914
(Minneapolis). Renovation--35
Participants.
18................................ 27-019 MN (Luverne)... Dementia Unit....... 1, 4, 2 568
19................................ 08-014 CO (Homelake).. Upgrade Resident 1, 4, 2 3,394
Support and
Activity Areas.
20................................ 44-009 RI (Bristol)**. Nursing Unit 1, 4, 2 2,287
Renovation.
21................................ 12-013 FL (Daytona Renovation, Phase 1. 1, 4, 2 650
Beach)**.
22................................ 13-009 GA Renov. & Upgrade 1, 4, 2 269
(Milledgeville Wheeler Bdg.
).
23................................ 04-004 AZ (Phoenix)... Renovation, Phase 2. 1, 4, 2 1,040
24................................ 21-008 KY (Wilmore)... Renov. 3 Nursing 1, 4, 2 794
Units.
25................................ 23-011 ME Renov. Alzheimer's 1, 4, 2 404
(Scarborough). Unit.
26................................ 01-006 AL (Alexander Moisture 1, 4, 2 1,363
City). Remediation, Phase
2.
27................................ 37-007 NC Building Code Renov. 1, 4, 3 784
(Salisbury)**. And Parking Lot.
28................................ 08-013 CO (Rifle)..... Upgrade Fire/Safety 1, 4, 4 1,652
Renovations.
29................................ 06-051 CA (Yountville) Steam Dist. System 1, 4, 4 1,729
Renovations.
30................................ 13-006 GA Elevator Renovations 1, 4, 4 805
(Milledgeville/ (5 Buildings).
Augusta)*.
31................................ 13-007 GA HVAC Renov.--Wheeler 1, 4, 4 521
(Milledgeville Bldg..
).
32................................ 55-033 WI (King)**.... Replace Steam Lines. 1, 4, 4 473
33................................ 06-054 CA (Yountville) Telecommunications & 1, 4, 4 1,950
Network.
34................................ 36-011 NY (Stony Building Sys./ 1, 4, 4 737
Brook). Utilities Renov..
35................................ 27-023 MN Sewer Pipe 1, 4, 4 463
(Minneapolis)*. Replacement--Buildi
ng 17.
36................................ 27-026 MN (Silver Roof Replacement.... 1, 4, 4 1,835
Bay)**.
37................................ 27-027 MN (Hastings)** Renovation, Phase 2. 1, 4, 4 4,922
38................................ 27-028 MN (Hastings)** Renovation, Phase 3. 1, 4, 4 5,266
39................................ 25-060 MA (Holyoke)... Masonry Restoration. 1, 4, 4 478
40................................ 39-020 OH (Sandusky).. Roof Replacement-- 1, 4, 4 552
Secrest Hall.
41................................ 39-021 OH (Sandusky).. Corridor Renovation. 1, 4, 4 325
42................................ 39-022 OH (Sandusky).. Mechanical Sys. 1, 4, 4 1,560
Upgrade.
43................................ 01-004 AL (Alexander General Renovations. 1, 4, 4 355
City)*.
44................................ 21-007 KY (Wilmore)*.. General Renovation, 1, 4, 4 839
Phase 2.
45................................ 06-055 CA General Renovations. 1, 4, 4 807
(Yountville)**.
46................................ 55-038 WI (King)*..... Domestic Water Pipe 1, 4, 4 724
Replacement.
47................................ 29-015 MO (St. Louis). Sprinkler Pipe 1, 4, 4 775
Replacement.
48................................ 55-039 WI (King)...... Replace Windows-- 1, 4, 4 267
Olson Hall.
49................................ 55-041 WI (King)...... 2nd Water Supply 1, 4, 4 860
Well.
50................................ 04-005 AZ (Phoenix)... Renovation, Phase 3. 1, 4, 4 780
51................................ 29-016 MO (Cape Replace Roof........ 1, 4, 4 635
Girardeau).
52................................ 36-012 NY (Stony Renovate Building 1, 4, 4 725
Brook). Systems & Utilities.
53................................ 06-047 CA (Yountville) Chapel Renovation... 1, 4, 5 1,013
54................................ 06-049 CA (Yountville) Recreation Building 1, 4, 5 4,485
Renovation.
55................................ 13-005 GA Dietary Facility.... 1, 4, 5 715
(Milledgeville
).
56................................ 39-023 OH (Sandusky).. Kitchen Upgrade-- 1, 4, 5 260
Secrest Hall.
57................................ 32-002 NV (Boulder Dietary Facility 1, 4, 5 1,429
City). Addition.
58................................ 23-013 ME (Caribou)... Multipurpose Room 1, 4, 5 354
Addition.
59................................ 46-011 SD (Hot General Renovations. 1, 4, 6 802
Springs).
60................................ 17-027 IL (LaSalle)... Bus and Ambulance 1, 4, 6 566
Garage.
61................................ 34-025 NJ (Paramus)... Multipurpose Room... 1, 4, 6 1,415
62................................ 36-010 NY (St. Albans) General Renovations. 1, 4, 6 4,470
63................................ 55-035 WI (Union Aboveground Building 1, 4, 6 2,217
Grove). Connectors.
64................................ 17-030 IL (Manteno)... Construct Storage 1, 4, 6 1,610
Building.
65................................ 17-033 IL (Manteno)... Convert/Upgrade 1, 4, 6 2,320
Courtyards.
66................................ 04-003 AZ (Phoenix)... Renovation, Phase 1. 1, 4, 6 364
67................................ 46-012 SD (Hot Construct Chapel.... 1, 4, 6 520
Springs).
68................................ 19-030 IA Renovate Medical 1, 4, 6 520
(Marshalltown). Clinic Space.
69................................ 08-015 CO (Walsenburg) General Renovations. 1, 4, 6 1,763
70................................ 23-012 ME (South Replace Flooring.... 1, 4, 6 353
Paris).
71................................ 48-008 TX (Pending)... 160-Bed NHC (New)... 1, 5 11,144
72................................ 48-009 TX (Pending)... 160-Bed NHC (New)... 1, 5 11,144
73................................ 55-032 WI (Union 24-Bed DOM Addition 1, 6 1,625
Grove). (New).
74................................ 02-001 AK (Palmer)*... General Renovations 1, 6 2,275
to Establish SVH
(79-Beds).
75................................ 49-002 UT (Ogden)..... 120-Bed NHC (New)... 1, 6 8,008
76................................ 04-002 AZ (Tucson).... 180-Bed NHC (New) 1, 6 18,671
and 35 Participant
ADHC.
77................................ 55-036 WI (Chippewa 120-Bed NHC/40-Bed 1, 6 15,925
Falls). DOM (New).
78................................ 51-005 VA (Richmond).. 80-Bed DOM (New).... 1, 6 5,200
79................................ 48-010 TX (Pending)** 169-Bed NHC (New)... 1, 5 11,144
\1\.
80................................ 48-011 TX (Pending)** 160-Bed NHC (New)... 1, 5 11,144
\1\.
----------------------------------------------------------------------------------------------------------------
Subtotal All Priority Group 1 ........... ............... .................... ........... 419,597
Applications (Has State
Matching Funds):
================================================================================================================
Applications Subject to 38 CFR 59 Priority Groups 2-7
----------------------------------------------------------------------------------------------------------------
81................................ 20-004 KS (Ft. Dodge). L/S Back-Up 2, 2 401
Generators.
82................................ 20-005 KS (Winfield).. L/S Back-Up 2, 2 940
Generator, Sprikle
DOM, etc..
83................................ 50-009 VT (Bennington) L/S Geothermal HVAC, 2, 4 2,306
Phase 2.
84................................ 50-010 VT (Bennington) L/S Geothermal HVAC, 2, 4 2,200
Phase 3.
85................................ 34-028 NJ (Paramus)... L/S Replace Fire 2, 5 307
Alarm System.
86................................ 34-027 NJ (Vineland).. L/S Install 2, 7 341
Emergency Generator.
87................................ 39-024 OH (Georgetown) L/S Security 2, 7 330
Upgrades, Phase 1.
88................................ 39-025 OH (Georgetown) L/S Security 2, 7 331
Upgrades, Phase 2.
89................................ 12-007 FL (Pending)... 120-Bed NHC (New)... 4 9,286
90................................ 12-008 FL (Pending)... 120-Bed NHC (New)... 4 9,418
91................................ 12-009 FL (Pending)... 240-Bed NHC (New)... 4 16,980
92................................ 12-010 FL (Pending)... 120-Bed NHC (New)... 4 9,857
93................................ 12-011 FL (Pending)... 240-Bed NHC (New)... 4 17,780
94................................ 19-028 IA General Renovations 5, 2 2,731
(Marshalltown). NHC.
95................................ 40-024 OK (Sulphur)... General Renovations. 5, 2 7,800
96................................ 12-014 FL (Lake City). Renovation, Phase 2. 5, 2 1,950
97................................ 26-015 MI (Marquette). Renov. Nursing Unit/ 5, 2 557
Roof Repl.
98................................ 39-027 OH (Sandusky).. Renov. Griffin Hall-- 5, 2 418
First Floor.
99................................ 25-062 MA (Holyoke)... Renov. Resident 5, 3 439
Toilet/Baths.
100............................... 27-029 MN Renovation, Phase 2. 5, 4 8,366
(Minneapolis).
101............................... 17-032 IL (LaSalle)... Replace Roof and 5, 4 273
Water System.
102............................... 25-061 MA (Holyoke)... Window replacement, 5, 4 398
Phase 1.
[[Page S1094]]
103............................... 06-056 CA (Yountville) Central Power Plant 5, 4 740
Renovation.
104............................... 34-026 NJ (Paramus)... HVAC Replacement.... 5, 4 356
105............................... 55-040 WI (King)...... Replace Lock and Key 5, 4 2,098
System.
106............................... 55-O42 WI (King)...... Renovate Burns 5, 4 5,574
Clemons Hall.
107............................... 39-026 OH (Sandusky).. Vets Hall HVAC 5, 4 997
Upgrades.
108............................... 39-028 OH (Sandusky).. Mech. Sys Upgrades, 5, 4 275
Phase 2.
109............................... 39-029 OH (Sandusky).. Replace Exterior 5, 4 368
Lighting, Phase 2.
110............................... 27-020 MN Kitchen/Dining Room 5, 5 2,844
(Minneapolis). Renov..
111............................... 27-021 MN (Silver Bay) Nursing Care Space.. 5, 5 499
112............................... 06-058 CA (Chula Expand Dining Room.. 5, 5 585
Vista).
113............................... 27-030 MN (Hastings).. Water Supply 5, 6 325
Replacement.
114............................... 72-003 PR (Juana Diaz) General Renovations. 5, 6 970
115............................... 06-057 CA (Yountville) Administration 5, 6 2,946
Building Renov..
116............................... 39-017 OH (Pending)... 168-Bed NHC (New)... 6 7,800
117............................... 39-018 OH (Pending)... 168-Bed NHC (New)... 6 7,800
118............................... 37-004 NC (Pending-- 120-Bed NHC (New)... 6 5,358
Eastern).
119............................... 55-021 WI (King)...... 45-Bed Dom (New).... 7 2,294
120............................... 24-005 MD ( Pending-- 120-Bed NHC (New)... 7 7,684
Western).
121............................... 53-030 WA (Orting).... 120-Bed NHC (97 7 8,316
Repl, 23 new).
122............................... 27-022 MN (Fergus Dementia--Special 7 4,799
Falls). Care Unit.
123............................... 37-005 NC (Pending-- 120-Bed NHC (New)... 7 5,358
Western).
124............................... 17-028 IL (Pending)... 200-Bed NHC (New)... 7 18,200
125............................... 17-031 IL (LaSalle)... 80-Bed NHC Addition. 7 4,881
126............................... 47-009 TN (Montgomery 120-Bed NHC +20-Bed 7 11,105
County). Alzheimer's Unit
(New).
127............................... 47-010 TN (Memphis)... 120-Bed NHC +20-Bed 7 11,533
Alzheimer's Unit
(New).
128............................... 51-006 VA (Hampton)... 260-Bed NHC/DOM 7 23,400
(New).
129............................... 21-009 KY (Hanson).... 90-Bed NHC 7 6,000
(Addition).
----------------------------------------------------------------------------------------------------------------
Subtotal All Priority Groups 2- ........... ............... .................... ........... 236,514
7 Applications ( No State
Matching Funds):
================================================================================================================
Total All Pending ........... ............... .................... ........... 656,111
Applications:.
----------------------------------------------------------------------------------------------------------------
* These projects were awarded after August 15, 2005.
** These projects were conditionally approved after August 15, 2005. This provides a 180 day time extension
authorized in 38 UCS 8135.
**\1\ The State of Texas requested FY 2006 funding consideration for two bed-producing projects (FAI 48-008 and
FAI 48-009). Projects FAI 48-010 and FAI 48-011 have PG-1 certification of 35% State matching funds.
These applications will be funded in FY 2006 in the order which they appear on this list, subject to the
availability of Federal funds and compliance with all Federal requirements. Conditionally approved projects
have been ranked and will be awarded grants subject to meeting the remaining Federal requirements.
Mr. DODD. The funding approved by this body and supported by this
motion would address these shortfalls and allow State homes to tap into
a trust fund to provide more funding for construction that has already
been approved by the VA.
In light of these facts, I urge my colleagues to consider the
consequences of not acting today. Call it Groundhog Day. Call it what
you want. But the fact is, we have another chance now to get right what
we didn't the other night.
Again, I support and appreciate what my colleague from Iowa did by
offering an amendment to provide for these priorities. But we did not
provide any funding for them. And there is not a Member of this Chamber
who does not know what is going to happen. They did it as basically a
political cover, to have an amendment which said: Yes, we agree with
you, we should be paying for these priorities. But then, when I offered
the amendment to pay for them, of course, I lost.
Today, you will get a second chance, like in the movie ``Groundhog
Day,'' to try to get right what we got wrong the other night. You make
the choice. If you think $64.8 billion in tax breaks for the two-tenths
of 1 percent of the American population making more than $1 million a
year is a more important priority than providing for State facilities
that serve veterans, providing for disability payments and veterans
medical care, then you explain that to your constituents. But that is
the choice I am going to offer you this evening. Supporting the Senate
position on this issue is the very least we can do to show our full
backing of America's men and women in uniform. We owe these individuals
at least that much.
I will end where I began. I do not think there is another
constituency group in America that deserves as much support from the
Congress as veterans do. Particularly in this day and age, if you go to
Baghdad, if you go to Iraq, as many of my colleagues have, as I have--
and I see my colleague, Jack Reed, in the Chamber as well, a graduate
of West Point and a veteran of the 82nd Airborne. You go there--and I
have gone with him--and you meet these young men and women. It is a
tough place to be. It is a tough place to be. It is a tough place to
come back from, even under the best of circumstances. But if you come
back physically broken, with arms and legs lost and scarred and burned,
as 16,000 of them have, you deserve better. If you think millionaires
deserve better than they do, I could not disagree with you more. And I
am going to give you a chance tonight to join me in this effort.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, we are next expected to hear from the
Senator from Rhode Island, who will have a motion to instruct on
defense needs. Thereafter, we expect to hear from the Senator from New
York, Mr. Schumer, who will have a motion to instruct on the tuition
deduction.
To facilitate the consideration of Senator Reed's motion, I ask
unanimous consent that the pending motions be temporarily set aside so
that the Senator from Rhode Island may offer his motion.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Rhode Island.
Motion To Instruct Conferees
Mr. REED. Mr. President, I send a motion to instruct conferees to the
desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report the motion.
The bill clerk read as follows:
Mr. Reed moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to insist on the inclusion in the final conference report of
the funding to strengthen America's military contained in
title VI of the Senate amendment instead of any extension of
the tax cuts for capital gains and dividends, which does not
expire until 2009, contained in section 203 of the bill as
passed by the House of Representatives.
Mr. REED. Mr. President, I find myself, as I so often do, agreeing
with my colleague, the Senator from Connecticut, Mr. Dodd. It is
exactly about priorities. It is about whether the wealthiest, most
affluent people in this country will enjoy a tax break or whether more
fundamental needs of our Nation will be served.
Senator Dodd pointed to the issue of returning veterans. Again, I was
pleased to travel with Senator Dodd last October to Iraq to visit with
our soldiers: marines, airmen, sailors--all of our outstanding men and
women in uniform. When they come home, they need the kind of support
that the fund Senator Dodd identified would give them. But there is
even a more immediate concern to our Armed Forces today: $50 billion in
equipment that has to be rehabilitated, refurbished, brought up to
operating conditions, so these men and women can continue their
operations on behalf of America.
[[Page S1095]]
I can tell you, as someone who had the privilege of commanding a
company of paratroopers, the most disconcerting concept, the most
disconcerting and troubling aspect, is when your equipment is poorly
maintained, will not operate, is inefficient, out of date. That drives
morale down as rapidly as anything. We have--not unexpectedly because
of the conflict in which we are engaged--seen our equipment stocks
become overused, both aviation equipment and ground equipment: trucks,
vehicles, humvees--all of them have taken a terrible beating in combat
operations in Afghanistan and Iraq.
Just 2 weeks ago, this body agreed with my proposal to spend $50
billion to refurbish this equipment. But as Senator Dodd pointed out,
they did not agree with the way we would pay for it. In fact, the
proposal was really just oratory. It says: Let's spend $50 billion
which we do not have to help the military refurbish their equipment. We
have to do better than that because, as the Senator pointed out,
without funding, that is all well-wishes without real results. And we
need real results for the men and women of our military forces.
The administration is quick to point out that we are a nation at war.
That is true, although in some respects we are simply an Army and a
Marine Corps, the Department of Defense, at war because the American
people have not been called upon to sacrifice very much, if anything.
Here we are making the point--I think it is so obvious--that the
wealthiest Americans, those who enjoy the benefits of this great
country, I believe would be quite willing to give up their tax break on
dividends and capital gains if they knew these funds would be directed
to precisely the programs I am talking about: refurbishing military
equipment or caring for veterans.
There are many reasons to oppose the extension of the lower tax rates
and dividends and capital gains, many macroeconomic reasons, many
reasons in terms of our fiscal problems and in terms of our growing
deficit. But one of the reasons is just the way it is distributed.
Forty-five percent of the tax cut goes to .3 percent of families with
incomes of $1 million or more. Seventy-two percent of the tax cut goes
to families with incomes of $200,000 or more.
Now, in a time when our troops are being sent into the field--at
times they are complaining or have complained about inadequate
equipment, insufficient equipment--at a time when they are looking
around and seeing their equipment stocks being drawn down and being
overused, I believe it is time to ask: What is our priority, the
protection of our military forces in the field or providing additional
benefits to those who have so much in society today?
I think it is more important to direct these funds to our military
forces. We have to do it, particularly with respect to the equipment of
the Army and the Marine Corps. As Senator Dodd indicated, I had the
privilege of traveling with him last October, but I just came back from
my seventh trip to Iraq and fourth trip to Afghanistan. Once you are
there, you understand the professionalism, skill, valor, fidelity to
duty and country of these marvelous men and women. You also understand
that the equipment is wearing down. The equipment has to be fixed.
Because they depend upon this equipment for their lives, we can't
tolerate equipment that won't operate properly.
A recent article in USA Today noted that the war in Iraq has taken
the biggest toll on military equipment since the Vietnam war. Two weeks
ago, the National Security Advisory Group, chaired by former Secretary
of Defense William Perry, released a report about the strain and risk
to our military.
In their words:
Given the harsh environment of Iraq and Afghanistan,
[resetting the force]--
that is, rehabilitating this equipment and repairing it--
is proving more extensive and expensive than in previous
operations. Estimates of the costs of rehabilitating Army
equipment coming back from operations overseas continues to
grow . . . in addition, both the Army and the Marine Corps
expect to see increasing costs associated with recapitalizing
aging forces and transforming their capabilities for a
broader range of 21st century missions.
Gary Motsek, the Army's deputy director for support operations at the
U.S. Army Materiel Command, has stated that the Army has to repair
virtually everything that goes to Iraq.
Last week, General Schoomacher, the Chief of Staff of the Army,
appeared before the Armed Services Committee. When I asked him what the
reset and recap cost for the Army was, he replied: $4 billion per year
over the next 6 years. What I have since discovered--and this might be
of some confusion in terms of trying to interpret a difficult and
complicated budget--is that his reply doesn't cover the whole situation
and doesn't provide an entire explanation of what is going on.
First, I believe the Chief of Staff was discussing the repair and
replacement cost, which is projected to be $24 billion over the next 6
years. He did not include recapitalization which is an additional $12
billion over the next 6 years. So the actual projected cost over 6
years is $36 billion. Second, this projection assumes a significant
drawdown of troops beginning at the start of fiscal 2007 and ending in
December 2008, when there are, according to the projections, no troops
in Iraq. I believe this assumption is rather unrealistic and,
therefore, we must assume that the reset and recapitalization costs
will be significantly higher. Again, it is very difficult to parse out
all of the different assumptions and other notions that are included in
the budget, but the sense is that they are assuming, at least when it
comes to maneuver units, that these units will essentially be drawn
down within 2 years. That is a highly problematic assumption, but one
that is within the President's budget.
In addition, General Schoomacher's number assumes that we do not
leave a single piece of equipment behind for the Iraqis. Yet I have
been privy to discussions here in Congress and elsewhere in which there
is a notion that we will leave significant equipment behind in Iraq to
provide their security forces with the kind of equipment they need to
operate. If we do leave equipment for them, the replacement costs,
which are an element of reset and recap costs, will increase.
A much more accurate picture of this notion of what we must do to
repair and rehabilitate our equipment, or reset and recap, is the
actual bill we have for fiscal year 2006, what we are paying for in
this fiscal year. The Army has determined that the cost of resetting,
recapping, and replacing equipment lost in battle for fiscal year 2006
is $13.6 billion. As long as we have approximately the same number of
troops in Afghanistan and Iraq as we do today, and we have the same
tempo of operation, then that $13.6 billion cost will be an annual
occurrence. As troops draw down, that funding level could go down from
$13.6 billion, but significant costs will continue to accrue until 2
years after the end of the conflict. So the annual $13.6 billion price
tag supports the opinion of GEN Paul Kern, who just retired as head of
the Army Materiel Command. He stated that fixing and replacing Army
equipment alone could run from $60 to $100 billion.
If you step back and look at what we are encountering today in terms
of costs, it is about $13 billion. Every year we are in Iraq at this
level of operational strength, it will be roughly that. That is a lot
more money than this budget anticipates. And so we have a huge unmet
need to fund simple recapitalization and reequipment, rehabilitation,
whatever term you want to use. But essentially, so that we understand
it, it is simply going back and fixing all the equipment we have been
using so aggressively in these different theaters. That doesn't buy you
a new Army. It doesn't buy you a transformed Army with new, modern
equipment. It simply gives you back the equipment you brought into
battle in a condition that you can use it in other hostile
environments.
This $13 billion seems to be the kind of level of spending we are
going to have to face year in and year out, as long as we are deployed,
as we are, in Iraq and Afghanistan. That is the figure we have to react
to. As a result, it is only prudent and sensible that for this $50
billion total we talked about for a 5-year period, that people support
the concept of spending that kind of money. But, of course, what they
refuse to do is put real assets, real resources to pay the bills. And
that is the thrust of my proposal.
I tried previously, in our debate a few days ago, to say that not
only must we
[[Page S1096]]
spend this money, we have to set priorities. We have to take those
funds from the capital gains and dividends taxes and apply them to this
fundamental need of our men and women in uniform.
That is the Army I was just talking about. Let's turn to the Marine
Corps. Last November, the Marine Corps estimated it would cost $11.7
billion to repair and replace their equipment over the next 5 years.
These are, again, costs that have already been incurred. These costs
are not included, as far as we can determine, in the President's budget
request. We have also discovered that the Air Force is concerned about
the cost of additional flying hours and the wear and tear on their
equipment. Again, we could not find explicit recognition of these costs
in the President's budget.
Last October, the GAO released a report on military readiness. It
assessed the state of 30 pieces of equipment, predominantly tanks,
vehicles, helicopters, and aircraft. It made several disturbing
observations, stating:
GAO's analysis showed that the reported readiness rates
declined between fiscal years 1999 and 2004 for most of these
items. The decline in readiness, which occurred more markedly
in fiscal years 2003 and 2004, generally resulted from 1. the
continued high use of equipment to support current operations
and 2. maintenance issues caused by the advancing ages and
complexity of the systems. Key equipment items--such as Army
and Marine Corps trucks, combat vehicles, and rotary wing
aircraft--have been used well beyond normal peacetime use
during deployments in support of operations in Iraq and
Afghanistan.
The report then goes on to say:
Until the DOD ensures that condition issues for key
equipment are addressed, DOD risks a continued decline in
readiness trends, which could threaten its ability to
continue meeting mission requirements. The military services
have not fully identified near and long term program
strategies and funding plans to ensure that all of the 30
selected equipment items can meet defense requirements.
I don't think there is anything startling in the sense of their
conclusion. They are stating what should be obvious. We have committed
our Army and Marine Corps to battle in a very harsh environment, Iraq
and Afghanistan. We are operating at robust tempos of operation. This
equipment is seeing the results. We have to provide for that. What is
disturbing to me is that this readiness trend portends danger in the
future. If readiness is declining, if it is not reversed, if we are
asking the soldiers and marines to operate equipment that is not 100
percent, that is not fully supported by ample spare parts, that has not
been rehauled, overhauled, rehabilitated, then we are putting our
troops in a precarious position which we should not.
The response, the answer? This one is relatively straightforward.
Give them the money to do the job and give them sufficient resources to
do so.
Another GAO report states that more than 101,000 pieces of National
Guard equipment, including trucks, radios, and night vision devices,
have been sent to soldiers in operations overseas. This means the Guard
does not have the equipment it needs to respond to crises here. This
problem was exemplified during Katrina when the Guard stated that its
communications equipment had been abroad and, therefore, it was unable
to operate effectively in the aftermath of that disaster.
Another impact that we all hear about is the condition of National
Guard equipment. Their equipment has been sent overseas and left
overseas. Their equipment is also being used intensively in these
operations. We have to restore and rehabilitate the National Guard
equipment also. They have several missions. One critical mission is not
only homeland security but preparedness for natural disasters and
consequent management.
This week, Wednesday, the other body will release a report on
Katrina. I am interested to see what it will say in terms of the
National Guard's ability to respond, their equipment, the fact that
they have been tasked to go overseas, personnel and equipment. But we
have to remind ourselves that we can't neglect the Guard also. These
reports, the GAO reports particularly, should have us thinking
seriously about what we must do today. Again, it comes down to
priorities. Secretary Rumsfeld is right about the fact that our troops
are performing magnificently well. They are superb professionals doing
a remarkable job. But in order to keep that edge, they have to have the
equipment and the support to be the best they are.
Secretary Rumsfeld says that Perry report and another report by Andy
Krepenevich, which the Pentagon paid for, were looking at all material
when they found that the military was strained. We are not looking at
all material. We are looking today at what we believe, based upon
review of the budget, based upon discussions with military personnel,
is the condition of this equipment, and the need exists to fix it. We
do have the finest fighting force in the world, but we have to make
sure it has the finest equipment in the world.
Secretary Perry made the following recommendation at the conclusion
of his report:
In order to restore the health of U.S. ground forces in the
wake of Iraq, the nation must step up and invest substantial
resources to reset, recapitalize, and modernize the force . .
. Restoring the health of both services is not a matter of
simply returning them to the status quo; it is a matter of
that they are organized, trained, equipped, and restored to
meet the full range of traditional and nontraditional
challenges in the future.
Next year alone the Army needs about $13.6 billion and the Marine
Corps needs about $7.5 billion for reset and recap, as they call it, of
their equipment. This was not included in the President's budget
request. If it is not paid for with supplemental funding, the troops
will have to go without, which we can all agree is not acceptable.
Nothing makes our troops more vulnerable or lowers morale more rapidly
than working with inadequate equipment. If the $20 billion reset and
recap bill for this year alone is paid for with supplemental funding,
this will add directly to our deficit. I believe with the growing size
of this deficit, we should not add to it, that we should do what we can
to try to prevent increased deficits.
This is a time for Americans to come forward to share in the
sacrifice of our men and women overseas. Particularly when it comes to
a tax proposal that benefits the wealthiest Americans, I think we would
be more than willing to do so, knowing that these funds could be used
directly for the welfare of our soldiers in the field and for the
security of the United States.
Our men and women have volunteered to risk their lives. I believe we
have to risk perhaps a little political capital and instead of
providing these tax cuts to the very wealthiest Americans, provide a
dividend to our soldiers and marines in the form of better equipment.
Fifty billion in funding retained from not extending capital gains cuts
and dividends cuts could pay for this. That is the essence of my
instruction.
It is one thing to stand on this floor as a huge majority and say: We
understand our troops need $50 billion to rehabilitate their equipment.
It is something else to stand up and make a tough choice, set a
priority, pay for it. My instruction will do that.
I yield the floor.
Mr. BAUCUS. Mr. President, people call Montana the ``big sky'' State.
Standing on the top of Mount Sentinel--the backdrop of the University
of Montana--on a clear day, a person can see nearly 50 miles in almost
every direction. I might say that at the top of Lone Mountain in Big
Sky, MT, you can see the Tetons in Wyoming. Back at Mount Sentinel,
which many of us climb from time to time, at the foot of it a professor
is studying a horizon that stretches much farther than 50 miles.
Professor Dan Reisenfeld is one of the key astrophysicists working on a
mission to map and study the edge of the solar system.
Professor Reisenfeld is busy playing a part in the design of the
interstellar boundary explorer, or I-BEX, an instrument that uses a
large-aperture camera to detect high-energy particles coming from the
edge of the solar system.
What does this mean? If I-BEX is successful at gathering information
about the boundaries of the solar system, this will help companies that
build satellites orbiting the Earth to predict solar storms. Solar
storms can disrupt a satellite's operation and even cause irreparable
damage.
Here on Earth, that means that emergency communications equipment
would be able to function without the fear of interruption. And global
communications can be more seamless.
[[Page S1097]]
Some of the most important scientific research is being done at
universities across Montana and across the country. This research
covers the gamut from biotechnology to stem cell research, to cutting-
edge computer science. But institutions across the world are catching
up.
In January, I visited India's Institute of Technology in Delhi.
Eager, young engineering students are plotting for a better tomorrow in
their country and the world. India, similar to many other developing
countries, has made significant investments in education over the past
several years. India produces 12 percent of the total global supply of
university graduates. This percentage is increasing. China is now
second only to the United States in the number of researchers in its
workforce. According to the World Bank's most recent statistics, since
1985, China has seen an almost 400-percent increase in its per capita
education spending.
While China, India, and other developing nations may still have a
long way to go, they are training workers for a new world.
That takes me back to Professor Reisenfeld at the University of
Montana. The University of Montana, similar to most colleges and
universities across the country, is a tax-exempt organization. Tax-
exempt universities rely in large part on tax deductible charitable
contributions from alumni, private foundations, and businesses.
Legislative proposals that encourage more giving to charity help
provide scholarships, build science centers, and hire new faculty to do
cutting-edge research. In large part, charitable donations from the
private sector--business and individuals--help America keep its
competitive edge. There is no doubt about that, Mr. President. Our
universities are a very key, integral part in America's R&D and in
enhancing our country's competitiveness.
The Senate-passed tax reconciliation before us includes several
incentives to encourage charitable giving. One of the most important
incentives for charitable giving included in the Senate-passed bill is
the IRA rollover provision. According to the American Council on
Education, the IRA rollover provision is supported by close to 2,000
colleges and universities across the country. The provision promises to
be an important tool for planned giving--a staple of university
fundraising.
In addition, the IRA rollover represents a significant simplification
over current law. Let me explain.
The IRA rollover provision allows older, financially secure donors to
seamlessly transfer amounts in their IRA to their favorite charity,
without first recognizing the IRA into income.
Under current law, taxpayers who want to donate their IRAs to charity
must first take the amount into income. This can cause a huge
disincentive to give if the amount of the IRA exceeds the donors'
adjusted gross income limitation, for example.
In some cases, donors are forced to incur income for tax purposes for
amounts the donor has given to charity. This makes no sense. The law
should encourage taxpayers to give to charity.
For example, a taxpayer with an adjusted gross income of $40,000 and
an IRA worth about $100,000, is forced to take that full $100,000 into
income prior to making a gift to charity.
As a result, this taxpayer is considered to have $140,000 in income,
for tax purposes--even though the taxpayer is giving $100,000 away.
Because taxpayers are subject to adjusted gross income limitations,
even if the donor gives the entire $100,000 in the IRA away to charity,
the taxpayer can only deduct up to half of adjusted gross income--in
this example, $70,000.
In short, under current law, this taxpayer is forced to recognize
$30,000 more in taxable income, even though the IRA is going entirely
to charity. We should not penalize charitable giving.
The IRA rollover provision corrects this problem by simply
disregarding from income amounts in a donor's IRA given to charity.
This proposal will have a fundamental effect on the amount of money
contributed to charity. Currently, there are more than $2.5 trillion
held in IRAs. If 1 percent of the assets currently held in IRAs were
donated to charity, that would mean an additional $25 billion would go
to benefit the type of research conducted by Professor Reisenfeld at
the University of Montana. And money would also go to scholarships for
the students working side by side with Professor Reisenfeld in his
classroom.
The House bill does not include these new charitable giving
incentives. Mr. President, the upcoming conference will highlight the
priorities of each body. We include this provision; the House does not.
It is unclear at this point whether there will be enough revenue to
extend capital gains and dividend tax treatment beyond the current law,
which we all know doesn't expire until January 1, 2009, and also
include the important charitable incentives included in the Senate-
passed bill.
I hope that the conference committee makes charities and our future
scientists its priority.
Mr. President, I want to discuss the importance of extending the R&D
development tax credit for 2 years.
This is one of the key issues for conference. The Senate passed a 2-
year extension of the revised and improved R&D credit, but the House
only passed 1 year.
I am hopeful that 2 years will be retained in conference, as this tax
incentive is essential for U.S. businesses in our global economy.
Businesses depend on it. They need to know it is there. Predictability
is important.
I have consistently discussed the need for America to maintain its
competitive edge. To do that, we must cater to our strength:
innovation.
Let me state that during the almost 2 weeks I was in Asia, China, and
India in January meeting with business leaders and public officials,
one thing became clear; that is, sure, there is a rising Chinese and
Indian challenge, just as other countries challenge the United States,
but they constantly told us that in the private sector the one
advantage America still has is innovation, creativity. Over and over
again I heard that. I hope that lasts. I hope it lasts a long time. We
know people in other countries are working very hard; they are
aggressive and hungry and they are going to do all they can to be as
creative--if not more so--as we are in the United States. But that is
the one edge we have currently, and we must do our utmost to make sure
that lasts.
Foreign direct investment, including research and development, is
shifting heavily toward China and India. The competition for qualified
researchers has increased markedly.
On my recent trips to China and India, people constantly told me, as
I have said, that the one thing they admire most about America is our
innovation. We must foster R&D, and extending this vital credit for 2
years would help maintain that focus.
Every morning we hear news of some new product or discovery that
promises to make our jobs easier and our lives better. For example,
between 2002 and 2003, the annual number of cancer deaths decreased for
the first time in 70 years. Unfortunately, for women, it rose slightly,
but the annual number of cancer deaths has decreased. One reason for
that was better detection and treatment. That is a direct result of
American technological innovations, and those result from R&D.
Since 1981, when the research and development credit was first
enacted, the Federal Government has been a partner in R&D. And we
contribute to this effort as a society because of the benefits to
society from additional research spending. It is a societal effort to
get a societal benefit.
Congress clearly believes that the R&D credit is an effective policy
instrument. One of the major limitations of the credit, however, is its
temporary nature.
As the Electronic Industries Association wrote:
An extension of the credit that goes beyond the end of this
year will also help diminish the uncertainty for companies
regarding the availability of the credit.
The organization goes on to say:
The yearly fight to ensure that the credit is available for
costly and high-risk research done in the United States can
cause companies to discount the credit's long-term value and
reduce its benefit to the economy.
An analysis by the Joint Committee on Taxation found:
A credit of longer duration may more successfully induce
additional research that would a temporary credit, even if
the temporary credit is periodically renewed.
[[Page S1098]]
U.S. workers who engage in R&D activities benefit from some of the
most intellectually stimulating, high-paying, high-skilled jobs in the
economy. My own State of Montana is an excellent example of this
economic activity.
During the 1990s, about 400 establishments provided high technology
services, at an average private wage of about $35,000 a year. These
jobs paid nearly 80 percent more than the average private-sector wage
of less than $20,000 per year during the same time. Many of these jobs
would never have been created without the assistance of the R&D credit.
The R&D tax credit is vital to the economic development of our
country. It is very important to American businesses. It is very
important to American workers. It is important to help America maintain
our competitive edge.
I urge my colleagues to support a 2-year extension of the R&D credit.
I hope you will join me in pressing our House colleagues to accept this
Senate provision.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, what a difference 5 years makes. On March
21, 2001, the Finance Committee conducted a hearing entitled ``Budget
Surpluses and Debt Reduction.'' When we held that hearing, the Office
of Management and Budget projected a surplus of about $5.6 trillion
over the next 10 years. A lot has changed since then.
At the end of this past December, Treasury Secretary Snow sent us
letters asking us to raise the debt ceiling for the fourth time in the
last 4 years. The Government is now seeking to raise the debt ceiling
by $781 billion. This is on top of a $450 billion increase in 2002, a
record $984 billion increase in 2003, and an $800 billion increase in
2004. With the latest debt limit increase, the Government will have
raised the debt ceiling by $3 trillion in just 4 years. Remember, 5
years ago, OMB projected a surplus of about $5.6 trillion for the
following 10 years.
Something needs to change. We have a serious problem with our Federal
budget. For the current year, the administration's budget projects a
deficit of $423 billion. That would be the highest deficit in the
history of the country. That deficit would equal 3.2 percent of the
entire economy. While that percentage is not a record, it is far too
high, with the baby boom generation about to retire just around the
corner. The retirement of this large generation will dramatically raise
the costs of Social Security, Medicare, and Medicaid. Their retirement
will put enormous pressures on the budget.
We should rather be entering this stressful period with a balanced
budget. We should be paying down the debt. We should be getting ready.
We should not be running record budget deficits. We need to change
course. We need to return to the policies and procedures that helped
reduce that $5.6 trillion surplus.
One of those procedures was the pay-as-you-go rule. That rule made it
difficult for Congress to enact new spending or tax cuts without paying
for them. That simple rule had a powerful effect, but that rule ended a
few years ago. Congress replaced it with a newer, toothless version,
and we have paid the price in higher deficits and debt. Congress must
reinstate the original pay-go rule.
Beginning in 1990, we also enacted policies to reduce deficits and
debt. First, following a budget summit, Congress enacted the deficit
reduction package of 1990. Then, in 1993, in the first year of the
Clinton administration, we narrowly enacted a $500 billion deficit
reduction package. What happened? Long-term interest rates dropped.
Economic growth ensued. The deficit came down.
Finally, both parties worked together again in 1997 and enacted
another deficit reduction package. That package was intended to balance
the budget by 2002.
But economic growth was strong. These years were a part of the
longest peacetime economic expansion in American history. The
Government balanced its budget in 1998, earlier than expected, and then
the Government balanced the budget even without using Social Security
surpluses. It is incredible, if you stop and think about it.
That set the stage for the projections of 2001, with a $5.6 trillion
surplus for 10 years. But now we are projecting huge deficits and debt
for both the long term and the near term. The time has come for leaders
of both parties to work together to achieve another agreement to reduce
our deficits. But in order to be successful, we need to put everything
on the table, and I mean everything. We need to put all spending, not
just entitlement spending, on the table. We need to put all corporate
tax loopholes and tax breaks for special interests on the table, and we
need to put the $350 billion yearly tax gap between revenues owed and
revenues collected on the table.
I don't know the answers, but I do know we cannot keep on going as we
are. Something has to change. We need to come together to reduce
Federal deficits. The task is clear, and I can only hope and pray all
our leaders will take up the task.
Mr. President, in Proverbs, King Solomon begins by offering words of
encouragement to the Israelites to embrace learning:
Let the wise hear and gain in learning, and the discerning
acquire skill.
A little later in the passage Solomon admonishes:
Fools despise learning and wisdom.
I hope the upcoming conference committee will take this proverb to
heart. It is past time for this country to start taking education
seriously again, and be ready to make investments in our children's
future now. Delay would be foolish.
The Senate-passed bill takes a step in the right direction by
including a provision to eliminate the barriers in the Tax Code to the
charitable giving of books to schools, libraries, universities, and
literacy programs. Educational institutions and literacy programs are
beset by budget cuts and continued challenges to our Nation's
commitment to literacy. Two-thirds of American classrooms have fewer
than 50 children's books, and almost 60 percent of childcare centers
buy less than 1 book per child a year.
This is not just an issue in the classroom. Almost 12 million
children living below the poverty level in the United States today are
growing up with minimal access to books. According to First Book, a
nonprofit that focuses on child literacy, more than 60 percent of low-
income families have no children's books in their home, and more than
80 percent of programs serving children in need have no age-appropriate
books or other printed materials.
In my home State, as in many other States, there is a real need. In
2003, according to the Montana State Library Association, the Montana
State library system was a victim of a 26-percent budget cut. These
reductions mean less money for local libraries, and these reductions
mean cuts in State subsidies that funded book purchases.
Large-scale book donations are crucial to these libraries, and these
donations also greatly assist adult literacy efforts. Programs such as
the Montana Adult Basic and Literacy Education, or ABLE, serve adults
who lack sufficient mastery of basic skills to function in society, a
high school diploma, or basic English skills. ABLE is meeting real
needs. According to the State agency in charge of adult literacy in
Montana, nearly 75,000 adults in Montana do not have a high school
diploma or GED.
Because of the tremendous need for books in Montana and across the
country, I filed an amendment in the Finance Committee with Senator
Hatch to include incentives for book donations in the Senate-passed
bill. Here is how it works.
Current law provides special tax incentives for gifts of property
including books to certain organizations. Current law, however,
requires the donor to make the gift targeted solely to the ill, the
needy, or infants, categorized as children under the age of 18.
Unfortunately, books donated directly to educational programs at
public libraries and universities are not eligible for that tax
deduction. Why? Because they don't exclusively serve the ill, the
needy, or infants.
In addition to the exclusion of those institutions, donations are
sometimes
[[Page S1099]]
discouraged when the differences in educational and commercial market
elude the IRS when valuing the donation. If book donations do not
qualify for the enhanced deduction, the value of the deduction for
charitable giving is no more than what they would give if they merely
threw them away. As a result, it is often more economical for
publishers to truck these books to a dump than it is to distribute them
to needy schools and libraries, especially given the manpower and
postage costs of determining worthy donees and shipping books.
In the Senate-passed bill, we have provided legislative language to
ensure that public libraries, universities, and literacy programs are
eligible with enhanced deductions that already exist in the Tax Code
for other kinds of charitable donations.
To protect against publishers making unwanted donations of dated
materials, the provision includes a requirement that organizations
certify the materials are suitable and appropriate for their
educational programs.
In addition to organizations in Montana such as ABLE, many gulf area
government agencies that are in desperate need after Hurricanes Katrina
and Rita have written us petitioning for this change. We have heard
from the Mississippi Department of Education, Louisiana-Mississippi
school and library systems and library associations, as well as the
Texas Library Association and Mississippi's Barksdale Reading
Institute. Numerous national educational organizations have written us,
including the American Library Association, the Education Industry
Association, and the Association of Educational Publishers.
The lack of access to books poses the greatest barrier to literacy.
We shouldn't allow books to be taken to the landfill because of an
unintended obstacle in the Tax Code, particularly when one considers
the massive loss of books along the gulf coast.
I might add, I was down at the gulf coast. I was standing next to a
library that was obliterated on the gulf. There were books strewn open,
and you could see where a cake of mud was left after the water receded
and we were standing on ruined books. You won't believe this, but I
reached down to pick up a book and look at it to see what it was, and
out of all of the books, guess what its title was. ``A Perfect Storm.''
I couldn't believe it. It was pure happenstance, pure coincidence, but
I can tell you that having visited the gulf, they need books.
As students and families make the slow return to the gulf and an
incredible effort to rebuild their communities, it is necessary to
remember that equally important to the rebuilding of these important
institutions is the need to restock them with sufficient numbers of
books and quality education materials.
As First Lady Laura Bush said on September 24 last year, it is our
duty to ``rebuild these schools on the Mississippi coast and in New
Orleans and make sure the libraries are built better and stocked even
better than they were before.''
The book provision in the Senate-passed bill would help restock
schools from the gulf to Montana and across the country. As the First
Lady admonished, this is our duty. I hope the conference committee
agrees.
Mr. President, continuing in a series of statements prefacing the
conference and other measures that might be coming up later this year,
I wish to spend a moment on health savings accounts.
High-deductible health plans and health savings accounts, otherwise
known as HSAs, have become the centerpiece of the administration's
effort to reform the health care system. In fact, the proposed budget
would spend an additional $156 billion over 10 years to encourage more
Americans to choose these plans and accounts.
I am concerned that high-deductible plans will do more harm than
good, and the billions of dollars the President wants to spend on
beefing up the limits on HSAs, health savings accounts, will not
benefit those who need coverage the most and can least afford it. That
is because HSAs favor the healthy and they favor the wealthy. As
healthy insureds join these arrangements, the average cost for those
remaining in comprehensive plans will increase, and that will make
comprehensive plans less affordable for those who need coverage.
Do HSAs favor those who are healthy and can afford something? Let me
quote from the High-Deductible Health Plans and Health Savings Accounts
Worksheet, found on the Federal Government's Office of Personnel
Management Web site. This worksheet is designed to help Federal
employees decide whether to use plans such as these which are now part
of the Federal employees health benefit plan. Step three of this
worksheet reminds us that preventive care is not subject to the high
deductible. Then it goes on to say:
Absent other health care needs, if you contribute a higher
amount to your HSA, you will get a higher tax deduction plus
a higher balance in your HSA to use for future expenses.
Since your out-of-pocket costs before plan benefits begin
also defines the maximum amount of personal, tax-deductible
contributions you can make, contributing a larger amount
isn't necessarily bad. If you use a relatively low amount of
health care and you can afford to make the maximum
contribution, you may be attracted to these aspects of HDHPs
with HSAs.
That is high-deductible health plans and the health savings account.
This is what it says in the Federal brochure for Federal employees: If
you use a relatively low amount of health care and you can afford to
make the maximum contribution, you may be attracted to it.
If we enacted the higher HSA contribution limit proposed by the
President's budget, the attraction of HSAs for those who are healthy
and can afford to contribute the maximum would only grow stronger. Why?
Because that statement was written before the proposal that the
administration has before us, to dramatically increase the deductibles
and eligibilities of those plans which I think are basically investment
vehicles, not health vehicles.
Billie Holiday sang, ``Them that's got shall get, them that's not
shall lose''. That's a pretty good description of the effect of
expanding HSAs on our health care system.
Some may argue that this preference of healthy, well-to-do taxpayers
for HSAs would not be a problem if we just put everyone into a high-
deductible plan and eliminated more comprehensive arrangements.
Eliminating choice takes care of adverse selection. If there were no
choice, and therefore no adverse selection, would expanding HSAs be a
cost-effective solution? Would tax dollars spent on expanding HSAs go
to increase coverage and control costs?
Let us say, for the sake of discussion, that we force everyone,
healthy or not, into a high-deductible health plan with a $1,500
deductible. And let's go further, and put $1,500 into an HSA for
everyone, so ability to contribute is not a factor. Wouldn't that
address my concern that the President wants to spend money on the
healthy and wealthy instead of focusing on those who need help most?
The answer is, no, not as HSAs currently operate. And certainly not
with the President's proposed increase in the contribution limit.
To illustrate my concerns, let's consider two taxpayers--Jane and
John, both 30 years old. Jane is healthy. John has a chronic condition
that requires him to take medications every day and occasionally pay a
midnight visit to the emergency room.
Every year, $1,500 is deposited to Jane and to John's HSA accounts.
Each year, John must withdraw his $1,500 contribution to pay out-of-
pocket medical expenses. Jane only has to withdraw about $500 a year,
leaving the other $1,000 to accumulate for retirement.
Over the next 35 years, if Jane can earn 5 percent investment return,
she will accumulate an HSA account balance of more than $90,000. If the
President's higher contribution limits were in place and Jane could
afford to contribute the maximum to her HSA, she could have more than
$400,000 in her HSA at retirement. Because he had to use his HSA
contributions to pay medical expenses, John will retire with a zero
balance in his HSA.
In other words, the President's health tax proposals may or may not
expand health coverage and will do little to control costs. But they
will definitely create retirement savings for the healthy.
I am all for retirement savings, but using tax dollars to increase
retirement savings for individuals with low medical expenses is a
strange and ineffective approach to covering the uninsured, and
controlling health care costs. Surely we can do better.
[[Page S1100]]
Mr. President, I am going to stop speaking pretty soon here. I very
much hope Senators come to the floor with motions to instruct because
time is passing. Just because I am speaking, it doesn't mean someone
can't come to the floor. If anybody comes to the floor, I will stop
speaking.
Mr. President, Yale Law School professor Michael Graetz once said:
A tax shelter is a deal done by very smart people, that,
absent tax considerations, would be very stupid.
A GAO study estimated that tax shelters cost the American taxpayer up
to $18 billion a year in lost revenue.
There must be a lot of very smart people out there putting together
some very stupid deals.
We have all heard about some of these deals.
We know them as the Enron scandal, the KPMG scandal, the German SILO
sewer system scandal. The list goes on.
These deals are like the legendary retail scam used by con artists to
cheat cashiers out of extra change. It's called the ``short count.''
Like a tax shelter, it involves smart cons and stupid deals.
There are several steps to the cash register scam. First, the con
artist buys something that costs less than $1, and he gives the cashier
a $10 bill to pay for it. When the cashier hands back the change, the
con artist offers to give back ten $1 bills in exchange for the $10
bill he used to make his original purchase.
Now, the trick is that the con artist must get the cashier to give
back the original $10 bill before he gives up his $1s. Quickly, before
the cashier notices, the con then substitutes the $10 bill the cashier
just handed him for one of the $1 bills. He hands the cashier nine $1
bills and one $10 bill, for a total of $19.
When the cashier notices the con artist gave her too much money, the
con acts surprised.
Because he's such a ``nice guy,'' he offers to give the cashier
another $1 to add to the $19 so the cashier can just give him back a
$20 bill.
The con then leaves the store with a tidy $10 profit, while the poor
cashier is left holding the bag.
When she tries to reconcile her register at the end of the day,
she'll have a gap of $10. She will probably end up paying the $10 out
of her own pocket.
I don't know if you follow that. It's a little complicated, isn't it?
The con artist is a pretty smart guy who took advantage of an
unsuspecting cashier. He took a routine transaction and turned it into
something complicated and stupid. Yet, all those steps, all that
shifting of money back and forth, didn't add one iota of substance to
the transaction.
We call the guy who duped the cashier a con artist. But, we call
lawyers, accountants and financial advisors who get involved in tax
shelters ``tax professionals.''
We call the victim of the ``short count'' scam the cashier. But, we
call the victims of tax shelters ``innocent American taxpayers.''
Individuals who invest in tax shelters to avoid paying their fair
share of taxes shift their tax burden onto the backs of hard-working
Americans who do comply with our tax laws.
The IRS estimates that 85 percent of taxpayers pay the taxes that
they owe. Investors in tax shelters are part of the other 15 percent.
Eighty-five percent of American taxpayers are carrying the tax load
for the noncompliant 15 percent.
This is not right. This is not fair. We cannot allow this to
continue.
We need to finish up the work that we started in the American Jobs
Creation Act. That bill beefed up laws against tax shelters. It
increased penalties for wrongdoers.
We need to pass legislation that will clarify the economic substance
doctrine. Clarifying the economic substance doctrine will put an end to
the erratic and inconsistent court decisions that have determined the
legitimacy of tax shelters.
The economic substance doctrine is a common-law doctrine that courts
use to deny tax benefits on transactions that don't provide a
meaningful change to the taxpayer's economic position other than the
tax benefit itself.
In other words, the doctrine requires that a transaction must have
economic reality and a business purpose apart from the tax
consequences.
The proposed change clarifies how the courts should apply this
doctrine. It doesn't require them to use the doctrine. But if they do
decide to use the economic substance doctrine, the change would give
them standardized criteria to use as litmus tests to decide if a
transaction has any real economic purpose.
The Senate has passed this proposal several times, most recently in
the tax reconciliation bill before us today. But it has never passed in
the House.
We need to stop batting this proposal around. We need to make it into
law.
The economic substance doctrine exposes transactions that use the Tax
Code in an unintended way to avoid paying taxes.
Clever accountants, attorneys, and financial advisers deliberately
manipulate the Tax Code to design and sell abusive transactions. At
first glance, the deals stand up to scrutiny. At first glance, they
appear to comply with the literal language of the Tax Code. They are
very complicated. But when you give the deals the smell test, they give
off a very bad odor. It is clear this is not what the law basically
intended.
You realize that they have no purpose other than to avoid or evade
taxes. They have no real business purpose and no economic reality. They
shift money and paper around using complex arrangements that have no
reason to exist, except to create nonexistent losses or false
deductions.
They are smoke and mirrors, a cleverly designed illusion, to fool the
IRS and to cheat the rest of our Nation's taxpayers, who properly
report their income and pay what they owe.
That's where the economic substance doctrine comes in. Its standards
of economic benefit and business purpose allow the courts to pierce the
facade of legitimacy to determine if a deal has any real economic
substance.
The courts have employed the economic substance doctrine countless
times. But their decisions have been inconsistent.
This is due, in large part, because they lack a specific framework of
guidelines and principles within which to apply the doctrine.
The courts are divided on what to do.
Some look only to the form of the transaction. They limit their
analysis to the four corners of the Tax Code, no matter how crazy the
result.
Others look beyond the form to the substance of the transaction and
consider whether the tax result is consistent with congressional
intent.
It is the role of Congress to pass legislation clarifying the
economic substance doctrine to resolve these inconsistencies and
uncertainties. The legitimacy of a tax transaction in California should
be evaluated in the same way as a transaction in Florida.
Reliance on isolated and diverse judicial decisions does not lead to
effective tax administration. Litigation is expensive both for
taxpayers and the IRS. Tax professionals will shop around for the most
advantageous court case to justify an egregious position. We all know
that there is forum shopping. They are going to go to the judge who is
most lenient.
We need to provide clarity and certainty.
Congress's failure to enact this legislation sends an implied message
that we don't take abusive transactions seriously. Tax professionals
know that we cannot keep all the holes in the dike plugged up by
dealing with each abusive scheme on a piecemeal basis.
With our proposed change, we are not reinventing the wheel. We are
only improving it. The economic substance doctrine has been part of the
fabric of our tax system since the case of Gregory v. Helvering in
1935. It has been around. It has to be consistently applied to minimize
taking advantage of the Tax Code.
Our proposal merely articulates the way many of the circuits have
already applied this longstanding judicial doctrine.
Codification will strengthen this important standard that has been
eroded by conflicting and confusing case law and by the greed of many
practitioners who are willing to overlook it in exchange for profit.
We must give the courts a reliable and consistent standard to use
when considering the economic substance doctrine. Failure to do so
protracts the cat-and-mouse game that taxpayers, the IRS and the courts
have played for years.
You might ask: If passing a law to clarify the economic substance
doctrine will stop this kind of abuse to our
[[Page S1101]]
tax system, why hasn't it happened? That's a very good question.
Unfortunately, there are powerful critics against the proposal,
including the American Bar Association and the Bush administration.
Our legislation provides a framework of consistent and standardized
criteria to apply to the economic substance tests. The courts retain
complete autonomy and flexibility to decide whether or not to use the
doctrine in the first place.
The critics, however, argue that the courts will ``lose flexibility''
to evaluate transactions.
They say that ``an explicit and comprehensive statutory test'' is a
bad thing.
In truth, their position would maintain the status quo. Their
position would keep the law broad and vague. And their position would
perpetuate the same environment that has fostered tax shelters, tax
schemes, and other abusive transactions.
Taxpayers have a right to plan their taxes so that they don't pay
more than they legitimately owe. This legislation is aimed at those
deals that cross the line into manipulation and abuse--not smart tax
planning.
The critics say, unfairly, that the Senate proposal is ``overbroad''
and could cast doubt on ``legitimate tax planning.'' They say that this
provision will be ``ineffective'' because taxpayers will just find a
way to work around it by crafting their deals with apparent business
purpose and economic substance.
But if the legislation is as ``inflexible'' and ``overbroad'' as they
say, how can it possibly leave room for taxpayers to work around it?
The proposal that Chairman Grassley and I included in this tax
reconciliation package provides standardized principles to use as
guidelines to clarify when a transaction is abusive.
It will reduce rogue interpretations of the Tax Code and promote
consistency and certainty instead of the existing confusion.
Critics argue that it promotes uncertainty because there is no clear
line of demarcation between what passes muster and what doesn't.
Ignoring the provision's standardized guidelines, they suggest that the
proposal gives the IRS and the courts too much power--that it provides
opportunities and incentives to find transactions ``abusive at will.''
In reality, it does just the opposite.
And that's exactly why some of the opponents of this measure don't
like it. They want to keep the power and flexibility to design and sell
tax shelters and other transactions that pillage our tax system.
There's an old saying that the best defense is a good offense. That
pretty much sums up the opposition to this proposal. Like the tax
shelters they peddle, their arguments lack substance.
We should not stand idly by as a few con artists peddle their scheme
and take advantage of honest taxpayers. We should plug this loophole in
the law.
We should urge the House to agree to the Senate-passed provision.
I urge my colleagues to work together to get this passed for the
benefit of the American taxpayers, most of whom are honest and decent,
and they are paying their fair share and do not like at all these con
artists making millions and forcing the good, honest, paying taxpayers
to subsidize those con artists and those companies taking advantage of
it.
I yield the floor. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. KYL. Mr. President, I ask unanimous consent that the order for
the quorum call be dispensed with.
The PRESIDING OFFICER (Mr. Burr). Without objection, it is so
ordered.
Mr. KYL. Mr. President, let me respond to the kind invitation of the
ranking member of the Finance Committee, on which I sit, to speak to
the matter that is before us. I appreciate listening to his remarks
about various aspects of the reconciliation tax bill and features
thereof. Let me speak to some of those items as well.
There will be a lot of debate, I suspect, over the next several
hours--much of which has very little to do with the Senate bill--but I
think in anticipation of what is likely to occur in the conference
committee when the Senate bill joins up with the House bill and we
decide what provisions to take from each of those bills and bring back
to our respective bodies.
Clearly, discussion about the capital gains and dividends extension
will be part of that discussion. Let me start with that.
I want to begin by noting that the budget resolution which the
conference reached in April provides reconciliation protection for $70
billion in tax reductions over 5 years with the direction that the
allocations be used to prevent tax-rate increases during the budget
window, which is 2006 to 2010.
Let me repeat that. The instruction that we gave for this budget was
to prevent tax-rate increases during this budget window. If we do not
take action, there will be tax-rate increases during this budget
period.
This, as the President said in his State of the Union speech, would
be both unanticipated and very unwelcomed by the American people.
What exactly do we mean by that?
Talking about capital gains and dividends, what we did back in April
was send a signal to investors that capital gains and dividend tax
rates would be extended through 2010. Investment advisers have been
alerting their clients that in their planning they must consider that
the tax rates have not yet been extended and may, in fact, expire in
2008.
The conference agreement that comes back to our respective bodies
needs to extend these investment tax rates to give these investors
certainty and to give businesses certainty about how they raise funds
to expand their operations.
When Secretary Snow testified before the Finance Committee a week
ago, he said it was his opinion that the investors in the country,
those people who helped create jobs by investing in our businesses, had
already determined that it was likely these tax rates would be
extended.
He said, if we do extend them, which we anticipate doing, that is
built into the market right now. But he said if we should fail to do
so, we could anticipate that the market would react very negatively to
our failure to do so. The reason, of course, is obvious. Investors want
to know what the return on their investment will be 3 or 4 years out.
That is when they will likely turn the asset that will provide the
profit or a deficit for them. They want to know what that return is
likely to be, which means they want to know what the tax rate is.
The tax rates that will expire in 2008 do not tell them what they
need to know.
We have the opportunity to extend those tax rates through 2010 and
prevent an increase from occurring, and that is precisely what we ought
to do.
It is interesting that these particular taxes are very important to
the majority of taxpayers in the country. These are not the so-called
tax cuts for the rich. These are a continuation of existing tax rates
for a majority of tax filers.
More than half of all Americans own stocks, either directly or
through mutual funds. The 2003 marginal rate cut on investment income
worked by giving investors an incentive to put more of their money to
work in the markets. At the lower rates, the tax penalty imposed on the
additional investment earnings, the reward for taking on additional
risk, is smaller than before, and it makes the risk more attractive.
When investors get to keep more of their reward, they are encouraged
to invest more. With more investment, businesses have an easier time
attracting the capital they need to expand, create new goods and
services, and also create new jobs.
It is all part of this additional economic activity that creates this
economic growth.
Americans support the extension of these tax rates.
A recent poll by the Pew Research Center, released on January 24,
found that ``half of Americans support extending reductions in taxes on
investment income such as capital gains and profits from stock
dividends, while 35 percent believe these tax cuts should not be
extended.''
I intend, by the way, to support extending the tax cuts by 34
percent, 35 percent. The reason is very apparent--
[[Page S1102]]
because it benefits millions of taxpayers.
These lower rates have helped millions more taxpayers than other
popular tax provisions; for example, the alternative minimum tax relief
that we want to enact as well.
Let me do a comparison between the AMT, which both Senator Baucus and
I would like to see repealed, how many people would benefit from our
relief from the alternative minimum tax versus how many would gain
relief from an extension of current rates on capital gains and
dividends.
It turns out, of all taxpayers that pay the AMT--these are figures
from the 2003 tax year, which is the last year--9.7 percent had
adjusted gross incomes under $100,000. Meanwhile, of all taxpayers
reporting capital gains in 2003, 67.5 percent had adjusted gross
incomes under $100,000. Of those reporting dividend income in that
year, more than 70 percent had adjusted gross incomes under $100,000.
Nationwide, fewer than 8 million filers would be helped by the AMT
hold-harmless provisions, while nearly 20 million filers would be
helped by the dividend relief that we would extend, and just over 7
million filers would be helped by the relief from capital gains.
Here is the bottom line: A lot of Americans--over half--are now
invested in the stock market. A lot of people will receive benefits if
we continue the current tax rates for dividends and capital gains. Over
20 million of these filers under $100,000 will have dividend income and
over 7 million will have capital gains income. That is compared to
those taxpayers whom we will help under the AMT relief that we provide
of about 8 million filers.
The bottom line is, other than the wealthy in our country, we are
talking about helping people with both kinds of relief, but far more
will benefit from the capital gains relief, and especially the dividend
relief, than will benefit from the AMT relief. Some of our colleagues
understand that and say: We understand in terms of pure numbers there
are a lot more taxpayers, especially in the lower income categories,
who will benefit from dividends and capital gains relief than AMT
relief.
What about the fact that maybe they do not get as much relief, that
the dollar amount is not as much? There is a myth floating around that
it is actually very low. In fact, there is something being quoted as
IRS statistics--and they are not IRS statistics. They are from a report
of a group called the Center on Budget and Policy Priorities and also
the Brookings Institute Tax Policy Center, which claims IRS data shows
the taxpayers with income of $50,000 or less only receive a benefit of
$11 per return from the lower rates on dividends and capital gains, and
the benefit for taxpayers with income under $75,000 would only be $77
per return.
That is just plain wrong. First of all, the data is not from IRS.
What is the data from IRS showing? Mr. President, I ask unanimous
consent a couple of charts be printed in the Record after these remarks
to show what I am talking about.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. KYL. The IRS statistics--and this comes specifically from table
3.6, 2003, of a report called ``Individual Income Tax Returns, Returns
with Modified Taxable Income: Taxable Income and Tax Classified by Each
Rate at which Tax Was Computed and by Marital Status.'' If you look
under that table, what you will find is that based upon actual IRS data
estimated from 2003, the people who had taxable income of less than
$50,000 on a per return basis, saved about $171 each. In 2008, the tax
rate is reduced from 5 percent to zero for these taxpayers. Based upon
the same data, that allows the rate to expire, which would result in a
$341 tax increase on each of the almost 10 million taxpayers in these
two lowest income tax brackets if we do not extend this tax rate at its
current level.
What are we saying? If we do not take action and extend this current
rate, what we are going to have for these lower income tax payers,
those who make $50,000 or less, is they will see a $341 tax increase on
each of those almost 10 million taxpayers. That is a far cry from this
figure of $11, which is simply wrong.
The bottom line is, not only will more taxpayers receive relief under
the extension of the capital gains and dividends part of what we hope
will be the conference report than those who receive AMT relief, it
will be substantial relief. If we allow these rates to expire, there is
going to be a substantial tax increase on these people in the lowest
brackets, those making $50,000 and below. They will see a $341 tax
increase. I would call that real money. I call that amount of people
real people.
I mentioned before the people making $100,000 or less. What about
those making less than that? If you look at those with adjusted gross
incomes of $30,000, for example, with regard to dividends, 19.2 percent
of the people reporting dividends were in that income category. With
respect to capital gains, likewise, at that lower adjusted gross income
of $30,000, 18.5 percent of those reporting long-term capital gains
were in that category.
The bottom line is, whether you are talking about less than $100,000,
less than $30,000--I mentioned the amount of money received from those
making less than $50,000--whatever category you are looking at, you
better extend the current rates or there will be millions and millions
of these low-income taxpayers receiving a big hit on their taxes.
Let me be very plain. We are not talking about additional cuts in
taxes. What we are talking about is just keeping the existing tax
rates. If we do not extend them, millions of low-income Americans are
going to see a huge increase in their tax bill; one that is
unanticipated, unappreciated. We cannot afford to allow that to happen.
I hope we could agree, those who agree there should be relief from
the alternative minimum tax, that we also need to continue to provide
the relief from the dividends in capital gains taxes as well.
In addition to talking about this in terms of American families, it
is important to understand what this has done for our economy. The fact
is, all taxpayers, all workers in this country, all people who have
jobs, all benefit from the economic expansion that has occurred largely
as a result of the tax policies the President has proposed and to which
Congress has agreed. It would be folly to allow those tax policies to
expire.
What kind of impact have these tax policies had on the gross domestic
product? Whether you embrace these lower rates or not, you have to
acknowledge they have helped our economy, which grew at a 4.1-percent
annual rate in the third quarter of last year, the 10th straight
quarter in which gross domestic production grew at a rate above 3
percent. It is interesting to compare this with the European economies.
For 2005, the Euro area gross domestic production grew at only 1.4
percent. Economists predict for 2006 it will be about 1.9 percent. The
United States, by contrast, is expected to grow at 3.6 percent for
2006, according to the CBO.
What does this mean, or how does the gross domestic production
actually increase? You have to have business investment, primarily
small businesses. Interestingly, business investment fell in the nine
consecutive quarters before the 2003 tax rate bill was passed. For nine
consecutive quarters, businesses were not investing. Investment was
declining. So in 2003 we passed these additional tax rates. What
happened was cutting taxes on capital helped reverse the decline. In
the 11 consecutive quarters since these tax cuts, business investment
measured by nonresidential fixed investment has increased each and
every quarter. In fact, business investment has continued to increase
even after the expiration of the temporary bonus depreciation for
business investments expire.
Interestingly, it has not just been businesses that have seen
additional revenue as a result of the investment, but there has been
job creation from these tax cuts. But, ironically, these tax cuts--or
paradoxically, I could say--have also provided increased revenues to
the Federal Treasury. According to a recent report by the CBO, capital
gains revenue is 16 times greater than it was forecast to be.
Government estimators predicted that the reduction in capital gains
rates enacted in 2003 would cost the Federal Government $27 billion in
lost revenues for 2004. CBO's most recent report shows
[[Page S1103]]
that the lower rates actually brought in an additional $26 billion in
revenue. Instead of costing $27 billion, the lower rates actually made
$26 billion for the Treasury.
Why does that happen? It is fairly obvious. You are holding assets,
and if you sell them, it will cost you 20 percent in taxes, 20 percent
of the gain. That is a pretty stiff tax. You do not want to do that.
Congress comes along and says: We will reduce that down to 15 percent.
Small businesses, in particular, say: Great; in that event, we will pay
less in taxes, 25 percent less. We will go ahead and sell the asset and
only pay 15 percent.
So more people do that than were expected to sell assets so even at a
lower rate, because of the increase in volume, the Government ends up
making a lot more money.
Think of it this way. You are a department store. When you go to the
department store and there is a big sale over the week, how can the
department store make any money? It is simple. They reduce the price
they sell their product for, but there is so much more of the product
sold that they more than make up for the reduced cost by the volume of
sales.
It is the same thing that occurs here. Lower the rate a little bit,
but that attracts people to sell their assets, to take advantage of
that lower rate. And that increased volume in sales more than makes up
for the reduction in the rate. That is why you have to be a little
careful with the CBO projections about the ``cost'' to the Federal
Government of lower taxes. Frequently, the cost ends up not to be a
cost at all but an increase in actual revenues. That is precisely what
has been occurring here.
It is interesting that according to the same CBO report, the
Government took in $60 billion in capital gains taxes in fiscal year
2004, which is a 20-percent increase from 2003. And it is projected
that capital gains taxes coming into the Treasury increased another 25
percent in 2005--up $75 billion. That is real money no matter how you
calculate it.
We cannot say for certain that the lower tax rates will always
continue to make revenue for the Treasury in the future, but looking
back we can sure conclude that these investment tax rates have thus far
been nothing but good news for the Treasury. That means good news for
all of us because instead of the Government going further into a
deficit situation, this increased revenue is helping us to keep the
deficit more under control.
It is interesting that overall revenues are up in 2005. The Treasury
collected $2.15 trillion in revenues, which is the highest level of
Federal receipts in history, and it is $274 billion more than collected
in the previous year. Remember, this is with lower tax rates. Yet we
still took in $274 billion more than collected the year before. That is
a 14.6-percent increase overall. CBO has projected individual revenues
for 2006 will be up 8.2 percent, greater than they were from 2005, and
that corporate receipts will be 8.6 percent higher. Revenues for
December 2005, just to take that month, were 12 percent higher than
they were for December 2004. Corporate receipts were up about 33
percent, and receipts from individual income tax payments were up about
5 percent.
This is the biggest reason we should not in any sense be accepting
arguments that somehow we need to have what some people around here
call pay-go, where you take the CBO estimates of how much a tax
reduction is going to cost the Treasury, and somehow you make that up
in additional revenue. So that net, you are not reducing taxes on the
taxpayers at all.
What is the point of a tax reduction if it is not a real tax
reduction; if you are just taking money out of one pocket but then you
have to add it from the other pocket? It makes no sense. In fact, it is
just reversed. We should not be talking about the cost to the Treasury;
we should be talking about the cost to the taxpayers. They are the ones
who have to pay. It is their hard-earned money. We cannot spend a dime
in Congress that somebody did not work very hard to earn to send back
to Washington in the form of taxes.
When we talk about increasing taxes or decreasing taxes or keeping
the level of the taxes where they are right now, and we calculate the
cost to the Federal Treasury, I say forget that. I am worried about the
cost on my constituents. They are the ones who will invest. They are
the ones who will hire more people if we let them keep more money. And
that means more people will have jobs. If people have jobs, they will
pay more in taxes and the Government will continue to collect more
revenue.
The statistics I have quoted demonstrate that a sensible tax policy,
one which doesn't set the rates too high, will actually end up bringing
more revenue into the Federal Treasury than one which tries to set the
rates too high. That is why since pay-go does nothing about the
spending side of the equation, which is what is driving up the
deficit--because our big entitlement programs: Medicare, Medicaid, and
Social Security are not affected by that. It does nothing to affect
them whatsoever. The only thing it does is require if we have a tax
reduction we have to have a tax increase somewhere else so it comes out
even. That does not do the economy any good at all.
The bottom line is the provisions of the bill before the Senate, as
well as those that are likely to come back to the Senate from
conference, will be helpful to individual taxpayers in the lower income
brackets and helpful to families who create small businesses, who have
small businesses that create jobs. They will be helpful to the economy
as a whole and even helpful to the Federal Treasury.
I will refer a little bit to this argument made by some, including my
good friend from Montana, that we cannot afford to do both the 1-year
fix for AMT; that is to say, have most people not pay the unanticipated
taxes under the alternative minimum tax, and also the relief we would
provide by continuing the existing tax rates for capital gains and
dividends. The fact of the matter is, we can, and we will, do both.
Within the next 3 or 4 weeks, we will have done both, and the country
will be better off for it.
There is about $30 billion that is required to provide the so-called
fix for the alternative minimum tax to make sure that at least most
taxpayers are not going to be stunned by that tax this year. I support
that. The AMT is a feature of our Tax Code that has gone awry. As I
said, both Senator Baucus and I have sponsored legislation to do away
with it. Its intended purpose was to make sure very wealthy people
could not zero out their tax liability by claiming what are, in fact,
legitimate deductions and exemptions and credits. But they were being
used to the point that some people paid virtually no taxes or no taxes.
Congress decided: Well, everybody has to pay something, everybody
except people at the low income.
But because it was not indexed for inflation, and, as it turns out,
it is almost impossible to target just the ``rich,'' the AMT has gone
awry. It has crept into the middle class. If we do not stop it, before
long it is going to affect virtually all taxpayers.
So what the bill provides is an increased exemption for 2006 so that
the exemptions do not drop back to pre-2001 levels. It also prevents
certain credits from being eroded by the AMT. The net result is that
most people should not have to worry about the AMT tax bill for this
year.
But the bottom line is, we can do that and also provide the relief
for capital gains and dividends, according to the calculation of the
``costs'' for that relief. In other words, extending for 2 more years
the existing rates for capital gains and dividends, that is a little
more than $20 billion.
So when Congress passed the $70 billion in relief in the budget last
April, and asked the committees to come back with their reconciliation
in taxes for that amount, we wanted to make sure no one would pay
higher taxes during this 5-year budget window. We can do that by
extending the same rate for capital gains and dividends--that is about
$20 billion--providing this year of relief from the alternative minimum
tax--that is about $30 billion--and there is still something like $16
billion or $20 billion, about $20 billion left over for other
provisions which we also want to take care of.
I am also going to discuss some of these other provisions because I
think it is very important for anybody who might think about voting
against this bill to appreciate what they would be voting against.
First, they would be voting against the savers' credit. The savers'
credit is
[[Page S1104]]
a nonrefundable tax credit that encourages low-income taxpayers to make
contributions to an employer-provided retirement savings plan or an
IRA. This tax reconciliation bill extends that credit through 2009. It
is currently scheduled to expire at the end of this year. Nationwide,
almost 5.5 million filers take advantage of this tax credit. By the
way, almost 100,000 of those filers are in my State of Arizona.
How about small business expensing? Under current law, small
businesses can deduct the cost of qualified investments in the first
year they are made, up to $100,000, indexed for inflation. After 2007,
this amount will drop back to $25,000. What our bill does is to extend
the increased amount through 2009. Keeping the increased amount enables
small businesses to continue to invest and grow.
Now, if you vote against this bill, here is something else you will
be voting against: the above-the-line deduction for college tuition
expenses. Under current law, the provision that allows a taxpayer to
take an above-the-line deduction for college tuition costs expired at
the end of 2005. It is done. The full deduction is available for joint
filers with income under $130,000 and is phased down for higher income
filers.
The tax reconciliation bill, the bill that is before us, would extend
it through 2009. We have to do that this year because it has expired.
Above-the-line deductions are important in this case because they are
available to nonitemizers, while most deductions, below the line, are
only available to those filers who itemize. Nationwide, over 3.6
million filers claimed this deduction in 2004. About 74,000 of those
filers, by the way, were in my State of Arizona.
There are some other extenders. The President talked about some of
these in his State of the Union speech. For example, the R&D tax credit
that is so important to continued research and development in our
country. And there is the 15-year depreciation recovery period for
restaurant improvements, the 15-year depreciation recovery period for
leasehold improvements. This bill also extends the deduction for
teachers who pay for some expenses out of their own pocket. This is
something I introduced some years ago. In fact, if my recollection
serves, the average teacher spends about $500 a year out of her or his
own pocket to bring supplies to school that are not paid for by the
schools in order help teach the kids. We provide a deduction for that.
Nationwide, there are 3.3 million filers who take advantage of that.
And 62,000 of those are in my State of Arizona.
Finally, to mention the sales tax deduction. This is very important.
It is not important in my State in particular, but it sure is important
in some other States. For 2004 and 2005, taxpayers living in States
without income taxes could take an itemized deduction for State and
local sales taxes in lieu of the existing deduction for State and local
income taxes, from which they get no benefit. The reconciliation bill
would extend this option for 2006. Nationwide, 12.3 million families
and individuals will benefit from the sales tax deduction this year,
2006.
So the bottom line of all of this is that this bill is not just about
the AMT and capital gains and dividends; it is about a lot more. My
colleagues who want to help average taxpayers, people who do not even
itemize their deductions, teachers, small businesses--all of these
taxpayers are benefited by the bill we have before us. It is important
for us to support these taxpayers, by the millions, as I said.
There is a final point; that is, a point that Senator Baucus has
raised concerning the so-called Byrd rule. This is a very technical,
rather arcane point about revenue loss beyond the budget window. The
two tax-writing committee chairmen in the House and the Senate are well
aware of this requirement and will make certain the conference
agreement complies with all rules of the Senate by including any
necessary offsets, as the Senate-passed reconciliation bill complies
with all rules of the Senate. So I want to assure my colleagues that
the problem that has been raised is not going to be a problem by the
time we conclude voting on this legislation. They can rest assured of
that.
So, Mr. President, I urge my colleagues, as they consider any motions
to instruct conferees this evening, that it is all well and good to
tell our conferees what we think, but the bottom line is, we need to
get this bill into conference so the conference committee can issue a
conference report that we will then deal with and our House colleagues
will then deal with, that will continue the tax rates that currently
exist, that will continue the deductions and exemptions we currently
have for all these taxpayers we talk about, that will not allow taxes
to increase on our constituents. That is what this bill is all about--
nothing more, nothing less--no tax increases.
Thank you, Mr. President.
Exhibit 1
TABLE 3.6.--2003, INDIVIDUAL INCOME TAX RETURNS WITH MODIFIED TAXABLE INCOME: TAXABLE INCOME AND TAX CLASSIFIED BY EACH RATE AT WHICH TAX WAS COMPUTED AND BY MARITAL STATUS
[All figures are estimates based on samples--money amounts are in thousands of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All returns Joint returns and returns of surviving spouses Returns of married persons filing separately
--------------------------------------------------------------------------------------------------------------------------------------------------------
Marginal tax rate classes Income tax Income tax Income tax
Number of Income taxed generated at Number of Income taxed generated at Number of Income taxed generated at
returns at rate rate returns at rate rate returns at rate rate
(1) (2) (3) (4) (5) (6) (7) (8) (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All tax rates.......................... 101,386,201 4,206,592,861 780,305,566 44,033,987 2,867,802,099 551,093,751 2,027,382 74,697,606 14,992,353
5 percent.......................... 9,833,227 33,552,373 1,677,619 5,735,137 21,989,140 1,099,457 109,279 358,270 17,913
8 percent.......................... 1,058,265 3,780,577 302,446 638,945 2,744,256 219,540 12,762 24,298 1,944
10 percent......................... 100,367,644 914,053,162 91,405,316 43,667,544 555,949,302 55,594,930 2,017,756 13,037,057 1,303,706
10 percent (capital gains)......... 1,445,014 3,942,692 394,269 837,753 2,774,756 277,476 12,290 22,530 2,253
10 percent (Form 8814)............. 92,871 62,588 6,267 70,255 48,325 4,837 56 67 7
15 percent......................... 74,461,039 1,583,782,894 237,567,434 35,870,035 1,052,826,848 157,924,027 1,721,892 24,754,136 3,713,120
15 percent (capital gains)......... 9,461,124 205,205,659 30,780,849 6,285,159 152,654,959 22,898,244 144,743 5,995,346 899,302
20 percent......................... 2,188,286 75,411,601 15,082,320 1,441,471 57,677,194 11,535,439 25,602 2,464,341 492,868
25 percent......................... 26,738,916 640,244,673 160,061,168 14,119,838 423,664,278 105,916,069 652,367 9,830,617 2,457,654
25 percent (capital gains)......... 349,114 7,250,430 1,812,607 236,994 5,705,659 1,426,415 4,929 185,917 46,479
28 percent......................... 5,459,365 199,378,501 55,825,980 3,635,902 143,892,642 40,289,940 160,274 2,894,980 810,594
28 percent (capital gains)......... 9,600 805,760 225,613 5,868 609,221 170,582 *12 *14,530 *4,068
33 percent......................... 2,029,605 170,336,243 56,210,960 1,634,272 140,306,823 46,301,252 59,230 2,399,367 791,791
35 percent......................... 752,028 367,903,515 128,766,230 641,635 306,958,696 107,435,544 22,824 12,716,151 4,450,653
Form 8615.......................... 100,337 882,194 186,486 ............... ............... ............... ............... ............... ...............
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Estimate should be used with caution because of the small number of sample returns on which it is based.
Note: Detail may not add to totals because of rounding.
Source: IRS, Statistics of Income, Individual Complete Report 2003, Publication 1304, October 2005.
TABLE 3.6.--2003, INDIVIDUAL INCOME TAX RETURNS WITH MODIFIED TAXABLE INCOME: TAXABLE INCOME AND TAX CLASSIFIED BY EACH RATE AT WHICH TAX WAS COMPUTED
AND BY MARITAL STATUS--continued
[All figures are estimates based on samples--money amounts are in thousands of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Returns of heads of households Returns of single persons
-----------------------------------------------------------------------------------------------------
Marginal tax rate classes Income tax Income tax
Number of Income taxed at generated at Number of Income taxed at generated at
returns rate rate returns rate rate
(10) (11) (12) (13) (14) (15)
All tax rates..................................... 13,218,829 258,524,437 39,251,842 42,106,004 1,005,568,719 174,967,619
5 percent..................................... 403,159 934,890 46,745 3,585,652 10,270,073 513,504
8 percent..................................... 34,235 80,776 6,462 372,323 931,248 74,500
[[Page S1105]]
10 percent.................................... 13,184,715 102,452,847 10,245,285 41,497,629 242,613,955 24,261,396
10 percent (capital gains).................... 52,205 149,977 14,998 542,765 995,430 99,543
10 percent (Form 8814)........................ 19,653 12,773 1,281 *2,907 *1,421 *143
15 percent.................................... 7,628,714 105,116,730 15,767,510 29,240,398 401,085,180 60,162,777
15 percent (capital gains).................... 254,126 4,043,136 606,470 2,777,097 42,512,217 6,376,833
20 percent.................................... 48,027 1,325,228 265,046 673,186 13,944,838 2,788,968
25 percent.................................... 1,450,057 28,069,853 7,017,463 10,516,654 178,679,925 44,669,981
25 percent (capital gains).................... 11,082 188,343 47,086 96,109 1,170,512 292,628
28 percent.................................... 141,741 4,805,859 1,345,641 1,521,448 47,785,019 13,379,805
28 percent (capital gains).................... *8 *5,732 *1,605 3,712 176,275 49,357
33 percent.................................... 50,672 4,107,496 1,355,474 285,431 23,522,557 7,762,444
35 percent.................................... 15,740 7,230,795 2,530,778 71,829 40,997,872 14,349,255
Form 8615..................................... ............... ............... ............... 100,337 882,194 186,486
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Estimate should be used with caution because of the small number of sample returns on which it is based.
Note: Detail may not add to totals because of rounding.
Source: IRS, Statistics of Income, Individual Complete Report 2003, Publication 1304, October 2005.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, the next motion will be a motion by the
Senator from Oregon, Mr. Wyden, on energy. I ask unanimous consent that
the pending motions be temporarily laid aside so the Senator from
Oregon may offer his motion.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Oregon.
Motion To Instruct Conferees
Mr. WYDEN. Mr. President, I send a motion to the desk and ask for its
immediate consideration.
The PRESIDING OFFICER. The clerk will report the motion.
The assistant legislative clerk read as follows:
Mr. Wyden moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to insist on a provision that repeals accelerated
depreciation for geologic and geophysical costs for oil and
gas exploration by the 5 major oil companies for the
following reasons:
(1) In April 2005, President Bush stated that ``With $55
oil, we don't need incentives for oil and gas companies to
explore.''. On February 10, 2006, oil futures trading on the
New York Mercantile Exchange closed at $61.84 per barrel.
(2) At a November 9, 2005, joint hearing of the Committee
on Energy and Natural Resources and the Committee on
Commerce, Science, and Transportation, the Chief Executives
of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell
all testified that the new tax breaks in the Energy Policy
Act of 2005 were unnecessary for their companies to explore
for oil. Accelerated depreciation for geologic and
geophysical costs for oil and gas exploration is one of the
new tax breaks provided by the Energy Policy Act of 2005.
(3) The Joint Committee on Taxation estimates that this
special interest tax break for major oil companies costs the
taxpayers and the United States Treasury more than
$100,000,000 over the next 5 years and almost $300,000,000
over 10 years. The United States taxpayers will have to pay
higher taxes to provide this tax break for big oil companies.
(4) In 2005, the 5 major oil companies whose Chief
Executives testified before the joint hearing of the
Committee on Energy and Natural Resources and the Committee
on Commerce, Science, and Transportation reported net profits
of more than $111,000,000,000.
(5) At a time of record high oil company profits and high
Federal budget deficits, hardworking American taxpayers
should not have to provide record subsidies to major oil
companies. Congress should eliminate this special interest
tax break for the largest oil companies that even these oil
companies say is not needed.
Mr. WYDEN. Mr. President, I thank, particularly, the distinguished
Senator from Montana, who is on the floor, Mr. Baucus, and Senator
Grassley, for working very closely with me on this issue because I
think this illustrates something the Senate is going to have to tackle
aggressively in the days ahead. This, at least, makes a modest step in
the right direction.
At a time when the oil companies have been making record profits and
often charging record prices at the pump, it does not seem, to me, they
ought to be receiving record subsidies from the taxpayers.
What this amendment does--and this would mean for the first time in,
as far as I can tell, 20 years--the Congress would actually be rolling
back a subsidy to the oil industry. This would limit one of the new tax
breaks that the major oil companies received in last year's Energy
bill.
The reason I feel so strongly about this, colleagues, is we had the
major oil companies before the Energy Committee recently, and I asked
the CEOs of the five largest oil companies if they agreed with the
President's statement--and I quote here--``With $55 oil, we don't need
incentives for oil and gas companies to explore.''
The CEOs of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell
all agreed that the new tax breaks for exploration in the Energy bill
were unnecessary. In fact, ExxonMobil CEO Lee Raymond said:
When you add it all up that energy legislation is zero in
terms of how it affects ExxonMobil.
So what we have is the bizarre situation where the Congress sends
billions of dollars of new subsidies to the oil companies when the oil
companies actually show up at congressional hearings and say they do
not even need these subsidies that the Congress is sending them.
Now, ExxonMobil recently announced it had posted an all-time record
profit of $36 billion in 2005. That huge amount is not just the highest
profit ever for an oil company, it is the highest profit ever for any
company. And ExxonMobil is not the only oil company to post a record-
high profit in 2005. ConocoPhillips reported its profits shot up 66
percent to $13.5 billion, while ChevronTexaco's profits jumped to more
than $14 billion. The five largest oil companies in the country had
combined profits of more than $110 billion.
So I would only say to the Senate today, it is one thing to talk
about new tax breaks to the oil companies and to look at them, as we
are doing today, and to particularly say: Do the oil companies need
these tax breaks in order to promote exploration and secure the energy
our country needs? What we now have is the situation where the oil
companies themselves have come to the Congress and have said, publicly,
before the Congress, they do not need these kinds of tax breaks.
At a time when they make record profits and consumers have recently
paid record-high prices, the Federal Government simply should not
record record-high subsidies to these companies.
The Senate tax reconciliation bill includes an amendment I had the
opportunity to work with Chairman Grassley and Senator Baucus on to
eliminate one of the new tax breaks for the oil companies to explore.
This is exactly the type of incentive the major oil company CEOs and
President Bush have said they do not need.
The special-interest tax break I was able to see eliminated from the
Finance Committee bill would cost taxpayers about $300 million over 10
years. The taxpayers, in effect, would have to pay higher taxes to
provide this big break for major oil companies, when the price of oil
is over $60 per barrel. That is $7 per barrel higher than the price at
which the President said they
[[Page S1106]]
do not need incentives. At these high prices, it is my view we ought to
take back this unnecessary tax break and save our citizens hard-earned
tax dollars.
Now, there are some in the industry who may argue the five major oil
companies' CEOs do not speak for the entire industry. They may argue
the small producers still need more incentives to explore.
I want to emphasize this amendment does not affect the small
producers. This amendment is about the large oil companies, the people
who came to the Senate and said they do not need new subsidies.
This amendment is about making sure these major firms don't get a tax
break they now have testified they don't need. The fact is, over the
past 2 years, oil companies have already increased their drilling
operations as the price of oil has skyrocketed from $45 per barrel to
over $70 per barrel. The number of rigs in operation and the amount of
drilling have also been increased by a third since 2003. Most of this
increased drilling occurred before the new tax break went into effect.
What it comes down to is Congress should not provide more subsidies
to major oil companies that make record profits to do what they are
already doing, especially at a time when our consumers are getting
hammered at the pump. Unless the Congress accepts this measure that the
Finance Committee accepted when I offered it through the support of the
chairman and Senator Baucus, the major oil companies would be getting a
significant new tax break that other major industries don't get.
Instead of having to write off some of their capital costs over a
number of years, major companies would get accelerated writeoffs for
what is called geological and geophysical exploration costs. According
to the Joint Committee on Taxation, the IRS and the Federal courts have
ruled that these costs are capital costs which should properly be
depreciated over the entire period the oil well is producing, which can
be a decade or longer.
The President's budget calls for scaling back this special treatment
of oil and gas exploration costs by extending the depreciation period
for what are called G&G costs from 2 to 5 years. The Senate bill takes
a little different approach by repealing accelerated depreciation of
these costs for the biggest oil companies.
I wish to emphasize this, particularly since I see my friend from
Mississippi who has discussed the energy issue in a very thoughtful way
in committee. The Senator from Mississippi and others have stressed how
important these incentives are to the independents and small producers.
This is something with which I am sympathetic.
I have indicated to Chairman Grassley and others that I believe we
ought to be taking a comprehensive look at the Tax Code as it relates
to the energy field to make sure we can reconfigure these tax breaks so
that when they are needed by the small companies and the independents,
they can get them, but we don't keep sending them out the door to the
big oil companies and then have these big oil companies in effect
embarrass the Congress by coming to a hearing and saying: Look, we
don't need these breaks.
Tax breaks such as the accelerated writeoffs for these costs also
clutter up the Tax Code and distort capital markets. It is not the
place to discuss it today, but my Fair Flat Tax Act would give us a
bipartisan opportunity to remove some of that clutter from the Tax
Code. At least we can make a start at reform today by eliminating the
special interest tax break for the oil industry which the companies say
they don't need.
Our consumers already pay more at work, they pay more at home, and
they pay more as they drive everywhere in between. Let's give them a
break in their personal energy bills. We can give them a break by
ensuring that those folks who are getting hammered with high energy
bills at home won't have to subsidize profitable oil companies when
they pay their taxes.
I urge my colleagues to support fiscal responsibility by supporting
my motion to urge the conferees to support the Senate position,
eliminate this special tax break for the major companies. This does not
apply to the small companies. It doesn't apply to the independents. I
have worked closely with Chairman Grassley and Senator Baucus to ensure
that will be the case.
I hope we will be back in this Chamber for a more comprehensive
discussion of the Tax Code and energy policy in the days ahead. My own
sense is, in the last energy bill, we subsidized an awful lot of people
to do the wrong thing. Getting a new energy policy is arguably the most
red, white, and blue issue the Congress could possibly take up. I think
about our soldiers in Iraq and Afghanistan, these individuals who honor
us every day with their courage and valor. I want to make sure their
kids and grandkids are not off in the Middle East fighting a war and
Congress is still dallying on oil.
This is a step in the right direction. I suspect other colleagues
want to discuss this issue. I reserve the remainder of my time.
In fact, how much additional time do I have on this motion?
The PRESIDING OFFICER. The Senator has 18\1/2\ minutes.
Mr. LOTT. Mr. President, will the Senator from Oregon yield for a
couple questions?
Mr. WYDEN. Absolutely.
Mr. LOTT. I wanted to make sure I understood what the Senator was
advocating.
Is the Senator proposing a motion to instruct that would basically
say that the Senate should insist on the position it had in our version
of this reconciliation tax package in conference?
Mr. WYDEN. The Senator is correct. I am asking that we insist on what
we did in the Finance Committee and what Chairman Grassley and Senator
Baucus have worked closely with me on. It is our feeling that we do
need to have a broader and more comprehensive discussion about this
down the road, but we took a modest step in the right direction in the
Finance Committee. That is what I wish to preserve with this motion.
Mr. LOTT. And that language was retained in the full Senate?
Mr. WYDEN. Right.
Mr. LOTT. Let me just say to the Senator from Oregon that regardless
of whether Senators agree or disagree, this is an appropriate motion to
instruct. This relates to the bill at hand. Obviously, it is not going
to buy any conferees. I hope I will be a conferee. Certainly, it won't
buy me. But at least it speaks to the substance of the bill before us.
The Senator has his right to do this, and it certainly is appropriate.
Most of these other motions to instruct we are going to be dealing
with don't really deal with the bill; they are purely partisan hit
amendments or motions to instruct. And what we are going to do on this
side is respond in kind. It is the kind of partisan political
``gotcha'' which has caused this institution to deteriorate to the
nadir where we are. It is unfortunate, and I am sad about it. But if
that is the way we are going to proceed, I am going to join in the fun
and games before the day is done.
At least in the case of the Senator from Oregon, he is dealing with a
subject in the bill. I commend him for that. He is very thoughtful in
this, as in most subjects. His motion to instruct is an appropriate
one.
Mr. WYDEN. Mr. President, to respond briefly, I thank the Senator
from Mississippi. I am interested in working with him on the Finance
Committee. This discussion does need to be part of a longer debate.
The Senator from Mississippi has drawn an important distinction that
a number of us have talked about as to the difference between the small
firms and the independents and the big firms. What we tried to do in
this bipartisan amendment is to preserve it. Frankly, in a sense, we
ought to do this just to prevent the embarrassment of the Senate. When
you have these big oil companies show up in broad daylight and say they
don't need these tax breaks, and the Congress has just been sending out
billions of dollars, that ought to be a wake-up call for both sides of
the aisle, Democrats and Republicans, to work together to rethink this.
I hope this will be the beginning of such an effort. It is a modest
step. It will save $300 million over 10 years--clearly, not what we
need to do to deal with the hemorrhaging of the Federal budget, but at
least it is a step in the right direction.
[[Page S1107]]
I thank the distinguished Senator from Mississippi and reserve the
remainder of my time.
The PRESIDING OFFICER. The Senator from Mississippi.
Mr. LOTT. Mr. President, parliamentary inquiry: Are we now on the
conference report itself so that I could yield myself time off the
overall report?
The PRESIDING OFFICER. The time can be yielded from the general
debate.
Mr. LOTT. I ask unanimous consent that I be yielded time off of the
debate which is scheduled on our side of the aisle.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. Mr. President, I will be brief. In line with what I was
just saying, I have been informed by the staff that the Parliamentarian
probably would consider motions to instruct conferees regarding making
permanent the changes we have provided in the alternative minimum tax
area. If that would be in order, if we start down this trail of motions
to instruct, I would be prepared to offer one in this AMT area or defer
to the chairman, if he would prefer to do so.
This is an area in which we should act. I remember a few years ago
when we got into the discussion of the alternative minimum tax, the
desired goal was to make sure that everybody paid some minimum amount
of taxes. It was aimed at the wealthy. But as we all have learned,
because of the way the Tax Code works, more and more middle-income
Americans have been pulled into this AMT web. It has gotten to be a
serious problem, so we have proposed to do something in the Senate-
passed bill on a temporary basis on the AMT.
My proposal would be, if it is the right thing to do, make it
permanent. This is the kind of thing we are playing around with that is
inappropriate. Why would we do it for a year or two? If it is the right
thing to do, let's make it permanent.
I suspect there are some people in the Senate who will not want to do
that for whatever reason. My question is: Why not, if it is the right
thing to do? The same thing is true with some of the other proposals
which have been considered. If we are going to extend the tax break for
some of these families with children so they won't get hit with a tax
increase, shouldn't we do it here? Who now wants to stand up and defend
the fairness of what is happening with this alternative minimum tax,
what it is doing to middle-income workers?
With all the complaints we hear about the AMT on both sides of the
aisle, why in the world wouldn't we support a motion to instruct to
make it permanent? I would hope that we would. I think that
substantively, this is a no-brainer. Yet I understand there is
resistance to doing that. Maybe there are some people who don't want to
vote on that motion to instruct.
There are 20 million American families affected by this pernicious
provision in the Tax Code which has taken on aspects we never intended.
If it is the right thing to do, then the budget should reflect that.
This tax reconciliation should reflect that. We ought to make the
change in the AMT permanent.
I would hope that we wouldn't get into a long list of motions to
instruct. They are irrelevant anyway. But both sides need to know that
if we are going to start down that trail, there are going to be some
uncomfortable motions to instruct on both sides, and we are going to
get a chance to vote on making the changes in the unfairness of the
alternative minimum tax that affects all these millions of families
permanent.
I yield the floor.
Observing no other Senator wishing to speak, I suggest the absence of
a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I think around 8 we will probably have two
votes. It is also my understanding that the other side of the aisle
will be offering various motions to instruct which presumably will be
voted on, as will motions to instruct on this side of the aisle.
I must say, though, I have glanced at the proposed motions to
instruct on the other side, and I find it very curious. Why do I say
that? I say that because we in the Senate passed a bill. The House has
passed a bill.
We are going to go to conference on the two bills now. Presumably, it
is the Senate conferees who are charged to defend the Senate bill.
Presumably, the House conferees are charged to defend the House bill.
After all, that is what a conference is all about. The Senate passes a
bill and goes to conference; the House passes a bill and goes to
conference.
These motions that are going to be offered, however, do not defend
the Senate bill. Quite to the contrary, they are opposed to the Senate
bill. They defend the House-passed bill, the capital gains treatment. I
find that very curious. I, frankly, find it very disconcerting, because
if this is the case, it will set the precedent basically for a motion
to instruct, not to defend the body's views. Most of the motions to
instruct from the other side will be motions not to defend the Senate
bill, but urge provisions in the House bill. That is nuts.
Most of the motions to instruct by Members on this side are asking
the conferees to defend the Senate-passed provisions. I point that out
because, as I said, it is curious and disconcerting, and I hope all
Members recognize what is going on here; namely, what I just outlined.
I hope this is an aberration and that it doesn't continue. Otherwise,
this is another example of the chaos, the virtual free-for-all around
here, and disrespect for procedure, for rules, for civility, and for
both sides working together. I hope maybe that is an oversight by the
other side of the aisle with all the motions that are going to be
coming up.
Nevertheless, I have them before me. That is what they seem to say. I
point that out for Members; it is an observation before we vote to take
into consideration. Most of the instructions I see are with respect to
capital gains treatment. There is no provision for extending current
law which doesn't expire until January 1, 2009; whereas, there are
provisions in the House-passed bill to extend it for 2 more years, even
though current law doesn't expire until January 1, 2009.
The motions to be offered are to basically take up and encourage the
conferees to pass the House provisions. That is very curious.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Mr. President, I see the Senator from Illinois, and I ask
unanimous consent that the pending motions be temporarily set aside so
that the Senator from Illinois may offer a motion.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion to Instruct Conferees
Mr. OBAMA. Mr. President, I thank the Senator from Montana for the
excellent work he has been doing.
I send a motion to the desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report the motion.
The bill clerk read as follows:
Mr. Obama moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to insist that any final conference report shall provide tax
relief for the most vulnerable members of our society,
including the low-income victims of Hurricane Katrina and
children in families that are too poor to benefit fully from
the refundable child tax credit.
Mr. OBAMA. Mr. President, 2 weeks ago, in a debate on the Senate
version of the tax reconciliation bill, I proposed an amendment to
provide tax relief for victims of Katrina, paid for by restricting the
extension of capital gains and dividend tax cuts only to people with
incomes under $100 million. My amendment would have made all children
of working parents in the disaster area eligible for at least a partial
credit.
[[Page S1108]]
For the convenience of my colleagues, I agreed not to demand a vote
on that amendment. But I rise again to urge my colleagues not to forget
Katrina and her victims who continue to struggle. In a bill with $70
billion of tax cuts, surely we can find $274 million to do something
for the most vulnerable members of our society.
In the weeks after Katrina made landfall, President Bush vowed to do
what it takes to help the region recover. We wanted to believe him. We
had witnessed the devastation caused by the hurricane, and we saw the
terror of poor families with their lives turned upside down, homes
destroyed, jobs and businesses lost, families separated, and lives
permanently changed.
At the time, the President said:
We have a duty to confront this poverty with bold action.
Almost 6 months later, the Government's actions have not matched the
President's rhetoric. Evacuees are getting kicked out of their hotel
rooms this week because FEMA stopped paying the bill. Thousands of
temporary mobile homes ordered by FEMA are sitting empty in nearby
Southern States. The Federal response continues to be inadequate to get
the families back on their feet.
We can do better for these families. At a time when we are debating
$70 billion of tax cuts, most of which will benefit corporations and
people who need help the least, why not set aside a small fraction to
help those who need it most?
One way to help those who need help the most is to enhance the
refundable portion of the child tax credit. Under current law, families
who earn less than $11,000 get no benefit from the refundable child
credit. That means that a child does not get any benefit from the
credit even if her parents work full time at the minimum wage. And the
child doesn't get the full benefit of the $1,000 credit until her
parents earn close to $18,000, or even more if the child has siblings.
As a result, almost 17 million children get less than the full credit.
Wouldn't it make sense to recognize the damage wrought by the hurricane
and to eliminate the income threshold that excludes the poorest of
children from getting the credit? Wouldn't it make sense to say to the
children affected by Katrina that they will no longer be denied at
least a partial credit so long as their parents are working?
The cost of this fix is estimated at $274 million over 2 years. To
get a sense of perspective, that is less than one-half of 1 percent of
the cost of this entire bill. It is a matter of common sense and
fairness--the least we can do when we are cutting taxes for wealthy
Americans. If we do this, hundreds of thousands of this country's most
disadvantaged children will see an increase in their credit--not as a
handout but because their parents work.
I hope we don't forget the images we witnessed in the aftermath of
the hurricane--the people, their suffering, and the devastation. We
shouldn't forget the daily struggles families right now are going
through trying to rebuild their lives. Let us not forget our
Government's promise to do what it takes for families along the gulf
coast. Let us not forget our duty, as the President put it, to confront
poverty with bold action.
I urge my colleagues to join me in instructing the Senate managers to
provide tax relief for the most vulnerable members of our society.
Together, let us urge them to remember the low-income victims of
Katrina and the children and families too poor to benefit fully from
the refundable child credit. Obviously, this is a modest piece of
legislation. It is a motion to instruct. My suspicion is that even if
it passed, other priorities would move to the fore.
Let me say in closing that it is shameful, what is happening in the
gulf coast right now. I think all of us recognize the scope of the
devastation. All of us were embarrassed at the slow response
immediately after the hurricane. It has now been 6 months. We have not
shown the sense of urgency that the American people did privately after
the hurricane. I would hope that at least we can send some small signal
that we are concerned about the kids who are languishing, who have been
uprooted, who aren't in the schools they were attending and in the
neighborhoods in which they grew up.
This is one way to send that signal, and I urge my colleagues to
support my motion.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Montana.
Mr. BAUCUS. Mr. President, I strongly support extending the deduction
for tuition costs through December 31, 2009, as provided for in the
Senate bill.
To compete successfully in the world today, America must make
education a priority--not only a priority but a very top priority. Why?
I think it is pretty obvious. For one thing, our competitors certainly
are.
Let's talk about, for example, training engineers. Engineers develop
new jobs and new industries. Yet Japan and Europe train twice as many
engineers as we do. China trains three times as many. In fact, I think
the statistics are even more alarming than that. We are missing the
boat. We are missing the boat.
Let's just stop for a minute. If China, Europe, and Japan train many
more times than we, especially China, and add Indians to the mix--
Indians are training lots of engineers--just think of what that means
for the next 5 or 10 years based only on the size of those countries.
If they are training many times more than we--and I think the
population of India is close to 1 billion, and China is 1.3 billion. In
about 10 years, it is going to be somewhat more than 1 billion. And our
population is about 280 million, 290 million, something like that. I
would say we are way behind the eight ball. We need to spend much more
time than we are on education.
Congress has responded with a number of income tax benefits for
higher education financing. Tax incentives such as the HOPE scholarship
and lifetime learning credits, the Coverdell education savings account
and prepaid tuition and college savings plans help American families
pay for college. The deduction for qualified higher education tuition
and related expenses, section 222 of the Tax Code, was first added as
part of the 2001 Economic Growth and Tax Relief Reconciliation Act.
Let me explain more. We cannot allow America's workforce to be left
behind. To remain the most competitive and innovative country in the
world, we need to make education affordable.
Let me state a small anecdote. I was in Bangalore, India, not too
long ago, about 3 or 4 weeks ago, and I asked the head of the research
center there, the Jack Welch Research Center, which, frankly, is one of
the two or three state-of-the-art research centers General Electric
has, I asked the manager of it: Why are you here? Why are you here in
Bangalore? Guess what he said.
He said: Because this is where the greatest talent pool is.
I asked: Where is the next greatest talent pool for your top-flight
scientists and engineers here?
He said: China.
I asked: Well, where is the United States in terms of ranking for the
best talent pool?
Frankly, he said it was way down on the bottom. Not the very bottom.
He said: You are down there.
So I asked him: What can we do in America to be more competitive than
we are today, to make sure we have the best jobs for our kids, and,
more importantly, for our kids and grandkids so that we in America can
pass on to our kids and grandkids the same standard of living we have
today, which our parents gave to us?
His answer: You guys have to spend more on education, and you have to
make it less expensive so more students can get the quality education
they want and need. Also, you have to lower your education costs. It is
too costly in America to get a good education. He said: You also have
to lower your health care costs. Your health care costs are way, way
too high compared to every other country in the world.
Sure, we have high-quality health care, he said, but we spend twice
as much per capita on health care in America as does the next most
expensive country.
Are we twice as healthy as the next most expensive country? I doubt
it.
But right off the top, the manager of that technology center in
Bangalore, India, made it very clear to me that we
[[Page S1109]]
Americans have to spend a lot more time boosting our talent pool so we
have more scientists and engineers than we currently have in the United
States. We have a lot of them, and they are good, but it is also very
clear that we are slipping or, to put it differently, other countries
are catching up and are going to pass us soon if we don't get our act
together.
It costs today almost $43,000 a year for tuition, fees, and room and
board in a 4-year public college. Just think of it: $43,000 a year;
that is a public college. At a 4-year private college, it costs more
than $100,000. That is just ridiculous, that it costs that much for a
college education in America today. It is outrageous, and it puts
education far out of reach for so many students.
From 1981 to 1995, tuition at a 4-year public college/university
increased by 234 percent. That is right. From 1981 to 1995, tuition
increased by 234 percent. That is three times the growth in median
household income and more than three times the increase in the cost of
living over this same period. That is unsustainable, clearly
unsustainable. That is wrong. I don't know why this country doesn't
start to address that more directly, more frontally, because the
earlier we do, the more jobs and the more high-paid jobs we are going
to have for Americans.
For tax years 2002 and 2003, taxpayers with adjusted gross incomes of
less than $65,000--or say $130,000 for married couples filing jointly--
are allowed to deduct $3,000 for qualified higher education tuition and
related expenses. Three thousand dollars. Remember how costly education
is, the figures I just gave you a moment earlier.
For tax years 2004 and 2005, the maximum deduction is $4,000 for
those same families and $2,000 for Americans with adjusted gross
incomes of $65,000 to $80,000 for a single person or from $130,000 to
$160,000 for married couples filing jointly. Unfortunately, this
important deduction expired at the end of 2005.
Critics of extending the deduction for tuition costs ask why we have
both this deduction and the HOPE and lifetime learning tax credits. It
is true that the current system can be complicated, and it is
complicated. Families that qualify for tax credits are sometimes better
off with a deduction. Unfortunately, families don't always know which
tax choice is best for them. So we are looking at whether the tax
incentives for education should be combined or should they be
simplified. But until we do, I wish to put the deduction on the same
timetable as the tax credits which are in effect until 2010.
Let us look at the House. The House only extends this deduction for 1
year--clearly not enough. Senators on both sides of the aisle have
agreed that this deduction is important to working families trying to
get their children a good education. We must, therefore, preserve this
deduction and, as proposed in the Senate bill, extend this important
deduction for 4 years.
If America is going to be competitive in the global economy, it must
make education a top priority. Extending the deduction for tuition
costs through December 31, 2009, does exactly that by helping provide
our children with affordable education. Therefore, I will work hard to
ensure the deduction for tuition costs is extended through December 31,
2009, as provided for in the Senate bill, and I urge my colleagues to
support this extension.
I may sound like a broken record, but every fiber in me, my bones and
my muscles, my blood and whatever is in me, I just know that we have to
work a lot harder, a lot more effectively to address American
competitiveness, and most of that comes down to education. It is making
sure that our kids and we ourselves are educated as best as we possibly
can. Education is a lifetime effort; it is not just K through 12. It is
lifetime. It also begins at very early ages--Prestart, Head Start, K
through 12, college. It also includes votech training for job skills.
It is continuing education. It is bringing us more up to date. For
those of us who graduated a long time ago, it is making sure we are
continuing to be up to date with what is going on and are able to
translate new ideas into jobs.
I have traveled a lot overseas and I have seen a lot of countries,
especially in Asia. I can tell you, they are on the march. Speaking
primarily of the Chinese and the Indians--clearly Japan is a very large
country, with the second largest economy in the world, but it will not
be long before China is the largest economy in the world. I am guessing
by the year 2030 China will be the largest economy in the world. That
is not far away. It is only 24 years from now. I may be off by 10
years; it may be 10 later or 10 earlier. But 24 years is now, in terms
of the time it takes to get us up to speed, the time it takes to get
education programs in place, the time it takes to make sure we are
graduating more scientists and engineers and have a tax and health care
policy that makes more sense, and an energy policy that makes more
sense.
We are a wonderful, big country. We are extremely lucky. We are the
luckiest people in the world to be Americans. We don't see people
heading for the door to live in other countries. Rather, people want to
live in America. They want to come to America because of our values, et
cetera.
It is true in the last couple of years our image overseas has been
greatly tarnished. The image of America today is not what it was
several years ago. That is due, I think, primarily to the foreign
policy of this country. But nevertheless, overall most people would
rather live in America than some other country. We Americans certainly
would. We want that to continue as long as it possibly can, not just
for ourselves but, more importantly, for our children and for our
grandchildren. That is the legacy we want to pass on to them.
To do that, you have to have some kind of plan. You can't let these
go helter-skelter. Other countries have plans. They definitely have
plans. It is clear, China has a plan. I don't know if they are going to
be successful, but they have a plan. They know what they want to do.
They know that they have to boost and are boosting their science and
engineering education. They know they have to develop the interior
provinces, not just the eastern coastal provinces. What are they doing
about it? They are doing something about it. They have a plan. They are
spending a lot of money and building big superhighways out in western
China. There is a big, fancy airport in western China. I was in
Chunking 4 or 5 weeks ago, at a huge, massive, fancy, wonderful airport
in western China. That is government policy.
They have plans to deal with unemployment. They have plans, frankly,
to put on what they think will be the world's best Summer Olympics in
2008. I bet they have a plan to win more gold medals than any other
country, too. They have plans. You have to take your hat off to them
because they are doing what they think they have to do to progress and
bring themselves out from the lower living standards they have had for
so many years.
It is true many Chinese live in poverty. It is true many Indians live
in poverty. That is also true. But they have plans to address that. I
remember not too many years ago I was in Shanghai. I was talking to the
mayor of Shanghai about all these wonderful, fancy buildings in
Shanghai. I said: You must be proud of all you are doing in Shanghai.
The mayor turned to me and said: We have problems.
I said: What do you mean?
We have high unemployment by China's standards. This is what we are
doing to retrain people. Some of these jobs are old jobs. As the
Chinese Government works to downsize these state-owned enterprises,
Government-owned enterprises that are all subsidized, they know as they
enter the World Trade Organization they have to get rid of a lot of
these state trading enterprises. Man, oh, man, they know as that
happens they are going to have huge unemployment problems. So they have
details, all they are trying to do, in their plan to address that job
loss in China.
Then he pointed to the river there in Shanghai and he said:
Pollution; this river is polluted. We have a 10-year plan to clean up
this river so it is no longer polluted.
I don't know whether it has been successful or not. That was 5 years
ago. I assume the river is probably polluted. But you could tell,
talking to him, he had plans to address the problems that we have.
India certainly is the same. When I was in India a couple or 3 weeks
ago,
[[Page S1110]]
they have plans how they are going to build up India. I went to the
subway in Delhi. That is a fancy subway. That makes our subway in
Washington, DC--it is comparable. But guess what. In the Indian subways
you can use your cell phone because they make sure when they tunnel
under they have the radio stations there, the towers, so you can use
your cell phones. They are building 18 more subways in India, fancy
ones.
Other countries are building them. It is not us. When I was there, I
heard constantly from all over India: Where are the Americans? Where
are you? Australians are here and Malaysians, other countries are here,
Germans and French. The subway was 60 percent Japanese financed. Where
are the Americans? They want us there, but we are not there.
What I am saying is things are happening in this world. We have to
get with it. Much of that is education. Much of that is learning what
is going on. Much of that is forming partnerships where both countries
do well. We can't stick our heads in the sand. Things are happening and
I think a large part of this is education.
Let me say this again, about that same point. When Tom Friedman's
book came out, ``The World Is Flat,'' I took it on myself to travel
around the United States by myself and ask CEOs, What do you think of
this book? Have you read this book? They all read it, of course.
I said: What do you think? Do you agree? They all agreed. Some said:
This is scary. Some said: Yes, this is a challenge.
Then I asked the next set of questions: What do we do about all this?
Sure, it is true, largely true. Sure, it is a little scary. Sure, it is
a challenge. What do we do about it?
That kind of set them back a little bit. They hadn't thought a lot
about solutions; a little bit. But the solution they all tended to
gravitate to was education. We Americans have to focus much more on
quality education, quality teachers. We are doing a good job. I got a
great education when I grew up in Helena, MT, in Missoula, MT. The
teachers, I thought, were excellent. They were tough and they were
good. Current teachers are good. But all I am saying is whoever we are,
we know we have to keep moving and progressing. You know when you tread
water you are likely to sink. You can't keep treading water. You have
to go ahead.
I am often reminded of the former head of Intel, Andy Grove, who
wrote a book, ``Only The Paranoid Survive.'' That is probably true in
the semiconductor industry, but I think it is partly true in life. That
is not to say we all have to be paranoid. Clearly not. But it is to say
you have to be vigilant, and really vigilant.
Frankly, if I were President, what I would do is change this budget
around massively. I would put a lot more in this budget for education.
I would put a lot more into making sure we can solve our health care
cost problems in this country; more coverage. I would make sure we
tackled and made America energy independent. This thing about
independent 25 years from now is way too tepid, way too weak. We have
to get started now. I suggest developing DARPA for energy. DARPA, in
the Defense Department, developed lots of great technologies, military
technologies, applicable in the private, civilian sector. We can do the
same on energy. That will attract bright minds. It will help us be more
energy independent, make us less hostage to events overseas.
It is so clear to me. I may be wrong, but I tell you it is clear to
me, anyway, what we need to do. I think in my gut most Americans sense
that, this sort of sense we have to get moving here. I think a lot of
Members of this body would be surprised, if we were to be much more
bold, as to the gratitude Americans would show to Congress for finally
taking the lead and doing something.
We have to get organized somewhat, not seen to be prescriptive, not
seen to pick winners and losers, but I am saying harness the energy
that is in America and help focus it a little more on where we should
be going. After all, that is why many of us sought these jobs. We
sought these jobs to represent our people in the best way we could. We
sought these jobs because we thought, many of us--most of us think we
have pretty good judgment and priorities and common sense. If that is
the case, I urge us to get out of our little boxes, get out of our
little cubbyholes, get out of our daily routines, get out of the stuff
that pulls us apart from our real job here, just a little bit--maybe
for 30 percent of our time--and work more on long-term strategic
measures and do what is right and address the core of some major issues
that face us, rather than getting caught up in the routines around
here, our series of meetings.
Meetings are good. Seeing constituents is great. We serve our
employers back home. But we are also here as a body, 100 of us, and I
think it is time for us, working with the other body and the executive
branch, to truly put partisan politics aside and get something done
that makes some sense.
I yield the floor.
The PRESIDING OFFICER. The Senator from Utah.
Motion to Instruct Conferees
Mr. HATCH. Mr. President, I share some of my dear colleague's
frustrations about how this body runs and I wish we would work better
together. I think it would do a lot of good for our country. I would
like to see that happen.
I rise today to offer a motion to instruct the conferees to extend
the research credit permanently. I understand one of the motions to
instruct filed by one of my colleagues on the other side of the aisle
says we should extend the research credit.
Mr. BAUCUS. Mr. President, I don't want to be too picky here, but
don't we have to ask consent to put these motions aside? If that is
proper, whatever is the routine here, so we have some consistency.
The PRESIDING OFFICER. The Senator is correct. The Chair was not
understanding that the Senator was offering a motion.
Mr. HATCH. I wasn't offering it, but I will be happy to move to put
it aside when the time comes.
I understand one of the motions to instruct, as I was saying, filed
by one of my colleagues on the other side of the aisle, says we should
extend the research credit for an additional 2 years. In concept, I
certainly agree with this idea. The research credit is vital to America
keeping its lead in world innovation. But if we are instructing the
conferees as to better tax policy, why should we stop at a 2-year
extension? If the research credit is worthy of an extension of an
additional 2 years, why is it not worthy of a permanent extension?
Along with the distinguished Senator from Montana, Senator Baucus, I
have been for many years an advocate of making the research credit
permanent. As the lead Republican sponsor of legislation to provide for
a permanent research credit, it seems I have come to the floor nearly
every year for the past dozen years to either introduce a bill to make
the research credit permanent or to offer an amendment to do the same.
I might add that Senator Baucus, the distinguished Senator from
Montana, has been my partner in this matter--or should I say I have
been his partner in this body. We have worked together to try and do
this, along with a whole raft of other Senators, usually almost 100
percent.
In 2001, the Senate overwhelmingly passed an amendment to the
Economic Growth and Tax Relief Reconciliation Act to make the research
credit permanent. Unfortunately, the permanent credit was dropped in
conference in favor of yet another temporary extension. That amendment
in 2001, however, was not the only time the Senate voted for a
permanent extension of the credit. It has happened several times. A
very large majority of Senators has voted in favor of a permanent tax
credit.
My point is that practically every Senator supports the research
credit being made permanent. Despite this wide support, permanence has
not yet happened. Instead, we keep extending the credit for a year or
two at a time.
Why do we do this? The answer is simple. The artificial budget rules
under which we operate prevent us from making the credit permanent
because the cost of the permanent extension is determined to be far in
excess of the cost of an extension for a year or two.
Another reason that we extend the research credit for a year or two,
rather than permanently, is that we all
[[Page S1111]]
seem to be stuck in the mind-set that perpetual temporary extensions
represent de facto permanence. Why worry about making the credit
permanent when there is little or no doubt about it getting extended
again? Doing so represents poor tax policy, but it seems to be the way
Congress likes to handle this problem.
I will never forget the gap that once occurred between the expiration
of the tax credit and our ability in the Congress to get it restarted.
Let's be realistic. We all know that the cost of these temporary
extensions is no less than the cost of a permanent extension. If we
think we are saving revenue to the Treasury by our current practice of
extending the credit a year or two at a time, we are only fooling
ourselves.
However, by not making the credit permanent, we are driving down the
amount companies are willing to spend on innovative research. Even
though we all know that the next extension for a year or two is
practically a sure thing, the private sector does not see it that way.
They do not, and can not, plan for the credit on a long-term basis if
we only extend it for a temporary period.
Thus, we continually engage in a kind of self-defeating behavior--
trying to fool ourselves into thinking we are saving taxpayer money by
passing these temporary extensions while we tell ourselves it does not
matter anyway because we are always going to extend the credit again
for a year or two when it comes due. All the while, though, companies
are keeping down their R&D spending because of the uncertainty provided
by this practice.
Now, we see a Democratic motion to instruct the conferees to insist
on another two years of the research credit, but to be paid for by not
extending the lower rate on capital gains and dividends, which is in
the House bill.
That seems not only extreme, it knocks out a very important set of
tax principles that have kept the economy going. I think we ought to
have all of these.
Let's face the facts. This motion is nothing more than a weak attempt
to embarrass Republicans by forcing us to choose between the research
credit and the capital gains and dividends provisions.
However, it does not work for all the reasons I have indicated. The
motion presents us with a false choice. Another temporary extension of
the research credit in this body, whether for 1 year or for 2 years, is
practically a foregone conclusion. Virtually all of us are in favor of
it. It is going to happen regardless of this motion to instruct.
My point, and the point of my own motion to instruct, is to ask, if
we really believe the research credit is good policy, why not instruct
the conferees to push for a permanent credit? It does not cost any more
than a series of temporary extensions.
The motion from the other side is not really about the research
credit, and everyone knows it. It is about the lower rates for
dividends and capital gains.
I continue to hear claims that Republicans are interested only in
giving tax breaks to the rich. This mantra is false and insulting. We
do not advocate continuing the lower rates on dividends and capital
gains because we want to do a favor for the rich.
We believe that people respond to incentives, and that higher net
benefits of investment leads to more saving. There is ample evidence
for this, and this concept is not controversial among economists--they
might argue how sensitive saving is to the returns on saving, but no
one disputes that higher returns affects saving.
Higher saving leads to more investment by firms, which increases
productivity and with it, wages and economic growth. Every worker
benefits from an increase in saving. Nobel Laureates Robert Lucas and
Ed Prescott have stated that reducing the tax on investment income is
the closest we can come to a free lunch.
Some of my colleagues would have the American people believe that by
supporting an extension of the lower tax rate on capital gains and
dividends, Republicans are hurting those with lower incomes. I submit
that by increasing saving and investment, we are helping lower income
people more than we could in any other way.
Besides, if you look at how many people are now invested in the
market, either through pensions or otherwise, or through mutual funds
or otherwise, a good 50 percent of all taxpayers in America are now in
the stock market.
Frankly, they all benefit from having these lower rates that we have
been talking about.
Incentives lead to more saving. More saving leads to more investment.
More investment leads to higher productivity and higher economic
growth. Productivity and economic growth lead to more and better jobs
for everyone. It is time for us to stop playing political games and get
to work helping Americans realize their highest potential. We can start
by appointing the conferees to the tax bill.
That is something that in the past we never had difficulties with,
but in the last few years we have.
I send this motion to instruct conferees to the desk and ask for its
immediate consideration.
The PRESIDING OFFICER. Without objection, the pending motion is set
aside.
The clerk will report the motion.
The legislative clerk read as follows:
Mr. Hatch moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to insist on the inclusion in the final conference report of
a permanent extension of the credit for increasing research
activities (based on section 108 of the amendment passed by
the Senate), in order to improve American competitiveness.
Mr. HATCH. Mr. President, I understand that will be placed in the
proper order and to be considered in the next few days.
The PRESIDING OFFICER. The Senator should know that it is now
pending.
Mr. HATCH. I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. BAUCUS. Mr. President, I first commend my friend and colleague
from Utah. I agree with him. I think it should be permanent. I urge my
colleagues to support the motion to instruct making it permanent. We
will have a little more certainty and help in research and development
in our country. It helps us be more competitive. I compliment him for
offering that motion to instruct.
I also speak in favor of the Stabenow motion to instruct with respect
to the R&D tax credit which will be coming up shortly, essentially
because we have to move ever more aggressively to invest more in
research and development in our country. And the current temporary
nature of the credit just makes no sense.
The Senate-passed bill is a credit extension for 2 years. I remind my
colleagues that the current credit is expired. It expired at the end of
last year. We are now in February. The Senate bill extends it for
calendar years 2006 and 2007, and the House bill just has 1 year, 2006.
I am for more predictability, more certainty, especially with expect
to the R&D tax credit.
I also received a letter from the R&D Credit Coalition, a group
representing 85 trade associations and more than 1,000 small, medium,
and large companies. In the manufacturing sector alone, which performs
nearly 60 percent of all private and industrialized R&D in the United
States, there are 14 million manufacturing employees who get the
benefit of this credit.
The coalition in their letter said:
The Coalition believes the Senate-passed provision will
help make the credit a more powerful incentive to undertake
long-term, high-risk R&D projects in the United States.
Consistent with the provision you and 45 of your Senate
colleagues have taken as sponsors of a permanent and
strengthened R&D credit, extending this credit for an
additional year will better enable the intended incentive
effect of the tax credit to be realized.
I ask unanimous consent that the letter be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
R&D Credit Coalition,
Washington, DC, February 13, 2006.
Hon. Charles Grassley,
Chairman, Committee on Finance, U.S. Senate, Washington, DC.
Hon. Max Baucus,
Ranking Democrat, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Chairman Grassley and Ranking Member Baucus: On behalf
of the members
[[Page S1112]]
of the R&D Credit Coalition, we thank you for your leadership
in amending the Tax Relief Act of 2005 to include a two-year
extension of a strengthened research tax credit (the ``R&D''
tax credit). It is critical that the credit be extended and
strengthened and the additional length of the proposed
extension will provide needed certainty to businesses that
are making investment and hiring decisions.
The Coalition believes the Senate-passed provision will
help make the credit a more powerful incentive to undertake
long-term, high-risk R&D projects in the United States.
Consistent with the position you and 45 of your Senate
colleagues have taken as sponsors of a permanent and
strengthened R&D credit, extending this credit for an
additional year will better enable the intended incentive
effect of the tax credit to be realized. The best incentive
is one on which businesses can rely and one that applies
broadly to all research-intensive companies. The members of
the R&D Credit Coalition applaud your efforts to strengthen
this credit and to lengthen its extension period. We look
forward to working with you on this issue.
Sincerely,
Bill Sample,
Microsoft Corporation, Chair, R&D Credit Coalition.
Donna Siss Gleason,
The Boeing Company, Vice Chair, R&D Credit Coalition.
Keith H. Smith,
United Technologies Corporation, Cochair, R&D Credit
Coalition, Government Affairs Committee.
Karen Myers,
CA, Cochair, R&D Credit Coalition, Government Affairs
Committee.
Monica M. McGuire,
National Association of Manufacturers, Executive Secretary,
R&D Credit Coalition.
Mr. BAUCUS. Mr. President, spending for R&D will increase in 2006,
but America has challenges to face, such as major increases in the
funding of offshore operations. The total amount of foreign direct
investment, including R&D, is shifting heavily towards India and China,
and competition for qualified researchers will increase markedly over a
short period of time.
Most important is to keep American jobs. Keep them here, keep them at
home. R&D has some of the most highly paid and intellectually
stimulating jobs. With offshore operations and foreign R&D investment
shifting to India and China, jobs for U.S. workers will decrease in
this area.
I strongly urge support of both the motion to instruct by Senator
Hatch and also the motion to instruct that will be presented later, I
assume, by the Senator from Michigan, Ms. Stabenow.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. I yield such time as the Senator from Arkansas may use.
The PRESIDING OFFICER. The Senator from Arkansas.
Mrs. LINCOLN. I thank my colleague from Montana, Senator Baucus, who,
as always, does a tremendous job in helping the entire Senate stay
focused on what is important, helping us to reflect on where our values
lie as Americans, and certainly for us as leaders of this great Nation.
I come to the Senate today to once again discuss an issue that is
near and dear to my heart, an issue that is of great importance to all
working families across this country. As we look now at what working
families are going through--astronomically high fuel prices, what it is
costing them to heat their homes; the cost of health care; the cost of
educating their children and saving for higher education, which is
going to increase again this year and years to come; trying to be
competitive in their jobs and the global economy--in looking at these
issues, I and many other Senators have recognized how tough it is for
working families across this country.
In 2001, and again in 2003, Senator Snowe of Maine and I worked
together, with the help of our chairman on the Committee on Finance,
Senator Grassley, and our ranking member, Senator Baucus, to ensure
that low-income working families with children receive the benefit of
the child tax credit. It is so important to remind ourselves: we know
how near and dear our children are to us; other people's children are
just as near and dear to them, regardless of their income level.
As the chairman said earlier today, I, too, feel a bit as though I am
trapped in that movie ``Groundhog Day,'' although for a different
reason. I feel that I am trapped in ``Groundhog Day'' life. I have been
in this instance time and time again, and I come to the Senate today to
again ask my colleagues to help me ensure that low-income working
families are not forgotten as we discuss tax relief. It is absolutely
essential we put ourselves in the shoes of other working Americans, the
working families who are the fabric of this great Nation, and say: We
believe your children are just as important as our children to the
future of this country.
I applaud the action taken in the Senate the week before last. I was
pleased we affirmed that the permanency of the child tax credit is a
priority of the Senate and should be addressed during conference on
this tax reconciliation bill. Even though I applaud that effort, I
still say it is not enough. It is not enough to not look further and
see those working Americans who are still not going to be helped. It is
not enough because the credit in its current form does not work for all
low-income working families.
We can and should take one additional step. As some may be aware, to
be eligible for the refundable child tax credit, working families must
meet an income threshold. If they do not earn enough, they do not
qualify for the child credit. The problem is, some of our parents are
working full time every week of the year. Yet they still do not earn
enough to meet the income threshold to qualify for the credit, much
less to receive a meaningful refund.
Heaven forbid we look at what they are making. Is it enough to safely
and adequately raise their children? We have an obligation to make sure
those people, those hard-working Americans who were willing to play by
the rules to get a job, to work hard, to perform things that are
important to our quality of life, too, that they have the same
opportunity to love and nurture their children and work hard to provide
their children a better opportunity than they may have had.
I will say this again because it is right and it is important people
know. I will say it again to make sure the point is not missed. We have
full-time working parents who do not qualify for the child tax credit
because their incomes are simply too low. Again, people playing by the
rules, working hard so our lives might be a little bit better, yet
under minimum wage, they do not make enough.
If we are talking about American values, if we are talking about
family values, if we want to reinforce the aspect of work instead of
handouts, if we want to reinforce caring for all of America's children
because we know all of America's children are part of our future, our
future leaders, if what we want to do is reinforce working, caring for
our children, taking the responsibility of our families--that does not
mean just my children or just a few children; it means all children--
are we not then going to step up to the plate and say to those hard-
working Americans that your children are just as important as my
children?
In 2003, the income threshold was set at $10,500. The threshold is
indexed for inflation and thus has increased the last 2 years. It was
$10,750 in 2004 and $11,000 in 2005. And, yes, it will go up again in
2006.
Unfortunately, the low-income worker's wage is not increasing at the
same pace, or even at all, for that matter, as we look at the low-
income working wages that exist in this country. A single working
mother or father in the State of Arkansas or across this Nation
perhaps, who makes minimum wage, is going to get $5.15, working a 40-
hour week, every week of the year. That is not taking a vacation,
taking their family to the beach, going to Disney World or anything
else. It is working a 40-hour week, every week of the year, 52 weeks
out of the year, with an income of only $10,712 a year. That came
[[Page S1113]]
in under the threshold, both in 2004 and 2005; it will, most
definitely, come in below the threshold this year, in 2006.
It is wrong--it is absolutely wrong--to provide this credit to some
hard-working Americans while leaving others behind. The single, working
parent who is stocking the shelves in your local grocery store is every
bit as deserving as the teacher or accountant or insurance salesman who
qualifies for the credit in its current form. And, yes, they love their
children just as much as you and I love our children and want for them
all of the great things that are available to young American children
when they can be nurtured and cared for and encouraged and taken care
of in their families.
We must address this inequity, and we must ensure our Tax Code works
for all Americans, especially those working parents forced to get by on
minimum wage.
Senator Snowe and I have proposed a solution to this horrible
inequity. If we were to simply de-index the income threshold and set it
at a reasonable level, such as $10,000, all full-time working parents,
including those making minimum wage, would qualify.
We talk day in and day out about how important our children are. We
talk about making them a priority in this country and recognizing how
they weave the fabric of this great Nation and the future. We
understand, as parents, it is not easy. It is not easy to raise
children in this environment, with everything from Internet security to
making sure education is available, and health care, including simple
nutritional needs. We have 600,000 Arkansans living with food
insecurity, the majority of which are children.
Why is it we cannot take the extra step to make sure that, again,
those who are playing by the rules, those who are willing to work, to
work to care for their children and their families--we are not going to
give them the same benefit of that Tax Code?
This is a simple, easy solution Senator Snowe and I have offered to a
very serious problem. I will not rest until we get it done. As we
prepare to enter conference with the House on this tax reconciliation
bill, I encourage my colleagues to support Senator Snowe and me in our
efforts to fix this inequity.
As many of you may recall, the last time Senator Snowe and I went to
work to improve the child tax credit, back during the debate of the
President's tax package in 2003, tax relief for low-income families was
left behind in the conference. I hope we have changed. I hope we have
refocused ourselves and our priorities. I hope we do recognize all
working American families are struggling today with high gas prices,
the cost of health care, and higher education--education at all--that
all working families are struggling to heat and cool their homes with
high energy costs and are struggling to keep the jobs they have in
their globally competitive companies.
Please, let's not repeat this mistake again. If the opportunity
arises to take action on the child tax credit in this conference, we
must not only extend it, we must ensure that it works for all of
America's working families.
We should always remember that budgets reflect priorities, the
priorities of those who put those budgets together. We know priorities
create choices. The choices we make in budgets and in decisions on the
floor of the Senate and in conferences over such critical issues--our
choices--have real and substantive consequences, not just to those
working families out there who so desperately want success for their
child, but it has consequences for our Nation. If we set our priorities
so low that we leave behind the children of hard-working American
families, the consequences for our Nation will be great.
I thank you, Mr. President, and again encourage my colleagues to
support the efforts not only of a child tax credit but also making sure
it is fair to all working families of our Nation.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DeWINE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DeWINE. Mr. President, I ask unanimous consent that the pending
motion be set aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion to Instruct Conferees
Mr. DeWINE. Mr. President, I have a motion at the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
Mr. DeWine moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to accept the veterans' mortgage bonds
expansion provisions contained in section 303 of the bill as
passed by the House of Representatives with such revisions as
are necessary to provide veterans in all 50 States with
access to lower-rate mortgages.
The PRESIDING OFFICER. The Senator from Ohio is recognized.
Mr. DeWINE. Mr. President, this proposal would instruct the conferees
to accept the House provision that expands the qualified veterans
mortgage bond program. The qualified veterans mortgage bond program
allows States to issue tax-exempt bonds that are used to fund mortgages
for our veterans. Because the States borrow this money at low, tax-
exempt interest rates, they are able to pass that lower rate on to
veterans for home mortgages. This means veterans are able to finance a
home at a lower interest rate than they otherwise would have been able
to.
The program in place today is limited to veterans who served before
1977. Mr. President, this motion will instruct the conferees to accept
the House provision eliminating that limit. By doing so, we can offer
to all the brave men and women who have served and are serving our
Nation the important benefits of this program.
The current program is also limited to veterans who settle in Alaska,
California, Oregon, Texas, and Wisconsin. This motion instructs the
conferees to bring back a provision that would permit veterans of all
States to have access to these lower rate mortgages.
This is the right thing to do for our veterans. We owe a great debt
of gratitude to the men and women who have served our country in the
armed services. These brave men and women, with their honor and
courage, have kept our Nation secure and our future bright. They
deserve the assistance that we can provide with this mortgage bond
program. It is simple to do and it will have a profound impact on many
military families. I strongly encourage my colleagues in the Senate to
support it.
Mr. President, while Senators cannot cosponsor motions to instruct,
Senators Santorum, Grassley, Burns, and Chafee have expressed their
support of this motion.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. DeMint). The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, I ask unanimous consent that the pending
matter before the Senate be set aside so I can offer a motion on behalf
of Senator Menendez.
The PRESIDING OFFICER. Without objection, it is so ordered.
Motion to Instruct Conferees
Mr. REID. Mr. President, on behalf of the junior Senator from New
Jersey, Mr. Menendez, I offer the following motion to instruct the
conferees on tax reconciliation.
The PRESIDING OFFICER. The clerk will report the motion.
The bill clerk read as follows:
Mr. Menendez moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the two
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to report a conference report that
includes the Senate-passed ``hold-harmless'' relief from the
individual alternative minimum tax (AMT) in 2006, and does
not include the extension of lower tax rates on capital gains
and dividends.
Mr. REID. Mr. President, this motion is to instruct the conferees to
insist on relief from the alternative minimum
[[Page S1114]]
tax--known as AMT--in the final bill they report back from the
conference committee.
It reaffirms the Senate's position that AMT relief should take
priority over extending tax cuts for capital gains and dividends.
If the conference agreement fails to include relief from the AMT, 15
million taxpayers will face higher tax bills this year.
The Senate has expressed its support for AMT relief two times as this
legislation has made its way through the legislative process.
First, the Finance Committee included AMT relief in the bill that it
reported to the Senate floor.
Then, during floor consideration the Senate overwhelmingly approved
the amendment offered by Senators Menendez, Schumer, Kerry, Feinstein
and others that expressed the Senate's desire that AMT relief take
priority over tax cuts for capital gains and dividends.
That amendment was approved by the Senate by a vote of 73 to 24.
The conferees for the Senate should respect the Senate's instructions
and include AMT relief in the final bill.
There are two reasons that the Senate conferees should insist on
including AMT relief in the final bill and reject tax cuts for capital
gains and dividends. First, AMT relief is needed to protect taxpayers
this year. Married couples with children are most affected by the AMT.
Absent any relief for next year, nearly three-quarters of married
couples with two or more kids and income between $75,000 and $100,000
will be subject to the AMT.
In contrast, almost 50 percent of the benefits of a reduction in the
tax rates on capital gain and dividend income goes to taxpayers with $1
million or more, which is .3 percent of all taxpayers. The average tax
cut for these taxpayers will be about $32,000.
The higher AMT exemption levels that were enacted in 2003 expired at
the end of last year. Without this provision, middle-class taxpayers
will be hit with higher AMT liabilities when they file their 2006
returns. The lower tax rates for capital gains and dividends do not
expire until 2009.
Second, extending lower tax rates on capital gains and dividends
reflects misplaced priorities. The benefits of lower taxes on capital
gains and dividends go disproportionately to wealthy taxpayers.
According to an analysis by the nonpartisan Tax Policy Center,
jointly run by the Urban Institute and the Brookings Institution, about
50 percent of the benefits of lowering taxes on capital gains and
dividend income goes to taxpayers with $1 million or more of income.
In 2005, the average tax cut for millionaires was nearly $38,000. In
contrast, 92 percent of taxpayers received a tax cut of less than $100
as a result of the reduced tax rates on capital gains and dividends.
At a time when we face record budget deficits, Congress should not
consider tax cuts whose benefits so clearly go to the most well off in
our country.
Mr. KERRY. Mr. President, less than 2 weeks ago we debated the
importance of addressing the individual alternative minimum tax, AMT.
Without congressional action, this year 17 million families will be
impacted by the AMT. And this problem is growing. Without a permanent
solution to the AMT, as many as 30 million families will be impacted by
it in 2010.
We all seem to agree that the alternative minimum tax needs to be
addressed, but we differ on how big a priority it should be. Very
recently, 73 Members of this body voted to address the AMT before
addressing tax cuts that do not expire until the end of 2008. This
sense of the Senate specifically stated that ``protecting middle class
families from the alternative minimum tax should be a higher priority
for Congress in 2006 than extending a tax cut that does not expire
until the end of 2008.''
Some of my colleagues believe we can address both the AMT and extend
the capital gains and dividends tax cut, but I am concerned this will
be difficult to do within the confines of a $70 billion tax bill. The
House has made their position clear that they would rather address AMT
outside the reconciliation tax bill. This is troubling because it would
likely result in a total of over $100 billion in tax relief that is not
paid for. We cannot afford another costly debt-financed tax cut. The
Senate-passed bill does include some revenue offsets, but I do not
expect the conference report to include any revenue offsets.
Not less than a week after we debated the alternative minimum tax,
the administration's budget submitted to Congress for fiscal year 2007
failed to adequately address the AMT. Once again, the budget makes the
2001 and 2003 tax cuts permanent but ignores the looming problem of the
AMT.
The President only chose to address the AMT for 1 year--2006. He
chose not to address it for fiscal year 2007. In addition, the relief
provided in the budget for 2006 is not as generous as the AMT relief in
the Senate-passed bill. Under the budget proposal, an additional 1.2
million families would be impacted by the AMT. The Senate-passed bill
prevents additional taxpayers from being impacted by the AMT. The
budget deliberately leaves out a more permanent solution for the AMT
for two reasons. First, the AMT would add additional costs to the
budget. Second, the AMT masks the true costs of the 2001 and 2003 tax
cuts.
Back during the debate on the Economic Growth and Tax Relief
Reconciliation Act of 2001, I offered an amendment that would have
exempted taxpayers with incomes of $100,000 or less from the AMT. The
reason I offered this amendment was that I was concerned about the
impact of the AMT on families who were never meant to be affected by
it.
In 1998, we began to notice that something was happening that was
unintended--the AMT was beginning to encroach on middle class
taxpayers. At that time, the AMT was expected to impact over 17 million
taxpayers in 2010. The AMT problem resulted because the regular tax
system is indexed for inflation, while the personal exemptions,
standard, deduction, and AMT are not. Under the AMT, exemption amounts
and the tax brackets remain constant. This has the perverse consequence
of punishing taxpayers for the mere fact that their incomes rose due to
inflation.
The AMT has another perverse consequence. It punishes families for
having children. The more children a family has, the lower the income
necessary to trigger the AMT. For example, if no action is taken in
2006, a family with four children with an income of $58,500 would be
subject to the AMT while a family with one child would have to make
$72,000 to be affected.
As we debated the Economic Growth and Tax Relief Reconciliation Act
of 2001, I stressed the fact that the legislation would result in more
individuals being impacted by the AMT and that not addressing the AMT
hid the real cost of the tax cuts. This holds true today. Revenue
estimates show us that it would be cheaper to address the AMT if the
tax cuts were repealed than if the tax cuts were made permanent.
A choice was made in 2001 to provide more tax cuts to those with
incomes of over a million dollars rather than addressing a looming tax
problem for the middle class. The Economic Growth and Tax Relief
Reconciliation Act of 2001 did include a small adjustment to the AMT,
but it was not enough. We knew at the time that the number of taxpayers
subject to the AMT would continue to rise steadily. The combination of
lower tax cuts and a minor adjustment to the AMT would cause the AMT to
explode.
The amendment that I offered would have simply exempted those with
incomes of less than $100,000 from the AMT and it was offset by
decreasing the amount that the top rate would be reduced. It would have
reduced the top rate to 37 percent instead of 35 percent. This
amendment was not a panacea to the AMT, but we would not be in the
situation that we are today because the amendment would have countered
the interaction between the tax cuts and the AMT by exempting middle
class taxpayers. The Joint Committee on Taxation estimated that the
amendment would have prevented 18 million taxpayers from being impacted
by the AMT.
Each year that we wait to address the AMT, more taxpayers are
impacted and the cost of addressing it increases. We missed an
opportunity in 2001 to address the AMT. Repeatedly, the AMT has been
pushed aside to give priority to making the tax cuts for the wealthiest
Americans permanent. So often we
[[Page S1115]]
hear that the bulk of the tax cuts assist the average American family.
This is ironic because by 2010, the AMT will take back 21.5 percent of
the promised tax breaks for individuals making between $75,000 and
$100,000 per year and 47 percent from individuals making between
$100,000 and $200,000. However, households with annual income over
$1,000,000 will only lose 9.2 percent of the tax cuts.
Once again today, we have the opportunity to choose to help hard-
working families or very wealthy investors. We can choose to protect 17
million middle class families by voting for the motion offered by my
colleague, Senator Menendez. Not addressing the AMT this year would
result in tax increases as large as $3,640. The other choice is to
extend the capital gains and dividends rate cuts that go to households
with income over $1 million. Over 50 percent of the benefit goes to
these households that make up only 0.2 percent of all households. These
tax cuts do not expire until the end of 2008.
Last week, the Senate Finance Committee heard from Treasury Secretary
Snow that the capital gains and dividends tax cut helps individuals
with income of less than $50,000. I believe that he was trying to make
the argument that more middle class taxpayers would benefit from the
capital gains tax relief than from AMT relief. I disagree. The
important statistics to look at are the percentage of income that is
capital gains and dividends and the amount of the tax cut. In 2009,
those making over $1 million would receive an average tax cut of
$32,000 and those with incomes below $50,000 would receive an average
tax cut of $11. IRS income tax data for 2003, which is the most recent
data, shows that capital gains and dividends income accounts for nearly
one-third of all income for millionaires. For those making less than
$100,000, capital gains and dividends income accounts for 1.4 percent
of total income and it is even less for those with incomes of $50,000.
I urge my colleagues to choose hard-working families. We can
reexamine the issue of capital gains and dividends tax cuts once we
have our fiscal house in order. The budget that was sent to Congress
last week projects the largest deficit in history for fiscal year 2006.
In times of deficits, we have to carefully choose our priorities. It is
time for Congress to address the AMT which has turned into the family
tax.
Mr. BAUCUS. Mr. President, I ask any motions be set aside so the
Senator from Michigan can offer a motion to instruct.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Michigan.
Motion to Instruct Conferees
Ms. STABENOW. Mr. President, I thank our leader on the Committee on
Finance, Mr. Baucus, for his leadership on so many different issues.
I send a motion to the desk and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
Ms. Stabenow moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to insist on the inclusion in the final
conference report of a permanent extension of the credit for
increasing research activities and to reject any extension of
the tax rate for capital gains and dividends which does not
expire until 2009.
Ms. STABENOW. Mr. President, I rise this evening to introduce a
motion to instruct conferees to extend the R&D tax credit permanently
and offset costs related to that by striking capital gains and
dividends provisions of the House bill in the conference committee. I
realize my colleague from Utah has introduced something similar to
extend the R&D tax credit permanently, which I support, but I believe
the most responsible approach is to provide as much of an offset as
possible so we are not extending the national debt which is already the
largest in our Nation's history.
This is a very difficult time for Michigan families. Michigan lost
11,000 manufacturing jobs since 2000. Last week, GM announced more bad
news. Plant closings and job losses are becoming a common headline in
our newspaper. There needs to be a sense of urgency in Washington about
helping to protect and maintain these good-paying jobs and the way of
life these jobs have offered for Americans. Our middle-class way of
life is truly at risk. We are still not seeing any action from this
administration. I was so disappointed to see the President did not
mention the word ``manufacturing,'' in his State of the Union Address,
despite all that is happening and all that needs to be done on behalf
of Michigan families, Michigan businesses, and those across the country
that are affected.
People in my State are worried about their jobs, they are worried
about the fact that they might lose their pension that they worked for,
for 30 years. Who would have thought, in the United States of America,
people would have to worry about paying into a pension system and
possibly not having that when they retire? That is immoral.
They see their health care premiums continuing to skyrocket every
year, they are struggling to fill their gas tank and pay their home
heating bill and are feeling squeezed on all sides. We need to take
that seriously because there are things we can do to help turn that
around.
What does the House bill dealing with taxes propose to do to help
middle-class families? Absolutely nothing. Instead, it gives more tax
cuts to the wealthiest few.
We can do better. We must do better for the people we represent.
Hard-working families should be able to have a good-paying job, send
their kids to college, retire with dignity, including health care and a
pension and Social Security. We need to lower health care costs which
are hurting American manufacturers and promote new health IT
technologies that can save billions in health care costs. I was pleased
to see the President mention that in the State of the Union.
Senator Snowe and I have legislation, working with colleagues on both
sides of the aisle. We can get this done and save hundreds of billions
of dollars that can go back into lowering health care costs and paying
for access to health care for our families.
We need to protect people's pensions and uphold the fundamental
principle that if you work hard and pay into a retirement fund, you get
every cent you have earned and you deserve.
We must also investigate and enforce our trade laws. Countries such
as China and Japan should be required to play by the rules, stop
manipulating their currency. This is what we should be voting on now.
How to save and strengthen our middle class, our way of life.
One answer that would be extremely positive would be to make the R&D
tax credit permanent, to help continue to spur innovation into the
future. As we all know, the way to profitability for struggling
manufacturers is through innovation and education.
The House bill only budgets a 1-year extension of the R&D tax credit,
leaving businesses to worry about whether longer term projects will be
terminated. A 1-year extension undermines our commitment to innovation
and economic prosperity. Instead, the House bill provides $50 billion
in tax breaks for the wealthy few who do not have to worry about losing
their jobs or pensions tomorrow or struggling to pay their bills.
We need to be investing in our manufacturers and our workers to
prepare for the future by planting seeds for the next innovative idea.
I am very proud that in Michigan we have been the heart of so much
innovation. We create ideas. We build great products, not just
automobiles but furniture and all kinds of products. And we are on the
cutting edge today of new innovations.
But it is time to reinvest in what has led our country to economic
prosperity and to support these on-going efforts. We have the best
colleges and the brightest minds in the world. We know American workers
can compete with any workers from any country if we make it a priority
to invest in education and innovation--and, by the way, if we enforce
our trade laws so other countries are not cheating--and change the way
we fund health care. That is the prescription for success, for
maintaining our way of life as Americans.
Countries such as Japan and China have been doubling and tripling
their investments in R&D over the last decade. Japan, which has always
invested in R&D, increased their funding by 25
[[Page S1116]]
percent. Korea has doubled their R&D. China has tripled their R&D. In
China, engineering professors and graduate students even receive
bonuses every time they are published in an international journal.
Our Federal Government must be a strong partner with American
manufacturers, American businesses, and American workers, and support
innovation in this country for the next generation of workers.
My home State of Michigan invests over $20 billion in R&D
expenditures--the second highest of any State, according to the
National Science Foundation. Although Federal investments in R&D only
contribute 17 percent of total investments, these Federal funds are
used to attract even more research dollars from businesses. It is a
great investment for us.
It makes perfect sense for us in the Federal Government to help spur
this innovation by being partners with the private sector. In total,
about $25 billion is provided by the Federal Government and over $200
billion by businesses. This partnership in innovation is at the center
of American companies competing in the global marketplace. Everyone
knows that to stay ahead, we need to invest in the future. That means
education. That means innovation.
I might say, it does not mean accepting the cuts the President has
proposed--the largest cuts in the 26-year history of the Department of
Education--over $2 billion in cuts proposed in this budget. That
certainly is going in the wrong direction. But permanently extending
the R&D tax credit goes in the right direction, and helping to pay for
that also goes in the right direction of fiscal responsibility.
As I indicated before, the distinguished Senator from Utah, Mr.
Hatch, has offered a motion to instruct on a permanent extension of the
R&D tax credit without an offset--in other words, without paying for
that. I would suggest there is a more fiscally responsible approach and
that we are not providing a long-term incentive for investment by just
extending the credit for a year at a time or by not paying for it. I
believe we need to have a permanent extension of the R&D tax credit,
but we need to do that in a way which is fiscally responsible.
This debate this evening is really about our values and about our
priorities and who will benefit from the tax bill. Are we going to give
another $50 billion in tax cuts to those who are most blessed and
extend the capital gains tax cut which is not even going to expire for
2 years or are we going to help people who are trying to create jobs
and working men and women right now, manufacturers who right now need
some support as they move into the future to compete internationally
and businesses that right now need our support, by extending the R&D
tax credit so they have the partnership they need, the support they
need for those new ideas which will allow them to compete on into the
future?
This is about what is happening to families right now. In Michigan,
people are asking the President and asking us to look at what is
happening to families at this moment and to take action now.
Let's stop China and Japan from cheating by stealing our patents or
by counterfeiting--counterfeit autoparts, for example, is a $12 billion
industry which has cost over 200,000 jobs in this country--or by
manipulating their currency. Let's force them to play by the rules and
have a level playing field, but turn around and look at what they are
doing on R&D and education. While they are cheating and stealing our
ideas, they are educating more engineers and more scientists and those
who will be competing with our workers. We need to turn that around,
make them play by the rules, change the way we fund health care in our
country, protect our pensions, and then aggressively invest in
education and innovation.
To see the kind of bold, aggressive investment we need means we need
to extend the R&D tax credit. We need to send a strong message to
businesses around this country that this is a permanent tax credit, the
R&D tax credit. We also need to send a message that we are going to
choose, when choices have to be made, between those who need the
support right now to keep jobs here in America and those who down the
road may be interested in having an additional tax cut on top of those
they have already received. I believe it is about the future of our
country, which approach will create opportunity, which approach will
create jobs for the future.
My vote is with our manufacturers who are deciding, maybe at this
very moment, whether to lay off more people in Michigan or around the
country, who need this tax credit to invest in the future of their
companies. That is my priority, not a few, most blessed in this country
who have a capital gains tax cut in place until 2008--it does not even
expire until 2008--those who are not worried today about whether that
pension is going to be there or whether they can pay their heating bill
or whether they can send their kids to college or whether they are
going to have a job tomorrow. They have a tax cut in place which does
not even stop until 2008.
We can do better than the bill that was certainly passed by the House
of Representatives. I hope the conference committee will do better. I
urge support for my motion to instruct, with a clear message. This is
about bold innovation for the future, permanently extending the R&D tax
credit. It is about fiscal responsibility. And it is about making the
right choices and values that say we are going to focus on those today,
we are going to pay for this by focusing on those right now, those
businesses right now which need our help, and make those families a
priority for us.
It is about our way of life in this country. It is a fight we can win
if we are serious about it. And I believe innovation is an important
part of our future. I urge the support of my colleagues for this motion
to instruct.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I rise for the purpose of offering some
motions to instruct for myself and my colleagues.
Motion To Instruct Conferees
Mr. GRASSLEY. I send the first motion to the desk and ask for its
consideration.
The PRESIDING OFFICER. Without objection, the pending motion is set
aside.
The clerk will report.
The legislative clerk read as follows:
Mr. Grassley moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to insist on the inclusion in the final
conference report of the funding to support the health needs
of America's veterans and military personnel contained in
section 315 of the Senate amendment and the funding to
strengthen America's military contained in title VI of the
Senate amendment.
Mr. GRASSLEY. Mr. President, in explaining the rationale for my
motion to instruct, I will be referring to other motions to instruct
that two Senators on the other side have put in place, Senator Dodd of
Connecticut and Senator Reed of Rhode Island.
The Dodd motion to instruct is yet another episode in the tale of the
``groundhogization'' of this tax relief reconciliation bill, a long
journey. The Senate adopted the alternative to the Dodd amendment, a
Grassley amendment, that passed, including the following Budget Act
waiver language:
Waive all provisions of the Budget Act and budget
resolutions necessary for the consideration of the pending
amendment to this bill, and for the inclusion of the language
of the pending amendment in consideration of an amendment
between Houses.
That is what we added back on February 2 to S. 2020. The Dodd motion
instructs conferees to proceed by ignoring this waiver language. You
see, the waiver language only applies for the purposes of our action in
the Senate. If Senator Dodd were to prevail, the conferees could not
follow his directive without violating the Budget Act. It is because
the Dodd motion deals with outlays. We can't do outlays in a budget
reconciliation package. I might add that the Reed motion that we expect
to vote on tomorrow suffers from the same defect. The conferees, even
if they were inclined, can't return from conference with a provision
that contains outlays.
We all know this is a political season. If you look at this motion,
and if you look at the Reed motion, both cannot
[[Page S1117]]
be adopted and followed. You can draw your own conclusion, then, why
they are adopted, unless the Members don't know that this is a
parliamentary situation. I can't believe they don't know what that
parliamentary situation is.
While we are at it, I am going to offer a motion to clarify what the
Dodd and Reed motions are all about. Basically, if you support the
principles of providing more health care for veterans, the supposed
purpose of the Dodd amendment, and, secondly, assisting our troops with
body armor, the supposed purpose of the Reed amendment, then vote for
the Grassley motion. If you support these two principles but don't
support a tax increase on America's seniors, at a higher cost of
capital for American business, support the Grassley motion. If you just
want an increase, then vote for the Dodd motion.
I will summarize it this way: I appreciate Senator Dodd's attention
to the issue of our veterans health care needs. This issue is of utmost
importance to the Members of the Senate, as evidenced by the fact that
we appropriated a massive amount of extra money last fall for the
fiscal year we are in now to meet the needs of veterans, particularly
those who were not recognized, people returning wounded from Iraq. But
my colleagues suggest that in order to provide this support, we should
give up the important economic tax policy of reduced capital gains and
dividends tax, the present tax policy, just continue it for 2 more
years so that people have a long-term view of what the tax policy is so
that they know what they are going to invest.
The Dodd motion claims to be paid for by capital gains, but capital
gains offsets don't even come into play until the year 2009. I have
offered a motion that supports military health care facilities, but we
don't tie it up with an offset that is 3 long years down the road.
You will remember that the Senate debated this issue on Groundhog Day
and voted to accept my amendment that provides the same benefits but
does not raise taxes to pay for it. I urge my colleagues to vote
against Senator Dodd's motion and to support my motion to instruct the
conferees on the amendment we have already passed.
In regard to what Senator Reed is trying to do with his motion to
instruct, this is the issue of funding for our military. Proper funding
for those serving our country is not a controversial issue. The method
of providing this funding for our military is, on the other hand, being
made into an unnecessarily controversial issue. My colleague suggests
that in order to provide for this funding, we eliminate a tax benefit
that doesn't even arise until the year 2009, similar to the same issue
in the Dodd amendment. I ask how this would provide the funds so badly
needed this very day to ensure that we meet the operational needs of
our courageous military service personnel.
I offered an amendment that supports the operational needs of our
military without tying it to an offset that is 3 long years down the
road.
Again, in an effort not to sound repetitive, you will remember that
the Senate debated this issue also on Groundhog Day and voted to accept
my amendment that provides the same benefits but does not raise taxes
to pay for them. So I urge my colleagues to vote against Senator Reed's
motion and to support my motion to instruct conferees on the amendment
we have already passed.
To sum up, if you are against a tax increase but for veterans health
care and properly equipping our military, vote for the Grassley motion.
If you are for a tax increase, then look elsewhere to our colleagues
who are offering their version of it.
Motion To Instruct Conferees
Mr. GRASSLEY. Mr. President, I am sending several motions to the desk
now. I ask that these be taken up together. I ask that the clerk would
read each one at a time because I want to speak to each one. I would
ask the clerk to read the first one.
The PRESIDING OFFICER. Without objection, the pending motion is set
aside.
The clerk will report.
The legislative clerk read as follows:
Mr. Grassley moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to report a final conference report that
includes the ``hold-harmless'' relief from the individual
alternative minimum tax in 2006 (sections 106 and 107 of the
amendment passed by the Senate) to protect middle class
families and includes an extension of lower tax rates on
capital gains and dividends (based on section 203 of the bill
passed by the House of Representatives) to protect tax cuts
for middle class families.
Mr. GRASSLEY. Mr. President, the motion to instruct that was just
read is mine. Simply stated, this is a motion that says there are
sufficient funds to do both alternative minimum tax and capital gains
and dividends and that we should do both--in other words, as an
instruction to conferees.
Motion to Instruct Conferees
Mr. GRASSLEY. Mr. President, I ask the clerk to read the motion that
I am introducing for Senator Lott, listed as No. 3.
The PRESIDING OFFICER. Without objection, the pending motion is laid
aside and the clerk will report the motion.
The legislative clerk read as follows:
Mr. Lott moves that the managers on the part of the Senate
at the conference on the disagreeing votes of the 2 Houses on
the Senate amendment to the bill H.R. 4297 (to provide for
reconciliation pursuant to the concurrent resolution on the
budget for fiscal year 2006 (H. Con. Res. 95)) be instructed
to report a final conference report that includes the repeal
of the individual alternative minimum tax (based on sections
106 and 107 of the amendment passed by the Senate.)
Mr. GRASSLEY. Mr. President, as I said, I am doing that for Senator
Lott of Mississippi. I think it is self explanatory. Just to reiterate,
this motion, on behalf of Senator Lott, calls for full and permanent
repeal of the alternative minimum tax.
Motion to Instruct Conferees
Mr. GRASSLEY. Mr. President, I now go to motion No. 4, which is for
Senator Hutchison.
The PRESIDING OFFICER. Without objection, the pending motion will be
set aside, and the clerk will report the motion.
The legislative clerk read as follows:
Mrs. Hutchison moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendments to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to insist on the inclusion in the final
conference report of a permanent extension of the election to
deduct State and local general sales taxes (based on section
105 of the amendment passed by the Senate).
Mr. GRASSLEY. Mr. President, this is repetitive, but I will state
this for Senator Hutchison. This resolution of instruction calls for a
permanent deduction of State and local general sales tax.
Motion to Instruct Conferees
Mr. GRASSLEY. Mr. President, I offer motion No. 5 for Senator
Santorum.
The PRESIDING OFFICER. Without objection, the pending motion is set
aside.
The clerk will report.
The legislative clerk read as follows:
Mr. Santorum moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to report a final conference report that
includes a permanent extension of the above-the-line
deduction for tuition and fees (based on section 103 of the
amendment passed by the Senate).
Mr. GRASSLEY. Mr. President, this motion I offer on behalf of Senator
Santorum of Pennsylvania would make permanent the above-the-line
deduction for tuition and fees for college.
Mr. SANTORUM. Mr. President, I offer this motion to instruct with
regard to the college tuition deduction. As I have noted on other
occasions, this bill is really a ``tax increase prevention'' bill. One
of the many important elements is the college tuition deduction. This
provision was established in the 2001 tax relief bill and provides an
above-the-line deduction for higher education expenses, commonly called
the ``college tuition deduction.'' The eligibility for the deduction is
limited based on income and is aimed at helping middle-class American
families that are struggling to meet the rising
[[Page S1118]]
cost of college tuition. It benefits students and their families at all
types of institutions--from community colleges to 4-year schools, and
both public and private institutions.
However, because we have had to slow-walk this bill with some foot-
dragging across the aisle, this deduction expired on December 31, 2005.
Nonetheless, it is important that we not only extend this provision,
but make it permanent. The college tuition deduction is an important
and popular education tax benefit, particularly for the middle class.
It is not available to taxpayers with income above $80,000--$160,000 in
the case of joint returns.
In 2003--the last year for which official data are available--more
than 3 \1/2\ million Americans benefited from the tuition deduction,
with nearly $7 billion in college tuition costs covered by the
deduction--an increase of nearly 9 percent from the previous year. Tax
incentives for college tuition helped nearly 11 million Americans
realize the dream of a college degree. This represents more than two-
thirds of all college students. In the Commonwealth of Pennsylvania,
over 150,000 families and students took advantage of this deduction.
The tuition deduction is a crucial part of our education tax incentives
and must be made permanent. We should send the message to parents of
high school students that this deduction will be there when their
students begin college.
I urge my colleagues to support this motion and support these
families and students striving for a college education.
Motion to Instruct Conferees
Mr. GRASSLEY. Mr. President, I turn to motion No. 6, which is my own.
I ask for the reading of it.
The PRESIDING OFFICER. Without objection, the pending motion will be
laid aside, and the clerk will report.
The legislative clerk read as follows:
Mr. Grassley moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the two
Houses on the Senate amendment to the bill H.R. 4297 be
instructed to report a reconciliation conference report
ensuring that in 2009 and 2010, the international
competitiveness of the United States in attracting capital
investment, and therefore job creation, is not weakened
further by a higher combined corporate and individual income
tax rate on corporate and capital income as a result of a
higher dividend tax rate, based on the following:
(1) In 2005, the combined maximum corporate tax rate and
individual dividend tax rate in the United States was 50.8
percent. This rate was the eighth highest rate in the thirty-
nation Organization for Economic Cooperation and Development,
taking into account both national and subnational taxes.
(2) If the top federal tax rate on dividend income would
have been thirty-five percent, instead of fifteen percent,
the combined tax rate would have been 62.9 percent, and would
have been the second highest combined corporate and
individual tax rate on corporate income in the OECD, behind
only Japan.
Mr. GRASSLEY. Mr. President, I offer this motion instructing
conferees that in the years 2009 and 2010, the international
competitiveness of the United States in attracting capital investment,
and therefore job creation, is not weakened further by higher combined
corporate and individual increased tax rates on corporate and capital
income as a result of the higher dividend rate.
Motion to Instruct Conferees
Mr. GRASSLEY. Mr. President, I send a motion to the desk that I am
going to file and not discuss at this point.
The PRESIDING OFFICER. Without objection, the pending motion is laid
aside, and the clerk will report.
The legislative clerk read as follows:
Mr. Grassley moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendments to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to insist on the inclusion in the final
conference report of a permanent extension of the
modifications to the child tax credit made by the Economic
Growth and Tax Relief Reconciliation Act of 2001 and the Jobs
and Growth Tax Relief Reconciliation Act of 2003.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that at 8 p.m.
tonight, the Senate proceed to a vote in relation to the Grassley
motion on veterans, to be followed by a vote in relation to the Dodd
motion on veterans, with no amendments in order on either motion.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Montana is recognized.
Mr. BAUCUS. Mr. President, I ask that the pending motions be set
aside so the Senator from New Jersey can offer his motion. Obviously,
under the rules, he has at least a half hour, maybe even longer.
Senator Schumer from New York is coming over. Under the rules, he would
have the same length of time. We are going to vote about 8 o'clock,
but, of course, that can slip a little to accommodate the Senators from
New Jersey and New York. I counsel my friends from New Jersey and New
York to not use all of their time unless they really want to. I admire
the Senator from New Jersey. He is concise and to the point in his
presentation.
Motion to Instruct Conferees
Mr. LAUTENBERG. Mr. President, I ask unanimous consent that the
pending motion be set aside, and I send a motion to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. Without objection, the pending motion will be
set aside. The clerk will report.
The legislative clerk read as follows:
Mr. Lautenberg moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to report a final conference report that
does not increase the national debt of the United States.
Mr. LAUTENBERG. Mr. President, I want to discuss this motion to
instruct conferees that I bring to this bill. You see here a display of
a credit card. It is drawn on the ``Bank of our Children's Future.'' My
amendment is simple. It asks the conferees, please, do not increase our
national debt.
A lot of what we do around here is hidden and complicated Federal
budget rhetoric. But to put matters simply, this bill allows President
Bush to charge another $50 billion on the credit card of the United
States of America. But when he leaves office, who is going to pay the
debt that is left behind? Certainly, it will not be their rich or
infamous friends. They are guaranteed to be safe from the bill
collector. The reality is that the President is going to leave
repayment of this credit card debt to our kids and our grandchildren. I
don't want to have that burden on my grandchildren or my children. They
work hard and they pay their debts and they pay their taxes--my
children, I am talking about; my grandchildren are too young. They are
willing to pay their taxes and they are proud of this country of ours.
The Democrats want to pay for these tax cuts by ending giveaways to
rich special interests. But the Republican side said: No, no, don't
persecute millionaires.
I had a very successful business career. It happened because I live
in America and America responds to ingenuity and hard work. I don't
mind paying my taxes. I want to pay my taxes to be sure that America is
strong internally, not just on the weapons front but strong in
character, strong in mission.
My colleagues on the other side, all good folks, will not admit they
are passing this burden on to future generations. They claim they are
going to cut spending to make up the difference.
Are they? As President Bush insists, are they willing to cut Medicare
and make health care more expensive for seniors? Are they, as President
Bush insists, willing to cut student loans? Isn't tuition expensive
enough for the average family in America? Are they, our colleagues on
the other side, as President Bush insists, going to eliminate the Safe
and Drug-Free Schools Program? Are they willing to cut the Head Start
Program for children who don't have the benefit of being in a home
where they can learn, who don't have the benefit of guidance from
parents often? Those children often get their only nutritional meal in
a facility that is supported by the Federal Government. We are now only
serving 800,000 out of 1.6 million children who would qualify.
Even if we do all these things, we are still going to be in the hole
with massive deficits because of the President's
[[Page S1119]]
insistence on irresponsible tax cuts, and I use the word advisedly.
I know something about balancing budgets. I was a senior Democrat on
the Senate Budget Committee that produced the first balanced budget in
30 years. We did such a good job that when President Bush took the oath
of office, he was presented with a rosy financial picture like no
President in the history of our country has ever seen.
We had budget surpluses as far as the eye could see. In 2000, we had
a budget surplus of $236 billion. In 2001, President Bush enjoyed a
surplus of $128 billion. We were ready to pay off our national debt by
the end of President Bush's last term. We were in the middle of the
longest economic expansion in the history of our country. But the
Republicans plunged into massive tax breaks for the wealthy and the
special interests, tax breaks that will cost $3.4 trillion to make them
permanent over the next decade. One-third of that, more than $1
trillion, will go to the richest 1 percent of our population.
So here is how the Republican tax cuts translate. If you make $1
million a year, you get an average tax cut of $136,000, but if you make
less than $20,000 a year, you get a whopping $19. To what end? Instead
of paying off our national credit card bill, President Bush and the
Republican majority are set to double our national debt. If we continue
on this path, our national debt will be more than $12 trillion by 2011.
With this bill, we are being asked to approve another $50 billion
charge on our credit card. The most tragic thing is that there is no
reason to charge these tax cuts to the national credit card.
When we were considering this bill a few weeks ago, our senior
colleague on the Budget Committee, Senator Conrad, offered a way to pay
for these tax cuts by closing corporate loopholes. Closing these
loopholes would have shut down abusive foreign tax shelters. I don't
understand why we should give cover to abusive foreign tax shelters. It
would have made polluters pay to clean up the damage they cause to our
environment, it would have required tax withholding on payments to
Federal contractors, such as Halliburton, just like every American has
on their paycheck. Every Member on this side of the aisle voted for
budget discipline, and every Member of the other party voted for budget
recklessness.
We still have a chance to put a stop to this. We can adopt my motion.
It is simple. It says to the conferees: Don't increase our national
debt. Is that too much to ask, don't increase our national debt?
Of course, we could go ahead and get a second mortgage on the White
House or this Capitol Building or the Pentagon. Every day people across
America will take a second mortgage in a similar situation. ``Similar
situation'' means when your debt exceeds your ability to pay it down.
The administration is willing to do that.
So if my colleagues think we should saddle our children and
grandchildren with more debt, then I suggest they oppose my motion, but
if they think it is wrong to run up our Nation's debt so special
interests, such as Halliburton and polluters, can get off scot-free,
then vote for my motion.
Every American's share of the national debt now is $27,529. This bill
raises that debt another $170 per adult and child in this country. By
voting for my motion, we say no to debt for our kids.
I urge my colleagues to support this motion and show that they want
some fiscal responsibility put into place.
I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I see several Senators on the floor. I
believe--and perhaps someone can correct me--the Senator from New York
was here earlier.
Motion to Instruct Conferees
Mr. SCHUMER. Mr. President, I wish to offer a motion.
Mr. BAUCUS. Mr. President, I ask that the pending motions be set
aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report the motion.
The legislative clerk read as follows:
Mr. Schumer moves that the managers on the part of the
Senate at the conference on the disagreeing votes of the 2
Houses on the Senate amendment to the bill H.R. 4297 (to
provide for reconciliation pursuant to the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res.
95)) be instructed to report a conference report that
includes the Senate-passed provision to extend the above-the-
line deduction for tuition and fees through December 31, 2009
(section 103), before it includes the House-passed extension
of lower tax rates on capital gains and dividends (section
203) given budget constraints, noting that a conference
report which maintains the tuition deduction will provide
needed tax relief to more than 4,000,000 American families
each year that are struggling to keep pace with rising
tuition costs.
Mr. SCHUMER. Mr. President, in the Senate-passed tax reconciliation
bill, we have recognized the importance of the tax deduction for
college tuition, and the bill we are sending to conference extends it
for 4 additional years, through 2009. Unless extended by the 109th
Congress, the deduction will not be available to taxpayers filing 2006
returns. It is urgent that the provision be extended in this bill, so
families can plan for their kids' education.
The House bill, in sharp contrast with the bill that the Senate
passed with 66 votes, extends this common-sense, middle-class tax
relief for only 1 year. Given that we face choices and budget
limitations, and we can't do it all, this motion instructs the Senate
conferees to insist that the conference report should include the
Senate-passed 4-year extension of the tuition deduction, rather than
extending the tax cuts for dividends and capital gains that will not
expire for nearly 3 years.
That is the gist of my motion. We simply do not need to take action
on dividends and capital gains today, but on issues such as the college
tuition deduction and the alternative minimum tax, Congress must act
now. If we can not do it all under the reconciliation limits, then the
tax cuts for the middle class that have already expired should take
priority.
The supply-siders who insist that cutting taxes for millionaires in
2009 is more important than cutting taxes for middle-class families
this year argue that low tax rates on investments are central to our
economic well-being.
Like many of my colleagues, I agree that lower taxes are generally
preferable to higher taxes. That is not a controversial position. The
question is, when we have large budget deficits, what are our highest
priorities?
We have to make choices. And in today's information-driven economy, a
college degree is no longer a luxury, it is a necessity.
In terms of long-term economic growth and developing this country's
human capital--which is ultimately the true source of innovation and
competitive advantage--we could make few better investments than
ensuring that future generations have access to an affordable college
education.
And talk about a tax cut that pays for itself over time. According to
the Census Bureau, workers 18 and over with a bachelor's degree earn an
average of $51,206 a year, while those with a high school diploma earn
$27,915, and the disparity has been growing over time. College
graduates make more money, and they will pay more in taxes as a result.
Making college easier to afford is a real investment, and you don't
need so-called dynamic scoring to make the case.
The challenge for American families is that the cost of college
tuition has increased faster than any other major consumer item,
including health care, over the last 20 years. It has skyrocketed from
$5,156 in 1981 to $29,026 in 2005, an increase of 462 percent.
Even in real, inflation-adjusted dollars, the price of a 4-year
public or private college education has almost doubled over the past
two decades.
While many of my colleagues talk about lower taxes on investment,
when a family spends money on college tuition, they are investing too.
These families may not have a lot of money in taxable financial
investments--more than three-quarters of U.S. households earn less than
$1,000 in taxable income from investments, such as capital gains and
dividends--but they are investing a lot in their kids' education.
In today's global, interconnected world, who is to say that these
investments in human capital are not just as important, if not more so,
than the buying and selling of stocks?
I urge each of my colleagues to think about how quickly tuition costs
are rising in their States and consider whether the majority of
taxpaying
[[Page S1120]]
families in their States really need an extension of capital gains
relief or whether they really need relief from the AMT and college
tuition costs.
Here are just a few examples from my State:
At Adelphi University on Long Island, tuition cost $5,114 in 1983 and
$17,800 in 2003-2004, a more than three-fold increase.
At SUNY Purchase in Westchester County, tuition increased from $1,005
in 1980 to $4,079 in 2003-2004, or 4 times as much.
At Niagara University outside Buffalo, tuition has nearly quadrupled,
from $3,300 in 1983 to $17,380 in 2003-2004.
I am sure each of us has similar stories to tell. I urge my
colleagues to support my motion, and keep the college tuition deduction
in place for at least 4 more years.
The skyrocketing rise of college tuition is not the only trap
ensnaring an unsuspecting, and undeserving, American middle class. The
individual Alternative Minimum tax is another, and I would like to
speak for a moment on the motion to be offered by the minority leader.
Unless we act, the alternative minimum tax's crushing burden will be
felt by 17 million more middle- and upper-middle income taxpayers this
year than in 2005, and millions more in the years to come. AMT relief
is a critical part of the Senate's version of this bill and we all must
do everything we can to ensure that this tax--which affects middle- and
upper-middle class taxpayers--is addressed this year.
It would be nearly impossible to overstate the AMT issue in its
importance and urgency. By the end of the decade, the AMT will ensnare
more than 30 million taxpayers, the majority of which will have incomes
below $100,000, and the National Taxpayer Advocate at the IRS has
identified the alternative minimum tax as the most serious problem
facing individual taxpayers.
Here are a few statistics I want to reinforce for my colleagues,
which I mentioned on the floor earlier this month:
The year 2006 is the tipping point for the AMT, as the number of
taxpayers affected nationally will explode from 3.6 million to more
than 20 million, if the Congress fails to act;
A family with two children will become subject to the AMT at about
$67,500 of income in 2006; and a family with five children will start
owing AMT at about $54,000 of income this year, if the Congress fails
to act;
In 2004, only 6.2 percent of families earning $100,000 to $200,000 a
year were subject to the AMT, and that number will explode to nearly 50
percent this year, if the Congress fails to act; and
Starting in 2008, the average married couple with two children
earning $75,000 or more will find that more than half of the tax cuts
they have been expecting from the various laws passed since 2001 will
be taken back via the AMT, if the Congress fails to act.
If AMT relief is extended through 2006, about two-thirds of the
benefits will be realized by families earning under $200,000, with more
than half of the total benefits going to families with incomes between
$100,000 and $200,000. In New York and many other States, particularly
in or near major cities, a combined income of $100,000 or $150,000 does
not make you rich.
Contrast this with the tax relief for dividends and capital gains,
where more than half of the total benefit goes to families with income
over $1 million. This is more than 50 percent of the benefit going to
less than one-half of one percent of all taxpayers in the country.
It was for these reasons that 73 Senators voted earlier this month to
support a sense-of-the-Senate resolution that AMT relief should be a
higher priority for this Congress than a dividend and capital gains tax
cut. The American people now expect us, and our conferees, to follow
through on that pledge.
When you consider the statistics I mentioned, about who will become
subject to the AMT this year if we fail to act, it becomes pretty
obvious that addressing the AMT problem--or extending the college
tuition tax cut--should be far more important than extending a tax cut
on investment income that doesn't expire for nearly 3 more years. That
is common sense, and it is an entirely separate question from who
benefits from which tax cut, or what your ideology may be.
In conclusion, we need a bill back from conference that mirrors the
previous Senate versions of reconciliation. We passed a bipartisan bill
that excluded the dividends and capital gains cuts and provided
generous AMT relief for 2006. That bill passed the Senate with 64
votes. Two weeks ago, a modified version of the bill received 66 votes.
I strongly encourage our conferees to bring a similarly bipartisan bill
back from conference.
Mr. BAUCUS. Mr. President, even though the hour of 8 is about to
arrive, I yield whatever time the Senator from Texas requires.
The PRESIDING OFFICER. The Senator from Texas.
Mrs. HUTCHISON. Mr. President, when the hour of 8 o'clock arrives, I
ask to be notified. I wish to speak on the motion made on my behalf by
Senator Grassley earlier to instruct conferees to make the sales tax
deduction permanent.
This is very important to the States that have a sales tax but no
income tax. There are seven States that have no income tax. Yet the
citizens of all the other States of our country are able to deduct the
income taxes they pay at the State level from their Federal income
taxes. Two years ago, we enacted the law that would bring sales-tax
States into equity so that every State would be treated the same. We
are now faced with another 2-year extension, or we will have this
inequity continue because the sales tax deduction that was enacted by
Congress lapsed at the end of last year. We have to make this deduction
permanent.
I ask that our conferees be instructed to make it permanent so that
every person in America can deduct their State taxes, whatever kind of
tax that may be, from their Federal income taxes. This is a matter of
equity. It is only fair that sales-tax States be treated the same as
income-tax States.
I urge my colleagues to vote to make sales tax deductions permanent.
Give people a choice. That is the right thing to do.
I yield the floor.
Motion to Instruct Conferees
The PRESIDING OFFICER. Under the previous order, the vote now occurs
on the motion to instruct conferees offered by the Senator from Iowa,
Mr. Grassley, relating to veterans.
Mr. BAUCUS. Mr. President, I ask unanimous consent that 2 minutes be
allocated to explaining these motions and that 2 minutes be equally
divided.
The PRESIDING OFFICER. Without objection, it is so ordered.
Who yields time?
Mr. BAUCUS. Mr. President, I will yield my time.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, I rise for the purpose of asking
unanimous consent to change the names of the sponsors of a motion that
I filed.
I ask unanimous consent that the Grassley motion regarding the
permanence of the child tax credit be identified as Grassley for Talent
and Snowe.
The PRESIDING OFFICER. Without objection, it is so ordered. Is there
further debate?
Mr. STEVENS. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is on agreeing to the motion. The clerk will call the
roll.
The legislative clerk called the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from North Carolina (Mrs. Dole), the Senator from Montana (Mr.
Burns), and the Senator from Arizona (Mr. McCain).
Further, if present and voting, the Senator from North Carolina (Mrs.
Dole) would have voted ``yea.''
Mr. DURBIN. I announce that the Senator from Indiana (Mr. Bayh), the
Senator from Delaware (Mr. Biden), the Senator from Vermont (Mr.
Jeffords), the Senator from New Jersey (Mr. Menendez), and the Senator
from Maryland (Ms. Mikulski) are necessarily absent.
[[Page S1121]]
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 92, nays 0, as follows:
[Rollcall Vote No. 14 Leg.]
YEAS--92
Akaka
Alexander
Allard
Allen
Baucus
Bennett
Bingaman
Bond
Boxer
Brownback
Bunning
Burr
Byrd
Cantwell
Carper
Chafee
Chambliss
Clinton
Coburn
Cochran
Coleman
Collins
Conrad
Cornyn
Craig
Crapo
Dayton
DeMint
DeWine
Dodd
Domenici
Dorgan
Durbin
Ensign
Enzi
Feingold
Feinstein
Frist
Graham
Grassley
Gregg
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Isakson
Johnson
Kennedy
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
Martinez
McConnell
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Obama
Pryor
Reed
Reid
Roberts
Rockefeller
Salazar
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
Wyden
NOT VOTING--8
Bayh
Biden
Burns
Dole
Jeffords
McCain
Menendez
Mikulski
The motion was agreed to.
The PRESIDING OFFICER. Under the previous order, there will be 2
minutes equally divided on the Dodd motion to instruct.
The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the Grassley
motion for Senators Talent and Snowe be the Grassley amendment for
Talent, Snowe, and Lincoln.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Connecticut.
Mr. DODD. Mr. President, parliamentary inquiry: How long did that
last vote require?
The PRESIDING OFFICER. Approximately 37 minutes.
Mr. DODD. I thank the Chair.
Let me briefly explain to my colleagues the distinction between the
vote you just took and the motion I offer. Very simply put, it is
whether we are going to pay for the language we just adopted with the
motion of the chairman of the Finance Committee to have $19.9 billion
for veterans and then not provide the resources to achieve that goal.
Everyone in this Chamber knows what will happen. That amendment will be
dropped before this bill even gets out the door. If you adopt the
motion I offer, you will support taking the $19.9 billion out of the
$64.8 billion that the House of Representatives proposes to spend on
the two-tenths of 1 percent of American taxpayers who make incomes of
more than $1 million a year. For that small amount, we can pay the
veterans who desperately need the kind of services all of us know they
need. If you want to do something for the Grassley amendment, then
adopt this motion which will provide the resources we have not adopted
with the Grassley provision.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, the words ``paid for'' also mean tax
increase. The difference between these motions is, the Grassley motion
does not contain the tax increase. The Dodd motion asks the conferees
to raise taxes.
Mr. DODD. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be.
The question is on agreeing to the motion. The clerk will call the
roll.
The assistant legislative clerk called the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from Montana (Mr. Burns) and the Senator from Arizona (Mr.
McCain).
Mr. DURBIN. I announce that the Senator from Indiana (Mr. Bayh), the
Senator from Delaware (Mr. Biden), the Senator from Vermont (Mr.
Jeffords), the Senator from New Jersey (Mr. Menendez), and the Senator
from Maryland (Ms. Mikulski) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 40, nays 53, as follows:
[Rollcall Vote No. 15 Leg.]
YEAS--40
Akaka
Baucus
Bingaman
Boxer
Byrd
Cantwell
Carper
Chafee
Clinton
Conrad
Dayton
Dodd
Dorgan
Durbin
Feingold
Feinstein
Harkin
Inouye
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
Wyden
NAYS--53
Alexander
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burr
Chambliss
Coburn
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Kyl
Lott
Lugar
Martinez
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
NOT VOTING--7
Bayh
Biden
Burns
Jeffords
McCain
Menendez
Mikulski
The motion was rejected.
Mr. FRIST. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. FRIST. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Unanimous-Consent Agreement--Motions to Instruct
Mr. FRIST. Mr. President, I ask unanimous consent that the only
motions to instruct be those currently pending and that no other
motions be in order; I further ask consent that no amendments be in
order to the motions; provided further that when the Senate adjourns
this evening, all remaining debate time under the statute be considered
as having expired; further that when the Senate convenes tomorrow, the
Senate begin to vote in relation to the motions, with the Republican
alternatives occurring prior to the votes in relation to the Democratic
amendments; and I send a list to the desk with the order of votes;
further that prior to the Kennedy motion and the Grassley motion on
capital gains/dividends, there be 2 minutes per side for debate prior
to the votes on each, with debate before all other votes limited to 2
minutes equally divided and all votes after the first vote in the
sequence be limited to 10 minutes each.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________