[Congressional Record Volume 152, Number 19 (Wednesday, February 15, 2006)]
[Senate]
[Pages S1323-S1325]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE ALTERNATIVE MINIMUM TAX

  Mr. WYDEN. Mr. President, millions of Americans are now going through 
a paperwork nightmare, trying to complete their taxes. They are trying 
to find their 1099s and their W-2s and their schedule this and schedule 
that. They shout across the room: Honey, can you find the copy of the 
receipt for that copier we bought back in March?
  What I am going to do between now and April 15 is highlight some of 
the ways this Tax Code gratuitously complicates the lives of all our 
citizens--middle-income folks, low-income folks, and the affluent. I am 
going to be pointing out specific provisions in the Tax Code and try to 
describe how it does not have to be this way. We do not have to have a 
``deadwood'' tax bureaucracy, where we now have had more than 14,000 
changes. That comes to something akin to three for every working day in 
the last 20 years.
  Our citizens are going to spend more this year complying with the Tax 
Code than this country spends on higher education. We are going to 
spend $140 billion complying with the needless kind of bureaucracy that 
I am going to describe this morning. It is my intent between now and 
April 15 to discuss this. I am going to start today with the 
alternative minimum tax, which is true water torture for middle-class 
folks who basically have to figure out two taxes, their taxes and the 
alternative minimum tax. There is a whole set of complicated procedures 
here. After I complete this week's presentation on the alternative 
minimum tax, it is my intention to go next to the earned income tax, 
which is also mindlessly complicated.
  Then I intend to focus on a number of the provisions for those who 
are very affluent that strike me, again, as defying common sense in how 
they are written.
  Today, I want to begin by focusing on the alternative minimum tax. It 
is, of course, a crushing tax for millions of middle-income people, 
folks who definitely do not consider themselves fat cats. Across this 
country, 3.6 million taxpayers were impacted by the alternative minimum 
tax this year. The number is expected to rise to over 19 million by 
2006 unless the Congress acts this year.
  The form that you use for the alternative minimum tax is form 6251. 
The first line sums up what all of this has come to. The first line 
says:

       If filing Schedule A (form 1040), line 41 (minus any amount 
     on form 8914, line 2) and go to line 2. Otherwise enter the 
     amount from form 1040, line 38 (minus any amount on form 
     8914, line 2) and go to line 7. (If less than zero, enter as 
     a negative amount.)

  I think it is pretty obvious that what I have read is, for all 
practical purposes, incomprehensible. You would have to have a Ph.D. in 
economics. What it means is that in order to fill out form 6251 for 
your minimum tax you have to fill out not just form 1040 but also form 
8914. How much time is that going to add to tax preparation? What about 
trying to understand form 8914, for those who may have to fill it out?
  Are people in this country going to have to become CPAs to fill out 
this tax requirement that affects millions of middle-class people? I 
bring this up because it does not have to be this way.
  I would like to now post the alternative that I have developed in my 
Fair Flat Tax Act, S. 1927. On line 1, instead of all the mumbo jumbo I 
read--it is real simple--all you have to state is whether you are 
single, married, head of a household, qualifying widower.
  I filled out my one-page 1040 form that my legislation mandates in 
about a half hour. That alone is a bit of a revolution in the Senate 
Finance Committee, or the tax-writing committee in the other body, 
because it has been a long time since anybody who wrote tax laws could 
fill out their own returns. I bring this up only by way of saying let's 
make sure people understand how much deadwood and legal mumbo jumbo and 
needless complication there is in the Tax Code. That is why I have 
started today with the burdensome requirements of the alternative 
minimum tax. But I am going to go on, in the weeks ahead, to a number 
of other kinds of provisions.
  As a result of what I read on the alternative minimum tax, lots of 
folks simply turn to tax preparers. This year we will spend $140 
billion on tax preparation. That is more than the Government spends on 
higher education. It is pretty obvious why. There were 14,000 changes 
in the Tax Code since the last major overhaul, three significant 
changes for every working day in the last 20 years.
  What I do in my fair flat tax legislation is simply say to the 
distinguished Presiding Officer of the Senate, the distinguished 
Senator from Oklahoma: You take your income from all your sources, you 
subtract your deductions, you add your credits, add it all up, send it 
to the IRS, and say: Have a nice day, I am done.
  One page, 1040 form--somebody called me about it yesterday and we 
discussed how long it took me to do it. I mentioned I could do mine in 
half an hour. They said: Ron, it only took me 15 minutes.
  That is what this is all about. I am not sure the Congress 
understands how this body has permitted this mindless bureaucracy, a 
bureaucracy that only can be described as deadwood, a bureaucracy that 
has lost all kind of connection with what the middle class in this 
country is all about. And I want to change it.
  I believe we ought to start tax reform by simplifying the Code. Then 
let us

[[Page S1324]]

change the tax system so that all Americans have the opportunity to 
climb the ladder of success. One way you do that is to change a set of 
rates that now have the second richest person in America, Warren 
Buffett, paying a lower tax rate than his receptionist. The Tax Code 
discriminates against work.
  I am not interested in soaking anybody. I believe in markets, and I 
believe in creating wealth, but as we saw today where we have very low 
rates in savings for the middle class, it is because they cannot keep 
up. Their wages aren't even keeping up with inflation. Their concerns 
are about those matters where the second word is ``bill''--the tax 
bill, the medical bill, the gas bill, the heating bill, and the 
education bill.
  We say with my legislation that we are going to end the 
discrimination against work. We will protect 90 percent of all interest 
income earned by our citizens--their house, the capital gains they may 
be able to enjoy if they sell it, their savings accounts, their life 
insurance. I want us to build a new savings ethic. I do that in this 
legislation as well. But for the life of me, I can't figure out why we 
can't get both political parties to get moving on this issue.
  The President has an advisory commission. They asked me what I 
thought about it. I said: Look, I have a one-page 1040 form which will 
simplify this code for everybody. The President's commission report is 
a bit longer, but for purposes of Government work, they are pretty 
close together.
  So why not start with simplification? Why not start with the rates I 
have proposed which I would like to bring to the attention of the 
Senate? The first bracket of rates in my legislation is 15 percent, the 
second bracket is 25 percent, and the third bracket is 35 percent. That 
is what Ronald Reagan proposed. Those are the exact brackets Ronald 
Reagan proposed in 1986.
  Now, much has changed. I would be the first to acknowledge that. 
Certainly the AMT hits much harder than anything that was anticipated 
in the 1980s. But I am interested in being flexible with respect to the 
rates.
  If the Senate, after bipartisan deliberation on a fair flat tax, 
wanted to have 13, 23, and 33, that would be fine with me. The 
principle is we ought to say marginal rates are important; they send a 
very significant message with respect to growth. But let us treat all 
income the same. Let us particularly get rid of some of this mindless 
kind of bureaucracy.
  We are having a hearing today on the tax gap, the money that is not 
collected that ought to be paid. We all realize that is a good 
opportunity to generate revenue to help the middle class. If we pick up 
some of that money, we will drive the rates down for everybody in this 
country even more than I am proposing.
  People ask me what I stand for. I stand for the proposition that 
every American ought to have the opportunity to climb the ladder of 
success. And let us start by changing the Tax Code, where the second 
wealthiest person in the United States, Warren Buffett, pays a lower 
tax rate than his receptionist. How is the receptionist going to be in 
a position to be in the middle class if we don't treat them fairly?
  I also think it is worth noting that when you graduate from a college 
in Oklahoma or in Illinois, when you go out into the marketplace and in 
the first job with your new college degree, after all that hard work, 
you are going to pay a higher tax rate than Warren Buffett, the second 
wealthiest person in this country.
  We need incentives for investment.
  I protect 90 percent of the interest income earned by people who are 
saving and showing the kind of financial discipline which is necessary 
to get ahead.
  But we can have a Tax Code that is simpler, flatter, and fairer.
  I wrap up by saying to both Democrats and Republicans, I believe this 
is really what you are all about.
  For Democrats, what could be more important than a message about 
giving the middle class a fair shake, the opportunity to climb the 
ladder of success and get out from under some of this bureaucracy?
  Our friend from Illinois is here, Senator Durbin. His colleague from 
the House, Congressman Emanuel, has tax clinics in Chicago for families 
who can't fill out the earned income tax credit because it is too 
complicated. I have outlined how absurd the requirements are for the 
alternative minimum tax and why it is difficult for folks to comply. 
But this is something which affects everybody--poor folks with the 
earned income tax credit and the middle-class folks with the 
alternative minimum tax.
  As far as I can tell, many of the affluent in this country are saying 
to themselves: What really counts is finding a better accountant to get 
me more tax dodges because that is the way you get ahead in this 
country, not by innovating but by finding an accountant to get you more 
tax dodges.

  It doesn't have to be this way. The Code doesn't have to be as 
complicated as it is. The Code doesn't have to discriminate against 
people who work for a living. The late President Reagan accepted that 
principle in the 1986 tax reform.
  We can do this. Certainly the administration, after talking about how 
they were interested in tax reform and forming a commission, is going 
to ask me and, I believe, other Members of Congress: Where are the 
deadlines?
  This is an opportunity for the administration to have a big second-
term initiative. Ronald Reagan did this in the middle of his second 
term because he reached out to Senators such as Bill Bradley and the 
chairman of the Ways and Means Committee in the other body, Congressman 
Rostenkowski.
  It is time to cleanse this Code. It has been 20 years since real 
reform, 14,000 changes, spending more on preparation than the 
Government spends on higher education. That is a disgrace. It is not 
right to working people. It is not right to all taxpayers, regardless 
of their income.
  It is my intention to come back to this Chamber again and again--but 
particularly between now and April 15--as I have done today with the 
alternative minimum tax.
  I would like to pose once more the language for folks who are middle 
income and trying to comply with the alternative minimum tax. If 
anybody who is not a CPA can figure out the first line of the AMT, I 
urge them to call me. My guess is they can't. They will have to call 
their accountant to sort it out.
  I also wish to point out for people trying to get help this morning 
that the IRS has an 800-number. We will post it on our Web site: 1-800-
829-1040.
  As I wrap up this presentation, let me contrast this, which is the 
dead wood in the tax bureaucracy today, with the legislation I have 
filed, the Fair Flat Tax Act, which replaces the legal mumbo-jumbo I 
have shown you with our section 1--just a handful of lines--describing 
whether you are single, married, head of household, or a widower.
  I know colleagues are waiting to speak.
  Mr. DURBIN. Mr. President, will the Senator yield for a question?
  Mr. WYDEN. Certainly.
  Mr. DURBIN. I would like to ask the Senator from Oregon through the 
Chair--first, I would like to tell him that about 10 or 15 years ago, 
in my hometown, my accountant in Springfield, IL, passed away, a man 
who had done the tax returns for my wife and me. After years of being a 
lawyer, I thought to myself: I can do this. I will fill out my own 
income tax return.
  I went back home Sunday afternoon and sat down to fill out what is a 
pretty simple income tax return for a Member of Congress. It took me 3 
or 4 hours, and then I had to come back to it the next day, and I filed 
it. I then found out I had made several glaring errors. This was before 
TurboTax, H&R Block's Web site, and all the rest of these things. But I 
thought: Let me do it myself. I tell the Senator from Oregon that I 
have an abiding respect for what he just said after that humbling 
experience.
  I would like to ask the Senator whether he thinks we would have more 
impetus for simplifying tax returns if Members of Congress had to file 
their own tax returns, prepare their own tax returns, and then submit 
to the American people the fruits of their labor as to whether they 
made mistakes?
  Mr. WYDEN. Mr. President, I thank the distinguished Senator from 
Illinois, who as usual is being a bit too logical. The fact is, if 
Members of the Congress had to go through this--because we

[[Page S1325]]

will have a lot who are paying the AMT, many who have investments of a 
variety of sorts--I believe that alone could trigger a bit of a 
revolution around here. I think the challenge is for people to see just 
the kind of tax hole we have dug ourselves into over the last 20 
years--14,000 changes, needless complications.

  I really do not see how a middle-class person can get ahead with a 
Tax Code that discriminates against work. The Senator from Illinois has 
been a champ for the middle-class kind of family.
  Here is the way it works. If a cop in Chicago gets a $500 pay raise, 
that cop pays 25 percent of his or her pay raise to the Federal 
Government in income taxes, and then they pay Social Security payroll 
taxes on top of that. If somebody in downtown Chicago makes all their 
money from capital gains and investment, they pay 15 percent on their 
capital gains and no Social Security payroll tax.
  Again, I have tried to emphasize that I am not for soaking anybody. I 
believe in markets, and I believe in creating wealth, as I believe 
Senators of both political parties do. But as the Senator from Illinois 
has pointed out, if Senators were really forced to deal with these 
kinds of situations themselves, starting with the Tax Code 
complications, when they fill it out on their own, that could start a 
revolution around here.
  I believe this is a bipartisan opportunity that comes along rarely.
  I will wrap up with one last point.
  I believe the Social Security reform showed a lot about what our 
citizens think about a vital American program. A lot of Americans love 
Social Security dearly, and there are a lot of rallies outside the 
offices of Members of Congress, with folks carrying signs saying, ``I 
love Social Security.'' I tell colleagues that there will be no rally 
outside your office with people carrying signs saying, ``We Love the 
IRS Code.'' This is something which could be reformed, could be changed 
on a bipartisan basis.
  Mr. DURBIN. Mr. President, if the Senator will yield for one question 
which I think gets to the concern people have about tax reform, it 
seems like a zero-sum game in this respect: If you end up lowering the 
taxes paid by someone in order to keep the same return to Government in 
revenue, you have to raise the taxes for others.
  So I ask the Senator to step back from his proposal for a minute. Who 
are the winners and losers?
  Mr. WYDEN. The Senator asks a good question. First, a quick word on 
my proposal, which is available from the Congressional Research Service 
and Jane Gravell, the top economist who is there to discuss it with 
Senators. It would actually reduce the deficit by about $100 billion 
over 5 years, making downpayments in terms of deficit reduction.
  But here is what the distribution profile looks like in terms of our 
legislation. We believe that upwards of 70 percent of the people in 
this country would get a solid tax cut. These are middle-class folks 
making $60,000, $70,000, $80,000, and $90,000. Essentially, what the 
Congressional Research Service has shown is that millions of middle-
class people would get relief. It is upwards of 70 percent. We have 
calculated that about 15 percent of the people in this country would be 
treated about the same.
  For example--and it is matter of public record, and I can discuss 
it--I have a Senate wage of about $160,000, and I have a bit of 
investment income. I come out about the same under my proposal as under 
the status quo. We have to make 6 or 7 percent of the people in this 
country who make virtually all their income from capital gains and 
dividends--not from wages--pay a bit more.
  So that is what the distributional effect of one actual proposal 
looked like. That was again very similar to what happened in 1986 when 
Ronald Reagan, after having started his Presidency with a set of tax 
changes--and my colleague will remember they were largely for 
investment--did an about-face and passed a reform proposal that gave 
real relief to middle-class people.
  I want to close by thanking the Senator from Illinois, who I know has 
a great interest in this subject and has been a strong champion of the 
middle class.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. DURBIN. Mr. President, 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. FEINGOLD. 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. FEINGOLD. Mr. President, it is my understanding the Senator from 
New Hampshire is going to make some remarks and I ask unanimous consent 
that I be recognized after he has completed his remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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