Congressional Record, Volume 152 Issue 57 (Thursday, May 11, 2006)

[Congressional Record Volume 152, Number 57 (Thursday, May 11, 2006)]
[Senate]
[Pages S4385-S4447]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

TAX INCREASE PREVENTION AND RECONCILIATION ACT OF 2005--CONFERENCE
REPORT

The PRESIDENT pro tempore. Under the previous order, the Senate will
proceed to the consideration of the conference report to accompany H.R.
4297, which the clerk will report.
The legislative clerk read as follows:

The committee of conference of the disagreeing votes on the
two Houses on the amendment of the House to the bill (H.R.
4297), to provide for reconciliation pursuant to section
201(b) of the concurrent resolution on the budget for fiscal
year 2006, having met, have agreed that the House recede from
its disagreement to the amendment of the Senate and agree to
the same with an amendment and the Senate agree to the same,
signed by a majority of the conferees on the part of both
Houses.

The PRESIDENT pro tempore. The Senate will proceed to the
consideration of the conference report.
(The conference report is printed in the House proceedings of the
Record of May 9, 2006.)
The PRESIDENT pro tempore. Under the previous order, there are 8
hours of debate equally divided on the conference report.

recognition of the majority leader

The majority leader is recognized.

schedule

Mr. FRIST. Mr. President, in a moment, we will begin consideration of
the conference report to accompany the Tax Relief Act. Our order from
last night provides for up to 8 hours of debate from the statutory
limit. The chairman and ranking member of the Finance Committee will be
on the floor throughout the day to yield some of that time to Senators
to speak. I hope we will not need the entire 8 hours and that we could
yield back some of that time and vote a little earlier today. We will
see how we are progressing in the early afternoon and alert Members if
that is possible and, indeed, I hope that it will be.
Following the vote on the adoption of the Tax Relief conference
report, we will have up to 1 hour of debate before the vote on invoking
cloture on the small business health plans bill. If cloture is invoked
on the small business health plans bill, then we would stay on that
bill until we complete it. I hope the Senate will invoke cloture on the
bill and will not miss the opportunity to help our small businesses
provide more affordable health care benefits to their employees and
families.
We have two important votes this afternoon. We will alert Senators as
to the timing when we get a better idea of the amount of debate that is
needed.

unanimous consent agreement--S. 2611

Mr. FRIST. Mr. President, I ask unanimous consent that unless cloture
is invoked on the pending substitute to S. 1955, on Monday, May 15, at
a time to be determined by the majority leader after consultation with
the Democratic leader, the Senate proceed to the consideration of S.
2611, the immigration bill. I further ask that when the Senate agrees
to a request for a conference or the Senate requests a conference on
this bill and the Chair is authorized to appoint conferees on the part
of the Senate, the ratio of conferees be 14 to 12; provided further
that from that ratio, the first 7 Republican Senators from the
Judiciary Committee and the first 5 Democratic Senators from the
Judiciary Committee be conferees; finally, I ask unanimous consent that
the majority leader select the final 7 from the majority side and the
Democratic leader select the final 7 for the minority side.
Before the Chair rules, I wish to be clear that the two leaders
anticipate full session days on this bill, with a considerable number
of amendments debated and voted on each day. We intend to allow
amendments to come forward and to be voted on in an efficient way. This
is a comprehensive immigration bill, and therefore it is important for
Senators to have adequate time to have their amendments considered.

[[Page S4386]]

The PRESIDENT pro tempore. Is there objection? Without objection, it
is so ordered.

recognition of the minority leader

The minority leader is recognized.

immigration

Mr. REID. Mr. President, this is one of the rare times that we have
been able to move forward on a bipartisan basis. The procedural aspects
of this immigration debate are over with. The two leaders want a
comprehensive immigration reform bill. What is going to be in it? I
don't know and the Republican leader doesn't know. But, Mr. President,
this is going to take a lot of hard work.
I want to extend to the majority leader my appreciation and my
acknowledgment of the difficulty of arriving at this point. It has been
very hard for both of us. And as the time went on after the Easter
recess, it didn't get easier, it got harder. But I do believe that this
is what the Senate is about, and we can move forward in a way that I
think the country will acknowledge. There is a lot of hard work to be
done, but we can do it well.
I receive my fair share of criticism, as does the Republican leader.
But I want everyone to know we try very hard to move things along. It
is not easy with the political atmosphere we find in the country today,
but we have done this on this bill, and it has been extremely
difficult. I don't want to sound like poor me, but that has been pretty
hard to do. I will always remember the difficulties we have had, but
also things such as this, as we know, in life bring people closer
together. I think the majority leader and I have had--if we have talked
about this bill once, we have talked about it 25 times. I have nothing
but admiration for the Republican leader for arranging things so we can
be at this spot today.
Mr. FRIST. Mr. President, what the Democratic leader and I have laid
out is a way to get onto this bill, and as you can tell, both of us
have been working in good faith on various issues that have been raised
on the floor. We both appreciate our colleagues' patience in arriving
at this point. We both anticipate a lot of challenging times over the
period which will begin, in all likelihood, on Monday on what we all
know is a very difficult bill.
The process that has been laid out is one that we both feel is very
fair and will give the opportunity for the will of the Senate to
express itself on a difficult issue to which there are not very many
clear-cut answers. So I look forward to beginning that debate in the
very near future, and I look forward to having dignified debate, debate
that under the leadership of the two managers will need to be
efficient, effective, and fair, but we will need to keep moving through
that debate in order to allow the Senate's will, through amendment and
voting on those amendments, to be reflected.

modification to unanimous consent agreement--s. 2611

Mr. FRIST. Mr. President, I modify the unanimous consent request so
that it is clear that it is applicable to S. 2611 or a House bill in
which we conference using the language of S. 2611.
The PRESIDENT pro tempore. Is there objection? Without objection, it
is so ordered.

immigration

Mr. REID. Mr. President, I also want the Record to be spread with the
fact that this is not a time for anyone to claim victory. Certainly, in
this process, I didn't get everything I wanted. I think the majority
leader didn't get everything he wanted. But in the legislative process,
building consensus is the art of compromise.
I look back to the days when I tried cases. I found some of the best
settlements were those where basically both sides were kind of unhappy
about it, and I think that is what we have gotten. I certainly feel
that this is a fair compromise procedurally with these intricate rules
we have in the Senate. This is going to work well.
I also want to repeat what the majority leader said. This is going to
take a lot of work. We have a lot of amendments. This is not a two- or
three-amendment bill. There are a lot of amendments. People on both
sides of the aisle have been waiting for weeks to offer amendments. We
are going to have to work our way through these. It is going to take a
lot of cooperation.
There may come a time during this debate that the managers are going
to have to move to table some of these amendments. I hope we can
arrange for time on these amendments. If we can't, we will do what has
to be done in the Senate and move forward as expeditiously as we can.
People have strong feelings about this bill on both sides of the aisle.
But I feel very good that we have a road forward, and I believe we will
complete this legislation and have, for the American people,
comprehensive immigration reform that deals with security, deals with
the guest worker program, deals with the people who are undocumented,
and also will deal with a better way of enforcing employer sanctions.
The PRESIDENT pro tempore. The majority leader is recognized.
Mr. FRIST. Mr. President, I will close by saying it is important we
finish this bill before the Memorial Day recess. I have said that
several times in my statements over the last couple of weeks, and I
think in my discussions with the Democratic leader, we both agree that
once we start this bill, we will stay on the bill until we complete it.
Mr. GRASSLEY. Mr. President, am I right that we are prepared to
proceed to the text of the conference reconciliation report?
The PRESIDENT pro tempore. The Senator is correct. That is the
pending business. There are 8 hours equally divided.
Mr. GRASSLEY. Mr. President, before I explain what is in the
conference report, I want to make clear what the tax policy is we are
talking about. For 90 percent of the legislation that is before us, we
are talking about maintaining existing tax policy as it has been,
either from the 2001 Tax Reduction Act or the 2003 Tax Reduction Act.
The reason I want to take some time to explain that--and that is not
part of my explanation of the conference report--is because the public
listening in and/or my colleagues are going to be confused over the
words ``tax cuts.'' For 90 percent of this legislation, we are not
cutting anybody's tax bill. What we are trying to do because of sunset
is we are maintaining for the next year, or in some cases the next 5
years, existing tax policy. So I don't want anybody to come over and
say we are cutting taxes.
If we don't pass this legislation in the year 2006, or in some cases
in the years 2009 and 2010, people are going to get an automatic
increase of taxes without a vote of Congress. So we are talking about
maintaining existing tax policy. The reason we are talking about
maintaining tax policy would be for two reasons. In the case of
dividend and capital gains tax policy, the tax policy we adopted in
2003 is the reason we have created 5.2 million jobs.
That is why the economy is rolling. I know the public is listening.
When they pay $3 for gas, the $3 for gas blinds them to the fact that
we had 4.8 percent growth last quarter. It blinds them to the fact that
we have 4.7 percent unemployment, which is practically full employment,
and some economists would tell you it is full employment, or that we
have a low inflation rate.
It seems that when my constituents, and probably constituents in
every State, see high gasoline prices, that is all that is on their
mind. I don't blame them because I put gasoline in my car--I don't have
some driver do it, I put it in myself--and I know what the price of
gasoline is. I know a lot of my constituents go out of the same
convenience stores I do with a bottle of water. Bottled water, if you
buy it in these small containers, you are paying about $8 a gallon for
water and never complaining about the cost for water but complaining
about $2.63 gas that you can buy in Des Moines, IA, this very weekend.
We are talking with regard to capital gains as maintaining existing
tax policy. Just so everybody understands, we are not cutting anybody's
taxes below what they are today. We are maintaining existing tax
policy. But if we didn't take the action we are taking today, taxes
would automatically go up in these areas by 33 percent, and for low-
income people, who have zero capital tax gains, they go up--what would
that be? One hundred percent. If they are not paying taxes today and
they start paying taxes at the rate everybody else pays, it is a 100-
percent increase in taxes.

[[Page S4387]]

I don't know why people would argue with us, when we have a zero
capital gains for lower income people, that you would want to tax lower
income people. But if we do not continue this tax policy, that is the
case.
I wish to emphasize again what Chairman Greenspan has said about the
2003 tax policy we are continuing today, and that is that it is
responsible for the economic recovery we have had of 18 quarters of
economic growth and 5.2 million jobs being created.
The other part of the bill is to continue tax policy existing since
2001. That existing tax policy is that 22 million Americans--well, no,
I better say it this way. That tax policy since 2001 has been that when
we reduce people's taxes here on the one hand, we are not going to take
it away from them on the other hand by having them hit by the
alternative minimum tax. I am going to explain this in greater detail,
but up front, a good part of this bill is to maintain the policy
Senator Baucus and I have had in place since 2001 of holding people
harmless from the alternative minimum tax. In other words, if you get a
tax decrease here, we are not going to have the same people pay a tax
over here on the alternative minimum tax.
As far as the alternative minimum tax is concerned, I think the best
policy is what we did in the late 1990s when this body sent to
President Clinton a bill to repeal the alternative minimum tax, and he
vetoed it. I don't know how many Democrats we are going to have
condemning us for not doing more on the alternative minimum tax. What
more could you do than what we did in 1999 and repeal a very bad tax
policy, the alternative minimum tax? And a Democratic President vetoed
it. But they will probably be the ones complaining and crying the most
because we are not doing more.
What we are talking about here today is maintaining present tax
policy through this reconciliation bill for roughly 90 percent of it.
Ten percent of it would be some change in tax policy. If people want
details on that, I will be glad to go into that.
Maybe another thing I ought to explain--and it is more personal
because I am going to be the chief negotiator for the Senate on this
bill because I am chairman of the Senate Finance Committee--I have
negotiated for a long period of time with Chairman Thomas, and
everything has worked out fine as compromises have to work out fine,
and I think I have done a very good job of protecting the Senate's
position.
Let me remind everybody, all of my colleagues, particularly
Republicans, particularly about a telephone call from the President on
the Thursday before we began our Easter break--the exact date I don't
have in mind--and in meetings with the leader and the Speaker and all
this, we were just very anxious to get something done before Easter. At
that point, the position of the House was that we were not going to
have hold harmless on AMT. Consequently, I didn't agree to this
agreement. I believe I probably disappointed a lot of my colleagues and
the leader and the Speaker and the President of the United States
because I just didn't, how would you say, surrender to a House position
that we were doing too much on AMT.
Our policy since 2001 has been hold harmless, and I believe that is
what we passed three times on the floor of the Senate: in November last
year, January this year, February of this year, as the Democrats made
us go through three periods of 3 days of debate on the same tax bill
that ended up passing by a bipartisan majority of somewhere between 64
and 67. So it has been the policy of the Senate since 2001, reaffirmed
by three votes of this body in the last 6 months, to hold harmless.
I didn't believe I was doing 66 Senators a favor by agreeing to
something which would have 3.5 million--let's say more accurately 2.5
to 3 million taxpayers being hit by the alternative minimum tax out of
the 22 million to whom I have already referred. So it took a little
longer, and here we are--what, May 11, 1 month later than when it
originally happened. But we have hold harmless in this bill. Hold
harmless is in this bill.
Everything is going smoothly between Chairman Thomas and me. Nobody
is going to believe that because if you read the papers, we are always
at each other's throat. You know, those characterizations are entirely
wrong. He has strong convictions about tax policy, and he is the
negotiator for the U.S. House of Representatives. He has a right to
stand firmly for their positions, but I have a responsibility to stand
firmly for the Senate position, with the understanding that someplace
there are some compromises. I guess enough said on that point.
I have mentioned, in summation, before I go into explanation about
the conference report, and this is the third time, but it cannot be
said too many times because I don't know how many times you are going
to hear today--in fact, we ought to count how many times we are going
to say we are cutting taxes, we are cutting taxes, we are cutting
taxes. Would you keep track of that for me? I want to hear how many
times that is used. We are not cutting anybody's tax. Maybe we ought be
cutting people's taxes, but we are not. We are maintaining existing tax
policy as expressed by this body in the 2001 and 2003 tax bill so 22
million Americans don't get hit by the alternative minimum tax and so
that we have incentives for investment and taxes don't go up, and
capital gains and dividends, without a vote of the people in 2009 and
2010; so that we keep the incentives Chairman Greenspan said are the
reason we are having the economic recovery we have had for 18 quarters,
creating 5.2 million jobs, 4.8 percent economic growth, 4.7 percent
unemployment, et cetera.

We have moved to the final step in the tax reconciliation process to
which I have already referred that we dealt with three times and
probably 3 days each time during November, January, and February. We
have an agreement of the conferees from the House and Senate on a
conference report. The basic objective of this conference was to
produce a conference report that will pass both the Senate and the
House and be sent to the President.
To achieve that objective, we needed to focus our efforts on a true
bipartisan, bicameral compromise. As I said and will probably say again
today--but you have heard me say it over the last 3 months to my
colleague and friend, Senator Baucus--a compromise must be bicameral.
Likewise, I said to Chairman Thomas of the House and to House conferees
that the compromise should be bipartisan.
In the Senate, we passed a reconciliation bill for the second time
but the contents of the bill for a third time, on February 2, with a
bipartisan vote that included 66 Senators. So that obviously includes a
vast number of Democrats.
My preference was to continue working in conference to produce a
bipartisan compromise that could pass in the Senate. Unfortunately, I
doubt if we will get 66 votes for this conference report. But I am very
hopeful that we will pick up some Democratic votes.
Going into conference, everybody knew that the House bill and the
Senate bill were significantly different. The centerpiece of the House
bill was a 2-year extension of the 15-percent maximum tax rate on
dividends and capital gains and the zero percent tax rate that will
apply to taxpayers in the lowest two tax brackets. Such an extension
would continue the bipartisan tax policy enacted in 2003, a policy
which has been vital to our economy's recovery and continued growth.
The centerpiece of the Senate bill was a 1-year extension and
modification of the alternative minimum tax hold-harmless provisions.
This provision would keep 15 million American families from being hit
by the stealth tax. The AMT is a stealth tax because you really never
know when you are going to be hit by it. Hitting Americans with such a
stealth tax, the alternative minimum tax, is wrong. So, as I said
before, the AMT should be abolished. It is not abolished. We did vote
to abolish it in the late 1990s, but President Clinton vetoed that. So
here we are, since 2001, working in a bipartisan way to do what we call
hold harmless.
As I said at that particular time, my highest priority was to make
sure we kept our promise to make certain that no additional taxpayers
are brought into the AMT system on an annual basis, and that is the
purpose of the Senate's hold-harmless provision on alternative minimum
tax.
I will expand on that notion for a moment and be somewhat repeating
myself from my extemporaneous remarks,

[[Page S4388]]

but exactly 5 years ago today, May 11, 2001, Senator Baucus and I
announced the bipartisan deal that became the basis for historic 2001
bipartisan tax relief legislation. I say historic because taxes were as
high as they had ever been in the history of the country as a
percentage of the gross national product.
When newly elected President Bush released his budget for that first
year in 2001, his tax relief plan did not contain a general hold
harmless on the alternative minimum tax, and the House passed a bill
that did not have hold harmless provisions for the alternative minimum
tax. When Senator Baucus and I were negotiating the bipartisan plan, we
agreed on that bedrock principle of hold harmless--hold harmless on AMT
so no new people would get hit with it. Because they got a tax decrease
over here, we should not take their taxes away over here.
We agreed to make sure the AMT would not take the tax relief we were
providing. This is how we came up with the concept we refer to as hold
harmless. To me, it goes to a fundamental principle of transparency in
government: Don't promise taxpayers relief that you know they are not
going to really get.
Some of my friends on this side of the aisle--meaning Republicans--
rightly complain about doubletalk on alternative minimum tax that we
hear from Members on the other side, Democratic Members, the Senators
from so-called blue States. You remember the blue-red map in
Presidential elections of 2000 and 2004? Blue States generally go for
Democratic candidates for President, red States go for Republican
candidates for President.
I am going to refer to the blue States which are those that generally
vote Democratic. Senators from these States are generally hostile to
the tax relief we have provided in 2001 and provided again in 2003, and
seem to be sympathetic to tax hikes. They take this position despite
the fact that their constituents in these blue States, and represented
for the most part by Democratic Senators, tend to bear the highest per
capita Federal tax burden. The hostility of these Members seems to grow
to a white-hot intensity when anybody above, say, $100,000 in income
benefits from any tax relief package.
It has always been a strange disconnect to those of us on this
Republican side of the aisle because that intensity--and at times what
appears to be outright anger--seems to grow as the States' shade of
blue grows much darker. Ironically, the per capita income, living
costs, and Federal tax burdens tend to rise as the shade of the State
tends to get a darker blue. The implication appears to be that
constituents in these blue States should be happy to bear this high tax
burden as their Senators fight against tax relief for them. In fact,
Members from blue States seem to have no limit to the level of Federal
taxes they believe folks in their States should bear. Taxes can never
be too high, goes the rationale, as long as we keep growing the
public's dependence on more Federal programs.
When Members on the Republican side hear demagoguery on taxes
emanating from Members from blue States on a daily basis that we
shouldn't have tax cuts for high-income people, they ask, Why do these
folks then seem to change their mind when we are talking about the
alternative minimum tax? As you tend to get intense debate that we
ought to do something about the alternative minimum tax from the same
Senators who are complaining because we are giving too much tax relief
to high-income people in their various States, and the AMT happens to
most dramatically impact taxpayers between $100,000 and $500,000. How
is this any different from other forms of tax relief? They are hot and
heavy to have the AMT which helps their taxpayers in blue States, but
they are not hot and heavy to have tax relief in the first instance
when you vote to reduce tax rates.
If I go to some extent talking about this contradiction, it is a
contradiction that affects and bothers a lot of people on the
Republican side of the aisle. It is an argument we do not understand.
Frankly, it is a sentiment I have to overcome in my caucuses as I argue
for the AMT and for tax relief; and I have had to argue this
contradiction particularly with my House counterparts as we go to
conference to negotiate differences between the House and Senate and
try to explain to them why we need to do a hold-harmless provision on
AMT.
I had people from the other body who would say, What is wrong with
having an alternative minimum tax hit people in blue States who are in
the high bracket because their Senators are arguing we shouldn't reduce
the tax rates in the first place? It is a very difficult thing to argue
that sort of contradiction. I think it would help me a lot if they
would get off this kick.
I want to take a chart on the AMT and explain some of what we are
talking about. This chart will show the alternative minimum tax hold-
harmless benefits that have always been the bedrock of our tax bill
since 2001 because it is something Senator Baucus and I agreed on to be
our tax policy, how the hold harmless benefits taxpayers everywhere but
is especially important in the blue States.
We don't have a map with blue States versus red States. But the chart
you are looking at, and which I need to explain, is based upon 2003
return data because it is the most up-to-date data we have. But
projecting out the numbers, we think it would be entirely possible and
intellectually honest to double the 2003 figures. As a rule of thumb, I
am going to do that as I explain California being a blue State with 2
million taxpayers; Texas, not a blue State, a red State, but 1.2
million; Florida, a blue State, 900,000 taxpayers affected if we don't
do something about the alternative minimum tax as we have it in this
legislation; Illinois, a blue State, 848,000; New York, a blue State,
822,000; Pennsylvania, 694,000; Michigan, 640,000; New Jersey, 632,000;
Virginia, 568,000; and Massachusetts, 490,000.
I go to this length because Senators, particularly on the Democratic
side of the aisle, might think about voting against this bill; that in
all these States so many hundreds of thousands of people are going to
be hit by the alternative minimum tax if you do not help us get this
bill passed. Those are people who were not hit in 2005 but who will be
hit when they file on 2006 income.
The bottom line is in blue States versus red States implications
shouldn't decide this issue. As you can see, there are plenty of red
States affected as well as blue States. Again, that shouldn't matter.
We ought to do the right thing--and the right thing would be to pass
this bill and continue the hold-harmless policy Senator Baucus and I
have led the Senate through in the 2001 and 2003 tax bills, and also on
the Senate consideration of hold harmless in this conference report.

Senator Baucus and I understood that when we took resources in the
Finance Committee package to make sure that for at least 5 years this
broad-based tax relief we promised will not be undermined by the
alternative minimum tax.
Moving on, this conference agreement also contains some loophole
closures and tax-shelter-fighting provisions that raise revenue. There
are two reasons to raise revenue. The most important one is when we
have tax shelters that allow people to cheat on their income tax and
when we have loopholes that don't make sense, they ought to be closed
as a matter of fairness to all taxpayers. But they also raise some
revenue. We need some revenue in this bill to offset some provisions of
this bill so we didn't exceed the $70 billion reconciliation
instructions of Congress for us in the Finance Committee.
The House bill, however, didn't contain any revenue raisers. Although
we didn't come back with all the loophole closures, especially
clarification of something that needs to be done with the economic
substance doctrine defined, and the House conferees very much oppose
any change in that, we did make some headway on loophole closings and
closing tax shelter abuse.
Let me go back to economic substance. My argument for it: It raises a
lot of revenue. But we have had several courts that have instructed
Congress--and courts cannot make Congress do anything we don't want to
do--to define economic substance. By defining it, it brings in some
revenue.
I don't understand why it shouldn't be defined. My feeling is there
are a lot of K Street lobbyists and maybe a lot of lobbyists who aren't
on K Street who benefit from the loopholes that can

[[Page S4389]]

stretch economic substance in the Tax Code.
The Senate bill and the House bill that went to conference also
shared some similarities. Both bills sought to extend and extend and in
some cases modify certain provisions that expire at the end of 2005--
provisions such as the research and development credit, increase small
business expense, cost recovery for leasehold improvements, the savers
credit, or better said, the small savers credit; the deduction for
State and local sales tax in those States that is not particularly
valuable to those States that don't have a State income tax; the
qualified tuition deduction for college; and teachers' classroom
expense deductions. Local teachers who spend money out of their own
pockets to bring tools to the classroom can deduct that from their
income tax.
A true bicameral compromise would merge both bills in a way that
takes care of these common extenders which I mentioned, and many more I
did not mention.
Second, it accommodates the centerpieces of each bill which, as I
have explained this morning, are the AMT hold-harmless provisions on
the one hand and the extension of the dividends and capital gains tax
provisions as they now exist, not cutting capital gains and dividend
taxes below what they are presently, and providing as much tax relief
as possible by using appropriate revenue-raising measures.
We ended up with cornerstones of each bill in this conference report
and made progress on some of the revenue raisers, meaning loophole
closings, and tax shelter abuse closings. The extenders for the most
part--I guess almost entirely--will be addressed in another vehicle.
They are not part of this conference report. We have compromised and
agreed on that point. We also agreed to resolve key Senate priorities
in the extender vehicle.
Can I tell Members exactly what is going to be in that vehicle? I
can't because we are still negotiating. What I can tell Members is we
had good preliminary negotiations and I feel we have a solid foundation
to come to a fair compromise on these issues. The final determination
of those key Senate priorities will depend upon the vehicle that we
will go with and other parts of the agreement when it is finalized.
After laying out the basic structure of the conference agreement and
the Senate's key provision, AMT hold harmless, I want to talk about the
parts of the agreement the House needed.
The dividend and capital gains provisions in the House bill were met
by strong opposition from the other side.
A principal argument against this policy made over and over again by
the Democrats is that it is simply a tax cut for high-income people. I
use the words ``tax cut,'' and that brings me to emphasize once again
that if anybody says we are cutting taxes, we are maintaining existing
tax policy for an additional number of years. Without doing that, then,
we would get an automatic increase in taxes basically undercutting what
Chairman Greenspan has said about the goose that laid the golden egg--
the tax policy we adopted in 2003 being responsible for the 18 quarters
of economic growth which we have had.
In support of their claim, Democrats cite distorted statistics that
include taxpayers who don't receive dividends or capital gains. They
fail to take into account the zero percent rate for lower income
taxpayers in 2008 and ignore the size of the overall income tax
liability that taxpayers bear.
My analysis of 2005 data that I received from the Joint Committee on
Taxation shows that lower income taxpayers actually have more at stake
than higher income taxpayers. The Joint Committee on Taxation is not a
Republican or Democratic operation. These are professional people who
spend whatever time they are in public service on this committee
becoming experts on the Tax Code, the economic implications of tax
policy, and whether it is good or bad for the economy, whether it
brings in more or less money to the Federal Treasury. These are not
people wearing a Republican hat or a Democratic hat. My quoting of
their statistics ought to have a great deal of credibility because they
are professional people.
This is 2005 data received from the Joint Committee on Taxation
showing lower income taxpayers actually have more at stake than higher
income taxpayers. Of course, I don't mean to speak in absolute dollar
amounts because I cannot say that, but I can say in percentage
advantage to various income classes that lower income taxpayers have
more at stake than higher income taxpayers. It is common sense for me
to say that because higher income taxpayers receive higher tax cuts
measured in dollar terms, quite simply, because they pay more taxes to
begin with. But the extension of the lower rates on dividends and
capital gains will give lower income taxpayers greater tax savings as a
percentage of their total tax liability.
I will refer to a couple of charts that summarize tax savings as a
percentage of total income tax liability of average gross income
levels. The chart illustrates the dividend tax savings as a percentage
of the total tax liability for those who benefit from the reduced
rates. The savings percentages include 2008 savings, when the tax rate
for lower income taxpayers drops to zero percent. That we will
continue, then, for an additional period of time. That is the rate we
are talking about extending.
Based on my staff's analysis of the Joint Committee on Taxation data,
taxpayers with adjusted gross income of less than $50,000 will save 7.6
percent of their total income tax bills and seniors will save 17.1
percent. Those making more than $200,000 will save a lot less as a
percentage of their taxes paid, at 2.2 percent.
Opponents of this policy want to persecute these taxpayers--I point
to those earning $200,000 and over--by taking back their 2.2 percent
savings.
At the same time, they would punish these taxpayers, those under
$50,000 at the lower income level, by taking away their 7.6 percent
savings and punish the seniors in the same tax bracket by taking away
their 17.1 percent savings.
One cannot help but wonder, as we are all concerned about senior
citizens having a decent opportunity to have a greater retirement, one
that is comfortable as when they worked, with a chance to keep their
tax savings at what they are right now, and not raise them or lower
them anymore--but raise their taxes by 17.1 percent?
This chart illustrates the relative savings from reduced capital
gains taxes across the alternative minimum tax levels. Now, here again,
extending the lower tax rates will give a bigger percentage reduction
in their tax bill for taxpayers making less than $50,000. Opponents of
this policy want to persecute these taxpayers earning $200,000 and over
by taking back their 7.6 percent savings. But that also has a negative
impact, then, upon lower income people, people making $50,000 and
under, by taking away their 10.2 percent savings. And they would punish
senior citizens in that same tax bracket of $50,000 and under, by
taking away their 13.2 percent savings.
Extending this tax policy, not cutting taxes but extending existing
tax policy, will provide meaningful tax savings to taxpayers across the
income spectrum. Lower income taxpayers will save more than higher
income taxpayers when measured as a percentage of total tax liability.
Extending the lower rates will allow millions of Americans to keep
more of their money to spend or add to their savings through
reinvestment in the economy rather than give it to those in Government
to spend for them.
Those on the other side describe the capital gains and the dividends
provisions as applying to only a few high-income taxpayers. The reality
is reflected in the following chart. Take a look at capital gains. I
will not go through every State, but in the State of California,
839,616 families and individual taxpayers report capital gains. If you
take a look at the dividend statistic in California, 2,053,398 families
and individual taxpayers report dividends.
I will not take time to go through all of these, but if you think the
economy growing at 4.8 percent, as Chairman Greenspan says, is because
of the tax policies of 2003, and we have the economy growing, why would
you want to hit these families with a big tax increase on capital gains
and dividends? Two million more families in California is only one
State. Why would you want to hit them again? It seems

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to me in California you would want to keep the economy growing, as we
want to keep the economy growing in Iowa.

We know that 7.5 million families and individuals across the country
with capital gains are not all millionaires, obviously. We know that 19
million families and individuals across the country with dividends are
not millionaires. These numbers are based on 2003 IRS data.
The Joint Tax Committee estimates for 2005 over 21 million returns
will report dividends savings and 6 million of the returns will be
filed by senior citizens. Nearly 12 million returns will report capital
gains tax savings with almost 4 million people who are senior citizens.
These families and individuals are not millionaires.
Yet to listen to some on the other side, all of these people are
wealthy. That false assertion is going to be repeated time and time and
time again. That false assertion in itself is their justification for
opposing this conference report, putting in jeopardy what Chairman
Greenspan said is a reason for economic recovery, therefore putting in
jeopardy economic recovery and taxing all of these people when this
sunsets by taxes going up automatically, because there will not be a
vote of Congress, by an increase of 33 percent. It does not make sense.
To sum up, my goal for this conference was to produce a true
bipartisan bicameral compromise with both bills. A compromise should
accommodate the centerpiece of each bill, meaning the House bill and
the Senate bill. That includes the AMT relief in the Senate bill and
the dividends and capital gains relief in the House bill, take care of
common extenders and maximize tax relief by using appropriate revenue-
raising measures. This bill contains the cornerstone of each body's
bill. It is conditioned upon an agreement between the Ways and Means
and Committee and Finance to process the extenders and other issues on
later vehicles. I believe the conference agreement and collateral
agreement on extenders is a fair outcome of the House and Senate.
To make everything relatively clear, I did not make up my mind to
sign this conference report until we had 6 hours of negotiations with
the House of Representatives last Friday. Even though we had an
agreement on reconciliation, I wanted to make sure there was some
understanding on what we were going to have in the follow-on bill,
everything that could not be included in the conference report. As I
said, it is somewhat under negotiation, but I am satisfied we have
enough of an agreement that I can come back and say the things that the
Senate, for the most part, is concerned about, that are very basic to
our economic growth, will be included in a bill that will come before
the Senate shortly.
I yield the floor.

Unanimous Consent Agreement--S. 1955

Mr. BAUCUS. Madam President, in consultation with the chairman of the
committee, I ask consent that the filing deadline for the second-degree
amendments to S. 1955 occur at 3 p.m. today.
The PRESIDING OFFICER (Ms. Murkowski). Without objection, it is so
ordered.
Mr. BAUCUS. Madam President, I begin by commending my good friend,
the chairman of the Committee on Finance. He is a great American.
People in Iowa are very lucky to have him representing them. I know of
no finer man in the Senate.
I know Senator Grassley sought to defend the Senate's position in the
conference committee. He is a proud man, too. He wanted to do what is
right in defending the Senate's position, but I regret the conference
committee could not end up more like the Senate product because the
conference before the Senate today is much different than the bill that
passed the Senate. It is so different that I am raising questions as to
how much of the Senate bill we have in the conference.
This past Saturday, Lillian Asplund died. Ms. Asplund was the last
American survivor of the 1912 sinking of the Titanic. She was the last
survivor with actual memories of the event. Ms. Asplund's life reminds
us that people make choices, and those choices can have significant
consequences. Just as much, the bill before the Senate today reflects
choices. Those choices will have significant consequences.
Shortly after midnight on that cold morning of April 15, 1912,
passengers started evacuating that doomed ship. At the beginning, women
and children went first. But it was not long before that rule gave way.
Soon it became clear that the privileged went into the rescue boats
first.

About that time, the most extraordinary thing happened: Some of those
privileged and wealthy passengers decided to give up their place in
line. They decided to let others go first. Benjamin Guggenheim, the son
of the colossally wealthy mining magnet, sipped brandy and smoked
cigars in a deck chair while the ship went down.
Today, on this bill, we see no such valor, we see no such sacrifice.
Rather, in this bill, ideological wants push their way to the front of
the line, ahead of America's needs.
At the end of last year, 16,000 American businesses lost their tax
incentive to create high-paying research jobs for American-based
workers. But relief for them did not make it into this bill.
At the end of last year, millions of school teachers lost a small but
significant tax break for classroom supplies they purchase out of
pocket. But relief for them did not make it into this bill.
At the end of last year, millions of middle-income American families
with kids in college lost the ability to deduct tuition costs. But
relief for them did not make it into this bill.
These provisions--what some people call the popular ``tax
extenders''--were given second-class status. They did not make it into
the lifeboat. And to what did these popular, already-expired tax
provisions have to give way? Well, the first-class passenger on this
ship is a tax break for investors, where not one dollar will be used
until January 1, 2009.
I think it is important to remind ourselves of that. Not one dollar
of cap gains and dividend tax breaks will be utilized by anyone until
January 1, 2009. That is several years from now.
But some will say this tax break for 2009 is desperately needed
today--Why? they say--to provide certainty. You might as well just call
this tax bill, the 2009 Tax Increase Prevention Act, because it does
just that: it prevents tax increases for the most well-off in the
future, in 2009. This bill chose to prevent a tax increase in 2009,
rather than prevent tax increases in 2006.
For the millions of families, teachers, businesses, and workers out
there who lost their tax benefits on January 1 of this year, there is
no tax increase prevention in this act. There is no ``tax increase
prevention act'' for the so-called second-class citizens.
I do not call them second class at all. They are Americans. They are
teachers. They are people working in research and development. They are
families and kids trying to pay tuition costs. There is no relief for
them. All of those provisions expired at the end of last year. Here we
are, well into 2006, and they are not in this bill. Middle-American
provisions are not in this bill. No. Rather, what is in this bill is
for 2009, a tax break for 2009 for investors.
Well, some will also say: Oh, don't worry. Other tax legislation may
be, might be, should be coming soon. Yes, and the check is in the mail.
Some will say these 2009 cuts on capital gains and dividend income
will benefit all Americans, and you will see a blizzard of statistics
and quotes to try to substantiate that point, including the chart you
recently saw from my good friend from Iowa. Actually, that is not a
Joint Tax Committee chart. That is a chart based upon the Finance
Committee staff with Joint Tax Committee statistics. And that chart,
frankly, does not accurately portray the facts. Many commentators who
have commented on that chart have pointed out the discrepancies in it.
I am not going to get into this tit for tat, back and forth as to
whose statistics are better. But I will say this, it defies common
sense to argue that a tax break that takes effect in 2009 for the high-
income Americans somehow benefits middle-income and lower income
Americans more than the most wealthy. That totally defies logic.
Someone can come up with a set of statistics to try to make that point
but it is patently absurd.
Some will say these 2009 tax cuts, as I say, will benefit all
Americans, and you will see statistics, but that is not the fact.

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I decided to go to the source. I represent Montana. The more than
900,000 residents of Montana are my employers, so I asked the Montana
Department of Revenue where the benefit of these tax cuts would go.
Well, of course, not everyone in Montana has this type of investment
income.
So the Montana Department of Revenue told me that just 400 households
in Montana would receive an average benefit of $14,000 from the capital
gains tax cut in 2009. Roughly, 90 percent of the households in Montana
would get almost zero benefit from the capital gains cut. Ninety
percent: almost zero benefit.
With these numbers, it is very hard for me to understand why this
2009 tax break is urgent, while Montana teachers and families with kids
in college who lost their tax break last December must wait for the
next rescue boat, whenever it may or may not occur.
Of course, I am very pleased that protection is in the bill from the
alternative minimum tax. I am pleased that conferees included the full
Senate-passed version.
Some may recall, it was a struggle to get that in the Senate-passed
version last November. The original version, and the version that came
out of committee, did not include a full hold harmless from the
alternative minimum tax. Those versions would have left 600,000 more
families paying that tax. We fought to improve the Senate bill to be a
true hold harmless. And we succeeded in doing so before the bill
finally left the Senate. That version is retained today. This
protection from the alternative minimum tax will protect almost 17
million families across our country, including about 45,000 in Montana.
The Montana tax collector tells me that AMT protection will help about
a quarter of all households in Montana with incomes between $45,000 and
$80,000. That group might have otherwise seen an average tax increase
of $1,700.

Unfortunately, there is little else in this bill to be proud of.
Working families have been left behind. Congress has chosen ideological
wants over America's needs.
The Senate-passed bill did the tax business the Congress needed to do
this year. I am proud of that bill. In contrast, the bill before us
leaves much work undone. As a result, the deficit will probably be
larger because the conferees made the choices they did.
I will have more to say about the fiscal effects of this bill. In the
end, those effects may be the real iceberg. The fiscal effects of this
policy may be the real disaster. Madam President, I urge my colleagues
to reject the choice made by this conference. I urge my colleagues to
vote against leaving those families and teachers and workers behind. I
urge my colleagues to reject this disastrous bill.
One other point, Madam President, is this: The conferees had a
choice. Basically, we did one thing we had to do. I should not say
``we'' because I was not on the conference. I was not allowed to be a
member of the conference. But while the conferees did do something that
was good--that is, make sure the taxpayers do not have to pay the
alternative minimum tax--they had another choice, and the choice
basically is this: Do they enact a tax break that does not take effect
until 2009, for investors, or do they include provisions such as the
research and development tax credit, the WOTC, the work opportunity tax
credit, the tuition tax deduction, and the teachers deduction, which
expired last year? Do they enact those and extend those for this year
so people will still know research and development is important this
year?
Again, the choice is: On the one hand, enact a provision that does
not take effect until 2009 for investors or, instead of doing that,
because that can be postponed for a couple years--we are not yet in
2009--extend the provisions which expired last year. These are
provisions that American business and industry and innovators are
desperately depending on--that is, the research and experimentation tax
credit--to help America be competitive in the world. Or they could have
included provisions that parents paying for college tuition can count
on, teachers can count on for the supplies and so forth. All of these
expired last year.
So again, the choice is: a 2009 tax break or help maintain those
provisions which expired last year. That is basically what all this
comes down to. That is the choice that was before the conferees. And
the conferees chose the former, the 2009 extension--it does not take
effect for a few more years--for the most well-off, at the expense of
American businesses, their companies, and universities that are so
depending on the research and experimentation tax credit. And, at the
expense of teachers who so clearly today depend upon that little extra
help for classroom supplies, at the expense of kids and families who so
need that tuition deduction.
That was the choice that was made. And the choice, as I said, was
ideological wants of a few at the expense of America's needs. That is
basically what is before us today. That is why I think it makes sense
not to adopt this conference report.
Madam President, our country is in a battle. It is a competitive
battle with the rest of the world--China, India, Eastern European
countries. There are so many countries that are so excited about their
future, and they are trying to increase their economic position. I take
my hat off to them. They are trying very hard, and they are doing a
great job. Certainly, businesses in China and India are.
We have to meet that challenge. And it is a great opportunity for us.
But to meet that challenge, we have to start today thinking
strategically, thinking longer term. What does that mean? That means
much more attention on education, a lot more attention on education, so
we have the best and the brightest in America who can design the
products we can utilize here, with high-paying jobs here, and export
those products overseas.
Also, there is so much we have to do. We have to stop thinking short
term in this country, in this Congress, in this administration and
start laying the foundation for the long term.
Now, some will say: Well, we need, in 2009, to extend, for 2 more
years, the dividend and capital gains tax cut because that is good for
America. I have to say, I have lots of arguments and statements by very
reputable people who say that is not the case. Let me refer to a couple
of them.
Let's take the Federal Reserve. Let's talk about the stock market.
Federal Reserve economists recently compared key U.S. stocks, which
would benefit from the 2003 tax cuts, to other investments, which would
not. What did they conclude? What did Federal Reserve economists
conclude:

We fail to find much, if any, imprint of the dividend tax
cut news on the value of the aggregate stock market.

That is the conclusion of Federal Reserve economists. The
Congressional Research Service agrees. What do they say?

Any stock market effects represent temporary windfalls to
holders of current stocks and are simply a manifestation of
the income effects of the tax cuts; these wealth effects
should not be considered as an additional stimulus. . . .
Recent studies finding that dividends had increased
substantially have been used to argue that the tax cut
induced private savings. This evidence does not appear
robust. . . .

There are lots of comments--lots. And I might say: Why is the economy
doing pretty well today? The proponents of this conference report would
like to say: Oh, it is because of the other tax cuts. The stock market
went up dramatically more before those tax cuts went into effect. And
since those tax cuts went into effect, the stock market has not done so
well.
I might also point out that the economy is doing well now. Why? Read
this morning's paper. There was a big, long article asking: Why is the
economy doing so well? And what does this morning's paper say? What are
the conclusions, basically? It is because of strong, aggregate demand--
where? China, India--for commodities, for oil, for gas, for coal, for
uranium. That is what I think has kept basically demand strong. It is,
also, frankly, a major propellant for the economy today. It is not the
dividends and capital gains tax cut. That is a ruse. I am not going to
go into it any more than that because I know subsequent speakers will
have a blizzard of statistics to argue the opposite.

It kind of gets me to another point. When the rooster crows, does
that cause the Sun to come up? Does it? I don't think so. Did the
dividend and capital gains tax cuts cause the great economy we have?
Not necessarily.

[[Page S4392]]

You have to ask yourself what is the real cause. The real cause is the
underlying demand from other countries which are buying so many
commodities. That is one reason why the price of oil is so high today,
and that is what is causing the market to go up. That is what is
causing the economy to be strong.
We have to ask ourselves: That is today; what about tomorrow? What
about next year, 2 or 3 years from now? These tax breaks are also going
to make the deficit and debt much worse. We want to be strong tomorrow.
By tomorrow, I mean the next few months, the next, couple 3 years. We
want the stock market to be high during that period. We want demand and
wages to be high.
That will happen the more we focus on the basics today. The basics
again are education, research, and development so that we start
strategically to plan for our kids and grandkids. The conference report
before us decides against that. This report says: No, forget the
basics. Forget teachers, forget research and development. Even though
those provisions expired last year, we won't do anything about them.
Rather, we are going to pass this provision which costs so much money
in this budget and doesn't take effect for 3 more years. That is not a
choice most Americans would want us to make.
I notice Senators Bingaman and Dodd have been waiting to address the
Senate. I would like to inquire through the Chair whether the
Republican side has a speaker who wishes to speak. If not, I yield 10
minutes to Senator Bingaman, to be followed by 15 minutes to Senator
Dodd. I ask unanimous consent for that. That is 10 minutes to Senator
Bingaman and 15 minutes to Senator Dodd.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from New Mexico.
Mr. BINGAMAN. Madam President, I thank my colleague, Senator Baucus,
for his leadership and for yielding me time to make a few points. I
know my colleague from Connecticut is here, ready to make some
additional points. I will try to be brief.
I wanted to point out some of the reasons why I am strongly opposed
to this reconciliation bill. I don't think it is responsible for us go
forward with debt financing of another tax cut for the wealthiest
while, as I see it, we are ignoring the need to reduce the deficit. We
are ignoring many of the country's other needs. We are not following
through on earlier efforts we made to create an energy plan for the
country. I want to focus on that since I have been involved in some of
the legislation that put that plan in place.
A few weeks ago, the majority held a press conference announcing a
variety of initiatives to deal with our energy problems. One of them,
of course, was to have a $100 check that would be sent to each
taxpayer. The public reaction was pretty swift. It was pretty clear
that the public thought this was a gimmick. They thought this was
irresponsible, particularly given the size of the deficit. The majority
essentially decided, then, that that was not a part of their energy
plan with which they wanted to proceed.
Now they are bringing to the floor a tax bill which does virtually
nothing for most of these people who previously were in line to get the
$100 tax rebate. The question is probably coming back to some of these
people now that if we can afford to give the kind of tax relief that is
provided for in this bill to those who are better off, those who are
wealthier, maybe we should go ahead and send $100 to everyone, sort of
as a consolation prize, so that they, too, can participate in this tax-
cutting effort. We ought to think of this in the context of what we
have been doing in the last few weeks around here.
It is estimated that in my State of New Mexico, there are about 18
percent who will, in fact, receive any benefit at all from the
reconciliation bill before the Senate. If we look specifically at the
bottom 60 percent of working New Mexico families, their average tax cut
is $15. In contrast, the top 5 percent in my State would get 64 percent
of the tax cut. This is at a time when the price of gasoline is very
high, the price of educating a family's children is very high, and when
the price of health care is extremely high. Obviously, there is a ring
of unfairness about the allocation of these tax benefits which strikes
everybody.
I wanted to talk a minute about the provisions related to energy. An
important part of the Energy bill we passed last year was to provide
tax incentives that would move us away from dependence on foreign oil.
We passed a variety of those. Let me put up a chart that lists a few.
Of course, there was an R&D tax credit which has already expired. There
was an electricity from alternative fuels tax credit. There was a home
energy efficiency tax credit, where you would get a credit if you
wanted to put a solar heating system on your house, for example. There
was a credit for fuel cells for microturbines, an electric car tax
credit, clean renewable energy bonds, a hybrid vehicle credit. We put a
lot of those in the law. Unfortunately, because of the fiscal situation
of the country, we said: They are going to expire at the end of 2007.

That date is approaching. Frankly, the way we wrote it, we said: You
cannot get the tax credit we are writing into law unless you have put
your project, you have built it and put it into service prior to the
expiration of the tax credit. Well, the expiration of the tax credit is
about 18 to 19 months away. A lot of people are beginning to say: Wait
a minute. Let's hold off on any additional investment in alternative
energy. We can't proceed with the wind farm, the solar power
installation because these tax credits are going away.
We ought to be addressing that. Instead, we are saying: Let's add a
couple years, out to 2011, to the tax provisions that assist the most
wealthy. That is misplaced priorities.
It is important that the Congress try to follow through on what we
did last year. We have a very short attention span in the Congress. Two
weeks ago, everyone was holding press conferences about how we are
going to solve our energy problems. Here we are now, using up any
ability we have to extend the tax credits that were part of the
solution to our energy problem down the road. We need to think about
that, and I hope we will.
Let me talk about one other issue that I believe is so egregious, it
needs to be focused on before the vote on this conference report. This
came to my attention, quite frankly, when I was getting a cup of coffee
this morning. I said good morning to one of the people who works in one
of our offices here, a friend of mine. And she said: Good morning.
Another beautiful day in the land of make believe.
I thought, that sounds right. And I started questioning, as I was
going back to my office, exactly why we all agree that this is the land
of make believe, this Congress, this Capitol Hill is the land of make
believe. Then it became clear to me when I focused on this provision.
Under current rules in the Senate, we can't consider this bill as a
reconciliation bill under special procedures, if it, in fact, would
make the deficit worse outside the budget window. That means after
2010, outside the 5-year period. It is clear to everyone who is willing
to look at it that this bill does add to the deficit after 2010. But
the folks who put this bill together have found a very ingenious offset
which they claim will allow them to extend these tax cuts for the
wealthiest without, in fact, adding to that deficit outside the budget
window.
You ask: What is that ingenious offset? The ingenious offset is a
provision that allows couples with incomes over $160,000 to convert
their individual retirement accounts from regular conventional accounts
into Roth IRAs and pay whatever tax is due in accomplishing that which
would be some tax. Of course, once they have made that conversion from
the IRA to the Roth IRA, then they have paid any tax that is due, and
any future earnings on those funds is protected from any future
obligation. That is why, when we wrote the Roth IRA into law, we made
provision and said: We are only going to give this kind of a tax
benefit to people whose incomes are not too high. If a couple has over
$160,000 in income, they are not eligible for a Roth IRA. That was what
we determined. We said: Of course, you can't convert a regular IRA into
a Roth IRA if your income is too high.
In this bill we are saying that is no longer the case. In this bill
we are saying: If you are Bill Gates or Warren Buffett or whoever you
are, if you have

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a regular IRA, you are welcome to and encouraged to convert it into a
Roth IRA, pay whatever tax is due. And then, of course, from then on
there is no tax due. Why would we stick this in? This is another tax
break for the wealthiest. Why would we stick this in? We stick it in
because it results in some additional revenue coming into the Federal
treasury over the first 3 years that it is in effect. So while people
are making these conversions and paying the tax they have to to make
those conversions, the Treasury is earning money. And we can use that
money to offset the large deficit increase that otherwise would be
occurring after this budgetary window, so to speak.
Of course, after the Federal Treasury receives that revenue for 3
years, it starts losing revenue because of this very provision. As our
Vice President would say: It loses revenue big time after that. So we
will lose $4.5 billion in revenue over the 10-year period and
substantially more in the future after that. So who benefits from this
offset provision that was put into this conference report? I will tell
you who benefits from it: 99.4 percent of the benefit goes to the top
quintile of income.
The PRESIDING OFFICER (Mr. Ensign). The Senator has used the 10
minutes that was yielded to him.
Mr. BINGAMAN. I ask unanimous consent for 1 additional minute.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BINGAMAN. Let me conclude by saying that there are many reasons
why people should vote against this reconciliation bill. It is bad
fiscal policy. It is bad priorities as far as what extensions we ought
to be focused on at this time, if we can afford extensions. It also has
in it some of these provisions that are bad policy and egregious in the
effect they have. I hope my colleagues will reject the bill when it
does come to final vote.
I yield the floor.
The PRESIDING OFFICER. Under the previous order, the Senator from
Connecticut is recognized for 15 minutes.
Mr. DODD. Mr. President, I begin by thanking my friend and colleague
from Iowa, chairman of the Finance Committee, and the Senator from
Montana for the hard work they and their staffs put in on this
legislation. These are not easy bills to deal with, either in this
Chamber or the other. And getting through conference always poses a
trying time for everyone. Regardless of what positions we take on the
final product they present to us, we have a great deal of respect for
the work they do. I commend my colleague from New Mexico, as well, for
his fine comments this morning regarding this legislation.
It is sort of a nasty day in Washington weather-wise. I was noticing
this morning a lot of our constituents from around the country are in
the building to see their Nation's Capitol. We have a lot of students,
a lot of people with families, and graduating classes that have come to
Washington. I was trying to think how I might explain to these younger
people, if asked--and I will be meeting with various student groups
from my State of Connecticut later today--the $8.4 trillion in our
Nation's debt.
What is $8.4 trillion? That is a big number. That is the size of our
national debt as we gather here this day in May of 2006. The way I
thought I could possibly explain it would be like this: Since they are
in this building today, if these students would stand on the steps of
the Capitol and hand out one-hundred-dollar bills, a one-hundred-dollar
bill every single second, 24 hours a day, 7 days a week, for the next
2,635 years, you would equal $8.4 trillion--a one-hundred-dollar bill
every second, 24 hours a day, 7 days a week, for the next 2,600 years.
That is the level the debt has reached in the last 5 years under this
administration and in this Congress. That is a staggering amount of
money.
So when somebody says to you: What is $8.4 trillion, explain it to
them in simple terms. I will hand out a one-hundred-dollar-bill every
second for the next 2,600 years, every single day of the week, every
minute of the day, and that is the national debt.
Now we are about to add $70 billion to that without paying for it.
And the benefits don't even go to the average citizen. Quite frankly,
very few of them get much at all. In fact, the middle 20 percent of
income earners will get an average tax benefit of only $20. That
doesn't even fill a car's gas tank today. Go to your local gas station
and try to put $20 worth of gas in your car and find out how much you
get. That is your tax break.
If you fall into the $35,000-to-$65,000 range of income, that is what
you get out of this bill. So the benefits are very small and we're not
paying for the bill, so it adds to the deficit and the national debt--
which is already staggeringly high. Frankly, we are disregarding very
important priorities that we ought to be considering. With all due
respect--and I know the managers tried their darnedest to get a better
bill, and I know both of the gentlemen--this bill should be rejected. I
don't know how we go back to our constituencies and explain that the
fiscal irresponsibility of this Congress and this administration should
dictate that we ought to allow our national debt to grow to the extent
that it is growing.
So my hope is that when the vote occurs, our colleagues, Democrats
and Republicans, would say no to this; that we should go back and try
again. This is not a good bill, and it will do a great disservice to
our country.
What are we going to use the money for? Where is it going? We intend
to use this money--this $70 billion that we are going to put on a
credit card--by the way, of that $8.4 trillion, who do you think holds
about a quarter of that mortgage? It is not held in America; $2
trillion of that debt is being held offshore in some countries that
don't necessarily have the best interests of our country at heart. They
are holding that mortgage, and we are going to give them $70 billion
more, more than likely, or a good part of it, to be held offshore.
We have young men and women serving in uniform in Iraq and
Afghanistan who are putting their lives on the line. Are we going to
pay for that? Of course not. Are we providing for the veterans who have
come home who we know need significant help in health care? No. Are we
going to invest in education? How many times do you have to read that
we need to do a better job in education in our country if America is
going to be able to compete in the 21st century? But no. Research and
development? No. How about alternative fuels so that we are less
dependent on foreign sources of energy? No. Or infrastructure? There is
not a person anywhere who won't warn you that our roads, highways,
sewage systems, and water systems are collapsing in many places, and we
are doing nothing about replacing or maintaining them. None of this
bill goes for that at all.
Under this bill, mainstream Americans--the middle 20 percent of
income earners--will get an average tax cut of $20. I suspect that a
lot of the people we saw arriving in our Nation's Capitol, walking the
halls, would fall into that category. They are going to get about a $20
break in this bill. I won't go down this complete chart. But if you
make less than $10,000, of course, you get no tax break. If you make
$10,000 to $20,000, you get $2. If you are in the $20,000 to $30,000
category, you get $9. If you make $30,000 to $40,000, you get $16 in a
tax break in this bill. If you make $40,000 to $50,000, you get $46. If
you are in the $50,000 to $75,000 range, it is $110. I will jump ahead.
If you are in the two-tenths of 1 percent of the population of this
country that makes more than $1 million, you get a $41,977 tax break.
I don't agree with some of my colleagues and others who talk about a
sort of class warfare, pitting those in the middle against those who
make a lot of the money. I represent one of the most affluent States in
the country on a per capita income basis. Connecticut is always listed
near the top on per capita income. I have a sizable part of my
constituency that do well financially and would benefit under this
bill. As I stand here today, I will tell you that the majority of those
people who do well in my State think this bill is a bad idea. They are
not calling and writing and e-mailing and demanding that this bill be
signed into law. They understand fiscal responsibility. They think it
is a mistake for us to go deeper and deeper into debt, and to deliver
little or no benefit for anyone other than those with incomes of over
$1 million.
There are 146,000 people in this country in the top one-tenth of one
percent

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of income earners, who make more than $5 million a year on average.
They get an $82,000 tax break under this bill; 146,000 people get an
$82,000 tax break. How many of those people do you think actually need
that tax break to make the kind of investments that the supporters of
the bill envision? A tiny fraction, if any, would admit that this bill
has any merit when it comes to growing our economy. I do know that a
small percentage of our population gets a windfall here. The average
citizen gets little or nothing.
We are not making the kinds of investments in our country that we
ought to be making, and we are going deeper and deeper into debt. We in
this generation are going to have an awful lot of explaining to do to
coming generations, as to why we left such a mess on their doorstep as
we go off into retirement and they are left trying to figure out how to
pay these bills.
My colleague from North Dakota, and others, when we considered the
bill on the floor, offered amendments to pay for these provisions. We
lost them on party-line votes, pretty much. If you want to have a $70
billion tax break, pay for it, we said, but we lost. Pay-as-you-go
proposals were made on this side of the aisle. They were rejected by
the other side. Of course, we come back from the conference report with
the House and the bill gets even worse.

Let me you show what happened. Senator Bingaman of New Mexico did
this eloquently. Let me explain it again because it shows you the sort
of fantasy world in which people are living. We have all kinds of
priorities we need to address in the tax code, some of which were part
of this bill when it went over from the Senate--provisions that
provided for research and development tax incentives, electricity from
cleaner fuels, energy-efficient home tax credits, solar investment,
electric car credits, and so forth--reflecting what we are hearing from
constituents: Do something about the dependency on foreign oil and the
rising price of gasoline. That is what our constituents are asking us
to do for the future. But we go to a conference and come back and we
dump provisions like the R&D tax credit from the bill and fail to
address the pressing energy issues. This bill addresses none of those
priorities. Under previous legislation, we've taken care of estate tax
relief and top marginal tax relief up until 2010. And now in this bill,
we have, of course, capital gains and dividend tax relief in this bill,
which have 2 more years on them. They are not going out of date in the
next few months, or even the next year. Why not wait and see whether
you really think you need to extend them further? Instead, we dump the
very provisions to which the American people think we ought to pay
attention, not to mention putting non-pressing capital gains and
dividends tax benefits ahead of all these other items I talked about
that the American people think are important.
So the R&D tax credit is gone. A chance to address the Alternative
Minimum Tax for a more meaningful length of time is gone. How about the
provisions for kids in college that allow their parents a deduction for
tuition expenses? That got dropped from the bill. How many Americans
would like tax relief when they are looking at the rising cost of a
college education? It is very important to us as a country that those
of you in the middle-income category in this country can afford to send
your kids to college. We provided for that in the bill, and it got
dumped in order to take care of the top two-tenths of 1 percent of
income earners. Those were some of the ideas that we thought were
important to send over to the other body.
As I mentioned, my colleague from North Dakota offered the amendment
that would have paid for these tax cuts, but it was rejected.
Mr. President, I find this terribly disappointing. I wonder if anyone
is listening at all. I am not suggesting that all of the wisdom in the
world resides in one corner of this Chamber or the other. But I don't
know how, when the debt is mounting at the rate it is, with debt being
held offshore by countries who don't necessarily have our interests at
heart, we are not investing in things that we ought to be investing in
to make our country better prepared for the 21st century; how we are
squandering our ability to prepare for the great challenges we will
face economically in the 21st century. In the midst of all of that, we
turn around and take up a tax bill costing $70 billion, which is unpaid
for, the overwhelming majority of which goes to those who, frankly,
don't need it or want it. And we do this at the expense of everything
else we should be doing in our country.
Again, we are adding to that $8.4 trillion in debt. When you want to
explain it back home, just say if you give away a one-hundred-dollar
bill every second of every day for 2,600 years, you will get that
number. How do you explain that in 5 years we have accumulated so large
a portion of that debt, yet we are adding to it today with this
irresponsible piece of legislation?
I urge my colleagues to reject this conference report when we have a
vote later today.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, first, I will respond to some of the
things that Senator Baucus brought up in his opening statement. He
complimented me in our working through this, and I always have a good
working relationship with Senator Baucus. And 90 percent of the time,
or maybe more, he and I are on the same side of the fence. I remind
people in the Senate that on three occasions, in November and January
and February, we were on the same side of the fence on this issue.
The difference between us now is related to the extension of the
capital gains and dividend tax credit that was not in the Senate bill
at that particular time. And since it is not in the conference report,
that is one of the reasons he and I are on separate sides of the fence.
I will respond to some of the points he made on extenders because
they are not in the conference report. Senator Baucus's criticism is
right that they are not in this bill. They are, however, covered in a
collateral agreement between tax-writing committees and congressional
leadership. And on a document basis for my saying that we will be
dealing with those, even though they are not in the conference report,
I ask unanimous consent to have printed in the Record a joint statement
on a collateral extenders agreement, that they will be in a follow-on
piece of legislation that ought to be before the Senate very quickly.
These are not in dispute between the House and Senate. This is a
product under negotiation, but these issues are no longer under
negotiation.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Hon. Chuck Grassley,
Chairman,
Committee on Finance.
Today a majority of conferees signed the conference report
on H.R. 4297, the Tax Increase Prevention and Reconciliation
Act of 2005, and filed it with the House floor. Sen. Chuck
Grassley, chairman of the Committee on Finance, and chairman
of the conference committee, made the following comment on
the conference report. A detailed summary of the conference
agreement follows.

Statement of Chairman Chuck Grassley, Senate Committee on Finance

conference report on h.r. 4297, the Tax Increase Prevention and
Reconciliation Act of 2005, Tuesday, May 9, 2006

The tax relief laws extended in this conference report are
working to strengthen the economy and protect millions of
families from footing a higher tax bill because of the
Alternative Minimum Tax. Rolling back these widely-applicable
tax relief measurea would hurt the economy and mean less
take-home pay for hard-working taxpayers. By acting on this
tax reconciliation conference report, Congress will assist
small businesses, encourage the kind of investment that
creates jobs and makes our economy grow, and ensure more fair
tax treatment for middle-income families who would otherwise
be left to pay a tax intended for wealthy individuals.
Ultimately, these temporary fixes need to become permanent
law if Congress is serious about promoting economic growth
and tax fairness.
In addition to the tax reconciliation conference report,
Chairman Thomas and I have an understanding about how other
expiring tax provisions will be extended in a second tax
bill, including relief for college students paying tuition,
teachers buying supplies for their classrooms, and the
research and development of innovative ideas that benefit our
society. The items in this second tax relief bill reflect
additional tax policy priorities for both Republicans and
Democrats in Congress, and I look forward to congressional
action on the legislation as soon as possible.

Mr. GRASSLEY. Mr. President, on Senator Baucus's criticism of the
charts that I used, let me say that the

[[Page S4395]]

charts reflect the data of the Committee on Joint Taxation. I explained
how the Committee on Joint Taxation is a professional group, not a
Republican group or a Democrat group. They are paid by the taxpayers of
this country to be experts on tax policy. I challenge many of my
critics, and the sympathetic ears that these critics have in the east
coast media, to also use the joint tax data because in a lot of the
presentations already, and today, we are going to hear statistics that
don't come from the green eyeshade people who have no political ax to
grind in the Joint Tax Committee but, quite frankly, come from liberal
think tanks who do have a political ax to grind.
I ask Democrats to use Joint Tax Committee data. I think my friends
on the other side have an issue with the perspective of the charts. The
charts I used earlier take into account the tax savings taxpayers enjoy
relative to their tax burden. Democrats tend to look only at the tax
benefit. They ignore the taxes people pay. That is where there is a
very real difference. It is philosophical. The charts I used are
accurate.
On the number of taxpayers by State, the source is the Internal
Revenue Service, not a conservative or liberal think tank.
Finally, on the need to do an extension now, just ask folks in the
market whether this decision to extend the capital gains and dividend
tax provisions ought to be done now or in the year 2008. We hear that
it is very important to have a long-term tax policy if you are going to
encourage investment, and that is why we are extending this now at this
particular time.
I would also like to refer to some comments that were made by the
Senator from New Mexico. He spoke about the impact of one of our
offsets for policy long term, speaking about the Roth IRA being the
wrong kind of policy to put in this bill.
It is interesting to hear my friends on the other side criticize the
Roth IRA conversion provisions in the conference report. One would be
led to believe that this protaxpayer provision is somehow an evil
Republican idea that the Democrats have never seen before. But I am
afraid that my friends on the other side of the aisle have a short-term
memory. They are giving this Finance Committee chairman and my
Republican colleagues too much credit.
I wish I could take credit for what is called the Roth IRA. Maybe it
could be called the Grassley IRA. But I can't. There is another Finance
Committee chairman, not a Republican, who first laid out the exact IRA
conversion proposal that is in the conference report we are going to
vote on today.
Way back in 1991, there was a chairman of the Finance Committee, a
famous Senator from Texas, by the name of Lloyd Bentsen. He introduced
the identical provision as part of what they called the Tax Fairness
and Savings Incentive Act of 1991. If the Roth IRA--later named the
Roth IRA--was tax fairness in 1991 when the Democrats wrote it, it is
tax fairness in 2006 as it comes back in a conference report.
Chairman Bentsen's bill would have allowed all taxpayers, regardless
of income, to convert amounts from traditional IRAs into the new Roth-
styled IRA account that he also proposed. In fact, the only difference
between Democratic Chairman Bentsen's original proposal and the
provision in the conference report is Chairman Bentsen's bill would
have given taxpayers 4 years to pay tax on converted amounts compared
to the shorter 2-year period under the provisions in this conference
report.
But some may ask: Was Chairman Bentsen just a lone Democratic voice
in the wilderness on this issue without support from fellow Democrats
at that time in 1991? Not surprising to those of us who had the honor
of serving with Senator Bentsen, it wasn't just his idea. His bill was
introduced with 13 Democrats as original cosponsors, and it has a
prominent list of Democratic cosponsors, many of whom are still serving
with us in the Senate today. In fact, I can point to my good friend
from Montana, Senator Baucus, as one of the original cosponsors of
Chairman Bentsen's bill. Let me name some others: Akaka, Dodd, Inouye,
Lieberman, Mikulski, and Senator Pryor's father was also an original
cosponsor. So this is not a new idea, nor is it a Republican idea. It
is an idea which has had bipartisan support in the Finance Committee
and the Senate for the past 15 years, ever since Chairman Bentsen first
proposed it. Indeed, the Bentsen bill was just the beginning of a long
bipartisan history of this provision. So why today is there not
bipartisanship on this issue?
In the next Congress, after Senator Bentsen became Treasury Secretary
under President Clinton, the bill was introduced. Senator Roth--who
would, of course, later become Finance Committee chairman--introduced
Senator Bentsen's former bill, including the proposal that would become
known as the Roth IRA conversion proposal. Senator Roth introduced this
bill with a bipartisan list of 57 original cosponsors, 24 of whom were
Democrats.
In the next Congress, Senator Roth reintroduced his bipartisan
legislation with 52 cosponsors, and 18 Democrats were cosponsors of
that bill, including Minority Leader Reid and Senator Kerry. It was a
good proposal for the Democrats then. So why is it not a good proposal
today?
Democrats say they are concerned about the budget deficit, but we all
know our deficit was much larger as a percentage of GDP in the early
1990s than it is today. The real question is, Do my Democratic friends
really oppose this protaxpayer provision that merely creates a level
playing field when it comes to access to retirement plans or do they
only have this objection because the provision is part of a progrowth
tax relief bill that the Democratic leadership has decided to oppose
today?

The bipartisan history of this concept didn't stop when Democratic
Chairman Bentsen became Secretary of the Treasury. Roth IRAs became law
in the Tax Relief Act of 1997. The Senate version of that legislation
allowed all taxpayers to convert traditional IRAs to Roth IRAs, the
same as the conference report before us this very day.
That bill passed the Senate--now listen, that bill passed the Senate.
The exact thing we are doing today passed the Senate by an overwhelming
80-to-18 bipartisan vote.
When an income limit was placed on Roth IRA conversions during the
conference negotiations in the 1997 act, the Senate came back the very
next year in the IRS Restructuring and Reform Act and again showed
bipartisan support for expanding the eligibility for Roth IRA
conversions. Expanded Roth IRA conversion eligibility was part of the
Senate bill which passed unanimously 97 to 0. So obviously Democrats
voted for it then. It was also included in the final conference report
which passed the Senate 96 to 2.
I hope this makes it very clear that this isn't a provision which
came out of thin air. This isn't a Republican proposal. This isn't a
budget gimmick. This is a provision which Democrats have long
supported. This is a provision which was proposed by a Democratic
chairman of this committee. This is a bipartisan provision. And most
importantly, it is a good provision. Good policy makes good politics.
It is a protaxpayer provision. This is a provision which means all
Americans have access to the same retirement plans. This is a provision
which brings in real revenue to the Federal Government. This is a
provision which will increase tax compliance in an area in which there
is much room for improvement. This is a provision which rewards those
who work hard, pay their taxes, and do what we need to do more of: save
for retirement. That is why it has such a long history of bipartisan
support. It also is why it is a very good part of this conference
report.
I would think people on the other side of the aisle would be ashamed
of damaging the very good image Senator Bentsen had as a U.S. Senator,
as a Democrat, as chairman of the Finance Committee. Why don't they
honor his reputation as a Senator and vote for provisions he had that
are in this conference report rather than being so partisan?
Mr. President, my friend from Montana referred to a report published
by Federal Reserve staff, and I would like to make a few comments on
that.
The report compares U.S. and European stock values during brief
periods of time before and after the lower rates were announced in late
2002 and enacted in 2003. Since U.S. and European stock values moved
together, the report concludes that the lower rates had

[[Page S4396]]

no effect on the aggregate market value of U.S. stocks.
The report was written by members of the Federal Reserve staff. It
does not represent the views of the Federal Reserve itself. In fact,
Chairman Alan Greenspan has repeatedly testified before the Congress
that lower rates on dividends and capital gains represents good tax
policy, and Ben Bernanke has cautioned that not extending the rates
soon could negatively impact the economy.
I am not an economist, but it seems to me that the analysis of these
Fed staffers is overly simplistic for at least four reasons:
First, the analysis covers a very short period of time--2 months
surrounding the President's proposal in January 2003 and 4 months
surrounding enactment of the reduced rates in May 2003. Looking at such
a short period of time, the Fed staffers only tried to determine if the
news of the tax cut had an effect on the U.S. market. Now, I am a
believer in the efficient capital markets theory to some degree, but it
can't be that simple. Surely, the broader, longer term benefits of
these lower rates on the economy should be considered more than simply
the news of their enactment.
Second, the analysis essentially assumes away all other factors
during that short period of time could affect U.S. markets and European
markets differently. It is hard for me to understand how this
assumption could be valid. If that was true, then why would anyone
consider investing in European stocks as a diversification strategy?
There is a multitude of factors that would seem to affect the U.S.
and European markets differently, given how complex the U.S. and
European economies are. The Wall Street Journal article that described
this report noted a few things that ``might have contributed to a rise
in European stocks or a drop in the U.S. market during the review
periods'':
In the U.S., some companies reported weaker than expected earnings,
while some European firms reported strong earnings;
There was a terrorist bombing in Saudi Arabia that ``rattled'' the
U.S. market;
There were concerns about the weak dollar.
Third, the analysis assumes that the impending war in Iraq would
affect U.S. and European stocks equally. Again, I am not an economist,
but I find this assumption hard to believe.
Fourth, the Fed staffers' analysis does nothing to convince me that
taxing something less doesn't make it worth more. It is common sense
that people value assets based on how much those assets put in their
pockets on an after-tax basis. So if the Government taxes certain
investments less, it makes those investments worth more, relative to
other investments. Of course, there are many other factors besides tax
policy that affect investment value. But we should do what we can in
terms of tax policy to promote economic growth.
The Wall Street article concludes with a quote from Michael Thompson,
director of research at Thomson Financial, that ``attributing stock
market gains to one isolated factor risks being `intellectually
dishonest' ''. It would be just as intellectually dishonest to point at
this simplistic study as a reason to raise taxes on dividends and
capital gains.
Mr. President, my friend from Montana criticized the charts I showed
earlier that showed how lower income taxpayers, relative to their tax
burden, have more at risk than higher income taxpayers. In light of
Senator Baucus' criticism of those charts, I want to go into detail
regarding how the statistics were calculated by my Finance Committee
staff.
To get a clear picture of the relative benefits of this tax policy, I
have taken another step in the distributional analysis.
I looked at the size of the tax benefits in relation to the total tax
liabilities that these taxpayers bear.
The results of this analysis show that, among taxpayers who benefit
from this tax policy, those with less than $50,000 of AGI benefit more
from this tax policy, especially when the lower income tax rate drops
from 5 percent to zero percent.
According to the JCT data, 6.3 million tax returns with adjusted
gross income of less than $50,000 benefited from the reduced tax rates
on dividends.
The aggregate total income tax liability of these taxpayers was $12.4
billion, which is an average of $1,968 per tax return.
In 2005, the lower tax rates on dividends saved these taxpayers $600
million in the aggregate at an average of $95 per return.
In 2008, if we assume the same data, the elimination of dividend
taxes for lower income families will save them an additional $350
million, which is an average of $56 per return.
In total, this tax policy will save $950 million, or an average of
$151 per tax return.
That produces a savings of 7.6 percent for these taxpayers.
Tax returns with more than $200,000 in adjusted gross income would
save $6.5 billion in the aggregate, or an average of $2,964.
These numbers, of course, are much bigger than the savings numbers
for the less than $50,000 of AGI category. But these numbers represent
only 2.2 percent of this group's total tax liability.
The estimates for capital gains show that 3.6 million tax returns
with under $50,000 of AGI will report a savings of $680 million from
lower tax rates on capital gains, or an average of $189 each, producing
a 10.2-percent tax savings.
Those with $200,000 or more in AGI will save $13.7 billion in the
aggregate or $11,421 each on average. To be sure, these dollar numbers
are much higher than the less than $50,000 group, but as a percentage
of total tax liability, it is only 7.6 percent, lower than the savings
of the less than $50,000 group.
And what about seniors?
2.4 million tax returns filed by seniors with adjusted gross income
of less than $50,000 benefited from the reduced tax rates on dividends.
The aggregate total income tax liability of these taxpayers was $4.4
billion, which is an average of $1,833 per tax return.
In 2005, the lower tax rates on dividends saved these seniors $500
million in the aggregate at an average of $208 per return.
In 2008, if we assume the same data, the elimination of dividend
taxes for lower income seniors will save them an additional $250
million, which is an average of $104 per return.
In total, this tax policy will save seniors $750 million or an
average of $312 per tax return.
That produces a savings of 17.1 percent for these taxpayers.
Four hundred thousand tax returns for seniors with more than $200,000
in adjusted gross income would save
$2.7 billion in the aggregate, or an average of $6,775 each,
representing a 5.7-percent savings.
The estimates for capital gains show that 1.5 million tax returns
will be filed by seniors with under $50,000 of AGI, reporting a savings
of $305 million from lower tax rates on capital gains or an average of
$204, producing a 13.2-percent tax saving.
Seniors with $200,000 or more in AGI will save almost 3.8 billion in
the aggregate or $12,633 on average representing a 10-percent savings.
Now, I have a couple charts that summarize the tax savings as a
percentage of total income tax liability across AGI levels.
This chart illustrates the relative savings from reduced dividend
taxes across AGI levels.
Opponents of this policy want to persecute these taxpayers by taking
back their 2.2 percent savings.
But at the same time they will punish these taxpayers by taking away
their 7.6 percent savings.
And they will punish these seniors by taking away their 17.1 percent
savings.
This chart illustrates the relative savings from reduced capital
gains taxes across AGI levels.
Opponents of this policy want to persecute these taxpayers by taking
back their 7.6 percent savings.
But at the same time they will punish these taxpayers by taking away
their 10.2 percent savings.
And they will punish these seniors by taking away their 13.2 percent
savings.
As this data shows, the tax policy enacted by Congress in 2003 to
lower taxes on dividends and capital gains has provided meaningful
benefits to taxpayers across the income spectrum, not just the rich.

[[Page S4397]]

In fact, lower income taxpayers will save more than higher income
taxpayers when measured as a percentage of total tax liability.
These lower rates have allowed millions of taxpayers to keep more
money in their pockets to spend or add to their savings through
reinvestment in the economy, rather than give it to the Federal
Government to spend.
I yield the floor.
The PRESIDING OFFICER. The Senator from South Carolina.
Mr. DeMINT. Mr. President, I am so appreciative of Senator Grassley
coming to the floor to set the record straight. It is so difficult to
sit back in our offices and watch the debate and hear our Democratic
colleagues distort so many facts. I would like to straighten out a
little bit of the record myself. Unfortunately, the Wall Street Journal
this week, along with a lot of other publications, has also tried to
set the record straight.
I hear my Democratic colleagues saying the President and the tax
package has been a great benefit to the wealthy and hurt the poor. But
since the tax cuts of 2001 and 2003, the tax burden has actually
shifted more to the wealthy. The percentage of Federal taxes paid by
those with incomes of $200,000 and above has risen 40.5 percent to 46.6
percent. In fact, today, out of 100 Americans, the wealthiest 3 are now
paying close to the same amount, about half of the total taxes as the
other 97 Americans.
We have shifted the tax burden more to the wealthy. The richest
income group pays the largest share of tax burden than at any time in
the last 30 years, with the exception of the late 1990s. The record is
clear.
The record is also clear that this tax package and economic growth
package is not for the rich. It is for the people who need jobs in this
country. It is for the little guys, the 5 million people who have
gotten jobs because of our economic growth.
Those who say this tax cut is increasing the deficit need to look at
the expanded tax revenues last month alone, the second highest tax
revenue in history because of this economic boom.
Those who are focusing on this tax rescission package and saying we
should not be keeping the tax rate the same low rate for capital gains
and dividends need to know that half of Americans now own stocks. They
are savers and investors. Our goal as a nation should be to try to make
every American a saver and investor. In fact, if some of the Democrats
had voted with us just a few weeks ago, we could have stopped spending
the Social Security retirement funds of Americans and made every
American a saver and investor. The number of people owning stocks in
America has risen, more than doubled since 1983 when it was about 40
million, and now it is over 90 million, and we have seen incredible
growth.
My colleagues also need to know the statistics of those who do own
stock. They are not just rich Americans; they are retired
Americans. They are people with incomes below $50,000, about a third of
them below $50,000. So the facts just need to be straightened out.

I think we also need to take our Democratic colleagues to task on
things they have said about this economic package and what the real
facts are.
This chart shows a Democratic contention here that the Republican
budget will undermine potential GDP and hurt economic growth. You can
go back to 2001 when the first package passed and see the GDP growth
consistent over the years. We can also go to a quote Democrats had on
this floor which said: ``The President has put us on a fiscal course
that means lower employment.'' Here we see from this chart that
employment continues to go up in this country.
Let's put up a couple more charts quickly. The Democrats said the
Republican budget will crowd out private sector investment. But since
these tax cuts took effect, private sector investment has grown at one
of the fastest rates in recent years.
Another quote from the Democrats: ``The Republican budget will raise
equilibrium real estate rates.'' The interest rates have continued to
fall with the housing boom across the country. Ownership has grown.
The facts are, frankly, indisputable. I agree with Senator Grassley.
It is a shame for folks to come down and distort the reality of what is
happening and what we are doing to help the American people at every
level. One out of every two households in America is earning stock, and
allowing them to keep more of what they are earning through those
stocks only makes common sense.
Mr. President, I yield to Senator Lott, who I think would like to
continue to set the record straight.
The PRESIDING OFFICER. The Senator from Mississippi is recognized.
Mr. LOTT. Mr. President, I ask unanimous consent to get an agreement
for the lineup of speakers over the next several minutes. It has been
cleared by both managers here in the Senate.
I ask unanimous consent that the next speakers come up in this order:
Since Senator DeMint has finished, next would be 5 minutes for Senator
Hutchison, to be followed by 15 minutes for Senator Schumer, to be
followed by 10 minutes for myself, followed by 15 minutes for Senator
Wyden after I finish speaking, and then Senator Enzi would come next,
to be followed by Senator Boxer for 5 minutes.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. LOTT. We did not indicate a time amount for Senator Enzi. We were
not able to confirm exactly how much time he would need. I think part
of it would depend on how the rest of the time goes.
Mr. President, on behalf of hard-working American people, I am
pleased to rise today in support of picking up this very important Tax
Increase Prevention Act. I have been looking forward to this for almost
a year now, and finally we have reached the magic moment. I believe we
are waiting for Senator Hutchison to arrive. While she is on her way,
let me just put in the Record at this point the timeline of what has
transpired.
First of all, the tax reconciliation legislation passed the Senate
Finance Committee on November 15, 2005. The Senate then passed the tax
reconciliation bill 64 to 33, a very strong bipartisan vote. On
December 8, 2005, the House passed the bill 234 to 197.
Along the way, there were many hurdles thrown up, delays, and
obstruction. In fact, instead of going to conference, because of the
fact that the Senate had acted first, we actually had to bring it back
to the floor of the Senate and go through the process again.
On February 2 of this year, 2006, the Senate repassed the tax
reconciliation bill by a vote of 66 to 31, again bipartisan, actually
an increased number. Then on February 14, the Senate completed action
on the debate, 10 hours of motions to instruct conferees with a mini
vote-arama. But we completed our work, and conferees were appointed on
February 18. Now here we are with a conference report and a bill that
clearly is needed to prevent a tax increase on working Americans.
I just wanted to get the timeline in the Record, and then I will have
some further comments, following the next two speakers, about the
substance. At this time, I believe we are lined up for Senator
Hutchison for 5 minutes.
The PRESIDING OFFICER. The Senator from Texas is recognized for 5
minutes.
Mrs. HUTCHISON. Mr. President, I appreciate the opportunity to speak
on this very important legislation. I thank Senator Grassley and
Senator Baucus for bringing us this bill. It was hard-fought. Tax cuts
always are. There are always those who will say: Oh, this only helps
the rich. There are always those who will say: This is going to
increase the deficit. Let's talk about what this bill in fact does.
This is a bill which will continue the tax cuts we passed in 2001 and
2003, the tax cuts that have spurred the growth in our economy, that
have created jobs, the tax cuts that caused the stock market to
immediately turn from being stagnant or worse to being on the brink of
record highs for the history of the stock market. If we don't pass the
extensions that are in the bill before us today, it would be like
telling Wall Street and telling the investors: We are going to increase
your taxes; we are reserving that right. That would immediately put a
freeze on this economy, and it would stop the incredible prosperity we
are seeing in our economy today.
We can look at what has happened to our economy since September 11,
2001, when our tourism industry was severely impacted and our entire
airline

[[Page S4398]]

industry was shut down. Commerce was affected. We had a huge hit to our
economy in 2001. Then we have had the war on terror, trying to keep
terrorists who attacked our country in 2001 from being able to come
back and hurt Americans again, and that has caused us to have to spend
billions of dollars more. Then we were hit with Katrina, the worst
hurricane in dollar damage in the history of our country, and Rita
following that. We have had huge hits on our economy. Now we have
gasoline prices and energy prices that are going through the roof. But
our economy is strong. Our economy is strong for several reasons, one
of which is that we have kept taxes low, particularly on dividends and
capital gains.

So when someone says these are tax cuts for the rich, the fact is
these are tax cuts for small business. These are tax cuts which have
allowed them to start hiring people again and have spurred our economy
to new highs. With this bill, we will prevent the egregious reach of
the alternative minimum tax on our middle class by extending the higher
exemption levels we approved last year. We also make an incredible
investment incentive for the younger people in our country with the
ability to convert Traditional IRAs to Roth IRAs.
If I were only 35 years old, I would be so excited because I would
know that under the provisions of this bill I could provide for my own
retirement security through the use of the Roth IRA. The Roth IRA has
been limited in use with a salary cap of $100,000 for conversions. If
you make more than that, you can not convert from a Traditional IRA to
a Roth IRA, which allows you to put money in and then earn interest tax
free until your retirement, and you can take it out tax free. That is a
nest egg which could make every American self-sufficient because you
can just put in the $3,000 or $4,000 every year, and once it is in
there it is tax free, expanding its scope, interest rates going back
into the pot, and then you can take it out without paying taxes. The
traditional IRAs are not that way; you do have to pay taxes. This bill
allows people who have started a Traditional IRA to convert it to a
Roth IRA without income limitations. That is going to help the young
people of our country because any of them, if they are working or if
they are married, will be able to do this.
Tax cuts have created 5 million new jobs since they were last passed
in 2003.
Mr. President, I hope we will pass this bill. It is a good bill for
our country, a good bill for our economy, and it is going to put money
in the pockets of the people who are earning it instead of sending it
to the Federal Government.
The PRESIDING OFFICER. The Senator from New York is recognized.
Mr. SCHUMER. Mr. President, I ask unanimous consent that I be ceded
15 minutes from our side's time.
The PRESIDING OFFICER. The Senator is already recognized under the
previous unanimous consent agreement for 15 minutes.
Mr. SCHUMER. Mr. President, everyone here knows we are going to vote
on a $70 billion reconciliation bill later today, and it is far
different from the bipartisan bill that originally passed the Senate. I
would like all of America to please pay attention to this bill because
if anything ever showed the differences between the two parties, this
is it. We want to help the middle class; they want to help the richest
people in America who are doing very well already. That is the
fundamental difference between the bill that left the Senate with
bipartisan support and the new bill that is coming back.
My good friend from Texas said: Help the people who earn it. Far too
much of this bill goes to the people who make over $1 million a year;
far too much. If there were no harm to the middle class, that would be
great. But too many provisions that affect the middle class are hurt,
and the one that I am going to focus on is one of the best provisions
we have passed under this new President, and that is making tuition tax
deductible for people whose incomes go up to about $150,000. That is
gone. That is not extended for 1 new year or 2 new years; it is gone.
And in its place are tax benefits for the wealthy and, worst of all,
the removal of $5.1 billion of tax increases on the oil companies which
are making record profits. No one likes to tax anybody, but I ask
America: Oil companies or middle-class students? Whom do you pick? The
leadership, the Republicans, and the President chose the oil companies.
Democrats choose middle-class students struggling for college.
It is not just this issue. That is a metaphor for why Americans are
looking for change. That is a metaphor for what they finally
understand--that the trickle-down economics, which gives the
overwhelming benefit of the tax cuts to the wealthy with a few crumbs
for the middle class, doesn't work anymore.
Politics is a tough and tricky business, but sometimes you get handed
an issue that is so crystal-clear, you want to make sure everybody
knows about it. And this tax bill so perfectly shows the Republican
majority's misplaced priorities that I think the American people are
going to see it the way most of my colleagues and I see it. This bill
shows the true colors of the Republican Party, which is far more
interested in helping the very wealthy--God bless them--than hard-
working middle-class Americans.
Make no mistake about it. There is a choice. There is a choice. You
can't do both. And when people on the other side of the aisle, whether
they are up for reelection this year or not, vote against our proposals
and vote for this tax bill, they will be taking away from the middle
class one of the best benefits we have given the middle class in recent
years.
Let me talk a little bit about this issue. Several months ago, the
Senate passed its version of the tax bill with 66 votes, 17 Democrats,
myself among them. Our bill contained AMT relief, which this bill does,
but it also contained college tuition. The extender package, including
a 4-year extension of college tuition deductibility, which I was proud
to author, was in the Senate bill, but because, again, the White House,
the House leadership, and Senate leadership said: No, no, no, big oil
comes above middle class students, it is gone. To refresh everyone's
memory, since our Republican conferees seem to have forgotten, the 2001
tax cut contained a provision that made college tuition deductible for
the first time. The deduction, modeled on a bill I championed with
Senators Snowe, Biden, Smith, Bayh, and Durbin--bipartisan--allowed
middle-class families to deduct $3,000 from their tax return and that
deduction was raised to $4,000 a year in 2004.

Last year, single filers who made up to $65,000 and joint filers with
income up to $130,000 qualified for the full deduction, and there was
also a smaller $2,000 deduction for those with higher incomes.
For the first time, the middle class would get some relief. You know,
we help the poor go to college. We help the working poor go to college
with Federal grants. That is a great thing. But in every one of our
States, middle-class people came to us and said: What about us? I may
make $70,000 or $80,000 or $90,000 a year, but I can't afford tuition.
We finally came to their aid. It is gone. It is gone because the other
side wanted to extend tax cuts that are already there in the outyears
for capital gains and dividends.
I am all for reducing the tax on capital gains and dividends, but it
is there already. And the cavalier attitude--do something for 2009 and
2010 and take away something from the middle class this year--again,
bespeaks volumes as to why the American people are turning away from
the majority and the President and turning to us. I have consistently
worked with my colleagues to try to expand the deduction. But as I
said, this deduction is not in the report.
The conference report is also interesting for what it includes that
was not in the Senate version, as I mentioned: the 2003 tax cuts on
dividends and capital gains for those earning $1 million a year. We did
not include those in the Senate version because the Senate believed
that those tax cuts that have already expired, such as the tuition
deduction, should take priority over tax cuts that are not scheduled to
expire for 3 more years.
I offered a resolution with Senator Menendez, a sense of the Senate,
and got 73 votes. There will probably be 20 people who voted for that
resolution saying support college tuition, not extend dividend and
interest income deductions which go to the very wealthy, that are
already on the books, and they are going to flip-flop when they vote
for this bill.

[[Page S4399]]

Some of my other colleagues are going to speak of the distributional
inequities, but I want to speak of the real choices we have with
tuition, even assuming that it was a good idea to extend the capital
gains and dividends tax cut. As I said, I believe that those taxes
should be reduced. I do believe they create growth. But there was
another alternative, because in the Senate bill was $5.1 billion which
changed the accounting and created revenues from big oil. Again, that
was taken out. If it had been kept in, we could have had the dividend
cut, we could have had the capital gains cut, we could have had the AMT
cut, and we could have saved the tuition deductibility for middle-class
students.
So the choice was clear: Big oil or middle-class students. The other
party couldn't help itself. They had to side with big oil. That they
are going to live with, certainly, through the 2006 elections.
Do you think half of America would choose big oil over college
student tax deductions? Do you think a quarter of America would choose
that? Do you think 5 percent of America would choose that? Absolutely
not. But as in the past, my colleagues on the other side of the aisle
think they are insulated from the argument. They think by saying ``tax
cuts,'' no one can show which tax cuts they have chosen over others. It
is not true anymore. The tuition deductibility is a tax cut just like
the other tax cuts in this bill, and it is not there anymore.
The oil provisions should have stayed in. The first related to an
accounting method that the oil companies use. Along with Senator Snowe,
I added a provision that disallowed the oil companies from using LIFO,
which means when the costs of your inputs are rising--in other words,
the price of oil--using LIFO allows the oil companies to make their
income appear lower than it is so they pay less tax; and oil costs are
rising. So this would have simply restored some equity and made sure
they paid a fair amount of tax. But the President and the Republican
leadership hated this one because they have to protect big oil above
the interests of middle-class students.
The Senate passed our provisions with 66 votes, and I suppose the
conferees thought that in the dark of night they could put them back.
There was a third provision added by my colleague from Oregon,
Senator Wyden, in addition to the two that I offered--one with LIFO and
one with profits they make overseas. They didn't put that one back
either. President Bush actually spoke out against it a few weeks ago.
So the bottom line is simple, and there is an amazing coincidence.
What was the cost of the oil tax breaks? It was $5.1 billion. What
would be the cost of extending tuition deductibility for 3 years to
middle-class people? It would be $5.1 billion.
America, whom do you choose? If you choose big oil, continue to vote
for the other side. If you choose students, vote for us. This bill
could have had the exact same provisions in it with all of the
arguments made by others about needing the capital gains and dividends
tax cuts, if simply the other side had the guts to tell big oil you are
still going to make record profits, but we are not going to allow you
this extra $5.1 billion. Instead, they are telling hard-working,
middle-class families who are struggling to pay tuition: Tough luck.
The oil companies come first.
This is a sad day for the middle class. It is a sad day for those of
us who know that a college education is crucial for the future for
America to stay No. 1. It is a sad day when this Senate turns its back
on the interests of others. The Republican majority will try to spin
this bill as a boon to the middle class. The facts show it is not true,
and we are not going to let them get away with it anymore. Democrats
are not afraid to face these issues because we know there are choices.
When we convey the choices to the American people, we are confident
they will decide we need new leadership in Congress and the White
House. We need change. Because a party that once heralded itself as
friends of the middle class has turned its back on that middle class
for the special interests.
I yield the floor.
The PRESIDING OFFICER. The Senator from Mississippi.
Mr. LOTT. Mr. President, I am delighted to be here and be able to
respond to some of the comments we heard from the Senator from New
York. I do agree with him--up to a point. I agree that this bill shows
the stark differences between the two parties. One is for tax
increases, that is the Democrats, and one is for preventing tax
increases and supporting tax relief for all Americans--working
Americans, middle-class Americans, and seniors who depend on dividends
and capital gains to be able to support themselves in their retirement.
My colleagues on the other side often say: Oh, yes, we are for
middle-class tax cuts. But, in fact, when they get a chance to vote on
them, they almost always vote against them, or at least the majority of
them. Yes, this is a good example of the difference in the two parties.
As a matter of fact, the Senator from New York knows quite well that we
are going to have a follow-on tax bill that is very close to being
completed, and it has already been announced by the distinguished
chairman of the Finance Committee that it will include the relief for
college students paying tuition. We are going to have that. It is
almost as if he thinks that because it is not in this reconciliation
tax increase prevention bill, it is gone, it will not happen. I will
tell you right here and now, it will happen. It will happen soon. I
have the press release from Senator Grassley, announcing that has
already been agreed to.
I do find it interesting, too, that Senator Schumer, while he talks
about how wonderful this tuition tax deduction is, when it was first
passed in the bipartisan 2001 tax bill, he voted no. He voted no on the
bill that had it in there. Now it is the most wonderful thing he has
ever seen.
You know, there is a little positioning going on, on both sides. I
understand that. But I think we need to look at the substance of what
we are dealing with and what the impact is going to be. I do want to
emphasize this point again, too. Our senior citizens are very dependent
on the income they get from capital gains and also from dividends. If
we allow the tax on that to go way up, back to where it was, they will
feel it as much or more than anybody. So we need to be sure that we
know what the true impact is going to be if we do not stop these tax
increases from occurring.
With regard to the oil provisions, no final decision has been made on
that. That will be considered and will be a part of the next bill,
frankly. I think some of those provisions that were in the earlier bill
should stay in there, personally, but we are going to work through
that. But I want to go over some questions and some details of what is
in the bill. I wonder, do the Democrats oppose the centerpiece of the
bill, which is a $34 billion provision to ensure that the alternative
minimum tax does not hit more than 15 million middle-income families
this year? I thought this was something they felt passionately about.
You know, we have to take action to stop the unintended consequences of
the alternative minimum tax, AMT--$34 billion. This is only a $70
billion bill, and about half of it would go, clearly, to these middle-
income people.
Do they oppose exempting Americans with incomes up to $62,550 from
the onerous AMT? Do they oppose quadrupling small business expensing,
which allows small businesses to write off up to $100,000 a year in the
cost of new equipment?
There are two provisions there that, combined, take over half the
bill, that clearly help middle-income taxpayers avoid the AMT and help
small businesses that keep creating the jobs and moving the economy.
It prevents a tax increase for small businesses of over $7 billion
from being foisted on this very important part of our economy.
What do they oppose? Do they oppose the progrowth policy of taxing
capital gains and dividends at 15 percent? Or at 5 percent--get this
now--5 percent for individuals in the 10- or 15-percent tax brackets?
If we don't stop these tax increases, you are going to see a
significant tax increase for individuals in the 10- and 15-percent tax
brackets. Do they oppose that?
Contrary to the Democratic mantra, these tax cuts affect individuals
at every income level. If anybody accuses my State, after being
devastated by Hurricane Katrina, of being a wealthy State--we are
trying to join the Union

[[Page S4400]]

and move up in our economic status. Yet, in my home State, over 150,000
taxpayers will see a tax increase if we don't extend the 15-percent tax
rate on dividends. Nearly 120,000 taxpayers will face a tax increase if
we don't extend the rate on capital gains.
That is IRS data. That is not something I put together with a pencil
and a piece of paper.
The average tax increase will be nearly $200 per person per year.
That is significant.
I was explaining to my own daughter this very morning about how this
bill is important to her. She doesn't have a lot of capital gains. She
has some dividends--not much but she is in that category which is
significantly impacted by the AMT if we don't pass this bill.
I understand. I guess it is a political season and taking positions.
I don't believe Democrats oppose anything in this bill. In fact, the
Senator from New York said: Well, yes, many people I guess in New York
are concerned about the impact of a tax increase on capital gains and
dividends. It is just that he doesn't like this one. If not this, what?
If not now, when? This needs to be done. What has been the impact of
these tax cuts? The economy has continued to grow astronomically in
spite of all the major cataclysmic events we have been dealing with;
creating jobs; the American dream at the highest it has ever been; and
the number of American people who own their homes. Almost 70 percent of
Americans own their homes. Yet we clearly show from the nonpartisan
Congressional Budget Office that we have had a greatly higher
unanticipated increase in the revenue from capital gains than we would
have had otherwise.
Do we want to kill the goose that laid the golden egg?
I don't understand why the American people are still not aware that
there are so many goods things happening in the economy. Unemployment
is at 4.7 percent, which is caused by 5 million new jobs being created
since 2003. The gross domestic product is 4.8 percent--I was astounded
by that growth--in the last quarter. Overall, household wealth is at an
all-time high, reaching $51.1 trillion. Income is rising, and inflation
remains in check. Lastly, but perhaps most critically, Federal revenues
grew by 14 percent in 2005, reaching a record $2.15 trillion.
The problem with the deficit is not insufficient revenue. It is
coming in. It is coming in because Presidents and Members of Congress--
Presidents such as Kennedy and Reagan--knew that if you cut taxes in
the right way, you get important revenue. There are those who still
want to deny that, but history and the statistics speak for themselves.
I think this is a good bill. It is a relatively narrow bill in terms
of portions included in it. We only have about five major things, and a
few little smaller points included in this bill. We are not finished.
We are going to have the follow-on bill. I want to keep the economy
growing. I want to do the right thing. This is the right thing to do.
I am delighted to be here to speak in behalf of this legislation and
to explain what is in it and to question some of the allegations that
are being made about what is in it or what is not in it. This is good
for the American people because it will be good for the American
economy.
I don't understand this class warfare stuff that is always going on.
If you cut taxes for people who actually pay taxes, you automatically
get less. When are we ever going to grow up and get over that?
I think it is good legislation. I am pleased to be here and support
it. I urge my colleagues to vote for it. It will pass, and we will go
to the follow-on bill which will have a number of other very important
provisions, and perhaps it will be part of what we do with regard to
guaranteeing people's security and their pensions for the future, also.
I do not know if I have any time remaining. If I don't, I yield the
floor.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. WYDEN. Mr. President, before he leaves the floor, I wish to say
to the distinguished Senator from Mississippi that I am certainly not
interested in class warfare. But what I am interested in is giving all
Americans a fair chance to accumulate wealth. This legislation doesn't
do that, and that is why I am opposed to it.
My sense is that everybody in our country wants to do well. Everybody
aspires to be well off. Everybody wants to be able to get ahead. Yet
that is not possible in many respects because of our Tax Code.
The American people just finished the annual ordeal of doing their
taxes. This spring, Warren Buffet, the second wealthiest person in the
United States, paid a lower tax rate than his receptionist. But under
this bill, that receptionist isn't going to get much of anything.
Senator Lott made a point with respect to the next tax bill. We are
going to have another bill, Senator Lott said. But the bottom line is
the oil companies get their boost in this bill today. What Senator Lott
and others have said is maybe sometime down the road we will start
talking about middle-class folks.
I think we have to give everybody in this country the chance to
accumulate wealth. We have to do more than hand out gusher giveaways to
a fortunate few.
That is why I have introduced the Fair Flat Tax Act that gives
everybody in our country the opportunity to accumulate wealth.
So we are clear on this oil issue, I want the Senate to understand
some of the history of it.
On November 9, 2005, the CEOs of the major oil companies came to a
joint Senate hearing of the Energy and Commerce Committees. I asked
them then--it had never been asked in a public forum--whether they
agreed with the President's statement that ``with $55 oil we don't need
incentives for oil and gas companies to explore.'' The CEOs of
ExxonMobil, Chevron, Conoco, Phillips, and BP-Shell for the first time
agreed that the tax breaks which had been provided in the Energy bill
weren't necessary.
Having heard that statement, I said I want to begin, on a bipartisan
basis, to start working with colleagues in the Finance Committee to
scale back these tax breaks that, to his credit, the President of the
United States said aren't even necessary. I began to work with the
distinguished Senator from Montana, Senator Baucus, and the Chair of
our committee, Senator Grassley, to try to start rolling back those tax
breaks. It was a very modest step that was taken. Our committee
repealed one of the tax breaks that dealt with what are called
geological and geophysical drilling expenses. But we got it passed, and
for the first time in 20 years, the Senate Finance Committee--I think
Senator Lott was even there that day--a tax break that the oil
companies had gotten was taken away. Repealing that tax break would
have saved about $1 billion. It certainly is not everything that is
needed to deal with these exploding deficits but a solid step in the
right direction.

You then have a conference between the Senate and the House. At a
time of record profits, at a time of record prices, this bipartisan
amendment to make a modest reduction in the kind of tax breaks that the
President said are not needed when oil is over $55 a barrel pretty much
disappeared. It was cut by more than 50 percent.
I say to my good friend from Mississippi that I can't accept a double
standard where the oil companies get their tax breaks today--they get
them right now--and yet, the Senate will come back and maybe sometime
down the road start talking about relief for the middle class.
I want to work with the Senator from Mississippi. He and I have
worked together on many occasions. That was why I felt that the
bipartisan agreement I got in the original Senate bill was so
important. But what I can't accept is a double standard, where you have
the gusher giveaways today on the oil side and then we hear--as we
heard on the floor of the Senate--we will come back with another bill
at a another time and maybe at that point we can talk about tax relief
for middle-class folks.
Another comment was made that I want to highlight about former
President Ronald Reagan who, of course, is revered and respected by
all. The last thing President Reagan did, to his credit, in the tax
area is he worked with colleagues on both sides of the aisle, with
former Senator from New Jersey, Bill Bradley; the former chair

[[Page S4401]]

of the Ways and Mean Committee in the House, Dan Rostenkowski, on
overhauling the Tax Code.
One of the steps that they agreed on is we were not going to hit the
cops who walk the beat with a higher tax rate than somebody who is out
investing, say, in Google stock.
We had a bipartisan agreement back in 1986 that we weren't going to
discriminate against wages. We weren't in this country going to say
that the people who work hard and play by the rules and make their
money from wages are going to get hammered.
What the Senator from Mississippi said I found very interesting with
respect to Ronald Reagan because what Ronald Reagan embraced in 1986 is
exactly what I am calling for in my Fair Flat Tax Act. That is an
approach that says we are in it together. We are all going to be able
to accumulate wealth. Everybody is going to have a chance to get ahead.
Everybody who aspires for a better life for themselves and their
families would have an opportunity to do it under the Fair Flat Tax
Act.
They sure don't under this bill with those oil gusher giveaways right
now.
We have been told that sometime in the future, we will come back to
talk about middle-class folks, and we will have a discussion about
their needs and what they hope for their families sometime. This is one
other area where, again, I have a little bit of a difference of opinion
with my friend from Mississippi. He has talked about the fact that
corporate profits are up, revenue is coming in. Of course, we are glad
to see all of that. But the reality today is this is the first time in
decades when corporate profits are up and productivity is up--both
trends we like to see--that middle-class people are seeing their wages
stagnant. The middle-class folks are not enjoying the fruits of these
benefits of additional revenue. Again, I want our corporations to do
well. I want to see the incredible improvements in productivity. What I
think every Member of the Senate ought to be talking about is that not
all Americans are in a position to enjoy these developments. That is
why any time when I go home and have a community meeting, almost all of
the issues raised by my constituents have the second word ``bill.''
They ask about their gas bill or medical bill or mortgage bill or tax
bill.
That is why I want to work with Senator Lott on a bipartisan basis so
that when we have an expansion of corporate profits, when we see an
increase in productivity, the middle-class person can get ahead as
well. We are not seeing that today.
In fact, the Federal Reserve said the other day that, for all
practical purposes, over the last 5 years, the net worth of middle-
class folks has hardly moved. What I want to do is what Ronald Reagan
and Bill Bradley and others did back in 1986--make changes in the Tax
Code so that everybody has the opportunity to accumulate wealth.
I wrote a bill, the Fair Flat Tax Act, which does that.
In fact, I am saying this to Senator Lott because I would love having
a chance to work with him.
I took the same brackets that Ronald Reagan did. I chose the exact
same tax brackets that Ronald Reagan did for my Fair Flat Tax Act. It
is an indication that if we can have a bipartisan effort, as we saw two
decades ago before the 14,000 changes in the Tax Code since 1986, we
could see once again Democrats and Republicans coming together to
continue the trend toward expanded corporate profits and corporate
productivity, but we would not be leaving the middle-class person
behind.

That is what is so unfortunate about what has happened. My proposal
allows us to save about $100 billion over the next 5 years. By
contrast, the tax legislation before the Senate increases the deficit
with more tax cuts that aren't paid for.
In terms of tax compliance, you can go to my web site,
wyden.senate.com to see my simplified 1040. People at Money Magazine
were able to complete this form in just 15 minutes. But this year,
Americans spent more complying with the Tax Code than the government
has spent on higher education. Is that what we want? Is that our vision
of tax reform? I don't think so.
I think we want to build on the kind of bipartisan effort we had in
1986. We had a revered Republican President, Ronald Reagan, who has
been cited on the floor today, coming together with Democrats in both
the Senate and the House. We were able to do something that allowed us
to grow the economy and also let middle-class folks get ahead.
Is it right that the cops who guard this wonderful institution pay a
higher tax rate on their wages than Warren Buffett does as the second
wealthiest person in our country? I don't want to soak anyone. I want
everyone to be able to get ahead. I want everyone to be able to
accumulate wealth.
What we have been told under this tax bill is that the oil companies
get theirs today, but we will have some other day, some other time,
some other opportunity to talk about the interests of the middle class.
That is not fair to the people of this country. We have said we are all
in it together. We should not have a double standard with the powerful
getting theirs today and working families having to wait for another
time. That is not right.
While we are, for example, putting a little patch on the alternative
minimum tax in this legislation, and I am glad to see that--the
crushing costs of this tax are not being addressed. My fair flat tax
legislation abolishes the alternative minimum tax altogether. That is
what we ought to do before we see this thing ramp up and up and up,
engulfing millions of middle-class folks who end up having to pay their
taxes twice.
I will wrap up with one last point. In this legislation, as we look
at the tax cuts being offered in the bill to a fortunate few, we are
seeing in the legislation that those who have crafted the bill are
taking the very money Senator Baucus and I have sought in order to keep
rural schools open, something Senator Lott and a number of colleagues
on the other side have been with us on a bipartisan basis. Senator
Baucus and I asked, are we going to sell off hundreds of thousands of
acres of our public lands in order to pay for the rural schools? We did
not think that made any sense. So we said we are going to go to the
drawing board. We are going to come up with an alternative. We did
that. We said we were going to keep money from going to tax dodgers,
make sure they paid what was owed, and to make sure the federal
government honors our commitments to rural schools, rural schools in
Oregon, in Mississippi, and all across the country.
It is possible, as Ronald Reagan and Democrats did in 1986, to make
the Tax Code simpler, flatter, and fairer, and allow us to grow our
economy and do right by the middle class. The legislation I have
introduced, the Fair Flat Tax Act, is a starting point for the debate.
We ought to understand, certainly on the Committee on Finance where I
have the honor to serve with Senator Lott, that there is a lot of give
and take in a tax debate.
What I do know is the bill that the Senate will be voting on before
too long does not give all Americans the opportunity to accumulate
wealth. That is why I must oppose it.
I yield the floor.
Mr. LOTT. Mr. President, we had an order lined up. Senator Enzi
cannot be here at this time so we have agreed to go with Senator Boxer,
who is here. She is ready to proceed at this time. We have some other
speakers who will be here momentarily and we will get this lined up.
I yield the floor.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, thank you very much.
Do I have a specific time associated with my remarks?
Mr. LOTT. We locked in 5 minutes.
Mrs. BOXER. Could I make it 8 minutes?
Mr. LOTT. I ask consent the Senator from California will be allowed
to speak for 8 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mrs. BOXER. Mr. President, when I look at the distribution chart
showing who benefits from the bill before the Senate, my question is,
whose side are we on, anyway? I hope the answer to that question is,
the majority of the American people.
When we look at this chart, what we find is we are on the side of not
even 1 percent of the American people. We are on the side of those
earning over $1 million a year. That is who gets the benefits of this
bill.

[[Page S4402]]

According to The Urban Institute-Brookings Tax Policy Center, we see
that the average tax cut of those over $1 million is $41,977 a year in
this bill. The benefit of this tax break is essentially more than what
some middle class Americans earn all year.
Then we have an additional number from the Center for Budget and
Policy Priorities. Their chart shows if you earn over $1.6 million,
this Republican tax bill will get you back $82,000 each and every year.
Well, what is someone who earns, say, $40,000 getting back? Forty-six
dollars--not even enough in some cases to fill up a gas tank.
Whose side is this Republican Senate on? If this were a time when we
did not have deficits and we did not have debt, it would be one thing.
I still would oppose this bill. I would rather give the benefits to
those in the middle. I would rather give the benefits to those who were
struggling with the high cost of gas. I would rather give the benefits
to those who are struggling to send their children to college.

By the way, in this particular bill, the college tuition tax
deduction, so popular with middle-class families, was not included. The
Republicans took it out in order to help the wealthiest Americans and,
by the way, big oil. Big oil gets big tax breaks in this bill, $5
billion strong.
Here we have a circumstance where the millionaires and the oil
companies win and middle-class America and working-class America, 99
percent plus, lose.
No wonder there is change in the air. People are saying, Enough is
enough. Colleagues, we can say enough is enough today by voting down
this ill-conceived, unfair bill that punishes most Americans, except
for big oil and the very wealthiest few.
Yes, there is a one-year fix to the alternative minimum tax in here.
For that, I am grateful. Yet, still, that good fix is far outweighed
when you look at the distribution tables. You can see who gets the
benefits. Twenty dollars for regular working and middle-class American
families is the average tax cut; $20 a year, while people making over
$1.6 million get up to $82,000 a year.
This is America. This country is great because we believe in our
middle class. We know our working people are the engine of our economy
and the pride of our Nation, yet we have a table that shows that the
middle class is not only forgotten, they are made fools of in this
bill.
Yes, there is a fix to the AMT. Good. Outside of that, we have a
situation where those who have, get more; those who have a lot, get
even more; and the oil companies that have been manipulating supply and
hurting the American people get a tremendous amount.
That is how the tax break for big oil works.
See if you can follow me. They set the rules governing oil company
profits so that if an oil company buys a lot of oil at a low price,
say, $40 a barrel, and then they sell that oil at $70 a barrel, they
get to pretend that they bought the oil at $70 too. You would think the
difference between $40 and $70 would be their profit and what they
would owe taxes on.
But under this bill, no, no, no. Their profits, and tax liabilities,
are calculated on the price of oil on the day they sell the oil. So if
they buy oil at $40 a barrel and sell it at $70, they do not pay any
taxes on it because they are allowed to claim their costs are the same
as their revenues--$70 a barrel. It is a giveaway to big oil, which is
having the most unbelievable record profits, which we believe are
manipulating supply, and which gives their CEOs a $400 million bonus
package. This is what this Republican bill does. How they can even
bring it to the Senate with a straight face is beyond me. But they have
brought it to the Senate. I ask those moderate Republicans to join us
and send a message that it is time to change. It is time to look at our
middle-class families in California and all across this country and
stand on their side--those struggling with the gas crisis, those
struggling with health care, those struggling with college tuition.
This is a day when we ask the question, Whose side are we on? I hope
the answer is, we are not on the side of the winners in this chart. The
winners are the wealthiest among us and the oil companies.
Again, if this were a different time, if we did not have raging
deficits, which we have had since this President took office, if we did
not have a debt that is going so high that this Senate has to vote in
the dead of night to raise the debt ceiling, if we were not in a
terrible war that is killing our soldiers, with no end in sight and no
plan in sight, that would be a different story, and we could say a
rising tide lifts all boats, and we will give everyone a break. But
those are not the times in which we live.
At the end of the day, the gimmicks that are used to pay for the tax
breaks are just so many gimmicks because we know by putting the
wealthiest in the Roth IRAs, there is an initial flush of money coming
in, but at the end of the day the earnings in the Roth accounts are not
taxable and will cost us billions of dollars in lost revenues. This
bill will drive up our debt and deficits.
In closing, a recent NBC-Wall Street Journal poll asked Americans
their top concerns. Do you think that Americans said, I want to give
tax breaks to the oil companies? I want to give tax breaks to those
earning $1.6 million a year? No, they said their top concerns were
rising gas prices, Iran's nuclear ambitions, immigration, civil
disorder in Iraq, the Bush administration leaking national security
information, and Enron-style corruption.
What do we give them today, the American people? We give them
everything they do not want, rewarding big oil and rewarding those who
have not asked to be helped. They are doing fine. The people earning
over $1.6 million a year are doing just fine.
We are giving the American people more deficits. We are giving them
more debt. We are not helping middle-class families solve the problems
of the raging costs of college tuition and the raging costs of gas
prices. I hope we vote no on this bill. It is a bad bill.
The PRESIDING OFFICER. The Senator from Mississippi.
Mr. LOTT. Mr. President, as acting manager, let me get some agreement
on time so Senators can plan accordingly. I ask unanimous consent the
following Senators be able to speak in this order: Senator Gregg for 15
minutes; Senator Feinstein to follow Senator Gregg for 15 minutes;
Senator Thomas is next, for 15 minutes; and Senator Reed for 15
minutes.
Mrs. FEINSTEIN. Reserving the right to object, Mr. President, could I
ask a question?
Mrs. BOXER. Could the Senator repeat that?
Mr. LOTT. Mr. President, I apologize for not having my microphone on
earlier. We are trying to lock in the next three speakers. Senator
Gregg will have the next 15 minutes, to be followed by the Senator from
California for 15 minutes.
Mrs. BOXER. I thank the Senator.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
The Senator from New Hampshire is recognized for 15 minutes.
Mr. GREGG. Mr. President, I appreciate the Senator from Mississippi
granting me this time on this very important piece of legislation.
I want to pick up on the statement made by the junior Senator from
California. What are we giving the American people? We are giving them
jobs. We are giving them the opportunity to get good jobs in a
thriving, growing economy as a result of good policy in the area of tax
law.
We came out of an extraordinarily serious recession, the largest
bubble in the history of the world, the Internet bubble--bigger than
the tulip bubble, bigger than the South Seas bubble--which occurred at
the beginning of 2000. It collapsed, which should have thrown us into a
deep recession.
We followed that bubble with a huge disruption of our lives, the loss
of human life, which was unbelievable and horrific, as a result of 9/
11, but also it had a dramatic impact on our economy.
Those two factors alone should have led to a fairly significant, deep
and painful recession. Why didn't they? They did not because this
President and this Republican Congress put in place tax policy which
allowed Americans who wanted to be entrepreneurial to go out and
invest, take risk--which is the American way--and, as a result, create
jobs.
The facts are incontrovertible. This chart shows it. This is the
period during which we had the Internet bubble

[[Page S4403]]

and the 9/11 attacks. In 2003, we reduced the taxes on productivity in
this country and gave people an incentive to go out and earn more, take
risk, and create jobs. As a result, we are seeing a dramatic increase
in economic activity and in jobs.
Mr. President, 5.3 million jobs have been created since these tax
cuts were put in place--5.3 million jobs in those 32 months. Look at
this green line on the chart. Those are all new jobs coming into the
economy as a result of the tax cuts. There has been a massive explosion
in economic activity as a result of these tax cuts.
Now, the other side of the aisle will have you believe that the only
people who benefited from these tax cuts were the wealthy. Well, all
these people who got jobs benefited from these tax cuts. More
importantly, the American Government benefitted from these tax cuts
because our revenues have climbed dramatically as a result of these tax
cuts.
The reason that has happened is because assets which had been locked
up for years are now being used to create better investments and more
productivity. In fact, revenues from income taxes have gone up by 10
percent. They have grown by 10 percent in the last 6 months. Revenues
from corporate activity have gone up by 26 percent. This is all a
function of putting in place tax rates which essentially said to
Americans: You go out and invest. You go out and take risk. You go out
and create jobs. And we will say we will benefit your efforts by giving
you an incentive to do that.
Now, the essence of this whole effort is embedded in this tax bill,
and that is the setting of a reasonable tax rate on capital gains and
dividends. There is a psychology which is out there, which is human
nature: If you say to a person: We are going to take 70 percent of your
income, they are not going to have a lot of reason to go out and make
an extra dollar because the Government is going to take their money.
But if you say to someone: We are going to take 30 percent of your
income, then that person has a bigger incentive to go out and work.
The same is true for capital investment. If you say to somebody, if
you sell that asset you have, we are going to tax you at 30 percent,
that person has very little incentive to go out and sell that asset.
But if you say to that person, if you sell that asset, we are going to
tax you at 15 percent, then that person has a reason to go out and sell
that asset, and take that money and do two things. First, they reinvest
it so it is being used more productively and generates more economic
activity and probably creates more jobs, but, secondly, by selling that
asset, they actually end up paying taxes, taxes which they did not
otherwise and would not have otherwise paid.
If you own some stock or a piece of land or a farm or any asset which
is a capital asset, you do not have to sell it, you do not have to
generate tax revenue to the Federal Government. That is what was
happening. A lot of people were sitting on those assets. But by cutting
the capital gains rate, we essentially created an atmosphere out there
where people started to turn over those assets. As a result of turning
over those assets, they created more productivity in our economy.

In fact, we are now at the highest level of productivity that our
economy has experienced in the post-World War II period. That
additional productivity has created more jobs so that more Americans
are working. Mr. President, 5.3 million more Americans are working than
were working back in 2003 when these tax cuts began. Equally important,
the revenues to the Federal Government have jumped dramatically.
In fact, they have jumped so dramatically in capital gains that they
have outstripped the estimates by $30 billion each year over the last 2
years. The CBO had originally estimated that we would have about $49
billion of capital gains income in 2005. Well, we got $75 billion. They
estimated, in 2006, we would have about $54 billion. We have gotten
about $81 billion. That is $60 billion of new revenue that was
generated by cutting the capital gains rate to something that was
reasonable and caused people to go out an convert capital assets--
whether it is stocks or land or businesses--convert those assets, sell
them, pay taxes, and reinvest in a way which would actually create more
jobs and more economic activity in the economy.
So this concept that cutting capital gains rates somehow benefits the
rich cannot be defended on the facts. What it benefits is the American
Treasury, the Government's Treasury. What it benefits are the people
who have gotten all these jobs, these 5 million new jobs.
Now, another chart over there that was used by the other side said:
Well, the tax benefit flows to the top 10 percent of the income
brackets. Well, that is because the top 10 percent of the income
brackets pay most of the taxes. In fact, if you have income over
$185,000, that is where 65 percent of the taxes come from. Those are
the folks with the highest income, those are the folks paying the most
taxes. That is the way it should be. And now they are actually paying a
lot more taxes than they were before this tax cut because they are
generating activity which is taxable.
Before the tax cut, when capital gains was so high, they sat on it.
But now, because there is an incentive for them to go out and convert
those assets, they are actually paying more in taxes than they were
paying before. So the argument that the high-end taxpayer, the high-end
income individual is benefiting disproportionately from this simply
flies in the face of the facts. They are paying more in taxes. More
revenue is coming in from those people than ever before. And a higher
percentage, in fact, of Federal revenues now comes from those
individuals than ever before. And they are, most importantly--and this
is the point that the other side seems to miss completely because they
subscribe to the 1930s ``old left'' theory of economic policy--these
people create jobs, and the bottom line is, good jobs.
That is what they are creating in our economy by going out and taking
assets, which were locked down, which were in a less-productive
atmosphere, and moving them over to assets which are more productive
and creating more opportunity for people to generate jobs.
It always amazes me that this concept completely escapes our friends
on the other side of the aisle. But this also translates into
investment growth. It is ironic that both of these two charts show the
exact same thing. And business investment has expanded dramatically.
When did it begin to expand? In 2003, when we made these tax cuts. Job
creation has expanded dramatically. When did it begin to expand? In
2003, when we made these tax cuts. These are not chance events. These
increases in jobs and business activity are a direct function of the
fact that we have created a fairer tax climate, where people are
willing to be more aggressive, take more risk, be more entrepreneurial,
and, as a result, create more jobs.
And to at this point take the position we should go back to the old
tax rates, which would essentially double--double--we are not talking
about a little bit. We are talking about doubling. The position of the
other side of the aisle is, they want to double the tax rate on capital
investment, on risk takers, on entrepreneurs, the people who create the
jobs in our society.
To take that position now, in the middle of this recovery, which has
been historic in nature, in that we are now at historic levels of
productivity--we have had 32 months of expansion. We have more people
working today in America than at any time in our history. To take the
position we would put this huge, damp cloth on top of this economic
expansion in the name of populous tax policy, which has been proved
wrong over and over again, ever since it was conceived in the 1930s, as
the way to generate revenues--back in the 1930s and 1940s, the policies
of the left were that you generated more revenues by raising taxes
dramatically. And we had a 90-percent tax rate at one point in this
country. Then, we had a 70-percent tax rate in this country.
Then, along came a gentleman who, ironically, understood this did not
work but, also ironically, came from the other side of the aisle. His
name was John F. Kennedy. And he, as President, cut the tax rates
because he believed the high tax rates were disincentivizing the
American spirit to be productive. He cut rates. And what happened?
Revenues went up. And all the people from the left said: Oh, my God,
this can't be happening. This

[[Page S4404]]

must be an aberration. It was not an aberration. It should have put a
stake through the policies of the old left, but it did not.
So then along came Ronald Reagan, who said: Hey, it worked for John
Kennedy. I will try it. He cut rates. And what happened? Revenues did
not go down. They went up.
And then along came President Bush, and he said: John Kennedy and
Ronald Reagan were right. The way you generate revenues is you create
an incentive for economic activity, you create an incentive for people
to go out and invest, and you create more jobs. More jobs translate
into more taxpayers. As a result, you generate more revenues to the
Federal Government. So he put in place his tax cuts in 2003.
The facts are incontrovertible. The numbers are coming in at a
dramatic rate. We are seeing a 14-percent increase in revenues to the
Federal Treasury. Last year, it was the largest single increase in our
history in dollar terms; with 11 percent through the first 6 months of
this year. It is probably going to be even higher before we finish the
year.
The practical effect of this is these new revenues, these additional
revenues have been generated by a lower tax rate, a fairer tax rate.
And they are assisting us in reducing the deficit. In fact, the deficit
is coming down precipitously as a result of these additional revenues.
And people are getting more jobs because this economy is vibrant and
strong as a result of these tax rates.
You would think after this approach to tax policy has been proven by
three major initiatives by three Presidents, being from both parties,
in three different decades, the other side of the aisle would look in
the mirror in the morning and say: Listen, the policies of the 1930s
and 1940s--which were taught to us as a result of the outgrowth of the
theory that if you constantly raise taxes, you generate more revenues--
those policies have been proven wrong. They have been proven wrong by
President John Kennedy. They have been proven wrong by President Ronald
Reagan. And they have been proven wrong by President George W. Bush.
Human nature tells you they are wrong. If you give a person a reason
to go out and be productive by putting a lower tax burden on them, a
fair tax burden--we are not saying no taxes, we are talking about a
fair tax burden. It is obviously not a tax burden that is at zero
because we actually have high-income individuals in this country
actually paying more in taxes today than they did prior to the tax
cuts, significantly more, and also they are bearing a larger percentage
of the burden of taxes today than they did before the tax cuts. It is a
fairer way to approach tax policy. As a result of that fairer way, you
generate more income, more economic growth, and that leads to more
jobs, which is the purpose of our efforts.
This bill is a critical piece of legislation.
The PRESIDING OFFICER (Ms. Murkowski). The Senator has used 15
minutes.
Mr. GREGG. It is a critical piece of legislation that we should
endorse, embrace, and recognize that by its passage, we will continue
to give the American people the opportunity to be in a vibrant, growing
economy where jobs will be created, not lost.
The PRESIDING OFFICER. The Senator from California.
Mrs. FEINSTEIN. I believe I am recognized for 15 minutes.
The PRESIDING OFFICER. The Senator is correct.
Mrs. FEINSTEIN. I thank the Chair.
Madam President, I don't think any single bill or issue more
delineates the difference between the Democratic and Republican Parties
today than this bill and the issues it contains.
I would like to respond to the Senator from New Hampshire. He talked
about how good this was for job creation. Under the Clinton
administration, 23 million new jobs were created. So far, 2.6 million
jobs have been created under President Bush. Take a look at the
difference between the two in jobs and also in debt. These are the
early years of Clinton, up to 1997. Look at the blue. That is all
surplus: $69 billion, $126 billion, $236 billion, $128 billion. These
are the years under George Bush, the deficit: $158 billion, $378
billion, $412 billion, $318 billion, and $350 billion. So far, the tax
cuts have cost $1.9 trillion.
I believe this conference report reflects misplaced priorities. It
exacerbates an already serious deficit. It certainly exacerbates the
national debt. And most importantly, it is certainly not equitable.
At a time when most American families are struggling to meet the
rising cost of living, we should be taking constructive steps to
provide targeted tax relief to those who need it most. We are not doing
that. You would think this package of tax cuts might take steps to
alleviate some of the financial strain. Instead, the bill offers no
benefit to middle-class and low-income households. These provisions
have been removed in favor of billions of dollars of additional tax
cuts for the wealthiest Americans. Unfortunately, this conference
report does not resemble the bill that left the Senate earlier.
Today, Americans deal with record gas prices. It is $3.40 a gallon in
some areas in California. The conference committee chose not to require
more from big oil companies, even as corporate profits hit a record
$1.35 trillion last year, now accounting for the largest share of
national income in 40 years. The conferees decided not to do anything
to affect the oil companies, the special incentives and tax breaks they
get. Instead, middle-class families were left to bear the brunt of
these decisions.
Rather than providing millions of Americans with the necessary
extended relief, the lion's share of this bill--$50 billion over the
next 10 years--is devoted to extending reduced rates for capital gains
and dividend tax breaks. I have never had anyone in the business
community come up to me and say: You have to lower capital gains. What
they have said to me is that it doesn't make much difference, certainly
not dividend tax breaks. Unlike the AMT fix, these rates were not
scheduled to expire this year or even the next. Why are we doing it
now? We are doing it now only to make the future bleaker. More than 75
percent of the capital gains and dividend tax breaks have served
Americans earning more than $200,000.
The Senator from New Hampshire says how great these are for the
average person. No, they aren't. They are good for the very wealthy,
for the individual who makes more than $200,000 a year. That is 75
percent of the benefit. The average millionaire will receive a $42,000
tax cut from capital gains and dividends alone in 2005. Meanwhile, the
average taxpayer, earning less than $75,000--that is three quarters of
the taxpayers--receives only $13. So three quarters of the tax-paying
population of America receives only $13, while the individual earning
over $200,000 has a huge tax break. This is unfair. It is
irresponsible. It is not without consequences.
The Federal budget deficit will be at least $300 billion this year.
The national debt is soaring. We have fewer resources available for
critical domestic priorities.

Under President Clinton, we had 4 years of budget surplus. When he
left office, we had a projected 10-year surplus of $5.6 trillion. What
is interesting to me is, the two parties have switched. The Republicans
are not the deficit hawks; the Democrats have become the deficit hawks.
The Republicans have become the big spenders, and this bill clearly
identifies that.
The economic policies of the last 5 years have produced a
catastrophic turnaround. Record budget surpluses have given way to
record deficits projected at $1.6 trillion over the next decade. The
full impact of this administration's fiscal policies remains clouded.
This President has broken with his predecessors by submitting only 5-
year budgets. Why? Think about it, especially after we were presented
with the traditional 10-year numbers during the President's first year
in office. I will tell you why I think he is doing it, and that is to
hide the fact that these tax cuts explode in the out years. They create
enormous problems for the future. The result is a wall of debt.
Over the next 10 years, the debt is projected to reach $12 trillion.
In this year alone, our national debt is slated to increase by $654
billion. More startling is the fact that the national debt is currently
at 66 percent of our gross domestic product. I heard someone make a
speech the other day and say it was 2 percent of GDP, ``don't worry

[[Page S4405]]

about it.'' So we went and got the CBO figures. It is 66 percent of
GDP; worry about it.
The total debt equates to roughly $30,000 owned by every man, woman,
and child in America. This is really troubling to anyone who runs a
household or runs a business. You would have your house repossessed if
you ran your books this way. You would lose your business if you ran
your books this way.
When all costs are included, the tax breaks for the wealthiest
Americans will cost almost $2 trillion over the next decade. When you
combine the cost of the tax cuts with spending on the war in Iraq--
currently totaling $370 billion--the inevitable result is the programs
that matter most are squeezed.
Let me explain that. This chart takes 2 years, 2005 and 2015. It
looks at everything the Federal Government spends. It is deceptive to
look just at the budget. The budget does not reflect what we spend in
entirety. The fact is, entitlements--Social Security, Medicare,
Medicaid, veterans' benefits--are 53.5 percent of what the Federal
Government spent in 2005. Interest on the debt alone was $184 billion.
That is 7.4 percent. So 60.4 percent of everything the Federal
Government spent in 2005 was not budgeted and cannot be controlled.
What is left? Forty percent of total spending. There is 20.1 percent
for defense--not likely to be cut much in view of the circumstances of
the war on terror--and non-defense discretionary, which is everything
else, at 18.9 percent of what the Federal Government spent in 2005.
That is a fact.
So because the only thing you can cut is discretionary defense and
other discretionary spending, these tax policies mean the only thing
you can do is cut every program that matters to the American people.
Fewer cops on the street, down 15,000. Every nutrition and supplemental
aid to seniors is cut. Less for highways, interior, and agriculture.
That is what you have to cut. That is it. And that is what these tax
cuts, when they explode exponentially at the end of the 10-year period,
will do. They will create an enormous problem for the future.
If you add interest on the debt and go to the year 2015, 70 percent
of everything the Federal Government spends will not be controllable--
it will increase 10 percent from 2005 to 70 percent in 2015. Defense
discretionary will be reduced to 15 percent and non-defense
discretionary to 13.7 percent. That is the projected inevitable trend
of what we are doing here today.
Let me talk about some of the cuts: Food stamps for poor people, $272
million; COPS Program, $407 billion or 15,000 fewer officers
nationwide; job training, $55 million. Education, the President's
signature program, No Child Left Behind, will be underfunded this year
by more than $12 billion, and $39 billion since it was enacted. That is
the impact forced by passing a bill like this. No wonder people look at
No Child Left Behind and say: ``Yes, we like the standards, yes, we
want to strive for excellence, but you have to provide the money that
was assured when the bill was signed.'' The fact is, it is $39 billion
underfunded since that bill was signed.
So we are shortchanging our Nation, and it isn't worth the tax cut
for millionaires. I have never had a millionaire--and I would defy any
Member of this body to identify one--come before me and say: ``You
know, I really need a tax cut. I really need that additional $140,000 a
year these tax cuts provide for me.'' I challenge anyone to bring a
name forward of someone who said that because I don't believe they need
it at all.
I have supported tax cuts in the proper context. Let me tell what you
that context is. It is a balanced budget and a projected surplus. That
is the time to cut taxes for people, when you can say: ``We have
balanced the budget and we are in surplus.'' That was true when the
first tax cut went through. The budget was in surplus. The projected
surplus was $5.6 trillion over 10 years. That is when the first tax cut
was made. This is the difference between the two parties. The
Republicans cut taxes even when the red ink is great.
Cut out the revenues, force the squeezing of Government. That means
you have to cut transportation, and agriculture, and cops, and aid to
seniors and virtually every other program, because you cannot cut
entitlements. You cannot cut interest on the debt. We are in a war and
unlikely to cut defense. So you have to cut everything else.
That is where we are going and it is only going to get worse in the
future. The fact of the matter is that we don't have to make these tax
cuts permanent at this time. There is only one reason they are in this
bill. I don't believe it is for jobs. Clinton balanced the budget and
produced 23 million jobs. This administration produced 2.6 million
jobs. That is a pittance in comparison, and it is tax cut after tax
cut. And when we finish here, we will be faced with an estate tax cut
that will take hundreds of billions of dollars out of this revenue
stream. So if there are any cops left, you can be sure they will be
gone. If there are any food stamps left, they will have to be cut.
Those are the choices this forces. It is wrong, it is immoral and, I
think, long term, it is a disaster for this Nation.
Bottom line: I urge my colleagues to vote no on this conference bill.
The PRESIDING OFFICER. The Senator from Mississippi is recognized.
Mr. LOTT. Madam President, we had speakers lined up under the
unanimous consent agreement, but they have not been able to reach the
floor yet. If Senator Thomas shows up or Senator Reed of Rhode Island,
I will yield. I understand that perhaps Senator Akaka is on the way.
While we are waiting, I found the remarks of the Senator from
California very interesting, as they always are. I found her chart
particularly interesting. When you talk about the situation of the
Federal budget and the deficits, I think the chart showed where the
problem is. I appreciate being able to refer to it.
The problem is that entitlement spending will go from 53 percent to
63 percent of the entire Federal budget over the next 10 years.
Entitlements are going to eat the entire Federal budget, yes. We are
getting squeezed in the nondefense discretionary area, but it is
because of the entitlements. We all say that these are untouchable. Are
they? We need reform in these programs--in Medicaid, Medicare, Social
Security--so we can control the spiraling costs they are putting on the
Federal budget.
There are those who say let's just raise taxes and we will have more
money for all of these programs. No. I think that is going the wrong
way. Certainly, we don't want to raise taxes on middle-class Americans.
This bill would give relief, through the alternative minimum tax
changes, of $38 billion to people in that middle-income area. Don't we
want to help them?
Small business expensing. We want to help small businesses. We heard
the Senator from New Hampshire talk about the growth in jobs creation.
So we want to encourage that. That is why this bill would provide some
additional tax relief, or at least prevent tax increases on small
business men and women. That is why we want the alternative minimum tax
to be dealt with because so many people are going to be hit with AMT,
when nobody wanted that or anticipated that.
If we don't pass this bill, then middle-income America is going to be
hit with this very unfair alternative minimum tax. We can deal with
entitlements, but we have not been able to get the political courage to
do so. Then, of course, the idea I have heard two or three times today
is that President Clinton had a balanced budget during the latter part
of his administration. Well, I was there. I remember what happened on
the balanced budget. I remember the very difficult negotiations. I
remember that we did have reform which he eventually signed. He didn't
want to. We had welfare reform and he signed it. We had tax cuts to
encourage growth in the economy, coupled with a reduction in Federal
budget spending. He signed it. The Congress had a lot to do with that.
I think he deserves credit. He was on the seat and he signed the bills.
But I remember it was the Congress that drove that debate, and I am
very proud of that period because I was in the leadership at that time
and for 4 years, we had balanced budgets and a surplus, proving that it
can be done. But you have to have both. You have to control spending,
reform entitlements, and you have to cut taxes in a way that will
create jobs.

[[Page S4406]]

I still have a novel idea. I think that people who should get tax
cuts are the people who pay taxes, and to have some percentage that
reflects that makes a big difference. Some people say, well, we won't
give but $100 to somebody who makes $30,000 or $40,000 a year. It is
not nearly as important to somebody who makes $200,000 who gets a
$1,000 tax cut. But the fact is that you get tax cuts proportionate to
what you pay. The people at the lower levels will get a tax cut; it
won't be as big dollarwise as somebody who makes more because
percentagewise, of what they do in terms of creating jobs, there is no
comparison. It is part of the old class warfare that we always go
through here.
If you tax the people who are producing jobs and paying the bulk of
the taxes, they will change their behavior and they will quit creating
jobs and paying taxes, and we will have less revenue. We are trying to
encourage continued growth in the economy.
With that, I see Senator Reed from Rhode Island has arrived. I yield
the floor at this time.
The PRESIDING OFFICER. The Senator from Rhode Island is recognized.
Mr. REED. Madam President, I rise in opposition to this tax
reconciliation conference report. At a time when we are all already
shouldering a large budget deficit and fighting a war, this is an
irresponsible fiscal policy. At a time when economic growth is mainly
showing up in the bottom lines of companies, ordinary Americans are
struggling with stagnating real wages and incomes. This is not the
approach to take. Yet, we are debating a tax cut whose benefits go
overwhelmingly to those who are so well off that they don't have to
worry, as ordinary people do, about what they will have to give up to
pay for the next tank of gas or to heat their homes.
Supporters of the tax cut in this reconciliation package, including
the President, argue that those tax cuts have produced a robust
economic recovery and extending them is necessary to keep the economy
growing. Some of them even claim that the tax revenues bring in enough
revenue to pay for themselves. These arguments are self-contradictory,
where they are not downright wrong.
At the time the tax cuts in this package were originally passed, the
economy was mired in an economic slump and they were sold as a means to
jump-start the economy. If the administration is right that the economy
is now growing strongly, extending them is unnecessary. If those of us
who believe there are still problems with this economic recovery are
right, we would be throwing good money after bad to extend tax cuts
that have been ineffective.
Responsible economists, at the time of these original tax cuts,
pointed out that these particular tax cuts were very poorly designed to
produce the job-creating stimulus the economy needed in the short run,
and that they would be harmful in the long run by adding to the budget
deficit. They were right.
Economic growth, job creation, and investment have been weak by the
standards of past recoveries. At this point in the recovery from the
1990-1991 recession, the economy had created 4.8 million more jobs than
have been created in this recovery.
Make no mistake, this tax cut will be paid for by borrowing and
adding to the long-run structural budget deficit, and it will depress
the growth in the American standard of living.
If the tax cuts pay for themselves, where are the revenues? Federal
tax revenues as a share of the economy declined in each of the first 4
years of this administration, reaching a 45-year low in 2004. As the
economy recovered, it was natural for revenues to rise. But despite
that growth, Federal revenues were still below their historical average
level last year.
Some have pointed to the higher than expected capital gains
realization as evidence that the tax cuts pay for themselves. Yet, in a
recent letter to Finance Committee Chairman Grassley, the CBO
concluded: ``After examining the historical record, including that for
2004, we cannot conclude that the unexplained increase (in capital
gains realizations) is attributable to the change in the capital gains
tax rates. Volatility in gains can stem from other factors, such as
changes in asset values, investor decisions, or broader economic
trends.''
Past history suggests that the timing of capital gains realization
does respond to tax rates. We saw this in 1986 when realizations
doubled from the previous year as investors took advantage of lower tax
rates. Today, many investors are choosing to realize gains now while
tax rates are low. This increases revenues today, but this is just tax
revenue borrowed from the future. In recent testimony before the Joint
Economic Committee, Federal Reserve Chairman Bernanke noted:

There are a lot of factors affecting both the increase in
the stock market and realizations. And one of the issues here
is the question as to whether or not some realizations are
taking place today which otherwise might have taken place in
the future. And so, in that sense, the increase in tax
revenue is reflecting a one-time gain, as opposed to a
permanent gain.

It is clear that over the long term tax cuts do not pay for
themselves. Former Federal Reserve Chairman Greenspan said in testimony
before the House Budget Committee:

It is very rare and few economists believe that you can cut
taxes and you will get the same amount of revenue. . . . When
you cut taxes, you gain some revenue back. We don't know
exactly what this is, but it's not small, but it's also not
70 percent or anything like that.

Former Chairman of the Council of Economic Advisers, Gregory Mankiw,
wrote in his macroeconomic textbook that there is ``no credible
evidence'' that tax cuts pay for themselves, and that an economist who
makes such a claim is a ``snake oil salesman who is trying to sell a
miracle cure.''
I believe he was an adviser to the Republican President. The
reconciliation bill is full of one-time gimmicks that take money from
the future and leave major issues unaddressed. The one-year AMT fix
costs $33 billion, but we will be back here next year to pass another
fix that could cost an additional $40 billion for another 1-year
solution. The AMT is a trillion dollar problem that the administration
refuses to permanently correct.
The IRA provision is another gimmick that raises revenues now at the
cost of greater revenue losses in the future. Why provide another tax-
favored saving opportunity to the well off who are already able to save
on their own? With all the gimmicks and front loading of future
revenues, we should rename this bill ``the future tax increase for
working Americans reconciliation act,'' because that is what we will
need to happen to pay for these tax cuts for the wealthy.
Reconciliation was designed to enforce fiscal responsibility. It was
designed to force us to make tough choices that emphasize our national
priorities. Instead, what we now have is an unprecedented bifurcation
of the reconciliation process that is full of gimmicks to pay for
unwise tax cuts for those who need it the least, and poor decisions
that ignore our needs to invest more in hard-working families.
The bill before us today has made an utter mockery out of the budget
process and has turned it on its head. Once again, the legislation
before us is about choices and missed opportunities. We have real
crises and issues that we must confront as a nation, and we are again
missing the opportunity of addressing them by squandering millions of
dollars on cuts that are unnecessary. It is critical that we deal with
energy, and it should be at the top of our agenda.
The fiscal strains caused by record high gas prices hurt workers and
the economy. The average household will spend 75 percent more in
gasoline costs this year than in 2001 and yet this tax reconciliation
bill continues to give more tax breaks to large oil companies that have
reported record profits in the past year, at the expense of Americans
everywhere.
In March of this year, Lee Raymond, CEO of Exxon, testified before
the Judiciary Committee that they didn't need the recent tax cuts
provided in the Energy Policy Act of the 2005. When the most profitable
companies in the world tell you they don't need tax cuts and you have
more than a dozen tax cuts that have expired for millions of teachers,
working families, and students, I believe the right decision is to help
those who are in need and not these huge companies.
Last November, the Senate passed a tax reconciliation bill which
scaled

[[Page S4407]]

back some of the tax incentives for the major oil and gas companies.
Many in the industry noted that these provisions would have little, if
any, impact on supply and demand. In essence, the bill took back some
revenue from unnecessary tax cuts for the most profitable companies.
However, these reasonable proposals were eliminated from the conference
report before us today.
Why was that done? Because, of all the provisions in this bill,
President Bush threatened to veto this entire bill if it included the
LIFO revenue raiser, which is a provision that would have eliminated
for one year a favorable method of accounting for the big oil
companies. When it comes to making the most profitable companies pay
their fair share, the administration threatens to veto the legislation.
These specific oil and gas provisions which were included in the
Senate-passed tax reconciliation would have raised $5 billion. This
money could have been invested in fully funding energy efficiency and
renewable energy programs in the Energy Policy Act. The money could
have also been better invested in programs such as LIHEAP and the
Weatherization Assistance Program to help reduce the energy burden of
working families who are disproportionately impacted by these rising
prices. These are the first steps in reducing our demand for fossil
fuels and are currently our Nation's best means of addressing a secure
energy future.
Ultimately, this bill will be a drain on national savings, and our
children and grandchildren will pay the price. These tax cuts have not
contributed to raising national savings. The personal savings rate
which these tax cuts were presumably designed to stimulate has been
going down and is now negative. On average, people are spending more
than their current income. To be sure, soaring corporate profits and
retained earnings have boosted the business part of private savings,
but this is offset by budget deficits which these tax cuts will only
increase.
We no longer have the fiscal discipline we had in the 1990s which
allowed for a monetary policy that encouraged investment and long-term
growth. The President's large and persistent budget deficits have led
to an ever-widening trade deficit that forces us to borrow vast amounts
from abroad and puts us at risk of a major financial collapse if
foreign lenders suddenly stop accepting our IOUs.
Even assuming we can avoid an international financial crisis,
continued budget and trade deficits will be a drag on the growth of our
standard of living and leave us ill-prepared to deal with the effects
of the retirement of the baby boom generation. Strong investment,
financed by our own national savings, not foreign borrowing, is the
foundation for strong and sustained economic growth and rising living
standards.
We desperately need to bring our fiscal house in order, and today's
bill only takes us further away from meeting that goal.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Vitter). The Senator from Iowa is
recognized.
Mr. GRASSLEY. Mr. President, it is very unfortunate that when it
comes to issues of taxes that we see hand-wringing and we read
editorials about who is receiving the benefits of a reduction in taxes
or, in this case, who is going to have to face an increase in taxes
because that is what this is all about, preventing an automatic
increase in taxes if we don't do anything.
With the AMT, the alternative minimum tax, it is going to hit
millions of families next year if we don't do something. We are going
to have an increase in capital gains and dividends in a couple years if
we don't take action today on this bill.
We should think of this as a question of who is going to see an
increase in taxes. That is why the title of this bill is so on point.
The title of the bill is the ``Tax Increase Prevention and
Reconciliation Act,'' and the key part of those many words is ``tax
increase prevention.'' That is the key part of the title. That is what
this bill is all about. This is not about cutting taxes further. How
many times have we heard the words ``cutting taxes'' used on the floor
of this body?
What we are doing in this bill is making sure that people don't get
an automatic tax increase because of sunset, and because Congress
doesn't have guts enough to vote for a tax increase, they can stop
legislation like this and have a tax increase and never have to be on
record in favor of the tax increase. But we are not cutting taxes. We
are keeping the same tax policy that we had in the 2003 tax bill, in
the case of dividends, and we are keeping the same tax policy in the
case of the alternative minimum tax that we had in the tax bill since
Senator Baucus and I negotiated that tax bill in 2001--in other words,
to hold harmless 22 million more people who are not going to be paying
that tax on 2006 income who didn't have to pay it on 2005 income.
I would like to discuss some of the points on this matter that I hope
will help keep the feet of people on the other side of the aisle, and
maybe a couple on our side of the aisle, on the ground.
Let's start with the basic fact that thanks to the tax cuts we have
enacted during the Bush administration, we have now removed millions of
people from the Federal income tax rolls. Millions of hard-working
families now do not have to pay any Federal income tax and, as my
colleagues know, many of these families can get benefits from what is
called the earned-income tax credit which serves the purpose of
offsetting some payroll taxes low-income people pay.
Let me make it very clear. If you are bad-mouthing the tax policies
of 2001 and 2003 in this administration, are you saying that it was
wrong to take millions of low-income people who previously had to pay
some income tax off the rolls? They probably couldn't afford to pay a
little amount of income tax, and they are no longer paying income tax.
It just shocks me that I would hear people bad-mouthing that tax policy
that was adopted in 2001 which, quite frankly, is a continuation of
some tax policy that was adopted in other tax bills in previous years.
That is a fact of life. Thanks to our tax cuts, millions of low-
income families and individuals no longer pay Federal income tax. Yet
people love to pull their hair about the fact that we are not giving
tax cuts to these same low-income people. It is a fact of life that we
all looked at. This kind of talk stops me right in my tracks. It
reminds me of city folk who start to farm, plant soybeans, and wonder
why they are not going to get a corn crop.

It is this way: If you don't pay Federal income tax--and remember, we
just took lots of people, millions of people, off the Federal income
tax rolls who don't pay Federal income tax--if you don't pay it, it is
pretty hard to cut your income taxes. If you don't plant corn, you are
not going to get a corn crop.
Again, this bill is focused on preventing tax increases, not cutting
taxes. So anybody on the other side of the aisle who says we are
cutting taxes for this group or that group doesn't know what they are
talking about because what we are doing is continuing existing tax
policy. If they want to go back and argue that tax policy adopted in
2001 and 2003 is wrong, that we cut taxes way back then, that is an
intellectually honest argument. But don't say we are cutting taxes in
this tax bill because we are not cutting taxes anymore. We are keeping
the tax policy where it has been.
I find it particularly interesting that we hear from the other side
of the aisle that we should have done just the alternative minimum tax
in this bill and not done provisions for capital gains and dividends.
Often, these folks arguing this way are the same folks who are wearing
their hair shirt ragged on this issue of who is going to get tax
benefits.
Interestingly, the Tax Policy Center, which is so often cited by
newspapers and Members, shows that if we had just done capital gains
and dividends and not done the alternative minimum tax, that would have
provided more tax relief for low-income families and individuals. Let
me make sure my colleagues understand that point. By including capital
gains and dividends, this bill provides more tax benefits to low-income
families and individuals than if we had just done the alternative
minimum tax.
So I suggest to those who think they should only do the alternative
minimum tax, they should hang up their hair shirt. We all know the
reality is that capital gains and dividends are encouraging investors,
new businesses,

[[Page S4408]]

and as a result we get 5.2 million new jobs. We get 4.8 percent
economic growth in the last quarter--18 quarters in a row of growth. I
don't say that; Chairman Greenspan says that the tax cuts are
responsible for turning the economy around and having this growth.
Let me further say that Chairman Greenspan has always had a great
deal of credibility, and he still does. If he says it is better, then I
say it. But if we can both say it, we are both right.
You create new jobs, new businesses. It is absolutely wrong to state
that low-income families are not seeing benefits. They are seeing the
benefits of these tax policies previously enacted by these 5.3 million
new jobs created, and they will see these benefits in the future with
more new jobs being created.
This has helped Americans at all levels. It is reported that the
percentage of Americans earning more than $50,000 a year rose from 40.8
percent of the population to 44.2 percent of the population in just 2
years. While inflation is a factor--it is a very low inflation rate--
that still reflects real gain.
To reduce all of this to a spreadsheet of who benefits directly from
taxes is an easy game, and it is a good tool of demagoguery. The truth
is that all Americans will benefit from a strong, growing, robust
economy that will continue when we pass this bill because these
policies are working today, and if we continue these tax policies, they
are going to continue to grow the economy, producing new jobs and, more
importantly, better jobs.
I would like to focus on this issue of who is paying the taxes in
this country because that argument vexes me when I hear it demagoged. I
ask unanimous consent to have printed in the Record an editorial from
the Wall Street Journal last week that says: ``How to Soak the Rich
(the George Bush Way).''
There being no objection, the material was ordered to be printed in
the Record, as follows:

How To Soak the Rich (the George Bush Way)

(By Stephen Moore)

With the House and Senate preparing to vote on extending
George W. Bush's investment tax cuts, it's no surprise the
cries against ``tax giveaways to the rich'' grow increasingly
shrill. Just yesterday Senate Minority Leader Harry Reid
charged that the Bush tax plan ``offers next to nothing to
average Americans while giving away the store to multi-
millionaires'' and then fumed that it will ``do much more for
ExxonMobil board members than it will do for ExxonMobil
customers.''
Oh really. New IRS data released last month tell a very
different story: In the aftermath of the Bush investment tax
cuts, the federal income tax burden has substantially shifted
onto the backs of the wealthy. Between 2002 and 2004, tax
payments by those with adjusted gross incomes (AGI) of more
than $200,000 a year, which is roughly 3% of taxpayers,
increased by 19.4%--more than double the 9.3% increase for
all other taxpayers.
Betwen 2001 and 2004 (the most recent data), the percentage
of federal income taxes paid by those with $200,000 incomes
and above has risen to 46.6% from 40.5%. In other words, out
of every 100 Americans, the wealthiest three are now paying
close to the same amount in taxes as the other 97 combined.
The richest income group pays a larger share of the tax
burden than at anytime in the last 30 years with the
exception of the late 1990s--right before the artificially
inflated high tech bubble burst.
Millionaires paid more, too. The tax share paid by
Americans with an income above $1 million a year rose to
17.8% in 2003 from 16.9% in 2002, the year before the capital
gains and dividend tax cuts.
The most astounding result from the IRS data is the deluge
of revenues from the very taxes that were cuts in 2003:
capital gains and dividends. As shown in the nearby chart,
capital gains receipts from 2002-04 have climbed by 79% after
the reduction in the tax rate from 20% to 15%. Dividend tax
receipts are up 35% from 2002 to 2004, even though the
taxable rate fell from 39.6% to 15%. This is as clear
evidence of a Laffer Curve effect as one will find: Lower
rates produced increased revenues.
What explains this surge in tax revenue, especially at the
high end of the income scale? The main factor at play here is
the robust economic expansion, which has led to real income
gains for most tax filers. Higher incomes mean higher tax
payments. Between 2001 and 2004, the percentage of Americans
with an income of more than $200,000 rose from 12.0% to
14.2%. The percentage of Americans earning more than $50,000
a year rose from 40.8% to 44.2%--and that's just in two
years. While these statistics are not inflation-adjusted by
the IRS, price rises were relatively modest during these
years, so adjusting wouldn't alter much.
We can already hear the left objecting that the rich are
paying more taxes simply because they have hoarded all the
income gains, while the middle class and poor wallow in
economic quicksand. But, again, the IRS data tell a more
upbeat story of widespread financial gains for American
families. The slice of the total income pie captured by the
richest 1%, 5% and 10% of Americans is lower today than in
the last years of the Clinton administration.
So how can the media contort these statistics to conclude
that the Bush tax cuts only benefited the affluent? The New
York Times claims that the richest 0.1% got 5,000 times the
tax benefit than those with less than $50,000 of income. That
figure can only be true if one assumes that there were no
economic benefits from the tax cuts whatsoever; and that
lower taxes on income, capital gains and dividends resulted
in no changes in the real economy--not the value of stocks,
not business spending, not employment, not capital flows into
the U.S., not corporate dividend payments, not venture
capital funding--nothing. The underlying assumption of this
static analysis is that tax cuts don't work and that
incentives don't matter.
Of course, in the real world, financial incentives through
tax policy changes matter a great deal in altering economic
behavior. And we now have the evidence to confirm that the
latest round of tax cuts worked--five million new jobs, a 25%
increase in business spending, 4% real economic growth for
three years and a $4 trillion gain in net wealth. So now the
very class-warfare groups who, three years ago, swore that
the tax cuts would tank the economy rather than revive it,
pretend that this robust expansion would have happened
without the investment tax cuts. Many Democrats on Capitol
Hill recite this fairy tale over and over.
One final footnote to this story: Just last week, the
Department of the Treasury released its tax receipt data for
March 2006. Tax collections for the past 12 months have
exploded by 14.4%. We are now on course for a two-year
increase in tax revenues of at least $500 billion, the
largest two-year increase in tax revenue collections after
adjusting for inflation ever recorded. So why are the
leftists complaining so much? George Bush's tax rate cuts
have been among the most successful policies to soak the rich
in American history.

Mr. GRASSLEY. Mr. President, I will highlight a few points from this
editorial that is based on Internal Revenue Service data. After the tax
cuts passed by Congress and signed by President Bush, the Federal
income tax burden substantially shifts as a greater burden to the
wealthy. Well, that must be a shock to people on the other side of the
aisle. It says that after the tax cuts passed by Congress and signed by
President Bush, the Federal income tax burden substantially shifted as
a greater burden to the wealthy. It cites these statistics: Between
2001 and 2004, the percentage of Federal income taxes paid by those
with incomes of over $200,000 a year and above has risen from 40.5
percent to 46.5 percent. The tax share paid by millionaires has risen,
with Americans with incomes over $1 million going from 16.9 percent to
17.8 percent in 1 year, from 2002 to 2003.
And what have we gotten from the tax cuts in capital gains and
dividends? Not only has it sparked the economy, as Chairman Greenspan
gives it credit for doing, but in response to the cuts in capital gains
and dividends, we haven't seen revenues from capital gains and
dividends go down as part of our overall revenues. But the Wall Street
Journal editorial states that capital gains receipts have increased 79
percent after the cut in capital gains and dividend tax receipts have
gone up 35 percent.
We are seeing all this with the bottom line being that tax revenues
have been increasing at an incredible rate. The Secretary of the
Treasury noted in a press conference with me that we have seen double-
digit increases in tax receipts in the last 2 years--hundreds of
billions of dollars of taxes coming in. And I think I remember the
figures that the Secretary of the Treasury gave. But first of all,
before I give those figures, let me say there may be some people
listening who think if you increase tax rates, you increase revenue
coming into the Federal Treasury. Then there are people who believe
that if you cut tax rates, you are going to cut revenue coming into the
Federal Treasury. We are in an era where we are cutting tax rates, 2001
through 2003, and the surprise is--and this is probably a shock to some
people--we had $274 billion more coming into the Federal Treasury in
2005 than in 2004. And with the continuation of that policy, right now,
we have $137 billion more coming into the Federal Treasury than we
anticipated in a 6-month estimate at this point in this fiscal year.
So it is working. That is why the title of this article that I am
submitting is: ``How to Soak the Rich (the George Bush Way).''

[[Page S4409]]

Mr. President, there are studies that go around that say you can get
marginal tax rates too high; that people that have some means are going
to decide they are only going to pay so much money into the Federal
Treasury. Then you know what they do? Instead of choosing productive
activity to make money and pay more taxes, they decide: I am not going
to pay any more. They choose leisure and do nothing, or do less. But
when you reduce marginal tax rates, there is something about the
wealthy: They are greedy. They are going to take advantage of the
opportunity, and they are going to invest, make more money, pay more
taxes and, in the process, create more jobs. That is what is happening
in this economy today.
My hope is that my colleagues will see past the editorials and the
rhetoric that make fun of what we are trying to do because they are too
stupid to read the studies which show that you can lower taxes and have
more revenue come in and recognize the reality that the wealthy are
paying the greater tax, which happens when you reduce taxes, you
increase revenue, because they are done choosing leisure and then they
have incentives for productivity. Also, I hope my colleagues realize
that low-income families have seen their Federal income taxes reduced
as well, as best evidenced by those who are no longer on the rolls, or
additionally what Senator Baucus and I got in the 2001 tax bill: The
10-percent rate. And people over here are bad-mouthing the 2001 tax
cut. Do you want to do away with the 10-percent rate? Do you want to
let that sunset in 2010 because you don't have guts enough to vote for
a tax increase? Do you want it to go into place automatically and have
a 50-percent increase in the tax rate of low-income people? It doesn't
sound to me like you are very populace when you say things such as
that.
The tax cuts have benefited all Americans by giving us a strong and
growing economy, creating new jobs, 18 quarters of economic growth, 5.2
million jobs. We need to keep this economy going, and the way to help
that along is not to increase taxes on middle-income people by voting
against this bill that prevents 22 million middle-income people from
being hit with the alternative minimum tax and to not increase taxes on
those who invest in new or growing businesses that create new jobs.
This bill is about preventing a major tax increase. A tax increase will
hurt the economy. Don't take my word for it, take Chairman Greenspan's
word for it.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Hawaii is recognized.
Mr. AKAKA. Mr. President, the chairman of the Finance Committee is a
very good friend, and I know him as a good friend and a very passionate
person who takes his work very seriously and is a hard worker in this
body. I want him and the body to know that I do appreciate his good
work. In this body we know that many of the bills offered are not
perfect. We know there are many bills that are of concern to Members of
this body and for those they represent.
Mr. President, once again, we are faced with a tax package that
represents misplaced priorities, and that is not in line with the views
of a majority of Americans, including taxpayers in my State of Hawaii.
My constituents are calling for fairness in tax treatment, and they are
not getting it in this tax package.
The $70 billion tax reconciliation conference report before us puts
tax cuts for the richest in this country above tax relief for the
middle class. It leaves out real solutions for real pocketbook issues
for middle America, like the gas price crunch that has many families in
a bind. It is outright fiscally irresponsible in an era when annual
federal deficits exceed $300 billion, and uses budget gimmicks and
timing shifts to mask its true costs. There are other choices that my
colleagues and I would have made, and did make when we passed the
Senate version of this bill, such as extending the Research and
Development and Work Opportunity Tax Credit, but, once again, we were
simply shut out of meaningful input into the conference committee
process.
My constituents will not appreciate the inequities in this conference
report. The measure provides an estimated annual tax cut of $42,000 for
those making more than $1 million. For the top one-tenth of one percent
of households in this country whose incomes exceed $1.6 million, tax
cuts will average more than $82,000. Roth IRA changes would benefit
those taxpayers who make $100,000 or more, meaning that more than 99
percent of the benefit would go to the top 20 percent income group. In
contrast, Mr. President, the average tax reduction for middle-income
families would be $20. Only five percent of benefits would go to those
earning annual incomes of $75,000 or less.
What does this mean for those who are left out of this package? Not a
single taxpayer can deduct state or local sales taxes from their 2006
federal taxes. School teachers who purchase classroom supplies out of
their own funds--and I remember doing this when I was a teacher, and my
teachers doing this often when I was a principal--will pay higher taxes
this year. Families paying college tuition will be unable to deduct
that tuition from their taxes this year. Employers will not receive a
tax credit for people hired from welfare to work, so fewer will be
hired. The research and development tax credit will not be available
this year to businesses working hard on innovations to allow America to
remain competitive in global markets. And, as the Ranking Member for
the Homeland Security and Governmental Affairs subcommittee with
jurisdiction over D.C., I must protest the non-inclusion of certain tax
incentives for the District of Columbia.
Large oil corporations are taken care of in this package, while
people in Hawaii and many others across the country continue to see
their household budgets squeezed by high gas prices. This week,
according to the AAA Daily Fuel Gauge, the average price for the nation
is $2.88 a gallon for regular unleaded. The average price in my state
of Hawaii where most supplies are imported is a whopping $3.40 per
gallon for regular unleaded, and this number is steeper on the neighbor
islands. I really feel for my constituents who have long commutes, such
as those going from Wahiawa or Nanakuli to downtown Honolulu, Kona to
Hilo on the Big Island, or Lahaina to Kihei on Maui, whose household
budgets leave little room for excess costs. Hawaii's average price a
year ago was almost a dollar lower per gallon, at $2.51 for regular
unleaded. You can see what this has done to household expenses in my
state and across the country. This tax package presented an opportunity
to send a message to big oil. Instead, it fails to adequately curtail
existing tax benefits for big oil--benefits that business leaders in
the industry say they do not need--and includes pared back provisions
such as a measure that eliminates exploration expensing. In the
meantime, protections for those buying hybrid vehicles were weakened.
The conference report does not respond to the current crisis at the gas
pumps in a meaningful way.
For all of these reasons, Mr. President, I oppose this tax
reconciliation conference report. We are once again burning the candle
at both ends--shrinking revenues while absorbing tremendous ongoing
costs for our military operations, efforts to combat terrorism, and
relief for hurricane victims. This package comes at the wrong time and
fails to deliver on promises of fairness to the American people.
The PRESIDING OFFICER. The Senator from Delaware is recognized.
Mr. CARPER. I believe under a unanimous consent agreement the Senator
from North Dakota is to be recognized next, and as soon as he is
prepared to take control of the floor, I will be happy to yield to him.
But until then, if I could have a moment or two, I would appreciate it.
The PRESIDING OFFICER. There is no unanimous consent agreement
currently in operation, so the Senator has been recognized.
Mr. CARPER. I appreciate the Senator from North Carolina giving me a
minute or two.
Mr. President, earlier this year I had an opportunity to vote on a
tax bill. The tax legislation I voted for, not once but twice, provided
for renewing--extending the investment tax credit. We needed to do
that. It expired. It called for extending for a 2-year period of time
the fix to the alternative minimum tax. We needed to do that. It has
expired. It called for renewing and extending the college tuition
deduction.

[[Page S4410]]

We need to do that. It has expired. We paid for doing all of those
things in ways that would not make the budget deficit grow larger.
Today, as we take up this legislation and consider its passage, it
includes nothing about relief for those people who are now paying the
alternative minimum tax who should not be; there is nothing to extend
the research and development tax credit, and we should be; and,
frankly, it doesn't do anything about restoring the college tuition
deduction, and we ought to be doing that as well.
What we do is go down the road a couple of years and say that the 15
percent tax on capital gains and on dividend income, we are going to
extend it for 2 years beyond December 31, 2008. Yet we are not
addressing the stuff that needs to be addressed, the tax provisions
that need to be addressed right now.
What makes today's proposal all the more galling is, in order to pay
for this tax bill we use a gimmick. I thought I had seen everything. I
have never seen anything quite as cynical as this, where we actually
pay for a tax cut with a tax cut. Some of us have heard the old saying,
``no pain, no gain.'' Around here, in this Congress, and, frankly, with
this administration, instead of our slogan being ``no pain, no gain,''
it really ought to be ``short-term gain and long-term pain'' because
what we are doing is stealing revenues beyond the year 2015 in order to
pay for a tax cut that will largely help people who honestly don't need
a huge tax cut.
I don't know that this makes a whole lot of sense. It doesn't pass
what I call the commonsense test back in Delaware. ``Short-term gain,
long-term pain'' is not as catchy, I suppose, as ``no pain, no gain,''
but I tell you that is what the watchword of the day is around here. It
is wrong. We ought not to do it. I will be voting against this tax bill
as a result.
I thank the Senator from North Dakota for sharing this time. I yield.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. CONRAD. Mr. President, I want to thank my very able colleague
from Delaware, Senator Carper. I always enjoy listening to him and his
perspective on these issues. I think he is somebody who is rock solid
on this issue of fiscal responsibility. I am hopeful at some point very
soon we will get serious about restoring fiscal discipline to this
country. We are headed for the cliff, and we are headed at a very rapid
rate. So I again thank my colleague from Delaware, Senator Carper.
I have said publicly before, and I believe it, that I have never seen
this city, this institution, the White House, more disconnected from
reality than we are at the current time. Let me just put in perspective
where I see that we are and where we are headed.
This chart shows the fiscal failures of this administration. He
inherited a surplus of $128 billion in 2001, and by his second year in
office he had us in the ditch, right back in the deficit ditch that we
dug out of: $158 billion of red ink in 2002.
Then the deficits really exploded to almost $400 billion in 2003,
over $400 billion in 2004. We saw somewhat of an improvement in 2005 to
about $320 billion. Now it is going back the other way. We now estimate
the deficit will be in the range of $325 billion this year.
Far more serious is what is happening to the growth of the debt
because the deficit, while it is projected to go up $325 billion this
year, here is the projection on the debt. The debt is now estimated to
be increasing by over $600 billion this year.
Put that in perspective. At the end of the first year of this
Presidency we had a gross debt of the country of $5.8 trillion. In 1
year under the President's plan--this year we are going to add another
$600 billion to the debt. That is an absolutely unsustainable course.
Now the President comes to us and says what we need to do is make all
the tax cuts permanent. Let's dig the hole deeper. Here is what the
President's proposal would do. In the first 5 years--see, this is a
little like hitting the iceberg. You know, most of the iceberg is
underwater. Most of the President's tax cut is hidden from view because
it is outside the 5-year budget window. The President only shows 5
years. Why? Maybe it is because he doesn't want to show where all this
is headed. But here is the revenue loss as you go forward. The cost of
these tax cuts absolutely explode.
This is at a time when the debt is exploding. Remember what the
President told us when we adopted this fiscal course? He told the
country he was going to have maximum paydown of the debt. Do you
remember that? He was going to pay off all the debt that was available
to be paid off. Now we can go back and check the record and see what
actually happened, and here is what actually happened. This is what has
happened to the national debt under this President's watch. There is no
pay down of debt. The debt is exploding.
As I indicated, it was $5.8 trillion after his first year in office.
We don't hold him responsible for the first year because we were
operating under another fiscal plan. But look at what has happened
since. The debt has skyrocketed. At the end of this year it will be
$8.6 trillion. This President has already added $3 trillion to the
national debt.
Under the budget plan that is over in the House of Representatives
and here, it is going to go up another $3 trillion. They will have more
than doubled the debt of this country.
Perhaps most stunning is how much of this debt is being financed by
foreigners. This chart shows it took all these Presidents, 42
Presidents, 224 years, to run up $1 trillion of debt held by
foreigners. This President has more than doubled that amount in just 5
years. This President has trumped all these Presidents combined, in
terms of running up foreign debt, U.S. debt held by foreigners. That is
truly a stunning achievement.
This morning in the Budget Committee we were interviewing Mr.
Portman, who has been nominated to head the Office of Management and
Budget. One of my colleagues said: The performance of this
administration on fiscal affairs has been extraordinary. And I agree.
It has been--extraordinarily bad. No other President has come close
to this record of running up debt, debt on top of debt. He will have
doubled the debt of this country, and he has already more than doubled
U.S. debt held by foreign countries.

Our Republican colleagues say: Don't worry. If you cut taxes you get
more money. The only problem with that is we are now able to examine
the record. We are now able to go back and look at what happened since
they started down this policy road, and here it is. The numbers do not
lie.
In the year 2000, we had over $2 trillion of revenue. The President
came into office and said he had an idea, he was going to cut, and cut
massively, taxes, and we would get more revenue. Let's look. Did we get
more revenue? In 2001, the revenue went down to under $2 trillion. The
next year it went down some more. It went down to $1.85 trillion. How
about the next year, did it go up then? No. It went down some more. In
2003, we went down to $1.78 trillion.
In 2004--how about this, now, 4 years later, was the revenue up to
where it had been in 2000? No, not even close.
What is this talk, you cut taxes and you raise more revenue? The only
problem with that is it hasn't worked. It didn't work. We didn't get
back to the 2000 level of revenue until 2005.
It is even more clear for revenue as a share of gross domestic
product, which is what economists say we should use so that we are
taking out the effects of inflation and growth. What do we see? The
President came into office in 2000, revenue was 20.9 percent of GDP.
Look what happened. This is what happened on the revenue side of the
equation. It absolutely collapsed, most of this because of the tax
cuts. So in 2004 we were down to 16.3 percent of GDP, revenue of the
Federal Government. That was the lowest it has been since 1959.
Now we have had an uptick, but we are still way below where we were.
We are also well below where they said we would be back in 2001. If you
go back to 2001 and see what their estimates were of what revenue would
be in 2006, this is what they said. In January of 2001, they said: When
we get to 2006, we will have $2.7 trillion of revenue.
Here is what we see--not $2.7 trillion but far short of that, $2.3
trillion. Maybe we are going to have something a little bit better than
that, maybe even 10 percent better, but still way short of what they
projected.

[[Page S4411]]

Now our Republican colleagues come out with this plan. It's
breathtaking that, when already we can't pay our bills, we are adding
dramatically to the debt. Their answer? Spend more money. We just
approved more than $100 billion of additional spending that was off-
budget--and cut the revenue some more, cut the revenue $70 billion, and
that is just step 1. They are going to come out here with some more tax
bills and cut it even more. So their answer is dig the hole deeper.
They are saying: America, you are going to get a big tax cut. It is
your money.
Let's examine that statement: It is your money. I agree with that.
All of this is the people's money. That is exactly right. But, you
know, to give this tax cut--because we are running deficits, there is
no money to give back. This money is all being borrowed. It is being
borrowed largely from the Japanese and the Chinese. So let's think
about what we are doing. We can't pay our bills so the President says
let's have a big tax cut, reduce our revenue even more, and we have to
borrow it.
Increasingly, we borrow the money from the Chinese and the Japanese.
So we are going to borrow the money from the Chinese and the Japanese
to give people a tax cut and here, who is going to get it? Those who
earn from $10,000 to $20,000 are going to get an average tax savings of
how much? Two dollars. That will certainly be helpful to them. Those
earning $20,000 to $30,000 are going to get $9. Those earning from
$30,000 to $40,000 are going to get $16. Those earning between $40,000
and $50,000 are going to get $46. Those earning from $50,000 to $75,000
are going to get $110.
Let's go to the other end, those earning more than $1 million. They
are going to get $42,000. And where are they going to get it from? They
are going to get it from borrowing from the Chinese and the Japanese--
and the British and the Caribbean banking centers and the South Koreans
and every other country in the world that we can borrow money from.
Does this make any sense?
Let's see. We can't pay our bills now, so what is the answer? The
administration says: Spend a bunch more money. They wanted $92 billion
off-budget additional spending, and by the way, cut the revenue some
more so that the hole gets deeper.
Where are you going to get the money? We don't have the money. So we
are going to have to borrow the money. Who are we going to borrow the
money from? From the Chinese and the Japanese so we can give those
earning more than $1 million a year a $42,000 tax cut, so we can give
those earning $10,000 to $20,000 a year $2. That way they can say
everybody is getting something. As amusing as it might be, it is also
serious and it is leading us down a path that is, in my judgment, a
complete disaster.
The tax bill that is before us also leaves out things that we
typically extend year to year that would normally be included in this
legislation. But our friends on the other side said, No, it is much
more important to give these big breaks to those who are at the very
highest part of the income level in our country. We are going to leave
out the R&D tax cut, which might actually help strengthen our country
for the future. We are going to leave out tuition deduction, which will
help families afford tuition so we can better educate them. That is
left out. The sales tax deduction is left out for States that have
sales tax and people deduct what they pay in sales tax. The work
opportunity and welfare-to-work credit is left out. The savers credit--
and we have negative individual savings in our country--they leave out
that credit. That is an interesting idea. Leasehold and restaurant
improvements is left out. Teacher classroom expenses is left out. The
new market tax credit is left out. Our friends last year labeled this
whole plan the deficit reduction plan.
Let us look at what they have done. They reduce spending $39 billion
over 5 years. They did not actually reduce spending. Spending, of
course, is going up dramatically; it is not going down.
They reduced the rate of growth theoretically over 5 years by $39
billion. But then they turned right around and in this bill cut the
taxes $70 billion.
When you put the two together, there is no deficit reduction. The
deficit increases. Instead of labeling it the ``deficit reduction
bill,'' they should have called it the ``deficit increase bill.''
They are not done yet because we all know they are going to come with
a second tax package outside of reconciliation and add another $30
billion or $40 billion of revenue reduction.
On top of it all, they have used the series of budget gimmicks to
make room for these additional tax cuts. They count short-term savings
from the revenue-losing Roth IRA provision. That gains about $6 billion
in the near term but loses $36 billion over a longer period. They
concocted this as a way to make the numbers work at least for a moment.
They sunset small business expensing provision, they have a 5-year
delay on the implementation of withholding on Government contracts, and
they have a timing shift for corporate estimated payments--gimmicks on
top of gimmicks to make something look like something it is not. That
is an old Washington tradition.
Perhaps the most egregious is the Roth gimmick, counting short-term
savings for something that is a long-term loser.
There is a quote from the Washington Post:

One measure would allow upper-income savers with a
traditional Individual Retirement Account to pay taxes on the
account's investment gains and then roll over some of the
balance into a Roth IRA, where the money can be withdrawn tax
free upon retirement. The provision would raise about $6.4
billion over 10 years, seemingly keeping the size of the tax-
cutting package down. But over the next 5 years, it would
cost the Government $36 billion, according to the Urban
Institute Tax Policy Center. This is the kind of shell game
that gets us deeper into trouble.

If you look at it, just visually, what they are doing with business
expensing, 2006, 2007, 2008, and 2009, it is $100,000. What do they do?
They drop it dramatically by 75 percent to make it look as though
somehow this whole package fits within the $70 billion. It is, frankly,
a giant fraud.
Here is what our Comptroller General said about the current fiscal
path. He says:

Continuing on this unsustainable fiscal path will gradually
erode, if not suddenly, damage our economy, our standard of
living, and ultimately, our national security.

That is what is at stake here. Ultimately, that is what is at stake
here--the economic security of our Nation, the national security of our
country. And our friends are playing fast and loose with the long-term
security of America--doubling the national debt over a very short
period of time, doubling the amount of money that we will owe foreign
investors, utterly unsustainable. None of it adds up.
What are the consequences? Here are the consequences. Here is what
the Federal Reserve has been doing to interest rates. Interest rates--
up, up, up, up, up, and up--16 rate increases. Why? Because they are
desperately afraid of the inflation that comes when you borrow massive
amounts of money and you spend more than you take in. They are very
worried about a country that is going add $600 billion to the national
debt this year and run a trade deficit of another $700 billion--
unprecedented in our Nation's history.
Our friends on the other side say the economy is doing well. Is it
doing well? Here is what has happened to real median household income.
It has declined 4 straight years. Real median income is down, down.
That is not success. When we compare this economic recovery with the
previous nine economic recoveries since World War II, here is what we
find. This dotted red line is what has happened in the nine previous
recoveries on business investment. The black line is the recovery. What
you see is we are 45 percent lower than the average of the nine
previous recoveries since World War II. That is not economic strength.
That is an economic plan that is not working.
It is not just true in business investment; it is also true in job
creation. Again, the dotted red line shows what has happened in the
average of nine recessions since World War II. The black line is the
recovery. You can see that we are 6.5 million private sector jobs short
of the average recovery since World War II.
Something is wrong. I submit that one of the things wrong with this
massive debt is we are loading on this economy the biggest increase in
debt in the history of our country--and it just keeps on coming.
Our colleagues on the other side have abandoned fiscal responsibility
completely. They have decided to put it on

[[Page S4412]]

the charge card, send a bill to our kids and our grandkids, and they
have done it at the worst possible time. They have done it before the
baby boomers retire.
This is the sweet spot in the budget cycle. These are the good times.
What is going to happen when the baby boomers start to retire? The baby
boomers are not a projection; they are a reality. They are going
retire, and they are going to be eligible for Social Security and
Medicare, and we can't pay our bills now. What is going to happen when
they begin to retire?
Let me tell you that the logic of what our colleagues on the other
side of the aisle are doing is to force this country into a situation
in which they have to shred Social Security and Medicare in order to
keep this country from bankruptcy. That is the logic of where they are
taking our country. It is a disastrous fiscal direction.
I hope very much that our colleagues will say no to this, say no and
get us back on the course of fiscal responsibility.
I ask unanimous consent that a description of a provision, which is
extraneous pursuant to the Byrd rule, be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

PROVISIONS OF CONFERENCE REPORT TO ACCOMPANY H.R. 4297, TAX RECONCILIATION ACT OF 2005 WHICH ARE EXTRANEOUS
PURSUANT TO THE BYRD RULE
[Senate Budget Committee Democratic Staff]
----------------------------------------------------------------------------------------------------------------
Violation(s) of Sec.
Provision 313(b)(1)(A-F) Description of Provision
----------------------------------------------------------------------------------------------------------------
Sec. 512........................ Sec. 313(b)(1)(E) of the Roth IRA conversion provisions.
Congressional Budget
Act of 1974: Net
revenue decrease in
every year beyond FY
2010 exceeds savings
from other provisions
in each of those years.
----------------------------------------------------------------------------------------------------------------

The PRESIDING OFFICER (Mr. Alexander). The Senator from Iowa.
Mr. GRASSLEY. Mr. President, the Washington Post printed on its front
page yesterday a chart that was intended to show that the tax benefits
in this tax bill go disproportionately to the super rich. The
information was based on a study by the Tax Policy Center, along with
the Center on Budget and Policy Priorities that has made no secret of
its opposition to the tax relief included in this conference agreement.
So there is a biased view.
I have had an opportunity to dig into the details of how that
particular study was conducted. But if it is like similar analyses, the
reported dollar savings statistics don't tell the whole story, and for
three reasons:
First, it includes all households, even those that do not file tax
returns or don't owe any tax liability, and even those that have a
negative tax liability because they receive refundable credits.
In analyzing the distribution of the tax cut, it makes more sense to
look at who actually receives the benefits as opposed to what they do.
In other words, why include people who don't pay any taxes in the first
place?
Second, the statistics in that study did not take into account the
fact that the tax rates on dividends and capital gains for those in the
bottom two income tax brackets drop to zero percent in 2008. That is
that rate we are extending.
Third, and most importantly, the statistics are not shown in the
context of the total income tax burden that these taxpayers bear. It is
common sense that income tax cuts can only go to people who pay income
tax.
Let me repeat that because I think the other side wants to ignore
that:
Income tax cuts can only go to people who pay income taxes.
The value of the tax cut should be measured then not only in absolute
dollar terms but also in relationship to the total income tax
liability.
This conference agreement before us has two centerpieces, the
alternative minimum tax hold harmless, which passed the Senate with 66
votes. The extension of lower tax rates on dividends and capital gains
is the second provision.
If we applied the logic of including all tax returns in the various
income groups and compare the AMT and dividend and capital gains tax
savings to the total income liability borne by those groups in the
aggregate, we can see that all of these groups receive meaningful
benefits.
That is what the chart before us says. This chart was prepared by my
Finance Committee staff, but it is based upon analysis of data provided
by the Joint Committee on Taxation, not some liberal think tank that
has its own ax to grind. The Joint Committee on Taxation is not
Republican or Democratic--they are professional tax people who just
study taxes up and down, and their economic impact.
As the statistics from the Joint Committee on Taxation show, all of
these income groups receive meaningful benefits from this conference
agreement.
In fact, the biggest beneficiaries are those in the $100,000 to
$200,000 and $200,000 to the $500,000 AGI categories. The $100,000 to
$200,000 and the $200,000 to $500,000 category.

The reason that shows up on the chart that way is not because of the
reduced rates on dividends and capital gains that the other side is
complaining about; it is because of the alternative minimum tax, the
hold-harmless provisions that I fought to get completely the way the
Senate had included them in this conference report.
Of course, it is strongly supported by the same folks who strongly
oppose this conference agreement because of the extension of lower
rates on dividends and capital gains, which I point out benefits low-
income taxpayers more than the AMT relief--as we can see on the chart,
$50,000 and under and the $50,000 to $100,000 category.
The core of this conference agreement is the alternative minimum tax
hold harmless, which is the Senate position I fought hard for in
conference. The other main provision is the extension of the lower
rates on dividends and capital gains in combination with two provisions
providing meaningful income tax savings to Americans across the income
spectrum, not just the rich. These savings will prevent over 15 million
Americans from being hit by the stealth AMT tax and allow those
taxpayers and millions more to keep more money in their pockets to
spend in the economy, adding to savings rather than sending money here
for Members of Congress to spend.
Let me remind people of something brought home to me when I held a
town meeting in Iowa. I never have anyone come in and say they are
undertaxed, but I sure have plenty of people come in and say that
Congress is wasting a lot of money. So every time we have a tax bill,
people are complaining because we are not taxing more to reduce the
deficit, and higher tax rates do not bring in more revenue. The people
crying about that are the very same ones who are voting all the time to
increase expenditures whenever they get an opportunity.
I also address one of the important measures in this bill, the tax
gap. Last January, 2005, the Joint Committee on Taxation provided a
report on possible options to improve tax compliance. This report
suggested that one of the key ways to deal with the tax gap is to
impose withholding on certain payments made by government entities. The
joint committee report stated:

The lack of a withholding mechanism on nonwage payments
leads to substantial underpayment of tax each year and has
long been identified as contributing to the tax gap.

And a further quote:

Payments made by the Federal government and State and local
governments represent a significant amount of those annual
payments that are not subject to withholding. Imposing
withholding on nonwage payments made by the Federal
government and State and local governments would improve
taxpayer compliance, reduce the tax gap, and promote
fairness.

The problems of government contractors not paying tax has been a
subject of very good oversight of the Committee on Governmental
Affairs, particularly led by Senators Coleman and Levin, as well as the
Government Accountability Office. The findings of the Government
Accountability Office report in June of 2005 show that over 33,000
contractors owed over $3 billion

[[Page S4413]]

in unpaid Federal taxes as of September 30, 2004. Clearly, there is a
serious problem. Fortunately, there is broad bipartisan support for a
solution proposed by Joint Tax of a 3-percent withholding on government
payments.
I think it important that my colleagues recall that this basic, same
reform was included in an amendment offered by the ranking member of
the Budget Committee on November 17, 2005. That was vote No. 330. This
amendment, which included this provision, was supported by all but two
of the Members of the other side of the aisle.
I am pleased that there is wide recognition of the need for this
reform and that this is not a partisan question. However, I do
anticipate that some Senators will want to make an argument that we
should have implemented this reform much earlier.
Several points on that issue. This is a real break from previous
practice and will require changes in business as usual by Federal,
State, and local governments. It is for these reasons that the Joint
Tax Committee recommended at a minimum there should be a 6- to 18-month
delay before implementation.
It was unfortunate that the amendment from the ranking member of the
Committee on the Budget did not allow for this time period for
governments to prepare for this new requirement. In fact, rather than
giving the time allowed as recommended by the Joint Committee on
Taxation, the provision was actually retrospective. However, I
understand firsthand the difficulties of trying to deal with revenue
issues in a specific year, so the author of the amendment has my
sympathy.
We chose to go beyond the period recommended by the Joint Tax
Committee and give governments and contractors additional time to
prepare for this new withholding requirement. Allowing for additional
time was a point that brought greater comfort to conferees in
considering this new legislation. Additional time would give Congress
an opportunity to hear from parties. It may be possible that after the
dialog, we will be able to move up the effective year to begin this
important provision dealing with the tax gap.

Let me be clear. This is a measure which has bipartisan support. That
is very positive. We need to work on a bipartisan basis to deal with
the tax gap. This is a good first step. The only question, then, is
possibly one of timing. I have erred on allowing government and the
contractors to fully prepare for this new requirement and for the
Treasury to issue regulations that will give guidance allowing for a
smooth start.
I also take a moment to respond to something that was said this
morning by my friend from Oregon, Senator Wyden, a member of the Senate
Committee on Finance. He is up on tax legislation most of the time. His
earlier comments about his provision to eliminate energy bill tax
incentives for major oil companies needs an explanation that I don't
think he is aware of.
In November of 2005, he offered an amendment in the Committee on
Finance to eliminate the tax break known as G&G for geological and
geophysical costs that major oil companies received in the Energy bill.
His provision is in this conference report. I went to the conference
with his provision, and I came out of conference with his provision
intact.
In addition, we actually improved the original Senate amendment and
increased the amount of tax revenue that is going to be raised over the
5-year period. The provision of my friend from Oregon resulted in a
$101 million Federal tax benefits savings for the 5-year budget window
this bill covers. Through conference negotiations, we managed to find a
way to actually increase the revenue raised over 5 years from that $101
million up to $160 million, and we still respected the concerns in the
original Senate bill.
Another point I make is that the original proposal filed by my friend
from Oregon actually lost $88 million in Government taxes the first
year. In other words, the way the original amendment worked, it
actually gave major oil companies an $88 million tax benefit, and under
the reconciliation rules, that would not work. We had to change the
formula so that the provision raised tax revenue of $160 million over
all 5 years of the budget resolution.
I want the record to reflect that I upheld my part of that bargain.
This conference report holds up its part of the bargain on that
provision. The major oil companies only received one tax benefit in the
Energy Policy Act of 2005. This conference report removes the tax
benefit the major oil companies received from the G&G tax incentive.
I yield the floor.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I like my colleague from Iowa. We work
together on a lot of things. But I know he will give me room to
disagree today.
I disagree very strongly about the philosophy, the approach, and the
legislative initiative that is in the Senate. I was thinking about
legislating. We do not have legislative reviews, like movies do. In
movie reviews, you can get a sense of what is going to happen, and
maybe someone will have made a judgment about it.
I have a review from ``Groundhog Day.'' I don't know if anyone here
has seen ``Groundhog Day,'' but it is about a weatherman who goes to
cover Groundhog Day to determine how much additional winter will exist,
and then he goes back to his hotel room. Every morning, the alarm rings
at 6 o'clock and the same day starts over again. He simply cannot get
out of it. That was the movie ``Groundhog Day.'' The review for it said
that Phil Conners is an egocentric weatherman who annually covers a
Groundhog Day celebration in a small Pennsylvania town. Phil finds
himself reliving Groundhog Day over and over, which makes him realize
he has to change his ways.
So this is like Groundhog Day in the Senate. We are reliving over and
over and over the ability of the majority party to cure whatever ails
America with another big tax cut that goes largely to upper-income
Americans.
We have a big deficit that is out of control. We are deep in debt,
choking on debt. What is the solution? Cut the revenue. What kind of
solution? How do you cut the revenue? Cut the revenue for the top
folks. The big guys. The big shots. Because the little folks do not pay
taxes, we are told. Oh really?
Well, there are lots of taxes people pay. There are payroll taxes.
That is a proportional tax. The person at the lowest end of the
economic ladder pays the same percentage in payroll taxes as the person
at the very top. Yet we are told, somehow, that these people at the
bottom do not pay taxes. Therefore, when we construct an income tax
rebate or an income tax cut, sure, most of it has to go to the upper
income folks.
Here is a description of where most of the tax cuts have gone in this
bill. This is from the Tax Policy Center. It says that if you are
somewhere between zero and $20,000 in income, you are going to get a $3
tax cut--not $2, not $4, but $3. So just get ready, that is one gallon
of gasoline you will get. But if you have over $1 million in income,
you in this conference report which is brought to the Senate today,
boy, you ought to get ready to celebrate. You will get a $42,766 tax
cut on average. Someone says here is a check for $42,000. All we know
is that you have a lot of money, you are at the top of the scale, but
you will get $42,000 and the person over here is going to get $3.
Let me read something that comes from a fellow whom I like. He is one
of the wealthiest people in our country. His name is Warren Buffett.
Warren Buffett wrote a piece for the Washington Post a few years ago.
Here is the op-ed piece by the second richest man in the world. Here is
what he says about the tax cuts in the Congress. He talks about himself
and the receptionist in his office. He wrote this op-ed piece when the
majority party was proposing that there be a zero tax rate on
investment income, dividends, and the like.
He said:

Now, the Senate says dividends should be tax free to
recipients.

I admit this bill does not make them tax free. It takes dividends to
the low tax rate of 15 percent and keeps them there.

Now the Senate says dividends should be tax free to
recipients. Suppose this measure goes through and the
directors of my company therefore decide to pay $1 billion in

[[Page S4414]]

dividends next year. Since I own 31 percent of my company, I
would receive $131 million in additional income. I wouldn't
owe another penny in Federal tax. My tax rate would plunge to
3 percent--

He is talking about his income----

while my receptionist would still be paying 30 percent.

So here are comments from the world's second richest man who is
taking a look at the strategy for tax cutting by the majority party,
saying--and he said it in another venue--if this is class war, my side
is winning, and I don't need these tax cuts.
But that is exactly what is happening because there is a belief here
that somehow our economy works when you put something in at the top and
it filters down. We have heard of this ``trickle down'' for a long
time. But that is what is at root here, the ``trickle-down'' economics.
I had a guy once tell me: I have heard of this trickle down for 10
years now, and I ain't even damp yet. But that is because he did not
earn a lot of money and he was not getting big tax cuts.
Well, let me describe what is not in this legislation. At a time when
we have very significant budget deficits--everybody here should
understand the country is off track. We are seriously off track. We are
going to load up and burden our kids and grandkids with all this debt
at a time when we just passed a $109 billion emergency supplemental
bill that was not paid for, to fund military operations in Iraq and
Afghanistan, to pay for Hurricane Katrina relief, and so on.
Just following that, we bring to the floor of the Senate another
massive tax cut. Groundhog Day: Do it again and again and again. It
will cure every ill, we are told.
What doesn't this legislation have? Let me give you an example of
what it does not have. It does not have any provisions that should have
been in the bill that would attempt to get the taxes owed by U.S.
multinational companies that park their earnings offshore or use tax-
haven countries to avoid paying their taxes on income they earned in
this country.
Let me give you an example of that. I have used this many times on
the floor of the Senate. This is compliments of David Evans, an
enterprising reporter for Bloomberg. This is a picture of a five-story
building on Church Street in the Cayman Islands. This is home to 12,748
companies.
Let me say that again because it is important. This little white
building called the Ugland House in the Cayman Islands--a tax haven
country--is home to 12,748 companies.
Now, do they live there? No. No. That is just their mailing address
set up by a lawyer. For what purpose? So they can run income through it
to avoid paying taxes. It is a sham. In the nature of an old spaghetti
western, you would think the sheriff would get on his horse and ride
right into the canyon after these folks. It is unbelievable what is
going on. Now we believe the proposal that would shut this down would
raise about $15 billion over 10 years. It is not in here.
I will give you another example. In addition to the Ugland House,
where companies run the income--incidentally, in many cases, these are
the same companies that moved their jobs to China, sell their product
in America, and run the income through the Cayman Islands so they do
not have to pay taxes; and the same companies that next week will be
here saying: Yes, I moved my jobs over to China. And I also want to,
through the back door, bring cheap labor in through a different source.
That is another story for another debate next week, perhaps.
But in addition to the Ugland House and 12,000 companies perpetrating
a myth that this is home for tax purposes, we see U.S. companies moving
their jobs overseas and the Joint Committee on Taxation says we are
losing $1.2 billion a year subsidizing and providing tax breaks to
these very companies that are closing their American manufacturing
plants and moving their jobs to China or Indonesia or Sri Lanka or
Bangladesh or elsewhere.
People will say: I don't believe that. That can't possibly be
happening. Yes, it is happening. We actually have this pernicious tax
break in tax law that says to a company: This is a global world, a
global economy. Shut your American plant, fire your American workers,
move your jobs to China, sell your product back into the United States,
and we will give you a big, fat tax break.
Should that tax loophole be closed and maybe raise a little money? I
have tried four times on the floor of the Senate to close it. Four
times I have lost that vote. It is nearly unbelievable.
In the broader case of fiscal policy, there is no philosophy that I
can understand--economic philosophy or political philosophy--that would
justify at this moment deciding what America needs most is to reduce
its revenues, especially by benefiting the highest income earners at a
time when we are choking on debt.
I have said before, and I say it with some amount of jest, I guess,
that there was a time when the majority party here in this Congress--
the party that controls the White House, controls the House and the
Senate--could be relied upon for a couple of things. Conservatives were
conservative.
In my little town of 300 people, I knew what a conservative was. I
could see them. I could see it operate day to day. I could see the way
they behaved in our town. You could count on them for something,
always. I always kidded, they wore gray suits like bankers, they wore
wire-rimmed glass, and they looked as though they had just eaten a
lemon--very serious. The one thing you could count on was, they would
stand up for fiscal policy that says: We demand balance. Balance your
budgets. Save for the future. Conservative values. That is what they
always gave to our country, always gave to our communities, State
legislatures: the philosophy of staying on track, balancing your
budget, decent fiscal policy.
It is gone. It is absolutely gone. Proposed increases in the Federal
debt of gigantic proportions, tax cuts coming to the floor when we
are choking on debt, bills coming to the floor saying: Let's spend $109
billion more. And, by the way, don't worry, we don't have to pay for
it. Just declare it an emergency. Where on Earth is the conservatism
that used to be involved in fiscal policy construct? It does not exist.

Some of us understand, I think, that this is off track, and we have a
responsibility to put it on track. Ronald Reagan used to ask the
question: If not us, who? If not now, when? If not us, who is going to
do this? We are elected to do this. It is our responsibility to look
truth in the eye and decide: This is unsustainable. We can't continue
on this track. If we don't do it now, when will we do it? Next month?
Next year? I don't think so.
This is the kind of Groundhog Day of fiscal policy; every time we
come to the floor and turn to another chapter in this book, the next
chapter says: It does not matter what is wrong with us, what we need is
to cut taxes, and we need to cut them for the top folks. If you earn $1
million or more a year, you get a $42,000 refund check. If you earn
$10,000 or $20,000 a year, you get $2 or $3.
I am saying that is not what I think is going to cure what ails
America. We need a strong fiscal policy that recognizes our
responsibilities, one that is fair, and one that stares truth in the
eye and says: This cannot continue. This current fiscal policy is off
track. We have a responsibility--yes, we do; Republicans and Democrats,
conservatives and liberals, this President and this Congress--now. It
is us, and it is now. That is the answer.
We have this responsibility, and I hope we act sooner rather than
later. For that reason, I will not vote for this legislation. This
legislation is, in my judgment, poorly constructed, provides all the
benefits in the wrong direction. But, secondly, and even more
importantly, it seems to me the worst step you could make at this point
is to send a signal to the folks who are watching this country's
economy, saying: Yes, we are way off base. We are about $1.4 trillion,
just in the last 12 months, off track--about $650 billion in additional
borrowing on the fiscal policy side, and a $700 billion deficit on the
trade side, added together is almost $1.4 trillion in the red--and the
signal we are going to send to people is: We are not serious about
that. What we want to do is cut revenues.
I am telling you, people watching this--the bond markets, the
investors--worldwide will say: This is not a Congress that is serious
about addressing this country's problems.

[[Page S4415]]

America deserves better than that, in my judgment. That is why I
cannot vote for this legislation.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from West Virginia.

Health Insurance Marketplace Modernization and Affordability Act

Mr. BYRD. Mr. President, today the Senate debates S. 1955, the Health
Insurance Marketplace Modernization and Affordability Act. Now, health
care is a very complicated subject. The issue of health care involves
life-or-death decisions for millions upon millions of Americans who
lack even the basic access to affordable health care.
The reality is that health care costs are skyrocketing, and the
number of individuals with access to medical insurance is diminishing.
That is unacceptable. The harsh reality is that 45 million Americans
have no health care coverage, including 275,000 West Virginians.
That is 275,000 West Virginians who cannot take even the most basic
steps to ensure that their health and their lives are not in jeopardy.
That is 275,000 West Virginians who may be unaware that an illness or a
disease is preparing to spread unabated throughout their bodies.
Today, technology enables doctors to discover and treat diseases
faster than ever before, and, in many cases, cure these diseases before
their effects are irreversible. It is unacceptable--unacceptable--that
more and more Americans cannot take advantage of new technological
tools to discover problems early. It is past time to do something for
these citizens.
The current health care crisis hits small businesses especially hard.
Small businesses often pay the highest rates for health care benefits
because they lack the power to negotiate with big insurance companies.
One innovative solution is for small businesses to be able to join
together--join together--to ensure that their employees have access to
affordable health care.
That is why Senator Olympia Snowe and I have introduced the Small
Business Health Fairness Act of 2005. The purpose of this bill is to
enable small businesses in West Virginia and around the country, like
corner grocery stores, like the little store my wife and I had once
upon a time, restaurants, and hardware stores, to offer health care
coverage for their workers.
Hard-working Americans employed by these businesses deserve
affordable health care. A waitress working the night shift to provide
for her child is every bit as deserving of health care benefits as the
CEO of the largest corporation. A clerk in a family store should not be
priced out of basic health care coverage simply because he works for a
small business. There are 275,000 stories like this in West Virginia,
and the Federal Government should be taking actions to help these
people.

While I agree in part with the goals of the bill before us, there are
important differences between the bill offered by Senator Snowe and
myself and the Enzi bill. The Snowe-Byrd bill, unlike the bill proposed
by the very distinguished Senator from Wyoming, Mr. Enzi, does not
preempt State law by erasing all preventative health tests and
treatments. These mandates are the core medical services which are
already part of many existing health plans.
The amendment I am cosponsoring, with the very able Senator from
Maine, proposes to simply put some of the safeguards back that were
eliminated by the Enzi bill. Our amendment provides small business
workers with guaranteed access to the most important health care
screening and services. It is imperative to include procedures
guaranteed to catch diseases before the damage can be done. Our
amendment guarantees patient access to procedures such as mammography
screenings and screenings for prostate and cervical cancers. It is
necessary in my State of West Virginia to make sure that diabetics have
access to the supplies they need to regulate their blood sugar levels
and to allow for maternity stays to assure the well-being of both
mother and child after childbirth. Basic requirements such as these are
essential keys to the health of all Americans, including those who work
for small businesses. That is why Senator Olympia Snowe and I want to
offer this amendment. Why prohibit such lifesaving tests? These are
basic questions I am asking. Why offer half a loaf to small business
employees?
I never ceased to be amazed by the medical advancements that have
occurred during my lifetime. It is absolutely amazing, unbelievable,
these advances that have occurred--penicillin, modern X-ray machines,
laser surgery, CAT scans, PET scans. Each day, every day doctors and
researchers make critical discoveries and develop new technologies that
help people to enjoy longer and healthier lives. And still, too many of
our people are unable to take advantage of such advancements. They
cannot afford to do so because they lack insurance. We have a moral
obligation to find ways to help families gain access to lifesaving
medical care. Millions without health care insurance go through life
hoping, praying that they will not get sick or will not face a
catastrophic medical complication. Living a life free from worries
about health care coverage should not be a privilege. It ought to be a
guarantee in this country.
While Senator Snowe's and my amendment could vastly improve vital
coverage currently left out of the Enzi proposal, unfortunately, it
looks as though the Senate will not have the opportunity to even vote
on the amendment. Our bipartisan amendment, offered to better the bill
before us, will never be allowed--ever--a vote in this Chamber. This is
not the way the Senate should conduct its business. Purposefully
blocking and disregarding amendments on an issue as vital as affordable
health care does a disservice--I say again, a disservice--to our people
and to this institution. The Snowe-Byrd amendment would make an
important improvement to the bill before us.
Why employ a legislative maneuver that blocks attempts to improve
health care options for small businesses and for their employees? Why?
Why? Instead of blocking important amendments, the Senate ought to get
to work on improving health care for the 45 million Americans,
including 275,000 West Virginians, without health insurance. The lack
of affordable health care in this country has reached crisis
proportions. Why is that? Why is the Senate cutting off debate?
We should be working together in this Senate to find ways to help our
people afford health care insurance. We should be discussing the May 15
enrollment deadline in the new Medicare Part D Program. Why can we not
have a vote on extending this deadline? Why, I ask, and I ask and I ask
again, why, after hearing from millions of the Nation's senior citizens
and their worries about the deadline, are we not even talking about
their concerns? My office has received hundreds of calls from concerned
senior citizens. This is a pressing issue that requires our attention.
Yet due to the actions of the leadership, the Senate is being held
hostage. To what? To a deadline. Our senior citizens, whose sweat and
blood helped to make our Nation great, are now being told that time is
up for them. They must choose a health plan immediately or face
financial penalties.
Because of the complexity of the new Medicare Part D Program, it is
only right that our senior citizens be given time to understand their
options and make informed decisions when selecting drug coverage. But
instead, our elderly citizens are being told to hurry up or face
penalties. That is just not good enough for the greatest country on
Earth. Where is the compassion that our country is so known for? What
is so almighty sacred about Monday, May 15?
It is unbelievable that important improvements to the Enzi bill will
probably never receive a vote. It is a disservice to the small business
employees and owners who deserve relief from the health care crunch. It
is absolutely ridiculous that the Senate will not be permitted to
consider pressing health issues for our senior citizens, the people who
have worked so hard for so many years to build this great country.
I urge Senators to reject this process by which we are being gagged
and denied a vote on these critical health care issues.
I yield the floor. I thank all Senators.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.

[[Page S4416]]

The assistant legislative clerk proceeded to call the roll.
Mr. THOMAS. 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. THOMAS. Mr. President, I have been watching the interesting
debate for some time. Of course, it is interesting and there is a great
deal involved. Fortunately, we are having a debate. However, it seems
to me that much of it has been very complicated. Some have had charts
and details. It occurs to me that basically it is a broader issue than
that, one that frankly divides the two sides of the aisle. We have had
deficits that are larger than they ought to be. They were brought about
by events such as September 11 and Katrina and those kinds of things.
Just like in your family and your business, you have to go back and do
something about it. However, this is one of those decisions that
defines the direction we want to take in this country.
Choices are before us all the time. From time to time, we have hard
decisions to make that are quite broad. I think those of us on this
side of the aisle are interested in trying to have a strong economy,
one that provides jobs and growth in the economy, and we are doing
that. That is a good thing. I think at the same time we are looking for
a Government that is smaller and less expensive and that spends less.
To do that, of course, we want to have less taxes so the money can be
invested in the economy and jobs can be created. That is precisely what
we are seeking to do.
The other point of view--I understand it, but I don't agree with it--
is that we need to basically spend more and, therefore, you need more
taxes. You would have more Government involved in more and more things.
You get down to a broad decision, and that is where we are. I know
every detail is a little different; on this issue it is here and that
issue it is there, but you have to kind of put them together in the
overall picture and see where we are going.
I guess I have tried to kind of avoid some of the details but to look
at what I think the broad directions are in the votes we are having
today. Do you want less Government, with more emphasis on the private
sector, more emphasis on job development, more emphasis on less taxes,
and more involvement with the growth of the economy or do you want more
Government, with more spending and more taxes? That is the issue. I
think it is fairly simple.
I know there are a lot of details and arguments and I know people
have different ideas about it. But the fact is that the other side of
the aisle has been for more taxes and spending. We have tried to reduce
taxes on this side and, hopefully, we will be able to reduce the size
of Government and do something about the deficits, not by more taxes
but by less spending. That is our decision. I think it is fairly
simple. I certainly encourage our effort. This is not to reduce taxes;
it is continuing reductions that we have had in place that have
supplemented and strengthened the economy. It is pretty clear.
The deficit talk that we have heard and seen on the charts--that has
gone on for several years. Yes, we need to do something about that and
reduce spending. I am for that. I am encouraged that we can hold down
taxes rather than letting them go back up again, so that we have more
jobs, a better economy, and we can operate in that fashion. I hope that
we are able to continue this reduction.
I yield the floor and 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. 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, a few days ago, at Lincoln Center in New
York City, illusionist David Blaine completed a week in a water-filled
bubble. He then got himself chained up, got rid of his air hose, and
tried to escape from the chains, while setting a world record for
holding one's breath underwater. His goal was to hold his breath for 9
minutes.
His feat was impressive. But he failed. After 7 minutes, he had to be
let out of the remaining chains. He had to be rescued.
This bill also contains an illusion. This bill's illusion is paying
for tax cuts with further tax cuts. Like Mr. Blaine's illusion, this
bill's illusion also fails.
I give Mr. Blaine a lot of credit. He does his illusions in full view
of the public--an open water bubble in the middle of New York City.
The tax bill does its illusions in the dark--outside the budget
window.
Some of those viewing Mr. Blaine in New York City thought he had a
lot of chutzpah to try his feat. The sponsors of this tax bill also
have a lot of chutzpah if they think they can balance one set of tax
cuts with another set of tax cuts--and call that fiscal responsibility.
Mr. Blaine called his stunt ``Drowned Alive.'' That also a fitting
name for what this bill would do to the American taxpayer.
I am talking about section 512 of this bill. That section would
remove the income limits on conversions from traditional IRAs to Roth
IRAs, effective in 2010. Under this provision, all who convert their
IRA accounts in 2010 get a tax break--2-year averaging of the taxable
amount of the conversion, with payments to be made in 2011 and 2012.
Why does the bill contort these changes into 2010 through 2012? There
is an easy explanation. The conferees wanted to raise money in 2011
through 2013. They needed money on those years to help cover the cost
of extending capital gains and dividends cuts. And they needed to cover
those costs to avoid a point of order under the Byrd Rule. So a 2010
effective date and the funneling of transfers into 2010 serve a clear
purpose.
The sleight of hand is that a provision that loses money--billions of
dollars a year--in years beyond the budget window are made to pass
muster as a revenue offset provision. The illusion is to call this
provision a revenue raiser.
How does this provision raise revenue? It encourages taxpayers who
earn more than $100,000 a year to transfer traditional IRA balances
into a Roth account. These taxpayers would pay taxes in the short run
on traditional IRA balances and get tax-free investment income later.
Take for example a taxpayer with an IRA holder who makes $120,000 and
is covered by an employer-sponsored retirement plan. Say that this
taxpayer contributes to a traditional IRA. Under current law, the
contributions would not be deductible. At retirement, the taxpayer
would pay ordinary income taxes on the invstment earnings--what tax
advisers call ``the inside buildup.'' But the original contributions
would be returned tax-free. They would be what tax advisers call
``basis'' in the account.
In 2010, say that the taxpayer takes advantage of the new law we
create today and converted the traditional IRA to a Roth IRA. In 2011
and 2012, the taxpayer would pay taxes on 50 percent of the investment
earnings that were in the account. At retirement, the taxpayer could
withdraw any additional buildup in the account tax free.
So the provision would raise revenue by taxing the conversion in 2011
and 2012. Then the provision would lose revenue when withdrawals were
made from the account in the future.
The provision would thus borrow from our children. The conferees felt
a need for revenue in 2011 and 2012 to pay for a 2-year extension of
the capital gains and dividends cuts. So this bill would take the
revenues from the future and claim them now.
The philosophy of this bill is: Let's just spend it now. Let our
children figure out how to replace the revenue that would have been
collected 10 or 20 or 30 years from now.
How much revenue would this provision take from our children? The
Joint Tax Committee's revenue estimates show losses of more than $1
billion in 2014, 1.2 billion in 2015. To get a good idea of the longer-
term losses, we asked the Joint Tax Committee to provide us with an
estimate for the same provision, but effective in 2006 instead of 2010,
so we could confirm that there will be revenue losses further down the
road.
Under the joint tax rules, you have to ask them for it beginning this
year because they can provide the estimates.

[[Page S4417]]

If you ask them beginning in later years, under their rules, they will
not do the math. We asked them to do the math and we asked if it went
into effect this year.
Mr. President, I ask unanimous consent that the Joint Tax Committee's
response appear at this point in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Congress of the United States, Joint Committee on
Taxation, Longworth House Office Building,
Washington, DC, May 9, 2006.

MEMORANDUM

To: Pat Heck, Judy Miller, and Ryan Abraham
From: Thomas A. Barthold
Subject: Revenue Estimate
This memorandum is in response to your request dated May 3,
2006, for a revenue estimate of your proposal to eliminate
the income limitation on conversions from a traditional IRA
to a Roth IRA. Under your proposal, any amount otherwise
required to be includible in income as a result of a
conversion that occurs in 2006 may be included in income in
equal installments in 2007 and 2008. Your proposal would be
effective for taxable years beginning after December 31,
2005.
We estimate that your proposal would have the following
effect on Federal fiscal year budget receipts:

FISCAL YEARS
[Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Item 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-10 2006-15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Eliminate the income limitation on Roth IRA -0.1 1.8 3.4 1.0 -1.1 -1.5 -1.7 -1.9 -2.1 -2.3 5.0 -4.5
conversions; taxpayers can elect to have amounts
converted in 2006 included in income in equal
installments in 2007 and 2008....................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Mr. BAUCUS. The Joint Tax Committee estimated that the pattern of
increasing revenue losses continues, growing about $200 million a year.
So by 2020, the loss would be over $2 billion a year. That extrapolates
to $3 billion a year by 2030. In other words, this bill would take $2
to $3 billion from our children, every year, to pay for a 2-year
extension of capital gains and dividends rate tax cuts, which we know
would not go into effect until January 1, 2009.
That troubles me, and it should trouble all my colleagues.
The conferees made bad choices in putting this conference report
together. American workers need an extension of the Saver's Credit that
expires after 2006, but get an extension of a capital gains and
dividends cut that does not expire until 2009. And the bill purports to
pay for those tax cuts for with a Roth IRA conversion provision that
starts losing revenue by 2014 and has losses that balloon outside the
budget window.
There are so many reasons to vote against this report. The use of a
tax cut to allegedly pay for another tax cut is just one symptom of a
seemingly irresistible urge to put wants before needs. I encourage my
Colleagues to join me in voting for setting the right priorities. I
urge them to vote against this conference report.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
The Senator from Iowa is recognized.
Mr. GRASSLEY. Mr. President, I spoke this morning about the
bipartisanship and the origination of the idea behind the Roth IRA
conversions, and how Senator Bentsen was the inventor of that idea, and
how it had such broad bipartisan support. I supported it. It also had
bipartisan support when Senator Roth introduced the bill. It had passed
the Senate so many times by big, bipartisan margins.
We hear people on the other side of the aisle badmouthing an idea of
one of the most esteemed Members of their party in the history of the
Senate, Senator Bentsen of Texas, who was chairman of this committee in
1991, 1992, and was going to be chairman in 1993 and 1994, but he
became Secretary of the Treasury. Now all of a sudden it becomes
partisan that we are including that idea in this legislation. I don't
understand it.
I have this response to what was said. I heard my friend on the other
side try to argue that the provisions in the conference report that
will allow taxpayers to make Roth IRA conversions is a budget gimmick.
Was it a gimmick when Senator Bentsen introduced it? It is not a
gimmick. Nothing could be further from the truth.
The Roth IRA conversion provision generates real Federal revenue. In
fact, the nonpartisan Joint Committee on Taxation estimates that the
provision will generate $6.4 billion in Federal revenues over the next
10 years. This is a provision with longstanding bipartisan support in
the Senate.
The Democrats have also tried to argue that the Roth IRA conversion
provision will actually make the Federal deficit worse in the long
term. That, too, is not true. Roth IRA conversions merely change the
timing of when individuals must pay tax on their retirement savings,
accelerating tax payments in the case of those who convert. It does not
result in a net change in Federal revenues over any long-term period.
In addition, critics choose to ignore a reverse effect of the various
retirement savings incentives. Because congressional budget estimates
are done on a 10-year basis, these estimates ignore distant revenue
gains as well as losses. Because tax incentives for retirement savings
basically and typically are front-loaded, the 10-year budget estimates
generally reflect only large losses of Federal revenue. These estimates
ignore the fact that the Federal Government will recoup the tax on that
money and the associated investment gains when it is distributed later
in retirement.
From a budgetary standpoint, the Roth IRA conversion provision only
balances out a small part of this effect. If anything, this provision
has the potential to actually increase receipts over a long period of
time because it will lead to higher tax compliance as folks voluntarily
pay their tax up front.
This provision brings in real money into the Treasury, it is good,
and, most importantly, it is bipartisan--or I guess it used to be
bipartisan. Today it is very partisan, and that is something I don't
understand. How could you as Democrats be for something over the 1990s
and not be for it now? Is it because maybe the Republicans are in the
majority? It just doesn't make sense.
I yield the floor.
The PRESIDING OFFICER (Mr. Coleman). The Senator from New Jersey.
Mr. LAUTENBERG. Mr. President, I wish to call attention to a saying
that is kicked around here quite often: When you are in a hole, quit
digging.
We are approaching $10 trillion in debt, and the majority--and I
respond to my friend and colleague for whom I have great respect, the
Senator from Iowa, the chairman of the Finance Committee--is not
dealing in a typically bipartisan fashion when conferences are held
without the minority being invited to participate.
There is, in case no one noticed, a Republican majority Senate, a
Republican majority House, and the White House is occupied by a
Republican President. It is fair to say that what we see happening
reflects directly the will of the majority.
As we look at approaching $10 trillion in debt--and we just approved
it; it is going up to $9 trillion--the majority wants to continue the
lifespan of the Bush tax cuts to add another $70 billion to our debt. I
find it incredible.
None of us have an exclusivity of knowledge--none of us. One can
argue about whether an additional tax cut has value in increasing
revenues, about where that money is spent when it gets into the hands
of those who get the largest part of it.
There is another side to this that I think deserves examination, and
that is we have done the tax cut thing, and where are we? We are deeper
in debt. There is a song that goes: The harder I work, what do I get? I
get deeper in debt.
When I see that we just increased the debt limit and we are about to
push up against it pretty closely, we now want to add another $70
billion to our debt, I think it is a subject for fair debate, whether
it is good for business or isn't.

[[Page S4418]]

I come from the business world, and I ran a very successful company.
The company I started with two other friends now employs 40,000.
We have ideas that have been thought out, and I think this is a fair
place to express them.
I know the other side of the aisle likes to say these are tax cuts to
help everyday people, but I want to do a reality check. Those who earn
over $1 million a year get 22 percent of the tax breaks in this bill.
That is a very small percentage of the wage earners in this country.
Millionaires get an average tax cut of almost $42 thousand--41,977,
to be precise--while those earning from $40,000 to $50,000--I want to
point this out, millionaires get an average tax cut of about $42,000,
while those earning from $40,000 to $50,000 a year get an average tax
cut of $46.
I got some gas the other day and one tankful cost over $60. When you
get an average tax cut of $46, my advice to those who get it is: Don't
spend it all in one place; $46, distribute it around; maybe buy a
little boat or something so you have some fun with it.
The last time we complained about unfair tax cuts such as this, one
of our Republican colleagues actually accused us of ``persecuting
millionaires.'' Alas, what a pity, that we should be so biased in our
statements.
If Republicans were more concerned about helping the middle class in
this country, we would all be better off--all of us. The best idea we
have seen from the majority recently was to give everyone $100 to help
with soaring gasoline costs. Maybe that ought to be accompanied by a
statement that says if you go to Las Vegas or buy a lottery ticket,
perhaps you can really hit it big. Mr. President, $100, how do you use
that? We now know how little $100 is, and the offer is offensive, so
offensive that it was quickly withdrawn when people said: This doesn't
make any sense. What do we do for people? Giving them a $100 gift
certificate, if I can call it that.
Gas prices are out of control, wages are stagnant, more and more
working people are losing their health insurance, and the Republican
side of the aisle is admonishing us about persecuting millionaires.
I know some people who made money in their lifetime. I know if you
want to buy a particular airplane, a G-5, that you have to wait 2 to 3
years to get it delivered. It costs $30 million. If you want to add
some amenities, it can get up to $40 million. But there are so many
people wanting to buy them, you have to wait years to get delivery.
Yachts that are over 150 feet, that is a 2-year wait.
It looks like there is plenty of use for that $42,000 tax break.
President Bush and the Republican majority in Congress have lost all
sense of fiscal discipline. When the President took office in 2001, he
inherited a rosy fiscal picture, a better one almost than any President
in history. We had a $236 billion budget surplus. We thought we would
pay off the entire national debt by the end of President Bush's first
term. But now we are on a track to double our national debt by 2011.
President Bush holds the Nation's credit card. We are the bank, and
he keeps asking us to raise his credit limit, also commonly called the
debt ceiling. In 2002, Republicans raised the debt ceiling by $450
billion, and in 2003, they raised the debt ceiling again by a record
$984 billion. And despite the earlier admonition, in 2004, they dug the
hole deeper by adding another $800 billion to the debt ceiling. When
will this stop?
Then just 2 months ago, they squeezed through another $781 billion
increase in the debt ceiling. So now we will owe the Chinese and other
countries this money as we beg them to buy our bonds.
These numbers are so large that it is hard to relate to them. I think
that is exactly what President Bush and Republican colleagues are
counting on.
By adding nearly $4 trillion to our debt, we add a bill to every
American of over $13,000 that has to be paid off in the future. Your
kids, my kids, everyone's kids will have to pay it back with interest.
It is time to get serious about fixing our Nation's financial
condition. We can't continue to run record-setting budget deficits year
after year, and we can't keep increasing our debt like it doesn't have
to be paid off by future families and wage earners.
President Bush and the majority in Congress are doing long-term harm
to our economy, to our standing in the world just by throwing more
money at people who don't need it or, in many cases, don't even want
it.
We have to stop conducting ourselves like the proverbial drunken
sailor, like the guy in Las Vegas who is about to bet the family farm
on the turn of a wheel. We should not be passing our endless debt on to
our children and as the legacy for our grandchildren. I hope we will
see votes against this irresponsible tax bill. I hope people on the
other side of the aisle--and we can agree that maybe we ought to take a
deep breath, step back, and not just casually increase the debt limit
while we fight to give the millionaires an average $42,000 tax break.
It is really something when we think about it.
Tax cuts for millionaires. We could send 1.9 million children to
preschool. This tax cut that is designated to go to the millionaires
could be used to give health care to 8.7 million uninsured children. Is
that a better thing to do, I ask you, than to give those who make over
$1 million a year another $46,000? I would rather give the health care
to 8.7 million uninsured children. I can tell you one thing: There are
no children of those who stand here who are without health care--not
one. But there are hundreds of thousands of children--millions, I
should say--who are uninsured; 8.3 million uninsured children.

Tax cuts for millionaires could send 2.8 million young people to
college. Tax breaks for big oil, as we have given to them, could keep
college tuition tax deductible for 6.4 million students and their
families. We give tax cuts for millionaire investors instead of tax
credits to help poor people save.
I hope we will stop passing along endless debt to our children and
our grandchildren. Our legacy would best be shown as an indication that
we want this country to be stronger domestically. We want our country
to be stronger when it comes to military engagements, and we are
failing that--failing that. If you read the papers--contrary to what I
heard from our Secretary of Defense the other day about how everything
is OK and we have enough people to do what we want to do--recruiting is
way down and under pressure. So I think it would be a good idea if we
got together at this point and said: OK, let's agree that our legacy to
our children is going to be eliminating or reducing the debt that we
are placing on their shoulders. And instead saying: If you want to go
to college, you don't have to end your college career with a debt of
$50,000 or $60,000 or, in some cases, much more. If we want to leave a
real legacy, something of value to our children, then we have to say we
want an Earth that is free of contaminants in the air that our kids
breathe. We want to stop global warming. Some on the other side say it
is a hoax, global warming. Ice floes are coming off of Antarctica. I
was there and visited Antarctica and the South Pole. You can find there
chunks of ice floating that are bigger than some States. Kilimanjaro is
about to see the last of the snow that has been there since time
immemorial. Glacier Park is soon to be without glaciers. What does it
take? Those are the items of legacy that we ought to be talking about.
We want the air to be better so that when children are growing up,
they are free from asthma attacks on their respiratory system. If we
want to give our kids something to be grateful for, let's clean up the
waters that surround us and make sure that we are not going to be
overflooding lands across this globe, with global warming creating
melting seas.
I hope we will be able to muster the courage to say: Don't increase
this national debt any more than we already have done, and don't give
tax breaks to millionaires who don't need or want the money--$42,000 in
tax breaks if you have a $1 million income. That is a pretty sizable
bite. I don't think it is fair to say that Democrats are too stupid to
see the advantage of these tax breaks.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The majority whip is recognized.
Mr. McCONNELL. Mr. President, in spite of unprecedented shocks to our

[[Page S4419]]

economy, terrorist attacks, corporate accounting scandals, rising
energy prices, and natural disasters, our economy is incredibly strong.
It is not an accident that our economy is so strong; it is a byproduct
of policies proposed by President Bush and the Republican Congress that
encourage Americans to work hard, keep more of their own money, and
invest in the economy.
Let's look at the facts. One of the most important components of this
Tax Increase Prevention Act that Congress initially passed in May of
2003 was the tax relief on capital gains and dividends. Since enactment
of that important tax-reduction measure back in 2003, we have seen
absolutely remarkable economic growth and job creation. More Americans
are working than ever before, the economy has created over 5.2 million
jobs since August of 2003, and we have witnessed 32 straight months of
job growth.
Take a look at this chart. It is no accident. The red lines going
down represent job growth as late as early 2003, and then we acted with
the tax relief package in 2003. There was a very dramatic turnaround in
job growth beginning in August 2003, and it continues through today--
5.2 million new jobs since we got the tax burden down on the American
people. Americans are willing to invest more now because they will be
able to keep more of those earnings.
Unemployment remains very low, at 4.7 percent. Of course, we will not
rest until every American who wants a job has one. But the fact is that
the current low, low rate of 4.7 percent is lower than the average
unemployment rate of the 1960s, the 1970s, or the 1980s. It is even
lower than the average rate in the 1990s, which our Democratic
colleagues would have you believe is the golden period of economic
progress.
From the time since the tax cuts to the beginning of this year, which
is the latest period for which we have numbers available, America has
created more jobs than the European Union-15 and Japan combined.
Let me repeat that. From the time since the tax cuts to the beginning
of this year, the American economy has created more jobs than the
European Union-15 and Japan combined.
Economic growth remains strong. The economy grew at a rate of 4.8
percent in the first quarter of 2006.
Businesses are investing in our economy because of the 2003 tax cuts.
This chart shows that business investment has increased for 10
consecutive quarters, averaging 9 percent growth over that period.
Americans are willing to invest more because they will be able to
keep more of these earnings. The stock market is up more than 3,100
points since May of 2003. It has gone from 8,454 on May 1 of 2003 to
11,639 on May 10 of this year, nearly a 37-percent increase in the
stock market since we originally acted in 2003 to get the tax burden
down on the American people. It is not only good news to Wall Street,
but really good news to the folks with pensions and savings on Main
Street.
Americans have more money in their pockets. Their real after-tax
income is up 8.2 percent since President Bush took office. Over the
past year, it is up 2.2 percent.
Consumer confidence is at a 4-year high--a 4-year high.
We cut the tax rate on capital gains, and tax revenues from capital
gains have increased from $58 billion in 2002 to $78 billion in 2005.
Tax collections are up 14 percent over the past 12 months, even though
we have reduced taxes. By the way, revenue is up for State governments
as well as a result of this booming economy.
We must never forget that Government does not create growth;
entrepreneurs, risk-takers, and hard-working Americans create growth.
However, Government, through its tax, spending, and regulatory
policies, obviously can establish an environment that strangles growth
or allows it to flourish.
This body, by lowering taxes in 2003, is making growth flourish.
These policies have been a resounding success--a resounding success--
and the Senate clearly needs to extend them to project this booming
economy into the future.
We ought to reject efforts from the other side of the aisle to
reverse this course and increase taxes by $70 billion on the American
people. Clearly, that is a bad idea.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. SANTORUM. Mr. President.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. Mr. President, I am happy to be here in strong support
of a bill that I guess I was somewhat responsible for in giving its
title to: the Tax Increase Prevention Act. We first called this a jobs
or growth package or something such as that, but that is not what it
is. Taxes are going to go up if we don't extend these provisions to
allow people to keep more of their own money, to not have the
alternative minimum tax kick in that is going to affect over 350,000
taxpayers in the Commonwealth of Pennsylvania. They will have to start
paying the alternative minimum tax. As an AMT payer myself, I can tell
you: You don't want to pay this tax. This isn't fair for increasingly
average-income people who, if we don't fix it today, will now be thrown
into this alternative minimum tax situation which will cost them
thousands of dollars in their tax bill. We stop that from happening.
The problem doesn't go away, though. We need to continue to work on
this to make sure we don't have this problem into the future.
The second thing we do is capital gains and dividends. Capital gains
and dividends is a vital part of the growth that we have seen in our
economy. Since we passed them, we have seen 5.3 million new jobs. We
just heard the Senator from New Jersey talk about how the benefits of
capital gains and dividends all go to these high-income individuals.
What he forgot to mention was the 5.3 million people who have jobs
today in large measure because of the tax policy that we put in place
in 2001 and 2003. So while they may get a small financial benefit--
although every financial benefit, depending on your income level, is a
benefit--the fact of the matter is, in many of these cases, over 5
million cases, they have a job, and they have a job paying at 20
percent above the average compensation of most jobs in America. So
these are good jobs. These are jobs that are family-sustaining jobs,
and these are jobs I am sure these 5.3 million people--net new jobs
that we have--are very happy to have.
I will tell you what. I bet if we polled all of those folks who
received those jobs in the last few years, they would be happy to have
someone who created that job, who had a tax incentive to grow their
business so that they could, in fact, invest to make that job possible
for them. They are very happy to have someone who had a tax break
because of a capital gains rate reduction or a dividend rate reduction
or the AMT not being in place or the marginal rates being lower or
having an expense of capital equipment as a small business. Those folks
would be very happy to get these jobs, from 2003 to today, I am sure,
to allow that tax break to be in place so they could have the job in
the first place.
That is what we are talking about. We are talking about growing the
economy by investing in small businesses, by investing in people who
are creating economic activity, who are creating jobs, who are building
wealth, who are creating a better economy for all of us. When we passed
this legislation in 2003, the unemployment rate was 6.1 percent. It is
now 4.7 percent. In Pennsylvania, it is below that. We have had a great
run, as Senator McConnell talked about. The stock market is at all-time
highs. That doesn't just mean wealth for people who own stocks and
trade. We are talking about pension funds; pension funds which were on
the brink and are still having problems. But can you imagine what we
would be debating in the pension reform bill that we are trying to pass
if we had the market at 20 or 30 percent below where it is today. A lot
more pension funds would be in trouble. A lot more folks would not have
the savings they have to be able to enjoy their retirement.
A lot of good things have happened because of the tax policy we have
put in place.
Let's talk about the deficit. The Senator from New Jersey--I love to
hear people get up on the other side of the aisle and gnash their teeth
and woe, how terrible it is about these huge deficits--I mean huge
deficits--when we are talking about letting people keep their money.
But when it comes to

[[Page S4420]]

spending their money, we never hear a word about deficits on the other
side of the aisle. Never. We went through the process of a budget, and
amendment after amendment, billions after billions after billions,
hundreds of billions of dollars of amendments were offered on the other
side of the aisle to spend more money, to increase the deficit by
spending more money and not one word about how bad the deficit is. No.
If Washington spends it, if the bureaucracy spends it, if we are
growing the size of government, we are OK with bigger deficits. We only
have a problem with deficits if we let you keep your money. Then there
is a problem. This is the kind of misguided economic policy which the
American public thankfully has rejected time and time again.
I am very proud to be here today to say I am on the side of the
taxpayer. I am on the side of the people who are the middle-income
folks today and who are not going to see their taxes go up this year
because of the alternative minimum tax. They are going to see capital
gains and dividends policy extended for a couple more years so we can
continue to see growth in our financial markets, more responsibility in
the corporate board room, the kind of benefit to the average taxpayer
where 28.1 percent of Pennsylvania tax returns claimed income from
dividends. Over half of that money came from returns--over half of
those returns have an average adjusted gross income of under $50,000.
We are looking at, not high-income people claiming dividend income
but a lot of my seniors--and I don't have a lot of high-income seniors
as a percentage compared to some of the other States where folks retire
in the South. We have a lot of moderate- and low-income seniors, and
that dividend income is a big deal. Not having to pay those taxes--it
may only be $40 or $50 to the Senator from New Jersey, who doesn't have
to worry about $40 or $50, but there are a lot of folks who worry about
$40 or $50.
I hear complaints all the time from the other side of the aisle: When
it comes to prescription drugs we can't have a $2 copay or a $3 copay.
It has to be a $1 copay or something like that. Or we can't increase it
by a dollar or two. Then they throw off $50 in a tax break as if it
means nothing. Again, the idea if it is Government, it is OK; if it is
letting people keep their money, it is not OK. It is OK in the minds of
most people to have the people who earn the money, who made the
investment, be able to keep the investment, get the fruits of their
labor or wise investment, and be able to keep as much of it as
possible. That is what this bill does.
I am proud of the fact we have been able to make this happen. We have
not concluded the exercise. We have more work to do on the tax side. I
have been a staunch advocate of making sure that we do something this
year to help our charities. Over the past 25 years we have seen
charitable giving go down from 2.5 percent of GDP to under 1 percent.
That is not to say we are not a generous country, but the bottom line
is we are not giving as much as we have in the past. I think part of
that is the tax structure that we have. We need to create more
incentives for folks to give to those who are helping millions of
people across this country in need. The charitable giving package I
continue to fight for in the followup tax bill that is coming along, we
need to get that done. It is something vitally important.
There are several other issues we are working on in that second bill
that, in the interest of time, I will not go into. But I will tell you
there is more work to be done. This is a good start. This is a solid
start on a package of legislation that is going to stop taxes from
going up. This is not a tax reduction, this is a tax increase
prevention, and that is the least we should do at a time when we want
to keep this economy growing.
I yield the floor.
Mr. HATCH. Mr. President, I rise today to applaud the conferees for
successfully concluding the negotiations and giving us a tax
reconciliation bill that I believe fixes glaring problems that would
otherwise punish millions of American families. The provisions in the
conference report before us today will also help to perpetuate the
strong growth our economy has experienced over the last 3 years that
has created millions of jobs for Americans. I want to exhort my
colleagues to give their support to the conferees' efforts and vote for
the passage of this conference report.
One major problem the conference report addresses is the fact that
the alternative minimum tax is due to hit tens of millions of American
households this year had it not been temporarily fixed. The ``fix''
provided in the bill before us is by necessity only a 1 year ``Band-
Aid,'' so our tax writers will have to address this issue once again
next year. Without this provision over 18 million households would
unexpectedly find themselves bereft of deductions and facing a higher
tax bill.
The alternative minimum tax is Exhibit A for the law of unintended
consequences in the tax world. Originally created as a response to news
reports that a few millionaires were using available deductions to not
pay any taxes at all, this provision, which is essentially a parallel
tax system to our ``normal'' tax system, is on pace to snare tens of
millions of households in just a few years unless repealed or reformed
permanently. It is only the projection of major revenues from this tax
that keeps us from discarding it completely.
The alternative minimum tax is an especially pernicious tax for
Utahns, as it unduly burdens large families by disallowing the
exemptions for dependent children. A family of six earning $90,000 a
year pays enough taxes as it is without us taking away their
exemptions.
While the fix of the alternative minimum tax is welcome, I believe
the most important provision in the reconciliation bill is the
extension of the lower tax rate on dividends and capital gains to 2010.
This provision has proven to be a boon for economic growth since it was
added to the code in 2003.
The revenue cost of this lower rate has been very slight we collected
more tax revenue from dividends and capital gains last year than we did
in 2002, the year before we reduced the tax rate. In fact, total
Federal revenue growth has been simply tremendous the past 2 years as
the economy has taken off. Revenue grew more than 14.5 percent last
year and is growing at more than 11 percent this fiscal year, well
above the predictions made by CBO.
The benefits of the lower tax rates on dividends and capital gains
has been higher economic growth. The way it works is simple: a lower
tax on investment income means that investors get a higher return from
their investments, thus spurring them to save more. Greater savings
means that firms find there is more money available for them to use to
increase production and improve the productivity of their workers, both
of which ultimately lead to an increase in economic growth.
Moreover, the money invested is used more effectively with a lower
tax on capital gains. Capital is not locked up in long-term investments
held in order to avoid paying the tax. As a result, capital flows to
the most productive investments, and economic growth is maximized. A
vibrant, dynamic economy benefits from flexibility, both in the labor
market and the capital market. Our 4.7 percent unemployment rate and 2
million jobs created in the past year, on top of a total of 5.2 million
new jobs created since August of 2003, testify to the strength of our
labor market. The $52 trillion of net wealth in this country, which
increased by 8 percent last year, is a manifestation of the strength of
our capital market. The Dow Jones Industrial Average is also nearing
its all-time high, in no small part due to the tax policies of this
country.
The benefits of economic growth are in ample abundance in Utah, where
the current unemployment rate is just 3.4 percent, while wages
increased last year by nearly 4 percent.
I am also pleased to see the extension of the small business
expensing provision, which has been very important to business
investment in this country. Another important provision included in the
conference report is the 2-year extension of the active financing
exemption under subpart F, which allows many of our U.S.-based
multinational firms to remain competitive with their foreign
counterparts.
We need to remember that taxes are only a means to an end.
Ultimately, a primary goal of the government needs to be to ensure the
continued prosperity of its citizens, and our Tax Code

[[Page S4421]]

should be constructed with that purpose in mind. Our Tax Code is by no
means perfect; and I could litter this discussion with references to
the hundreds of exceptions, exemptions, credits, ill-advised
deductions, dubious penalties, and needless complexities that should
not be in there. But fixing the myriad imperfections of the tax code is
a task for a later Congress and was not the assignment of the
conference committee. What they did accomplish was figure out a way for
us to keep a provision that has been a boon to our economy for another
2 years. I fervently hope that by the time this provision is next due
to expire, or even before then, that my colleagues can see how
important it is to have a Tax Code that encourages saving and
investment. A lower tax rate on dividends and capital gains is a modest
step towards that goal, and one that has cost us little or no revenue
in return.
At a time of growing prosperity, it is important to continue with the
policies that have contributed to that prosperity, and that is exactly
what this bill has done. I urge my colleagues to support its passage.
The PRESIDING OFFICER. Who yields time? The Senator from South
Dakota.
Mr. THUNE. Mr. President, in probably a few minutes we are going to
be voting on whether to extend the tax relief that was passed by this
Congress in 2001 and 2003, and thereby give the markets in this economy
some certainty about what the rules are going to be. Frankly, that is
something that investors need to know. They need to know for tax
consequence purposes whether Congress is going to be changing the law,
whether Congress is going to be raising taxes.
I think there is probably no better issue that illustrates the
differences in philosophy between the two political parties in the
Senate than does this one because it is the question of who spends the
money. Do the American people spend the money? Do the taxpayers in the
country get to spend their own money? Or do they send it to Washington,
DC, so the politicians can spend it?
You have heard a lot of debate from both sides on this issue. If you
look at the statistics, it is pretty clear that beginning in 2003--of
course, there were tax cuts in 2001 and then subsequent tax cuts in
2003--the economy has behaved in a remarkable way. That proves, once
again, that the lessons of history have a tendency to repeat
themselves.
If you go back clear to the 1920s under President Harding when you
cut taxes, when you cut marginal tax rates, you get not less revenue
but you get more government revenue. It happened in the 1920s under
President Harding, it happened in the 1960s under President Kennedy, it
happened in the 1980s under President Reagan, and it is happening
today.
If you look at the U.S. economy today, again in the first quarter of
this year, there is 4.8 percent growth, the fastest rate in 2.5 years.
The economy has been growing for 17 straight quarters. The average
growth rate last year was 3.5 percent. There were 211,000 jobs created
in March, 2.1 million jobs in the last 12 months, and more than 5.2
million jobs since August of 2003.
The unemployment rate has fallen to 4.7 percent, lower than the
average of the last three decades, and led by strong home values and a
steadily rising stock market; household wealth is at an all-time high,
reaching $52.1 trillion in the fourth quarter of 2005; home ownership
remains very close to its all-time high, more than 69 percent reached
in early 2005.
As I said earlier, the ironic thing about this is the assumption that
is made by many on the other side. You go back to 2003. The Democratic
leader said:

The tax cuts didn't work to stimulate the economy during
the Reagan years and they are not working now.

That was the suggestion made in 2003 by our colleagues on the other
side. Yet, again, the facts have borne out a very different story. That
story is an incredible response to the tax relief, a growing economy,
record numbers of jobs, and ironically--people might think this is
counterintuitive--when you cut marginal tax rates, when you cut capital
gains rates, you get not less Government revenue, you get more.
That is exactly what we have seen here. The Government revenues
between 2004 and 2005 increased $274 billion, a 14-percent increase in
Government revenues between 2004 and 2005. Between 2005 and 2006, the
first 8 months that we are measuring for this year, Government revenues
are up 11 percent, another $137 billion over the baseline of what was
projected previously.
So when you add that up, the fact that we are creating jobs, growing
the economy, raising more revenue for the Government not less, we have
again unemployment at an all-time low. And how do our colleagues on the
other side want to reward that? With a big, fat tax increase because
essentially if we don't extend these tax cuts. What we will in effect
be doing is raising taxes; marginal tax rates will go back up, capital
gains tax rates will go back up, dividend tax rates will go back up,
and you will see higher taxes which have the opposite effect of what we
want to see happen. We have stimulated the economy. It is growing, it
is expanding, and rather than continue on that path by extending these
tax cuts and allowing the economy to continue to expand and grow and
create jobs, the Democrats, rather, would allow the tax cuts to expire
thereby raising tax rates and mess with what is a very good thing in
the economy right now.
That is the opposite of what we ought to be doing. We ought to be
extending these tax cuts. We ought to be giving people in this country
an opportunity to take their realizations, to pay taxes, continue to
invest, and continue to grow the economy and create jobs. There are
provisions that have expired or will soon expire, including the
expensing for business equipment purchases for small businesses, relief
from the alternative minimum tax--which is catching more and more
middle-income taxpayers in this country--and, of course, lowering tax
rates on dividends and capital gains.
Ironically, contrary to the arguments that have been made by the
other side, if you look at who benefits from the tax relief--I am just
going to use one example, dividend tax relief--those making under
$50,000 a year see their taxes cut 7.6 percent. Seniors in this country
see their taxes cut by 17.1 percent. Those making over $200,000, the
so-called rich in this country, as has been argued by the other side,
realize a 2.2-percent tax cut.
Where do the dividends tax relief benefits go? To people making under
$50,000, to seniors across this country. We have a lot in both of those
categories in my State of South Dakota, people who are making under
$50,000, and a high proportion of seniors in my State who will benefit
from this tax relief.
It seems to me, at least, that when we have this vote in a few
minutes, if we want to do right by the American people--and, again, we
want to assert what is a fundamental principle that at least I think
most of us on this side of the aisle adhere to, and that is the
American public is better and the American economy is better, frankly,
if individuals across this country, taxpayers in this country, are
making their own decisions about how to spend their own money for their
families, for themselves, for their communities, rather than sending
that money to Washington, DC, and having the Government and politicians
in Washington decide how to spend it.
That I think probably points out as well as anything else in this
debate that we are having today the difference in philosophy between
those of us on this side of the aisle who want to extend the tax relief
that was enacted in 2001 and 2003 and those who want to allow that tax
relief to expire, thereby creating a huge, massive tax increase on the
American people at a time when the economy is growing, creating jobs,
expanding at a record level.
I hope today when the vote comes that we will have a strong vote in
favor of growing this economy and creating additional jobs for
Americans and allowing people in this country to keep more of what they
earn and spend it on their own priorities, rather than sending it to
Washington, DC, and allowing the politicians to spend it.
I yield the remainder of my time.
The PRESIDING OFFICER (Mr. Chafee). The Senator from Idaho.
Mr. CRAIG. Mr. President, I am pleased to see the tax reconciliation
conference report before the Senate today. I commend the conferees'
hard

[[Page S4422]]

work and perseverance in reaching a compromise on this bill. I know it
was no easy task.
Americans have been asking for tax relief, and now is the time that
we give it to them. Lower taxes on capital gains and dividends--and
higher alternative minimum tax exemption amounts--will assist America's
small businesses, encourage the kind of investment that creates jobs
and makes our economy grow, and ensure fairer tax treatment for middle-
income families who would otherwise be left footing the bill for a tax
intended for the wealthy.
These policies have a proven record of success. Since Republican pro-
growth tax policies were enacted in 2003, the economy has grown at an
unprecedented rate, over 5.3 million jobs have been created, tax
revenues are surging, and household wealth is at an all time high. We
must extend, not end, this trend and the conference report we have
before us, in part, does that.
When the original tax reconciliation bill came before the Senate, I
voted against it. I did so because it contained a windfall profits tax
provision which would have imposed an additional $4.923 billion tax on
the energy industry alone. I voted ``no'' because the bill that was
supposed to provide tax relief actually raised taxes. I was pleased to
see and commend the conferees for stripping the windfall profits tax
provision out of the bill.
I am going to vote for this bill. The majority of it contains the
kind of tax relief essential to creating jobs and growing our economy.
But I stand before you today to register my opposition to the addition
of an expanded withholding provision--a near $7 billion tax increase in
a bill that claims in its title to prevent tax increases: The Tax
Increase Prevention and Reconciliation Act of 2005. That title is
misleading.
The provision requires withholding on payments to any person--
including small businesses--providing goods and services to the
Federal, State, and local governments. The rate of withholding is 3
percent on all payments, meaning that if contract payments were made
quarter-annually, 12 percent of the total contract value--some
undoubtedly in the hundreds of millions--would be withheld from the
contractor, kept by the Government interest-free for up to 15 months.
Proponents of this provision say it simply closes the ``tax gap'' and
assists in collecting Federal taxes that are already owed. To say that
the expansion of withholding requirements is anything other than a
significant shift in U.S. tax policy is misleading.
Withholding has not always been around. Federal income tax
withholding came into being during World War II, as the need for
increased tax collections arose. When Federal income tax withholding
became mandatory in 1943, tax collections jumped from $7.3 billion in
1939 to a whopping $43 billion in 1945. That's an increase of $35.7
billion in 4 years.
In congressional hearings on the issue, Congressmen spoke candidly of
the revenues that needed to be ``fried out of the taxpayers.'' There
was no doubt in the minds of lawmakers that the result of withholding
would be an increase in the tax burden on the public. However, it was
wartime and the proposal was sold as a patriotic one. What is our
reason now?
Some say it is to improve compliance by ``closing a tax loophole''
that allows some taxpayers to avoid their tax obligations. There is no
such ``loophole''--the IRS has simply failed to do its job of
collecting and aims to shift this responsibility elsewhere.
Information reporting requirements are already in place to assist the
IRS in its collection duties. Government entities are specifically
required to make an information return, reporting payments to
corporations as well as individuals.
Moreover, every head of every Federal executive agency that enters
into contracts must file an information return reporting the
contractor's name, address, date of contract action, amount to be paid
to the contractor, and other information.
Expanding withholding would now not only have the Federal Government
spend taxpayers' dollars, but it would make taxpayers bear the burden
and costs of collecting them too.
And the cost of this provision is high--nearly $7 billion over 10
years. This offset is not without strings, and it is not free. As
portions of individuals and small businesses' income are withheld for
as long as 15 months, cash flows will drop and opportunities to invest
will go down. These expenses will result in a higher cost of business.
Withholding is the ultimate hidden tax. When taxpayers no longer see
the money that is withheld from their paychecks, the cost of government
becomes obscured. And with Government spending what it is right now,
transparency is what we need.
This is not the last time you will be hearing about this from me or
the taxpayers. This provision will not simply go by unnoticed. In fact,
the same type of withholding was tried on dividends and interest in
1982. Public opposition was so profound that it was repealed less than
1 year later. Although I will vote today to extend essential tax
relief, I will work to do the same before this tax increase takes
effect in 2011. I will work to give more meaning to the phrase in the
bill's title: ``Tax Increase Prevention.''
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. DAYTON. Mr. President, this bill should be a billboard for the
corruption of the public interest in Washington. It is a disgrace, it
is an abomination, and it should be rejected by the Senate.
Last year, when this body passed a version of this legislation, I
voted for it, principally because it included my amendment requiring
corporate executives to pay their fair share of taxes when they use
their company planes for their personal use. That is a matter of simple
tax fairness. When all other Americans take vacations, they pay for
their air travel on commercial airlines with their after-tax income.
Yet when some of this country's wealthiest people, corporate
executives, take vacations on their company planes, they fly for free
and they pay almost no taxes on the actual value of that special
employment benefit. My amendment would have raised $44 million in
Federal revenues during the next 10 years, all of it coming from some
of the very richest Americans, all of it coming from the end of their
tax avoidance scheme.
What happened to my amendment, which was adopted by the full Senate
on a unanimous voice vote? It was stripped from this conference report
by the House-Senate conference committee which is controlled by the
Republican majority in both bodies. It was done behind closed doors
with no explanation and, thus, once again the greedy, a few rich and
powerful Americans, have prevailed over the best interests of everyone
else.
No wonder so many working Americans have lost their faith and trust
in this Congress and in this President. Under their control, the rich
get richer and everyone else gets poorer. And the national interest is
betrayed behind the closed doors of a conference committee.
Stripping out my amendment is unfortunately only the beginning of the
terrible abuses in this conference report. According to the nonpartisan
Tax Policy Center, someone in this country who earns between $20,000
and $30,000 a year will receive an average of $9 in tax cuts from this
bill. Someone earning $40,000 to $50,000 a year will get an average $46
tax reduction. But the very wealthiest Americans with incomes over $1
million a year will get an average tax cut of almost $42,000 every
year.
Let us reverse those numbers since some of my colleagues are trying
to portray our failure to pass this as a tax increase. Conversely, if
that were to be the case, someone who makes between $20,000 and $30,000
a year would receive by their words an average of $9 a year tax
increase. Someone earning between $40,000 and $50,000 a year would get
on average a $46 tax increase. But the very wealthiest Americans, those
with incomes of over $1 million a year, would get an average tax
increase of about $42,000 every year. That is what progressive taxes
are about.
Over half of this $70 billion which they want to reduce in Federal
revenues, almost $40 billion of that will go to the richest 4 percent
of American taxpayers. By doing so, the rest of this country will go
deeper and deeper into public debt. Last year's combined Federal budget
deficit was $318 billion. All Federal revenue, including the surplus

[[Page S4423]]

in the Social Security trust fund thus amounted to only 87 percent of
all Federal expenditures.
If you set aside the Social Security surplus, put it in a lockbox
that so many people, including myself and the President, campaigned on
in the year 2000, that surplus which this administration is squandering
every year entirely on current consumption, then last year's so-called
on-budget deficit for the Federal Government was $483 billion. That
meant all Federal revenue set aside totaled only three-fourths of
Federal expenditures.
That occurred during an expanding economy. It will continue this
year, according to the President's own projections, during an expanding
economy.
According again to the President's own budget forecast, this revenue
shortfall of one-fourth of total expenditures will continue over each
of the next 5 years. This even assumes the continuation of a relatively
good economy.
By contrast, in the fiscal year 2000, which is the last fiscal year
of the Clinton administration, non-Social Security revenues totaled 106
percent of on-budget expenditures.
In other words, we were in a budget surplus--there was a budget
surplus projected every year for the next 10 years--and now those
revenues total only three-fourths of expenditures, which means that,
starting in 2001, President Bush and his supporters in Congress have
destroyed the fiscal integrity of the Federal Government by recklessly
cutting taxes, which primarily benefits the rich and powerful, while
increasing Federal spending in every cycle one of those years, which
caused the bipartisan or nonpartisan Concord Coalition, headed by the
former Secretary of Commerce under President Richard Nixon, to call
this administration the ``most reckless'' administration in the history
of this country in its fiscal policy.
This tax bill will further feed that greed of the richest and most
powerful Americans and it will weaken our country. Any sensible
American understands that if their income is $30,000 a year and they
are spending $40,000 a year, that is an unsustainable imbalance.
Borrowing the difference only postpones the day of reckoning and makes
that future reckoning more painful and difficult.
Any farmer or small business person knows if their annual income is
$150,000 and their annual expenditures are $200,000, they too will go
deeper into debt every year and eventually face bankruptcy. That basic
law of economics also applies to governments and nations. It may take
longer to exhaust the wealth of a country with our resources, but that
will eventually happen unless we change our course.
This tax bill provides more tax favors to those who need them the
least while increasing our future deficits and putting additional
financial burdens on our children and grandchildren who will ultimately
face those days of reckoning for this fiscal hedonism.
What is most disgusting about this spectacle is that the people in
Washington who are responsible for it, the people in the Bush
administration and in the majority of this Congress, know what they are
doing. They know--or at least they should know--the future damage they
are inflicting on this country. They just know that they can get away
with it. They know when those days of reckoning arrive, when this great
and strong nation has exhausted its ability to borrow from the rest of
the world, when it has been reduced to being the largest debtor nation
in the history of the world, it will be other people's nightmare--
certainly another President's. And they can hope to avoid that future
blame by now avoiding being responsible.
They have had plenty of help. These tax handouts don't happen by
accident. They are heavily lobbied for by the people who benefit from
them. They are the same people who benefitted most from the 2001 tax
cuts and the 2002 tax cuts and the 2003 tax cuts. But more is never
enough. Greed cannot be satisfied by feeding it more. That greed will
eventually destroy this country, if it continues.
There used to be an ethic in this Nation that when you made more
money, you paid more taxes. Now the obsession of individuals and of
corporations is to make more money but pay less taxes, or pay no taxes,
or even get tax rebates. The annual report of a major corporation
recently noted proudly that it had paid no U.S. taxes in three of its
previous five years although it had been profitable during all five of
those years. The chief executive officer of that corporation then is
now the Secretary of the U.S. Treasury. He is advocating lower taxes,
and even eliminating taxes on unearned income, corporate dividends, and
capital gains. He was quoted as saying:

It was as if a light switch has been thrown on. Rarely has
a piece of public policy been so effective, with the effects
so evident and immediate.

Reduce the rate on unearned income, dividends, and capital gains.
There is a noted economist, not a partisan on the other side, but the
chief economist of Lehman Brothers Investment Bank, who said in
contrast you might credit the cuts with providing a little bit of a
jump-start, but they believe the main reason the economy has done so
well has more to do with the corporate sector starting to spend some of
their record profits.
Former Secretary of the Treasury Robert Rubin, under President
Clinton, who presided over this period of economic expansion in the
1990s when they balanced the Federal budget, said:

We had very good markets in the 90's, before all of these
tax cuts went into effect.

My colleagues on the other side are claiming that those tax giveaways
back in 2003 are responsible for the modest economic expansion that
benefitted some Americans while leaving many other Americans worse off
than they were before. Most of the tax cuts that they are touting were
actually passed and took effect in 2001, and they certainly were not
bragging about continuing recession in 2001, 2002, and most of 2003.
Since then, our country's economy has improved, thank goodness, and
they want us to believe that this cycle is as sure as the sun is
setting and would not have occurred without their tax cuts for the rich
and for the super-rich. And they claim the economic growth in this
country will not continue if we don't extend those tax cuts, which are
not even scheduled to expire until the end of 2008, through 2009 and
2010.
In fact, their priority is such that they will set aside such
measures as tax credits for research and development, which this
country does need, a real and far more effective fix to the alternative
minimum tax, which is part of the Senate bill which I voted in favor
of. Those have to be set aside, postponed, delayed, or take no effect
at all so they can extend the lower rate on dividends and capital gains
the years 2009 and 2010.
Talk about the wrong priorities. Talk about destroying ethics in this
country, that people who make more money, who are more privileged, more
fortunate than anybody else on this planet, virtually in the history of
the world, should not have to pay their fair share of taxes to keep
this country strong and provide sufficient revenues to the Federal
Government, to balance our budget, to be responsible, to pay our own
way, which we are certainly capable of doing, and leave this country in
a sound financial state to those in this country now and to those who
will follow in 10 or 15 years.
I hope the people who are alive then and facing those consequences
will look back and review the transcripts of this debate today. I hope
they will ask themselves, Why is it that people today in responsible
positions cut taxes for the very wealthiest, most privileged, and
politically powerful people in this country and added $70 billion to
the debt we inherited, that we have to pay in addition to the hundreds
of billions of dollars more they are adding every year to that deficit
and to the national debt? They are going to say it was wrong; they are
going to say it was misguided; and they are going to wonder how it
could be that responsible people could have failed to foresee the
consequence of this selfishness and cater to the greed of those out
there who want these cuts and won't be sated until they get more and
more and more.
If they are working hard, as most Americans do today, they are going
to ask themselves, Why is it that I struggle to pay my fair share of
taxes, most of which are withheld and never in my pocket to begin with?
Why am I paying higher tax rates from my earned income, from the sweat
of my brow hour

[[Page S4424]]

after hour, than the very wealthiest people in the country? People in
many cases don't even earn that much. Who are the beneficiaries--as I
have been, and as others of my family have been in my previous
generations of success--who are not even willing to pay a tax rate
similar to those who earn their income by their daily toil? It is
fundamentally wrong. It is fundamentally wrong, what is happening in
this country. It is making the rich richer, making average Americans
poorer and more tax averse. The cumulative result is that revenues are
three-fourths of expenditures, unsustainable, and a fiscally dangerous
proposition from which we will suffer the consequences, the pain, for
years to come.
Mr. KENNEDY. Mr. President, budget reconciliation is a process
adopted by Congress nearly three decades ago to facilitate the passage
of legislation to reduce the deficit and to help bring the Federal
budget into balance. But in recent years, under the Republican
majority, that process has been repeatedly abused to enact more and
more tax cuts for the wealthy that make the budget deficit even larger.
Now, they are trying to do it again, in spite of the urgent problems
facing the Nation, from the ongoing war in Iraq to the devastating
hurricane damage along the gulf coast that has not yet been repaired.
President Bush's policies have already added $3 trillion to the
national debt in the last 5 years. Yet he is still proposing more of
the same, more tax cuts benefiting the wealthiest among us.
The audacity of the Bush administration and their congressional
allies truly knows no limit. First, the Republican majority cuts
spending on Medicaid and other important Government programs for people
in need by nearly $40 billion. They claim we have to do it to reduce
the deficit. Then they bring this outrageous tax bill to the floor, a
bill that will cut taxes by far more than the savings in spending from
the programs cuts. The net result will be a substantial increase in the
budget deficit--exactly the opposite of what the reconciliation process
is supposed to accomplish. Billions of dollars will go from programs
that assist low-income families and senior citizens into the pockets of
the already wealthy. It takes from those with the least and gives to
those with the most. It is a breathtaking Republican scam on the Nation
that can only further discredit this Congress in the eyes of the
people.
From day one, the Republican plan has been to use this reconciliation
process to push through a cut in the tax rate on capital gains and
dividend income. These are tax cuts that overwhelmingly benefit the
richest Americans, with approximately half the tax benefits going to
millionaires. Leading Republicans have repeatedly made it clear that
their top priority was extending capital gains and dividend tax breaks,
and that is exactly what they did in this conference report. No matter
the cost and no matter what needs go unmet, the GOP is intent on
delivering these tax breaks to their wealthy supporters.
What is the real cost of these capital gains and dividend tax cuts?
The Republicans claim the cost of these provisions is $20 billion; the
real cost of extending the lower rates for another 2 years is $50
billion. This tax break is particularly unfair because over 75 percent
of capital gains and dividend income goes to taxpayers with incomes
over $200,000 a year. Over half of all capital gains and dividends--54
percent--go to taxpayers with incomes over $1 million a year. The
average millionaire will save over $42,000 a year from these tax breaks
on capital gains and dividend income. By contrast, the average family
earning $50,000 a year will save $46 in taxes.
As a result of this shameful Republican let-them-eat-cake proposal,
millions of working families will pay a substantially higher tax rate
on their wages than wealthy taxpayers pay on their investment income.
What could be more unfair? Republicans are penalizing hard work, not
rewarding it. They are giving a preference to unearned income over
earned income.
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 much more rapidly in the 1990s than since the rates on capital
gains and dividend income were cut in 2003. The overall health of the
economy has much more to do with financial stability than special tax
breaks for the rich. More tax cuts that America cannot afford will hurt
the economy, not help it.
As if the capital gains and dividend tax breaks were not enough, the
conferees created another new tax break for the wealthy that was not
contained in either the Senate or the House bill. After 2010, the bill
will allow high-income taxpayers to have retirement accounts where
unlimited amounts of interest, dividends, and capital gains income that
they receive would be totally tax free. This will have an enormous
long-term cost, taking billions of dollars each year out of the
Treasury.
The Republican conferees also made sure that multinational
corporations got their piece of the pie. More than $5 billion in tax
breaks were added to the bill for companies doing business overseas, a
further incentive for these corporations to invest abroad rather than
in the United States. They also took care of the oil industry. The
Senate bill would have eliminated several special tax loopholes that
big oil uses to avoid paying taxes on its substantial profits,
including questionable accounting gimmicks that will cost the
Government over $4 billion in lost tax revenue. However, those
loophole-closing provisions were removed in conference. The Republicans
made sure that the oil companies will get to keep their tax loopholes.
There are some very important tax provisions that we should be
addressing in this bill, but the Republicans threw them overboard:
The alternative minimum tax was never intended to apply to middle-
class families, and they deserve tax relief. However, this bill's AMT
relief is provided only through 2006, while capital gains and dividend
tax breaks are extended through 2010. What about AMT relief for 2007?
Shouldn't that be a higher priority than capital gains and dividend tax
breaks for 2010?
The research and development tax credit is critical to our
international competitiveness and should be retained. However, the R&D
credit was taken out of this bill to make more room for their tax
breaks for the rich.
The deduction for college tuition is vital to millions of middle-
class families struggling to afford a college education for their
children. But it obviously was not very important to the Republican
conferees. They took it out of this bill.
They also removed the savers credit, designed to help low- and
moderate-income families build a nest egg for their future. Those
families will just have to make do with less.
The priorities of this Republican Congress are truly scandalous.
The financial mismanagement of the Bush administration has weakened
our economy and placed our children's financial wellbeing in peril. The
national debt has risen to an all-time high of nearly $9 trillion.
Under President Bush, our country has borrowed more from foreign
governments and foreign financial institutions than in the prior 200
years combined. We are losing control of our Nation's future, and all
the Republicans offer is more of the same. More and more tax breaks
further enriching the already wealthy, while working families are left
to struggle on their own in an increasingly harsh economy.
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. These families
are being squeezed unmercifully between stagnant wages and ever-
increasing costs for the basic necessities of life. The cost of health
insurance is up 56 percent in the last 5 years. Gasoline is up 75
percent. College tuition is up 46 percent. Housing is up 57 percent.
The list goes on and on, up and up--and paychecks are buying less each
year. The dollars that go to pay for more tax breaks for the rich are
dollars that could be used to help these families. Instead, this
Republican budget plan turns a blind eye to their problems.
The economic trends are very disturbing for any who are willing to
look at them objectively. The gap between rich and poor has been
widening in recent years. Thirty-seven million Americans now live in
poverty, up 19 percent during the Bush administration. One in

[[Page S4425]]

five American children lives in poverty. Thirteen million children go
to bed hungry each night. Wages remain stagnant while inflation drags
more and more families below the poverty line. Long-term unemployment
is at historic highs.
The Republican majority has abandoned our Nation's working families.
They cut the programs that these families depend on, while granting the
wealthy even more tax breaks. The American people deserve better; and
in November they will insist on a new Congress that truly shares their
values and cares about their needs.
Mr. OBAMA. Mr. President, I rise today to speak in opposition to the
tax reconciliation conference report.
The Federal Government is the rare institution that can spend money
it just doesn't have. We spend and we spend and when we don't take in
enough to cover the bill, we just borrow from China and Japan and keep
on spending.
Families would go bankrupt if they managed their budgets this way.
Businesses would shut down. Most mayors and Governors would be thrown
in jail. And yet Washington operates as if we can continue to get away
with more of the same.
The reality is, we can't. To do so simply passes the burden to our
children and grandchildren, while keeping us in debt to our major
economic competitors.
By standard accounting rules, our Federal deficit last year rose to
$760 billion, a figure that now makes our national debt more than $8.4
trillion.
Think of it this way: last year, the Federal Government spent more
than it took in by about $2,500 for every single man, woman, and child
in America. And that is on top of each household's $75,000 share of our
national debt. That is a credit card bill and a second mortgage that
most Americans didn't even know they had.
What is worse is that even these figures don't tell the full picture.
The rising demands on Medicare and Social Security over the next 35
years will swallow up the Federal budget unless we adjust either the
amount that is paid into the two trust funds or the amount that is paid
out.
Sadly, there may be too much partisan rancor right now to address
these long-term challenges. But, at the very least, what we can do
right now is to stop making things worse. This bill doesn't do that.
This bill makes things worse--much worse.
The $70 billion pricetag is just the start. Because we know that that
number is just a gimmick to push this through--and we know that more
tax cuts are coming in another bill that will push the real cost closer
to $150 billion in new deficits.
But the most offensive part of this bill isn't even the pricetag. The
most offensive part is where this tax relief is going. Because this
money's not going to the working Americans who are already having
trouble paying their medical bills and tuition bills and their mortgage
payments and their taxes. Those middle-class Americans will get an
average of $20 from this tax bill. Twenty dollars.
On the other hand, if you make more than a million dollars, well,
this is the bill for you--because you will get an average of $42,000 in
tax cuts--$42,000 in tax cuts for millionaires.
This bill is out of touch with the country's priorities. It makes the
wrong choice for Americans over and over again. It makes America more
vulnerable financially at a time when we need to be stronger. It
enshrines tax breaks for oil companies yet leaves out the deduction of
college tuition. It creates a huge tax break for wealthy savings yet
leaves out the saver's credit to help moderate-income households save
for retirement. It privileges the high incomes of wealthy investors yet
leaves out tax credits that help employers hire people off welfare. It
rushes to address the demands of big corporations out in 2009 yet fails
to shield middle-class families from the outdated alternative minimum
tax even through 2007.
Given our country's precarious budgetary situation, now is not the
time for a $70 billion tax cut that will only push us deeper into debt.
Before we embark on an expensive package of tax cuts or new spending
initiatives--no matter how meritorious--we should insist upon sensible
pay-as-you-go rules so that tax cuts and new spending are paid for
today rather than passed along to our children and grandchildren.
You know, this place never ceases to amaze me. It amazes me that at
this time in our country's history--a time when so many Americans are
struggling to get by; a time when so many have lost faith in the idea
of a government that looks out for their interests and upholds their
values; a time when we continue to mortgage our future to bankers in
China; at a time when all this is going on--we are debating a $70
billion tax bill that will give the wealthiest one-tenth of 1 percent
of all Americans a tax cut that is more than 4 thousand times larger
than most middle-class Americans will get.
If you are wondering why our approval ratings are in the tank, take
another look at this bill. This is a bill that is neither responsible,
nor fair, nor honest. It is not worthy of the people who sent us here,
and it certainly doesn't help them. And so I urge my colleagues to vote
against the conference report on tax reconciliation.
Mr. FEINGOLD Mr. President, this country needs meaningful health care
reform. I believe that health care is a fundamental right, and I
believe that this right should not be compromised, nor should the
quality of the insurance offered to Americans be compromised. Far too
many of our constituents lack health coverage, and we should be acting
to address that problem today. In fact, we should have addressed that
problem long ago.
Unfortunately, it has become clear that in this current political
environment Congress will not discuss ways to provide health care
coverage to all Americans. In fact, we find ourselves debating
legislation today that will set back our efforts to provide adequate
coverage to Americans.
The Health Insurance Marketplace Modernization Act would allow the
preemption of State insurance mandates that were put into place to
protect people from plans that would otherwise drop coverage of
medically necessary services. Insurance regulation is an issue that has
traditionally been under the jurisdiction of the States. As a former
State legislator, I appreciate the hard work that is done on the State
level to tailor these laws to State residents, and I think that it is
shameful to undo all of this hard work and subvert States' rights in
this area.
States rights are not my only concern about this legislation. This
preemption could have a very dangerous impact on individuals and
families. It could result in health insurance policyholders no longer
having access to numerous services including mammograms, mental health
care, and newborn baby care. And these are not simply my concerns--I
have heard from thousands of chiropractors, podiatrists, optometrists,
and mental health providers in the State of Wisconsin, all of them
concerned about losing provider mandates in the State. The people of
Wisconsin believe that they should have access to comprehensive health
insurance, but this legislation would reverse the progress that
Wisconsin has made in ensuring adequate health coverage for its
citizens. Wisconsin is not the only State--many States would lose
mandates under this legislation. This bill would essentially provide
underinsurance for Americans, and this isn't what Americans want or
deserve.
In addition, this bill would cause fragmentation in the health
insurance market, which would make it even more difficult for sick
individuals to obtain health insurance. Without adequate regulation,
insurance plans offered under this new scheme would be able to attract
healthy low-risk individuals, leaving higher concentrations of sick
individuals in traditional health plans that operate within State laws.
This could drive up the costs in these traditional health care plans,
potentially making insurance unaffordable for their policyholders.
Supporters of this bill are right about one thing, small businesses
are facing enormous challenges in offering health insurance to
employees. Health care costs have skyrocketed along with health
insurance premiums, and it is difficult for small businesses to stay
competitive without being able to afford insurance for employees. I
have been hearing about this problem firsthand for years from small
businessowners who attend my listening sessions and tell me that they
want

[[Page S4426]]

to provide insurance for their employees, but they are getting squeezed
financially. They are looking for help from the Federal Government, and
I regret that they are instead being offered a badly flawed bill.
Small businesses owners and their employees should have access to
high-quality health insurance, and I introduced legislation with
Senator Collins that would help provide this for small businesses. Our
legislation would avoid the problems of S. 1955 while still allowing
associations and small businesses to pool their members so as to
negotiate lower insurance premiums. This bill, the Promoting Health
Care Purchasing Cooperative Act, would establish grant programs to help
both large and small businesses form group purchasing cooperatives
within the framework of existing State regulation. This legislation
provides an alternative to the legislation we are debating that would
not preempt State mandates and that works within the existing framework
in the States. But this legislation certainly isn't the magic bullet
that can address the entirety of the problems within the health care
system.
We need to find a comprehensive solution to the problems with our
Nation's health care. Almost 46 million Americans are currently
uninsured, and millions more underinsured. This number has been
climbing steadily for 20 years. People who fall into the category of
the uninsured are seven times more likely to seek care in an emergency
room. They are less likely to receive preventative care, and they are
more likely to die as a result. The effects of uninsurance are not
limited to individuals and families without coverage--each one of us
deals with the consequences.
By not taking action on providing affordable insurance for people in
our country, we are putting our future physical and economic health at
stake. America's survival rate for newborn babies ranks near the bottom
among industrialized nations, better only than Latvia. Our other health
outcomes for most segments of the population are poorer than outcomes
in other industrialized nations. Additionally, our businesses are
having difficulty competing in the global market with businesses in
countries that have universal health care. The combination of problems
is clearly taking its toll on our country's future.
While we face these looming problems of poor health and access into
the health care system, we devote more of our economy to health care
than any other developed nation. In real dollars, we spend more on
health care than the entirety of England's GDP. Despite this incredible
spending, our country is still looking at astounding numbers of
uninsured people, and Congress continues to do nothing.
The only thing worse than doing nothing is pretending to do
something, and that is what this Republican-designated Health Week
amounts to. We have been given 1 week only 1 week to discuss the
staggering problems facing the health care system in this country. We
have been presented with legislation that ignores or exacerbates the
real problems we face. And we have been shut out of the opportunity to
offer amendments. If we are going to finally debate health care, as we
must, we should engage in a real debate, a debate that gives health
care the attention it deserves, instead of debating a bill that
Republican leadership probably expects will not even be passed into
law. Let's talk about real answers for real people. Let's talk about
true health care reform.
I was pleased to be joined by the Senator from South Carolina, Mr.
Graham, in introducing legislation that requires Congress to act on
health care reform. Our legislation would force Congress to finally
address this issue. It requires Congress to discuss, debate, and
consider universal health care bills within the first 90 days of the
session following enactment of the bill. This bill does not prejudge
what particular health care reform measure should be debated. There are
many worthy proposals that would qualify for consideration, and this
bill does not dictate policy. This simply requires Congress to act. The
American people want action, the States want action, and it is time
that we answered their call.
Instead of avoiding the issue or offering dead-end solutions, we
should enact health care reform legislation that harnesses the talent
and ingenuity of Americans to come up with new solutions. That is why I
advocate a State-based approach to health care reform, which allows
States to experiment with ways to enhance access to health care for
their citizens. This approach takes advantage of America's greatest
resources--its mind-power and diversity--to bring our country closer to
the goal of realizing a working health care system with universal
coverage. If the Federal Government helped States enact changes in the
health care system, then I believe we would see our political logjam
around health care begin to loosen.
We are already seeing States move ahead of the Federal Government on
covering the uninsured. Massachusetts recently passed into law a plan
to require health insurance for residents. In Wisconsin there has been
discussion of expanding health insurance coverage in the State. I think
the Federal Government should be working to encourage these innovative
initiatives.
States could be creative in the State resources they use to expand
health care coverage. For example, a State could use personal or
employer mandates for coverage, use State tax incentives, create a
single-payer system or even join with neighboring States to offer a
regional health care plan.
This approach would guarantee universal health care but still leave
room for the flexibility and creativity that is necessary to ensure
that everyone has access to good, affordable coverage.
Why don't we use this so-called Health Week to discuss meaningful
legislation like the approach I have discussed, rather than simply
bringing partisan bills to the floor that won't move? It is time for
the government to step up and fulfill its duty to make sure that the
benefits of our Nation's health care system can be enjoyed by all
Americans. I urge my colleagues to act.
I yield the floor.

Unanimous Consent Request--S. 1955

The PRESIDING OFFICER. The Senator from Wyoming.
Mr. ENZI. Mr. President, I am here to propound a unanimous consent
request. I want to make sure when we have the cloture vote tonight,
that after cloture we are assured we can still have a vote on the
Durbin-Lincoln bill as well as S. 1955.
I ask unanimous consent that if cloture is invoked on the substitute
amendment, notwithstanding rule XXII, it be in order for the Senate to
consider the Durbin-Lincoln substitute amendment, which is the text of
S. 2510; provided further that the pending amendments be temporarily
set aside immediately after cloture is invoked and the Senate proceed
to the Durbin-Lincoln amendment.
I further ask that following 2 hours of debate, equally divided in
the usual form, the Senate proceed to a vote in relation to the
amendment, with no other amendments in order prior to that vote.
Mr. DURBIN. Reserving the right to object, I thank the chairman of
the committee for being so thoughtful as to include the substitute as a
possible vote after cloture.
I ask the Senator if he would consider including stem cell research,
which we have been waiting for for a year. Senator Frist has promised
he would bring it before the Senate.
There are millions of Americans suffering from afflictions such as
diabetes, Alzheimer's, Parkinson's, Lou Gehrig's disease, and spinal
cord injuries who are counting on us. Will the chairman of the HELP
Committee, as part of Health Care Week, amend his unanimous consent
request to include a vote, after an adequate debate, on stem cell
research?
Mr. ENZI. Our purpose is to get a vote on small business health plans
of some form. You proposed a small business health plan. I proposed a
small business health plan. I would like for both of them to be able to
get a vote so that small business can get something out of this
session.
We have already been promised there will be a debate on stem cells
and a vote on stem cells. I heard some of the discussion last night
about the three votes that will be taken on that issue. I am pretty
sure that will be covered. It would be difficult to amend onto this
bill because it is a totally different subject. We need to do something
for

[[Page S4427]]

small business. This allows your small business plan and my small
business plan to be considered and to get a vote.
Mr. DURBIN. Reserving the right to object, then let me ask the
chairman of the HELP Committee, since we are just 4 days away from the
deadline on Medicare prescription Part D, and 6 or 7 million
Americans--seniors, many of whom are in precarious physical and health
conditions--have been unable or have not signed up for the program and
4 days from now will face a lifetime penalty for failing to sign up,
will the chairman of the committee, understanding the critical
importance and urgency of this issue, amend his unanimous consent
request so that we can consider this before the deadline to make
certain these seniors are held harmless and have a chance to change
their plans in the next year?
He can understand if stem cell research is promised months from now,
and I hope we will reach it, this is something which is time-sensitive
and urgent to millions of Americans. Will the Senator amend his
unanimous consent request?
Mr. ENZI. I appreciate the request and the emphasis of making a
decision by Monday. I hope millions of people across the United States
are using all of the different mechanisms--the volunteers, the phone
numbers, the Internet--to get to a very simple result, having Medicare
do the math so they can make that decision.
Deadlines are a marvelous thing. I operate on deadlines. So to do it
before Monday would probably preclude a lot of people from making that
decision and will give people the impression that we will move the
deadline now, move the deadline next time, move the deadline next time.
That won't get people signed up. We have time to move the deadline
after the deadline if that seems to be a major concern--I am sure there
is a major concern--but to move it beforehand and not to put the
pressure on it would be a huge mistake.
That falls under the Committee on Finance, not under the HELP
Committee, not under HELP, and the Finance Committee has to make those
determinations to bring that forward. It would not be possible to put
that in this amendment.
Again, we are trying to keep it a small business health plan so that
small business can have a chance for the first time in 12 years to have
something done for them.
Mr. DURBIN. Reserving the right to object, I would like to say as
follows: On behalf of 9 million seniors in this country who face a
lifetime penalty in 4 days because they failed to sign up for this
confusing prescription Part D program that has been created by this
administration, and on behalf of millions of Americans who ask me every
chance they get: When will you possibly bring up this issue of stem
cell research so we can have the medical research to spare people from
suffering and death, and on behalf of those millions of Americans who
will not have a chance during this Health Care Week to even have their
issue considered by the Republican majority in the Senate, I am sorry
that I must object.
The PRESIDING OFFICER. The objection is heard.
Mr. ENZI. It would do me no good to change the unanimous consent, so
we have 2 more hours of debate or have germane amendments available to
your bill?
Mr. DURBIN. If the Senator is asking me a question, I have given him
two other requests. There are others, such as reimportation of drugs.
This was supposed to be Health Care Week. The majority leader started
with medical malpractice and then went to your bill and does not want
to talk about anything else. How can we miss this opportunity? The
Senator from Wyoming knows these opportunities are few and far between.
If we do not seize this moment and take up these issues, we will not
reach them this year and people will be left penalized and still
waiting for Congress to act.
Mr. ENZI. And there is only one opportunity to talk about small
business. I have been trying to expand that opportunity as much as
possible. That is why I propounded this unanimous consent, so that it
could be absolutely clear that both methods of taking care of small
business would be done. I am sorry the other side is not willing to do
that.
Mr. SANTORUM. Will the Senator from Wyoming yield for a question?
Mr. ENZI. Yes.
Mr. SANTORUM. Is the Senator from Wyoming aware we have had votes on
the extension of the May 15 deadline at least on two occasions or more?
Has the Senate already voted on this issue repeatedly?
Mr. ENZI. Yes, it has.
Mr. SANTORUM. So what the Senator from Illinois is asking is to have
another vote after the Senate has already, on more than one occasion,
voted it down. So it is not that we have not discussed that issue. We
have discussed that issue in the past, and the Senator does not like
the decision of the Senate, but that does not mean we have not debated
that issue.
The second issue on which I wish to ask a question is the stem cell
issue. I think you said this, but I want to make it very clear. Is the
leader not in discussion right now with the Democratic leader on
setting up a framework to bring up stem cell? And did not the leader
say that he would bring this issue to the Senate, and he gave a
commitment, and isn't his intention--hasn't he stated it clearly--that
he will bring this issue to the Senate in a timely manner before the
end of this session?
Mr. ENZI. I have been next to conversations but not a part of the
conversation where that was absolutely the case. I have heard speeches
in the Senate where that absolutely was the case. I know there are
three different proposals that will be voted on and debated in regard
to that, so it is something which will be covered this session.
Mr. SANTORUM. And the third issue on which the Senator says we have
to have a vote is the importation of drugs. Have we not debated that
issue repeatedly in the Senate, and the position the Senator from
Illinois has taken has repeatedly failed; is that not the case?
Mr. ENZI. Over a period of years, that has been debated and voted on
here, and it has been voted down.
Mr. SANTORUM. I ask the Senator from Wyoming, have we ever debated
and brought to the Senate small business health plan reform for the
opportunity of small businesses to be able to get insurance for their
employees, to take care of one of the biggest problems Members on both
sides of the aisle have talked about, which is the rate of uninsured in
this country? Have we ever debated this issue in your bill, in the
Senate?
Mr. ENZI. It has not been debated in the Senate before. The House has
done it for the past 12 years. They passed it eight times, but we have
never done it on the Senate side. It has not made it out of committee
before.
Mr. SANTORUM. Let me understand, if I am correct, the Senator from
Illinois is objecting to moving forward with a bill that has never been
considered, that has support, I assume, from both sides of the aisle,
that is important from the standpoint of insuring more people; and the
reason he does not want to let that go forward is to bring up two
issues that have repeatedly been brought up in the Senate, including
this session of Congress, and he has been defeated on, and a third
issue which the majority leader has already said he would give time
for. That is his reason for objecting to this unanimous consent?
Mr. ENZI. That is the reason that was given.
All I am asking is that we do something for small business. I know
they were concerned about getting a vote on the Durbin-Lincoln
amendment. I tried to make any concessions I possibly could to get that
vote postcloture so that we would both be able to get a vote on the two
bills and do something for small business. We can weed out what will
work for small business. We can do additional amendments. There are
actually unlimited amendments that can be done to S. 1955 that the
other side could use to improve that, if they so desire. What we do is
have 30 hours of debate and then a vote-arama on any issues remaining
and a final vote on whether small business has anything different.
I yield the floor.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, let me correct my colleague from the State
of Pennsylvania who has misstated a fact which I am sure has escaped
his attention; that is, on February 2, this year,

[[Page S4428]]

there was, in fact, a vote on this Medicare prescription Part D. The
vote was propounded by the Senator from Florida, Mr. Nelson. It was
under the debate on the budget and needed 60 votes, but 52 Senators
voted in favor, including, obviously, Republican Senators. So his
statement earlier that it has never passed in the Senate is not
correct.
It is correct that he voted against giving relief to seniors who
failed to sign up in time on May 15. That is reflected in the Record. I
want to make sure that is clear for the record.
I also say when it comes to this issue, we have been told repeatedly
regarding this wonderful program that the seniors would figure it out
and all sign up. It turns out half of them have not. It is too
complicated. It is too difficult. We have been trying to give the
seniors some relief from the possible penalty they will face. I don't
know whether it is because of the embarrassment that the program is so
complicated, but for whatever reason the Republican majority has not
allowed this.
Mr. SANTORUM. Will the Senator yield?
Mr. DURBIN. I am happy to yield.
Mr. SANTORUM. Does the Senator from Illinois recall what the
estimates were as to how many seniors would sign by the date of May 15?
Mr. DURBIN. Whose estimates?
Mr. SANTORUM. By the Congressional Budget Office, which scores the
bill.
Mr. DURBIN. No.
Mr. SANTORUM. Between 28 and 30 million.
Does the Senator from Illinois know how many have signed up?
Mr. DURBIN. The Senator is very carefully avoiding the obvious; that
is, the vast majority of seniors already have prescription drug
coverage. What we are trying to do is bring into coverage those who do
not have it, and more than half of them have not signed up for the
program. So he is comparing numbers here that do not work.
I will reclaim my time because I would like to speak to the tax
reconciliation bill. But before I do, the way to deal with this issue
on small business health insurance is on behalf of the leader to sit
down and decide what amendments will be in order and to move forward.
But that is not the way we do business in the Senate. It is a
confrontation strategy.
The Republican majority brings a bill to the Senate, fills the tree
so no amendments can be offered, and then files cloture, which stops
debate. So we cannot have this conversation. We cannot offer other
amendments.
Why would the Republican majority leader want to avoid a vote on stem
cell research? Because Members on the Republican side of the aisle up
for reelection are nervous about this vote. They have said they oppose
stem cell research, and they know a majority of the people in their
states favor stem cell research and they do not know what to do. They
want to avoid the pain. They do not want to face the votes.
I remind them what my former colleague from Oklahoma, Mike Synar,
used to say: If you don't want to fight fires, don't be a firefighter.
If you don't want to cast controversial votes, don't run for the
Senate. That is what this is all about. You have to face the music and
face the voters.
The Senator from Tennessee, the majority leader, is trying to protect
and insulate his Senators from a delicate and difficult political vote.
I am afraid he is going to have to answer to the millions of people
across America who believe that stem cell research is critically
important to a nation that counts on medical research to deal with our
future.
One out of three of our children alive today will be diagnosed with
diabetes. If we can do medical research with stem cells to save and
spare those children, why don't we do it? We know what Parkinson's is
doing to so many healthy people--cutting their lives short,
compromising their ability. Alzheimer's is rampant. We have situations
with Lou Gehrig's disease, spinal cord injuries.
All of these could be addressed with stem cell research. And despite
the fact that the Senate majority leader has said he favors this
research, he refuses to call it to the floor. That is not fair. It is
not fair to the families who count on us.
If this President has decided we are going to prohibit medical
research, we should have a voice in that decision. The people should
have a voice in that decision through their Senators. And because the
Senate majority leader wants to protect his Members from a tough vote,
a controversial vote, he does not want to bring this to the floor. That
is unfortunate--unfortunate for the Senate, more unfortunate for the
people who count on us.
Let me tell you what we did have time to do this week. Before we
left, we found time to do something critically important. We found time
to make sure we are dealing with the tax cuts being proposed by the
Republican majority.
What are those tax cuts worth to average Americans? Well, if you
happen to make about $75,000 a year or less, they are worth $110.
Do you remember when the Republican majority said, we will solve the
gasoline price crisis by sending every American a check for $100, and
they were laughed out of Washington? Here they come again. Here comes
the Republican tax cut for working families across America--$110. Thank
you so much. It almost will buy two tankfuls of gas. That is their idea
of helping working middle-income families.
But look down here on this chart. Look at the people who are making
more than $1 million a year. Do you know what the tax cut is worth to
them? It is $42,000. I will tell you this, there are 17,000 people in
the State of Illinois, in the State I am proud to represent, who make
more than $1 million a year. Do you know how many have written to me
and said: ``Please, I need a tax cut for $42,000''? None. Not one. Do
you know why? They are doing quite well, thank you.
Mr. President, $42,000 more a year for them is money, perhaps, for
another purchase of something to make their lifestyle even more
comfortable, or to put it in their savings, or put it in investment,
but they do not need it to get by.
The people making $75,000 a year could use a real tax cut. But this
bill that is before us has removed one of the tax provisions that would
help working families across America. It is the tax provision which
said that working families can deduct the cost of college education
expenses for their kids. Think about that. Working families, some who
have a first-generation son or daughter in a college, got a helping
hand from our Tax Code to pay for the cost of college education. And
you know it is going up. Kids come out of college today with more and
more debt.
And to the families that want to help them, we said: We will give you
a helping hand in the Tax Code. But guess what. When the Republicans
met in conference, they eliminated that provision. They took out the
tax cut for these working families for college education so they could
put in a tax cut of $42,000 for people making $1 million a year.
Well, let me tell you what it means in real terms. When you look at
the average family across America, it means the tax cut is worth $16.
You could not fill up a gas tank unless you were driving, perhaps, a
motorcycle. Mr. President, $16--that is the average tax cut across
America.
The gentleman whose picture I have here is Mr. Lee Raymond, the
retiring CEO of ExxonMobil. Do you remember his retirement gift from
ExxonMobil? After totaling up the largest profits in the history of the
company, they gave him--not a gold ring, not an engraved plaque--they
gave him $400 million as a retirement gift for leaving ExxonMobil. And
there is better news coming. This bill will give Mr. Raymond an
additional $2.5 million tax cut. There is a guy who really needs it--
really needs it--$400 million, and he did not even have to buy a
Powerball ticket. And now the Republicans say: Come on. Give the guy a
break. Give him a tax cut.
What is wrong with this picture? What is wrong with this picture is
that the tax cuts are not only unfair, they are building a wall of
debt. The legacy of the Bush administration will be the biggest
increase in the debt of America in our history.
Look at this chart. When this President took office, our national
debt ceiling was $5.8 trillion. By this year it is up to $8.6 trillion.
The mortgage on America has grown faster under this

[[Page S4429]]

President than any other President in our history, and more than a
third of the responsibility is the President's tax cuts. Do you know
why? He is the first President in the history of the United States of
America to ever cut taxes in the midst of a war--the first.
Why didn't other Presidents cut taxes in the middle of a war? It did
not make sense. Along comes a war that costs you $2 billion a week, and
you are going to cut taxes? Don't you know that is going to drive your
country into debt? This President should know that. Our Republican
colleagues should know that. But they are ignoring it.

And as we are debating this bill, do you know why we are moving on it
so fast? We got word this week that they are going to have to raise the
debt ceiling again. We just raised it a few weeks ago. We are going to
have to raise the mortgage on America again because the fiscal policies
of the Bush administration have failed so utterly.
Well, we have time to do this. We do not have time to debate stem
cell research. We do not have time to have a real Health Care Week. But
we have time to pile debt on our kids. That is what this is all about.
If you want to know the foreign-held debt of America, take a look at
this chart. Who are the mortgage bankers for America? Japan, No. 1,
with $673 billion; China, No. 2, with $265 billion; and the list goes
on. We have to borrow money from foreign countries to float our debt.
They loan us money so we can keep going and give tax cuts to the
wealthiest people in America, knowing full well that any of these
foreign countries could turn on us tomorrow and say, ``We are sick and
tired of the dollar. We are moving to the Euro or some other
standard,'' and our economy would be paralyzed as a result of it.
It is the height of irresponsibility--height of irresponsibility--for
us to drive this Nation so deeply into debt, particularly from a party
that used to pride itself on being a fiscally conservative party. He is
the first President to raise taxes in the midst of a war, giving tax
cuts to the wealthiest people in this Nation, piling debt on children
to the point we have never seen in our history, and borrowing money
from foreign governments at a rate we have never seen.
This chart indicates that in the history of the United States, before
George W. Bush was elected President, 42 other men held the Presidency.
In that entire 224-year period of time, in the history of the United
States, all of the previous Presidents borrowed $1.01 trillion in
foreign-held debt for America--$1.01 trillion. This President, in 5
years, has borrowed $1.22 trillion. That is more than double the
foreign-held debt.
Is America safer and more secure because of this? Of course not. And
you know what the impact of this is. Remember the debate over Dubai
Ports? More and more of these countries awash in dollars they have
loaned us are now coming into the United States to invest. They are
becoming a bigger part of our economy. So it is not just debt for our
children; it is squandering our economic future. And that is a priority
that this Republican majority wants to move to today.
When you consider who wins and who loses in Washington, it is very
clear. Big oil wins with this bill, and not just Mr. Raymond who got a
$2.5 million tax break. Two Senate provisions would have collected
nearly $6 billion from oil and gas companies such as ExxonMobil,
Chevron, and ConocoPhillips. The Republican majority took them out of
the bill. At a time when the oil companies are experiencing the
greatest profits in their history, the Republican majority has decided
this is not the time to tax them, this is not the time to ask them to
give back to America. So they stripped out the tax provisions on big
oil.
The lobbyists for the financial service companies did very well, too.
Citigroup, GE, and JPMorgan will be able to delay paying taxes on
profits they make overseas. What is it worth to them? It is worth $4.8
billion. Why are we providing tax giveaways to companies to keep their
profits overseas? Why is our Tax Code rewarding conduct that ships jobs
overseas? The Republican majority thinks this makes as much sense as
giving tax cuts to people who make $1 million a year.
Who are the losers? Well, every American is going to end up losing
because our national debt is going to grow dramatically because of this
irresponsible fiscal policy.
This bill, sadly, will not allow Americans to deduct State and local
sales taxes. School teachers who buy their classroom supplies have lost
their deduction. Families paying college tuition will not be able to
deduct the tuition from their taxes. Fewer people will be hired from
welfare to work. Businesses working to do research and develop new
technologies will not get the tax credits they have had. These are only
some of the losers.
But the real losers are the American kids. The kids are going to have
to pay for this: $2 trillion that the Bush tax cuts have added to the
debt of America--$2 trillion.
Our national deficit is expected to exceed $11 trillion within 5
years. The money we are spending today is not free, no matter how much
we pretend it is. Someday we are going to have to pay for it. I should
say someday our children will have to pay for it.
So this President--the first in history to cut taxes in the midst of
a war, the first President to amass a wall of debt larger than every
other President before him when it comes to foreign debt, the first
President in history to create a $9 trillion IOU for our kids to pay--
is going to have his chance in a few moments with his bill that he so
dearly believes in. And you will find that his party will stand behind
him.

The President's popularity is not at a high point. Obviously, the
Republican Senators believe the way to win the next election is to keep
digging the deficit hole deeper. What we are witnessing here is not a
debate about tax policy. It is the death rattle of a failed Bush
economic policy.
I would say to my friends on the other side of the aisle, I admire
your consistency. You stick with the program even though the debt has
become unbearable. You stick with it even when conservatives in your
own party can no longer explain what your party stands for. You stick
with it when we are in a war that costs us $2 billion a week. You stick
with it even though we have become indebted further and further to
foreign countries, which, if they called in the debt, would make life
miserable for this entire Nation. At least you are consistent.
Mr. President, I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SANTORUM. Mr. President, I would also say, we know what the other
side believes in. We know they believe in higher taxes. We know they
believe in more Government spending. We have seen amendment after
amendment come here.
I cannot believe I hear again, repeatedly, from the other side of the
aisle the woe and complaint about deficits when it comes to letting
people keep their money, but no concern about deficits when it comes to
spending and increasing the size of Government.
I want to correct the Senator from Illinois on a couple of points he
made with respect to the Medicare Program. He said I was wrong when I
said the Nelson amendment lost. He said it got 52 votes. Well, a motion
to waive the Budget Act requires 60 votes. Fifty-two is less than 60.
It lost. I want to make sure the Record is clear that I was correct
and, in fact, the amendment did lose.
I also want to make sure the Record is clear when it comes to low-
income eligible seniors signing up for Medicare. The Senator from
Illinois said more than half the people who need to go out and sign up
for Medicare have not done so. The bottom line is, my understanding is,
according to the HHS News of May 10, 2006, a total of 37 million
seniors have signed up for the Medicare prescription drug coverage, of
a total of around 44 million to 45 million seniors. Now, that does not
look like half to me. It looks like a lot more than half have signed
up, and a very small percentage have not.
As far as low-income individuals, 10 million of the 13 million have
signed up for the program. And those who have not signed up and do not
sign up by May 15 will not be penalized. They will suffer no penalty.
So if you are a low-income individual, you will not suffer a penalty.
So let's understand now, 37 million have signed up, and there are 3
more

[[Page S4430]]

million who, if they do not sign up, will not receive a penalty. So you
have 40 million people who either signed up or will not receive a
penalty for not signing up, which leaves about 4 million people who
will receive a penalty if, in fact, they do not sign up.
Again, there were still, as of this number, 5 days. And as we have
seen with other programs--just like as with Congress, we wait until the
last minute to do things--we will probably see, and I think we are
evidencing, there will be a number of people who will come in and sign
up.
The other thing is, believe it or not--I know this is hard for some
to believe--some people do not want the program. Some people do not
want to participate in a Government program. They are very happy to not
participate. They are very happy to purchase their prescriptions on
their own.
I know that might come as a shock to some, but there are people who
don't like to participate in Government programs, who don't participate
in a whole variety of programs the Federal Government offers. As we
know, with Medicaid there are lots of people who do not participate.
With Medicare, there are people who do not participate, even though
they can. It has nothing do with complexity, when you have that high a
percentage, much higher than was anticipated by all of those who looked
at this, including the Congressional Budget Office. And if you look at
the satisfaction of people who have been in the program, more than
three-quarters of the people surveyed said they are happy with the
benefit. So let's get the facts right.
The reason the Democratic whip objected to Senator Enzi's request to
move to a vote on cloture allowing the Durbin-Lincoln amendment was
because they don't want to move to cloture. They don't want to pass
small business health plans. They don't want to make this happen for
small businesses because of another ideology they stick to. That is,
they want a big Government-run health care system, and they don't want
us to cover other people. I appreciate their sticking to their
ideology, even though it has been proven to be a failure in every other
country where it has been used and is not popular with the American
public.
Mr. FEINGOLD. Mr. President, I will oppose H.R. 4297. It fails in
nearly every aspect to justify enactment, but among the biggest of its
defects is that it adds $70 billion to our already mounting deficits.
The last thing we should be doing is adding to the burden already
facing our children and grandchildren.
What are we getting in exchange for this fiscal recklessness? Are we
addressing some urgent tax need? Perhaps this bill finally gives us the
kind of reform of the alternative minimum tax that is so clearly
needed. No, we get another 1-year patch on the AMT problem, and that is
it. This bill does nothing further to fix the AMT because the real tax
agenda in this bill is to enact dividend and capital gains tax cuts of
dubious merit, and which do not take effect for 2 years.
Two years, Mr. President. We are running up a $70 billion credit card
tab, and handing it over to our kids to pay, just so we will have a tax
cut that takes effect in 2 years.
Worse, the body is once again abusing the reconciliation process in
order to shield these questionable tax cuts from the kind of scrutiny
they so clearly need. Make no mistake: This bill would never pass
without this abusive use of reconciliation. The benefits of this bill
are grossly skewed to the most well off. The Center on Budget and
Policy Priorities notes that this tax bill provides middle-income
households with an average tax cut of $20, about the price of two
medium sized pizzas. By contrast, households with incomes over $1
million will get an average tax cut of $42,000, the price of a Lexus.
Altogether, more than half of the benefits from this bill will go to
the top 3 percent of households, those making $200,000 or more.
Moreover, in order to squeeze those questionable tax cuts into the
limited space afforded by the reconciliation maneuver, the conferees
have resorted to an outrageous bookkeeping gimmick which shifts
revenues that would have been collected in the future to the current
budget window. The Roth IRA conversion provisions permit individuals
with incomes over $110,000 and married couples with incomes over
$160,000 to shift savings into tax sheltered Roth IRAs. The net result
is to spend revenues from future budgets to shoehorn through grossly
unbalanced tax cuts now. The Center on Budget and Policy priorities
notes that by 2050, the Roth IRA provision, which is being used as a
temporary revenue enhancer, will actually reduce revenues by $14
billion in present value terms.
As I have had to note too many times, when we choose to spend on
current consumption--through appropriated accounts, mandatory spending,
or tax cuts--without paying for that spending, we are robbing our
children of their own choices. When we spend on our wants, by cutting
taxes or through government programs, without paying for those
decisions, we are saddling our children and even grandchildren with
debts that they must pay from their tax dollars and their hard work.
That is exactly what this bill does. The Roth IRA maneuver, along
with the billions in pure deficit spending contained in this bill,
comes out of our children's wallets. By digging the deficit ditch even
deeper, and by spending future revenues on tax cuts today, we are
adding even more debt to the bill with which we are passing on to our
children and even grandchildren. As a result, our children will have to
forego program benefits or pay higher taxes.
This tax bill is an abuse of the reconciliation process, a process
designed to reduce the deficit not aggravate it. The tax policy it
encompasses is fiscally reckless and economically regressive. And this
legislation fails to address a tax problem that is truly urgent, the
mounting problems with the alternative minimum tax. The Senate should
reject this bill.
Mrs. MURRAY. Mr. President, with their latest tax plan, Republicans
are showing once again that they care more about giving tax breaks to
millionaires than helping working families.
Republicans said this week would be health care week. While it is
insulting to devote only 1 week to such a critical issue, it's even
more troubling that Republicans pulled the plug on health care week in
favor of even more tax breaks for the rich. This tax bill and the
Senate's failure to help families with the soaring cost of health care
are further proof that Republicans have the wrong priorities.
If we want to make America strong again, we need to invest here at
home. Today middle-class families throughout Washington State and the
country are struggling to pay for the skyrocketing costs of gas,
college tuition, and health care. Instead of helping these hardworking
families, Republicans have once again decided to leave the middle class
behind.
While I am pleased that this bill includes a 1-year patch for the
alternative minimum tax, there is not much else to be pleased about in
this bill. According to the Tax Policy Center, this tax bill would
provide middle income families an average tax cut of just $20, while
millionaires would get an average tax cut of $42,000. Rather than
extending the middle-class tax cuts that have already expired or will
expire at the end of the year, Republicans have again turned their
backs on the middle class. The Republican bill also denies families in
my home State the ability to deduct their State sales taxes. It blocks
teachers from deducting the cost of classroom expenses they pay out of
their own pockets. It denies businesses access to the research and
development tax credit which I helped extend in September 2004.
On its own, this bill has the wrong priorities, but when you look at
the bigger picture a more disturbing pattern is clear. This tax bill is
the second part of last year's budget resolution. The first part of the
budget resolution, which was enacted in February, cut $39 billion from
important areas like health care and education. When we passed that
bill, we were told that the bill was necessary to reduce the deficit.
Yet today we are presented with a tax bill that in fact increases the
deficit by $30 billion and adds to our massive debt.
We need a tax system that is fiscally responsible, helps business
grow, and provides maximum relief to the middle class, but this bill
achieves none of this. Instead it takes out a loan against our
children's future and adds

[[Page S4431]]

to the deficit. This tax bill makes it more difficult for us to address
other important priorities like homeland security, paying for the war
in Iraq, our nation's infrastructure, health care, and education. This
is the wrong tax plan, at the wrong time, for the wrong reasons.
Mr. LEVIN. Mr. President, this tax reconciliation conference report
before us today sets a new standard for irresponsibility. It is a huge
giveaway to the wealthiest among us that is papered over by a
disingenuous effort to increase short-term revenues at a great long-
term cost. Like so many of the bills we have considered recently, this
conference report fails to invest in our Nation's priorities while
driving us deeper and deeper into debt.
Perhaps the most outrageous aspect of this bill is how deeply unfair
it is. According to the Tax Policy Center, 87 percent of the benefits
of this bill would flow to the 14 percent of households with incomes
above $100,000; 55 percent of the benefits would go those with incomes
above $200,000; and households earning more than $1 million a year,
which account for only 0.2 percent of all households, would receive 22
percent of the benefits of these tax cuts.
In contrast, the three-quarters of American households with incomes
below $75,000 would receive just 5 percent of the benefits. And the 60
percent of households with incomes below $50,000 would receive less
than 2 percent of all benefits. Approximately three-quarters of
Michigan taxpayers would receive no benefit at all from the bill's most
expensive provision an extension of the capital gains and dividends tax
cuts.
The inequities in this bill are even more glaring when you look at
the actual dollars. The average tax cut for the middle 20 percent of
households would be just $20, while the top one percent would get
$13,800. For those with incomes above $1 million, the average tax cut
would be $42,000.
What is even more brazen about this bill is that, with an outrageous
accounting gimmick, it purports to pay for a portion of these tax cuts
for the wealthy by giving even more tax cuts to the wealthy. Proponents
of extending the capital gains and dividends tax cuts had to find a way
around a Senate rule that says a reconciliation bill may not increase
long-term deficits. One way would have been for 60 senators to vote to
waive the rule, but it was not likely that there would be 60 votes for
this expensive and inequitable proposal. Instead, proponents have
resorted to a devious circumvention of this rule by pretending to
offset the long-term costs with a provision that will increase revenue
in the short-term before turning into a sea of red ink in later years.
Right now, individuals with incomes above $110,000 and couples with
incomes above $160,000 cannot contribute to a Roth IRA. Furthermore,
only those with incomes over $100,000 are prohibited from converting
traditional IRAs to Roth IRAs. This bill would lift both of those caps
beginning in 2010, meaning that a large number of high-income
households will convert their traditional IRAs to Roth IRAs because
funds in a Roth IRA are tax free when withdrawn in retirement. As taxes
are paid on the funds being contributed to Roth IRAs, the Treasury will
see an increase in revenues over a few years, but the Treasury will
lose revenues on investment gains for years down the line.
The Joint Committee on Taxation, the Congressional Research Service,
and other nonpartisan experts agree that this proposal will ultimately
result in a significant net revenue loss, even once interest is taken
into account.
So how did a revenue-loser get dressed up as a revenue-raiser in this
bill? As a rule, official Joint Committee on Taxation estimates do not
look past the next 10 years, so if the decrease in revenues doesn't
occur before 2017, it doesn't show up in the Joint Committee's
estimate. Thus, for purposes of the Senate's rules, it is as though it
doesn't happen. But in the real world, it will happen. This is a
transparent gimmick, designed to indulge this Congress's addiction to
irresponsible spending.
We owe it to our children and grandchildren not to continue building
up this massive debt. Today, each American citizen's share of the debt
is almost $28,000, and that will rise to more than $39,000 by 2016.
Paying off this debt will require either extraordinary tax increases or
significant cuts in critical areas such as defense or Social Security.
Tragically, it will mean that an increasing number of taxpayer dollars
will be spent not on moving America forward but simply on treading
water by making interest payments to our creditors, most of whom are
foreign countries.
One of the few bright spots in the bill that the Senate passed last
November was the meaningful antitax shelter provisions. Sadly, even
these have now been dropped from this conference report. House
Republicans once again rejected the economic substance provision that
the Senate has passed many times and that would prohibit abusive tax
shelters that have no economic purpose other than tax avoidance. The
Senate bill also included an amendment that Senator Coleman and I
pushed for that would increase penalties on those who promote abusive
tax shelter schemes and the banks, law firms and others that aid and
abet in these complex shenanigans. Dropping these provisions is a
disappointment that only benefits powerful special interests.
Finally, this bill misses yet another opportunity by failing to limit
any of the unnecessary tax breaks currently enjoyed by major oil
companies which are reaping record profits. In fact, the conference
committee struck one of few provisions in the Senate bill that might
have helped. The Senate bill had a provision that would have allowed
taxpayers caught by the AMT to still enjoy the benefit of the consumer
tax credits allowed for the purchase of hybrid and other alternative
vehicles. Unfortunately, this provision, too, was omitted in
conference.
Although the overwhelming majority of this bill is completely
misguided, I do support one positive provision in it--extending for 1
year the patch that prevents middle income families from being slapped
with the alternative minimum tax. The AMT was originally created to
make sure that the wealthiest Americans paid at least a minimum amount
of tax. Because the AMT is not indexed to inflation, however, it is
affecting many more taxpayers today. At a time when median family
income is falling, middle-income families need all of the help they can
get, and they certainly don't need to be socked with an unintended tax
increase.
Unfortunately, this bill provides the AMT fix for only 1 year. It
makes no sense to extend the capital gains and dividend tax cuts to
2010 and give AMT relief only through the end of 2006. We all know that
the reason this bill does not offer longer AMT relief is because the
fix so expensive--$33 billion for just 1-year. Knowing that we'll need
to do a similar fix to cover future years and leaving the fix out to
mask the real costs of the Bush policies, makes this costly bill all
the more irresponsible. Finding a more permanent fix for AMT is a cost
that we all know is coming, and we should not continue to ignore it in
our fiscal policies.
Not only do we need to provide AMT relief for years past 2006, but we
also need to pay for it. When the Senate originally considered its
version of this bill, many of us supported an alternative package
offered by Senator Conrad. That package would have paid for extending
all of the tax cuts that expired at the end of 2005, including AMT
relief and the important R&D tax credit. It would have raised this
needed revenue by closing many loopholes in our current tax system,
including one that allows oil companies to avoid taxation on foreign
operations. Unfortunately, Senator Conrad's amendment was defeated on a
nearly partyline vote of 44 to 52.
As a result of these many misplaced priorities, the bill before us
today is an irresponsible giveaway to powerful industries and the
wealthiest among us that will drive us deeper into the deficit ditch.
And it uses outrageous shenanigans to hide its true cost. We do need to
fix the AMT, but we also need fiscal responsibility, and we need
policies that will build economic security for all Americans, not just
those at the top who are already very secure economically.
Lower and middle-income families are getting squeezed from all sides,
with the costs of essentials like gas, health insurance, and education
going

[[Page S4432]]

through the roof. And, as we have seen in Michigan, our Nation is
hemorrhaging manufacturing jobs, and median family income is falling.
We need to be investing in our people and in our future, but this bill
would take a giant step backward. The tax cuts for the wealthy in this
bill are totally out of whack with what America needs right now, and I
will vote against this irresponsible conference report.
Mr. SARBANES. Mr. President, we have before us more of the same--tax
reconciliation legislation that further undermines our underlying
fiscal health while providing extraordinary, generous benefits for the
very wealthy but little relief for hard-working, hard-pressed, middle-
class Americans. As an editorial in today's New York Times says
pointedly, ``There's nothing in it for most Americans, and yet all
Americans will pay its cost. . . .''
The Republican conferees who produced this conference report made a
series of critical choices. Rather than providing tax relief for
millions of middle-class Americans, they have given most of the $70
billion to the wealthy few.
Rather than extending critical tax provisions that expired at the end
of last year--like the research and development tax credit, the college
tuition deduction, and the credit for teachers who use their own money
for classroom expenses--they have extended tax cuts for the wealthy,
which do not expire until 2009. Rather than finding ways to help
Americans address the tremendous prices at the gas pumps, they have
allowed the big oil companies to continue enjoying their large tax
breaks and Government giveaways. Rather than charting a course to
fiscal responsibility a change in direction long overdue they have
presented us with a bill whose $70 billion in tax cuts will only add to
the already-massive Federal deficit, and whose budgetary gimmicks will
cost the country billions of additional dollars in the years to come.
Among the most egregious of the gimmicks is the provision allowing
wealthy taxpayers to contribute more to their Roth retirement accounts.
While it provides revenue at this time to offset the costs of the
bill's other tax cuts for the wealthy in the near term, it will cost
billions and billions of dollars in lost revenue in the future, and
this cost will be borne by future generations of working Americans.
An editorial in this morning's Washington Post sums up this
legislation succinctly: ``Budgetary dishonesty, distributional
unfairness, fiscal irresponsibility,'' adding ``by now the words are so
familiar, it can be hard to appreciate how damaging this fiscal course
will be.''
Again and again, the administration points to figures on the growth
in the economy that mask the clear, deeply disturbing underlying trends
that show the income gap widening. Just the title of an article that
appeared in the March 27th Wall Street Journal tells the story: ``Wages
Fail to Keep Pace With Productivity Increases, Aggravating Income
Inequality.''
Indeed, while the wealthy are getting richer, the incomes of the
middle class and the poor have been steadily declining. There is an
abundance of evidence on this point. As a New York Times editorial,
entitled ``Barely Staying Afloat,'' noted yesterday, more than 37
million Americans now live below the poverty line, and an additional 54
million live between the poverty line and double the poverty line the
so-called ``near poor.'' The Washington Post, in another editorial this
past Sunday, reported that real income of families in the middle 20
percent has grown only 12 percent since 1980, while the incomes of
those in the top 10th have grown an astonishing 67 percent. Those who
are fortunate enough to find themselves in the top 1 percent have seen
their incomes more than double.
The bill before us reinforces this trend, delivering handsome
benefits to the very wealthy, while providing precious little for
middle- and lower-class Americans. According to a report recently
released by the joint Brookings-Urban Institute Tax Policy Center,
approximately 87 percent of this bill's benefits will go to the 14
percent of households with incomes above $100,000, while 55 percent of
the benefits will go to the 3 percent of those with incomes over
$200,000. While millionaires represent only two-tenths of 1 percent of
our population, they will receive 22 percent of this bill's largesse.
In terms of real dollars, families in the middle 20 percent of income
will receive an average of only $20 in benefits from this bill. In
stark contrast, those in the top 1 percent will receive an average of
$13,800. Even more troubling, those with an income of over $1 million
will benefit by an average of $42,000. This means that millionaires
will receive on average 2,100 times as much from this bill as those in
the middle 20 percent of society.
Not only are these tax cuts skewed to the wealthiest among us, they
further skew the fiscal dilemma that the Nation now confronts. When
President Bush took office in 2001, the Federal budget was in surplus
for the third consecutive year. In 1998, the Federal Government had
reported its first surplus in the budget since the 1960s, and surpluses
of $5.6 trillion were projected over a period of 10 years. This very
strong fiscal situation put the Nation in a position to pay down the
large national debt that had been accumulated as we moved through the
1980s and into the 1990s. Instead President Bush squandered the
projected surpluses by instituting irresponsible and reckless tax cuts.
When the history of this period is written, the fiscal policy of this
administration will be regarded as a gross irresponsibility.
When the President submitted his first budget proposal, he asserted:
``We can proceed with tax relief without fear of budget deficits, even
if the economy softens.'' The following year, 2002, with the budget
already in deficit, the President called for yet another tax cut,
promising that ``our budget will run a deficit that will be small and
short term.'' In fact, the President's budget in that year confidently
asserted that the deficits would be so short term that by this year
2006 the budget would be back in surplus.
In fact, exactly the opposite has happened. Consistent with the
irresponsible fiscal policy that this President has pursued, we have
run deficits each and every year since 2001. We went from a surplus of
$128 billion in 2001 to a deficit $158 billion in 2002 a swing of $286
billion. The deficit rose to $378 billion in 2003, rose again in 2004
to $413 billion, fell slightly in 2005 to $319 billion, and is now
projected to go back up again in 2006 to $371 billion. Far from being
small and short term, these deficits are at record levels. Every year,
the goal of returning to fiscal balance recedes, as administration
policies drive us deeper into debt.
Much of this debt is held by foreign lenders, and that amount is
growing all the time. At the end of fiscal year 2001, 31 percent of the
outstanding Federal Government debt was held by foreign lenders. Over
the succeeding 4 years, borrowing from abroad accounted for more than
80 percent of the increase in our Government debt. So as we have seen
the debt rise, the proportion of that debt held by foreign lenders has
risen at a much more rapid rate. As our borrowing abroad increases, a
shift has also occurred from private to Government lenders.
If foreign lenders continue to buy 80 percent of new Federal debt,
the Federal Government will owe more than half of the debt to foreign
lenders by 2011. In other words, as Blanche DuBois says in Tennessee
Williams' play ``A Streetcar Named Desire,'' we will be dependent on
``the kindness of strangers.
I opposed the President's tax plan as unfair and irresponsible at the
time the budget was in surplus, and I oppose the legislation before us
today. It is unfair and it is irresponsible, and I urge my colleagues
to vote against it.
Mr. VOINOVICH. Mr. President, I rise to speak on the reconciliation
bill that is before the Senate.
There are three reasons we should oppose the tax cuts that are
currently before the Senate, as well as tax cuts that may come before
the Senate in the near future:
No. 1, we do not need these tax cuts; No. 2, we cannot afford these
tax cuts; and
No. 3, we should be working on tax reform rather than enacting tax
cuts in a piece-meal fashion.
Mr. President, we do not need these tax cuts now. In short, the
economy is already growing. The Nation's gross domestic product grew by
over 4 percent in both 2003 and 2004 and 3.5 percent in 2005. In the
first quarter of 2006, it was reported that the economy grew

[[Page S4433]]

at 4.8 percent. Additionally, unemployment has dropped from 6.6 percent
to the current 4.7 percent.
The stock markets have regained their strength over time. In fact,
proponents of tax cuts point to the stock market as an indicator of the
Nation's economic growth and have stated that if tax cuts are not made
permanent, we threaten to send our stock market, and consequently the
economy, into a tailspin. The growth in the stock market may have
coincided with the enactment of certain tax cuts, but as the Wall
Street Journal reported, ``A group of Federal Reserve Board economists
concludes that the tax cut, which slashed the dividend-income tax on
stocks to 15 percent from about 30-38 percent, was a dud when it came
to boosting the stock market when it was announced and passed in
2003.''
Moreover, I would argue there are other factors, arguably much larger
in scope and importance, which played into the market's, as well as the
Nation's economic growth. A rational individual would conclude that the
historic lows in interest rates played a large role not only in
providing cheap capital for business expansion but also to spur the
housing market. As former-Chairman of the Federal Reserve Alan
Greenspan indicated, there are factors outside the control of the
Federal Government that have led to long-term growth, including the
boon in productivity fueled by technology as well as the relative
strength of the world economy.
I do not doubt that tax cuts have some effect on the economy. In
fact, some may point out that I supported two of the largest tax cuts
to be enacted in American history, the tax cuts in 2001 and 2003. In
both of these instances I looked at the facts that were before me and
came to the conclusion that supporting these tax cuts was the right
policy decision. But they were the right policy decision for two
distinctly different reasons.
In 2001, our Nation was facing a starkly different fiscal picture
than what we have today. At that time, the 10-year surplus was
estimated to be $5.6 trillion. There was a surplus on the table, and
Congress was faced with two choices: spend the money or give it back to
the taxpayer. I chose to get that money off the table and out of
Washington so it could not be spent, but I made this decision based on
the premise of using the surplus as a three-legged stool: providing tax
cuts, paying down the debt, and controlling spending.
On June 7, 2001, the President signed the Economic Growth and Tax
Relief Reconciliation Act. I voted for this bill, which reduced the
individual income tax rates that apply to taxable income, increased the
child tax credit to $1,000 and extended it to smaller families,
addressed the ``marriage penalty,'' phased out the Federal estate tax
over the period 2002-2010, provided a temporary reduction in the
alternative minimum tax, and provided some savings incentives and child
care credits.
In 2003, our Nation faced a very different scenario. The country was
still reeling from September 11, fighting the war against terror and
trying to rebound from corporate accounting scandals. We needed
stimulative medicine to ensure that the economy did not sink further
into the doldrums. While I supported these tax cuts, I fought to ensure
that the amount was the right balance between needed stimulus and
taking the deficit into consideration. I joined Senators Olympia Snowe,
John Breau, and Max Baucus to get the $350 billion that was eventually
enacted.
On May 28, 2003, the President signed the Jobs and Growth Tax Relief
Reconciliation Act into law. We accelerated the cuts from the 2001 tax
bill such as the individual income tax cuts, the child tax credit and
the marriage penalty relief. We also extended the alternative minimum
tax, AMT, again and reduce the rate on both dividends and capital gains
to 15 percent for higher tax brackets and 5 percent for those in the
lower tax brackets.
Mr. President, the world has changed again. Just as the decisions I
made in 2001 and 2003 were not made in a static environment, I now look
at the economic outlook facing our Nation, as well as the ongoing needs
I know this government will have to fund.
The second reason we should not move forward on tax cuts is that we
cannot afford them. Our fiscal health is in dire straits. In the
simplest terms, the Federal Government continues to spend more than it
takes in. In case anyone has forgotten, the deficit for Fiscal Year
2005 was $318 billion. This was the third highest deficit in our
Nation's history. The first and second largest deficits occurred Fiscal
Year 2003 and Fiscal Year 2004.
When I came to the Senate in 1999, the national debt stood at $5.6
trillion. The national debt now stands at $8.4 trillion, an increase of
about 50 percent. As a percentage of gross domestic product, GDP, our
national debt has grown from being 58 percent of GDP at the end of 2000
to an estimated 66.1 percent of GDP by the end of 2006.
In fact, the debt continues to grow so quickly that the House of
Representative's Fiscal Year 2007 budget resolution is reported to
contain a provision that would raise the Federal debt ceiling to nearly
$10 trillion. This is less than 2 months after Congress was forced to
raise the debt ceiling from the previous ceiling.
According to the reports from Medicare and Social Security trustees,
the trust funds for these programs will be exhausted even earlier than
previously thought. According to the most recent trustees' report, the
cost of Social Security and Medicare will grow from nearly 7.4 percent
of the economy today to 12.7 percent by 2030, consuming approximately
not just 60 percent as predicted by the administration but 70 percent
of all Federal revenues, crowding out all other discretionary spending
and some other mandatory programs.
I am for entitlement reform. Senator Gregg took the first step last
year with the deficit reduction bill of 2005. I voted for that bill. We
need to do more to reform entitlements. No matter which way you look at
it, entitlement programs coupled with an ever increasing national debt
are staring down on our children and grandchildren.
Some Members believe that the solution is to grow the economy out of
the problem, that by cutting taxes permanently the economy will
eventually raise enough revenue to offset any current losses to the
U.S. Treasury. I respectfully disagree with that assertion. I do not
believe that in the current situation our country faces, we can
continue to spend more than we take in.
In November 2005, former Federal Reserve Chairman Alan Greenspan
testified before the Joint Economic Committee and told Congress:

We should not be cutting taxes by borrowing. We do not have
the capability of having both productive tax cuts, and large
expenditure increases, and presume that the deficit doesn't
matter.

That is exactly what we have been doing the last several years.
I have said many times on this floor that our major problem is we are
unwilling to pay for or go without what we want to get done. We have
been willing, time and time again, to put the cost of our current
spending on the credit cards of our children and grandchildren. To be
candid and fair, we have had no choice in much of the spending since
September 11. The Federal Government had to rebuild after September 11.
We have made the decision to increase security for the homeland. We
have to fund the war in Iraq and Afghanistan. And we have to rebuild
after the devastation of dealing with Hurricanes Katrina and Rita.
What we should be doing is spending our time on tax reform. The Tax
Code has nearly universal disapproval for its complexity and magnitude.
As the one who amended and pushed for the creation of the task force on
tax reform in 2003 and 2004, I was delighted when the President said,
in his 2004 convention acceptance speech, he would move forward with
tax reform. We all know that fundamental tax reform is critical, and as
we consider these and future tax provisions, it becomes more and more
clear we need to overhaul our tax code.
I simply cannot understand why some of my colleagues want to make so
many provisions of the current tax code permanent or add new tax cuts
when we very well may be eliminating precisely the same provisions as
part of fundamental tax reform. No homeowner would remodel their
kitchen and bathroom right before tearing down the house to build a
newer and better one.
Frankly, one of the measures in the reconciliation bill I do have
sympathy

[[Page S4434]]

for and that is the patch for the AMT. Like the Sword of Damocles, it
hangs over Congress's head nearly annually as it threatens to swallow
more middle-class taxpayers. We do need to fix the AMT. Unfortunately,
every year we move forward with a piece-meal tax policy, we delay
action on permanently fixing the AMT, which will cost over $500
billion. When will we wake up and face the music on AMT?
Additionally, simplifying the code to make it more fair and honest
could, by some estimates, save taxpayers over $265 billion in costs
associated with preparing their taxes. That would be a real tax
reduction, and it would not cost the Treasury one darn dime. It would
be a tax cut that would guarantee that people are paying their fair
share and would bring more money into the Federal Treasury.
According to the Tax Foundation, we lose about 22 cents of every
dollar of income tax collected in compliance costs. That amount adds up
to the combined budgets of the Departments of Education, Homeland
Security, Justice, Treasury, Labor, Transportation, Veterans Affairs,
Health and Human Services, and NASA.
Mr. President, the bottom line is we do not need less revenue, we
need more revenue. As a recent Wall Street Journal article states,
``federal taxes amounted to 17.5 percent of gross domestic product, up
from a modern low of 16.3 percent in 2004, but well below the high of
nearly 21 percent in 2000 . . . keeping the tax burden low will be
difficult. Last year, the federal government's spending exceeded its
tax take by about $318 billion. And the retirement of the baby-boom
generation starting in 2011 could cause spending on big-ticket federal
retirement programs to jump.'' I could not have stated it better myself
except I would utilize the on-budget deficit. In other words, if you
exclude the Social Security surplus, money that I believe should be
utilized for its intended purpose rather than funding the government,
the deficit was actually almost $492 billion. This number is even worse
if we took the Department of Treasury's accrual number for FY2005,
which was a deficit of $760 billion.
I know this is controversial to state, but if you look at the
extraordinary and unexpected costs that we have with the war on terror,
homeland security costs, and rebuilding after Hurricanes Katrina and
Rita, the logical thing that one would think about is to ask for a
temporary tax increase to pay for them today. Instead, we are saying we
will let our children and grandchildren take care of these costs.
The people who are sacrificing today in this country are those who
have lost men and women in the war against terror. The people who have
sacrificed today are the ones who have come back without their arms and
legs, thousands of them. They are making the sacrifice. The question I
ask is, what sacrifice are we making?
The simple fact is that we can not have it all--we need to set
priorities and make hard choices--otherwise our children will end up
paying for it. Anyone in the know who is watching us has got to wonder
about our character, our intellectual honesty, our concern about our
national security, our Nation's competitiveness in the global
marketplace now and in the future, and last but not least, our ``don't-
give-a-darn'' attitude about the standard of living and quality of life
of our children and grandchildren.
The simple fact is we cannot have it all. We need to set priorities
and make hard choices; otherwise, our children will end up paying for
it.
Mr. JOHNSON. Mr. President, today I wanted to talk briefly about the
current debate on S. 1955 and what is supposed to be Health Week in the
Senate. It was my hope and the hope of many of my colleagues that this
week would bring about changes to improve health care for South
Dakotans and all Americans. This week should have provided an
opportunity to debate many important and critical issues, but
unfortunately the direction being taken is anything but productive and
meaningful.
A real Health Week would be about many things, including addressing
problems with the Medicare Part D Program. In recent months, I have
held several meetings in my home State with seniors, advocates,
pharmacists, and other health providers about the program. What I have
heard over and over again is that the benefit is not only confusing for
beneficiaries but also often not adequately address prescription drug
costs. It has also been unrealistically demanding on pharmacists and
other health care providers, literally threatening community
pharmacists' abilities to keep their doors open.
While the administration continues to tout their estimated number of
beneficiaries enrolled in Part D, the reality in small towns across
South Dakota paints a very different picture. Supporters of the Part D
Program have marketed the low-income benefit as one of the most
important and beneficial aspects of the program. While I did not
support the bill that is now law because I believe its basic structure
is flawed, I have always conceded that the low-income provisions will
help those seniors in need, and we should be doing what we can to make
sure seniors who are eligible are informed about their choices.
Unfortunately, the administration has done a poor job of ensuring
that those most likely to see a benefit from the program are actually
enrolled. In my State, there are 29,000 beneficiaries eligible for the
low-income benefit, and according to a recent estimate by Families USA,
only 9 percent of individuals have been enrolled. These are everyday
South Dakotans with limited resources and support and they need help.
Part of the problem is that the program is just too complicated and
not being administered effectively. Just last week, the Government
Accountability Office released a report that indicated that when
beneficiaries contact the Centers for Medicare and Medicaid services,
only 41 percent of questions are answered correctly regarding which
plans are the least expensive and most appropriate for them. This is
simply unacceptable, and frankly all of my colleagues should be
outraged by this statistic. This is a problem that must be addressed,
and during this time of debate on health care, we should be working
toward enacting changes that will make things better.
Meanwhile, the clock keeps ticking toward the deadline for enrolling
in the program. After May 15, only 5 days from now, seniors will suffer
a penalty for late enrollment. CMS cannot even answer questions
correctly--questions that are essential in order to help seniors select
a drug plan that works for them, but the administration insists on
penalizing seniors for delaying their decision regarding participation.
All this time, drug companies and insurance companies continue to see
the checks roll in. Negotiating lower drug prices under Medicare Part
D, extending the enrollment for the program, and making the program be
more accountable to seniors--these are the things we should be dealing
with right now and what Health Week should be about.
Health Week should also be about passing embryonic stem cell research
legislation that will create a path toward cures for many diseases
plaguing our society. It is hard to believe that on May 24, it will
have been 1 year since the House passed its bill, the Stem Cell
Research Enhancement Act of 2005 or H.R. 810.
I am strongly in favor allowing a closely monitored and controlled
stem cell research effort to go forward using frozen fertilized embryos
that would otherwise be incinerated as medical waste, and I am a
cosponsor of S. 471 which was introduced by Senator Specter and is
cosponsored by 41 of my colleagues here in the Senate.
I believe these cells, which are created by the hundreds of thousands
at fertility clinics, would be better used to advance medical research
that holds great promise for curing or preventing some of the world's
worst diseases, as well as repairing spinal cord and other injuries.
This type of research is overwhelmingly supported by the American
public and by a broad range of health, science, and disease advocacy
groups.
I have met with and heard from hundreds if not thousands of South
Dakotans and their families, encouraging me to support vital, life-
giving research, including embryonic stem cell research, and I agree.
My values and my faith tell me to support lifesaving research which
will provide cures and therapies for devastating illnesses such as
diabetes and Parkinson's disease. The majority leader has indicated in
the past that he will allow an up-or-

[[Page S4435]]

down vote on stem cell research on the Senate floor, and it is
unfortunate that my colleagues on the other side of the aisle will not
permit us to move forward, right now, on this issue.
A real Health Week would also be about promoting a health insurance
proposal that does help small business, but does so in such a way that
protects consumers and does not infringe on State rights to regulate
the health insurance market. The Health Insurance Marketplace
Modernization Act or S. 1955 would make health care coverage more
affordable in many cases but would do so at the expense of providing
meaningful coverage to consumers.
South Dakota has mandated that insurance companies that want to offer
plans in the State must provide some basic services including diabetic
supplies and education, mammography screening, mental health parity,
and prostate cancer screenings. My State also requires that insurers
provide access to certain types of providers including nurse midwives,
nurse anesthetists, optometrists, osteopaths, chiropractors,
podiatrists, psychologists, and social workers. S. 1955 will allow
insurers to come into South Dakota and provide bare bones coverage that
preempts these State mandates. South Dakota deserves to determine what
basic care and coverage must be provided to our citizens, and S. 1955
would take away that right.
To gain this exemption, all an insurer has to do is offer a plan that
is similar to one offered to State employees in one of the five most
populous States. Now some have stated that the availability of this so
called enhanced option will ensure access to services that States have
mandated, but this is simply not true. The alternative plan does not
have to be affordable or comprehensive and could be a high-deductible
health plan that provides virtually no preventive care. That means no
dental screenings, no prostate cancer screening, no access to nurse
practitioners.
The Small Employers Health Benefits Program or SEHBP Act provides a
strong alternative to the Enzi approach making coverage more affordable
for small businesses and providing individuals with the same type of
insurance offered to members of Congress and other Federal employees.
This proposal is based on the successful Federal Employees Health
Benefits Program which provides health coverage to millions of Federal
employees, retirees, and their families and does so with very low
administrative costs.
While this alternative does provide an opportunity for small
businesses to obtain coverage for their employees, it does so without
jeopardizing the basic coverage currently ensured by South Dakota's
health insurance laws.
It provides a tax credit to small businesses and ensures that State
consumer protection laws are kept in place. According to the most
recently available data from the Small Business Administration, in
South Dakota 19,750 businesses fall in this category, employing 136,560
people. The legislation also will provide for grant participation
waivers to businesses with more than 100 employees under some
circumstances.
The SEHBP approach is supported by groups such as Families USA, the
American Academy of Family Physicians, American Medical Association,
Consumers Union, and the National Partnership of Women and Families.
We need to address the complex health care issues facing our Nation
today, but we need to do so in a way that moves us forward. I believe,
as do literally hundreds of organizations, including the AARP, American
Cancer Society, and the American Academy of Pediatrics, that S. 1955 is
wrong for small businesses and their employees. I oppose this bill and
will continue to fight for adequate health care access in South Dakota.
Mr. KOHL. Mr. President, I rise in opposition to the tax
reconciliation conference report before us. We cannot afford it, and we
don't need it. Even more distressing, it benefits overwhelmingly those
with incomes greater than $1 million at the expense of middle-income
families, of our ability to protect and defend our Nation and of our
fiscal bottom line.
We cannot afford adding $70 billion to the burgeoning deficit. Months
ago, my colleagues voted to cut programs such as Medicaid and child
support--programs that directly serve low-income families and the
elderly. They did this in the name of deficit reduction. Yet today,
those same Senators will vote to add $70 billion to the deficit.
We don't need the majority of this bill. The centerpiece of that $70
billion is an extension of the tax breaks on capital gains and dividend
income. My colleagues have argued that this will prevent a tax
increase, but we all know such an increase is not imminent. The cut on
capital gains and dividends will not expire until 2008; this
legislation extends it from 2008 to 2010.
This legislation puts the needs of everyday Americans behind the
luxury of an unnecessary tax break. Families making $50,000 a year or
less will see an average of $20--half a tank of gas--in benefits from
this bill. But those with incomes of more than $1 million will get back
an average of $42,000, enough to buy a new SUV.
The needs of everyday Americans are ignored by this legislation.
Businesses are ignored as the bill fails to extend the expired research
and development tax credit. It overlooks the needs of students trying
to pay for college by not extending the expired deduction for higher-
education tuition expenses. It ignores our teachers, by failing to
extend the expired deduction for their classroom expenses.
Let's set aside extending tax cuts that don't expire for 2 years in
favor of extending those that expire now. Let's not go on a $70 billion
spending spree in the face of record levels of Federal deficit and
debt. Let's not use our limited revenues to enrich those that need the
least at the expense of those who need the most. Finally, let's send a
message to the American people about where our priorities lie.
Mr. HARKIN. Mr. President, if you want to know why this Republican-
controlled Congress's approval rating has plunged to 22 percent and why
President Bush's approval rating is an equally dismal 31 percent,
exhibit A is this reckless, irresponsible tax reconciliation bill.
Let's consider the context in which the Republicans are pushing this
latest giveaway of $70 billion, all of which will be added to the
deficit and national debt:
The Republicans are ramming through these new tax breaks despite the
fact that they we are facing a deficit, this year, in excess of $300
billion a year despite the fact that they have run up $2 trillion in
new debt since President Bush took office, despite the fact that they
are trying to raise the debt limit to an astonishing $10 trillion,
despite the fact that we are spending $10 billion a month on their
endless wars in Iraq and Afghanistan and despite the fact that they
have increased spending by 25 percent in just 5 years' time.
The level of irresponsibility here is just breathtaking. There is
nothing conservative about handing out $2 trillion in tax breaks over 5
years and passing the bill to our children and grandchildren. Rather
than providing for our children's education, health, and well-being,
this bill will provide them with another huge dose of our debt.
That is plain, old-fashioned recklessness and irresponsibility. It is
simply shameful.
In his State of the Union speech 3 years ago, President Bush made
this statement: We will not deny, we will not ignore, we will not pass
along our problems to other Congresses, to other presidents, and other
generations.
But that is exactly what this new tax-break bill will do. It will add
to the $2 trillion in new debt that President Bush is passing on to
other generations. It will deliberately create a fiscal time bomb set
to detonate on January 1, 2011, which a future President and future
Congress will somehow have to defuse. And it will result in higher
interest rates in the years ahead--indeed, interest rates are already
rising rapidly.
This morning's New York Times runs two editorials that are dead on.
One editorial is titled, The Republican Agenda for 2006: Tax Cuts for a
Favored Few. The second editorial is titled, The Republican Agenda for
2006: Tax Increases for Everyone Else.
This bill is one of the most cynical giveaways to the wealthy we have
seen. If this bill were entirely in effect this year, taxpayers making
more than $1 million a year would be getting an average tax cut of more
than $40,000 this

[[Page S4436]]

year, enough to buy a new Mercedes. Taxpayers with middle incomes will
get an average tax cut that may pay for a tank of gas or tow, for many
it will be less than that.
According to the Brookings Tax Policy Center, assuming that all of
major tax provisions were put into place this year, taxpayers making
more than $200,000 a year will get seven-eights of the benefits in this
reconciliation bill. Taxpayers in the lower 60 percent of the income
scale--average working Americans--will get only 1 percent of the
benefits in this bill--1 percent. This is simply outrageous.
But the cynicism does not stop there. The Republican tax conferees
glued this package together with the worst kind of gimmickry. In order
to stuff more tax breaks into this bill, they deliberately designed it
in such a way as keep the revenues just within the $70 billion limit
over 5 years. But they did it in a way that will drain countless
billions of dollars from the Treasury in the decades beyond the budget
window.
How did they do this? They put in provisions to encourage the wealthy
to convert their 401(k) plans and regular IRAs into Roth IRAs, which,
itself, will be a bonanza for the rich. As one newspaper put it, this
morning:

This is what passes for fairness in Washington these days:
a big windfall for the wealthy to ``pay for'' another tax cut
for the wealthy.

The core of this bill is an extension of the 15 percent tax on
capital gains from 2008 to 2010. To make this possible, the tax-writers
jettisoned two very useful provisions that help ordinary Americans.
They did not extend the work opportunity tax credit, which creates
incentives to provide job training for the more difficult to employ in
our society, and they did not extend the research and development tax
credit, which promotes improvements in our efficiency and the
development of new products. Those provisions have already expired.
Because this bill costs more than the $70 billion allowed, offsets
were needed. Did the tax writers cut the billions in excessive tax
breaks going to the oil companies--provisions such as the last in first
out rule on their overseas operations? Even the oil company executives
have said they don't need this. After all, Exxon made $36 billion last
year. Exxon payed its CEO more than $140,000 a day. But the tax-writers
didn't touch this tax break for the oil companies which had been in the
Senate bill.
Republicans claim that their endless tax cuts have created a strong
economy, and that the tax cuts will almost pay for themselves by
creating new revenue. This is the old supply-side economic theory--you
know, the idea that the best way to feed the sparrows is to give an
extra big bag of oats to the horse. The first President Bush got it
right; he called it ``voodoo economics.''
The truth is that current economic growth and job creation during
this recovery are well below normal, and they are well below the levels
we saw when President Clinton was doing what was necessary to balance
the budget.
Let's look at this economy. Business investment always recovers after
a recession. But, by historical standards, we have seen a sluggish
recovery in business investment. In the past 5 years, business
investment has grown 65 percent more slowly than the average for all
recoveries since World War II. In the early 1990s, George H.W. Bush and
Bill Clinton signed significant tax increases into law in order to
balance the budget. But business investment was far greater during that
period.
In addition, job creation during this recovery has been anemic, at
best. Last Friday, the administration ballyhooed the fact that 138,000
jobs were created in April. The cheerleaders didn't mention that
138,000 new jobs is not even enough to keep pace with population
growth. And it is less than half of the job creation we experienced,
month after month, under President Clinton. Remember, he dared to raise
taxes on the wealthy in order to balance the budget, and the resulting
economic boom created more millionaires than any recovery in history.
When President Bush passed his third round of tax breaks in 2003, he
claimed that it would create 5.5 million new jobs by the end of 2004.
That was when Congress cut the tax rate on dividends and capital gains,
which the current bill would extend. That bill did not create the
promised 5.5 million new jobs. Job growth was only 2.4 million, less
then the norm without tax cuts. Over the past 19 quarters since the
recession, the growth in employment has been consistently below normal.
Meanwhile, incomes of workers have not kept up with inflation.
We have seen the same disappointing results in terms of gross
domestic product. Since the end of the last recession, GDP growth has
been less then the average GDP growth following recessions since World
War II.
And what about the Republicans' argument that tax cuts largely pay
for themselves? Are they kidding? They have passed $2 trillion in tax
cuts over the last 5 years. And, over that same period of time, the
national debt has increased by--you guessed it--$2 trillion.
Yes, we are seeing an increase in revenues at the moment, as one
would expect during a recovery. But our revenue estimates are actually
below the levels predicted by the Congressional Budget Office in early
2003, before we passed the capital gains and dividend tax breaks we are
rushing to extend today.
And let me make one more point about these tax breaks on capital
gains and dividends. Over and over again, our friends on the other side
of the aisle claim that middle-income families are big beneficiaries of
these breaks. Yes, but the typical middle-income taxpayer gains a $20
cut here and a $100 cut there. But the lion's share of the benefits go
to you know who. Half of the benefits go to those making more than
$200,000 a year. When we just look at the cut in the capital gains and
dividends rate: over half of those benefits go to those making over a
million a year and over 93 percent of those benefits go to those making
over $100,000 a year, according to a table just released by the Joint
Tax Committee.
This reconciliation bill gives $70 billion that we do not have,
overwhelmingly to people who don't need it; and it passes the resulting
debt to people who haven't even been born yet. This bill is reckless.
It is irresponsible. And it is shameful.
I urge my colleagues to defeat this conference report so we can
substitute a responsible bill--a bill that is progressively paid for,
that prevents the alternative minimum tax from penalizing middle-income
taxpayers, and that extends job training and the R&D tax credit.
Mr. KERRY. Mr. President, today we are debating a $70 billion tax
reconciliation bill and the centerpiece of this bill is a provision to
extend the lower tax rates on capital gains and dividends that do not
expire until the end of 2008. I cannot support this bill for many
reasons. It abuses the budget reconciliation process in order to
provide an extension of tax cuts to those with incomes above a million
dollars rather than addressing tax issues in a fiscally responsible
manner.
This bill is the third and final piece of a flawed budget strategy
that does not put us on a path towards deficit reduction. The first
piece was the spending bill that cut $40 billion, with most of those
cuts hitting those who need our help the most. The second piece was a
$781-billion increase in the debt ceiling, which will bring the total
to $3 trillion under this administration's watch. If you combine these
three bills, the result is a $30 billion increase in the deficit and
record level debt.
The conference report does not reflect the tax bill passed by the
Senate. Back in November during the Senate Finance markup, I did not
support the bill even though it did not include capital gains and
dividends tax relief. I was concerned that the bill would come back
from the House with this tax relief and that it would substantially
increase the deficit in future years. The conference agreement does
what I expected and it is even worse than I initially imagined.
The only reason this bill is before us is to extend the lower rate on
capital gains and dividends. These lower rates do not even expire until
the end of 2008. We have repeatedly heard how American families have
benefited from this tax cut and that half of American households now
have some investment income. We do not hear the entire side of the
story. Even though about half of American households own stock, two-
fifths of this stock is held in retirement accounts in which capital
gains

[[Page S4437]]

and dividends earned are not subject to taxation, and thus do not
benefit from the lower rates on capital gains. According to the Federal
Reserve Bank's Survey of Consumer Finance, only 17 percent of the
households in the bottom 60 percent own stock and the average value is
$52,000. This accounts for 9 percent of all taxable stock. Households
in the top 1 percent own 29 percent of all taxable stock and 84 percent
of these households own taxable stock with an average value of nearly
$2 million.
These tax cuts are skewed towards the wealthy because they have more
capital gains and dividends income than the average family. For those
with incomes under $100,000, capital gains and dividend income accounts
for 1.4 percent of their total income, but for those with incomes over
$1 million, capital gains and dividends account for 31.4 percent of
their income. According to the Urban-Brookings Tax Policy Center, those
with income over $1 million will receive an average tax cut of $32,000
in 2009, whereas those with incomes below $50,000 will only receive an
average tax cut of $11.
Not only will upper-income individuals benefit from this provision,
they will benefit from a new provision that was added during the
conference. This provision removes the income limits for converting
from traditional individual retirement accounts--IRAs--to a Roth IRA.
This provision was added to meet requirements of the budget rules, but
don't be fooled, this provision is a gimmick. It is ironic that this
gimmick is being used to solve a budget issue--it is being added to
solve the budget issue of the capital gains and dividend provision
having a $30 billion cost in the second 5 years of the bill. The Roth
IRA provision does solve this budget problem, but this provision will
add to the deficit. It raises revenue initially because contributions
to Roth IRAs are not deductible, but it loses revenue because earnings
in these accounts accumulate tax free.
Only households with income over $100,000 would benefit from the
easing the restrictions on rollovers to Roth IRA accounts. The Tax
Policy Center estimates that the 99.1 percent of the benefits of this
provision will go to those in the top 20 percent of households with
average incomes of $189,863. I have to admit that it is clever to
offset one tax cut with another tax cut that only benefits families in
the upper-income limits. This provision highlights how this bill makes
a hypocrisy of the budget process.
As I said before, there are several budget gimmicks used in this bill
to mask its real price tag of the bill and its total impact on the
deficit. All this is being done just so the lower rates on the capital
gains and dividends can be extended for another two years.
Many of those in the majority will argue that the lower rates on
capital gains and dividends are needed to sustain economic growth. It
is hard to prove that these tax cuts are the cause of recent economic
growth. Prior to the enactment of these tax cuts, there were
significant factors in support of an economic recovery. The President's
Council of Economic Advisors was predicting a significant increase in
employment growth starting in 2003 without the enactment of additional
tax cuts. The rationale for cutting the tax on capital gains and
dividends income is that it stimulates investment, but there is no
solid data to support this conclusion. The stock market did much better
during the 1990s when we had a higher tax rate on capital gains than it
has done since the rates were cut in 2003.
Proponents argue that these cuts encourage a great deal of selling by
investors, so much so that they pay for themselves. However, in a
letter to Finance Committee Chairman Grassley, the Congressional Budget
Office found that, ``[I]ncreases might suggest a large behavioral
response to the tax rate cut--except that realizations also increased
by 45 percent in 1996, before the rate cut. Thus changes in
realizations are not necessarily the result of changes in taxes; other
factors matter as well.'' CBO explained that asset values, investor
decisions, and other economic conditions can influence capital gains
realizations just as much.
CBO not only examined the year following the 2003 tax cuts, but they
dug even deeper and did a historical analysis of capital gains cuts.
The CBO experts found that, ``[a]fter examining the historical record,
including that for 2004, we cannot conclude that the unexplained
increase [in realizations] is attributable to the change in the capital
gains tax rates.'' CBO concluded that much of the volatility in capital
gains realizations ``seems unrelated to changes in the capital gains
tax rates.''
However, the majority seems to think that the cutting taxes on
capital gains and dividends is a priority and that debt financed tax
cuts reflects sound economic policy. I disagree and believe that this
bill chooses the wrong priorities. It fails to extend tax breaks that
expired at the end of 2005. The research and development tax credit
that is used to help businesses with innovative and groundbreaking
research expired at the end of 2005.
This bill does not help families with the cost of college tuition.
Due to the deepest cuts in student aid in more than a decade, loans
will increase by an average of $5,800. At the end of 2005, a tax
provision that provides a deduction for college expenses expired. This
bill chooses not to extend this tax cut.
This bill does address the individual alternative minimum tax--AMT--
for 2006, but not for 2007. The conference report reflects the Senate
language that is based on an amendment that I offered with Senator
Wyden. This AMT provision will prevent any new taxpayers from being
impacted by the AMT in 2006 that were not impacted by the AMT in 2005.
It is important that we address the individual AMT, and it can be done
in a way that does not increase the deficit.
The individual AMT was created in 1969 to address the 155 individual
taxpayers with incomes exceeding $200,000 who paid no federal income
tax in 1966. Then, it applied to a tiny minority of households. But it
is rapidly growing from 155 taxpayers in 1969, to 1 million in 1999 to
almost 29 million by 2010. It now affects families with incomes well
below $200,000. By the end of the decade, repealing the AMT will cost
more than repealing the regular income tax.
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.
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. 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.
Each year that we wait to tackle the AMT, more taxpayers are impacted
and the cost of addressing it only 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 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.
Instead of addressing the AMT for next year, this bill chooses to
extend the lower rates for capital gains and

[[Page S4438]]

dividends for 2009 and 2010. This bill ignores the fact that we will
have to address the AMT for 2007. Without Congressional action, the AMT
will impact 23 million taxpayers. To prevent additional taxpayers from
being impacted by the AMT in 2007, the exemption amount will need to be
increased at a cost of $48.3 billion. We need to address the AMT in a
fiscally responsible manner before we extend tax breaks that do not
expire until the end of 2008.
Furthermore, this bill chooses to provide tax breaks to the oil and
gas industry. The Energy Policy Act of 2005 contained $2.6 billion over
10 years in tax breaks for oil and gas companies. Recently, President
Bush said:

Record oil prices and large cash flows also mean that
Congress has got to understand that these energy companies
don't need unnecessary tax breaks like the write-offs of
certain geological and geophysical expenditures, or the use
of taxpayers' money to subsidize energy companies' research
into deep water drilling. I'm looking forward to Congress to
take about $2 billion of these tax breaks out of the budget
over a 10-year period of time. Cash flows are up. Taxpayers
don't need to be paying for certain of these expenses on
behalf of the energy companies.

Not long ago, we heard the top oil executives testify before Congress
that they do not need the tax breaks either.
At a time when the world's largest energy companies are reaping
record-setting profits, this bill chooses to only scale back one of the
new tax breaks for oil companies. Integrated oil companies will still
receive benefit of a provision to expense their geological and
geophysical expenditures. The provision only scales the tax break back
by $189 million. The Senate bill included three provisions that address
the tax breaks of large oil and gas companies, totaling $5 billion.
This bill chooses not to include these provisions. Recently, I
introduced legislation to address tax breaks provided to the oil and
gas companies that would repeal over $28 billion in tax breaks for this
industry.
It is embarrassing that this bill keeps in place tax breaks that are
not needed by this industry while at the same time providing lavish
benefits to oil and gas executives. An executive who makes $400 million
a year does not need tax breaks. Executives rewarded with exorbitant
amounts of stock options will be able to sell their stock and benefit
from the lower tax rate on capital gains. It simply does not makes
sense to provide a $42,000 tax break for millionaires when the average
American family has seen a $1,950 increase in their cost of gas.
During this debate, we have heard that this bill does not provide tax
cuts, that it is just a continuation of tax policy, but it is a
continuation of a reckless tax policy. According to the Tax Policy
Center, 87 percent of the benefits of the conference agreement go to
the 14 percent of households with incomes above $100,000. The top 0.2
percent of households, those earning over a million a year would
receive 22 percent of the benefits of this conference report. Those
earning over $1 million will receive a $42,000 a year tax cut while the
average tax cut for the 20 percent of households in the middle of the
income spectrum would be just $20.
We should not continue a tax policy that helps those who do not need
our help. While American families are struggling with the costs of
health insurance, college education, and gas tax prices, it is not the
time to extend tax cuts that only help a small percentage of elite
taxpayers. Last quarter, the economy grew 4.8 percent, but wages only
grew 0.7 percent. Middle-class families are not feeling confident about
the economy. These families are not experiencing the 4.8 percent growth
of the economy. They are worried about their economic future. They are
living paycheck to paycheck. With the continuing cost of the wars in
Iraq and Afghanistan, it is not the time to extend debt financed tax
cuts. We could have a very different bill before us that would extend
the tax cuts that help families with the cost of the education, address
the AMT for next year, and help businesses with the cost of research.
Instead, we have a continuation of a tax policy that contributed to the
broadening disparity between the rich and the poor.
We are going through this process today, just so one provision in the
bill can be passed--the extension of the dividends and capital gains
cuts. These cuts expire at the end of 2008.
We do not need to make a farce out of the reconciliation process. We
can do better and we should reject this bill and take up a bipartisan
bill that helps all American families.
Mr. LIEBERMAN. Mr. President, I rise in opposition to this tax
reconciliation conference report. It is a financially bizarre
hodgepodge of misplaced priorities, missed opportunities and misguided
economics.
Not only is there nothing in this package that helps average American
families, whose incomes are stagnant, the Republican majority let
programs expire that helped ease the financial burdens of working
families.
Instead, this Republican bill showers tax breaks on the Nation's
wealthiest, who don't need the help, the oil industry, which is
enjoying record profits, and explodes the debt, placing a hidden tax on
our children and grandchildren.
This bill is so bad you look at it and wonder: What were they
thinking?
For instance, under this tax package the oil industry gets tax breaks
worth $5.1 billion, while eliminating tax incentives on hybrid cars,
solar energy panels and other energy conservation measures that would
help lessen our dependence on foreign oil.
What were they thinking?
The capital gains and dividend tax cut extensions overwhelmingly
favor households taking in more than $1 million a year. Middle income
households get a tax savings of about $20 a year, while millionaires
get a break of somewhere between $42,000 and $82,000.
What were they thinking?
I have supported capital gains relief as a way to stimulate
investment, innovation and job creation. But this bill offers that
relief at a time when we're running a massive Federal deficit and does
next to nothing for anybody other than the wealthiest taxpayers.
Look at what's missing from this bill: The State and local sales tax
deduction, the college tuition deduction, the welfare to work tax
credit that encouraged employers to lower welfare roles by creating
jobs; and the research and development tax credit that helped spur the
innovation we need to compete in the global economy.
What were they thinking?
This bill does provide a one-year fix to keep middle-income Americans
from falling into the alternative minimum tax trap. But even that is
not enough. We need to fix the AMT Problem once and for all.
A famed economic thinker named Marx--Groucho not Karl--once said:
``Money frees you from doing things you dislike. Since I dislike doing
nearly everything, money is handy.''
Groucho may have summed up the Republican approach to fiscal policy:
They avoid doing the things they dislike--like facing hard financial
truths and making tough fiscal decisions--and just keep showering money
we don't have on wealthy people and oil companies who don't need it and
then pass the bill off to our children who can't afford it.
At least Groucho was joking about how he spent his own money. We're
stealing our children's. And that's no joke.
Mr. President, we must come to grips with the exploding deficits. We
can't keep cutting taxes, increasing spending and pretend there are no
consequences. There are. And it will be our children who will face the
reckoning. And on that day they will look back at us in anger and cry:
What were they thinking!
I yield the floor.
Mr. BAUCUS. Mr. President, I would like to enter into the Record some
information I just received from the Joint Committee on Taxation. I
asked them to provide me with information on who benefits from the
capital gains and dividends tax cuts.
According to the Joint Committee on Taxation, 84 percent of the
capital gains tax cut goes to individuals earning $200,000 or more. And
also according to the Joint Committee on Taxation, 2 percent goes to
households earning less than $50,000.
Additionally, for the dividends tax cut, 63 percent of the tax
savings goes to individuals with annual income of $200,000 or more. And
only 6 percent goes to taxpayers earning $50,000 and under.
I hope this information will help clarify some of the debate on the
floor today. Again, these numbers are directly from the Joint Committee
on Taxation with no interpretation.

[[Page S4439]]

I ask unanimous consent that this information be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

TABULATION OF CAPITAL GAINS TAXED AT 5% AND 15% RATES, ALL TAXPAYERS--CALENDAR YEAR 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
Capital gains taxed at 5% rate Capital gains taxed at 15% rate Total: Capital gains taxed at 5% or
------------------------------------------------------------------------------ 15% rate
Returns Amounts Tax savings Returns Amounts Tax savings --------------------------------------
Adjusted gross income \1\ ------------------------------------------------------------------------------ Returns Amounts Tax savings
--------------------------------------
Millions $ billions $ billions Millions $ billions $ billions Millions $ billions $ billions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000.................. (\2\) (\3\) (\3\) ........... ........... ........... (\2\) (\3\) (\3\)
$10,000 to $20,000................. 0.7 1.0 (\3\) ........... ........... ........... 0.7 1.0 (\3\)
$20,000 to $30,000................. 0.9 2.0 0.1 ........... ........... ........... 0.9 2.0 0.1
$30,000 to $40,000................. 1.0 2.3 0.1 (\2\) (\3\) (\3\) 1.0 2.3 0.1
$40,000 to $50,000................. 0.7 2.3 0.1 0.3 0.4 (\3\) 1.0 2.7 0.1
$50,000 to $75,000................. 1.6 6.0 0.2 0.8 2.3 0.1 2.4 8.3 0.4
$75,000 to $100,000................ 0.9 5.1 0.2 1.2 4.4 0.2 1.9 9.5 0.4
$100,000 to $200,000............... 0.3 6.1 0.2 2.5 25.4 1.3 2.6 31.6 1.5
$200,000 and over.................. 0.1 4.1 0.1 1.2 262.5 13.3 1.2 266.6 13.5
--------------------------------------------------------------------------------------------------------------------
Total, all taxpayers......... 6.3 28.9 1.0 6.1 295.1 15.0 11.7 324.0 16.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Excludes dependent returns and returns with negative AGI.
\2\ Less than 50,000.
\3\ Less than $50 million.

TABULATION OF QUALIFIED DIVIDENDS TAXED AT 5% AND 15% RATES, ALL TAXPAYERS--CALENDAR YEAR 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualified dividends taxed at 5% rate Qualified dividends taxed at 15% rate Total: Qualified dividends taxed at
------------------------------------------------------------------------------ 4% or 15% rate
Returns Amounts Tax savings Returns Amounts Tax savings --------------------------------------
Adjusted gross income \1\ ------------------------------------------------------------------------------ Returns Amounts TAx savings
--------------------------------------
Millions $ billions $ billions Millions $ billions $ billions Millions $ billions $ billions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000.................. 0.1 (\3\) (\3\) ........... ........... ........... 0.1 (\3\) (\3\)
$10,000 to $20,000................. 1.1 1.1 0.1 ........... ........... ........... 1.1 1.1 0.1
$20,000 to $30,000................. 1.5 1.7 0.1 ........... ........... ........... 1.5 1.7 0.1
$30,000 to $40,000................. 1.7 2.3 0.2 0.1 (\3\) (\3\) 1.8 2.4 0.2
$40,000 to $50,000................. 1.2 1.9 0.2 0.8 0.8 0.1 1.9 2.6 0.2
$50,000 to $75,000................. 2.7 4.0 0.4 1.6 2.8 0.3 4.3 6.8 0.7
$75,000 to $100,000................ 1.3 2.7 0.3 2.4 4.1 0.4 3.5 6.8 0.7
$100,000 to $200,000............... 0.1 1.2 0.1 4.7 15.3 1.7 4.8 16.5 1.8
$200,000 and over.................. (\2\) 0.4 (\3\) 2.2 42.9 6.4 2.2 43.2 6.5
--------------------------------------------------------------------------------------------------------------------
Total, all taxpayers......... 9.7 15.3 1.3 11.9 65.8 8.9 21.1 81.1 10.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Excludes dependent returns and returns with negative AGI.
\2\ Less than 50,000.
\3\ Less than $50 million.

Mr. BAUCUS. Mr. President, I want to talk now about the rules of the
Senate. With this bill, the majority has once again abused the process.
With this bill, the majority has once again shown its disrespect for
the rule of law.
Mr. President, I have served in the Congress for 32 years. I have
served in the Senate for 28 years. I am continually grateful to my
employers, the people of the State of Montana, for giving me this
opportunity.
I was in the Congress in 1975, when the Budget Committee reported the
very first budget resolution. I was in the Senate in the early 1980s,
when the Budget Committee reported its first budget reconciliation
bill. I have seen this process change. And the Majority is changing
this process again today.
Mr. President, this bill comes before us today under the
extraordinary procedures that we call budget reconciliation. This is a
process that bypasses the normal Senate rules.
Under the normal Senate rules, Senators may debate legislation at
length. Under budget reconciliation, this bill is subject to a strict
time limit.
Under the normal Senate rules, and rule XXII, it takes the
affirmative vote of 60 Senators to cut off debate. Under budget
reconciliation, a simple majority will determine the outcome of this
bill.
The Senate chose early on to limit the power to use budget
reconciliation. The Senate saw early on that this power could be
subject to abuse.
Thus, starting in 1985, the Senate adopted the Byrd Rule against
extraneous matter in reconciliation bills. This important rule was
named after the dean of the Senate, the Senior Senator from West
Virginia. The Senate enacted this rule to ensure that the majority did
not abuse the budget reconciliation process to cover extraneous
matters.
From 1985 through 1996, that meant that budget reconciliation bills
could not worsen the deficit. Then, in 1996, the current majority chose
to overturn that understanding of the rule. And in 1996, the current
majority began the process of using reconciliation for legislation that
worsens the Nation's fiscal balance. That choice is at the root of much
of the fiscal debacle that we see today.

But at least one vital part of the Byrd rule remains. One part of the
Byrd rule so explicitly prohibits worsening the deficit that the
majority has not yet been able to write it out of the books. One part
continues to prohibit including in reconciliation provisions that would
cause a committee's entire work product to worsen the deficit in years
beyond those covered by the reconciliation instructions. That part is
section 313(b)(1)(E) of the Congressional Budget Act.
I believe that, today, the majority is taking another step down the
road of abusing the reconciliation process. I believe that today the
majority is willfully ignoring the application of that rule. And I thus
believe that today the majority is once again cheapening the rule of
law.
My complaint lies with the Roth IRA provision that I discussed
earlier. As I noted, that provision will worsen the deficit by
increasing amounts into the future. But because the majority chooses
not to recognize this fact, I am left with no procedural recourse.
I'll try to demonstrate my point through a series of steps.
First, let me take the hypothetical case of a budget reconciliation
bill that contained just the Roth IRA provisions in this bill but
effective in 2006. That is the case for which the Joint Tax Committee
has provided the revenue estimates that I discussed earlier. For the
sake of simplicity, I ask unanimous consent that the Joint Tax
Committee estimates be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Exhibit 1

Congress of the United States,

Joint Committee on Taxation,

Washington, DC, May 9, 2006.

memorandum

[[Page S4440]]

any amount otherwise required to be includible in income as a
result of a conversion that occurs in 2006 may be included in
income in equal installments in 2007 and 2008. Your proposal
would be effective for taxable years beginning after December
31, 2005.
We estimate that your proposal would have the following
effect on Federal fiscal year budget receipts:

Mr. BAUCUS. In summary, it shows a provision that begins with revenue
increases but then shows revenue losses. Specifically, it shows revenue
losses of $1.1 billion in year 5, $1.5 billion in year 6, $1.7 billion
in year 7, $1.9 billion in year 8, $2.1 billion in year 9, and $2.3
billion in year 10.
Now, if this provision were the only provision in a budget
reconciliation bill covering years 2006 through 2010, it would plainly
violate section 313(b)(1)(E) of the Congressional Budget Act because of
its revenue losses in the out years.
This is of course a simplistic analysis. There are other provisions
in the bill before us. The question then arises whether those other
provisions raise more revenue than the Roth IRA provision loses.
My Finance Committee staff have taken the Joint Tax Committee
estimates for these other provisions--all the revenue raisers--and
projected their current rate of growth into the future. The results are
shown in another table, which I ask unanimous consent be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

PROJECT REVENUE EFFECTS OF THE TAX RECONCILIATION BILL
[Estimates by the Finance Committee Democratic Staff]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projections
Raiser # 2011 2012 2013 2014 2015 -----------------------------------------------------------
2016 2017 2018 2019 2020
--------------------------------------------------------------------------------------------------------------------------------------------------------
1................................. 31 33 35 38 41 44 47 50 53 56
2................................. 3 3 3 3 3 3 3 3 3 3
3................................. 10 3 4 6 6 6 6 6 6 6
4................................. 3 3 3 3 3 3 3 3 3 3
5................................. 12 12 15 15 16 17 18 19 20 21
6................................. 44 46 49 52 54 56 58 60 62 64
7................................. 209 224 241 259 279 299 319 339 359 379
8................................. 204 242 260 298 349 400 451 502 553 604
9................................. 6,079 215 220 228 235 242 249 256 263 270
10................................. 2,541 4,929 1,756 (1,080) (1,267) (1,500) (1,700) (1,900) (2,100) (2,300)
11................................. 18 9 5 2 1 .......... .......... .......... .......... ..........
12................................. 24 26 28 29 31 33 35 37 39 41
13................................. 228 234 239 254 268 282 296 310 324 338
14................................. 46 53 62 69 75 81 87 93 99 105
--------------------------------------------------------------------------------------------------------------------
Total........................ 9,452 6,032 2,920 176 94 (34) (128) (222) (316) (410)
--------------------------------------------------------------------------------------------------------------------------------------------------------

Mr. BAUCUS. This analysis shows that the provisions of this bill will
worsen the deficit by $34 million in 2016, $128 million in 2017, $222
million in 2018, $316 million in 2019, and $410 million in 2020.
Now, if the appropriate authorities advised the Chair that the bill
before us had the revenue effects described in this table, and the Roth
IRA provisions caused the deficit to worsen in these by years by the
amounts that I have cited, even when taken together with all the other
provisions in this bill, once again, the Roth IRA provision would
violate the Byrd rule.
Thus, if one does some rather simple arithmetic, one can readily see
that the Roth IRA provisions in this bill would worsen the deficit in
the out years. And doing that rather simple arithmetic would render the
Roth IRA provisions out of order.
The problem is that my staff's estimates, and even the estimates of
the Joint Tax Committee and the Congressional Budget Office, are not
authoritative. Under the Budget Act, the Chair is required to turn to
the Budget Committee for revenue estimates.
The problem is, for whatever reason, the Budget Committee majority
has chosen not to do this rather simple arithmetic. The Budget
Committee majority has chosen not to see the fiscal consequences of
this bill.
It is not as though these fiscal consequences are somehow obscure. It
should come as little surprise that one tax cut will not pay for
another tax cut. But the Budget Committee majority chooses not to see.
It is not as though the Budget Committee cannot look into the future.
The Budget Committee majority has complained of out year costs
involving spending to help the victims of asbestos, for example.
But when it comes to these tax cuts, the Budget Committee majority
chooses not to see.

It is not as though the Budget Committee cannot recognize a budget
gimmick when it sees one. The Budget Committee majority has complained
of shifts from one year to another in the highway bill, for example.
The Roth IRA provision before us today is the mother of all such
shifts. But the Budget Committee majority chooses simply not to see.
Thus, Mr. President, I see this case as another abuse of the process.
I see this case as another instance of disregard for the rules of the
Senate. I see this case as another case of disrespect for the rule of
law.
In 1996, this majority abused the reconciliation process by applying
it to legislation to worsen the deficit. Last year, this majority
abused the Senate rules by threatening to eliminate the right to
extended debate through what folks call ``the nuclear option.'' And
today, this majority adds another chapter to that history of abuse of
power, by simply choosing not to see violations of the rule when they
are there staring us all in the face.
I find it curious that the same majority that cried so loudly about
``the rule of law'' in the impeachment of President Clinton today once
again shows such little respect for the rule of law right here in the
Senate. For this disrespect for the rule of law is not about private
morality. This disrespect for the rule of law is about the exercise of
power.
There is a word for disrespect for the rule of law in the exercise of
power. It is called tyranny.
And that, Mr. President, is another reason to vote against this
conference report.
Mr. President, I must say that I was surprised to see such a
complicated and controversial provision in the conference agreement. I
am referring to the provision to repeal the grandfather clause that was
enacted by the American Jobs Creation Act of 2004, as part of the
repeal of the old FSC/ETI regime. Further, this provision was not in
the Senate or the House bill.
What is most surprising, though, is that it may not have been
necessary in addition to maybe not being prudent.
This provision purports to end a dispute with the European Union over
these long standing tax incentives. But the EU said it was willing to
accept the remaining time on the 2-year transition period, and the
grandfathering of leasing contracts. The only provision

[[Page S4441]]

that the European Union is totally against is the grandfather clause
for sales contracts. The European Union stated as much in a letter just
last week where they said they wanted to work out a negotiated
settlement.
So the question has to be asked: Why does this bill go beyond the
European Union's concessions? In an attempt to increase the revenue
raised by this bill, the bill eliminates binding contract relief for
both lease and sales contracts.
In every step of the way during the last 7 years of this dispute,
Congress has worked closely amongst tax and trade experts and alongside
business to minimize the harm any new regime might entail. But not
here. No hearings, no deliberations, ignoring a concession by the other
side and game over.
It is interesting to reflect on the long history of this provision.
Both the extraterritorial income and the Foreign Sales Corporation, or
FSC, regimes offered exclusions for export income. The Jobs Act
repealed the extraterritorial income exclusion provisions and provided
transition rules to phase out the tax benefits. The Jobs Act also
provided a grandfather clause which allowed certain contracts to
continue to receive the extraterritorial income exclusion.
For the past two decades, the U.S. provided export-related tax
benefits under the foreign sales corporation regime. In early 2000, the
World Trade Organization found that the regime was a prohibited export
subsidy under the relevant WTO agreements. Congress then repealed the
foreign sales corporation provisions and enacted a new regime, the
extraterritorial income regime, or ETI.
From its inception, the European Union has doubted the validity of
this regime. The European Union lodged a complaint with the World Trade
Organization. It argued that the provision was an export subsidy in
violation of World Trade Organization agreements.
The World Trade Organization agreed with the European Union in August
of 2001. An appellate body upheld the finding in January 2002. The
World Trade Organization later ruled that the European Union could
impose $4.03 billion in sanctions on its imports from the United
States. Congress immediately began work to fix the problem. There were
several hearings that lead to a number of bills attempting to either
repeal or modify the exclusion provisions.
The Jobs Act repealed the extraterritorial income regime for
transactions after December 31, 2004. It provided a transition rule
that phased out the tax benefits over a 2-year period. Taxpayers could
retain 100 percent of their exclusion benefits for transactions prior
to 2005, 80 percent for transactions during 2005, and 60 percent for
transactions during 2006. For transactions after 2006, a taxpayer would
not have any income exclusion benefits.
The Jobs Act also provided that a contract in effect prior to
September 17, 2003, would still be awarded exclusion benefits for the
duration of the contract. This is what we call the binding contract
relief. The purpose behind transition rules was to provide a soft
landing to corporations. To give corporations time to adjust to the
change in tax policy.
Prior to September 17, 2003, companies relied on the extraterritorial
income tax benefits when they entered contracts. The binding contract
relief protected U.S. companies where the company might otherwise be
substantially harmed by the loss of the tax benefit. Eliminating the
grandfather clause eliminates certainty for these U.S. companies.
We shouldn't blindly accept a provision that was not part of the
Senate nor the House bill. We shouldn't blindly accept a provision that
repeals a provision that took years to develop. We shouldn't blindly
accept a provision that goes beyond what is required. I urge my
colleagues to vote down this bill.
Mr. President, we have had a very interesting debate today. As I
expected, it was a real battle of statistics and charts.
Again, I would like to thank my good friend, the chairman of the
Finance Committee. I know that Senator Grassley fought hard to defend
the Senate position in the conference committee. And I think the vote
in favor might have been overwhelming if he had been successful in
bringing back that Senate bill rather than the bill we have today.
But I look forward to working with him and battling side-by-side to
deliver that promised second bill. And that brings me back to what I
spoke of this morning: there is a substantial amount of work undone.
Despite $70 billion spent on tax cuts today, there are millions of
teachers, families with kids in college, businesses that want to
conduct important research or hire the hard-to-employ that will not see
one dollar of the benefits handed out today.
It is true that this conference report made tough choices. Those
choices were tough on teachers, tough on families, tough on businesses.
Hopefully, their relief boat will be coming soon.
Until then, though, I will be voting against this bill that made the
wrong choices--putting 2009 tax cuts before 2006 tax cuts, and putting
ideological wants before America's needs.
I hope that the next bill will be a bipartisan product. I am sure if
it is, that it will enjoy broad support in this Senate and across the
country. I look forward to working on that bill.
Mr. President, I want to take a moment to thank the individuals who
worked so hard on this legislation.
First, I thank my good friend Senator Grassley, the chairman of the
Finance Committee, for his leadership on this bill. I also appreciate
the hard work and cooperation of his staff, especially Kolan Davis,
Mark Prater, Dean Zerbe, Elizabeth Paris, Christy Mistr, John O'Neill,
Chris Javens, Cathy Barre, Anne Freeman, Grant Menke, and Nick Wyatt.
Second, I thank the staff of the Joint Committee on Taxation and
Senate legislative counsel for their service.
Finally, I thank my staff for their tireless effort and dedication,
including Russ Sullivan, Bill Dauster, Pat Heck, Melissa Mueller,
Jonathan Selib, Judy Miller, Rebecca Baxter, Ryan Abraham, Carol
Guthrie, and Brianne Rogers.
I also thank our dedicated fellows, Mary Baker, Stuart Sirkin, Thomas
Louthan, Tiffany Smith, Laura Kellams, Caroline Ulbrich, Margaret
Hathaway, and Robin Burgess. I also thank our law clerk, Christal
Edwards.
I thank our hardworking interns Zachary Henderson, Lesley Meeker,
Lauren Shields, Britt Sandler, Jordan Murray, and Andreas Datsopoulos.

Wage Limitation

Mr. BAUCUS. Mr. President, I would like to engage in a brief colloquy
with the distinguished chairman of the Finance Committee, Senator
Grassley, regarding changes to the section 199 wage limitation. The
conference report attempts to better target the application of the wage
limitation by counting only those wages that are ``properly allocable
to domestic production gross receipts.''
This change may have unintended consequences for certain industries.
In some industries, many workers, particularly those with specialized
expertise, provide services as independent contractors or through their
own businesses. In such cases, service payments to these workers are
not treated as wages under the current wage limitation.
When section 199 was first created, some of the impacted industries
requested that we adopt a rule to count these payments for services in
determining the wage limitation. The request was dropped because we
addressed their issue indirectly by allowing them to use a broader wage
base for calculating the limitation. By eliminating this ``headroom,''
we are resurrecting a problem for these industries.
These industries are doing exactly what section 199 was meant to
encourage. They are creating high-quality manufacturing and production
jobs and contributing substantially to our Nation's economy and trade.
I am hopeful that we will reexamine this issue and take the steps
necessary to ensure that these industries are not adversely and unduly
affected.
Mr. GRASSLEY. I appreciate my distinguished colleague from Montana,
Senator Baucus, raising this concern. I can assure him that the changes
made to the section 199 wage limitation were intended to target the
incentive to domestic production activities. If these changes unduly
harm the types of industries he has raised in a way that is
inconsistent with this intent, I would be happy to consider revisiting
this issue in future legislation.

[[Page S4442]]

Mr. BAUCUS. I want to thank the distinguished chairman of the Finance
Committee for this clarification and his willingness to work with me to
address this important problem.
Ms. COLLINS. Mr. President, the Senate is now considering H.R. 4297,
the tax reconciliation conference report. This bill contains several
important tax relief provisions, including relief from the alternative
minimum tax, extended expensing provisions for small businesses, and a
2-year extension of the 15 percent tax rate on dividends and capital
gains. I will be voting for this bill in order to block tax increases
that would be harmful to our economy and to our citizens.
According to the latest data that I have seen, more than 100 million
American taxpayers benefit from the various tax reductions that we have
passed since 2001. In Maine, 100,000 taxpayers have benefited from the
lower capital gains and dividends tax rate, and about 25,500 Maine
taxpayers have benefited from AMT relief.
The 5-year cost of this reconciliation package is just under $70
billion. Of this amount, nearly half--$33.4 billion will go to provide
an additional year of relief from the alternative minimum tax. The AMT
was originally enacted to ensure that all taxpayers, especially high-
income taxpayers, paid at least a minimum amount of Federal taxes. But
the AMT is not indexed for inflation, and because of this flaw, each
year a larger number of middle-income Americans find themselves subject
to this ``stealth tax.'' In fact, without the relief provided in this
bill, the number of taxpayers subject to the AMT will increase to 20
million in 2006, up from just 3 million in 2004.
I believe it is essential to protect middle-income families from the
AMT ``stealth tax.'' I also believe that the 15 percent capital gains
and dividends tax rates have proven their effectiveness and ought to be
extended.
When I voted to support lower capital gains and dividends taxes in
2003, my hope was that this tax policy would help lift our economy out
of recession and restore the healthy growth we need to create good jobs
and opportunity for Americans. Since that tax relief became law, our
economy has grown at nearly 4 percent per year, and over 5 million new
jobs have been created. The unemployment rate has dropped to 4.7
percent--beneath the average of the past three decades.
I am aware of the ongoing debate among economists over whether, and
to what extent, tax cuts can ``pay for themselves.'' Whatever one
thinks of that debate, I cannot help but note how far off the estimated
cost of this tax relief was. The year before this tax relief became
law, the Federal Government received $49 billion in revenues through
the capital gains tax--at the 20 percent rate. The Joint Tax Committee
predicted that reducing the rate to 15 percent would reduce revenues by
$3 billion from 2003 to 2005. But, in fact, capital gains tax revenues
jumped instead--to $71 billion in 2004, and $80 billion last year--all
paid at the lower 15 percent rate.
To me, the vote on this bill is not about settling a debate among
economists. My focus is on finding the right tax policy to help keep
our economy healthy, and growing. It is only with strong economic
growth that our Nation will be able to meet the needs we currently
face--needs that will only become more urgent as our society ages.
Many in this Chamber, and many of my constituents, are concerned
about our growing national debt. I share this concern. That is why I
have been a consistent supporter of the pay-go rules throughout my
tenure in the Senate. But I continue to be struck by the difference
that even a small change in our economy's growth rate can make to the
deficit and to the revenues we need to support critical social
programs. According to the Congressional Budget Office, a change of
just one tenth of 1 percent in the GDP growth rate over a 10-year
period would change revenues by $224 billion and spending by $48
billion, for a total net impact of $272 billion on the deficit.
The actual growth rate we have experienced since 2003 has been higher
by at least two-tenths of 1 percent than CBO predicted before the 15
percent tax rate was enacted. In light of the fact that CBO estimates
that a 0.1 percent change can have a net impact of $272 billion on the
deficit, it is so important to maintain policies that maintain a
healthy growth rate.
For all of these reasons, I will be supporting the tax reconciliation
bill.
Mr. KYL. Mr. President, as one of the three Senate conferees on this
legislation, I want to take a moment to explain why this legislation is
so important to our Nation's continued economic growth.
The centerpiece of this conference agreement is the extension of the
15 percent investment tax rate for 2 more years, through 2010. Under
this rate structure, lower income taxpayers will have dividends and
capital gains taxed at a 5-percent rate through 2007, and in 2008-2010
will have them taxed at a zero rate. Taxpayers who fall above the 15-
percent income tax bracket will have their dividends and capital gains
taxed at a 15-percent rate through 2010. As the lead sponsor of the
Republican leadership bill, S. 7, to make the lower investment rates
permanent, I am pleased we were able to extend these rates to give
investors certainty that they will not face a tax increase in the near
term.
The reason I have worked so hard to extend these lower rates is
because the policy has worked exactly as we intended it when we enacted
the rates in 2003. In 2003, we suggested that by reducing the marginal
rate imposed on investment earnings we would give investors an
incentive to put more of their money at work in the markets. At that
time, following the tech-bubble bursting and the terrorist attacks of
September 11, investors had been very reluctant to put their hard-
earned money at risk in the markets. But by reducing the marginal tax
rate on investment income, the tax penalty imposed on the additional
investment earnings the reward for taking on additional risk is
smaller, and thus 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
more jobs. All of this additional economic activity creates economic
growth.
Critics argue that most of the benefit of the lower rates flows to
the wealthiest taxpayers, but they fail to acknowledge that millions of
low- and middle-income taxpayers receive dividends and capital gains
and will benefit from the lower rates. Research by the Joint Committee
on Taxation and the Finance Committee has found that lower income
taxpayers will save more than higher income taxpayers, when the savings
are measured as a percentage of total tax liability, thanks to the
lower rates, especially the 5 percent and zero rates. The savings are
even more pronounced for seniors. In 2008-2010, seniors with adjusted
gross incomes of $50,000 and under will see their tax liability reduced
by 17.1 percent as a result of the lower tax rates for dividends. In
contrast, seniors with income over $200,000 will see their tax
liability cut by only 5.7 percent. All taxpayers with incomes of
$200,000 and up will see their tax liability reduced by just 2.2
percent as a result of the dividend tax rates.
The sheer numbers of taxpayers who benefit from these policies is
equally impressive. More than 19 million taxpayers claimed dividend
income in 2003 and more than 7 million reported capital gains. More
than 315,000 Arizona taxpayers reported taxable dividends in 2003 and
more than 127,000 Arizona families reported capital gains in 2003. More
than 38 percent of Arizona tax filers who reported dividend income in
2003 had incomes under $50,000; 73.1 percent had incomes under
$100,000. Of those reporting capital gains, 35.1 percent had incomes
under $50,000 and 68.8 percent had incomes under $100,000.
In addition to benefiting millions of taxpayers, the lower rates have
encouraged investment in our growing economy. The economy expanded at a
4.8-percent annual rate in the first quarter of 2006. This follows
economic growth of 3.5 percent in 2005 the fastest rate of any major
industrialized nation. Moreover, the economy has created about 2
million jobs over the past 12 months and more than 5.2 million jobs
since August 2003. The unemployment rate is 4.7 percent--this is lower
than the average of the 1960s, 1970s, 1980s, and 1990s.
Productivity increased at a strong annual rate of 3.2 percent in the
first

[[Page S4443]]

quarter of 2006. Productivity is a key factor to increasing standards
of living. Hourly compensation rose at a 5.7 percent rate in the first
quarter--more than twice as much as in the previous quarter. The
Conference Board index of consumer confidence increased in April to its
highest level in almost 4 years. Industrial production rose at a 4.5-
percent annual rate in the first quarter. The stock market hovers near
its all-time high. Our economy is booming, and it is due in large part
to the tax policies we enacted in 2003.
Another argument we hear about this bill is that we cannot afford it.
I don't think we can afford to not pass this bill. The growing economy
that has resulted from these tax policies has led to a surge of revenue
flowing into the Treasury. According to the Congressional Budget
Office, ``Monthly Budget Review'' released on May 4, 2006, ``the 2006
deficit will be significantly less'' than was predicted, even assuming
enactment of the supplemental and the tax reconciliation agreement.
Revenues for April 2006 were 14 percent higher than revenues for April
2005. Government estimators had predicted that the reduction in capital
gains rates that was enacted in 2003 would cost the Federal Government
$27 billion in lost revenues for 2004, but CBO now reports that the
lower rates actually brought in an additional $26 billion in revenue.
So instead of costing $27 billion, the lower rates actually made $26
billion for the Treasury.
I heard that this morning Ambassador Portman, in his nomination
hearing to be the new Director of the Office of Management and Budget,
told the Budget Committee that revenues flowing into the Federal
Treasury will reach their post-World War II average of about 18 percent
of GDP as early as this year. That means Congress must make the 2001
and 2003 tax cuts permanent just to avoid taking historic amounts of
revenue out of the economy. Clearly, the American people are not
undertaxed.
I want to mention briefly some of the other important provisions of
this reconciliation agreement. It extends the AMT ``patch'' through
2006, thus keeping 15.3 million taxpaying families out of the
alternative minimum tax. I am a cosponsor of Senator Baucus's
legislation to repeal the AMT, S. 1103, and, as chairman of the
Subcommittee on Taxation and IRS Oversight, I held a hearing last year
that looked into the burdens of the AMT.
I am proud that we were also able to address some problems in the
international section of our Tax Code in this agreement. The conference
agreement provides ``look through treatment'' for 3 years for certain
payments between related controlled-foreign corporations. I am the
sponsor of legislation, S. 750, to provide this treatment permanently.
Today's economy is different from the environment that existed when our
foreign tax rules were introduced in the 1960s. Enacting the ``CFC
Look-Through'' provision will simplify business structures for U.S.
multinational companies and make it easier for them to compete with
foreign companies.
The conference agreement also includes an extension of the ``active
financing income'' exception, which I actively sought in the conference
negotiations. I am a cosponsor of legislation to make this exception
permanent, S. 1159. Active financial services income banking income,
leasing transactions and other financial transactions that is earned
overseas has an exception under law that allows deferral until the
funds are repatriated to the U.S. parent, but it expires at the end of
2006. The conference agreement extends the exception through 2008.
The conference agreement extends the current thresholds for small
businesses to expense equipment purchases through 2009. Under current
law the increased thresholds were due to expire after 2007. Expensing
makes it more cost-effective for small business owners to grow their
businesses by purchasing new machines and other equipment; extending
the provision through 2009 enables businesses to better plan for such
investments.
Finally, the conference agreement eliminates the income restrictions
on the ability of taxpayers to convert a regular IRA into a Roth IRA in
2010. Under current law, families with incomes over $100,000 cannot
convert a regular IRA into a Roth. Allowing the conversion will help
families save for retirement because Roth IRAs are made up of aftertax
money, and all appreciation in the accounts is withdrawn tax free. We
ought not double-tax savings, especially when we need to encourage
young people to do more to plan for their own retirements.
I thank Chairman Grassley for being so supportive of my efforts to
extend the investment tax rate for 2 more years and for all of his hard
work as chairman of this conference. Through his efforts we were able
to put together a tax reconciliation agreement that prevents tax
increases on millions of Americans and that will keep our economy
growing strong well into the future.
Mr. GREGG. Mr. President, pursuant to section 313(c) of the
Congressional Budget Act of 1974, I submit for the Record a list of
material in the conference agreement on H.R. 4297 considered to be
extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) of
section 313. The inclusion or exclusion of material on the following
list does not constitute a determination of extraneousness by the
Presiding Officer of the Senate.
To the best of my knowledge, H.R. 4297, the Tax Increase Prevention
and Reconciliation Act of 2005, contains no material considered to be
extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) of
section 313 of the Congressional Budget Act of 1974.
Mr. SMITH. Mr. President, I had first like to thank Chairman Grassley
for all of his hard work and leadership on the tax reconciliation bill.
He represented the Senate well during sometimes difficult negotiations
on this bill. Because Chairman Grassley stuck to his principles, we
have a better bill today.
I am very pleased to vote today for the Tax Increase Prevention and
Reconciliation Act of 2005. Enactment of this bill is beneficial for
all Americans. It will help America sustain its economic strength and
allow all Americans to keep more of their hard earned money in their
own wallets.
One of the key provisions of the tax reconciliation bill extends the
tax cuts on dividends and capital gains through 2010. We've heard a lot
of chatter in the media, and frankly from the other side of the aisle,
that the investment tax cuts only benefit the wealthy. However, that's
simply not the case. The investment tax cuts benefit all Americans--
even those in the lowest income brackets.
Let's just look at the hard facts. Out of the nearly 20 million
Americans who reported taxable dividends in 2003, more than 36 percent
made less than $50,000--and more than 70 percent made less than
$100,000. Similarly, of the 7 million who reported taxable capital
gains, more than one-third were taxpayers with income of less than
$50,000 and two-thirds were taxpayers with income of less than
$100,000.
We find the same trends in my home State of Oregon. Over 60 percent
of Oregon families claiming income from dividends made less than
$75,000--and 20 percent made $30,000 or less. Middle income Oregonians
also benefit from the lower capital gains rate. Almost three-fourths of
Oregonians claiming capital gains income made less than $100,000--and a
fourth had income under $30,000.
Beyond putting money back into Americans' wallets, the recent tax
cuts, including the investment tax cuts, have played a major role in
strengthening our economy--and enactment of the tax reconciliation bill
will assist in continuing this growth. According to virtually every
economic indicator, the U.S. economy is thriving. Our economy grew at a
4.8-percent rate in the first 3 months of 2006, the fastest pace in the
last three years. This follows economic growth of 3.5 percent in 2005,
which was faster than any other major industrialized nation. In
addition, we have an unemployment rate of 4.7 percent, which is below
the average rate for each of the past four decades.
The recent tax cuts also have helped strengthen Oregon's economy.
Although our economy still lags behind the Nation, Oregon's
unemployment rate has fallen to 5.5 percent from 6.2 percent 1 year
ago.
Another important component of this bill is the AMT relief. The
original purpose of the AMT was to ensure that taxpayers with
substantial income could not avoid tax liability by using

[[Page S4444]]

exclusions, deductions and credits. However, because the AMT was never
indexed for inflation, an increasing number of middle-income families
have become subject to the tax. Thanks to this bill about 15 million
middle-income Americans will not be subject to the AMT in 2006.
Finally, I am very pleased that two issues that I have worked on
legislatively were included in the tax reconciliation bill.
First, in line with my bill, the American Veterans Homeownership Act
of 2005, Oregon's qualified veterans' mortgage bond program will be
expanded. Under current law, Oregon can issue tax-exempt bonds, the
proceeds of which can be used to finance mortgage loans to veterans.
However, due to current limitations, veterans of Operation Iraqi
Freedom, Operation Enduring Freedom, Kosovo, Bosnia, Haiti, Somalia and
the 1991 Persian Gulf War are not eligible. The tax reconciliation bill
eliminates this limitation allowing more veterans to take advantage of
these low-cost home loans.
In addition, the tax reconciliation bill extends for 2 years the
increased amount that small businesses may expense. Although this
provision doesn't go as far as my proposal in the Tax Depreciation,
Modernization, and Simplification Act of 2005, which would make small
business expensing permanent, it is a good first step. Small businesses
are the heart of our economy. This important provision encourages
investment by small businesses--and provides administrative
simplification.
I urge all of my colleagues to support this important legislation.
Mr. ALEXANDER. Mr. President, I offer my support for the Tax Increase
Prevention and Reconciliation Act of 2005 conference report, which will
prevent a tax increase on millions of Americans and keep our economy
growing.
This bill could also be called the Job Creation and Economic Growth
Act. In the nearly 3 years since we cut taxes on dividends and capital
gains in 2003, the U.S. economy has experienced significant growth.
We've had 32 straight months of job growth. More than 5.3 million jobs
have been created since August 2003. The Nation's unemployment rate is
4.7 percent--the lowest in nearly 5 years, and lower than the averages
of the last four decades. More Americans are working today than ever
before, and they have more opportunities for better jobs.
Business investment is up. The stock market is up. And construction
spending, home building and household wealth levels are at all-time
highs. These factors illustrate families in Tennessee and across
America are benefiting from the progrowth tax policies initiated by the
President and Congress.
This legislation will continue those pro-growth policies. It includes
an extension of lower rates on dividends and capital gains. More than
425,000 Tennesseans--including seniors and lower-income workers--will
benefit from these lower rates, with an average tax benefit of $989 per
year. More than one third of these Tennesseans are families earning
$50,000 or less. I am glad the Senate is passing this bill to keep
their taxes from going up.
The bill also include a one-year extension of a provision that will
keep the alternative minimum tax, AMT, from hitting nearly 150,000
Tennesseans when they file their taxes for 2006. The AMT was originally
passed to ensure that wealthy Americans paid their fair share of taxes.
Without a change in the law, the number of Americans subject to the AMT
would have jumped from 4 million in 2005 to 19 million in 2006,
eventually growing to nearly 52 million by 2015. So by including AMT
relief in this legislation, we've prevented millions of Americans from
having to pay higher taxes.
This legislation also provides tax relief to our small business
owners by allowing them to continue to expense certain amounts of
equipment they purchase. This gives our small business owners greater
flexibility to buy the necessary items they need to expand and improve
their businesses--which is particularly important in Tennessee, where
97 percent of all businesses are small businesses.
This legislation also includes a provision to help songwriters in
Nashville and throughout the country. Under current law, these
songwriters have to pay a tax rate of 35 percent for any sale of their
music catalogues or collected works. The tax rate on these sales will
now be taxed at the capital gains rate of 15 percent. Now songwriters
who sell their work will be able to treat it the same as the sale of
any other business. Many songwriters earn modest incomes, so this
change will make a big difference in their lives.
The way Congress can keep our economy strong is by keeping taxes low,
exercising fiscal discipline and controlling the growth of Federal
spending. This Tax Increase Prevention and Reconciliation Act of 2005
is an important step in that direction, and I look forward to working
with my colleagues on other measures to promote economic growth and
fiscal responsibility.
Mr. REID. How much time remains on this side?
The PRESIDING OFFICER. Six minutes.
Mr. REID. I thank the Chair.
Mr. President, the headlines glared yesterday from Bloomberg News:
``Republicans Set Aside Middle-Income Tax Cuts to Focus on the Rich.''
Those are not my words. They are the words of Bloomberg News. It is a
headline they chose to describe the Republican tax reconciliation bill,
and it is 100 percent correct: ``Republicans Set Aside Middle-Income
Tax Cuts to Focus on the Rich.''
This bill is a big gift to the wealthiest of the wealthy and an even
bigger burden to future generations of Americans. It was bad
legislation when it left the Senate, and it is a lot worse now that it
has returned. To think, with gas prices still on the rise--the average
price in Nevada is about $3.08 a gallon--46 million Americans with no
health insurance, students literally worrying about whether their
parents can afford to send them to college, with the debt at $8.2
trillion, the majority has sent us a bill that does nothing to help any
of the people about whom I spoke. In fact, for many Americans, it makes
life far worse by presenting them with a tax increase. The choices the
Republicans made in producing this legislation are very revealing.
Remember the headline: ``Republicans Set Aside Middle-Income Tax Cuts
to Focus on the Rich.''
Three bad choices were made in this bill. They chose millionaires and
billionaires over the middle class. For 5 years, the Republican
majority has handed out billions of dollars in tax breaks and perks to
the wealthy elite at the expense of everyone else.
This bill is no different. It extends $21 billion in tax breaks for
capital gains and dividends over the next 5 years, a tax break that
overwhelmingly benefits the wealthy. It ignores provisions that could
have helped families in Nevada and all across the country today. For
example, the sales tax deduction, some States pay a lot of sales tax.
This was not extended, even though it provides tax fairness for
taxpayers in nonincome tax States. This provision, the sales tax
deduction, expired. Why would a State such as Nevada that has no income
tax be penalized? Because the majority wanted the wealthiest of the
wealthy to get a tax break.
The tuition deduction was not extended, even though it helps families
pay for the high cost of college and the provision expired at the end
of last year. During the 5 years that George Bush has been President,
college tuition costs have gone up over 30 percent.
Something simple, the teacher school supply deduction, not a lot of
money but what a symbol. Teachers in Nevada and around the country pay
out of their own pockets for supplies that the school district can't
afford to give them. This little deduction helped thousands and
thousands of teachers with a deduction for the school supplies they
paid for themselves out of their own pockets. It is not in here because
it may take a little bit away from the billionaires. Remember the
headline from Bloomberg News: ``Republicans Set Aside Middle-Income Tax
Cuts to Focus on the Rich.''
What is in this bill are tax breaks on capital gains and dividends.
An analysis in yesterday's New York Times shows how unfair these tax
cuts are. According to the newspaper, the 2003 tax cut for those with
$10 million or more of income was one half of $1 million--$500,000. For
those with a meager income of $1 million a year, the average tax cut
was $41,400. In contrast, the

[[Page S4445]]

average capital gains and dividends tax cut for those whose income was
up to $50,000 was $10. So if you make more than $10 million, you get
half a million; $1 million, $40,000 plus; anything less than that, 10
bucks. That says it all about this tax reconciliation.
Choice No. 2: Republicans wrongly ignore America's fiscal security. I
always thought the Republicans were the party of fiscal integrity. That
has been blown sky high as being a false impression. On the same day a
month or so ago, we passed a bill increasing the deficit by billions
and billions of dollars, and on the same day, we increased the debt
ceiling up to $9 trillion. But that is not enough. We understand the
House is bringing one over here that increases the debt ceiling to more
than $10 trillion.
Given all the rhetoric from the other side in recent weeks about the
need to get the Federal Government's fiscal house in order, you would
think our Republican friends would come forward with a fiscally
responsible bill. I heard one Republican Senator say: We had the budget
bill and Democrats offered amendments to increase spending.
I will now use leader time.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Any amendment we offered to increase spending, we had some
unique thing in this modern Republican world. What was so unique? We
had an offset for it. We found savings someplace else in this massive
budget to pay for what we wanted. Remember, during the last 3 years
Bill Clinton was President, we spent less money than we brought in. We
brought down the national debt by a half a trillion dollars. But not
this Republican Congress and this Republican President. Now it is red
ink as far as one can see.
Instead of real fiscal discipline, all the majority has given us is
gimmicks that actually make the problem worse. They purport to offset
the cost of the tax cuts for capital gains and dividends. But as
reported in the Washington Post yesterday, these offsets are nothing
but cheap tricks.

One measure would allow upper income savers with a
traditional individual retirement account to pay taxes on the
account's investment gains and then roll over some of the
balance into a Roth IRA, where the money can be withdrawn
tax-free upon retirement. The provision would raise about
$6.4 billion over 10 years, seemingly keeping the size of the
tax-cutting package down. But over the next 35 years, it
would cost the [federal] government $36 billion, according to
the Urban Institute.

Think about that. A gimmick to let people think that this was a good
thing for the American people because it was raising revenue. It was
only about $30 billion short. It is a shell game, and it is a wrong
choice for America.
Choice 3: This bill, if you can imagine, is still lavishing tax
breaks on the oil companies. As we speak, ExxonMobil--we know they made
$34 billion, which is the most any company has ever made in history--as
we speak, ExxonMobil has $34 billion in cash. We are giving them more
tax breaks? We have these oil companies, as my friend from Oregon said,
which are marinating in oil. They cannot make enough money because
there is no way they can make enough. But they made $34 billion last
year, and that is the most money made in the history of our Republic.
On the other hand, we have middle-class families who have paid for
these profits and they are sick and tired of being squeezed at the gas
pump.
Who did the Bush Republicans choose? Big oil companies. Their big oil
friends. This is the most oil-friendly administration in the history of
our country. President Bush had an oil company. Vice President Cheney
worked for an oil company. The Secretary of State was on the board of
directors of Chevron. They liked her so much they named a tanker after
her. Secretary of Commerce Evans? Oil.
This reconciliation bill kept in place billions of giveaways for big
oil, even though the industry is doing well enough to send a CEO into
retirement--and there is a dispute as to how much he made when he
retired, whether it is $400 million or $670 million. It was a lot of
money.
Once again, this is the wrong choice for America. I oppose this bill.
It caters to an elite group of wealthy Americans at the expense of the
middle class, those with the greatest needs, and future generations. We
need a new direction. This legislation won't do it.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. FRIST. Mr. President, I will be brief, and we will be voting
shortly. We know that keeping taxes low spurs economic growth and that
results in the creation of jobs. Twice in the last 4 years, this
Congress passed major tax relief bills. Together these laws have cut
taxes for nearly 100 million Americans, spurred a period of energetic
economic growth, improved our overall budgetary climate, and it has
encouraged businesses to invest in their future. When you put all that
together, it has created jobs.
Indeed, since the 2003 tax relief progrowth package, our economy has
added 5.3 million new jobs. We have seen unemployment rates fall down
to record lows, where today it is remarkable that it is lower than the
average of the 1970s and the 1980s and the average of the 1990s, at 4.7
percent. We have enjoyed 18 consecutive quarters of robust growth.
You know, those are the statistics, and that is what we see, what is
reported. What really results is that individual lives and families are
leading more productive lives, with a higher quality of life. The
creation of jobs affects families.
The centerpiece of that 2003 bill was the reduced tax rate on capital
gains and dividends. It did other things, but that was the heart of the
bill. As we argued then, and what history as clearly shown, is that
keeping taxes low promotes tax revenue, what comes into our Government.
In January, the Congressional Budget Office found that the tax cuts
on capital gains and dividends resulted in the Government collecting an
additional $26 billion in revenue in 2004 and 2005. This year, revenues
will be 29 percent higher than they were in 2003. In fact, the Treasury
Department just reported yesterday that this year's tax revenues were
the second highest in American history, giving the country a sizable
surplus for the month.
Mr. President, we hear about who is advantaged by this particular
piece of legislation. A majority of households now own stock. A lot of
people may question that. The matter is that the majority of households
in this country own stock. Almost half of all income tax returns that
report capital gains on dividends--the returns that were reported--came
from households that have an adjusted gross income of less than
$50,000. Of all of the tax returns that report capital gains on
dividends, over half of those are reported from households making less
than $50,000. It is hard to argue that cutting capital gains taxes
benefits only the rich.
Chairman Grassley, Senator Kyl, Congressman Thomas, and all who have
participated in this bill, have delivered for the American people and
have participated in a progrowth policy legislative agenda that will
create jobs. The provisions will continue to strengthen our economy,
which is growing, and help provide a stable and inviting environment
for small businesses to continue to grow and invest and create jobs.
Keeping these taxes low helps Americans find and create those jobs
that we know improve the quality of life for all Americans. Keeping
taxes low helps Americans support families and makes America a great
place to do business. We will keep taxes low so that we can keep this
great country of ours strong and growing.
Last night, the House voted to pass the tax reconciliation conference
report and send it to the Senate for action.
I want to applaud the House and Senate conferees for working hard to
maintain the 2003 tax cuts that have boosted the economy and grown
jobs.
Here on the Senate floor, the Republican majority will work hard to
keep up the momentum and resist efforts to raise America's taxes.
I expect that some on the other side will continue to oppose low
taxes. They've supported billions of dollars of new taxes since they
lost control of the Senate in 2002. Rarely have they met a tax hike
they don't like. But we can't let their anti-growth plans win the day.
If they get their way, nearly 7.5 million families and individuals
will see their capital gains taxes go up. Twenty million will see taxes
on their stock dividends rise, as well.

[[Page S4446]]

In my home State of Tennessee nearly 150,000 families and individuals
will see their taxes increase if the current alternative minimum tax
relief expires this year.
More than 425,000 families and individuals will see their dividend
tax rates rise from as little as 0 percent to as much as 35 percent
after 2008. Of these taxpayers, roughly 135,000 low-income taxpayers,
many of them senior citizens, reported dividend income in 2003.
When it comes to capital gains, nearly 325,000 families and
individuals will see their capital-gains tax rates increase from as
little as 0 percent to 20 percent after 2008. Of these taxpayers, more
than 100,000 low-income individuals, including retirees, reported
capital gains in 2003.
The other side says only the rich benefit from tax cuts. But as the
taxpayers in my home State demonstrate, the 2003 tax cuts benefited
hard working families across the income scale.
Opposing the 2003 tax cuts will hurt these families and hurts
America's economic strength.
I urge the minority leader to reject obstructionism and allow swift
passage of this legislation.
Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second.
Mr. FRIST. Mr. President, I yield back all time on our side.
The PRESIDING OFFICER. All time having been yielded back, the
question is on agreeing to the conference report to accompany H.R.
4297.
The yeas and nays have been ordered. The clerk will call the roll.
The legislative clerk called the roll.
Mr. McCONNELL. The following Senator was necessarily absent: the
Senator from Pennsylvania (Mr. Specter).
Mr. DURBIN. I announce that the Senator from West Virginia (Mr.
Rockefeller) is necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 54, nays 44, as follows:

[Rollcall Vote No. 118 Leg.]

YEAS--54

Alexander
Allard
Allen
Bennett
Bond
Brownback
Bunning
Burns
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
McCain
McConnell
Murkowski
Nelson (FL)
Nelson (NE)
Pryor
Roberts
Santorum
Sessions
Shelby
Smith
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Warner

NAYS--44

Akaka
Baucus
Bayh
Biden
Bingaman
Boxer
Byrd
Cantwell
Carper
Chafee
Clinton
Conrad
Dayton
Dodd
Dorgan
Durbin
Feingold
Feinstein
Harkin
Inouye
Jeffords
Johnson
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Menendez
Mikulski
Murray
Obama
Reed
Reid
Salazar
Sarbanes
Schumer
Snowe
Stabenow
Voinovich
Wyden

NOT VOTING--2

Rockefeller
Specter

The conference report was agreed to.
Mr. LOTT. Mr. President, I move to reconsider the vote.
Mr. McCONNELL. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. AKAKA. Mr. President, too many in our country are uninsured or
unable to afford health care. For those with coverage, costs continue
to rise as insurance premiums and copayment increases make it more
difficult to continue to access health care. We must take steps to
increase health insurance coverage and expand access to affordable
health care, but we must not do so in a manner which will undermine
existing coverage and leave consumers without adequate protections and
benefit mandates.
I appreciate the efforts of my colleague from Wyoming, Senator Enzi,
to expand access to employees through his bill, S. 1955, the Health
Insurance Marketplace Modernization and Affordability Act. However, the
preemption of State laws will have negative impacts on consumers.
Existing State benefit requirements ensure consumers are protected
against the cost of illness and provided coverage to preventive
services at earlier stages for the better likelihood of favorable
treatment. AARP, the American Diabetes Association, and the American
Cancer Society, a sample of the many health care related organizations
opposed to the legislation, believe that the bill ``could remove
critical consumer protections pertaining to rating and benefits as well
as reduce broad access to the services necessary to continue producing
better outcomes for those with cancer, diabetes, and other chronic
illnesses.''
Health care organizations are not alone in their opposition to this
legislation. Attorney generals across the country, including Attorney
General Mark Bennett in Hawaii, are opposed to S. 1955 because it would
cause health insurance consumers to lose important state protections.
We must act to make health care more affordable. An alternative to S.
1955 is S. 2510, the Small Employers Health Benefits Program Act. This
legislation would help improve access to insurance without bypassing
State consumer protections. The legislation would also provide a tax
credit to make health coverage more affordable.
In addition, we need to enact reforms to ensure generic competition
for name brand prescription drugs. The legitimate patent protection
period needs to be respected, but we need to make sure that generic
prescription drugs get to market in a timely manner and that name brand
drug companies cannot simply pay generic drug companies to not make a
drug. Greater use of generic drugs will help slow the increase in
health care costs without reducing access.
Unfortunately, the majority in the current Congress have made it more
difficult to access health care. For example, the Deficit Reduction Act
contained a provision which will require individuals applying or
reapplying for Medicaid to verify their citizenship through additional
documentation requirements. For most native-born citizens, these new
requirements will most likely mean that they will have to show a U.S.
passport or birth certificate. These requirements will create barriers
to health care, are unnecessary, and will be an administrative
nightmare to implement.
One in 12 U.S. born adults, who earn incomes of less than $25,000,
report they do not have a U.S. passport or birth certificate in their
possession. Also, more than 10 percent of U.S.-born parents, with
incomes below $25,000, do not have a birth certificate or passport for
at least one of their children. An estimated 3.2 to 4.6 million U.S.-
born citizens may have their Medicaid coverage threatened simply
because they do not have a passport or birth certificate readily
available. Many others will also have difficulty in securing these
documents, such as Native Americans born in home settings, Hurricane
Katrina survivors, and homeless individuals.
Having to acquire a birth certificate or a passport before seeking
treatment will create an additional barrier to care. Some beneficiaries
may not be able to afford the financial cost or time investment
associated with obtaining a birth certificate or passport. The costs
vary by State and can be as much as $23 to get a birth certificate or
$97 for a passport. Taking the time and obtaining the necessary
transportation to acquire the birth certificate or a passport,
particularly in rural areas where public transportation may not exist,
creates a hardship for Medicaid beneficiaries.
Further compounding the hardship is the failure to provide an
exemption from the new requirements for individuals suffering from
mental or physical disabilities. Those suffering from diseases such as
Alzheimer's may lose their Medicaid coverage because they may not have
or be able to easily obtain a passport or birth certificate.
It is likely these documentation requirements will prevent
beneficiaries who are otherwise eligible for Medicaid to enroll in the
program. This will result in more uninsured Americans, an increased
burden on our health care providers, and the delay of treatment for
needed health care.
I have introduced legislation, S. 2305, to repeal the additional
documentation requirements to ensure that Medicaid

[[Page S4447]]

beneficiaries are not unfairly denied access to care by these
burdensome and unneeded requirements. I had hoped that I would be able
to offer my bill as an amendment to the pending legislation. However,
the majority has taken action that will prevent this from occurring on
S. 1955.
We also need to improve and simplify the Medicare prescription drug
benefit so that all seniors are able to obtain all of the medications
that they need. We must correct the mistakes of the Medicare
Prescription Drug, Improvement, and Modernization Act and fulfill the
promise to seniors that the Federal Government will help beneficiaries
get the drugs they need. We also need to extend the deadline so that
seniors are not unfairly penalized if they need more time to figure out
which plan is right for them.
Another important Medicare issue are provider reimbursements. Rising
costs, difficulty in recruiting and retaining staff members, and
declining reimbursement rates make it necessary to make improvements in
Medicare reimbursements to ensure that Medicare beneficiaries have
access to health care services. We must increase Medicare
reimbursements for service providers so that they can continue to
afford to treat Medicare beneficiaries.
Another issue that should be addressed during Health Care Week is
stem cell legislation. I am a proud cosponsor of S. 471, introduced by
Senators Specter and Harkin, which would authorize Federal funding for
research on stem cells derived from embryos donated from in vitro
fertilization. Unless this legislation is enacted, these embryos will
likely be destroyed if they are not donated for research. This bill
also would institute strong ethical guidelines for this research. The
House companion measure is pending consideration in the Senate. We must
pass this bill so that researchers may move forward on ethical,
federally funded research projects that develop better treatments for
those suffering from diseases such as diabetes and Parkinson's.
Mr. President, I am afraid that this will be a Health Week only in
terms of rhetoric because we are not able to offer amendments to
address the pressing health needs of this country. Instead of working
together to find common solutions to better meet the health care needs
of our country, the majority party has simply offered up legislation
that is flawed and refuses to work with us in a meaningful way on this
issue.

____________________