[Congressional Record Volume 153, Number 12 (Monday, January 22, 2007)]
[House]
[Pages H826-H832]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
DEMOCRATS MUST ACT TO AVOID TAX INCREASES
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 18, 2007, the gentleman from Pennsylvania (Mr. Shuster) is
recognized for 60 minutes as the designee of the minority leader.
Mr. SHUSTER. Mr. Speaker, I rise tonight, as I have for the past
couple of weeks, to remind the American people that if this Congress
does not act over the next 2, over the next 4 years, in just 1,440 days
there will be a tax increase in this country. It is going to happen as
I said over the next 4 years if the Democrats do not extend the tax
cuts that the Republicans have put in place over the last several
years.
It is going to amount to about $200 billion that the American people
will pay more in taxes. And I appreciate my colleagues from the Blue
Dog Democrat Coalition coming down to the House floor and talking about
fiscal responsibility. They talk about the budget. But I hear very
little about taxes and keeping taxes low on the American people.
And one of the Blue Dogs mentioned in his remarks that he believes in
smaller and efficient government and that we have to make tough
choices. And that is true. We have to make very tough choices. But it
is not our money.
We need to make sure that one of the decisions is to not raise the
taxes on the American people, because when we were here in the final
hours of the Democrats' 100 hours, on that Friday morning, right after
they finished the 100 hours, we were in session for all of about 45
minutes, from 10 to 11 a.m. and most Americans did not see that 45
minutes.
So that is why I think it is important that I come to the floor and
remind the American people what this Congress is doing and what we have
done in the last couple of weeks or the 100 hours that the Democrats
ran their six bills. And I have a number, 1,440. That is again January
1, 2011, when our taxes will finally get up to that $200 billion tax
increase if we do not act. All the Democrats have to do is run the
clock out, they do not have to pass legislation, and those tax cuts
that we put in place that have benefited this economy so greatly will
expire.
There is another number that you can put up, and that is how many
days since the Democrats' last tax increase. And it has been just 4
days. Now, little did I know and little did I think that it would take
only 14 days of the Democrats being in the majority party in Congress,
they worked for 13 years to win back the majority, and in 14 days the
first tax increase passed this House and is going to move on to the
Senate. I hope the Senate does not pass it.
Because that is a tax increase on the American people. Now, the
Democrats say that it is the oil company, the big oil companies that
are going to receive this increase in taxes. And that is true. The big
oil companies will pay about $6.5 billion of taxes over the next
several years. But the reality is, corporations and businesses do not
pay taxes in this country; consumers pay it. The tax increase will be
passed along. And it will be passed along in the form of higher energy
costs.
We will pay more at the pump when we go to fill our cars up. Oil
companies, they will have a competitive disadvantage. They will have to
pay more when they go out to explore for oil. It will be the Venezuelan
oil company, Citgo, or it will be the Iranian or some other foreign oil
company that is going to be in a better position to be able to spend
money to find oil, to sell it to the American economy, sell it to
America, less expensive than our own domestic energy producers.
Ladies and gentlemen, I just think if you are watching tonight that
is not the right thing to do, especially in this time of high energy
costs. We have got to make it more cost efficient, give our companies a
better footing to compete, not only in energy but in manufacturing. And
raising taxes on business is the wrong thing to do.
And as I said, it has only taken the Democrats 14 days until this
first tax increase has come down the road and has passed this House of
Representatives. And that should not surprise anybody in America,
because during the campaign, the new chairman of the Ways and Means
Committee, the Representative from New York, he told the Bloomberg News
that he cannot think of one tax cut passed under President Bush that
merits renewal.
There is no question about it, he said, everything has to be on the
table. And what we have seen already is a tax increase just 4 days ago.
And as I said, I believe that is going to trickle down into the
American public, and they will be paying that through higher energy
costs, higher fuel costs.
As I said, it is important that I think the American people, if you
are watching this evening, are reminded that you are getting exactly
what the Democrats said during the election. They said that they would
raise your taxes. Once again, I hear the Blue Dogs come down here
night after night talking about fiscal responsibility. I do not hear
them, though, talking about taxes, making sure they keep the taxes low
on the American people.
I do not hear them talking about the biggest spending programs that
our government has, and that is Social Security, Medicare, Medicaid.
How are we going to improve and strengthen, reform those important
programs important to the American citizens, important to our seniors
in this country?
So those are things that I do not hear them talking about. I am very
interested to see what the Blue Dog Democrats will propose when it
comes to the budget. We will come into budget season here I believe in
March. And I know that when the Republicans were in the majority, the
Blue Dogs offered a budget every time. There was a Democrat budget,
there was a Blue Dog budget, and there was the Republican budget. So I
am very, very interested in seeing what the Blue Dogs propose if in
fact they are even allowed to propose a budget, because I think it will
be different than their elected leadership will put on this floor.
But back to the tax cuts and what it means to the American people.
Over the last 4 years we have seen 7.2 million jobs created in this
country from those tax cuts. Our economy is creating jobs month after
month. Just in December 167,000 jobs were created in this country. The
unemployment rate is down to 4.5 percent. It is the lowest average it
has been in four decades. That is directly attributable to the tax cuts
we have put in place over the last several years.
Now, if we do not extend them, if we do not do the responsible thing,
the American taxpayers are going to be penalized for their hard work by
us taking money out of their pockets. When you look at a family of four
that earns over $40,000, if we allow the child tax credit and the
marriage penalty to expire, they will pay about $2,000 more that will
come out of their pockets.
That is money that they could use to save for college, to pay for
health care insurance, to buy a new washer and dryer, or put a down
payment on a new car. That is their money. They should be able to spend
that money as they see fit. And the way to do that is to keep the tax
rates low so that they can continue to determine how to use that money
best.
Small business owners, same situation. If we allow some of these tax
cuts to increase, our small businesses in this country will be hurt.
And I hope the Democrats take a lesson from history. President Kennedy,
back in 1960, did just that. He cut taxes. And when he cut taxes,
revenues to the Federal Treasury rose as they have today.
Ronald Reagan did it in 1980. He had to fight a Democratic majority,
but finally was able to cut taxes. And what happened was the economy
grew, one of the greatest expansions of our economy in history, and
revenues to the Federal
[[Page H827]]
Government grew as well. That is the same thing we did in 2001 and
2003, cut taxes, the economy rebounded, it was coming out of a
recession, coming out of the terrible attack of 9/11, and now our
economy is growing very strong. And we do not want to turn that back.
I do not think the Americans, although they did vote in many part of
this country for a change, they did not vote to change to slow this
economy down. They did not vote to increase taxes. I know that none of
my constituents is coming up to me and saying we voted for a change,
increase our taxes. That is not what they voted for.
I think it is very important that we in Congress have a very clear
voice talking about the need to maintain these tax cuts that as I said
we put in place in 2001 and 2003.
I see I am joined tonight by my colleague from Kentucky, a former
Army Ranger and a great Kentuckian and also a small business owner who
has six kids. So he knows the effects of when you are running a small
business how important it is to have a low tax rate so that you can
invest back in your business, and also with six children the importance
of having money to be able to raise your children and save for their
college and make sure that they have a better tomorrow than we have
today.
So with that I yield to the gentleman from Kentucky (Mr. Davis).
{time} 2145
Mr. DAVIS of Kentucky. Mr. Speaker, I thank the gentleman from
Pennsylvania. One of the things I do want to share is I appreciate his
leadership on this critical issue that often gets lost in much of the
noise that we hear in politics of the moment.
As you and I have shared before, what happened on election day,
unbeknownst to the vast majority of Americans, is that with the change
in majority, every working family in the United States of America voted
themselves, or what was voted for was a tax increase of over $2,000 a
year for families making between $30,000 and $50,000 a year.
We have been in the business world and worked out there creating
jobs, and we understand the issues relating to health care. In fact,
when we look at the bigger picture from the standpoint of job creation,
I think about my oldest daughter who is in her third year of college
and has started her practicum now as an education major. She is working
2 days a week in a local high school in our home county teaching. Where
is the revenue going to come from to pay for her health insurance, to
provide for her future as she teaches students in the generation coming
behind? Ultimately, it is going to be job creation and economic growth
that comes from policies that will stimulate that and focus on making
our economy more competitive for the long term.
One of the things that I think you have emphasized is that the
government is the best steward of money. The American people should be
able to keep more of their own money, and we have proven time and time
again, by allowing people to keep more of their own money and creating
taxpayers instead of raising taxes, we actually get more revenue into
the Federal Government.
One of the things I would like to read into the record tonight which
is very important for some of these policy discussions was an editorial
in the Wall Street Journal regarding surging revenues, and I think it
is important to note when we create taxpayers and don't raise taxes,
government will have the revenue that is necessary to function. There
is a fundamental world view difference between the parties on the role
of government. Liberal Democrats believe the government needs to be
paternalistic in telling us how to run our lives to make these
decisions.
The reality is that by allowing people to keep more of their own
money, which is a bedrock Republican principle, we will make sure that
people can make the decision on the spot, they understand the impact of
that.
I look back at the time when I started my business. I look back on
the decisions we had to make, and we understood everything in terms of
the cost that we had, the obligations that we had to our employees, the
commitments that we made to each other to keep that money, moving
forward to keep us employed to strengthen the business. At the same
time, that was when President Clinton in 1993, our first full year in
business, allowed us to make an investment in the government that
dramatically increased the taxes not for me and the company, but for
every member of our team. I think about all of those literally hundreds
of thousands of dollars over the following decade. Had those been
allowed to stay there, that would not have been simply revenue that the
government lost, it would have been more employees, more people who
would have been out there generating revenue and creating jobs and
helping to keep our economy strong.
This editorial that appeared in the Wall Street Journal on January 17
highlights this and talks about the surging of revenues. What we need
to do from the standpoint of Congress is to empower people, not to
constrain them.
It says, ``The myth persists in some media circles that the Federal
budget deficiency is surging or ballooning or something terrible, all
of which is served up as ammunition for those in Congress who want a
tax increase.''
As an aside, I make a parenthetical statement and say we are now a
little over 1,400 days away from a very, very large tax increase that
will happen unless Congress takes action.
``At the risk of being drummed out of the guild, we thought you'd
rather have the real story.
``The deficit has in fact declined by some $165 billion over the last
2 fiscal years, and according to the most recent data has continued to
fall in the first quarter of fiscal 2007. The latest Treasury estimates
for January show that tax receipts in December were $18 billion higher
than a year earlier, helping to boost the budget surplus for the month
to $40 billion, up from $11 billion a year ago. December is typically a
good month for revenues due to year-end tax payments.
``Meanwhile, for the first 3 months of fiscal 2007 through December,
revenues climbed 8.1 percent, building on double-digit revenue
increases in the previous 2 years. Corporate income taxes were up a
remarkable 22.2 percent in the first fiscal quarter, showing that the
government continues to grab a nice chunk of rising business profits
that so many of our politicians like to deplore. Individual income
taxes rose 8.8 percent, thanks to strong wage and salary growth. Much
of this revenue comes from `the rich,' believe it or not.
``In the most surprising budget news, Federal spending was nearly
flat in the first fiscal quarter. This was despite a 22.1 percent
increase in Medicare spending due largely to the new prescription drug
benefit, and a 10.7 percent increase in defense spending. Those
increases were offset by lower spending for flood insurance and
disaster assistance compared with the peaks of post-Katrina payments a
year ago. So the first quarter deficit was $85 billion, down sharply
from $119 billion a year earlier.
``All in all, despite huge outlays for wars in Iraq and Afghanistan,
the Nation's fiscal picture is brightening. We hate to ruin the press
corps's day with such cheerful news, but there it is.''
That article shows clearly this contrast between the perception that
is created with the politics of fear, the politics of class warfare,
and what I would like to call the politics of reality and truth. The
one thing that we need to remember is the ultimate key to the economic
success to our children and their children in the future is not going
to be big government, it is not going to be large solutions and
increases in taxes, taking away that extra benefit that working
families have, but it is going to be allowing them to keep more of
their own money.
I think it is critical that we do this. It is critical to funding
many of the programs that we do, be it defense, be it education,
ultimately comes from somebody who has a job who is not a government
employee, somebody out there in the economy creating a job to make that
difference and provide that revenue by adding that value that funds all
of the critical infrastructure.
Our goal must be to create taxpayers, not raise new taxes. And I
think the one thing that we see, and it is one thing that I appreciate
my colleague from Pennsylvania taking great leadership on this issue,
is to shine a light of truth onto the fact that the Democrats are going
to raise taxes. They are committed to that. We are a little over 1,400
days away from that taking place
[[Page H828]]
if Congress does not act, and it is critical that we act to preserve
this one thing that has generated so much revenue for the government
that allows us to bring the deficit down and control spending and
ultimately provide a future for our children.
Mr. SHUSTER. I would just remind the gentleman, it has only been 4
days since the Democrats raised taxes because of their repeal of
section 199 for oil and gas which was enacted in 2004 to help
manufacturing companies. It took them 13 years to win the majority, and
in only 14 days they raised taxes.
What you are talking about in that article, this is what is going to
happen. It is wrong for us to raise taxes, those tax increases that
they put in place just 4 days ago, placed squarely on the domestic
energy production which will encourage companies to move jobs overseas.
When you raise taxes, when you raise the regulatory burden, that is
what companies do, they want to go someplace where they can make a
profit. And they are going to encourage the domestic energy industry,
which employs 1.8 million Americans who have an average salary of $30
an hour with great benefits, this is going to cause these companies to
look to go offshore to produce their product, in this case energy.
Shifting the energy industry and facilities overseas will make
America more dependent on foreign oil, not less, as the Democrats
claim. So the refining of fuels and, again, exploration is going to
occur off the coast of America and not on the coast of America, driving
jobs out of this country.
The higher taxes on the oil companies will hurt retirement security
because as I have found out in some of the research we have done, 41
percent of the shares of oil and gas companies are in retirement
accounts and pension funds. So when Democrats are helping to drive
their profits down to make less money to drive them offshore, it is
going to hurt those folks who are retired today. Again, 41 percent of
the shares of oil and gas companies are owned by pension funds and
retirement funds. Once again, this is a wrong-headed plan. It only took
them 14 days.
I see the CPA from Texas joins us to remind me of that. It is only 4
days since the Democrats last raised taxes, and we see it is going to
come. We talked the past couple of weeks about how they made it easier
to raise taxes with the PAYGO rules going from three-fifths majority to
a simple majority to raise taxes.
Now the Speaker and her party want to give the vote to the American
Samoa here in Congress. They want Guam and the Virgin Islands, they are
territories of the United States and wonderful people, but they don't
pay taxes. They are going to allow them to vote, so these folks that
don't pay taxes are going to have the ability to raise taxes on
Americans.
American Samoa has a population of 60,000, which is 91 percent of the
average congressional district. My district is 650,000. The delegate
from the American Samoa is going to have the ability to vote to raise
taxes.
Mr. DAVIS of Kentucky. And I would add one point on that. We have 10
times that number of folks in my district in Kentucky. I think there is
a bit of a double standard on Samoa, too. Though they would be given
the vote on the ability to raise taxes, they were denied the fairness
on the minimum wage that the Speaker had programmed in for a large
company in her district to ensure there would be a double standard.
I think one of the things that is important to understand from
somebody who worked in manufacturing after my military life is, and I
have talked to many workers in the energy industry in my own district,
they are dismayed, regardless of their party, be they Republican,
Democrat, union, nonunion, to find out that this legislation that the
Democrats passed last week, I would say forced through without regular
order and debate, without discussing the impact on working families, to
find that the energy industry is not manufacturing.
Mr. CONAWAY. If the gentleman would yield, not only did they kick
them out, but they have now defined all workers in the oil and gas
industry as foreign workers. Isn't that the effect? Every one of these
jobs are no longer American manufacturing jobs, but get the same
treatment that the jobs for foreign workers. I know my colleagues in
the oil business in West Texas are not excited about that.
I yield back.
Mr. DAVIS of Kentucky. To the gentleman from Texas' point, my
constituents, who are members of the International Boilermakers, from a
bipartisan standpoint, we have a positive and proactive relationship
with our boilermakers and our professional trades in the Fourth
District of Kentucky. But it is my boilermakers, my pipe fitters, my
millwrights and steelworkers, ironworkers, my operating engineers, my
Teamsters, anybody who is affiliated in the energy industry is no
longer considered in manufacturing.
What that means for the average working family is a hidden tax
increase, because the tax credits that would go for training and
professional development, that would relate to a provision of health
care, nearly 80 percent of manufacturing employees are covered with
full health benefits. In my company we covered every single family with
health benefits. The economic incentives are now removed, and it is no
different than treating those in our critical bedrock base industry
that drives not only manufacturing, drives the automotive industry,
drives utilities, drives the transportation infrastructure of this
Nation, is now being told they are not manufacturing, they are not
value added. Somehow they are a nemesis.
Again, I come back to the fact of this issue of class-warfare
politics. Who gets affected by the tax increases that are buried in
that bill? It is not a simple issue of trying to say these are tax
breaks for some nebulous, super-rich oil executives. Here is what
happens: The entire supply chain is affected. This does not hurt the
large international global energy producers, the international oil
companies. Who does it hurt? It hurts our wildcatters for natural gas,
our small natural gas producers, our small oil producers, the
investors. It hurts the supply chain of manufacturing and fabrication
industry that supports the oil industry.
Outside of any refinery, one will find a very large base of welding,
fabrication, machine tool operations, toolmaking, maintenance. Then we
have around that circle there the provision of parts, the supply chain
of manufacturers' representatives for components that come into the
industry. And then who else is affected by that? It is the small
business owner. It is the distributor of gasoline and oil and energy
products. It is the parts manufacturer for vehicles. It is the
convenience store operator who is affected by that.
And ultimately all of these people who I have mentioned so far in the
chain are taxpayers. They are contributing to the public welfare and
public infrastructure. Who is going to be lost when we lose those
taxpayers because we eliminate those jobs by what seems to be a good
thing on the surface but is very hurtful? We are eliminating funding,
in effect, that provides for law enforcement, provides money for
education, and provides money to deal with transportation and
infrastructure, that funds the operation of government. And ultimately
it is a regressive issue and it comes back it your fundamental point:
When we leave money in the hands of taxpayers, they will invest it,
they will save it, or they will spend it in such a way that we create
taxpayers and we don't need to raise taxes, and I think the numbers
bear that out.
Mr. SHUSTER. The gentleman is correct. All Americans want to pay less
at the gas pump and less for heating oil. As we have seen in the last
month alone, prices have come down to about $50 to $52 a barrel.
{time} 2200
But the answer is not to increase the cost on the oil and gas
producers. The answer is to have more supply. The answer is for us to
conserve more, to use it in more efficient ways. The answer is to come
up with alternative fuels, which I hope to hear the President talk
about that initiative tomorrow night.
But when you talk about the oil industry and you talk about dollars
and cents, there is nobody better to talk about it than the gentleman
from Texas, our resident CPA, who can keep us on the dollars and cents.
And with that I would like to yield to the gentleman from Texas.
[[Page H829]]
Mr. CONAWAY. Mr. Speaker, I appreciate the gentleman from
Pennsylvania's hosting tonight and allowing me to participate in it.
Let me kind of flesh out what our good colleague from Kentucky said
about the mechanics of those impacts on tax increases. He talked about
a variety of manufacturing and some service industries who may or may
not be directly impacted by section 199, but here are the mechanics of
what happens:
The small E and P companies, the exploration and production
companies, those companies that are out there trying to find crude oil
and natural gas, on average in 2005 spent 617 percent of their profits.
In other words, for every dollar that they earned, they spent $6.17
reinvesting in the ground. And here is how they are able to do that: if
you are a successful oil and gas finder, you find reserves in the
ground that have a value. The value is based on the price and the
length of time you expect it takes to get that crude oil and natural
gas out of the ground; the lifting costs, depending on what that costs;
lease operating expenses. All those expenses go into that, and they
make a reasonably scientific guess as to the future value today of
those reserves in the ground. Proved oil and gas reserves.
In other words, you take the life of that well, those cash flows. You
discount that back to today's number, and that creates a value that in
many instances these E and P companies go to the bank. They take the
reserve report that shows that they have got a cash flow stream over
the next 10 years, as an example, to their banker, and they say, Mr.
Banker, we want to borrow against those reserves because we want to
replicate what we have done. We want to put those dollars that we
borrow from you back into the ground to find additional reserves for
oil and gas or develop additional wells that are currently in the
proved undeveloped category that they will continue to expand our
reserve base, in other words, continue to expand the cash flow stream
that we are going to earn as that oil and natural gas is produced over
the next 30, 40 years, whatever the life of the well is, 10 years, 5
years, whatever the economic life of that well may be.
The large companies, to my recollection off the top of my head,
reinvest about 175 percent of their profits. So everybody in the
exploration and production food chain spends more money than they make
going back in the ground.
So this tax increase that this Congress, and some of our good
colleagues on the Republican side joined in, passed last week, a mere 4
days ago, what that does is it reduces the cash flow, reduces the
profits of all of these companies. And as you reduce those dollars,
like in the small E and P company, if you reduce them a dollar, you
have really cut expenditures in the oil business by $6. So for every
dollar of taxes that are increased as a result of this action, we have
eliminated $6 out of the reinvestment in the ground. And it is that
reinvestment that my good friend from Kentucky was talking about,
because that money goes to all of these suppliers, goes to all these
subcontractors, goes to all the folks who actually do the work and try
to find this business.
So when that doesn't happen, then there is less work for them to do.
There is less need for employees, less of everything. So just the
mechanics of the tax increase has that effect.
Here is the twisted logic that our colleagues on the other side have
used, and I have been thinking about this for all of last week when we
found out what that bill was going to do, as well as over the weekend.
I think one of the things we can all agree on is that we want to be
less dependent on foreign sources of crude oil and natural gas, sources
that we pay our good hard-earned money for. These are foreign sources.
So all of us agree on that. The road forward or how we get that done is
a multidecade journey.
While we are on this journey, it would make sense to me that the more
domestic production we can produce, the more domestic barrels, the more
domestic Mcf of natural gas that we produce means that that offsets or
reduces in and of itself the crude oil and natural gas that we are
importing. So the logic that our good colleagues used last week was if
we can reduce the domestic supply of crude oil and natural gas, then we
have also reduced our dependency on foreign crude natural gas.
Well, that doesn't make any sense. I grew up in Odessa, Texas, and I
am just a country boy from west Texas and grew up in the oil fields.
That is twisted logic. It does not make any sense whatsoever.
It would seem that we would want to promote the production of
domestic supplies so that we could increase the domestic supply and
therefore offset, in some small way, the need for foreign imports. Now,
that does make sense. So a bill and a mechanics that reduces directly
the domestic production seems awfully weird to me and a convoluted
logic that I have been unable to kind of work my way through that.
Now, you and I and many of our colleagues have stood at these
microphones and bemoaned the fact that that happened. Will we be able
to point specifically at last Thursday's vote 5 years down the road and
say, okay, had we not had that tax increase, had we not abrogated those
contracts, if we hadn't done the things that the Democrats decided were
in the best interests of this country, production would be some
percentage greater than it currently is? We will not have that
analysis. We just won't be able to do it, partly because the industry
that we hit upside the head with a big old stick last week is
incredibly resilient.
These are tough, independent, self-sufficient folks, and whatever
hand they are dealt, they are going to go back to the drawing board and
try to find domestic crude oil and natural gas. That is what they do.
We have just simply made their job harder. We are going to force them
to do a little bit less of it, or we are going to force them to go to
other sources for their backing. But whatever it is we did, it will
have an impact on the volume of crude oil and natural gas produced in
this country over the next decades.
The bad news is we won't be able to quantify that. We won't be able
to come to these microphones and say, as many of our colleagues did
over the last 2 years, I told you so, Monday morning quarterbacking. We
are telling you ahead of time that this will happen, and we will be
more dependent on foreign sources of crude oil and natural gas than we
would have otherwise been, and that is really the differential here. We
didn't have to be that dependent. We are going to be dependent on it,
but we could have helped ourselves just somewhat by every increased
barrel of crude oil produced and every increased Mcf of natural gas
produced domestically and whether those restrictions come and where we
can explore for crude oil and natural gas, the resources that companies
have available to them after they comply with all of the regulatory
schemes and the tax schemes that we have put in place.
And just to whine the most, the contracts we abrogated last week, you
saw some of the estimates of why that is important to the folks on the
other side, which is that money stolen from those oil companies is big
dollars. The leases signed in 1998 and 1999 when the price of crude was
10 bucks a barrel, when that seemed to make sense, if it did at that
point in time, it takes 5 or 6 years to get that crude oil to market,
as it were. By the time you get the rigs put in place and all the
things that have to go on when you drill in deep water, it takes
awhile. And now we are beginning to see the fruit of all that hard
work, the fruit of the risks taken by those companies.
There is a particular company I am aware of that, along with one of
the major oil companies, has recently discovered what looks to be a
very large oil discovery in the gulf, and it is off of one of those
leases in which they were incented to buy and pay the lease bonus on at
a time when it really didn't make a lot of economic sense, 10 bucks a
barrel. They are estimating the cost to themselves, if this process
that went through last week is sustained, that it will cost that one
company $1 billion. And as you mentioned earlier, 41 percent of the
stock is in individual retirement accounts. But I wonder if you picked
up in addition to retirement accounts mutual funds owned outside of
retirement accounts, individuals who owned stock directly in these oil
companies.
[[Page H830]]
{time} 2210
My guess is the percentage ownership would be much higher than the 41
percent.
Mr. SHUSTER. Retired folks that have mutual funds.
Mr. CONAWAY. That is right, separate and apart.
Mr. DAVIS of Kentucky. If the gentleman would yield on one point to
emphasize this. Again, I come back to the issue of the politics of fear
versus the politics of hope and a practical and truthful vision of what
the future is.
Again, I come back to my real-world experience in manufacturing,
which wasn't as a Democrat or a Republican, it was simply as an
operations person. The average manufacturing company in this country,
gross profit is about 7 percent per year if they are successful. That
is an important thing to understand, if they are successful.
The oil companies who right now are achieving record profits and are
being portrayed as these great robber barons, and I am going to come
back to my district here in just a minute, are making slightly over 8
percent gross profit. So they are 1 percent higher than the average
manufacturing company in terms of truthful and real numbers versus the
hype, versus the rhetoric and the emotion.
Who actually gets hurt by this foolish bill that was passed last week
on a motion without regular order? Democratic friends of mine shared
privately they are extremely upset about the fact of adverse economic
impact that it had on their districts. I can tell you the impact on our
district. One of our larger employers in the Fourth District of
Kentucky, the Marathon refinery, which has many, many first- and
second-tier vendors that do work with them, this was a huge tax
increase on their ability to refine and produce oil that directly
affects our transportation industry. Their largest customer in Kentucky
is the worldwide air hub of United Parcel Service, a great job creator
in the Louisville area. It is one of the largest employers in the
Commonwealth of Kentucky, really in the tristate area.
So what was done by this seemingly well-meaning issue to support
energy independence has actually hurt a local job-producing entity and
affected the entire supply chain. And I think the one thing that to me
the reality is not the hype, not the emotion, not the class warfare,
but it is the old comment: Do the numbers. What are the real numbers?
What is the impact?
A job-creating manufacturing entity, a job-creating technology entity
will have a 3-1 multiplier for its community on average. That is the
convenience stores, the retail outlets, the personal service companies.
It is the other types of businesses that supports the public
infrastructure, law enforcement, education, transportation and public
works.
Mr. CONAWAY. The property tax base.
Mr. DAVIS of Kentucky. The property tax base that pays for the
schools. In my home county, which has got a growing and thriving
manufacturing industry, that payback is 7-1. One of the reasons we have
some of the top schools in the Commonwealth of Kentucky is the fact
that we have a tremendously powerful economic engine that ironically is
directly affected by energy prices and access.
One of the issues in this so-called bill, which was really a tax
increase. Calling it energy independence is not only disingenuous, and
maybe that points back to the discussion which took place earlier this
evening in the House, but it really misrepresents the entire reality of
what is happening.
Barack Obama from Illinois, someone that would not be considered a
strong conservative by the standards of human events, but is a very
committed Senator, and Jim Bunning, who is the junior Senator from
Kentucky, cosponsored a bipartisan bill for energy independence that
focused on an alternative source which is one we really have; instead
of building lots of windmills and solar generators in the colder areas,
was to use the resource that we have. And coal is environmentally
friendly, it is a proven technology, and he was attacked from the left
from environmental groups that strongly supported this bill that hurts
jobs for being bad on environmental issues because he would support
this very thing that he sees the facts on that would create a second
industrial revolution in this country.
And it all comes back to the reality of what the role of government
would be here in the long run, missing the truth that we need to allow
people, those who create the jobs, to keep more of their own money, to
allow working families to keep more of their own money to invest.
Mr. SHUSTER. And you look at another measurement when you look at
investments and profitabilities. In 2004, a 10-year period ending in
2004 shows that the return on investment the refining marketing segment
of the oil companies are in was 7.7 percent return on investment, which
was well behind the 13.9 average of the S&P 500. So I think, as our
friend from Texas was talking about, huge investments, huge
investments. They are certainly making returns, and they are certainly
making profits, but it is far behind what many of the other
manufacturing and the other companies in the S&P 500 are making.
So this is a capital investment industry. We have got to encourage
them to keep on going out and looking and looking and finding the
reserves. But it is also important, I think, as you pointed out, coming
from Kentucky, I come from Pennsylvania, the importance of that other
natural resource we have from coal and how we utilize that to truly
make us energy independent or move toward energy independence, not this
wrong-headed tax increase.
And, again, I believe that it is just the first of many we are going
to see, statements by the chairman of the Ways and Means Committee over
the last several months, the rules that the Speaker and the Democrats
put into place to make it easier to raise taxes, not harder, to make it
easier. And I think the American people need to know that the
Democrats, the majority in the Congress, are going to raise your taxes.
And when it happens, as it happened 4 days ago, this was a targeted tax
increase, they think, just to one industry, but it is going to flow
down through the economy, and every American is going to feel it. But
we are going to see tax increases. They are not going to control
spending, they are going to continue to increase spending. And they
said they are going to pay for it, and they are going to pay for it by
taking away hard-earned dollars from Americans.
I was talking today, I went to see my accountant to prepare myself
for tax season this year. And I wonder if the gentleman from Texas
would comment on it. My accountant told me that just the sheer
difficulty, the complexity, of keeping up with the Tax Code, he said to
me that he thinks he produces a reasonably correct, he can't assure
anybody that it is correct because it is so difficult. We passed the
extenders last year, and he told me that the IRS has informed him he
cannot file electronically until February 1. So he is going to have a
backlog; he is trying to figure it out, but he doesn't get an extension
from April 15 to May 15 because he doesn't file electronically.
So I think that the time has not only come to continue to keep tax
rates low, but to change our Tax Code. He had on his wall, I am going
to get a copy of it, 1913 was the first year that we had the income
tax. It was three pages long, it was pretty simple, and basically it
was a graduated flat tax. And, again, I am going to bring that in here
next week and have it blown up to see how simple it was, and I think
the time has come that we go to some different kind of tax.
But if the gentleman CPA from Texas would like to comment on that.
Mr. CONAWAY. I thank the gentleman.
I think it is Money Magazine every year or so runs a contest where
they will present a set of facts, the same set of facts to a variety of
tax preparers. And it is interesting the variety of taxes due number
that comes up. You would think, the same facts because everybody is
working off the same codes, the same set of regulations, that all these
tax return preparers would come up with the same answer. But it is very
rare that even two out of the group come up with the same answer
because of the complexity of the code.
I spent 32 plus years of my professional career helping clients
comply with the code or a company that I was working for and attempting
to do my own tax return, because most folks
[[Page H831]]
really wouldn't understand a CPA screwing up his own tax return. So if
I couldn't do mine right, why would I hold myself out for doing
somebody else's right? And every time you signed one of those returns,
it gives you a pause, because this is complicated stuff. And the legend
at the bottom where you sign doesn't say, I have got this as close as I
can to the right answer, sign your name; it requires you under
penalties of perjury to say you have got it right. And that does give
you some pause, because it is an incredibly complex code, unnecessarily
complex.
And we will have hopefully another night where we can talk about ways
that we ought to be looking at how we collect the minimum amount of
money needed to fund this Federal Government in a fair,
straightforward, easy-to-comply-with way that most Americans would buy
into, because I think our voluntary compliance in that arena would be
far greater than it currently is with this incredibly complicated code.
If you want to file manually, your client, you can file manually. I
am trying to remember, I was reading one of those tax credits that was
extended.
{time} 2220
There is no line for it on the form, and so the services said if you
want to claim this credit or deduction, one of the two, since we did
not put a line item on the return for it, stick it on a different line
and tell us what that is. So you can go ahead and file manually if you
would like to, but you are right. I thought it was February 4 maybe.
Mr. SHUSTER. Beginning of February.
Mr. CONAWAY. Electronic filing before the IRS will have their
computer systems ready to be able to receive that information coming in
as a result of the late-breaking changes that we Republicans made in
December to extend many of the tax credits that some had already
expired and others that were set to expire with the close of business
in 2006.
Mr. SHUSTER. My accountant also told me that he believes this year
the AMT that is starting to catch more and more people in the AMT to
pay higher tax. He said he believes next year he will see for the first
time dual income husband and wife that are teachers that are making in
central Pennsylvania about 110, 120 combined income, he thinks for the
first time they are going to be caught up in the AMT and they are going
to pay several hundred to a thousand dollars or more in taxes.
Mr. CONAWAY. Could I give the gentleman a quick history lesson?
Mr. SHUSTER. Absolutely.
Mr. CONAWAY. The alternative minimum tax was put in in 1969 at a
point in time where our marginal tax rate, upper marginal tax rate was
like 70 percent, and it was a point in time where there were a lot of
gimmicks and tax loopholes, not loopholes because the code was written
that way, but there were a lot of deductions and a lot of activities
that folks could deduct against that 70 percent number.
So consequently you had a lot of folks incented to do that, to take
risks they might not have otherwise taken. So, as a matter of fairness
and equity, the Congress put in an alternative minimum tax. In other
words, they felt like everybody in America ought to pay something and
that these folks were taking advantage of tax shelters in a way that
was keeping them from paying any tax at all. Congress and the
President, Johnson I guess, at that point in time felt like everybody
ought to pay a little something.
This was targeted at the really larger tax returns, really big
investors, the big folks who made a lot of money. It was never intended
to catch those two teachers who make together, what did you say, about
$110,000, $120,000. The spirit of that was never intended to catch them
in this loop.
In the interest of full and fair disclosure, I had to pay the
alternative minimum tax this year which irritated me.
So the AMT is something that we did not do a good job of it. As
Republicans, we kind of kicked the can down the road for a couple of
years, a year at a time. This Democrat-led Congress is going to have
that issue wrapped around their neck, and we will see how they go about
trying to propose a fix for it, but it is an issue that is going to
catch millions and millions of new taxpayers through the alternative
minimum tax scheme each year that we move forward.
Mr. SHUSTER. We seem to be wrapping up, so if the gentleman from
Kentucky has any closing remarks.
Mr. DAVIS of Kentucky. I think one thing to put into perspective is
the real question, what I like to do is come back to the facts and the
numbers.
There is a lot of talk about, again, the politics of fear, the
politics of class warfare, who actually will be rewarded or hurt by
these tax cuts or tax increases. Here is the reality in a practical
sense.
The tax cuts that have been put in place have created record revenues
for government because of job creation. Millions of people were taken
off of the tax rolls all together. The floor for tax payments was
pushed upward. The 10 percent tax bracket was created for those who are
just starting out, those who are just in transition, so their burden
would not be unduly high. All of that goes away. What are some other
things that go away?
One of the things that I think is kind of interesting, as somebody
who is the grandson of a teacher, the husband of a teacher and the
father of a soon-to-be-certified teacher, how does it impact education?
Well, let us look at this.
We passed an extension in the last Congress, carrying on above-the-
line deduction for higher education expenses. The provision allows
taxpayers to deduct up to $4,000 depending upon their income for higher
education expenses to improve their lives in lieu of claiming the hope
or lifetime learning tax credits. The deduction can be claimed by all
individual taxpayers regardless of whether they itemize and use
specific deductions or do not itemize, and it is extended for 2 years
through 2007.
The incoming chairman of the Ways and Means Committee put this, along
with an entire bushel basket of tax incentives for working families,
for people to improve their lives, and that goes away. For teachers, we
passed an above-the-line deduction that became law for teacher
classroom expenses.
I remember when I was a young officer in the Army and my wife was
teaching school. She paid for a tremendous amount of classroom expenses
out of her own pocket because she cared about her students and wanted
to invest.
What is the response of the Republican Congress to that was to give
them the incentive to invest and to know that that will not be a
personal penalty for them to make that investment in their children, to
make that investment in their future. It is a provision that allows
teachers to deduct up to $250 of out-of-pocket costs incurred to
purchase books, supplies and other classroom equipment. It is available
to all individual taxpayers, regardless of whether they itemize their
deductions or not.
This provision was extended for 2 years through 2007. That is in that
bushel basket of things that go away when we enact these tax policies,
these tax cuts that ultimately will be in full force in 1,440 days.
As a former small business owner who helped companies to create jobs
in the manufacturing industry and operations, we dealt with many entry-
level people. People would come in with difficult tasks or in
transition. We passed a welfare-to-work tax credit that would incent
small business owners and employers to create jobs, to give people a
leg up, to give them an opportunity to create value, to become a
taxpayer, not a burden on the system, to create a future for their
children.
Employers can claim that welfare-to-work tax credit if they hire
individuals who receive public assistance to help them move from a
receiver to a giver. The maximum credit is $3,500 during an employee's
first year and $5,000 during the second year. That incentive for small
business owners goes away with this.
All of these small things, these numbers that are hidden from the
American people out of this politics of fear get lost in this whole
issue, and ultimately, we need to allow people to keep more of what
they earn to create that future.
I appreciate your leadership on this issue greatly.
[[Page H832]]
Mr. SHUSTER. I thank the gentleman for joining us tonight. The
gentleman from Texas, if he has any closing remarks?
Mr. CONAWAY. I do. I wonder how many words have been spoken from
these microphones over the almost 160 years that we have been just in
this chamber.
Mr. SHUSTER. Too many.
Mr. CONAWAY. Too many, clearly. There are not a lot of lines created
or spoken here that many people quote. The inaugural address produces
great lines. It is not what you do for your country, all those kinds of
lines that come out. I do not know of anything spoken here that many
people quote.
Lincoln said, and I will butcher this, but I think he said in his
Gettysburg Address, the world will little remember what is said here.
As it turns out, he was wrong, but I think that is exactly what
happened here.
In West Texas, I suspect, and in central Pennsylvania as well as
Kentucky, talk is cheap, but what we do here is important and it is
remembered. When we vote, as we did last week, to abrogate contracts
with the Federal Government, when we vote, as we did last week, to tell
people who have business deals with this Federal Government you really
cannot trust the contract because if it begins to look like you are
making a little money off this contract, some Member of Congress will
think that is a bad idea and they will convince a party, maybe both
parties, to take and redo that contract.
When we vote, as we did two weeks ago, to say there are some lives in
this country, they are not particularly important, lives on the front
end of creation, that is remembered. That is important. That has an
impact on what we do.
When we vote here to do things to protect America, as I suspect over
the next coming couple of weeks we will vote as to how we think this
Congress ought to be commander-in-chief, that is important what we do.
The good is important and the bad is important just as well. It is
long remembered and long noted by the people of this country, the
people in West Texas in District 11, and many instances, the people
around the world.
As I hear tonight our good colleague from Maryland talking about
flaws in the bill that we will vote on tomorrow with respect to
pensions, that I think all of us would love to support, when he says,
well, guys, do not worry about it, this is just the House version; we
will fix it in conference or we will fix it in the Senate.
Mr. DAVIS of Kentucky. Heard that before.
Mr. CONAWAY. We said it, our guys said it, but today was a particular
one where our good colleague from Maryland just seemed to pooh-pooh the
idea that there were some flaws in this bill that we did not need to
worry about because we are the House of Representatives. I challenge
that. We are the House of Representatives, and what we do here is
important. I do not know that what we say here is of particular
importance, but what we do here is important.
I appreciate being with you tonight.
{time} 2230
Mr. SHUSTER. Mr. Speaker, I think the gentleman is absolutely
correct. What we did here in 2001 and 2003 by reducing the tax rate on
American people, it is going to expire in 1,440 days, unless this
Congress acts.
You need to look at the numbers that the gentleman from Kentucky
pointed out. Record revenues are flowing into the Federal Government.
Since August of 2003, we have created 7.2 million jobs. In December
alone, 167,000 jobs were created. The October and November numbers
increased by 29,000 jobs. In 2006 alone, there was an increase of 1.8
million jobs. In the 2003 period to today, 7.2 million have been
created. That is more jobs than the European Union and Japan combined
have created.
Our economy has added jobs for 40 straight months, and I believe it
is going to do that with an unemployment rate of 4.5 percent. That is
well below the 5.1 percent rate of 2005, and below the average of the
past 4 decades. So these tax cuts have worked.
We need to make sure that we act in this Congress and not run out the
clock. The American people need to know that if this Congress does not
act, if it just sits on the ball and runs out the clock, come 1,440
days, January 1, 2011, the American people will have seen a $200
billion tax increase, and that is not good for America.
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