[Congressional Record Volume 153, Number 61 (Tuesday, April 17, 2007)]
[Senate]
[Pages S4602-S4604]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. KYL (for himself, Mr. McConnell, Mr. Grassley, Mr. Lott,
Mr. Ensign, Mr. Hatch, Mr. Thomas, Mr. Smith, Mr. Bunning, Mr.
Crapo, Mr. Roberts, Mr. DeMint, Mr. Alexander, Mr. Martinez,
Mr. Chambliss, Mr. Brownback, Mr. Craig, Mr. Allard, Mr.
Graham, Mr. Enzi, Mr. Inhofe, Mr. Burr, and Mr. Coburn):
S. 14. A bill to repeal the sunset on certain tax rates and other
incentives and to repeal the individual alternative minimum tax, and
for other purposes; to the Committee on Finance.
Mr. KYL. Mr. President, today, on behalf of the Senate Republican
leadership, I am introducing the Invest in America Act, a comprehensive
set of legislative proposals that are designed keep American families
and the American economy on the path of continued prosperity by
preventing--the largest tax increase in our Nation's history--a tax
increase that is scheduled to happen in 2011 if Congress fails to
extend current tax policies.
The American economy is the envy of the developed world. Our
unemployment rate is just 4.4 percent, and 7.8 million new jobs have
been created since mid-2003. Not only are more Americans working than
ever before, but the benefits of our growing economy are broadly shared
by all Americans. Real, inflation-adjusted wages rose 2.2 percent in
the last 12 months--faster than the average rate of the late 1990s.
This meant an extra $1,279 in the past year for the typical family with
two wage earners. To keep our economy growing on this strong and
sustainable path, we must avoid tax increases that could damage our
economy.
America's economy has been growing at a strong and sustainable pace
due in large measure to the fact that Americans are willing to work
harder and be more productive in their labor, thus creating more new
goods and services at lower costs. Americans will continue to be
productive and contribute to our strong economy if we reject marginal
tax rate increases on the income they earn. Studies have shown that
people really do work more if the tax imposed on their extra labor is
relatively low. Arizona State University's distinguished economics
professor, Dr. Edward Prescott, won a Nobel Prize in economics for
research that proved this theory.
It's interesting that the big investment bank, Goldman Sachs, studied
what would happen if taxes increase across-the-board, as is scheduled
to happen in 2011 when the various tax rates and other provisions
enacted since 2001 expire. The short answer is an immediate recession--
a recession that would not be avoided even if the Federal Reserve acted
to cut interest rates. This study demonstrates very clearly why
Congress cannot allow this tax hike to happen.
The President proposed in his fiscal year 2008 budget to make the tax
rates and many other tax incentives enacted since 2001 permanent. In
marked contrast, Democrats have produced budget resolutions in both the
House and the Senate that assume all of these tax policies will expire
and taxes will increase dramatically for virtually every American. In
fact, the average family will see its taxes increase by about $3,675 if
the Democrats are successful in canceling the tax relief. Today, Senate
Republicans are going on the record in support of making these
important tax policies permanent and in opposition to plans by
Democrats to allow these tax increases to occur.
Our legislation underscores our commitment to American families and
to a strong American economy by preventing the largest tax increase in
American history. We believe that American families pay enough in
taxes--indeed, revenues are running above historical levels. The Invest
in America Act makes all of the current-law tax rates permanent so that
no American family faces an automatic tax hike in 2011. I want to
underscore that Republicans believe that no American family should face
a tax increase--not young people just entering the job market and other
lower-income Americans who are benefiting so substantially from the 10
percent bracket; not middle-income families; and not more successful
Americans, including the almost 80 percent of taxpayers in the top
bracket who report small business income.
Our legislation also invests in American families by making the
$1,OOO-per-child tax credit, the marriage penalty relief, and the other
components of the Economic Growth and Tax Relief Reconciliation Act--
EGTRRA--of 2001 permanent. American moms and dads face an enormous and
unexpected reduction in the child tax credit in 2011,
[[Page S4603]]
when the child tax credit is scheduled to be cut in half. Republicans
know that the child tax credit helps countless parents offset some of
the costs associated with raising their children, and we know that
reducing the credit by 50 percent will be a terrible blow to many
families. That's why Republicans support making the current $1,000 per-
child tax credit permanent.
Married couples will face an unwelcome surprise when the marriage
penalty relief expires. The marriage penalty relief the Republicans
enacted is aimed squarely at middle-income families because the relief
is only provided for the standard deduction and the 15-percent bracket.
Republicans believe there is no reason a married couple should face a
higher tax burden than they would as two single taxpayers, and so we
propose to invest in American families by making the marriage penalty
relief permanent.
The Invest in America Act underscores our commitment to investing in
America's future by making the important education-related tax benefits
enacted in recent years permanent. This will help countless middle-
income Americans afford higher education costs. Our legislation invests
in America's future by extending the tuition deduction, extending the
modifications to Coverdell education savings accounts, extending
certain provisions for the student loan interest deduction, and
extending the exclusion for employer-provided educational assistance.
We also propose to permanently extend the $250 deduction for expenses
of elementary and secondary school teachers.
Republicans also believe that parents ought to be able to pass on the
fruits of their labor to their children without the Federal death tax
confiscating half of their estate, above a small exemption amount. The
death tax hits family businesses and family farms and ranches the
hardest because the owners are often not wealthy families, but rather
have most of their assets tied up in the value of the business or the
value of the land. And while the death tax hurts families, it also
hurts our economy if it forces family businesses to close down,
eliminating good-paying jobs in the process. Under current law, the
death tax is repealed in 2010, but springs back to life in 2011, when
more than 131,000 families will have to file estate tax returns in that
year alone. Americans pay taxes throughout their lives, and Republicans
believe they should not have more than half of their assets taken in
taxes at death too, so the Invest in America Act makes repeal of the
death tax permanent.
The Invest in America Act goes beyond the 2001 and 2003 tax relief
laws and also repeals--once and for all--the individual Alternative
Minimum Tax (AMT). If you go by rhetoric alone, there is overwhelming
bipartisan support in Congress for repealing the AMT. But, American
taxpayers want action. The problems we have encountered from the AMT
demonstrate what happens when Congress tries to target a tax
specifically at the ``wealthy''--we almost always end up hitting the
broad swath of middle-income families. The AMT was never intended to
hit middle-income taxpayers, and Congress ought to repeal it before it
imposes unnecessary and unexpected taxes on more and more families.
Republicans understand that, in addition to not raising taxes on
families, we cannot take our strong and dynamic economy for granted; we
believe we must invest in American competitiveness. While our
legislation should not be viewed as a comprehensive approach to
improving American competitiveness, we believe a necessary first step
is to prevent tax increases that will surely hurt America's competitive
position in the world economy. Specifically, the Invest in America Act
makes permanent the current tax rates for capital gains and dividends;
it makes the increased expensing amounts available for small businesses
permanent; and it makes permanent the newly-enhanced research and
development tax credit.
America cannot expect to be the home for worldwide capital markets if
it is hostile to American investors, so the Invest in America Act makes
the existing tax rates for long-term capital gains and for qualified
dividends permanent. These lower tax rates implemented in 2003 and
extended in 2006 have encouraged investors of all income categories to
put their money to work in the markets, generating solid returns for
American investors and providing much needed capital for American
businesses to grow and create new jobs. It has been 4 years since these
lower rates were enacted-long enough for us to determine once and for
all that lower rates really do encourage increased economic activity.
Growth since the 2003 tax relief has averaged more than 3.5 percent,
while it averaged just 1.3 percent from the first quarter of 2001
through the second quarter of 2003. The Dow Jones Industrial Average
has risen by 40 percent since the lower investment tax rates were
enacted. The average 401(k) balance has risen by about 65 percent since
2003. All of this investment activity makes it easier for entrepreneurs
and businesses to raise funds to expand and grow their businesses,
create more jobs, and improve standards of living around the country.
It's interesting to note that, while the conventional wisdom is that
these lower investment tax rates only benefit ``the rich,'' half of all
Americans own shares of stock, either on their own or in their
retirement savings. In fact, most of the Americans who are benefiting
from these lower rates are middle-income taxpayers. Moreover, the
current 5 percent rate, which is available for the lower-income
investors and drops to zero in 2008, is a sometimes-forgotten benefit,
but it is especially important to our senior citizens who rely on their
investment income. According to statistics calculated by the Joint
Committee on Taxation, the vast majority of elderly taxpayers who
report capital gains and dividends income have incomes under $100,000.
In addition to reducing tax rates to encourage more business
investment, Congress also significantly increased the amount of
investment that small businesses may expense in a given year. This has
helped countless small businesses expand their operations by making the
purchase of new equipment more cost-effective. Unfortunately, these
increased levels are only in effect through 2009. Small businesses
create most new jobs in the U.S. and comprise half of our private gross
domestic product, so the Invest in America Act proposes to make the
enhanced small business expensing levels permanent.
While low tax rates on income and investments are essential to
keeping America competitive, Republicans know that many countries
around the world are specifically and aggressively working to attract
some of the most high-quality jobs and economic activities available:
research and development. America hinders its ability to attract and
retain R&D here because the tax incentives we give to encourage R&D are
not permanent law, but must be extended every year or so. This makes it
very difficult for companies to commit to large-scale R&D investments
in the U.S., when other countries are offering permanent or longer-term
tax incentives. To ensure that America remains the most attractive
place for R&D, the Invest in America Act makes the R&D tax credit
permanent.
The Invest in America Act also acknowledges that the U.S. tax system
imposes a costly and frustrating burden on taxpayers, with filers
spending an average 30 hours to complete the typical Form 1040. Six in
ten Americans opt instead to hire a professional. The billions of
dollars spent each year simply complying with the tax system could be
put to a much better, and more economically beneficial, use. The Invest
in America Act expresses the Sense of the Senate that the Finance
Committee should report tax simplification legislation by the end of
the year to make the tax system fair, transparent, and efficient,
without raising tax rates.
Finally, I want to address the effect all of the tax changes have had
on our budget deficit and to dispute the notion that Congress must
raise taxes elsewhere if we are going to make existing tax rates and
incentives permanent and repeal the AMT. It is important for all
Americans to know that all of the additional tax revenue flowing into
the Treasury from our growing economy, hardworking Americans, and from
profitable investments has caused our budget deficit to shrink below 2
percent of GDP--well below its historical average. If we stay on our
current progrowth path, reject tax increases,
[[Page S4604]]
and impose reasonable restraints on spending growth, we will balance
the budget by 2012, if not sooner.
As for the notion that Congress must ``pay for'' tax relief with tax
increases, I would note that the official estimates about how much
certain tax provisions will ``cost'' the Treasury are just that,
estimates. And they often prove to be wrong. For example, since 2003,
the Treasury has collected $133 billion more in capital gains revenue
than was originally projected by the Congressional Budget Office;
revenues have exceeded official CBO projections by 68 percent. Second,
the concept of requiring corresponding tax increases falsely assumes
that the Government is entitled to the revenue, when it really belongs
to the American people. Third, revenues are running above their
historical average of about 18.2 percent and are projected to continue
increasing even if we make the current tax structure permanent, as we
propose in the Invest in America Act. If we raise taxes in order to
extend the tax policies, we will be taking even more resources out of
the private sector and spending them on government programs, which will
certainly damage our economy. To protect our growing economy, I believe
we must ensure that revenues, as a percentage of our economy, do not
rise much above their current level.
I am pleased to be the lead sponsor of this important legislation
that underscores the commitment of the Senate Republican leadership to
investing in American families, America's future, and American
competitiveness. America's economy is growing at a strong and
sustainable level, to the benefit of all American families, but this
growth will not continue if we unwisely allow taxes to be increased on
work, savings, and investment--the very engines of economic growth.
______