[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.
                                 ______