[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[Senate]
[Pages 2459-2461]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   PRESIDENT BUSH'S TAX CUT PROPOSAL

  Mr. NICKLES. Mr. President, last night President Bush spoke before a 
joint session of Congress and outlined his agenda in many areas--
certainly in education, in preserving and saving Social Security, and 
Medicare. He challenged Congress. He also made a very strong case for 
reducing our taxes. He said: We can pay down the debt, we can fund our 
priorities, pay down the debt to the maximum amount practical--in other 
words, retire every bond that would mature between now and the year 
2010--pay down the debt as much as possible, and we can still give 
significant tax relief.
  Some people said that is not enough. Some people said it is too much. 
The President said it is about right. I happen to agree with him.
  To my colleagues on the Democrat side who responded and said: We 
would agree to a $900 billion tax cut but we can't go for the $1.6 
trillion tax cut--when we talk figures, I think it is important we talk 
policy and not just figures.
  The policy--and the bulk and the essence of what President Bush is 
pushing for--is reductions in marginal rates, reducing tax rates for 
taxpayers. Some have said: Wait a minute. This is a greater dollar 
benefit for higher income people. But the fact is the President's 
proposal cuts the rates more for lower income people than it does for 
those people with a higher income level.
  Unfortunately, some people, when taxes are discussed, want to play 
class warfare. They want to rob Peter to pay Paul. They want to use the 
Tax Code as a method of income redistribution. I do not think we should 
do that.
  If we are going to have a tax cut, I think we should cut taxes for 
the people who pay the taxes. We have programs where we spend money for 
the general population, most of that focused on lower income 
populations. But if you are going to have a tax cut, you should cut 
taxes for taxpayers. President Bush's proposal does just that.
  He has greater percentage tax reductions for those on the lower 
income scale than he does for those on the higher income scale. Let me 
just talk about that a little bit.
  He takes the 15-percent bracket and moves it to 10 percent for many 
individuals. That is a 33-percent rate reduction. He reduces other 
rates. He moves the 28-percent rate to 25 percent. That is 3 percentage 
points, but that is about a 10- or 11-percent rate reduction. Yes, he 
moves the maximum rate from 39.6 percent to 33 percent, and that is an 
11-percent rate reduction.
  Some have said that is too much for the upper income. I point out 
that that rate, even if we enacted all of President Bush's income tax 
rate reduction, is still much higher than it was when President Clinton 
was elected because he raised the maximum rates substantially.
  Let me just give a little historical background on what has happened 
to the maximum rate since I have been in the Senate.
  When I was elected to the Senate in 1980, the maximum personal income 
tax rate was 70 percent. Ronald Reagan and 8 years later, it was 28 
percent--a very significant reduction. Some people said that caused 
enormous deficits. That was not because the rates were cut because, 
frankly, revenues to the Federal Government doubled in that period of 
time. So revenues increased dramatically, though we reduced income tax 
rates from 70 percent to 28 percent.
  President Bush, in 1990, agreed with the Democratic-controlled 
Congress--reluctantly, I believe--but raised the maximum rate from 28 
percent to 31 percent, raised it 3 points, about 11 percent.
  President Clinton, in 1993, raised the maximum rate from 31 percent 
to 39.6 percent--its current maximum rate--but he also did a couple of 
other things that a lot of people tend to forget about. He said: There 
will be no cap on the amount of Medicare tax that you pay on your 
income.
  At one time, Medicare was taxed on the same basis as Social 
Security--about $75,000. Now there is no cap. So you pay 2.9 percent. 
Actually, the employee pays 1.45 percent and the employer matches that. 
It totals 2.9 percent on all income. If you have a salary like Tiger 
Woods or Michael Jordan, you pay a lot of Medicare tax--2.9 percent. So 
you can actually add that 2.9 percent to the maximum tax rate, the 39.6 
percent. So that increases to a total of about 42.3 percent.
  Then President Clinton did something else. He phased out the 
deductions and exemptions for people who have incomes above $100,000. 
We can add another 1 or 2 percentage points on as a result. So 
President Clinton, in the tax act that passed in 1993 by one vote in 
both the House and Senate--Vice President Gore broke the tie in the 
Senate--raised the maximum rate from 31 percent to about 44 percent.
  President Bush today is saying, let's reduce the income tax rate down 
to 33 percent. He didn't take off the increase in the Medicare tax and 
didn't change the deduction limitation, so actually the net max tax, 
under the Bush proposal, is about 37.5 percent. Keep in mind, it was 31 
percent when Bill Clinton was elected. So after all these reductions 
that President Bush is talking about, the maximum rate is still about 
20 percent higher than it was when President Clinton was elected.
  Yes, he has a tax reduction, but he is reducing taxes less than 
President Clinton increased them. That is the point. Certainly, for 
upper incomes that is the case. Let me repeat that. President Bush has 
a tax cut. Some people say it is too much, his tax cut for upper income 
people. I have heard so much demagoguery and class warfare concerning 
people who make higher incomes. Their tax rates are much higher today. 
Assuming we pass all of President Bush's tax cut on income taxes, it is 
much higher than it was when President Clinton was elected, about 20 
percent higher.
  You might remember President Clinton, when he had a moment of 
truthfulness in Texas, admitted that. He said: You might think I raised 
taxes too much. I agree with you. I did raise taxes too much.
  President Bush is saying we need some tax relief. We have enormous 
surpluses, and we have to decide who is going to spend the surpluses. 
Are we going to come up with new ways within the Government to spend 
them? We can. There are unlimited demands on spending public money, 
somebody else's money, unlimited. That is not too hard for people to 
figure out. If you ask your kids: Could you spend more money? You bet. 
You ask your friends: Could you spend more money? You bet. You ask your 
spouse: Could you spend more money? You bet. If we leave a lot of money 
on the table here, can we find more ways in Government to spend it? You 
bet. There are unlimited demands on spending somebody else's money.
  We have to do what is fair, what is right. How much is reasonable? We 
actually have taxation, as a percentage of GNP, at an all-time high. We 
are taking in a lot more right now than we need to fund the Government. 
If we leave it on the table, we will find ways to gobble it up. That is 
what we have done in the last couple years.
  Last year nondefense discretionary spending budget authority grew at 
14 percent, far in excess of the budget. We didn't abide by the budget 
last year. Congress was spending money. We will do it again, Heaven 
help us.
  I don't think we will because I believe we are going to have 
discipline in the budget process this year. Unlike what we have had for 
the last 8 years, a President who pushed us to spend more--we now have 
a President who says: Let's show discipline. Instead of having somebody 
in the White House who is going to be threatening to veto a bill unless 
we spend more money, we have a person in the White House saying he is 
going to veto a bill if we don't show some fiscal discipline.
  President Bush, instead of saying let's rescind money that is a 14-
percent increase, he said, we will even build upon it. We will increase 
spending with inflation, spending increases of about 4 percent, which 
is in excess of inflation. He is being pretty generous. He enumerated a 
lot of ways where he can spend money. He said: We can do all

[[Page 2460]]

those things. We can pay down the maximum amount of debt allowable, and 
then we should give some tax relief.
  The core of his tax relief is rate reduction. Rate reductions are 
necessary. I mentioned this because a lot of people aren't aware of how 
much the Government is taking from them. They should be. If they are in 
the process of doing their income tax returns, as millions of Americans 
are this month and next, they will find out. There is a big difference 
between the gross amount they are paid and the net they receive. The 
difference, in many cases, is what goes to the Federal Government. It 
goes to the Federal Government in the form of income taxes, in the form 
of Social Security taxes and Medicare taxes. The net in many cases is 
much smaller.
  We can get some relief. We should get some relief. We must get some 
relief. The President's proposal of across-the-board rate reductions is 
the only fair and the best way to do it.
  Some have said we need ``targeted'' tax cuts. Targeted means we are 
going to define who benefits and who does not. If you spend your money 
the way we think you should spend it, you will get a tax cut. If you 
don't, you don't get one. So if you do Government-approved, designed, 
adopted, favored behavior, we will give you a tax cut. If you don't, 
you are out of luck. In other words, that is another way of saying we 
think we can spend your money better than you can. You spend it the way 
we want you to and we will give you some relief. But if you don't, we 
are going to spend it.
  I happen to disagree with that wholeheartedly. If we are going to 
give a tax cut, let's not have members of the Finance Committee and the 
Ways and Means Committee and Members on the floor of the House and 
Senate saying: We are going to design and direct where the money should 
go. We should allow individuals to make those decisions. That is what 
President Bush calls for.
  Let me touch on one other issue that has been demagogued 
unmercifully, and that is the issue of the death tax. Last year we 
passed a bill to eliminate the death tax. It was slightly different 
than what President Bush has called for. The President's proposal 
doesn't cost as much, according to the bean counters in Joint Tax. It 
costs about $100 billion, $104 billion over 10 years, according to 
their estimates. Let me talk about that.
  A lot of people have said this only goes to the wealthiest people. I 
disagree. People who make that comment don't understand what makes 
America run. They don't know there are millions of businesses out there 
today that are trying to build and grow, and yet they are suffocated 
with this overall idea that if they pass on, if they die, the 
Government is going to come in and take half of their business. So they 
don't grow their business, or else they come up with all kinds of 
schemes to avoid this tax. There is a tax, a Federal tax called a death 
tax, an inheritance tax, an estate tax where the Government comes and 
if you have a taxable estate above $3 million, the Federal Government 
wants 55 percent, over half.
  How in the world can it be fair in this day and age for the Federal 
Government to come in and say they want half of anybody's property that 
they worked their entire life on and their kids want to keep the 
business going and they say you have to sell that business because we 
want half? That is present law. That needs to be changed. It will be 
changed, in my opinion.
  President Clinton vetoed the bill last year. We put it on his desk. 
We had overwhelming bipartisan support in the House, and we had a lot 
of Democrats who supported it in the Senate. We passed it. President 
Clinton vetoed it. I regret that decision. We have a new President, one 
who will sign it.
  I used to manage a business. We thought about growing it--and we grew 
it a lot, and we could have done a lot more--but this idea of working 
really hard with the idea of building it up and making it successful, 
maybe making it worth more and then having the Government come in and 
take over half of it was a suffocating proposition. Did we suffer? No. 
Who really suffered? Our employees who could have had a new business. 
Maybe the kids who would work for those employees would have had a 
better income. They might have had more educational opportunities. 
There would have been growth and opportunity for more people. This tax 
hurts in so many ways that people just can't even calculate.
  Let me touch on what the proposal that we passed last year would do. 
We replaced the taxable event of death and said: The taxable event 
should be when the property is sold. Present law is, when somebody 
dies, they pass the property on to the kids. There is a taxable event. 
If you have a taxable estate above the deductible amount--right now 
$675,000--you are at a taxable rate of 37 percent. Anything above that, 
Uncle Sam wants over a third. At $3 million, the rate is 55 percent. If 
you have a taxable estate of $10 million, it is 60 percent. Between $10 
million and $17 million, it is 60 percent. How could we have a rate at 
60 percent? Why is the Government entitled to take 60 percent of 
something somebody has worked their entire life for? I can't imagine. 
That is on the law books today. One of the reasons is because people 
said: Let's just increase the exemption and leave the rates high. We 
made that mistake. We will not make it again. I hope we don't make it 
again.
  I have heard some people say that as an alternative let's just 
increase the exemption another million or two. We will exempt people 
and put more in the zero bracket. If you are still a taxpayer, bingo, 
you are going to have to pay 55 percent. I disagree. I think that is 
wrong, unconscionable. Why would you take half of somebody's property 
because they happen to pass on? Our proposal--what we passed last 
year--replaced the taxable event of somebody's death and made it a 
taxable event when the property is sold. So the person who dies doesn't 
benefit because they are going to Heaven--I hope they are--and they 
can't take the money with them. But their kids, the beneficiaries, 
right now have to pay a tax.
  Under present law, they may have to sell the farm, the ranch, the 
business, or the property and assets--they may have to sell half of it 
just to pay the tax. What we are saying is there is no taxable event 
when somebody dies. The taxable event would be when they sell the 
property. If they inherit an ongoing business, a farm, or a ranch, or 
property, if they keep it, there is no taxable event. When they sell 
it, guess what? They have the assets to pay the tax, and the tax will 
be for capital gains. But the tax rate will be 20 percent, not 55 
percent or 60 percent. That is fair. It is income that hasn't been 
taxed before because it is capital gains.
  To me, that makes the system work. You tax the property once. You tax 
a gain that hasn't been taxed before, unlike a death tax. You might pay 
income on these properties you are building up in a business year after 
year, and you have paid income tax on it and you put money into it, it 
appreciates, and right now you get a little stepped-up basis, but, 
bingo, you have to pay a big tax. Why? Because you die. Sorry, second 
generation; if you want to keep the company going, if you want to keep 
the employees, you may have to pay a tax of 55 percent because this 
business is worth $3 million. That may sound like a lot, but it is not. 
In some places in Colorado, and others, it might be a development. You 
may have to sell it just to pay the tax so that Uncle Sam can take 
half. I think that is wrong. Our proposal is that you don't have a 
taxable event when somebody dies; it is when the property is sold--when 
it is sold. That would be on a voluntary sale, when whoever inherited 
it wanted to sell it, and they would pay a capital gains tax of 20 
percent.
  We leave the step-up basis alone, or at a lower level. They pay 20 
percent on the gain of the property. If the property has been in the 
family for decades, you may have a significant capital gain. That is 
only fair because that property hasn't been taxed. I think this system 
makes sense. I think it would save so much.
  I can't imagine the money that has been spent in this country trying 
to create schemes and, in some cases, scams, and other ways of trying 
to

[[Page 2461]]

avoid this unfair tax. So now we would say you would not have to have 
foundations, you would not have to come up with irrevocable trusts and 
different games and try to give property around to avoid this tax. You 
can say, wait a minute, there will be a taxable event when they sell 
the property. They will then have the liquid resources to be able to 
pay the tax, and it will be 20 percent. People won't have to go through 
tax avoidance, and planners, and lawyers, and so on, who are working 
this system trying to help people avoid this unfair tax.
  I mention that, Mr. President, because I think a lot of people have 
tried to demagog the issue. They have tried to unfairly characterize 
President Bush's proposal to eliminate this tax. I think what we passed 
last year was eminently fair. We had the votes last year, and I believe 
we have the votes this year. I think we will pass it and do a good 
thing for the economy, the American people, for free enterprise, and 
for families by eliminating this so-called unfair death tax. We will 
replace it with a capital gains tax when the property is voluntarily 
sold.
  I am excited about President Bush's economic package. I am excited 
about his tax proposal. I think at long last taxpayers have a friend in 
the White House. They haven't had one for the last 8 years. We now have 
a friend who will give them long overdue relief. I am excited about 
that, and I expect we will be successful in passing substantial tax 
relief this year. I look forward to that happening, and I compliment 
President Bush on his package and his presentation. I tell taxpayers 
that help is on the way, and hopefully we can make it the law of the 
land.
  Mr. President, 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. NICKLES. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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