[Congressional Record (Bound Edition), Volume 149 (2003), Part 1]
[Senate]
[Pages 394-399]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. CORZINE. Mr. President, I say to the distinguished Senator from 
Utah, I could very much agree with many of the broad principles I hear. 
How we rearrange them to get to those longrun growth numbers that do 
compound and make our economy stronger is an area where men have a 
difference of opinion. That is one of the things I will discuss. We are 
seriously at a point in the path of economic history, at least of our 
Nation, where those choices lead to long-term structural problems, ones 
we have visited at other points in time, ones that with regard to 
alternatives could actually stimulate the economy, get us into an 
investment cycle that could drive that same kind of growth rate that 
the Senator speaks so eloquently about and which I could agree. If we 
could get that economy growing from 2.9 percent to 3.5 or 3.4, we could 
create the kinds of incentives for people to invest and go forward.
  The real issue is how do we get on to that path of growth? There are 
serious differences of opinion. That is a debate we need to have on the 
floor of the Senate in front of the American people.
  I will take a few moments to actually talk through at least my 
perspective on some of the issues that arise from the President's 
proposal. I have certainly heard a lot of commentary on it. We have 
heard from some that it is bold. We have heard from some that it is 
risky. We have heard from some that it is reckless.
  From my point of view, it is more towards the imprudent, at best, and 
in some ways I find it is reckless with regard to long-term fiscal 
health and stability.
  I consider myself a fiscal conservative, on balance, over a period of 
time. I think we need to live within our means. I don't think that is 
going to be accomplished here.
  I am pleased the President recognizes our economy has major problems. 
It is a reality. Unfortunately, it is past the time when we should have 
addressed some of these issues, but it is an important admission. This 
and changing the economic team has been an important statement. We 
needed a new look at where we were.
  Since March of 2001 when the recession was declared by a blue-ribbon 
panel of economists led by Mr. Feldstein, a prominent conservative 
economist, we have lost 2.1 million American jobs in the private 
sector. Actually, with this morning's announcement on unemployment, 
that would be about 2.2 million jobs. The unemployment rate, again, as 
many have heard, stands at 6 percent. The most important element of the 
announcement today is that over the last 2 months we have lost 188,000 
jobs.
  By the way, the President is predicting that the program that we put 
in place will only produce that amount of jobs over the next 12 to 18 
months.
  Mortgage foreclosures are at a high. I think everyone knows all too 
well the

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kind of lost value we have had in the stock market over the last 2 
years, even more substantial over the last 3. Consumer confidence is 
bumping along at historic lows. Demand has declined to an extent that 
businesses are operating at 75 percent of their capacity. The average 
for the country over the last 25 years is about 81 percent.
  We are running Federal budget deficit rates of about $200 billion 
this year. Just yesterday there was a new study of the State 
governments. They are running budget deficits cumulatively of about $90 
billion. Many of our local communities are suffering from the same kind 
of pressures in their local budgets. We are seeing increases in 
property taxes.
  I think, in short, we have a serious economic situation in this 
country. It is one that does deserve attention and I am glad we are 
having the debate with regard to it. Frankly, the people of New Jersey 
have known this for some time. I live in a State where Lucent 
Technology has shrunk its workforce from 180,000 employees--not all of 
them in New Jersey but on a worldwide basis--to roughly 30,000. We have 
closed essentially one of the great intellectual research institutions 
that created some of the innovation that has driven the American 
economy--Bell Labs. We are seeing an impending shutdown of the two 
remaining auto manufacturing plants, certainly cut shifts to one, and 
they are talking about closing one of those plants in New Jersey. In 
the northern part of the State we are seeing significant if not massive 
layoffs in the financial services industry, among others.
  We are having about a $4 billion budget deficit in the State of New 
Jersey in fiscal 2003 and projections for about $6 billion in fiscal 
2004.
  Our Governors and mayors know we have a problem. I am glad we are now 
coming to that recognition here in Washington.
  California is looking at a budget deficit, I saw in the paper this 
morning, of about $35 billion over the next 15 months to 18 months. The 
Texas deficit is $12 billion, New York's is $10 billion, New Jersey, as 
I said, is someplace between $5.5 billion and $6 billion. We have to 
understand we have to deal with growth in this economy and it has to 
happen now or we are going to have incredible stress and strain and I 
think actions that will end up undermining our longrun economic 
security here at home.
  We need a serious and focused action to get our economy moving. On 
that front I think there are several parts of the President's program 
that deserve support. For example, I totally would back accelerating an 
expanded child credit, the adjustments in the marriage penalty, tax 
relief for the middle class in the 10 percent bracket, the small 
business, the AMT provisions. These are all sound and reasonable 
provisions.
  Unfortunately, though, they are a relatively small part of the 
overall package. I think we need to make sure we are providing help to 
those who need it most. These do. I think they will help get our 
economy on track. Unfortunately, so few of these will be hit today, in 
2003 and 2004, to really give that drive, that thrust to the economy 
that I think will make a difference in a way that deals with some of 
those problems I talked about.
  We have 1 million people with 95,000 a week already on long-term 
extended unemployment. These are people who dropped off the rolls that 
will allow for benefiting from the unemployment compensation program we 
put in place this week.
  I think it is important that we get moving. There are some elements 
in the President's plan that I think are supportable, but they are 
relatively a small piece--about 30 percent--of the overall program. I 
think in many ways--and I will try to go through this and will make 
some comments on specific elements of it--you could argue there are 
elements of this program that are antigrowth.
  I would particularly like to talk about some of this cash issue I 
heard the Senator from Utah talk about. He and I agree that cash is 
king. It is one of those things that actually drives the valuations of 
corporations and their ability to do things. I just come out with a 
different perspective on how we are addressing that in this particular 
program.
  We really do, though, need to stimulate our economy now to provide 
jobs, absorb excess capacity, get into that investment cycle that I 
think will drive our economy to creating jobs. Let's remember, most 
economists and business people believed--and by the way, so did all of 
our budgeteers around here--that there were some simple principles we 
need to follow with regard to stimulus programs. They articulated those 
last year when we were going through these programs.
  We need short-term stimulus. That should be immediate and temporary. 
We need long-term fiscal discipline, long-term fiscal health and, in my 
view, the plan we saw put on the table on Tuesday just the reverse. 
Less than 10 percent of its 10-year cost will go into the economy this 
year, a very small percentage.
  By the way, if we talk for a while longer here on the floor of the 
Senate, there will be even less going to the economy this year, before 
the program is implemented.
  There is very little argument with the view that it will undermine 
our long-term fiscal discipline leading to what I believe will be 
higher long-term interest rates down the road. People argue about 
whether deficits create interest rates. They only do that when we are 
operating at full capacity. When there is not full capacity, there is 
no crowding out issue. What we need to worry about is what are interest 
rates going to do when there is real competition for money in a fully 
operating economy. I think those shortfalls that are going to be built 
in structurally when we come out of this are going to lead to 
disastrous deficits when we come out of this down the road.
  When the baby boomers retire--we have 35 million seniors now--we will 
have 70 million in 20 years. That will put incredible pressures on our 
medical system, Social Security system, all elements of our society. I 
do not think anyone has planned, particularly in the context of these 
tax cuts, how we are going to get through that.
  The bottom line, in my view, is this is a plan that will not work. It 
is antijobs and antigrowth, from my perspective, on balance, and in 
many ways it is imprudent.
  First, this plan--and this gets at one of the things on which I think 
the distinguished Senator from Utah and I agree, in principle--the plan 
to encourage corporations to shift cash from corporate investments and 
employment into dividends will reduce overall business investment and 
either cost jobs that could be created, or even the maintenance of 
them. Certainly in the short run that is going to be the case, and 
potentially over the long run.
  Few people seem to get focused on the fact which I think should be 
obvious: You can't spend the same dollar twice. So for each dollar 
contributed as a dividend, companies will have one less dollar to 
invest in plant and equipment; one less dollar to plow into research 
and development, one less dollar to hire new personnel. The end result 
will be investment in fewer jobs in the short term and potentially less 
economic growth in the long term as well.
  By the way, I have some sympathy for this double taxation of dividend 
argument. But if you were going to do that, it ought to be a deduction 
against taxable income on the balance sheet of the corporation. Then 
the cash is held, they can make the decisions and treat it as an 
equivalent of interest, and then we would not have the bias in our 
system towards debt as opposed to equity. And it should, in my view, be 
accompanied with reform, other tax reforms, that take away some of the 
causes of why reported income is about 100 percent higher than what 
taxable reported income is.
  It just strikes me we are addressing this problem wrong, even if we 
wanted to reduce the double taxation of dividends, but it is absolutely 
obvious and certainly common sense if you take cash off the balance 
sheet of the corporation it has less ability to invest in its future, 
less ability to invest in hiring more people going forward. Cash is

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king. It is part of the valuation. But it strikes me, as we are 
approaching this, it is a wrong formulation.
  The Bush plan does contain one element that I think is a reasonably 
decent and dampening incentive to shift money in cash dividends. It is 
very complicated. It adjusts the shareholder base. Their stock profits 
are not distributed in the form of dividends. I accept the fact that it 
will marginally offset the shift of cash dividends. I think that will 
be the minor scheme of things because I think the competition among 
corporations showing different returns will be high. But I do think 
that it is a reasonable attempt to try to make some offset to getting 
cash off the balance sheet for those who think they have to do marginal 
rates of return in which they can invest.
  It is an incredibly complex concept to be able to explain to the vast 
majority of Americans. To understand the differences and the increased 
bases for the vast majority of Americans will be a hard concept to get 
their minds around. It is going to lead to an absolute deluge of 
paperwork and shifting of information back and forth between investors, 
brokers, tax preparers, and all other kinds of folks which I think can 
lead to all kinds of unintended consequences.
  Beyond the lack of fiscal stimulus in the first year and what I 
believe will be a perverse impact created by the structure of the 
different proposals, I am also concerned about the distribution of tax 
benefits provided in the President's plan. Many of my colleagues tried 
to explain or at least talked about the obvious unfairness of that 
distribution in a progressive tax system. The Bush administration, in 
my view, and those who often talk about this obscure distributional 
impact of the proposal, focus the tax burden exclusively on Federal 
income taxes and ignore the severe burdens imposed by Federal payroll 
taxes, all shapes and forms of State taxes, and local taxes, and 
especially property taxes and sales taxes.
  In New Jersey, the budget deficit required us to cut services and 
raise property taxes 7.1 percent. The State of New Jersey, by the way, 
also had to put on a business tax to be able to raise about $1 billion 
to close that budget deficit. In the city of New York, which has been 
troubled by current events, will have to raise property taxes 18.5 
percent this year to try to make up for the holes that are being 
created and the lack of support from the Federal Government.
  These additional taxes that I am talking about, such as property 
taxes in particular, which weigh very heavily on the middle class, and 
taking into account the distribution of the American tax burden, create 
an entirely different profile than if you just take a small slice of 
the pie and look at the Federal income tax.
  Without taking a more comprehensive approach, the President is really 
misleading the American people based on the secondary impacts that will 
occur. Rather than focusing on the fairness issue, I wish to focus 
instead on the ineffectiveness of the administration's proposal in 
promoting economic growth.
  I am one of those guys who believes a rising tide does lift all 
boats, and if we do well everyone will benefit. Grow the pie.
  There is a broad agreement among economists that low- and moderate-
income people are likely to spend the tax cuts rather than the high 
marginal income people who would not have a propensity to spend it. It 
is a well-known fact and it is a matter of economic policy that any 
stimulus program ought to focus its tax cuts marginally on those who 
will turn around and spend it because then you will get the multiplier 
effect on the economy. You will get that growth that we are both trying 
to get.
  My friend from Utah has talked about trying to get it up to 3.5 or 
3.1 or 3.2. We can do that if we can get the people to spend the 
money--reducing inventories of manufacturers and people going back to 
work. I think the Bush plan does precisely the opposite.
  Over the next 10 years, just looking at some of the distributional 
interests, lots of people with annual incomes of more than $1 million--
by the way, this is a 10-year look--those with $1 million of income or 
more will get a break worth $900,000.
  Middle-class-income families--by the way, I define, at least in New 
Jersey, the middle class as being in the $75,000 to $125,000 range 
because there are different views about what that is. But let us take 
middle-class-income families of $75,000 to $125,000. In that same 10-
year period, they would get $18,000 over 10 years. I think that is 
roughly 2.5 percent of the $900,000.
  Let us consider people who would be in moderate-income classes. In 
some parts of the country maybe this is defined as the middle class. 
Even in New Jersey, it is between $30,000 and $40,000.
  The median income for an individual in the United States is about 
$27,000. But using a $30,000 to $40,000 range, I think the total 10-
year cumulative value of this is about $3,500 under the Bush plan. This 
is .4 percent of the total benefit that the million-dollar earners get.
  Consider the 25 million taxpayers with purported gross incomes of 
less than $10,000. They make up 20 percent of the population of 
taxpayers. They will get, over the 10 years, a total of $50.
  By the way, they are paying payroll taxes. Many of them are paying 
property taxes. Many of them are paying State sales taxes, and all the 
other nonconsidered taxes in this view. I think that is a tough way to 
look at it. This is not intended to say, wow, this is bad; people at 
the top end are getting such great breaks. It is just that there is a 
distributional reality that doesn't make sense: $900,000 over 10 years 
for those making more than $1 million; $18,000 for those between 
$75,000 and $100,000; and $3,500 for those between $30,000 and $40,000; 
and $50 for those $10,000 and below.
  I think you can make a fairness argument. But I think the most 
important piece is that it will not stimulate the economy. The people 
who will spend money--particularly in the short run--are not going to 
be receiving the resources to be able to go off to their Wal-Marts or 
Targets and other places and put the demand into this economy.
  I know that the administration and many have argued and are pointing 
out that those of us who make the kind of case that I just made are 
entering into what is tantamount to class warfare. My point has nothing 
to do with that--nothing at all. It is, in fact, just the opposite.
  As other Democrats, I believe our goal should be to grow the economy 
to the benefit of every American--for all Americans. I want to create 
more millionaires. I want more people to be more successful--not fewer. 
Handing out tax cuts so disproportionately to the top of the income 
scale is a highly ineffective way to grow our economy. They just do not 
turn around and drive the economy--certainly not in the short run.
  There are real debates about whether that actually gets back into the 
investment system, particularly if a lot of it goes off to seniors and 
a lot of it goes into bonds and coupons and into Federal Government 
securities. It is just not certain that it is going to grow productive 
capacity, and certainly it isn't going to eat up the excess capacity we 
have today. I don't think this is going to grow the pie larger, which 
is what all of us should look for.
  We made more millionaires in the 1990s than we did in any other 
period in the history of the United States. I think it is absolutely 
essential that we talk about growing the pie as opposed to getting into 
this discussion about how we are dividing it.
  Keep in mind that all Americans, including the very wealthy, in my 
view, benefit from a strong economy. Those at the top income scale, as 
I said, did well in the 1990s. We adopted policies based on a 
commitment of fiscal discipline, along with targeted investment in 
priorities such as education. Abandoning those policies for tax breaks 
such as the proposed dividend exclusion clearly will not mean more cash 
in hand for those who invest in our society. There is nothing wrong 
with that in its own right. But is it going to grow the economy? I 
think this, in many ways, runs the risk of being

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antigrowth. It certainly runs the risk of higher interest rates down 
the road given the fiscal implications that may very well come about.
  I just have to say that it seems odd after the growth experience of 
the 1990s. I know there were problems at the end of the 1990s. But we 
created 22 million new jobs, we had a balanced budget, and we had 
tremendous growth and productivity in this country because of 
investment in technology and the spread of American entrepreneurial 
skills.
  Why we need radical surgery on America's tax structure is just a hard 
concept to get your mind around. Clearly, we have cyclical problems 
that can be addressed by dealing with an inventory cycle and investment 
cycle. And I think that calls for short-term stimulus and managing 
carefully our long-term fiscal situation.
  Next, I want to move on and talk about one claim that has been made 
repeatedly by proponents of the administration and the administration 
officials that gets sort of tied up in this class-warfare charge; that 
is, the administration's tax cut supposedly benefits seniors. This 
claim, in my view, is about as misleading as anything I can imagine.
  There are 37 million seniors in the U.S. Yet only one-fourth of 
them--less than 10 million; about 9.25 million--will receive dividends. 
Some 75 percent--or 27 million--of America's seniors will get 
absolutely nothing from the President's dividend exclusion. Moreover, 
only a small fraction of the wealthiest seniors will enjoy most of the 
benefits. Nearly 40 percent of the dividend tax cut for seniors will 
flow to those filers with incomes exceeding $200,000. That is a mere 
2.5 percent of tax returns filed by senior citizens.
  I am trying to figure it out because there are married couples in 
there, but I think it is around 250,000 seniors out of 37 million 
seniors who will get 40 percent of that so-called benefit for seniors. 
So it is highly misleading to argue that seniors will benefit from this 
plan. Only a small number of the wealthiest seniors will benefit.
  And when you take the potential cost of this--in maintaining the real 
value of Social Security benefits, the ability of our Nation to truly 
deal with a prescription drug benefit, regardless of what kind of plan 
comes forward--to talk about this benefiting seniors on a relative 
basis to the overall needs of the seniors is hard for me to get my mind 
around. It is virtually mind-boggling. In fact, one could make the case 
that seniors are among the biggest losers in the President's plan 
because we are not going to have the ability to deal with this baby 
boom generation, going from 37 million seniors to 70 million seniors 
over the next 15 years.
  So far, I have discussed the small size of the stimulus in the first 
year, its incentives for companies to shift cash away from investments 
and jobs, and targeting the tax cuts to those who are least likely to 
spend it. I have responded to some of the claims that I think are 
relatively bogus with regard to benefits for America's seniors.
  Now I want to focus on another and critically important issue, which 
is the failure to address the severe fiscal problems facing our States. 
In many ways, it makes those problems worse. In fact, it is in this 
vein that this plan is also seriously antigrowth. And if it isn't 
antigrowth, it is absolutely antistate when you come to considering the 
impact on State finances.
  While many of us in Washington are talking about putting more money 
into the economy, as I suggested, most of our Governors and our State 
legislators are having to deal with how we pull money out of the 
economy. That is because almost all of our States have strict balanced 
budget requirements--48 out of 50 States--and face severe fiscal 
problems.
  The total of the projected deficits, as I said, was just 
reestimated--about $90 billion, give or take $10 billion. I agree with 
the distinguished Senator from Utah; some of these economic projections 
are hard to put in print. But if we do not get the economy going, the 
only way that number is going to go is up. The crisis facing State 
treasuries is not just a problem for elected officials; it is a problem 
for all of our citizens and for our economy. States and localities 
already have begun to raise taxes.
  In New Jersey, property taxes have increased 7.1 percent; in the city 
of New York, 18.5 percent. Across this country, we are raising property 
taxes because people care about the education of their children, they 
care about transportation, and they are investing heavily in homeland 
security to protect the American people. It is a big deal that we are 
not taking on a fair share of that at the Federal level.
  By the way, we just created another unfunded mandate with Leave No 
Child Behind. And our budget proposals are not meeting our promises 
according to it. We have not done that with IDEA or in special 
education. And there are real needs with regard to our homeland 
security. We are putting burdens on the States and local governments 
and not coming up with help to make it happen.
  These tax increases and spending cuts that the individual States and 
localities are doing not only hurt taxpayers but they really undermine 
the efficacy of Government and the program beneficiaries they serve to 
depress the economy further. That deficit among the States, in fact, 
more than offsets the entire stimulus proposed for fiscal year 2003 in 
the President's plan. And I suspect you will be able to say the same 
thing about fiscal year 2004. We have different timings on when the two 
fit together. But we are taking out of one pocket and putting it into 
another. I think it is really wrongheaded policy and really will limit 
growth in the country. I think it is really putting unfair burdens on 
our State and local governments.
  Only the Federal Government is in a position to counter these 
pressures. Instead, the administration's plan does absolutely nothing 
to address these fiscal crises in our States or to reduce the need for 
State tax hikes or spending cuts. It just does not deal with these 
issues. I hope we can understand and adjust this plan to take into 
consideration the plight of all of our country, all of our various 
entities that service the American people, by pulling this all 
together.
  By the way, the proposal actually worsens the situation on not only 
the support level, but every State ties its State income tax--those 
States that have an income tax--to the Federal tax system. And the 
States are going to directly lose $4.5 billion--almost $100 million in 
my State of New Jersey, but over $1 billion in the State of California.
  Mr. President, I ask unanimous consent for an additional 5 minutes.
  The PRESIDING OFFICER. Is there objection?
  Mr. GREGG. Mr. President, reserving the right to object, I would 
simply ask if we could enter a unanimous consent agreement on order. I 
certainly do not object to the Senator from New Jersey having an extra 
5 minutes, but I understand the Senator from Utah and the Senator from 
Ohio wish to speak.
  I ask unanimous consent that after the Senator from Utah has spoken, 
who will speak after the Senator from New Jersey, and after the Senator 
from Ohio has spoken, I be recognized at the completion of the comments 
of the Senator from Ohio.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. GREGG. I thank the Senator from New Jersey.
  Mr. CORZINE. I appreciate very much the courtesy of the Senator from 
New Hampshire.
  Mr. President, we have a problem in the States. And the tie in of the 
taxes that States collect to the Federal tax system is one of those 
places where there is a problem.
  Another, on which I will not go into great deal, is the issuance of 
municipal bonds, tax-exempt bonds, the fundamental element of how you 
fund infrastructure, schools, and all the other elements at the local 
level. They are going to have to compete now with tax-free dividends 
and are going to suffer very seriously on a competitive basis in the 
financial markets.
  I can assure you, interest rates for State and local government 
bonds, on an equal basis--regardless of where the

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markets go, where interest rates go--will be higher than they would 
have otherwise been. So there is a real problem.
  I will go back and just mention briefly, the lack of attention to 
these exhausted unemployment benefits is going to put greater burdens 
on States and create greater rolls in Medicaid. Lots of support is 
going to have to be delivered to the individual families who are 
suffering from those kinds of situations. I think we have a real 
problem there.
  I also want to say I think there are other issues involved. Maybe the 
most important is, where are our priorities? We are at a time of great 
national insecurity, with good reason. We need to protect the American 
people at home, abroad, and against terrorists.
  We had almost 700 New Jersey people lose their lives on September 11. 
People are concerned about security. We need to be investing in it. Why 
and wherefore are we having such a program that brings little sacrifice 
to those who are doing well at a time when there are such great needs?
  I could go on further about some of the complexities of this and how 
it will offer great opportunity for financial engineering, chicanery, 
if you will, almost the repetitive nature of some of the things that we 
saw in the last several years: The unfortunate implication for 401(k)s 
and IRAs and tax-exempt pension funds with regard to dividends, the 
disincentives it will create for longrun savings for retirement, the 
problems it may very well cause to the real estate industry because of 
the competitive disadvantage of REITs and the financial structure which 
is an important thing for housing for people.
  There are serious, serious flaws in this. Instead of directly 
addressing the fundamental economic problem, which is excess capacity, 
both in labor and manufacturing, this reflects, in my view, a return to 
the discredited economics of radical supply siders.
  I don't want to quote only a Republican commentator, but I will. 
Kevin Phillips put it this way:

       This isn't even trickle-down economics. It's mist down 
     economics.

  We are on the wrong track. We have a new economic team at the White 
House. I hope they will step back and evaluate some of these elements. 
There are places where we can work together on this plan, but 90 
percent of this proposal that is focused on the longrun restructuring 
of economic structure, in my view, is a bad idea. It truly hurts our 
States and potentially undermines investment at the corporate level, 
and it has some issues on the fairness side.
  It is time that we take a rethink. I hope we can have a great debate 
over the next few months in the Senate to make this a better program to 
help all Americans.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. BENNETT. Mr. President, I spoke at length and I do not intend to 
do that again. I congratulate the Senator from New Jersey on his 
presentation. Even though it sounds as if we are miles apart, we are in 
fact very much together on our determination to see to it that the 
ultimate result of what we do is long-term growth for the whole 
economy. I congratulate him on his analysis.
  I have a few things, obviously, with which I would disagree and 
anticipate that we will have that conversation both in the Banking 
Committee and on the floor.
  There are two specifics I would like to respond to briefly before I 
turn the time over to my friend from Ohio. The Senator from New Jersey 
said he would prefer, with respect to dividends, that they be deducted 
as expenses on the corporate P&L statement rather than made tax free to 
the recipient. I agree with him absolutely, that that is the more 
intelligent way to do it. I have said that to the White House as we 
have had these conversations. The reaction is politically that would be 
more difficult to sell than making it sound tax free to the recipient.
  Maybe if the Senator from New Jersey and I march together in that 
particular parade, we can move in that direction because the comments 
he makes about the complexity of the tax system are exactly correct. 
The difficulties of reporting how this would be handled are just as 
complex as the Senator from New Jersey suggests they are. I would be 
with him in seeing if we could make that shift somewhere along the way.
  I know he would stop short of doing that because of his feelings with 
respect to the dividend proposal anyway, but I want him to know that 
his analysis here is the same as mine and that he has analyzed that one 
correctly.
  The other item we ought to have on the table as we have the 
discussion, the Senator from New Jersey refers to the impact on the top 
1 percent; they would receive $900,000, et cetera. That is true if we 
assume that every taxpayer who files a tax return who is in that top 1 
percent is in fact an individual.
  When I first came to the Senate, I stood on this floor and asked this 
fundamental question--I know the answer from the Senator from New 
Jersey will be yes, but the answer from the vast majority of my 
colleagues was no--do you know what a K-1 is? Overwhelmingly, 
Republicans and Democrats had no idea what a K-1 is. A K-1 is the form 
you file for income you are receiving from a partnership or an S 
corporation.
  A majority of the tax returns filed by the individuals who would 
receive the $900,000 to which the Senator from New Jersey refers 
include K-1 income. The K-1 is set up to avoid double taxation. You 
join an S corporation or a partnership and you say: All right, the 
profits of that corporation will flow to my individual tax return. I 
will pay taxes.
  I know this very dramatically from my experience in the 1980s when 
the personal rate was lower than the corporate rate. With four other 
individuals, we built a company from virtually nothing to a company 
that today employs over 4,000 people, and we did it in the decade of 
greed, as it was referred to by some, of the Reagan years when the top 
personal rate was 28 percent. By putting that on my personal tax return 
and paying 28 percent rather than today's effective rate of 42, I was 
able to see to it that that company, which I headed as the CEO, grew 
with internally generated funds.
  The difference between a 28-percent yield to the Feds and a 42-
percent yield to the Feds was the difference between our ability to 
make that business survive. We built that business entirely with 
internally generated funds.
  My salary was $100,000. My tax return showed $1 million because the 
money that was flowing through that corporation went on to my tax 
return as K-1 income. I didn't get a dime of that. I would have loved 
to have had the after-tax income show up, but we had to fund the 
company. So as we talk about the tax break to wealthy individuals 
during this debate, let us keep in mind that we are not talking about 
Michael Jordan or Donald Trump or Tiger Woods. Yes, they would get 
those breaks, but overwhelmingly a majority of the people who would get 
those breaks are businesses that, either through an S corporation 
device or a partnership device, are putting that income on to 
individual returns. And that would, in fact, be money that would be 
invested in creating new jobs. That would, in fact, be money that would 
be invested in growing the economy.
  I know the Senator from New Jersey has had K-1 income because he has 
been a partnership partner in a very successful partnership, and he 
understands this. But I want to take this occasion to put this on the 
record and make this part of the debate as we go forward.
  Let us understand, as we argue about the amount the top 1 percent is 
going to get out of this, that we are not talking just about 
individuals; we are talking about businesses that depend very 
definitely on the benefit that comes from having S corporation profits 
reported through a K-1 show up on individual tax returns but are, in 
fact, not getting into the individual pockets, are, in fact, funding 
the growth of small businesses and new enterprises.
  With those two immediate comments, I will yield the floor and save 
the other notes I have taken on the Senator's excellent speech for a 
direct conversation with the Senator from New Jersey. He has made a 
significant

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contribution to this debate, and I look forward to working with him to 
try to eventually come up with a growth package that makes sense.
  Mr. CORZINE. Mr. President, I ask unanimous consent to respond for 1 
minute, if the Senator from Ohio will not object.
  Mr. DeWINE. I have no objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CORZINE. I appreciate very much the comments of the Senator from 
Utah. I think we need a healthy debate to get the best policies. I will 
make one observation about the S corporations and K-1s, which I know 
something about. The fact is, I try not to use the sort of 
distributional numbers. You will notice I did not use the top 1 
percent; I used people making $1 million or more as the basis on which 
I compare numbers. So there is some element of that which translates 
into comparability. I think you and I can sort through those in detail. 
But the fact is, people at $1 million or more in adjusted gross income 
are going to have an advantage of $900,000 cumulatively over the 10 
years, and the other brackets are at $18,500, $3,500, and $50.
  I believe that a rising tide lifts all boats. That is the theme about 
which I am talking. We may have differences about how you get there. I 
want to make sure that we distinguish between talking about 
percentages, and what I am trying to talk about is the people who 
actually get the benefit.
  The PRESIDING OFFICER. The Senator from Ohio is recognized.

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