[Congressional Record (Bound Edition), Volume 149 (2003), Part 2]
[Senate]
[Pages 1817-1820]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        THE PRESIDENTIAL BURDEN

  Mrs. HUTCHISON. Mr. President, the President of the United States has 
an awesome responsibility. I don't think anyone in America would say 
that he does not realize what his responsibility is and that he is not 
working as hard as any person could to try to do the right thing for 
our country, in both our domestic agenda, our homeland security, and, 
of course, our national defense.
  He has a heavy burden. He must do something that stimulates the 
economy, that puts people back to work, and at the same time he must 
spend everything that is necessary to secure the people in our country 
who live here and to make sure that our young men and women who are 
fighting the war on terrorism, who are fighting for our freedom and our 
country, wherever they may be in the world, have everything they need 
to do the job we are asking them to do.
  I have been listening to a lot of the comments that have been made on 
the floor today. I would like to take each of the areas that have been 
mentioned and try to talk about what the President's agenda is and why 
he is trying so hard to beef up our economy, at the same time fighting 
a very long and, frankly, iconoclastic war on terrorism.
  This is a new kind of enemy. It is not the kind of enemy that is one 
country or two countries. It is no particular country. It is not the 
kind of enemy we always have had one which wanted to kill or harm us 
but didn't want to hurt themselves. No, this is an enemy that is 
willing to blow itself up in order to harm Americans. It is even an 
enemy that would tell their children, teach their children, educate 
their children, that suicide, in order to harm Americans and freedom-
loving people, is a good thing.
  This is a difficult kind of war. Our President knows we are fighting 
on every front, that we are trying to find the enemy, no matter where 
they are. If they are in the caves in Afghanistan or if they are in 
Iraq or if they are in North Korea or if they are in our own country, 
the President is doing everything he can to execute this war and to 
tell the people of the United States we must stand together. We must 
stand together and keep the spirit of our country if we are going to 
have the patience and the resolve to beat this new kind of enemy.
  That is what our President is trying to do. He doesn't want to make 
war. He doesn't want to make war on Iraq or anyone else. But he also 
knows that if we are going to keep another 9/11 from happening--God 
forbid a 9/11 with a nuclear weapon or biological or chemical weapon--
if he is going to prevent that from happening in our country, he is 
going to have to have the full support of the American people. That is 
exactly what he is trying to get, by talking about the problems in 
Iraq, talking about what Saddam Hussein is doing.
  The people who have seen Saddam Hussein, who have seen the treachery 
of this despot, know he is someone we must not have in control of a 
country and with the potential of having a weapon of mass destruction.
  I know the President tonight is going to talk about the war on 
terrorism and all the things he is doing and all the young men and 
women who are on their way to the Middle East to make sure we are 
negotiating from a position of strength. But I know this President's 
very last resort is war. It is not the 1st resort, nor the 2nd resort, 
nor the 3rd resort, nor the 100th resort. But he knows that unless 
Saddam Hussein knows we mean business--we will do what we say we are 
going to do--we are going to lose this war on terrorism. That is the 
leadership the President of the United States is showing.
  The President, in addition to the burden of having to prosecute a 
war, also has the burden of having to make sure our domestic economy 
stays strong, because it will be very difficult to prosecute a war if 
our domestic economy continues to erode.
  We passed a tax cut 2 years ago under the leadership of President 
Bush and with strong support from Congress. That tax cut has helped a 
lot of people. I believe that tax cut kept us from going into a deeper 
recession. Now the

[[Page 1818]]

President is trying to stimulate the economy, and the President is 
looking at history, and what has happened when we have had tax cuts in 
history has been phenomenal.
  In 1964, President Kennedy led the fight for tax cuts. In 1965--1 
year later--the gross domestic product rose 8 percent. Over the next 5 
years, it rose 48 percent. Unemployment fell from 5.2 percent in 1965 
to 3.5 percent in 1969. Five years later, revenues had risen for the 
U.S. Government by 66 percent. There was a $5.9 billion deficit in 1965 
but a $3.2 billion surplus in 1969. That was the effect of the tax cuts 
of 1964.
  After the Reagan tax cut of 1981, the gross domestic product rose 4 
percent the next year, 1982; 42 percent over the next 5 years; 
unemployment fell from 7.6 percent to 7 percent in 1986. Five years 
later, revenues had risen by 28 percent.
  So it has been proven that tax cuts will give the economy the boost 
it needs.
  We have seen a situation in America where corporations have been 
dissuaded, because of double taxation of dividends, from giving 
dividends. So people who are saving and investing in order to have 
retirement security have been getting fewer and fewer dividends because 
companies get nothing for paying the dividend. They have to pay taxes 
on the money first before they would issue a dividend. It is cheaper to 
go into debt. So we have seen debt financing rise, and dividends that 
go to shareholders that can help secure retirement have been going 
down.
  Today in America, 50 percent of the people own stock and 50 percent 
of the people who get dividends are our senior citizens. These are 
people who have tried to provide for their retirement security, not 
looking to their Government but looking to themselves. That is what we 
want to encourage. That is why the President is trying to eliminate the 
dividends' taxes.
  So we are trying very hard to stimulate the economy.
  How are we doing it? We are doing it, of course, by trying to 
eliminate the double taxation of dividends, trying to encourage 
corporations to give dividends and help people who want to have that 
income to live on, who need that income. But we are also doing 
something else. We are trying to lessen the burden of the marriage 
penalty. Why would we have a marriage penalty in our country? We don't 
need to tax marriage, but that is what we do. And the President is 
trying to eliminate that. I have introduced the bill in the Senate to 
eliminate the marriage tax penalty.
  We are also trying to bring down the tax rate for every bracket--yes, 
every bracket. Mr. President, 35 percent of the small businesses in our 
country will get relief if we lower the upper bracket. Everyone will 
get relief under the President's plan--everyone who pays taxes will get 
relief, and especially the small businesspeople in our country who 
desperately need this tax relief and are trying very hard to make ends 
meet in these tough times. We want to help them.
  I think the President is doing a great job. I am very proud that he 
is trying to stimulate the economy. He is very concerned about people 
who have lost their jobs, people who are worried about their retirement 
security, and he is trying to do something about it. At the same time, 
he is taking on a massive war on terrorism, to make sure that freedom 
reigns in the world, to make sure that our way of life--democracy, 
freedom, free enterprise, self-reliance--lasts in the world--not a way 
of life that says that suicide is a good thing if you can kill other 
people at the same time, not a way of life that says people will never 
have a chance to have a role in their own government. There will be no 
self-government in a world of terrorism. We cannot allow that kind of 
power to take over the world. That is what the President is trying to 
do.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I compliment our distinguished Senator from 
Texas for the excellent remarks she has made about really what is going 
on right now and what the President is trying to do.
  I, for one, want to help the President. I want to help him to help 
this economy. So I rise today in support of President Bush's growth and 
jobs plan, and I would like to take a few minutes today to tell you why 
I believe this is the right prescription for America at this time.
  I know from talking to people in my own home State of Utah, and 
across the country, that our current economy is not meeting its full 
potential. This is crystal clear. The nationwide unemployment rate 
stands at 6 percent. And while that is better than usual after a 
recession, it is still far too high. Thousands of people in Utah and 
millions of people across the country are out there looking for work. 
Yes, most of them are finding jobs eventually, but jobs are far too 
scarce still. As long as there are people who want to work but cannot 
get work, we have a problem in our country.
  The President's plan starts off by speeding up the tax reductions 
this body has already passed by a significant margin. This is just 
plain common sense. A big part of the tax cut we passed in 2001 was 
designed to be phased in over the following 10 years, with rate cuts, 
marriage penalty relief, and child tax credits increasing every few 
years. But since our economy is below its potential right now, then 
right now is the time to make the full amount of these tax cuts 
effective. Doing so would put money in people's pockets immediately. 
The IRS would change their withholding tables immediately after the 
accelerated tax cuts become law, so more money would show up 
immediately in workers' paychecks.
  The President's plan to speed up the tax cuts now, right when we need 
them, will have an immediate, visible impact on practically every 
American taxpayer.
  A key part of the President's plan is to accelerate marriage penalty 
relief and speed up the $1,000-per-child tax credit. Phasing in these 
family-friendly tax provisions slowly might have made some political 
sense 2 years ago, but today, when young families are wondering whether 
Mom and Dad will have a job next week, cutting the tax man's share of 
the pie will be a big help.
  Waiting 3 to 5 years for family tax relief makes no sense in the 
middle of a slow economic recovery. Let's do it now. Let's provide a 
tremendous boost to millions of American families.
  As to some of the media reports that the President's plan unfairly 
benefits the wealthiest people in the country and does little or 
nothing for low- or middle-income taxpayers, let me set the record 
straight.
  According to the Treasury Department, a married couple with two 
children and an annual income of $40,000 would see their taxes decline, 
under the President's plan, by $1,133--from $1,178 to $45--in 2003.
  In other words, under today's taxes, they would pay $1,178. That 
would be reduced $1,133 to where they have a tax bill of $45. That is 
for people who make $40,000 a year. For this family, there is not much 
more tax relief that can be given.
  Under the Bush plan, 92 million taxpayers would receive, on average, 
a tax cut of $1,083 in the year 2003 and thereafter. Forty-six million 
married couples would receive an average tax cut of $1,716. Thirty-four 
million families with children would benefit from an average tax 
benefit of $1,473. Six million single women with children would receive 
an average tax cut of $1,384. Twenty-three million small business 
owners would receive tax cuts averaging $2,042. Talk about helping the 
middle class.
  In my home State of Utah, over 646,000 taxpayers would get tax relief 
from the President's package. That is important to me. That is 
important to almost 650,000 people in the State of Utah.
  Under our ultra-progressive income tax, the top 50 percent of income 
earners--those who made $27,682 in the year 2000 or more--that upper 50 
percent, from $27,000 and up, paid over 96 percent of all the income 
taxes paid in this Nation.
  Therefore, those who are paying most of the income taxes are 
naturally going

[[Page 1819]]

to get much of the benefit of a tax cut. In fact, it is almost 
impossible to cut any tax without making the people who pay that tax 
better off.
  Projections prepared by the Treasury Department show that 40 percent 
of the President's proposed tax cut would go to people with income over 
$200,000 per year. But it is important to note that this same group is 
paying 44.8 percent--almost 45 percent--of the total income tax.
  If we enact the President's plan, people making over $200,000 a year 
will end up paying even a larger fraction of the Nation's income tax 
bill, 45.4 percent. On the other hand, people making less than $50,000 
would pay less of the total share than they do now.
  Further, the President's plan contains an important provision to 
increase the incentive for small business investment. I might have made 
this provision even stronger than the President chose to make it. But 
even as it stands, the increase to $75,000 per year of business 
expensing will be a boon to companies struggling to grow. It will 
increase the demand for business equipment and software, sectors that 
have been hit especially hard in this downturn. This proposal can help 
to revive business spending and create new jobs in industries that make 
machines, computers, and software.
  I would like to debunk one particular false notion that is making the 
rounds here on Capitol Hill and in the media; the idea that lower 
income people spend all of their tax cut but the middle and higher 
income people will just save them.
  It turns out that how much you earn does not have a night-and-day 
impact on the people's decision to spend. A recent study by the 
nonpartisan National Bureau of Economic Research concluded--and I 
quote--

       Low-income households are not more likely to spend the 
     rebate.

  In fact, as this chart shows, it looks as though families with lower 
incomes actually tended to spend a smaller fraction of their rebate.
  I will just point to this chart now. The modest income earners spent 
little of their rebates. Americans who earned up to $50,000 per year 
spent less than 20 percent of their 2001 tax rebate. But Americans who 
earned more than $50,000 a year spent over 25 percent of their rebate 
checks.
  It would appear to me rebates are not the way to go if we want to 
stimulate the economy. Yet that is what our colleagues on the other 
side seem to think is the gold standard to help get the economy going.
  I would now like to address the part of the President's package that 
has drawn the most attention, the plan to end the double taxation of 
dividends. Ending the double taxation of dividends will make stocks 
more valuable, it will make businesses more financially sound, and it 
will make it harder for a few wrongdoers to hide their corporate 
shenanigans.
  Why do America's corporations load up on debt financing despite the 
fact that the higher debt levels increase the risk of bankruptcy? I 
will tell you why. Because our Nation's tax laws have always given them 
massive financial incentives to do just exactly that.
  The reason is simple. When a corporation pays interest to 
bondholders, that payment is taxed only once. That is at the bondholder 
level. But, in contrast, when it pays dividends to stockholders, that 
payment is taxed twice--to both the corporation and the shareholder.
  President Bush's economic growth plan contains a proposal to end this 
absurd incentive and, by doing so, his plan will strengthen the 
foundations of our economy and help ensure growth and new jobs for 
years to come.
  This chart--``How the Double Taxation of Dividends Harms Our 
Nation''--shows that bankruptcies go up, corporate accountability goes 
down, and investment in capital formation also goes down. And that is 
where jobs are thrown to the wind.
  Our Tax Code's harsh and unfair treatment of dividend payments harms 
the foundation of our economy in those three ways. It increases the 
number of bankruptcies, it weakens corporate accountability, and it 
slows the formation of capital.
  By loading up on tax-deductible bonds and bank loans rather than 
issuing new shares of stock, corporations increase their chance of 
going bankrupt.
  Our Tax Code should not encourage this behavior. When corporations 
load up on debt, they commit too much of their cash flow to making 
interest payments, and the danger of bankruptcy becomes all too real. 
Once we change this policy, businesses will find they have people lined 
up out the door to buy stocks that pay dividends. When companies hear 
of the clamor for dividend-paying stocks, they will have a much 
stronger incentive to pay for new projects and new factories by issuing 
new shares of stock rather than running to the bank or the bond market 
for a loan.
  And then, if times get tough, businesses will not be as likely to 
declare bankruptcy and head to Federal court for a painful 
reorganization, as we are seeing today. Instead, many companies will be 
able to cut their dividend to shareholders, and continue business more 
or less as usual.
  This is not speculation on my part. Just open up any textbook on 
corporate finance--books that are on the shelves of many an MBA--and 
you will see it yourself in black and white: Business managers are 
taught to weigh the benefits of tax-favored debt finance against the 
increased risk of bankruptcy. They even have a name for it. They call 
it the Trade-off Theory of Capital Structure. And it is caused by the 
double taxation of dividends.
  Our Tax Code's inequitable treatment of equity also weakens corporate 
accountability. Dividend payments are cash-on-the-barrelhead evidence 
that a company is profitable.
  While not a perfect measure by any means, it can be an important 
signal that a firm is solvent. As they say on Wall Street, ``Profit is 
an opinion, but cash is a fact.''
  The Wall Street Journal reported recently that only about 30 percent 
of S&P 500 corporations pay any dividends at all. A crucial reason for 
this dividend drought is our Tax Code, which requires corporations to 
pay 35 cents in taxes for every dollar in profit and then, on top of 
that, requires taxpayers who get those profits in the form of dividends 
to pay personal income tax. The total government take, when state taxes 
are added, can exceed 70 percent. So what is the incentive to pay 
dividends--something we ought to be encouraging, rather than 
destroying.
  Finally, our inequitable treatment of equity slows innovation and the 
formation of capital. The double taxation of dividend income cuts the 
flow of equity funding to all but the most promising investments. Good 
ideas go unexplored and promising investments go unfunded because they 
cannot guarantee enough after-tax profit to investors.
  I believe it is important for Congress to eliminate the double 
taxation of dividends. It is important for our country and the 
stability of our business community. That is why I support President 
Bush's plan. By making shares a more attractive investment, his plan 
will boost demand for stocks and push up their value. By reducing the 
long-run risk of bankruptcy and encouraging companies to take on 
promising projects, it will be good for employees. And most 
importantly, ending the double taxation of dividends will make American 
corporations stronger, much more accountable, than they are today and 
more innovative in the years to come.
  I am proud to be able to support the President's growth and jobs 
package, and I am looking forward to working with my colleagues on the 
Finance Committee, both Democrats and Republicans, to pass out a bill 
that give tax cuts to America's families, that gives small businesses 
an opportunity to grow, and that end the double taxation of dividends 
to strengthen both our stock market and the financial foundations of 
American business. This is an economic agenda that addresses the needs 
of today as well as the challenges of the future. The American people 
deserve no less.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.

[[Page 1820]]

  The legislative clerk proceeded to call the roll.
  Mr. THOMAS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. THOMAS. Mr. President, we are in morning business, I believe.
  The PRESIDING OFFICER. The Senator is recognized for up to 32 
minutes.

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