[Congressional Record (Bound Edition), Volume 149 (2003), Part 9]
[Senate]
[Pages 11797-11822]
[From the U.S. Government Publishing Office, www.gpo.gov]




    JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003--Continued

  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, is it in order to continue now on the 
growth package?
  The PRESIDING OFFICER. The regular order is the growth package.


    Amendments Nos. 567, 571, 580, 593, 613, 625, 626, 627, 644 As 
Modified, 646, 649, 651, 654, 657, 659 As Modified, 661, 665, 673, and 
                              680, En Bloc

  Mr. GRASSLEY. Mr. President, I have a series of amendments that both 
sides have cleared. I send the amendments to the desk, ask that they be 
considered, as modified, ask that they be agreed to en bloc, and that 
the motion to reconsider be laid upon the table.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments were agreed to, as follows:


                           Amendment no. 567

    (Purpose: To require group health plans to provide coverage for 
   reconstructive surgery following mastectomy, consistent with the 
             Women's Health and Cancer Rights Act of 1998)

       At the end of end of subtitle C of title V, add the 
     following:

     SEC. __. CONFORMING THE INTERNAL REVENUE CODE OF 1986 TO 
                   REQUIREMENTS IMPOSED BY THE WOMEN'S HEALTH AND 
                   CANCER RIGHTS ACT OF 1998.

       (a) In General.--Subchapter B of chapter 100 (relating to 
     other requirements) is amended by inserting after section 
     9812 the following new section:

     ``SEC. 9813. REQUIRED COVERAGE FOR RECONSTRUCTIVE SURGERY 
                   FOLLOWING MASTECTOMIES.

       ``(a) In General.--A group health plan that provides 
     medical and surgical benefits with respect to a mastectomy 
     shall provide, in a case of a participant or beneficiary who 
     is receiving benefits in connection with a mastectomy and who 
     elects breast reconstruction in connection with such 
     mastectomy, coverage for--

[[Page 11798]]

       ``(1) all stages of reconstruction of the breast on which 
     the mastectomy has been performed,
       ``(2) surgery and reconstruction of the other breast to 
     produce a symmetrical appearance, and
       ``(3) prostheses and physical complications of mastectomy, 
     including lymphedemas,

     in a manner determined in consultation with the attending 
     physician and the patient. Such coverage may be subject to 
     annual deductibles and coinsurance provisions as may be 
     deemed appropriate and as are consistent with those 
     established for other benefits under the plan. Written notice 
     of the availability of such coverage shall be delivered to 
     the participant upon enrollment and annually thereafter.
       ``(b) Prohibitions.--A group health plan may not--
       ``(1) deny to a patient eligibility, or continued 
     eligibility, to enroll or to renew coverage under the terms 
     of the plan, solely for the purpose of avoiding the 
     requirements of this section, and
       ``(2) penalize or otherwise reduce or limit the 
     reimbursement of an attending provider, or provide incentives 
     (monetary or otherwise) to an attending provider, to induce 
     such provider to provide care to an individual participant or 
     beneficiary in a manner inconsistent with this section.
       ``(c) Rule of Construction.--Nothing in this section shall 
     be construed to prevent a group health plan from negotiating 
     the level and type of reimbursement with a provider for care 
     provided in accordance with this section.''
       (b) Clerical Amendment.--The table of sections for chapter 
     100 of such Code is amended inserting after the item relating 
     to section 9812 the following new item:

``Sec. 9813. Required coverage for reconstructive surgery following 
              mastectomies.''

       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to plan years beginning on or after the 
     date of enactment of this Act.
       (2) Special rule for collective bargaining agreements.--In 
     the case of a group health plan maintained pursuant to 1 or 
     more collective bargaining agreements between employee 
     representatives and 1 or more employers, any plan amendment 
     made pursuant to a collective bargaining agreement relating 
     to the plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.


                           Amendment no. 571

  (Purpose: To amend the Internal Revenue Code of 1986 to expand the 
 combat zone income tax exclusion to include income for the period of 
    transit to the combat zone and to remove the limitation on such 
      exclusion for commissioned officers, and for other purposes)

       On page 281, between lines 2 and 3, insert the following:

     SEC. __. EXPANSION OF INCOME TAX EXCLUSION FOR COMBAT ZONE 
                   SERVICE.

       (a) Combat Zone Service To Include Transit to Zone.--
     Section 112(c)(3) of the Internal Revenue Code of 1986 
     (relating to definitions) is amended by adding at the end the 
     following new sentence: ``Such service shall include any 
     period (not to exceed 14 days) of direct transit to the 
     combat zone.''.
       (b) Removal of Limitation on Exclusion for Commissioned 
     Officers.--
       (1) In general.--Subsection (b) of section 112 of the 
     Internal Revenue Code of 1986 (relating to certain combat 
     zone compensation of members of the Armed Forces) is 
     repealed.
       (2) Conforming amendments.--
       (A) Section 112(a) of such Code is amended--
       (i) by striking ``below the grade of commissioned 
     officer'', and
       (ii) by striking ``Enlisted Personnel'' in the heading and 
     inserting ``In General''.
       (B) Section 112(c) of such Code is amended by striking 
     paragraphs (1) and (5) and by redesignating paragraphs (2), 
     (3), and (4) as paragraphs (1), (2), and (3), respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to months beginning after December 31, 2002.

     SEC. __. AVAILABILITY OF CERTAIN TAX BENEFITS FOR MEMBERS OF 
                   THE ARMED FORCES PERFORMING SERVICES AT 
                   GUANTANAMO BAY NAVAL STATION, CUBA, AND ON THE 
                   ISLAND OF DIEGO GARCIA.

       (a) General Rule.--In the case of a member of the Armed 
     Forces of the United States who is entitled to special pay 
     under section 305 of title 37, United States Code (relating 
     to special pay: hardship duty pay), for services performed as 
     a member of the Joint Task Force Guantanamo at Guantanamo Bay 
     Naval Station, Cuba, or for services performed on the Island 
     of Diego Garcia as part of Operation Iraqi Freedom, such 
     member shall be treated in the same manner as if such 
     services were in a combat zone (as determined under section 
     112 of the Internal Revenue Code of 1986) for purposes of the 
     following provisions of such Code:
       (1) Section 2(a)(3) (relating to special rule where 
     deceased spouse was in missing status).
       (2) Section 112 (relating to the exclusion of certain 
     combat pay of members of the Armed Forces).
       (3) Section 692 (relating to income taxes of members of 
     Armed Forces on death).
       (4) Section 2201 (relating to members of the Armed Forces 
     dying in combat zone or by reason of combat-zone-incurred 
     wounds, etc.).
       (5) Section 3401(a)(1) (defining wages relating to combat 
     pay for members of the Armed Forces).
       (6) Section 4253(d) (relating to the taxation of phone 
     service originating from a combat zone from members of the 
     Armed Forces).
       (7) Section 6013(f)(1) (relating to joint return where 
     individual is in missing status).
       (8) Section 7508 (relating to time for performing certain 
     acts postponed by reason of service in combat zone).
       (b) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), this 
     section shall take effect on January 1, 2003.
       (2) Withholding.--Subsection (a)(5) shall apply to 
     remuneration paid after December 31, 2002.


                           amendment No. 580

(Purpose: To amend the Internal Revenue Code of 1986 to allow employees 
in renewal communities to qualify for the renewal community employment 
      credit by employing residents of certain other communities)

       At the end of end of subtitle C of title V add the 
     following:

     SEC. __. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR 
                   EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF 
                   CERTAIN OTHER RENEWAL COMMUNITIES.

       (a) In General.--Section 1400H(b)(2) (relating to 
     modification) is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) subsection (d)(1)(B) thereof shall be applied by 
     substituting `such renewal community, an adjacent renewal 
     community within the same State as such renewal community, or 
     a renewal community within such State which is within 5 miles 
     of any border of such renewal community' for `such 
     empowerment zone'.''.
       (b) Reduction of Acceleration of Top Rate Reduction In 
     Individual Income Tax Rates.--Notwithstanding the amendment 
     made by section 102(a) of this Act, in lieu of the percent 
     specified in the last column of the table in paragraph (2) of 
     section 1(i) of the Internal Revenue Code of 1986, as amended 
     by such section 102(a), for taxable years beginning during 
     calendar year 2003, 35.1% shall be substituted for such year.
       (c) Effective Dates.--
       (1) The amendments made by subsection (a) shall take effect 
     as if included in the amendment made by section 101(a) of the 
     Community Renewal Tax Relief Act of 2000.
       (2) Subsection (b) shall take effect on the date of 
     enactment of this Act.


                           Amendment No. 593

  (The amendment is printed in the Record of May 14, 2003 under ``Text 
of Amendments.'')


                           amendment no. 613

 (Purpose: To clarify that water and sewerage service laterals qualify 
                as contribution in aid of construction)

       On page 281, between lines 2 and 3, insert the following:

     SEC. __. CLARIFICATION OF CONTRIBUTION IN AID OF CONSTRUCTION 
                   FOR WATER AND SEWERAGE DISPOSAL UTILITIES.

       (a) In General.--Subparagraph (A) of section 118(c)(3) 
     (relating to definitions) is amended to read as follows:
       ``(A) Contribution in aid of construction.--The term 
     `contribution in aid of construction' shall be defined by 
     regulations prescribed by the Secretary, except that such 
     term--
       ``(i) shall include amounts paid as customer connection 
     fees (including amounts paid to connect the customer's water 
     service line or sewer lateral line to the utility's 
     distribution or collection system or extend a main water or 
     sewer line to provide service to a customer), and
       ``(ii) shall not include amounts paid as service charges 
     for starting or stopping services.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to contributions made after the date of the 
     enactment of this Act.


                           amendment no. 625

  (The text of the amendment is printed in today's Record under ``Text 
of Admendments.'')


                           amendment no. 626

   (Purpose: To amend the Internal Revenue Code to simplify certain 
        provisions applicable to real estate investment trusts)

       At the approprite place, add the following:

                       TITLE I--REIT CORRECTIONS

     SEC. 101. REVISIONS TO REIT ASSET TEST.

       (a) Expansion of Straight Debt Safe Harbor.--Section 856 
     (defining real estate investment trust) is amended--
       (1) in subsection (c) by striking paragraph (7), and

[[Page 11799]]

       (2) by adding at the end the following new subsection:
       ``(m) Safe Harbor in Applying Subsection (c)(4)--
       ``(1) In general.--In applying subclause (III) of 
     subsection (c)(4)(B)(iii), except as otherwise determined by 
     the Secretary in regulations, the following shall not be 
     considered securities held by the trust:
       ``(A) Straight debt securities of an issuer which meet the 
     requirements of paragraph (2).
       ``(B) Any loan to an individual or an estate.
       ``(C) Any section 467 rental agreement (as defined in 
     section 467(d)), other than with a person described in 
     subsection (d)(2)(B).
       ``(D) Any obligation to pay rents from real property (as 
     defined in subsection (d)(1)).
       ``(E) Any security issued by a State or any political 
     subdivision thereof, the District of Columbia, a foreign 
     government or any political subdivision thereof, or the 
     Commonwealth of Puerto Rico, but only if the determination of 
     any payment received or accrued under such security does not 
     depend in whole or in part on the profits of any entity not 
     described in this subparagraph or payments on any obligation 
     issued by such an entity,
       ``(F) Any security issued by a real estate investment 
     trust.
       ``(G) Any other arrangement as determined by the Secretary.
       ``(2) Special rules relating to straight debt securities.--
       ``(A) In general.--For purposes of paragraph (1)(A), 
     securities meet the requirements of this paragraph if such 
     securities are straight debt, as defined in section 
     1361(c)(5) (without regard to subparagraph (B)(iii) thereof).
       (B) Special rules relating to certain contingencies.--For 
     purposes of subparagraph (A), any interest or principal shall 
     not be treated as failing to satisfy section 1361(c)(5)(B)(i) 
     solely by reason of the fact that the time of payment of such 
     interest or principal is subject to a contingency, but only 
     if--
       ``(i) any such contingency does not have the effect of 
     changing the effective yield to maturity, as determined under 
     section 1272, other than a change in the annual yield to 
     maturity which either--
       ``(I) does not exceed the greater of \1/4\ of 1 percent or 
     5 percent of the annual yield to maturity, or
       ``(II) results solely from a default or the exercise of a 
     prepayment right by the issuer of the debt, or
       ``(ii) neither the aggregate issue price nor the aggregate 
     face amount of the issuer's debt instruments held by the 
     trust exceeds $1,000,000 and not more than 12 months of 
     unaccrued interest can be required to be prepaid thereunder.
       ``(C) Special rules relating to corporate or partnership 
     issuers.--In the case of an issuer which is a corporation or 
     a partnership, securities that otherwise would be described 
     in paragraph (1)(A) shall be considered not to be so 
     described if the trust holding such securities and any of its 
     controlled taxable REIT subsidiaries (as defined in 
     subsection (d)(8)(A)(iv)) hold any securities of the issuer 
     which--
       ``(i) are not described in paragraph (1) (prior to the 
     application of paragraph (1)(C)), and
       ``(ii) have an aggregate value greater than 1 percent of 
     the issuer's outstanding securities.
       ``(3) Look-through rule for partnership securities.--
       ``(A) In general.--For purposes of applying subclause (III) 
     of subsection (c)(4)(B)(iii)--
       ``(i) a trust's interest as a partner in a partnership (as 
     defined in section 7701(a)(2)) shall not be considered a 
     security, and
       ``(ii) the trust shall be deemed to own its proportionate 
     share of each of the assets of the partnership.
       ``(B) Determination of trust's interest in partnership 
     assets.--For purposes of subparagraph (A), with respect to 
     any taxable year beginning after the date of the enactment of 
     this subparagraph--
       ``(i) the trust's interest in the partnership assets shall 
     be the trust's proportionate interest in any securities 
     issued by the partnership (determined without regard to 
     subparagraph (A)(i) and paragraph (4), but not including 
     securities described in paragraph (1)), and
       ``(ii) the value of any debt instrument shall be the 
     adjusted issue price thereof, as defined in section 
     1272(a)(4).
       ``(4) Certain partnership debt instruments not treated as a 
     security.--For purposes of applying subclause (III) of 
     subsection (c)(4)(B)(iii)--
       ``(A) any debt instrument issued by a partnership and not 
     described in paragraph (1) shall not be considered a security 
     to the extent of the trust's interest as a partner in the 
     partnership, and
       ``(B) any debt instrument issued by a partnership and not 
     described in paragraph (1) shall not be considered a security 
     if at least 75 percent of the partnership's gross income 
     (excluding gross income from prohibited transactions) is 
     derived from sources referred to in subsection (c)(3).
       ``(5) Secretarial guidance.--The Secretary is authorized to 
     provide guidance (including through the issuance of a written 
     determination, as defined in section 6110(b)) that an 
     arrangement shall not be considered a security held by the 
     trust for purposes of applying subclause (III) of subsection 
     (c)(4)(B)(iii) notwithstanding that such arrangement 
     otherwise could be considered a security under subparagraph 
     (F) of subsection (c)(5).''

     SEC. 102. CLARIFICATION OF APPLICATION OF LIMITED RENTAL 
                   EXCEPTION.

       Subparagraph (A) of section 856(d)(8) (relating to special 
     rules for taxable REIT subsidiaries) is amended to read as 
     follows:
       ``(A) Limited rental exception.--
       (i) In general.--The requirements of this subparagraph are 
     met with respect to any property if at least 90 percent of 
     the leased space of the property is rented to persons other 
     than taxable REIT subsidiaries of such trust and other than 
     persons described in paragraph (2)(B).
       (ii) Rents must be substantially comparable.--Clause (i) 
     shall apply only to the extent that the amounts paid to the 
     trust as rents from real property (as defined in paragraph 
     (1) without regard to paragraph (2)(B)) from such property 
     are substantially comparable to such rents paid by the other 
     tenants of the trust's property for comparable space.
       ``(iii) Times for testing rent comparability.--The 
     substantial comparability requirement of clause (ii) shall be 
     treated as met with respect to a lease to a taxable REIT 
     subsidiary of the trust if such requirement is met under the 
     terms of the lease--
       ``(I) at the time such lease is entered into,
       ``(II) at the time of each extension of the lease, 
     including a failure to exercise a right to terminate, and
       ``(III) at the time of any modification of the lease 
     between the trust and the taxable REIT subsidiary if the rent 
     under such lease is effectively increased pursuant to such 
     modification.

       With respect to subclause (III), if the taxable REIT 
     subsidiary of the trust is a controlled taxable REIT 
     subsidiary of the trust, the term `rents from real property' 
     shall not in any event include rent under such lease to the 
     extent of the increase in such rent on account of such 
     modification.
       ``(iv) Controlled taxable reit subsidiary.--For purposes of 
     clause (iii), the term `controlled taxable REIT subsidiary' 
     means, with respect to any real estate investment trust, any 
     taxable REIT subsidiary of such trust if such trust owns 
     directly or indirectly--
       ``(I) stock possessing more than 50 percent of the total 
     voting power of the outstanding stock of such subsidiary, or
       ``(11) stock having a value of more than 50 percent of the 
     total value of the outstanding stock of such subsidiary.
       ``(v) Continuing qualification based on third party 
     actions.--If the requirements of clause (i) are met at a time 
     referred to in clause (iii), such requirements shall continue 
     to be treated as met so long as there is no increase in the 
     space leased to any taxable REIT subsidiary of such trust or 
     to any person described in paragraph (2)(B).
       ``(vi) Correction period.--If there is an increase referred 
     to in clause (v) during any calendar quarter with respect to 
     any property, the requirements of clause (iii) shall be 
     treated as met during the quarter and the succeeding quarter 
     if such requirements are met at the close of such succeeding 
     quarter.''.

     SEC. 103. DELETION OF CUSTOMARY SERVICES EXCEPTION.

       Subparagraph (B) of section 857(b)(7) (relating to 
     redetermined rents) is amended by striking clause (ii) and by 
     redesignating clauses (iii), (iv), (v), (vi), and (vii) as 
     clauses (ii), (iii), (iv), (v), and (vi), respectively.

     SEC. 104. CONFORMITY WITH GENERAL HEDGING DEFINITION.

       (a) Definition.--Subparagraph (G) of section 856(c)(5) 
     (relating to treatment of certain hedging instruments) is 
     amended to read as follows:
       ``(G) Treatment of certain hedging instruments.--Except to 
     the extent provided by regulations, any income of a real 
     estate investment trust from a hedging transaction (as 
     defined in clause (ii) or (iii) of section 1221(b)(2)(A)) 
     which is clearly identified pursuant to section 1221(a)(7), 
     including gain from the sale or disposition of such a 
     transaction, shall not constitute gross income under 
     paragraph (2) to the extent that the transaction hedges any 
     indebtedness incurred or to be incurred by the trust to 
     acquire or carry real estate assets.''.

     SEC. 105. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

       Clause (i) of section 857(b)(5)(A) (relating to imposition 
     of tax in case of failure to meet certain requirements) is 
     amended by striking ``90 percent'' and inserting ``95 
     percent''.

     SEC. 106. PROHIBITED TRANSACTIONS PROVISIONS.

       (a) Expansion of Prohibited Transaction Safe Harbor.--
     Section 857(b)(6) (relating to income from prohibited 
     transactions) is amended by redesignating subparagraphs (D) 
     and (E) as subparagraphs (E) and (F), respectively, and by 
     inserting after subparagraph (C) the following new 
     subparagraph:
       ``(D) Certain sales not to constitute prohibited 
     transactions.--For purposes of this part, the term 
     `prohibited transaction'

[[Page 11800]]

     does not include a sale of property which is a real estate 
     asset (as defined in section 856(c)(5)(B)) if--
       ``(i) the trust held the property for not less than 4 years 
     in connection with the trade or business of producing timber,
       ``(ii) the aggregate expenditures made by the trust, or a 
     partner of the trust, during the 4-year period preceding the 
     date of sale which--
       ``(I) are includible in the basis of the property (other 
     than timberland acquisition expenditures), and
       ``(II) are directly related to operation of the property 
     for the production of timber, or for the preservation of the 
     property for use as timberland,

     do not exceed 30 percent of the net selling price of the 
     property,
       ``(iii) the aggregate expenditures made by the trust, or a 
     partner of the trust, during the 4-year period preceding the 
     date of sale which--
       ``(I) are includible in the basis of the property (other 
     than timberland acquisition expenditures), and
       ``(II) are directly related to operation of the property 
     for the production of timber, or for the preservation of the 
     property for use as timberland,

     do not exceed 50 percent of the net selling price of the 
     property,
       ``(iv)(I) during the taxable year the trust does not make 
     more than 7 sales of property (other than sales of 
     foreclosure property or sales to which section 1033 applies), 
     or
       ``(II) the aggregate adjusted bases (as determined for 
     purposes of computing earnings and profits) of property 
     (other than sales of foreclosure property or sales to which 
     section 1033 applies) sold during the taxable year does not 
     exceed 10 percent of the aggregate bases (as so determined) 
     of all of the assets of the trust as of the beginning of the 
     taxable year,
       ``(v) in the case that the requirement of clause (iv)(I) is 
     not satisfied, substantially all of the marketing 
     expenditures with respect to the property were made through 
     an independent contractor (as defined in section 856(d)(3)) 
     from whom the trust itself does not derive or receive any 
     income, and
       ``(vi) the sales price of the property sold by the trust to 
     its taxable REIT subsidiary is not based in whole or in part 
     on the income or profits of the subsidiary or the income or 
     profits that the subsidiary derives from the sale or 
     operation of such property.''.

     SEC. 107. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), the 
     amendments made by this title shall apply to taxable years 
     beginning after December 31, 2000.
       (b) Sections 103 Through 106.--The amendments made by 
     sections 103, 104, 105 and 106 shall apply to taxable years 
     beginning after the date of the enactment of this Act.

                   TITLE III--REIT SAVINGS PROVISIONS

     SEC. 301. REVISIONS TO REIT PROVISIONS.

       (a) Rules of Application for Failure To Satisfy Section 
     856(c)(4).--Section 856(c) (relating to definition of real 
     estate investment trust), as amended by section 101, is 
     amended by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) Rules of application for failure to satisfy paragraph 
     (4).--
       ``(A) De minimis failure.--A corporation, trust, or 
     association that fails to meet the requirements of paragraph 
     (4)(B)(iii) for a particular quarter shall nevertheless be 
     considered to have satisfied the requirements of such 
     paragraph for such quarter if--
       ``(i) such failure is due to the ownership of assets the 
     total value of which does not exceed the lesser of--
       ``(I) 1 percent of the total value of the trust's assets at 
     the end of the quarter for which such measurement is done, 
     and
       ``(II) $10,000,000, and
       ``(ii)(I) the corporation, trust, or association, following 
     the identification of such failure, disposes of assets in 
     order to meet the requirements of such paragraph within 6 
     months after the last day of the quarter in which the 
     corporation, trust or association's identification of the 
     failure to satisfy the requirements of such paragraph 
     occurred or such other time period prescribed by the 
     Secretary and in the manner prescribed by the Secretary, or
       ``(II) the requirements of such paragraph are otherwise met 
     within the time period specified in subclause (I).
       ``(B) Failures exceeding de minimis amount.--A corporation, 
     trust, or association that fails to meet the requirements of 
     paragraph (4) for a particular quarter shall nevertheless be 
     considered to have satisfied the requirements of such 
     paragraph for such quarter if--
       ``(i) such failure involves the ownership of assets the 
     total value of which exceeds the de minimis standard 
     described in subparagraph (A)(i) at the end of the quarter 
     for which such measurement is done,
       ``(ii) following the corporation, trust, or association's 
     identification of the failure to satisfy the requirements of 
     such paragraph for a particular quarter, a description of 
     each asset that causes the corporation, trust, or association 
     to fail to satisfy the requirements of such paragraph at the 
     close of such quarter of any taxable year is set forth in a 
     schedule for such quarter filed in accordance with 
     regulations prescribed by the Secretary,
       ``(iii) the failure to meet the requirements of such 
     paragraph for a particular quarter is due to reasonable cause 
     and not due to willful neglect,
       ``(iv) the corporation, trust, or association pays a tax 
     computed under subparagraph (C), and
       ``(v)(I) the corporation, trust, or association disposes of 
     the assets set forth on the schedule specified in clause (ii) 
     within 6 months after the last day of the quarter in which 
     the corporation, trust or association's identification of the 
     failure to satisfy the requirements of such paragraph 
     occurred or such other time period prescribed by the 
     Secretary and in the manner prescribed by the Secretary, or
       ``(II) the requirements of such paragraph are otherwise met 
     within the time period specified in subclause (I).
       ``(C) Tax.--For purposes of subparagraph (B)(iv)--
       ``(i) Tax imposed.--If a corporation, trust, or association 
     elects the application of this subparagraph, there is hereby 
     imposed a tax on the failure described in subparagraph (B) of 
     such corporation, trust, or association. Such tax shall be 
     paid by the corporation, trust, or association.
       ``(ii) Tax computed.--The amount of the tax imposed by 
     clause (i) shall be the greater of--
       ``(I) $50,000, or
       ``(II) the amount determined (pursuant to regulations 
     promulgated by the Secretary) by multiplying the net income 
     generated by the assets described in the schedule specified 
     in subparagraph (B)(ii) for the period specified in clause 
     (iii) by the highest rate of tax specified in section 11.
       ``(iii) Period.--For purposes of clause (ii)(II), the 
     period described in this clause is the period beginning on 
     the first date that the failure to satisfy the requirements 
     of such paragraph (4) occurs as a result of the ownership of 
     such assets and ending on the earlier of the date on which 
     the trust disposes of such assets or the end of the first 
     quarter when there is no longer a failure to satisfy such 
     paragraph (4).
       ``(iv) Administrative provisions.--For purposes of subtitle 
     F, the taxes imposed by this subparagraph shall be treated as 
     excise taxes with respect to which the deficiency procedures 
     of such subtitle apply.''.
       (b) Modification of Rules of Application for Failure to 
     Satisfy Sections 856(c)(2) or 856(c)(3).--Paragraph (6) of 
     section 856(c) (relating to definition of real estate 
     investment trust) is amended by striking subparagraphs (A) 
     and (B), by redesignating subparagraph (C) as subparagraph 
     (B), and by inserting before subparagraph (B) (as so 
     redesignated) the following new subparagraph:
       ``(A) following the corporation, trust, or association's 
     identification of the failure to meet the requirements of 
     paragraph (2) or (3), or of both such paragraphs, for any 
     taxable year, a description of each item of its gross income 
     described in such paragraphs is set forth in a schedule for 
     such taxable year filed in accordance with regulations 
     prescribed by the Secretary, and''.
       (c) Reasonable Cause Exception to Loss of REIT Status If 
     Failure To Satisfy Requirements.--Subsection (g) of section 
     856 (relating to termination of election) is amended--
       (1) in paragraph (1) by inserting before the period at the 
     end of the first sentence the following: `unless paragraph 
     (5) applies', and
       (2) by adding at the end the following new paragraph:
       ``(5) Entities to which paragraph applies.--This paragraph 
     applies to a corporation, trust, or association--
       ``(A) which is not a real estate investment trust to which 
     the provisions of this part apply for the taxable year due to 
     one or more failures to comply with one or more of the 
     provisions of this part (other than subsection (c)(6) or 
     (c)(7) of section 856),
       ``(B) such failures are due to reasonable cause and not due 
     to willful neglect, and
       ``(C) if such corporation, trust, or association pays (as 
     prescribed by the Secretary in regulations and in the same 
     manner as tax) a penalty of $50,000 for each failure to 
     satisfy a provision of this part due to reasonable cause and 
     not willful neglect.''.
       (d) Deduction of Tax Paid From Amount Required To Be 
     Distributed.--Subparagraph (E) of section 857(b)(2) is 
     amended by striking ``(7)'' and inserting ``(7) of this 
     subsection, section 856(c)(7)(B)(iii), and section 
     856(g)(1).''.
       (e) Expansion of Deficiency Dividend Procedure.--Subsection 
     (e) of section 860 is amended by striking ``or'' at the end 
     of paragraph (2), by striking the period at the end of 
     paragraph (3) and inserting ``; or'', and by adding at the 
     end the following new paragraph:
       ``(4) a statement by the taxpayer attached to its amendment 
     or supplement to a return of tax for the relevant tax 
     year.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after date of 
     enactment.


                           amendment no. 627

(Purpose: To exclude certain punitive damages received by the taxpayer 
                           from gross income)

       At the end of subtitle C of title V, add the following:

[[Page 11801]]



     SEC. __. EXCLUSION OF CERTAIN PUNITIVE DAMAGE AWARDS.

       (a) In General.--Section 104 (relating to compensation for 
     injuries or sickness) is amended by redesignating subsection 
     (d) as subsection (e), and by inserting after subsection (c) 
     the following new subsection:
       ``(d) Exclusion of Punitive Damages Paid to a State Under a 
     Split-Award Statute.--
       ``(1) In general.--The phrase `(other than punitive 
     damages)' in subsection (a) shall not apply to--
       ``(A) any portion of an award of punitive damages in a 
     civil action which is paid to a State under a split-award 
     statute, or
       ``(B) any attorneys' fees or other costs incurred by the 
     taxpayer in connection with obtaining an award of punitive 
     damages to which subparagraph (A) is applicable.
       ``(2) Split-Award Statute.--For purposes of this 
     subsection, the term `split-award statute' means a State law 
     that requires a fixed portion of an award of punitive damages 
     in a civil action to be paid to the State.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to awards made in taxable years ending after the 
     date of the enactment of this Act.


                     amendment no. 644, as modified

            (Purpose: To extend certain expiring provisions)

       At the end, insert the following:

          TITLE VII--EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

             Subtitle A--Extensions of Expiring Provisions

     SEC. 701. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO 
                   MENTAL HEALTH BENEFITS.

       (a) In General.--Subsection (f) of section 9812 is amended 
     by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to plan years beginning after December 31, 2002.

     SEC. 702. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST 
                   REGULAR AND MINIMUM TAX LIABILITY.

       (a) In General.--Paragraph (2) of section 26(a) is 
     amended--
       (1) by striking ``rule for 2000, 2001, 2002, and 2003.--'' 
     and inserting ``rule for 2000, 2001, 2002, 2003, and 2004.--
     '', and
       (2) by striking ``during 2000, 2001, 2002, or 2003,'' and 
     inserting ``during 2000, 2001, 2002, 2003, or 2004''.
       (b) Conforming Amendments.--
       (1) Section 904(h) is amended by striking ``during 2000, 
     2001, 2002, or 2003'' and inserting ``during 2000, 2001, 
     2002, 2003, or 2004''.
       (2) The amendments made by sections 201(b), 202(f), and 
     618(b) of the Economic Growth and Tax Relief Reconciliation 
     Act of 2001 shall not apply to taxable years beginning during 
     2004.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 703. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN 
                   RENEWABLE RESOURCES.

       (a) In General.--Subparagraphs (A), (B), and (C) of section 
     45(c)(3) are each amended by striking ``2004'' and inserting 
     ``2005''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to facilities placed in service after December 
     31, 2002.

     SEC. 704. WORK OPPORTUNITY CREDIT.

       (a) In General.--Subparagraph (B) of section 51(c)(4) is 
     amended by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals who begin work for the employer 
     after December 31, 2002.

     SEC. 705. WELFARE-TO-WORK CREDIT.

       (a) In General.--Subsection (f) of section 51A is amended 
     by striking ``2003'' and inserting ``2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to individuals who begin work for the employer 
     after December 31, 2002.

     SEC. 706. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   OIL AND NATURAL GAS PRODUCED FROM MARGINAL 
                   PROPERTIES.

       (a) In General.--Subparagraph (H) of section 613A(c)(6) is 
     amended by striking ``2004'' and inserting ``2005''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 707. QUALIFIED ZONE ACADEMY BONDS.

       (a) In General.--Paragraph (1) of section 1397E(e) is 
     amended by striking ``2000, 2001, 2002, and 2003'' and 
     inserting ``2000, 2001, 2002, 2003, and 2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 708. COVER OVER OF TAX ON DISTILLED SPIRITS.

       (a) In General.--Paragraph (1) of section 7652(f) is 
     amended by striking ``January 1, 2004'' and inserting 
     ``January 1, 2005''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to articles brought into the United States after 
     December 31, 2002.

     SEC. 709. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER 
                   TECHNOLOGY.

       (a) Extension of Deduction.--Section 170(e)(6)(G) (relating 
     to termination) is amended by striking ``December 31, 2003'' 
     and inserting ``December 31, 2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 2002.

     SEC. 710. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

       (a) In General.--Section 30 is amended--
       (1) in subsection (b)(2)--
       (A) by striking ``December 31, 2003,'' and inserting 
     ``December 31, 2004,'', and
       (B) in subparagraphs (A), (B), and (C), by striking 
     ``2004'', ``2005'', and ``2006'', respectively, and inserting 
     ``2005'', ``2006'', and ``2007'', respectively.
       (2) in subsection (e), by striking ``December 31, 2006'' 
     and inserting ``December 31, 2007''.
       (b) Conforming Amendments.--Clause (iii) of section 
     280F(a)(1)(C) is amended by striking ``2007'' and inserting 
     ``2008''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     2002.

     SEC. 711. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN 
                   REFUELING PROPERTY.

       (a) In General.--Section 179A is amended--
       (1) in subsection (b)(1)(B)--
       (A) by striking ``December 31, 2003,'' and inserting 
     ``December 31, 2004,'', and
       (B) in clauses (i), (ii), and (iii), by striking ``2004'', 
     ``2005'', and ``2006'', respectively, and inserting ``2005'', 
     ``2006'', and ``2007'', respectively, and
       (2) in subsection (f), by striking ``December 31, 2006'' 
     and inserting ``December 31, 2007''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to property placed in service after December 31, 
     2002.

     SEC. 712. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

       (a) In General.--Subparagraph (D) of section 62(a)(2) is 
     amended by striking ``during 2002 or 2003'' and inserting 
     ``during 2002, 2003, or 2004''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 713. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Paragraphs (2) and (3)(B) of section 
     220(i) (defining cut-off year) are each amended by striking 
     ``2003'' each place it appears and inserting ``2004''.
       (b) Conforming Amendments.--
       (1) Paragraph (2) of section 220(j) is amended by striking 
     ``1998, 1999, 2001, or 2002'' each place it appears and 
     inserting ``1998, 1999, 2001, 2002, or 2003''.
       (2) Subparagraph (A) of section 220(j)(4) is amended by 
     striking ``and 2002'' and inserting ``2002, and 2003''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2003.

     SEC. 714. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

       (a) Extension of Termination Date.--Subsection (h) of 
     section 198 is amended by striking ``2003'' and inserting 
     ``2004''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to expenditures paid or incurred after December 
     31, 2002.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.


                           amendment no. 646

 (Purpose: To allow a credit for distilled spirits wholesalers and for 
 distilled spirits in control State bailment warehouses against income 
tax for the cost of carrying Federal excise taxes prior to the sale of 
                      the product bearing the tax)

       On page 281, between lines 2 and 3, insert the following:

     SEC. __. INCOME TAX CREDIT FOR DISTILLED SPIRITS WHOLESALERS 
                   AND FOR DISTILLED SPIRITS IN CONTROL STATE 
                   BAILMENT WAREHOUSES FOR COSTS OF CARRYING 
                   FEDERAL EXCISE TAXES ON BOTTLED DISTILLED 
                   SPIRITS.

       (a) In General.--Subpart A of part I of subchapter A of 
     chapter 51 (relating to gallonage and occupational taxes) is 
     amended by adding at the end the following new section:

     ``SEC. 5011. INCOME TAX CREDIT FOR AVERAGE COST OF CARRYING 
                   EXCISE TAX.

       ``(a) In General.--For purposes of section 38, the amount 
     of the distilled spirits credit for any taxable year is the 
     amount equal to the product of--
       ``(1) in the case of--
       ``(A) any eligible wholesaler--
       ``(i) the number of cases of bottled distilled spirits--

       ``(I) which were bottled in the United States, and
       ``(II) which are purchased by such wholesaler during the 
     taxable year directly from the bottler of such spirits, or

       ``(B) any person which is subject to section 5005 and which 
     is not an eligible wholesaler, the number of cases of bottled 
     distilled spirits which are stored in a warehouse operated 
     by, or on behalf of, a State, or agency or political 
     subdivision thereof, on which title has not passed on an 
     unconditional sale basis, and

[[Page 11802]]

       ``(2) the average tax-financing cost per case for the most 
     recent calendar year ending before the beginning of such 
     taxable year.
       ``(b) Eligible Wholesaler.--For purposes of this section, 
     the term `eligible wholesaler' means any person which holds a 
     permit under the Federal Alcohol Administration Act as a 
     wholesaler of distilled spirits which is not a State, or 
     agency or political subdivision thereof.
       ``(c) Average Tax-Financing Cost.--
       ``(1) In general.--For purposes of this section, the 
     average tax-financing cost per case for any calendar year is 
     the amount of interest which would accrue at the deemed 
     financing rate during a 60-day period on an amount equal to 
     the deemed Federal excise tax per case.
       ``(2) Deemed financing rate.--For purposes of paragraph 
     (1), the deemed financing rate for any calendar year is the 
     average of the corporate overpayment rates under paragraph 
     (1) of section 6621(a) (determined without regard to the last 
     sentence of such paragraph) for calendar quarters of such 
     year.
       ``(3) Deemed federal excise tax per case.--For purposes of 
     paragraph (1), the deemed Federal excise tax per case is 
     $25.68.
       ``(d) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Case.--The term `case' means 12 80-proof 750 
     milliliter bottles.
       ``(2) Number of cases in lot.--The number of cases in any 
     lot of distilled spirits shall be determined by dividing the 
     number of liters in such lot by 9.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 38 is amended by striking 
     ``plus'' at the end of paragraph (14), by striking the period 
     at the end of paragraph (15) and inserting ``, plus'', and by 
     adding at the end the following new paragraph:
       ``(16) the distilled spirits credit determined under 
     section 5011(a).''.
       (2) Subsection (d) of section 39 (relating to carryback and 
     carryforward of unused credits) is amended by adding at the 
     end the following new paragraph:
       ``(11) No carryback of section 5011 credit before january 
     1, 2003.--No portion of the unused business credit for any 
     taxable year which is attributable to the credit determined 
     under section 5011(a) may be carried back to a taxable year 
     beginning before January 1, 2003.''.
       (3) The table of sections for subpart A of part I of 
     subchapter A of chapter 51 is amended by adding at the end 
     the following new item:

``Sec. 5011. Income tax credit for average cost of carrying excise 
              tax.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.


                           amendment no. 649

 (Purpose: To provide tax relief to growers affected by citrus canker)

       At the appropriate place insert the following:

     SEC.   . CITRUS CANKER TREE RELIEF.

       (a) Ratable Inclusion.--
       (1) In general.--Part I of subchapter Q of chapter 1 
     (relating to income averaging) is amended by inserting after 
     section 1301 the following new section:

     ``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE 
                   PAYMENTS.

       ``(a) In General.--At the election of the taxpayer, any 
     amount taken into account as income or gain by reason of 
     receiving a citrus canker tree payment shall be included in 
     the income of the taxpayer ratably over the 10-year period 
     beginning with the taxable year in which the payment is 
     received or accrued by the taxpayer. Such election shall be 
     made on the return of tax for such taxable year in such 
     manner as the Secretary prescribes, and, once made shall be 
     irrevocable.
       ``(b) Citrus Canker Tree Payment.--For purposes of 
     subsection (a), the term `citrus canker tree payment' means a 
     payment made to an owner of a commercial citrus grove to 
     recover income that was lost as a result of the removal of 
     commercial citrus trees to control canker under the 
     amendments to the citrus canker regulations (7 C.F.R. 301) 
     made by the final rule published in the Federal Register by 
     the Secretary of Agriculture on June 18, 2001 (66 Fed. Reg. 
     32713, Docket No. 00-37-4).''
       (2) Clerical amendment.--The table of sections for part I 
     of subchapter Q of chapter 1 is amended by inserting after 
     the item relating to section 1301 the following new item:

     ``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE 
                   PAYMENTS.''.

       (b) Expansion of Period Within Which Converted Citrus Tree 
     Property Must Be Replaced.--Section 1033 (relating to period 
     within which property must be replaced) is amended by 
     redesignating subsection (k) as subsection (1) and by 
     inserting after subsection (j) the following new subsection:
       ``(k) Commercial Trees Destroyed Because of Citrus Tree 
     Canker.--In the case of commercial citrus trees which are 
     compulsorily or involuntarily converted under a public order 
     as a result of the citrus tree canker, clause (i) of 
     subsection (a)(2)(B) shall be applied as if such clause 
     reads: `4 years after the close of the first taxable year in 
     which any part of the gain upon conversion is realized, or 
     such additional period after the close of such taxable year 
     as determined appropriate by the Secretary on a regional 
     basis if a State or Federal plant health authority determines 
     with respect to such region that the land on which such trees 
     grew is not free from the bacteria that causes citrus tree 
     canker'.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning before, on, or after 
     the date of the enactment of this Act.


                           amendment no. 651

 (Purpose: To amend the Internal Revenue Code of 1986 to allow for the 
  expansion of areas designated as renewal communities based on 2000 
                              census data)

       At the end of subtitle C of title V, insert the following:

     SEC. __. EXPANSION OF DESIGNATED RENEWAL COMMUNITY AREA BASED 
                   ON 2000 CENSUS DATA.

       (a) Renewal Communities.--
       (1) In general.--Section 1400E (relating to designation of 
     renewal communities) is amended by adding at the end the 
     following new subsection:
       ``(g) Expansion of Designated Areas.--
       ``(1) Expansion based on 2000 census.--At the request of 
     the nominating entity with respect to a renewal community, 
     the Secretary of Housing and Urban Development may expand the 
     area of a renewal community to include any census tract--
       ``(A) which, at the time such community was nominated, met 
     the requirements of this section for inclusion in such 
     community but for the failure of such tract to meet 1 or more 
     of the population and poverty rate requirements of this 
     section using 1990 census data, and
       ``(B) which meets all failed population and poverty rate 
     requirements of this section using 2000 census data.
       ``(2) Expansion to certain areas which do not meet 
     population requirements.--
       ``(A) In general.--At the request of 1 or more local 
     governments and the State or States in which an area 
     described in subparagraph (B) is located, the Secretary of 
     Housing and Urban Development may expand a designated area to 
     include such area.
       ``(B) Area.--An area is described in this subparagraph if--
       ``(i) the area is adjacent to at least 1 other area 
     designated as a renewal community,
       ``(ii) the area has a population less than the population 
     required under subsection (c)(2)(C), and
       ``(a) the area meets the requirements of subparagraphs (A) 
     and (B) of subsection (c)(2) and subparagraph (A) of 
     subsection (c)(3), or (b) the area contains a population of 
     less than 100 people.
       ``(3) Applicability.--Any expansion of a renewal community 
     under this section shall take effect as provided in 
     subsection (b).''.
       (2) Effective Date.--The amendment made by this subsection 
     shall take effect as if included in the amendments made by 
     section 101 of the Community Renewal Tax Relief Act of 2000.
       (b) Change of Top Income Rate.--
       (1) In general.--The table in paragraph (2) of section 1(i) 
     (relating to reductions in rates after June 30, 2001), as 
     amended by section 102 of this Act, is amended by striking 
     ``35.0%'' in the last column and inserting ``37.6%''.
       (2) Effective date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
       (3) Application of EGTRRA.--The amendment made by this 
     subsection shall be subject to title IX of the Economic 
     Growth and Tax Relief Reconciliation Act of 2001 to the same 
     extent and in the same manner as the provision of such Act to 
     which such amendment relates.


                           amendment no. 654

(Purpose: To amend title XIX of the Social Security Act to temporarily 
 increase the floor for treatment as an extremely low DSH State and to 
        provide for an allotment adjustment for certain States)

       At the end of subtitle F of title III, add the following:

     SEC. __. MEDICAID DSH ALLOTMENTS.

       (a) Temporary Increase in Floor for Treatment as an 
     Extremely Low DSH State Under the Medicaid Program.--
       (1) In general.--Section 1923(f)(5) of the Social Security 
     Act (42 U.S.C. 1396r-4(f)(5)) is amended--
       (A) by striking ``In the case of'' and inserting the 
     following:
       ``(A) In general.--In the case of''; and
       (B) by adding at the end the following:
       ``(B) Temporary increase in floor for fiscal year 2004.--
     During the period that begins on October 1, 2003, and ends on 
     September 30, 2004, subparagraph (A) shall be applied--
       ``(i) by substituting `fiscal year 2002' for `fiscal year 
     1999';
       ``(ii) by substituting `Centers for Medicare & Medicaid 
     Services' for `Health Care Financing Administration';
       ``(iii) by substituting `August 31, 2003' for `August 31, 
     2000';
       ``(iv) by substituting `3 percent' for `1 percent' each 
     place it appears;
       ``(v) by substituting `fiscal year 2004' for `fiscal year 
     2001'; and
       ``(vi) without regard to the second sentence.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     take effect on October

[[Page 11803]]

     1, 2003, and apply to DSH allotments under title XIX of the 
     Social Security Act only with respect to fiscal year 2004.
       (b) Allotment Adjustment for Certain States.--
       (1) In general.--Section 1923(f) of the Social Security Act 
     (42 U.S.C. 1396r-4(f)) is amended--
       (A) by redesignating paragraph (6) as paragraph (7); and
       (B) by inserting after paragraph (5) the following:
       ``(6) Allotment adjustment for certain states.--
       ``(A) Tennessee.--Only with respect to fiscal year 2004, if 
     the statewide waiver approved under section 1115 for the 
     State of Tennessee with respect to the requirements of this 
     title (as in effect on the date of enactment of this 
     paragraph) is revoked or terminated, the Secretary shall--
       ``(i) permit the State of Tennessee to submit an amendment 
     to its State plan that would describe the methodology to be 
     used by the State (after the effective date of such 
     revocation or termination) to identify and make payments to 
     disproportionate share hospitals, including children's 
     hospitals and institutions for mental diseases or other 
     mental health facilities (other than State-owned institutions 
     or facilities), on the basis of the proportion of patients 
     served by such hospitals that are low-income patients with 
     special needs; and
       ``(ii) provide for purposes of this subsection for 
     computation of an appropriate DSH allotment for the State for 
     fiscal year 2004 that provides for the maximum amount 
     (permitted consistent with paragraph (3)(B)(ii)) that does 
     not result in greater expenditures under this title than 
     would have been made if such waiver had not been revoked or 
     terminated.
       ``(B) Hawaii.--The Secretary shall compute a DSH allotment 
     for the State of Hawaii for each of fiscal year 2004 in the 
     same manner as DSH allotments are determined with respect to 
     those States to which paragraph (5) applies (but without 
     regard to the requirement under such paragraph that total 
     expenditures under the State plan for disproportionate share 
     hospital adjustments for any fiscal year exceeds 0).''.
       (2) Treatment of institutions for mental diseases.--Section 
     1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
     4(h)(1)) is amended--
       (A) in paragraph (1), in the matter preceding subparagraph 
     (A), by striking ``Payment'' and inserting ``Subject to 
     paragraph (3), payment''; and
       (B) by adding at the end the following:
       ``(3) Special rule.--The limitation of paragraph (1) shall 
     not apply in the case of Tennessee with respect to fiscal 
     year 2004 in the case of a revocation or termination of its 
     statewide waiver described in subsection (f)(6)(A).''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect as if enacted on October 1, 2002.


                           amendment no. 657

   (Purpose: To exempt certain sightseeing flights from taxes on air 
                            transportation.)

       At the end of subtitle C of title V, insert the following:

     SEC. __. CERTAIN SIGHTSEEING FLIGHTS EXEMPT FROM TAXES ON AIR 
                   TRANSPORTATION.

       (a) In General.--Section 4281 (relating to small aircraft 
     on nonestablished lines) is amended by adding at the end the 
     following new sentence: ``For purposes of this section, an 
     aircraft shall not be considered as operated on an 
     established line if such aircraft is operated on a flight the 
     sole purpose of which is sightseeing.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to transportation beginning on or 
     after the date of the enactment of this Act, but shall not 
     apply to any amount paid before such date.


                     amendment no. 659, as modified

  (Purpose: To modify the involuntary conversion rules for businesses 
         affected by the September 11, 2001, terrorist attacks)

       At the end of subtitle C of title V, insert the following:

     SEC. __. MODIFICATION OF INVOLUNTARY CONVERSION RULES FOR 
                   BUSINESSES AFFECTED BY THE SEPTEMBER 11TH 
                   TERRORIST ATTACKS.

       (a) In General.--Subsection (g) of section 1400L is amended 
     to read as follows:
       ``(g) Modification of Rules Applicable to Nonrecognition of 
     Gain.--In the case of property which is compulsorily or 
     involuntarily converted as a result of the terrorist attacks 
     on September 11, 2001, in the New York Liberty Zone--
       ``(1) which was held by a corporation which is a member of 
     an affiliated group filing a consolidated return, such 
     corporation shall be treated as satisfying the purchase 
     requirement of section 1033(a)(2) with respect to such 
     property to the extent such requirement is satisfied by 
     another member of the group, and
       ``(2) notwithstanding subsections (g) and (h) of section 
     1033, clause (i) of section 1033(a)(2)(B) shall be applied by 
     substituting `5 years' for `2 years' with respect to property 
     which is compulsorily involuntarily converted as a result of 
     the terrorist attacks on September 11, 2001, in the New York 
     Liberty Zone but only if substantially all of the use of the 
     replacement property is in the City of New York, New York.''.
       (b) Effective Date.--The amendments made by this Act shall 
     apply to involuntary conversions occurring on or after 
     September 11, 2001.
       On page 19, line 13, strike ``2007'' and insert ``2008''.


                           amendment no. 661

  (The text of the amendment is printed in today's Record under ``Text 
of Amendments.'')


                           amendment no. 665

  (Purpose: To amend the Internal Revenue Code of 1986 to restore the 
     deduction for the travel expenses of a taxpayer's spouse who 
              accompanies the taxpayer on business travel)

       At the end of subtitle C of title V, add the following:

     SEC.__. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF 
                   SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS 
                   TRAVEL.

       (a) In General.--Subsection (m) of section 274 (relating to 
     additional limitations on travel expenses) is amended by 
     striking paragraph (3).(A)
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act, and on or before December 31, 2004.


                           amendment no. 673

(Purpose: To amend the Internal Revenue Code of 1986 to provide for the 
             treatment of certain imported recycled halons)

       At the appropriate place insert the following:

     SECTION 1. TREATMENT OF CERTAIN IMPORTED RECYCLED HALONS.

       (a) In General.--Section 1803(c) of the Small Business Job 
     Protection Act of 1986 (Public Law 104-188) is amended by 
     striking ``1997'' and ``1998'' and inserting ``1994''.
       (b) Waiver of Limitations.--If refund or credit of any 
     overpayment of tax resulting from the amendment made by this 
     section is prevented at any time before the close of the 1-
     year period beginning on the date of the enactment of this 
     Act by the operation of any law or rule of law (including res 
     judicata), such refund or credit may nevertheless be made or 
     allowed if claim therefore is filed before the close of such 
     period.


                           Amendment No. 680

  (The text of the amendment is printed in today's Record under ``Text 
of Amendments.'')
  Mr. GRASSLEY. Mr. President, I ask unanimous consent to add Senator 
Murkowski as a cosponsor to amendment No. 594 on rural equity, and 
amendment number 596, the Collins amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      Limitation on Tax Deductions

  Mr. SANTORUM. Mr. President, I rise today to engage the distinguished 
chairman of the Finance Committee in a colloquy regarding subtitle E, 
section 364, of the Jobs and Growth Tax Reconciliation Act of 2003, S. 
1054.
  This section would limit the deduction for charitable contributions 
of patents and similar properties. It is my understanding that this 
provision would include a limitation on tax deductions for donation of 
the following items: any patent, copyright, trademark, trade name, 
trade secret, know-how, software, or similar property, or applications 
or registrations of such property. The effective date of this 
limitation would apply to contributions made after May 7, 2003.
  I have a specific concern about this provision.
  I understand the intent behind this change is to eliminate abuses 
associated with deductions claimed under IRC 170(e)(1)(B). What has 
resulted, however, is the unintended consequence of capturing 
legitimate and pending contributions that were in the process of being 
formalized, but not enacted by the effective date.
  Specifically, I am concerned about the impact of a pending 
transaction between two organizations in the Commonwealth of 
Pennsylvania. The process to formalize the referenced donation began in 
December 2002, with the targeted date of April 21, 2003, for a signed 
and completed transfer.
  In an effort to clarify the impact of S. 1054 on this specific 
pending transaction, the involved organizations have worked with your 
staff to provide adequate background and substantial documentation to 
verify the legitimacy of the concern.
  I inquire of the chairman of the Finance Committee if he would 
comment

[[Page 11804]]

on Section 364 of the bill, and my stated concern about a pending 
transaction?
  Mr. GRASSLEY. Mr. President, I thank my colleague from Pennsylvania 
for raising this issue. He is correct that my staff has been working 
with these organizations to obtain a fuller understanding of their 
transaction. We have learned that there is widespread abuse involving 
donations of patents and similar property. We made this provision 
effective May 7, 2003, so that abusive donations could not be rushed to 
completion if a later effective date was chosen.
  We will continue our discussion with these organizations, and will 
objectively consider their concerns and whether further clarifications 
are appropriate as the bill moves to conference.
  Mr. SANTORUM. Thank you, Chairman Grassley, for your willingness to 
work with me on this issue as the Jobs and Growth Tax Reconciliation 
Act of 2003 moves forward.


                          Limitation Provision

  Mr. LEAHY. Mr. President, I see the distinguished majority leader, 
Senator Frist, and wonder if I could ask him to address a concern I and 
other Senators have about a provision entitled ``Limitation'' which is 
located on page 62, line 13 of the bill.
  Mr. FRIST. I would be happy to.
  Mr. LEAHY. This provision says that no funds made available to carry 
out this act may be used to provide assistance to any group or 
organization that does not have a policy ``explicitly opposing'' 
prostitution and sex trafficking. On its face, this provision appears 
harmless. No one here supports prostitution or sex trafficking. In 
fact, we abhor these practices, which are demeaning and degrading 
towards women, and also extremely dangerous. The rate of HIV infection 
among prostitutes in Cambodia is estimated to be 40 percent. India is 
facing a similar catastrophe. It is no secret that commercial sex 
workers and sex trafficking are a major cause of HIV transmission in 
Asia and in parts of Africa. We all want to see these practices end.
  But the reality is that they exist. Prostitution and sex trafficking 
are rampant, not only in parts of Africa and Asia, but in Eastern 
Europe and the former Soviet republics, the Caribbean, and parts of 
Latin America. Any effective strategy to combat HIV/AIDS must include 
programs to reduce its spread through prostitution and sex trafficking. 
As difficult as it is, this reality cannot be ignored.
  There are organizations who work directly with commercial sex workers 
and women who have been the victims of trafficking, to educate them 
about HIV/AIDS, to counsel them to get tested, to help them escape if 
they are being held against their will, and to provide them with 
condoms to protect themselves from infection. This work is not easy. It 
can also be dangerous. It requires a relationship of trust between the 
organizations and the women who need protection.
  I am concerned that this provision, which requires such organizations 
to explicitly oppose prostitution and sex trafficking, could impede 
their effectiveness. In fact, some or many of these organizations may 
refuse to condemn the behavior of the women who trust they need in 
order to convince them to protect themselves against HIV. I would ask 
the Majority Leader how we can avoid that result, because we need to be 
able to support these organizations.
  Mr. FRIST. I thank the Senator from Vermont for his question. I agree 
that these organizations who work with prostitutes and women who are 
the victims of trafficking play an important role in preventing the 
spread of HIV/AIDS. We need to support these organizations, because HIV 
transmission through this type of behavior is widespread in many parts 
of the world. At the same time, we do not want to condone, either 
directly or indirectly, prostitution or sex trafficking. Both are 
abhorrent.
  I believe the answer is to include a statement in the contract or 
grant agreement between the U.S. Government and such organization that 
the organization is opposed to the practices of prostitution and sex 
trafficking because of the psychological and physical risks they pose 
for women. Such a statement, as part of the contract or grant 
agreement, would satisfy the intent of this provision.
  Mr. LEAHY. I thank the majority leader. I think that is important, 
because we do not want to impose requirements which have the unintended 
result of impeding the ability of these organizations to do their work, 
or interfering with our ability to support them.


                              section 333

  Mr. SHELBY. Mr. President, I would like to take this opportunity to 
ask the Chairman of the Finance Committee about the Committee's intent 
with respect to Section 333, the section entitled ``Denial of Deduction 
for Certain Fines, Penalties, and Other Amounts.'' As currently 
drafted, Section 333 eliminates tax deductions for amounts paid or 
incurred at the direction of a governmental entity in relation to the 
violation of any law or the investigation or inquiry into the potential 
violation of any law.
  Although I appreciate the Chairman's intent, I am concerned that this 
provision is drafted too broadly and applies to fees and compliance 
expenses that are mandated by regulators and that depository 
institutions must pay. For example, banks and thrifts are subject to 
routine, as well as special, examinations as part of supervisory 
reviews by State regulators, the FDIC, the Office of Comptroller of the 
Currency, the Federal Reserve Board and the Office of Thrift 
Supervision. The purpose of these supervisory examinations is to ensure 
that depository institutions are operating in a safe and sound manner 
and in full compliance with regulations. Institutions are then required 
to correct any deficiencies.
  Currently, Section 333 could be interpreted to eliminate the 
deductibility of these fees because they relate to examinations, which 
are, to some extent, inquiries into potential violations. Also, this 
Section could be interpreted to preclude tax deductions for remedial 
measures undertaken pursuant to a regulator's order, or to address 
concerns raised in an examination. As a result, we could be in a 
situation where the regulators are requiring audits or imposing other 
compliance-related costs, but the companies are prohibited from taking 
deductions for the required payments.
  Mr. GRASSLEY. I appreciate the concern of the Senator from Alabama 
with respect to Section 333. It was not the Committee's intent to 
prohibit deductions for amounts paid by companies as a condition to 
their operation in a regulated industry.
  Mr. SARBANES. Mr. President, I too am concerned that the language of 
Section 333 could have unintended consequences. It was my understanding 
that Section 333 was intended to exclude certain payments.
  Mr. GRASSLEY. The Senator from Maryland is correct. The Committee 
addressed this issue in its publication entitled: ``Technical 
Explanation of Provisions Approved by the Committee on May 8, 2003.'' 
Footnote 164 of this publication states:

       The bill does not affect amounts paid or incurred in 
     performing routine audits or reviews such as annual audits 
     that are required of all organizations or individuals in a 
     similar business sector, or profession, as a requirement for 
     being allowed to conduct business. However, if the government 
     or regulator raised an issue of compliance and a payment is 
     required in settlement of such issue, the bill would affect 
     that payment.

  Mr. SHELBY. I would ask that the Chairman clarify the text of Section 
333 in order to specifically exclude such payments.
  Mr. GRASSLEY. It is my intention to amend and clarify Section 333 in 
the conference report in order to reflect the Senators' comments and to 
carve-out certain fees and expenses paid by companies operating in 
highly-regulated industries.
  Mr. SHELBY. In addition we have received letters from Chairman 
Greenspan of the Federal Reserve Board, Director Gilleran of the Office 
of Thrift Supervision and Chairman Powell of the FDIC expressing their 
concern regarding the breadth of Section 333. At this time, I would 
like to incorporate these letters into the Record. Mr.

[[Page 11805]]

Chairman, thank you for your attention to an issue that is of great 
importance to many companies in a variety of industries. I look forward 
to working with the Chairman to amend the text of Section 333 in the 
conference report.


                              syndication

  Mr. SMITH. Mr. President, I want to bring to the Chairman's attention 
a matter that has arisen regarding the bonus depreciation provision 
that was enacted last year in the Job Creation and Worker Assistance 
Act of 2002. When the House developed this provision, it wanted to 
ensure that the provision would stimulate the production of new, as 
opposed to ``used'', equipment and other products. Thus, the additional 
depreciation deduction was restricted to those taxpayers who first 
``used'' the product. Inadvertently, the ``original use'' requirement 
of this provision excluded many of the transactions in heavy equipment 
that the provision was intended to stimulate. Specifically, the 
provision inadvertently excluded multi-unit sales of equipment that 
were placed in service by manufacturers over a period of time and then 
sold to the ultimate purchaser of the equipment.
  Mr. GRASSLEY. That is correct. The Senator from Oregon refers to a 
common form of financing transportation and other equipment that 
involves the production of numerous units, all subject to a common 
lease. We refer to this form of financing as ``syndication''.
  Mr. SMITH. I have language that would correct this oversight in the 
original 2002 Act. My language would ensure that sales of equipment 
which involve numerous units of the same good, subject to the same 
lease, would not inadvertently be excluded from the bonus depreciation 
benefits of the 2002 Act, simply because the manufacturer was placing 
the goods into service as they were being manufactured, prior to his 
ultimate sale of the goods, subject to the master lease, to the 
ultimate purchaser. My language would ensure that no abuse of the bonus 
depreciation could occur and that the final sale of the products occurs 
within a short period of time. I would ask the Chairman to reassure the 
many heavy manufacturers of the United States and the purchasers of new 
equipment that this oversight in the 2002 Act will be rectified when 
the House and Senate meet in conference to iron out the differences in 
our respective tax legislation.
  Mr. GRASSLEY. I can assure the Senator from Oregon that I support the 
effort to clarify this situation in conference and ensure that the 2002 
bonus depreciation provision is available to purchasers of equipment 
pursuant to this method of financing multi-unit sales of heavy 
equipment. I thank the Senator for bringing this inadvertent error in 
the original 2002 Act to my attention.
  Mr. SMITH. I thank the Senator. I propose that the conference adopt 
language to clarify this unfortunate oversight.
  Mr. GRASSLEY. I appreciate the Senator from Oregon providing me with 
this information. This is a serious oversight in the original language 
and I will work closely with the Senator to ensure that this is 
corrected in conference with the House.
  Mr. SMITH. I sincerely appreciate the Chairman's support and the good 
work he is doing as Chairman of the Senate Finance Committee.


                         income forecast method

  Mr. BREAUX. Mr. President, I would like to engage in a brief colloquy 
with the distinguished chairman and ranking member of the Finance 
Committee, Senator Grassley and Senator Baucus, regarding a provision 
in the bill that provides needed clarification and helps to insure an 
accurate reflection of taxpayers' income.
  The provision I refer to resolves certain uncertainties that have 
arisen recently regarding the proper application of the income forecast 
method, which is the predominant cost recovery method for films, 
videotapes, and sound recordings. The provision merely reinforces the 
continued efficacy of existing case law and longstanding industry 
practice. For example, the provision clarifies that, for purposes of 
the income forecast method, the anticipated costs of participations and 
residuals may be included in a property's cost basis at the beginning 
of the property's depreciable life. This was the holding of the Ninth 
Circuit in Transamerica Corporation v. U.S. (1993). The provision also 
clarifies that the Tax Court's holding in Associated Patentees v. 
Comm., 4 TC 979 (1945), remains valid law. Thus, taxpayers may elect to 
deduct participations and residuals as they are paid. Finally, the 
provision clarifies that the income forecast formula is calculated 
using gross income, without reduction for distribution costs.
  I would like to confirm my understanding with Senator Grassley and 
Senator Baucus that by providing these clarifications and eliminating 
uncertainty the provision was intended to put to rest needless and 
costly disputes.
  Mr. GRASSLEY. I am happy to confirm the understanding of the 
distinguished Senator from Louisiana. The provision was adopted to 
provide needed clarifications in order to eliminate the uncertainties 
that have arisen regarding the proper application of the income 
forecast method. I believe the disputes that have arisen regarding the 
mechanics of the income forecast formula are extremely unproductive and 
an inefficient use of both taxpayer and limited tax administration 
resources. By adopting these clarifications, I believe the committee 
intended to end any disputes and prevent any further waste of both 
taxpayer and Government resources in resolving these disputes. Any 
existing disputes should be resolved expeditiously in a manner 
consistent with the clarifications included in the bill.
  Mr. BAUCUS. I agree with the distinguished chairman of the Finance 
Committee, Senator Grassley. The disputes resulting from any 
uncertainty regarding the proper application of the income forecast 
method are extremely unproductive and wasteful. To avoid further waste, 
resolution of any disputes must be resolved in a manner consistent with 
the clarifications contained in the bill.
  Mr. BREAUX. I thank both of my distinguished colleagues for this 
important clarification. I hope this puts to rest any uncertainty and 
wasteful disputes regarding the proper application of the income 
forecast method.


                               dividends

  Ms. COLLINS. I would like to engage the distinguished chairmen of the 
Senate Budget and Finance Committees in a colloquy on the Budget 
Committee chairman's dividends amendment. As my colleagues are aware, 
no provision of the economic growth package is more important to me 
than my amendment providing $20 billion in short-term fiscal relief to 
States and localities. If we are to kick-start our economy through 
Federal tax relief, we must help our States avoid raising taxes and 
slashing spending. And in the process of passing this bill, the last 
thing we can afford is to exacerbate the States' fiscal woes.
  I am therefore concerned that the language of the Budget Committee 
chairman's dividends amendment does not adequately protect States from 
revenue loss. As you know, I cannot vote for a dividends amendment that 
would lessen the benefits of my fiscal relief provision without an 
assurance that it would be fixed in conference. I therefore seek the 
assurances of the distinguished Budget and Finance Committee chairmen 
that they will do all they can in conference to protect States from 
revenue loss associated with any dividends provisions in the final 
bill.
  Mr. NELSON of Nebraska. I, too, believe that there is no more 
important component of this bill than its fiscal relief provisions, and 
I have serious reservations over any dividends language that would 
further hurt the States that we are trying to help. I join my colleague 
from Maine in asking my colleagues, the distinguished chairmen of the 
Senate Budget and Finance Committees, for assurances that they will do 
all they can in conference to prevent States from losing revenue as a 
result of any dividends language.
  Mr. NICKLES. I thank the distinguished Senators from Maine and 
Nebraska for raising this issue again.

[[Page 11806]]

They have carried the torch for the States throughout the debates on 
the budget and an economic growth package.
  I am pleased to provide the assurances that my colleagues seek. The 
intent behind my amendment is not to add to the fiscal plight of 
States, and I will do all I can to ensure that any dividends language 
that emerges from conference does not cause States to lose tax 
revenues.
  Mr. GRASSLEY. I would echo the comments of my colleague from 
Oklahoma. I, too, will do all that I can in conference to ensure that 
States revenues are not reduced by any dividends provisions that are 
included in the final product.
  Ms. COLLINS. I thank my distinguished colleagues, both for their 
assurances and for their leadership in putting together a growth 
package that can stimulate the economy and create new jobs.
  Mr. NELSON of Nebraska. I, too, thank my colleagues for their 
assurances.


     Colloquy between Senator Ensign and Chairman Grassley on the 
             Depreciation Treatment of Hospitality Business

  Mr. ENSIGN. Mr. President, I rise to engage in a colloquy with the 
distinguished Senator from Iowa, the Chairman of the Finance Committee.
  First of all, I want to commend my distinguished colleague for his 
strong leadership in crafting the tax cut package before us today that 
is so critical to creating new jobs and building economic growth for 
the citizens of my State of Nevada and across the country.
  I would say to my distinguished colleague that I am very concerned 
about recent efforts by the IRS to carve up integrated hotels, 
restaurants, and casino businesses into different pieces subject to 
different depreciation treatment.
  Equipment, furniture, and similar personal property used in the 
hospitality business, and in the retail industry more generally, have 
long been depreciable over a 5-year period. However, the IRS is now 
asserting on audit that the tables, chairs, carpeting, and other 
furniture and equipment used in the gaming portion of such hospitality 
facilities must be depreciated over a longer 7-year period used for 
miniature golf courses and bowling alleys, while the same table, chair, 
and carpeting 10 feet away in the hotel portion of the facility 
continue to be depreciated over 5 years.
  The IRS has promulgated no regulation on this point and is unable to 
cite any applicable statutory or judicial authority for its assertion 
on audit.
  In the face of this uncertainty, I would ask the chairman of the 
Finance Committee to clarify whether these efforts by the IRS are 
consistent with the congressional intent of the depreciation provisions 
of the Internal Revenue Code.
  Mr. GRASSLEY. If the Senator will yield, I would say to my 
distinguished colleague from Nevada that I share his concerns and that 
it may not properly reflect congressional intent for the IRS to 
separate an integrated hotel, restaurant, and casino business into 
different pieces subject to different depreciation treatment. 
Equipment, furniture, and similar personal property used in a such a 
business should be depreciable in accordance with the current law 
treatment of the hotel industry and the retail industry generally. I 
will be happy to work with the Senator to provide appropriate 
clarification for depreciation of assets used for gaming in the 
hospitality industry.


                           amendment no. 545

  Mr. KENNEDY. Mr. President, this Republican tax bill provides lavish 
support for the wealthy, but it gives only the back of its hand to 
America's senior citizens. This amendment changes those backward 
priorities. It eliminates the dividend tax cut and the cut in the top 
rate bracket, and uses the funds to pay for a Medicare prescription 
drug benefit for the elderly.
  The two tax cuts my amendment eliminates will primarily benefit the 
rich. Prescription drug coverage under Medicare will benefit 40 million 
senior citizens and the disabled individuals, who are overwhelmingly of 
modest means and typically have high medical costs. These men and women 
have stood by our country through war and depression. Giving them the 
medical care they deserve is a higher priority than giving the wealthy 
even greater wealth. When Republicans side with the wealthy, they call 
it free enterprise. When senior citizens ask for fair treatment, 
Republicans call it class warfare.
  Medicare is not class warfare. It's a solemn promise between 
government and the American people. It says, ``Play by the rules, 
contribute to the system during your working years, and you will have 
health security in your retirement years.'' Because of Medicare, the 
elderly have long had insurance for their hospital bills and their 
doctors bills. But the promise of health security at the core of 
Medicare is broken every day because Medicare does not cover the 
soaring price of prescription drugs.
  Too many elderly citizens must choose between food on the table and 
the medicine they need. Too many elderly Americans are taking only half 
the drugs their doctor prescribes--or none at all--because they can't 
afford them. Today, the average senior citizen has an income of 
$14,000--and prescription drug bills of $1,500, and many senior 
citizens pay far more than that.
  Every day, senior citizens face the harsh fact that prescription drug 
costs are going through the roof, while their incomes are stagnating. 
Over the last four years, prescription drug costs have gone up by 16 
percent a year, while the Social Security benefits on which senior 
citizens depend have gone up only 2.3 percent a year. Hard-pressed 
employers are cutting back on retiree prescription drug coverage--and 
some retirees are losing their coverage altogether, because their 
former employers are now bankrupt.
  While millionaires receive huge tax breaks they do not need under the 
Republican tax plan, the Republican budget shortchanges senior citizens 
who desperately need prescription drug coverage. Prescription drug 
spending for senior citizens will total $1.8 trillion over the next 
decade but the Republican budget allocates only $400 billion for 
Medicare.
  Even worse, the Republican budget's $400 billion for Medicare isn't 
even reserved for prescription drug coverage. The President wants to 
spend tens of billions of this amount on so-called reforms to force 
senior citizens to give up Medicare and join HMOs or other private 
insurance plans. Relief for hard-pressed doctors, hospital, home health 
agencies, and nursing homes is also supposed to come out of this 
minimal allocation.
  It is important for every Senator to understand who it is that 
Medicare protects--and who it is that the Bush administration would 
force into an HMO or other private insurance plan. The typical Medicare 
enrollee is a 75-year-old widow, living alone. Her total income is just 
$11,300 a year. She has at least one chronic condition and suffers from 
arthritis. In her younger years, she and her husband worked hard. They 
raised a family. They stood by this country through economic hard 
times, the Second World War, the Korean war, and the cold war. They 
sacrificed to protect and build a better country--not just for their 
children but for all of us.
  This is the woman Republicans want to force to give up her doctor and 
join an HMO. This is the woman they say should give up her freedom to 
go to the physician and hospital of her choice, so that HMOs can 
profit. This is the woman who would be victimized if Congress allows 
the GOP plan for Medicare to become law.
  Senior citizens deserve prescription drug coverage--no ifs, ands, or 
buts. Republicans say Medicare is a failed program--but millions of 
senior citizens know better. Republicans believe that the private 
sector does a better job of controlling costs than Medicare--but 
studies show the reserve is true. Republicans say senior citizens 
should be forced to give up the doctors they trust, so that HMOs and 
private insurance plans can enjoy higher profits--but the American 
people don't agree; and the U.S. Senate shouldn't agree either.
  Senior citizens are faced with a deadly double whammy. Prescription 
drug

[[Page 11807]]

costs are out of control, and private insurance coverage is drying up. 
Last year, prescription drug costs soared by a whopping 14 percent. 
They have shot up at double-digit rates in each of the last five years. 
Whether we are talking about employee retirement plans, Medigap 
coverage, or Medicare HMOs, prescription drug coverage is skyrocketing 
in cost, and becoming more and more out of reach by the elderly.
  It used to be that the only seniors with reliable, adequate, 
affordable coverage were the very poor on Medicaid. Today, because of 
the state fiscal crisis created by the recession and the let-them-eat-
cake attitude of the Republican party, even the poorest of the poor can 
no longer count on protection. States are now facing the largest budget 
deficits in half a century--an estimated $26 billion this year, and $70 
billion next year.
  The result is that States are cutting back on prescription drug 
coverage for those least able to pay. Thirty-nine States expect to cut 
their Medicaid drug benefit this year. In Massachusetts, 80,000 senior 
citizens were about to lose their prescription drug coverage under the 
State's Senior Advantage program on July 1. Emergency action by the 
State legislature saved the program, but only after making substantial 
reductions in coverage.
  Tax cuts in this Republican bill will make the States' fiscal 
situation even worse. Because State taxes are often pegged to the 
Federal system, the dividend tax cut alone will cost States $11 billion 
over the next 10 years.
  Ten million of the elderly enjoy high quality, affordable retirement 
coverage through a former employer. But retiree coverage is plummeting 
too. In just 8 years--from 1994 to 2002--the number of firms offering 
retiree coverage fell by a massive 40 percent.
  Medicare HMOs are also drastically cutting back. Since 1999, more 
than 2 million Medicare beneficiaries have been dropped by their 
Medicare HMOs. Of the HMOs that remain in the program, more than 70 
percent limit drug coverage to a meager $500 a year or less, and more 
than half only pay for generic drugs. Medigap plans that offer drug 
coverage are priced out of reach for most seniors--and even the 
coverage offered is severely limited.
  Thirteen million Medicare beneficiaries have no prescription drug 
coverage at all. Only half of all senior citizens have coverage 
throughout the year.
  Previous Republican proposals have shown what happens to senior 
citizens when funds are inadequate. High deductibles, gaps in coverage, 
demeaning asset tests, and incentives for employers to drop retiree 
coverage are just some of the unacceptable features of programs that 
give crumbs to the elderly and plums to the wealthy.
  This amendment strikes two provisions of the tax bill that primarily 
benefit the rich, in order to provide funds to give the elderly the 
prescription drug benefit they deserve. The first provision the 
amendment strikes speeds up the reduction of the top tax rate from 38.6 
percent to 36 percent. Virtually all the benefits of this Republican 
tax rate reduction go to people earning more than $310,000 a year. 
People earning a million dollars a year or more will receive a tax cut 
of $60,000. I ask Members of the Senate: Do persons with a million 
dollars in income a year really need another $60,000 in tax cuts? 
Surely, our values and priorities have not become so warped that we 
think it is more important for millionaires to be richer than it is for 
senior citizens to have life-saving prescription drugs.
  The second provision the amendment strikes is the dividend tax cut. 
That cut does virtually nothing for senior citizens and everything for 
the wealthy. The provision in the bill is only a partial elimination of 
the tax on dividends, but its intention is clearly to set the stage for 
full repeal of the tax. The full repeal would certainly be welcomed by 
millionaires. They will get an average tax break of $52,000. But a low-
income elderly person with $8,600 in income will get a tax cut 
averaging $1. And the average elderly person with an income of $14,000 
will get a tax cut of $26. Do the Members of the Senate really believe 
this is the right priority for our country?
  The funds saved from this amendment--$115 billion over 10 years--will 
be used to provide a better prescription drug benefit than will be 
possible if this tax bill passes in its current form. Passing this 
amendment will be a clear statement by the Senate that mending the 
broken promise of Medicare is more important than lavishing unneeded 
and undeserved new tax breaks on millionaires.
  Mrs. MURRAY. Mr. President, I rise in strong support of the amendment 
offered by Senator Kennedy to extend unemployment benefits for millions 
of Americans. These fellow citizens are out of work through no fault of 
their own. They need our help, and by extending their benefits, we will 
also help stimulate our struggling economy.
  In my own State of Washington, we have lost over 80,000 jobs since 9/
11. The Kennedy amendment would help some 102,000 workers in my state 
who will exhaust their benefits over the next few months. It will help 
nearly 4 million workers nationwide.
  These are people who want to work and who are looking for jobs but 
can't find them in our slow economy. It is not easy to find a job in 
this economy. Just listen to these statistics. The average number of 
jobs for which unemployed adults have applied is 29. The average for 
those who have been unemployed for 9 months or more is 39, and 
unemployed adults over 44 years old apply for an average of 42 jobs 
before they find work.
  Despite these efforts, these workers are now being threatened with 
mortgage foreclosures and repossession of their vehicles. One in four 
unemployed workers has had to move to other housing or move in with 
friends or relatives.
  They are facing problems in health care. For instance, one-third of 
the unemployed were once covered by health insurance, but now they have 
lost these benefits because they have lost their jobs.
  They are spending less on food, medical care and clothing for their 
children.
  I know these workers will help provide a real and immediate stimulus 
for our economy because they will buy groceries, pay their utility 
bills, make house payments and pay for other essential needs for their 
day to day existence. Nearly 80 percent of these workers say that 
unemployment benefits have been very important in helping their 
families meet their basic needs.
  In fact, a recent study by Economy.com found that the single most 
effective stimulus measure would be an extension of unemployment 
compensation benefits. The study also found that each dollar dedicated 
to extending the program would boost the economy by $1.73, while each 
dollar connected to reducing the taxation of dividends would boost the 
economy by just nine cents.
  So I urge my colleagues to extend unemployment benefits for these 
workers. They need and deserve our help, and helping them will directly 
help our economy.


                           Amendment No. 557

  Ms. CANTWELL. Mr. President, I rise today in support of Senator 
Schumer's amendment to expand the higher education tax deduction. This 
amendment would make the higher education tax deduction permanent and 
increase the amount that taxpayers can claim for a deduction. The 
higher education tax deduction helps families afford a college 
education at a time when tuition increases are outpacing the cost of 
inflation. Families need help to be able to give their children the 
opportunities and support needed for a good solid education.
  In our information-based economy, the value of a good education is 
the key to success. I know this from personal experience. When I left 
the House of Representatives, I went to work for a high technology 
company in Seattle, WA. I did not have any expertise or knowledge in 
this area, but because I had a solid education that gave me the 
foundation to learn on the job, I was able to learn quickly and thrive 
in my new environment. That is the value of a good education.
  My experience is hardly unique. According to the Department of Labor,

[[Page 11808]]

the typical worker will change jobs nine times during his or her 
career.
  When workers change jobs, they will find that more and more 
employment opportunities require a college degree. Eight of the 10 
fastest-growing occupations require at least a bachelor's degree. At 
the same time, jobs for people who have not attended college are 
quickly disappearing. Twenty-three of the 25 fastest-declining careers 
do not require a degree.
  A college degree is no longer a luxury--it is an imperative.
  There is a ``perfect storm'' brewing at colleges across this country 
that is making it increasingly difficult for families to afford a 
college education. First, endowment earnings are down, significantly 
reducing revenue for colleges and universities. Second, the economy has 
been sluggish for so long that corporate and individual charitable 
giving has been reduced across the country. Third, the sluggish economy 
has put State budgets across the country in crisis. All of these 
factors are contributing to the skyrocketing costs of college tuitions.
  In Washington State, the legislature has significantly cut funding 
for higher education and that means tuition is going up. In just the 
last 2 years, tuition at 4-year universities and two-year colleges has 
increased by 12 percent each year. Over the past decade, tuition at the 
University of Washington has shot up an astounding 103 percent.
  This trend is not limited to my State.
  The vast majority of American families rely in part on federal aid to 
help finance their children's college education. A recent General 
Accounting Office report illustrated this point. It found that more 
than 75 percent of all undergraduate students receive some form of 
federal financial assistance. In addition, more than 40 percent of all 
undergraduate students benefit from a higher education tax credit.
  With the cost of tuition on the rise, we can expect that even more 
families will require aid to send their kids to college.
  We cannot let the opportunities of higher education slip out of 
reach. Expanding access to federal financial aid is a critical long-
term investment in our workforce, and in our economy.


                           amendment no. 575

  Mr. SPECTER. I voted to sustain the point of order against the Kyl 
amendment because there needs to be more analysis as to its ultimate 
effects. The amendment is very complicated. I tried to determine the 
effects of the legislation in the absence of hearings, and could only 
begin to scratch the surface due to the many conflicting 
representations from various parties. We have not had the necessary 
foundation established as to the effects of this amendment.
  There are many facts that should be developed before we embark on 
this course of action. Either the Finance Committee or the Judiciary 
Committee should hear from the parties involved, including the States, 
and develop a factual record as to what occurred during the course of 
the litigation. Senators should have access to the record on these 
issues through the hearing process. After the facts have been 
developed, then a determination should be made on the issue. It is not 
a timely decision absent the development of such a record.
  I am prepared to participate in hearings, find the facts and make an 
informed judgment on whether sound public policy would be served by a 
mechanism, through the tax code or otherwise, to limit compensation for 
anyone in the marketplace.


                           Amendment No. 575

  Mr. BIDEN. Mr. President, I rise to speak in opposition to the 
amendment of the Senator from Arizona. This amendment would 
retroactively breach the contracts entered into by States and their 
attorneys, and the settlement agreement reached in the tobacco-related 
Medicaid expenses litigation.
  Let me remind my colleagues of the context in which this historic 
tobacco settlement came about. There were over 40 years of law suits 
brought against tobacco companies, occurring over three different time 
periods.
  When these attorneys brought this litigation, cases against tobacco 
companies would go on for years and years, almost always with little or 
no favorable results. In order to catch the deception and subterfuge of 
these companies, these cases needed staying power. The attorneys 
bringing these cases needed the ability to withstand significant losses 
while they uncovered the facts needed to make the damning case that the 
tobacco companies had been hiding from the public.
  The plaintiffs' attorneys undertook this riskiest of cases against 
daunting odds, with a high likelihood of never getting paid at all. In 
the first phase of tobacco litigation, no one was able to muster the 
resources needed to bring these cases. Then a group of attorneys in the 
public interest pooled over $100 million of their own money in order to 
withstand the onslaught put up by tobacco companies bent on hiding the 
truth from the public.
  The tobacco companies spent approximately $700 million a year in 
legal fees to their lawyers during this period. Thanks to their 
tenacity, their legal skill, and the righteousness of their cause, in 
the end the attorneys who brought this action prevailed. They secured a 
settlement that returned $246 billion to the States. That is 
``billion'' with a ``b.'' To put it in perspective, that is almost as 
large as our entire budget deficit.
  Let me say that again the tobacco settlements resulted in a huge 
windfall for the States and for the American people. I daresay that, in 
this day and age when State budgets are more squeezed than ever as a 
result of Federal cuts and unfunded mandates, if the States were 
offered this deal again, including the attorney's fees, they would take 
the deal in a heartbeat. In a heartbeat.
  And the money collected by the States under this settlement is only 
the beginning. The settlement funds a new public education program to 
reduce youth tobacco use; it provides money every year for tobacco-
related research; it dissolves the organizations that have historically 
served as the tobacco companies' propaganda machines; and it prohibits 
tobacco advertising aimed at children, such as the use of cartoon 
characters.
  Supporters of this amendment would have you believe that its 
provisions somehow make the existing system fairer. Nothing could be 
further from the truth.
  The American way is to reward those who take a risk and succeed. We 
grant patents that protect inventions for 17 years. We give copyright 
owners exclusive rights to their works for their entire life, plus 
another 70 years. More importantly, we don't punish people who come up 
with a great idea and turn it into a success. To the contrary we let 
them keep the fruits of their labor. But under the logic of this 
amendment, we would seek to penalize Bill Gates' $40 billion net worth, 
simply because he started with little more than a great idea and a 
vision to make it happen, took the risk, and prevailed. Just like these 
attorneys who brought the tobacco cases.
  Supporters of this bill would also have you believe that it is only 
the trial lawyers and their supporters who oppose this amendment. 
Nothing could be further from the truth. Among others, consumer 
advocates people who look out for the little guy strongly oppose this 
amendment.
  I also find it ironic that this amendment, which would abrogate a 
settlement entered into by the States, is being offered by some of the 
very same Senators who have made a career of advocating for States 
rights. This amendment, which would abrogate the contractual rights of 
private parties, is being offered by some of the very same Senators who 
have made a career of upholding the right to enter into contracts 
without undue regulation.
  Just to be clear my colleagues refuse to interfere in the right of 
States to send defendants to execution without competent counsel, but 
insist on interfering to undo an agreement where the States reap $246 
billion from the tobacco companies. Quite simply, they have got their 
priorities backwards.
  I might also remind my colleagues of one other historical fact: Some 
of the

[[Page 11809]]

Senators who are pushing this amendment today are the same folks who, 
just a few years ago, were doing everything in their power to defeat 
Federal attempts to force the tobacco companies to pay for the huge 
damages they have inflicted on the American people. Fortunately for the 
American people, and for the 50 States, they failed. Now, however, they 
are trying to undo this successful settlement after the fact.
  Ladies and gentlemen, this is America. We make deals and we stick to 
them. We do not go back on our word. I urge you to oppose this 
amendment.


                           amendment no. 594

  Mr. BINGAMAN. Mr. President, I am pleased to cosponsor and support 
amendment No. 594 being offered by the chairman of the Finance 
Committee with respect to the Medicare Program.
  The amendment provides approximately $25 billion over 10 years to 
reduce the inequity in the Medicare Program between urban and rural 
areas and between the States that has so penalized health care 
providers in New Mexico and includes language from four bills that I 
have either introduced this year or introduced last year.
  First, I am pleased the Grassley amendment includes the language from 
S. 379, the Medicare Incentive Payment Program Improvement Act of 2003, 
which I introduced with Senator Thomas and makes automatic the 10 
percent bonus payment intended to physicians in rural, medically 
underserved areas. Under current law, physicians must go through a 
cumbersome application process, if they even know they are eligible and 
can apply, and subject themselves to increased scrutiny for audits if 
they do apply. Consequently, few doctors are receiving the payment 
intended to provide physicians incentives to treat Medicare patients in 
medically underserved areas and to retain those doctors already 
providing services in those areas.
  Second, the Grassley amendment includes language that significantly 
reduces the geographic inequities that are a part of the current 
Medicare physician payment system and disadvantages New Mexico 
physicians. This language is similar to that in S. 881, the Rural 
Equity Payment Index Reform, REPaIR, Act of 2003, which I introduced 
with Senator Cochran and is a companion bill to H.R. 33, introduced in 
the House of Representatives by Representative Bereuter. Reducing the 
inequity in just the work component of the physician payment schedule 
will increase payments to New Mexico physicians by an estimated $3 
million annually.
  Third, this amendment includes language from legislation I introduced 
late last year entitled the Medicare Hospital Outpatient Department 
Fair Payment Act with Senator Snowe to extend the hold harmless for 
rural hospitals in outpatient departments, and adds a 5 percent add-on 
payment for clinics and emergency room visits in rural hospitals.
  And fourth, the amendment lifts the rural cap in the Medicare 
disproportionate share hospital, DSH, program, which comes from the 
Medicare Safety Net Hospital Improvement Act that I introduced last 
year with Senator Roberts. This provision will add an estimated $4 
million annually to New Mexico rural hospitals.
  In addition, I would like to applaud the chairman for including 
language from legislation, S. 816, introduced by Senator Conrad that I 
was an original cosponsor of and entitled the Health Care access and 
Rural Equity Act. Among other things, the language eliminates the 
disparity in hospital payments caused by the differential paid to rural 
and small urban hospitals compared to large urban hospitals and 
significantly reduces the disparity caused by the wage index in the 
hospital payment formula. Although rather arcane provisions in the 
hospital payment formula, they result in significant disparities in 
payments and the changes will have an important impact on hospitals 
throughout New Mexico.
  Before closing, I would like to express profound concern with respect 
to the offsets used by the amendment, which include the addition of 
copayments for clinical services and the impact the change in payments 
for outpatient department prescription drugs will have on oncology 
physicians. However, Chairman Grassley has committed to work to address 
the need for a revision in payments to oncology doctors and we will 
work to change the language with respect to copayments for clinical 
laboratory services as this language moves forward.
  Mr. NELSON of Florida. Mr. President, I would like to take this 
opportunity to explain my vote against the Grassley amendment during 
consideration of the tax bill.
  Since joining the Senate in 2001, I have been an avid and consistent 
supporter of rural health care and Medicare providers.
  It was a hard decision to vote against this amendment. However, I 
could not in good conscience, support an amendment that as an offset 
would increase out-of-pocket expense for our Nation's seniors.
  Medicare beneficiaries are already coping with having to choose to 
buy their medicines or put food on the table. They are struggling to 
pay for their share of health care costs, and even increased health 
plan premiums. It is unconscionable to think that we would ask them to 
meet deductibles and make copayments on outpatient lab services--
something they have not had to pay for in the past. At this point, no 
concrete analysis is available showing the impact this would have on 
seniors and their out-of-pocket costs.
  At a time when we are growing increasingly concerned about how much 
seniors are having to spend to access the care they need, how can we 
ask them to pay more? We have not even delivered the promise of a 
comprehensive outpatient prescription drug benefit.
  I was prepared to support Senator Harkin's amendment--which he 
withdrew. That amendment, which included many of the provisions in the 
Grassley amendment, would have resulted in over $870 million to 
Florida's hospitals over the next 10 years. That amendment, however, 
eliminated the dividend tax cut beyond the initial $500--an offset I 
could support.
  Last year, I was a cosponsor of the Beneficiary Access to Care and 
Medicare Equity Act of 2002. This bill, by Senator Baucus, included a 
myriad of provisions benefiting rural health care providers, and as a 
result, beneficiaries residing in rural areas.
  Furthermore, earlier this year, during consideration of the budget 
debate, I supported an amendment by Senator Harkin to help rural health 
care providers and hospitals receive a fair reimbursement for services 
under Medicare. That amendment reduced tax cuts to the wealthiest 
income brackets--an offset I could support.
  I am committed to improving the state of health care in our rural 
communities and will continue looking for ways to do so, but not on the 
backs of our Nation's seniors.


                           amendment no. 596

  Mr. CRAIG. Mr. President, I regret that I was detained in my effort 
to return to the floor, from another appointment, to vote on the 
Collins amendment, No. 596. Had I been present, I would have voted in 
favor of the amendment. I have been speaking again this week with our 
Governor of Idaho about the current fiscal difficulties faced by State 
and local governments. In both his role as Governor of our State and as 
the incoming chairman of the National Governors Association, Governor 
Kempthorne has eloquently argued the case for Congress to work with the 
States to address this situation. I am pleased that the Senate today 
could come to bipartisan agreement in its approach to temporary fiscal 
relief.


                           amendment no. 654

  Mr. GRASSLEY. Mr. President. I commend my colleagues for their work 
on this important amendment, which injects much needed flexibility and 
funding for safety net hospitals that treat especially vulnerable 
populations. This amendment alleviates pressure on those hospitals and 
allows ``extremely low-DSH States'' to increase Medicaid DSH allotments 
to 3 percent in Fiscal Year 2004. Currently, Federal law restricts 
Medicaid DSH allotments to ``extremely low-DSH States'' to only 1 
percent of Medicaid Program costs.

[[Page 11810]]

  I thank Senators Bingaman and Domenici for their work and for their 
dogged commitment to the cause. I have supported low DSH improvement 
legislation in the past, and I am thankful for their leadership on this 
important issue this year.
  Mr. BINGAMAN. Mr. President, I would like to thank the chairman and 
ranking member of the Finance Committee, Senators Grassley and Baucus, 
for agreeing to accept the language in the amendment being offered by 
me and Senators Enzi, Lincoln, Smith, and Nelson of Nebraska, that 
would increase the Federal allotment to States for Medicaid 
disproportionate share hospital, or DSH, payments to what are called 
``extremely low-DSH States'' from 1 percent of overall Medicaid 
spending in each State to 3 percent. The language comes from 
legislation, S. 204, that I introduced with Senators Enzi, Lincoln, 
Baucus, Smith, Harkin, Domenici, Johnson, Nelson of Nebraska, and 
Dayton, and was cosponsored by Senators Pryor, Dorgan, and Daschle, 
entitled the Medicaid Safety Net Improvement Act of 2003.
  This amendment is important to the continued survival of many of our 
Nation's safety net hospitals that provide critical health care access 
to a number of our Nation's 41.2 million uninsured citizens, including 
373,000 in New Mexico, through the Medicaid disproportionate share 
hospital, or DSH, program.
  At a time of growing numbers of uninsured and increased financial 
strain on our Nations' safety net, we need to increase the ability of 
``extremely low-DSH States' to address the problems facing their safety 
net and to reduce the current inequity in funding among the States. In 
fact, many hospitals have resorted to cutting services or eliminating 
jobs to deal with the growing uncompensated care problem, and it 
threatens the health care safety net across this country.
  At Memorial Medical Center in Las Cruces, NM, the hospital recently 
announced the elimination of its maternity and mental health care 
services due to the rapidly growing burden of uncompensated care. While 
the elimination of those services has been temporarily forestalled, the 
uncompensated care burden and bottom line deficits at that hospital 
remain and the personnel layoffs of over 100 staff members in that 
community has already occurred.
  Indeed, the stories about the growing burden on hospital emergency 
rooms across the country are well known. This is completely and 
directly related to the economic recession facing our country and makes 
this amendment directly relevant to this legislation.
  It is also why the amendment has the support of the American 
Association, the National Association of Public Hospitals and Health 
Systems, the National Association of Children's Hospitals, the 
Federation of American Hospitals, the Association of American Medical 
Colleges, and the Catholic Health Association of the United States. As 
they write, ``Today, safety net hospitals face a confluence of 
challenges--including increased uncompensated care as more Americans 
find themselves without health insurance--that put critical pressure on 
hospitals' ability to serve their entire communities.''
  The 20 States that would benefit from this amendment include: Alaska, 
Arkansas, Delaware, Hawaii, Idaho, Iowa, Kansas, Maryland, Minnesota, 
Montana, Nebraska, New Mexico, North Dakota, Oklahoma, Oregon, South 
Dakota, Tennessee, Utah, Wisconsin, and Wyoming. I would add that the 
legislation does not impact the Federal DSH allotments in other States 
but only seeks to give ``extremely low-DSH States'' the ability to 
respond to the growing burdens of uncompensated care in their States.
  I would note that Hawaii and Tennessee have been included in their 
amendment because their respective States currently do not have DSH 
programs and are prohibited from making such payments. The amendment 
provides them that authority under certain circumstances.
  I would like to once again thank Senator Grassley and his staff 
members, Ted Totman, Colan Roskey, Jennifer Bell, and Leah Kegler, 
Senator Baucus and his staff members, Bill Dauster, Liz Fowler, Kate 
Kirchgraber, and Andrea Cohen, for their help in getting this amendment 
passed. In addition, this would have never come to fruition without the 
strong support by Senators Enzi, Lincoln, Smith, Nelson of Nebraska, 
and the other cosponsors of S. 204.


                           Amendment No. 666

  Mr. SARBANES. Mr. President, I am in support of the Dorgan amendment 
to the reconciliation tax cut bill that would strike a provision in the 
bill to privatize tax collection by the Internal Revenue Service.
  The proposal to privatize tax collection is misguided. Privatizing 
tax collection will hurt both Federal employees, by contracting out 
Federal jobs, and taxpayers, who could be subject to the abuse and 
mismanagement of a private company. Privatization of tax collection has 
already been tried by the IRS in a 1996 pilot project. The pilot 
project was such an extraordinary failure that a further 1997 pilot 
project was cancelled. The contractors who conducted the project did 
not protect the sensitive information of taxpayers, and the project 
ultimately did not save the Federal Government any money.
  The proposal would allow private companies to engage in collection 
activities without providing adequate safeguards for taxpayers against 
abusive activities. It is my understanding that the Fair Debt 
Collections Practices Act, known as FDCPA, which provides the most 
important protections for consumers from abusive or unfair actions by 
debt collectors, would not fully apply to the activities of the private 
tax collectors. I am particularly concerned that a taxpayer's ability 
to recover certain damages from an abusive private tax collector may be 
severely limited under this proposal.
  In addition, the privatization of tax collection is a major change to 
the way our Government works. To make such a change without holding any 
hearings on the matter, and without considering all aspects of the 
proposal, particularly the failed pilot project and whether or not the 
plan will actually save money, is irresponsible.
  Ms. SNOWE. Mr. President, I rise to speak to the critical issue of 
State fiscal relief, which I believe adds tremendous value to this 
economic growth package. As I have discussed on numerous occasions, I 
believe that one of the best stimulants for the economy is providing 
assistance to our State and local governments, which is why I have 
fought for its inclusion in this package.
  Since December, when I first identified elements that I believed 
would stimulate the economy, I insisted on a State and local fiscal 
relief component. Today, I am pleased that the Senate is taking action 
through this floor amendment to further refine both the agreement and 
language that Senator Smith and I insisted must be included in the 
growth package as passed by the Senate Finance Committee.
  The growth package that the Senate Finance Committee reported 
establishes a $20 billion trust fund in S. 1054, the Jobs and Growth 
Tax Relief Reconciliation Act of 2003, to provide critical, flexible 
relief for both State and local governments. Also, I would like to 
thank Chairman Grassley for his willingness to work with me to identify 
appropriate offsets that ensured this proposal would not increase the 
net cost of the growth package, and also that the relief provided was 
not only flexible, but helped to meet the challenges faced by our 
communities.
  By securing support to include a $20 billion fiscal relief trust fund 
in this package, I was able to ensure that States and localities 
received the help they need in balancing their fiscal year 2004 
budgets. Fiscal relief to State and local governments is vitally 
important to the health and strength of our economy, which is why I 
fought to ensure that half of the $20 billion would be modeled after my 
bill, S. 201, and would be flexible and divided between State and local 
governments with 40 percent going to localities and 60 percent to 
States.
  The floor amendment under consideration will provide $20 billion in 
State and local aid to be distributed in fiscal

[[Page 11811]]

years 2003 and 2004. Ten billion dollars in flexible funding will be 
distributed between state and local governments, with the remaining $10 
billion provided to States through a temporary increase to the Federal 
Medical Assistance Percentage, known as FMAP, to help alleviate the 
short-term spike in Medicaid costs.
  Because I thought it was important, we are providing $4 billion in 
flexible funding to local governments. While I know a number of my 
colleagues have questioned the necessity and importance of providing 
relief to local governments, I strongly believe that local governments 
have all the more pivotal and increasing responsibilities at a time 
such as this, when they face decreasing revenues. And a large 
percentage of this increased burden has come from unfunded federal 
mandates related to education, homeland security and election reform. 
By including $10 billion in flexible funding, distributed between state 
and local governments, we will ensure that essential government 
functions are performed.
  As we all know, our states and local communities are struggling. For 
the past 3 years, while the economy has been in a downturn, they have 
worked to meet the needs of residents, while 49 out of 50 States 
including Maine are also required to balance their budgets. In fact, 
the National Conference of State Legislatures reports that since fiscal 
year 2001, the combined budget shortfall in states has totaled more 
than $200 billion. And the outlook for fiscal year 2004 is not proving 
different. In January, 36 states reported budget gaps totaling more 
than $68 billion for this year alone. In Maine, the Governor and 
Legislature were forced to trim $1.2 billion from their biennial budget 
in the wake of a $150 million shortfall in fiscal year 2003.
  Some argue State budget shortfalls result from overspending--yet a 
report issued by the National Governors Association shows that State 
spending from 1995 to 2001 increased 6.5 percent per year, a rate 
identical to spending from 1979 to 2003. Rather, it has been a drop in 
the stock market and the economy concurrent with increased costs 
associated with necessities like elementary and secondary education, 
programs under the Individuals with Disabilities Education Act, or 
IDEA, homeland security, and Medicaid--that has been the real culprit 
in burdening State and local budgets.
  The National Conference of State Legislatures has reported a 
substantial decline in projected revenue, including drops in income, 
sales and property tax receipts, and user fees. Indeed, data suggest 
that over three-fourths of the combined State budget shortfall is due 
to declines in State revenues. Again, unlike the Federal Government, 
States don't have the option of running deficits--and after 3 years, 
most practical belt-tightening measures have already taken effect.
  On the spending side, the NCSL estimates that unfunded mandates for 
the policy areas I just mentioned account for up to $82 billion in 
increased expenses. And States rightly argue that the vast majority of 
their increased cost burden comes from the growing unfunded Federal 
mandate for providing care to the elderly and disabled. Medicaid 
provides access to health care for almost 43 million of America's poor, 
elderly and disabled citizens and it alone is a program for which costs 
have grown by 11.1 percent from 1990 to 2000.
  Because of benefit shortfalls in the Medicare program--such as a 
prescription drug benefit--Medicaid ends up providing more vital 
services. Indeed, while seniors and the disabled represent only one-
quarter of the Medicaid population, they account for almost three-
fourths of all Medicaid expenses. For example, in fiscal year 2002 
States provided $6.9 billion in prescription drug assistance to 
Medicare beneficiaries, and another $5.5 billion in copayment and 
premium assistance.
  That is why providing fiscal relief is so critical--because while 
there is no question this population needs to be served, there should 
also be no doubt we can't leave States to be the last line of defense 
in footing the bill.
  It is the same with issues like education--and that is why I also 
support providing flexible funding for States and localities to use as 
they see fit. In California 20,000 teachers are at risk of being laid 
off, in New York local districts are raising property taxes to offset 
the expected 4 percent cut in State education aid, and in Nebraska 
officials have told 1,000 students that their academic scholarships to 
state universities are being canceled and 431 college positions were 
eliminated. We are making such great advances in education--and we all 
know that education is the key to our future economic success. By 
providing fiscal relief, the Federal Government is continuing its 
commitment.
  Of course, the level of assistance that Congress is providing would 
not eliminate any State or local governments' total budget shortfall. 
But it will provide vitally important assistance and has the support of 
the largest State and local associations that represent our country's 
local elected representatives and leaders. Moreover, providing this 
State and local fiscal assistance within the tax package is entirely in 
keeping with our efforts to stimulate the economy.
  According to a recent Wall Street Journal article, ``Analysts at 
Goldman Sachs figure State and local belt-tightening will shave as much 
as a half-point from the economy's growth so that overall fiscal policy 
will be no more than neutral next year.'' After all, dollars spent on 
education, health care and transportation have an economic value today 
and tomorrow.
  In fact, the U.S. Chamber of Commerce reports that for every $1 
billion invested in transportation, 47,500 new jobs are created. And 
let us not forget that State and local governments account for more 
than 15 million jobs nationwide. As we take steps to put more money 
into the hands of consumers, we must also make sure that those who are 
employed by a State or local government, either directly or through a 
government service contract, are able to stay employed.
  Providing short-term fiscal relief to help State and local 
governments balance their budgets is vitally important to the long-term 
viability of our economy. I thank Chairman Grassley for his leadership 
on this issue, and I urge my colleagues to support this amendment.
  Mr. REED. Mr. President, today I joined 49 of my colleagues in voting 
to waive the Congressional Budget Act in support of Senator Dorgan's 
amendment to restore the pre-1993 tax treatment of Social Security 
benefits.
  In 1993, I joined a majority of Congress in voting for the Omnibus 
Budget Reconciliation Act, which combined with subsequent similar laws, 
eliminated the deficits of the early 1990s and the debt that had grown 
exponentially under Presidents Reagan and Bush. Included in this 1993 
Act was a provision that changed the way Social Security benefits for 
individuals making over $25,000 and couples with income over $32,000 
were taxed. Like many of my colleagues at that time, I believed there 
were more appropriate ways to eliminate the deficit, but budget 
procedures prevented them from being considered, and, while there were 
partisan amendments offered at later dates to reverse this policy, they 
did so by increasing the deficit, so I and a majority of my colleagues 
opposed these proposals.
  Today's vote was different. It was different because the President 
and the Republican majority have brought about a striking reversal in 
our Nation's fiscal policies. In the span of less than 3 years, the 
government's fiscal situation has deteriorated from budget surpluses to 
near record budget deficits. We have gone from concerns that we would 
retire our mountains of public debt too quickly to considering the 
President's request to increase our debt limit to its highest level 
ever. And, today we are voting on a tax bill that will only exacerbate 
both of these problems. Indeed, it appears that the majority is 
resolutely determined to cut dividend taxes for the most affluent in 
our society. These actions are being taken without regard for fiscal 
soundness and without any consideration of the impact and the burden 
decisions we make today place on future generations.

[[Page 11812]]

  In this environment, Senator Dorgan's amendment to aid senior 
citizens rather than the wealthiest 1 percent of Americans, is the 
appropriate policy because at the very least if we are going to deficit 
spend, we should direct those resources to those individuals who have 
already contributed in so many ways to this great Nation.
  It would be my hope that we can find a way to address 1993 OBRA in a 
manner that aids deserving seniors while protecting the long term 
solvency of Social Security and restoring some sense of discipline to 
the Federal budget process.
  Mr. JOHNSON. Mr. President, I rise today to share my thoughts on the 
tax measure before us. Few issues touch more Americans than the 
economy. Now that hostilities with Iraq are winding down, we need to 
focus on our own economy. Economic discussions tend to take on an 
unfortunate partisan tone, and I know that this bitterness is on 
display on the floor of the Senate today as we debate the President's 
latest tax cut proposal.
  Regrettably, we often forget that we share a common goal: Every 
single member on this committee wants America to succeed. We all want 
Americans to find good jobs, to have access to affordable health care, 
to educate our children, and to retire with dignity and comfort. While 
we have sharp divisions on how to achieve that common goal, I hope we 
can remember at the end of the day that all of our intentions are good.
  Despite all of our best intentions, we are facing nothing short of a 
budget crisis in America. CBO has revised its deficit projections 
upward yet again to reflect an end-of-year deficit of $300 billion. 
Federal revenues are on track to fall to the lowest level since 1959, 
even without more tax cuts, and we are about to vote on whether to 
raise the debt ceiling by almost another $1 trillion.
  At the same time, we must make good on our commitments to the Iraqi 
people to help rebuild that country. We need to follow through on 
commitments here at home: to fund education and water projects and 
transportation and veterans' programs. Let's not forget that we will 
run right through the Social Security trust fund without setting aside 
so much as a dime for the young men and women who are paying into that 
system today, nor have we taken any steps to address the imminent 
Medicare crisis.
  Now, I admit that I went to college quite some time ago, and I 
understand that economic theories come and go, but I do not believe 
that basic math has changed. If you spend more than you have, you run 
up a deficit.
  Yesterday in the Banking Committee we considered the nomination of 
Dr. Gregory Mankiw to become chairman of the Council of Economic 
Advisors. Given the health of this economy, we are certainly in need of 
some good advice. On reviewing some of Dr. Mankiw's work, I was 
especially interested in a passage from his 1998 book ``Principles of 
Economics,'' which talks about the dangers of short-term policies: 
``People on fad diets put their health at risk but rarely achieve the 
permanent weight loss they desire. Similarly, when politicians rely on 
the advice of charlatans and cranks, they rarely get the desirable 
results they anticipate. After Reagan's election, Congress passed the 
cut in tax rates that Reagan advocated but the tax cut did not cause 
revenue to rise. Instead, tax revenue fell. . . and the U.S. federal 
government began a long period of deficit spending.''
  On several occasions, I have expressed concern that this 
administration is sacrificing the long-term health of this Nation for a 
popular, short-term political measure. And the President's own nominee 
for the Council of Economic Advisors appears to share my concern.
  I voted in 2001 for the President's tax cut plan. While I would have 
preferred to see more of that $1.3 trillion go to working Americans, I 
nevertheless agreed with a majority of my colleagues that a projected 
surplus of $5.6 trillion over 10 years was too high, and that we needed 
to refund some of that money. We face a starkly different picture 
today, and I simply do not understand how my distinguished colleagues 
can reverse course so completely with respect to their long-standing 
stated principles.
  For example, the majority leader of this body, Senator Bill Frist, 
said back in 1996 that ``we have a moral obligation to balance the 
budget.'' Senator Santorum, back in 1995, said that ``the American 
people are sick and tired of excuses for inaction to balance the 
budget. The public wants us to stay the course towards a balanced 
budget, and we take that obligation quite seriously.'' And Senator 
Lott, just last year, said that ``the most important thing really does 
involve . . . keeping a balanced budget, not dipping into Social 
Security, and continuing to reduce the national debt.''
  I would like to focus on Majority Leader Frist's statement that 
running budget deficits is a moral issue. What he meant by that was 
that when we run a deficit, we defer the hard decisions for our 
children and grandchildren.
  In February, a group of 10 Nobel Prize-winning economists spoke out 
against the President's latest plan: ``Passing these tax cuts will 
worsen the long-term budget outlook, adding to the nation's projected 
chronic deficits. This fiscal deterioration will reduce the capacity of 
the government to finance Social Security and Medicare benefits as well 
as investments in schools, health, infrastructure, and basic research. 
Moreover, the proposed tax cuts will generate further inequalities in 
after-tax income.''
  And just a few weeks ago, Fed Chairman Greenspan appeared before the 
Banking Committee and said, in as many different ways as he possibly 
could, that tax cuts should only take place in the context of fiscal 
discipline. In other words, don't cut taxes if you can't pay for the 
cuts.
  To quote once again from Dr. Mankiw: ``Prosperity tomorrow calls for 
sacrifice today. It is the rare politician that is willing to call for 
that.'' In a radio address on March 3, 2001, when we still had record 
surpluses and we were on a course to pay down the debt, President 
George W. Bush proclaimed, ``Future generations shouldn't be forced to 
pay back money that we have borrowed. We owe this kind of 
responsibility to our children and grandchildren.'' At the time, this 
was an easy statement to make. Now, however, fiscal discipline requires 
sacrifice, and we need President Bush to follow through on the promise 
of leadership through hard economic times. I call on President Bush to 
exercise leadership and put an end to this tax cut mania. No one likes 
to deliver hard messages, but that is the price of true leadership.
  Every time I talk to someone from South Dakota, I hear the same 
thing: Our schools need more funding; our water projects need more 
funding; our veterans need more funding; the list goes on and on. But 
the simple fact is, we just don't have the money anymore. And we 
certainly won't have the money if we continue on this reckless course 
of tax cuts that will fill the pockets of those who already have more 
money than they can spend in a lifetime. I agree that we shouldn't let 
government grow too big. But we shouldn't destroy it either.
  Mrs. BOXER. Mr. President, I am voting against this bill because I 
came to the Senate to represent California families and this tax cut 
for the wealthy elite is not in their interest. It contradicts the 
basic American values of fairness, responsibility, and opportunity.
  We are now in the longest period of continued job losses since the 
Great Depression. In the first 3 months of this year alone, America 
lost another half a million jobs. As result, 8.8 million people are 
unemployed today. That is 2.8 million more than when President Bush 
took office. Most troubling, 1.9 million of those workers have been out 
of work for more than a year and a half. But instead of targeting the 
majority of the benefits to a majority of the people, this bill targets 
its benefits to the very top.
  There is not a single responsible economist I know who thinks this 
tax package will get us out of the terrible economic condition we are 
in. In fact, 11 Nobel laureate economists and hundreds of others have 
published an open

[[Page 11813]]

letter saying that passing these tax cuts ``will worsen the long-term 
budget outlook, adding to the Nation's projected chronic deficits. This 
fiscal deterioration will reduce the capacity of the Government to 
finance Social Security and Medicare benefits as well as investments in 
schools, health, infrastructure, and basic research.''
  Those Nobel laureates also added that the tax cuts would generate 
further inequalities in after-tax income. The reason for that is that 
this package is skewed to those who do not need it.
  That kind of windfall for the wealthy is bad policy. That is why I 
supported the Democratic alternative and other amendments that would 
have spread the benefits of the bill to more Americans.
  The Democratic Plan for Jobs, Opportunity and Prosperity would put 
over 1 million people back to work by the end of 2004. The Democratic 
plan would provide three times more economic boost right now than the 
Republican plan. At the same time, the Democratic plan would put us 
back on the path to fiscal responsibility.
  The Democratic plan would have cut taxes for every working American, 
providing an average benefit of $1,630 to a family of four making 
$50,000 a year. And it would have provided real assistance to the 8.8 
million Americans who are currently unemployed. Our plan would have 
created a new credit for every working American, which will provide 
$300 for each adult in a family and $300 for the first two children. We 
wanted to accelerate the refundability of the child tax credit, 
accelerate the elimination of the marriage penalty, and extend and 
expand unemployment insurance for those looking for work, including the 
1 million people who have already exhausted their benefits.
  Also, the Democratic plan would have sparked growth by helping the 
States sustain vital services during the economic downturn and 
encouraging small businesses to invest. As part of the Democratic 
proposal, we proposed a 50 percent tax credit in 2003, worth $8 
billion, to help small businesses pay their share of insurance 
premiums. And very important for California, our plan would have 
provided $40 billion in immediate aid to State and local governments. 
We also proposed tripling the amount of investments small businesses 
can write off immediately from $25,000 to $75,000 in 2003.
  I was deeply troubled that my colleagues cared so much for the elite 
few that they voted against a number of amendments that would have 
helped working Americans. They rejected an effort to cut taxes on 
social security benefits for middle-income seniors. They rejected 
expanding the child tax credit. They supported raising taxes on 
Americans working abroad. They fought efforts to increase tax benefits 
to help families pay for higher education. And they fought every effort 
to get more meaningful assistance to the States in this time of crisis.
  There were two bright spots during the Senate consideration of this 
legislation. First, the Senate passed the Invest in the USA Act 
amendment that Senator Ensign and I introduced. It will create a one-
time incentive for U.S. companies to bring $140 billion dollars in 
funds earned abroad back to the U.S. for job creation, investment in 
plants and equipment, and for other economically stimulative uses.
  The Senate also adopted an amendment offered to crack down on 
delinquent parents who do not pay child support. My amendment, which is 
based on bipartisan legislation that I introduced, penalizes those who 
do not pay the child support that they owe.
  Despite these two improvements, the bill--and some destructive 
amendments, such as an expansion of the dividend exclusion--is deeply 
flawed, unfair, and fiscally dangerous--creating massive deficits, 
which will hurt economic growth.
  Mr. SARBANES. Mr. President, I rise today in opposition to the 
pending legislation, S. 1054.
  Our economy today is in a precarious position. It was reported 
yesterday that retail sales in April fell. Initial unemployment claims 
remain well above 400,000, the level typically associated with a weak 
labor market. This morning we learned that industrial production 
decreased by one-half of 1 percent last month and that capacity 
utilization fell to 74.4 percent, and is now at the lowest level in 20 
years. Our industrial base is producing less, we have more plants and 
equipment idle which has led to fewer jobs, reduced consumer spending 
and increased economic insecurity for the vast majority of Americans. 
The unemployment rate has risen to 6.0 percent, the highest level sine 
1994 and our economy has grown only at rate of 1.5 percent over the 
past 6 months, far below its potential. This growth rate is far too 
slow to create enough jobs for the nearly 9 million unemployed American 
workers who want to find work but can not because there are not enough 
jobs to be had.
  The facts indicate the serious nature of the problem facing the 
economy in the short run. Our economic growth is not strong enough to 
even maintain our job base, much less create the jobs needed for those 
who lost their jobs during the recession.
  Unfortunately, the legislation before us today will not help solve 
these serious problems. The administration's proposal would create very 
little stimulus this year, when it is needed the most. Two economic 
consulting firms used by the administration reached this conclusion. 
One estimate, performed by Economy.com, calculated that the President's 
proposal will add only 0.4 percent to our gross domestic product this 
year. The President's proposal will not create enough jobs this year, 
when people are out of work and can not find a job because there are 
none to be had. Macroeconomic Advisers issued a report, entitled `A 
Preliminary Analysis of the President's Jobs and Growth Proposals' 
which concluded that the plan would create only 242,000 jobs by the end 
of this year. That is less than half the 525,000 jobs that we have 
already lost this year alone.
  The President's proposal falls far short of what the economy truly 
needs. Instead the administration proposal focuses on large permanent 
structural tax reduction aim at providing the maximum benefit to the 
wealthiest few. This will have very little stimulative effect while 
costing a great deal in both the present and the future. Far from 
stimulating the economy, the President's tax cut will create a large 
structural deficit which will slow future economic growth and result in 
fewer jobs. That is not just my conclusion. The Committee for Economic 
Development, CED, found that the President's proposal, ``would raise 
the cumulative 2004-2013 deficit by about $920 billion (including 
interest) and raise the annual deficit ten years from now by about $100 
billion.
  Large structural deficits have real consequences. They reduce 
national savings and investment, raise real interest rates and reduce 
economic growth. The costs of the President's plan over the long run 
are so substantial that the President's plan would actually reduce 
future economic growth. Macroeconomic Advisers concluded that ``as 
interest rates rise, the initial increase in the stock market and 
decline in the cost of capital are reversed. Weakening investments 
leads to a sustained decline in labor productivity and hence potential 
GDP.'' They found that the President's plan will reduce economic growth 
in the long run. Economy.com reached a similar conclusion. It estimated 
that the President's plan would actually shrink the economy over the 
next 10 years.
  In his April 26 radio address, the President stated: ``Some Members 
of Congress support tax relief but say my proposal is too big. Since 
they already agree that tax relief creates jobs, it doesn't make sense 
to provide less tax relief and, therefore, create fewer jobs.'' In 
regard to that statement, the Washington Post reported, ``Asked to 
evaluate Bush's new argument, one Republican economist with close 
administration ties quipped, `I suppose it matters whether you think 
economics matters.' ''
  I believe that economics matters. I also believe that when you pursue 
economic policies based on ideology instead of sound economic 
principles you

[[Page 11814]]

end up hurting the lives of millions of Americans and threatening our 
economic future and prosperity. Look at the record of this 
administration: Since the President took office, the economy has lost 
2.7 million private sector jobs. That is the largest job loss under any 
one President since we began keeping such statistics. This 
administration is on track to become the first administration since the 
Great Depression to witness a decrease in the number of jobs in 
America. When the President took office, what he, in effect, inherited 
was a 10-year surplus estimated at $5.6 trillion. That was a projection 
out for 10 years: a surplus of $5.6 trillion. Now with the policies 
that he has enacted and the policies that he is proposing, in 
particular, of course, this very heavily weighted tax cut for the 
benefit of upper income people, we will go from projecting a $5.6 
trillion surplus over the 10-year period to projecting a $2.1 trillion 
deficit. That is a seismic shift in our position.
  Many of my colleagues in the Senate as well as the President have 
argued that these deficit estimates are inaccurate because they fail to 
take into account the so-called dynamic effects from the President's 
proposed tax cuts. In a recent speech the President said that, ``in 
order to get rid of the deficit, you boost revenues coming into the 
Treasury by encouraging economic growth and vitality'' through his 
proposed tax cut. Yet when the Congressional Budget Office analyzed 
these dynamic effects under nine different models, it found that these 
dynamic effects made little difference on net and that under five of 
the nine models theses effects actually increased the deficit. That is 
under all of the various assumptions used by the CBO the so-called 
dynamic effects that the President has argued would help the tax cut 
pay for itself will not only fail to deliver on that promise but may 
actually increased the deficit. This is yet another example of engaging 
in a policy driven by political ideology instead of sound economics.
  This bill is modeled on the failed economic policy that this 
administration has advanced: vast tax cuts for the extremely wealthy. 
The administration's proposal as estimated by the Brookings Institution 
creates a tax giveaway of over $89,000 to the average millionaire while 
providing only $482 to the average family with an income of $50,000. 
This truly represents the priorities of `Leave No Millionaire Behind' 
instead of `Leave No Child Behind.'
  This does not have to be the case. The Congress could enact sensible, 
prudent policies which provide a real, substantial boost to our 
economy, create many more jobs now when they are needed, maintain our 
economic strength and security over the long run. Senator Daschle 
presented an alternative that would create real jobs, grow the economy, 
help unemployed workers, and assist State and local governments that 
are facing their worst fiscal crisis since WWII. Extending unemployment 
insurance benefits serves to stimulate the economy immediately as those 
receiving the benefits are almost by definition sure to turn around and 
spend what they receive. Providing aid to State and local governments 
will allow them to forestall cuts to vital programs or tax increases, 
either of which would only exacerbate our current economic problems.
  Comparing the Democratic alternative and the administration's 
proposal, the conclusions are the same using almost any economic model: 
The Democratic plan would create over 1 million jobs at by the end of 
this year, which is twice as many jobs as the administration's own 
estimate of their plan; the Democratic plan would provide more stimulus 
to the economy this year leading to higher economic growth; and the 
Democratic plan is temporary and far less costly than the President's 
proposal.
  Mr. President, I oppose this legislation and I urge my fellow 
colleagues to vote no on this bill.
  Mr. BIDEN. Mr. President, our economy is in a slump unlike any in 
recent memory. In fact, we are experiencing a downturn with features 
unseen since the days of the Great Depression.
  In the last 2 years, we have lost over 2.6 million jobs in the 
private sector. That is the longest continous decline in the number of 
jobs in over 50 years. It has almost doubled the number of Americans 
who are stuck in long-term unemployment--out of a job for over half a 
year.
  The unemployment rate has just risen to 6 percent, with 8.8 million 
Americans out of work.
  The stock market has lost value by more than ten percent each of the 
last 3 years. The last time that happened was, again, the Great 
Depression of the 1930's. A drop of almost 30 percent in the value of 
the stock market has decimated the retirement savings of millions of 
Americans, and drained over $5 trillion in wealth from their net worth.
  That is why we are here today, to debate how to respond to this 
crisis. This crisis is real, it is affecting millions of families 
directly and indirectly across this country. In addition to the 
thousands of jobs lost with every new report, millions more families 
are concerned about the security of their own jobs.
  In fact, the situation is so precarious that the Federal Reserve, 
under the leadership of Alan Greenspan, has shifted its historical 
concern about inflation to a worry we haven't seen since the 1930's--
deflation. Despite a series of 12 interest rate cuts in a row, that 
thave pushed interest rates to forty-year lows, the Federal Reserve's 
meetings are now focused on keeping us out of the kind of deflation 
trap that Japan has been stuck in for more than a decade.
  When the Fed is more worried about deflation than inflation, you know 
you have a probiem.
  And while we ended the last century with the Federal budget in 
balance for the first time in a generation, we now begin the new 
century facing deficits bigger that we have ever seen. The 
Congressional Budget Office has just raised its estimate of this year's 
deficit to $300 billion, and that doesn't even count this $350 billion 
tax cut before us today.
  Wall Street analysts expected the actual deficit to be closer to $400 
billion or even more for this year--the biggest dollar figure ever.
  This kind of budget policy is the reason why we will soon be voting 
to raise the national debt ceiling--to allow us to borrow enough money 
to pay the bills we have already incurred.
  This will be the single largest increase in the national debt in our 
history, adding almost a trillion dollars to the debt limit, raising it 
to over $6.7 trillion.
  Just a few short years ago we were paying down the national debt.
  We have gone from a projected surplus of $5.6 trillion to a $1.8 
trillion deficit. This is a record of economic bad news that has not 
been equaled in most American's lifetimes.
  Now we are piling up additional debt, and adding heavy new interest 
charges to the spiraling costs of this administration's irresponsible 
budget policy. Over the next 10 years, we will add an additional $1.7 
trillion in interest costs on that Debt--$1.7 trillion that will not be 
available for homeland defense, for health care, for education, for law 
enforcement.
  How well I remember. How the men and women in the business community 
would come to me in the decades of deficit and tell me, ``Balance the 
budget, stop borrowing money like nobody else needs it. Get the 
government out of the credit markets so we can invest and grow.''
  Where are those voices we used to hear on the Senate floor, imploring 
us to reverse decades of borrowing and return to the straight and 
narrow of balanced budgets?
  We need a strong dose of those principles now. We need an economic 
stimulus that works. And we need an economic policy that does not 
mortgage our future, that does not dump the bill on our children and 
grandchildren.
  We need a plan that we can afford, that treats the very real, 
specific problems that average families in Delaware and around the 
country are facing today. Unfortunately, the bill before us is the 
wrong plan, at the wrong time, at the wrong price.
  We need an economic policy that has an impact right now, in the very 
short

[[Page 11815]]

term--an impact on consumer spending, on the demand side, to give 
employers a reason to bring those workers back.
  That means tax cuts for the vast majority of American families who 
need some relief, and who can be counted on to go out and spend that 
money--to create demand for more products, create more jobs.
  But in addition to the very real and very serious problems we are 
facing today, in the very near future, just around the corner, the 
retirement of the baby boom generation will stretch our Social Security 
system to the breaking point.
  Just a decade from now, surpluses in the Social Security system--
extra funds that help to cover some of our current deficits--those 
surpluses will disappear. Then the drain on our resources will 
accelerate until--according to the Social Security System's trustees--
by 2030 Social Security and Medicare will be a third of every Federal 
income tax dollar, and by 2040, almost half of every Federal income tax 
dollar.
  That is clearly an impossible situation that we cannot permit to 
occur. We must act now to makes sure that we have the resources to keep 
the promises we made to the millions of Americans who have paid their 
Social Security taxes over the years.
  But every dime of the $350 billion tax cut before us today is 
borrowed from Social Security--it breaks our promise to those who 
depend on Social Security, and sends the bill to our children and 
grandchildren.
  The solution we are seeking today, for the ongoing loss of millions 
of jobs, must not ignore the crisis in federal finances that is 
beginning now and crests just a decade away.
  It is not just that it is unfair and irresponsible to put the burden 
of our choices off on our children. That should be reason enough to 
reject this policy out of hand.
  But a moment's reflection tells us that if we borrow $350 billion, or 
$550 billion, or--if the President had his way, $726 billion--if we 
borrow that money from the same capital markets where our corporations 
and home buyers get their money, that policy is self-defeating.
  It raises the cost of money, and slows the economy down, while 
handing out windfall tax breaks that people will get without any change 
in the behavior.
  That policy is indeed unfair. It is irresponsible. And it is 
ineffective.
  But a kick-start that gets people spending and businesses hiring--and 
that has a reasonable cost--that kind of policy can work.
  First, we all know that the real price of this bill is not $350 
billion. We have already heard that key members of the Republican 
leadership do not expect that the tax increases in this bill, that keep 
the cost of the tax cuts down, will survive a conference with the 
House. If those tax increases go, the cost of this bill goes up.
  And key provisions in the bill--like the dividend exemption--phase in 
slowly and then are supposed to expire after ten years. Even if you buy 
the idea--which I don't--that giving a tax break to the small 
percentage of Americans who receive dividends can somehow turn the 
economy around, how can you expect that change to happen if businessmen 
know they should wait a few years until the exclusion is phased in?
  And what kind of permanent change in corporate behavior can we expect 
when we know that the door is going to slam shut on this deal 10 years 
out?
  One answer is that they don't expect that door to close. They expect 
the dividend provision and others to be extended. Or more and more 
dividends could be excluded--that creeping expansion and acceleration 
has been the pattern since we passed the 2001 tax cuts.
  Full exemption of dividends, if it were in place at the end of this 
decade, would cost $750 billion over the next 10 years.
  For that and many other reasons, this tax cut, as big and 
irresponsible as it is, is just a place holder for even more 
reductions, and even more deficits, even more debt.
  But designed this way, to get ten pounds of tax cuts into a five 
pound bag, so to speak, has resulted in a tax cut that even a 
conservative economist who supports the administration has called, and 
I quote from yesterday's Washington Post, ``one of the most patently 
absurd tax policies every proposed.''
  But maybe if this bill offered the average American family some real 
tax relief, maybe if we could expect a little help for the millions of 
jobless men and women stuck in long-term unemployment, some of the cost 
would be worth it.
  Tragically, there is no reason to expect this legislation to do 
anything to stimulate the economy this year or next. The way this tax 
cut is designed, there is no reason to expect any benefit to the 
economy, and every reason to believe that the deficits it creates will 
cause harm.
  Estimates by Congressman Henry Waxman, who examined corporate 
statements, show that the top three executives at Fortune's largest 100 
companies would get a tax cut of $118 million if dividends were totally 
excluded from taxation, the goal that administration officials admit is 
the real aim of the partial exclusion in this bill. Under full 
exclusion, twenty one executives would get a tax cut of $1 million.
  That is for doing nothing. Just for doing what they already do. That 
is not corporate tax reform, it is simply a windfall. I trust that 
those men and women earn every dime they already make. But no one can 
argue that a $118 million personal windfall into the already large pay 
packages of those executives is going to create a single new job.
  I you really wanted to fix the problem of dividend taxation, even 
Republican economists--indeed, especially Republican economists--will 
tell you that you should eliminate the tax at the corporate level. That 
at least has the potential of changing the behavior of firms that now 
must choose between borrowing that is not taxed and dividends that are 
taxed.
  That could be part of an honest debate about tax reform and job 
creation.
  And when Alan Greenspan endorsed the idea of reforming dividend 
taxes, he said it should be done in a way that does not add to the 
national debt, and that it should be part of a bigger plan of reform. 
This proposal flunks all of those tests.
  Only 13 percent of the impact of this bill will be felt in this year, 
Mr. President--and less than half in its first 2 years. And the vast 
majority of the revenue losses come in the future, as the crisis in 
Social Security approaches. This plan turns economic logic on its head.
  This is not designed to stimulate the economy--if it were, it would 
provide a quick, short-term boost to family incomes, and would give 
businesses incentives to act right now to increase investment and 
create jobs.
  Under this bill, the one-tenth of one percent of Americans who have 
an income of over $1 million will receive an average tax cut of 
$64,000. But those Americans in the middle 20 percent of the income 
spectrum would get an average tax cut of $233.
  That's right, the average American gets a tax cut of $233, under this 
bill.
  That is not fair. But it is not good economic policy either. Those 
good men and women fortunate and hard-working enough to make over a 
million dollars a year are not going to change their behavior, they 
aren't going to create any new jobs, just because they get an 
additional $64,000.
  But getting money to the families who will go out tomorrow and spend 
it, getting money to those who are about to lose long-term unemployment 
benefits, getting money to the states to prevent further state tax 
increases or spending cuts--that has the best hope of giving the 
economy the stimulus it needs.
  The tax cut program that makes sense and that I supported would 
provide a tax cut for every American taxpayer--for example, $300 for 
every adult, $300 for the first two children. It increases the child 
tax credit to $700 this year and $800 next year. And for middle class 
and working families, this tax cut plan that I supported accelerates 
relief from the marriage penalty.

[[Page 11816]]

  Altogether, a middle class family of four would have gotten a tax cut 
of $1630 this year under the Democratic tax cut plan.
  And if you add to that my proposal to allow parents to deduct the 
cost of college tuition a family with kids in college could get an 
additional $3000 tax break. That is real help, for real families, to 
deal with a real problem, and frees up real money to stimulate the 
economy.
  Incredibly, this so-called ``Jobs'' bill makes no provision to extend 
the life of the long term unemployment program that expires in just two 
weeks. With the number of long-term unemployed at record levels and 
growing, this bill simply ignores their needs.
  Equally astounding, the bill provides almost nothing for the states 
whose fiscal crisis is dragging the economy down. State budget cuts in 
education, health care, law enforcement--even homeland security--slow 
the economy as workers lose jobs and businesses lose customers.
  While there appears to be $20 billion in aid to the states in this 
bill, in reality, the reductions in federal dividend and income 
taxation will cut as much as $11 billion from state taxes based on 
those sources.
  Under the tax cut plan I support, small businesses would get three 
times the tax write off for investments--$75,000 worth--this year, and 
a tax deduction for 50 percent of the cost of new equipment, along with 
help getting health insurance for their employees.
  The tax cut I support would get $20 billion in real help to the 
states to confront the fiscal crisis that is compounding the national 
economic slump.
  And the tax cut program I voted for would extend unemployment 
benefits to help those looking for work sustain that search in a time 
of record job losses.
  Finally, the plan I supported is affordable. Its effects take place 
immediately, and it would not leave a hole in our finances for our 
children to repair.
  That's the plan I supported, and it is the plan our country needs. I 
cannot vote for this bill that is now before us because it fails to do 
so.
  Mr. LEVIN. Mr. President, I cannot support this fiscally 
irresponsible and unfair tax cut package.
  Our economy is struggling right now. Eight-and-a-half million 
Americans are out of work, and we now have about 2.7 million fewer 
private sector jobs than were in existence at the beginning of this 
administration. No President since the Great Depression has ended a 
term with fewer jobs than when his term began. Michigan has an 
unemployment rate of 6.7 percent, among the highest in the Nation. 
According to the Bureau of Labor Statistics, Michigan lost 17,700 jobs 
just last month, the most of any State in the country. That brings the 
total number of Michigan jobs lost since the Bush administration took 
office to over 178,000, and the total number of unemployed in Michigan 
to 344,000.
  We are also back into a deep deficit ditch. As recently as January 
2001, the Office of Management and Budget projected a 10-year surplus 
of $5.6 trillion. Now, under the recently passed budget resolution, we 
face an estimated deficit of $1.95 trillion over the same time period, 
including record deficits of over $300 billion for this year and the 
next. Federal Reserve Chairman Alan Greenspan recently reiterated that 
the bigger the deficits, the higher the long-term interest rates, which 
means higher home, car, college and credit card payments for us all.
  Our economy needs a lift now. It needs real jobs and real growth now, 
not a rehash of the same policies that were tried and failed in the 
recent past. Unfortunately, this bill only provides more of the same 
failed policies.
  While the bill purports to cost $350 billion over 10 years--an amount 
which already is fiscally irresponsible given our current deficit--this 
number is arrived at by using a budget gimmick that masks the true cost 
of the bill, which in reality is upwards of $660 billion over 10 years. 
The bill would completely exclude dividend income from individual 
taxation in 2004 through 2006, a policy that is expensive, not very 
stimulative to our economy and sharply slanted towards upper income 
folks. But then the bill ``sunsets'' the dividend exclusion so that it 
disappears beginning in 2007. Not only is that bad policy, it is also 
disingenuous and deceptive to the American people.
  This bill also is too generous to those who need it the least. The 
top 10 percent of taxpayers would receive well over 50 percent of the 
tax benefits, and in 2003, those with incomes above $1 million would 
receive an average tax cut of $64,400, while those in the middle of the 
income spectrum would receive an average tax cut of only $233. 
Providing large tax cuts to the wealthy in the hopes that the benefits 
will trickle down to everybody else hasn't worked before, and there is 
little reason to think that it will work now. Following the same 
approach that failed time and again just doesn't make sense.
  This plan provides no unemployment benefits to any of our 8.7 million 
unemployed Americans. It is ironic that in a bill that is based on the 
President's so-called ``Jobs and Growth'' package, the Republican 
majority is not addressing the immediate need for job assistance for 
millions of Americans. It is elementary economics that providing 
additional unemployment benefits is an excellent way to jump start a 
stagnant economy. The money we are talking about is money that will be 
spent. According to a 1999 Department of Labor study, every $1 invested 
in unemployment insurance generates $2.15 in Gross Domestic Product. 
That is what our economy needs, not wildly expensive tax cuts that do 
little in the short term at a huge long-term cost.
  While I am pleased that this bill contains funds to assist our 
struggling State and local governments, it does not do enough. Our 
States currently are facing their worst fiscal crisis in over 50 years, 
with many being forced to raise taxes or cut vital services like 
Medicaid in order to balance their budgets. Instead of doing all that 
we should to assist them, this bill includes a dividends exclusion 
provision that will actually strip States of revenues, something which 
will stimulate neither jobs nor growth.
  I supported and voted for a tax package that was about creating jobs 
now, when we need it, in a way that did not mortgage our future.
  The plan I supported was estimated to put more than 1 million people 
back to work by the end of 2004 at a fraction of this bill's costs. It 
would have cut taxes for every taxpaying American, providing a tax cut 
of $1,630 to a family of four through a wage credit, an acceleration of 
the child tax credit, and an elimination of the marriage penalty. It 
would have helped small businesses by providing them with a 50 percent 
tax credit to help employers maintain health coverage for their 
workers, and would have provided large and small companies with 
incentives to invest and create jobs by allowing small businesses to 
immediately write-off more investments and providing bonus depreciation 
to all companies. It also would have provided unemployment benefits for 
nearly 4 million laid-off workers, including those who have already 
exhausted their benefits. What our sagging economy needs right now is 
immediate jobs, growth, and stimulus, and that is what the plan I 
supported offered.
  Instead, what passed is a package that is the wrong medicine for our 
ailing economy. It will create fewer jobs than what is needed. It will 
slight middle-class families in favor of the wealthy. And it will 
dramatically increase the deficit and national debt and drive up 
interest rates, which will make it more expensive to buy a house, pay 
for college, or pay off credit card debt. That is just not a plan that 
I can vote for.
  Mr. KOHL. Mr. President, I rise today to express my deepest 
disappointment in the actions of the Senate today. Today, across the 
country, States face a fiscal crisis as State legislatures attempt to 
close an estimated $17.5 billion budget gap. Today, more than 2 million 
American workers have been unemployed for more then 6 months. Today, 
families across the county are struggling to make ends

[[Page 11817]]

meet. Today, our country is seeing steadily increasing deficits, now 
projected at over $300 billion this year alone. And today, in the 
Senate, we passed a hugely expensive tax package that will 
overwhelmingly benefit the wealthy.
  It is for that reason I voted against the Finance Committee's jobs 
and growth package. I have consistently argued that the best way to 
meet the needs of our Nation is to find a balance between cost and 
benefit, and the votes I have taken today are a reflection on this 
desire. I voted to double the amount of funding that would go to 
struggling State legislatures and local governments. I supported 
efforts to get more money into the hands of working families. I also 
supported amendments that would assist small businesses with the cost 
of health insurance and new equipment. These initiatives are the most 
effective, as well as the most cost effective, means of stimulating the 
economy.
  I would like to take a moment to applaud the pieces of the Finance 
Committee's package that were actually beneficial to working families. 
Marriage penalty relief and accelerating the increase in the child tax 
credit are both worthy proposals that would benefit millions of 
families. In addition, the small business expensing provision is an 
excellent way of helping small businesses with startup costs thereby 
providing a significant boost to the economy. However, we could, and 
should, have done more--more help for the struggling economy and 
struggling families at less damage to our bottom line. I was 
disappointed to see proposals fail today that would have expanded on 
all of these provisions; proposals that would have gotten more money 
into the hands of families who would spend it and could have provided a 
larger, faster boost to our failing economy.
  My greatest disappointment, however, was with an amendment that was 
able to pass. Since the administration announced its support for a 
complete elimination of the taxation on dividends, I have voiced my 
opposition to this proposal. Forty-two percent of the benefits under 
this proposal would go to the richest 1 percent of taxpayers. Those are 
inexcusable figures for a provision to be included under a so-called 
growth package. The dividend proposal will not spur the economy, will 
not help working families, and will not help States with their budget 
shortfalls. These are the goals we should be working towards, and I 
believe that we have fallen severely short in passing this legislation 
today.
  Mr. BUNNING. Mr. President, I am pleased that the manager's of the 
Jobs and Growth Tax Relief Reconciliation Act of 2003, Chairman 
Grassley and ranking member Baucus, have agreed to included in their 
manager's amendment my provision, which is supported by many members in 
this body, that addresses the issue of the tax burden that is faced by 
wholesalers of domestic distilled spirits.
  I want to take this opportunity to express my support for this 
legislation and also to share my broader concern about how the current 
Federal Excise Tax, FET, system places an undue burden on distillers 
that must, at a minimum, not be increased to fund this legislation or 
for any other reason.
  I introduced this amendment because I believe that the existing FET 
system for domestically produced distilled spirits penalizes spirits 
wholesalers across the nation. These are mostly family businesses that 
create high wage jobs. Yet spirits wholesalers often find themselves in 
the position of, in essence, having to float Uncle Sam a loan when they 
purchase U.S. made spirits from their distillers.
  Let me briefly explain how this situation comes about in the 
marketplace. Under Federal law, spirits produced in the United States 
may not leave the distillery premises until the FET is collected. Thus, 
the cost of the FET is factored into the price of the goods that is 
paid when the wholesaler accepts possession from the distiller. The 
wholesale, in turn, may wind up having to warehouse these products for 
a considerable time before they are sold to a retailer. The fundamental 
issue here is the time value of the FET--valuable working capital for 
these businesses--while the wholesale warehouses products without 
realizing any income from their sale.
  This amendment would create a tax credit available to the wholesalers 
in order to offset these FET carrying costs. I believe this is 
fundamentally fair and will help protect and create good jobs in the 
wine and spirits wholesale tier across the nation.
  However, in introducing this amendment and supporting its inclusion 
in the Jobs and Growth Tax Relief Reconciliation Act of 2003, I want to 
make one thing perfectly clear. In supporting this bill, I want the 
Administration, and officials at the Treasury Department and the Bureau 
of Alcohol, Tobacco and Firearms to understand that by doing so I 
reject the connection that some have tried to make between this issue 
and Section 5010 of the tax code, the wine and flavors tax credit. In 
past years, the suggestion has been made that any revenue loss to the 
U.S. Treasury caused by the provisions of my amendment be offset by 
repealing Section 5010. I reject that notion because there is no 
logical link between the two issues.
  Section 5010 is a component-based tax provision allowing distillers 
to claim a credit for wines and other flavoring components that are 
added to their products. Thus, a distiller will pay the full spirits 
FET for that portion of a product that is derived from distilled 
spirits. However, many products sold as spirits contain wine and other 
non-spirits flavorings, which are subject to tax at lower rates. Under 
Section 5010, the distiller is entitled to a credit for the difference 
between the wine and the spirits tax for that portion of the product 
that is not derived from spirits.
  Section 5010 is important. It has the added policy virtues of being 
on the side of common sense, economic competitiveness and fundamental 
fairness. All of this is why I have fought hard to protect 5010 from 
several serious threats over the years.
  I am pleased that, with the inclusion of my amendment in this bill, 
the Senate has once again shown its support for solving this problem 
which penalizes spirits wholesalers of domestically produced distilled 
spirits. I am also pleased that the Senate has seen fit to address this 
important issue without harming Section 5010 or otherwise increasing 
the tax burden on distillers.
  Mr. DOMENICI. Mr. President, I rise today to thank my colleague from 
Iowa, Senator Grassley, for his leadership in providing much needed 
assistance to our Nation's hospitals and doctors. Specifically, I would 
like to thank him for his support of the disproportionate share 
hospitals--DSH--program, and for his support of fair and equitable 
Medicare reimbursement for America's doctors.
  The Medicaid DSH program is an essential program that provides relief 
to many of our Nation's safety net hospitals; hospitals that experience 
financial difficulty because they treat larger numbers of the 
uninsured, low-income, and Medicaid patients. By raising payment rates 
to these hospitals, the DSH program helps to alleviate the 
disadvantaged financial situation suffered by many of these hospitals, 
and helps to ensure that all who need access to hospital care are able 
to receive that care.
  Under current rules, a state's DSH payments may not exceed an 
allotment amount that is set in law for that state. In my home state of 
New Mexico, DSH payment adjustments are set at less than 1 percent. 
This 1 percent is far less than the national average of 8 percent, thus 
classifying my state as an ``extremely low DSH state.'' This lack of 
funding has seriously threatened the viability of many New Mexico 
safety net hospitals, and it puts at risk the care of some of our 
neediest citizens.
  Today however, as a result of the work done by this body, Medicaid 
DSH allotments for States like New Mexico that have extremely low 
payments will be raised from 1 percent to 3 percent. This additional 
funding will help to ensure that our hospitals can continue to treat 
Medicaid and other low income or

[[Page 11818]]

uninsured patients, and it will help relieve some of the pressure on 
our State's budget.
  In addition to the assistance provided to the DSH program, this 
Congress has also taken a proactive approach to resolving another issue 
of great importance to me, fair and equitable Medicare reimbursement 
for America's doctors.
  In many Medicare payment localities, current Federal policy 
undermines a doctor's ability to see Medicare patients by establishing 
disparity in reimbursement levels. Rural physicians are among the 
lowest Medicare dollar reimbursement recipients in the country, and I 
submit that this is the reason these areas cannot effectively recruit 
and retain their physicians.
  This practice is unfair and it is discriminatory. There is not reason 
doctors in Albuquerque, NM should be paid less for their time than 
doctors in New York City. Doctors should be valued equally, 
irrespective of geography.
  Today, Congress has agreed to fix many of these inequities, and has 
provided for a more balanced reimbursement formula. By increasing 
Medicare physician reimbursement, we will improve patient access to 
care and increase the ability of states to recruit and retain 
physicians. When Medicare physician reimbursement rates are raised, 
patients are the ultimate beneficiaries.
  I have enjoyed working with my colleagues, including Senator 
Bingaman, on these very important issues.
  Mr. NICKLES. Mr. President, pursuant to section 313(c) of the 
Congressional Budget Act of 1974, I submit for the Record a list of 
material in S. 1054, the Jobs and Growth Tax Relief Reconciliation Act 
of 2003 reported by the Finance Committee on May 13, 2003, considered 
to be extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) 
of section 313. The inclusion or exclusion of material on the following 
list does not constitute a determination of extraneousness by the 
Presiding Officer of the Senate.
  To the best of my knowledge, S. 1054, the Jobs and Growth Tax Relief 
Reconciliation Act of 2003, contains no material considered to be 
extraneous under subsections (b)(1)(A), (b)(1)(B), and (b)(1)(E) of 
section 313 of the Congressional Budget Act of 1974.
  Ms. SNOWE. Mr. President, I rise today to speak regarding the jobs 
and growth package that was reported by the Senate Finance Committee 
and that has been considered on the Senate floor. It was a long and 
often arduous journey that brought the bill here for consideration, and 
I especially thank the majority leader and Finance Chairman Grassley 
for their extraordinary and tireless efforts in ensuring we were able 
to pass a package in committee and consider this economic stimulus bill 
in the full Senate.
  Let us remember, this debate began when the President rightfully and 
forcefully made the case that we have an obligation to help jump-start 
an economy that was already in the doldrums even before the tragedy of 
September 11. Over the past few months--as we worked to pass a budget 
for the first time in 2 years and as the tax cut package moved through 
the respective House and Senate committees--some said the reductions 
should be smaller--some said larger--and others even believe that no 
cuts were warranted. Last week, the House passed a very different tax 
bill than the one the Senate is considering today, further reflecting 
the diversity of deeply held beliefs as to our appropriate course of 
action in Congress.
  I have believed since last fall that the American people must know we 
are serious about creating jobs with a plan that can be effective now. 
We have lost 2.3 million jobs since March 2001, and with 48,000 jobs 
lost in April alone, we have reached the highest level of unemployment 
in 8 years at 6 percent. In the last quarter of 2002, the economy was 
growing at a languid 1.4 percent annual rate, and the Commerce 
Department's latest report showed the economy was still at a weak 
growth rate of 1.6 percent. Consumer spending has increased more slowly 
than at any time since the 2001 recession, and capacity at the Nation's 
factories is at a low of 72 percent--meaning that demand can and must 
be increased.
  So the President is absolutely right to make passage of a robust 
growth package central to his agenda, and I applaud his unflagging 
leadership in rejuvenating our economy. At the same time, I have also 
held throughout this debate that to deficit-finance too high a level of 
tax cuts would be to risk condemning future generations to the 
corrosive economic effects of unsustainable deficits--and tying hands 
of future Congresses in addressing our most pressing domestic 
challenges.
  With a net $350 billion for stimulus, the package reported by the 
Finance Committee is consistent with these principles, and those that 
are embodied in a letter I signed along with Senators Voinovich, 
Baucus, and Breaux before consideration of the budget resolution. In 
that letter, we stated our belief that ``our nation would benefit from 
an economic growth package that would effectively and immediately 
create jobs and encourage investment.'' But we also expressed our 
belief that ``any growth package that is enacted through reconciliation 
this year must be limited to $350 billion in deficit financing over 10 
years and any tax cuts beyond this level must be offset.''
  So how did I arrive at 350? It was not by simply splitting the 
difference. It was by making a clear, bright-line distinction as to 
which measures were truly effective, short-term stimulus and which were 
not. The $350 billion package approved by the Finance Committee 
provides for all of the President's proposals that can truly have the 
immediate, stimulative effect our economy requires in their entirety. 
Indeed, as economist William Gale of the Brookings Institute has said, 
within that $350 billion figure, we would likely get most of the short-
term job boost.
  To pay for dividend tax cuts that could create long-term growth, the 
Finance Committee package employs genuine offsets. With all the 
provisions of the committee plan in effect for the full 10 years--
accelerating policy that was already passed by the Congress in 2001--it 
creates the kind of continuity and stability for both markets and 
consumers that is critical in making investment and spending 
strategies.
  While some undoubtedly believe we should pass a significantly larger 
tax cut, let us remember that $350 billion in net tax cuts is by no 
means inconsequential. In fact, if enacted it may be the third largest 
tax cut in history--and is being considered just 2 years following the 
largest tax cut in history. Moreover, the Finance Committee bill is a 
responsible bill that recognizes the lessons learned from past debates 
on economic stimulus--that boosting both consumer purchasing power and 
business investment is vitally important to economic growth.
  For example, the package would cut the marginal tax rates across the 
board--impacting workers' paychecks by increasing their take-home pay 
this year. The bill also accelerates tax relief for families with 
children, including a provision not in either the President's plan or 
the House bill to accelerate the increase in the amount of the child 
tax credit that is refundable for working families with low incomes--
building on my inclusion of refund-
ability in the 2001 tax package. Married couples would also receive tax 
relief from the unfair marriage penalty through the expansion of the 
standard deduction and the 15 percent tax bracket.
  To spur investment, the Finance Committee bill triples the amount a 
small business can write off for investments in new business assets--
and with small businesses representing 99 percent of all employers--
contributing to 51 percent of private-sector output--and providing 
about 75 percent of net new jobs, that is exactly the kind of policy 
that can help create jobs soon. It would also provide needed capital to 
small businesses by expanding the ability of pension plans and other 
tax-exempt entities to invest in the securities of Small Business 
Investment Companies. This provision alone is expected to create an 
additional 16,000 jobs due to the additional investment capital 
available for small businesses.
  Furthermore, the State fiscal relief provision in the Finance 
Committee

[[Page 11819]]

plan can provide additional economic stimulus. With States facing 
combined shortfalls of more than $68 billion in fiscal year 04, I thank 
Chairman Grassley for working to include a ``trust fund'' in the 
package of $20 billion in relief for the States and local governments 
to use as they see fit to address increasing Medicaid costs, 
transportation needs, homeland security infrastructure, education, and 
other critical functions.
  I know some have argued State budget shortfalls result from 
overspending. Yet, as a report issued by the National Governors 
Association shows, State spending from 1995 to 2001 increased 6.5 
percent per year, a rate identical to spending from 1979 to 2003, and I 
would like unanimous consent to print that report in the Record.
  I also have here a letter from the heads of the Conference of State 
Legislators, the Council of State Governments, the U.S. Conference of 
Mayors, the National Association of Counties, the National League of 
Cities and the International City/County Management Association 
documenting that States and localities are experiencing their worst 
fiscal conditions since World War II. I ask unanimous consent this 
letter also be printed in the Record along with my statement.
  Moreover, according to a recent Wall Street Journal article, 
``Analysts at Goldman Sachs figure state and local belt-tightening (in 
their budgets) will shave as much as a half-point from the economy's 
growth. . .'' By providing State fiscal relief, we have the opportunity 
to return that half-point of growth to our economy. And let us 
remember, dollars spent on education, health care, and transportation 
have an economic value today and tomorrow.
  Indeed, should State decide to use a portion of the assistance on 
transportation, it is worth nothing that, according to the U.S. Chamber 
of Commerce, for every $1 billion invested in transportation, 47,500 
new jobs are created. And let us not forget that State and local 
governments account for more than 15 million jobs nationwide. As we 
take steps to put more money into the hands of consumers, we must also 
make sure that those who are employed by a State or local government, 
either directly or through a government service contract, are able to 
remain employed.
  On that note, I am pleased an amendment was included here on the 
floor to further refine the agreement and language that Senator Smith 
and I included in the growth package reported by the Senate Finance 
Committee.
  After working to generate strong bipartisan support for this issue, 
the Senate Finance committee established a $20 billion trust fund in S. 
1054, the Jobs and Growth Tax Relief Reconciliation Act of 2003, to 
provide critical, flexible relief for both State and local governments. 
I also want to thank Chairman Grassley again for his willingness to 
work with me to identify appropriate offsets that enured this proposal 
would not increase the net cost of the growth package.
  By securing support in committee to include a $20 billion fiscal 
relief trust fund, I was able to ensure that States and localities 
receive the help they need in balancing their fiscal year 2004 budgets. 
The subsequent amendment we passed on the floor, with my support 
included my proposal which requires half of the $20 billion to be 
distributed between State and local governments--with States receiving 
$6 billion and localities receiving $4 billion. The remaining $10 
billion goes to States through a temporary increase to the Federal 
Medical Assistance Percentage, known as FMAP, to help alleviate the 
short-term spike in Medicaid costs. The assistance would be distributed 
in fiscal years 2003 and 2004.
  So, again, the Finance Committee bill fully provides for the 
appropriate range of short-term stimulus measures. At the same time, 
for me--as I have stated--the net $350 billion cost of that package 
strikes a balance in keeping with the requirements imposed by my 
allegiance to the principles of fiscal responsibility. Because I came 
to this debate as one deeply rooted in the idea that perhaps the issue 
that best demonstrates our commitment to the generation of tomorrow is 
balancing the Federal budget. I have said time and again that there is 
not goal more critical to the economic future of our Nation--and that 
is not just my view.
  As Chairman Greenspan recently testified, ``(The deficit) does affect 
long-term interest rates, and it does have an impact on the economy.'' 
And he has also warned that, ``If . . . you get significant increases 
in deficits which induce a rise in long-term interest rates, you will 
be significantly undercutting the benefits'' of tax cuts. If you 
consider that the two sectors that are keeping the economy afloat right 
now--housing and automobiles--are also two of the most interest rate 
sensitive--just imagine where we would be in the future with high 
unemployment and high interest rates.
  And it is not just our future economy at stake--if that by itself 
isn't reason enough for fiscal prudence. I will recall the years we 
fought to arrive at balanced budgets and surpluses--and reaching that 
fiscal ``holy grail'' in the late 1990s was supposed to open a window 
of opportunity to address the domestic challenges of the coming 
decade--most significantly, strengthening Social Security and Medicare.
  Yes, even then, many of us were mindful that projections of future 
surpluses were just that--projections. That is why even as I supported 
the tax cuts in 2001--to provide, in Chairman Greenspan's words--an 
``insurance policy'' against the effects of a recession, and to provide 
relief at a time when Americans were suffering under the highest tax 
burden since World War II--I proposed and I championed a trigger 
linking the level of spending and taxes to the level of surpluses 
actually realized.
  Of course, none of us could have foreseen that so many challenges 
would soon arrive, as the President has said, ``In a single season.'' 
September 11, the war on terrorism, and the necessity of disarming the 
Iraqi regime, the costs of bolstering our homeland security--all those 
shook an already fragile economy and sparked a return to deficits. In 
fact, CBO attributes fully 68 percent of the evaporated $5.6 trillion 
in surpluses to the recession and economic downturn.
  So here we are, with CBO having projected just this month that the 
deficit will be $300 billion--which is 22 percent higher than their 
projection from only 3 months ago and about 92 percent more than last 
year! Keep in mind that is without accounting for the approval of 
additional tax cuts or additional costs of pressing national priorities 
like the war in Iraq, homeland security costs, and passing a Medicare 
prescription drug benefit. And Citigroup economic forecasters have 
recently predicted that the 2003 deficit could be as high as $500 
billion.
  Even optimist projections that assume higher-then-expected 
productivity growth anticipate substantial long-term deficits. And if 
growth remains just ``average'', the Nation will fact unsustainable 
budget deficits. Just this month, economists with Goldman Sachs 
expressed alarm about projections that Federal debate will grow from 33 
to 49 percent of gross domestic product--a circumstance they say will 
undermine the economy, instead of spurring economic growth. And as we 
face a true cumulative deficit through 2013 projected to be nearly $4.5 
trillion--not counting the $2.7 trillion in surpluses from Social 
Security that are currently being sued to mask the size of the 
deficit--we cannot tolerate the confluence of burgeoning deficits in 
perpetuity with the retirement of 77 million baby boomers beginning in 
2013.
  That is why it was critical that--in establishing a policy on the 
taxation of dividends that could be built on as we assess the reaction 
of, and overall impact on, the financial and business sectors--the 
Finance Committee package pays for it with offsets. As Chairman 
Greenspan has said, cutting taxes on dividends will ``bolster the 
economy's long-term ability to grow''--but they should also be paid 
for.
  As reported by the Finance Committee, the bill includes real offsets, 
scored by the Joint Committee on Taxation, to fully compensate the 
approximately $80 billion cost of the provision.

[[Page 11820]]

Moreover, in providing a capped exclusion of $500 for the taxation of 
dividends, with an additional exclusion for dividend amounts above $500 
that goes from 10 percent to 20 percent over 10 years, the proposal 
would benefit all taxpayers who receive dividends, eliminating the tax 
entirely for 84.7 percent of all taxpayers.
  One of the arguments that proponents of eliminating the tax on 
dividends use to tout the proposal's benefits is that it will reduce 
the cost of capital for business over the long term. I agree. However, 
cutting taxes on dividends affects the financial markets as well.
  I am concerned that enacting a shorter term provision with a sunset 
would have negative consequences and potentially harm the economy. 
Kevin Hassett, a scholar at the American Enterprise Institute, has 
commented on such a dividend plan, saying that, ``Since the eliminate 
of dividend taxes is only temporary, investors must evaluate the risk 
that dividend taxes will come back. If they do, then the cash flows to 
investors from owing stock will plummet, as will the value of shares. 
Under such circumstances, it is undeniable that government policy 
significantly increases the fundamental risk of stocks. It would be 
hard to imaging that this would be good for the stock market or the 
economy.''
  Moreover, the benefits of cutting taxes on dividends cannot be viewed 
in isolation--the effect on the budget must be factored in the 
analysis. A key point is that, as the Federal budget goes further in 
the red, the associated mounting Federal debt will ``crowd out'' 
private capital in the marketplace--having a damaging impact on the 
economy. This will become more and more evident as we approach the end 
of this decade, with the pressures of the very large increase in baby 
boomer retirements.
  The bottom line is that, while deficits have supplanted surpluses due 
to war costs and the lingering effects of recession, we have a 
fundamental responsibility to ensure they are a temporary phenomenon--
not a perpetual cycle ``as far as the eye can see.'' The years of 
balanced budgets in the late 1990s should be no brief fiscal interlude, 
but rather the rule--so lowering taxes and containing deficits until we 
return to balanced budgets must not be mutually exclusive goals.
  Again, the tax bill that was reported out by the Finance Committee 
provides the right balance of tax relief that would stimulate both 
consumption and investment. The fiscally responsible growth policies 
contained in that package meet the dual, critical challenges of 
immediate, stimulative economic growth without further inflating budget 
deficits and returning to a perpetuity of red ink. And, as I have said, 
the dividend plan in the Finance bill is a long-term policy that takes 
an important, but incremental step to eliminating that ax on dividends.
  Regrettably, however, the temporary dividend proposals in the final 
bill, I believe, is not good long-term tax policy. If we assume a 
future Congress will extend this provision permanently, then the true 
cost would be over $300 billion--adding further to ballooning deficits 
well above the $350 billion net cost of the Finance Committee bill. On 
the other hand, if Congress does not extend the policy, it could have 
dire implications on the financial markets and companies.
  Finally, it must be noted the way in which this provision is paid for 
dilutes the important benefits of the section 179 expensing by 
sunsetting its expansion and cutting short marriage penalty relief 
proposed by the President. Therefore, for the reasons I have just 
detailed, I regret I am unable to support the final package, as 
amended.
  Mr. President, I ask unanimous consent that the letter I referred to 
earlier be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                                                  U.S. Senate,

                                   Washington, DC, March 13, 2003.
     Hon. Bill Frist,
     Majority Leader, U.S. Senate, Washington, DC.
     Hon. Tom Daschle,
     Minority Leader, U.S. Senate, Washington, DC.
       Dear Majority Leader Frist and Minority Leader Daschle: 
     With the international challenges our Nation faces, including 
     a possible military engagement with Iraq, continuing tension 
     on the Korean Peninsula, and the ongoing war on terrorism, 
     coupled with sluggish economic growth, we believe it is 
     critical a budget resolution for Fiscal Year 2004 (FY2004) be 
     enacted this year. We are committed to working in a 
     bipartisan manner to this end.
       We believe that our nation would benefit from an economic 
     growth package that would effectively and immediately create 
     jobs and encourage investment. We appreciate President Bush's 
     leadership in identifying this need and beginning this 
     important debate with his economic growth proposal.
       Given these international uncertainties and debt and 
     deficit projections, we believe that any growth package that 
     is enacted through reconciliation this year must be limited 
     to $350 billion in deficit financing over 10 years and any 
     tax cuts beyond this level must be offset. All signatories to 
     this letter are committed to defeating floor amendments that 
     would reduce or increase this $350 billion amount.
       We look forward to working with you on a bipartisan budget.
           Sincerely,
     John Breaux.
     Max Baucus.
     Olympia Snowe.
     George V. Voinovich.

         National Conference of State Legislatures, Council of 
           State Governments, National Association of Counties, 
           U.S. Conference of Mayors, National League of Cities, 
           International City/County Management Association,
                                                      May 8, 2003.
     Hon. Charles Grassley,
     Chairman, Senate Finance Committee,
     U.S. Senate, Washington, DC.
     Re Reconciliation, State and Local Fiscal Assistance.

       Dear Senator Grassley: On behalf of state and local 
     officials, we appreciate and support your proposal to provide 
     $20 billion in fiscal assistance to state and local 
     governments in reconciliation legislation pending before your 
     committee.
       The nation's economic recovery is essential. We believe a 
     partnership among the federal, state and local governments 
     and the private sector is necessary to expeditiously achieve 
     this recovery. With state and local governments experiencing 
     their worst fiscal conditions since World War II, we are not 
     positioned to help stimulate the economy. Additionally, 
     states and localities continue to deal with the excessive 
     inflationary costs of certain state-federal partnerships, 
     such as Medicaid. Finally, state and local governments 
     continue to fill gaps in unfunded federal mandates and 
     underfunded national expectations. Instead, state and local 
     governments are reducing workforces, deferring capital 
     projects, cutting programs and imposing fee increases and 
     raising income, sales and property taxes. These activities 
     work against economic recovery and the partnership we feel is 
     critically needed.
       We are very pleased with the Senate's past response to and 
     action on our request for fiscal assistance and partnership 
     in economic recovery. We are eager to work with you to 
     develop reconciliation and economic recovery legislation. 
     Thank you for your consideration of our concerns. Please have 
     your staff contact each of our organizations for assistance 
     and information.
           Sincerely,
     William T. Pound,
       Executive Director National Conference of State 
     Legislatures.
     Larry E. Naake,
       Executive Director National Association of Counties.
     Donald J. Borut,
       Executive Director National League of Cities.
     Daniel M. Sprague,
       Executive Director Council of State Governments.
     J. Thomas Cochran,
       Executive Director U.S. Conference of Mayors.
     Robert O'Neill,
       International City/County Management Association.

TABLE 2.--STATE NOMINAL AND REAL ANNUAL BUDGET INCREASES, FISCAL 1979 TO
                               FISCAL 2003
                          [Amounts in percent]
------------------------------------------------------------------------
                                                   State General Fund
                                               -------------------------
                  Fiscal year                     Nominal        Real
                                                  increase     increase
------------------------------------------------------------------------
2003..........................................          1.3          0.4

[[Page 11821]]

 
2002..........................................          1.3          0.4
2001..........................................          8.3          4.0
2000..........................................          7.2          4.0
1999..........................................          7.7          5.2
1998..........................................          5.7          3.9
1997..........................................          5.0          2.3
1996..........................................          4.5          1.6
1995..........................................          6.3          3.2
1994..........................................          5.0          2.3
1993..........................................          3.3          0.6
1992..........................................          5.1          1.9
1991..........................................          4.5          0.7
1990..........................................          6.4          2.1
1989..........................................          8.7          4.3
1988..........................................          7.0          2.9
1987..........................................          6.3          2.6
1986..........................................          8.9          3.7
1985..........................................         10.2          4.6
1984..........................................          8.0          3.3
1983..........................................         -0.7         -6.3
1982..........................................          6.4         -1.1
1981..........................................         16.3          6.1
1980..........................................         10.0         -0.6
1979..........................................         10.1          1.5
1979-2003 average.............................          6.5          2.1
------------------------------------------------------------------------
Notes.--The state and local government implicit price deflator, as cited
  by the Bureau of Economic Analysis on October 2002, is used for state
  expenditures in determining real changes. Fiscal 2001 figures are
  based on the change from fiscal 2000 actuals to fiscal 2001
  preliminary actuals. Fiscal 2002 figures are based on the change from
  fiscal 2001 preliminary actuals to fiscal 2002 appropriated.
Source: National Association of State Budget Officers.

  Mr. CHAMBLISS. Mr. President, I rise today to speak on S. 1054, the 
Jobs and Growth Reconciliation Tax Act of 2003.
  This debate on the tax reconciliation bill is necessary and long 
overdue. I think it is clear that Members on both sides of the aisle 
agree that our economy is struggling and a growth package is 
desperately needed. However, there are wide differences of opinion on 
the contents of the best package and the best way to implement it.
  I am, and always have been, a proponent of the President's original 
growth package of $726 billion. Implementing the President's proposed 
bill would create millions of jobs, increase the gross domestic 
product, GDP, and personal income, and in the process, stimulate 
overall growth of our Nation's economy.
  My home State of Georgia would reap overwhelming benefits from the 
President's proposal if enacted into law. For instance, between 2004 
and 2008, 26,720 additional Georgia citizens would secure jobs; Georgia 
taxpayers would average $4.2 billion more in disposable income per 
year; and Georgia taxpayers would average $2.2 billion more in personal 
saving per year.
  Between the President's proposal, the House-passed bill and the 
Senate bill, the Senate bill of $413 billion, which is loaded with tax 
hikes in the form of offsets, is by far the weakest of the three bills. 
This bill will do little to stimulate the economy and provide almost no 
tax relief to the millions of Americans who seek it. While many of the 
tax reducing provisions contained within this bill are worthwhile and 
sound, now may not be the best time to go forth with them given the 
state of our economy and the increasing budget deficit.
  Tax cuts will significantly improve the American economy, but only if 
Congress makes wise decisions about which taxes to cut and how to cut 
them. Addressing the double tax on dividends is a big step in the right 
direction, but the economy will not reap major benefits unless the tax 
is reduced in an economically beneficial manner.
  Several proposed amendments will strengthen this bill, but it has a 
long way to go for it to be in a form that will truly stimulate the 
economy and create jobs.
  I will vote for the passage of this bill, but only for the sake of 
advancing the process and moving the bill to conference so that it can 
be improved. Should this bill come out of conference looking much like 
it does now, I will most likely oppose final passage of the growth and 
economic stimulus bill.
  Mr. LEAHY. Mr. President, I rise today to oppose the tax 
reconciliation bill being considered by the Senate today. This tax cut 
bill is not fiscally responsible. When President Bush entered the White 
House our country enjoyed a record budget surplus. The fiscal 
irresponsibility of this administration quickly turned that surplus 
into record deficits. Now this bill will bring our country further into 
debt, cause more hard working Americans to lose their jobs, and put a 
greater share of the tax receipts in the pockets of our country's most 
privileged.
  I have several concerns about the bill before us. First, these tax 
cuts are tilted even more heavily to the very wealthy than the tax cuts 
the President championed in 2001. Just look at the rate reductions. For 
three income brackets, rates would drop by 2 percentage points, but the 
top rate falls by 3.6 percentage points. While the 2001 bill calls for 
marriage penalty relief beginning in 2004, the Senate rejected an 
amendment offered by Senator Jeffords to provide immediate marriage 
penalty relief to those who qualify for the earned-income tax credit. 
Sadly, this administration has chosen to support tax policies where 
people making over $1 million will reap enormously, while working 
families will receive very little tax relief.
  Second, these plans have taken tax gimmickry to a whole new level by 
pretending that most of the provisions will expire after just 3 years, 
at the end of 2005. By doing so, this bill attempts to jam in as much 
of the President's dividend tax proposal as they can into the Senate's 
$350 billion limit at the expense of more reasonable tax cut provisions 
aimed at low- and middle-income working families. It is obvious that 
proponents of these tax cuts have no intention of allowing any of these 
provisions to expire and in fact will come back to this floor again and 
again asking for them to be made permanent. Instead of acting in a 
fiscally responsible manner, they are masking from the American people 
the true, astronomical costs of this bill.
  Third, these cuts will push our country deeper in debt. The 
nonpartisan Congressional Budget Office has estimated that the 
President's full tax cut would add $2.7 trillion to the deficit through 
2013. At the same time the administration is pushing for Congress to 
pass a $1 trillion increase in the Federal debt limit that does not 
account for additional tax cuts. I do not think we can afford another 
large tax cut at this time until we get our own fiscal house in order.
  Clearly, this tax cut plan is not about growing the economy or 
creating jobs. It is about starving the Government and wooing some 
voters. In fact, leading economists have stated repeatedly that the 
elimination of taxes on dividends paid to investors--the centerpiece of 
the President's tax cut proposal--would do very little to spur economic 
growth or reduce the Nation's jobless rate.
  In 2001, I voted against the Bush tax cut bill because it was too 
skewed toward the wealthiest Americans and too fiscally irresponsible. 
Since then, we have gone from record surpluses to record deficits, and 
the economy is still floundering. Passing another enormous tax cut this 
year will only continue this trend and increase the economic problems 
that our children and grandchildren will inherit.
  Earlier this year, the President said we should not pass our fiscal 
problems onto future Presidents, Congresses, and generations. I agree 
with him. Unfortunately, this tax cut bill will drive us deeper into 
debt and will do exactly what the President says we should avoid, 
burden our children.
  While the promise of another tax cut sounds great, I am not going to 
ask my children and grandchildren and everyone else's children and 
grandchildren to pay for it. It is not right. It is not fair. And it is 
not the American way.
  Mr. GRASSLEY. Mr. President, it has come to my attention that certain 
provisions of S. 1054 have engendered concern in the equipment leasing 
industry. I recognize that assets used by vital American industries are 
often lease-financed. It is not the intention of the Senate or 
Committee on Finance to impede legitimate leasing transactions. I wish 
to assure the markets that in any final legislation, the tax incentives 
utilized in leases that are considered appropriate under current law 
will be maintained.
  Mr. BAUCUS. Mr. President, earlier today my colleague on the Finance 
Committee, Chairman Grassley, offered an amendment to S. 1054, the 
pending tax bill, to improve Medicare funding for rural patients and 
providers. I supported the amendment, which passed, 86-12.

[[Page 11822]]

  Many of the Grassley amendment's provisions were taken from S. 3018, 
Medicare legislation Senator Grassley and I introduced legislation last 
year. Many of those provisions were also included in the Senate Rural 
Health Caucus bill, which I support. And several of the provisions have 
been recommended by the Medicare Payment Advisory Commission (MedPAC), 
which advises Congress on Medicare payment policy.
  Taken together, these changes--including an equalization of the 
hospital base payment amount, changes to the Critical Access Hospital 
program, and language to improve access to physician care in rural 
areas--will go a long way toward ensuring greater geographic equity in 
Medicare reimbursement.
  That said, I believe the way in which the Senate passed these 
provisions--as an amendment to tax legislation--is far from perfect. A 
Medicare bill, debated in the Finance Committee, is the proper vehicle 
for changes to the Medicare law, and I would have preferred that these 
provisions be considered in that manner.
  A full debate in the Finance Committee will allow senators to 
exchange views and advocate changes they believe are important for 
Medicare. A debate in the Finance Committee will allow Medicare 
stakeholders an opportunity to share their views as well. Whether with 
respect to spending or offsets, the Committee should have the 
opportunity to consider all of those views fully.
  For example, while the provisions in the Grassley amendment are 
important, they do not represent a full list of Medicare changes I 
would like to see. Most notably, the amendment does not address 
Medicare's most severe inadequacy: the lack of an outpatient drug 
benefit. Further, the amendment does not address many concerns facing 
Medicare's various payment systems, including payments for physicians, 
nursing homes, teaching hospitals and hospital outpatient departments, 
to name a few.
  As for offsets, the Grassley amendment included three: a freeze in 
Medicare DME payments; establishment of copayments and deductibles for 
Medicare outpatient laboratory services; and reductions in payment for 
Medicare Part B-covered drugs. These offsets are not without 
controversy.
  For example, while independent experts agree that Medicare overpays 
providers for Part B drugs, agreement is less apparent on the proper 
payment providers should receive for the administration of these drugs. 
And while it is true that lab services are nearly unique in not 
requiring coinsurance under Medicare, it's also true that lab services 
are less discretionary than many other Medicare-covered services.
  Debate in the committee--as we recently had on the tax bill--is 
important to the legislative process. I urge Chairman Grassley to hold 
a markup on Medicare legislation, so that changes to Medicare--
including enactment of a Medicare drug benefit--can be considered in 
the appropriate manner.
  The PRESIDING OFFICER. Under the previous order, the clerk will read 
the bill for the third time.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  The PRESIDING OFFICER. Under the previous order, the Senate will 
proceed to the consideration of H.R. 2 which the clerk will report.
  The legislative clerk read as follows:

       A bill (H.R. 2) to provide for reconciliation pursuant to 
     section 201 of the concurrent resolution on the budget for 
     fiscal year 2004.

  The PRESIDING OFFICER. Under the previous order, all after the 
enacting clause is stricken and the text of S. 1054, as amended, is 
inserted in lieu thereof.
  The clerk will read the bill for the third time.
  The amendment was ordered to be engrossed and the bill to be read a 
third time.
  The PRESIDING OFFICER. The bill having been read the third time, the 
question is, Shall the bill, as amended, pass?
  Mr. BAUCUS. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The clerk will call the roll.
  The result was announced--yeas 51, nays 49, as follows:

                      [Rollcall Vote No. 179 Leg.]

                                YEAS--51

     Alexander
     Allard
     Allen
     Bayh
     Bennett
     Bond
     Brownback
     Bunning
     Burns
     Campbell
     Chambliss
     Cochran
     Coleman
     Collins
     Cornyn
     Craig
     Crapo
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Kyl
     Lott
     Lugar
     McConnell
     Miller
     Murkowski
     Nelson (NE)
     Nickles
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Voinovich
     Warner

                                NAYS--49

     Akaka
     Baucus
     Biden
     Bingaman
     Boxer
     Breaux
     Byrd
     Cantwell
     Carper
     Chafee
     Clinton
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Feingold
     Feinstein
     Graham (FL)
     Harkin
     Hollings
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     McCain
     Mikulski
     Murray
     Nelson (FL)
     Pryor
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Snowe
     Stabenow
     Wyden
  The bill (H.R. 2), as amended, was passed.
  (The bill will be printed in a future edition of the Record.)
  Mr. GRASSLEY. I move to reconsider the vote.
  Mr. ENSIGN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
with respect to S. 1054 be modified to allow for the following 
conferees: Senators Grassley, Hatch, Nickles, Lott, Baucus, 
Rockefeller, and Breaux.
  The VICE PRESIDENT. Without objection, it is so ordered.
  Under the previous order, the Senate insists on its amendment, 
requests a conference with the House on the disagreeing votes of the 
two Houses, and the Chair appoints conferees as specified on the part 
of the Senate.
  Thereupon, the Vice President appointed Mr. Grassley, Mr. Hatch, Mr. 
Nickles, Mr. Lott, Mr. Baucus, Mr. Rockefeller, and Mr. Breaux 
conferees on the part of the Senate.


                             change of vote

  Mr. BIDEN. Mr. President, on rollcall vote No. 162, I voted nay. It 
was my intention to vote yea. I ask unanimous consent that I be 
permitted to change my vote to yea, which was the Landrieu amendment, 
since it will not affect the outcome of the vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The tally has been changed to reflect the above order.)

                          ____________________