[Congressional Record (Bound Edition), Volume 158 (2012), Part 1]
[Senate]
[Pages 582-584]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BEGICH (for himself, Mr. Thune, Mr. Tester, Mr. Blunt, 
        Mrs. McCaskill, Mr. Grassley, Mr. Hoeven, Mr. Brown of 
        Massachusetts, Mr. Baucus, Mr. Enzi, Mr. Johanns, Mr. Casey, 
        Mr. McCain, Mr. DeMint, Mr. Roberts, Mr. Johnson of Wisconsin, 
        Mr. Burr, Mr. Risch, Mr. Toomey, Mr. Paul, Mr. Coburn, and Mrs. 
        Shaheen):
  S. 2054. A bill to suspend the current compensation packages for the 
senior executives at Fannie Mae and Freddie Mac, and to establish 
compensation for all employees of such entities in accordance with 
rates of pay for other Federal financial regulatory agencies; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. BEGICH. The STOP Act is the Stop the Outrageous Pay for Fannie 
and Freddie Act, the bill Senator Thune and I introduced this morning. 
Our bill comes in the aftermath of a series of events that began last 
November when reports surfaced that the Federal Housing Finance Agency, 
FHFA, approved nearly $13 million in bonuses for 10 executives, that 
enterprise that supervises Fannie Mae and Freddie Mac.
  In response, Senator Thune and I spearheaded a bipartisan letter, 
signed by 58 other Senators to the FHFA, Acting Director Edward DeMarco 
and the Treasury Secretary, Timothy Geithner. We expressed outrage over 
these pay levels, and I believe our message was heard. Almost 3 months 
after our letter was sent, the pressure was clearly on. Government 
regulators were cutting the pay of the executives they hired to replace 
the departing heads of Fannie Mae and Freddie Mac.
  Also, in response to our efforts, House Financial Services Committee 
chairman Spencer Bachus introduced legislation suspending these bonuses 
and limiting future compensation packages for Fannie and Freddie 
employees. In November, his committee passed the bill by a vote of 52 
to 4.
  The Begich-Thune STOP Act is a commonsense approach to address the 
outrageous Wall Street-like bonuses and pay that have occurred at 
Fannie Mae and Freddie Mac for far too long and which continue to occur 
to this day, even after billions in taxpayer bailouts. I wish to make 
it clear, this bill will not change the life much for nonexecutives. 
The pay structure for the everyday, hard-working Americans at Fannie 
and Freddie will stay almost as it is today. They are not the target. 
However, it will change the life for executives such as Peter Federico, 
who earned $2.5 million in 2010 and had a target compensation of $2.6 
million in 2011. This was at the same time he was gambling that 
struggling homeowners would be unable to refinance their high-interest 
mortgages to record-low interest rates. This is unacceptable, 
unethical, and I know this body will not tolerate it.
  Here is how our legislation works: It simply places Fannie Mae and 
Freddie Mac employees on the same pay scale as the financial regulators 
at the FDIC and SEC, a pay scale long established in Federal law. It is 
a pay scale called the Financial Institutions Reform, Recovery, and 
Enforcement Act. This is the pay scale we are basing our legislation 
on.
  Under our approach, Fannie Mae and Freddie Mac employees cannot be 
paid more than employees of other Federal financial regulatory 
agencies. Right now the highest paid person under this pay scale makes 
$275,000 a year. This is our pay cap. While this is a lot of money, it 
is not any more than what the cops, as we call them, on the financial 
beat make to ensure that ordinary Americans are protected and get a 
fair shake.
  Our legislation also stops any future bonus payments that go beyond 
the cap established in this legislation. Also, any bonuses that have 
been granted but have not yet been paid will be stopped. Any money in 
excess of the cap we have established will be used to pay down the 
national debt. Finally, our bill requires that Fannie and Freddie 
salaries be made available to Congress and the public through the 
Senate Banking Committee and the House Financial Services Committee.
  I am aware of the criticism of this bill and I would like to address 
them. Senator McCain offered an amendment yesterday that freezes bonus 
pay. I support Senator McCain in his efforts. In fact, I cosponsored 
this very same amendment the last time it was offered. Many of my 
colleagues have asked me why our bill does not freeze bonus pay. Our 
bill is based on a broad-

[[Page 583]]

based approach that looks at the entire pay structure within Fannie Mae 
and Freddie Mac.
  While it tackles the huge bonuses and pay policies for executives at 
Fannie and Freddie, we believe the everyday employees earning modest 
salaries should be occasionally rewarded for outstanding work so it 
ensures they get the small bonuses that may be effective for them. But 
to clarify, these would be modest bonuses that would never exceed the 
pay cap established in this bill.
  I have also heard the concern that Fannie and Freddie will not be 
able to attract the right kind of talent if they cannot pay people 
multimillion-dollar compensation packages. I hate to state the obvious: 
Fannie and Freddie have proven the opposite. They paid executives 
outrageous compensation and yet still failed by Alaskans and all 
Americans. They needed hundreds of billions of dollars in taxpayer 
bailouts and still ended up in conservatorship. This sends an 
unsettling message to millions of hard-working people who are 
struggling to make ends meet. They have taken Alaskans' tax dollars in 
the form of bailouts. Yet when my constituents in Anchorage or Kotzebue 
or Fairbanks or Juneau needed help to avoid foreclosure or refinance 
their loans, Fannie and Freddie often turned their backs.
  Finally, I have this response to people who say Fannie and Freddie 
executives need to earn millions: Whatever happened to the concept of 
public service or to the notion that it is an honorable calling to work 
on behalf of your friends and your neighbors? There are lots of 
dedicated, hard-working professionals at Fannie and Freddie who believe 
in that notion, and they are doing their absolute best to help American 
families to afford the American dream of owning and keeping their 
homes.
  The Begich-Thune bill makes sure this hard work continues and that 
their bosses at Fannie and Freddie come to work every day not with 
visions of dollar signs but instead with a clear eye of doing what is 
right for all Americans.
  I urge all Members to support this commonsense bipartisan bill. 
Senators Tester, McCaskill, Baucus, Blunt, Grassley, Hoeven, Enzi, and 
Scott Brown have already joined Senator Thune and me as original 
cosponsors. I wish to thank them for their support.
                                 ______
                                 
      By Mr. WHITEHOUSE (for himself, Mr. Akaka, Mr. Begich, Mr. Leahy, 
        Mr. Harkin, Mr. Blumenthal, Mr. Sanders, Mr. Schumer, and Mr. 
        Reed):
  S. 2059. A bill to reduce the deficit by imposing a minimum effective 
tax rate for high-income taxpayers; to the Committee on Finance.
  Mr. WHITEHOUSE. Mr. President, we are in an age of tight budgets and 
tough choices, and I rise today to introduce legislation that would 
address some loopholes in the Tax Code that provide ways for Americans 
with superhigh incomes to pay lower tax rates than are paid by regular 
hardworking, middle-class families. These middle-class families feel 
they are struggling to get by but then find that some people with 
extremely high incomes are actually paying a lower, all-in federal tax 
rate than they are. To them, it defies common sense, and I think for 
all of us it defies common sense. Americans deserve a straight deal, 
and right now they are not getting one from our tax system.
  To see the unfairness of our current tax system, we don't have to 
look much further than the national headlines. According to a Forbes 
magazine report last fall, billionaire Warren Buffet ``paid just 11.06 
percent of his adjusted gross income in Federal income taxes'' in 2010. 
Mr. Buffet is the first to express his dismay at this circumstance and 
acknowledges that the rate he pays is lower than the tax rate paid by 
his own secretary. Mr. Buffet has called for a correction of this 
anomaly, and I agree with him. So does President Obama, who, in his 
State of the Union Address, said Washington should stop subsidizing 
millionaires. I agree.
  We should celebrate the success of people who are earning $1 million 
and more a year, but we don't--particularly in this time of tight 
budgets and hard choices--need to subsidize that. The legislation I 
have introduced today, the Paying a Fair Share Act of 2012, would 
ensure that those with extremely high incomes pay at least a minimum 
Federal tax rate of 30 percent. I thank Senators Akaka, Begich, Leahy, 
Harkin, Blumenthal, and Sanders for being initial cosponsors of this 
measure.
  The structure of our bill is pretty simple. If your total income--
capital gains included--is over $1 million, you calculate your taxes 
under the regular system. If your effective tax rate turns out to be 
greater than 30 percent, you pay that rate. If, on the other hand, your 
effective tax rate is under 30 percent, like Warren Buffet's 11 
percent, then you would pay the fair share tax rate.
  After collecting input from some of my colleagues, I have also 
included a provision to allow the fair share tax to be gradually phased 
in for taxpayers earning between $1 million and $2 million per year. 
Taxpayers earning less than $1 million--which is 99.9 percent of all 
Americans--wouldn't be affected by this bill at all. Taxpayers earning 
over $2 million would be subject to the 30 percent minimum Federal tax 
rate, and those in between $1 million and $2 million would pay, on a 
phased-in basis, a portion of the extra tax required to get up to the 
30-percent effective tax rate. This way we make sure no taxpayer faces 
a tax cliff where earning an additional $1 of income increases his or 
her taxes by more than $1.
  In his State of the Union Address on Tuesday, President Obama called 
for legislation to ensure that the highest earning taxpayers pay at 
least a 30-percent tax rate. The Fair Share Act would do just that. To 
call our tax system fair, I believe the highest income Americans should 
pay a higher rate--not a lower one--than middle-income taxpayers. For 
more context, let's take a look again--because I have given this speech 
over and over on the floor--at how superhigh-income-tax payers fare 
under our current system.
  This is the Helmsley Building in New York, as I have pointed out 
before. It is on Park Avenue, and it has a unique characteristic, which 
is that it is so big it has its own ZIP Code. Because the Internal 
Revenue Service publishes information about tax payment by ZIP Code, we 
can see what the tax payments are that come out of this building. What 
we find with the latest information that the IRS has published is that 
the average filer has an adjusted gross income of over $1 million in 
the Helmsley Building, but the average tax payment out of that building 
is only 14.7 percent.
  To provide a little context for that, if we look at what the average 
New York City janitor or the average New York City security guard pays 
in terms of an effective all-in Federal tax rate, it is 28.3 percent 
for the security guard and 24.9 percent for the janitor. So at this 
point it looks as if the people who are the very successful occupants 
of the Helmsley Building pay an actual lower Federal tax rate than the 
people who come in and clean the building, and that does not seem fair 
or sensible.
  One might say, well, maybe it is just something about the Helmsley 
Building that causes it, but it is not. Despite Leona Helmsley's 
infamous line that it is only the little people who pay the taxes, it 
is a broader issue than that. Take a look at the income tax information 
about the 400 highest earning Americans.
  In the same way that the IRS aggregates information by ZIP Code, it 
also takes the highest income earners and reports on them in aggregate. 
The 400 top incomes for 2008--which is the last year the IRS has 
assembled--had an average income each of $270 million, which certainly 
is something to be proud of and to celebrate if one can achieve that 
kind of success. But the average tax rate paid by the 400 was only 18.2 
percent, which is--apart from the discussions we have been having in 
the Senate--about what the top income tax rate should be.
  We discuss often whether the top income tax rate should be 35 percent 
or should be 39.6 percent. It was 39.6 percent, for instance, during 
the booming Clinton economy. It is now 35 percent.

[[Page 584]]

Depending on where the tax cut discussion goes, it may go back up 
again. But that is not what a large number of these very high income 
earners pay. In fact, the top 400 aren't anywhere near that. They are 
at half that, at 18.2 percent. We are supposed to have a progressively 
graduated Tax Code, with people who earn more paying a higher rate.
  Let's see who else pays at the 18.2-percent rate. We looked at Bureau 
of Labor Statistics information for a single filer earning $39,350. 
That is where you hit an 18.2-percent tax rate, just like the 400 who 
made $\1/4\ billion each, on average. They are in the same position as 
somebody who is earning a little less than 40,000 who pays 18.2 percent 
under our present system. If we look at the type of jobs that hit that 
area, according to the Bureau of Labor Statistics, in the Rhode Island 
labor market a truckdriver earns on average $40,200. So we have a 
truckdriver paying the same rate of Federal tax as somebody earning 
$\1/4\ billion in a year.
  So I think there is plenty of room for correction and to bring our 
tax system in line to the principle that I think we all espouse 
theoretically, which is that it is a progressive tax system. The more 
you earn, the more you pay and indeed the higher rate you are supposed 
to pay. It is not supposed to be at the other way around where, at the 
other high extreme, you end up paying lower rates than regular 
Americans.
  The Helmsley Building was one building that has a little story to 
tell all of us. Here is another building with a story to tell. This is 
a building that is called Ugland House, and it is in the tax haven 
Cayman Islands. It doesn't look like much, does it? I don't want to say 
it is a crummy little building, but it certainly doesn't compare to a 
lot of other business buildings. But it does have something remarkable 
happening within it. It has 18,000 corporations that claim to be doing 
business out of this location--18,000 corporations in this little five-
story building. It gives a new meaning to the phrase ``small 
business.''
  As our budget chairman Kent Conrad has pointed out, the only business 
going on in Ugland House is funny business with our Tax Code, shell 
companies that hide assets and dodge tax liabilities. It does not make 
sense that our tax system permits the highest income Americans to pay a 
lower tax rate than a truckdriver pays, and it doesn't make sense that 
we allow Americans and American companies by the thousands to hide 
income in offshore tax havens.
  If we look at the rates that are paid--Warren Buffet 11.6 percent, 
the occupants of the Helmsley Building on average 14.7 percent, and the 
400 $\1/4\ billion-a-year earners on average 18.2 percent--and we look 
at the fact that we have multi-trillion-dollar budget deficits, it 
means the taxes they are not paying at the nominal 35-percent rate are 
taxes that somebody else ends up having to pay either through deficit 
or through additional taxation.
  This is why the Fair Share Act makes a lot of common sense, and I 
hope Senators on both sides of the aisle will take a look at it. This 
bill would do a lot of good. It would simplify taxes. There is no point 
chasing loopholes if someone knows they are going to have to pay the 
30-percent minimum. It will simplify that. It would discourage the 
exotic tax dodges that allow people to go down to 14 percent or 
whatever tax rates because they know they are going to get caught at 30 
percent, so why do the effort. The exotic tax dodges will be 
discouraged. It will reduce the deficit. We don't have a number yet 
from the Joint Committee on Taxation, but the public reporting so far 
has suggested it is going to be in the $40 billion to $50 billion range 
per year. Of course, it will bring fairness, as well as common sense, 
to our tax system. It makes no sense for somebody earning $80,000 or 
$100,000 or $120,000 a year to be paying a substantially higher tax 
rate than somebody earning $\1/4\ billion a year.
  There are a lot of advantages that come with enormous income, and 
that is a great thing because America thrives on capitalism, and we all 
love success. We celebrate success in America. We provide an economy 
and a culture in which people can accomplish remarkable things and 
create enormous fortunes and become enormously successful. That is part 
of what is good and what is right with America. They do it through hard 
work, they do it through being smarter than other people, they do it 
with a lot of good personal characteristics. But with all the 
advantages that do come with an enormous income, paying a lower tax 
rate than regular working families should not be one of those 
advantages.
  I hope we can get together to correct this, and I look forward to 
working with my colleagues on this issue.
                                 ______
                                 
      By Mr. KOHL (for himself and Mr. Wyden):
  S. 2060. A bill to provide for the payment of a benefit to members 
eligible for participation in the Post-Deployment/Mobilization Respite 
Absence program for days of nonparticipation due to Government error; 
to the Committee on Armed Services.
  Mr. KOHL. Mr. President, I rise today to introduce the Fair Military 
Leave Act. This legislation fixes a problem that is preventing some of 
our brave servicemembers from using benefits that they earned after 
serving multiple or extended deployments overseas.
  In 2007, the military established the Post-Deployment/Mobilization 
Respite Absence Program, or PDMRA, to assist men and women who are 
ordered to deploy beyond the established standards for troop rotation 
by providing extra paid leave when they return home. Unfortunately, a 
mistake during demobilization prevented some soldiers from receiving 
the paid leave they earned. The Army's records indicate that this 
problem affects 577 soldiers across the country, including 80 in 
Wisconsin.
  These soldiers have since gotten their military records corrected to 
reflect the days of PDMRA leave they were supposed to receive. However, 
the only way for these soldiers to use this benefit is to take extra 
paid leave on a future deployment. For those soldiers who will not 
deploy again or who have left the military entirely, this remedy does 
not work.
  Mistakes happen, but they need to be fixed. The Fair Military Leave 
Act gives troops the option of cashing out the leave they were 
incorrectly denied when they came home. This solution is modeled after 
legislation Congress passed in the National Defense Authorization Act 
for fiscal year 2010. As with that bill, the Fair Military Leave Act 
reimburses soldiers at a rate of $200 per day of PDMRA that they were 
incorrectly denied.
  I am pleased to have the senior Senator from Oregon join me as an 
original cosponsor of this legislation. My friend from Oregon led the 
effort to fix the earlier problem with PDMRA benefits in the 2010 
defense authorization.
  The men and women of our Armed Forces have done so much for our 
country, and we should not drag our feet in making this right. These 
troops earned their PDMRA benefit, and they should be allowed to use 
it.

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