To amend the Internal Revenue Code of 1986 to make higher education more affordable.

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Senate

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

Amendment No. 619

Ms. LANDRIEU. Mr. President, I send an amendment to the desk on
behalf of myself, Senator Corzine, and Senator Schumer.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Louisiana [Ms. Landrieu], for herself, Mr.
Corzine, and Mr. Schumer, proposes an amendment numbered 619.

Ms. LANDRIEU. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under ``Text
of Amendments.'')
Ms. LANDRIEU. Mr. President, I will take such time as I may need to
explain the amendment. I estimate it to be around 10 or 15 minutes for
myself and for Senator Corzine who joins me on the floor. I know there
are no time constraints, but I know there are other Members with
amendments and the hour is late. I just want to let them know
approximately how much time it will take for us to offer the amendment.
We offer this amendment in good faith because many of us are firmly
convinced and feel very passionately that the direction the President
is leading us with his proposal is the wrong direction.
Times have been much worse in this country over the course of our
long history. In many ways, things are moving along pretty well. We are
making a tremendous amount of progress on many fronts. But it is in
some ways a very crucial time. We are trying to transform our military.
We are moving into a technological age for which this particular type
of economy needs some special framework. We are fighting terrorism
worldwide. We are engaged in conflicts because of the recent attack on
our Nation. I wouldn't say this is the calmest of times, but yet we are
not in a depression; some would argue not in a recession. But it is an
important time to do the right thing.
For the 4.5 million people I represent in Louisiana, it is very
important that we get this tax package right. Their livelihoods depend
on it. Their children's futures depend on it. Their small businesses
depend on it. The health of their parents depend on it. We can't get it
wrong, and we are about to.
This plan the President has laid down will not create jobs. The plan
the President has laid down will raise taxes. The plan the President
has laid down will increase deficits. It will disappoint thousands of
parents, teachers, and students who actually believed him when he said
he would not leave a child behind. They actually believed him. And they
voted for him. This plan does not fund Leave No Child Behind.

This plan says no to so many small businesses that trusted him, that
came here to Washington and said: Mr. President, if you get a little
more money, could you please help us with our health care premiums? He
told them, yes. But this plan doesn't have a deduction for health care
premiums. It is the No. 1 issue for the small businesses in Louisiana
and across the Nation. You won't find it in the President's plan. It is
not in there. He said no to small business.
I know I can't use profanity on the floor of the Senate, so let me
just say: It is a darn shame that when he had a chance, when the
Republican leadership had a chance to do the right thing at an
important time in our Nation, for some reason, that some of us can't
figure out, I can't even go where they are going. I don't understand
it.
I don't understand a plan, when we need jobs, that doesn't create
jobs; when we are trying to fix the deficit, it makes the deficit
worse. For what?
So Senator Corzine and I have worked, along with Senator Schumer and
many of our colleagues, to come up with something that would actually
take the President at his word, which we are continuing to hope we can
do. I am getting personally unsure of that, but I am trying to take him
at his word that he really wants to create jobs; he wants to get the
economy moving again; he wants to have a stimulus package; he wants to
make it generally fair to everybody, or as many people as possible.
He wants to honor the military, which he continues to say is one of
his No. 1 priorities. We have something in here, a tax credit for the
Guard and Reserve. I don't know if anyone in America could say that
there is a group of people that deserve a tax credit more than the
people who have left their spouses, left their children, left their
jobs, put up a temporary sign ``gone to war'' on the front of their
building, but we are sitting on this floor tonight giving tax credits
to everybody in the world--the double taxation to corporations, many of
which don't pay taxes anyway--but we can't find space in the bill to
give it to the 400,000 guardsmen and reservists who are being called up
to protect us.
That is why I am standing on the floor late at night to try to
explain it. At least in Louisiana, people don't understand it. They
just don't understand it. So our amendment has something in here for
the Guard and Reserve.
You could argue we are in a recession or we are close to recession.
It is not booming times out there. I will not stand here and try to
argue whether we are technically in it or not. People who don't have
jobs really don't care about that. What they care about is having a
job. Jobs are hard to come by. We have a record high unemployment rate.
The people who are unemployed in the country are saying: Mr.
President, if you have a little extra money, could you please allow us
to use the money

[[Page S6234]]

in the compensation fund that we paid into to extend our benefits,
modest benefits? In Louisiana, it is $196 a week. The average benefit
is $250 a week. These are people who have worked, many of them, since
they have been teenagers. They find themselves out of work. They are 40
and 50 years old. They came here to ask the President: Could you please
extend the benefits? The President doesn't put them in his package.

But he puts in the package corporations that don't pay taxes, and he
won't put in his package unemployed people who paid taxes their whole
life since they have been teenagers.
I am offering the amendment because our amendment tries to take some
things the President put in his package, and the Finance Committee has
put in their package, that is sort of modeled on what the President had
originally planned, that does do some of the things that will stimulate
and that we generally agree on and there seems to be a consensus. And
there are some good things in it.
One is the marriage penalty which we recognize is a real penalty. It
is taken care of in this amendment.
We accelerate the child tax credit, which is something we all,
Republicans and Democrats, agree would be a good thing, if you had some
extra money, to give that thousand dollars to people. But instead of
the dividend tax, which has been argued by the likes of Alan Greenspan
and others that it is not the right time to do, instead of that, we
have placed in our $350 billion package wage tax relief.
If we want to create jobs in the Nation, I would maintain that
removing the tax on jobs would be the best way to encourage jobs to be
created. If you remove the tax from something, people are likely to
move toward whatever you remove the tax on. So people are paying a lot
of money on their wages, and our amendment would give an immediate $765
rebate to every worker. For two parents, it is almost $1,530, for two
workers in a family.
And the way we have structured the amendment, every business would
also be able to take that immediate rebate for every worker up to their
$10,000 in earnings. So every small business, every corporation would
be able to take that benefit of thousands and thousands and thousands
of dollars now.
As several of the Senators from the other side have said, that money
will go into their pockets, and they will have flexibility to spend it
however they want. We are not telling them how to spend it. They could
give bonuses. They could invest in property. They could invest in
equipment.
But it is putting money in their pockets--real money, not pretend
benefits from a dividend they won't get, or would not get anyway
because of the system that we have now.
So we offered this amendment--$350 billion. The centerpiece of it is
wage tax relief that will benefit every worker, particularly those two-
wage-earner families who make up the majority of our American
population because this economy demands two wages, basically, to carry
the burdens and responsibilities of family life.
It also helps small business in terms of stimulating for plant and
equipment expensing up to $100,000, small business health care, Guard
and Reserve, unemployment compensation, and a very important component
of this is helping the States. People have talked about this as aid to
undeserving recipients. It is as if there is something wrong because we
are giving aid to undeserving recipients. I like to think of States--
and I served in the State legislature for 8 years, and as treasurer for
8 years--as partners, good partners, hard-working partners. My Governor
is a Republican, and I do not consider him an enemy. I do not consider
him an undeserving aid recipient. I consider him a partner. Together,
with the senior Senator, our Governor, and our legislature, every day
we try to give kids a good education, give our teachers a decent
salary. We try to keep our hospitals open. When a child is born sick,
we try to help their family take care of them, to see that the garbage
gets picked up, that the sanitation is done, that highways are built.
We do this in partnership. They are not my enemies.
I have heard comments on the floor, and from the White House, that
they don't deserve it. Let me tell you something. They work hard, local
elected officials--mayors, county council members, and school board
members--trying to balance their budgets. They cannot run up deficits
like we do. Half of their problem is caused by the fact that we get
here day after day and put one unfunded mandate on them on top of
another. When it comes down to balancing their budgets, do you know
whose backs they balance them on? The schoolchildren get cut, teachers
get cut, firemen and policemen get cut, so the President can give a
dividend tax cut to corporations that don't even pay taxes.
I am not voting for the plan. I would not vote for it if it was the
last plan offered, because I am not raising taxes on police officers,
firefighters, teachers, and closing libraries. If you think I am making
this up, just go to any Nexus search. I went today and looked up
Maine--a billion-dollar deficit. The Maine Legislature considers itself
in a crisis mode. This is the State of Senators Snowe and Collins. So
far, this is what President Bush is asking the residents of Maine to
do--this is his plan, so the President is asking the residents of Maine
to cut library services, and one community began to lobby its residents
to reject a proposed health care center because the State could not
afford it.
Now, you can put up a sign at the libraries in Maine saying ``book
sale'' because the proceeds are going to a dividend cut. I don't want
to hang that sign on my library in Louisiana, and I don't intend to. If
this bill passes, fine, it will pass by one vote, maybe a tie vote. It
will not have Landrieu's vote.
People say: Senator, are you opposed to tax cuts? No. I voted for the
last tax cut proposal of $1.3 trillion. But, of course, then people
came to my State during the election and tried to convince people I
didn't when I did. Nonetheless, I am a Democrat who has voted for tax
cuts. I am not opposed to them. But if we are going to do them, let's
do them right, and fair, and in a way that stimulates the economy and
actually creates jobs and honors our States as the partners they are,
and respects those who are unemployed, not as charity cases but as
people who work and deserve a break, particularly when times are tough.

So we offer this amendment. Senator Corzine will speak because he
understands the intricacies of economics in a way that is harder for me
to explain. I hope he will explain why the plan that has been laid out
does not create jobs in a country that is desperate for jobs and needs
a boost so that we can put people back to work and meet the challenges
that are before us, and standing up for our military and fighting a war
on terrorism at home--that we might have the strength to do that.
The amendment will be voted on tomorrow with a list of amendments. It
is offered as a good-faith effort, an alternative, one that is
stimulative and will create jobs, is fair, and will hopefully get this
economy moving again.
I reserve the right to speak for another few minutes to offer
additional amendments.
The PRESIDING OFFICER. The Senator from New Jersey is recognized.
Mr. CORZINE. Mr. President, I must say I am very proud to join with
Senator Landrieu in sponsoring this substitute amendment for the
underlying bill we are debating. She put the passion into what it is
that we have tried to accomplish with respect to coming up with a
powerful job-creating initiative, a powerful economic growth
initiative--one that sticks to the $350 billion budget level that we
have agreed to in the Senate. The size is the same.
Some of us might argue we should not be doing that at all, based on
what we think the economy might need or the nature of it. But if we are
going to have a $350 billion tax relief program, stimulus program,
let's make it one that people know has efficacy and will work and is
not designed to go to the elite few but to all of America's families
and businesses, to everybody in America regardless of their economic
position.
Our proposal is designed to work for the person who makes the very
least, and also for those who make whatever they are blessed with to
make in our great country.
It also deals with an issue that I heard the Senator from Louisiana
talk about in what I think were clearly more forceful terms, about
dealing

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with the libraries, prisoners, schools, and everything that our State
and local governments are trying to deal with, by putting $50 billion
into our State and local governments so they can continue to service
the American people the way they are expected to. We have a $100
billion budget deficit cumulative across the States in the upcoming
year. That is coming on top of about $80 billion this year. We are
raising taxes and cutting services at the local level faster than we
are cutting taxes here at the Federal level. That makes no sense.
So we have put together a package that works to give tax relief to
every single American, working American, and also to help our State and
local governments so they are not out there chopping away at children's
health insurance programs, educational programs, and all the other
issues that are so important and so positively delivered by our State
and local governments.
If you go back and look at CBO looking at the individual pieces of
what we call the ``multiplier effect'' with regard to initiatives, you
will find that the package we put together, because of the breadth of
participation of the population and because of the benefits that are
offered, will contribute more to growth and jobs than anything on the
table that has been talked about. This is truly a pro-growth proposal.
If we are sincere about putting Americans back to work, about getting
growth going in our economy, then we ought to be doing those things
that work and where people know they work.
Mr. President, $350 billion is a lot of money. We ought to be using
it in absolutely the most effective and efficient way. That is what our
package is about. I will go through some of the details of it. I think
it is essential that we try to use our money and our efforts most
effectively. This substitute, which will stimulate jobs and will create
growth, will do so without irrevocably undermining the long-term budget
and fiscal position of the Federal Government.
It will avoid creating a debt burden for our children and their
children. By contrast, some of the various proposals that are
contemplated here force Americans to pay taxes to pay the interest on
the debt: $2.4 trillion, if you add it up with regard to the two tax
cuts, the one in 2001 and the one we are talking about which will
increase the debt burden for every family in America for a family of
four $30,000.
That is a debt tax. That is a tax because you are going to be paying
the interest on that $30,000. One can say we are cutting taxes on one
hand, but if we are creating interest expense for the Federal
Government on $2.4 trillion, we are raising taxes, and it is a debt
tax.
Deficits do matter, particularly in the long term, and the debt tax
that is being proposed will burden the financial health of every
working American for the long term, every bit as great or greater than
those tax cuts that we are talking about that are embedded in these
proposals.
Even the person nominated to be President Bush's top economist has
agreed that deficits matter. At least he did before joining the
administration. For example, this is what the nominee for Chairman of
the President's Council of Economic Advisers, Greg Mankiw, said in his
recently published textbook, appropriately named ``The Essentials of
Economics.'' I want to read a phrase:

The most basic lesson about budget deficits follows
directly from their effects on the supply and demand for
loanable funds.

He says specifically:

When the Government reduces the national savings by running
up a budget deficit, the interest rate rises and investment
falls.

That is very clear. It could not be clearer--Economics 101, the most
popular textbook in America, the President's Chairman of the Council of
Economic Advisers. When you run up deficits, you reduce the economy's
growth rate.
The underlying bill, like the House proposals and most egregiously,
actually, the $726 billion proposal by the President, grows the
deficits, will push up interest rates, will reduce investment in the
long run, and, thereby, reduce growth. I thought this was a jobs and
growth package.
That is the reality. It is tied together with some of the best
thoughts in the White House, and it certainly fits what we hear the 10
Nobel Prize winning economists talking about, and other folks, but this
is the President's economist. That is why the package Senator Landrieu,
Senator Schumer, and I are presenting tonight will provide a real boost
to the economy without destroying long-term fiscal discipline.
The heart of our amendment, as was described by Senator Landrieu, is
the wage tax credit. This is relief that would give each working
American a tax cut on their earned wages of up to $765. That is the
equivalent of the payroll taxes an individual paid on the first $10,000
of their earnings in 2001.
Under our proposal, a married, working couple--we can all add--would
receive tax relief up to $1,530 regardless of their income. Regardless
of whether you make $20,000, where it is a hard-working blue-collar
job, or $50,000 where you are a technician, computer programmer, or $1
million if you work on Wall Street, everybody gets this same $765 and
$1,530.
We need to remember that four out of five Americans pay more in wage
taxes, payroll taxes than they pay in income taxes. That is why this
does provide broad-based tax relief to everyone. People across America,
regardless of their overall income level, pay payroll taxes, and that
is why the benefit is so broadly distributed and allows for real growth
in the economy because you put money in the pockets of people who will
go out and spend it.

I remind my colleagues, this is a 1-year tax cut in which all
payments and tax credits would come out of the General Treasury. We
made that very clear so we did not get into this hyper conversation
about raiding Social Security trust funds or Medicare trust funds. This
is a tax cut coming out of the General Treasury, just as any of the
other proposals we see.
Every working American and business owner would benefit from our
proposal. As I said, the $1,530 cut for a couple would help American
families make ends meet and generate immediate growth in our economy.
For low- and moderate-income families, this payroll relief would pay
for 5 weeks' worth of groceries for a family of four, more than 2
months of childcare, 3 \1/2\ months of utility bills, and 7 months of
gasoline. By the way, if you were a millionaire, with this money you
could buy 50 shares of GE stock or any other $30 stock. You can get
involved in the marketplace.
The payroll tax relief has been scored among the most stimulative
cost-effective tax relief proposals evaluated by the CBO and private
economists. It has a high-multiplier effect by anybody who looks at it.
If we are serious about getting our economy moving--and I think people
are sincere in their belief that we need to put some stimulus in--this
is the place where we can get the maximum bang for our buck, the
maximum bang for $350 billion.
Our proposal is $188 billion of the total $358 billion. In addition
to helping working Americans, our wage tax credit would provide
business owners, small and large, a tax credit for up to $765 on each
of their employees. Our wage credit for business owners would put
immediate cash into the hands of employers to spur investment, new
jobs, plant, and equipment. They can do what they need to do to boost
their business.
America's businesses, bottom line, by the way, would grow by the
amount in this tax credit. The last time I looked at stocks, growing
earnings on America's publicly traded companies gets reflected in stock
values. That is what price times earnings means. It really will boost
the value of the stocks as much as the kinds of things we are talking
about with regard to the dividend.
By reducing payroll taxes, which many view as a tax on labor, we
would encourage more employers to hire more people and keep those they
already have.
I point out this is one of the reasons I think the Business
Roundtable, which represents 150 of the country's largest corporations
with over 10 million employees, along with many other business groups
around the country, have endorsed the concept of payroll-based tax
relief.
It is pretty simple. It is fair. It is an affordable economic
stimulus, if we believe $350 billion is affordable. It will put money
into the hands of consumers

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and businesses that will get immediately reinvested in our economy.
In the past few years, the concept of payroll tax relief has been
supported by people on both sides of the aisle. A year ago, Senator
Domenici and I introduced a similar bill, and in December 2001, the
distinguished majority leader, Senator Frist, expressed strong support
for payroll tax relief. As he put it then:

A payroll tax holiday is truly a stimulative, temporary tax
cut that would be welcome news for most Americans. . . .As
economic growth stagnates and unemployment numbers increase,
putting additional money in consumers' pockets will provide a
much needed economic boost.

Senator Frist was right on the mark then, in my view, about the need,
and he is right on the mark with respect to the stimulative impact of
payroll tax relief.
I hope my colleagues tomorrow will stand behind those words and
support this proposal to help reinvigorate the economy.
Beyond the centerpiece of the wage tax credit which I talked about,
again $188 billion, the Landrieu-Corzine-Schumer amendment includes
other provisions which are part of the underlying bill, such as
marriage penalty elimination, and acceleration of an expanded child tax
credit. We tried to take the best parts, the most powerful pieces of
the stimulus, and put them in the proposal. We are looking at high-
multiplier, high-return elements with regard to policies that we think
will get this economy going.
Maybe most importantly, I will not go into this because Senator
Landrieu did such a great job of it and we have heard a lot of
discussion on it, and I compliment the Finance chairman because he has
recognized the need for us to help out our cash-strapped State and
local governments in supporting an amendment--I believe it should be
more, but reasonable folks can differ about the degree. We need to make
sure we put real dollars into our State and local governments. We have
talked about it from our point of view, that that should be $52
billion.
We have things that take advantage of advanced refunding, of the low
financing rates, the lowest in 40 years. We put in here about
refinancing debt, just like the American consumer has with their
mortgages over the last year, having our State and local governments
take advantage of that same thing.
We have worked with Medicaid, where there is truly a lot of hurt. We
have talked about unfunded mandates with Leave No Child Behind, also
the issue of child care assistance. We have $3 billion in this program
for those purposes because if people are going to work, they have to be
able to take care of their kids. It is a kind of simple concept. Also,
general block grants for homeland security, education, and other
priorities.
Beyond the assistance provided to State and local governments, our
amendment provides for a variety of tax cuts for business. We believe
in those. We are supportive of those. We include in this an increase in
the expense from $25,000 to $100,000 a year for small business. We
repeatedly hear that 50 percent of the jobs in America come out of
small business, which 99 percent of businesses are. We are trying to
recognize that, and we are also trying to help small business with a
50-percent credit for health care premiums. It is one of those things
that holds back the economy most forcefully in New Jersey in other
communities I work with.
Finally, our $350 billion package includes the nearly $13 billion in
unemployment benefits that a number of folks have talked about. This is
a soggy economy, as Secretary Snow describes it. It is so soggy that we
have lost 2.7 million private sector jobs, including over 500,000 in
the last 3 months alone. We only have about 75 percent capacity
utilization in the country. So there are needs.
While some of us might not agree on size, myself included, we might
not even agree we need a serious proposal on tax cuts, if we are going
to do it, as we have decided to do it, we ought to make it as powerful
as we can possibly make it. I think we should be responsible fiscally
over a long period of time. I think deficits do matter. But if we are
going to have a $350 billion tax cut, we ought to design it in a way
that will create jobs and promote growth, without undermining our long-
term fiscal health. Our amendment does that, and I am proud of this
amendment which I am offering, along with Senators Landrieu and
Schumer. I very much appreciate their help and I hope our colleagues
will give serious consideration to a proposal that I think has real
meaning concerning job creation and economic activity.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I yield myself such time as I may consume.
Ms. LANDRIEU. Mr. President, I think I still control the time.
The PRESIDING OFFICER. The Senator from Iowa controls time in
opposition.
Ms. LANDRIEU. But I reserved as much time as I would consume to
present the amendment. I said I would speak for 15 minutes and then
Senator Corzine, and if the Senator from Iowa would allow us to present
our amendment, then we would be happy to yield to the opposition.
The PRESIDING OFFICER. The Senator's time is reserved, but the
Senator from Iowa has the right to seek recognition in opposition.
The Senator from Iowa.
Mr. GRASSLEY. Mr. President, a number of misleading and just flat out
wrong statements have been made by the proponents of this amendment.
They said this package does not help the military. I wonder where they
have been the last few months. We have already passed the military tax
cut bill in the Senate and we are trying to work it out with the House.
That is the situation. So do not tell me we have not dealt with the
problems of the people in the military.
They argue we do not deal with unemployment benefits. I guess they
were not paying much attention when just a few hours ago we were
talking about extending unemployment benefits. I offered a unanimous
consent agreement at that time, but what happened? The other side,
which is now complaining, rejected my offer to make that the top
priority just as soon as we are done with this bill.
We also put together a strong bipartisan State aid package, which the
other side has cried crocodile tears over. So I hope no one is misled
by some of the previous rhetoric we have heard. The amendment is
nongermane and violates the Budget Act. So obviously later on there
will be a point of order made on it.
To relieve any concern that the underlying bill is only concerned
about giving more money to corporations, I want to point out how this
legislation helps families. I will make a couple of points regarding
the distribution of tax benefits in our package. As I stated
repeatedly, the package fairly balances investment and consumption
incentives within the plan and benefits families at all levels of
income.
Now, this is quite contrary to much of the rhetoric we have heard on
the proposal's distributional benefits. I have heard repeatedly that
the typical family receives only $217 of benefits under the bill, while
millionaires receive tens of thousands of dollars of such tax breaks.
One response to this is to note the progressivity of our system. A
simple example, however, is an effective way to demonstrate the bill
does in fact provide benefits to families at all income levels. For
illustrative purposes, I have analyzed the tax benefits of accelerating
the $400 increase in the child tax credit combined with the increased
refundability for single mothers of two children at various income
levels under the bill.
The example does not account for additional benefits that are also
provided in this bill with expanding the 10 percent bracket.
The charts I have with me demonstrate the tax benefits to that single
mother with $15,000, single mother with $20,000, single mother with
$30,000 of wage income during the 2003 tax year. As we can see, the
first chart demonstrates a single mother of two with $15,000 of wage
income will receive an additional $250 of refundable tax credits under
this bill. This increased $250 comes from a combination of increasing
the tax credit amount and reducing the limits on refundability. With
her refundable earned income credit of $3,823, her total refundable tax
credits would increase by $250 all the way up to $4,573.

[[Page S6237]]

The second chart is for a family of $20,000 wage income, which
demonstrates a significant increase in benefit to the same single
mother. At a slightly higher income level, she receives an additional
$710 of benefits under the Finance Committee plan for a total
refundable credit of $4,270.
Finally, at $30,000, we can see this single mother receives the
entire benefit of $800 increased child tax credit in the form of
refundable payments.
I ask my colleagues to consider these examples as further evidence of
the impact this bill will make on hard-working families in this country
at different income levels, and I might say at all income levels. I
hope the informed judgment will be made based upon fact and not upon
the statements previously given about this bill.
I yield the floor.
The PRESIDING OFFICER. The Senator from New York.
Mr. SCHUMER. Mr. President, I first want to thank my colleagues,
Senator Landrieu and Senator Corzine, for their sponsorship of this
important amendment.
I also want to recognize Senator Grassley, the distinguished Chairman
of the Finance Committee, and Senator Baucus, the distinguished ranking
member, for their leadership. Democrats and Republicans may disagree on
our economic priorities, but we all appreciate the contribution
Senators Grassley and Baucus have made to the debate.
There is something else we all agree on. By any measure we are in the
midst of a very tough economy. Our long-term prospects are very bright,
but right now times are tough. We are all familiar with the
statistics--rising unemployment, choppy markets, low growth. These are
real problems that require real solutions.
But too often we hear economic theory and ideology as the rationale
for what we should do.
I believe that equitable tax relief can be very good short-term and
long-term policy. If we can find the means to afford it, hard-working
families and successful entrepreneurs should keep more of what they
earn. And at this time of low economic growth and high economic
uncertainty, there is an important role for the Federal Government to
play in reigniting our economy.
My concern with the legislation before us, and the reasons I support
a complete replacement of that bill, is quite simply that it does not
work as advertised. We all recognize that the bill is not a short-term
response to the economic downturn. It is a back-door attempt to
fundamentally change the tax code.
We may need to take up that debate at some point. But our first
priority should be getting the economy moving.
We need to unite behind an economic plan that is based on the
practical needs of our country for jobs and growth, not on an ideology
of how the world works.
It is time to replace the centerpiece of the President's plan--the
dividend tax cut--with something that both Democrats and Republicans
can rally behind, a one-time reduction in Federal payroll taxes, wage
taxes, for every working American. That is the heart of this amendment.
And it is time we put in place real aid to State and local governments
so that we don't undo the very economic recovery we are trying to
start.
Let me briefly review the key elements of wage tax relief.
Every working American is subject to taxes on his or her wages which
are used primarily to fund Social Security and Medicare. Under the wage
tax cut in this amendment, every American worker would receive a rebate
for the amount of these taxes they have paid on their first $10,000 of
earnings, about $800 for each working American.
In addition, every employer would be eligible to receive a tax credit
for the payroll taxes they have contributed on behalf of their
employees. This tax relief would take effect as soon as possible in
2003.
The cost of a payroll tax reduction would be paid out of the general
funds of the Treasury, so that there would be no impact on the Social
Security trust fund.
The benefits of a payroll tax cut are numerous. First, a payroll tax
cut gets money in the hands of people who need it and will spend it--
the litmus test for most economists of a good stimulus program.
While we can have a long debate about the merits of a dividend tax
cut, in the real world an additional $800, or $1,600 in the case of two
working parents, would have a big impact on the average family's
budget.
Second, it is good economic policy. The problem with our economy
today is that there is not enough demand for products and services. The
administration's supply-side approach, in fact, has it backwards.
Capacity is not the problem, as illustrated by the fact that inflation
has dropped during this downturn from 2.8 percent in 2001 to 1.6
percent in 2002.

We need to encourage consumption so that businesses will have the
confidence to invest in new plants and equipment and hire more workers.
Before the debate was politicized, the Business Roundtable, which
represents the CEOs of major U.S. corporations, wrote the President
that an immediate reduction in the payroll tax would be more effective
than ``any other proposal'' to stimulate demand and productivity.
Third, a payroll tax cut is equitable. It would benefit the many
Americans who work, not just the few who receive taxable dividends. The
Congressional Research Service estimates that 40 percent of all
dividends are received by the wealthiest 2 percent, or those with
incomes of $200,000 or greater. By contrast, the majority of American
households now pay more in payroll taxes than Federal income taxes.
Fourth, a payroll tax reduction removes a large disincentive to
creating jobs. In our present economy output is flat with GDP running
at an annualized rate of only 1.6 percent, but productivity is
increasing. The result is that since 2000 the economy has lost over 2
million jobs, and Americans are remaining out of work longer. A payroll
tax reduction will lower the cost of labor for an employer by about 15
percent, making it more likely that employers will keep workers on the
payroll and hire more people.
Finally, a payroll tax cut is affordable. The $188 billion estimated
cost of a one-time payroll tax reduction is about one-half the cost of
the President's dividend tax cut plan. While it costs less, a payroll
tax reduction provides more immediate stimulus. By contrast, the
President's dividend tax cut delivers only $2.5 billion in stimulus in
2003--50 times less impact.
If we want to grow the economy today, it makes sense to put money to
work now, not ten years from now. Most importantly, since a payroll tax
cut is a one year plan, it does not create structural deficits in our
economy which drive up our national debt and undermine our long term
growth.
Let me now turn to the issue of State aid.
We have had bi-partisan agreement to provide $20 billion in direct
Federal aid to the States and localities on a one-time basis. I commend
Senator Grassley for his leadership in getting this done. It is a very
good start, but it is not enough.
This amendment provides a bigger boost to our States and locals. They
clearly need the money.
According to estimates provided by the National Conference of State
Legislatures, the total budgetary shortfall for all States in fiscal
year 2004 was in the range of $80 billion, and an approximate $22
billion gap still remains from fiscal 2003. Many believe these figures
remain significantly understated.
Almost every State is running a significant, multi-hundred million
dollar deficit. In many States the figure runs into the multi-billions
of dollars. In several States the deficit's percentage of the total
State budget is estimated to be in the range of 25 percent or more. New
York State's budget shortfall alone is $12 billion.
The situation at the local level is just as dire.
According to the National Association of Counties, nearly 72 percent
of counties are facing budget shortfalls, 37 percent are reducing
services and 17 percent are increasing taxes--all at a time when the
demand for services and the need for tax cuts is rising given the sour
economy.
This is not a regional issue. It is a national crisis.
I have heard some argue that State aid is not good economic policy.
But numerous reports indicate that most economists believe that aid to
the States is, in fact, an extremely effective means of providing
fiscal stimulus,

[[Page S6238]]

as it quickly puts money in the hands of people who need it and will
spend it.
State and local aid also alleviates the need for States to cut more
jobs, cut more programs, and raise taxes, which acts as an ``anti-
stimulus'' on the economy.
Without any State aid, an individuals' or family's decrease in
Federal taxes could be surpassed by an increase in State and local
taxes.
We should not support policies where, ``What one hand giveth the
other taketh away.'' We should not ``rob Peter to pay Paul.''
This modest increase in the amount of aid is a 1-time shot in the arm
for the States. It is not an enormous, multi-year change that threatens
to build more deficits. It is a short-term proposal in response to a
crisis that threatens to further drag down our economy and further
increase the tax burden on our citizens.
Some argue that States and cities have dug their own fiscal graves,
and should now lie in them. I could not disagree more. Our States and
cities face the same economic forces as the Federal Government. As the
economy has forced a dramatic reversal in fiscal health in our Federal
budget, so has it wreaked havoc on local budgets.

Why should we hold states and localities to a different standard than
we hold ourselves?
And if we want to teach states a lesson, why should we force citizens
to bear the brunt of that discipline through higher taxes on their
income, bigger class sizes for their children, and less services for
those in need?
The money we are discussing is not a bailout. Nowhere close. States
and locals will still need to make painful cuts and possibly raise
taxes. But we can help alleviate the pain which will fall not on
lawmakers, as we all know, but on our citizens.
At a time when we are struggling to find funds for homeland defense,
public education, health services, and the environment, it is
unacceptable to many of us to push through massive, multi-year tax
cuts.
On behalf of the many citizens and business leaders who play by the
rules and quietly shoulder the burden of financing our government, it
is time for a new approach.
This amendment gives us an opportunity for that new approach.
Ms. LANDRIEU. I thank my colleagues for their comments. I will speak
an additional 2 or 3 minutes to wrap up, as I stated when I began.
First of all, I have a great deal of respect for the Senator from
Iowa, who has been under a great deal of pressure to try to provide a
plan for the Senate to consider. If we are given a fair hand, we could
have actually designed a plan that could have been more stimulative,
more fair, more equitable than the one we will be considering tomorrow.
No. 1, the dividend proposal--and I could say scheme--tries to
convince people this will create jobs in America when it will not
create jobs, and it will raise taxes because of the way it is designed
in the big picture, taxes at the local level. That is happening now.
If people think that is not going to happen, look at Arkansas. The
State of Arkansas just raised income taxes across the board by 3
percent. That is why they have a zero deficit, because they just raised
income taxes.
This plan, if it does not create jobs, will actually raise taxes at
the local level. In Louisiana, only 18 percent of filers even file for
a dividend tax. The average is $450 in earnings, so we are saving them
$100.

The plan that Senator Corzine, Senator Schumer, and I offer will give
relief to every worker. It gives help to the creation of jobs in
America. It gives a check to every businessperson, every small
business, every large business. It puts money in the economy in a
significant amount. For a two-wage-earner family, it is $1,500--not
next year, not in 2004. The checks go out within a few months--two
checks this year.
Averages can be extremely misleading. One of the best examples of
this was an article written recently that said if Bill Gates--assume he
was worth $20 billion--happened to walk into a homeless shelter and sat
down at a table with 19 homeless men, and one of the guys from the
other side walked in and said, What is the average income of the people
in this homeless shelter, the average income would be $1 billion. But
that average is not reflective of the reality, which is one guy has $20
billion and 19 guys have zero. But the average would be $1 billion.
So beware of averages. I am not fighting for averages. I am fighting
for the 4.5 million people who live in Louisiana who deserve a break.
If we are going to give out $350 billion on this floor, then give them
a fighting chance to get a portion of it, to keep their job, to send
their kid to college, to pay their house note. And stop confusing them
with these charts and these averages that do not mean a hill of beans.
Talk the truth to people. That is what we need. We need to speak the
truth and keep our promises and be disciplined in what we do.
I offer this amendment with a great deal of passion. A great deal of
study has gone into this because we want to work with the President. I
want to work with the President. I want to work with the Republican
leadership. I have demonstrated that time and time again.
But I can't vote for a package that doesn't make sense, that will not
create jobs, and will raise taxes, all the time promising people it is
going to do the opposite.
Like I said on the television, it is hogwash. We are going to offer
our amendment tomorrow. Hopefully, we will get some votes.
I ask to send two other amendments to the desk. I am not going to
debate them tonight, but I offer them now and ask to have the clerk
report them. I offer them for consideration but not until tomorrow.

Amendment No. 620

The PRESIDING OFFICER. Is there objection to laying aside the pending
amendment? The Chair hears none, and it is so ordered. The clerk will
report.
The legislative clerk read as follows:

The Senator from Louisiana [Ms. Landrieu] proposes an
amendment numbered 620.

Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To provide pay protection for members of the Reserve and the
National Guard, and for other purposes)

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

SEC. ____. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED
TO GENERAL BUSINESS CREDIT.

(a) Ready Reserve-National Guard Credit.--Subpart D of part
IV of subchapter A of chapter 1 (relating to business-related
credits) is amended by adding at the end the following:

``SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.

``(a) General Rule.--For purposes of section 38, the Ready
Reserve-National Guard employee credit determined under this
section for any taxable year is an amount equal to 50 percent
of the actual compensation amount for such taxable year.
``(b) Definition of Actual Compensation Amount.--For
purposes of this section, the term `actual compensation
amount' means the amount of compensation paid or incurred by
an employer with respect to a Ready Reserve-National Guard
employee on any day during a taxable year when the employee
was absent from employment for the purpose of performing
qualified active duty.
``(c) Limitations.--
``(1) Maximum period for credit per employee.--The maximum
period with respect to which the credit may be allowed with
respect to any Ready Reserve-National Guard employee shall
not exceed the 12-month period beginning on the first day
such credit is so allowed with respect to such employee.
``(2) Days other than work days.--No credit shall be
allowed with respect to a Ready Reserve-National Guard
employee who performs qualified active duty on any day on
which the employee was not scheduled to work (for reason
other than to participate in qualified active duty).
``(d) Definitions.--For purposes of this section--
``(1) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty, other than the training duty specified
in section 10147 of title 10, United States Code (relating to
training requirements for the Ready Reserve), or section
502(a) of title 32, United States Code (relating to required
drills and field exercises for the National Guard), in
connection with which an employee is entitled to reemployment
rights and other benefits or to a leave of absence from
employment under chapter 43 of title 38, United States Code,
and
``(B) hospitalization incident to such duty.
``(2) Compensation.--The term `compensation' means any
remuneration for employment, whether in cash or in kind,
which is paid or incurred by a taxpayer and which is
deductible from the taxpayer's gross income under section
162(a)(1).

[[Page S6239]]

``(3) Ready reserve-national guard employee.--The term
`Ready Reserve-National Guard employee' means an employee who
is a member of the Ready Reserve or of the National Guard.
``(4) National guard.--The term `National Guard' has the
meaning given such term by section 101(c)(1) of title 10,
United States Code.
``(5) Ready reserve.--The term `Ready Reserve' has the
meaning given such term by section 10142 of title 10, United
States Code.''.
(b) Credit To Be Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit) 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:
``(16) the Ready Reserve-National Guard employee credit
determined under section 45G(a).''.
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 45F the
following:

``Sec. 45G. Ready Reserve-National Guard employee credit.''.

(d) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B) of the Internal Revenue
Code of 1986, as added by section 201, is amended by striking
``2007'' and inserting ``2008''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.

Amendment No. 621

Ms. LANDRIEU. I waive any debate. I send another amendment to the
desk.
The PRESIDING OFFICER. Without objection, the pending amendment is
set aside and the clerk will report.
The legislative clerk read as follows:

The Senator from Louisiana [Ms. Landrieu] proposes an
amendment numbered 621.

Ms. LANDRIEU. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

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

Ms. LANDRIEU. I waive any debate until tomorrow.
Mr. GRASSLEY. I yield such time as he might consume to the Senator
from Nevada.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. ENSIGN. Mr. President, I ask unanimous consent the pending
amendment be set aside.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 622

Mr. ENSIGN. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Nevada [Mr. Ensign] proposes an amendment
numbered 622.

Mr. ENSIGN. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To encourage the investment of foreign earnings within the
United States for productive business investments and job creation)

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

SEC. ____. TOLL TAX ON EXCESS QUALIFIED FOREIGN DISTRIBUTION
AMOUNT.

(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by adding at the end the following new
section:

``SEC. 965. TOLL TAX IMPOSED ON EXCESS QUALIFIED FOREIGN
DISTRIBUTION AMOUNT.

``(a) Toll Tax Imposed on Excess Qualified Foreign
Distribution Amount.--If a corporation elects the application
of this section, a tax shall be imposed on the taxpayer in an
amount equal to 5.25 percent of--
``(1) the taxpayer's excess qualified foreign distribution
amount, and
``(2) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount.

Such tax shall be imposed in lieu of the tax imposed under
section 11 or 55 on the amounts described in paragraphs (1)
and (2) for such taxable year.
``(b) Excess Qualified Foreign Distribution Amount.--For
purposes of this section--
``(1) In general.--The term `excess qualified foreign
distribution amount' means the excess (if any) of--
``(A) dividends received by the taxpayer during the taxable
year which are--
``(i) from 1 or more corporations which are controlled
foreign corporations in which the taxpayer is a United States
shareholder on the date such dividends are paid, and
``(ii) described in a domestic reinvestment plan approved
by the taxpayer's president, chief executive officer, or
comparable official before the payment of such dividends and
subsequently approved by the taxpayer's board of directors,
management committee, executive committee, or similar body,
which plan shall provide for the reinvestment of such
dividends in the United States, including as a source for the
funding of worker hiring and training; infrastructure;
research and development; capital investments; or the
financial stabilization of the corporation for the purposes
of job retention or creation, over
``(B) the base dividend amount.
``(2) Base dividend amount.--The term `base dividend
amount' means an amount designated under subsection (c)(7),
but not less than the average amount of dividends received
during the fixed base period from 1 or more corporations
which are controlled foreign corporations in which the
taxpayer is a United States shareholder on the date such
dividends are paid.
``(3) Fixed base period.--
``(A) In general.--The term `fixed base period' means each
of 3 taxable years which are among the 5 most recent taxable
years of the taxpayer ending on or before December 31, 2002,
determined by disregarding--
``(i) the 1 taxable year for which the taxpayer had the
highest amount of dividends from 1 or more corporations which
are controlled foreign corporations relative to the other 4
taxable years, and
``(ii) the 1 taxable year for which the taxpayer had the
lowest amount of dividends from such corporations relative to
the other 4 taxable years.
``(B) Shorter period.--If the taxpayer has fewer than 5
taxable years ending on or before December 31, 2002, then in
lieu of applying subparagraph (A), the fixed base period
shall mean such shorter period representing all of the
taxable years of the taxpayer ending on or before December
31, 2002.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Dividends.--The term `dividend' means a dividend as
defined in section 316, except that the term shall also
include amounts described in section 951(a)(1)(B), and shall
exclude amounts described in sections 78 and 959.
``(2) Controlled foreign corporations and united states
shareholders.--The term `controlled foreign corporation'
shall have the same meaning as under section 957(a) and the
term `United States shareholder' shall have the same meaning
as under section 951(b).
``(3) Foreign tax credits.--The amount of any income, war,
profits, or excess profit taxes paid (or deemed paid under
sections 902 and 960) or accrued by the taxpayer with respect
to the excess qualified foreign distribution amount for which
a credit would be allowable under section 901 in the absence
of this section, shall be reduced by 85 percent.
``(4) Foreign tax credit limitation.--For all purposes of
section 904, there shall be disregarded 85 percent of--
``(A) the excess qualified foreign distribution amount,
``(B) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount, and
``(C) the amounts (including assets, gross income, and
other relevant bases of apportionment) which are attributable
to the excess qualified foreign distribution amount which
would, determined without regard to this section, be used to
apportion the expenses, losses, and deductions of the
taxpayer under section 861 and 864 in determining its taxable
income from sources without the United States.

[[Page S6240]]

For purposes of applying subparagraph (C), the principles of
section 864(e)(3)(A) shall apply.
``(5) Treatment of acquisitions and dispositions.--Rules
similar to the rules of section 41(f)(3) shall apply in the
case of acquisitions or dispositions of controlled foreign
corporations occurring on or after the first day of the
earliest taxable year taken into account in determining the
fixed base period.
``(6) Treatment of consolidated groups.--Members of an
affiliated group of corporations filing a consolidated return
under section 1501 shall be treated as a single taxpayer in
applying the rules of this section.
``(7) Designation of dividends.--Subject to subsection
(b)(2), the taxpayer shall designate the particular dividends
received during the taxable year from 1 or more corporations
which are controlled foreign corporations in which it is a
United States shareholder which are dividends excluded from
the excess qualified foreign distribution amount. The total
amount of such designated dividends shall equal the base
dividend amount.
``(8) Treatment of expenses, losses, and deductions.--Any
expenses, losses, or deductions of the taxpayer allowable
under subchapter B--
``(A) shall not be applied to reduce the amounts described
in subsection (a)(1), and
``(B) shall be applied to reduce other income of the
taxpayer (determined without regard to the amounts described
in subsection (a)(1)).
``(d) Election.--
``(1) In general.--An election under this section shall be
made on the taxpayer's timely filed income tax return for the
taxable year (determined by taking extensions into account)
ending 120 days or more after the date of the enactment of
this section, and, once made, may be revoked only with the
consent of the Secretary.
``(2) All controlled foreign corporations.--The election
shall apply to all corporations which are controlled foreign
corporations in which the taxpayer is a United States
shareholder during the taxable year.
``(3) Consolidated groups.--If a taxpayer is a member of an
affiliated group of corporations filing a consolidated return
under section 1501 for the taxable year, an election under
this section shall be made by the common parent of the
affiliated group which includes the taxpayer, and shall apply
to all members of the affiliated group.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary and appropriate to carry out
the purposes of this section, including regulations under
section 55 and regulations addressing corporations which,
during the fixed base period or thereafter, join or leave an
affiliated group of corporations filing a consolidated
return.''.
(b) Conforming Amendment.--The table of sections for
subpart F of part III of subchapter N of chapter 1 is amended
by adding at the end the following new item:

``Sec. 965. Toll tax imposed on excess qualified foreign distribution
amount.''.

(c) Effective Date.--Except as otherwise provided, the
amendments made by this section, other than the amendment
made by subsection (d), shall apply only to the first taxable
year of the electing taxpayer ending 120 days or more after
the date of the enactment of this Act.
(e) Termination of Rehabilitation Credit.--Section 47
(relating to rehabilitation credit) is amended by adding at
the end the following new subsection:
``(e) Termination.--This section shall not apply to
expenditures incurred after December 31, 2003.''.

Mr. ENSIGN. Mr. President, I send a second-degree amendment to the
desk.
Mr. BAUCUS addressed the Chair.
The PRESIDING OFFICER. The amendment is not in order while time
remains on the first-degree amendment.
Mr. ENSIGN. Mr. President, I withdraw the second-degree amendment.
I want to speak on the first amendment I sent to the desk. The
amendment I have sent to the desk is a fairly simple amendment. It was
one of those ideas you find when you go around and listen to real
people. When you do that, you can come up with ideas that will lead to
good policy that will actually help real Americans get back to work.
It has been said that we are in a sluggish economy right now. I agree
with that. Certainly, the American economy is the strongest economy in
the world. It has been incredibly resilient, but it is not nearly as
strong as what we would like to see. So when you talk to various
people, there are all kinds of ideas of how to get the economy started.
While I support what the President is trying to do, I have talked to
a lot of people in small businesses and large businesses who support
the elimination of the double taxation on dividends. They support the
acceleration of the cuts in the marginal tax rates and several of the
other small business expensing items and the like in the bill that the
President had sent up here, parts of which are in the Finance
Committee's mark. Those provisions will stimulate the economy.
I have a provision we sent to the desk that, for a very little cost,
as far as the people who score these budgets ascertained, for very
little cost will put a tremendous amount of money into the U.S.
economy.
Right now, we encourage businesses to go overseas. We encourage that
through our Tax Code, and actually it is beneficial a lot of times for
companies to relocate overseas. But if they do that and make money and
pay taxes in those other countries, when they try to bring the money
back here to invest in this country, they pay a 35 percent tax rate on
that money. So if a company is faced with bringing the money they have
made overseas back here or investing that money overseas, they say to
themselves: Do I want to invest $100 out of every $100 overseas or do I
want to invest $65 out of every $100 back here in the United States?
The obvious answer is they keep that money overseas, and they invest
that overseas.
I appreciate the support of both the ranking member and the chairman
of the Finance Committee. This amendment was brought up in the Finance
Committee. They both voted for it. I appreciate their vote on it. It
narrowly lost, by one vote. That is why we are taking another run at
this.
Our amendment says we will give companies that have invested overseas
and have made money overseas 1 year's time to bring that money back to
the United States and, instead of paying a 35-percent tax rate, they
will only pay a 5.25-percent tax rate.
J.P. Morgan and Associates just did a study to find out how much
money would actually come back into the United States if this amendment
is adopted within 12 months, the next 12 months. It is estimated $300
billion will come back into the United States--$300 billion.
Compare that with all the other plans that have been talked about
around here. For a cost of only $4 billion over 10 years, as far as
what the budget people score it, as far as loss of tax revenues, to get
a $300 billion boost in the economy--there is nothing else in the
stimulus package that gives you as much bang for the buck.
While I support the rest of it, and I am voting for the rest of it,
this is something that needs to be included in a stimulus package
because this will truly bring the money back into the United States.
This is money that is not going to be here any other way. This is not
taking money away from Government and putting it in the private sector,
or taking it away from the private sector and putting it in the
Government. This is money outside the United States that will come back
here and create U.S. jobs.
This is a bipartisan amendment. We have done a couple of things to
make sure it not just comes back here. It cannot go for executive pay,
for one thing. It has to come back here and be invested in the United
States, in their companies in the United States.
We have gone around and talked to people in business, instead of
relying on a study. I went around talking to a lot of businesses. I was
talking to some people the other day. They said they have $2 billion in
cash sitting overseas that they would bring back here in a heartbeat if
this passed. That is $2 billion in high-tech industry. A big part of
the sluggish part of our economy has been in the high-tech industry--$2
billion in just one company that will come back here to the United
States in the next 12 months. You can clearly see this would have a
very strong stimulative effect on our economy.
I thank the cosponsors of the original bill that we introduced--
Senator Boxer, Senator Gordon Smith, and Senator Allen--for joining as
original cosponsors of this bill. It is bipartisan in nature. Several
other Members from the other side of the aisle have approached us.
We think this amendment will be a significant part of this stimulus
package. Most people aren't aware of this amendment. Most people aren't
aware of the impact it will have on the economy. But I encourage all of
our colleagues to learn about this before we vote on it tomorrow. It is
very obvious that there are upsides to this. I just do not see any
downside. The upsides are tremendous. A huge amount of money

[[Page S6241]]

will come back into the United States to create American jobs.
If you ask yourself whether to vote for this amendment, you just have
to ask yourself whether you want to create jobs overseas or do you want
to create jobs in the United States? We are talking about $300 billion
coming back into the United States in the next 12 months to create
jobs. That is a lot of capital. We have heard about the lack of capital
and business investment being part of the recession. This would be a
significant addition to our economy.
I encourage our colleagues to vote for this amendment.
I ask for the yeas and nays, and I yield the floor.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, in regard to the statement just made by
the Senator from Nevada, I voted for the amendment that he speaks about
in committee. It lost by a 1-vote margin. I don't know whether Members
have had a chance to give it the thorough thought it ought to have when
it is brought up on the floor. I hope Members will take a good look at
it. If there is evidence to back up what has been said about the
amendment bringing money home, it is something that would give a shot
in the arm to the economy. It ought to be something we look at. I think
there has been some talk about it, but not enough at this point. I am
not suggesting the amendment should not be voted for tomorrow. I am
just suggesting it is something I am taking a very good look at.
Mr. ENSIGN. Mr. President, will the Senator yield?
Mr. GRASSLEY. I yield for a short statement and then I want to
continue.
Mr. ENSIGN. The only comment I would make is that a couple of years
ago when this was introduced, the Joint Tax Committee scored this as
bringing about $150 billion back into the economy. J. P. Morgan's--a
private institution--latest study estimated it would be $300 billion.
They have the latest figures. That is where we would come up
conservatively. Even if you do not go with the new study, the old study
said $150 billion. It puts a lot of money back into the economy.
The PRESIDING OFFICER (Mr. Grassley). The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent that all pending
amendments be temporarily set aside so that the Senator from New York
can offer an amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from New York.

Amendment No. 557

Mr. SCHUMER. Mr. President, I send amendment No. 557 to the desk and
ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from New York [Mr. Schumer] proposes an
amendment numbered 557.
Mr. SCHUMER. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To amend the Internal Revenue Code of 1986 to make higher
education more affordable)

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

SEC. ____. EXPANSION OF DEDUCTION FOR HIGHER EDUCATION
EXPENSES.

(a) In General.--
(1) Amount of deduction.--Subsection (b) of section 222
(relating to deduction for qualified tuition and related
expenses) is amended to read as follows:
``(b) Limitations.--
``(1) Dollar limitations.--
``(A) In general.--Except as provided in paragraph (2), the
amount allowed as a deduction under subsection (a) with
respect to the taxpayer for any taxable year shall not exceed
the applicable dollar limit.
``(B) Applicable dollar limit.--The applicable dollar limit
for any taxable year shall be determined as follows:

Applicable
``Taxable year:                                          dollar amount:
2003......................................................$8,000 ....

2004 and thereafter......................................$12,000.....

``(2) Limitation based on modified adjusted gross income.--
``(A) In general.--The amount which would (but for this
paragraph) be taken into account under subsection (a) shall
be reduced (but not below zero) by the amount determined
under subparagraph (B).
``(B) Amount of reduction.--The amount determined under
this subparagraph equals the amount which bears the same
ratio to the amount which would be so taken into account as--
``(i) the excess of--

``(I) the taxpayer's modified adjusted gross income for
such taxable year, over
``(II) $65,000 ($130,000 in the case of a joint return),
bears to

``(ii) $15,000 ($30,000 in the case of a joint return).
``(C) Modified adjusted gross income.--For purposes of this
paragraph, the term `modified adjusted gross income' means
the adjusted gross income of the taxpayer for the taxable
year determined--
``(i) without regard to this section and sections 911, 931,
and 933, and
``(ii) after the application of sections 86, 135, 137, 219,
221, and 469.

For purposes of the sections referred to in clause (ii),
adjusted gross income shall be determined without regard to
the deduction allowed under this section.
``(D) Inflation adjustments.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, both of the dollar
amounts in subparagraph (B)(i)(II) shall be increased by an
amount equal to--

``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.

``(ii) Rounding.--If any amount as adjusted under clause
(i) is not a multiple of $50, such amount shall be rounded to
the nearest multiple of $50.''.
(2) Qualified tuition and related expenses of eligible
students.--
(A) In general.--Section 222(a) (relating to allowance of
deduction) is amended by inserting ``of eligible students''
after ``expenses''.
(B) Definition of eligible student.--Section 222(d)
(relating to definitions and special rules) is amended by
redesignating paragraphs (2) through (6) as paragraphs (3)
through (7), respectively, and by inserting after paragraph
(1) the following new paragraph:
``(2) Eligible student.--The term `eligible student' has
the meaning given such term by section 25A(b)(3).''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments made in taxable years beginning after
December 31, 2002.
(b) Slower Acceleration 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 this Act, is amended to read as follows:

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The corresponding percentages shall be substituted for the following percentages:
``In the case of taxable years  beginning ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
during calendar year:              28%      31%      36%                                                                                                                                              39.6%
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2001......................................   27.5%    30.5%    35.5%                                                                                                                                             39.1%
2002......................................   27.0%    30.0%    35.0%                                                                                                                                             38.6%
2003......................................   25.0%    28.0%    33.0%                                                                                                                                             38.6%
2004......................................   25.0%    28.0%    33.0%                                                                                                                                             37.6%
2005......................................   25.0%    28.0%    33.0%                                                                                                                                             37.6%
2006 and thereafter.......................   25.0%    28.0%    33.0%                                                                                                                                            35.0%''.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(c) Application of EGTRRA.--The amendment made by
subsection (b) 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.

Mr. SCHUMER. Mr. President, I will be brief.
This amendment would continue the work we made in the last tax bill a
few years back to further increase the deduction for college tuition.
The bottom line is a simple one: College is a necessity today for young
people. Good jobs are hardly available without a college education.
They are getting rarer and rarer. Yet the cost of college is very, very
expensive.
If you are wealthy, you can afford it. If you are poor, we often pay
for your tuition, as we should. I fully support that. But if you are in
the middle class, that tuition bill every year is a fright. My wife and
I make good salaries, and we are up late at night trying to figure out
how we are going to pay for our two daughters' college education. One
is a freshman in college. One is in the 8th grade. So we know, because
our salary is better than the average American, what the average
American does: They struggle in terms of thinking of how they are going
to pay for tuition.
This amendment, cosponsored by Senators Biden, Boxer, Durbin,
Cantwell, and Lieberman, takes the current deduction and makes it
permanent, because now it expires at the end of 2005. It increases the
eligible tuition amount to $8,000 for the tax year 2003

[[Page S6242]]

and $12,000 for the tax year 2004 and thereafter. It now is $4,000 for
the tax year 2003 and thereafter.
The deduction is available to joint filers with taxable income up to
$130,000, with a phase-out up to $160,000; and single filers with
taxable income up to $65,000, with a phase-out up to $80,000.
The bottom line is simple: This helps middle-class people with
perhaps the greatest problem they struggle with. It also can be taken
by parents or grandparents who pay the tuition of a dependent child or
grandchild. It applies to any student enrolled at least half time,
including graduate students. It is per student, so if you have two
students in college or graduate school, you get the deduction for each
of them.
It would cost about $26.3 billion for the 10-year period of 2003 to
2013. The cost of the amendment would be offset by slowing the
acceleration of the top tax rate reduction so that the top rate would
become 37.6 percent in 2004 and 35 percent in 2006.
Now, again, we are dealing with choices. It would be nice to get that
top rate down quickly, but if you ask me, the future of America depends
on kids who deserve to go to the best college being able to afford to
go to the best college. That is probably more important than quickly
accelerating the top rate.
This amendment, as I said, applies to the solid, middle class who get
very, very few tax breaks and yet sweat and struggle to send their
children to college.
Mr. President, when a young man or young woman either does not go to
college, even though they have the grades to get in, or goes to a
lesser college than the one they deserve to go to, they lose. Their
lifetime productivity will be lower. Their families lose, but we lose.
America loses, because in this new ideas-oriented economy, we need the
best educated labor force possible.
So I can hardly think of a better investment for America than tuition
deductibility. We made a good step in the tax bill of 2001, as I said.
For the first time, I, Senator Snowe of Maine, and then-Senator
Torricelli of New Jersey managed to get this into the tax bill for up
to the $4,000 level. This will bring it up to $8,000 and make sure it
does not expire in 2005.
Mr. President, as I said, in today's information-driven economy, a
college degree is no longer a luxury, it is a necessity.
In terms of long-term economic growth and developing this country's
human capital--which is ultimately the true source of innovation and
competitive advantage--we could make a few better investments than
ensuring future generations have access to an affordable college
education.
The challenge is that the cost of college tuition has increased
faster than any other major consumer item including health care over
the last 20 years, skyrocketing from $5,156 in 1981 to $21,768 in 2001,
an increase of 322 percent.
Even in real, inflation adjusted dollars the price of a 4-year public
or private college education has almost doubled over the past two
decades.
As currently written, this bill does everything except invest in
people. We have incentives for plants, property, and equipment. Let's
take this opportunity to invest in the next generation.
As I said, the amendment makes the current tax deduction permanent
and increases the eligible tuition amount to $8,000 for tax year 2003
and $12,000 for tax year 2004 and thereafter.
The deduction is available to joint filers with taxable income up to
$130,000, with a phaseout up to $160,000, and single filers with
taxable income up to $65,000, with a phaseout up to $80,000. For
example, for a joint filer with an income of $105,000, the legislation
would mean a savings of as much as $3,240.
The legislation would allow families to choose the Hope Scholarship
instead of the deduction, depending on which is more beneficial to
them.
I know the hour is late. I heard my colleague from North Dakota got
out of his lovely home to come to the floor because he was so eager to
speak, and I am eagerly awaiting his remarks. I hope he did not have to
get out of his pajamas and back into his nice suit and tie. I don't
know what his status was while he was at home.
Mr. President, I ask for the yeas and nays on my amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. SCHUMER. Mr. President, I ask that my remaining time be ceded
back to the Senator from Montana.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, under our informal agreement, we had been
switching back and forth. The Senator from South Carolina is now
recognized.
The PRESIDING OFFICER. The Chair recognizes the Senator from South
Carolina.
Mr. BAUCUS. Mr. President, I urge the Senator, at this late hour, to
speak briefly so everybody who wants to speak can. The bewitching hour
arrives at about 10 minutes after midnight tonight.
Mr. GRAHAM of South Carolina. With that in mind, I will be very
brief.
Mr. President, I do appreciate the opportunity to be recognized very
briefly. The reason I want to speak is to recognize the Finance
chairman's great job, taking a pretty bad situation and making the best
of it. It got off to a rocky start in the Senate about how to craft a
tax package to help stimulate the economy. But I am very impressed by
what has happened.
Almost everyone has some view of how to cut taxes. That is good for
the American public. I am not here to criticize my colleagues on the
other side who have put forward tax packages. I think we all see the
economy soggy--whatever adjective you want to use--but both parties
have a view of getting money back into the economy. That is good.

I congratulate those who have stepped up to the plate to put money
back into the economy. I may disagree with your approach. But also I
would like to congratulate those Senators who took the road less
traveled; that is, saying: We do not need a tax cut. We cannot afford a
tax cut. We are in deficits. Now is not the time to take money out of
the revenue stream. We should be retiring the debt. To those Senators,
I say, you are absolutely right in terms of having a philosophy that
makes sense.
The problem is, if we do not cut taxes, we have shown a propensity,
particularly our friends on the other side, to spend the money. That is
an overarching thing that I think is well-documented.
It is not a debate as to whether we will take the $350 billion, the
$152 billion, the $550 billion, or the $726 billion, and put it on the
debt. That is not going to happen. That should happen, but it is not
going to happen.
So now the debate becomes, how do we take whatever money we are going
to set aside for taxes to create jobs? Because if it does not create
jobs, I am not going to vote for it.
Twelve Democratic Senators joined with the President and members of
the majority party to cut taxes in 2001 in a very comprehensive manner.
A lot has happened since that tax cut: America has been attacked, the
defense spending needs have gone up, the Iraq war has come, and a lot
of money has been spent. But I would argue that everything we have done
to make America stronger, to free the people of Iraq, making us
stronger, is money well spent. Let's keep that same theme of spending
our money wisely.
The one thing that disappoints me about my friends on the other side
is that every amendment they have to offer or every approach to taxes
goes after the dividend tax cut. That is the centerpiece of the
President's view of how to stimulate the economy. Every amendment being
offered takes money from the dividend tax cut to pay for that
amendment.
The best example of what is going on here is Senator Dorgan's
amendment about repealing the Social Security tax. A month ago we had a
chance to do that, and our friends on the other side en masse voted no.
We had a chance to expand the budget resolution by doing away with the
tax on senior citizens at the 85-percent rate on their Social Security.
This tax was put in in 1993 by our friends on the other side. I would
argue that offering this amendment now is the best evidence one could
point to as to what is going on here. Everything this President is
asking for in terms of job stimulus and economic activity beyond
helping people put money in their pockets goes to

[[Page S6243]]

the dividends, double taxation exclusion.
The Senate Finance Committee has produced a bill that addresses that
problem. There will be an amendment on this floor that will basically
mirror what the President has asked for. It will take taxation
dividends to zero for a 3-year period.
I honestly believe that is the best way to create jobs simply because
if you could buy stock and receive a dividend without paying taxes,
more people would be likely to buy stock. People say the stock market
would go up 10 or 20 percent. I don't know if that is right or not, but
that makes sense to me.
The $350 billion tax proposal by Senator Landrieu I disagree with.
But you have to understand that the difference between Senator
Daschle's plan of $152 billion, the Finance Committee's of $350
billion, and Senator Landrieu's amendment of $350 billion is negligible
in terms of the money it takes out of the economy to help people
receive tax benefits. So this argument that our President's plan
doubles the national debt has to give way to facts. Everybody is
wanting to cut taxes.
The point I am trying to make is the American people have to choose
between these competing plans. We will have to choose. Here is what I
am going to do. I am going to make a choice to take the tax package
that was passed in 2001 and accelerate the benefits. Because the reason
we haven't received the full benefit of the 2001 tax package is we put
everything off in terms of rate reductions. Let's take the money we are
putting on the table now and accelerate the rates. Let's accelerate the
child tax credit so people will have more money to spend. But let's do
something we didn't do in 2001. Let's create a system so that jobs can
be created by economic activity.
You will never convince me that if you make an investment in the
stock market more attractive, people will not have better jobs, and
there will be more jobs for people. That is why I will follow the lead
of the President.
I am pleased that I am a Member of the Senate at a time when both
parties want to cut taxes.
I yield the floor.
Mr. REED. Mr. President, we find ourselves here, yet again,
confronted with the third tax cut package in 3 years from the
President. As a recent Washington Post article pointed out, President
Bush seems dead set on ramming through tax cuts every year he is in the
Presidency---regardless of the economy, regardless of the budget
deficit, regardless of its competition with much-needed programs like a
universal and comprehensive prescription drug benefit for Medicare.
In fact, after years of harping on budget deficits, the Republican
Party has now jettisoned its sense of fiscal responsibility, but only
after President Clinton adopted that same fiscal responsibility and
successfully delivered budget surpluses. Now, Republicans are silent on
the issue.
But only when we put all of these concerns aside do we get to the
most fundamental question---the question of fairness. President Bush
has taken great strides to launch preemptive rhetorical attacks,
claiming Democrats are engaging in class warfare with opposition to tax
cuts. But when we consider the facts, it is the President who is
engaging in class warfare by pushing through a package that steals from
the poor and then gives to the rich. His preemptive rhetorical attacks
will not measure up to the facts.
So, with all the challenges we have ahead, we are being asked to vote
on another tax cut that will not help the average American family. It
is incumbent on us to separate the myth of Republican rhetoric from
reality in how this tax cut will affect our constituents, our families,
and our country. It is time to set the record straight.
Myth 1: The Republican tax proposals are best at generating new jobs
and promoting a strong sustainable recovery. The reality is that the
Republican tax proposals are poorly targeted to the problems facing the
economy. They generate fewer jobs and less economic growth this year
when they are needed most than does the Democratic alternative.
The economy is in a slump now, with 2.7 million fewer private sector
jobs than in March 2001, and even the Fed's outlook for the near future
is weak.
Economic forecasters expect that the economy will eventually bounce
back, but they have been expecting a recovery ``soon'' for over a year
and it has not come yet. With the economy still in a slump, with excess
unemployment and underutilized factories, the policy we need now is
job-creating stimulus that restores full employment quickly.
Republicans still insist that long-term tax cuts for the wealthy
somehow create jobs, despite the poor track record that 1.7 million
jobs have been lost since passage of the 2001 tax cut. Their program is
so backloaded that it doesn't take effect until past the time when it
is needed. Such a policy is not just ineffective but counterproductive,
because it creates large deficits and an increase in the public debt
that is a drag on long-term growth.
Additionally, most of the Republicans' proposed capital income tax
cuts reward capital owners without directly encouraging new capital
formation or higher output. Such tax cuts can't be expected to create
new jobs if they don't encourage output. In fact, to the extent that
the tax cuts effectively reduce the cost of capital facing businesses,
some businesses may be encouraged to substitute capital for labor
without increasing their output, so that jobs are lost rather than
gained. If the goal of the tax cut is really job creation, the tax cuts
should be designed to directly encourage businesses to hire more
workers.
The Democratic proposal adheres to the basic principles of sound
policy: it provides a boost to job creation and economic growth now
when it is needed and does not create large future deficits or
increases in debt that are a drag on growth. The Democratic plan just
has ``more taste'' and is ``less filling.''
When the JEC Democratic staff compared the impact on jobs and growth
of the President's $726 billion ``Jobs and Growth Initiative'' and a
much smaller but more targeted Democratic alternative, they found that
the Democratic proposal generated roughly twice the additional jobs and
growth by the end of this year than the President's plan but at one-
seventh the cost. The Republican proposal provides less growth and
fewer jobs in the first year when they are really needed than the
Democratic proposal.
Myth 2: The Republican tax proposals are good for economic growth.
The reality is that the Republican tax proposals hurt economic growth
and depress national income in the long run.
An analysis by the JEC Democratic staff found that because of its
long-run budgetary costs, the President's plan had adverse long-run
supply-side effects that lowered national income in 2013 by 0.4 to 0.6
percent. In their most recent analysis of the President's budget, the
CBO found adverse macroeconomic effects if tax cuts are not paid for--
that a proper ``dynamic scoring'' would raise, not lower, the costs of
the administration's tax proposals.
Economic theories that claim that private saving should fully make up
for drops in public saving are unsupported by experience. What did we
learn from the Reagan era and the fiscal discipline of the 1990s? The
Reagan tax cuts pulled down both public saving and national saving; the
tax cuts failed to generate the large supply-side responses that had
been claimed by the proponents of the cuts.
Myth 3: The Republican proposals are fair and are aimed at the middle
class. In reality, the Republican proposals are unfair and are heavily
tilted toward the very top of the income distribution.
The lion's share of the tax cuts enacted in 2001 already went to the
very richest of households, particularly the tax cuts scheduled to take
effect after 2002. Before the 2001 tax cut, the justification for large
tax cuts for the wealthy was that we were simply ``returning the
people's money'' and getting rid of surpluses that were too big, and
the wealthy were the ones who paid the most in taxes. But that is
clearly not the case because now we have no surpluses.
By 2010 when the tax cut is fully phased in, over a third of the tax
cut goes to the richest 1 percent of households, while less than one-
fourth goes to the entire bottom 60 percent. Despite this, the
administration has proposed additional tax cuts that would clearly
benefit only high-income households: the dividend tax exclusion and the
new savings incentives. As part of their growth and jobs package, the

[[Page S6244]]

administration also proposes to accelerate the portions of the 2001 Tax
Act that highest-income households benefit the most, while leaving
unchanged, continuing to phase in slowly, elements of the 2001 tax cut
that most benefit lowest income families with children. The plan truly
keeps the spirit of the administration's proposals--``leave no
millionaire behind.''
In advertising just how ``fair'' their growth package is, the
administration has repeatedly relied on the average tax cut statistic,
stating that households will ``on average'' receive a tax cut of over
$1,000 in 2003. But this is far greater than what a typical household
near the middle of the income distribution would receive; in fact,
four-fifths of households would receive less than this amount.
According to the Urban-Brookings Tax Policy Center, the middle 20
percent of households would get tax cuts averaging only $200 in 2003
from the President's plan. Meanwhile, households in the top 1 percent
would enjoy an average tax cut of over $20,000, and millionaires would
get tax cuts averaging about $90,000.
The compromise tax cut package crafted by Senator Grassley limits the
dividend exemption to the first $500 of a family's dividends in fiscal
year 2003, increasing by 10 percent of dividend income above $500 from
2004 to 2007, and 20 percent above $500 from 2008 to 2012. Still, even
in the first year with the $500 limit, the great bulk of the dividend
tax cuts will go to highest income households simply because they are
most likely to have dividend income, and among those with dividend
income are the most likely to have at least $500 of dividend income. In
later years as the tax break for higher dividend income increases, the
share of the dividend tax cut benefiting highest income households will
increase. Overall, the Grassley plan would still provide a
disproportionately large tax cut to the highest income households.
But most importantly, even though the low- and moderate-income
families need the most help in this troubled economy, Republican
proposals assist them the least.
Myth 4: The Republican tax plan is the best way to address the
problems of long-term unemployment. The reality is that the Republican
tax plan ignores the plight of the unemployed and the long-term
unemployed.
Although the temporary Federal unemployment insurance program will
expire at the end of May for workers exhausting regular state UI
benefits, currently the Republican plan does not extend the program.
Nor does the plan provide any further assistance to the approximately
1.1 million workers who have exhausted all of their unemployment
benefits and still have not found work.
The unemployment rate today is 6.0 percent, higher than when the
temporary Federal UI program was created in March, 2002, or extended in
January, 2003. During the last 3 months, over 540,000 private-sector
jobs have been lost and the economy has lost 2.7 million private-sector
jobs since the recession began. On average, job losses in a recession
bottom out after about 15 months and are erased within 2 years. The
persistence of job losses at the 25-month mark in this recession is the
most severe since the 1930s. These workers have carried the brunt of
this recession, there are simply no jobs out there for them.
Myth 5: The Republican tax plan is fiscally responsible, but the
reality is that the Republican plan leads to deficits as far as the eye
can see and exacerbates the fiscal pressures posed by the imminent
retirement of the baby boom generation.
What was a $5.6 trillion 10-year surplus when the President took
office has virtually disappeared, even without counting any current
proposals. The administration has repeatedly claimed that the
deterioration was largely out of their control, but the fact is that
even including the effects of the recession and other technical changes
to the CBO budget forecast, the tax cuts already passed are responsible
for over a third of the deterioration in the budget. Enactment of the
President's new budget proposals would result in a $2.1 trillion 10-
year deficit--a turnaround of an astounding $7.7 trillion.
A particularly large bias in administration estimates comes from
assuming that expiring tax provisions will indeed expire and that the
alternative minimum tax will continue to affect a larger and larger
segment of the population without any fix.
Deficits reduce national saving, reduce the resources available for
productive investments, and hence reduce future economic growth. Even
Chairman Greenspan recently warned of the danger to our nation's long-
term economic health: ``I support the program to reduce double taxation
on dividends and the necessary other actions in the federal budget to
make it revenue-neutral . . . it should be done in the context of paygo
rules, which means that the deficit must be maintained at minimal
levels.''
Myth 6: States will benefit from the Republican tax plan. The reality
is that the Republican tax plan ignores the fiscal crisis of the States
and probably makes it worse.
The Senate Republican plan established a $20 billion fund to be
equally divided between State governments and local governments, to be
used for education and job training, health care including Medicaid,
infrastructure, law enforcement, and other essential services. However,
at the same time, the Federal tax changes will reduce State revenues by
approximately $10 billion, leaving States on net with no additional
funds.

The recession that began in March 2001 has hit State budgets from
both sides. Income and sales tax revenues have fallen with reduced
economic activity, while the demands on social services have grown as
joblessness has increased and family incomes have declined. Every week
brings a new headline--or two--announcing another State's proposed
cutbacks in services or program eligibility as it responds to a
worsening budget crisis. Numerous spending cuts in social programs,
including Medicaid, have been announced by States as they work to close
their widening funding gaps. Some 22 States have proposed or adopted
cuts in Medicaid and the SCHIP that would drop coverage for at least
1.7 million people if all the proposals were adopted. Prospects for
2004 are worse: the National Conference of State Legislators estimates
that 41 States will face a cumulative budget shortfall of $78 billion.
The Democratic proposal requires that the Federal Government provide
twice as much money to help States mitigate the negative impacts of the
recession on poor and working families. This will also aid job
creation.
Myth 7: The congressional Republican tax plans adhere to the limits
set in the budget resolution. The reality is that the Republican tax
plans are full of ``smoke and mirrors'' gimmicks that hide their true
costs.
The true cost of the 2001 tax cut is much greater than the official
cost because of the gimmicks of phase-ins and sunsets and because the
tax cut allowed the alternative minimum tax to pick up additional
revenue from more and more over time--a situation that is not likely to
be tolerated for too long. The official cost ignores interest costs as
well. As a result, a more realistic estimate of the cost of the 2001
tax cut is much greater than the official cost--nearly $2.5 trillion
over the first 10 years, not the $1.35 trillion as officially scored. A
fully phased in version of the tax cut would cost even more over 10
years, over $4 trillion, even before counting interest payments.
Myth 8: Republican tax and budget proposals are no threat to Social
Security and Medicare. In reality the Republican tax and budget
proposals break our promises on Social Security and Medicare.
Tax cuts now mean even bigger tax increases later. The Bush tax cut
agenda gambles away the income security of future generations, and for
what? Current tax cuts to the wealthy, which Republicans claim will
ultimately benefit everyone. Instead, those tax cuts will ultimately
cost everyone.
Our country's impending demographic challenge and corresponding
fiscal pressures are a certainty. We were already faced with tough
decisions ahead about how the retirement of the baby boomers would be
made ``affordable'' to our Government budget: either taxes will have to
rise in the future, spending cuts, or some combination of both. The
Bush tax cut agenda is not responsible for that situation, but it
surely and dramatically has made the tough problem even tougher. It
makes the fiscal hole even deeper, and it unjustly pushes off most

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of the financial responsibility for the tax cuts and government
programs we now enjoy, onto our children and grandchildren. We're
putting our tax cuts on a credit card that our kids will have to pay
off.
In the end, tax reform should be considered in a time of surpluses
and not in a time during record budget deficits. Most importantly, we
as a Congress have responsibility to act fairly and effectively to
combat our Nation's economic crises. The Republican plans do not live
up to that responsibility and I can only hope that my words today have
separated the rhetorical myths from the facts.
Mr. ENZI. Mr. President, once again we have a challenging task before
us. We have to draw a road map that will lead to economic growth,
development, and future sustainability. We have to come up with a
package that is fair to all taxpayers. One that eliminates complexity
instead of creating more of it. Unfortunately, this is much easier said
than done. So far, we have all been talking about it. In fact, as I
have listened to my colleagues speak throughout the day, I have been
struck by the unusual tenor of this debate. We have Democrats claiming
they want to eliminate tax increases and Republicans saying we need to
use tax increases to offset other provisions. While I have serious
reservations about voting for a package that appears to rob Peter to
pay Paul, I believe the Finance Committee has crafted a bill that will
lead to the creation of new jobs. And, that is what this debate should
be about.
In April, the number of unemployed people in this country rose to 8.8
million--8.8 million. That is 8.8 million Americans without jobs and
without paychecks--but still with plenty of bills to pay. That kind of
economic chaos sends ripples throughout the economy. It affects more
and more people until we do something to stop it. Until we take action
to stem and control the problem so that the economy can regain its
strength.
The strength of our economy lies in our workforce, so we have to put
into place a plan for growth that will actually encourage the creation
of new jobs. I think this plan is a good step toward that goal, and I
believe the tax relief provided in this plan will put money back into
the pockets of taxpayers and provide much needed resources for
businesses to draw on in order to create more jobs for those who need
them.
That is what I would like to talk about for a moment--the employers,
the small business owners, the entrepreneurs. I am a strong supporter
of the President's dividend proposal, and I am extremely disappointed
we have been forced to reduce it in the Senate. I would hope we could
eventually reach an agreement here and with our colleagues in the House
to restore that proposal.
Nearly every week, I go back to Wyoming, and small business owners
and local residents from around my State want to talk about the
unfairness of our tax policy when it comes to the double taxation of
dividends. In fact, I have a stack of over 300 letters from
constituents representing different age groups and different income
levels supporting the full elimination of the double taxation on
dividends.
Although some of my colleagues continue to misrepresent to the
American people that this provision would only help the rich, I think
it is important to remind everyone that families, single people,
married couples, college students, working mothers, single dads, senior
citizens, and everybody in between are all unfairly burdened by the
loss of spendable cash that results from the double taxation of
dividends. We should not be surprised by that. After all, it is not
just corporate executives who receive dividends.
If we eliminate the double taxation on dividends we will put money
back into the pockets of hardworking taxpayers, and we will also create
jobs for working Americans across the country. Studies have shown that
the President's dividend proposal could create as many as 400,000 new
jobs. That would provide enough jobs for over four-fifths of Wyoming's
population. That is a lot of jobs.
I would prefer we pass a dividend proposal that completely eliminates
this unfair double taxation, but I understand why my colleagues on the
Finance Committee had to come up with a new dividend plan. They were
faced with a tough problem--staying within the budgetary constraints
set forth by Congress while still providing real, economic growth. I
believe they came up with a workable compromise that will provide some,
if not all, of the relief necessary to encourage short and long-term
investment by individuals and corporations. Under this plan,
individuals will have more money to reinvest in their portfolio, and
companies will be more likely to use equity financing to fund future
growth.
Other important components of this bill are the small business and
agricultural provisions, as well as the section that will increase the
allowable amount for small business expensing from $25,000 to $75,000.
Small business is truly the backbone of our economy, the engine that
makes it go, and we have to create an environment that encourages
rather than discourages growth. As corporations struggle to meet income
projections and cost reductions, small businesses are the ones
providing jobs and putting food on the tables for our working families.
As many as 22.4 million small businesses could directly benefit from
provisions like the increase in small business expensing. Other
employers will benefit from provisions like the repeal of the Special
Occupational Tax and the extension of the applicable period for a
taxpayer to replace livestock sold on account of drought, flood, or
other weather-related conditions. These provisions mean thousands and
thousands of employers will have more money to reinvest in their
company, hire more people, and create more jobs. That means putting
more Americans back to work.
This package should be about jobs; and I support the tax relief
provisions, because I think they will create the jobs that will
increase the flow of revenues that will bring this economy out of its
current slump.
However, I want to make it clear that I am concerned about the high
number of revenue provisions that are included in the bill. An economic
growth package should not simply shift the tax burden from one person
to another. That is not the way to create a more fair tax system.
Despite my concerns, I will vote for this package because we need an
economic growth package now. I encourage my colleagues to join me in
supporting this plan to put more Americans back to work and help our
families get back on their feet again.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 10 minutes off the remaining time
on the bill to the Senator from North Dakota.
Mr. CONRAD. I thank the manager of the bill, the ranking member of
the Finance Committee.
The Senator from South Carolina has just been talking about this
scheme to give the President all that he wants on dividends, but to do
it within the limits of the $350 billion tax bill that is before the
Senate.
A prominent Republican economist commented on this scheme today,
calling it, ``The Dividend Fiasco.'' This scheme would exempt exempt
one-third of dividends this year, two-thirds the next year, and all of
them in the third year, and then sunset the whole proposal after that.
Again, this is an economist whom Republicans have called before the
Congress repeatedly to testify on their behalf. Here is what he says
about that scheme:

Think, for a moment, of the likely wacky effects of such a
plan. If a firm pays you a dividend next year as opposed to
this year, then you will save 33 percent on your taxes. With
rates falling so sharply, it would be positively
irresponsible for a firm to pay any dividends at all until
the rates are at their lowest. Then, in 2005, the rate is
zero for only one year. Thus, a firm will have an incentive
to pay dividends that it might have planned to pay in 2006 in
2005 as well. So under the administration's proposal,
dividends would go as close to zero as firms could manage for
a few years, spike to their highest level in history, then
drop sharply for some time.
Administration sources admit that dividends will likely
decline relative to today under this plan between now and
2005. How can that be a harmless event given that increases
in dividend payments are viewed to be so wonderful? Clearly,
this proposal is one of the most patently absurd tax policies
ever proposed.

That is from a prominent Republican economist. He has it exactly
right. That is patently absurd.

[[Page S6246]]

It is a hoax. It is an absolute hoax. The principle behind this bill
is to limit the total tax cut to $350 billion. The reality of the
proposal advocated by the Senator from South Carolina is that it would
never be sunsetted, and the cost would turn out to be even more than
the President's original proposal.
While I was gone, my colleague from Arizona on the Finance Committee,
and for whom I have a great deal of respect, suggested that corporate
taxes are high compared to other nations. That is just not true. If you
look at the effective tax burden--not the nominal tax burden, the
effective tax burden--what companies really pay, the United States is a
relatively low tax jurisdiction. Look at where the OECD places the
United States in its international ranking of corporate income taxes as
a percentage of GDP. This is where the United States ranks. We are way
down the list, nowhere close to being high up on the list.
Another thing I have heard repeatedly is that this plan is a jobs
growth package. Let's do the math. If this is a jobs package, it is one
of the most poorly designed in economic history. They say it is going
to produce a million jobs. Actually, the models that have been done say
from 230,000 to 900,000 jobs. Let's say it is a million jobs. It costs
$350 billion. Let's divide 1 million jobs into $350 billion. Do you
know what the cost of this program is per job? Three hundred fifty
thousand dollars a job. Let's say that one more time. The cost of this
program to create a job is $350,000. Now, that is patently absurd. What
a ridiculous way to create jobs. The cost is $350,000. What are the
jobs going to be--$50,000 jobs, if they were pretty good jobs. So it
would cost $7 for every $1 you would produce in jobs? That makes no
sense.
My colleague said that consumer demand is not the problem in the
economy. That is absolutely the problem. Consumer demand in the last 2
months has been 1.4 percent and 1.7 percent. That has been the growth.
That is mighty tepid growth. That is right at the heart of what is
wrong in this economy.
My colleague from South Carolina said Senator Dorgan's amendment on
the Social Security tax is an example of what is wrong here. No. It is
an example of what is right here. The Senator from South Carolina said
we had a chance on the budget resolution to do something about the
previous increase in income subjected to Social Security tax. No, the
budget resolution doesn't decide those things. It has nothing to do
with that--nothing, zero.
This is the place where you can do something about repealing a
previous tax increase. The budget resolution doesn't change the tax
code. This is the bill that determines the specifics. Our colleagues
will have a chance tomorrow to indicate whether they are going to
repeal the previous tax increase that involved Social Security
recipients.
One other thing I heard my colleague from Arizona say was that the
dividend proposal would be such a tremendous benefit to the elderly.
That's true, if you are wealthy. If you are an elderly person earning
more than $500,000 a year, this plan gives you an average benefit of
$24,000. If you are an elderly person earning less than $50,000 a year,
your average benefit is just $90. If you are earning $50,000 or less,
and you are elderly, you get $90. If you are earning over half a
million dollars, this dividend tax cut gives you $24,000. I don't think
that is equitable. I don't think it is fair. I don't think it does much
to stimulate the economy.
Let's remember the context within which we are making these
decisions. The budget deficits have skyrocketed. All of this money,
everything being proposed here, is with borrowed money. This is not
being offset by spending reductions. This is all borrowed money.
The Senator from South Carolina says that at times you need to do
that to give a boost to the economy. I agree with that entirely. That
is absolutely the right economics. But do you know what? The deficit
this year on an operating basis is going to be between $500 and $600
billion.
Should we do more? I believe we should. In fact, I think we should do
more than what is in this plan, because this plan doesn't do much. This
plan doesn't do much in the first year or the second year. This plan is
very tepid in terms of what it does. In the first year, this plan gives
$44 billion of stimulus in a $10.5 trillion economy.
Frankly, that is not going to do much of anything. That is exactly
what we see when you analyze this proposal in terms of what it is going
to do to grow the gross domestic product. Senator Daschle's plan is the
only plan that has much stimulus--$125 billion this year. Only $44
billion is in the plan before us.
Here is an analysis of what the various plans would do in terms of
stimulus. The President's plan, which is even more costly than the one
before us, would increase GDP by less than half of 1 percent. The
Democratic plan is significantly more, seven-tenths of 1 percent. In
the second year, the Republican plan is half of 1 percent, and the
Democratic plan nine-tenths of 1 percent.
But what is most interesting is that the Republican plan, over the 10
years, is actually negative. It actually hurts economic growth. How can
that be? Very simply, because it is going to explode deficits and debt.
Here is what happens under the Republican plan: The debt of $6
trillion in 2002 will go to $9 trillion by 2008, and to $12 trillion by
the end of this budget period. It explodes the deficits and debt.
The Chairman of the Federal Reserve, Mr. Greenspan, has told us:

With a large deficit, you will be significantly
undercutting the benefits that would be achieved from the tax
cuts.

He also said:

New academic evidence had strengthened his opinion that
budget deficits led directly to higher interest rates, and
that those higher interest rates choke off economic growth.

It is not just Chairman Greenspan. Here are 10 Nobel laureates in
economics.
The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator has
used 10 minutes.
Mr. CONRAD. I will conclude by saying the tax cut plan proposed by
President Bush is not the answer to these problems of weak economic
growth.
I ask unanimous consent for an additional 30 seconds to call up my
amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CONRAD. Mr. President, I ask unanimous consent to set aside the
pending amendments.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 611

Mr. CONRAD. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from North Dakota [Mr. Conrad] proposes an
amendment numbered 611.

Mr. CONRAD. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To make the child tax credit acceleration applicable to 2002)

Strike page 14, line 8 through page 15, line 11, and insert
the following:
``(d) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.''.
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:

``Sec. 6429. Advance payment of portion of increased child credit for
2003.''.

(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Subsections (a) and (c).--
(A) The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 2001.
(B) The amendments made by subsection (c) shall take effect
on the date of the enactment of this Act.
Strike the first table on page 8 and insert the following:

------------------------------------------------------------------------
The corresponding percentages shall
be substituted for the following
``In the case of taxable years                percentages:
beginning during calendar year:  -------------------------------------
28%      31%      36%      39.6%
------------------------------------------------------------------------
2001..............................   27.5%    30.5%    35.5%     39.1%
2002..............................   27.0%    30.0%    35.0%     38.6%
2003..............................   25.0%    28.0%    33.0%     38.6%
2004..............................   25.0%    28.0%    33.0%     37.6%
2005..............................   25.0%    28.0%    33.0%     37.6%
2006 and thereafter...............   25.0%    28.0%    33.0%    35.0%''.
------------------------------------------------------------------------

Mr. CONRAD. The amendment increases the child tax credit from $600 to

[[Page S6247]]

$1,000 and makes it retroactive to the beginning of 2002 instead of
2003, as called for in the bill. To offset the cost, the amendment
would delay the rate reduction for the 1 percent of taxpayers in the
top income tax bracket from this year to 2005. I hope my colleagues
will give it close consideration.
Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending
amendments be temporarily laid aside so I might call up amendment No.
612.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 612

Mr. BAUCUS. Mr. President, I send the amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:

The Senator from Montana [Mr. Baucus], for Mr. McCain,
proposes an amendment numbered 612.

Mr. BAUCUS. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. BAUCUS. Mr. President, this is the Military Fairness Act. I am
offering it, and it is being cosponsored by Senator McCain.
Very simply, this is the amendment that is Ping-Ponging back and
forth between the House and Senate. We did pass, at one point,
provisions that allow National Guard, Reservists, and other military
personnel to have a level playing field and not be unfairly taxed,
particularly while serving in our Armed Forces. One is the death
benefits gratuity and another is the travel expenses. There are similar
provisions like that.
It is only fair, particularly as we are winding down the war in
Iraq--and the hostilities there are not over--about 80 percent of the
benefits of this amendment are to our Reservists and National Guard who
will always be serving our country. This amendment makes very good
sense. It is paid for by slightly reducing the rate reduction at the
top rate. It is a very modest change. I think it is only fair and
proper.
Again, the major cosponsor of this amendment is the Senator from
Arizona, Senator McCain. I urge adoption of the amendment at the
appropriate time.
Mr. McCAIN. Mr. President, I am proud to sponsor with my colleague
Senator Baucus this important amendment to S. 1054, the Jobs and Growth
Tax Act of 2003. This amendment would simply add the Armed Forces Tax
Fairness Act of 2003, as previously passed by this body, to the growth
bill. This amendment is much needed tax relief for our men and women in
uniform whose sacrifice and commitment are the foundation upon which
the freedom we all enjoy is built. There are a number of provisions to
this amendment that many of us have worked on for several years.
One of the provisions I would particularly like to highlight today is
section 601. The Military Home Owners equity Act has passed this body
previously on a 97-to-0 vote. This legislation would allow service
members, who are away on extended active duty, to qualify for the same
tax relief on the profit generated when they sell their main residence
as other Americans. I am pleased to announce that Secretary of State
Colin Powell fully supports this legislation and this legislation
enjoys overwhelming support by the senior uniformed leadership--the
Joint Chiefs of Staff--as well as the Office of Management and Budget
Director Mitch Daniels, the 31-member associations of the Military
Coalition, the American Foreign Service Association, and the American
Bar Association.
The average American participates in our Nation's growth through home
ownership. Appreciation in the value of a home allows everyday
Americans to participate in our country's prosperity. Fortunately, the
Taxpayer Relief Act of 1997 recognized this and provided this break to
lessen the amount of tax most Americans will pay on the profit they
make when they sell their homes. Unfortunately, the 1997 home sale
provision unintentionally discourages home ownership among service
members and Foreign Service Officers.
This provision will not create a new tax benefit, it merely modifies
current law to include the time service members are away from home on
active duty when calculating the number of years the homeowners have
lived in their primary residence. In short, this provision is narrowly
tailored to remedy a specific dilemma.
The Taxpayer Relief Act of 1997 delivered sweeping tax relief to
millions of Americans through a wide variety of important tax changes
that affect individuals, families, investors, and businesses. It was
also one of the most complex tax laws enacted in recent history, and
unfortunately our service men and women were left out of this critical
tax relief act.
The 1997 act gives taxpayers who sell their principal residence a
much needed tax break. Prior to the 1997 act, taxpayers received a one-
time exclusion on the profit they made when they sold their principal
residence, but the taxpayers had to be at least 55 years old and live
in their residence for 2 of the 5 years preceding the sale. This
provision primarily benefitted elderly taxpayers, while not providing
any relief to younger taxpayers and their families.
Fortunately, the 1997 act addressed this issue. Under this law,
taxpayers who sell their principal residence on or after May 7, 1997,
are not taxed on the first $250,000 of profit from the sale, joint
filers are not taxed on the first $500,000 of profit they make from
selling their principal residence. The taxpayer must meet two
requirements to qualify for this tax relief. The taxpayer must (1) own
the home for at least 2 of the 5 years preceding the sale, and (2) live
in the home as their main home for at least 2 years of the last 5
years.
I applaud the bipartisan cooperation that resulted in this much
needed form of tax relief. The home sales provision sounds great, and
it is. Unfortunately, the second part of this eligibility test
unintentionally and unfairly prohibits many of the women and men who
serve this country overseas from qualifying for this beneficial tax
relief.
Constant travel across the United States and abroad is inherent in
the military and Foreign Service. Nonetheless, some service members and
Foreign Service officers choose to purchase a home in a certain locale,
even though they will not live there much of the time. Under the new
law, if they do not have a spouse who resides in the home during their
absence, they will not qualify for the full benefit of the new home
sales provision because no one ``lives'' in the home for the required
period of time. The law is prejudiced against families who serve our
Nation abroad. They would not qualify for the home sales exclusion
because neither spouse ``lives'' in the house for enough time to
qualify for the exclusion.
This amendment simply remedies an inequality in the 1997 law. The
bill amends the Internal Revenue Code so that service members and
Foreign Service officers will be considered to be using their house as
their main residence for any period that they are assigned overseas in
the execution of their duties. In short, they will be deemed to be
using their house as their main home, even if they are stationed in
Bosnia, the Persian Gulf, in the `no man's land,'' commonly called the
DMZ between North and South Korea, or anywhere else they are assigned.
In the wake of September 11 and operations in Iraq and Afghanistan,
our Armed Forces are now deployed to an unprecedented number of
locations, in very significant numbers. They are away from their
primary homes, protecting and furthering the freedoms we Americans hold
so dear. We cannot afford to discourage military service by penalizing
military personnel with higher taxes merely because they are doing
their job. Military service entails sacrifice, such as long periods of
time away from friends and family and the constant threat of
mobilization into hostile territory. We must not use the Tax Code to
heap additional burdens upon our women and men in uniform.
In my view, the way to decrease the likelihood of further
inequalities in the Tax Code, intentional or otherwise, is to adopt a
fairer, flatter tax system that is far less complicated than our
current system. But, in the meantime, we must ensure that the Tax Code
is as fair and equitable as possible.
The Taxpayer's Relief Act of 1997 was designed to provide sweeping
tax relief to all Americans, including those who

[[Page S6248]]

serve this country abroad. Yes, it is true that there are winners and
losers in any tax code, but this inequity was unintended. Enacting this
narrowly tailored remedy to grant equal tax relief to the members of
our Uniformed and Foreign Services restores fairness and consistency to
our increasingly complex Tax Code.
I would like to thank Senator Baucus and the chairman of the Finance
Committee, Senator Grassley, for their superb effort on behalf of our
soldiers, sailors, airmen, marines, and Foreign Service officers. As I
stated earlier, the provisions in this amendment are issues we have
needed to fix for a long time. Let's get it passed this year and
finally enacted into law.
Mr. GRAHAM of South Carolina. I rise today to tell you about an
urgent issue in my State that could benefit from the same relief this
bill provides for Arkansas schools. The relief is known as ``advance
refunding.''
Just like homeowners, municipally owned utilities are able to
refinance or ``refund'' their bonds. But the Tax Code permits them to
do this only once. Imagine if you had refinanced your home at 7.5
percent a few years ago. Having taken that one opportunity, now that
rates are at 5.15 percent, you would not be permitted to do another
refinancing. You would miss out on this opportunity to refinance.
There is a utility in my State that finds itself just in this
position and all of the utility's consumers suffer the consequences.
Without an additional advance refunding, it customers face significant
rate increases as the utility struggles to remain competitive in the
restructured marketplace while paying off debt it incurred to bring
electricity to many customers in my State. I want my constituents to
enjoy stable rates just as I know yours do, Mr. Chairman. I ask if you
would work with me in this conference to provide additional advance
refunding relief to meet this urgent need in my State.
Mr. GRASSLEY. I agree that an additional advance refunding
opportunity would be helpful and practical in your situation and in
others. I will work with you in conference to see if there is an
opportunity to accommodate you.
Mr. BAUCUS. Mr. President, tomorrow, an amendment will be offered--I
am not sure by whom; it may be Senator Nickles from Oklahoma--which
accelerates the dividend exclusion provisions considerably beyond the
provisions that are in the Finance Committee bill. Our understanding is
it is a 50 percent exclusion in the first year, 2003, and 100 percent
up through 2006, and after that the provision will be sunsetted.
I will make a couple of comments because we will not have time to
comment on it tomorrow at any length. One is that this is a significant
increase from the committee bill, which costs $80 billion. My
understanding is that this amendment will cost in the neighborhood of
$124 billion. How is the $40 billion difference going to be paid for?
Clearly, there is going to have to be cutting back on other tax
cuts--whether it is the marriage penalty or whatever--to bring that to
the attention of Members who may believe it is better to have a child
tax credit or a marriage penalty and whatnot.
And I have not seen the amendment, so I am not exactly sure of the
provisions, but from all indications, it will eliminate the provisions
in the President's dividend exclusion, which will require that before a
dividend can be paid, a company would have to pay income taxes in the
prior year. If that provision is eliminated, that is going to mean that
we are not only ending double taxation of dividends, in many cases we
will be ending single taxation of dividends, which, in a sense, will
mean dividends will be tax-free. All American wages will be taxed,
interest income will be taxed, and other ordinary income is going to be
taxed. But if a company did not pay taxes in the prior year, then the
company will be basically giving dividends to shareholders, and there
will be no tax on them, not at the individual level or the corporate
level. That, I think, is a gross miscarriage of justice.
For that additional reason, I hope the Senate does not adopt that
provision when we vote on it tomorrow.
The PRESIDING OFFICER. The Senator from Iowa is recognized.

____________________