Small Business Military Reservist Tax Credit Act

Mr. President, the press and some in this body have unfairly defined this legislation as a ``porky'' tax bill. There have been articles in all the major papers following that line of attack.

One Member of the leadership on the other side said on April 20 he is worried that the sheer amount of tax breaks in the bill could end up impeding its progress. ``They've loaded this truck up and the tires are about to explode,'' he said, calling the efforts to pile sweeteners onto the bill ``haphazard.''

That Member went on and cautioned, ``any time you load it up as vigorously as they have, you create as many problems as you solve.''

Well, let's talk about the so-called ``porky'' provisions in this bill. It is a bit irritating that the complaints come from folks who say they support the bill. Every provision in the bill is the result of a joint recommendation of myself and Senator Baucus. We responded to requests from every Senator, including those who are critical of the bill.

I guess I would ask anyone, including the critics a question. That question would be, ``Are you willing to throw aside the provision you asked us to put in the bill?'' Are you willing to go back to your constituents and tell them you don't think their interest has merit?

I don't think I will hear any of the critics respond yes. I haven't had any takers yet and don't think I will by the time the bill's done.

Let's look at the bigger picture.

This bill has about $60 billion dedicated to the replacement of the FSC/ETI benefit. This bill has another $40 billion dedicated to international tax reforms to make our domestic manufacturers more competitive overseas.

There is another roughly $20 billion in domestic manufacturing incentives, including the research and development tax credit.

Some of that package deals with issues such as the unfair tax on bows and arrows which has a domestic job impact. There's another $8 billion dealing with the extenders, including a permanent tax credit directed at hiring hard-to-place workers. There's another $10 billion dealing with housing, rural areas, hard hit urban areas, Indian tribes, and other sectors of our economy. We're directing resources at economic development, plain and simple.

Finally, there's another almost $20 billion for the bipartisan Finance Committee energy incentives package which has passed the Senate twice.

All of this is offset with corporate loophole closers and measures aimed at curtailing tax shelters. The dollars involved in the much- criticized provisions are very small--perhaps less than 3 percent of the total cost of the bill. Members and the ``big city'' press need to keep their eyes on the ball: ending the euro tax and helping domestic manufacturers.

Senator Daniel Patrick Moynihan responded to the New York Times regarding the 1997 bipartisan tax relief bill. The press had made much of a few narrow provisions, such as a provision to provide tax relief for parachuter trainees. There is an excise tax on air travel. The tax is meant to apply to commercial travel. Read literally, the tax applied to parachute training flights even though those flights are not commercial transportation.

Senator Moynihan described the Finance Committee provisions that were designed to deal with these inequities this way: ``You will never see representative government more specific than in the Senate Finance Committee . . . It's a form of accommodation, and in between you think about the national interest, because there are things we all share.''

Like the 1997 tax relief bill, the bill before us includes a number of provisions that, at face value, may seem to be trivial. It is important to keep in mind, however, that each of these provisions was added in response to specific requests from fellow Senators who are looking out for the vital interests of their constituents. That is what representative government is all about.

The Federal tax system is vast. It touches virtually every aspect of life. From birth to grave. There are excise taxes to fund our airports and highways. There is a corporate and individual income tax to fund defense and general welfare. There are payroll taxes to fund Social Security and Medicare benefits. There is an unemployment payroll tax to fund unemployment benefits.

Now, when you go through this bill, you can find some provisions that involve animal manure or windmills. If you don't look beyond the superficial humor of the subject matter, you can have a lot of fun. Of course, big city papers like to make fun of these rural provisions. I always have to remind these folks that food doesn't grow in supermarkets. It grows on farms. The byproducts of those farms can give us clean energy. What's so bad about that?

Part of what we hear out in the heartland is get us some insurance that jobs are coming back. Especially, they say, in the area of manufacturing. The economy is coming back. The U.S. economy, the mightiest in the history of the planet, is adding jobs at a healthy rate. The people want an insurance policy.

Growing jobs in our diverse economy is not a cookie cutter exercise. This bill has general policies for the most part. Some are proactive, like the manufacturing deduction. Others are reactive, like responding to the Euro tax. Still others are particular. They may relate to small isolated communities or a single industry. When you take a look you'll find a common thread through nearly all of them: job creation.

That is what this bill is all about. Creating jobs, plain and simple.

Mr. President, I ask unanimous consent that all time be yielded.

I ask for the yeas and nays.

Mr. President, I ask unanimous consent that following the disposition of the Hollings amendment, the next amendments to be offered are the following in the order provided: Senator Kyl, No. 3127, 60 minutes equally divided; Senator Landrieu, 60 minutes equally divided; Senator Levin, 20 minutes equally divided; further, that there be no second-degree amendments in order to the amendments prior to the vote.

Mr. President, I ask unanimous consent that the Senators from Pennsylvania, the senior and the junior Senators, have 5 minutes apiece to discuss something very personal to their State.

Mr. President, I yield myself such time as I might consume.

Senator Hollings asks us to take $39 billion of international reforms and put it towards more domestic manufacturing relief.

I have told my colleagues so many times I shouldn't have to repeat it. But this bill is all about encouraging domestic manufacturing.

The level of spending in this bill is already over three to one in favor of domestic issues. We dedicate over $75 billion to domestic manufacturing relief.

FSC/ETI currently benefits manufacturing by $50 billion. Obviously, you can see this bill is a much stronger

commitment to manufacturing than the old FSC/ETI bill we are replacing. We have already accelerated the phase-in of the manufacturing tax rate. That is thanks to a bipartisan amendment by Senator Bunning and Senator Stabenow. We have modified the transition rules to provide stronger relief in transition for manufacturing companies which presently get the old FSC/ETI benefits this bill replaces.

I hope it is easy for my colleagues to conclude that there is very little to be gained by the amendment proposed by the Senator from South Carolina.

It is time we had our rational discussion of the international reforms in this JOBS bill because we have been spending so much time on nongermane amendments. The amendment before us is not one of those nongermane amendments but it has kept us from discussing so much which is very basic with this legislation. Maybe people think there is no reason to discuss it because this bill was built from the ground up in a bipartisan way, coming out of our committee on a very overwhelming vote of 9 to 2.

I think Members will be surprised to learn that some of our international tax rules actually harm the domestic operations of U.S. companies. When foreign income is brought home, the United States allows an offset against U.S. tax for any foreign taxes paid on that income. That is why it is called the foreign tax credit. Foreign tax credits ensure that we do not double tax foreign earnings. Accordingly, the foreign tax credit plays a vital role in preserving the international competitiveness of our companies.

In the Tax Reform Act of 1986, Congress enacted a provision that causes foreign tax credits to expire every 5 years. That was done for a reason that is not very well justified because it is often used around here--to make that 1986 tax bill revenue neutral.

Some claim this is a good rule because it forces foreign earnings to be repatriated within 5 years. But that conclusion does not comport with reality. The reason companies don't bring back foreign earnings is because of double taxation. That is what occurs with foreign tax credits expiring.

I will give you an example. A U.S. company sets up new operations in Poland to serve Eastern Europe at this time when Eastern Europe is being integrated with the European Union. That happened last week. For the next 8 years in this hypothetical--quite reasonably--it takes all of the capital generated by the Polish subsidiary to expand the company's presence in Eastern Europe. At the end of 8 years, it finally has some extra cash which it can send home.

What happens? It discovers the taxes it paid to Poland from years 1 through 3 are no longer eligible for the foreign tax credit because they are more than 5 years old. The Polish tax rate is 28 percent. This means if a company repatriates those early earnings, it will pay combined Polish and U.S. taxes of 63 percent. It is really almost confiscatory. That means, of course, the money is not coming home for reinvestment in the United States. We lose the benefit.

If those early tax credits had not expired, the United States would actually pick up some tax revenues. The subsidiary would owe the difference between the 28-percent Polish rate and the 35-percent U.S. rate. That happens to be a gain of 7 percentage points of taxation into our U.S. Treasury from that company.

To ensure that double taxation no longer occurs, our JOBS bill extends the carry-forward period for foreign tax credits from 5 years to 20 years. Twenty years is the amount of time companies have to utilize net operating losses. It is only appropriate, then, that the key mechanism for avoiding double taxation should have the same shelf life.

Our JOBS bill mostly fixes problems in the foreign tax credit area. The only time a company benefits from a foreign tax credit is when it brings that money home.

To repeat a very elementary point, foreign tax credits are a benefit to that company only when that company brings foreign earnings home for reinvestment. When the credit expires, this impedes capital mobility because of double taxation, and it blocks reinvestment of foreign earnings in the United States.

Another example of guaranteed double taxation is our rule that only allows 90 percent of a company's AMT to be offset with foreign tax credits. This rule guarantees that the company will be double taxed on 10 percent of the alternative minimum tax. The JOBS bill allows what is common sense--a 100-percent offset.

To give you a real-life example of how these two changes will help U.S. operations make investments in America and create jobs in America, the largest American manufacturer in this example of a particular automobile part is bringing dividends back from its profitable foreign operations to cover losses in its U.S. operations. Their U.S. losses, when combined with the foreign dividends to fund the U.S. operations, has created huge unused foreign tax credits with a 5-year expiration period. Because of their ongoing U.S. losses, it is unlikely these credits will be used within those 5 years.

This company also has a growing alternative minimum tax because their foreign tax credits can only be offset by 95 percent of their AMT liability.

The limit is creating an annual alternative minimum tax liability because the additional 10 percent of the AMT cannot be offset with the foreign taxes that have already been paid on that income. The company is guaranteed to incur double tax on foreign earnings brought back to support the U.S. operation. This may be unbelievable to anyone listening, but this is actually happening under U.S. tax laws.

The company's foreign competitors in the United States are not equally hindered in the same way by the 90-percent alternative minimum tax, foreign tax credit limit. If a foreign competitor loses money, they get a 20-year U.S. net operating loss compared to the 5-year foreign tax credit carryforward. Our Tax Code, then, is harming a company that has operations in all 50 States and employs 38,000 people in 16 different manufacturing facilities.

This example shows why the 20-year foreign tax credit carryforward and the repeal of the 90-percent AMT foreign tax credit limits are in this very important jobs in manufacturing bill. The current rules harm U.S. operations and we need to fix it.

I also have some comments on another provision, the interest allocation provisions, to give another example of how our international rules harm U.S. operations. As I said earlier, foreign tax credits can only offset foreign income; they cannot offset income from U.S. activities. In determining the amount of foreign income, certain U.S. expenses, such as interest expense, are partially allocated to foreign income. This is used in calculating the amount of foreign tax credit a U.S. company is allowed to claim on its return. The United States arbitrarily allocates U.S. interest expense to foreign earnings, but the foreign government does not recognize that interest expense for its tax purposes. It is as if the interest expense somehow disappears into the clear air.

The interest allocation rules artificially reduce the foreign tax credits that can be used, and when the credits cannot be used the credits expire. It may surprise many Senators to hear that our interest allocation rules create a competitive disadvantage for U.S. multinationals that try to expand their operations into the United States and maybe do not get expanded here.

A portion of the interest expense on debt incurred to invest in the United States is allocated to foreign source income. A foreign corporation making the same U.S. investment is not impacted by these interest allocation rules. It gets to fully deduct the interest costs within the United States and thereby has a lower cost of capital than a U.S. company making that same investment. Therefore, the interest allocation rules actually work against U.S. multinational companies that invest in the United States. It has put some at a competitive disadvantage with foreign companies operating in the United States. I hope this is very clear, that this is not the right thing for the U.S. Tax Code to do to foreign manufacturers. Why should we encourage international competition in the United States against our own domestic manufacturer?

We have Senators demonizing the JOBS bill international provisions. This gives me an opportunity to emphasize once again how anything gets done in the Senate--only in a bipartisan way. This is a bipartisan bill.

Democrats and Republicans agree to everything in this bill, and the international provisions we agreed to were provisions that actually help U.S. job creation and help our own economic growth.

I ask the Senate to support Senator Baucus and this Senator in this bipartisan bill. I hope Members will not buy the distortion. None of the international changes caused jobs to go offshore. Just the opposite. These were selected to bring the foreign money back for real investment in the United States, creating jobs in the United States, creating manufacturing jobs in the United States because this is a manufacturing bill. These changes level the playing field between the United States and foreign companies operating inside the United States. They were specifically selected because they tend to help U.S.-based manufacturers more than other sectors of our economy.

The entire JOBS bill is geared towards creating jobs in manufacturing--jobs in the United States, not overseas--because American manufacturing overseas does not benefit from this bill.

It is quite simple. These are the only kinds of international provisions we could ever get bipartisan agreement on because it is so obvious. It is so obvious, it came 19-2 out of our committee. We should not allow international rules to remain in place if they harm U.S. operation. Once again, we are talking about commonsense international tax reform. In fact, if anyone wants to condemn this bill, it is that maybe we do not do anything radical in this bill. We just fix problems. We fix problems with current law. We fix problems with current law that happens to be harming U.S. domestic interests.

So I ask Members to vote against the amendment of the distinguished Senator from South Carolina.

I yield the floor.

Mr. President, I say to the Senator, if you do not have any more time, then I will yield back my time and we can then vote.

Is that OK?

Mr. President, I yield back all time on this side.

Mr. President, I move to reconsider the vote.

Mr. President, I ask unanimous consent that the Senator from Texas, Mrs. Hutchison, have 2 minutes for an amendment that she wants to offer.

Madam President, I can comment very positively about the motivation behind the amendment, and the good policy of giving equity to people who are called away from jobs and away from family to go to a far-off land to defend America in a war against terrorism and doing it in a way that has never been done for guardsmen and reservists to this extent, I think going back to the Korean war. What we are doing now has not been done for a long period of time.

The Senator from Louisiana needs to be complimented on her efforts to recognize that and, particularly, to recognize that through employers who show very patriotic fervor in cooperating in this whole program.

I can say that very positively about the amendment of the Senator from Louisiana. She is asking me to predict what might happen in conference. It is very difficult to do that. I have a reputation for defending the position of the Senate and working as best I can to work through this. Obviously, I cannot make any promises to the Senator from Louisiana.

I ask unanimous consent Senators Hatch and Pryor be added as cosponsors to the Hutchison amendment.

I move to lay the motions on the table en bloc.

The motions to lay on the table en bloc were agreed to.

I promised the Senator from South Carolina we would have a little colloquy on an issue he was concerned about. Could we do that right now?

I ask the Senator from South Carolina be recognized.

As Chairman of the Senate Finance Committee, I join my colleague from South Carolina in expressing concern about the way in which the Chinese currency is valued. I certainly agree that it is a serious problem that needs to be taken seriously. A fairly valued currency is in China's own long-term interests, and is key for moving to a market driven economy. I was pleased to hear that Secretary Snow was assured that interim steps are being taken and that progress in this area will continue.

I do appreciate the importance of this issue. If we do not see substantial progress toward adoption of a market-based currency valuation system, I would support Senate hearings at the appropriate time.

Mr. President, I would like to thank the Senator from Pennsylvania for his commitment to the Section 29 extension to new coke facilities. Although I am supportive of the provision, the most appropriate time to address it is during the conference. I look forward to working with Senator Santorum and the two Senators from Ohio to include this amendment in the conference report.

privacy

I would be pleased to engage in a colloquy with the Senator from Oregon.

The Senator is correct. It is my intent to urge my colleagues to minimize this penalty in the final bill that is sent to the President for his signature.

income forecast method provision

I am happy to confirm the understanding of the distinguished Senator from Louisiana. The provision was adopted to provide needed clarifications in order to eliminate the uncertainties that have arisen regarding the proper application of the income forecast method. I believe the disputes that have arisen regarding the mechanics of the income forecast formula are extremely unproductive and an inefficient use of both taxpayer and limited tax administration resources. By adopting these clarifications, I believe the committee intended to end any disputes and prevent any further waste of both taxpayer and Government resources in resolving these disputes. Any existing disputes should be resolved expeditiously in a manner consistent with the clarifications included in the bill.

Yes.

I agree with the Senator from Tennessee that such an exception to the ``kiddie tax'' would be

good public policy. I commit to you that my staff will work with the Treasury Department, the Social Security Administration and your staff during conference negotiations to craft language that addresses Mr. Domm's concerns but also contains solid anti-abuse language. My hope is that we could place such language in the final version of S. 1637 or another appropriate tax bill.

Mr. President, I want to assure Senator Lincoln that I will continue to work with her to make sure adequate incentives for LFG are included in any final package from the upcoming House-Senate conference. Her concerns are my concerns as well. She has stated them well and I will devote my best efforts to resolving them as we move forward on discussions and deliberations with the House of Representatives.

car provision

I agree with your concerns, Senator Baucus, and I also am in favor of giving Treasury this expanded authority.

Madam President, Senators Kyl and Nickles say that a lower rate just for manufacturing is ``bad tax policy and is virtually without precedent in our history.''

Well, this is just wrong and the evidence is staring them in the face. FSC/ETI itself is a tax cut for manufacturing. FSC/ETI keeps U.S. manufacturing competitive by lowering tax rates on exports. Manufacturers could lower their rates by 3 to 8 points.

The Joint Committee on Taxation says that 89 percent of all FSC/ETI benefits go to manufacturing companies. The Kyl-Nickles Treasury proposal would take money from FSC/ETI and spread it to other industry sectors.

Kyl-Nickles will be a $50 billion tax increase on manufacturing. It will not send the FSC/ETI repeal money back to manufacturing. It is mathematically impossible for their proposal to work any other way.

We know that tax increases do not create jobs. So why would Senator Kyl and Nickles increase manufacturing taxes by $50 billion?

There are other reasons why we did not go the route of the Kyl- Nickles approach. First, their top-level rate cut would only go to the biggest corporations in America. It would not go to family-held S corporations, partnerships, or smaller corporations.

Under the Finance Committee bill, all manufacturers in America, regardless of size, get a 3-point rate cut, including S corporations and partnerships.

S corporations and partnerships benefit under current FSC/ETI law, so the Kyl-Nickles bill takes a benefit away from them and gives it to large corporations.

Kyl-Nickles claim that a manufacturing tax cut ``penalizes all other U.S. businesses.'' I think just the opposite is true. The manufacturing sector should not be a revenue offset to give investment bankers a tax cut. Kyl-Nickles claim that our definition of manufacturing is too difficult to understand. But the definition we use in the JOBS Act is the same definition used for both FSC and ETI. It covers property that is manufactured, produced, grown or extracted within the United States.

This definition is 20 years old, but suddenly no one understands what it means. We did confirm that manufacturing includes computer software, films, and processed agricultural goods. Kyl-Nickles claim that these are special interest definitions of manufacturing. However, all of these activities qualified as manufacturing under the FSC/ETI rules, which have been in place for 20 years.

We also ensured that farm co-ops get the same benefit that they do under current law.

In response to our energy crisis, we provided that refining oil pulled from American wells would qualify as manufacturing.

They claim it is too difficult to allocate income and expenses in determining the amount of manufacturing income. But for 20 years, Treasury has had administrative pricing rules on its books that tell taxpayers how to allocate expenses in figuring FSCETI benefits. Our JOBS bill grants Treasury broad latitude to revise the cost allocation rules, based on existing tax principles.

Kyl-Nickles also claims that Canada recently gave up a similar manufacturing rate cut because it did not work. This is not correct. For many years, Canada had a special lower rate for their manufacturing sector. Canada created their manufacturing rate cut in reaction to the U.S. creating FSC back in 1982. They reduced their rate on manufacturing so they could stay competitive with the U.S. Canada recently repealed that provision because they reduced all their corporate rates to the lower manufacturing rate.

Canada did not repeal their manufacturing rate cut because of its complications. Canada ended their manufacturing regime because it worked so well, that they extended it to all sectors. But when Canada reduced their overall tax rates, they did not do so at the expense of their manufacturing sector.

We put together a strong bipartisan bill, with a 19-to-2 vote out of committee, that will cut our manufacturing tax rate this very year. There is no purpose in blocking such a strong bipartisan bill. These days, is it rare that we can reach such strong agreement on anything.

Mr. President, the CBO report says the flat corporate rate cut would yield slightly more long-term growth than the JOBS bill. But the reason has nothing to do with our manufacturing tax cut.

CBO says the antitax shelter provisions and Senator Smith's and Senator Ensign's homeland reinvestment provisions are the cause.

CBO says that because we shut down shelters, corporations' taxes won't be as low and, therefore, their long-term growth is not as high.

CBO also concludes that Senators Smith's and Ensign's temporary 1- year rate cut won't help in the long-term.

The CBO concludes that a flat rate cut could be more ``efficient'' than a manufacturing rate cut. So what do they mean by ``efficient''? They said it means that a manufacturing rate cut would cause more capital to flow into the manufacturing sector.

So I have to ask, what is the problem?

I thought tax cuts were designed to increase capital investment. Isn't that what we want for manufacturing?

If we increase taxes on manufacturing, then capital should flow out of the manufacturing sector. Is that what we want?

I urge adoption of the Levin-Coleman modified amendment.

I suggest the absence of a quorum.

Mr. President, I ask unanimous consent to call up amendment No. 3133 and ask for its immediate consideration.

Mr. President, I ask unanimous consent that further reading of the amendment be dispensed with.

Mr. President, I think this is going pretty well now. We expect a vote around 6:30.

I suggest the absence of a quorum.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, on behalf of Senator Nickles, I call up amendment No. 3040 and send a modification to the desk.

Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

On this side, too.

I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Mr. President, I send an amendment to the desk and ask for its immediate consideration.

I ask for consideration of the amendment.

Mr. President, now that this bill has finally passed the Senate, I take the opportunity to thank several people.

First and foremost, I thank Senator Baucus. I am very certain we would not be here without his good work and his cooperation. In fact, as I have said so many times in speeches, this whole effort started when Senator Baucus was chairman of the committee in the last Congress. He held hearings and started this process going. He has not only cooperated and put in good work during this Congress, but it all started under his leadership.

I also need to thank all the other members of the Finance Committee for their time and energy in making this bill a reality. I thank my staff on the Finance Committee: Mark Prater, chief tax counsel, and the other tax counsels, Ed McClellan, Elizabeth Paris, Dean Zerbe, Christy Mistr, and John O'Neill as well as John's predecessor, Diann Howland. These individuals, along with Adam Freed, the staff assistant for the tax team, have been real workhorses for the committee, keeping the lights burning long into the night to make this bill possible.

For the record, as evidence of the work effort, this bill was introduced on the day Hurricane Isabel blew into town. Because of hard work, the markup of the bill occurred in a calm environment.

I also thank the trade staff, particularly Everett Eissenstat, chief Trade Counsel, and his team of David Johanson, Stephen Schaefer, Daniel Shepherdson, and Zach Paulsen. I also thank Carrie Clark who recently left our trade staff. Thanks also needs to be paid to our administrative staff, including Carla Martin, Amber Williams, Geoff Burrell, and Mark Blair. From my personal staff, I thank Sherry Kuntz and Leah Shimp. Also helpful were our Finance Committee press team of Jill Kozeny and Jill Gerber, known around the committee as the ``Jills.'' Lastly, on my side, I thank Kolan Davis and Ted Totman, the Committee's staff director and deputy staff director for riding herd on all this work.

In addition, this bipartisan bill would not have been possible without close work and cooperation at the staff level. I appreciate and thank the minority staff for their good work. I particularly note Russ Sullivan, Democratic Staff Director, as well as Pat Heck, Democratic Chief Tax Counsel, Matt Stokes, Matt Jones, Matt Genasci, Judy Miller, Jon Selib, Liz Leibschutz, Matt Stanton, Dawn Levy, and Anita Horn Rizek. In addition, I thank Tim Punke and his trade team, along with John Angell, Bill Dauster, and Mike Evans, former Deputy Staff Director, for their time and energy.

I extend my thanks also to George Yin and his staff at the Joint Committee on Taxation for providing their extensive knowledge and guidance to this effort. I particularly point out the good work of Ray Beeman, David Noren, and Brian Meighan. Brian recently left Joint Tax for the private sector.

I also thank Acting Assistant Secretary for Tax Policy, Gregory Jenner, and his staff for their assistance on the so-called SILOs tax shelter provision of this bill.

I thank the majority leader, Senator Bill Frist, and his leadership staff for all their assistance. The majority leader backed me and Senator Baucus all the way on this bill. We would not have the result today but for the majority leader's patience, determination, and dedication. It was tough going at times, but he and I knew we would get the right result. From Senator Frist's staff, I thank Lee Rawls, Eric Ueland, Rohit Kumar, and Libby Jarvis.

I also thank our Senate leadership team and their staffs, especially our able whip, Senator McConnell.

Finally, my thanks go to Jim Fransen, Mark Mathiesen, Mark McGunagle, and their capable staff at Legislative Counsel for taking our ideas and drafting them into statutory language.

I would like to tell them all to go home and get a good night's rest because the bill has been a very long time working its way through the Senate.

Now, I urge our friends in the other body to pass a companion bill. Hopefully, when that bill passes the House, our friends in the Senate Democratic leadership will not resist our efforts to go to conference. Every month of delay is another month where the Euro tax ratchets up another percentage point on our products going to Europe.

I thank everyone for their cooperation in allowing us to get to this point this evening. This, of course, is not the final step in the process. The House has

not passed their version of the FSC legislation. I anticipate the House will send a bill to the Senate at some point. When that happens, I hope we will be able to proceed to conference so that we are able to get a final product.

I appreciate the assistance of Senator Baucus throughout this process and hope we will be able to send a bill to committee.

Order Of Procedure

Mr. President, following Senator Baucus's remarks, I ask unanimous consent that the Senate proceed to a period of morning business, with Senators permitted to speak for up to 10 minutes each.

Mr. President, I ask unanimous consent, notwithstanding the adoption of amendment No. 3143, that the modification which is at the desk be agreed to.

I yield 5 minutes to the senior Senator from New Mexico.

Mr. President, I yield 5 minutes to the Senator from Wyoming.

How much time remains on our side?

I yield 3 minutes 22 seconds to the Senator from Delaware, and 3 minutes 22 seconds to the Senator from Alaska following the Senator from Delaware.

I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Mr. President, as has been ordered, after the Hollings amendment, there are three more. I am not sure any votes are needed on the three amendments the chairman just mentioned, by Senators Kyl, Landrieu, and Levin. We have times, but we are trying to work with the Senators. For example, it is my understanding that the Kyl amendment will be offered and withdrawn. We may be able to work out the others as well. Nevertheless, that is the order.

Mr. President, I have a unanimous consent request that has been cleared on both sides. I ask unanimous consent the pending Kyl amendment be recalled.

Mr. President, I suggest the absence of a quorum.

Mr. President, I ask unanimous consent the amendment by the Senator from Texas be temporarily set aside so the Senator from Louisiana may offer her amendment.

Madam President, I compliment the Senator from Louisiana. This is a very important amendment. The reservists clearly, particularly under the current circumstances, deserve at least the provision suggested by the Senator from Louisiana. The Senator can be assured this Senator will fight vigorously for her amendment in conference. It is a very important amendment.

Madam President, I believe there is no more debate on this amendment.

All time is yielded back.

(At the request of Mr. Daschle, the following statement was ordered to be printed in the Record.

Mr. KERRY. Mr. President, the continuing activation of military reservists to serve in Iraq and the war on

terror has imposed a tremendous burden on many of our country's businesses, especially our small businesses. Too many small businesses, when their employees are asked to leave their jobs and serve the Nation, are unable to continue operating successfully and face severe financial difficulties, even bankruptcy. That is why I am pleased to join Senator Landrieu to provide all American businesses with a tax credit to help them continue to pay their employees who are called to active duty and to help small businesses temporarily replace reservists who are called up.

This amendment expands upon the Small Business Military Reservist Tax Credit Act that I introduced last year which provides help to small businesses in paying the difference in salary for their reservist employees called up to active duty. My legislation, S. 1595, also provided a tax credit to help small businesses cover the cost of temporarily replacing that employee while he or she is serving our Nation.

I worked with Senator Landrieu to develop this amendment which honors all patriotic employers who continue to pay the salaries of their employees who are members of the National Guard and Reserve and are called up to active duty in the war on terror in Afghanistan, Iraq and elsewhere. I believe this amendment will encourage all employers, especially small businesses, to pay their reservist employees when they face a reduction in salary due to their activation. Employers who continue to pay their reservists will be eligible to receive a tax credit up to $15,000 of the wages they pay to members of the Guard and Reserve for as long as the reservist is on active duty status. The JOBS Act, which we seek to amend, only provides a tax credit for reservists on active duty status for 1 year and does not provide any assistance for small businesses to help temporarily replace their reservists. I believe this approach is insufficient and that our amendment is needed to help reservists for each day of their service to our Nation and to provide important assistance to small businesses.

I am very pleased that Senator Landrieu has included provision of my bill to help small businesses cover the cost of temporarily replacing the reservist employee while he or she is serving our Nation. Today, many small employers are currently having a difficult time hiring temporary workers to replace their employees who have been called up to active duty in the national Guard or Reserve. The United Sates Chamber of Commerce estimates that 70 percent of military reservists called to active duty work in small- or medium-size companies. The Landrieu-Kerry amendment will provide a tax credit of 50 percent up to $6,000 to help small employers defray the costs of hiring a worker to replace a guardsman or reservist who has been called up to active duty. Small manufacturers will be eligible for a tax credit of 50 percent up to $10,000 to assist in hiring a temporary worker.

To fight our wars and meet our military responsibilities, the United States supplements its regular, standing military with reservists, citizen soldiers who serve nobly. Not since World War II have so many National Guard members been called to serve abroad. President Bush authorized the activation of up to 1 million military reservists for up to 2 years of active duty. Today, there are about 170,000 reserves on active duty in the war against terrorism--nearly half of the more than 350,000 called to duty since the attacks of September 11, 2001. Many are serving admirably around the world, performing critical wartime functions in Iraq, Afghanistan, and elsewhere. Our Nation does not go into battle without members of the National Guard and Reserve, and we are all grateful for their service.

Just this week, the Bush administration authorized the activation of an additional 47,000 reservists. The extension will cause significant economic difficulties for the reservists, their families and their employers that are left behind. Beyond the hardship of leaving their families, their homes and their regular employment, more than 41 percent of military reservists and National Guard members face a pay cut when they are called for active duty in our Armed Forces. Many if these reservists have families who depend upon that paycheck to survive and can least afford a substantial reduction in pay.

The large number of reservists being called up to active duty has hurt many small businesses across the Nation and may impact the number who are willing to re-enlist in the National Guard and Reserve in the future. In January, the Commission of the Army Reserve, Lt. General James R. Helmly, warned of a recruiting-retention crisis in the future for the National Guard and Reserve. A recent U.S. military questionnaire of returning Army National Guard soldiers projected a resignation rate of double what it was back in November 2001. From October to December 2003, almost one-quarter of the Guard members who have had the opportunity to re-enlist have opted not to do so. Recently, the U.S. Army developed a plan to pay reservists up to $10,000 to re-enlist to stop a developing problem.

That is why the Federal Government must take action to help businesses weather the loss of an employee to active duty and protect employees and their families from suffering a pay cut to serve our Nation. It is imperative that we help families of reservists maintain their standard of living while their loved one serves our Nation. We must also ensure that the cost of that service does not force businesses into financial ruin. We must ensure that our great tradition of citizen soldiers does not fade or cease because of the effect that service has on work and family. The Landrieu-Kerry amendment will help achieve their important goals and I urge my colleagues to vote in favor of this amendment.

I call for regular order with regard to the Hutchison amendment.

I believe there is no further debate.

Madam President, I move to reconsider the vote on the previous two amendments en bloc.

Mr. President, my colleague from New York and my colleague from Minnesota have filed a noteworthy amendment to the Jumpstart Our Business Strength Act, S. 1637. The amendment raises the very important issue of how in this global economy we can protect the privacy of personally identifiable information that is transmitted abroad. Senator Clinton and her staff have worked diligently with me and my staff to find a way for the Senate to address these issues. The amendment raises significant issues that I believe will benefit from being made part of any appropriate hearing this session in the Finance Committee. They have graciously recognized the importance of moving forward on the JOBS bill. That is why I have agreed to invite Senators Clinton and Dayton to testify on this issue during the Senate Finance Committee's hearing on offshoring. My hope is that we will schedule that hearing soon.

I appreciate the comments of the Senator and share his commitment to the new markets tax credit.

The Senator is correct. The intent of the economic substance provision in the JOBS bill is clearly to uphold and protect congressionally mandated tax benefits while curtailing unintended abuses of the tax code. I assure the Senator that the new markets tax credit would not be adversely affected by this provision.

As the Senator knows, our intent in codifying the economic substance doctrine is to curtail the use of abusive tax shelters that have no economic substance or business purpose other than reducing the Federal tax liability of the taxpayer. This is clearly not the case of the new markets tax credit.

We attempted to clarify the intent of this provision in the Finance Committee report, 108-192, in a footnote that states:

If tax benefits are clearly contemplated and expected by

the language and purpose of the relevant authority it is not

intended that the tax benefit be disallowed if the only

reason for the disallowance is that the transaction fails to

meet the economic substance doctrine as defined in this

provision.

The report also specifically identifies the low income housing tax credit and the historic rehabilitation credit as examples of tax benefits that would not be taken into account in measuring potential tax benefits. These credits were noted as examples of the types of tax benefits that would not be considered in applying the economic substance doctrine.

The new markets tax credit was authorized with the clear intent of using a tax subsidy to attract private investors to business and economic development opportunities in poor communities--investment opportunities that otherwise might not be able to secure such investment capital. It is our intent that the NMTC be treated like the LIHTC and the HRTC and protected as a congressionally mandated tax benefit.

canadian softwood lumber dispute

I want to join my colleague from Oregon in support of this amendment, which cannot be considered for inclusion in the legislation at hand. I concur that action must be taken to ensure the integrity of the Chapter 19 Panel Process. There is a clear breakdown of due process with respect to Chapter 19. The decision by the NAFTA Panel to reject the UTC's injury analysis in the softwood lumber dispute between the U.S. and Canada proves to me that the credibility of the NAFTA Panel process is in serious jeopardy. By imposing an impossible standard for proving ``material injury'', this NAFTA Panel seems to be saying that it will reject any antidumping or counterveiling duty in any circumstance. If the ANFTA dispute panel process wants to maintain its credibility, the panelists themselves must respect the limits of their responsibility. No country will allow the dispute panel process to undermine the integrity of perfectly valid trade remedies. Action must be taken to address this situation, and I can give my colleague my assurance that I will work to find an opportunity for the Senate to consider his amendment in the near future.

I agree with the distinguished chairman of the Finance Committee, Senator Grassley. The disputes resulting from any uncertainty regarding the proper application of the income forecast method are extremely unproductive and wasteful. To avoid further waste, resolution of any disputes must be resolved in a manner consistent with the clarifications contained in the bill.

Mr. President, I raise an issue with regard to the car donation provision included in the JOBS bill. Under the provision donors are limited to deducting the actual sale price of the vehicle that is donated to charity, unless the charity uses the car, in which case donors a get fair market value deduction. This is a good rule. It will cut out abuse of this charitable giving device, and make it easier for donors to comply with the tax law. However, I am also concerned about the potential for charities that intentionally sell/transfer donated vehicles at a low or no cost to low-income recipients as part of a charitable program to be unintentionally hampered from doing so. I believe the law is written in such a way that if the car is given by the charity to a low income family, or used for parts to repair a different car, there is no sale that triggers the sales proceeds limit, and the donor gets a fair market value deduction. I agree with some folks' suggestions that the sales to needy families case does not fit within the ``use by the charity'' rules as presently drafted. But trying to modify the proposal to move away from the sale bright line rule can be tricky, and I fear we would be opening up the proposal to abuse. I pledge to charities that do sell cars to low-income or needy individuals at reduced prices as part of a charitable program, that we will expand regulatory authority during conference or a preconference period with the House to permit Treasury to issue rules excepting certain sales from the sales proceeds limit and certain reporting rules if the sale furthers a charitable purpose.

Mr. President, we have looked at this amendment on this side, and we are agreeable that this amendment should be adopted.

I move to reconsider the vote.

Mr. President, I ask for the yeas and nays on the bill.

Mr. President, I am very proud of the Senate. The Senate worked its will through a very involved and complex tax bill. I might add--I don't have the final figures here, but in the case of first impression, this probably is one of the largest tax bills the Senate has taken up and passed, outside of reconciliation--we don't know yet-- in maybe a decade, or maybe close to two decades.

I say that because of the importance of protecting Senators' rights. I know this sounds like a little inside baseball, but when I say ``outside reconciliation,'' all of us in the Senate know this means the bill was taken up under the usual Senate process, which means Senators have the right to offer amendments, have the right to speak as long as they can stand on their own two feet, and have the rights Senators usually have in taking up bills. Whereas, if this were to be taken up under the process we call ``reconciliation,'' then amendments would have to be passed very easily; that is, there is no right for extended debate. Germaneness rules do not apply; that is, unless cloture is invoked.

So the main point I want to make is that the Senate has done a good job. The Senate has taken up a very complicated, very large tax bill, and done it the way the Senate should ordinarily do business; that is, outside of reconciliation. We are responsible. We can do it. We did it.

I very much thank my good friend and colleague, the chairman of the Finance Committee, who led us in a way to help make that happen. He basically did it by being so gracious, by being so fair. He has a reputation, we all know, of being one of the most honest and fair persons you would ever have the privilege to meet, not only in the Senate but in life. His credibility is unquestioned. That is a substantial reason why we were able to pass such a messy bill outside reconciliation. I thank my friend for his leadership, for his friendship, and for all he has done.

I also especially thank Senator Reid of Nevada. We all know Senator Reid is probably one of the masters of the floor. He knows procedure, and his main goal is to get things done. He, too, is a man whose word is his bond. He is invaluable here. If not for the efforts of not only the chairman but Senator Reid, I am not so sure we would be here today. He has done a super job.

It is also very appropriate to thank a lot of my staff, and Senator Grassley's staff, and many others, which I will do. But before I do that, I would like to do something a little bit differently and thank some people who helped me with this bill; that is, the people I talked with back home who provided ideas on how to structure the FSC/ETI replacement bill in a way that made the most sense for our manufacturers, not only throughout the country but in my home State of Montana.

This was a great chance for me to learn even more about manufacturing in my State, by going to manufacturers in my State and saying: What do we need? What can we do to help make this happen?

Let me give you a few examples.

The timber industry, for example, has faced very tough economic times during the last several years. In the years 2000 and before, many of these businesses paid very high taxes on solid profits.

So a provision in this bill will permit businesses in industries with cyclical profits to smooth out their tax rates. This is accomplished by permitting a loss to be carried back for up to 5 years. That will help a lot.

I thank Jim Hurst at Owens & Hurst, a small timber company located in Eureka, MT, for helping us better understand the economics of the timber business. The JOBS bill will help this company and many other companies that have very cyclical incomes.

I might add, too, that the people at Mountain Harvest Pizza Crust Company, from Billings--that does not sound like a huge American manufacturing company but they are extremely important to Montana, to Billings, and to me--helped educate me about the challenges of rising costs facing small businesses, and about how the cost of health care was getting to be too much to handle.

I might say, too, not all exporters are large corporations. We learned this from Sun Mountain Sports in Missoula. They are an S corporation. They export golf bags and other sports equipment. They are just the kind of company we want to stay strong so they can keep those manufacturing jobs here in the U.S. and so they can continue to export overseas.

Because of discussions with many small businesses such as Mountain Harvest Pizza Crust and Sun Mountain Sports, I made sure that every manufacturer would get this deduction. So we in the Finance Committee produced a bill that gives a deduction not only to C corporations but to S corporations, to partnerships, and to sole proprietorships so they all could have help and not be left behind by this legislation. The tax relief they are getting in this bill will help defray those and other rising costs.

Again, by consulting with the people at home, we were able to realize what the FSC/ETI replacement bill should be. It should not be just for big C corporations--those are large, publicly held corporations--but, rather, for any organization that manufactures, including proprietorships, small businesses, et cetera.

I also thank the people at CHS--that is Central Harvest--who showed us the role that cooperatives play in rural America and helped us better understand the importance of making this tax deduction pass through to the members of cooperatives. Agricultural cooperatives are a crucial part of the economy of my State and a lot of the West, and, I might add, a lot of other rural parts of America.

CHS helped to make sure their important contributions were not overlooked in this bill. I wanted, as I said, the bill to include all American manufacturers, and I have made sure the bill includes the agricultural cooperatives that are so important to so many States.

Also, I thank Elvie Miller at Mountain Meadow Log Homes, who talked to us about how integral good research and design is to their business. Frankly, with the addition of the amendment by the Senator from Texas, we were able to add that provision.

I also want to thank Leland Griffin and the good folks at Montana Refining Company in Great Falls. They pointed out that under the export credit this bill will repeal, oil refining operations are not eligible for tax benefits. But Montana Refining pointed out that if we are converting the laws to a manufacturing deduction, then it should cover oil and gas refining operations. Those operations are manufacturing. They take raw material, crude oil, and convert it to a usable product-- gasoline and other petroleum products. I offered an amendment in committee to include refining operations in the definition of manufacturing.

All of these companies, and many more, were invaluable in passing such a strong bill in the Senate. I thank them. I thank them very much for adding their part to this bill. Were it not for their very valuable contributions, this legislation would not be as good.

I also thank a lot of people from my office. I don't have the whole list. There are so many of them. If we turned the camera over, we could see them lined up against the wall over there. Starting with Brian Pomper on the far right, he does a very good job, handles a lot of trade work. We have Pat Heck over there; Russ Sullivan; Matt Genasci; Liz Liebschutz, Matt Stokes, Jon Selib. We have Scott Landes there in the corner, Simon Chabel, many others. Wendy Carrey is there; Mac Campbell. They are our folks. They do the work. My guess is

that if I talk much longer, they are going to fall asleep, they are so tired. We all very much appreciate, deeply appreciate what they do.

I have often said that the most noble human endeavor is service-- service to church, to community, to mankind, service to whatever makes the most sense to us as human beings. A lot of us who run for public office get some of the psychic rewards of service. We see our names in newspapers and on TV. Usually that is good, not always but usually.

However, the folks who work in the Senate, on Joint Tax and elsewhere, work harder. And they don't get public recognition for what they do. They are the real servants. They are the ones who really provide the most noble kind of service. I know I speak for everyone listening, for everyone else who stops and thinks about these things if only for a nanosecond, when I say how true that last statement is. They are the most wonderful folks. I take my hat off to all of them.

I yield the floor.

Mr. President, I call up my amendment No. 3134 and ask the clerk to report.

Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

I thank the distinguished Chair.

Mr. President, the underlying bill gives a 5-percent domestic manufacturing deduction to the manufacturing industry. Of course, that is woefully insufficient. My amendment would provide a full 9-percent domestic manufacturing deduction.

The underlying bill slowly phases in the domestic manufacturing provision over a 5-year period, but instantly it gets the full effect of the overseas industry, the outsourcing. They immediately get some tax breaks over the period of the bill covering some 39, almost 40 billion bucks.

Can you imagine that? Here is a bill entitled--this is the committee report--the Jump-Start Our Business Strength, JOBS, Act. It jump-starts the jobs in Shanghai and Guadalajara and not in Philadelphia, PA, I can tell you that right now.

What my amendment does is provide the right incentives. It eliminates the tax breaks for corporations that have moved American jobs offshore and gives those tax breaks to the employers of jobs in America today.

I wish to thank, first, the distinguished ranking member, Senator Baucus, of our Finance Committee and his outstanding staff. They have been very helpful in trying to make this amendment not only relevant but budget neutral. I am not sure about its budget neutrality, but I am told now we do have a relevant amendment. If we have to get into the arcane discussion with respect to budget neutrality, I will be glad to join it.

I want to get to the point. We are still in a post-World War II culture, what they call up here an environment or pedigree. What happened was, after World War II, we had our finest hour with the Marshall plan. We sent money overseas. We sent expertise overseas. We sent equipment overseas. In the cold war, capitalism defeated communism. It worked. All during that almost 50-year period since World War II, we all enjoyed it because we fudged when it came to trade. We treated fair trade more or less as foreign aid, but we knew what we were doing. We had to sacrifice a certain amount of our industry, our jobs, our economic strength to prevail in this cold war.

Now what has occurred is the competition has regeared, they have rebuilt, they have industrialized, and they have become outlandishly competitive. And here amidst a trade war, we hear those in the national Congress running around and saying: Woo, we might start a trade war; free trade, free trade, I am for free trade, when they know free trade is like dry water. There is no such thing. If you trade, you are trading something, you are

swapping an article with various countries, free trade, but we know that is not going to come to pass.

The example we set of a capitalistic free market and our endeavor in the last 50 years, the Japanese did not follow suit. They have the financing, they have the subsidies, they have the nontariff barriers, and we have yet to get into downtown Tokyo with American sales. Come on, quit kidding each other. It worked that way for Japan. Korea followed. And now China is following the same Japanese pattern of restricted and competitive trade, not free trade.

Today we are in real trouble. We are losing jobs like gangbusters overseas. We have lost 68,000 jobs in the little State of South Carolina in the last 3 years, over 3 million jobs nationally. I can tell you, 58,000 of those jobs are our textile jobs, and they are not going to be replaced. You can put all this statistical information from the Federal Reserve and Greenspan about how we are creating jobs, but they are not coming to South Carolina.

As Abraham Lincoln said some years ago: The dogmas of the quiet path are inadequate to the stormy present. As our case is new, we must think anew, we must act anew, we must disenthrall ourselves, and then working together we can save our Nation. That is the reason for this amendment.

One does not put up an amendment to this finance bill with hope. The chairman of the Finance Committee knows there are not going to be any amendments. But we might be able to disenthrall our colleagues because the country has to develop a competitive trade policy in order to subsist and survive.

I can point out survival in the very beginning of this Nation started with Alexander Hamilton. Of course, I will not read the book--Ron Chernow's ``Alexander Hamilton.'' They will not give me that much time, but I recommend to everyone this particular edition. You will find the mother country, England, prevented manufacture in the Colonies, later the United States of America. In fact, they arrested and jailed anyone with any manufacturing talent who would move from England to the Colonies.

We had a veritable struggle in the earliest days, and we had just barely 1 hour of freedom when the mother country said: Under this David Ricardo doctrine of comparative advantage, we will trade with you what you produce best and you trade back with us what we produce best.

As a result, Alexander Hamilton wrote his famous treatise, ``Report on Manufacturers.'' I will not read that and put it in the Record, but I will say in a phrase exactly what Hamilton told the Brits: Bug off. He told the Brits, we are not going to remain your colony, shipping you our timber, iron ore, rice, cotton, indigo, and natural resources, and importing the manufactured articles and remaining a banana republic; we are going to build up our own manufacturing.

It caused me to listen to our friend Akio Morita, the former head of Sony. Some 20 years ago in Chicago, while lecturing third world countries, he said you have to develop a strong manufacturing sector in order to become a nation state. Then he pointed to me and said: Senator, that world power that loses its manufacturing capacity will cease to be a world power.

It is economic strength that counts in this terrorism war. It is diplomacy. It is negotiation. It is not military strength. We have to disenthrall ourselves and realize when we are going around talking about we might start a trade war, it was Hamilton himself and the United States of America some 228 years ago that started the trade war.

The very first bill--well, Pat Moynihan used to correct me on that. He said the first was a resolution for the United States Seal. So let's say the second bill that passed this Congress in its history on July 4, 1789, was a tariff bill, protectionism, a 50-percent tariff on 60 different articles. We started a trade war.

When Abraham Lincoln was President, they were going to build a transcontinental railroad. They said, we are going to get the steel from England. President Lincoln said, we are going to build our own steel plants, and he put import restrictions on that British steel and we built the steel plants.

When Franklin Roosevelt was President in the darkest days of the Depression, we did not practice any comparative advantage. He put on the most successful initiative ever with import quotas and subsidies for America's agriculture. That farm crowd that is now heading up our Finance Committee gets $180 billion worth of all kinds of subsidies. Then they run around here and tell this poor little textile Senator, protectionism, protectionism, you are going to start a trade war.

We do not get a subsidy. We do not have those things the farmers have. I favor what the farmers have, I say in the same breath. I vote for it because I think it is a very successful program.

President Eisenhower, in the mid-1950s, put on oil import quotas. Yes, John F. Kennedy--I sat there with Andy Hatcher and we would grind out the mimeograph machine--and we got the seven-point Kennedy textile program of restrictions on textile imports in 1961.

Who else other than Ronald Reagan, the best of the best, he put import quotas on steel, machine tools, semiconductors, motorcycles. Last night, I was near Myrtle Beach and they told me there were 100,000 motorcyclists--I think I ran into 99,000 of them out on the highway-- but do my colleagues remember what old Ronnie Reagan did? He started a trade war of motorcycles. He put a 50-percent import tariff on motorcycles. Harley Davidson now has recovered its health and we have them all running up and down the beach at Myrtle Beach, SC. So do not come now and tell me about starting a trade war.

We have had that trade war and we know simply and clearly what happens. I want to read starting on page 20 of ``Theodore Rex'' by Edmund Morris, because this is so interesting. I will read what protectionism did at the turn of the century, this is under Teddy Roosevelt, when we did not have an income tax. For the first 100 and some years, we financed this great United States of America with protectionism. I am trying to get that through so this crowd will wake up and quit pulling off this charade of the multinationals, because that is who we are facing. We are facing the U.S. Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, the Conference Board, the United Federation of Independent Businesses. The newspapers make a majority of their money on retail advertising and grind out this free trade, free trade, do not let us start a trade war.

Well, here is what the trade war gave us:

This first year of the new century found her worth twenty-

five billion dollars more than her nearest rival, Great

Britain, with a gross national product more than twice that

of Germany and Russia. The United States was already so rich

in goods and services that she was more self-sustaining than

any industrial power in history. . . .

More than half of the world's cotton, corn, copper, and oil

flowed from the American cornucopia, and at least one-third

of all steel, iron, silver, and gold.

Here we are having trouble manufacturing steel. We were exporting one-third of the world's steel.

Even if the United States were not so blessed with raw

materials, the excellence of her manufactured products

guaranteed her dominance of world markets. Current

advertisements in British magazines gave the impression that

the typical Englishman woke to the ring of an Ingersoll

alarm, shaved with a Gillette razor, combed his hair with

Vaseline tonic, buttoned his Arrow shirt, hurried downstairs

for Quaker Oats, California Figs and Maxwell House coffee,

commuted in a Westinghouse tram (body by Fisher), rose to his

office in an Otis elevator, and worked all day with his

Waterman pen under the efficient glare of Edison light bulbs.

``It only remains,'' one Fleet Street wag suggested, ``for

[us] to take American coal to Newcastle.'' Behind the joke

lay real concern: the United States was already supplying

beer to Germany, pottery to Bohemia, and oranges to Valencia.

As a result of this billowing surge in productivity, Wall

Street was awash with foreign capital. Carnegie calculated

that America could afford to buy the entire United Kingdom,

and settle Britain's national debt in the bargain. For the

first time in history, transatlantic money currents were

thrusting more powerfully westward than east. Even the Bank

of England had begun to borrow money on Wall Street. New York

City seemed destined to replace London as the world's

financial center.

Well, in the year 2004, we are broke. We have come from the greatest creditor nation to the greatest debtor nation. The Japanese are financing over $460 billion of my deficit. The Chinese are financing my debt--not me financing any other country like we started

with protectionism. The Chinese have over $200 billion of my deficit. We will end up this year in September, in a few short months, with a deficit that will approximate $700 billion.

We are spending around $2 billion a day more than we are taking in. Can you imagine that? In the early 1980s when I talked about budget matters, I spoke about how it took us 200 years of our history to get to $1 trillion in debt. The cost of the Revolution, the Civil War, Spanish-American War, World War I, World War II, Korea War, Vietnam War--it took us 200 years and the cost of all the wars to reach a $1 trillion debt.

In the last 3\1/2\ years--because we don't want to pay for our war and want to give tax breaks instead--we have already piled up $2 trillion in debt; $2 trillion in the last 3\1/2\ years.

This crowd has to sober up. We have to get hold of ourselves. We have to disenthrall ourselves and we have to start competing. Remember, it is our standard of living. That is the most frustrating thing around here. Here we add on these requirements: the minimum wage, Social Security, Medicare, Medicaid, plant closing notice, parental leave, safe working place, safe machinery, the old age act, the discrimination act, and this act and that act--all of that goes into the cost of production. It is not just the minimum wage; it is our high standard of living. Every Republican and every Democrat favors clean air and clean water. So we are not going back on our standard of living. So fundamentally we have to protect, and that is the fundamental role of Government.

I will never forget when we swore in President Ronald Reagan for his second term. It was inclement weather and we did it in the Rotunda. He raised his hand to preserve, protect, and defend. We came back and we were debating trade, and we said: Oh, we don't want to protect, we don't want to protect. The fundamental oath that we take as public servants is to protect. We have the Army to protect us from enemies without, the FBI to protect us from enemies within. We have Social Security to protect us from old age, Medicare to protect us from ill- health; clean air, clean water--antitrust laws to protect the freedom of the market. We can go right on down the list. Are we going to pass a wonderful high standard of living and then run around like ninnies hollering: Wait a minute, wait a minute, free trade, free trade. We don't want to start protectionism--they get that garbage from the Business Roundtable and the U.S. Chamber of Commerce.

I talk as one having received all of their awards. In 1992, I was man of the year of the National Chamber of Commerce. By 1998 they were sending out leaflets against me. So I speak advisedly. That crowd is not any longer interested in Main Street America. They are interested in Main Street Beijing. That is where you make the money, and the country can go to hell as far as they are concerned. So it is our duty to protect the economy and open up the markets and everything else like that.

Don't tell us more about retrain, retrain, retrain. I continually hear that. Oh, we have to retrain. I went through another little town yesterday, Andrews, SC. It brings to mind Oneida. I brought that plant in. They make little T-shirts. They closed to go to Mexico. At the time of closure they had 487 employees. The average age was 47 years.

We have done it, Senator, your way. We have retrained them and we have 487 highly skilled computer operators. Are you going to hire the 47-year-old highly skilled computer operator or the 21-year-old highly skilled computer operator? You are not going to take on the retirement, the pension cost of the 47-year-old. You are not going to take on the health cost of the 47-year-old. You are going to get the 21-year-old. So don't tell me about retraining.

We have the most productive economy--that is what Alan Greenspan says. He is sobering up himself. He came down here with this administration saying we were paying down too much debt. ``We are paying down too much debt.'' He sanctioned all these tax cuts. Now he says debt and deficits matter, and he is worried about interest rates now and everything else of that kind, and paying bills.

It is time we speak out as much as we can, early on, so we will know exactly where we stand. Where we stand is that we have to reorganize-- begin to organize, I should say--our trade effort, not just the Department of Commerce, but a Department of Trade and Commerce. I have been serving for almost 38 years on what was originally the Committee of Foreign and Interstate Commerce because article I section 8 says that Congress--not the President, not the Supreme Court--but the Congress of the United States shall regulate foreign commerce.

But, instead, it is over in the hands of a deep six group known as the Finance Committee. What they do is they work out their little deals. You might get a stadium, you might get a courthouse, you might get any kind of visions of sugarplums dancing in their head.

Forget about trade. They put on fast track. After they make their deal, the vote is fixed. Then it comes to the floor of the most deliberative body that cannot, under fast track, deliberate. And we enjoy it. We have tied our hands with fast track because we don't want to take the responsibility. That is what the polls will tell you: Don't say you are for or against, just say you are concerned.

So we say we are concerned and we keep getting reelected and the country goes to hell in an economic hand pot. I can tell you right now we are in real trouble, and we have to disenthrall.

What happens is that we need to organize a Department of Trade and Commerce, take that special Trade Representative, put it under that Secretary, do away with the International Trade Commission, which is a fix. You can find the damage done by the International Trade Administration over in Commerce. Then you go over to the Commission and they find out--oh, there is never any injury because you have growth. The GNP now is 3 or 4 percent, so there is no injury. So we keep sending the jobs out of the country like gangbusters, and we ought to do away with that particular fix of the Finance Committee. Then come in and get an Attorney General--an assistant, let's say, to enforce the trade laws.

Many a trade lawyer in this city has gone all the way to the Supreme Court and found out that, well, politically it is set aside. It was that way in the Zenith case, when they were gathered around the Cabinet table and President Reagan walked in and he said: I have to take care of Nakasone. We are going to have to reverse that decision, after 3 years and millions of dollars of legal costs.

So we ought to put in, like we have for antitrust, like we have for equal employment--we have to put in an Assistant Attorney General to enforce those laws, get the Customs agents, and finally when we get right down to it, do like the others do, play their game. If you are going to sell it here, you have to make it here. Isn't that wonderful? That is exactly what China really controls.

They said, if you want to sell it here you have to make it here. I haven't gotten them that far along, I am just trying to flex their minds so we will get away from this trade war and protectionism nonsense, so we can put in a competitive trade policy and save our industrial backbone.

Mr. President, how much time do I have remaining? My distinguished colleague from Florida, Mr. Bob Graham, wants to be heard.

Let me yield at this time to the proponents and the distinguished leadership of our Finance Committee. I retain the remainder of our time.

Mr. President, I yield 8 minutes to the distinguished Senator from Florida.

Mr. President, how much time is remaining on this side?

Mr. President, I yield whatever time I have to the distinguished Senator from North Dakota.

Mr. President, I ask for the yeas and nays on the amendment.

Good.

Yes.

Madam President, I ask unanimous consent that our amendment No. 3120 at the desk be modified and called up.

Madam President, I ask unanimous consent that further reading of the amendment, as modified, be dispensed with.

Madam President, I am offering this amendment along with our colleague, Senator Coleman. I understand the amendment has been cleared now on both sides of the aisle. I very much appreciate the effort that has been put into this matter by Senator Grassley and Senator Baucus. They have been battling abusive tax shelters for years now, and it is a privilege to join them in this fight by providing the IRS with stronger enforcement tools.

Abusive tax shelters are undermining the integrity of our tax system, robbing the Treasury of tens of billions of dollars each year, and shifting the tax burden from high income corporations and individuals onto the backs of the middle class.

The bill before us contains a host of important reforms to combat abusive tax shelters, including codifying and strengthening the definition of when a shelter has ``economic substance.'' But there is an area where the underlying bill falls short and unnecessarily so. That's on the penalties for the people who design and sell the abusive shelters. The bill sets the penalty at 50 percent of the fees earned by these promoters, meaning they get to keep half of their ill-gotten gains.

That is the provision that our amendment addresses, but we significantly toughen this provision in a way which I think this body will totally approve.

The amendment I originally filed proposed raising the penalty on abusive tax shelter promoters and those who aid or abet tax evasion to 150 percent. Today we have reached a compromise, agreeing to set the penalty at 100 percent, which will ensure that those who peddle abusive tax shelters will not get to keep a single penny of their ill-gotten gains.

The issue is whether when you have an abusive tax shelter, one which robs the Treasury of millions of dollars, the people who cook up those tax shelters are going to be penalized in any significant way. Will the accountants or the lawyers or the investment bankers--the people who design these deceptive and sham tax shelters, which are abusive and have no economic purpose, except to avoid taxes--will they be deterred from doing this? And if they do it, will they be penalized, at least to the extent of having their ill-gotten gains being taken back from them? That is the issue.

The current law is like a slap on the wrist. It is like a parking ticket. These abusive tax shelters, which have been designed by the banks and the accounting firms, and which have made them millions of dollars, result in a maximum fine of $1,000 under current law.

What our amendment does is say, if you design and promote an abusive tax shelter which has no economic substance and you are found responsible for doing that, the IRS can get all of your fee that is ill-gotten and wrongfully obtained for cooking up that tax shelter--not $1,000 of the fee, not half of the fee, as was originally proposed in the bill, but the entire fee is going to be recoverable by the IRS.

We can take a quick look at one of these tax shelters. This is called Flagstaff. I am not going to try to explain what that tax shelter you are looking at does. It is obviously inexplicable. It has all of this mumbo jumbo, all of these boxes and arrows that were intended by JP Morgan Chase to create an impression of economic activity when there was none. That is what this bowl of spaghetti is all about: to create a sham impression that there was some economic substance to these transactions when, in fact, there was no economic substance. They were cooked up in order to create the appearance of economic substance and, thereby, obtain a tax deduction for them.

The question is, when that happens, whether we are going to say to these firms that design these tax shelters for Enron, or for whoever: We are not going to let you, the designers, the perpetrators--who are called aiders and abettors in the law, but are really the promoters of the tax shelters--we are not going to let you keep those ill-gotten fees. We are going to recover those for the Treasury of the United States.

That is the only real deterrent we have.

I want to quickly show how some of these firms analyze these fees they get. Again, we are talking about millions of dollars in fees. These are cookie-cutter tax shelters that are designed and sold by the hundreds to people who can use a tax deduction for, usually, their capital gains, but are not engaged in economic activity which would justify the non-payment of tax on these capital gains.

This is what KPMG did when analyzing one of their phony tax shelters: First, they look at the financial exposure to the firm. It is minimal. So what they are saying is: Hey, we can engage in this. We can get away with it because there is no financial exposure.

. . . we conclude that the penalties would be no greater

than $14,000 per $100,000 in KPMG fees. . . . For example,

our average deal would result in KPMG fees of $360,000 with a

maximum penalty exposure of only $31,000.

They do a cost-benefit analysis.

They cook up and design an abusive tax shelter and then say: Now should we really go with this? Shall we peddle this, promote it, look for people who can benefit from it, sell it for hundreds of thousands of dollars and take the risk that we will be caught? Because what happens if we are caught? We are going to be paying a few thousand dollars in penalties and making $100,000. Our maximum exposure, our financial exposure, is minimal.

That is what this amendment changes.

Last November, the Permanent Subcommittee on Investigations, on which Senator Coleman is the chairman and I am the ranking member, held hearings that provided an inside look at how respected accounting firms, banks, investment advisors, and lawyers have become high-powered engines behind the design and sale of abusive tax shelters.

These hearings were the culmination of a year-long investigation into abusive tax shelters, which first began by pulling the curtain away from one of Enron's sham tax transactions. At the November hearings, we released a report by my subcommittee staff on four case histories of abusive tax shelters developed and marketed by KPMG. At the hearings themselves, we heard from a number of accounting firms, banks, investment firms, and others.

One of the key findings of the subcommittee investigation was that it was not taxpayers visiting their tax advisors that provided the engine for the

creation of abusive tax shelters, but rather hordes of tax advisors cooking up one complex scheme after another, and then peddling them to potential customers. There are legitimate tax shelters and abusive ones. The abusive shelters are marked by one characteristic: there is no real economic or business rationale other than a tax reduction. We found the abusive shelters being packaged up as generic ``tax products'' with boiler-plate legal and tax opinions, followed by elaborate marketing schemes to peddle these products to literally thousands of taxpayers across the country.

It is the insight gained during our close look at these shelters that led me and Senator Coleman to introduce the Tax Shelter and Tax Haven Reform Act, S. 2210. While the Levin-Coleman bill addresses a wide range of tax shelter issues, our amendment focuses on one key issue: the woefully inadequate penalties that are now on the books for the tax shelter promoters who concoct and peddle abusive shelters.

Existing tax shelter penalties are a joke. They provide no deterrent at all. The story begins with Enron, and I think the Enron scandal has shown us one reason this amendment is so important. The Flagstaff example I talked about earlier was designed to save Enron more than $60 million in taxes. The whole scam was built around a sham $1 billion loan that was issued to Enron but was repaid in nanoseconds, and then used to claim various tax benefits as well as creating a false impression of profits on the balance sheet. JP Morgan Chase designed and sold this concoction to Enron for more than $5 million. After Enron collapsed and this scam came to light, we learned that JP Morgan had sold the same abusive tax shelter to at least one other company as well.

Under Section 6700 of the tax code prohibiting the promotion of abusive tax shelters, JP Morgan was subject to a whopping $1,000 penalty. Let me repeat: For one tax shelter which was abusive because it was a sham and a deception, JP Morgan Chase's ill-gotten gain from one company, Enron, was $5 million. Its penalty exposure to the IRS under current law was $1,000.

As IRS Commissioner Mark Everson said when he testified at our tax shelter hearings, the current tax shelter promoter penalty is ``chump change.'' To continue quoting Commissioner Everson: ``We need significantly increased penalties to hit the promoters who don't get the message where it counts, in their wallets.''

Our tax shelter investigation found some fascinating documents as well, including one I have shown here today in the KPMG memo that shows a particular tax shelter promoter performing a specific cost-benefit analysis when deciding whether or not to take the risk of peddling an abusive shelter. The third paragraph of this KPMG memo says:

First, the financial exposure to the Firm is minimal. Based

upon our analysis of the applicable penalty sections, we

conclude that the penalties would be no greater than $14,000

per $100,000 in KPMG fees. . . . For example, our average

deal would result in KPMG fees of $360,000 with a maximum

penalty exposure of only $31,000.

The fact that all KPMG could lose if caught was a small part of its fee was a driving consideration in KPMG's decision to take the risk. This memo is proof that weak penalties encourage tax shelters and that tough penalties would deter them. Congress needs to enact meaningful, tough penalties to deter promoters from pocketing any gains from designing and peddling abusive tax shelters. We need to deter folks from making a cost-benefit analysis that encourages the promotion of a tax shelter they know is not likely to withstand scrutiny.

Our amendment would do just that by strengthening penalties for promoting abusive tax shelters.

Our amendment focuses on two key penalties. The first is the penalty for promoting an abusive tax shelter under Tax Code section 6700. The second is the penalty for aiding and abetting tax evasion under Tax Code section 6701. It would increase the penalty for both types of misconduct.

Currently, the penalty under section 6700 of the Tax Code is the lesser of $1,000 or 100 percent of the promoter's gross income derived from the prohibited tax shelter. That means in most cases, the maximum fine is $1,000. That figure is laughable, when many abusive tax shelters are selling for $100,000 or $250,000 apiece. Our investigation uncovered tax shelters that were sold for millions each. The Enron tax avoidance scam sold for more than $5 million. We also saw instances in which the same so-called tax product was sold to more than 100 clients. A $1,000 fine is like a parking ticket for raking in millions illegally.

The bill before us is an improvement over the status quo, but an unnecessarily modest one. It would increase the penalty for promoting an abusive tax shelter to 50 percent of the promoters' gross income from the prohibited tax shelter. Why should anyone who pushes an abusive tax shelter--an illegal tax shelter that robs our Treasury of much needed revenues--get to keep half of his ill-gotten gains? And what deterrent effect is created by a penalty that allows promoters to keep half of their fees if caught, and all of them if they are not? That half-hearted penalty is not tough enough to do the job that needs to be done.

At the very least, a meaningful penalty for those who peddle abusive tax shelters must ensure that the tax shelter promoter does not profit from its wrongdoing. It must require the wrongdoer to disgorge every penny of the income obtained from selling the shelter. Our amendment would do just that.

My original amendment would have gone further. It would have created a maximum penalty equal to 150 percent of the promoter's gross income from the prohibited tax shelter. Under that penalty, the first 100 percent would have forced the disgorgement of the ill-begotten gains, and the remaining 50 percent would have imposed what I consider to be an actual penalty on top of that. But today, our amendment does not go that far. It stops at 100 percent. While that is not as tough as called for in the Levin-Coleman bill, it is a reasonable compromise and will ensure that those who promote abusive tax shelters will lose 100 percent of their ill-gotten gains.

The underlying bill has the same problem in the way it addresses many professional firms the accountants, law firms, banks, and investment advisors that aid and abet the use of abusive tax shelters and enable taxpayers to carry out abusive tax schemes. The underlying bill takes the same half-hearted approach of denying only 50 percent of the gross income obtained by the aider and abettor, and allowing the wrongdoer to keep half of its ill-gotten gains. Just as we do with tax shelter promoters, our amendment would raise the penalty under tax code section 6701 to 100 percent of the aider or abettor's gross income, thereby denying them 100 percent of their ill-gotten gains. In addition, our amendment would make an important change to section 6701 itself by eliminating a provision which limits the penalty to persons who prepare tax returns. Instead, our amendment would apply the penalty to all wrongdoers who knowingly aid and abet the understatement of tax liability, not just tax return preparers.

Finally, while I am pleased that today we have reached agreement to accept a 100 percent penalty, I would like to take this opportunity to observe that penalties that cause wrongdoers to not only disgorge their ill-gotten gains, but also pay a monetary fine on top of that are fair and provide a meaningful deterrent.

There is no reason why those who concoct and peddle these shenanigans should get off any easier than the taxpayers who use them. Just last week the IRS came out with an initiative to allow taxpayers who used a tax shelter known as ``Son of Boss'' to come clean. This tax shelter was marketed beginning in the late 1990s and was one of the tax shelters we looked at during our investigation. Under the terms of the IRS initiative, taxpayers are required to come forward and pay 100 percent of the tax they tried to escape. On top of that, the IRS can impose a penalty that ranges up to an additional 40 percent. That means the taxpayer faces up to a 140 percent penalty.

Son of Boss is a hellaciously complicated tax shelter that was dreamed up and carried out by tax shelter promoters and other professionals. The taxpayers who bought this shelter have to cough up 100 percent plus. It is only fair that the tax shelter promoters who made so many millions of dollars in profit on these schemes should do no less.

It is also important to realize that Congress has frequently set penalties for corporate misconduct and financial crimes that require wrongdoers to disgorge 100 percent of their ill-gotten gains plus pay a penalty on top of that, and courts have upheld those penalties as both constitutional and enforceable. For example, under current law, violation of the federal securities laws results in 100% disgorgement plus a civil fine of up to 100 percent, for a total civil penalty equal to 200 percent. In the special case of insider trading, violations result in 100 percent disgorgement plus a civil fine of up to 300 percent, for a total civil penalty equal to 400 percent. Manipulation of commodity markets results in a civil fine of up to 300 percent. False claims submitted to the Federal Government result in a civil fine of up to 300 percent. Even the tax code has penalties of this magnitude; for example, personally profiting from a charity results in a civil fine of up to 200 percent.

Men and women in our military are putting their lives on the line every day for our nation. To make sure we can provide them with the resources they need, all Americans need to contribute their fair share in taxes. While the bill before us improves the tax shelter penalties over current law, we can and should do much better. We need penalties that truly deter those who make a profit from peddling abusive tax shelters and aiding and abetting tax evasion, not penalties that would allow the promoters to keep half of their ill-gotten gains.

It is long past time to stop in their tracks the shelter abusers and the promoters who push them. This amendment would send the message to promoters that their tax schemes are unfair and unpatriotic. Again, I appreciate the bill managers accepting it into the bill.

I also thank Senator Coleman for being such a strong advocate of this approach, putting in the law a real deterrent to end these abusive tax shelters which have cost the Treasury and the average taxpayers of this country, who have to share the burden, so many tens of billions of dollars. That is now hopefully going to end.

Again, I thank the chairman and ranking member of the Finance Committee for the way they have worked with us to adopt this amendment.

I yield the balance of my time to my friend from Minnesota.

Mr. President, I appreciate the opportunity to speak for just a few minutes on a very important amendment to this underlying bill, an amendment I offer on behalf of Senator Murray, Senator Johnson, Senator Cantwell, Senator Corzine, Senator Kerry, Senator Durbin, and Senator Dodd. They offer this amendment with me. It is an amendment I understand the chairman and ranking member have looked at and both support. In just a moment, I want to ask each of them, if they would, to make some comments about this amendment. We have to dispose of it one way or the other in the next few minutes. We may not need a rollcall vote. I understand their wishes to move through this bill, but I am anxious to hear from the chairman and the ranking member about the importance of making sure this amendment is carried through the process.

This amendment has to do with the Guard and Reserve and the people who employ them stateside. It has to do with our responsibility as a government--or our obligation, if you will, our commitment to the concept of a total force that relies, now, heavily on our Guard and Reserve. This amendment provides some much-needed tax relief to patriotic employers who try to help fill the pay gap between what a man or a woman might earn when they are stateside at their regular job--and then they put on the uniform to defend us and to fight this war that we are engaged with today.

There are maybe 1,000, maybe 2,000, good, compelling stories I could share with you about our current situation. But let me begin by saying the underlying bill moves around about $120 billion. The underlying bill doesn't cost the Treasury because we are raising some fees and taxes and modifying others.

Amendment No. 3123

(Purpose: To improve the credit for Ready Reserve-National Guard

employees, to provide a credit for replacement employees of Ready Reserve-National Guard employees called to active military duty, and

for other purposes)

Mr. President, I call up amendment No. 3123.

Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. President, the underlying bill moves around about $120 billion in tax relief, tax increases, changes in our Tax Code to hopefully increase employment opportunities, increase and strengthen employment across the board, and strengthen our economy here and abroad. That is the intention of the underlying bill.

This amendment moves around only $2 billion of that $120 billion. Every Senator could come here and argue that section A is more important than section C or section D. But I can tell you that, to my knowledge, this is the only section of $120 billion that deals specifically with tax credits for guys and gals who are putting on the uniforms, who are not working for the pay but are working because of their patriotism, and working in some of the most horrific and very difficult situations. The least we can do while we are debating a tax bill is to provide some much needed relief.

I could give you 2,000 stories. Because time is short, let me give you 2.

This is a family from Louisiana. It is the subject of an article. There were hundreds of articles written. This one happens to be from the Washington Post. Kathy Kiely did a beautiful job of writing this article. She starts off:

Drastic pay cuts. Bankruptcy. Foreclosed homes. They aren't

exactly the kind of challenges that members of America's

military reserves sign up for when they volunteered to serve

their country.

But for many, the biggest threat to the home front isn't

Saddam Hussein or Osama bin Laden. It's the bill collector.

Janet Wright is from Louisiana.

Kathy Kiely writes:

Janet Wright says she ``sat down and cried'' when she

realized how little money she and her children, Adelia, 5,

and Carolyn, 2, would have to live on when her husband was

sent to the Mideast. In his civilian job with

an environmental cleanup company, Russell Wright makes

$60,000 a year--twice what he'll be paid as a sergeant in

the Marine Forces Reserve. Back in Hammond, LA, his wife,

who doesn't have a paying job, is pouring the kids more

water and less milk. She is trying to accelerate Carolyn's

potty training schedule to save on diapers.

Let me ask: Could we do a little better for our Guard and Reserve members who have to take a cut in pay to serve in the military for us? They knew the responsibilities when they signed on to the Guard and Reserve. They understood their commitment to training. They understood their commitment to their monthly responsibilities. And, yes, they understood it wasn't going to be a ``paid vacation,'' but because our policy in Congress is relying on their work and relying on them for longer periods of time than either they or, I might add, at least according to the generals who have testified before the Armed Services Committee, we anticipated, the least we could do in a tax bill is to give them some minimal relief.

This amendment helps families just like the Wright family in Hammond, LA, by allowing the employer to pay the difference between the $30,000 that this Marine Reserve officer will earn when he is serving our country and putting himself in harm's way, and if they pay that gap up to $30,000--it is not mandatory; it is voluntary. Many of our companies, but not all, are doing it for obvious reasons. There is a strain particularly on small businesses. But for those employers that-- and I note Boeing is a good example of a very large employer with a wonderful policy, and much better, I might add, than our own Government which today has refused to adopt this policy. But at least there are some employers out there that are doing more than hanging the flag and saying the Pledge of Allegiance. They are actually taking out their checkbook in a very patriotic manner and keeping their Guard and Reserve families whole. The least we could do is give them a 50-percent tax credit, which is what our amendment does.

Let me read another example. I have 2,000; I am only going to read 2.

This is a firefighter from the Pacific coast. He earned a decent living before being called up in 2002, but active duty meant a $700 or a $1,000 a month pay cut and some very painful choices. He said:

My wife said ``We cannot live here anymore. It is too

expensive.''

He said he rented a 12,100 square foot home. He moved the whole family into a two-bedroom apartment where his wife has to sleep on a couch.

I understand we all have to make sacrifices. Most certainly the men and women who sign up for our All-Volunteer Force don't sign up because they think they are going on vacation or for the pay or the benefits. They sign up because they are patriotic. They believe in the ideals of this country.

When we are passing a $120 billion bill, if we can't take $2 billion or $3 billion or $4 billion and support the hundreds of thousands of men and women who are away from their jobs stateside and away from their businesses--not 3 months, not 12 months but 18 months under very tough conditions--so their children don't have to drink more water in their cereal in the morning and the wives have to sleep on couches, I think we can do better.

That is why I have waited for several months actually to offer this amendment and to have support from both sides of the aisle.

There is a cap on the credit. So the cost is very reasonable. We have taken the necessary precautions to make sure this amendment is affordable.

According to DOD, 98 percent of the reservists have a pay gap. Sometimes it is only $1,000 a month. Sometimes it could be $500 a month. But in some cases it is more than that. But 98 percent have pay gaps under $30,000.

This amendment will cover almost the entire Guard and Reserve population. Our Guard and Reserve on deployment would not have to worry about their bills being paid and could focus on the job before them, and do it well, as the vast majority of them do day in and day out, night in and night out.

That basically is what amendment does.

There is also a replacement worker tax credit for small businesses, many of which would be affected in the State of the Presiding Officer, with 50 employees or less. It is not just helping to fill the pay gap for employers that continue to pay the salaries, but it also gives some help to small business owners that in many instances take the brunt from their service, particularly when it is extended.

I will end my remarks. I see some of my colleagues on the floor who may want to add some comments.

This affects thousands of people in all of our States. I am proud our Guard and Reserve are right there stepping up on the front lines.

We have an outstanding Guard and Reserve unit. In about a month, we will have over 5,000, almost 6,000, men and women serving in Iraq; again, some of them for much longer periods of time than they were initially told.

I understand the chairman is prepared to accept the amendment. But before I waive my right to a recorded vote, I would like to have some comments from the chairman, who has negotiated this bill beautifully through this process. If he could, I would like for him to comment about the importance of this amendment and the outlook for keeping this amendment in the conference report as we move this bill to the President's desk for his signature.

I can appreciate that. I appreciate the comments of the chairman. He has shown himself to be a great leader, a man of his word. I know he will uphold and fight for our position.

I think it would be a real shame to move a $120 billion tax bill through this Congress at this time and have not a part of it specifically directed to some of the men and women who are carrying the greatest burden right now.

I know our businesspeople of all sizes and shapes are contributing to the overall economy and creating jobs, but there would not be any country to create jobs for if it were not for the men and women in uniform who protect us here and abroad.

I appreciate the remarks of the chairman.

I ask unanimous consent to have printed in the Record three articles involving enlisted reservists of the National Guard, and a letter from the National Guard Association that represents thousands of current and retired guardsmen and reservists.