Art and Collectibles Capital Gains Tax Treatment Parity Act

Mr. President, I rise today to support the Coastal Zone Enhancement Reauthorization Act of 2003. I am pleased to have bipartisan support for this bill and to be joined by the chair and ranking Democrats of the Commerce Committee and the Subcommittee on Oceans and Fisheries. Senators McCain, Hollings, and Kerry have been instrumental in developing the wide range of support for this bill, and I appreciate their interest in improving the way we manage our Nation's valuable coastal and marine resources.

In 1972, Congress responded to concerns over the increasing demands being placed on our nation's coastal regions and resources by enacting of the Coastal Zone Management Act. These pressures have greatly increased since the act was originally authorized.

Although the coastal zone only comprises 10 percent of the contiguous U.S. land area, nearly 53 percent of all Americans live in these coastal regions, and more than 3,600 people are relocating there annually. This small portion of our country supports approximately 361 sea-ports, contains most of our largest cities, and serves as critical habitat for a variety of plants and animals.

This bill reauthorizes and makes a number of important improvements to the Coastal Zone Management Act. Under the authorities in this act, coastal States can choose to participate in the voluntary Federal Coastal Zone Management Program. States then design individual coastal zone management programs, taking their specific needs and problems into account, and then receive federal matching funds to help carry out their program plans. State coastal zone programs manage issues ranging from public access to beaches, to protecting habitat, to coordinating permits for coastal development.

As voluntary program, the framework of the CZMA provides guidelines for State plans to address multiple environmental, societal, cultural, and economic objectives.

The health of our coastal zone is vitally important not only to the multitude of plants and animals that inhabit this area, but also to the people and communities that are dependent on it for their livelihood. For example, coastal areas provide habitat for more than 75 percent of the U.S. commercial fisheries and 85 percent of the U.S. recreational fisheries. In turn, the commercial fishing industry, along with value- added services included, contributes $40 billion to the U.S. economy each year. Recreational fishing adds another $25 billion to the economy.

The Coastal Zone Management Program can be used to help balance the conservation of fish stocks with the demands that we place on coastal areas. In my State of Maine, a $150,000 study of the State's cargo needs led to a $27 million bond issue for cargo port improvements. As a result, Bath Iron Works built a new $45 million facility, creating 1,000 new jobs. Similar work needs to be done with our fishing ports so that when fisheries stock rebound, the fishermen will be able to realize the returns.

Unfortunately our precious coastal resources are being threatened by environmental problems, including non-point source pollution. Although the States are currently taking action to

address this problem under existing authority, the Coastal Zone Enhancement Reauthorization Act of 2003 encourages, but does not require, them to take additional steps to combat these problems through the Coastal Community Program.

This initiative provides States with the funding and flexibility needed to deal with their specific nonpoint source pollution problems. The States will have the ability to implement local solutions to a broad array of local problems. Many States are actively engaged in nonpoint source pollution programs and all can benefit from this new tool I am proud to say that Maine has risen to the challenge and already spends close to 30 percent of its funding on such activities. This has led to the reopening of hundreds of acres of shellfish beds and the restoration of fish nursery areas. Even with these successes, Maine is looking forward to this new opportunity to do more.

The Coastal Community Program in this bill also aides States in developing and implementing creative initiatives to deal with problems other than nonpoint source pollution. It increases Federal and State support of Local community-based programs that address coastal environmental issues, such as the impact of development and sprawl on coastal uses and resources. This type of bottom-up management approach is critical.

The Coastal Zone Enhancement Reauthorization Act of 2003 significantly increases the authorization levels for the Coastal Zone Management Program, allowing States to better address their coastal management plan goals. The bill authorizes $135.5 million for fiscal year 2004, $141 million for fiscal year 2005 and increases the authorization levels by $5.5 million each year through fiscal year 2008. This increase in funding is necessary to allow the coastal programs to reach their full potential.

Additionally, the Coastal Zone Enhancement Reauthorization Act of 2003 increases authorization for the National Estaurine Research Reserve System, NERRS, to $13 million in fiscal year 2004 with an additional $1 million increase each year through fiscal year 2008. NERRS is a network of reserves across the country that are operated as a cooperative Federal-State partnership.

Currently, there are 25 reserves in 22 States. They provide an important opportunity for long-term research and education in these ecosystems. Additional funds will help strengthen this nationwide program which has not received increased funding commensurate with the addition of new reserves.

I wish to address a very serious problem facing the Coastal Zone Management Program that we have tried to rectify in this bill. The Administrative Grant Program, section 306, serves as the base funding mechanism for the States' coastal zone management programs. The amount of funding each State receives is determined by a formula that takes into account both the length of the coastline and the population of each State.

However, sine 1992, the Appropriations Committee has imposed a $2 million dollar cap per State on administrative grants. This was an attempt to ensure equitable allocation to all the participating States. Over the past 8 years, appropriations for administrative grants have increased by $19 million, yet the $2 million cap has remained. The result has been an inequitable distribution of these new funds. By fiscal year 2000, 13 States had reached this arbitrary $2 million cap. These 13 States account for 83 percent of our Nation's coastline and 76 percent of our coastal population.

It is not equitable to have the 13 States with the largest coastlines and populations stuck at a $2 million dollar cap, despite major overall funding increases. While smaller States have enjoyed additional programmatic success due to an influx of funding, some of the larger States have stagnated.

In an attempt to reassure members of the Appropriations Committee that a fair distribution of funds can occur without this hard cap in place, I have worked with Senator Hollings to develop language that has been included in this bill that directs the Secretary of Commerce to ensure equitable increases or decreases between funding years for each State. It further requires that States should not experience a decrease in base program funds in any year when the overall appropriations increase.

I thank Senator Hollings for his assistance in resolving this matter and his commitment over the years to ensuring that the states are treated fairly.

The Coastal Zone Management Program enjoys wide support among all of the coastal States due to its history of success. This support has been clearly demonstrated by the many members of the Commerce Committee who have worked with me to strengthen this program over the past several years.

I thank Senator Kerry, the ranking Democrat of the Oceans and Fisheries Subcommittee, for his hard work and support of this bill. I would also like to express my appreciation to Senator McCain, the chairman of the Commerce Committee, and Senator Hollings, the ranking Democrat of the Committee, for their support of this measure and for their willingness to discharge this bill out of the committee so that we may begin working with our colleagues in the House of Representatives to enact this critical piece of legislation.

This is a solid, reasonable, and a realistic bill that enjoys bipartisan support on the Commerce Committee. It is time that we now turn to legislation reauthorizing a program with a long track record of preserving our coastal environment while allowing sensible development.

I am pleased to support this legislation that will provide the States with the necessary funding and framework to meet the challenges facing our coastal communities in the 21st Century. I urge my colleagues to support.

Mr. President, I rise today to introduce the Harmful Algal Bloom and Hypoxia Amendments Act of 2003. This bill continues and builds upon the research efforts established in 1998 by the Harmful Algal Bloom and Hypoxia Research and Control Act.

I am very pleased to continue working with my friend and co-sponsor Senator Breaux on this important issue. He and I represent coastal States that are directly affected by harmful algal bloom outbreaks and hypoxia, and we see the ecological and economic damage, as well as the risks to human health, that are caused by these events.

In Maine, for example, harmful algal blooms lead to paralytic shellfish poisoning, a potentially fatal neurological disorder. When humans eat shellfish that have fed on algae in the genus Alexandrium, they are exposed to the toxins that have accumulated in the fish as a result of the algae. Along with human, fish and marine mammals suffer and die from this exposure. This phenomenon, which occurs along thousands of miles of U.S. coastline, has increased dramatically in the Gulf of Maine in the last 20 years.

Although we have learned a great deal about harmful algal blooms and hypoxia in recent years, we still have a long way to go in understanding, predicting, and mitigating these events. Massive fish kills still occur along our coastlines on almost a regular basis, leading to extensive impacts on fish and shellfish populations and fishing industries. Beach-goers and anglers are still being warned of ``no swimming'' and ``no fishing'' alerts when conditions pose a threat to human health. The Woods Hole Oceanographic Institution, in a 2000 study, estimated the annual economic impact from harmful algae to be $49 million, in lost tourism, fishing, and health costs. According to the National Oceanic and Atmospheric Administration, in the U.S. approximately $1 billion could be lost in the next decade due to harmful algae.

Harmful algal blooms and hypoxia present enormous challenges to marine resource managers. For example, consider what happens in the Gulf of Mexico. Thirty-one States drain into the Mississippi River, and the runoff from this massive watershed is carried into the gulf. When the waters heat up in the summer, the heavy loads of nutrients in this runoff likely contribute to massive algal blooms. When these algae die and decompose they are consumed by bacteria, which depletes oxygen from the water. If the algal blooms are extensive enough, they will essentially remove all oxygen from the water. No sea life can live under these conditions, which creates a massive area in the water column known as the

``dead zone.'' At that point, all we can really do is wait it out. Clearly, we need to equip our coastal and ocean managers with better tools for predicting, minimizing, and mitigating these outbreaks.

Harmful algal blooms and hypoxia are just as much of a problem now as they were in 1998, when we passed the original bill. It is clear that these problems have not gone away. Algal blooms are still prevalent around the country, the dead zone still occurs each summer in the Gulf of Mexico, and the management and mitigation measures we set the framework for in our 1998 bill still need to be realized.

Our 1998 bill authorized a cross-section of research and monitoring activities on harmful algal blooms and hypoxia. These activities were to encompass basic and applied sciences, looking at the distribution and frequency of outbreaks, as well as how they may be better mitigated and managed. This research, however, was never fully funded at the authorized amounts for research and monitoring, so many of these research activities still need to occur, and many on-going projects need to continue. These amendments would authorize the funding that will reignite these scientific activities.

Our 1998 bill also codified an Interagency Task Force, chaired by the Department of Commerce. Through this group, experts from the Environmental Protection Agency, the Department of Agriculture, the Department of the Interior, the Department of Health and Human Services, and numerous other appropriate Federal agencies were able to start the long process of collectively understanding and seeking solutions to many aspects of harmful algal blooms and hypoxia. This Task Force spearheaded a technical assessment of the causes and consequences of the northern Gulf of Mexico dead zone, an action plan to eliminate this dead zone, a national assessment of harmful algal blooms, and a national assessment of hypoxia. I would like to express my appreciation for the hard work and accomplishments of this group, yet I realize--as do they--that much more needs to be done.

The 1998 bill allowed the President to disestablish the Task Force after submission of their reports. Considering the great challenges that lay before us and this Task Force, we need to keep this group intact so that they can follow through on their previous recommendations and continue much of their ongoing collaborative efforts. This bill would repeal the Task Force disestablishment clause in the 1998 bill.

This reauthorization continues to seek the valuable contributions of Task Force members on a response and prediction action plan to protect environmental and public health from impacts of harmful algal blooms. This plan would review prediction techniques, develop innovative response measures, and include incentive-based partnership approaches. The Task Force would contribute to this plan, as would coastal zone management experts from State and local governments, Indian tribes, industries, universities, and non-governmental organizations. In developing this process, we mirrored the process used for the dead zone action plan, one of the products of the Task Force from the 1998 bill, to ensure widespread public participation and involvement of the coastal governors.

The dead zone action plan recommended a national framework for reducing nutrients entering the Mississippi River as well as regional plans to implement any needed measures. While a national framework is essential for facilitating the widespread changes that are needed, it is at the local and regional level that solutions must be developed and implemented. The regional plans will help avoid a one-size-fits-all approach, since local and regional variations in the types of land use, landscape geology, and community input should be taken into account when carrying out nutrient reduction and outbreak mitigation measures of this magnitude. By tailoring mitigation and management measures to each location, the overall approach can be more effective.

Local and regional assessments are a key component of this reauthorization as well. Coastal states, Indian tribes, and local governments would be able to request these local and regional assessments of hypoxia and harmful algal blooms, so they can better understand the causes, impacts, and mitigation alternatives for these outbreaks. By having the Commerce Department and the Task Force provide and assist in these assessments, local and regional communities can be more empowered to take action on reducing the magnitude and impacts of these outbreaks.

This bill would authorize $26 million in FY04, and $26.5 million in FY05, and $27 million in FY06. These funding levels reflect modest increases in some of the research and monitoring programs authorized in the 1998 bill and provide funding for the new assessments and implementation of their recommendations.

This reauthorization enables collaborative, science-based research efforts that can help us to better understand how to predict and mitigate harmful algal blooms and hypoxia events. It facilitates action at the local and regional levels, which is a key element for effectively addressing and minimizing the adverse ecological, economic, and health impacts of these outbreaks. I wish to thank Senator Breaux for his continued vigilance and important contributions on this matter, and I encourage my colleagues to support this bill.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today to introduce again legislation to eliminate one of the great inconsistencies in the Internal Revenue Code.

The bill I am introducing today with Senator Bennett is designed to restore some internal consistency to the tax code as it applies to art and artists. No one has ever said that the tax code is fair even though it has always been a theoretical objective of the code to treat similar taxpayers similarly.

The bill I am introducing today would address two areas where similarly situated taxpayers are not treated the same.

Internal inconsistency #1 deals with the long-term capital gains tax treatment of investments in art and collectibles. If a person invests in stocks or bonds, holds the asset for the requisite period of time, and sells at a gain, the tax treatment is long term capital gains. The top capital gains tax rate is 20 percent, 18 percent, if the asset is held for five or more years. However, if the same person invests in art or collectibles the top rate is hiked up to 28 percent. Art for art's sake should not incur an additional 40 percent tax bill simply for revenue's sake. That is a big impact on the pocketbook of the beholder.

Art and collectibles are alternatives to financial instruments as an investment choice. To create a tax disadvantage with respect to one investment compared to another creates an artificial market and may lead to poor investment allocations. It also adversely impacts those who make their livelihood in the cultural sectors of the economy.

Santa Fe, NM, is the third largest art market in the country. We have a diverse colony of artists, collectors and gallery owners. We have fabulous Native American rug weavers, potters, and carvers. Creative giants like Georgia O'Keeffe, Maria Martinez, E.L. Blumenshein, Allan Houser, R.C. Gorman, and Glenna Goodacre have all chosen New Mexico as their home and as their artistic subject. John Nieto, Wilson Hurley, Clark Hulings, Veryl Goodnight, Bill Acheff, Susan Rothenberg, Bruce Nauman, Agnes Martin, Doug Hyde, Margaret Nez, Dan

Ostermiller are additional examples of living artists creating art in New Mexico.

Art, antiques, and collectibles are a $12 to $20 billion annual industry nationwide. In New Mexico, it has been estimated that art and collectible sales range between $500 million and $1 billion a year.

Economists have always been interested in the economics of the arts. Adam Smith is a well-known economist. He was also a serious, but little-known essayist on painting, dancing, and poetry. Keynes was a passionate devotee of painting.

Even the artistically inclined economists found it difficult to define art within the context of economic theory. When asked to define jazz, Louis Armstrong replied: ``If you gotta ask, you ain't never going to know.''

A similar conundrum has challenged Galbraith and other economists who have grappled with the definitional issues associated with bringing art within the economic calculus. Original art objects are, as a commodity group, characterized by a set of attributes: every unit of output is differentiated from every other unit of output; art works can be copied but not reproduced; the cultural capital of the Nation has significant elements of public good.

Because art works can be resold, and their prices may rise over time, they have the characteristics of financial assets, and as such may be sought as a hedge against inflation, as a store of wealth, or as a source of speculative capital gain. A study by Keishiro Matsumoto, Samuel Andoh and James P. Hoban, Jr. assessed the risk-adjusted rates of return on art sold at Sotheby's during the 14-year period ending September 30, 1989. They concluded that art was a good investment in terms of average real rates of return. Several studies found that rates of return from the price appreciation on paintings, comic books, collectibles and modern prints usually made them very attractive long- term investments.

William Goetzmann when he was at the Columbia Business School constructed an art index and concluded that painting price movements and stock market fluctuations are correlated.

I conclude that with art, as well as stocks, past performance is no guarantee of future returns but the gains should be taxed the same.

In 1990, the editor of Art and Auction asked the question: ``Is there an `efficient' art market?'' A well-known art dealer answered ``Definitely not. That's one of the things that makes the market so interesting.'' For everyone who has been watching world financial markets lately, the art market may be a welcome distraction.

Why do people invest in art and collectibles? Art and collectibles are something you can appreciate even if the investment doesn't appreciate. Art is less volatile. If buoyant and not so buoyant bond prices drive you berserk and spiraling stock prices scare you, art may be the appropriate investment. Because art and collectibles are investments, the long-term capital gains tax treatment should be the same as for stocks and bonds. This bill would accomplish that.

Artists will benefit. Gallery owners will benefit. Collectors will benefit. And museums benefit from collectors. About 90 percent of what winds up in museums like the New York's Metropolitan Museum of Art comes from collectors.

Collecting isn't just for the hoyty toity. It seems that everyone collects something. Some collections are better investments than others. Some collections are just bizarre. The internet makes collecting big business.

The flea market fanatics are also avid collectors. In fact, people collect the darndest things. Books, duck decoys, chia pets, snowglobes, thimbles, handcuffs, spectacles, baseball cards, and guns.

For most of these collections, capital gains isn't really an issue, but you never know. You may find that your collecting passion has created a tax predicament, to phrase it politely. Art and collectibles are tangible assets. When you sell them, capital gains tax is due on any appreciation over your purchase price.

The bill provides capital gains tax parity because it lowers the top capital gains rate from 28 percent to 20 percent, 18 percent if the asset has been held for five or more years.

Internal inconsistency #2 deals with the charitable deduction for artists donating their work to a museum or other charitable cause. When someone is asked to make a charitable contribution to a museum or to a fund raising auction it shouldn't matter whether you are an artist or not. Under current law, however, it makes a big difference. As the law stands now, an artist/creator can only take a deduction equal to the cost of the art supplies. The bill I am introducing will allow a fair market deduction for the artist.

It's important to note that this bill includes certain safeguards to keep the artist from ``painting himself a tax deduction.'' This bill applies to literary, musical, artistic, and scholarly compositions if the work was created at least 18 months before the donation was made, has been appraised, and is related to the purpose or function of the charitable organization receiving the donation. As with other charitable contributions, it is limited to 50 percent of adjusted gross income, AGI. If it is also a capital gain, there is a 30 percent of AGI limit. I believe these safeguards bring fairness back into the code and protect the Treasury against my potential abuse.

When I introduced this legislation in the last Congress, the Committee on Joint Tax estimated that revenue for the capital gains provision was $2.3 billion over ten years and for the charitable deduction was approximately $48 million over ten years.

I hope my colleagues will help me put the internally consistent into the Internal Revenue Code for art's sake.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I am pleased to be joined by Senator Bingaman in introducing legislation that declares the United States holds certain public domain lands in trust for the Pueblos of San Ildefonso and Santa Clara in New Mexico. This body, in the 107th Congress, passed this legislation by unanimous consent. The House did not act on it's companion and so we are here today to reintroduce the legislation.

In 1988 the Bureau of Land Management, BLM, pursuant to the Federal Lands Policy and Management Act, declared approximately 4,484 acres located in the eastern foothills of the Jemez Mountains in north central New Mexico, including portions of Garcia and Chupadero Canyons, to be ``disposal property.'' The Garcia Canyon surplus lands qualify for disposal partially because the track is an isolated tract of land almost inaccessible to the general public. It is bordered on three sides by the reservations of Santa Clara Pueblo and the Pueblo of San Ildefonso, and by U.S. Forest Service land on the remaining side. The only road access consists of unimproved roads through the two Pueblo's reservations. These factors have resulted in minimal or no public usage of the Garcia Canyon surplus lands in recent decades.

I understand that currently there are no resource permits, leases, patents or claims affecting these lands; nor is it likely that any significant minerals exist with the Garcia Canyon transfer lands. The Garcia Canyon transfer lands contain a limited amount of lesser quality forage for livestock and have not been actively grazed for over a decade. However, the Garcia Canyon surplus lands constitute an important part of the ancestral homelands of the Pueblos of Santa Clara and San Ildefonso.

Santa Clara and San Ildefonso are two of the Tewa-speaking federally- recognized Indian Pueblos of New Mexico. Both Pueblos have occupied and controlled the areas where they are presently located many centuries before the arrival of the first Europeans in the area in the late 16th century. Their homelands are defined by geographical landmarks, cultural sites, and other distinct places whose traditional Tewa names and locations have been known and passed down in each Pueblo through the generations. Based upon these boundaries, about 2,000 acres of the Garcia Canyon surplus lands is within the aboriginal domain of the Pueblo of San Ildefonso. The remaining approximately 2,484 acres are in Santa Clara's aboriginal lands.

The Bureau of Land Management currently seeks to dispose of the Garcia Canyon surplus lands and the Pueblos of Santa Clara and San Ildefonso seek to obtain these lands. In addition, the BLM and Interior Department for years have supported the transfer of the land to the two Pueblos, provided the Pueblos agree upon a division of the Garcia Canyon surplus lands. In response, the two Pueblos signed a formal agreement affirming the boundary between the respective parcels on December 20, 2000.

The Pueblos of Santa Clara and San Ildefonso have worked diligently in arriving at this agreement. They have also worked collaboratively in seeking community support and garnering supporting resolutions from Los Alamos, Rio Arriba and Santa Fe Counties, the National Congress of American Indians and supporting letters from the National Audubon Society's New Mexico State Office, the Quivira Coalition and the Santa Fe Group of the Sierra Club.

This unique situation presents a win-win opportunity to support more efficient management of public resources while restoring to tribal control isolated tracts of federal disposal property. Upon transfer, the Pueblos of Santa Clara and San Ildefonso intend to maintain these lands in their natural state and use them for sustainable traditional purposes including cultural resource gathering, hunting and possible livestock grazing. Where appropriate, both tribes are interested in performing work to restore and improve ecosystem health, particularly to support habitat for culturally significant animal and plant species. Both Pueblos have experience Natural Resource Management and Environmental Protection programs and are capable of managing these lands for both ecologic health and community benefits.

We want to secure Congressional authorization to transfer control of these lands to the two Pueblos, with legal title being held in trust by the Secretary of the Interior for each of the Pueblos for their respective portions of the property. I urge my colleagues to support this legislation as they did last term. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today to introduce again legislation to eliminate one of the great inconsistencies in the Internal Revenue Code.

The bill I am introducing today with Senator Bennett is designed to restore some internal consistency to the tax code as it applies to art and artists. No one has ever said that the tax code is fair even though it has always been a theoretical objective of the code to treat similar taxpayers similarly.

The bill I am introducing today would address two areas where similarly situated taxpayers are not treated the same.

Internal inconsistency #1 deals with the long-term capital gains tax treatment of investments in art and collectibles. If a person invests in stocks or bonds, holds the asset for the requisite period of time, and sells at a gain, the tax treatment is long term capital gains. The top capital gains tax rate is 20 percent, 18 percent, if the asset is held for five or more years. However, if the same person invests in art or collectibles the top rate is hiked up to 28 percent. Art for art's sake should not incur an additional 40 percent tax bill simply for revenue's sake. That is a big impact on the pocketbook of the beholder.

Art and collectibles are alternatives to financial instruments as an investment choice. To create a tax disadvantage with respect to one investment compared to another creates an artificial market and may lead to poor investment allocations. It also adversely impacts those who make their livelihood in the cultural sectors of the economy.

Santa Fe, NM, is the third largest art market in the country. We have a diverse colony of artists, collectors and gallery owners. We have fabulous Native American rug weavers, potters, and carvers. Creative giants like Georgia O'Keeffe, Maria Martinez, E.L. Blumenshein, Allan Houser, R.C. Gorman, and Glenna Goodacre have all chosen New Mexico as their home and as their artistic subject. John Nieto, Wilson Hurley, Clark Hulings, Veryl Goodnight, Bill Acheff, Susan Rothenberg, Bruce Nauman, Agnes Martin, Doug Hyde, Margaret Nez, Dan

Ostermiller are additional examples of living artists creating art in New Mexico.

Art, antiques, and collectibles are a $12 to $20 billion annual industry nationwide. In New Mexico, it has been estimated that art and collectible sales range between $500 million and $1 billion a year.

Economists have always been interested in the economics of the arts. Adam Smith is a well-known economist. He was also a serious, but little-known essayist on painting, dancing, and poetry. Keynes was a passionate devotee of painting.

Even the artistically inclined economists found it difficult to define art within the context of economic theory. When asked to define jazz, Louis Armstrong replied: ``If you gotta ask, you ain't never going to know.''

A similar conundrum has challenged Galbraith and other economists who have grappled with the definitional issues associated with bringing art within the economic calculus. Original art objects are, as a commodity group, characterized by a set of attributes: every unit of output is differentiated from every other unit of output; art works can be copied but not reproduced; the cultural capital of the Nation has significant elements of public good.

Because art works can be resold, and their prices may rise over time, they have the characteristics of financial assets, and as such may be sought as a hedge against inflation, as a store of wealth, or as a source of speculative capital gain. A study by Keishiro Matsumoto, Samuel Andoh and James P. Hoban, Jr. assessed the risk-adjusted rates of return on art sold at Sotheby's during the 14-year period ending September 30, 1989. They concluded that art was a good investment in terms of average real rates of return. Several studies found that rates of return from the price appreciation on paintings, comic books, collectibles and modern prints usually made them very attractive long- term investments.

William Goetzmann when he was at the Columbia Business School constructed an art index and concluded that painting price movements and stock market fluctuations are correlated.

I conclude that with art, as well as stocks, past performance is no guarantee of future returns but the gains should be taxed the same.

In 1990, the editor of Art and Auction asked the question: ``Is there an `efficient' art market?'' A well-known art dealer answered ``Definitely not. That's one of the things that makes the market so interesting.'' For everyone who has been watching world financial markets lately, the art market may be a welcome distraction.

Why do people invest in art and collectibles? Art and collectibles are something you can appreciate even if the investment doesn't appreciate. Art is less volatile. If buoyant and not so buoyant bond prices drive you berserk and spiraling stock prices scare you, art may be the appropriate investment. Because art and collectibles are investments, the long-term capital gains tax treatment should be the same as for stocks and bonds. This bill would accomplish that.

Artists will benefit. Gallery owners will benefit. Collectors will benefit. And museums benefit from collectors. About 90 percent of what winds up in museums like the New York's Metropolitan Museum of Art comes from collectors.

Collecting isn't just for the hoyty toity. It seems that everyone collects something. Some collections are better investments than others. Some collections are just bizarre. The internet makes collecting big business.

The flea market fanatics are also avid collectors. In fact, people collect the darndest things. Books, duck decoys, chia pets, snowglobes, thimbles, handcuffs, spectacles, baseball cards, and guns.

For most of these collections, capital gains isn't really an issue, but you never know. You may find that your collecting passion has created a tax predicament, to phrase it politely. Art and collectibles are tangible assets. When you sell them, capital gains tax is due on any appreciation over your purchase price.

The bill provides capital gains tax parity because it lowers the top capital gains rate from 28 percent to 20 percent, 18 percent if the asset has been held for five or more years.

Internal inconsistency #2 deals with the charitable deduction for artists donating their work to a museum or other charitable cause. When someone is asked to make a charitable contribution to a museum or to a fund raising auction it shouldn't matter whether you are an artist or not. Under current law, however, it makes a big difference. As the law stands now, an artist/creator can only take a deduction equal to the cost of the art supplies. The bill I am introducing will allow a fair market deduction for the artist.

It's important to note that this bill includes certain safeguards to keep the artist from ``painting himself a tax deduction.'' This bill applies to literary, musical, artistic, and scholarly compositions if the work was created at least 18 months before the donation was made, has been appraised, and is related to the purpose or function of the charitable organization receiving the donation. As with other charitable contributions, it is limited to 50 percent of adjusted gross income, AGI. If it is also a capital gain, there is a 30 percent of AGI limit. I believe these safeguards bring fairness back into the code and protect the Treasury against my potential abuse.

When I introduced this legislation in the last Congress, the Committee on Joint Tax estimated that revenue for the capital gains provision was $2.3 billion over ten years and for the charitable deduction was approximately $48 million over ten years.

I hope my colleagues will help me put the internally consistent into the Internal Revenue Code for art's sake.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today to reintroduce two bills that I originally sponsored in the 107th Congress. As our Nation prepares to go to war with Iraq and continues the war against terrorism, my bills will give additional tax relief to military families. One will give tax relief to a small group of men and women in our armed services stationed on the island of Diego Garcia in the Indian Ocean, supporting the war on terrorism in Afghanistan. The second bill will exclude from gross income child care benefits paid to members of our armed forces. These are small measures, but both will be of great benefit to the men and women serving our country.

Diego Garcia is a British Territory lying seven degrees South Latitude off the coast of India, in the middle of the Indian Ocean. The island is 40 miles around and encompasses an area of 6,720 acres, most of it dominated by a large lagoon. The land mass is actually very small. It is home to a joint British--United States Naval Support Facility, and while there are only a small handful of British Royal Navy personnel on the island, there is a larger, tight-knit team of American Air Force, Navy, Marine Corps and Army personnel there. These men and women serving on Diego Garcia have been supporting B-52 bombing missions and other operations over Afghanistan. They will be called into service in the event of war with Iraq, they served this purpose in the previous Gulf War.

As a Nation, we provide members of our armed forces with a variety of benefits, all of them deserved. They receive hardship duty pay of $150 per month for serving in austere regions of the World. They get imminent danger pay of $150 per month as compensation for being in physical danger. One of the most generous benefits for those serving in the war on terrorism is the combat zone tax exclusion. Enlisted members of the armed services do not pay Federal taxes on their compensation for any month of service inside a combat zone. Officers pay tax on any amount of income over the highest salary for enlisted personnel. Both officers and enlisted personnel have to serve one day in the combat zone to get this benefit for the entire month. The exclusion only applies to personnel who receive imminent danger pay.

On Diego Garcia, the pilots and flight crews who fly the missions over Afghanistan are eligible for the combat zone income tax exclusion because they receive imminent danger pay. Many of them are from the 2nd Bomb Wing and the 917th Wing. Both units call Barksdale Air Force Base in Louisiana their home. But the men and women who load the bombers, fuel them, and maintain them are not eligible because they do not enter the combat zone. Barksdale is also their home base. My office was contacted by some of the Barksdale officers who fly the bombing missions about this discrepancy. They asked me to help out their support crews, a gesture of selflessness that I seek to honor today.

I recognize that the support crews may not receive imminent danger pay, but their situation is not too different from Naval personnel performing the

same tasks on ships in the Arabian Sea. Naval support crews receive imminent danger pay and are eligible for the tax exclusion, but they do not enter Afghanistan.

Diego Garcia is a beautiful place, but is a long way from home. The least we could do is treat everyone who has served on the island the same. That is what my bill will do.

My second bill will correct an omission in the Tax Reform Act of 1986. That Act contained a provision consolidating the laws regarding the tax treatment of certain military benefits. The Conference Report to that Act contains a long list of benefits to be excluded from gross income of military personnel. According to the report, this list was to be exhaustive. The problem is that child care benefits are not on that list.

I do not know if this omission was intentional. Perhaps at that time, child care benefits were relatively unknown in the military. The Conference Report gives the Treasury Secretary the authority to expand the list of eligible benefits, but so far no Secretary has chosen to provide any guidance to the Department of Defense as to how these benefits should be treated for tax purposes. While military families are not currently being taxed for child care benefits, the Department of Defense has indicated that it would like Congress to clarify that child care benefits are not subject to tax. My bill will give our military families and the Department of Defense a greater degree of certainty.

I am pleased that my dependent care provision has been included in S. 19, the Veterans and Military Personnel Fairness Act of 2003. The same provision had been included in a similar package in the last Congress. I urge the Finance Committee to consider this package very soon and to include my Diego Garcia bill in the final package.

Throughout our history, in time of war we have worked to make sure that our armed forces have everything they need and we have spared no expense in meeting that need. But the men and women on the ground often have families back at home. We should make sure that we support them as well. I urge my colleagues to support this legislation.

Mr. President, I am pleased to rise today to join Senator Snowe as an original cosponsor of the Harmful Algal Bloom and Hypoxia Amendments Act of 2003.

The Gulf of Mexico has a serious hypoxia condition. The water flowing out of the Mississippi River Delta is loaded with nutrients, nutrients that help things grow. In the gulf, the nutrients fuel accelerated growth of algae and other plankton-like organisms. As the organisms die and descent through the water, they decompose and rob the water of dissolved oxygen. This lack of oxygen, below a level which can sustain marine life, is hypoxia and creates what we call ``the Dead Zone.'' In 1998, the ``Dead Zone'' exceeded 7,000 square miles, equivalent to the combined areas of the States of Rhode Island and Connecticut.

As a Senator from the State that is on the receiving end of this unprecedented problem and as a member of the Senate Commerce Committee, Subcommittee on Oceans and Fisheries, I was very pleased to have worked with Senator Snowe on legislation that first drew national attention to hypoxia and harmful algal blooms, the Harmful Algal Bloom and Hypoxia Control Act of 1998.

Among important issues, the enacted legislation required an interagency task force to develop an assessment of hypoxia in the northern Gulf of Mexico. It also required the task force to submit to Congress a plan based on the assessment for reducing, mitigating, and controlling hypoxia in the northern Gulf of Mexico.

The Mississippi River/Gulf of Mexico Watershed Nutrient Task Force was given a large job, to come up with a national strategy to reduce the size and growth of the ``Dead Zone'' in the Gulf of Mexico off of the coast of Louisiana. They were charged by the Harmful Algal Bloom and Hypoxia Research and Control Act of 1998 to put this strategy in the form of an action plan that could be undertaken by the States and partner agencies at the Federal and State level that make up the task force. They succeeded on both fronts, not only delivering an action plan, but doing so by reaching consensus after a process of strenuous debate and discussion involving many stakeholders and interests. That plan was delivered to Congress in January of 2001 but has yet to be fully funded. Even so, it has been providing some significant benefits to the Mississippi River Basin and the country.

As the action plan states ``the work of the Task Force has provided a basin-wide context for the continued pursuit of both incentive-based, voluntary efforts for non-point sources and existing regulatory controls for point sources.''

The task force made it clear in the action plan that efforts to reduce hypoxia in the Gulf involve cleaning up waters upstream and throughout the Mississippi River Basin, and that the benefits, economic, as well as environmental, can be achieved across the entire basin as well. Their work is providing us with a way to unify the Mississippi River Basin in terms of our common interests and resources, primary of which is the Mississippi River, probably the most important piece of infrastructure in the country.

In Louisiana, we value all of the resources of that vast system, not only our productive coastal fisheries which are endangered by hypoxia, but the corn, grain, and other food sources that are shipped out through our port system.

Solving the problem of the ``Dead Zone'' will require an unprecedented degree of cooperation among many States, agencies, and stakeholders. The task force is continuing to provide us with a forum and a means for expanding that cooperation.

One of the prime research facilities on the hypoxia problem is taking place at the Louisiana University Marine Consortium, LUMON, in Cocodrie, LA. LUMCON has been studying the hypoxia problem in the Gulf of Mexico since 1985 under grants from the National Oceanic and Atmospheric Administration's Coastal Ocean Program.

The combined efforts of the task force has become even more apparent over the past year, as the ``Dead Zone'' reached a new record size in the summer of 2002, exceeding 8,000 square miles and extending from the mouth of the Mississippi River well into the coastal waters of Texas.

I believe that the Harmful Algal Bloom and Hypoxia Amendments Act of 2003 that Senator Snowe and I are introducing today will provide much needed funding and direction to continue the effort to mitigate and eventually eliminate the hypoxic problem in the Gulf of Mexico and harmful algal blooms in our Nation's waters.