Floor Statements

Madam President, there has been a great deal of conversation recently about the need to close tax loopholes. This is a welcome development for those of us who have gone after these loopholes for years. It is particularly timely as the public is focusing more and more on how tax loopholes distort economic incentives and often benefit the wealthiest among us at the expense of most U.S. taxpayers.

Last week, President Obama released a framework for business tax reform that took aim at many corporate tax loopholes. I look forward to working with the administration and with our colleagues in the Senate to make real reform a reality--reform that brings greater fairness to the Tax Code, eliminates incentives for moving jobs and assets overseas, restores revenue lost to unjustified tax loopholes, and helps us reduce the deficit without damaging vital programs for education, transportation, health care, and national security.

One recent and very public announcement illustrates dramatically our Tax Code's distortions and the need for reform. At the center of this story is Facebook and its founder and CEO Mark Zuckerberg. Mr. Zuckerberg and his company have become a remarkable American business success story. As part of that success, Facebook is in the process of making its initial public offering of stock. The public documents that Facebook is required to file as part of that offering tell another compelling story about one of our Tax Code's unjustified corporate loopholes.

According to its filings, when Facebook goes public, Mr. Zuckerberg plans to exercise options to purchase 120 million shares of stock for 6 cents a share. Obviously, Mr. Zuckerberg's shares are going to be worth a great deal more than 6 cents each--a total of about $7 million. They will apparently be worth in the neighborhood of $5 billion.

Here is where the tax loophole comes in. Under current law, Facebook can, perfectly legally, tell investors and the public and regulators that the stock options he received cost the company a mere 6 cents a share. That is the expense shown on the company's books. But the company can also, perfectly legally, later on file a tax return claiming that those same options cost the company something close to what the shares actually sell for later on--perhaps $40 a share. The company can take a tax deduction for that far larger amount. So the books show a highly profitable company--profitable, in part, because of the relatively small expense the company shows on its books for the stock options it grants to its employees--but when it comes time to pay taxes, to pay Uncle Sam, the loophole in the Tax Code allows the company to take a tax deduction for a far larger expense than they have shown on their books.

In addition, Facebook is allowed by law to carry back the so-called loss arising from this deduction for 2 years into the past, which means it can claim a tax refund for the income tax it has paid over the past 2 years--a refund that the company estimates at $\1/2\ billion. So instead of paying taxes to the Treasury, this profitable company will claim a hefty refund on the taxes already paid.

But that is not all. The company says it will, as allowed by law, also carry forward the so-called losses arising from this tax deduction for over 20 years into the future, thereby reducing any taxes that it owes in the years ahead. Over the years, this loophole could give a tax break of up to $3 billion. The end result is that a profitable U.S. corporation--a success story--could end up paying no taxes at all for years, even decades.

I emphasize that Facebook's actions are within the law. As with so much of our Tax Code, it is not the law-breaking that shocks the conscience, it is the stuff that is perfectly legal. For years, my Permanent Subcommittee on Investigations has identified this stock option loophole and tried to explain its cost, its unfairness, and why it should be closed. Facebook's $3 billion tax break brings the issue into sharp focus.

Again, the stock option loophole allows corporations to compensate their executives with stock options, report a specific stock option expense to their shareholders, and then later take a tax deduction for typically a much higher amount. Stock option grants are the only kind of compensation where the Tax Code allows companies to claim a higher expense for tax purposes than it shows on its books. Our subcommittee found that the difference between what U.S. corporations tell the public and what they told the IRS was as much as $61 billion in 1 year.

Facebook's use of this loophole is the most pointed illustration yet of the cost of this loophole. It is difficult to get our minds around a $3 billion tax break for a single corporation. Just how big is it? Well, consider this: In 2009, the most recent year for which IRS data is available, taxpayers from 11 States in our Union sent less than $3 billion in individual income tax revenue to the Treasury. How does this make any sense? After all, American taxpayers are going to have to make up for what Facebook's tax deduction costs the Treasury. That $3 billion is either going to come out of the pockets of American families now or it will add to the deficit they are going to have to pay for later.

What could our Nation do with the $3 billion it will lose when Facebook exploits the stock option loophole? We could reduce the Federal deficit or we could pay for programs that protect our seniors, put cops on the beat or teachers in classrooms. The $3 billion Facebook will get in tax deductions would more than triple the budget of the Small Business Administration, which seeks to help American entrepreneurs create jobs and grow the economy. Three billion dollars would pay for the Pentagon's budget for housing our military families for nearly 2 full years. It would pay the budget of the National Institute of Science and Technology for 4 full years. It would more than triple what we plan to spend helping homeless veterans next year. It would pay 6 times over for the 24 Reaper unmanned aerial vehicles the Air Force plans to buy next year.

Some are going to argue that Facebook's tax break is offset by the fact that Mr. Zuckerberg himself, as well as the other executives who are receiving stock options, will pay taxes as individuals. As various news reports indicate, Mr. Zuckerberg will face a substantial tax bill on the $5 billion in compensation he is about to receive--perhaps in the neighborhood of a $2 billion tax bill. But it is unlikely that the individual taxes Mr. Zuckerberg pays will offset the tax revenues lost to this loophole. What the Treasury receives from Mr. Zuckerberg on the one hand, it will return, and then some, to his company with the other hand. We also should remember that Mr. Zuckerberg's financial future is closely tied to that of his company. The value of the options and his retained interest make that clear. To the extent that his corporation benefits--and as I have shown, Facebook will benefit handsomely from the use of this loophole--Mr. Zuckerberg stands to benefit as well. Put simply, some of that big tax bill he faces right now will come back to him through the corporation he will still own a huge part of and will control.

Our tax system is built on the principle that businesses as well as individuals ought to help pay our Nation's bills. Corporations impose plenty of costs on society, from environmental disasters, financial bailouts, product recalls, and more. Businesses also want and need government services, including efficient transportation systems, patent protections, even Federal loan guarantees. Paying those costs is why we have a corporate income tax to begin with. Both businesses and individuals are required by law to contribute, and should do so, to meet their civic obligations and to pay their fair share. There is no reason Facebook and the other corporations that use this tax loophole should continue to receive these windfall tax deductions.

Senator Conrad and I earlier this month introduced S. 2075, the Cut Unjustified Tax Loopholes Act, or CUT Loopholes Act. This bill, similar to the legislation I have introduced in the past few Congresses, would close this loophole. Under our bill, corporations would no longer be allowed to claim tax deductions for options that are larger than the expense they report to their shareholders and to people considering buying their stock. It would also subject stock options to the same $1 million cap on deductions for executive compensation that now applies to other forms of compensation. At the same time--and this is important to know--our bill would leave unchanged the way the law applies to individuals who receive stock options, and it would leave unchanged incentive stock options that are offered by startup companies. We would not affect that.

The stock option loophole should have been closed long before Mr. Zuckerberg's extraordinarily lucrative options became public. But surely the case of Facebook illustrates to the Senate, to the Congress, and to the American people that we must close this loophole.

I have spoken today about one corporate tax loophole, but there are many more. The momentum has never been stronger for tax reform that brings more fairness to the Tax Code, restores revenue lost to unjustified tax loopholes, reduces the deficit, and protects important priorities. I look forward to working with our colleagues and with the administration to turn that momentum into real reform.

Madam President, I thank the Chair, I yield the floor, and I note the absence of a quorum.

Mr. President, the amendment we are considering today represents a direct assault on access to preventive health care services for millions of women in this country. The ostensible purpose of this proposal is to protect the rights of conscience of any employer or healthcare insurer, religious or secular, who may have a religious or moral objection to providing family planning services free of charge to their employees. I respect and will defend the moral values of employers and insurance companies. But I also respect the moral values of people who need medical services. So we will end up deciding whether or not to deny access to critical and possibly lifesaving health services for millions of people in this country, not whose religious or moral values have precedence.

As drafted, Senator Blunt's amendment would grant employers and health insurance companies the power to deny access to not just preventive healthcare services for women, but any healthcare service, for anyone, regardless of its nature. This means any employer could choose to deny employees insurance coverage for such things as children's immunizations; mammograms; lifesaving cancer treatments; or blood transfusions simply because that employer may find these or any other healthcare services morally objectionable.

For the Senate to pass such a policy would be indefensible. It would go far beyond nullifying the administration's rule to implement provisions in the Affordable Care Act requiring access to some preventive services at no cost. Instead, this amendment would codify infringement on personal healthcare decisions, would grant an employer the right to substitute his moral convictions for those of his employees, and would effectively deny access to critical healthcare services.

Considering that some of my colleagues vociferously defend the idea of personal liberties, I am truly surprised they would support a policy to undermine those same liberties by handing

power over an individual's personal healthcare decisions to that individual's employer or his insurance company.

This body took a bold and historic step by enacting healthcare reform in 2010. We accomplished something that had eluded the country and the Congress for decades. The law recognizes that women have specific medical needs and that gaps have historically existed in preventive care for women. And it correctly called for specific steps to address that. We should not now support policies that would not only walk these advances back, but take giant leaps backwards in access to healthcare services for everyone. I urge our colleagues to vote against this amendment.

Mr. President, I am pleased that today we can approve a full-year extension of the payroll tax cut, important tax relief that is focused on middle-class families who have suffered greatly during the Great Recession, tax relief that will help continue the economic recovery that appears to be under way and that we all hope will strengthen in the months to come.

The controversy over how to offset the cost of this payroll tax relief has twice now nearly derailed this important middle class tax relief. I am glad that we have for the second time avoided such an outcome. But my strong preference would be for our colleagues across the aisle and across the Capitol to accept the reality that added revenue must eventually be a part of our strategy here. Democrats have offered common-sense solutions that would have allowed us to prevent a tax increase on American families without adding to the deficit and without damaging our economic recovery. Rather than take steps such as ask for a small contribution from the wealthiest Americans--those with annual incomes above $1 million--our Republican colleagues preferred to add to the deficit. That is an unfortunate choice.

Just as important as the extension of middle-class tax relief in this bill is the extension of emergency unemployment benefits. It is good for Michigan and good for the Nation that we have rejected the approach advocated by some, which would have slashed these important benefits. Emergency jobless benefits have kept food on the table and shelter overhead for millions of families across the country coping with the loss of a job through no fault of their own. Beyond those families, this funding has been an economic lifeline to communities hard-hit by job losses, and it has been an important component in our economic recovery.

I should note here that my own State cannot take full advantage of this extension unless it reverses the decision of the Governor and State Legislature to cut State benefits from 26 weeks to 20 weeks. Because of this decision, from March through May of this year, Michiganians who could be eligible for a total of 89 weeks of benefits will be limited to 69 weeks. For a relatively small investment on the State's part, we could make a major difference for Michigan families if we reverse the State's cuts. I hope the Governor and Legislature will reconsider their position.

The extension of the so-called ``doc fix'' to prevent major cuts in Medicare reimbursements to health care providers is another important part of this legislation. Year after year we find ourselves toying with the idea of allowing drastic cuts to the providers who serve our nation's elderly and most vulnerable. I am glad we again avoided this outcome; however, we missed yet

another important opportunity to fix this growing problem that becomes more expensive the longer we wait to act.

In addition to supporting our nation's health care providers, this bill includes a short-term extension of hospital wage index reclassifications under Section 508 of the Medicare Modernization Act. While I am disappointed we were unable to provide a long-term extension of this provision--which helps remedy an inaccurate Medicare classification--at least we were able to include a retroactive 4-month extension for affected hospitals in my State. And while some of the health care cuts used to pay for these extensions will be very difficult to absorb, I am pleased we successfully pushed back against the most draconian cuts to important safety net providers that House Republican's included in their bill.

The legislation also authorizes the Federal Communications Commission to hold incentive auctions to entice broadcasters to sell some of their unused or underused spectrum to free up spectrum to meet growing demand for wireless broadband technologies and also help public safety officials build a national broadband network to improve communications during emergencies.

Securing adequate spectrum for and building out a nationwide interoperable public safety broadband network is an important public policy goal that is overdue to be implemented as a recommendation of the 9/11 Commission.

One issue related to these auctions of particular interest to me is the uniqueness of our border states when it comes to spectrum signals. Broadcasters, including those in Detroit, Flint, Traverse City, Grand Rapids, and Lansing, have been concerned about potential interference of signals along the border if spectrum allocations were modified from the carefully negotiated existing signals. I am pleased that this has been addressed by requiring that any reassignments of channels be subject to special rules to avoid that interference.

Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Record on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar, that these nominations lie at

the Secretary's desk for the information of Senators.

Mr. President, my colleague Senator Debbie Stabenow and I would like to pay tribute to Brian Donnelly. The measure of a man is seen from many vantage points, from the family he loves, to the good work he has done, to the lives he has positively influenced along the way. By this measure, Brian Donnelly lived a full and prosperous life. We see that in the words of his adoring and devoted wife and family; we see that in the seemingly endless outpouring of affection from his colleagues, friends, and associates; and we see that even from those he prosecuted.

Brian Donnelly, who died suddenly last month, was a dedicated civil servant from my home State of Michigan. He devoted his life to upholding the law and serving the citizens of Michigan. This devotion and commitment can be seen through Brian's 25 years of service as a prosecutor, most recently for Kalkaska County. Brian was a skilled and highly respected litigator who was known to work long days, often returning to the office after dinner. Brian was admired not only by his colleagues but by those on both sides of the bench. His commitment both to his work and to his family was evident to all who knew him.

Brian graduated from Michigan State University and received his law degree from the University of Michigan School of Law. He married his wife Ruthann in July of 1987, and they remained partners for the rest of his life. While Brian's life was full of many successes, he also experienced tragedy. Brian's brother, Mac J. Donnelly, Jr., was killed in the line of duty while working as a police officer in Lansing, MI, in 1977. His brother's death helped encourage Brian to pursue a successful career as a prosecutor. It also led to his continued support of Michigan Concerns of Police Survivors, MI C.O.P.S, an organization dedicated to supporting the families of fallen officers. He took what was a personal tragedy and transformed it into a lifelong, positive pursuit that filled a void for many across Michigan.

After his death last month, Ruthann was inundated with letters of condolence from across our State. Some of these condolence letters even came from people Brian had prosecuted, who praised his fairness and decency and expressed sorrow for his loss. To be respected by one's colleagues is a sign of a job well done, but to be respected by one's adversaries is the mark of a truly unique man. Posthumously, Brian was honored by the Prosecuting Attorneys Association of Michigan for his outstanding service as a prosecutor in Kalkaska County, an honor he richly deserved.

Brian Donnelly left a legacy of nobility and dedicated public service for Michigan and for the legal profession. He will be missed, but his many efforts and the good he has done will be remembered for years to come. Senator Stabenow and I are proud to honor him today.

Mr. President, I would like to pay tribute to MG Jeffrey J. Dorko, deputy commanding general for military and international operations for the U.S. Army Corps of Engineers, who is retiring from Active Duty service on Friday, February 10, 2012. As we reflect on the career of this exemplary public servant, I express appreciation for his distinguished and selfless service on behalf of a grateful nation. It is his sacrifice, along with the sacrifices of countless others in uniform around the world, which helps to keep our Nation strong and secure.

Major General Dorko has accumulated more than 33 years of service to our country, and, more important, has amassed an impressive record of accomplishments. His military career began in 1978 as a platoon leader, company executive officer, and assistant battalion operations officer for the 299th Engineer Battalion at Fort Sill, OK. Over the next three decades, he served three tours of duty with the U.S. Army Corps of Engineers in Germany and was deployed in support of Operations Joint Endeavor and Joint Guard in Bosnia-Herzegovina.

From 2007 to 2008, Major General Dorko assumed command of the U.S. Army Engineer Division, Gulf Region, headquartered in Baghdad, Iraq, in support of Operation Iraqi Freedom. And currently, as the deputy commanding general for military and international operations for the U.S. Army Corps of Engineers, Major General Dorko is responsible for the successful execution of more than $28 billion in design, construction, and environmental projects.

I know Major General Dorko would want us to also recognize his family's many sacrifices throughout his exemplary career. Major General Dorko's dedicated service and sound leadership have served as useful examples to our men and women in uniform. I know my Senate colleagues join me in congratulating Major General Dorko and honoring his distinguished record of service to our country. I wish him the best as he embarks on the next chapter of his life.

Mr. President, today, along with Senator Conrad and others, I am introducing S. 2075, the Cut Unjustified Tax Loopholes Act, or CUT Loopholes Act. This legislation will help us meet three important goals: Reducing the budget deficit, protecting important priorities, and restoring some of the fairness to our tax system.

Our legislation would reduce the deficit by $155 billion. It would do so by closing tax loopholes that favor wealthy individuals and corporations while raising the tax burden that American families must carry. It would provide more than enough revenue to pay for a full-year extension of the payroll tax cut now in place, or put a significant dent in the deficit reduction we need to avoid draconian automatic cuts through sequestration.

It is clear to almost everyone that revenue must be a part of our deficit reduction strategy. Presidents from Reagan to Bush, Sr. to Clinton have used balanced strategies that included revenue as well as spending cuts.

I will continue to fight for a number of other revenue measures such as a surtax on millionaires and billionaires; eliminating tax subsidies for oil and gas companies; ending the Bush-era tax cuts for those earning more than $250,000; and ending the carried interest loophole. We need to make those changes. But so far, they have run into an ideological brick wall, as many here in Congress refuse to consider reasonable revenue measures. But even that rigid ideological stance should allow for ending the kinds of egregious loopholes we are discussing today.

First is offshore tax haven abuse. The Permanent Subcommittee on Investigations, which I chair, has spent years shedding light on how these abuses aid the wealthy and corporations. Based in part on S. 1346, the Stop Tax Haven Abuse Act, our bill would, in part: Give Treasury the authority to combat tax haven banks and jurisdictions that help U.S. clients hide assets and dodge U.S. taxes; crack down on offshore corporations that are managed from the U.S. from claiming foreign status to dodge taxes; eliminate tax incentives for moving U.S. jobs overseas or for transferring intellectual property offshore; and establish the presumption that, unless a taxpayer proves otherwise, a corporation formed by, receiving assets from, or benefiting a U.S. taxpayer is considered under that taxpayer's control for tax purposes.

These provisions and others would reduce the deficit by at least $130 billion over 10 years.

Our bill's second focus is on a tax loophole that subsidizes corporations giving stock options to corporate executives. Today, corporations can take massive tax deductions for stock options, but usually show much lower expense on their books. Our subcommittee found that from 2005-2009, this loophole allowed excess tax deductions ranging from $12 billion to as high as $61 billion in a single year.

The CUT Loopholes Act would prevent corporate income tax deductions for stock options that exceed the expense shown on company books. It would preserve current tax treatment for individuals receiving options and

for incentive stock options used by start-up companies.

According to the Joint Committee on Taxation, these measures would reduce the deficit by $25 billion over 10 years.

The time for these measures is now.

First, the math is inescapable. We can't reduce the deficit and do other important things--protect our country, care for our seniors, educate our young--if tax revenue remains at its lowest level in decades, and if the effective corporate tax rate is at historic lows, thanks in part to these and other tax loopholes.

Second, there is a growing recognition among Americans that loopholes like these and many others leave the deck stacked against them and their families. Overwhelmingly Americans tell us: Close those loopholes down.

Third, this is not just a realization by Democrats. Strong majorities of Independents and Republicans say that we need balanced deficit reduction, and that closing loopholes is one way to do that. Just this week, a national poll showed that 90 percent of small business owners-- a majority of them Republicans--believe big corporations use loopholes to avoid taxes that small businesses still have to pay.

Reducing the deficit and protecting important programs is hard. We face many tough decisions and difficult fights in the months ahead.

But this decision should be easy. We should close these loopholes and make a bipartisan statement that we can reduce the deficit, serve important priorities, and restore fairness to the tax code.

Mr. President, today, along with Senator Conrad and others, I am introducing S. 2075, the Cut Unjustified Tax Loopholes Act, or CUT Loopholes Act. This legislation will help us meet three important goals: Reducing the budget deficit, protecting important priorities, and restoring some of the fairness to our tax system.

Our legislation would reduce the deficit by $155 billion. It would do so by closing tax loopholes that favor wealthy individuals and corporations while raising the tax burden that American families must carry. It would provide more than enough revenue to pay for a full-year extension of the payroll tax cut now in place, or put a significant dent in the deficit reduction we need to avoid draconian automatic cuts through sequestration.

It is clear to almost everyone that revenue must be a part of our deficit reduction strategy. Presidents from Reagan to Bush, Sr. to Clinton have used balanced strategies that included revenue as well as spending cuts.

I will continue to fight for a number of other revenue measures such as a surtax on millionaires and billionaires; eliminating tax subsidies for oil and gas companies; ending the Bush-era tax cuts for those earning more than $250,000; and ending the carried interest loophole. We need to make those changes. But so far, they have run into an ideological brick wall, as many here in Congress refuse to consider reasonable revenue measures. But even that rigid ideological stance should allow for ending the kinds of egregious loopholes we are discussing today.

First is offshore tax haven abuse. The Permanent Subcommittee on Investigations, which I chair, has spent years shedding light on how these abuses aid the wealthy and corporations. Based in part on S. 1346, the Stop Tax Haven Abuse Act, our bill would, in part: Give Treasury the authority to combat tax haven banks and jurisdictions that help U.S. clients hide assets and dodge U.S. taxes; crack down on offshore corporations that are managed from the U.S. from claiming foreign status to dodge taxes; eliminate tax incentives for moving U.S. jobs overseas or for transferring intellectual property offshore; and establish the presumption that, unless a taxpayer proves otherwise, a corporation formed by, receiving assets from, or benefiting a U.S. taxpayer is considered under that taxpayer's control for tax purposes.

These provisions and others would reduce the deficit by at least $130 billion over 10 years.

Our bill's second focus is on a tax loophole that subsidizes corporations giving stock options to corporate executives. Today, corporations can take massive tax deductions for stock options, but usually show much lower expense on their books. Our subcommittee found that from 2005-2009, this loophole allowed excess tax deductions ranging from $12 billion to as high as $61 billion in a single year.

The CUT Loopholes Act would prevent corporate income tax deductions for stock options that exceed the expense shown on company books. It would preserve current tax treatment for individuals receiving options and

for incentive stock options used by start-up companies.

According to the Joint Committee on Taxation, these measures would reduce the deficit by $25 billion over 10 years.

The time for these measures is now.

First, the math is inescapable. We can't reduce the deficit and do other important things--protect our country, care for our seniors, educate our young--if tax revenue remains at its lowest level in decades, and if the effective corporate tax rate is at historic lows, thanks in part to these and other tax loopholes.

Second, there is a growing recognition among Americans that loopholes like these and many others leave the deck stacked against them and their families. Overwhelmingly Americans tell us: Close those loopholes down.

Third, this is not just a realization by Democrats. Strong majorities of Independents and Republicans say that we need balanced deficit reduction, and that closing loopholes is one way to do that. Just this week, a national poll showed that 90 percent of small business owners-- a majority of them Republicans--believe big corporations use loopholes to avoid taxes that small businesses still have to pay.

Reducing the deficit and protecting important programs is hard. We face many tough decisions and difficult fights in the months ahead.

But this decision should be easy. We should close these loopholes and make a bipartisan statement that we can reduce the deficit, serve important priorities, and restore fairness to the tax code.

Mr. President, I will vote in support of the conference report to accompany the FAA Reauthorization and Reform Act, H.R. 658. The last reauthorization bill expired at the end of fiscal year 2007 and since then we have passed 23 short-term extensions. We are long overdue to enact a long-term reauthorization of FAA's programs in order to provide important funding and program improvements that will enhance the safety and efficiency of our Nation's aviation system. I am pleased we are finally doing that today and in so doing we make key investments in our Nation's aviation infrastructure as well as create good jobs in the process.

One of the main issues holding up the bill for so long was a provision contained in the House bill, but not the Senate bill, to repeal the National Mediation Board--NMB--rule that ensures that only those votes cast in a union election are counted. I am glad to see that controversial provision has been removed, although I am disappointed language has been added to change Railway Labor Act rules and regulations governing union elections by raising the showing of interest threshold for holding an election from 35 percent to 50 percent of the employees in the craft or class. I do not believe the FAA reauthorization bill is the appropriate vehicle for this sort of change and I do not support its inclusion in this bill.

Providing a long-term 4-year reauthorization of our aviation programs is vitally important. Our global economy depends on the smooth and efficient movement of goods, services and people from city to city and across international borders. A safe and efficient aviation system goes hand in hand with a strong economy. We are fortunate to have one of the best aviation systems in the world and I am pleased that under this bill we continue to make the necessary investments and upgrades to retain that high standard. This FAA reauthorization bill addresses problems of capacity, congestion and delays to help ensure our aviation system can handle the projected growth in airlines passengers.

The FAA reauthorization bill will also create much needed jobs by providing the funding and directives for safety improvements at our airports and in the aviation industry. In Michigan alone the FAA is building two new air traffic control towers, at Kalamazoo and Traverse City. The FAA is also repaving numerous runways and taxiways, including at Detroit Metropolitan Wayne County Airport, Alpena County Regional Airport, Bishop International Airport, Sawyer International Airport and at other airports around the state. The FAA is also constructing new terminal buildings at Kalamazoo/Battle Creek International Airport and at MBS International Airport in Freeland, MI. And FAA funds are paying for the design of a new building for aircraft rescue and firefighting and snow removal equipment at Pellston Regional Airport in Emmet County. These are important upgrades to Michigan airports and funding of many more needed improvements will make flying into and around Michigan safer and easier.

H.R. 658 will move us closer toward modernizing our air traffic control system by building the Next Generation Air Transportation System--NextGen--of satellite-based navigation. The NextGen system will be more accurate and more efficient than the current radar-based air traffic control system. It will also result in significant fuel efficiencies and time savings by allowing aircraft to fly more direct routes. This is good for the environment, good for air carriers and good for the flying public.

I am very pleased the conference report adopted the Senate approach to the Essential Air Service Program--EAS--and preserves this important program rather than terminate it as the House bill would have done. The EAS provides rural communities with

access to the national air transportation system and is very important to Michigan. We have 8 communities that rely on EAS subsidies to help provide them with daily commercial air service. This conference report maintains the EAS program at current funding levels with some minor modifications. I very strongly opposed attempts to deprive Michiganians living in the less populated areas of our State of commercial air service. For businesses in the affected communities, this service is an economic lifeline that connects them to the web of both national and international commerce. At a time when we are doing everything we can to compete globally and to increase the number of jobs, cutting off that access makes no sense and I am glad this conference report recognizes this.

Mr. President, Senator Leahy and Senator Cornyn have introduced a rather substantial amendment to the STOCK Act that would strengthen the tools that prosecutors and investigators use to detect and prosecute corruption by public officials. I would like to ask my colleagues a few clarifying questions about how their amendment achieves this laudable goal.

My first question refers to section 205 of your amendment, covering bribery and graft. What is the purpose of including the phrase ``former public official''? How is it possible to bribe a former public official?

Under section 205, an ``official act'' can refer to any matter which may ``at any time be pending.'' What prevents this definition from being overbroad and covering matters that a former public official, for example, never anticipated would be pending?

Section 205 also refers to an official's ``place of trust and profit.'' What is a ``place of trust and profit''?

I thank my colleague. Turning to section 211 of your amendment, the ``Prohibition on Undisclosed Self-Dealing By Public Officials,'' what is purpose of codifying this prohibition?

Why is it necessary to make it a Federal crime for a local official to engage in undisclosed self-dealing?

Does this amendment create the potential for arbitrary or politically motivated prosecutions of local officials?

Why isn't there a magnitude requirement for the financial interest underlying undisclosed self-dealing? If one just reads this section, it appears as though even a trivial, attenuated financial benefit could lead to a violation.

Suppose a local official has not disclosed, as required by a local ordinance, that he owns a home in a targeted improvement district in his county. Then this official votes to install street lights in his town, which lowers crime, improves commerce, and consequently increases the value of his and other homes. Has he committed a Federal offense?

I thank my colleague for his helpful explanation. There is one more issue I would like to discuss. Section 211 of your amendment includes a definition of ``material information.'' I want to be absolutely clear that this definition is specific to section 211 and is in no way intended to provide any meaning to the phrase ``material information'' as used elsewhere in the STOCK Act or anywhere else in law.

One question that has arisen is whether the definition of ``material information'' in the new Criminal Code section your amendment creates is intended to or could affect other parts of the STOCK Act since the same term also appears in a very different context in other parts of the bill.

I thank the Senator for that clarification. In addition to the precise wording of amendment 1483 and clear congressional intent that the phrase used in the new Criminal Code section not be imported to Federal securities law, the definition actually used in your amendment has no applicability or relevance to the materiality considerations that arise in insider trading cases.

I ask Senator Cornyn, does he agree with Senator Leahy regarding our discussion of the amendment?

I thank both of my colleagues for working with me to address my questions about the Leahy-Cornyn amendment.

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

Mr. President, the lifeblood of our democratic government is the contract between the people and their elected representatives--a contract that must be based on trust that elected officials will act for the good of our Nation and in the interests of their constituents and not for personal gain. To ensure that we maintain that trust, our Nation has laws and our Congress has rules that establish clearly the responsibilities of government officials, Members of Congress, and their staffs and that provide for the enforcement of violations. The legislation that will be before us is, in a way, preventive maintenance to protect that trust. It is a tightening of our legal and ethical guidelines as part of what must be a constant effort to ensure that the interests of our Nation and our constituents come first. Our constituents must have confidence that Members of Congress and our staffs will not use our positions for our personal financial benefit.

There should be no doubt that regardless of our action on this legislation, the STOCK Act, it is a violation of the trust our constituents placed in us, a violation of the democratic process, a violation of the securities laws, and a violation of congressional ethics rules for Members of Congress or their employees to engage in insider trading--the use of information not available to the public to make investment decisions.

Insider trading is and will remain prohibited for Members of this body to seek private profit through their public responsibilities, no matter the fate of this bill. But questions have been raised about insider trading by Members of Congress. The legislation before us today is designed to ensure that those questions are answered. It removes any doubt that insider trading by Members and employees of Congress is against the law and against congressional rules. It is important to remove that doubt because any appearance of a breach in trust between Congress and our constituents is so corrosive to honest, open, and effective government.

Back in December, the Homeland Security and Governmental Affairs Committee held extensive discussions on the need to preserve that trust, including a very productive hearing on December 1. Later in December, the committee held a markup and approved the Stop Trading on Congressional Knowledge Act, or the STOCK Act. I commend Chairman Senator Lieberman and our ranking member, Senator Collins, for their leadership and the many members of the committee, Democratic and Republican, who made contributions to that process.

Two things became clear during our hearings and markup. First, there was consensus that we should remove any uncertainty about the prohibition on insider trading. The second thing that became clear was that there was a significant bipartisan desire to avoid any unintended consequences as we sought to remove any uncertainty. We reported out the legislation because of widespread agreement on our goals, but their remained concerns about the means, and it was understood that we would attempt to address those concerns before this bill came to the floor. So a number of us have worked in the weeks since to make sure our goals and our means are in concert. The revised legislation, which will be before us, meets that objective. It should remove any uncertainty over the prohibition on insider trading, and it avoids unintended, harmful consequences that concerned some of us.

I will point to two provisions that I believe are important to achieving those goals. The first reassures the American people that there are no barriers to prosecuting Members and employees of Congress for insider trading. It does so through language establishing that Members and employees of Congress have a duty arising from ``a relationship of trust and confidence''

with the Congress, the government, and, most important, with the American people. Establishing such a duty removes any doubt as to whether insider trading prohibitions apply to Congress. It is also important that the bill language makes clear that in offering this new language, it does not in any way prevent enforcement of the anti- insider trading provisions contained in current law. Again, I am confident that, under current law, Members of Congress and our staffs are prohibited from insider trading. This bill will ensure that the current prohibition is unambiguous and thereby strengthened.

The second major provision of the legislation instructs the ethics committees of both Chambers to issue clear guidance to Members and staffs on the prohibition on profiting from inside information. This guidance will clarify that existing rules in both Chambers relative to gifts and conflicts of interest also prohibit the use of nonpublic information gained in the conduct of official duties for private profit.

Finally, one other provision I will briefly mention, which is unrelated to insider trading but nonetheless an important step forward in terms of gaining the confidence of our constituents. As one of the originators of the Lobbying Disclosure Act of 1995, I am well aware of the value of transparency in government. The bill before us improves congressional transparency by requiring that personal financial disclosure filings required of Members and certain staff are made available electronically to the public. I commend Senators Begich and Tester for offering a measure that improves that transparent governance.

Mr. President, it is important we pass this legislation, that we clarify and strengthen our rules and our laws and end any uncertainty about insider trading by Members of Congress. I hope we can promptly pass this legislation.

Again, I commend our chairman and ranking member and all the members of our committee for the work they have put into this bill.

I yield the floor.

Mr. President, the State of my birth, the State I am honored to represent in the Senate, the great State of Michigan celebrates its 175th birthday today. This landmark occasion is cause to reflect on Michigan's contributions to the greatness of our nation.

Michigan has never failed to excite imaginations. The great Civil War historian Bruce Catton, a Michigan native, once wrote that Michigan has always been less about the present than about our voyage to the future, ``to the fantastic reality that must lie beyond the mists.'' From the first European explorers who yearned to learn what they would find on the far lakeshore or around the next river bend, to the scientists and engineers who today are charting the technologies that will define our world for decades to come, Michigan has always helped to answer America's burning question: What comes next?

To a large degree, that voyage of discovery has always been about the growth of America's economy and the prosperity of her people. The lumber that built great cities in New York and Chicago came from our forests. The ores that fed the Industrial Revolution came from our Copper Country and Iron Mountains. The cars that put the world on wheels, and helped build America's middle class, came from our factories--as did the bombers and tanks that helped win World War II. And today, the exploration of new technologies in energy and transportation is helping to shape America's economy so that we can prosper in an extraordinarily competitive global marketplace.

Our State's identity is inextricably linked to the jewels that surround us: the Great Lakes. Their waters provide the drinking water that sustains us. They drive our economy. They help move goods to and from the far corners of the globe. They bring visitors to our shores. And they are a treasure trove of memories--of families sharing a picnic on the beach, of a kayaker's solo paddle through the mists of early morning, of a youngster's first successful cast of a fishing line or of a sunset walk along the water. We are custodians of the largest store of fresh water on the globe, and throughout our history, Michiganians have sought to exercise that responsibility with gratitude and care.

Michiganians have left an indelible mark on history, a mark that reaches far beyond our borders. The cry ``Remember the Raisin!'' rallied American troops to win the War of 1812, and Custer's shout, ``Come on, you Wolverines!'' helped turn the tide at Gettysburg. From W.K. Kellogg's cereal to Thomas Edison's light bulb to Henry Ford's assembly line, Michigan innovators have shaped the world around us. Michiganians helped to run the Underground Railroad and to lead the fight for civil rights. A Michigan woman, Sojourner Truth, changed the world by asking, ``Ain't I a woman?'' And a Michigan man in the White House, Gerald Ford, helped heal the wounds of division in the dark days of Watergate.

Michigan has given the world remarkable artists, from the poems of Philip Levine to the sounds of Motown. Michigan has given the world Magic Johnson's smile, Joe Louis's power and Derek Jeter's leadership.

Michiganians look back with pride on these 175 years. And we look forward with hope and anticipation to that always-approaching future that Bruce Catton described, to the fantastic reality that awaits our State in the years ahead. I hope my colleagues will join me in celebrating the 175th anniversary of Michigan statehood and the greatness ahead for our State.

I yield the floor.

Mr. President, the coming year is certain to be focused on two problems: the need to restore prosperity for American working families, and the need to reduce our budget deficit. Our challenge is to accomplish these goals together, and not to pursue one at the expense of the other. As I have said repeatedly to this Senate, I believe the only way we can successfully achieve both goals is to pursue deficit reduction strategies that do not rely solely on slashing federal spending and attacking programs that help build opportunity for the middle class. We must recognize that revenue, as well as spending cuts, must be part of our strategy, and we must ensure that the sacrifices that surely will be needed to reduce the deficit fall not just on middle-class Americans, but are spread equitably, and ask for contributions from those who have benefitted so greatly from policies enacted in the past.

Today I introduce the Closing the Derivatives Blended Rate Loophole Act. This bill meets the twin tests of helping to reduce the deficit while promoting the interests of American families. It would put an end to a tax loophole that epitomizes how our tax code too often favors short-term speculation over investment in economic growth and job creation. This loophole showers benefits on short-term traders of certain financial instruments, but does nothing to promote economic growth and raises the tax burden on American families.

What is the derivatives blended rate? It's an example of how the complexities of the tax code can grant breaks for the few at the expense of the many. Here is how it works.

Generally speaking, taxpayers are allowed to claim the lower long- term capital gains tax rate on earnings only if those earnings come from the sale of assets that they have held for more than a year. The reason is simple: we tax longterm capital gains at a lower rate because we want to encourage the long-term investment that helps our economy grow.

But under Section 1256 of the Internal Revenue Code, traders in certain derivatives contracts have managed to win themselves an exemption from the distinction between short-term and long-term capital gains. Under this section, traders in those derivatives can claim 60 percent of their income as long-term capital gains, no matter how briefly they hold the asset. This ``blended'' tax rate applies if the trader holds the asset for 11 months or 11 hours.

The details may be complex, but the bottom line is that this treatment bestows a substantial tax break on those who typically hold the covered derivatives for only a brief period. It encourages and rewards short-term speculation in complicated financial products and does little, if anything, to help our economy grow and create jobs. In fact, the increasing focus of our financial markets on short-term profit through trades that last just minutes or seconds threatens real damage to our economy. This speculation is hardly the sort of activity that our tax code should subsidize.

We also lose significant tax revenue by allowing this tax break--a revenue loss that means we must either ask for more from American families, or add to the deficit. What's more, this misguided policy contributes to the basic unfairness that characterizes too much of our tax code, by providing an unusual and unnecessary tax break to a small group of financial speculators. Instead of encouraging growth and investment, these loopholes contribute to what Warren Buffett has called the ``coddling'' of the wealthy and well-placed.

Closing this loophole is a common-sense, mainstream idea. I ask my colleagues to heed the advice of the tax experts at the American Bar Association's Tax Section, who wrote in December to the tax-writing committees of the House and Senate:

We are aware of no policy reason to provide preferential

treatment for these gains and losses. Lower capital gains

rates are intended to encourage long-term investments in

capital assets such as stock. Whatever the merits of

extending preferential rates to derivative financial

instruments generally, we do not believe that there is a

policy basis for providing those preferential rates to

taxpayers who have not made such long-term investments.

Ending this loophole by passage of the Closing the Derivatives Blended Rate Loophole Act would not solve all the problems in our tax code, nor end our deficit dilemma. But it would be another important step toward a saner, fairer tax code. It would demonstrate that Congress shares the concerns of so many Americans that the tax system is too often stacked against the interests of working families and in favor of the privileged few. It would end a policy that encourages short-term speculation over long-term investment in growth. It would provide a down-payment on the revenue we need to restore if we are to engage in serious deficit reduction and avoid slashing critical programs. I urge my colleagues to join me in the effort to pass it.

Mr. President, the coming year is certain to be focused on two problems: the need to restore prosperity for American working families, and the need to reduce our budget deficit. Our challenge is to accomplish these goals together, and not to pursue one at the expense of the other. As I have said repeatedly to this Senate, I believe the only way we can successfully achieve both goals is to pursue deficit reduction strategies that do not rely solely on slashing federal spending and attacking programs that help build opportunity for the middle class. We must recognize that revenue, as well as spending cuts, must be part of our strategy, and we must ensure that the sacrifices that surely will be needed to reduce the deficit fall not just on middle-class Americans, but are spread equitably, and ask for contributions from those who have benefitted so greatly from policies enacted in the past.

Today I introduce the Closing the Derivatives Blended Rate Loophole Act. This bill meets the twin tests of helping to reduce the deficit while promoting the interests of American families. It would put an end to a tax loophole that epitomizes how our tax code too often favors short-term speculation over investment in economic growth and job creation. This loophole showers benefits on short-term traders of certain financial instruments, but does nothing to promote economic growth and raises the tax burden on American families.

What is the derivatives blended rate? It's an example of how the complexities of the tax code can grant breaks for the few at the expense of the many. Here is how it works.

Generally speaking, taxpayers are allowed to claim the lower long- term capital gains tax rate on earnings only if those earnings come from the sale of assets that they have held for more than a year. The reason is simple: we tax longterm capital gains at a lower rate because we want to encourage the long-term investment that helps our economy grow.

But under Section 1256 of the Internal Revenue Code, traders in certain derivatives contracts have managed to win themselves an exemption from the distinction between short-term and long-term capital gains. Under this section, traders in those derivatives can claim 60 percent of their income as long-term capital gains, no matter how briefly they hold the asset. This ``blended'' tax rate applies if the trader holds the asset for 11 months or 11 hours.

The details may be complex, but the bottom line is that this treatment bestows a substantial tax break on those who typically hold the covered derivatives for only a brief period. It encourages and rewards short-term speculation in complicated financial products and does little, if anything, to help our economy grow and create jobs. In fact, the increasing focus of our financial markets on short-term profit through trades that last just minutes or seconds threatens real damage to our economy. This speculation is hardly the sort of activity that our tax code should subsidize.

We also lose significant tax revenue by allowing this tax break--a revenue loss that means we must either ask for more from American families, or add to the deficit. What's more, this misguided policy contributes to the basic unfairness that characterizes too much of our tax code, by providing an unusual and unnecessary tax break to a small group of financial speculators. Instead of encouraging growth and investment, these loopholes contribute to what Warren Buffett has called the ``coddling'' of the wealthy and well-placed.

Closing this loophole is a common-sense, mainstream idea. I ask my colleagues to heed the advice of the tax experts at the American Bar Association's Tax Section, who wrote in December to the tax-writing committees of the House and Senate:

We are aware of no policy reason to provide preferential

treatment for these gains and losses. Lower capital gains

rates are intended to encourage long-term investments in

capital assets such as stock. Whatever the merits of

extending preferential rates to derivative financial

instruments generally, we do not believe that there is a

policy basis for providing those preferential rates to

taxpayers who have not made such long-term investments.

Ending this loophole by passage of the Closing the Derivatives Blended Rate Loophole Act would not solve all the problems in our tax code, nor end our deficit dilemma. But it would be another important step toward a saner, fairer tax code. It would demonstrate that Congress shares the concerns of so many Americans that the tax system is too often stacked against the interests of working families and in favor of the privileged few. It would end a policy that encourages short-term speculation over long-term investment in growth. It would provide a down-payment on the revenue we need to restore if we are to engage in serious deficit reduction and avoid slashing critical programs. I urge my colleagues to join me in the effort to pass it.