Floor Statements

Madam President, I am pleased that we are finally discussing legislation that is designed to deal with time-sensitive tax matters. I thank Chairman Baucus for his cooperation in working in a bipartisan way on this legislation.

There are five categories of time-sensitive tax matters. These are things that are sunset. For those in the public who don't recognize the word ``sunset,'' at certain times, legislation comes to an end and must be reenacted. That is called sunset.

The first category of this sunset legislation is the alternative minimum tax fix. It expired on December 31 of last year. If we don't act, 24 million families will face an average tax increase of at least $2,000 each.

The second category of tax relief includes several tax benefits available to middle-income taxpayers. These expired also December 31 of last year. Included are deductions for out-of-pocket expenses for teachers who buy supplies for their classrooms, sales tax in various States that have a sales tax but not income tax, and college tuition for middle-income families. Millions of taxpaying families would face an unexpected tax increase if this sunset legislation is not reenacted.

The third category in the bill consists of many valuable business incentives, such as the research and development tax credit that has likewise expired and has put corporations in a position of not doing research and development or maybe wondering whether the tax incentives are going to be available to them. This will reenact incentives such as that.

In this time of high oil prices and instability in the energy market, Congress should send a clear signal in support of alternative energy and conservation. This very important issue is dealt with in the fourth category in this bill. We will be considering that issue today to send a strong signal in support of alternative and renewable energy, as well as conservation. We will not let the wide assortments of tax incentives for alternative energy and conservation expire this year, which would otherwise happen.

The fifth and final category deals with the disasters that have ravaged the Nation's heartland, especially my State of Iowa and, of course, most recently the gulf coast, particularly along Galveston. We need to respond to help these folks in these regions, and these tax incentives are meant to help both business rehabilitation, as well as individual rehabilitation.

I believe this legislation is must-do business. Congress cannot dawdle any longer. And with a sense of emergency and urgency, Senator Reid and Senator McConnell, the leaders of the Senate, have devised a path for the Senate to complete action on these provisions. I would rather have processed this legislation over a period of time. Several months ago would have been a better time to process this sensitive business. Better late than never, and this is late, and better to do it now than not to get the job done at all.

Our leaders provided Chairman Baucus and me with the authority to do a compromise. That, of course, was a critical step. I am glad our leaders were able to get together on that point. So Chairman Baucus and I pulled out our note pads and resharpened our pencils and, of course, here we are with this bipartisan compromise.

I am confident that the Senate will approve the first and third amendments that will be before the Senate. The first amendment will deal with the fully offset energy tax incentives package that I will deal with in some detail in a minute. The third amendment will contain a bipartisan compromise on the alternative minimum tax fix and, of course, these business extenders to which I have referred.

In between those two bipartisan amendments will be an amendment to be offered by Senator Reid for the Democratic caucus. All amendments will face a 60-vote threshold.

Last year, I laid out the principles Senate Republicans would follow when it came to revenue raisers, and those principles are still in effect, somewhat modified by the bill before us. But the basic rationale behind the Senate Republicans on revenue raisers is still there.

The first principle I laid out is whether the proposal is good tax policy. If the proposal is good tax policy, then we would support, and vice versa, not support if it is bad tax policy.

The compromise before us meets fully the needs of all Republicans on this point that the principles of this bill are good tax policy.

The crackdown on offshore deferred compensation plans is appropriate tax policy. I am pleased we made it tougher on hedge fund managers by removing a charitable loophole. Likewise, the offsets in the energy portion of the bill are appropriate policy.

The second principle I laid out last year deals with how revenue raisers are accounted for. This is where our two parties differ. How do the two caucuses differ? Republicans do not want to go down the slippery slope of building in a bias toward automatic tax increases--I should say almost automatic tax increases--and against current law tax relief. This is especially compelling when appropriations are wholly outside the Democratic version of their pay-as-you-go principle.

Let me explain that we find it in our Republican caucus inconsistent that Democrats would say, when you are going to continue existing tax policy, you need to raise taxes on other Americans to pay for it. We believe existing

tax policy should be continued without offset.

The inconsistency for us comes from the Democratic point of view that if you want more spending in appropriations bills, you don't have to pay for it. We find that highly inconsistent.

Also, I could say that expiring entitlement spending does not figure in to the Democratic caucus's pay-as-you-go proposition--another inconsistency.

The Democratic version of pay as you go sets us down an irreversible path of higher taxes and higher spending. If expiring tax relief and expiring spending and appropriations were treated similarly, maybe the deficit reduction rationale behind pay as you go would be credible. As it exists now, it only reinforces an ideology of higher taxes and higher spending. The rejection of Senator McConnell's deficit-neutral offer on alternative minimum tax and the extenders proves my point. I will refer to a chart which shows the bias toward more spending and against current law tax relief.

If we look at that chart, we see the red line is one of mandatory expiring spending. We see the annual increase in nondefense discretionary spending going up very much. We see the annual cost of increased AMT, the solid green line, going down, and we see making certain other tax provisions permanent and what that does.

In any event, we found ourselves at an impasse on this point, but we still were able to reach this compromise that is before us.

In getting to that compromise, Democrats insisted on offsetting current law tax relief, and Republicans resisted more tax and spend. Republicans were willing to use revenue raisers for new policy and for long-term or permanent tax policy. Republicans did not want to use revenue raisers for new spending.

We came to a compromise by looking at this impasse as kind of a prism. A prism breaks one beam of light into several different shades. I have a chart showing the most famous prism of recent decades. It is a copy of the album entitled ``The Dark Side of the Moon'' by the band Pink Floyd. I am not, of course, a big fan of rock music. I am not a fan of its lyrics and its culture, but I think this piece of art by itself makes this very important point as ideal with this compromise legislation before us.

As we can see, there is a beam of white light on the left side of the triangular prism. On the right side, the beam of light is very fractured and multishades.

At the end of the day, we will have an alternative minimum tax fix, we will have extenders, and we will have an energy and disaster relief package that is a compromise. That is the white light on the left side. Republicans will see that the compromise meets their principles.

Let's say Republicans see the red light on the right. The offsets are good policy. From a Republican standpoint, there is enough new policy in the energy part of the deal to tie the nonenergy offsets; otherwise, energy incentives are reformed. That is our way of looking at this within the policy I annunciated a year ago. Republicans can see that the biggest item in the bill, the alternative minimum tax, is not offset. That preserves our point that the unfair alternative minimum tax--hitting 23 million middle-class Americans if we don't fix it-- should not be a reason to raise taxes on other taxpayers.

Likewise, there is enough new and modified policy to tie to the offshore deferred compensation revenue. The bottom line is that the leaders were able to secure a longer term extension of current policy, as well as with the revenue.

Democrats are able to see the offset policy from their standpoint. That is the blue strand of light on the right side of the prism. Democrats wanted significant revenue raisers, and they got them. Both sides wanted the underlying revenue-losing extensions and new policy.

Most prisms are delicate. They are transitory. This one is no different. Our friends in the House need to see that. They can break this fragile prism. The shards will cut millions of taxpaying families.

This deal defers the very vital debate between Republicans and Democrats on whether we tax our way out of this fiscal situation--the Democratic view--or contrariwise, do we restrain spending. That is the Republican view. That is a very important debate which has held us up for so very long. That very important debate is deferred to another day.

Each side holds to its principles. Each side does the people's business. I thank Chairman Baucus and both leaders for getting us to this point of compromise where each of us can have some victories. But for me, it is preserving the very basic policies of the Republican caucus.

Using the prism that presents the opportunity to preserve tax relief for millions of middle-income families, I ask that we pass this compromise.

Madam President, one of the amendments we will be voting on today is the energy tax extenders bill that I just told you I would refer to in detail, and here it is.

I once heard a man say he always went everywhere with his wife because he never wanted to kiss her goodbye. Our dependence on foreign oil is very similar. As Americans, we know our dependence on foreign oil is not pretty but have not found a way to kiss that dependence goodbye. We need to enact commonsense, bipartisan laws, such as this energy tax extenders amendment that we will be voting on, the first vote midafternoon. It will help America move toward ending its dependence on foreign oil.

We are almost three-quarters of the way through this year, 2008. Since January 1 of this year, a number of energy tax relief provisions have already expired. In addition, a number of energy tax provisions are set to expire in just 3 months. For example, section 45, production tax credit for energy production for wind and refined coal, is extended through the year 2009.

Importantly, the wind production tax credit does not have the harmful 35-percent cap that the House Democratic leadership wants to place on it.

Another provision contained in this amendment is a new credit for electric plug-in vehicles. Consumers who purchase an electric plug-in-- and it has to be a passenger vehicle--can get up to a $7,500 tax credit. If Americans are using electricity instead of gas to power their cars, it is a step toward reducing our dependence on foreign oil, much as ethanol has reduced our dependence on foreign oil for use in our cars by at least 5 percent.

Included in this amendment is a provision to reduce the tax on idling reduction units. These units are designed to eliminate the need for a big rig to idle to provide heating, air-conditioning, and electricity when it is stopped.

That brings me to the fact that we are saving diesel in big Mack trucks because they don't idle because we have this incentive for the separate unit to keep the cab cool while people are sleeping. It irritates me then, when I look back to this summer--and maybe even right now for all I know--when I saw Government officials using their chauffeured SUVs which were idling outside our office buildings wasting a great deal of fuel. As Members of Congress, we should be setting a good example for the American people by conserving fuel and not wasting it. For instance, I have a Ford Taurus. You don't see it idling outside my home or outside of wherever I am momentarily stopped. You surely would not see my driver in it because I don't have one. If you do see anyone else driving my Taurus, please call the police because someone has stolen my car. I would like to refer to Ashton Kutcher, from Cedar Rapids, IA, saying: ``Dude, Where's my car?''

So far, the Senate has not passed these popular expiring and expired energy tax extender provisions. However, the Senate has now reached a bipartisan agreement that should enable us to pass this first amendment that we will be voting on midafternoon. This first amendment contains these popular energy tax extender provisions--many beyond what I have already talked about--as well as revenue offsets for these provisions.

My fellow Republicans were divided on whether energy should be offset. Some opposed any tax increase on oil and gas. Others, such as this Senator, looked to convert conventional energy tax incentives into incentives for alternative energy and conservation. On the other hand, almost all Democrats were in this ``conversion'' camp. I kind of

feel myself like we have had a lot of incentives for old-time fossil fuels; that those industries are developed, and it is okay to move that money from that source over to alternative energy--a new industry that we are in the middle of developing and, in the case of ethanol, for a long time have been developing.

We compromised between Republicans and Democrats by cutting back the following oil and gas tax incentives, which totaled roughly $9 billion. First, we froze the manufacturing deduction for all oil and gas production at 6 percent. We reformed the use of the foreign tax credit for major oil companies. This offset is very important to get done. Finally, we raised the cap on funding for the oil spill trust fund.

To reach the $17 billion target for fully offsetting this energy tax package, we used a couple of nonoil and gas offsets totaling roughly $8 billion. First, we included the Bush administration's ``tax gap'' proposal to have securities firms report the cost of stock purchases and sales to the Internal Revenue Service. Secondly, we extended the unemployment surtax.

In keeping with the principle that tax offsets should make good policy sense and should be used to pay for new tax policy, we used these $8 billion in nonoil and gas offsets to pay at least $8 billion in new energy tax policy because it is a Republican program that if you have new tax policy, it should be offset. Our objection is to offsetting existing tax policy that might sunset; that you want to extend it in the same way it has been functioning for the last several years.

So the bottom line of this is that both sides compromised. Democrats yielded on unoffset popular current law tax relief--AMT as an example-- and Republicans agreed to offsets that were good tax policy. But we ensured that our principle that major current law tax relief, such as the alternative minimum tax fix, should not be conditioned on other tax increases.

It is important to note that if we don't do more to encourage alternative energy, we might one day run out of oil and end up having to drive the alternative vehicles, such as Fred Flintstone, as you recall from the cartoon on television.

So I urge a ``yes'' vote on this first amendment that we will be voting on midafternoon, and I hope we can get this bipartisan agreement through and get it to the House of Representatives because we only have a little time left before we adjourn for the elections.

I yield the floor, and as I don't see any other Member who wants to speak, I suggest the absence of a quorum, and I ask unanimous consent, Madam President, before you call the roll, to divide the time that lapses in the quorum call between the two sides.

Mr. President, I want to speak on the second or third amendments we are going to be voting on. But before I do that, I think the Senator from North Dakota has asked a very important question that I want to address: Is anyone around here concerned about the debt?

I want to remind everybody that it seems uncharacteristic to be able to speak about concern about the debt when it comes to the issue of tax policy, and not reducing taxes but basically in this bill keeping taxes where they have been for years and in some instances for more than a decade, but at the same time not think in terms of the debt when it comes to spending policy.

I have heard the Senator from North Dakota speak about concern about the debt when it comes to tax policy and the necessity to raise taxes to keep the existing tax policy in place. But at a time that we have increases in spending, I do not hear people talking about offsetting increases in expenditures.

I spoke this morning about pay-as-you-go somehow applying to taxes, but when it comes to increased spending we do not see the same concern about spending as it is with tax policy. That is an inconsistency that shows to me that the other party--at least the Senator from North Dakota--is concerned about the debt when it comes to talking about taxes, but when it comes to talking about spending I do not see that same concern. Hence I see an inconsistency in the debate on the issue of pay-as-you-go.

On this issue in this tax bill we are not talking about reducing taxes, we are talking about taxes that have sunset and periodically Congress deals with: Should we keep those same tax policies in place? For the most part, this bill is nothing more than keeping existing tax policy in place. As on the alternative minimum tax, it has been a policy of this Congress for a long period of time, at least since 2001, that we would not tax middle-income people because the alternative minimum tax was not indexed. This bill does that for the year 2008, so 25 million middle-income families do not pay more. They were not intended to pay it with tax policy of that nature--keeping it right where it is.

It is one thing to say we ought to raise taxes on other Americans to keep that tax policy where it has been, of not taxing the middle-income folks with the alternative minimum tax. But the game around here and in the amendment suggested by the Senator from North Dakota is to raise taxes permanently but to reduce the alternative minimum tax--I should not say reduce it, keep it so it doesn't hit 25

million Americans, where it has been, for 1 more year. So you have a tax increase forever to offset the tax policy that is for 1 year and sunsetting and have to deal with it next year. So next year we come back and if you follow his analogy, you raise taxes someplace else forever but probably deal with the alternative minimum tax for a short period of time of a year or probably at most 2 years.

We see it as a gimmick to raise taxes forever but not to take care of the problems of middle-income taxpayers not being hit by the alternative minimum tax, but for 1 year--once in a while for 2 years but in this bill for 1 year. So that is my response to the Senator from North Dakota. I hope people, as we have, do as we have done before. This body last year decided that when we keep tax policy where it has been for a long period of time and we want to extend it for 1 more year, we do not raise taxes on other Americans to continue doing what we have done for a long period of time.

While Members of this body may disagree on a lot of issues, there are some concepts that I think we should all be able to agree on. For instance, I think we can all agree it is not fair to penalize one group of people for another group of people's mistakes; second, that two wrongs don't make a right. Despite the fact that all of us may agree on these basic ideas, the amendment we have before us today suggests otherwise. So the Conrad amendment attempts to violate these principles--first by punishing taxpayers for the repeated mistakes of Congress not indexing the alternative minimum tax and, second, by attempting to correct Congress's original mistakes with yet another mistake.

The original mistake I am referring to, of course, is the alternative minimum tax. We all know the story. The alternative minimum tax was created 40 years ago in response to the discovery that a few people, 155 wealthy taxpayers, were able to eliminate their entire tax liability through legal means. The goal of the AMT was to guarantee that extremely wealthy people were not able to game the system and avoid paying some income tax. While this doesn't sound like a bad plan--on the surface, at least--the design and execution of this plan could not have been worse. That is because it was not indexed. Today, nearly 40 years after this travesty of a law that was put into place, the alternative minimum tax continues to fail on every level as a policy instrument while plaguing more than 4 million American taxpayers on a yearly basis. If we do not do something, 25 million more people will be hit this very year.

Since 2001 the Finance Committee has produced annual legislation to do what we call hold harmless the amount of families and individuals who are subject to this AMT. The amendment before us, if agreed to, would fully offset the alternative minimum tax fix for the year 2008. While I have said it on numerous occasions in the past, I want to say it again: The alternative minimum tax is a phony revenue source. It should not be offset, since it collects revenue that was never meant to be collected in the first place. In other words, it was meant to be collected only from very wealthy people and not from middle-income Americans. Therefore, I urge my colleagues to join me in rejecting this amendment.

Let's look at some of the reasons the 2008 AMT fix should not be offset. First, we need to go back to the original purpose of the alternative minimum tax. As I said earlier, 155 wealthy taxpayers were able to completely avoid Federal income taxes in 1969, and the AMT was put in place to make sure this practice did not continue.

So in 2008 has this problem been eliminated? Well, the answer is, absolutely not. In 2004, IRS Commissioner Mark Everson informed the Finance Committee that the same number of taxpayers, as a percentage of the tax-filing population at large, continued to pay no Federal income tax. In fact, the most recent IRS data available on high-income returns show that this problem is getting worse. According to an IRS analysis of tax year 2004, 2,351 taxpayers with incomes of $200,000 or more who do not use the medical or dental expense deduction had no income tax. In 2005, the number rose to 6,640. In other words, 6,640 taxpayers with incomes of $200,000 or more paid no income tax in 2005, which is over 42 times greater than the number--the 155--of wealthy taxpayers who paid no income tax in 1969. After nearly 40 years of failure and futility by the alternative minimum tax, the problem of wealthy taxpayers legally eliminating their entire tax liability is over 40 times worse than it was in 1969.

Clearly, the alternative minimum tax was and is a mistake. It is not doing what it was proposed to do. If you keep it on the books, it is going to kill the middle-income taxpayer.

Despite widespread agreement that the alternative minimum tax is a mistake and that something needs to be done about it, agreement on what exactly to do is not so widespread. A major factor in the disagreement relates to the massive amount of money the alternative minimum tax brings into the Federal Government, which is the only thing the AMT actually does well. In 2006, AMT filers paid more than $21.8 billion into the Federal Treasury, which is up from $17.2 billion in 2005 and greater than the $12.8 billion in 2004.

If we do not extend the most recent AMT hold harmless, that number is projected to balloon to a much greater amount, and long-term budget forecasts currently show this greater amount coming into the Treasury. When forecasters put their projections together, they are working under assumptions that the hold harmless that was extended last year will not be extended again because they base their assumptions on what the law says right now. Because of this, budget planners make the assumption that revenues will be much higher than everyone who is frustrated with the AMT thinks they ought to be because we have concluded that middle- income people never have paid this tax, never should pay it, so consequently the revenue is not going to come in. But the reason for this is then the AMT balloons the revenue base as it is projected to increase revenues as a percentage of GDP. There is a great deal of evidence to support this. Therefore, since these projections showing the AMT ballooning revenues are used to put together budgets, the central problem in dealing with the AMT is money.

There are some people who say we can only address the AMT if offsetting revenue can be found to replace the money the AMT is currently forecast to collect. Anyone who says this sees the forecasts showing revenues being pumped up as a percentage of GDP and wants to keep them there.

This argument is especially ridiculous when one considers that the AMT was never meant to collect nearly so much revenue. Subscribers to this argument want taxpayers to pay the price for a tax that was designed poorly and, through a comedy of errors, was allowed to flourish. It is simply unfair to expect taxpayers to pay a tax they were never intended to pay.

Offsetting the AMT would be a clear case of attempting to correct a past congressional mistake by punishing innocent taxpayers both today and into the future. If we are going to solve this problem, we need to look on the other side of the ledger; that is, the spending side. Budget planners need to take off their rose-colored glasses when looking at long-term revenue projections and read the fine print. In general, it is a good idea to spend money within your means, and that wisdom holds true in this case as well. If we start trying to spend revenues we expect to collect in the future because of the AMT, we will be living beyond our means. We need to stop assuming that record levels of revenue are available to be spent and recognize that the AMT is a phony revenue source.

As we continue to consider how to deal with the AMT, we must first remember that we do not have the option of not dealing with it. The problems will only get worse every year and make the solution even more difficult.

We must also be clear that offsetting the revenue that the AMT would fail to collect as a result of repeal or reform should not be a condition of repeal or reform. We should not call it ``lost revenue'' because it is revenue that we never had to begin with. Making the offsetting of the AMT's ill-gotten gains a condition of an AMT fix is to punish the American taxpayer for ill-conceived and poorly executed policy that has been a total failure.

Aside from not increasing the proportion of wealthy taxpayers who pay income tax, the AMT is projected to balloon Federal revenues over historical averages and to become a greater source of revenue than even the regular income tax. Budget forecasters need to recognize that the AMT is not a legitimate source of revenue, and Congress needs to be disciplined enough to show restraint on spending so that the AMT solution does not boil down to the replacement of one misguided policy with another. The amendment before us would certainly be such a misguided policy, so I urge my colleagues to reject this amendment because two wrongs certainly do not make a right.

We are almost three quarters of the way through the year 2008, and since January 1 of this year, several tax relief provisions have expired. These are what we call the tax extenders. The biggest one I have just referred to is the alternative minimum tax affecting 25 million Americans. There are a number of other widely applicable tax relief provisions in the bill. One provides millions of families with the deduction for college tuition, and another provides a deduction for teachers for out-of-pocket expenses. There is one that is very important to innovation in American business, which is a research and development tax credit.

All of these tax relief provisions expired over 8 months ago. So far, the Senate has not passed these popular expiring and expired tax extender provisions. However, the Senate has now reached a bipartisan agreement that should enable us to pass this third amendment we will be voting on shortly. The third amendment contains these popular individual and business tax extender provisions as well as the alternative minimum tax fix, the incentive stock option AMT fix, disaster tax relief, and other important provisions such as the secure rural schools and mental health parity provisions.

You might ask, now that the Senate is expected to pass these tax extenders and other tax relief in this third amendment, what could hold up these important, bipartisan, time-sensitive tax relief measures? They are time sensitive. In short, the answer is, the philosophy in the other body by the Democratic leadership's version of pay-go.

I have worked with the Senate Democratic leadership, including my friend Chairman Baucus, in putting together this bipartisan tax relief package. However, it seems in the other body the leadership is saying that instead of taking this amendment we will pass today, along with the energy tax extenders we will pass today, they will instead insist that more of this tax relief be offset with tax increases elsewhere.

I have spoken on this before, and the hangup the leadership in the other body has is that they obsess over raising taxes to offset continuing current tax relief policies. I offered a deficit-neutral path for these tax extenders, a restraint on new spending, but I got no takers. The leadership of the other body has been so obsessed with raising taxes that they were willing to hold hostage popular, bipartisan tax relief measures. Now the House leadership is threatening to kill these tax extenders unless they get the tax increase they want so badly.

It reminds me of the nursery rhyme story. I am referring to the story of the big bad wolf. I have a chart here that depicts the big bad wolf. You remember the story--the big bad wolf that threatened the three little pigs. He said: I am going to huff and puff and blow your house down. The Democratic leadership is playing the role of the big bad wolf right now. There is some serious huffing and puffing from my friends in the Democratic leadership in the other body.

For those millions of families sending their kids to college, forget about your tax deduction unless Democrats get their offsetting tax increases. They have ignored the spending cut proposals I circulated a few months ago. So they are not holding tax extenders hostage to a pledge to pay for them; they are holding tax extenders hostage to their version of pay-go, which is guaranteed tax increases. More revenue means more spending and bigger Government.

What we have is huffing and puffing and a threat to blow the tax extenders house down by the big bad wolf. A partisan obsession with a tax-increase version of pay-go will not, at the end of the day, trump bipartisan, popular tax relief measures that millions of families are counting on. The House should take up the bill we have passed today and pass it through the House as well so we can send it to the President for his signature. If the House does not do this, the House leadership will have some explaining to do to millions of families and hundreds of thousands of businesses that will ask: What is more important--a partisan agenda or doing the taxpayers' business? Will House Democrats tell their constituents that having a big Government was more important to them than providing tax relief to their constituents suffering from natural disasters, as one example? Will House Democrats tell their constituents that partisan politics was more important to them than providing tax incentives to lower the high gas prices they are paying and moving away from our dependance on foreign oil, as another example? I will wait for a response from the House leadership. More importantly, the House Democrats' constituents should hear the answer.

I urge you to vote yes on this third amendment. I also urge our friends in the House to pass this genuine compromise.

I ask unanimous consent to have printed in the Record a copy of the President's Statement of Administration Policy dated September 23 in support of this compromise.

Madam President, I speak in favor of the Baucus- Grassley amendment, which is an important step in our effort to free America from our addiction to foreign oil. The amendment converts tax incentives for conventional energy and, in turn, puts that as an incentive for alternative energy, as well as conservation.

The amendment continues the path to development of clean coal, hybrid vehicles, and biofuels. A vote for this amendment is a vote for a brighter American future for all families, for cleaner fuel. I ask that you all support the amendment.

Madam President, I ask for the yeas and nays.

Mr. President, everyone, of course, agrees with the Senator from North Dakota that the fiscal situation is unsustainable. So as an alternative--as the minority ought to offer a reasonable alternative--on this side, our leader a few weeks ago offered a deficit-neutral proposal on AMT and on extenders. That proposal would have reduced new above-baseline spending nondiscretionary appropriations for future years. That deficit-neutral proposal was rejected. In its place is this amendment, which insists that AMT relief be conditioned on a tax increase.

A vote for this amendment is a vote to hold AMT relief now, and in the future, hostage to a tax increase. That is not reasonable. I urge my colleagues to reject the amendment.

Mr. President, we are reaching the end of a long road. We are about to pass the compromise on the AMT patch, extenders, energy tax incentives, and disaster relief.

I urge my friends in the House leadership to take a careful look at the votes the Senate took this afternoon. Also, they should take a look at the White House policy statement. House Democrats will see $42 billion of revenue raisers. House Republicans will see an unoffset AMT patch, extenders and other items.

There must be a majority to match the supermajority here.

I thank Chairman Baucus, Leader Reid, Leader McConnell, and their staffs. I wish to single out Russ Sullivan, Bill Dauster, Cathy Koch, Josh Odinitz, Pat Bousilman, Tiffany Smith, Mary Baker, Bridget Mallon, and Ryan Abraham.

I also wish to thank the Senate legislative team led by Jim Fransen. Finally, the crew at Joint Tax went above and beyond the call of duty. Ed Kleinbard, Tom Barthold, and the Joint Tax team moved effectively and efficiently. Mr. FEINGOLD. Mr. President, I will support this measure, but I do so reluctantly because in passing this bill the Senate is also passing its cost on to our children and grandchildren rather than paying for it. With the exception of the provisions relating to emergency disaster relief, the provisions of this measure were entirely predictable and as such could have been fully offset with spending cuts, revenue increases, or some combination of both. The emergency disaster relief provisions are another matter, and I do not suggest that they should have been offset, though it is always preferable to do so whenever possible. But the disaster relief provisions, which I strongly support, represent a tiny fraction of the entire cost of this bill. The bulk of the cost stems from one provision, namely the so- called 1-year patch of the alternative minimum tax to ensure that tax does not expand its reach to millions of average families. The need for this fix has been known for some time. Indeed, it has become almost an annual ritual to extend the AMT patch, and regrettably Congress has done so without paying for the fix. Instead, we have just added the cost to the debt. This year, the 10-year cost of that provision will amount to over $60 billion, every penny of it added to our already massive debt.

As I have noted frequently on this floor, every dollar that we add to the Federal debt is another dollar that we are forcing our children and grandchildren to pay back in higher taxes or fewer government benefits. When the government in this generation chooses to spend on current consumption and to accumulate debt for our children's generation to pay, it does nothing less than rob our children of their own choices. We make our choices to spend on our wants, but we saddle them with debts that they must pay from their tax dollars and their hard work. And that is not right.

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

Madam President, I am going to address two things today. First, I wish to address an Iowan I am very proud of, a person whom, if you watched the Olympics, you saw on television recently. So I am here today as a proud Iowan and American to tell other Americans just how proud I am of this Iowan.

Millions of Americans tuned in to the Olympics this past August and witnessed phenomenal performances by American athletes. I am proud of all the athletes who competed in the Olympics but especially the 11- member Team USA with Iowa ties who represented our country in Beijing.

One of those exceptional athletes was a fellow Iowan named Shawn Johnson. Shawn was a member of the U.S. women's gymnastics team who brought home the silver in the team competition. She went on to win individual honors too. She won the Silver Medal

both in all-around competition in the floor exercise, and she also received the Gold Medal for the balance beam. And that was her favorite event. All Americans were proud to see Shawn's success, but Iowans are overwhelmingly proud of the self-described--and these are not my words, but other people described her as the daredevil with a big smile.

At this year's Iowa State Fair, the famous butter sculpture, which has been a part of the State fair for the last 45 years--a sculpture made out of butter, usually a cow--this year featured a cow but also a sculpture of Shawn Johnson.

Shawn is the reigning women's world gymnastics All-Around Champion, but she is also a teenager from West Des Moines who presently attends Valley High School when she is not competing around the world. She attends football games and school dances and tries to live the life of a typical teen. She goes to class 5 hours each day and then trains at Chow's Gymnastics in her hometown. With all of this on her plate, she still manages to get straight As.

Her talent is anything but typical. As a baby, Shawn skipped the crawling and went right to walking. She climbed out of her crib before she was a year old. As a toddler, she would build a ladder out of toys, scale the entertainment center, and jump onto the couch.

After seeing their daughter's abundant energy and fearlessness, Shawn's parents Terri and Doug enrolled her in a tumbling class at age 3, and she showed promise early on. Her coach at Chows Gymnastics in West Des Moines, Liang Chow, noticed her talents and honed those talents. He even submitted a tape of Shawn to the U.S. women's gymnastics team coach Marta Karolyi because it is tough for a gymnast training in Iowa to get noticed by a national team.

Training as an elite athlete did not come cheap, though. Shawn's parents eventually mortgaged the family home three times so that their daughter could achieve her Olympic dream, and they managed to travel with Shawn to her international competitions.

In June of this year, the disastrous floods hit much of Iowa. Shawn was training with the national team, but her heart was with her fellow Iowans who were suffering, especially her coach. You see, Chow's Gymnastics, which is Shawn's second home, is located near the Raccoon River in West Des Moines, and the facility suffered a great deal of damage from the flood. Shawn, knowing what this sort of damage could mean for her coach continuing to run her business, wrote a $12,000 check from her endorsements to help get Chows Gymnastics back up and running.

Iowans have all known about Shawn and her extraordinary talent--and, of course, her big smile--for a few years now, and Iowa knew she would make them proud. But the world did not really get to know Shawn until these recent Olympics.

Despite losing the all-around competition to her U.S. teammate and close friend Nastia Luikin, Shawn handled herself with grace, poise, and genuine happiness. And when Shawn finally won the coveted Gold Medal on the incredibly difficult balance beam, her joy was written all over her face.

So I take this opportunity for my colleagues and everybody in this country to commend Shawn on her extraordinary performance in the Beijing Olympics, not only for medals that she won but for her hard work, her composure, and maturity. I compliment her. She did Iowa and America proud.

Madam President, I am going to now visit about an issue I often visit with my colleagues about, the issue of drugs, because I served with Senator Biden as cochairman of the drug caucus.

As a parent and now grandparent, I remain deeply concerned about the hazardous environment to which our children are exposed. Every day, we see more and more heartbreaking stories of a child being victimized in one way or another. Some of the most disturbing trends involve deadly drugs and our own kids. More specifically, there is an alarming number of kids who are being exposed to environments where illegal drugs are being manufactured and sold. Kids are also falling prey to unscrupulous drug dealers who are disguising highly addictive drugs to make them appear as if they were candy. I believe we have a moral obligation in this country to ensure our young people have every opportunity to grow up without being accosted by drug pushers at every turn, whether it is on TV in the home or on the way to school.

As a Senator representing a State that has been among the hardest hit by the scourge of methamphetamine abuse, I have witnessed firsthand how this horrible drug has devastated individual lives and families. I have seen the havoc wreaked on the environment as well as the child welfare system. I have listened to the horror stories of those caught in the grips of addiction. This is why I joined a number of my colleagues in passing the Combat Meth Act of 2005. This landmark legislation has shown dramatic results in decreasing the number of clandestine meth labs and increasing methamphetamine seizures.

While this is certainly welcome news, particularly for our first responders and local law enforcement community, meth labs in our communities are still a reality. For instance, in 2006, there were still over 6,400 clandestine meth lab incidents throughout the country. In my home State of Iowa, we have seen an 88-percent decrease in the number of meth lab incidents since 2004 when the Iowa Legislature passed a very important piece of legislation cutting down on the number of labs. Yet there were still 240 incidents of clandestine labs last year alone.

The Combat Meth Act has been particularly helpful in cutting down on mom-and-pop meth labs. However, our efforts have given rise to new and more disturbing instances of meth production, trafficking, and abuse that are becoming more prevalent throughout our country.

A case in point can be found in the State of Missouri, where police recently made seven meth-related arrests in just as many hours in the tiny quiet town of Ozark. The house where these arrests were made belonged to a 45-year-old grandmother, who was babysitting her infant grandson while his mother was away at school. Upon her arrest, she admitted using meth but denied that she was a dealer. However, while police searched the house, six more individuals were picked up on meth- related charges.

When it was all said and done, three children under the age of 3 watched as the police arrested their parent or grandparent for selling or possessing this terrible drug.

Sadly, this is not an unusual incident. We have here a picture of a baby. Scenes such as the one depicted on this chart are seen throughout the country. According to the Drug Enforcement Administration--DEA, as we call it around this town--more than 12,000 children throughout the country have been affected, injured, or killed at meth lab sites since 2002. Thousands more have been sent to foster homes or were victims of meth-related abuse in the home during the same period.

In my State of Iowa, the Department of Human Services reports that over 1,000 children over the past 4 years were classified as victims of abuse and that nearly half of child abuse cases have been meth-related. In 2006, there were 107 reported cases of child abuse where meth was manufactured in the presence of a minor.

Due to the shocking number of children who were being victimized by drugs in one form or another, I joined my colleagues in supporting a bill called the Drug Endangered Children Act of 2005.

This bipartisan legislation established a national grant program to support state Drug Endangered Children--DEC programs. These programs assist local law enforcement, medical services, and child welfare workers to ensure that victimized children receive proper attention and treatment after living in these terrible environments.

DEC programs greatly benefit local law enforcement by helping law enforcement coordinate in close cooperation with the Department of Human Services. This ensures a seamless coverage of child welfare and law enforcement joint operations. I am pleased to report that since this program was implemented a large number of communities throughout the Nation have

formed multi-disciplinary alliances for the benefit of drug-exposed children. There are 16 communities throughout Iowa that have set up DEC programs and more are in the process of setting up additional programs.

Unfortunately, the authorization for this grant program expired for fiscal year 2008. That is why Senator Feinstein and I introduced S. 1210, the Drug Endangered Children Act of 2007. This legislation would reauthorize this important grant program for an additional 2 years to assist States in coordinating law enforcement, medical services, and child welfare efforts to ensure children found in such environments receive appropriate attention and care. The Senate Judiciary Committee unanimously reported this bipartisan legislation to the floor. I urge my colleagues to join us in support of this important legislation and pass the Drug Endangered Children Act of 2007.

As cochairman of the Senate Caucus on International Narcotics Control, I can tell you that the most at-risk population for drug abuse is our young people. Research has shown time and again that if you keep children drug-free until they turn 20, chances are very slim that they will ever try or become addicted to drugs. Unfortunately, unscrupulous drug dealers are all too aware of statistics like these. They have developed new techniques and marketing gimmicks to lure in younger users. The DEA and the White House's Office of National Drug Control Policy have recently issued warnings about highly addictive and dangerous drugs being colored, packaged, and flavored in ways that appear to attract use by children.

These drug dealers are flavoring drugs with additives to make them taste like candy. For instance, some drugs that have been recovered by the DEA and local law enforcement have been flavored to taste like strawberry. I have two charts just to show you the seriousness of this problem. One of these charts is of the popular novelty candy ``Pop Rocks.'' The other is of some strawberry-flavored methamphetamine, which is known on the street as ``Strawberry Quick,'' that was seized by police during a traffic stop in Missouri. You can see how similar these two products appear. It would be very difficult for a child to distinguish between these two.

Other flavors, such as lemon, coconut, cinnamon and chocolate are clearly being used to make highly addictive and dangerous drugs seem less harmful and more appealing. These flavored drugs are also being marketed in smaller amounts, making it cheaper and more accessible to children. According to an article in USA Today, at least eight States have reported instances involving candy-flavored drugs, and many law enforcement officials are expecting these deadly substances to infiltrate their communities in the near future.

Meth is not the only drug that is being flavored or disguised by drug dealers. The DEA recently arrested three men in an undercover operation in California where candy flavored cocaine was being distributed. The DEA seized at least four different flavors of cocaine along with other dangerous substances. The estimated street value of the flavored cocaine seized in this operation was over $272,000.

The DEA also arrested 12 people in connection to a marijuana-laced candy operation in 2006. The marijuana-laced candy that was seized in this operation was packaged to look like well-known brand name candy bars. You can see in this chart, all the varieties of marijuana-laced candy that this operation produced. Once again, you can see how it would be difficult for a child to distinguish between these marijuana candies and the real product. These drug busts further illustrate the fact that drug dealers will stop at nothing to hook a new generation on these deadly drugs.

Due to the growing trend of these candy-flavored drugs, I joined Senator Feinstein in co-sponsoring S. 1211, the Saving Kids from Dangerous Drugs Act of 2008, a bill that ought to currently move forward. Currently, Federal law enhances the criminal penalties that apply when a person sells drugs to anyone under the age of 21. When this occurs, the Federal penalties are doubled--or tripled for a repeat offense--and a mandatory minimum of at least 1 year must also apply. However, this penalty applies only to someone who actually sells drugs to someone under 21.

The Saving Kids from Dangerous Drugs Act, as amended in the Judiciary Committee, would expand the circumstances under which these enhanced penalties apply to cover the entire operation. Under our bill, the enhanced penalties that already exist would also apply to anyone over 18 years of age who knowingly or intentionally manufactures, creates, distributes, dispenses or possesses a schedule I or II controlled substance that has been combined with a candy product, is marketed or packaged as if it were similar to a candy product, or has been modified by flavoring or coloring with the intent to distribute, or sell that controlled substance to a person under 21 years of age. The DEA busts are prime examples of why we need this bipartisan bill to keep drug dealers from pedaling their poison to our children.

The fight against deadly drugs is an ongoing struggle. We must continue to do all we can to protect the most vulnerable among us. We must send a clear message to those wishing to prey on our youth that you risk serious prison time when you target our future. The National Narcotics Officers Associations Coalition is strongly supporting this measure. This organization represents 69,000 law enforcement officers who encounter these terrible substances on a daily basis and work endlessly to keep our children and communities safe. I am pleased that my colleagues on the Judiciary Committee overwhelmingly voted in favor of reporting this important legislation to the floor. I urge all of my colleagues to join us in passing the Saving Kids from Dangerous Drugs Act of 2008.

I urge all my colleagues to join us--meaning myself and Senator Feinstein, the main sponsors of the bill--in passing the Saving Kids From Dangerous Drugs Act of 2008.

I yield the floor.

Mr. President, I am pleased to join my colleague, Senator Murkowski, in cosponsoring a resolution commemorating Red Ribbon Week. Red Ribbon Week, observed October 23-31, encourages individuals, families, and communities to take a stand against alcohol, tobacco and illegal drug abuse. During this week, students all over the country pledge to live drug and alcohol free.

The tradition of Red Ribbon Week, now in its 23rd year of wearing and displaying red ribbons, started following the assassination of U.S. Drug Enforcement Administration Special Agent Enrique ``Kiki'' Camarena. In an effort to honor his memory and unite in the battle against drug crime and abuse, friends, neighbors, and students from his home town of Calexico, CA, began wearing red ribbons. Shortly thereafter, the National Family Partnership took the celebration nationwide. Since then, the Red Ribbon campaign has reached millions of children, families, and communities across the country, spreading the message about the destructive effects of drugs.

In my State of Iowa, the theme for Red Ribbon Week is ``Ask me, See me, Be me . . . I'm Drug Free.'' Schools and community groups across the State are organizing a variety of activities including pledges, contests, workshops, rallies, theatrical and musical performances. These events are all designed to educate our children on the negative effects of drugs and to promote a drug-free environment.

Research tells us that the longer children stay drug-free, the less likely they will become addicted or even try illegal drugs. This is why it is so important to maintain a coherent antidrug message that begins early in adolescence and continues throughout the growing years. Such an effort must involve parents, communities, and young people. Red Ribbon Week provides each of us the opportunity to take a stand by helping our children make the right decisions when it comes to drugs.

In light of the growing epidemic of prescription drug and cold medicine abuse throughout the Nation, this year's Red Ribbon Week holds greater importance. I hope my colleagues will join me in passing this resolution to demonstrate our commitment to raising awareness about drugs and encourage everyone to make healthy choices.

Madam President, I come to the Senate today to talk about an important segment of our Nation's population, America's senior citizens.

Our senior population has seen a very rapid growth in the 20th century. As of the year 2000, there were about 35 million people who were 65 years of age or older. Compare this with 3.5 million people at the beginning of the 20th century. Today, about 37 million people are 65 years or older. This amounts to about 12, 13 percent of our total population.

In 2011, the first baby boomers turn 65. This will mark the beginning of an explosion in our senior population. By 2030, the senior population will be twice as large, growing from 35 million to 70 million.

You may ask why I am citing these numbers. My Senate colleagues may think I am setting the stage for a lengthy discussion about our entitlement programs--Social Security and Medicare. While the impending entitlement crisis does require my attention, along with the attention of every Member of Congress--and very soon--I wish to discuss another issue that is at the center of this year's political debate, and that is that mean word ``taxes''--yes, taxes on our senior citizens. I wish to explain to my Senate colleagues and my friends in the media how seniors are taxed under current law. I also would like to talk about how the Republican and the Democratic Presidential candidates' tax plans will affect our senior citizens.

With a significant increase in our older population looming, those who are currently 65 and older--and those who will be turning 65 over the next 2 decades--should pay close attention to the tax changes that will be faced under a Republican administration and Senator McCain or a Democratic administration and Senator Obama as President. People should not only be wary of campaign promises, they must also understand the flaws in the various tax proposals being offered the voters this election season. Change may result in higher taxes.

I wish to start by picking up from a speech I gave back in July. That speech featured Rip Van Winkle. I have a picture of Rip Van Winkle up here on a chart. In that speech, I explained how a charismatic, likable, articulate, young Governor from Arkansas barnstormed across America in 1992 as the Democratic Presidential candidate. That candidate--now former President Bill Clinton--had a battle cry: ``putting people first'' and ``middle-class taxpayer fairness.'' It sounds familiar, doesn't it?

Another familiar tune is what candidate Clinton was saying in that same year, 1992. He said, if elected, ``the only people who will pay more income taxes are those living in households making more than $200,000 per year.''

If elected, the junior Senator from Illinois, the Democratic candidate, says that he will only raise taxes on families earning $250,000 or more.

But once candidate Clinton was sworn in as President Clinton, that campaign promise was quickly discarded. In 1993, President Bill Clinton and a Democratic Congress enacted the largest tax increase in history. Those are not my words. I will quote the great chairman of the Finance Committee at that time, New York Senator Patrick Moynihan, who termed it ``the largest tax increase in the history of public finance in the United States or anywhere else in the world.'' And much to the voters' surprise, the tax increase of 1993 was on people who earned more than $20,000, not just those earning more than $200,000, as candidate Clinton had said in that campaign.

So the moral of this story is that candidate Clinton, who promised middle-class tax relief, raised taxes on the hard-working middle-class taxpayers once he became President Clinton. This was obviously change that you could not believe in.

The reason I told that story was to tell this story back then. Not only did President Clinton raise taxes on the middle class, he raised taxes on seniors.

That is why I am speaking to my colleagues about the impact of tax proposals on senior citizens that are an issue in this election. That is right, taxes were raised on seniors.

What was this tax increase on seniors back in 1993? It was an added tax on Social Security benefits. Let me take a moment to explain how this tax currently works.

Prior to the 1993 tax increase, married seniors with incomes less than $32,000 did not pay taxes on their Social Security benefits. For single seniors, those with less than $25,000 paid no taxes on their Social Security benefits. However, single seniors with incomes over $25,000 and married seniors with incomes over $32,000 paid income tax on only 50 percent, or maybe for the people paying it, it was on the whole 50 percent of their Social Security benefits. The revenue raised from this tax is directed into the Social Security trust fund.

These rules remain in place today, but under the 1993 tax increase that President Clinton signed, senior citizens with incomes over $34,000 and married seniors with incomes over $44,000 were required to pay income tax on not 50 percent of their Social Security benefits but 85 percent of their Social Security benefits. So this so-called tier 2 Social Security tax is still part of our tax laws. The revenue generated from the tier 2 tax is directed to the Medicare trust fund.

Let me pause for a moment to show how many seniors actually pay tier 1, that is 50 percent, and tier 2, the additional 35 percent. We can see on this chart a number for 1994 and a number for 2005. In 1994, when the tier 2 tax became effective, almost 6 million seniors paid income tax on their Social Security benefits. This includes singles and married seniors.

Compare this with 2005, the most recent year we have accurate data from the IRS. Around 12 million seniors paid the tier 1 and the tier 2 Social Security tax. So you can bet your bottom dollar that seniors with incomes of less than $200,000 were surprised when they woke up to the fact that the tax increase of 1993 hit them.

Why were they surprised? Candidate Clinton assured them their taxes would not go up. Not only did their taxes go up, they had to give back a significant portion of their Social Security benefits to the Government, benefits that they worked a lifetime to receive.

Will America's seniors and the middle class, for that matter, wake up to higher taxes after the 2008 election? That is the key for my being here, to look at the tax debate going on in this election season for the Presidency. Will American seniors and the middle class, for that matter, have to wake up to higher taxes after the 2008 election?

Much like Rip van Winkle woke up to a different, changed world, will Senator Obama's change be something seniors can believe in? Could history repeat itself?

I wish now to explain how the 2001 and 2003 bipartisan tax relief benefits American seniors. The reason I call them the bipartisan tax relief bills is because it had bipartisan support, unlike the rhetoric of the campaign which is always referring to the Bush tax cuts.

If these were the Bush tax cuts, they would have been a heck of a lot bigger tax cuts than the bipartisan tax relief that is now the law of the land.

I wish to specifically focus on the reason for the 2003 tax relief because in 2003, Congress reduced the top tax rate on capital gains from 20 percent down to 15 percent. Congress also tied dividend income to the capital gains tax rate instead of the taxpayers' marginal tax rate. That is, of course, the same 15 percent as for capital gains.

For low-income taxpayers, the tax rate on capital gains and dividends is currently zero. How does a lower capital gains and dividend income tax rate benefit our senior citizens who have contributed so much to this country? Census Bureau statistics show that about 23 percent of the taxpayers claiming dividend income are senior citizens; in other words, 65 or over. A nonpartisan research group, the Tax Foundation, shows that nearly 26 percent of all taxpayers claiming capital gains are seniors 65 or over. So a considerable number of seniors rely on investment income as a cornerstone of their overall income.

The Democratic leadership may file on to this floor and tell you that the majority of seniors' income is locked away in retirement plans and IRAs and because of this, they don't need the favorable tax relief of capital gains and dividend income. I have news for anybody. First, as I pointed out, a large number of seniors rely on a stable flow of income that dividends provide. Add seniors' reliance on capital gains and you see that any reduction in investment income through higher taxes will hurt our hard-working senior citizens.

Let me show my Democratic colleagues and friends in the media the tax savings that seniors currently enjoy due to lower tax rates. As we can see on the chart, seniors with incomes under $50,000 earning dividend income see the biggest tax savings. Their tax liability is 17 percent less than it would be if the favorable tax relief expired. This portion of the chart also illustrates how much more seniors rely on this favorable tax treatment than taxpayers of all ages. For all other taxpayers, their tax liability is 7.6 percent less, as we can see from the chart, the first bar.

Let's look at seniors claiming capital gains. Same chart, as we can see. Seniors with incomes under $50,000 pay about 13 percent less in taxes than they would without the favorable tax relief in the 2003 capital gains law. That is a significant chunk of change for our hard- working seniors or, if they are retired, for having worked hard throughout their life.

So we can see my Democratic friends don't have a leg to stand on. They come out here--we have seen them and heard them--like the big bad wolf and huff and puff about how seniors do not benefit from the 15- percent capital gains and dividend income tax rate. But the facts, as I presented them, are clear, and we get this information from foundations and study groups. Seniors rely on capital gains and dividend income to maintain their standard of living and pay their medical expenses. Seniors benefit significantly from the favorable tax treatment on capital gains and dividend income, especially low-income seniors.

The moral of this story is that lower tax rates on investment income means these seniors can keep more of their earnings to pay for life's necessities. Taking these tax benefits away from seniors by raising capital gains and dividends, these are people who will be hurt because they most typically live

off of a fixed income and their standard of living would be severely impacted.

My Democratic colleagues in Congress actually want to take away the 2003 tax relief for seniors. For example, in March of this year, this body took a very important vote. I, along with my Senate colleagues, voted on an amendment to the budget that would have allowed the 15- percent capital gains and dividend income tax rates to be extended beyond their sunset period of 2010. Every Democrat voted no. If the Democrats get their way, this favorable tax treatment will go away for seniors, raise taxes on seniors, and lower the standard of living of seniors. I voted to extend the 15-percent capital gains and dividend income tax rate.

The senior Senator from Arizona voted yes. Interestingly, the junior Senator from Illinois voted no. My friend's vote is interesting because the junior Senator from Illinois is now barnstorming across America campaigning to be President, much as President Clinton did. On the stump, the Democratic candidate has stated he does not want the 15- percent capital gains and dividend income tax rates to go away, at least for families earning less than $250,000 a year. Let me repeat, the junior Senator from Illinois, whose word is his bond, voted with this budget vote last spring to allow the 15-percent capital gains and dividend income tax rates to expire, but now he is saying he wants this tax relief to stick around.

To a degree, I am glad for that change of heart, but the more I think about it, the more I wonder whether the junior Senator from Illinois will stick to this campaign promise if elected because he might find himself in a position like Candidate Clinton who failed to stick to his campaign promise when he became President not to tax the middle class. So maybe my Democratic friend will be the big bad wolf after all. Huff and puff and let the 15-percent capital gains and dividend income tax rate expire. I am not sure if a President Obama will be living in such a brick house. His house may be made of straw and his campaign promise of extending the 15-percent capital gains and dividend income tax rate for families earning less than $250,000 may be blown down.

Former President Clinton's promise was blown down, and we saw the biggest tax increase in history. That is what Senator Moynihan, chairman of the committee at that time, said. I don't want history to repeat itself.

Let's focus on how seniors would be affected under a Republican or a Democratic administration. Let me start with a Republican administration because Senator McCain's tax plan is straightforward. That is, the Senator from Arizona would continue the current 15-percent capital gains and dividend income tax rates beyond its sunsetting. He would also continue the tax rate of zero percent for low-income taxpayers. Yes, it is a very simple tax plan.

I ask permission to continue. I was told I would have until 10 after 6, and I will be done before 10 after 6.

Let's say 7 minutes, and if I am not done in 7 minutes, I will quit.

Madam President, seniors under the tax plan proposed by the senior Senator from Arizona would continue to benefit from lower tax rates. This would allow seniors to maintain their current standard of living. These taxpayers will be able to age with dignity.

The Democratic Presidential candidate's tax plan for seniors is much more complicated. But first let's keep it simple. Although the junior Senator from Illinois voted to allow the 15-percent capital gains and dividend income tax rates to expire, he is now saying he wants to keep this favorable tax treatment for families earning less than $250,000.

It seems the Senator from Illinois thinks the bipartisan tax relief is good and should continue for most taxpayers. However, his Democratic colleagues in the House and Senate don't seem to think so. After all, they voted to allow the 15-percent capital gains and dividend income tax rate to expire in that vote we had this spring.

I ask, if Senator Obama is elected on November 4, will he be able to convince his Democratic colleagues to continue this favorable tax treatment? President Clinton was unable to stop a Democratic Congress from increasing taxes in 1993. And I wouldn't want history to repeat itself.

I also want to spend some time discussing a proposal my friend from Illinois has discussed on the campaign trail. Senator Obama has proposed to exempt seniors with incomes less than $50,000 from income taxes. This sounds pretty good. I mean, for 2007, the median income for people 65 and over was close to $28,000. But if you take a closer look, there are a number of flaws.

These are not my words. The Tax Policy Center, a nonpartisan think tank that has received notoriety for analyzing the tax plans of Senator McCain and Senator Obama, states that ``the proposal is poorly designed.'' They also say the proposal ``creates inequities between older and younger workers with the same income.'' The AARP, the powerful senior lobby, hasn't even highlighted the proposal in communications with its membership.

But I wish to highlight this proposal and expose its flaws because I don't want our seniors to believe in a campaign promise that can't be delivered.

First, the $50,000 exemption amount would not be indexed. This means it would erode over time, becoming less and less valuable to seniors.

Second, the $50,000 threshold is a cliff. That means a senior earning $1 over $50,000 won't qualify for the exemption and that senior might stop working to make sure they do not go over that cliff.

Third, the $50,000 exemption amount applies to both single and married taxpayers. This produces a marriage penalty that is unfair to married seniors.

Finally, this proposal exempting seniors making less than $50,000 from paying income taxes would add to the Social Security and Medicare deficits. This may not be such a big deal for seniors, but it is a big deal for those of us here in Congress who have to find solutions to the shortcomings of Medicare and Social Security.

Let me tell my colleagues, and of course the media, how this proposal would add to the Social Security and Medicare deficits. As I discussed earlier, our current tax laws require seniors with incomes over $250,000 and $32,000 to pay income taxes on their Social Security benefits. According to preliminary data released by the IRS, close to 14 million seniors paid income tax on their Social Security benefits in 2006. This is because many seniors continue to work. Or they retire, but earn interest income, capital gains dividends, or rental income. Even half of their Social Security benefits are taken into account for purposes of determining whether a taxpayer must pay income taxes on their Social Security benefits.

Now, there are many seniors who are earning less than $50,000 but more than $25,000 and $32,000. Currently, the income taxes these seniors pay on their Social Security benefits go directly to Social Security and Medicare. This means if these seniors are exempt from taxes, less tax revenue flows into the Social Security and Medicare. The trustees of these funds are already projecting that the Medicare trust fund will run out of money in 2019 and that the Social Security trust fund will follow in 2041.

The Senator from Illinois may say he will make up for this revenue loss by raising payroll taxes on families earning more than $250,000 a year, but his campaign has recently stated that any increase in the payroll taxes on these workers would be phased in over 10 years. This means the revenue Senator Obama was relying on to make up the revenue loss that would result from the seniors' tax exemption won't be there. I am not sure about you, but making a campaign promise that will balloon the Social Security and Medicare deficits is not good judgment, especially when baby boomers are on the verge of turning 65.

Now, I have saved the best for last, and I want to say it loud and clear so my friends in the media and our Nation's seniors can hear it: Seniors will see their taxes go down under Senator McCain's plan, especially married seniors. Low- and middle-income seniors

who are married will be taxed less than under the Democratic tax plan. Senior citizens will also enjoy tax relief under the McCain tax plan.

The Senator from Arizona is doing the right thing in reducing the corporate tax rates. After all, our Nation has the second highest corporate tax rate in the world. That causes companies to move their operations overseas. Both Senator Obama and Senator McCain have alluded to the competitive problem our corporations face because of high tax rates. There is an added benefit to reducing corporate rates. The answer is: a tax cut for middle-class seniors. Well, the incidence of the reduction of corporate tax rates falls on capital. The Congressional Budget Office tells me that the burden of the corporate tax falls on capital, and so does the Tax Policy Center.

So because seniors hold investments in corporations--as evidenced by the fact that almost a quarter of all Americans claiming dividends are seniors--they will see the benefits of lowering corporate tax rates. This means they will see their taxes go down if the corporate tax rate is reduced. Married seniors in particular will see their taxes go down more than under the tax plan of the Senator from Illinois, and in some cases the senior taxes would go up under the Democratic tax plan.

The Tax Policy Center has indicated that low-income seniors, those earning up to $32,000, would see their taxes go up by close to $150 under Obama's tax plan. Contrast this with Senator McCain's plan, where these same low-income seniors would see tax cuts of over $150.

The Senator from Illinois may not believe me. After all, he has promised no new taxes for families earning less than $250,000, and that these taxpayers would receive a tax cut. But here on this chart, it is in black and white. According to the Tax Policy Center, seniors with a total income up to approximately $24,500 and $32,000 would see a tax cut of $186 and $154 respectively. That is under the McCain plan. Under the Obama plan, these same seniors would see their taxes go up by $157 and $131 respectively. That is a tax increase. And if your income is around $83,000, you will see a tax increase of $364 under Obama. Compare that to a $431 tax cut under the McCain plan.

Let's look at single seniors. If you are a single senior with a total income around $21,000, you will see your taxes go up $118 under Senator Obama's tax plan and they will go down $140 under Senator McCain.

So I ask the Senator from Illinois whether he would like to revise and extend his remarks. He says no new taxes and tax cuts for people making less than $250,000. But as we can see here, that is not true. And the tax increase is on one of the most vulnerable segments of our society: our seniors.

I would like factcheck.org to post the Tax Policy Center's numbers on their Web site, and I want seniors in Pennsylvania, Florida, Ohio, Missouri, and my home State of Iowa to read this and study it. Don't buy a pig in a poke. Be wary of a unified government. We need to make sure that we install in the Presidency people who are going to keep tax rates low on seniors.

I yield the floor.

Mr. President, I would like to inform my colleagues of my request to be notified of any unanimous consent agreement that would allow for the consideration of S. 3325, the Enforcement of Intellectual Property Rights Act of 2008. I intend to reserve my right to object to any such request.

S. 3325 was marked up by the Judiciary Committee just last Thursday afternoon. I circulated several amendments to address a number of concerns I had about the bill. Two of my amendments--one that would add USDA to the list of agencies on the IPEC Advisory Committee, and another that would provide for an orderly transition from NIPLECC to IPEC--were adopted by the committee. However, I withheld from offering other amendments because I received a commitment that the chairman and ranking member of the Judiciary Committee would work with me to address my other concerns.

For example, I have concerns with the funding of the new State and local law enforcement grant programs in section 501 and the grant match ratio for those programs. Further, I have concerns with the creation of a new intellectual property crimes unit at the FBI to enforce intellectual property rights and the authorization of additional funding, resources and staff for the FBI to implement these additional responsibilities. I firmly believe that the FBI should focus its efforts on combating terrorism. I am concerned about duplication with work currently being performed at ICE and its National Intellectual Property Rights Coordination Center. Moreover, I am concerned with language calling for the prioritization of cases involving foreign controlled companies, and the lack of any priority for cases investigated by the FBI that have a nexis to potential terrorist activities.

My staff will be sitting down with the chairman and ranking member's staff to work on my concerns. Again, I intend to reserve my right to object to proceeding to the consideration of S. 3325 until my concerns have been addressed.

Mr. President, after I spoke about small business tax issues yesterday, Senators Sanders and Durbin responded. I would like to thank my friends from Vermont and Illinois for engaging in the important debate of the future of tax policy for our country last night. The upcoming congressional and Presidential elections will have a big impact on tax issues, so these issues should be debated here in the world's most deliberative body. In response to the comments of my friends from Vermont and Illinois, I would like to raise a few brief points.

First, the 2001 and 2003 tax relief bills were not and are not the ``Bush tax cuts.'' These bills were crafted in a bipartisan manner. In fact, one-fourth of the Democratic Caucus voted for the 2001 tax relief.

I will be discussing middle income tax relief in a separate speech shortly. However, there's no question the legislation criticized by my two friends improved the progressivity of the Tax Code and cut taxes for middle income

families. For a single mom with two children and $30,000 of income, the 2001 and 2003 tax relief has prevented a tax increase of $1,100 per year. Similarly, for a family of four with $50,000 of income, this tax relief has prevented them from facing a $2,300 yearly tax increase.

Indeed, both Senator Obama and Senator McCain agree on keeping most of the structure of the legislation criticized by my friends from Vermont and Illinois.

Where Senators Obama and McCain disagree is on whether we should keep the tax rates where they are. I would note that Senator Obama recently agreed that, because of concerns about the economy, we should leave the top rates where they are, at least for now.

I would encourage my friends to review the data I presented yesterday. That data clearly illustrates that there are negative effects on small business from raising marginal rates by 17 percent to 33 percent. The data show that the tax increases of Senator Obama's plan will take direct aim at small business owners. Senator Obama does now agree that we should defer his tax increases until 2011. Senator McCain thinks the current levels of taxation are appropriate for both now and the future.

The bipartisan tax relief of 2001 and 2003, largely supported by Senators Obama and McCain, kept revenues at or above historical averages for most of the period they were in effect. These policies were put in place during economic shocks, and the economy responded.

I would ask my friends why they disagree. Why should we raise taxes on small business now? I look forward to their response.

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

Madam President, today I wish to continue my discussions about one of the big choices facing voters this fall. That choice is which of our colleagues, Senator McCain or Senator Obama, should we follow in terms of future tax policy. I speak as ranking member and former chairman of the Committee on Finance that has jurisdiction over tax policy.

In recent weeks--when I say in recent weeks, I mean in July because we weren't in session in August--I have talked about the history of party control and the likelihood of broad-based tax increases. I will use the tax increase thermometer--and that thermometer is up here--to point out history. I have discussed the specific precedent of the 1992 campaign with its promise of middle-class tax cuts and

the 1998 world record tax increase that hit taxpayers above $20,000. I have referred to a case of tax hike amnesia, and I put up my famous Rip Van Winkle chart. I have discussed the impact of the McCain and the Obama plans, and in July I also talked about how the McCain and Obama plans would affect seniors and middle-income families. Today, I wish to focus on small business and the effect on small business of the tax policies of the respective Presidential candidates.

There has been a lot of controversy over the years about the effect of marginal tax rate increases on small business. It first arose back in 1993. At that time, President Clinton and the congressional majority Democrats pushed through legislation that retroactively raised the top marginal income tax rates. The rate was 31 percent. Under the 1993 bill, two new higher rates went into effect: the 36-percent rate and the 39.6-percent rate, and that is where it was until the 2001 tax bill.

One of the criticisms of those higher marginal tax rates passed back in 1993 was that these rates would harm small business. Did they harm small business? Well, I am here to say they did, but I have to back up what I am saying.

In the year 2001, Chairman Baucus--now the Democratic chairman of the committee I used to chair--Chairman Baucus and I crafted a bipartisan package of marginal rate reductions. The first part of 2001, I was chairman of that committee, and Chairman Baucus was the ranking member. So in 2001, we had this bipartisan package of marginal tax rate reductions. Part of that package brought the top rate from that 39.6 setup in 1993 down to 35 where it is now.

Another part of the package lowered the 36-percent rate to 33 percent. Although the nonpartisan Joint Committee on Taxation, in its distribution analysis, concluded that the legislation improved the progressivity of the Tax Code, the top marginal rate reductions were controversial.

Many of the liberal Members of this body and in the punditry decried the marginal rate reductions as a tax cut for the wealthy. Many of the press echoed those criticisms. They focused on the top rate reductions and defined the bipartisan, broad-based tax relief as ``the Bush tax cuts for the rich.'' These critics and Members who shared their view failed to examine the data on the whole bill, and if they had, they would have come to a different conclusion.

The fact that the Democratic Presidential candidate this year is embracing most of the policy from the bipartisan deal should give these liberal critics some pause. Senator Obama's campaign tax plan confirms what I said many times over the last 7 years. It confirms that the bill Chairman Baucus and I crafted in 2001 was a bipartisan plan that would stand the test of time.

Since the top rates of 35 percent and 33 percent were the source of considerable opposition back then in 2001, there was a lot of debate about their merits. Aside from the general economic benefits of the increased incentives for work and investment, Chairman Baucus and I focused on the benefits to small business. On Monday, August 20, 2001, Chairman Baucus and I released a statement on the Treasury Department's analysis of that 2001 tax bill, and I will quote from part of that press release that Senator Baucus and I put out:

Owners of sole proprietorships, partnerships, S

corporations, and farms will receive 80 percent of the tax

relief associated with reducing the top income tax rate of 36

percent to 33 percent and 39.6 percent down to 35 percent.

Senators Baucus and Grassley said most of the job growth over

the last decade has come from small business. Experts agree

that lower taxes increase a business's cash flow which helps

with liquidity constraints during an economic slowdown and

could increase the demand for investment and labor.

That is the end of the quote of Senator Baucus's and my press release commentary on the 2001 tax bill impact on small business.

Madam President, I ask unanimous consent at this point to have printed in the Record a copy of that August 20, 2001, Baucus-Grassley press release.

I wish also to thank my friend, Chairman Baucus, and those on the other side for sticking with me on these marginal rate reductions over the years. With a strong impulse to raise marginal rates in the Democratic caucus, I know these votes were not easy. I know that small business folks in the State of Montana and other Members who supported it are also very grateful because it has really helped small business, besides giving parity between proprietorships and corporations which have a 35-percent rate, and there is no reason to tax businesses that are sole proprietorships more than big fat corporations.

Today, now, 7 years later, we find ourselves in the same debate. The data and implication of it are still very important in debating the merits of the stated top rates of 35 percent and 33 percent. Senator McCain's position is that we should not raise those rates, especially in a time of the economy slowing down. Senator Obama insists that we raise those top rates. This is a sharp tax policy difference between the two potential Presidents.

As ranking member on the tax-writing Finance Committee, it is my duty to clarify this important debate. Our constituents have a right to be informed in an intellectually honest manner on this very important question. So, Madam President, let's take a look at this small business issue.

The first question we need to consider is what is small business. The second question would be what role do these small businesses play in our overall national economy. After that, we need to get a handle on which small businesses are affected by the higher rates that Senator Obama has proposed. Finally, we need to get a sense of how the small businesses are affected on the short term and long term. I am going to deal with each one of these questions right now.

So the first question: What is a small business? It is not a precise answer. In one way, some on the other side have said small businesses that matter are only those with owners who earn less than $200,000 to $250,000. To those folks at the local hardware store, if one of the owners or the sole owner owns over $250,000, no matter how many folks it employs, it is the same as a Home Depot or a Lowe's. Those of us from the heartland know the definition of small business is not limited to those whose owners make $250,000 or under. For us, it depends on whether the business is locally based. It depends on whether the business finances its growth from its own earnings. Conversely, to folks from small towns such as myself, big business is generally the companies that finance themselves through the stock market.

The reason the distinction is important for public policy issues such as the level of taxation is that we value local or regionally based businesses. The folks who own those businesses are drawn from the community. They attend the local Rotary clubs. They support the local little leagues.

Small business, as I see it, is a stabilizing yet very dynamic social force and just not an economic being. So when we talk about small business, we should not use any artificially low levels of income. We should use a commonsense definition of small business. There is too much at stake to demagog the definition.

It seems a good place to go for a definition of small business would be the Small Business Administration, the SBA. For most Federal policies, as a rule of thumb, the SBA would tell you it would be a privately held business with 500 or fewer employees. When we are considering tax policy--specifically the tax rate applicable to business--we have two categories. The first one is regular corporations. Virtually all big businesses--that is, publicly traded companies--are taxed under the regular corporate rate schedule.

There are several Tax Code rules dealing with small business. In general, the Tax Code treats those businesses that go to the capital market differently from those businesses that are financed by their owners. There are special rules for depreciation and there are special pension rules. Most important, however, are the rules that allow small business to avoid the double taxation that applies to corporate earnings. Owners of certain kinds of small business corporations, known as S corporations, can elect to be taxed as proprietorships or partnerships. That is, these corporate shareholders include the business income on their personal income tax returns. In general, an S corporation can have no more than 100 shareholders. In the case of families or pension plan owners, the number of shareholders can, in fact, be larger.

So with respect to the first question, I think we are on pretty solid ground in identifying any small business as a privately held business with 500 or fewer employees and, of course, the vast majority of them probably only a handful of employees, and maybe all within the family. You won't find much controversy, I believe, over that definition because it is one that we use here a lot on a lot of tax policy when it comes to SBA-type legislation.

Let's go to the second question, which is what is the economic impact of small business. No one disputes the fact that small business creates most of the jobs in America. According to the Small Business Administration's Office of Advocacy, small businesses generated 60 to 80 percent of the net new jobs annually over the last decade. I think that is important to think of. Again, over the last decade, small business has generated 60 percent to 80 percent of the new jobs.

Where are tomorrow's jobs going to come from? The answer is the largest share of future jobs is going to come from small business employers. I recommend that my colleagues consult the Small Business Administration's Office of Advocacy's ``frequently asked questions,'' which is available on the Internet at www.sba.gov/advo.

We should not be surprised that small businesses create the lion's share of the new jobs. A lot of American economic might, a lot of know- how and dynamism, resides in small business. According to the latest Treasury data, flow-through small business accounts for 93 percent of all businesses, 36 percent of business receipts, 34 percent of the wages paid, and 50 percent of all business income. I have a chart here that shows the growth of these flow-through small businesses since the year 1980. You can see it. The solid line, the number of businesses-- the large dashes are total receipts and the small dashes are net income less deficit.

While I have focused on the flow-through, keep in mind that many of the other small businesses would be affected by the top marginal rates. Let's focus on the small business data. We have another chart here. The non-flow-through small businesses are what we call C corporations. These entities are taxed like conventional corporations but are not big publicly traded businesses. So the owners are paid through salary and dividends. These small businesses account, as you can see, for about 10 percent of the total receipts.

In terms of business receipts, then, the combination of flow-through and regular corporations accounts for about 46 percent, or almost half, of the Nation's private sector income. These regular small business entities account for 13 percent of the wages paid, and when combined with flow-throughs, the small business sector accounts for 47 percent of wages paid. That is almost half of the wages paid in the private sector jobs. In terms of net income, these regular small business entities account for 2 percent of the net business income. But when combined with the flow-throughs, the small business sector accounts for 52 percent of net business income. So that is over half of the net business income in our Nation. In other words, small businesses are a very vital, important, and productive part of our economy.

We may use the adjective ``small'' to describe this part of the business sector of our Nation, but the economic impact of these businesses, then, as you follow this chart, is not small. Like the answer to the definition of small business, I don't think many on the other side would quarrel with the notion that small business is a key part of our economy.

We have answered the first two questions, the definition of small business

and its economic impact. Now, we need to ask that very vital third question that is being dealt with or being affected in this campaign for the Presidency. How are small businesses taxed? How should they be taxed? And what is the impact of that tax?

First off, small business owners pay the tax. The individual tax rate, at the owner's level, is the rate paid by small business. These businesses are described as flow-throughs because the business income and the tax burden flows through to the business owner. I have a chart here that shows how the small business owner is taxed. It may look a little complicated, but it is not as complicated as it looks. It shows the business entity. It could be a partnership or an S corporation or a proprietorship. The business gets its cash from four sources. The first is sales. The second is debt. As a practical matter, a business may be able to access credit only if its owners are willing to guarantee the debt. The third source is the owner's investment. The fourth is retained aftertax profit. That aftertax profit is a very important part of the economic viability of small business. I emphasize ``aftertax.'' These are sources of cash for the business.

The business uses its cash to pay workers. It uses this cash to pay other expenses, such as utilities, rent, and supplies. A business either makes a profit or a business suffers a loss. If it makes a profit, the profit is taxed at the owner's level; it flows through to the owner. At that point, the Federal Government takes or gets its share. The aftertax profit then, of course, is available to the owners. That aftertax profit, I will say once again, is a very important factor. That is where tax policy in this Presidential debate is very important.

Currently, the top two Federal tax rates are, since 2001, 33 percent and 35 percent. Senator McCain wants to keep the rates right there. Senator Obama wants to raise statutory rates to 36 percent and 39.6 percent, where they were set between 1993, under President Clinton, until 2001. In addition, Senator Obama also wants to restore kind of a hidden marginal rate increase; that was referred to until recently in part of the Tax Code, known as PEP and Pease. With these additional add-ons of a hidden marginal tax rate, their real marginal tax rates actually go up above 39.6, to 40 percent and 41 percent respectively.

Senator Obama has also proposed to raise the Social Security tax on the same group of small business owners by 2 percent to 4 percent. Recently, however, Senator Obama modified his tax plan to defer the Social Security tax increase. If we set aside this future Social Security tax increase, the taxes owed by small business owners would rise by as much as 21 percent and 17 percent respectively. I have a chart that shows the difference between the current top rates, which Senator McCain would keep, and the increase in the rates proposed by Senator Obama. So the blue line is Senator Obama, and the red line is Senator McCain.

For that same group of taxpayers, Senator Obama proposes, in addition, to tax dividend income at 20 percent instead of 15 percent. That is a 33-percent increase.

So for these regular non-flow-through small business owners, the amount of tax owed on their business income would rise at a range of somewhere between 17 percent to 33 percent.

As with the answers to the questions of definition and economic impact of small business, I don't think folks on the other side would dispute what I have said about how small businesses are taxed.

Now we come to the fourth question. That question is: What is the relationship between the top marginal tax rates and small business activity? Put another way, how much small business activity will be affected by the increased rates Senator Obama proposes? Unlike the first three questions, the answers to this question have been very controversial.

Over the years, folks who are hostile to marginal rate reduction have pointed to one statistic. They have referred to the percentage of small business tax filers who fall in the top two rates. For instance, they cite a statistic from the Tax Policy Center that concludes that only 1.9 percent of the filers with business income pay the top two marginal rates.

According to the Tax Policy Center analysis, that percentage is roughly three times the percentage of tax filers in the general population. They will state that the proportion of small business owners in the top two brackets is roughly similar to that of the general taxpaying population. The opponents of marginal rate relief will use this data to conclude the small business owners' tax profile is similar to the nonbusiness taxpayer profile. Since the tax profile is similar, the general redistribution argument applies. The bottom line is that opponents will argue that raising marginal tax rates on small business owners makes the tax system more progressive.

For the opponents of marginal rate relief, that is where the discussion ends. It comes down to the view of tax fairness from their perspective. Although the statistics show small business owners are three times more likely to be in the top two brackets, that matters not one whit to the opponents. The rates must go up and the revenue must be spent on expanding Government. For an example of this perspective, I recommend that my colleagues consult the article ``Big Misconceptions About Small Businesses and Taxes'' from the Center on Budget Policy and Priorities, dated August 29, 2008, available on the Internet at www.cbpp.org. The political point of the opponents boils down pretty simply. This small group of filers is very well off. So other than them, who cares if the rates go up? That is good politics. When you are talking about 1 percent or 2 percent of the population versus the rest, your theory is redistribution. You are going to be making an easier political case. That is where they leave it.

There is a huge assumption that makes this argument so very dangerous and has economic impacts in the end. The assumption is that since the number of filers is limited to roughly 2 percent, the business activity is likewise limited.

The assumption is extremely dangerous economic policy. Why? I will give two reasons. One, the 2 percent understates the number of small businesses affected. Second, the assumption assumes any negative effect of removing resources from small business. You don't have a lot of room, as the chart shows, to play with small business. They don't go to Wall Street and sell their stuff. They have to accumulate their own capital.

Let's go to that first dangerous assumption that I just proposed of understating the number of small businesses affected by that 2-percent figure. Distribution tables are like any other estimate. Inside this beltway, distribution tables are a fetish. Many on the left side of the political spectrum worship at the altar of distribution statistics. They treat it as the only measure--the only measure--of whether a tax policy proposal is good tax policy or bad tax policy. Economic consequences, what do they matter? But distribution tables are an analytical tool meant to inform a tax policy debate. Distribution tables are a snapshot. Like any other snapshot, the analysis is limited.

Let's take a look at the oft-cited Tax Policy Center distribution tables. The table references a total of roughly 35 million business tax units. That is a proxy for tax returns and households. About 30 percent of that total, roughly 8 million tax units, represent folks who pay no income tax for that year. The footnote to the table states that all business income is defined as the sum of ``gains or losses reported on Schedules C, E, and F.'' Those are where the flow-through income is reported on the owner's tax return.

When you look at small business gains and losses, it is quite revealing. Small businesses are at the cutting edge of our capital system. With capitalism comes the viability of the business cycle. Small businesses are more susceptible to the good and bad years that come with business cycles. One year a small business may do very well; the next year might be a year of loss.

As evidence of this volatility, I would like to refer to the SBA data on small business survival rates. You will find this on the frequently asked questions document I referred to, and you have a citation. According to SBA, two-thirds of small businesses survive at least 2 years; 44 percent of small businesses survive at least 4 years. What this means is that over time many small businesses rise and some fall.

By the way, mobility within income tax brackets is something that occurs to a great degree in the United States because of the dynamics of our society and our economy. So think about it. How many people in their midtwenties stay in the same bracket all the way through retirement? The mobility of income of small business is a subset of the overall income mobility in the U.S. population.

Treasury data clarifies the TPC snapshot, the Tax Policy Center snapshot. I have another chart. This chart shows that when gain and loss is considered, the snapshot changes very dramatically. So pay attention to this chart as I go through it.

For all flow-through taxpayers, 8 percent fall in the top two brackets. For taxpayers with active, positive flow-through income, the percentage is roughly the same, about 7 percent. For taxpayers with flow-through income that is greater than half their wage income, the percentage is the highest, at 9 percent.

So keep in mind we are dealing with a moving target when we talk about the 2-percent figure. Some businesses will produce losses for their owners one year and income in another year. So the business owners caught in the snapshot may not be the same business owners in another snapshot.

The second assumption about the 2-percent filer argument is even more dangerous. That assumption is, since a small percentage of tax filers are affected, the impact on small business activity is somehow trivial.

How will the higher marginal rates remove resources from small business you might ask? It is a simple answer. Let's go back to the chart that shows how small business works. If the amount paid in taxes increases somewhere, as I have said, between 17 percent to 33 percent, the tax take of the business rises as well. It comes out here. Let's go through an example.

I am going to use another chart. This taxpayer filer jointly owns a small business and earns $500,000 of business income. For purposes of this example, we will assume all of that taxpayer's income comes from the small business. As an aside, this assumption favors the opponents of marginal rate relief. Why? Because most small business owners have income from other members of the household and income from other sources. In that more likely scenario, the marginal rate hikes would bite even harder because more business income is pushed into the higher brackets.

Under this example, the small business owner pays $146,700 under current law. Senator McCain's plan leaves this level of taxation in effect. Under Senator Obama's proposal, the small business owner's taxes would go up by $20,000. That is a tax increase on this small business owner of roughly 13 percent.

The tax increase would present the small business owner with a $20,000 current problem. The small business owner's current problem is how does he or she alter his or her business to make up the $20,000 he or she has lost to Senator Obama's higher tax rates? Can he or she grow enough sales to pay the extra tax? Maybe, but maybe not. Can he or she replace a $20,000 machine? Maybe maybe not. Can he or she cut back on the payroll? Maybe but maybe not.

How about the future? Any good business person has to project how their business is working. Any investment's value is predicated on how much income the investment is likely to produce in the future. If income is projected to go down, then the value of the investment declines.

Higher taxes negatively affect the net income from an investment. Small business owners have choice about where to put their capital. If taxes press down on the projected net income, then the value of the small business investment declines. Everything else being equal, a small business owner is less likely to leave the after-tax profit in the business. Likewise, the small business owner is less likely to make future investment in the business.

My point is, the tax increase Senator Obama is proposing has a very real cost to small business owners. And my entire remarks have been directed toward the tax policies on small business because they are the engine of employment and economic growth.

What are the businesses Senator Obama is proposing to hit with this tax increase; that is, which businesses are owned by taxpayers making over $250,000? How many employees do they have?

I have another chart. It is based on data from the National Federation of Independent Businesses, and we refer to that as the NFIB. It is a national small business organization. The NFIB has 350,000 dues-paying members. They take surveys of their members and other small business folks. I have the latest survey that deals with the finance questions from the year 2007. This chart contains the results of question No. 12. The question identifies, as we can see from the chart, groups of small business owners by household income with the size of their firm by the number of employees. Household income includes income from other adult members of the household. If you take a look at the responses, you can compare firm size with income level of the owners.

Here we have $250,000 and above. Those are the folks who are targeted for the tax increase, and that would raise the amount owed to the Government between 17 percent under one scenario and 33 percent under another. The survey indicates that 6.4 percent of the business owners of firms with one to nine employees--so small business--one to nine employees would be hit by Senator Obama's tax increase.

Now move a step over and you are going to find that about 21 percent of the owners of firms with 10 to 19 employees would be hit by the tax increase. That is the 20.6-percent figure you see. Move one step to the right and we find 40 percent of the owners of firms with 20 to 249 employees would be hit by the tax increase; 20 to 249 employees, 40 percent hit. Forty percent of the owners of the small business firms then would have increases of 17 percent to 33 percent.

There seems to be armies of hard-working tax analysts in this town who work for think tanks of the liberal variety. If you look at the analyses of the tax data, the armies of the left clearly are far more numerous than the armies of the right and the middle. And I give them credit for their hard work and dedication. I am sure they are poring over all this data.

Since the redistribution dogma is what floats their boats, they will probably take a hostile attitude toward the data I have just cited. Anticipating the attacks of green-eye-shaded armies of the left, I think we can trust the survey statistics.

NFIB has been conducting these surveys for years. I cannot think of any reason why respondents to the NFIB survey would inflate or deflate their income statistics. So I think this 40-percent snapshot is a very solid figure.

The data above relates to taxpayers of $250,000 and above. Since Senator Obama's advisers have said his current proposal would raise taxes on single taxpayers above $200,000 on a rough basis, it is fair to look at those small business owners as well. If you do that calculation, then on a combined basis, Senator Obama's proposed tax increase would hit even more small business owners.

So let's go back to NFIB question No. 12. For small businesses that employ one to nine workers, 12 percent would be hit by Senator Obama's higher taxes. For small businesses with 10 to 19 workers about 27 percent would be hit by the higher taxes. For small business owners with 20 to 249 workers, 50 percent--half of the small businesses--would be hit by Senator Obama's tax plan.

I want to get to the scariest part. As the chart shows, the percentage of small business owners hit by Senator Obama's higher taxes goes up as the number of employees goes up. So it is fair to say these figures probably understate the impact of the higher marginal tax rates on the remaining small businesses, meaning those between 250 and 500 employees. Moreover, like the distribution tables, the survey obviously is a snapshot. With small businesses alternately running gains and losses over time, then the higher rates will hit a larger number of small business owners.

With the conservative nature of this data in mind, let's take another look at the economic profile of the small business owner Senator Obama has targeted for a tax increase. Every year, the SBA prepares a report to the President on small business economy.

The last report we have was submitted to President Bush in December of last year. It covers data for the previous year--2006. For 2006, the entire private sector workforce growth occurred in small businesses with 500 or fewer employees. For 2006, over half of America's private sector employees worked in these firms--over half. For 2006, these small businesses accounted for over half of the Nation's private sector gross domestic product.

Drill down deeper into the data, and you will be worried even more. Two-thirds of that small business payroll came from firms that employ between 20 and 500 workers. If we go back to the NFIB question, we will find that the owners of these small businesses are the ones most targeted by Senator Obama's tax increase proposal.

Finally, Mr. President, I don't want you to take my word for it. Listen to what small business folks have said about the importance of lower marginal tax rates. Take a look at the chart I am now putting up. The chart is a copy of a letter dated March 14, 2003, from three principal small business grassroots organizations: the National Federation of Independent Businesses, the Small Business Legislative Council, and the Small Business Survival Committee. I would like to read the second paragraph of that letter. It may be too small for you to see on the screen, but it sums up the reality of the effects of the marginal tax rates on small business.

Approximately 85 percent of small businesses file their tax

returns as individuals. An increase in tax refunds means

small firms will have more resources and more capital to put

back into growing their businesses. A series of studies by

four top economists examined the effect of the tax rate cuts

on sole proprietors. Their results indicate that a 5 percent

point cut in rates would increase capital investment by 10

percent. And they found that dropping the top tax rate from

39.6 to 33.2 percent would increase hiring by 12.1 percent.

That kind of tells you what a business force small business can be and how tax increases are negative or tax decreases are positive for small businesses to hire and to grow. What these small business groups said was that their tax policy priorities included a reduction in top marginal rates. You see it there in the letter from small business advocates.

Now, let's think about this. As the small business folks say in their letter, there is a link between tax relief, economic growth, and jobs. We have seen the evidence of that linkage in the year past. Tax relief kicked in, the economy started growing, and jobs started coming back. Why would we want to go in reverse gear?

Senator McCain and Senator Obama agree on the policy objectives of growing jobs. Why would you aim a 17-percent or 33-percent marginal tax rate increase at the businesses that grew all the jobs in the most recently studied year? Senator McCain's plan recognizes this job-loss risk. Senator Obama's plan goes in the opposite direction.

Let me conclude with a challenge to the proponents of raising marginal rates on small business. When I say critics, I am referring to political leaders, pundits, and even some in the media. I think the data I presented speaks for itself. If you disagree with the analysis but hold the position that higher marginal tax rates won't affect small businesses, would you agree to exclude small businesses from the 17- to 33-percent marginal rate increases that are being offered? I await your answer.

I yield the floor, and I suggest the absence of a quorum.

Madam President, I ask unanimous consent that Katie Graham of my Finance Committee staff have privileges of the floor for the duration of the 110th Congress.

Mr. President, it is my honor to pay tribute today to COL Eric J. Wilbur, Vice Commander of the 37th Training Wing at Lockland Air Force Base. On February 1, 2009, Colonel Wilbur will retire after a distinguished 20-year military career in which he has honorably and faithfully served his country. Among many other awards, Colonel Wilbur has been decorated with the Legion of Merit, the Bronze Star, and the Defense Meritorious Service Award.

I have always considered it a privilege to highlight the distinguished service of those men and women serving in the military, especially when they have Iowa ties. As an Iowa native and graduate of Iowa State University, I am confident that Colonel Wilbur retires not only with the esteem and admiration of his peers, subordinates, and country but also his hometown of West Union, IA, and all Iowans.

Through his distinguished career, Colonel Wilbur has been a noteworthy example of the definition of loyalty, dedication, and sacrifice. Today I would like to extend my personal thanks to Colonel Wilbur for faithfully serving his country with excellence, as well as my congratulations on his much deserved retirement. Men and women such as Colonel Wilbur deserve to be recognized for their service and patriotism.

Mr. President, several years ago I started looking at the financial relationships between physicians and drug companies. I first began these inquiries by examining payments from pharmaceutical companies to physicians serving on Food and Drug Administration advisory boards. More recently, I began looking at professors at medical schools and their financial relationships with pharmaceutical companies. In turn, I scrutinized the grants that these physicians may have received from the National Institutes of Health.

I first examined a psychiatrist at the University of Cincinnati. Then I looked at three research psychiatrists who took millions of dollars from the drug companies and failed to fully report their financial relationships to Harvard and Mass General Hospital.

I then discovered a doctor at Stanford who founded a company that is seeking the Food and Drug Administration's approval to market a drug for psychotic depression. The National Institutes of Health is funding some of the research on this drug, which is being led by this same Stanford scientist. If his own research finds that the drug is successful, this researcher stands to gain millions. The NIH later removed this researcher from the grant.

I would now like to address two doctors with the University of Texas System.

Dr. Augustus John Rush is a psychiatrist at the University of Texas Southwestern Medical Center. During 2003-2005, Dr. Rush received an NIH grant to conduct a clinical training program. This program helped trainees understand how to conduct proper clinical trials and also dealt with medical ethics.

However, just 2 years before getting this Federal grant, Dr. Rush failed to report all of the money that Eli Lilly paid him. Dr. Rush disclosed $3,000 in payments from the company, but Eli Lilly tells me that they paid Dr. Rush $17,802 in 2001.

I would also like to discuss Dr. Karen Wagner, a professor at the University of Texas Medical Branch at Galveston.

Dr. Wagner was one of the authors on a Paxil study known as Study 329. This study was published in 2001.

Study 329 was cited in a New York case where GlaxoSmithKline was charged with ``repeated and persistent fraud.'' Part of the case against Glaxo was that the drug company promoted positive findings but didn't publicize unfavorable data.

In March 2006, Dr. Wagner was being deposed in a case on Paxil. During that deposition, Dr. Wagner was asked how much money she had taken from drug companies over the previous 5 years.

Her response? She said: ``I don't know.'' In fact, she testified that she couldn't even estimate how much money she received from the drug companies.

According to Glaxo, they paid Dr. Wagner over $53,220 in 2000. In 2001, when study 329 was published the company reported paying her $18,255.

During many of these years, Dr. Wagner has led NIH-funded studies on depression. These studies involved Paxil and Prozac; an antidepressant made by Eli Lilly. Eli Lilly reported to me that they paid Dr. Wagner over $11,000 in 2002. However, Dr. Wagner did not disclose this payment to the University of Texas.

Apparently, the University of Texas Medical Branch didn't require their physicians to disclose their financial relationships with the drug industry, until around 2002. But federal guidelines from 1995 are clear that researchers need to disclose this money when they take a grant from the NIH.

What makes this even more interesting is that from September 2003 through August 2004, Dr. Wagner was a voting member of the Conflict of Interest Committee at her university. That is right, she was one of the university's experts on conflicts of interest during the same time that she was not reporting her outside income.

Before closing, I would like to say that the University of Texas System has been very cooperative in this investigation. And I appreciate the continued cooperation of companies like GlaxoSmithKline and Eli Lilly.

I ask unanimous consent to have my letter to the University of Texas printed in the Record.

Mr. President, it is my honor to pay tribute today to 20 outstanding young scholars and recipients of the 2008 Davidson Fellows Award, a scholarship granted to exceptional students to assist them in pursuing higher education. The Davidson Institute for Talent Development distributes grants to highly gifted individuals under the age of 18 who have demonstrated academically rigorous projects that demonstrate a potential to make a significant positive contribution to society. Mr. President, allow me to introduce the recipients and elaborate on their noteworthy accomplishments.

Akhil Mathew, a 16-year-old from Madison, NJ, proved a single filter, or system of weights, can decode only a finite number of rationals. Akhil's work is relevant to signal processing, analog-to-digital conversion, and representing numbers in an alternative way.

From Gaithersburg, MD, 17-year-old Sikandar Porter-Gill developed a novel process to clean wastewater and produce methane for use as an alternative form of energy by engineering bio-catalyzed microbial fuel cells to degrade organic material in wastewater. Sikandar's research is a promising step toward pursuing a cost-effective and environmentally friendly energy source.

A 17-year-old from Setuaket, NY, Christine Shrock, studied a region of the HIV protease, a protein crucial in the replication of HIV. She found that this region is a promising target for drugs to bind to change the shape of the protease, preventing it from performing its function. Christine's research is an important contribution to the development of a new class of drugs to reduce the number of infections and deaths caused by HIV.

Philip Streich, a 17-year-old from Platteville, WI, showed that carbon nanotubes are thermodynamically soluble, contradicting the generally held assumption that they were universally insoluble. He designed and custom built a unique photon-counting spectrometer that is more sensitive and precise than any commercially available. Philip's work has broad applications in the field of nanotechnology engineering.

At just 14 years old, Conrad Tao from New York, NY, has made classical music relevant to younger generations through his performances that display a vast knowledge, deep understanding, and mature interpretation of the repertoire. A composer, pianist, and violinist attending the Juilliard Pre-College Division, he has been featured on NPR's ``From the Top,'' performed at Carnegie Hall and has received five consecutive American Society of Composers, Authors and Publishers, ASCAP, Morton Gould Young Composer Awards.

Michael Cherkassky from Minneapolis, MN, compared the application of several machine learning methods to real-life medical data sets in order to understand the generalization capability of the estimated models, advancing the current predictive diagnostic model. Michael, who is 16 years old, also compared the diagnostic accuracy of two classification methods, allowing physicians to obtain more accurate diagnostic conclusions while advancing patient care.

Twelve-year-old Hilda Huang from Palo Alto, CA, has determined to change the way people feel about Johann Sebastian Bach. Performing on the harpsichord and piano, Hilda aims to bring Bach to everyone, especially young people who may be unfamiliar with his music. Her many accomplishments include performances on NPR's ``From the Top'' and at Carnegie Hall.

Jasmine Miller, a 17-year-old from Nashville, TN, examined her generation's interactions with technology and the impact of digital media on our identities. Through a one-act play, creative essays, and a novel excerpt, Jasmine explored the uncharted minds of the current generation of American youth.

At age 17, Saraswathi Shukla from Princeton, NJ, has conducted an in- depth study of sound and music in Franz-Anton Mesmer's theory of animal magnetism. Combining history, music, language, and literature, she examined the role of music in Mesmer's therapeutic seances in the context of broader changes in the popular perception of sound in pre- Revolution Paris. The importance of sound in mesmerism presents new ways to analyze scientific theories of this period.

Seventeen-year-old August Siena Thomas from Montague, MA, examined the ways in which personal and political histories are purposefully reimagined and rewritten. Through a historical novel, literary reflection, drama, and historical interpretation, August observed the manner in which interpretation of history remain fluid and reflected on how writers have used malice, ambition, flattery, and imagination through the ages to shape the way history is written.

Vijay Venkatesh, a 17-year-old from Laguna Niguel, CA, won the grand prize at the Los Angeles Music Spotlight Awards and the second prize at the Virginia Waring International Piano Solo Intermediate Competition. Vijay views music as a gift to move the world, serving as a common link to touch humanity, and believes it is his duty as a performer to assure the audience of the joy and love that transcend life's struggles.

Only 12 years old from Beaverton, OR, William Yuan invented a novel solar panel that enables light absorption from visible to ultraviolet light, doubling the light-electricity conversion efficiency. William also developed a model for solar towers and a computer program to simulate and optimize the tower parameters, providing 500 times more light absorption than commercially available solar cells and 9 times more than the cutting-edge, three-dimensional solar cell.

At age 17, Charles Zhang from Oakland Township, MI, has researched and

developed a prototype for renewable battery power that harvests energy from mechanical vibrations with a larger magnitude and efficiency of AC voltage. His prototype can be used as a primary power source in wireless structural monitoring sensors for bridges, implantable medical devices, tire pressure monitoring systems and portable devices.

Another 17-year-old, from Ponte Vedra Beach, FL, Nathan Georgette, developed a mathematical model intended to reduce the costs of stopping viral disease outbreaks in impoverished nations. He used mathematical modeling to generate a formula to calculate in real time the minimum number of vaccines needed to stop a measles outbreak. Nathan's research represents a new approach to understanding the dynamic effects of infectious disease spread and gradual immunization.

Seventeen-year-old Molly Hensley-Clancy from Minneapolis, MN, explored the primal human instinct of storytelling through the eyes and minds of young girls, demonstrating that geographic and linguistic differences do not change the universality of dreams, thoughts, and troubles. She believes the more we notice the commonalities that bind us together as human beings, rather than what sets us apart, the less we will be able to ignore those who are suffering among us.

Kyle Hutzler, a 16-year-old from Huntingtown, MD, authored a substantial policy paper on education reform, recommending that successful school reform must incorporate choice, autonomy, and accountability, along with the empowerment of parents, students, and teachers. His work articulates a vision for restructuring with specific proposals ranging from classroom organization and curriculum, to funding and teacher pay.

At 17 years old, Michael Leap from Okemos, MI, has examined the role of science in our society by synthesizing and applying several complex philosophical concepts to basic questions about science in everyday life. With the thesis that conventional views of science, truth, and nature only function from a self-referential viewpoint, he presents new, transversal perspectives in hopes that this critical examination will lead to a greater understanding of the world at large.

Divya Nag, a 17-year-old from El Dorado Hills, CA, developed both a thermal analysis technique to quantify the effects of forest fires and a novel ratio to determine organic matter loss in on-site situations. By using differential scanning calorimetry, thermogravimetry, and x-ray diffraction, Divya determined soil ignition temperatures and soil compositions before and after burning. These techniques can be used in evaluating the efficacy of prescribed burning and forest management.

Seventeen-year-old Avanthi Raghavan from Orlando, FL, studied mechanisms of protein transport critical to the survival and pathogenicity of the malaria parasite, Plasmodium falciparum, which infects human red blood cells and causes malaria. By using confocal microscopy, Avanthi characterized the role of the SNARE proteins PfSec22 and PfBet1, thus identifying potentially exploitable targets for the future development of parasite-specific drugs.

Sarah Waliany, a 16-year-old from Arcadia, CA, discovered that expression of the gene t-Darpp can make Her-2 positive breast tumor cells become resistant to the drug Herceptin. Sarah demonstrated that t-Darpp alters a critical signaling pathway that regulates growth and survival in cells. Sarah's work shows that blocking the t-Darpp gene can eventually lead to more effective breast cancer treatment.

Mr. President, today each of these 20 young scholars deserve our praise for the commitment they have demonstrated to enriching our understanding in the fields of music, science, literature, and technology. These 20 young people also deserve our admiration for their desire to improve the lives of individuals worldwide by addressing issues of practical import. Finally, these young people deserve our gratitude for the shining example they have set for us by the excellence of their work and their desire to work on the behalf of others. I would also like to thank the Davidson Institute for the support and direction they provide to this group of our country's young leaders. The knowledge of such dedicated and gifted young Americans gives me great hope and comfort for the future. Clearly, the future of our country rests in capable hands.