TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005
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Mr. GRASSLEY. Mr. President, earlier this month we began and finished the second floor debate on the tax relief reconciliation bill. At that time, I spoke in recognition of Groundhog Day because it was just around the corner. I have next to me that portrait of Punxsutawney Phil. Phil is the groundhog.
In thinking of Phil and his unique form of weather reporting, I thought about that popular film entitled ``Groundhog Day'' starring Bill Murray in which a man relives the same day, Groundhog Day, over and over again. This film has taken on even greater significance for me as I seem to be in a similar situation for the third time. More than just the sense of deja vu, I feel as though I am reliving a couple of past experiences, and before these several votes tonight or tomorrow, I think everybody will agree with me.
I have before you another chart. The chart shows a scene from the Bill Murray movie ``Groundhog Day.'' From this movie is a picture of Phil, the groundhog, driving the car and Bill Murray is there with him. Bill Murray is in this case the copilot. Phil is driving the car. You see Phil with his paws on the steering wheel, and you see the copilot seated behind him.
As I said just now, I feel like the Bill Murray character in the movie. It seems we are reliving the same events over and over again. We are going through the same debates over and over again.
For those who watch C-SPAN regularly--probably not too many Americans--they know what I am talking about because it was 2 weeks ago we were debating the tax reconciliation bill, the same tax reconciliation bill we were debating back in November, and the same debate we had a couple of weeks ago.
I will summarize the floor process we have been going through on this bill.
At 11:08 a.m. on Wednesday, February 1, 2006, I opened the second Senate floor debate on this bill. The rollcall vote on final passage occurred at 9:42 p.m. on Thursday, Groundhog Day, 2006. All the time permitted for debate under reconciliation--20 hours--was used in the second floor debate--again, Groundhog Day.
Three Senators were not here for the final vote. There was a total of eight rollcall votes that day, including the vote on final passage.
You will recall that, as I said, this was the second time. I hope you will recall I said then that we actually had debate earlier in November on the very same bill. The very same bill is this bill right here, S. 2020, the Tax Reconciliation Act.
We started that debate at 3:35 p.m. on Wednesday, November 16, 2005. For 20 hours on Wednesday, Thursday, and into Friday we debated this bill, S. 2020. A total of 80 amendments was filed, and 7 of those amendments were agreed to. The liveliness of the legislation culminated in 18 rollcall votes. The final vote on passage came at 12:05 in the morning of Friday, the 18th of November, 2005. According to the Secretary of the Senate, 97 of us were there for that vote. I must not be the only one who is reliving this experience of Groundhog Day over and over again.
There is one Senator whom I can't speak for, so I have to clarify that the new Senator, Senator Menendez, was not a Senator during the first debate back in November. He has been appointed to the Senate since then. He was here for the second debate because he joined the Senate after the first bill passed. Maybe the second debate would not be old hat to him, but for the other 99 Senators it would be more or less old hat.
Here are the two bills. Technically, right now we are on the House bill, H.R. 4297, but between these two publications, I guess it would be fair to say they are 95 percent the same.
This bill, S. 2020, was first debated in November last year and passed then as the Tax Relief Act of 2005. The Senate passed the second bill, after we amended the provisions of this to it, as H.R. 4297. The first bill, S. 2020, is 417 pages long, and the second bill, H.R. 4297, as amended, is 363 pages long. The bills are very close to the same length. What happened in between was between November and February, the Senate removed the Hurricane Katrina provisions and interest suspension provision because those proposals became law in a separate piece of legislation in November 2005. Removing the Katrina provisions and the interest suspension provision accounted for a reduction of 63 pages from this bill. The five amendments agreed to during the second floor debate added 14 pages to H.R 4297.
Again, except for those five amendments that were put in, plus the Katrina provisions taken out, most all of this bill is pretty much the same.
So why are we debating this for a third time, November of last year, 3 days, 2 days this year, on February 1 and February 2, and now back here again this very day, February 13?
My point is these two bills are virtually the same. The Senate basically debated the same popular, bipartisan bill twice, and we are going through another one of these purposeless delays at the insistence of the Democratic leadership again today, and it may take much more than 1 day.
As we consider what they are going to offer--we refer to them as motions to instruct the conferees--to the bill, we are going to go to conference on H.R. 4297 to work out the differences between the House and Senate. I have to ask my colleagues: Why are we still doing this? Didn't we already go through this exercise? Shouldn't we be finished with the Senate debate? For me, the answer to those questions is there is no reason to be here. All you have to do is in 5 seconds appoint conferees and get to work ironing out the differences between the House and the Senate.
Without a doubt, we have gone through this exercise twice. When is debate on the same subject enough for the Senate? In the face of the multitude of other important issues this body needs to deal with, does the Democratic leadership want to reenact recent debates and resuscitate old talking points? The tax reconciliation bill already passed with the support of 64 of us the first time.
The second time we passed this bill, the bill garnered the support of 68 Members. Included in the first count were 15 Democrats. I am pleased we picked up two more Democrats the second time we debated the bill. Maybe if we keep up this exercise enough times, we will have a bill that will get 100 Senators for it.
What is the purpose of that? If we do that, we will not be passing this bill in the year 2006; we will be passing this bill in the year 2007. Do not think that the millions of taxpayers expecting us to act would be very happy about running the Senate through that many Groundhog Days. Even Phil, the groundhog, might even be a bit irritated. Phil, wouldn't you be irritated if you had to go through all of this?
This legislation is extremely important. We will debate it as long as necessary. I question the necessity of going through a process that resulted in bipartisan passage of the same bill almost 3 months ago. We often think bipartisanship is when we get to 60. You are lucky to get to 60. That is what you have to do in the Senate to get anything done. To get to 64 or 68 is almost a landslide in the Senate. Why the continued debate? I doubt if the people who are stalling this want to continue the debate long enough to convince even more Democrats to vote for this bill. I don't think that is their motive.
That is my first point. This is a very curious exercise. It is an exercise with no apparent purpose other than delay. Is the delay on the part of the Democratic leadership important? The answer is, yes. Ask American tax-paying families and you will get an answer, but you get a different answer. The answer is, yes, if you are 1 of 20 million families waiting for certainty that you are not caught in the clutches of the alternative minimum tax with which this bill deals.
We hear a lot of talk about the alternative minimum tax. We will hear about it in the debate over the next few hours. This bill does something about the AMT. It holds harmless 20 million Americans so they will not be hit by a tax that they were never supposed to pay in the first place.
I will use some charts that describe different provisions of this legislation and how it affects the constituents of each of the Senators, on a State-by-State basis. The data is from the Internal Revenue Service. It is the latest available in terms of State-by-State impact. The data comes from the year 2003, so it understates the tax problems of citizens in the various States for taxes in the year 2006. I apologize for not having more up-to-date information. I suggest to people who are considering the figures on the charts to more than double the figures; that will be a rough State-by-State idea.
We will look at a chart dealing with the alternative minimum tax. This tax will hit 20 million Americans if we do not pass this legislation. It is not on the taxes they will file for 2005 because we are talking about income earned during the year 2006. They will be hit by the alternative minimum tax 12 months from now, when people file their taxes, if we do not pass this legislation.
When you start a tax year, you ought to have some idea what the tax laws are going to be for the next 12 months and into the future. That is why this legislation should have been passed in conference last fall to get a permanent law so people earning money on January 2, 2006, would know they would not be hit by the alternative minimum tax.
The basis of the bill the Senate passed and the bill that is once again before the Senate is an extension of the AMT hold harmless, so that no additional number of people will be hit by the alternative minimum tax. Every Member who is participating in this deliberate strategy of delaying our entry to conference to work out the difference between the House and the Senate is delaying the certainty these millions of American families deserve. Again, it affected 8 million in 2003. That figure now is 20 million in 2006. For my State of Iowa, it is 65,000 taxpayers. It is probably tens of thousands more now. In Nevada, there are 68,000, with a lot more than 68,000 being hit in 2006.
Those are the facts on the alternative minimum tax. Look it up in the Internal Revenue Code. The AMT relief provisions expired December 31, 2005. I ask my friends and the Democratic leadership to look at the calendar: 1 1/2 months have passed, and the alternative minimum tax hold harmless has not been extended to prevent 20 million Americans from being hit by a tax on income earned in 2006; earning the same income in 2005, they would not have had to pay that tax. The AMT hold-harmless provisions are the cornerstone of this legislation. It is the cornerstone of a bill that the Democratic leadership is delaying. I don't want to hear people talk about the alternative minimum tax problem and at the same time delay real action to help those millions of tax-paying families. I suggest we may hear that.
This bill also includes another provision, broadly popular and broadly applicable in its tax benefits. I will talk about them beyond the alternative minimum tax.
This chart shows deductibility of college tuition, first inaugurated in the tax bill of 2001. This is a benefit for families who send their kids to college. By definition, this benefit goes to middle-income families. A lot of these families are not low income so their kids possibly do not qualify for Pell grants. They are not high income either. All they have to do is have mom and dad write out a check, and they go to college. These are families that get the full benefit of the deduction if they make up to $65,000 as a single person or up to $130,000 as a couple.
The reason I say it is conservated on the middle income is because above those figures the benefit phases out. A lot of these families are paying significant Federal, State, and local taxes, and they get no help in defraying the high costs of their kids' college tuition. This tax deduction provides help for these hard-pressed, middle-income families with a benefit and furthers a very important national goal that we try to give attention to, the support for higher education. This deduction runs out at the end of this year, 2006. These families next year will face tax increases if we do not act on this bill. We ought to act on it now, although it does not phase out until the end of this year. During the spring, people anticipate their capability of sending their kids to college. If they cannot count on this, they have to dig up money someplace else for their kids to start college in September, which carries over into 2007.
The chart before the Senate shows the number of families, on a State-by-State basis, that benefit from this deduction. I emphasize that these are 2003 figures. I don't know exactly how much more we increase them because we are now in 2006, but it would be significant. In Iowa, more than 37,000 families are affected by this legislation, 37,000 in Iowa who do not know for sure if the tax deduction will be available when their kids go to college next year.
Now I will pick out another State. Nevada has 25,000 families. If we do not pass this legislation, 25,000 families will not know whether their kids are going to get the advantage of this tax for the next school year.
It seems to me the perpetuation of support for higher education, particularly for middle-income families, that their families cannot qualify for Pell grants, we ought to be reenacting this legislation now so these families can plan on sending their kids to college next September.
Another benefit addressed in this bill is the small savers credit. This gets back to the problem we are always talking about, that Americans are not saving enough. Lower income people, spending most of their disposable income on the necessities of life, do not have money left over to save. They may not have an ethic to save. Through the Tax Code, we try to give incentive to save and some help to save. This happens to be the tax credit for low-income people to save through an individual retirement account or a pension plan. Saving money is important. We all want all Americans to be part of the effort to save for the future.
This chart shows the number of low-income savers who benefit from this bill, on a State-by-State basis, from the small savers tax credit. Again, more than 5.5 million people take advantage of this. How many more for the 2006 figures, I don't know, but in Iowa 95,000 people take advantage of saving money through the small savers tax credit. And I will also take Nevada: 36,000, almost 37,000 people 3 years ago were saving through this program. That needs to be reenacted or there will not be incentive to save.
The bill before the Senate also extends another needed tax deduction. This is for teachers who buy their own supplies for their students. This provision was developed by Senators Warner and Collins. It makes whole teachers who go that extra mile to pay out of their own pocket classroom expenses. Who is going to argue with a devoted teacher whose school district does not provide enough supply if she wants to spend out of her own salary, his or her own salary, to buy supplies? That proves the dedication of our teachers.
I will point to the number of teachers included on the chart, on a State-by-State basis, who take advantage of this deduction. This deduction needs to be reenacted for these teachers to have the certainty that money they will spend today will be deductible from the taxes they file 12 months from now.
Again, in my State of Iowa, almost 34,000 Iowa teachers benefit from this. Another State we could look at would be Nevada, where 22,000 families benefit.
Is there any reason this help to teachers--who are good teachers but want to make better use of their talent, to make sure their students have adequate supplies--why that should not be reenacted, and why, this very day, in classrooms across America, teachers have to be worrying about whether they are going to have this benefit to reimburse them for going that extra mile?
Now, there is another item in this bill which is very popular which I do not have shown on a chart. But this bill extends what we call small business expensing, so that anything which is depreciable, on an increased amount of money of up to $100,000, can be expensed in 1 year rather than spreading it out over a period of 5 to 10 years. Many small businesses use this benefit to buy equipment on an efficient, after-tax basis.
This is very good for small business. Small business creates 70 to 80 percent of the new jobs in America. So it is a job-creation tax incentive. It is good, then, for workers in these small businesses. Obviously, if you employ more people, you end up with greater economic growth for our entire country.
The final chart I have deals with the tax deductibility of the State and local sales tax deduction. This applies to the States of Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
This bill helps 12.3 million taxpayers in your States. Tennessee is one of these States. It is the home State of our majority leader. He has worked hard to get this bill to the floor. For the third time now, our majority leader, Senator Bill Frist, has worked hard to move this bill into conference. I want the good people of Tennessee to know that.
Now, another State that could benefit when we get this passed is Nevada, the home State of our Democratic leader. Unfortunately, this bill is going through another process of holding it up for another day of debate, meaning the people in these States who have deductibility of their State taxes do not know whether, come 12 months from now when they are filing their income tax on income earned in 2006, it will be deductible.
So I would ask them to focus on the taxpayers of these respective States. I still hold out hope that the Democrat leadership will see the light. I hope they will work with me to guarantee that the folks in their States will be able to deduct their sales taxes this year. This is the third time, then, this bill has been delayed.
This is a bipartisan bill with a bipartisan consensus. This needs to pass. Maybe the third time will be a charm. Maybe we will finally get this bipartisan bill to conference because you do not get bills to conference around here that are not bipartisan because when you only have 55 Republicans in the Senate, there is no way, even when all of us vote alike--and we do not vote alike--we can move a bill to conference. So it has to be bipartisan. You have to have Democratic support. So in this particular instance, we have 15, 16, 17, roughly, of the Democrats voting for it.
Every Senator ought to help us pass this bill because of the provisions I just went through on these charts which are included in the bill. But there are also other reasons for supporting this bill.
Our bill addresses expiring business and individual provisions that are known as extenders. These provisions include items such as the research and development tax credit and the work opportunity tax credit. This bill also includes many of the charitable incentives introduced in what we call by the acronym the CARE Act and which provisions have previously passed the Finance Committee and passed the entire Senate.
In this regard, in regard to the CARE Act, in regard to the R&D credit, I have to give particular applause to Senators Santorum and Baucus in working with me to balance these incentives with several of the much-needed reforms that are supported by the charitable sector, the Treasury Department, the IRS, and donors and taxpayers to make sure charitable giving is not abused.
Last, but not least, this bill contains loophole closers and tax shelter-fighting provisions that raise revenue.
This bill is bipartisan.
I thank my friend and working partner and ranking member, Senator Baucus, for his cooperation. He and I were not always partners on this bill, at least in the beginning, but we teamed up in the Finance Committee. We teamed up in the first Groundhog Day floor debate. We teamed up in the second Groundhog Day debate. I look forward to working with him today and hope we can team up in the conference working out the differences between the House and the Senate. As always, his cooperation and, in tense times, his good humor make a big difference in this body.
Let me also thank those Democratic Senators who joined us in this bipartisan effort on our first floor journey. Most of them repeated through the second time on February 1 and 2 of this year. I ask them to help me persuade their leaders to let this bill proceed. I ask them to ask their leaders to focus on taking care of tax legislative business, bringing certainty to the tax policy of this country for the benefit of our taxpayers and the benefit of investment because investment creates jobs. I ask that the political games be cut out. I ask that we roll up our sleeves and get down to the people's business.
I suggest the absence of a quorum.
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Mr. GRASSLEY. Mr. President, on Medicare--and I know the debate here is not about Medicare, but Senator Kennedy spoke to one part of the new prescription drug program to which I wish to make reference. He referred in his remarks to the dual eligibles. He spoke about a problem that is real--the problem of signing up people who were dual eligibles into the new Medicare Part D prescription drug program.
I do not find fault with his explanation. I will say, however, that our committee which has jurisdiction over this, the Senate Finance Committee, has been working with Secretary Leavitt and Administrator McClellan of CMS to work through these problems. They pointed out seven problems they have identified. They have assumed responsibility for those problems, and they are giving us a program to work through those problems so they will not be repeated and enrollment will by easier and work more smoothly.
But the Secretary has told us about dual eligibles, that with 50 different States having 50 different ways of handling dual eligibles, frankly, merging the information technology system at the Federal level with the information which came out of 50 different States has been difficult to do.
Several of us in the Senate knew this was going to be a problem in 2003. That is why, in the Senate bill, along with the White House, we wanted to leave the dual eligibles just as they were--covered by Medicare and Medicaid. It happens that most of the Democrats in the Senate, along with Republicans in the House, felt we should end up with just 1 national Medicare Program so all of the 50 different States' dual eligibles ought to be merged into the national program.
We had a debate on the Senate floor on that issue, and my point of view won on a very narrow margin. Let me see if I can find it exactly--a very narrow margin of 47 to 51. We defeated an amendment on the Senate floor to bring them together.
What bothers me is Senator Kennedy is bringing up all these problems. If he had listened to us 2 years ago, we would not have ended up where we have because we would not be integrating dual eligibles into the national Medicare Program. But people on his side of the aisle were just totally insistent that was the wrong way to go, that we ought to have them integrated into the prescription drug Part D Program.
So, without embarrassing any Senator, I wish to quote a Democratic Senator who was in the middle of this debate. I am not going to give the name. Comments like this came out about how gung-ho they were to have dual eligibles in the Medicare Program. It says:
It's not a frequent day that Chairman Thomas--
I assume that refers to Chairman Thomas of the House Ways and Means Committee.
and I are in full agreement. But he does say such a shift ``ensures that all seniors across the country will have access to affordable prescription drugs, while alleviating much of the burden that states now confront.'' I say to my colleagues, as I indicate, I am not always in agreement, but we are going forward directly on this policy, I hope.
Continuing to quote:
Fully integrating a key benefit for prescription drugs into Medicare is a critical first step toward improving the current system's flaws. Not only is it unfair to exclude the poorest seniors from part of the Medicare program, it is a raw deal for some of our neediest seniors. For seniors who have worked all their lives, paid into the Medicare system, it is not fair for them to be at the mercy of State coverage decisions. All Medicare beneficiaries deserve to receive Medicare benefits. There should be no exception for drugs. It would be a very bad precedent to make Medicaid pay for items that are clearly the responsibility of Medicare except at the present and in this bill for one particular discrete population.
I think that--i.e., coverage under Medicaid--puts the dual eligibles, 74 percent or less of poverty, at terrible risk, and that is not something I associate with my understanding of the values of the Senator from Iowa--
Meaning me, I believe-- whom I so much respect.
That was on January 23, 2003.
On June 26, 2003, this quote was given by the same Senator:
Never in the history of Medicare have we precluded Medicare beneficiaries from being Medicare beneficiaries. In the underlying bill, for the very first time, we do.
In that rollcall of 47 to 51, to leave the dual eligibles as they were, which presumably we would not have the problem Senator Kennedy is complaining about now--that we have a hard time integrating them into the program--he was one of those 47 Senators who thought they ought to be put into the prescription drug program.
The reason we left them out is because we wanted to solve a problem for people who did not have prescription drugs, people who were dual eligibles, already had their prescription drugs through a State/Federal program, probably to a better point than maybe their having it through our bill where they pay some copay. At least in some States, they probably didn't have to pay a copay. We wanted to take care of the seniors who didn't have any prescription drug program, and by leaving the dual eligibles as they were, it would free up money to take care of more seniors.
As I said, we lost out in the final analysis. In conference, we agreed to include the dual eligibles in this program. Now I hear all this complaint about how it is working to the detriment of seniors because of the integration of 50 different State programs into 1 national program. It will be worked out. It will be worked out. The Secretary of HHS, Mr. Leavitt, says it will work out. He is working on it. He has identified a solution to it, and every day the signup is getting better as we sign up 94,000 people each day into the Part D prescription drug program.
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Mr. GRASSLEY. Mr. President, Senator Kennedy repeats the old demagogic saw about capital gains and dividends being only tax benefits for the wealthy. The facts are very different. I have two charts here which will show how wrong he is. One of these charts deals with capital gains. The other one deals with dividends.
Dividends is the first one to which I make reference because, in the State of Massachusetts, you can't have all these wealthy people benefiting from the 15-percent dividend tax instead of what he would prefer, the 20-percent dividend tax. Don't forget, again, as I referred in my opening remarks, these are year 2003 figures, so it could be a lot more than that right now, but these are the most up-to-date Internal Revenue Service figures we have.
In Massachusetts, we have 589,897 taxpayers who benefit from the 15-percent capital gains dividend. Don't tell me that all 589,000 of those are millionaires. Massachusetts may be a very wealthy State, but it doesn't have that many millionaires in it. So somewhere along the line, Senator Kennedy ought to wake up to the fact that there are a lot of middle-income and common folks in his State who are benefiting from the 15-percent tax on dividends instead of having a 33-percent increase in that tax and having it go back to 20 percent.
My friend from Montana did make a correct judgment that this is not running out right now. But the point is that when you are asking people to invest to create jobs in America, they have to have the long-term view of that investment. If you want to encourage investment to create jobs, people have to know what the tax law is for the long term, not for the short term.
The point is, in order to persecute a few millionaires, Senator Kennedy wants to punish the many. And the many are the 589,000 people in his State who benefit from the 15-percent tax on dividends.
Let's go to the number of people in that State who benefit from the 15-percent capital gains tax. There are 212,000 people in Massachusetts--again, I remind you these are 2003 tax year figures because that is the most up-to-date we have from the IRS. There are more today, probably. But there are 212,000 people in Massachusetts, taxpaying families and individuals, benefiting from the 15-percent capital gains tax. Those are not wealthy people.
Again, you get back to the point of whether we ought to persecute the few, the few millionaires he is talking about, persecute them and at the same time punish 212,000 people in the State of Massachusetts. I don't think so. I don't think it is good policy.
I hope this Congress is able to have a sensible tax policy that not only includes sensible levels of taxation, but if you look at all the dividends that are being paid out today that wouldn't have otherwise been paid out, you think you would come to a conclusion that is a sensible policy because we have tens of millions of taxpayers deciding how the profits of a corporation are going to be spent instead of a few thousand chief executive officers of those same corporations deciding how it is going to be spent. When millions of taxpayers are making those decisions, it is going to respond to the dynamics of our economic system and create more jobs and important prosperity than when a few corporation executives keep all those profits internal in a corporation making those decisions.
I don't think we ought to be persecuting a few to punish the many.
When it comes to these motions to instruct, we may have some motions to instruct on this side of the aisle that will set the record straight on what we are trying to accomplish and give people opportunities to vote on good economic policy and good tax policy as well as bad economic policy and bad tax policy that we are getting from some on the other side of the aisle.
In 2003, a bipartisan Congress lowered the top tax rate on dividends and capital gains to 15 percent through December 31, 2008, and for low- and middle-income taxpayers to 5 percent through 2007 and zero percent through 2008.
I filed six motions to instruct conferees to report back a conference report that includes the extension of these tax rates through 2009 and through 2010, the same as the House of Representatives has.
Critics of this policy claim these are tax cuts for the rich that make a budget deficit worse because they want to persecute the few and in the process punish the many. But I filed these motions that are going to tell the other side of the story; that when you have sound tax policy which encourages the economy to grow, we are also going to reduce the deficit.
Besides, let me suggest to you that I don't know how it is in other States, but I don't run into very many in my State who are saying I am undertaxed, tax me more. But I run into people day after day in almost every one of my town meetings where they are complaining about the overspending of the Congress of the United States.
In regard to the other side of the story and the motions to instruct that I filed, the lower rates of capital gains and dividends have produced several positive effects. They benefited low- and middle-income families in a meaningful way.
Can't you see that when you have a very low tax rate for certain low-income people, as one example? For low- and middle-income taxpayers, it will be 5 percent through 2007 and zero percent through 2008. This is going to encourage people to save to a greater extent, particularly people who have a lower income and don't have the ability to save.
These lower tax rates have reduced the tax burden on senior citizens who rely on their investment incomes during retirement. They have contributed to our economic recovery and continue to help the economy grow. They have made capital investments in America more competitive with the capital investment in other countries. With the globalization of the economy, that is something we always have to be cognizant of in this Congress, that you can't have a tax policy that makes our corporations, particularly in manufacturing, uncompetitive with manufacturing overseas.
Finally, these tax rates have helped impose transparency and discipline on corporate managers which is critical to protecting investments and workers.
I may or may not seek a vote on these motions to instruct, but I want to go through each one of these points which I made so that when Members come over to vote tonight, they will know some of the rationale behind Republican motions.
The lower rates on dividends and capital gains have benefited low- and middle-income families in a meaningful way. That is the third time I have said that in the last 5 minutes. But we have to get away from this attitude of persecuting a few and in the process punishing the many.
I don't know whether they on the other side of the aisle realize it, but when they want to persecute a few millionaires, they are punishing hundreds of thousands of people--I guess it is millions of people, if you take all 50 States, but I was making reference to the State of Massachusetts.
According to the Internal Revenue Service estimates for 2003 tax return data, about 10 million low- and middle-income taxpayers have $34 billion of income taxed at the 5-percent rate and saved at least $1.7 billion, or about $170 per taxpayer on average.
I know what I am going to hear from the other side. Well, $170 is nothing. Why don't we let the taxpayers of this country decide whether they would rather spend that $170 or that we ought to spend it for them?
I can guarantee if they invest it, or if they spend it, it is going to do more economic good than if I spend it for them as a Member of Congress. That is the way the dynamics are and the way society works. Money spent by the Government doesn't turn over as many times in the economy as it does if it is spent in the private sector.
At these 2003 levels, these taxpayers I have referred to save a heck of a lot of money. Don't forget, in 2008 that rate drops to zero percent.
My motion would instruct the conferees to ensure that Congress won't raise the annual tax bill on low- and middle-income taxpayers at the 2003 levels. That tax increase would be at least $3.4 billion. That is an average of $340 per taxpayer.
Senior citizens benefit from lower tax rates on dividends and capital gains. They have reduced the tax burden for senior citizens who rely more than working people do on investment income, and they need this particularly during retirement.
According to IRS estimates for 2003 tax return data, about 57 percent of the tax returns for taxpayers age 65 and older had taxable dividends income. That is over 6.5 million tax returns. These taxpayers rely on investment income, and particularly dividend income in their retirement. Low- and middle-income seniors pay tax on this dividend income at the 5-percent rate instead of 20 percent or 15 percent. That rate for these low-income seniors is going to drop to zero in 2008. Other taxpaying citizens, those with higher incomes, paid at the 15-percent rate, but that was instead of paying at the 35-percent rate.
We need to instruct the conferees that Congress won't impose a new tax on low- and middle-income seniors and more than double the tax on other taxpaying seniors in 2009 and 2010. In other words, we need to tell the other side to quit persecuting a few because in the process you punish the many.
In this particular case, why would they be crying about what we might be doing to senior citizens in one of the recent speeches and then stand there and want to increase the tax rates from zero percent to 35 percent for some of these people who are senior citizens?
Also these reduced tax rates on dividends and capital gains have contributed tremendously to our economic recovery and continue to help our economy grow. They reduce the cost of capital for American businesses and increase return on investment, enhancing economic growth, creating more jobs, and expanding the tax base.
Companies are responding to shareholder demand created by the lower 15-percent rate on dividends by paying record levels of dividends.
According to the Congressional Budget Office, capital gains realizations increased significantly in 2003, 2004, and 2005, causing capital gains tax revenues to be $62 billion higher over those years than were projected before we changed this law.
Don't tell me that $62 billion more coming in, according to the CBO--not a partisan like me; they are nonpartisan--$62 billion more didn't benefit the Treasury and reduce the deficit by reducing taxes. You know what you get out of this--a growing economy. That means more jobs, and 44.7 million jobs have been created since this tax policy has been in effect. The unemployment rate has dropped during the same period of time from 6.1 percent to 4.7 percent.
I feel very strongly, just as the other side wants to persecute the few to punish the many by going after what they call millionaires, that we ought to state the reality: that is, my motion to instruct the reality of keeping these tax rates so the economy continues to grow.
The progrowth policy will not expire at the end of 2008 or at the end of 2009 because investors who need the long-term view of investing know what the law is going to be and are going to make decisions.
The lower rates have done another thing--they have made our businesses more competitive with the global economy. And other countries around the world, having lower tax rates than we have, have jumped ahead of our businesses. Even with the United States at 50.8 percent, we still have the eighth highest tax rate on corporate income among the 30 nations in the OECD. For every dollar an American corporation makes on its U.S. investments, more than half of it ends up in Federal and State governments. Without the lower dividend tax rate, it would have been nearly 63 cents of every dollar, ranking second only behind Japan.
High taxes on capital investment make the United States less attractive compared within investment opportunities in other countries. That costs us jobs. In today's global economy, we should do everything we can to ensure the competitiveness of our businesses.
In this process of persecuting a few, the few millionaires, punishing everybody, you are punishing the people who need jobs, and who lose jobs because our businesses can't be competitive because our cost of capital is higher than global competition.
Also, there is a benefit to a motion to instruct for transparency of how a corporation works. The lower rates have helped impose transparency and discipline on corporate managers. That is very important to protecting investors and, particularly, jobs for our workers.
The high tax on dividends causes corporations to favor debt financing over equity financing, leaving more highly leveraged businesses vulnerable to economic downturns. High dividend taxes reduce the demand to receive and thus the incentive to pay dividends, leading corporate managers to invest in wasteful and unprofitable projects and to hide the results from their investors and their workers.
On the other hand, the reduced tax rate on dividends lessens the disparity between debt and equity financing, thus heightening demand for dividends, thus contributing to more transparency and more accountability of corporate managers for their decisions.
It seems to me in this post-Enron era, we need to instruct the conferees to ensure that the transparency and the discipline imposed on corporate managers by lower dividend taxes and critical to protecting investors and workers is not threatened by this expiration date in 2009 and 2010.
I yield the floor.
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Mr. GRASSLEY moves that the managers on the part of the Senate at the conference on the disagreeing votes of the 2 Houses on the Senate amendment to the bill H.R. 4297 (to provide for reconciliation pursuant to the concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 95)) be instructed to insist on the inclusion in the final conference report of the funding to support the health needs of America's veterans and military personnel contained in section 315 of the Senate amendment and the funding to strengthen America's military contained in title VI of the Senate amendment.
Mr. GRASSLEY. Mr. President, in explaining the rationale for my motion to instruct, I will be referring to other motions to instruct that two Senators on the other side have put in place, Senator Dodd of Connecticut and Senator Reed of Rhode Island.
The Dodd motion to instruct is yet another episode in the tale of the ``groundhogization'' of this tax relief reconciliation bill, a long journey. The Senate adopted the alternative to the Dodd amendment, a Grassley amendment, that passed, including the following Budget Act waiver language:
Waive all provisions of the Budget Act and budget resolutions necessary for the consideration of the pending amendment to this bill, and for the inclusion of the language of the pending amendment in consideration of an amendment between Houses.
That is what we added back on February 2 to S. 2020. The Dodd motion instructs conferees to proceed by ignoring this waiver language. You see, the waiver language only applies for the purposes of our action in the Senate. If Senator Dodd were to prevail, the conferees could not follow his directive without violating the Budget Act. It is because the Dodd motion deals with outlays. We can't do outlays in a budget reconciliation package. I might add that the Reed motion that we expect to vote on tomorrow suffers from the same defect. The conferees, even if they were inclined, can't return from conference with a provision that contains outlays.
We all know this is a political season. If you look at this motion, and if you look at the Reed motion, both cannot be adopted and followed. You can draw your own conclusion, then, why they are adopted, unless the Members don't know that this is a parliamentary situation. I can't believe they don't know what that parliamentary situation is.
While we are at it, I am going to offer a motion to clarify what the Dodd and Reed motions are all about. Basically, if you support the principles of providing more health care for veterans, the supposed purpose of the Dodd amendment, and, secondly, assisting our troops with body armor, the supposed purpose of the Reed amendment, then vote for the Grassley motion. If you support these two principles but don't support a tax increase on America's seniors, at a higher cost of capital for American business, support the Grassley motion. If you just want an increase, then vote for the Dodd motion.
I will summarize it this way: I appreciate Senator Dodd's attention to the issue of our veterans health care needs. This issue is of utmost importance to the Members of the Senate, as evidenced by the fact that we appropriated a massive amount of extra money last fall for the fiscal year we are in now to meet the needs of veterans, particularly those who were not recognized, people returning wounded from Iraq. But my colleagues suggest that in order to provide this support, we should give up the important economic tax policy of reduced capital gains and dividends tax, the present tax policy, just continue it for 2 more years so that people have a long-term view of what the tax policy is so that they know what they are going to invest.
The Dodd motion claims to be paid for by capital gains, but capital gains offsets don't even come into play until the year 2009. I have offered a motion that supports military health care facilities, but we don't tie it up with an offset that is 3 long years down the road.
You will remember that the Senate debated this issue on Groundhog Day and voted to accept my amendment that provides the same benefits but does not raise taxes to pay for it. I urge my colleagues to vote against Senator Dodd's motion and to support my motion to instruct the conferees on the amendment we have already passed.
In regard to what Senator Reed is trying to do with his motion to instruct, this is the issue of funding for our military. Proper funding for those serving our country is not a controversial issue. The method of providing this funding for our military is, on the other hand, being made into an unnecessarily controversial issue. My colleague suggests that in order to provide for this funding, we eliminate a tax benefit that doesn't even arise until the year 2009, similar to the same issue in the Dodd amendment. I ask how this would provide the funds so badly needed this very day to ensure that we meet the operational needs of our courageous military service personnel.
I offered an amendment that supports the operational needs of our military without tying it to an offset that is 3 long years down the road.
Again, in an effort not to sound repetitive, you will remember that the Senate debated this issue also on Groundhog Day and voted to accept my amendment that provides the same benefits but does not raise taxes to pay for them. So I urge my colleagues to vote against Senator Reed's motion and to support my motion to instruct conferees on the amendment we have already passed.
To sum up, if you are against a tax increase but for veterans health care and properly equipping our military, vote for the Grassley motion. If you are for a tax increase, then look elsewhere to our colleagues who are offering their version of it.
MOTION TO INSTRUCT CONFEREES
Mr. GRASSLEY. Mr. President, I am sending several motions to the desk now. I ask that these be taken up together. I ask that the clerk would read each one at a time because I want to speak to each one. I would ask the clerk to read the first one.
The PRESIDING OFFICER. Without objection, the pending motion is set aside.
The clerk will report.
The legislative clerk read as follows:
Mr. GRASSLEY moves that the managers on the part of the Senate at the conference on the disagreeing votes of the 2 Houses on the Senate amendment to the bill H.R. 4297 (to provide for reconciliation pursuant to the concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 95)) be instructed to report a final conference report that includes the ``hold-harmless'' relief from the individual alternative minimum tax in 2006 (sections 106 and 107 of the amendment passed by the Senate) to protect middle class families and includes an extension of lower tax rates on capital gains and dividends (based on section 203 of the bill passed by the House of Representatives) to protect tax cuts for middle class families.
Mr. GRASSLEY. Mr. President, the motion to instruct that was just read is mine. Simply stated, this is a motion that says there are sufficient funds to do both alternative minimum tax and capital gains and dividends and that we should do both--in other words, as an instruction to conferees.
MOTION TO INSTRUCT CONFEREES
Mr. GRASSLEY. Mr. President, I ask the clerk to read the motion that I am introducing for Senator Lott, listed as No. 3.
The PRESIDING OFFICER. Without objection, the pending motion is laid aside and the clerk will report the motion.
The legislative clerk read as follows:
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Mr. GRASSLEY moves that the managers on the part of the Senate at the conference on the disagreeing votes of the two Houses on the Senate amendment to the bill H.R. 4297 be instructed to report a reconciliation conference report ensuring that in 2009 and 2010, the international competitiveness of the United States in attracting capital investment, and therefore job creation, is not weakened further by a higher combined corporate and individual income tax rate on corporate and capital income as a result of a higher dividend tax rate, based on the following:
(1) In 2005, the combined maximum corporate tax rate and individual dividend tax rate in the United States was 50.8 percent. This rate was the eighth highest rate in the thirty-nation Organization for Economic Cooperation and Development, taking into account both national and subnational taxes.
(2) If the top federal tax rate on dividend income would have been thirty-five percent, instead of fifteen percent, the combined tax rate would have been 62.9 percent, and would have been the second highest combined corporate and individual tax rate on corporate income in the OECD, behind only Japan.
Mr. GRASSLEY. Mr. President, I offer this motion instructing conferees that in the years 2009 and 2010, the international competitiveness of the United States in attracting capital investment, and therefore job creation, is not weakened further by higher combined corporate and individual increased tax rates on corporate and capital income as a result of the higher dividend rate.
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Mr. GRASSLEY moves that the managers on the part of the Senate at the conference on the disagreeing votes of the 2 Houses on the Senate amendments to the bill H.R. 4297 (to provide for reconciliation pursuant to the concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 95)) be instructed to insist on the inclusion in the final conference report of a permanent extension of the modifications to the child tax credit made by the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.
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Mr. GRASSLEY. Mr. President, the words ``paid for'' also mean tax increase. The difference between these motions is, the Grassley motion does not contain the tax increase. The Dodd motion asks the conferees to raise taxes.