RENEWABLE ENERGY AND JOB CREATION ACT OF 2008--Continued -- (Senate - September 23, 2008)
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Mr. GRASSLEY. 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.
There being no objection, the material was ordered to be printed in the Record, as follows:
Executive Office of the President, Office of Management and Budget, Washington, DC,
September 23, 2008.
Statement of Administration Policy
SENATE AMENDMENTS TO H.R. 6049--ENERGY IMPROVEMENT AND EXTENSION ACT OF 2008 AND TAX EXTENDERS AND ALTERNATIVE MINIMUM TAX RELIEF ACT OF 2008
The Administration supports prompt passage of the above-named Senate amendments to H.R. 6049. This legislation is important to protect about 26 million Americans from an unwelcome tax increase in the form of the Alternative Minimum Tax. This legislation would also extend the tax credit for research and experimentation (R&E) expenses, incentives for charitable giving, subpart F active financing and look-through exceptions, and the new markets tax credit. The Administration supports these provisions and supports the passage of this legislation, despite the inclusion of several provisions that the Administration opposes.
The Administration supports tax incentives for renewable energy and has proposed replacing the current complicated mix of temporary incentives with a comprehensive unified approach that is carbon-weighted, is technology-neutral, and provides long-term certainty. The Administration believes this approach would be preferable to the provisions included in the Senate amendments.
It is the policy of this Administration that efforts to avoid tax increases on the American people should not be offset by provisions to increase revenue and treated as the equivalent of additional government spending under budgetary guidelines. Protecting taxpayers from the higher 2008 AMT liability and extending current rules for business taxation should not be impeded by the same procedural barriers as provisions to increase Congressional spending. For this reason, the Administration supports the provisions in the Senate amendments that provide individual and business tax relief without subjecting Americans to offsetting tax increases.
The Administration remains strongly opposed to provisions that would freeze the domestic manufacturing deduction for one industry, change the tax treatment of foreign income for American energy companies operating abroad, and eliminate the cap on the oil spill liability trust fund, raising the price of a barrel of oil. These provisions will increase the costs of American oil production, will give further advantages to foreign suppliers, and will likely result in higher prices at the pump. At a time when consumers are already struggling with the high price of gasoline and diesel fuel, Congress should not put additional upward pressure on fuel prices. As a matter of general principle, the Administration opposes singling out particular industries, based on political considerations, to be denied the full amount of broadly available tax advantages. In addition, the Administration strongly opposes the provision in the bill treating U.S. citizens with deferred compensation from certain employers, in all industries, more unfavorably than other U.S. citizens. The Administration is also concerned about certain incentives included in the bill, such as expensive and highly inefficient tax credit bonds. The Administration urges Congress to eliminate all such provisions from the final bill. Finally, the Administration opposes new mandatory funding for Payments in Lieu of Taxes, and believes that any extension of rural community payments should be phased out, as it has previously proposed. The Administration urges Congress to eliminate all such provisions from the final bill.
The Administration supports passage of mental health parity legislation included in the Senate amendments to H.R. 6049 that eliminates disparities between mental health benefits and medical and surgical benefits without significantly increasing health coverage costs. Also, the Administration is pleased that the Senate amendments include the President's Budget proposal to restructure and eventually retire the debt of the Black Lung Disability Trust Fund.
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Mr. GRASSLEY. 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.
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Mr. GRASSLEY. 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.
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Mr. GRASSLEY. 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.
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