To Amend the Internal Revenue Code of 1986
TO AMEND THE INTERNAL REVENUE CODE OF 1986 -- (Senate - December 08, 2006)
BREAK IN TRANSCRIPT
Mr. GRASSLEY. Mr. President, I want my colleagues to understand that if this budget point of order is not waived, this legislation that we have been working on for a period of 8 months, and should have been passed in July--probably should have been passed in May, but for sure in July, and here we are still doing it--will not be passed.
I want to comment on why, without hearing my colleague yet--and going before him, but anticipating from some statements that have been in the press--why he is wrong about his point of order against this legislation.
Earlier today, there were comments made by my Republican colleague regarding the tax extenders bill. I would like to take a few minutes to clarify the record regarding the tax extenders bill.
Three points:
First is the claim that tax cuts are a budget buster, that it is tax cuts that are putting us in the red. Nothing could be further from the truth. We have seen tax receipts going up by a record amount. From 2004 to 2005, receipts went from $1.8 trillion to $2.1 trillion. The calculators at the Treasury needed new batteries to count the new dollars coming in this year, increasing from $2.1 trillion to $2.4 trillion--an 11.8-percent increase. These tax receipts far outpace what was projected in the budget, and, most importantly, the budget resolution we are currently operating under.
The bottom line: Taxpayers are sending checks to the Treasury well over $100 billion in excess of what was expected under the budget resolution. We are now taking action to prevent what is effectively a tax increase. I never thought I would hear a Republican advocating we ought to have a tax increase. If we do not pass this legislation, 19 million people are going to have tax increases.
And let my colleagues absolutely be clear in understanding that failure to pass this legislation, then, is not just about nothing, it is about allowing tax increases to go into effect. And they would go into effect without even a vote of the Congress. Taxpayers, then, will be writing checks even bigger than this unexpected amount of money that is coming into the Treasury already, if this legislation does not pass. Teachers, parents of college students, working families will all have to dig deeper into their pockets to pay for out-of-control spending in Washington.
Taxes are pouring into the Treasury. As I said earlier, it is not for the lack of tax receipts that we are seeing a deficit. It is because of the inability to control spending. In my time here in Washington, DC, I have never seen that the way to control spending is to keep taxes high. Higher taxes is a license to spend more money. And that is borne out by the facts. While tax receipts have gone up 11.8 percent in 2005-2006, spending has increased 8.6 percent.
It is important for my colleagues to also understand that much of the tax cuts that are in the tax extender package were expected to be included in the $70 billion tax cuts passed in the budget resolution--the budget resolution out of the Budget Committee.
I find it extremely frustrating that those who come to the floor and decry this bill fail to note it is because we made room for other priorities, priorities they championed, such as capital gains and dividend cuts in the tax reconciliation bill, that we were unable to include the tax extender provisions in that reconciliation bill last spring. And it is for that reason that we now have to consider an extender bill.
It reminds me of the fellow who complains about not being able to get a BLT sandwich after he ate all the bacon. And speaking of bacon, one of the major pork products, I would now like to turn to the second point: the discussion on the floor earlier about earmarks.
I know my colleagues who serve on the Appropriations Committee have familiarity with the term ``earmark.'' Earmark is something that goes to one individual or one company. That is not what this bill is about. But they have tried to characterize it that way. This bill provides tax relief, and these provisions provide tax relief that is not for one individual or one company. They are not earmarks.
For example, the deduction for tuition will help--let me take a State at random. Let's take New Hampshire as an example. It helped 23,124 taxpayers in the year 2004. These tax policies, then, are not earmarks when you are helping 23,000 taxpayers in New Hampshire. And failure to extend the tax extenders means that these taxpayers are going to have an increase in taxes.
Earlier we heard on the Senate floor discussion about a tax provision that benefited songwriters. Again, this is not an earmark. As most Members who have been to a record store recently are aware, there is more than one songwriter in this country. But I raise the songwriter provision to respond to another point, which is that there are provisions in this bill that because of the Senate rules, Members will be prevented from effectively raising concerns.
The songwriter provision, supported by several Members on both sides of the aisle, was voted on by Members earlier this year in the tax reconciliation bill. It already passed the Senate. The extenders bill is now making that provision permanent. Members had ample opportunity to raise concerns about this provision when it was considered 6 months ago. Not a discouraging note was heard. In fact, colleagues who discussed this provision earlier today actually voted for the legislation that contained the songwriter provision. Talk about saying one thing and doing another. So I think those who sang the first verse earlier in the year should be cautious about complaining that we are now singing the second verse.
Finally, I want to comment about the point raised on the sales tax deduction. Again, you call that an earmark, when people in nine States who would not be able to deduct their State sales tax from their Federal income tax have the opportunity to do it? It is affecting 10 million people, and that is an earmark? I find the statements made about the sales tax to be of concern and a misrepresentation of policy.
First, my colleagues earlier heard complaints about the cost of the sales tax provision but then in the same breath complain that the sales tax provision does not cost enough, that the sales tax provision's flaw is it should be expanded to both itemizers and nonitemizers, which then would cost billions more.
The easy answer is that the intent is to roughly mirror the deduction for State income tax that residents of the rest of the States have. The State income tax deduction is only for itemizers. So why would you want the sales tax deduction to be expanded to include nonitemizers?
Second, the deduction for sales tax is only allowed in lieu of a deduction for the income tax. So the benefits that it provides to residents of States such as New York and California, who have both a State income tax and sales tax, is limited. But it does certainly provide real benefits to taxpayers who live in States without a State income tax but do have a State sales tax.
The provision means that the Federal Tax Code will not treat similarly situated taxpayers differently based on how the State decides to raise revenue. The Finance Committee has seen no evidence that States have responded to this provision by raising the sales tax.
I appreciate the opportunity to clear the record and separate facts from fantasy when it comes to this tax extender bill. These are important provisions that we need to act on now to ensure that taxpayers can properly file their tax returns and receive much-needed tax relief.
Finally, the Congressional Budget Office has scored the total health package as costing $1.7 billion over 5 years. The $1.7 billion stems from the cost the Congressional Budget Office has attributed to making the Recovery Audit Contractor Demonstration a permanent part of the Medicare Program and implementing it on a nationwide basis.
The 3-year demonstration project was authorized in the Medicare Prescription Drug Act of 3 years ago and requires the Center for Medicare Services to contract with the recovery audit contractors to detect Medicare overpayments and underpayments and to recoup overpayments. Typical overpayments involve improper coding or billing for services for which there is no medical necessity. Also, Medicare inadvertently pays for services when another payer, such as a worker's comp or auto insurance, should be a primary payer.
Despite being implemented for a limited time in three States, this demonstration has already shown enormous potential for the identification of overpayments and underpayments and the recoupment of overpayments. In fiscal year 2006, this demonstration identified around $300 million in improper payments in three States. It is estimated that implementing this program on a permanent basis nationwide would result in approximately $8 billion in recovered funds being returned to the Medicare trust funds over 5 years. And somebody is bellyaching about investing $1.7 billion to bring back $8 billion.
CBO has assigned a cost to this provision because of a budget scoring rule--some scoring rule that somebody ought to do something about--called rule 14, which says that ``no increase in receipts or decrease in direct spending will be scored as a result of provision of a law that provides direct spending for the administration or program management activities.'' As a result, even though they are real and substantial, savings from this program will not be recognized for budget purposes.
Despite the potential of a budget point of order, we have included this provision in the package because it is simply good policy. It will recover billions that would otherwise be wasted in the Medicare Program--some of it fraudulently wasted. For all these years, Medicare has not been able to effectively detect payment errors. The nationwide adoption of this program will result in real savings for the Medicare Program and, ultimately, the taxpayers.
Mr. President, I wish to talk briefly about the issue of Red Cross reform. The Red Cross is one of the great institutions in this country. It is supported by millions of Americans with their volunteer work and contributions. Americans have a right to expect the best from this proud organization.
On Monday, I shared with leadership staff on both sides of the aisle as well as interested members copies of legislation that brings much needed reform to the governance of the Red Cross. The Red Cross is congressionally chartered and therefore any reforms to the governance require changes in statute.
As many of my colleagues know, I have been active in oversight of the Red Cross since problems came to light with the organization after the tragedy of 9/11. However, it was after the Katrina hurricane that it became evident that fundamental change was needed in how the organization was managed and governed.
In response to my oversight, the Chairman of the Board Ms. Bonnie McElveen-Hunter called for an Independent Governance Advisory Board. I thank her for her leadership and responsiveness to the concerns raised.
This board recently issued its report ``American Red Cross Governance for the 21st Century'' which can be found on their website. This report is based on the fine work of its Chair, Karen Hastie Williams as well as Peter Clapman, Professor Charles Elson, Margaret Foran, Professor Jay W. Lorsch, Patricia McGuire and Professor Paul Neuhauser. I thank them all for their service.
The legislation that I shared with colleagues on Monday is based on the findings of the report from the Independent Governance Advisory Board which was approved by the Red Cross Board of Governors and released to the public on October 30, 2006.
The legislation deals with such vital issues as the size and role of the board; the characteristics of who should serve on the board; the role of cabinet members in Red Cross governance; the creation of an ombudsman; the responsibilities of the Government Accountability Office and many other important matters.
However, while the statutory changes are important, much of the hard work of changing the culture and governance of the Red Cross will have to be done by the management and board of the Red Cross. I expect them to look to the findings of the report as a close guide for their actions on the details.
I am hopeful that this legislation, which has the support of the Red Cross, can be passed by unanimous consent quickly so that we can have in place a Red Cross that has effective and modern leadership for this Nation.
However, I am deeply discouraged that despite the fact that this legislation has been cleared for several days on the Republican side it still has not been cleared on the Democratic side, and this despite the fact that the legislation has been originally cosponsored by Democrat Senators KENNEDY, LANDRIEU and AKAKA as well as Senators on this side of the aisle, SANTORUM, ENZI, ISAKSON, MARTINEZ and DOLE. As my colleagues all know, Senator DOLE was the former President of the Red Cross. I am pleased to have all their support.
But I am very frustrated that I have received no response or courtesies from the Democrat leadership of why this commonsense and needed legislation cannot be passed.
I have been informed that staff in the other body have stated to Red Cross officials that they do not want to pass this legislation because they want it to be an early victory for the new Congressional leadership. I do not want to believe that that is the reason why there is no action on these reforms.
The failure to act on these reforms is having a very real and very negative impact on the vital work of the Red Cross. I met with the Chairman of the Board of the Red Cross just two days ago and she informed me that the failure to pass this legislation quickly is hurting their efforts to successfully recruit and bring into place a new CEO. In addition, the needed changes to the governance structure at the Red Cross are also frustrated by the failure to make the necessary statutory changes.
We saw with Katrina the need for strong leadership and governance at the Red Cross. The Red Cross has taken the right steps to make reforms, reforms that will lead to better service for the American people in times of need. The Democrat leadership should be placing those same priorities first. I call on them to allow us to go forward with passing this legislation.
Mr. GRASSLEY. Mr. President, in connection with H.R. 6111, the Tax Relief and Health Care Act of 2006, the nonpartisan Joint Committee on Taxation has made available to the public the following document: Joint Committee on Taxation, Technical Explanation of HR. 6408, The ``Tax Relief and Health Care Act of 2006,'' as Introduced in the House on December 7, 2006--(JCX-50-06)--December 7, 2006. This technical explanation expresses the Senate Finance Committee's understanding of the tax and other provisions of the bill and serves as a useful reference in understanding the legislative intent behind this important legislation.
BREAK IN TRANSCRIPT
Mr. GRASSLEY. Mr. President, I would like to discuss a tax policy matter that is important to several Senators. Although it is not a priority for me, I pursued the issue for those Senators during the ``trailer'' bill negotiations. On my side of the aisle, the interested Senators included Senators SMITH, LOTT, CORNYN, DOLE, GRAHAM, and VITTER. I know Senators on the other side of the aisle have similar interests, including Senators LINCOLN, PRYOR, LANDRIEU, CANTWELL, and MURRAY.
Under current law, the tax treatment of capital gain income from timber activities varies. The variance depends to a great degree on the form of the business entity that holds the timber. The top individual capital gain rate of 15 percent applies to capital gain from timber if the timber is held by pass-through entities. By contrast, capital gains from timber held by regular ``C'' corporations are taxed at the top corporate rate of 35 percent.
Senators SMITH and LINCOLN filed an amendment for the Finance Committee reconciliation tax relief markup last year. The amendment aimed at addressing the differential treatment of timber capital gains among entities. A form of that amendment was included in the first round of negotiations on the trailer bill. The final form of the trailer bill agreement did not include the timber capital gains amendment.
Since this issue was not fully resolved, and many Members remain strongly interested in the issue I would like to ask my friend, the ranking Democrat and incoming chairman, Senator BAUCUS, if he plans to further examine the issue in the next Congress.
BREAK IN TRANSCRIPT
Mr. GRASSLEY. Mr. President, I rise in support of the Haiti trade provisions in this legislation. And I want to respond to some of the criticisms leveled at these provisions.
Right now over two-thirds of Haitian apparel exports to the United States are made from fabric made in either the United States or a beneficiary country under the Caribbean Basin Initiative.
Under the bil l, it is true that Haiti can use fabric from third countries to produce apparel exports for duty-free entry into the United States.
But to be eligible for such duty-free treatment, at least 50 percent of the value of the apparel must be attributable to Haiti, the United States, or another regional qualifying country.
If, for example, Chinese-origin fabric is used to manufacture apparel in Haiti, only the value of the cutting and sewing counts toward the 50-percent value-added requirement. The value of the Chinese fabric itself does not count toward the requirement.
And because fabric generally accounts for more than 50 percent of the value of a garment, the 5 0-percent value-added requirement will often mean that qualifying apparel must be made from fabric produced in a regional qualifying country to be eligible for preferential treatment.
Moreover, the benefits are capped in the first year at 1 percent o f United States apparel imports, which is less than current apparel imports from Haiti and equal to only 20 percent of the total level provided under the African Growth and Opportunity Act.
Now, the bill does include a tariff preference level, but it is limited to woven apparel, not knits. And the level of the tariff preference level is equal to only 0.23 percent of United States apparel imports.
The Commissioner of Customs wrote a letter to Chairman THOMAS of the House Committee on Ways and Means stating that Customs remains committed to enforcing all textile trade laws. The Commissioner further indicated that Customs can, and will, enforce the textile provisions in this bill if they become law.
The bottom line is that the Haiti trade provisions in this bill will help to spur economic growth and prosperity in the most impoverished country in this hemisphere. At the same time, these provisions do not threaten to significantly impact our domestic industry in an adverse manner.
In addition, these provisions have been endorsed by a number of non-governmental organizations, including Oxfam America and the International Policy Committee of the United States Conference of Catholic Bishops.
I urge my colleagues to support the Haiti legislation, as well as the other trade provisions in this bill.
Mr. President, I ask unanimous consent that my remarks be printed at the appropriate place in the CONGRESSIONAL RECORD, and I yield the floor.
BREAK IN TRANSCRIPT
http://thomas.loc.gov/