March 25,1999

Roth Statement on Grams Tax Cut Amendment

WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today urged support for tax relief in the budget resolution. Roth pointed out that the budget resolution includes tax cuts, while the President's budget raises taxes. Roth's statement follows:

"Mr. President, as we turn our attention to the Budget Resolution, pondering the course government is going to take -- the philosophy and policies that are going to lead us into a new millennium -- I want my colleagues to consider that rather than a time for acrimony and partisan politics, this is a time of great opportunity.

"In fact, few times in history have been so rich with the opportunities that are before us -- opportunities to set a future where the needs of taxpayers, families, students, and communities come before the insatiable appetite of the federal government. Because of policies we began to implement in the early 1980s, we are the beneficiaries of the longest peacetime economic expansion in history.

"Our efforts to support the home -- to provide incentives to save and invest -- as well as our work to encourage risk-taking businessmen and -women, researchers and developers, our agricultural and educational communities -- these efforts have paid tremendous dividends.

"Now the question, as we face the final hours of the 20th century, is simple: Do we move forward, embracing economic policies that are proven to increase prosperity and economic opportunity for all Americans, or do we abandon them for proposals that will raise taxes on the most vulnerable among us, proposals that will fill government coffers, swell federal programs, and risk shutting down the tremendous engine of growth that we have successfully created?

"It seems that the answer to this question is clear, and therefore I rise today to introduce a Sense of the Senate amendment to the Budget Resolution -- a Sense of the Senate amendment that is bipartisan in nature -- one that makes it clear that in the choice between a tax cut, as authorized in the resolution, or a tax increase, as provided in the Administration's budget, we are resolved and choose to be consistent as to the direction we want to go.

"Today the federal government is collecting more taxes than ever before. Because of our entrepreneurs, our farmers, laborers, and families preparing for the future, we are witnessing strong economic growth, and this has been very beneficial for the government's income. These individuals have been encouraged by our efforts to dramatically cut taxes in the 1980s, to create incentives for saving and investing in the 1990s, and by our work to reduce government interference in their lives.

"Unfortunately, and despite the fact that government is collecting more revenue than ever, the Administration's budget reverses this important trend. It represents another in a series of large tax increases this Administration has tried to impose on Americans. In fact, this proposal is a net tax increase of $50 billion over five years and $90 billion over ten years. It is not a targeted tax cut as its proponents claim. Rather, it is a tax increase that dramatically hits lower-income Americans the hardest. For example, under the Administration's budget, taxpayers with incomes of $25,000 and under will bear almost 40 percent of the net tax increase. Taxpayers with incomes of $75,000 and under will bear over 75 percent of the burden.

"One might ask, with all the talk about targeted tax breaks in the Administration's budget, how can it be a tax increase on America's most vulnerable. The simple answer is that the Administration's budget relies to a great degree on a 55 cents per pack cigarette tax increase. That tax increase, which largely goes for new spending, far outweighs any tax cutting provisions in the budget, and it hits lower-income Americans the hardest.

"On the other hand, Mr. President, the budget resolution proposed by Senator Domenici does not unfairly penalize one group of Americans. In fact it does not penalize any group. Rather, it provides the Senate Finance Committee with the authority to cut taxes, not increase them. And it allows us to cut taxes in a way that will continue to energize the economic growth our nation is enjoying. This is what America needs as we look to the opportunities before us.

"I reject any argument that tries to raise the old worn-out issue of class warfare -- those who might try to suggest that this resolution will provide tax cuts for the rich. First, I reject it because this resolution does not actually cut taxes, but only authorizes the Finance Committee to proceed to cut taxes. And second, I reject it because the kind of across-the-board tax cuts that are being discussed are just that -- fairly applied across-the-board tax cuts that go to everyone. They are just like the tax cuts that President Kennedy implemented in the 1960s and the tax cuts that President Reagan implemented in the 1980s. On both occasions these bipartisan tax cuts led to record-setting economic growth, so not only were they fairly applied, but they benefitted everyone.

"Mr. President, I also reject the argument that the federal revenue windfall, or budget surplus, will be used by the Administration to retire the debt. For years, there were many among us who argued that tax increases were needed to reduce deficit spending and retire the debt. On occasion, they prevailed and taxes were raised, but then something interesting happened. Deficit spending did not stop, the debt was not retired. The increased taxes actually placed a damper on the economy, and the government spent more than $1.50 for every $1.00 it increased taxes. In other words, the government actually taxed itself into higher deficit spending. It wasn't until Congress insisted on holding the line on spending that the growing economy actually brought about a balanced budget.

"According to a new study by the Joint Economic Committee, in the post-war period, sixty cents of every dollar of surplus taken into government coffers has been spent by government within a year. Does anyone doubt the taxpayer overpayments that are now contributing to surplus revenue will not be spent by future Congresses? Of course they will. The way to reduce the debt is to keep the economy growing -- to keep an environment of opportunity available to all Americans. And the way to keep the economy growing is to cut taxes and minimize government interference in the lives of Americans. This is the message of the Grams Sense of the Senate amendment. It reaffirms support for the tax cut authorized under the resolution offered by Senator Dominici. The tax cut provided in that resolution is $142 billion over five years and $778 billion over ten.

"This resolution will empower the Finance Committee, Republicans and Democrats, to work together and provide comprehensive tax relief. The Finance Committee can provide across-the-board tax relief, over the long-term -- relief that is simple, fair, and meaningful to all taxpayers. With the authority given us by this resolution, the Finance Committee can provide tax relief in the short term for many good purposes -- purposes supported by Republicans and Democrats alike.

"For example, we could enhance retirement security. By this I mean improving small business pension plans, making IRAs more accessible, and simplifying employer 401(k) plans. Also, we should address the needs of women returning to the workforce. Every worker has a stake in a better retirement that these incentives could provide.

"Second, we could enhance family tax relief. For instance, we could ensure that the $500 per child tax credit, dependent care tax credit, and education credits are available to middle income families by exempting these credits from the alternative minimum tax ("AMT"). If we do not provide these exemptions, millions of families could be adversely affected. In addition, the Budget Committee, on a bipartisan basis, has emphad the importance of providing marriage penalty relief.

"Third, we could do more to correct our abysmal national savings rate. Chairman Alan Greenspan says this is the number one economic problem confronting America. To this end, in addition to the retirement plan and IRA expansion mentioned above, we could do something for small savers. For instance, we could simplify the tax system by providing an exclusion for small savers of $200 for singles and $400 for married couples. This bipartisan tax cut would benefit more than 60 million taxpayers. It would also allow up to 11 million Americans to file the 1040 EZ -- which is the simplest federal tax form there is.

"Fourth, we could provide greater tax relief to improve educational opportunities for students and their families. We could provide incentives for families and students to seek higher education and avoid large debt burdens. For instance, nearly every state has a prepaid college tuition plan, and those plans could be made tax-free under a bipartisan proposal.

"Fifth, we could address the expiring provisions in the current tax code, and we could look at real tax code simplification. The Finance Committee could eliminate needless complexity that results from income limits, phaseouts, and the alternative minimum tax. Again, these are bipartisan objectives.

"And finally, Mr. President, we could continue to push for proper taxpayer protections. Reform of the IRS is in its infant stages. Elimination of unjust penalties and interest scores as revenue loss. In order to continue meaningful reform of the Internal Revenue Service, we must realize that our efforts will be scored as revenue losses and we must consequently address them in the context of tax cuts.

"This Sense of the Senate amendment makes clear that without the authority provided in the budget resolution, the Finance Committee will not be able to provide significant tax relief -- we will not able to address these important bi-partisan issues and fix problems in the current code. The resolution will allow us to move forward. And let me conclude by explaining how important it is that we move forward.

"Working together, we have delivered on a bold promise to the American people -- the promise of a balanced budget and a dynamic economy where jobs, opportunity, and growth are available to all. Since 1995, we have worked for tax relief for families, savings and investment incentives, health care-related tax relief, relief for small business, and tax simplification. As we moved forward in these areas, not everyone was supportive at first, but they were eventually adopted by Congress and signed into law by the President. Among the items enacted were tax deductible treatment for long-term care insurance and raising the deductible portion of health insurance for self-employed small businesses and farmers. In addition, pension plan reforms, especially for small business, were enacted.

"In 1997, we pushed for tax relief in the context of a balanced budget. The President agreed to tax relief he had previously vetoed. Among the tax relief proposals enacted was a $500 per child tax credit that is now providing relief to millions of taxpaying families. We also expanded individual retirement accounts and created the new Roth IRA. Millions of taxpayers now have tax-favored savings vehicles open to them. We reduced the top capital gains rate from 28% to 20%. This provision helped unlock investment dollars for the economy and provided relief to farmers and small business.

"Beyond this, Mr. President, we have worked together to offer education-related tax relief, including educational IRAs, prepaid college tuition plans, an extension of the tax-free treatment of employer-provided educational assistance, and a revival of the student loan interest deduction. We have passed estate tax relief, including relief for small businesses and farmers. And we have succeeded with historic reform of the Internal Revenue Service, including new taxpayer protections regarding the collection activities of the IRS.

"The Grams Sense of the Senate amendment makes clear that once again, we are at the crossroads on the question of tax relief or tax increases. The Sense of the Senate clarifies that the resolution continues Congress on the same tax relief path begun in 1995. It can be summarized into three points:

"First, the Administration's budget, though described by its supporters as targeted tax cuts, is a tax increase.

"Second, if you are serious about tax relief, it must be accommodated in the resolution. The Finance Committee must have the tools to provide meaningful relief. To oppose the tax cut in the resolution is to deny the Finance Committee the tools to do the job.

"Third, a vote for the tax cut in the resolution is a vote for tax relief that is consistent with tax cuts that have been enacted over the past four years.

"Mr. President, I urge my colleagues to support the Grams Sense of the Senate amendment and I ask unanimous consent to insert into the record a copy of the Tax Foundation's analysis of the Administration's budget, as well as a copy of a revenue table, prepared by the Joint Committee on Taxation, which scores the Administration's budget."