Date: 2003-03-17
Speaker: CARL LEVIN (democrat)
Chamber: S

they suggested clearly that we would fund the costs of a war by a supplemental. In the letter they wrote on February 27. it says: The administration Is expected to request a supplemental appropriations for these concurrent and future military operations. We urge our colleagues consideration for any such request. We must show strong support of our troops in the field. Signed. CARL LEVIN and JOHN WARNER. Now. that is what we have been doing all along. and everybody knows it. I know the Democratic leader. Senator DASCHLE. has been promoting the ideawas quoted In the paper. and it came up at the Budget Committee. now it has come up on the floorthat they would start carping about the fact that we cannot have a budget until the President sets forth in detail exactly what money is going to be spent on this conflict. a conflict that has not even occurred yet. He should not be expected to do that. We had the Congressional Research Service to check on budgeting for wars in the past. and they stated this. if it makes any difference to anybody: Presidents have not requested and Congress has not provided funding for wars In advance of the start of operations. Rather. administrations have requested funding after operations have begun and Congress has subsequently appropriated money to meet specific documented budgetary requirements. Further: Congress has provided the executive branch with considerable flexibility in financing military operations in advance of specific congressional action on appropriations. Of course. that Is the way it has been historically because that is the way it Is. We cannot predict how these things are going to go with certainty. I believe that is a red herring and an improper thing to be saying now. to suggest that we may not be willing to fund this effort. We are going to keep the cost as low as possible. But this Congress. through its vote last fall. when Democrats were in the majority. authorized the President to act If he needed to and we would pay for it. I will make a couple of points in general about where we are with the budget and what we can do about it. The economy has been sinking. In fact. as I recall. during the last month of President Clintons tenure in office. the economy was in negative growth. The President inherited an economy that began to stall. It began to make some progress. and then there was 9/11. and the economy has not moved. We do not need to get into recriminations or blame. The question is. What do we do now to grow this country. get our economy moving? That is the question we ought to deal with. When there is a robust economy. unemployment falls. This allows American workers choices on jobs. Certainly some workers will be able to find a job and other workers will have choices and can pick a better job. Growth helps employment. It provides more overtime to workers and it provides more revenue for the Government. That ought to make our big government friends happy. The more people work. the more they make overtime. the more they pay taxes. and the more we can spend it in Congress. We clearly are at a point where we need to strengthen economic growth. Americans believe and the characteristics we display as a Nation are to focus on growth in the private sector. Innovation occurs there. investment occurs there. jobs are created there. That Is how we make progress as a nation. That Is why we remain strong economically. We are not where we want to be. I saw recently unemployment In Germany was at 13 percent. The French economy is in trouble. The Japanese economy has been in trouble for a long time. Consistently. our economy has been stronger than the other industrialized nations in the world. We have done it because we have believed in the private sector. We learned through the big government years. it does not work. Tax and tax and spend and spend does not create Jobs. We remember President Clinton made that dramatic announcement. the era of big government is over. It represented the collection of intellect and economic offense of taxandspend government. It was a big deal when he said that. It was an important change in our psychology. I suggest we ought not go back to tax and spend. We need to watch what we do. We need to contain the growth in spending. We have another growth plan this year. We need not follow that European model that has stilted their economy. It is the time of less taxes. less regulations. and a greater commitment to the free market has allowed us to be a vibrant and strong economy and allowed us to have money to spend on a military. have money to spend on incredible amounts for our research and health care. to be able to help the fight for AIDS around the world. because we have a strong economy. We need to defend and cherish that aggressively. There are a number of components of this tax package. I dont know who my colleagues refer to as the rich. but lets talk about some of the people who are going to benefit from eliminating the marriage penalty. reducing tax rates for all groups. accelerating and enhancIng the tax credit individuals get for children. enhancing the child tax credit. and eliminating double taxation on dividends. The President has proposed moving forward the cuts in the marginal tax rates. Those are the rates paid. depending on your income level. with lower rates made retroactive to January 1 of this year. which will give a stimulus to the economy. What does that mean? Tax brackets in excess of the 15 percent rate. already slated to decrease in 2004 and in 2006 based on the existing law. will be made effective immediately. In other words. we are phasing in tax cuts and the reduction of that 15 percent rate at 10 percent and making that happen by 2006. The President said lets make that effective immediately. These are working Americans. lowerincome working Americans. Currently. the tax brackets in this range are 27 percent. 30 percent. 35 percent. and 38.6 percent at the top. The Presidents proposal will immediately reduce each of these tax brackets to 25. 28. 33. and 35 percent. At their lowest levels. these benefit married couples with taxable income of $47.000 and up. and single taxpayers with taxable incomes of $28.000 and up. Who would benefit from the change? The Treasury Department estimated 28 million taxpayers would receive an average tax reduction of $1.100. That is almost $100 per month this Government will not be extracting from hardworking American citizens. They will be allowed to keep that money. There is no tax on this. Remember. there is no withholding on this reduction in tax. It is right off what you would be paying the Federal Government. A taxpayer who gets a $90 a month benefit receives a benefit of $90 a month. Second. the plan calls for acceleration of the reduction of the 10 percent bracket expansion that has been scheduled for 2008 and brings it to 2003. this year. That means effective immediately. for married couples. their first $14.000 in taxable income is taxed at only the rate of 10 percent. It does not mean their first $14.000 they earn. but the first $14.000 taxable income after their deductions. That is a 33 percent reduction. Under current law. only the first $12.000 in taxable income is allowed to be received at this preferential rate. Single taxpayers would see their first $7.000 in taxable income immediately fall under the lower rate. Who benefits? The Treasury estimates it would reduce taxes for over 69 million taxpayers. The President is also proposing an accelerated reduction in the marriage penalty. As we have all learned. there is a penalty on marriage in this country. It is the result of a quirk in the Tax Code which assesses additional tax liabilities on couples who choose to marry and file jointly rather than remaining single where they can file separately. The marriage penalty is an unfair and incredibly unpopular part of the Tax Code. In fact. we are in the bizarre position in this country of penalizing that which we would want to encouragemarriage. I know someone who got divorced in January. They said had they been clever and gotten their divorce in December they would have saved $1.800 on their taxes. We had the spectacle of the U.S. Government paying bonuses to people who divorced and penalizing people who marry. It is not good social policy. It is not good tax policy. It is something we ought to eliminate. It is past due to be eliminated. We are working on that. We were going to phase this in by the year 2009. and the President proposes making that effective this year so people get the benefit now. A married couple earning a taxable income of $47.000 or more will be able to claim twice the standard deduction they are currently allowed. Who benefits from this? According to the Treasury Department. 35 million married couples would receive an average tax deduction of $574 from this alone. That is meaningful money for any family. The economic principle is when you tax something. you get less out of it. When you subsidize something. you get more. We have been taxing marriage and subsidizing divorce. That is not good for this country to be doing. Another of the Presidents proposals is to accelerate the child tax credit. immediately raising this credit to $1.000 in 2003 from its current $600 level. When I got elected to the Senate in 1996. I campaigned on this issue. I talked to young families all over America. They are trying to buy a house. They have to have a car. Maybe both are working. They have to have two cars. They are trying to raise children and meet those expenses. The tax deductions that were significant for children in the 1950s have been totally eroded. and they are getting whacked in taxes. They are trying to raise the next generation of children taking care of us when we are drawing Social Security. I think this is a huge deal. I remember how excited I was when we passed the $500perchild tax credit in 1997. They said this was cutting taxes too much. It was too much of a tax cut and we could not sustain it. But we continued. ending up later having the huge surplus we had just a couple of years ago. This Is a fairness issue. In this country. the people who may be hurting the most when you look at it fairly are young couples. just working. just beginning in their careers. They have not raised up and gotten seniority. been promoted and making higher wages. but they have young children they are trying to take care of. to educate. to buy shoes for. to take to Disney World on occasion if. Lord willing. they have the opportunity. We ought to pass this tax deduction and accelerate it as good public policy. This will also put money in the pockets of families to spend on behalf of their children. It will help the economy when they buy products. Somebody makes those products. Somebody at the store benefits from that. You pay sales taxes on it. The State and local governments benefit from that also. According to the numbers I have. 06 million families would receive an average tax benefit of $623. That is $40plus or $50 per month as a tax benefit as a resultper child under this plan. We have a plan for small businesses to be able to accelerate their depreciation. their expensing of new investments from $25.000 to $75.000. We want to encourage businesses to expand. to invest. When they do that. they hire people to do the expansion. They buy equipment. They expand their building. They improve their parking lot. They create economic growth. Small businesses. for a lot of reasons. are not being treated fairly in todays business environment. I strongly believe. in the course of passing legislation that would create a budget for us and that would allow for a growth package and would set the spending levels for America. we need to create an atmosphere. not of dependence on government benefits. what we need to do is create an atmosphere that invigorates employment in the private sector. creating jobs. creating choices of jobs for American workers. where they can get raises and leave one business and go to another one for a higher paying job if they want. where they can get bonuses. and where they can have overtime and bring home more money. That is what we need to do. to strengthen our economy. Our goal should be to do that. One of the reasons the Council of Economic Advisers has recently estimated that the Presidents plan will spur the American economy to create over 2.1 million jobs in the next 3 years is this focus on the private sector. The President is focused on assuring Americas continued economic growth. This plan is one large indication of his commitment to promoting job creation. The Presidents plan also calls for the elimination of double taxation on corporate dividends. Under his plan. dividend income received by individuals would be excluded from their taxable income. if those dividends are paid out of previously taxed corporate earnings. This is a very important provision. Many people in Americas investor class understand that when they buy stock and receive dividends. they are paying probably a third or more of that in taxes in addition to the fact that it has been paid previously by the corporation. According to the numbers that have been put together. the United States of America has the second highest tax in the world on corporate earnings. second only to Japanover 70 percent when you total it up. So this is an unhealthy situation. What is happening for a lot of reasons is the American businesses realize if they distributeafter they make a profit and they pay their 35 percent corporate tax on thatif they distribute it to their stockholders. they have to pay another 35 or so percent on itor more. So what do we think. and what do the experts think. this reduction would do to help the economy? I think one thing it would do. clearly. is it would make stocks more attractive. It would cause people to have an additional reason to invest in the stock market. Whatever the level the stock market would be. whether it was low or high. by passing this tax it would make it higher than it would be otherwise. I dont guarantee the stock market will go up because it passes. but I guarantee it will be higher than it would otherwise have been. Why? Because when you make the purchase of a stock that produces a dividend. and that dividend comes to you tax free. it is a more attractive investment. That is why people buy taxfree bonds instead of other bonds. So that would be helpful in raising the stock market. It would make it more attractive. I think it important for us to recall that revenue to our Government is volatile. One reason revenue income to our Government is volatile is the stock market. When the market is up and people sell stock. they have to show a capital gain. and they will pay a tax on the sale20 percent normally. When the market is down and they sell a stock. they do not take a gain. so they do not pay 20 percent tax on that profit. they take a capital loss. If they have some other product they soldreal estate they sold and showed a gain onthey can use the loss in the market to offset that gain. Also. they are allowed. under the Tax Code. to take $3.000 per year and offset that capital loss against their ordinary income. reducing the ordinary income tax they would pay. To me. this is a clear indication that if the stock market is high and doing well. the Government will receive more revenue. That is not factored into any of these projections whatsoever. what impact the dividend tax reduction would have. If the market is up. revenue will be up. It will give businesses more value if their stock goes up. and they will be able to invest more and grow more. With a higher value stock. they can do that. In summary. the dividend tax is an unfair double tax. It is the second highest in the world. The elimination of this tax will help the stock market. it will help the recovery. it will help businesses be able to borrow and invest. It wi.l allow individuals to receive income on which they do not have to pay taxes. They will have more money to spend. Because of the change from taking losses to growth. revenues to the Government will go up. I think it is the right thing to do. Dollar for dollar. it is a good plan. I tell you. there are many good things in the Presidents proposal. It is something we have to deal with this week. This budget will set the framework for where we are going. It will set the outline for what our spending and our taxing plans will be. I hope we will focus on two things: containing spending. making it at a reasonable level. and growing this economy. because it is only through growth we will be able to return to surpluses and eliminate the deficits that are now occurring. I thank the Presiding Officer and yield the floor.