Max Baucus

Mr. BAUCUS

Mr. BAUCUS. It is true. That is the assumption.

Mr. BAUCUS. If I might ask another question. Basically, the CBO baseline we are all working under, House and Senate, is the baseline which assumes that after the caps expire by 2002, spending under the discretionary caps will proceed at inflation.

Mr. BAUCUS. That is correct. That is CBO.

Mr. BAUCUS. The number on your chart that says CBO/Senate Budget Committee, that is really a Senate Budget Committee number. That is not a CBO number.

Mr. BAUCUS. Will the Senator yield?

Mr. BAUCUS. Which is not CBO's assumption. But what you have done is, in order to show there may be, under your figures, there may be a $500- , $400 billion in spending, the yellow mark, you went back to CBO and said, I need to show a number, that yellow bunch there. What you did was, you said, CBO----

Mr. BAUCUS. I have a question.

Mr. BAUCUS. Mr. President, I understand each side has 1 minute of explanation.

Mr. BAUCUS. Mr. President, I move to reconsider the vote.

Mr. BAUCUS. I suggest the absence of a quorum.

Mr. BAUCUS. Mr. President, I will not object. But there comes a point when we have to wrap things up tonight. In the earlier conversation with the Senator it was a different amount of time we agreed to.

Mr. BAUCUS. Thank you, Mr. President. I would like to emphasize a point that I made earlier about complexity. The tax bill passed by the other body reduces capital gains. Without getting into whether they should or should not be reduced, the effective date is July 1, 1999, which adds tremendous additional complexities to the code--to accountants, who have to add in more lines, and for programmers in their computers to adjust to the IRS. The preliminary analysis is that there are many more pages for the capital gains increase schedule than currently is required. It is immense. Add to that Y2K. This provision goes into law on July 1. I am just addressing the complexity. I am not talking about the merits. Then the IRS--who knows? It may well have to go back and retest their Y2K program to see if it works again with these additional items that are plugged in. I very much hope the conferees on their tax bill, in working with the President when this bill is finally put together, pay much more attention to the complexity than they have in the past. Just bear down on that because if we hear anything from the taxpayers, it is the additional complexity of the code. We have an obligation not to add additional complexity. In my experience in all of the debate on all of the tax bills, we have to cut a little bit here and raise some more revenue. We are going to add a little bit over here, with not one second of attention to whether or not this adds additional complexity to the taxpayers. We have had IRS hearings on the problems the IRS has caused the taxpayers. There is some truth to that. The IRS has been a little bit too draconian in some ways in some of the proceedings that it has brought against taxpayers. They have been a bit rough. But mark my words. Most of the complexity is caused by Congress. Most of it is caused by Congress. We are a little two-faced around here. We like to say: Oh boy, we are helping taxpayers reducing taxes--and at the same time we are increasing complexity. We don't talk about that. But we have an obligation to address both tax reduction as well as complexity. I very much hope we live up to our responsibility and address that because it is a huge problem. No wonder Americans want a flat tax. It is the complexity. On the other hand, I might ask myself and each of you, how do you address the marriage tax penalty with a national tax? Americans want both simplicity and equity. We all want both simplicity and equity. Of course, those are enemies of each other. The more something is simple, the more someone else claims it is inequitable and applies to them. The more we try to deal with them to make it more equitable, the less simple the code becomes. But nevertheless we have an obligation. I very much hope we address it and solve it. I suggest the absence of a quorum.

Mr. BAUCUS. Mr. President, how much time remains on our side?

Mr. BAUCUS. I will not object.

Mr. BAUCUS. I yield 7 minutes 20 seconds to the Senator from Iowa.

Mr. BAUCUS. Mr. President, I yield 10 minutes to the Senator from Iowa.

Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS. Mr. President, I think there is another dimension to this tax bill which I think is important for us to address. It is not only tax reduction in the amount of the reduction and not only the composition of the reduction, it is also whether we are making this Tax Code even more complex. If there is anything we hear from our people at home, it is that this Tax Code is much too complex; it is just a mess. I see the Presiding Officer, who has deep experience in this, is nodding his head in agreement. We all know that he is right. Regrettably, when Congress passes tax legislation, we tend not to pay much attention to whether this adds further complexity to the code. We rarely pay any attention to that. Frankly, I take some pride in that I pushed for the provision of the law last year that directs the IRS, in conjunction with the Joint Tax Committee, to come up with a complexity analysis of new provisions that the Congress enacts. We did not get this analysis until after the Finance Committee reported out its bill, but we did get it, finally. I have with me a letter from Charles Rossotti, the Commissioner of the IRS, to Ms. Lindy Paull, who is the Chief of Staff of the Joint Committee on Taxation, which is a brief analysis of the additional complexity that the bill before us would cost. Just by way of example, we are here today trying to correct a problem by providing relief for the marriage tax penalty. This marriage tax penalty is where a couple pays a higher net tax when both couples earn about the same amount of money. The underlying bill before us today attempts to address that problem, but in a way which is very complex. The amendment offered by the Senator from Texas is a much more crude way to deal with alleviating the marriage tax penalty by raising the standard deduction by a significant amount, an approach that we took in our Democratic alternative bill, too, where we would raise the standard deduction even more. But to give you an example of the additional complexity that this bill would cause in trying to resolve the marriage tax penalty, let me just state the following items which I hope we will get worked out as this bill progresses. Essentially, taxpayers would have to fill out two forms or the 1040 would have to have more columns and many more items, because essentially couples would have to fill out their 1040 in many ways twice--one as if married, and then separate, as if joint filers, attempting to determine which is less in that tax, and so forth. Then there is the question of allocation of personal exemptions: When you file separately, who gets the personal exemptions, the additional personal exemption for children, and so forth, and who doesn't. Then there is the question of large medical payments, the medical deduction, which, as the Presiding Officer knows better than anybody else in the Chamber, is about 700 percent of adjusted gross income. And then the question is, How is that allocated--one spouse or do both spouses get it or whatnot? There is a lot of additional complexity that couples would face under the underlying bill. All of this is not glamorous stuff. It doesn't get headlines. It is not in the evening news. It is my hope that as we undertake the work in this body, as well as in the other body, to reduce taxes, and we try to do it in a fair way, we also do it in a way that is less complex, not more complex. As this bill stands tonight, with respect to the marriage tax penalty relief, it is going to be much more complex for taxpayers, for individual taxpayers, whether they file separately, particularly for married taxpayers trying to determine how to deal with the solution we have so far drafted with respect to the marriage tax penalty. I ask unanimous consent to have printed in the Record a letter and a short document from Commissioner Rossotti to the Joint Tax Committee which begins to outline some of the additional complexities this bill will cause.

Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS. Mr. President, I congratulate the Senator from Texas for her amendment. It is a good amendment. It does deal with an inequity in the code clearly, simply. I congratulate her, too, because she is taking the course that we in the Democratic alternative took in trying to address this problem when we proposed to raise the standard deduction as well to address essentially the marriage tax penalty. It is interesting; there is a marriage tax penalty today, but there is also a marriage tax bonus. Basically, the rule of thumb is 70-30. That is, if there is more than a 70-30 percent differential between the income of each spouse, then there is a marriage bonus; that is, you get a tax bonus for marriages as opposed to a penalty. The penalty situation arises roughly when the 70-30 starts to narrow down, is less of a differential, and when both spouses are earning a similar income. That is what we are addressing here, the penalty side, because more couples have both spouses working. It is interesting to note, there is a bonus for getting married today if the differential is roughly between 70-30. The amendment the Senator from Texas is offering goes part way to eliminate the marriage tax penalty. Our Democratic alternative actually went a lot further. She raises the standard deduction by about $1,400, and the Democratic alternative raised the standard deduction for married couples by about $4,300. In addition, in our proposal we began to eliminate the marriage tax penalty for itemizers; that is, for couples who itemize. The amendment before us deals only with couples who use the standard deduction. There are some couples who still itemize in the Tax Code, and it is our hope that we could address, eliminate, as you would, the marriage tax penalty not only for couples who use the standard deduction but also for couples who itemize. Also, we in the Democratic alternative raised the standard deduction not only for married couples but also for singles. We thought the standard deduction should go up quite a bit higher than it now is for singles. The long and short of it is, this amendment goes part way in raising the standard deduction. We proposed to go a lot further in raising the standard deduction, but the net effect is to help begin to eliminate the marriage tax penalty by raising the standard deduction for married couples. It is our hope that maybe a little bit later the Senator from Texas would, since she sees the wisdom in our proposal, go a little further and agree to other provisions that we in the Democratic alternative have suggested. I do not think this really is a matter that requires a lot of debate. I believe most Senators agree this is a good amendment. It begins to eliminate the penalty married couples pay. It is our suggestion we also address the marriage tax penalty for couples who itemize because that would begin to complete the elimination of the marriage tax penalty. Again, I hope that occurs at some reasonable future date. I reserve the remainder of my time.

Mr. BAUCUS. Mr. President, I yield 10 minutes off the bill to the Senator from New Jersey.

Mr. BAUCUS. I thank the Chair.

Mr. BAUCUS. If we understand that the next speaker will be the Senator from New Jersey, that would be helpful.

Mr. BAUCUS. Mr. President, might I get some understanding of the order. I wonder if there is some way we could go back and forth.

Mr. BAUCUS. Mr. President, the point I am making is, those numbers are accurate, if you believe the assumptions behind the chart. The assumptions behind the chart are no increases, not even inflationary adjustment, for discretionary spending over the next 10 years. I think that is an unrealistic assumption. And it is, in effect, a reduction of some $500 billion over 10 years. If you add in the $127 billion for defense, that means, in effect, about a $775 billion reduction in domestic spending. So again, he is right, if you make those assumptions. I say those assumptions are unrealistic. Mr. KENNEDY addressed the Chair.