Max Baucus

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am gratified that at long last the Senate is acting to keep the alternative minimum tax from hitting 19 million more American taxpayers. We tried to save those 19 million families from AMT on November 15, when the majority leader asked the Senate to do so. We tried to save those 19 million families from the AMT on repeated occasions this week. Most recently, today we tried to save those 19 million families from the AMT by moving to the House-passed bill. When the other side blocked us, we tried to save those 19 million families from the AMT by asking consent to pass the legislation that we have before us now. But at every step, the Republican caucus objected. I am gratified that at long last the Republican caucus has agreed to let us act. Perhaps the third time is the charm--or the fourth or the fifth. In any event, here we are. I will support this effort to save those 19 million families from the AMT. The bill before us is plainly not my first choice of how to do so, but this is our best choice to do so. Let me once again remind people why we need to act. That is, we need to act because if we do not, nearly 12 million families with incomes between $100,000 and $200,000 will pay the AMT next year. We need to act because if we don't, 5 million families with incomes between $75,000 and $100,000 will pay the AMT next year. We need to act because if we don't, remarkably, nearly 2\1/2\ million families with incomes of less than $75,000 will have to pay the AMT next year. We need to stop that from happening. We need to keep the AMT from hitting any more families than it already does. I urge my colleagues to join me in voting for this bill.

Mr. BAUCUS. Mr. President, on behalf of the leader, I ask unanimous consent that the Senate now proceed to consideration of the House AMT bill, H.R. 3996; that all after the enacting clause be stricken, and the text of Senator Baucus's amendment, No. 3804, providing for a 1- year, unpaid-for AMT extension be substituted in lieu thereof; that the time between now and 6:15 p.m. be equally divided for debate between the two leaders or their designees; that at 6:15 p.m. the bill, as amended, be read a third time, and the Senate, without any intervening action or debate, vote on passage of the bill.

Mr. BAUCUS. Mr. President, at this point, if the Republican leader would modify that to provide for the extenders package with the offsets in Senator Baucus's earlier amendment, we could agree to that. I wonder if he could agree to that.

Mr. BAUCUS. Mr. President, on behalf of a number of Senators on this side, I would have to object to the Republican modification, and I renew the original consent request.

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

Mr. BAUCUS. Mr. President, I yield 4 minutes to the Senator from North Dakota.

Mr. BAUCUS. I ask for the yeas and nays.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I think most of us are a little distressed that the other side is objecting to a request which is a huge concession on the part of this Senator, as well as most of the Senators on this side of the aisle, and that would be helping the other side, and that is that we are agreeing to pass AMT not paid for. Why? Because we need to get the AMT patch fixed. We don't want the American taxpayers to have to pay additional taxes under the alternative minimum. We want to get this fixed right away. It is also important to remind us that time is of the essence because the IRS has to get out the correct forms. The computer programs have to be written properly. So I very much hope that very quickly the other side will no longer object and we can get this passed. Mr. President, this reminds me of an old joke, and the joke goes like this: There was a big flood, and a man of faith heard about it on the radio. But he did not flee to higher ground. He said: No, I'll put my trust in God. I am not going to flee to higher ground, even though there is this big flood, which I heard about on the radio. I'll put my trust in God. Well, the waters surrounded the man's home. And as he was standing on his front porch, a boat came up and the skipper said: Jump in, I'll take you to safety. And the man said: No, I'm going to put my trust in God. Well, the boat went away, and the water rose up to the roof. So the man stood on the roof, and a helicopter came and dropped a ladder, and the pilot yelled down: Climb up the ladder, I'll save you. But the man, said: No, I'm going to stay. I'll put my trust in God. So the helicopter flew away, and the water continued to rise, and the man drowned. The man went to Heaven, and God asked him: What are you doing here? The man said: I put my trust in you, and you let me down. Well, God said: What do you mean I let you down? I sent you a message, I sent you a boat, I sent you a helicopter. I tried to save you three times. I think that is what the Republican caucus has done to the AMT. The House passed a bill to prevent the AMT from hitting 19 million more taxpayers, but the Republican caucus said, no, we will wait for our own legislation. The majority leader asked unanimous consent to consider a compromise amendment that did not pay for the AMT but just paid for the extenders. The Republican caucus said, no, we will wait for our own legislation. And now the majority leader has once again asked consent to allow us to consider an amendment that does nothing but prevent new taxpayers from being hit by the AMT, and once again the Republican caucus said, no, we will wait for our own legislation. Mr. President, at this point I want everyone to know if the AMT hits more taxpayers next year, it is not because of the House of Representatives. If the AMT hits more taxpayers next year, it is not because of the majority leader. If the AMT hits more taxpayers next year, it is not because of the Democratic caucus. If the AMT hits more taxpayers next year, it is because of the Republican caucus. That is clear. They cannot take yes for an answer. We are trying to set it up so we can vote on a unanimous consent request to fix the AMT, unpaid for, and get it done now, but the Republican caucus says, no. They cannot take yes for an answer. Mr. President, I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I just want to make the fundamental point that if we don't act, we will be raising taxes on 19 million Americans. We have to act to prevent a tax increase from going into place. We on our side ask to vote for cloture so as to get to the bill which accomplishes that result of preventing 19 million Americans from paying greater income taxes. We have to get to the bill so we can pass that legislation. It can always be amended by any Senator who has a problem with other provisions that might be in this bill. I respect that. In fact, I would agree with some of those amendments, I am quite certain, and motions to strike are always available. We need to get to the bill so we can prevent a tax increase on 19 million Americans, called the alternative minimum tax, from going into effect. To the degree to which the other side prevents us from getting to the bill, that indicates to me they want to increase taxes on those 19 million Americans. I hope that is not true, but their actions indicate that it is true. Unless they totally change and say, yes, we should get to the bill to fix this AMT problem, I have to conclude they want to increase taxes on those 19 million Americans. I see no other Senators who wish to speak, so I note the absence of a quorum, and I ask unanimous consent that the time be equally divided on both sides.

Mr. BAUCUS. Reserving the right to object, I remind all of us, we are here to solve a very imminent problem; that is, the alternative minimum tax. The IRS is having fits, frankly, because they are unable to send out the right returns, programs, and so forth, to help the American public avoid this AMT for 2007. The other provisions listed in that consent have nothing to do with the alternative minimum tax. One is the Bush tax cuts. They don't expire until 2010. We are talking about 2007, right now, this month. Then there is the flat tax. That has nothing to do with the alternative minimum tax. That is a whole other issue that has nothing to do with what we are trying to accomplish today. I urge Senators to keep their eye on the ball. Let's get the AMT patch passed. That is what we are talking about. I must, on behalf of the majority leader, object. I can't agree to a procedure on the floor without the presence of the majority leader. I just point out the pitfalls of that request which prevent us from getting to a real problem, and that is solving the AMT for the tax year 2007.

Mr. BAUCUS. Mr. President, in the 1931 film classic, ``Frankenstein,'' the character Dr. Waldman tells Dr. Frankenstein: You have created a monster, and it will destroy you. That is how the AMT looks to the Tax Code. That is what it looks like. It is a monster. It is a thing of dread for many Americans. Unless we act, it will destroy the entire tax system. If we don't act pretty soon, the AMT tax will be greater than the individual Federal income tax. This tax is a problem for taxpayers in all 50 States. I must give a few numbers as to what will happen if we don't extend the AMT patch. Let's take Texas. The number of Texans subject to the alternative minimum tax, if we do not act this year, would increase from roughly 150,000 taxpayers in Texas to 870,000 taxpayers. That is about a sixfold increase in 1 year. The number of Nevadans subject to AMT would increase from about 15,000 to about 100,000--again, a little over a sixfold increase. The number of South Carolinians would increase from 30,000 to 190,000, again a large increase, about 6 times. That is about average across the country, six times more Americans will pay more taxes under the AMT if we don't act, compared to what they were otherwise paying. Even taxpayers who do not pay the AMT tax are hurt. Why? Because taxpayers have to calculate not only the regular tax, but taxpayers then have to calculate the alternative minimum tax. That is the law. You have to do both. First, you have to calculate all your regular taxes. Then you have to calculate what taxes you may pay under a whole separate system of AMT. So even though you may not pay more under the alternative minimum tax, you have still got to go through a second calculation. That is not a lot of fun. Then, if the second calculation shows you pay more under the alternative minimum tax, guess what. You have to pay more. You cannot choose to pay the lesser of the two; you have to pay the greater of the two. That is the law. Again, the monster created by the Congress years ago, unintended consequences, but a monster we can eliminate, if not destroy, if we take action today. Calculating taxes once is scary enough. Calculating taxes twice is almost enough to destroy a person. It may also cause significant financial hardship. Why? Because in today's economy, families depend on that refund check. It is getting close to Christmas. People are buying presents. Sometimes they run up their credit cards a little bit. They are depending upon that refund check to pay off their credit card balances. A lot of Americans do that. A lot of Americans do that. Think of the taxpayers who think they are going to get a refund from the Federal Government. But then, if we do not fix this AMT problem, what happens? They get the letter in the mail telling them they have to pay more taxes because of the AMT. Talk about your horror story. Here is an example of how AMT hits working families. Let us take a married couple, four young children. What is their household income? A whopping $75,000 a year. Their regular income taxes should be about $1,800. That is probably what they pay. This is after the standard deduction and after the child tax credit. Again, a family with a $75,000 income, family of four, pays about almost $2,000. Not quite, because they are able to take a standard deduction for the child tax credit. Well, let's see what happens when we calculate the alternative minimum tax. Same family. Same income. The amount more than doubles this family's tax liability. It raises their tax from $1,800 to $3,800. More than twice. More than twice. That is a family earning $75,000. Not a huge, big-income family. That is a $75,000 family. The AMT hits this family not because they are rich, because they are not. Why? Because they have four kids. That is kind of how it works. It is perverse. If you have more children, you pay more taxes. That is kind of nutty, but that is what it is today. The AMT will cost taxpayers because it costs the Federal Government. A delay will create delayed tax return filings, and last minute legislation will delay the issuance of Federal refunds. With each extra day we delay, the greater the cost. The greater the cost to taxpayers, the greater the cost to the IRS. The cost mounts up. Let's look at some of the costs of delay. If the IRS has to postpone accepting returns to the early part of the filing season, say January 28, this would delay the receipt of more than 6.5 million returns, delay the issuing of more than 5.5 million refunds, totaling more than $17 billion, delay about $17 billion worth. A delay in fixing the alternative minimum tax affects States. We are not just talking about the Federal income tax, we are talking also about State taxes. Why? Because most State taxes are tied to the Federal tax system. A delay in the Senate will mean not only a delay in the Federal tax receipts but also a delay in the State tax refunds, Federal and State. A delay will also mean States that are already financially strapped could have a cash crunch. Think of the States' coffers. Their normal flow of tax revenues will not be coming in. Many States are very tightly budgeted. I know that is true in the State represented by the officer in the chair. I hear many times about the tight fiscal situation in that State. That is true for most States. If tax agencies cannot reprogram their computer systems in time, States and the IRS are concerned taxpayers will turn back to paper returns. What is the consequence of paper returns? It leads to an increase in processing times and costs as well as more errors. Let's take the State of Montana. In Montana, it costs $2 to process an electronic return, $2. But it costs $9 to process a paper return. I daresay that disparity is probably true in most States. At a time when families are experiencing hardship, I must say the other side of the aisle is playing politics. They are not letting us fix this problem. They, in effect, consequently want to increase taxes. They are increasing taxes. How? By causing the alternative minimum tax to be imposed upon Americans, by not letting us fix the alternative minimum tax. You watch that vote that is coming up. We are not going to get 60 votes. You watch how, when the leader is going to request we take up the House-passed bill, and the substitute measure where we fix the AMT patch, unpaid for, they will object to that. They do not want to fix this problem. They say they do, but their actions are louder than the rhetoric. They are raising taxes. They are raising taxes by not allowing us to fix the alternative minimum tax patch for 2007. In the 1945 B movie ``House of Dracula,'' the character, Dr. Edelman, says of Frankenstein's monster: He's indestructible. Frankenstein's creation is man's challenge to the laws of life and death. Let's prevent that from being said about the AMT. Let's prove the AMT is not indestructible. Let's move to proceed to the House bill and stop this tax monster. We are going to do this. Let's do it now. We know we are going to fix this one way or another. So I say: Stop playing politics. I say that to the other side of the aisle because they are going to block this next cloture vote. They are going to object to the motion asking consent to pass the alternative minimum tax, unpaid for. I say: Stop the games. Let's get on with it. Let's help do something for the American people. Let's move to proceed to the House bill, stop this tax monster.

Mr. BAUCUS. Mr. President, I yield myself such time as I consume.

Mr. BAUCUS. You go ahead.

Mr. BAUCUS

Mr. BAUCUS. I ask that my 5 minutes be expanded to 10 minutes.

Mr. BAUCUS

Mr. BAUCUS. I think the Senator from Washington made a point to show the Senator from Texas is incorrect.

Mr. BAUCUS. Mr. President, if I understand the Senator from Texas correctly, he is essentially complaining that Congress has not passed legislation to prevent the alternative minimum tax from going into effect for American taxpayers for calendar year 2007. I think that is basically what he is saying. I might say, Mr. President, there is not one Senator on the floor who disagrees with that--maybe one or two, but this Senator wants to fix AMT so Americans do not have to pay an additional tax in calendar 2007 when they are preparing their tax returns next year. I daresay virtually every Member on this side of the aisle has that same belief. We do not want to force that additional tax on Americans for all the reasons he correctly stated; namely, this was a provision which was enacted in the code back in the early 1960s intended to ensure--I think there were 200 only, very wealthy Americans who were not paying income taxes and who should pay some income taxes. That was the genesis of the alternative minimum tax. Unfortunately, as has been stated by many speakers, it was not indexed, so over the years more and more middle-income taxpayers have had to pay this additional tax, and frankly, ironically perversely, the most wealthy Americans have escaped. So this alternative minimum tax does not do what it was intended to do. It was not a tax on the most wealthy because basically the capital gains provisions in it are so low, the net effect is the basic rate is 26 percent for the first $75,000 and 28 percent just above, and so it affects taxpayers who make between $75,000 and $500,000. That is who it hits. We want to repeal that for 2007. Virtually every Senator here wants to repeal that for 2007. We are trying to do it. We are trying to get that enacted--the repeal for 2007--so taxpayers don't pay it. What has happened? We are being blocked. We are being blocked. Just as the Senator from Washington was trying to get an appropriations bill up, she was blocked in her effort by the other side of the aisle. Just as the President of the United States says: Congress, do your work, do your work, pass appropriations bills, he is, in effect, instructing his minions here to do the opposite--to block. That is what is happening. The Senator from Texas, I would daresay--and it is a presumption to say this--would probably vote against efforts here on the floor to bring up a way to fix AMT. There is a cloture motion pending right now, Mr. President. It is basically on the House-passed bill to fix AMT. The leader offered a couple suggestions. What are they? One is, well, if we can't do that, let's take up the measure proposed by myself and the ranking member of the Finance Committee, Senator Grassley. What does it provide? It basically says: Okay, repeal AMT. We have the AMT patch unpaid for, 2007. In addition, we have to pass these so-called tax extenders for 1 or 2 years and pay for it. Nobody seems to complain about that; the complaint is whether the AMT should be paid for. We are willing, myself and Senator Grassley, to bring up and advocate the passing of that legislation. Blocked. We couldn't get consent to bring that up. Not paying for AMT but paying for extenders blocked. Well, Mr. President, I have another suggestion. In fact, it was even mentioned by our leader. Let us bring up AMT not paid for alone. Will the Republicans object to that? So far, they have. I am waiting. Where is the Republican Party? Do they or do they not want AMT fixed in 2007? What could be easier? Bring it up--alone, unpaid for. Where are they? Why don't they accept it? What is going on here, Mr. President? What could be easier? What could be more appropriate? What could be more Republican? Lowering taxes, unpaid for. No, they do not want to do that, either, which is a good indication to me that what is really going on here--what is really going on here--is that side of the aisle will do whatever is possible to prevent the Congress from even passing legislation that is very good for the American people.

Mr. BAUCUS. I will be glad to yield.

Mr. BAUCUS. Will the Senator yield?

Mr. BAUCUS. I say to my dear friend from Washington that it is part of the extender package that is in there. So if that were extended this year and that would go into effect, the good people of the State of Washington would not have to pay that.

Mr. BAUCUS. I appreciate that. I may also say I suspect--I am only guessing here--the objection from the other side of the aisle is in part mischievous. Senators from the other side of the aisle wish to force some votes on some other measures which are not apt at this moment. What are they? President Bush's tax cuts, extending the tax cuts, extending the 2001 tax cuts. Some Senators on the other side want to force a vote on that. That doesn't expire until 2010. This is 2007; AMT applies to 2007. We have to act now. This isn't 2010. Others wish to vote on the 2003 tax cuts, which expire--when? Again, 2010. Not now; in 2010. I see my time is expiring. I strongly urge people to focus on what is going on here--not the rhetoric, just look at the facts. The facts are that I, as chairman of the Finance Committee, am willing and do advocate bringing up legislation to repeal the alternative minimum tax as it applies to taxpayers for 2007. There are various ways to do it. One is the House-passed bill. If that doesn't work, we will do the measure proposed by myself and Senator Grassley, which is AMT, not paid for, but the tax extenders paid for. If that doesn't work, I am even willing to go so far as to see AMT alone, not paid for. That is where we should be and what we should do. Finally, I don't know if I am known as a partisan guy. I think I tend to be perceived as somebody who tries to work things out, tries to be pragmatic, tries to get things done, not flail in a partisan manner, not engage in flowery rhetoric for the heck of it, getting headlines, and so forth. There comes a time when you have to call it like it is, say it like it is. That is what I am trying to do. I am trying to be practical and pragmatic here by calling it, saying what is going on here, and that is, despite the cries from the other side, despite the cries from the White House for Congress to fix AMT, they themselves, behind the scenes, indirectly, are blocking it. They are blocking it. They are saying one thing and doing something else. As my father used to tell me, it is deeds, not words. They have the words but they also are blocking the deeds. I hope very much they change their minds and allow us to pass legislation here to fix AMT, because it is up to them to let us do it. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I underline the urgency of curing this alternative minimum tax problem and also underline how strongly the Senators on this side of the aisle are attempting to get that legislation passed as soon as possible. We tried, on this side, to get AMT legislation up before the Senate and passed so that American taxpayers will not have to pay it. That was objected to by the other side. We made many attempts. There were many suggestions by the majority leader to bring up legislation to prevent the alternative minimum tax from going into effect. They were all objected to by the other side. We are here again trying to get resolution. The leader filed cloture on the House-passed bill so we can get a vote on the issue in an attempt to move the issue forward. I commend him for that. Again it was, in a sense, objected to by the other side because they offered just now a package which is somewhat in the right direction but also has complications in it which raise questions to the degree we can fully get AMT passed. But I want to underline the importance of this body passing legislation to prevent the alternative minimum tax from affecting about 19 million Americans. We all know this is a pernicious tax, it is a stealth tax. It was not intended to have this effect on so many middle-income Americans. Unfortunately, it has this effect because when it was enacted years ago it was not indexed, and each year more and more American taxpayers have to pay the alternative minimum tax. Soon we will get very much to the point where most Americans--I will not say most, but a vast number of Americans will have to pay the alternative minimum tax, and that is not what we want. We did not intend that. We are trying to get it solved. There is another issue, and that is this: The IRS has sent the 2007 tax forms to the printer. They were sent to the printer on November 16. So each day that we dally here, each day the Congress does not correct this problem, it means it costs the Government more money to correct the forms, to correct the programs that it has to utilize when paying taxes online, whether it is various providers--it is the wrong way to do business. It means a lot more frustration for taxpayers. Just think, if you are a taxpayer and you are beginning to figure out what your income tax is going to be, and suddenly out of the blue, Congress does not change this AMT, it causes huge problems. Just think of the withholding provisions. Americans have a certain amount of dollars withheld from their income as taxes every year, from every paycheck, for example. The calculation assumes the AMT, pretty soon, if it is not corrected-- assume AMT will be corrected. If it is corrected, those changes have to be made on the taxpayers when they withhold. I hope, again, we get this done. Senator Grassley, the ranking member of the committee, and I have offered a proposal. We have a package we agree on, Senator Grassley and I, to take up and pass legislation which says: OK, nobody has to pay AMT in 2007 who didn't pay it in the previous year. That is the tax year 2007. We are providing it doesn't have to be paid for. That is a big step. But I say that because it is my judgment that because the President--because Republicans so adamantly said it cannot be paid for, and because we need 60 votes, that it will not be paid for. That is just a judgment I made. I suggest we bring up legislation, pass an AMT patch for 1 year, and also include the extender provisions which will be paid for. That is where we are going to end up. Everybody knows that is where we are going to end up. If that is where we are going to end up, let's just do it, not go through this kabuki here, these games, not use this as leverage to offer amendments that are going nowhere and will never be enacted, that are just political. But we are unfortunately in a position where we are not yet free to pass legislation that we know at some point we are going to end up with; that is, AMT not being paid for and all the extenders paid for. I again underline how much we on this side of the aisle are trying to get the AMT passed. Up to this point we are being blocked by the other side. We are going to keep trying. The earlier we get this passed the better because the forms can be sent out more quickly, the computer programs changed more quickly, and we are going to keep at it because it is the right thing to do. And, second, we are going to do it anyway. If it is the right thing to do and we are going to do it anyway, why don't we do it now? Mr. President, I yield the floor, and I suggest the absence of a quorum.

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

Mr. BAUCUS. The leader mentioned to me he had an urgent meeting he had to attend. It is up to the leader if he wants to propound his consent now or later.

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

Mr. BAUCUS. Mr. President, this is a very interesting proposal. I think it is constructive. Now the Senate is engaging on this issue. At an earlier point, a couple or 3 weeks ago, the leader propounded a consent on this subject, and it was objected to and the Senate took no action. But here the distinguished minority leader is suggesting a process. He is suggesting a way, perhaps, to resolve this question. I think the basic implication of his suggestion is that we must and should very definitely pass legislation this year that prevents about 19 million Americans from paying the alternative minimum tax for tax year 2007 when they fill out their tax returns next year. There are provisions which are interesting, which I have not seen until this moment--I daresay which I think the leader has not seen until this moment--which have to be worked out before I think there can be an agreement. But there may be something here, the beginnings of something so that we can work out an accommodation. I very much hope that is the case. Over the next hours and day or two perhaps we can find a way to reach an agreement on what the procedure should be, what amendment will be offered by whom, et cetera. I again thank the distinguished minority leader, but on behalf of the leader, on behalf of Senator Reid, I must object.