Jim Cooper

Mr. COOPER

Mr. COOPER. The gentleman is an excellent economist, and another great economist is our own Federal Reserve chairman, Alan Greenspan, who said, History suggests that an abandonment of fiscal discipline will eventually push up interest rates, so deficits do matter, crowd out capital spending, lower productivity growth, and force harder choices on us in the future. We should be listening to Alan Greenspan. We should be listening to the gentleman from South Carolina and the gentleman from Virginia because deficits do matter. They are hurting this economy, and we need to return to the fiscal discipline that we saw in the previous administration and live within our means because our Nation is embarking on long-term structural deficits today that we may never be able to erase.

Mr. COOPER. The gentleman is so correct. And a huge deficit like that hurts our economy. It creates higher interest rates. It hurts the employment statistics. And as I think most of the world knows, under the Clinton years we had the most robust economy in the history of this Nation or the history of the world. Surpluses helped us. Fiscal discipline helped us. That is important for us to realize now as we are returning to the era of massive budget deficits. The gentleman from South Carolina (Mr. Spratt) has displayed great leadership, but I worry so many folks back home find these numbers too large to be comprehended. They are confused. They are over-burdened in their daily lives. They are worried about the war. They are worried about unemployment. They do not know really how to grapple with numbers of this magnitude. But this chart shows it better than anything else, this sea of red ink that we are passing on to the next generation. President Bush mentioned in his State of the Union that each Congress, each President should take care of its own problems, but this budget is not doing that.

Mr. COOPER. As I recall, the gentleman has said that the deficit for fiscal year 2004 is supposed to be about $300 billion, not counting the war in Iraq, not counting the war in Afghanistan, not counting the war on terrorism, not counting other important problems that need to be solved in our Nation. So the deficit may well be $400 or even $500 billion. A temporary deficit is one thing. As we know, sometimes a deficit is appropriate to stimulate the economy, but what we are talking about are permanent structural deficits in our economy.

Mr. COOPER. As I recall, the gentleman has already said these are about to be the largest deficits in history. Is that conservative?

Mr. COOPER

Mr. COOPER. Mr. Speaker, most Americans take for granted that federal laws apply to every American equally, regardless of what state we live in. Well, you may be surprised to learn that taxpayers in seven states are discriminated against by the Internal Revenue Code, and have been since 1986. This means that the 51 million people who live in the states of Texas, Florida, Tennessee, Washington, New Hampshire, Alaska, and Wyoming are treated differently, and punitively, by the federal government, due to no fault of their own, and for no good reason of public policy. This injustice amounts to many billions of dollars in higher taxes paid by residents of these states every year. How did this discrimination occur? Prior to 1986, federal tax law allowed taxpayers to deduct from their federal income tax any state taxes that they paid, whether for a state income tax or a state sales tax. This deduction allowed all Americans the ability to reduce their federal tax burden due to the accepted principle that (1) the federal government deferred to the chosen tax system of each state, and (2) to prevent double taxation of taxes paid to state governments. After 1986, in the tax reform act of that year, only state income taxes were deductible. Taxpayers in states with no income tax were suddenly allowed no deduction on the money they paid to their state governments. The 1986 tax reform legislation was a giant bill with many unintended consequences. There was no sound public policy reason for discriminating against states which have chosen to rely on a sales tax, yet this discrimination has persisted for 16 years. There are 43 states today which have a state income tax and seven states which have no income tax, but which in most cases use a state sales tax for their primary source of revenue. This means that taxpayers in 43 states get different and better treatment from the Internal Revenue Code than the residents of the other seven states: Texas, Florida, Tennessee, Washington, New Hampshire, Alaska, and Wyoming. I have introduced a bill today to remedy this situation. My original cosponsors are Bart Gordon, John Tanner, and Lincoln Davis. My legislation would allow taxpayers in states which rely on a sales tax to get the same deduction as residents of income tax states--no better and no worse. To allow the current injustice to continue means that federal law is forcing all states to adopt an income tax. This should never be federal policy. To deny 51 million Americans the benefits of a deduction that every other American enjoys is rank discrimination. And to deny this deduction is to effectively double-tax the hard-earned pay of residents of seven states. My colleague Brian Baird has been fighting this battle for years now, as has my predecessor, Bob Clement. There are 79 Members of Congress whose constituents are directly and adversely affected by this discrimination. We owe it to our seven states, and to the 51 million people we represent to restore basic fairness to our tax code.