Phil Gramm

Mr. GRAMM

Mr. GRAMM. Mr. President, let me first say that our dear colleague from Alabama, Senator Sessions, is a freshman Member of the U.S. Senate, and I am very proud of the leadership that he has provided on this issue and on other issues. I think he is a testament to the fact that we have good people in the U.S. Senate, and I am very proud of him. Mr. President, when we tell people that we are debating a bill that is going to set in place a procedure whereby attorneys are going to receive $92,000 an hour, they find it hard to believe. But let me just read from an article by Robert J. Samuelson in the Washington Post: The hourly rates strains belief. Lester Brickman of the Cardozo School of Law, an expert in fees, estimates that the Texas lawyers spent, at most, 25,000 hours on their case which never went to trial. A $2.3 billion settlement values their time at $92,000 an hour. This is absolutely predatory. It is totally unfair to be taxing my 85-year-old mother, because she started smoking 65 years ago, $1,015 a year, which is what she will pay under this bill because she is not going to quit smoking cigarettes. It is unfair to tax her to pay a plaintiff's attorney $92,000 an hour. It is predatory and it is outrageous, and something needs to be done about it. The Senator from Alabama is not proposing that we be tightfisted with plaintiffs' attorneys. In fact, he is proposing that they be paid $1,000 an hour. How many people in America would figure that they were being cheated if they were getting $1,000 an hour in a fee for work that they had done? I don't think many people in America would think that we are cheating lawyers by requiring that they be compensated no more than $1,000 an hour for work that he had done on these cases. But when asked about $1,000 an hour, a prominent attorney, who was quoted in the Washington Times, scoffed and said, ``That would hardly pay for tips for my house staff.'' ``Hardly pay for tips for my house staff.'' Our colleagues on the left are very fond of talking about how they are trying to protect average citizens. Our President is always talking about his position as champion of the average person. But yet what is happening here is our President is supporting provisions that allow attorneys to be paid $92,000 an hour. Many of the Members of the minority here, the great majority of them, are supporting provisions where attorneys will be paid $92,000 an hour. And our colleague from Alabama is saying, let's set a cap in this bill that says that attorneys on these cases will be paid no more than $1,000 an hour. I believe that it is totally outrageous that we cannot see this amendment adopted by 100 votes in the U.S. Senate. I do not see how anybody can go back home and say we are going to tax Joe and Sarah Brown--a waitress and a truck driver. Seventy-five percent of the money we are going to collect in these taxes on cigarettes come from Americans and families that make less than $50,000 a year. We are going to reach in their pockets and take their money, and we are going to pay $92,000 an hour to plaintiffs' attorneys. It is predatory. It is outrageous. And something has to be done about it. Is there no shame in this whole process? Is no one embarrassed by the fact that we are allowing this piracy to go on? I believe it is imperative that this amendment be adopted. I want to pledge that if this amendment is rejected, that we are going to come back and raise this figure and do it again and again and again and again until we cut these fees off at something less than $92,000 an hour. If that is not enough, or if that is no more than enough to tip your house staff, then I want people to explain to people back in their States about how we are imposing a tax to raise $600 billion and turn around and let plaintiffs' attorneys make $92,000 an hour on the deal. I would be embarrassed to say that I was for allowing that to happen. I do not understand how anybody--anybody--could oppose this amendment and go back home and explain to people what they are doing. Let me also say--this is something I do not do, but I want to respond to people who do it--one of the games that is played now in Washington is that when people cannot debate the issue, they try to attack your integrity. We have all these little groups around town that try to find somebody who maybe runs a store that sells tobacco products--a 7-Eleven store for example--who contributed to Senator Sessions' campaign or contributed to Senator McConnell's campaign or my campaign or to the campaigns of other of our colleagues who are here on the floor, and they say, ``That was a tobacco contribution.'' But it is very interesting to me that when we are debating $92,000 an hour for plaintiffs' attorney fees, where are these groups? Why are they so silent? Who took away their tongues and their pens to not write about the millions, tens of millions, perhaps hundreds of millions of dollars that plaintiffs' attorneys contribute to the Democratic National Committee, and who contribute to candidates who oppose this amendment and who support this bill? Now look, I don't get into the business of trying to question people's motives. But the point I want to make is this: If these groups are going to run around trying to tag Senators as being the spokesmen for some interest, I think that is perfectly legitimate. It is a tactic that I do not agree with, but it is perfectly legitimate. But why are they silent on this issue? Why are they silent on the source of the contributions going to some of those who support the bill? What we have here is a bill that has but one constituency. And that constituency reminds me of a large group of vultures who want to bring down this industry and then feed on the carcass. And the biggest appetite, in this case, belongs to the plaintiffs' attorneys who are going to make $92,000 an hour on this bill. So I hope my colleagues will not stand up and say, ``We can't give a tax cut and eliminate the marriage penalty. We don't have enough money to do that.'' Well, we have enough money for attorneys to make $92,000 an hour. As long as we have enough money to do that, we have enough money for tax cuts. We are going to see an amendment offered in a couple of days to try to do something about teenagers drinking. I hope it is going to be a bipartisan amendment. I want to predict right now that the proponents of this bill will stand up and say, ``We don't have enough money to do anything about teenage alcohol use. We are spending our money on teenage smoking,'' which is, in terms of public concern, a much less concern than teenage drinking. But they are going to say, ``We don't have the money for it.'' Let me suggest that we begin with $92,000 an hour legal fees. There is a source for money. Let us take the money from that, and let us use that money on programs designed to reduce teenage drinking, drunk driving, things of that nature. I know my colleague from Kentucky wants to speak. Let me sum up and stop. I am proud of our colleague from Alabama. He speaks with passion and with clarity, and he is absolutely right. There are no other terms for these kind of settlements other than predator and clear abuse of the system. We have in this bill a provision that sets out a commission made up of lawyers to review lawyer fees. It is not an issue over whether we are going to have the Federal Government involved. There is a provision in the bill that guarantees that. But rather than letting lawyers oversee fees for lawyers so they get the $92,000 an hour, let us have a provision that simply says you cannot get more than $1,000 an hour in these cases. Let me offer right now, if any of my colleagues want to come to my State and go with me into a local restaurant in the morning or go to McDonalds--and let us try to gather up a crowd--I would like them to explain why those folks ought to be taxed on their cigarettes or their chewing tobacco so that we can pay attorneys $92,000 an hour. If they can do that in Lubbock, for example, if they can sell that in Lubbock, TX, then I would come back and review my position on this issue. But let me predict there will not be anybody to take me up on this because anybody who would vote for this would be ashamed for people to know it. But we are going to vote on it. And we are going to vote on it over and over and over and over until we do something about this predator behavior and this clear abuse of ordinary working people in America. I thank the Chair and I thank my colleague. Mr. McCONNELL addressed the Chair.

Mr. GRAMM. I am sure the Senator has seen thousands of articles where outside groups rate how much money people received from groups that had interests before the Congress. You have seen thousands of those articles. Have you ever seen any of those groups rate how much money plaintiffs' attorneys have contributed on a bill where the plaintiffs' attorneys are the single largest beneficiary of the bill?

Mr. GRAMM. Mr. President, our colleague from Massachusetts says not one cent of these settlements comes from the money in this bill. But this bill makes the payment of these settlements possible. The consumer is going to pay every penny of this in higher fees and taxes. So the net result is that while the Federal Government is not paying these bills, blue-collar workers who smoke are going to end up paying each and every one of these bills. I want to remind my colleagues that on the front page of the Washington Times, in a story about these $92,000-an-hour fees paid to the attorneys, had the following quote: The lawyers laugh at a payment of $280 million for all 12 law firms, which would be more than $23 million per attorney. This is $23 million an attorney that they are talking about as a payment. ``One lawyer said that wouldn't''--that is, $23 million --``be a decent tip for his house staff.'' Twenty-three million dollars would not be a decent tip for his house staff. How many Americans think $23 million is a pittance? The fact that we have in this bill $92,000 an hour for plaintiffs' attorneys is piracy; it is outrageous; it is predatory on the working men and women of this country who have to work hard for a living. Many of them have become addicted to tobacco and nicotine, and they are going to have to pay higher prices and higher taxes to pay $92,000 an hour to attorneys who say a $23 million payment for an individual attorney ``wouldn't be a decent tip for his house staff.'' If people do not have their stomachs turned at this kind of behavior, at this predatory, outrageous behavior, then absolutely nothing will turn their stomachs. I believe we have an obligation to limit these fees to protect working Americans who will have to pay these prices. It is important to note that we already have in the bill a procedure whereby the Federal Government is sanctioning these fees with a review by attorneys. What the Senator from Alabama is saying is, rather than having a group of lawyers review these fees for $92,000 an hour, rather than having the provision which was in the original bill, we ought to have a clear definition, and the Senator from Alabama has defined it very simply: Give them $1,000 an hour. How many waitresses or truck drivers who will be paying this tax will take $1,000 an hour? Every single one of them.

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

Mr. GRAMM. Will the Senator yield for a question?

Mr. GRAMM. Mr. President, I know our dear colleague from Nebraska is here to speak, and I will try to be brief. I do not want to hold him up, knowing he has something we need to hear and I am eager to hear it. But I want to talk just a moment about the pending amendment. Let me remind my colleagues that in this bill before us, one of the things the proponents of the bill say is good about the bill is that it transfers money to the States. While this bill allows attorneys to be paid $92,000 an hour, while this bill provides $18,615.55 per Native American who smokes for smoker abatement, while this bill pays farmers $21,000 an acre who are currently under the tobacco program while allowing them to keep their land and to continue to farm tobacco, we are told that at least a good thing about the bill is that it gives money back to the States. However, when you open up the bill to page 201, you find that we do give money back to the States, but only half the money can be spent by the States as they choose to spend it. Basically this bill dictates Federal mandates as to how the other half of the money has to be spent. The bill requires that ``a State shall use not less than 50 percent of the amount received'' for the following kinds of programs: maternal and child health services block grant, child care under section 418 of the Social Security Act, federally funded child welfare and abuse programs under title IV-B of the Social Security Act, programs administered within the State under the authority of the Substance Abuse and Mental Health Services Administration under title 19 part B of the Public Health Service Act, the Department of Education Dwight D. Eisenhower Professional Development Program under title II. It is obvious that there is some lobbyist somewhere who has all these pet programs and is now having the Federal Government dictate to the State of Texas and to other States in the Union how they are supposed to spend the money that they are getting under this tobacco settlement. If this weren't bad enough, if this weren't outrageous enough, now Senator Kerry and others come along and say, ``Well, this is not enough. What we are going to do in addition to all these things is we are going to tell the States that they have to spend half of 50% on a specific program. ``A State shall use not less than 50 percent of the amount described in subsection (b)(2) of section 452 for each fiscal year to carry out activities under the Child Care and Development Block Grant Act.'' In other words, not only are we making them do all these things, but now Senator Kerry and others want to say that 50 percent of the 50 percent that we are forcing the states to allocate has to go for this one particular use. Yesterday and the day before, we went back and forth with amendments. Senator Coverdell got to offer a real amendment to try to target drug use among teenagers, and those who were opposed to it got to offer their supposed alternative. Yesterday, I offered an amendment to give a third of the money back to moderate-income working people by repealing the marriage penalty, and those who were opposed to it got a chance to offer their alternative. I have an amendment that will eliminate all the restrictions in the bill related to the Federal Government telling the States how to spend this money. I want to make it clear I don't intend to see this Kerry amendment voted on up or down until I have an opportunity to offer my alternative. My amendment takes all these earmarks out of the bill and gives the Members of the Senate the opportunity to decide if they want to serve in the State legislature and allocate State moneys, or do they want to be U.S. Senators? If I wanted to tell the State of Texas how to spend money, I would have run for the Texas Senate or for the Texas Legislature. I didn't run for the Texas Legislature. I never served in State government, and I don't want to get into State government now by trying to tell my State how they have to spend this money. We can have a motion to table this Kerry amendment. But, if it is not tabled, before this amendment is going to come to a final vote, I want to have the right to offer my alternative and give the Senate, as we did on drugs, as we did on taxes, two alternatives: One, do more to make the States spend the money they get under the bill the way Congress and all these special interest groups that have written this bill dictate it should be spent; or, two, rip out all the provisions of the bill relating to mandating how the States spend the money and let the States spend the money as they choose to spend the money. I think the Senate ought to have that choice, not a choice between a bad provision and making it worse, but a choice between making it worse and getting rid of the whole process of telling the States how to spend their money. I thank the Senator from Nebraska for his patience, and I yield the floor. Mr. KERREY addressed the Chair.

Mr. GRAMM. Will the Senator yield on that point?

Mr. GRAMM. I wonder if those on the other side of the issue are taking money from plaintiffs' attorneys?

Mr. GRAMM. Let me take 3 minutes.

Mr. GRAMM. Mr. President, I was yielded 3 minutes. Is that right?

Mr. GRAMM

Mr. GRAMM. Mr. President, I send a modification of my amendment to the desk.

Mr. GRAMM. Madam President, I think somewhere I heard the old saying, ``No good deed goes unpunished.'' In trying to see if we might find some consensus on this issue, I tried to write our marriage penalty repeal amendment in such a way as to limit the amount of resources that it took from the underlying bill. I did it recognizing that the underlying bill is as full of fat as any bill could possibly be. It is a bill that provides funding for a Native American antismoking campaign that will spend $18,615.55 per Native American who will be served. It is a bill that pays trial lawyers $92,000 an hour. It is a bill that pays tobacco farmers $23,000 an acre, and they can keep the land and go on farming tobacco. With all of these gross expenditures, our colleagues say that if we take more than a third of the money we are raising in taxes--which they say they are not increasing the tax to raise money--but if we take any more than a third of it and give it back, then somehow the bill is going to collapse. Then I try to adjust the amendment to keep it within those constraints, and our dear colleague from Massachusetts accuses me of taking money from Social Security. And it goes on and on and on. ``No good deed goes unpunished.'' I have the ability to modify my amendment. I want my colleagues to understand that if we don't work out something on this amendment pretty soon, I am going to modify my amendment, and I am going to take every penny of this money out of this larded bill. So I can solve all of these problems. I tried to help somebody. I tried to work out a consensus, and now we are not able to do it. But I can fix that problem. I can fix the problem by taking the money out of this bill, and I am prepared to do that. I am not going to do it right now. I am going to wait and see if we can work something out. But I am prepared to do it. I have a modification. I have a right to modify my amendment, and I will modify my amendment at some point if we don't work something out. Madam President, I want to address a number of issues that our colleague from Massachusetts raised. Our colleague from Massachusetts says, ``Well, I have a marriage penalty correction device, but mine doesn't cost as much and gives more relief.'' So the question is, How is that possible? Well, the answer is that it gives no relief to one particular kind of family. That is a family where one of the parents decides to stay at home and work within the home--one of the hardest and most difficult jobs in America and one of the most important jobs in America. We have not seen their amendment, but the way our Democrat colleagues could give a marriage penalty for so much less money is that it is a marriage penalty correction that you get only if both parents work outside the home. That is not the way we have done it. We have not done it that way because I do not want the Government to be making the decision as to whether a parent works outside the home or works inside the home. Let me say, it is a tough decision for people to make. Some people make it based on economics; some people make it based on their careers. And I think families need to make it, not the Government. My mama, as I have said earlier, worked all my life because she had to. My wife has worked all my children's lives because she chose to. She had a career. She wanted to do it. But the point is, the Tax Code should not discriminate against parents who choose to make an economic sacrifice to have one of the parents stay home and raise the children. So the magic in this Democrat alternative, if such an alternative exists, is they can do it for less but the way they do it for less is, they say if you have a stay-at-home parent, you get no relief from the marriage penalty. They are going to complicate this issue. But, fortunately, I understand this issue. So let me try to straighten it all out before they waste all the time trying to complicate it, because I can answer it and will save everybody time. There is something called a marriage bonus. If there has ever been a totally fraudulent concept, it is the marriage bonus. This thing that we call in the Tax Code a marriage bonus is, if you marry--and let me just speak from the point of view of a male--if you marry a lady and she comes and lives with you in marriage, you get to take her personal exemption and you also get an adjustment to your standard deduction. So I am sure that people will laugh at this, but since our colleagues are going to go to great lengths to talk about it, let me just destroy it, and we will not waste our time. Something is called a marriage bonus when--let us say you have John and Josephine who fall in love. And Josephine is just getting out of college. Her father and mother have been taking a personal exemption for Josephine. She marries John. And John is already working. Josephine is getting ready to go into the labor market. They went to the graduation and she got her diploma. Then they walked down the aisle and said, ``I do.'' And sure enough, John gets to declare $2,700 on his tax return for her personal exemption. And John gets $2,850 added to his standard deduction. But does anybody believe that John can feed, clothe, and house Josephine for $5,550? Some bonus. That is no bonus. Let me show you what has happened. In 1950, the Tax Code of America was such that for the average family of four--husband, wife, two children--75.3 percent of their income was totally shielded from any Federal income tax. This meant that by the time they took their personal exemptions--and they got four of them--that shield was 65.3 percent of their income. Then they got their standard deduction, and that shielded 10 percent of their income, for a total of 75.3 percent. So in 1950, the cold war had heated up, we were going into Korea, defense spending was rising, but we still shielded 75.3 percent of the income of the average family of four in America from any income taxes because of the personal exemptions and the standard deduction. The personal exemption was $500 in 1950. To be the same level today, the personal exemption would have to be $5,000. But it is $2,700. So today, the same family of four, making the average income in the country in 1996, has only 32.8 percent of their income shielded. Every bit of the additional income is being subject to income taxes. So what happened between 1950 and 1998? What happened between 1950 and 1998 is that the real value of the standard deduction and the personal exemption declined dramatically because it did not keep pace with inflation. So whereas in 1950, 75.3 percent of the income of the average working family in America was totally shielded from income taxes, now the average family in America, family of four, making the average income, has only 32.8 percent of their income shielded from taxes. So since 1950, what has happened? Rich people paid a lot of taxes in 1950, and rich people pay a lot of taxes today. Poor people paid no income taxes in 1950, and they do not pay any income taxes today. What happened to the tax burden between 1950 and today? It almost doubled. Who paid it? Middle-class families. Today, the number that just came out showed that 20.4 percent of all income earned by all Americans is taken by the Federal Government, and when you take State and local taxes, the tax burden today is at the highest level in the peacetime history of the United States of America. No American has ever lived with a peacetime tax burden higher than today. Even though we won the cold war, tore down the Berlin Wall, cut defense by 50 percent, we still have the highest tax burden in American peacetime history because of passing bills like the one that is before us today. What is the amendment that I have offered with Senator Domenici and Senator Roth trying to do? What it is trying to do is address the problem, shown on this chart, where working families end up paying more and more of their income. When you have a working spouse today, that working spouse is paying 60 percent of their income in taxes that did not exist in 1950. What Senator Domenici, Senator Roth, and I are trying to do is to correct that. We are trying to take a first step to correct this marriage penalty, which is basically a penalty that falls on 31 million Americans where they actually pay an average of $1,400 a year more because they are married than they would pay if they were single. We want to give them an additional $3,300 deduction. We want to put it above the line so it applies to the earned-income tax credit. And our Democrat colleagues say, ``No, we don't want to do it that way.'' Let me tell you what they want to do. No. 1, they want to say that if a family chooses to have one of the parents stay at home with their children, that that parent is worthless and therefore they should get no correction for the marriage penalty at all. What Senator Domenici, Senator Roth, and I are trying to do is to not tilt the Tax Code against stay-at-home parents. I am not trying to make a judgment. In the two families I have had the privilege to live in my parents'; and now my own family--both parents have worked. I am not trying to stand in judgment on whether both parents should work or they should not work. Families should do what works for them. But we should not have a Tax Code that penalizes people who give up income in order to have one parent stay at home with the children. That is the proposal that the Democrats are making. The second proposal they are making is, do not give any of this to moderate-income people. I did not hear anything in their proposal about making it a rebate to people who are getting the earned-income tax credit. Let me tell you why that is so important. You have a lady who is washing dishes and you have a man who is a janitor in a school. They might be about as well off on welfare as they are working, but they are proud, they are ambitious, they want to be self-reliant. So every morning they set the alarm for 6 o'clock. When the alarm clock goes off, their feet hit the ground. They get up, they get dressed, they go to work. They often work more than one job. They meet and fall in love. It looks like their dream has come true because together they can have more. But under the existing Tax Code each of them making very low income qualifies them for an earned-income tax credit. They lose the earned- income tax credit if they get married. So they face a huge penalty, often more than $1,400 a year if they get married. In our amendment, we apply the correction to this perversion in the Tax Code called the marriage penalty so that even people that are getting the earned-income tax credit can deduct this $3,300 before they gauge their eligibility. Why? First of all, we are for love. Secondly, if a lady washing dishes and a man who is a janitor in a school fall in love, we want them to get married. What society would want to discourage that from happening? They may get married, have a child, their child may become President of the United States. The alternative being offered is so much cheaper. One of the reasons it is cheaper is that it doesn't apply to these very low-income people. We thought it should apply to very low-income people. The reason is 34 percent of the money they are taking out of the pockets of working Americans through this tobacco tax come from people that make $15,000 a year or less. They should not be excluded from this provision. To sum up the points I wanted to make, I want the marriage penalty to be corrected. I want this tax deduction to apply to families, whether they both work outside the home or whether they decide they will sacrifice, take less income, and one of them will stay home and raise their children. I am not trying to make a judgment as to whether that is better or worse. I think it depends on the people and what they want. But I don't think the Tax Code should treat people differently based on that decision. Our colleagues who supposedly are offering an alternative think it should. Our colleagues say, look, if you don't work outside the home, you don't work. If you don't work outside the home, you are not due any correction for this penalty. Then as the final absurdity they say, after all, John, by marrying Josephine, he already got $5,550 tax deduction by getting her personal exemption and part of her standard deduction. But who can live on $5,550? What kind of bonus is that? It just shows you the absurd language we have developed to defend a provision in the Tax Code which is absolutely indefensible. I want, in this amendment, to give at least a third of the money we are taking from working Americans back to them. Our colleagues try to get us to focus on these terrible tobacco companies and forget about the fact that tobacco companies are paying no taxes at all under this bill. In fact, this bill makes it illegal for the tobacco companies not to pass through the tax to consumers. Who is paying this tax? A majority, 59.1 percent of this tax is being paid by families that make less than $30,000 a year. So I have made the modest proposal to give a third of the money back to moderate-income families so that those who were in favor of the bill can say, well, we raised tobacco prices. Hopefully, that will discourage children from smoking. Hopefully, it will discourage other people from smoking. Just don't impoverish blue- collar workers in America who smoke and who, paradoxically, are the victims of this whole process. The incredible, unthinkable, virtually unspeakable truth about this bill is it doesn't penalize the tobacco companies. It penalizes the victims. We tell everybody you have been victimized by the tobacco companies. They knew you would get addicted to nicotine, and they conspired to get you to smoke. Then this bill says we are going to do something about it; we are going to tax you, not the tobacco companies. Always seeking to do good, I had this modest amendment to take a third of the money and give it back to moderate-income families in repealing the marriage penalty and making health insurance tax deductible for the self-employed. I tried to do it in such a way as to protect some of their huge trust funds. Now they say, no; you can't do that. So at some point, if we don't work this out, I am going to modify my amendment and I am going to take all the money out of the bills trust fund. The truth is we should be giving back about 80 percent of this money in tax cuts. We should be using the other 20 percent--10 percent of it on antismoking, 10 percent of it on antidrugs, and that ought to be it. In any case, if we are going to debate this issue, I think our colleagues are going to be a long time explaining why, if mom or dad decides to stay at home, they are discriminated against under this Tax Code. I don't think people are going to be in favor of that and I hope something can be worked out. Finally, at the end of the budget cycle in the year 2007, we have a choice: We can repeal these marriage penalty provisions and take all of it out of this trust fund, or we can set a portion of it out of this trust fund. I can do it either way. I am beginning to be convinced, as my dear colleague from Arizona has been convinced throughout this debate, that no good deed goes unpunished, even when you try to do what you believe is a good work. If you try to do something good and you try to be reasonable and you try to make things work, something is going to happen to punish you for it. I think that is a shame for the process. I wanted my colleagues to be aware, when we are talking about giving a $3,300 tax deduction for working families, that you have to wonder why is that reasonable? Well, in 1950, 75.3 percent of their income was totally shielded from income taxes because of the standard deduction and the dependent exemption. Because of inflation since that time and because the personal exemption has not been raised to equal inflation, now only 32.8 percent of their income is shielded from taxes. I am not going to apologize for trying to let working families keep more of what they earn. Nor am I going to apologize for having a provision that says to parents you can get this tax deduction if both of you work or you can get it if one of you works and you have to make the decision about what works for you and your family. I don't think doing it any other way is going to be successful. I hope we can work this out. But it may be preordained somewhere at a higher level than we are and maybe for some good purpose that this can never work out and this might never be done. I yield the floor.

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

Mr. GRAMM. Mr. President, I wanted to respond to some comments. I was over in a conference on the IRS reform bill when several of our colleagues came over to comment on the pending amendment. I want to try to address briefly some of the issues that they raised. Let me begin by trying to delineate between the marriage penalty that is pending in the amendment before us and some of the alternatives that appear to be supported by opponents of this amendment. The principal feature of the amendment before us is an effort to give back roughly a third of the money that is collected in the cigarette tax embodied in the bill before us. A tax that is very regressive in its impact. As I noted earlier, 59.1 percent of the taxes are collected from people who make less than $30,000 a year. This amendment gives a rebate to moderate-income Americans, who will be devastated by this bill which will raise the tax by $1,015 per year, for the average smoker who smokes one pack of cigarettes a day. If the objective of the tax is to discourage smoking, if we hope to get a 50- percent reduction in smoking among teenagers as a result of raising the tax, if the objective is to discourage smoking and not to take money away from blue-collar workers to give to Government to spend, then the logic of the amendment that is now pending is that we should take roughly a third of the money we collect and give it back to people and families who make less than $50,000 a year by repealing the marriage penalty. Some of our colleagues have come to the floor with very pretty charts with my name on them. I appreciate the free advertising. I hope my mother saw them. They were beautiful charts. But they refer to something called a marriage bonus, and I think what is happening is this whole debate is getting skewed by people who do not want to focus on the issue. So let me explain what we are doing. Then I want to say a little bit about this marriage bonus, and then talk about why doing the marriage penalty in the way that is being suggested by the minority will discriminate against stay-at-home parents. First of all, under the current Tax Code there are 31 million families that end up paying an average of $1,400 a year more in income taxes because they fall in love and get married than they would pay if they stayed single. I think it is a uniform position in the country as a whole and in the Senate in particular that it cannot be prudent tax policy, even in the economy of the greatest nation in the history of the world, to have a tax policy that discourages people that fall in love from getting married. I think our colleagues on both sides of the aisle would agree with the premise that the family has been the most powerful institution in the history of mankind in terms of promoting progress and happiness. Those are two important things. So what I am trying to do in this amendment is to repeal that marriage penalty so we do not discourage people who fall in love from getting married and forming families and achieving the stability and the happiness and the fulfillment that comes from being married. Now, I think there is a general view that we should do that. Not everybody wants to pay for it. Not everybody supports the fact that I am taking a third of the money from this bill which was going to things like paying lawyers $92,000 an hour, or paying farmers $23,000 an acre when they do not have to give up the land and do not have to stop farming tobacco, or paying $18,615.55 for smoker cessation programs for every Native American who smokes. They would rather spend the money on those things than to correct the marriage penalty. But I do not think philosophically anybody objects to the thesis that a tax policy that discriminates against marriage is counterproductive, in this Nation or any other nation. Now, there are two issues that have been raised by opponents. One issue has been that we could do it cheaper if we excluded couples where one of the parents does not work outside the home. That is, if we only gave the marriage penalty correction to those couples that make roughly the same income. Now, when we put our amendment together, we looked at that. We thought about it for about a microsecond, and we rejected it because if you do it the way the minority wants to do it, you end up giving a tax break only to those couples where both have roughly equal incomes. But for families that make a decision to sacrifice so that one of them can stay home and work in the home, which is real work, maybe the most important work on the planet, for those who choose to do that they would be discriminated against by the provision that the minority is proposing to offer. Under our amendment, you get $3,300 of deductions whether or not both parents work outside the home. Now, why did we do that? We did it because we do not believe the tax policy of the country should discriminate against people based on whether or not they both work outside the home. And let me make it clear. I am not trying to tilt the Tax Code one direction or the other. My mother worked all my life because she had to work. My wife has worked all our children's lives because she wanted to work. And I am not making a judgment about whether it is better for both parents to work or one parent to stay at home. I think that is something each family has to make a decision on based on what they want for themselves, their children and what they can afford. But the point I want people to understand is that the amendment that is before us treats couples exactly the same whether they both work outside of the home or whether one works outside the home and one stays home to be a homemaker, to raise the children. I do not believe the Tax Code should discriminate against people based on the decision they make about whether to work inside or outside the home. The way we have written the bill we do not discriminate. You get the benefit if both parents work and you get the benefit if only one parent works because we give a $3,300 tax deduction. We do it above the line so you get to deduct it before you calculate what your taxable income is. So that very modest-income people who get an earned tax credit, but who still work, can still take the credit. For example: a lady who is washing dishes and a man who is a janitor are both working. They are trying to get ahead, they are trying to be self-sufficient, they both get an earned-income tax credit, and they each have two children. They meet and say, ``I have found the solution; I am going to form a family.'' They find if they get married, they lose the earned-income tax credit and they suffer a substantial decline in income. So they decide not to get married. Well, one of the things we wanted to do in our amendment was to assure that we made this adjustment so that people at very low-income levels who in many cases are penalized most by the marriage penalty would get the relief. That is why we did our amendment the way we did, and it does cost more to do it that way. But if you do not do it that way, you discriminate against families where one parent stays at home and works at home, and you discriminate against very low-income people who are working and often working two or more jobs, but are still getting some assistance in the earned-income tax credit. I think when our colleagues criticize this they do not really understand that what they are saying is if you stay home and raise your children, you should be discriminated against. I think when people understand the distinction they are not going to be for doing it their way. The second issue I wanted to address because it did come up while I was gone is the so-called misnomer of a marriage bonus. If there has ever been a fraudulent concept in the history of American taxation, it is the so-called marriage bonus. Now, let me define this marriage bonus. You have a guy named John, and he has a job, and he is out working. He is a sales representative, and he is traveling all over the country selling school supplies. And you have a girl named Josephine, a young lady who is graduating from high school. Now, she graduates from high school and then the next day she and John walk down the aisle and get married. What the minority is calling a tax bonus is that Josephine's father was taking a dependent exemption because he was supporting Josephine while she was living in the family home, going to school. He was paying her expenses, and he got to write off on his income taxes every year or deduct $2,700. Now, what is being called a marriage bonus is that by marrying Josephine and forming this family, before Josephine goes out next year and gets a job herself, John is going to be able to write off $2,700 in a dependent exemption. He is also going to be able to raise his standard deduction, because he is married, by $2,850. So that he is going to get a deduction by marrying Josephine of $5,550. I want to pose this question to our colleagues who think that is such a terrible thing and that anybody who is getting that should not get the benefit of eliminating the marriage penalty. How many fathers go to the wedding and when they get to the point where they say, ``Is there anybody here who objects?'' Bill, Josephine's father, stands up and says, ``Wait a minute, I object to this marriage, because if Josephine gets married, I'm going to lose $2,700 of deductions and, as a result, it is a bad deal for me''? I never heard of that happening. How many people rush out to get married because, by marrying someone with no income, you get $5,550 of deductions? That is not that much less in taxes; that is just the amount you get to deduct. Does anybody believe that you can feed, clothe, and house a spouse for $5,550? But to listen to our colleagues talk, you get the idea that this is some big bonus, that this is some unfair provision in the Tax Code, because by John marrying Josephine and forming a couple and filing jointly, his deductions go up by $5,500, and that is a ``marriage bonus.'' Some bonus. Does anybody believe that John can pay for having a wife for $5,550? No. It is not a bonus; it is simply the way the Tax Code works. Why should we give more protection to family income? This chart really tells the whole story. This chart shows 1950 and 1996, the last year when we have complete data on how much of the income of average- income working families with two children was shielded from Federal income taxes by personal exemptions and by the standard deduction. Basically, what this chart shows is that in 1950 the personal exemption and the standard deduction for a family of four making the average income in the country shielded 75.3 percent of their income from any Federal taxes. In fact, in 1950 the average family with two children was sending $1 out of every $50 it earned to Washington, DC; $1 out of every $50. Because of inflation not keeping up with the rise in real income and because the standard deduction and personal exemption didn't keep up with inflation, today they shield only 32.8 percent of the income of the average family of four. So, whereas in 1950 the average family making the average income, with two children, was sending $1 out of every $50 it earned to Washington, today the average family with two children is sending $1 out of every $4 it earns to Washington, DC. Under these circumstances, is it obvious that one of the things we need to do is to shield more family income from Federal taxes? That is what this amendment is about. In 1950, rich people paid a lot of taxes. Today, rich people pay a lot of taxes. In 1950, poor people paid no income taxes. And in 1996, poor people pay no income taxes. How did the tax take double? How did taxes, as a percentage of the economy, double the Federal level between 1950 and 1996? It doubled by raising the burden on families with children from $1 out of every $50 to $1 out of every $4. So, under these circumstances, it makes perfectly good sense to me that we would want to do something to help working families shield more of their income and, in doing so, end the starvation of the one institution in America that works, and that is the family. We are feeding Government, and we are starving families. What the amendment I have offered, with Senator Domenici and Senator Roth, tries to do is to give some of this money that is being taken from working families in this confiscatory excise tax back to working families. So while raising the price of tobacco products and hopefully discouraging people from using it, we do not impoverish people who are, in this case, the victims by having become addicted to tobacco products. That is what this debate is about. So I hope people do not get confused about this silly business about a marriage bonus. The idea that somehow you are getting a bonus when you take a spouse, by the fact that your tax deductions go up by $5,500 ridiculous. Nobody ever got married thinking that they were going to benefit with a $5,500 is deduction when they have to pay for the expenses of their spouse. That is not a bonus. In fact, that is inadequate. That is outrageous. It ought to be higher. Finally, to suggest that we want to fix the marriage penalty but only if both parents work is ludicrous. I want to fix the marriage penalty, but I don't want to tilt the Tax Code against families where one parent decides to stay at home. That is really what the debate is about. I hope reason will prevail here. Sometimes it does; sometimes it doesn't. But, I hope it will in this case. And I yield the floor.

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

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

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

Mr. GRAMM

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

Mr. GRAMM

Mr. GRAMM. Let me reclaim my time to say it is true that moderate- income Americans who do not smoke will benefit from this tax cut, if they are married. It is true that high-income people who smoke will bear a burden from the bill, and they will not get a benefit from this tax cut. But it is also true that Americans who pay 80 percent of the tax that will be imposed in the name of discouraging smoking, they are in families who earn less than $50,000 a year, and they will get a benefit from this bill. There is no way we can target it just to smokers, nor does anybody want to. The point that we are making is, if we are trying to raise the price of cigarettes to discourage consumption, that is one thing. But many of the critics of the bill have viewed this as a tax and spend bill, and with great justification, in my opinion. Therefore if we are raising the price of cigarettes to fund tens of billions of dollars of new Government spending, then why not give part of it back? There is no perfect tool in giving it back. The best we have found is to repeal the marriage penalty and to make health insurance tax deductible for the self-employed. Let me explain how the marriage penalty works and how our amendment will work. Many Americans are surprised when they learn that we have roughly 31 million families in this country who pay higher taxes because they are married than they would have paid had they remained single. In fact, the average tax burden that is incurred by these couples is about $1,400 a year higher. They pay the Federal Government $1,400 a year for the privilege of being married rather than continuing to file as single individuals. In fact, during a Finance Committee hearing, we actually had the startling testimony from a young woman who said she was living with her boyfriend and would like to get married but, because of the burden of the marriage penalty, they had delayed that decision. I think we all understand that the family is the most powerful institution for progress and happiness in history. Strong families, I think we would all agree on a bipartisan basis, represent the solution to everything from drugs and gangs and violence, and for the perpetuation of the basic values that we all treasure as Americans. And so I think anyone would want to get rid of a provision of tax law that discourages people from getting married. Our amendment does not try to get into a position of discriminating for or against couples based on the decisions they make about whether both parents or just one of them work outside the home. Some people have criticized our amendment, and perhaps will do it today, by saying that this marriage penalty provision will benefit families where only one of the couple works outside the home. But our objective is to have a provision that corrects the marriage penalty but doesn't do so in such a way as to discriminate against stay-home parents. A vast majority of the time, that is stay-home moms. We don't believe the Tax Code should treat people differently based on whether they decide to stay home and raise their children or whether they decide to work in the marketplace. My mama worked my whole life because she had to. My wife has chosen to work the whole life of our children because she wanted to. But we believe, those of us who are authors of this amendment, that it is not the business of the Government to try to dictate through the Tax Code that very important personal family decision. We want to be sure that for those who do choose to give up the income by having one parent stay at home and raise the children, that we don't see them discriminated against in the Tax Code. So here is how our provision works: What our provision will do is give every couple who makes less than $50,000 a year relief from the marriage penalty. We chose $50,000 a year because we really are rebating part of the revenue from the cigarette tax back to those people who pay 80 percent of the taxes. It is my goal, in the tax cut that I believe will flow from the budget, to repeal the marriage penalty for every American, no matter what their income. But we have targeted $50,000 and below here because that is where the smokers in America are, in the middle- and moderate-income range. We are using this to rebate part of the money collected in this bill due to the increase in the price of cigarettes to them. What we will do for every married couple is, compared to the tax return they filed last year, they will get a $3,300 deduction above the line, before they calculate what their income is for taxation purposes. This will repeal the marriage penalty. In addition, it will save the average family about $1,400 a year in taxes. For low-income people who are still working to try to get ahead and trying to become self- sufficient, we will let them deduct this $3,300 from their income before they calculate their eligibility for the earned-income tax credit. As Senator Domenici knows, some of the heaviest tax penalty burden falls on moderate-income people who are getting an earned-income tax credit if they stay single, but if they get married, which is part of the solution to their problem in terms of helping to put together a strong family, they end up losing their earned-income tax credit. So under our amendment we will give a substantial tax cut to the very Americans who are bearing the burden of this increased price of cigarettes. Finally, we deal with a problem related to the self-employed by immediately making health insurance deductible for the self-employed. If I work for General Motors and they buy my health insurance, it is fully tax deductible. But if I quit working for General Motors and go into business for myself, not only do I have to pay both sides of my payroll tax, but my insurance is not tax deductible and I have to pay it with after tax money. We have started the process of phasing this out over an extended period of time. What this bill will do is it will immediately give full tax equity to those Americans who are self- employed. So the net result of our amendment will be to give back $16 billion in the first 4 years, to give back $30 billion over the ensuing 5 years, to the very people who pay 80 percent of the cigarette tax under this bill. We will give about a $1,400 tax break to working couples in that income category by repealing the marriage penalty, and we will make health insurance fully tax deductible for the self-employed. We have crafted the bill carefully so that we take about a third of the revenues that flow from the tax that is collected on cigarettes. Quite frankly, in the final bill I believe this number should be bigger. This is a number we picked when we introduced the amendment. We have tried to structure it to stay with that through the end of the budget cycle, which will terminate in 2007, and we tried to stay faithful to that agreement in the drafting of the amendment. I think this is an important amendment. I believe that it does provide some degree of tax relief for the people who are going to pay this confiscatory tobacco tax. I hope my colleagues on both sides of the aisle will support this amendment. I do believe that we have gone to great lengths to try to make the amendment fair. We have listened to the concerns that have been raised by our colleagues who are in support of this bill. I think this is a good amendment. I commend it to my colleagues. It does not correct the many wrongs in the bill that is before the Senate. It does not eliminate the marriage penalty for all Americans. It is a major step in that direction. This is not the end of the marriage penalty debate. This is the beginning of it. By the end of this year we will have repealed the marriage penalty for every American family. This will allow us to do it immediately in this bill for those in moderate-income areas who pay the bulk of the cigarette tax. We will do it for the rest of Americans in the budget, in my opinion. I commend this amendment to my colleagues. I want to thank Senator Domenici for his leadership in this area. I yield the floor.

Mr. GRAMM. I would be happy to yield.

Mr. GRAMM. Mr. President, I apologize to my colleagues that it took so long to get this amendment together. We were trying to do several things, to bring together several provisions of different Members into one amendment. We also were trying to deal with a concern that the authors of the bill have about their trust fund and how much money we will take out of the trust fund in each ensuing year as a result of the amendment. We are still looking at some of those provisions. The net result is that we have the amendment together. What I would like to do in offering it is to outline the problem with the existing bill in terms of the impoverishment of blue-collar workers who dominate the ranks of smokers in the country. I would like to talk about the need to rebate some of the tax money we are getting, in an effort to raise the price of cigarettes, to the very people who are going to be impoverished by this confiscatory tax. I would like to talk about why the marriage penalty is a good choice for that tax rebate. I would like to then talk about how this marriage penalty repeal works and how the numbers work out in terms of the budget. And that will constitute the relevant information in offering the amendment. First of all, the problem. We have heard now for weeks and weeks a running debate about tobacco companies and their conspiracy to induce people to smoke. With just cause, those tobacco companies have been denounced on the floor of the Senate over and over again. However, people have become so fixed on these tobacco companies, they have totally lost sight of the fact that a giant bait and switch has occurred. In reality tobacco companies are not paying taxes under this bill, consumers are paying taxes under this bill. In fact, the provisions of this bill make it illegal for a tobacco company to refuse to pass the price through to the consumer. So they are held harmless in terms of the tax, but blue-collar Americans who smoke are devastated economically by this tax. So the problem with the bill is that, in the name of raising the price of cigarettes to discourage smoking, we are, if this bill goes unamended, imposing one of the most regressive taxes in American history. And ``regressive tax'' means that poor people pay an increasing share of the tax burden. Why do I say that? Well, I say it basically because in America smoking is primarily a blue-collar phenomenon. Obviously, people at all income levels smoke, but if you look at who will pay this tax, it really brings home the fact that in our country most of the people who smoke are moderate-income, blue-collar workers. Of all of the tax collection that will occur under this bill, in an effort to drive up the price of cigarettes, 34 percent of those taxes will be paid by Americans who make less than $15,000; 47.1 percent of these taxes will be paid not by tobacco companies but by Americans who make $22,000 a year or less; 59.1 percent of these taxes will be paid for by Americans in families with incomes of $30,000 a year or less. So whether it is the intent of the underlying tobacco bill or not, the net result is that this bill imposes no taxes on tobacco companies whatsoever. It shields tobacco companies by requiring that they pass the tax through to their consumers, and it squarely hits moderate- income, blue-collar workers right in the wallet and in the pocketbook. Those who favor this bill have said over and over again that their objective in this bill is, not to raise money so they can spend it, but their objective in the bill is to drive up the price of cigarettes to discourage smoking. So recognizing the problem, that while the proponents of the bill vilify the tobacco companies, in reality they are taxing blue-collar workers. While they say they are not imposing the tax to get money to spend, in truth they are spending all the money. I have offered this amendment with Senator Domenici, Senator Roth, and others, to achieve what the bill proponents claim they want to do. My amendment gives a part of the money that is collected in this tax back to the very people who are going to bear the burden of this tax. Let me give some examples. In my State of Texas, we have 3.1 million Texans who smoke. If this bill drives the price of a pack of cigarettes up by $2.78, which is the general estimate that is given, a Texan who smokes one pack of cigarettes a day would pay $1,015 in new Federal taxes and would see their Federal tax burden grow by over 50 percent as a result of this tobacco tax. Under this bill if a moderate-income family made up of two blue- collar workers, one might be a local delivery person and one might be a waitress, each smoke a pack of cigarettes a day and are earning less than $30,000 a year, they are going to pay $2,000 in additional Federal taxes. So Senator Domenici, Senator Roth, other Senators and I, have offered an amendment that says: Let us target people who make $50,000 or less because they are going to pay some 75 to 80 percent of these taxes, and let us take a portion of the taxes, roughly a third, and give that money back to the people who will be paying the taxes in the form of repealing the so-called marriage penalty.

Mr. GRAMM. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. GRAMM. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. GRAMM

Mr. GRAMM. Mr. President, at 2 o'clock, we should have distributed our amendment to both sides of the aisle. We will have given everybody an opportunity to look at it. We are in the final stages of getting the amendment done by legislative counsel. We went over it this morning with Senator McCAIN's staff. I think probably the best part of valor is to get it over here in a few minutes, distribute it widely, get everybody to look at it, and then be ready to begin at 2 o'clock. At that time, it will be my objective to offer the amendment. There is an open spot on the tree. I will offer the amendment. Hopefully, we will have support from both sides, it will be adopted, and we will take a major step toward repealing the marriage penalty and giving tax equity to the self- employed on health insurance. This is a good amendment. I think it will serve a good purpose, and I hope my colleagues on both sides of the aisle will vote for the amendment. I yield the floor. Mr. McCAIN addressed the Chair.

Mr. GRAMM

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