Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, the Washington Post printed on its front page yesterday a chart that was intended to show that the tax benefits in this tax bill go disproportionately to the super rich. The information was based on a study by the Tax Policy Center, along with the Center on Budget and Policy Priorities that has made no secret of its opposition to the tax relief included in this conference agreement. So there is a biased view. I have had an opportunity to dig into the details of how that particular study was conducted. But if it is like similar analyses, the reported dollar savings statistics don't tell the whole story, and for three reasons: First, it includes all households, even those that do not file tax returns or don't owe any tax liability, and even those that have a negative tax liability because they receive refundable credits. In analyzing the distribution of the tax cut, it makes more sense to look at who actually receives the benefits as opposed to what they do. In other words, why include people who don't pay any taxes in the first place? Second, the statistics in that study did not take into account the fact that the tax rates on dividends and capital gains for those in the bottom two income tax brackets drop to zero percent in 2008. That is that rate we are extending. Third, and most importantly, the statistics are not shown in the context of the total income tax burden that these taxpayers bear. It is common sense that income tax cuts can only go to people who pay income tax. Let me repeat that because I think the other side wants to ignore that: Income tax cuts can only go to people who pay income taxes. The value of the tax cut should be measured then not only in absolute dollar terms but also in relationship to the total income tax liability. This conference agreement before us has two centerpieces, the alternative minimum tax hold harmless, which passed the Senate with 66 votes. The extension of lower tax rates on dividends and capital gains is the second provision. If we applied the logic of including all tax returns in the various income groups and compare the AMT and dividend and capital gains tax savings to the total income liability borne by those groups in the aggregate, we can see that all of these groups receive meaningful benefits. That is what the chart before us says. This chart was prepared by my Finance Committee staff, but it is based upon analysis of data provided by the Joint Committee on Taxation, not some liberal think tank that has its own ax to grind. The Joint Committee on Taxation is not Republican or Democratic--they are professional tax people who just study taxes up and down, and their economic impact. As the statistics from the Joint Committee on Taxation show, all of these income groups receive meaningful benefits from this conference agreement. In fact, the biggest beneficiaries are those in the $100,000 to $200,000 and $200,000 to the $500,000 AGI categories. The $100,000 to $200,000 and the $200,000 to $500,000 category. The reason that shows up on the chart that way is not because of the reduced rates on dividends and capital gains that the other side is complaining about; it is because of the alternative minimum tax, the hold-harmless provisions that I fought to get completely the way the Senate had included them in this conference report. Of course, it is strongly supported by the same folks who strongly oppose this conference agreement because of the extension of lower rates on dividends and capital gains, which I point out benefits low- income taxpayers more than the AMT relief--as we can see on the chart, $50,000 and under and the $50,000 to $100,000 category. The core of this conference agreement is the alternative minimum tax hold harmless, which is the Senate position I fought hard for in conference. The other main provision is the extension of the lower rates on dividends and capital gains in combination with two provisions providing meaningful income tax savings to Americans across the income spectrum, not just the rich. These savings will prevent over 15 million Americans from being hit by the stealth AMT tax and allow those taxpayers and millions more to keep more money in their pockets to spend in the economy, adding to savings rather than sending money here for Members of Congress to spend. Let me remind people of something brought home to me when I held a town meeting in Iowa. I never have anyone come in and say they are undertaxed, but I sure have plenty of people come in and say that Congress is wasting a lot of money. So every time we have a tax bill, people are complaining because we are not taxing more to reduce the deficit, and higher tax rates do not bring in more revenue. The people crying about that are the very same ones who are voting all the time to increase expenditures whenever they get an opportunity. I also address one of the important measures in this bill, the tax gap. Last January, 2005, the Joint Committee on Taxation provided a report on possible options to improve tax compliance. This report suggested that one of the key ways to deal with the tax gap is to impose withholding on certain payments made by government entities. The joint committee report stated: The lack of a withholding mechanism on nonwage payments leads to substantial underpayment of tax each year and has long been identified as contributing to the tax gap. And a further quote: Payments made by the Federal government and State and local governments represent a significant amount of those annual payments that are not subject to withholding. Imposing withholding on nonwage payments made by the Federal government and State and local governments would improve taxpayer compliance, reduce the tax gap, and promote fairness. The problems of government contractors not paying tax has been a subject of very good oversight of the Committee on Governmental Affairs, particularly led by Senators Coleman and Levin, as well as the Government Accountability Office. The findings of the Government Accountability Office report in June of 2005 show that over 33,000 contractors owed over $3 billion in unpaid Federal taxes as of September 30, 2004. Clearly, there is a serious problem. Fortunately, there is broad bipartisan support for a solution proposed by Joint Tax of a 3-percent withholding on government payments. I think it important that my colleagues recall that this basic, same reform was included in an amendment offered by the ranking member of the Budget Committee on November 17, 2005. That was vote No. 330. This amendment, which included this provision, was supported by all but two of the Members of the other side of the aisle. I am pleased that there is wide recognition of the need for this reform and that this is not a partisan question. However, I do anticipate that some Senators will want to make an argument that we should have implemented this reform much earlier. Several points on that issue. This is a real break from previous practice and will require changes in business as usual by Federal, State, and local governments. It is for these reasons that the Joint Tax Committee recommended at a minimum there should be a 6- to 18-month delay before implementation. It was unfortunate that the amendment from the ranking member of the Committee on the Budget did not allow for this time period for governments to prepare for this new requirement. In fact, rather than giving the time allowed as recommended by the Joint Committee on Taxation, the provision was actually retrospective. However, I understand firsthand the difficulties of trying to deal with revenue issues in a specific year, so the author of the amendment has my sympathy. We chose to go beyond the period recommended by the Joint Tax Committee and give governments and contractors additional time to prepare for this new withholding requirement. Allowing for additional time was a point that brought greater comfort to conferees in considering this new legislation. Additional time would give Congress an opportunity to hear from parties. It may be possible that after the dialog, we will be able to move up the effective year to begin this important provision dealing with the tax gap. Let me be clear. This is a measure which has bipartisan support. That is very positive. We need to work on a bipartisan basis to deal with the tax gap. This is a good first step. The only question, then, is possibly one of timing. I have erred on allowing government and the contractors to fully prepare for this new requirement and for the Treasury to issue regulations that will give guidance allowing for a smooth start. I also take a moment to respond to something that was said this morning by my friend from Oregon, Senator Wyden, a member of the Senate Committee on Finance. He is up on tax legislation most of the time. His earlier comments about his provision to eliminate energy bill tax incentives for major oil companies needs an explanation that I don't think he is aware of. In November of 2005, he offered an amendment in the Committee on Finance to eliminate the tax break known as G&G for geological and geophysical costs that major oil companies received in the Energy bill. His provision is in this conference report. I went to the conference with his provision, and I came out of conference with his provision intact. In addition, we actually improved the original Senate amendment and increased the amount of tax revenue that is going to be raised over the 5-year period. The provision of my friend from Oregon resulted in a $101 million Federal tax benefits savings for the 5-year budget window this bill covers. Through conference negotiations, we managed to find a way to actually increase the revenue raised over 5 years from that $101 million up to $160 million, and we still respected the concerns in the original Senate bill. Another point I make is that the original proposal filed by my friend from Oregon actually lost $88 million in Government taxes the first year. In other words, the way the original amendment worked, it actually gave major oil companies an $88 million tax benefit, and under the reconciliation rules, that would not work. We had to change the formula so that the provision raised tax revenue of $160 million over all 5 years of the budget resolution. I want the record to reflect that I upheld my part of that bargain. This conference report holds up its part of the bargain on that provision. The major oil companies only received one tax benefit in the Energy Policy Act of 2005. This conference report removes the tax benefit the major oil companies received from the G&G tax incentive. I yield the floor.

Mr. GRASSLEY. Mr. President, before I explain what is in the conference report, I want to make clear what the tax policy is we are talking about. For 90 percent of the legislation that is before us, we are talking about maintaining existing tax policy as it has been, either from the 2001 Tax Reduction Act or the 2003 Tax Reduction Act. The reason I want to take some time to explain that--and that is not part of my explanation of the conference report--is because the public listening in and/or my colleagues are going to be confused over the words ``tax cuts.'' For 90 percent of this legislation, we are not cutting anybody's tax bill. What we are trying to do because of sunset is we are maintaining for the next year, or in some cases the next 5 years, existing tax policy. So I don't want anybody to come over and say we are cutting taxes. If we don't pass this legislation in the year 2006, or in some cases in the years 2009 and 2010, people are going to get an automatic increase of taxes without a vote of Congress. So we are talking about maintaining existing tax policy. The reason we are talking about maintaining tax policy would be for two reasons. In the case of dividend and capital gains tax policy, the tax policy we adopted in 2003 is the reason we have created 5.2 million jobs. That is why the economy is rolling. I know the public is listening. When they pay $3 for gas, the $3 for gas blinds them to the fact that we had 4.8 percent growth last quarter. It blinds them to the fact that we have 4.7 percent unemployment, which is practically full employment, and some economists would tell you it is full employment, or that we have a low inflation rate. It seems that when my constituents, and probably constituents in every State, see high gasoline prices, that is all that is on their mind. I don't blame them because I put gasoline in my car--I don't have some driver do it, I put it in myself--and I know what the price of gasoline is. I know a lot of my constituents go out of the same convenience stores I do with a bottle of water. Bottled water, if you buy it in these small containers, you are paying about $8 a gallon for water and never complaining about the cost for water but complaining about $2.63 gas that you can buy in Des Moines, IA, this very weekend. We are talking with regard to capital gains as maintaining existing tax policy. Just so everybody understands, we are not cutting anybody's taxes below what they are today. We are maintaining existing tax policy. But if we didn't take the action we are taking today, taxes would automatically go up in these areas by 33 percent, and for low- income people, who have zero capital tax gains, they go up--what would that be? One hundred percent. If they are not paying taxes today and they start paying taxes at the rate everybody else pays, it is a 100- percent increase in taxes. I don't know why people would argue with us, when we have a zero capital gains for lower income people, that you would want to tax lower income people. But if we do not continue this tax policy, that is the case. I wish to emphasize again what Chairman Greenspan has said about the 2003 tax policy we are continuing today, and that is that it is responsible for the economic recovery we have had of 18 quarters of economic growth and 5.2 million jobs being created. The other part of the bill is to continue tax policy existing since 2001. That existing tax policy is that 22 million Americans--well, no, I better say it this way. That tax policy since 2001 has been that when we reduce people's taxes here on the one hand, we are not going to take it away from them on the other hand by having them hit by the alternative minimum tax. I am going to explain this in greater detail, but up front, a good part of this bill is to maintain the policy Senator Baucus and I have had in place since 2001 of holding people harmless from the alternative minimum tax. In other words, if you get a tax decrease here, we are not going to have the same people pay a tax over here on the alternative minimum tax. As far as the alternative minimum tax is concerned, I think the best policy is what we did in the late 1990s when this body sent to President Clinton a bill to repeal the alternative minimum tax, and he vetoed it. I don't know how many Democrats we are going to have condemning us for not doing more on the alternative minimum tax. What more could you do than what we did in 1999 and repeal a very bad tax policy, the alternative minimum tax? And a Democratic President vetoed it. But they will probably be the ones complaining and crying the most because we are not doing more. What we are talking about here today is maintaining present tax policy through this reconciliation bill for roughly 90 percent of it. Ten percent of it would be some change in tax policy. If people want details on that, I will be glad to go into that. Maybe another thing I ought to explain--and it is more personal because I am going to be the chief negotiator for the Senate on this bill because I am chairman of the Senate Finance Committee--I have negotiated for a long period of time with Chairman Thomas, and everything has worked out fine as compromises have to work out fine, and I think I have done a very good job of protecting the Senate's position. Let me remind everybody, all of my colleagues, particularly Republicans, particularly about a telephone call from the President on the Thursday before we began our Easter break--the exact date I don't have in mind--and in meetings with the leader and the Speaker and all this, we were just very anxious to get something done before Easter. At that point, the position of the House was that we were not going to have hold harmless on AMT. Consequently, I didn't agree to this agreement. I believe I probably disappointed a lot of my colleagues and the leader and the Speaker and the President of the United States because I just didn't, how would you say, surrender to a House position that we were doing too much on AMT. Our policy since 2001 has been hold harmless, and I believe that is what we passed three times on the floor of the Senate: in November last year, January this year, February of this year, as the Democrats made us go through three periods of 3 days of debate on the same tax bill that ended up passing by a bipartisan majority of somewhere between 64 and 67. So it has been the policy of the Senate since 2001, reaffirmed by three votes of this body in the last 6 months, to hold harmless. I didn't believe I was doing 66 Senators a favor by agreeing to something which would have 3.5 million--let's say more accurately 2.5 to 3 million taxpayers being hit by the alternative minimum tax out of the 22 million to whom I have already referred. So it took a little longer, and here we are--what, May 11, 1 month later than when it originally happened. But we have hold harmless in this bill. Hold harmless is in this bill. Everything is going smoothly between Chairman Thomas and me. Nobody is going to believe that because if you read the papers, we are always at each other's throat. You know, those characterizations are entirely wrong. He has strong convictions about tax policy, and he is the negotiator for the U.S. House of Representatives. He has a right to stand firmly for their positions, but I have a responsibility to stand firmly for the Senate position, with the understanding that someplace there are some compromises. I guess enough said on that point. I have mentioned, in summation, before I go into explanation about the conference report, and this is the third time, but it cannot be said too many times because I don't know how many times you are going to hear today--in fact, we ought to count how many times we are going to say we are cutting taxes, we are cutting taxes, we are cutting taxes. Would you keep track of that for me? I want to hear how many times that is used. We are not cutting anybody's tax. Maybe we ought be cutting people's taxes, but we are not. We are maintaining existing tax policy as expressed by this body in the 2001 and 2003 tax bill so 22 million Americans don't get hit by the alternative minimum tax and so that we have incentives for investment and taxes don't go up, and capital gains and dividends, without a vote of the people in 2009 and 2010; so that we keep the incentives Chairman Greenspan said are the reason we are having the economic recovery we have had for 18 quarters, creating 5.2 million jobs, 4.8 percent economic growth, 4.7 percent unemployment, et cetera. We have moved to the final step in the tax reconciliation process to which I have already referred that we dealt with three times and probably 3 days each time during November, January, and February. We have an agreement of the conferees from the House and Senate on a conference report. The basic objective of this conference was to produce a conference report that will pass both the Senate and the House and be sent to the President. To achieve that objective, we needed to focus our efforts on a true bipartisan, bicameral compromise. As I said and will probably say again today--but you have heard me say it over the last 3 months to my colleague and friend, Senator Baucus--a compromise must be bicameral. Likewise, I said to Chairman Thomas of the House and to House conferees that the compromise should be bipartisan. In the Senate, we passed a reconciliation bill for the second time but the contents of the bill for a third time, on February 2, with a bipartisan vote that included 66 Senators. So that obviously includes a vast number of Democrats. My preference was to continue working in conference to produce a bipartisan compromise that could pass in the Senate. Unfortunately, I doubt if we will get 66 votes for this conference report. But I am very hopeful that we will pick up some Democratic votes. Going into conference, everybody knew that the House bill and the Senate bill were significantly different. The centerpiece of the House bill was a 2-year extension of the 15-percent maximum tax rate on dividends and capital gains and the zero percent tax rate that will apply to taxpayers in the lowest two tax brackets. Such an extension would continue the bipartisan tax policy enacted in 2003, a policy which has been vital to our economy's recovery and continued growth. The centerpiece of the Senate bill was a 1-year extension and modification of the alternative minimum tax hold-harmless provisions. This provision would keep 15 million American families from being hit by the stealth tax. The AMT is a stealth tax because you really never know when you are going to be hit by it. Hitting Americans with such a stealth tax, the alternative minimum tax, is wrong. So, as I said before, the AMT should be abolished. It is not abolished. We did vote to abolish it in the late 1990s, but President Clinton vetoed that. So here we are, since 2001, working in a bipartisan way to do what we call hold harmless. As I said at that particular time, my highest priority was to make sure we kept our promise to make certain that no additional taxpayers are brought into the AMT system on an annual basis, and that is the purpose of the Senate's hold-harmless provision on alternative minimum tax. I will expand on that notion for a moment and be somewhat repeating myself from my extemporaneous remarks, but exactly 5 years ago today, May 11, 2001, Senator Baucus and I announced the bipartisan deal that became the basis for historic 2001 bipartisan tax relief legislation. I say historic because taxes were as high as they had ever been in the history of the country as a percentage of the gross national product. When newly elected President Bush released his budget for that first year in 2001, his tax relief plan did not contain a general hold harmless on the alternative minimum tax, and the House passed a bill that did not have hold harmless provisions for the alternative minimum tax. When Senator Baucus and I were negotiating the bipartisan plan, we agreed on that bedrock principle of hold harmless--hold harmless on AMT so no new people would get hit with it. Because they got a tax decrease over here, we should not take their taxes away over here. We agreed to make sure the AMT would not take the tax relief we were providing. This is how we came up with the concept we refer to as hold harmless. To me, it goes to a fundamental principle of transparency in government: Don't promise taxpayers relief that you know they are not going to really get. Some of my friends on this side of the aisle--meaning Republicans-- rightly complain about doubletalk on alternative minimum tax that we hear from Members on the other side, Democratic Members, the Senators from so-called blue States. You remember the blue-red map in Presidential elections of 2000 and 2004? Blue States generally go for Democratic candidates for President, red States go for Republican candidates for President. I am going to refer to the blue States which are those that generally vote Democratic. Senators from these States are generally hostile to the tax relief we have provided in 2001 and provided again in 2003, and seem to be sympathetic to tax hikes. They take this position despite the fact that their constituents in these blue States, and represented for the most part by Democratic Senators, tend to bear the highest per capita Federal tax burden. The hostility of these Members seems to grow to a white-hot intensity when anybody above, say, $100,000 in income benefits from any tax relief package. It has always been a strange disconnect to those of us on this Republican side of the aisle because that intensity--and at times what appears to be outright anger--seems to grow as the States' shade of blue grows much darker. Ironically, the per capita income, living costs, and Federal tax burdens tend to rise as the shade of the State tends to get a darker blue. The implication appears to be that constituents in these blue States should be happy to bear this high tax burden as their Senators fight against tax relief for them. In fact, Members from blue States seem to have no limit to the level of Federal taxes they believe folks in their States should bear. Taxes can never be too high, goes the rationale, as long as we keep growing the public's dependence on more Federal programs. When Members on the Republican side hear demagoguery on taxes emanating from Members from blue States on a daily basis that we shouldn't have tax cuts for high-income people, they ask, Why do these folks then seem to change their mind when we are talking about the alternative minimum tax? As you tend to get intense debate that we ought to do something about the alternative minimum tax from the same Senators who are complaining because we are giving too much tax relief to high-income people in their various States, and the AMT happens to most dramatically impact taxpayers between $100,000 and $500,000. How is this any different from other forms of tax relief? They are hot and heavy to have the AMT which helps their taxpayers in blue States, but they are not hot and heavy to have tax relief in the first instance when you vote to reduce tax rates. If I go to some extent talking about this contradiction, it is a contradiction that affects and bothers a lot of people on the Republican side of the aisle. It is an argument we do not understand. Frankly, it is a sentiment I have to overcome in my caucuses as I argue for the AMT and for tax relief; and I have had to argue this contradiction particularly with my House counterparts as we go to conference to negotiate differences between the House and Senate and try to explain to them why we need to do a hold-harmless provision on AMT. I had people from the other body who would say, What is wrong with having an alternative minimum tax hit people in blue States who are in the high bracket because their Senators are arguing we shouldn't reduce the tax rates in the first place? It is a very difficult thing to argue that sort of contradiction. I think it would help me a lot if they would get off this kick. I want to take a chart on the AMT and explain some of what we are talking about. This chart will show the alternative minimum tax hold- harmless benefits that have always been the bedrock of our tax bill since 2001 because it is something Senator Baucus and I agreed on to be our tax policy, how the hold harmless benefits taxpayers everywhere but is especially important in the blue States. We don't have a map with blue States versus red States. But the chart you are looking at, and which I need to explain, is based upon 2003 return data because it is the most up-to-date data we have. But projecting out the numbers, we think it would be entirely possible and intellectually honest to double the 2003 figures. As a rule of thumb, I am going to do that as I explain California being a blue State with 2 million taxpayers; Texas, not a blue State, a red State, but 1.2 million; Florida, a blue State, 900,000 taxpayers affected if we don't do something about the alternative minimum tax as we have it in this legislation; Illinois, a blue State, 848,000; New York, a blue State, 822,000; Pennsylvania, 694,000; Michigan, 640,000; New Jersey, 632,000; Virginia, 568,000; and Massachusetts, 490,000. I go to this length because Senators, particularly on the Democratic side of the aisle, might think about voting against this bill; that in all these States so many hundreds of thousands of people are going to be hit by the alternative minimum tax if you do not help us get this bill passed. Those are people who were not hit in 2005 but who will be hit when they file on 2006 income. The bottom line is in blue States versus red States implications shouldn't decide this issue. As you can see, there are plenty of red States affected as well as blue States. Again, that shouldn't matter. We ought to do the right thing--and the right thing would be to pass this bill and continue the hold-harmless policy Senator Baucus and I have led the Senate through in the 2001 and 2003 tax bills, and also on the Senate consideration of hold harmless in this conference report. Senator Baucus and I understood that when we took resources in the Finance Committee package to make sure that for at least 5 years this broad-based tax relief we promised will not be undermined by the alternative minimum tax. Moving on, this conference agreement also contains some loophole closures and tax-shelter-fighting provisions that raise revenue. There are two reasons to raise revenue. The most important one is when we have tax shelters that allow people to cheat on their income tax and when we have loopholes that don't make sense, they ought to be closed as a matter of fairness to all taxpayers. But they also raise some revenue. We need some revenue in this bill to offset some provisions of this bill so we didn't exceed the $70 billion reconciliation instructions of Congress for us in the Finance Committee. The House bill, however, didn't contain any revenue raisers. Although we didn't come back with all the loophole closures, especially clarification of something that needs to be done with the economic substance doctrine defined, and the House conferees very much oppose any change in that, we did make some headway on loophole closings and closing tax shelter abuse. Let me go back to economic substance. My argument for it: It raises a lot of revenue. But we have had several courts that have instructed Congress--and courts cannot make Congress do anything we don't want to do--to define economic substance. By defining it, it brings in some revenue. I don't understand why it shouldn't be defined. My feeling is there are a lot of K Street lobbyists and maybe a lot of lobbyists who aren't on K Street who benefit from the loopholes that can stretch economic substance in the Tax Code. The Senate bill and the House bill that went to conference also shared some similarities. Both bills sought to extend and extend and in some cases modify certain provisions that expire at the end of 2005-- provisions such as the research and development credit, increase small business expense, cost recovery for leasehold improvements, the savers credit, or better said, the small savers credit; the deduction for State and local sales tax in those States that is not particularly valuable to those States that don't have a State income tax; the qualified tuition deduction for college; and teachers' classroom expense deductions. Local teachers who spend money out of their own pockets to bring tools to the classroom can deduct that from their income tax. A true bicameral compromise would merge both bills in a way that takes care of these common extenders which I mentioned, and many more I did not mention. Second, it accommodates the centerpieces of each bill which, as I have explained this morning, are the AMT hold-harmless provisions on the one hand and the extension of the dividends and capital gains tax provisions as they now exist, not cutting capital gains and dividend taxes below what they are presently, and providing as much tax relief as possible by using appropriate revenue-raising measures. We ended up with cornerstones of each bill in this conference report and made progress on some of the revenue raisers, meaning loophole closings, and tax shelter abuse closings. The extenders for the most part--I guess almost entirely--will be addressed in another vehicle. They are not part of this conference report. We have compromised and agreed on that point. We also agreed to resolve key Senate priorities in the extender vehicle. Can I tell Members exactly what is going to be in that vehicle? I can't because we are still negotiating. What I can tell Members is we had good preliminary negotiations and I feel we have a solid foundation to come to a fair compromise on these issues. The final determination of those key Senate priorities will depend upon the vehicle that we will go with and other parts of the agreement when it is finalized. After laying out the basic structure of the conference agreement and the Senate's key provision, AMT hold harmless, I want to talk about the parts of the agreement the House needed. The dividend and capital gains provisions in the House bill were met by strong opposition from the other side. A principal argument against this policy made over and over again by the Democrats is that it is simply a tax cut for high-income people. I use the words ``tax cut,'' and that brings me to emphasize once again that if anybody says we are cutting taxes, we are maintaining existing tax policy for an additional number of years. Without doing that, then, we would get an automatic increase in taxes basically undercutting what Chairman Greenspan has said about the goose that laid the golden egg-- the tax policy we adopted in 2003 being responsible for the 18 quarters of economic growth which we have had. In support of their claim, Democrats cite distorted statistics that include taxpayers who don't receive dividends or capital gains. They fail to take into account the zero percent rate for lower income taxpayers in 2008 and ignore the size of the overall income tax liability that taxpayers bear. My analysis of 2005 data that I received from the Joint Committee on Taxation shows that lower income taxpayers actually have more at stake than higher income taxpayers. The Joint Committee on Taxation is not a Republican or Democratic operation. These are professional people who spend whatever time they are in public service on this committee becoming experts on the Tax Code, the economic implications of tax policy, and whether it is good or bad for the economy, whether it brings in more or less money to the Federal Treasury. These are not people wearing a Republican hat or a Democratic hat. My quoting of their statistics ought to have a great deal of credibility because they are professional people. This is 2005 data received from the Joint Committee on Taxation showing lower income taxpayers actually have more at stake than higher income taxpayers. Of course, I don't mean to speak in absolute dollar amounts because I cannot say that, but I can say in percentage advantage to various income classes that lower income taxpayers have more at stake than higher income taxpayers. It is common sense for me to say that because higher income taxpayers receive higher tax cuts measured in dollar terms, quite simply, because they pay more taxes to begin with. But the extension of the lower rates on dividends and capital gains will give lower income taxpayers greater tax savings as a percentage of their total tax liability. I will refer to a couple of charts that summarize tax savings as a percentage of total income tax liability of average gross income levels. The chart illustrates the dividend tax savings as a percentage of the total tax liability for those who benefit from the reduced rates. The savings percentages include 2008 savings, when the tax rate for lower income taxpayers drops to zero percent. That we will continue, then, for an additional period of time. That is the rate we are talking about extending. Based on my staff's analysis of the Joint Committee on Taxation data, taxpayers with adjusted gross income of less than $50,000 will save 7.6 percent of their total income tax bills and seniors will save 17.1 percent. Those making more than $200,000 will save a lot less as a percentage of their taxes paid, at 2.2 percent. Opponents of this policy want to persecute these taxpayers--I point to those earning $200,000 and over--by taking back their 2.2 percent savings. At the same time, they would punish these taxpayers, those under $50,000 at the lower income level, by taking away their 7.6 percent savings and punish the seniors in the same tax bracket by taking away their 17.1 percent savings. One cannot help but wonder, as we are all concerned about senior citizens having a decent opportunity to have a greater retirement, one that is comfortable as when they worked, with a chance to keep their tax savings at what they are right now, and not raise them or lower them anymore--but raise their taxes by 17.1 percent? This chart illustrates the relative savings from reduced capital gains taxes across the alternative minimum tax levels. Now, here again, extending the lower tax rates will give a bigger percentage reduction in their tax bill for taxpayers making less than $50,000. Opponents of this policy want to persecute these taxpayers earning $200,000 and over by taking back their 7.6 percent savings. But that also has a negative impact, then, upon lower income people, people making $50,000 and under, by taking away their 10.2 percent savings. And they would punish senior citizens in that same tax bracket of $50,000 and under, by taking away their 13.2 percent savings. Extending this tax policy, not cutting taxes but extending existing tax policy, will provide meaningful tax savings to taxpayers across the income spectrum. Lower income taxpayers will save more than higher income taxpayers when measured as a percentage of total tax liability. Extending the lower rates will allow millions of Americans to keep more of their money to spend or add to their savings through reinvestment in the economy rather than give it to those in Government to spend for them. Those on the other side describe the capital gains and the dividends provisions as applying to only a few high-income taxpayers. The reality is reflected in the following chart. Take a look at capital gains. I will not go through every State, but in the State of California, 839,616 families and individual taxpayers report capital gains. If you take a look at the dividend statistic in California, 2,053,398 families and individual taxpayers report dividends. I will not take time to go through all of these, but if you think the economy growing at 4.8 percent, as Chairman Greenspan says, is because of the tax policies of 2003, and we have the economy growing, why would you want to hit these families with a big tax increase on capital gains and dividends? Two million more families in California is only one State. Why would you want to hit them again? It seems to me in California you would want to keep the economy growing, as we want to keep the economy growing in Iowa. We know that 7.5 million families and individuals across the country with capital gains are not all millionaires, obviously. We know that 19 million families and individuals across the country with dividends are not millionaires. These numbers are based on 2003 IRS data. The Joint Tax Committee estimates for 2005 over 21 million returns will report dividends savings and 6 million of the returns will be filed by senior citizens. Nearly 12 million returns will report capital gains tax savings with almost 4 million people who are senior citizens. These families and individuals are not millionaires. Yet to listen to some on the other side, all of these people are wealthy. That false assertion is going to be repeated time and time and time again. That false assertion in itself is their justification for opposing this conference report, putting in jeopardy what Chairman Greenspan said is a reason for economic recovery, therefore putting in jeopardy economic recovery and taxing all of these people when this sunsets by taxes going up automatically, because there will not be a vote of Congress, by an increase of 33 percent. It does not make sense. To sum up, my goal for this conference was to produce a true bipartisan bicameral compromise with both bills. A compromise should accommodate the centerpiece of each bill, meaning the House bill and the Senate bill. That includes the AMT relief in the Senate bill and the dividends and capital gains relief in the House bill, take care of common extenders and maximize tax relief by using appropriate revenue- raising measures. This bill contains the cornerstone of each body's bill. It is conditioned upon an agreement between the Ways and Means and Committee and Finance to process the extenders and other issues on later vehicles. I believe the conference agreement and collateral agreement on extenders is a fair outcome of the House and Senate. To make everything relatively clear, I did not make up my mind to sign this conference report until we had 6 hours of negotiations with the House of Representatives last Friday. Even though we had an agreement on reconciliation, I wanted to make sure there was some understanding on what we were going to have in the follow-on bill, everything that could not be included in the conference report. As I said, it is somewhat under negotiation, but I am satisfied we have enough of an agreement that I can come back and say the things that the Senate, for the most part, is concerned about, that are very basic to our economic growth, will be included in a bill that will come before the Senate shortly. I yield the floor. Unanimous Consent Agreement--S. 1955

Mr. GRASSLEY. Mr. President, I will highlight a few points from this editorial that is based on Internal Revenue Service data. After the tax cuts passed by Congress and signed by President Bush, the Federal income tax burden substantially shifts as a greater burden to the wealthy. Well, that must be a shock to people on the other side of the aisle. It says that after the tax cuts passed by Congress and signed by President Bush, the Federal income tax burden substantially shifted as a greater burden to the wealthy. It cites these statistics: Between 2001 and 2004, the percentage of Federal income taxes paid by those with incomes of over $200,000 a year and above has risen from 40.5 percent to 46.5 percent. The tax share paid by millionaires has risen, with Americans with incomes over $1 million going from 16.9 percent to 17.8 percent in 1 year, from 2002 to 2003. And what have we gotten from the tax cuts in capital gains and dividends? Not only has it sparked the economy, as Chairman Greenspan gives it credit for doing, but in response to the cuts in capital gains and dividends, we haven't seen revenues from capital gains and dividends go down as part of our overall revenues. But the Wall Street Journal editorial states that capital gains receipts have increased 79 percent after the cut in capital gains and dividend tax receipts have gone up 35 percent. We are seeing all this with the bottom line being that tax revenues have been increasing at an incredible rate. The Secretary of the Treasury noted in a press conference with me that we have seen double- digit increases in tax receipts in the last 2 years--hundreds of billions of dollars of taxes coming in. And I think I remember the figures that the Secretary of the Treasury gave. But first of all, before I give those figures, let me say there may be some people listening who think if you increase tax rates, you increase revenue coming into the Federal Treasury. Then there are people who believe that if you cut tax rates, you are going to cut revenue coming into the Federal Treasury. We are in an era where we are cutting tax rates, 2001 through 2003, and the surprise is--and this is probably a shock to some people--we had $274 billion more coming into the Federal Treasury in 2005 than in 2004. And with the continuation of that policy, right now, we have $137 billion more coming into the Federal Treasury than we anticipated in a 6-month estimate at this point in this fiscal year. So it is working. That is why the title of this article that I am submitting is: ``How to Soak the Rich (the George Bush Way).'' Mr. President, there are studies that go around that say you can get marginal tax rates too high; that people that have some means are going to decide they are only going to pay so much money into the Federal Treasury. Then you know what they do? Instead of choosing productive activity to make money and pay more taxes, they decide: I am not going to pay any more. They choose leisure and do nothing, or do less. But when you reduce marginal tax rates, there is something about the wealthy: They are greedy. They are going to take advantage of the opportunity, and they are going to invest, make more money, pay more taxes and, in the process, create more jobs. That is what is happening in this economy today. My hope is that my colleagues will see past the editorials and the rhetoric that make fun of what we are trying to do because they are too stupid to read the studies which show that you can lower taxes and have more revenue come in and recognize the reality that the wealthy are paying the greater tax, which happens when you reduce taxes, you increase revenue, because they are done choosing leisure and then they have incentives for productivity. Also, I hope my colleagues realize that low-income families have seen their Federal income taxes reduced as well, as best evidenced by those who are no longer on the rolls, or additionally what Senator Baucus and I got in the 2001 tax bill: The 10-percent rate. And people over here are bad-mouthing the 2001 tax cut. Do you want to do away with the 10-percent rate? Do you want to let that sunset in 2010 because you don't have guts enough to vote for a tax increase? Do you want it to go into place automatically and have a 50-percent increase in the tax rate of low-income people? It doesn't sound to me like you are very populace when you say things such as that. The tax cuts have benefited all Americans by giving us a strong and growing economy, creating new jobs, 18 quarters of economic growth, 5.2 million jobs. We need to keep this economy going, and the way to help that along is not to increase taxes on middle-income people by voting against this bill that prevents 22 million middle-income people from being hit with the alternative minimum tax and to not increase taxes on those who invest in new or growing businesses that create new jobs. This bill is about preventing a major tax increase. A tax increase will hurt the economy. Don't take my word for it, take Chairman Greenspan's word for it. Mr. President, I yield the floor.

Mr. GRASSLEY. Mr. President, am I right that we are prepared to proceed to the text of the conference reconciliation report?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that Anne Freeman and Elizabeth Goff of the Committee on Finance be given privileges of the floor for the duration of the deliberation on H.R. 4297, the Tax Increase Prevention and Reconciliation Act of 2005.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise today to honor the life of a truly brave American who has passed away while defending our country. SSG Mark Wall died April 27, 2006, in Mosul, Iraq, where he was serving his country as part of Operation Iraqi Freedom. Staff Sergeant Wall was assigned to C Company, 2nd Battalion, 1st Infantry regiment in Fort Wainwright, AK. He was deployed to Iraq in August of 2005 and served near Mosul. I would like to extend my deepest sympathies to his parents, Arthur and Helen Wall, his two brothers and his sister. Mark Wall graduated from Alden High School in 1997 where he participated in basketball, football, track, chorus, and band. He was a Boy Scout, attaining the rank of Eagle Scout in 1997. He also participated in 4-H, garden and photography projects, and FFA. Staff Sergeant Wall joined the Iowa National Guard in February of 1997. He attended classes at Ellsworth Community College studying agricultural business and worked as an electrician's helper before joining the Active-Duty Army in May of 2000. I understand that Mark had a passion for the outdoors and took advantage of that passion while he was in Alaska, prospecting for gold, hiking, fishing, and skiing. I would like to again give my condolences to the family of SSG Mark Wall. He served his country with pride and passion, and we are all saddened by his loss. I would like my colleagues in the Senate to take a moment and remember the life of Mark Wall and remember the tremendous sacrifice he gave for us and our great country.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I would like to speak on a matter that has gotten a lot of attention lately, and for good reason. The rising cost of gasoline is hitting all Americans hard. Families, businesses, farmers, and truckers are all hurting as the cost escalates out of control. With gas prices now hovering around $3 a gallon, everyone in Congress is looking for a solution or for someone to blame. Unfortunately, some have chosen to pinpoint ethanol as the culprit. However, blaming ethanol for the costs at the pump ignores the fact that crude is at near record highs, and our country is still suffering from a strained domestic refining industry. Around the country, gasoline refiners are making a voluntary decision to remove MTBE, a gasoline additive, from the market. In its place, they are using ethanol. So, ethanol is currently being blended for the first time in many parts of the East Coast and in Texas. Because of the new demand for ethanol, some of my colleagues have begun to argue that there is a shortage and that it is responsible for the rising cost of gasoline. They look to increased imports of ethanol, and the lifting of the import tariff, as the solution. Let me be clear: there is no shortage of ethanol. And, ethanol is a tiny fraction of cost of gasoline. You don't have to take my word for it. Guy Caruso, Administrator of the Energy Information Administration of the Department of Energy, recently stated that the 10 percent blend of ethanol is affecting prices by ``just a few pennies.'' Ethanol's role in gasoline prices is a tiny fraction of the overall increase. I would like to address the claim that there is a shortage of ethanol. According to the Energy Information Administration, 130,000 barrels per day of ethanol are needed to replace MTBE. Last month, 302,000 barrels of ethanol were produced each day. That seems to me like it is enough to meet the demand. There is also 25 days of ethanol supply in storage. Have there been some transportation issues surrounding the transition from MTBE to ethanol? The answer is yes, and they're being dealt with. Sufficient supplies of ethanol are where they need to be. There is no shortage of ethanol. If there is no shortage, what good does it do to eliminate the import tariff on imported ethanol? None. Domestic supplies are sufficient. Lifting the tariff won't have an impact on gas prices because the only other major producer of ethanol--Brazil--simply doesn't have enough ethanol to export at significant levels at this time. I know this issue well. I was in Brazil just six weeks ago, and one thing I heard over and over was that Brazil is experiencing an ethanol shortage. Shortages of ethanol in Brazil are being driven by strong demand for ethanol in that country. Looking at the longer term, USDA analysts in Brazil are reporting that Brazil is anticipating even higher demand for ethanol later this year and in 2007. Given low supplies in Brazil, there has even been talk of importing ethanol into Brazil. I would like to point out something else. Brazil and other countries can already ship duty-free ethanol to the United States. They don't have to pay the U.S. tariff. Under the Caribbean Basin Initiative, Brazilian ethanol that is merely dehydrated in a Caribbean country can enter the U.S. market duty-free up to 7 percent of the U.S. ethanol market. That's generous access, but Brazil has never even come close to hitting the 7 percent cap. And it isn't that the Caribbean countries don't have the capacity to dehydrate more Brazilian ethanol. They do. As we're already providing duty-free access for Brazilian ethanol shipped through Caribbean countries, and as Brazil isn't taking full advantage of this duty-free treatment, I don't know why we should bend over backwards to provide even more duty-free access for Brazilian ethanol. I especially don't know why we should do this given Brazil's stance in the Doha Round negotiations of the World Trade Organization. Brazil is the leader of the G-20 negotiating group in the WTO negotiations, a group that is resisting our efforts to obtain improved market access for U.S. products around the world. In addition, the Brazilian government intervenes extensively in the price and supply of ethanol in that country. But the U.S. tariff on ethanol operates as an offset to an excise tax credit that applies to both domestically produced and imported ethanol. So by lifting the tariff, we would in effect be giving the benefits of a U.S. tax credit to subsidized Brazilian ethanol. Providing yet more duty-free treatment for Brazilian ethanol would send the wrong signal to those Americans who are devoting their careers to help America become more energy independent. The U.S. ethanol industry is working every day to lessen our dependence on foreign oil. This is a virtue that President Bush has touted again and again. Just last week the President restated his goal to replace oil from around the world by expanding the use of U.S. ethanol. The President stated: The federal government has got a role to play to encourage new industries that will help this nation diversify away from oil. And so we're strongly committed to corn-based ethanol produced in America. The President clearly understands the need to assist our domestic ethanol industry so that they can get a foothold and succeed. Why would the United States want to send a signal that we're backing away from our efforts to seek energy independence by promoting renewable fuels in the United States? We're already dependent on foreign oil. Surely, President Bush doesn't intend for our nation to go down the path of eventually becoming dependent on foreign ethanol also. Providing yet more duty- free treatment would be a step in the wrong direction. I don't think our country should take any action that would harm the farmers and investors in rural America that have worked so hard to develop this industry. The efforts to reduce our dependence on foreign oil have only just begun. Providing more duty-free treatment for ethanol won't increase supplies or reduce prices at the pump. It's a bad solution in search of a problem. It's a bad idea for our energy independence and our national security.

Mr. GRASSLEY

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

Mr. GRASSLEY. Mr. President, I ask unanimous consent to speak in morning business for 20 minutes, and I probably will not speak that long.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent to call up amendment No. 3732.

Mr. GRASSLEY. Mr. President, the supplemental appropriations bill includes $27 billion for disaster-related expenses. But, no money, other than a nominal amount for the Inspector General, was provided for the Social Security Administration. This amendment would correct this omission. This amendment would provide $38 million to the Social Security Administration, SSA, to reimburse costs incurred as a result of Hurricane Katrina and other hurricanes of the 2005 season. The Social Security Administration performed a remarkable job in response to these recent disasters. They assisted more than 528,000 persons in FEMA Disaster Recovery Centers and shelters and helped many others who came to SSA field offices. Altogether these activities cost the agency $38 million: $6 million to acquire and outfit temporary space and renovate offices damaged by the storm, including costs for computers, furniture and supplies; $12 million for processing immediate payments, changing addresses, confirming Social Security numbers, and taking new claims that resulted from the hurricanes; $7 million to pay for the travel and per diem expenses for employees; $12 million for costs related to unprocessed workloads--claims, hearings, etc.--due to the storms' disruptions; $1 million for salaries of those SSA workers who volunteered to work for FEMA in the affected areas. SSA cannot easily absorb this $38 million because its budget is already $300 million below the President's request for fiscal year 2006. SSA is already experiencing reductions and delays in service. This $38 million would allow an increase in overtime hours to begin to address these backlogs. Finally, the cost of this amendment is offset by a $38 million reduction in the FEMA disaster relief fund. This reduction in FEMA would come from the $2.4 billion that is designated for ``other needs.'' This designation refers to money that has been made available for unspecified, potential future activities. It would not affect any specific project or activity in this bill. I urge my colleagues to support this amendment.

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

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, sadly, every year over 26,000 people die in this country from the effects of drug abuse. This is a staggering and sobering statistic. Still, millions more have been devastated by this tragic loss of life and promise. Ordinary people like you and I, are left to cope with the loss of a loved one senselessly taken at the hands of drugs. Over the years, families and friends have individually found ways to remember and honor their memory. But to date, there has been no national event to bring people together to call attention to the nature and extent of the drug problem in this country. Now, eight families who have personally suffered the loss of a loved one because of drugs have joined together to plan a remembrance. On June 8, 2006, the first annual Vigil for Lost Promise: Remembering Those Who Have Died From Drugs will be held in Washington, DC. This national event finally gives these and other families the opportunity to remember and honor the memory of those who have died from drugs. This event will illuminate for everyone just how pervasive and dangerous this problem is in our society. Others sharing similar stories of loss will be joined by leaders in the drug prevention, treatment and education fields, community leaders, clergy from all faith, educators, legislators and concerned citizens as well as the Drug Enforcement Administration, the National Institute on Drug Abuse and the Partnership for a Drug Free America to raise public awareness about the terrible toll that drugs take on families, friends and society . Today, I am pleased to submit along with my colleagues, Senator Biden and Senator Talent, a resolution to support the goals of the Vigil for Lost Promise and to designate June 8, 2006, as the day of a National Vigil for Lost Promise. It is important that these and other families who have lost of a loved one to drugs know that they are not alone. Many wonderful people have had to endure the same nightmare and this event lets everyone know that there is hope and there is help. I encourage all my colleagues to visit www.nationalparentvigil.com to learn more about this very important event. I also want to urge my colleagues to join us in passing this resolution to demonstrate our commitment to raising awareness about drugs and to lend our support to those who have lost a loved one to drugs.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am here today to speak about a brave and heroic American who gave the ultimate sacrifice in the name of freedom. SGT Daniel L. Sesker died on April 6, 2006 near Bayji, Iraq in support of Operation Iraqi Freedom. Sergeant Sesker was assigned to C Troop, 1st Squadron, 113th Calvary Regiment, 34th Infantry Division, Army National Guard based out of Le Mars, IA. I extend my deepest sympathies to his mother and stepfather, Mysty and Marvin Stumbo, his father, Dennis Sesker, his brother and sister, and his fiancee Angie. Daniel Sesker was born in Boone, IA, and graduated from Ogden High School in 2001, where he participated in wrestling. He studied criminal law at Iowa Central Community College before enlisting in the Army National Guard. He served as part of Kosovo Force in Operation Joint Garden and had served a previous tour in Iraq. Between his two tours, Daniel worked as a counselor at the Woodward Academy and as a part-time police officer in Gowrie, IA. Sergeant Sesker received several decorations for his exemplary service, including the Bronze Star, Purple Heart, Army Commendation Medal, National Defense Medal, Iraq Campaign Medal, and Combat Action Badge. Sergeant Sesker is remembered as having a great sense of humor. His love for his family and friends as well as his love for life will be missed by all who knew him. He was the kind of person who could light up a room with his personality and positive attitude. My thoughts and prayers are with his family and friends. We all owe Sergeant Sesker our eternal gratitude for his service and sacrifice.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise to express concern about the consideration of comprehensive immigration reform legislation. As a member of the Judiciary Committee, I have been involved in the democratic process of reviewing, amending, and voting on this year's immigration bill. I was one of six Republicans who opposed the legislation in the committee on March 27. When the bill was brought to the floor of the U.S. Senate, a select group of Members forged a ``compromise'' that drastically changed title VI of the bill that deals with the 11 million illegal aliens currently in the United States. The Senate had very little time to review the bill. Moreover, some Members opposed any amendment that would change the Hagel-Martinez compromise. I had numerous amendments that would have improved the bill. However, the other side of the aisle refused to let our deliberative body do its job. As a representative of the people of Iowa, I believe amendments should be debated. Therefore, I have asked the majority leader to make me aware of any unanimous consent agreements that both sides aim to enter into before unanimous consent is agreed to. I ask unanimous consent that my letter be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I would like to speak for 20 minutes on immigration. Immersed in the routines of daily life, many people don't make an extra effort to track legislation as it winds through Congress. It usually takes an issue that hits close to home before it motivates people to take notice. This issue has hit home to many. We have dived into a very passionate and emotional debate in the U. S. Senate. Our country was founded by immigrants, and continues to be a Nation of immigrants. We have benefited from the achievements of many new residents. And, today, people in foreign lands want to be a part of this great country. Generation after generation tirelessly pursues the American Dream. We should feel privileged that people love our country and want to become Americans. We are a wonderful nation, and it is evident by the number of people who want to come here. But it is hard to empathize with those who thumb their noses at the rule of law. Estimates say more than 11 million undocumented immigrants already live in the country. They deliberately bypassed the proper channels and broke our laws to enter the country. We are a nation of laws. Our country was founded on the rule of law. And now our welcome mat is being trampled on. I am a member of the Judiciary Committee, and I was a part of the 5- week markup session. I voted against the committee bill. But I think we made great strides on the border security and interior enforcement titles. I supported amendments to provide more authority and resources to our State and local law enforcement. One of my amendments increased the number of ICE agents we have in each State. I supported amendments dealing with expedited removal and increased detention space. We enhanced border security and increased our manpower to patrol the border. We reformed the L visa program and the Temporary Protected Status program. We addressed the problem with countries which don't take back their illegal citizens by denying them visas. We did a lot of positive things. But these reforms will mean nothing if an amnesty in sheep's clothing goes forward. Some say that our enforcement-only approach in 1996 didn't work. Let me remind my colleagues that the 1996 bill contained measures that still have not been implemented. The best example is the entry-exit system. It is not fully operational because Congress and our bureaucrats keep delaying its implementation. The compromise before us may contain enforcement measures, but they mean nothing if Congress and the administration don't make the commitment to follow through. And our strong enforcement measures are worthless if we pardon every illegal alien. I was here in 1986. I voted for the amnesty during the Reagan years. I know now that it was a big mistake. I have been here long enough to know the consequences of rewarding illegal behavior. Let me take a moment to raise some concerns about the compromise before us. The compromise provides for a three-tier system. It puts illegal aliens into three categories. Those who have been here for 5 years or more automatically get a glide path to citizenship. Those who have been here for 2 to 5 years have to go home--at some point in the future--and re-enter through a legal channel. Those who have been here for less than 24 months are illegal aliens, and we assume that they will return to their home country. Some have estimated that there are 7.7 to 8.5 million illegal aliens who have been here for more than 5 years. That is more than 75 percent of the illegal population. But that is not all. The compromise says that the family of the illegal alien--their spouses and children--can also apply. It doesn't say that their family has to be in this country. In fact, those back in their home countries are now getting a free pass to cross the border. They, too, are on their way to a citizenship. Those in the second tier who are required to go home and re-enter through a legal channel won't go home. Why would they if their neighbors are getting citizenship? They will hold out for their reward. They will wait for Congress to pass another amnesty bill. We are sending a bad signal. We are saying some can get amnesty and some cannot. I know my colleagues say this isn't amnesty, but it is. I know some say that the alien has to pay their taxes, pay a fine, have worked for 3 years, and learn English. They say that the aliens are earning their citizenship. I respectfully disagree. Yes, an alien has to pay $2,000 to come out of the shadows. But individuals under 18 don't have to pay. And the fine probably won't cover the costs of implementing the program, nor will it cover the costs of a background check. I have said it before, and I repeat is now: $2,000 is chump change. These same people probably paid a smuggler $15,000 to get them across the border. We are selling citizenship. The proponents say that illegal aliens have to pay their taxes. Don't let them fool you. Sure, they have to pay all outstanding Federal and Sate taxes before their status is adjusted, but they only have to pay the taxes they owe for the 3 years that they are required to work. What about the other years? They have been here for at least 5. What about those under the age of 20 who are exempt from having to work? What if they work? Don't they have to pay their taxes? Another point about this provision on taxes is that it is going to be a burden on the IRS. As chairman of the Finance Committee, which oversees the IRS, I can tell you that the taxman is going to have a difficult time verifying whether an individual owes any taxes. It will be impossible for the IRS to truly enforce this because they cannot audit every single person in this country. We need to place the burden on the alien, not the Federal Government. We need to require them to come forward and show us their tax returns. When an alien applies for legal status, they have to prove that they have been working for 3 out of the last 5 years. If an illegal alien can't get their IRS records or an employer to attest to their working, then they can get a friend to attest. They can have anybody on the street sign a sworn affidavit to attest for them. That is fraud and corruption waiting to happen. Do you think the Federal Government is going to have time to check out their sources and prove their claims? The proponents of amnesty also say that the alien is not eligible if they do not meet certain health standards. It does not say that one has to undergo a medical exam. In fact, those who fall under the second tier, who have been here for 2 to 5 years, may be required to take a medical exam. My home State of Iowa is currently dealing with a mumps epidemic. Some speculate that the disease was brought over by a foreign student. That is the point of a medical exam. This compromise would place heavier burdens on our public health departments because we won't know what types of diseases these individuals have. They should be required to undergo a medical exam at their own expense. We need to require them upfront in order to prevent outbreaks of contagious diseases. The English requirement is weak. It is weaker than current naturalization requirements. Under current law, an immigrant has to demonstrate an understanding of the English language and a knowledge of the fundamentals of our history and government. Under this compromise, an alien only has to prove that they are pursuing a course of study in English, history, and U.S. Government. Anybody could make that claim. The compromise would require the Department of Homeland Security to do a background check on the illegal aliens in the United States. In fact, this compromise has placed a time limit on our Federal agents. They have 90 days to complete them. That is unrealistic. It is possible. It is a huge burden. And it is a huge expense. Homeland Security will surely try to hurry with these background checks. They will be pressured by Congress to rush them. They will rubberstamp applications despite possible gang participation, criminal activity, terrorist ties, and other violations of our laws. This is a national security concern. The compromise before us prohibits the Government from using the information in an application against an alien. So if an illegal alien writes in their application that they voted, or that they smuggled in drugs, or that they are related to Osama bin Laden, then our Government cannot use that information for critical investigations. In fact, the compromise would fine bureaucrats $10,000 if they use the information in an application for purposes other than adjudication. But wait--there is more. If an alien has been ordered removed, and is sitting in jail ready to be deported, the alien still gets the chance to apply for this amnesty. The thousands of illegal aliens with orders to leave the country can apply. Their country won't take them back, so our country will give them citizenship. That doesn't make sense. Everything that I have spoken about so far is based on the amnesty program for those who are currently in the United States. I would like to express two concerns about the future flow provisions. When we say future flow we mean those who aren't here but who can apply for legal entry through a ``temporary'' guestworker program. First, on day 1 of their entry into the U.S., an employer can sponsor the alien for a green card. If they are not sponsored within 4 years, then the alien can petition for him or herself. Yes, this temporary program for temporary workers becomes a citizenship program for anybody and everybody. Second, there is a numerical limit of 400,000. It is intellectually dishonest to say that this is the ceiling. The cap can be increased automatically without congressional approval if the limit is reached. It will never decrease; it can only increase. This compromise will have enormous economic and employment implications for the Nation. If we enact it, we will sell out the middle class in America. We would also push aside the lower, uneducated class of American citizens. Foreign workers won't have to take low-skilled jobs anymore. They won't be required to do the jobs that Americans supposedly won't do. Their spouses and children will permanently take jobs away. These aren't temporary workers anymore. What happens when this country goes into recession? Americans will be banging on our door, asking why we did this to them. We are allowing businesses to hire people at lower wages because they are illegal, rather than hire Americans at somewhat higher wages. Maybe this country needs to focus more on training and educating our own people, and less on how businesses can make more money by hiring illegals. By opening the floodgates for these kinds of low-skilled immigrants, we are taking away opportunities for our own. Businesses have no problems paying under the table or paying lower wages. They also don't have problems paying CEOs and executives astronomical salaries. There is something wrong with this equation. I have an amendment to create an Employer Verification System. This amendment, worked out between the Finance and Judiciary Committees, will require employers to check the eligibility of their workers. It will give businesses the tools they need to be compliant with the law. Right now, the system is voluntary, but it is time to make this system a staple in the workplace. We will increase worksite enforcement and penalties, safeguards and privacy protections. But this system needs to be in place if we are going to have a guest worker program. Employers are put on notice--we will hold them accountable, and we will penalize them if they violate the law. We are taking a huge step here in shaping the future of our country. What we do here with immigration will impact every aspect of our daily lives. An amnesty program for millions of people will increase the fiscal burden on our country. It will further strain our health care, education, and infrastructure systems. If these folks are not paying their taxes, then American citizens will have to pick up the tab. Americans will have to build bigger schools, and pay for the huge medical expenses of these people. So I ask my colleagues to think twice. Read the fine print. Ask yourself this: What about fairness? What about those who waited their turn in line? What about those who abide by the rules? I know many of my colleagues will support the compromise that was agreed to in the last day. I know they are saying to themselves: This is better than nothing. We had to do something. I ask my colleagues this: Do you think voting for this without the process of amending and debating is what we were elected to do? Voting for this bill because it is supposedly the best thing out there isn't a good enough reason. As a U.S. Senator, I took an oath of office to honor the Constitution. I bear a fundamental allegiance to uphold the rule of law. And that is why I cannot in good conscience support granting legal status to illegal immigrants who have violated our laws. Lawbreakers should not be rewarded. The compromise sends the wrong message to millions of people around the world. If you vote for this compromise, you obviously don't respect the rule of law. With a wink and a nod, Uncle Sam would turn America's historic welcome mat into a doormat trampled upon by millions and millions of illegal immigrants.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, as chairman of the Senate Committee on Finance, I chair a committee that has jurisdiction over international trade. We find ourselves being both a participant and an observer of Doha Round negotiations under the World Trade Organization. Those negotiations are in a very determinative state; success will be made, I believe, during the month of April or the Doha Round, for all practical purposes, would end--not in the minds of the WTO or in the minds of the 148 nations other than the United States but as a practical matter. If things are not done by the end of 2006 and the President's authority for trade promotion running out in July of 2007, there will not be time for us to get something done before trade promotion authority runs out. I would like to have trade promotion authority for the President continued beyond July 2007. I would try to promote that, but we saw very close votes on CAFTA and other trade agreements; there is a protectionist trend in the Congress--maybe not in the Nation as a whole but at least in Congress--that might keep us from getting trade promotion authority reauthorized. I comment in these few minutes on where we are on the Doha Round and what I expect to happen and leave the message, if it does not happen very soon, this round could be dead. As we enter the final months of the WTO Doha negotiations, I am very concerned the bright promise of a world far less burdened with often crippling, market-distorting trade barriers may be slipping from our grasp. In particular, I am very troubled by the fact that nearly 5 years after WTO members adopted the Doha ministerial declaration that launched this round of global trade talks, some of our WTO negotiating partners still seem willing to forgo this very historic opportunity that Doha represents to open highly protected agricultural markets. We now have less than 4 weeks to go to meet the WTO's new April 30 deadline to reach agreement on what is referred to as modalities or, another way to put it, a roadmap for how we will achieve our specific market- opening objectives in the agricultural negotiations. This deadline, similar to most of the others, also appears to be elusive. The Doha Round is a historic opportunity because global trade rounds are relatively rare events. We have had only nine of them since the creation of the global trading regime back in 1947, what we then called the General Agreement on Tariffs and Trade, or GATT. Agriculture, which was ignored for almost the first 40 years of GATT, was only first addressed at all during the last round, which was the eighth round, which was called the Uruguay Round because it started in Montevideo and finished and passed by Congress in 1993. So here we are, 13 years later, trying to make some progress--but not making very much progress--toward what we would hope would be a 10th successful round since the regime started in 1947. Because many trade- distorting barriers were untouched or minimally reduced at the end of the Uruguay Round in 1993, much was left to be done, particularly in agriculture, but we are negotiating manufacturing, we are negotiating services, so a lot needs to be done. In light of the lack of progress in the World Trade Organization, I briefly address a few points. First, as chairman of this Senate Committee on Finance, I reaffirm, as strongly as I can, the basic elements of the Trade Act of 2002, especially the legislation crafted by this committee that renewed the President's trade promotion authority in 2002, after it had lapsed for about 7 years. The underlying premise of our trade promotion authority legislation, which gives Congress enhanced oversight authority over trade negotiations conducted under that act, is that the United States will pursue a very ambitious, very comprehensive trade negotiation, particularly in agriculture. This was the cornerstone of the Doha Round--ambitious, comprehensive negotiations and nothing less. The reason I fought so hard for trade promotion authority is simple. The benefits from ending decades of trade-distorting practices in the global agricultural trade are overwhelming. The U.S. Department of Agriculture has estimated getting rid of market-disrupting agricultural protection could increase the value of U.S. agricultural exports by at least 19 percent. In addition, the Department of Agriculture study also concludes that agricultural liberalization would increase global economic welfare by $56 billion each year. I know well how vital trade is to farming families anyplace in America, but I am particularly knowledgeable about my State of Iowa because I happen to be a family farmer, farming jointly with my son Robin. Our farmers and agricultural producers sold over $3.6 billion in agricultural exports in overseas markets last year. Although importers and consumers from all over the world seek out Iowa's agricultural products, this is also true of American agriculture generally. Moreover, more than $3 trillion of economic activity in our $12 trillion economy is derived from trade. Think of that: More than 25 percent of our economy is based upon international trade. That is why an ambitious, comprehensive result in the Doha negotiations is the only kind of result that makes sense, both for my State of Iowa and the United States. President Bush and Ambassador Portman have done a very good job--in fact, a remarkable job, in my view,--of pursuing an ambitious, comprehensive agricultural deal, especially in the difficult period prior to and during the Hong Kong Ministerial Conference last December. Nevertheless, some World Trade Organization members, principally the European Union, now apparently want to stop short of that ambitious, comprehensive, result-seeking agreement that was previously reached in opening Doha Round, and they particularly want to shortchange the negotiations in the area of agricultural market access. That is why, when pressed by the United States and other World Trade Organization members, the European Union appears to be changing the subject away from ambitious market access to secondary issues such as food aid, on which we are now having protracted discussions. I am not even sure our own negotiators should be participating in something as fringe as food aid as compared to the massive discussions and decisions that need to be made in trade-distorting export subsidies by the European Union or by, in the case of the United States, production-related subsidies that we do for American agriculture, not subsidies for agriculture generally but those which are trade distorted. We find our American negotiators getting all nervous about food aid as somehow being a major item. No. What it is is an effort on the part of the European Union to detract attention from the really big export subsidies and production-oriented subsidies. Perhaps that is because of the intense political pressure European trade and agricultural officials think they face at home. It seems to me that the European Trade Minister wants to open up and do really good trade negotiations. It seems like there is a hangup by the European Agricultural Minister. And it seems to be really a hangup by French farmers. According to one account by former European Commission officials, European farm groups described one compromise agricultural agreement as a death warrant for European farmers. However, that was in 1992, connected with the Uruguay Round negotiations, and the agricultural agreement that drew so much protest in Europe was back then, not today, when that description was made. Ultimately, of course, Europe accepted the Uruguay agreement in 1993. Now the European Union is right back where they were 13 years ago, citing that same agreement as a model for the type of agreement they would like to see today, at least in terms of linear tariff reductions. So we have seen this type of reaction from Europe before. Today, once again, the European Union thinks that ambitious market access too politically painful to achieve or to even thoroughly negotiate, but they got over that hurdle in Uruguay. Why can't they get over that hurdle in Doha? So we are back at the European tactic. It appears that what they are really trying to do is a minimal deal somehow being seen as a good deal. Apparently, they think it is a good result if they can get something that is marginally better than the status quo, end negotiations, declare victory, and go home. Other WTO Members such as Brazil appear reluctant to agree to an ambitious outcome in agricultural market access because they may believe that they can achieve their objectives through other means, such as litigation. You know about the cotton case. Brazil recently was successful in that case. So it may give them false hopes that they can achieve, through legal briefs in Geneva, what they do not appear to win at the negotiating table of the Doha Round. I would like to say a word about both of those situations. First, a minimal deal in the Doha agricultural negotiations is not something that can be considered a victory in any sense of the term, even in a political sense. What do I mean by a minimal deal? A deal that goes just beyond the 36-percent average tariff reduction of the Uruguay Round, a deal that leaves tariff peaks in place, or a deal that undermines market access by long lists of special exemptions. I will not try, as chairman of the Finance Committee, to spin some minimalist deal into some sort of political victory. In fact, I will not even allow it to be brought up for consideration in the Finance Committee or, if I was overruled by my own committee, I would fight it on the floor, if it ever got that far. So let me make that as clear as I can. A bad deal for agriculture in Doha negotiations is worse than no deal. That was my position at the start of these negotiations, and that is my position now. All those people spending all their time negotiating on food aid when they ought to be negotiating on export subsidies, when they ought to be negotiating on subsidies encouraging overproduction, that is not going to take my eye off the ball. A minimalist outcome in the Doha negotiations, after years of effort and high-level political engagement, would send a terrible message that real reform in agriculture is too hard to achieve and may set us back for decades. It would make meaningless a key element of the agricultural component of the Doha Ministerial Declaration where WTO member countries committed themselves to ``comprehensive negotiations aimed at substantial improvement in market access.'' That is what U.S. agriculture demands for giving up our subsidies connected to production. Farmers want their income from the marketplace, not from the Federal Treasury. But we cannot do that without market access, where there are 62 percent average tariffs around the world on agriculture compared to our 12 percent. If that happened, it would reward countries such as the European Union that have big farm spending, highly inefficient production----

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

Mr. GRASSLEY. Mr. President, I ask unanimous consent to speak for 15 minutes as in morning business.

Mr. GRASSLEY. I ask unanimous consent for 4 more minutes.

Mr. GRASSLEY. If we went this route, it would reward countries such as the European Union that have big farm spending, highly inefficient production, and use nontariff barriers to thwart trade. And even though this round is known as the Doha Development Round because it is supposed to help poor countries, a bad deal that keeps high trade barriers in place would tell developing countries that they can forget about seeing fair opportunity to export their products. As for World Trade Organization members that see litigation in dispute settlement--as Brazil did in the cotton case--as a practical alternative to negotiations, I would remind those who are tempted to adopt this position that litigation, even under the new, improved WTO rules, is unpredictable, costly, time-consuming, and not the way to resolve unfair trade. Moreover, litigation is not always the most effective way to open markets and eliminate trade barriers, especially over the long haul. Historically, we have also depended on negotiations and the everyday management of trade and commercial relations as much better ways to achieve and maintain open markets. Make no mistake, we can and will defend our interests through dispute settlement when it is necessary to do so, and we have done so as the United States in the World Trade Organization quite successfully. But substituting litigation for negotiations or for management of our commercial relations is neither practical nor desirable, nor is it the way to bolster confidence in the World Trade Organization as an effective negotiating forum. I began by saying that this round of trade negotiations is a historic opportunity. It can be historic in the sense that we achieve a result that truly benefits the global community by increasing global prosperity, and it can be historic in the sense that we miss a great opportunity to promote prosperity and open markets throughout the world. Unfortunately, we have made enormous mistakes before when we missed important opportunities to fight for comprehensive global trade liberalization. In the early years of the General Agreement on Tariffs and Trade, going as far back as 1947, it was the developed nations, particularly the United States, that created exceptions for agriculture, that exempted it from liberalization under the GATT regime. It has taken us decades to shift gears to try to bring agriculture under the discipline of global trade rules. That is why it is so important for us to continue to make real progress in this round of global trade talks. Achieving real, meaningful results in these talks is something I am as strongly committed to now as ever before. It is also why I will continue to oppose any outcome in the WTO that, in my judgment, fails to accomplish these goals, even if it is a minimalist approach. Don't expect me to bring such an agreement before the Senate as chairman of the Finance Committee. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, thank you. And I thank Senator Wyden for his leadership and the time. Everything this body has heard the Senator from Alabama say about what is wrong with this piece of legislation is entirely inaccurate. Everything he said we need to do to study bills--to hold them up until we get a feel about everything in a bill before enactment by this body--this amendment, which brings transparency to holds, does not in any way prevent any of that from happening. All it simply says is, if you are going to put a hold on legislation, you ought to have guts enough, not be a sissy that the public might find out who you are, why you are holding something up. State for the entire country why you think this person or this bill ought to be held up in the Senate. You can hold it up for a year. You can hold it up for 1 day. I have been putting things in the Record of why I put holds on bills, just as this amendment requires, for several years. And I can assure you, not one of my colleagues has beaten me up because they knew who I was. Not one of my colleagues has bloodied my nose. Not one of my colleagues has given me a black eye. Not one of my colleagues has done anything. It does not hurt. You can be a Senator. You can be out in the open. You can be transparent and still do the job you need to do. But after all, this is the Senate. The public's business ought to be public. That is what this legislation is all about. But it also has something to do with the practical workings of the Senate. If somebody does not like a bill you propose, and they want to slow it up, you can sit down and talk to them. Now you do not even know who they are, in many instances. If you are going to do business, you have to know who to talk to. Being a part of a collegial body, as we are, talking to each other is how you get things done and move the ball along. It is about open government. It is about reducing cynicism and distrust of public officials. It is about public accountability. It is about building public confidence. It is about making sure that as to what is being done here, the public knows who is doing it and why they are doing it. I do not see why there can be any opposition to this amendment. A hold is a very powerful tool and must be used with transparency. I believe in the principle of open government. Lack of transparency in the public policy process leads to cynicism and distrust of public officials. There is no good reason why a Senator should be able to singlehandedly block the Senate's business without any public accountability. The use of secret holds damages public confidence in the institution of the Senate. Our amendment would establish a standing order of the Senate requiring Members to publicly disclose when they place a hold on a bill or nominee. For several years now, I have made it my practice to insert a notice in the Congressional Record whenever I place a hold. Under our proposal, disclosing holds will be as simple as filling out a cosponsor sheet and Senators will have 3 days to do it. This proposal was drafted with the help of Senators Lott and Byrd, who as former majority leaders know how this body operates and how disruptive secret holds can be to the Senate's business. Senator Stevens has expressed his concerns about the use of secret holds. It says a lot that the longest-serving Members of this body oppose the use of secret holds and see them as a real problem. If Senators support the goal of the underlying bill to increase legislative transparency and accountability, then they should support this amendment.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, it is beyond my understanding when the argument is made that this program is too confusing because there are too many plans, and then you add yet another plan. That is what this amendment does. They say there is too much confusion and there are too many plans, and they want to add another plan. This amendment is going to destroy the competitive incentives and replace them with a Government-controlled regime. It puts the Government into the full-time business of setting drug prices and determining what drugs are covered. Strong competition has led to lower costs. The average premium is $25. That is 20 percent less than we expected. This amendment would result in higher premiums. This amendment would also have a drug safety issue with it. This amendment would force plans to keep unsafe drugs in the formulary because what is on at the first of the year has to stay on through the whole year. So if Vioxx was on in January 2004 and was found unsafe in September 2004, it would still have to be on the formulary for another 3 months. This is a Government-run plan. It increases costs and has price controls and unsafe drugs. This is just not a good amendment.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I urge my colleagues to vote in favor of final passage. Raising the debt limit is necessary to preserve the full faith and credit of the U.S. Government. We cannot as a Congress pass spending bills and tax bills and then refuse to pay our bills. Refusing to raise the debt limit is like refusing to pay your credit card bill--after you've used your credit card. The time to control the deficits and debt is when we are voting on the spending bills and the tax bills that create it. Raising the debt limit is about meeting the obligations we have already incurred. We must meet our obligations. Vote for this bill.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today, I would like to take a few minutes to speak about the tax gap. Before I get started, I first want to thank my colleagues, the chairman and ranking member of the Budget Committee, for their interest in the tax gap. As chairman of the Finance Committee, I too have a great interest in this topic. It is my intention to close the tax gap, and I look forward to working with Senator Gregg and Senator Conrad to achieve this important goal. The tax gap, as we all know, is the difference between the amount of tax owed by taxpayers from legal activities and the amount voluntarily paid on time. Today, specifically, I want to clarify the facts and the fiction regarding the possible solutions to this $350 billion problem. Under my chairmanship, the Finance Committee has held at least eight hearings to address the tax gap: No. 1, Oversight of the Internal Revenue Service, ``Taxpayer Beware: Schemes, Scams, and Cons,'' April 5, 2001; No. 2, Tax Code Complexity: New Hope for Fresh Solutions, April 26, 2001; No. 3, Taxpayer Alert: Choosing a Paid Preparer and the Pitfalls of Charitable Car Donation, April 1, 2003; No. 4, Tax Shelters: Who's Buying, Who's Selling, and What's the Government Doing About It?, October 21, 2003; No. 5, Bridging the Tax Gap, July 21, 2004; No. 6, Charities and Charitable Giving: Proposals for Reform, April 5, 2005; No. 7, The $350 Billion Question: How to Solve the Tax Gap, April 14, 2005; and No. 8, Social Security: Achieving Sustainable Solvency, May 25, 2005. During these hearings, we learned a lot about the tax gap, including several good ideas for closing it. We heard from the Joint Committee on Taxation. We heard from the Treasury Department, including IRS and TIGTA. We heard from the Comptroller General and GAO. We heard from the Justice Department. We heard from the Taxpayer Advocate. We heard from CBO. We heard from the States. We heard from the private sector, both nonprofit and for-profit. And, of course, we heard from the American taxpayer. From the testimony of all these hearings, and the expertise of all these witnesses, we identified several truths about the tax gap: No. 1, the tax gap is a huge problem for the tax system; No. 2, it is easy to discuss in the abstract; No. 3, there is no easy solution to the problem; No. 4, there is no one silver bullet; the tax gap can only be solved through many small steps; No. 5, enforcement is important, but any real solution to this problem will require legislative changes, the most important being Tax Code simplification; No. 6, closing the tax gap should not place an undue burden on honest taxpayers; and No. 7, taking concrete steps to close the tax gap will require a lot of political will and bipartisan cooperation. In the spirit of bipartisan cooperation, I look forward to working with Senator Conrad and others to solve the tax gap problem. Before we can reach a bipartisan solution, however, we first need to get on the same page regarding the facts and fiction of this issue. A common misperception by some of my friends on the other side of the aisle is that the only thing we need to do to close the tax gap is give the IRS more money for enforcement. This myth asserts that if the IRS gets more funding for enforcement, both the $350 billion tax gap and the budget deficit will magically disappear. This myth is even being used as an offset for new spending. The Finance Committee's tax gap hearings have emphasized the importance of IRS enforcement. In fact, this budget will provide the IRS additional resources to get the job done. However, our best estimates suggest that enforcement alone could account for only 10 percent of the tax gap, not 100 percent as purported by Senator Conrad. But even this possible 10 percent is misleading, because it doesn't accurately reflect the reality of expanded enforcement. To achieve these kinds of returns from enforcement alone would, I fear, require us to backtrack to a time when there was serious concern about the IRS overreaching and stepping on the rights of taxpayers. We must always keep a balance between taxpayer rights and enforcement. So yes, while I support additional enforcement, we need to keep our feet on the ground and our rhetoric in check as to how much can be achieved through enforcement and the level of enforcement that can be supported. We must also remember that it is vital that enforcement resources be targeted properly. We need to be smart in our use of enforcement. Too often the IRS has ``no-change'' audits. That is, they have spent a lot of time going through the shoebox of receipts belonging to some person and found out there were no problems. This is a waste of IRS resources and takes up the time of honest taxpayers. I been pleased to work with Senator Baucus to encourage the IRS to do the research and review that will allow them to focus their attention on the bad actors and get more bang for the buck on audits and enforcement. Let me note, too, from my work on the Commission on Restructuring the IRS that the Commission found that taxpayer service and clarity of law are vital in encouraging compliance. So many folks want to abide by their obligations as a citizen, but they can't because the law is too confusing, and they can't get the right answer. Service and simplification must be part of any effort to deal with the tax gap. I will return to simplification later in my comments. So if enforcement can't solve the $350 billion problem, what are our other options? Well, a little over a year ago, the Joint Committee on Taxation, at the Finance Committee's request, issued a report. This is the report right here. It is titled ``Options to Improve Tax Compliance and Reform Tax Expenditures,'' otherwise known as the ``White Book.'' This report provided about $190 billion over 5 years with some very controversial items. Let me give you some examples: Repeal the mortgage interest deduction for home equity loans. Subject State and local workers to the Medicare tax. Apply the payroll tax to most fringe benefits. Allow the offshore activities of U.S. companies to be exempt from U.S. tax. These are clearly controversial proposals, and I am sure there are not many in the Senate who would line up to endorse them today. Some other ideas came out of the Finance Committee's examination of the payroll tax gap last spring. The Joint Committee on Taxation and the Treasury Department testified on the leakage in the payroll tax system. To fix this leak, we heard some of the following ideas: Modify the determination of amounts subject to employment tax for partners and S Corporation shareholders. Provide consistent FICA treatment of salary reduction amounts. Remove the employment tax cap. Again, many of these and other comprehensive payroll tax proposals, all which would have improved Social Security solvency, were too controversial to stand on their own. With the lack of bipartisan cooperation on Social Security, we did not have an environment to consider these important, but controversial proposals. Perhaps, if there had been bipartisan cooperation on addressing the Social Security problem, we could have made headway on the payroll tax gap. In addition, no discussion of methods to close the tax gap can be complete without identifying the single most important one, which is Tax Code simplification. Our tax code is just too complex. Complex laws lead to inadvertent errors as well as opportunities for intentional noncompliance. Complexity in the Tax Code also contributes heavily to taxpayer confusion and real or perceived unfairness in the tax system. And studies have shown that if taxpayers feel they are being treated unfairly by the tax system, they are less likely to be compliant. Any real effort to close the tax gap cannot be taken seriously unless Tax Code simplification is part of the proposal. Finally, I also want to alert my colleagues to the fact that we have measures in the tax relief reconciliation bill that aim at some aspects of the tax gap. In particular, some of these are dealing with problems we are seeing in tax-exempt entities--charitable donations and abuses of tax-exempt organizations. We have reforms of two types of charitable entities--donor advised funds and supporting organizations. Too often, people have been making donations to these organizations but retaining control and seeing an inappropriate benefit going to themselves and their family, rather than to the community and those in need. Let my colleagues understand, the issues of donor advised funds and supporting organizations are not minor as it relates to the tax gap. The IRS recently released its ``dirty dozen'' tax scams for 2006, and throughout the thousands of pages of Tax Code and regulations, abuse of donor advised funds and supporting organizations was targeted as one of the top dozen problems. Two years ago, the Commissioner of the IRS, in a letter to me, highlighted the abuse of donor advised funds and supporting organizations as the No. 1 problem IRS was seeing in tax-exempt entities. I think the public would view the Finance Committee as neglecting its work if it didn't seek to shut down such abuses. The Finance Committee didn't turn a blind eye; we worked on addressing these problems and drafting reforms. These reforms of donor advised funds and supporting organizations have been drafted on a bipartisan basis and with significant comment and input from the charity sector, particularly the Nonprofit Panel. I am pleased that these measures are now in tax reconciliation and conference. I think it is important that we take steps in addressing these problems here and now. But my point is that here is something--problems of donor advised funds and supporting organizations--labeled as one of the most dirty abuses in the entire Code, and yet I still have a few colleagues who come to me with this complaint, this change, this concern about what we are doing to stop the abuses. If the road is so full of potholes on dealing with these areas of clear abuse and relatively small dollars, I think we need to recognize the real problems ahead in dealing with the big issues in the tax gap. Unfortunately, all too often I find that the tax gap is an issue in which everyone shouts for solving in the abstract, while many of those same voices are stilled when it comes to the particulars. In closing, I want to re-emphasize the importance of this debate. Today, I have just scratched the surface on this topic. I praise the Treasury and IRS for taking some initial steps. I applaud the chairman and ranking member of the Budget Committee for their interest in closing the tax gap, and I welcome input from other Senators as well. I will eagerly entertain any specific ideas to close the tax gap as long as they go beyond ``more money for IRS enforcement,'' and as long as they do not place an undue burden on honest taxpayers. The solution to this problem needs to be bipartisan, and it needs to be legislative. Let's sit down at the table, separate the facts from the fiction, and work together to solve this tax gap problem. But, the bottom line for the discussion today is that the minority's point that closing the tax gap can be done just through enforcement just doesn't have merit. And, the $35 billion--and that is stretching it--that may be gotten through enforcement doesn't come close to paying for the over $100 billion in new spending that the Democrat leadership is pushing. Mr. President, virtually all Democratic Members have had a common theme in their purported offsets for their amendments to this resolution--they would close tax loopholes to pay for whatever popular spending program is proposed. Closing corporate tax loopholes is the common refrain to pay for spending. Several Members have referred to the raisers in Senator Conrad's substitute amendment to the tax relief reconciliation bill--and they keep trying to spend that same money over and over again. Of the raisers in Senator Conrad's substitute amendment, $30 billion of those are included in the Senate tax relief reconciliation bill that is now in conference between the House and Senate. Many of the proponents of these amendments that have been offered on the other side of the aisle, using tax loophole closers, were among the small minority of Members who opposed the tax relief reconciliation bill that contained offsets. This brings me then to the amendments that have been proposed. The sponsors say they have offset the costs of the amendments by closing tax loopholes. Senator Conrad's amendment contains the known universe of revenue raisers supported by those on the other side. If we assume that the raisers in Senator Conrad's amendment would have raised approximately $89 billion over 10 years that is still a far cry from the cumulative demands of the amendments that have already been offered from the other side. The amendments that have been offered that propose to use those tax loophole closers as offsets total $319 in new spending. That total is as of 3:30 p.m. this afternoon. We don't have a tally for all of the additional amendments that have been proposed since then. That new spending, by the way occurs over the budget period--5 years. That means we will have to find $319 more in revenue raisers just to cover those new spending items. Now, if you use a loophole closer that is already called for in the tax relief package that is in conference, we will also need to find another $30 billion in raisers to cover the tax reconciliation bill unless my colleagues on the other side of the aisle have decided that they are no longer interested in the tuition deduction and the low income savers credit and the work opportunity tax credit and the deduction for teacher expenses and small business expensing and, oh yes, AMT relief for nearly 20 million Americans. The Finance Committee staff hopes to use the full $30 billion that is already in conference in the Senate tax relief reconciliation bill for those important tax relief provisions. So, if we leave the $30 billion in raisers that are in tax reconciliation out of it, we will have $59 billion in net new revenue raisers available that are supported by those on the other side. Keep in mind, I'm giving the other side a break here because I'm using 10 year numbers for the offsets. The 5 year numbers are probably less than half of the net $59 billion they could claim they are raising. If you subtract the $59 billion from the $319 billion in new spending proposed, it means the other side's amendments were short by $260 billion. That's $260 billion, Mr. President. Now, that $260 billion needs to come from some place. It wipes out all the tax relief in the package. That means no extension of the child tax credit, marginal rate relief, marriage penalty relief, retirement security relief, or education tax relief when those provisions expire in 2011. It also means no extension of the Alternative Minimum Tax relief ``patch'' and other extenders like the research and development tax credit. You can't have it both ways, Mr. President. Either the other side, if they had prevailed, would have added $260 billion in deficit spending or they would've gutted the tax relief they claim to support. Budgets are about choices. In this case, the choices are clear. If the Democratic leadership were in control of the Senate, we would have no tax relief left in this budget or we would have added $269 billion in deficit spending. That deficit spending would be $269 billion higher than the deficits in the budget that the other side criticizes. Neither choice would be the right choice for the American people. I yield the floor.