Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to speak briefly about low-income families and the recently passed tax bill. There has been much heat and very little light about what we have done in this bill. Most of the heat has been focused on the conference decision not to retain the Senate position regarding acceleration from 10 percent to 15 percent as part of the refundable child credit--a change already scheduled to take place in 2005. Before I discuss this matter in detail, let me start by saying that I agree with my colleagues that we should seek to reconsider this provision. I am introducing legislation today that will do that, and will also, of equal, and perhaps greater importance, provide a uniform definition of a child and make the $1,000 child credit permanent. Finally, my bill will eliminate the marriage penalty that is contained in the child credit. This bill is an encompassing effort to help low- income and middle-income families. The uniform definition of a child will help hundreds of thousands of families receive tax benefits for which they are not currently eligible. As important, it will bring simplification and clarity for millions of families, ensuring that they are not subject to IRS audit and collection efforts. The bill also makes permanent the $1,000 child credit. Otherwise, in 2005 working families with two eligible children will receive a $600 tax increase as the tax credit drops to $700. In addition, the bill accelerates the refundable calculation from 10 percent to 15 percent. Finally, the bill addresses the marriage penalty contained in the child credit. Currently, the child credit phases out at $75,000 for a single mother and a $110,000 for a married couple. My bill would eliminate the marriage penalty by having the credit phase out at $150,000. In addition, it adjusts the phase-out level for inflation. I do not need to wait for comments from my colleagues or from the media to take this action. Many from the media who attended my press conference the day of final passage of the conference report will recall that I stated then that I would quickly seek to revisit the child tax credit issues and seek Senate action on permanency of the child credit. Let me turn now to the acceleration issue. The media and some members of Congress seem to have a willful blindness as they discuss this matter. What are they blind to? The Earned Income Credit, EIC, program provides great assistance to the very population that is of concern. Let me give you an example: A family of four making $11,000 will be eligible for $50 under the refundable child credit. By accelerating it, as proposed by my bill and by others, they will now be eligible for $75. What does this family get under EIC? In 2002 they will get a check for $4,140. That means that family is paying no income tax and payroll tax of $842 and is getting a payment from the federal government of almost $3,300 in excess of the payroll tax they pay. You would never know this from the media accounts and the press releases. And even if there is a mention of the EIC, I have seen no mention of the dollar amount--the $4,00-plus check for families with two children and $2,500 for families with one child. Why is that? Because the chicken littles are too busy running around. I would hope that the concept of ``context'' would not be something of which the media has to be reminded. You would think from reading speeches and media accounts that the whole tax relief provided in the tax code to a family making $11,000 is the refundable child credit. The child credit for these families at this income level is a thimble compared to the enormous benefits of EIC. Let me remind my colleagues of the purpose of the child credit: It was designed to address the perceived penalty for working families as the EIC began to phase out. In fact, the original proposal of the refundable child credit that I drafted with Senator Baucus in 2001 would not have begun to take effect until the point where the EIC begins to phase-out--at approximately $13,500 for a head of household and $14,500 for married couples. The Finance Committee heard testimony, and it was the repeated view of academics, that Congress needed to address the phase-out of the EIC. There was no testimony to the Senate Finance Committee and I can find very little in respectable academic discussions that advocated an increase in the check for EIC recipients--that the EIC top amount of $4,000 plus for two children or $2,500 for one child was insufficiently generous. So that is what was the genesis of the Finance Committee's support for a child credit--addressing somewhat the EIC phase-out as families begin to make more money. However, the beginning point of the phase-in was shifted at the request of some Senators to $10,000. That does not negate that the underlying purpose was and is to deal with the EIC phase-out. This concern about the phase-out is reflected in the actions we took in conference. By raising the child credit to $1,000 we helped put more money in the pocket of a single mom with one child making $17,000 to $20,000. That single mom making $20,000 will now get a $1,000 check instead of a $600 check under previous law. What if we were to only do as some propose and do acceleration to 15 percent but not increase the child credit in 2005 to $1,000? Yes, it will mean a bit more for those families already receiving a $4,000-plus check under EIC--and I recognize that every penny counts to these families. But this proposal will also mean a tax increase on that single mom making $18,000, that single dad making $19,000 and that married couple with one child making $20,000. Why? Because they benefit more from the increase in the child credit to $1,000. The acceleration will not benefit them; they will quickly meet the maximum child credit. It is the increase to $1,000 that is the real benefit for these families that do not receive the maximum benefits under EIC. That is why I urge my colleagues to support my legislation that helps millions of working families, and doesn't impose a tax on families that are working hard and getting themselves a little bit better paying job. And let me close with one other note. My colleagues should remember that it still takes 3 million taxpayers off the rolls completely. They will no longer have to pay tax under this legislation. Much of that is due to the increase in the child credit to $1,000. Finally, for those who want to talk about income tax relief for low- income individuals, I would encourage them to remember this is many ways a bill that is in concert with the 2001 tax relief that created the 10 percent bracket and provided great income tax relief to singles. Again, a bigger picture that provides greater context of our work will show that we are providing broad-based relief to millions of taxpayers. I urge my colleagues to work with me in passing this full relief for families. I also think it is important that we pass legislation that can be passed into law by working with the House and the White House. We have already passed legislation that deals with just the 10 percent to 15 percent--the Finance Committee passed it and the Senate passed it. The Senate is on record on this matter already. Now is the time to bring real relief and permanent relief to all working families.

Mr. GRASSLEY

Mr. GRASSLEY. I appreciate the Senator's work in this important area. It is true that permitting States and localities to advance refund governmental bonds one additional time would provide important financial flexibility at a critical time. State and local governments across the country are facing unprecedented fiscal crisis. Being able to refinance debt at a lower rate will clearly translate into important savings for our Nation's cities, counties and states. I assure the Senator this proposal will receive serious and thorough consideration by the Finance Committee, which I chair, as we address tax legislation in the future.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I will take a moment to congratulate the individuals from Central Academy in Des Moines, IA who participated in the We the People: The Citizen and the Constitution national finals in Washington, DC. This event is the culmination of extensive study by students throughout the country of the American system of constitutional democracy. The students from Central Academy won the State competition in West Des Moines and thus were given the distinction of representing Iowa in the national finals. I had the opportunity to meet with these students when they were in Washington and I am certainly proud to have had them representing the great State of Iowa. I am also pleased that my staff member, Aaron McKay, was able to be involved in this program as a judge for both the Iowa competition and the national finals as well as acting as a mentor for the team going into the finals. The We the People: The Citizen and the Constitution program, run by the Center for Civic Education with the help of Federal funding, provides an outstanding curriculum that promotes civic competence and responsibility among elementary and secondary students. Students take away a solid understanding of the origin of American constitutional democracy as well as the contemporary relevance of our founding documents and ideals. In short, it produces better citizens. In fact, I would like to personally recognize the Central Academy students who participated in this program, Alexander Body, Alec Davis, Ainslee Ericson, Joanna Grillas, Brian Haroldson, Daren Ho, Meryl Houser, Jonathon Kent, Michael Larking, Conrad Lee, Kyle McCord, Jasmine McDowell, Eleanore Neumann, Timothy Smith, Akili Thomas, Sarah Wang, Kyle Wilkinson, Jay Williams and their teacher, Harvey Kimble. They can all be very proud of their knowledge and accomplishments. I look forward to next year's competition.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to speak briefly about low-income families and the recently passed tax bill. There has been much heat and very little light about what we have done in this bill. Most of the heat has been focused on the conference decision not to retain the Senate position regarding acceleration from 10 percent to 15 percent as part of the refundable child credit--a change already scheduled to take place in 2005. Before I discuss this matter in detail, let me start by saying that I agree with my colleagues that we should seek to reconsider this provision. I am introducing legislation today that will do that, and will also, of equal, and perhaps greater importance, provide a uniform definition of a child and make the $1,000 child credit permanent. Finally, my bill will eliminate the marriage penalty that is contained in the child credit. This bill is an encompassing effort to help low- income and middle-income families. The uniform definition of a child will help hundreds of thousands of families receive tax benefits for which they are not currently eligible. As important, it will bring simplification and clarity for millions of families, ensuring that they are not subject to IRS audit and collection efforts. The bill also makes permanent the $1,000 child credit. Otherwise, in 2005 working families with two eligible children will receive a $600 tax increase as the tax credit drops to $700. In addition, the bill accelerates the refundable calculation from 10 percent to 15 percent. Finally, the bill addresses the marriage penalty contained in the child credit. Currently, the child credit phases out at $75,000 for a single mother and a $110,000 for a married couple. My bill would eliminate the marriage penalty by having the credit phase out at $150,000. In addition, it adjusts the phase-out level for inflation. I do not need to wait for comments from my colleagues or from the media to take this action. Many from the media who attended my press conference the day of final passage of the conference report will recall that I stated then that I would quickly seek to revisit the child tax credit issues and seek Senate action on permanency of the child credit. Let me turn now to the acceleration issue. The media and some members of Congress seem to have a willful blindness as they discuss this matter. What are they blind to? The Earned Income Credit, EIC, program provides great assistance to the very population that is of concern. Let me give you an example: A family of four making $11,000 will be eligible for $50 under the refundable child credit. By accelerating it, as proposed by my bill and by others, they will now be eligible for $75. What does this family get under EIC? In 2002 they will get a check for $4,140. That means that family is paying no income tax and payroll tax of $842 and is getting a payment from the federal government of almost $3,300 in excess of the payroll tax they pay. You would never know this from the media accounts and the press releases. And even if there is a mention of the EIC, I have seen no mention of the dollar amount--the $4,00-plus check for families with two children and $2,500 for families with one child. Why is that? Because the chicken littles are too busy running around. I would hope that the concept of ``context'' would not be something of which the media has to be reminded. You would think from reading speeches and media accounts that the whole tax relief provided in the tax code to a family making $11,000 is the refundable child credit. The child credit for these families at this income level is a thimble compared to the enormous benefits of EIC. Let me remind my colleagues of the purpose of the child credit: It was designed to address the perceived penalty for working families as the EIC began to phase out. In fact, the original proposal of the refundable child credit that I drafted with Senator Baucus in 2001 would not have begun to take effect until the point where the EIC begins to phase-out--at approximately $13,500 for a head of household and $14,500 for married couples. The Finance Committee heard testimony, and it was the repeated view of academics, that Congress needed to address the phase-out of the EIC. There was no testimony to the Senate Finance Committee and I can find very little in respectable academic discussions that advocated an increase in the check for EIC recipients--that the EIC top amount of $4,000 plus for two children or $2,500 for one child was insufficiently generous. So that is what was the genesis of the Finance Committee's support for a child credit--addressing somewhat the EIC phase-out as families begin to make more money. However, the beginning point of the phase-in was shifted at the request of some Senators to $10,000. That does not negate that the underlying purpose was and is to deal with the EIC phase-out. This concern about the phase-out is reflected in the actions we took in conference. By raising the child credit to $1,000 we helped put more money in the pocket of a single mom with one child making $17,000 to $20,000. That single mom making $20,000 will now get a $1,000 check instead of a $600 check under previous law. What if we were to only do as some propose and do acceleration to 15 percent but not increase the child credit in 2005 to $1,000? Yes, it will mean a bit more for those families already receiving a $4,000-plus check under EIC--and I recognize that every penny counts to these families. But this proposal will also mean a tax increase on that single mom making $18,000, that single dad making $19,000 and that married couple with one child making $20,000. Why? Because they benefit more from the increase in the child credit to $1,000. The acceleration will not benefit them; they will quickly meet the maximum child credit. It is the increase to $1,000 that is the real benefit for these families that do not receive the maximum benefits under EIC. That is why I urge my colleagues to support my legislation that helps millions of working families, and doesn't impose a tax on families that are working hard and getting themselves a little bit better paying job. And let me close with one other note. My colleagues should remember that it still takes 3 million taxpayers off the rolls completely. They will no longer have to pay tax under this legislation. Much of that is due to the increase in the child credit to $1,000. Finally, for those who want to talk about income tax relief for low- income individuals, I would encourage them to remember this is many ways a bill that is in concert with the 2001 tax relief that created the 10 percent bracket and provided great income tax relief to singles. Again, a bigger picture that provides greater context of our work will show that we are providing broad-based relief to millions of taxpayers. I urge my colleagues to work with me in passing this full relief for families. I also think it is important that we pass legislation that can be passed into law by working with the House and the White House. We have already passed legislation that deals with just the 10 percent to 15 percent--the Finance Committee passed it and the Senate passed it. The Senate is on record on this matter already. Now is the time to bring real relief and permanent relief to all working families.

Mr. GRASSLEY

Mr. GRASSLEY. I yield myself such time as I might consume. As we wind down debate on this bill, it is very important that I give appropriate thank-yous to people who have worked so hard on putting this bill together. I am talking about the staff of the Finance Committee and the Joint staff, both Republican and Democrat: Chief tax counsel, Mark Prater; chief of staff, Kolan Davis; Ed McClellan, Dean Zerbe, Christy Mistr, Diann Howland, Elizabeth Paris, and Brad Cannon; members of the health staff of the Finance Committee: Colin Rosky, Jennifer Bell; members from the Budget Committee staff: Chief of staff, Hazen Marshall; Cheri Reidy, Beth Felder, and Rachel Jones; Staff of Majority Leader Frist and Assistant Majority Leader McConnell, including Lee Rawls, Eric Ueland, Rohit Kumar, Bill Hoagland, and Mike Solon. All of the staff of the Joint Committee on Taxation worked through the night on many occasions. As one who was caught in the crossfire on this bill, I can appreciate when they take the heat from both sides on revenue estimates. I would especially like to thank George Yin, Mary Schmitt, and Bernie Schmitt of the Joint Tax Committee. I wish more of the participants in the tax legislative process realized how tough the Joint Tax's job is; conferee staff, including Evan Liddiard and Garett Jones with Senator Hatch's office; Laura O'Neill with Senator Lott's office; Lisa Wolski and Lawrence Willcox of Senator Kyl's staff. Senate legislative counsel, these folks, of course, are true legal wizards who do excellent work under amazing pressure. This group includes Jim Fransen, Mark Mathiesen, and Ruth Ernst. Then a team of people who worked on the State aid issue so much: Ted Totman, Steve Robinson, Becky Shipp, Leah Kegler, Michaela Sims, and Amy Tejra with Ben Nelson's staff, and Michael Bopp with Senator Collins; Treasury Department staff, including Pam Olson, Greg Jenner, J.T. Young, and Drew Lyon; the administration staff, including Ziad Odjakli, O. Jack Lee, Christine Burgeson, Candi Wolff, and David Hobbs. Finally, I would like to thank Senator Baucus's Finance Committee staff who assisted in the creation of a better product during times when we were able to work collaboratively: Jeff Forbes, Bill Dauster, Russ Sullivan, Matt Jones, Pat Heck, Anita Horn-Rizek, Liz Liebschutz, and Jonathan Selib. I really appreciate all of that. I am very pleased with the bill that is before us today. We have given the country some very good tax relief and investment incentives. But there is one provision in the bill that I intend to change, and that is to let the inverters of the world know they better be on notice, as far as I am concerned. The new 15 percent tax rate applies to dividends paid by foreign corporations to their U.S. shareholders. That is good policy. What is not good policy is when those dividends are paid by a phony foreign shell corporation created by a U.S. corporate inversion. In an inversion, a U.S. corporation pretends to move its headquarters to a phony shell corporation that is nothing more than a folder in a filing cabinet or a post box in a tax haven. With this phony tax haven parent corporation in place, the U.S. company is positioned to rip its taxable income out of the United States through artificial interest payments to the tax haven shell, which are legally deductible on its U.S. return. This structure also allows the corporate inverter to move U.S. assets offshore and outside the reach of the IRS on a tax-free basis. I question whether it is proper to allow a tax cut for dividends from a corporate inversion. The House blocked my efforts to insert this ban in today's legislation. Because the President wanted the Jobs & Growth bill on his desk by Memorial Day, I chose not to block the legislation over this issue. I acknowledge that it is the shareholders who would be denied the rate reduction, and not the corporate management that engineered the inversion. But an inversion requires shareholder consent. Usually around 60 percent must approve of the inversion. So do not let it be said that all shareholders are innocent bystanders in an inversion. Those who disapprove of the transaction are always free to sell their shares. We should not give a tax cut that benefits an inversion, and I will continue to examine this issue and hopefully put a stop to it.

Mr. GRASSLEY. Mr. President, I yield 1 minute to the Senator from Wyoming.

Mr. GRASSLEY. I would say that as my good friend, the Senator from Utah, knows, the Jobs and Growth Tax Relief Reconciliation Act of 2003 is first and foremost an economic stimulus bill. The most effective aid the Federal Government can give to States or individuals is a healthy economy with a robust job market. Without jobs, families with children won't need child care services and won't have any way to pay the family bills. I thank the good chairman of the Judiciary Committee and understand his concern over the State aid portion of the legislation. We have tried to provide as much leeway as possible to the States. However, it would be impossible to list all of the acceptable activities for which a state could use his money. Therefore, the Congress has broadly defined the allowable activities for which States could spend their temporary fiscal relief dollars. Therefore, my answer to the question posed to me from the Senator from Utah is yes. We did intend for child care expenses to be included as an element of ``essential government services'' provided that a state is currently operating a child care program and expenditures for child care were permitted under the most recently approved budget for the State.

Mr. GRASSLEY. Mr. President, I yield myself such time as I might consume. I would like to refer to the capital gains provisions of the compromise bill. I discussed last night the benefits of seeing capital gains reduced to 15 percent, and 5 percent for low-income families and individuals. But I also want to emphasize the simplification that we are bringing to the capital gains rates. While we still have the 1-year division between short-term and long-term capital gains, we have eliminated the 5-year holding period and the 18-percent rate. It is a small but very important step in actually eliminating lots of lines and lots of calculations that taxpayers face in their annual returns. The Joint Tax Committee has stated that there is much need for simplification of capital gains. The Joint Tax Committee notes that Congress has received continual testimony that capital gains is a source of enormous complexity. So in this compromise, we make a very good start on an important source of complexity in the Tax Code. Let me make clear for my colleagues that for many middle-and low- income families, we make capital gains as simple as possible. At the end of the time period of this bill, middle- and low-income families will pay zero capital gains. Of course, it doesn't get much simpler than that because zero brings it down to nothing. I now would like to deal with the issue of corporate governance that was a significant part of the Senate bill. The Senate bill contained several major provisions that seek to put an end to the Enron abuses and corporate shell games that we have all learned so much about recently. These con artists who had keys to the executive washrooms have devastated the lives of millions of workers and shareholders. I am proud to have worked closely with my colleague, Senator Baucus, on so many of these provisions with the goal of addressing and reforming corporate governance. While I very much wish we could have seen these reforms incorporated in the House-Senate conference committee, let me be very clear that the snake oil salesmen should not be celebrating. I intend to continue to work very hard to press to have these provisions incorporated into other tax legislation and ultimately placed into the statute books. For example, some of the critical corporate tax shelter provisions that were in the Senate bill are already included in the Charitable Giving Act--what we call the CARE Act--because these are used for ``pay-fors'' in this legislation. The CARE Act will soon go to conference with the House. In addition, I expect us to soon revisit provisions regarding corporate inversions where corporations set up overseas offices, basically simply a file drawer. They do this simply to escape taxation. Other legislation that I expect we will have a chance to consider again would include the Baucus-Grassley provisions dealing with fines and penalties--ending the loopholes that allow Wall Street firms to escape the real costs of their own wrongdoing. I am very proud of the bipartisan efforts of the Senate Finance Committee to shut down corporate tax shelters and promote proper corporate governance. I apologize to my colleagues if it is immodest. But I suggest the legislation contained in the Senate finance bill probably represents the most sweeping tax reforms in a generation to seek to clean up corporations and shut down the pin-striped con artists. I will continue to push for these needed reforms, and I expect that we will have step-by-step success in stopping corporate shelters and providing greater protection to the shareholders and workers. I yield the floor and reserve my time.

Mr. GRASSLEY. Mr. President, I yield 5 minutes to the Senator from Texas.

Mr. GRASSLEY. Mr. President, I yield 5 minutes to the Senator from Oklahoma.

Mr. GRASSLEY. Mr. President, I am very much aware of Senator Miller's interest in this provision. As you know, the Finance Committee has supported his provision by including it in two separate pieces of legislation that our committee considered this year. We had hoped to include it in this bill, even if the corporate shelter language was not included. Unfortunately, this measure has a negligible revenue effect and could possibly violate the Byrd rule. Accordingly, we were obliged to remove it from the bill. I give Senator Miller my commitment, however, that we will continue to work with him on opportunities to get this amendment enacted into law this year. I would also add that I discussed this provision with Mr. Thomas, the chairman of the House Ways and Means Committee, and his staff, and they indicated a willingness to examine and explore the measure in conferences on future bills.

Mr. GRASSLEY. Mr. President, how much time remains on my side?

Mr. GRASSLEY. I move to reconsider the vote.

Mr. GRASSLEY. Mr. President, he just admitted I was right. He said every time they took money away from our tax cut allotment in the budget, they took it to offset spending someplace else. That is exactly my point. They never did take any money away from it to put against the bottom line. They took it away because they wanted to spend it someplace else. They want to continue that money coming into Washington. They want more money to spend. I will take them seriously when they want to reduce the amount of money in the budget for tax cuts and put it against the bottom line.

Mr. GRASSLEY. Mr. President, I yield myself such time as I might consume. I want to respond to the statements just made because it brings up the issue of the Federal debt. We have heard from the other side that we are unconcerned about the Federal debt, as if they are concerned about it. I want to remind my colleagues--particularly those on the other side of the aisle--of how many amendments we had during the budget debate and during the omnibus appropriations bill debate back in January where there was amendment after amendment after amendment after amendment on the other side of the aisle to spend more money--spend more money. When it came to the budget, there was amendment after amendment after amendment to take money away from the part of the budget of giving authority for tax relief and reducing that amount of money. Did it go against the bottom line? No. They took the money they wanted to take away from tax relief and spent it someplace else. So don't give me this sort of lesson that they are concerned about the deficit and we are unconcerned about the deficit. If they were concerned about the deficit and they wanted to cut the amount of money we are going to give for tax relief and put it against the bottom line, then I would believe them. But it is just the opposite. When they want to spend it someplace else, the bottom line stays the same, the bottom line of the budget is not reduced. The problem here is they don't want any tax relief because they want to spend it. They think they know better how to spend it than the taxpayers. It isn't going to do as much economic good if the 535 members of Congress decide how to spend it. If the people back home spend it, it is going to turn over more times in the economy and create more jobs. They think the American taxpayers are undertaxed and that is why we have a budget deficit. The American people are not undertaxed, and it is not undertaxation that is the cause of the deficit. The cause of the deficit is the overspending, and that overspending is best exemplified by amendment after amendment. Two times this year we have had those vote-aramas, with amendment after amendment to spend more money. This is about giving money back to the American taxpayers. If we are worried about the deficit, we will express that worry by spending less. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to speak the common sense of Iowa to the Senator from the political machine of Chicago and to express a simple statement of fact: If, in fact, we had adopted the minority's budget, the Democrat budget, earlier this year, we would be facing the exact same increase in the debt ceiling now and by almost the same exact amount of money throughout the rest of the year. So it doesn't matter whether you are in the majority or we are, we would be doing about the same thing right now. So don't try to fool the people of America. You cannot do it even if you are from Chicago.

Mr. GRASSLEY. Mr. President, as well intentioned as the amendment is to bring information to the Congress from the Joint Committee on Taxation, to bring a greater degree of transparency to where we are on certain tax legislation, I have to ask my colleagues to vote against this amendment because if it were adopted, it would force the bill back to the House and we would not be able to fund Government. We would also have a situation of having to have a conference. I urge my colleagues to vote against it.

Mr. GRASSLEY. Mr. President, I want to speak in opposition to the amendment. I think the information the Senator from North Dakota wants, and wants in one document or one report, is a very legitimate bit of information, not just a small bit but a legitimate amount of information that he wants, and it is a reasonable request. I think a lot of it exists in the Department of Commerce and maybe it is just a case of bringing it all together. But that can't be the issue today. The issue today is, if we amend this bill, it goes back to the House, and then we are in a situation where we are not able to operate Government. We can't wait until the month of June to get a conference with the House on this issue. The Secretary of Treasury has made it very clear that he has taken all prudent and legal steps available to him to avoid reaching the statutory debt limit. I urge everybody to vote against the amendment regardless of the merits.

Mr. GRASSLEY. The Hollings amendment would prevent the ``disinvestment'' of the Social Security Trust Fund. What that means is if we did not increase the debt limit, the Social Security Trust Fund could not be used to pay Social Security benefits. We need to defeat this amendment and pass a clean debt limit bill so Social Security checks can go out on time.

Mr. GRASSLEY. I will yield back my time. I move to table the amendment and I ask for the yeas and nays.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today I am introducing a bill to bring the United States into compliance with its obligations under the World Trade Organization. The basic thrust of the bill is simple--it repeals section 801 of the Revenue Act of 1916 which the WTO Appellate Body found to be inconsistent with our responsibilities under Article VI of the GATT 1994 and the WTO Antidumping Agreement. Repealing section 801 will therefore bring the United States into conformity with its WTO obligations. Section 801, which has been referred to as the Antidumping Act of 1916, allows private parties to sue importers of dumped imports in U.S. district courts, and also establishes criminal liability for importing dumped goods. While the provision is seldom used, there are several recent court cases pending in the United States where litigants have sued under the Antidumping Act of 1916. I am introducing this legislation because I believe it is important that the United States comply with its WTO obligations. While we may not agree with each and every decision that comes out of the WTO, we should not pick and choose which decisions we will comply with. The bottom line is that the United States benefits greatly from a rules- based world trading system. We have had considerable success in bringing down foreign import barriers, and this has resulted in increased trade, economic growth, and more jobs right here in the United States. When we comply with adverse decisions we only strengthen our position in other cases where we challenge the impermissible import restraints of our trading partners, such as the de facto biotechnology moratorium adopted by the European Union, which continues to hurt farmers in Iowa and is now under challenge before the WTO. I want other countries to comply when we win, so I think it is important to comply when we lose. I would also like to point out an important aspect of the bill I am introducing. The bill brings us into compliance with our WTO obligations, but it does not apply retroactively. I think retroactive application of repeal would be wrong in this case for a number of reasons. First, the U.S. Supreme Court has held that under the constitutional due process standard, retroactive application of economic legislation is acceptable only where it is justified by a rational legislative purpose. To my knowledge, no one has yet articulated any reason, let alone a rational legislative purpose, for depriving litigants in U.S. courts of the opportunity for final adjudication of their disputes in this case. In fact, the Appellate Body Ruling itself does not call for a retroactive repeal of section 801 in order for the United States to conform to its WTO obligations. It seems to me that no rational legislative purpose is served by retroactive repeal of section 801 when the Appellate Body Report does not ask for retroactive repeal and the Administration has not explained why retroactive repeal is necessary. The Supreme Court has also held that the justification for prospective application of legislation may not suffice for retroactive application of the same legislation. The justification for repeal of section 801 is to conform to our WTO obligations; again, if WTO compliance does not call for retroactive repeal, then the justification for repealing section 801 should not extend to a retroactive repeal of this provision. Second, the administration and Congress have consistently taken the position that retroactive repeal is not necessary to ensure compliance with our WTO obligations in all cases, particularly in cases dealing with U.S. trade remedy laws. The Joint Report of the Committee of Finance, Committee on Agriculture, Nutrition, and Forestry, Committee on Government Affairs of the U.S. Senate which accompanied the legislation implementing the Uruguay Round Agreements Act explicitly noted that compliance with WTO panels in trade remedy cases applied prospectively only. The Joint Report continued that prospective application ``is consistent with the general principle in the GATT, and in the future WTO, that panel decisions do not have retroactive effect.'' This principle is fully consistent with the text of the WTO agreement itself. Article 19.1 of the Dispute Settlement Understanding states only that ``{w here a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that Agreement. In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations.'' Thus, the text of the WTO calls only for ``bringing the measure into conformity'' and not retroactive application of an Appellate Body decision. To my knowledge, this is the position which has consistently been taken by the U.S. Government and the WTO Appellate Body. In fact, with the exception of one aberrant decision by a panel in the case of Australian Automotive Leather, WTO panels and the Appellate Body have continued to adhere to the general principle that retroactive compliance measures are inappropriate. The panel ruling in Australian Automotive Leather is instructive. The WTO Dispute Settlement Body adopted a panel report that recommended the Australian recipient of a subsidy pay back the entire amount of the $30 million Australian dollar subsidy it had received. This recommendation went far beyond what the United States asked for. The United States sought only the return of the prospective value of the subsidy that the Australian automotive leather company had received. The United States argued that repayment of the entire subsidy was inappropriate and ultimately settled the dispute with Australia in a deal that required the automotive leather company to pay back $7.2 million Australian dollars to the Government of Australia, which reflected the prospective value of the subsidy. Thus, both U.S. law and U.S. trade policy conform to the general principle that compliance measures should be prospective in nature. Finally, I believe that as a general matter, attempts at retroactive compliance with WTO rulings can make for bad trade policy. The intent of the rules-based trading system established under the WTO is to bring Members into compliance so that going forward international trade can be conducted on a level playing field. There is just no telling where efforts at retroactive compliance may lead. While in this instance the retroactive repeal of section 801 may seem clear-cut to some, it could set a dangerous precedent for future cases. Imagine if the WTO Appellate Body required or the U.S. Government advocated for retroactive application of a measure repealing the Extraterritorial Income Act/Foreign Sales Corporation tax regime. The result would be ludicrous. Rather than foster the establishment of a level playing field, efforts at retroactive compliance may well distort markets to an extent even greater than the underlying measure that was found to be WTO inconsistent. We need to carefully consider whether retroactive repeal of a statutory provision is appropriate. I believe that considerations of judicial precedent, legislative intent, established practice under the GATT and the WTO, as well as good trade policy, all mitigate against the retroactive repeal of section 801. I call upon my colleagues to support this bill repealing section 801. Passing the bill will bring us into compliance with our WTO obligations, demonstrate our continued commitment to the rules-based trading system, and strengthen our position in future cases where we prove successful in challenging impermissible import restraints erected by our trading partners. I ask unanimous consent that the text of the bill be printed in the Record. There being no objection the bill was ordered to be printed in the Record, as follows:

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I have the opening script that the majority leader would usually give. I will do it in his stead. The Senate will begin debate in relation to the conference report to accompany H.R. 2, the jobs and economic growth bill. Under the previous order, the Senate will vote on the adoption of the conference report at 9:30 a.m. Following the disposition of the conference report, the Senate will consider H.J. 51, the debt limit extension legislation. Amendments to the measure are expected throughout the day. Therefore, rollcall votes will occur into the afternoon. If Members show restraint in the number of amendments offered, the Senate could complete action on this necessary measure early in the afternoon. Following completion of the debt limit extension, the Senate will take up the unemployment insurance extension.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today I am introducing a bill to bring the United States into compliance with its obligations under the World Trade Organization. The basic thrust of the bill is simple--it repeals section 801 of the Revenue Act of 1916 which the WTO Appellate Body found to be inconsistent with our responsibilities under Article VI of the GATT 1994 and the WTO Antidumping Agreement. Repealing section 801 will therefore bring the United States into conformity with its WTO obligations. Section 801, which has been referred to as the Antidumping Act of 1916, allows private parties to sue importers of dumped imports in U.S. district courts, and also establishes criminal liability for importing dumped goods. While the provision is seldom used, there are several recent court cases pending in the United States where litigants have sued under the Antidumping Act of 1916. I am introducing this legislation because I believe it is important that the United States comply with its WTO obligations. While we may not agree with each and every decision that comes out of the WTO, we should not pick and choose which decisions we will comply with. The bottom line is that the United States benefits greatly from a rules- based world trading system. We have had considerable success in bringing down foreign import barriers, and this has resulted in increased trade, economic growth, and more jobs right here in the United States. When we comply with adverse decisions we only strengthen our position in other cases where we challenge the impermissible import restraints of our trading partners, such as the de facto biotechnology moratorium adopted by the European Union, which continues to hurt farmers in Iowa and is now under challenge before the WTO. I want other countries to comply when we win, so I think it is important to comply when we lose. I would also like to point out an important aspect of the bill I am introducing. The bill brings us into compliance with our WTO obligations, but it does not apply retroactively. I think retroactive application of repeal would be wrong in this case for a number of reasons. First, the U.S. Supreme Court has held that under the constitutional due process standard, retroactive application of economic legislation is acceptable only where it is justified by a rational legislative purpose. To my knowledge, no one has yet articulated any reason, let alone a rational legislative purpose, for depriving litigants in U.S. courts of the opportunity for final adjudication of their disputes in this case. In fact, the Appellate Body Ruling itself does not call for a retroactive repeal of section 801 in order for the United States to conform to its WTO obligations. It seems to me that no rational legislative purpose is served by retroactive repeal of section 801 when the Appellate Body Report does not ask for retroactive repeal and the Administration has not explained why retroactive repeal is necessary. The Supreme Court has also held that the justification for prospective application of legislation may not suffice for retroactive application of the same legislation. The justification for repeal of section 801 is to conform to our WTO obligations; again, if WTO compliance does not call for retroactive repeal, then the justification for repealing section 801 should not extend to a retroactive repeal of this provision. Second, the administration and Congress have consistently taken the position that retroactive repeal is not necessary to ensure compliance with our WTO obligations in all cases, particularly in cases dealing with U.S. trade remedy laws. The Joint Report of the Committee of Finance, Committee on Agriculture, Nutrition, and Forestry, Committee on Government Affairs of the U.S. Senate which accompanied the legislation implementing the Uruguay Round Agreements Act explicitly noted that compliance with WTO panels in trade remedy cases applied prospectively only. The Joint Report continued that prospective application ``is consistent with the general principle in the GATT, and in the future WTO, that panel decisions do not have retroactive effect.'' This principle is fully consistent with the text of the WTO agreement itself. Article 19.1 of the Dispute Settlement Understanding states only that ``{w here a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that Agreement. In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations.'' Thus, the text of the WTO calls only for ``bringing the measure into conformity'' and not retroactive application of an Appellate Body decision. To my knowledge, this is the position which has consistently been taken by the U.S. Government and the WTO Appellate Body. In fact, with the exception of one aberrant decision by a panel in the case of Australian Automotive Leather, WTO panels and the Appellate Body have continued to adhere to the general principle that retroactive compliance measures are inappropriate. The panel ruling in Australian Automotive Leather is instructive. The WTO Dispute Settlement Body adopted a panel report that recommended the Australian recipient of a subsidy pay back the entire amount of the $30 million Australian dollar subsidy it had received. This recommendation went far beyond what the United States asked for. The United States sought only the return of the prospective value of the subsidy that the Australian automotive leather company had received. The United States argued that repayment of the entire subsidy was inappropriate and ultimately settled the dispute with Australia in a deal that required the automotive leather company to pay back $7.2 million Australian dollars to the Government of Australia, which reflected the prospective value of the subsidy. Thus, both U.S. law and U.S. trade policy conform to the general principle that compliance measures should be prospective in nature. Finally, I believe that as a general matter, attempts at retroactive compliance with WTO rulings can make for bad trade policy. The intent of the rules-based trading system established under the WTO is to bring Members into compliance so that going forward international trade can be conducted on a level playing field. There is just no telling where efforts at retroactive compliance may lead. While in this instance the retroactive repeal of section 801 may seem clear-cut to some, it could set a dangerous precedent for future cases. Imagine if the WTO Appellate Body required or the U.S. Government advocated for retroactive application of a measure repealing the Extraterritorial Income Act/Foreign Sales Corporation tax regime. The result would be ludicrous. Rather than foster the establishment of a level playing field, efforts at retroactive compliance may well distort markets to an extent even greater than the underlying measure that was found to be WTO inconsistent. We need to carefully consider whether retroactive repeal of a statutory provision is appropriate. I believe that considerations of judicial precedent, legislative intent, established practice under the GATT and the WTO, as well as good trade policy, all mitigate against the retroactive repeal of section 801. I call upon my colleagues to support this bill repealing section 801. Passing the bill will bring us into compliance with our WTO obligations, demonstrate our continued commitment to the rules-based trading system, and strengthen our position in future cases where we prove successful in challenging impermissible import restraints erected by our trading partners. I ask unanimous consent that the text of the bill be printed in the Record. There being no objection the bill was ordered to be printed in the Record, as follows:

Mr. GRASSLEY

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

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, some are going to say during this debate on this reconciliation compromise tax relief for working men and women that we cannot afford to give money back to the American people. You get the impression from people who say that this is the Government's money and not the people's money. It is the people's money that comes to Washington. We spend it for them--a lot of times not as they would. But it is never the Government's money. No government creates wealth. Only working men and women, either through their labor or the use of their genius and using that in a productive manner, is what creates wealth in America. It is not right to assume in this body or any other legislative body that the resources of the American people belong to Government and we let them keep some of their own resources to use as they want, but it all belongs to us. This attitude is that we in Government are smarter and know better than other people how to spend other people's money. This bill before us underscores the President's, and the majority's, belief that this is the people's money first. The people will spend and invest their money in more productive ways than government ever will. This bill reinforces that philosophy. I commend the President for his leadership, his perseverance, and his ability to get things done. I am still going to speak on the issue of the conference committee report before us, but I want to concentrate now for just a few minutes on the accuracy and intellectual honesty in the debate over our bipartisan tax relief package. This mostly would address who benefits and who does not benefit. Too many people on the other side of the aisle want you to believe this legislation only benefits the wealthy or high-income people of America. In fact, what this bill is about is not worrying just about income, but it is an effort through what we do on capital gains and what we do on dividend taxation to encourage the creation of wealth. We are not starting from ground zero here in the creation of wealth. This was started by the people themselves over the last now maybe a couple of decades. Because just 20 years ago, maybe less than that, about 12 percent of the people in the country had money invested in the stock market or had pensions and 401(k)s that were dependent upon the stock market. Today that is about 55 percent of the people in the country. So there is an expansion of instruments leading to the creation of wealth. There is a broader range of people in the United States now, compared to 10 years ago, or let's say 20 years ago, who have an interest in the stock market. So I want to discuss the importance of the accuracy of the data in the debate over the bipartisan tax relief package before us. In this and all tax policy debates, it is very important to have accurate data and to debate the issues in an intellectually honest manner. Involved is the key question of whether a tax relief package is fair. In evaluating fairness, we frequently look at whether a proposal retains or improves the progressivity of our tax system. We have critics of President Bush's growth plan who attempt to use what we call distribution tables to show that a certain proposal--in this case President Bush's proposal--disproportionately benefits upper- income taxpayers. Let me say flat out this is factually inaccurate. But more importantly, it misses the point of this legislation for several reasons I want to present to my colleagues. Make no bones about it, this is not a tax relief package for the sole purpose of just giving more money back to the taxpayers. It is for the purpose of doing that with the end result that it will lead to the creation of jobs and it will cause our economy to grow, which is necessary to create jobs. As such, the proposal attempts to promote investment incentives so that companies will purchase capital and labor. Although the package is balanced between consumption and investment, it is the investment-side incentive that will result in long-term economic growth. What we are trying to do is enhance the capital-to-labor ratio. When there is a surplus of capital, that is when labor benefits. When there isn't capital to invest, there is a surplus of labor and consequently labor cannot advance up the economic ladder the way we want all Americans to be able to do. But when you bring in a surplus of capital that is invested, there is an increase in demand for labor. When there is an increase in the demand for labor, wages and benefits go up for working men and women. This bill is all about increasing--or at least a good part of it; some of it is oriented toward consumer spending, but a good part of this is oriented towards encouragement for capital and enhancing that capital-to-labor relationship. Those who criticize this plan for benefiting wealthy taxpayers assume the rich stay rich and the poor stay poor through a lifetime. It is almost ``born rich, you are always rich; born poor, you are always poor.'' That is not America. America is all about economic mobility, the dynamics of the free marketplace. That gives people opportunity to improve themselves and that is what America is all about. Recent studies, including one produced by the National Center for Policy Analysis, indicate this is untrue, that the rich are always rich and the poor are always poor. The study measures income mobility by breaking same-age workers into five income levels and monitoring their movement between the income quintiles over a period of 15 years. The study shows there is considerable economic mobility in America and that large numbers of people move up and down the economic ladder in relatively short periods of time. Moreover, in recent years, earnings mobility has in fact increased. The study demonstrates that within a single 1-year timeframe, one-third of the workers in the bottom quintile moved up and, in fact, one-fourth of the workers in the top 20 percent of our population moved down. One- half of the remaining labor force changed quintiles within that year, and 60 percent of the workers are upward mobile within 10 years. The University of Michigan study also concluded that taxpayers tend to move between income groups during their lifetime. It is quite obvious how much sense this makes. It makes a lot of sense. Taxpayers are likely to be lower income earners early and late in life, but are likely to be higher income earners during their midpoints of life. My colleagues, just think of your own lifetime starting out in your first job out of high school or your first job out of college. Hasn't there been a great deal of movement during your lifetime, both up and down? We hope most of it is up. But for some, it is down. What allows these people to escape the lowest-income quintile and start earning more money is a college education and acquiring necessary skills on the job. Interestingly, anecdotal evidence shows that 80 percent of the individuals in the Forbe's 400 list were self-made as opposed to those who inherited fortunes. Again, this underlies the importance of taking advantage of educational opportunities. Education allowed these people to overcome differences in income, increase their chances to escape low-wage jobs, and determine the success of their future earnings. These findings are backed by a third study produced by the Financial Services Roundtable by the same organization I have been quoting, the NCPA. This study confirms that there is substantial economic mobility between generations. Almost 60 percent of the sons whose parents' incomes were in the bottom 20 percent are in higher income groups. Thirty-one percent have incomes in the top 60 percent. Therefore, whoever is saying that once rich, Americans always stay rich and once poor, they always stay poor are purely mistaken. I welcome this data on this important matter for one simple reason. It sheds light on what America really is all about. We are a nation of vast opportunities. We are a nation of tremendous economic mobility by people from all over the world. Our country truly provides unique opportunities for everyone. These opportunities include better education, health care services, financial security but, most importantly, our country provides people with freedom to obtain necessary skills to climb the economic ladder and to live better lives. We are a free nation. We are a mobile nation. We are a nation of hard-working, innovative, skilled, and resilient people who like to take risks when necessary in order to succeed. We have an obligation as lawmakers to incorporate these fundamental principles into our tax system, and this bill succeeds in doing that. If I could, I would like to continue on an item that was in the Senate bill more specifically than I have spoken about the bill in the past. I want to speak about a provision that was, in fact, dropped in conference. It was very important to Zell Miller, the Senator from Georgia. On a preliminary point, I express my appreciation to Senator Miller for his support of the President's package. It has not been easy for a person from the other side of the aisle to be so consistent in their support. But he has been a fearless man with the Marine courage and conviction that is in his background. Senator Miller discussed a proposal regarding CEOs to sign a corporate tax return. This measure has been in the tax shelter curtailment proposal passed by the Senate Finance Committee. I support the proposal. I share Senator Miller's commonsense view of this proposal. As does Senator Miller, I think CEOs ought to be accountable on their companies tax returns just as individuals are. Unfortunately, I was not able to secure Senator Miller's position in conference. I faced two barriers. One was a potential procedural problem. The other, the opposition of the House to any proposals that raised revenue. Despite my effort, I was not able to deliver this provision back to the Senate for Senator Miller. But I would like to make clear to downtown lobbyists and to corporate America that Senator Miller and I will be back on this very important provision. Chairman Thomas and his staff know the importance of this issue to Senator Miller and to me. I have let them know that we will be back at it in legislation that has passed the Senate called the CARE Act--that is a charitable giving act--or if we don't do it there, we will do it in other tax legislation this year. At a later point in this debate, Senator Miller and I may engage in a colloquy on this very important subject to all of us; but very important for Senator Miller because of his instigation of it, the CEO signature provision. I yield the floor.