Judd Gregg

Mr. GREGG

Mr. GREGG. I see Senator Specter who also has an amendment. Maybe he wants to speak.

Mr. GREGG. Mr. President, Senator Specter will talk about this amendment. Essentially, this amendment would repeal the AMT permanently, as it relates to middle-income Americans. It is currently wrong that we have this tax. It was never intended to be a tax that would cover 20 million Americans. It was supposed to hit high-income individuals who were avoiding taxes, using legal tax vehicles but basically avoiding paying any income tax. It has turned into a monster where literally 20 million Americans would be subject to the tax unless it is adjusted. This budget presumes that it will be abated for this year. There is no reason to keep these revenues in the baseline because we know we will do this again next year and the year after that. It is time to correct this permanently and stop having these illusory revenues, which we turn around and spend, and it creates inappropriate expectations and leads to less fiscal discipline here. This is an attempt to address the issue by essentially repealing the AMT and addressing the fact that if we don't do this, 20 million Americans will be hit with this tax, and that was never the intention of the Federal Government, to get revenues from them. It is wrong to have it on the books. The Senator from Pennsylvania will come over to speak to this around 11:30 or so. The Democratic side may have another amendment relative to this issue.

Mr. GREGG. I did. Amendment No. 4190

Mr. GREGG. If the Senator would yield further, I wanted to clarify where the number came from. I did not know if the Senator, as chairman of the Budget Committee, was calling on this number of people to die during 2009 for the chart?

Mr. GREGG. Would the Senator yield for a question?

Mr. GREGG. Is it my understanding you are telling us how many people are going to die in 2009 in this part of the Democratic budget; that you are projecting deaths in 2009 to be 7,000?

Mr. GREGG. Will the Senator yield?

Mr. GREGG. Will the Senator yield?

Mr. GREGG. As I understand your proposal, which, if I recall correctly, got 56 votes in this body last year

Mr. GREGG. I wish to ask the Senator further, through the Chair: As I understand the proposal, estates over $10 million would continue to be subject to full estate tax obligation; is that correct?

Mr. GREGG. So we aren't talking about the wealthiest Americans. We are talking about people with significant wealth, up to $10 million. But a family farm can easily be valued at $10 million. A small business, a restaurant could easily be valued at $10 million. A small software company could easily be valued at $10 million. So we are talking about continuing, without major tax consequences, small businesses and farms that otherwise would be subjected to a very onerous tax which might put them out of business; is that not correct?

Mr. GREGG. If I may ask a further question, I think the Senator's anecdotal story is one everybody has seen innumerable times in their home States: Small businesses put out of business or put under distress as a result of the death of a principal in the small business due to the estate tax, the death tax. After finishing law school, I went back for 3 years and got a master's degree in taxation, which was one of the most foolish things I ever did. It only proved to me the tax law is totally inane. But I don't believe in the tax law there is any other place where there is such a penalty of tax assessment for an act which has occurred without any economic event. In other words, the only thing that generates this tax is not that you sold a business or built a business or that you were involved in some transaction. It is that you got hit by a truck crossing the street, which is not an economic act. Isn't that why this tax makes no sense on the face of it, especially for smaller estates that involve small businesses? It is a noneconomic event. It is a ``comes out of the blue'' type of an event. You die, unfortunately. If you get hit by a truck, you get sick, any number of events can cause that event to occur, but it is not something you have control over and, therefore, you can't create economic activity around it which is going to give you the wherewithal to pay the tax. Is that not true?

Mr. GREGG. It is called casualty loss.

Mr. GREGG. As a final question--I think it needs to be emphasized--is it not true that this doesn't exempt all estates? This exempts estates up to $10 million, which are probably going to be small businesses or small farms?

Mr. GREGG. Well, Mr. President, Senator Conrad, I think, was going to straighten this out. But I think the plan now is to go to Senator DeMint. He needs approximately 20 minutes. Then there would be whatever time the Senator from North Dakota plans to respond. Then we will go to Senator Bunning.

Mr. GREGG. I ask unanimous consent that after Senator Dorgan sends his amendment to the desk, that then Senator Alexander will be recognized to offer an amendment.

Mr. GREGG. Then the next amendment would be Senator Alexander.

Mr. GREGG. Mr. President, as I understand it, the sequence would be, of the amendments just offered, that the side by side for Senator Bunning of Senator Conrad, followed by Senator Specter, followed by Senator Dorgan, followed by Senator Alexander, who has not yet sent his to the desk. In the intervening period, I understand the chairman wishes to take some time. That is my understanding.

Mr. GREGG. Mr. President, the game plan, as the Presiding Officer laid out, is to go to Senator Alexander and then come back. We will go to the Sanders amendment and then come back. I am not sure which is next, but there will be another amendment from our side. I wanted to respond briefly to Senator Sanders. I respect Senator Sanders because he believes fervently in his view of the way Government should work, which is, we should keep making it bigger and keep raising taxes to accomplish that. I have to disagree with the basic philosophy that the present tax law isn't effectively raising taxes from high- income Americans. The simple fact is, over the last 4 years especially, we have seen a higher growth in revenues than we have ever seen before. That growth in revenues has come from wealthy, high-income Americans. Today under this tax law, we have a more progressive tax system than was in place under President Clinton. The lowest 40 percent of wage earners who don't pay income taxes, for all intents and purposes--some pay, but the majority do not; they actually get money back under the earned income tax credit--are getting about twice as much back today under our tax laws than they got back under President Clinton's term. The highest percentage income earners, the top 20 percent, are paying more into the Federal Government than they were paying into the Federal Government under the Clinton years. I think it was 82 percent of Federal revenues came from the top 20 percent of income tax payers under President Clinton. Today almost 85 percent of revenues come from the top 20 percent of income earners. That is a progressive system-- lower income people getting more back; higher income people paying more of the burden. The reason it works this way under our tax laws is that we have created a fair and level playing field where people are willing to do taxable investment. Somebody who has income of significant levels has two options. They can take action to invest in a way which takes risks and generates jobs and also is taxable, or they can take action which takes risks, hopefully generates jobs, and probably isn't taxable because they use our tax laws in order to legally position their money so they don't have to pay the tax burden. It is only human nature, as has been proven over and over again, that if you get the tax rates up too high, higher income people start to use legal means to reduce their tax burden. But if you get the tax burden set correctly, then higher income people take the risk, pursue entrepreneurship, and create jobs, all of which generates income to the Federal Government. That is what is happening today.

Mr. GREGG. I will yield after I finish making my comment. The point is, what is the right tax burden. If you have a progressive system where 85 percent of your revenue is coming from one group, the high-income people, and the bottom income folks are getting much more back than they got back historically, you have a progressive system. If you are generating more revenue than you have ever historically generated over a 4-year period, and you are well above the average amount the Federal Government receives, then you have a pretty reasonable tax structure which is giving a fair amount of revenue to the Federal Government. In fact, as a percent, we are well over what is the norm over the last 20 years. I argue that the tax structure which we presently have in place is working to the benefit of the Federal Government in getting more revenue which is being spent rather aggressively by the other side of the aisle. The Senator from Vermont says: Let's just raise it some more. Raise that tax some more, and we will get even more revenue. I would argue that when you start to jump those rates back up, you will probably not get more revenue. You will dampen economic activity. You will cause people to take action which causes them to invest in a way which reduces their tax liability. You will probably end up reducing revenues with that type of action. It is human nature, and human nature in a capitalist system tends to produce revenues when you have fair taxes and tends to reduce revenues when you have an overly burdened tax system. I am happy to yield.

Mr. GREGG. My answer to the Senator from Vermont is, we get two things from Vermont and New Hampshire: bad weather and bad economics. At this point, I will yield the floor and allow the Senator from Tennessee to pursue his amendment.

Mr. GREGG. Madam President, if the Senator has time, I will be happy to try to respond to a question.

Mr. GREGG. Madam President, if the Senator will yield, it is the Senator's time, so let me put it in the form of a question to ask him back. It is my understanding--and I believe the Senator would agree with this--at the time it was supposed to be the top 1 percent of taxpayers. It turned out it exploded over the years. It was supposed to apply to 1 million people. It has ended up applying to potentially 20 million people.

Mr. GREGG. Madam President, if I could reclaim my time, I think the explanation is that this is a reallocation within the $35 billion which was in the original budget, which basically was added to the deficit.

Mr. GREGG. Thank you. I think Senator Sessions is ready to proceed.