Judd Gregg

Mr. GREGG

Mr. GREGG. Mr. President, I have referred to this as the Wizard of Oz budget because there is someone behind the curtain somewhere on the other side of the aisle who is going to pay for all of those proposals they have put into the budget. No matter how you do the numbers, it works out that this budget has in it, as proposed by the Democratic Party, the largest tax increase in the history of the country. It is interesting that the Senator from North Dakota continues to bring forward the chart that says his tax revenues are about the same as the administration's, failing to mention--well, he did mention it, he just did not highlight it--that he is using one accounting scheme to get to one number, and another one to get to the other. But when you do compare apples to apples and oranges to oranges, you realize that under CBO scoring the difference is very significant between the two. Under OMB scoring the difference is significant between the two. The fact is, there is a dramatic increase in taxes in both packages. In the Democratic package, if you score it consistently the difference is about $300 billion if you do not take into effect the AMT. So you have got a $300 billion tax increase in this bill. Now, if it were not there, why would they have cut taxes to begin with as their first amendment? Their first amendment was a $180 billion revenue reduction. They were at the House number of $900 billion in new taxes. They cut that by $180 billion, which the Senator from South Dakota has ably laid out in his chart with his fig leaf, that $180 billion was their first amendment out of the box. They obviously needed that amendment to reduce the tax burden which they had in their budget. Yet they claim they don't have a higher tax burden in their budget. Totally inconsistent on its face. Not defensible. If they were at the House number, which they were when they originally proposed the budget, they had a $900 billion tax increase. They are now at the new number, which is a $700 billion tax increase. If you take out the AMT number, they are at a $300 billion tax increase. If it looks like a duck and walks like a duck, talks like a duck, it is a duck. This is a tax increase. This budget has a major tax increase. It is incredible to me that they can argue they do not have a tax increase and then oppose my motion, which basically says do not increase taxes. If they are not increasing taxes, they did not have to oppose my motion. They should be supporting it on its face. So the inconsistency is palpable. Palpable. Then the idea that they are going to cover this $300 billion of new taxes, plus the AMT, of an extra $500 billion out of one building in the Grand Caymans--oh, yeah, that is where it is. That is where all of the money is. They are going to get $1 trillion dollars of new taxes out of this building. Granted, we all accept the fact that there is obviously something wrong, when you have 12,000 companies filed there, and they are in a tax haven. But to represent that they can generate this type of revenue by closing tax loopholes on overseas tax activity is absurd on its face; or that they can collect this from unpaid taxes is absurd on its face. The Commissioner of the IRS came to us, the Commissioner. He said the most they can collect over what they are already collecting over the next 5 years is about $20 to $30 billion of unpaid obligated taxes. They have obviously put in place, they believe, a very robust effort to try to collect unpaid obligated taxes. They think the incremental increase they can get, no matter how much more money it gave them, would be $20 to $30 billion, not $300 billion, not $700 billion. That was the testimony before the committee. The Senator, the former chairman and present ranking member of the Finance Committee, came down and spoke at length about the effort to close overseas loopholes and what they have been able to recover. Yes, there may be more dollars there, but there is nothing in the realm of $300 billion, $700 billion, which is what this tax bill--what this tax bill, which is what you should call this budget; it is a tax bill-- proposes. No, this is a budget which has in it a huge tax increase. That is simply the way it is. If it did not, people would not be opposing my motion. They would be accepting it, taking it, because it is a reasonable motion. My motion continues tax cuts for the child credit, for the marriage penalty, 10 percent bracket, the lower marginal rates for Americans and small business, earned-income tax credit, relief for military families, adoption tax credit, dependent care tax credit, college tuition deduction, deductions for student loans, $2,000 Coverdell IRAs, 15 percent capital gains and dividend rate, and the Kyl-Landrieu death tax reform. It is a very reasoned approach. It is what we should be doing. We should not be raising taxes on the American people. Now, the argument is that raising taxes won't have an effect on the economy; that passing this budget, if it were put in full operation, will not have an effect on the economy. Of course, it will. It will have a dramatic effect on the economy. You cannot put $700 billion of new taxes on this economy and not expect this economy to adjust rather dramatically to a slowdown as a result. You cannot ask people who are entrepreneurs, who are taking risks, who are creating jobs, you cannot say to them: We are going to raise your capital gains rate up to 30 percent. We are going to raise your dividends rate, potentially, up to 39 percent. You cannot say that to them and not expect there to be a reaction in the marketplace. People are going to stop taking risks. One thing we have learned in this economy is, if you give people a fair tax system, one where they are taxed at a rate that is reasonable, they will go out and take risks. That is the great genius of the American economy. But, if you give them a tax rate which is unreasonable, they are going to take action to avoid that tax rate, which will mean ineffective use of dollars, inefficient use of capital. It will also mean a lot more people thinking of ways like going to the Cayman Islands to try to avoid taxes. The practical effect of that is you slow the economy, you contract the economy. This proposal will do that. This proposal increases spending over the period of 5 years by, I think it is $147 billion. They have to pay for that, so they raise taxes. It is the old approach. I don't know why it is denied by the other side of the aisle. Why don't they simply admit they like to spend money; they like to take tax dollars and spend money? That is what they are going to do, take people's taxes and spend on it their priorities. Our philosophy is, let people keep their money and they get to spend it on their priorities. They usually do a better job. It is more efficient. They create more jobs, and they create more economic activity. I thought the chart of the Senator from South Dakota was one of the better ones we have seen. It was a pretty good example of what the problem is. I call it the Wizard of Oz budget, where there is somebody behind a curtain who will pay for this. He calls it a fig leaf.

Mr. GREGG. I am many happy to yield.

Mr. GREGG. That was an excellent question. I appreciated that.

Mr. GREGG. Why would you fix it, if it is not broken?

Mr. GREGG. I wished to comment on a couple other points. We went through this when we debated the budget and the Senator from North Dakota used his charts and I responded with an occasional chart, not quite as many. But I think it is important to make these points in a couple of areas. He says there is a 2-percent difference now between his tax revenues and the President's tax revenues over the 5 years. When he brought the budget out, it was 3 percent; 3 percent came out to $\1/2\ trillion. He is at the 2 percent number now because he has factored in the fact that they reduced taxes or they at least allowed some of the tax extenders to go forward with the Baucus amendment which, basically, by accepting that amendment as a first amendment, the Senator from North Dakota made our argument for us, which was that they were raising taxes. That 2 percent would translate into about $300 billion today, a lot of money. If you decide you are going to create a chart and you use small enough incrementals, you can end up with those two lines being together, but $300 billion is big-time dollars. That is the American taxpayer having to pay a lot of money in order to cover new spending under the Democratic proposal. In addition, this whole issue of economic expansion, the Senator from North Dakota pooh-poohs the last few years of economic expansion. He says it is not that good compared to the Clinton years. Nearly eight million jobs is a lot of jobs; 22 continuous quarters of economic growth is a lot of economic growth. Equally important, is the fact that we now have a revenue stream which exceeds the national average. Let's put that chart up there again because that is one of the most important charts we have. We have a revenue stream which exceeds the historic average of what we generate for revenues to the Federal Government. That is a critical issue and a critical point. We have a tax law which has actually gotten lower rates in a lot of areas for working families, for families with children, for people who have dividend income and take capital gains and, thus, take risk. By the way, senior citizens who are on fixed incomes are by far the biggest receivers as a group of dividend income. When you start raising the rate on dividend taxes, you are hitting seniors who are on a fixed income. The fact is, with these lower rates, which we put in place, we are generating revenues to the Federal Government today--we have been for the last 3 years--which dramatically exceed the amount of revenues which have historically been generated to the Federal Government. As a result, the deficit is coming down precipitously. We will be in balance. I said Humpty Dumpty could balance the budget by 2011. In fact, under CBO's scoring, the budget goes into a dramatic surplus by 2011. They don't take into account a couple of major issues, but it doesn't matter. The fact is, you can get to balance because revenues are coming in dramatically. Why are they coming in dramatically? Because we have a tax law that works today. What does the other side want to do with that? They want to throw it out. They want to go back to the old ways, when you just significantly increase the taxes on productive America, on working Americans, on Americans who unfortunately die and run small businesses and their families get wiped out. Why does the other side of the aisle want to do that? Why does the other side of the aisle want to say to a family who has a death, who runs a small restaurant or a small farm or small business: We are going to put you out of business; we are going to hit you with a 45-percent tax rate? That makes no sense at all. Why not agree to the Kyl motion which was a balanced approach, worked out by both sides of the aisle, a fair, bipartisan approach? Why not be willing to extend the capital gains and dividends rate which has generated so much revenue, so much economic activity? In fact, capital gains has actually been a net winner for us. By reducing rates, we have now generated significantly more income from capital gains taxes than we did when the rates were higher. Why is that? It is called human nature. If you own an asset, a stock, a bond, a piece of real estate, and you know you are going to be taxed at 25 percent or maybe 30 percent, the odds of your selling that asset and realizing the gains are pretty slim. Maybe you are figuring, I will hold onto it. But when that tax rate went down to 15 percent, there was an immediate incentive for Americans to go out and sell those locked-up assets. What was the effect of that? The first effect was they got cash, which they then reinvested in something that was much more efficient. They put their capital into a better working situation so they created more economic activity. It is human nature that they would go out and invest to try to earn more money, which means they are basically investing in taking maybe more risk or creating more opportunity for jobs. In addition, they generated a huge windfall to the Federal Government which we are continuing to receive because those assets which were not going to get sold under the higher tax rates were getting sold. We were getting the revenues. The proceeds were being reinvested, and that generated more jobs, more economic activity, which generated additional revenues. That is why we have seen this dramatic increase in Federal revenues. In fact, the vast majority of the Federal revenue that we have seen jump has been a function of capital gains revenue. That is where most of this new revenue comes from. Yet the other side doesn't want to extend the rates on capital gains, doesn't want to extend the rates on dividends. They want to kill that goose that has been laying significant revenues for the Federal Government and giving people an incentive to be productive and helping senior citizens who are on a fixed income meet the challenges of living on a fixed income. It makes no sense to me that they would oppose this amendment, if their argument is they have no tax increases in their budget. The only way you can oppose my motion is if you do have tax increases in your budget because the only way my motion has any impact is to address tax increases. So if you didn't have any tax increases in your budget, you would have to support my motion. If that is their position, that there are no tax increases in their budget, then my motion should be a nonevent and should be supported. But it appears they do have tax increases in their budget because they are opposing my motion. In fact, if we go back to the chart that shows the actual calculation of tax increases, the 3 percent chart or the apples to apples, it is true. There is a $300 billion tax increase over and above the AMT, even after the Baucus language, and there is, in addition, an issue of where that $300 billion is going to come from. The concept that it is going to come out of a building in the Grand Caymens or from uncollected taxes is not valid in the face of the testimony before our committee and the history of our attempts to try to close those, to address those two issues. No more than 10 percent of that tax increase could possibly be gained out of those two accounts. The rest will have to come out of working Americans who today are benefitting from the tax cuts which are in place and using those tax cuts to significantly expand this economy and, as a result, generate significantly more revenues to the Federal Treasury. That is obviously why I put this motion forward. The Senator has put forward his alternative, which is responded to by the summary I have given of mine and speaks to the fact that his third paragraph, which is you are going to get the money from the tax gap and abusive tax shelters is not credible in the face of the facts and the situation. Although we certainly want to get as much as we can from those two accounts, we are not going to get anywhere near what is proposed, nowhere near the $300 billion. Of course, he held up my motion. He said: It doesn't address the AMT to the Senator from South Dakota. I would note that his also does not address the AMT. At least we are consistent on that point. It is my understanding that Senator Cornyn is going to be back in 10 minutes to offer his motion. I yield the floor.

Mr. GREGG. Will the Senator yield for a clarification? I will acknowledge there was no budget last year. But 2 years ago, there was a budget, if you recall, and it actually had a reconciliation instruction in it--a very significant instruction.

Mr. GREGG. I want the Senator to be correct. Was the third year the year you were in charge when we did not have a budget?

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

Mr. GREGG. Mr. President, to respond quickly, we have been over this ground many times in our discussions, but I do think it is important to reinforce the differences. First off, I ask unanimous consent to have printed in the Record the letter from Director Portman which reflects the fact that CBO scores the administration revenues significantly different than what is used as a chart by the Senator from North Dakota and reflects the fact there is a $300 billion increase in the proposal of the Senator from North Dakota.

Mr. GREGG. He holds up the wall of debt chart. Let me hold up the wall of taxes chart which the Senator from North Dakota is showing in his budget. He is basically proposing dramatic increases in the tax burden on the American people. He claims it is going to come from this Grand Cayman building and that the Commissioner of Revenue is not doing his job in collecting the funds that are owed and obligated. But the fact is, the Commissioner has aggressively pursued this. We have given him more money. He will continue to aggressively pursue this. Yes, there is more that can be collected, but the numbers are nowhere near what the Senator from North Dakota has represented they might be.

Mr. GREGG. Not right now.

Mr. GREGG. I will answer questions in a second.

Mr. GREGG. Well, let me finish my statement on the points which I am making; which is that the Grand Cayman building is not going to pay for the tax increases in the Senator's budget. Now, the Senator says he has a 2-percent increase in the tax burden. Two percent translates into about $300 billion. That has to come from somewhere. Do you know why that tax increase is in this budget? Because he spends the money. He spends that money. In all the numbers that are being thrown out here on the floor, all the different ideas, all the different arguments about OMB and CBO and this and that and this and that and Grand Cayman buildings, the bottom line is that the budget of the Senator and the Democratic Party increases spending. In the discretionary accounts, the Democrats' budget is about $145 billion above the President's request over the 5 years. It increases mandatory spending by nearly $460 billion. It increases taxes, above the AMT issue, by about $300 billion over 5 years. It does not extend those tax cuts and rates which have generated the huge explosion in revenue for this Government; specifically, things such as the dividend and capital gains tax rates and the rates that assist working Americans. So it is not necessarily--if it did extend those rates, you would think there wouldn't be so much resistance to my motion. You can't make the argument that you are not raising taxes on Americans and then oppose my motion, which essentially says: Don't raise taxes on Americans. That is the bottom-line inconsistency of the Senator from North Dakota's arguments when you get beyond all the numbers. I will yield to the Senator from Iowa, but the Senator from North Dakota had a question, and I look forward to his question. Remember, it has to be a question.

Mr. GREGG. Well, because--

Mr. GREGG. Because the tax burden is going up in the billions on the side there, the x-axis. Does my colleague see that on the side? It is the amount of tax in billions--the actual taxes you are taking from people, the tax burden, that is the problem. Look at it this way: If you are taking $2.5 billion from people today and then at the end of your budget you are taking $3.15 billion from people, that is all coming out of those tax numbers.

Mr. GREGG. Mr. President, if I may reclaim my time, the Senator has made my argument for me. My motion should not be opposed because my motion would accomplish what the Senator wishes, which is to maintain a reasoned tax law in this country and a tax burden on the American people which would be consistent. If you oppose my motion, you are saying you have to raise taxes. By definition you do.

Mr. GREGG. I reclaim my time, Mr. President. As much as I would like to hear from the Senator from North Dakota, I have told the Senator from Iowa I would grant him some time.

Mr. GREGG. But I have the floor.

Mr. GREGG. Well, I believe I control the time.

Mr. GREGG. Well, I believe the Senator from Iowa had a question.

Mr. GREGG. I believe the Senator from Iowa had a question. I heard him say he wanted me to yield for a question.

Mr. GREGG. I am sure the Senator from North Dakota has some succinct comment he wants to make before we turn to the Senator from Iowa.

Mr. GREGG. I yield to the Senator from Iowa such time as he may consume.

Mr. GREGG. I yield to the Senator from Iowa as much time as he may consume.

Mr. GREGG. Madam President, I express my support for the efforts of the Senator from Texas. I understand the parliamentary situation. It has been ruled that if his amendment were accepted and finds it way through the entire process--it is going be accepted, but if it were to come back, it would put in jeopardy the privileged status of the budget and that is obviously not appropriate. But the fact is this amendment highlights an essential point. Even though it may not come back, it is important that we be on record as having supported it, as the 63 people did, and as we will be when we adopt this amendment in this motion to instruct, because it makes the statement, which the Senator from North Dakota has agreed with, that rates should not be increased. Unfortunately, the structure of this budget, in my humble opinion, militates toward increasing rates. I do not see how it does anything else in the final analysis. That, of course, is why I have offered my own motion to instruct here, so the rates will not be increased, or at least we will have that statement. But I think the Senator from Texas has hit the nub of the issue, which is we should not be increasing tax rates on the American people. No matter what the structure of this budget is when it comes back, even if it doesn't have this language, there will be a pretty clear statement by this Senate that rates should not be increased, and should at some point down the road there be a bill brought to the floor, which will be, I am afraid, reflective of the priorities of this budget, which does increase rates--or fails to maintain the rates which are presently in place and thus in the alternative is increasing rates--we can turn to the excellent amendment of the Senator from Texas and say that was not the position of this Senate. The position of the Senate was that would not happen. I think his amendment, even if it may not return from conference because of the effect it would have on the privileged status of the budget resolution, is still a very effective statement and one that needs to be made.