Orrin Hatch

Mr. HATCH

Mr. HATCH. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. HATCH

Mr. HATCH. Mr. President, the amendment I offer is simple and straightforward. It would extend permanently the credit for increasing research activities, commonly known as the research credit, or the R&D credit. This provision has been an important contributor to our robust economic growth in the past decade. I have to admit I am working with the managers of the bill on trying to find an acceptable offset for this particular amendment. Even if we don't find an offset, this amendment is very important, and should be adopted. Let me explain why this amendment is necessary. In July 1999, the Senate voted to make the research credit permanent. Unfortunately, the House version of the 1999 tax bill included only a 5-year extension of the credit. The 5-year extension prevailed in conference. As we all know, that bill was vetoed by President Clinton. However, in November of 1999, Congress passed and President Clinton signed the Ticket to Work and Work Incentives Improvement Act, which included the 5-year extension of the research credit. Therefore, the credit was extended to June 30, 2004. Last summer, the Senate again had the opportunity to vote on a permanent extension of the research credit. While we were debating last year's version of the death tax repeal bill, Senator Baucus and I offered an amendment to again make the research credit permanent. The Senate passed the amendment with a vote of 98-1. Once again, President Clinton vetoed the underlying tax bill. Thus, as it stands under present law, the research credit is scheduled to expire on June 30, 2004. This is most unfortunate, Mr. President, because in 2004, the Congress and, more importantly, America's business community, will once again have to go through the rigmarole of on-again, off-again uncertainty of an important tax provision that means so much to our country. The ultimate loser in this game is not the Congress, nor even the companies that engage in research, but each American. This is because every one of us is the direct beneficiary of the research investments made by the businesses of America. Each one of us benefits from the higher economic growth, the increased productivity, and from the higher degree of global competitiveness that increased research brings. The research credit has been in the Internal Revenue Code for 20 years, in one form or another. It has expired and been extended ten times. Ten times, Mr. President. Those extensions have been as short as 6 months and as long as 5 years. There have even been periods when the credit was allowed to expire, and then retroactively reestablished. On one occasion, the credit expired and was re-enacted prospectively, leaving a gap period when the credit was not available. The one thing the credit has never been is permanent. This is significant because, as effective as the credit has been in providing a strong incentive to companies to increase their research activities, it has been inherently limited in its effectiveness because business leaders have never been able to count on the credit being there on a long-term basis. Anyone who has been in business for more than 10 minutes knows that planning and budgeting--unlike what we do in Congress--is a multiyear process. And, anyone who has been involved in research knows that the scientific enterprise does not fit neatly into calendar or fiscal years. Our history of dealing with the research credit--that is, allowing it to run to the brink of expiration and reviving it at the 11th hour, the 12th hour, or even bringing it back from the dead with retroactive extensions--results in not only very poor tax policy, but is also detrimental to our research-intensive business entities and indeed the whole country. It is time to get serious about our commitment to a tax credit that is widely viewed by economists and business leaders as a very effective provision in creating economic growth and keeping this country on the leading edge of high technology in the world. A 1998 study by Coopers and Lybrand dramatically illustrated the significant economic benefits that have been provided by the research credit. According to the study, making the credit permanent would stimulate substantial amounts of additional research and development in the U.S., increase national productivity and economic growth almost immediately, and provide U.S. workers with higher wages. That is hard to beat. In fact, it cannot be beat. The vast majority of the members of this body are on record in support of a permanent research credit. As I mentioned, last summer, 98 Senators voted in favor of permanence. Moreover, making the research credit permanent was practically the only business provision that President Bush included in his tax proposal. And, just in case some have forgotten, former Vice President Al Gore also included a permanent research credit in the tax plan on which he campaigned last year. The point here is that making the credit permanent is probably the most bipartisan tax cut provision that has been before the Congress in recent years. While practically everyone says they support a permanent research credit, it has become too easy for Congress to fall into its two- decade-long practice of merely extending the credit for a year or two, or even 5 years, and then not worrying about it until it is time to extend it again. These short-term extensions have occurred ten times since 1981. Ten short-term extensions for a tax credit that most Members of this body strongly support. I am not sure we realize how the lack of permanence of the credit damages its effectiveness. I am telling you it does, and so do the experts. Research and development projects cannot be turned on and off like a light switch. They typically take a number of years and may even last longer than a decade. As our business leaders plan these projects, they need to look years ahead in making the projections and estimating the potential return on their investment. Because the research credit is not permanent, and its extension is not assured, the availability of the credit over the life of these projects is uncertain and is thus often not included in the numbers. As a result, the projected return on the investment is lower and some promising research projects are simply not funded. With a permanent credit, these business planners would take the benefits of the credit into account, knowing they would be there for all years in which the research is to be performed. The result would be a lower projected cost, leading to more research projects being funded, which in turn would lead to more benefits to the economy, to our productivity, and to each consumer. In fact, making the credit permanent would start these benefits now and actually give an immediate boost to the amount of research performed, even before the current credit expires in 2004. There is little doubt that a significant amount of the incentive effect of the research credit has been lost over the past 20 years because of the constant uncertainty about its continuing availability. This uncertainty has undermined the very purpose of the credit. For the Government and the American people to maximize the return on their investment in U.S.-based research and development, this credit must be made permanent. And now is the time to do so. Each time that Congress has extended the research credit for only a short period, rather than permanently, the ostensible reason has been a lack of revenue. We tell our constituents that we simply did not have the money to extend the credit permanently. Is this the excuse we are going to give the next time we meet with the high-tech workers and entrepreneurs in our States? Are we going to tell them that out of a tax cut bill totaling $1.35 trillion, we could not find the revenue to pay for the permanent extension of this credit? I admit that the revenue cost of extending the research credit permanently is not inconsequential. The estimate I have from the Joint Committee on Taxation says that its extension would cost around $47 billion over 10 years. But this is only 3.5 percent of the total cost of the bill. It seems to me that 3.5 percent is a small price to pay for a provision that will help ensure continued productivity increases, economic growth, and job creation. Ironically, it costs at least as much in terms of lost revenue to enact short-term extensions as it does to extend it permanently. So saying we cannot afford to make the research credit permanent is a notion of false economy forced on us by the budget rules. I believe there is simply no valid reason that the credit should not be extended on a permanent basis. The provision was in the President's proposal, and it should be in the bill before us today, and was in Al Gore's plan as well. I believe a permanent research credit is one of the most important elements of President Bush's tax plan because it is so tied in with the issues of economic growth and our future prosperity. According to Chairman Greenspan, the Nation's high productivity growth, which has played an instrumental role in our economic growth of the past few years and also in creating our projected budget surplus, would likely not have been possible without the innovations of recent decades, especially those in information technologies. The research credit is a key factor in keeping these innovations coming into our lives. But a temporary credit is inherently limited in its ability to do this. As I mentioned earlier, I am afraid too many of us are stuck in a mindset that says that since the research credit can just be taken care of later this year in a tax extenders package, or when it gets closer to its 2004 expiration date, why bother about it now? I want to emphasize that another temporary extension is not the issue here. We can and probably will always extend the credit when the time for its expiration comes. It will likely be on the less effective basis we have always done it, perhaps only for a few months, or it may be on a retroactive basis, and there may be a gap created, but we will probably keep extending it. The issue is whether or not we should magnify the power of this credit by making it permanent. It is just common sense to do so. The conditions for a permanent extension now are better than they have ever been, and are likely to be again, and we should not let this bill go by without doing this. This amendment is about long-term growth, it is about fostering innovation and keeping the innovation pipeline filled, and this is about sustaining the productivity gains that have brought us where we are today and that can help us stay prosperous in the future as we deal with the entitlement challenges ahead. In conclusion, if we decide not to make the research credit permanent, are we not limiting the potential growth of our economy? How can we expect the American economy to hold the lead in the global economic race if we allow other countries, some of which provide huge government direct subsidies, to offer stronger incentives than we do? Making the credit permanent will keep American business ahead of the pack. It will speed economic growth. Innovations resulting from American research and development will continue to improve the standard of living for every person in the U.S. and also worldwide. This provision should be in this bill. It deserves to be on the table in conference with the House. We should not overlook the importance of making the credit permanent now. I urge my colleagues to support this amendment. Amendment No. 701 to Amendment No. 697

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

Mr. HATCH. Mr. President, on behalf of myself, Senators Allen, Craig, Gordon Smith, and Harry Reid, I send an amendment to the desk and ask for its immediate consideration.

Mr. HATCH. I thank my colleagues for their graciousness and willingness to work with me to see how we can make this part of the overall tax bill, and I sure hope our colleagues on both sides will support whatever offset they come up with, and that they can support this amendment. We are making a diligent effort to try to resolve the offset problems. I am willing to yield my time, but I notice the Senator from Nevada has risen. I will be happy to yield to the Senator from Nevada.

Mr. HATCH. Mr. President, I will just take a few minutes to speak to Senator Kerry's amendment. This amendment provides a 30 percent tax credit on qualified research expenses to develop microbicides for HIV and vaccines for malaria, TB, HIV, and other diseases that kill 1 million people or more annually. This is an expansion of the existing 20 percent research and development tax credit. It mandates that a company file a research plan with the Secretary of the Treasury on these priority vaccines or microbicides before claiming the tax credit. It allows the tax credit to be applied to the costs of clinical trials outside of the United States, because of the prevalence of malaria, TB, and HIV in developing countries. However, pre-clinical research must be conducted in the United States in order to claim the tax credit. This amendment also provides a refundable tax credit to small biotech companies based on the amount of qualified research that a company does in a given year. This credit is designed to stimulate increased research among firms that often do the most innovative research. It mandates that any firm receiving this credit put an equivalent amount of funds into research and development within 2 years of having received the credit. Such expenditures cannot be claimed under the tax credit for qualified vaccine research and development. It requires the Secretary of the Treasury to promulgate regulations to recapture the credit if a company fails to make these expenditures. The amendment allows 100 percent of the expenditures on contracts and other arrangements for research and development on these priority vaccines and microbicides to be counted toward the baseline for the R&D tax credit. Currently only 65 percent can be counted. This increase is designed as an incentive for larger firms to contract with smaller vaccine research companies. So, Mr. President, I have filed this on behalf of Senator Kerry and myself. I hope the Senate will give great consideration to this. I yield the floor and reserve the remainder of my time.

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

Mr. HATCH. Mr. President, on behalf of Senator Kerry and myself, I send a perfecting amendment to the desk and ask for its immediate consideration.

Mr. HATCH. I thank my colleague and I am prepared to yield the remainder of my time if the floor managers are prepared to yield the remainder of their time?

Mr. HATCH

Mr. HATCH. Mr. President, today I wish to pay tribute to a World War II veteran who brought hope to an occupied people. On May 24th for more than half a century, the residents of the former German-occupied Als Island off the coast of Denmark celebrated Robert ``Bud'' Clay as a hero. However, until recently, Bud was unaware of this honor. Robert B. Clay was a Lieutenant Colonel in the 351st Bomb Group stationed in Polebrook, England during World War II. He was leading a B-17 bombing raid when things went terribly wrong. The plane's engines started failing one by one. Bud steered the plane toward neutral Sweden, but with the failure of an additional engine, it was clear that they would be unable to escape enemy territory. After ensuring that eight of the ten crewmen had safely bailed out of the plane, Clay and his copilot attempted a crash-landing in a nearby grassy clearing on Als Island. Als Island was first occupied by German troops in 1939. The crashing of the B-17 on May 24, 1944 was seen by the people of the island as a symbol of approaching liberation. In fact, the plane was such a beacon of hope to them that the people of Als Island kept pieces of the wrecked B-17 not only as souvenirs but also as near-sacred tokens. One woman even made her wedding dress using fabric taken from one of the pilot's parachutes. All the crewmen in Lieutenant Colonel Clay's plane survived the flight, but were taken as prisoners-of-war. Clay was held captive as a POW for one year in camps near Sagon, Nuremburg, and finally Mooseburg, Germany. Then on the 28th of April, 1945, Bud saw the stars and stripes being flown from a tall building in an adjacent town. He suddenly realized that liberation was on its way. An experience uncannily like the Danes who viewed his plane's crash as a harbinger of freedom. For 40 years Clay did not speak of his experience. He was the pilot of the mission and harbored feelings of guilt and responsibility, for the crash, for his crew being taken as POWs, and for not being able to finish out other missions. However, as he was looking through a war-reunion newsletter two years ago, Clay recognized a photograph of the plane wreckage and the hills and farmhouses surrounding it. An islander had taken the picture as a boy and published the photo and story in hopes of finding the Americans whose crash-landing has been celebrated for decades. This year will be the first year that Clay will be part of that celebration. He and five others from his bomber crew have been invited to personally attend the ceremonies that have been held in their honor for 56 years. Clay will forever live as a hero in the memories of Als Island people. He has received e-mails and letters from them expressing their thanks. They have told him that seeing his plane helped them realize for the first time that help was on the way. I am very proud that this great man, who continues to serve in his local community, will finally receive the personal recognition he earned so long ago.

Mr. HATCH

Mr. HATCH. Mr. President, I am rising to introduce a bipartisan resolution to designate May 20-26, 2001 as National Emergency Medical Services Week in honor of the 750,000 Emergency Medical Services, EMS, personnel who are on the front lines every day saving the lives of countless Americans. I am delighted that my esteemed colleague, Senator Baucus, is joining me as the primary cosponsor, in addition to 50 other original cosponsors. The theme of this year's week is ``EMS: Answering the Call,'' emphasizing the responsiveness of emergency medical services around the country, while underscoring the importance of the national 9-1-1 emergency number system. This observance also honors the passion and commitment of those serving the system including emergency physicians, emergency nurses, emergency medical technicians, paramedics, firefighters, and many other dedicated individuals who provide lifesaving care 24 hours a day, seven days a week. The continued strength and growth of our Emergency Medical Services System has been an important issue to me. In 1984, Senator Inouye and I worked closely with several of our colleagues to enact legislation to establish the Nation's first Emergency Medical Services for Children program, EMSC. Over the past decade, this pediatric EMS program has improved the availability of child-size equipment in ambulances and emergency departments. It has fostered literally hundreds of state and local programs to prevent injuries, and has supported thousands of hours of training for Emergency Medical Technicians, EMTs, paramedics, and other emergency medical care providers. EMSC efforts have led to legislation mandating programs in several States, and to the development of educational materials covering every aspect of pediatric emergency care. However, most importantly, EMSC efforts are saving kids' lives. EMS providers, be they career or volunteer, which the majority are, engage in thousands of hours of specialized training and continuing education to enhance their lifesaving skills. It is well known that access to quality emergency care dramatically improves the survival and recovery rate of those who experience sudden illness or injury. In fact, emergency medical services providers have traditionally served as the safety net of America's health care system. However, this healthcare safety net today is in crisis. On the front lines, emergency medical service providers are faced with crowded emergency departments and dwindling resources. These, and many other complex issues are threatening the ability of health professionals to deliver quality care. A solution to the overcrowding of our nation's emergency departments requires a national commitment. This will mean allocating significant financial resources and convening Federal and State policymakers, local hospitals, community leaders and public and private health plan payers to develop workable solutions. We will also need adequate monitoring and data collection efforts to understand the scope of these problems and to uncover the best methods for resolving this crisis. To continue to deliver quality healthcare in this country, we must not only recognize those individuals who have dedicated their careers to caring for the very sickest Americans, but also the undue stress and burden this system in crisis places on them each and every day. We must work toward resolving this crisis so we can continue to attract quality healthcare professionals to the EMS field and to give them the resources they need to continue to save lives. It is appropriate to recognize the value and the accomplishments of emergency medical service providers by designating this May 20-26, Emergency Medical Services Week. I ask my colleagues to join with me in supporting this resolution.

Mr. HATCH

Mr. HATCH. Next, if I can, on tax credit. I will wait until Monday.

Mr. HATCH

Mr. HATCH. Mr. President, today I am introducing bipartisan legislation that will provide important and necessary technical changes to the Radiation Exposure Compensation Act of 1990, RECA, as amended. I am delighted that my good friend and esteemed Chairman of the Budget Committee, Senator Domenici, is joining me as the primary cosponsor. Pete and I have been working on RECA since its enactment in 1990 and his leadership has been invaluable over the years in making this program a reality. I want to give special thanks to Senator Daschle for joining us as an original cosponsor on this important legislation. His support of this program has been critical to its success. I also want to thank Congressman Chris Cannon who is introducing the companion bill in the House. The compensation fund established under the original RECA Act of 1990 provides a level of financial support to thousands of individuals, both workers and civilians, who were not informed about the health hazards associated with radiation exposure. Many of these individuals worked in uranium mines, many drove the trucks which transported uranium ore, and many happened to live downwind from a nuclear test site. These individuals, especially the downwinders, became ill due to their radiation exposure. As my colleagues will recall, last year Congress passed the Radiation Exposure Compensation Amendments of 2000, S. 1515. This law, P.L. 106- 245, included new eligibility standards so that individuals who were injured as a result of working in the government's nuclear weapon's program would receive some compensation for their radiation-related illness. The RECA Amendments of 2000 made important changes to the original 1990 Act by updating the list of compensable illnesses, primarily cancers, eligible for consideration as well as increasing the number of individuals and states eligible for compensation based on the latest scientific and medical information gathered over the past decade. It has become painfully clear that there remain several important problems with the program which needs immediate or corrective attention by the Congress. First and foremost is the fact that the RECA Trust Fund is depleted. This is a situation we cannot allow to continue. I must say that I am outraged by the lack of funding for RECA. If Social Security recipients suddenly did not receive their checks, can you imagine the outcry that would fall on the Congress? A government IOU is a second injustice for families who have already suffered once too much. The fact of the matter is that funding for RECA must be permanently appropriated. Otherwise, we continue to run the risk of annual appropriation shortfalls during the appropriations process. Because the trust fund is depleted, RECA claimants are now receiving ``IOU'' letters from the Federal Government in lieu of a check. I am informed by the Justice Department, which oversees the RECA program, that approximately 180 claims cannot be paid because the trust fund is depleted. Morever, I understand this number is likely to increase to as many as 2,000 claims. This situation is simply unacceptable. I have met with RECA claimants in my state. It does not take long to see the pain and suffering they have endured over the years. Pain and suffering, I might add, that has taken a toll not only on their lives but on the lives of their families, as well. Most of these individuals are now retired; they live on modest incomes, and fear their declining health will only exacerbate their limited family finances. Many of these individuals have already died as a result of their injuries sustained while working for the government's nuclear production program. They have paid the highest price for service to their country--their lives. I recently received a copy of a letter from one of my constituents, Miss Rita Torres, who wrote to President Bush regarding her father, Mr. Jose O. Torres, who suffered from cancer as a result of working in a uranium mine. Mr. Torres was diagnosed with lung cancer two years ago. It metastasized to his liver. He had to use oxygen constantly because part of one of his lungs had been removed. Seven months ago Mr. Torres received a letter from the Department of Justice informing him he had been approved for compensation under the RECA program. According to Mr. Torres, ``When I received my approval, it was a happy day. I have exhausted all my means and have been waiting for some relief from my government since the approval letter arrived seven months ago. Once I was a strong man, glad to work hard all day long. But I am no match for the pain, it has brought me to tears, it has brought my wife to tears as she struggles to make me comfortable, it has brought my children to tears to see their parents suffer so. I have no access to money. I have no influential friends. I am a simple person who has understood that when you gave your word, it meant something. But all the promises to the people have been forgotten. To be near the end [of my life] with no relief from the government has saddened me very much.'' Mr. Torres never received his check from the federal government. He received an IOU instead. Several weeks ago, on March 21 at 2:30 p.m., Mr. Jose Torres passed away. He was 73. We cannot forget these brave Americans. When Congress passed the original RECA legislation in 1990 and the subsequent RECA 2000 amendments last year, we made a promise to them. Mr. Torres, like thousands of other individuals in the 1940s, 50s and 60s, worked in some of the most horrendous conditions imaginable all the while not knowing that they were exposed to dangerous levels of radiation. The legislation I am introducing today will provide for a permanent, indefinite appropriation to the RECA Trust Fund. Both the President's budget and the budget resolution contain a provision proposing to fund RECA on a permanent basis. The bill we are introducing today provides the necessary authority for Congress to follow-through and appropriate a full and permanent allocation to the trust fund. Let me also take a moment to comment briefly about another key provision in the bill which I believe deals with a matter of fairness for the RECA community. The legislation we are introducing today ensures that all individuals exposed to radiation as a result of the government's nuclear weapons production program are accorded the same level of benefits. Last fall, Congress passed the Department of Defense Authorization Act of 2000, P.L. 106-398, creating a new ``Energy Employees Occupational Illness Compensation Program.'' This new program, which I supported, establishes a compensation fund for Department of Energy, DOE, employees and contract employees who were injured due to exposure to radioactive materials while working at DOE nuclear facilities and weapons testing sites. Under the Energy program, individuals whose claims are approved will receive a monetary amount of $150,000 plus prospective medical benefits. These benefits are considerably more generous than those provided under RECA. During the DOD conference last fall, Senator Domenici and I worked to provide an increase in benefits for the RECA claimants to provide them with an additional $50,000 plus prospective medical benefits. It seems blatantly unfair for the federal government to provide a richer level of benefits to its own employees than for innocent civilians who happened to live downwind from a test site, or who worked in one of the mining operations. Although the final agreement did extend additional benefits to the RECA workers, the conferees decided not to include the downwinders or on site participants. The bill we are introducing today corrects this injustice and ensures that all individuals exposed to radioactive materials, as part of the government's program, are treated the same with respect to the level of benefits provided. The third and final key provision of this legislation provides necessary technical changes to the 2000 Act which, essentially, were recommended by the Department of Justice. The 2000 Act inadvertently eliminated some claimants previously eligible for compensation, and made it more difficult for other claimants to prove eligibility. For example, in amending the list of downwinder areas, RECA 2000 inadvertently eliminated individuals in a portion of Mohave County in Arizona who were previously eligible under the original RECA program. As a consequence, claimants who reside in this portion of Mohave County are no longer eligible for compensation. The technical amendment would again include this area in the definition of downwinder areas. The proposed legislation we are introducing today will also improve the efficiency of the RECA program. Moreover, this bill will ensure fairness in the administration of RECA. I am particularly mindful of concerns regarding the inclusion of additional cancers or counties to be included in the Act as well as the standards for length of radiation exposure necessary to qualify for the program. I know there has been some confusion over the length of radiation exposure requirements for certain cancers. In this regard, I have included in the bill Section 5 which specifically directs the National Research Council to report to Congress annually with recommendations to include additional cancers, or counties, in the program. Moreover, the NRC is directed to examine whether the requirements for exposure to radiation should be reduced. This section will provide Congress the needed epidemiological data to assist us in resolving these issues. It is critical that Congress pass this legislation as soon as possible. And, to that end, I intend to schedule this bill for an executive business meeting in the Judiciary Committee as soon as possible. This bill has strong bipartisan support. I urge my colleagues to support this measure so that the Federal Government can keep its commitment to those eligible claimants for whom RECA was enacted. I ask unanimous consent the text of the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, today I am introducing bipartisan legislation that will provide important and necessary technical changes to the Radiation Exposure Compensation Act of 1990, RECA, as amended. I am delighted that my good friend and esteemed Chairman of the Budget Committee, Senator Domenici, is joining me as the primary cosponsor. Pete and I have been working on RECA since its enactment in 1990 and his leadership has been invaluable over the years in making this program a reality. I want to give special thanks to Senator Daschle for joining us as an original cosponsor on this important legislation. His support of this program has been critical to its success. I also want to thank Congressman Chris Cannon who is introducing the companion bill in the House. The compensation fund established under the original RECA Act of 1990 provides a level of financial support to thousands of individuals, both workers and civilians, who were not informed about the health hazards associated with radiation exposure. Many of these individuals worked in uranium mines, many drove the trucks which transported uranium ore, and many happened to live downwind from a nuclear test site. These individuals, especially the downwinders, became ill due to their radiation exposure. As my colleagues will recall, last year Congress passed the Radiation Exposure Compensation Amendments of 2000, S. 1515. This law, P.L. 106- 245, included new eligibility standards so that individuals who were injured as a result of working in the government's nuclear weapon's program would receive some compensation for their radiation-related illness. The RECA Amendments of 2000 made important changes to the original 1990 Act by updating the list of compensable illnesses, primarily cancers, eligible for consideration as well as increasing the number of individuals and states eligible for compensation based on the latest scientific and medical information gathered over the past decade. It has become painfully clear that there remain several important problems with the program which needs immediate or corrective attention by the Congress. First and foremost is the fact that the RECA Trust Fund is depleted. This is a situation we cannot allow to continue. I must say that I am outraged by the lack of funding for RECA. If Social Security recipients suddenly did not receive their checks, can you imagine the outcry that would fall on the Congress? A government IOU is a second injustice for families who have already suffered once too much. The fact of the matter is that funding for RECA must be permanently appropriated. Otherwise, we continue to run the risk of annual appropriation shortfalls during the appropriations process. Because the trust fund is depleted, RECA claimants are now receiving ``IOU'' letters from the Federal Government in lieu of a check. I am informed by the Justice Department, which oversees the RECA program, that approximately 180 claims cannot be paid because the trust fund is depleted. Morever, I understand this number is likely to increase to as many as 2,000 claims. This situation is simply unacceptable. I have met with RECA claimants in my state. It does not take long to see the pain and suffering they have endured over the years. Pain and suffering, I might add, that has taken a toll not only on their lives but on the lives of their families, as well. Most of these individuals are now retired; they live on modest incomes, and fear their declining health will only exacerbate their limited family finances. Many of these individuals have already died as a result of their injuries sustained while working for the government's nuclear production program. They have paid the highest price for service to their country--their lives. I recently received a copy of a letter from one of my constituents, Miss Rita Torres, who wrote to President Bush regarding her father, Mr. Jose O. Torres, who suffered from cancer as a result of working in a uranium mine. Mr. Torres was diagnosed with lung cancer two years ago. It metastasized to his liver. He had to use oxygen constantly because part of one of his lungs had been removed. Seven months ago Mr. Torres received a letter from the Department of Justice informing him he had been approved for compensation under the RECA program. According to Mr. Torres, ``When I received my approval, it was a happy day. I have exhausted all my means and have been waiting for some relief from my government since the approval letter arrived seven months ago. Once I was a strong man, glad to work hard all day long. But I am no match for the pain, it has brought me to tears, it has brought my wife to tears as she struggles to make me comfortable, it has brought my children to tears to see their parents suffer so. I have no access to money. I have no influential friends. I am a simple person who has understood that when you gave your word, it meant something. But all the promises to the people have been forgotten. To be near the end [of my life] with no relief from the government has saddened me very much.'' Mr. Torres never received his check from the federal government. He received an IOU instead. Several weeks ago, on March 21 at 2:30 p.m., Mr. Jose Torres passed away. He was 73. We cannot forget these brave Americans. When Congress passed the original RECA legislation in 1990 and the subsequent RECA 2000 amendments last year, we made a promise to them. Mr. Torres, like thousands of other individuals in the 1940s, 50s and 60s, worked in some of the most horrendous conditions imaginable all the while not knowing that they were exposed to dangerous levels of radiation. The legislation I am introducing today will provide for a permanent, indefinite appropriation to the RECA Trust Fund. Both the President's budget and the budget resolution contain a provision proposing to fund RECA on a permanent basis. The bill we are introducing today provides the necessary authority for Congress to follow-through and appropriate a full and permanent allocation to the trust fund. Let me also take a moment to comment briefly about another key provision in the bill which I believe deals with a matter of fairness for the RECA community. The legislation we are introducing today ensures that all individuals exposed to radiation as a result of the government's nuclear weapons production program are accorded the same level of benefits. Last fall, Congress passed the Department of Defense Authorization Act of 2000, P.L. 106-398, creating a new ``Energy Employees Occupational Illness Compensation Program.'' This new program, which I supported, establishes a compensation fund for Department of Energy, DOE, employees and contract employees who were injured due to exposure to radioactive materials while working at DOE nuclear facilities and weapons testing sites. Under the Energy program, individuals whose claims are approved will receive a monetary amount of $150,000 plus prospective medical benefits. These benefits are considerably more generous than those provided under RECA. During the DOD conference last fall, Senator Domenici and I worked to provide an increase in benefits for the RECA claimants to provide them with an additional $50,000 plus prospective medical benefits. It seems blatantly unfair for the federal government to provide a richer level of benefits to its own employees than for innocent civilians who happened to live downwind from a test site, or who worked in one of the mining operations. Although the final agreement did extend additional benefits to the RECA workers, the conferees decided not to include the downwinders or on site participants. The bill we are introducing today corrects this injustice and ensures that all individuals exposed to radioactive materials, as part of the government's program, are treated the same with respect to the level of benefits provided. The third and final key provision of this legislation provides necessary technical changes to the 2000 Act which, essentially, were recommended by the Department of Justice. The 2000 Act inadvertently eliminated some claimants previously eligible for compensation, and made it more difficult for other claimants to prove eligibility. For example, in amending the list of downwinder areas, RECA 2000 inadvertently eliminated individuals in a portion of Mohave County in Arizona who were previously eligible under the original RECA program. As a consequence, claimants who reside in this portion of Mohave County are no longer eligible for compensation. The technical amendment would again include this area in the definition of downwinder areas. The proposed legislation we are introducing today will also improve the efficiency of the RECA program. Moreover, this bill will ensure fairness in the administration of RECA. I am particularly mindful of concerns regarding the inclusion of additional cancers or counties to be included in the Act as well as the standards for length of radiation exposure necessary to qualify for the program. I know there has been some confusion over the length of radiation exposure requirements for certain cancers. In this regard, I have included in the bill Section 5 which specifically directs the National Research Council to report to Congress annually with recommendations to include additional cancers, or counties, in the program. Moreover, the NRC is directed to examine whether the requirements for exposure to radiation should be reduced. This section will provide Congress the needed epidemiological data to assist us in resolving these issues. It is critical that Congress pass this legislation as soon as possible. And, to that end, I intend to schedule this bill for an executive business meeting in the Judiciary Committee as soon as possible. This bill has strong bipartisan support. I urge my colleagues to support this measure so that the Federal Government can keep its commitment to those eligible claimants for whom RECA was enacted. I ask unanimous consent the text of the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, today, my good friend and colleague, Senator Biden, and I are introducing legislation we have drafted to help ease the burden of those whose husband or wife or father or mother was a public safety officer and has made the ultimate sacrifice and died while protecting the citizens of this Nation. I am speaking of the families of law enforcement officers, firefighters, and rescue squad or ambulance crew members who have lost a loved one in the line of duty. The Hatch-Biden bill we introduce in the Senate today, the Fallen Hero Survivor Benefit Fairness Act of 2001, is designed to make annuity benefits for survivors of public safety officers killed in the line of duty tax free, so long as the annuity is provided under a governmental plan to the surviving spouse or to the child of the deceased officer. In the Taxpayer Relief Act of 1997, Congress took an important step in showing our appreciation for this country's fallen heroes by exempting from taxation survivor benefits for those killed in the line of duty after December 31, 1996. This change has undoubtedly made a significant difference to many such surviving families. But what about the families of fallen heroes who died before that date? Should not their government-provided survivor annuities be tax- free as well? Of course they should. This bill provides tax equity for those survivors receiving annuities for officers who died on or before December 31, 1996. We must make this tax-free treatment available for all survivors of peace officers who gave their lives to make this great country a safer place for us all to live. The tax correction in this bill would not be retroactive. Rather, it provides that payments from a qualified survivor annuity received after December 31, 2001, would qualify for tax-free treatment, even if the peace officer was killed prior to the effective date of the Taxpayer Relief Act of 1997 provision. We are not talking about a great deal of money here. The Joint Committee on Taxation estimates this correction would result in about $5 million per year in lost revenue or a total cost of $46 million over 10 years. This is not a high price to pay to show this country's gratitude for the service these men and women who are public safety officers perform each day when they leave their homes, the risks they take, and for the ultimate sacrifice some of them have made. Last week, the House Committee on Ways and Means approved identical legislation to correct this problem, and I am told the bill is coming before the entire House for a vote today. Mr. President, this week (May 13-19, 2001) is National Police Week. Although it does not begin to pay our debt to these men and women and their survivors, I cannot think of a better way to honor those public service officers who have died in the line of duty than to pass bills like this one that recognize their sacrifices and attempt to help their survivors with their burdens. I hope our colleagues will join us in cosponsoring this bill and in passing this legislation this week. Mr. President, I ask unanimous consent that the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, today, my good friend and colleague, Senator Biden, and I are introducing legislation we have drafted to help ease the burden of those whose husband or wife or father or mother was a public safety officer and has made the ultimate sacrifice and died while protecting the citizens of this Nation. I am speaking of the families of law enforcement officers, firefighters, and rescue squad or ambulance crew members who have lost a loved one in the line of duty. The Hatch-Biden bill we introduce in the Senate today, the Fallen Hero Survivor Benefit Fairness Act of 2001, is designed to make annuity benefits for survivors of public safety officers killed in the line of duty tax free, so long as the annuity is provided under a governmental plan to the surviving spouse or to the child of the deceased officer. In the Taxpayer Relief Act of 1997, Congress took an important step in showing our appreciation for this country's fallen heroes by exempting from taxation survivor benefits for those killed in the line of duty after December 31, 1996. This change has undoubtedly made a significant difference to many such surviving families. But what about the families of fallen heroes who died before that date? Should not their government-provided survivor annuities be tax- free as well? Of course they should. This bill provides tax equity for those survivors receiving annuities for officers who died on or before December 31, 1996. We must make this tax-free treatment available for all survivors of peace officers who gave their lives to make this great country a safer place for us all to live. The tax correction in this bill would not be retroactive. Rather, it provides that payments from a qualified survivor annuity received after December 31, 2001, would qualify for tax-free treatment, even if the peace officer was killed prior to the effective date of the Taxpayer Relief Act of 1997 provision. We are not talking about a great deal of money here. The Joint Committee on Taxation estimates this correction would result in about $5 million per year in lost revenue or a total cost of $46 million over 10 years. This is not a high price to pay to show this country's gratitude for the service these men and women who are public safety officers perform each day when they leave their homes, the risks they take, and for the ultimate sacrifice some of them have made. Last week, the House Committee on Ways and Means approved identical legislation to correct this problem, and I am told the bill is coming before the entire House for a vote today. Mr. President, this week (May 13-19, 2001) is National Police Week. Although it does not begin to pay our debt to these men and women and their survivors, I cannot think of a better way to honor those public service officers who have died in the line of duty than to pass bills like this one that recognize their sacrifices and attempt to help their survivors with their burdens. I hope our colleagues will join us in cosponsoring this bill and in passing this legislation this week. Mr. President, I ask unanimous consent that the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, on behalf of myself and Senator Torricelli, I rise today to introduce the Capital Gains Relief and Simplification Act of 2001. We are joined by Senators Kyle and Murkowski, each of whom contributed to the development of this bill. This is a strong, bipartisan capital gains tax cut package designed to help all investors, but is aimed directly at small investors first. This bill takes a bottom-up approach to capital gains relief, but offers reduced capital gains rates to all taxpayers. But this is not all. The bill also offers a great deal of simplification for all taxpayers with capital gains to report on their tax returns. Both of these features are important because investment in capital assets has become such an important part of the lives of most Americans. In looking at the issue of capital gains in 2001, Mr. President, three things are clear. First capital gains and losses are experienced by ordinary Americans and are not just the province of the wealthy. Second, the reporting of capital gains transactions on the tax return has grown very complex and burdensome, and third, capital gains tax rates are too high. These all add up to the need for capital gains relief, and this is what our bill is designed to address. Long gone are the days when anyone can credibly say that capital assets are only, or even mostly, owned by the rich. A 1992 Treasury study showed that about three-quarters of all families in the U.S. owned capital assets, and this percentage has grown higher since then. That same study showed that 30 percent of the dollar value of all capital assets, excluding personal residences, was held by families with incomes of $50,000 or less in 1992. More recent data confirm that more and more U.S. families own capital investments. A survey last year by the Federal Reserve showed that stock made up nearly 32 percent of U.S. household wealth in 1999, up from 28 percent the year before. Moreover, another Federal Reserve study showed that in 1998, almost 49 percent of all families directly or indirectly held stock. Among families with annual income of between $25,000 and $50,000, the level was almost 53 percent. When looking at data on who pays capital gains taxes, we find that many lower- and middle-income Americans are reporting capital gains. In fact, IRS data from the year 1998, the latest available, show that over 25 million returns filed that year reported capital gains. This is about one in five tax returns filed in 1998. Over 40 percent of those reporting capital gains had income of less than $50,000, and 59 percent had income of less than $75,000. Moreover, when looking at the dollar amount of gains reported, we find that 56 percent of all capital gains in 1998 were claimed by taxpayers with incomes of under $75,000. I believe it is very clear, that capital gains relief is not just for wealthy Americans. It is very much needed by the average American family. It is also clear that reporting capital gains is very complex for most taxpayers. Millions of Americans hold investments in mutual funds. In fact, according to the Joint Economic Committee, 44 percent of all U.S. households owned mutual funds in 1998, up from just 6 percent in 1980. Most of these mutual funds annually distribute dividends and capital gains to their owners, which must be reported as income on Form 1040 each year. This can be a rather confusing process for many investors, for several reasons. First, many mutual fund owners routinely reinvest the dividend and capital gains income back into the fund, rather than taking them in cash. Because they receive no cash, it comes as a surprise to some that they must pay tax on the gains at all. Many mutual fund investors were particularly dismayed this past tax filing season, because they had to report capital gains from funds that had decreased in value. Second, when mutual fund owners sell their interest in a fund, computing the capital gain or loss on the sale can be daunting, particularly if the individual had been reinvesting the dividends and capital gains back to the fund. Finally, after figuring out what capital gains have been received and how much should be reported, and any gain or loss from a sale of the fund, mutual fund owners, like other investors in capital assets, must then deal with the challenge of reporting capital gains on the complicated Schedule D of Form 1040. This form is confusing at best and exasperating at worst. It consists of 54 lines on two pages, and is accompanied by an 8-page set of instructions with two worksheets. The estimated time to complete this form, according to IRS estimates, is an astounding 6 hours and 48 minutes. Finally, it is clear that capital gains tax rates are too high. In fact, a new report by Arthur Andersen LLP shows that the average middle-income individual investor faces a combined state and federal capital gains tax burden of 25 percent on long-term capital gains. I want to emphasize that this is the average rate across the U.S. In some states, including my home state of Utah where the rate is 27 percent, the burden is even higher. These figures may surprise some of our colleagues. After all, many members of this body were present in 1997 when we reduced the maximum capital gains tax rate from 28 percent to 20 percent. The fact is, however, that most states tack a relatively high additional tax on the federal capital gains rate to produce this 25 percent average capital gains tax rate. This is particularly important in light of the fact that the United States still taxes capital gains more heavily than do most other countries. In fact, a recent survey of 24 industrial and developing countries taken by the American Council for Capital Formation's Center for Policy Research showed an average capital gains rate of 14.5 percent. This is more than 10 percent above the combined average federal-state U.S. rate. The Capital Gains Relief and Simplification Act we are introducing today is designed to address the problem of too high a tax rate as well as the complexity problem, in a way that is directed to all taxpayers, but especially those in the middle- and lower-income groups. Let me briefly describe this bill. First, it provides a 100 percent exclusion for the first $1,000 in capital gains for every individual taxpayer. This would be $2,000 for a married couple filing a joint return. Individuals with capital gains below these thresholds would generally not even have to file the confusing Schedule D. Totally avoiding a complex tax form is the ultimate in simplification. Second, for individual capital gains above the $1,000 (or $2,000) exclusion threshold, the bill provides a 50 percent deduction. The effect of this would be to lower an individual's top capital gains tax rate to exactly half the ordinary income rate. If for example, under current law an investor's marginal tax bracket is 31 percent, the top capital gains rate for that investor would be 15.5 percent. This deduction approach offers both simplicity, and a greater reduction in rates for those in the lower tax brackets than for those in the highest brackets. For example, compared with current law, a taxpayer in the highest tax bracket of 39.6 percent would find his or her top capital gains tax rate cut from the current 20 percent to 19.8 percent under this bill. An investor in the 28 percent bracket, however, would see his or her top capital gains rate drop from the current 20 percent to 14 percent. Moreover, under this bill investors would see further capital gains tax rate cuts as the ordinary income tax rates are reduced, as under President Bush's tax plan. For example, those in the proposed 25 percent rate bracket would enjoy a top capital gains rate of just 12.5 percent, while those in lower brackets would see even lower capital gains rates, to the extent their capital gains exceeded the 100 percent exclusion thresholds. Furthermore, this 50 percent deduction approach also helps with the problem I mentioned before of high combined federal and state capital gains tax rates. Most states use the federal adjusted gross income, AGI, as a starting point for determining state income tax liability. Thus, under current law, all of an investor's capital gains are generally included in the state tax base. Under this bill's exclusion approach, only 50 percent of capital gains over the exclusion would be included in the federal AGI. This means most states would generally only tax a fraction of the investor's capital gains. Therefore, this bill would result in lower federal and state taxes on capital gains. I would like to mention several other features of the bill. First, it would reduce the holding period of long-term capital gains from one year to six months. According to Bruce Bartlett, a well-known economist with the National Center for Policy Analysis, a holding period requirement for favorable capital gains treatment has several economic costs to investors, the consequences of which may reduce the level of investment. Among these economic costs are a reduction in liquidity and the creation of a lock-in effect that can cause the prices of stock to vary from its real value. Reducing the holding period will reduce these costs and may also increase revenue to the Treasury from capital gains. Second, the bill increases the amount of capital loss an individual may deduct against ordinary income. Under current law, an individual's capital gains are taxed from the first dollar to the last dollar. However, if an individual suffers a capital loss, and has no capital gains to use to offset the loss, he or she is allowed to deduct only $3,000 of the loss against ordinary income. This is unfair and the amount is too low. Our legislation helps alleviate this problem by increasing the $3,000 figure to $10,000 and indexing it for future inflation. Finally, the Capital Gains Relief and Simplification Act includes two provisions to help taxpayers who sell their homes and want to take advantage of the principal residence exclusion enacted in 1997. The first one addresses a problem that members of the U.S. uniformed services and Foreign Service sometimes suffer when called away from their homes for work-related purposes. In many cases, they return from these assignments and want or need to sell their principal residence. Because they do not meet the five-year ownership and use test, however, they are denied the full use of the present law exclusion. This bill corrects this inequity by suspending this test during such absences. The provision would also apply to individuals relocated outside the United States by their employers. The second provision merely indexes for inflation the $250,000 and $500,000 thresholds for purposes of the principal residence exclusion. While these levels might have seemed adequate in 1997, and perhaps even in 2001, inflation will soon cause these thresholds to be worth far less than Congress intended when crafting this provision. We should adjust them now. This bill represents a win for everybody. All investors win because it would significantly lower the capital gains tax rate and simplify their lives at tax time. Small investors especially win because all or much of their capital gains would escape taxation altogether and they would avoid much of the complexity they currently face with Schedule D. All Americans win because reducing capital gains would increase economic growth and job creation. I urge my colleagues on both sides of the aisle to take a close look at this legislation and join us in lowering taxes on millions of Americans and striking an important blow for tax simplicity at the same time.

Mr. HATCH

Mr. HATCH. Mr. President, on behalf of myself and Senator Torricelli, I rise today to introduce the Capital Gains Relief and Simplification Act of 2001. We are joined by Senators Kyle and Murkowski, each of whom contributed to the development of this bill. This is a strong, bipartisan capital gains tax cut package designed to help all investors, but is aimed directly at small investors first. This bill takes a bottom-up approach to capital gains relief, but offers reduced capital gains rates to all taxpayers. But this is not all. The bill also offers a great deal of simplification for all taxpayers with capital gains to report on their tax returns. Both of these features are important because investment in capital assets has become such an important part of the lives of most Americans. In looking at the issue of capital gains in 2001, Mr. President, three things are clear. First capital gains and losses are experienced by ordinary Americans and are not just the province of the wealthy. Second, the reporting of capital gains transactions on the tax return has grown very complex and burdensome, and third, capital gains tax rates are too high. These all add up to the need for capital gains relief, and this is what our bill is designed to address. Long gone are the days when anyone can credibly say that capital assets are only, or even mostly, owned by the rich. A 1992 Treasury study showed that about three-quarters of all families in the U.S. owned capital assets, and this percentage has grown higher since then. That same study showed that 30 percent of the dollar value of all capital assets, excluding personal residences, was held by families with incomes of $50,000 or less in 1992. More recent data confirm that more and more U.S. families own capital investments. A survey last year by the Federal Reserve showed that stock made up nearly 32 percent of U.S. household wealth in 1999, up from 28 percent the year before. Moreover, another Federal Reserve study showed that in 1998, almost 49 percent of all families directly or indirectly held stock. Among families with annual income of between $25,000 and $50,000, the level was almost 53 percent. When looking at data on who pays capital gains taxes, we find that many lower- and middle-income Americans are reporting capital gains. In fact, IRS data from the year 1998, the latest available, show that over 25 million returns filed that year reported capital gains. This is about one in five tax returns filed in 1998. Over 40 percent of those reporting capital gains had income of less than $50,000, and 59 percent had income of less than $75,000. Moreover, when looking at the dollar amount of gains reported, we find that 56 percent of all capital gains in 1998 were claimed by taxpayers with incomes of under $75,000. I believe it is very clear, that capital gains relief is not just for wealthy Americans. It is very much needed by the average American family. It is also clear that reporting capital gains is very complex for most taxpayers. Millions of Americans hold investments in mutual funds. In fact, according to the Joint Economic Committee, 44 percent of all U.S. households owned mutual funds in 1998, up from just 6 percent in 1980. Most of these mutual funds annually distribute dividends and capital gains to their owners, which must be reported as income on Form 1040 each year. This can be a rather confusing process for many investors, for several reasons. First, many mutual fund owners routinely reinvest the dividend and capital gains income back into the fund, rather than taking them in cash. Because they receive no cash, it comes as a surprise to some that they must pay tax on the gains at all. Many mutual fund investors were particularly dismayed this past tax filing season, because they had to report capital gains from funds that had decreased in value. Second, when mutual fund owners sell their interest in a fund, computing the capital gain or loss on the sale can be daunting, particularly if the individual had been reinvesting the dividends and capital gains back to the fund. Finally, after figuring out what capital gains have been received and how much should be reported, and any gain or loss from a sale of the fund, mutual fund owners, like other investors in capital assets, must then deal with the challenge of reporting capital gains on the complicated Schedule D of Form 1040. This form is confusing at best and exasperating at worst. It consists of 54 lines on two pages, and is accompanied by an 8-page set of instructions with two worksheets. The estimated time to complete this form, according to IRS estimates, is an astounding 6 hours and 48 minutes. Finally, it is clear that capital gains tax rates are too high. In fact, a new report by Arthur Andersen LLP shows that the average middle-income individual investor faces a combined state and federal capital gains tax burden of 25 percent on long-term capital gains. I want to emphasize that this is the average rate across the U.S. In some states, including my home state of Utah where the rate is 27 percent, the burden is even higher. These figures may surprise some of our colleagues. After all, many members of this body were present in 1997 when we reduced the maximum capital gains tax rate from 28 percent to 20 percent. The fact is, however, that most states tack a relatively high additional tax on the federal capital gains rate to produce this 25 percent average capital gains tax rate. This is particularly important in light of the fact that the United States still taxes capital gains more heavily than do most other countries. In fact, a recent survey of 24 industrial and developing countries taken by the American Council for Capital Formation's Center for Policy Research showed an average capital gains rate of 14.5 percent. This is more than 10 percent above the combined average federal-state U.S. rate. The Capital Gains Relief and Simplification Act we are introducing today is designed to address the problem of too high a tax rate as well as the complexity problem, in a way that is directed to all taxpayers, but especially those in the middle- and lower-income groups. Let me briefly describe this bill. First, it provides a 100 percent exclusion for the first $1,000 in capital gains for every individual taxpayer. This would be $2,000 for a married couple filing a joint return. Individuals with capital gains below these thresholds would generally not even have to file the confusing Schedule D. Totally avoiding a complex tax form is the ultimate in simplification. Second, for individual capital gains above the $1,000 (or $2,000) exclusion threshold, the bill provides a 50 percent deduction. The effect of this would be to lower an individual's top capital gains tax rate to exactly half the ordinary income rate. If for example, under current law an investor's marginal tax bracket is 31 percent, the top capital gains rate for that investor would be 15.5 percent. This deduction approach offers both simplicity, and a greater reduction in rates for those in the lower tax brackets than for those in the highest brackets. For example, compared with current law, a taxpayer in the highest tax bracket of 39.6 percent would find his or her top capital gains tax rate cut from the current 20 percent to 19.8 percent under this bill. An investor in the 28 percent bracket, however, would see his or her top capital gains rate drop from the current 20 percent to 14 percent. Moreover, under this bill investors would see further capital gains tax rate cuts as the ordinary income tax rates are reduced, as under President Bush's tax plan. For example, those in the proposed 25 percent rate bracket would enjoy a top capital gains rate of just 12.5 percent, while those in lower brackets would see even lower capital gains rates, to the extent their capital gains exceeded the 100 percent exclusion thresholds. Furthermore, this 50 percent deduction approach also helps with the problem I mentioned before of high combined federal and state capital gains tax rates. Most states use the federal adjusted gross income, AGI, as a starting point for determining state income tax liability. Thus, under current law, all of an investor's capital gains are generally included in the state tax base. Under this bill's exclusion approach, only 50 percent of capital gains over the exclusion would be included in the federal AGI. This means most states would generally only tax a fraction of the investor's capital gains. Therefore, this bill would result in lower federal and state taxes on capital gains. I would like to mention several other features of the bill. First, it would reduce the holding period of long-term capital gains from one year to six months. According to Bruce Bartlett, a well-known economist with the National Center for Policy Analysis, a holding period requirement for favorable capital gains treatment has several economic costs to investors, the consequences of which may reduce the level of investment. Among these economic costs are a reduction in liquidity and the creation of a lock-in effect that can cause the prices of stock to vary from its real value. Reducing the holding period will reduce these costs and may also increase revenue to the Treasury from capital gains. Second, the bill increases the amount of capital loss an individual may deduct against ordinary income. Under current law, an individual's capital gains are taxed from the first dollar to the last dollar. However, if an individual suffers a capital loss, and has no capital gains to use to offset the loss, he or she is allowed to deduct only $3,000 of the loss against ordinary income. This is unfair and the amount is too low. Our legislation helps alleviate this problem by increasing the $3,000 figure to $10,000 and indexing it for future inflation. Finally, the Capital Gains Relief and Simplification Act includes two provisions to help taxpayers who sell their homes and want to take advantage of the principal residence exclusion enacted in 1997. The first one addresses a problem that members of the U.S. uniformed services and Foreign Service sometimes suffer when called away from their homes for work-related purposes. In many cases, they return from these assignments and want or need to sell their principal residence. Because they do not meet the five-year ownership and use test, however, they are denied the full use of the present law exclusion. This bill corrects this inequity by suspending this test during such absences. The provision would also apply to individuals relocated outside the United States by their employers. The second provision merely indexes for inflation the $250,000 and $500,000 thresholds for purposes of the principal residence exclusion. While these levels might have seemed adequate in 1997, and perhaps even in 2001, inflation will soon cause these thresholds to be worth far less than Congress intended when crafting this provision. We should adjust them now. This bill represents a win for everybody. All investors win because it would significantly lower the capital gains tax rate and simplify their lives at tax time. Small investors especially win because all or much of their capital gains would escape taxation altogether and they would avoid much of the complexity they currently face with Schedule D. All Americans win because reducing capital gains would increase economic growth and job creation. I urge my colleagues on both sides of the aisle to take a close look at this legislation and join us in lowering taxes on millions of Americans and striking an important blow for tax simplicity at the same time.

Mr. HATCH

Mr. HATCH. Mr. President, it is with great pleasure that I rise today to pay tribute to the first celebration of ``World Intellectual Property Day.'' Last fall, the World Intellectual Property Organization dedicated April 26th as ``World Intellectual Property Day'' with the objective of highlighting the valuable contributions intellectual property makes to economic, cultural and social development and to raise public awareness of just what intellectual property is all about. Intellectual property, which includes patents, trademarks and copyright protections, is hardly a household phrase, but its significance to all Americans should not be underestimated. Intellectual property is really about creativity and innovation; it is about ideas that start out as just a dream, but then go on to become the creations and products that enrich our daily lives and improve our standard of living. Included among our Founding Fathers' many accomplishments were the express intellectual property protections of Article 1, Section 8 of our Constitution. This section is so seemingly simple, ``to promote the progress of science and the useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries'', but it has done more to shape our Nation's economic growth than almost any other provision in the Constitution. Indeed, one of the most significant results of this constitutional provision was the creation of the U.S. patent system. Today, more than six million patents have been issued, for inventions ranging from Farnsworth's cathode ray tube to the airplane to life- saving pharmaceuticals. The value of our patent system was perhaps best summarized by President Abraham Lincoln, himself a patent holder, when he noted that it ``adds the fuel of interest to the spark of genius.'' We also are world leaders in copyrighted works. Books, movies, music, and other examples of American creativity entertain and enlighten the world, and make a generous contribution to our balance of trade. Our country's technological prowess and our high standard of living stem from the creativity, determination, and entrepreneurial drive of our citizens and the protection we provide for their creations. So, today, as nations around the world mark ``World Intellectual Property Day,'' let us take pride in the fact that our intellectual property system is recognized as the most effective in the world. As we look to the future, let us also pledge ourselves to ensuring that the United States remains the world's pre-eminent provider and protector of intellectual property.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to address a bill I have just introduced, S. 760, the ``CLEAR Act,'' which is short for the Clean Efficient Automobiles Resulting from Advanced Car Technologies Act. Let me begin my remarks by thanking the original cosponsors of S. 760, Senators Rockefeller, Jeffords, Kerry, Crapo, Lieberman, Collins, Chafee, and Gordon Smith, all of whom have joined with me in drafting this legislation which will help our country achieve a greater reliance on alternative fuel technologies. Our proposal relies on a system of tax-based incentives to encourage development of alternative fuel technologies and consumer acceptance of these products. Rather than rely on a system of federal mandates, we use tax credits to promote all of the advanced technologies being pursued by auto manufacturers in a dramatic effort to reduce emissions and improve efficiency. These technologies include: fuel cell; hybrid electric; alternative fuel; and battery electric vehicles. It is significant that our bipartisan initiative is founded on a belief that government should not be in the business of picking winners and losers in the free market. Rather, the CLEAR Act leaves it up to the consumer to choose among the lowest emitting vehicles. By promoting the technologies and fuels that improve air quality, S. 760 helps to solve two of our nation's most difficult and expensive problems, air pollution and energy dependence. These are issues of critical concern in my home state of Utah. According to a study by Utah's Division of Air Quality, on-road vehicles in Utah account for 22 percent of particulate matter. This particulate matter can be harmful to citizens who suffer from chronic respiratory or heart disease, influenza, or asthma. Automobiles also contribute significantly to hydrocarbon and nitrogen oxide emissions in my state. These two pollutants react in sunlight to form ozone, which in turn reduces lung function in humans and hurts our resistance to colds and asthma. In addition, vehicles account for as much as 87 percent of carbon monoxide emissions. Carbon monoxide can be harmful to persons with heart, respiratory, or circulatory ailments. While Utah has made important strides in improving air quality, it is a fact that each year more vehicular miles are driven in our State. It is clear that if we are to have cleaner air, we must encourage the use of alternative fuels and technologies to reduce vehicle emissions. Let me paint the picture on the national scale. In 1998, a year for which we have complete data, our nation had 121 regions that failed to attain the Environmental Protection Agency's National Ambient Air Quality Standards, NAAQS. This status directly threatens the quality of life of more than 100 million, or about one-third, of our citizens who must bear the health and the economic burden associated with non- attainment. Non-attainment status can be costly, whether due to the loss of federal highway money, lost economic opportunities, or the expensive measures required to reach attainment. EPA has set new standards for both ozone and particulate matter, PM 2.5. By the EPA's own estimates, the annual cost of achieving the new ozone standard in 2010 was set at $9.6 billion. Additionally, the EPA put the annual cost of achieving the PM 2.5 standard at $37 billion, for a combined cost of $47 billion annually. These staggering figures paint a graphic picture of why we need to invest more effort toward the promotion of alternative fuels. Every new alternative fuel or advanced technology car, truck, or bus on the road will displace a conventional vehicle's lifetime of emissions and reliance on imported oil. This brings me to another important benefit of the CLEAR Act, increased energy independence. Whether during the energy crisis in the 1970s, during the Persian Gulf War, or during our current energy crisis, every American has felt the sting of our dependency on foreign oil. And I might add, Mr. President, that our dependency on foreign oil has steadily increased to the point where we now depend on foreign sources for more than 57 percent of our oil. Last month alone, it was over 60 percent. When enacted, the CLEAR Act will play a key role in helping our nation improve its energy security by increasing the diversity of our fuel options and decreasing our need for gasoline. Our nation's energy strategy will not be complete without an incentive to increase the use of alternative fuels and advanced car technologies. Historically, consumers have faced three basic obstacles to accepting the use of alternative fuels and advanced technologies. These are the cost of the vehicles, the cost of alternative fuel, and the lack of an adequate infrastructure of alternative fueling stations. The CLEAR Act would lower all three of these barriers. First, we provide a tax credit of 50 cents per gasoline-gallon equivalent for the purchase of alternative fuel at retail. To give customers better access to alternative fuel, we extend an existing deduction for the capital costs of installing alternative fueling stations. We also provide a 50 percent credit for the installation costs of retail and residential refueling stations. Finally, we provide tax credits to consumers to purchase alternative fuel and advanced technology vehicles. To make certain that the tax benefit we provide translates into a corresponding benefit to the environment, we split the vehicle tax credit into two. One part provides a base tax credit for the purchase of vehicles dedicated to the use of alternative fuel or vehicles using advanced technologies. The other part offers a bonus credit based on the vehicle's efficiency and reduction in emissions. In this way, we are confident that the CLEAR Act will provide the biggest possible ``bang for the buck'' in terms of providing a social benefit to our citizens. We all recognize that in the future we will not use gasoline fueled vehicles to the same extent we do today. Our legislation is an attempt to bring benefits of cleaner air to our citizens sooner, to free our cities from expensive EPA regulations, and to reduce our consumption of foreign oil. S. 760 enables us to tackle these problems with incentives, not mandates. Our proposal is the most comprehensive legislation ever brought before Congress to promote the use of alternative fuel vehicles and advanced car technologies among consumers. We urge our colleagues to join with us in this forward-looking approach to cleaner air and increased energy independence.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to speak on the subject of education, a subject about which we have been hearing a good deal in the past several months. I commend President Bush for putting forth a credible plan for education improvement. The Bush Administration has worked with colleagues on both sides of the aisle to craft a policy compromise which will go along way to securing that all children have access to quality education. I also commend the distinguished Chairman of the Health, Education, Labor and Pensions, HELP, Committee for his tireless work on this issue. As former chairman of the then Labor Committee, I know my friend from Vermont has a job roughly akin to herding cats. I also appreciate the Majority Leader's diligence and persistence in continuing to bring this measure up for Senate consideration and his efforts at brokering a compromise. President Bush has made it a priority to ensure that State and local education agencies have the discretion to make key decisions on how education dollars are spent. I support the President's approach. I have often said that we should not be second guessing on a federal level the ability of State and local school boards, educators and parents to direct the education of students. President Bush has made it a priority to link a reduction in the ridiculous amount of red-tape that State and local education agencies face with real accountability measures. Paperwork reduction is a decidedly pro-teacher priority, 80 percent of our nation's educators say that paperwork is their number one headache. Teachers just want to teach, not fill out forms or go to meetings required by federal regulations. The President has made yearly testing a priority and I commend him for that. In my State of Utah, we have already begun implementing an annual test. The Utah Performance Assessment System for Students, U- PASS, requires a statewide criterion referenced test for all students, grades 1st through 12th in reading, language arts, and math. I am proud that, once again, Utah educators are ahead of the curve when it comes to education innovation and reform. I sincerely hope that my colleagues on the other side of the aisle will not stall, delay or prevent the reauthorization of the Elementary and Secondary Education Act, or as it is now called, BEST, the Better Education for Students and Teachers Act. We really need to pass this bill and set the country on a path toward meaningful education progress. The need for reform is great. A recent report from the National Center for Education Statistics, NAEP, concluded that reading scores for 4th and 12th graders failed to improve over their 1992 levels. This study also concluded that 58 percent of disadvantaged children in 4th grade scored at the ``below basic'' level. There also is an alarming disparity in skills between white students and African American students. According to the National Center for Education Statistics, achievement gaps between white and African- American 9-year-old students have not narrowed since 1975. The score gap in reading narrowed to its lowest, 18 points in 1988, and has since widened to 29 points in 1999. For 17-year-old students, the gap in reading was also its lowest in 1988, 20 points and has since widened to 31 points in 1999. Clearly, the challenge is before us. And yes, we can do better. Many local school districts are struggling. They are struggling with class sizes that are too large and school buildings that are too small or dysfunctional. They are struggling to provide books, materials, and equipment that are appropriate for the 21st century. They are struggling with resources, so they can pay their teachers better, increase professional development for educators, and provide essential music, art and sports opportunities for students as well. They are struggling with transportation needs, especially in many rural Utah communities where children can be bused as many as 100 miles round-trip a day. There is not a Senator in this body who doesn't want to help solve these problems. Certainly, I have been a long-time advocate of federal support for education, and I will continue to make that a top priority. I honestly believe that colleagues on both sides of the aisle sincerely and with good intentions want children to attend clean, safe schools with state of the art technology and teachers who are appreciated and well paid in reasonably sized classrooms and up-to-date textbooks. Sometimes, when the rhetoric gets too hot around these deeply felt issues, I think it would behoove us all to remember that no one gets elected to serve as an anti-education Senator. So, if we are all pro-education then why the debate? Because, of course, while we all agree on the merits of reform and we all want education progress, we disagree on the means to achieve this goal. We cannot afford to tie this bill up in partisan gridlock over a debate on how much funding to provide. Where there is a will, there is a way, and we simply have to find that way or we will be letting the American public down. While there are good intentions on all sides, some of my colleagues honestly feel that education policy is best met at the federal level and that the answer to every education challenge is a new federal program. Others of us have markedly differing views. I sincerely believe that State and local officials in Utah's 40 school districts and 763 public schools are the best ones to decide whether or not to target federal money on school construction, technology improvements, hiring new teachers, or anything else. I trust the people of Utah to make these decisions. And, I believe Utahns are perfectly capable of debating these issues locally and choosing a course. I have repeatedly said that Utah does more with less than any State in the nation. Utah is a worst case scenario when it comes to school finance, yet we consistently rank highly on student performance measures. We must be doing something right! Actually, I think we are doing a lot that is right, and one of the things that Utah parents do right is spend a lot of time with their children. An integral part of Utah's way of life involves family- centered activities. This clearly has spill-over benefits for schools. Utah can claim some well-deserved bragging rights. For example: Utah is first in the nation in both advanced placement participation and performance on a per capita basis. Utah's dropout rates are substantially lower than the nation's as a whole. In the Statewide Testing Program, the performance of Utah students on the Stanford Achievement Test exceeds national performance in mathematics, reading, science reasoning, and the composite score. Since 1984, Utah high school graduates have taken increasingly more rigorous programs of study with substantial increases in such areas as mathematics and foreign language. Utah is second in the nation in the percentage of its adult population holding a high school diploma. Utah has made a number of important commitments to advancing technology in education. Utah provides incentives for school districts to acquire technology infrastructure. Utah installs Internet connections at every school and pays most of the line charges. Utah has launched a number of professional development efforts. Utah provides in-service training opportunities and requires pre- service teachers to complete a technology course as part of their preparation program. Utah parents are educated and informed and take an active role in educating their children. I firmly believe that this is one of the reasons why Utah students perform so well. But, what we need in my State is not a federal superintendent looking over the shoulder of our State-elected or locally elected school boards. We need additional resources, plain and simple. But, resources with so many strings attached bog us down. Give us the flexibility to manage these resources and apply them to the areas of greatest need in our State. Measure our children's educational progress. We will meet the challenge. I look forward to a challenging and informative debate. It is my sincere hope that we will be successful in crafting legislation which will genuinely put children first. Children are America's greatest asset, and our future depends on their educational excellence. We must ensure that no child is left behind. We must ensure that the achievement gap is closed between disadvantaged children and their peers. We must ensure that every child in this country is prepared for the challenges and opportunities that await them in the years to come. For it we fail, we have failed not only ourselves, but future generations. I am confident we are up to the task.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to express my support for the Retirement Security and Savings Act of 2001, and I am pleased to once again join my colleagues as an original cosponsor of this important legislation. Enactment of this bill would encourage more businesses to offer pension plans to their employees by simplifying the complex and burdensome pension rules they face and would also make it easier for employees to save for their own retirement. I want to congratulate my colleague, the chairman of the Finance Committee, Senator Grassley, for his effective and persistent leadership on this issue. Senators Grassley, Baucus, Graham, and Jeffords, along with myself and several other Senators, have been working on enactment of a bipartisan pension simplification and retirement savings enhancement bill for several years now. These efforts led to the successful passage of a bipartisan package of such provisions in the Taxpayer Refund and Reform Act of 1999, which was unfortunately vetoed by President Clinton. We again came close to the goal line last year when the Finance Committee reported out a bill containing similar provisions. The ultimate objective of enactment has been elusive, however. Introduction of this legislation today is the first step of what I hope will be the successful completion to this long quest. However, I have some serious concerns with some changes that were made to the bill being introduced today, compared with earlier versions. Specifically, important changes to the top-heavy rules that affect small businesses have been left out. Let me explain. Today's pension laws are complicated and cumbersome and a deterrent to small businesses wanting to establish a retirement plan. In 1996, Congress began the job of pension simplification when it passed the Small Business Job Protection Act. This Act contained important changes to our pension laws, including two simplification provisions important to small and family-owned businesses--an exemption from costly nondiscrimination testing for 401(k) plans that meet certain safe harbors, such as providing a minimum level of benefits to non-highly paid employees, and the elimination of complex and duplicative family aggregation rules. Unfortunately, these changes did not apply to the top-heavy rules. The top-heavy rules are additional testing and minimum benefit requirements aimed at ensuring that owner-dominated plans do not discriminate against lower-paid workers. Due to their design, top-heavy rules generally only affect business with fewer than 100 employees. I recognize the need to protect lower-paid employees from discrimination in the design of retirement plans. However, the top- heavy rules can be duplicative and especially harmful in that they discourage small employers from establishing pension plans because they add to the cost and administrative burden of sponsoring a plan. In the end, rules like these that were designed to protect employees can end up harming them by leaving them with no employer-provided retirement coverage. Moreover, the general nondiscrimination rules have been strengthened over the years since the enactment of the top-heavy rules, and are further strengthened by the provisions of the bill being introduced today. Therefore, eliminating these duplicative top-heavy rules would not leave workers unprotected. It would, however, remove a disincentive for small employers to sponsor a retirement plan. H.R. 1102, the pension simplification bill that passed the House of Representatives and the Finance Committee last year with broad bipartisan support, as well as H.R. 10, this year's version of the so- called Portman-Cardin bill recently introduced in the House, contain two important provisions that were left out of the bill being introduced today. These two omitted provisions would exempt safe-harbor 401(k) plans from the top-heavy rules and remove the family aggregation requirement from the top-heavy rules. First, the 401(k) safe harbor provides exactly what the top-heavy rules attempt to do--guarantee that non-highly paid workers get a minimum level of benefits and are not discriminated against. In return, employers can avoid costly nondiscrimination testing. Congress provided the safe-harbors to encourage small employers to create new pension plans and provide more generous benefits to employees. However, because qualification for the safe harbor does not exclude a plan from the top- heavy rules, the fear of costly testing can be a serious deterrent to businesses wishing to take advantage of the safe harbor, even if the plan satisfies the minimum benefit requirements. Thus, in order to provide certainty and encouragement to small businesses, 401(k) plans that meet the safe harbor rules should also be exempt from top-heavy testing. Second, as was noted by Congress in 1996, the family aggregation rules are complex and unnecessary in light of the numerous other provisions that protect against pension plans disproportionately favoring high-paid workers. Moreover, requiring the aggregation of family members when testing pension plans imposes undue restrictions on the ability of a family-owned business to provide adequate retirement benefits for all members of the family working for the business. Therefore, Congress should complete the task of easing this burden on family-owned businesses by removing the family aggregation requirement from the top-heavy rules. On the whole I support the legislation we are introducing today. It would go a long way toward increasing the retirement security for millions of Americans. However, I am disappointed that these two provisions, along with several others, were dropped from the bill. These two provisions are particularly important tools in our effort to expand employee retirement coverage by encouraging small businesses to establish pension plans. As pension reform legislation makes its way through the legislative process, I will work to try to restore these provisions so that small family-owned businesses will have more certainty and confidence and fewer unnecessary burdens and costs when establishing pension plans for their workers.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to introduce the Animal disease Risk Assessment, Prevention, and Control Act of 2001. I want to thank my friend and colleague, Senator Tom Harkin, for his partnership in developing this bipartisan bill. I also want to recognize Senator Campbell's exceptional leadership in bringing to the forefront of public discussion the issue of the health of our domestic cattle herds. We are joined in cosponsorship by Senators Durbin, Lugar, Daschle, and Leahy, as well as over one-third of the Senate in this bipartisan effort. Our bill makes clear the Congress' commitment to our livestock industry and to ensuring our public health. Our goal is to make certain that the Congress and the American public are fully informed as to the reliability of our nation's animal health inspection system, its ability to protect our domestic herds and the American public from the potential introduction into the United States of foot and mouth disease and bovine spongiform encephalopathy (BSE), commonly referred to as mad cow disease. The presence of either of these diseases would have staggering economic consequences for our country. In addition, it is imperative, as this bill directs, that we learn more about the possible public health consequences of BSE so that we can be confident that our nation continues to successfully prevent any potentially negative impacts on human or animal health. Americans from Salt Lake city, Iowa City and across the country need to maintain confidence that the beef products they purchase and consume are safe. The public has no doubt heard the media reports on the recent cases in Europe of BSE and the outbreak of FMD, and they have heard about the devastating effect these outbreaks have had on the livestock industries in that part of the world. With all this media coverage, misconceptions have arisen which could make matters worse than the situation merits. The public deserves to know the facts surrounding these animal diseases, their threat to public health, and their potential means of transmission. This is one of the basic goals of our legislation--to help overcome the lack of information associated with these diseases. However, in the unfortunate event that it becomes necessary to fight this disease at home, we must ensure that the government and other officials have the necessary tools to move swiftly and completely to control these diseases in the United States. We have been successful so far in preventing the return of FMD to the United States. No case of BSE has ever been identified in the United States. This bill is intended to continue that success into the future. Here is what the bill does in a nutshell. The legislation lays out a series of detailed findings that set forth the current state of knowledge with respect to these two diseases. A key provision of the bill requires the Secretary of Agriculture to submit two reports to Congress. The first report, to be submitted in 30 days of enactment, requires the Administration to identify any immediate needs for additional legislative authority or funding. The second report, to be submitted within 180 days of adoption, requires the submission of a comprehensive analysis of the risks of FMD and BSE to American livestock and beef products, the potential economic consequences if FMD or BSE are found in the United States, and information concerning the potential linkage between BSE and variant Cruetzfeldt-Jacab Disease (vCJD), a condition affection humans. The legislation requires the Secretary of Agriculture to consult with the Secretaries of State, Treasury, Defense, Commerce, Health and Human Services, the United States Trade Representative, the Director of the Federal Emergency Management Agency, and other appropriate federal personnel when she develops both the reports mandated by this bill. In addition, in issuing the comprehensive 180 day report, the Secretary of Agriculture must consult with international, State, and local government animal health officials, experts in infectious disease research, prevention and control, livestock experts, representatives of blood collection and distribution entities, and representatives of consumer and patient organizations. A chief goal of that report is to help devise a coordinated plan to prevent the introduction of FMD and BSE into the United States and to help identify the proper corrective steps if FMD and BSE find their way into our country. Mr. President, let me take this opportunity to comment upon some common myths on this issue. First, the public should know that there is no known etiologic relationship between BSE and FMD. While it is true that these diseases have occurred in the same region within a shared time-frame, the fact is that the two diseases are quite distinct and have occurred independently from one another. BSE is a transmissible, neuro-degenerative disease in cattle. The disease is believed to have an incubation period of years, but once active in cattle it can quickly become fatal in a matter of a few weeks. It is carried in the brain and spinal cord of the animal, not in the meat products normally consumed by humans. In a practice banned in the U.S., cattle in Great Britain were fed protein products derived from other animal products, which may have carried BSE. Scientists believe that this practice led to the spread of BSE in Great Britain and Europe. I want to emphasize that the importation into the U.S. of grazing animals from BSE-prevalent countries has been forbidden since 1997. I also want to point our that U.S. law also prohibits the feeding of most animal proteins to grazing animals. As for foot and mouth disease, it is a highly contagious virus affecting cloven hoofed animals, including cattle, swine, sheep, goats, deer, and others. Although this disease was eradicated in the U.S. in 1929, it could be reintroduced by a single infected animal or animal product form another country, or by a person or conveyance that carries the virus from another country. It can then spread quickly among our domestic herds by animal contact or through the aerosol transmission. We cannot afford to allow that to happen. The disease can be carried by the wind from one animal to another. Animals infected by FMD can be cured by injections, however, the infected animal will continue to spread the disease during recovery. For that reason, the preferred remedy is to slaughter the animal before it can spread the disease further. To be safe, the entire herd will often be killed even if only one or two animals are found to be infected. This is why our bill also contains a provision to determine whether adequate compensation would be available under existing programs for producers suffering losses from destruction of affected herds. Mr. President, another concern held by some is that there is a strong risk of humans being infected by these diseases, either by eating meat or through some other means of transmission. Let me first discuss BSE. There are, in fact, human spongiform encephalopathies. An example of such a disease is the recently discovered variant of Cruetzfeldt-Jacab Disease. Scientists have not determined that a definitive causal link exists between BSE and variant Cruetzfeldt-Jacob Disease or other spongiform encephalopathies found in humans. The Centers for Disease Control and Prevention (CDC) has stated: ``Although there is strong evidence that the agent responsible for these human cases is the same agent responsible for the BSE outbreaks in cattle, the specific foods that may be associated with the transmission of this agent from cattle to humans are unknown.'' Scientists are currently studying the issue further and the Animal Health Risk Assessment, Prevention, and Control Act of 2001 encourages such research. While these studies are ongoing, the Food and Drug Administration (FDA) has acted to minimize the spread of human spongiform encephalopathies in the United States by disqualifying any individual who lived in the United Kingdom for more than six months since 1980 from donating blood while in the U.S. With respect to foot and mouth disease, it is principally an animal disease and is not thought to be threatening to human health. Humans can, however, spread the disease to animals. I am concerned that based on the outbreak of these diseases in Europe and the potential for spread into the U.S., consumers might question the safety and wholesomeness of animal products sold in this country. Because of our vigilance in the past our nation has a very safe and wholesome meat supply, and we should be proud of that. In fact, other nations have been seeking out American meat products, because they know that our animals health system is strong and has successfully kept these diseases out of our domestic livestock herds. Mr. President, the Animal Health Risk Assessment, Prevention, and Control Act of 2001, will help the United States to maintain the safety of our food supply and will help our nation to evaluate the sufficiency of the steps taken, or planned, to protect our citizens from any potential untoward impacts if these animal diseases enter into the United States.

Mr. HATCH

Mr. HATCH. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. HATCH

Mr. HATCH. Mr. President, on behalf of myself, Senator Baucus, and 18 other of our colleagues, I rise today to introduce the Railroad Retirement and Survivors' Improvement Act of 2001. This bill represents an important opportunity in the 65-year history of the Railroad Retirement system. Rail labor and rail management, working together, developed a proposal that would build on the system's strengths to modernize Railroad Retirement to provide better, more secure benefits at a lower cost to employers and employees. This proposal was further refined as a result of extensive discussions last year between rail labor and management and the congressional committees of jurisdiction. The bill we are introducing today builds on our efforts in the 106th Congress to reform the Railroad Retirement system. Last year, the predecessor to this bill, H.R. 4844, passed the House by a vote of 391- 25, and received similar bipartisan support in the Senate. Eighty senators signed a letter urging quick passage of the legislation, and on September 28, 2000, it was favorably reported by the Finance Committee. H.R. 4844 was placed on the Senate legislative calendar, but unfortunately, this is where the bill remained. Despite an overwhelming majority of Members in both houses in support of the bill, time ran out and the 106th Congress adjourned without this bill being brought up on the Senate floor. Both rail labor and rail management have come to the Congress to seek changes to their pension plan because Railroad Retirement is a unique system. It is the only private industry pension plan established in statute and administered by the federal government. As such, any changes in Railroad Retirement can be made only through legislative action. Historically, such legislation has reflected negotiated agreement by management and labor with the Congress followed by congressional consideration and enactment of necessary statutory changes. The legislation we introduce today continues this practice and embodies the reform principles agreed to by rail management and the vast majority of rail labor this past year. Some may ask, why reform the Railroad Retirement system at this time? Railroad Retirement has served railroad workers, their families, and their surviving spouses well for 65 years. Its roots reach back to the struggle to find answers to the hardships that resulted from the Great Depression of the 1930s. Today, the Railroad Retirement system is fiscally strong, providing benefit payments to more than 673,000 retirees and other beneficiaries. The most recent report to Congress by the Railroad Retirement Board's chief actuary, which addressed the 2000-2073 period, indicated that no cash-flow problems are expected to arise over that period. This strength, combined with the willingness of rail labor and rail management to work together constructively, provides an opportunity to address a number of concerns about Railroad Retirement that have developed in recent years. First, Railroad Retirement is very costly, both to employers and employees. It has two components: Tier I, which is largely equivalent to Social Security, and Tier II, which provides additional benefits and is similar to a private, defined benefit pension plan. Tier I and Tier II are funded primarily through payroll taxes on employers and employees--15.3 percent combined for Tier I, including Medicare, and 21 percent for Tier II. Together, these payroll taxes make up a staggering 36.3 percent of taxable payroll, a figure substantially higher than the cost other industries face to provide retirement benefits to their employees. This high cost represents a major financial burden to both employees and employers. Perhaps worse still, it constitutes a major disincentive for employers to hire new employees under Railroad Retirement. A second factor that led to the development of this legislation is the adequacy of the Railroad Retirement benefit structure. One special area of concern among retirees has been the widow's and widower's benefit under the Tier II portion of Railroad Retirement. Indeed, this was the subject of a 1998 hearing by the Ground Transportation Subcommittee of the House Transportation and Infrastructure Committee. That hearing was a spur to rail management and rail labor to engage in discussions about a broad range of issues affecting the system. Let me explain the reasons why this bill has the strong support of railroad retirees, railroad management, and the great majority of rail labor. First, it provides for increased responsibility by the railroad industry for the financial health of Railroad Retirement. Under current law, if changes in tax rates or benefits are needed to assure the financial health of the system, Congress is required to pass new legislation. The bill being introduced today would make Tier II tax rates more responsive to actual financing needs by establishing an automatic tax adjustment schedule. Under this statutory schedule, payroll taxes would be raised or lowered automatically, without any further action by Congress, depending on the level of funds available to pay Railroad Retirement benefits. The schedule is designed to maintain a minimum balance of 4 years of benefit payments and a maximum balance of 6 years. The four year minimum reserve balance represents a higher balance than has existed in the Railroad Retirement Account (RRA) for most of the past 40 years. Rail employers have agreed to bear entirely any tax schedule increases--employees and employers would share any tax decreases that might occur. Employees would have the option of seeking congressional action to convert any planned decrease in the employee tax rate to a benefit increase, and management has agreed to support such action. Second, the bill provides for greater flexibility in the investment of Railroad Retirement assets. This investment provision would apply only to Tier II, the portion of the program that is similar to a private pension plan and is funded entirely from industry sources. Tier I, the portion that is similar to Social Security and is linked to the Social Security system, would not be affected. Currently, investment of RRA assets is limited by law to U.S. Government securities. Actuarial projections for the RRA assume an annual return of 6 percent on investments. Between 1985 and 1998, the average annual return on RRA investments was unusually high at 9.12 percent, but this still lagged far behind the average annual return to large multi-employer pension plans of 15.17 percent over the same period. The differential in returns between RRA investments and private pension plan investment portfolios contributes significantly to the high cost of funding the benefits provided from the RRA. This bill would provide the authority for the industry assets in the RRA to be invested in a diversified investment portfolio, as are the assets of private sector retirement plans. In the process of developing this proposal, concerns were raised by some Members of Congress that this aspect of the legislation could result in government intrusion into the equity markets. While the funds that would be invested are, in effect, railroad industry pension funds which, through historical circumstance, have been maintained in a government account, we have included a provision to draw a bright line distinction from current investment practice. The Congressional Committees of jurisdiction worked with labor and management last year to create a new structure that separates the new investment activity from the Railroad Retirement Account. This structure has been included in the legislation we introduce today. It would establish a new Railroad Retirement Investment Trust (RRIT), whose exclusive purpose would be the investment of RRA assets entrusted to it by the Railroad Retirement Board (RRB). The RRIT would not be an agency or instrumentality of the federal government. RRA assets would be transferred to the RRIT for investment and from the RRIT to a centralized disbursement agent that would pay the various components of the aggregate railroad retirement benefit in a single check to beneficiaries. The RRIT would have seven trustees chosen by the Railroad Retirement Board: three representing labor, three representing management and one representing the public interest. Trustees of the RRIT would be required to have experience and expertise in the management of financial investments and pension plans, and would be subject to fiduciary standards similar to those required by ERISA. The RRIT trustees would set investment guidelines for the prudent management of the assets entrusted to it, and select outside investment advisors and managers to implement its policies. Earnings on RRIT investments would be available only for the purpose of paying Railroad Retirement benefits and necessary expenses of the RRIT. I believe that these measures will allow for increased returns on the industry's pension plan while building an effective firewall between the government and the private markets. Third, this legislation would improve benefits for retirees and their families. In particular, it would resolve the concern regarding the benefit for widows and widowers under Tier II. Under current law, while the retired employee is alive, the couple receives a Tier II benefit equal to 145 percent of the retiree's benefit--the retiree's benefit plus a spousal benefit of 45 percent of the retiree's benefit. When the retiree dies, the spouse is left with a Tier II benefit of 50 percent of the retiree's benefit--a reduction of almost two-thirds. Under this bill, the surviving spouse would receive a Tier II benefit equal to that received by the retiree, preventing such a drastic reduction in survivor income. Also of key importance is a reduction in the current early retirement age of 62 with 30 years of service to age 60 with 30 years of service. This would return the age at which a railroad employee can retire with full benefits to what it was prior to 1984. It is significant that rail labor and rail management have agreed to revise their national collective bargaining agreement to conform the age of eligibility for retiree health benefits to 60, if this legislation is passed. There are also two other benefit improvements: the vesting requirement would be lowered from 10 to 5 years, a change which would align Railroad Retirement with current private industry pension practices; and the bill would also eliminate an arbitrary cap on Tier II benefits, known as the ``Railroad Retirement Maximum'', which can result in retirees and their spouses having their earned benefits substantially reduced. Fourth, Tier II payroll tax rates would be reduced for employers. Railroad employers currently pay 16.1 percent of taxable payroll into the RRA, which, as I have mentioned, is a rate substantially higher than other industries' pension contributions. The reduction of employer taxes would be phased in over the first 3 years following enactment of the bill. Employee tax rates would continue at the current 4.9 percent. Further tax reductions for employers and tax reductions for employees would be possible as provided under the tax adjustment mechanism I have already described. In addition, the supplemental annuity tax, a 26.5 cents-per-hour tax paid entirely by rail employers, would be eliminated. Supplemental annuity benefits would continue to be paid to eligible beneficiaries. The legislation being introduced today is nearly identical to the legislation that was reported last year by the Senate Finance Committee, with the exception of updated effective dates. I am concerned that certain aspects of this bill have been undeservedly criticized since it was first introduced last year, and I believe it is important to put these criticisms to rest in order to avoid any further misconceptions. First, the legislation's budget impact has been mischaracterized and overstated. Under current scoring rules, CBO is required to treat the initial purchase of private securities by the Railroad Retirement Investment Trust as a government ``outflow.'' These private securities would become an asset of the RRIT, but would not be scored as a corresponding government ``inflow'' under current budget scoring rules, a decision which, I am told, the CBO characterized as a ``close call.'' CBO further indicated that some budget experts believe that OMB's long- standing practice under ``Circular A-11'' may be ``ill-suited to purchases of financial assets that the government acquires as a way of preserving, or enhancing, the value of cash balances,'' and that they ``may consider a different budget treatment in the future.'' Simply put, even if the estimated $14.8 billion acquisition of private securities is scored as an initial outlay, the assets received in return would produce on-budget revenues in the form of interest, dividends and capital gains. Over time, these revenues will contribute to increasing future surpluses and reducing debt service. In fact, CBO estimated that after the third year under the Railroad Retirement and Survivors' Improvement Act, the program would add to the surplus in every succeeding year in ever-increasing amounts. Second, some have expressed concern that the transfer of federal income taxes on railroad retirement benefits into the Railroad Retirement trust fund is a Government subsidy. In fact, railroad retirees, concerned about the future of Railroad Retirement, agreed in 1983 to the taxation of their benefits and the dedication of the proceeds to Railroad Retirement as a form of benefit cut to help support the long-term solvency of the program. If benefits had been cut in the conventional way, there would be no question as to whether this would be considered a subsidy. Third, critics' claims that this legislation relies on Social Security funds or makes any changes to Social Security reflect a total misunderstanding of the relationship between Railroad Retirement and Social Security. Since 1950 there has been a financial interchange mechanism between Railroad Retirement and the Social Security system that ensures that neither system is advantaged or disadvantaged by which system covers a worker. The current bill would make no changes to this interchange process or to Social Security. As in the past, these Tier I funds would be available to pay benefits, would be considered assets of the Railroad Retirement program, and would be limited to investments in federal government securities. Railroad Retirement has always been a bipartisan concern. I hope that many more of our colleagues will join us in taking this opportunity to improve Railroad Retirement and the lives of its more than 673,000 beneficiaries, and that we act early to ensure that there is plenty of time in this session to accomplish this important task.