Sam Johnson

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield 3\1/2\ minutes to my friend and colleague, the gentleman from North Carolina (Mr. McHenry).

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Madam Speaker, I filed a bill to support our troops in harm's way, and I rise in support of them, and in support of this country and this Congress backing our brave men and women in uniform 100 percent. I fear what all the talk of Washington about pulling funding for our troops is going to do to the privates and sergeants stationed in Camp Blue Diamond, think about it, for the next 11 months. We are elected to protect our men and women in uniform, just as they protect our freedoms every day. Our guys are fighting for America. They are fighting for you and me. All this talk of doom and gloom hurts mission success and stifles troop morale. It is imperative our Nation backs our troops to the hilt. As long as we deploy men and women across the globe, we will never, ever leave a member of our military in harm's way without support. That is our Congress's responsibility. Our troops are not the enemy. They deserve our full support, and that is why I hope folks will cosponsor my bill to support our troops in harm's way.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, for all the efforts of the proponents of H.R. 4 to confuse this issue, it truly is a simple one, basically a choice between hot-air promises and real-life facts. Today, some people are claiming we need government negotiation in order to increase the pool of Medicare beneficiaries trying to buy affordable drugs. Well, unfortunately, that math just doesn't add up. The pharmacy benefit managers negotiating drug prices on behalf of seniors enrolled in part D are the very same PBMs going to bat for tens of millions of the under-65 population, including those of us enrolled in the Federal Employee Health Benefit Plan. So if we took the Medicare population out from under that huge umbrella, they actually lose bargaining power, not gain it. Another claim that is being made is that the Secretary will not have to limit the formulary in order to achieve promised savings. Mr. Speaker, if you believe that, I have got some oceanfront property in Arizona I would like to sell you. Let us take a look at the VA plan as an example since it is being touted as a stellar illustration of government negotiating. The VA formulary has 1,300 drugs compared to more than 4,000 for Medicare. And all the Medicare plans protect drugs for the most vulnerable, including drugs that treat cancer, AIDS, and mental illness. That is why H.R. 4 is opposed by the National Alliance on Mental Illness, the ALS Association, and others. Finally, some are saying this bill will provide outstanding savings. Not to let the facts get in the way of a good story, but our own Congressional Budget Office says the effects of this bill will not save money. Drug prices have fallen every year of part D's existence because of one thing: competition. And it is working great. As we say in Texas, ``If it ain't broke, don't fix it.'' This debate boils down to a choice between government promises and free market results. I urge Members to vote against H.R. 4.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, while I am not sold on the effectiveness of a minimum wage increase, I rise in support of increasing the number of Americans with health insurance. Too many working Americans have a job but aren't insured because their employers cannot afford to purchase quality health care plans. This is particularly true of small businesses where it is difficult to pool risk, and the regulatory environment is overwhelmingly complicated. Currently, small businesses are denied the ability to purchase health coverage with the benefits large companies and unions have enjoyed for decades. So today, as part of a comprehensive motion to recommit, the Republicans will offer a proposal to address health care for many small businesses: association health plans. AHPs would increase small businesses' bargaining power with health care providers, give them much-needed freedom from a costly State-mandated benefit package and lower their overhead costs by as much as 30 percent. By pooling their resources and increasing their bargaining power, AHPs will help small businesses reduce their health insurance coverage costs. As you have heard me say before, if it is good enough for Wall Street, it is good enough for Main Street. By making health care more affordable, AHPs will expand access to quality health care for people for whom it is currently out of reach: uninsured working families. That is something my friends on both sides of the aisle can agree on. It is no wonder my AHP bill has had unwavering bipartisan support in the House for nearly a decade now. I look forward to working with my colleagues to make AHPs law this year. Small businesses need help now. Vote ``yes'' on the motion to recommit.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I appreciate that. And I thank the gentleman for his opposition. The fact is that you have the whole Lone Star State delegation backing a bill to repeal that outdated Wright amendment. Back in 1979, Congress created that law. Look at there. That is what those stewardesses were wearing in those days. That is where we were from, and today is a victory for freedom and free enterprise. That was 1979. People had mood rings, Rubik's cubes, smiley face stickers, and pet rocks. Just like this picture, so much has changed since 1979; but the Wright amendment never did. I want to commend officials in north Texas who worked tirelessly to craft a local compromise that works for all parties involved. For Texans, the traveling public, we are making history. It is not perfect. In my opinion, it doesn't do the job fast enough. But there is one thing I have learned in the people's House: you have got to give a little to get a little. Here, compromise can save the day, and it gives me great pleasure to come into the 21 century and cast my vote to end the outdated Wright amendment once and for all.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, today I am introducing the International Tax Simplification Act of 2006. This bill is aimed at streamlining tax rules so that American companies doing business all over the world can be more competitive. In the last few years we have taken a number of important steps toward this goal and the bill I am introducing would continue this effort. In the past one of our former colleagues, Amo Houghton of New York, introduced similar bills. Some of the provisions of this bill echo his legislation and build off of his efforts. Many of the concepts related to the taxation of international business operations were written forty years ago and have remained frozen in time. The global business environment has changed dramatically since the early 1960s when American companies were the major player in global business transactions. In the early 1960s, Western Europe was still recovering from the scars of World War II and the Asian business environment was just developing. Today, our European and Asian competitors produce products and services of world-class standards and have consumers that demand the same. American companies must compete in these markets but are sometimes still bound by a tax code that presumes they are the only player on the field. The American system of taxation--based on a ``worldwide income'' model--basically taxes all income earned by American companies both in the United States and abroad and then gives credits for taxes paid in other countries. Many other countries look only at income earned within its borders--based on a ``territorial'' model--but make certain exceptions for income earned abroad. The tax departments of American companies are double and triple the size of tax departments of their foreign competitors. I believe there are more productive uses of corporate assets than complying with the arcane rules that make up our tax system. At the House Ways and Means Committee, we've been taking steps to modernize the tax rules for American businesses working in the global business environment. We were also forced to change our tax code because of rulings by the World Trade Organization. Yet there remain dozens of places in the tax code that need work. The bill I am introducing is a first draft at this work. I am introducing it as the 109th Congress comes to a close and I invite those who are interested in these issues to work with me to either fine tune these provisions or find broader strokes to envelop wider solutions. I hope to reintroduce similar legislation early in the 110th Congress. The bill I am introducing would get rid of some of the rules regarding the worldwide grab for revenue. The part of the tax code known as ``Subpart F'', in particular requires that tax be paid on income earned in foreign countries where American companies are making goods and providing services as if that money were earned in this country. The presumption is that companies are just keeping money offshore so that they can avoid American taxes. But we know that American companies must engage in business activities such as making loans to finance the sale of their goods and that a temporary provision exists to allow companies to engage in this legitimate business activity without seeing their income taxed immediately. My bill would make this provision of the tax code permanent. I'd also repeal the rules that require immediate taxation of American subsidiaries on the income earned when related subsidiaries do business with one another. The anti-deferral rules are meant to discourage parking money offshore and evading taxes but the rules as written punish American companies that try to work collaboratively with their subsidiaries. If a subsidiary in Germany is working on a project with a subsidiary in Brazil, that income should not be subject to immediate tax in the United States. American subsidiaries should be able to work together for sourcing products and services rather than being encouraged by the tax code to work with other companies. By having subsidiaries work together on sales and services projects, American parent companies should see higher growth and productivity. I have had several companies request that I fix specific parts of the rules on sales and services income. Because the full repeal of these rules is likely to be scored as a big loss to the Treasury, I may have to whittle away at these rules bit by bit instead of taking one bold step. I would like to hear comments from the business community and tax lawyers on the full repeal of these rules as well as inviting comments and suggestions on more narrow approaches. Another provision in this bill would make permanent a temporary provision that permits related American subsidiaries in other countries to make dividend, interest, rent and royalty payments between subsidiaries without being subject to current taxation in the United States. We've already decided that this is not a business activity that should be penalized and we should now take the step of making it permanent. The foreign tax credit regime prevents double taxation of income in multiple countries. Because use of credits is restricted in some circumstances, credits are not always used in the year earned. My bill would double to 20 years the current 10-year carryforward period that sometimes causes credits to expire before they can be used. While this would virtually eliminate the expiration of credits, I would like to hear from companies that would instead prefer to have the ordering rules changed so that oldest credits would be used first. The bill changes a simple threshold for when American subsidiaries abroad are subject to the Subpart F rules. The current $1 million or 5 percent of income threshold, set generations ago, would be raised to $5 million or 5 percent of income. Another provision of the bill concerns how earnings and profits are reported. Publicly traded companies are required to file financial statements. based on Generally Accepted Accounting Principles (GAAP) in the United States. My bill would permit American subsidiaries abroad to report their foreign earnings and profits based on GAAP rather than the American tax accounting rules of uniform capitalization. The bill would accelerate the effective date of a provision of law that allows companies to allocate their interest expense as if all members of a worldwide group were a single corporation. This change would speed up the ability of companies to use a formula for allocating interest expenses. Finally, this bill would repeal special rules on income from foreign oil and gas. American oil and gas companies need to explore and develop energy sources in other countries where oil and gas deposits exist. The provision would also repeal special tax rules that limit foreign tax credits for oil and gas companies, thus permitting underlying tax rules to apply. The provisions of this bill generally focus on American corporations that have subsidiaries abroad. However, there are two other areas on which I invite comment for the next version of this bill. One is the inverse of this bill and concerns subsidiaries in America that have a parent company abroad. Global businesses know that having American operations is strategically important and I know that these businesses provide excellent jobs and contribute to American economic expansion. The other area on which I invite comment is individual taxpayer concerns regarding international taxation. I want to thank several professional tax staffers who have helped to comb through many proposals and provided invaluable advice to me in drafting this legislation. They are: Marc Gerson from the Ways and Means Committee, Tom Barthold, Patrick Driessen, Tara Fisher, Chris Gerke, David Lenter, and Allen Littman from the Joint Committee on Taxation.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, you know, all Americans know if you are here legally, you ought to be rewarded. If you are here illegally, you ought to be deported. My constituents constantly complain to me that illegal immigration is a huge problem. Local officials have used the so-called ``catch-and- release'' policy when they apprehend an illegal immigrant. Really, that person should be sent to jail. Why would we want someone who was just picked up by the police and is here illegally still out in the community and potentially free to flee? That just doesn't make any sense. It is time America totally ends catch-and-release policy when it comes to illegal immigration. Texans and all Americans want, need and deserve real immigration reform.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I missed votes on H.J. Res. 88, H.R. 2808, H. Res. 605, H. Res. 875 and H. Res. 981. Had I been present, I would have voted for each of these measures. I also missed votes on H.R. 503 and the Edwards motion to instruct conferees on H.R. 5122. Had I been present, I would have voted against these measures. In addition, there was a vote on a motion to close portions of the defense authorization conference to the press and public when matters of national security are under consideration. Had I been present, I would have voted for this.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Thank you, Mr. Chairman, for that time. I normally don't do this, but I rise in opposition to this pension bill on which I am a conferee. The original House pension bill had no specific industry relief. In the House bill we did not pick winners and losers. However, the Senate bill did contain specific airline industry relief. The four legacy carriers that maintain pension plans were all treated the same. Within that industry, there was no picking winners and losers. Yet this bill that we are debating chooses to favor two bankrupt airlines, Delta and Northwest. I appreciate the comments previous on Northwest. I think they need the help. It gives them extra relief for having run their pension plans even into the ground. The two airlines that are not threatening the retirement security of their employees, American and Continental, are being punished for having gotten wage and benefit concessions from their employees during very hard-fought, but successful, negotiations. American Airlines has been working closely with their pilots, flight attendants, and ground crews to be sure that this is an airline that keeps flying and keeps its promises to its employees. Yet the bill debated here tonight will give Delta and Northwest a huge competitive advantage. I will vote against this bill because all four legacy carriers should get the same interest rate, I believe, for unfunded promises. The Senate bill and the draft conference report that has been circulated by the Senate would provide for parity for all four airlines on the interest rate. Those who support this deal say American and Continental are being greedy. I say American and Continental need the same interest rate as the other two or they are going to be hundreds of millions of dollars at a disadvantage against their direct competitors. As a matter of fact, American just reported, I think, somewhere around $300 million profit in this year, and $600 million is what they would be cost by this bill each year. I am standing with the Texas delegation and airlines that keep their word. Our Texas airlines have worked hard to keep their word with their employees. This Congress must give equal treatment for our major airlines. I urge a ``no'' vote.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, due to illness in June. As a result, I missed votes on H. Res. 323, H.R. 4890, H.R. 5638, H.R. 4973, H.R. 4893, H.R. 889, H. Res. 890, H. Res. 895, H.R. 4761, H.R. 5672. Had I been present, I would have voted ``aye'' on each of these measures.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I am here to congratulate the men and women of our Armed Forces who have cornered and captured the leader of al Qaeda in Iraq, al Zarqawi. His death dealt a harmful blow to his followers who practice and preach hate, death, and fear. Better yet, the raid on the warlord's hideout produced a slew of information: policy, propaganda, and paraphernalia. Even Zarqawi says they are losing. Just as important is what transpired after they uncovered that intelligence: 452 raids since the killing of al Zarqawi, 104 insurgents killed, and 759 anti-Iraqi elements captured. This morning's news release claims the death of Zarqawi's replacement. One man said, ``We are beating the snot out of them. Why quit now short of complete victory?'' This is big news for democracy and freedom. Our men and women in uniform deserve the utmost respect and thanks, and I would like to honor them for a job well done

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, the question of the day is this, do you support the war against terrorism or don't you? You know, our enemy brutally attacked the World Trade Center in 1993, and we did nothing. In 1998, they attacked two American embassies in East Africa killing 80 people. We did nothing. We were attacked again on USS Cole. We did nothing. Well, now we have a strong President with courage and conviction who is bold enough to say enough is enough. If you are going to attack the United States, then we are going to fight back, and we will not tolerate terror. You know, I devoted 29 years of my life to the Air Force, flew 62 missions in the Korean War, 25 in Vietnam, and spent 7 years as a prisoner of war in Vietnam, more than half of that in solitary confinement. When I say I revere freedom, I mean that with my whole heart. I know what it is like not to have it. Every single day, since I left that God forsaken place, I thank God for my freedom. Sometimes people here in America take the countless blessings of this Nation for granted. However, freedom is the touchstone of democracy, and America means business when we say we want to help people in Iraq experience the rich taste of freedom. When we say we are with you, our word is golden. It is through the lens of a lifelong fighter pilot that I step back today and marvel at some of the tremendous accomplishments of the last several years in the promising democracy of Iraq. It gives me hope and provides just a glimpse of how the best is yet to come. Mr. Speaker, we are making great progress in Iraq. I have been there, and I have seen it. What a difference a few years makes. For generations, the people of Iraq only knew hate, fear and death. The former leader of Iraq gassed his own people by the thousands and hanged people in his very own death chambers. Remember just days ago looking at the image on the television of Zarqawi, the leader of al Qaeda in Iraq? He was cornered and killed. Better yet, from that raid, came a slew of information. We are hunting down terrorists, and they are going to pay. According to the Associated Press, American and Iraqi forces have carried out 452 raids just since last week's killing of al Zarqawi and 104 insurgents were killed during those raids. They also resulted in the capture of 759 anti-Iraqi elements. As a result, we discovered a treasure trove of al Zarqawi's information, almost ensuring a defeat against the evil forces of al Qaeda. Americans are training and working with Iraqi forces nationwide. There is over 260,000 Iraqi security forces serving their country. Another exciting facet of the development in Iraq is the budding democracy. Remember last January we saw the pictures from the first election? The news media predicted gloom and doom. What did we see? We saw bold images of people patiently waiting in lines for hours, defying death threats just to cast a vote. Today, people are working tirelessly to guarantee their freedoms. Participation in many Sunni areas of Iraq went from as little as 25 percent in January 2005 election to 75 percent in December. That is tremendous. Wouldn't we like that here in the United States? The people of Iraq have created a framework for their own future, their very own constitution. They have announced a new unity government, and the people of Iraq refused to allow those who rule by hate and fear to stop them from forging ahead for the future. They are already tasting the fruits of our freedom. Their strong resolve will pay off in the long run. They know what a difference several years of budding democracy makes. This is what democracy looks like in Iraq today. Schools and hospitals have been renovated, over 3,700 schools. In May, oil production was over 2.1 million barrels a day. In 2003, barely anyone had a cell phone. In Iraq today there are 6.4 million telephone users, and 1 million land-line connections. There are over 100 privately owned newspapers and magazines and more than two dozen radio and television stations. That is just the beginning. Our men and women in uniform are doing a tremendous job bolstering this new democracy and planting the tree of freedom in tyranny's backyard. Our men and women are making a difference, and making progress. They are lifting up the people of Iraq, so ultimately the people of Iraq can help themselves. We must stay the course and see this through. We must be patient and persevere. I think President Bush said it best, quote, this is going to be freedom's century. God bless you. God bless America. I salute you one and all and praise the people of Iraq.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I salute our soldiers, marines, seamen, and airmen of tomorrow, the service-bound academy students of the Third District of Texas. This district of Texas is home to some of the best and the brightest young people. It is always a tremendous honor to recommend such fine students to our nation's service academies. Each year, thousands of students apply to these prestigious academies, but only the cream of the crop makes the cut. I am very proud of these future leaders. Their appointments truly are a testimony to their hard work, discipline and strong desire to serve our country. While they passed the rigors of the nomination and appointment process, the real test has just begun! In just weeks these fine students will report in to begin an intensive basic training program before they begin a tough, and gratifying, four-year education. They have such exciting futures ahead of them. I know they are ready to join the premier military force of the world. To the appointees I say, ``God bless you. God bless America. I salute you.'' The appointees and their hometowns are as follows: UNITED STATES MILITARY ACADEMY: John Kottlowski--McKinney, Texas--McKinney North High School, Preston Pham--Plano, Texas--Plano Senior High School, Colin Skowronski--Plano, Texas--Plano East Senior High School, Anil Tilbe--Plano, Texas--Plano Senior High School. UNITED STATES NAVAL ACADEMY: Lindsay Atwood--Garland, Texas--North Garland High School, Jacqueline Juhn--Plano, Texas--Plano West Senior High School. UNITED STATES AIR FORCE ACADEMY: Ridge Flick--Plano, Texas--Plano West Senior High School, Daniel Fulcoly--Plano, Texas--Plano Senior High School, Mallory Morgan--Parker, Texas--Pecan Orchard Academy, Vanessa Warwick--Plano, Texas-- Ursuline Academy. UNITED STATES MERCHANT MARINE ACADEMY: John Tosetto--Plano, Texas--Bishop Lynch High School.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, Dr. Gary Purdue, MD, FACS, is one of my constituents performing life-saving work at the Burn Center at Parkland Health and Hospital System. In addition to his work at Parkland, Dr. Purdue is Professor of Surgery at The University of Texas Southwestern Medical Center in Dallas and is also a Professor of Anesthesiology and Plastic Surgery. In addition to these achievements, he has served as the President of the American Burn Association and spearheaded efforts to improve research into the treatment of burn injuries, worked to increase critical funding in the field, and furthered the cause of education for the prevention of devastating burn injuries. Dr. Purdue's work as leader of the ABA is significant because this is the organization that sets the industry standard for this challenging specialization within the field of medicine. Burn professionals, physicians, nurses, fire fighters and emergency personnel practice in every state of the union, playing a significant role in this country's response to emergencies, including terrorism risks which are now part of our world. The Burn Center at Parkland has been an ACS/ABA verified burn center since 1996, and the integrated in and out patient rehabilitation program gives the burn team a very strong presence treating over 600 new acute burn patients each year. Dr. Purdue's research interests include development and maintenance of a single center 14,500 patient database, causation of injury and high risk patients. He has had over 150 articles published in peer review journals and books. I would like to take this opportunity to congratulate Dr. Purdue on his valuable contributions to the field of burn injury treatment, an area I have had personal experiences with, and to apprise my colleagues of the American Burn Association and urge them to work with the burn centers and burn professionals in their own districts and states.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, there are millions of Americans benefiting from the new Part D Drug Program. Many people overlook that fact, though. I'm pretty tired of hearing the same old story from nay-sayers . . . that people could get their drugs cheaper, ``If only the Government had the ability to negotiate lower prices.'' I'll tell you what--That's just not true. People love to tout the V.A. system as an example of successful government negotiation. But did you know that only 13 of the top 33 prescribed drugs for seniors are on the V.A. formulary? Heck, a negotiated price doesn't help you much if you can't get the drug you need. For years, P.B.M.'s have been negotiating prices for millions of Americans--and now they are getting the job done for medicare beneficiaries. Some plans are able to offer prices lower than Internet wholesalers, lower than Canadian prices. The beneficiaries, the States, and the taxpayers are all benefiting from these lower prices. I encourage a yes vote on the resolution and thank the gentlelady from Connecticut for her tireless--and persistent--efforts on this issue.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, I move to suspend the rules and agree to the resolution (H. Res. 803) providing for the concurrence by the House with amendment in the amendment of the Senate to H.R. 1499.

Mr. SAM JOHNSON of Texas. Mr. Speaker, this is an important bill that will allow our troops serving in combat zones to contribute some of their tax-exempt combat pay to retirement savings. Because combat pay is exempt from tax, it does not qualify as earned income that is normally allowed in an individual retirement account. Mr. Speaker, I would now like to yield as much time as she may consume to the Representative from North Carolina (Ms. Foxx).

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, as Mr. Levin pointed out, we passed this legislation before. Our colleagues in the Senate then passed the bill by unanimous consent back in October, but made a change regarding the effective date. The HERO Act will help our combat troops save for their retirement, as Mr. Levin pointed out, or for first-time home purchases or for education by saving in a Roth IRA. Currently, all Americans can save up to $4,000 this year in an IRA or a Roth IRA. This cap on annual contributions will increase to $5,000 in 2008. Right now our combat troops are not able to contribute to IRAs because that combat pay does not fit the definition of taxable earned income. As Mr. Levin pointed out, our combat troops are putting their lives on the line in a very dangerous situation, and to recognize this service, their pay is not subject to tax. This bill is a way for Congress and the American people to say thank you every payday. There are a lot of young servicemembers who are single who come home at the end of a tour in a combat zone with a nice little nest egg. Once we get this bill signed into law, it will be great for these young men and women to put some of that money into a Roth IRA for the purchase of a home, to spend on school, or just for long-term retirement. While there are plenty of other tantalizing things for these young people to spend their money on, we need to at least give them the opportunity to save some of it in the same way that all other Americans can save. I am one of the conferees working out the differences between the House and Senate on the pension bill. I look forward to getting that bill completed soon so we can increase the opportunity of all Americans to save and to make their pension plans safer. However, our troops are prohibited from even contributing combat pay to an IRA, and we need to remedy this situation right now. According to the Joint Committee on Taxation, the bill would provide $70 million of tax benefits to military families over the next decade. We will pass the HERO Act with no controversy, and I hope our colleagues in the other body follow suit in the near future. Mr. Speaker, I thank Mr. Levin for his comments, and I appreciate Ms. Foxx introducing the bill. It is the right thing to do. Mr. Speaker, I yield back the balance of my time.

Mr. SAM JOHNSON of Texas

Mr. SAM JOHNSON of Texas. Mr. Speaker, can I ask the gentleman, how many more speakers do you have?

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, you know, talking about helping our companies, the energy bill that my opponent referred to was equally divided among oil, among chemical, among hydrogen, among all those renewable-type fuels so that we could bring this Nation into self-sufficiency. Today's Democrat motion to instruct conferees is just as bad as it was last week when it failed by a vote of 190-232. Yes, gas prices are high, and I can't name anyone I know who is happy about having to pay $3 a gallon for fuel. But this motion is the wrong policy on any number of fronts. It is bad energy policy. It is bad economic policy, and it is bad tax policy. The Democrats just do not want to understand the law of supply and demand. When supply is low and demand continues to rise, the price goes up. We are seeing continuing demand for gasoline both here in the United States and around the world. The demand for gasoline is growing leaps and bounds in developing economies such as China and India. We are not the only consumers of gasoline in the world, and we are sure not the ones in charge of supply. In the world, crude markets, the price of oil is bumping along at record prices. The worldwide demand for oil is chasing up the price of the basic commodity. This basic law of supply and demand is something that the Democrats think Congress can repeal, but they are sadly mistaken. This motion to instruct conferees is a reflection of this mistake. The law of supply and demand for gas also has another component that my friends just want to complain about; that is on the supply of refined oil in the form of gasoline. They talk out of both sides of their mouth on the issue of price because they have refused to allow new refineries to be built since 1976. There are 148 refineries in America today, down from 324 in 1981. And last year, during the hurricane season, we saw that refining capacity damaged. This creates a choke point in supply regardless of the rising cost of crude. The ability to refine oil is itself a problem and a demand problem. We have a problem with refineries running close to capacity and some of them shut down due to damage and basic maintenance. At this point in the year, refineries also have to start blending niche fuels due to clean air requirements. I support clean air. We all do. We like to breathe clean air. My grandchildren like to breathe clean air. But the blending of special fuels for 17 particular markets hampers the ability of refineries to keep running at capacity as they switch from one fuel to another. The pipelines that move fuel to terminals, the trucks that run from terminals to stations are not carrying generic fuel. They have to move boutique fuels. All of that adds costs and, more importantly, causes disruptions in supply so we end up seeing some gas stations without any fuel at all. Yet our Democrat friends just want to complain about some big conspiracy and own up to no responsibility for creating these supply problems that then drive the price to $3 a gallon. It is easier to send out press releases that claim they are attacking Big Oil than it is to take a semester of Economics 101. Mr. Speaker, I reserve the balance of my time.

Mr. SAM JOHNSON of Texas. Well, I didn't understand her. You claim you want to tax away the profits of oil companies, and yet they do not even come here with their tired old windfalls profit tax because they know it is a bogus policy that doesn't pass the laugh test. Instead, they come here convoluting tax items that sound intriguing in a 15-second sound bite. The first of the items is to switch the way that oil companies account for their inventory. They claim to pick up on a Senate idea to move away from long-standing accounting rules for inventory. Well, what this motion would propose to do is go back in time to the 1930s to theoretical inventories still held by oil companies. We know darn well there is no oil inventories held by oil companies since the 1930s, yet the Democrats here propose that we go back that far to tax theoretical inventory, propose a one-time retroactive tax back to the 1930s. Such a proposal is scary even for my friends on the other side of the aisle. They did not use some economic policy that was developed by a PhD. No, they simply decided how many billions of dollars they wanted to raise in taxes on oil companies, and with some simple division it came out to $18.75 for each layer of theoretical inventory for every oil company back to the 1930s. This provision has no real policy behind it. It simply is a big ATM withdrawal from oil companies to punish them for following the laws of supply and demand. They couldn't pass the laugh test on the windfall profits tax, so instead they came up with a tax that is retroactive to the 1930s. We have to defeat this proposal. Mr. Speaker, I reserve the balance of my time.

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I may consume. Last week, my colleague from Washington State submitted for the Record an article describing a draft economist paper that claims to find no positive effects from the 2003 dividend and capital gains tax cut. There is solid evidence to the contrary. I would like to submit a column from Business Week magazine written by Robert Barro, an economist at Harvard University and nominee for the Nobel Prize in Economics. He sums up a paper published in the Quarterly Journal of Economics by saying the 2003 tax cuts enhanced incentives for work effort, saving and investment. The paper shows that tax policy can have substantial and rapid effects on economic behavior. I submit for the Record a list of seven academic papers that offer support that a dividend tax cut of 2003 had a positive effect on capital markets and the economy. These papers were written by a diverse group of prominent academic economists from such institutions as the University of California at Berkeley, the University of Michigan, the University of Illinois and the Federal Reserve Board, and they directly contradict the papers submitted by my colleagues across the aisle, that the dividend tax cut had no effect. In fact, according to the IRS, dividend income by taxpayers went up 22 percent in the year after the tax cut, and qualified dividend income went up 30 percent. [From Business Week, Jan. 24, 2005] How Tax Reform Drives Growth and Investment (By Robert J. Barro) Not since 1986, during President Ronald Reagan's second term, has the atmosphere in Washington been so promising for basic income-tax reform. Proposals are likely to include making permanent the tax changes of 2001 and 2003, flattening the tax-rate structure, and moving toward taxing consumption rather than income. The 2003 law gave a taste of what is to come by advancing the effective date for the 2001 marginal tax-rate cuts and by reducing rates on dividends and capital gains. The 2003 tax cuts enhanced incentives for work effort, saving, and investment. So I think it is no accident that the U.S. has enjoyed rapid growth rates in gross domestic product, investment, and productivity since early 2003. Employment also grew, albeit with a lag. Because the sharp cut in dividend taxation was a centerpiece of the 2003 law, it is particularly interesting to see how companies' dividend policies changed. The anecdotal evidence suggests a strong positive response, highlighted by Microsoft Corp.'s initiation of a regular dividend in 2003. Other large companies that started regular dividends in 2003-04 include Analog Devices, Best Buy, Clear Channel Communications, Costco, Guidant, Qualcomm, and Viacom. A broader picture comes from the recent National Bureau of Economic Research working paper, ``Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut,'' by Raj Chetty and Emmanuel Saez, economics professors at the University of California at Berkeley. The Chetty-Saez study analyzes dividends paid by the universe of publicly listed corporations from the first quarter 1982 through the second quarter 2004. The sample, designed for statistical reasons to include the same number of companies in each period, comprises roughly the 4,000 largest companies by market capitalization in each quarter. The study documents a surge in initiations of dividends after the dividend tax cut was proposed in January, 2003, and enacted in May, 2003. The percentage of companies in the sample that paid dividends increased from 20% in fourth quarter 2002 to 25% in second quarter 2004. This increased propensity to pay dividends reversed a long-term decline. The 2003 reform was also followed by increases in payouts by dividend-paying companies. In the Chetty-Saez sample, the number of companies that raised regular dividends by at least 20% rose from 19 per quarter in the period before the tax reform was implemented to 50 in the post-reform period. Another response was a surge in special, one-time dividends. This number rose from 7 per quarter pre-reform to 18 post-reform. The most celebrated special dividend was Microsoft's payout of $32 billion, announced in July, 2004. The post-reform increases in dividends--new dividends, larger dividends, and special dividends--still apply when Chetty and Saez control for profits, assets, market capitalization, and cash holdings. In other words, the tax reform made companies more likely to pay a dividend and to pay a larger dividend. In addition, dividend initiations did not increase among companies for which the largest institutional investor was a pension fund or other entity not affected by the tax change. Neither did dividend initiations rise for Canadian companies, which are not affected by U.S. tax changes. The study also revealed the relationship between the concentration of company ownership and the propensity to pay dividends. After the reforms, dividend initiations were more likely if share ownership was heavily concentrated among executives or taxable institutions. The desire of these players to have larger dividends when the tax rate falls is particularly likely to be translated into corporate dividend policy. There's also evidence that the tax cut particularly heightened the propensity to pay dividends among companies with low forecasted earnings growth. So tax reform may have efficiently taken cash out of companies with below-average prospective returns on investment. The dividend study shows that tax policy can have substantial and rapid effects on economic behavior. The data highlight the importance of the current deliberations on tax reform. The Bush Administration should seize the moment and deliver a tax system that promotes economic growth. The following seven academic papers offer evidence of the positive impact of the 2003 tax relief: Hassett (AEI), Auberbach (UC Berkeley), The 2003 Tax Cut and the Value of the Firm: An Event Study, NBER Working Paper No. 11449, July 2005, http://elsa.berkeley.edu/users/ auerbach/03divtax.pdf. Chetty (UC Berkeley), Rosenberg (UC Berkeley), Saez (UC Berkeley), The Effects of Taxes on Market Responses to Dividend Announcements and Payments: What Can We Learn From the 2003 Dividend Tax Cut?, NBER Working Paper No. 11452, July 2005, http://papers.nber.org/papers/w11452.pdf. Chetty (UC Berkeley), Saez (UC Berkeley), Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut, Quarterly Journal of Economics, Vol. 120 issue 3, August 2005, http://elsa.berkeley.edu/saez/chetty- saezOJE05dividends.pdf. Chetty (UC Berkeley), Saez (UC Berkeley), The Effect of the 2003 Dividend Tax Cut on Corporate Behavior: Interpreting the Evidence, American Economic Review (forthcoming), Papers and Proceedings, Vol 92, issue 2, January 2006, http:// elsa.berkelev.edu/saez/chetty-saezAEA06.pdf. Brown (University of Illinois at Urbana-Champaign), Liang (Federal Reserve Board), Weisbenner (University of Illinois at Urbana-Champaign), Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut, Presented at 2006 Boston American Finance Association meeting, http://papers.nber.org/papers/w11002.pdf. Richard Kopcke (Federal Reserve Bank of Boston), The Taxation of Equity, Dividends, and Stock Prices, Federal Reserve Bank of Boston Public Policy Discussion Paper No. 05- 1, January 2005 http://www.bos.frb.org/economic/ppdp/2005/ ppdp051.pdf. House (University of Michigan) and Shapiro (University of Michigan), Phased in Tax Cuts and Economic Activity, NBER Working Paper No. 10415, April 2004, http://papers.nber.org/ papers/wl0415.pdf. Selected quotations from outside. independent academic papers offering evidence of the positive impact of the 2003 tax relief: ``The immediate tax rate cuts under the 2003 law provided incentives for production and investment to rise substantially . . . These incentives likely contributed to the stronger economic performance in late 2003.''-- Christopher House, Matthew Shapiro, ``Phased-In Tax Cuts and Economic Activity,'' NBER Working Paper 10415. ``We find strong evidence that the 2003 change in the dividend tax law had a significant impact on equity markets.''--Alan Auerbach (DC Berkeley) and Kevin Hassett (AEI), ``The Dividend Tax Cut and the Value of the Firm: An Event Study,'' NBER Working paper 11449, July 2005. ``An unusually large number of firms initiated or increased regular dividend payments in the year after the (2003 tax) reform. As a result, the number of firms paying dividends began to increase in 2003 after a continuous decline for more than two decades.''--Raj Chetty and Emmanuel Saez (UC Berkeley), ``Dividend Taxes and Corporate Behavior, Evidence for the 2003 Dividend Tax Cut,'' Quarterly Journal of Economics, August 2005. ``Fiscal policy along with monetary policy was an important factor in helping to restart the economic engine in this latest episode.''--Federal Reserve Chairman Ben Bernanke, Testimony before the Joint Economic Committee, April 27, 2006. Mr. Speaker, I reserve the balance of my time.

Mr. SAM JOHNSON of Texas. Mr. Speaker, I continue to reserve the balance of my time.

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I wonder how many people in this country have stocks in gas companies, ExxonMobil, for example. You are making a profit, too. Stop and think about it.

Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I may consume. You can talk about price gouging all day, but it costs money to get oil out of the ground and get it delivered, and we have an excellent delivery system. And that oil doesn't come from just this country, because some of my friends over there have blocked us from drilling for oil or gas in the major parts of our country. I think that another provision that our Democrat friends propose in their effort to repeal the law of supply and demand by reducing foreign tax credits, they are proposing to increase the capital cost of American oil companies when drilling in other countries. And they think this will somehow reduce the cost of oil. Well, if you are scratching your head and wondering how increasing capital costs will then somehow be able to reduce the cost of a final product, join me in voting against this motion. This motion simply doesn't make sense. The Democrat proposal to take away foreign tax credits when American oil companies are drilling in far off places like Africa, South America or Central Europe, the last time I looked, that is where a lot of oil is. Yet the part of the Democrat motion on the foreign tax credit does increase the cost of drilling in those countries. Perhaps our Democrat friends would rather have China National Offshore Oil Company or Venezuelan companies winning these drilling contracts rather than American companies. I can assure you that the president of China National Offshore Oil Company and Hugo Chavez in Venezuela really don't care about the cost of a gallon of gasoline in suburban America. To handicap American oil companies when drilling offshore would be to disadvantage American oil companies in these global drilling contracts and will ultimately harm Americans at the pump. Again, Mr. Speaker, our friends on the other side of the aisle are aiming to repeal the law of supply and demand. Just like they can't repeal the laws of physics and have pigs fly, they can't repeal the law of supply and demand in the oil market. We should defeat this motion to instruct conferees. Mr. Speaker, I yield back the balance of my time.