Jon Kyl

Mr. KYL

Mr. KYL. Mr. President, the Senator from Minnesota has well described his amendment. It is very similar to the last amendment, but this is a motion to recommit. There is no estimate of the revenue loss of the proposal, though it will be huge. The bill already, as we all know, has a $30 billion package of education tax incentives. Given the amount of money available for the various pieces of relief within the bill, we think that is quite generous. The proposal, obviously, will raise the taxes of individuals and small businesses by the billions that would be necessary to pay for it. It is almost 8:30 p.m. This is the third day we have been taking up amendments. We have now considered 44. This will be 45. Almost half of them today have not been relevant. Why do we keep having the same amendments over and over? This is virtually the same amendment as the last one. I appreciate those on both sides of the aisle who have supported the committee bill. It is important we continue to do that. This all boils down to who supports tax relief and who does not. If you support tax relief, vote no on this crippling proposal.

Mr. KYL. Mr. President, compared to the bill that is before us, this amendment is a tax increase for a large segment of middle America. Families making $50,000, $60,000 a year would not see rates reduced. Relative to the bill, the rates are effectively increased. We believe it would be a very expensive addition to a $30 billion package of education proposals already included in the bill. As a result, obviously, it not only upsets the bipartisan agreement that has been crafted between Senator Baucus and Senator Grassley and the committee but in fact would represent a huge revenue loss --the estimate not being before us. As I said before, what we are seeing is amendment after amendment being presented which do not pass but which clearly make the point that there are some folks here who are for tax cuts and some folks who are not for tax cuts. This is the 43rd amendment on which we have voted. Of those presented today, almost half of them have not even been relevant. It is time to call this to a stop. I urge my colleagues to vote no.

Mr. KYL. Mr. President, I move to reconsider the vote.

Mr. KYL. Mr. President, I am pleased to stand in for the chairman of the committee. This amendment for full funding of Head Start has no place in this bill. The chairman has made the point over and over again that this bill is carefully constructed to include a variety of interests on both sides of the aisle. Each of these amendments is an attempt to upset that balance, in many cases, as in this one, with no estimate of the cost whatsoever. As a result, of course, a point of order lies, a point of order which I will make in just a moment. It ought to be clear to everyone that this is boiling down to a question of who is for tax cuts and who isn't. Time after time, amendments are presented on that side of the aisle, and they are defeated by this side of the aisle. I think it ought to become clear to people after a while what is really occurring on. It is a stall tactic, and it really defines who is for tax cuts and who isn't. Mr. President, because of the point I made, the pending amendment is not germane to the provisions of the reconciliation measure. I, therefore, raise a point of order against the amendment under section 305(b)(2) of the Budget Act.

Mr. KYL

Mr. KYL. Madam President, the point of order would be well taken, although the amendment is a darned good amendment, and I hope we will be able to vote on it again some other time. In the interests of time this evening, I will not move to challenge the point of order.

Mr. KYL. Madam President, this amendment would provide a $500 tax credit for contributions to scholarship funds which could then be given to parents and needy families to enroll their children in the school of their choice. It is an idea that is now being tried in several States, including my own State of Arizona. It is an idea whose time has come. The Federal Government should provide a tax credit for this purpose, but I understand a point of order will be raised against the amendment. I ask the Senator from Montana, will there be a point of order raised against the amendment?

Mr. KYL. Mr. President, I am offering this amendment because I believe our Tax Code must and can be reformed to address the urgent need to improve elementary and secondary education in our country. This tax bill takes a very important first step by allowing the Coverdell education IRAs to be used not only to facilitate savings for college education but for grades K through 12 as well. Many of us since 1997 have worked very hard to secure this reform. I am gratified that it will finally be accomplished. For that, by the way, special credit is due to my late colleague, Senator Paul Coverdell, as well as Senators Torricelli and Hutchinson of Arkansas, whom I am pleased to have as cosponsors of this amendment. While the administration of our schools is and should remain a local responsibility, we have a compelling national interest in improving the quality of K through 12 education. There are ways to do it without adding to the bureaucracy in Washington and without adding new mandates. It is a fact that America is currently not educating the workforce it needs for the economy of the 21st century. Raising overall achievement will enhance America's competitiveness. Congress has been compelled to authorize the issuance of hundreds of thousands of new visas for highly skilled temporary workers because it is a fact that not enough qualified American workers were available to fill new economy jobs. Unless we take action, this situation is unlikely to change. It is a fact that international tests reveal that American high school seniors rank 19th out of 21 industrialized nations in mathematics achievement and 16th out of 21 nations in science achievement. Ironically, this threat to our competitiveness is the result of our failure to apply the very principles undergirding our economy's success in the area of education. Our Nation has thrived because our leading industries and institutions have been challenged by constant pressure to improve and to innovate. The source of that pressure is vigorous competition among producers of a service or a good for the allegiance of their potential customers or consumers. So why not promote innovation by producers and choice for consumers in the field of education? The quasi-monopoly of public education today discourages this innovation, and the fact that funding is through tax dollars diminishes the choice option for all but the most wealthy. They have to go to schools where they are told. They can't direct their tax dollars to the school where they want to send their children. We must find a way to promote innovation and opportunity through greater choice for parents. Those are the concepts that have built this country through our great free market economic system, and it is the same concept that can improve our educational system for the competition that I spoke of earlier. Another problem with our education system is that too many of our children are literally being left behind. Thirty-seven percent of American fourth graders' tests show that they are essentially unable to read. For Hispanic fourth graders, the proportion is 58 percent, and for African-American fourth graders, it is 63 percent. That is intolerable. Since 1983, over 10 million Americans have reached the 12th grade without having to learn how to read at a basic level. Over 20 million have reached their senior year unable to do basic mathematics. As President Bush has repeatedly noted, far too many of America's most disadvantaged youngsters pass through public schools without receiving an adequate education. It is intolerable that millions of children are trapped in unsafe and failing schools. Parents should have a right in the United States of America to get the best education possible for their children as they see it, and the amendment I offer today will help secure that right. My amendment would provide a $250 tax credit, $500 for joint filers, to partially offset the cost of donations to tuition scholarship organizations. What are those? They are organizations that in the past have been primarily founded by business leaders that provide partial tuition scholarships to enable needy youngsters to attend a school of their family's choosing. The idea first came to light about a decade ago when the first one was founded in Indianapolis. Now there are more than 80 such programs serving more than 50,000 students nationwide. For families who benefit, these programs are a godsend. A study that was just released by the Kennedy School of Government found that 68 percent of parents awarded scholarships are very satisfied with academics at their child's school compared with only 23 percent of parents not awarded scholarships. The problem is that demand for scholarships far outstrips supply, even though families must agree to contribute a significant portion of the total cost of tuition. The interesting thing is, that is especially the case at the lower end of the economic ladder. For example, in 1997, 1,000 partial tuition scholarships were offered to families in the District of Columbia. Nearly 8,000 applications were received, many of them from very low income families. Another example: In 1999, 1.5 million people applied for 40,000 scholarships in a national lottery. Clearly, there is a huge unmet demand for this kind of assistance. In 1997, Arizona implemented an innovative plan to meet that demand in our State: A $500 tax credit to offset donations to organizations that provide tuition scholarships to elementary and secondary students. The results: Upwards of $40 million in donations to tuition scholarship organizations. The number of school tuition organizations operating in my State of Arizona is up from 2 to 33, and the organizations have a very wide range of emphasis and orientations. For example, they range from the Jewish Community Day School Scholarship Fund to the Fund for Native Scholarship Enrichment and Resources to the Foundation for Montessori Scholarships. Nearly 15,000 Arizona students, nearly all of them from disadvantaged backgrounds, have received this scholarship assistance. The interesting thing is while some have charged that the law was unconstitutional, particularly given the explicit prohibition on direct aid to parochial schools in Arizona's constitution, our State supreme court recognized that allowing taxpayers to use their own money to support education is a different matter and upheld the program. And consistent with previous holdings on the subject, the U.S. Supreme Court declined to review the decision. We have the answer to those who fear that Federal dollars going to vouchers which students would then take to the school of their choice could possibly be unconstitutional, though I do not think that is the case. But we have an answer to that concern. Here you do not have Federal dollars being given to students in the form of vouchers which are then taken to the school of their choice. Instead, what we provide is that if people want to contribute money to a duly qualifying scholarship fund, that scholarship fund can then give that scholarship to needy students and those students can take that scholarship to whatever school in which they want to be educated. The people who originally donate to the scholarship fund will be granted a tax credit by the U.S. Government. That is constitutional. It does not violate any notion of separation of church and state, and yet it permits people to help those who need the help the most to have the flexibility that only the most wealthy in our society have today: the ability to take their kids to the school of their choice. It is a much better way to resolve this problem of choice and innovation than, frankly, anybody has come up with to date because it meets the constitutional challenges; it involves the private sector; it involves personal donations; it does not have the Federal Government having to fund a large voucher program. Yet it gets the benefits to the students who need it the most, who are willing to contribute part of their own income to match that scholarship and pay the tuition at the school of their choice, be it a public school, a public charter school, a private school, a parochial school--it does not matter. In many cases, this money could even be used to pay the public school when one is able to transfer from one public school to another. It is neutral in this regard, as to whether it is used at public or nonpublic schools, and, as I said, it could even be used to offset tuition costs both at private schools and to help enroll a child in a school across a district boundary. This, in effect, creates a Federal credit comparable to those upheld in Arizona and to recently enacted provisions in other States, such as Pennsylvania and Florida, of which I am aware. It is interesting; the Joint Committee on Taxation has estimated this credit could cost the Federal Treasury $43.4 billion over a 10-year period. Think what a magnitude of difference that money would make in the lives of our children: $43 billion would finance 12.4 million $3,500 scholarships. Think of the opportunity provided to those 12.4 million students with a $3,500 scholarship to take them out of the condition of education they are in now, out of the failing school, out of the unsafe school, and to a school where they can achieve, where they can learn, where they can be competitive, where they can learn their full potential. I close with this point. I have said many times that if we can get education right, almost everything else in this country will follow. Probably all of my 99 colleagues would agree with that general proposition. If we can get education in this country right, everything else follows. By ``we,'' I do not just mean the Federal Government. In fact, I mean primarily the parents and local school folks. First, it will help people realize their full potential. Second, it will make them more qualified to compete for the kinds of jobs that are going to exist in the future. Third, it will help our Nation compete. We are going to need to compete in a world environment. Fourth, it is going to make us more secure because we are going to have the kind of young students who can invent the things that are going to help us keep our technological edge when it comes to national security. Fifth, it is going to make us better citizens. I have been somewhat appalled at what some of our schools do not teach about the history of this great country of ours, about the foundation for the self-governance we have, about the need for people, especially young people, to participate in our democratic Republic. I fear that generations of Americans are growing up not being taught the fundamentals of our society, our Government, and our free-market system that we were taught, and I think fairly well. People such as the Presiding Officer have helped to create wealth to create jobs, to help turn this country into the great economic engine it is. People in public life have also helped Americans realize the stake they have in self-governing. If we go a couple generations without teaching our children accurately and adequately in subjects from math and reading to history to government to economics and all the other subjects that students in this complex world have to master, then we are not going to progress as a nation and be the leading superpower and the leader of the world we are today, not just in economic terms but in terms of human rights, democratic principles, and other societal values, as well as the technological values I spoke of earlier. If we get education right, we can flourish in all of these areas, and if we stay 19 out of 21 on these tests, then Americans are not going to be as well educated and we will be overtaken by other nations. Is it all bad we would be ``overtaken''? Not necessarily, if other nations are putting their productive capabilities into the same things the United States has, but we have never won a war without turning over to the vanquished the territory we took. We have led the world in foreign aid and assistance. We have led the world in our insistence on human rights. In other words, America stands for what is good on this Earth, and for us to continue to be the leader of the world to promote these values requires an educated citizenry, a citizenry that will be educated and committed to these ideals, to these propositions. We cannot sustain that kind of education with the system we have today. The scholarship tuition credits I am proposing with this amendment will enable parents to allow their children to be educated in the very best schools for those students and to enable them to escape the kind of system we have today to one where each child can grow to their full potential. We must demand nothing less of our system. The final point is, if children are able to take scholarship tuition money to the school of their choice, the school from which they left will have a much greater incentive to improve than is the case today. We are talking about improvement of all schools, not just a few. This is an idea whose time has come, an idea we can support through a tax credit, through this bill before the Senate today. I hope even though there may not be adequate support for this when we vote on it tonight because of the opening of the debate on the subject, we will be able to promote this idea in ways that will enable it to bear fruit in the days and weeks to come. This is an amendment Congress needs to pass. It is a tax credit the Federal Government needs to provide for an educational benefit that the children of the country need to have.

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

Mr. KYL. Mr. President, I send amendment No. 691 to the desk. It is the tuition scholarship tax credit.

Mr. KYL. That is right. The immediate repeal--that was my original bill--would cost $662 billion. But we are not immediately repealing. The Senator should consult the bill. The estate tax is not eliminated until the 10th and final year. That elimination is $30 billion of the $145 billion of the total cost of reforming and finally repealing the estate tax. It is not repealed in the first year, not until the 10th year.

Mr. KYL. Mr. President, I will be happy to take 30 seconds when he is done, and I will not object.

Mr. KYL. Then I will be happy to have a rollcall at that point. This is a very deceptive amendment. There is absolutely nothing in this amendment that calls for any money to be spent on paying down the national debt or applying any money to the infrastructure of the United States. Only in the title does the amendment say that the purpose is to allow money to be spent for this. It says ``may be used'' for Federal debt reduction and improvements to the Nation's infrastructure. What it does is repeal almost all of the benefits in this bill relating to the repeal and reform of the estate tax and takes away all but 1 percent of the top marginal rate reduction called for in the bill. When the Senator from Connecticut claims that the repeal of the estate tax in this bill is going to cost $662 billion, he is absolutely, totally wrong. According to Joint Tax, the cost of the estate tax repeal and reform measures in this bill is $145 billion, period, not $662 billion. Moreover, it is a fallacy to say that few will benefit. While it is true that relatively few estates pay the tax, hundreds of thousands of people will benefit by the reforms in the estate tax that are included in this legislation: The rate reductions; the increase in the amount of unified credit; and, in the 10th year, the repeal of the tax.

Mr. KYL. Might I be recognized to take that time in response to the Senator from Connecticut?

Mr. KYL. Mr. President, how much time does the chairman of the committee, the Senator from Iowa, have remaining on the Republican side?

Mr. KYL. Might I, on behalf of the Republican majority, pose a question to the Chair?

Mr. KYL. Does the Senator from Montana believe that President Bush, however, would veto a capital gains reduction as President Clinton did?

Mr. KYL. Mr. President, will the Senator yield for a quick comment?

Mr. KYL. I note that I offered a similar amendment myself. In fact, I know several of us offered similar amendments because this is such a good idea. I begin by complimenting the Presiding Officer for the extraordinary job he has done in putting together a compromise tax bill. It is with great hesitancy that I suggest an amendment to this bill, but I know if it were not so critical to get a lot of support from disparate groups of folks, the Presiding Officer undoubtedly would be supporting an amendment of this type as well. So I simply agree with the Senator from New Hampshire that the primary point here is to both raise revenue and stimulate the economy, which is what a capital gains rate reduction will do. That is what our prior experience in this country has been. Clearly, that is what would happen in this particular case. So again, what this amendment does is reduce the long-term top rate from 20 to 15 percent for a 2\1/2\-year period, from June 2001 to December 31, 2003--a period of 2\1/2\ years. That is the period at which the rate will be reduced. What would be the impact of that? All investors, it has been pointed out--small, medium, and even large investors--would understand there is a window of time for 2\1/2\ years, during which they could dispose of assets, sometimes assets they have held for a long period of time because they have not wanted to have to pay the large capital gains rate on them. So they have held on to the asset, thus, in effect, making less money available for investment into the newer technologies and the more exciting things in the market today. It would provide a 2\1/2\-year window for all of these people to go ahead and sell those older portfolio stocks, those older assets of land or equipment--or whatever it might be that they have been hesitant to sell in the past because of the huge tax they would have to pay--a 2\1/2\-year window to dispose of those assets, take the cash, and reinvest it in something that would help the new economy even more. That kind of churning effect in the past has been demonstrated to provide not only stimulus to the economy, as the Senator from New Hampshire said, but also more revenues to the Treasury. Indeed, Joint Tax, which does not have a reputation of favorably scoring these kinds of things, noted that during the first 4 years there would be a net gain in revenue to the Treasury from the reduction in the capital gains rate. It is only after that that they have estimated a very slight loss that would occur thereafter. I disagree with that estimate. But, in any event, clearly this is the way to both stimulate the economy and increase revenues. I think it is unassailable by any standard that the capital gains rates in this country are too high. According to a study by the American Council for Capital Formation, American taxpayers face capital gains tax rates that are 35 percent higher than those paid by the average investor in other countries. This is an area where virtually every other country on the globe outcompetes the United States because they recognize the anchor effect, the drag effect, of a capital gains rate on their economy. We need to get in the game, and we can do that by reducing our capital gains rates. Lowering the rates will be a boost to the economy. The recent individual capital gains rate reductions have boosted U.S. economic growth. These are facts. Reducing the cost of capital promoted the kind of productive business investment that fostered growth in output and in high paying jobs. Lowering the capital gains rates aided entrepreneurs in their efforts to promote technological advances in products and services most people wanted and needed. It has this unlocking effect I mentioned earlier. Further reductions in the capital gains rates will enhance savings, investment, GDP growth, and boost equity values. A recent analysis done by Dr. Allen Sinai, President and CEO of Decision Economics, concluded that the capital gains reductions that were included in the 1999 tax bill, which was vetoed by President Clinton, which would have reduced long-term rates from 20 down to 18 percent, would have had a significant, positive impact on the economy. The analysis indicates that if the rate reductions had been enacted, real GDP would be $64.6 billion higher, and employment, investment, new business formation, and national savings would be greater over the period of 2000-2004. It is quite likely--I think evident--that our economy would be in much better shape today had the previous administration appreciated the importance of capital formation growth and the President not vetoed the capital gains reduction we passed. The recent Federal Reserve Board report indicated that Americans lost nearly $2 trillion in wealth in just the last quarter of 2000 as a result of the stock market decline. That is approximately a loss of $20,000 in wealth and capital for each household in America--think of that--the equivalent of $20,000 in loss for each household in America. Of course, less household capital means less capital available for investment and capital formation. Reducing the capital gains tax rate will encourage investors to unlock cumulative gains of the past. Capital would be more free to go into the entrepreneurial and future-oriented, technology-generating enterprises. In particular, venture capital investment, which is vital to this new technological innovation and productivity, will benefit as a result of the unlocking of this capital. Let's not forget about national savings. Reducing capital gains taxes means less taxes on Americans who choose to save for their future. To conclude, this estimate by Joint Tax indicates a revenue increase to the Treasury for the first 4 years. There is not another provision in the tax bill the Presiding Officer has so carefully crafted that will produce actual increases in revenue during this period of time. This is exactly the time when our economy needs the boost. I can't think of anything that would be better for inclusion in this tax bill than this temporary reduction in the rate of capital gains paid by Americans. The fact that they declare a slight net loss in the time thereafter is simply an indication of the kind of poor estimating they have done in the past. Again, it is a very small amount of money, and the time we really need the boost is right now. That is where Joint Tax indicates there would be a revenue increase. The amendment to this bill complements many aspects of the President's plan. It adds another important addition, immediate relief for capital formation and growth. That is what this tax plan is all about. That is what the American people are expecting as the result of the plan. That is why this idea put forth by several of us, encapsulated in the amendment of the Senator from New Hampshire, is such a great idea. I urge my colleagues, when the time comes, to support this amendment as something that will both generate new revenue and foster capital formation for the American economy. I thank the Senator from New Hampshire for offering the amendment.

Mr. KYL. Mr. President, I thank the Senator from New Hampshire for bringing this amendment forward. If I am not listed as a cosponsor, I ask unanimous consent that I be added as a cosponsor of the amendment.

Mr. KYL

Mr. KYL. Thank you, Mr. President. Let me correct a couple things the Senator from New York said earlier. To be accurate, the Senator from New York said his rate kicked in for estates of $3 million. The truth is that according to section 2001 of the IRS Code, his amendment would affect the estates if they were one penny over $2.5 million. The committee had testimony from a variety of witnesses to talk about what $2.5 million was. A grocer from Duncan, OK, talked about why the independent grocers support the rate relief in our bill--because it takes over $3 million just to put together the average-size grocery store. So when he dies, that estate is going to be denied relief because of the amendment of the Senator from New York. There is already, as we said before, $33 billion in this bill. By the way, I was in error because I said it was $10 or $11 billion. There is already $33 billion of relief for education in the bill. This amendment would add an additional $37 billion. We do not need to pit one group against the other. In fact, the bill is delicately balanced because we have relief for education and for those small businessmen and farms that would benefit from the rate reduction we provide for in the estate tax. The bottom line here is, we are not just talking about 32 such estates or some number such as that. In my own State of Arizona, according to the Internal Revenue Service statistics for 1998, there are over 250 estates that would be adversely affected by this. In the State of New York, I counted up over 900. The number may be quite a bit higher than that. So we are talking about a significant number of estates that are over $2.5 million that would be denied the rate relief because of the amendment of the Senator from New York. The bottom line is this: We tried to put a bill together that was fair. Most Americans believe that nobody should have to pay more than 50 percent in a tax rate. In fact, if you ask them, most of them say the highest rate anybody should pay is 25 percent. We tried to bring the estate tax--the highest rate of which, because of a bubble effect, is at about 60 percent--down to 45 percent. That is at least below 50 percent. No, the Senator from New York says we can't give that kind of relief; we are going to hold the rate at 53 percent. It is all about fairness. I urge my colleagues to vote against the Schumer amendment, to follow the advice of the committee, which gives relief both for education and for these small businesses that would get modest rate relief under our bill. If we do that, then I think we will be fair to everybody. If we do not do that, we are hurting one group of Americans in order to try to help a different group of Americans. That is not what this bill is all about. That is not what we should be all about. I urge my Senate colleagues to reject the amendment.

Mr. KYL. I thank the Chair.

Mr. KYL. My understanding was the Senator from New York was willing to yield time to me for the time he took on my time. What I am asking is, is there a minute of time that my friend from New York took that was in fact included in my time?

Mr. KYL. I have a question for the Chair.

Mr. KYL. Mr. President, reclaiming my time, it is evident that the Senator from New York does not want to see a permanent repeal of the estate tax. He does not want to see a reduction in the rates except by 2 points, from 55 to 53. He apparently agrees with me that because of the bubble effect, the effective rate is closer to 60 percent. As a result of his amendment, and as a result of his opposition to making the repeal of the estate tax permanent, albeit with other Senators as well--I am not suggesting that my friend from New York is the only one who may oppose that--opposing that and then also wiping out the rate relief that we are providing here leaves very thin any opportunity for us to go back to the American people and say we have done anything meaningful with respect to death tax relief. Yet that, according to public opinion surveys, is among the most popular of the features of the bill which we passed out of committee and which is on the floor. That is why I say to my good friend from New York, as laudable as it is for the Federal Government to assist families sending their kids for education--Heaven knows, I could have used some of that assistance a few years ago--as laudable as that is, we need to recognize, No. 1, that the bill already has education relief in it, and, No. 2, if we take out this rate relief, we are effectively gutting the bill's effective help for people with respect to the estate tax because of the fact that the 53-percent rate would still be in existence and that that rate, because of the bubble effect, is actually closer to 60 percent.

Mr. KYL. I reclaim my time. The point the Senator from New York was trying to make was that his amendment didn't affect the repeal of the estate tax. That is true. The repeal of the estate tax is only in existence for 9 months because of Senators such as the Senator from New York who won't agree to make it permanent. So the relief is very tenuous here for people, and that is why I am fighting very hard to retain the rate relief. The repeal of the estate tax is going to go away 9 months after it goes into effect, which is in the 10th year of this bill. That is why we need the rate relief that is built into the bill, and that is what is taken away by the amendment of the Senator from New York. I am happy to yield.