John Linder

Mr. LINDER

Mr. LINDER. Mr. Speaker, realtors would come in my office and say, we need the deductibility of home interest to calculate if they can afford to buy a house. My response has always been a little bit flip. I say, well, if you think that the deductibility of mortgage interest sells your houses, double the interest rate and you will sell twice as many houses. Well, it does not work that way. In fact, two-thirds of America uses a short form and does not use deductions anyway. Secondly, what really sells houses is whether an individual has enough take-home pay at the end of the month to make that house payment. Currently, according to our studies, 28 percent of the cost of a new house is the embedded cost to the IRS. There are thousands of business entities that touch all the products that go into a new house, and each of them has tax costs. We think that 28 percent of the cost of that house is the embedded cost to the IRS. Under our system, it would be 23 percent of the cost of a house, so the house would be less expensive. Secondly, if you are making $60,000 a year, you are currently taking home $3,800 a month to make the payment. Under our system, you would take home $5,000 a month, so you could make the payment easier. We also believe, our studies show that interest rates would decline by about 30 percent. So for that one-third of us that uses deductibility of home interest, you lose that, but you will not have anything to deduct against, because you will not have any income tax.

Mr. LINDER. Mr. Speaker, the average income-earner, paying the 28 percent withholding and their share of the 8 percent of the payroll tax, would have a 56 percent increase in take-home pay the next day.

Mr. LINDER. My understanding is, and the gentleman from Georgia could tell better than me, we spend about $34 billion a year on the earned income tax credit. The reason it was put into place many years ago was to relieve people at lower income, $17,000 to $23,000 or $24,000 a year from the payroll tax. These people do not pay income taxes, so they are not paying for the military or the parks or the Justice Department or the FBI, and the earned income tax credit relieves them of paying for their own retirement. Nine billion dollars of that $34 billion is considered to be fraud. Under our system, since nobody will have a payroll tax, there will be no reason to have an earned income tax, an earned income tax credit, and we will save a ton of money.

Mr. LINDER. Well, as the gentleman knows, most of the companies support their governments largely on the value-added tax, which is a consumption tax. We rebate that tax to the companies that export overseas so they come to America more competitive because they do not have much of a tax component in the tax system. Under our system, we will be selling goods and services under the global economy, 22 percent less on average, making the same profits; but our imports to our shores will be taxed at the retail checkout counter exactly the same as the domestic competition and will be perfectly neutral, although I think we will be more competitive if we can totally get the tax component out of the tax system.

Mr. LINDER. Mr. Speaker, I would yield to the gentleman from Texas.

Mr. LINDER. I thank the gentleman for those comments.

Mr. LINDER. Reclaiming my time, on that point, people have said to me over the years, well, will people quit consuming? The studies that we have shown from 1945 to 1995 is that the consumption economy is a very steady predictor of economic activity. People will spend so much. The biggest downturn it has had since 1945 was 3 percent in the 1970s and early 1980s. The income economy is very volatile. We are seeing collections right now down 20 percent because of layoffs and no corporate profits; and yet if we were on the consumption economy, the revenues would have increased in 13 of the last 14 quarters because the economy grows. This is a predictable thing to build retirement programs on. We know it is going to grow. We know if we fund the programs off the overall size of the economy, as opposed to the number of people working in it, we will be able to fund those programs. The gentleman is right, and you study it in your committee on a regular basis. This system is destined for collapse.

Mr. LINDER. I thank the gentleman, and I yield to the gentleman from Georgia (Mr. Burns).

Mr. LINDER. Which is about the top 2 percent of incomes.

Mr. LINDER. There are 8 to 12 million people living in the shadows of our life doing jobs in America that other people are not doing. You could not get a crop out of the ground in your district without some of these folks. You cannot build a house in north Georgia without some of these folks; but the biggest concern that I run into among my constituents is that they think they are not paying anything for their fair share. I think if they were paying every time they bought a loaf of bread and they were paying their share to the government, attitudes would change. There is no question we need to find these folks and identify them, and as President Bush has suggested, know who they are; when the job is over, send them back. But if the American people knew they were equally supporting the cost of government every time they bought a loaf of bread, I think the attitudes would change. I think your point is right.

Mr. LINDER. There would be no taxes on income whatsoever.

Mr. LINDER. Let me just address an issue you raised that is kind of interesting and it is a bit arcane. Health care. We made a decision in the 1940s to allow corporations to deduct health care insurance and not have it treated as income to the employees, and so the first dollar of third-party coverage has really caused the abuse of the system. I was with a corporation where we had a huge health care debate in 1994, and they proudly told me that they spend $1,000 per employee per month on the health care. I said, ``You ought to be ashamed of that.'' Because they were funding everything from fertility treatments to the grave, and hair transplants and everything in between. Under our system, that benefit, the value of that premium would be taxed as a personal consumption. And if I worked for that company that was spending $1,000 a month for me, I would start saying, ``I do not need that fertility treatment or hair transplant. I do not need AIDS coverage. I want this, this, and this, and I am willing to pay the tax on the provision of those services.'' And then I think we would have, for the first time since 1946 or 1947, American citizens shopping for and selecting their coverage benefits, and they would bring some sanity to the health care world.

Mr. LINDER. That is what we are currently paying for at retail.

Mr. LINDER. Absolutely.

Mr. LINDER. If we could lower the cost of production in Florida of fruits and vegetables by 15 percent, Latin America could not compete with us. If we could lower it by 20 percent, we would blow them out of town.

Mr. LINDER. Mr. Speaker, I would now like to yield to the gentleman from Iowa (Mr. King).

Mr. LINDER. I thank the gentleman for that.

Mr. LINDER. Mr. Speaker, I am so glad the gentleman raised that point. I want to throw one thing in here. Seventy-four percent of the money that goes to not-for-profits come from businesses they run. Universities sell hats and mugs, the Red Cross sells blood. Eighteen percent comes from the checks we write, and the rest comes from interest earned on interest-bearing accounts. People do not give money away to charities just for tax reasons. The great fortunes that have been given away, the Goulds, the Fricks, the Melons, the Carnegies, were given away before 1913. Carnegie funded 2,437 libraries before the Tax Code came into effect. People with a lot of money give it away because they like to give it away. In 1980, when the value of a charitable contribution's margin was a 70 percent deduction, we gave $48 billion to charity. Over several tax changes since then, the value of charitable giving has dramatically declined, and last year we gave nearly $200 billion to charities. People give money away if they have more money. If they have more money in their pocket, we will put more money in their pocket.

Mr. LINDER. Mr. Speaker, let me close with one point, and that is 47 percent of America does not pay any income taxes today. They pay payroll taxes, but we have a huge bias that is a dangerous bias in my judgment because people who do not pay taxes are disproportionate beneficiaries of government, and they want more government and more taxes because they think they do not pay them. I want a tax system that is so fair and equal that the next time we decide we want a tax increase, my mother is willing to pay it. We had two tax increases in 1990, both promised at the top 2 percent; it works its way through the system, and we all pay. I want a system that everyone sees they are the ones paying the taxes, and they are the beneficiary.

Mr. LINDER. We hear from everyone, and you talk about it, and people say it will never happen. This town responds to our constituents, and if the American people want this to pass, it will pass. There is no organized opposition to it. If the American people catch on, it will pass. But one thing that I have learned over the last 6 years on this issue, and I have been on several hundred talk radio shows, I have been in many States, the American people are so far ahead of the politicians on this it is scary. Politicians have no idea how close the American people are to throwing them out over this issue. The American people want the simplicity of it, the fairness of it, and they want it to be equal. All of the polling and focus groups we did, they want everybody treated the same. Half of the people in the focus groups thought they were the only ones paying taxes, and everybody else had a deal. They want everybody treated the same. Cab drivers want wealthy people treated the same because they want to be wealthy one day, and they want to be treated exactly the same. I believe there is a confluence of events occurring. The Social Security and Medicare crisis is going to force us to make some tough decisions. The fact that our revenues are not dependable, when under the sales tax and the growing economy, would not only be dependable, we may not even be facing deficits, and the projected long-term growth of the economy of a significant percentage above what we can do now. And lastly, we cannot continue to compete in a global economy with such a large tax component in our price system. These various things are coming to bear on our economy, and I believe the American people will catch on to this. As the gentleman knows in Georgia, he cannot run for office without discussing it. We need to do that in all of the States. I believe the American people will move this country, and it will take them to move the politicians. Politicians are, more than anything, followers. They want to know where the country is going, and they want to get in front of the parade, wherever it is. We are looking for some leaders, and the American people will show the way. Yes, it will happen.

Mr. LINDER. Mr. Speaker, I thank all Members who have participated tonight and continue the fight. This will happen.

Mr. LINDER

Mr. LINDER. Mr. Speaker, I reserve the balance of my time.

Mr. LINDER. Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 619 and ask for its immediate consideration.

Mr. LINDER. Mr. Speaker, for the purpose of debate only, I yield the customary 30 minutes to the gentleman from Florida (Mr. Hastings), pending which I yield myself such time as I may consume. During consideration of this resolution, all time yielded is for the purpose of debate only. Mr. Speaker, H. Res. 619 is a modified, closed rule that provides for the consideration of H.R. 4227, the Middle-Class Alternative Minimum Tax Relief Act of 2004. It provides for one hour of debate in the House, equally divided and controlled by the chairman and ranking minority member of the Committee on Ways and Means. H. Res. 619 also provides for the consideration of the amendment in the nature of a substitute printed in the Committee on Rules report accompanying this resolution, if offered by the gentleman from New York (Mr. Rangel) or his designee, which shall be considered as read, and shall be separately debatable for one hour equally divided and controlled by the proponent and an opponent. It waives all points of order against the amendment printed in the report and provides for one motion to recommit, with or without instructions. Mr. Speaker, this is a fair and traditional rule for the consideration of legislation amending the Internal Revenue Code, and I hope that the House will approve the rule in order to have the opportunity to consider the merits of the underlying consideration. The Alternative Minimum Tax was originally conceived as a means of ensuring that the wealthy ``paid their fair share of taxes'' in 1969. But, as has happened so many times in the past, the law of unintended consequences has meant that the AMT has produced a very different result. Because the AMT is not currently indexed to the inflation rate, the number of taxpayers falling into the ``AMT trap'' is growing larger and larger every year. In 1970, 19,000 people paid the AMT. Today, this number has risen to over 3 million taxpayers. According to some estimates, approximately 35 million taxpayers will come under the AMT's procedures in the next 6 years. These taxpayers are not wealthy by any stretch of the imagination. Increasingly, the AMT is punishing hard-working, middle class families. With this in mind, I wanted to commend the gentleman from Connecticut (Mr. Simmons) for bringing H.R. 4227 to the floor today. This bill extends for 1 year the current limits on income exceptions from the AMT that Congress and President Bush enacted in 2001 and 2003. Notably, H.R. 4227 also indexes the limits for inflation, thereby precluding the AMT from taking an even bigger bite out of most moderate-income families' paychecks. President Clinton's 1993 tax raise increased the AMT tax rate without adjusting the AMT exemption amount for inflation. Since then, however, the Republican majority in the Congress has repeatedly delivered AMT relief to taxpayers. The Economic Growth and Tax Relief Reconciliation Act of 2001 increased the AMT exemption amounts, and the Jobs and Growth Tax Relief Reconciliation Act of 2003 further increased the AMT exemption amounts. These steps provided some relief to families, but for procedural reasons, the current law's AMT relief will expire next year if we do not enact H.R. 4227. While H.R. 4227 is a good proposal that deserves our support today because it will help provide much-needed AMT relief to workers, it is increasingly clear to me that the current income Tax Code is fatally flawed and in dire need of a fundamental overall. To that end, I have introduced legislation, H.R. 25, that moves the Federal Government from an income tax-based system to a personal consumption system by abolishing all Federal income taxes and the IRS and replacing the Tax Code with a national retail sales tax on consumers buying new goods and services. Enacting the Fair Tax would, as just one example, solve the AMT problem for all families in the United States. Mr. Speaker, I urge my colleagues to join me in supporting this rule so we may proceed with the debate on the underlying legislation. Mr. Speaker, I reserve the balance of my time.

Mr. LINDER. Mr. Speaker, I yield myself such time as I may consume to comment on the gentleman's opening statement. The gentleman from Washington did not show up at the committee to pursue his proposed amendment. And it is regular order for the Committee on Rules not to allow an open amendment process in bills that come out of the Committee on Ways and Means. Lastly, let me just applaud the gentleman for saying we should get rid of the IRS. I welcome him as a cosponsor on H.R. 25. Mr. Speaker, I reserve the balance of my time.