Jim Moran

Mr. MORAN

Mr. MORAN. Mr. Speaker, reserving the right to object, I have no objection if there are no further speakers. Mr. Speaker, I withdraw my reservation of objection.

Mr. MORAN

Mr. MORAN. Mr. Speaker, further parliamentary inquiry. It would appear to me then that clause 5(c) of rule XXI is meaningless, since we have never changed any income tax rate, increased it or decreased it, without first striking the prevailing tax rate and inserting a new tax rate. I understand that the ruling of the Chair is based upon a conclusion by the Joint Tax Commission that the provision we passed in the first day of this session does not apply to effective tax rate changes, and that in fact the change from the capital gains rate of 28 percent to 39.6 percent does not apply because we first struck the 28 percent before imposing the 39.6 percent as it applies to capital gains. Mr. Speaker, that is the way we have done every tax rate change. You first have to strike the existing change and then impose a new one. That means that subsequently, if this ruling prevails, that this body is able to increase tax rates anytime it wants simply by striking the existing rate, putting in a new rate, or, if it chooses, to say that the taxes will now apply to 110 percent of income without changing the tax rates. Mr. Speaker, this is a very dangerous precedent. Mr. Speaker, in light of the fact I have a letter from the Treasury Department that says this is a Federal tax rate increase, and I have a letter from the Small business Committee identifying the taxpayers and small businesses that will have to pay the 36 percent increase in the effective income tax rate that applies to investors in small businesses, I would ask the Speaker what clause 5(c) of rule XXI actually means if it does not apply to this income tax rate increase? Is the Speaker suggesting that any time there is an effective tax rate change, that what we passed does not apply? When would it ever apply, if it does not apply in this instance, Mr. Speaker? The Speaker pro tempore. The Chair is not in a position to answer hypothetical questions. It has been the determination of the Chair that this measure does not include a Federal income tax rate increase. The Chair would like to inquire if the gentleman from Texas [Mr. Archer], wishes to be heard on the point of order?

Ms. MORAN

Ms. MORAN. Mr. Speaker, that was not the question.

Mr. MORAN

Mr. MORAN. Mr. Speaker, in my opinion there are two Federal income tax increases in this bill before us. There is an indirect tax increase on Federal employees of $4,525 over the next 5 years through a 313 percent increase in their retirement contribution, and there is a second more direct income tax rate increase in this bill. Mr. Speaker, my parliamentary inquiry is directed at the clear, unequivocal Federal income tax rate increase. Does clause 5(c) of rule XXI that was passed in the first day of this session require a three- fifths majority for any increase in the Federal income tax rate?

Mr. MORAN. Mr. Speaker, I have a parliamentary inquiry.

Mr. MORAN. Mr. Chairman, my friend from Michigan mentioned that he worked for the Reagan administration during the 1980's. I worked for the Nixon administration for quite some time. But during the 1980's I was a stockbroker. I sold tax shelters, tax shelters because they paid the highest commission. And most people that came into the office, whatever they invested, we could show them how to avoid paying any Federal income taxes. I have some familiarity with the way tax shelters work, and I am not particularly proud of the fact that we financed so many see-through buildings, so many investments that had no real economic value, but the people did not care, the investors did not care, because they were not investing for the substantive value of the asset; they were investing because of the tax benefits. Mr. Chairman, if this bill passes, we will never have enacted tax shelters that are more open to abuse in the history of this Congress. There are two tax shelter areas here that will yield billions of dollars in tax savings and yield no economic value to our economy. The neutral cost recovery system, for example, if you are going to borrow money in the first place to purchase an asset, put it in use for less than 10 years, you will get back your value, because you will depreciate it, plus it will be indexed, plus you are going to get 3.5 percent annual increment. Now, Mr. Chairman, what happens is we do not index interest costs for inflation, so no one in their right mind will put actual cash down. They will borrow. But there will be a built-in tax credit, a built-in tax shelter. It is too complex to be able to describe it in a way that anyone in the audience is going to fully understand. I just have to tell you, Mr. Chairman, that we will rue the day that we pass these kind of tax shelters. did not even get into the tax shelter and capital gains. Mr. Chairman, we have to learn from the past. We are going to repeat what happened in the 1981 Tax Act if we are not careful here. I wish Members would read the entire tax bill before us.

Mr. MORAN. Mr. Speaker, I respectfully appeal the ruling of the Chair. motion to table offered by mr. archer

Mr. MORAN. Mr. Speaker, I would like to underscore the last comment that was made by the distinguished chairman of the Committee on Ways and Means that the House rule in question is not intended to apply to effective tax rate changes. There was never any reference to effective rate changes. In fact, it was any income tax rate increase. I read the debate again that occurred on the first day of this session. We are now making a distinction between effective rate changes apparently and statutory rate changes, although both apply here. I do have a letter from the Treasury Department explaining that this is a tax rate increase. How it occurred, Mr. Speaker, is in the 1993 Omnibus Budget Reconciliation Act we did pass a capital gains tax rate reduction. What it said is that when people invest in small capitalized firms for five years, their capital gains tax is reduced by 50 percent. What this bill did was to strike the capital gains rate of 28 percent, raise it to 39.6 percent, and then apply the 50 percent preference for capital gains investment. What that means is that the effective capital gains rate is 19.8 percent if this bill were to pass, whereas today there are investors getting a 14 percent tax rate on capital gains investments. Now, this is not an obscure provision. It is a $725 million capital gains provision that was passed in the 1993 Budget Reconciliation Act. What we have done is for some investors who have invested hundreds of millions of dollars in small capitalized firms, is increased their tax rate from 14 percent to 19.8 percent. That is an increase in the income tax rate. It is both a statutory increase, in that we remove the 28 percent level and put in 39.6 percent. It is also an effective rate increase because it changes from 14 percent to 19.8 percent. That is what the letter from both the Treasury Department and the Small Business Committee underscores, that in fact investors would be paying a higher capital gains rate.

Mr. MORAN. The Small Business Administration. I thank the gentleman from California for clarifying that.

Mr. MORAN. Mr. Speaker, I made a parliamentary inquiry, but I would state a point of order that any vote on this bill should require a three-fifths vote. If it does not require that, then I would appeal the ruling of the Chair.

Mr. MORAN

Mr. MORAN. Mr. Speaker, I would ask, when would be the appropriate time for a ruling on this parliamentary inquiry?

Mr. MORAN. Mr. Speaker, it is my recollection that this body passed legislation earlier this term, in fact, on the first day of this session, that required that any tax increase be passed with a three- fifths vote of this body. Since there is a tax increase to be leveled on Federal employees, in the case of the Federal Employees Retirement System, a 313 percent increase on their retirement contribution; in the case of the Civil Service Retirement System there was a 35 percent increase in their retirement contribution. This is clearly a tax increase, Mr. Speaker. Therefore, it seems to me, to be consistent with the legislation this body previously passed, it would require a three-fifths vote. I would reserve my point of order, but I would make that parliamentary inquiry at this time.

Mr. MORAN. I have a parliamentary inquiry, Mr. Speaker.

Mr. MORAN. Mr. Speaker, the rule said that all points of order are waived, but yet I am making an inquiry as to whether this is consistent with previously passed legislation of this body. It seems to me this then ought to enable us to call for a division as to the ruling of the Speaker. What I want to understand is when that might occur, when this body might be able to vote on that ruling. gentleman will suspend. At this point the Chair is merely not responding to an anticipatory parliamentary inquiry. The Chair will rule at the appropriate time.

Mr. MORAN. Mr. Speaker, when would I be able to get a division of the question on that issue?

Mr. MORAN

Mr. MORAN. Mr. Speaker, this is not a good tax-cut bill. In fact, there are two tax shelters within it which will make all the other tax shelters even enacted by this body pale by comparison, with regard to the abuse that they will enable people to take advantage of. But the worst part of this, of what we are to do today, is not even the bill, it is the rule. We are going to consider legislation which was rejected by the committee of jurisdiction, and under the guise of tax fairness, and not breaking contracts, we are going to increase taxes on each Federal employee by an average of $4,525, to provide a tax cut of about $1,000 to the average American. And talk about breaking contracts, when each Federal employee had to decide how to provide for the retirement security of their wives and children, we told them we would never break this retirement contract, and today we are going to break it. We are going to require them to lose retirement benefits, percent. This day will go down in infamy if we pass this bill, and particularly if we do not reject this rule.

Mr. MORAN

Mr. MORAN. Mr. Speaker, 1 hour ago we turned and faced this flag. We pledged allegiance to it, and we pledged liberty and justice for all. Mr. Speaker, where is the justice when we take an average of $5,000 from each of America's civil servants in order to pay a tax cut of about $1,000 over the next 5 years to America's taxpayers? Where is the justice to increase taxes on America's civil servants and reduce their benefits in order to provide tax cuts for other people? There is no justice, and there is no integrity, Mr. Speaker, when 8 years ago America's civil servants were faced with one of their most important decisions, the financial security of their wives and children when they retire, and we promised them we would never again change their retirement system. Mr. Speaker, we are going to do that today. Where is the justice? Where is the integrity of this institution? I urge my colleagues to vote against this tax cut bill and against the rule.

Mr. MORAN

Mr. MORAN. Mr. Speaker, the most egregious, unfair aspect of the tax bill that will come before us deals with the people who process our Social Security tax, who patrol our borders, who operate the Federal Bureau of Investigation, and who in fact do so many services that we take for granted--the Federal employees, a quarter of a million of whom have been cut, requiring those left to perform much more difficult work. But the most egregious aspect of this is that we are going to take $12 billion from their retirement plan, which means that the average Federal employee will pay $760 more per year in taxes in order to provide a tax cut for the average American of $124. I want to repeat this. The average Federal employee will pay $760 more in taxes to provide a tax cut of $124 for the average American. And these are employees who were guaranteed 8 years ago that their retirement system would never be changed. Mr. Speaker, this is an egregious assault not only on the integrity of the Congress but on the security of our Federal employees.

Mr. MORAN

Mr. MORAN. Mr. Speaker, I thank my friend from the District of Columbia for yielding to me, but most importantly, for the role she has played within the Washington metropolitan region. When her leadership was called for, she came through in flying colors. As has been said previously, I do not think any constituency represented by any Member of this body is served better than by the gentlewoman from the District of Columbia [Ms. Norton]. In fact, this was a perfect time to demagog to achieve short-term political benefits at the long-term expense of the health of the District of Columbia. She chose instead to work in a constructive fashion. Likewise, I think we ought to give some credit, as I said in the full committee, to the gentleman from Georgia, Mr. Gingrich, the Speaker, in having the foresight to make the gentleman from Virginia, Tom Davis, the chairman of this subcommittee. The fact is that he could not have chosen better. The gentleman from Virginia has proven himself fully worthy of the task. He deserves a great deal of credit, not just from us in the Washington region, but from this entire body. Mr. Speaker, this is a terribly important first step, but it is only a first step. This board will distribute the limited resources that are available to the a responsible job in that, but it is only a first step in that those resources are too limited. We need to take many more steps. One such step may be giving the responsibility for Lorton, for example, over to the Federal Bureau of Prisons, because that is a State function, and the city has only normal city resources available to it. We ought to examine other steps like that. We also ought to look at possibilities of setting aside large tax- free zones. The board might want to take the initiative to seek out consortia, bankers, developers, city planners, and find areas in the city that are currently not yielding any Federal revenue, so it would not cost us anything in terms of Federal income taxes, but perhaps take the initiative to give the city an opportunity to rebuild its tax base. That ultimately is what is needed. The fact is this entire body ought to be proud of this piece of legislation. It is the right thing to do, done by the right people in the right way.

Mr. MORAN

Mr. MORAN. I thank my very good friend from Maryland and also thank him for his leadership on this issue and so many issues of importance to Federal employees and, in fact, to the American people, because the way in which we treat the people who serve our constituents reflects well on how much we respect our constituents and in fact on ourselves, because the people who make this institution and the legislative branch and the executive branch are all affected by this legislation. But it seems to me there are two principles at stake here on this issue. One is fairness, and the other is integrity. With regard to fairness, we will have before us a tax cut bill. The purpose of that bill is to relieve the tax burden on other Americans, middle class. And the principal beneficiaries happen to be the wealthiest class of Americans. But the purpose is to relieve their tax burden. How unfair to relieve their tax burden by increasing the taxes of one group of American people, who happen to serve the American people by working for the Federal Government, 2 million people that we are talking about. In fact, their taxes would go up by 35 percent if they participate in the Civil Service retirement system, since they are currently paying 7 percent and it is a 2.5 percent increase, that is 35 percent of the base that they are currently paying that they would pay in addition. That money goes to paying for a tax cut for other Americans. If, however, they happen to participate in the Federal employees retirement system, the new system where they currently pay 0.8, what they would contribute after this change increases by over 300 percent to 3.3 percent, which is an enormous increase. But does it go to the retirement system itself? No. Because that is not the purpose of it, to fix any retirement system. The purpose of it is to finance a tax cut for other Americans. We are singling out one group of Americans in order to finance a tax cut for another group of Americans. How unfair. But beyond that, let us talk about integrity, the integrity of this institution is what I am referring to. From 1984 to 1986, this Congress worked on the Federal retirement plan, brought in all the experts. Both the House and the other body led that effort. The gentleman from the other body, Senator Stevens, was one of the most important leaders, as well as the gentleman from Maryland [Mr. Hoyer] and others. I was not in the Congress at the time. But Mr. Hoyer knows who they were, those who were involved. But they came up with a system that was based upon the best knowledge that existed both in the private sector and in the public sector, a system that was designed to pay for itself. That is why the CSRS system, the Civil Service Retirement System, is being phased out, because it had been calculated on static basis, not a dynamic basis. It had not taken into account merit promotions, locality pay increases, cost-of-living increases, and so on. It was calculated on a basis that was inadequate. Thus, it was not fully paying for itself. So what they decided was to come up with a new system, and to take care of inflation, as the private sector does, use the Social Security System, assuming Social Security System provides annual cost-of-living increases. So that is what they did. Federal employees who elected the new system pay 7 percent into Social Security and 0.8 percent into the FERS plan. Those employees who chose to stay with the old system pay 7 percent into that system, but they do not have the assurance of cost- of-living increases. So, it was balanced, it was a difficult choice. They made the choice, but they made it within the context that this Congress, this branch of Government, established. And that context was a commitment that we will not change the rules of the game. Once you make a decision, we are not going to tamper with your retirement plan. We will set it in concrete. We know it is designed to pay for itself. So once you make this decision, ``you can rest assured you can make your retirement plans based upon this commitment that we make today,'' back when the legislation was enacted in 1986. Some Members chose to stay in the old plan, and other Members chose to stay in the new plan. You know, Mr. Speaker, the fact is that those calculations worked out exactly as it was anticipated. happened between then and now is exactly what they calculated would happen. As the gentleman from Maryland [Mr. Hoyer] said, we have a system that is financially solvent and, in fact, last year there was a $60 billion reduction in the unfunded liability. In fact, $63 billion was paid into the system, $36 billion was paid out, exactly what was calculated would happen. It is working. It is exactly what was anticipated. The Federal employees are doing their part, and their employer, the Federal Government is doing its part. In fact, if any change should be made, we should recognize that the static system that they based it upon has actually not required as much funding as they estimated. It has gone down from about 12 percent of payroll down to about 10 percent. The dynamic system, taking into account all the changes that could occur, actually went down from 36 to 25 percent. So, if we should make any change, that change should be to reduce Federal employees' contributions. But what are we doing? We are being driven by other political considerations. We are choosing one group of only 2 million people to take money from them to pay for tax cuts for a larger group of people. I personally do not think this tax cut is in the Nation's best interests. But I will tell the Speaker and anyone that is listening that they should not be complicit in this unfairness, this violation, this breach of the kind of integrity that this institution has established over 200 years. To think that we would make a commitment to all those Federal employees, upon which they based their decision, and now we would violate it? I cannot believe that that could happen or that our leaders are even considering that. We ought to consider, Mr. Speaker, that we are not just talking about the Federal employees themselves. We are talking about their families because that is what retirement is all about. Mr. Speaker, you do not contribute to a retirement system for your own interests, nor does the gentleman from Maryland [Mr. Hoyer], nor does anybody in the room today. The reason we contribute to a retirement system is to ensure there will be financial security for our spouses, for our children. That is our commitment to them. That is the commitment that Federal employees make to their families. And now to think that these retirement plans that have influenced the direction that their lives have taken, that have influenced their decision to stay in the Federal Government based upon a commitment we made, would be breached; we cannot allow this to happen. Mr. Speaker, I thank my good friend from Maryland for yielding me the time, and I thank him for taking the time to make our case before the American people.

Mr. MORAN

Mr. MORAN. I would just suggest that there is an answer to why it was not included in the Constitution. In the original Articles of Confederation there was a limit on the period of time in which you could serve. You could not serve for longer than 3 years within a 6-year period. It did not work. And so there was a debate, in fact, precedent to the Constitution, and it was deliberately decided not to include term limits, because it did not work when the Articles of Confederation were the law of the land. So it is deliberate that we do not have term limits in the Constitution, and that is one of the reasons why I do not think we should change the Constitution at this point either.

Mr. MORAN. Mr. Chairman, will the gentleman yield?

Mr. MORAN

Mr. MORAN. I yield to the gentleman from Arizona.

Mr. MORAN. Mr. Chairman, it is encouraging that at least we have found one subject on which we all agree, and it is a terribly important subject. And whether it is men or women legislators or Republicans and Democrats, we realize something has to be done. We all know that the single greatest correlative factor to poverty and, thus, welfare dependency is teenage girls becoming pregnant, out of wedlock, without a man to support the family. One thing we may not be aware of, I was shocked when I found out, is that the vast majority of the men that are causing teenage pregnancies are significantly older adult men. They are men who oftentimes are financially independent, and they skip out on their responsibilities. But this is much more than skipping out on one's responsibilities. What we are left with is a program that in effect punishes the parent who raises the child, who assumes responsibility for the discipline, the structure, the financial support of that child, worries every day about their health care, about their child care, about their discipline, while the man who is at least equally responsible has no concern for what is happening to the family they created. There is probably no greater scandal in American society today than to think of the millions of young children of families who are living in poverty because of the lack of responsibility and accountability by the men who caused those families, who are equally responsible for their support. If nothing else happens, we at least will make sure that they have to assume their responsibility when welfare reform legislation is passed.

Mr. MORAN. Mr. Chairman, I demand a recorded vote.