Donald Manzullo

Mr. MANZULLO

Mr. MANZULLO. Mr. Speaker, I rise in opposition to the Democrat substitute. We have heard a lot today about the SEC, through no fault of its own, collecting six times more per year than it needs to fulfill its obligations. That extra money goes into the general government money pot and then it is spent on other programs. Apparently some people think that is okay, but the bottom line is this: More Americans are investing than ever before and this is good. Unfortunately, only 20 percent of small business owners are able to set up pension plans for their employees. This is bad. Any unnecessary money we collect diminishes the value of American savings and may prevent other small businesses from helping their employees plan for retirement. We should not penalize the millions of American families and small businesses who are working hard to plan for the future. I would encourage my colleagues to vote no on the Democratic substitute.

Mr. MANZULLO

Mr. MANZULLO. Mr. Speaker, our country faces difficult energy policy issues. Every day, people fill their gas tanks in order to get to work and support their families. For every gallon of gasoline they buy, they pay federal, state and local sales and excise taxes. Current federal policy requires taxes to be paid on the income that pays for all of those sales and excise taxes. In my view, that is double, sometimes triple, taxation. That is wrong. Taxpaying Americans should not be required to pay income taxes on taxes that must be paid. Congress should make every attempt to eliminate from our books policies that do just that. That is why I rise today to introduce legislation that would allow all taxpayers to deduct from their income level those taxes that are paid on gasoline. This means that people would not be forced to pay income taxes on those taxes that are paid for fuel that Americans need to get to work, go to school, attend church, drive to hospitals to see hurting loved ones, and other of life's necessities. This is not a quick fix to our energy problems--by any stretch of the imagination. It is an attempt to help give some relief to taxpayers who are forced to pay exorbitant fuel costs caused, in most part, by federal regulatory requirements. Those costs, especially in Illinois, are compounded by state and local sales taxes that rise as a percentage of the overall price of fuel instead of the per gallon excise taxes. I believe it is wrong to ask Americans to pay income taxes on money that they pay in other taxes, whether it is a federal, state or local tax.

Mr. MANZULLO

Mr. MANZULLO. Mr. Speaker, almost one year ago, to the day, I introduced the Federalization of Crimes Uniform Standards (FOCUS) Act. I rise today, to re-introduce that legislation. The bill lays out what the appropriate Federal activity--response--is to an offense against the Federal Government. Under the bill, Section 6, an offense, or federal crime, is an activity with respect to which a clear need for uniform Federal law enforcement exists. This includes an activity that involves conduct of an interstate or international nature, or of such magnitude or complexity that a State acting alone cannot carry out effective law enforcement with respect to that conduct; or, that involves conduct of overriding national interest, such as interference with the exercise of constitutional rights. The criminal conduct must be an offense directly against the Federal Government, including an offense directly against an officer, employee, agency or instrumentality of the Federal Government. The idea behind this is to set a standard definition to what constitutes a federal crime. The current method seems to be that a federal crime is whatever Congress deems it to be, without any true consideration of the constitutional issues involved. Therefore, under the current methods, political will is the only thing that keeps us from federalizing crime. Political weakness in the face of media sound bite criticisms, forces Congress to act again and again to federalize crime--even when there is nothing but rhetoric to suggest that ``something must be done!'' to fight crime. Sometimes less is better. It's high time that Congress takes a serious look at the federalization of crimes in the United States. The State and Federal Courts together comprise an intertwined system for the administration of justice in the United States. The two courts systems have played different but equally significant roles in the Federal system. However, the State courts have served as the primary tribunals for trials of criminal law cases. The Federal Courts have a more limited jurisdiction than the State Courts with respect to criminal matters because of the fundamental constitutional principle that the Federal government is a government of delegated power in which the residual power remains with the States. In criminal matters, the jurisdiction of the Federal Courts should compliment, not supplant, that of the State Courts. The 1999 Year-End Report on the Federal Judiciary shows how its caseload has grown: One hundred years ago, there were 108 authorized federal judgeships in the federal judiciary, consisting of 71 district judgeships, 28 appellate judgeships, and 9 Supreme Court Justices. Today, there are over 850--including 655 district judgeships, 179 appellate judgeships and 9 Supreme Court Justices. In 1900, 13,605 cases were filed in federal district courts, and 1,093 in courts of appeals. In 1999, over 320,194 cases were filed in federal district courts, over 54, 6000 in courts of appeals, and over 1,300,000 filings were made in bankruptcy courts alone. It is apparent that some growth of the federal court system should occur over time due to increases in population. But what also has grown substantially is the scope of federal jurisdiction. Federalization of the states criminal codes is something that politicians, especially here at the federal level, cannot seem to help but engage in from time to time. It has been over time, in response to criminal concerns nationwide, that Congress has again and again federalized crimes in the name of fighting crime and protecting the nation's populace. But, is the federalization of crime really an antidote for our nation's crime problems? Is it really proper to federalize crime so politicians can ``prove'' their effectiveness? These are important questions that must be asked. We all must look in the mirror and ask ourselves whether there is a sound justification for having two parallel justice systems. Americans should not be subject to different, competing law enforcement systems, different penalties depending on which system brings them to trial, and an ever-lengthening possibility that they might be tried for the same offense more than once. In 1999, the Senate Government Affairs Committee held hearings on the issue of ``controlling the federalization of crimes that are better left to state laws and courts to handle.'' The hearings were held in part as a response to questions raised by Supreme Court Chief Justice William Rehnquist regarding the federalization of criminal law. The hearings also focused on the American Bar Association's Task Force on the same issue. The Task Force, which was chaired by former Attorney General Edwin Meese, concluded that in order to maintain balance in our Constitutional system of justice, there must be a ``principled recognition by Congress for the long-range damage to real crime control and to the nation's structure caused by inappropriate federalization.'' Some might suggest that this is a Republican's attempt to weaken the laws of the land. My reply is simply that federalization of crime does not make anyone safer. Simply adding more laws to the federal code will not necessarily help the citizenry. On the contrary, it could end up hurting those we want to help. Consider that increased federalization has caused a significant case backlog in our federal courts. Those people with cases pending in the federal system for things other than criminal purposes are impacted. Their rights to due process for fair hearings on their issues are delayed. The rights of those who are criminal victims are often delayed, too, due to the length of time it takes at the federal level to hear a criminal case. The backlogs are real. The delays are frustrating. Justice is not being served. Some might say, simply, let's add more money so we can get these cases to trial. Again, my response to that is: why should we have two entirely parallel systems of justice in our country? Money is not the answer. Better utilization of our constitutional system of federalism and separation of powers is a good place to begin. Let the states work their will. The Federal Government doesn't always have the best answers. We effectively have 50 different constitutional republics that can and do serve as policy laboratories. The electorate in these states are the very same people that elect us all to Congress. They can take control of what is happening in their states and compare outcomes with 49 other state jurisdictions (not to mention the District of Columbia and the territories). With a federal system, will we ultimately move to a single federal criminal code? It would appear that way. It may not happen this year, this decade or even this century. However, over the course of time, the trend indeed is moving that way. This bill is a common sense approach to checking the Congress' penchant for federalizing crimes. It sets guidelines for Congress, which will certainly debate crime again in the legislative branch. The standards state that no federal criminal legislation shall be enacted unless and until certain criteria are met: the legislation must center on the core functions discussed earlier; the States must be inadequately addressing the perceived need; the Federal Judiciary is able to meet the needs without restructuring and without affecting efficiency; and, the bill includes a federal law enforcement impact statement. We pass bills all the time to address certain needs. Let's put the rhetoric to a test. The bill also sets up a Commission to Review the Federal Criminal Code. This commission will review, ascertain, evaluate, report, and recommend action to the Congress on the following matters: the Federal criminal code (Title 18) and any other federal crimes as to compliance with the standards in this Act; recommend changes, either through amendment or repeal, to the President and Congress where appropriate to the offenses set forth in said criminal code (Title 18) or otherwise; and such other related matters as the Commission deems appropriate. Also, for each piece of legislation passed out of congressional committees of jurisdiction that modify or add to federal criminal code, the commission must submit a report to Congress. This report will be called a Federal Crimes Impact Statement that shall be included in the reports filed prior to consideration by the House and Senate. The membership of the commission is important to consider. The bill calls for 5 appointed members--1 each from both sides of the aisle in the House and Senate, and one appointed by the Chief Justice of the United States, who shall chair the Commission. This will bring a new, and much needed, dimension to the debate. Under the bill, the commission would be charged with obtaining official data directly from any department or agency of the United States necessary for it to carry out this section--unless doing so would threaten the national security, the health or safety of any individual, or the integrity of an ongoing investigation. Finally, the bill would subject certain legislation to a point of order--if it has not met the conditions set out in the legislation. This would provide additional time for Congress to debate the merits of legislation being considered. In effect, this bill is about considerate and appropriate debate for federalizing crime. It will help educate Congress to make more informed decisions that impact the daily lives of all of our constituents. It will help take some of the politics out of the important issues that we face with regard to protecting people from crime. Mr. Speaker, we need to act. The Judiciary has made subtle and not so subtle pleas for Congress to refrain from and restrain its penchant to federalize the criminal code. For example, last year in a decision concerning the Violence Against Women Act, the Chief Justice writes, [t]he Constitution requires a distinction between what is truly national and what is truly local, and there is no better example of the police power, which the Founders undeniably left reposed in the States and denied the central government, than the suppression of violent crime and vindication of its victims. Congress therefore may not regulate noneconomic, violent criminal conduct based solely on the conducts' aggregate effect on interstate commerce. [U.S. v. Morrison et al. decided May 15, 2000 (Syllabus)] Clearly, there is a message in those words about the federalization of crime. It is time that Congress heeds it. I look forward to working with my colleagues to move this important legislation.

Mr. MANZULLO

Mr. MANZULLO. Mr. Chairman, I rise in strong support of my amendment to the State Department authorization bill. My amendment is a simple, technical correction to legislation Congress passed and the president signed last fall: H.R. 3244, the Victims of Trafficking and Violence Protection Act of 2000. In its closing weeks, the 106th Congress passed H.R. 3244 to provide relief to Americans victimized in five terrorist incidents sponsored by nation states. H.R. 3244 permits the payment of anti-terrorism judgments with the frozen assets of countries that sponsor terrorism, such as Iran. One of the five incidents involved seven Americans, retired and active duty members of the U.S. Navy and U.S. Army, who were taken hostage by terrorists allegedly sponsored by the nation state of Iran when TWA flight 847 was hijacked from Athens, Greece to Beirut, Lebanon airport in 1985. The American were tortured and held hostage for 17 days. Of the seven American TWA victims, Robert Stethem was murdered. The remaining six Americans, survived. One of them is my constituent. Stethem's family members filed suit against Iran in U.S. District Court for the District of Columbia on March 15, 2000, pursuant to the Foreign Sovereign Immunities Act. The remaining six American TWA victims filed a separate but similar suit against Iran in the same court on June 6, 2000. Through inadvertent error, Congress listed only Stethem's suit, not that of the other six American TWA victims, when it provided relief in H.R. 3244 in the closing weeks of the 106th Congress. The two American TWA victim cases are now consolidated and await a joint trial during the summer of 2001. My amendment would render the six American TWA victims eligible for compensation on the same basis as are complainants associated with the five other complaints listed in H.R. 3244. This is a matter of fairness. I ask my colleagues for their strong support.

Mr. MANZULLO

Mr. MANZULLO. Mr. Speaker, as Chairman of the Small Business Committee, I rise today to introduce a bill, the Independent Contractor Determination Act of 2001, to clarify and simplify the determination of whether an individual worker is an employee or an independent contractor. The current definition of independent contractors is so complex that many small businesses face inconsistent Internal Revenue Service (IRS) worker reclassifications and potentially crippling back taxes, penalties and fines. Today's tax law hinders our dynamic economy, which includes millions of independent contractors now used by roughly 60 percent of all businesses and many diverse industries. The Independent Contractor Determination Act of 2001 would provide a new safe harbor to help small business owners use independent contractors with more confidence, and to minimize IRS reclassifications of their legitimate business relationships. New objective criteria would protect both employees and independent contractors. These criteria include economic and workplace independence, a written contract, and the ability to realize a profit or loss. In addition, to protect employees further, the bill includes an effective anti-abuse provision that would limit the ability of corporations to treat former employees as independent contractors. As important as this bill is to protecting all workers by providing an objective test for the determination of worker classification, the bill also limits the ability of the IRS to reclassify workers retroactively. Most small businesses operating as or hiring independent contractors do so in good faith and, therefore, face unfairly imposed back taxes, penalties and fines. Consequently, the bill allows only prospective IRS reclassifications of good faith independent contractor determinations, and shifts the burden of proof to the IRS. Mr. Speaker, I am pleased to offer this bill as an identical, companion bill to one introduced earlier this week by Senator Kit Bond, Chairman of the Senate Committee on Small Business, and recommend its passage in this Congress.

Mr. MANZULLO

Mr. MANZULLO. About $29 million in purchases, of which only about $4 million was domestic and the rest was procured overseas. We have succeeded to a large part in stopping the overseas procurement, but the gentlewoman had mentioned to me something to the effect that just this past week she lost several hundred jobs involved in the clothing industry; is that correct?

Mr. MANZULLO. In fact, the IRS had entered into some type of an agreement with a dentist in downstate Illinois that said he would have to be on the accrual method. We got wind of this and worked with a couple of organizations. I actually sat down with Commissioner Rossotti of the IRS. His background is in systems as opposed to being a tax attorney. He was really surprised that one of his 106,000 employees had forced this dentist to do that, and he put an end to it. So we see all of these tremendous numbers of abuses and we are really working on, I believe, some monumental, in fact bipartisan, legislation to help out the small businesspeople. I appreciate the gentleman from Pennsylvania joining us today for special orders.

Mr. MANZULLO. And may never collect.

Mr. MANZULLO. It is.

Mr. MANZULLO. It is just something that the small businesses have been trying and trying for the longest period of time to get, and it has had a very difficult time getting through. Hopefully, it will get through this year. On this bipartisan bill, as to which I believe the gentleman is a cosponsor, it would get rid of it by repealing the FUTA, a 2 percent surtax. It would increase expensing up to $50,000. In fact, we are in the process now of looking at whether or not the small business owner or the casual investor should be allowed to set his or her own depreciation schedule. I just put a rubber roof on a building, a 130-year-old building, not worth that much but the roof cost $25,000. The law says one has to take 39 years to depreciate it. It has a 10-year warranty on parts and a 5- year warranty on labor. It absolutely does not make sense to have arbitrary rules like that. If we allowed the small business owner to set his or her own depreciation schedule, then, for example, I could choose the number of years I want to do it, say 4 or 5 years, but if I expense it then I could no longer add it to the basis for the property when I sell it. Well, that is all right. To have to go through that tremendous expense and really get very little tax break to help with it, simply does not make sense. So there are a lot of things that we can do. This small business bill also allows small businesses with annual gross receipts of $5 million or less to automatically use a cash method of accounting as opposed to the accrual system. The gentleman would recall a hearing that was held in the Committee on Small Business where people were involved in the installation of drywall. It was a very small company and the Federal Government said even though they did not have a storehouse where they took the drywall, and even though they called the wholesaler and the wholesaler delivers the drywall directly to the place where it is to be installed, that we are going to consider this to be inventory and, therefore, we are going to tax them on the accrual method, which means that they are taxed based upon what they bill as opposed to what they receive. This is a company of about 12 people, got hit with a $200,000 tax bill. Now, it does not make sense because essentially the Federal Government collects no more money on the accrual system than it does on the cash system.

Mr. MANZULLO. Yes.

Mr. MANZULLO. There is no rationale for it.

Mr. MANZULLO. If we just increase the exemption, then the next Congress can come back and lower it way back again. Back in 1992, before I was elected to Congress, there was a bill that was introduced that would lower the then-exemption from $400,000 to under $200,000, which would make it even more obstructive. We have introduced a bill called the Small Employer Tax Relief Act of 2001, H.R. 1037, that is a bipartisan bill. I signed onto it, helped draw it, along with the gentlewoman from New York (Ms. Velazquez), who is the ranking minority member on the Committee on Small Business. I believe that this is a breakthrough, a bill that really will help small businesses. First of all, small businesspeople that are not incorporated should be allowed to write off 100 percent of the cost of health and accident insurance for the self-employed. My brother is facing $600 and $700 a month for health and accident insurance, and there are small businesspeople that actually go out of business, decide to work for somebody else, simply because they can get the health insurance benefits. So it is time that this Congress really stepped up to the plate and said, look, for too long we have gone with playing games. Now I think it is only 60 percent is deductible.

Mr. MANZULLO. I was in a position years ago, as an attorney in Ogle County, Illinois, when a family had to sell half the 640 in order to keep the 320, just to pay the death taxes. That is not nice. That was before there was the unlimited marital deduction. To see the widow and the kids devastated by the sale of that farm, and money just to pay taxes and they had worked on that farm their entire lives. What we see is the farmers who have to have a tremendous amount of capital assets, and restaurant owners, grocery store people, people with construction companies literally can run into the millions of dollars worth of equipment in many cases to make a very modest living. They are absolutely totally devastated. Take the difference between a professional person such as an attorney. He does not need but literally a few thousand dollars' worth of equipment to get started. At the end of that person's career, the cases are picked up by other people within his office and not taxed. The firm is not taxed. Yet, for a farmer or the grocery store owner or the restaurant owner, that cannot be done because their wealth, their income, is based upon the use of assets that cost a tremendous amount of money. So we see that 80 percent of small employers have to spend costly resources to protect their families from the death tax. There is a tremendous amount of money in attorneys' fees, accountants' fees, life insurance premiums all going towards that eventual date when the person dies that there be enough resources out there to pass that farm on to the kids. What happens when that money is used for expenses like that, it does not get plowed back into the business.

Mr. MANZULLO. One of the things that I have seen taking place is farmers that really want to pass the farm on to their kids but they know the death tax would be so excessive that they sell out because the capital gains tax is cheaper than the death tax and the capital gains tax can be timed over a period of time. Some folks in our country are concerned, and in many cases rightly so, over the loss of green space. A person wants to sell his or her farm, that is obviously their right of private property. But to sell it, essentially prematurely, that is not the way it should be.

Mr. MANZULLO. During the lifetime.

Mr. MANZULLO. I concur with the gentleman. The best thing that government can do for all businesses is to stay out of the way. Obviously, there are necessary things that the government has to do with regard to safety. We are not questioning those things. But take the area, when my mother died about a year ago and although our brother's business is not affected because of the very modest amounts, I would like to ask the gentleman what in his opinion this death tax does when the owner of the business dies and he wants to pass it on to his children. What has been the gentleman's experience on that?

Mr. MANZULLO. So often we hear people saying, well, look at all the things that government can do for businesses. I would like to ask the gentleman what in his mind he envisions when he hears that question asked.

Mr. MANZULLO. I would like to ask the gentleman from Pennsylvania a question if he has the opportunity to stick around for a few minutes.

Mr. MANZULLO. Mr. Speaker, this is National Small Business Week, and it is a time to reflect on exactly who these small business people are, why they are involved in small businesses operating for themselves as opposed to working for somebody else. There is a lady back home by the name of Rebecca Hillburst in Rockford, Illinois, and she has been honored this week in the field of government procurement as the Regional Subcontractor of the Year. Mr. Speaker, few people know that small businesses provide over $63 billion worth of goods and services to the Federal Government. Rebecca is the first in our region to receive this award. Rebecca's father started the Commercial Printing Company in Rockford in 1948. She assumed the helm of the company in 1989. The business performs customized and commercial printing jobs. Rebecca Hillburst and her four employees, George, Lars and Eleanor Hillburst, as well as Darcie Powelson, are symbolic of the small entrepreneur enterprise that makes America great. I applaud their hard work and dedication. When I was 4 years old in 1948, my father bought a grocery store on the southeast side of Rockford, Illinois. At that time, right after World War II, times were very difficult. The immigrants coming from eastern Europe would often stop right in front of my father's grocery store, which was also a bus stop, and they would walk in with a piece of paper which would say, ``See Frank at Frank's Port Market when in Rockford.'' Likewise, hundreds of families came out of Arkansas, came to Rockford because of a huge crop failure in Arkansas at that time. Dad, over the period of years that he had that grocery store, grubstaked literally hundreds of families who otherwise could possibly have starved. He would extend them credit based upon the fact that he knew he would get repaid and he was doing the right thing. He was also a master carpenter. I recall on occasions when dad would take the Blue Star potato chip boxes which were about an inch thick, he would go to garages and places where these people lived and use those potato chip boxes to insulate their homes so the cold air would not come right through the board walls. Those were times when in the summer, people lived in tents, and many times people lived in basements, not being able to build the house on top of the basement that they themselves had constructed. Dad chose to go into small business because of his desire to work for himself. He could have earned a lot more money working for other people, but he envisions today what we know as the entrepreneurial spirit. That spirit gave rise to a sense of social consciousness that has been passed down to me. Oftentimes on Saturday night, Dad and other people in the community would get a large painter's tarpaulin and hang it from a billboard and get the 16-millimeter projector from Morris Kennedy School and show Hopalong Cassidy movies and all types of movies that those people in this country that are in their 50's will remember at that time. The small businesses worked very closely with the schools and the churches and brought together what we call this sense of community, people working together to make a community a better place to live. When I ran for Congress, I would talk about my father and his commitment to the people. Time after time people would come up to me and say, Mr. Manzullo, we knew your father. Were it not for him, our family would have had a very difficult time making our way even to live in this country. He found us places to live. He found us jobs. We would go into the grocery store with a cut hand, and he would be there to break open a package of Band-Aids just to help us. But Dad is not unique. He envisioned along with my mother the spirit of entrepreneurship and, that is, you work as hard as you possibly can to get ahead in life. But he also recognized something else. Dad was not much about government. Oh, he voted all the time and believed that government was necessary; but he also believed that government was getting involved in too many areas where it should have stayed out of, the regulations that hit Dad's grocery and then eventually the restaurant business that he went into in 1953. My brother Frankie carries on that tradition today with Manzullo's Famous Italian Foods. I told my brother I think that name is a little bit facetious, but he believes that his menu is famous; and he believes that the fact that people eat that Italian food, that they will be famous also. But Frankie also with his 13 tables and a small Italian restaurant carries on the tradition of entrepreneurship. He believes very strongly that people are supposed to work hard, it is an ethic that is ingrained into our system of America today, and that small businesspeople should be rewarded, not asking for anything except to keep the fruits of their labor. What do we have today? We have a government that has gotten so big, so large, exercised jurisdiction where it has no business being, that small businesses are crushed under the burden of regulations. Mr. Speaker, I yield to the gentleman from Pennsylvania.

Mr. MANZULLO. Mr. Speaker, I thank the gentleman from Indiana for participating in our special order today. Mr. Speaker, I yield to the gentleman from New York (Mr. Grucci).

Mr. MANZULLO. Mr. Speaker, I appreciate the gentlewoman's participation in our special order this afternoon. Mr. Speaker, I yield to the gentleman from Indiana (Mr. Pence).

Mr. MANZULLO. And being it is a small town in a rural county, it is very difficult to find work elsewhere.

Mr. MANZULLO. There is about $40 billion a year worth of all types of procurement coming from the Department of Defense; a good percentage of that is clothing. I know that your heart was hurting over the fact that 3- or 400 people lost their jobs.

Mr. MANZULLO. I have a question for the gentlewoman. She was kind enough to participate in a full small business hearing that we held this past week concerning the purchase of berets for our soldiers.