Richard Neal

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, one of the previous speakers noted the Kennedy tax cuts as a measure of achievement, but what he failed to note was that part of the revenue, at least one-third of the revenue generated on that occasion, came from closing tax loopholes, which this Congress has been reluctant to address, but let me speak specifically to this issue. The hot movie in 1981 was Smokey and the Bandit, the cool band was Blondie, and the prevailing fiscal theory was trickle down economics. While 1981 is a distant memory for most of us, we should learn from that experience and not repeat the mistakes of the past. The meaningless resolution we are considering today would unfortunately do just that. The budget released this week says that the way to climb out of this deficit is with more tax cuts, exploding tax cuts that we all know are going to be drawn from Social Security and Medicare Trust Funds, just when the baby boomers begin to retire. Mr. Speaker, we cannot afford these tax cuts now, and everybody knows it, so why do we think we can afford them when the baby boom generation begins to retire? Apparently the taxpayers agree with us. The Los Angeles Times poll is clear that the American people dispute the priority that the majority in this House is about to undertake. These tax cuts are not only skewed toward the wealthy, but they disproportionately go to the superwealthy.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I, like Julia Carson, was sitting in my office and I heard the tribute, and I wanted to come over for just a couple of seconds and highlight I think Dave's contributions to this institution, but, most importantly, to the American family. David Bonior's sense of America is community, and what he means by community is a place where nobody is ever to be abandoned and nobody is ever to be left behind. One of the best speeches I ever heard on this House floor came the night that David led us in opposition to the NAFTA treaty, when he raised the question for all of us here that night of what the Edmond Pettis Bridge meant to a generation of Americans, and what it meant to cross that bridge, what it meant to have a sense of justice and fairness and equity in this life, a catholic sense of justice; fairness, equity, the notion that you just cannot walk by the poor, that you just cannot abandoned them and turn your back, that government is there in the end to help them. Another thing I am going to say about David, in an institution that really troubles me, because many of the people that have gotten here on both sides of the aisle, they have run this institution into the ground day in and day out with their diatribes on what has always been wrong, and then they abandon in the next breath term limits, they abandoned the line item veto, they abandon things like disturbing the Constitution based upon every whim that moves along. Not David Bonior. David Bonior believed in something, and for too many people that have come to this institution for the last few years, their beliefs are bland. Their beliefs are based upon the emotion of the moment, there is no long-held view of anything. It has been an honor for me to serve with David, and, most importantly, I supported you when you ran for these jobs and was glad to do it. The manner in which you carried yourself day in and day out, you could be as fierce a partisan as there was, but you loved this institution, and, most importantly, you loved the community that we call the American family. Thanks for all the goods things you did, Dave. (Mr. FRANK asked and was given permission to speak out of order for 5 minutes.)

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, the gentleman from California (Mr. Thomas) said, ``would have, could have and should have.'' Let us add another part of that, ``want to,'' because as a free trader here I strongly urge my colleagues today to vote against this particular version of Fast Track Authority. The bill, put together by the gentleman from New York (Mr. Rangel) and the gentleman from Michigan (Mr. Levin) is far superior, and I hope that that version will pass by the end of the hour we have to debate. While being more modern perhaps than their previous offerings, the Republican bill still fails to give adequate voice to the new realities of trade negotiations, that decisions made impact our constituents in many more ways than they used to, because the negotiations no longer simply attempt to lower tariffs or to reduce direct restraints on trade. Hence, the goals the United States should pursue need to be more clearly articulated in any legislation, the issues that we do not always see at the surface in Fast Track Authority. The role of Congress needs to be far more extensive in order to bring about a successful conclusion. These new realities are knitted together in a far more comprehensive manner by the Rangel-Levin version of Fast Track Authority than the Republicans have proposed. We all would be better off in the long run by a decision to negotiate, in a meaningful way, bipartisan legislation rather than forcing this through this afternoon.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I want to thank my colleague, the gentleman from Massachusetts (Mr. Markey), who is the dean of the Massachusetts delegation, for organizing this Special Order as we pause in remembrance of my friend and former Congressman, Edward P. Boland. Congressman Boland came here in the midst of the Eisenhower landslide; and he won that first race, I believe, by 5,000 votes. And for 36 years he served here virtually, but with a couple of exceptions, without challenge. What I think is ironic about the Boland legacy, beyond the kindness that he exhibited time and again, was the affection that he held for this old House. He revered his service in this institution, respected it, and believed time and again that this was one of the best jobs that anybody could ever hope to hold. Eddie Boland came from Springfield's Hungry Hill. He was the child of Irish immigrants. For 50 years, 50 years, he was elected. Think of it, at least 25 elections, and at the end of those 25 elections he could say, at retirement, he was undefeated and untied. What a remarkable legacy indeed that was. But there are projects across this country that bear his imprint. Because of his relationship with John Kennedy and the fact that he was on the plane with President Kennedy, or at that time Senator Kennedy, as they returned from Los Angeles after having secured the Democratic nomination in 1960, he was devoted to the Apollo program and, indeed, remained, until his last days, one of its great champions. We recall in this institution his wisdom as it related to the Boland amendment and Nicaragua. He saved this country from a disastrous journey had we proceeded with military support for Nicaragua. Today, Mr. Speaker, with the exception of Cuba, every government in Central and South America is freely elected. His impact on housing programs because of his subcommittee chairmanship at VA-HUD happens to be profound. But there was another side of Congressman Boland, and I think my colleague, the gentleman from Massachusetts (Mr. Markey), and others in the delegation again hold it in highest regard. Congressman Boland only talked to reporters from the hometown newspaper. In 36 years in this institution, Congressman Boland had one fund-raiser, and really was upset that he had to go to it. He thought that the only allegiance he owed to anyone was to those people back in the Second District of Massachusetts. And here is an even more compelling statistic, given the modern nature of Congress. Congressman Boland held one press conference in 36 years to announce he was retiring; and he did it on Hungry Hill, where 36 years before he had announced he was running, without a press conference at that time. It is remarkable that his legacy could have been as pervasive as it was, given the fact that by nature he was fairly shy and really did not care for the limelight and did not care for the national attention that his years in Congress and the Boland amendment and the housing programs that he championed brought him as they were put in front of the American people. It is the honor of a lifetime to have known him. I attended one day this remarkable Christmas luncheon that he had every year after he retired, which many of the people that had elected him State representative 50 years before all attended faithfully. At one of those luncheons, the fellow he defeated, I believe in 1934, for State representative from Hungry Hill, was there. And when asked why he was there, he simply pointed out that a half century before Eddie Boland had retired him from public life. And with that graciousness Boland simply smiled and laughed, and they had a wonderful moment of friendship and harmony again. I am struck by that service, I am struck by the legacy, but I would like to take all of the young Members that have come to this Congress during the last 2 years and say to them: you should understand the reverence that Eddie Boland held for service in this institution. He really believed that this was one of the great arbiters of fairness in American life. He really believed that this institution was courageous and visionary in the manner in which it proceeded. But not only did he feel strongly about this institution, he was a believer in the Federal Government of the United States. I am going to close on this note, because while people understood him and his legacy and the programs he championed, one of the footnotes that occurred in his obituary that few people ever knew, because he never called attention to it, Eddie Boland marched in Selma, Alabama, to bring about an end to much of the unfairness that had been institutionalized in American life. He was patriotic, he was kind, he was impeccably decent. He has a wonderful wife in Mary Egan, and to hear his son's remarkable testimony to his father at the funeral, his son Edward, his daughter Martha, daughter Kathleen, and son Michael. What a great family. And I would be remiss as I close if I did not mention one of the great eulogies that I have ever heard that came from former judge and my friend, Daniel M. Keyes, who was Eddie Boland's friend for 70 years. We will miss him in this institution; we miss him in Massachusetts. A great friend was Congressman Eddie Boland.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I have the sad responsibility this evening of reporting to this Chamber that a very distinguished former Member of this institution, Edward P. Boland, died on Sunday evening. Ed Boland served in this House for 36 years with distinction as a member of the Committee on Appropriations and as a chairman of the House Permanent Select Committee on Intelligence. He served in an institution that he revered. He represented the people of western and central Massachusetts with distinction. He was a patriot of the highest order and an individual who loved the notion that politics had meaning in American life. In addition to that, for all of us that are gathered here tonight, just two quick lessons that have stuck in my mind for a long period of time as one who even served as an intern for him many years ago. Mr. Speaker, in 36 years, Eddie Boland had one fund-raiser, and he was mad that he had to go to it. In 36 years, Mr. Speaker, Eddie Boland had one press conference when he announced that he was retiring. He would not issue a press release, and when members of the national press over the Boland amendment attempted to secure his favor, he simply said he would report to the hometown paper and to the people back home what he was doing, and that was about the size of it. This institution mourns his passing. He was a great confidant of Tip O'Neill and of President Kennedy, as well as the Kennedy family, and this institution could not have had an individual who carried its reputation in better form. Mr. Speaker, I yield to the gentleman from Massachusetts (Mr. Markey), the dean of the Massachusetts delegation.

Mr. NEAL of Massachusetts. Mr. Speaker, 50 years without having lost an election, a terrific wife in Mary and four wonderful children, this institution tonight mourns his passing.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman for yielding time to me. Mr. Speaker, I guess we are not going to wait for this pleasant moment here when the President and the Senate hang this party in the House, the majority party, out to dry on these issues, because very few of the suggestions they have had today are ever going to be enacted into law. Somebody was talking about show business. The Secretary of the Treasury talked about show business. He said the Republican proposal was show business. Unless he has turned in his party registration, I think he is one of them. Now, the Republican alternative today is composed of some well-worn tax items that have been around for a long time. Some of them perhaps have some merit; but by and large, if we really want to talk about items that might have merit today, in reference to the gentleman from Pennsylvania, we should be here doing something about the individual alternative minimum tax for real people caught in the middle of perhaps a decision that has outlived its usefulness. But these are two very different proposals today. Ours deals with the immediacy of the problem in front of us in the aftermath of September 11. One side clings to that old, tired economic philosophy of trickle- down economics. Economic solutions are to be found in taking care of large, wealthy powerful institutions in society. If they are well, then benefits can trickle down to the rest of us. The other side, the Democratic side, we want to provide significantly more aid directly to those out of work, those who lack health insurance as a result of the downturn, along with some help for corporations to get through these difficult times. It is a question of philosophy. It is a question of values. Do Members value giving a $20 billion tax break to major financial institutions, or do we give them a 1-year extension in the supposedly temporary stimulus bill, and invest the balance in expanding unemployment compensation for families that are really hurting? Mr. Speaker, it is about philosophy, and it is about values. Do we cash out $20 billion in corporate AMT tax credits for GE, GM, and IBM to distribute to their shareholders, or do we invest this money in providing temporary health insurance for unemployed airline workers, travel agents, bus drivers, and others who no longer have employer- provided health insurance for themselves or their families? It is a question of philosophy and values. I find it very disheartening that the bill before us states that powerful corporations do not have to live with the decisions that they made under the current tax system. It turns a cold shoulder to America's AMT families who are losing their homes and their pension savings. They are suffering because they listened when Congress told them that if they did not diversify their stock holdings this year, Congress would reward them with a lower capital gains rate. This may be the only entrepreneurial group in history that some on the other side do not seek to lavish assistance on. I began with the notion, Mr. Speaker, that there were some good items in the legislation proposed today. I would reiterate this assertion as I close. But this is not the time and not the place for approval. There are many others that have a claim on these needs at this time, and I hope we will stand in support of the Democratic alternative.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I would like to take a few moments today to pay tribute to Bill Putnam, a friend and constituent of mine, and a pioneer in the broadcasting arena. On November 12, 2001, in New York City, Bill Putnam will be inducted into the Broadcasting Hall of Fame for his long and distinguished career in television. It is my privilege to share with you his many accomplishments and to recognize his great work in the Springfield, Massachusetts area. I am pleased to share these remarks and his accomplishments in the Congressional Record and to congratulate him on his well-deserved honor. Bill Putnam started WWLP in Springfield, the first licensed UHF station in the United States. WWLP has a long history of ``firsts'' in Springfield for a small market station. The station ran editorials, used longer news formats, ran an ``As Schools Match Wits'' high school quiz show, and aired a considerable amount of local programming. For more than 30 years, Bill Putnam himself did the editorials for the station, making WWLP the example of what local television is supposed to be. Bill Putnam concentrated not only on the local market, but was a visionary into what broadcasting should become. He lobbied extensively for changes that would treat UHF signals on televisions the same as VHF signals. In the 1950's, many television sets either did not have UHF tuners or had tuners that were simply not as good as their VHF counterparts. The ``All Channel Act'' and subsequent FCC regulations, of which Bill Putnam was an outspoken advocate, made UHF stations able to get the market share that made them viable in mixed markets. In turn, this created the platform that gave us independent television, and is today the backbone of FOX and the UPN and WB networks. Bill Putnam later served on the MSTV Board, a reversal that some found ironic since it was a group started by VHF owners trying to keep UHF people out of their market. He was the Secretary of the NBC Affiliates Board and was the head of the All-Industry committee on Teletext in the late 1970s. His contributions were integral as to why Fin-Syn regulations were redone in the early 1980s. Bill Putnam was an outspoken advocate on this issue. Bill Putnam's interests are greater than broadcasting alone. Bill is a past President and Treasurer of the American Alpine Club and continues to serve as a U.S. delegate to the UIAA, the international standards club for climbing. He is the longest serving member of that group. In addition, he was written and had published 11 books, with more than two currently underway. Bill Putnam is also a decorated and distinguished patriot. He is a World War II veteran with two Purple Hearts, a Combat Infantry Badge, and a Silver Star, and he has the scars to prove it. He enlisted as a private in the military and came out as a first lieutenant. Bill Putnam is currently the Sole Trustee of the Lowell Observatory in Flagstaff, Arizona where he resides with his wife, Kitty Broman, who is also well known in broadcasting circles. Mr. Speaker, it is my privilege to honor Bill Putnam on being recognized and honored by the Broadcasters Hall of Fame for a long and distinguished career that has benefitted the lives of so many in the Western Massachusetts area. Congratulations on the good work.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, this evening I stand in the strongest position of support for the resolution that is in front of us and that has been carefully negotiated and in coming days, weeks, and months will play out, and also to offer unqualified support tonight for President Bush in the difficult days, weeks, and months ahead that surely will confront this Nation. It is to be a difficult time. But as we witness the bravery and the heroism of those men and women of New York City and those families who have lost loved ones as well at the Pentagon, we know the resolve of the American people. I supported the Iraqi incursion a decade ago in one of the most difficult votes in this House. Tonight, this vote is not easy either, knowing as well that when the days grow very difficult, it will require the strength of all the American people. But tonight let us resolve to proceed with vigor, not vengeance, in remembrance of those who have been lost over the last 3 tragic days. The same comments I offered on Wednesday night I offer tonight: strength to the American people and wisdom to President Bush and this Congress.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I have, as a Member of this body, not been one who frequently seeks the microphone or comes to this well of the House on any and all topics. Instead, I have attempted many times to offer measured comments here based upon what I feel strongly about. Last Wednesday evening, at about 11:10 p.m., I came to the well of this House, like so many Members of this institution, to state my outrage over what had happened on Tuesday morning beginning at about 8:45. I pledged on that occasion my support for President Bush during this national crisis; and at this grave moment in our history, I think I at that time spoke for all Americans when I said we stood together in support of our commander in chief just as we did on behalf of those brave firemen, policemen and policewomen, and the citizenry of New York and Washington, D.C., and our military forces as well. I call attention to that simply to point out that in the strongest possible terms I condemned the unimaginable and unprecedented terrorist attacks that had taken place in New York City and Washington, D.C. on that morning. In the wonderful epic that de Tocqueville wrote, simply entitled ``America,'' he asked what it was that had set the American people apart from the rest of the world. And he suggested, after having difficulty coming up with a term, it was simply a habit of the heart. In what has represented the most serious act of aggression on American soil, a nameless and faceless enemy launched an assault on the very foundation of our society and, indeed, upon the manner in which we live. There is no body in America that is more representative than this institution of its people. It was my belief then and my belief now, as I had rallied to President Bush, Sr.'s support, President Clinton's support in perilous moments, now the consistent thing to do would be to support President Bush, the Republican and Democratic leadership in this institution, as we sought and continue to seek to reassure the American people about events of the last few days and, indeed, just as importantly, over events of the next few weeks, months, and, I frankly believe, years. These are moments when we come to the conclusion that old quotation that America offers unity without uniformity; free to be of different backgrounds and religions and persuasions and hold strong and differing political views. But on occasions like this we stand firm in our resolve to support our President and the brave men and women of the United States Armed Forces as they prepare, with our support, a clear and decisive response against those who perpetrated these unspeakable acts. Those are the comments that I offered on Wednesday night, and there is nothing that has happened during these 48 hours that would have caused me to change my mind. Indeed, my resolve, like the resolve of the American people, as we have witnessed this horror, has only been stiffened. And I would suggest that all Americans, regardless of political philosophy, political party, or political persuasion intend to stand shoulder to shoulder in our effort to seek out those who would cause such destruction, anguish, and pain upon a free people. There will be plenty of time in weeks and months and years again down the road to review the decisions that we have made during these days; but let no one mistake the resolve that I feel as a Member of this body, or as a citizen of this Nation, or those who stand with me in this institution in our support of President Bush and, again, our military as we seek answers across the globe.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman for yielding time to me. Mr. Speaker, I just want to join all who serve in this wonderful House on this occasion, both Democrat and Republican, to condemn in the strongest possible terms the unimaginable and unprecedented terrorist attacks that took place at daybreak yesterday. Not even air should stand between the two political parties on this issue. We are also reminded of the lyrics of that old song, ``What a difference a day makes.'' In what represents the most serious act of aggression on American soil in our Nation's history, a nameless and faceless enemy launched an assault on the very foundation of our society. For many Americans, the memory of planes crashing into the World Trade Center and the Pentagon will be the defining images of a lifetime. No words can really express the feelings of shock, sorrow, and outrage that we all feel, and we are all in the process of mourning in our own way. But soon we are going to desire answers to precisely what happened, why it happened, and how we will prevent it from happening again. That, too, is a natural response. But we also have to be patient, because we need and want our response to be right. Americans have been challenged before, and we will meet this challenge as we have before. We are blessed as a people by having our values and beliefs written into our Constitution, a wellspring to which we repeatedly turn in times of trouble. It is important to remember that this is the act of a small group, and these actions cannot be blamed on any ethnic group to which they belong. That is the foundation on which our Constitution rests, and it is not, even on this occasion, worth giving up. It is clear to the world that we stand united on this issue, and this Congress will support the President as he undertakes action against this enemy. All Congress will support these decisions on rebuilding the devastation we feel today morally and spiritually. We support the determination of the American people to proceed with prosecuting those who are responsible for these actions. It is true now and it will be true as long as it takes to bring these people to justice.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing with Mr. Davis of Virginia, Ms. Lofgren, Mr. Weller and several of our colleagues, legislation to alleviate the problem of the unfair tax imposed by the alternative minimum tax on many of our constituents who exercised incentive stock options last year. The bill represents a temporary patch for the tax year 2000. I have advocated repeal of the alternative minimum tax (AMT) for some years now. It no longer serves the function for which it was designed. The AMT was intended to make very high income individuals who heavily invested in tax shelters, pay some minimum amount of tax each year. However, the 1986 Tax Reform Act repealed most of these tax shelters, leaving the AMT with little impact on taxpayers until recently. Since the AMT is not adjusted for inflation while the regular tax base is, the AMT now increasingly hits families with large numbers of children, taxpayers in higher tax states, users of the education tax credits, and, in the case of incentive stock options, the unwary. Incentive stock options are a preference item for purposes of the alternative minimum tax. That means that you include for purposes of calculating the AMT the difference between the price you pay for a share of stock, and the value of the stock at time of exercise. For example, if you exercised an incentive stock option for $10 a share, and the stock was valued at $100 a share, you must include the difference--$90 a share--for purposes of calculating the AMT in the year you bought the stock. Unfortunately, most people have never heard of the AMT, or believe it applied to only high income individuals, and never took this into account in their decision making. If the stock increases in value, then you can pay the taxes you owe. But if your stock crashes in value, you still owe the same amount of tax. Last year, the stock of some people sank so low that they could sell all their stock and still not raise the amount they need to pay the tax they owe. People have complained about taking out a second mortgage on their home, emptying out their pension plans or education funds for their children, and selling all their other assets, just to pay the tax they owe on stock that has lost much of its value. What makes this situation our responsibility is that Congress told these people to hold onto their shares of stock. Congress provides in the regular tax base an incentive to hold their stock--a lower capital gains tax rate if they hold their shares for at least a year. So, on the one hand, Congress tells them to keep their stock, and gives them a backhanded slap by means of the AMT when they listen to us. The bill we are introducing fixes this problem for last year. The bill states that, in effect, that you can recalculate your AMT tax preference using the difference between the amount you pay for a share of stock, and its value on April 15, 2001. Using the example above, if the value of your share fell from $100 on date of exercise to $30 on April 15, 2001, your tax preference would be $20 per share (instead of $90). Under this proposal, the more you have been hurt by the fall in the value of your stock, the more relief you get. For those who had their stock rise, this bill would not impact them at all. Some may argue that the bill is retroactive. This, however, has never been a high hurdle for a pro-taxpayer provision. In fact, this week's energy bill contains a retroactive tax provision, as did the Bush tax cut signed into law June 7, 2001. Others may argue that these individuals simply made a bad investment decision. A bad investment decision does not rest on a tax trap set by Congress, and masked by an outdated and hopelessly complex ``second'' tax system. Without the AMT, these individuals would simply have lost the value of their stock when it declined, as would any other investor. No one is talking about restoring any value to that stock, and ``bailing'' these people out. Individuals who exercised incentive stock options are actually much worse off than those who simply made a bad investment decision, because these individuals lose the value of their stock and get to pay the AMT tax on that lost value as well. This bill costs $1.3 billion over five years according to the Joint Tax Committee. It is bipartisan, and has Members from across the nation as original cosponsors. Senator Lieberman is introducing a companion bill in the Senate. Mr. Speaker, this tax bill needs to be enacted this year, so that affected taxpayers can file for relief this year. We are working to attach this legislation to any tax bill that moves forward this fall.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing with Mr. Matsui the Individual Tax Simplification Act of 2001, and invite all my colleagues to join me in sponsoring this legislation. It is fitting that this bill on tax simplification is being introduced on the first day of joint hearings on tax simplification in the Select Revenue Measures and Oversight Subcommittees of the Ways and Means Committee. Simplification is on everyone's wish list. While my bill may not fulfill everyone's wish, this bill will eliminate approximately 200 lines from tax forms, schedules and worksheets. My bill generally does this in a revenue neutral manner, and without moving money between economic income groups. As we all know, the tax code is terribly complex, and has become dramatically more complex for average taxpayers during the past six years. A skeptic might argue that there is no constituency for simplification, but that is changing. A poll by ICR found that 66 percent said the federal tax system is too complicated. Five years ago slightly less than half agreed. I believe that with a little compromise, we can enact significant tax simplification. That is why I have made sure this bill is essentially revenue neutral, so it contains no tax increase. And that is why the bill does not try to change the tax burden between economic income groups. This is not an attack on the wealthy, nor anyone else. As with any change in the tax law, there are some winners and losers--but I want to stress that this is incidental to the objective of the bill-- which is simplification that benefits us all. The bill has three parts. The first is based on legislation I introduced in the last two Congresses regarding nonrefundable personal credits. The second part simplifies the taxation of capital gains. The third part repeals two hidden marginal tax rates on high income individuals, and repeals the individual minimum tax. Title I--Simplification Relating to Nonrefundable Personal Credits In recent years, much tax relief has been given to taxpayers in the form of nonrefundable credits, like the two education credits. These credits are not usable against the alternative minimum tax. That means that more and more individuals will lose all or part of these credits, and will have to fill out the extremely complicated AMT form. Congress recognized this problem last year by enacting my proposal to waive this until the end of this tax year. It also, this year, permanently took the child credit and the adoption credit out of the AMT. Now is the time to finish the job. The other problem with nonrefundable credits is that the phase out provisions vary from credit to credit, causing unnecessary complexity. In addition, the same additional dollar of income can result in a reduction in more than one nonrefundable credit. It is fundamentally wrong to promise the American public tax relief, then take all or part of it away in a backhanded manner. This fundamentally flawed policy, enacted in 1997, will get worse each and every year as more American families find themselves to be AMT taxpayers simply because of the impact of inflation, or because of their desire to take advantage of the tax relief we have promised them. Not only that, this situation will also get worse if additional nonrefundable credits are approved by Congress. The bill addresses both concerns. First, it permanently waives the minimum tax limitations on all nonrefundable credits. Second, the bill creates a single phase out range for the adoption credit, the child credit, and the education credits, replacing the current three phase out ranges. Title II--Simplification of Capital Gains Tax The second title of this bill is, essentially, Mr. Coyne's capital gains proposal from 1999. Under current law, there are 5 different tax rates for long term capital gains, and a 54 line tax form that must be endured. Moreover, this part of the tax code is already scheduled to get worse because additional rates will take affect under current law in 2006. The solution is clear. Replace this jumble of rates and forms with a simple 38 percent exclusion. Not only will this result in tremendous simplification (eliminating 36 of the 54 lines), but more than 97 percent of individuals would be eligible for modest capital gains tax reductions. Title III--Repeal of Certain Hidden Marginal Rate Increases, and of the Individual Minimum Tax The third title of the bill repeals the hidden marginal rate increases in current law, and repeals the individual minimum tax. Most of my colleagues understand the phrases, PEP and Pease. Under current law, itemized deductions are gradually reduced by 3 percent of adjusted gross income above approximately $124,000. This is known as the Pease provision. In addition, personal exemptions are phased out for incomes between approximately $187,000 and $309,000. This is PEP. If we did not hide the effect of these provisions of current law, more people would know that these provisions result in hidden marginal rate increases. These marginal rate increases begin at almost 1 percent for incomes above $124,000, and increases for those with incomes above $187,000 by about .78 percent for each dependent. The important point here is that current law has a hidden marginal rate increase, which gets worse as families grow larger. The most recently passed tax bill made some progress in this area, but not enough. The second part of this title is a complete repeal of the individual minimum tax. The minimum tax was intended to make sure that wealthy individuals did not overuse certain tax benefits and unfairly reduce their tax burden. It no longer accomplishes that goal. Most of the significant business related provisions have already been repealed. Since the AMT is not adjusted for inflation, more and more middle and upper middle income taxpayers are falling into the AMT. This is not what was intended, especially when you note that what pushes taxpayers into the AMT now, more often than not, are state and local income and property taxes, personal exemptions, and the nonrefundable credits. I repeat, this is not what Congress was trying to accomplish when the AMT was passed. My suggestion is to repeal it for individuals, and substitute a simple tax on adjusted gross income. The current hidden tax is dropped, and is paid for with an explicit tax on the same individuals. They get simplification, and we convert a deceptive practice into an open one. In the last Congress, the replacement tax began at 1 percent for adjusted gross incomes in excess of $120,000 on a joint return, and increased to 2.08 percent for income greater than $150,000, which is where the minimum tax exemption begins to phase out. This year I have given the Secretary of the Treasury the ability to set the rate so that this bill would be revenue neutral over ten years. The initial threshold amount and the second threshold amount remain the same-- $120,000 and $150,000 in the cases of a joint return. Conclusion Ironically, this simplification proposal must be complex, because it mirrors our current law. I want, therefore, to focus on what is important. This bill provides fairly dramatic simplification of the individual tax system. It eliminates approximately 200 lines on tax forms, schedules and worksheets. It is basically revenue neutral, so it can be accomplished during a year when there is no non-social security non-medicare budget surplus to fund tax cuts. It does not attempt to shift money between income groups. The general philosophy behind the bill is that those who benefit from tax simplification of the current code should offset any revenue loss involved. It is estimated that more than 50 percent of individuals use tax return preparers, and that more than 16 percent use computer software to prepare their return. Only about one-third of individuals actually fill out their own forms. There is no excuse for that reality, and we should do something about it. Given the lack of resources to write another major tax bill the priority for which is likely to be business tax breaks anyway, the reality that no one wants to pay for simplification no matter how much they support the goal, and the need to resolve the solvency issues surrounding social security and Medicare, I think the opportunity exists this year to solve some of the problems that bother all our constituents during this tax filing season in the manner that I have suggested. I am introducing this legislation to continue the discussion I began in the last Congress, and I hope it will be seriously considered by all parties.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I would like to take this opportunity today to enter into the Congressional Record the eloquent remarks delivered on June 1, 2001 in Boston by William M. Bulger, President of the University of Massachusetts, at the funeral of our colleague, the Honorable John Joseph Moakley. These brief remarks speak volumes about the quality of the life of our friend Joe, and I submit them for the Record so that they may be forever be a part of our nation's history. Remarks Delivered at the Funeral of U.S. Representative John Joseph Moakley by University of Massachusetts President William M. Bulger It is of surpassing significance, isn't it, that Joe was summoned to the joy of eternity on Memorial Day? A day set apart for reflection and tribute in grateful memory of all who have given their lives for the strength and durability of the country we love. Joe's spirit enlivens Memorial Day for us: patriotism, gratitude, remembrance. Long years of unselfish devotion to bringing the ordinary blessings of compassion to those most needy among us stand as silent sentinels to his inherent goodness, to his desire to make a difference in the quality of life for less fortunate friends and neighbors. His helping hand was always extended in genuine recognition of the responsibility he believed was his to make things better for those in need of encouragement and inspiration. To him the ideal of brotherhood was not simply something to be preached but, more importantly, he was challenged by his soul to exemplify this ideal in positive advancement of the common good. Everyone knows the facts of Joseph Moakley's background and career. They are impressive and worth knowing, but they reveal little about the man himself, little of who he was, of what he was, and of why. He lived his entire life on this peninsula, and it was here in this place that his character was shaped. It was, and it still is, a place where roots run deep, where traditions are cherished, a place of strong faith, of strong values, deeply held: commitment to the efficacy of work, to personal courage, to the importance of good reputation--and withal, to an almost fierce sense of loyalty. No one spent much time talking of such things, but they were inculcated. And no one absorbed those values more thoroughly than did Joseph Moakley. To understand them is to understand him. In recent months Joe Moakley would reassure his friends in private conversation that he slept well, ate three meals easily, and was not afraid. He had a little bit of the spirit of the Irish poet (Oliver St. John Gogarty), who said on the subject of death: Enough! Why should a man bemoan A fate that leads a natural way? Or think himself worthier than Those who braved it in their day? If only gladiators died or heroes Then death would be their pride; But have not little maidens gone And Lesbia's sparrow--all alone? The virtue of courage was his in abundance. But Joe had, during his lifetime, become the personification of all that was best in his hometown. And he was a man of memory; he recognized the danger of forgetting what it was to be hungry once we are fed . . . and he would, in a pensive moment, speak of that tendency to forget as a dangerous fault. Joe exemplified the words of Seneca: You must live for your neighbor, if you would live for yourself. And he abided by the words of Leviticus in the Old Testament and St. Matthew in the New Testament, ``Thou shalt love they neighbor as thyself.'' These are words that he would have absorbed at home, at St. Monica's, St. Augustine's and at St. Brigid's. And Joe brought his competence, dedication, his lofty principle to the public purpose that he saw as most worthwhile. His steady determination in his various public offices, and as a member of Congress, earned him the respect of his colleagues and the confidence of his party's leadership. It also explains the overwhelming support he received from a truly grateful constituency as expressed in their many votes for him solidifying his position of public responsibility. His devotion to justice and imbedded sense of humanity moved him to investigate the Jesuit murders and the ravishing of innocent women in El Salvador. He volunteered for a task most unusual for him. But he, guided by his aide, Jim McGovern, brought to bear his own deep commitment and those old solid working principles that had become a cornerstone in his lifetime quest for fairness and equity. The success of his effort is recognized by all, especially by an appreciative Jesuit community that had suffered from a sense of abandonment. When I saw how he thought about that particular achievement in his life, it brought to mind the wonderful words of Pericles: ``It is by honor, and not by gold, that the helpless end of life is cheered.'' Joe, dear friend and neighbor through these many eventful years, we are stuck, as we think about it, by your startling contradiction: humility and pride. You were never pompous seeking the applause of the grandstand. You diligently shunned the glare of the spotlight. You did not expend your energy in search of preening acclaim. You were too self- effacing for that. Humble, indeed. On the other hand you were a proud, proud person: proud of your religious faith, proud of your family, proud of your South Boston roots and neighborhood, proud to proclaim the ideals that animated your public service--ideals that have been expressed in the unsought torrent of tribute that has flooded the press and airwaves in recent sad days. Humility and pride, seemingly contradictory trait, coalesced in your admirable character, commanding abiding recognition, respect and, yes, affection. Joe, the dramatic focus on you during the President's recent appearance before the Congress highlighted your humility and pride. During the course of his address, our eminent President Bush paused for a moment to digress. He singled you out Joe, for special recognition. He described you as ``a good man.'' Whereupon, as you stood in your place, spontaneous bipartisan applause shook the Congress. This episode also reverberated in thrilling dimensions throughout your Congressional District. Thank you President Bush for this tribute to a good man and for other manifestations of your respect for our Joe and his services to his country. Joe, you were good enough, as one neighbor to another, to ask me to participate in this liturgy of sacrifice, sorrow and remembrance. With many another heavy heart it is wrenching to say goodbye. God is with you, I'm sure Joe, as you now join your beloved Evelyn and your parents in the saintly joy of eternity. We pray He may look favorably on us who lament your loss and who are challenged to follow your example of integrity and justice and useful service. Fair forward, good friend.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I want to thank the gentleman from Massachusetts (Mr. McGovern) for organizing this special order today, and to all of you who have assembled for the purpose of remembering our dear friend, Joe Moakley. Just before he died, even though he had the courage to call all of us on a Sunday evening in the delegation to tell all of us that the end was near, and he did it without flinching, incidentally. He still maintained that great sense of humor that we all can identify with. He was sitting in the corner, and a colleague rushed over to him very sincerely and was all over him and said, I am so upset, Joe. I am so troubled by this. I am so bothered. When the colleague walked away, Joe said, he is more upset than I am about this. I thought that was classic Joe Moakley. But there is a great lesson in this life, and if I can just spend a couple of seconds on it, I would like to. He loved the job that he had and thought that it was a special privilege to serve in the House where Mr. Madison and Mr. Lincoln and Mr. Kennedy and Mr. Johnson and Mr. Nixon and Mr. Ford and Mr. Bush, Sr., had all served. They had come from this House. And what have we watched here for the last 2 decades? We have watched the people that have gotten elected here overwhelmingly come here by running against and then running down the institution. Joe Moakley was unabashed in his support of the appropriations process. He believed strenuously in the notion that the great privilege that had been offered to him in life was to be a Member of the Congress. He could be as partisan as anybody in this House. He was a great Democrat, an old school Democrat. But do you know who he liked to have dinner with? This is going to kill them in Alabama when they find this out, the voters down there; Sonny Callahan, Terry Everett, Hal Rogers. That was the group he assembled with after hours. He enjoyed their company socially. He loved those stories about rural Alabama and how they had come here, because we all came here under an interesting scenario. We all got here for different reasons. We all came to this marvelous institution, the great deliberative institution in the history of man and womankind, because of special circumstances. It is the memory of Moakley that we honor today. If I might for just a second, he is the answer to this argument that we should have term limits. Remember the great deeds that Members do here? They generally do them in the latter part of their careers. He thought the line item veto was perfectly foolish. Why would we have a balanced budget amendment to the Constitution? Does the law not say we are supposed to do that without disturbing the Constitution? Imagine trying to use that rhetoric to soothe the public today: Gees, I love my job. This is a marvelous institution. I am as comfortable back in the streets of ``Southy'' with the ``townies,'' as he would call them, as I could be anywhere. He came to this institution with a special reverence, he treasured the friendships, he was the great heir to McCormick and O'Neill. That was his memory. It was a snapshot in time. He would talk about those great battles. Just a couple of weeks ago, the gentleman from Massachusetts (Mr. Meehan) and I had this marvelous opportunity the night that they dedicated his portrait. We fought to get him to go to that dinner, fought to get him to go to that dinner. He was not going to go that afternoon, and when I got there, he was sitting at the head table. One of the things we understood in our delegation was when he spoke, there was deference. You listened to what he had to say. That night he talked about the great political battles that he had won. And do you know what else he talked about? The battles he had lost along the way. He explained how he had handled many of those difficult moments, and he held forth in a way that everybody in the room was mesmerized, as he spoke of names that are legendary in Massachusetts politics, and he spoke how he had handled many of those controversial races. But I am going to close on the note I opened with. Joe Moakley loved service in this institution, and when I hear the rhetoric of some Members of this House that come to the microphone to vilify the other side, to vilify the institution that we serve in day in and day out, he was never part of it. He could be as partisan as they would come in this institution, and yet he loved his service here, and he loved the Members that he served with; peculiar friendships, peculiar alliances, but he understood that day in and day out. I think it is time that we all thought, look, this is the best job that the public could ever offer to any of us, to be a Member of this old House, as members of the American family. I think that I would just say this, that his friendship to me, from committee assignments, to everything else that I ever asked for, never once in 13 years did he say no; and do you know what? Never once in 13 years did I not say thank you.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, this is a sad day for America, but one everyone knew was coming. The bill we have before us repeats the mistakes of the 1981 Tax Bill, mortgaging our future for immediate political benefits. The only question is: Who is going to play the role of Senator Dole this time? Who is going to have the courage to begin to turn this boat around once the immediate euphoria has passed, and the reality of what has been done is reflected in budget estimates? How are we going to act when the delayed effective dates come due and the hemorrhaging of revenue occurs just as the baby boom generation begins to retire, and our only choices are to reverse this tax bill or make deep cuts in Medicare and Social Security? Having said that, let me make a few comments about how the pension provisions came out, as I understand them. I am willing to concede that this procedure makes it difficult to know exact details, so I will rely on the Chairman correcting me if I have misconstrued something. I understand that the nonrefundable retirement savings account proposal is in the conference report, as is the small business credit for administrative costs for start up pension plans. Those are two of the three provisions I have been working for these past three years, so I thank the Chairman and those who supported these provisions. These provisions, when combined with the many solid provisions like portability, make this a better bill than when it left the House. On the downside, I understand the House version of the nondiscrimination rule and the top-heavy rule has prevailed, thereby in my view weakening pension coverage for some low income workers. In addition, the application of nondiscrimination rules to the catch up provision has for the most part been dropped. I know Mr. Cardin was the chief proponent of this very good policy, so I regret that outcome. I suppose the theme of the pension provisions, as with this entire bill, is that it is built around a number of good provisions but on the whole it simply goes too far. And we will eventually have to clean it up. It would be better to simply vote this down, and start again to build a bill that solves problems in the tax code like the alternative minimum tax and other complex issues, to the extent we can afford to do so. I suspect that will not happen, but still I would hope Members would vote this down and start again.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I want to make a sweeping prediction here to the gentleman from California (Mr. Thomas), chairman of the Committee on Ways and Means, that before I have seen the final product, I am not going to like it. I can assure my colleagues I am not going to like that final product. This motion to instruct conferees contains many good elements. As the chairman has acknowledged, this is one of the tools of the minority to make a point. I recall the distinguished majority leader of the House now when he was the, I believe, minority second person in command on the Republican side, when he said that the Clinton budget would be fiscal Armageddon; and I recall when the former chairman of the Committee on the Budget, Mr. Kucinich, the gentleman from Ohio, indicated that we were headed toward a depression with the Clinton budget agreement in 1997. So there are tools that the minority employs from time to time to make a point around here. The key point of this motion is that the conference report should not include phase-ins longer than 5 years. This limits the ability of each party to push costs we cannot afford now out into the future. It also means that whatever we enact into law would probably stick. It also is fair to acknowledge that this is truth-in-advertising for the House of Representatives tonight. Nor is it unheard of. As the current chairman of the Committee on Ways and Means has said many times, and I agree with him, the House works off of a 5-year projection. So to ask that this bill is fully phased in within 5 years is simply consistent. The motion to instruct also asks that the alternative minimum tax be adjusted so that none of the benefits in this bill is reversed by AMT. Again, taxpayers get what they have been promised. Another truth-in- advertising provision. I would add my personal plea to the leadership on the other side, however, that we explore how to solve, even on a temporary basis, the incentive stock option issue with the alternative minimum tax. As the chairman knows, the interaction of the regular tax treatment of incentive stock options and AMT treatment leads to a tax trap to individuals in a declining market. I have a number of letters on my desk from people who know that right now. The gentleman from California (Chairman Thomas) has said to me consistently, and I believe him, that he wants to resolve the AMT issues as they arise and to look at the whole issue sometime in the future. AMT is a serious issue that we have to take up, and I have been on it consistently for a couple of years. I appreciate his sentiments, but this issue is one that taxpayers are facing today. They are filing for bankruptcy, and we cannot wait to resolve this issue in the next year or the year after. So I request the chairman to seek at least a temporary solution in conference such as removing incentive stock options from the alternative minimum tax for last year and this year while we decide how to permanently resolve the many problems of alternative minimum tax in which I will remind this body multiply and get worse day after day after day.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman for yielding me this time. Mr. Speaker, the tax vote today is essentially a procedural vote to go to conference, since the only reason we are here is to add a reconciliation instruction to a tax bill to speed up the process in the other body. But that does not mean this is an unimportant vote. The House should go to conference with the best product, and the best product is the Rangel substitute. It contains rate reductions for the American people, marriage penalty relief, improvements in the earned income tax credit, and a rebate of $600 for married couples. But let me stress this, and my colleagues talk about the juxtaposition of the two political parties, our substitute is affordable. The Republican bill is not. Our substitute is fiscally prudent. The Republican bill is not. Mr. Speaker, the substitute does not push 10 years into the future tax cuts which we cannot afford today. If we cannot afford them now, why does anyone think we can afford them when the baby-boom generation begins to retire? I would call everyone's attention to that front-page piece in The New York Times yesterday about who is going to get this tax cut. I was mistaken, because I used to argue that the Republican bill would only take care of the wealthy. I discovered yesterday it really takes care of the super-wealthy. That is an extraordinary achievement, even for the other party. Mr. Speaker, we should be investing in the promotion of retirement savings, and we know that this bill that the Republicans have is deficient on that score. The pension provisions approved by the House lack direct incentives for anyone other than those who least need it to save for retirement. We could have done something about that here with simply spending $100 billion over 10 years. Over 10 years, I emphasize. The pension provisions produced by the other body are superior in structure to the House pension provisions, but squeezing those provisions into the $40 billion box was done. At the very least, I would recommend to the conference that they take the House cost figure and spend the additional money on the other body's retirement savings proposal. Mr. Speaker, let me go back to something. The main point here is that no one in business across this country would use up all of the surplus when they see large investment needs just around the corner. Education, defense, the environment, the retirement of baby-boom generation members are all going to make gigantic demands on the Federal budget beginning in 2012, and we are going to have nothing to offer to those people once this bill goes into effect. The responsible thing to do is to support the Rangel substitute and object to and oppose the irresponsible majority party's position on this tax cut.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I introduced legislation in the previous Congress to eliminate a tax avoidance technique available only to the very wealthy. This technique involves the use of swap funds. Today I am introducing this legislation again. Legislation to shut down this particular practice was enacted in 1967, 1976, and again in 1997. In 1967 Congress enacted a law to prevent swap funds from being transacted in the form of a corporation, as was popular at the time. This led to the swap fund transaction being resurrected in the form of a partnership, which was closed down in 1976. Subsequently, the industry developed methods to get around both laws by manipulating the 80 percent test for investment companies. The Taxpayer Relief Act of 1997 closed these transactions down by broadening the definition of financial assets that are taken into account for purposes of the 80 percent test. Obviously, the point here is that three times Congress has acknowledged the tax avoidance potential of this transaction, and three times Congress has made a public policy decision to close this shelter down. And three times Congress has failed. Swap funds are designed to permit individuals with large blocks of appreciated stock to diversify their portfolio without recognizing gain and paying tax. In this transaction, a fund is established into which wealthy individuals with large blocks of undiversified stock transfer their stock. In exchange for the transferred stock, these individuals receive an equivalent interest in the funds' diversified portfolio. In effect, these individuals have now diversified their holdings by mixing their shares of stock with different shares of stock from other individuals, without having to sell that stock and pay tax on the gain like ordinary Americans. The swap fund transaction is complicated, and is limited to individuals with large blocks of stock. For example, one offering was limited to subscriptions of $1 million, although the general partner retained the right to As outlined above, current law tries to stop swap funds involving a corporation or a partnership that is in investment company. An investment company is a corporation or partnership where the contribution of assets results in a diversification of the investor's portfolio, and more than 80 percent of the assets of which are defined by law as includable for purposes of this test. In the most current form of the swap fund transaction, that limitation is avoided by holding at least 21 percent of assets in preferred and limited interests in limited partnerships holding real estate. In fact, the purpose of the fund is clearly identified by the prospectus, which states that ``the value of the Private Investments will constitute at least 21% of the total value of the Fund's portfolio, so that the Fund will satisfy the applicable requirements of the Code and the Treasury Regulations governing the nonrecognition of gain for federal income tax purposes in connection with the contribution of appreciated property to a partnership.'' As in past years, the bill I am introducing addresses the specific transaction being used; that is, the bill would eliminate the latest avoidance technique by providing that such investments would be treated as financial assets for purposes of the 80 percent test. The second part of this bill at long last recognizes the inadequacy of the above approach, given its 32 year record of failure. This section states that any transfer of marketable stock or securities to any entity would be a taxable event, if that entity is required to be registered as an investment company under the securities laws, or would be required to but for the fact that interests in the entity are only offered to sophisticated investors, or if that entity is formed or availed of for purposes of allowing investors to engage in tax-free exchanges of stock for diversified portfolios. The effective date of this legislation is for transfers after date of Committee action. Mr. Speaker, the Committee on Ways and Means regardless of the party in charge has traditionally been concerned with tax transactions constructed for the very few the sole purpose of which is to avoid paying tax. I believe the Committee continues to hold this concern and look forward to working with the Members to enact this law later this year.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, today I am joining my colleague, Representative Nancy Johnson, in introducing legislation to put an end to the Bermuda reinsurance tax loophole. During the past few years, several Bermuda-based companies have either acquired a U.S. property-casualty insurer, or U.S. reinsurers have relocated to Bermuda. One reason for these actions was to allow insurers to avoid U.S. income tax on investment income by reinsuring their U.S. owned subsidiaries' reserves to a parent located in a tax haven such as Bermuda, which has no income tax. It works like this: the company pays a one-time I percent federal excise tax to reinsure offshore, and in return, the foreign reinsurer earns tax-free investment income on the transferred reserves for as long as they are held offshore. By escaping all U.S. income tax on investment income, these companies can have up to a ten percent pricing advantage over U.S. taxpaying companies in the U.S. in the ``long-tail'' insurance marketplace. Mr. Speaker, such an advantage for some foreign companies over U.S. owned companies is patently unfair and should be eliminated immediately. Our legislation solves the problem by deferring the deduction for reinsurance premiums until the loss is paid in recognition that the primary insurance covers U.S. business risk. Again, this would only apply when reinsurance to parent companies in tax havens is used. Of course, these companies would have the option of being taxed like a U.S. company and thereby avoid this provision. This is not a trade issue, as some would like to make it. The purpose of reinsurance is to enable property-casualty companies to spread risk among several companies. The practice of reinsurance allows greater access to insurance for consumers, promotes solvency in the marketplace, and helps ensure claims are paid to customers. But this is not the true purpose of the transactions affected by this bill. In these cases, reinsurance is written between related parties--a U.S. subsidiary cedes U.S. business to its foreign based parent--to obtain a tax benefit. No risk has been spread in this transaction, the company is simply moving money from one pocket to another pocket within the same corporate entity. Mr. Speaker, this is clearly a very technical issue, but that should not stop Congress from moving quickly to shut down this loophole. If we do not stop this practice, other U.S. companies will be forced to relocate to Bermuda, or be bought by a Bermuda based parent, in order to stay competitive. This, in turn, will result in a significant reduction in U.S. corporate tax payments, and has implications not only for the property casualty business but also for affiliated corporations, especially life insurance companies, who could in theory benefit from this loophole. Mr. Speaker, this may be simply one issue in a series of issues that may need to be addressed by Congress. For example, there is another, separate issue, emerging involving hedge funds and Bermuda insurance companies. When U.S. taxpayers invest in hedge funds, they pay taxes each year on realized profits, usually at the ordinary income tax rate. However, if they invest in shares of an offshore reinsurance company in a tax haven country like Bermuda, they pay nothing on trading profits until they sell shares of the company and those profits are taxed at the capital gains rate. Congress has taken the position several times over the past few years that investors should not get better tax treatment by investing indirectly than they would have gotten if they had made a direct investment in an asset. To quote one article, ``The Bermuda reinsurance game is a thing of beauty. High-net-worth investors get the double tax advantage of investing in a Bermuda insurance company while literally capitalizing on hedge fund returns. Institutional investors that might be prohibited from investing directly in hedge funds can do so through an insurance company . . . You are effectively taking U.S. assets and moving them offshore. . . .'' Mr. Speaker, I believe we need to look generally at these issues. However, the matter at hand is one specific transaction that has been studied for a year at the Treasury Department, and it is time to either create fair competition for U.S. businesses, or declare that the U.S. government does not care if U.S. tax laws give a competitive advantage to foreign companies doing business in the United States.

Mr. NEAL of Massachusetts

Mr. NEAL of Massachusetts. Mr. Speaker, I yield 30 seconds to the gentleman from Vermont (Mr. Sanders).

Mr. NEAL of Massachusetts. Mr. Speaker, I cannot agree more with the authors of this legislation that our common goal here today is to provide meaningful retirement benefits for all working men and women of this country. Expanded pension coverage and an increased rate of participation in employment-based plans are more important now than ever, given our current savings rate and the imminent retirement of the baby boom generation. Our current system is built upon the assumption that the minimal level of income provided under Social Security would indeed in the end be supplemented by other sources of income such as an employer-based pension plan as well as personal savings. Thus, it is very important to make sure that the pension reform legislation today includes incentives for all Americans to increase retirement savings. There are many provisions in this bill that are desirable by increasing benefits and contribution limits for those currently saving the maximum in their current pension plans or for those currently saving in individual retirement accounts. I would remind both sides here today that, with the gentleman from California (Mr. Thomas), we were responsible for the Roth IRA here in the House of Representatives. But my primary concern with this legislation today is that it does not provide the same opportunity for all Americans to save who are not currently in a retirement system. It could be fixed through the amendment process. H.R. 10 contains many provisions designed to enhance and expand the portability of pension benefits. The current level of mobility among workers requires a modified approach to our retirement system. The lack of portability can result in workers being shortchanged in pension benefits merely because they change jobs. This bill responds to the need by giving workers greater flexibility to transfer their pension benefits between employer plans or to an IRA. These provisions have been in many bills over the last two sessions of the Congress. They were strongly backed by myself and members of the Clinton administration. There are also provisions in this legislation that would enhance benefits for women and we acknowledge that. However, while this bill contains many provisions such as those I have mentioned that are designed to achieve worthy goals, on the whole, the bill is not balanced. Under the bill, high-income workers would receive very generous benefits with no corresponding meaningful direct incentives to expand and increase retirement savings for low- and moderate-income workers. One analysis of this bill showed that workers earning less than $41,000, the bottom 60 percent of the American workforce, would receive, listen to this, 4.3 percent of the benefits; and the top 5 percent of American workers with incomes of more than $134,000 would receive, and listen to this number, 42.4 percent of the benefits. I do not oppose increasing retirement savings for workers at the top of the income scale, but I am concerned that the workers who are most in need of our assistance today in saving for retirement are being excluded from our efforts here. In its current form, the legislation would fail to provide a secure and adequate retirement for all Americans. The retirement savings account proposal that will be offered later today as an addition to this bill would provide the balance that is necessary for a successful accomplishment of our shared goal, which is a secure retirement for all workers. The RSA proposal builds on our current system by providing an incentive for low- and middle-income workers to participate in an employment-based retirement system. Under the proposal, the worker would receive an annual credit of up to $1,000 for contributions made to an individual retirement account or an employer-based pension plan. In addition, this bill must do more to provide direct incentives for small businesses to establish and administer pension plans. In a recent Small Employer Retirement survey conducted by the Employee Benefit Research Institute, 65 percent of small employers stated that tax credits for starting a pension plan would be a major contributing factor for them to establish a pension plan for their employees. This factor was second only to an increase in business profits. With this compelling evidence, I would like to encourage my colleagues here today to seriously consider another amendment that will be offered later on as well that would include two tax credits as an incentive for small employers to offer pension plans to their employees and to make contributions to those plans on behalf of their employees. The gentleman from Ohio (Mr. Portman) has been more than kind and more than receptive to that notion. Why we cannot do it today, I do not understand it. This bill could pass this House today 435 to 0 if those incentives were simply offered, which I have been assured they are going to be offered when the Senate brings back its version. I hope at that time we will have an opportunity for this bill to pass almost or nearly unanimously. I would be remiss if I did not mention the additional controversies with provisions underlying this bill. Last year, the Department of Treasury and outside groups argued strongly that some of the provisions of this bill could actually lead to a shrinking of pension coverage for low- and moderate-income workers. They cited most often changes in top heavy rules and nondiscrimination rules which are designed to protect non-key employees by making sure that they get a minimum amount of the benefit from an employer's pension plan. Now I know the authors of this bill believe the opposite; but a blend of my tax credit proposal, along with the efforts that they have made here today, could secure truly one of the great feats of this Congress; and I expect when it comes back from the Senate that provision will be included and we will have an opportunity, as I indicated earlier, to nearly unanimously pass this very important legislation with some technical corrections.

Mr. NEAL of Massachusetts. Mr. Speaker, I offer an amendment in the nature of a substitute.

Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I would like to begin by pointing out that this amendment is being offered by myself, the gentleman from New York (Mr. Rangel), the gentleman from New Jersey (Mr. Andrews), and the gentleman from Massachusetts (Mr. Tierney). The amendment is comprised of three parts, and is the same as the amendment I offered in the Committee on Ways and Means last week. In the last hour, we have really gone through a very helpful debate. I think it demonstrates that we are not as far apart on this legislation as some might think. Even though our differences may not be that large, they remain substantial for low- and moderate-income workers. As I said earlier, if we do not deal with the issue of providing direct incentives for small businesses to offer pension plans and direct incentives for workers to participate, then we are going to be right back here again in the near future arguing over these same issues. While 70.8 percent of workers with adjusted gross incomes between $75,000 and $100,000 participate in an employer pension plan, only 17.9 percent of those workers whose gross adjusted income is between $10,000 and $15,000 participate. The current system clearly fails these workers with little or no disposable income. I do not believe that H.R. 10 in its current form will achieve much success with these workers, as well. This amendment deals with these issues by establishing a refundable retirement savings credit for low- and moderate-income workers. The purpose is to encourage those who have little if any disposable income to make the effort to save, or if they can, to save even more. The credit would be up to 50 percent of annual contributions to a traditional individual retirement account or to a qualified pension plan like a 401(k), 403(b), or a 457 plan. It is important to understand that this amendment does not establish a new savings vehicle. It only establishes an incentive to use current pension vehicles. The eligible contribution would not exceed $2,000, thus resulting in a maximum credit of $1,000 when the proposal is fully phased in. The credit amount phases down as income increases, phasing out at $75,000 for a married couple. The two other credits that would be added to the bill would reward small businesses for establishing new pension plans. Many small employers would like to establish qualified pension plans for their employees but they need some help in getting there. We are all aware of how small employers struggle to attract and retain quality employees, particularly today. They can be successful in this effort only if they can compete with large businesses and the benefits they offer to their employees. Moreover, the 38 million employees who work in small businesses deserve the same secured retirement as employees in large businesses. Yet, pension coverage of this group of workers continues to lag behind the coverage available for employees of large companies. In a recent survey conducted by the Employee Benefit Research Institute, 65 percent of small employers stated that the availability of tax credits was a significant factor in their decision on whether to offer a pension plan to their employees, second only to an increase in business profits. Sixty-five percent is a most substantial number. Clearly the two small business credits in the amendment would go a long way to increasing the number of small business pension plans. The gentleman from Ohio (Mr. Portman) acknowledged this in the committee debate. The first small business credit would provide a tax credit for expenses incurred by small businesses, employers with 100 or fewer employees, for costs associated with starting up new pension plans. Under this credit, small employers would be eligible to claim a 3-year tax credit for an amount equal to 50 percent of administrative and retirement education expenses incurred as a result of offering a new qualified pension plan. Eligible expenses for the credit would be capped at $2,000 for the first year and $1,000 for the second and third years. The second small business credit would allow these same employers to be eligible for a tax credit for employer contributions to a pension plan. This credit would be equal to 50 percent of the employer contributions to a qualified retirement plan made on behalf of their non-highly-compensated employees. Qualifying contributions would be both non-elected employer contributions and employer matching contributions, up to a total of 3 percent of compensation for non- highly-compensated employees. This is important to hear, Mr. Speaker. The additional cost of this amendment is $46 billion over 10 years. When coupled with the cost of H.R. 10, the total cost remains under $100 billion. We have managed to fit that into our $900 billion tax cut proposal on the Democratic side. Surely the other side would not be asking too much if they could put that into the $1.6 trillion tax cut that they have offered. It is simply today a matter of political will. I would predict when the legislation comes back from the Senate, it will involve at least one and perhaps two of these amendments. In conclusion, let me say what I have said repeatedly, I think the gentleman from Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin) did a good job with this legislation. I have supported expanding IRA limits since the day I arrived in the House 13 years ago, and along with the gentleman from California (Mr. Thomas), carried the Roth IRA in the House. There are many good provisions in this bill. But at the same time, we have a remarkable opportunity today. With just a couple of small changes on the edges, which the gentleman from Ohio (Mr. Portman) has at least grudgingly acknowledged in committee were worthwhile, we could pass this bill today almost unanimously here. If we do not accept this challenge today, we are going to be back here next year and the year after and the year after. I do not know what is so difficult today about addressing a couple of small issues that would allow low- and moderate-income Americans who go to work every day to participate in a good and predictable retirement savings plan. I know in his heart that the gentleman from Ohio (Mr. Portman) would really like to do that today. He has that opportunity with simply a nod to move on his side, and I hope that as this debate proceeds for the next few minutes we will have a chance to say, look, there are many portions of this bill that are indeed desirable, but there are also two small portions of this bill on which we could improve upon today. Mr. Speaker, I reserve the balance of my time.

Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself 30 seconds. That is precisely the point. We can fit $100 billion into a $900 billion tax cut proposal on the Democratic side, and the gentleman from Ohio (Mr. Portman) has acknowledged they find difficulty in including it in a $1.6 trillion tax cut, even though, as he has pointed out, and again I think in a very sincere form, that there is at least part of this he believes at the end of the day is desirable. Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. Levin). (Mr. LEVIN asked and was given permission to revise and extend his remarks.)