Don Nickles

Mr. NICKLES

Mr. NICKLES. That investigation is pending. Supposedly, the Justice Department is reviewing that case. I urge all of our colleagues, to think about that. There are two federal employees involved in developing these MMS regulations who were paid $350,000 by a group with a financial interest in the final rule. I find that to be corrupt. I find that to be unethical. I find that to be outlandish. It needs to be stopped. So I compliment, again, my colleague from Texas for this amendment. We need to make sure that Congress raises taxes if Congress is going to. If there is going to be a tax increase, if there is going to be a royalty increase, it should happen by an act of Congress. It should not happen by an act of unelected bureaucrats changing the rules without appropriate legislative authority and opening up a litigation nightmare. Mr. President, I move to table.

Mr. NICKLES. Mr. President, I wonder if the Senator from Texas would give me time. I know the Senator from Louisiana wants a couple of minutes.

Mr. NICKLES. Mr. President, I ask unanimous consent that we have 20 minutes of debate on the motion to table, equally divided between the Senator from Texas and the Senator from California.

Mr. NICKLES. Mr. President, for the information of my colleagues, I would like to have a vote on the Hutchison amendment. I think the Senator from Texas has a good amendment. The Senator from New Mexico, Mr. Domenici, has worked on this amendment. It is unfortunate that it is needed. I am chairman of the Energy Regulation Subcommittee, and we had a hearing on this issue. The issue was whether or not MMS could change policy on royalties, or does that take an act of Congress. Does MMS have the power to increase taxes or the power to increase royalties? They have the power to collect royalties; that has been the law. Do they have the power to change it? I tell my colleague from California, if she is not going to give us a vote on the amendment, then I am going to move to table the amendment momentarily. I am going to make a couple more comments. If she wishes to have a couple of minutes on this, I will agree to that. I listened to the debate last night for a while. I wasn't able to get in here to join the debate. I will make a couple of comments momentarily. If the Senator from California wishes to speak before I move to table, I will agree to that.

Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) and the Senator from Alaska (Mr. Murkowski) are necessarily absent.

Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) and the Senator from Alaska (Mr. Murkowski) are necessarily absent.

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

Mr. NICKLES. I announce that the Senator from Rhode Island (Mr. Chafee), the Senator from Arizona (Mr. McCain), the Senator from Alaska (Mr. Murkowski) and the Senator from Kansas (Mr. Roberts) are necessarily absent.

Mr. NICKLES. Mr. President, I ask unanimous consent that we have a vote on the Hutchison amendment no later than 5 p.m. today.

Mr. NICKLES. Mr. President, I see both the sponsor of the amendment and also a couple of opponents of the amendment. I ask unanimous consent that we have an up-or-down vote on the Hutchison amendment no later than 12 o'clock today.

Mr. NICKLES. Mr. President, what is the pending business? Amendment No. 1603

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Arizona (Mr. McCain) and the Senator from Alaska (Mr. Murkowski), are necessarily absent.

Mr. NICKLES

Mr. NICKLES. Mr. President, I would like to announce that a subcommittee hearing has been scheduled before the Subcommittee on Energy Research, Development, Production and Regulation. The hearing will take place Tuesday, September 14, 1999, at approximately 10:30 a.m. (or immediately following the 9:30 Full Committee hearing) in room SD-366 of the Dirksen Senate Office Building in Washington, D.C. The purpose of this hearing is to receive testimony on S. 1051, a bill to amend the Energy Policy and Conservation Act to manage the Strategic Petroleum Reserve more effectively, and for other purposes. Those who wish to testify or to submit written testimony should write to the Committee on Energy and Natural Resources, U.S. Senate, Washington, D.C. 20510. Presentation of oral testimony is by Committee invitation only. For further information, please contact Jo Meuse or Brian Malnak at (202) 224-6730. committee on energy and natural resources

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Utah (Mr. Hatch), the Senator from Arizona (Mr. McCain), the Senator from Alaska (Mr. Murkowski), and the Senator from Ohio (Mr. Voinovich) are necessarily absent. I further announce that, if present and voting, the Senator from Utah (Mr. Hatch) would vote ``yes.''

Mr. NICKLES. I announce that the Senator from Utah (Mr. Hatch), the Senator from Arizona (Mr. McCain), the Senator from Alaska (Mr. Murkowski), and the Senator from Ohio (Mr. Voinovich) are necessarily absent. I further announce that, if present and voting, the Senator from Utah (Mr. Hatch) would vote ``yes.''

Mr. NICKLES

Mr. NICKLES. Mr. President, today I am pleased to introduce the ``Small Business Franchise Property Recovery Act of 1999.'' This bill would amend the Internal Revenue Code of 1986 to classify certain franchise operation property as 15-year depreciable property. As my colleagues may recall, the recovery period for real estate property and building improvements was generally extended to 39 years in 1984 primarily for revenue reasons. Since that time, growing concerns have been voiced that having such an extended recovery period is neither justifiable nor based on sound tax policy. In many cases, 39 years is far longer than the normal use life of the property. Congress has directed the Treasury Department by early next year to provide us with a study and recommendations for overhauling the tax code's depreciation provisions. I look forward to receiving the Treasury's report, but in the interim, I do not believe we should defer addressing obvious depreciation inequities. Therefore, I am offering this bill now to shorten the depreciation period for real property and buildings for all franchisees from 39 years to 15 years. Mr. President, franchisees-such as those who operate quick-service food restaurants generally enter into a franchise agreement with the franchisor that terminates after a set period of time (e.g., 15 or 20 years). There typically is no guaranteed right to renew the agreement. Franchisees often must undertake major renovations and improvements to the property at least once during the franchisee period. Under current law, the real estate and buildings owned by franchisees generally must be written off over 39 years. This extended depreciation period bears no relation to economic reality and is roughly double the normal use life of the franchise property. The ``Small Business Property Recovery Act of 1999'' would reduce the 39 year recovery period for such franchisee property to 15 years. This shorter period, which tracks the convenience store precedent, would essentially reflect the property's use life. This would be fairer to the small and closely held businesses that operate quick-service restaurants and other franchises. It also would enable them to free-up more capital to expand their businesses and create more jobs. I urge my colleagues on both sides of the aisle to cosponsor this bill. I would also note that Representative Ramstad recently has introduced a similar bill, H.R. 2451, in the House. I look forward to working with him and others to help secure the passage of this legislation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. NICKLES

Mr. NICKLES. Mr. President, today I am pleased to introduce the ``Small Business Franchise Property Recovery Act of 1999.'' This bill would amend the Internal Revenue Code of 1986 to classify certain franchise operation property as 15-year depreciable property. As my colleagues may recall, the recovery period for real estate property and building improvements was generally extended to 39 years in 1984 primarily for revenue reasons. Since that time, growing concerns have been voiced that having such an extended recovery period is neither justifiable nor based on sound tax policy. In many cases, 39 years is far longer than the normal use life of the property. Congress has directed the Treasury Department by early next year to provide us with a study and recommendations for overhauling the tax code's depreciation provisions. I look forward to receiving the Treasury's report, but in the interim, I do not believe we should defer addressing obvious depreciation inequities. Therefore, I am offering this bill now to shorten the depreciation period for real property and buildings for all franchisees from 39 years to 15 years. Mr. President, franchisees-such as those who operate quick-service food restaurants generally enter into a franchise agreement with the franchisor that terminates after a set period of time (e.g., 15 or 20 years). There typically is no guaranteed right to renew the agreement. Franchisees often must undertake major renovations and improvements to the property at least once during the franchisee period. Under current law, the real estate and buildings owned by franchisees generally must be written off over 39 years. This extended depreciation period bears no relation to economic reality and is roughly double the normal use life of the franchise property. The ``Small Business Property Recovery Act of 1999'' would reduce the 39 year recovery period for such franchisee property to 15 years. This shorter period, which tracks the convenience store precedent, would essentially reflect the property's use life. This would be fairer to the small and closely held businesses that operate quick-service restaurants and other franchises. It also would enable them to free-up more capital to expand their businesses and create more jobs. I urge my colleagues on both sides of the aisle to cosponsor this bill. I would also note that Representative Ramstad recently has introduced a similar bill, H.R. 2451, in the House. I look forward to working with him and others to help secure the passage of this legislation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. NICKLES

Mr. NICKLES. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. NICKLES. I want to take a minute to congratulate and thank my friend and colleague from Arizona for his leadership in the entire tax reduction effort, but particularly in estate taxes. The Senator from Arizona has been principal sponsor of a bill to reduce and eliminate the estate taxes. We have incorporated most all of that provision in this bill. I want to compliment him because I am confident eventually--maybe this bill will be vetoed; I hope not; I hope the President reconsiders--we will pass a bill to eliminate the death tax. The Senator from Arizona deserves great accolades and credit for being a principal player in making that happen.

Mr. NICKLES. Will the Senator yield?

Mr. NICKLES. I announce that the Senator from Idaho (Mr. Crapo) is necessarily absent.

Mr. NICKLES

Mr. NICKLES. Mr. President, first, I wish to compliment my colleague, the chairman of the Finance Committee, Senator Roth, for his leadership in bringing the bill to the floor. In addition, I compliment Senator Lott and Senator Domenici because they helped make this happen. The Senate, earlier this year, passed a budget resolution that says let's use most of the surplus that is projected to pay down the national debt. As a matter of fact, let's use over two-thirds of it to pay down the national debt. I have heard complaints from colleagues on the Democrat side saying we don't do enough. Frankly, we pay down the national debt more than the Democrats have proposed and more than the President has proposed. Maybe that is not enough for them, but it is more than they have proposed. I compliment Senator Domenici and Senator Lott, as well as Senator Roth, for laying the groundwork to say let's take at least one-fourth of the surplus projected and let the people keep it. Some people say give it back to them. Well, I don't think they should ever have to send it to Washington, DC, in the first place; it is their money. That is the issue. Are we going to allow the taxpayers to keep one- fourth of the surplus, or are we going to insist on that money going to Washington, DC, and Washington spending it? Obviously, there is no limit on the number of demands we have on spending other people's money. We can spend it all just like that. It is quite easy, in fact it is the easiest thing to do. Now, we finally have an opportunity, as a result of the significant surplus, to allow people to keep more of it. We do that in this bill. We have come up with a bill that I believe is fair, balanced, and I think is a good tax bill, a tax bill for taxpayers. I will go into some of the benefits. First, I want to repudiate some of the comments that were made against it. One Senator said it was too much. It is one-fourth of the surplus. I don't think that is too much. We have given tax cuts in the past when we didn't even have a surplus. I happen to have supported those. We passed a tax cut in 1997--a strong majority of Congress passed it. We didn't have a surplus then. I think it was the right thing to do. We gave a tax cut because, in some cases, rates were too high. We said if we have a tax cut, it will stimulate the economy and raise more money. Guess what. That is what happened. We cut the capital gains tax both in 1995 and in 1997. The President vetoed it in 1995. He signed it in 1997. When I say ``we,'' I am talking about Republicans because we didn't have any support in 1995 from our Democrat colleagues--maybe with one or two exceptions. We passed it in 1997. We cut capital gains from 28 to 20 percent. It helped the economy and raised a lot of money. It beat the expectations by the CBO and the Treasury Department. Why? We reduced the tax on transactions by about 230 percent and ended up having more financial transactions. As a result, you have more income and more taxes. It helped the economy. Many of us said that would happen, that it would have a very positive impact. Let me touch on one other thing. A couple of colleagues said you can't have this tax cut because it benefits high-income people. Heaven forbid, somebody making $500,000 is going to get a greater benefit than somebody making $10,000. Let me just step back a little bit. Is this tax cut too high, too generous for high-income people? I don't think so. Let me talk about rates. I believe marginal rates impact on whether or not somebody is going to do extra work. I have been in the private sector. I used to have a janitorial service, and marginal rates kept me from doing more work. I had a situation where I was making enough money to combine income and Social Security taxes. I was working about 40 percent of the time for the Government, and I said that is enough. I am not going to work more if the Government is going to take almost half of everything I make. It denied the advancement and expansion of my business--a small business. I might mention, that small business is where most additional new employees are starting. Somebody says, wait a minute, this tax cut is unfair, it benefits the high income bracket. Look at what we do for high income. We reduce every single income bracket by 1 percentage point. The low end is 15 percent and we reduced it to 14 percent. The high income is 39.6 percent, and we reduced it to 38.6 percent, and so on. There is a 28 percent bracket; we move that to 27. Somebody says, that benefits the high income. Wait a minute. We reduce it in every single bracket by 1 percentage point. It so happens that for the 15-percent bracket, to move down 1 point, that is a 7- percent reduction. If you move a 39.6 percent down to 38.6, that is a 2.6-percent reduction--less than half of a percentage reduction of the 15-percent taxpayer, or the lower income taxpayer. So I don't think this is tilted in any way. If anything, if one really looks at this, it makes the system more progressive. So the argument that this benefits upper income doesn't fly, and it doesn't fly with history. Look at what the tax cut rates were when President Clinton was sworn into office. The maximum rate in 1992 was 31 percent. After the Clinton tax increase--or maybe I should say the Democrat tax increase because it only passed by Democrats, with the Vice President breaking the tie vote twice in this Chamber--it increased the maximum rate from 31 to 39.6 percent. Actually, it went higher than that because they also took the cap off the Medicare tax and said you have to pay Medicare tax on all income, all salary, and all wages. So you have payroll taxes and Federal income taxes and Social Security taxes, and no limit, no base, no cap on Medicare taxes. Medicare tax is 1.45 percent of payroll, plus your employer's contribution; that is 2.9 percent. So a person in the maximum bracket pays actually 39.6, plus 2.9 percent Medicare. That is a total of 42.5 percent. When Bill Clinton was sworn in, the maximum rate was 31 percent. One year later, it was 42.5 percent on all income, all wages, on everybody in the country. That is a massive tax increase. That is a 37-percent increase. What are we doing in this bill? We are reducing that by one point. We reduce it from 39.6 to 38.6; 38.6 is a whole lot more than 31. So, the tax cut that we are proposing is just a small fraction of the tax increase President Clinton and the Democrats passed in 1993--a small fraction. Yet some of my colleagues are saying we can't do that. It might deny us the ability to spend more money. We have a whole laundry list of people parading to Washington, DC, saying: Give me some more money because we want to spend it. We want more of your money because we can spend it better than you can. Finally, I want to address the comments of one of our colleagues who says we favor a tax cut, but we don't believe now is the time to do it. Wait a minute. When are you going to do it, if not now? We have estimates of a $3 trillion surplus over the next 10 years. And we are not going to do it now? Will we only give you a tax cut if it is $4 trillion, or $5 trillion? At what point would our colleagues say it is time to let people keep more of their own money? We are taking too much from them. If my colleagues are not going to agree to a tax cut that is only one-fourth of the surplus, they will never agree to one. It absolutely amazes me how our Democrat colleagues all marched in step in 1993 and said: We are going to support this tax increase because Bill Clinton wants it. You might remember that Bill Clinton shortly after that said, Oops, surprise, I agree with the business community. We increased taxes too much. He actually admitted to that. A lot of Democrats were mad, but he admitted to it anyway and then he went ahead and vetoed our tax cut in 1995. Then in 1997, he eventually agreed to a tax cut and everybody seemed to favor it. I guess whatever Bill Clinton says the Democrats march in line to. I don't know. But we cut taxes in 1997. We reduced capital gains from 28 to 20 percent--very positive things. They might think that was a bad thing to do. No one offered an amendment saying let's bring capital gains back up to 28 percent saying that it was terrible. A lot of people debated against it in 1997. But it was the right thing to do. We cut taxes for families in 1997. We passed a $500 tax credit for each child in 1997. Bill Clinton campaigned for it in 1992. He didn't deliver in 1993. As a matter of fact, in 1993 he increased taxes. That tax cut didn't happen until 1997. Republicans passed it. The President vetoed it. We passed it in 1997 and he eventually signed it. A family of four with an income of less than $80,000 has $2,000 per year that they can keep. A family with four kids gets to keep $2,000 more per year because Republicans in Congress said we are going to pass it. We promised to and we did. We established the Roth IRA. We did some good things in 1997. Guess what? We didn't have the projected surplus in 1997 that we have in 1999. Now we have trillions of dollars of anticipated surplus. Let's give one-fourth of it back to the American people. Let's let them keep it. They shouldn't have to send that much to Washington, DC. Their taxes are too high. I will go through a couple of examples that we correct in this bill to show why their taxes are too high and what we do about it. There are too many people who send too much to Washington DC. Let me address a couple of those examples. I mentioned a self-employed person. A self-employed person, an individual, makes $25,000. They are taxed at the marginal bracket of 15 percent on everything they make up to $25,000. Above that they are taxed at 28 percent. If somebody has a painting service in rural Delaware, and paints houses and works for himself, that individual has a taxable income of $25,000, and probably is not considered wealthy by most people's standards. Any additional contract that person makes, any additional income that person makes, is taxed at 28 percent. He also has to pay Social Security and Medicare tax. That is 15.3 percent on top of the 28 percent. Add those two together, and it is 43.3 percent. He has to pay State income tax. In my State that is 6 or 7 percent. For any additional dollar that individual makes painting houses, fifteen cents of it goes to the government. That is too high. That is far too much. For a married couple right now that makes $43,000, it is the same thing. For any additional dollar they make, half of it goes to the government, if they are self-employed. That is too high. So we cut that. We provide marriage penalty relief and several other positive things. Let me go through some more of the changes. I mentioned that we cut all brackets by one percent. That benefits the lower more than the upper brackets. The lower brackets get a seven- percent reduction and the upper brackets get a 2.8 percent reduction. That is not stacked towards the higher income people. It is a tax cut for all taxpayers, and it benefits, percentage-wise, the lowest income taxpayers first. The lowest income taxpayer gets the break first. Again, for somebody who says this is weighted towards the wealthy, it is absolutely totally and completely false. We widen the 15 percent bracket. We make it 14 percent. Then we widen it. We ship $3,000 more of income into the 14-percent bracket instead of the 28-percent bracket. That is a very positive change for an individual with an income up to $25,750. That means they get to save $390. That is fairly significant. I think that is very significant. For a couple you are talking about double that amount. So they get to save a significant amount as well. Marriage penalty relief: What did we do? Some people do not understand what we did. We said we would double the bracket by increasing the standard deduction--basically doubling the standard deduction for an individual. If you look at the income tax forms, and say you are filing as individuals, or joint. If you file as married, you don't get twice the individual deduction. So, frankly, it would be better off if a married couple filed as individuals. They are penalized for filing jointly. Does it make any sense for our Tax Code to penalize people for being married to the tune of $1,400 per family? That is wrong. This bill eliminates that for most couples. What do we do? We said, Let's double the standard deduction. It should be twice as much for those who are married as it is for individuals. We do that with this legislation because the biggest hit is on married couples, and the marriage penalty is that individually they are taxed at 15 percent. For joint income tax they are taxed at 28 percent--almost twice as high. We move those rates to 14 and to 27 percent. We are saying for all of the income that is taxed up to 14 percent they should have twice that bracket amount for a couple. That is not the way the tax code is right now. Let me explain it. Individuals today are taxed at 15 percent up to $25,000. You say, OK. That is for an individual, and it would make sense for a couple then to be taxed at 15 percent up to $50,000. But that is not the present law. The present law says above $43,000 they are taxed at 28 percent. So they have $7,000 that they are taxed at a higher rate, twice the rate as what they should be. We eliminate that. We double the 15 percent bracket for married couples. So if it is $25,000 at 15 percent for an individual, it would be $50,000 for a couple. What does that mean in savings to a couple that makes $50,000? It means $980 a year that they will be able to keep. We are not going to penalize couples because they happen to be married and because they happen to file joint returns. I want to compliment the chairman, because he has worked very hard in supporting this. We have $100 billion in tax relief for married couples by eliminating the marriage penalty in this legislation--that is one eighth of this bill. When we debated this legislation on the floor of the Senate last week, no one said take out the marriage penalty. The marriage penalty tax elimination is one of the most important aspects of this bill and we are going to make it happen. The upper rate reductions that I mentioned move one percent down. That may not happen, because we have a trigger mechanism that says if we don't meet the deficit reduction targets the tax cut doesn't happen. That is not the case for marriage penalty relief. I encourage my colleagues. If you believe in getting rid of the marriage penalty, you had better vote for this bill. It is one of the most significant reforms that we have in this legislation. What else did we do? Why should somebody be in favor of this? We eliminate the death tax. We changed the current unified credit into an exemption. What does that mean? Right now everybody knows that we have a unified credit that says if you have a taxable estate above $650,000, you don't have to pay a death tax. If you pass away, your survivors and kids won't have to pay any death tax. We changed that unified credit into an exemption. What does that mean? Once you have to pay the tax, you start paying at 39 percent. By making an exemption, you start out at a lower rate. So any taxable estate will be taxed at an 18 percent rate. The beginning rate of a taxable estate will be 18 percent instead of 39 percent. We will be helping out estates that are just over the threshold, estates that are $1 million or $1.5 million. That is a very positive change. Eventually, in 9 years, by the year 2009, we eliminate the death tax. At that point, estates should be taxed when the property is sold--not in the event of death but when the property is sold. If your kids inherit a business or ranch, they don't have to pay inheritance tax until they sell it; if they sell it, then they are taxed capital gains. And they have to pay tax on the base, going back to the original base. That is how it should be. If they sell, they should pay capital gains; if they don't sell, they shouldn't be hit. I learned the hard way. This inheritance tax makes people sell businesses all the time. It makes people sell farms, ranches, homes-- just name it--to cover estate taxes. That is wrong. If they should choose to sell it, then let them pay the tax on the gain. That is what we do here and that is a very significant provision in this bill. What else do we do in this bill? We reduce capital gains taxes. We have proven time and time again, going back to the time of John F. Kennedy, reduce taxes and we generate more money to Government, particularly with marginal rates and capital gains rates. We reduced the capital gains rate in 1997 from 28 to 20 percent, and it raised a lot of money for the Federal Government. In this bill, immediately going back to January 1 of this year, we reduce the capital gains rate from 20 percent to 18 percent. Beginning January 1 of next year we index capital gains. What does that mean? It means we will quit taxing inflation. If someone has a home and that home is escalating in price through inflation, they won't have to pay taxes on that inflated gain because the home really hasn't increased in value, it is just staying up. That is a very positive provision and I compliment the authors of the bill for their hard work. We increase IRA deductions from $2,000 to $5,000. We haven't increased it since we passed IRAs many years ago. That is another significant provision, so people are saving and are not so dependent on an employer or the Federal Government. We allow self-employed persons to deduct 100 percent of their health care costs. Right now they can deduct 45 percent. This measure affects nearly 16 million taxpayers. It is a very positive provision. We allow 100-percent deductibility of health insurance for workers without generous employers. If you do not work for a generous employer, you can deduct your health care costs. We increase child care tax credits. We have AMT reforms so people don't get stuck paying an alternative minimum tax just because they are taking tax credits that Congress has already passed. We allow small businesses to be able to expense up to $30,000 a year. We increase that from $19,000. This is a provision that will benefit thousands and thousands of businesses, small businesses, all across the country. I say to my colleagues, this bill is a good tax bill, it is a fair tax relief bill. It allows small business, individuals, and married couples an opportunity to keep more of their own money instead of sending it to Washington, DC. I urge my colleagues on behalf of the taxpayers all across America to vote ``yes'' on this bill later this evening. Mr. President, I ask unanimous consent to have printed in the Record a couple of tables showing the distributional effects. Changes that we are making will show the greatest percentage of reductions are certainly pushed towards the lower income. For example, on married filing jointly, the rate reduction is 7 percent but the biggest reduction actually is for incomes of $40,000 to $60,000, receiving significant reductions, up to 17 and 22 percent, because of the marriage penalty relief that we have added. I ask unanimous consent to have these tables printed in the Record.

Mr. NICKLES. Mr. President, I ask the Senator from Delaware to yield me 20 minutes.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Idaho (Mr. Crapo) and the Senator from Colorado (Mr. Allard) are necessarily absent.

Mr. NICKLES

Mr. NICKLES. I announce that the Senator from Idaho (Mr. Crapo), and the Senator from North Carolina (Mr. Helms) are necessarily absent.