Frank Pallone

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I thank the gentlewoman. I notice that she and our Democratic leader constantly refer to the working middle class, and that is really what this is all about. The Democratic tax cuts would basically target the working middle class. That is the way it should be. We have mentioned, the gentlewoman has mentioned over and over again, this is a balanced budget bill where we have limited resources, because we are trying to balance the budget. Those resources need to go to the working middle class, not to the big corporations, not to the top 1 percent of the people in this country. One of the things that really bothers me, and I just wanted to mention it, and then I will yield to our friend from Texas, is that the strength, if you will, of America, I was always taught, was the fact that we have a large and growing middle class; that we do not have this huge gap, if you will, between the rich and the poor. And I think that we need to encourage the middle class. We need to help people who are working in the middle class. One of the things, if I could just mention briefly, because again I think that now the media is giving this Republican tax plan some very serious analysis, there was an article that appeared in yesterday's New York Times under the headline, ``Study Shows Tax Proposal Would Benefit the Wealthy,'' with the subhead, ``Wider Gap Is Seen Between Rich and Poor. '' In that editorial, or in that article, the Times reports that the 5 million wealthiest families in our country would gain thousands of dollars, while the 40 million families with the lowest incomes, now these are still working people, that those 40 million at the lower end of that middle-class spectrum would actually lose money, with the effect of widening the already growing gap between the richest and poorest families. That has been one of the real problems we have had in the last few years, is this gap between the rich and the poor keeps getting bigger and people drop out of the middle class. We cannot let that happen.

Mr. PALLONE. Mr. Speaker, I certainly want to thank our Democratic leader for being here tonight and pointing out the major differences between this Republican tax cut plan and the Democratic alternative tax cut plan, and what we are really trying to do tonight, which the gentleman from Missouri did very well, is to bring this home and explain how it affects real people, and I think that the word is getting out to the country about the differences here and why this Republican tax plan is basically bad for the average working person. I just want to say briefly, and then I want to yield to the gentlewoman from Connecticut, I just received a letter today from the president of Rutgers University, which is the State university in New Jersey, the major university in the State and the main campus of which is in New Brunswick in my district, and the president, the Rutgers president, expressed deep concern over the Republican bill, the one that came out of the House Committee on Ways and Means, and if I could just read a couple lines from this? He goes into very great detail about how it impacts a lot of students, but he says, and I quote, ``that the higher education community was encouraged by the bipartisan budget agreement reached by the President and congressional leaders because it put the country on track to a balanced budget while targeting tax relief to families struggling with the cost of higher education. Chairman Archer's bill, however, reduces this tax relief and imposes new burdens on students and families,'' and he goes into the details which I will not get into at this point. But it is real. These are real people. There are thousands of students at Rutgers in my home State of New Jersey who are impacted by this and really had hopes based on what was agreed to that this was going to be something that was really going to help the average working family meet the costs of a college education, and now the President and many others are very disappointed when they read what the Republicans have in mind here. I yield now to the gentlewoman from Connecticut.

Mr. PALLONE. Mr. Speaker, following up on the gentleman from Massachusetts who just addressed the House previously, I think that I need to stress that the unfairness of the Republican tax scheme really has not gone unnoticed out in the real world, beyond the city of Washington. People have really caught on to the fact that the Republican plan is blatantly skewed to help the rich, and the bad news for the Republican leadership here in Washington is that the grassroots really understands what is happening and what we will be voting on in the next 2 days here in the House of Representatives. The people are asking us to do the right thing. I would maintain that the Democratic tax cut alternative is far superior when you deal with the concerns of the average American working family. This week as Democrats we are trying to illustrate in human terms the implications of the Republican tax scheme since we are going to be voting on this over the next 2 days. I wanted to start out this evening by using the example of a woman from New Jersey, Debra Hammarstrom, who is a resident of Toms River, NJ, in Ocean County. She is a divorced mother of two children living on a single income. I actually have photographs of her daughter here and also of her son. These are her two children, Ms. Hammarstrom's two children. She recently wrote, and I want to quote a section from her letter, the reason was, quote, to stress the importance of how a child tax credit would help to offset some of the financial burdens that come with raising a family on a single income. She is concerned that the child tax credit that the Republicans have proposed here will simply not help her even though it should. Ms. Hammarstrom earns $21,500 in her job as the benefits coordinator for Visiting Home Care Service of Ocean County, NJ. She pays for child care, $105 a week, or $5,460 a year, so that she can work. To quote again from Ms. Hammarstom's letter, she says, ``Unfortunately the Republican child tax credit proposal is targeted against those who need it most, those who are just one step away from falling into the welfare system. We are working poor who work to pay for child care, food and a roof over our family's head and nothing more. The child tax credit should be given to financially benefit the child, and I think a child from a lower income family would benefit greatly by receiving the credit. However, my family would receive no benefit at all from the proposed child tax credit.'' That is the Republican tax credit. They do not give it to her in her case, another member of another working family. The Republican bill denies the $500 child tax credit to more than 15 million working families because it does not let them count the credit against their payroll taxes. These payroll taxes are the taxes that are deducted from a worker's paycheck. Everyone understands that. But some of our Republican colleagues, including Speaker Gingrich and the chairman of the Committee on Ways and Means, the gentleman from Texas [Mr. Archer] have claimed that working families who qualify for the earned income tax credit are welfare recipients. Mr. Speaker, I maintain this is an outrage. The people who qualify for the earned income tax credit are working people as the words ``earned income'' attest. No less a conservative than President Ronald Reagan himself praised the EITC program as a great incentive for helping people make the transition from welfare to work. To call these families welfare recipients is simply dishonest. To deny the $500 child tax credit to these families who need it the most is cruel and shows that the Republicans do not care about giving tax relief to millions of moderate income families. We are going to be highlighting some of these families like Debra Hammarstrom and her children tonight and over the next 2 days as this Republican tax proposal comes forward. Mr. Speaker, I am very pleased to see that our Democratic leader the gentleman from Missouri [Mr. Gephardt] is here tonight to join with this special order and I would like to yield to him at this time.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, on June 18, 1997, Monmouth Medical Center in Long Branch, NJ, hosted a dedication of the new community health center. This center's main purpose is to benefit the residents of the Long Branch area that are currently medically underserved. The new community-based center represents a major outreach from Monmouth Medical Center. This expansion is proof positive that Monmouth Medical Center is true to its commitment to the Long Branch community. Residents of the city and the immediate surrounding area will be able to share and experience high quality, convenient and comprehensive medical care. I am delighted that several organizations and agencies joined together to bring about this endeavor. I would like to pay tribute in particular to some of the individuals whose efforts have made this dedication possible, including the executive director of the Long Branch Housing Authority, David A. Brown, Lisa Thornton, president of the Long Branch NAACP, Phyllis Kinsler, executive director of Planned Parenthood, Joseph Ferraina and other administrators from the Long Branch Board of Education, Antonia Alvarez, from Hispanic Affairs, Rodney O'Neal and Webster Tremell of the Monmouth County Urban League, representatives from my congressional office, and so many others that have contributed enormously to this endeavor.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, the House is expected to vote next week on a Republican tax bill that gives more than half of its benefits to the wealthiest 5 percent of Americans. Because the Republicans do not know how to defend themselves against charges that their bill short-changes working families, Republicans are firing back with the blatantly false charge that tax breaks for millions of working families would be welfare payments. I would tell my colleagues that the Republican bill denies the $500 child tax credit to 20 million working families, because it does not let them count the credit against their payroll taxes. This is the Federal taxes that are deducted from the worker's paycheck. I do not understand why the Republicans are so desperate to keep these working families from getting tax breaks. I suspect it is because they are trying to funnel every dollar they can right back to their wealthy contributors. I would say, Mr. Speaker, we should welcome ourselves to the Republican Congress where tax breaks for struggling working families are welfare, but massive capital gains and estate tax breaks for the very rich are an important national policy.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I also rise in opposition to the rule. I had an amendment, as I know many others did, which was germane and, I think, important which was denied by the committee for consideration, and I do believe very strongly that there should have been more amendments allowed including the one that I proposed. My amendment would strike section 1021 of the bill. That section exempts the Navy and MARAD from the provisions of section 6 of the Toxic Substances Control Act which governed disposal of PCB's and other hazardous materials on vessels which are being exported for scrap or sunk in ocean waters during tests of operational readiness. This section also exempts the Navy and MARAD from related provisions in the Resource Recovery and Conservation Act and the Marine Protection Research and Sanctuaries Act. Under these regulations export of PCB's for disposal is banned. While the Navy and MARAD may wish to export ships for scrap, they have been barred from doing so because the vessels contain PCB's which are highly toxic, persistant and mobile, and I think that is a pretty good reason to put the brakes on these sales, at least in the short run. Overseas scrapping of PCB containing vessels poses real threat to foreign workers in the environment. Section 1021 allows the Navy and MARAD to be treated in a more privileged manner than private ship owners, and let me add there is no national security reason to treat them differently. Section 1021 is opposed by the EPA for these reasons, it is opposed by the administration, and finally I do not think this Congress wants to go on the record in support of allowing ocean dumping of toxic materials. Yet that is just what section 1021 would allow. By exempting the Navy and MARAD from the Marine Protection Act, which by the way is also under the jurisdiction of other committees, it would allow them to sink ships laden with PCB's and other toxins in our oceans. What we are doing here is reopening the ocean dumping ban, and that is something which I know that I cannot stomach, and I really think that the majority of my colleagues on both sides of the aisle share my view. For these reasons, Mr. Speaker, and many others that I have not stated I would urge my colleagues to vote against this rule.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I would like to address some of the issues related to the tax bill as well as the minimum wage this evening in the time that remains. I listened to some of the statements that were made by my Republican colleagues over the last 45 minutes or so, and I know they are sincere, but I also think they are very wrong about the implications of this Republican tax bill. But before I get into that I would like to spend about 5 minutes talking about another issue about a country that is far away from the United States but none the less where the United States, I think, can make a difference and where there is a great need for the United States to play a strong, but neutral, role in trying to resolve a conflict that has the potential for creating an even wider conflict if the United States does not address it in the proper way. Mr. Speaker, I am talking about a region of the world that many of my colleagues and indeed most Americans may be unfamiliar with but which the United States has identified as an important area of interest, and this is the Republic of Nagorno-Karabagh which was established on September 2, 1991, and declared its independence on January 6, 1992. The State of Nagorno Karabagh is predominantly populated by Armenians which was formally part of the Soviet Union and Nagorno Karabagh fought and won a war with the neighboring Republic of Azerbaijan to gain its independence back in 1991. A ceasefire has for the most part held for the last 3 years, but Azerbaijan has refused to recognize the independence of Nagorno Karabagh and still insists that Karabagh is a part of Azerbaijani territory despite the fact that Karabagh is a functioning State with the government and the proven capacity for self- defense. Negotiations have been brokered by the organization for security and cooperation in Europe with the goal of achieving a political settlement, but so far those negotiations have failed to produce a diplomatic breakthrough. And, Mr. Speaker, I wanted to mention this on the floor tonight to express my serious concern about the apparent direction of U.S. diplomacy in this region. The United States is a cochair of the OSCE's Minsk group or Minsk conference which is charged with negotiating a political solution to the Karabagh conflict. In this capacity we should be working along with our co-chairs, France and Russia, for a negotiated settlement that recognizes the self determination of the people of Nagorno Karabagh. But based on media reports that I have recently been reading and recently have surfaced I am fearful that the United States may not be pursuing a neutral course and that U.S. negotiators may, in fact, be trying to impose unacceptable conditions on Nagorno Karabagh and Armenia, and I am calling on the State Department to clarify these reports and to confirm that the United States is working for a fair solution to this issue. Mr. Speaker, earlier this month the House passed the Foreign Relations Authorization Act, and that legislation included an amendment sponsored by myself and the gentleman from Michigan [Mr. Knollenberg] which would help promote U.S. leadership and neutrality for a just and lasting peace in Nagorno Karabagh. The legislative language reaffirms the current United States position of neutrality, and our rational in offering this bipartisan amendment was that the U.S. has identified a resolution of Nagorno Karabagh conflict as a vital interest. We believed that Congress should play a positive role in jump starting the negotiating process by going on record in support of a negotiated settlement and by reaffirming U.S. neutrality. But while it is ultimately up to the parties directly involved; that is, Armenia, Nagorno-Karabagh and Azerbaijan, to agree to a negotiated settlement, I believe that the power and the prestige of the United States can count for a great deal in moving things forward. But that power and prestige has to be accompanied by fairness, by the goal of being a honest broker and not impose solutions that one of the parties will not be able to accept. President Clinton in a letter to the Armenian American community on March 26 of this year stated, and I would like to quote, Mr. Speaker; he said, quote, I can assure you that our consistent position of neutrality on the tragic Nargorno Karabagh conflict has not changed and will not change. I have to say, Mr. Speaker, though that I am concerned by recent reports that have come from the media that suggest that the balance may be tilting against the people of Nagorno Karabagh. A report this week from Noyan Tapan, an English language newspaper in Armenia, suggests that the Minsk group, which again the United States cochairs, may be trying to impose on Nagorno Karabagh a unacceptable solution. The newspaper reports that the proposed solution would require Nagorno Karabagh to withdraw its forces from the Azeri firing posts. These were places where the Azerbaijani forces fired on the people of Nagorno Karabagh, and basically what these newspaper reports say is that this proposed solution by the United States and others would force Karabagh to withdraw its forces from these firing posts. I will name them: Kelbajar, Aghdam, Fizouli, Dzhebrail, Gubatly, Lachin. Lachin is of course the corridor between Nagorno Karabagh and Armenia that was neutralized by Karabagh's self-defense forces, and also Shoushi, what has historically been part of Nagorno Karabagh for centuries, if not thousands of years. And ultimately to dissolve the army, this is another one of the conditions, to ultimately dissolve the army, which is the only guarantee of security for the population of Nagorno Karabagh, and also to require that Karabagh remain an enclave within Azerbaijan with the danger of the deportation of the native Armenian population, that danger will always exist as long as Karabagh is considered part of Azerbaijan. The newspaper reports that Karabagh would be granted the right to have its own Constitution, symbol, national anthem, flag, and national guard. This all sounds very nice, but, Mr. Speaker, these trappings, and that is what they are, trappings of nationhood would obviously be hollow symbols if the people of Nagorno had no way of protecting and maintaining their hard-won freedom and independence. Combined with these newspaper reports, there was a news report last month on CNN that President of Azerbaijan, President Aliyev, was vowing to take control over Nagorno by force if necessary. The United States, and I believe very strongly, the United States must not be in the position of tacitly supporting, much less openly supporting, any government that still advocates the use of force to settle this controversy. As I indicated, Mr. Speaker, I hope that the State Department will clarify its position and respond to these recent media reports. Deputy Secretary of State Strobe Talbot and our new special negotiator for Nagorno, Ambassador Lynn Pascal were recently in the region. As the cochairman of the Congressional Caucus on Armenia Issues, I am working to get the State Department to make clear where they stand on these negotiations, particularly in light of the fact that this House has gone on record in support of continued U.S. neutrality. The Republican Tax Bill Mr. Speaker, on another topic, I listened to some of the comments made by my Republican colleagues for the last 45 minutes or so about the Republican tax bill and also about the minimum wage issue, and I feel very strongly that it is necessary to respond. I am not going to take up the whole time that has been allocated to me tonight, but I am particularly concerned about some of the statements that were made with regard to the tax bill. As I think my colleagues know, as part of the balanced budget resolution, there is a bill that would basically cut taxes and the issue is how to do it. Obviously, everyone would like to see a tax cut, but there is a major difference between the Republicans and the Democrats on who should benefit from these tax cuts. What I have maintained and my Democratic colleagues maintain, is that the majority of the tax cuts that have been proposed by the Republican leadership, and they of course are in the majority and are likely to hold sway, the majority of those tax cuts basically either favor the wealthy, either individuals who are rather wealthy or corporate interests. Just to give some statistics, according to an analysis by the Treasury Department, two-thirds of the Republican tax breaks benefit those earning more than $100,000, and the richest 1 percent would receive an average tax break of more than $12,000. More important, the Republican bill uses a number of gimmicks to hide the cost of tax breaks benefiting the wealthy which explode in costs in the second 5 years. The capital gains indexing provision, for example, raises $2.5 billion in the first 5 years, but costs $35 billion over 10 years. Now, I think this is particularly dangerous, because remember, we are talking about the balanced budget resolution. The whole reason to come up, or the reason why the President agreed and the majority of the Democrats, including myself, voted for this balanced budget resolution, is because we felt it was going to balance the budget and eliminate ultimately the deficit that we have suffered under for a number of years. Well, if in the course of passing this tax bill, 5 or 10 or 15 years from now the deficit starts increasing again and balloons to even greater than it is now, then obviously we have not accomplished our goal, and that is the fear that many of the Democrats have now, which is that simply that in the first few years, there is going to be an effort to save money, but in the long run, because of the level of tax cuts, particularly those for corporations and wealthy individuals, that in fact the deficit will increase once again. Just some more information. The Republican bill gives large corporations a $22 billion windfall by scaling back the corporate minimum tax that consistently denies or limits tax relief for working families. A working family with two children earning $25,000 would not receive the $500 child credit. Some working families who take a deduction for child care expenses would be penalized, losing half of every dollar they receive for the child credit. And the value of the HOPE education tax credit, this is the tax credit that would help families pay for their children's college education, well, that would be cut in half and would provide only 50 percent of tuition expenses for millions of students attending community colleges and other low- cost institutions. Finally, the Republican bill threatens the security of low-wage workers by allowing employers to choose to pay their workers on a contract basis. Millions of workers could be reclassified as independent contractors so that employers can avoid paying the minimum wage and can avoid providing health care and pension benefits to their workers. I just wanted to talk a little bit about the minimum wage provision, because again I listened to my colleagues earlier this evening and they seemed to suggest that it was the right thing to do to not require the minimum wage for those workers, again workers who are coming off welfare and are entering the work force now, because of the welfare reform bill that we passed in the last session of Congress. I just want to talk a little bit about the ideology, if you will, of getting people off welfare. The idea was to get people off welfare, off the Government assistance programs and to have them work. Well, I think we all know that people need an incentive to work. In other words, by staying on welfare they do better than if they are working, then why should they work? So when we talk about getting people to work, we want to make sure that they are getting a decent wage. A minimum wage is not really a decent wage, but at least it is something. We want to make sure that if they are parents and they have young children, particularly working mothers who do not have a spouse, that they have adequate child care, and of course we want to make sure that they have health care. Because if they stay on welfare and they get those benefits, but then when they work, they do not, there is no incentive for them to be working as opposed to being on welfare. Well, a big part of that is to make sure they have the minimum wage, to make sure that they have a decent wage when they are working. In addition to that, if we make it more difficult for them to get child care because we do not give them the credit to get the child care, then again, they do not have the incentive to work. So I think that by the Republicans saying that we are not going to provide minimum wage for these people coming off welfare or that we are going to make it more difficult for them to get child care, we are defeating the very purpose of the welfare reform bill. The other thing that the Republicans have done, though, in their budget proposal is that they have created an exception not only for people coming off of welfare or in the workfare program to be exempt from the minimum wage, but also they have created this provision, it is called safe harbor for independent contractors, that basically expands the definition of independent contractors in the Tax Code and allows businesses to reclassify millions of workers as independent contractors rather than employees. Now, what that means is in addition to being denied a number of benefits, they would lose the basic worker rights such as minimum wage. So here we are creating another big loophole, and I just think that it is wrong. If one group of people are entitled to the minimum wage and are working, then another group of people who are working and doing the same job should also be entitled to the minimum wage. I just wanted to talk a little bit, if I could, about this message that again some of my Republican colleagues tried to deliver tonight where they were suggesting that their bill managed to make sure that people who were not paying taxes did not get a credit. Well, the reality is, what they are doing is cutting off a lot of people who are making under $30,000 a year from getting any tax cut or tax credit, even though they are paying a significant amount of taxes. I think we have to remember that people pay Federal taxes in a number of ways. They may pay taxes on their income, but they also pay what we call the FICA, or the payroll tax, which is a significant tax for people at almost every level, at every income level. In addition to that, people pay all kinds of taxes: State taxes, property taxes, local property taxes. So to suggest that there are some people who are not paying Federal income tax and because they are not paying Federal income tax, that they should not get a tax break is very unfair, because they may be paying thousands of dollars in Federal payroll taxes, in property taxes, in other kinds of State and local taxes. I just wanted to give some information in that regard, because I think that what my Republican colleagues are trying to do is give the false impression that the Democratic tax alternative is simply giving money back to people that do not pay taxes. In fact, just the opposite is true. The tax legislation that I am talking about is the legislation that was adopted by the House Committee on Ways and Means and also proposed by the Senate Finance Committee. This is the Republican proposal, and it makes very significant changes in previous Republican proposals with regard to the child tax credit. The new version, this is the new Republican version which is different from their prior version, denies the credit to 4 million children, this is the child tax credit, in middle income families that would have received the credit under previous Republican tax proposals. The new version of the credit also reduces the size of the credit for several million additional children in middle income families. Most of these children live in families that owe Federal taxes. Their tax burdens often amount to several thousands dollars, even after the effects of the earned income tax credit are accounted for, and claims that these families owe no Federal tax are not correct. This is from the Center on Budget and Policy Priorities, and I just wanted to give a little more information about it. Under the child tax credit that Congress passed in 1995, now remember, this was the Republican Congress, as well as under the child credit contained in the leadership tax package that was introduced this year by the Senate majority leader, a family would receive a credit of up to $500 per child to be applied against the family's income tax liability. The child credit would be applied before the family's eligibility for the earned income tax credit is calculated. Now, under the more restrictive version of this child credit, the one that the Democrats have been criticizing that has been proposed by Republicans now in the various committees, the child tax credit could be used only to offset any income tax remaining after the earned income tax credit is applied. The family has no income tax liability left after the EITC is applied, the family would be denied the child credit, even if the family owes substantial amounts of other Federal taxes, such as payroll taxes. What the Republicans are trying to do now is to justify the denial of this child credit to 4 million children by arguing that these children live in families that owe no Federal taxes. But it is not the case. The large majority of the families would either be denied under the child credit under the new proposal or have the size of the credit reduced. Those families do owe Federal taxes. They have large tax bills. I just want to give an example. The families that would be denied the child credit or have the credit reduced have incomes between $15,000 and $30,000. For example, two-parent families of four with incomes between $17,500 and $27,000 will receive less under this Republican proposal than they would have received under the child credit proposal that Congress adopted in 1995, this is the Republican proposal from the previous year. Just an example here. Under current law, the family's tax bill just from the income tax and the employee's share of the payroll tax equals $1,700 after the EITC is subtracted. Under the 1995 Republican budget bill, this family would receive a child tax credit of $975, which would have reduced the family's tax bill from $1,700 to $725. But under the new proposal, the family would not receive any child tax credit to help offset this tax bill. So what we are seeing here is that middle income families, and I think families that are in this category between $17,000 and $27,000 are clearly middle income families, they are not going to be able to take advantage of this child tax credit, even though they may owe significant amounts of Federal taxes, not to mention the fact that most of them are probably paying a significant property tax and possibly other State and local taxes as well. It is not fair to characterize these people with significant tax burdens, including Federal tax burdens, as people who are not paying taxes. That is what the Republicans are trying to do, and it is wrong. I think we need to constantly bring that up. Now, I just wanted to, in the small time that I have left, I just wanted to talk about some of the other criticisms that I have of the GOP tax plan. I think it should be understood that the Democrats have an alternative. The Democrats are going to provide tax relief to middle- income working families, education tax credits, child tax credits, capital gains tax cuts for homeowners, a whole list of tax cuts, if you will, that will benefit middle-income families. Mr. Speaker, if we look at the Republican tax plan, two-thirds of the capital gains tax cut in their plan will go to the wealthiest 1 percent of families. It would give a windfall of $1 million to many CEOs with big stock options, but only $150 to the average working familiy. What the Republicans are doing is looking at the capital gains tax and cutting it across-the-board for stocks, for bonds, for the whole portfolio of assets, if you will, that an individual may have. That person can be extremely wealthy. What the Democrats are saying is if we are going to have a capital gains tax reduction, and we are in favor of it, it should be targeted to homeowners, because most people pay capital gains only when they sell their home. Under the Republican proposal, the wealthiest 1 percent of Americans, those making $600,000 or more, would receive 40 percent of the tax cuts in the plan, nearly as much as the rest of the country combined. Two-thirds of the capital gains tax cut in the Republican plan would go to people with incomes of more than $600,000 per year. Again, I want to go back to what I was saying from the beginning. Compare the Democratic plan, compare the Republican plan. The Democratic plan is fair to working families. It is targeted to working families. The Republican plan is targeted essentially to the wealthy, but the worst part of the Republican tax plan, in my opinion, is that ultimately it will explode the deficit and not reached the balanced budget, which this is all designed to do. The cost of the Republican tax cuts will explode in the same years that the baby boom generation starts to retire, and that is going to require, in other words, if we have this huge deficit and the costs explode, the only way we are going to eliminate it then is to do major cuts in Medicare, major cuts even in Social Security. So what the Republicans are doing is essentially putting us further into debt and causing future generations to have to pay double. The Republicans claim that the tax bill would give everyone a $500 per child tax credit, but millions of families that make less than $50,000 would receive no credit at all, this is what I was talking about before, and the value of the credit would go down in future years. On average, the child credit would be worth only half of what the Republicans claim. The Republican tax plan has many gimmicks and tricks designed to hide its real impact on the future, and disguise who it would really benefit the most. The public has not been told about the real long-term impact. Many economists are saying that the Republican tax plan would undermine the new balanced budget agreement because of the hidden costs that would increase the deficit in later years. Essentially what you would have under this Republican plan is a $1 trillion tax cut, an irresponsible policy which in many ways would hark back to the tax cuts that we had in the 1980's, and would put us back on a path of large and growing deficits. Mr. Speaker, I just want to conclude, if I could, by pointing to the two tax cuts that I think are the most contentious here in terms of the impact on the wealthy in the case of the Republicans, and the working person in terms of the Democrats. With regard to the capital gains tax cut, the Republican plan rewards the rich with deficit-busting capital gains tax breaks. The Republican plan grants massive tax breaks to wealthy people who make money by selling their stocks, bonds, and other assets. What the Democrats are saying is do not give these huge capital gains tax cuts to people with these stock portfolios. Provide a targeted capital gains tax break for homeowners, small business owners, and farmers, because those are the people that would benefit the most and where it would impact the average working familiy. With regard to estate taxes, only 1.5 percent of families currently pay any estate taxes, and yet the Republican plan would simply expand the estate tax exemption to larger and larger estates, providing large estate tax breaks to very wealthy families. The Democrats are saying, yes, we will reduce the estate taxes, but we are going to target it for family-owned businesses. That is where the relief is needed the most. So I think whether we look at the education benefits, we look at the capital gains cuts, we look at the estate taxes, we look at the child tax credit, in each case we have a limited amount of money. The Democrats are saying, target those tax cuts to the working people, and the Republicans are saying, no, let us give those tax breaks primarily to wealthy individuals, let us eliminate the tax burden of the corporations. And in the long run, the worst thing of all is that the Republican plan will balloon the deficit and be contrary to the very purpose of this whole process, which is to achieve a balanced budget.

Mr. PALLONE

Mr. PALLONE. Mr. Chairman, I rise in support of the bill. Mr. Chairman, I want to commend the committee for producing what is an excellent bipartisan effort. I share the committee's concern regarding the state of Nation's military infrastructure. The Committee's report on the fiscal year 1998 Defense Authorization bill, expressed concern that military construction projects at bases across the Nation have been underfunded. Indeed, the committee was right to add an additional $750 million on top of the administration's request for military construction. The committee has done an excellent job in making do with the limited resources. At Fort Monmouth in Monmouth County, NJ, for instance, the committee recognized the serious need to rebuild the fort's firehouse. The existing firehouse, Mr. Chairman, was severely damaged by fire in 1994. Currently, the firefighters who protect the fort's childcare center, family housing, and high-technology research centers. Live in and operate out of a housetrailer that does not provide minimum essential operational and living requirements. The committee also recognized the need to upgrade some housing facilities at Fort Monmouth that had not, other than roof and window replacements, had any major modernizations in 50 years. The importance of such improvements really cannot be underestimated. Modernizing and preserving infrastructure must be done not only to ensure our military personnel live in safe environments, but to ensure they receive, in exchange for their service, the finest possible quality of life benefits--and along those lines I am pleased to see the committee included a 2.8-percent pay raise for military personnel. Mr. Chairman, like the military construction and personnel sections, the other parts of the bill were well thought out and developed. Funding for the operations and maintenance section is at an appropriate level--a fact I know to be of importance to Fort Monmouth, where CECOM--the Communications and Electronics Command--the Army's leader in communications and electronics research, continues to do cutting edge work. Mr. Chairman, I intend to vote for this bill and urge my colleagues to do the same.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I follow up on my colleague from the other side of the aisle and say do, in fact, look at the details and my colleagues will find that the GOP tax plan rewards the rich and the Democratic alternative helps working families. Let us look at the capital gains tax. Basically the GOP plan would essentially cut the capital gains tax across the board. It would say that for the sale of stocks, bonds or other assets the rate would drop to 20 percent, where it is now at 28 percent. What the Democrats are saying is why benefit Wall Street? Why benefit wealthy people who have these large portfolios of bonds and stocks? Let us help the homeowner. The capital gains tax cut is a good idea, but it should be targeted for homeowners because that is where most middle-class working people have to pay a capital gains tax cut. Reduce it for the person selling the home, not the person with the large stock portfolio. And the same with the estate tax break. Right now only 1.5 percent of families currently pay any estate tax, but the Republicans are saying that they want to increase the amount up to a million dollars. That is for the rich, not for the working person.

Mr. PALLONE

Mr. PALLONE. I want to thank the gentleman from Hawaii for yielding me this time. Mr. Chairman, I will not use the entire 3 minutes, but I did want to say in my prior life, before I was in Congress and before I was a politician really, I was a Sea Grant coastal law specialist. I mention that, because I learned a lot about the Sea Grant Program and particularly how it benefits the average person. Sea Grant really is a very valuable program because it reaches out to help so many people in very positive ways. I think that many Members of Congress and certainly the public at large are not aware of how far-reaching its positive efforts are. When I was a coastal law specialist, basically I worked with various user groups, if you will, whether it was marina owners or commercial or recreational fishermen or longshoremen, anyone really who was involved in the coastal environment took advantage of what we called the New Jersey Marine Advisory Service, which was basically an outreach program financed through Sea Grant to help those people, working people mostly, who made their living from the sea or from the coastal area. It was a very unique program in a way because it is one of the few times, I think, when people who are in the Federal employ actually are in the working area, if my colleagues will, and actually helping people on a daily basis with their problems. I thought that it was tremendously valuable, and of course I have also had contact with the Sea Grant program because here in Congress and Federal agencies we have Sea Grant fellows, and I know that this reauthorization legislation specifically provides for the continuation of the Sea Grant fellowship program, again another way to get young people involved, to help interaction here in Washington, as well as with the Federal agencies, to learn more about how we at the Federal Government can be a positive force in the field, so to speak. In my own State of New Jersey the Sea Grant program is managed by the New Jersey Marine Science Consortium which is an alliance of about 30 colleges, universities, private organizations and individuals interested in marine affairs, and New Jersey Sea Grant is very cost effective. I have to stress that; very cost effective in that all resources are shared by the institutions that participate in the Sea Grant program, thereby avoiding duplicative purchases statewide, and collective State and Federal funds are used for administration of a summer marine science program for college students as well as operation and maintenance of a small research fleet and state-of-the art sampling equipment. Mr. Chairman, I do not want to take much more time, but I wanted to, say, just give some recent examples of Sea Grant-supported research and outreach activities in New Jersey that have positively impacted the lives of the residents of my State. Right now Sea Grant is funding two biotechnology research projects that help develop products with practical uses in the pharmaceutical and pulp industries. It is sponsoring a commercial fisherman's safety training program. It is supporting a red tide research effort, and the list goes on. Sea Grant is a valuable program, and we should support this legislation.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I appreciate the statements that the gentleman from Texas made, and if I could just elaborate on these MSA's and what is happening with Medicare with the MSA's. I find it incredible. The gentleman, of course, listened to the earlier debate that we had where we were discussing the fact that as part of that balanced budget resolution, we wanted to make sure that scarce resources, in this case the tax cuts, went to working class people, working families in this country, and not to corporations or the wealthy. Well, here again, we are seeing the same thing on the other side. That was the tax cut side. This is of course the entitlement or the spending side, if you will, to some extent, and here we are seeing the same thing happen again. MSA's, medical savings accounts, were not part of the balanced budget resolution. The idea was that we were going to have to cut back on the amount of money we spent on Medicare and Medicaid, because we knew that entitlements were ballooning and that, if we did not make some cuts in those entitlements, that the programs would not be there in the future, because we do not want Medicare and Medicaid to become insolvent. We want them to be there for future generations. So we all reluctantly, I know the gentleman and I reluctantly agreed to some of these cuts in Medicare and Medicaid. But in the context of that, to come along with a totally new program now, medical savings accounts, which really do absolutely nothing but take more money away from Medicare, I think, is unconscionable. I really do, because what we are basically saying is that we are going to cut, if you will, another $2 billion that is going to be possibly taken out of the Medicare Program, when we already know that it is a problem taking some of the cuts that it is taking under this budget resolution; and we are going to give that money, in my opinion, primarily to wealthy people. I say that because, as the gentleman said, who is going to take advantage of this program? Basically what we are telling this individual is this: If you take the money that it costs on an annual basis for Medicare, for the average person, and we give you that money and you go out and buy a catastrophic health care policy just to cover you in case you have a catastrophic illness, then you keep that other money, what is left, in the bank. Say it cost $1,500 for the catastrophic policy and you have another $2,500 to play with, you keep that in your bank; and as you get sick, you pay for that in cash, essentially. The average senior citizen, the average person over 65 who is going to be worried about how they are going to pay for their health care if they get sick is not going to take that risk. The only person who will take that risk is, first of all, someone who is very healthy, and not too many over 65 are very healthy, and they have to have enough extra money, they have to have a lot of other money and be wealthy to know if they have to pay into it, if they have to go over that 25, that the money is available. So the only people who are going to take advantage of this are healthy and wealthy people. The other thing is if they do get sick, then a year later they can go back into the traditional Medicare. What are we doing? Once again we are creating a huge hole in Medicare to give money back essentially to pretty much wealthy people, and then at the same time, the Republicans have refused to pay for the premiums for the very poor people, we call them SLMBY's, who they promised in the budget agreement they were going to pay for. So under this Republican proposal that came out of the Committee on Commerce, if I am somebody at the lower end, relatively poor, right now my Medicare Part B, my doctor bills, if you want, my doctors insurance, is paid for by Medicaid, OK? But the Republicans are saying, we are not going to do that because that is going to cost us $1.5 billion, so you are on your own. So what happens is the poor person cannot get the money to cover the Medicare Part B; the wealthy, healthy person now gets money back that they basically get as income to themselves from the taxpayer. I hate to say it because I do not like to talk in these terms, but basically what the Republican leadership has done is to say that we are going to help the wealthy, and we are not going to help the relatively poor struggling working people; again, the same thing that is happening with the tax cuts. I just find it incredible that they are proposing this with a straight face. This was not part of the budget agreement. This does not do anything to help Medicare. It does not do anything, and if anything, it aggravates the potential problem in terms of insolvency for Medicare.

Mr. PALLONE. I just want to thank the gentlewoman from Connecticut. Again what the gentlewoman is saying and what all the Democrats are saying here is that in the context of this balanced budget resolution what we want to do is augment the middle class. The middle class, the working class, is really what defines America. It is why this country is so much greater and has been so much more successful than other countries, because we have this huge middle class. And so what we are saying is that with the limited resources that we have available pursuant to this balanced budget resolution we want to make sure that those tax cuts go to increase the middle class and to make the middle class and the working class a larger and larger group. Now I think that the gentlewoman in particular by focusing on the struggling working people, you know those who are at the lower end we are trying to get off welfare, those are the ones in particular that we have to try to help. You know, that is the whole idea of the welfare reform, to get people off welfare. But they are only going to get off welfare and have an incentive to get off welfare if on the one hand they are paid a decent wage. I would maintain that a minimum wage is not even a decent wage, but at least it is a beginning, and that they have a place where they can provide child care for their kids while they work, and everything that is being done by the Republicans that addresses these struggling working-class people is essentially to their detriment. We have this earned income tax credit which has been a major incentive to get people off welfare and stay off welfare. To the extent that people are penalized because they are getting that, it is detrimental to the goal of getting more people into the middle class. To the extent that they are penalized because they are poor and they are trying to take advantage of a child tax credit and they cannot juxtapose that with the earned income tax credit, again, it is a disincentive for them to work and for them to get off welfare. So I think that the gentlewoman is right on board there when she is talking about these things. Of course the biggest aspect is the minimum wage. If one says that people who are getting off welfare are not going to get the minimum wage, if we take that away, and we take away the advantages of a child tax credit and create disincentives for the earned income tax credit, we are basically making it more difficult for those struggling working class people, the very opposite of what we should be trying to do with this legislation. At this point I would like to yield to the gentleman from Texas [Mr. Green].

Mr. PALLONE. Mr. Speaker, I appreciate the gentleman's comments. I just want to talk a little bit more about the MSA's, because I think the gentleman made a very good point about how the MSA's actually, in the long run, may hurt or even kill the Medicare program. Many of our Republican colleagues, including the Speaker, who made the comment about how Medicare should wither on the vine, essentially have been indicating over the years their lack of support for the Medicare Program. I think in many ways what is happening here with the MSA's, with the medical savings accounts, is an effort to try to ultimately destroy the Medicare Program. I am not going to say it is always intentional on the part of my colleagues on the other side of the aisle, but the effect is the same. Let me just give a little bit of information in that regard. First of all, the whole idea of an insurance pool, and the whole idea of Medicare, because it essentially is an insurance pool, is that you have both healthy people as well as sick people, and everyone in the middle. In other words, you finance the system, if you will, by having as many people as possible who are healthy as well as sick, because the idea is that having a lot of healthy people in the overall insurance pool provides money that can be paid out to those who get sick. If you break that system, if you separate the healthy from the sick and essentially put the healthy into medical savings accounts so Medicare, now the traditional Medicare, only has sick people, you are essentially breaking the insurance pool, and you are driving up the costs of the Medicare Program for those who are left in it, the people who are essentially sick. What essentially MSA's do is the antithesis of what health insurance is meant to be, financial protection for the sick. You break the insurance pool and you make it much more difficult for Medicare to exist as a viable program. Just to consider an example of how the MSA's would drain Medicare, 10 percent of the sickest costs Medicare, per beneficiary, $37,000. Ninety percent of the healthiest costs Medicare, per beneficiary, $1,400; and the cost of the average Medicare enrollee is $5,000. So if 90 percent of the healthiest seniors, whose actual health care costs are far lower than the average cost Medicare pays per beneficiary enrolled in MSA's, then ultimately what would happen is the increased cost to Medicare for the coverage for the healthy beneficiary would be $3,600, more than double the present costs. Medicare MSA's would drain the funds meant to pay for the sick and would provide a windfall, essentially, to the healthy. What we are going to see in the long run with MSA's is essentially what I call a death spiral for the Medicare Program. Payments to SMA enrollees will divert funds from traditional Medicare, leave behind higher costs for Medicare enrollees. To meet budget targets, this will lead to cuts in provider payments and possible benefit cuts. The next year the cycle will continue, and eventually the cycle will continue to drive relatively healthy seniors into MSA's, drive up traditional Medicare costs, cut provider payments in traditional Medicare, and drive doctors away from serving patients enrolled in traditional Medicare. This could ultimately lead to the demise of the Medicare Program. I am afraid that that is what we are going to see with the MSA's. Mr. Speaker, I would like to go back, if I could, for a few minutes to the tax cut plan, and why the Democratic alternative is so much better than what the Republicans have put forward. If I could just talk about two aspects of this, one is what the Republicans have done in their tax cut plan to essentially attack the struggling working families, people who are just getting out of welfare, that are trying to work. The second thing I would like to talk about is how the two plans, the Democrat versus the Republican plans, differ on capital gains and estate taxes, because I think that is where we see the difference in terms of Democrats trying to help working families and Republicans primarily trying to help the very, very wealthy. As far as this Republican attack on struggling working families, again, going back to the earned income tax credit, to the minimum wage aspect, and to the children in day care, in a letter to President Clinton, the Committee on Ways and Means chairman said that he would not give his $500 child tax credit to millions of working families because they ``already receive Tax Code benefits through the earned income tax credit welfare program,'' referring to the earned income tax credit as a welfare program. Again, I think that is totally inaccurate, because the earned income tax credit is for struggling working parents. People would be shocked to hear themselves described as on welfare when they are paying taxes. Essentially I think this is the Republican strategy. In order to give as many tax breaks as possible to the wealthy, they have to keep putting down low- and middle-income families, and they make them seem undeserving of tax credits. The other thing is that the GOP bill punishes working parents for placing children in day care. We talked about this a little bit. Families eligible for this same earned income tax credit are not the only ones that the Republican tax bill shortchanges. The House Republicans refuse to give their child tax credit to parents who deduct child care expenses from their taxes, effectively punishing working moms and dads for putting their kids in day care. Then, of course, the last piece of this is the effort, this sneak attack, if you would, on the minimum wage is saying people who are in workfare, who are coming off welfare, would not be paid a minimum wage. What I am saying, again, is if we look at the Republican plan it does the opposite of what is necessary to get people off welfare and to help the struggling working class people at the lower end of the spectrum, but who are still working, because it makes it more difficult, more difficult for them to get day care, more difficult to keep money they would get through the earned income tax credit, and more difficult for them to earn a decent wage because they are no longer necessarily going to be paid the minimum wage. I just wanted to talk a little bit, though, also about the two tax cuts that I think in many ways are at the heart of this Republican effort to try to benefit the wealthy at the expense of the middle class. That is the capital gains tax cut and the estate tax. In the Senate Finance Committee plan put forward by Senator Roth with regard to capital gains, the top rate on capital gains from the sale of stocks, bonds, or other assets would drop to 20 percent from 28 percent, so again, the Republicans are looking at capital gains cuts across-the-board, stocks, bonds, or whatever assets, and they are dropping the rate from 28 percent to 20 percent. Up to $500,000 of the gains from the sale of a home would be exempt for married couples. Currently the tax can be deferred if the gain is rolled over into purchasing of another home. What the Democrats, or I should say the President's response is, President Clinton's response to the Senate Republican plan, was to basically say that capital gains breaks should be narrowly targeted to homeowners and middle-income families. That is not to say that we would not like to give a tax break to people who have large portfolios of stocks and bonds, but we have a very limited amount of resources here. If we are going to have tax cuts that are going to help working families, they should be narrowly targeted to homeowners. That is essentially what the President has been saying and what the Democrats have been saying. What the Democrats have proposed in their alternative with regard to capital gains for homeowners is it permits homeowners to sell their homes at a loss, and to deduct those losses, up to $250,000, from their taxes. The Democratic tax alternative permits homeowners to not be taxed on the first $500,000 of gain from the sale of a House, again, as in the President's budget. With regard to small businesses and farms, the Democrats provide a targeted tax cut for capital gains income. The Democratic alternative cuts the rate from 28 percent to 18 percent for certain capital gains income, and it is targeted only to those who sell real estate, farms, and small businesses after 3 years. Let us go to the estate tax, because again this is where we see the big discrepancy between the Republicans and the Democrats. On the estate tax, the Roth plan, the Republican plan, says the amount an estate can pass on without paying tax would gradually be increased up to $1 million of small business, and family farms would be exempt from estate tax. What the President says in response to that is that estate tax relief should be offered only to small businesses and family farms, not to the well-to-do. What does the Democratic alternative propose? It is narrowly targeted, focusing on family-opened businesses that make our country thrive. For a couple, the Democratic bill increases the amount that a family can pass down at death from $1.2 to $2.0 million, and targets it only on family-owned businesses. So again, the question here again is where are we going to give the tax relief? Where are we going to make the changes and provide tax relief? The answer, the Democrats say for working families, not for the wealthy. Please, let us not again phase out the alternative minimum tax for corporations, because again, the Republicans there once again show that they prefer large corporations and the wealthy for their tax cuts. Mr. Speaker, I yield to the gentlewoman from North Carolina [Mrs. Clayton]. Activities Surrounding Discrimination Against Minority Farmers within the Department of Agriculture

Mr. PALLONE. Mr. Speaker, I wanted to spend some time today, and know I have some of my colleagues, including the gentlewoman from Connecticut [Ms. DeLauro], who has been really outspoken on this issue of why the Republican tax cuts which are part of the balanced budget package really are not fair to working families in this country. Of course the Democrats have come up with an alternative primarily targeting the tax cuts to working families. Really for those of us who voted for the balanced budget resolution and who have supported that plan over the last couple of weeks, it has been very disappointing to see the Republican leadership, particularly on the Committee on Ways and Means, come up with a tax bill that essentially does not do the right thing for America's working families. Because we believe, those of us who supported the balanced budget resolution, that in achieving a balanced budget, we have to do what is fair. We have to make sure that whatever tax cuts are implemented, primarily are targeted to help America's working families. I am really concerned that the Republican leadership is doing just the opposite. Their tax bill would essentially phase out the alternative minimum tax for corporations which will cost taxpayers $22 billion over the next 10 years. This is a tax on corporations that was passed in 1986 to stop many large, wealthy corporations from getting away with paying no taxes at all which is what we are going to go back to if the Republican leadership plan, their tax cut plan, goes through. And while doling out this corporate welfare essentially, the Republican leadership has also decided to deny tax breaks for working families and also deny, and I want to stress deny, the minimum wage and basic worker protections for men and women they said had to get off welfare and go to work. I do not know how this got into the bill, but in addition to the problems with the Republican tax cuts not helping working families, they have also put a provision in the reconciliation bill as part of their budget plan that would say that for those who are on workfare, those coming off of welfare as a result of the welfare reform, that they do not get minimum wage, and I think that is totally wrong. The whole idea of the welfare reform was to encourage people to work, to bring these people who are on welfare up to the standards, if you will, of the rest of the working population, and if you simply deny them minimum wage in the context of this overall plan, I think what you are doing is basically saying they are second-class citizens, and making them create competition between those who are already working, who are getting the minimum wage, to essentially bring down their wages as well. So, Mr. Speaker, the Republican priorities I think are clear, and they are actually very bad for working people because the tax cuts are not for working people; the minimum wage, the lack of a minimum wage for people coming off welfare, does not encourage them to work, and the tax breaks again go for the wealthiest and most powerful corporations and individuals rather than for the working families of America. We are going to be talking a lot more about this, but at this point, if she likes, I would yield to the gentlewoman from Connecticut [Ms. DeLauro].

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, I was shocked to learn that Speaker Gingrich had suddenly dissolved the ethics task force, and this Tuesday night massacre I hope does not effectively end bipartisan ethics reform. After 4 months of work, a bipartisan task force voted 11 to 1 in support of an ethics reform package, but none of us will ever see the fruits of their labor, just hours before it issued its report. While the task force reviewed the rules and made its recommendations, both Democrats and Republicans agreed to a 6-month moratorium on all ethics complaints. Now it appears that the entire process was merely a political device to shield Members from ethics complaints and to delay investigations. Speaker Gingrich is the last person who should be thwarting ethics reform. He should not have the final word on this. He should allow the task force to issue its report, and allow the House to vote on this bipartisan reform proposal.

Mr. PALLONE

Mr. PALLONE. I yield to the gentlewoman from Connecticut.

Mr. PALLONE. Mr. Speaker, tonight I would like to talk about two issues which I believe are related. First is the analysis, if you will, of the Republican tax cut plan, which I believe mainly benefits the wealthy and how the Democratic alternative is much better for the average family, the average middle-income family in this country; all of this, of course, in the context of the budget bill and the efforts we are now making in committee and eventually on the floor next week to work out a budget bill and the tax cuts that are a part of that budget bill. Second, following up on what I spoke about earlier today during morning hour, what happened with regard to Medicare in the matter of MSA's, or medical savings accounts, being incorporated in the Medicare Program as part of this budget package to the detriment I believe of the Medicare Program and, at the same time, the Republican leadership's failure to provide funding for low-income people who currently receive Medicaid funding to pay for their Medicare part B premium. All of this is in the overall context of the budget bill. As my colleagues know, when we passed the budget resolution about a week or two ago, it was pretty much a bipartisan vote. I voted for the budget resolution because I am very concerned that we need to balance the budget, we need to be concerned about spending and we certainly, at the same time, need to provide some tax cuts or tax breaks to the average American. And so, as a whole, the budget resolution seemed to make sense. However, what happens is that after the budget resolution passes, both the House and the Senate and eventually the President have to get together on an implementation bill, if you will, that will show where spending takes place, where tax cuts take place, what kinds of changes are going to take place with entitlement programs like Medicare and Medicaid. And essentially what we are doing now is getting down into the details of how we are going to balance the budget and how we are going to be fair in our tax and spending policy. This is where now there are starting to be divergences, or differences I should say, between the Republicans and the Democrats on a number of these issues. I wanted to start off if I could by talking about the Republican tax cut plan. There is a new study that was done by a nonpartisan research organization called Citizens for Tax Justice, and they basically found that the Republican tax cut plan that was unveiled by the Committee on Ways and Means last week overwhelmingly benefits the richest Americans, while giving little essentially to middle-income families and actually raises taxes paid by lower-income families. If my colleagues look at this chart, which I know some of my Democratic colleagues have been pointing to today during the special orders, we can see basically what Citizens for Tax Justice is saying. This graph compares the Republican tax plan and the Democratic alternative. And if we look at various income brackets, and I will start on my left, we can see that for the lowest 20 percent, and that is people whose average income is $6,600 or less, the Republicans actually provide a tax hike, whereas the Democrats are providing for a 4.2-percent tax cut. Again, for the second lowest 20 percent of American families average income, $15,900 or less, again the Republicans would provide for a tax hike, Democrats would have a tax cut of 11.4 percent. Now as you get into middle-income brackets, this gap if you will, at this level the Republicans are starting to provide a tax cut for middle-income families at 20-percent below the $26,900 average income. But again, although the Republican tax cut is 4.4 percent, the Democratic tax cut is 19.1 percent, significantly higher. Same thing for the fourth 20 percent, those making $44,500 or less, Republican tax cut 14.5 percent, Democratic tax cut 39.6 percent. Now, as we get into the higher income categories, we see that there the Republicans are actually providing a much larger tax cut than the Democrats. At the 15 percent of the people who are below $75,500, in other words, between $44,000 and $75,500, the Republican tax cut is 24 percent, the Democratic is 14.4 percent. Then when you get to the very top 5 percent of American families who are making $247,200 or above, there is a huge difference, with the Republicans providing a 57.9-percent tax cut and the Democrats only a 12-percent tax cut. Now I think this pretty dramatically shows that the Democrats, in general, are trying to work out these tax cuts so that they benefit the average person, whereas the Republicans are basically weighting the tax cuts toward the higher income families in America, which is not the way this is supposed to be. Remember, this is being done, Mr. Speaker, in the context of a balanced budget plan. We are trying to balance the budget. We are trying to provide fairness here in doing so. It certainly does not seem fair to me to make most of the tax cuts benefiting people who are of means, who are in these higher income brackets. In fact, according to the Citizens for Tax Justice study, 41 percent of the total tax cut benefits the top 1 percent of the taxpayers. These people have incomes over $241,000 with an average of $644,000. Under the Republican tax plan, they would realize a net tax cut averaging $21,576, particularly when all the capital gains indexing provisions are fully effective. I do not want to keep giving my colleagues all these figures, but just as an example, with the capital gains tax cut, which is, of course, the one that if you skew it a certain way has the greatest potential for helping people who are wealthy, according again to this study by Citizens for Tax Justice, the capital gains tax cut that has been proposed by the Republicans would be worth $13,976 per year to a family making over $350,000 per year but only $17 to the average family in the middle of the income distribution with an income of about $27,000. Now some Republicans argue that an across-the-board capital gains rate cut and indexing are middle-class tax relief because about half of the tax returns reporting capital gains income are filed by people with income less than $50,000. But this is wrong because, in fact, because most liquid financial and other capital assets are held by upper income people. They realize the most capital gains, and the vast majority of American families will see very little economic benefit, either direct or indirect. One of the things, of course, to look at in all of this is the capital gains tax cut, because, as I said again, that is where if you do not frame it specifically for middle-income families, particularly with regard to giving most of the relief for a sale of a home, they you can get into a situation where the majority of this tax cut goes to upper-income individuals. I would like to now talk a little bit if I could about the Democratic tax alternative, which I think is a far better alternative and a lot fairer because it targets the tax cuts on those who need them. More than two-thirds of the Democratic tax cuts go to the truly struggling middle class and lower income families making less than $57,500 a year. It is basically better for working families. It is better for education. It is better for the deficit. Just to give my colleagues an example here, which we have cited before, the typical working family in 1998, under the GOP as opposed to the Democratic proposals, this is a family who has an average income of $24,000, the family has one child age 10 and one child age 19. The 19- year-old is attending his first year of community college with an annual tuition of $1,200. Remember, one of the major focuses of the Democratic tax cuts and the President's plan when this all started during the budget negotiations was to make sure that we were providing relief for middle-income families that have to send their kids to college, because that is where a big bulk of their expenses go when they have kids in college. Well, under the GOP plan, there is a HOPE scholarship that is for the first 2 years of college that basically gives the family back $600, and the child tax credit provision gives them nothing because they do not qualify due to nonrefundability and the earned income tax provisions. On the other hand, the Democratic alternative gives them instead of $600 for the HOPE scholarship $1,100, which is phased up to $1,500 by the year 2001 toward the end of this 5-year budget cycle. And with regard to the child tax credit, again, the GOP bill gives them nothing. The Democratic alternative gives them $300, which is phased up to $500 by the year 2001, which is again toward the end of the 5-year plan. But there are many other ways in which the relief is concentrated on families of middle income, and I would like to get into some of those perhaps later this evening. But I see my colleague, the gentlewoman from Connecticut [Ms. DeLauro], and I wanted to yield to her if I could. Let me just say one thing with regard to homeowner tax relief. The Democratic alternative provides $5.7 billion of tax relief to homeowners. It includes the President's proposal to exclude up to $500,000 of profits, capital gains, on the sale of a home, and the exclusion would be $250,000 for single taxpayers. It also allows losses on the sale of a home up to $250,000 to be written off as a deductible loss against taxes. Now I mention this because again I want my colleagues to understand that the Democratic alternative does provide capital gains tax relief, but it does it primarily to homeowners. And that is where the middle income, the average person is more likely to benefit from the capital gains tax cut. Because really, for most of them, the only time they are paying capital gains tax is when they sell their home. What we are saying is that rather than the Republican plan, which basically would provide relief to all kinds of capital gains across the board, let us focus in on the homeowner because that is where most middle-income people see a capital gains tax and would most benefit from some sort of cut or relief on that particular type of tax. Mr. Speaker, at this point I would yield to my colleague, the gentlewoman from Connecticut [Ms. DeLauro], who has been a leader essentially, really the outstanding leader in bringing home to the Members of this body why this Democratic alternative is much preferable to the Republican plan that has been put forward.

Mr. PALLONE. I thank you both, and I would like to yield at this time to the gentlewoman from Texas.

Mr. PALLONE. I want to thank the gentlewoman and explain that I have to yield next to the gentleman from California [Mr. Waxman].

Mr. PALLONE. I yield to the gentleman.

Mr. PALLONE. I yield to the gentleman from Washington.

Mr. PALLONE. I appreciate the gentleman's comments, and I want to yield, but I just wanted to say I think one of the most important things that you raised tonight, and I am getting this back from my constituents, is the fact that the Republican proposal will essentially explode and cause the deficit to balloon in these outyears, because after all, the whole premise of this budget debate is to balance the budget, and when I tell my constituents, and it is not just me; the gentlewoman from Connecticut read the various editorials in major newspapers around the country; when they read that and they find out that this Republican proposal will actually 5 or 6 or 10 years from now cause an even greater deficit, they are outraged. And I just briefly, because I am reading just from this document from the Center on Budget and Policy Priorities, and they say that, specifically they conclude that although the cost of the GOP bill is held at $250 billion in the first 10 years, the costs would explode to between $650 billion and $750 billion in the second 10 years, and basically they talk about how these provisions, these backloading provisions, if you will, have a common characteristic that they provide most of their tax cut benefits to high income individuals and that essentially they make heavy use of gimmicks delaying effective dates, slow phasing, and timing shifts and revenue collections to minimize the revenue losses these tax cuts caused during the first 5 years, but then beyond they balloon. And to me that is the most outrageous aspect about this.

Mr. PALLONE. That cannot be. We just have to keep pointing it out every day on the floor, as we are doing now, and hopefully ultimately our colleagues will listen and understand why the Democratic alternative is better. Mr. Speaker, I just want to thank the two gentlewomen for participating, but we are going to have to do this a lot more.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, last month I voted in favor of the balanced budget resolution, but as the details of this budget become known, I am more reluctant to support the final budget product. The Democratic tax cut plan targets the bulk of the tax cuts to working families and to those who need assistance. The Republican plan does not. Their proposal would actually increase taxes for those with incomes below $15,900, while those making nearly $250,000 and beyond would receive over half of the tax cuts. Not only is this unfair to low-income families, but it also leaves very little tax relief for the average working family. In addition to the skewed Republican tax scheme, Republicans have also abandoned their agreement to help low-income seniors pay for rising Medicare premiums. Mr. Speaker, the Republicans are putting the balanced budget agreement at risk by insisting on only helping their wealthy friends.

Mr. PALLONE

Mr. PALLONE. Mr. Speaker, last week the Committee on Commerce voted on Medicare and Medicaid legislation that included the controversial medical savings accounts, or MSA's, which, according to the nonpartisan Congressional Budget Office, will cost the Medicare program over $2 billion over 5 years. At the same time, Republicans did not include the $1.5 billion for specified low-income beneficiaries, also known as SLMB's, which basically is a fund that assists low-income Medicare beneficiaries in paying their part B premiums. The Republicans have again, in my opinion, Mr. Speaker, shown their true colors by helping the wealthy at the expense of low-income seniors. As a result of maintaining the part B premium for senior citizens at 25 percent of program costs and shifting home health to part B, Medicare premiums will rise by as much as $23 per month from 1997 to 2002 over the life of the budget agreement. The budget agreement reached by the President and Republican leaders included moneys to help low-income seniors who would likely see their monthly premiums rise from $43.80 to $66.67 per month. Unfortunately, the Republicans on the Committee on Commerce did not honor that agreement. Instead, the Republicans opted to spend an additional $2.2 million on MSA's which would benefit only wealthy and healthy seniors. When the Democrats learned of the Republican legislation, Mr. Speaker, we offered an amendment, it was actually offered by the gentleman from California [Mr. Waxman] in the subcommittee, and again in the full committee, that would have eliminated the costly MSA provision and used those moneys for SLMB's. But both times, Republicans voted along party lines against low-income seniors. It is not enough that the Republicans have broken the budget agreement with this and voted against low-income seniors, but that they would try to include the costly MSA's in Medicare reform, again. I just wanted to point out, Mr. Speaker, why I think Medicare MSA's make no sense. They would only appeal to healthier and wealthier seniors while further eroding the financial integrity of the Medicare Program, to the detriment of older and sicker seniors. Even worse, the Republican proposal would allow senior citizens to spend Medicare dollars, that is, tax dollars intended for health care purposes, for other purposes, basically having it become income to them that they could use to buy a boat or go on a vacation instead of for health care. Last year, as a result of the passage of the Kennedy-Kassebaum legislation, a pilot program was created to examine the effect of MSA's on the general population. We are not going to know the results of this demonstration program for another 4 years, but it seems to me it would make sense to wait for these results before experimenting with MSA's on the senior citizen population. Many do not understand that most Medicare beneficiaries only cost the program about $1,400 per year, but that the sickest Medicare beneficiaries cost Medicare over $36,000 per year. If the healthier seniors leave the traditional Medicare program for MSA's, then the Medicare program will increasingly become a health care program for just the older and sicker seniors, which will only exacerbate its solvency problems. Every senior will eventually get older and sicker, and they thus will have to rely on the Medicare program that will no longer be able to pull money from the healthier seniors. What I think we are going to see with the MSAs ultimately, Mr. Speaker, is a death spiral for Medicare. In the last Congress, when the Republicans advocated inclusion of MSA's in the Medicare Program, they received strong support from insurance companies, particularly the Golden Rule Insurance Co. It is a well known fact that Golden Rule would receive a financial windfall with the expansion of MSA's into Medicare. It is also well known that Republicans have been reaping financial benefits from Golden Rule. After all, Golden Rule has contributed as much as $1.6 million to Republicans in the 1992 and 1994 election cycles, and contributed nearly $400,000 to Republicans during 1996. Many Republicans have been staunch advocates of MSA's and have suggested that MSA's will provide seniors with another health care option. I would argue that MSA's only create options for healthier and wealthier seniors. Just to give an example, Mr. Speaker, in a letter to an MSA applicant dated the 29th of May this year from Golden Rule, this was the response to this individual named Alan from Virginia. It says, ``Thank you for your interest in our company. We do currently market health insurance, including the Medical Savings Account, in your State. However, your medical condition of'', and then you could fill in the blank, in this case they said diabetes, ``would not be one that falls within our underwriting guidelines. Therefore, we would be unable to consider you for coverage.'' What this means, Mr. Speaker, is that Golden Rule's rule is only interested in the bottom line, while this individual, Alan, will remain in the traditional health insurance that will see increasing health care costs because of the further division in the health care pool. MSA's are not going to provide choice, they are just going to break the insurance pool. The average elderly woman has an income of less than $12,000 a year. MSA's will not benefit her, but part B premium increases will make it more difficult for her to balance her health care needs.