Pete Sessions

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I thank the gentleman from North Carolina. I appreciate his comments. In summary, I would like to say that House Concurrent Resolution 102 talks directly about the problem that we have about Government spending and overregulation in our Government. Whereas there are $3 trillion 520 billion that are spent each year, of this, $785 billion is related to Federal regulatory costs. This body will be taking under hand the opportunity just in the coming weeks to talk about a tax cut for hard- working Americans that is only $85 billion. Mr. Speaker, of that figure, we can see that $785 billion, a larger, much larger figure, is just for regulation. We can do a better job. Mr. Speaker, I reserve the balance of my time.

Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume. Once again today, Mr. Speaker, we have an argument, we have a discussion, we have a debate here on the floor of the House of Representatives, to talk about not only Government, but its performance and how that works. As we have seen for many, many years, the other side refuses to understand that what we are talking about here is that we need a Government that works, a government that does not put more rules and regulations on people. Even if Government were free, there were certain parts of it that I would not want. I would like to bring us back to what is germane about this argument, and that is the gentleman from Texas [Mr. DeLay], in offering House Concurrent Resolution 102, talks about expressing the sense of Congress that the cost of Government spending and regulatory programs should be reduced. We are talking about the governmentwide programs. We are not just talking about the military today. We are not just talking about the men and women who preserve freedom for America. What we are talking about is the Government that is made up of bureaucrats, those faceless, nameless people who we never see in our lives, but who have a controlling factor on us. Mr. Speaker, what this is all about is a resolution by the House of Representatives that this is a sense of Congress that is part of balancing the budget and reevaluating the role of Government. Federal, State, and local elected officials should also carefully consider the cost of Government spending and regulatory programs in the coming year. That is exactly what this resolution is all about. Mr. Speaker, I yield such time as he may consume to the gentleman from North Carolina [Mr. Jones].

Mr. SESSIONS. Mr. Speaker, I yield such time as he may consume to the gentleman from Texas [Mr. DeLay], the author of this resolution.

Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, today we are recognizing the Cost of Government Day. Next week, Americans will have more than one reason to celebrate the ideals of freedom and independence. July 3 is the day on which we will be free to work for ourselves instead of the Government because this is the Cost of Government Day in 1997. From January 1 to July 3, Americans will work to pay for all levels of government, plus the volumes of regulations brought into effect this last year. That is over half the year, or 183 days working to pay for the cost of government. The total cost of government this year translates into $13,500 for each man, woman, and child in America. Federal regulations consume at least $3,000 of that total. It is simply disgraceful to force the hard- working Americans in each of our districts to fork over half of their earnings to pay for government. I call on all Members to resolve to stop the chronic overspending and overregulating by supporting this cost of government resolution.

Mr. SESSIONS. Mr. Speaker, I move to suspend the rules and agree to the concurrent resolution (H. Con. Res. 102) expressing the sense of the Congress that the cost of government spending and regulatory programs should be reduced so that American families will be able to keep more of what they earn.

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on House Concurrent Resolution 102.

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, I yield back the balance of my time.

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, the death tax, known to the IRS as the estate tax, has profound effects on the American public, both direct and indirect. Directly, it forces the liquidation or dismantling of a lifetime of work, building of a family farm or a small business. Indirectly, and more insidiously, it forces taxpayers to undergo complex, expensive planning with lawyers and accountants to help minimize its bite. Workers are laid off when a firm or a farm is dismantled, and local economies are disrupted. This distorts economic activity and increases the cost of doing business in communities. Throughout the Fifth District of Texas, and this country, the very people who deal in these income distributions are faced with this and really what it is needed to do is to help people rather than putting them on the lower rung of the economic ladder. It harms. The death tax hurts America and it hurts everyone. I am urging this Congress to repeal the death tax now.

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, not long ago his excellency, President Eduardo Frei of Chile, spoke to a joint session of the Congress. He gave us some advice. He began by saying, I want to share with you why we Chileans are ever more satisfied with the dividends of freedom, why we do not want to look back, why we wish to have a part in the new history, the history mankind is now beginning to write. I did not find his remarks presumptuous, as some did, because I believe we have a lot that we can learn from Chile. Chile was in a period of stagnation and suffered many of the budgetary perils that exist today in the United States. But Chile rose above it. Chile today has sustained 14 years of growth averaging 7 percent annually. Real annual wages have risen over 4 percent. Per capita income has doubled in Chile in just the last decade. Chile's savings rate is close to 25 percent. All of this has been achieved not in spite of but as a direct result of 5 consecutive years of balanced budgets and fiscal surpluses. Listening to President Frei, I was most impressed how he described the character of the Chilean people and its leaders. He said: We have learned to be patient. Chile does not begin anew with each election. Rather, we build on our creativity and on our work. We are well aware that we have a unique historic opportunity to achieve full development in a free market of political freedom. We value our achievements but we give equal attention to the challenges that are ahead of us. Mr. Speaker, I say that balancing the budget is about discipline, the discipline to do the right thing, the discipline to tell the American people the truth. With annual revenues of $1.45 trillion, the Federal Government spends more than $1.56 trillion each year. That means that the Government spends $4.3 billion every day, $178 million every hour and $3 million every minute. That also comes out to be $50,000 per second. But more importantly, it means that the President and Congress cannot do what American families do every single day, and that is to spend only what they have. We have reached a historic accord with the President now, one that will balance the budget by the year 2002. It came as a result of compromise and fair dealing. The Republicans in the House and the Senate have dealt with the administration in a direct and honest fashion, negotiating in good faith. Now it is up to the Democrats to meet us at this historic crossroads. This country has a great history of standing up to whatever challenges God sends our way. When we were oppressed, we fought for independence against overwhelming odds. When tyranny threatened our neighbors, we stood up against it and conquered it twice. When poverty sapped our Nation's energy, we rose from it to retain our place as the greatest Nation in the world. Today we face similar challenges. One of the most important things President Frei said was that his countrymen did not need excessive government in their lives. He said: Our people want no more paternalism. They are ready to forge their own destiny. Now we have come to an agreement on the budget. Americans should be calling on Members of Congress from both parties to sign on the dotted line and to pass this balanced budget. With this balanced budget, we will provide $85 billion in tax relief over 5 years. It is not as much as we conservative Republicans think the American people deserve, but it will mean a child tax credit, death tax relief, capital gains tax relief, expanded IRAs and relief for parents who send their kids to college. This balanced budget saves Medicare for 10 years, providing America's seniors more choice and enacts real reforms that slow the growth of spending by $115 billion over 5 years. In addition, it provides funding for domestic priorities, including transportation, housing and education. I will fight for this balanced budget so that we can secure freedom for the future of all Americans and those Texans that live within the Fifth District. My constituents deserve leadership that tells them the truth, that can make tough decisions and that will make their life better. Like Chile, our character is strong enough to withstand the path to a better future for our children.

Mr. SESSIONS

Mr. SESSIONS. Mr. Speaker, I ask unanimous consent that I be removed from cosponsorship of H.R. 1062.

Mr. SESSIONS

Mr. SESSIONS. As we talk about these men and women who have their businesses out of their own home, I think it should be mentioned that they have to pay taxes also. They have to pay taxes as a result of being self-employed. They have to, in essence, double down, what I call double down, where they have to pay an employer's side and an employee's side: Social Security, what is known as FICA, unemployment, and all of these things. So it is not as though this home business that we are talking about is not done within compliance of the law. In fact, there is a huge burden, I would suggest a bigger burden, that is on these people who must maintain records, must be able to run their own business while at the same time trying to survive with an onslaught of agencies and rules and regulations who are coming after them.

Mr. SESSIONS. We also could, I am sure, include in there that they are doing this at their own risk. They are putting their own money right at risk. They think of that as a business. They think of that as an opportunity to go out. And it is incredible that the IRS would not even recognize this; that they would put that at risk. Which goes back to the point that the gentleman from Montana was speaking about, this safe harbor, that is so important for people who are attempting to not only follow the law without being a tax expert, to follow the law and file complete and accurate tax records, but also to run their business. It is this huge burden that is not only on these types of people but I think upon all Americans to know and understand this magnificent document that is known as the Tax Code, but that yet is a burden to each one of us as Americans.

Mr. SESSIONS. If the gentleman would yield, I also believe that from what I have seen in the Fifth District of Texas, that many of the people who are at home, who are operating these home businesses, are women, women who are trying to not only make a go of it with their marriage and family and children and the needs that come upon the business, but they are upstart women who have the ability to get out and to compete in the marketplace. I think this home office deduction really finds that the people that are discriminated against most are women, women trying to do these type of things. I believe that H.R. 1145 will offer us a clear definition, one that the IRS cannot only understand but also that these taxpayers and these people who wish to make a go of it can have and avoid the IRS coming on them.

Mr. SESSIONS. Mr. Speaker, further, we find that another part of what this bill is to do is to clarify the definition of a principal place of business. So many times I hear people from Texas as the Representative from the Fifth District of Texas, I hear from people who are working out of their own home, trying to honestly and legitimately make a living without being on welfare, might we add, people who are trying to contribute something back to their community and what they are asking for is, why can we not have this home mortgage deduction? What this 1145 would do is it would clarify this place of business, this home, this person, this place or where these people might have their business. What I would like to do is clarify exactly what we are going to codify. We would talk about a principal place of business, and for the purposes we are talking about a home office that would qualify for a business deduction if the office is in the location where the taxpayer did all of their management and business activities and conducted themselves on a regular basis; and that the office is necessary because the taxpayer has no other location for the performance of essential administrative or management duties that they have in their business. This is what happens every single day by families who by circumstances may have been laid off from their company, by circumstances may have an opportunity because of children, children that they have to take care of and watch on a regular basis. These are the kinds of things that we have got to see the tax code evolve to. We have to see the tax code become responsible, not only as it evolves into the 1990s and the year 2000, but also as we evolve around life as we know it.

Mr. SESSIONS. Mr. Speaker, this deduction that I believe the gentleman is talking about is one that we would call pretax. This is the exact same pretax tax treatment that is given by corporations. So what we are trying to say is, these people who are self-employed, these people who are honest, hard-working, taxpaying families across this country would then have the advantage, the same tax advantage that would be given by law to someone who worked for a corporation.

Mr. SESSIONS. I yield to the gentleman from Pennsylvania.

Mr. SESSIONS. Mr. Speaker, I would like to continue this discussion so we can make sure that those people who are at home really understand what we are talking about when we talk about people who are out in the marketplace, people who are trying to comply with the law, honest Americans. What I would like to do is, if I could, read some statements from congressional testimony that has been given one this year. It is a statement of Dale Frey. Dale Frey is a small business owner. I would like to read from that testimony, if I can. It says, D.E. Frey & Company, a full-service broker-dealer, was organized in 1989. The company is privately held with offices in 22 States. The company has approximately 200 registered representatives that are independent contractors. The company provides administrative support for the transactions involving bonds, equities, insurance products, mutual funds, and unit investment trusts that are initiated by registered representatives for their individual clients. The registered representatives are individual entrepreneur business owners that are financially responsible for their own occupancy, telecommunications, information systems, registration, and all other operating expenses associated with offering their services to clients. The Internal Revenue Service examined Mr. Frey's records for tax years 1993 and 1994. The company is a broker dealing with the Securities and Exchange Commission, known as the SEC, and a member of the National Association of Securities Dealers, NASD. The Internal Revenue Service determined that each registered representative is an employee of the company, and that the company failed to withhold or pay taxes imposed by FICA and FUTA and income tax withholding provisions with respect to pay to such individuals. The IRS then assessed employment taxes of $1,160,884 and $2,113,614 for 1993 and 1994. This came on the heels of an IRS audit just 2 years earlier that determined that they were following the independent contractor status, that they were following the laws. I also have a statement that was read by Mr. Raymond Peter Kane. Mr. Kane gave his testimony before the Committee on Small Business and the Subcommittee on Tax, Finance and Exports on independent contractors on July 26, 1995. Here is what Mr. Kane said. In August 1991, he received a notice from the IRS that they wanted to conduct an audit for the fiscal year 1989. The audit took place over a period of several months and resulted in a finding on February 18, 1992 of no change, which, as we know, means that the auditor found nothing wrong. During the 6 months that the IRS auditor was in the office, the contacts between his agent, between his agency and those of his independent contractors were carefully scrutinized and found to be in compliance with IRS rules and regulations regarding independent contractor status. However, 2 years later, with no change in IRS rules and no change in any contract that he had with the independent contractors, the IRS decided that these same independent contractors were really not independent contractors all along but that they were employees, and for the years 1992, 1993 and 1994, the IRS then demanded $274,000 in penalties. This is the type of egregious action as a result of the IRS that we are talking about, why we have a problem, why we need 1145.

Mr. SESSIONS. I yield to the gentleman from Montana.

Mr. SESSIONS. I thank the gentleman from Pennsylvania (Mr. Fox) so much for being here, the people of Pennsylvania are well served, and the gentleman from New Jersey (Mr. Pappas) for his participation here tonight, the people of New Jersey have done very well, and also to the gentleman from Montana (Mr. Hill), those voters are well served, also. I think that what our discussion tonight has been about is that we want to be probably just a beacon, albeit just a small beacon, that is speaking on the floor of the House of Representatives to try to be that voice, that voice to people, Americans, who are out there in the heartland, who are trying to make a go of it, people who do own their own business, who are independent contractors, those people who do have to worry about paying for their health insurance out of their own pocket, those people who are trying to make a go of it that are not given a home business deduction that they should have. We stand up tonight as a voice to those people and say, ``We hear you in Washington, DC. We know what you are struggling with.'' I hear it in the fifth district of Texas. H.R. 1145 is not all-encompassing, it is not that magic bullet that will give tax relief to all Americans, but what it is is an opportunity for us to not only clarify and codify law but to give a reintention to the IRS and to these small business owners so that they recognize that someone does hear them in Washington, DC. I would like to go through this, if I can, just to summarize once again what H.R. 1145 does. It allows for the deductibility of expenses for a home business deduction. It offers a safe harbor, an opportunity for those people who are attempting to comply with the law, that when they do come into contact with the IRS, that they can prove to the IRS that they are attempting to follow the law even if they might have not have done so exactly to the full intent, that they are attempting to do that. It gives them an opportunity to be safe without having these back penalties. It will also allow for the expenses related to health care to be treated the same on a pretax basis as corporations have. And, lastly, it is going to codify rules that are related to the tax status of independent contractors. I think this is important for America. I hope that tonight we have talked about things that represent the heart of problems in the heartland, that we are talking about important things, not talking about something that would be good just for a Member of Congress or a special interest but, rather, for the working middle class of America.

Mr. SESSIONS. The status of this legislation is that, and I am not on the Committee on Small Business, but the status is that we are debating this tonight with the full expectation within the next week and a half or two that we will be debating this on the floor.

Mr. SESSIONS. So when we talk about H.R. 1145, I believe what we are taking about is that we have to codify the law, the law that is being misapplied by the IRS. We have to take into account that America has changed; that we now have not only a great amount of people who are at work either because they have been laid off or downsized or whatever the word might become associated with them leaving their work, or on their own they might have decided to do this. So H.R. 1145 will take into account the changing climate that we have that will allow a deduction of home business expenses, that will be a safe harbor for those people who believe and expect and are trying to not only follow the law but to do that with the greatest of intent. We are going to have the law say that the IRS now would look at those people and not hit them for back taxes and penalties but rather to acknowledge that they were attempting to follow the law. We will come in with H.R. 1145 and say that we will allow expenses related to health care to be treated as a pretax expense, which will put these people who are independent contractors and those people who work at home and those people who are self-employed with the opportunity to have health care, to have the opportunity to take care of their families, the opportunity to be able to comply with the tax law that would be consistent with what corporations are allowed. And then, lastly, that we are going to look at the independent contractor status that would say that the 20-point test that is used by the IRS, that we are going to look at and codify that, or make changes in the law so that the IRS would have to say that what that independent contractor had been doing as they followed the law they would not be liable for taxes and penalties related to their performance under law.

Mr. SESSIONS. We believe that what it will do is put very clearly and, let me get to the language, if I can, that will talk about this instance. What we are going to do is to make sure that codified within the law that we talk about what is an independent contractor, what are those tests that need to be done. How can the IRS, and should the IRS, look at an independent contractor. But what it is going to do is to reaffirm the 20-point test that the IRS has been working along this entire period of time.

Mr. SESSIONS. This is correct, Mr. Speaker. So what we are talking about tonight, and I thank the gentleman for that insight that he offered, what we are trying to do is to make sure that the IRS gets it. Our independent contractors have already been following the law, people who are out conducting themselves as honest and fair Americans. Unfortunately what we are talking about tonight is an IRS that does not get it and so we are going to codify this into law, critical for the success of not only independent contractors but all Americans who may have these type of situations where they work out of their home and work as interested contractors.

Mr. SESSIONS. Mr. Speaker, as we talk about people who are in the marketplace, this growing part of the business, and we talk about the safe harbor, I believe that what we should do as a Congress is deal with problems in America. I believe that there is no problem in America that we cannot solve. But many times, public opinion polls feel like that all Congress is trying to do is to deal with something that would help us or special interest. Do you not believe that this deals with millions of Americans and what we know as the middle class and the guts of the problem where people who are trying to comply with the law, people who are putting their own capital at risk, people who are putting their name on the door, people who are worried about whether they can pay themselves and make that home payment and whether they can pay for their kids to go to school, this is the essence of what this is all about, that we will codify in law those things that honest, hard- working Americans want to have, wish to have and it is only fair for them to have.

Mr. SESSIONS. Mr. Speaker, tonight I rise to talk, with several of my colleagues, about the Internal Revenue Service. The Internal Revenue Service, through a series of laws that have been passed for many years, has what is called the Internal Revenue Code. What this code is is it consists of two huge books that I am showing the audience tonight that are very thick with very fine print that talk about the tax laws of this country. Tonight myself and my colleagues stand to talk about not only the Tax Code but the application of that Tax Code by citizens of this country, and also how they are judged in that Tax Code by the Internal Revenue Service. Tonight we stand to talk about H.R. 1145, the Home-based Business Fairness Act of 1997. It allows self-employed entrepreneurs, which are the fastest growing and most dynamic sector of our economy, and as a simple matter of fairness, to deduct the expenses of a home office and 100 percent of their health insurance costs. H.R. 1145 also provides a clear definition of an independent contractor to help entrepreneurs avoid crippling IRS costs and fines. This year small business cited the cost of health insurance as the No. 1 concern, and tax demands accounted for 6 of the 10 most severe problems confronting small business. H.R. 1145 deals with both of these concerns, addressing the high cost of a home office and of health care. Because many small businesses use independent contractors, their business status is critical to the success of entrepreneurs all over this country. An independent contractor is one who does work with the help of someone but who is not under that person's control. This allows entrepreneurs to work for themselves but with the assistance of a primary contractor, as a primary contractor does not have to withhold taxes for his independent contractors, and that is why this issue is so important. What we would like to discuss tonight is H.R. 1145 and how this is going to play out. We have any number of issues to discuss, including factors and criteria which the IRS uses to determine these independent contractors. But as I talk tonight, what we would like to do is further examine what is happening in the marketplace. As we talk about the marketplace, what we are talking about is small businesses, men and women who are attempting not only to do work out of their home, but also work in industry and work in business. What we would like to do is to provide several examples of how the factors that are based upon the 20-point criteria, the 20 factors, how they play out with the IRS.