November 30, 1973
Page 38937
Mr. KENNEDY. Mr. President, in a moment I shall take the opportunity to explain this amendment. The senator from Wisconsin (Mr. NELSON), the cosponsor of the amendment, and I are prepared to reach a short time agreement, if it is the desire of the chairman of the committee. One of the cosponsors, the Senator from Maine (Mr. MUSKIE), would like to make a brief statement, so I yield to him.
Mr. LONG. Mr. President, Is the Senator talking about the minimum tax amendment?
Mr. KENNEDY. Yes.
Mr. LONG. Mr. President, I believe it best that we simply debate the amendment for awhile and see if we can reach a vote. Sometimes we are able to make better progress in that way than by a time limitation.
Mr. DOMINICK and Mr. TAFT addressed the Chair.
Mr. KENNEDY. Fine.
Mr. President, I yield to the Senator from Maine.
Mr. MUSKIE. Mr. President, I am pleased to join once again with Senators KENNEDY, NELSON, and BAYH to propose to the Senate an amendment to bring about a much needed reform of the minimum tax. Last June, during Senate consideration of the debt ceiling extension bill, we offered the identical amendment to the Senate. At that time the amendment was tabled by a narrow margin – a vote of 49 to 47. I hope that the Senate will agree today that we can no longer afford to ignore the gross inequities in our system. I hope we will approve this minimum tax reform amendment as a down payment on the thorough tax reform we have set as our objective for the next session of this Congress.
Mr. CURTIS. Mr. President, will the Senator yield briefly on that point?
Mr. MUSKIE. Yes, I am glad to yield.
Mr. CURTIS. Mr. President, I am fully aware of the fine and worthwhile objective sought in the minimum income tax, but I would like to call attention to the fact of the very material change in our economy which has taken place since the earlier date to which the Senator referred.
The application of this increased tax will fall primarily upon the petroleum industry. So today it constitutes an increase in taxes upon those who explore for, discover, and produce petroleum. Since 1969–
Mr. KENNEDY. Mr. President, would the Senator be kind enough to yield?
Mr. CURTIS. I do not have the floor.
Mr. KENNEDY. I think I had it, and I yielded it to the Senator from Maine.
The PRESIDING OFFICER. The Senator from Maine has the floor.
Mr. KENNEDY. Will the Senator permit us to make our brief opening explanations, and then I will be delighted to respond to any question of the Senator from Nebraska?
Mr. CURTIS. Very well.
Mr. KENNEDY. I have a brief statement, as does the Senator from Maine and the Senator from Wisconsin, and then if we could enter into the debate and discuss it in accordance with the ordinary procedure, I think we could expedite action on the amendment.
Mr. CURTIS. Very well.
Mr. MUSKIE. I thank the Senator from Massachusetts.
Mr. President, the need for this amendment is dramatically illustrated in the literature of those organizations which seek to peddle tax shelters to investors. A good example is a brochure advertising a tax shelter symposium sponsored by the Illinois Institute for Continuing Legal Education last June 22 and 23. The complete title of this symposium was "Tax Shelters: Pot of Gold at the End of the Rainbow, or Gone With the Wind?" Some of the specific sessions on the program evidently purported to guide the investor to that "pot of gold." They describe tax shelters in enticing terms. One session was titled "Tax Shelter Accounting – A Disneyland World," which was described as covering "accounting or tax sheltered investments for individuals and corporations." Another session on "The Greening of America – or, Wall Street Cowboys and Farmers," covered "on the hoof and in the ground tax shelter deals." The session on "Shipping as a Tax Shelter – No Poseidon Adventure," covered "foreign shipping and domestic shipping – its tax advantages and problems." One of the sessions, at least, points in what I think is the proper direction – it was titled "Future Shock – What Congress Has Planned." The amendment before us today would go a long way toward realizing that last prediction.
Another description of tax shelters comes in advertising for a report published by the Research Institute Recommendations. The report is titled "Tax Breaks that Lead to Executive Wealth." The letter promoting this report points out that executives "have been badly hurt by taxes and inflation. ... as times grow tougher, what then?" The letter says the answers are found in the report, which covers topics including "How Profits from Real Estate Investments Can Escape Tax," "How to Reduce Tax on Personal Investment Income," and "Tax Savings Through Prepayment of Interest and Taxes."
These tax preferences make it possible for a well-to-do minority to pay less than a fair share of the tax burden. Our taxes fall hard and heavy on the vast bulk of low- and middle-income Americans, on the men and women whose only source of income is the wage they work for, or the earnings of small family-owned stores, workshops, and farms. The institutionalized tax dodges allow the wealthy to escape part of that burden.
I have detailed the workings of unfair provisions in the tax code which permit allowances for these and other tax shelters in statements before the Ways and Means Committee and in statements in this Chamber. I have introduced legislation to correct many of these inequities, S. 1439, the Tax Reform Act of 1973. Cosponsored by Senators BAYH, HASKELL, HUGHES, PASTORE, and TUNNEY, this bill would raise approximately $18 billion in new Federal revenue in 1974 without increasing the tax burden on low- and middle-income Americans.
I have hopes that thorough tax reform, along lines of the bill I have introduced, will finally be enacted by this Congress. The amendment before us, to strengthen the minimum tax, is a first step.
Under current law, the minimum tax applies to 10 items of tax preference: First, accelerated depreciation on real property; second, accelerated depreciation on net leased personal property; third, stock options; fourth, depletion allowances; fifth, capital gains; sixth, special amortization of pollution control facilities; seventh, special amortization of railroad rolling stock; eighth, bad debt reserves for financial institutions; ninth, special amortization for job training and child care facilities; and tenth, excess investment interest. The minimum tax, at a rate of 10 percent, is imposed on these items of preferential income, with three deductions allowed: a $30,000 exclusion; the deduction of all Federal taxes paid in the current year; and the carry-forward of any excess of these Federal tax deductions from the 7 previous years.
The amendment we are considering today would repeal what is perhaps the most illogical and self-defeating of these deductions from the minimum tax: the deduction allowable for "regular" taxes paid. The reason for the minimum tax is that Congress judged that the taxes paid on these preferential items were too low. It makes little sense to allow a further escape from the taxation, under the minimum tax, by allowing an unrelated deduction for taxes paid on normal income.
Mr. President, I commend the work of Senators KENNEDY and NELSON in bringing this issue before the Senate today, and especially the continued effort of Senator NELSON on the committee level. I urge that the Senate adopt this amendment, as a first small step toward thorough reform of our tax system.
I suggest that the analysis of the amendment which my colleagues from Massachusetts and Wisconsin will make, to demonstrate its minimal effect on fuel production, will constitute the answer to the question that the Senator from Nebraska will later ask.
I ask unanimous consent that the brochures and the letter described earlier in my remarks be printed at this point in the RECORD.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
[From the Illinois Institute for Continuing Legal Education]
TAX SHELTERS: POT OF GOLD AT THE END OF THE RAINBOW OR GONE WITH THE WIND
FRIDAY, JUNE 22
9:00-9:45 a.m., Shaping Tax Shelter Investment Structures – or Your Playmate of the Month,
OUI – What to use and how to use it: general and limited partnerships, joint ventures, subchapter S, trusts, section 351 transfers, John S. Pennell, McDermott, Will & Emery, Chicago.
9:45-10:30 a.m., Hot Line-CATV and Microwave Tax Shelters, Jerry Greene, Television Communications, New York, N.Y.
10:45-11:30 a.m., Foreign Tax Havens are Worldly Tax Shelters – Places and techniques ... foreign corporations ... WHTC's ... DISC's ... foreign trusts, Grant L. Jones, Helliwell, Melrose & De Wof, Miami, Fla., Of Counsel, Gottesman, Evans & Van Merkensteijn, London.
11:30 a.m.-12:15 p.m., All That Glitters is Not Gold – Even on the Silver Screen – An anatomy of movie deals as tax shelters ... other theatrical ventures, Bruce M. Stiglitz, Loeb & Loeb, Los Angeles, Calif.
12:15-2:00 p.m., Course Luncheon (Included in Tuition Fee) – SEC Registration and Tax Statement Rules – A New Science of Acupuncture – SEC problems ... rule 146 ... private placements ... tax language for prospectuses, Harvey L. Pitt, Chief Counsel, Division of Market Regulation, Securities & Exchange Commission, Washington, D.C.
2:00-2:45 p.m., Tax Shelter Accounting – A Disney World Land – Special problems in accounting for tax shelter investments for individuals and corporations ... overlooked effects and long range impacts, Solomon A. Weisgal, Oppenheim, Appel, Dixon & Co., Chicago.
2:45-3:30 p.m., The Greening of America – or Wall Street Cowboys and Farmers – On the hoof and in the ground tax shelter deals, Richard S. Bright, Erighthaven, New York, N.Y.
3:45--4:30 p.m., Bearding the Lion – Tax Audit Issues – Typical problems; e.g., loss allocations, interest deductions, depreciation schedules, investment credit, Robert M. Gunn, Price, Cushman, Beck & Mahin, Chicago.
4:30-5: 00 p.m., Question Period.
SATURDAY, JUNE 23
9:00-9:45 a.m., The Landed Gentry – America's Shangri-La – Real estate deals for everyone: subsidized housing projects ... traditionally financed projects ... analyzing and approaching development of good real estate deals into tax shelter oriented deals. Sam Zell, Equity Financial and Management Company, Chicago.
9:45-10:30 a.m., Tax Shelter "Work. Outs" – Reaching for the Brass Ring – Passing through deductions ... grantor trusts, cross over points, contributions to charity. Marvin Kamensky, Carlins & Kamensky, Chicago.
10:45 a.m.-12:15 p.m., Panel: Double, Double, Toil and Trouble – Co-Chairmen: Burton W. Banter, Calvin Eisenberg, Levenfeld, Banter, Bashes & Lippitz, Chicago. Participants: Robert N. Hampton, Salomon Brothers, Chicago. Howard 0. Bran, Kirkland & Ellis, Chicago. Alan L. Reinstein, D'Ancona, Pflaum, Wyatt & Riskind, Chicago. Joseph E. Tansill, Coopers & Lybrand, Chicago. Tom Moran, Moran & Company, Chicago.
12:15-1:30 p.m., Lunch Break
1:30-2:15 p.m., Shipping As a Tax Shelter – No Poseidon Adventure – Foreign shipping and domestic shipping – its tax advantages and problems. Roy Albert Povell, Cadwalader, Wickersham & Taft, New York, N.Y
2:15-3:00 p.m., Estate Planning (and Planning For Estates) – That Great Tax Shelter in the Sky – Estate considerations often overlooked in conjunction with shelter investments and how to plan for the estate ... tax shelter investments for estates. Earl A. Samson, Jr., Samson & Monier Associates, Inc., New York, N.Y.
3:15-4:00 p.m., Future Shock – What Congress Has Planned – New Laws and rules affecting tax shelter deals. Ira A. Siegler, Neel and Siegler, Washington, D.C.
4:00-4:30 p.m., Question Period.
RESEARCH INSTITUTE RECOMMENDATIONS,
New York, N.Y.
DEAR SIR: If you now earn $15,000 a year you have about $8,900 left in "1949 dollars" after you pay your taxes. If you earn $25,000 you have about $14,300 on the same basis.
Executives in these brackets have been badly hurt by taxes and inflation. Many have been unable to build up a decent retirement income, even during the boom years.
As times grow tougher ... what then?
Fortunately, something can be done about it – and many of the best executives are doing it to boost their after-tax income.
If you are not familiar with this more tax-minded method, what follows may seem almost incredible. But here's what it does:
1. It explains how a man can slash his tax bill by shifting income to members of his family in a lower tax bracket. The result: the same income is taxed at much lower rates.
2. It gives the one step that enables an executive to pay for his child's college education with tax dollars.
3. It tells you how to get tax-free income from investments.
4. It tells you how proper timing of your vacation can lead to complete deductions for travel, including meals en route.
5. It reveals a provision in the tax law that allows you to remain in a lower tax bracket if your income jumps dramatically in a given year from salary increases, bonuses, investment profits (including capital gains), etc.
6. It explains a way your company can deposit money to your credit tax-free. You pay no tax on this money (including the interest it earns) until you withdraw it – and then this interest can be long-term Capital Gain (averaging about 1/2 the usual tax). Even deposits to your account get special treatment resulting in a fraction of the usual tax.
7. It tells you the two conditions (with executives) for deducting the expenses for your personal residence – and how a man's personal residence can be partially depreciated.
8. It reveals how some executives make "private arrangements" with their companies to guarantee them a good sum of money when they retire or slow down. Since the money comes when an executive is in a lower tax bracket, he keeps more of it.
Now that these methods are proved we're printing them up in a. special Report we can send you if you return the enclosed card.
This 21-section Report – Tax Breaks That Lead to Executive Wealth – was worked out by the best tax brains in this country. It was built for those realistic executives who know that if they are going to offset rising prices and a shrinking dollar, it will have to be through taxes.
The special Report we send will help you do that job. It can help any executive who is serious about cutting taxes and multiplying wealth.
It is offered without charge to introduce you to the regular weekly Research Institute
Recommendations on business and taxes – the leading source of business and tax advice in thin country.
These are the weekly Recommendations which help over 30,000 executives lift part of the tax load off their backs.
Frankly, we felt that by offering you the special 21-part Report – Tax Breaks That Lead to Executive Wealth – letting you see for yourself how it switches dollars over from taxes into net income, you will then see the TYPE of tax saving help you get with a year of the regular weekly Recommendations.
Though the Recommendations are weekly, they cost but $3 a month, payable annually. But since this whole matter of cutting your taxes and keeping more of what you earn for yourself has been so clarified, please act promptly.
If you want a copy of Tax Breaks That Lead to Executive Wealth, the enclosed card should be returned at once.
Very sincerely,
E. PAGE DOSS.
Second free report: Return your card now and you will also receive the Report, Tax Wise Handling of Expense Accounts Under the Tax Law. See post paid card.
Free to New Subscribers – The Special Report for Executives
TAX BREAKS THAT LEAD TO EXECUTIVE WEALTH
Please send me a free copy of Tax Breaks That Lead to Executive Wealth by return mail.
And enter my new subscription to the weekly Research Institute Recommendations on business and taxes for one year at the low tax-deductible rate of just $3 a month, payable annually. Bill us later. Name Firm
Address City
State Zip
By returning this card at once you receive an extra premium – a copy of Tax-Wise Handling of Expense Accounts Under the New Law.
TAX BREAKS THAT LEAD TO EXECUTIVE WEALTH
Many executives do an excellent job for their companies, but fail to look out for themselves. May we ask you to take a minute out from company affairs and think for a change of your own personal interest through these methods which may cut your income tax sharply?
This Report offers outstanding tax saving plans now available for executives. You will receive Recommendations each week covering any law changes and new developments as they occur.
SO MANY EXECUTIVES HAVE ASKED FOR SPECIFIC EXAMPLES OF THE TYPE OF TAX SAVING METHODS IN RECOMMENDATIONS
Here are 4 examples – all gleaned from cumulative works and files of the Research Institute – and included in "Tax Breaks That Lead to Executive Wealth." No bothersome cross references. No indexes. This Report offers the executive outstanding tax saving methods now available in clear, concise form.
YEARLY BONUS
Here's an executive getting a $3,000 yearly bonus and after 10 years has only $20,166 to show for it, due to taxes. Yet the same man getting the same bonus over the same 10 years could amass $36,018 under the plan shown here: That's $15,852 more and all under special low-taxed shelters.
$5,000
To give his 8-year-old daughter $5,000 at age 18, this man sets aside $500 a year. But this $500 is the entire after-tax interest on $25,000 of bonds he owns. Then he read how his daughter could have her $5,000 from only HALF the interest. Now he can keep the other half for his own use.
REAL ESTATE INVESTMENTS
You have to know about this one to reap its sensational tax-free advantages. The tax rules say you must ask for it ... it's not automatic. It allows investors in certain rental housing to sell their property and pay no tax on the profits – no matter how large the profits are – when they continue re-investing.
OFFICE-AT-HOME
One deduction the taxpayer may overlook is the expense of an "office-at-home." If you meet the two basic requirements of this deduction, simply list it on your tax return. Rent, depreciation, light, gas, and so on. Here is a particularly good tax break for salesmen, self-employed or professionals.