April 12, 1973
Page 12004
TAX REFORM
Mr. SCOTT of Pennsylvania. Mr. President, I understand that today a number of Senators will discuss tax reform. I hope they will be practical about it and address their speeches to sustaining the budget ceiling. They could help us by sustaining vetoes, because they have bound themselves, in their own caucus, to exercise restraint on excessive expenditures over and above the ceiling. A ceiling has been fixed, but that is by no means a guarantee that will be adhered to.
Finally, when we talk about tax reform, let us not have a whole lot of vague talk about closing loopholes. Let us find out what loopholes they want closed. Do they want to close the mortgage loopholes, by which millions of Americans are benefited? Do they want to reduce the benefits for beneficiaries? Do they want to say, "Let us get rid of the depletion allowance," when we are faced with the greatest energy crisis that has ever faced the Nation? Or do they want to do away with such things as the investment credit type of relief? If so, let them say so.
Above everything else, let them have some figures on what the closing of those loopholes will mean in additional revenue. Otherwise, we will have no information but will just have a lot of oratory. We will have tax reform, yes. However, usually people say that they are for tax increases. Whom are they going to soak? How much are they going to soak them? Where are they going to get the money, and how much will the closing of each loophole cost? How much real chance do they think they have of closing loopholes?
I hope today that oratory may be ingrained with a little fact or at least inlaid with some factual statements in order that we might see some substance in what is normally a very cloudy type of subject.
The PRESIDENT pro tempore. Under the previous order, the Senator from Maine is now recognized for not to exceed 10 minutes.
Mr. MUSKIE. Mr. President, in response to the remarks of the distinguished minority leader who seeks substance on the issue of tax reform, I point out that in January of this year I spelled out the elements of what I thought would be a responsible program. Last week I introduced a bill, S. 1439, that was 62 pages long and had many constructive suggestions that get down to the nitty-gritty of the issue.
I remind the minority leader that last week, in adopting a ceiling, the Senate took the position that in the event additional revenues are generated by tax reform measures, Congress shall look at the ceilings again for the purpose of determining whether the additional revenues should be used to fund essential services that might otherwise be neglected.
So, may I say to the distinguished minority leader that those of us who speak this morning do speak responsibly. We do offer specifics. We do not have to rely upon such red herrings as the possibility of eliminating or reducing the mortgage interest for the purpose of benefiting the home owner.
Mr. President, if I may continue
Mr. SCOTT of Pennsylvania. Mr. President, will the Senator from Maine yield briefly?
Mr. MUSKIE. Mr. President, I am limited to 10 minutes, which was supposed to start at 9:30. I have a commitment at 10 o'clock this morning. I would be delighted normally to yield to the Senator from Pennsylvania. However, I do have a limitation on time.
Mr. President, with the assurance of the distinguished majority whip that I will have time yielded to me, I will yield briefly. However, the other Senators also have limited time.
I now yield to the distinguished minority leader.
Mr. SCOTT of Pennsylvania. Mr. President, I ask the Senator to cover one other subject. He has spoken of additional revenues obtained and what uses may be found for them. I respectfully ask the distinguished Senator from Maine if it ever occurred to him that, if we do obtain additional revenues, they might be returned to the taxpayer so that he might put them in his pocket?
Mr. MUSKIE. That is another red herring that the leader and some of the other members of his party throw down on this issue.
The proposal offered by the Senator from Maine last week does not add a penny to the tax income of middle Americans. This is offered so that the tax burden will be shared more equitably among those who do not now bear a fair share.
I intend to get into some of this matter in my 10 minutes this morning. I am sure that some of the other Senators will do the same in the colloquy that will be had.
I suggest also to the distinguished minority leader that the President of the United States last year promised us that there would be tax reform legislation, a promise about which we have heard nothing from the administration or its spokesmen in the Senate this year.
I think that the American people are struggling with the burden of the increased cost of living and the inflation brought on by the policies of this administration. And every taxpayer would be interested to know that the President proposes to do to see that the burden is shared fairly among Americans who do not now bear them.
Mr. ROBERT C. BYRD. Mr. President, I ask unanimous consent that the time already consumed by the Senator from Maine be taken out of the time allotted to me under my order.
The PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I thank the distinguished majority whip.
TAX REFORM : A TOP PRIORITY
Mr. MUSKIE. Mr. President, the combined effort of Senators taking the floor this morning to speak together to the subject of tax reform represents more than an oratorical exercise. We hope our voices will carry one simple message beyond the walls of this Chamber: tax reform must be a top priority of this Congress.
The inequities of the Federal tax system can be cured. Many of them are well-known, and their perpetuation, through inaction by the Congress, denies our claims both to fairness and to fiscal responsibility. Every year that we fall to correct unjustness in the tax code more citizens lose confidence in their Government and its will to justice.
And every year that tax shelters, tax preferences, and tax incentives remain unexamined and unreviewed, the Federal Treasury loses billions of dollars in revenues. One estimate places their total cost at $77 billion a year, more than one quarter of the total direct Federal budget. To make good our claim to fiscal responsibility, we must give these tax expenditures the same thorough scrutiny we give the budget itself.
The President claims that Congress is irresponsible when it appropriates funds for social programs. He feels these appropriations drain the Treasury, fuel inflation, and do not respond effectively to the Nation's most pressing needs. He has made himself the sole judge of the effectiveness of these programs.
Vetoing an authorization of funds – not an appropriation, just an authorization – for the rehabilitation of America's handicapped, the President alleges that:
The cumulative effect of a Congressional spending spree would be a massive assault upon the pocketbooks of millions of men and women in this country.
His personal decision on our spending priorities reflects an unjustifiable emphasis on defense spending, at the expense of our human needs.
But leaving aside this deep policy disagreement, I agree, as most in the Congress do, that we must act with frugality and responsibility in our spending decisions. We must make sure that the purposes of Government spending are worth the costs they impose on the public and on the Treasury.
Although tax expenditures are conceptually similar to direct Federal spending, the evaluations they receive are quite different. A direct Federal spending program is usually proposed in Congress as an authorization bill. It receives thorough hearings in those House and Senate committees familiar with the problems and programs in the subject areas. After committee hearings, each House acts on the authorization, with the opportunity for full debate. But in most cases, this initial evaluation is only the beginning of the decision making process. Before any money is spent, funds must be appropriated by still another set of committees. And throughout this authorization and appropriations process, the President is forced to give us the benefit of his judgment and evaluation on spending items.
This process is not, of course, a perfect one. Congress, needs to reevaluate its budget process and resolve disputes with the President as to his role. But in the process of modeling the direct Federal budget, we are forced to make distinct and visible judgments on the cost and the benefits of direct Federal program.
But tax expenditures receive no regular cost-benefit evaluation. Some of the most costly of the tax preferences have been on the books for many years – the mineral depletion allowance and the exemption for interest on municipal bonds, for example. Some of them, such as the ADR system, and the special preferences for domestic international sales corporations, were added more recently. In none of these cases, however, did these tax preferences receive the systematic assessment they deserve.
There is more than one procedure which will allow us to make regular evaluations of tax expenditures. One proposal was made jointly by our distinguished majority leader, Mr. MANSFIELD, and the chairman of the House Ways and Means Committee, Mr. MILLS, last summer. Under their plan Congress would prospectively repeal all tax preferences. Then, as each repeal fell due, Congress would be forced to evaluate whether the expenditures deserved to be continued, whether they actually met their policy goals, or whether they should be modified or abolished.
Another approach would be to study the preferences and expenditures and decide which needed to be changed and which should be repealed. This is the approach I took in introducing S. 1439, the Tax Reform Act of 1973. It would create an additional $18 billion in Federal revenue by fiscal year 1975 through modification and repeal of a number of tax shelters and preferences.
But whichever approach Congress takes, it is important that we measure tax expenditures just as we weigh direct expenditures. We never assume that Federal money should be appropriated unless someone proves the expenditure is unwise. On the contrary – we always assume that only the most effective and least expensive programs should be funded by the Federal Treasury.
This approach puts the burden of proof on those who would spend money. They must justify the goals of the expenditures and, more importantly, they must demonstrate why Federal dollars must be spent for these purposes, rather than others. They must show us why the program they propose will be an effective use of money and how it will solve the problems it is designed to meet.
But this same approach has never been applied to tax expenditures. For instance, the special benefits for oil and gas were not initially adopted to encourage drilling for scarce fuels. And the favored treatment for real estate investments was not designed to encourage building of apartments and office buildings. Never have the many preferences in the tax code received the same thorough analysis we make of the Federal budget.
Now is the time to analyze these preferences and end or alter those that operate unfairly to enrich the few. And that analysis, I believe, shows that we should cut back on the expenditures in the tax code before we cripple needed human programs in the Federal budget.
This administration seeks to phase out the Office of Economic Opportunity, supposedly to save $780 million in this and the next 2 fiscal years. Instead, I believe we should phase out the preferences we accord income from foreign investments – for new Treasury revenues of $1.5 billion annually in 1975.
The administration is attempting to terminate Federal housing and model cities programs, supposedly to save $1.7 billion through fiscal 1975. Instead of abandoning these programs which offer shelter to the disadvantaged, we should be phasing down the special treatment given capital gains income – and bring into the Treasury an extra $2.1 billion a year by 1975.
This administration seeks to end Federal support for Hill-Burton hospital construction programs, at a bookkeeper's saving of $156 million by the end of fiscal 1975. It wants to increase the costs to the elderly, in the medicare and medicaid programs, to "save" $1.5 billion in that same period.
These and other vital programs work for the health of all Americans. Instead of wiping them out or cutting them back, we should be improving the health of the Federal Treasury by wiping out the favoritism of the ADR system for large corporations – and earning the Treasury over $4 billion a year in 1975.
We have a choice in this Congress, one that affects the well-being of all Americans and of our system. We can continue to behave as though our resources were unequal to our needs, or we can use tax reform to bring both fairness to the law and financial support to the objectives of progress we all share.
The choice is simple. It is responsible. It is essential that we make it correctly and make it now.