June 19, 1974
Page 20103
Mr. MUSKIE. Mr. President, it is no secret that the real issue to be decided in the cloture votes in the Senate this afternoon concerns more than the level of the Federal debt ceiling. The real issue we will vote on is whether or not the Senate will be allowed to consider legislation to make a beginning at reforming our tax system, and to grant moderate relief to the American taxpayer.
The record of the 93d Congress, despite whatever other accomplishments it might contain, will be incomplete unless it includes serious reform of the Federal income tax system. But during the first session of this Congress in 1973, and so far this year, we have been stymied in our efforts to make even a beginning toward comprehensive tax reform.
Last spring, the chances for tax reform looked encouraging – but those expectations have turned into frustration. I am sure that the distinguished chairman of the Finance Committee, my good friend from Louisiana (Mr. LONG), has been as disappointed as I have that the Senate has not yet been sent comprehensive tax reform by the House, so that we could give it Senate evaluation and speed it toward enactment into law.
But despite the absence so far of tax reform action by the House, we in the Senate this month do have the opportunity to approve a modest, reasonable, and balanced tax reform and relief package.
Senator HUMPHREY and others, including myself, have proposed such a package in the form of amendment 1443. We do not pretend that this amendment is a substitute for the comprehensive tax reform we still hope can be enacted this year. But it will be a beginning.
In the opinion of our most respected economic experts, including Walter Heller and Art Okun, the cost-push causes of our inflation, notably the soaring increases in food and fuel prices, will not be aggravated by this tax relief. And in the long run, the revenue raised by the reforms in our amendment would reach $7 billion, almost entirely offsetting the cost of the tax relief it contains.
The most significant long term result of our amendment, in fact, would be to heed the demands of the average American taxpayer for economic equity. The resources of the average American have been eroded by inflation. In real dollars, the per capita disposable income of Americans declined 7.3 percent in the first quarter of this year. Real average weekly earnings declined by 3 percent in April, to the lowest level since 1970.
The average American wage earner has been the most serious victim of inflation. The modest tax cut we propose would ease that heavy and unfair burden.
Mr. President, the proposals in our tax cut and tax reform amendment are not novel or unevaluated. I believe that they make good economic sense. I hope they will meet with Senate approval.
But a predicate to Senate consideration of this measure is a decision to invoke cloture on the amendment of the distinguished Senator from Alabama (Mr. ALLEN), and reject the proposal to prohibit further debate on the debt ceiling bill itself. I hope the Senate's decision today allows the consideration of tax reform and tax relief to go forward.
Our amendment contains five parts. They would: Repeal the percentage depletion allowance for oil and gas wells; terminate DISC provisions; repeal the 20 percent leeway rule under ADR; strengthen the minimum tax; and provide tax relief for the bulk of Americans.
Repealing percentage depletion for oil and gas wells as of January 1, 1974, would raise $2 billion this calendar year, and excise from the tax code one of the most persistent, expensive, and unjustified loopholes it contains.
The termination of DISC benefits, beginning this year, would raise $815 billion by discontinuing tax subsidies which have been proven ineffective in attaining their purpose of increasing exports, but have in the meantime served for the most part to fatten the profits of our largest corporations.
Modifying the asset depreciation range by repealing the 20 percent leeway rule would raise $250 million in revenue this year, and an eventual $2 billion per year after 5 years, which now unnecessarily and illogically gives large corporations an extra tax break in computing their depreciation deductions.
The reform of minimum tax contained in our amendment, which we have presented to the Senate three times in the past year, and which the Senate finally approved last January, would raise $860 million in lost revenue by eliminating the deduction for "other Federal taxes paid" and lowering from $30,000 to $10,000 the exemption for tax preference income subject to the minimum tax.
Finally, our amendment would grant $6.5 billion in tax relief by raising the personal exemption from $750 to $825, allowing tax payers to take an optional $190 credit in lieu of the personal exemption, and providing a new "work bonus" tax credit for low-income workers with children to alleviate the burden of regressive social security payroll taxes.
By raising $4 billion through tightening and eliminating some existing tax preferences, and reducing taxes by $6.5 billion in the form of tax relief for Americans in general, the net effect of our amendment would not be inflationary, but would instead give a modest, immediate stimulus to the economy. The 6.3 percent annual rate of inflation in the gross national product in the first quarter demonstrates the recessionary dangers we face.
Unemployment is continuing at high rates, with an increase to 5.2 percent last May, and predictions of a 6 percent rate before the end of the year. And high interest rates at levels unprecedented in recent history are imposing significant restraints on economic expansion. A modest tax cut such as we propose, by priming demand across the economy this year, will help protect against recession and economic stagnation which we cannot afford.
Given the modest size of this tax cut, and the offsetting revenue gains contained in our tax reform package, our amendment would result neither in extra inflationary pressures nor in an erosion of the revenue raising capacity of the Federal income tax system.