April 11, 1974
Page 10816
ORDER OF BUSINESS
The ACTING PRESIDENT pro tempore. Under the previous order, the Senator from Maine (Mr. MUSKIE) is recognized for not to exceed 15 minutes.
Mr. MUSKIE. Mr. President, I ask unanimous consent that Beverly Lindsey of my staff have the privilege of the floor during the colloquy on this matter.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. ROBERT C. BYRD. Mr. President, I ask unanimous consent that I may yield 5 minutes of the time under my control to the Senator from Maine.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered. The Senator from Maine is recognized.
TAX REFORM
Mr. MUSKIE. Mr. President, I am delighted that so many of my colleagues are joining on the Senate floor this morning to discuss the need for tax reform. Last year we held a similar colloquy and I am gratified that today we will hear from an even larger bipartisan group of Senators.
But I hope, Mr. President, that we do not have to repeat this exercise next year. I hope that this Congress will pass comprehensive tax reform legislation this year to make our tax system truly fair.
For the need for tax reform is clear and compelling. Many wealthy individuals and corporations escape paying their fair share of taxes, but average Americans continue to bear a heavy tax burden. For instance, the Treasury Department reported last month that 402 individuals with incomes over $100,000 paid no taxes last year. Some corporations also escaped significant tax – such as the oil companies which paid taxes of only a few percent of their income.
Wealthy individuals and corporations can avoid tax in large part because of special treatment – such as tax code provisions which allow special deductions and exclusions, deferral of tax liability, and other sophisticated tax shelters. For many of these special tax provisions there is no justification. Yet they cost the Federal Government about $60 billion in lost taxes in 1972. And estimates for what they will cost in fiscal year 1975 range as high as $78 billion.
These special provisions violate the principle of taxation according to ability to pay. They have created a tax system that is inequitable. Citizens see the inequity of the present system, and are beginning to rebel against it. But Congress has not yet responded to their protests.
In 1972, all the Presidential candidates talked about tax reform. But no comprehensive tax reform legislation has yet been passed.
In 1973, the House Ways and Means Committee held extensive hearings on the subject. But no tax reform legislation has yet been passed.
And today, in April 1974, we are again talking tax reform – but not yet legislating it. This year, I hope we can finally follow up our concern with action. I hope we will pass comprehensive tax reform legislation before the 93d Congress adjourns.
The comprehensive tax reform we need now is of two kinds – relief from high tax burdens for the ordinary American, and a strengthening of the tax code to eliminate unjustified tax advantages.
Tax relief would not only ease the burden on average Americans, but it would also provide a much needed stimulus to the economy – to help ease the economy – to help ease the recessionary slowdown we are now experiencing. Giving taxpayers extra spending power through tax relief would not likely contribute to our current inflation, which is being caused mostly by price rises in food and petroleum, rather than by general excess demand. The stimulus of moderate tax relief could, however, keep our Nation's production and employment at acceptable levels.
A number of Senators have made worthwhile proposals for shaping this tax relief. For instance, Senator KENNEDY has proposed to increase the personal exemption from $750 to $850, retroactive to the 1973 tax year. This proposal would provide about $4 billion of tax relief. Other Senators, including Senator HARTKE, have made similar proposals. Senator MONDALE has proposed an alternative approach: to allow individuals the option of taking a $200 tax credit instead of the $750 personal exemption. This proposal would yield approximately $6.5 billion in tax reductions.
Other proposals have been made to give relief from the social security payroll tax, including legislation I have introduced in the past to provide relief through exemptions and a low-income allowance.
Tax relief measures such as these would bolster the economy, and would alleviate some of the tax burden under which average Americans now suffer. They should receive prompt attention by Congress.
But comprehensive tax reform should also correct the inequities which allow some wealthy individuals and corporations to pay less than their fair share.
Last year, I introduced S. 1439, a comprehensive tax reform act, cosponsored by Senators BAYH, HASKELL, HUGHES, PASTORE, and TUNNEY. It would correct some of these inequities and raise approximately $18 billion in new Federal revenue in fiscal year 1975. This proposal would not increase the tax burden on low- or middle-income individuals. But it would regain $8.1 billion in tax revenues now lost because of tax shelters and tax preferences by reforming long-term capital gains rates, the minimum tax, tax treatment of farm losses, percentage depletion, intangible drilling and development expenses, and interest deductions for large investments. My bill also includes provisions to raise $1.5 billion by restricting the preferential treatment now given to foreign income and investments.
Other provisions of my bill would raise $2.5 billion by reforming the investment tax credit, $200 million by disallowing excessive deductions by banks of bad debt reserves, $5.3 billion by reforming tax treatment of depreciation, and $4.9 billion through reform of the estate and gift tax system. Finally, my bill would give States and local governments the option of issuing taxable bonds with a compensatory Federal subsidy, so that such bonds would no longer be available to investors as a source of tax-free income.
The tax reform bill I have introduced represents what I believe to be a moderate, yet comprehensive, tax reform program. Such a comprehensive program is essential if we are to transform our tax code into a system that is truly fair. And it is needed to insure that the tax system continues to generate the revenue necessary to allow the Federal Government to meet the needs of the American people.
Preserving this revenue-raising capacity, while giving tax relief to average citizens and a stimulus to the economy, is only possible if we match the revenue lost through tax relief with reform which will recapture the revenue now lost through unjustified tax shelters.
Mr. President, Congress does not need more study to know that our tax system needs changing. Proposals for reform of that system are before us. The time has come for affirmative action on those proposals.
Mr. President, may I, at this point, express my appreciation to my distinguished colleague from Massachusetts (Mr. KENNEDY), my distinguished colleague from Maine (Mr. HATHAWAY), and the other Senators who will join us in this discussion this morning.