March 21, 1975
Page 8116
Mr. MUSKIE. Mr. President, the Senate this week has voted tax reductions in both this year and the next which will provide an immediate stimulus to a recession-ridden economy and additional incentives to help sustain long term growth. By putting almost $30 billion back into the economy, we can increase the purchasing power of our citizens and restore strength to the business community.
We have focused individual tax relief on the low- and middle-income wage earners who have the greatest need and will make the greatest use of this revenue.
We have directed tax relief to our Nation's business community – with emphasis on small businesses and the housing industry – which is intended to bring new growth and help hire new employees.
Finally, the Senate has closed a large loophole in the tax code which allowed excessive profits through use of the percentage depletion allowance on oil and gas and the handling of taxes on foreign income.
The proposal by the administration falls short of those goals. The President's proposal for an immediate rebate on Federal taxes is too small. His proposal would end with this calendar year, and the growth it might spark would tend to dwindle by the end of that period.
In 1974, this country experienced the largest annual decline in the gross national product since 1946. During 1975 it is expected that the gap between our potential and our actual gross national product could reach $200 billion. That would be the equivalent of $1,000 for every person in this country.
We all generally agree upon the economic goals for this year and the next. We must stop this economic decline and turn the recession around. We must reestablish orderly economic growth. And we must overcome the record-high 8.2 percent unemployment recorded in February – the highest in this country since 1941. Finally, we must bring down the intolerable rate of inflation.
The $29.3 billion dollar tax reduction measure approved by the U.S. Senate is a responsible approach. It will go far toward achieving those goals – to stimulate the economy and get it moving without inviting a new round of inflation. If it were not for the recession, we would have a surplus – not a deficit budget.
The choices before us were not easy. But it was important to assure that the reductions we approved would benefit the entire country – that it would act as a general stimulus without favoring any one segment of the economy and without pushing the country into any greater deficit than necessary.
Let us look at the solutions that we have agreed upon. We have provided $22.5 billion worth of tax relief to individuals. This will give the American people additional money to cope with the harsh impact of rising costs and to encourage them to start purchasing consumer goods again.
These reductions will go in large part to low- and middle-income wage earners and to those of our citizens on the social security rolls who have been coping with escalating costs while they are bound by fixed sources of income.
For each person who paid Federal income taxes in 1974, the Senate measure would provide a 12 percent rebate of those taxes up to $240 per individual. This is the basic stimulus which our economy needs to help renew consumer purchasing and restore consumer confidence.
The Senate bill gives each taxpayer the option to elect taking a $200 credit on 1975 taxes instead of the $750 exemption. This would provide $6.1 billion in relief to low- and middle-income wage earners. This is also important as a reform of our present tax structure as it provides more equitable tax relief for all those who have been limited to the $750 personal exemption.
That exemption has benefitted the rich – as it is worth $525 to persons in a 70-percent tax bracket – while it has discriminated against the low- and middle-income wage earner – since it is worth only $125 to the individuals in the 14 percent tax bracket.
The Senate has provided another $1.7 billion in assistance to those workers with families who earn up to $4,000 in the form of a 10 percent reduction in the taxes they owe up to a maximum credit of $400. This is phased out between incomes of $4,000 and $8,000.
One of the first segments of the economy to stumble in the battle against inflation was the housing industry. In 1972, 2.4 million new houses were started. In 1973, the number had dropped to 2.1 million. In 1974, the drop was to 1.4 million, and by January of this year, it was anticipated that the annual rate of housing starts would be under 1 million. It is essential that we turn this industry around and provide a stimulus for Americans to again begin to purchase new homes.
The Senate bill would allow individual taxpayers to reduce their taxes by 5 percent up to $2,000 of the cost of a new home purchased between March 13 and December 31 of this year.
For our older Americans and other citizens who must rely upon social security and railroad retirement payments, the Senate bill provides $100 to each recipient for a total of $3 billion to help them cope with inflationary costs which outstrip their fixed incomes.
We have provided $7 billion dollars to encourage a new cycle of business investment and activity. We hope the combined reductions will renew purchases of consumer goods, rejuvenate retail sales and industrial production and get more of our citizens back to work. And $1.9 billion of this reduction is directed at small businesses in the form of an increase in the surtax exemption – the 22 percent corporate rate would apply to the first $50,000 instead of the first $25,000 and the rate itself would be reduced to 18 percent.
In an effort to encourage businesses and utilities to invest in new facilities, the investment tax credit is increased to a permanent rate of 10 percent from the present 7 percent – 4 percent for utilities. For a 2-year period, the taxpayers may claim up to a 12 percent investment tax credit.
If that credit is elected, an employer must contribute one-half of the additional 2 percent gained under this credit to an employee stock ownership plan. Finally, the Senate bill repeals the 10 percent manufacturers excise tax levied on new trucks and buses and the 8 percent manufacturers excise tax on truck parts. It is estimated that this will reduce costs on these items by an estimated $7 million in 1975.
Mr. President, when the Congress set about the task of stimulating economic recovery, our goal was to provide sufficient reductions in taxes for both individuals and businesses to combat the impact of the current recession.
It is inevitable in the consideration of tax legislation that certain issues of tax reform are considered. On Thursday, the Senate adopted long-overdue reforms in the availability of the percentage depletion allowance to the oil and gas industry – reforms which will provide additional revenues to the Federal Treasury at a time when that industry has experienced record windfall profits. This is a realistic reform which will help restore equity to our tax structure without appreciable impact on the development of new oil and gas resources.
This achievement is no substitute for long-range, comprehensive tax reform. I am preparing legislation to introduce again in this Congress which would propose reforms in the Internal Revenue Code and to restore the basic premise of our system of taxation – that taxes be measured by ability to pay and that citizens with equal resources make equal contributions to the costs of government.
In many fields of law, government and custom, we have made great strides toward carrying out the goal of the Declaration of Independence that all men are created equal. In other areas we have much progress to make. In the area of taxation we actually have moved away from the standard of equality we all have sought to achieve.
We started with the idea of collecting taxes in direct proportion to the ability to pay them. We have strayed from that path and it is time to go back to the precepts which guided us in the beginning.
I know that the distinguished chairman and the members of the Committee on Finance intend to give thorough consideration to this most important issue.
Most of us in the Senate who believe in the vital need for tax reform have withheld our proposals at this time so that we would not delay the need for immediate tax relief to all of our citizens. We believe that this is a responsible approach at this time and hope that comprehensive tax reform will be forthcoming in the very near future.
Mr. President, the economy needs a strong stimulus. I hope that the House and Senate conferees will agree upon the Senate bill which I believe is a responsible approach toward moving us out of a recession and into an economy of growth and renewed prosperity.