June 16, 1976
Page 18545
Mr. MOSS. Mr. President, it is my difficult duty to inform the Senate that the impending tax bill does not satisfy the requirements of the congressional budget we adopted 1 month ago.
I speak today for myself, for Chairman MUSKIE, and I believe for a great many other Senators who want to see the new budget process work.
This bill does not continue the personal tax reduction for the full fiscal year, and is therefore contrary to our plan for economic recovery.
It does not raise $2 billion by closing tax loopholes, and therefore fails to impose the same discipline on the tax side that we have decided to impose on spending.
The Finance Committee's report suggests that the personal tax cut could be extended beyond next June if economic conditions warrant — extended in the middle of the next fiscal year after all other elements of the budget are in place. By that time it will be too late to raise any revenue through loophole closing. So a late and piecemeal extension will only mean a larger deficit.
I regret the necessity for the statement I am making today. I regret very much the fact that these reservations have been billed as the beginning of a confrontation between the Budget Committee and the Finance Committee. Senator LONG and his committee have worked diligently for 3 months to produce the bill now before us. No committee has worked harder than Finance to meet the deadlines and requirements of the Budget Act. The Finance Committee spent almost a full week of sessions developing the recommendations included in its March 15 report to the Budget Committee. Senator LONG took the time to present his views personally to the Budget Committee in April on the revenue aspects of the first concurrent resolution.
And Senator LONG and the rest of my colleagues know very well that it has been our earnest desire that the Budget Committee not get into the business of making "line item" revenue and spending decisions.
The fact remains, however, that the Finance Committee bill in its present form does not support the fiscal policy and priorities choices of the budget both Houses of Congress adopted just last month. With modest amendment it can conform. I cannot escape the obligation to explain these issues to my colleagues today, and I will be working with them throughout this debate to help the Senate achieve consistency with the revenue budget of its first concurrent resolution.
Let me briefly review the revenue elements of that first concurrent resolution which was adopted by both Houses of Congress last month. The resolution set an overall revenue target of $362.5 billion for fiscal 1977.
The committee report accompanying the Senate budget resolution stated that the overall revenue target represented two underlying recommendations:
First, "that the temporary tax reductions enacted in December 1975 be extended at least through fiscal 1977," and
Second, "the enactment of legislation concerning tax expenditures and related provisions that will result in a net increase of $2 billion in fiscal 1977 revenue collections."
So the $362.5 billion revenue target results from the following calculation:
Compared to the $15.3 billion net revenue reduction targeted in the budget resolution, the pending bill would reduce fiscal year 1977 tax collections by $14.5 billion under current law.
The finance bill would extend the principal provision of the 1975 temporary tax reduction — the alternative $35 per exemption credit or 2 percent of $9,000 of taxable income credit — only until June 30, 1977. The expiration 3 months before the end of fiscal year 1977 would increase fiscal year 1977 revenues by $1.8 billion.
The Finance Committee bill would raise only $1 billion in net additional revenues from tax expenditure legislation in fiscal year 1977 and, thus, would fall $1 billion short of the Budget Committee recommendations with respect to net revenue gains from tax reform.
The congressional budget adopted in May is a complete, interrelated plan — as the Budget Act intended it should be. The overall level of spending was coordinated with the overall level of revenue collections to produce an optimum level of economic activity for fiscal year 1977, and maintain the lowest possible deficit. A full fiscal year extension of the 1975 temporary tax reductions is a keystone in achieving the economic recovery goals. The Finance Committee bill would mean a tax increase of at least $35 per person at an annual rate — $180 for a family of four. Such a withholding increase in mid-1977 would pose a serious threat to the economic recovery that is the ultimate goal of the budget resolution — so serious, in fact, that Congress almost certainly will not let that increase occur. Even if the abbreviated Finance Committee tax credit extension were now adopted, the Senate would adopt legislation offered next summer to extend the credit through the end of fiscal year 1977.
By then it would be too late to recoup the needed revenue offset through tax reform, so the deficit would increase by about $1 billion. Congress will look just that much less effective to the average taxpaying American.
On the spending side we cannot spend our annual budget allocation in the first 9 months of the year and then ask for more, if we expect the budget process to work. The taxing side of the budget is no different.
While I am talking about equal discipline in both spending and taxing, let me make another point:
The budget resolution we adopted last month contained an overall spending ceiling of $413.3 billion. This target constitutes an overall spending reduction of over $8 billion compared with what would be spent under "current policy" — that is under the laws and policies contemplated in the 1976 congressional budget. So we cut about 2 percent.
On the revenue side, the Senate Budget Committee report accompanying the first resolution contained a list of 82 tax expenditures provided by the Joint Committee on Internal Revenue Taxation. The estimated revenue losses associated with the individual provisions total more than $105 billion for fiscal 1977. The $2 billion target for tax expenditure reductions represent just about the same proportion of fiscal discipline — 2 percent. The Budget Act contemplates the same standards of review for tax expenditures as for other expenditures. That makes sense — indeed it is essential — if we ever expect to have real control over the whole spectrum of Federal budget management.
Now the argument has been made that the Congress — and more particularly the Budget Committee — should not be concerned with the makeup of revenue legislation as long as it would not breach the revenue floor of a concurrent resolution.
I would point out that the Budget Act specifically requires the report accompanying the Senate and House Budget Committees resolutions to "allocate the level of Federal revenues recommended in the concurrent resolution among the major sources of revenues." Pursuant to this requirement, both budget committees allocated the full $17.3 billion tax reduction between individual and corporate taxpayers, and in addition included $2 billion from tax expenditures and related provisions in a separate category. The conference report accompanying the concurrent budget resolution reiterated the $2 billion net revenue increase tax reform target.
I would further point out that budgeting is not a numbers game. We budget to guarantee economic recovery. We budget to achieve national goals. We budget to save money and control the deficit. That is what Congress thought it was doing when it adopted the first concurrent resolution. Those were the goals we hoped the Finance Committee would help us achieve. With all respect to my colleague Senator LONG, the Finance Committee bill falls short.
Moreover, the long term revenue effect of the "reform" segment is even less than the fiscal year 1977 estimated increase of $1 billion implies, and means ever increasing pressures on the deficit in future years. In the following fiscal years, the "reform" segment of the bill would show overall net losses: $80 million loss in fiscal year 1978; $160 million loss in 1979; $128 million loss in 1980, and $263 million loss in 1981.
The relatively higher fiscal year 1977 net revenue effect results principally from calendar 1976 effective dates being used for almost all the major revenue gaining provisions in the bill, while 1977 effective dates are used for almost all its major revenue losing provisions. In addition, the Finance bill contains several new major revenue losing provisions that only will have their full impacts in later years. By comparison, while the Finance Committee bill would lose $263 million in 1981 from its "reform" segment, the House-passed bill reform provisions would raise about $2.2 billion in the same year.
So I am concerned about this bill's failure to extend the tax reductions through fiscal year 1977 and the damage this would do to the economy.
I am concerned about increasing the deficit if the tax cut is subsequently extended.
I am concerned about revenue losses in the future when we have promised the American people we will lead them toward a balanced budget.
And I am concerned that we would be telling the American people that we cannot impose the same kind of restraint on tax loopholes that we impose on spending.
Senators MUSKIE and BELLMON have written to each Senator stating their views that the 1977 extension of the temporary tax reductions and a $2 billion net revenue increase from tax expenditures must be included in this tax bill to meet the overall budget resolution revenue target.
No, the Budget Committee is not a line item committee. The Budget Committee does not intend to offer its own amendments to bring this tax bill into conformity with the congressional budget. This must now be done by all Senators together here on the floor. I urge all my colleagues to support amendments to extend the tax cut through the fiscal year, to raise the necessary $2 billion through loophole closing and to forestall any new revenue losers unless these fundamental requirements of our congressional budget are satisfied.
I ask unanimous consent that the two "Dear Colleague" letters, one by the Budget Committee and one by the Finance Committee be printed in the RECORD.
There being no objection, the letters were ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.,
June 15, 1976.
DEAR COLLEAGUE: We are writing you about the relationship between the pending tax legislation and the budget Congress adopted last month. After one year of successful operation, the Congressional budget process now faces a severe test. Revenues are no less important than spending in the Congressional budget. The choice we make on this bill will help determine the size of the deficit we will incur this year.
We believe Congress has shown during the past year that the budget process can meet its intended goal of fiscal control. It appears that the spending and deficit totals for fiscal year 1976 will come out where Congress prescribed they should when it adopted the second budget resolution last fall. Based on this record of Congressional commitment to the budget process, we have confidence that the spending limits we have described for fiscal 1977 will be attained as well.
Congressional fiscal policy has also successfully supported the economic recovery. This recovery must be maintained if we are to balance the budget in the near future.
In adopting a Congressional budget for fiscal 1977 that continues to support the recovery, Congress contemplated two major initiatives on the revenue side.
1. Extending the 1975 tax reduction through at least the next fiscal year, which would reduce revenue by $17.3 billion, to maintain the economic recovery in 1977.
2. Increasing revenues through reductions of tax expenditures by $2 billion to help restrain the deficit.
Neither the Congress in its budget nor the Budget Committees in their reports attempted to instruct the tax writing committees as to the details of the tax cut extension or the line items among tax expenditures to be reduced. But the Congressional budget is clearly based upon the assumption of an aggregate tax reduction of $17.8 billion and a reduction of $2.0 billion out of a tax expenditure budget which currently totals $105 billion.
Continued economic recovery, along with the reduction in tax expenditures, was intended to permit a balanced budget in the near future. Unfortunately, we are now faced with a tax bill which does not meet these objectives.
The Finance Committee bill does not breach the numerical revenue floor of the First Concurrent Resolution, but only because it terminates the major personal tax reduction item on June 30 of next year, thereby increasing fiscal 1977 revenues by $1.8 billion. If this termination does take place each individual taxpayer's withholding will increase substantially. This will jeopardize economic recovery. If the tax reduction is extended beyond that date — and the need to do so will probably make the extension inevitable — the shortfall in tax reform provided in the Finance Committee bill will increase the fiscal 1977 deficit by $1 billion.
Looking farther ahead, the $1 billion in tax reform that the Finance Committee bill would raise disappears in fiscal 1978 when the tax losing provisions become effective. Thus, the prospect of reaching a balanced budget would be postponed not only by slower recovery but by a lower tax base as well.
This is not a contest between the Budget and Finance committees. Each committee is doing its duty as it sees it. The Congress is presented with a difference in judgment as to the revenue pattern that is best for this country in the present economic circumstances and in the long run. The Congress has adopted a budget. We believe the revenue assumption behind that budget represents the best course of action for the economy.
For two successive years, the Congressional budget has called for a reduction of tax expenditures in order to help finance personal and corporate tax cuts necessary for economic recovery. In the Second Budget Resolution last year, we accepted the position of the Finance Committee that the tax expenditure reductions the Congressional budget called for last year could not be obtained in the time available during the trial year of the budget process. Now, one year later when we do have time, the Senate is asked once more to abandon the tax expenditure reduction assumption Congress ratified just last month. The question before the Senate is whether to sustain the Congressional budget. We urge you to do so.
Sincerely,
HENRY BELLMON, EDMUND S. MUSKIE.
U.S. SENATE,
Washington, D.C.,
June 16, 1976.
DEAR COLLEAGUE: We have seen a "Dear Colleague" by the Chairman of the Senate Budget Committee and we have read newspaper stories concerning the intentions of Mr. Muskie and his committee.
It is apparent from that letter that the Senate will have to decide whether the function of the Budget Committee is to recommend target figures within which each committee will live, or whether the Budget Committee, in addition, is to write the specifications for the bills of other committees within the area of their jurisdiction.
This is not an issue involving the integrity of the Congressional Budget Process. That process is secure and we firmly support it. Instead, this is an issue involving the proper jurisdictional functions of the Senate's committees, especially the Budget and Finance Committees. If there is any question that the budget process is being violated, then the Finance Committee is certainly not a culprit.
The Senate Concurrent Resolution, as recommended by the Budget Committee, provided for $15.3 billion in tax reductions. The Senate Finance Committee recommends a package which adds up to $15 billion. The Committee, thus, is within the budget ceiling for tax reductions with $300 million to spare.
The burden of Chairman Muskie's letter is that the Senate Finance Committee did not act in precisely the fashion that the Budget Committee would have done had it written the bill for us. The language of the Senate Budget Committee's report indicates that it based its calculations on the following:1977 — one-half billion dollars more than the figure used by the Budget Committee in computing the target in the first Budget Resolution. The Finance Committee bill also includes tax cuts of $17.5 billion in fiscal year 1977, slightly more than the $17.3 billion assumed by the Budget Committee. The net result is a bill losing $15.0 billion, less than the $15.3 billion approved by the Congress in the first Budget Resolution.
The Finance Committee figures are clearly consistent with the action of the Congress in approving the first Budget Resolution. Any other conclusion necessarily implies that the Budget Committee has the authority to write our tax laws and that the Finance Committee does not.
If, as the Budget Committee says, it is not up to the Finance Committee to let tax cuts expire, then there may equally well be circumstances where they would say that is beyond the Finance Committee's jurisdiction to propose particular tax cuts, even though such cuts fall clearly within the overall figures assigned.
The Budget Committee spokesman has stated repeatedly that the Budget Committee cannot tell the Finance Committee or any other committee how to write its bills. Now, if the Finance Committee cannot be told how to write its bills, how can it, nevertheless, be told that tax cuts shall be for stated durations, and in stated amounts?
We doubt that any Senator agrees with every decision of the Committee on Finance. There were more than 200 of them, and I voted against some myself. I doubt that any two Senators would vote the same way with regard to every decision in a 1,500-page bill. That is not the issue.
The issue is whether the other standing committees are expected to make the recommendations within the area of their jurisdictions. The budget Committee has not had the benefit of lengthy hearings and consideration of specific proposals and their impact. Is the Budget Committee to decide in advance what the standing committees are to do and to write their bills for them in detail?
The Senate must decide: is it to be one, two or more committees that are to make recommendations to the Senate within a single limited area of jurisdiction.
We are enclosing a copy of an excerpt from the debate of the Budget Resolution when it was under consideration. Mr. Muskie made it plain at that time that the Finance Committee had the discretion to recommend a 12-month extension rather than a 15-month continuation of all items in the temporary tax cut.
He also made it clear that we had the jurisdiction to recommend other tax increases (See Exhibit One). What Mr. Muskie did not say on the Floor is that if the Finance Committee recommended fitting within the Budget Resolution in a way different from the way the Budget Committee would have done it, then the Budget Committee would decide that the budget resolution was being violated.
Is the Senate to respect the right of each committee to make its recommendations? Or is the Senate to expect a single committee to tell all other committees in advance what they should do in detail and police them to see that they do precisely that?
Sincerely,
RUSSELL B. LONG,
Chairman.
CARL T. CURTIS,
Ranking Minority Member.