June 17, 1976
Page 18872
Mr. MUSKIE. Mr. President, will the Senator withhold for just a moment?
Mr. HASKELL. I withhold.
Mr. MUSKIE. Earlier in the day we had an extensive discussion with a smaller attendance than we now have over the issues supposedly raised by the Finance Committee bill and the budget resolution.
It seems to me before we get into an extensive discussion and action on revenue raising amendments that we ought to settle the fundamental issue of whether or not the tax cut extension mandated by the budget resolution should be approved.
So I have an amendment that I would like to offer to title I of the House bill which would have the effect of extending the tax cut through fiscal year 1977 as provided in the first concurrent resolution.
It seems to me that we ought to resolve that issue one way or another at the outset of this debate before we get into all of these other amendments because until we do Members may well be in doubt as to whether or not we need the additional revenue to fund the tax cut, to fund the budget, or to hold the deficit down. Until that question is answered then, it seems to me, the question of whether this amendment or that amendment ought to be approved is up in the air for every Member of the Senate.
So, if the distinguished Senator from Colorado has no objection to my going ahead along that line
Mr. HASKELL. I have no objection.
Mr. LONG. Mr. President, will the Senator yield?
Mr. MUSKIE. Yes, I will.
Mr. HASKELL. I have no objection. I would withhold my motion for the yeas and nays. I have no objection. I do not know what the parliamentary situation is.
Mr. MUSKIE. The Chair needs some straightening out.
The PRESIDING OFFICER. The Chair has not announced the order for the yeas and nays.
Will the Senator withdraw his request:
Mr. HASKELL. Mr. President, I withdraw my request for the yeas and nays
Mr. LONG. Mr. President, if the Senator wishes to offer his amendment, I should like to advise him that I met with a group who are offering amendments or behalf of the five members on the committee who did not agree with the ma jority, and also Mr. KENNEDY and others and we agreed that we were going to try to vote on these first three titles and vote them up or down with germane amendments to them; and thereafter we were going to seek a unanimous consent request to vote on certain other important amendments that that group wanted to offer, and I think the Senator is associated with those Senators in their legislative endeavors.
It would seem to me that the amendment the Senator is talking about ought to come at the end of title IV, which is the extension of individual income tax reductions, and I hope that the Senator would withhold his amendment until that point. That is where it belongs in the bill. Our agreement and understanding was that we were trying to go in sequence. We were trying to go seriatum up until we got to title IV, and at that point we were going to try to enter into a unanimous consent agreement to vote on these other major amendments to accommodate those who were sponsoring them, and let them vote on them at times more to their choosing.
I hope the Senator could cooperate with that because I think the Senator is in agreement generally with Senator KENNEDY and Senator HASKELL and others who agreed to this, and I am trying to fulfill my end of it, and I would like the others to do the best they can to cooperate in theirs.
Mr. MUSKIE. Let me make my position clear on that. I am not a cosponsor of that package of amendments, and I deliberately did not cosponsor those amendments, so that my responsibility as chairman of the Budget Committee would be clearly separated fom their responsibilities in pursuing their joint interests.
We took this matter up in the Budget Committee yesterday and I made it clear to the Budget Committee that we ought not to sponsor a package of amendments; that we rather ought to. present the Budget Committee's point of view of the resolution because we are not a taxwriting committee. We do not want to have anyone confused as to what our role is.
So although I sympathize with some of the amendments that are in this package, and probably will vote for some of them I have not been associated with them, and so I am not part of that agreement.
The second point I would make is this, may I say to the Senator: I went to Maine last night and I got an emergency call when I arrived in northern Maine "Senator LONG, the floor manager of the bill, refuses to go forward with any vote on the LAL amendments or any of the other amendments until the Budget Committee chairman comes back, engages in a colloquy and a debate to resolve the issues that arise between the Budget Committee and the Finance Committee."
So I came back as fast as I could, ant I understood that debate on the bill was delayed until 3 o'clock this afternoon so that we could have that colloquy.
Well, now, we have had this colloquy. The issue has been raised. The question of whether or not the first concurrent budget resolution does mandate a continuation of the tax cuts through fiscal year 1977 is clearly before us.
The chairman of the Finance Committee and the chairman of the Budget Committee are in disagreement on it. So I think it is a fundamental first question or the Senate to resolve. I did not raise it. I went to Maine thinking that you were going to go through the procedure which I understood was in the works, but when I got there I was told that, no, the first issue was the budget resolution.
The clearest issue of the budget resolution is the extension of the tax cuts, and that is the first and primary issue which the Senator from Louisiana himself has raised and made fundamental to the debate. It seems to me we ought to resolve that at this point. Then, whatever way it is resolved, we can proceed to the scheme that has been worked out.
Having come back and engaged in an extensive colloquy with the Senator from Louisiana, I just do not like to see the clarity which we were able to generate in respect to these issues now muddied up by other issues.
I think the Senator has made his position clear. I hope I made my position clear.
So I think this is just the right time to have the Senate act.
Mr. LONG. If the Senator offers that amendment, he will break the budget, because there are other provisions in the bill that do reduce taxes, may I suggest to the Senator.
Mr. MUSKIE. We can debate it after I offer it.
Mr. LONG. May I suggest that if the Senator wants to hold us to the budget resolution, he offer a motion to recommit and let us vote on that motion to recommit.
Mr. MUSKIE. I have never known the Senator from Louisiana to delegate his parliamentary prerogatives to his opponent, so I do not intend to delegate my parliamentary prerogatives to the Senator from Louisiana.
I do not think this is a time for a motion to recommit.
I have tried to make it clear this afternoon that the budget resolution is the accepted policy of this Congress, until the Congress changes it.
It is not for the Finance Committee to change it. It is not for the Budget Committee to change it unilaterally. But this bill does put before the Senate the issue of whether or not the budget resolution should be changed, and because it is the Senator's initiative that has brought this issue before us, I think we ought to resolve it.
Mr. LONG. How does the Senator want to resolve it? The Senator wants to resolve that with a budget busting amendment. He wants to resolve that with a $17 billion tax cut on top.
Mr. MUSKIE. Mr. President, who has the floor?
The PRESIDING OFFICER. The Senator from Maine has the floor.
Mr. MUSKIE. Very well.
Mr. PACKWOOD addressed the Chair.
Mr. MUSKIE. I offer to debate this after I send it to the desk. The Senator from Louisiana may use his rhetoric thereafter.
But I have watched the managers of the bill control the time for the last 3 hours. Now I have the floor.
AMENDMENT NO. 1887
Mr. MUSKIE. Mr. President, I call up my amendment and ask that it be stated.
Mr. PACKWOOD. Will the Senator yield for a question only?
Mr. MUSKIE. As soon as the amendment is stated.
The PRESIDING OFFICER. The amendment will be stated.
The legislative clerk proceeded to read the amendment.
Mr. MUSKIE. Mr. President, I ask unanimous consent that further reading of the amendment be dispensed with.
Mr. LONG. I object. I would like to know what the amendment is.
The PRESIDING OFFICER. The amendment will be stated.
The legislative clerk proceeded to read the amendment.
Mr. STEVENS. A parliamentary inquiry, Mr. President.
Is it proper to interrupt the reading of the amendment?
The PRESIDING OFFICER. The clerk will continue to read the amendment and then if the Senator wishes to address his inquiry, the Chair will recognize the Senator.
The clerk will proceed.
The legislative clerk resumed and concluded the reading of the amendment.
The amendment is as follows: AMENDMENT NO. 1887
Beginning on page 7, strike title one, and insert in lieu thereof the following:
TITLE I — TAX REFORM
SEC. 101. INDIVIDUAL INCOME TAX REDUCTIONS.(a) TAXABLE INCOME CREDIT.
(1) IN GENERAL.—Subsection (a) of section 42 (relating to taxable income credit) is amended to read as follows:
"(a) GENERAL RULE.
"(1) In the case of an individual, there is allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the greater of—
"(1) 2 percent of so much of the taxpayer's taxable income for the taxable year as does not exceed $9,000, or
"(2) $35 multiplied by each exemption for which the taxpayer is entitled to a deduction for the taxable year under subsection (b) or (e) of section 151.".
(2) NINE-MONTH RULE FOR 1977.—Paragraph (2) of section 42 (a) (relating to application of six-month rule) is amended to read as follows:
"(2) NINE-MONTH RULE.—Notwithstanding the provisions of paragraph (1), in the case of taxable years ending after December 31, 1976, and before January 1, 1978, the percentage "1.5 percent"shall be substituted for "2 percent" in subparagraph (A) of such paragraph and the amount "$26.25" shall be substituted for the amount "$35" in subparagraph (B) of such paragraph.".
(2) TECHNICAL AMENDMENTS.
(A) Section 56(a) (2) (relating to imposition of minimum tax), as in effect on the day before the date of the enactment of the Tax Reduction Act of 1975, is amended by striking out "and" at the end of clause (iv), by striking out "; and" at the end of clause (v) and inserting in lieu thereof ", and", and by inserting after clause (v) the following new clause:
"(vi) section 42 (relating to taxable income credit) ; and".
(B) 'Section 56(c) (1) (relating to tax carryovers), as in effect on the day before the date of enactment of the Tax Reduction Act of 1975, is amended by striking out "and" at the end of subparagraph (D), by striking out "exceed" at the end of subparagraph (E) and inserting in lieu thereof "and", and by inserting after subparagraph (E) the following new subparagraph:
"(F) section 42 (relating to taxable income credit), exceed".
(C) Section 6096(b) (relating to designation of income tax payments to Presidential Election Campaign Fund), as in effect on the day before the date of enactment of the Tax Reduction Act of 1975, is amended by striking out "and 41" and inserting in lieu thereof "41, and 42".
(3) CLERICAL AMENDMENT.—The table of sections for subpart A of part IV of subchapter A of chapter 1, as in effect on the day before the date of enactment of the Tax Reduction Act of 1975, is amended by striking out the item relating to section 42 and inserting in lieu thereof the following:
"Sec. 42. Taxable income credit.".
(b) STANDARD DEDUCTION.
(1) LOW INCOME ALLOWANCE.—Subsection(c) of section 141 (relating to low income allowance) is amended to read as follows:
"(e) LOW INCOME ALLOWANCE.—The low income allowance is—
"(1) $2,100 in the case of
"(A) a joint return under section 6013, or
"(B) a surviving spouse (as defined in section 2 (a) ),
"(2) $1,700 in the case of an individual who is not married and who is not a surviving spouse (as so defined), or
"(3) $1,050 in the case of a married individual filing a separate return."
(2) PERCENTAGE STANDARD DEDUCTION. Subsection (b) of section 141 (relating to percentage standard deduction) is amended to read as follows:
"(b) PERCENTAGE STANDARD DEDUCTION: The percentage standard deduction is an amount equal to 16 percent of adjusted gross income, but not more than—
"(1) $2,800 In the case of
"(A) a joint return under section 6013, or
"(B) a surviving spouse (as defined in section 2(a)),
"(2) $2,400 in the case of an individual who is not married and who is not a surviving spouse (as so defined), or
"(3) $1,400 in the case of a married individual filing a separate return.".
(3) TECHNICAL AMENDMENTS.
(A) Subsection (a) of section 3402 (relating to income tax collected at source) is amended to read as follows:
"(a) REQUIREMENT OF WITHHOLDING.—Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables prescribed by the Secretary.
For purposes of applying such tables, the term 'the amount of wages' means the amount by which the wages exceed the number of withholding exemptions claimed, multiplied by the amount of one such exemption as shown in the table in subsection (b) (1).".
(B) Paragraph (6) of section 3402(c) (relating to wage bracket withholding), as such paragraph existed on the day before the date of enactment of the Tax Reduction Act of 1975, is amended by striking out "table 7 contained in subsection (a)" and inserting in lieu thereof "the table for an annual payroll period prescribed pursuant to subsection (a) ".
(C) Subparagraph (B) of section 3402(m) (1) (relating to withholding allowance based on itemized deductions) is amended to read as follows:
(b) an amount equal to the lesser of (i) 16 percent of his estimated wages, or (ii) $2,800 ($2,400 in the case of an individual who is not married (within the meaning of section 143) and who is not a surviving spouse (as defined in section 2(a) ) ).".
(D) So much of paragraph (1) of section 6012 (a) (relating to persons required to make returns of income) as precedes subparagraph (C) thereof is amended to read as follows:
"(1) (A) Every individual having for the taxable year a gross income of $750 or more except that a return shall not be required of an individual (other than an individual referred to in section 142(b) )
"(i) who is not married (determined by applying section 143), is not a surviving spouse (as defined in section 2(a) ), and for the taxable year has a gross income of less than $2,450,
"(ii) who is a surviving spouse (as so defined) and for the taxable year has a gross income of less than $2,850, or
"(iii) who is entitled to make a joint return under section 6013 and whose gross income, when combined with the gross income of his spouse, is, for the taxable year, less than $3,600 but only if such individual and his spouse, at the close of the taxable year, had the same household as their home. Clause (iii) shall not apply if for the taxable year such spouse makes a separate return or any other taxpayer is entitled to an exemption for such spouse under section 151(e).
"(B) The amount specified in clause (i) or (ii) of subparagraph (A) shall be increased by $750 in the case of an individual entitled to an additional personal exemption under section 151(c)(1), and the amount specified in clause (iii) of subparagraph (A) shall be increased by $750 for each additional personal exemption to which the individual or his spouse is entitled under section 151 (c);".
(C) EARNED INCOME CREDIT.—Section 209 (b) of the Tax Reduction Act of 1975 (as in effect on November 30, 1975) is amended by striking out "and before January 1, 1976".
(d) EFFECTIVE DATES.—The amendments made by subsection (a) apply to taxable years ending after December 31, 1975. The amendments made by subsection (b) apply to taxable years ending after December 31, 1975. The amendment made by subsection (c) takes effect on the date of enactment of this Act.
(e) Section 3(b) of the Revenue Adjustment Act of 1975 is amended by striking out "December 31, 1976" and inserting in lieu thereof "December 31, 197'7."
(I) DISREGARD OF EARNED INCOME CREDIT FOR CERTAIN PURPOSES.—Any refund of Federal income taxes made to any individual by reason of section 43 of the Internal Revenue Code of 1954 (relating to earned income credit) shall not be taken into account as income or receipts for purposes of determining the eligibility of such individual or any other individual for benefits or assistance, or the amount or extent of benefits or assistance under any Federal program or under any State or local program financed in whole or in part with Federal funds.
Several Senators addressed the Chair.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. PACKWOOD. I was just going to ask a question of the majority whip or the committee chairman.
Mr. MUSKIE. Mr. President
The PRESIDING OFFICER. The Senator from Oregon asked for recognition.
Mr. MUSKIE. I offered the amendment, and I wanted to speak to it.
The PRESIDING OFFICER. The Senator lost the floor when the amendment was reported.
Mr. MUSKIE. I will hang around a couple of more hours.
Mr. PACKWOOD. I can assure the Senator from Maine I do not intend to hold the floor for a couple of hours. All I was going to do was ask what we were going to do.
Mr. ROBERT C. BYRD. I was going to ask the same question. I believe I know what the answer is. I do not believe there will be any roll call votes tonight.
Does the chairman agree with me, that there will be no roll call votes tonight?
Mr. LONG. I agree.
Mr. ROBERT C. BYRD. Some Senators do want that information.
Mr. MUSKIE. All I want is some time to explain the amendment.
Mr. ROBERT C. BYRD. It is my understanding there will be no roll call votes the rest of the evening.
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. Mr. President, I am sure, with that word, my audience will rapidly shrink, but I want to make clear precisely what my purpose is.
The distinguished floor manager of the bill reacted with his customary vigor. There is the feeling that this is a budget busting amendment. Let me make something clear: The budget as of now is the budget that was adopted this spring. This amendment I am offering was part of that budget. If the budget is changed by the adoption of the essentials of the Finance Committee bill, then it might be appropriate to describe this as budget busting, because, as others have said on the floor today, if we were to adopt the Finance Committee bill and then do what seems inevitable, extend the tax cuts in any case, we would be busting the budget.
What we are offering — and I am offering this, incidentally, in the name of myself and my good friend from Oklahoma (Mr. BELLMON) who feels as strongly about this as I do — is an amendment which implements the budget which the Congress adopted this last spring.
It is part of that budget and it is very much a part of that budget.
That is the issue before us, whether or not we take it out of that budget and substitute for it what is in the Finance Committees bill. That is the issue.
If this particular provision busts the budget, it will only be because we adopt the other provisions of the Finance Committee bill. That is why I want the Senate to come to grips with this issue first. If the Senate does not want this amendment to be a part of our current budget policy any longer, then knock it out by voting against this amendment. Then there will be the money to pay for these additional tax preferences, the maintenance of tax preferences, which the Finance Committee bill represents.
I think the choice is as plain as can be, and I think this is the time to raise it. I think this is the time to settle it.
What this will do, and I will explain the amendment in a little greater length for the RECORD as well as those who are still in the Chamber, is this:
The amendment would extend the temporary tax reduction provision through all of fiscal 1977.
As a result, taxpayers could plan on being able to deduct either $35 per exemption or 2 percent of their income up to a maximum income of $9,000 from their taxes next year. That is families and individuals with incomes exceeding $9,000 would have their taxes reduced by $180 or more if there are more than five dependents.
We believe this extension is an essential part of the fiscal policy provided in the first concurrent resolution. The objective of that fiscal policy is to continue the economic recovery and bring unemployment down to 6 percent without accelerating inflation. A critical part of that policy is a clear signal to producers and consumers that our policies will aim for a steady and prolonged economic expansion.
Overall, the tax credit provision would reduce tax receipts by $9.4 billion if it were extended for the full fiscal year. The Finance Committee's proposal to terminate the credit on June 30, 1977 would cost $1.7 billion less than an extension for the full year — the revenue gain in the first 3 months is less than one-fourth of $9.4 billion because of collection lags.
The $9.4 billion that the tax credit pumps into the economy each year is essential to maintain the pace of the recovery. Present forecasts indicate that the unemployment rate will be well above 6 percent in the middle of 1977, and that a further extension of the tax cut will be needed if the unemployment rate is to continue to fall at a satisfactory rate. Past CBO estimates of the effect of tax increases of this size indicate that within a year, 270,000 jobs would be lost due to the expiration of the tax credit. The tax credit is the largest part of the antirecessionary legislation passed by Congress last year. It should be kept at least until the end of the recession.
It is completely unrealistic to assume that the tax reduction will not be continued. So let us do it now. The next action that the Congress takes on personal taxes is likely to be a further reduction, not an increase. The Joint Economic Committee in its report to the Budget Committee suggested the possibility of a further $10 billion tax reduction in January. The President has indicated the possibility of a further tax reduction before 1979.
We all know the reluctance of the Senate to raise personal income taxes, even when economic conditions require it. And it is clear from all of the testimony that we have heard that our economic policy will not require the $10 billion increase next June which would occur if the tax deductions expire.
None of the economists that appeared before our committee suggested terminating the current tax reduction. Most suggested the possibility of increasing it further. Progressive income taxes in conjunction with a rapidly raising GNP means that the average tax burden is increasing. It is already high by historical standards and will increase to unprecedented levels in the near future unless further general tax reductions are made. Therefore, I submit that the Congress was wise when it adopted an economic policy that extended the tax reduction through the next fiscal year and that the Finance Committee's counterproposal is unsound.
Moreover, this is the policy it will surely adopt in the end. The reductions will be extended. Revenues will be reduced by $1.7 billion more than the committee report maintains. If the Congress adopts this tax bill, it will be back next spring to produce a third concurrent resolution increasing the deficit by another $1 billion.
Mr. President, I thought it important that at least that much of my view of this issue be in the RECORD, so that Senators who are a little tired of senatorial rhetoric may by tomorrow morning at least have the opportunity to read it.
Mr. HOLLINGS. Mr. President, I commend our distinguished chairman of the Budget Committee. It is not an easy task to be the keeper of our fiscal conscience. It would be a wonderful thing if we could just all forget about that vote on April 12, when this body voted our budget numbers, after being admonished by the chairman of the Finance Committee that it was unrealistic, that it could not be done, that it could not be assumed. He said the continuation of that tax reduction was totally out of the question, because we would have to raise taxes.
Well, of course, if you look at the Finance Committee's report itself what the distinguished Finance Committee chairman said was unrealistic and impossible, you only have to look at the top of page 22 and find out that he could finally do it, $2.5 billion. What he found impossible on April 9, he comes out on June 16, and says, "Now, here it is, I have found out it is realistic, and I propose it."
But the main thing is the unsavory task that none of us would want, and that is to remind us to put our legislation where we put the law. We passed the law, and we told everybody, budgetwise, in America, "Here is the first concurrent resolution. After May 15, you cannot even propose a bill that has not been authorized and reported. And after the admonitions of the distinguished chairman, voting on the minority side, having considered about what was realistic, we voted 3 to 1 for it, but now we come here when the main revenue bill is before us and are put in the position that we are out of order, we are out of kilter, we are budget busting. So I want to commend the Senator from Maine for being very kind, very considerate, and very patient.
This is the problem. It would be very nice to tinker around with everything, spend a lot of time, and then say, "Oh, well, that is their tax reduction; maybe it was a good idea," when we start increasing taxes on people on June 30 of next year. But that is not what the will of the Senate was when we considered the budget resolution.
I would have been one who perhaps would have preferred the Budget Committee to come out with a package to show that since we had found these amounts and levels we would stick with them and show how to achieve them; but that is another matter. Another package is before us, and I happen to be a part of it. The Senator from Maine, our chairman, has kept the integrity of the Budget Committee and the budget process, and I commend him for that, because we have to either put up or shut up. You could go on talking about the LAL forever, and say, "It is all confusing, and Ernst and Ernst and all the CPA's can never figure it out."
But the $400 million it raises. I can tell you this right now: Every one of those CPA's, Ernst and Ernst, all the accountants and everyone else in this field were able to figure out how to get the $400 million for their clients. But now, when we want to talk about the LAL's which repeal these shelters, it is awfully complex, it is not understood by any of them, no Senator could explain it.
Oh, I can find you people to explain it. My auditor at home can explain it. We are just repealing it, that is all. It is not complicated whatever.
When we get through with this debate, most of the Senate will understand this LAL; but we have got to get to first things first. We have to get to the budget resolution. I wish Senators would turn to the very first part of that resolution, right here at the beginning part. The first thing out of the box on page 6 lists the amounts.
Fiscal year 1977 revenues tax loss as of January 1, 1976, $377.7 billion, extension of December 1975, temporary tax reduction minus $17.3 billion.
That is the Muskie-Bellmon amendment.
Mr. President, I ask unanimous consent that I may be permitted to be a cosponsor in that particular amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HOLLINGS. That is the first order of business.
Then there is the net increase from tax expenditure legislation of $2 billion.
So, it is not only appropriate but very much in order to consider this proposal now.
Mr. ALLEN. Mr. President, will the Senator yield?
Mr. HOLLINGS. I am glad to yield.
Mr. ALLEN. I ask the question not to discredit what the Senator said but to obtain information.
Would it mean, if this amendment is adopted, adding to the tax reduction $1.8 billion? Would that mean then that we would have to eliminate a like amount, $1.8 billion in tax reductions provided by the Finance Committee plan?
Mr. HOLLINGS. $1.7 billion. Yes.
Mr. ALLEN. Is that what this would entail?
Mr. HOLLINGS. That is right.
What we are going to do is fix that $1.7 billion in and then—
Mr. ALLEN. That would eliminate some of the committee reductions; is that right?
Mr. HOLLINGS. That is right.
What we were doing, and the motion just tabled the proposal eliminating $400 million, picking up $400 million of the $1.7 billion.
Mr. ALLEN. So once this is adopted we would have to start looking for places to reduce $1.8 billion in reductions provided by the committee.
Mr. HOLLINGS. So the RECORD will reflect an accurate answer, I ask Senator LONG, how much would it be? I want the record to reflect the actual amount. I am not sure.
Mr. ALLEN. The amount is not so important.
Mr. HOLLINGS. It is $1.7 billion, I am told.
Mr. ALLEN. We would have to start looking for ways to reduce the reductions provided by the committee bill; is that correct?
Mr. HOLLINGS. That is right, or increase the revenue.
Mr. ALLEN. Yes.
Mr. HOLLINGS. That was one of the measures right in the Nelson amendment that we just voted upon.
Mr. ALLEN. So it is a question of whether we want this particular reduction or the reduction provided by the committee bill.
Mr. HOLLINGS. Also, put so eloquently by the Senator from Massachusetts, we must look out for the low-income or middle-wage earners in America to the tune of $1.7 billion, or forget about them, and look at those in the $50,000 and above income bracket who have all of those nice loopholes with oil wells.
The Senator is right. If we pass this $1.7 billion we are going to have to look around, as I am told, for the next additional $1 billion. By adopting the House approach on limitation of artificial losses $400 million can be raised.
Mr. ALLEN. Would that be more or less a single shot approach?
Mr. HOLLINGS. We have a package here, but the Senator from Louisiana, the distinguished chairman, came up with individual sections rather than as a single package.
So we have tax deferrals, foreign tax credits, and Domestic International Sales Corporations. We have plenty to take care of this particular vote if we vote again as we voted on April 12.
Mr. ALLEN. I thank the Senator.
Mr. HOLLINGS. Every Senator should look at the RECORD overnight and put it by his pillow as he lays his head to rest and says his prayers and just see what has happened between April 12 and now to change his mind.
Mr. PELL. Mr. President, will the Senator yield?
Mr. HOLLINGS. I yield.
Mr. PELL. I think we realize it is much easier to vote tax reductions than increases or leaving them as they are. But this is a political body. We have just seen the fate of what happened to the proposal to eliminate some of the more egregious tax shelters that went down to defeat. It would be very easy to pass this, which also reduces taxes. But would not the net result of that be to increase the deficit, increase the debt, and increase inflation?
Mr. HOLLINGS. No, we have not had a final vote on LAL. I think the Senator from Louisiana and the debate showed it was a mistake to include that.
I was one of those who thought it better, but we had a housing program. I used to work on the Subcommittee on Housing. We were 26 million houses shy.We said some 10 years ago we ought to be building 2.6 million units a year. We were building less than 1.3 million. So, with the depressed housing, the building trades, that particular industry in bankruptcy, and high unemployment, we said this is a matter to look into. Let us as a matter of public policy go along with the residential part.
But we can see now from the debate of the Senator from Louisiana and the Senator from Oregon that that was a mistake.
I think perhaps looking overnight at the LAL's and the objectives now presented by the Senator from Colorado we will get a roll call vote on it, but we will vote to go ahead with the housing provision.
I am not one of those who thinks we win on the first vote. We do not win easy with the Senator from Louisiana and then do not ever think one wins because whenever he walks on the floor and shakes his head it will fall right on the ground. The Senator from Louisiana will get you. He is the sharpest I have ever seen.
So this thing is just beginning. We are not finalizing anything.
This is the book and we have just gotten under the cover. Frankly, we have not even gotten into the title.
One cannot find a Muskie amendment in here.
Mr. PELL. If we pass the Muskie-Bellmon amendment that is done and that means a reduction of revenue for government by $1.7 billion and assurance that we will retrieve that revenue from somewhere else.
Mr. HOLLINGS. We have plenty of choices for the Senator. We have plenty of chances and choices.
Mr. PELL. We are a political body and when it comes to retrieving that revenue, I notice those votes usually seem to go more adversely.
Mr. HOLLINGS. But more each day we find that the best politics is no politics. That is how we got the Concurrent Resolution No. 1. I think it was quite an advancement.
Mr. MUSKIE. Mr. President, may I respond?
Mr. HOLLINGS. Yes.
Mr. MUSKIE. That gets us to the budget resolution. The whole purpose of that is to give us the game plan, a policy early in the session to which we are all committed. So we are all committed to this.
What I offered here is something that passed the Senate overwhelmingly and passed the House of Representatives overwhelmingly. It has been adopted. Now, if we have faith in our joint decisions. and common decisions, we cannot make every one of these amendments that are pending a single decision. We have to make them in the backdrop of common policy. The common policy still includes this tax extension. If we just adopt the position that we have in the past that we are going to take one of these at a time and if we lose one, we are going to lose the next one, and that relieves us of the obligation that we assumed in adopting the budget process. If we do that we are doing the wrong thing. I am running for reelection. I do not lightly introduce an amendment of this kind, not at all, not in my State.
But I do so with full confidence that my constituents understand that this is offered in the context of a budget policy. For a year and a half we made budget policy work. We have made it stick.
May I say to the Senator that the numbers of the second concurrent resolution for fiscal 1976 on spending are coming out virtually to the penny as we approach the end of this fiscal year. So we should have some confidence in our ability to support a policy once we make it, but we cannot guarantee what the next vote will be. We cannot guarantee what the next vote on LAL will be. But we can be sure that this policy is a policy that has been overwhelmingly approved by Congress just last month.
Mr. PELL. If the Senator will yield, it is the policy he points out that we all in general have supported and do support. But for a political viewpoint, I see no danger in supporting this resolution because any amendment to reduce taxes is not unfavorably received at home.
The question comes up, what will be our stance if we pass the amendment of the Senator which I am sure we very well can, and we do not sufficiently raise the revenue to compensate it? Is it the intention of the Budget Committee at that point or later on in debate to introduce revenue saving measures or back away from this?
Mr. MUSKIE. We are not the tax writing committee, as I have been reminded by reading the RECORD last night and reading the RECORD this morning. If I had asked the Budget Committee yesterday to submit a package of amendments of the kind described by the Senator from Rhode Island, the Senator from Louisiana would have lifted this roof so high I could have seen it from northern Maine last night. The Senator knows that. There are plenty of opportunities, some of which I support, as an individual Senator, to produce the revenues. If in the overall exercise we still have not made the books balance in terms of the budget resolution, the legislation will still be before us. I have not committed myself to vote for this bill when we get to final passage. If it is no different from what it is now, I may well vote against it and urge my colleagues to vote against it.
Mr. PELL. Speaking for myself, my concern is with inflation, which I think is the cruelest tax of all. That is why, to my mind, the most important thing is that net revenue remain the same. I like the approach of the Senator from Maine. It is the same as mine. I would rather have the Senator from Louisiana's approach than have a reduction in revenue, and this is what concerns me.
Mr. MUSKIE. I remind the Senator about last year. Last year, inflation was such that we had double digit figures. Yet, in March of last year, Congress insisted upon a tax cut, a much bigger tax cut than the President wanted; as a minimal stimulus to the economy.
In addition, we adopted the budget which nominally on its face, the President said, was above his. The record proved that our deficit came out about the same.
A year ago this spring, we were talking about budget deficits on the order of $60 billion. We are ending up with a budget of $72 billion. With that tax cut of last year, which stimulated the economy and turned it around, with the budget policy of last year, the rate of inflation for the first quarter of this year was 3.5 percent. Where was the inflationary impact of last year's congressional budgetary policy? It is not going to stay that way at 3.5 percent because other factors get into it.
The fact is that the congressional budget policy of last year, including tax cuts of the same magnitude we are talking about here, on an annual rate, allow us to cut our budget deficit by a third this year because of the economy's recovery. This progress shows that the congressional budget policy is moving with the economy and with the changes in it.
I hope that last year's performance would give us some confidence that we have a reasonably good handle on the whole business, because I think our experience up to now has been good. We met our budget targets, inflation went down, the economy is recovering, and people have gone back to work. So the whole business has worked out pretty well.
If we had adopted the President's policies, resisting the tax cut, cutting back on programs for unemployment and so on, removing controls on energy, we would not have the same result.
When I talk about the congressional budgetary policy, I am not talking about ED MUSKIE; I am talking about Congress. That tax cut was enacted by Congress before the first concurrent resolution last year. We were consulted; our staffs worked with the leadership. We had not yet gotten into operation. After our examination of the economic situation, we reaffirmed the wisdom of that tax cut last year. This tax cut is the same one.
The interesting thing is that we have had three major tax cuts since I came to the Senate 18 years ago. We have been told about the growth in Government spending. The fact is that, notwithstanding that growth, if we had a full employment economy, notwithstanding those three major tax cuts since I have been in the Senate, the budget would be in balance. Why? Because the progressive nature of the income tax system and continuing inflation push people continually into higher tax brackets, and that increases their tax burden. We have been trying, as a nation, to keep the total tax take at 20 percent to 21 percent of GNP and no more. That is one basic justification for continuing the tax cut. That is why the President says that by 1979 we may have to cut taxes again.
I refer to my good friend the Senator from Minnesota, who is chairman of the Joint Economic Committee. We get this kind of wisdom from. that committee and its staff experts as well as from OMB.
So this tax cut should be continued and made permanent as we look down and see the increasing percentage of GNP that the progressive income tax will take unless we do something. All we are doing right now is continuing it for 3 months more, a continuation which is already mandated by the first concurrent budget resolution.
Mr. HUMPHREY. Mr. President, will the Senator yield?
Mr. MUSKIE. I yield.
Mr. HUMPHREY. Today, the Joint Economic Committee held hearings with key witnesses on the very subject about which the Senator is speaking. We had one of the vice presidents of one of the large banks, a trust bank, in New York, and we had Arthur Okun and a leading economist from American University. They all pointed out the necessity of the continuity of the tax cut to which the Senator from Maine is relating his argument, the need for a permanent tax cut along the lines that the Senator is speaking of, and to keep the tax take within that 20 percent bracket. If you do not have tax cuts as the economy improves, with the same rate of inflation, you will start to have a tax rate of 21 or 22 percent, which has a regressive action upon the economy.
By the way, the Senator will be interested to know that Mr. O'Leary, the gentleman who is vice president of the trust company bank in New York City, said that he considered the action of Congress in the passage of the Budget Control Act and the action of Congress in supporting the Budget Committee and its budget resolution has had a very good effect on lowering interest rates and in giving some sense of confidence in the investment community and of sparking the kind of confidence that has been necessary for consumers on the one hand and investors on the other.
That testimony is the high praise we had today for the work of the Budget Committee and for the fact that Congress has supported the recommendations that have come from the Budget Committee. I encourage Senators.who are interested to take a look at it. We can supply that information for the RECORD tomorrow.
Mr. MUSKIE. Incidentally, the Finance Committee has jurisdiction with reference to the budget. The Finance Committee has half of the budget right off the bat, because it has jurisdiction over all taxes.
In addition, the Finance Committee has jurisdiction over 40 percent of the spending side of the Federal budget. This is all the income security programs, such as social security.
In the conference report on the budget, we allocated to the Finance Committee $176 billion in budget authority, to be distributed in accordance with spending programs, mostly, entitlement programs that operate on formulas which originated in that committee.
So the budget process is nothing if the Budget Committee is told that Finance Committee jurisdiction is off limits. The remainder of the budget is not worth anything if we cannot have something say, as the Senate as a whole, about these areas.
Mr. ALLEN: Mr. President, will the Senator yield?
Mr. MUSKIE: I yield.
Mr: ALLEN. It seems to the Senator from Alabama that the committee has come within the dollar amount of the budget resolution, but it has done this by dropping the reductions, the tax credit, 3 months earlier. It has developed an overall plan, as shown by the bill reported, which would come within the dollar limitations of the budget resolution.
What disturbs the Senator from Alabama is that if the amendment that the Senator from Maine has offered is adopted, it would mean that while the budget might not be busted, the plan of the committee to come within the confines of the budget resolution certainly would be busted. That would mean that the Senate then would have to completely rewrite this bill on the floor.
That is what seems to me to be the questionable feature that is embodied in the Senator's amendment.
Does the Senator think it would be wise to disregard the work of the committee and work this matter out on the floor and put back in $1.8 billion in revenue or cut out $1.8 billion in tax reduction? Is it practical to write a major tax reform bill here on the floor?
Mr. MUSKIE. Well, let me put a question to the Senator: Of what use is it for Congress as a whole to adopt a budget if it then can be unilaterally rewritten by every committee acting on its own? If the Senator will read through the report on this tax bill, he will find, over and over again, that the Committee on Finance is justifying its decisions on the basis of its economic judgment.
Well, Congress, as a whole, made its economic judgment in the first concurrent resolution. If each committee is going to adopt its own economic judgment to justify more or less spending, more or less revenues, more or fewer programs, will we not end up in the same kind of anarchy that we had before?
We cannot have it both ways. If the committee had come to us and said, "Look, we scratched our heads and we did our damnedest to come up with $2 billion in tax loopholes and we could not do it — we could not do it; all we could bring up was a net of $1 billion again, so we are coming back to the Senate and saying we could not do it; this is the best we could do" — that would be one thing. But when, instead of doing that, they tell us that they are going to change the economic policy — and that is the effect of it in the first concurrent resolution; when they conclude that tax cuts ought not to be extended for the last 3 months and, as a consequence, they are able to come technically within the $15.3 billion of tax reduction — that is not the same policy. That is not the same policy at all. If it is, then somebody else ought to be chairman of the Committee on the Budget, because I have no fiscal intelligence whatsoever. If anybody can persuade me that those two policies are the same, I will eat it.
I can understand why a committee may not be able to meet a target, or say, "Now, look, we cannot meet your target on tax reform. We have met your target on tax extension; that leaves us $1 billion short, so we leave it to the Senate. Do you want to increase the deficit by $1 billion because we were not able to come up with that in reforms, or do you want to try to add reforms on the floor, or do you want to end the tax cut as of July l?"
If those options had been presented to the Senate in that form, that is a legitimate committee report. I can understand that. I expect that the committees in charge of energy legislation may be coming to us before the year is over; indeed, we anticipated that policy in some of the discussion. I think the Senator remembers.
They may say, "Now, look, we have been provided these dollars for energy. But we have gone over everything that we think makes sense and we think we ought to spend another $0.5 billion or $1 billion." The budget process contemplates the possibility of that kind of committee report. We do not have manacles or handcuffs. But to tell me that this bill represents the same policy that the first budget resolution represents and pass it off in that sense, to me, makes a mockeryof the whole process. If that is what the Senate is going to make of it, I would rather have nothing to do with it.
Mr. ALLEN. To undo that, it does require the Senate to take on the monumental task of rewriting the bill here, on the floor, is that not correct?
Mr. MUSKIE. Well, it is monumental and I do not like to write tax bills on the floor any more than anyone else. But we do it. We rewrite appropriations bills. We rewrite other complicated legislation.Before long, as the Senator knows, I shall be floor managing another one of these things called the Clean Air Act. That is about as complicated a piece of legislation to try to rewrite on the Senate floor as I can imagine. But the effort is going to be made. Changes may well be adopted. That is what the Senate is all about.
I hope we do not get into a Christmas-tree attitude about it, but I think there are a half-dozen legislative issues which can help us decide whether, on the Senate floor, whether we can make up the revenues to help pay for the extension of the tax cuts. If we cannot do it, the legislation will still be before us for whatever jurisdiction anybody wants to make of it.
Mr. GRAVEL. Mr. President, the Senator from Alabama makes a very good point. That is that if the Muskie amendment is adopted, it will require the rewriting of this entire bill.
Mr. MUSKIE. I would not say that.
Mr. GRAVEL. I have not interrupted the Senator from Maine.
Mr. MUSKIE. "Entire" is a big word.
Mr. GRAVEL. Certainly, it is within the purview of the Senate to rewrite that bill.
The PRESIDING OFFICER. Does the Senator from Maine yield the floor?
Mr. MUSKIE. Yes; I do.