June 22, 1976
Page 19613
TAXES AND THE BUDGET
Mr. MUSKIE. Mr. President, I have taken a good deal of the Senate's time during the last few days to clarify the relationship between the pending tax bill and the first concurrent resolution on the budget.
I have argued that the bill must be amended to extend existing personal tax cuts for the full fiscal year, so that it will sustain the fiscal policy Congress's budget requires. I have argued that we must achieve the $2 billion through tax reform which that budget envisioned, or else we will unnecessarily increase the deficit.
I hope both these objectives can be achieved, because the stakes are high: not only continued economic recovery, and not only tax equity, but the credibility of Congress.
I hope my case has been heard within this Chamber. It has been heard outside, and I ask unanimous consent that two recent editorials — one from the Washington Post and the other from the Washington Star — along with this morning's fine article by Eileen Shanahan of the New York Times, be placed in the RECORD.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
[From the Washington Star, June 20, 1976]
BUDGETARY FRAUD?
In a June 16 letter to fellow senators, the chairman and the ranking Republican member of the Senate Budget Committee Senators Muskie and Bellmon — declare that the current impasse over the tax bill "is not a contest between the Budget and Finance Committees," since "each committee is doing its duty as it sees it."
That modest disclaimer takes senatorial courtesy too far. In fact, as the Muskie-Bellmon letter elsewhere establishes, Sen. Russell Long and the Finance Committee are in contempt of the recent concurrent budget resolution. Since the Budget Committee must be the watchdog of that resolution, it really is in a "contest" with the Finance Committee and its cantankerous tax czar, Senator Long.
In the spring concurrent budget resolution, the Senate adopted a target policy on taxation. One feature was a target figure of some $15.3 billion in tax cuts; another — the feature now under floor debate — was that $2 billion of that tax cutting must take the form of closing some "tax expenditure" loopholes. What loopholes would be closed was left to the Finance Committee. But the budget resolution contemplated the extension of the current individual income tax credits for the full fiscal year 1977.
To reconcile his array of favored tax preferences with the resolution, Senator Long persuaded his committee to meet the budget target by extending the individual tax credits only partway through fiscal 1977.
This is, to put it bluntly, a dodge. Few expect the Senate to embarrass itself in an election year by trimming tax advantages for rank-and-file income taxpayers so as to spare Senator Long's bigger clients the pinch of some loophole closing.
Too much emphasis, in this scrap, is being placed on the relative merits of different kinds of tax cutting. That emphasis tends to obscure the focal policy issue as Senators Muskie and Bellmon have drawn it — which is, quite simply, the honesty and integrity of the new congressional budget making procedure.
The premise of the fledgling Budget Reform Act is simple: Congress, by failing to make and stick to a budget, had pretty much forfeited its primary legislative function of raising and spending the nation's revenues. It had exposed itself not only to presidential charges of fiscal irresponsibility, but also to executive infringements (chiefly in the form of impoundments that second guessed congressional policy) of the spending process.
However deferentially the ranking Budget Committee leaders now define the issue, it is clear that the Senate will either honor its own budget resolution (which means bringing Mr. Long into step) or it will confess that the Budget Reform Act is a fraud: that the Senate has adopted budgetary ideals that it cannot back up with action, and that any powerful committee can still rewrite budget policies at whim.
[From the Washington Poet, June 21, 1976]
TAXES AND THE SENATE
Once again the Senate Finance Committee has disgraced itself. The committee put in six weeks of diligent work revising the tax reform bill that the House passed last year. The harder the committee worked, the longer the bill got. The longer it got, the less reform it contained. By the time it was finally reported, it ran to 1,536 pages, and finding any lingering trace of reform had become a considerable challenge — like hunting penguins in the Mojave Desert. It was the finance committee's usual performance. The question is whether the rest of the Senate is going to do anything about it.
This year the politics of taxation is sharply different from the familiar pattern. Under the old rules, there would have been some squawking from the reformers and a low groan from the Treasury Department — followed by a long silence in which the House conferees tried to paste a few of their original ideas back into the battered draft. But this time there is a new force at work.
The congressional budget process is taking hold, and it is having precisely the effect that its authors hoped when it was enacted two years ago. Last month Congress passed a budget resolution setting preliminary spending and revenue estimates. The finance committee's tax bill would raise substantially less money than that budget resolution requires, and it would inevitably result in a larger deficit than Congress voted.
"So now it is up to the Senate to choose between that tax bill and the congressional budget Congress adopted just last month," Sen. Edmund S. Muskie (D-Maine), the chairman of the Senate Budget Committee, declared as the floor debate opened last week. Sen. Muskie and Sen. Henry L. Bellmon of Oklahoma, the budget committee's ranking Republican, have raised a sharp and explicit challenge to the finance committee and its chairman, Sen. Russell Long (D–La.). It is not merely the usual squabble between two committees. It is a collision between two styles of politics. The finance committee and its bill represent the cynical old tradition in which the insiders take care of their friends quietly and invisibly, in the dim jungles of tangled syntax and cross-references — and the chairman is the final arbiter of who gets what. This tradition has contributed mightily over the years to the erosion of effective congressional control over the federal budget and national economic policy. The budget committee is defending the new procedures that — if Congress sustains them — will return to it a great measure of this crucial power.
The congressional budget resolution calls for an extension of last year's temporary tax cut. Sen. Long and the finance committee, thumbing their noses at the congressional budget, voted to extend this tax cut for only nine months of the coming fiscal year. The nine-months' extension is a deliberate prevarication, since everybody understands perfectly clearly that the tax cut would be routinely extended for the rest of the year. It is Sen. Long's way of inviting the Senate to acknowledge that it lacks the political will to stay within its own budget.
Compounding this challenge, the finance committee has come up with only about half of the $2 billion in new revenue that the congressional budget requires. Where can the Senate find an additional $1 billion a year? First of all, it can reinstate the limitation on artificial losses that the finance committee deleted from the House bill. That means narrowing the tax shelters. Skillful manipulation of the shelters sometimes makes it possible for people with large incomes to avoid paying any taxes at all for years on end. The House bill included a minimum rate that those people would have to pay, regardless of their shelters. The finance committee has greatly diluted that provision as well.
The new budget procedure makes it impossible for any senator to evade the fiscal significance of the tax bill. The political balance of the Senate, where the Democratic majority has 61 votes, makes it impossible for the Democrats to evade responsibility for the outcome. The finance committee has proposed abandoning the modest but useful progress toward tax reform that the House has already voted. Tax legislation is always intricate in its details. But the broad choices before the Senate have now become altogether clear.
[From the New York Times, June 22, 1976]
SENATE THWARTS NEW BUDGET PLAN, BACKS TAX PANEL IN DISPUTE ON FISCAL REFORM
(By Eileen Shanahan)
WASHINGTON, June 21.— Advocates of strict adherence to the letter and spirit of the new Congressional budget procedures lost their fight in the Senate today to forces led by Senator Russell B. Long, Democrat of Louisiana, who is chairman of the Senate Finance Committee.
The defeat for the Budget Committee, though theoretically reversible at a later date, had important implications both for the whole new Congressional process for handling the budget and for the tax bill that is before the Senate.
What was specifically at issue, and has been since the Senate began work on the tax bill last week, was whether the bill should be changed to comply with the assumptions Congress had in mind when it passed the Congressional budget resolution for the fiscal years 1977 last month. One of those assumptions was that $2 billion in revenues would be raised through reforms that would increase the taxes paid by individuals and businesses that enjoy preferential tax treatment now.
The tax bill, as it came from the Senate Finance Committee, did not raise that much revenue from tax reform.
Thus Senator Edmund S. Muskie, Democrat of Maine, who is chairman of the new Budget Committee, and Senator Henry Bellmon of Oklahoma, the committee's ranking Republican, sought to force the Senate to agree in advance to make sufficient changes in the Finance Committee's bill to meet the objectives of the budget resolution.
After three days of debate and filibuster by Senator Long's forces, who were delaying a vote because they were not sure they could defeat the Muskie-Bellmon proposal, the test votes finally came tonight on two procedural questions. On the first, the Long forces won, 53 to 39, and on the second they won, 49 to 42.
PERMANENT CUTS
The two defeats, back to back, were sufficient to cause Senators Muskie and Bellmon to give up their fight for the present and they withdrew their proposed amendment to the committee bill.
The Senate will go ahead now starting tomorrow, with consideration of the tax bill, which is the longest and most complicated tax measure in more than 20 years.
The bill makes permanent most of the tax reductions for individuals and businesses that were voted as an antirecession tax measure in 1975. One of the cuts, the $35 per person tax credit, would be extended only through June 30, 1977, under the bill, but it is expected that Congress will make this reduction permanent, too, at some future date.
In addition, the measure contains nearly 200 separate changes in the tax laws, some of which affect millions of individuals and others of which affect only one company or person.
The significance of the defeat of the Budget Committee forces, so far as the tax bill is concerned, is that they have lost, at least temporarily, a chance to use the budget process to force the Senate to vote for more revenue raising tax reforms. The Finance Committee's bill, as it currently stands, contains scores of new tax preferences, which lose revenue for the Treasury, and also scores of tightenings of old preferences, which gain money.
LITTLE DIFFERENCE
The amount by which the tax gainers outstrip the tax losers is so small — somewhere between $300 million and $1.7 billion depending on who is doing the counting — that tax reform advocates have said the bill is not worthy of the name tax reform.
The effect of today's votes on the new Congressional budget process seemed likely to have at least as great long range significance, and possibly more, than the effect on the tax bill.
This was the first significant defeat for the advocates of the new budget procedures, which were adopted two years ago in an attempt to give Congress greater control over Federal fiscal policies by making its decisions on tax and spending issues more rationally and internally consistent.
The budget process had been perceived from the outset, however, by many members of Congress as a threat to their individual powers.
CHAIRMAN FEARFUL
Among those who felt threatened were the chairman of the other committees in Congress, who feared that the Budget Committees would be able, in effect, to tell them what legislation they could and could not pass.
That threat was mirrored in today's Senate vote, which saw 11 of the chairmen of the Senate's 15 major committees voting with Senator Long and against the Budget Committee's leaders. .
The nearly solid Republican vote also contributed to the defeat of the stand of the Budget Committee's leaders against the Finance Committee's bill.
Other than Senators Bellmon and J. Glenn Beall of Maryland, another Budget Committee member, only seven of the Senate's Republicans voted with the Budget Committee. Of those seven, all but one, Robert Taft Jr. of Ohio, are members of their party's liberal wing.
It was not immediately clear why nearly all of the conservative Republicans sided with the Finance Committee against strict enforcement of the principles laid down by the budget resolution. One reason may have been that most of them were supporting some revenue losing provision that could be threatened with removal from the tax bill if the standards of the budget resolution were strictly adhered to.