April 28, 1977
Page 12780
Mr. PELL. Mr. President, I thank the Chair and I thank my colleague from Rhode Island.
The purpose of the jobs credit provision of this tax bill is to provide business with an incentive to hire additional workers.
If the jobs tax credit is to work, and to work most effectively then it must be particularly effective in areas of high unemployment.
It is in areas of high unemployment that the bulk of our jobless Americans are, and it is in areas of high unemployment that business activity is most sluggish and most in need of effective incentives.
Unfortunately, as written, the bill places severe restrictions on the effectiveness of the job tax credit in economically depressed areas.
A business firm under the Committee bill would be eligible for no credit unless his total Federal Unemployment Tax Act payroll for 1978 is at least 3 percent greater than it was in 1976, and his total payroll is 5 percent greater. As the committee report states, this requirement is intended "to allow the credit only where an employer's employment growth exceeds normal increases in employment for the economy as a whole."
The problem is that in areas of high unemployment like my own State of Rhode Island, employment has not grown in step with the economy as a whole. That is why there is high unemployment. The 3 percent rule may work well in areas of average unemployment, but in high unemployment States, it virtually eliminates the credit as a real incentive to most business firms.
For this reason, I heartily support the amendment offered by my distinguished junior colleague.
Reducing the 3 percent and 5 percent rules in areas of high unemployment — where the jobless rate is 71/2 percent or greater — will provide a real incentive for expansion of businesses and for an increase in jobs.
I commend and congratulate my colleague on presenting this amendment and I urge its approval by the Senate.
Mr. CHAFEE. I thank the Senator very much. I would like to thank my senior colleague for his eloquent remarks on this subject, and I would like to yield to the senior Senator from Massachusetts.
Mr. KENNEDY. Mr. President, I ask unanimous consent to be included as a cosponsor of the amendment of the Senator from Rhode Island.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. I want to join in commending the Senator from Rhode Island for putting this proposal before the Senate.
He is a new Member but he understands very quickly and very ably the importance of formulas and how they can work to treat a region of the country fairly and equitably, or how they can work to our disadvantage.
He recognized that under the jobs credit formula that had been devised, it would have worked in an unfair way against a particular region of the country, New England, and also to the Middle Atlantic States, where unemployment is high, but where firms would have difficulty meeting the 103 percent threshold in the formula. The Senator from Rhode Island has offered a well tuned amendment, to improve the thrust and purpose of this legislation.
I want to commend him and congratulate him and say I look forward to supporting him.
Mr. JAVITS. Mr. President, I ask unanimous consent that the Senator put me on the amendment as a cosponsor, as well.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CHAFEE. Mr. President, I would like to thank the Senator from Massachusetts for his contribution to this debate, for his thoughtful addition.
I ask unanimous consent that Senator DOLE be added as a cosponsor to this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. CHAFEE. Mr. President, unless somebody else chooses to comment, I am prepared to yield back my time on the amendment.
Mr. LONG. Mr. President, I had hoped I would have the chairman of the Budget Committee (Mr. MUSKIE) here to make an argument for fiscal integrity, but I think I have done the best that can be done at the moment on that issue. I wish to state that he shares my concern.
While I, of course, have some sympathy with what the Senator is seeking to do, I think I should state this is an over-the-budget expenditure, just as some of the others have been, and I am hopeful that the Senate will be willing to restrain itself and limit its activities in adding amendments which increase the cost of the bill.
I honestly think the President would like to sign this bill, but the more we add on to the cost of it the more that jeopardizes the prospect of the bill becoming law.
I do not for a moment take issue with the Senator from Rhode Island and his cosponsors and supporters in their feeling that they have a problem and that they seek to do something about it.
I just hope that they understand that we are doing what we can to try to protect the budget for fiscal year 1978 and in good faith trying to stay within those budget estimates.
Mr. MUSKIE. Mr. President, reluctantly, I oppose the amendment offered by the Senator from Rhode Island (Mr. CHAFEE) . It is particularly difficult to vote against the amendment because I am sympathetic to the goal of the Senator to redress the discrimination in the present employment credit. The discrimination results from the credit now applying only for new employees over 103 percent of the prior year's employment level. Thus, the credit is unavailable to companies struggling to maintain their current employment levels — companies often located in economically depressed sections of the country, such as Maine and the rest of New England.
However, I do not believe that by dropping the 103 percent threshold to 101 percent in high unemployment areas, as the Chafee amendment would do, additional jobs would be created that can justify the very substantial budgetary costs of the amendment. As I said during the floor debate on the employment credit last week, I do not believe this credit is an effective means of stimulating employment. Business simply will not hire new employees costing $10,000 in wages a year with a $1,200 incentive — the approximate level of benefits now provided for most corporate employers under the credit provision approved by the Senate.
The Chafee amendment would cost approximately $200 million in lost revenues in fiscal year 1977, $700 million in fiscal year 1978, and $500 million in fiscal year 1979. The first budget resolution recently reported by the Budget Committee provides for tax rdeuctions of $18.4 billion in fiscal year 1978, and a net revenue reduction of $18.2 billion.
The tax bill as it has been amended so far by the Senate, contains revenue reductions of approximately $19.3 billion, or $900 million in excess of the reported resolution target.
Moreover, 1978 revenues will be reduced by $1.7 billion as a result of lower economic activity stemming from deletion of the rebate from the tax bill. The Chafee amendment would increase these revenue losses by another $700 million to $3.3 billion. This is clearly an unacceptable figure. The Chafee amendment should be rejected to restrain any further expansion of the projected 1978 budget deficit.