April 25, 1978
Page 11424
Mr. ROTH. Mr. President, I am offering an amendment to the budget resolution to reduce the recommended revenue level by approximately $5 billion, from $443.3 billion to $438.4 billion.
This amendment would allow room in the budget to accommodate the enactment of a tax cut of approximately $25 billion, effective October 1, 1978.
The Budget Committee's recommended revenue target assumes the enactment of a $19.4 billion tax cut for fiscal 1979. As the committee report states, this figure represents a $25 billion tax cut on an annual basis, but assumes the tax cut would be delayed until January 1, 1979,and be effective for only 9 months of fiscal 1979.
Mr. President, the only rationale for postponing the tax cut is to reduce the apparent size of the budget deficit. While the Budget Committee's recommended budget deficit is $5 billion lower than the administration's proposed budget deficit, virtually all of the reduction in the deficit is obtained by delaying and reducing the tax cuts.
In other words, instead of reducing Federal spending to reduce the budget deficit, the Budget Committee is making the American taxpayers pay for Congress spending excesses by reducing and delaying their tax cuts.
I believe substantial tax reductions are needed to both offset the social security and inflation- induced tax increases and to reduce the total tax burden on the economy.
Because of the higher social security taxes and the impact of inflation pushing taxpayers into higher tax brackets, smaller tax cuts will only result in a tax increase on the American people.
Under the budget resolution as it now stands, the Budget Committee is recommending that Congress reduce the budget deficit by raising the tax burden on the American people.
I believe this is wrong. I believe Congress must enact substantial, across-the-board tax reductions to offset the social security and inflation-induced tax increases and to provide real tax relief for all Americans.
Furthermore, I believe Congress must reduce the budget deficit by reducing the growth rate of Federal spending, not by increasing the tax burden on working Americans.
Mr. President, my amendment does not set forth the type of tax cut that is to be enacted. This amendment would merely allow Congress to adopt a tax cut of up to $25 billion, effective October 1,1978.
As the Budget Committee's report states, many economic forecasters anticipate a sharp slowing of economic growth in late 1978 and early 1979 if tax reductions are not enacted before that time. In addition, both the Senate Finance Committee and the Joint Economic Committee urged the adoption of larger tax cuts than the Budget Committee recommends in this budget resolution.
The heavy tax burden on working Americans has reached the breaking point, and unless taxes are reduced substantially, I believe we face the dangers of a taxpayers revolt.
The heavy tax burden on our economy has resulted in sluggish economic growth, rising prices, persistent unemployment, and reduced productivity.
And unless taxes are reduced substantially, we face continued economic stagnation, inflation, and high unemployment.
Mr. President, I want to emphasize again that substantial tax cuts are needed to offset the increased social security taxes and the inflation-induced tax increases. Because of these huge tax increases, smaller tax cuts will only result in substantial tax increases on working Americans.
We must not try to reduce the budget deficit by raising taxes on the American people.
This budget imposes no restraints on Government. It is merely a continuationof the same old pattern of more spending and higher taxes, and it is asking the American taxpayer to pay for its higher spending levels. In effect, this budget is asking the American taxpayer to make sacrifices rather than the Government.
Mr. President, let me again emphasize that this amendment does not mandate the type of tax cut that is to be enacted. This amendment does not even mandate the enactment of a $25 billion tax cut, nor does it mandate the enactment of a tax cut on October 1. This amendment merely allows Congress to preserve its flexibility to enact the tax cuts by October 1. It will give us the flexibility to retain the timetable for implementing tax cuts as recommended byPresident Carter and many economic forecasters.
The economy is faced with a great deal of uncertainty, and we must maintain our flexibility to act. This amendment gives us that necessary flexibility to act quickly if the economy experiences a sharp downturn in the next few months, while still retaining the flexibility to delay the tax cuts if the economy overheats.
Mr. President, we should not shut the door on our tax cut options.
I urge the Senate to adopt this amendment. I yield the floor.
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. Mr. President, I must say I was certain I was not hearing accurately when I heard the Senator say we should not reduce the deficit by raising taxes. I fail to understand that comment. The action of the Budget Committee was simply to delay by 3 months the effective date of the very tax cut the Senator from Delaware is supporting, a $25 million tax cut on an annual basis. He proposed to assume its effective date to be 3 months earlier. How that translates into reducing the deficit by raising taxes escapes me.
I strongly urge the Senate to reject Senator ROTH's amendment to reduce the budget resolution revenue floor to allow for general tax rate reductions beginning on October 1, 1978, instead of on January 1, 1979, as provided in the budget resolution.
The Budget Committee took its action for very specific, legitimate, and sound reasons. I will undertake to explain them.
The Roth amendment is unrealistic.
The Roth amendment would raise the deficit to an unacceptable and unnecessarily high level.
It would raise the deficit for fiscal year 1979 to a level of $60.5 billion which theSenator earlier in remarks on the floor described as dangerous. I heard him say so.
And the Roth amendment could result in substantially increased future year budget deficits as well as a loss of fiscal discipline.
The Roth amendment would allow for a $25 billion general tax reduction to be implemented on October 1, 1978, for all of fiscal year 1979. By comparison, the budget resolution assumes a $19.4 billion general tax reduction. This amount represents a $25 billion reduction on a full-year basis, but assumes the rate reductions would become effective on January 1, 1979, for only 9 months of fiscal year 1979. The Roth amendment would allow an additional $5.6 billion of tax reductions in fiscal year 1979, but does not specify the type of reductions to be enacted, nor the extent of reductions in future years. Under the Roth amendment, the fiscal year 1979 budget resolution revenue floor would be reduced by $4.9 billion; and the deficit would be increased by $4.9 billion from $55.6 to $60.5 billion.
The Roth amendment should be rejected because it is unrealistic. Why do I say that? It is highly unlikely that the tax reduction legislation which the Ways and Means Committee has just begun to mark up can be completed early enough to be reflected in lower withholding rates by October 1.
That is the first assumption of the Budget Committee.
According to the Internal Revenue Service, it takes approximately 6 weeks from the time congressional tax bill conferees agree to new tax reductions until these changes are widely reflected in actual lower withholding. As a result, Congress would have to agree upon tax reductions by August 15, in order that they be implemented by October 1.
Based upon the numerous time-consuming issues likely to be considered as part of this legislation, as well as the relatively slow chronology of past major tax bills, it is highly unlikely new tax reductions will be agreed to as part of the pending tax bill by August 15. This tax bill, for example, is likely to be the forum for considering general financing of social security, as well as all the numerous contentious tax proposals made by the administration.
I cannot imagine that those issues will be quickly resolved, in time for both Houses of the Congress to agree by August 15.
Recent tax legislation containing comparable numbers of major issues have taken at least an entire year to proceed through the legislative process. This was true for the Tax Reform Act of 1969, and also true for the recent Tax Reform Act of 1976.
For example, the 1976 tax bill required 9 months from the beginning of the Ways and Means markup until the completion of the conference. The Ways and Means markup required 2 months. One more month was spent in the House between rules committee consideration and floor debate. Three months were required in the Senate from the time the Finance Committee began hearings on the bill until floor debate began. Floor debate consumed 2 months. Another month was spent preparing for, and completing, the conference. The bill now in the Ways andMeans Committee surely could not be completed before October of this year if it follows the timetables of the past.
The Roth amendment would increase the fiscal year 1979 deficit from $55.6 billion to $60.5 billion.
Assume that we make room in the budget for the Roth amendment and the tax bill is not completed in time for implementation on October 1. That would mean that the additional room that we would be making available for that 3-month period would be added to the room available in the 9 months remaining in fiscal 1979. That would support a tax cut of $32 billion. It would support rate reductions aimed at a $32 billion tax cut on an annual basis instead of the $25 billion that is the ostensible purpose of the Roth amendment, and the $25 billion on a full-year basis that the Budget Committee recommended.
The Budget Committee was well aware of that and did not want to make that room available, either for the purpose of increasing the 1979 deficit or subsequent deficits, or for still another alternative.
If that additional $7 billion is not used for general tax reduction totaling $32 billion, it would be available for special tax legislation of the kind we so often see around this place.
So the Budget Committee had three considerations in mind:
One, we cannot, realistically, enact a tax cut that will be effective October 1.
Two, that being the case, there is an inflation problem confronting this country to which we ought to try to make a contribution. Reducing the deficit to $55.6 billion. which is less than the President's deficit, less than the House deficit, is a strong signal that we could send to the business community, and to all Americans, that we are concerned about the size of the deficit.
The fact that the tax bill probably cannot be made effective October 1 gives us an opportunity to send that signal,and we ought to take it. We ought to send that signal and hold to that $55.6 billion deficit figure.
Finally, Mr. President, the Budget Committee did not think it sound, now that we are beginning to budget in terms of 5 years, to make room in the budget for a possible $32 billion tax cut on an annual basis.
That is exactly what we would be doing if we approve the Roth amendment and if my prediction that the tax bill cannot be implemented October 1 materializes. The $55.6 billion deficit reported by the Budget Committee is more than $5 billion lower than the deficit now recommended by the administration.This reduction is an important signal to the American people that the Senate is serious in its efforts to control budget deficits and inflation. Acceptance of the Roth amendment would reverse this signal.
The reduction in the deficit proposed by the committee, but vitiated under the Roth amendment, could have a favorable impact on inflation. This would occur if the reduction were reflected in reduced inflationary expectations and subsequently in reduced wage and price demands in the private sector.
The Roth amendment could result in substantially increased budget deficits in future years as well as a loss of fiscal discipline. For example, if the reduction advocated by Senator Roth were approved, Congress could adopt a $32 billion annual tax reduction effective January 1, 1979, for only 9 months of fiscal year 1979. Alternatively, under the Roth amendment, Congress also could enact a $25 billion annual tax reduction effective January 1, 1979, as well as up to $7 billion of unspecified special tax benefits. In neither case, would the budget resolution be violated, yet control over the revenue side of the budget would be lost.
There is no reason to provide the flexibility to enact earlier tax reductions that will almost certainly not be enacted.
Those, Mr. President, and not some cosmetic approach to the deficit, are the reasons why the Budget Committee assumed an effective date of January 1, 1977 rather than October 1, 1978. At that time we did not know about a Roth amendment. All we knew about was a Presidential recommendation. And even though this was the recommendation of a President of my own party, I still said it was sound to delay the effective date from October 1 to January 1 in order to reap these additional benefits.
So, Mr. President, I urge my colleagues to reject the Roth amendment.
Mr. BELLMON. Mr. President, will the Senator yield to me for about 2 minutes?
Mr. MUSKIE. Yes, I yield.
Mr. BELLMON. Mr. President, I think the chairman has made a highly eloquent and certainly sound argument against the Roth amendment. There is one additional argument I would make.
In the final months of the Ford administration, the Ford administration came to Congress with a tax package similar to the Carter package. It consisted of a tax decrease just before an election and a tax increase in January, just after the election. That is what we have now.
If we put in a tax reduction in October, this may make the voters think they are getting a kind of election day present from the Congress, only to find out that in January, when the social security taxes come on, we will take back more than we gave them.
To me, it seems politically dishonest to come along with a tax reduction just before an election, knowing full well that the voters are going to get hit with a tax increase in January. That is another reason I voted to put off the effective date of the tax reduction until January 1 of 1979.
Mr. ROTH. Mr. President, I yield myself 3 minutes.
As I sit here listening to the arguments made against the so-called Roth amendment, I realize they are the same tired old arguments we hear year in and year out. In earlier debate today, when amendments were proposed to reduce Federal spending, the argument was, oh, no, this was a tight budget, there is no place to cut Federal spending. In other words, the Senate was unwilling to cut Federal spending to reduce the budget deficit and ease inflation. But now, when an amendment is proposed to reduce taxes we learn we dare not give the taxpayer a break back home because of it inflationary impact.
Ladies and gentlemen, it is about time we stopped ripping off the middle-class people of this country. I am only asking what the President himself has asked to be retained in the budget resolution. I am not asking today that we establish a tax cut on October 1. I am asking that the Senate have that option, just as President Carter has asked.
The distinguished chairman says that this is unrealistic, that the timetable would not permit it to be accomplished. I find it hard to believe, Mr. President, that the Treasury Department so advised the President that he would make recommendations that are unrealistic. In any event, if we find we cannot accomplish it, there is no harm, because it will not happen.
But notwithstanding what was said by the opposition, the people of this country face a substantial tax increase because of what we have done on social security taxes and because of the fact that, through inflation, almost every American faces an automatic tax increase if he is lucky enough to get a cost-of-living increase in his wages.
I want to stress again that, this amendment does not mandate the type or the date of the tax cut. I intend to argue another day when a tax cut should take place, and I intend to argue another day what the makeup of that tax cut should be. What I am seeking to retain here is freedom of action, the option of considering the President's own proposal of a $25 billion tax cut October 1. If this amendment is defeated, it means that we will lose the flexibility to act quickly in this area of tax cuts if we experience a sharp downturn in the economy in the next few months.
Mr. President, I think that it is about time that we remember the campaign promises of 2 years ago, when there was great talk about less Washington, less Federal spending, less Government regulation, and more freedom of choice on the part of the American people. The one way we can do that, the one way we can provide options to the Senate during the coming months when it considers tax cuts, is to adopt the Roth amendment, which would enable us to adopt, if we choose to do so, the President's own program.