October 10, 1978
Page 35266
Mr. GLENN. Mr. President, after cloture was invoked on the tax bill, the so-called Glenn amendment applying the sunset process to tax incentives and tax credits was ruled nongermane, along with other amendments then pending to the bill.
This new amendment was filed prior to cloture, has no budgetary impact whatsoever, and differs from the first in that it would apply only to the tax incentives in this pending tax bill.
Like the first amendment, it would not in itself terminate any of these tax incentive provisions. What it would do is simply provide for the establishment through legislation to be enacted in the next Congress of an orderly review process for these provisions.
Any of the tax incentives involved could be exempted from the process if the Congress so chose. In other words, the amendment would merely instruct the next Congress to examine each tax incentive provision in the enacted legislation in order to determine whether a 10-year review and reauthorization process on the order of that of the sunset legislation should be applied to it.
Mr. President, there was a great deal of misunderstanding that was injected into our discussion on the original amendment, and I hope we can clear any of that away.
To show the importance of what we are doing and what this would apply to, I point out that in the Finance Committee report which accompanies this Revenue Act of 1978, not including what we have added on the Senate floor, has tax incentives for fiscal year 1979 which would result in a revenue loss of nearly $1.7 billion; this revenue loss would increase to $6.5 billion for 1980; $11 billion for 1981; over $16 billion for 1982; and $18.1 billion by 1983.
The cumulative total revenue loss of these tax incentives is $53.6 billion over the next 5 years.
All we are asking for is to establish a review process over those particular items in this bill when it is enacted.
We tried a few moments ago to get a running total of what tax incentives have been added through Senate floor action on this bill, and we were unable to get an accurate total. But we know it certainly will run that $53.6 billion figure up considerably.
All we are asking is that there be some sort of review process established to consider tax incentives on a timely basis. We are not advocating some crazy theory, as the Senator from Wyoming has termed this, that purports to represent that the Government owns all the wealth in this country and only should give back a certain part to the people. I do not subscribe to that any more than the people of Wyoming.
All this bill does is try to set up a procedure for orderly consideration of tax incentives which are in this bill.
So I think all doubts about this have been removed.
I reserve the remainder of my time for whatever comments the floor managers of the bill might have.
Mr. CURTIS. Mr. President, I yield myself 5 minutes.
Even though this amendment is limited to the tax expenditures in the pending bill, it constitutes an adoption of a principle. Once we embark upon it we will have injected into our tax system the question of uncertainty. We will have put into our economy that feeling that you cannot depend upon the permanency of the tax law.
There are those who believe that all so-called tax expenditures are wrong per se. An examination of those that come within the definition will prove to the contrary. For instance, in the field of company pensions there is a tax preference there. Half of the working public do not have the benefit of a company pension. All the money that the employer puts into the pension fund is tax free. The earnings of the pension fund are tax free.
Is that wrong? Is it wrong to encourage companies to provide pensions for the people that work? I think not. But, now, is it wrong, then, for that tax expenditure to grow? If it is not wrong for some companies to have a tax benefit that makes it possible to have a pension plan, is it not desirable that other companies that have not extended that fringe benefit to their employees do likewise?
We had back here a chart the other day that held in horror the amount of so-called tax expenditures, and then horror again because they were growing.
Now, according to the statute, a tax expenditure is defined much more broadly than in the distinguished Senator's amendment. Any deduction is a tax expenditure according to the statute.
We were able to raise the personal exemption to $1,000. Is that bad? That is a growth in tax expenditures.
Mr. President, this amendment is based upon the philosophy that all tax expenditures, or most of them, are bad, and that the growth of tax expenditures means something is wrong.
Mr. GLENN. Mr. President, will the Senator yield?
Mr. CURTIS. Not on my time.
Mr. GLENN. Will the Senator yield on my time?
Mr. CURTIS. Happy to.
Mr. GLENN. How the Senator can read into this amendment any such strange philosophy as that he has just expressed is beyond my comprehension.
We do not adopt any new principle. The principle we adopt here is not a principle, as the Senator says, of trying to put in a deep freeze pension funds, of trying not to encourage pension savings that will accrue to the future incomes of older people.
The one thing this amendment provides is that there will be a review. The review itself is neutral, as I have repeated many times on this floor in the past few days. The result of the review could be to increase the incentive to save: it is working so well, we can leave it at the same level, or, if it is not working, we can terminate it. All we are saying is that there should be a review process.
All those tax expenditures which the Senator from Wyoming has brought up that affect unemployment, workmen's compensation, sick pay, veterans', and GI benefits may very well be increased upon review, not sunsetted. But by precluding such a review, or saying we will not even provide for such a review, we are in effect saying to those people, "Whatever benefits you are receiving now, do not expect us to increase them, because we are probably not going to look at them for the next 10 years."
That is not the philosophy behind this amendment. The philosophy behind this amendment is that we will in fact provide an orderly review process, and nothing more. It provides for a review process, and nothing more; it is that simple.
I yield to the Senator for a reply on his time.
The PRESIDING OFFICER (Mr. LEAHY) The Senator from Nebraska.
Mr. CURTIS. Mr. President, it is not a review process. It stops, and then Congress has to reenact it. A President of the United States and 34 Senators can end it.
Now, here is where it comes in: Who is going to set up a pension plan that the actuaries have to fund or have to work out a funding plan for, and make it solvent down through the years, if they do not know what the law will be at the end of the road? And the big difficulty of this sunset provision applied to our tax law is that it creates a doubt and lack of confidence in the continuity of our tax system.
Mr. President, a great deal of the country's planning is long range. Also — and I am not confining my remarks to this bill, because we are adopting a principle here that is dangerous and wrong — suppose we have a termination of the allowance for research, long-term re-search? What company is going to build a great laboratory and gather students and scholars from all over, and launch out on a long-range research program, if they know it is going to end?
The PRESIDING OFFICER. The Senator's 5 minutes have expired.
Mr. CURTIS. Mr. President, this is the most far-reaching proposal in the field of taxation this Senator has witnessed.
Mr. MUSKIE. Mr. President, I just heard an argument that I found most interesting, and I yield myself 5 minutes.
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. I have heard it so much that I believe I should answer it. It is most interesting. It is the question of certainty.
I assume that when it was advanced, the Senator advancing it was asking us to believe that all these tax expenditures or incentives that affect business decisions are permanent law. That is the underlying assumption, namely, that any such provision of the tax law that is not permanent creates chaos or uncertainty in the investment world, in the financial world, and in the business world.
Let me refer to the report of the Committee on Governmental Affairs on this sunset bill, dated July 1, 1977. Here is a list of such tax provisions which at that time the tax-writing committees themselves had set definite termination dates on:
Tax expenditure: Year
Investment tax credit generally will revert from 10 percent to 7 percent 1980
Expanded corporate surtax exemption 1978
Employment tax credit 1978
ESOP tax credit 1980
Special investment credit treatment for railroads and airlines 1982
Special investment credit treatment for utilities 1980
5-year amortization for low-income housing rehabilitation 1978
Exclusion for prepaid legal expenses 1981
Deduction for removing barriers for the handicapped 1979
And so on and so on. And some of the tax expenditures in the pending tax bill have termination dates.
Well, if the Finance Committee believes so surely that in order to give stability and certainty and investment assurance to the investment, financial, and business world, these things must be made permanent, why have they not made all such provisions permanent?
For a very simple reason: They themselves acknowledge that these provisions, and especially the new ones, ought to be tried. We ought to see whether or not they will work. They ought to be subject to modifications. So they are adopting the very philosophy that underlines the Glenn amendment when they enact these provisions.
We ought to look at these things, and not freeze them in ice. The Finance Committee itself does not do so. There is provision after provision in the Tax Code that can be regarded as an incentive or guarantee of certainty to the financial, investment, and business world, that is not treated as such in the Tax Code. They must be reviewed from time to time and reenacted into law.
That is all that Senator GLENN is requesting. But because Senator GLENN proposes to establish it as a congressional policy to do so, suddenly his action becomes unAmerican, alien, a shock to the business world, the kind of trauma that our economic structure cannot stand.
Then the most laughable thing about it all, Mr. President, the Senator asks us to accept his argument. For the last 4 days on the floor of this Senate we have seen the most chaotic, unpredictable, uncertain procedure for writing tax policy that I have ever seen.
If the business world of America could sit in these galleries and watch how tax policy is written, they would not invest another nickel in America. And you try to tell me that establishing an orderly process for looking at this is against the public interest? I ask anybody in the gallery who has been listening to this: Would we give more assurance to the business world if we adopted this kind of orderly process for looking at these provisions of the tax cut rather than relying on the disorder and chaos of this floor?
The PRESIDING OFFICER. The Senator's time has expired.
Mr. GLENN. I yield 2 additional minutes.
Mr. MUSKIE. The Finance Committee came to the floor with this bill that would cut taxes by 1979 by $20.5 billion. What we have done now is to insure that $20.5 billion tax cut will amount to $144 billion in fiscal year 1983. Is that an orderly way to write taxes? Is that the tax writing method that brings assurance to the country that the country is in safe hands?
Mr. President, I have heard that argument until it is a little bit upsetting to the stomach.
This amendment is a sensible thing. It does not render judgment with respect to anything that is described as a tax expenditure, a tax loophole, a tax preference, a tax incentive, or a tax disincentive. All it says is that on a regular schedule we look at these provisions, just as the tax-writing committees tell us we must look at provisions from time to time. But we must do it on an orderly schedule so that we can all anticipate the time when the provisions will be reviewed, so that the business world and the investment world can anticipate the time they will be reviewed, so that we can all look at their performance to see how they are performing and render a second judgment.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. GLENN. I yield an additional 2 minutes.
Mr. MUSKIE. And if need be a third judgment on the effectiveness and performance of those provisions of the law.
Mr. President, I reserve the remainder of my time.
The PRESIDING OFFICER. The Chair will remind the Senator that the Senator from Ohio was not allowed to yield time to the Senator.
Mr. MUSKIE. I understand that, and I believe I have enough of my own time to take care of this.
The PRESIDING OFFICER. The Chair understands. The question is on agreeing to the amendment.
The Senator from Ohio.
Mr. GLENN. Mr. President, I appreciate the support of the Senator from Maine for this very simple amendment. I could not agree more. The big issue was certainty and yet he has read off item after item on which the Finance Committee itself has recommended termination dates. If there is anything we need in our tax laws it is certainty. The certainty that the tax laws will be fair, certainty that we can rely on them. The certainty that we will not have some tax incentives become the infamous loopholes, the tax breaks that benefit the very few, that do not accomplish the social or business purpose for which they were originally intended, and which, in turn, siphon off needed tax dollars for unworthy purposes. Only by orderly review processes will we ever ferret these out at the earliest possible date.
How we can say now that a tax law passed today will be just as valid down the road in 10 years without any such review, without any such consideration, defies reason.
Yet that is all we are trying to do with this amendment. We want certainty, too. We want certainty that our tax laws will be fair. That is what this guarantees, that a review process will be set up that will consider these tax incentives on an orderly and timely basis over a 10-year period of time.
In establishing that orderly review process we even provide the Finance Committee an opportunity to recommend to the Senate for its approval that certain tax incentives in this bill that we realize are particularly good ones be exempted from even going through this review process.
In order to reduce any potential uncertainty due to the establishment of a review procedure, we provide that the Finance Committee can recommend to the Senate transition rules for tax expenditures included in the schedule in order to insure that those who would rely on those provisions not be adversely affected.
Mr. President, I reserve the remainder of my time. If anyone else wishes to speak, they may.
Mr. LONG. Mr. President, I believed most of this was left behind us when we voted for cloture. We thought that was the idea of voting for cloture, that we would get on to the bill itself, the tax cut bill.
Mr. President, the business community has been assured by the administration that they would recommend that the investment tax credit be made "permanent." Well, this amendment would make it expire in 2 years, maybe 10, something along that line. The earned income credit is permanent in the bill. That helps low-income individuals. That would expire. The capital gains provision in this bill would expire.
It is the same thing about the targeted jobs credit or the exemption for the disabled or the exclusion of the employee benefit plan. The same thing would also be true for the employee stock ownership plans.
Therefore, Mr. President, I think the Senate wants to get on with the bill. I think that they already thought that the amendment was left behind. Mr. President, I do ask that the amendment be laid on the table and I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to lay on the table the amendment of the Senator from Ohio. The yeas and nays have been ordered and the clerk will call the roll.
The legislative clerk called the role.
So the motion to lay on the table was agreed to.
The result was announced — yeas 50, nays 41, as follows:
[Roll call vote tally omitted]