October 10, 1978
Page 35240
Mr. PACKWOOD. Mr. President, I join in support of this amendment. Time after time, in listening to witness after witness after witness from different business groups, in the Finance Committee, over and over they emphasized the fact that, given the choice, they would rather have a corporate rate reduction than an ADR increase or DISC. Sure, this gave them more flexibility, and this gave them the opportunity to use the money as they thought seemed wise to produce the jobs and invest the capital.
I supported the Nelson amendment. I was a cosponsor of it. I thought it was a good amendment.
The argument now made by the Senator from Missouri that, having passed the Nelson amendment, we have now substantially reduced the incentive for larger businesses in this country, is true.
If you were to say to business, "Would you like an incentive?" they would say, "Sure. We'll take any incentive we can get." Absent a corporate rate reduction, they would take the decrease in the asset depreciation range. Absent the corporate tax cut, they would take DISC. Absent the corporate tax cut, they would take anything they could get. It is some help in capital formation.
But, given the choice, they will promptly opt for a corporate rate reduction rather than any of the secondary or tertiary capital formation devices we give them.
I emphasize again that, having adopted the Nelson amendment, which I supported and which I think was a good amendment, this amendment that the Senator from Missouri and the Senator from New York now offer is a very necessary amendment.
Mr. JAVITS. I yield myself 3 minutes.
Mr. President, I will not reargue the case at all. We argued it very thoroughly. I do wish to emphasize the changed situation.
The fact is that the Nelson amendment takes $194 million and restores it, as it were, to the revenues, because it strikes out the ADR improvement. The ADR increase was very clearly calculated to induce business to make capital investment. That is now gone.
We must, therefore, replace it with another method of spurring capital formation — reduction of the rate of corporate tax. The testimony is clear from economists and from the business community that the corporate rate reduction is the way to go.
Mr. President, I cannot say often enough, in terms of stimulating the economy and shaking it out of the stagnation in which it now lies, that this is the guts of this bill. This is one thing we can do in this bill which will give the American economy a real shot in the arm, for those who employ the people and make the capital investments and do the things which make the American economy the vital organ it is.
I hope the Senate will change its vote. It takes only a few votes, and we will legislate this particular change as we request.
Mr. President, 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.
Mr. JAVITS. Mr. President, I ask unanimous consent that the name of the Senator from Oregon (Mr. PACKWOOD) be added as a cosponsor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LONG. Mr. President, when the President sent his tax recommendations to Congress, they included some so-called reforms; and of those so-called reforms, such as eliminating DISC and deferral, that would have amounted to an annual saving of about $2.6 billion a year for the Treasury, to help cushion the cost of the tax cuts that were being recommended in rates for the larger corporations.
Now, the $2.6 billion worth of cuts, with the reforms to help cushion the cost of the reforms, was not passed. Congress would not buy that. It would not buy eliminating the DISC. It would not buy eliminating deferral.
So that is $2.6 billion that the large corporations will be better off because the President's so-called reforms did not go into effect.
Now, notwithstanding that, the Senate had voted to give the corporations 3 percentage points out of the 4 points of tax cuts that the President recommended anyway.
That makes this a far sweeter bill than the President recommended in terms of dollars. When you eliminate the so-called reforms that cost the corporations some additional taxes and when you then proceed to give them 3 out of the 4 percentage points of the corporate tax cut, it makes it just a much bigger tax advantage than the administration and the House of Representatives intended and I think a much bigger advantage than we intended.
Keep in mind, Mr. President, that the capital gains reduction that is in this bill is a very controversial item, a major cut in capital gains that also benefits the same class of individuals who hold this corporation stock. Even though the corporate tax cut on capital gains is only about a couple hundred million dollars, it is a very big item running into billions of dollars where individuals are concerned, and the individuals who hold the corporate stock are, in the main, the ones who are going to get the benefit of the cut in the capital gains.
Mr. President, when you tax corporations you tax people, either because the tax is passed through to them in the price of the product or because the shareholders find it reflected in the size of their dividends. This bill is extremely good to the people who own those corporations, and that is, after all, what we are talking about. When you are talking about corporations, you do not tax corporations; you tax people, the people who own a corporation or the people who buy the products. This bill is very, very good to those people even though the emphasis of the depreciation does go to small business which incidentally also benefits big business. They get it on the first $100,000 just like the smaller ones do. Even though the depreciation is now slanted toward small business in the Senate bill, big business people can still take it insofar as the Nelson amendment goes.
Mr. MUSKIE. Mr. President, will the Senator yield for a question?
Mr. LONG. I yield on the Senator's time.
Mr. MUSKIE. Yes, on my time, of course.
The other day, in addition, we adopted an amendment — I think it was the Packwood amendment — further reducing the corporate rate to 45 percent. The present rate is 48 percent. The committee bill would have provided 46 percent, and we reduced it further in the Chamber to 45 percent as a result of an amendment that coupled it to 'the elimination of DISC. But we did not eliminate DISC. So that reduction of the corporation tax rate was an additional plus, was it not, for business? I understand that an additional point reduction results in $1.7 billion in revenue reductions this year and that reduction will climb to $2.5 billion in the next 4 or 5 years. Am I correct in saying that?
Mr. LONG. Yes, the Senator is correct. It would mean an additional cut of $1.7 billion.
Mr. DANFORTH. Mr. President, just in very brief response to the Senator from Louisiana, day after day, day after day in the Finance Committee the chairman of the Finance Committee made the point, talked to the witnesses, berated the Treasury Department about the issue of reflows, constantly making the point that a tax reduction is not a pure revenue loss. Now, if the argument about reflows ever applies, it applies about business tax cuts.
I do not think that it is going to produce any revenue to have a high rate of tax on a shrinking economy. That is what we have now. We have a shrinking economy in this country. For every percent we lower the corporate rate, it is $1.7 billion. If we can provide that kind of minor dollar tax reduction and at the same time provide the kind of business confidence long term about a reduced corporate rate so they can make the kind of investment decisions to get this economy moving, then we are going to provide the kind of expanded economy which will produce more revenue than lose revenue.