Tax Relief Act of 2005
TAX RELIEF ACT OF 2005
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Mr. GRASSLEY. Mr. President, I yield myself such time as I might consume. This is for the purpose of addressing two amendments before the Senate. I wish to make a short comment on the amendment that was just proposed by Senator Cantwell.
In regard to this amendment, what she terms the anti-gouging amendment, obviously I can't help but say the intent of the amendment might be good, but this is a tax relief bill that is before us. It is not a crime bill before the Senate right now.
We just received a copy of the amendment. There are all kinds of policy questions that need to be considered. So because of this and the fact that it is not germane to the bill, I will be raising a point of order at the appropriate time.
AMENDMENT NO. 2610
I also wish to make a comment on the amendment proposed about a half hour ago by Senator Feinstein. Before I go into the problems behind the Feinstein amendment, let me say that it is unfortunate that our Nation has had to respond to so many unexpected crises over the past 4 years. Most recently, we have had to provide an enormous amount of hurricane relief to families in many of our Southern States. Despite this fact, our economy is growing and continues to grow and, even considering the hurricanes, growing at a rate that nobody would have anticipated considering a possible ripple effect that presumably is not rippling as much as we thought through the economy because of that natural disaster.
As far as Federal receipts are concerned, these are up $275 billion over the prior year, and Federal revenues are returning to their average level of GDP. That average level, if you want a little leeway, is somewhere between 17 percent of GDP and 19 percent of GDP, and that is not just recently, that would be a 50-year average where all Federal taxes coming into the Federal Treasury have fallen within that band. Also, it has been our policy, at least in this administration, to do tax policy that falls within that band of 17 to 19 percent of gross domestic product.
I would like to take a look at the tax increase that Senator Feinstein put on the table. It would increase the top rate by almost 5 percent for ordinary income.
The premise of Senator Feinstein's position seems to be that taxpayers in the top brackets are solely Park Avenue millionaires, that somehow these people are sitting around clipping coupons and drawing all the income from them. The facts show differently, so I would like to go to the facts that are put out by the nonpartisan people in the Treasury Department.
About 80 percent of the benefits of the top ordinary income tax rate go to taxpayers with small business ownership. Those of us from the heartland know that the definition of small business is not determined by some gross revenue taxable income that is used as a basis and the arguments for this amendment. It depends upon whether the business is locally based. It depends on where the business finances its growth from its earnings.
The people who own these businesses are drawn from the community. They go to the local church. They support the local little leagues. Small business, as I see it, and as I know it coming from a Midwestern State, is a very stabilizing yet very dynamic social and economic force in their respective communities and tends to be the bulwark of the strength of the American middle class.
Small business income is generally taxed at an individual rate. In most cases, owners of small businesses put the income of the small business on his or her tax return. As a practical matter, then, the individual tax rate is the rate that is paid by these small businesses as opposed to the corporate rate.
The corporate tax rate, with some exceptions, in the case of some older, smaller corporations, generally applies to big business. The relationship between the top individual rate and the top corporate rate then has a bearing on our policy toward small business and whether or not we are going to give small business the incentives to grow and create jobs because these people create 70 percent of the new jobs in America.
If the top individual marginal tax rate is higher than the top corporate marginal rate tends to be--it is very obvious that you can quantify it--then we are sending a bad signal to small business.
Before 2001, the top marginal rate for small business was 39.6 percent, the rate that Senator Feinstein's amendment would return us to. The top corporate rate is 35 percent. When you look at the difference, that is about a 15-percent difference between the top rate for big corporations and the rate that is used for a small business that is not incorporated.
So small business was paying then, before we made these changes in 2001, about 15 percent more. It is what I call a 15-percent small business tax penalty. When you tax labor, when you tax business--the old principle, you tax more and you get less of it, that was the law at that time.
We recognized the detrimental impact that was having on the economy. So we looked at the Federal tax policy bias against small business, and then we had a bipartisan majority in this Senate, including Senator Baucus, the ranking Democrat, and one-fourth of the Democratic caucus at that particular time voted to gradually--because we couldn't do it all at once--gradually equalize the top marginal rate between big corporate business and small unincorporated business, small unincorporated business paying the individual rate that was 15 percent higher, a 15-percent small business tax penalty, something that common sense ought to dictate is totally unfair.
Since 2003, for the first time in many years, the top rate, 35 percent, has been the same for Fortune 500 companies incorporated, obviously, as for successful small businesses that file the individual return.
Senator Feinstein's amendment would take the first step to restore and perhaps even enhance the 15-percent penalty on small business.
With all the appetite for taxing and spending around here, rest assured, small business will be facing even higher taxes.
Small business creates 70 to 80 percent of the jobs in this country. Why, then, at this time would any Member of this body want to raise taxes on people for their ingenuity and their willingness to take a gamble in creating a small business? Why would they want to do that to people who create 80 percent of the new jobs in America?
So, without a doubt, anyone voting for Senator Feinstein's amendment is, in effect, saying they support raising taxes on these small business people who create 70 to 80 percent of the new jobs in America.
That does not pass the commonsense test. In 2003, it is worth noting that the business community told us reducing the top rate of taxation was their tax policy priority. The small business community told us, when we were writing this legislation, that doing away with this 15-percent penalty, the small business tax penalty, was their top priority.
Now let's think about this. There seems to be a link between tax relief, economic growth, and jobs. Taxes make a difference. They make a difference whether we are going to have economic growth. Without economic growth, there is no increase in jobs. We have seen evidence of that linkage since 2003. Economic statistics prove that when tax relief kicked in, the economy has grown and more jobs have been created. That is the dynamic of the American free market economic system.
Public policy made by Congress makes a difference, and reducing taxes on small business, or at least making sure there is not a penalty against small business vis-a-vis major corporations, have a great deal to do with whether the free market system works. So that tax policy has helped the enhancement of our economy.
We are in the process of thinking about reversing that course. Whether it is intended or not, that is the impact of Senator Feinstein's amendment. Some would speculate that for the minority party--and that is the Democratic Party--it is good politics for the economy to go into the tank; raise taxes as the economy is coming back and economic growth will be stifled. If economic growth is stifled, then jobs will disappear. If jobs disappear, then voters are more apt to throw out members of the President's party, members of the Republican Party.
I am not that cynical. I do not believe some of the opposition would want to put short-term political advantages over the economic well-being of their constituents, but obviously that is the impact of this amendment. So it does make one wonder what everything is about as we deal with these issues.
To sum up, a vote for the amendment by the Senator from California is a vote that will increase taxes. It is a tax increase that comes during economic recovery. I remind people of a quote from somebody who people listen to more than anybody else on how the economy is going and they respect what he says, Chairman Greenspan. He says that the reason we have had these 2 1/2 to 3 years of economic recovery is because of the tax policies that have been put in place in the recent couple of tax bills.
So we do not want a tax increase when we have a recovery. It is a tax increase on the folks that create jobs in America, and that is our hard-working small business owners. For those reasons, I ask that we reject the Feinstein amendment.
I yield the floor.
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Mr. GRASSLEY. I am pleased to be able to report to Senator Kennedy that we do not need a board to tell us how to end poverty.
I quote Washington Post columnist William Raspberry, writing in a recent op-ed piece:
Fatherless families are America's single largest source of poverty. The Annie E. Casey Foundation, ``Kids Count,'' once reported that Americans who failed to complete high school, to get married and to reach age 20 before having their first child were nearly 10 times as likely to live in poverty as those who did these three things.
The Brookings Institution, obviously a liberal think tank, published an analysis of a variety of factors that could reduce poverty. The authors from Brookings concluded that the combination of education, full-time work, and marriage could reduce poverty rates from 13 percent to 17 percent.
The bipartisan welfare reform bill reported out of the Senate Committee on Finance would make substantial progress in helping families make progress in areas that we know would reduce poverty. We could not get an agreement with the other side to get this legislation discussed on the floor. We got it out of the committee in a bipartisan way. It deals with the issues of education, work, and marriage.
Following upon the views of the Brookings Institute and the views of the Annie E. Casey Foundation, rather than engage in politically motivated efforts, we should work together to implement these serious policies of education, of work, and of marriage. Together, by implementing these policies, and we know these policies work, we will take one giant step toward reducing poverty.
I don't think Senator Kennedy's amendment is necessary. I yield the floor.
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THE FDA
Mr. GRASSLEY. Mr. President, today is the anniversary of the hearing on the worldwide withdrawal of Vioxx, the blockbuster drug that became a blockbuster disaster. As chairman of the Committee on Finance, I called for this hearing a year ago. The Vioxx hearing turned the spotlight on a troubled agency in denial. The type of problems exposed during the hearings have proven to be not isolated but systemic.
Over the past year, my committee staff has investigated allegations coming from within and outside the Food and Drug Administration. Brave whistleblowers, such as Drs. Andrew Mosholder, David Graham, and others, have come forward to expose the too cozy relationship between the agency and the drug industry. I can tell you today that problems exist not only within the Center for Drugs but extend to the centers for devices, biologics, and even into veterinary medicine.
I am concerned--and every other Member of this Senate should also be concerned--about this agency's cozy relationship with industry. To further illustrate this problem, I am sending today a letter to another drug company that appears too cozy with the Food and Drug Administration. Last year, 2 days after the Vioxx hearing, the drug company Wyeth met with former Commissioner Crawford. Why did Wyeth's CEO want to talk with the commissioner? Because Wyeth recently had to remove one of its most profitable veterinary drugs from the market.
So what did Wyeth do? They launched an investigation of a Food and Drug Administration employee, Dr. Victoria Hampshire. It was Dr. Hampshire who concluded that Wyeth's drug was killing hundreds of dogs. I have in my hand what Wyeth presented to former Commissioner Crawford. Every page of this document has on it things that are referred to as confidential. It is a 29-page PowerPoint with 10 pages of backup material. It is dated November 19, 2004. Besides being marked confidential, it says:
ProHeart 6 Apparent Conflict of Interest.
In summary this PowerPoint alleges that Dr. Hampshire had a personal and financial conflict of interest. Dr. Hampshire approached my committee staff because she was scared and felt unfairly targeted by the Wyeth Company and also by her agency. Why? Because she was simply doing her job to check to see if drugs were as effective and safe as they were said to be.
Last week, the Food and Drug Administration briefed my committee investigators on this matter. It turns out that Wyeth succeeded in having Dr. Hampshire removed from reviewing its drugs. Dr. Hampshire's hard work and dedication to science and drug safety placed a bull's eye on her back and destroyed her reputation and career--I should say temporarily destroyed her reputation. When you hear the end of this, she got commendation. Without her knowledge, the Food and Drug Administration also launched a criminal investigation against her.
This sordid story is still unraveling. I can say that no action was taken against Dr. Hampshire, and after the investigation closed, the Food and Drug Administration rewarded Dr. Hampshire for her work on the Wyeth drug, which remains off the market. Unfortunately for Dr. Hampshire, Wyeth's efforts to discredit her did not end when the FDA cleared her. At least one Wyeth sales representative attempted to discredit Dr. Hampshire in the veterinary community. Fortunately for Dr. Hampshire, the salesperson's comments about Wyeth's investigation of her and her alleged conflicts of interest were made to a former colleague of Dr. Hampshire. My letter to Wyeth today seeks information and documents related to Wyeth's investigation of Dr. Hampshire and the salesperson's comments.
So a year later, we are still uncovering the cozy relationship between the agency and the drug industry.
In this case, a company had the guts to go to supposedly an unbiased regulating agency and tried to get somebody fired, removed, and even a criminal investigation against them, do everything to discredit
them. That sort of culture and environment should not exist in any regulatory agency with the economic sectors that they are regulating.
Dr. Hampshire's sad story is further proof that the Food and Drug Administration needs a permanent commissioner who can restore order and respect for independence. The Food and Drug Administration cannot serve the American people and the interests of the drug industry at the same time.
A year ago, Dr. Graham created a firestorm when he said at the Vioxx hearing:
I can tell you right now, there are at least five drugs on the market today that I think need to be looked at quite seriously to see whether or not they belong there.......
Dr. Graham identified those five drugs: Accutane, Bextra, Crestor, Meridia, and Serevent, when asked by my distinguished colleague, Senator Bingaman of New Mexico. Some roundly criticized Dr. Graham's testimony as inflammatory a year ago. Today it is noteworthy that the agency has taken regulatory action or action is pending on four out of the five drugs named by Dr. Graham.
Less than a week after the hearing, the Food and Drug Administration announced it was strengthening its plan to reduce the risk of birth defects associated with Accutane. Then in August the agency issued a public health advisory to help make sure females do not become pregnant while taking this medicine and to release more information about depression and suicidal thoughts associated with that drug. A month after the hearing, December of last year, the Food and Drug Administration issued a public health advisory for Bextra. The agency announced it changed Bextra's label to provide consumers with upgraded warnings about possible heart and blood clotting problems. Ultimately, the agency asked Pfizer to voluntarily remove Bextra from the market in April of this year.
Less than 4 months after Dr. Graham's testimony, Crestor was subject to a public health advisory as part of the agency's effort to notify the public of potentially significant emerging safety data. Crestor's label was changed to highlight important information on the safe use of Crestor. Eight months after the hearing, the Food and Drug Administration convened an advisory committee meeting related to the safety of Serevent and other asthma drugs. The advisory committee recommended strengthening the labels for Serevent as well, but the agency has yet to act. Only one drug, Meridia, has not been the subject of any action by FDA.
American consumers are the beneficiaries of these actions. I don't know if the agency would have acted without Dr. Graham's testimony before my committee a year ago. But I know from experience that sunlight is the best disinfectant. The scrutiny of the last 12 months is just the kind of medicine that the Food and Drug Administration needs. Things have not turned around overnight. Reforming this agency is a long-haul task.
For those of us in Congress committed to oversight, reform, and improvement, the Vioxx investigation and hearings, as well as other investigations, prompted me to cosponsor two Food and Drug Administration reform bills this year. Senator Dodd of Connecticut and I introduced a bipartisan bill, the Fair Access to Clinical Trials Act, in February and the Food and Drug Administration Safety Act of 2005 in April of this year. These bills represent part of a sustained effort to restore public confidence in the Federal Government's food and drug safety agency. A number of you have cosponsored these bills with Senator Dodd and me. I urge everyone else who hasn't to consider them again.
Enactment of these bills will be a meaningful step towards greater accountability and transparency for the Food and Drug Administration. And if enacted, they would provide the agency with some much needed authority to ensure the safety and efficacy of drugs.
One big opportunity that absolutely cannot be missed right now is the appointment of a new full-time commissioner who is committed to reform. This leader must recognize the problems of a culture that has become too cozy with the industry.
Then that leader must be tough enough to make necessary changes happen.
The FDA has to do a top-notch job on ensuring the safety of the products it regulates.
And where the FDA lacks the tools and resources to do so, Congress has to step in and help.
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Mr. GRASSLEY. I am against the Feinstein amendment. It is a typical Democratic response to a budget: Raise taxes. They happen to think that Americans are crying, ``We are undertaxed.'' I don't hear that from my constituents. I bet they don't hear it in California either.
If those taxpayers she is talking about were only coupon-clipping, Park Avenue millionaires or somebody from Rodeo Drive, a resident of Beverly Hills, I would not be concerned. But we are talking about taxing small business people 80 percent by the Treasury Department. The people that fall into this category whom she wants to tax are the small business people that create 70 to 80 percent of the jobs in America. There is no reason, when we finally have the individual tax rate at 35, the same as the corporate tax rate, to treat small business the same as we treat corporations--not have a bias in the tax bill. We shouldn't go back to that bias.
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Mr. GRASSLEY. Mr. President, this is an amendment sponsored by Senator Baucus and me. It remedies two matters in the bill. The most important one makes the amendment hold harmless, a pure hold-harmless amendment. The amendment also clarifies that Government contractors will receive the research and development credit. This amendment is fully offset.
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Mr. GRASSLEY. Mr. President, this is an alternative to the Durbin sense-of-the-Senate resolution. The Durbin amendment in essence says certain taxes should be extended and that money ought to be used to provide health care and insurance for children.
We agree that more needs to be done to help uninsured people. But we believe that the pretax policy in place is such a good tax policy--for instance, Chairman Greenspan saying that the tax policy has been good for the recovery and the extended growth, bringing in $274 billion this year over last year. We think we need to do all the things--expanding the economy and everything else--because it is through an expanding economy that middle-income people advance themselves; that we have an opportunity then for more people through more income to be able to buy health insurance. We have to do all those things. We can't change tax policy and count that as doing it.
I urge this as an alternative to Senator Durbin's amendment.
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Mr. GRASSLEY. I am going to give the Senator from Illinois an opportunity to come down out of the grandstand and play on the same playing field I do, and the Senator will have an opportunity to take care of all those people.
The Senator had an opportunity 2 weeks ago on the Deficit Reduction Act. All the things we had in there for the people who do not have health care the Senator had an opportunity to vote for and didn't.
Just to name a few of these: We had the Family Opportunity Act that would have helped 500,000 severely disabled children. The Senator voted against that. We had a vote against a bill in regard to the children's health insurance shortfall. The Senator voted against that. The Senator voted against an outreach and enrollment to get eligible children health care coverage for which they are entitled. If the Senator were serious about helping low-income people, the Senator would have voted for that because we took care of a lot of the children the Senator is talking about.
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Mr. GRASSLEY. Mr. President, there is substantial research that shows the way to make progress in eliminating poverty is to encourage healthy marriages, responsible fathership, full-time work, and education.
The poverty rate for married couple families is 5.5 percent. The overall poverty rate is 12.7 percent. The poverty rate for single-family households, if there is no husband, is 28 percent.
So it is quite obvious, poverty reduction should not be a partisan issue. We know what we need to do to reduce poverty. So we need to roll up our sleeves, work together, strengthen marriage, strengthen fatherhood, promote education, and get people full-time work. That is the way to end poverty. Statistics prove it.
I make the point that the pending amendment is not germane to the measure now before the Senate, and I raise a point of order against it under section 305 of the Budget Act.
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Mr. GRASSLEY. I support the LIHEAP program. Most everybody in this body supports the LIHEAP program. I have had an opportunity to vote for that even in recent days. But we have to make sure we do it in the right way. I have even tried to get oil companies to contribute to the low-income fuel fund. But here we have the Senator resurrecting the old nonworkable windfall profits tax. As Senator Domenici said in previous debate, this is one way of raising the price of gasoline and other fuels.
I ask you to oppose this amendment, and I would raise the point that the amendment is not germane.
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Mr. GRASSLEY. Mr. President, I raise the point, first of all, that we voted on a like amendment a couple of weeks ago. But I want to say why the amendment is defective, as I would have said then. It would require us to raise taxes to extend expiring tax cuts, but it would allow entitlement spending to continue to grow without any offset. This then creates a double standard between current tax law and current spending law.
The amendment also is not germane, and so I raise a point of order.
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Mr. GRASSLEY. Mr. President, I oppose this amendment. This is an increase in the price of gasoline. Also, I don't know how many times we have to vote on a windfall profits tax. This is at least the third or fourth time.
Although there is a tax credit that the tax funds, I want everybody to know there is no guarantee that the tax will not be passed on to consumers with these higher prices at the pump as well as home heating.
This amendment raises revenue. The bill before us raises revenue from oil already taxed. This new tax is not well designed and should be defeated.
I raise a point of order that the amendment is not germane.
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Mr. GRASSLEY. Mr. President, I happen to be the original author of section 45, renewable fuels.
I have extended this provision already through 2008. The amendment will undermine the reconciliation bill by going beyond our 5-year budget window, and the amendment is no longer paid for.
So, regrettably, I oppose this specific amendment. But as the author of section 45, you can be assured that when it is necessary to extend it, we will. I ask you to vote against this amendment.
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Mr. GRASSLEY. Mr. President, this amendment is simply not necessary. The first enrollment period began--can you believe it--just 2 days ago, and somebody says, You know, it is not long enough. It is going to last for 6 months--until May 15.
There are lots of resources available. As one example, States have counselors available to assist beneficiaries under the State Health Insurance Program.
That is the whole point of that program--to help beneficiaries understand the Medicare benefits in the legislation.
The bottom line is that it is no picnic to sort through the fine print of health insurance. It even may rank among the most unpopular and complicated responsibilities of American adulthood--like deciphering your income tax.
The Centers for Medicare and Medicaid Services developed a nationwide network of other community-based organizations that can provide beneficiaries one-on-one assistance. The prescription drug plans base their proposal to serve Medicare beneficiaries on the enrollment period specified in the law. The amendment would affect those proposals and could lead to higher costs for both beneficiaries and the government.
I, for one, am tired of people on the other side seeming to have a lack of confidence in our American senior citizens who are often well informed about the choices they can make and make good decisions.
This amendment is not needed, and I raise a point of order on germaneness.
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Mr. GRASSLEY. Mr. President, I know this amendment is well-intended because if there is anything I hear from my constituents, particularly small business people, it is the problems with health insurance. But it is not going to work with this legislation because it is going to make the reconciliation process out of order.
So I ask the Members to oppose it.
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Mr. GRASSLEY. Mr. President, this amendment is also well intended. It is not germane. I am not going to raise a point of germaneness. I raise the point that it does not fit in with the reconciliation.
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Mr. GRASSLEY. Mr. President, the substance of the legislation is difficult to argue with, but this is an outlay, and you can't have outlays in this particular reconciliation bill. So I raise the point of order.
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Mr. GRASSLEY. Mr. President, this is one of those amendments we have dealt with four or five times. It is a tax on consumers by raising the price of gasoline. It may be used for a good purpose, but it affects the germaneness. I raise a point of order on germaneness. I ask my colleagues to vote against the amendment.
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Mr. GRASSLEY. Mr. President, this is another way of cutting back on the mortgage deduction, the charitable deduction, and the State and local tax deduction. When these provisions of phaseout of deductions were put in years ago, it was subterfuge for raising the marginal tax rate without raising the marginal tax rate.
From Iowa, we are very transparent. If one wants to raise the marginal tax rate, raise the marginal tax rate but do not do it by subterfuge. Besides, this amendment is not germane. I raise a point of germaneness.
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Mr. GRASSLEY. Let me say that I agree with the amendment's purpose to combat abusive tax shelters. We need to eradicate the phony tax schemes that abuse our tax laws at the expense of honest taxpayers. I have worked hard to enact legislation to combat tax shelters by shutting them down and raising the penalties on those who promote and participate in those phony deals. This bill contains many more provisions that do just that. I will add to the bill the increased penalties on tax shelter promoters and on aiders and abettors, and I will support these provisions in conference. These provisions will help deter the activities of those who sell illegal tax schemes and those who help participants in these schemes.
I share the Senator's desire to combat tax shelters, and I share his goals of deterring banks' participation in tax shelters and in exploring ways to let agencies work together to prevent tax shelter activity. However, I think that your amendment has some technical matters that I would like my staff to work through with your staff for future consideration. Combating tax shelters is a constant battle that we will continue to fight.
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Mr. GRASSLEY. No, it is my intention that the provision should not affect the ability of charities to borrow to purchase life insurance, particularly where the people insured are officers, directors, employees or in some cases established donors of the charity that benefits.
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