Emergency Supplemental Appropriations for Iraq and Afghanistan Security and Reconstruction Act, 2004

EMERGENCY SUPPLEMENTAL APPROPRIATIONS FOR IRAQ AND AFGHANISTAN SECURITY AND RECONSTRUCTION, 2004

Mr. GRASSLEY. I yield myself such time as I might consume of that amount.

There are three big problems with Senator Biden's amendment. One is substantive and two are procedural. Before I go into the problems with Senator Biden's amendment, I will say that I agree with everybody's concern, including his, about the size of the package and the concern that we should have about the Federal deficit. Hopefully, as the economy grows—and the last figures indicate it is growing now at 3.4 percent—Federal revenues will return then to their average levels of 18 to 19 percent of the gross domestic product, which is an average of over the last 60 years, and we will close the gap.

I also point to the fact that there are really two sides to the Federal ledger. One is the revenue side; that is, what comes in from the taxes paid by our factory workers, office workers, and farmers from across the America. The other side of the ledger is the spending side of the ledger, the appropriations bills by the Congress of the United States.

My friends on the other side of the aisle, as Senator Biden's amendment shows, are zeroing in exclusively on the tax side.
They look only to the taxpayers to put our fiscal house in order. I agree with the goal of reducing the deficit. I disagree that it is appropriate to look at only one side as if what is wrong with America and what is the cause of the deficit is that American taxpayers are undertaxed and that in no way Congress overspends. Indeed, the Finance Committee approved a bill yesterday that included $55 billion in revenue offsets. So Republicans have been willing to exercise fiscal discipline, especially when it comes to closing corporate loopholes and curtailing tax shelters.

I ask the full Senate, who was the last Democrat to propose any savings on the spending side of the ledger? I do not recall a single spending cut being proposed by those on the other side of the aisle. Maybe back in the mid-1990s, but we would have to go back many years.

All I see, and Senator Santorum makes this clear with his spendometer chart, is spending increases. So if those on the other side want to claim to be fiscal disciplinarians, let us see entries on the spending side of the ledger in order for there to be credibility. We cannot just go to the American people and ask for more tax money.

Let me also say that I am concerned about the degree to which taxpayers are financing reconstruction in Iraq on a blank check basis. I first raised this concern almost a year ago. We ought to be very careful about the structure of this aid package.
Maybe it should be a loan or have some equity interest for the taxpayers.

Now I would like to turn to Senator Biden's amendment. Let us go to the substantive problems first. Senator Biden is seeking to offset the President's $87 billion request with a tax increase. For 2001, the top rate was reduced to 38.6. For 2003, the top rate was reduced to 35 percent. Senator Biden's amendment would raise the top rate to 38.2 percent. The premise of Senator Biden's position seems to be that taxpayers in the top bracket are solely Park Avenue millionaires, clipping coupons and enjoying life. Well, the facts show quite differently.

According to the Treasury Department, about 80 percent of the benefits of the top rate go to small businessowners, people who create 80 percent of the new jobs in America. For the first time in many years, because of our tax bills, we have that top rate down to 35 percent, which is the very same as Fortune 500 companies. Senator Biden's amendment would restore a 10-percent penalty against small business, 38.2 percent, as opposed to 35 percent now for small business, the same as corporations.

I do not quarrel with the notion that taxpayers in the top bracket make incomes starting in the range of around $350,000 to $400,000. A lot of these successful small businessowners make those figures. But keep in mind that figure represents the total net income of those small businesses. Successful small businesses are those that purchase the equipment and hire those new workers that I referred to as 80 percent of the new jobs.

I ask my friends on the other side of the aisle who are eager to raise taxes—they are reluctant to cut spending and eager to increase spending—to focus on the negative effects of their policy on small business. Small business creates many jobs.
Why at this time, with high unemployment, would we want to raise taxes on the folks who create 80 percent of the new jobs?

Just yesterday, the Finance Committee, on a 19-2 vote, reported a bill designed to cut the top marginal rate for small business manufacturers to 32 percent. Senator BIDEN's amendment would go the other way and hammer our small business manufacturers.

Now, let's discuss the two procedural problems.

The first procedural problem is also constitutional. Under the Constitution, revenue measures must originate in the House.
Senator BIDEN's amendment is a tax increase. It is a clear case of a revenue measure. The Ways and Means Committee has indicated the House will exercise its Constitutional prerogative and "blue slip" this bill if it contains Senator BIDEN's amendment. A blue slip kills this bill. We go back to square one. A vote for the Biden amendment is a vote to stop aid to our troops. It is a vote to stop aid to the Iraqi people at a critical time.

Let me repeat that point. A vote for the Biden amendment is a vote against aid to our troops. A vote for the Biden amendment is a vote against assistance to the Iraqi people.

From my own perspective, as chairman of the Finance Committee, I have to warn members of our committee that the Biden amendment raises a fundamental tax issue on an unrelated bill. The Biden amendment treads on Finance Committee's jurisdiction. Every Finance Committee member should oppose Senator BIDEN's amendment on that basis alone. But, most importantly, this amendment is a reckless attack on our economic recovery and I strongly urge its defeat.

I ask Senators to defeat the Biden amendment and not increase taxes on small business.

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Mr. BIDEN. Mr. President, I yield myself as much time as I may consume. Senator Grassley is leaving. I wanted to grab him.

I do enjoy the sarcasm of my friend from Oklahoma, who speaks on this floor about 40 times as much as I do, if he goes and checks the RECORD. Always elucidating, if I might add, always elucidating.

I say to my friend, the chairman of the Finance Committee, I understand the points he is making. But he is aware, in terms of small businesses, that a small business owner would still have to be in the top 1-percent income bracket, the 35-percent bracket, to be affected? And, of all the small businesses in America, only 2 percent fall in that bracket? Only 2 percent of the 100 percent of the small businesses in America fall in the bracket.

To further make a point, I understand his point that this is the engine of our economy, small businesses. There is no question about that. There is no question, though, as well—let's say a small business owner is making $400,000 in gross income. The effect of the additional tax he would pay from the tax reduction he has gotten down to now would be $2,140 a year. Is my friend suggesting we are going to constrain and strangle business in America when 2 percent of the small businesses, roughly 5,000, who make $400,000 gross income and above, are going to have to pay $2,100 a year more, that that is going to constrain the growth of small business? Is that what he is saying? Is that going to prevent them from being able to invest or to be able to grow?

Mr. GRASSLEY. I am saying it is unfair to tax small business that is not incorporated at a higher rate than the tax on Fortune 500s, No. 1.

Number 2, this may only be 2 percent of the employers, but they are the people who create the jobs.

Mr. BIDEN. I couldn't agree more.

Mr. GRASSLEY. I have worked at packing plants; I worked at the Waterloo Register Company. I never had one poor person provide the job for me. I always had somebody who makes a lot more money than I do provide the jobs for me. We don't want to choke that off in America.

Mr. BIDEN. I thank my colleague for his response. He is always courteous. I just respectfully suggest that taking 2 percent of the small businesses in America, having them have to pay slightly more than they would have paid with this tax cut that is in place now—which, again, if they are making $400,000 in gross income, that means about $2,100 more they will pay—is a heck of a lot more preferable than asking middle-class taxpayers and asking small businessmen who make $50,000 a year, and mechanics who make $35,000 a year, and schoolteachers who make $40,000 a year, to have to pay more.

I find it fascinating that for those who do not like my proposal to deal with the top 1 percent, I have not heard any alternative offered. Are they suggesting we should repeal part of the tax cut or delay part of the tax cut for everybody? No, they make no alternative offer. The alternative offer they make is we are going to add it to the deficit, so the pages can pay.
I am going to start calling this the page-pay bill. The pages will pay.

I see my friend from Oklahoma, whom I always enjoy hearing, and he was seeking the floor earlier, so I reserve the remainder of my time and await the eloquent words of my friend from Oklahoma as to why this is not a good idea. I am sure he has very many ideas as to why this is not a good idea.

I yield the floor. I reserve the remainder of my time.