Press Conference with Sens. McConnell (R-KY); Grassley (R-IA); Lott (R-MS); Smith (R-OR); and Kyl (R-AZ) on Democrats' Management of Congress

Interview

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SEN. GRASSLEY: Well, thank you very much. This is a very important issue, one of the two or three most important issues we have to deal with between now and the end of the year. We have little time left, as you know; we can't delay any further.

So I implore the Senate Democratic leadership to follow the standard that was laid out in a letter that four of us -- of senior members of the two tax-writing committees sent to the secretary of Treasury. I implore the Democratic leadership to work with us Republicans and our leadership to change this legislation that passed the House to a form that can be passed and signed by the president. We need to put the needs of 50 million hardworking, tax-paying families and individuals above partisan politics at this particular time.

So PAYGO comes into this process. From a policy standpoint, PAYGO is supposed to be about fiscal discipline. The PAYGO advocates are pursuing veto spending bills with a goal of $23 billion in additional spending. If the PAYGO advocates prevail, several hundred billion dollars in new spending will be baked into the budget over the next 10 years. How can these same people, I'm asking you, propose to prevent an AMT tax increase on 23 million families only if an unrelated tax increase goes into effect?

Now, back in the early and middle part of this decade, the Democratic leadership opposed the bipartisan tax relief plans that we Republicans here helped get passed then. The main reason for this opposition was their charge that the tax relief would gut -- gut -- the revenue base.

Now, over the period, with these plans in full effect, and the AMT held harmless over these years, revenues have been coming in at levels that are above historic average. With the revenue base preserved, the Democratic leadership now have shifted their opposition to tax relief. The shift has occurred, then, to a new argument. They are insisting that the maintaining a higher revenue base trumps the tax policy of remedying a very flawed Alternative Minimum Tax.

Let me put it another way. The Democratic leadership believes it is more important to raise revenue that we do not intend to collect than to fix the AMT. They're willing to pursue legislation that the president will veto.

But let's have that debate after we've taken care of business and passed an AMT patch that will gain the supermajority in the Senate and, I think, a supermajority that we can get and be signed by the president.

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SEN. MCCONNELL: Questions, anyone?

Q Yes. If the goal is to get something done really, really quickly, are you still going to be sticking to the idea of trying to withhold Republicans' votes to waive PAYGO in order to get some sort of capital gains extension or other tax bills that Republicans have?

SEN. MCCONNELL: (Off mike) -- if you want to answer --

SEN. KYL: Do you want me to comment on that?

SEN. MCCONNELL: Yeah, go ahead.

SEN. KYL: First of all, we're trying to restrict this to the AMT because of the need to do this. But the point that you allude to is an equally valid point, and that is that there are other taxes that we also have not anticipated getting revenue from. And if we do not deal with those tax rates on marginal income tax, on capital gains, on dividends, on the estate tax -- if we don't take action on those, there's going to be a tax increase. And we believe that instead of waiting until the last minute, where people cannot plan against the future here, that we should begin now taking action on those tax rates, just as we are with the AMT.

And so you're right; what we have said is that we shouldn't just deal with the AMT, though we're saying we must deal with it now. But we should also recognize that these other tax rates have to be extended as well, and that just as they're -- it makes no sense to have to, quote, "pay for" a loss in revenue that was never anticipated with AMT, likewise you shouldn't have to do that with these other tax rates either, which we believe were going to continue on, were not going to expire. I can't even believe that most Democrats really support the mother of all taxes, which is actually what would happen if the House bill were to pass.

SEN. SMITH: I'd say something on that score as well. My colleague said it well. But when we initially passed those tax cuts, they were scored as losses of revenue. They were nothing of the sort. When it comes to marginal rates, when it comes to dividends and cap gains that we put in, they made the federal government money and have played a significant part in the health of the American economy. And to repeal those or to allow them to expire does not necessarily raise you money. It may as we account for it here, but in terms of receipts by the Treasury, it means nothing of the sort. So we believe in a low tax society. We believe in a high opportunity society.

Q A real quick question. What's the deadline? We've heard of a number of different times for when Congress must act. Last week the IRS commissioner said that if Congress didn't act starting last week, that the filing season was at risk. Senator McConnell said today that -- (inaudible) -- is going forward, but the filing season wouldn't be late. Do you know when too late is too late?

And two, is this some sort of a cliff where if it's a day late, you'll also have months of delay or is it if it's a day late, we'll also -- (off mike) --

SEN. MCCONNELL: Well, the only thing I can say -- I've got four Finance Committee members behind me, but I can just tell you, I talked to Secretary Paulson yesterday. I don't think he's kidding. So the question is, do you believe the secretary of the Treasury and the IRS or the Democrats?

I don't know if anybody wants to elaborate on that.

SEN. : Well, Chuck, why don't you tell them.

SEN. GRASSLEY: Well, I -- just in one measure of this, I was told last week that whatever forms are needed under present tax law are already going out. So they've already had to move forward.

SEN. LOTT: In terms of the -- the forms are being printed up is what he's saying.

SEN. GRASSLEY: Yeah, that's what I mean.

SEN. LOTT: But keep in mind, too, we aren't going to get it done this week. I mean, I presume we're going to be in tomorrow and maybe Friday, and it looks like we'll be out for two weeks for Thanksgiving. So we'll be back in here until December the 3rd, where we have a very heavy agenda. But in the, you know, the best of all worlds, you know, maybe if we had moved something in the Senate that first week in December, then we'd have to deal with the House, which came up with something that would be totally unacceptable.

SEN. MCCONNELL: Not to mention a presidential signature at the end of the day.

SEN. LOTT: Yeah. And -- so you're really not talking about right away. You're talking a minimum the middle of December. So even if you could say, well, they're not -- you know, maybe they don't -- they could still change the forms, a month from now with the tax season, you know, right around the corner, it is a problem.

Q Senator Grassley, I'm wondering -- Senator Lott mentioned that Republicans tried to repeal AMT back in 1999. Why in the 2001 tax cut didn't you guys -- (off mike)?

SEN. GRASSLEY: Because of operating within the bipartisan necessity of a 50-50 Senate to get the votes that it took to get the job done.

And if it had been a partisan thing, it would have been 50 Republicans plus 1 Democrat. And we had that Democrat probably on our side, but that's two narrow of a margin. So we were operating within a $1.35 trillion tax cut and doing everything that Republicans wanted to do: lowering marginal tax rates.

You know, it was just -- we did do it for four years, but obviously that ran out in 2005. And then we did it again for 2005, 2006. Remember, we had this done a year ago in May. You didn't have this problem.

Q (Off mike) -- still looking at a two-year package for the extenders part. Could you envision a situation where an AMT patch went through but extenders did not?

SEN. GRASSLEY: I think that the extenders will be easier to get done. I think the major stumbling block here, I think, in our committee, if we have to, to compromise with the Democrats, we would have offsets for extenders. We want the AMT patch to go through without, and we're hoping to get some extension of existing tax law as part of our bargain of going along without a revenue offset.

I had a poster on the floor last week that shows that what all the offsets we have to have for the next year, and what revenue we know is coming in, what offsets that we can agree to in a bipartisan way, that we're $109 billion short. So 55 billion is a big hunk of that, and I think the Democrats will welcome and privately thank us for the opportunity to get by without an offset on the AMT.

Q (Off mike) -- dead on arrival -- (off mike) -- filibuster it -- (off mike) -- allow it to get to the White House -- (off mike)? I mean, how do you plan to proceed on that?

SEN. MCCONNELL: Well, we're going to take it one day at a time.

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