[Pages S7421-S7460]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

SMALL BUSINESS JOB PROTECTION ACT OF 1996

The PRESIDING OFFICER (Mr. Brown). Under the previous order, the
Senate will now resume consideration of H.R. 3448, which the clerk will
report.
The assistant legislative clerk read as follows:

A bill (H.R. 3448) to provide tax relief for small
businesses, to protect jobs, to create opportunities, to
increase the take-home pay of workers, to amend the Portal-
to-Portal Act of 1947 relating to the payment of wages to
employees who use employer-owned vehicles, and to amend the
Fair Labor Standards Act of 1938 to increase the minimum wage
rate and to prevent job loss by providing flexibility to
employers in complying with minimum wage and overtime
requirements under that act.

The Senate resumed consideration of the bill.
Pending:
Kennedy amendment No. 4435, to amend the Fair Labor
Standards Act of 1938 to provide for an increase in the
minimum wage rate and to exempt computer professionals from
the minimum wage and maximum hour requirements, and to amend
the Portal-to-Portal Act of 1947 relating to the payment of
wages to employees who use employer-owned vehicles.
Bond amendment No. 4272, to modify the payment of wages
provisions.
The PRESIDING OFFICER. The time until 12:30 p.m. shall be equally
divided between the Senator from Delaware and the Senator from New York
or their designees.
Mr. KENNEDY. Mr. President, may I ask the Senator a question? Did the
Senator include a vote on the TEAM Act after the Defense authorization?
Is that referenced in the Senator's list of votes?
Mr. NICKLES. The Senator is correct.
Mr. KENNEDY. I thank the Senator.
The PRESIDING OFFICER. Who seeks recognition?
Mr. ROTH addressed the Chair.

[[Page S7422]]

The PRESIDING OFFICER. The Senator from Delaware is recognized.
Mr. ROTH. Mr. President, America's most valuable economic resource is
the spirit of enterprise that moves in our people. This spirit is
reflected in men and women and families that build businesses on
dreams, personal risk, and good ideas. It is reflected in the strength
of our communities, communities held together by commerce. It is
reflected in the strong economic status our Nation enjoys, indeed, in
our superpower status. And it is reflected in the security and
opportunity we enjoy as individuals.
The responsibility of Congress, of Government in general, is to help
promote an environment where this spirit can flourish, especially among
America's small business men and women.
How important is it that we succeed in this endeavor? Consider that
there are 22 million small business owners in America today, and that
each year another 800,000 new small startups are created. Consider that
nearly 6 out of 10 Americans get their paychecks from small businesses
and that small business represents 99.8 percent of all American
businesses. They contribute more than half of our sales in our country.
They provide more than half of our economy's output and 55 percent of
all new innovations each year.
Consider, Mr. President, that of the 25 million future jobs that will
be needed to provide employment for Americans, 75 percent will come
from small business. Recently, I heard that the majority of small
businesses today are being created by women. With these trends in mind,
we can see how important it is that we succeed in passing a small
business bill that meets the real needs of America's entrepreneurs, a
bill that unleashes enterprise and rewards risk taking.
Toward this end, Senator Moynihan and I have spent a great deal of
time taking comments from our colleagues pertaining to this small
business bill. We have consulted with the leadership on both sides of
the aisle. We believe we have developed an amendment that addresses the
requests and comments we received.
Before turning my attention to the managers' and leaders' amendment,
however, I would like to address the tax provisions to the small
business bill that are proposed by the Finance Committee.
For small business, the only thing worse than excessive taxation is a
visit from the people at ``60 Minutes.'' Frankly, Mr. President, I know
several small business men and women who would rather face Mike
Wallace. Excessive taxes are the sludge that binds the gears of small
business, and we must do something about them.
The tax provisions proposed by the Finance Committee represents a
good start. They lift some of the burden that is borne by small
businesses. They make it easier for small business men and women to
hire, to expand, to modernize. Our tax provisions facilitate the
ability of small businesses to offer retirement plans for their
employees. They allow businesses to bring more employees into pension
plans.

Beyond all of this, we make both undergraduate and graduate education
more affordable for employees by extending the tax-free treatment of
employer-provided education assistance. These are incentives that will
go a long way toward creating an environment for growth, job creation,
economic security, and real opportunity for Americans. Legislation with
similar tax incentives passed the House by a vote of 414-10.
Specifically, what this bill does is provide an increase in the
expensing of small business equipment from the current $17,500 annual
amount to $25,000 by the year 2003. It offers a package of subchapter S
corporation reforms that will improve the ability of small business men
and women to use this corporate status. Among a number of reforms, the
principal changes include increasing the number of subchapter S
corporation shareholders, easing the use of subchapter S corporations
in the area of estate planning, broadening the access of subchapter S
corporations for small banks, employee stock ownership plans and
charities, and granting greater flexibility in the use of multiple
subchapter S corporations. Additionally, the reforms will permit
taxpayers to keep subchapter S corporation status, and allow
corrections for inadvertent mistakes.

Our bill also contains pension simplification proposals, including
spousal IRA's and a new kind of pension plan for small business. Our
purpose here is to increase access to the pension system for the
millions of small business employees who currently do not have this
important security. One of my major objectives is that spouses be
treated equally when it comes to pension benefits and individual
retirement accounts. Currently, a homemaker can only contribute up to
$250 to an IRA. Under our plan, they would be able to invest up to
$2,000, the same amount contributed by their spouses.
In addition, our package permits tax-exempt organizations to set up
section 401(k) opportunities for their employees, and it simplifies
pension rules for employers who currently offer pension plans. Beyond
this, we offer a package of proposals that extend tax benefits that
have expired. These important benefits include the tax credit for
research and development which keeps us competitive in the global
economic community. They include credits for the very expensive costs
associated with the development and testing of drugs for rare diseases.
These are often referred to as ``orphan drugs''--orphans because their
limited demand makes it otherwise cost prohibitive to research,
develop, and market them.
Included in the package of extenders is an extension of the section
29 alternative fuels credit. This credit provides an incentive for the
production of clean and environmentally friendly energy sources.
Mr. President, in the last 5 years, small businesses have created 9
out of 10 new jobs. In fact, small business provided all the net new
jobs from 1987 to 1992. Mr. President, 9 out of 10 of these firms have
fewer than 20 employees. They are, indeed, the heroes on the front
line. With these changes to the tax law, these small business men and
women will have greater incentives and resources to move our economy
forward.
Should anyone doubt how stalwart these men and women are compared to
those in other countries, should anyone doubt that Government policies
have consequences on their ability to succeed, I refer to a recent
article from the London Sunday Telegraph. According to that paper,

The United States has created 30 times more new private-
sector jobs in the European Union over the last 20 years. . .
The British Treasury reported that the EU created fewer than
1 million net jobs, compared with more than 31 million
produced by the more deregulated American economy.

The stark Treasury figures paint a much grimmer picture
than the Foreign Office' recent White Paper on Europe, which
claimed that the EU had created 8 million jobs over the same
period.
Compiled from independent figures, the Treasury tracks
detailed employment patterns between the two trading blocks
for 1974-1994. With roughly similar populations during that
period of around 250 million, they show the United States
created 31,306,000 net new jobs in the private sector to
Europe's 823,000. . .
Speaking in London on Friday. . . the French commissioner
for a single currency, admitted that overzealous EU
regulation had taken its toll on job creation.

Mr. President, taxation and regulation do have profound influences on
the ability of nations to create jobs. What we propose is to take some
of the burden off the backs of American small business men and women.
My hope is that this is only a beginning, but it is a good beginning.
Now, our tax provision to the Small Business Job Protection Act of
1996 passed the committee unanimously. There is no reason why we cannot
see similar success here on the floor.
Mr. President, I now turn our attention to the managers' and leaders'
amendment. In developing this amendment, I believe we have maintained
the goals that were set out in crafting the campaign finance reform
bill. Our objectives were, first, to retain the bipartisan spirit of
the bill. Second, to stay with two basic themes: To create incentives
for small business and economic growth; and to extend many of the
important tax provisions that have either expired or are set to expire.
Our third objective sought to refrain from opening up controversial
issues, issues that would divide Republicans and Democrats here on the
floor.

[[Page S7423]]

Amendment No. 4436

(Purpose: To provide additional amendments.)

Mr. ROTH. Mr. President, I send to the desk a copy of the managers'
and leaders' amendment.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Delaware [Mr. Roth], for himself, Mr.
Moynihan, Mr. Lott, and Mr. Daschle, proposes an amendment
numbered 4436.

Mr. ROTH. Mr. President, I ask unanimous consent reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The text of the amendment is printed in today's Record under
``Amendments Submitted.'')
Mr. ROTH. Mr. President, I note that a copy of the amendment and its
explanation will be available on the desk of each Senator on the Senate
floor.
Many Members of the Senate have raised tax proposals for
consideration in this managers' and leaders' amendment. Some of these
proposals are outside the scope of the objectives I mentioned. Other
proposals are relevant to our objectives but they are controversial or
costly.
This managers' and leaders' amendment strives to stick with the small
business and extenders themes, so these controversial, nongermane
proposals are not included.
Mr. President, the major components of the managers' amendment are:
First, to extend most of the expired provisions to December 31, 1997.
This is a half-year extension. I note that the section 29 alternative
fuels credit is extended to December 31, 1998, and the grandfather for
certain publicly traded partnerships is extended to December 31, 1999.
Second, this amendment provides additional pension simplification
provisions. Most of these are directed at protecting spouses of pension
plan participants.
Third, at the request of a bipartisan group of Labor Committee
Senators, led by Senator Kassebaum, our amendment offers a
clarification of the effect of the Harris Trust Supreme Court case. The
Harris Trust case overturned 20 years of Labor Department policy
regarding insurance companies. It created additional uncertainty about
the liability of insurance companies that fund employee benefit plans.
Our proposal adopts the Labor Committee's directive to the Labor
Department, mandating a clarification of the treatment of insurance
companies under the Employee Retirement Income Security Act [ERISA].
In a recent letter from Secretary Robert Reich, he stated the Labor
Department's strong support for the Labor Committee's bill. In that
letter, the Secretary writes: ``The legislation will provide the
guidance necessary to avert disruption in the insurance industry,
thereby improving the security of American workers' pension plan
assets.''
Fourth, our amendment provides additional clarifications of the
worker classification safe harbor known as section 530. This concerns
the distinction between employees and independent contractors for
employment tax purposes. I believe these additional clarifications are
necessary steps to help clear up the confusion and controversy in
worker classification.
Mr. President, the managers' and leaders' amendment is fully offset,
and I would like to comment on a couple of these.
First, the managers' and leaders' amendment adopts a proposal from
the President's budget that denies the personal exemption deduction and
dependent care credit if taxpayers do not supply the dependent's Social
Security number. I believe this proposal is necessary to insure against
fraud.
Another important offset is the extension of the 10-percent air
ticket and cargo excise taxes.
The House bill did not include an extension of this ticket tax. The
aviation program's authorization terminates on September 30, 1996. In
response to concerns raised by Commerce Committee members, the Finance
Committee bill extends the ticket tax through the end of this year as
an interim measure to ensure adequate funding for the aviation program
until it is reauthorized.
Under the managers' and leaders' amendment, the air ticket and cargo
excise taxes are further extended until April 15, 1997--an additional
3\1/2\ months. This is an extension I agreed to reluctantly and one I
believe should be revisited in conference with the House.
Mr. President, I believe the managers' and leaders' amendment lives
up to the spirit of the bipartisan Finance Committee bill. I urge my
colleagues' support.
Mr. President, I yield the floor.
Mr. MOYNIHAN addressed the Chair.
The PRESIDING OFFICER. The Senator from New York is recognized.
Mr. MOYNIHAN. Mr. President, I will not take a great deal of time
this morning as I spoke yesterday, and there are Senators who wish to
speak to other provisions of this bill. But I would take as much time
as is required to state my gratitude to and admiration for the work of
the chairman, our chairman, Senator Roth.
Mr. President, would you care to pause for a moment and ask, how many
unanimous, bipartisan, 100-page bills have you seen come to the Senate
floor in the 104th Congress? I think not many. I dare to think there
has not been even one.
The chairman has crafted a major tax cut--a major tax cut. It comes
from a unanimous Finance Committee, and it has other matters attached
to it. But I hope that as we debate those other matters, we would not
overlook the substantive, important revenue provisions in this bill.
I just want to say it is very difficult to make it look easy, and the
chairman has managed that. I want to express my appreciation.
I would particularly call attention to the employer-provided
educational assistance provisions in this bill. This, Mr. President, is
almost surely the most successful education program the Federal
Government sponsors. A million persons a year are provided higher
education by their employers, and the tuition is tax free.
I had occasion to speak about this yesterday. Outside the
organizations involved, not many people would know of this program.
There is no bureau in the Department of Labor for employer-provided
educational assistance, and no bureaucracy; it has no titles, no
confirmations, no assistant secretaries. A million persons a year are
sent by their employers to higher education, about a quarter for
graduate-level education, with the understanding that they are capable
of doing work at higher levels and skills and compensation, and that it
is mutually rewarding to the individual and the firm.
To say again, a quarter of these individuals are going to graduate
schools, and very complex ones. Ask any major employer about their
training systems, and they will say nothing is more helpful than being
able to send a promising young person, or middle management person, to
a graduate school to learn a new field, learn a field that has
developed since that person had his education. That can be very rapid
in many technologies. Consider the area of software: 16 years is
another era.
We have had employer-provided educational assistance in place since
1978, but we have been on and off about keeping it in place. It has
expired. Now we are going to bring it back--retroactive to the last
day's expiration, up to December 31 of this year. In the managers'
amendment, we extend it another year.
I would like to simply say to the chairman that I hope early in the
next Congress we can make this provision permanent so it can be
depended on. This will permit workers to make it part of their plans.
They can go off to the University of Delaware and take another degree
in advanced chemistry, and then come back in another, better, position.
It is part of your career program, and it should be. This is a
wonderful piece of unobtrusive social policy.
I would also like to thank the chairman for including in the
managers' amendment a version of the expatriation proposal I first
introduced in 1995. I will not go into the details at great length, but
we have resolved the expatriation issue in this bill. Expatriation is
the matter of individuals, wealthy individuals, who renounce their
American citizenship in order to avoid American taxes. This is no small
sum. In the course of the next 10 years, this provision will pick up
$1.7 billion.

[[Page S7424]]

This issue arose in 1995 when the Finance Committee reported a bill
to restore the health insurance deduction for the self-employed. We
were going to include expatriation at that time, and yet we had a
series of communications from scholars of the first order, including
Prof. Paul B. Stephan III, a specialist in both international law and
tax law at the University of Virginia Law School; Mr. Stephen E. Shay,
who served as international tax counsel at the Department of the
Treasury; Detlev Vagts of Harvard Law; Andreas F. Lowenfeld of New York
University Law; and particularly Prof. Hurst Hannum of the Fletcher
School of Law and Diplomacy at Tufts University, who raised the
question of whether our statute was legal under the International
Covenant on Civil and Political Rights, which the United States
ratified in 1992. It is our law, treaty law, and it is therefore the
supreme Law of the Land under article VI of our Constitution.
Section 2 of article 12 of the international covenant states:
``Everyone shall be free to leave any country, including his own.''
The expatriation legislation had seemed to legal scholars to raise a
question of infringement of the treaty and, in effect, the law would
fall before the treaty, the treaty being the higher law. Professor
Robert F. Turner, a professor of international law at the U.S. Naval
War College, so testified before the Finance Committee. Although other
experts gave us contrary opinions, it was clear to us that the Senate
should not act improvidently on the matter. Genuine questions of human
rights under international law, and the solemn obligations of the
United States under treaties, were in question. So when the conference
committee met on the self-employed health deduction bill, we had no
alternative but to defer a decision on the matter until we got it
straight. To do otherwise, obviously, would have been not only
imprudent but irresponsible.
Even so, there are persons in the Chamber who wondered whether or not
we were looking after millionaires who renounce their citizenship and
move to the Bahamas, and there were some rather heated exchanges. I
said at that time that you never have to be more careful of human
rights than when you are dealing with persons who are despised. Nobody
thinks very much of a millionaire who chooses to become a Bahamian and
keeps his membership in the Woonsocket Yacht Club.
In the ensuing months, a general consensus developed that it was
possible to craft legislation to curb the abuse of expatriation without
violating our international legal obligations. Which is precisely what
this bill does. We were determined, and we now bring to the floor, Mr.
President, a measure which addresses the problem--and which will raise
$1.7 billion over 10 years. Although not many people expatriate, their
tax liabilities are significant. So this provision will raise $1.7
billion. The Finance Committee has a record, we hope, of being vigilant
about abuses but also concerned and careful about rights. So, Mr.
President, I would like to thank again the chairman for this work. We
have done it well.
We are going to have to be careful in conference about the provisions
on Puerto Rico. We have major provisions we have decided to end after
60 years, the provisions under section 936 of the Internal Revenue
Code, but I think we are doing so in a way that is acceptable to the
elected officials in Puerto Rico and all in all is a good job. It took
us 2 years to get it right, and we bring it before you with pride and
confidence that it will be enacted--whatever else happens in the course
of the day.
Mr. ROTH addressed the Chair.
The PRESIDING OFFICER. The Senator from Delaware is recognized.
Mr. ROTH. I thank my good friend and colleague, Senator Moynihan, for
his contribution to the development of both the Finance Committee
legislation as well as the managers' amendment. It could not have been
done without his contribution. I just want it to be known that he has,
as always, brought great intelligence, skill, and knowledge to this
most important task.
I share with him his interest and concern in education. I think it is
only fair to say that in today's world, where technology and knowledge
are changing so rapidly, there has never been a time for it to be more
important that we keep the most well educated people anywhere in the
world, and certainly Senator Moynihan has been a leader in that effort.
I have to say to my distinguished colleague that many of these
extenders I think are critically important. One of my first questions
on it is, Why don't we make them permanent? Unfortunately, we have a
problem of cost and budget rules, but this is something that we will
have to look at jointly in the future.
Mr. MOYNIHAN. Mr. President, I take that remark with great
encouragement. I think the chairman is right. When the chairman is
right, he will figure how to do what is right. I thank him very much.
Mr. ROTH. At this time, I am happy to yield to the senior Senator
from Kansas.
The PRESIDING OFFICER. The Senator from Kansas is recognized.
Mrs. KASSEBAUM. Mr. President, I very much appreciate the chairman of
the Finance Committee yielding to me for just a moment to comment on
one aspect of the bill. I think the package that has been put together
by the Finance Committee under the distinguished leadership of both the
chairman and ranking member is an important package. I am
particularly pleased that, for example, there has been provision for
educational assistance and the orphan drug tax credit. These were
expiring credits that have been extended that I think are very
important. I am also pleased that the extension of the airway and
airport trust fund has been acknowledged, and I would like to speak to
the clarification of the application of ERISA to insurance company
general accounts. This has also been included in the managers' package,
and I am not sure that it is clearly understood. I am very appreciative
of it being included, and I think it was important to do so. If I may,
Mr. President, just for a moment speak to what this is about.

The Department of Labor has been working closely with all parties for
nearly 3 years to address the complex issue raised by the Harris Trust
decision of the Supreme Court in December 1993. They ruled then in John
Hancock versus Harris Trust that this longstanding practice of
including pension assets as part of a general account could violate
ERISA. The Court recognized it was overturning the Department's ruling
and that its decision created the possibility of serious disruptions in
the pension marketplace. It indicated, however, that any problems could
be addressed legislatively or administratively. So that is what this is
about, and that is why this bill has the full support of this
administration. The administration believed that it had to be addressed
legislatively and that was the only way that we could fully acknowledge
the difficulties that were apparent by the Supreme Court's decision.
In its January 17, 1996 letter of support, Secretary Reich writes
that the legislation:

Will provide the guidance necessary to avert disruption in
the insurance industry, thereby improving the security of
American workers' pension plan assets.

Let me make clear the ERISA Clarification Act, as this is called,
does not overturn Harris Trust. Rather, it requires the Labor
Department to issue guidance by March of next year as to how insurance
companies are to deal with pension plans in the future. To protect the
rights of plan participants and beneficiaries, consistent with the
Harris Trust decision, any guidance issued by the Department must
contain strict standards that companies must meet in order to qualify
for the relief. Failure to comply with these rules will subject any
company to all the sanctions imposed by ERISA on those who violate the
fiduciary responsibility and prohibited transaction rules.
The legislation also prevents the Harris Trust decision from being
applied retroactively. This is appropriate because the life insurance
industry has relied for almost 20 years on Government's interpretation
as to how it was to act under the statute and because exposing the
industry to retroactive liability could severely threaten the security
of pension assets.
In response to some initial concerns raised by the administration and
others, the legislation before us contains

[[Page S7425]]

several modifications. Most important: No. 1, the legislation contains
new, stricter standards to ensure that any guidance issued by the Labor
Department must fully protect the rights and interests of plan
participants and beneficiaries; and, No. 2, the legislation would not
grant relief from proceedings based on fraudulent or criminal
activities by insurers. I would also like to point out the bill does
not affect any ongoing civil actions.
I think this is very important that this be included in the
management package at this time. This is in addition to the State
insurance regulations that already provide important protections to
contract holders, so I am confident that there is the protection there
that is necessary, and it is important that this be enacted at this
time in order to ensure the security of pension assets for millions of
American workers and retirees who hold assets in insurance company
general accounts.
So I am very pleased and express my appreciation, again, to both the
distinguished chairman and ranking member of the Finance Committee for
including this important legislation in their managers' amendment.
I yield the floor.
The PRESIDING OFFICER. Who yields time? The Senator from
Massachusetts.
Mr. KENNEDY. Will my friend, the ranking minority member of the
Finance Committee, be willing to yield 10 minutes?
Mr. MOYNIHAN. Of course. The Senator spoke eloquently yesterday, and
I look forward to hearing him do the same today.
Mr. KENNEDY. Mr. President, will the Chair let me know when there is
a minute and a half left, please.
Mr. President, the other part of this debate is about the basic,
underlying issue, which is whether this country is going to respond to
the very powerful needs of working families who are working 40 hours a
week, 52 weeks a year, playing by the rules, trying to provide for
their families. That is really the underlying issue which the Senate is
going to be voting on in the early afternoon. I wish to address that
particular part of the debate and the alternatives which will be before
the Senate.
Minimum wage workers are the people who do some of the most thankless
jobs in America. They are Head Start schoolteachers, they are teachers'
aides who work with the 50 million of our young people in kindergarten
through 12th grade. They are health care workers who look after our
parents in nursing homes and in hospitals all across this country. They
clean the offices and restrooms, collect the garbage at the curb, make
the beds in fancy hotels, mop up the floors in public schools and
hospitals. Minimum wage workers are the people who make the engine of
our economy work while laboring behind the scenes and toiling at the
drudgery jobs that must be done for America to thrive.
Minimum wage workers have dreams for their families, their children,
and their future, just like all other Americans. They have served their
country in war and peace, and they still believe in the American dream.
They cry into their pillows at night when their children are sick and
they have no money for the doctor. They are giving to America, not
taking from America. They are fighting to stay off welfare because of
the shame they would feel if they took a handout from a Government
established for the people and by the people. Their faces pressed
against the windows of our affluence, they see the riches and abundance
that so many take for granted but so often seems beyond their reach.
But if they work hard and well, they know their children will have a
greater chance for a better life.
The minimum wage increase the Senate will vote on today will bring
millions of those workers closer to that dream, and I urge the Senate
to vote in a spirit of generosity that extends a helping hand, not the
back of your hand, to all those who need and deserve this help. Today,
we have the opportunity to put action behind the rhetoric of family
values. If we really care about work, about families, about children
and the future, we will vote for an increase in the minimum wage for
all workers.
If we care about helping the working poor, then we must support an
increase in the minimum wage, regardless of the size of the company
they work for. If we want to help minorities and women and single
parents, then we must raise the minimum wage for all workers without
the so-called opportunity wage. If we want to help adults stay off the
welfare rolls, we must raise the minimum wage.
Support for the minimum wage is an effective way to achieve the basic
goal of improving the lives of American workers. Raising the minimum
wage is long overdue. The increase we are voting on today should take
effect as soon as possible, obviously prospectively, I hope some 30
days after the President signs it into law. And it should be available
to all minimum wage workers.
I urge the Senate to reject artificial limitations on the size of the
company or the time the worker has been on the job. Reject the
gimmickry and chicanery we see in the Bond proposal.
A fair minimum wage is the goal. No one who works for a living should
have to live in poverty, and I urge the Senate to vote for the
Democratic amendment and against the Republican amendment.
Mr. President, this issue is about the number of individuals earning
the minimum wage and whose hopes and dreams are in the future. They are
about Tonya Outlaw of Windsor, NC, the parent of two girls, ages 6 and
8. She works as a teacher at the Kiddie World Child Development Center.
She worked there for 3\1/2\ years. She used to work at the Purdue
chicken factory, where she used to earn more than minimum wage, but it
was not enough to pay for child care. In order to work, Tonya needed
child care for her children. Working at Kiddie World provided a
solution.
Now Tonya earns $4.25 an hour, and it is very hard to get her family
the things they need. She said sometimes it is hard to provide her
children with things they need like coats, medicines, and other types
of essential needs. Tonya is unable to afford the insurance that they
make available at her children's school, and she is unable to provide
her children the medicine they need when they are sick. If they
increase the minimum wage, she hopes to afford a place of her own, for
her family. It is time for her to get a raise in the minimum wage.
It is time for Alvin Vance, who is 45 years old and works picking up
residential garbage. He earns the minimum wage of $4.25 an hour. He
works 50 hours a week, counting 10 hours of overtime. This provide him
with about $200 take-home pay. Alvin receives no health benefits or
paid vacation, no paid sick days. If Alvin is sick, he will go to the
charity hospital where he can obtain services with little or no charge.
Alvin receives no AFDC, WIC, or food stamps. His rent is $125 a month
for a one-room shack in a high-crime neighborhood. He has no car and
must get a ride or walk to work, which is 7 miles away. It is time for
him to get a living minimum wage.
We heard comments today about the bipartisanship which has
accompanied the provisions in this proposal that has been recommended
by the Finance Committee. Just to point out once again the
bipartisanship which has existed on the minimum wage in the past, Harry
Truman in 1949, with President Eisenhower in 1955, President Kennedy in
1961 and 1963--increases; President Johnson in 1967 and 1968, President
Nixon and President Ford, 1974 through 1976; President Carter, 1978
through 1981, President Bush, 1990 to 1991. This has been a bipartisan
effort.
This is what Senator Bob Dole said in 1974:

A living wage for a fair day's work is a hallmark of the
American economic philosophy.

President Nixon, April 1974, on signing the minimum wage:

The federally legislated minimum wage for most American
workers has remained static for 6 years despite a number of
increases in the cost of living. Raising the minimum wage is
now a matter of justice that can no longer be fairly delayed.

We go into the more recent years in 1989 and 1990, President George
Bush:

It gives me great pleasure to sign into law the first
increase in the minimum wage since 1981.
I have called for an increase in the minimum wage that
would protect jobs and put more money in the pockets of our
workers. . . I am pleased to sign it. It offers promise of
better wages for working men and women.

[[Page S7426]]

Senator Dan Coats during the debate on the minimum wage increase:

Let me state that I am one Senator who is convinced that an
increase in the minimum wage is justified. I do think that by
doing so, we can assist an element of the public, the working
poor, often those a step below or just a step above welfare
and above poverty. And that since the minimum wage has not
been increased since January of 1981, and since it has lost
in that time period nearly 20 percent of its value to
inflation, then an increase in the minimum wage is justified.

It had lost nearly 20 percent of its value in 1989, and Dan Coats at
that time was supporting an increase. Now it is at the lowest level of
purchasing power in 40 years, and the economy's strength certainly
clearly justifies this increase.
Mr. President, this is an issue about work. It is an issue about
children.
The PRESIDING OFFICER. The Senator is advised he has 1\1/2\ minutes
remaining.
Mr. KENNEDY. I thank the Chair. This is an issue about children, the
children of working families that are working hard and trying to make
it. This is an issue about women. More than 60 percent of the full-time
minimum wage recipients are women. It is an issue about families and
family values. It is an issue about the taxpayers, because this is
going to lift over some 100,000 families out of poverty, 300,000
children out of poverty, reducing the burden on the taxpayers, on AFDC
and the Food Stamp Program and other support programs.
Most of all, it is about work. Are we going to honor work in our
society? Are we going to say men and women who play by the rules, work
hard 40 hours a week 52 weeks of the year are going to have a living
wage for themselves, their children, and their future? That is the
option that will be here to vote on at 2:15 and 2:30 this afternoon. I
hope we will support Senator Daschle's amendment.
Mr. GRAMM addressed the Chair.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Mr. GRAMM. Mr. President, recognizing that we are unlikely here on
the floor of the Senate to repeal the law of supply and demand, as many
of our Members would like us to try to do, we have included in this
debate a tax bill, H.R. 3448, the Small Business Job Protection Act of
1996, which was put together on a bipartisan basis to try to offset
some of the negative impacts of an increase in the minimum wage,
especially as it relates to increasing unemployment among young people
with low skill levels. What I would like to do this morning is talk
about some very positive provisions in that bill and explain why I am
for the Small Business Job Protection Act of 1996.
I want to talk specifically about four provisions of this bill that I
have been directly involved in, and explain to my colleagues why they
are important and why it is critical that this bill pass and why we
must send a bill to the President which can be signed.
The first issue I want to talk about has to do with agricultural club
dues. We have had, since 1987, a running dispute between the Internal
Revenue Service and the Farm Bureau about Farm Bureau dues. In this
bill, we have a provision that I and others have pushed which says to
the Internal Revenue Service that: First, dues to the Farm Bureau are
not taxable Farm Bureau income; second, that the Farm Bureau is a
nonprofit agricultural research and business promotion institution
which is owned by its members; and third, that being part of the Farm
Bureau is being part of agriculture.

Interestingly enough, the Internal Revenue Service did not oppose our
effort to say to them that in the future, Farm Bureau dues will not be
viewed as income to the Farm Bureau. Yet for some unexplainable reason,
the Internal Revenue Service has continued to press ongoing lawsuits
against Farm Bureaus in Florida, Georgia, Illinois, Kentucky, Michigan,
Missouri, North Carolina, Tennessee, Texas, Washington State and
Alabama. In these States, there is ongoing litigation--instituted by
the Internal Revenue Service--where the IRS is trying to force the Farm
Bureau to pay taxes they do not owe.
I do not understand how the Internal Revenue Service can say that
they are willing to be supportive of an act of Congress that defines
that for all future times, dues to the Farm Bureau are not taxable
income, but yet refuses to go back and drop all these lawsuits. We had
hoped in the Finance Committee to work out an agreement on this issue.
I worked with the chairman and the ranking member who were hopeful that
the Internal Revenue Service would issue a position paper saying that
it would drop these existing lawsuits, but the Internal Revenue Service
has refused to do that.
In fact, Mr. President, I ask unanimous consent that a letter to this
effect, from the Assistant Secretary of the Treasury for Tax Policy, be
printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:

Department of the Treasury,

Washington, DC, June 24, 1996.
Hon. Phil Gramm,
U.S. Senate,
Washington, DC.
Dear Senator Gramm: This letter is in response to the
question you raised at the Senate Finance Committee mark-up
held on Wednesday, June 12, 1996 concerning farm bureaus.
Last year, in Revenue Procedure 95-15, we clarified that no
tax is to be imposed on associate member dues payments
received by tax-exempt agricultural organizations unless the
organization's principal purpose in forming or availing
itself of an associate member class was to produce income
from an unrelated trade or business.\1\ The approach in the
ruling reflects current law. See National League of
Postmasters v. Commissioner, sl. op. (4th Cir. June 14,
1996,), affirming T.C. Memo 1995-205 (May 11, 1995).
---------------------------------------------------------------------------
\1\ As noted in the Senate Finance Committee report
accompanying H.R. 3448, the focus of the inquiry under the
Revenue Procedure ``is upon the organization's purposes in
forming the associate member category (and whether the
purposes of that category of membership are substantially
related to the organization's exempt purposes other than
through the production of income). . . .''
---------------------------------------------------------------------------
While Rev. Proc. 95-15 was being developed, the IRS
suspended its examinations of agricultural organizations to
ensure that any associate member dues issues that had been
raised would be resolved consistently with the analysis in
the Revenue Procedure. We are confident that as the IRS
finishes the remaining examinations on this issue, it will
follow the Revenue Procedure in analyzing the activities of
farm bureaus and the income they receive with respect to
their associate members.
Of course for periods to which the proposed legislation
would apply (Section 1113 of the Small Business Job
Protection Act of 1996), the treatment of associate member
dues paid to agricultural organizations would follow the
statute as amended.
Nevertheless, if there are cases under audit for taxable
years beginning prior to December 31, 1994 which cannot meet
even the test of the Revenue Procedure, it is not possible to
provide administrative relief, other than relief that may be
available under section 7805(b) of the Internal Revenue Code.
Thus, you should be aware that, because each case will be
determined according to its own facts and circumstances, we
cannot assure you that the IRS will provide administrative
relief in these pre-effective date cases beyond the guidance
provided in Revenue Procedure 95-15.
Please call us if you have any further questions.
Sincerely,
Donald C. Lubick,
Acting Assistant Secretary (Tax Policy).

Mr. GRAMM. Mr. President, to get to the bottom line, basically, the
Internal Revenue Service has said that no matter what Congress does in
terms of defining dues to the Farm Bureau as nontaxable income, they
are going to pursue these lawsuits anyway. So we will be offering later
as part of the managers' amendment an amendment that I have authored
which basically says to the Internal Revenue Service, ``We have made a
decision in Congress, we want these frivolous lawsuits to be dropped,
and we want them to be dropped now.''
This is an issue that should be settled. The position of the IRS is
indefensible in the opinion of the vast majority of Members of Congress
and is indefensible in the opinion of the vast majority of the American
people. We not only want the IRS to stop doing this in the future, we
want them to go back to these old lawsuits and end this harassment once
and for all.
We are taking a major step in that direction in this bill. In an
amendment that the chairman will offer on my behalf later and on behalf
of others, we are also going to go back and, in essence, say to the
IRS, ``Drop these lawsuits and end this issue once and for all.''
The second issue that I think is important in this bill is also
another IRS issue. For some unexplainable reason, roughly 3 years ago,
the Internal Revenue Service decided that newspapers

[[Page S7427]]

and paperboys were cheating the Internal Revenue Service. The Internal
Revenue Service, in a series of lawsuits filed all over the country
against major daily newspapers, said that paperboys--and I use the term
``paperboy'' because there is no comparable gender neutral term in the
English language that I have found, and though I was once a paperboy,
if someone has a gender neutral term, I will be happy to use it--but
until they do, I will use the one that people recognize.
In any case, the Internal Revenue Service has argued that paperboys
are not legitimate independent contractors and that they have, in
essence, conspired with newspapers to avoid being employees and, in the
process, have not paid Social Security taxes, withholding taxes,
unemployment insurance, and Medicare taxes. The ultimate objective of
the IRS, it appears, is to force paperboys to become employees of daily
newspapers.
Mr. President, in the grand scheme of things this is not a very
important issue. But I was once a paperboy--I threw 106 newspapers--and
for the life of me, I cannot understand why the IRS wants to destroy a
system which allows literally hundreds of thousands of young people,
both boys and girls, to be independent businesspeople.
If the IRS had its way, it would raise the cost of having a daily
newspaper delivered to your door and it would destroy an opportunity
that has been part of the American system of small business since
almost the colonial period. In my opinion, the negative impact of this
approach goes far beyond newspapers and the cost to those who read
them.
Let me make the point as succinctly as I can: I am trained as an
economist, and at some point in my career I became interested in
various historic economic periods in America, the greenback and free
silver movement period, and other periods in the 18th and 19th
centuries. One of the things which I discovered was that people in the
18th and 19th centuries, for some unexplainable reason, understood
economics and understood how our economy works much better than
educated people do today.
After having looked at this, I concluded that the reason this was so
is that in the world of the 18th and 19th centuries--when most people
were farmers or independent businesspeople--most people actually bought
things, produced things, and sold things. They were both buyers and
sellers in the market at the same time, and because of this, just
carrying on their daily business provided a tremendous educational
experience for them about how this great economic system works.
Today, when people graduate from college, they go to work for some
big company or for the Government, and for most of their lives they
specialize in one particular field. They may buy things, they may sell
things, they may produce things, or they may even deal with the huge
paperwork and litigation trail that often goes with it--but very few
people in America today are actually engaged in all facets of any
business.
One of the reasons that I have taken on this paperboy issue with a
very strong commitment and zeal is that being a paperboy is one of the
last jobs left where young people are actually in business for
themselves. They buy their newspapers from the newspaper and then sell
it to their customers. I bought 106 copies of the Ledger-Enquirer from
the local newspaper and delivered it to 106 residences and businesses.
I collected the money, as literally millions of paperboys have done
since the colonial period, and in the process not only did I earn
money, but I learned about how our market system works. I think it is
vitally important that we not let the Internal Revenue Service destroy
this great educational and business system that is available to young
people all over America. So I have championed this provision in the
bill that says to the Internal Revenue Service, get out of the paperboy
business. Let paperboys be independent businesspeople. Stop challenging
their independent status. Do not destroy a great American institution
which not only brings the newspaper to our home at 6 o'clock in the
morning, at a very low price, but also is a great business and learning
opportunity for the young people of this country.
So I am very proud of this provision. Is it going to change the
world? No. But for hundreds of thousands of young people all over
America, it is going to preserve their opportunity to be an independent
businessperson. It is going to preserve a great American institution
and it is going to tell the Internal Revenue Service to go make war on
somebody else and leave America's paperboys alone.
The third provision in the bill that I want to talk about is the
research and development tax credit. This credit came into place in
1981 in an effort to try to encourage American businesses to invest in
research and development. If I had the chart with me that I have used
around the country, I could show that in every single year since 1970
Japan and Germany have invested a higher percentage of their gross
domestic product in nondefense R&D than has the United States of
America.

We need more research and development if we want to produce the
products of the 21st century, if we want to be competitive in the world
market. If we really want higher wages in this country, we should not
simply just mandate them in Congress, we should promote investment in
research and development. We should promote investments which develop
new products, which develop new tools, and which develop new ways of
doing things. We need to be the leader of the world in science and
technology, and extending the R&D tax credit is a critical part of that
effort.
Quite frankly, Mr. President, I am disappointed that we are only
extending the R&D tax credit for 18 months. This tax credit should be
made permanent because people need to know with certainty that if they
undertake a long-term R&D project--that if they try to bring a new
product on to the market, or to develop new tools and new techniques,
or to bring the power of science to the farm and to the factory--that
there will be a consistent and favorable tax policy.
The R&D tax credit is broadly supported on both sides of the aisle. I
think it is absolutely imperative that we adopt this bill and put the
credit back into place, and eventually I want to make it permanent.
This business of taking important features in the tax structure and
every 6 months or every year going through the process of re-debating
it creates uncertainty and it greatly reduces the positive benefit to
the country of long-term research, development, and experimentation
expenditures by private businesses. So I think it is imperative that we
make this tax credit permanent. I am pleased that we are reinstituting
it. I see it as a positive step forward, but I do not think we are
going far enough.
One final issue: Senator Hutchison has sponsored, and I have
cosponsored, a bill to eliminate a terrible inequity in the Tax Code.
And that terrible inequity is that if you work outside your home and
the company you work for does not have a private retirement program,
you can put up to $2,000 a year tax free into an individual retirement
account. If, however, you decide to stay at home and raise your
children and be what is traditionally called a homemaker, you lose the
ability to put $2,000 a year into your individual retirement account.
I believe, and Senator Hutchison believes, that the Tax Code
discriminates against people who decide to stay at home to raise their
children and to provide for their family.
I want to make it very clear that neither Senator Hutchison nor I are
trying to make a value judgment here as to what people should do. My
mama worked all during my childhood because she had to. My wife has
worked because she wanted to. But the point is this, the Tax Code
should not discriminate against people based on whether they make a
decision to work outside their home or inside their home.
The provision that is in our bill makes it so that regardless of
whether a person decides to take a job in the economy or whether they
decide to stay, and work, in their home and to raise their children,
they have the equal right to provide for their retirement and to
provide for their individual security.
Under this provision we will let a homemaker, as well as someone who
works outside the home, set up an individual retirement account, and we
will allow them to put up to $2,000 a year tax free into that account.
The net result will be to strengthen families and

[[Page S7428]]

to allow people who stay at home and raise their children to build up a
retirement program like other people can. We will be eliminating an
antifamily element in the Tax Code, and, therefore, I think this is an
important provision.
I am equally committed to the goal of trying to expand what people
can use individual retirement accounts for. Last year, we were
successful in both Houses of Congress in opening up individual
retirement accounts to allow them to be used to build up a nest egg for
a downpayment on a first home, to be used for college tuition, and to
be used for major medical expenses. I think this is an important step
in creating a lifelong saving program which will not only expand
national savings and enrich the country in the process, but will make
it easier for people to prepare financially for the expenditures that
they are going to have to face during their lifetimes. In making it
easier to save, we will make families stronger, we will make people
more secure, and we will spread happiness, which is the only legitimate
aim of a free government.

I am afraid that with all of our efforts here to defy logic and
economics and to repeal the laws of supply and demand that we are going
to forget that there are other provisions being voted on today.
Individually, they do not represent Earth-changing policy, but getting
the IRS out of the business of trying to force the Farm Bureau to pay
taxes on dues, getting the IRS out of the business of trying to destroy
the independent contractor status of paper boys, extending the R&D tax
credit, and letting homemakers have the same right to build up
retirement that those who choose to work outside the home have are all
important changes in tax policy.
I think these changes will be beneficial to the country as a whole as
well as to the individuals who are directly affected. I want to thank
our chairman for his leadership on this bill and for allowing
individual Members who care strongly about these small issues, which
often end up falling through the cracks, to get them into this bill. I
yield the floor.
Mr. MOYNIHAN. Mr. President, I congratulate the Senator from Texas
for a very careful exposition. I think this is perhaps the first time
he has been on the floor as a member of the Committee on Finance.
As many academic theories go, there are problems sometimes with
reality. This Senator from New York at age 12 was a paperboy. He had
learned if at 9 o'clock at night you bought 10 copies of the Daily News
and 5 copies of the Daily Mirror at 96th Street and Broadway and then
sold them in places of entertainment along Amsterdam Avenue, if you
bought them for 2 cents and you sold them for 5, you had a profit of
150 percent capital that very day. I knew all of this by the age of 13.
Somehow by age 16 I had forgotten it entirely. And here I am, looking
for Social Security. That is why I insist Social Security will be
there.
Thanking the Senator, I have the honor to yield 8 minutes to the
distinguished Senator from Minnesota.
The PRESIDING OFFICER. The Senator from Minnesota is recognized.
Mr. WELLSTONE. The Democratic minimum wage amendment that is pending
which I cosponsored is simple and straightforward. It would increase
the Federal minimum wage from $4.25 an hour to $5.15 an hour. That is
90 cents over 2 years, not even indexed for inflation.
Mr. President, the increase in the minimum wage for our Nation for
working families in our Nation is a matter of simple justice. Mr.
President, the Republican alternative to this bill is in many ways, I
think, worse than the House-passed bill. It is certainly not a step
forward; rather, it is a great leap backward. First of all, Mr.
President, the Republican amendment argues that a family would not
receive a raise until January 1, 1997. That would deny people an extra
$500. That is important. We want this minimum wage to take effect right
now. For people who have significant wages, for people who have
significant incomes, $500 may not seem like much, but for many
families, for many wage earners who just make a little bit over $8,000
a year, that additional $500 is a difference that makes a difference.

Second of all, the Republican alternative would create a subminimum
wage that would apply to all workers regardless of age for a 6-month
period. Mr. President, this particular part of their alternative I find
to be egregious. I know of no other word. In other words, we are saying
there will be a 8-month period for wage earners, regardless of age,
regardless of experience, regardless of background. They call this an
opportunity wage. I, instead, call it an exploitation wage. It to me
makes no sense at all. You are 55 years of age, you have been
downsized, you had a good job, and you are saying through this
amendment, that as a matter of fact, people who have been downsized now
have to start out at $4.25 an hour, and for 6 months work at that. They
cannot even receive $5.15 an hour. Mr. President, for a 55-year-old
out-of-work steelworker in Hibbing, MN, that is not justice. For a 38-
year-old waitress in Sauk Centre, that is not justice. For a 27-year-
old young man working in a grocery store in Rochester, that is not
justice.
To make the argument that is not just teenagers, it is everybody,
regardless of their age, regardless of their experience, that for 6
months they make $4.25 an hour, not even $5.15 an hour, I think, is no
less than a scandal.
Finally, Mr. President, the exemption, the small business exemption,
is unprecedented, it is unnecessary, it creates a two-tier wage
structure, and about half of the 10 million or so wage earners and
families that would be benefited by this would no longer benefit.
Mr. President, when I look at this alternative and I look at all of
the exemptions, I look at all the delays, and all of the rest of it, it
is hard to determine under the Republican alternative, who, if anyone,
would actually receive an increase even if their bill was to become
law. There are so many loopholes and so many exemptions to the Bond
alternative that after all is said and done, if it was passed, it is
hard to even figure out who would actually receive an increase.
Mr. President, we should have no illusions about this on the floor of
the Senate. Justice delayed is justice denied, and the Bond amendment
does not represent a step forward.
Mr. President, I would like to talk about this minimum wage debate
and this vote, which I think is a historic vote on the floor of the
Senate, in a national context and in a family context. I do not think
this is a vote really about the minimum wage. I think it is about more
than a minimum wage. For the vast majority of Minnesota families and
families in this country, they view this as providing a foothold into
the middle class. Over 50 percent of the minimum wage workers are
adults, they are not teenagers. Over 60 percent of the minimum wage
workers are women, and for these women and these men and their
families, an additional $1,800 is a difference that makes a difference.
It means you can buy the groceries and put food on the table. In a cold
weather State like Minnesota you can pay the heating bill. You might be
able to afford your tuition at a community college.

Mr. President, this is not about just the minimum wage. It is more
important than the minimum wage. This is about the squeeze that
families feel. This is about the concerns that people have that their
children in their twenties cannot find employment that they can count
on. That is to say, a job that pays a decent wage. This is about the
concern that people have that they cannot afford to send their kids to
college. This is about the concern that people have that they cannot
make ends meet. This minimum wage amendment that we have introduced
represents a step forward for our country. Justice delayed is justice
denied. The Bond alternative does not represent a step forward, Mr.
President. It represents a step backward.
Now, I will not go through the whole political economy debate but I
will make two final points. Point one, you look at Salomon Bros. report
on this and they say if you raise the minimum wage you have people who
can consume more and the economy does better and it creates more jobs,
and then you have 100 economists that signed the letter, including a
Nobel laureate economist, and they say this is a modest increase, it
will not lead to a decrease in jobs. We use to have bipartisan support
for raising the minimum wage. We used to believe it was the right thing
to do. We

[[Page S7429]]

used to believe it was a matter of fairness and justice. We should pass
this minimum wage in its strongest form.
Mr. President, the National Retail Federation, in talking about the
Bond amendment said, ``Passing the Bond amendment is probably our best
chance to kill the minimum wage increase.'' ``Passing the Bond
amendment is probably our best chance to kill the minimum wage
increase.''
Senators, colleagues, if you vote for this amendment, that is what
you are doing. You are killing the minimum wage increase. There are so
many exemptions built into it and so many loopholes that all of the
wage earners and all of the families that could benefit will not be
able to benefit. We are not going to be able to fool anybody. You
cannot duck and run. You cannot hide. You cannot duck for cover. You
cannot look for a political cover vote--and that is what this amendment
is.
We should vote for this minimum wage. It is long overdue. It is the
right thing to do. I hope that there will be very strong support for
it.
Mr. President, let me just finish on a somewhat different note and
just reference some of the remarks that my colleague from Illinois is
going to make.
I am concerned with the managers' amendment. We now just had a chance
to see the specifics. It is very long, very involved, and there are a
number of provisions in this amendment that I am extremely concerned
about.
My colleague from Illinois I might ask very briefly to speak about an
important Supreme Court decision and what is in this managers'
amendment.
Mr. SIMON. Yes. There are a number of things. I thank my colleague
for yielding.
The PRESIDING OFFICER. The Senator is advised that the time has
expired.
Several Senators addressed the Chair.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. I yield 10 minutes to the distinguished Senator from
Missouri.
Mr. WELLSTONE. I wonder whether I might ask unanimous consent for 1
more minute so my colleague can finish this.
Mr. GRAMM. Mr. President, if we could amend the unanimous-consent
request so that the distinguished Senator from Minnesota has 1 more
minute but at the expiration of that minute the distinguished Senator
from Missouri be recognized for 10 minutes.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. WELLSTONE. I thank my colleague.
Mr. SIMON. I thank my colleague. There are several provisions in
here.
First of all, ESOP's--we take away the advantage. We have always said
ESOP's are a good thing. Now we retreat on that. Harris Trust is a
provision that protects the pension funds. I do not know how much is at
stake here; $300 billion is one figure. I heard $500 billion, another
figure.
This complicated thing we are acting on without a hearing. I do not
think it makes sense.
Then, finally, we are changing the small business provisions on
401(k) plans so that highly compensated executives will have advantages
over those of lesser incomes.
I think the managers' amendment is a very bad amendment.
The PRESIDING OFFICER. The Senator from Missouri is recognized.
Mr. ASHCROFT. Thank you, Mr. President.
I am pleased to have this opportunity to participate in the debate
that relates to the compensation levels received by American workers.
It is an important debate, in my judgment, because it allows us to
address the problem which is understood by people across the political
spectrum and around the country.
The fact is that take-home pay has declined by 6.3 percent since its
1989 level. Americans' tax burden has been going up while their take-
home pay has been going down. Currently, we charge people more for
government than we have at any other time in history. That troubles me.
Americans spend more on taxes than they do on food, clothing and
shelter combined.
This concept of wage stagnation, of the flatness of wages, has really
caused the American people to be troubled. The Senator from Minnesota,
Senator Wellstone, recently--in fact, just a few moments ago--talked
about the fact that families are struggling to make ends meet, are
worrying about how they get their kids to college, are worrying about
being able to move into the work force and are worrying about getting
the kind of experience which is necessary in order to become
productive, long-term workers in our economy.
So I think there is an important condition to be addressed. It is a
condition of wage stagnation, of a flatness in terms of take-home pay.
As I spent the last couple of weeks, or almost a couple of weeks,
home in Missouri, I worked with workers side by side. I worked with a
group of workers in the Eagle Pitcher Corp. which manufactures
batteries for use in satellites. I did assembly line jobs and those
workers are concerned about their take-home pay. I worked in the food
service industry. And, yes, those workers are concerned there about
their take-home pay. One day I worked in the apparel industry--in
manufacturing of clothing and uniforms. And those workers also are
concerned about their take-home pay.
While individuals are concerned about their take-home pay--none
mentioned an increase in the minimum wage. They understand that the
minimum wage is something that would address only between 4 and 5
million people in this country, and many of those individuals are not
full-time workers.
I think we need to address this problem of wage stagnation far more
substantially than we would if we were to increase the minimum wage.
There are problems attendant with increasing the minimum wage which
would intensify the economic difficulty for individuals, not relieve
it. For instance, the Congressional Budget Office indicates that a 90-
cent increase would create employment losses in the country from
100,000 to up to 500,000 jobs lost. I do not think we want to craft
relief that will cause a significant number of American workers to lose
their jobs.
Seventy-seven percent of the American Economists Association
responded that a minimum wage increase would have job losses that are
substantial.
Even the Democratic Leadership Council opposes a minimum wage
increase. Even the Clinton administration understands this concept.
Secretary Reich, in a letter to President Clinton, dated July 20, 1993,
wrote: ``A full assessment of where to set the minimum wage should
consider a wide range of factors beyond its income effects on the
working poor. After all, most minimum wage workers are not poor.''
So if we really want to try to increase the take-home pay for
individuals, I do not think the minimum wage is a very good way to do
it.
First, many of those who are on the minimum wage are not poor people.
About 57 percent of these workers are in households with income of over
$45,000.
Second, we do not want to shrink the job base for this country in the
process of helping people.
So what kinds of alternatives are there for helping people with flat
wages which also do not shrink the job base but grow the job base,
which do not just address 4 to 5 million people but address 70 or 80
million people? What are the kinds of things that we can do to provide
relief that really would help families--generally--across the board,
rather than focus on less than 5 percent of the American work force?

I believe that there is such an opportunity, and I have offered it in
the U.S. Senate. Almost all of the individuals who speak so eloquently
in favor of the minimum wage voted against this proposal. But the truth
of the matter is this proposal would help almost 80 million workers
instead of 4 million workers. It is something that would grow the job
base of the United States by a half million jobs instead of shrink it
by a half a million jobs.
It would be something that would allow a broad base of Americans to
have more take-home pay rather than just helping a few. It is this--
right now, as Americans pay more in taxes than we have ever paid in
history, we pay double taxes on the Social Security taxes which we have
deducted from our paychecks. It is money we never see.

[[Page S7430]]

The money actually is taken by our employer and sent to the
Government. It is the Social Security tax of 6.2 percent of our income.
Then we are later charged income tax on that same tax which we have
already paid.
If we were to allow this tax to be deductible to ordinary workers
like it is deductible to corporations which pay the other half of the
Social Security tax, we would have a $1,770 impact on the average two-
earner working family, and that would benefit 77 million-plus workers
instead of 4 million-plus workers. It seems to me, if we want to
address this challenge in our culture, which has recognized the
flatness in take-home pay, we ought to do it on a broad base for
Americans rather than a narrow base, and we ought to do it in a way
that grows this economy rather than stunts the economy.
As the economists have indicated, a mandated increase in the minimum
wage could result in up to 500,000 jobs lost. However, the economists
have indicated there would be 500,000 jobs gained if we were to provide
this kind of tax relief to American families.
I think we ought to find ways to grow ourselves into helping people
out of wage stagnation rather than stunt the economy and hope there
would be those who would benefit as a result, in spite of the fact we
had substantial job losses. The reasons are substantial to provide
deductibility of our Social Security taxes which we pay from our income
taxes.
First, it is necessary to eliminate this double taxation on American
families.
Second, corporations which pay the other 6.2 percent of a person's
earnings in order to make the total combined 12.4 percent of earnings,
deduct their share--yet, the average worker cannot deduct their share.
This fundamental lack of fairness, this disparity in tax treatment
between the corporate side and the individual side should be resolved.
Finally, if we really want to help American workers. We ought to be
looking out for workers generally rather than a very small segment of
workers, many of whom are only part-time employees. Many of whom are
the youngsters like my children. They began work in the fast food
industry. Well, some 40 years ago I began work in the fast food
industry myself, or at least in the ice cream industry. I do not think
there was really fast food in those days. But I think we ought to find
a way to help American families generally, and we can help American
families generally by providing tax relief for American families
generally. It is tax equity because it would give the American family
the same tax break that the American corporation enjoys. It would be
tax fairness because it would stop a double taxation on American
families. And it would help grow the economy rather than slow the
economy, which is the way we ought to try to move people ahead in terms
of their own wages.
That ought to really be the focus of our endeavor. We ought to try to
benefit families generally. We ought to try to provide help and
assistance to the 70 or 80 million wage earners that could be assisted
from this proposal rather than limit our assistance to the 4 million or
so individuals who are involved in the minimum wage category.
I believe there has been an appropriate recognition, a diagnosis, if
you will, of a discomfort in the American body politic. The diagnosis
is for wage stagnation. I believe we can remedy that by providing tax
relief for American families generally, rather than seeking to focus
our efforts on a very small segment of the American population.
The PRESIDING OFFICER (Mr. Campbell). The Senator's time has expired.
Mr. ASHCROFT. Mr. President, if my time has not been consumed, I
would reserve the remainder.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. MOYNIHAN. Mr. President, I yield 8 minutes to the distinguished
Senator from California.
The PRESIDING OFFICER. The Senator from California is recognized for
8 minutes.
Mrs. BOXER. I thank the Chair. I thank very much Senator Moynihan who
has been working so hard to put together a measure this body can pass
and feel good about. I thank him specifically for helping us with some
very important provisions dealing with pension protection for widows.
Without going into those details, I see that it has been included in
the managers' amendment, and I am very grateful because what happens
many times, I say to my friend, is that when a person loses a spouse--
in this particular case I am talking about, it is usually a woman left
in a circumstance where the pension that they were receiving together
drops from 100 to 50 percent, and there are ways to fix that so the
couple gets two-thirds in pension, so that there is no dropoff after a
death. What we have been saying is that this option ought to be
available, and the committee, on a bipartisan basis, has recognized
this, and I am grateful to all sides on that.

On the other issue about which I rise to speak, I am not as pleased
because I am worried. I am worried that while we take up the minimum
wage, there will be enough votes to carry what I consider to be an
egregious loophole, and I think if it does pass--and I am very hopeful
it will not--what we will be doing here today really is more of a sham,
because we have information which says that if the Bond amendment
passes--and I know my friend from Missouri really believes it is the
right thing to do, and I respect his view; I just do not happen to
agree with it--if the Bond amendment would pass, 50 percent of those
who would get a minimum wage increase would not get that increase.
I think that would be a little bit akin to going to a birthday party
for twins, and you can imagine two little children 6 years old, 7 years
old, and you give a gift to one and nothing to the other. I do not
think anyone in America would do that. I do not think we should treat
our working people that way. Simply because one works for a large
corporation and another for a small should not mean that we punish the
one who works for a small corporation. By the way, the definition of
such a corporation is $500,000 in business, which is not exactly a mom
and pop operation. And so I am worried about this vote today. I am
excited, frankly, that we finally come to the point where we have a
chance to vote for a clean minimum wage. I am not so sure the body will
do so.
Really, the question today is whether there will be a straightforward
increase in the minimum wage, which is at a 40-year low. That increase
will go soon to the people at the bottom of the economic ladder that my
friend from Massachusetts, Senator Kennedy, I think, has described so
well--who these people are and what they do. They are at the very
bottom of the American economic ladder. They work very hard. They earn
well below the poverty level. We are calling for a slim dime-an-hour
increase for those people over 2 years--over 2 years. I think we ought
to just do that the way we have done it in the past.
Again, the Senator from Massachusetts has pointed out that under
President Nixon we have done it, under President Bush we have done it,
under President Kennedy we have done it, under President Carter we have
done it, and we really did not set up a two-tiered permanent system. We
never did that before. We should not do it now. We have never set up a
subminimum wage. We have never done that before. We should not do that
now.
I just want to point out to my colleagues that the issue of the
minimum wage in many ways is about people who are struggling to earn
money for their families, and many of them are women. As a matter of
fact, most of the people on the minimum wage are adults, and most of
those are women.
There is a particularly egregious part of the Bond amendment that I
hope Members will look at and vote against. That has to do with those
workers at the bottom of the ladder who count on tips--in other words,
waitresses and waiters and others. Now, again, these are the people who
work with the sweat of their brow, and they go home at night and they
can barely stand on their feet. I want you to know that 80 percent of
those people are women. They are women. What we are going to do here is
freeze in their minimum wage because, under the current law, people who
count on tips get half the minimum wage. Actually, it used to be 60
percent, but we changed that in the 1980's. They get half the minimum
wage and then they get their tips to

[[Page S7431]]

compensate. In the Bond amendment we freeze that at the current half of
the current minimum wage, and therefore those folks are frozen in place
and they are going to go down the economic ladder.

Why would we do that when we have a chance today to send a message,
Republicans and Democrats alike, that we think everybody ought to be
brought along in this economic recovery? We hear there is good news out
there. There is good news out there. There is more to be done, but we
are seeing that unemployment rate go down.
So my message here this morning is this: Why do we not just do the
right thing? Just do it. Just vote for an increase in the minimum wage
the way we have done for so many years. And this argument that, oh,
jobs will be lost and it will be inflationary--if we had that attitude
we would still have people working for 50 cents an hour. If we truly
believed that every single minimum wage increase was going to bring
loss of jobs we never would have increased the minimum wage. Why do we
not do the right thing today?
Mr. President, I hope we will defeat the Bond amendment and pass a
clean increase in the minimum wage.
Mr. MOYNIHAN. I thank the Senator from California.
The PRESIDING OFFICER. Who yields time?
Mrs. KASSEBAUM. Mr. President, I yield 10 minutes to the Senator from
Utah.
The PRESIDING OFFICER. The Senator from Utah, [Mr. Bennett], is
recognized.
Mr. BENNETT. Mr. President, one of the things that continues to amaze
me in my service in the Senate is how we, in this body, spend all of
our time projecting and conjecturing about the future and not much time
looking at the past in an attempt to find out if there is a model that
can give us a more sure understanding of the future than the
projections of professional pundits and economists. In this debate on
minimum wage, we do have a clear model from the past which illustrates
what happens when the minimum wage is raised. I want to spend some time
this morning talking about this model.
By coincidence, the best summary of this model appeared in this
morning's New York Times. Under the headline, ``Thesis, Rise in Wages
Will Hurt Teenage Group,'' we have the following:

At one time, Sidewinder Pumps Inc., in Lafayette, La.,
would hire a dozen or more young people to work each summer
at minimum-wage jobs like weeding or expanding the parking
lot--tasks that were not really essential to the company but
that let it give teenagers a taste of what paid work is like.
When the Federal minimum wage went up in the early 1990s,
the company cut back to three or four summer workers. And
this year the prospect of another increase led the company to
end this quarter-century tradition.

The last time Congress raised the minimum wage this company cut back
the number of minimum wage earners. Now, some are proposing to raise
further the minimum wage and this company is now eliminating more jobs.
This situation is not theory, but actual experience, actual practice.
The article goes on to give us some statistics:

In March 1990, just before the Federal Government raised
the minimum to $3.80 from $3.35, 47.1 percent of teen-agers
had jobs, but that promptly began a slide that carried it
down to less than 43 percent a year later, when the $4.25
wage kicked in. The figure then tumbled to 39.8 percent by
June 1992 before slowly recovering to 43.2 percent now.
``The timing of the drop in teen-age employment is
absolutely coincident with the increase in the minimum,
whereas for other groups the recession's bite was delayed,''
declared Finis Welch, an economics professor at Texas A&M
University and a prominent student of the subject.

In other words, the last time the minimum wage was raised, the group
that was hurt the most, in terms of unemployment, statistically and
historically, was teenagers. The article states:

Black teenagers, often most in need of basic job skills,
fared even worse. At the beginning of 1990, 28.8 percent of
this group held jobs. But lack of hiring and dismissals drove
this down to 22.5 percent by January 1991 and to a low of
20.4 percent in August 1991. Not until April 1996 did it
recover to 28 percent.

In other words, they started out at 28 percent. The minimum wage was
raised, and black teenagers saw employment go all the way down to 20
percent. It has taken 6 years to get back to 28 percent. And now some
want to again raise the minimum wage so that black teenagers can see
their employment go back down, the way it did the last time the minimum
wage was raised.
The article continues:

``Teenagers shouldered a disproportionate share of the
burden'' even after allowing for their ranks contracting from
demographic trends, said Erich Heinemann, an economist at
Brimberg & Co., a Wall Street firm. ``To a very significant
degree,'' he added, ``the 1990-1991 recession was a teenage
recession.''

The article summarizes:

[Some have] found the 1990-91 experience persuasive.
``The last increase turned out to be a cruel joke for low-
skilled teenage workers,'' he declared. ``To the extent that
the minimum is raised high enough to positively affect wage
levels,'' he contended, ``it will negatively affect the
demand for labor.''

Like many in this body, I worked as a teenager. I started out when
the minimum wage was 40 cents. You do not earn a lot of money at 40
cents an hour. Frankly, the money was not the most important reason for
me to work. It seemed important at the time, in fact, it seemed like a
tremendous boon to me because I was earning more money than I received
in allowance from my parents. But looking back on it, the most
important thing I gained from working at age 14, was the experience of
going to work: Showing up on time, staying the full work period whether
I was bored or not, punching out at the proper time, dressing in proper
attire--the kinds of experiences which I find far more valuable than
the money. We are denying these experiences to more and more teenagers
when we raise the minimum wage. Fortunately, the amendment by the
Senator from Missouri will allow many teenagers to continue to have the
work experience that this Senator had when he was a teenager.
For me, the lessons learned from the last increase in the minimum
wage are persuasive. We should learn from the past. We should learn
from what happened last time and be very, very careful about raising it
this time.
At the risk of sounding more demagogic than I would like, I say to
teenagers who lose their jobs, to black teenagers who see a repetition
of what happened in 1990-91 when they appealed, ``Where did the jobs
go,'' the answer might be, ``Talk to the senior Senator from
Massachusetts. In the name of trying to help you, he has fashioned a
program that has destroyed your jobs.''
I know the Senator from Massachusetts does not have that motive. I
know he is acting out of the best of intentions. But I say that past
experience in raising the minimum wage indicates that history will
repeat itself and we will again see jobs lost. I plead with the senior
Senator from Massachusetts in the name of the teenagers whose jobs will
be destroyed, to examine past history and do his best to see to it that
we do not repeat the mistakes made 6 years ago.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. MOYNIHAN. Mr. President, I am happy to yield 8 minutes to the
junior Senator from Massachusetts.
The PRESIDING OFFICER. The Senator from Massachusetts, [Mr. Kerry],
is recognized for 8 minutes.
Mr. KERRY. Mr. President, thank you very much. I thank the Senator
from New York.
Mr. President, let me address some of the concerns that were just
raised by the Senator in Utah. The facts show that through the years,
there may be individual instances where there is a tailoff in the
numbers of teenagers who might be hired by a particular company but,
broadly speaking, the number of teenagers who are helped by the
increase in the wage is much greater. The fact is that any company that
requires a certain amount of work to be done is going to pay somebody a
wage to do that work that they want to get done. They are not just
hiring teenagers as a matter of altruism.
Generally speaking, we in the U.S. Congress have recognized our
responsibility to make up for that gap so that teenagers have the very
opportunity that the Senator from Utah talks about. That is why
historically we have had a Summer Jobs Program, until our Republican
friends in recent years have seen fit to zero it out--zero it out.

[[Page S7432]]

The basic issue here remains the same: What are we willing to give in
America as the value of an hour's work? We decided that in the late
1930's, and under every President since then, Republican or Democrat
alike, with Republican votes and Democratic votes--we have raised the
minimum wage. And with what impact, Mr. President? With the impact that
unemployment has gone down and the wages of more Americans have at
least come up closer to the poverty level.
My friend from Texas earlier said we should not monkey with supply
and demand. But this is the same Senator who is down here voting to
preserve the wool and mohair subsidy. If that is not monkeying with
supply and demand, not to mention all of the pages in here of different
tax provisions, subchapter S provisions, depreciation allowances--we
monkey with it every single day. The question is, For what social
purpose do we do that?
The fundamental issue before the U.S. Senate is, for people who work
hard and play by the rules, do they deserve a raise? Not a handout--a
helping hand up, yes, but not a handout. The way you send that message
is to value the work with a living wage.
We have done that before, Democrats and Republicans alike. We have
raised the minimum wage closer to the poverty line, not a great level,
but that is what we feel we can do in the best balance against job loss
and other market forces.
I acknowledge there are market forces. We do not want to monkey with
the level that is so high that you would, in fact, generate enormous
unemployment. But the proposed increase would not put our country in
danger of reaching that level.
In Vermont and Massachusetts, we raised the minimum wage at the
beginning of this year. New Hampshire and New York refused to raise the
minimum wage. Unemployment in Massachusetts and Vermont went down.
Unemployment in New York went up and New Hampshire went up.
Mr. President, it is clear historically that raising the minimum wage
may create minor dislocations. My friend talks about one company laying
off five people in this article in the New York Times. Five people who
are kids, teenagers at the minimum wage, let's say 8 weeks of
employment, if they take some time off in the summer, is $288. So we
are now being told that a company is going to deny a teenager $288 for
8 weeks of work. It is hard for me to believe that if that job was
necessary, that company is not going to produce enough product or sell
enough goods to make up $288 for a teenager to work. What we need is a
little more ethic in America where our corporations understand an
obligation to try to hire teenagers, to try to pay people a decent
wage.
We know the statistics. We are living in a country that now has the
third highest number of poor children since 1964. Two-thirds of the
people on the minimum wage are adults, not teenagers, and most of them
are women. In my State of Massachusetts, almost 5 percent of the
children in Massachusetts live in families where at least one parent
works full-time but the family still lives below the poverty line.
Nationally, more than 2 million children live in families which would
get a raise if the minimum wage is increased to $5.15 an hour.

The question is, should these children and their families get an
increase in the minimum wage, and should the Congress fill the gap to
help those teenagers have a summer job? Then everybody benefits
correctly and we do not create a Hobson's choice of denying both of
them everything: No summer jobs and no minimum wage, and the country
can get poorer together. That is really what we are talking about here.
We have heard this argument year in and year out. We keep hearing it:
``Oh, if you raise the minimum wage, America isn't going to get
stronger.''
From 1938 to now, look at the number of jobs we have created, look at
the increased strength in America, look at the stock market go up. Last
year, the stock market went up 34 percent in 1 year, and corporations
took record profits. But the consumer debt in America went up. The
consumer debt in America is at the highest level in history.
So we are going to vote today on whether or not someone at the bottom
of the economic ladder who has seen their income decline and their
wages decline in the last years is going to get an opportunity to work
for less than three-quarters of the rate of poverty.
If you work at the minimum wage in America a 40-hour week, 52 weeks a
year, you earn $8,500 a year. Try and live on that. The poverty level
for a family of four is $16,000 a year. The poverty level for a family
of three is $12,500. Can we not even find it in our capacity, where we
have the most expensive, rich pensions in American history, where we
have a salary--all of us --at $130,000 a year, to raise the minimum
wage for people working at the bottom of the economic ladder? That is
the test of the conscience of the Senate today.
The efforts of the Republicans to come in with an exemption for two-
thirds of the companies in this country is wrong. In combination with
the rest of their amendment, one-half of the people working for the
minimum wage would be denied an increase. This is a vote over right and
wrong, and I think history has proven that it is right to raise the
minimum wage.
The PRESIDING OFFICER. The Senator's time has expired.
Mrs. KASSEBAUM. Mr. President, I yield 10 minutes to the senior
Senator from Colorado, Senator Brown.
The PRESIDING OFFICER. The Senator from Colorado, Senator Brown, is
recognized for 10 minutes.
Mr. BROWN. Mr. President, I thank the Senator from Kansas for her
kindness in yielding time.
We are debating today as if one side is in favor of raising wages and
the other is not. With all due respect to my dear colleagues, I suggest
that is not the question. Both sides are in favor of wages going up. As
a matter of fact, anyone who serves in the U.S. Congress, ought to have
at the center of what they are here for an effort to promote and
improve the lives and the compensation of the working men and women of
America.
However, there is a real and a legitimate difference of opinion about
how you increase wages, and compensation. Many of my colleagues
sincerely believe Government is the way to set prices for products and
services in an economy. But let me point out that countries that have
taken that philosophy to an extreme, that have put that philosophy into
effect in a broad range of both services and goods in a market have had
disasters. There is no question as to why countries have abandoned
socialism across the world. They have abandoned it because it is a
disaster.
The real price-setting mechanism that is efficient and productive and
perhaps most carried, in terms of job opportunities, is a market
system. To suggest the Government is the right one to determine the
right wage for every individual is absurd.
Perhaps some will vote for this because it does a little damage, and
I think in some areas that is probably true. But the problem with it is
this says more than simply set a wage; it says it is illegal for
someone to work a job that pays under a certain amount, even if that
person wants to. It becomes illegal for you to take that job even if
there is no other job available.

I hope Members will take a look at who this legislation impacts. We
have heard the passionate rhetoric from people, many of whom have never
held a minimum wage job in their lives. I think sometimes you can be
more impassioned when you have not had that opportunity. But, Mr.
President, the ones who are primarily affected are not necessarily
four-member families. The ones who are primarily affected are people
who are getting their first job, oftentimes teenagers. Do we want them
to do better? Absolutely. But no one should vote on this measure
without realizing what its impact is going to be.
I look back on the jobs that I had as I grew up. I think of them
because they were very, very important in helping me understand how to
work, how to be productive, how to accept responsibilities. One of the
first jobs I had was as a dishwasher in the local restaurant down the
street. It was a job on Friday or a Saturday night. I was not a
Catholic, but I was very thankful for Catholics because they had an
affinity for fish on Friday nights. This restaurant served fish and
thus had a job for a dishwasher.

[[Page S7433]]

That job has been eliminated now. The higher costs have encouraged
them to automate much of the function. Yes, they still have some
dishes, but now it is different. Two things have happened. One, they
have automated, and, two, the higher cost of labor has caused many
restaurants to skip recyclable dishes and simply use paper plates.
Those who go to McDonald's or Burger King or many of the other fast
food restaurants know what that means, but they may not understand the
jobs that are lost because we have the fast food operations.
I was a lawn boy. It was a great job. I worked 40 hours a week in
high school, long days on Saturday and Sunday. It is the way I paid my
way through school. Most of those jobs are gone now, at least in the
area we were in. Not all of them, but in the area we were in, many of
them no longer put in the kind of vegetation that needs the intense
care that it did. Some of them, thankfully, are still available. But
this change in wage will affect the job opportunities that are
available to kids.
I was a busboy and a waiter. Those jobs with fast food restaurants
have largely been dropped. I worked in a service station for 4 years.
Those jobs primarily have been dropped, not all of them but most of
them. You have now self-service in your filling stations. I assume we
have a whole generation who does not really know what a full-service
gas station is. It used to be a great source of jobs for teenagers.
Mr. President, the point is this, this measure will have an impact,
not necessarily on the families, but will have an impact on jobs
available to kids. Mr. President, you ask yourself, what happens to
kids who get out of school at noon--and there are a lot of school
districts in this country that end at noon or 12:30; in Colorado I know
there are some that end at 12:30 and 1 o'clock--and there is no one
home because mom is out working, as my mom was, until 6 o'clock at
night or 7 o'clock at night?
Ask yourself what happens to a teenaged boy--I say teenaged boy
because I think the propensity to get into trouble is greater for them
than for girls; but I suspect both are subject to that problem. You ask
what happens to them with little homework from their schools and 4 or 5
hours off in the afternoon and no job.
Mr. President, I can tell you what happens. All you have to do is
look around this country and see what happens. You deny those kids
jobs, and you do not keep them busy, you create a crime problem and a
juvenile problem of epic proportions. No one should look at what
happens in this country today and not understand that the absence of
job opportunities for teenagers and for high school kids, both male and
female, is a major factor in the rise of juvenile delinquency.
So, Mr. President, people will vote on their philosophy. Some will
say they are doing something to help out low-income people. But, Mr.
President, we also should keep in mind what we do to young people when
we deny them job opportunities. We reduce the chance to learn, the way
to earn your way out of poverty. I yield the floor, Mr. President.

The PRESIDING OFFICER. Who yields time?
Mr. MOYNIHAN. Mr. President, I have the great pleasure of yielding 8
minutes to the distinguished Senator from Illinois, a scholar and a
friend.
The PRESIDING OFFICER. The Senator from Illinois, Senator Simon, is
recognized for 8 minutes.
Mr. SIMON. I thank my colleague from New York, and I thank him for
his leadership.
I strongly support the minimum wage and I oppose the Bond amendment.
The speech that my friends from Colorado and Utah just made about
teenagers, if the Bond amendment said, let us not apply it to those
under 18, then, frankly, I might even consider voting for such an
amendment. I think that would make a little bit of sense. I do not
think the Bond amendment, as it is constructed, does make sense.
Raising the minimum wage clearly is needed. I hear the phrase
``welfare reform'' around here a great deal. But 95 percent of it is
not welfare reform. This bill raising the minimum wage probably will do
more for welfare reform than all the bills that are called ``welfare
reform'' around here because you give people a chance to earn a little.
You give them an option.
Twenty-four percent of our children in this Nation live in poverty.
No other Western industrialized nation has anything close to that. If
you need a good argument for campaign finance reform, look at what is
happening in the minimum wage. What if the people at the minimum wage
were big contributors? Would we have this kind of a problem? The
minimum wage would pass overwhelmingly. And this is a women's issue; 58
percent of the people who draw the minimum wage are women. We ought to
be doing better than this.
Having said that, Mr. President, I am concerned about some provisions
in the basic bill, the small business provisions, and the managers'
amendment which I am going to ask for a vote for and will oppose. On
the basic bill, we knock out the incentive to banks to finance ESOP's,
the employee stock option plans. This is a legacy of Senator Russell
Long, and it is a good legacy for our country. ESOP's should be
encouraged, not discouraged. Let no one fool themselves; knocking out
this financial incentive for ESOP's virtually kills the chance for
additional ESOP's in this country.
Second, the modification of the 401(k) plans. Here it is geared to
helping people in the higher income brackets. Here is a letter from the
American Academy of Actuaries. Let me just quote from this letter.

There is likely to be increased discrimination in favor of
highly compensated employees. Such redistribution of
contributions in favor of higher income workers could tarnish
401(k) plans to the extent that they would no longer receive
the support needed in Congress to justify their cost to
taxpayers.

Under current law, if lower income employees put in 1 percent, or
defer 1 percent, higher income employees can defer 2 percent. There is
a whole series of limitations. Under this proposal, if a lower income
employee puts in 1 percent, the higher income employee can defer 9.5
percent. It is clearly for the benefit of those in the high-income
brackets who work for corporations.
Then, finally, Mr. President, in the managers' amendment, which is a
procedure under which we put this in--and we did not have a chance to
modify it, no amendments; and the same on these other provisions that I
just talked about--this reverses the Hancock versus Harris Trust
decision in the U.S. Supreme Court. It is an ERISA thing. I have to
tell you candidly--I see the chair of our committee here, and she knows
this--I do not know that much about ERISA, and, real candidly, I do not
think anyone in the U.S. Senate really understands ERISA. It is a very
complicated thing.
I do know this, that we are moving back on safeguarding the pension
funds of workers with this amendment. What the Harris Trust decision
did was, it said that the John Hancock Co., when it set aside pension
funds in stocks, had to meet the ERISA standards. But what John Hancock
was doing was taking these other funds and putting them--let me read
the Supreme Court decision, the group annuity contract No. 50, which is
what they call it there.

Group annuity contract No. 50 assets were not segregated,
however. They were part of Hancock's pool of corporate funds
or general account out of which Hancock pays its cost of
operation and satisfies its obligations to policyholders and
other creditors.

They do not think they had to meet ERISA standards. The Supreme Court
said you have to meet ERISA standards here, and the managers'
amendment, with all due respect to my friends who are sponsoring this,
the managers' amendment reverses that decision and says that insurance
companies, when they do not have these fixed stocks and put the rest in
the general pool, they continue to do that, out of which they take all
these expenses.

Let me just point out one unusual feature of this bill. Mr.
President, you have been here a while in this body and in the other
body. Listen to this: ``The amendment made by this section shall take
effect on January 1, 1975.'' Have you heard about a bill like that
before? Why does this take effect January 1, 1975? To protect insurance
companies who have abused these pension funds so they do not have to
meet ERISA standards. That is not good legislation, my friends. We
ought to be protecting pension funds, not loosening the protection.
I have great respect for Senator Moynihan, Senator Roth, Senator
Lott,

[[Page S7434]]

and Senator Daschle, but I think this is a move in the wrong direction.
The managers' amendment ought to be defeated. We should not reverse
that Supreme Court decision. Justice Thomas wrote the dissent and took
the side of the insurance companies. The U.S. Senate, with this vote,
will take the side of the insurance companies. There is huge money
involved. I was told about $300 billion in assets are affected here. I
received a call from our former colleague, Senator Howard Metzenbaum,
who said, ``You are wrong. It is $500 billion.'' I do not know what it
is. Maybe it is $100 billion. Whatever it is, it is a lot of money. We
ought to be doing everything we can to protect pension funds, not to
move in the other direction.
Mr. President, when the time comes on the managers' amendment, I will
request a vote. I will vote against it. I know what the situation is
and I recognize that I will be outvoted but I want to make clear I am
not part of moving in this direction.
Mrs. KASSEBAUM. Mr. President, I yield myself 2 minutes from the
leaders' time.
The PRESIDING OFFICER. The Senator is recognized.
Mrs. KASSEBAUM. If I may respond briefly to my good friend and
colleague and member of the Labor Committee as well, some clarification
on the Harris Trust. I have spoken earlier to it and I will not
reiterate. I certainly agree, ERISA is complicated. It is something all
of us struggle to understand.
In this particular situation, as I pointed out, the administration is
strongly for this. This particular language in the managers' amendment
does not overturn the Harris Trust. What it does is require the Labor
Department to issue guidance by March of next year as to how insurance
companies are to deal with pension plans in the future. Because the
Supreme Court decision created some concerns about how these would be
handled as plan assets, there needs to be a clarification. Until that
clarification is given, much is in doubt, and many workers will be
seriously hampered by uncertainty regarding their pension plans and how
it would be counted as a plan asset.
I just suggest to the Senator from Illinois, we made two changes
which we hoped would address some of the concerns that had been raised
by the Senator from Illinois. One was the legislation would not grant
relief from proceedings based on fraudulent or criminal activities by
insurers. I know that had been a concern. That language is now clearly
stated. Second, that the legislation gives the Secretary of Labor
authority to ensure that insurers do not engage in prohibited
transactions prior to the issuance of final guidelines.

I had hoped that might take care of some of the concern of the
Senator from Illinois.
Mr. SIMON. If my colleague would yield.
Mr. MOYNIHAN. I yield to the Senator from Illinois.
Mr. SIMON. Mr. President, I am happy to respond. Some of what the
Senator says is correct, and I appreciate the changes that were made. I
do think this area is complicated enough we should have at least had a
hearing. Here we are passing this massive change without a hearing. I
think it is not a good way for a legislative body to proceed.
Mrs. KASSEBAUM. Mr. President, just to respond, we have considered
this in the last Congress as well. We have not had a full-blown hearing
but it is something Senator Metzenbaum, as part of the Labor Committee
in the last Congress, raised. It has been under consideration for some
time as all parties were trying to find common ground. It was hoped
this was the common ground that would succeed.
Mr. MOYNIHAN. Mr. President, I yield 8 minutes to the Senator from
Connecticut.
Mr. DODD. I thank my colleague. I commend my colleague from New York
and others who have been responsible for putting this matter together.
Before getting to my comments on the minimum wage, let me also address
the issue raised by our colleague from Illinois that our colleague from
Kansas responded to, and that is dealing with the Harris Trust matter.
Mr. President, let me say categorically and unequivocally to you, Mr.
President, as well as to our colleagues, there is nothing in the
managers' amendment that reverses the Harris decision by the Supreme
Court--nothing at all. To put it briefly here, for 20 years the
industry had operated on a set of guidelines established by the
Department of Labor. No action was brought by the Department of Labor.
It relied on the guidance as a means of how they did business dealing
with pensions. In fact, no one can demonstrate any wrong that was done
at all.
The Supreme Court reached its decision in 1993 and and said using the
guidance of the Department of Labor is invalid. The Court also in the
decision then recommended that the Department of Labor or Congress
establish new guidelines and regulations by which these pensions would
be regulated. The Department of Labor thought it would be better if
Congress acted and they acted on their own, and it ought to be done
statutorily rather than by regulation. So for the past year and a half
the Department of Labor, the industry, and those of us who have been
involved in this matter, have spent about a year and a half putting
together this amendment that is prospective, deals forward, and sets up
a series of regulations that will not go into effect until next June,
after serious consideration.
We do not establish the regulations, the Department of Labor does.
What those who are opposed to us doing this have in mind is that they
want to have the retroactivity and to go back into those 20 years that
the industry was allowed, through no action at all, to operate under
Department of Labor guidances. Obviously, it could be a windfall to the
trial lawyers to go back and bring actions based on 20 years of
practice. We are trying to respond to that decision at the direction of
the Court and to do so in a comprehensive, thoughtful way. That is what
we have done.
I point out that the language of this amendment dealing with the
Harris Trust passed the committee 14 to 2 in a bipartisan vote. A lot
of effort went into this. I commend my colleague from Kansas, Senator
Kassebaum, who did a remarkably fine job, along with her staff. Bob
Reich, the Secretary of Labor sent a letter to the chairman of the
committee, Senator Kassebaum and Senator Kennedy urging adoption of
this legislation. They spent a long time at it. As our colleague from
Illinois pointed out, ERISA is complicated, but to suggest somehow we
are reversing the Harris decision is just totally, completely,
fundamentally incorrect.
What we are trying to do is deal with a situation that, if we do not
address, puts pensioners at risk by leaving the situation with only the
Harris decision and no corrections being made.
So I say, with all due respect to those who oppose this, this is a
windfall, or could potentially be something that the trial lawyers
would love to dive into for 20 years based on the Harris decision. We
are saying, for 20 years that is how it operated. No one complained
about it. No wrong was done. We are correcting a situation.
I commend those who have been involved in this for bringing us to the
point where we are going to finally straighten this matter out, as it
should be.
For those reasons I hope, at least on that basis, that our colleagues
will vote against the managers' amendment that deals with a number of
issues.
Let me now reach, if I can, to the substance of what is the major
debate and argument, and that is dealing with the minimum wage
increase.
Mr. President, I ask unanimous consent that the sum and substance of
my prepared remarks be printed in the Record.
There being no objection, the statement was ordered to be printed in
the Record, as follows:

Minimum Wage

Mr. President, nearly 6 months ago, President Clinton came
before a joint session of Congress with a commonsense
proposal--increasing America's minimum wage from $4.25 to
$5.15 an hour.
Considering that we've joined together in the past--in a
bipartisan manner--to raise the minimum wage and lend a hand
to working Americans, this would seem to be a straightforward
initiative.
However, since January 1996, the snow melted, the
temperatures swelled, and the flowers began to bloom, but for
America's working families the minimum wage remains very
close to a 40-year low.

[[Page S7435]]

Because, over the past 5\1/2\ months, the Republican
leadership in Congress has utilized every possible tool to
block this legislation.
They've tried to convince the American people that raising
the minimum wage will cost jobs--even though study after
study shows this to be untrue.
They raised erroneous economic arguments--even though 101
economists, including 3 Nobel Prize winners, endorse an
increase in the minimum wage.
They've asserted that minimum wage recipients are wealthy
high school kids flipping hamburgers--even though more than
73 percent of minimum-wage workers are adults.
Even though more than 47 percent are full-time workers and
4 in 10 are the sole wage earner for their families.
Now today, after nearly 6 months the Republican leadership
in Congress is finally giving the Senate an opportunity to
cast a vote on the minimum wage.
But, it seems just as we climb one mountain, my colleagues
across the aisle put another one in the way.
Because what we have before us today is not an amendment to
increase the minimum wage.
Instead we have an amendment that would eviscerate the
minimum wage.
Under the provisions of the Bond amendment one would be
hard pressed to find any American who actually would benefit
from this phony increase.
First of all, it would exempt an entire category of
Americans from the minimum wage's benefits--namely the 10.5
million who work for companies that make less than $500,000.
That represents two-thirds of all workplaces.
Second, the Bond amendment would delay any increase until
January 1, 1997.
So after making working families wait nearly 6 months for
Congress even to vote on a minimum wage, Republicans would
make Americans--struggling to get by--wait an additional 6
months to see any benefit. But, that's only the beginning.
Exemptions in the Bond amendment would force working
Americans to wait 180 days after starting a new job before
receiving a minimum wage increase.
This provision along with the delay in implementation until
January 1, 1997, would mean America's working families would,
at the earliest, not receive the benefits of an increased
minimum wage until July 1997.
Now, I know my colleagues across the aisle say this
provision is necessary to protect small businesses.
Well, I say, what about working families? Who will protect
them?
Certainly not this legislation. Because under the Bond
amendment working Americans would be at the mercy of their
employers.
There is absolutely nothing in this amendment to stop a
business from paying a new employee at the subminimum wage
for 179 days, firing them, and then turning around and hiring
a new worker, whom they could then pay at the same subminimum
wage.
Under the Bond amendment, there is little incentive for a
business to keep a new employee for more than 180 days and
provide a minimum wage increase.
Instead, for millions of American workers struggling to
work their way out of poverty and make ends meet, their
newfound paychecks would be replaced by pink slips or another
subminimum wage-paying job.
Well, Mr. President, in my State of Connecticut and
throughout America, working families cannot afford to wait
any longer for a real increase in the minimum wage.
And if we're going to be truly serious about helping those
Americans that work hard and play by the rules, then an
immediate and unequivocal increase in the minimum wage should
pass by a unanimous vote.
Now, I realize that the Democratic proposal of an extra 90
cents an hour may not seem like a lot.
But, raising the minimum wage would benefit nearly 12
million Americans.
For those Americans who are struggling to get by at $4.25
an hour this increase represents $1,800 in potential income.
Raising the minimum wage could pay for 7 months of
groceries, 1 year of health care costs, or more than a year's
tuition at a 2-year college.
Today, the annual income of a minimum wage worker is $8,500
a year--well below the poverty level for a family of three,
which is $12,500.
In fact today, nearly one in five minimum wage workers
lives in poverty.
How can any American expect to bring themselves out of
poverty or pull themselves up by their bootstraps when
they're expected to raise a family on $8,500 a year?
The fact is, at the present rate minimum-wage workers have
little hope of ever earning their way out of poverty.
But if the rate is increased the dream of reaching the
middle class becomes attainable.
Over the past year I've heard a lot of talk from the other
side of the aisle about encouraging responsibility and a
strong work ethic among our Nation's welfare recipients. I
think it's something we can all agree upon.
But, it's utter hypocrisy to talk about encouraging
responsibility while we ask our Nation's poorest citizens to
live on a meager wage of $36 a day.
I know my colleagues on the other side of the aisle like to
claim that raising the minimum wage would cause unemployment.
But, according to The New York Times a 90-cent minimum wage
increase would probably eliminate fewer than 100,000 of the
approximately 14 million low-paid jobs in the economy. That's
less than a 1 percent loss.
In addition, studies done after the minimum wage was raised
in 1990 demonstrate that not only did it have a negligible
effect on job loss, but in some locales it actually brought
higher employment.
The fact is, a higher minimum wage is not only a stronger
incentive to work, but it reduces turnover, increases
productivity and lowers cost for retraining and recruiting.
The minimum wage is not, and should not be, a political
issue.
In fact, I am pleased to see that members from both sides
of the aisle are coming to the realization that low-wage
workers in this country deserve a pay raise.
The Republican amendment before us today would leave
millions of Americans mired in poverty, barely able to make
ends meet and struggling to put food on the table.
Today, we have an historic opportunity to reverse that
trend and lend a helping hand to millions of America's
working families.
I strongly urge all my colleagues to reject the Bond
amendment and continue the bipartisan tradition of supporting
the minimum wage as a living wage for working Americans.

Mr. DODD. Mr. President, I am saddened by this day that we are
involved in a lengthy debate about the increase in the minimum wage.
This should not be happening. It really should not be happening. We are
talking about a 90-cent increase over 2 years. It has been 5 or 6 years
since we have had any increase at all.
The notion somehow that a family--remember, more than 73 percent of
the people who get the minimum wage are over the age of 20. If you are
on the minimum wage and you are age 20, it is not inconceivable that
you are raising a family. We are not talking about teenagers. Few are
over the age of 25. Some are. Obviously, then the number comes down.
You have a sizable number of people between the ages of 20 and 25. But
to suggest somehow that you can live on $36 a day--that is what the
minimum wage is--$36 a day, with more than 73 percent of the people
earning the minimum wage over the age of 20, and that we can't find it
here possible to come up with a 90-cent increase for those people.
If you will just consider the great debate we had here over last
year's welfare reform, one of the major matters of debate and concern
is, how do you avoid people falling back into dependency and on to
public assistance? How do we get people who are living on welfare to
move from welfare to work? That has been the subject of major debate
and discussion here.
How ironic, indeed, in this day in July that we are now going to
potentially reverse or deny the opportunity for people who are making a
minimum wage today, to get a modest increase over the next 2 years.
With the minimum wage close to a 40-year low in terms of earning power,
how do we prevent people from tumbling back into welfare?
It seems to me that this ought to be passing unanimously on a voice
vote. This ought not be the subject of an acrimonious debate on minimum
wage at the very hour we are trying to move people from welfare to
work. How can we say to people that if you get a minimum wage job, the
most you can hope to make is $8,500 a year or $36 a day? I do not know
of anywhere in America that you can live on $36 a day any longer. In
fact, that is almost $4,000 less a year than is the poverty level for a
family of four--which is $12,500.
Frankly, as our colleagues know, there is no illusion. The Bond
amendment is designed to just blow significant holes through the
minimum wage and would take away from the roughly 10 million people who
would otherwise qualify for the minimum wage and deny them the
opportunity--those 10 million Americans--from seeing any benefit from a
minimum wage increase.
Our colleague from Minnesota earlier pointed out the benefits of
$1,800. That is what a minimum wage increase of 90 cents amounts to--
$1,800 a year. With $1,800, you could afford a year of health insurance
for yourself, or at least participate in health insurance. It is more
than a year's tuition for the average 2-year community college, $1,800
a year. Think what a benefit that might be for someone at that minimum
wage level trying to better themselves, trying to improve themselves,
to be able to get an education, to move themselves further along, to
avoid tumbling back, as I said earlier, into a life of dependency on
State, local, or Federal welfare;

[[Page S7436]]

$1,800 a year could buy groceries for a family for 7 months.
So while I know people say we have to protect small business, I
understand that. But of one study that I have seen done, says of the
approximately 14 million low-paid jobs in the economy that could
potentially be affected--there may be fewer than 100,000 jobs that
would be adversely affected by a minimum wage increase. One of the most
conservative studies done says 100,000 people out of 14 million people.
I appreciate and understand the concern of wanting to protect small
businesses. But how about protecting these people out there that we
talk about all the time, who are getting off welfare, staying off
welfare, and going to work? They need protection as well.
Lastly, I would point out, as someone earlier did--I believe my
colleague from Massachusetts--we have now done away pretty much with
the summer JOBS Program. Again, what an irony indeed that we would be
sitting here today talking about youth employment at the very time we
ought to be trying to put kids to work during the summer. Then we turn
around and deny, of course, a minimum wage increase that could
potentially affect and benefit those younger people, as well, who would
be looking for some employment, to be able to participate and
contribute to their own educational needs and costs of participating
and contributing to their family's financial needs.
I will conclude as I began on this point. Again, I am saddened by
this debate. This should not be happening--this debate.
This is something that we passed and which has enjoyed strong
bipartisan support. When President Bush took the leadership on it, it
had bipartisan support. We have spent so many weeks. We have gone from
the winter now into the depths of summer arguing for an increase in the
minimum wage. I think it is a sad day, indeed, for this body.
So I urge my colleagues for the remaining hour or so which we have
before the vote to search their souls on this issue and support this
minimum wage increase, and oppose the Bond amendment, which would gut
this effort.
I thank my colleague.
Mr. MOYNIHAN. I thank my friend from Connecticut for clarifying most
particularly the provision in the managers' amendment concerning the
pension fund. I hope they listened to it carefully, and also the
remarks of the chairman of the Committee on Labor and Human Resources,
the senior Senator from Kansas.
Mr. President, I yield 8 minutes to my distinguished friend and
neighbor from Vermont.
The PRESIDING OFFICER. The Senator from Vermont is recognized.
Mr. LEAHY. Thank you. I thank my good friend from New York State. We
have the privilege of living parts of the year in the northern parts of
our two States. I commend him for the strong work that he has done on
this. He has been a stalwart supporter, as well as the Senator from
Connecticut and the Senator from Massachusetts, of the question of the
minimum wage.
Mr. President, it really comes down to this: Working Americans
deserve the opportunity to earn a decent wage.
It has been more than 5 years since the last increase in the minimum
wage. You would think when it has been more than 5 years, that would be
enough reason to increase the minimum wage, just that issue alone. But
during the last 5 years, living costs have not stood still. In fact,
the cost of living has gone up.
Since 1991, the average monthly gas bill has gone up. Since 1991, the
average monthly electric bill has gone up. In fact, in my home State of
Vermont, where many Vermonters use wood stoves to heat their homes, and
when it is 20 below zero--that is not a luxury in heating your homes--
but since 1991, the average cost of a cord of wood has gone up. But
throughout all this time, the minimum wage has stayed the same.
The basic living costs of working Americans in every area--food,
heat, shelter, transportation--have gone up. But the minimum wage has
remained the same.
In fact, the minimum wage is at a 40-year low, as far as its buying
power. The minimum wage earner today grosses only $8,840 a year.
I defy anybody in this body to try to raise a family on that amount
of money. But there are people who do.
In Newport, VT, the most rural area of my home State, Brian Deyo and
his family have been trying to do just that. In fact, the Wall Street
Journal reporter met Mr. Deyo and his family and wrote the article
about the sheer harshness of life on the minimum wage.
Mr. Deyo works full time in a hockey stick factory. He brings home
$188.40 a week. A lot of the time he and his wife have had to choose
between paying rent, or buying food, or paying the medical expenses for
a chronically ill daughter.
They talk about sometimes during especially tough times, Mr. Deyo
will take his last $5 and go down to the hardware store and buy a box
of bullets to go hunting in the Vermont woods because that is the only
way his family is going to eat. And he will go out there and hope that
he gets lucky and finds a deer.

But I think Mr. Deyo said it better than any of us ever could. He
said, and I quote him, ``I'm proud to be a working man. I only wish I
could make a living.''
So I ask unanimous consent that a copy of the Wall Street Journal
article about Brian Deyo and his family, entitled ``Minimum Wage Jobs
Give Many Americans Only a Miserable Life,'' be printed in the Record
after my remarks.
The PRESIDING OFFICER (Mr. Ashcroft). Without objection, it is so
ordered.
(See exhibit 1.)
Mr. LEAHY. But as the Wall Street Journal points out, Brian Deyo is
not alone. Many working families depend on the minimum wage. In fact,
73 percent of those affected by the proposed minimum wage increase are
adults. Many are trying to support their families on a minimum wage,
and that minimum wage has been mauled by inflation. This should be a
bipartisan issue.
The distinguished Senator from Connecticut just said, as others have,
the last time it was raised it was--I believe my good friend from New
York will agree with this--under a Republican President, and the time
before that, the Senator from New York reminds me. We had Republicans
and Democrats joined together on this. The last minimum wage increase,
which was a 2-year 90-cent increase just like the one that is under
consideration today, received overwhelming bipartisan support when it
was voted on in 1989. In fact, it passed the House by a vote of 382 to
37--better than 10 to 1. It passed the Senate by a vote of 89 to 8--
again, better than 10 to 1.
Back then, Senator Dole and Speaker Gingrich voted for raising the
minimum wage, but today some of my colleagues on the other side of the
aisle fiercely oppose any raise in the minimum wage. I find it ironic
that some of the same Senators who would vote to give tax breaks to the
wealthy are against giving working families a raise. Some have said
they will fight with ``every fiber of their being'' the idea that a
person who works 40 hours a week could make as much in a year as
Members of Congress make in a month.
So let us not play politics with the lives of working families
struggling to live on the minimum wage. We need to pass a minimum wage
increase now. I hope my colleagues will support Senator Kennedy's
amendment and support this bill to make the minimum wage a living wage.
Let us be serious about what we are talking about. Let us think,
would any of us accept for ourselves or our families the basic minimum
wage today? Would any of us accept the idea that our family, members of
our family, would try to support a family, whether it is our children,
our siblings, cousins, or anybody else, at the minimum wage?
They cannot live on it in Vermont. They cannot live on that in
California or Texas or, frankly, Mr. President, in any State in this
country. So let us let the Senate at least stand up and do the right
thing.
Mr. President, I yield back to the Senator from New York.

[[Page S7437]]

Exhibit 1

[From the Wall Street Journal, Nov. 12, 1993]

The Working Poor: Minimum-Wage Jobs Give Many Americans Only a
Miserable Life

in rural vermont, some go week to week, hoping no major bills hit them

hunting bear for the table

(By Tony Horwitz)

Newport, VT.--On payday, Brian Deyo's sole purchase is a
$4.96 box of cheap bullets known as ``full metal jackets.''
Mr. Deyo works full time at a hockey-stick factory. He
takes home $188.40 a week. After rent and utilities, that
leaves about $20 for food--and no margin at all for
misfortune, such as the one Mr. Deyo now faces. Vermont's
brutal cold hit freakishly early this fall, and he must buy
heating oil three paychecks ahead of plan.
``Every day I'm making choices,'' says Mr. Deyo, who has a
wife and a chronically ill two-year-old daughter. ``Do I pay
the rent and risk having the power cut? Or do we take a
chance on both and buy food?''
This payday, the choice is clear: He's two weeks late on
the rent, and the fuel tank must be filled. Unable to afford
food, he will hunt for it. Stalking through the icy woods
beneath the Green Mountains, Mr. Deyo mulls his life. At age
28, he senses he has done something wrong, but he isn't sure
what. ``I'm proud to be a workingman,'' the son of two
factory workers says. ``I only wish I made a living.''
``Making work pay'' has become a Clinton administration
catch phrase, but one that appears increasingly hard to
fulfill. Put simply, the aim is to lift working Americans
above the poverty line--a threshold that Mr. Deyo and 9.4
million others currently don't reach. Almost 60% of poor
families have at least one member working. ``Someone who
plays by the rules and tries to work full time should be able
to support a family,'' says Lawrence Katz, chief economist at
the Labor Department.
However, with universal health insurance--one means toward
achieving this goal--under siege, the administration has
retreated from another. In late October, after arguing for
months that a modest rise in the minimum wage is needed to
help pull workers out of poverty, Labor Secretary Robert
Reich shelved his campaign until after Congress votes on
health-care reform. This delay was welcomed by business
groups, which argue that an increase would cost jobs because
employers would automate, relocate overseas or cut staff to
recoup higher labor costs.
But what's often obscured by such policy debate is the
sheer harshness of life in low-wage America. The minimum
wage--currently $4.25 an hour--was mauled by inflation in the
1980s and now provides an income so meager that welfare
recipients often do better if they turn down jobs paying it.
A full-time minimum-wage worker grosses $8,840 a year--$2,300
under the poverty line for a family of three. In 1979, the
same worker earned $459 above the line.
The depressed minimum wage also anchors the bottom end of a
pay ladder so low that even people who, like Mr. Deyo, climb
up a few rungs are still in poverty. In fact, such workers
often are worse off than those earning $4.25 an hour because
they are more likely to be adults and heads of households
qualifying for little or no government assistance. Many
minimum-wage workers are young part-timers with other income
from spouses or parents.
``Families where the main breadwinner is making $5 or $6 an
hour--these are the people who are really hurting,'' says
Gary Burtless, a labor economist at the Brookings
Institution. This largely forgotten group also helps account
for the 44.3% jump in the number of working poor between 1979
and 1992.
America's working poor are mostly white, mostly high-school
educated and disproportionately rural--a profile that is
typified by the three-county corner of Vermont known as the
Northeast Kingdom. This bucolic landscape of moose crossings,
maple-syrup stands and scarlet foliage also harbors 10%
unemployment, closed mills and ramshackle homes.
Barbara Stevens runs a crisis center in Newport, a town of
4,700 that is a two-hour drive from Burlington. The morning
after the first big chill, her office was crammed with
disheveled people unprepared for the winter and seeking help.
Many were on their way to work. ``They'd say things like,
`I've got two kids and no oil in the furnace, so we slept in
the car last night with the heat on,' '' Ms. Stevens says.
One such visitor is Mr. Deyo, the hockey-stick worker. Late
paying his bills, he has had his electricity disconnected
several times. This is a special calamity for Mr. Deyo; his
daughter has asthma and relies on a ventilator. Letters from
Ms. Stevens and local doctors have helped him to get his
power switched back on.
Ironically, Mr. Deyo is earning more than he ever has.
After years of minimum-wage jobs, he gets $5.50 an hour
stenciling trademarks onto hockey-stick blades. His annual
gross income is so near the poverty line that now he
qualifies for very little public assistance. In principle,
this suits him fine; he's a former National Guardsman and
a conservative Republican wary of government and liberal
``do-gooders.'' But in practice, just a minor setback--
even a blown-out tire on his 1980 Buick--sets off a cycle
of late bills, ruined credit ratings and shakey
employment.
Though the cost of living here is low, his take-home pay of
$188.40 a week barely covers his fixed costs: $60 rent for a
cramped apartment, about $40 for heat, $40 for power (high
because of his daughter's ventilator and humidifier), $10 for
gasoline and $15 for installment payments on the family's few
possessions. The Deyos can't afford a phone. That leaves
about $20, mostly spent at a discount market that sells
dented cans and crushed boxes.
``We don't buy taped boxes because the food could have
spilled on the floor and been scooped back in,'' says Roxanna
Deyo, who stays home because she is loath to put her frail
child in day care.
The Deyos also live in terror of small shocks that can
knock them off their tightrope budget. Three years ago, for
instance, their car developed transmission trouble. Unable to
afford a $500 repair bill, Mr. Deyo had to abandon the car--
and his job cleaning kitchens at a ski resort more than an
hour's drive away.
Soon afterward, the Deyos, seeking work in higher-wage
Massachusetts, sold all they owned to go there. But they ran
out of money before finding jobs. Two years later, they are
still making payments on the used, now-tattered furniture
they bought on their return north. Many needs are put off
indefinitely. Plagued by painful, rotted teeth, Mr. Deyo
waited two years until he was laid off and eligible for
Medicaid before having a few pulled.
Week to week, the Deyos still cling to one luxury. To
``break the constant tension,'' Mr. Deyo says, he buys a
take-away dinner every Saturday, usually a plain pizza
costing $5.99.
``I feel like I'm doing what I'm supposed to do,'' says Mr.
Deyo, who dreamed of studying forestry when he graduated from
high school but couldn't afford the fees and went to work at
McDonald's instead. ``I work hard, my family's together. But
I'm running just to stay where I am, which isn't a real great
place.''
His most recent frustration: an attempt to free his family
of rent--and of their grim quarters--by purchasing a $24,000
trailer to park on his parents' land. A local bank refused
his loan request, citing ``excess obligations'' and
``insufficient income.''
One upbeat note: the Deyos, who anxiously await their
annual rebate from the earned-income tax credit to catch up
on bills and buy appliances, should see the amount double in
early 1995 to about $3,200 because of a recent change in the
law.
A growing number of Americans share the Deyos' plight.
Lawrence Mishel of the Washington-based Economic Policy
Institute says 28% of adult workers are at wage levels too
low to keep a family of four out of poverty, compared with
21% in 1979. He also notes that their privation has deepened:
14.3% of adult workers now earn wages below 75% of the
poverty line, triple the 1979 percentage.
Mr. Mishel and other economists cite various reasons, such
as the decline of manufacturing jobs and of unions in an
ever-more technological economy. In addition, minimum-wage
increases, which tend to bump up the whole bottom of the pay
scale, didn't occur between 1981 and 1990. That especially
hurt young workers, such as Mr. Deyo, who began working
during the 1980s at the minimum wage and have edged up very
slowly ever since.
However, the depressed minimum wage may have kept alive
some jobs that otherwise would have vanished. Along Newport's
railroad tracks, in an old flour depot, American Maple
Products Corp. employs 40 people bottling syrup and making
candy Santas and other treats. The family-owned company is
typical of the light, often-marginal businesses that employ
many low-wage workers nationwide.
``Maple candy,'' the company's president, Roger Ames, dryly
observes, ``is not your basic growth industry.''
Starting most workers at the minimum wage, Mr. Ames ekes
out profits of 3% on sales from what he admits is a creaking
plant. At one conveyor belt, nine people fill jugs with
syrup, then cap, date and box the jugs by hand--a task, Mr.
Ames says, that costly new machines can perform with two
workers. Nearby, two people run a 50-year-old device that
drops candy into molds, while other workers use their fingers
to smooth the fuzzy edges left by the plant's old tools.
``If you're paying the minimum wage and it takes 20% more
time to do a job than it should, it doesn't seem that
critical,'' Mr. Ames says.
He adds that a 50-cent increase in the minimum wage would
cost him about $100,000 a year and force him to ``take a hard
look'' at labor-saving machinery. He would stop replacing
workers who leave or retire and go to a peacework system that
might penalize older employees.
``I don't have a sweatshop mentality,'' Mr. Ames says. But
he says neither he nor other employers are likely to raise
their pay simply out of charity, particularly in a
competitive industry. ``If you had someone who mowed your
lawn every week for $5, would you reach in and pay $10 the
next week?'' he asks.
Moreover, he is under no pressure to raise pay because few
employers deviate from the prevailing wage. The result: an
uncompetitive labor market that traps low-skilled workers
even as they climb the pay scale. Connie Lucas went to work
at American Maple 12 years ago at the minimum wage and now
earns $6.10 an hour. With a weekly take-home pay of only
$151.50, and worried

[[Page S7438]]

about the plant's future (her husband also works there), she
decided to seek another job.
``But every opening offers the same--$4.25, $4.25, $4.25,''
the 35-year-old Ms. Lucas says. ``I can't afford to work
another 12 years just to get back to where I am.''
Bonnie Buskey wonders whether she can afford to work at
all. Last spring, both she and her husband were unemployed
and received about $1,000 a month in public assistance. Now,
he works in construction, and she works full time at American
Maple at the minimum wage. Together, they bring home about
$1,200 a month.
But Ms. Buskey pays a baby sitter $2 an hour to look after
her two girls for part of the day, slicing her real wage
during those hours to $2.25. And now that the Buskeys are off
welfare, they no longer qualify for Medicaid. Unable to
afford health insurance, Ms. Buskey spent a week's pay on a
recent visit to the dentist and lives in dread of serious
illness.
``The message from the government seems to be, `Stay home,
vegetate in front of the TV, and you'll be better off,' ''
the 29-year-old says. Asked why she doesn't, she shrugs.
``Good old American pride. I like to think that I earn
whatever I get.''
In fact, some people do quit jobs because they can do
better on benefits. Ms. Stevens, the Newport social worker,
says she feels forced to advise jobless people to turn down
work at or near the minimum wage. ``I have to tell them, `The
job's good for your soul and good for your mind but not for
your pocketbook,' '' she says.
Trapped at the bottom by the low minimum wage, such workers
also must compete with people sliding down the pay ladder. At
the hockey-stick factory, Mr. Deyo's brother-in-law and co-
worker, Garth Shannon, has never worked for the minimum wage.
His first job after finishing high school was at a shoe
factory that paid $9 an hour. But after a wage dispute, the
plant moved to the Dominican Republic, and Mr. Shannon has
bounced down the pay scale ever since, enduring plant
closings, layoffs and menial jobs.
``Most people plan for when things get better,'' says the
35-year-old Mr. Shannon, who wears thick glasses on which he
pays monthly installments. ``I try to plan for when things
get worse.''
As a foreman, he is among the factory's best-paid workers,
earning $5.95 an hour. But with a family of five, his poverty
is even worse than Mr. Deyo's. He heats his jerry-built home
with a wood stove in which he burns old doors and other scrap
timber salvaged from abandoned houses. He burns kerosene
lamps to save on electricity. Like the Deyos, the Shannons
can't afford a telephone. They also couldn't afford a
foundation when they built the house seven years ago; stones
and wood props keep it from sliding downhill.
A conservative man with a fierce work ethic, Mr. Shannon
has urged his wife to work part time rather than stay home
with their youngest daughters, age five and eight. As a
nursing-home housekeeper, who earns $4.61 an hour and brings
home $20 a week after baby-sitting bills. ``Work is what made
this country great,'' says Mr. Shannon, who has draped an
American flag across the front of his house.
But as he cooks home-made pizza for his girls, he confesses
to occasional despair at how little his labor provides for
his family. the worst moment came when his five-year-old's
kindergarten class took a day trip to a zoo in nearby Canada.
The Shannons couldn't afford the $12 bus fare and were too
proud to borrow. ``We kept her home that day so she wouldn't
feel bad about missing the trip,'' he says.
David Price, Mr. Shannon's and Mr. Deyo's boss, is
sympathetic. He helped pay for Mr. Shannon's glasses and
recently gave him his own children's outgrown clothing. But
like Mr. Ames at American Maple, Mr. Price doesn't need to
raise pay to keep his 13 workers; he has 500 job applications
on file.
So Mr. Price does small things, such as treating workers to
a birthday lunch. In October, it was Mr. Deyo's turn.
Devouring a prime-rib sandwich, he confides that it is his
first meal out in six months. Mr. Price also gives workers a
turkey at Christmas and a ham at Easter; Mr. Deyo still has a
bit of ham left, in his freezer, ``for emergencies,'' he
says.
But there is little else in the larder. So, on payday,
after banking his check to cover the rent, Mr. Deyo buys
bullets and drives to his brother-in-law's home. The two men
hike off in search of an animal Mr. Shannon recently spotted
in a cornfield. ``I've never eaten bear,'' Mr. Deyo says
excitely, toting a used military rifle he bought for $80.
``But they look like they have a lot of meat on them.''
The two men soon find tracks but no bear. At dusk, after
two hours of tramping through dense woods, Mr Deyo spots a
crow--``edible if you cook it just right,'' he says. But he
can't get close enough for a shot. Frustrated, he aims at a
chipmunk. Mr. Shannon talks him out of it. ``There wouldn't
be enough meat there for a sandwich,'' he says.
Exhausted and cold, the two head back. Mr. Deyo tosses his
gun in the trunk. Mr. Shannon touches his brother-in-law on
the arm. ``It could have been worse,'' he says. ``At least we
didn't waste any bullets.''

Mr. MOYNIHAN. Mr. President, may I just thank the Senator from
Vermont. The remark by Mr. Deyo, ``I'm proud to be a working man. I
only wish I could make a living,'' needs to be underscored.
Mr. HELMS. Mr. President, in the first place, raising the minimum
wage is a political issue, not an economic issue. In order to adjust
the perspective, it should be remembered that the Senator from
Massachusetts may be revealing a bit of a forked tongue on this phony
political issue.
That is why I am supporting the Lott-Bond amendment which honestly
and clearly addresses the real issues of this debate.
For years, Senator Kennedy served as chairman of the Senate Labor and
Human Resources Committee--prior to his losing his chairmanship in the
1994 elections. To my knowledge the issue of minimum wage increase was
never brought up, even once, by Senator Kennedy during the 2 previous
years before he lost his chairmanship.
But, Mr, President, I recall that in 1995, when the State Department
reorganization bill became the pending business in the Senate, there he
was, the same Senator from Massachusetts, who was the first to pop his
head up and begin as the lead-off filibusterer among the Democrats who
had their orders to stymie a bill that would have saved the American
taxpayers billions of dollars while clearing a lot of dead wood from
the U.S. foreign policy apparatus.
And what was the subject of Senator Kennedy's filibuster? He was
shouting at the top of his voice about the dire need to raise the
minimum wage--a subject, bear in mind that had prompted not a peep out
of Chairman Kennedy during those years when he headed the Senate Labor
and Human Resources Committee.
But now, the political issue of raising the minimum wage is before
the Senate and, at the outset, it would be unfair to the American
people to fail to warn them that if the minimum wage is raised, the
American economy is likely to suffer in a number of ways. Americans--
particularly teenagers, minorities, and low-skilled workers--can expect
a significant loss in job opportunities. Moreover a mandatory wage
increase will result in countless small businesses throwing in the
towel. It has always happened, and it always will.
Increasing the minimum wage will therefore harm the working poor and
high school and college students. It will not help them. According to a
respected University of Chicago economist, Kevin Murphy, every 10-
percent hike in the minimum wage reduces job availabilities by 1
percent, with the greatest loss of jobs occurring among the working
poor, and among students.
This is why I support the Bond amendment which will curtail some of
the harsh effects of a minimum wage increase. The Bond amendment will
exempt small businesses from the increase in the minimum wage, and it
will allow for a training wage for newly hired employees for the first
6 months. As we all know, most new jobs are created by small
businesses.
The Wall Street Journal confirms Professor Murphy's warning, saying,

. . . to the degree that economists ever reach a consensus
on anything, they concur that the minimum wage increases
unemployment among low-skilled workers. What's clear is that
anyone in the White House with an economics degree has
been told to hold his or her nose while the political
types try to relaunch the Clinton presidency on a minimum-
wage hike.

Mr. President, while proponents of a minimum wage increase tearfully
pretend to be concerned about the welfare of America's least well-to-do
citizens, I dare say the proponents are really interested in the next
election. As I stated at the outset, this minimum wage issue was locked
onto the back burner when the Democrats controlled both ends of
Pennsylvania Avenue. In fact, President Clinton never even mentioned
the minimum wage, not once, when Mr. Clinton's party controlled
Congress in 1993 and 1994.
Then when the Democrats lost control of Congress, there came the
minimum wage issue drowning in phony tears. And with it, the crack of
the whips of the powerful labor union bosses. When all that happened,
President Clinton made haste to mention the minimum wage issue more
than 47 times.
Mr. President, let's play just suppose: Just suppose Congress and the
President do increase the minimum wage, what can the American people
expect?

[[Page S7439]]

The warning has come time after time from bipartisan economists--loss
of jobs, higher labor costs, and consequential higher prices for
American consumers.
Economists at the Heritage Foundation, for example, estimate that a
90-cent increase in the minimum wage will result in more than 200,000
fewer entry level jobs in 1999. Furthermore, according to an article in
The Wall Street Journal ``Lawrence Lindsey, a governor at the Federal
Reserve Board, says internal staff studies suggest a 90-cent increase
would reduce employment by about 400,000 jobs over the long term.''
Retail prices will, in turn, increase through 1998 because employers
will pass their increased costs on to the consumers, with the consumers
being hit hardest. Unemployment among teenagers will increase by an
expected 20 percent and will put an end to many entry-level jobs. This,
of course, will deny young unskilled people the priceless opportunity
to gain work experience.
Labor costs for small businesses, and larger ones as well, will
increase, forcing many business owners to make substantial adjustments
in the way they do business in order to stay afloat.
How will employers deal with these new demands imposed on them by the
Federal Government? They will, of course, pass the costs on to the
consumers, raising prices for food, goods and services. Many will have
to eliminate employees, or reduce benefits to employees--or both. Even
new Democrat economist Rob Shapiro concedes as much.
Proponents of the increase in the minimum wage want to keep secret
the fact that 80 percent of minimum wage earners are not below the
poverty line. To the contrary, a high percentage of minimum wage
earners are members of middle-income families. The Bureau of Labor
Statistics confirm that 37 percent of minimum wage earners are
teenagers. The vast majority of high school and college students are
working at summer jobs, not struggling to feed their families because
they are secondary wage-earners in their families.

Moreover, many of these minimum wage earners in fact take home more
than $4.25 an hour. The Bureau of Labor Statistics confirms that ``Just
over half were employed in retail trade, and another one-fourth worked
in services. It should be recognized that for many working in these
industries, tips and commissions may supplement the hourly wages
received.''
So let the record be clear--despite the statements of Senator Kennedy
and other proponents of raising the minimum wage--the babble of voices
is trying to sell political nonsense. If Congress really wants to help
America's working families, it would reduce taxes instead of increasing
the minimum wage.
Twenty-eight million households would benefits from a $500 per child
tax credit--but Mr. Clinton vetoed that idea.
In North Carolina, 758,648 households would have more take-home money
with the $500 per child tax credit. But only 42,876 of those households
would benefit from the minimum wage increase.
Mr. President, I receive thousands of letters each week, and one of
them came from Bruce Stakeman of Durham, a small business owner. In
explaining the minimum wage to his son, Jeremy, Mr. Stakeman said:

I told (Jeremy) that I had a very large yard of 4 acres and
would pay him $1 for him to cut. He said no way! I don't
blame him. $2.? No. $3.? No. This went on until we reached
the dollar amount for which he would be willing to cut my
grass. I told him this was the minimum wage. He agreed. If a
13-year-old can understand this, why is it so hard for well
educated people in Washington to?

Mr. President, I ask unanimous consent that Bruce Stakeman's letter
be printed in the Record at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HELMS. Mr. President, one doesn't have to be a rocket scientist
to understand this issue. It's simply a matter of common sense, and
reviewing Thomas Jefferson's ideas about the free enterprise system.
The American people deserve better than to be misled by political
schemes. After all, in the mid-thirties, when President Franklin D.
Roosevelt signed the Social Security legislation into law, he warned
that this program must never be allowed to become into a political
football.
Mr. President, look at who's booting around this political football.

Exhibit 1

Environmental Technologies, Inc.,

April 18, 1996.
Hon. Jesse A. Helms,
Raleigh, NC.
Dear Mr. Helms: This is my response to the desire of the
liberals to raise the minimum wage. My thirteen year old son
and I were in the car when the news came on the radio, about
President Clinton's desire to raise the minimum wage. Having
owned a small business and managed others I understand the
problems associated with its raising. I then began to explain
this to my son, Jeremy.
Suppose you owned a small business. Let's say for this
example we use a restaurant and minimum wage is $4.00 per
hour. You have five teenagers employed making $4.00 per hour.
You as the employer have taken the chance to start a business
and give people a chance to earn a fair wage. You are making
a living, but not getting rich. I then asked him, the
government tells you that you have to pay the new minimum
wage of $5.00 per hour. You want to maintain your standard of
living, what do you do? He responded, you could raise your
prices. What might happen, I asked? You might lose some of
your customers. What else could you do? You could let one of
the employees go. Now you have an unemployed person drawing
unemployment compensation.
Then we discussed what the minimum wage should be? I told
him I had a large yard of four acres and would pay him $1.00
for him to cut it. He said, no way! I don't blame him. $2.00?
No. $3.00? No. This went on until we reached the dollar
amount that he would be willing to cut my grass. I told him
this was the minimum wage. He agreed. If a thirteen year old
can understand this, why is it so hard for well educated
people in Washington to?
In Durham, just about everywhere I go has a help wanted
sign on their window. Never have I seen a sign for minimum
wage, most start at $5.00 per hour. As you see I am opposed
to raising the minimum wage. It may mean the difference in my
son getting a starter job where he can learn how to work
outside the home. Thank you for this opportunity to express
my opinion.
Sincerely,
Bruce A. Stakeman.

Ms. MOSELEY-BRAUN. Mr. President, I rise in support of the Small
Business Job Protection Act of 1996. This legislation will help small
businesses invest, grow, and create new jobs. I am pleased to be able
to say that this is a bill that enjoys bipartisan support; it is a
testament to the progress that can be made when Senators from both
sides of the aisle work together.
This bill increases the level of investment by small businesses that
can be expensed, rather than capitalized and depreciated from the
current $17,500 level to $25,000. It reforms subchapter S corporation
laws, most significantly by increasing the maximum number of
shareholders in an S corporation from the current 35 to 75. And it
gives business employers a number of other tools designed to promote
job creation, expansion, and prosperity.
To further stimulate job creation, the bill creates a new tax credit,
the work opportunity tax credit. This new credit replaces the current
targeted jobs tax credit program. The work opportunity tax credit
encourages employers to hire people from populations suffering from
high unemployment, who are on government assistance, or who have
limited education. The work opportunity tax credit would also create
incentives to hire 18 to 24 year olds who are on food stamps for 90
days, which will promote self-sufficiency and help prevent these
individuals from returning to the welfare system. By creating this new
category for 18 to 24 year olds, employers will have an inducement to
hire young people who are all too often overlooked. Additionally, the
minimum employee work requirement would be reduced from 500 to 375
hours. This will enable employers to benefit from the credit to
compensate for job training costs associated with hiring individuals
that generally need extra training and attention.
This bill not only helps small businesses, it also expands
opportunity for education, which is a priority of mine. I was delighted
to work with Chairman Roth to ensure that employer-provided educational
assistance was retroactively reinstated and extended for graduate
education. However, I am troubled by the failure of the House to extend
the program for graduate-level study. I firmly believe that employer-
provided educational assistance should

[[Page S7440]]

be a priority within this bill, and I hope that this can be resolved in
conference.
I am very pleased to have had the opportunity to work with Members on
both sides of the aisle for the inclusion of the Spousal IRA Equity
Act. For the first time, women who stay at home to care for the
family's children will have the ability to place the same amount of
money in a tax-free IRA as men who work outside the home. Each spouse,
including whichever spouse is the family homemaker, will now have the
opportunity to make a deductible IRA contribution of up to $2,000 a
year.
This bill partially corrects another problem area that affects
millions of women. Earlier this year, I introduced the Womens' Pension
Equity Act of 1996. I am pleased to see that this small business tax
legislation includes two of the most important provisions from my
women's pension bill. One provision requires the IRS to create a model
form for spousal consent with respect to survivor annuities. Another
provision would require the Department of Labor to create a model
qualified domestic relations order form.

Pensions are often the most valuable financial asset a couple owns--
earned together during their years of marriage. Unfortunately, it is
now all too easy for a woman to unknowingly compromise her right to a
share of her spouse's pension benefits in case of divorce if both
spouses do not sign a complete QDRO form. These provisions would make
it more likely that women will be able to protect their rights to
pensions.
This legislation also extends for 6 months the currently expired
excise tax on commercial airline tickets. This 10-percent ticket tax
has historically been the principal source of funding for the aviation
trust fund. Since the tax expired last year, however, the fund has been
without a revenue source, and has been spending down its balances.
The ticket excise tax was designed to ensure that users of our
aviation system played a major role in financing of the Federal
Aviation Administration, and these revenues have been used to help the
FAA enhance airline safety, and ensure that the airline industry safely
meets the needs of the traveling public. Without this revenue, the
long-term ability of the FAA to perform its safety mission could be put
at risk.
I therefore support the short-term extension of the ticket tax.
However, commercial aviation has changed radically since the ticket tax
was first imposed in the 1970's. The old system may no longer be
appropriate to today's aviation industry--or tomorrow's. I therefore
urge the administration to use the 6-month period provided by this bill
to evaluate whether the 10-percent excise tax on tickets should be
extended for the long term in its current form, or whether it should be
replaced with another concept more attuned to the realities of the
modern aviation industry.
The financing system imposed by the Federal Government to pay for the
FAA must build on the strengths of the dynamic American aviation
industry. I therefore strongly urge the administration to take the next
6 months to review the current funding needs of the FAA, and work to
craft a permanent system for financing aviation that meets the
interests of the American traveling public and of all the other
participants in that system.
There are a number of other features in this bill that make a lot of
sense, and that will be of significant benefit to our country, but
rather than speak further on provisions of the bill that already
command broad, bipartisan support, I would instead like to address a
few issues that I believe need further review. Given the current floor
situation, it is not possible to fully address all of these issues here
on the Senate floor. That review will therefore necessarily have to
take place in the upcoming Senate-House conference.
The House bill, for example, contains a provision that would tax
nonphysical compensatory damage awards. Under the House language,
victims of sex discrimination, race discrimination, and emotional
distress would be required to pay taxes on any damages they receive
resulting from a successful lawsuit in any of these areas of the law.
Singling out this category of damages for differential tax treatment is
wrong and discriminatory, and it would make it more difficult for
people who suffer these harms both to access the court system and to
achieve justice. I am therefore pleased and commend my colleagues in
the Senate for excluding this provision, and I hope that the Senate
language is adopted in conference.

The Research and Experimentation tax credit is another area that will
need careful attention in conference. I have worked hard with my
colleagues Senator Baucus and Senator Hatch to ensure that the R&E tax
credit is extended in the bill now before this body, and I am pleased
that the R&E tax credit will be extended effective July 1, 1996.
However, I am deeply concerned by the fact that it was neither extended
in the House version nor retroactively reinstated in the Finance
Committee to cover the gap created by our failure to act. The last
extension of the credit expired on June 30, 1995, and based on six
prior extensions of the credit, businesses had every reason to expect
that the credit would be extended without creating a gap where the
credit is not available. If Congress is now to reverse that series of
precedents, we might well create a chilling effect on business research
and development investment. We need to make the R&E tax credit
permanent, so that there will be no future gaps in the availability of
the credit.
The section 29 tax credit for nonconventional fuels is yet another
area that needs further consideration. This tax credit is good for our
environment. For example, recovering and managing landfill gas such as
methane has improved the quality of life around landfills, reduced
smog, and alleviates global warming. With this tax credit, landfill gas
has become a practical fuel for use in conventional electrical
generating equipment. However, the extension of the credit will be less
effective as it relates to coal unless the placed in service date is
changed from January 1, 1998 to January 1, 1999, given the scope and
complexity involved in converting coal into synthetic fuels.
While I believe these issues need to be addressed, I want to
reiterate that the bill as it was reported from the Finance Committee
is a good bill. Women, children, and working people will all benefit if
this bill can be enacted, and it will help promote job creation and
economic growth. I want to commend my colleagues on the Finance
Committee, particularly Chairman Roth and the ranking Democratic
member, Senator Moynihan, who have worked hard to produce a bipartisan
bill that promotes growth and stability among small businesses.
I will speak separately on the minimum wage amendments that have been
offered to this bill. At this time I only want to remind all of my
Colleagues that this bill will not and cannot become law if this body
passes a minimum wage provision that works against the interests of
working Americans. I therefore urge all of my colleagues to vote for
the minimum wage amendment being offered by the distinguished Senator
from Massachusetts, Senator Kennedy, and against any attempts to
undermine this long overdue, and very modest increase in the minimum
wage.
The Finance Committee worked in a bipartisan way to create a bill
that commands broad support. It is a bill of which we can be proud, and
of which the American people can be proud. If we continue the
bipartisanship that brought the bill this year, if we continue to work
together to put the interests of the American people first, we can
ensure that this bill remains bipartisan, and that it becomes law. The
alternative, to continue a politics of confrontation and gridlock, is
not in the public interest, not in our national interest, and will
result in creating another legislative failure out of what would
otherwise be a significant legislative success. I strongly urge my
colleagues not to let that happen. I urge my colleagues to cast votes
based on the bipartisanship that has brought the bill this far. I urge
the Senate to vote against gridlock and for the American people, so
that this bill can become law.
Mrs. MURRAY. Mr. President, I rise today in strong support of the
Kennedy amendment and as a cosponsor of the minimum wage increase.
I cannot sit idle as I hear of those struggling to live on today's
minimum wage. I thought, like many of you, that the minimum wage earner
was my

[[Page S7441]]

daughter or one of her friends: a teenager flipping burgers or taking
food orders to earn some extra cash for new clothes or a movie.
That is the misperception though. The sad fact is that 73 percent of
those earning between $4.25 and $5.14 an hour are over the age of 20.
That represents 9 million adults who will attempt to live on $8,840
this year. One-third of these adults are the sole income-earners in
their families. If these adults were supporting a family of three, they
would fall $2,682 below the Federal poverty line.
I am immensely troubled with the fact that 58 percent of those
struggling with a minimum wage are women; 5.2 million women, many of
these single mothers, would benefit directly from this increase.
These single moms are trying. Trying to raise two kids on a below-
poverty income. And how does Congress reward these single parents? By
attacking Medicaid that would have paid for her son's asthma medicine.
By cutting her child care support that allows her to work. By taking
away funding for nutrition programs that pay for her kids to eat at
school or day care. By eliminating her Head Start Program that gives
her kids a chance at starting school ready to learn. By refusing to add
90 cents to her hourly wage--a wage that pays for heat, clothing, and
food.
Aren't these the individuals and families we are trying to keep
employed and off of Federal support? Instead, this Congress has
targeted the low-income family through cut after cut and a resistance
to move them above the poverty line.
This amendment does not eliminate jobs, it barely keeps people
working, who otherwise would be completely reliant on public support.
If we had only passed this amendment a year ago, it would have meant
that the single mother would have earned an additional $2,000 today. To
that low-income family, that would have meant more than 7 months of
groceries, 4 months of rent, a full year of health care costs, or 9
months of utility bills.
I did not reach my decision to support the minimum wage easily. I
have listened carefully to the concerns of small business owners from
across my State, who have highlighted the implications of this
increase. I don't want to see prices for the American consumer rise or
jobs eliminated. But I don't think an increase to the minimum wage will
end employment in small business, either.
It has now been over 5 years since the last minimum wage increase. We
must remember that the value of the current minimum wage has fallen by
nearly 50 cents since 1991 and is now 27 percent lower than it was in
1979. Now is the time to adjust that inequality and demonstrate a true
commitment to our working families.
A slight increase in this wage provides those who work hard and play
by the rules an increased opportunity and a chance to succeed. If any
of my colleagues oppose the minimum wage, I urge them to live on $8,840
this year and then reconsider their vote.
Mrs. FEINSTEIN. Mr. President, I rise to support increasing the
minimum wage from the current floor of $4.25 to $5.15 per hour, the 90-
cent increase being phased-in in two stages over the next year.
This issue is about making ends meet. It's about people being able to
pay the rent and put food on the table, and the bottom line is, the
current minimum wage is simply not enough to live on.
A person working full time at minimum wage today does not even make
enough money to meet the Federal poverty level. An American working a
40-hour week makes an annual salary of $8,640--nearly $300 below the
Federal poverty level of $8,910. For a family of two, the poverty level
is $11,920.
The minimum wage is supposed to be a safeguard against poverty-level
wages, but for millions of Americans, the cost of living has outpaced
any protection afforded by the minimum wage.
Many families in this country are just one paycheck away from
disaster--whether it is an illness, the need to move, or simply the car
breaking down--many people living paycheck to paycheck live in fear
that they may not make it this month or the next. They live in dread of
the next heat wave that could force them to choose between paying the
extra-high electric bill or buying the kids a new pair of shoes.
We don't have a magic wand to fix their situation, but in my view we
do have an obligation to maintain a minimum wage level that, at the
very least, keeps pace with the cost of living.
Let me give you an example of what raising the minimum wage just 90
cents would mean to a family:
It means $1,800 more money every year; enough to pay 4 months of
rent; enough to cover health care costs for a whole year; enough to pay
9 months of utility bills; and enough to buy 7 months worth of
groceries.
Maintaining a minimum wage that makes sense is especially important
for States like mine with a higher than average cost of living:
A loaf of bread in Los Angeles, at $1.34, is double that of the
United States average of 75 cents.
A gallon of milk in the United States costs $1.41 on average, but in
San Diego it costs $1.71.
A can of tuna that costs 69 cents on average costs 90 cents in San
Diego.
In San Francisco, housing costs are 160 percent higher than the
national average.
The cost of health care in Los Angeles is 37 percent higher than the
national average.
The cost of transportation is 22 percent higher and there a fewer
lower cost alternatives.
The minimum wage does not just affect teens who are working their
first job. Seventy percent of Americans who receive the minimum wage
are adults over 20 years old. Forty percent are the sole breadwinner in
their family and more than three of every five are women, many of whom
are single women supporting a family.
A decent wage has long been a hallmark of this country's promise. It
means a livable wage for a fair day's work. It means providing for your
family and staying off welfare. A decent minimum wage honors work. I
hope my colleagues will join me in passing this amendment. It will mean
a great deal to a lot of hard-working Americans.
Mr. HATFIELD. Mr. President, I agree that Congress should increase
the minimum wage standard. I have voted for reasonable minimum wage
increases in the past and will certainly vote for the reasonable
increase of the minimum wage today.
As this Congress discusses welfare reform, it has been emphasized
time and time again that those who can work should work. However, with
the minimum wage today at $4.25 an hour, a person laboring 8 hours a
day, 5 days a week, 52 weeks a year would gross only $8,840. The
minimum wage is already very close to its lowest real value in over 40
years. In addition, paired with inflation, the minimum wage increase of
1989 has been virtually nullified. If the minimum wage in January 1978
had kept pace with the Consumer Price Index, for example, the current
level would be $6.40 in 1996. If we expect those on welfare to work, we
can at least ensure that a minimum wage is a living wage and by voting
for an increase in the minimum wage today we will have taken steps to
assure those who are working are justly compensated for their work.
The minimum wage, established in 1938 by the Fair Labor Standards Act
has been raised 17 times, more recently in 1989 and 1991. I voted both
for final passage and the conference report of the wage increases in
1989, which raised the minimum wage to $3.80, and 1991, which raised it
to its current level. A minimum wage provides vital protection for
those workers who are not union members or who have few if any skills
and little bargaining power. With bipartisan support, Congress should
raise the minimum wage to $5.15 per hour and I support that increase.

clarification of section 4271 aviation excise tax

Mr. PRYOR. Mr. President, H.R. 3448 reinstates all airport and airway
trust fund excise taxes, including the section 4271 tax on the
transportation of property by air. In Revenue Ruling 80-53, the
Internal Revenue Service clarified that this excise tax does not apply
to charges paid by the U.S. Postal Service for accessorial ground
services. Although the Internal Revenue Service has followed the same
interpretation in an unpublished ruling involving a commercial carrier,
there seems to be confusion about the application of section

[[Page S7442]]

4271 to commercial integrated carriers that provide accessorial ground
services, in addition to air transportation.
In reinstating section 4271 excise tax, is it your view, Senator
Thompson, that the statutory language of section 4271 is to be
interpreted and applied to commercial carriers in accordance with the
holding of Revenue Ruling 80-53--i.e., that amounts reasonably
attributable to accessorial ground services of commercial carriers are
not taxable under section 4271? If you agree with this statement, would
you also agree that any uncertainty about the present or future
application of section 4271 to commercial carriers should now be
eliminated.
Mr. THOMPSON. I agree.

SBIC Participating Security Program

Mr. BOND. Mr. President, I ask unanimous consent that I be allowed to
engage in a colloquy with the managers of the bill and the Senator from
Arkansas [Mr. Bumpers], regarding a correction that is needed for the
Small Business Investment Company Participating Security Program.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BOND. This is an issue that arose so recently that it has proven
impossible to address it in this small business tax bill, even though
this would be the perfect forum for it because it is a tax issue having
a serious impact on SBIC's. So we are hopeful that this issue can be
taken care of in the conference committee on the small business tax
bill.
Specifically, we are talking about a correction that is critical to
the continuation of the newest form of SBIC: the participating
securities SBIC. The need for and the language of the correction are
supported by Treasury, SBA, and the SBIC industry.
As you know, Mr. President, SBIC's are small, privately managed and
privately capitalized venture capital firms that are licensed by SBA to
invest solely in U.S. small businesses. In return for their agreement
to invest and to put 100 percent of their private capital at risk
before Government funds are at risk, SBIC's are eligible to draw
additional capital, or leverage, which is raised by the sale of SBA-
guaranteed certificates. Leverage is repaid with interest, and a share
of the profits in the case of participating securities SBIC's, as
investments mature. At a time when strictly private venture capital
funds are less and less inclined to invest in the $250,000 to $3
million range critical to small businesses and more and more interested
in investing in foreign companies which compete with our U.S. small
businesses, the need for the SBIC program is perhaps greater than ever.
The participating securities SBIC is a new form of SBIC financing
that was created by Congress in 1992 to stimulate equity, vis-a-vis
debt, investment in small U.S. businesses. With that legislation,
Congress created not only a vehicle that has attracted substantial
private capital for equity investment in small U.S. companies, but also
created the mechanism by which the U.S. Treasury--and thereby the
taxpayers--share directly in profits made by these SBIC's from their
investments. To date, 35 participating securities SBIC's with $565
million in private capitalization operating in 17 States have been
licensed by the SBA. By the close of fiscal year 1996, it is estimated
that the Government will have received over $500,000 in profits over
and above principal and interest factors from these new SBIC's. When
one considers that nonprofit sharing SBIC's provided early financing to
companies such as Apple Computer, Intel, Federal Express, and Cray
Research, it is understandable why so many are excited about this new
form of industry-led partnership with Government. It is a true
partnership that will see U.S. taxpayers share both directly and
indirectly in the profits associated with the creation of new jobs,
technologies, and overall economic development by the small firms in
which SBICs invest.
As referenced above, leverage funds for participating securities
SBIC's are raised quarterly by sale of SBA-guaranteed certificates by a
funding trust set up for this purpose. The certificates are 10-year
obligations with interest payable quarterly. Because the participating
securities issued by SBIC's to the trust in return for the leverage
raised by the trust's certificate sales are equities which do not
require the SBIC's to pay any amounts unless they have earnings, which
they likely will not have while holding the stock of the small
companies they invest in, the SBA's guarantee of the payment of both
regular interest and principal is the critical element which supports
the sale of the certificates through public capital markets. In
recognition of SBA's guarantee as the primary reliance factor for
investors, in all fundings to date, the Internal Revenue Service,
through private letter rulings, has characterized the SBA-guaranteed
certificates sold by the trust as obligations of the U.S. Government
and not as those of the participating securities SBIC's being funded by
the trust. These rulings have supported the six sales that have
occurred thus far in the short history of the new program.
At this point, Mr. President, I wanted to ask my good friend from
Arkansas, Senator Bumpers, a question regarding the intent behind the
enabling legislation for this program when it was passed in 1992.
Because the Senator from Arkansas was chairman of the Small Business
Committee at that time, he is probably better qualified than anyone in
this body to opine on this matter. And my question is this: Was the
intent of the enabling legislation for the participating securities
program that the SBA-guaranteed certificates sold by the trust were to
be obligations of the U.S. Government and not obligations of the
participating securities SBIC's being funded by the trust?

Mr. BUMPERS. That was certainly my intent, and I believe the intent
of the members of the Small Business Committees of both the House and
Senate, when we acted on this legislation in 1992. I feel confident
that this was the understanding of the other Members of this Chamber,
as well. Frankly, to treat these certificates as debt instruments
backed by the full faith and credit of the United States is the only
way to make this program work. If they were not, the investors would
demand a far higher return on their investment because the risk would
be significantly higher. And the important aspect of that fact at
present is that without this change, the cost of this program to the
Federal Government will be substantially more. The consequences of
failing to cure the definitional defect are severe. Either future
leverage fundings would be impossible, thereby directly ending the
program, or the uncertainty surrounding the nature of the certificates
would dramatically increase their cost, thereby effectively ending the
program in our view. Not only would a valuable program have been killed
unnecessarily, but the Government might be liable for unfunded leverage
commitments outstanding at this time, perhaps as much as $90 million,
and, perhaps, losses of the $565 million in private capital that has
been committed to the program to date in reliance on the availability
of leverage capital at reasonable rates. For this to happen because of
a lack of definitional clarity would be unfortunate indeed.
Mr. BOND. So this characterization of the SBA-guaranteed certificates
sold to the public as U.S. Government debt is what permits the
certificates to be sold to the broadest possible base at the lowest
possible interest rates.
Mr. BUMPERS. That is correct. And currently the rate is the rate for
10-year Treasury bonds plus approximately 75 basis points.
Mr. ROTH. If I might ask a question at this point, it is my
understanding that heretofore, the IRS has been willing to confirm that
these certificates are debt obligations of the United States
Government. Is that correct?
Mr. BOND. That is correct. The IRS has provided private letter
rulings to that effect on six occasions in the past. Unfortunately,
just last week, the IRS made a final decision that it is unwilling to
give a permanent revenue ruling that would so characterize the
certificates for all time. The IRS believes that the language of the
statute is ambiguous with respect to congressional intent and fears
that a ruling based on the ambiguous language might have negative
consequences in non-SBIC areas. However, notwith-standing this
unwillingness of IRS to issue a revenue ruling, the Department of
Treasury is not opposed to a legislative correction to clear up the
issue of congressional intent.
Mr. MOYNIHAN. If I could make one inquiry of the Senator from
Missouri.

[[Page S7443]]

There is significant time sensitivity to this issue, is there not?
What happens to the SBIC Participating Security Program if we do not
resolve this issue soon?
Mr. BOND. It could be in trouble by the end of the year. Without
clarifying language, it could well be impossible to sell any more
certificates following the August 1996 quarterly offering. And let me
add that the reason this issue was not raised earlier was that, up
until last week, the SBA and IRS believed it could be worked out
administratively. But at that time, the IRS determined it needed a
legislative fix, and that is why we are here today. We have asked the
Joint Committee on Taxation for a revenue request, which we hope will
be ready post-haste.
Mr. MOYNIHAN. Well, this is certainly an issue that needs to be
addressed.
Mr. ROTH. I thank the Senator from Missouri and the Senator from
Arkansas for bringing this matter to our attention. Although the
Participating Security Program is relatively new, it appears to have
great potential for small business. Let us see what we can do to
resolve this issue.
Mr. BOND. I thank the managers and my friend from Arkansas for taking
the time to discuss this important issue.

disallowance for business meals

Mr. BAUCUS. Mr. President, I would like to engage the chairman of the
Finance Committee in a colloquy regarding a provision in the Small
Business Job Protection Act.
Section 1120 of the act provides an exception from the 50 percent
disallowance for business meals for certain remote seafood processing
facilities.
It is my understanding that this provision is intended to address a
specific issue related to these seafood processing facilities, and is
not intended to imply congressional intent on other exceptions to the
50 percent disallowance on business meals claimed by taxpayers.
Mr. ROTH. The Senator is correct.
Ms. MOSELEY-BRAUN. Mr. President, I rise today to talk about just a
few of the compelling reasons that this Congress should support a real
increase in the minimum wage.
By raising the minimum wage, this Congress can close the ever
increasing gap between the working people of this country and the
wealthy, help ensure that there is a market for all the goods and
services the workers of this country produce, stop paying assistance
and start collecting taxes, and honor the American tradition of
rewarding hard work and perseverance.
The current minimum wage is not a living wage for the millions of
American's who support themselves and their families on $4.25 an hour.
Today, 10 million Americans earn the minimum wage--well below the
poverty line for a family. In my State alone, over 10 percent of the
work force earns the minimum wage--545,647 Illinoisans earn $4.25 an
hour. This means that an Illinoisan, working 40 hours a week, 52 weeks
a year, earns only $8,840.
The legislation we are considering today would increase the minimum
wage by 90 cents over the next year. It has been almost 5 years since
the minimum wage was last increased. During this time, the real value
of the minimum wage has, of course, declined. While wages have stayed
the same, prices have increased, as I'm sure anybody who has gone to
the grocery store or the doctor's office lately can tell you. It is no
wonder then, that the working people of this country are faced with a
declining standard of living.
As I have pointed out to the Senate before, in the 1980's, 80 percent
of Americans did not improve their standard of living. While the
average wage increased 67 percent, the average price of a home
increased by 100 percent, the average price of a car increased 125
percent, and the cost of a year in college increased by 130 percent.
The minimum wage increased by only 23 percent. In fact, a recent study
stated that the decline in the value of the minimum wage since 1979
accounted for between a 20- and 30-percent increase in wage inequality
in this country.
It is important to understand that workers earning the minimum wage
are not just young people working at their first job--although many
young people contribute to their family's income.

The majority of the people earning the minimum wage--two-thirds--are
adults. Many of these are parents raising families on under $9,000 a
year. The poverty rate for a family of four is $15,600.
Close to 60 percent of those earning minimum wage are women. These
are women who are taking responsibility for themselves and their
children. They go to work every single day, and still the minimum wage
does not provide them with a living wage on which to raise their
families. It is a travesty that a mother or father working full time--
40 hours a week, 52 weeks a year--cannot support a family or get out of
poverty, no matter how hard they work.
A 90-cent increase in the minimum wage would provide a full-time
worker earning the minimum wage with $1,800 a year in additional
income. That money could pay more than 7 months of groceries, rent or
mortgage for 4 months, a full year of health care, or 9 months of
utility bills for a family living on the minimum wage. The money would
make a world of difference to that family. That money would also be
part of the economy.
A family that can pay for rent, groceries, or health care is putting
money back into the economy. That family is buying goods and services
produced by other workers. That family is also earning taxable income
and reducing the need for public assistance. An increase in the minimum
wage helps people to contribute to, rather than drain, the Nation's
economy.
It is not only the lowest paid workers who will benefit from this
increase. All those who earn a dollar or two above the minimum wage
should see their income rise. This will increase the pool of consumers,
increase taxable earnings, and improve the lives of countless American
families.
Paying a living wage does not mean that jobs will be lost. Last year,
a group of respected economists, including three Nobel Prize winners,
concluded that an increase in the minimum wage to $5.15 an hour will
have positive effects on the labor market, workers, and the economy.
Any job loss is negligible compared to the benefits an increase in the
minimum wage would produce.
Some argue that small businesses should be exempt from the minimum
wage increase. We should remember that the minimum wage bill is
attached to the Small Business Jobs Protection Act of 1996, a bill that
provides $6.5 billion in tax benefits for small businesses over 10
years.
Even more to the point, however, is the fact that small businesses
which right now pay a living wage to their employees are at a
competitive disadvantage to those which do not. By setting a floor, a
minimum wage, we will level the field for business. If there is a
consistent basic wage among businesses, no worker's livelihood will
become the basis for competitive advantage. We should help small
businesses to pay a living wage, not allow them to be penalized if they
do so.
Workers are our greatest resource. The American worker is more
lasting and more valuable than all our coal and oil. The American
worker made this country great. We should recognize the contributions
of our workers and reward those who work long and hard to earn a
living. We must be especially careful to ensure that those workers
caring for children are able to do so. Parents working full time to
support their families must be able to support their families.
I urge my colleagues to vote against the Bond amendment. That
amendment strips the wage increase of any real meaning by providing
exceptions and loopholes that will leave millions of workers without
the minimum wage increase they deserve.
I urge my colleagues to vote for the Kennedy amendment. This
amendment covers more of America's minimum wage workers with less
delay. This amendment responds to the wishes of the American people and
provides a real increase in the minimum wage.
Our country is founded on the belief that hard work is the foundation
of success--this is the American dream. Congress should encourage, not
discourage, effort and perseverance. A minimum wage should provide a
living wage for those who are working day in and day out to provide for
themselves and their families. Family values and

[[Page S7444]]

the American dream are ideas we like to talk about, but today we can
actually make them more real for millions of Americans.
Mr. MACK. Mr. President, I rise today in support of S. 295, the
Teamwork for Employees and Management Act.
This bill, which I am proud to cosponsor, amends the National Labor
Relations Board Act to permit teams of employees in nonunion settings
to work with management to address workplace issues of mutual interest.
Under current law, only union representatives can represent workers in
communication with management.
In an article in this week's edition of the AFL-CIO News, union
members were urged to call their Senators and tell them that ``the TEAM
Act is an underhanded effort to prevent workers from forming unions.''
This is simply false. The TEAM Act merely gives non-union workers an
effective voice for change in the workplace. In essence, the bill
extends the same rights to non-union workers which union members
already possess. How can that be such a bad idea?
Employee participation on labor/management teams gives them the
opportunity to make significant and valuable contributions to their
companies. Employee involvement teams are about respect and fairness
for all workers. Today's worker's have much to offer about the work
they perform, and employers have learned to listen to them.
Even President Clinton agreed with this concept. In his 1996 State of
the Union Message he said: ``When companies and workers work as a team,
they do better--and so does America.'' I could not agree more.
Mr. President, there are many difficult issues facing America's work
force. One area which should be neither challenging nor stressful is
the relationship between labor and management. I believe that Congress
must offer policies which improve the quality of work life and reduce
the tension between managers and workers. The TEAM Act is such a
proposal. This bill intends to break down the communication barriers
between employers and employees, and as a result, establish more
cooperative labor/management relationships in American companies.
Mr. President, I urge my colleagues' support of this legislation.
American laws should be designed to stimulate and encourage cooperation
and teamwork in the work force, rather than suppress such activities.
The time has come to pass the TEAM Act.
Mr. DOMENICI. Mr. President, millions of Americans worry about their
ability to retire, pay the bills and not be a burden to their children.
Some worry because their employer is unable to provide them with a
pension. Others worry about whether their existing pensions will be
there for them when they retire.
This bill is a blessing for all of these workers. It will make it
easier for people to get pensions and will protect pensions of those
who already have them.
Thirty-six million Americans work for small businesses that can't
afford to provide pensions to their employees. These 36 million people
will benefit from the simple pension plan created in this legislation.
This plan allows small businesses tax-favored treatment when they
establish pension plans for their workers, and it eliminates most of
the redtape associated with creating a pension plan.
Two million Americans who work for tax-exempt organizations will, for
the first time, be eligible to sign up for 401(k) savings plans.
In addition to pension reforms, the bill includes provisions that
help small businesses and their workers. They include creation of the
work opportunity credit designed to encourage the hiring of hard-to-
place workers, and an increase in expensing for small business to help
the Nation's job creators grow and create more jobs. The work
opportunity tax credit replaces the targeted jobs tax credit which I
helped author. The reforms update that legislation.
The bill changes the S corporation laws to make it easier for
families to maintain their enterprises and the bill extends a popular
tax provision that allows employers to provide their workers with
educational assistance on a tax-favored basis.
This bill also includes an expansion of IRA provisions for homemakers
so that they can contribute $2,000 to an IRA.
The bill and managers' amendment also extends the R&D tax credit
through December 31, 1997.
Out of the six areas of tax law, the most complex for small business
owners are the independent contractor rules, depreciation, alternative
minimum tax, inventory accounting, pension rules, and the home office
deduction.
This bill addresses the independent contractor rules and pension
rules. This is a very good start.
The tax title contains revenue offsets to pay for the relief granted
to small businesses and pensions. The bill reduces the deficit by $100
million in 1996 and by $1.1 billion in 1997.
A few of the revenue offsets are from the vetoed Balanced Budget Act:
reform of section 936 possessions tax credit, repeal of the 50-percent
exclusion for financial institution loans, elimination of the interest
allocation exception for certain nonfinancial corporations, revision of
the expatriation tax rules.
The bill also reinstates the airport and airway trust fund taxes
through April 15, 1997.
This bill contains many tax provisions passed by Congress last year
in the Balanced Budget Act which was vetoed by President Clinton.
Congress believes that it is worth sending the small business tax
relief to the President again in this minimum wage bill.
Despite the current tax burden, small business is the fastest
growing, most vibrant sector of our economy. The bill provides much
needed relief so that businesses can create even more new jobs.
I hope that next Congress we will enact comprehensive tax reform.
Instead of limited expensing, there could be expensing and no
depreciation calculation. We would eliminate the alternative minimum
tax and get rid of inventory accounting.
If we enacted the USA tax plan introduced by Senator Nunn and me the
Tax Code would get much simpler.
There are 5 million employers in the United States today. Some 60
percent employ 4 employees or fewer and 94 percent employ fewer than 50
employees.
Tax regulations and compliance burden ranks highest among small
business people's problems and concerns.
A recent NFIB tax survey found that 79 percent of those responding
said we should substantially change the Federal Tax Code as it affects
both business and individuals.
Current code smothers small business.
Arthur Hall of the Tax Foundation found that small business owners--
small corporations with assets less than $1 million--pay a minimum of
$724 in compliance costs for every $100 paid in income taxes. This is a
total of $28.6 billion in compliance costs for these small business
owners, compared to $3.9 billion paid in income tax.
Additionally, small firms bear a compliance burden at least 24 times
greater than big business.
There is growing recognition by politicians, economists, and all
citizens alike of a disturbing fact--the burden created by Federal
income tax and other Federal regulations falls predominantly and
disproportionately on the very people who we rely upon to create jobs--
small business owners.
Endless paperwork associated with tax regulations takes more and more
time, allowing less and less time to run their businesses.
The alternative minimum tax and depreciation calculations mean
endless hours of work and high accountants fees, often for little
bottom line tax benefit.
Additionally, 53 percent said payroll taxes are less fair or much
less fair than business income taxes.
One-half of small business owners start their business with less than
$20,000, most of which is from personal savings or family savings. The
unlimited savings allowance in the USA tax will make it much easier for
entrepreneurs to get started. This means more new businesses and more
new jobs.
I am pleased to support the tax title of this bill; however, we need
comprehensive reform.

Providing Equal Tax Treatment To Software Exports

Mr. LEAHY. Mr. President, I am disappointed that the tax package in
the

[[Page S7445]]

Small Business Job Protection Act, H.R. 3448, does not include any
provisions to correct the foreign sales corporation tax to provide
equal treatment to computer software exports.
I believe the managers of the bill, Senator Moynihan and Senator
Roth, have done a fine job on the tax provisions in this legislation,
except for this one issue. I want to thank Senator Moynihan for his
support and I will continue to work with him and other Senators to
correct this tax discrimination because it has hampered the
competitiveness of our software industry for far too long.
In 1971, before the birth of the software industry, Congress created
tax incentives for U.S. companies to bolster exports. In an
increasingly competitive global economy, Congress realized that U.S.
businesses must export to succeed. Since 1987, however, the Treasury
Department has interpreted the law to exclude most U.S. software
exporters from receiving these benefits.
Correcting this inequity will protect U.S. software development jobs
and encourage economic growth through increased software exports. The
United States is currently the world leader in software development,
creating more than 500,000 high-wage, high-skill jobs in this country.
Our tax policy should be encouraging the creation of more of these
jobs, not hindering the ability of our software companies to compete in
the global economy.
Correcting this problem does not grant special treatment to the
software industry. It would merely restore equal treatment under
existing law. Fixing this anomaly in our tax law makes economic and
common sense. I urge my colleagues to provide equal tax treatment to
software exports as soon as possible.
Ms. MIKULSKI. Mr. President, I am voting to raise the minimum wage.
This increase in the minimum wage is long overdue. While opponents have
tried to kill this increase, inflation has killed the value of the
current wage.
The bill before us today has two major components. First of all, it
raises the minimum wage from $4.25 an hour to $5.15 an hour. This is a
major step in improving paycheck security for America's workers.
Second, the bill contains a number of tax provisions. Many of these
provisions are designed to benefit small business, and to address
concerns that small business might be hurt by the wage increase the
bill provides.
One tax provision of special importance to me is the language that
expands the availability of spousal IRAs. Along with Senator Kay Bailey
Hutchison, I am the author of the Homemaker IRA Bill. Sixty of our
colleagues have joined in cosponsoring our bill to allow homemakers to
get a full IRA deduction. So we are delighted that our bill, which is
so important in providing retirement security for American families,
has been included in this legislation.
If this Congress fails to raise the minimum wage, we will be letting
down millions of hard working men and women. We will be letting down
the 130,000 Maryland workers who will benefit from an increase.
The last time we acted to raise the minimum wage was 1989. When we
add in what inflation has done to that increase in the last 7 years,
the minimum wage is at its lowest level since 1955--40 years. How many
in this Chamber would be satisfied with 1955 wages?
When I say I am for a minimum wage increase I want to make clear that
I will not vote for the Republican amendment. The Republican amendment
is an attempt to have it both ways. Tell the voters you voted for an
increase, but don't tell them that the millions of working men and
women who need the increase will never get it. Under the Republican
amendment, two thirds of all workplaces--and 10.5 million employees--
would be denied the minimum wage increase.
The Republican amendment delays the increase for another half year.
It effectively cuts out all waiters and waitresses, and others who
depend on tips. This is a particular concern to women. Women represent
some 80 percent of tipped employees.
The Republican amendment denies an increase to every worker,
regardless of age, for the first 6 months on any new job. The
Republican amendment will not result in an increase in the minimum wage
but it will result in an increase in the public cynicisms about
Washington.

The Democratic amendment is straightforward, and it will raise the
minimum wage. Under our proposal the minimum wage will increase from
$4.25 an hour to $5.15 an hour by the second year. This is a modest
proposal that will not kill jobs, but will help America's families.
Mr. President, some will argue that the minimum wage doesn't really
help families or adult workers, but that is not what the facts tell us.
The facts are that over 60 percent of workers receiving the minimum
wage are adults. And over one-third of minimum wage earners are the
only wage earners in their families.
Too many workers are losing ground. Too many people are working
longer and working harder, but their checks are getting smaller. These
people don't work on Wall Street and they don't work in this Chamber,
but they do work in every corner of the United States and every place
in between. They live their lives trying to meet their day to day
needs. In a country where voters wonder if Washington is interested in
improving their lives, raising the minimum wage is one small signal we
can send that says we do care.
Mr. President, I also want to mention my support for the small
business tax package that will become a part of this legislation if it
is passed. I am pleased that we have a bipartisan agreement on a tax
package that will provide some needed tax changes.
Some have denounced a minimum wage increase as being antibusiness.
These same people fail to mention the nearly $11 billion in tax cuts
that are a part of this legislation. Extension of the research,
education, and targeted tax credits are all important tax deductions
that I have long supported. I believe the continuation of these credits
will help businesses as well as help the country.
I am also very pleased that this tax package includes an expansion of
the IRA for spouses. I want to take this opportunity to commend Senator
Hutchison, with whom I introduced the bill early last year to provide
homemaker IRA's. Senator Hutchison has been such an able and staunch
advocate for our legislation, and I am pleased that it is included in
the bill before us. By passing this we are finally recognizing the
value of the labor of all the spouses who work at home.
Mr. President lets pass a minimum wage increase. One that is real and
one that is needed.
Mrs. FRAHM. Mr. President, few would disagree that small businesses
are the backbone of the American economy. From the mom-and-pop general
store, to the diner on Main Street, small businesses play an integral
role in keeping our economy moving. In fact, these enterprises create
half of all of the new jobs created in this country.
The greatest obstacle facing small business today is the Federal
Government itself. Ronald Reagan had it clear in his mind when he said
what the test of an economic program should be: ``Government has an
important role in helping develop a country's economic foundation. But
the critical test is whether the Government is genuinely working to
liberate individuals by creating incentives to work, save, invest and
succeed.''
Sweeping tax reform is the only way to truly unleash America's
potential and free small business from the burden of Government while
encouraging savings, investment and real prosperity. However, until we
have someone in the White House who puts the interests of small
businesses and the American people before politics, this type of
complete tax reform seems impossible.
In the meantime, passing the Small Business Job Protection Act
provides immediate and meaningful relief for small businesses in Kansas
and the rest of the Nation. The specific provisions of this bill will
enable small businesses to increase capital investments, enhance job
and overall economic growth, and provide retirement savings options for
their employees. This is the proper role of Government.
People are worried about the economy and more specifically their
financial futures. When I talk to Kansans, one thing is abundantly
clear--people are fearful of their post-employment futures. They wonder
if they will be able to afford to retire despite all of

[[Page S7446]]

their years of hard work. For many the only option is to work until
they no longer can. The American dream of a secure retirement becomes
more and more of a dream and less of a reality every day.
Currently, complex regulations and the resulting high costs keep
small businesses from offering retirement plans to their employees.
Only 19 percent of workers in businesses with fewer than 25 employees
had employer provided pensions made available to them, and only 14
percent participated. A major contributing factor to this dismal
statistic is the sky-high cost per participant of establishing and
maintaining these pensions.
This bill will fix this situation, making pensions accessible to more
Americans, and helping to secure their financial futures. A lifetime of
hard work should be accompanied by the earned reward of a secure
retirement.

To me, Kansas common sense dictates that our policy toward small
business should support creation and growth, In fact, during the
1980's, they accounted for an increase of more than 20 million jobs
alone--20 million. It is vital that we look to protect America's small
enterprises. We cannot afford to send hard-working Americans to the
unemployment lines.
However, I am very concerned that a mandatory increase in the minimum
wage, will excessively raise labor costs, forcing employers to either
close down or dramatically decrease the number of people that they
employ.
We must remember that protecting small business protects small
business employees. A minimum wage increase without substantial
protection for small business will destroy hundreds of thousands of
entry-level and low-wage jobs. Many Americans rely on these jobs for
their very survival.
The solution here is not the quick fix of simply paying individuals a
bit more per hour--the prudent, long-range solution is providing these
individuals with the training they need to land higher paying jobs. A
minimum wage increase will substantially decrease the funds that small
employers will be able to spend on the training of entry-level
employees to prepare them for higher paying jobs.
Although I oppose any effort to increase the Federal minimum wage, I
certainly support Senator Bond's small business exemption provisions.
Since small enterprises are the hardest hit by a minimum wage increase,
they are in the greatest need of relief to continue to be competitive.
If we are going to pass legislation that makes such important strides
in protecting small business, and more importantly, the people who
depend on them--we cannot take a giant step backward by simply creating
new obstacles for these hard-working entrepreneurs to overcome.
Again, raising the minimum wage is not the feel-good cure-all.
However, tax relief and a minimum exemption for small business are
steps in the right direction. Any minimum wage increase must be coupled
with such provisions if we are to keep hard-working Americans from a
trip to the unemployment office.
It is my top priority to help bring some commonsense conservatism to
the U.S. Senate. I urge my colleagues to do the same. By supporting a
small business protection bill with a minimum wage increase, we take
one step forward and two giant steps back. We owe it to the American
people to keep their dreams of a brighter future alive.

section 936

Mr. MOYNIHAN. Mr. President, last year, the Senate voted to terminate
section 936 and provide for a 10-year grandfather period, with various
restrictions, for existing companies doing business in Puerto Rico.
Many of us were uncomfortable leaving Puerto Rico without any economic
incentives to replace section 936 following its termination. I want to
commend and thank the distinguished chairman of the Committee on
Finance for his leadership in reporting out, as part of the Small
Business Job Protection Act of 1996, language that begins to address
this serious problem.
The provision we are considering today is a step toward encouraging
job creation for the 4 million American citizens in Puerto Rico by
putting in place a long-term wage credit for companies currently doing
business in Puerto Rico. This provision also moves toward the program
that we established in 1993. The chairman is to be commended for
recognizing the importance of this modification, and I urge the Senate
to insist on this modification when we go to conference.
While this bill provides security for the almost 150,000 employees of
companies currently doing business in Puerto Rico, it does not address
the issue of new investment and new jobs under a wage credit program,
and leaves in question the adequacy of the incentive at the end of 10
years.
Mr. ROTH. My distinguished colleague from New York makes some good
points, and his views reflect his long standing interest in the
economic stability of Puerto Rico. Let me note that I view section 936
as an overgenerous tax benefit. However, I recognize that our provision
for a continuing wage credit provides significant economic stability
for Puerto Rico and enhances job security for these many thousands of
employees of U.S. firms. I included the continuing wage credit in the
Finance Committee bill as a response to the concerns raised by Senator
Moynihan about Puerto Rico.
Mr. GRASSLEY. Mr. President, I rise today in strong support of the
business tax provisions in this legislation. In particular, I want to
speak about a tax item that I had an opportunity to help include in the
legislation. People from my State of Iowa, and other farm States, have
been actively seeking tax relief. This tax bill is a giant step in the
right direction.
In particular, young farmers and all consumers will benefit from the
inclusion of legislation that we call the Aggie Bond Improvement Act,
S. 1674. Young farmers will benefit from the improved access to the
farming profession. Consumers will benefit from the addition of a new
generation of farmers into the profession that guarantees the flow of
cheap food into our Nation's supermarkets.
Aggie bonds are tax exempt bonds used for first time farmers. I
introduced the Aggie Bond Improvement Act with Senators Pressler,
Baucus, and Moseley-Braun in order to improve the popular first time
farmer programs administered by various state authorities. These
authorities issue tax exempt bonds to finance loans for first time
farmers. With the help of the authorities, these usually younger
farmers must secure a participating private lender. This legislation
protects the Government's interests because this is a Government and
private sector partnership where the private sector lender assumes all
of the risk.
However, problems exist in the current program, and this legislation
corrects some of those problems. The biggest problem is that the
current first time farmer program does not allow a young farmer to
purchase the family farm. Because the success of our Nation's farming
industry has followed from passing our farmland to succeeding
generations, the current program discriminates against families and
thereby discourages success.
Under current law, a son who is farming with his father, and meets
certain eligibility tests, may qualify to use aggie bond financing to
buy farmland from a stranger, but not from his father, or even his
grandfather. Ironically, the father or grandfather could also use the
aggie bond program to sell farmland to any qualified beginning farmers,
as long as that farmer is not related to him. Thus, fathers or
grandfathers and sons can use aggie bond financing, but not if the
transaction involves the sale of the family farm from one generation to
the next.
This imposes an unfair burden to family farms when compared to
nonfarm family businesses. In nonfarm family businesses, such as
manufacturing or retail businesses, inter-generational sales can use
all of the tax and purchase benefits that are available in sales
between unrelated parties. Thus, when purchasing the family business,
children of nonfarm business persons compete fairly with the open
market place.
However, children of farm families do not have a level playing field
when compared to unrelated buyers. Instead, they have a huge financial
burden on them. This is easily explained by the fact that they have to
pay a higher rate of interest to get loans to buy the same farmland
that unrelated persons can buy.
I will add that there is an aging generation of farmers on the land
that

[[Page S7447]]

would like to retire, but cannot because the next generation cannot
afford the capital to buy the land. In my State of Iowa, and I think in
most agricultural States, the average age of our farmers is in their
upper fifties. In 5 to 6 years we will have 25 percent of our farmers
wanting to retire. This legislation to improve the State aggie bond
programs simply makes the necessary transactions possible. Though it is
only a small provision in the greater bill, the aggie bond legislation
in this Small Business Job Protection Act is extremely important to
farm States and consumers alike. Therefore, the tax legislation in the
Small Business Job Protection Act earns my resounding support.
Mr. President, at this point I ask unanimous consent to have printed
in the Record after my remarks a letter that I received from a resident
of Knoxville, IA. Her name is Leslie Miller, and I think that she does
an outstanding job of quantifying and personalizing the importance of
this aggie bond legislation.
There being no objection, the letter was ordered to be printed in the
Record, as follows:

Iowa State Savings Bank,

Knoxville, IA, July 8, 1996.
Hon. Charles Grassley,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senator Grassley: I am writing to express support for
H3448 because it contains provisions originally included in
your bill, S1674. The most important of these provisions
would expand the use of tax-exempt aggie bonds to include
financing the sale of farmland between related parties. These
important changes are needed to ease the financial burdens
involved with shifting family farming operations from one
generation to the next.
Iowa State Savings Bank has frequently used aggie bond
financing (through Iowa's Beginning Farmer Program) to lower
interest costs to beginning farmers. We have found this
program successful in helping young farmers acquire the base
they need to survive in farming. We have been frustrated that
this program has not been available to finance transactions
between related parties, particularly sales between parents
and children.
Under current law, a son who is farming with his father,
and meets certain eligibility tests, may qualify to use aggie
bond financing to buy farmland from a stranger, but not from
his father (or even his grandfather). Ironically, the father
(or grandfather) could also use the aggie bond program to
sell farmland to any qualified beginner farmer, as long as
that farmer is not related to him. Thus, fathers (or
grandfathers) and sons can use aggie bond financing, but not
if the transaction involves the sale of the family farm from
one generation to the next.
This inequity imposes an unfair burden to family farm
businesses when compared to family businesses that are non-
farm in nature. In non-farm family businesses, such as
manufacturing or retail businesses, inter-generational sales
can use all of the tax and purchase benefits that are
available in sales between non-related parties. Thus,
children of non-farm businesspersons compete fairly with the
open marketplace, when purchasing the family business.
However, children of farm families to do not have a ``level
playing field'' when compared to non-related buyers. Instead,
they have a huge financial burden placed on them that can be
best explained by the following examples. These examples use
average land values from the 1995 Iowa Land Value Survey,
released in December, 1995 by Iowa State University. The
values are based on estimates as of November 1, 1995, as
compiled by Mike Duffy, an extension economist in Farm
Management at ISU.
Example 1: Assume that a farmer wants to sell his 270 acre,
average-sized, Marion County farm. He prices the farm at
$1200 per acre (the county average price) which totals
$324,000. He is willing to take 20% down payment and will
finance the sale with a 25-year contract. If he sells this
farm using the aggie bond program, his interest is tax-
exempt, so he could charge about 6.5% interest. If he sells
the farm to his son, the interest cannot be tax-exempt, so he
will have to charge 9.03% interest (the higher interest is
needed for the father to receive the same amount of after-tax
money that he would get under the aggie bond program).
Under these conditions, the non-related buyer would pay the
father a total of $531,426 over the life of the contract. On
the other hand, the son would wind up paying $661,583 over
the life of the contract. This means the son would pay
$130,157 more to buy the farm, than a non-related person
would pay. The difference is an extra $5206 per year (or an
extra $19.28/acre per year), which places the son at a huge
financial disadvantage.
(Note: If the father charges his son the same 6.5% interest
rate, then he must sell the farm to his son for $1386/acre to
get the same after-tax dollars from his 25-year contract.)
Example 2: Assume the same size farm, but use the Iowa
state average of $1,455/acre. This brings the purchase price
to $392,850. Also assume a 20% down payment and a 25-year
contract. Under these conditions, a non-related buyer, paying
6.5% interest will pay $644,353 over the life of the
contract. A son, paying a taxable 9.03% interest, will pay
$802,169 over the life of the contract. Thus, the son would
pay $157,816 more than a non-related person would pay for the
same farm. This is a difference of $6,313, per year (or
$23.38/acre per year). Again, the extra dollars make it
difficult for the son to survive in farming.
We believe that the changes proposed in H3448 will affect
15 to 18% of our borrowers. This number can only increase as
other children recognize that it may be possible for them to
buy their family farm. H3448 can also be of immediate benefit
to farmers in poor health, who are reluctant to sell their
farm to strangers, but might sell it to a child willing to
start farming.
We ask that you share the information in this letter with
those who would not support the changes proposed in H3448.
Thank you, once again, for your diligent work on behalf of
beginning farmers and farm families everywhere.
Sincerely,
Leslie S. Miller,
Vice President.

contributions in aid of construction

Mr. GRASSLEY. Mr. President, this small business tax bill includes
legislation that helps home buyers.
The provision is called contributions in aid of construction. It
repeals the gross-up tax imposed on families building homes since the
1986 Tax Act.
It will save families and small businesses up to $2,000 off the price
of a new home or building. The gross-up tax is one where under current
law, regulated public utilities must include in their taxable income
contributions from customers, or potential customers. These utility
services include water and sewer systems.
Customers routinely must finance the cost to the utility of extending
the necessary capital improvements to the family home. Therefore, State
utility commissions require that homes hoping to get utility services
contribute to the company both the cost for the capital improvements
necessary to extend the service, and the amount of tax that the utility
will have to recognize on the receipt of the funds or assets needed for
those improvements.
This gross-up tax can increase the cost of the contribution in aid of
construction by 70 percent.
The cost to families of the present law encourages the proliferation
of small, uneconomical, and environmentally unsafe water and sewer
systems.
This legislation is paid for by the water utility industry.
Contributions in aid of construction are so important that the water
utility industry has volunteered to change the depreciable lives of its
property to finance the law change.
Over a 10-year period, this legislation in the chairman's mark raises
an extra $200 million more than is necessary to pay for the
legislation.
The contributions in aid of construction legislation is important tax
relief for families, and I believe that it is an outstanding addition
to this legislation.

CHURCH PENSIONS AND PENSION SIMPLIFICATION

Mr. President, I am pleased that this manager's amendment contains,
in the pension simplification portion, provisions which will help
clarify the treatment of church pension plans. The amendment would
allow combined pension plan coverage for self-employed clergy. It would
allow pension plans established prior to the enactment of ERISA, which
is the case for many of the church plans, to use the new definition of
highly compensated employees. It authorizes, but does not require, the
Treasury to design safe harbors from the nondiscrimination rules for
church plans. And it allows for the payroll deduction of pension
contributions for clergy on foreign missions. The final bill will also
retain a change in the tax treatment of parsonage allowances which will
benefit many ministers.
Mr. President, we included last year in the Finance Committee's
portions of the Balanced Budget Act legislation which Senator Pryor and
I introduced early in this Congress designed to deal with many of the
problems the church plans were having with the rules pertaining to
highly compensated employees and to nondiscrimination. Ultimately,
those provisions were dropped from the legislation on the grounds that
they did not meet the requirements of the Byrd rule. If the legislation
we are considering today is enacted, Mr. President, we will have gone a
long way toward taking care of the

[[Page S7448]]

most serious of the problems faced by the church plans. Of course, much
will depend on the Treasury Department's willingness to develop rules
for non-discrimination with which the church plans can live. I am
optimistic that can be done, Mr. President. I believe that, as the
Treasury Department reviews the situation faced by the church plans
because of the way many of the interested denominations are organized,
Treasury staff will conclude that it is practically impossible for many
of the church plans to do the kind of data collection and analysis
necessary to demonstrate compliance with the nondiscrimination rules.
This is certainly not to say that these plans discriminate; but it is
to say that Treasury should help work out a method to insure that such
plans can more easily demonstrate that they do not.
I will conclude with just a word about the main pension
simplification provisions in the bill, Mr. President. And that is to
say that these simplification represent a major step forward. Their
enactment should ultimately result in more pension plans being created,
particularly by smaller businesses. Since it is that segment of the
business community that has the greatest difficulty in offering
pensions to their employees, enactment of these provisions should
result in a major increase in pension coverage. Ultimately, that means
more savings and more income for retirees. These simplification
provisions have been on our congressional agenda for several years. It
is high time they were enacted.
Mr. BYRD. Mr. President, the Senate is today considering a
legislative proposal to increase the federal minimum wage, which
currently stands at $4.25 per hour. Few actions taken by this body can
effectuate more immediate and discernable effects on our nation's low-
wage earners than increasing the minimum wage. Many of these minimum
wage earners are struggling to make ends meet in today's paradoxical
economy, where continued economic growth has been accompanied by rising
economic inequality among our nation's citizens. Indeed, we are
entering a time where President Kennedy's famous saying, ``A rising
tide lifts all the boats,'' might be made more appropriate if it
included an exception for those diminutive vessels that may be washed
away and sunk by the indiscriminate waves of economic growth. Consider
a report issued by the U.S. Census Bureau on June 20, 1996, that
revealed that income inequality, based on the most commonly used index
measure, increased 22.4 percent from 1968 to 1994, despite considerable
economic growth in that same period. For example, in 1994, a household
with an income in the 95th percentile earned $109,821, while a
household with an income in the 20th percentile earned $13,426. The
former household earned 8.2 times as much as the latter. In 1968,
however, a household with an income at the 95th percentile earned just
six times that of a household at the 20th percentile. Clearly, we have
seen growing economic disparity in our nation, and there is no
indication of this perilous trend reversing itself. If we are to combat
this nefarious problem, we must first identify its causes. The
aforementioned Census Report presents several reasons for the growing
income disparity. Specifically, the report states:

The wage distribution has become considerably more unequal
with more highly skilled, trained, and educated workers at
the top experiencing real wage gains and those at the bottom
real wage losses. One factor is the shift in employment from
those goods-producing industries that have disproportionately
provided high-wage opportunities for low-skilled workers,
towards services that disproportionately employ college
graduates, and towards low-wage sectors such as retail trade.
. . . Also cited as factors putting downward pressure on the
wages of less-educated workers are intensifying global
competition and immigration, the decline of the proportion of
workers belonging to unions, the decline in the real value of
the minimum wage, the increasing need for computer skills,
and the increasing use of temporary workers.

While, as the report states, there are numerous contributors to
rising economic inequality, the declining value of the minimum wage
must be addressed if we are to seriously combat this insidious trend.
Mr. President, as passed by the House of Representatives, H.R. 3448
would increase the statutory minimum wage from its current level of
$4.25 per hour to $4.75 per hour this year and $5.15 per hour next
year. In inflation adjusted terms, the proposal would restore the
minimum wage to roughly the same level it had after the most recent
1991 increase went into effect. If no action were taken this year with
respect to the minimum wage, it would continue approaching a 40-year
low in real buying power by 1997. Included in the House-passed minimum
wage increase is an exemption for employees under 20 years of age who
are in their first 90 days of service to an employer--the so-called
``Opportunity'' Wage. A similar, albeit temporary, provision was
included in the last minimum wage increase in 1989, and, despite the
fact that the Department of Labor found that few employers actually
used this ``training'' wage, it is being reestablished on a permanent
level in the bill before us today. While I question the logic of
rehashing this failed experiment, I nevertheless intend to support the
bill as it currently stands. It will restore the minimum wage to a
reasonable level by making work pay for a substantial number of our
lowest-wage earners.

Mr. President, it should be noted that the value of the minimum wage
in real, or inflation adjusted, dollars peaked in 1968 and has since
fallen gradually to less than 60-percent of that value. According to a
report by the Congressional Research Service, the value of the minimum
wage today would have to be $7.13 per hour to be worth as much as it
was in 1968. Mr. President, the proposal before us today would only
increase the minimum wage by 90 cents per hour over two years--hardly
enough to bring it close to its 1968 inflation-adjusted level. Yet, we
are told by many that this minimum wage increase is unnecessary and
excessive. The Republican leadership has cleverly crafted an amendment
to the House-passed minimum wage increase that would effectively deny
even this modest minimum wage increase to a substantial number of
deserving workers. The Republican amendment to H.R. 3448 would not only
delay the increase until next year, but it would also extend the
``Opportunity'' wage to 180 days of service for all employees, not just
to those under the age of 20. In addition, the Republican amendment
would exempt all businesses with less than $500,000 in annual sales
from the minimum wage increase. The Department of Labor estimates that
this provision alone would deny the minimum wage increase to 10.5
million workers. In my own state, West Virginia, this small business
exemption would exclude nearly 67,000 workers from coverage under the
new minimum wage increase. Clearly, this amendment represents an
attempt to eviscerate the minimum wage increase entirely. If we are to
approve a real increase in the minimum wage, we must defeat this
tendentious amendment.
Mr. President, allow me to reiterate that we are engaged in a
fundamental debate about fairness. We are considering a proposal to
increase the federal minimum wage from $4.25 per hour by just 90 cents
to $5.15 per hour. In my own state of West Virginia, this increase in
the minimum wage would affect nearly 100,000 workers--about 23 percent
of West Virginia's estimated 425,000 employed wage and salary workers.
According to the U.S. Department of Labor, in 1995, the percentage of
West Virginians paid wages at or below the $4.25 minimum wage was 10.2
percent, which was the highest in the nation and nearly twice the
national average of 5.3 percent. The pending minimum wage increase
would give a raise of up to $1,800 a year to these workers that could
be used to pay for seven months of groceries, nine months of utility
bills, or four months of housing costs. In addition, many of these low-
wage earners are women who represent their families sole source of
income. According to the 1990 Census, more than 80 percent of single
parent families in West Virginia were headed by women. In short, the
pending minimum wage increase would help lift many low-income families
above the poverty line--not with work-deterring welfare checks, but
with higher wages for hours worked.

Mr. President, in conclusion, I would like to reemphasize my support
for the modest minimum wage increase that is before us today. It is a
proposal that will affect the lives of many of our most needy citizens.
It is not akin to

[[Page S7449]]

handing out welfare checks; the minimum wage only applies to those who
work. Moreover, in the context of welfare reform, it is essential that
we create incentives for current recipients to work and earn a decent
living. The current minimum wage earner who works 40 hours a week earns
just $170 a week, or about $680 a month. Every Member of this body
earns nearly that much in one day. So, I hope that all Senators will
view the minimum wage increase in the context of fairness, and not
partisanship. In addition, I ask that all Senators consider the growing
income inequality that I have already discussed. We are slowly becoming
a nation of haves and have-nots--we are losing those in the middle.
This trend does not augur well for the future of our Nation. Aristotle
admonished mankind more than 2000 years ago about how important it is
to maintain a healthy, sizable middle class, or what he described as
the ``middle people.'' He writes in ``Politics'':

It is the middle citizens in a state who are the most
secure: they neither covet, like the poor, the possessions of
others, nor do others covet theirs as the poor covet those of
the rich. . . . It is clear . . . that the best partnership
in a state is the one which operates through the middle
people, and also that those states in which the middle
element is large, and stronger if possible that the other two
altogether, or at any rate stronger than either of them
alone, have every chance of having a well-run constitution.

We must remember Aristotle's insightful words. While the minimum wage
will not instantly lift any poor, low-wage earner to the middle class,
it will provide a more accessible ladder for those who, although they
may lack certain skills, have the energy and determination to fulfill
their own American dream. Let us give them that chance.
Mr. President, I yield the floor.
Mr. HARKIN. Today we get the opportunity to assure that 12 million
American workers are provided with a much needed and much deserved
raise. The value of the minimum wage is 50 cents less than it was when
it was last increased and it's headed for a 40-year low. At last we
have the chance to increase the minimum wage so that American families
aren't working harder for less.
Some say that working Americans don't deserve a raise. I say look at
the facts. In my home State of Iowa our minimum wage is 40 cents above
the national law. The increase has meant more money in the pockets of
Iowa workers and more money spent in our local economy. Jobs are up,
unemployment is down, and our economy is stronger.
Look around the Nation. Two-thirds of minimum wage workers are
adults. Nearly 60 percent are women. More than one-third are the sole
breadwinners.
Now think about this. Last year, the CEO's in America's top companies
made an average of over $4.3 million--about $12,000 a day. Meanwhile
someone working for minimum wage made $8,500 a year. That means that a
top CEO made more in 1 day than a minimum wage worker earns in well
over a year. That's not right and it's not good for America.
The one thing spoiling this vote today is an amendment offered by the
majority. They delayed this vote for as long as they could and they're
still trying to stack the deck against working Americans. The Bond
amendment is even more extreme than the Goodling amendment that was
rejected as too extreme by House Republicans. Through a host of
exemptions, denials, and delays, the Republican minimum wage proposal
is designed to provide the minimum possible minimum wage increase to
the minimum number of people.
First, the Bond amendment delays the increase until January 1, 1997--
that means that for another 6 months, minimum wage workers will go
without a raise, as they already have for more than 5 years. This works
out to about $500 in pay that employees would receive over the next 6
months, money that could be spent on crucial family needs like health
care, food, and housing.
Next, they want to create a subminimum wage for all workers. Their
proposal would allow employers to pay all new employees a subminimum
wage of $4.25 an hour, for 6 months. That means that no matter how old
you are and how much experience you have, if you start a new job, your
value to your employer is equal to the most inexperienced employee.
That's far worse than the opportunity wage passed by the House that
affected young workers age 20 and under for 90 days.
And last, the Bond amendment would exempt 10.5 million workers--two-
thirds of all companies--from a minimum wage coverage by providing for
an across-the-board exemption for small businesses with less than
$500,000 annual sales. This is unnecessary. The economy has added more
than 10 million jobs since the last minimum wage increase and small
business has led the way.
The Bond amendment is a blatant attempt to derail the opportunity to
give America a raise. The National Retail Association admitted as much
in one of their action alerts to members. Referring to the Bond
amendment the alert advised members that, ``It is our last chance and
best hope for stopping the minimum wage increase this year.''
The majority is trying to two-step with the working Americans. They
say for every step forward, working Americans have to take two steps
back. Well, we don't do that dance and I urge my colleagues to reject
the Bond amendment.
The bottom line: America deserves a raise. Profits and productivity
are up. There is room to give workers a wage they deserve without
harming economic growth. The rest of the economy shouldn't be doing
better than the people who make it run.
So I urge my colleagues to support a raise in the minimum wage. It is
the right thing to do and it is overdue.
Mr. President, I also want to make brief remarks on the tax
provisions in the bill.
I am a strong supporter of the pension improvements: increasing the
ability of small businesses to establish pension plans with far less
paperwork. Too many smaller businesses do not have pension plans. And,
this legislation will help in that area. We need to do more to increase
the availability of pensions and to secure further protections against
inappropriate actions that reduce pension benefits.
The higher expensing limits allowing more capital purchases to be
deducted will be helpful to many small businesses.
The extension and modifications in the targeted jobs tax credit, now
called the work opportunity tax credit and the extension of the
exclusion of employer paid higher education costs are an excellent step
toward increasing the ability of Americans to improve their education
and job skills. We need to help people get their first leg up the
ladder of success and we need to improve the skills of workers. The
measure also extends the R&D tax credit which I have long supported.
I am also pleased that the Senate once again passed provisions to
block billionaires from gaining tax advantages from renouncing their
citizenship. This is long overdue reform.
So, while I believe certain provisions can and should be improved in
this bill, overall it is a victory for American workers and will
provide needed help to small businesses. I hope conferees are named
promptly and a strong bill is quickly sent to the President in a form
he will sign.

minimum wage and nursing homes

Mr. HATCH. Mr. President, I would like to ask the bill's proponents
about one serious ramification of a minimum wage increase, that is, the
effect this increase will have on the Medicaid Program. Almost one-half
of Medicaid dollars are spent in long-term care, primarily for the
elderly. It stands to reason that an increase in the minimum wage will
affect all health care providers, including those who are providing
care under Medicaid.
Nursing homes are large employers of minimum wage workers. They
employ significant numbers of nurse aids, orderlies, food service, and
housekeeping staff who all contribute to the care of nursing home
patients. Labor costs account for about 60 percent of all nursing home
costs.
However, unlike other businesses, the nursing home industry is unable
to reduce its staff. The level of care that is required both by
internal quality standards and by Federal regulations means that
nursing home staff, particularly those individuals who are directly
providing patient care, cannot be reduced.
In short, nursing homes are caught in a catch-22. They cannot adjust
the size

[[Page S7450]]

or configuration of their staffs; so they suffer a significant increase
in labor costs. Yet, unless the minimum wage increase is taken into
account in determining Medicaid reimbursement rates, nursing homes
cannot recover any of the increase.
So, unlike any other business, which can either reduce its number of
workers or pass the increased costs on to consumers, nursing homes are
simply left to absorb it. I am very concerned that this will have a
serious adverse impact on our nursing homes both in the short- and
long-run. In our country, we need to be able to depend on these
facilities to provide quality care for our frail elderly and infirm
population.
Does the Senator from Massachusetts agree with me that the Fair Labor
Standards Act should be a factor in determining nursing home
reimbursements under Medicaid?
Mr. KENNEDY. Yes, I do. Major nursing home reform passed Congress in
1987 as part of the Omnibus Budget Reconciliation Act [OBRA], Public
Law 100-203. This act required significant changes in staffing and
training requirements, quality of care, patient services, and
enforcement of new nursing home standards. Because Congress was
concerned about the ability of the nursing home industry to absorb
costs of this magnitude, special language was included to ensure that
the Medicaid reimbursement systems of the States were altered to cover
these costs. Just as care was taken to ensure that the Medicaid
reimbursement system adequately accommodated the OBRA 1987 cost
increases, I believe it is fair to do so in conjunction with a new
minimum wage law. The increase in the minimum wage should be taken into
account in plans submitted by States to HCFA. The Federal nursing home
quality standards have been enormously successful in improving the
quality of care and quality of life of our nursing home residents and
we do not want to do anything to diminish the successes we are
achieving as a result of those reforms.
We are all well aware that States now are setting Medicaid rates, not
on the basis of costs incurred by facilities in providing long-term
care services, but rather on State budgetary constraints. A recent
survey of nursing homes nationwide indicates that in half the States, a
majority of facilities do not receive Medicaid rates that cover the
actual cost of providing care to their Medicaid patients. This
situation will only worsen if States are not held accountable for
recognizing increased labor costs that facilities will incur under this
new minimum wage law.
Mr. HATCH. I think we agree that any increases in the minimum wage
should be a factor in Medicaid reimbursements. I thank my colleague for
this clarification.
Mr. HARKIN. Mr. President, I wanted to lend my support to the
colloquy between my colleagues Senators Hatch and Kennedy relative to
nursing homes and the minimum wage. In their colloquy my colleagues
note that nursing homes, many of which, particularly in rural areas
like my State of Iowa, are funded primarily through the Medicare and
Medicaid programs. Nursing homes provide vital services to our elderly
and disabled citizens and they employ many minimum wage workers who
provide direct care to these residents. Therefore, this minimum wage
increase, which will help these valued workers and help increase their
retention, will have an impact on nursing homes costs. And that should
be reflected in Medicare and Medicaid payments. It is essential that
state Medicaid payments be reasonable and adequate to enable well-run
facilities to meet and exceed the quality standards set by law.
I thank my colleagues for raising this important issue and I
appreciate the opportunity to express my agreement with their
statements.
Mr. BINGAMAN. Mr. President, finally, the issue of raising the
minimum wage has come to the floor for a vote. It has been disturbing
during these many months that the Republican leadership has employed
extraordinary legislative tactics, some quite complicated and
perplexing even for our parliamentarians, to keep the Members of this
Chamber from voting on this issue.
In the State of New Mexico, which I represent, more than 10 percent
of the work force, approximately 80,000 workers, would receive a wage
increase if this legislation is passed. Let me put in stark perspective
what we are talking about.
Minimum wage levels today are approaching their lowest levels in
history. Despite having raised the minimum wage 17 times since 1938,
each time with bipartisan support, the minimum wage will hit its lowest
level in real dollars in January 1997. Two-thirds of those earning the
minimum wage today--and working full time--are adults, and 40 percent
of those earning minimum wage are the sole breadwinners for their
families. For working hard, trying to stay in the mainstream of those
wanting to get ahead in this economy, these workers make just $8,840 a
year. And usually, they don't have health coverage. They don't have
gain-sharing. They aren't covered by pension benefits. And their
training resources are usually very limited, if not non-existent.
This is a subject that we should have been allowed to vote on long
ago. Americans need to know that we support those who want to work to
get ahead. A family of four earning less than $16,039 is classified as
one in poverty. And yet, we have a substantial portion of America's
work force earning $8,840 a year--well under the poverty level.
Furthermore, I think that we must recognize that women represent 60
percent of the work force earning minimum wage, and that occupations
with the highest percentage of minimum wage workers are women. This is
not acceptable.
Earlier this year, I issued a report entitled ``Scrambling To Pay the
Bills: Building Allies for America's Working Families.'' In that
report, I endorsed an increase in the minimum wage--which I strongly
support today. However, we tried to do some other things in that report
as well. One of these was to address the huge disparity between what
the CEO of a firm made in salary compared to the lowest-paid employee
of that respective firm. Numerous objections came from the business
community that we were attempting to set up a ratio that did not
reflect a reasonable ratio between the highest and lowest paid workers
for a company. When we wrote this, I mistakenly assumed that the lowest
paid employee was probably earning somewhere about $15,000 a year--and
50 times that figure would allow the CEO to earn $750,000 a year, in
order to receive some tax advantages we were proposing. That same week,
the Washington Post reported that CEO's of America's top 100 firms
earned an average salary over $4 million.

I was wrong on two fronts. The lowest paid are earning less than
$9,000 a year and the highest paid salaries are somewhere between 400
and 500 times this figure. I don't think that this ratio reflects a
fair balance between those who are working hard to help companies and
communities prosper and those who are profiting higher up in the salary
chain.
We must defeat an effort here today sponsored by Senator Bond to
exempt certain small businesses from paying a higher minimum wage to
their employees. Of the more than 10 million workers who deserve a
raise, the Bond amendment exempts nearly 5 million--and would have
undermined the entire rationale for the minimum wage, which establishes
a floor above which all employees can expect a fair and decent return
for the work they expend on an employer's behalf. The Bond amendment
would encourage employers to favor particular groups of workers over
others, particularly younger workers over older ones. This is not
acceptable and not just.
The Bond amendment also creates a 6 month waiting period before the
increased minimum wage kicks in. This is nothing more than a way for
many employers with high turnover to keep from ever paying the minimum
wage to those who work in high turnover industries. It is not uncommon
for restaurants to experience more than 200-percent staff turnover in 1
year.
Workers can't support families--and can hardly support themselves--on
$4.25 an hour. In the 17 previous times that the minimum wage has been
raised, there have been naysayers who have predicted dire consequences.
The economic trauma that had been predicted by these negative
commentators

[[Page S7451]]

has never occurred, and it is wrong not to include minimum wage workers
in the gains of an economy that is producing sky-high corporate
salaries, historic corporate profits, and all time high stock market
averages.
Mr. President, we can't ignore hard working Americans working on the
lower end of the economic ladder any longer. I strongly support this
raise in the minimum wage, and I urge others to do the same.
Mr. SHELBY. Mr. President, I want to express my support for
provisions in the Small Business Job Protection Act of 1996, that will
help make higher education a reality for thousands of young people in
America.
It is no secret that many families in our Nation are struggling to
finance their childrens' education. College tuition costs have
skyrocketed in the past decade increasing 95 percent at private
institutions and 82 percent at public institutions. Some families will
spend more than $100,000 just to send one child to college.
Mr. President, the financial burdens facing parents with college-age
children is overwhelming. The tendency of some in this Chamber would be
to create a new Federal program to try to deal with this issue. Yet,
many States, including Alabama, have shown that is not necessary by
developing their own prepaid tuition funds. These funds allow parents
to make a tax-free investment, years in advance of their child's
enrollment in college, with the guarantee that the child's full tuition
will be paid for by the State when he or she enrolls in college. These
tuition plans provide parents some help in dealing with the exorbitant
inflation in tuition costs.
The Clinton administration, until very recently, was planning on
taxing these State funds and the parents who invest in these plans.
After months of encouragement, we have been successful in getting the
administration to temporarily back off from taxing these funds and the
working class families who invest in them. At the same time the
President was cheering the benefits of lowering the cost of education
through his new education tax credit, his administration was preparing
to slap a new tax on families.
Mr. President, this bill ensures that these funds will not be taxed,
and it provides that parents will not have to pay taxes on the money
they invest in these funds. These are two very positive steps, but I
believe we should go further. Congress should ensure that students are
not forced to pay taxes on their education when they enroll in college.
Currently, the student is taxed on the difference between the value of
the education services they receive from the State and the amount his
or her parent paid for the prepaid tuition contract.
Mr. President, the correct way to view these prepaid tuition
arrangements should be as a prepayment of services, not an investment
scheme to make money. When parents enter into these contracts with the
States, they are trying to buy their child's future education at an
affordable price. Neither they nor their children are trying to get
rich. Therefore, I don't believe the Federal Government should saddle
students with taxes on their college expenses. Students today are
already facing a lifetime of enormous taxes to pay off the debts of
previous generations. Now, the IRS would have these same people pay
taxes on a service their parents purchased for them long before they
enrolled in college.
Unfortunately, because of the minimum wage issue, we were unable to
offer amendments to this legislation. Had we been permitted, I would
have offered an amendment to ensure that students would not be taxed on
their college expenses. I am a cosponsor of Senator McConnell's bill
which would accomplish that, and I applaud him for his efforts in this
area. I will continue to do everything I possibly can to find ways to
make education in America more affordable. The bill before us today is
a significant step in that direction, and I look forward to working
with Chairman Roth and others in the future to provide even more
favorable tax treatment for families.
Mr. BRYAN. Mr. President, the difficulty in bringing the issues we
are voting on today before the Senate has resulted in an unfortunate
parliamentary situation, where the bill is not open to amendments.
While I generally support the bill, and plan to vote in favor of the
bill today, I would have preferred the bill to be open to amendment,
both to add other desirable provisions, particularly to the small
business tax relief title, and to offer amendments to strike provisions
which I believe are inappropriate.
In particular, there is one provision which I am strongly opposed to:
the provision which imposes income tax withholding on winnings from
keno and bingo. Under current law, income taxes are withheld only for
winnings where the odds are over 300 to 1, but bingo and keno are
exempt. The bill being considered by the Senate today extends this
withholding to bingo and keno winnings over $5,000, regardless of the
odds of the wager.
The change in withholding included in the bill is not included for
any serious policy or enforcement reason. In fact, there is good reason
not to require withholding on gambling winnings. For example, gambling
winnings can be offset by gambling losses--drastically reducing the
actual tax due from the winnings. Since withholding is intended to
approximate actual tax liability, requiring withholding for a tax
liability that does not exist runs counter to sound tax policy.
Of course, requiring withholding on bingo and keno winnings was not
included in this bill for tax policy or enforcement reasons--it was
solely in order to raise revenue for other tax provisions of the bill.
While I am supportive of these tax cuts, I object to offsetting them
with a provision that will negatively impact only one segment of the
economy, the gaming-entertainment industry.
Tax withholding on bingo and keno winnings is unsound for policy
reasons and unfair to an important industry in my State. This
provision, and similar provisions proposed or adopted in recent years,
continue to show a disregard and lack of knowledge concerning the
gaming/entertainment industry in Congress and at the IRS. The revenue
raised by this provision is relatively small--$69 million over 10
years--but could cause significant harm in a legitimate industry.
I will vote for this bill in spite of my opposition to increasing
withholding on gambling winnings, but I urge the conference committee
to drop this misguided attempt to raise revenue.
Mr. HATCH. Mr. President, I support the tax provisions included in
H.R. 3448, the bill now before us. These provisions are important, not
only to small businesses, but to almost every American business. And, I
am one who believes, Mr. President, that simplifying and lessening the
tax burden faced by American entrepreneurs--both small and large--will
have substantial benefits for workers as well. Unfortunately, the
detriments of the minimum wage increase, which is also included in this
bill, outweigh the benefits of the tax provisions in this bill.
Mr. President, H.R. 3448 has much to recommend it. For example, I am
pleased to see that the bill increases the amount of newly purchased
equipment that a small business can expense from the current $17,500 to
$25,000. This change will make it easier for these enterprises to
afford to invest in new equipment. This will help not only small
businesses but also those larger companies that supply equipment to
them and will thus have a multiplier effect on the economy. Moreover,
increasing the expensing allowance will decrease the recordkeeping
burden these companies face.
This bill also goes a long way toward reforming the tax treatment of
S corporations. My colleague and friend from Arkansas, Senator Pryor,
and I have long been advocating the need for S corporation reform.
While this bill does not contain all of the reform measures that we
introduced in our S. 758, the S Corporation Reform Act, it certainly is
a very good step in the right direction.
Many of my colleagues may not realize it, Mr. President, but there
are nearly 2 million S corporations in the United States, most of them
small businesses. These reform provisions are designed to ease their
tax compliance burden and to increase these companies' access to
capital.
Another very good set of provisions included in this bill is that
dealing with pension simplification. All of us

[[Page S7452]]

are aware, I think, of the special problems that small businesses face
in providing pension benefits to their employees. It is no accident
that fewer than 20 percent of the employees of small businesses are
covered by a pension plan. The problem is twofold, Mr. President.
First, many small businesses are afraid to commit to providing a
certain percentage of their payroll every year to funding a pension or
profit sharing plan. It's not that these businesses are stingy with
their employees. Rather, many of them are operating on such thin cash
flow margins that they are hesitant to add to their overhead and
possibly overcommit their already strained resources.
The second problem is probably even more widespread among small
enterprises. This problem is that setting up and administering a
pension plan is a very costly undertaking. Let's face it, Mr.
President. Most small businesses in America are already struggling to
keep up with the myriad rules and regulations that are piled on them by
Federal, State, and local governments. The last thing they need is to
have to learn and comply with the mind-numbing regulations governing
pension plans contained in the Internal Revenue Code. Even hardened tax
veterans admit that these rules are almost beyond comprehension for
them. How is a small business man or woman supposed to master them? The
alternative is paying big dollars for a specialist to administer the
plan, again stretching the small firm's tight resources.
This bill deals with both of these problems by providing for a new
type of pension plan that allows small employers to sponsor pension
plans with low employer contributions. It gives the business the
flexibility to contribute a higher percentage of employee compensation
in good years or to contribute as low as 1 percent in difficult years.
At the same time, however, employees are given the benefits of tax
favored treatment on both their own contributions and those of the
employer.
Moreover, Mr. President, H.R. 3448 simplifies the onerous compliance
burden that now accompanies pension plan sponsorship. These rules are
designed to take away the worst of the compliance headaches that are
now keeping many businesses from offering pension plans to their
employees. All in all, the pension reform provisions in this bill
should go a long way toward increasing the retirement security of the
millions of Americans who work for small businesses.
Let me mention one other very important section of the tax bill now
before the Senate. This bill temporarily extends a number of tax
provisions that Congress has allowed to expire. These include the
research and experimentation credit, the work opportunity tax credit,
the orphan drug tax credit, and the tax credit for producing fuel from
a nonconventional source. It is important to note, Mr. President, that
these so-called extenders are important for small, medium, and large
businesses alike. There are thousands of businesses in my home State of
Utah, and millions across the Nation, that will find the extension of
these provisions important in helping them to grow and create jobs in
the future.
But, as much as I like the tax title of this bill, Mr. President, I
have to say that it is far from perfect. Let me just briefly outline
what I see as its greatest deficiencies.
As my colleagues know, the only reason we are voting on a tax bill
today is because of the increase in the minimum wage that is also
included in H.R. 3448. I believe strongly that mandatory increases in
labor costs create any number of problems for both small businesses and
workers. I will discuss those in a moment.
The House of Representatives recognized the added burden placed on
small businesses in particular and attached the small business tax
provisions to the minimum wage bill in order to help alleviate some of
the harsh results that the minimum wage increase will have on small
enterprises.
One harsh result that will come from a 21-percent increase in the
minimum wage is the loss of jobs. According to CBO, it is estimated
that increasing the minimum wage will mean that as many as 500,000 jobs
will either be lost or not created.
Yet, as beneficial as these tax provisions are, and they will have an
indirect benefit to job creation, they are not designed to be big job
generators. I would have liked to see provisions that would have at
least offset the job losses that will result from the minimum wage
hike.
The best thing we could include in a bill designed to overcome the
disemployment effect of the minimum wage increase is a cut in the
capital gains tax rate. Such a change would unleash a significant
portion of the estimated $8 trillion in unrealized capital gains that
is out there in our economy. If we could free up only 10 percent of
this mountain of capital--or $800 billion--the job creation that would
result would overshadow the loss of jobs that will result from
increasing the minimum wage.
Don't get me wrong, Mr. President. The tax measures in this bill are
positive provisions that will assist small businesses. They don't,
however, have the job creation power that a capital gains tax cut has.
So, if the Senate were really serious about helping workers or those
who cannot find a job, we would concentrate our efforts on improving
opportunities for those who may be unemployed or underemployed. The
best way to do this is by expanding the availability of capital needed
to create these opportunities.
I am also concerned about the way that this bill extends the expired
tax provisions. Ideally, Congress should find a way to make these
provisions permanent. The continual expiration and reinstatement of
these provisions leads to taxpayer skepticism about our tax laws and
greatly reduces the effectiveness of the provisions. This is
particularly true of the research and experimentation credit. The bill
before us today does include an extension of the research credit, but
only on a prospective basis from July 1, 1996. Therefore, the bill
leaves a year-long gap, from July 1, 1995 to June 30, 1996, in which
the research credit is not in effect.
The research credit has been a part of the Internal Revenue Code
since 1981, but only as a temporary measure. It has been allowed to
expire seven times, counting the most recent expiration on June 30,
1995. Each of the times that the bill expired before this last
expiration, Congress has extended the bill on a retroactive basis.
Thus, even though Congress often did not act until after the research
credit had expired, it has always, until this bill, gone back and made
the credit effective from the date of expiration.
The seamless extension of the research credit is important because
the businesses that have counted on the credit as an incentive to
increase their research activities will now find that the credit is not
available for an entire year. Many of these companies based their
research plans on the availability of the credit. Why shouldn't they
count on it being there? After all, Congress had never left a gap in
its extensions of the credit before. The bill before us, however,
breaks this faith and sets a very poor precedent. This gap, along with
the temporary nature of the credit, will greatly reduce the
effectiveness of this credit, Mr. President. I hope that this problem
can be corrected in conference.
Finally, Mr. President, let me briefly mention another flaw of this
bill. In the name of closing a perceived corporate tax loophole, H.R.
3448 dramatically reduces the benefits available to companies doing
business in Puerto Rico under section 936 of the Internal Revenue Code.
We could debate the merits and perceived abuses of section 936 all day.
I simply want to point out to my colleagues that the focus of attention
on this issue has been far too concentrated on a few companies that
have reportedly reaped rich benefits from the section 936 credit, and
far too little on the people of Puerto Rico, who have been able to pull
themselves out of dire economic circumstances over the past few
decades, largely as a result of the credit.
I believe that Congress is being shortsighted in gutting section 936,
Mr. President. Without the jobs that section 936 companies bring to the
island of Puerto Rico, many U.S. citizens will find themselves in
economic difficulties. Congress will likely spend more money in
increased transfer payments through higher welfare benefits and
unemployment benefits than will be saved through the tax changes
included in this bill. At a minimum, we should

[[Page S7453]]

ensure that Puerto Rico has a permanent incentive to attract new jobs
to the commonwealth.
So, Mr. President, I am disappointed in the overall small business
tax package. I favor its provisions, but I believe they should be
stronger. The potential positive impact could be so much greater.
My views on increasing the minimum wage are well known. I have long
believed that raising the statutory minimum wage merely raises the
rungs on the ladder of opportunity.
I am also well aware of the opinion polls that show that a
substantial majority of the American people believe that a raise in the
minimum wage is a good idea.
Many believe that this is a quick, painless way to help the
disadvantaged in our society; many believe that a minimum wage hike is
costless; and many believe that it has no adverse impact. I can only
suggest that the people have not been given all the facts about this
proposal.
I wonder, for example, if the people realize that even the most
optimistic estimate puts job loss at 100,000 entry level jobs. The
Congressional Budget Office estimates the loss of 100,000 to 500,000
jobs given a 21 percent increase in the minimum wage. Other estimates
are higher.
While there are always dissenters, there are few public policy issues
on which there is such an overwhelming consensus among economists.
Three-quarters of the members of the American Economic Association
agree that minimum wage hikes have a disemployment effect that stifles
employment opportunities for low-skilled workers.
This position is summed up by William Baumol and Alan Blinder, who
was a Clinton appointee to the Federal Reserve Board: ``The primary
consequence of the minimum wage law is not an increase in the incomes
of the least skilled workers, but a restriction on their employment
opportunities.''
The long and the short of it is simply that you cannot mandate an
increase in the price of entry level or unskilled labor--which is
exactly what the statutory minimum wage is--without reducing the demand
for that labor.
It is true that some workers will reap the benefit of the increase.
But, by mandating wage increases we are going to destroy job
opportunities for many others.
Let me put it another way: Some workers will get a $36 a week raise.
Potentially half a million workers won't have a job at all. I hope my
colleagues do not break their arms patting themselves on the back for
such benevolence.
Now, let us look at the demographics of who would be helped and who
would be hurt by the loss of job opportunities.
There are more adult minimum wage earners in families earning $30,000
per year than in families earning less than $10,000 per year. Forty
percent of all minimum wage earners are teenagers and young adults
living at home. They are not heads of household.
A majority of minimum wage earners live in families in which they are
not the principal breadwinner. Only about a quarter of all minimum wage
earners are heads of household.
The fact is that there is no way to target the benefit--to the extent
there is one--only to those who are heads of households or working
poor.
The reality is that those who are not poor are more likely to get
raises and those whose skills do not justify the higher wage will be
out of jobs. Study after study has concluded that raising the minimum
wage is an ineffective means of helping those who are disadvantaged.
Kevin Lang, professor of economics at Boston University, has stated
that ``Low-skilled adults in states that raised their minimum wage were
often crowded out of the job market by teens and students.''
Peter Brandon, of the Institute for Research on Poverty at the
University of Wisconsin has found that ``welfare mothers in states that
raised their minimum wage remained on public assistance 44 percent
longer than their peers in states where the minimum wage remained
unchanged.''
If there was ever an issue for which the benefits were swamped by the
downsides, this is it. And, those who we intend to help are exactly
those who are most likely to be hurt.
Yes, Mr. President, raising the minimum wage sounds like an easy way
to help those who are working but still struggling to find their way
out of poverty. It is no wonder that, lacking the facts, the American
people would support this.
Frankly, if I thought it would do what my friend Senator Kennedy says
it will do, I would support it myself. If I believed we could improve
the standard of living for all Americans by governmental fiat, I would
be joining the Senator from Massachusetts on the other side of the
aisle. Who would not want to stamp out poverty with the stroke of a
pen?
But, things just do not work that way. It is not that easy.
The idea that there is no adverse impact from a mandatory increase in
the cost of hiring workers is delusional.
And, what's worse, this adverse impact is for nothing.
This legislation will not be the economic salvation of minimum wage
earners. Even for a minimum wage worker lucky enough to benefit from
it, it will provide a $36 a week raise.
It will take about $7.10 an hour to produce an income equal to the
poverty level for a family of four. But, proponents will not suggest
raising the wage to that level. Why? Because they know the
consequences.
This proposal to increase the minimum wage, like the emperor who has
no clothes, is spurious. And, someone has to tell the truth. The
American people deserve to know all the facts about this minimum wage
hike.
We have a lot of work to do yet during this Congress. It is
disappointing that my colleagues on the other side of the aisle have
become Johnny one-notes with respect to the minimum wage and have
offered it to virtually every bill we have debated since mid-March.
Is this the only idea they have to offer? It would certainly seem so.
Let us get down to business on some proposals that will help working
men and women--like tax cuts, a balanced budget, regulatory reform. Let
us get the economy moving. Let us create new jobs and new
opportunities, not jeopardize the ones we have.
Mr. FEINGOLD. Mr. President, I rise today in support of the
Democratic proposal to increase the minimum wage.
First, let me address the issue of process.
It has been clear for months that there is a majority in the Senate
who have been prepared to vote for the modest $.90 increase over 2
years which has been proposed. This increase would raise the current
level set in 1989 at $4.25 to $5.15, in two 45 cent steps.
Indeed, the majority of our colleagues have already voted to support
an increase of this size.
Yet, rather than allow this issue to be fully debated and voted upon,
enormous time and energy has been spent on devising ploys to either
block such a vote or to load it down with anti-labor poison pills.
Mr. President, I'm relieved that this game playing is finally going
to stop. I'm pleased that we will finally have the opportunity to have
a clean, up or down vote on raising the minimum wage.
We ought to raise the minimum wage because it is the fair, just, and
necessary thing to do.
It has been 5 years since the minimum wage was last adjusted.
The minimum wage has been adjusted seven times since the minimum wage
law was first enacted in 1938.
Each time, opponents predicted economic disaster would follow any
increase. None of those dire predictions came true. The American
economy has continued to grow.
Since the minimum wage was enacted, every President except Ronald
Reagan signed an increase in the minimum wage into law.
Adjusting the minimum wage at regular intervals is a routine task
that should never have been turned into a pitched partisan battle.
Indeed, Mr. President, it is remarkable that this fierce debate
should be taking place in the 104th Congress. This Congress has been
awash with statements about how we should have work, not welfare. Those
are views that I, too, share. We should be promoting work, not welfare.
But how can we encourage people to leave the welfare rolls and join
the

[[Page S7454]]

work force when we fail to set a minimum hourly wage that provides a
decent income?
An American worker, working full-time, 40 hours a week, 52 weeks a
year, at the current minimum wage would earn less than $9,000 per year.
The current poverty level for a family of four is $15,600. Forty
percent of those earning the minimum wage today are the sole
breadwinners for their families.
The 90 cent increase being proposed would make a real difference in
the lives of these families, and encourage them to stay in the work
force.
It is estimated, Mr. President, that 12 million American workers--
200,000 in my own State of Wisconsin--would directly benefit from the
increase being proposed in the Democratic amendment.
The vast majority--more than two-thirds--are adult workers, not
teenagers, and they are working to help support their families.
Over 101 leading economists, including three recipients of the Nobel
Prize in Economics, have refuted the argument that increasing the
minimum wage would hurt the economy. Instead, they have concluded that
the modest increase being proposed would have a positive, not a
negative, impact upon the labor force and the economy in general.
Apparently, Mr. President, many of my colleagues on the other side of
the aisle remain unconvinced by the opinions of Nobel laureates.
Although the amendment they are advocating purports to raise the
minimum wage, it is difficult to imagine a worker who would actually
have the opportunity to benefit from it, because it is so loaded down
with exceptions.
Actually, their amendment seems designed to assure that the status
quo is maintained. It exempts all employees of small businesses with
gross annual revenues under $500,000--the very businesses most likely
to pay their workers the least. These businesses employ 10\1/2\ million
people and comprise two-thirds of all American workplaces. Not all
employees who work in such settings earn the minimum wage, but those
who do deserve the same modest raise that others who work for more
prosperous businesses receive, once this bill is passed and signed by
the President.
Another outrageous provision in the Republican amendment would create
a permanent second class, subminimum wage. Employers would be allowed
to pay new workers, regardless of age or experience, $4.25 an hour for
their first 6 months on the job. Although my colleagues on the other
side of the aisle refer to this lower rate of pay as a ``opportunity
wage,'' there is no suggestion anywhere in their amendment that workers
will receive training in exchange for this discriminatory treatment.
This provision would be particularly harmful for migrant and seasonal
agricultural workers, who rarely work for the same employer for 6 month
periods of time. Up to 8,000 migrant workers are employed in my State
of Wisconsin alone.
Finally, adding insult to injury, the Republican amendment wouldn't
even fully take effect for another year and a half.
Mr. President, the workers who benefit from an increase in the
minimum wage are likely to do something important with the extra
dollars they receive: Spend them on goods and services for their
families. That's good for everyone, as these dollars are plowed back
into the economy, creating jobs and expanding economic growth.
Mr. President, there seems to be a lack of understanding in the minds
of some about the connection between the economic well-being of the
average American worker and economic prosperity for the Nation.
Some see the down-sizing of large companies and layoffs of thousands
of workers across America as an unfortunate, but necessary part of
increasing profits for Wall Street investors and attracting the
investments of the multinational conglomerates.
They fail to appreciate the fact, however, that if American workers
don't have the money to purchase the goods and services, eventually
both Wall Street and corporate America will feel the pain as well.
The modest increase in the minimum wage being proposed is not a
panacea for the troubling trends in the relationship between American
workers and their employers. There is a growing feeling that the link
between corporate responsibility and the workforce has been frayed
almost beyond recognition and that American workers are coming to be
regarded as disposable goods.

In his campaign for the Republican Presidential nomination, Pat
Buchanan tapped into this sense of abandonment of the average American
worker by corporate America and by international trade agreements like
GATT and NAFTA that appear to put the profits of large corporations
ahead of the jobs of American laborers.
Mr. President, let me stress that this growing separation between
employees and their employers is not limited to corporate America or to
minimum wage job holders.
It is not limited to the worker flipping hamburgers at the local
fast-food shop.
It reaches into all levels of the work force, from the mid-level
corporate executive to the filing room clerk, who are surviving the
mergers and downsizing but wonder each night if they will be next.
Not a week goes by without a story in some major paper documenting
the anxieties of members of the work force, when companies like IBM and
AT&T begin casting off thousands of long time employees. Many
companies, still burdened by the debt acquisition of the leveraged buy-
out frenzy of the 1980's see themselves as having limited options and
are forced, by economic pressures, to close factories, spinoff
divisions, and lay off employees at all levels.
Yet, some of the new employment trends cannot be attributed solely to
economic pressures.
I recently heard of a nonprofit agency, funded almost entirely by
State and Federal grants which employed some 35 individuals. Yet only
five of those people were regular, full-time employees. The rest were
so-called contract workers--employees in every sense of the word, but
forced to work without health care, without pension coverage, without
sick leave, without vacation or other benefits.
The Federal Government itself also engages in this practice, hiring
people as temporary employees--again without the protections that
regular workers receive.
The vocabulary of the workplace is now filled with new terminology
like outsourcing which describes the practice of laying off workers and
replacing them with individuals--called either temporary workers,
contract workers, or contingent workers--who lack the benefits of
regular employees and can be treated accordingly, like disposable
employees, to be purchased and discarded at will.
Mr. President, I have raised issues which I know go beyond the simple
question of whether it is time to increase the minimum wage because I
think we need to start thinking about these broader questions.
Secretary Reich has spoken out forcefully already about the need to
re-establish the concept of corporate responsibility to the labor
force. I would take that a step further and broaden it to the need to
repair the deteriorating bonds between employers and employees in all
sectors of our society.
As we approach the turn of the century, there are troubling signs
that we may be moving backward, toward relationships between workers
and employers that are reminiscent of the 19th century. I seriously
doubt anyone wants to see the workplace of the 21st century resemble
that of the last century. America left that era behind long ago.
A great Nation draws upon the strengths and contributions of all its
people. John F. Kennedy said, in 1961, when he asked Congress 35 years
ago to increase the minimum wage, ``Our Nation can ill afford to
tolerate the growth of an underprivileged and underpaid class.
Substandard wages lead necessarily to substandard living conditions,
hardships and distress.''
Let's do our job.
Let's vote for an honest increase in the minimum wage.
Let's acknowledge that America's prosperity rests upon the well-being
of its people, its work force, and their families.
Mr. KYL. Mr. President, it is regrettable that the bill that comes
before us

[[Page S7455]]

today combines two unrelated and very different issues--tax relief with
an increase in the minimum wage.
I presume that the two issues were coupled in an effort to mitigate
the adverse effect that the minimum wage increase would have on small
businesses. It would not, however, mitigate the adverse effect on those
individuals who will be unable to find jobs, or who will lose their
jobs, on account of the increased wage that the Federal Government will
have mandated.
The Congressional Budget Office (CBO) estimates that the proposed 21-
percent increase in the minimum wage to $5.15 would create job losses
of between 100,000 to 500,000. In addition, CBO has said that the
creation of thousands of jobs could be inhibited if the minimum wage is
increased.
I have heard from numerous constituents who are opposed to an
increase in the minimum wage. One motel management owner in Arizona
wrote me to say that the tax repeal provisions of the bill are not
enough to offset the negative ramifications of an increase in the
minimum wage. Another constituent, the owner of a fast-food restaurant
in Arizona, wrote to say that employees could be let go if the minimum
wage is increased.
Congress can best facilitate increased job creation and wages by
decreasing governmental interference in business and reducing taxes. I
ask unanimous consent that a recent Arizona Republic editorial that
provides a good summary of why raising the minimum wage is a bad idea
be reprinted in the Record.
There being no objection, the editorial was ordered to be printed in
the Record, as follows:

[From the Arizona Republic, May 15, 1996]

Maximum Politics

The tea-leaf readers in Washington predict congressional
approval of a hike in the nation's minimum wage, probably
coupled with some other tax-related legislation, in the next
few weeks. Alternative plans are to raise the wage, now at
$4.25 an hour, by 90 cents or $1.
What makes the vote to raise the minimum wage a near sure
thing is that it has nothing to do with economics. Indeed,
most economists say raising the minimum wage is likely to
hurt those its supporters say they intend to help: the poor.
It doesn't take a degree in economics to understand why.
Raise the price of labor to businesses and businesses are
likely to respond by trimming some jobs. How many is open to
debate. One familiar bench mark is that every 10 percent rise
in the minimum wage trims 1 percent to 2 percent of affected
jobs. Therefore, the legislation might endanger up to 200,000
U.S. jobs.
But forget economics. As the Washington Post's Robert
Samuelson reports, it's election-year politics that's driving
the minimum-wage push. Plain and simple. Consider: President
Clinton says he's a backer of raising the wage. But in 1993
and 1994, asks Samuelson, guess how many times he advocated
raising it when his party controlled Congress? Zero. Nada.
Zip. Nil.
In 1995 and the first part of 1996, by way of contrast,
Clinton has publicly thumped the tub for a minimum-wage hike
47 times by Samuelson's count. The economics of the argument
hasn't changed, but the politics has. The American public
overwhelmingly believes that raising the minimum wage is a
good idea. So, for politicians, the issue is a no-brainer.
What likely accounts for the strong public appeal for
raising the wage is that it seems like a decent thing to do.
Maybe some of us remember working for the minimum and think
back that it would have been nice to have a dollar more an
hour. Families can't live on $4.25 an hour these days, we
think. (But they'd get by even less easily without that job.)
Samuelson cites two myths he says are responsible for the
public's support for boosting the wage. The fact that some of
us remember earning it is a clue to one: that there's a
permanent group of workers stuck at the minimum. Not so. The
vast majority of minimum-wage workers quickly move up.
The other myth is that many minimum-wage workers are heads
of households. In fact, says Samuelson, the data show that
single parents make up only 3 percent of minimum-wage
workers. More often than not, the typical minimum-wage worker
is a teenager or young adult from a middle-class family or
the second part-time jobholder in a two-income family.
Will raising the minimum cause great economic harm? Hardly.
The loss of 200,000 jobs would cause hardly a ripple. Over
time, they'd likely be replaced. But is it good policy? Not
if the intent is to help poor people, who stand to lose some
economic opportunities as a result.
A better way to help the working poor would be to make tax
deductible the 6.2 percent of their wages they now are
required to pay in payroll taxes to fund Social Security. It
wouldn't add to the cost of labor, but would, according to
the tax reform commission chaired by former Congressman Jack
Kemp, give a boost to the incomes of 100 million U.S. workers
and boost the GDP by half a percentage point. It also would
end the unsavory practice of taxing a tax.
But good sense, economic or otherwise, is not what's
driving the minimum-wage push. Political capital is what's at
stake, and so long as it involves spending or jeopardizing
other people's money it comes cheap.

Mr. KYL. Mr. President, there are far too many people in Washington
who like to play fast and loose with other people's money. They are not
content just to tax away a large share of people's hard-earned incomes
to spend on government-knows-best programs. They even want to tell
people how they have to spend the money they have left over after
taxes.
They trust the American people so little that they feel they have to
dictate what benefits they can receive and even what wages they can
work for. Combined with high taxes, it is a prescription for the kind
of anemic economic growth and stagnating wages that have been plaguing
the Nation. It is like rearranging the deck chairs on the Titanic. The
economy is still in peril.
Mr. President, I contend that the way to get people off of minimum
wage is to ensure that the economy is healthy and growing and providing
people with the opportunity to earn a better living for themselves and
their families.
It is no coincidence that slow economic growth and stagnating wages
have predominated since the low-tax policies of the 1980's were
abandoned in favor of the high-tax policies of the 1990's. As noted in
a recent report by the Institute for Policy Innovation, the economy has
grown by about 2.2 percent on average so far this decade. By
comparison, it grew at an average annual rate of 3.3 percent during the
Reagan years.
Had the economy done as well during the Bush and Clinton
administrations as it did under President Reagan, the economy would be
$2.6 trillion larger than it is today. That would have added $21,000 to
the average family's income between 1990 and 1996. Annual revenues to
the Treasury would have been $90 billion greater, an amount that would
cut this year's budget deficit by more than half.
So how do we promote the kind of growth that helped make everyone
better off during the Reagan years? Cut taxes. As President John F.
Kennedy once said, ``An economy hampered with high tax rates will never
produce enough revenue to balance the budget, just as it will never
produce enough output and enough jobs.''
The tax relief provisions in this bill, H.R. 3448, are a modest first
step in the right direction. For example, we extend the tax exclusion
for employer-provided educational assistance, something that will help
people improve themselves and get ahead.
We extend the work opportunity credit and increase expensing for
small businesses to encourage them to invest in new property and create
new jobs. We extend the research and experimentation tax credit, and
permit non-working spouses the same opportunity to save in individual
retirement accounts.
These and other changes in the law relating to S corporations and
pension law are good steps toward making tax policy more conducive to
economic growth and opportunity. I would add, however, that they are
only modest first steps. They are no substitute for the across-the-
board income tax rate reduction that many of us think would do far more
good for the economy.
The tax changes we are considering here are good and sound. If we had
the opportunity to vote on the merits, I would support them. However,
these modest changes are not sufficient to justify the high cost of the
minimum wage increase being proposed --a cost that will be borne by
employees as much as employers.
Mr. KOHL. Mr. President, I rise in support of the Kennedy amendment
to raise the minimum wage and against the Bond amendment, which would
retain the status quo and deny an increase for millions of low wage
workers.
Mr. President, we have just returned from the Independence Day
recess. I always value the time spent in Wisconsin during breaks in the
Senate schedule. Not only does it mean going home, it means spending
time with people who work hard and work together by compromising in
their daily lives.

[[Page S7456]]

Hard-working families struggling to make it to the next pay-check do
not have the luxury to shirk responsibility or skip their work. They
must go to work every day and get the job done. That's why it shouldn't
be a surprise when the people of this country grow more and more
pessimistic, even angry, because Congress has yet to get the job done
and pass meaningful legislation.
In the attempt to score political points and out-maneuver the other
party, legislation that is critical to working families has languished
or been killed.
Instead of increasing investments in education and job training to
provide the foundation for a stronger economy, these programs have been
cut. The earned income tax credit, which helps working poor families
stay afloat, has been targeted for huge reductions. A bipartisan health
care reform bill that passed the Senate by a 100-0 vote has become
stalled and may die because some want to poison the modest reforms with
controversial provisions. Bipartisan campaign finance reform
legislation has been killed. And balanced budget legislation, which
everyone agrees is needed to end deficit spending and shore up the
economy for our children's future, is now also on a partisan track to
failure.
Despite the odds that partisan politics may win the day, I remain
hopeful that moderate proposals can still be enacted during this
Congress. One of the most important bipartisan and moderate
intitiatives is the minimum wage amendment offered by Senator Kennedy.
This amendment closely resembles the wage increase passed by the House
of Representatives and excludes controversial provisions rejected by a
majority of House Members.
The Kennedy amendment would allow some of the hardest working
American's to make a better life for themselves and their families. It
would increase the minimum wage from the current level of $4.25 to
$5.15 over 2 years. Granting a 90-cent wage increase over 2 years will
help these families keep up with inflation and stay at or above the
poverty level. Over 200,000 workers and their families in my State of
Wisconsin would benefit from the increase.

This amendment would be coupled with a series of tax breaks for small
businesses to help offset the potential effects of the wage increase. I
remain concerned about the challenges facing small businesses even
though many prominent economists argue that the modest increase
proposed would not significantly jeopardize employment or business
opportunities. So I am pleased that these tax breaks will help ensure
that any impact is minimal.
The Bond amendment is a stark contrast to this reasonable minimum
wage proposal. Instead of starting the 2-year increase this year, the
Bond amendment would delay for 6 months the much needed raise. Further,
the Bond amendment holds down millions of American workers who are
employed at small businesses or who work in the restaurant industry by
carving out huge exclusions to the increase.
Anyone who has been on the job for less than 6 months would get no
increase. At least 4 million workers would be affected by this
permanent submimimum wage. Under Senator Bond's proposal, another 2
million workers would be denied any increase because they work for
tips. The complete exemption provided for companies that earn less than
$500,000 annually would result in workers at two-thirds of all small
businesses being left behind.
Supporters of these exclusions claim that the minimum wage increase
would devast small businesses. Even though it is arguable that
significant negative effects would result from a modest minimum wage
increase, the proposal before us would provide 34 specific tax breaks
for small businesses.
History also argues against this claim. Since the last minimum wage
increase, far from being devasted, small businesses have helped spur
economic growth and bring our Nation out of recession. Under the Bond
amendment, scores of small businesses would be rewarded with generous
tax breaks even though they would be exempted from raising the wages of
their lowest paid workers.
Opponents of the minimum wage have also been quick to assert that
minimum wage earners are mainly teenagers from middle class families.
Again, the facts tell a different story. Two-thirds of those paid the
minimum wage are adults and a third of those are the sole household
wage earners for their families. If granted the minimum wage increase
without exclusions, over 2.3 million children from poor and near poor
families would benefit.
Mr. President, recent reports on the economy continue to show healthy
growth and provide optimistic prospects for business. But although
unemployment is down and millions of jobs have been created over the
past 3 years, the average American worker remains uneasy.
With the strong economic growth, corporate CEO's have been rewarded
with sky-high salaries and impressive benefits. In contrast, real wages
have become stagnant for many Americans and their standard of living
has decreased over the years. Perhaps more disturbing, working families
have seen their health benefits eroded and opportunities for child care
diminished.
The Congress cannot create complete equity in the work force and
resolve all of the challenges of working families. That is not
realistic and ignores the fundamentals of our economy. But there are
actions Congress can take that will make a real difference.
We can help ensure health security by reforming the health insurance
market; we can provide child care and education opportunities by
balancing Federal investments in these programs; and I still believe we
can balance the Federal budget in a fair manner. Today we can and must
help the lowest wage workers by passing a long-over due minimum wage
increase. The House of Represenatives has already done so, it is now
time for the Senate to act.
Mr. President, 5 years have elapsed since the minimum wage was
increased and the real value of the wage has fallen by nearly 50 cents
over that period. Furthermore, the real value of the minimum wage is 29
percent lower than it was in 1979. Without action, the value of the
minimum wage will plummet to a 40-year low by 1997. Do people really
believe that working at $4.25 an hour, which amounts to $8,500 a year,
is a fair and livable wage?
To deny America's lowest paid workers a sustaining wage during a time
of substantial budget cuts simply represents misguided priorities. This
is precisely the time when we need to reward the people who work. If we
are going to cut funding for education and training and reform welfare,
we must provide individuals with the economic tools necessary to get
ahead.
The last minimum wage increase under President Bush enjoyed broad
bipartisan support. I urge my colleagues in the Senate to undertake a
similar bipartisan effort today and demonstrate their commitment to
working families by restoring the fair value of the minimum wage.
The Senate is faced with a critical choice that will determine
whether or not the minimum wage increase becomes a reality this year.
One amendment would provide a modest minimum wage increase to the
working poor; the other would grant an increase to some workers, but
leave millions of Americans with stagnant wages and result in a certain
presidential veto. Let us do the right thing by passing the Kennedy
amendment and rejecting the Bond amendment.
Mr. PRESSLER. Mr. President, I rise in support of the amendment
offered by the chairman and ranking member of the Finance Committee--
the so-called managers' amendment. I just want to take a moment to
comment on a few of the provisions of the amendment that are very
important to churches and ministers in my home State of South Dakota.
Specifically, there are three provisions in the managers' amendment
that are taken from S. 881, the Church Retirement Benefits
Simplification Act, introduced by friends and colleagues from Iowa and
Arkansas, Senators Grassley and Pryor. This bill already has 34
cosponsors. One of the provisions in S. 881 was included in the House-
passed version of the underlying legislation we are considering today.
This provision would respond to the Internal Revenue Service retreat
from its four-decade-old policy of not taxing parsonage allowances paid
to retired clergy. The provision would clarify

[[Page S7457]]

that all retirement benefits of clergy are not subject to self-
employment taxes.
The three additional provisions of S. 881 that are included in the
managers' amendment address the churches' concerns regarding the
treatment of chaplains and foreign missionaries and the application of
nondiscrimination rules designed for secular employers to church
pension plans.
First, the manager's amendment would clarify that chaplains may
continue to participate in denominational pension plans. Under current
law, chaplains who work outside the church, serving in hospitals,
jails, and other secular organizations, are not expressly allowed to
participate in their denomination's pension plan. Often, chaplains may
leave their church to work in a secular organization for only a brief
period of time, and it makes little sense for Congress to force those
chaplains to participate in the secular pension plan instead of the
denominational one. The managers' amendment simply would clarify that
chaplains may participate in their denomination's plan without
inadvertently violating pension coverage and related rules.
Second, the managers' amendment would facilitate the ability of
foreign missionaries to participate in their denominational pension
plan. This amendment would promote sound retirement policy while also
benefiting the foreign missionaries who are America's humanitarian
emissaries abroad.
Finally, the managers' amendment would authorize the Secretary to
develop a safe harbor from the nondiscrimination rules for those church
plans that were left out when Congress exempted most church plans from
the same nondiscrimination rules. Although the IRS has issued a self-
imposed moratorium on enforcement of these nondiscrimination rules for
church plans, that moratorium ends soon. This amendment would give the
Secretary of the Treasury the authority to develop a safe harbor plan
for the pension plans of the Catholic dioceses, the Episcopalian
Church, and the Presbyterian Church. These churches simply do not have
the infrastructure to prove compliance with the nondiscrimination rules
which apply to secular employers.
Again, I want to commend the two managers--Chairman Roth and Senator
Moynihan--for their assistance in addressing the concerns of the
churches in this legislation. Thanks to their leadership, we can
correct and clarify the laws to ensure that they not unduly burden
church retirement plans and the clergy and lay workers who participate
in them.
Mr. CRAIG. Mr. President, I rise in support of the amendment to H.R.
3448 offered by the chairman of the Small Business Committee, Senator
Bond. I also support the Finance Committee's amendment to the tax title
of that bill, which already has been adopted.
For once, with the inclusion of these amendments in H.R. 3448,
Congress would be looking at an issue in context and taking in the big
picture. Both amendments are necessary to make this an acceptable bill,
on balance.
This bill is supposed to be named the ``Small Business Job Protection
Act of 1996.''
Title I, the tax title, is consistent with that spirit. It would make
the Tax Code a little fairer, improve economic and employment
opportunities, and provide some necessary tax relief.
However, unless the Senate adopts the Bond amendment as well, this
bill will not be worthy of its name. It will not protect small
business. And it will hurt the low-wage breadwinners it is supposed to
help.
I commend Senator Bond and Senator Roth for the work they have done
on their amendments.
All too often, past Congresses have taken a perceived problem; put it
under a microscope; and tried to address it with a one-size-fits-all
Federal mandate. The result often has been Government by anecdote.
Unintended consequences and innocent bystanders have not always been
taken into account in the rush to adopt a feel-good solution.
That risk of unintended consequences is definitely present in the
case of proposals to increase the Federal minimum wage.
We feel for those Americans who are working hard at making ends meet.
It is easy and it is tempting to look at a $4.25 an hour minimum wage
and say, let's just mandate an increase in that wage. But that would be
the wrong answer.
Standing alone, an arbitrary increase in the minimum wage destroys
jobs for the very persons it is meant to help--the working poor and
entry-level employees.
Common sense, the laws of economics, and experience all tell us this.
There is no dispute over this fact, except from some inside the
Washington, DC, beltway and from some academicians with a political
agenda.
We've all heard the numbers. The commonly accepted figure is that, an
arbitrary, stand-alone increase in the minimum wage from $4.25 an hour
to $5.15--a 21-percent increase--would result in the loss of 621,000
jobs. In Idaho, it would destroy 3,200 jobs.
Some have suggested that the economic impact of such an increase is
negligible. But it's not negligible for each one of those 621,000
Americans--or possibly more--who would lose their jobs as a result. In
many cases, the job lost would be the most important one that person
will ever have--his or her first job.
The Bond Amendment takes a fair and balanced approach that would
minimize the harm that would come from a one-size-fits-all, federally
mandated increase in the minimum wage. It would treat small employers
fairly and would be good for those entry-level workers most in need of
making it to the first rung on the ladder of economic opportunity.
Unlike the amendment defeated in the House, the small business
exemption in the Bond Amendment would apply only to the minimum wage
increase in this bill.
Mr. President, most Senators were serving in Congress in 1989. We
remember what happened when we finally voted for a compromise minimum
wage bill then. Everyone--if you read the Record, you will see
everyone--thought and said there was a small business exemption in that
bill for every small business with gross receipts of less than
$500,000. That bill would not have passed in 1989 without that $500,000
exemption. Everyone understood that the 1989 compromise would increase
the small business threshold from $362,500 to $500,000 and broaden the
exemption from some service and retail employers to all enterprises.
But then, a bureaucrat at the Department of Labor noticed an apparent
drafting error. The bill's language was convoluted and was interpreted
as applying the Fair Labor Standards Act to virtually every individual
employee in the country, regardless of the employer's receipts. I say
it was an apparent drafting error because everyone thought there was a
universal, $500,000 threshold, and I do not want to accuse anyone of
lying to the Congress or the President back in 1989.
Correcting this apparent drafting error had been a bipartisan effort
up until recent weeks. Democrat Members in both the Senate and the
House previously introduced bills to restore this intended exemption,
in bills that would have gone farther than the Bond Amendment.
In recent years, small businesses have created every net new job in
this country. They take the risks of hiring and training new workers.
They do not have the economies of scale of large businesses and suffer
a disproportionate impact from Government regulation. They tend to be
labor intensive. If you drive up the costs of their labor, they will be
forced to create fewer jobs.
In fact, 77 percent of the economists who responded to a survey of
the American Economics Association agreed that, by itself, a higher
mandated minimum wage would have a negative impact on employment.
Obviously, that negative impact is going to fall on workers at or
near the minimum wage, and especially those who are the least-skilled
and need an entry-level job the most. The Bond amendment would
safeguard the most vulnerable employees, those of the smallest
businesses, against that impact.
The Bond amendment also includes a realistic opportunity wage, or
training wage.
Realistically, the Federal minimum wage today already is a training
wage. The average minimum wage worker is earning $6.06 an hour after 1
year.

[[Page S7458]]

In most work places, at every level of compensation, it is common for
a new employee to be paid more after a few months. That is because
there is almost always a learning curve, during which the employer is
investing time, energy, and money in training and acclimating the new
employee. The opportunity wage in this amendment simply reflects that
reality of labor economics.
Some critics have said the training wage would allow churning of
employees--the firing of employees when they become eligible for the
new, higher, minimum wage, and replacing them with new hires at the
training wage. The Bond amendment makes that practice specifically
illegal.
Finally, the Bond amendment would provide employers--especially small
businesses with limited resources and profit margins that are slim or
nonexistent--with a more realistic effective date for this bill.
Unlike the Federal Government, employers make reasonable projections
of their revenues and then budget their resources to live within those
means. To impose an immediate increase in costs of thousands of dollars
would be a cruel jolt to many small, vulnerable employers. To do so
retroactively, as would happen under the Kennedy amendment or the
House-passed bill, would be unconscionable.
The Bond amendment would provide the necessary flexibility to protect
the workers and small businesses that would be most vulnerable to a
one-size-fits all mandate. It is an important part of a two-step
process to improve this bill. The second step is the inclusion of the
tax provisions that would provide essential relief for small
businesses, help them create jobs, and make the Tax Code a little
fairer.
I particularly want to express my support and appreciation for
several of the tax provisions in title I of this bill, including:
Increasing the availability of spousal individual retirement
accounts; revising and extending the work opportunity tax credit, which
will help employers hire and retain disadvantaged employees; restoring
and extending the tax exclusion for employer-provided educational
assistance; making S-corporation rules more flexible; providing fairer
treatment for dues paid to agricultural or horticultural organizations;
extending the research and experimentation tax credit; and improving
depreciation and expensing rules for small businesses.
I have supported these provisions consistently in the past and
commend the Finance Committee for including them in this bill.
There is at least one provision in the House-passed version of this
bill that I hope the Senate would accept in conference: Restoring and
making permanent the exclusion from FUTA--the Federal unemployment
tax--for labor performed by a temporary, legal, immigrant agricultural
worker. Such employees are ineligible for FUTA benefits that are
financed by this tax. Therefore, this tax is imposed on employers for
no reason, except that the previous exclusion simply expired.
The Finance Committee provisions are valuable and beneficial. And I
commend the chairman of the Small Business Committee for the thoughtful
approach he has taken on his amendment. For me to vote for this bill,
it would also be necessary for us to adopt the Bond amendment, which
includes essential safeguards for employees and small businesses alike,
and make this package complete.

higher education savings act

Mr. McCONNELL. Mr. President, I am pleased that the Finance Committee
has included my proposal to clarify both the tax treatment of the
State-sponsored education savings plans and taxation of the
beneficiary's investment. This measure will put an end to the tax
uncertainty that has hampered the effectiveness of these State-
sponsored programs and help families who are trying to save for their
children's higher education needs.
I have been working on this proposal since I first introduced S. 1787
in 1994. This Congress I have introduced S. 386 to provide families
with an incentive to save for college and put an end to the tax
uncertainty regarding the State-sponsored programs. This legislation
will offer families an opportunity to save in order to keep pace with
the spiraling cost of education. S. 386 has been endorsed by the
National Association of State Treasurers, the National Association of
State Scholarships and Grant Programs and the Kentucky Advocates for
Higher Education.
Mr. President, the facts are clear. Education costs are outpacing
average wages, creating a barrier to attending college. Throughout the
1980's education costs have risen by roughly double the rate of
inflation. In 1983, tuition at the University of Kentucky and
University of Louisville rocketed 16.7 percent followed by an 11.2-
percent increase in 1994. Since 1986, the cumulative percentage
increase in tuition at Kentucky's two largest public universities rose
an astounding 82.3 percent.
Unfortunately, Kentucky's numbers are not extraordinary when compared
to average tuition increases nationwide. Over the past 10 years,
tuition rose by 81.7 percent for public universities and 95 percent for
private schools compared to 46.6 percent increase in the median income
for the same period. Which brings us to the real problem: education
costs are quickly out-pacing income growth.
As tuition costs continue to increase, so does the need for
assistance. In 1990, over 56 percent of all students accepted some form
of financial assistance and the statistic was even higher for minority
students. It is increasingly common for students to study now and pay
later. In fact, more students than ever are forced to bear additional
loan costs in order to receive an education. In 1994, Federal education
loan volume rose by 57 percent from the previous year. On top of that,
students have increased the size of their loan burden by an average of
28 percent. So not only are more students taking out loans, but they
are taking out bigger loans as well.
Over the past decade, many States have tried to respond to the
concerns parents have raised regarding the affordability of a college
education. Today, 11 States, including Kentucky, have responded by
developing programs that will provide families with incentives to save
over the long term to make college more affordable. Sixteen other
States are quickly moving to put into place their own education savings
plans.
Currently, there are 500,000 participants investing over $2 billion
in State-sponsored savings programs. In Kentucky, there are 2,700
participants with $4 million invested in their children's future. Under
this plan, participants don't have to be rich to benefit. In fact, the
average monthly contribution in Kentucky is just $47.22. This proposal
rewards those who are serious about their future and are committed to
the education of their children.
The language included in this bill is a variation of my original
legislation. It provides tax-exempt status to qualified State tuition
programs. In November 1994, the U.S. Appeals Court ruled that the
Michigan Education Trust is not subject to Federal income tax. Although
the circuit court was quite clear on this issue, it is my understanding
that the IRS continued to look for a different avenue to tap this
growing investment pool. This proposal clarifies legislatively the tax
status of these programs and puts and end to the uncertainty and
constant threat posed by the IRS. I am told by Kentucky's program
administrators that this tax clarification is their No. 1 priority and
vital to the continued existence of the program.
This legislation will also clarify the tax treatment of the
investment itself. As proposed in the recent Treasury regulations, the
child would be taxed on the earnings buildup at the time of
distribution. While my original legislation proposed the inside buildup
be fully tax exempt, I believe that this clarification is a significant
reform and consistent with the limits of this bill. I want to assure
every one of my colleagues that I will reintroduce legislation and
continue my efforts to make the inside buildup in this investment tax
free. Nonetheless, this proposal will be a tax cut for Kentucky
participants since they have been forced to pay taxes annually to avoid
possible penalties, while the IRS has been considering the tax
treatment of this investment.
This legislation is not a funding cure but is a serious effort to
encourage long-term savings, by eliminating the tax disincentive to do
so. Aside from

[[Page S7459]]

limited assistance through bond programs, nothing has been done to
encourage savings or decrease borrowing. I believe it is widely agreed
that it is in our best interest as a nation to maintain a quality
education system for everyone. We need to make a decision, however, on
how we will spend our limited resources to ensure that both access and
quality are maintained.
Before I close, I would like to take a moment and commend Senators
Roth, Graham, Shelby, and Breaux for their hard work and support of
this legislation. I appreciate their interest and look forward to
working with them in the future to make these investments tax exempt.

Small Fishing Vessels

Mr. KERRY. Mr. President, for almost 8 years hard-working owners of
fishing vessels in New Bedford, MA have been subject to an Internal
Revenue Service ruling that would result in approximately $11 million
in penalties. This situation arises from an IRS misinterpretation of
Tax Code provisions as they applied to crew members on small fishing
vessels. The IRS's interpretation and assessment is potentially
devastating to the fishing families in southeastern Massachusetts--a
region already struggling with the departure of the textile industry
and the demise of the fishing industry. I am pleased that the managers
amendment to H.R. 3448 includes a section clarifying the application of
this disputed provision and making the original intention of the
Congress clear with respect to it.
I have worked on this issue for many years along with the senior
Senator from Massachusetts as well as colleagues in the other body,
especially Congressman Barney Frank, Congressman Gerry Studds and
Congressman Richard Neal.
Mr. President, today the Senate is providing relief for four fishing
vessels in New Bedford--F/V Edgartown, F/V Nordic Pride, F/V Lady J, F/
V Seel--by rendering moot a court action against them. Central to the
case is the question of whether crewmembers on small fishing vessels
are considered self-employed or employees for tax purposes. The pay of
employees is subject to withholding of Federal income tax while payment
to persons who are self-employed is not subject to withholding.
Life on the seas requires fishermen to be ruggedly independent
individuals. Fishing boat operations reflect this independence in that
they are fundamentally small business operations with crews that
typically vary from trip to trip, with each crewmember acting as a free
agent. Recognizing this unique arrangement on fishing vessels, Congress
amended the Tax Code in 1976 to clarify the employment status of
crewmembers as self-employed and required the self-employed crewmembers
to be compensated solely with a share of the catch.
It is common practice in fishing communities around the country to
provide a small cash payment called a ``pers'' to the cook, first mate
and engineer in recognition of additional duties they perform at sea.
These pers represent only 1 to 5 percent of the total compensation and
amount to approximately $500 annually based on a $30,000 income.
In 1977, the IRS issued Ruling 77-102 which stated that a pers
payment would subject the entire salary of the pers recipient to
withholding. In response, the industry initiated a sliding scale per
that ranged from $24.50 to $25.50 depending on the catch. The IRS did
not question this practice until 1988 when the Service suddenly issued
an unexpected interpretation of the pers payment and ruled
retroactively that the entire salaries of crewmembers receiving pers
were subject to withholding. The IRS ruling means that much of the New
Bedford fleet does not qualify for the small fishing vessel treatment
on withholding and therefore each boat owner owed the IRS large amounts
in back withholding for the fishermen who worked on them. As a result,
IRS placed liens on property and is poised to begin enforced
collections from the boat owners which will be devastating to the New
Bedford fishing industry as it struggles to survive until the
groundfish stocks recover.
This bill will permit the pers payments--which are essentially
calculated as a share of the catch--without jeopardizing the self-
employment status of crewmembers. Let me emphasize, Mr. President, that
the boat owners believed they complied with the new tax laws and
regulations, and in fact they did comply with the law as Congress
intended it to be applied to small fishing vessels. The vessel owners
paid the crew the amounts the IRS now claims should have been withheld,
and the crewmembers, as contractors, were individually responsible for
paying taxes due on those payments. To assess these boat owners now
would be grossly unfair and will have the effect of sinking the New
Bedford fleet.
Those of us trying to remedy this situation have been working for a
solution for 7 years. We have appealed to the Treasury Department and
the Internal Revenue Service, and introduced legislation that was
vetoed twice by President Bush. Today, we are working against the clock
as the Court of Appeals will soon hear the vessel owners appeal if this
provision of H.R. 3448 is not enacted into law.
Mr. President, this has been a long and difficult struggle to provide
relief for the fishing families of New Bedford. I am pleased we are on
the cusp of victory. Until the bill is signed by President Clinton, I
will continue to fight for these hard-working families in southeastern
Massachusetts.
Mr. SPECTER. Mr. President, I am voting in favor of increasing the
minimum wage because there has been no increase since 1989 while cost
of living adjustments have been provided to others.
I am pleased to note that this bill, the Small Business Job
Protection Act of 1996 provides benefits to small business which will
offset their higher wage payments. Among important provisions to help
small business, the bill as amended includes over $11 billion in tax
incentives, such as tax incentives for employer-provided tuition aid,
increased expensing limits for small business equipment purchases,
pension simplification rules, and extension of expired tax credits for
research and development, employment of certain targeted individuals,
and the orphan-drug tax credit.
With respect to the minimum wage provisions of this bill, while I
have given serious consideration to the provision to exclude businesses
with less than $500,000 in annual revenues, I have decided to vote
against the Bond amendment because of the provision that delays the
increased minimum wage for 6 months regardless of the age of the
employee. That would allow too much opportunity for circumventing the
law by discharging employees just short of the 6-month period and
employing new people.
I am voting against the Kennedy amendment because I believe the
provisions of the underlying House bill provide a better balance with
the longer waiting period of 90 days before the new minimum wage must
be paid compared to only 30 days in the Kennedy amendment and because
the House bill provides more equitable treatment for restaurant owners
on the tip issue.
In this statement, I am including, at the manager's request, an
explanation for my amendment which will help small businesses in their
efforts to operate defined benefit pension plans. This amendment will
help small businesses in their efforts to comply with new stricter
funding rules enacted as a part of the Uruguay Round Agreements Act
[GATT]. It gives the Internal Revenue Service [IRS] the authority,
under very limited circumstances, to waive the excise tax that is
imposed on a company that fails to meet a liquidity requirement
mandated under the new law.
By way of background, at least two small Pennsylvania companies,
Freedom Forge Corp. of Burnham and Erie Forge Corp. of Erie were not
aware of the new liquidity requirements when they became effective less
than 1 month after the GATT enabling bill was enacted. The bill had no
transition rules that applied to the new liquidity requirements. I am
advised that the Pension Benefit Guaranty Corporation, the Federal
agency with jurisdiction, called companies proactively to inform them
of the new liquidity requirements, but that these two Pennsylvania
companies are among the only companies not to receive such counseling.
Consequently, these companies were unable to prepare for their new
obligations in a timely manner and, I am informed, had to increase
their pension plan funding by approximately 1,500 percent.

Once the companies became aware of the new law and the resulting
dramatic

[[Page S7460]]

increase in pension obligations, I understand that they acted as
quickly as possible to come into full compliance with the law and
remain in compliance today. However, because they did not receive the
same warning from the Pension Benefit Guaranty Corporation as other
companies did, they are subject to a penalty excise tax for the first
quarter in which they were not in compliance with the new law.
Currently, the Internal Revenue Service has no statutory authority to
waive the penalty excise taxes that apply in these instances, even
where the contribution due the plan was due to reasonable cause and
reasonable steps have been taken to remedy the liquidity shortfall. In
the absence of a legislative remedy, these companies will be forced to
pay penalties to the IRS because they did not immediately comply with a
law they had no knowledge of, in spite of their proven best efforts to
fund their pension plans once made aware of their new responsibilities
under the law. While ignorance of the law generally is not an excuse, I
believe, Mr. President, that where the Government actually notified and
counseled companies, but not these, it is appropriate that the tax
penalty be waived.
Accordingly, my amendment that the distinguished managers of the bill
included in their package of amendments would provide authority to the
IRS to waive the excise tax in those cases where the shortfall was due
to reasonable cause and reasonable steps were taken to remedy the
liquidity shortfall. In consulting with the Pension Benefit Guaranty
Corporation about this problem and a possible legislative solution, I
am advised that the agency said that their primary interest is ensuring
that pension plans have adequate funds to pay their benefits. The
agency recognizes that some companies had difficulties complying with
the new liquidity requirements due to a lack of transition rule.
Therefore, I am advised that the agency has no objections to my
amendment so long as it requires that reasonable steps have been taken
to remedy the shortfall as a condition of the waiver, which my
amendment provides.
This change in law will enable Freedom Forge Corp., Erie Forge Corp.
and any other company that may find itself in a similar circumstance to
be treated with fairness. Without fair pension laws, small companies
will be unlikely to undertake this substantial responsibility. As
legislators, we should be encouraging small employers to provide a
pension plan for their employees, not discouraging them. Therefore, I
commend Chairman Roth for his understanding of pension policy and for
including this important amendment in the managers' amendments package.
I thank the Chair and yield the floor.
Mr. HELMS. Mr. President, the Small Business Job Protection Act of
1996 includes two essential and much-needed provisions that I've
supported for years. Together, these provisions will extend for 3 years
the tax credit for employer provided educational assistance to workers,
and it will allow spouses to invest fully in tax-deferred individual
retirement accounts even though they are not employed outside of their
homes.
Reauthorization of the employer provided education tax credit,
codified at section 127 of the IRS Code, will enable American workers
to provide for their families in a more substantial way. First
authorized in 1978, this provision has helped more than 7 million
working Americans to further their education and to acquire additional
skills.
Mr. President, earlier this year I introduced Senate Concurrent
Resolution 57 to extend this critically needed tax provision. I was
gratified and encouraged when this resolution was adopted. Now, it's
time for the Senate to act on the commitment expressed in Senate
Concurrent Resolution 57 and extend the credit through December 31,
1997.
Mr. President, this Congress approved a reauthorization of this tax
credit in the Balanced Budget Act of 1995. Notwithstanding his rhetoric
in support of education, the President vetoed the bill, and prevented
the extension of this urgently needed education tax credit, while
sowing uncertainty among the workers and employers who were
understandably relying upon these tax-free benefits.
This uncertainty is particularly acute among workers and employers in
areas undergoing sweeping economic changes. In my State of North
Carolina, thousands of textile workers have lost their jobs in recent
years, while other industries have experienced phenomenal growth.
Extension of this credit will help all workers by encouraging employers
to provide tax-free education benefits to their employees, thereby
benefiting employers by improving worker skills while benefiting their
workers by reducing concerns about job security.
Mr. President, perhaps the case for extending this credit was made
most eloquently by two distinguished North Carolinians. Representative
of employer concerns, Nan Keohane, president of Duke University in
Durham, NC, wrote to me saying that:

We at Duke believe it is important for our employees to
achieve their educational goals and to acquire the skills
they need to succeed in an increasingly complex society. The
ability to exclude education benefits from personal income
tax is obviously important to our own employees, and
particularly to those who otherwise could not afford the
educational costs that the tax on these benefits would
require.

Typical of letters from workers who have written to me is one by Jeff
Stanley, a fine young man who works for Motorola in Research Triangle
Park. Jeff has been working toward a Bachelors Degree in Business
Administration at North Carolina Wesleyan College; he is close to
completing it. However, his employer-provided education benefits are,
he says, ``taxed at approximately 40 percent'' and that ``[t]his extra
expense is causing a financial hardship. I would very much like to
complete my degree within the next year, but due to the extra expense
of the taxation, I may have to delay the completion.''

Passage of the Small Business Job Protection Act will ensure that
Jeff Stanley can complete his education without those benefits being
made subject to a 40-percent tax rate, the effect of which is to
discourage pursuit of a life-long education goal. This time, I hope the
President will permit this important provision to become law.
Another provision of the bill proposes that spouses may invest fully
in an individual retirement account. Current law prohibits these
working spouses from investing more than $250 in an IRA. Yet, if the
same spouse works outside the home, he or she is able to participate
fully in IRA tax-deferred investments--to the tune of $2,000 per year.
The Small Business Job Protection Act eliminates this double-standard
and recognizes the value of those who labor in the home. In the
process, it will benefit the estimated 18.6 million households with
married couples. Many of those households include a parent who chooses
to work at home, frequently sacrificing more lucrative careers for the
more rewarding job of raising children. It's common sense that the tax
code shouldn't discourage these parents from working in the home.
Mr. President, the IRS Code is a testament to the big-spending
leviathan known as the Federal Government. In addition to over-taxing
American citizens, the Code contains countless irrational provisions
which ought to be scrapped. It's too bad that politics caused this bill
to be burdened with an unwise increase in the minimum wage; rammed down
the throats of countless thousands of small businesses who will have to
eliminate untold numbers of entry-level jobs that are so meaningful to
young workers today.

____________________