Congressional Record: Proceedings and Debates of the 107th Congress, First Session, Volume 147, Part 17 Page: 23,391
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CONGRESSIONAL RECOR HUSE
T~his gets into another theme, but at
this point I ield to the gentleman
from Arizona (Mr. FLAKEx). I thank the
gentleman for coming here, and salute
the gentleman for all of the great work
he has been doin: to help lower the tax
break for American people.
Mr. FL AKE. M. Speaker, there are a
few comTments I would like to make.
WXhen I talk to my constituents in Ari-
zon, they are not clammring for a few
more months of unemployment or
health care, they are clamoring to get
their jobs back. The best way to do
that is to recognize that w e do not
have such a problem with spending, as
my colleague from WLscornsin pointed
out very effectively. If the problem was
spending we would not have a problem.
Government has grown over the past 6
or 7 years at the ra te of, I think, an av_-
erage of 6 percent a year. When w'e in_-
crease the baseline evTery year, that
amounts to a shopping amount of
spending. Tha t is not the problem.
The problem is investment for the
most part. We penalize invTestment, and
we should not do so. What w e need to
do is lower the tax burden. The Presi-
dent has said a number of tims, and
the adi ministration has indicated
through a number of people, that the
best thing to do is to cut ma rginal
rates. In the President's tax package,
we did that. We cut the marginal rate.
The problem is that a lot of those cuhs
do not ta ke effect for a number of
Tears, particularly the rate cuts at the
top end. .
As our distinguished colleague Sen-
ator GRAMM ion the other side of the
Capitol lik es to say, I never got a job
from a poor man. We have to recognize
that class envy simply does not cut it.
We have to recognize that we cannot
begrudge those who are making more
than w e are. We ought to encourage
then to make more and invest more-.
We can do tha t by cutting the marginal
rate at all levels; the top one at 39.6,
accelerate that cut, and cut the lower
mates as well. That is the first order-.
The second thing has also been m 'en-
tioned, cut capital gains. It has been
noted earlier, that is one of the
quickest way to spur stook market,
spui increased investment-.
IMr. TOOMEY. Mr. Speaker, the gen-
tleman has touched on something
which is worth dicussing. I have heard
people suggest that if we cut the cap-
ital gains tax rate, it might be bad for
the stock market. People night think
the capital gain is lower so I should
sell stool now while I enjoy a lower tax
rate. I have head people suggest if w e
evem cut the capital gains mate, we
could hav'e a collapse in the stock 'mar-
k et-.
That stmik es me as exactlyT the oppo-
site of the likely effect. Fimrst of all, ye
have rut capital gains tax ra tes b efore,
and the stock market has gone up. We
cannot ignore the fact that we have
historocal eviddenoe on this. W e haveseen this happen before. And the reason
whyT, if we were to lower the capital
gains ra te tomorrow, we womld im'me-
diately increase the value of every
asset in Ameroca. Because what is the
value of an asset? It is its ability to ap-
preciate in daue. If you diminish the
am 'ount that the government is going
to take of that, it is worth more. So
why would the sto k ma rket collapse
when every 0 ompanyT in A merica be-
came more va lua)le?
The gentleman n points out if w'e cut
the capital gains rate, in fact it w ould
help the stock market. Tbat is
counterintuitive to some people, for
the reason I just mentioned, but it is
exactly ight.
Mlr. FLATKE. Mr. Speaker, w e have to
look at history. It has been cut before,
and time result has been an increase e in
asset values and more invest ment. Peo-
ple are not going to take that out amid
stick it under a mattress. TheyT are
going to invest again. TIhere is a
compounding effect, and it is beneficial
for the entire economy. That is ex-
tremely important-.
Congress needs to recognize that we
have to stop the class warfare. We hae
to stop saying let is get on this popu-
list theme of spend more, and get
money in people's po 4kets. Let us
make sume that Americans can invTest.
Arh TOOMFYhe Mr dpe ker, the gen-
tleman's points ame very w'ell taken.
Regarding class warfare, the gentleman
from Noith Carolina made the argu-
ment that lowering the capital gains
burden helps low-income and mod-
emate-inome people. It is a job-cre-
ation engine. It has nothing to do with
class warfare.
As w'e move on in this discussion, I
want to just touch on an issue that is
rajisd sometimes. I think sometimes it
is not obvious to see the connection e_-
tween lowering taxes and economic
grow th. Why does that happen? How
does it really generate economic
growth? One of the ways that I think is
useful to think about this is the fact
that there are alot of transactions
that could be ocoumrring in our econ-
omy. tra nsactions on the margin, one
more home being sold, one more car
being built, and a few more services
being prov'i ed. These are transactions
that are not hap pening b ecause bumyer
and seller cannot agree on a price.
There ame not enough buyenrs w'ho can
quite afford the price that the seller
needs, or there are not enough sellers
who can lowTer their price to the point
that the consumer can afford. So there
is this inability to get the transacton
done,
What is one of the biggest costs to
every producer, every potential seller
of goods and series? It is their tax
burden.
13 1745
What is one of the bigest costs of
every consun m' that takes away theirdisposable inomTe? It is the tax burden.
So if y ou lower taxes on producers and
you lower taxes on consumers, pro-
ducers are suddenly- able to pass on the
lower costs ini the form of lower prices
and potential buyers have more dispos-
able income so they can afford mome,
and all of sudden you have these
transactions that start o 'curring that
cannot occur today. If that just hap-
pens on the margin with just a small
pemoentage, it can have huge impact
on economic growth.
I think the gentleman from Wis-
oonsin wanted to comment on that.
Mr. RYAN of Wisconsin. I just want-
ed to ask the gentle man a question.
What you are basicafly saying is that
the government actually controls to a
large extent the price level of jobs, of
retirement, of economic activity. The
government through its taxes actually
can control the pri e or the activity of
job growth, investment, people's metire-
'ments, their tak e-hoi me pay. So if we
lower that price, we get more of it. Is
that what you are saying? If we tax
more of it, we get less of it; and if we
tax less of it. we get 'more of it?
Mr. T'OOMEY. That is absolutely' an-
othem way to describe it. Another way
that I tl'ink about it is there is this
barrier between buyers and s eliers, I e-
tween cons umers and producers. The
barrier is the cost imposed by govern-
ment. It is not only taxes. It is regula-
tion, it is tariffs, t is litigation that is
encouraged or tolerated by the govern-
ment, but taxes are the biggest part of
it. That is why it is mnot just a coinci-
dence that when ye lower taxes, we see
economTi growth. It is because e when
we lower taxes, we allow more eco-
nonmio transactions and economic ac-
tivity to take place. That is whyT evemy
time in our history, as the gentleman
front Wisoonsin pointed out, that we
haye had a significant tax reduction,
w hat have we seen without fail? Pros-
perity, economic growth, people get-
ting back to work, people getting a
raise, people having more disposable
income. It h'elps all Americans.
I have on this chart a couple of exam-
ples from our history., We haxe really
only h'ad a few major, sweeping, across-
the-board1 tax relief ills enacted in ouir
Nation's histomy and it was in the 20th
century., We havTe really had three pmior
to what w e did earlier this year. The
T920s was the first. That is not on this
board, but the 1920 tax outs initiated by
Treasury Secretary TM~ellon ushered in
an era of unl elievabie prospemityT in the
twenties. That era started to wane
when taxes w ere raised and a trade Tar
began.
But let us look at some other tax
cuts. Ini the T960s, President Kennedy
had the good sense to realize that y ou
lower taxes, you generate more eco-
imomic output. Suire enough in the T960s,
gross domestic product grew by 50 per-
cent. Staggering growth. The T980s was
the other great tax relief act of theNovember 29, 2001
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United States. Congress. Congressional Record: Proceedings and Debates of the 107th Congress, First Session, Volume 147, Part 17, book, 2001; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc31049/m1/76/: accessed April 30, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.