[Sorry, the video for this story has expired, but you can still read the transcript below. ]
ROBIN MACNEIL: Sen. Rockefeller, you Democrats have made no secret of your opposition to this family tax credit. Explain why.
SEN. JAY ROCKEFELLER, (D) West Virginia: (Capitol Hill) The child tax credit?
ROBIN MACNEIL: Yes.
SEN. ROCKEFELLER: The reason–my basic reason–is because I think it fits in with so many of the other Republican tax break suggestions. It’s not available to so many. 40 percent of the children in America would not be eligible for the full tax credit, and that’s because it’s something called nonrefundable, and that means that that’s very complicated but it has to do with let’s say a family that’s making $20,000 a year, has four children, they may be paying $600 in taxes, and that’s all they’d get, as opposed to a family that got–had four children, would get $500 per child, so they’d get $2,000. And once again, as in everything, it’s–Republicans tend to tilt it towards those that have money and away from those that are working hard and don’t have money.
ROBIN MACNEIL: Sen. Nickles, how do you respond to that?
SEN. DON NICKLES, (R) Oklahoma: (Capitol Hill) Well, Robin, I take issue with that. It is a tax cut for taxpayers; it’s family-friendly. It basically says, if you have kids and if you’re an individual making $75,000 or less or families less than $110,000, couples, joint return payers, that you get a $500 tax credit for each child under the age of 18. So it’s family-friendly. It’s a tax cut for taxpayers, and really what we’re trying to do is tell families that we think that they should be able to spend money better than Washington, D.C.. We’re trying to slow the rate of growth in federal spending, which we’re doing through our budget package, so-called reconciliation package, and we’re also trying to say to families we think you should be able to keep some of your own money, instead of us taking more and more money. My good friend and colleague, Sen. Rockefeller, wants to use the tax code to redistribute income and say, well, let’s write checks to individuals. We’re not saying that. We’re just saying we’re going to eliminate the tax liability for the family that has a $20,000 income and maybe that a family of four with income less than $30,000 they would have zero federal income tax liability. So we’re giving them a real break. We’re saying you don’t have to pay taxes; you take care of your families first.
ROBIN MACNEIL: Sen. Rockefeller, what is wrong with a tax cut for taxpayers?
SEN. ROCKEFELLER: There’s nothing wrong with it, and it is better than not having anything at all. I mean, the National Commission on Children, which I chaired for four years, came out with a, with a nonrefundable–a refundable tax credit for children, and but we made sure that, you know, that everybody got to have that $500 per child.
ROBIN MACNEIL: Just so that I understand it, a refundable tax credit of $500 per child would mean that even if you didn’t earn enough to pay that much in income tax for each child, you will still get the $500?
SEN. ROCKEFELLER: You would get the $500.
ROBIN MACNEIL: And that’s called a refundable tax credit.
SEN. ROCKEFELLER: That’s a refundable tax credit. The nonrefundable is if you don’t make enough income tax so that what you’re paying doesn’t get you that break, then you don’t–
ROBIN MACNEIL: So would you support it if it were refundable?
SEN. ROCKEFELLER: I would come–yes, I would.
ROBIN MACNEIL: And Sen. Nickles, why don’t Republicans make it refundable and get all the Democrats voting with you?
SEN. NICKLES: Something tells me, Robin, they probably wouldn’t support the final package anyway, but really, it should be a tax cut for taxpayers, not another federal excuse to redistribute income. It shouldn’t be a welfare program.
ROBIN MACNEIL: You think a refundable tax plan would be simply a way of redistributing income?
SEN. NICKLES: Well, no question about it. You’re going to have Uncle Sam writing checks. That’s what we do right now under the so-called “earned income tax program.” We write checks. 85 percent of that program is Uncle Sam writing checks up to $3,100 right now, so my point being we want to have a tax cut for taxpayers for families. We are family-friendly. We’ve designed this package, this $245 billion package, to where about 2/3 of it goes directly to families–middle income and low income families, in some cases totally eliminating their income tax liability. So we’re trying to be family-friendly. We’re trying to also do some things in the package that would encourage savings investment, create jobs, make the United States more competitive in, in world markets.
SEN. ROCKEFELLER: Robin, can I comment on the earned income tax credit?
ROBIN MACNEIL: Right.
SEN. ROCKEFELLER: Because that’s a classic. The earned income–take each word–the earned income tax credit–this is the working poor. And what the Republican tax package does is cut $43 billion out of the earned income tax credit to help pay for capital gains breaks for the wealthy and other programs of that sort. But you cannot say that the earned income tax credit is, is a redistribution of wealth if at the same time you’re saying that if you play by the rules in America, if you stay off welfare, if a family earning just above the welfare limit, which is earning income, but they’re declining Medicaid, they’re declining the chance to have their children on public medical assistance, that they should be able to keep more of what they earn. That is a good thing. The Republicans are saying, no, that’s not a good thing; that’s redistribution of income.
ROBIN MACNEIL: Sen. Nickles, may I just ask the question about that earned income tax credit, although it’s not part of this bill before your committee, it is true that other parts of the Republican budget plan would reduce the money–
SEN. NICKLES: That’s true.
ROBIN MACNEIL: –so the earned income tax credit would not apply to as many people or would not be as generous?l
SEN. NICKLES: Well, that is true, and we have to. If you’re ever going to balance the budget, you have to curb the growth of entitlements. This is the fastest growing entitlement in government. Robin, this is the program that cost $2 billion in 1986 cost $23 billion in ’95. It’s exploded in cost. The maximum benefit today is $3100. In 1990, it was $950. So it’s more than tripled in just the last few years and scheduled to continue to increase, and these cuts that Jay was talking about, we allow the maximum benefit to continue to increase. It goes from $3100 today under our proposal, still goes up to $3800. We just reduce the rate of growth in the program because it is a cash outlay program. 85 percent of the benefits under this program is Uncle Sam writing a check. It’s what Jay would call a refundable tax credit. It’s a negative income tax, and it’s exploding in cost. So we say let’s curtain its growth. It still grows under our proposal. It just doesn’t grow quite as fast.
SEN. ROCKEFELLER: But don’t you want to give people a chance to–encouragement to stay off of welfare?
SEN. NICKLES: Well, I don’t see this–as a matter of fact, I would say in many cases the earned income tax credit is a great name but is mis-titled. It’s income redistribution. It’s an exploding entitlement program, and in many cases, it’s a disincentive to work, because a lot of people want to have their income at a certain level, twelve, thirteen, fourteen, fifteen thousand dollars, so they can maximize their credit, because right now, Uncle Sam says hey, if you have your income in this range with a couple of kids, we’ll write you a check for $3100.
ROBIN MACNEIL: Sen. Nickles, doesn’t it provide the Democrats with some justification or ammunition for arguing that the Republican tax cut plan is taking from poorer members of the, of the American community so as to help less poor or better off?
SEN. NICKLES: No. I totally disagree. If you look at our tax package, you’re going to find, Robin, that 2/3 of this package are very family friendly. It’s a tax cut for taxpayers. It’s not a scheme to redistribute wealth. It’s a tax cut for taxpayers, and many cases, for low income families, middle income families. We’re going to eliminate the federal income tax liability, totally eliminate it, so they won’t have to pay taxes, but we shouldn’t be using the tax code as just another excuse or method to rob Peter to pay Paul. In many cases, that hasn’t worked. It’s had disincentives for work. We need to change that. We’re trying to change it.
ROBIN MACNEIL: Senator, back to you, Sen. Rockefeller, what is your objection to the other main part of this proposal, which is to lower capital gains tax?
SEN. ROCKEFELLER: My objection to it is that if you spend your time and your money in investment and you get your income through investment as opposed through let’s say working in a, in a grocery store, working at day care center, working at a steel factory, something of that sort, you can’t–you’re not going to have capital gains. And, in fact, in the Republican proposal, 28 billion of the $33 billion in, in capital gains tax reduction which goes to individuals goes to individuals who are making $350,000 or more. And I have fundamental objections, because I think that is income redistribution, it’s just done in the classic Republican tradition of taking care of their wealthier friends, while shutting out folks who just can’t avail themselves of that kind of opportunity.
ROBIN MACNEIL: Senator Nickles, what is the purpose of the, of the–of lowering the capital gains tax cut–tax?
SEN. NICKLES: Well, Robin, it is two- or three-fold. One, history has proven every time we’ve lowered capital gains taxes, we’ve had an increase in revenues to the federal government. Now, some people want to demagogue that, but John Kennedy’s done it. Every time it’s happened revenues to the federal government have increased, because capital gains tax is really a tax on a financial transaction. And if somebody wants to move assets–and Jay mentioned, well, this is going to help the wealthy, but it is going to help the economy. It’s going to help create jobs. It’s going to create incentives for people to invest and to save and create jobs, and so this is a very positive thing that’s going to be lifting a lot of people economically, and it’s not just the wealthy. This is–we cut the capital gains rate for all individuals. Low income people that pay 15 percent tax, if they are selling a piece of property, maybe it’s a farm, maybe it’s a little equipment that they have or whatever, they would pay a capital gains tax of 7 1/2 percent. So we–we make this tax cut really to, to say we don’t want the federal government to be going in and punishing investment. And the United States has one of the highest tax rates on capital gains of any of our industrialized competitors, makes us less competitive. We need to encourage in savings. We’re still saying that 2/3 of this tax cut is going to go directly towards low and middle income families, but we’re taking 1/3 of it and saying let’s create some jobs and savings and invest.
ROBIN MACNEIL: Sen. Rockefeller, with the votes in the committee the way it is, the Finance Committee, should we assume that this proposal is going to go through, the next stage?
SEN. ROCKEFELLER: I’m afraid to say to you, Robin, two days before your final day, that that is the case. And it’ll probably go through on your final day.
SEN. NICKLES: Well, Robin, we want to give you a special going-away present–
ROBIN MACNEIL: Oh, I see, okay. Well, thank you very much.
SEN. NICKLES: –and pass a very good tax bill.
ROBIN MACNEIL: Thank you, Senators.