Floor Statements

Mr. MCCAIN. Mr. President, I voted against cloture on this measure yesterday because it is loaded with corporate pork and special interest tax provisions. This conference report, at 633 pages and $148 billion, serves as a sad example of the way business is done around here. The special interests continue to rule at the expense of the hardworking American taxpayer.

   The original intent of this legislation was laudable. Earlier this year, we missed a golden opportunity to pass a good, clean bill that would have brought us back into compliance with World Trade Organization, WTO, agreements and stop the burdensome tariffs now imposed on our manufacturers. Simply repealing the extraterritorial income, ETI, exemption tax benefit for exports would have saved $50 billion. Instead, because this was known to be a ``must pass'' piece of legislation, it was loaded up with billions and billions of dollars in tax breaks for big corporations and special interests of all types. I recognize the need to pass legislation to bring the United States back into compliance with the WTO, and I am more than willing to support a bill that accomplishes that goal. Unfortunately this legislation's worthy purpose has taken a back seat to a host of special interest tax provision add-ons and a big buyout for tobacco farmers.

   In an editorial on the issue, The Washington Times, noted that ``the ideal solution would have been a quick, simple repeal of FSC-ETI, which is bad economic policy in any case. The $50 billion in savings could then have been used to streamline and simplify the corporate tax code.'' I couldn't agree more. The Tax Code is far too complex and is in dire need of reform. While campaigning in recent months, the President has stated, with tremendous approval from every audience, that reforming and simplifying the Tax Code would be one of the main objectives of his second term. I will support him in that effort, and I encourage him to take the first step in that reform by vetoing this bill.

    We have a deficit that is quickly approaching $500 billion--that is half of a trillion dollars. The proponents of this bill say that it's ``revenue neutral.'' Well, I doubt that, and I am not alone in my skepticism. The Center for Budget and Policy Priorities has figured that the bill would actually cost $80 billion if the temporary tax cuts are extended for the full 10 years. Sadly, I have no doubt that those extensions will happen--because we simply don't say no to anyone anymore. We are told that this bill is offset by closing tax loopholes, and I will be the first person to say that I support closing those loopholes, but can anyone explain to me the rationale behind closing loopholes in order to raise revenues to open more loopholes? It is remarkable. It makes no sense.

   As I have said many times in the past, we need to start making some very tough decisions around here about our fiscal future. We need to be thinking about the future of America and the future generations who are going to be paying the tab for our continued spending. It is simply not fiscally responsible for us to continue to load up bills with good deals for special interests and their lobbyists. We have had ample opportunities to tighten our belts in this town in recent years, and we have taken a pass each and every time. We can't put off the inevitable any longer.

   Here is the stark reality of our fiscal situation. According to the General Accounting Office, the unfunded Federal financial burden, such as public debt, future Social Security, Medicare, and Medicaid payments, totals more than $40 trillion or $140,000 per man, woman and child. To put this in perspective, the average mortgage, which is often a family's largest liability, is only $124,000--and that is often borne by the family breadwinners, not the children too. Instead of fixing the problem, and fixing it will not be easy, we only succeeded in making it bigger, more unstable, more complicated, and much, much more expensive.

   The Committee for Economic Development, the Concord Coalition, and the Center on Budget and Policy Priorities jointly stated that, ``without a change in current (fiscal) policies, the federal government can expect to run a cumulative deficit of $5 trillion over the next 10 years.'' They also stated that, ``after the baby boom generation starts to retire in 2008, the combination of demographic pressures and rising health care costs will result in the costs of Medicare, Medicaid and Social Security growing faster than the economy. We project that by the time today's newborns reach 40 years of age, the cost of these three programs as a percentage of the economy will more than double--from 8.5 percent of the GDP to over 17 percent.''

   Additionally, the Congressional Budget Office has issued warnings about the dangers that lie ahead if we continue to spend in this manner. In a report issued at the beginning of the year, CBO stated that, because of rising health care costs and an aging population, ``spending on entitlement programs--especially Medicare, Medicaid and Social Security--will claim a sharply increasing share of the nation's economic output over the coming decades.'' The report went on to say that, ``unless taxation reaches levels that are unprecedented in the United States, current spending policies will probably be financially unsustainable over the next 50 years. An ever-growing burden of federal debt held by the public would have a corrosive ..... effect on the economy.''

   So what do we do when we are faced with these problems? We pass a tax bill that is loaded with corporate pork.

   This conference report is called the JOBS Act, but I think we should call it what it truly is: ``the corporate tax haven act.'' I doubt it will create any new jobs but it will certainly allow a few lucky folks, who have extremely well paying jobs, to make even more at the expense of the taxpayers. I'm sure the energy corporations are pleased that they won't have to wait for the energy bill to add to their over-flowing coffers.

   Yesterday we passed a bill to address the issue of FDA regulation of tobacco products. Essentially, the consideration of a free standing bill to address this issue at this stage means nothing. We're supposed to be appreciative that the FDA bill was taken up and passed quickly--we all know that passing a controversial Senate bill on a Sunday at the end of the session is meaningless. The House will not move the bill, and, even if by some miracle they did, there certainly would be no conference held. This is a sham--plain and simple. The Senate had

   already addressed the issue of FDA regulation of tobacco. Sadly, the conferees on the FSC/ETI bill stripped that provision from this conference report.

   What the conferees did was unconscionable. They turned their backs on the health of our nation's youth and opted to strike the DeWine-Kennedy amendment that would have granted authority to the Food and Drug Administration, FDA, to regulate tobacco products. It is a very sad day for public health. They have used the FDA tobacco authority language as a linchpin to effectuate the passage of the underlying tax bill. It was nothing more than a sweetener to them and now that it is no longer of use, the conferees have discarded the language, and with it, who knows how many lives.

   In striking this historically important provision, the conferees ignored the public and medical health community, child health advocates, and registered voters who in a recent poll overwhelmingly, 69 percent favor FDA authority over tobacco. Even in the six leading tobacco growing states, support for FDA authority is above 65 percent.

   Without FDA authority over tobacco, there will be no regulation of tobacco marketing, no information disclosure such as nicotine and carcinogenic content, no requirement that can force the tobacco industry to remove harmful components from their products, and no pre-market approval of ``new products'' marketed as ``safer cigarettes.''

   Tobacco-related illnesses and deaths in this country have reached epidemic proportions, but according to the Surgeon General, tobacco use is ``the single most preventable cause of death and disease in our society.'' The Surgeon General estimated 400,000 U.S. citizens lose their lives each year as a result of a smoking-related illness. This figure translates into approximately 1,200 smoking-related deaths per day. This loss of life has a significant economic impact accounting for an estimated $75 billion per year in health care expenses. Most tragically, however, the Surgeon General estimates that approximately 2,000 kids start smoking every single day, and that one third of them will die from a smoking-related illness.

   I thank Senators DEWINE and KENNEDY for their commitment to our Nation's youth, and I am certain that they will continue to fight for FDA authority over tobacco because it is simply too important not to continue to fight. We must protect the public health and hold the tobacco industry accountable for the production and marketing of its products, particularly as their business practices affect children, but I fear we have lost yet another opportunity.

   Not only have the conferees jeopardized the health of our Nation's youth by striking the FDA authority provisions of this bill, they left provisions that would eliminate the quota system and channel $10 billion--into the pockets of tobacco farmers--many of whom no longer even farm tobacco--and disguised the money as a buyout to encourage such ``farmers'' to shift their crops to something other than tobacco. According to the Wall Street Journal, among these ``tobacco farmers'' who would benefit from a tobacco buyout are Larry Flynt and his brother, who admittedly abandoned the ``blood, sweat, and tears'' of the tobacco business to pursue pornography.

   I fear that the conferees have failed to realize that, by not setting domestic production restrictions, and not restricting new market entrants from farming tobacco, they may be creating new opportunities for more tobacco farming. In doing so, they create the possibility that a greater supply of tobacco will result in reduced prices thereby making tobacco products more accessible to kids. Studies have shown that increases in the cost of cigarettes directly correlate to reduced youth smoking rates. Greater youth accessibility to tobacco products coupled with a lack of FDA authority over the marketing and information disclosure of these cheaper products is the most invidious combination possible. By turning their backs on FDA tobacco authority while simultaneously making it easier to grow and sell tobacco, the conferees may be exposing kids--not to mention adults--to an even greater health risk than they are today.

   As if the lack of FDA language wasn't bad enough, let me go through some of the other ridiculous items contained in this conference report.

   Many provisions in this bill remind me of the golden oldies we saw in the energy bill. One of the more generous tax breaks in this bill is a creative provision that allows energy companies to reclassify energy production as a manufactured good in order to qualify for potentially tens of billions of dollars in new tax deductions. The manufacturing tax deduction is currently available only to traditional manufacturing industries as an incentive for job creation. While this change in the tax code may not create manufacturing jobs, it does create a tax balloon, which increases to a maximum of 9 percent of a company's production income after 2009. The total estimated cost of this golden parachute is $76.5 billion. Other industries that will now be considered to be ``manufacturers'' are movie studios, real estate development, and construction companies. But the greatest share of this tax break will go to the oil and gas industry and electric utility companies.

   Fear not, not all of the largess goes to oil and gas companies. There are equal opportunities for other corporate and special interests to make profits at the expense of the taxpayers. An article in the Wall Street Journal on October 6, refers to the legislation as ``a trove of obscure breaks and perks'' and identifies four companies in Houston that were singled out for special treatment. These companies recently changed their addresses to the Cayman Islands and Bermuda when the Senate proposed a retroactive crackdown on businesses that incorporate offshore to shave their U.S. tax bills. Fortunately for them, the provision in this bill is no longer retroactive. Not only does the bill allow these companies to slip comfortably away, but others contemplating such actions will be heartened by the fact that the bill doesn't include a provision that would have supported Federal judges and the IRS in bringing companies that indulge in these improper tax shelters to justice.

   This bill also contains a tax credit totaling more than $2 billion over 9 years for industries generating electricity from alternative fuel sources. Let me be clear that I support clean renewable energy technologies as a means to reduce greenhouse gas emissions and increase energy independence, but most of these subsidized technologies aren't clean. No matter how you look at it, chicken droppings simply are not a clean alternative fuel. Just how, exactly, does the public benefit from the subsidies provided for the burning of municipal trash and poultry waste, both which create significant air pollution?

   The most outrageous provision in this section could be easily missed. It defines ``refined'' coal as a qualifying renewable resource. According to the Tax Code, refined coal is just another name for synthetic fuel. I would be greatly relieved if my colleagues could document that this is not the case, but it appears to me that the synthetic fuel credit has been snuck in here along with so-called renewable sources of electricity.

   I have spoken before about the synthetic fuel tax credit scam that was revealed by Time reporters in October 2003. It is shameful for Congress to perpetuate this expensive hoax, which has cost taxpayers $4 billion since 1999. The IRS followed up the Time report with a November 2003 bulletin stating, ``The Service believes that the processes approved under its long standing ruling (that a synthetic fuel must differ significantly in chemical composition from the substance used to produce it) do not produce the level of chemical change required.'' Incredibly, it goes on to say, ``Nevertheless, the Service continues to recognize that many taxpayers and their investors have relied on its long-standing ruling to make investments.'' So, basically, we should just ignore the fact that chemical change isn't occurring. They should have just said that if Congress wants to continue this shameful scam, then the IRS will let it pass.

   The original intent of the synthetic fuels tax credit was not sheer folly. It is just that, for a variety of reasons, a synthetic fuel industry never materialized in the United States. Canada invested heavily in synthetic fuel production over the past decades and sells millions of barrels of synthetic crude oil to the United States annually. The only evidence of a U.S. synthetic fuel industry is this gigantic tax shelter. One doesn't need to be in the oil or gas business to strike it rich with synthetic fuels either--one of the greatest beneficiaries of this tax shelter--and that is all that it is--a tax shelter, is a very profitable hotel chain, Marriott. This is an equal opportunity bill for wealthy corporate interests.

   Wait, we can't forget ethanol! $77 million from this bill will go to ethanol manufacturers. No tax break bill would be complete without subsidies for this synthetic fuel, ethanol gasohol, created and perpetuated by Congress. And it all starts with corn. Ten percent of the corn grown in this country is used to produce ethanol. Of course, corn producers, like producers of other major crops, receive farm income and price supports. In the 107th Congress, this body passed the Farm bill which appropriated more than $26 billion in direct assistance to corn-growers over 6 years. That is an average of $4.3 billion in direct subsidies each year just to corn-growers!

   In addition to the subsidies going primarily to agribusiness corporations, the public pays for ethanol in other ways as well. More energy is used in the production of ethanol than it provides to consumers, it increases the per gallon cost of gasoline, and it results in environmental degradation. Finally, to add to all these insults, ethanol subsidies increase the public's grocery costs. Subsidized corn results in higher prices for meat, milk, and eggs. This happens because about 70 percent of corn grain is fed to livestock and poultry in the U.S. Increasing ethanol production further inflates corn prices and subsequently food prices.

   So the American public provides billions to create this artificial market for ethanol, and then pays more for their groceries and what do they get in return? I will tell you

   what they get in return--absolutely nothing. No reduction in petroleum fuel use. No reduction in air pollution. There is one reduction, however, consumers are rewarded with--reduced fuel economy. More gasohol must be used to go the same distance as conventional fuel. So no one can honestly claim that subsidizing ethanol is in the public interest or an element of sound national energy policy.

   Another objectionable provision is the ``green'' bond program. The original form of this provision prompted the ``hooters'' part of my ``hooters and polluters'' reference to the energy bill. Well, the hooters is gone, but this program is still top-heavy with tax breaks--$231 million for the real estate corporations that are going to develop these projects. With or without a hooters, I don't see how it's in the public's interest to pay for enormous commercial facilities in three or four States. These projects all sound like enterprises that can stand or fall on their own--they don't need the taxpayers throughout the country giving them a big boost.

   Let me give you a sense of the ``public works'' that benefit from this provision:

   Destiny USA in Syracuse, NY is an entertainment and retail development touted as an economic stimulus for upstate New York. The primary developer has committed to 3.2 million square feet of space with a price of close to $700 per square foot. They estimated these green bonds would save them close to $100 million.

   Belmar in Lakewood, CO is a $500 million redevelopment of a mall, which will include many restaurants, clothing stores, shops, and office space.

   Atlantic Station in Atlanta GA is a 138-acre redevelopment of a former steel mill which will include 12 million square feet of retail, office, hotel space, and parks.

   Riverwalk Development in Shreveport, LA, minus the Hooters, this $150 million project will feature stores, restaurants, movie theaters, hotels, and entertainment spots.

   These all sound like grand, money-making ventures to me--they don't need taxpayer support. Pork called ``green bonds'' is still pork.

   Some of the other notable giveaways in this grab bag of corporate tax delights are:

   The ``hummer in every home'' provision is still intact. It is just not quite as expensive as it has been the past. This provision extends the existing $100,000 tax deduction for the purchase of vehicles weighing over 6,000 pounds. The original intent of this deduction was to benefit farmers and other business owners in need of heavy-duty vehicles. Unfortunately, some individuals unscrupulously seized on this loophole in order to purchase Hummers, Escalades and other expensive, gas guzzling SUVs. Thankfully, due to the insistence of Senator Nickles, those purchasing luxury sport utility vehicles can no longer take advantage of the $100,000 deduction. However, they can still take a deduction of up to $25,000. This could cost our Treasury $350 million for every 100,000 taxpayers who take advantage of this loophole. Again, it is not as bad as it used to be, but it is still too expensive and should be eliminated. The cost of foreign oil is about $53 a barrel. Shouldn't we, as a practical matter, be encouraging the use of smaller, more fuel efficient vehicles?

   There is a tax break for ``small refiners'' of oil to improve clean air standards. Unfortunately, ``small'' is defined as those with refining capacity below 205,000 barrels per day, so some of the large oil companies can get in on this one too.

   Three of the world's richest energy companies--BP, Exxon Mobil, and Conoco Phillips--stand to be the primary recipients of two tax breaks, totaling $445 million, for building an Alaskan natural gas pipeline and for processing natural gas for the project. Considering that these three companies have enjoyed after-tax profits of $95 billion since 2001, the wealthy shareholders of these companies--not taxpayers--should foot this bill. In addition, these three companies are allowed to depreciate their natural gas pipeline over seven years, costing taxpayers another $150 million.

   There is $27 million for dog and horse race tracks to help lure more foreigners to gamble at U.S. horse and dog racing facilities; $995 million for the treatment of aircraft leasing and shipping income. This provision would provide a tax exemption on income derived from an aircraft or vessel leasing business.

   There is $28 million for a cruise ship tax break. This provision would allow the cruise industry to delay paying taxes on airplane tickets, hotels, and other excursions it sells in the United States. The delay would save the Carnival Corp. $15 million, and Royal Carribean would save anywhere from $8 million to $10 million.

   There is $9 million for a tax break on archery products; $11 million for a provision that would reduce the excise tax on fishing tackle boxes; $44 million for the importers of Chinese ceiling fans; $4 million to repeal the excise tax on sonar devices that are used for finding fish; $247 million for a provision that is designed to help the producers of small jets and planes, 60% of which are built in Kansas. Lear Jet and Cessna benefit greatly from this provision; $27 million for providing tax-free treatment if farmers replace livestock because of weather related conditions; $101 million for NASCAR track owners; $57 million for a tax break for shipping companies; $501 million for a tax credit for the maintenance of railway tracks; $336 million for a tax break for Hollywood studios; $234 million for a tax break for the producers and marketers of alcoholic beverages; and $495 million for Naval shipbuilders.

   Where is it going to end? We have to face the facts, and one fact is that we can't continue to cater to wealthy corporate special interests any longer. The American people won't stand for it, and they shouldn't--they deserve better treatment from us. I strongly encourage my colleagues to vote against this conference report.