As a member of the Senate Finance Committee, I recently crossed party lines to vote with my Republican colleagues for a sensible and realistic tax cut. We are projected to run a $2.9 trillion surplus over the next 10 years, and I strongly believe that we should return part of that money to hard-working Americans.
This tax cut will provide Americans with broad-based tax relief aimed squarely at the middle class. Not only will it encourage Americans to save more for their retirements, it will also encourage Americans to give more generously to charities.
I am proud to have participated in and voted for three budget acts -- in 1990, 1993 and 1997 -- which have radically altered the fiscal condition of the federal government and the debate about how the public's hard-earned tax dollars should be spent. After the enactment of these three budget acts -- particularly the 1993 and 1997 budget acts -- and on account of impressive gains in private-sector productivity and growth, we were able to reverse the deficit trend.
Deficits have continued to shrink since 1994 -- and we were able to celebrate our first unified budget surplus (counting Social Security surpluses) of $70 billion last year. The Congressional Budget Office (CBO) is now projecting surpluses of $2.9 trillion over the next 10 years.
Since 1983 working Americans have been forced to shoulder a disproportionate amount of deficit reduction by paying larger-than-necessary payroll (FICA) taxes. Now they are being asked to shoulder a disproportionate share of debt reduction. I strongly believe that a portion of these surpluses should be returned to the American people.
To put it in another context: If, over the next 10 years, Congress projected a balanced budget and I proposed a $3 trillion tax increase, people would call it ridiculous. To suggest we can't afford to cut income taxes when we are running a $3 trillion surplus is just as ludicrous.
To say that tax cuts stand in the way of needed domestic spending, Medicare and debt relief is also folly. What is standing in the way of debt reduction and a shrinking discretionary spending budget is our refusal to make structural reforms to our entitlement programs.
In 1970 entitlement spending accounted for only 35 percent of federal spending. By 2010, it will account for nearly 70 percent of federal spending. During the same period, discretionary spending will have fallen from 58 percent of spending to 27 percent. Absent structural reforms or massive tax increases, Social Security and Medicare will continue to eat up ever larger percentages of our budget -- at the expense of important investments in our children and our future.
In the Finance Committee last week, I offered an amendment with Sens. John Breau (D-La.), Charles Grassley (R-Iowa), Charles Robb (D-Va.) and Fred Thompson (R-Tenn.) to cut the payroll tax, increase retirement savings and restore permanent solvency to the Social Security program.
This amendment would have provided a $928 billion payroll tax cut to the 80 percent of American families who pay more in payroll taxes than in income taxes. This tax cut would be directed into individual savings accounts for retirement security. Not only does this amendment provide all workers with a massive payroll tax cut, it also substantially expands the ownership of assets in this nation.
Ownership of wealth is essential for everyone to have a shot at the American dream. The payroll tax is the principal burden on savings and wealth creation for working families. Furthermore, this payroll tax cut would still have left room for Medicare reform, an income tax cut, debt reduction and other spending priorities.
While I did vote for the Senate Finance Committee tax bill, I believe that a $500 billion income tax cut is a compromise figure that will leave room to reform and modernize the Social Security and Medicare programs and to invest in important domestic priorities, such as education, defense, veterans and housing.
I agree a compromise is ultimately doable. That's why I intend to join Sens. Breaux, John Chaffee (R-R.I.) and Jim Jeffords (R-Vt.) in proposing a $500 billion income tax cut alternative. While it can easily be argued that the GOP version is too high, it's also as clear the Democratic alternative is too low.
The writer is a Democratic senator from Nebraska.