Published: January 13, 2003
preview / download Budget Chairman Nickles Calls Elimination Of Tax On Dividends “Biggest Challenge”
FT. LEE, N.J. — January 13, 2003 — In an interview this afternoon on CNBC’s “Open Exchange With Tyler Mathisen” the Chairman of the Senate Budget Committee, Don Nickles (R – OK), addressed dividend tax cuts, the marriage penalty and state aid. The following is an official transcript. All references must be sourced, “CNBCs Open Exchange With Tyler Mathisen.”
DATE: January 13, 2003
NETWORK: CNBC
PROGRAM: “CNBCs Open Exchange With Tyler Mathisen”(Mon. – Fri. 2-3 p.m. ET)
TYLER MATHISEN, anchor:
And now to our lead story. Our Balance of Power series on CNBC continues now with the chairman of the Senate Budget Committee, a man at the very epicenter of the debate over the president’s economic plan. Don Nickles of Oklahoma is that man, and we are glad to welcome him now.
Senator Nickles, great of you to join us today. Thank you.
Senator DON NICKLES (Republican, Oklahoma): Thank you, Tyler; happy to join you.
MATHISEN: Well, we’re very glad to have you here. Over the weekend, there seemed to be some more sort of stirrings within the Republican senatorial ranks that the president’s economic plan may be in trouble. Your counterpart, Chairman Grassley, said, quote, “We may not be able to sell it.” Do you agree?
Sen. NICKLES: Well, I think the–the thrust of what the president is trying to do will–will pass. I would expect se–pretty much in size, maybe some amendments. We usually do amend thing in–in the process, both the budget and the tax components. I believe you’re talking about mostly the tax components. But I think we’ll pass a–a positive growth package, one that will help stimulate the economy, one that will help grow the economy. The president, I think, was right in saying we needed a bigger package than originally discussed, the $300 billion package, over a 10-year period of time. That’s not very much if you’re trying to move a $3 trillion–or a $10 trillion-plus economy. And so the president’s put a little on the table. We’ve got a big challenge in Congress. It will probably be it–altered a little bit as it goes through but, hopefully, we’ll end up with a good strong bipartisan package that will help grow the economy.
MATHISEN: Educate us a little bit, Senator. I know that under normal procedures it would take 60 votes to get a project like this passed, but under budget reconciliation rules, there is some openness to getting a–parts of the plan through with just 51 votes, but that presumes that you pass a budget. Do you expect to use that parliamentary maneuver to get more of this president’s plan passed than might otherwise be the case?
Sen. NICKLES: Well, one, it takes 50 votes, 50 plus the vice president, to pass a budget. I hope that we’ll have more than that. I hope that we’ll have bipartisan support in the budget, and sometimes the budget does give directions to committees sometimes ca–or it’s called reconciliation to pass certain elements of the package. We’ll be considering that. We just now have the–the composition of the committee put together, and–and–but we will be meeting, and–and there’s a good likelihood that we’ll use reconciliation process to pass the–the tax components, the growth components of the package. That remains to be seen.
We’ll be negotiating that when–when–when we discuss that with all the senators on the Budget Committee and on the Finance Committee. I happen to serve on both. But I–it’s my hope that we can pass a positive package that will really grow the economy, help bring deficits down, not–not increasing or ever increasing. We need to stimulate the economy to do that. Revenues have fallen dramatically. Last year they fell by 7 percent. The year before that, by 2 percent. That’s because of the economic growth or–the economic–really the recession, primarily attributable to the loss in the market. So we need to turn that around. The president has proposed several things, I think, that would help the economy grow, help the markets grow. And so we–we need to be closing the gap on the fiscal side, the deficit gap, mainly, I think, by growing the economy.
MATHISEN: Can you keep all of the Republican members in line and voting for this plan? As you certainly well know, about a half dozen, maybe eight Republicans have voiced concerns, including Senator McCain, Senator Chafee, Senator Voinovich, Senator DeWine. Can you keep all of them in line and, ultimately, will they all vote for this plan?
Sen. NICKLES: Kee–keeping all senators in line is almost an impossible task. But we have a–a very good group of senators that I have the pleasure of serving with. And–and several one of them, probably, have some adjustments or some changes, and–and both on the budget and–and Budget Committee and in the Finance Committee. I look forward to working with them and I’m optimistic that we’ll pass a good growth-oriented package. The president has laid out a good agenda for us. We’ll probably adopt–maybe modify it a little bit, but my guess is we’ll pass a positive package later this year.
MATHISEN: Let’s talk about the dividend tax cut. As you point out, you’re both on the Finance Committee and chair the Budget Committee. The dividend tax cut is–or elimination of taxes on dividends is really the centerpiece of this. It is the biggest ticket item in this $674 billion, or thereabouts, package. Do you think that the total elimination of taxes on dividends will be a reality in this time next year?
Sen. NICKLES: It’s probably going to be the biggest challenge we have as far as the economic package. But it’s certainly one that makes sense. It’s–it’s hardly right to say we’re going to have double taxation on–on anything but much less dividends. If you want to encourage people to invest, why tax it twice? It’s a real discouragement to investment. It’s rea–punishes, penalizes investors. It makes really no economic sense. Talk–talk to any economist, say, `Does it really make sense to have the corporations pay 35 percent, and then have individuals pay 30 percent tor 35 percent or even 38 percent tax in addition to that?’ That’s a tax rate of 60 percent, 65 percent, 70 percent. That’s–just doesn’t make economic sense.
MATHISEN: Do you–you–you’ve made a very eloquent case for doing just that. Do you think that the tax cut will happen or is this the area where compromise will really take told?
Sen. NICKLES: Well, there’s likely to be some compromise. Some people have said, `Well, let’s have a 50 percent exclusion.’ I think Senator Breaux will be on later, and he talked about exempting the first $500 in dividend income.
There’s different ways of doing it. I used to run a corporation. I think the best way to do it would be to allow corporations to deduct dividends just like they deduct compensation, just like they deduct other–but that costs a little bit more than even the president’s proposal so–there’s different ways of doing it, all of which I think would have a positive impact on the economy…
MATHISEN: Right.
Sen. NICKLES: …and on investment, and maybe restore some sanity to–to the–the tax code. I hope that whatever we do makes good sense economically, it makes good sense for the tax code in the long term. Double taxation does not. You can get around that by allowing corporations to deduct it or allow individuals to deduct it or maybe some percentage or maybe have a–a rate that’s…
MATHISEN: Right.
Sen. NICKLES: …comparable to capital gains, a 20 percent rate. There’s lots of different ways, I think, that would help take giant steps towards encouraging investment.
MATHISEN: Like to get your thoughts on two more quick items very important, indeed, to a–a tremendous number of taxpayers. One, do you think that the mar–so-called marriage penalty will be eliminated as a part of this package? And, number two, when all is said and done, will there be more aid to the states as part of an economic growth plan?
Sen. NICKLES: Well, a couple of comments on–one on–on the marriage penalty relief. I hope that we can make that immediate. We passed it l–in–in ’01. But it takes several years to get it done. If we do that, that’s the best thing that you could do for middle-income married couples. It greatly expands the 15 percent rate so you’re not–just because you’re married you don’t find yourself in a 27 percent rate where as you’d be a 15 percent rate as–as individuals. So that’s very positive. It’s worth over $1,000 for a marriage couple–married couple that has combined income less than $54,000. So it’s good middle-income tax relief. My guess is that will be–we will be successful in getting that enacted. And then the proposals that–Hey, can we bail out the states? I–I have serious reservations about that. For us just to go into further debt so the states won’t be in–in–have some of their fiscal problems, I–I’m not sure. I–I–I know there’s a lot of proposals. There’s a lot of ideas for us to spend federal money, but I’m–I want to be kind of cautious before we–we make those kind of open-ended commitments.
MATHISEN: Senator Nickles, thank you so much for spending so much time with us today.
Sen. NICKLES: You bet. Thank you.
MATHISEN: Senator Don Nickles, chairman of the Senate Budget Committee, and a man really at the center of it all in Washington.
