Thursday, March 22, 2001 -- What business in American would hand out employee bonuses for the next decade based on what they hoped their profits would be? Unfortunately, at the request of President Bush, that is just what the U.S. Congress did when it passed the first piece of the President’s ten year $1.6 trillion tax plan by a vote of 230-198. The Democrats proposed a similar, but smaller plan. I opposed both plans for the same reason: the President has not presented a federal budget for next year.

Both the President’s plan and the Democratic alternative would give the American people well-deserved tax relief. But without an overall budget framework, we do not know how much tax relief we can afford without sacrificing the priorities we all share, protecting Social Security and Medicare benefits, building new schools and hiring teachers, paying our men and women in uniform a decent salary, and helping seniors meet the rising cost of prescription drugs.

Without a budget in place, we have no plan to pay down our national debt. Recent surpluses at the federal level have begun to reduce our national debt but it still stands at $3.4 trillion. That is money the government spent that it didn’t have; money the government borrowed from private sources and will eventually have to pay back. Are we going to use part of the surpluses we are enjoying today to pay down the debt, or are we going to stick our children and grandchildren with the tab?

The President says that based on projected surpluses, we can cut taxes and pay down debt. Well, one thing is certain; the national debt is real money, projected surpluses are just that: projections, that are usually wrong. Remember that 10 years ago we were hearing about deficits “as far as the eye could see.” Now the word “surplus” has replaced deficit. In either case, these budget projections have proven about as accurate as ten-year weather forecasts.

A growing number of states are suffering the consequences of sunny budget forecasts turning into severe revenue shortfalls. In Texas, where then Governor Bush cut taxes by $3 billion, state leaders anticipate a $700 million budget shortfall over the next two years. Texas is just one of 17 states reporting revenue shortfalls in recent months. Here at home, Tennessee state lawmakers are struggling to deal with a nearly $ 400 million shortfall.

These budget shortfalls force states to sacrifice critical priorities to make ends meet. Eleven states have already cut their budgets and another 8 are considering doing so. Governor Musgrove of Mississippi recently announced a $250 million shortfall, and cut the state’s budget by 3 percent. Alabama recently cut state education funding by six percent. South Carolina’s governor plans to cut spending by 15 percent. The state of Washington’s governor is proposing cutting $236 million from social services, health, and prisons. These budget problems have been especially tough on Southern states who depend on sales taxes as the major source of revenue but across the country, states are learning the consequences of overly optimistic budget projections: when the economy slows, vital priorities are sacrificed. We cannot repeat this on a national level. Our national priorities are too important to gamble on money we don’t have and may never collect.

Once we establish a budget framework that sets guidelines for debt reduction, spending priorities, and tax relief, we can look more closely at how to cut the taxes we all agree should be cut. Every American who pays taxes should get tax relief. Unfortunately, the President’s tax plan leaves out 39% of taxpaying Tennessee families - 298,000 families to be exact -- and nearly one in three families nationwide. Those 298,000 Tennessee families get no tax relief because although they rarely owe any federal income tax, they still pay the tax that hits working families the hardest - the payroll tax.

Payroll taxes -- or “FICA” as they appear on people’s pay stubs (for Federal Insurance Contributions Act) -- fund the two biggest federal programs: Social Security and Medicare. Every working American pays 7.65 percent of the first $80,400 of his or her income into payroll taxes. This contribution is matched by all employers. But when employers decide how much it costs to employ someone, they must factor in their share of the payroll tax. The result is that workers pay the other half of the payroll tax in the form of lower wages. When this hidden part of the payroll tax is taken into account, the payroll tax is really a direct 15.3 percent tax of the first $80,400 in income. At last count, eighty percent of American taxpayers actually pay more in payroll taxes than they do in income taxes.

Most Americans need relief from the payroll tax. Any tax cut package should meet two requirements: first, it should fit into a realistic budget framework that meets our priorities and second, it should provide working Americans with payroll tax relief in the form of a monthly or bi-weekly rebate. This would put money back in the pockets of Tennesseans who need it the most and would do more to help immediately reinvigorate consumer confidence than any other policy provide the economy with the jumpstart that it needs today.

We can pay down the debt, cut taxes, save Social Security and Medicare, and meet our national priorities. But these goals can only be achieved in the context of an overall budget. The budget should come first, tax cuts and spending should come second.