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USER FEES, REVENUE PROPOSALS CONTAINED IN PRESIDENT REAGAN'S 1986 BUDGET, AND OTHER REVENUE MEASURES

WEDNESDAY, JUNE 19, 1985

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, DC. The committee met, pursuant to call, at 9:10 a.m., in room 1100, Longworth House Office Building, Hon. Dan Rostenkowski (chairman of the committee) presiding. [The press release announcing the hearing follows:

[For immediate release, Thursday, June 6, 1985)

THE HONORABLE DAN ROSTENKOWSKI (D., ILL.), CHAIRMAN, COMMITTEE ON WAYS

AND MEANS, U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES A HEARING ON USER FEES, REVENUE PROPOSALS CONTAINED IN PRESIDENT REAGAN's 1986 BUDGET, AND OTHER REVENUE ISSUES

The Honorable Dan Rostenkowski (D., Ill.), Chairman of the Committee on Ways and Means, U.S. House of Representatives, today announced that the Committee will hold a public hearing on the user fee proposals, certain of the other revenue increase proposals contained in President Reagan's Budget for Fiscal Year 1986, and other revenue issues. Many of these proposed revenue increases are also included in the First Budget Resolution for Fiscal Year 1986 as passed either by the Senate or the House. The hearing will be held on Wednesday, June 19, 1985, and, if necessary, will continue on the morning of Thursday, June 20, 1985, beginning at 9:00 a.m. each day in the Committee's main hearing room, 1100 Longworth House Office Building

In announcing this hearing, Chairman Rostenkowski stated, “The President's proposed budget for fiscal year 1986 includes several selective revenue increases. Many of these are also contained in the compromise budget developed by the President and Senate Republicans or in the budget recently passed by the House. It is important for the Committee on Ways and Means to thoroughly review these proposals as it prepares to consider legislative initiatives relating to efforts to reduce the fiscal year 1986 budget deficit.'

“In addition, user fees have been multiplying as a means of revenue raising over the last several years. It is often difficult to distinguish between taxes and fees for services. For example, our current highway system has been financed with charges clearly structured as excise taxes imposed on the users of highways. It is important for the Committee on Ways and Means to receive information to help it to distinguish when the user charge should be implemented through an excise tax and those situations where the charge should be structured in another fashion.' The revenue proposals upon which the Committee invites testimony include:

1. BLACK LUNG DISABILITY TRUST FUND Under present law, a manufacturers' excise tax is imposed on domestically mined coal (other than lignite) which is sold or used by the producers. Amounts equal to the revenues from this excise tax are automatically appropriated to the Black Lung Disability Trust Fund. The President's budget proposes temporary increases in the excise tax on coal.

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2. PENSION BENEFIT GUARANTY CORPORATION FUND The President's budget requests an increase in the premium that single-employer pension plans are required to pay the Pension Benefit Guaranty Corporation from $2.60 to $7.50 per participant per year.

3. CUSTOMS SERVICE FEES

The President's budget proposes imposition of user fees on several Customs services provided to identifiable commercial and processing operations. These fees would be designed to cover the cost of these services to the traveling and importing public.

4. INTERNAL REVENUE SERVICE FEES

The President's budget proposes establishment of Internal Revenue Service user fees for the determination of the tax status of pension funds and tax-exempt organizations and for “private letter rulings” (which clarify the IRS position in certain unprecedented tax situations).

5. SOCIAL SECURITY TAX DEPOSITS

The President's budget would require subdivisions of State governments to be responsible for making their own timely social security tax deposits. Also, State and local governments would be required to conform to the same deposit schedule subject to the same interest rate as private employers.

6. RAILROAD RETIREMENT BENEFITS

Under the President's budget, those tier I Railroad Retirement benefits which are not identical to social security

benefits would be taxed under the rules that apply to all other payments under the Railroad Retirement system.

7. MISCELLANEOUS USER FEES a. Coast Guard Fees—The President's budget proposes a levy on certain services to commercial mariners and recreational boaters that are currently performed freeof charge. The President's budget proposes to exempt search and rescue missions from this fee.

b. Inland Waterways Trust Fund-Under present law, revenue derived from taxes imposed on fuel used in vessels in commercial waterway transportation is deposited into the Inland Waterways Trust Fund. The President's budget anticipates legislation to provide and permanently appropriate additional receipts based on waterway user fees.

c. Water Resource Development Projects—The President's budget anticipates that new water resource development projects will be financed in part by increased contributions from non-Federal interests and user fees. The budget summary anticipates legislation to recover Army Corps of Engineers expenses for the nation's harbors.

The Committee notes that its jurisdiction under House rules includes “revenue measures generally.” Thus, the Committee invites testimony on these miscellaneous user fees to the extent they affect the revenue jurisdiction of this Committee.

8. CIGARETTE EXCISE TAX

Under present law, the cigarette excise tax is scheduled to be reduced from 16 cents per pack to 8 cents per pack on October 1, 1985. The Committee invites testimony at this hearing on the issue of whether the temporary increase in the cigarette excise tax should be extended.

9. EXTENDING MEDICARE TO STATE AND LOCAL GOVERNMENT EMPLOYEES Under present law, social security (including medicare coverage of State and local government employment) is on a group option basis. The Committee invites testimony on whether, for medicare only, coverage should be extended to all State and local government employment.

Note: The scope of this hearing does not include (1) proposals relating to the Superfund which, although included in the President's budget, were subject to a separate hearing on May 9, 1985; and (2) the proposal in the President's budget that anticipates legislation to cover rail workers under the regular Federal-State unemployment insurance system, which will be considered by the Subcommittee on Public Assistance and Unemployment Compensation at a date to be announced later. In addition, the hearing does not include any revenue losing proposals that may be included in the President's Budget.

DETAILS FOR SUBMISSION OF REQUESTS TO BE HEARD Individuals and organizations interested in presenting oral testimony before the Committee must submit their requests to be heard by telephone to Harriett Lawler [(202) 225-3627)] no later then Noon, Friday, June 14, 1985, to be followed by a formal written request to Joseph K. Dowley, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515.

In view of the limited time available to hear witnesses, the Committee will not be able to accommodate all requests to be heard. Those persons and organizations not scheduled for an oral appearance will be encouraged to submit written statements for the record of the hearing. All persons requesting to be heard, whether they are scheduled for oral testimony or not, will be notified as soon as possible.

It is urged that persons and organizations having a common position make every effort to designate one spokesman to represent them in order for the Committee to hear as many points of view as possible. Time for oral presentations will be strictly limited with the understanding that a more detailed statement may be included in the printed record of the hearing. This process will afford more time for members to question witnesses. In addition, witnesses may be grouped as panelists with strict time limitations for each panelist.

In order to assure the most productive use of the limited amount of time available to question hearing witnesses, all witnesses scheduled to appear before the Committee are required to submit 200 copies of their prepared statements to the Committee office, room 1102 Longworth House Office Building, at least 24 hours in advance of their scheduled appearances. Failure to comply with this requirement may result in the witness being denied the opportunity to testify in person.

Requests to be heard, prepared statements to be presented in person, and statements filed for the printed record of the hearing, must contain the following information:

1. The name, full address, and capacity in which the witness will appear, as well as a telephone number where the witness or a designated representative may be reached;

2. A list of any clients or persons, or any organization for whom the witness ap3. A topical outline or summary of comments and recommendations.

pears; and

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE

Persons submitting written statements for the printed record of the hearing should submit at least six (6) copies by the close of business, Friday, June 24, 1985, to Joseph K. Dowley, Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. (See other requirements enumerated above.) If those filling written statements for the record of the printed hearing wish to have their statements distributed to the press and the interested public, they may provide 100 additional copies for this purpose to the Committee office before the hearing begins.

Chairman ROSTENKOWSKI. The committee will come to order.

Today, the committee will hear from witnesses regarding a variety of revenue proposals relating to the fiscal year 1986 budget.

One major aspect of this hearing will be those revenue increase proposals, including a number of user fees, contained in President Reagan's budget. Some of these proposed revenue increases have been assumed in the budget resolutions passed by the House and Senate. The assumption of over $6 billion of revenue increases in both budget resolutions will change the revenue floor with which this committee must work.

In addition, the committee has asked witnesses to testify regarding the reduction in the cigarette excise tax from 16 cents per pack to 8 cents per pack scheduled to take effect on October 1, 1985. Wit

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nesses discussing the cigarette excise tax will be heard tomorrow morning.

All of the issues before us today and tomorrow are important to this committee. Consequently, it is unfortunate that the committee's extensive tax reform schedule has forced us to consolidate such a large number of items into one hearing. However, witnesses at this hearing and those submitting written statements for the record can be assured that this committee will thoroughly review your comments before action is scheduled on any of these revenue items.

Our first witness today is our colleague, Pete Stark, who has given us a great deal to think about in his service on the committee. But first, Mr. Duncan has a statement.

Mr. DUNCAN. Thank you, Mr. Chairman.

The hearings scheduled for today and tomorrow will focus on the various revenue and user fee proposals contained in President Reagan's 1986 budget. While these individual provisions may appear small in comparison to some of the other budget items, each one involves a number of important issues which the committee should consider very carefully before taking action.

Provisions affecting the Black Lung disability trust fund, for example, affect many current and retired workers as well as the domestic coal industry.

The proposal to increase the premium for single employer pension plans raises basic questions about the solvency of the pension benefit fund and other important issues concerning the benefit surety program.

The Customs Service fees raise important issues relative to the importing and traveling public. A number of user fees are proposed along with modifications of existing fees. User fees are proposed for certain IRS letter rulings Coast Guard and inland waterways operations and water resources development.

The President also has proposed a revision which would require subdivisions of State governments to be responsible for making their own timely Social Security deposits.

I think it is especially important to note that one item on today's agenda is unrelated to the President's budget proposal. I refer to the fact that we will receive testimony on whether a temporary increase in the cigarette excise tax, which expires on October 1, 1985, should be extended. We will have that tomorrow. The tax on cigarettes now is at 16 cents per pack and under current law will revert to 8 cents per pack, but a change of existing law to extend the 16 cents would result in a tax increase of approximately $1.5 billion.

I look forward to hearing the testimony of all the witnesses today and tomorrow. I am sure they will be more helpful to all of us.

Thank you, Mr. Chairman.
Chairman ROSTENKOWSKI. Thank you, Mr. Duncan.
Mr. Stark, the committee is ready to receive your testimony.

STATEMENT OF HON. FORTNEY H. (PETE) STARK, A REPRESENT

ATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA Mr. STARK. I would ask unanimous consent to submit a prepared and detailed statement for the record.

Chairman ROSTENKOWSKI. Without objection, your entire statement will be included in the record.

Mr. STARK. I want to testify on behalf of taxing State and local employees under the Medicare tax. For the most part, we are talking about 4 million workers who are not now covered by Medicare. For the most part, they get the benefits either because their spouses are covered or they have other covered employment as part of their working career, and the only question is whether or not they should pay for it.

It is the same question we faced in 1983, when we decided whether or not Federal employees, including ourselves, should be included in Medicare, we decided they should. The same principle holds here.

There was some question of the constitutionality. That was resolved by a decision in February by the Supreme Court, which takes that barrier away. There will be perhaps 4 million, or some of the 4-million population of uncovered workers who will object to this, but it is a logical step in moving toward universal mandatory Medicare coverage.

Currently more than 70 percent of the workers are paying Medicare premiums. In certain States, there is already 100 percent coverage. New Jersey, Virginia, Alabama, and Mississippi; in New York, Pennsylvania, and Michigan, for example, it is over 90 percent. It will be somewhat less popular in California, where only 40 percent of the State local employees are covered.

It makes some other sense in these days, and it will raise $1.6 billion each year, going up to $2 billion, $3 billion in 1987 and $2.5 billion in 1988. And that will contribute to the solvency of the Medicare trust fund.

There are some alternatives, charging them only half and phasing it in, and I would suggest, as a minimum alternative, although I hate to always quote my lowest price first, would be only covering new hires, which would raise far less money, only approximately $50 million, going up to about $250 million in 1988. I would say that ought to be done on principle as a minimum, but I think fairness, equity would decide in favor of covering them when we come to marking up actually the Medicare bill under the budget reconciliation procedure.

If any of the members have any questions—I unfortunately do not have copies of the list of each State and the percentage of employees covered in those States, but I will furnish that to each of the members later today.

[The prepared statement follows: STATEMENT OF HON. FORTNEY H. (PETE) STARK, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA One of the topics I believe we should address as we consider the budget for next year is the unfinished medicare agenda. Medicare is now 20 years old. It has proven to be an invaluable program for millions of Americans. But it can do better. And it

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