Policy Luncheon, March 10, 1992
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- Title (Dublin Core)
- Policy Luncheon, March 10, 1992
- Date (Dublin Core)
- 1992-03-10
- Date Created (Dublin Core)
- 1992-03-10
- Congress (Dublin Core)
- 102nd (1991-1993)
- Policy Area (Curation)
- Government Operations and Politics
- Record Type (Dublin Core)
- reports
- Rights (Dublin Core)
- http://rightsstatements.org/vocab/CNE/1.0/
- Language (Dublin Core)
- eng
- Collection Finding Aid (Dublin Core)
- https://dolearchivecollections.ku.edu/index.php?p=collections/findingaid&id=26&q=
- Physical Location (Dublin Core)
- Collection 007, Box 403, Folder 2
- Institution (Dublin Core)
- Robert J. Dole Institute of Politics, University of Kansas, Lawrence, KS
- Archival Collection (Dublin Core)
- Robert J. Dole Republican Leadership Collection, 1985-1996
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(page 1)
United States Senate
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Memorandum
(the remainder of this page is handwritten with black ink marker and pencil)
S-230
4-5
Thursday
Symms
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Peter D.
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SYMMS - 3-4
Ted S.
Motor
Votes
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U.S. Senate Republican Policy Committee
Don Nickles, Chairman
Rick Lawson, Staff Director
Legislative Notice
Editor, Judy Gorman Prinkey
No. 60
March 10, 1992
H.R. 4210-Family Tax Fairness, Economic Growth, and Health Care Access Act of 1992
Calendar No. 419
Reported: From the Committee on Finance on March 6, 1992, with an amendment in the nature of a substitute, on a party-line vote of 11-9. Minority views filed by all Committee Republicans (Packwood, Dole, Roth, Danforth, Chafee, Durenberger, Grassley, Symms and Hatch). No written report filed, but a "technical explanation" of bill's provisions, accompanied by minority views, has been published (S. Prt. 102-77).
NOTEWORTHY
• Unanimous Consent Agreement: no later than 3:00 p.m. on Tuesday, March 10, 1992, the Senate will proceed to H.R. 4210 for opening statements. No amendments or votes are in order before Wednesday, March 11, 1992.
At 10:00 a.m. on Wednesday, Senator Pryor will be recognized to offer an amendment to limit section 936 tax benefits to drug companies operating in Puerto Rico if they increase their drug prices by a rate that exceeds the Consumer Price Index.
• As reported by the Finance Committee, H.R. 4210 would:
- Provide a non-refundable $300 tax credit per child up to age 16, phased out for families with average incomes between $50,000 and $70,000;
- Impose a tax rate of 36 percent on individual filers who earn over $150,000 and for couples earning more than $175,000;
- Impose a 10 percent surtax on taxable income in excess of $1 million;
- Create a new capital gains tax rate system tied to income tax rates;
- Make health insurance premiums fully deductible for the self-employed; and
- Require most coal companies to pay a new tax to finance health benefits for retired miners.
• Over the five-year period 1992-1996, H.R. 4210, as amended by the Committee on Finance, raises taxes by $66.8 billion and spends $70.3 billion on revenue losers and other items, for a net loss of $3.5 billion.
• The Statement of Administration Policy says, "the President will veto H.R. 4210, the Democratic proposal reported by the Finance Committee, if it is presented to him in its current form."
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BACKGROUND
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In his State of the Union address, the President announced a two-part plan for economic growth - one to stimulate short-term economic recovery and one to promote long-term economic growth and job-creating investment. The President called for quick action - by March 20, 1992 - on the seven proposals making up his short-term plan. The remaining long-term proposals were to be acted on later in the year.
The Democrats rejected the President's call for a two-bill strategy. Instead, they decided to use this opportunity to advance partisan legislation under the guise of tax fairness that would do little to create jobs and help our economy. The linchpins of both the Democratic House bill and the Democratic Finance Committee bill are large tax increases on individuals which fall principally on small business entrepreneurs, and middle class tax cuts.
Tacked onto the Democratic Finance Committee bill are several new government programs, including the bailout of a bankrupt coal miners' retiree health fund, a pilot program for a new direct student loan program, and a small-employer health insurance market reform proposal.
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THE PRESIDENT'S SEVEN PROPOSALS TO PROMOTE SHORT-TERM ECONOMIC RECOVERY
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1. Capital Gains: Lowers the tax on gains from long-term investments by individuals, as follows:
Years Owned: 1
Current Law 15% Taxpayers: 12.75%
Current Law 28% Taxpayers: 23.8%
Years Owned: 2
Current Law 15% Taxpayers: 10.50%
Current Law 28% Taxpayers: 19.6%
Years Owned: 3 or more
Current Law 15% Taxpayers: 8.25%
Current Law 28% Taxpayers: 15.4%
Gains from the sale of real estate and family businesses are not preferences in the alternative minimum tax. Depreciation recaptured is ordinary income, but maximum tax is 28 percent.
2 Investment Tax Allowance: Tax deduction for 15 percent of cost of business equipment and machines purchased before the end of 1992 and placed in service by June 30, 1993.
3. First Home Tax Credit: $5,000 tax credit for purchase of a first home before the end of 1992. The home can be a new or existing house.
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4. IRA Withdrawals for First Homes: Penalty-free IRA withdrawal of up to $10,000 for the purchase of a first home, whether a new or existing house.
5. Real Estate Passive Losses: Provides passive loss relief for rental real estate owned and operated by real estate developers.
6. Pension Fund Investment in Real Estate: Facilitates real estate investment by pension funds.
7. Alternative Minimum Tax Treatment of Depreciation: Repeals the ACE depreciation adjustment for the minimum tax.
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SENATE DEMOCRATIC BILL PROVISIONS
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H.R. 4210, as reported by the Committee on Finance, raises taxes of roughly $66.8 billion over the five-year period 1992-1996 by:
• Adding a new 36 percent income tax rate at taxable incomes of $150,000 (single), $162,500 (head of household), and $175,000 (married couple).
• Adding a 10 percent millionaire's surtax.
• Making permanent the phaseout of personal exemptions and dependency deductions for individuals with 1992 taxable incomes over $105,250 (single), $131,550 (head of household), and $157,900 (married couple). This is currently scheduled to expire at the end of 1995.
• Making permanent the so-called Pease cutback on itemized deductions for individuals with 1992 taxable income over $105,250 (single, head of household, and married couple). This is currently scheduled to expire at the end of 1995.
• Repealing the "wee tot" tax credit for about one million working families with 1992 adjusted gross incomes under $22,370.
• Extending the depreciation period for commercial real estate to 40 years (now, it is 31.5 years).
• Denying a tax deduction for executive compensation over $1 million a year.
• Denying a tax deduction for club dues, including dues for health and fitness clubs, meal clubs and country clubs.
• Imposing a $160/month cap on parking that can be provided tax-free to employees.
• Imposing new taxes on certain domestic coal companies and imported coal to bail out a bankrupt coal miners' retiree health fund.
• Increasing the tariff on imported sport utility vehicles and mini-vans.
• Increasing the excise tax on ozone-depleting chemicals.
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The revenue-losing items and other spending provisions approved by the Committee on Finance cost roughly $70.3 billion over the five-year period 1992-1996. The major items include:
• A version of the President's seven short-term growth proposals, but it significantly cuts back the most important items, such as the first home tax credit, investment tax allowance, passive losses for real estate, and capital gains rate reduction (see comparison chart below).
Provision:
1. Capital gains.
President's Proposal:
Provides an exclusion from income of up to 45 percent depending on how long the asset is held, with effective top rate of 15.4 percent.
H.R.4210:
Maintains current 28 percent top rate, with lower rates for certain taxpayers and for certain venture capital investments.
Provision:
2. Investment tax allowance.
President's Proposal:
Provides a 15 percent deduction for purchases of new equipment and machinery.
H.R.4210:
Cuts back the President's proposal to 10 percent.
Provision:
3. First-time home buyers credit.
President's Proposal:
Provides a $5,000 tax credit for first-time home buyers for new and existing homes bought before the end of 1992.
H.R.4210:
Limits the President's proposal to new homes only.
Provision:
4. IRA withdrawals.
President's Proposal:
Up to $10,000 can be withdrawn penalty-free to buy a first home.
H.R.4210:
Same as President's proposal, but allows unlimited withdrawals.
Provision:
5. Real estate passive loss.
President's Proposal:
Provides relief from passive loss rules for real estate developers.
H.R.4210:
Limits the President's proposal to existing properties and cuts back on deductible losses.
Provision:
6. Pension fund investment in real estate.
President's Proposal:
Facilitates real estate investments by pension funds.
H.R.4210:
Same as President's proposal.
Provision:
7. Alternative minimum tax (AMT) depreciation.
President's Proposal:
Simplifies and enhances AMT depreciation.
H.R.4210:
Same as President's proposal.
• The largest revenue-losing item is a $300 tax credit for each child under age 16 for families with adjusted gross income under $50,000 (families with income between $50,000 and $70,000 would receive a partial credit). Since this credit is nonrefundable, low-income families will not receive any benefit. Everyone agrees this will do nothing to help our economy.
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• Increases the earned income tax credit (EITC) for working families with at least two children.
• Extends for 18 months (through December 31, 1993) all expiring tax provisions, except for three: section 29 nonconventional fuel tax credit, section 861 allocation of research expenses for multinational companies, and the employer-provided group legal program.
• Adopts Roth-Bentsen individual retirement account (IRA) proposal to restore fully deductible IRAs and to establish a new type of IRA under which contributions are not deductible, but interest on contributions left in the account at least five years is tax-free. Penalty-free IRA withdrawals are allowed for first home purchases, large medical bills and post-secondary education.
• Repeals the luxury excise tax on boats, airplanes, jewelry and furs, and adjusts the automobile threshold amount to $30,000, adjusting for inflation.
• Establishes a new tax credit equal to the employer's share of FICA payroll tax on tips.
• Adopts the Grassley-Boren proposal to allow a tax deduction or up to a $300 credit for student loan interest.
• Provides alternative minimum tax relief for intangible drilling costs.
• Provides alternative minimum tax relief for charitable donations of appreciated property.
• Increases the amount of mass transit passes (from $21 to $60 a month) that can be provided tax-free to employees.
• Adopts "T2," the new Taxpayer Bill of Rights proposal of Senator Pryor.
• Adopts certain tax code simplification proposals.
• Establishes a pilot program for a new direct student loan spending program.
• Establishes a new program to bail out a bankrupt coal miners' retiree health fund.
• Adopts Durenberger-Bentsen small employer health insurance reforms.
• Adds immunizations and well-child care to Medicare benefits and authorizes demonstrations of certain other preventive benefits.
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BUDGETARY ASPECTS
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The Budget Committee will cover the $3.5 billion net loss anticipated in the bill by allocating a CBO revenue surplus under its scorekeeping function. However, this money was already spent to finance two recent unemployment bills. Under preliminary OMB scoring, the bill if enacted will trigger an end of the session $4 billion pay-as-you-go
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sequester on entitlement programs such as Medicare, crop payments to farmers, social services block grants and unemployment compensation.
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MINORITY VIEWS
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\[Signed by all Republicans on the Committee.]
"Many economists have ... cautioned against a short-term fix which will be counterproductive over the long term. There was a clear consensus that a significant tax increase at a time when the economy is struggling to get back on its feet will not stimulate economic growth and jobs creation.
"Regretfully, the majority in the Senate - like the majority in the House - appear intent on advancing legislation that will significantly raise taxes while doing little to rebuild the competitive position of America. This approach will not stimulate investment in productive endeavors so that Americans can look forward to securing a good family wage, owning a home, raising a family, and enjoying a prosperous retirement....
"Clearly, as long as the bill contains significant tax increases, it will be vetoed by the President and the veto will be sustained....
"We sincerely hope this futile course will not be pursued. We urge the Committee to lay this bill aside, and begin working together immediately to draft a plan to reinvigorate our economy and provide a blueprint for our future.
"This is no time for the Senate to succumb to political expediency. This bill is not a solution to the economic problems facing this country, and we all know it. We have the opportunity to rise above the fray and do something for the good of America. We should seize this opportunity now."
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ADMINISTRATION POSITION
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See attached Statement of Administration Policy.
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POSSIBLE AMENDMENTS
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Pryor. Cut back on section 936 tax benefits for drug companies that raise drug prices above the consumer price index.
Bradley. Make the $300 per child tax credit refundable.
Bradley. Exempt accelerated death benefits paid under life insurance policies from taxation; paid for by increasing the excise tax on foreign reinsurers.
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DeConcini. Allow penalty-free withdrawals from IRAs in cases of extended unemployment.
DeConcini. Allow a tax credit for employers who provide on-site or near-site child care.
Kasten. Strike all tax increases from bill and finance tax cuts by capping defense and domestic discretionary spending.
Kasten. Family Farm Tax Relief and Savings Act.
McCain. Repeal the Social Security earnings test.
McCain. Amend Budget Act to require 60-vote point of order for tax increases and to lower the existing 60-vote point of order for tax decreases to a simple majority.
Nickles. Interest and dividend exclusion, with offset.
Nickles. Domestic energy incentives, with offset.
Reid. Prohibit states from imposing a "source tax" on pension income of nonresidents.
Reid. Exclude from taxation "contributions in aid of construction" received by water companies.
Seymour. Expand first home tax credit to existing homes.
Specter. Allow penalty-free IRA withdrawals in 1992 for the purchase of durable goods.
Symms. Remove tax-exempt bonds for high-speed rail from state volume caps.
Unknown. Strike or amend the coal miners' retiree health fund bailout.
Unknown. Cutback on certain entitlement programs for upper-income individuals, in lieu of tax increases in the bill.
Unknown. Substitute the President's capital gains proposal for the one in the bill.
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Staff Contact: Doug Badger, 224-2946
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(seal of the Executive Office of the President of the United States)
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
March 10, 1992
(Senate)
STATEMENT OF ADMINISTRATION POLICY
(THIS STATEMENT HAS BEEN COORDINATED BY OMB WITH THE CONCERNED AGENCIES.)
(the following line is underlined)
H.R. 4210 - Tax Fairness and Economic Growth Act of 1992
(Gephardt (D) Missouri)
The Administration strongly supports enactment by March 20th of the President's short-term economic growth proposal. The President's plan addresses the immediate challenges facing the economy: it will create jobs, increase the value of real estate and small businesses, and stimulate savings and investment. It is fully paid for with entitlement reforms and satisfies the pay- as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990 (OBRA).
The President will veto H.R. 4210, the Democratic proposal reported by the Finance Committee, if it is presented to him in its current form. The bill would:
-- Raise income tax rates substantially and permanently for individuals.
-- Increase taxes by more than $100 billion. More than two-thirds of all taxpayers facing tax increases will be small businessmen and women and entrepreneurs. Small businesses are the primary source of new job creation.
-- Fail to provide adequate incentives for short-term job creation or to generate investment incentives necessary for long-term growth.
-- Increase the deficit by $2.2 billion in FY 1992 and $1.8 billion in FY 1993. Enactment of this bill could trigger a $4 billion pay-as-you-go sequester on Medicare, FY 1993 crop payments to farmers, Social Services Block Grants, emergency unemployment benefits, Family Support Payments to States, the Veterans' Housing Loan Program, and other entitlement programs. (These estimates do not take into account the provisions identified on page 4 of this statement that have not yet been scored.)
Specifically, the Administration strongly objects to the following provisions of H.R. 4210:
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-- The first-time homebuyer credit provides benefits to less than 20 percent of first-time homebuyers because the credit is limited to newly constructed residences.
-- The capital gains exclusion for small business stock is far too narrowly targeted and does not provide adequate incentives for broad-based capital formation and job creation.
-- The capital gains provision would not provide meaningful incentives for entrepreneurial risk-taking. Under the proposal, the sale of a successful investment is penalized by generally taxing the gain at the highest marginal rate because the capital gain is included in determining the applicable tax brackets. This is a particular problem for enterprises and investments that are sold in a single transaction such as family farms, personal residences and high-tech businesses. Moreover, the proposal continues the incentive to hold substantially appreciated assets rather than make funds available for new productive investment.
-- Various provisions in the proposal significantly increase the effective tax burden on the real estate industry when the industry can least afford it. For example, the depreciable life of non-residential real estate would be lengthened.
-- The $300 per child tax credit does not provide benefits to over 40 percent of American families with children under 19 years old, and almost 50 percent of such children are not covered. The credit is phased out for many middle-income families.
-- The bailout of privately negotiated health benefit plans will principally benefit selected large eastern coal companies. This bailout is financed by an industry-wide tax that will hurt consumers and all coal workers not covered under the Bituminous Coal Operators Association agreement. This wholly unjustified bailout is highly objectionable from both an employment policy and a health policy perspective.
-- The bill diverts income tax revenues of $2.2 billion over the next decade to the rail pension fund, substituting for rail sector contributions. This diversion subsidizes a high-wage industrial sector and inappropriately sets a precedent for taxpayer support for other private pension systems.
-- The "Self Reliance Loan" proposal would provide $2.6 billion in new direct loan entitlements on top of existing postsecondary loan and grant programs. With
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this much loan volume and 500 participating schools, the initiative is not a "demonstration" but a full-blown program unsupported by any evidence that it is actuarially sound or that the complex administrative procedures envisioned can work. Moreover, collection procedures would further involve the Internal Revenue Service in many taxpayers' daily lives.
-- The Administration opposes Section 2514 as stated in the Department of Treasury views letter to Ways & Means Committee Chairman Rostenkowski dated November 20, 1991.
-- The bill repeals the supplemental young child (wee tot) credit to the Earned Income Tax Credit, which allows eligible families with children under the age of one to claim a supplemental credit based on earned income. This provision, which grants additional relief to low income families with young children, was a pivotal component of child care legislation enacted in 1990.
-- The provisions relating to small group health insurance parallel the President's proposals in many respects, but they could be strengthened significantly. In particular, the Administration's Health Insurance Network proposal is more comprehensive and less costly than the grant program in this bill. Because there is broad support for this kind of health market reform, these provisions should be considered as separate legislation, outside the context of a tax bill, so that reforms can be enacted this year.
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Pay-As-You-Go Scoring
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H.R. 4210 as reported by the Finance Committee would reduce receipts in FYs 1992-1994 and increase direct spending in FYs 1993-1997; therefore, it is subject to OBRA's pay-as-you-go requirement. A budget point of order should apply against any bill that is not fully offset for pay-as-you-go purposes [underlined] in each year. [end underlined]
OMB's preliminary scoring estimates of this bill are presented in the table on the next page. Final scoring of this legislation may deviate from these estimates. If H.R. 4210 were enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA.
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(the following two lines are underlined)
ESTIMATES FOR PAY-AS-YOU-GO*
($ in millions)
(the following line is underlined)
1992
Receipts...-2,217
Outlays....--
Net deficit increase (+) / reduction (-): +2,217
(the following line is underlined)
1993
Receipts...-1,610
Outlays....+200
Net deficit increase (+) / reduction (-): +1,810
(the following line is underlined)
1994
Receipts...-733
Outlays....+172
Net deficit increase (+) / reduction (-): +905
(the following line is underlined)
1995
Receipts...+3.602
Outlays....+153
Net deficit increase (+) / reduction (-): -3,449
(the following line is underlined)
1996
Receipts...+8,696
Outlays....+138
Net deficit increase (+) / reduction (-): -8,558
(the following line is underlined)
1997
Receipts...+19,304
Outlays....+120
Net deficit increase (+) / reduction (-): -19,184
(the following line is underlined)
92-97
Receipts...+27,042
Outlays....+784
Net deficit increase (+) / reduction (-): -26,258
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* Details may not add to totals due to rounding.
The above estimates do not include the outlay effects of provisions relating to student loans; small employer health benefits; and coal miners' health benefits, because insufficient time was given to accurately determine the scoring effects of these provisions. The statutory language is being reviewed and estimates are under development.
The above estimates also do not include the potential impact that the Taxpayer Bill of Rights provisions may have on revenues. The Department of the Treasury estimates preliminarily that these provisions (excluding a provision concerning retroactive regulation, which has not yet been estimated) could reduce revenues by at least $0.2 billion in FY 1993 and $1.1 billion between FY 1993 and FY 1997 because of their impact on IRS operations. These costs have not been scored against this bill at this time, however, because of remaining technical and legal uncertainties still under review.
It appears likely that the provisions in the two preceding paragraphs, taken together, would increase the deficit.
* * * * * * *
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(the following line is underlined)
SCHEDULE FOR THE WEEK OF MARCH 9, 1992
(the following line is underlined)
TODAY, TUESDAY, MARCH 10
THE SENATE WILL RECONVENE AT 2:15 P.M., AND AT 2:30 P.M. A ROLL CALL VOTE WILL OCCUR ON ADOPTION OF THE RADON BILL. IMMEDIATELY FOLLOWING THAT VOTE, THE SENATE WILL BEGIN OPENING STATEMENTS ON THE ECONOMIC GROWTH BILL. THEREFORE, ONE ROLL CALL VOTE WILL OCCUR DURING TODAY'S SESSION.
(the following line is underlined)
WEDNESDAY, MARCH 11
THE SENATE WILL RESUME CONSIDERATION OF THE TAX BILL AT 10:00 A.M., WITH SENATOR PRYOR TO BE RECOGNIZED TO OFFER HIS AMENDMENT REGARDING PRESCRIPTION DRUGS. THE MAJORITY LEADER HAS INDICATED THAT THE SENATE WILL BE IN SESSION LATE ON WEDNESDAY, IN ORDER TO MAKE PROGRESS ON THE TAX BILL. THEREFORE, VOTES CAN BE EXPECTED TO OCCUR EACH DAY OF SENATE SESSION THIS WEEK.
(the following line is underlined)
THURSDAY, MARCH 12 - FRIDAY, MARCH 13
THE SENATE WILL BE CONSIDERING THE TAX BILL. THEREFORE A LATE SESSION IS ANTICIPATED, AND ROLL CALL VOTES WILL OCCUR. BY A PREVIOUS CONSENT, IMMEDIATELY FOLLOWING THE DISPOSITION OF THE TAX BILL, A CLOTURE VOTE WILL OCCUR ON THE CRIME CONFERENCE REPORT.
(the following line is underlined)
NOTE:
THE MAJORITY LEADER HAS ANNOUNCED THAT NO VOTES WILL OCCUR ON MONDAY, MARCH 16TH. ALSO, THE FIRST ROLL CALL VOTE WILL OCCUR NO EARLIER THAN 2:15 P.M. ON TUESDAY, MARCH 17. I HOPE THIS WILL BE OF SOME HELP FOR SCHEDULING.
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