Sen. Charles E. Grassley Outlines Finance Committee Agenda
During ACCF Capital Formation Forum

ACCF Capital Formation Forum
February 2004

While hopeful the Senate is finally ready to replace the extraterritorial income (ETI) exemption, Finance Committee Chairman Charles E. Grassley (R-IA) is disheartened by his chamber’s inability to resolve the issue in the prescribed period of time. The World Trade Organization ruled that the ETI provisions constituted an illegal export subsidy in 2001, and the U.S. was given until March 1 of this year to replace them. "It is a personal embarrassment to me because I visit the European Union throughout the year and we’re supposed to be a leader on trade issues. When we say we’re going to get it done and then we don’t get it done, it’s embarrassing," Senator Grassley said February 26 at an ACCF Capital Formation Forum.

International tax reform is just one of several issues Chairman Grassley addressed during his remarks, which also covered retirement savings, energy legislation and estate tax reform.

Despite the recent upturn in equity prices, Senator Grassley maintains his position that Congress must act to find a replacement for the 30-year Treasury rate that is used to determine pension liabilities.

"A temporary replacement for the 30-year Treasury rate for pensions is must pass," according to the Chairman. "Others may say that the stock recovery lessens the need for action, but I disagree." Senator Grassley also noted that he continues to work on comprehensive legislation that will not only solve the pension funding issue but also address the nation’s broader need for increased retirement savings.

Senator Grassley is still undecided about the Bush Administration’s proposal to bolster the U.S. savings rate. Last January the Administration unveiled its plan to replace the current menu of 401(k) and IRA-style tax preferred saving’s vehicles with the introduction of retirement savings accounts (RSAs), lifetime savings accounts (LSAs) and employer retirement savings accounts (ERSAs).

"I have some concerns about those proposals," Senator Grassley admitted. "I certainly don’t have concerns about the proposition to improve savings, but retirement has to be the focus," the Chairman said.

Energy legislation is another area the chairman hopes to focus on soon, but time will be a factor.

"[Senate Majority Leader Bill] Frist (R-TN) reminds us in our Tuesday meetings that we have 120 total work days in the Senate. Fifty of those days are for legislating and the rest will be used for appropriations," Senator Grassley said, adding "that means we can’t spend much time on an energy bill, even though an energy bill is really important."

The Senate is set to begin work on a new bill from Senate Energy Committee Chairman Pete V. Domenici (R-NM) that is dramatically less costly than the energy bill voted out of the Finance committee last April. The price tag has fallen from $24 billion to about $16 billion, according to Senator Grassley. Tax incentives remain for fossil fuels, alternative fuels, conservation efforts, fuel cells, and energy efficient home appliances.

Senator Grassley also addressed the perennial issue of estate tax repeal, conceding that reform is more likely in 2004.

"I see less of a chance for permanent repeal," Chairman Grassley said. "Moving the [sunset] date is just now being considered," Senator Grassley added.

The Economic Growth and Tax Relief Reconciliation Act of 2001 stipulates the estate tax will gradually phase-out between now and 2009, disappear completely in 2010, but return in 2011 when all provisions of the bill "sunset" on December 31, 2010.

"It is difficult to see bipartisan support for full repeal. It is easier to see bipartisan support for a higher exemption and a lower rate. The question remains how low can you set the rate and how quickly will it take effect," Senator Grassley said.