very sharp increases in their payroll taxes of the last year or two, and when they are being further buffeted by an inflation in food and fuel which falls upon them with a particular burden. For us to give a very substantial tax reduction to people in the upper 5 percent of the income receivers while forgetting all about the lower income two-thirds of the American families seems to me to be a badly skewed sense of priorities. The tax preference being granted here would cost taxpayers $175 million a year. Those who do not get it, of course, will have to pay for it, and that, in my judgment, compounds the inequity.

It will be said, "Oh, you have to do something for the $50,000-a-year doctor, lawyer, or professional person, because if he belonged to a corporate pension plan and was an employee or officer of a corporation, he would be allowed to deduct a very large sum, up to about $35,000 a year." Well, that is true, but the answer is not to pile loophole upon loophole.

We should lower the preference to corporate pension-holders.

Unfortunately, the rule which confronts us, one that does not allow germane amendments except in the one instance, prevents our attacking that which really ought to be attacked; namely, the practically unlimited bonanza offered very wealthy people under corporate pension plans. It is true that the bill does set a limit of about $75,000 a year pension which could be drawn on, a level corresponding to about a $35.000 a year input, but this is wholly out of line in the single equity. If the Ways and Means Committee would let us, we ought to reduce the corporate-plan preference.

A second reason for not going along with the committee in this $7.500 tax preference is that it would leave a terrible hodge-podge in our system. If you are the beneficiary of a qualified corporate pension, you get $35.000 a year, approximately tax free. If you are a self-employed professional with a qualified Keogh plan, you get $7,500 a year. But if you are a mobile engineer or a fishery worker or some one of the 40 million workers in this country who are working for a corporation without a qualified pension plan, then your maximum is $1,500 a year. What kind of justice is this?

I suggest that this $35,000 or $7,500 or $1,500 represents the approximate disparate political weights of these various groups rather than any real attempt to do equity.

By telling the Committee on Ways and Means that we in the House here are perfectly capable of making basic tax judgments ourselves, and by voting in favor of the amendment I offer, we will get our taxwriting committees to introduce some equity into the disparate differential treatment of these various income tax groups.

Therefore, Mr. Chairman, I urge Members to vote in favor of the amendment I have offered, so as to leave the situation where it now is. Mrs. GRIFFITHS. Mr. Chairman, I move to strike out the last word. (Mrs. Griffiths asked and was given permission to revise and extend her remarks.)

Mrs. GRIFFITHS. Mr. Chairman, I oppose the amendment offered by the gentleman from Wisconsin (Mr. REUSS). I would like to point out that in this bill there are only three efforts to try to bring closer together the tax-deferred retirement savings of different groups. One of those is the limitation of $25,000 per year, or 25 percent of the income which applies to a corporate deferred contribution pension plan.

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The second one is this effort to raise the Keogh plan from $2,500 to $7,500. And the third is the attempt to give all individuals who were not under corporate or Keogh plans the right to save $1,500 a year.

The real effort in this bill is to see to it that the money that has been set aside from tax stream is used so that the people who are supposed to get pensions really do get them.

All pensions, as far as I know, are paid for, either originally from tax free money, or finally they are paid out of the tax stream.

If there were a real effort on the part of the gentleman from Wisconsin who offered this amendment, to knock down the $25,000 maximum contribution to a corporate plan-that comes out of the tax stream-I might go along with the gentleman. But I would like to show you what the gentleman really is doing.

As most of the Members are aware, I am going to leave the Congress at the end of this year. For 20 years I have paid into a pension fund, along with the rest of the Members, and when I leave here I will draw a pension of $21,250 a year. My husband and I went to the same schools, and got approximately the same grades, and my husband is a lawyer. He has never had an opportunity to pay into a corporate pension fund. The only money that he could have saved before taxes would have been if he had set up a Keogh plan for his law firm covering everybody else, along with himself.

I would like to point out to the Members that we here in Congress are a favored few. The $20,000 that people who retired drew last year, has increased within the last 11 months, I believe 6 percent at one time, and 5 percent at another time. If I were lucky enough to live to the beginning of the next century my pension would be more than $40,000 a year, but every cent that I put into that pension fund will be withdrawn by the time I have been gone for 17 months.

What the gentleman from Wisconsin (Mr. Reuss) is attempting to do is to say that doctors and lawyers who are going to draw their money under the Keogh plan, are all wealthy, but he is quite wrong, because the wealthy law firms have already incorporated, and so have the wealthy medical firms, and so they are putting $25,000 yearly into a plan, which can pay them $75,000 yearly. We have a distinction between those who incorporate and those who do not. And what the gentleman from Wisconsin is attempting to do will affect those who are not incorporated. And those who do not incorporate will include, although perhaps it is not even popular to think of it now, the man who runs the gas station, the man who runs the grocery store, the man who runs the pharmacy, anyone who has a plumbing concern, or any other of these people who run an individual business, the grocer, the candlestick maker, the baker, the farmer, and whoever else may be running individual businesses. If we go along with the gentleman from Wisconsin, we are now saying to these people, we will let you put only $2,500 a year into your pension plan.

Also, we will require them to cover everyone else in their firm in this case. But we will also say, we will let you take $1,500 a year if you do not cover anybody. This does not make sense.

I have the highest regard for the gentleman from Wisconsin, but in this particular amendment he could not be more unfair. He could not be more wrong. What he is really doing is hitting at the person in our society who is taking all of the risks.

The CHAIRMAN. The time of the gentlewoman has expired.

(By unanimous consent, Mrs. Griffiths was allowed to proceed for 2 additional minutes.)

Mrs. GRIFFITHS. He is hitting the private entrepreneur. He is hitting the person who is attempting to cover all of the other employees. He is not objecting to the large corporate pensions. He is not really objecting to the fact that Congressmen are drawing pensions. These pensions all come out of the tax stream, too. The only person he is objecting to is the very person who made America. It is a part of the American tradition that one start on his own and work. We are doing equity for everybody else, but that man.

Mr. Chairman, I hope the Members resoundingly defeat this amendment and give those who are on their own a chance.

Mr. SCHNEEBELI. Mr. Chairman, I move to strike the last word. (Mr. Schneebeli asked and was given permission to revise and extend his remarks.)

Mr. SCHNEEBELI. Mr. Chairman. I join the gentlewoman from Michigan in opposing this amendment. I should like to supplement some of the figures which she has submitted.

Under existing law there is virtually no limitation on what a corporate officer can put into a pension plan. In this bill we have included separate limitations on defined contribution plans amounting to 25 percent of his income up to $25,000, and for defined benefits plans an amount necessary to fund a pension equal to 100 percent of an employees' high 3-year average salary not to exceed $25,000.

If we went along with the proposal of the gentleman from Wisconsin, the self-employed individual would be limited to $2,500 a year, one-tenth of what this bill proposes for a qualified defined contribution plan. What has happened as a result of this differential? Between 1968 and 1971 the law corporations that were formed by individuals have increased from 158 to 3,000. The medical corporations in that same period of time increased from 1,600 to 19,000. They were driven to incorporate because of the limitation imposed upon the self-employed.

Mr. CONABLE. Mr. Chairman, will the gentleman yield?
Mr. SCHNEEBELI. I yield to the gentleman from New York.
Mr. CONABLE. I thank the gentleman for yielding.

I would like to associate myself with his remarks and with the remarks of the gentlewoman from Michigan.

It seems to me this is one of the very important public policy points involved in having a reasonable limitation on Keogh plans instead of the limitation we have had now for the past 12 years. That is, we have been forcing people to incorporate in order to achieve the tax benefits they can get through incorporation, rather than permitting them the natural way in which they would do business, namely, as a proprietorship or partnership. As long as we have the kind of malpractice insurance we have now, there is no other reason for the professional corporation, I suspect, then that they want to take advantage of very generous deductions available to corporate officers. This increase in permitted Keogh deductions is far preferable. We need the symmetry of this in the law.

I should like to support the position enunciated by the gentleman from Pennsylvania and the gentlewoman from Michigan.

Mr. SCHNEEBELI. To proceed further with this comparison, were we to limit the self-employed individual to $2.500 a year-and we are talking about the gas station operator as well as the professional-we would just drive them into corporations. This $2.500 limit was established in 1962. Since that time the income of this class of people has increased by 88 percent.

To get this thing into perspective, the present pension laws cost the Treasury $4 billion.

This bill adds another $460 million in Treasury loss, and of this $460 million there is $175 million which could be attributed to the increase from $2.500 to $7.500 for the self-employed.

Because of all the facts recited it would seem this House should agree that the amendment offered by the gentleman from Wisconsin should be voted down.

Mr. SEIBERLING. Mr. Chairman, will the gentleman yield?
Mr. SCHNEEBELI. I yield to the gentleman from Ohio.

Mr. SEIBERLING. Mr. Chairman, I would like to ask the gentleman. since he is the ranking minority member on the committee, why it is that the very first tax bill that we come out with in this session of the Congress, after all the pressure that has been put on for some general tax reform and loophole closing and relief for the average person, especially on the payroll tax that has gone up again this yearafter all the talk about tax reform during the past several years, that the very first thing we bring out which provides relief for the taxpayer, is for those in the higher tax brackets.

Mr. SCHNEEBELI. We have incorporated a major provision in this legislation-known as IRA-which allows the fellow who works for the gas station owner and is not covered by a pension plan to contribute up to $1,500 to a retirement account and receive a deduction for it. This is something new and takes care of the very limited income people. This was proposed by the administration and is a provision of which the committee is very proud.

The CHAIRMAN. The time of the gentleman from Pennsylvania has expired.

(On request of Mr. Seiberling, and by unanimous consent. Mr. Schneebeli was allowed to proceed for 2 additional minutes.)

Mr. SCHNEEBELI. It allows the individual who works for the gas station owner-just the ordinary attendant or a farmer to provide for his retirement via the tax system. It will cost about $350 million to have this IRA approach incorporated into the bill. It is for the class of people the gentleman is inquiring about.

Mr. SEIBERLING. I still raise the question as to whether this committee is going to deal with the loophole closing and the tax relief which the average employed person in this country is interested in and whether we will close some of the gaping loopholes now existing in the tax laws.

Mr. SCHNEEBELI. As the gentleman knows, currently we are having executive sessions on windfall profits taxes. Following that it is my understanding the majority leaders on our committee plan to begin work on general tax reform. That is my understanding. We are discussing tax reform at the present time which will bring back to the Treasury several billion dollars.

Mr. SEIBERLING. Does that include relief for the people paying the payroll tax? Will that subject be included in this tax reform also?

Mr. SCHNEEBELI. I defer to the chairman of the committee in that regard.

Mr. ULLMAN. Mr. Chairman, I move to strike the requisite number of words.

First, in response to the question of my friend, this bill is one that does contain a great deal of tax reform. We have set limits on corporate plans and this provision for the self-employed improves the equity of the law.

Reform sometimes includes increased benefits. What we have to do is to bring into balance as much as we can the tax treatment for the self-employed as compared to the corporate community, and this provision in the bill is an effort in this direction. We are proceeding on tax reform. We are doing it now on an energy bill, as my friend the gentleman from Pennsylvania said, and we will be proceeding forthwith to general tax reform. There will be major tax reform before the House this year.

But let me go on with the subject and point out that the self-employed pension provisions do involve tough antidiscrimination rules. The plan cannot be for just the doctor or the lawyer. The plan has to be for all the employees in the business organization. Let me read into the Record percentages which indicate that doctors and lawyers are not the only ones involved of the self-employed under these plans, 33.8 percent were physicians, surgeons, optometrists, and other persons in medical organizations; then the dentists have 8.3 percent and the legal services have 8.9 percent; the accounting and auditing services have 2.8 percent; finance, insurance and real estate, 5.6 percent; agriculture, 9.2 percent of the total; retail and wholesale trade and manufacturing, 15.2 percent; ministers and teachers have less than 1 percent; and all others have 15.9 percent-so these plans are spread across the whole community of self-employment in this Nation. It has been a very basic part of our business life.

It seems to me this is a most equitable treatment and one that deserves the support of the House. I hope we will vote down the amend

ment.

Mr. DANIELSON. Mr. Chairman, I move to strike the requisite number of words.

Mr. Chairman, I am in support of this bill.

I have a few questions and I will pose them to the gentleman from Oregon (Mr. Ullman) after stating a hypothetical case.

My concern is that we are permitting a self-employed person to set aside $7,500 a year as a maximum figure, but another person who is not self-employed, I will call him a wage earner for reference, is only allowed to set aside $1,500 a year.

The thrust of my question is: What equity would there be in permitting the self-employed person to set aside $7,500, while the one who is not self-employed is limited to $1,500?

Let me give the Members a hypothetical case. We have a couple of nearly identical twins, Abel and Mabel, that go to medical school, that graduate with honors.

Abel joins the Kiwanis Club. He is really quite a guy and the first thing you know he has patients coming in so fast he cannot handle them.

Mabel, on the other hand is a medical genius, but she cannot attract trade. She is starving to death down the street.