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weren't trying to slash the school budget to pieces or anything else to do this that you would have to retract.

What is the outlook now for the Virginia economy over, let's say, the next couple of years?

Governor GILMORE. Well, there is no evidence of any type of downturn in Virginia that would be unseparated from a national downturn. I think it is clear that, if there is a national downturn, we would have one in Virginia as well. There is no evidence of it that we can foresee on the horizon. But even if there was, we are confident that we are in a position to continue to provide the essential services that we ought to provide.

But I want to make one more point that sometimes I think that some members, some individuals in the committee have not fully grasped, and that is that the return of tax money back to the people as an independent value of itself, to improve the quality of life of people and their liberties and freedoms, itself is a value on the table, and it should not be first off the table in the case of a downturn. Instead, we should be demanding in our management to make sure that we select our priorities well and we run our government in the proper way. But that doesn't mean that the taxpayer is the first one to be thrown overboard.

Mr. DAVIS OF VIRGINIA. Well, I appreciate your taking the time to be with us here today. I think your message, when this was first announced, there was kind of everybody was scratching their heads; the pundits weren't sure what to do with it; the papers ridiculed it. You stayed on message, and now you are following through. I think you have made believers out of a lot of people who a couple of years ago weren't sure where all this could-Virginia's economy I think is just a great example of how these work. So thank you very much.

Governor GILMORE. Thank you, Congressman Davis.
Mr. BURTON. Mr. Ose.
Mr. OSE. Thank you, Mr. Chairman.

Governor, thank you for being here today. When I have the opportunity to visit with folks like yourself, who have a long history in elected office, who take the time to come visit, I always learn something, and I appreciate that.

My background is real estate development, which is tied to local land use. I see across the river here a remarkable degree of enterprise and creativity, and I give you and your colleagues credit for that.

One of the things I am concerned about remains the tendency of some here in Washington to, in effect, push or grab decisionmaking that ought to be left to local entities and aggregate it to Washington. I am somewhat amused by what appears to be the Vice President's campaign for mayor in terms of land use decisions and traffic questions, and something like that. And the consequences that it has at the local level from a tax-level perspective in other words, if all that power is aggregated for land use decisions and infrastructure improvements for sewers, and what have you, to a mayor that sits at 1600 Pennsylvania, together with the taxing ability to impose the cost and the benefits, what is the consequence, for instance, across the river in the balance of your State?

Governor GILMORE. Let me say two thoughts. First, we care very much about the quality of life in the localities in Virginia. We never forget for a moment what is going on in Arlington or in Alexandria, or especially in Fairfax. We just never forget that. And so our policy on the spending side, if you will, is to devote more and more money back to the localities for their essential needs.

The lottery money in Virginia this year has passed through the legislature, on my initiative, to be returned to the localities for education, K-12 education, entirely. In addition, old commitments to return money back to support local law enforcement, we are keeping those promises now, and we are sending that back as well. So we care very much about how our policies impact upon the locality.

I think you asked the question, what consequence is there in much of these decisions that we make on localities? Well, you know, it could be the loss of just individual liberty to choose how people are going to live. If we make a concept in Washington, or even in Richmond, that we know how people ought to live, you could begin to deny some choices for people to own their own homes or to have their own cars or to define their own lives, and I am never in favor of that.

Mr. OSE. Looking at your résumé, you were a county Commonwealth attorney. So you have vast experience at the local level, having served there for 6 or 7 years.

Governor GILMORE. I do, although that is a prosecutor's office.

Mr. OSE. You are still dealing with the consequence at the local level?

Governor GILMORE. Every day.

Mr. OSE. And I just cannot hammer home or re-emphasize your point about local people making local decisions for the local benefit-I mean the consequence of that. I want to encourage you to continue on. Frankly, I am trying to keep myself from delving into local land use matters because, I have got to tell you, I have plenty of opportunity; I just don't need to do it. I have enough problems, as a Congressman, considering Social Security or Kosovo or trade, or what have you. I don't need to be mayor also.

I very much appreciate your respect for that, and I thank you for coming today.

Governor GILMORE. Thank you, Congressman.
Mr. BURTON. Thank you, Mr. Ose.

Well, Governor, we really appreciate you taking time out of your busy schedule to be with us. You are my quasi-Governor since I live near Old Town Alexandria, and I am very proud of what you have done. Like I said, I knew when you said you were going to cut that car tax you were going to win that election. I was one of those fellows that looked into the crystal ball way ahead of time, and I don't care what the pundits said; you were right on target.

Thank you again for being here, and thank you for sending Mr. Davis, your old college buddy, to be a Congressman here. He has done a great job.

Governor GILMORE. We think so, too. Thank you, Mr. Chairman.
Mr. BURTON. Thank you, Governor.
We stand adjourned.
(Whereupon, at 4 p.m., the committee was adjourned.]

NATIONAL PROBLEMS, LOCAL SOLUTIONS:

FEDERALISM AT WORK

PART II
TAX REFORM IN THE STATES

THURSDAY, APRIL 15, 1999

HOUSE OF REPRESENTATIVES,
COMMITTEE ON GOVERNMENT REFORM,

Washington, DC. The committee met, pursuant to notice, at 10:25 a.m., in room 2154, Rayburn House Office Building, Hon. Dan Burton (chairman of the committee) presiding.

Present: Representatives Burton, Shays, Ros-Lehtinen, McHugh, Horn, Mica, McIntosh, LaTourette, Hutchinson, Biggert, Walden, Ose, Ryan, Chenoweth, Towns, Maloney, Norton, Cummings, Kucinich, and Schakowsky.

Also present: Representatives Lazio and Meeks.

Staff present: Kevin Binger, staff director; Barbara Comstock, chief counsel; David A. Kass, deputy counsel and parliamentarian; John (Timothy) Griffin, senior counsel; John Mastranadi, investigator; James Wilson, chief investigative counsel; Mark Corallo, director of communications; John Williams, deputy communications director; Carla J. Martin, chief clerk; Lisa Smith-Arafune, deputy chief clerk; Nicole Petrosino, legislative aide; Corinne Zaccagnini, systems administrator; Jacqueline Moran, legislative aide; Phil Schiliro, minority staff director; Phil Barnett, minority chief counsel; David Sadkin, minority counsel; Ellen Rayner, minority chief clerk; and Jean Gosa, minority staff assistant.

Mr. BURTON. Good morning, a quorum being present, the Committee on Government Reform will come to order. And I ask unanimous consent that all Members and witnesses opening statements be included in the record. And without objection, so ordered.

Good morning. How are you? We have the Honorable Rick Lazio here with the Governor. Today we are to going to hear from Governor Pataki of New York. Governor Pataki inherited a legacy of high taxes and out-of-control spending. Since his election in 1994, he has sought to bring fiscal responsibility to the government in Albany and was soundly affirmed by his reelection in 1998.

Governor Pataki's record of tax reform is nothing short of remarkable. He has cut income taxes by 25 percent, for a savings to the taxpayer of $3 billion. And in 1996, he worked to repeal school taxes, farm taxes, the death tax, and the 10 percent real estate transfer-gains tax, otherwise known as the Cuomo tax. It is interesting to note that with all of these tax cuts, the New York economy has generated more income tax revenue than it ever did under the previous Governor.

I see that Mr. Waxman is not here. Do any of my colleagues have any kind of opening remarks they would like to make on the Democratic side? Mr. Towns.

Mr. TOWNS. Thank you very much, Mr. Chairman. Let me say that I am delighted to see my Governor here and, of course, though more than cutting taxes, I think the thing that has happened is the fact that he has increased tourism in the State of New York which has also lead to additional income and revenue. And I think that is the thing that should be highlighted. You know, if you have other things going and then you can produce revenue, then you can look at taxes, I think that the Governor has done that.

And I would like to salute him for that, of course, in terms of bringing additional folks in to our State, spend more money. And I think that is the key. So, Governor, delighted to see you and happy that you are here. And to say that you know when you talk about cutting taxes, you didn't just look at it in one way, you looked at it from a comprehensive approach. And I think that is the thing that makes sense to me.

Governor PATAKI. Thank you.
Mr. TOWNS. Glad to see you.

Mr. BURTON. Thank you, Mr. Towns. Do any other Members have opening statements they would like to make? Mr. Shays.

Mr. SHAYS. Just very briefly. Governor, it is great to have you here. I love what you have done for the city of New York, which is a place where a lot of my constituents work. You have done a tremendous job, and Connecticut is a better place because of what you have done for New York.

Governor PATAKI. Thank you.

Mr. BURTON. Any other comments? If not, the Honorable Mr. McHugh of New York who is one of my subcommittee chairman and a very fine representative in the Congress of the United States from New York will introduce the gentleman who is going to introduce the Governor.

Mr. MCHUGH. Thank you for the chance, Mr. Chairman. Thank you, sir. Let me, first of all, Mr. Chairman, thank you for the continuation of these very timely and very important hearings. It is no secret to the vast majority of Americans that this is the beloved tax day. Like millions and millions of citizens of this great Nation, I was trying to finish up my taxes last evening.

And, in fact, in my case, it was my State. I can tell you from personal experience that, thanks to the efforts of our honored guest here today, I still had to pay, but I had to pay significantly less. Governor, I thank you for that savings and for the savings on my aspirin budget that your hard work has accrued to me personally.

It is, as you noted, Mr. Chairman, my honor today to introduce a gentleman who is accompanying the Governor at the front table. New York is, if nothing else, a highly diversified and varied State. Sometimes we tend to divide ourselves geographically and to differ on things not depending, not so much on our partisan politics, but on our location. But I can tell you that more often than not, we have a delegation in this city and in this Congress that works to

gether incredibly well and works across varying lines of interest, be they geographical or otherwise.

I think that is particularly true with my friend Rick Lazio. Rick has done an extraordinary job, not just as a Member of this House and this Body, but in his duties now as deputy majority leader. He is the individual to whom all of us look, Democrat and Republican alike, to provide access to our leadership, to ensure that the needs of New York and our views and concerns are heard and felt.

But even more to the point, in his service as chairman of the Housing and Urban Development Subcommittee, where he has done a tremendously effective job fighting for adequate affordable and safe housing for every New York State resident, be they from Massena or Montauk or somewhere in between. So it is a delight to see him somewhere other than in my district, where he has been spending a considerable amount of time in recent weeks and days. As he examines his future I feel very confident that, whatever path he chooses, it will be highly successful.

So with that, Mr. Chairman, I appreciate the honor of introducing my friend, our colleague, Congressman Rick Lazio. Rick.

Mr. BURTON. Mr. Lazio.

Mr. LAZIO. Thank you, Mr. Chairman. Thank you very much, John, for those very generous remarks. And, Mr. Chairman, and my colleagues on both sides of the aisle, how pleased I am to see you here. Great vantage point to be down here looking at you to be recognized. T.S. Sullivan wrote, April is the cruelest month. As some people say it was because of his reflection on childhood indiscretions, about unpredictability of this month in terms of its weather, but I think it was just because he failed to pay his estimated quarterly taxes. And so today is a great day to be hearing from one of the Nation's premiere tax cutters.

He is a perfect choice to talk about tax reduction at the State level. Governor Pataki has received numerous awards for his focus on economic strength and recovery through a fairer tax system from New York's people and for its businesses. Governor Pataki, as the chairman has noted, has cut personal income taxes for New Yorkers by 25 percent. You may want to look at the burden of high property taxes.

Under the previous administration, New Yorkers, particularly senior citizens, were losing their homes because they couldn't afford to pay their property taxes. Governor George Pataki has slashed property taxes an average of 27 percent and a staggering 45 percent for New York seniors.

Now, tax reform may sound like a dry, dull subject; but when you meet an older person who has been able to stay in the home they love as a result of the Governor's reforms, you will agree that taxes are truly a quality of life issue.

And as a clear sign of the Governor's intention to New York's economy of the future, New York became the first State to declare the Internet a tax-free zone. Governor Pataki has cut taxes 36 times in his first 4 years in office, more than any other Governor in the Nation, saving New York taxpayers and businesses $19 billion so far. In fact, in 1996, he cut taxes more than all other States combined.

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