Mr. President, Abraham Lincoln is quoted as saying: I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the…
Mr. President, Abraham Lincoln is quoted as saying:
I am a firm believer in the people. If given the truth,
they can be depended upon to meet any national crisis. The
great point is to bring them the real facts.
There have been a number of inaccurate claims over the past several weeks accusing Democrats of proposing tax hikes. Nothing could be further from the truth. So let me set the record straight, as Lincoln said, and bring them the real facts.
Democrats are proposing to extend a tax cut for 100 percent of taxpayers. Under the Democratic proposal, all taxpayers get a tax cut. Those lower income, those middle income, and those upper income all get a tax cut. Everyone does. Millionaires get a tax cut under the Democratic proposal, billionaires get a tax cut under the Democratic proposal, and all taxpayers who pay ordinary income tax are going to get a tax cut.
Why is that? It is very simple. Because even if your income is above $200,000 for an individual or $250,000 for a family, you are still getting a tax cut for your first $200,000 of income or the first $250,000 of income. So you are getting a tax cut. Everybody is getting a tax cut. I want to make that clear: All Americans get a tax cut under the Democratic proposal.
Even though the most wealthy are also getting a tax cut under the Democratic proposal, those on the other side of the aisle want to give an even greater tax cut to those earning above $200,000 as individuals or $250,000 as a couple. So let me repeat: Everyone gets a tax cut under the Reid bill. The other side of the aisle says: Okay, maybe that is so, but they want to give an even greater tax cut to those earning over $250,000. That is the fact.
An awful lot of people think the Democratic bill does not cut taxes for those above $200,000 and $250,000. It does. It does. The facts are clear. The numbers don't lie. It does. Everyone gets a tax cut. So there should be no question about that.
As I said, my colleagues on the other side of the aisle are threatening to oppose a middle-income tax cut, which actually is a tax cut for everybody. They say, oh, no, don't do that. They say, do that, but then add a greater tax cut for those top 2 percent of the wealthiest of Americans.
But let's go back and ask ourselves why are we here, in part? These tax reductions were instituted in 2001, at a time when our country had record surpluses. I think the total tax cut in 2001 was projected to be about--I may be off a little here--$1.5 or $1.6 trillion over 10 years, at a time when our Nation had a projected surplus of about $3 trillion or up to $5 trillion. I have forgotten exactly, but it was way above the 2001 tax cut. That is why, in large part, the 2001 Congress decided, well, we have these big projected surpluses, so let's give some of it back to the people. I voted for it.
That is why I voted for it. It made sense to me--with the great projected surpluses--to take a little less than half of that and give it back to people in terms of tax cuts.
But times have changed. In the wake of two wars that have cost over $1 trillion, unpaid for--Iraq and Afghanistan--and also the 2008 financial collapse that very much hurt our economy, times have changed since 2001. As a consequence, our Nation now is faced with record debt, and we cannot continue to spend money we don't have. We have to put our Nation back on solid fiscal ground. So a lot has happened since 2001.
In addition, something else has happened, regrettably. Today, the average household income indexed for inflation is lower than it was when the tax cuts for the wealthy were put into effect. This means more people are making less money now than they were when these cuts were signed into law. Today, American families have less money to spend on their mortgages, gasoline, and groceries, for example. Actually, including benefits, Americans are not as well off as they were 10, 15 years ago.
These cuts were enacted in 2001 for all Americans. Those top two rates for the wealthiest 2 percent of Americans has cost future generations nearly $1 trillion. I think it is bad economics to continue these highest income tax cuts without evidence they actually solve America's economic woes. They don't. It is especially bad economics when our Nation's debt has increased by $10 trillion since they were first enacted.
Hard choices need to be made as we work to get our debt back to sustainable levels. We are all going to be asked to contribute. We need to make sure the most fortunate pay their fair share to deficit reduction as well. Again, they are already getting a tax break under the Democratic proposal. Everyone gets a tax cut under the Democratic proposal, but it is wrong to go further and say those making above $250,000 should be getting an even greater tax cut.
With a greater contribution from them, we could more easily work to get our Nation's debt down to manageable levels.
Some have argued we cannot let the tax rates expire for the wealthiest Americans--the top 2 percent--because they are ``small business owners.'' Let me address that and marshal the facts, as Abraham Lincoln would ask us to do.
Being wealthy is not the same as being a small business owner. One can be very wealthy in America but not be a small business owner. Some might have us believe there are 1 million small business owners earning over $200,000 a year. How do they get that number? They get that number from an estimate prepared by the Joint Committee on Taxation, a bipartisan group that gives us accurate data--both Republicans and Democrats, Senators and House Members.
The Joint Committee predicts that in 2013 there will be about 940,000 taxpayers with some business income in the upper two tax rates. But that Joint Committee estimate isn't the number of small businesses. That is a different number. Instead, it is the number of all individuals in the top two rates who receive any amount of income, from a passthrough business or from rental real estate, royalties, estates or trusts. That number of 940,000 taxpayers does not tell us whether the taxpayer spent any amount of time actually working in the business or if that taxpayer is merely an investor sitting on the sidelines. In addition, that number does not tell us whether the income is from a large business or from a small business. It can be a large business passthrough. So that number of 940,000 doesn't tell us is it large or is it small. It does not tell us if the business actually even employs anybody. We don't know that. There are a lot of taxpayers at that bracket who don't employ anybody. They are not small businesspeople.
So that 1 million number being thrown around includes taxpayers who, for example, invest in publicly traded partnerships which can be purchased on the New York Stock Exchange similar to any other stock. They are not small businesses as ordinary Americans think them to be. The 1 million number also includes celebrities and sport stars who receive income from speaking engagements. They are not small businesspeople, but yet they are lumped into that same number. Americans wouldn't regard sports celebrities as a small businessperson. That is not right.
That 1 million number also includes best-selling authors receiving royalties for book sales. That 1 million number includes partners in law firms and hedge funds who receive their income as a share of a partnership distribution. They are not a small business. The 1 million number also includes
wealthy individuals who rent out their vacation homes for just a few weeks a year.
Both President Obama and Governor Romney would be considered small business owners in 2011 under this definition. I wouldn't think they are small businesspeople, Americans don't think they are small businesspeople, but they would be included in the definition the other side bandies about.
In reality, only a very small fraction of the top earners actually own or control or manage a business that is small and has hired anyone. I have forgotten the exact number, but it is a small number. It isn't sound fiscal policy to extend tax cuts for the wealthiest 2 percent of Americans just because a small portion of them have income from a business and a tiny portion of them manage a small business. But that is what some would have us believe. I don't have the number with me, but it is very small. There aren't very many at all.
Finally, the argument that higher taxes on the wealthiest hinders job creation is tenuous at best. Why do I say that? I say that because even the nonpartisan Congressional Budget Office found that extending the high income tax cuts for those in the top two rates was the least effective way of creating jobs among a list of alternatives commented on by the Congressional Budget Office. As I recall, the top of the list were items such as payroll tax. If we cut the payroll tax, that is a big job creator. If we extend unemployment insurance benefits, that is a big job creator. Down at the bottom of the list of job creation on a dollar-for-dollar basis is extending the 2 percent top rates. That creates very few jobs, according to the Congressional Budget Office.
Actually, it hurts job creation, according to the Congressional Budget Office. Why? It found that extending the high income tax cuts actually reduces the gross domestic product and the number of jobs over 10 years. Why? Because doing so increases the deficit. The CBO said that actually extending the top two rates is a job reducer, not a job creator--a job reducer--because it would add to the deficit and, in doing so, all things being equal, would lose jobs.
So despite efforts to hide behind small businesses, the fundamental question is, What is fair? What is best for our country? Should we drive up deficits further, reducing growth as a result by extending the tax cuts for the top 2 percent? Don't forget, we are already reducing their taxes under the Reid bill. Should we tame our deficits by ending Medicare as we know it and cutting important social programs to the bone? The more those top two rates are extended, the more we have to cut someplace else. It is just mathematics. It is a choice we have to make in our country. There is no free lunch. We know that. We can't have our cake and eat it. Life is choices. Our fiscal situation needs choices. We have to decide what makes the most sense or should we control our deficits through a balanced approach that thoughtfully cuts spending and ask the wealthiest 2 percent to contribute no more than they did 11 years ago? Clearly, as we reduce our debt and try to cut spending, there is no question about that. There is also no question that there has to be some combined income tax increase along with the spending cuts to be able to reduce our budget deficit.
The answer is clear: We should vote for Leader Reid's bill and continue down the path toward responsible deficit reduction. I wish to make the point again, if it wasn't clear. The Reid bill reduces tax rates for all Americans, middle income and upper income, because we have a marginal rate system. The most wealthy have to pay in the 10- percent bracket, then they pay in the 15-percent bracket, then they pay in the 25-percent bracket, then they pay in the 28-percent bracket, all the way up to the top bracket today which is 35 percent. They pay in all brackets. So what we are saying is we are going to reduce your taxes; we are going to make sure you stay at those low rates for the next year so you, therefore, are going to pay less in income taxes, even if one is a billionaire.
Let's go with the Reid bill. It is fair. It is the right course. I hope the Senate adopts it and we get enough votes--60 votes--to get this passed.
I yield the floor.