Mr. President, if I may interject, I believe I have the floor. Mr. President, I wish to interject just for a moment to sort out the order on the floor. I apologize to the Senator from Arizona for the last exchange. I thought I had the…
Mr. President, if I may interject, I believe I have the floor.
Mr. President, I wish to interject just for a moment to sort out the order on the floor.
I apologize to the Senator from Arizona for the last exchange. I thought I had the floor at that point. I understand now this is a colloquy.
I think Senator Ayotte seems to be in order, but the chairman of the Appropriations Committee is here, so perhaps she could be recognized at the conclusion of Senator Ayotte's remarks. I see Senator Inhofe, so if he could follow Senator Mikulski and then I will follow Senator Inhofe, I offer that as a proposal.
The Senator has that right, and she will yield to him.
I yield for a question.
Having the floor, why don't I propose now that at the conclusion of my remarks Senator Toomey be recognized.
Madam President, I am rising today in strong support of Leader Reid's proposal to stop the sequester. We need to reduce our debt and deficit. We should do so in a thoughtful manner.
We have so often on this floor heard our Republican friends criticize Democratic legislation as job killing: a job-killing bill, a job- killing proposal. We hear that all the time. Often that charge has been without much factual support, but it is part of the common rhetoric in this room. But now we face an event that actually is expected to cause the loss of 1 million jobs, and yet so many Republicans support these cuts in their fixation, frankly, on what economists call budget austerity, cutting your way out of a recession.
How has the budget austerity record worked? There is a record now, because a lot of countries have tried it--from Spain to Portugal to Greece, countries slashed spending to address deficits in the name of budget austerity. Their record? Lousy. Persistent double-digit unemployment and negative economic growth.
The U.S. unemployment rate of 7.9 percent--which is actually even higher in my home State--is for sure too high, but it is far better than the rate of 26 percent unemployment in Spain and Greece, the record of 16 percent unemployment in Portugal. Our 2.3 percent growth rate may seem inadequate, and it is; but as we recover from the deepest recession we have seen since the Great Depression, it is much better than the negative growth rates in the countries that took the austerity path. The results are clear. The evidence is in from the austerity experiments. The countries that cut the deepest have been hurt the most.
If we want to continue growing our economy and creating jobs, we need to resist the European path that is championed by Republican austerity advocates. We need to maintain the balanced approach that has brought the U.S. economy up out of recession--admittedly, not fast enough. But look at what the alternative has been.
Leader Reid's bill would replace the indiscriminate cuts of the so- called sequester with targeted cuts to agricultural subsidies and defense spending--as the chairman of the Appropriations Committee said--after the troops are home when the costs can necessarily come down, paired with revenue not from raising taxes but from closing a loophole, a tax loophole that allows the highest paid people in America to pay lower tax rates than regular middle-class families.
I heard the passion of Senator McCain--and I respect him immensely-- on the harm the sequester will do to the military. We have a way out. It is a question of priorities. Do you really want to protect the military from these cuts or is it more important to protect the low tax rates of billionaires? That is the choice, and that is the choice they are making. Leader Reid's is a smart and balanced bill, and I hope it will pass.
To put this into some context about where we are on spending cuts, the ranking member of the Budget Committee said this week that President Obama was opposed to spending cuts. I have the transcript of what he said in
committee here: The President believes no spending, even wasteful spending, should be cut.
Well, let's look at the facts. Through the Budget Control Act of 2011 and several other measures, we have cut spending almost $1.5 trillion in the budget period of the next decade. When you include interest savings--the top part--from that reduced borrowing, it comes to $1.7 trillion in spending cuts and associated interest savings.
On the revenue side, we have only generated a little over $700 billion from ending the Bush tax cuts for the top 1 percent--at least over $450,000 in income--and from the associated interest savings. This together puts us $2.4 trillion in deficit reduction toward our goal of $4 trillion in total deficit reduction that most economists agree is needed to stabilize our budget. But notice, in the balance between spending cuts and new revenues, spending cuts are ahead by $1 trillion.
The ranking member of the Budget Committee said President Obama believes no spending, even wasteful spending, should be cut. And he is $1 trillion ahead on spending versus revenues. We have cut $7 of spending for every $3 of revenue, even though right now U.S. Government revenue is at its lowest percentage of GDP in more than 50 years, more than half a century. Our proposal going forward is 50/50, spending cuts and revenues. So let's not pretend we are immune to or allergic to spending cuts. There have been more spending cuts than new revenues. We have tried to find a balanced approach and so far, in this $2.4 trillion, we have not even looked at tax loopholes, at spending that happens through the Tax Code that mostly benefits big corporations, special interests, and super-high-end American earners.
Take a look at how big that amount is. We collect, in individual income tax revenue, a little over $1 trillion every year from individuals. But the total liability of individuals under the Tax Code is over $2 trillion. What happens to this other $1.02 trillion? It flows back out. It never comes into the government as revenues. It goes back to people as tax deductions, loopholes, and various ways that we spend money through the Tax Code.
If you look at the corporate income tax side, it is about the same. We look at our corporations--which, by the way, contribute about one- sixth as much into our national revenue as they used to. They are at an all-time low in terms of contributing to our national revenues in the last couple of decades--60 years, I want to say. They are at $118 billion that actually gets collected and becomes revenue. And there is another $157 billion that is corporate tax liability, but we let them get it back through loopholes in the Tax Code. You put them together and you have $1.16 trillion that we can use to help defeat or replace the sequester.
It is a big deal to look at the tax spending as well as just the revenues that come in. We have done nothing on that yet. That should be part of this discussion. That is what we do in the proposal I put out.
Last year we spent a great deal of time in this body debating whether the top income tax rate should be 35 percent or 39.6 percent, and we ultimately set the rate at 39.6 percent for families whose income is over $450,000. But what we know is that many of those families will never pay anything close to that rate. The Tax Code is riddled with those special provisions that I talked about, the loopholes, the tax spending that disproportionately benefits high-income folks. They are special deals for special interests. Of them all, perhaps the most egregious is the so-called carried interest loophole that allows billionaires--literally billionaires--to pay lower tax rates than regular families. That is why in the last election it became apparent that Mitt Romney was paying something like an 11-percent tax rate.
It is not just Mitt Romney. The IRS tracks the effective tax rates paid by the top 400 highest income earners in the country. In 2009, the last year they have data, the top 400 earned an average of over $200 million each, 1 year's income, over $200 million each. What did they pay in taxes on average? About 20 percent. About 20 percent on average. Some paid more. The nominal rate was supposed to be 35 percent. How many Mitt Romneys are there paying 11 percent in order to average to 20 percent? And 20 percent is the same rate that an average firefighter pays in Rhode Island, or a brickmason pays in Rhode Island. Don't tell me a billionaire hedge fund manager cannot pay a higher tax rate than a brickmason.
It is not just the top 400. The Congressional Research Service estimates that about a quarter of people in America who make more than $1 million a year, about a quarter of them pay lower tax rates than over 10 million middle-income taxpayers. In that sense the Tax Code is upside-down in favor of these high-income earners. Loopholes let them do that.
So we cut across all these loopholes with the so-called Buffett rule. They are supposed to pay 39.6 percent. The Buffett rule says: Ok, take all the loopholes you want, but you cannot go below 30 percent. We will let you take off 9.6 percent of the rate the law says you are supposed to pay but you cannot go below 30 percent. You can't go to 11 percent. You cannot be paying lower than a brickmason pays. That is in our sequester replacement bill. It produces $71 billion.
High-earning professionals can perform another trick. They can avoid paying Social Security and Medicare taxes simply by calling themselves corporations for tax purposes. You heard the Republican Presidential candidate say corporations are people. This is the flip side. These people are corporations. If you make enough money you can afford to turn yourself into a corporation to dodge paying your Social Security and your Medicare contributions. So the second item on my list closes that loophole too, which is another $9 billion.
The next item on the list contributes $3 billion by ending special depreciation rules for private jets. Private jet owners can depreciate their aircraft faster, for tax purposes, than commercial aircraft. I am very happy for anybody who is successful enough to have a private jet. But that luxury need not be subsidized by taxpayers. Setting aside the need for this because of the sequester, this is a change that makes sense just on fairness grounds. It stands on its own and it is another $3 billion.
The fourth provision in my bill would end tax breaks for big oil companies. Over the past decade the big five oil companies have collectively enjoyed over $1 trillion in profits--yes, trillion with a T. Repealing taxpayer giveaways to them is something we should be doing anyway. It is another $24 billion toward getting rid of the sequester.
The final provision in my plan helps replace the sequester by ending a tax break that, unbelievably, rewards manufacturers that close up shop in the United States and move jobs to other countries. It does that by allowing those corporations to indefinitely delay paying taxes on profits from those foreign overseas operations. Ending the deferral loophole for companies that manufacture goods overseas for sale to American customers is something we should do anyway to support our domestic manufacturers. It adds almost $20 billion toward replacing the sequester cuts.
Each one of these five provisions would make the Tax Code more fair for ordinary Americans. I love our chairman of Appropriations. She can speak to issues on the floor of the Senate like nobody else. When she said these are cushy, lobbyist-driven earmarks, she is dead right. They do not deserve to stand on their own. And we can get rid of some of the smelliest ones and spare ourselves the sequester and the loss of a million jobs at the same time? Gosh, I think we ought to be doing that.
I strongly support Leader Reid's bill to replace the sequester cuts with a 50/50 mix of revenue and spending. But I also want to show we can avoid the sequester for the coming year by looking at the vast tax spending we do through loopholes and gimmicks in the Tax Code--usually for the benefit of powerful corporations, special interests, and very high-income individuals. When you set that against the economic harm the sequester is going to cause to our country, closing those loopholes should be a higher priority, on economic grounds and on grounds of fairness.
I yield the floor.