What are the priorities?
This week, the House will vote on a bill that extends a number of tax cuts. I support targeted tax cuts that focus on working families and help small businesses grow and invest in our economy. What I do not support is the direction taken by congressional leaders in Washington with this bill, which targets tax relief to the wealthy at the expense of a balanced budget and relief for the middle class.
Since I first came to the Maine Legislature, I have been a consistent advocate for fair tax policies that help working people. In Congress, I have supported bills to extend the exemption from the Alternative Minimum Tax that is hitting middle class families, extend the expanded 10% bracket to help low-income workers, extend the marriage penalty reduction to create greater fairness for married people, and extend the $1,000 Child Tax Credit to help working families. There is bipartisan agreement that these tax cuts should be extended because they target their help to working families.
By contrast, this week's bill focuses on the wealthiest people in America. The bill gives almost half of its tax cuts to people who make more than $1 million per year. Fewer than 1% of American households are at this level, yet they get half the benefit of the bill.
Furthermore, the biggest piece of the tax cut bill is an extension of the cuts on dividends and capital gains. What does this mean for most people? 55% of American households earn $40,000 or less each year. For this group, the average annual benefit of the extension for capital gains and dividend income tax breaks is only $7. Compare that to the average tax benefit from this bill for the millionaire householdsthe ones getting half the benefit of this billwhich is more than $32,000. That is wrong.
In fact, to see if this type of tax break was fair for Maine, I asked the House Committee on Government Reform's Special Investigations Division to prepare a report describing the impact of these types of tax cuts in Maine. The report found that 94% of taxpayers in Maine's second congressional district would receive an average of only $52 in tax cuts from the capital gains and dividend relief when it was originally proposed.
Remember that only two weeks ago, Congressional leaders forced a budget through the House to make room for these tax cuts. That budget cuts funding for student loans, health care assistance, and family farmer aid. Now, in exchange, the budget room is being used for tax breaks that mostly benefit people who make more than $1 million each year.
This is simply the wrong priority for Maine, and for America.
As our country struggles to deal with the war in Iraq and the challenges of hurricane recovery - all while people struggle to heat their homes, feed their family, and afford their medications - we need to seriously reassess our fiscal priorities.
Furthermore, it is important to note that in this week's tax bill, Congressional leaders had a very clear choice. The room that they had created under Congressional budget rules gave them space to include either the dividend and capital gains tax cut focused on the wealthy, or relief from the Alternative Minimum Tax (AMT), which is hitting the middle class, but not both. Their decision to include the dividend and capital gains piece makes it pretty clear where their priorities lie.
It is also important to keep in mind that these cuts come at a time when our country's $331 billion budget deficit for 2005 is the third worst in history. In fact, over the last three years - 2003, 2004, and 2005 - the current administration has overseen the three largest deficits in our nation's history. Tax relief is important, but it also should be focused where it is needed most to help people and to help our economy. It should not sink us deeper into debt.
There are many areas of our tax law that need to be fairer, and where we have a real opportunity to help working people. The people of Maine deserve targeted tax relief and a fiscally responsible budget. These remain my