Middle-Class Tax Increase

Floor Speech

MIDDLE-CLASS TAX INCREASE -- (Senate - August 03, 2009)

Mr. ALEXANDER. Mr. President, a few minutes ago, I was waiting to give a television interview with MSNBC. The White House press secretary, Robert Gibbs, was on. He said a most astonishing thing. He was there, obviously, for the purpose of an impromptu press conference to correct what I thought was a truthful impression left yesterday by two members of the Obama administration. Both Mr. Summers and Mr. Geithner yesterday did not rule out the possibility of a middle-income tax increase. That was widely reported all over the country today. Apparently, they were taken to the woodshed this morning, and Mr. Gibbs was sent out to say: Oh, no, we are not going to raise taxes on middle income Americans.

But that is misleading, at best, to the American people. Most people know that. An article in the New York Times on August 1, was titled: ``Obama's Pledge to Tax Only the Rich Can't Pay for Everything, Analysts Say.''

Among those quoted is Leonard Burman, ``a veteran of the Clinton administration Treasury and director of the nonpartisan Tax Policy Center.''

``This idea,'' he says, ``that everything new that government provides ought to be paid for by the top 5 percent, that's a basically unstable way of governing.''

I am sure the Senator from Arizona remembers Isabel Sawhill's distinguished service. She had some comments on tax increases as well. ``There is no way we can pay for health care and the rest of the Obama agenda, plus get our long-term deficits under control, simply by raising taxes on the wealthy,'' said Isabel V. Sawhill, a former Clinton administration budget official. ``The middle class is going to have to contribute as well.''

I wonder if the Senator from Arizona, who is a veteran member of the Finance Committee, is surprised to see, first, the two top finance people for the Obama administration say we are not going to rule out a middle-class tax increase, and then all of a sudden today, the Obama administration says no, nope, we are going to rule that out again. What is going on?

Mr. KYL. Mr. President, I say to my colleague, I had the same impression yesterday when I saw Mr. Geithner and Mr. Summers on television. They, frankly, were recognizing the reality of the situation. I did not think that much of it because the truth is, the people my colleague has quoted are absolutely right. You cannot do all the things the President wants to do without raising taxes, and inevitably that will be on the middle class.

To put in the Record what both Treasury Secretary Geithner and Mr. Summers said--this is as reported by George Stephanopoulous, ``This Week'' host for ABC. He said:

To get the economy back on track, will President Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a ``This Week'' exclusive, Treasury Secretary Tim Geithner told me, ``We're going to have to do what's necessary.'' Then Stephanopoulous continues:

When I gave him several opportunities to rule out a middle-class tax hike, he wouldn't do it. ``We have to bring these deficits down very dramatically,'' Geithner told me. ``And that's going to require some very hard choices.''

Of course it is. Secretary Geithner is right. It is pretty hard to deny.

Then the National Economic Council Director, Lawrence Summers, was asked by Bob Schieffer on CBS if taxes could be raised for middle-income Americans. Summers said:

There is a lot that can happen over time. It is never a good idea to absolutely rule out things no matter what.

Then he said that what the President has been completely clear on is he is
not going to pursue any of these priorities--not health care--in ways that are primarily burdening middle-class families. That is something that is not going to happen.

There seems to be a subtle switch here to, first of all, never say never and, secondly, say the tax burden is not going to primarily fall on middle-class Americans.

I say to my colleague, when you look at some of the provisions that are in the House of Representatives bill on health care, in the Senate HELP Committee on health care, and some of the things that are being considered by the Finance Committee, in all three situations, you do have taxes on working American families, middle-class families.

I think that what the Secretary and Mr. Summers said Sunday is actually more true than what the press secretary tried to make it out to be. It is simply the recognition of a reality--that you can't pay for all of this and not impose taxes on middle Americans.

Mr. ALEXANDER. Mr. President, I agree with the Senator. His point is a valid one. It is not a matter or are they going to propose middle-income tax increases. In the health care plans, we already see that happening. For example, in the proposed payroll tax or jobs tax on employers to pay for the proposed health care plan coming out of the House of Representatives, there is a very large tax. It could be up to 8 percent of payroll.

Quoting from the Wall Street Journal editorial of July 30:

So who bears the burden of this tax? The economic research is close to unanimous that a payroll tax is tax on labor and is thus shouldered mostly if not entirely by workers.

This is a middle-income tax increase already proposed. Then there is another issue that bothers me, especially as a former Governor. Our current Governor of Tennessee called it the ``mother of all unfunded mandates.'' If we add, as is proposed by both bills, another 20 million people to Medicaid--which is for low-income people, and the States help pay for that--that is more than 300,000 new people for Tennessee.

The estimates we have gotten from Tennessee's department of Medicaid, TennCare, is that would cost enough money to equal the amount raised by a 5-percent new State income tax. If we actually pay doctors a sufficient amount to cause them to see these people who are dumped into Medicaid, then Tennessee would need a total of a 10-percent new State income tax. That is another middle-income tax increase.

Mr. KYL. Mr. President, I would just ask my colleague also if he is aware that there are some other proposals in these various Democratic bills. One is that all individuals would be required to buy medical insurance. There would be a penalty if they refused to do so that would go directly to their income tax. I believe the latest proposal I saw was 2.5 percent of your income tax. There would be a penalty imposed if you didn't buy insurance.

Now, what happens to, let's say a young man or woman who has just graduated from college, who are no longer on their parents' insurance policy and they are now going to be required to go into a risk pool along with everybody else? Or let's say they have been paying a modest amount for their insurance through their college, perhaps. What is likely to happen when they are thrown into the pool of other Americans, all of whom are required to purchase insurance? Will their premiums go down, or what is the estimate of what will happen to the premiums of these young people?

Mr. ALEXANDER. The Senator makes a good point. If you are young and in America and you are forced into the health plan that is passing the House, your costs are going to go up, and that is a mandate or a tax that absolutely will go up. So the Senator is exactly right.

For every young person in America who is in this plan, their health care costs are, by definition, going to go up. Their health care costs are going to go up to help pay for older Americans whose benefits, I might add, are going to go down because half of the health care plan is going to be paid for by Medicare cuts. These Medicare cuts will not make Medicare solvent, but grandma's Medicare benefits are going to be cut to help pay for this new health program.

Whether it is a benefit cut or a tax increase, there are a lot of middle-income Americans who are already looking at a very big change in their economic circumstances.

Mr. KYL. Mr. President, I know we just have a couple of minutes left. There are several other examples--one that is being considered by the Finance Committee, I know. It is to amend the provision of the Tax Code by which if you itemize your deductions and you have medical expenses that exceed 7 1/2 percent of your adjusted gross income, you would get to deduct that from your income tax.

There are two different proposals pending in the Finance Committee. In both cases, there would be a new tax imposed. The problem is, according to the Joint Committee on Taxation, replacing the existing deduction with the new provision would increase taxes by $48 billion over 10 years. Who does it hit? Fifty-two percent of the taxpayers who claim the deduction earn under $50,000 a year. These are not the wealthy Americans the President was speaking of. Forty percent of the taxpayers who claimed the deduction are over the age of 65.

I guarantee you in Arizona we are going to look at that provision because a lot of our folks are over 65 and they rely upon the income-tax code to ensure if they have a catastrophic expense in any given year that they have the ability to deduct a portion of that.

Mr. ALEXANDER. As the Senator knows, we have heard about limited taxes before. We actually have a millionaire tax on the books, passed in 1969, 40 years ago, where 155 high-income Americans were avoiding paying Federal income tax. There was the cry: So let's tax them. And so we did.

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