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Mr. WHITEHOUSE. Madam President, tomorrow we will have the opportunity to deliver a little bit of tax certainty to the American people by advancing the Middle Class Tax Cut Act. This legislation would prevent tax rates from increasing for the vast majority of American families and would preserve an important tax credit that currently helps millions of students and families afford the costs of a higher education.
The Middle Class Tax Cut Act is the right thing to do for the middle class, and I intend to vote for it. The question is, Will it be filibustered--a tax cut for millions of hard-working Americans, filibustered simply to protect the wealthiest Americans from paying a fair share? We will find out.
This is not a new story. In 2001, when President George W. Bush decided to spend a large portion of the surpluses he inherited from President Clinton to cut tax rates across the board, many Democrats opposed it because the tax cuts were unfairly weighted toward the highest income Americans. As a result of this opposition, Republicans were forced to set the tax cuts to expire at the end of 2010.
As 2010 drew to a close, President Obama and many Democrats in Congress, including myself, supported extending the tax cuts for middle-class families but letting the lower rates on income above $200,000 for an individual and $250,000 for a family revert to the Clinton-era levels as was scheduled. Senate Republicans filibustered that effort, refusing to allow the middle-class tax cut without a tax cut for America's wealthiest. Not wanting tax rates to go up on middle-class families still struggling during the recovery, the President and Senate Democrats reluctantly agreed to extend all the tax cuts through this year, which brings us to now. Once again, these tax rates are set to expire.
I would like to keep rates low for middle-class families. Families in Rhode Island are still struggling in the aftermath of the mortgage meltdown on Wall Street, and this is not the time to raise their taxes. But I agree with President Obama that for reasons of fairness and to begin to address our deficit, it would be wise not to extend the Bush tax cuts for high levels of income.
Bear in mind in this discussion that the Middle Class Tax Cut Act would benefit even high-end taxpayers. When we protect the rates for the first $250,000 in income, it is the first $250,000 for somebody making $1 million; it is not just the first $250,000 for a family who makes $100,000 or $185,000. Whether someone makes $100 million or $185 million, they still get the first $250,000 tax cut. If a family, for instance, makes $255,000, they would only see an increase on the $5,000 and only to the Clinton-era rates that were in effect during the 1990s when our economy was thriving. A family earning $255,000 would pay an extra $150 as a result of this bill. Extending the lower tax rates for income above $250,000 for 1 year, as the Republicans have proposed, would add over $49 billion to our deficit. Even in Washington $49 billion is significant money, money that would have to be borrowed and would add to our deficit problem.
Many of the same Republicans who voted in the name of deficit reduction to end Medicare as we know it--deficit reduction was so important to them that they voted on the Ryan budget to end Medicare as we know it and would put thousands of dollars in costs on our seniors--would support deepening the deficit with high-end tax cuts. There is a double standard here, and for most Rhode Islanders these are exactly the wrong priorities when it comes to deficit reduction.
In addition to the deficit concerns, we should let the tax cuts at the top expire just for fairness reasons. Loopholes and special provisions allow many super high-income earners to pay lower tax rates than many middle-class families. According to the nonpartisan Congressional Research Service, 65 percent of individuals earning $1 million or more annually pay taxes at a lower rate than median-income taxpayers making $100,000 or less.
Let me say that again so it sinks in. Sixty-five percent, nearly two-thirds, of individuals earning $1 million or more a year--the vast majority of individuals earning $1 million or more annually--pay taxes at a lower rate than median-income taxpayers making $100,000 or less. Because of the loopholes, because of what the special interests have done, our supposedly progressive tax system is upside down to the point where 65 percent of those earning over $1 million pay a lower tax rate than the median-income taxpayer making $100,000 or less.
Earlier this year we voted on my Paying a Fair Share Act, legislation that would implement the so-called Buffett rule and ensure that multimillion-dollar earners paid at least a 30-percent overall effective tax rate. During debate on my Buffett rule bill, I cited an IRS statistic that the top 400 taxpayers in America in 2008 who earned an average of $270 million each in that 1 year paid the same 18.2-percent effective tax rate on average that is paid by a truckdriver in Providence, RI.
The single biggest factor driving this inequality is the special low rate for capital gains, 15 percent under the Bush tax cuts. The special capital gains rate allows hedge fund billionaires to avail themselves of that so-called carried interest loophole and pay taxes at lower rates than their doormen, secretaries, or chauffeurs. If we let the tax cuts at the top expire, these rates revert to 20 percent instead of 15 percent. Now 20 percent is still a pretty low rate for someone making $100 million a year, but more like what a family making $100,000 a year pays.
Let's also be very clear about one thing: The proposal that Republicans prefer, the tax cut bill introduced by Finance Committee ranking member Orrin Hatch, would raise taxes. It would raise taxes on 25 million lower and middle-income Americans. It would raise taxes on those 25 million Americans still struggling in these challenging economic times. Republicans claim not to want to raise taxes, but the Republican tax bill would let very popular lower and middle-income provisions expire that would cost 25 million Americans an average of $1,000 each. Under the Republican bill, 12 million families would lose part or all of their child tax credit, 6 million families would lose part or all of their earned income tax credit, and 11 million families would lose their American opportunity tax credit which helps pay for college. It provides a $2,500 tax credit for higher education. That popular tax credit has already helped millions of students and their parents pay for college, along with Pell grants, another subject of Republican attack.
Extending the American opportunity tax credit, the college tax credit, through 2013 would cost about $3.2 billion. Republicans believe we cannot afford a $3.2 billion investment in higher education for middle-class Americans, but we can afford $49 billion in continued tax cuts for ultra high-income earners. A $2,500 tax credit might seem pretty small in comparison to the $92,000 average tax break that millionaires, or people earning $1 million a year, would receive from another year of high-end tax cuts, but that $2,500 may make a much bigger difference in the life of that middle-class family with that child trying to get into a college they can afford than that $92,000 would make in the life of somebody earning well over $1 million a year.
Once again, look at the priorities here. Republicans fought to protect the tax loopholes and taxpayer subsidies for big oil. They fought to protect the carried interest tax loophole that lets hedge fund billionaires pay lower tax rates than their chauffeurs and doormen. They want to go after the child tax credit, they want to go after the earned income tax credit, and they want to go after the college tuition tax credit. Those are priorities that, like our Tax Code, for too many Americans are upside down.
I hope Republicans will join us tomorrow in voting to advance a measure that would keep taxes low for the vast majority of Americans, and I urge them to reexamine their proposal to raise taxes on 25 million low- and middle-income Americans.
I thank the Chair, and I yield the floor.
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