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Mr. WHITEHOUSE. Madam President, tens of millions of middle-class families face the distinct possibility of higher tax rates in January. With so many Americans who are still struggling to find their economic footing after the deepest recession of our lifetimes, these looming tax hikes would be hard for those middle-class families, and they are completely unnecessary.
Newspaper stories day after day on the so-called fiscal cliff often omit that the Senate has passed legislation to shield 98 percent of families and 97 percent of small businesses from the income tax part of this so-called fiscal cliff.
We passed the Middle Class Tax Cuts Act on July 25 of this year. We sent the measure to the House of Representatives. Did Speaker Boehner and the Republicans in the House promptly pass this popular bill and send it to President Obama for his signature? Did they move to protect 98 percent of middle-class families from this tax hike in January? No. They decided to hold the middle-class tax cuts passed by the Senate hostage in an attempt to push for tax cuts for the folks they care about the most, the top 2 percent of the highest earning households.
Republicans fighting for millionaires and billionaires is not a new story. In 2001 President George W. Bush decided to spend a large portion of the surpluses he inherited from President Clinton to cut tax rates. Many Democrats opposed him then because the tax cuts were unfair by favoring the highest income Americans. To overcome that obstacle, the Republicans resorted to a parliamentary technique of budget reconciliation, a maneuver that allowed for passage of their tax cuts but forced them to expire after 2010, at the end of the 10-year budget window.
So we scroll forward to 2010. As 2010 ended, President Obama and many Democrats in Congress, including myself, wanted to extend the tax cuts for middle-class families but let rates on income above $200,000 for an individual and $250,000 for a family revert to the Clinton-era levels. Our Senate Republican friends filibustered that effort, refusing to allow the middle-class tax cut without a tax cut for the highest incomes as well. Their hostage strategy worked that time, and the President and Senate Democrats reluctantly agreed to extend the tax cuts for 2 more years.
Now the 2 years is up and these tax rates are again set to expire. That is why Senate Democrats passed the Middle Class Tax Cut Act in July. This measure balanced our desire to keep tax rates low for middle-class families against the urgency of addressing our national budget deficits. By keeping tax rates low for 98 percent of Americans and letting the tax rates go up very modestly for families earning over $250,000 a year, the Democrat plan would cut the deficit by as much as $1 trillion over the next decade. Now, that alone doesn't cure our budget imbalance, but along with fair and sensible tax reforms and smart cuts in spending, it is part of the solution.
Let's be clear about one thing: the Middle Class Tax Cut Act would still benefit high-end taxpayers. Families making over $250,000 a year would pay lower tax rates on their first $250,000. So if a family made $255,000, they would only see an increase on the top $5,000, and only to the Clinton-era rates that were in effect during the 1990s, when, as we all recall, our economy was thriving. Under the Senate-passed plan, a family earning $255,000 a year would pay an extra $150 in taxes.
In opposing the Middle Class Tax Cut Act, Republicans claim that it would hurt the economy to raise tax rates on the top 2 percent of income earners. Speaker Boehner reiterated that line last week saying: It'll hurt small businesses. It'll hurt the economy.
Well, that is vintage Republican political theory, but it is just not supported by the facts. In a recent report, the nonpartisan Congressional Budget Office estimated that extending the middle-class tax cuts would boost our national GDP, gross domestic product, by 1.25 percent next year. It said the economic effects of extending only the middle-class rates are similar to those of extending all of the rates. Why? Because upper income taxpayers are less likely to spend their tax savings and put it back into the economy.
In other words, CBO reports we would get virtually no economic bang for our Federal buck by extending the upper income tax cuts for which the Republicans are fighting. CBO's analysis is confirmed by the experience of real-world businesspeople.
Madam President, I ask unanimous consent to enter into the Record at the conclusion of my remarks an op-ed by former Stride Rite CEO Arnold Hiatt entitled ``Smite the myth that tax cuts create jobs.''
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. WHITEHOUSE. Mr. President, Arnold Hiatt founded a successful small business before selling it to Stride Rite and then becoming CEO. He says:
As every good businessman knows ..... the soundness of a company and its ability to create jobs do not rest on lower taxes or tax avoidance--for the company or its senior management.
It is a fiction, pure and simple, that taxing so-called ``job creators'' will have an adverse effect on the economy.
Mr. Hiatt goes on to explain:
In the years we were creating so many jobs, my federal income taxes on the top slice of my income were sometimes as high as 70 percent, but these rates never discouraged me or anyone else from hiring workers or growing a company. Today we're paying about half of that on the top portion of salaries and fees, and a meager 15 percent on the big chunk of our income that comes from investments. That's why I ..... and many other millionaires pay a lower income-tax rate than many working American families.
Many millionaires never create any jobs at all. Those who do will create them regardless of the tax rate, and certainly won't be dissuaded by the small increase of about 5 percentage points that the president has proposed.
He concludes this way:
The myth of millionaires as job creators being turned off by higher taxes is the creation of some members of the U.S. House and U.S. Senate who are funded by these same millionaires. They know little of what makes companies successful.
That is the CEO of Stride Rite shoes.
If we extend the upper income tax cuts for another year, it would add over $49 billion to the deficit. Even in Washington, $49 billion is real money, money that would have to be borrowed and would add to our debt problem. Believe it or not, Republicans who voted to turn Medicare into a voucher program in the name of deficit reduction support adding to the deficit with high-end tax cuts. In Rhode Island, at least, those are lousy priorities when it comes to deficit reduction. We should let the tax cuts at the top expire for reasons also of fairness. 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. Sixty-five percent--nearly two-thirds--of individuals earning over $1 million a year actually pay a lower tax rate than median income taxpayers. That is a tax system that is turned upside down and needs to be fixed.
Earlier this year a majority of Senators voted to advance my Paying a Fair Share Act, the Buffett rule bill to ensure that multimillion-dollar earners pay at least a 30-percent effective Federal tax rate. The rate they are supposed to pay is 35 percent under the income tax laws.
But because of all these loopholes and special rates, IRS statistics show the top 400 taxpayers in 2008 who earned, by the way, an average of $270 million each that year, paid the same 18.2 percent effective tax rate as paid by, for instance, a truckdriver in Rhode Island. The single biggest factor driving this inequality is the special low rate for capital gains that allows, for instance, hedge fund billionaires, through the carried interest loophole, to pay taxes at lower rates than their secretaries and chauffeurs. If we let the tax cuts at the top expire, those rates revert to 20 percent instead of 15 percent. Twenty percent is still a low rate for someone making $100 million a year, but it is closer to what a middle-class family is expected to pay.
In short, allowing the Bush-era tax cuts to expire for income above $250,000 is the fiscally responsible thing to do and the fair and proper thing to do. Why, then, hasn't Speaker Boehner called a vote on the Senate-passed Middle Class Tax Cuts Act? Because threatening middle-class families with higher taxes is their strategy, to push for breaks for millionaires and billionaires--the hostage strategy--with the middle class as the hostages as Republicans fight for whom they truly care about.
If Speaker Boehner continues to ignore the Senate-passed bill, I urge President Obama to stand firm on his opposition to extending the upper income tax cuts. The American people support that approach, and we should not cave in to pressure.
I would also urge the President and congressional leaders to work to include the Buffett rule principles in any deficit deal. Letting the upper income tax cuts expire and ensuring multimillion-dollar earners pay a fair share will assure the American people we are working for them and not the special interests as we allocate the burden of addressing our deficits.
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