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Mr. HATCH. Madam President, as the Senate continues to debate the first budget resolution in more than 4 years, I am struck not only by the things we know about the Democrats' budget but also the things we don't know. For example, we know the budget would increase our debt by nearly $7 trillion over 10 years and it would continue on an upward trajectory thereafter. What we don't know is how, while amassing all that debt, our Nation will be able to respond to unforeseeable crises and emergencies in the future.
In addition, we know the budget does next to nothing to address our runaway entitlement spending. What we don't know is how programs such as Medicare, Medicaid, and Social Security would survive over the long term if this budget were to be followed.
Finally, we know this budget includes as much as $1.5 trillion in new taxes. What we don't know is where all that revenue will be coming from. Last week before the budget was released I came to the floor to speak about the rumors the Democratic budget would include reconciliation instructions with regard to taxes. The concern I expressed at that time was the budget would instruct the Finance Committee to close so-called tax loopholes in order to raise revenue and this would, in effect, end ongoing bipartisan efforts on tax reform. As it turns out, my fears were not unfounded. Specifically this budget instructs the Finance Committee to find nearly $1 trillion in new revenues to pay for additional spending.
The deadline under these instructions would be October 1 of this year. That clashes directly with the schedule Chairman Baucus and I have set out for bipartisan tax reform deliberations in the Finance Committee. This budget would instruct the committee to set aside those reform efforts and, instead, comb through the Tax Code looking for new revenues. In addition, this budget includes deficit-neutral reserve funds and sequester replacement which total more than $500 billion. According to the Budget Committee, this new spending would be paid for by closing so-called tax loopholes for the wealthy and corporations.
In addition to the $1 trillion in reconciliation instructions, this budget includes potential for another half trillion in new taxes. This means up to $1.5 trillion in fresh taxes from this budget will be used to expand our already bloated Federal Government.
The budget repeats the common refrain we hear from our friends on the other side of the aisle that our Tax Code is so full of so-called loopholes which benefit only the wealthy. According to their arguments, these loopholes may be closed at any time to generate untold amounts of revenue without affecting the middle class or our economy.
During last week's Budget Committee markup, the chairwoman claimed they could hit their revenue target by ``closing loopholes and cutting unfair spending in the Tax Code for those who need it the least.''
This statement is simply incorrect. First of all, a loophole is something created by accident or carelessness which is then exploited. When my colleagues talk about loopholes, they aren't talking about backdoors created unintentionally or sneaky abuses of the Tax Code, they are talking about tax expenditures, all of which were deliberately placed into the Code for specific reasons. More often than not my Democratic colleagues use the term "loophole'' to describe items in the Tax Code they don't like. This doesn't make the label any more honest.
Earlier this week one of my friends on the other side of the aisle took this rhetoric about loopholes up a notch. He described the Tax Code as this treasure trove of special deals and earmarks for the rich and well-connected. He went further by saying, We are at the place where the lobbyists wield the sweet corporate tax deals. He blamed Republicans for this, arguing we were responsible for the existence of these so-called loopholes and earmarks.
Admittedly there are some narrow provisions in the Tax Code--too many, if you ask me. There are supporters of these provisions on both sides of the aisle. Let's be honest. There aren't any real loopholes in the Tax Code, nor are there any earmarks. There are simply tax expenditures. If you look at a list of the largest tax expenditures, you will find a number of deductions and preferences which disproportionately benefit the middle class, middle-income taxpayers. That being the case, if my colleagues want to raise significant amounts of revenue by eliminating tax expenditures, they will have to do so by raising taxes on the middle class.
Look at this chart. If you look at this chart, you will see the revenue targets in the Democratic budget. First up, there is $975 billion right near the reconciliation instructions to the Finance Committee. Below that are additional revenues included in this budget. As I have mentioned, all told, if you include the specified revenue target for reconciliation and potential increases elsewhere, the budget may include more than $1.5 trillion in tax increases. Look at this.
Next we have a list of all the tax increases Senate Democrats have voted for over the last 2 years, including the elimination of tax breaks for oil and gas companies, increased taxes for carried interest and the so-called Buffett rule. All told, these tax hike proposals could raise about $108.3 billion in new revenues. At the bottom we see the difference between that number, the tax increases which Senate Democrats have actually voted for and the potential tax hikes which are included in the budget.
As I said, we can give the Democrats credit for having identified about $108 billion in tax increases they support, but that would mean there is as much as $1.4 trillion in unidentified tax increases in this budget.
How would they reach their target? The budget doesn't spell it out. It leaves more than enough room to speculate. For example, you might simply think they would adopt the idea from President Obama's past budgets to cap itemized deductions for higher income earners at 28 percent.
This seems unlikely for two reasons. First, to date very few Democrats in the Senate have come out in favor of that proposal. Indeed, it would impact things such as charitable contributions and pension deferrals which most have been unwilling to change. Second, and more important, according to the Joint Committee on Taxation, that proposal would generate only about $423 billion in new revenues over 10 years, which would leave my colleagues about $1 trillion short of their revenue goal. Still, I can't help but wonder if the tide has shifted with regard to this proposal.
With the Senate budget staking so much on the elimination of so-called loopholes, it will be interesting to see how many Democrats shift positions and endorse the President's proposal, even though it will not yield nearly enough revenue to reach the targets outlined in this budget.
Staying in the world of capping itemized deductions, there is also the proposal outlined by CBO in 2011 to cap all itemized deductions for all taxpayers at 15 percent. This would effectively raise taxes on every tax filer in every bracket who itemized their deductions. Make no mistake. This would be a tax increase on the middle class, meaning it would violate the promises made by President Obama and other Democrats to protect the middle class from further tax increases.
However, it would also generate enough revenue to be in the neighborhood of what the Democrats have outlined in their budget. All told, this proposal would, according to CBO, raise about $1.2 trillion in revenue over 10 years. Given the outlandish revenue proposal in the budget, this idea, while punitive and damaging to the middle class, can't be ruled out entirely.
I have another chart here which lists the top 10 tax expenditures according to the Joint Committee on Taxation. These 10 items account for 71 percent of what Democrats have called spending in the Tax Code.
What is No. 1 on this list? I will give you a hint. It is not corporate jet depreciation or carried interest. No, it is the tax-free treatment of employer-provided health care. Do you want to do away with that?
What is No. 2 on the list? It is the tax-deferred benefit for retired savings plans.
How about No. 3? It is the measure which provides relief against double taxation on investments. I am referring to the reduced rate on long-term capital gains and dividends. This rate went up recently. It was raised by 59 percent in the fiscal cliff bill. Raising it even more is a sure-fire recipe for job destruction and even slower economic growth.
No. 4 is the deduction for State and local taxes.
No. 5 is the home mortgage interest deduction. Do you want to do away with that?
No. 6 is the tax-free treatment of Medicare benefits.
So far I don't see a lot of expenditures aimed solely at benefiting the wealthy. No, most of these provisions benefit a significant number of middle-income taxpayers or earners.
Three of the four next items on the list are refundable, meaning the person filing the return can receive a check even if they owe no income tax. This is truly where there is spending in the Tax Code. These provisions exclusively benefit lower and middle-income earners. They are not available to those making over $200,000 a year.
The point is not simply there are a lot of popular tax expenditures. I think people know that already. No, my point is, given the difference between the revenue target in the Democrats' budget and the tax increases they supported on the record, there is no telling how they plan to actually raise their revenue. If they are serious about closing so-called loopholes to the tune of over $1 trillion, this list is where the real money is. If we are talking about raising that kind of revenue by eliminating tax expenditures, we are necessarily talking about provisions which benefit the middle class. It can't be raised through eliminating tax breaks for oil companies. It can't be raised by instituting the Buffett rule. It can't be raised even by eliminating all itemized deductions for millionaires.
I am sure my colleagues will disagree with this assessment. However, the burden is on them to show where I am wrong, and they can't.
This is their budget and their revenue target. If they want this budget to be taken seriously, the Democrats should come out and state specifically their plan for raising their $1.5 trillion in additional revenue. You can't simply say: We want the Finance Committee to figure out how to raise taxes by another $1 trillion to finance our spending spree. That is irresponsible and, as I said, it poisons the well for fundamental tax reform. You can't simply say: We want to turn off almost half a trillion dollars of sequestration spending cuts, but we won't say how we will pay for it. This is irresponsible and misleading to the American public.
Finally, I wish to point out the budget would also mark a significant shift in the position held by many Democrats with regard to corporate taxes. The Obama administration has repeatedly expressed support for approaching corporate tax reform in a revenue-neutral manner. Prominent Democrats on the Finance Committee have also publicly expressed support for revenue-neutral corporate tax reform in order to make America more globally competitive.
However, the Democrats' budget states: Eliminating loopholes and cutting unfair spending in the Tax Code for the biggest corporations must be a significant element of a balanced and responsible deficit reduction plan.
You cannot have it both ways. Revenue-neutral corporate tax reform means paring back corporate tax expenditures and lowering the corporate tax rate. Revenue-neutral corporate tax reform does not mean, and cannot mean, eliminating tax expenditures which some Members don't like because it polls well, and then using some or all of the resulting revenue gain to further expand the government. This is not tax reform of any kind, this is a tax hike pure and simple. I would be interested to find out whether the Democrats who have publicly expressed support for revenue-neutral tax reform will support this budget.
More generally, I wish to know where the Democrats stand on corporate taxes. Do they want to raise them, or do they want to make American companies more globally competitive? I hope it is the latter. You cannot do both.
When you look at the tax provisions of the Senate budget, it is clear it is nothing more than a political document.
I suspect my colleagues on the other side of the aisle know they cannot hit their revenue targets without impacting the middle class. I think they also know we can't do revenue-neutral corporate tax reform and at the same time raise more tax revenue from the corporate sector. I think they know that in real-world terms, the tax provisions of this budget are several bridges too far. So in the end, I have to assume there is a political calculation being made.
My colleagues apparently believe it makes good political sense to talk about reducing the deficit on the backs of the wealthy and less popular corporations rather than making difficult choices on spending.
The American people need a real blueprint for our Nation's fiscal future, not more talking points. Once again, I urge my colleagues on both sides of the aisle to reject this budget.
Now I wish to take just a few seconds to talk about one of the budget amendments I expect will be discussed and considered on the floor. I understand it is described as an amendment to ``establish a deficit neutral reserve fund to allow States to collect sales and use taxes already owed under State law.'' This amendment is intended to be a proxy vote for a bill called the Marketplace Fairness Act.
I greatly appreciate the diligent efforts of the supporters of this bill, including Senators ENZI and ALEXANDER.
Clearly, a lot of work has gone into this legislation. However, over the last few months, I have been on the floor several times to talk about the importance of restoring regular order in the Senate. The Marketplace Fairness Act has been referred to the Finance Committee. Both Chairman Baucus and I have the view that legislation is more properly considered within the context of the committee's current bipartisan efforts on tax reform.
However one feels regarding this amendment, it is undeniable that the Marketplace Fairness Act is controversial and that concerns about and suggestions for the legislation have been raised by many stakeholders. I have met with many people on both sides of the Marketplace Fairness Act, including people from Utah, and have heard many concerns. I am not here to take a position on the substance of this legislation, only to note that it deserves to be fully debated in committee and I am concerned this amendment might not allow those debates to occur.
For this reason, I intend to vote no on this amendment at this time.
What I have said is extremely important. It is not partisan. It is pointing out these doggone problems with this bill, and I hope my friends on the other side will start looking at things such as this. Because we can play politics with these things all day long, but that doesn't make it right and it doesn't make it so we can do what my friends on the other side would like to do, which is raise revenue so they can spend more.
It boggles my mind. We have to find some way of living within our means in this country. If we don't, we are creating a new generation of debtors--our children, our grandchildren, and in many cases--in my case--great-grandchildren as well. It is the debtor generation now. Every one of them owes well over $50,000 personally, and that is going to go up exponentially if we don't watch what we are doing.
In fact, even if we do watch what we are doing, it is still going to go up. But we have to do everything in our power to give them a future. The debtor generation is all those who are less than 50 years of age but especially our youth. We simply can't barter away their future because we don't have the guts to stand up and do what is right.
I yield the floor.
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