BREAK IN TRANSCRIPT
Mr. TOOMEY. Madam President, I wish to commend the Senator from Florida. I could not agree more with the importance of focusing on economic growth and developing policies that maximize economic growth.
I believe we could have a tremendous economic recovery underway right now, but we don't. The main reason we don't is because we have a dysfunctional government in Washington that has policies that are preventing economic growth.
Unfortunately, the budget resolution our Democratic friends have offered offers more of the same failed policies that would only result in extending this period of miserable economic growth or a lack thereof. I would like to talk about a few aspects of this. I will talk about what they want to do on taxes, but before we get into the substance of the Democratic budget proposal for taxes, I think a little historical context is important, and we don't have to go back to ancient history.
In the last few years, what our Democratic friends and this administration have done is repeatedly raise taxes on all Americans, including middle-income Americans, and they propose much more now. Let's go back, for instance, to the ObamaCare middle-income tax increases. I will run through a quick litany of some of the tax increases we have suffered through as a result of ObamaCare, which raises taxes on people with health savings accounts and flexibility spending accounts. It raises taxes on people with catastrophic medical expenses. It raises taxes on people who purchase medical devices. It raises taxes on people who buy health insurance. It raises taxes on people who don't buy health insurance. It raises taxes on employers who cannot afford to provide health insurance. It raises taxes on people who have family plans that Washington believes are excessive. Is there anyone in America who is not on one or more elements of this list? I very much doubt it. The fact is that ObamaCare was a huge tax increase that added up to $1.2 trillion over 10 years, and it very much included all kinds of taxes that will be carried by middle-income Americans.
More recently, on January 1 of this year, we had another huge tax increase. That was about $620 billion over the next 10 years. It was less than 3 months ago. This raises the top rate from 35 percent to 42.5 effectively when we include the phasing out of deductions. If we add in the Medicare increases and the total top Federal marginal tax rate, it is 44.8 percent.
By the way, this is the highest this rate has ever been. Right now, this is the highest this rate has been since Ronald Reagan inherited a disastrous tax code from Jimmy Carter. That was a long time ago. That doesn't include the State and local taxes, which put many Americans at a top marginal tax rate of over 50 percent. The government is taking over half of the income they are earning, and our friends who are introducing this budget are suggesting that all of this is not enough. They are suggesting that we need yet another big tax increase--in fact, we need a giant one, $1.5 trillion over the next 10 years in new additional taxes.
I have news for everyone. I don't see how this can
possibly be done without significant tax increases on middle-income Americans. I know some folks in this Chamber like to suggest this can be done by soaking the rich again. We can just go back to soaking rich folks again. I don't see how that can work. I will give an example of why I don't think that can work.
The President laid out in his budget last year his plan for a whole new round of taxes for wealthy Americans on top of the tax increases that occurred weeks ago. He specified how he would propose doing it. The gist is that he wants to limit the value of deductions and apply taxes to income that is not otherwise taxed at the moment. He will limit the value of all kinds of deductions. He laid this out. It would be all itemized deductions--mortgage interest deductions, charitable contributions, State and local taxes. They want to tax health insurance exclusions and employee contributions to 401(k)s and IRA plans, section 199 manufacturing deductions, tax exempt interest, contributions to health savings accounts.
All of these things would be limited and would especially affect the wealthy taxpayers under the President's plan--the last budget we got from this President. He has chosen not to comply with the rules whereby he should have already produced one for this year. These tax increases were meant to be in that budget above and beyond the tax increase he got on January 1. Guess what. The President's plan for raising taxes on the wealthy is $584 billion. That is a lot of money, but it doesn't get us anywhere near the $1.5 trillion this budget resolution calls for. The President has laid out his plan for how he intends to soak the rich yet again--we know that much--but we don't know yet how he will raise the other $1 trillion. I can tell everyone where they are going to get that money. It will come from the middle class; that is where the money is.
What are all of these tax increases for? A lot of it is for increasing spending. The Democratic budget would spend more money than the current CBO budget. I know it doesn't look that way if we look just at the top lines. We have to dig deeper. What we discover is that the Democratic budget decides to make a totally different assumption about the American presence in Afghanistan than what CBO does. We are winding down our presence in Afghanistan, but the budget doesn't decide that. That is a separate matter altogether. If we want to compare apples to apples, we make the same assumptions about ongoing war expenses. When we do that, we discover that this proposal actually increases spending at a rate faster than what current law calls for. That is what this budget would do.
This budget raises taxes enormously, including very much on the middle-class because I don't see any other way we can get there. It also increases spending.
By the way, the only operative year of a budget is the first year. In the first year, the increase is $162 billion over what we are going to spend this year. That is a 4.6-percent increase in spending in the year in which inflation is running around 2 percent, and that is what this plan is.
Here is what is most objectionable to me about all of the spending and these huge tax increases. This is a big part of the reason we are suffering through the worst economic recovery since the Great Depression. There is no coincidence here. If we look in the post-war era, in the 3 years following a recession, the economy, on average, has grown by 14.4 percent. That is the average growth over a 3-year period after we have had a recession. What is the growth we have had this time? It is 6.7 percent. It is less than half. This is the worst recovery in our lifetime, and it is no coincidence.
We have had huge increases in spending, and what has that given us? It has given us this feeble economic growth, and it has given us an unemployment rate hovering around 8 percent. We all know that does not include the millions of Americans who left the workforce altogether. They have given up looking for work. It doesn't include the many folks who are underemployed. In fact, we have fewer people working in America today than we did in 2007. And it never takes this long for an economy to bounce back and create the jobs that were lost during a recession. However, it has this time, and it is partly because we are pursuing the wrong policies.
There is huge government spending, stimulus spending, all kinds of growth in government, and huge tax increases and the threat of big tax increases. This is a big contributing factor. Higher taxes reduces economic growth not only because of the money it takes directly out of the economy but because of the incentives. It reduces the incentive to work, to save, to invest. Whatever is being taxed, there is less of for the person to enjoy who actually created it. Sure enough, as a result, we get less of that activity. So the more we raise taxes on work, on savings and investment, the less of it we get. The other thing is that there are tax increases that are looming in the future--and that day will come--and people's behavior is affected by it.
Huge growth in government spending and the corresponding deficits we have seen have a chilling effect on economic growth itself. People understand that is eventually going to get paid with either higher taxes or we are going to monetize it and diminish the value of our currency and have inflation or some combination of those. So all of this government--of which this budget proposes still more--is part of the reason our economic growth is so meager.
I have one final point to make on this as it pertains to the budget. The irony is that growth is the best way to solve all of our problems. Strong economic growth has a direct benefit for the families who enjoy it, who benefit from the jobs that are created, the higher wages they earn, the elevated standard of living, the integrity that comes from providing for their families. All of those things are the direct benefits from a stronger economy. There is no better way to deal with our budget deficit than stronger economic growth.
In fact, the CBO tells us that just one-tenth of 1 percentage point of sustained increase in the rate of growth in 10 years results in $280 billion of new revenue. That is not completely linear. However, we are so far below the average that if we just add a full percent, we would be talking about literally trillions of dollars in additional revenue and smaller deficits. All of that would come from economic growth in the context of people who are back to work and an economy that is booming. That is what we ought to be heading for. Unfortunately, this budget doesn't take us there.
I know the Senator from Wisconsin wants to speak, and I will yield the floor in a minute.
I want to say a quick word before I do that about one particularly important amendment we are going to debate beginning around 2 p.m. today and vote on hopefully soon. This goes to a small subset of the tax problems ObamaCare and this budget would create.
It is the medical device tax.
The medical device tax is one of the more egregious flaws in ObamaCare, in my view. Part of the reason is it is such a badly designed tax. This tax is badly designed, in my view, because it applies to total sales, so it is even worse than an income tax increase, which would have been a bad idea.
This applies a tax to sales, irrespective of whether a company is making income. So if you are a startup company, if you are a small growing company or if you are an established company and having hard times, this is a tax that disregards whether you are operating in the black and says, We are just going to apply this new tax on your total sales. That is a very badly designed tax, in my view.
It is a particularly bad idea in a sector that has so many young and growing and startup companies that have so much promise. They are making medical devices that are improving the quality of our lives, saving lives that without these inventions wouldn't be saved, and we are going to slap a new tax on the sales of some of these companies that are just trying to get started and not yet profitable. That is a terrible idea. I know in Pennsylvania, the tax has gone into effect. It went into effect on January 1 of this year. It is already costing us jobs, limiting growth, and preventing new factories from being built in Pennsylvania to manufacture medical devices. It is also making health care more expensive. We are all consumers of medical devices of various kinds. We are talking everything from surgical implements to prostheses, to hip replacement to ordinary health care devices.
Lastly, I would suggest that the existence of this tax makes it harder to raise the capital to launch new firms and, therefore, it is going to stifle innovation.
I know there is bipartisan support to repeal this tax. I am very pleased about that. I wish to thank Senator Hatch for his leadership for a long time on this. I know Senator Klobuchar has been a great leader on this issue as well. Several others, including Senator Casey and myself, feel very strongly about this. I am cautiously optimistic that this amendment could pass. I sure hope it does. It would be a big improvement.
At this time I am happy to yield to the Senator from Wisconsin.
BREAK IN TRANSCRIPT