Mr. WHITEHOUSE. Thank you, Mr./Madam President. I rise today on behalf of the tens of millions of middle-class families who face the possibility of higher tax rates in January. With so many Americans still struggling to find their economic footing after the deepest recession of our lifetimes, these looming tax hikes would be hard, and are completely unnecessary.
The newspapers print stories day after day on the so-called "fiscal cliff," often omitting that the Senate has passed legislation to shield 98% of families and 97% of small businesses from the income tax part of the so-called "fiscal cliff."
We passed the Middle Class Tax Cuts Act on July 25 and 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? No. They decided to hold the middle-class tax cuts hostage in an attempt to push for tax cuts for the folks they care the most about, the top 2% of 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 because the tax cuts were unfair --favoring the highest-income Americans. To overcome this obstacle, Republicans resorted to the parliamentary technique of budget reconciliation, a maneuver that allowed for passage, but forced the tax cuts to expire after 2010, at the end of the ten-year budget window.
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 Clinton-era levels. Senate Republicans filibustered our effort, refusing to allow the middle-class tax cut without a tax cut for the wealthiest. Their hostage strategy worked, and the President and Senate Democrats reluctantly agreed to extend all of the tax cuts for two more years.
Now the two years is up and these tax rates are again set to expire. That's why Senate Democrats passed the Middle Class Tax Cuts 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 taxes low for 98% of Americans and letting the rates go up very modestly for families earning over $250,000 a year, the Democratic plan would cut the deficit by as much as $1 trillion over the next decade. That alone doesn't cure our budget imbalance, but along with fair and sensible tax reforms, and smart cuts in spending, it's part of the solution.
Let's be clear: the Middle Class Tax Cut Act would benefit high-end taxpayers. Families making over $250,000 a year would still pay lower tax rates on their first $250,000. So if your family makes $255,000, you'd only see an increase on your top $5,000, and only to the Clinton-Era rates that were in effect during the 1990s, a time when we all recall our economy was thriving. Under the Senate-passed plan, a family earning $255,000 would pay an extra $150 in taxes.
In opposing the Middle Class Tax Cuts Act, Republicans claimed it would hurt the economy to raise tax rates on the top two percent of income earners. Speaker Boehner reiterated this line last week saying "It'll hurt small businesses. It'll hurt the economy."
That is vintage Republican theory, but is not supported by the facts. In a recent report, the non-partisan Congressional Budget Office estimated that extending the middle-class tax cuts would boost GDP by 1.25% next year. It said the economic effects of extending only the middle-class rates are similar to those of extending all of the rates because upper-income taxpayers are less likely to spend their tax savings. In other words, CBO reports, we would get virtually no economic bang for our federal buck by extending the upper-income tax cuts.
CBO's analysis is confirmed by the experience of real world business people. Mr./Madam President, I ask consent to enter into the record an op-ed by former Stride Rite CEO Arnold Hiatt titled "Smite the myth that tax cuts create jobs."
Mr. Hiatt founded a successful small business before selling it to Stride Rite and 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 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. 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."
If we extended the upper-income tax cuts for another year, it would add over $49 billion to the deficit. Even in Washington, $49 billion is significant money -- money that would have to be borrowed, adding to our debt problem. Believe it or not, Republicans who voted to turn Medicare into a voucher program in the name of deficit reduction would 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 non-partisan Congressional Research Service, 65% of individuals earning $1 million or more annually pay taxes at a lower rate than median-income tax payers making $100,000 or less. That's a tax system that has turned upside-down.
Earlier this year a majority of senators voted to advance my Paying a Fair Share Act, the Buffett Rule bill to ensure that multi-million dollar earners pay at least a 30% effective federal tax rate. The rate they supposedly pay is 35% under the income tax laws, but IRS statistics show the top 400 taxpayers in 2008 -- earning an average of $270 million each that year -- paying the same 18.2% effective tax rate that's paid by a truck driver in Providence, Rhode Island.
The single biggest factor driving this inequality is the special low rate for capital gains. The special capital gains rate that allows 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% instead of 15%-- still a low rate for someone making a $100 million a year, but closer to what a middle-class family pays.
In short, allowing the Bush-era tax cuts to expire for income above $250,000 is the fiscally responsible thing to do, and the equitable 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 breaks for millionaires and billionaires; the hostage strategy, with the middle class hostage as Republicans fight for who they really care about.
If Speaker Boehner continues to ignore the Senate-passed bill, I urge President Obama to stand strong on his opposition to extending the upper-income tax cuts. The American people support that approach, and we shouldn't cave to pressure. I also urge the President and congressional leaders to work to include the Buffett Rule in any deficit deal. Only by letting the upper-income tax cuts expire and ensuring multi-millionaire-dollar earners pay a fair share, can we assure the American people that the burden of addressing our deficits will be equitably shared by all. I thank the chair and I yield the floor.