[Congressional Record Volume 140, Number 40 (Thursday, April 14, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: April 14, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
THE CLINTON TAX HOAX
Mr. COVERDELL. Mr. President, at the conclusion of my first year in
the United States Senate, as we were approaching the new year, I was
asked, ``Well, what was your greatest disappointment?'' I indicated at
the time that my single greatest disappointment was the fact that we
had been unable to defeat in this body the Nation's largest tax
increase in its history; the largest tax increase in its history.
And then, with all the business that we deal with here in the Senate,
the pain of that loss began to ameliorate and we moved on to other
activities and I did not think about it every day.
And then, as we come upon tomorrow, April 15, when the bill comes
due, all the memories of that 7-month battle renew themselves for me.
Everybody is writing about the impact and the effect. None of it
makes very good reading, Mr. President.
I was reading an article by Alan Reynolds of the Hudson Institute
that appeared in the Wall Street Journal on April 12. He goes back to
that long, arduous battle over the fact that, well, this tax increase
is not going to affect many Americans; just 1.2 percent, I believe, was
the figure that kept being used, just a small number of Americans and,
therefore, we should excuse the fact that we are imposing this economic
burden on America because it did not affect very many people.
This article says, if that were true, that would equate to 1.4
million Americans. But it goes on to say:
This is much worse than misleading. It leaves out millions
of unmarried professionals and managers. The 36 percent tax
applies to all taxable income above $115,000 for singles,
$127,500 for household heads, and $70,000 for married people
who file separately. There are 5.6 million families with
expanded incomes between $100,000 and $200,000.
The article goes on a bit, and it concludes by saying, Mr. President:
In reality, the punitive new tax rates on success will
indeed hurt saving and will also shrink labor force
participation.
That means losing jobs.
The statistical tricks used to make incomes of affected
taxpayers look higher than they are, or to pretend that only
families filing joint returns are in the higher tax brackets,
will not fool those who are now filing their 1993 tax
returns. If legislators who voted for higher tax rates really
believe that only 1.2 percent of voters would be directly
affected, they will be surprised by the number of angry
taxpayers they have to face in November.
And I think that is absolutely accurate.
But the gloomiest report, the one that really set me back in my
chair, was the statistical data that now, long after the final vote and
the cheering that occurred in this gallery when it passed by one vote,
now that we can look at this data and sort of get a true fix on how it
affects my State, the State of Georgia, it is not a pretty picture.
The data now show that, over the next 5 years, $6.4 billion will be
moved from the families, the individual citizens, and the businesses of
my State to Washington, where, theoretically, we have people that feel
they are more able to know what to do with these funds than had they
been left in the hands of families and businesses at home in my State.
I harken back to the argument, ``Well, it is not going to affect
anybody except somebody that is terribly wealthy.'' But $443 million,
that is nearly a half billion dollars, will come from Social Security
recipients in my State over the next 5 years. It does not sound like
those folks are necessarily just wealthy folks, Social Security
recipients.
Over $1 billion will come from people who pay additional gas taxes.
Now, that is not just wealthy folks. Those are people that are taking
the kids to school, taking the route to work and back, going to pick up
groceries. That is everybody. Everybody who owns an automobile in my
State is going to shell out another $1 billion to send to Washington.
The sum of $1.5 billion comes from just miscellaneous impositions in
the bill, user fees, et cetera. That is everybody. That is not just
wealthy folks, as was portrayed in these hallowed Halls.
The sum of $3.2 billion is the number for half that is directed at
this target that has been rebutted by the Wall Street Journal. But it
was directed at this group that, theoretically, is so wealthy that it
will be unaffected by this kind of tax increase.
I am reminded every time one of those self-styled wealthy people,
many of whom are entrepreneurs, small businesses, every time $20,000 of
this amount is written out in a check and sent to Washington for better
use, that $20,000 is not left there in that little town and community
to hire the graduate from high school or college this May, when they
are out looking for a job. That figure is the exact amount that is
coming right out of the workplace, that is denying somebody standing
there in line with a job application in the private sector.
Mr. President, the 1992 election was virtually a rebellion and the
message was, quit doing this kind of thing. The message was, you get
spending under control. The promise was, we are going to bring relief
to the average American. And the result was, in my State, the largest
tax increase in American history and the loss of $1.5 billion a year
for my citizens, my neighbors, and businesses.
This is the beginning of President Clinton's economy, tomorrow, April
15, when this economic plan is imposed on the citizens of my State and
this Nation.
Mr. President, I ask unanimous consent to have the article by Mr.
Reynolds that appeared on April 12 printed in the Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:
[From the Wall Street Journal, Apr. 12, 1994]
The Clinton Tax Hoax
(By Alan Reynolds)
President Clinton has assured us that when we get around to
filing our tax returns, nearly all of us will be pleasantly
surprised to find that our taxes have not gone up after all.
``In fact,'' says The Economic Report of the President, ``the
income tax increases apply only to families with taxable
incomes over $140,000--the top 1.2% of households.''
Where did they come up with that 1.2% figure anyway? It
turns out to be a count of the number of families earning
more than $200,000. That comes to 1.4 million, or 1.3% of all
families. These families are said to be those with taxable
incomes above $140,000, which is where the new 36% tax kicks
in on a joint return.
How does a before-tax income of $200,000 turn into a
taxable income of only $140,000? When the administration says
81% of its tax increases affects only those earning more than
$200,000, it is defining income in a rather creative way. The
small print under Table 2.1 in the budget (omitted from the
same table in the economic report) explains: ``Family income
includes all federal income, social insurance and corporate
income taxes.'' Thus, families supposedly earning $200,000
are really earning closer to $180,000 in the conventional
sense. This figure then becomes $140,000 of taxable income,
assuming an average deduction of $40,000.
Even if the number of families with ``expanded'' income
above $200,000 is really equivalent to the number of joint
returns with a taxable income over $140,000, that still does
not tell us what percentage of workers or taxpayers will be
affected. For one thing, most high-income families have at
least two family members working. That means there are nearly
twice as many workers as families affected by the new higher
tax rates. By my calculation approximately 2% of all
workers who are in married families filing joint returns
are now in a 36% or higher tax bracket.
But that is only a fraction of the problem. Recall that the
economic report claims that ``only 1.2% of households'' are
affected by higher tax rates. This is much worse than
misleading. It leaves out millions of unmarried professionals
and managers. The 36% tax applies to all taxable income above
$115,000 for singles, $127,500 for household heads and
$70,000 for married people who file separately. There are 5.6
million families with expanded incomes between $100,000 and
$200,000. That figure includes many singles who are indeed
affected by the 36% tax bracket, as well as married people
who do not file joint returns and have taxable incomes above
$70,000. Not one of these taxpayers is counted among the 1.4
million families earning over $200,000. Retired people hit
hard by higher income tax rates on Social Security benefits
are not counted either.
Adding singles and second-earners into the ranks of those
shoved into the higher tax brackets would be more honest, but
would still understate the percentage of taxpayers in that
plight. That is because low-income families do not pay any
income tax. More than 10% of all households have instead been
receiving a federal check at tax time from the earned income
tax credit. This proportion will soon rise quite
substantially because the earned income tax credit was made
far more generous last year. As a result, many second-earners
in two-paycheck households may stop working--which further
expands the percentage of taxpayers hit by higher tax rates.
In fairness, nobody on the Clinton team ever claimed that
higher tax rates would have no bad effects on the economy.
What they claimed is that higher tax rates would only affect
1.2% of households, which is simply untrue. They also claimed
that higher tax rates would result in lower long-term
interests rates, which never made sense and is now
discredited by six months of rising bond yields.
There is a new line of defense, but it does not look more
promising than the first two. Mr. Clinton's economic report
claims tax rates won't be so bad because ``high income
taxpayers are presumably more likely to make the payments out
of savings.'' In demand-side, trickle-up economics, savings
don't matter. Those ``rich'' families and singles can simply
pay their taxes by liquidating stocks and bonds at distress-
sale prices.
Besides, says the economic report, payment of the EITC will
tend to stimulate demand.'' Just send out more government
checks on the condition that one spouse stays home, and the
economy will remain almost as rosy as the budget forecast of
perpetual 5.8% yields on 10-year bonds.
In reality, the punitive new tax rates on success will
indeed hurt saving and will also shrink labor force
participation. The statistical tricks used to make incomes of
affected taxpayers look higher than they are, or to pretend
that only families filing joint returns are in the higher tax
brackets, will not fool those who are now filing their 1993
tax returns. If legislators who voted for higher tax rates
really believed that only 1.2% of voters would be directly
affected, they will be surprised by the number of angry
taxpayers they have to face in November.
The PRESIDING OFFICER. The Senator from Pennsylvania.
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