[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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