[Congressional Record Volume 147, Number 98 (Monday, July 16, 2001)]
[Senate]
[Pages S7657-S7662]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX CUT ACHIEVEMENT
Mr. GRASSLEY. Mr. President, I want to visit with my colleagues and
our constituents about the issues of the tax relief that was recently
passed
[[Page S7658]]
by the Congress of the United States and signed by the President on
June 7 and will be the reason that tax rebate checks will go out,
distributing $65 billion of overtaxation to the American people--back
to the American people so they can spend it, so it will do more
economic good than if it is politically distributed here in Washington,
DC.
That bill not only has the $65 billion of tax refunds that will start
going out next week and be out by September 30, but it already has
reductions for other rates. The tax rebates come from the new 10-
percent rate that is going into effect retroactive to January 1. It is
my understanding there will be about 90 million Americans who will be
getting rebates of up to $300 if they are single, $500 if they are a
single parent, and also then up to $600 if they are married.
Also, remember that this is not a one-shot rate reduction, or tax
rebate; that these rebates, even though they will never be received in
a check again, will continue on into the future as permanent reductions
in taxation for people in the 10-percent bracket. And also remember
that everybody who pays taxes would pay some of that 10-percent bracket
so that it does affect all taxpayers. But checks are going out for
those up to the amount of $12,000 of taxable income.
I think this tax bill is going to make real changes in the lives of
folks across our country. The changes I am going to discuss today
result in the greatest tax relief provided in a generation--tax relief,
I might add, powerfully brought about in a bipartisan consensus.
Some might ask, Why talk about something we have already done? The
answer is that the legislation is quite comprehensive and to do it
justice we really need to take a thorough and methodical look at it--
not look at it just from the standpoint of the rebate checks that are
going out, which are getting all the attention, but all the other
aspects of the bill as well.
It is true there have been a lot of press reports on this
legislation. Again, most of those have been related to the rebate
checks going out starting next week. None of these reports, however, I
believe, in the press has really tied the specific benefits of the bill
back to its bipartisan purpose.
Also, the press reports have tended to analyze the bill in terms of
its impact on certain types of taxpayers. At the same time, many press
reports have focused exclusively on the budget angle of the tax
legislation; in other words, people nervous, tearing out their hair
because there is going to be less money coming into the Federal
Treasury as a result of our letting the people keep their tax
overpayment.
These reports that tend to be very pessimistic often echo the
sentiments of the harshest congressional critics of the legislation.
These reports, like the congressional critics of this bill--and
probably for the most part those who voted against it--tend to ignore
the benefits of the bill. Tax relief legislation is just not more money
in the taxpayers' pockets in some selfish way that you let the
taxpayers keep more of their money. There is great economic good that
comes from the distribution of goods and services in this economy based
upon an individual making that decision as opposed to a political
leader in Washington, DC, making that decision through the Federal
budget.
Now, of course, all of this criticism is fair play in the arena of
politics. However, in recent weeks it seems to me these arguments have
not been answered with the same vigor by the strong bipartisan majority
of us who supported the legislation. So today I take the floor to set
the record straight. Tax relief is absolutely necessary. Tax relief
legislation is an important vehicle in response to our short-term and
long-term economic situations. And that is basically a flat economy--1
to 1.5-percent growth instead of the 2-percent growth we projected a
year ago, 1 to 1.5-percent economic growth under the last two quarters
of the Clinton administration, and carrying through to the first two
quarters of President Bush's administration.
That is a situation where we have these checks going out, a short-
term stimulus, which, if we had not done it, would have had 100
Senators sitting around this body scratching their heads and deploring
the fact that we had a flat economy. So what can we do about it?
Congress has passed tax reduction in the past to stimulate the
economy but often taking effect after the economy turned around. It
tended not to be as beneficial as it would have been if it had been
done at the right time.
I do not want to take credit for having been a leader in the tax
rebates, knowing that they were going to be needed now as a stimulus. I
confess not to have thought that way last March and April when we
started working on tax relief. But we ended up with tax rebates--$65
billion--and most economists are saying they could not have come at a
more opportune time for an economy that is flat and in need of some
stimulus.
There are three reasons for this bipartisan tax relief package. One
is that it is necessary, when the Federal Government overtaxes people,
to reduce taxes so that there is not overtaxation.
No. 2, it is necessary to respond to the current and long-term
economic problems. I talked about the short-term stimulus, but there
are long-term economic benefits from this bill that are going to
enhance the economy.
Third, there is sufficient surplus outside Social Security and
Medicare that is still available to accomplish a tax cut that addresses
certain inequities in the Tax Code, such as the marriage penalty.
I will start with reason No. 1, that the tax cut corrected
overtaxation. Before the tax cut, the Federal Government was collecting
too much tax. The Federal Government was on a path to accumulate over
$3.1 trillion in excess tax collections over the next 10 years. Federal
tax receipts were at their highest level in our Nation's history.
The bulk of these excess collections came from the individual income-
tax payer. Individual income tax collections were near an all-time
high, even higher than some levels imposed by World War II.
The chart I have in the Chamber demonstrates this better than I can,
how, since 1960, we have seen very high income taxation. In this
particular case, we are seeing taxes, as a whole, collected by the
Federal Government, not just the income taxes but everything at the
highest level by the year 2000 at 20.6 percent of gross national
product.
This chart shows total tax receipts as a percentage of gross domestic
product over 40 years. Tax receipts have naturally fluctuated
frequently since 1960, but most shockingly they spike up since the tax
bill of 1993.
The January 2001 Congressional Budget Office report to Congress shows
that in 1992, total tax receipts were around 17 percent of gross
domestic product. As I said, by the year 2000, they were at 20.6
percent. The significance of this percentage can only be appreciated in
the historical comparisons to which I have already referred. But I want
to be more specific.
In 1944, at the height of World War II, taxes, as a percentage of
gross domestic product, were 20.9 percent--only .5 percent higher than
they are today. By 1945, those taxes had dropped to 20.4 percent of
GDP, which is actually lower than the collection level today.
It is unbelievable that in a time of unprecedented peace and
prosperity, which defines the last decade, the Federal Government would
rake in taxes at a wartime level. The sorriest part of this whole story
is that this huge increase in taxes has been borne almost exclusively
by the American people who pay the individual Federal income tax.
I have another chart which shows tax collection levels for payroll
taxes, corporate taxes, and all other taxes over the past decade. It
shows they have been relatively stable. Corporate taxes, during the
past 10 years, have increased from 1.6 percent of GDP to 2.1 percent of
GDP. Estate taxes have remained relatively stable over that period of
time.
However, collection of individual income taxes by the Federal
Government has soared. There was a 50-percent increase during that
period of time: 7.7 percent of gross domestic product in 1992 to 10.2
percent of gross domestic product as of the year 2000.
Individual income taxes now take up the largest share of GDP in the
history of the individual income tax. And that dates back to 1916,
except for the Civil War when there was one that the courts declared
unconstitutional.
[[Page S7659]]
Even during World War II collections from individuals were 9.4
percent. So you see it was a full percentage point below what they are
today in peacetime. As you can see, the source of current and future
surpluses is from a huge runup in individual income tax collections,
and not in runups in any other form of taxes and levies that the
Federal Government makes on the taxpayers of this country or the
businesses of this country.
Part of this is because the 1993 Clinton tax increase overshot its
mark. These excess collections are attributable to that enactment, in
August 1993, of the largest tax increase in the history of the world.
Since 1992, total personal income has grown an average of 5.6
percent. Federal income tax collections, however, have grown an average
of 9.1 percent a year, outstripping the rate of personal income growth
by 64 percent.
The Joint Committee on Taxation, at the request of the Joint Economic
Committee of the Congress, estimated that just repealing the revenue-
raising provisions of President Clinton's 1993 biggest-in-the-world tax
hike would yield tax relief of more than $1 trillion over 10 years.
We ought to take a closer look at that 1993 world's biggest tax
increase. The 39.6-percent top bracket reflected a 10-percent surcharge
on the basic 36-percent rate. The itemized deductions you can subtract
from your taxable income, known as the Pease Rule, and the phaseout of
personal exemptions, which we refer to as PEP, the personal exemption
phaseout, were temporary bipartisan deficit reduction provisions that
were made permanent under the 1993 tax hike.
So remember, you had a top marginal tax rate of 36. That was meant to
be permanent. But you had a temporary 10 percent put on top of that,
bringing that to 36.9 percent. Yet for higher brackets they wanted to
camouflage it. We had a phaseout of exemptions so that higher income
people did not get the full advantage of the personal exemption, as an
example, which ought to tell you that in a time of budget surpluses,
which we are in right now, anybody who was intellectually honest about
putting a 10-percent surtax on the basic 36-percent rate just to get
rid of the annual budget deficit ought to take that 10-percent rate
off. But, no, it was never done by those who proposed it and those who
did it. We did it through the gradual reduction of the rates that were
in the bill signed by the President June 7.
The chairman of the Finance Committee at the time of the 1993 Clinton
tax increase actually called this what I have already referred to as--
``a world record tax hike.'' Obviously, with income tax collections as
high as they have ever been in the history of the country, we know that
to be a fact.
The rationale for the tax increases was deficit reduction. It is
reasonable to think that if deficit reduction was a reason for raising
taxes to record levels, then in the era of surpluses we are in now,
those tax overcharges, those tax overpayments, should be left with the
taxpayers of America, not run through the Federal budget anymore, for
two reasons: No. 1, because they are not needed, once you balance the
budget; and, No. 2, if I distribute that income of the hard-working men
and women in America, it doesn't turn over in the economy as much as if
they keep it and spend it or invest it.
That is what creates jobs; they create wealth. We in the Federal
Government don't create wealth; we only expend the wealth created by
others.
This year, on a bipartisan basis, Congress did just that through the
tax bill signed by President Bush on June 7. We are going to let you
keep your money because we believe it does more economic good, it
creates more wealth if you have it than if we have it.
Congress then agreed to return a portion of the record level of taxes
back to the taxpayers and, in a sense, Congress, on party-line vote in
1993--and it was a party-line vote--raised taxes too much. And this
year, on a bipartisan basis--not a party-line vote but on a bipartisan
basis--we corrected that overtaxation and that temporary taxation that
was put in place in 1993.
Democrats and Republicans, led by President Bush, started with the
fact that the 1993 tax hike took too much from the American taxpayers
and the American economy. President Bush offered to reduce individual
tax rates across all rate brackets and to reduce the number of
brackets.
Congress changed aspects of the President's plan and, from my point
of view, improved the President's plan as it made its way through
Congress. The bill the President signed did contain relief for
taxpayers in all tax brackets. This benefits all taxpayers across
America.
There is much wringing of hands and gnashing of teeth over the fiscal
impact of that tax relief package. We hear it daily from the leadership
on the other side and from many in the media. What you don't hear about
is how close everyone in the Senate was on the size of the tax cut. In
other words, for those who voted against the tax cut, there was just a
little bit of difference between what Republicans and a bipartisan
group of Members of this body thought ought to be cut at a higher level
versus what everybody else, on mostly a partisan basis, thought we
ought to cut taxes--just a little bit of difference.
For the record, everyone on the other side of the aisle who opposed
the bipartisan tax relief package had already voted for over $1.25
trillion of tax relief. Some of those people who voted that way are the
very same ones who are saying we cut taxes too much. I hope you
remember that on the debate on the tax bill, everyone on the other
side, including every Member of the Democratic leadership, including
the present chairman of the Budget Committee, the Senator from North
Dakota, voted for $1.25 trillion in tax relief. Yet they are now saying
we shouldn't have this tax cut.
For instance, we had a vote on what was called the Carnahan-Daschle
Democratic substitute. That amendment, if it had passed, would have
represented tax cuts of that $1.25 trillion I cited.
I raise this point for two reasons: One, to make the record clear on
the votes on the tax cut bill; and two, to make an even more
fundamental point. That fundamental point is, despite all the rhetoric,
there was widespread support for significant across-the-board relief
even among the most critical of the final tax package.
Let me repeat reason No. 1 for this tax cut before I go on to reason
No. 2. The American people are overtaxed. The American people have paid
a tax surplus into the Federal Treasury. The goal is to let the
taxpayers distribute those goods and services as opposed to having 100
Senators distribute that money.
Now reason No. 2: The tax cut is needed to reverse slow growth in the
economy, not only slow growth long term but I have already referred to
the slow growth that has happened right now over the last four
quarters, 1- to 1.5-percent growth instead of 2.5-percent as we had
projected.
I provided you with the first reason, to correct overtaxation. Now
for the second one.
It is our responsibility to help the folks back home who are facing a
slower economy to create jobs, to expand the economy. There has been a
slowdown since the latter half of the year 2000. I will expand on the
point that the economic slowdown did start in the latter part of 2000.
We have two charts. The first chart shows that economic growth has
slowed considerably since the middle of last year. In the last two
quarters of the Clinton administration, it started to slow. Compared to
the average 4-percent growth rate since 1998, the economy grew only a
little over 1 percent.
Several factors have contributed to the economic slowdown. For the
two previous years, we had a tighter monetary policy by the Federal
Reserve. We had Chairman Greenspan throw out of the window his very
comprehensive program of liquidity from 1988 until 1995, and then he
started worrying about inflation. Worrying about inflation so much, he
tightened up money so that we didn't have enough liquidity. When he
gets back on the kick of worrying about liquidity, not worrying about
inflation, the monetary policy will turn it around. But a tighter
monetary policy has brought about this slowdown. We have also had the
rising energy rates, a decline in the stock market, and we have had
rising tax burdens.
The economic slowdown has real impact on working Americans, as
evidenced by this second chart we have
[[Page S7660]]
here, as you have seen the unemployment rate go up. It shows that the
unemployment rate had fallen steadily, but since the slowdown began
last year, the unemployment rate has risen. It is now at 4\1/2\
percent, the same level it was in October 1998.
Although there is still considerable uncertainty about the economy, a
number of factors seem to point in the right direction, and one is
there is some reversal of the Federal Reserve on its monetary policy.
We have had energy prices stabilize. For instance, a week ago last
weekend, I bought gas in Cedar Falls, IA, at $1.19 a gallon.
Given the continued pessimism on Wall Street, however, the economy
remains vulnerable to potential shocks. So we should continue to
monitor signs of potential trouble ahead and be prepared to take
additional steps should they become necessary. Republicans and
Democrats have a responsibility to address this problem.
There is some speculation by some on my side of the aisle that those
on the other side are hoping the recession comes about for political
reasons. I disagree with that speculation. I believe everyone here
wants to get the economy on a steady path. Everyone knows that the
worst thing you can do in an economic downturn is to raise taxes. On
the other hand, a tax cut is a stimulus to economic activity. So if
your goal were to further slow down the economy, one sure way to do it
would be to raise taxes. On the other hand, if you see a slowdown
coming, a tax cut would be a wise response to get the economy growing
again.
In other words, if we had not cut taxes, not had these rebate checks
going out, we would be nervously trying to cut taxes to stimulate the
economy. A tax cut stimulates economic growth in two ways. First is to
the extent the tax cut currently provides more money for consumers to
spend, it creates more demands for goods and services. Secondly, and
most importantly, the tax cut stimulates the economy through changes in
expectations for workers, investors, and businesses. In other words, a
lower tax bite means that workers, investors, and businesses can expect
to retain more of the income generated by their activities. That
expectation will change what workers and investors and businesses do
right now. That does more economic good than if we have a political
decision to distribute the goods and services.
Chairman Alan Greenspan and others have alluded to a new form of
``bracket creep'' brought about by high tax rates. In a sense, through
this new form of bracket creep, the Federal Government was getting a
windfall from workers, investors, and businesses.
With the lower marginal tax rates, some of the damaging bracket creep
has been eliminated over the long term. That change should free up more
income to flow through the marketplace and stimulate the economy.
So it was pretty clear some action needed to be taken to stimulate
the economy. Action was taken and now, hopefully, for the folks back
home, the economy will start to grow significantly.
Now if I can go to the third and last reason why the tax bill needed
to be passed--the issue of fairness. We heard during the debate, and
even recently, a hue and cry from some on the other side of the aisle
that not all taxpayers should receive a rate reduction. They said the
bipartisan tax relief bill that was signed by the President
disproportionately benefits upper income taxpayers and does not provide
enough relief at the lower income scale.
Well, we have news for that group of people. None of those
allegations is true, and the charts that I have will show that. But we
first need to understand the current distribution of tax burdens in
America. We already have a highly progressive income tax system.
According to the Congressional Budget Office, the top 20 percent of
income taxpayers pay over 75 percent of all the income taxes coming
into the Federal Government. By contrast, households in the bottom
three-fifths of the income distribution pay 7 percent of all individual
taxes.
Sometimes I get the feeling around here that when it comes to
progressivity, the only way it is going to satisfy anybody here is if
the richest man in America is supporting the Federal Government
totally. But for those who are worried about this tax bill not being
progressive enough, it not only preserves an already progressive
system; it actually makes it more progressive. Those who don't like
progressive income tax systems don't like to hear me say that. But for
those who say our tax bill has made it less progressive, I hope it
causes them to keep their mouths shut.
So to all who are critical of the bipartisan tax relief package as a
tax cut for the rich, I invite them to pay special attention to data
prepared by a neutral source, the Joint Committee on Taxation. These
professionals work for both sides of the aisle, Republicans and
Democrats, and for both the House and the Senate. As the Joint
Committee on Taxation says, the marginal tax rate reductions in our
bill, as signed by the President, combined with the increase in the
child credit, and its added refundability, the marriage penalty, the
education provisions, and the individual retirement accounts and
pension provisions--all these aspects of this bill provide the greatest
reduction in tax burden for the lower income taxpayer.
I ask unanimous consent that the tables prepared by the Joint
Committee on Taxation be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
DISTRIBUTIONAL EFFECTS OF THE CONFERENCE AGREEMENT FOR H.R. 1836 \1\
[Prepared by the staff of the Conference Agreement for H.R. 1836, May 26, 2001]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Change in Federal taxes Federal taxes \3\ under Federal taxes \3\ under Effective Tax Rate \4\
\3\ present law proposal -------------------------
Income category \2\ ------------------------------------------------------------------------------ Present Law Proposal
Millions Percent Billions Percent Billions Percent (percent) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -$75 -1.0 $7 0.4 $7 0.4 8.7 8.6
10,000 to 20,000................................ -2989 -11.5 26 1.5 23 1.4 7.5 6.7
20,000 to 30,000................................ -5,790 -9.4 62 3.5 56 3.3 13.4 12.2
30,000 to 40,000................................ -5,674 -6.4 89 5.1 83 4.9 16.1 15.1
40,000 to 50,000................................ -5,490 -5.4 102 5.9 97 5.7 17.4 16.4
50,000 to 75,000................................ -11,546 -4.5 256 14.6 244 14.4 19.1 18.3
75,000 to 100,000............................... -8,488 -3.5 244 13.9 235 13.9 21.7 21.0
100,000 to 200,000.............................. -10,488 -2.6 408 23.3 397 23.5 24.2 23.6
2000, and over.................................. -6,997 -1.3 555 31.7 548 32.4 27.8 27.4
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -57,536 -3.3 1,748 100.0 1,690 100.0 21.4 20.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -75 -1.0 7 0.4 7 0.4 9.2 9.1
10,000 to 20,000................................ -3,596 -13.3 27 1.5 23 1.3 7.6 6.6
20,000 to 30,000................................ -7,124 -11.3 63 3.4 56 3.2 13.5 12.0
30,000 to 40,000................................ -6,849 -7.6 91 4.9 84 4.8 16.1 14.8
40,000 to 50,000................................ -6,198 -5.8 106 5.8 100 5.7 17.5 16.5
50,000 to 75,000................................ -13,251 -5.0 267 14.5 254 14.4 19.0 18.0
75,000 to 100,000............................... -10,227 -4.0 255 13.9 245 13.9 21.7 20.8
100,000 to 200,000.............................. -14,416 -3.3 442 24.1 427 24.3 24.2 23.4
200,000 and over................................ -16,557 -2.9 578 31.5 562 32.0 27.9 27.1
-------------------------------------------------------------------------------------------------------
Total, All taxpayers...................... -78,294 -4.3 1,836 100.0 1,758 100.0 21.5 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -83 -1.1 8 0.4 8 0.4 9.7 9.6
10,000 to 20,000................................ -3,516 -12.9 27 1.4 24 1.3 7.6 6.6
[[Page S7661]]
20,000 to 30,000................................ -7,135 -11.0 65 3.3 58 3.1 13.6 12.1
30,000 to 40,000................................ -6,946 -7.5 93 4.8 86 4.6 16.0 14.8
40,000 to 50,000................................ -6,155 -5.7 108 5.6 101 5.5 17.4 16.4
50,000 to 75,000................................ -13,554 -4.9 279 14.4 266 14.3 18.9 18.0
75,000 to 100,000............................... -10,553 -4.0 265 13.7 255 13.8 21.7 20.8
100,000 to 200,000.............................. -15,487 -3.2 479 24.8 464 25.1 24.2 23.4
200,000 and over................................ -17,453 -2.9 609 31.5 591 31.9 28.1 27.3
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -80,882 -4.2 1,933 100.0 1,852 100.0 21.5 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -69 -0.9 8 0.4 8 0.4 10.0 9.9
10,000 to 20,000................................ -3,429 -12.6 27 1.3 24 1.2 7.6 6.6
20,000 to 30,000................................ -7,121 -10.8 66 3.3 59 3.1 13.6 12.2
30,000 to 40,000................................ -6,964 -7.3 96 4.7 89 4.6 16.0 14.8
40,000 to 50,000................................ -6,320 -5.8 110 5.4 103 5.3 17.4 16.4
50,000 to 75,000................................ -15,049 -5.2 288 14.2 273 14.2 18.7 17.8
75,000 to 100,000............................... -12,913 -4.6 279 13.8 266 13.8 21.5 20.5
100,000 to 200,000.............................. -22,095 -4.3 512 25.2 490 25.3 24.1 23.0
200,000 and over................................ -21.671 -3.4 642 31.6 620 32.1 28.2 27.3
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -95,630 -4.7 2,028 100.0 1,932 100.0 21.6 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -76 -1.0 8 0.4 8 0.4 10.1 10.0
10,000 to 20,000................................ -3,867 -14.0 28 1.3 24 1.2 7.6 6.5
20,000 to 30,000................................ -7,937 -11.6 68 3.2 60 3.0 13.7 12.1
30,000 to 40,000................................ -7,720 -7.9 98 4.6 90 4.4 16.0 14.7
40,000 to 50,000................................ -6,945 -6.2 112 5.3 105 5.2 17.2 16.2
50,000 to 75,000................................ -16,630 -5.5 303 14.2 286 14.1 18.7 17.6
75,000 to 100,000............................... -14,709 -5.1 287 13.5 273 13.5 21.4 20.3
100,000 to 200,000.............................. -24,654 -4.5 547 25.7 522 25.8 24.0 22.9
200,000 and over................................ -21,182 -3.1 678 31.9 657 32.4 28.3 27.4
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -103,720 -4.9 2,129 100.0 2,025 100.0 21.6 20.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
CALENDAR YEAR 2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $10,000............................... -76 -0.9 8 0.4 8 0.4 10.4 10.3
10,000 to 20,000................................ -3,789 -13.6 28 1.2 24 1.1 7.6 6.6
20,000 to 30,000................................ -7,853 -11.4 69 3.1 61 2.9 13.7 12.2
30,000 to 40,000................................ -7,839 -7.9 99 4.4 91 4.4 16.0 14.7
40,000 to 50,000................................ -7,570 -6.5 116 5.2 108 5.2 17.2 16.0
50,000 to 75,000................................ -18,755 -6.0 313 14.0 294 14.0 18.6 17.5
75,000 to 100,000............................... -17,212 -5.8 297 13.3 280 13.3 21.3 20.0
100,000 to 200,000.............................. -30,208 -5.1 588 26.3 558 26.6 23.9 22.7
200,000 and over................................ -44,177 -6.1 719 32.1 675 32.1 28.3 26.6
-------------------------------------------------------------------------------------------------------
Total, All Taxpayers...................... -137,476 -6.1 2,238 100.0 2,100 100.0 21.7 20.3
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\1\ Includes provisions affecting the child credit, individual marginal rates, a 10% bracket, limitation of itemized deductions, the personal exemption
phaseout, the standard deduction, 15% bracket and EIC for married couples, deductible IRAs, and the AMT.
\2\ The income concept used to place tax returns into income categories is adjusted gross income (AGI) plus; [1] tax-exempt interest, [2] employer
contributions for health plans and life insurance, [3] employer share of FICA tax, [4] worker's compensation, [5] nontaxable Social Security benefits,
[6] insurance value of Medicare benefits, [7] alternative minimum tax preference items, and [8] excluded income of U.S. citizens living abroad.
Categories are measured at 2001 levels.
\3\ Federal taxes are equal to individual income tax (including the outlay portion of the EIC), employment tax (attributed to employees), and excise
taxes (attributed to consumers). Corporate income tax and estate and gift taxes are not included due to uncertainty concerning the incidence of these
taxes. Individuals who are dependents of other taxpayers and taxpayers with negative income are excluded from the analysis. Does not include indirect
effects.
\4\ The effective tax rate is equal to Federal taxes described in footnote (3) divided by: income described in footnote (2) plus additional income
attributable to the proposal.
Source: Joint Committee on Taxation. Detail may not add to total due to rounding.
Mr. GRASSLEY. Mr. President, I will go to a couple of the charts I
referred to prepared by Joint Tax. Look at the levels of reduction in
tax burden shown on this chart. You can see that the lowest income
brackets receive the highest reduction.
Now, for the year 2006--and I say for the year 2006 because that is
when the individual tax provisions or rates are implemented--taxpayers
with over $100,000 of income receive a tax cut of between 5 and 6
percent. Taxpayers earning between $10,000 and $50,000 get a tax cut of
between 6.5 percent and 13.6 percent, with those at the lower income
levels getting the biggest percentage of reduction. Even those with
incomes below $10,000, who, by and large, don't pay income and payroll
taxes, receive a tax cut under the bipartisan tax relief package.
Under the tax relief, 6 million Americans will be taken off the
income tax rolls. Those are lower bracket people. Just tell 6 million
people who are never going to be paying income tax in the future that
they aren't getting a benefit from this greater than higher income
people who are going to be paying income taxes the rest of their lives.
A four-person family earning $35,000 a year will no longer have any
income tax burden.
As the Joint Tax data also shows, a large reduction of the tax burden
is targeted toward taxpayers between the $30,000 and $75,000 income
brackets. These taxpayers will enjoy significant effective tax relief.
I also said that the bipartisan tax relief actually makes our tax
system more progressive. The Joint Tax Committee again provides the
proof. As the Joint Tax tables demonstrate, under the bipartisan tax
relief package, the overall burden goes down for taxpayers earning
below $100,000. For taxpayers making $100,000 or more, however, their
share of the Federal tax burden will actually increase under the
bipartisan tax relief legislation. For example, for taxpayers earning
between $100,000 and $200,000 a year, their share of the burden will
increase by three-tenths of a percent. This is not the case for
taxpayers earning between $10,000 and $30,000. Their share of the
overall burden will decrease by three-tenths of a percentage point.
So the bipartisan tax relief legislation not only retains the
progressivity of the tax system, but that progressivity is enhanced.
Now, it is clear that distribution tables aren't the only way to
define tax fairness. There were other categories of tax relief that
carried bipartisan priority in terms of fairness. First, on a
bipartisan basis, there is concern about the added burden for couples
who decide to marry. This important social objective was impaired by
the marriage penalty. The bipartisan tax relief legislation provided
marriage tax relief.
Second, on a bipartisan basis, there was concern about the Tax Code's
failure to recognize the cost of raising children. The bipartisan tax
relief legislation provides tax relief for millions of families with
children, including those who pay no income tax at all. In addition,
the dependent care tax credit was enhanced for families with children
in day care.
Third, on a bipartisan basis, there was concern about helping
families with the rising cost of education. As a
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response, the bipartisan tax relief legislation includes a package of
educational tax relief measures.
Fourth, on a bipartisan basis, there was concern about declining
savings rates and the need for more secure retirement plan benefits for
more workers to help baby boomers who are saving less. As a response,
the bipartisan tax relief legislation included significant enhancements
to individual retirement accounts and retirement plans. This package
was then perhaps the greatest improvement in our individual IRAs and
retirement plans in a generation.
Finally, there was a bipartisan concern about the confiscatory impact
of the death tax, especially for family farmers and small businesses.
As a response, the bipartisan tax relief legislation includes death tax
relief, including repeal.
Today I have talked about the three most important reasons from my
perspective why we were able to pass the largest bipartisan tax relief
measure in a generation.
The first reason is to correct the policy of overtaxation that
stemmed from the heavy tax hike of 1993.
The second is to respond with an economic stimulus against the
current economic slowdown.
The third is there are sufficient budgetary resources to address tax
fairness problems.
It is important to realize that the major tax legislation just
enacted rests on a very sound foundation. It should not be dismissed,
it should not be obfuscated, and it should not otherwise be distorted
by budgetary demagoguery. Let us not forget that revenue is not an
abstract notion. Revenue reflects the sum total payments to Washington
by hard-working men and women. It is not abstract when paid and should
not be treated as an entitlement by those of us fortunate enough to be
sent here to make policy decisions to represent the folks back home.
We have a very good tax bill. Our challenge is to make sure that
those in Congress who want to spend more money and do not like giving
the people back their money--we are intent upon keeping this reduction
of revenue coming into the Federal Treasury, not because we are
concerned about the taxpayers, but because if those taxpayers spend
that money, it is going to do more economic good and turn over the
economy, create more jobs and more wealth than if I spend it as a
Member of the Senate.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from California.
Mrs. FEINSTEIN. Mr. President, I ask unanimous consent to speak for
approximately 20 minutes in morning business.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
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