[Congressional Record Volume 153, Number 60 (Monday, April 16, 2007)]
[House]
[Pages H3394-H3397]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REPUBLICAN TAX CUTS REDUCE THE TAX BURDEN ON AMERICANS
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 18, 2007, the gentlewoman from North Carolina (Ms. Foxx) is
recognized for 60 minutes as the designee of the minority leader.
Ms. FOXX. Mr. Speaker, tomorrow is the day that Americans are
required to pay their taxes. It is the last possible day in this year
that they can do that. We call it ``tax day.'' It is normally on April
15th, but because of the calendar and because today is a holiday in the
District of Columbia, it has been delayed.
I want to say something about the fact that our taxes are something
that people feel obliged to pay the Federal Government and to State and
local governments too, but many people do it grudgingly. We do it
grudgingly because we feel concern about the way too many of our tax
dollars are being spent. However, this year, taxpayers are paying less
than they have paid before as a result of the tax cuts that have
occurred in 2001 and 2003, tax cuts that were pushed through under a
Republican Congress and asked for by a Republican President.
Children often ask me when I speak to them in school groups, what is
the difference between Democrats and Republicans? I tell them that the
most simple definition that I can give them is that Republicans believe
that Americans should keep more of their money than Democrats do and
that Democrats believe that very often the government is the answer to
the problems that we have in this country, while Republicans think that
individual Americans have the capability for solving most of their
problems. So Republicans believe that the government that governs least
governs best, and that is the philosophy that I have.
The tax cuts that were instituted in 2001 and 2003 were designed for
Americans to keep more of their money than the government had been
taking from them, and those tax cuts have been very effective. We see
that our economy is doing extremely well as a result of those tax cuts.
We have the lowest unemployment rate in this country in many, many
years, the highest home-ownership rate, the highest level of income in
many, many years; and just on and on and on the economic indicators go
that are very, very positive in this country. Those are as a result of
the tax cuts.
Democrats will talk about ``investing in government.'' Well, we don't
invest in government when we give money to the government to spend. Our
investments come from individual Americans who are entrepreneurs who
create new jobs and create new businesses. That is where investments
come from, and that is where a good return on investments come from.
Mr. Speaker, I yield to the gentleman from Nebraska.
Mr. SMITH of Nebraska. Mr. Speaker, I rise today to express some
thoughts and concerns about taxation. Certainly, as taxes are due
today, I know that post offices around the country are well staffed, up
to midnight. It is interesting as I have paid my taxes in the past,
kind of pushing it up to the last minute, to see everyone else who
pushes up the payment of their taxes to the last minute. But the fact
is, it does take place.
But I rise today to very briefly reflect on what today means.
Certainly I realize that paying taxes is a necessary function of a
civilization, but I also rise to express my concern that some tax
policies that have been working over the past few years are in
jeopardy. The tax relief packages offered by President Bush and
certainly those in the House and Senate who supported tax relief have
done good things, in fact, great things, in terms of revenues to the
Federal Government, but I would say so in terms of revenues to the
household budget even more importantly.
We in Congress cannot utilize what we call ``dynamic scoring,'' the
reflection of what lower taxes can do in terms of tax revenue. I
understand that. I think it is unfortunate. Be that as it may, we are
faced with some tough decisions, decisions impacting the budget long
term, and I wish to speak of my concern for the long term.
I have learned over the years that government spending compounds once
a new program is started. We have to be very mindful of that. We have
to be mindful that as we look down the road, we have to come up with
ways to cover the expenses of new programs. That is why I believe we
should be careful when we talk about adopting new programs.
When it comes to the tax burden in general, certainly April 15th, and
now the 16th, speaks volumes not only in the 3\1/2\ months it takes to
prepare taxes owed from the prior year, but we often hear about ``tax
freedom day.'' Preliminary research tells us most recently this year's
tax freedom day is actually April 30. It takes a full 4 months, on
average, for Americans to earn enough money in their household to pay
their Federal income tax.
Now, throw on top of the Federal income tax State income tax, and in
a State like my State of Nebraska, property tax, it is a heavy burden
in Nebraska, and sales tax, plus the other
[[Page H3395]]
fees and taxes associated; and I just think it is important that we
reflect on this.
We heard earlier about financial literacy. Yes, we have an issue with
credit card debt, for example. But I think that it would serve us well
to make sure that for consumers and citizens of all kinds, that we
teach them about the tax burden, tax freedom day, and not just paying
taxes by April 15th or 16th, but more so what it might mean to take
some of those dollars paid in taxes and perhaps invest those.
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And it is interesting, as we look at our economy in general, what
available capital means to a business, to an individual.
I am inspired to hear of individuals who wish to start a business but
for the available capital. When we look at what available capital can
do in a house, whether it is a project around the house or whether it's
a small business incubating, I think that we should look at various
ways we can avail capital to our citizens, primarily through tax
relief.
It is absolutely vital that we always keep this in mind, especially
as we constantly need to look at growing our economy. And that it is
not just coincidence, as some might suggest, that tax relief actually
led to job creation and increased revenues to the Federal Government. I
don't believe that that's just coincidence. I believe that that is
through fashioning good tax policy and allowing individuals, individual
taxpayers, to keep more of what they earn because when they spend those
dollars, they spend them more wisely, and those dollars are leveraged
into actually greater Federal revenue so that we can provide for those
who cannot provide for themselves.
Ms. FOXX. I want to thank my colleague. He is in his first term in
Congress, but he speaks very, very eloquently of this issue and other
issues. I am very grateful to him for his sharing his concerns and his
perspective on this.
As I said earlier, when people ask me what is the difference between
a Democrat and a Republican, I say, well, Republicans think that you
should keep more of your money and spend it and take care of yourself;
and Democrats want to take more of your money away from you and give it
to the government. And let me give you an example of what is happening.
I don't have to just talk about that in the abstract; I can talk about
it in concrete terms.
The tax decreases that were put through by a Republican Congress and
advocated by a Republican President are due to expire in 2010 because
of the rules of the Senate, which would not allow those tax cuts to be
made permanent. Now, 2 weeks ago, the Democrats, who are now in a
majority here in the House, and our Constitution requires that spending
bills and budget bills have to begin in the House, they passed their
budget. It passed, and it assumes that the 2001/2003 tax cuts will
expire. The effect of that will be to impose the largest tax increase
in American history, nearly $400 billion over 5 years, mainly to
finance their immense new spending. And as my colleague from Nebraska
said, we have to be very much concerned about the long term, and we are
concerned about the long term.
Now, if the Republican tax relief is not extended, what happens when
the clock strikes midnight on December 31, 2010? Well, here's what
happens: the tax rates are going to go higher. In 2010, the top income
tax rate will be 35 percent. The Democrats propose that that tax rate
goes to 39.6 percent in 2011. The capital gains tax, 15 percent in
2010, 20 percent immediately thereafter. The tax on dividends, from 15
percent to 39.6 percent. The death tax: the death tax has been
gradually going down since the tax cuts of 2001/2003. In the year 2010,
the death tax will be zero. In 2011, it goes back to 55 percent.
I am particularly offended by the death tax, and I think most
Americans are. It is probably the third time that that same income is
going to be taxed when you impose a death tax, because we are paying
taxes on our income, if you have an opportunity to invest any of that
money you are going to pay capital gains tax on it, and then you are
going to pay 55 percent on whatever is left over. Again, I think it is
a particularly offensive tax to most Americans.
But how do the Democrats, who talk so much about the value of
children, act about the child tax credit? The child tax credit went to
$1,000 under the tax cuts of 2001/2003. It will be cut back to $500. We
all know that you can't raise children even on $1,000 as a tax credit,
let alone on $500.
The lowest tax bracket, hurting the lowest income people in our
country, and Democrats say that they stand for the little people and
they want to help the low-income people in this country, but what they
propose to do is take the taxes on the lowest income people in our
country and go from 10 percent to 15 percent. I think, again, that is
an abomination. Why in the world do we want to burden those folks who
are making the lowest income in this country?
Another part of the problem that we have in this country is the fact
that our Tax Code is so complicated. We believe now that more than 60
percent of tax returns are prepared by a professional. If you add the
number of Americans who use computer tax software to file a return, the
proportion of people who seek outside help rises to 90 percent. We
shouldn't live in a country where the Tax Code is so complicated that
the average American citizen cannot complete his or her income tax
forms.
The Office of Management and Budget estimates that we spend about 6.4
billion hours, and we did in 2006, complying with the Federal Tax Code.
That many hours is the equivalent of a 40-hour work week for every
employed person in America. Take your pick: do your taxes or go on a
week-long vacation.
While the tax cuts of 2001 and 2003 have lowered taxes across the
board and encouraged investments that lead to job creation, we are
still saddled with an incomprehensible Tax Code that costs more than
$265 billion a year to comply with.
As a supporter of the Taxpayer Bill of Rights, I pledge to work
towards scrapping the Tax Code in order to build a new one that
promotes transparency and common sense. By signing on to the Taxpayer
Bill of Rights, I have also promised to work to balance the budget, to
exercise the fiscal discipline needed to rein in the growth of the
Federal Government, and to protect the Social Security trust fund from
congressional raiding.
Let me say something about Social Security here, even though we're
talking about taxes today.
Many people don't understand the or origin of the Social Security
fund. After the Depression, President Roosevelt was desperate to raise
money for the social programs that he wanted to institute in this
country, but he knew that if he wanted to raise taxes that would raise
a hew and cry among the people. At that time, 1936/1937, the average
life expectancy of Americans was 59 years. People still weren't living
very long in this country. We had come a long way from the early part
of the century, but still life expectancy was only 59 years of age. So
they came up with a scheme to take money away from Americans and have
it available to spend on social programs, and they came up with a
Social Security fund. It was for every American to pay a small amount.
It was designed to provide a retirement income, or at least that is the
way it was sold to the American people. But what most people didn't
realize again at the time, the life expectancy was 59 years of age. And
when did they set Social Security up to be redeemed? Age 65. The idea
was that they would take in a lot of money to develop the programs that
they wanted to develop, and that very few people would ever draw on
Social Security for their retirement. So that's why the average age was
set at 65, way beyond the average life expectancy for Americans at the
time.
And immediately the money was going into other programs other than
into what most Americans thought would happen, which was a fund to pay
for Social Security. That has continued to the present time under both
Democrats and, I am sorry to say, under Republicans. Rather than
putting that money into a special fund and leaving it alone just to pay
for Social Security, most of that money is going into paying for
government programs, and those programs have become dependent on that
Social Security money, which
[[Page H3396]]
is why you find people very reluctant to create that mythical lock box
that has been talked about so much. But we now have groups who are
trying very hard to make sure that the money being paid into Social
Security stays in the Social Security account. That's what I believe
in, and I think that is what most Americans believe in.
The President proposed personal accounts so that people could take an
interest in where their Social Security money was going and manage that
money better than the Federal Government has been able to manage it.
That has been demonized as a way to do something bad with the Social
Security fund. But if people had a way to manage their own money, they
would get a lot more from Social Security.
The average Social Security payment right now is about $1,000 a
month, and I know of very, very few people who can live on that. And we
know that Social Security is going to be in deep trouble in the next
few years because there will be more people drawing on Social Security
than are paying into Social Security. So not only are we going to have
to come up with the money to pay for Social Security; we are going to
have to either cut the funding that is dependent on the Social Security
money or cut out programs or raise taxes. Republicans are opposed to
raising taxes and continuing to fund those programs, most of which were
begun in the 1930s.
What people can do in this country is to sign an online petition with
the grass-roots group Freedom Works to support the initiative of the
Taxpayer Bill of Rights. They can sign this petition at
www.freedomworks.org/action/taxpayer. I am sure if you put in the words
``freedom works,'' you can probably find out how to get on to that. But
we need to do everything we possibly can to keep the tax rate low,
protect Social Security, and reduce the burden of government on our
citizens.
I want to go back over the effects of the Democrat tax hike, which
were in the budget that the Democrats passed 2 weeks ago here. They
will be raising the 10 percent tax rate bracket to 15 percent. More
than 15 million individuals and families, who previously owed no taxes
under the Republican plan, would now become subject to the individual
income tax if the Democrats were successful in raising the 10 percent
tax rate bracket to 15 percent and reducing or eliminating other low-
income tax benefits.
That budget eliminates the marriage penalty relief. Most Americans I
think now know that if you are married and you file jointly, you pay a
penalty for being married in this country. Twenty-three million
taxpayers would see their taxes increase on average by approximately
$500 when that goes into effect. As I said earlier, it would cut the
child tax credit in half. Thirty-one million taxpayers would see their
taxes increase on average by $859 when this goes into effect.
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Elderly couples with $40,000 in income would see their tax bill rise
by 156 percent from $583 to $1,489. And a single parent with two
children and $30,000 in earnings would see their tax benefits decline
by 67 percent. With tax relief, the single parent qualifies to get back
$2,214. With the Democrat tax hike, this single parent would get back
only $799.
So we would see a major impact on the American family with the
effects of the budget that the Democrats passed here a couple of weeks
ago. It is not the way we should be going in this country.
The tax cuts of 2001 and 2003 have brought us one of the most vibrant
economies this country has ever seen. The stock market is at a new
high. Home ownership is at a new high. Personal income is at a new
high. Unemployment rates are at an all-time low. New business creations
are at an all-time high. Job creations are at an all-time high. All of
the things that should be positive in this country are positive; all of
the things that should be negative are negative in terms of our
economy, and those come as a result of the tax cuts that were made in
2001 and 2003.
I personally cannot take any credit for that because I was not here,
but I applaud those who voted for those tax cuts in 2001 and 2003
because they have had an extremely positive effect on our economy and
on American families.
I want to talk some more about the dysfunctional Tax Code that we
have and the impact that it has on Americans. I mentioned earlier how
much it costs to file income taxes and how much is being spent by
Americans because they have to go to professionals to get their taxes
done. But I want to put this into sort of an allegory.
Can you imagine a business that with every passing year grows more
difficult to manage, gets harder for its customers to understand, and
becomes increasingly susceptible to theft? You would be right to think
that such an operation would quickly go out of business.
Unfortunately, this imaginary business is more of an apt description
of the United States tax system. Every year the Federal Tax Code grows
larger and more complex. New rules and guidelines are added. Deductions
and special exemptions proliferate. As a result, each tax season more
Americans are throwing up their hands in disgust and calling in a
professional to do their taxes.
According to the IRS, more than 60 percent of tax returns are
prepared by a professional; and if you add the number of Americans who
use computer tax software to file a return, the proportion of people
who seek outside help rises to 90 percent.
Congress puts out a little-known tax law report each session that
serves as a chilling picture of the obscene complexity of our tax
system. The most recent version entitled ``The General Explanation of
Tax Legislation Enacted in the 109th Congress'' runs to 806 pages and
purports to explain the 109th Congress' changes to tax law. As you
might imagine, it is mind-numbing. That we need a publication of this
size simply to explain the 109th Congress' Tax Code additions is ample
evidence that we have a massive problem on our hands.
What ails our Tax Code is not just the fact that it is 7,000 pages
long. Rather, the real ailment is the burden, above and beyond the
actual financial burden of tax day, of complying with a chameleon Tax
Code.
As I said earlier, the government's Office of Management and Budget
estimated that we spent about 6.4 billion hours in 2006 complying with
the Federal Tax Code. That many hours is the equivalent of a 40-hour
work week for every employed person in America. While the tax cuts of
2001 and 2003 have lowered taxes across the board and encouraged
investments that lead to job creation, we are still saddled with an
incomprehensible Tax Code that costs more than $265 billion to comply
with each year.
Our tax professionals can't even understand it. I am sure you have
read and heard the horror stories about how 10 different people will
call the IRS to ask for an interpretation of a rule, and get 10
different interpretations. That, again, is a really sad commentary on
our Tax Code that you can't call 10 employees from the IRS and get the
same answer from 10 different people on a code that millions of us are
supposed to be adhering to because the way the Tax Code is written is
so incomprehensible.
While the tax cuts of 2001 and 2003 have lowered taxes across the
board and encouraged investments that lead to job creation, we are
still saddled with this incomprehensible Tax Code.
The IRS reports that the tax gap, the difference between what people
owe and what they pay is around $300 billion. This gap is composed of
the cheaters and those who simply don't know any better because the
system is too murky for the average taxpayer to accurately decipher.
Realities like the tax gap, the 6 billion hours of annual compliance
time, and the thousands of pages of rules and regulations have led me
to join with the approximately 100 fiscal conservatives of the
Republican Study Committee in support of the American Taxpayer Bill of
Rights. We need a taxpayer bill of rights passed. Many States have
passed a taxpayer bill of rights, and we need to do that at the Federal
level.
Those of us who have signed that pledge have pledged to work towards
scrapping the Tax Code in order to build a new one that promotes
transparency and commonsense. I have also promised to work to balance
the budget. I have done that every chance that I have had since I have
been in Congress, to exercise the fiscal discipline needed to rein in
the growth of the Federal Government.
[[Page H3397]]
I want to say that 2 years ago, when we dealt with the Hurricane
Katrina relief, I am very proud to say that I pushed for an offset in
Federal spending at that time. We were faced with spending outside the
budget, $52 billion in one fell swoop, to offer relief to the victims
of Hurricane Katrina. We had no good plan for how that money was going
to be spent, and we needed a plan. We did not have an offset set up
when we first passed that $52 billion. I urged the Republican Study
Committee to demand offsets.
In just a few weeks' period of time, we were able to come up with $39
billion in offsets to the $52 billion. We weren't able to come up with
$52 billion, but we came up with $39 billion. One of my colleagues who
gives me the credit for that, calls me the ``mother of offsets.'' It is
a title I wear proudly. All of us need to be doing that here in the
Congress. We all need to make sure that when we ask for any funding,
that we are looking for ways to offset that funding, and certainly any
new funding.
Unfortunately, the war supplemental that was passed 3 weeks ago did
not have offsets in it because the rules here in the House say that
emergency spending, such as the Katrina bill, don't have to have
offsets in them; and yet our Democratic colleagues promised that in
this session of Congress they would not do what the Republicans did and
that was spend outside the budget and expand the growth of the Federal
Government.
They just ignored that. They had $24 billion in new spending, pork-
barrel spending, I would call it, spending to buy votes to pass the war
supplemental, which were outside the budget and expanded the scope of
spending, violating all of the promises that they made last year to do
PAYGO. They found ways to get around those promises to pay as you go
and not expand spending by putting it within the supplemental which was
supposedly for the war and is emergency spending. That, to me, is one
of the most cynical things that a person can do.
But as we file our taxes on April 17, we need to imagine the
alternatives to piles of tax forms and schedules and endless hours
calculating Uncle Sam's take. We need a system that is fair, simple and
transparent. It is time for radical change in the way we collect taxes.
The first step is ditching the leviathan code we have inherited from
decades of congressional tinkering and start a real tax debate over how
to collect taxes responsibly, efficiently and fairly. I challenge my
colleagues on the other side of the aisle to bring forth legislation
that will relieve the burden that so many Americans feel at this time
of the year where they have to spend hours and hours and weeks at a
time preparing their taxes and paying a lot more out to the Federal
Government than we should be paying.
Many years ago I read an article in the Wall Street Journal where
they had done a survey of every segment of our society and asked, what
do you think would a fair amount of money that you should be paying to
the Federal Government in taxes. Most people felt 25 percent was about
the fair amount that they should pay, and they would pay that
willingly. But once you get beyond that, then people begin to begrudge
it and avoid trying to pay their taxes.
We have way too many people in this country at this stage of the game
paying approximately 48 percent of all of their income in taxes at all
three levels, so we are at twice the level that most people feel is the
fair amount to pay. I think most people would say that much of their
money is being wasted. Not only do they think that they should pay only
approximately 25 percent, but they want to know that the Federal
Government is spending their money wisely.
I want to say that as far as I am concerned what we should be doing
at the Federal level is funding primarily defense, the Federal system
of interstate highways, and national parks. Beyond that, we should not
be doing it.
Our Constitution shows that the things that are not mentioned in the
Constitution, and in the 10th amendment we say those things not
mentioned in the Constitution are the responsibility of the States.
What we have done at the Federal level is we have taken on many, many
more responsibilities than the framers and the founders of this country
envisioned that we would do. What we need to do is step back, look at
what we are funding at the Federal Government level and say, is it
constitutional, is it something that we should be funding, and if not,
then how can we get out of funding this and allow the States to do it.
If it is a project that is worthy to be funded, then the States and
localities should be doing it and not the Federal Government.
Our Federal Government was formed to provide for the defense of this
Nation. The States and localities cannot do that; only the Federal
Government can do it. That is our responsibility.
When people talk about the fact that we are taking money from
education and putting it into the war effort, that is not accurate. We
should not be funding education at all at the Federal level because
that is not one of the parts of the Constitution that we should be
funding. So I say if we could take the Federal Government back to its
roots, to those things that we should be funding, then we would be able
to lower the tax burden tremendously because much of the money that is
taken at the Federal level is wasted.
President Jefferson said: ``The government which governs least
governs best,'' and I think that is accurate.
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