[Congressional Record Volume 153, Number 80 (Tuesday, May 15, 2007)]
[Senate]
[Pages S6082-S6085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             BUSH TAX CUTS

  Mr. BENNETT. Mr. President, we celebrate anniversaries around here. 
We find times to look back. Today happens to be the fourth anniversary 
of the Senate passage of the last of the Bush tax cuts. We have heard a 
lot of rhetoric around here about those tax cuts. We heard it in 
advance, we heard it as they have gone along, we continue to hear it.
  I thought on the fourth anniversary of the Senate passage of the tax 
cuts it might be a wise idea to spend some time with some facts.
  Our former colleague, Senator Gramm of Texas, always used to say: I 
tell my children never argue about the facts. Facts are things you can 
look up. Argue about what the facts might mean, but don't argue about 
the facts.
  We don't take his advice as much as I think we should. We spend too 
much time arguing about the facts. Let's look them up.
  One of the things we are told constantly is that since the passage of 
the tax cuts, the rich have gotten richer, the tax burden has shifted 
from the rich to the poor, and that this is terrible and we need to 
reverse that trend. Well, let's look at a few facts. Let's go back to 
the 8 years prior to the time of the Bush administration and see what 
happened in terms of the rich getting richer and the poor getting 
poorer.

  While President Clinton was the President, dividing into five 
quintiles, which is what economists do, we see what happened to pretax 
income. During the Clinton years, in the lowest 20 percent, the bottom 
quintile, pretax income went down. In the second quintile, the pretax 
income went down. The red bars are prior to Clinton and the blue bars 
are after. In the middle 20th percentile, the pretax income went down. 
In the second highest quintile, pretax income went down. In the top 
quintile, pretax income went up between the time when Clinton was 
elected and the end of the Clinton administration.
  Our source for this is the Congressional Budget Office. These are the 
facts.
  What has happened since President Bush has been in office? Let's take 
a look at the same areas and look with the new data plugged in. It is 
very interesting.
  Since Bush has been elected, the lowest quintile has seen their 
pretax income go up. The second lowest quintile has seen their pretax 
income go up. The middle quintile has seen their pretax income go up. 
The second highest quintile has seen their pretax income go up, but the 
top quintile, the

[[Page S6083]]

top 20 percent, has seen their pretax income come down.
  Once again, the source for these facts is the Congressional Budget 
Office. On this side of the chart, we see the share of pretax income. 
This is the number of people to focus on.
  The share of income is very high for the top 20 percent and low for 
the bottom 20 percent. So we look at share and ignore the trend if we 
want to make the case that the tax cuts have been bad for people at the 
bottom. In fact, since Bush has been President, we see things have 
gotten better for people at the bottom.
  This comes as somewhat of a surprise to those who were advising us 
when we passed the Bush tax cuts. I would like to quote from the 
Brookings Institution. They viewed the tax cuts, as they were proposed, 
and they had this cogent statement to make about the future, and I 
quote:

       Our findings suggest that the tax bill will reduce the size 
     of the future economy, raise interest rates, make taxes more 
     regressive, increase tax complexity, and prove fiscally 
     unsustainable. These conclusions question the wisdom and 
     affordability of the tax cut and suggest that Congress 
     reconsider the legislation, especially in light of the 
     economic downturn and terrorist attacks that have occurred 
     last summer.

  Very interesting. Reduce the size of the future economy? Since Bush 
has been President, the U.S. economy has grown more than the entire 
Chinese economy. Under the Bush Presidency, the U.S. economy has grown 
$2.7 trillion in GDP. The total Chinese economy is $2.3 trillion. They 
missed that one.
  Raise interest rates? No. Make taxes more regressive? Well, let's 
look at that one in another chart. Increase tax complexity? I will 
grant them that. Congress increases tax complexity every time we pass a 
law. That is an easy prediction to make. And prove fiscally 
unsustainable? I don't think so.
  Here is the relative income tax burden by income group, taking the 
specific prophecy made by the people at the Brookings Institute. The 
people in the lowest quintile were receiving that much earned income 
tax credit. In other words, their tax payments were negative. They 
received money in transfers. Now, since the passage of the tax cut, the 
amount of money they have received has been greater. The second lowest 
quintile used to pay a little taxes; now they receive transfer 
payments. The middle quintile paid that much taxes; now they pay less. 
The second highest quintile, virtually identical, but the trend line is 
down. Who has paid the most taxes? Who has had the greatest increase in 
taxes? It is the top 20 percent.
  At the end of the Clinton administration, this is where it was, and 
at the end of the Bush term, this is where it is. Brookings was wrong 
on virtually every point, except their prediction that we would make 
the tax law more complex. That, as I say, is a prediction one can 
always make and always be sure of.
  What about fiscal sustainability? I remember when I ran for 
reelection in 2004, right after the tax cuts, my opponents said, we 
have to bring down the deficit. The deficit is too high. I said: Not 
only is it going to come down, it is coming down. We see year after 
year, since the passage of the tax cuts, that the deficit has shrunk. 
It has shrunk in absolute dollars and it has shrunk as a percentage of 
GDP. We have the same word out of the Congressional Budget Office and 
OMB at the end of the first quarter.
  Why would we get a shrinking deficit when we have cut tax rates? The 
answer lies in the dynamism of the American economy, and we look back 
again on this anniversary date to see what has happened to people's 
predictions. The red bars are the predictions that the Congressional 
Budget Office made of the amount of revenue we would receive from 
capital gains. They predicted that the capital gains revenue would stay 
flat or barely increase as a result of the reduction in capital gains 
tax rates.
  We reduced the capital gains tax rates, and guess what happened. That 
is shown in the blue lines. The capital gains realizations--that is the 
money that came in--went up in 2003, higher than the CBO projection. It 
went up in 2004 even higher. It went up in 2005 even higher. In 2006, 
it knocks your socks off. They had predicted $54 billion in 
realizations, and the fact is, it was $103 billion. The actual capital 
gains tax receipts were substantially higher than projected by CBO.
  Well, how can that be? If we cut the tax rates, how can we get more 
revenue? The answer to that, of course, is a reality that we so often 
forget around here, and that is the economy is not static. The economy 
is not a sum zero game that says: All right, if you cut it here, then 
you have to see it rise there. If we cut tax rates, we have to see the 
deficit go up.
  We have seen exactly the opposite. We have cut tax rates, and we have 
seen the deficit go down. Why? Because people respond to economic 
incentives. When they have an economic incentive to form a new 
business, create a new opportunity, modernize a plant--because they 
would not have to pay so much in taxes as they previously had to pay--
the new business, the new opportunity, the modernized new plant will 
create new jobs and creates new income and, therefore, more taxes, more 
tax revenue, even as the tax rates come down.
  We have seen this historical fact again and again for decades, yet we 
continue to ignore it. The computers at the Congressional Budget Office 
are programmed not to take into account the growth in the economy and 
not to predict this kind of result.
  So on this anniversary date, I thought I would simply share with the 
Senate a few facts that demonstrate that the tax cuts have been good 
for America.
  Mr. CORNYN. Mr. President.
  The ACTING PRESIDENT pro tempore. The Senator from Texas is 
recognized.
  Mr. CORNYN. Mr. President, I wish to join the distinguished Senator 
from Utah, Mr. Bennett, who gives, to my mind, one of the most cogent 
and understandable explanations for the economy given around here, and 
I wish to add a few comments about the fourth anniversary of the Jobs 
and Growth Tax Relief Reconciliation Act of 2003.
  While we have a lot of people trained in a lot of disciplines who 
make their way to the Senate, I daresay there are not very many of us 
who have a background in economics or accounting or the type of 
disciplines that would help them make good economic decisions. The good 
news is that I think the fundamentals are pretty clear when it comes to 
what provides people an incentive to work hard and save, and what 
Government policies--particularly tax increases--make it harder for 
people to save their hard-earned money and invest it as they see fit--
whether it is spending it on their family, investing in their 
children's college education or perhaps buying things that they would 
prefer--rather than having Uncle Sam stick his hand in their pocket and 
spend it on things the Federal Government wants.
  It is important to go back and highlight some of the challenges our 
economy was facing when the Senate first passed this protaxpayer 
legislation 4 years ago. The economy was hit with not just a one-two 
punch but with a one-two-three punch. We were dealing with the fallout 
from the corporate accounting scandals of the late 1990s, the bursting 
tech bubble and, of course, the horrific attacks of September 11, 2001. 
All these events combined would have knocked out any other economy in 
the world. But because we acted with well-timed tax relief that put 
money back in the pockets of working men and women, small businesses 
and entrepreneurs, our economy bounced back. Indeed, our economy has 
roared back.
  The 2003 act accelerated a number of individual and small business 
tax relief provisions Congress passed 2 years earlier. We allowed 
parents to take the $1,000 tax credit sooner. We accelerated relief 
from higher marginal tax rates--the marriage tax penalty and the 
alternative minimum tax. This legislation, passed 4 years ago, provided 
capital gains and dividends tax relief, which has helped increase 
economic activity and fill the Federal Government's coffers.
  How could it be that Federal revenue has seen historic highs even as 
we cut taxes 4 years ago? Well, it is for all the obvious reasons: 
People respond to financial incentives when they know they are going to 
be able to keep more of what they earn. They work harder, risk takers 
and entrepreneurs invest in ventures that generate revenue not only for 
them--and create new jobs--but generate a lot more revenue for

[[Page S6084]]

Uncle Sam as well. That is exactly what happened here.
  Since 2004, Government revenues have outpaced projections by the 
nonpartisan Congressional Budget Office, and the deficit this year 
could tumble to $150 billion, or about 1 percent of our Nation's gross 
domestic product. Things such as bonus depreciation and the $100,000 
expensing provision have allowed entrepreneurs and small businesses to 
grow and create jobs. This tax relief has helped produce 22 straight 
quarters of growth, with 7.8 million new jobs over the past 44 
consecutive months. That is an outstanding accomplishment, which makes 
America the envy of the world, and it is a trend we must continue as we 
face significant fiscal challenges ahead.
  We can and we should take great pride in the economy's performance 
and look with optimism toward the future. As we move forward, the last 
thing we should consider is reversing the policies that have generated 
this kind of beneficial economic activity and created so many jobs in 
America. Unfortunately, this tax relief will soon expire, resulting in 
a tax increase for all taxpayers without a single vote on the floor of 
the Senate.
  The other side is now pushing a budget that will result in a $736 
billion tax hike for taxpayers over the next 5 years. This, unless it 
is reversed, will not only jeopardize future economic growth but also 
the financial well-being of millions of Americans--families, small 
businesses, and seniors. If Congress fails to make this tax relief 
permanent, the fourth anniversary of which we are celebrating today, 
every American taxpayer will see their taxes go up. For instance, a 
family of four with two children, making $50,000 in annual income, 
would see an increase of $2,092 a year in their tax bill, or a 132-
percent hike.

  Four years ago, many of our colleagues on the other side of the aisle 
argued that the Jobs and Growth Tax Relief Reconciliation Act of 2003 
would not only not benefit our economy, they actually said it would 
endanger the economy. For example, the now-majority whip said:

       The Republicans who push this tax plan have to face 
     stubborn facts, and facts can be stubborn. The last time they 
     got a tax cut through, the American economy fell backwards. 
     We did not make progress. We lost jobs. We lost opportunity. 
     We lost a lot of hope in this country.

  There is one thing I agree with the distinguished majority whip 
about, and that is facts are, indeed, stubborn things. Four years ago, 
the Senate voted for hope and against fear. It voted for progress and 
against stagnation. It voted for the entrepreneurial spirit and against 
command and control out of Washington, DC.
  I think 4 years later we all have seen and can celebrate tremendous 
results as an outcome of this important legislation.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from New Hampshire.
  Mr. GREGG. Mr. President, first I thank the Senator from Texas for 
his elegant statement and accurate statement. I want to pick up where 
the Senator has left off.
  The Senator talks about the facts--and this is a fact--that revenues 
to the Federal Government have jumped dramatically in the last 3 years. 
In fact, in the last 3 years we have seen more revenues flowing into 
the Federal Government than ever in history, and the percentage of 
increase in those revenues has also been historic. As this chart 
clearly shows, we are now seeing revenues to the Federal Government 
which actually exceed the historic revenues to this Government. 
Historically, the Federal Government has gotten about 18.2 percent of 
the gross national product in revenue. Today we are up around 18.5 
percent. We are headed towards 18.7 percent. That is a significant 
increase in revenues to the Federal Government.
  What effect does that have? As the Senator from Texas said, it has 
had a dramatic effect on the deficit. Because we have gotten all this 
additional revenue, it has caused the deficit to drop dramatically.
  The other side of the aisle argues: So what. Taxes are still too low 
on Americans. We should raise the taxes on Americans. So they brought 
out a budget which is going to increase taxes on Americans by about 
$700 billion. It is the largest tax increase in the history of the 
country, should that budget actually come to fruition--and it looks 
like it is going to pass, and I assume they are going to follow up on 
it. They mean what they say, on the other side of the aisle.
  What will that do to Federal revenues, that dramatic increase in 
taxes? What will that do to the economy? We are not sure, but we 
suspect it will slow the economy dramatically. Some of these great 
gains that we have seen in the economy, the 22 months of expansion, the 
7.4 million new jobs, may be significantly impacted by that type of a 
tax increase.
  We also know it will create a Tax Code that is taking a lot more 
money out of Americans who work hard. We happen to believe, on our side 
of the aisle, we should let Americans keep the money they earn as much 
as possible, have a fair tax system, and as a result generate a benefit 
to working Americans by saying: Listen, if you are going to work hard, 
we are going to give you more money. We are also going to get more 
revenues, which is the way this has worked out.
  Why have we gotten more revenues even though we reduced the tax 
burden on the American people? The answer is pretty simple. It is 
called human nature. When you set tax levels at a fair level--which is 
what we have today--people are willing to go out and invest. They are 
willing to go out and take risks. They are willing to work harder 
because they know they are going to get to keep more of what they earn. 
What does that do? That creates a stronger economy which puts more 
people to work, and that is what we want, more jobs for people and, of 
course, the more jobs you have the more tax revenues you end up 
getting.
  In addition, especially in the area of capital gains, if you have a 
fair capital gains rate, which is what we have today, it causes people 
to go out and sell an investment which they might otherwise hold on to. 
If a person has an asset, say, a home or small business or stock, they 
don't want to sell that asset when they are going to have to pay 30 
percent or 25 percent in taxes on that sale because they don't want to 
have to pay all those taxes for that asset they spent their whole life 
building up, trying to make ends meet, trying to create a nest egg for 
themselves. When you put a fair capital gains rate on that sale, which 
is today 15 percent--which is the fair rate which was put into place by 
President Bush's proposals--then people are willing to go out and sell 
that asset.
  When they sell that asset, what happens? Two things which are very 
good for the Federal Government happen. No. 1, capital gains occur so 
we get revenues; otherwise, we would not get those revenues because 
people would just sit on those assets; they are not going to sell them 
and pay the high tax rate. When you have a fair tax rate, they sell 
them, the Federal Government gets the revenues, and the second thing 
that happens is they take that new money they have from the sale of 
that asset and reinvest it. By human nature, they reinvest it in 
something that is more productive. So you have a more productive 
society, where capital assets are being used more effectively, and as a 
result you get this great job creation and this economic growth.
  In fact, in the area of capital gains, we have seen a dramatic 
increase in revenues. Capital gains have increased over what the 
projection was by CBO, the Congressional Budget Office, by 47 percent. 
It is a huge jump in revenues we didn't expect--or at least the 
Congressional Budget Office didn't expect--but which we received 
because human nature kicked in and people were willing to sell 
assets, take that money and reinvest it in things that are productive, 
create jobs, and as a result we got those revenues. That is why today 
the Federal Government is actually getting more in revenues than it got 
under the old tax law where the rates were a lot higher. That is why we 
have gotten more economic expansion, more jobs. That is the good news.

  From the other side of the aisle we hear this constant patter: The 
rich are not paying enough taxes, and these tax laws are 
disproportionate in their application. I think we need to talk about 
that a little bit because let's see what has happened as a result of 
reducing these tax rates.

[[Page S6085]]

  Basically, what has happened is that even with the lower tax rates 
today, wealthy people are paying more in revenues to the Federal 
Government than at any time in history. Today the top 20 percent of 
people in this country who have income are paying about 85 percent of 
the tax burden.
  Let me restate that. The top 20 percent of people with income in this 
country are paying 85 percent of the Federal tax burden. Under the 
Clinton years, the top 20 percent of people with income paid 81 percent 
of the Federal tax burden. So even though we have cut rates, we have 
actually created more revenues from high-income individuals.
  Again, you are going to say: How does that happen? Again, it is 
called human nature. If you have a high-income situation, individuals 
with a high income, they could either invest in opportunities which are 
going to produce taxable events or not produce taxable events. They 
have the position to do that. So if you have a fair tax rate they will 
take the risk. They will make the decision. They will be the 
entrepreneurs who create the job. As a result, they will make an 
investment which is taxable. But if you have a tax rate that is too 
high, which is what the other side of the aisle likes to have, then you 
basically create an atmosphere where these folks are going to go out 
and invest a fair amount of their money in things that are tax 
avoidance, legal tax avoidance but tax avoidance. They are going to 
invest in nontaxable events, stocks and bonds that do not generate 
income to them that is taxable.
  What we have done is we have created a tax law where essentially 
high-income people are willing to go out and take risks and do it in a 
taxable way that generates revenue back to the United States. As a 
result, we have the top 20 percent of American income earners pay more 
in taxes today, significantly more than they did under the Clinton 
years.
  The alternative is also fairly interesting. At the low end of the 
income scale, the bottom 40 percent of people who have income do not 
basically pay income taxes. Obviously, they pay withholding taxes, but 
as a practical matter that segment of our society pays virtually 
nothing in income taxes. They get money back, in fact, on the earned-
income tax credit and other benefits the Federal Government puts in 
place.
  Under the law today, under President Bush's law, those bottom 40 
percent of income earners are now getting about twice as much back from 
the Federal Government as they did under the Clinton years. So what is 
the combined effect of these two facts, of these two things? The tax 
law--even though we are generating a lot more revenue for the Federal 
Government, even though we are well over that mean number of 18.2 
percent of gross national product, even though we have had jumps in 
revenue of 11 percent, 9 percent, 15 percent--we actually have a tax 
law today that is generating more revenue but is also more progressive. 
High-income individuals are paying more of the tax burden. Low-income 
people are getting more money back from the Federal Government.
  There is another factor that needs to be pointed out, and that is 
what is happening to senior citizens. Senior citizens 
disproportionately benefit from a low dividend tax rate. Why? It is 
logical, obviously. Most seniors are retired. If they have income, it 
is going to be Social Security, some pension program, or dividends, and 
most pension programs also involve dividends. So senior citizens are 
really the people who are benefiting the most from a low dividend tax 
rate. Yet the folks on the other side of the aisle have just passed a 
budget where they want to jump the tax rate on dividends by 100 
percent. They want to go from a 15-percent tax rate to a 30-percent tax 
rate on dividends. Who are they going to hit? They are going to hit 
senior citizens, primarily. That is the people they are going to hit.
  If you look at the proposals from the other side of the aisle, they 
come out of a 1930s philosophy of economics, which was pretty soundly 
rejected in the 1960s, the 1970s, the 1980s, and the 1990s, but they 
are still attracted to it.
  It is a theory that says you just raise taxes. The Federal Government 
will get more money, and we will spend it for you. In other words, 
there is a theory that says we are smarter than you. We have been 
elected to the Senate. We are good members of the Democratic Party. We 
know more than you know. Therefore, we should take your money and we 
should spend it for you and we can spend it more effectively than you 
can spend it.
  That is a philosophy that should and has been rejected as we move 
toward a much more market-oriented economy. It is also a philosophy 
that presumes the higher taxes always generate more revenue to the 
Federal Government, which is not true. Higher taxes, actually, in many 
instances reduce revenues to the Federal Government because they reduce 
economic activity. They certainly reduce expansion of the economy, and 
they reduce the creation of jobs.
  Three Presidents have proved beyond any reasonable doubt when you 
lower income tax rates, you generate economic expansion because people 
are just people. They just have common sense. If they know they are 
going to be able to keep more of their money, they are willing to go 
out and work harder to get more money. But they also know if the 
Federal Government is going to take more of their money, and a 
disproportionate amount of their money, they are not going to work 
quite so hard. They are not going to take that risk. They are not going 
to create that restaurant or open that little small business, create 
those jobs, because they don't want to have to pay all of their money 
to the Federal Government.
  President Kennedy knew that and that is why he cut income tax rates 
and was successful in generating revenue to the Federal Government. 
President Reagan knew that and he cut income tax rates. As a result, 
the revenue to the Federal Government jumped and the economy expanded. 
President Bush has shown it once again: Cut income tax rates, expand 
the economy, and as a result get a fair tax level and human nature 
kicks in and revenues flow into the Federal Treasury.
  What is unique about President Bush's initiatives is that at the same 
time he has cut rates, he created this much more progressive system 
which I just outlined. The fact that high-income taxpayers are now 
paying so much more of the Federal share of income taxes than they did 
under the Clinton years, and lower income individuals are getting much 
more back than they did under the Clinton years, makes for a more 
progressive system. It also disproportionately benefits senior 
citizens, people on fixed incomes, because of the dividend rate.
  Unfortunately, though, we now have the Democrats presenting to us a 
budget which wants to take us to the French path, which essentially is 
going to dramatically increase the cost to the Federal Government, to 
Americans, and as a result dramatically increase the tax level on 
Americans. We will go down that path that France has gone down.
  I have to tell you, it doesn't work in France. Productivity is not up 
in France. Jobs are not being created in France. People don't want to 
go out and work harder in France. And they certainly do not have a more 
progressive or effective economic system than we have in the United 
States.
  I think we should reject the Democratic approach under their budget 
of raising taxes and stay with this tax law that is raising so much new 
revenue and is so progressive and has such a strong benefit for senior 
citizens.
  I yield the floor.
  I make a point of order a quorum is not present.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. BOXER. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER (Mr. Casey). Without objection, it is so 
ordered.

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