[Congressional Record Volume 156, Number 155 (Wednesday, December 1, 2010)]
[Senate]
[Pages S8312-S8314]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             TAX INCREASES

  Mr. HATCH. Mr. President, we are a few hours into the month of 
December, 2010. Normally, the month of December means holiday times for 
most American families. For Jewish Americans, Hanukkah starts at 
sundown. As anyone who visits a department store knows, Santa Claus is 
already as much a fixture as the shelves and lights. The congressional 
Christmas tree will be lit in a few days.
  This should be a happy time for families. But the festive mood is 
dampened by the high unemployment and the slow economic growth rate in 
this country.
  Too many businesses are struggling. Too many investors are holding 
back their capital. Too many workers are idled. And here in Washington, 
we hear too much talk and take too little action to effectively address 
these problems.
  For almost 4 years, our friends on the other side have failed to take 
action on the tax increase that will soon hit virtually every income 
taxpaying American.
  There is bipartisan resolution staring us all in the face. It is the 
only bipartisan compromise. I am talking about a seamless extension of 
current bipartisan tax policy that was enacted in 2001 and 2003. How is 
it the only bipartisan compromise on the table?
  Look no further than the statements of members themselves. I am aware 
of no Republican in the House or Senate favoring less than a full 
prevention of the widespread tax hikes set to kick in in 31 short days.
  Democrats are split. That is why we have seen no action for almost 4 
years. It seems they may be split three ways.
  I have heard rumors that many Democrats in both bodies would 
privately prefer current law; that is, they would prefer to leave the 
law as it is and let the tax hikes kick in. But that is a privately 
held sentiment. The politics of advocating a tax increase on virtually 
every American income taxpayer are not, shall we say, compelling. This 
is the first group.
  The second group is aligned with President Obama's budget. That 
position would guarantee a marginal tax rate hike on all small business 
owners with incomes above $200,000 if single or $250,000 if married. 
That's the second group.
  A significant number of Democratic House and Senate Members have 
signaled that a short-term seamless extension of all current law tax 
relief is their preferred course. That is the third group.
  There might be a fourth group who think that we ought to raise that 
$200,000 to $500,000, and that $250,000 to $1 million. But that still 
hits small business right in the face at a time when we need to create 
jobs. We Republicans understand that. I cannot understand why my 
Democratic friends do not seem to understand that. The Presiding 
Officer understands that.
  Republicans generally support a permanent tax freeze. That position 
is embodied in Leader McConnell's bill. I am pleased to be a cosponsor 
of that bill. But we Republicans know that, as good as that policy is, 
we will not likely find at least 18 Democrats to join us. We likely 
will not get 60 votes for it now. We would make it permanent if we 
could.
  The wisdom of the bipartisan compromise is that it keeps intact the 
political glue that made the bipartisan tax relief possible in the 
first place.

[[Page S8313]]

  Republicans supported the original plan because of the mix of two key 
tax relief policies. The first policy was tax relief for America's 
families. The second policy was tax relief designed to spur economic 
growth.
  The fact that we are divided now is due to the Democratic 
leadership's insistence that the growth incentives part of the 
compromise be broken off. They want to break it off, using language 
like ``decoupling,'' and discard the pro-growth policy.
  That is the essence of the difference.
  Democrats are split, but the Democratic leadership is united on the 
point of breaking off the pro-growth piece of the policy.
  In an effort to avoid the obvious compromise, two members of the 
Senate Democratic leadership have put forward a new proposal. The 
proposal would apply the pending rate hikes to single taxpayers at 
$500,000 of income and married couples at $1 million of income. This 
latest partisan proposal is said to be necessary for fiscal reasons. 
Finance Committee Republican staff, using data from the non-partisan 
Joint Committee on Taxation, conducted a preliminary analysis of this 
proposal. They concluded that less than half the revenue sought by the 
Democratic leadership would be raised by this proposal. That tells me 
the reason behind this new proposal may be ideological.
  Now, some may ask why Republicans do not give in and agree to hike 
taxes on those earning over $500,000 or $1 million. Certainly, it puts 
a fine point on the usual political game of class warfare.
  To those of us on this side of the aisle, the sting of the proposal's 
political shot is far outweighed by its economic harm. Why is it so 
important?
  Let me turn to two broad principles where Democrats and Republicans 
generally agree. The first principle is that a healthy growing economy 
is a very good antidote to our fiscal ailments. The second principle is 
that small business will be the source of new jobs. Do not think you'll 
find much daylight between Republicans and Democrats on these 
principles.
  Now, let's consider the merits of this so-called ``millionaire'' tax 
in light of these bipartisan principles.
  Fiscal history shows, without question that revenues will grow and 
temporary social safety net entitlement spending will drop if the 
economy grows. I have a chart that shows this history. If you follow 
this chart, you will see revenue is very sensitive to the changes in 
growth. Revenue is red, GDP is green. Growth goes up. Revenue goes up. 
Growth goes down. Revenue goes down.
  It is well established that capital is the lifeblood of business. 
According to Answers.Com and I quote:

       CAPITAL is the life by which the body [of business] 
     operates. A business without finance is like a body in coma. 
     No matter how great the environment is, the entity is 
     considered dead. It is the blood that keeps men alive. Drain 
     the blood and watch life end for even the strongest and most 
     privileged human that exists.

  No one disputes the notion that taxpayers with incomes above $500,000 
for singles and $1 million for married couples are a small fraction of 
the taxpaying population. But they account for a lot of capital gain 
income.
  A proposal to raise the marginal rate on capital gain income by 33 
percent on this group may seem like it would have minimal impact on the 
pool of capital income. Internal Revenue Service data indicate the 
contrary is true. The latest data from IRS Statistics of Income 
division are revealing.
  According to SOI, taxpayers at $1 million and over accounted for 
56\1/2\--percent of the net long-term capital gain income for 2008. 
This figure reached close to 70 percent the year before. Keep in mind 
that statistic understates the impact. The reason is that the capital 
gain income for single taxpayers with income between $500,000 and $1 
million is not counted.
  The proposed so-called millionaire's tax would pile up rates on this 
large pool of capital income. I have a chart that illustrates the 
impact. The chart shows the current tax rate for this group of 
taxpayers rising to almost 24 percent in a little over two years. That 
means an almost 60 percent higher tax take on earnings from capital 
from current law.

  If capital is the lifeblood of business, does it make sense to make 
the investment of it dramatically less attractive? Considering the 
current slow growth, jobless recovery, should we put in place policy 
that drives down the after-tax rate of return on capital?
  I have talked only about the hike on capital income since flow-
through small business income would be adversely affected by the tax 
hikes on ordinary income. You can see I am concerned. Look what that 
means. It is true that these small business owners would be earning 
over $500,000 if single and over $1 million if married. They represent 
a significant portion of the ownership of small businesses that will 
create new jobs. According to the nonpartisan Joint Committee on 
Taxation, the President's tax hikes would hit half of flow-through 
small business income. I do not have the same calculation for this 
revised proposal. But do we have the margin for error? In this rough 
patch of our economic history, shouldn't the policy bias be towards 
business expansion? Why should we send the opposite signal? In this 
economic climate, what justifies a higher marginal rate of 17 percent 
on the most successful of our small businesses? Why hit the small 
businesses most likely to expand and hire people and give them jobs?
  The way is clear. To my friends in the Democratic leadership, and 
they are my friends, I dare say, everybody in this body is a friend of 
mine. There are good people here. Why are we not working in a 
bipartisan way to solve these proposals? I say throw down the partisan 
weapons. Don't sharpen them with a more partisan, edgy proposal, like 
the so-called ``millionaire's tax.'' On our side, we would like to keep 
the current low tax rates in effect. We want them to be permanent. We, 
however, recognize that the legislative calendar of this session is 
about to end. We are ready to take a short-term time out with a 
seamless short-term extension of current tax relief. I ask our friends 
on the other side to do the same.
  Now, it is no secret that 42 all 42 Republicans have said we should 
go to work on these problems right now and quit playing games around 
here. And we are unwilling to let anything else go forward until we 
solve these problems. These problems are the problems of extending the 
current tax relief for everybody.
  We would like it to be permanent. Most of the Democrats would not 
like it to be permanent. There has to be a way of bringing us together. 
We are not going to agree, it seems to me. We are not going to be free 
to go to what our friends on the other side want to do and increase 
taxes at this time in the economic history of this country.
  All 42 Republicans have signed a letter making it clear we will not 
get cloture on anything until we resolve these problems. Then let's go 
to work after that. If the leadership does want to keep playing around 
in December, in the holiday season, let's at least go to work on other 
problems. I can think of a lot of other problems. For instance, the so-
called SGR doc fix. The Democrats have taken $500 billion out of 
Medicare. If they took $282 billion of that, that solves the doc fix. 
We don't have to worry about it every year as we do right now. That 
money is there. What about the death tax? If we don't solve the death 
tax, it dramatically goes up. Who does it hurt? Small businesspeople, 
farmers, and others who don't have all the lawyers in the world to help 
them evade those taxes.
  What about the alternative minimum tax? That was a tax that was 
supposed to affect 155 multimillionaires who didn't pay taxes that 
year. Today it will affect 23 to 26 million people, many in the middle 
class. Democrats always talk like they want to get rid of it, but they 
love it because it means more revenue for them to spend. Why don't we 
get rid of it? Even if we don't have an offset, I prefer to get rid of 
it because it goes up every year. We have to patch it every year, it 
costs billions of dollars, where if we do it once, it is a one-hit 
thing that at least we know where we are and we can work the deficit 
down from there.
  What about the research and development tax credit? Virtually 
everybody in this body knows how important that is to our high-tech 
industry, which in some ways is not competitive because we always foul 
it up. It has now been absent for a year because even though the 
Democrats have had abject control

[[Page S8314]]

of this body and could have done anything they wanted to do to preserve 
it and protect it, they haven't done a doggone thing. As somebody who 
works on intellectual property issues day in and day out and has done 
so for 34 years in the Senate and has done so in a bipartisan way--and 
I don't think anybody on the other side can say I haven't worked with 
them in these areas; Senator Leahy and I worked together very closely 
on these issues--why aren't we making it possible for our high-tech 
world to create jobs by being more competitive, by giving them what we 
all basically agree they should have and do it permanently; that is, 
the research and development tax credit.
  These are just a few things I think we ought to be able to get 
together on in a bipartisan way and accomplish at the end of this year.
  If I was the President--and I am not, but if I was, and it is nice to 
speculate every once in a while, especially on the floor of the Senate, 
when we see all these problems--I would be banging on Democrats and 
Republicans to resolve these problems I have been discussing today. The 
President would have all December. He would have all January, 
virtually, since we don't get geared up and going very much until 
February. He would have most of February, and he might even have most 
of March almost all to himself and to his organization in the White 
House. I can't understand, for the life of me, why the President isn't 
weighing in to get this problem solved now as well as the problems I 
have been talking about. It is to his advantage. Instead, we will play 
these phony political games right up to Christmas Day. We have done 
that before. I can live with that. I can work on Christmas Day, as far 
as I am concerned. But it is ridiculous what is going on around here. 
It is ridiculous. Here we have 3 or 4 days gone, where hardly anything 
is going to be done, where we could resolve these problems.
  We have this group together. It is a good group with good 
representatives from the House and Senate and, of course, the Treasury 
Secretary and the Director of OMB. I have high hopes they will wise up 
and come to a conclusion that this is what we have to do and do it as 
quickly as we can, in the best interests of the country, so there is 
some certainty for our business community to create jobs and our banks 
to start loaning again and for others to get involved in the economy. 
This is to the advantage of the President. I don't understand why he is 
not beating on the guys on the other side and over there in the House 
to wake up and do what is right. Then let's get this over with and get 
this country back on track again.
  Republicans are dedicated to try to resolve the problem. We will not 
get pushed around on this. Frankly, we want to solve it with our 
friends on the other side. I just hope we can.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Ms. STABENOW. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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