[Congressional Record Volume 156, Number 157 (Friday, December 3, 2010)]
[Senate]
[Pages S8446-S8448]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         MIDDLE-CLASS TAX CUTS

  Mr. BAUCUS. Mr. President, the textbook definition of ``economics'' 
is about scarcity. For example, in his textbook ``Principles of 
Economics,'' President Bush's chief economic adviser, Gregory Mankiw, 
wrote this:

       Economics is the study of how society manages its scarce 
     resources.

  We could say the same thing about fiscal policy. Fiscal policy is 
about how society, acting through its government, chooses to allocate 
scarce resources. There is not an endless supply of money. We have to 
make choices. Every time we put together a budget, we have to make 
choices. Every time we formulate the Nation's tax policy, we have to 
make choices.
  So when it comes to whether to extend the 2001 tax cuts, once again, 
we have to make choices. It is a question of priorities. The debate 
over what to do about the 2001 and 2003 tax cuts for those with the 
highest incomes is a debate about priorities.
  Are we better off devoting scarce resources to a larger tax cut for 
those at the very top or are we better off devoting those scarce 
resources to new tax incentives to promote investment and create new 
jobs or are we better off devoting those scarce resources to reducing 
the Federal budget deficit and debt? Those are the choices we need to 
make.
  Today, the Senate is considering how we should make those choices. 
The amendment we have offered says basically: Let's make the middle-
class tax cuts permanent. That is something on which pretty much 
everyone in this Chamber should agree. After we have cut taxes for 
middle-class Americans, then let's have an honest debate. Let's debate 
whether extending tax cuts for the very top incomes is the right 
priority.
  But, in any case, making middle-class tax cuts permanent is the right 
thing to do. Let's not allow tax cuts for middle-class Americans to be 
held hostage to partisan wrangling about tax cuts for those who make 
the very most.
  So how did we come to this choice? Let me take a few moments to 
review how we got here.
  In 2001, Congress enacted legislation to let American families keep 
more of their money. Many of these tax incentives were phased in over 
several years. In 2003, Congress enacted legislation adding new tax 
incentives and speeding up implementation of the 2001 law.
  The 2001 and 2003 tax laws lowered tax rates for all taxpayers, and 
those laws provided much needed tax relief for families, education, and 
small business. Many of these tax provisions have broad support across 
the political spectrum. But these tax benefits are not permanent. 
Beginning on January 1, all these 2001 and 2003 tax cuts expire, even 
those for Americans who need them the most.
  At the same time, the Federal debt is at its highest level since 
shortly after World War II, and our fiscal challenges are growing with 
the retirement of the baby boom generation. The amendment we consider 
today responds to both these challenges.
  So what would our amendment do? First, our amendment would extend tax 
cuts for middle-class American families. Our amendment would 
permanently extend the lower tax rates for income up to $250,000 for 
married couples and $200,000 for individuals.
  Extending these lower tax rates would benefit all taxpayers--all 
taxpayers--including higher income taxpayers. In fact, higher income 
taxpayers would receive the largest tax benefits in terms of dollars 
per taxpayer. That is, of course, because we have our marginal tax rate 
system in America. So making the tax cut permanent for all taxes of 
Americans below $250,000 will benefit all Americans--not only those 
below $250,000, but those above $250,000, will, under this amendment, 
get a benefit. As I said, in fact, higher income taxpayers receive the 
largest tax benefits in terms of dollars per taxpayer, even under the 
$250,000 amendment.
  Our amendment would make permanent the provisions that help working 
families with children. The number of people living in poverty is at a 
15-year high. One out of every five American children lives in poverty. 
Many of these provisions in our amendment would help keep children and 
their families out of poverty.
  The amendment would make permanent the expanded earned-income tax 
credit for families with three or more children. The increased tax 
credit provides more help to families with children. The partially 
refundable portion of the credit allows families to receive a benefit 
even when their tax liability is low, as long as the family has earned 
income of more than $3,000.
  This credit helps to support 13 million children in low-income 
working

[[Page S8447]]

families every year. These families are likely to spend every dollar 
they receive right away. That means this provision would also help the 
economy.
  The increased dependent care credit recognizes the increased cost of 
childcare for working families. People should be able to go to work and 
have the quality care they need for their children. In 2008, the 
dependent care credit helped more than 6.5 million working families to 
make ends meet.
  Our amendment would make permanent a tax benefit for employers who 
construct, build or expand property used as a childcare facility. This 
benefit recognizes the contribution that some employers make to help 
their employees balance child-raising and a career.
  The amendment would provide permanent marriage penalty relief. That 
way, married couples would not get higher taxes as an added wedding 
present.
  The amendment would direct that certain government programs disregard 
refundable tax credits when determining eligibility for the 
programs. This would ensure that America's most in need would not be 
worse off because of tax incentives. We don't want to give with one 
hand and take away with the other.

  Our amendment also addresses the importance of getting a quality 
education and the increased cost of getting an education. Our amendment 
would make it easier to deduct student loan interest, to eliminate the 
restriction on the number of months eligible for the deduction, and it 
would expand the eligibility to more postgraduates. Our amendment would 
make permanent the American opportunity tax credit. This would help 
students to afford a higher education. This provision is a partially 
refundable tax credit up to $2,500 of the cost of tuition and fees, 
including books. The amendment includes an income exclusion for loan 
repayment for programs where a postgraduate becomes a health 
professional in an underserved area. The amendment would include 
continuing education for workers by allowing an exclusion from income 
for employer-provided educational assistance programs.
  What do we do about capital gains and dividends? Right now, capital 
gains are currently taxed at a maximum rate of 15 percent and dividends 
are treated as capital gains. This treatment expires at the end of this 
year. Starting January 1, unless we act, capital gains will be taxed at 
20 percent and dividends will be treated as ordinary income.
  Our amendment would make permanent the current capital gains rate for 
taxpayers with incomes up to $250,000 for married couples and up to 
$200,000 for individuals. The amendment continues to treat dividends as 
capital gains for all taxpayers, so dividends would not be treated as 
ordinary income for any taxpayer. This would level the playing field. 
This would ensure that the Tax Code will not favor one type of 
investment over the other.
  What do we do about the alternative minimum tax? Our amendment would 
provide 2 years of relief from the AMT. Every year, we talk about the 
AMT and how it ensnares hard-working Americans. Originally, Congress 
created the AMT to stop--get this--just 155 millionaires from 
completely avoiding income taxes. That was the point of the AMT. It was 
an attempt to make sure all taxpayers paid their fair share. What about 
today? Now, millions of hard-working families are subject to this 
dreadful tax--not 155 millionaires but millions of people--families who 
are working hard, raising children, and find themselves hit with 
increased taxes. We are not talking about millionaires; we are talking 
about a larger group of Americans. AMT has this effect because it was 
not indexed.
  To keep the number of taxpayers subject to this tax from growing, 
Congress has to pass an AMT patch every year. Without an AMT fix, the 
number of taxpayers subject to the tax would explode. In Montana, 
Congress's failure to enact a patch would mean that more than six times 
as many taxpayers would have that burden.
  Our amendment would take care of the AMT for 2010 and 2011. During 
that time, Congress can deal with this stealth tax once and for all as 
part of tax reform.
  What about small business? Our amendment would benefit small business 
owners by making permanent the 2007 expansion of section 179 expensing.
  What about the estate tax? Our amendment would provide permanent 
estate tax relief for family-owned businesses. In 2001, Congress voted 
to provide estate tax relief to American families. We decreased the 
rate and increased the exemption over time, until we had complete 
repeal for 2010 only. That is what we have today, in 2010. Next year, 
if we don't act, the law will snap back up to the old 2001 rate. This 
has resulted in uncertainty and a planning nightmare for families. Our 
amendment would eliminate that uncertainty. The amendment would make 
permanent 2009 estate tax law going forward. It would set the top tax 
rate at 45 percent and the exemption at $3.5 million per person, which 
obviously amounts to $7 million per couple.
  The amendment includes an election for estates that arose between 
January 1 and the law's enactment. The heirs would be able to choose 
either current law or the new permanent tax rate and exemption.
  Our amendment would provide an exemption for family ranches and 
farms. This provision would ensure that no family farm or ranch ever 
has to be sold to pay estate taxes.
  Our amendment would simplify planning for spouses. Most people 
believe that a couple automatically receives double the exemption 
amount. So if an exemption is $3.5 million, most folks assume that a 
couple gets $7 million. But what many people don't know is that to get 
the full $7 million exemption, couples have to plan. Our amendment 
would simplify planning for spouses by allowing the transfer of any 
unused exemption between spouses. This would make the law work the way 
most people think it works already. The resulting estate tax law would 
provide certainty to taxpayers, and the remaining estate tax would 
affect only the heirs of the very largest estates. It would ensure that 
the small number of people who inherit so much money that they never 
have to work during their life would contribute their fair share.
  What about the provision that folks call tax extenders? Our amendment 
would extend a number of other tax provisions important to individuals, 
businesses, and State and local governments. These provisions will 
continue to help create jobs and pay taxes. Our amendment would create 
jobs by improving our Nation's infrastructure. It would reduce the cost 
to local governments to build roads, bridges, and water treatment 
facilities. The amendment would extend multiple incentives that promote 
energy sustainability and efficiency. The amendment would extend the 
dollar-per-gallon credit for biodiesel and renewable diesel, and the 
amendment would extend the manufacturer's credit for the construction 
of new energy-efficient homes.
  The amendment includes a credit for energy-efficient appliances and a 
credit for alternative-fuel motor vehicles. The amendment includes an 
extension of the advanced energy investment credit for businesses 
engaged in the manufacturing of technologies for the production of 
renewable energy and energy storage, and the amendment provides parity 
for transit benefits so that employers can provide tax-free benefits to 
their employees for both transit and parking.
  Our amendment would extend a number of tax cuts for individuals, 
including an extension of the making work pay credit--very stimulative. 
It helps the economy dramatically, and if it is not in here, it will be 
destimulative and hurt the economy.
  Our amendment would help teachers by extending the expense deduction 
for teachers who buy school supplies for their classrooms. The 
amendment would extend the additional standard deduction for State and 
local real estate taxes as well as the ability of itemizers to deduct 
sales taxes in lieu of State and local income taxes. Our amendment 
would extend the qualified tuition deduction to help with college 
costs.
  This amendment would extend much needed relief for communities that 
have suffered from natural disasters.
  Our amendment would extend important business tax provisions to help 
create jobs and make our companies competitive in a global economy. The 
amendment would extend the research and development credit to help 
American businesses keep on the cutting edge.

[[Page S8448]]

  Our amendment also includes a provision that will help small 
businesses across our country. The provision would repeal an expansion 
of information reporting rules that was enacted this past year, 
otherwise known as 1099. Those rules expanded current information 
reporting requirements to include payments businesses make to 
corporations and payments for goods and property, not just services. 
This provision, known as the 1099 provision, imposes a record-keeping 
burden on small businesses that would take away from the time business 
owners need to expand their business and create jobs. This information 
reporting went too far, especially in this difficult economy. It is 
important that we repeal this expansion of information reporting.

  Now, some will say that we should extend tax cuts for everyone, even 
the very rich. America is working through tough economic times. At the 
same time, our country has record deficits. Our amendment would balance 
these two concerns. Our amendment would extend all the tax cuts 
affecting middle and lower income Americans that Congress enacted in 
2001 and in 2003 that sunset this year. Our amendment would also extend 
several expiring tax cuts benefiting middle and lower income Americans 
that Congress enacted in 2009. Our amendment would protect Americans 
who have been struggling to get by.
  Our amendment would also benefit taxpayers with higher incomes. The 
cuts in our amendment apply to all of the income up to $200,000 for 
individuals and $250,000 for couples even if the taxpayer makes more 
than that. At the same time, we crafted our amendment with recognition 
of the mounting deficits our country faces.
  Our amendment would not rely on the gimmick of temporarily extending 
tax cuts in order to mask their size, knowing that future Congresses 
will be unable to resist the temptation to keep extending these cuts. 
It is about priorities. Our amendment makes choices.
  Our amendment would not make permanent all of the expiring tax cuts 
that Congress enacted in 2009. It would not make permanent tax cuts 
that benefit only those Americans who need them the least. Only 3 
percent of Americans have incomes greater than $250,000 for couples or 
$200,000 for individuals.
  Over the past quarter century, the average after-tax income of the 
wealthiest 5 percent has grown 150 percent.
  At the same time in the past quarter century, the average after-tax 
income of middle-class Americans has grown by only 28 percent. So 150 
percent for the top 5 percent--the wealthiest--and only 28 percent for 
middle-income Americans. Today, the bottom 80 percent of households 
receive less than half of all after-tax income. The benefits of recent 
economic growth have not been widely shared, so the middle class should 
not be asked to tighten their belts as much as the high-income folks 
who have benefited the most.
  As we come out of the great recession, we need to recognize the 
growing Federal budget deficit. In 2010, the deficit was $1.3 trillion. 
That is the second highest level relative to the size of the economy 
since 1945. This was exceeded only by 2009's $1.4 trillion deficit--
$100 billion more--and the Congressional Budget Office projects that 
deficits will remain high for the rest of the decade. That means the 
Federal debt will keep growing.
  When we passed the 2001 tax cuts, the Federal Government was running 
a surplus. When we passed the 2001 tax cuts, economists projected big 
surpluses as far as the eye could see. Times have changed. We need to 
consider our current fiscal condition. With 15 million Americans still 
out of work, it is important that we keep our economy on the path to 
recovery by extending tax cuts for families who need them the most and 
who will spend it.
  Our amendment strikes the right balance. It is a question of 
priorities. Our amendment says that we should not devote scarce 
resources to a larger tax cut for those at the very top. Our amendment 
says that we would be better off devoting those scarce resources to new 
tax incentives that promote investment and create new jobs or we would 
be better off devoting those scarce resources to reducing the Federal 
budget deficit and debt. Those are the choices we have to make.
  Our amendment says: Let's make the middle-class tax cuts permanent. 
Our amendment says: Let's not allow tax cuts for middle-class Americans 
to be held hostage for tax cuts for those who make the very most. There 
is not an endless supply of money. We have to make choices.
  I submit that these are the choices we need to make. I encourage my 
colleagues to support our amendment.
  I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  Mr. BAUCUS. Mr. President, I suspend my request.
  The ACTING PRESIDENT pro tempore. The Senator from Ohio.

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