[Congressional Record Volume 156, Number 157 (Friday, December 3, 2010)]
[Senate]
[Pages S8451-S8453]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MIDDLE-INCOME TAX CUTS
Mrs. FEINSTEIN. Mr. President, I rise to support the Middle Class Tax
Cuts Act of 2010, which gives permanent tax relief to struggling
American families who need it most. By extending the current rates for
98 percent of taxpayers, this bill provides the certainty and security
necessary to protect working Americans, while at the same time
indicating that we need help and that we ask upper income Americans to
help address our growing fiscal deficits.
Make no mistake; extending current tax rates for the middle class is
crucial in order to encourage economic growth. The economic turmoil of
the last 3 years has left many American families cash-strapped and
struggling to stay afloat. Every extra dollar is critically important.
The evidence bears this out. Analysis by the Congressional Budget
Office indicates that lower and middle-income taxpayers have a higher
tendency to spend every dollar they earn. Consequently, by ensuring tax
rates don't rise on lower and middle-income earners, we prevent a
dramatic decline in consumer spending that could have a negative impact
on this fragile economic recovery.
Today's job numbers are bad. They indicate we are far below what is
necessary to reduce the unemployment rate. Unemployment remains
persistently high--12.4 percent or over 2.2 million people in my State,
California, unemployed and 9.8 percent or 15.1 million people across
America unemployed. With economic growth projected to be slow in the
near future, those numbers will likely not come down for some time.
America is hurting right now. Those who can should step up and help.
I know of no millionaire who needs a sustained tax cut of 4.6 percent
or who has asked for one. But I know several who are willing to step up
and help. That is the irony of this debate.
Conversely, the evidence is extremely poor for extending tax cuts for
wealthy Americans. When the CBO analyzed the number of different
policies aimed at creating jobs, sustained tax cuts for the wealthy
came in dead last. Interesting. On the other hand, permanently
extending the Bush tax cuts for the wealthy would require $700 billion
more in deficit spending. They are unpaid for.
In light of this report issued Wednesday by the President's fiscal
commission, of which some of my colleagues are members, I simply cannot
argue for extension of the upper income brackets.
It would be one thing if I could say the Bush tax cuts for the
wealthy contributed to an era of substantial economic growth and
prosperity. But here is the key: History does not support that.
In 2001, the first set of Bush tax cuts was proposed as a means of
stimulating the economy as we emerged from the dot-com bubble. Of
course, we were also projected to have a $5.6 trillion, 10-year budget
surplus. We all know that when President Clinton left office, he left a
surplus.
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In light of these facts--the fact that there was money, there was a
surplus--I voted for the first round of Bush tax cuts. I believed the
government surpluses should be returned to the American people. But as
President Bush was leaving office, we were forced to confront some very
sobering truths. The 10-year budget deficit was projected to be $6.3
trillion, not the $5.6 trillion surplus we had thought. There was a
total turnaround. The national debt had increased by over 80 percent.
The argument made by Republicans, if we remember, during that time
was that deficits don't matter. It doesn't matter that the Iraq war was
not funded. The tax cuts didn't matter. ``Deficits don't matter'' was
reiterated throughout this Chamber, and the belief was that lower
income tax rates would actually increase revenue for the Federal
Government. This has been debunked by recent history.
CBO data shows that changes in law between 2001 and 2005 resulted in
deficit increases of $539 billion, and the Bush tax cuts accounted for
nearly half that amount.
However, the most scathing indictment against extending these tax
cuts for the wealthy is illustrated in our recent history of inequality
and wage stagnation. From 2003 to 2007, incomes for families in the top
5 percent of taxpayers increased by 7 percent, while incomes for the
other 95 percent of taxpayers remained stagnant. So from 2003 to 2007,
the only incomes that increased were the top 5 percent. Everybody else
remained stagnant. So the economy was clearly working for the other 5
percent but not for anybody else.
The average income of the top 1 percent of income earners increased
by 10 times as much as that for the bottom 90 percent. That is an
amazing figure, if you think about it, that the top 1 percent gained 10
times more in income than all of the other bottom 90 percent of
taxpayers.
During the expansion of 2002 to 2007, families saw their median
income drop by $2,000. That is the first time Americans have seen their
incomes drop during a period of economic growth. So there was growth,
but the median income was dropping during that period of time.
During this period, also, income tax rates for the top 1 percent of
earners were reduced by twice as much as rates for anyone else. The top
1 percent today--and under the Bush years--are paying less in taxes
than they did in the Clinton years. So there was actually a drop in
rate for the top 1 percent.
In 2007, the top 10 percent took home almost half of the country's
total earnings, which translates to the highest level of income
inequality in our Nation's history in that year, 2007.
We face a number of daunting problems. Our national debt is now in
excess of $14 trillion. If we continue deficit spending, we will
unquestionably begin to constrict economic opportunity for this
generation and those that follow.
Our economy is struggling to grow at a pace that will start providing
jobs, we hope, for over 15 million out-of-work Americans. I think
income inequality today is at a historic high, and it is an
unacceptable high.
In light of these facts, I do not see the merit in the argument that
a permanent extension of the Bush tax cuts for the wealthy will have a
materially beneficial impact on the economy, and I applaud Chairman
Baucus for introducing a responsible bill recognizing these stark
realities.
If we were to do this, we increase income inequality. If you continue
to lower taxes for the top brackets, all you do is increase income
inequality. You grow the gap between the rich and the poor. I would
suggest that bodes ill for the United States of America.
Chairman Baucus also included two key provisions in this bill, and I
would like to take a few moments to speak about them.
This summer, I introduced a bill that would allow family farmers to
defer their estate tax payments until they sold the farm or took it out
of operation as a farm. The idea was to make sure small working family
farms avoided having to make crippling decisions about their land when
it came time to pay the estate tax. Let me explain why.
Family farms today in America are land rich and cash poor. Farm
incomes have not kept pace with rising land values in this country,
which puts family farms in a precarious position when it comes to
settling estate tax bills. Because family farmers often have little
cash on hand to pay the estate tax, they can be forced to sell land to
developers in order to make good on the estate tax. Over multiple
generations, this can decimate the operation of a farm.
This proposal before us today would preserve the existence of family
farms by allowing them to defer paying the estate tax until they are
taken out of operation and to reassess it at a stepped-up value at that
time. By doing this, we can preserve and strengthen existing family
farms, which I strongly believe are part of the fabric of this country.
This provision would not be available to everyone. It includes income
and asset restrictions in order to ensure that the deferral benefit
goes only to farmers who need it most and not agribusinesses. If
farmers who elect deferral fall out of compliance with the
requirements, they would face a recapture penalty in the amount of the
estate tax owed. It is my hope in this way we can help ensure the
continued existence of family farms, and I applaud the chairman for
including this provision.
The legislation also includes a 2-year extension of the highly
successful Treasury Grant Program, which has been widely credited with
maintaining strong economic growth in the renewable energy sector in
2009 and 2010 despite the severe economic turndown.
The grant program has proven a particularly effective job creation
tool. According to a Lawrence Berkeley National Laboratory study, the
program has enabled hundreds of renewable energy projects to move
forward and save more than 55,000 American jobs in the wind industry
alone.
Prior to the economic meltdown, clean energy project developers
relied on tax equity partnerships with investors to take advantage of
clean energy tax incentives. In 2008, the economic meltdown froze the
$8 billion tax equity market, jeopardizing billions of dollars in clean
energy investment. The Treasury Grant Program proved an effective
replacement for these partnerships, supporting about $18.2 billion in
clean energy investment to build 8,600 megawatts of renewable energy
generation through October 25 of this year.
With most utilities and developers still unable to utilize existing
production and investment tax credits, and our Nation's economic
recovery dependent on the creation of new jobs, this 1-year extension
of the grant program is critical.
According to a survey of all leading participants in the tax equity
market, without an extension of the program, the anticipated financing
available for renewable energy is expected to decrease by 56 percent in
2011.
In contrast, a recent study found that a 1-year extension of the
Treasury Grant Program would result in nearly 65,000 more jobs in the
solar industry alone and enough additional solar power to power more
than 1.2 million homes.
So it is important to emphasize this is not a new Federal incentive
program. It simply allows clean energy companies to utilize existing
investment and production tax credits without having to partner with
Wall Street banks.
This proposal, however, does include one serious problem, which I and
many of my colleagues oppose: an extension of wasteful subsidies and
tariffs for ethanol. The Baucus draft would extend, for 1 year, the
ethanol tariff at 54 cents per gallon while lowering the tax credit for
blending ethanol into gasoline from 45 cents to 36 cents. This
increases the real trade barrier on ethanol imports. Fuel importers
will pay a real 18 cents per gallon tariff on ethanol that they do not
have to pay if they choose to import oil instead.
This will only make America more dependent on foreign oil from OPEC
states. It will increase the competitive advantage that oil already has
over cleaner, climate friendly ethanol imports from democratic, sugar-
producing states including Brazil, Australia, and India. This is bad
trade policy, bad environmental policy, and bad energy policy.
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This provision is in direct conflict with the Imported Ethanol Parity
Act, a bill I have introduced on a bipartisan basis. This bill would
require the ethanol tariff to be lowered to the same level as the
ethanol subsidy. I believe the tariff should be lowered to 36 cents per
gallon, at a minimum, in this bill. Keeping the tariff at 54 cents does
not make sense.
Even the ethanol lobby itself does not believe the tariff should be
this high. In a statement just this week, the primary ethanol lobbying
group, the Renewable Fuels Association, put out a statement saying:
The tariff simply exists to offset the value of the tax
credit, preventing American taxpayers from subsidizing
foreign ethanol producers.
Bottom line: If the ethanol tariff served only as an offset, it
should be at the same level as the subsidy, not 18 cents higher.
Also, this proposal would be extraordinarily expensive. Oil companies
are required under the Renewable Fuels Standard to use 13.95 billion
gallons of biofuel in 2011. At 36 cents per gallon, the subsidy would
cost the U.S. Treasury more than $5 billion to pay profitable oil
companies to follow the law. We cannot afford such a subsidy to oil
companies that will use the ethanol anyway.
I believe it is important to underscore who is bearing the brunt of
the pain being doled out by the economic downturn and the subsequent
weak recovery. The top 2 percent of taxpayers are not the ones
suffering during this crisis. In fact, with sales of luxury goods set
to surge to their highest peak since the recession began in 2007, the
recovery for the richest Americans seems well under way. They are able
to do well for one reason or another in this economy. But it is the
income groups below them who are not, who cannot get the loans, who
cannot meet the payrolls, whose homes are being foreclosed on, who have
great difficulty surviving in this most difficult economic marketplace.
So let's not forget why we are faced with this impending tax increase
in the first place. The Bush tax cuts were designed to sunset because
they were not paid for. They were not paid for because we were told
they would lead to higher revenues. In fact, that has not happened. It
is time to let the Bush tax cuts for the wealthy Americans expire.
Mr. President, I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Illinois.
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