[Congressional Record Volume 157, Number 190 (Monday, December 12, 2011)]
[Senate]
[Pages S8473-S8474]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SPENDING AND TAXES
Mr. HATCH. Mr. President, over the last few weeks the Senate has been
engaged in a familiar exercise. The Democratic majority, urged on by
the President, offers up an increase in spending to be paid for by an
increase in taxes. If anything, this familiar refrain should cement in
the minds of the American people that President Obama and his
congressional allies remain committed to a policy of tax and spend.
Let's not mistake any of this for carefully designed stimulus spending
or tax policy. No, the series of tax-and-spend proposals brought to the
Senate floor during the past few months were designed for political
reasons only. It remains unclear what any of this has to do with job
creation. In fact, I suspect that much of this bread and circus routine
is meant to distract the families and taxpayers from the President's
mediocre record on job creation and economic growth.
For months the Senate has been asked to consider higher taxes,
including surtaxes on the so-called rich to pay for whatever the
Democrats have settled on as their spending idea of the week. Most of
those ideas were sold as stimulus even though they include things such
as an infrastructure bank, which would be a brandnew GSE to gobble
taxpayer resources--just like Fannie and Freddie--and which would take
years just to get off the ground. Most of the ideas have been designed
to appease Democratic constituencies--mostly unions--and to construct
campaign-season talking points attacking Republicans for their failure
to increase taxes on the evil rich in order to pay for the Democrats'
spending sugar highs. The focus on politics has become such a priority
for the President that he is now in the unusual position of making a
raid on Social Security's trust funds his principal policy objective.
At first, to pay for the very massive new stimulus plan of the
President's, the Democrats wanted to limit deductions for people
earning $200,000 or more, which in September was evidently how they
defined the so-called rich. Next came a proposed surtax of 5.6 percent
on people earning $1 million or more to pay for the President's
stimulus scheme. We can't be sure, but I suspect this jump in the
income threshold for the Democrats' tax increases came when high-income
Democrats in high-income jurisdictions such as New York, California,
and New Jersey made it clear that this is where they had to part
company with the President. Next came a surtax of 0.5 percent on high-
income earners to give funds to States to help pay mostly union
workers. Then came a surtax of 0.7 percent on those earners to help pay
for a new Fannie and Freddie called an infrastructure bank. This was
followed by a surtax of 3.25 percent on those earners for a payroll tax
expenditure. Finally came a surtax of 1.9 percent on those earners for
the payroll tax expenditure.
The pattern is clear: Democrats roll out their stimulus spending plan
of the week, find out how much it will cost, and then find out what
surtax to slap on high earners, including business income recipients.
That is how we get tax proposals with rates of 5.6 percent, then 0.5
percent, then 0.7 percent, then 3.25 percent, and then 1.9 percent. Who
knows what will come next. Never mind that businesses across this
country have been clear that massive uncertainty about the current
administration's policies, regulations, and tax increases is holding
back their hiring, job creation, and the economy. People are uncertain
about what their future health care costs will be, what their future
energy costs will be, what their future regulatory environment will be,
and what their future taxes will be. Given the past few months of tax
rate roulette being played by the Democrats, is it any wonder that
families and businesses are uncertain and pessimistic about the future?
These tax rates have nothing to do with designing optimal tax policy
and everything to do with scoring cheap political points and growing an
already bloated Federal Government. These tax rates have nothing to do
with engineering greater wealth or income equality through the Tax
Code. These tax rates have nothing to do with creating a foundation for
growth in jobs and the economy. They have everything to do with paying
for politically favored, poll-tested stimulus spending.
In the President's $800 billion-plus stimulus of 2009, we were told
that the measures would be temporary and we would ``pivot'' later to
fiscal austerity. But the promised pivot never comes. Still today we
are told to spend more now and pivot later, but the promised pivots
never come. Unfortunately, unless we pivot, we will run off a budgetary
cliff and face the deficit and debt crisis plaguing Europe today.
These tax rates recently proposed by Democrats have nothing to do
with long-term economic growth and more to do with the President's
vision of government as the benevolent allocator of people's hard-
earned income. Not content with his average deficits being close to 25
percent of the entire size of our economy--which we have not seen since
the years surrounding World War II--the President and my Democratic
friends here in the Senate want to permanently enshrine a European-
sized government in the American economy. They don't just want
additional infrastructure spending, they want a brandnew government
bureaucracy free of Congress to tax and spend. They want an all-
powerful, unchecked government czar to control the provision and costs
of consumer credit cards. They want an overzealous EPA to control
reliable sources of energy no matter what the cost of their policies.
They want an activist Labor Department to control how workers and
companies can bargain to control where they can operate a business and
to push people into their union voting base whether they support the
union or not. The President's pursuits are not those of someone who
thinks that in certain instances government is constitutionally
authorized to act and can occasionally do some good. His record is
[[Page S8474]]
that of someone who is confident that in most cases, government
technocrats can do better things with Americans' hard-earned incomes
than Americans can do for themselves.
When we look at the variable menu of recent tax rates proposed by
Democrats, we have to ask whether, once enshrined into law, the 5.6-
percent rate or the 0.5-percent rate or whatever happens to be their
flavor of the week is where my friends on the other side of the aisle
would leave things. I have every reason to doubt they would stop at
those rates and every reason to believe they will work as hard as they
can to keep increasing those rates, demolishing businesses and jobs as
they go. I have every reason to believe the current President will
stick with his commitment to ``spread the wealth around'' and ask the
so-called rich--and that could mean people who earn as little as
$200,000, according to Democrats--to pay ``just a little bit more.''
So where will they stop? What is the optimal tax-the-rich rate of
taxation? Economist Peter Diamond, who was nominated by the President
to serve on the Federal Reserve Board, has proposed in recent writings
that ``tax policy needs to be socially acceptable'' and then finds it
acceptable to go on to say that the so-called optimal top tax rate
could be as high as 73 percent. The current top marginal tax rate on
earnings in the U.S. economy is around 42.5 percent when we combine
income tax rates of 35 percent with the Medicare tax and average State
taxes. The cutoff for the top percentile of tax filers is about
$400,000, according to Diamond's analysis.
When we consider the liberal conventional wisdom about how businesses
operate, the American people, it seems to me, should be careful about
where the Democrats' tax hike proposals might lead. The bottom line is
that the sky is the limit.
Consider the New York Times' December 9 editorial, tucked in between
advertisements for jewelry, properties, and baubles that only the
tremendously megarich could afford, where the liberal press offered the
following guidance on tax policy:
The latest Democratic bill to cut the payroll tax, blocked
by Republicans on Thursday, called for a 1.9 percent surtax
on income over $1 million. More important, for any savvy
business owner, a surtax would have no bearing on hiring
decisions. If new workers are profitable before tax, they
will be profitable after tax, even if the employer has to pay
slightly more of the profit in taxes.
This perfectly encapsulates the understanding of the economy by folks
who have never run a business or tried to turn a profit. The liberal
notion is that business owners are immune to basic economics and that
their hiring decisions are entirely unaffected by tax rates.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. HATCH. I ask unanimous consent to be able to speak for just a few
minutes more.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HATCH. With this view in mind, it is not hard to imagine
proposals for taxes upward of 73 percent because those megarich
business owners simply won't flinch.
The Democrats' burning desire to raise taxes seems to confuse income
and wealth. They abhor the outsized wealth accumulation of the
megarich, even though they love the campaign contributions flowing from
them. They seem to think that massive increases in income taxes will
cure the growth in inequality observed over decades in the United
States and in many foreign economies.
Some of our Nation's wealthiest individuals, such as Bill Gates and
Warren Buffett, join this chorus and call for higher taxes on others,
even though they channel large portions of their wealth to private
foundations, revealing their preference for resources to be allocated
in the private sector rather than by the government.
Even our President calls for more taxes on himself, although he could
write a check to the IRS at any moment. He calls for a Buffett rule,
even though he paid a tax rate of 26.3 percent in 2010, which,
according to a recent Congressional Research Service analysis, means
the President violates his own idea of the Buffett rule by paying a
lower tax rate than well over 10 million more moderate income
taxpayers.
The past few months have witnessed a variable menu of tax rates
offered by my friends on the other side of the aisle. They claim these
tax increases will secure equality, economic growth, job creation, and
more.
Those claims are false. The evidence is clear that the recent
proposals from Democrats have been more of the same: tax and spend,
move toward a permanently larger government, and design politically
motivated bills they know will fail in the Congress in order to hone
election year talking points.
We need to be clear with the American people that these proposals
might be good for government, but they will do little to cure the ills
of our economy.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. KYL. Mr. President, I ask unanimous consent to speak for up to 15
minutes in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
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