[Congressional Record Volume 157, Number 190 (Monday, December 12, 2011)]
[Senate]
[Pages S8474-S8476]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CLASS WARFARE
Mr. KYL. Mr. President, last Thursday marked the fifth time this year
the majority has initiated a vote on the so-called millionaires'
surcharge--a tax that primarily affects small businesses--in order to
``pay for'' a piece of legislation. Notably, Thursday also marked the
fifth time this year this tax increase failed to pass the Senate, which
suggests, of course, it is being used for political purposes.
President Obama and his supporters have argued that the tax increases
they support--such as the millionaires' surcharge--will not affect
anyone but the wealthiest Americans, and that those people have to
start doing ``their fair share'' because they ``can afford it.'' They
repeat the phrase ``shared sacrifice.''
In a recent campaign speech in Kansas, President Obama took the class
warfare argument to a whole new level, injecting his speech with false
economic moralisms and evoking what he calls the ``you're on your own''
economics of Republicans and suggesting that the ``breathtaking greed
of a few''--these are his words I am using--has been crushing the
middle class. The President's object seems to be purposefully
conflating all upper income taxpayers with those reckless few who
helped cause the financial crisis, ignoring, I might add, those in
Congress who also helped to create that crisis.
The President's rhetoric is not only wrongheaded, in my view it is
irresponsible. I wish to make three points in response.
First, the President of the United States should not be pitting
Americans against each other. Class warfare has no place in American
debates. It is divisive, and it is unhelpful to the national discourse.
It is especially unbecoming of the President, who is the only person
elected to represent all Americans. He should speak for all Americans,
especially in times of high unemployment and high economic uncertainty,
not pit them one against each other for short-term political gain.
America is not a caste society. There is no formal class structure
engrained into our way of life. The opposite is true. That is why
millions of people left the old countries in Europe and elsewhere to
come here for economic opportunity and to compete in our free markets.
Why doesn't the President offer encouragement about America's
strengths and its future, rather than play into some Americans' fears?
In other words, why doesn't he run the kind of campaign he ran in
2008--one based on unity and hope?
The answer, I am afraid, is because the President's record during the
last 3 years does not inspire much hope: a massive stimulus filled with
special-interest goodies, a government takeover of health care, a
failed cap-and-trade agenda, an EPA power grab, and more new job-
killing regulations than one can count.
Obviously, the policies of the last 3 years have not left Americans
in better shape than they were 3 years ago. Indeed, about three-
quarters of Americans say the country is on the ``wrong track.'' As
columnist Charles Krauthammer wrote in a recent column: ``Obama has
spent three years on signature policies that ignore or aggravate''
structural problems, such as
[[Page S8475]]
high unemployment, weak growth, vast debt, and our strained safety net
and dysfunctional Tax Code.
So the President cannot run on his record. And he does not want
voters to focus on how his policies may have prolonged our economic
troubles or that his party controlled Washington for the first 2 years
of his Presidency. His way out is to blame others.
But rather than stir up resentment and unease, I suggest the
President focus on strengthening opportunity for all Americans. That
gets to the second point, which addresses the assertion that upper
income taxpayers are not doing their fair share. This is patently
false. Let me provide a few instructive numbers.
According to IRS data, the top 1 percent of taxpayers pays 38 percent
of total income taxes but earns only 20 percent of total income. In
other words, the top 1 percent earns 20 percent and pays almost double
that in their share of Federal income taxes.
The top 2 percent of taxpayers pays almost half of all the taxes--
48.68 percent, to be exact. They only earn a little under 28 percent of
the total income and pay almost 50 percent. So the top 2 percent are
paying almost 50 percent of all the taxes. And this is not a fair
share? This is not doing their part?
The top 5 percent of taxpayers pays 58.7 percent. They earn just a
little over one-third of all of the income. In fact, the top 5 percent
pays more than the bottom 95 percent, total. The top 5 percent pays
more taxes by far than the rest of the 95 percent. And they are not
doing their fair share?
The top 10 percent of taxpayers pays almost 70 percent and still
earns less than 50 percent of total income--45.7 percent, to be exact.
The bottom 95 percent of taxpayers pays 41.3 percent. They earn 65.3
percent of total income. So the bottom 95 percent--this is a big chunk
of American taxpayers--is earning a lot more in percentage than they
are paying in percentage of income taxes.
The Joint Committee on Taxation estimates that 51 percent of all
households, which includes both filers and nonfilers, had either zero
or negative income tax liability for the year 2009. Such progressive
taxation is, in fact, ``shared sacrifice.'' The United States has the
most progressive income Tax Code of any country among developed
nations. So the argument that top-tier earners are not doing enough
does not hold water, and somebody needs to call the President on this
false argument of his because it attempts to pit one group of Americans
against the other when in point of fact the President, of all people,
should be unifying Americans.
The third point is related to who actually would pay this
millionaires' surcharge that the President advocates and our colleagues
have been urging us to vote for yet again. This proposed tax increase
will presumably be trotted out again and again. It cannot get the votes
to pass, but it makes a nice political charge.
The President and his supporters claim it would only affect the
wealthiest of the wealthy. Well, the fact is this tax would crush small
business owners. Many small businesses are organized as ``pass-
through'' entities. That means they pay their taxes as individuals.
They are not organized as corporations. They do not pay their taxes as
corporations. They pay as individuals.
So when the plumbing company or the air conditioning company pays
taxes, that small business owner pays them as an individual and,
therefore, he pays at the individual income tax rates. If you are in
one of the top two rates--and 50 percent of small business income is
reported in those top two rates--you are going to get clobbered by this
surtax on millionaires. And these are the very businesses, the most
successful small businesses, that create many of America's new jobs.
According to the National Association of Manufacturers' December 5
weekly report:
Small and medium-sized payrolls (those with less than 500
employees) accounted for the bulk of the net new jobs,
continuing a familiar trend. This was true for both the
goods-producing as well as the service-producing sectors.
There is a lot of data that shows many of these job-creating small
businesses would be slammed by a millionaires' surcharge.
For example, a Wall Street Journal editorial reports that the Joint
Committee on Taxation has estimated that taxpayers will declare $1.2
trillion in business income in 2013. Of this reported tax income, 34
percent would be ``on tax returns with `modified adjusted gross income
in excess of $1 million.' '' As the Journal notes, that means about
$400 billion in business income would be subjected to the so-called
millionaires' surcharge tax.
And who pays that? As the Journal writes, the Treasury Department
examined IRS data in 2007 and found 392,000 tax returns with incomes
above $1 million, 311,000 of which were classified by the Treasury
Department as ``business owners.'' So 80 percent of a payroll tax
surcharge will fall on these small business owners. That is a direct
tax on job creation. What could you think of that would do more harm to
creating jobs in America than imposing a brandnew tax on the people who
we hope are going to create the new jobs coming out of this recession?
Remember too that taxes are already set to go up in 2013 when the
current tax rates expire. On top of that, business investors will also
face a 3.8-percent ObamaCare ``investment income tax surcharge'' set to
begin in 2013.
How is taking money away from these small businesses going to allow
them to expand and hire more workers?
John Mackey, who is the cofounder of the wildly successful Whole
Foods chain, wrote an op-ed last month explaining, from his point of
view, what policies can help and harm job growth. He writes:
One hundred years ago the total cost of government at all
levels . . . was only 8 percent of our gross domestic
product. In 2010, it was 40 percent. Government is gobbling
up trillions of dollars from our economy to feed itself
through higher taxes and unprecedented deficit spending--
money that could be used by individuals to improve their
lives and by entrepreneurs to create jobs.
Policymakers would do well to listen to the advice of entrepreneurs
such as John Mackey about a real growth agenda. Americans are counting
on job creators in the private sector to help turn the economy around
by putting capital at risk and hiring new employees. Relentless class
warfare and obsessing over income redistribution are not real policy
prescriptions.
Mr. President, I ask unanimous consent to have printed in the Record
the op-ed piece by Charles Krauthammer which I mentioned.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, Dec. 8, 2011]
Obama's Campaign for Class Resentment
(By Charles Krauthammer)
In the first month of his presidency, Barack Obama averred
that if in three years he hadn't alleviated the nation's
economic pain, he'd be a ``one-term proposition.''
When three-quarters of Americans think the country is on
the ``wrong track'' and even Bill Clinton calls the economy
``lousy,'' how then to run for a second term? Traveling
Tuesday to Osawatomie, Kan., site of a famous 1910 Teddy
Roosevelt speech, Obama laid out the case.
It seems that he and his policies have nothing to do with
the current state of things. Sure, presidents are ordinarily
held accountable for economic growth, unemployment, national
indebtedness (see Obama, above). But not this time.
Responsibility, you see, lies with the rich.
Or, as the philosophers of Zuccotti Park call them, the 1
percent. For Obama, these rich are the ones holding back the
99 percent. The ``breathtaking greed of a few'' is crushing
the middle class. If only the rich paid their ``fair share,''
the middle class would have a chance. Otherwise, government
won't have enough funds to ``invest'' in education and
innovation, the golden path to the sunny uplands of economic
growth and opportunity.
Where to begin? A country spending twice as much per capita
on education as it did in 1970 with zero effect on test
scores is not underinvesting in education. It's mis-
investing. As for federally directed spending on innovation--
like Solyndra? Ethanol? The preposterously subsidized,
flammable Chevy Volt?
Our current economic distress is attributable to myriad
causes: globalization, expensive high-tech medicine, a huge
debt burden, a burst housing bubble largely driven by
precisely the egalitarian impulse that Obama is promoting
(government aggressively pushing ``affordable housing'' that
turned out to be disastrously unaffordable), an aging
population straining the social safety net. Yes, growing
inequality is a problem throughout the Western world. But
Obama's pretense that it is the root cause of this sick
economy is ridiculous.
As is his solution, that old perennial: selective abolition
of the Bush tax cuts. As if all that ails us, all that keeps
the economy from
[[Page S8476]]
humming and the middle class from advancing, is a 4.6-point
hike in marginal tax rates for the rich.
This, in a country $15 trillion in debt with out-of-control
entitlements systematically starving every other national
need. This obsession with a sock-it-to-the-rich tax hike
that, at most, would have reduced this year's deficit from
$1.30 trillion to $1.22 trillion is the classic reflex of
reactionary liberalism--anything to avoid addressing the
underlying structural problems, which would require
modernizing the totemic programs of the New Deal and Great
Society.
As for those structural problems, Obama has spent three
years on signature policies that either ignore or aggravate
them:
--A massive stimulus, a gigantic payoff to Democratic
interest groups (such as teachers, public-sector unions) that
will add nearly $1 trillion to the national debt.
--A sweeping federally run reorganization of health care
that (a) cost Congress a year, (b) created an entirely new
entitlement in a nation hemorrhaging from unsustainable
entitlements, (c) introduced new levels of uncertainty into
an already stagnant economy.
--High-handed regulation, best exemplified by Obama's
failed cap-and-trade legislation, promptly followed by the
Environmental Protection Agency trying to impose the same
conventional-energy-killing agenda by administrative means.
Moreover, on the one issue that already enjoys a bipartisan
consensus--the need for fundamental reform of a corrosive,
corrupted tax code that misdirects capital and promotes
unfairness--Obama did nothing, ignoring the recommendations
of several bipartisan commissions, including his own.
In Kansas, Obama lamented that millions ``are now forced to
take their children to food banks.'' You have to admire the
audacity. That's the kind of damning observation the
opposition brings up when you've been in office three years.
Yet Obama summoned it to make the case for his reelection!
Why? Because, you see, he bears no responsibility for the
current economic distress. It's the rich. And, like Horatius
at the bridge, Obama stands with the American masses against
the soulless plutocrats.
This is populism so crude that it channels not Teddy
Roosevelt so much as Hugo Chavez. But with high unemployment,
economic stagnation and unprecedented deficits, what else can
Obama say?
He can't run on stewardship. He can't run on policy. His
signature initiatives--the stimulus, Obamacare and the failed
cap-and-trade--will go unmentioned in his campaign ads.
Indeed, they will be the stuff of Republican ads.
What's left? Class resentment. Got a better idea?
Mr. KYL. I thank the Chair.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. KERRY addressed the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts.
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