[Congressional Record Volume 158, Number 16 (Wednesday, February 1, 2012)]
[Senate]
[Pages S263-S264]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WHITEHOUSE (for himself, Mr. Akaka, Mr. Begich, Mr. Leahy, 
        Mr. Harkin, Mr. Blumenthal, Mr. Sanders, Mr. Schumer, and Mr. 
        Reed):
  S. 2059. A bill to reduce the deficit by imposing a minimum effective 
tax rate for high-income taxpayers; to the Committee on Finance.
  Mr. WHITEHOUSE. Mr. President, we are in an age of tight budgets and 
tough choices, and I rise today to introduce legislation that would 
address some loopholes in the Tax Code that provide ways for Americans 
with superhigh incomes to pay lower tax rates than are paid by regular 
hardworking, middle-class families. These middle-class families feel 
they are struggling to get by but then find that some people with 
extremely high incomes are actually paying a lower, all-in federal tax 
rate than they are. To them, it defies common sense, and I think for 
all of us it defies common sense. Americans deserve a straight deal, 
and right now they are not getting one from our tax system.

  To see the unfairness of our current tax system, we don't have to 
look much further than the national headlines. According to a Forbes 
magazine report last fall, billionaire Warren Buffet ``paid just 11.06 
percent of his adjusted gross income in Federal income taxes'' in 2010. 
Mr. Buffet is the first to express his dismay at this circumstance and 
acknowledges that the rate he pays is lower than the tax rate paid by 
his own secretary. Mr. Buffet has called for a correction of this 
anomaly, and I agree with him. So does President Obama, who, in his 
State of the Union Address, said Washington should stop subsidizing 
millionaires. I agree.
  We should celebrate the success of people who are earning $1 million 
and more a year, but we don't--particularly in this time of tight 
budgets and hard choices--need to subsidize that. The legislation I 
have introduced today, the Paying a Fair Share Act of 2012, would 
ensure that those with extremely high incomes pay at least a minimum 
Federal tax rate of 30 percent. I thank Senators Akaka, Begich, Leahy, 
Harkin, Blumenthal, and Sanders for being initial cosponsors of this 
measure.

[[Page S264]]

  The structure of our bill is pretty simple. If your total income--
capital gains included--is over $1 million, you calculate your taxes 
under the regular system. If your effective tax rate turns out to be 
greater than 30 percent, you pay that rate. If, on the other hand, your 
effective tax rate is under 30 percent, like Warren Buffet's 11 
percent, then you would pay the fair share tax rate.
  After collecting input from some of my colleagues, I have also 
included a provision to allow the fair share tax to be gradually phased 
in for taxpayers earning between $1 million and $2 million per year. 
Taxpayers earning less than $1 million--which is 99.9 percent of all 
Americans--wouldn't be affected by this bill at all. Taxpayers earning 
over $2 million would be subject to the 30 percent minimum Federal tax 
rate, and those in between $1 million and $2 million would pay, on a 
phased-in basis, a portion of the extra tax required to get up to the 
30-percent effective tax rate. This way we make sure no taxpayer faces 
a tax cliff where earning an additional $1 of income increases his or 
her taxes by more than $1.
  In his State of the Union Address on Tuesday, President Obama called 
for legislation to ensure that the highest earning taxpayers pay at 
least a 30-percent tax rate. The Fair Share Act would do just that. To 
call our tax system fair, I believe the highest income Americans should 
pay a higher rate--not a lower one--than middle-income taxpayers. For 
more context, let's take a look again--because I have given this speech 
over and over on the floor--at how superhigh-income-tax payers fare 
under our current system.
  This is the Helmsley Building in New York, as I have pointed out 
before. It is on Park Avenue, and it has a unique characteristic, which 
is that it is so big it has its own ZIP Code. Because the Internal 
Revenue Service publishes information about tax payment by ZIP Code, we 
can see what the tax payments are that come out of this building. What 
we find with the latest information that the IRS has published is that 
the average filer has an adjusted gross income of over $1 million in 
the Helmsley Building, but the average tax payment out of that building 
is only 14.7 percent.
  To provide a little context for that, if we look at what the average 
New York City janitor or the average New York City security guard pays 
in terms of an effective all-in Federal tax rate, it is 28.3 percent 
for the security guard and 24.9 percent for the janitor. So at this 
point it looks as if the people who are the very successful occupants 
of the Helmsley Building pay an actual lower Federal tax rate than the 
people who come in and clean the building, and that does not seem fair 
or sensible.
  One might say, well, maybe it is just something about the Helmsley 
Building that causes it, but it is not. Despite Leona Helmsley's 
infamous line that it is only the little people who pay the taxes, it 
is a broader issue than that. Take a look at the income tax information 
about the 400 highest earning Americans.
  In the same way that the IRS aggregates information by ZIP Code, it 
also takes the highest income earners and reports on them in aggregate. 
The 400 top incomes for 2008--which is the last year the IRS has 
assembled--had an average income each of $270 million, which certainly 
is something to be proud of and to celebrate if one can achieve that 
kind of success. But the average tax rate paid by the 400 was only 18.2 
percent, which is--apart from the discussions we have been having in 
the Senate--about what the top income tax rate should be.
  We discuss often whether the top income tax rate should be 35 percent 
or should be 39.6 percent. It was 39.6 percent, for instance, during 
the booming Clinton economy. It is now 35 percent. Depending on where 
the tax cut discussion goes, it may go back up again. But that is not 
what a large number of these very high income earners pay. In fact, the 
top 400 aren't anywhere near that. They are at half that, at 18.2 
percent. We are supposed to have a progressively graduated Tax Code, 
with people who earn more paying a higher rate.
  Let's see who else pays at the 18.2-percent rate. We looked at Bureau 
of Labor Statistics information for a single filer earning $39,350. 
That is where you hit an 18.2-percent tax rate, just like the 400 who 
made $\1/4\ billion each, on average. They are in the same position as 
somebody who is earning a little less than 40,000 who pays 18.2 percent 
under our present system. If we look at the type of jobs that hit that 
area, according to the Bureau of Labor Statistics, in the Rhode Island 
labor market a truckdriver earns on average $40,200. So we have a 
truckdriver paying the same rate of Federal tax as somebody earning 
$\1/4\ billion in a year.
  So I think there is plenty of room for correction and to bring our 
tax system in line to the principle that I think we all espouse 
theoretically, which is that it is a progressive tax system. The more 
you earn, the more you pay and indeed the higher rate you are supposed 
to pay. It is not supposed to be at the other way around where, at the 
other high extreme, you end up paying lower rates than regular 
Americans.
  The Helmsley Building was one building that has a little story to 
tell all of us. Here is another building with a story to tell. This is 
a building that is called Ugland House, and it is in the tax haven 
Cayman Islands. It doesn't look like much, does it? I don't want to say 
it is a crummy little building, but it certainly doesn't compare to a 
lot of other business buildings. But it does have something remarkable 
happening within it. It has 18,000 corporations that claim to be doing 
business out of this location--18,000 corporations in this little five-
story building. It gives a new meaning to the phrase ``small 
business.''
  As our budget chairman Kent Conrad has pointed out, the only business 
going on in Ugland House is funny business with our Tax Code, shell 
companies that hide assets and dodge tax liabilities. It does not make 
sense that our tax system permits the highest income Americans to pay a 
lower tax rate than a truckdriver pays, and it doesn't make sense that 
we allow Americans and American companies by the thousands to hide 
income in offshore tax havens.
  If we look at the rates that are paid--Warren Buffet 11.6 percent, 
the occupants of the Helmsley Building on average 14.7 percent, and the 
400 $\1/4\ billion-a-year earners on average 18.2 percent--and we look 
at the fact that we have multi-trillion-dollar budget deficits, it 
means the taxes they are not paying at the nominal 35-percent rate are 
taxes that somebody else ends up having to pay either through deficit 
or through additional taxation.
  This is why the Fair Share Act makes a lot of common sense, and I 
hope Senators on both sides of the aisle will take a look at it. This 
bill would do a lot of good. It would simplify taxes. There is no point 
chasing loopholes if someone knows they are going to have to pay the 
30-percent minimum. It will simplify that. It would discourage the 
exotic tax dodges that allow people to go down to 14 percent or 
whatever tax rates because they know they are going to get caught at 30 
percent, so why do the effort. The exotic tax dodges will be 
discouraged. It will reduce the deficit. We don't have a number yet 
from the Joint Committee on Taxation, but the public reporting so far 
has suggested it is going to be in the $40 billion to $50 billion range 
per year. Of course, it will bring fairness, as well as common sense, 
to our tax system. It makes no sense for somebody earning $80,000 or 
$100,000 or $120,000 a year to be paying a substantially higher tax 
rate than somebody earning $\1/4\ billion a year.
  There are a lot of advantages that come with enormous income, and 
that is a great thing because America thrives on capitalism, and we all 
love success. We celebrate success in America. We provide an economy 
and a culture in which people can accomplish remarkable things and 
create enormous fortunes and become enormously successful. That is part 
of what is good and what is right with America. They do it through hard 
work, they do it through being smarter than other people, they do it 
with a lot of good personal characteristics. But with all the 
advantages that do come with an enormous income, paying a lower tax 
rate than regular working families should not be one of those 
advantages.
  I hope we can get together to correct this, and I look forward to 
working with my colleagues on this issue.
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