[Congressional Record (Bound Edition), Volume 157 (2011), Part 14]
[Senate]
[Pages 19312-19313]
[From the U.S. 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 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

[[Page 19313]]

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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