[Congressional Record (Bound Edition), Volume 157 (2011), Part 14]
[Senate]
[Pages 19313-19315]
[From the U.S. 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 high unemployment, weak growth, vast debt, 
and our strained safety net and dysfunctional Tax Code.

[[Page 19314]]

  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

[[Page 19315]]

     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 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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