[Congressional Record (Bound Edition), Volume 157 (2011), Part 5]
[Senate]
[Pages 6423-6424]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        TAX BENEFITS AND BURDENS

  Mr. GRASSLEY. Madam President, I have had the privilege over most of 
my tenure in the Senate of serving on the Finance Committee and working 
with a good Senate leader such as Senator Baucus. I now have the 
privilege of serving on the committee but not as ranking member or 
chairman, just as a member. I compliment Senator Baucus for his 
leadership on this whole business of tax reform and for holding the 
hearings he is holding.
  Today, a very important hearing is being held on the question of is 
the distribution of tax burdens and benefits equitable. The topic of 
today's hearing--whether the distribution of tax benefits and burdens 
is equitable--is very appropriate and is a very important topic. 
However, I would argue there is a more important question we should be 
debating, and we should be answering this question: What is the purpose 
of the Federal income tax? We can't talk about whether taxpayers are 
paying their fair share if we don't know why we want them paying taxes 
in the first place.
  We are in a situation now where people are talking about increasing 
taxes on higher income people because, supposedly, they can afford it. 
Probably they can afford it, but I get sick and tired of the 
demagoguery that goes on in Washington not just by Members of Congress 
but by too many people who think higher income people ought to be 
paying more taxes. According to the Joint Committee on Taxation's 
latest analysis, 49 percent of households are paying 100 percent of the 
taxes coming in to the Federal Government, while 51 percent are not 
paying any income tax whatsoever.
  How high do taxes have to go to satisfy the appetite of people in 
this Congress to spend money? In particular, how high do marginal tax 
rates have to go to satisfy those clamoring for higher taxes from the 
wealthiest; how high

[[Page 6424]]

 to satisfy you? And you know who you are.
  There is an article by Investors Business Daily to which I want to 
refer. According to this article--not talking about the taxation of a 
certain amount of income--if the government confiscated all the income 
of the people earning $250,000 a year or more, that money would fund 
the Federal Government today for a mere 140 days. Do you know what you 
would have? You wouldn't have those people trying to maximize their 
income because why would they maximize it if the government was going 
to confiscate it.
  So that is a very basic question: How high do taxes have to go to 
satisfy the appetite of people in this Congress to spend money?
  Funding the government should be one of if not the primary goal of 
our income tax laws. Of course, that leaves out this whole business of 
whether the Federal Government's purpose is the purpose of 
redistributing income.
  Note here that I am specifically focusing on the income tax. This is 
because payroll taxes are not used to fund the government. Social 
Security and Medicare taxes are, in fact, insurance programs. Because 
they are insurance programs, the taxes they pay are insurance premiums 
because individuals who pay them expect to benefit when they reach a 
certain age.
  It is clear some believe the Tax Code should be used to reduce the 
growing income disparity between the lowest and highest income 
quintiles. This assumes a key objective of the Federal Government, 
through the Federal income tax laws, should be to ensure that income is 
distributed equally throughout our citizenry. In other words, these 
folks actually believe the Federal Government is the best judge of how 
income should be spent. That is not what our Founding Fathers or 
original authors of the tax laws intended.
  In addition to considering the purpose of tax revenue, we ought to, 
in fact, have some principles of taxation by which we abide. These 
principles of taxation would be a much stronger foundation than the 
day-to-day decisions about whether we ought to raise taxes on a certain 
number of people. So I abide by the principle that has been a fact of 
our tax laws for 50 years--that an average of 18.2 percent of the GDP 
of this country is good enough for what the government needs to spend.
  Now, I say that because with a 50-year average it hasn't been harmful 
to the economy, as we have seen this country expand and expand and 
expand economically over that period of time.
  Quite frankly, it ought to be clear that 18.2 percent of the GDP of 
this country coming in for us to spend is not a level of expenditures 
that taxpayers have revolted against. So we take in that 18.2 percent 
for 535 of us to decide how to spend, and the other 82 percent is in 
the pockets of the taxpayers to decide how to spend or to save. If 535 
Members of Congress were to decide how to divide up the resources of 
this country, we would not have the economic growth that we have had in 
our economy. With 137 million taxpayers deciding how to spend or how to 
save, and how much of each, the economic growth of this country is 
enhanced tremendously because of the dynamics of the free-market 
system. If we were going to go the greater route of increasing that 18 
percent very dramatically, we would be moving increasingly toward the 
Europeanizing of our economy, and I think that would be very bad.
  In evaluating whether people are paying their fair share, experts 
frequently look at whether a proposal improves the progressivity of our 
tax system. Critics of lower tax rates continue to attempt to use 
distribution tables to show that tax relief proposals 
disproportionately benefit the upper income. We keep hearing that the 
rich are getting richer while the poor are getting poorer. This is not 
an intellectually honest statement because it implies that those who 
are poor stay poor throughout their lifetimes, and those who are rich 
stay rich throughout their lifetimes. And that is just not the case.
  To illustrate this point, I quote from a 2007 report from the 
Department of the Treasury titled, ``Income Mobility in the U.S. from 
1996 to 2005.'' I quote the key findings:

       There was considerable income mobility of individuals in 
     the U.S. economy during 1996 through 2005 period as over half 
     of the taxpayers moved to a different income quintile over 
     this period.
       Roughly half of taxpayers who began in the bottom income 
     quintile in 1996 moved up to a higher income group by 2005.
       Among those with the very highest incomes in 1996--the top 
     1/100 of 1 percent--only 25 percent remained in this group in 
     2005. Moreover, the median real income of these taxpayers 
     declined over this period.
       The degree of mobility among income groups is unchanged 
     from the prior decade.

  The prior decade meaning the prior study by the Treasury Department 
from 1987 through 1996.

       Economic growth resulted in rising incomes for most 
     taxpayers for the period of 1996 to 2005. Median income of 
     all taxpayers increased by 24 percent after adjusting for 
     inflation. The real incomes of two-thirds of all taxpayers 
     increased over this period. In addition, the median incomes 
     of those initially in the lower income groups increased more 
     than the median incomes of those initially in the higher 
     income groups.

  Therefore, whoever is saying--and we hear it every day on the floor 
of the Senate--that once rich, Americans stay rich; and once poor, they 
stay poor, is purely mistaken. The Internal Revenue Service data 
supports this analysis. A report on the 400 tax returns with the 
highest income reported over 14 years shows that in any given year, on 
average, about 40 percent of the returns were filed by taxpayers who 
are not in any of the other 14 years.
  In other words, 40 percent of those people who are in the highest 
brackets are not in the highest brackets ever in that 14-year period of 
time. So once rich, not always rich.
  I welcome this data on this important matter for one simple reason: 
It sheds light on what America is all about: vast opportunities and 
income mobility. Built by immigrants from all over the world, our 
country truly provides unique opportunities for everyone. These 
opportunities include better education, health care services, and 
financial security. But, most importantly, our country provides people 
with the freedom to obtain the necessary skills to climb the economic 
ladder and live better lives.
  We are a free nation. We are a mobile nation. We are a nation of 
hard-working, innovative, skilled, and resilient people who like to 
take risks when necessary in order to succeed. Bottom line, we have an 
obligation as lawmakers to incorporate these fundamental principles 
into our tax system instead of just asking: Are the rich paying enough?
  Madam President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Texas.
  Mr. CORNYN. Madam President, I ask unanimous consent to speak for up 
to 20 minutes.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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