The Economy

THE ECONOMY

Mr. GRASSLEY. Mr. President, I have listened to a lot of debate yesterday and today on these subjects about the economy and about tax bills and things such as that. I want to address the tax bill as well. I think it is very legitimate for people to raise concerns about the deficit because I think a deficit is part of a measure of whether or not there is fiscal responsibility in Government. It is obviously not the only measure because you cannot have deficits and maybe still be fiscally irresponsible.

I would like to hear from my colleagues who are concerned about deficits when they express these at times when we are talking about tax cuts. I have not seen that same concern about deficits when they want to spend more money. I think we ought to demand a certain amount of consistency from people who are worried about deficits; that they are equally concerned about them at the time we might be cutting taxes as well as when we are spending money. I bet before a week is out there will be—from the very same people who are concerned about tax cuts being too much right now and raising the deficit—dozens of amendments offered to spend more money on the appropriation bills for 2003.

There is another thing I would like to make some comment on, because I have heard several members, particularly on the other side of the aisle, make reference to the fact that certain wealthy people have said they don't need tax cuts. Don't cut my taxes; I don't need the tax cut. I think it is very altruistic for people to say those things and probably mean them. But one of the things I hope we will consider as we are working at cutting taxes—particularly marginal tax rates—deals with the issue of whether or not you are a corporate executive of a Fortune 500-type company that says you don't need it because that individual might say he doesn't need a tax cut, as opposed to 80 percent of the benefits from the tax cuts, cutting the marginal tax rates from 39.8, 2 years ago, eventually down to 35 percent—85 percent of those benefits go to small business.

It happens that small business is a class of people that create about 80 percent of the jobs in America. A lot of small business people regularly are investing in their own business to create more jobs, to expand their business and, in the process, living throughout their lifetime relatively modestly in order to expand their business and be successful. We are talking about a jobs bill and marginal rate cuts, 80 percent of which are going to small entrepreneurs to create jobs, which ought to be something we would separate from the CEO who may make a lot more money and doesn't need a tax cut.

I want to speak generally about taxes and some reference to the tax bill of 2 years ago that the President's proposals are going to be building on, because I was chairman of the Senate Finance Committee when that bill passed. I had a good working relationship with my colleague, Senator Baucus, in getting that bill to the floor and to the President.

On June 7, 2001, President Bush signed tax relief legislation. For the first time in a generation, every income tax paying American received much needed tax relief. Unfortunately, in the period since Americans first started to receive their rebate checks, the effect of this legislation has been distorted. The distortion comes in the form of often-repeated bogus criticisms of the tax cut. This repetition has created what I will call three myths of the tax cut.

The first myth is that the bipartisan tax relief was a partisan Republican product. The second is that the bipartisan tax relief package is the primary source of our current budget problems. The third myth is that the tax relief favored the wealthy over low and middle income taxpayers.

Compare the first myth against the record. Often we hear the phrase Republican tax cut or partisan tax cut. In fact, the tax cut was bipartisan. Twelve Democratic Senators voted for the conference report. Senator JEFFORDS also voted for the conference report. That's over one-fourth of the Democratic Caucus.

Let's take a look at the second myth. How many time have we heard in debate or seen written in the media the charge that the bipartisan tax relief caused the current and projected deficits. Cold hard numbers tell a different story. Cold hard numbers from the Congressional Budget Office, the Office of Management and Budget, and private sector sources reveal the truth.

Here is what the numbers say. You can check it out on the CBO Web site. According to CBO, for the current fiscal year, the tax cut represents barely 8 percent of the total change in the budget since last year. For instance, for the same period, increased appropriations outranked the tax cut by $6 billion. So, spending above baseline, together with lower projected revenues, accounted for 92 percent of the change in the budget picture. Let me repeat that. Bipartisan tax relief was a minimal, 8 percent factor, in the change in the budget situation.

Over the long term, the tax cut accounts for 33 percent of the change in the budget picture.

There is a third myth about the tax relief package. According to this myth, the tax relief package was a tax cut only for the wealthiest Americans. Most often this myth comes in the form of a statistic. The statistic is that 40 percent of the benefits of the tax cut went to the top 1 percent of taypayers?

Where did the statistic come from? Did it come from the non-partisan Joint Committee on Taxation? The answer is no. The statistic cited by the media and the Democratic Leadership critics comes from a liberal think tank.

Once again, facts can be ugly things for harsh critics of the bipartisan tax relief package. According to the Joint Committee on Taxation, Congress's official non-partisan scorekeeper, the tax code is more progressive with the tax relief package. Joint Tax, concludes that the bipartisan tax relief returns to taxpayers, on a progressive basis, a small portion of the record level of Federal taxes.

Joint Tax's analysis shows that the largest reduction in tax burden went to taxpayers in the lower and middle income brackets. For instance, taxpayers with incomes between $10,000 and $20,000, will see their taxes reduced by almost 14 percent when the tax cut is fully in effect. Taypayers with over $200,000 will see their taxes reduced by barely 6 percent. This analysis shows that the third myth, like the first two, does not stand up when compared to the facts.

It is understandable that the largest tax relief package in a generation would spark continuous opposition from those that prefer record levels of Federal taxation. That is a good political debate that should play out. The terms of the debate, however, should be based on facts, not myths.

Now, I raise this point because we are about to embark on a new effort at aiding the recovery of the economy. As chairman of the Senate Finance Committee, I am open to all ideas, Republican and Democrat, aimed at boosting investment and consumer demand. The Finance Committee will begin to examine these proposals in our usual bipartisan manner. When we examine these proposals, however, we will use facts, not myths as our guide.

Now, let's look at some facts about the President's proposal. These are facts developed by the Treasury Department. These facts tell the story about who benefits from the President's proposal.

I have five examples, and then I will yield the floor.

Example No. 1: A married couple with one child making $40,000 gets a tax cut of $732. That is a tax bill of $2,235 goes down to $1,503. For that married couple with one child making $40,000, that is a 33-percent tax cut.

Example No. 2: A married couple with two children making $40,000 will get a cut of $1,133; in other words, a reduction of their $1,178 tax bill down to only $45, and that is a 96-percent tax cut.

Example No. 3: A married couple with two children making $20,000 more, $60,000, will get a tax cut of $900, a reduction, then, from $3,750 down to $2,850. That married couple with two children gets a 24-percent tax cut.

Example No. 4: A married couple with two children making $75,000 gets a tax cut of $1,122, and that is from a $5,817 present tax bill reduced to $4,695, and that is a 19-percent tax cut.

Example No. 5, the last example: A married couple, both age 65, making $40,000, of which $2,000 might be dividends and $15,000 Social Security benefits, will get a tax cut of $380—their tax bill down from $930 down to $550—or a 41-percent tax cut.

I ask everybody to stick to the facts, use the facts, let the facts speak for themselves, and I think we will have a more intellectually honest debate.