Tax Increase Prevention and Reconciliation Act of 2005

TAX INCREASE PREVENTION AND RECONCILIATION ACT OF 2005--CONFERENCE REPORT -- (Senate - May 11, 2006)

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Mr. THUNE. Mr. President, in probably a few minutes we are going to be voting on whether to extend the tax relief that was passed by this Congress in 2001 and 2003, and thereby give the markets in this economy some certainty about what the rules are going to be. Frankly, that is something that investors need to know. They need to know for tax consequence purposes whether Congress is going to be changing the law, whether Congress is going to be raising taxes.

I think there is probably no better issue that illustrates the differences in philosophy between the two political parties in the Senate than does this one because it is the question of who spends the money. Do the American people spend the money? Do the taxpayers in the country get to spend their own money? Or do they send it to Washington, DC, so the politicians can spend it?

You have heard a lot of debate from both sides on this issue. If you look at the statistics, it is pretty clear that beginning in 2003--of course, there were tax cuts in 2001 and then subsequent tax cuts in 2003--the economy has behaved in a remarkable way. That proves, once again, that the lessons of history have a tendency to repeat themselves.

If you go back clear to the 1920s under President Harding when you cut taxes, when you cut marginal tax rates, you get not less revenue but you get more government revenue. It happened in the 1920s under President Harding, it happened in the 1960s under President Kennedy, it happened in the 1980s under President Reagan, and it is happening today.

If you look at the U.S. economy today, again in the first quarter of this year, there is 4.8 percent growth, the fastest rate in 2.5 years. The economy has been growing for 17 straight quarters. The average growth rate last year was 3.5 percent. There were 211,000 jobs created in March, 2.1 million jobs in the last 12 months, and more than 5.2 million jobs since August of 2003.

The unemployment rate has fallen to 4.7 percent, lower than the average of the last three decades, and led by strong home values and a steadily rising stock market; household wealth is at an all-time high, reaching $52.1 trillion in the fourth quarter of 2005; home ownership remains very close to its all-time high, more than 69 percent reached in early 2005.

As I said earlier, the ironic thing about this is the assumption that is made by many on the other side. You go back to 2003. The Democratic leader said:

The tax cuts didn't work to stimulate the economy during the Reagan years and they are not working now.

That was the suggestion made in 2003 by our colleagues on the other side. Yet, again, the facts have borne out a very different story. That story is an incredible response to the tax relief, a growing economy, record numbers of jobs, and ironically--people might think this is counterintuitive--when you cut marginal tax rates, when you cut capital gains rates, you get not less Government revenue, you get more.

That is exactly what we have seen here. The Government revenues between 2004 and 2005 increased $274 billion, a 14-percent increase in Government revenues between 2004 and 2005. Between 2005 and 2006, the first 8 months that we are measuring for this year, Government revenues are up 11 percent, another $137 billion over the baseline of what was projected previously.

So when you add that up, the fact that we are creating jobs, growing the economy, raising more revenue for the Government not less, we have again unemployment at an all-time low. And how do our colleagues on the other side want to reward that? With a big, fat tax increase because essentially if we don't extend these tax cuts. What we will in effect be doing is raising taxes; marginal tax rates will go back up, capital gains tax rates will go back up, dividend tax rates will go back up, and you will see higher taxes which have the opposite effect of what we want to see happen. We have stimulated the economy. It is growing, it is expanding, and rather than continue on that path by extending these tax cuts and allowing the economy to continue to expand and grow and create jobs, the Democrats, rather, would allow the tax cuts to expire thereby raising tax rates and mess with what is a very good thing in the economy right now.

That is the opposite of what we ought to be doing. We ought to be extending these tax cuts. We ought to be giving people in this country an opportunity to take their realizations, to pay taxes, continue to invest, and continue to grow the economy and create jobs. There are provisions that have expired or will soon expire, including the expensing for business equipment purchases for small businesses, relief from the alternative minimum tax--which is catching more and more middle-income taxpayers in this country--and, of course, lowering tax rates on dividends and capital gains.

Ironically, contrary to the arguments that have been made by the other side, if you look at who benefits from the tax relief--I am just going to use one example, dividend tax relief--those making under $50,000 a year see their taxes cut 7.6 percent. Seniors in this country see their taxes cut by 17.1 percent. Those making over $200,000, the so-called rich in this country, as has been argued by the other side, realize a 2.2-percent tax cut.

Where do the dividends tax relief benefits go? To people making under $50,000, to seniors across this country. We have a lot in both of those categories in my State of South Dakota, people who are making under $50,000, and a high proportion of seniors in my State who will benefit from this tax relief.

It seems to me, at least, that when we have this vote in a few minutes, if we want to do right by the American people--and, again, we want to assert what is a fundamental principle that at least I think most of us on this side of the aisle adhere to, and that is the American public is better and the American economy is better, frankly, if individuals across this country, taxpayers in this country, are making their own decisions about how to spend their own money for their families, for themselves, for their communities, rather than sending that money to Washington, DC, and having the Government and politicians in Washington decide how to spend it.

That I think probably points out as well as anything else in this debate that we are having today the difference in philosophy between those of us on this side of the aisle who want to extend the tax relief that was enacted in 2001 and 2003 and those who want to allow that tax relief to expire, thereby creating a huge, massive tax increase on the American people at a time when the economy is growing, creating jobs, expanding at a record level.

I hope today when the vote comes that we will have a strong vote in favor of growing this economy and creating additional jobs for Americans and allowing people in this country to keep more of what they earn and spend it on their own priorities, rather than sending it to Washington, DC, and allowing the politicians to spend it.

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