Republican Tax Cuts Reduce The Tax Burden On Americans
Floor Speech
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Ms. FOXX. Mr. Speaker, tomorrow is the day that Americans are required to pay their taxes. It is the last possible day in this year that they can do that. We call it ``tax day.'' It is normally on April 15th, but because of the calendar and because today is a holiday in the District of Columbia, it has been delayed.
I want to say something about the fact that our taxes are something that people feel obliged to pay the Federal Government and to State and local governments too, but many people do it grudgingly. We do it grudgingly because we feel concern about the way too many of our tax dollars are being spent. However, this year, taxpayers are paying less than they have paid before as a result of the tax cuts that have occurred in 2001 and 2003, tax cuts that were pushed through under a Republican Congress and asked for by a Republican President.
Children often ask me when I speak to them in school groups, what is the difference between Democrats and Republicans? I tell them that the most simple definition that I can give them is that Republicans believe that Americans should keep more of their money than Democrats do and that Democrats believe that very often the government is the answer to the problems that we have in this country, while Republicans think that individual Americans have the capability for solving most of their problems. So Republicans believe that the government that governs least governs best, and that is the philosophy that I have.
The tax cuts that were instituted in 2001 and 2003 were designed for Americans to keep more of their money than the government had been taking from them, and those tax cuts have been very effective. We see that our economy is doing extremely well as a result of those tax cuts. We have the lowest unemployment rate in this country in many, many years, the highest home-ownership rate, the highest level of income in many, many years; and just on and on and on the economic indicators go that are very, very positive in this country. Those are as a result of the tax cuts.
Democrats will talk about ``investing in government.'' Well, we don't invest in government when we give money to the government to spend. Our investments come from individual Americans who are entrepreneurs who create new jobs and create new businesses. That is where investments come from, and that is where a good return on investments come from.
Mr. Speaker, I yield to the gentleman from Nebraska.
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Ms. FOXX. I want to thank my colleague. He is in his first term in Congress, but he speaks very, very eloquently of this issue and other issues. I am very grateful to him for his sharing his concerns and his perspective on this.
As I said earlier, when people ask me what is the difference between a Democrat and a Republican, I say, well, Republicans think that you should keep more of your money and spend it and take care of yourself; and Democrats want to take more of your money away from you and give it to the government. And let me give you an example of what is happening. I don't have to just talk about that in the abstract; I can talk about it in concrete terms.
The tax decreases that were put through by a Republican Congress and advocated by a Republican President are due to expire in 2010 because of the rules of the Senate, which would not allow those tax cuts to be made permanent. Now, 2 weeks ago, the Democrats, who are now in a majority here in the House, and our Constitution requires that spending bills and budget bills have to begin in the House, they passed their budget. It passed, and it assumes that the 2001/2003 tax cuts will expire. The effect of that will be to impose the largest tax increase in American history, nearly $400 billion over 5 years, mainly to finance their immense new spending. And as my colleague from Nebraska said, we have to be very much concerned about the long term, and we are concerned about the long term.
Now, if the Republican tax relief is not extended, what happens when the clock strikes midnight on December 31, 2010? Well, here's what happens: the tax rates are going to go higher. In 2010, the top income tax rate will be 35 percent. The Democrats propose that that tax rate goes to 39.6 percent in 2011. The capital gains tax, 15 percent in 2010, 20 percent immediately thereafter. The tax on dividends, from 15 percent to 39.6 percent. The death tax: the death tax has been gradually going down since the tax cuts of 2001/2003. In the year 2010, the death tax will be zero. In 2011, it goes back to 55 percent.
I am particularly offended by the death tax, and I think most Americans are. It is probably the third time that that same income is going to be taxed when you impose a death tax, because we are paying taxes on our income, if you have an opportunity to invest any of that money you are going to pay capital gains tax on it, and then you are going to pay 55 percent on whatever is left over. Again, I think it is a particularly offensive tax to most Americans.
But how do the Democrats, who talk so much about the value of children, act about the child tax credit? The child tax credit went to $1,000 under the tax cuts of 2001/2003. It will be cut back to $500. We all know that you can't raise children even on $1,000 as a tax credit, let alone on $500.
The lowest tax bracket, hurting the lowest income people in our country, and Democrats say that they stand for the little people and they want to help the low-income people in this country, but what they propose to do is take the taxes on the lowest income people in our country and go from 10 percent to 15 percent. I think, again, that is an abomination. Why in the world do we want to burden those folks who are making the lowest income in this country?
Another part of the problem that we have in this country is the fact that our Tax Code is so complicated. We believe now that more than 60 percent of tax returns are prepared by a professional. If you add the number of Americans who use computer tax software to file a return, the proportion of people who seek outside help rises to 90 percent. We shouldn't live in a country where the Tax Code is so complicated that the average American citizen cannot complete his or her income tax forms.
The Office of Management and Budget estimates that we spend about 6.4 billion hours, and we did in 2006, complying with the Federal Tax Code. That many hours is the equivalent of a 40-hour work week for every employed person in America. Take your pick: do your taxes or go on a week-long vacation.
While the tax cuts of 2001 and 2003 have lowered taxes across the board and encouraged investments that lead to job creation, we are still saddled with an incomprehensible Tax Code that costs more than $265 billion a year to comply with.
As a supporter of the Taxpayer Bill of Rights, I pledge to work towards scrapping the Tax Code in order to build a new one that promotes transparency and common sense. By signing on to the Taxpayer Bill of Rights, I have also promised to work to balance the budget, to exercise the fiscal discipline needed to rein in the growth of the Federal Government, and to protect the Social Security trust fund from congressional raiding.
Let me say something about Social Security here, even though we're talking about taxes today.
Many people don't understand the or origin of the Social Security fund. After the Depression, President Roosevelt was desperate to raise money for the social programs that he wanted to institute in this country, but he knew that if he wanted to raise taxes that would raise a hew and cry among the people. At that time, 1936/1937, the average life expectancy of Americans was 59 years. People still weren't living very long in this country. We had come a long way from the early part of the century, but still life expectancy was only 59 years of age. So they came up with a scheme to take money away from Americans and have it available to spend on social programs, and they came up with a Social Security fund. It was for every American to pay a small amount. It was designed to provide a retirement income, or at least that is the way it was sold to the American people. But what most people didn't realize again at the time, the life expectancy was 59 years of age. And when did they set Social Security up to be redeemed? Age 65. The idea was that they would take in a lot of money to develop the programs that they wanted to develop, and that very few people would ever draw on Social Security for their retirement. So that's why the average age was set at 65, way beyond the average life expectancy for Americans at the time.
And immediately the money was going into other programs other than into what most Americans thought would happen, which was a fund to pay for Social Security. That has continued to the present time under both Democrats and, I am sorry to say, under Republicans. Rather than putting that money into a special fund and leaving it alone just to pay for Social Security, most of that money is going into paying for government programs, and those programs have become dependent on that Social Security money, which is why you find people very reluctant to create that mythical lock box that has been talked about so much. But we now have groups who are trying very hard to make sure that the money being paid into Social Security stays in the Social Security account. That's what I believe in, and I think that is what most Americans believe in.
The President proposed personal accounts so that people could take an interest in where their Social Security money was going and manage that money better than the Federal Government has been able to manage it. That has been demonized as a way to do something bad with the Social Security fund. But if people had a way to manage their own money, they would get a lot more from Social Security.
The average Social Security payment right now is about $1,000 a month, and I know of very, very few people who can live on that. And we know that Social Security is going to be in deep trouble in the next few years because there will be more people drawing on Social Security than are paying into Social Security. So not only are we going to have to come up with the money to pay for Social Security; we are going to have to either cut the funding that is dependent on the Social Security money or cut out programs or raise taxes. Republicans are opposed to raising taxes and continuing to fund those programs, most of which were begun in the 1930s.
What people can do in this country is to sign an online petition with the grass-roots group Freedom Works to support the initiative of the Taxpayer Bill of Rights. They can sign this petition at www.freedomworks.org/action/taxpayer. I am sure if you put in the words ``freedom works,'' you can probably find out how to get on to that. But we need to do everything we possibly can to keep the tax rate low, protect Social Security, and reduce the burden of government on our citizens.
I want to go back over the effects of the Democrat tax hike, which were in the budget that the Democrats passed 2 weeks ago here. They will be raising the 10 percent tax rate bracket to 15 percent. More than 15 million individuals and families, who previously owed no taxes under the Republican plan, would now become subject to the individual income tax if the Democrats were successful in raising the 10 percent tax rate bracket to 15 percent and reducing or eliminating other low-income tax benefits.
That budget eliminates the marriage penalty relief. Most Americans I think now know that if you are married and you file jointly, you pay a penalty for being married in this country. Twenty-three million taxpayers would see their taxes increase on average by approximately $500 when that goes into effect. As I said earlier, it would cut the child tax credit in half. Thirty-one million taxpayers would see their taxes increase on average by $859 when this goes into effect.
Elderly couples with $40,000 in income would see their tax bill rise by 156 percent from $583 to $1,489. And a single parent with two children and $30,000 in earnings would see their tax benefits decline by 67 percent. With tax relief, the single parent qualifies to get back $2,214. With the Democrat tax hike, this single parent would get back only $799.
So we would see a major impact on the American family with the effects of the budget that the Democrats passed here a couple of weeks ago. It is not the way we should be going in this country.
The tax cuts of 2001 and 2003 have brought us one of the most vibrant economies this country has ever seen. The stock market is at a new high. Home ownership is at a new high. Personal income is at a new high. Unemployment rates are at an all-time low. New business creations are at an all-time high. Job creations are at an all-time high. All of the things that should be positive in this country are positive; all of the things that should be negative are negative in terms of our economy, and those come as a result of the tax cuts that were made in 2001 and 2003.
I personally cannot take any credit for that because I was not here, but I applaud those who voted for those tax cuts in 2001 and 2003 because they have had an extremely positive effect on our economy and on American families.
I want to talk some more about the dysfunctional Tax Code that we have and the impact that it has on Americans. I mentioned earlier how much it costs to file income taxes and how much is being spent by Americans because they have to go to professionals to get their taxes done. But I want to put this into sort of an allegory.
Can you imagine a business that with every passing year grows more difficult to manage, gets harder for its customers to understand, and becomes increasingly susceptible to theft? You would be right to think that such an operation would quickly go out of business.
Unfortunately, this imaginary business is more of an apt description of the United States tax system. Every year the Federal Tax Code grows larger and more complex. New rules and guidelines are added. Deductions and special exemptions proliferate. As a result, each tax season more Americans are throwing up their hands in disgust and calling in a professional to do their taxes.
According to the IRS, more than 60 percent of tax returns are prepared by a professional; and if you add the number of Americans who use computer tax software to file a return, the proportion of people who seek outside help rises to 90 percent.
Congress puts out a little-known tax law report each session that serves as a chilling picture of the obscene complexity of our tax system. The most recent version entitled ``The General Explanation of Tax Legislation Enacted in the 109th Congress'' runs to 806 pages and purports to explain the 109th Congress' changes to tax law. As you might imagine, it is mind-numbing. That we need a publication of this size simply to explain the 109th Congress' Tax Code additions is ample evidence that we have a massive problem on our hands.
What ails our Tax Code is not just the fact that it is 7,000 pages long. Rather, the real ailment is the burden, above and beyond the actual financial burden of tax day, of complying with a chameleon Tax Code.
As I said earlier, the government's Office of Management and Budget estimated that we spent about 6.4 billion hours in 2006 complying with the Federal Tax Code. That many hours is the equivalent of a 40-hour work week for every employed person in America. While the tax cuts of 2001 and 2003 have lowered taxes across the board and encouraged investments that lead to job creation, we are still saddled with an incomprehensible Tax Code that costs more than $265 billion to comply with each year.
Our tax professionals can't even understand it. I am sure you have read and heard the horror stories about how 10 different people will call the IRS to ask for an interpretation of a rule, and get 10 different interpretations. That, again, is a really sad commentary on our Tax Code that you can't call 10 employees from the IRS and get the same answer from 10 different people on a code that millions of us are supposed to be adhering to because the way the Tax Code is written is so incomprehensible.
While the tax cuts of 2001 and 2003 have lowered taxes across the board and encouraged investments that lead to job creation, we are still saddled with this incomprehensible Tax Code.
The IRS reports that the tax gap, the difference between what people owe and what they pay is around $300 billion. This gap is composed of the cheaters and those who simply don't know any better because the system is too murky for the average taxpayer to accurately decipher.
Realities like the tax gap, the 6 billion hours of annual compliance time, and the thousands of pages of rules and regulations have led me to join with the approximately 100 fiscal conservatives of the Republican Study Committee in support of the American Taxpayer Bill of Rights. We need a taxpayer bill of rights passed. Many States have passed a taxpayer bill of rights, and we need to do that at the Federal level.
Those of us who have signed that pledge have pledged to work towards scrapping the Tax Code in order to build a new one that promotes transparency and commonsense. I have also promised to work to balance the budget. I have done that every chance that I have had since I have been in Congress, to exercise the fiscal discipline needed to rein in the growth of the Federal Government.
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I want to say that 2 years ago, when we dealt with the Hurricane Katrina relief, I am very proud to say that I pushed for an offset in Federal spending at that time. We were faced with spending outside the budget, $52 billion in one fell swoop, to offer relief to the victims of Hurricane Katrina. We had no good plan for how that money was going to be spent, and we needed a plan. We did not have an offset set up when we first passed that $52 billion. I urged the Republican Study Committee to demand offsets.
In just a few weeks' period of time, we were able to come up with $39 billion in offsets to the $52 billion. We weren't able to come up with $52 billion, but we came up with $39 billion. One of my colleagues who gives me the credit for that, calls me the ``mother of offsets.'' It is a title I wear proudly. All of us need to be doing that here in the Congress. We all need to make sure that when we ask for any funding, that we are looking for ways to offset that funding, and certainly any new funding.
Unfortunately, the war supplemental that was passed 3 weeks ago did not have offsets in it because the rules here in the House say that emergency spending, such as the Katrina bill, don't have to have offsets in them; and yet our Democratic colleagues promised that in this session of Congress they would not do what the Republicans did and that was spend outside the budget and expand the growth of the Federal Government.
They just ignored that. They had $24 billion in new spending, pork-barrel spending, I would call it, spending to buy votes to pass the war supplemental, which were outside the budget and expanded the scope of spending, violating all of the promises that they made last year to do PAYGO. They found ways to get around those promises to pay as you go and not expand spending by putting it within the supplemental which was supposedly for the war and is emergency spending.
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