Concurrent Resolution On The Budget For Fiscal Year 2008--Conference Report

Floor Speech

CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2008--CONFERENCE REPORT -- (Senate - May 17, 2007)

BREAK IN TRANSCRIPT

Mr. THUNE. Madam President, the conference report on the fiscal year 2008 budget resolution isn't only about a bunch of numbers; it is about our priorities for America. It is about our vision for America. A budget in a lot of ways is like a checkbook. A checkbook tells us about an individual's priorities. This is our national checkbook. It tells us where we are and where we want to go as a nation.

The proponents of this budget are proud of their budget, claiming it is fiscally responsible, it reduces the deficit, it makes hard choices, and leads to a balanced budget. Opponents of the budget resolution say it is nothing of the sort. It adds spending, raises taxes, does nothing about long-term entitlement programs and the crisis America faces there. They say it is a tax-and-spend budget doomed to fail because it grows the Government, slows the economy, and will fail to balance the budget. The question for the American people is, who is right. This is no trivial matter. It is not just about our Government's finances and the Nation's prosperity; it is about our jobs and paychecks. It is about our family's budget. It is about our hopes and dreams. So who is right? Is this a tax-and-spend budget or a fiscally responsible budget? In America, everyone is entitled to their own opinion, but not everyone is entitled to their own facts.

Fortunately, we have plenty of facts by which to judge this budget. We have the facts of the budget, the facts of history, and the hard facts of the IRS form 1040 to determine exactly what this budget is and exactly what this budget does for American taxpayers and families.

I believe a reasonable review of those facts will, sadly, conclude this is, in fact, a tax-and-spend budget, that it is based upon hundreds of billions of new spending, and almost a trillion dollars of new taxes, that it will grow the Government and slow the economy, and that it will fail to balance the budget because no tax-and-spend budget ever has, that it is diametrically opposed to the only solution we factually know to successfully balance the budget, and that is to cut spending and reduce taxes.

How do I reach that conclusion? It begins with two facts of any budget: What does the Government spend? What does the Government tax? From this budget we can tell three things about spending. First, we know every dime the Government is spending today. This budget says what the Government will spend tomorrow plus more to account for inflation and population and whatever other factors come into play. This budget does not require a single program termination, not a single program reduction, not a single program freeze. So we know spending doesn't go down. It goes up in a business-as-usual approach.

Next we also know new spending is added, over $200 billion in new spending over the next 5 years with no offset. Finally, we know there are some 24 reserve funds added where billions of new spending can be added. Some of them allow for tax relief, but mostly they add new spending programs or expand existing ones.

The authors of the budget will tell us that any of these new initiatives have to be offset with either spending cuts or new taxes. Given the fact that not one penny of spending is cut in this budget and that billions of new spending is added, I don't think we can expect to see any future spending cuts. That only leaves one thing to pay for it, and that is taxes.

Thus we see every penny of existing Government kept, we see billions of new spending, and we see promises of even more new spending beyond that. However, to be fair, the Democrats do point to one spending cut they may do. They point to provisions, so-called reconciliation instructions, to cut education spending by $750 million over a 5-year period. They want to use the reconciliation process so the provision cannot be filibustered. So to get this straight, out of a budget of $2.542 trillion this year, out of CBO estimated spending of $12 trillion, $37 billion over the next 5 years, the Democrats are going to try and squeeze $750 million out of savings. That is six one hundred thousandths of 1 percent.

This may turn out to become a spending cut, but consider two facts: First, the $750 million cut that might occur is dwarfed by $205 billion in new spending that is scheduled to occur.

Second, that $750 million cut is a spending cut not to shrink Government but to actually grow Government.

The education reconciliation instruction is part of an effort to transfer subsidies that private lenders give to student loans and put the Government back in control of student loans. It is a cut not to shrink Government but a cut to shrink the private sector and expand the Government.

So in this budget, what do we have on the spending side? Well, as I said before, we have no spending cuts, no terminations, no freezes. We have $204 billion, $205 billion in new spending. We have numerous new spending initiatives promised, and the single, potential cut is infinitesimally small, is a fraction of new spending and is designed to use a special process to shrink private lenders and expand Government lending.

On the basis of no spending cuts, billions of new spending, promises of even more spending, and a miniscule cut that is actually a Government expansion--from all that--I think any reasonable person could conclude this budget spends more and more.

But what about taxes, the second part of our equation? Does this budget raise taxes? Does it help or harm taxpayers? Democrats insist there are no tax hikes in this budget. No one's taxes are going to go up, they assure us. But is that true?

If you are kind of boring and you care about budget numbers, you might come up with a different answer. If you are a taxpayer and know what it means to fill out your IRS Form 1040, you definitely will not agree with that assessment.

For those who care about the budget, here are the facts. Every budget passed since 2001 has excluded from its future revenue levels the tax cuts that were passed in 2001. In fact, each budget has excluded the revenue reductions from the 2001 tax relief, the 2003 tax relief, and the 2005 tax relief.

These budgets did not count as Federal tax revenue any of those revenues transferred back to taxpayers by those three tax cuts. Instead, every budget said the tax cuts are in your family's budget and not in the Government's budget; that is, until now.

This budget says those tax cuts are no longer part of your family's budget, but they are now part of the Federal Government's budget. Money cannot have two masters, and this budget says the money going to your tax cut has a new master, and it is not you, it is the Government.

In fact, over the next 5 years, some $736 billion in tax relief that Americans enjoyed yesterday and today to pay their bills, to feed their families, to invest in their dreams, will not be in their families' budgets tomorrow but in the Federal Treasury's coffers.

By transferring $736 billion of tax relief you enjoy today out of your families' budgets into the Government budget, the Federal Government revenue baseline makes a huge leap, and from that a deficit projected at $229 billion in 2012 suddenly becomes a surplus.

Do tax hikes account for that swing in the deficit? We know spending has not been cut. In fact, we know spending is going up. So the only reason the budget could swing from a deficit to a surplus in 2012 is because something has happened on the revenue side. Judging how big the deficit swings to surplus, something big must have happened on the revenue side in this budget, and the facts bear that out.

At $736 billion, that tax hike in this budget is not only the biggest tax hike in history, but it is more than double the largest tax hike in history. In fact, this tax hike is two times the record tax hike of $293 billion that was enacted back in 1993 by President Clinton and a Democratic Congress.

In fact, it is interesting to note, because we are talking about $736 billion in the conference report, if you look at the House-passed budget resolution when it left the House and went into conference, the tax increase was $917 billion. At that level, that would exceed and be greater than all the revenues collected to run all the Federal Government budgets for 156 years--from 1789 to 1957, from Washington to Eisenhower. It is a huge tax hike. So from a budgetary perspective, we know that spending goes up, and we know taxes go up. It is not the Government that will be spending less. The only folks spending less under this budget will be the American taxpayers.

That leads to the next tax hike test: the view of the taxpayer. This one is easier, but it is also more painful, as we look at the IRS Form 1040 that most of us filled out a month ago. We can ask the hard question--those of us who filled out the Form 1040 in the last few weeks or months--if losing various tax changes constitutes a tax hike in the mind of the average taxpayer.

So let's take a look at the Form 1040 and the tax changes this budget is specifically based upon and would include.

Now, obviously, as I said earlier, the House-passed version was a $917 billion level. The report that has come out of conference is at a $736 billion increase in taxes. But if you look at it on a Form 1040, you can see--when we started this process, when the budget was passed earlier this year--it eliminated the marriage penalty relief that was enacted a few years back.

It took the dividend income and capital gains income a lot of people have realized when they have sold stocks, or perhaps seniors in particular who have dividend income, and it takes the increase, or the rate on dividend income, from 15 percent--boom--up to 39.6 percent.

Capital gains as well--as shown right down here on the form--if you look at capital gains, which currently is taxed at a 15-percent rate, that is going up. Your tax rate, right there, is also going up to 20 percent. So you have dividend income and capital gains income tax rates going up in both those areas in this budget.

Now, if you turn to the next page of the tax form, you can see other areas in the budget where taxpayers are also going to see increases.

The Senate Democrats in the conference have restored a few of the Senate-passed items in the Tax Code, which I will get back to in a moment. But where we started out in this whole thing was we saw the standard deduction, itemized deduction, mortgage interest deduction, charitable contribution deduction--all those sorts of things that normally taxpayers are able to take--those went down. If you look at the credit for childcare, which is $1,000 today, and in the original budget, that would have gone down to $500, so you would have seen a decrease in that area of the Tax Code.

If you look down to the earned-income tax credit, which a lot of our men and women in uniform, our soldiers, are able to take advantage of, that, too, would have been slashed and gone down.

You can go up and down this Tax Code, and you can pretty much see every area in the Tax Code that was addressed in 2001, 2003, 2005--the tax relief that has been provided to the American taxpayer--those tax cuts are all going to expire and tax rates and everything else is going to go back up.

Now, the last chart I wish to show you is the tax rate schedule, which I think is also important. I am going to come back to this in a minute because, in fairness to my colleagues on the other side, they attempted, in the Senate resolution, to restore, put back, some of this tax relief.

But if you look at the original proposal, as it came forward from the House, the 10-percent lowest tax rate in the rate schedule, which benefits the lowest income taxpayers in this country, would have been slashed all the way through, completely cut, gone--no 10-percent rate.

Now, as I said, in fairness to the Democrats in the Senate, they put that back in, in an amendment, or at least they have alleged to have put it back in at some point, so some of these tax relief items that were knocked out in the House budget resolution get restored.

But the one thing that is clear--they may have done something that, as I said, only time will tell if we are actually going to realize that benefit and have the 10-percent rate restored--the one thing that is clear is that in the tax rate schedule, every other tax rate is going to go up.

So today, if you are paying at the 25-percent rate, your taxes are going to go up to the 28-percent rate. If you are paying at the 28-percent rate, your taxes are going to go up to the 31-percent rate. If today you are paying at the 33-percent rate, your taxes are going to go up to 36 percent--from 33 percent up to 36 percent. If you are paying at the high rate--the 35-percent tax rate--today, when this is all said and done, your tax rate is going to go up to 39.6 percent.

So as you can see throughout the entire rate schedule--this is even assuming the 10-percent rate gets restored for low-income taxpayers--for every other taxpayer in this country, every other rate in the rate schedule will go up.

What does that mean? That means higher taxes for a lot of Americans across this country. On this basis, I think it is fair to say that typical taxpayers are going to say, yes, these changes constitute a tax hike on them.

Senate Democrats insist there is no tax hike in this budget. So who is right, the taxpayers or the Senate Democrats in their budget? Well, my colleague from North Dakota sees the Democratic budget probably less like a taxpayer, maybe more like a Budget Committee chairman. But this budget, as it was originally proposed, as I said, got rid of the 1,000 tax credit, the 10-percent rate. It got rid of the death tax relief we were going to experience. Their claim now is they put an amendment in the Senate budget, which was adopted in conference, that will restore $180 billion of tax relief that this budget assumed would expire.

Now, if, in fact, there is no tax increase in this budget, why was it necessary to go through the exercise of having an amendment to extend the existing tax relief, such as the 10-percent tax bracket or the child tax credit, or some of the death tax relief that was enacted a few years ago and that will expire in a few years? I think the Senate Democrats saw billions of tax hikes in this budget, such as the taxpayers did, and decided to extend some but not all the tax relief this budget would allow to expire.

Now, by the action of the Baucus amendment that was adopted here, there was an admission, I believe, by the Democrats that billions and billions of dollars of what average taxpayers would call tax hikes actually are in the Democratic budget. If that were not true, we would not have needed an amendment, the Baucus amendment, to attempt to restore some of the tax relief that is set to expire in a few years constituting, as I said earlier, the largest tax increase in American history.

So it looks to me like what happened was an attempt to try and camouflage or disguise what clearly is a very large tax increase on the American people. No matter how they try--we will put this other chart up here--this budget cannot camouflage or disguise the extent to which taxes are going to go up on the American people.

The purpose of this whole exercise in having an amendment that allegedly would, as I said, restore some of the tax relief, was to provide a figleaf, not for the taxpayers in this country but for the tax raisers right here in the Congress.

Again, I wish to illustrate this was the $916 billion in new taxes that came out of the House budget resolution. The bill that left here, the Senate, and which is in the conference report we have before us today, as I said earlier, attempts to restore some of that tax relief.

So what did our colleagues on the other side do? They took a figleaf and said: We want to provide some cover for people here in the Congress who want to see taxes go up. Yet with the American people, what the American people see is a figleaf because this is a figleaf for the tax raisers and provides no cover whatsoever for the taxpayers; that is, the American people.

So even if you say we are going to restore the 10-percent tax rate, some of the death tax benefit that would accrue--and if not extended would expire--even if we do some of these other things they say they have done in their budget, you cannot address all the additional tax increases that are going to happen in this budget.

Let's say you cover some of the child tax credit, let's say you do some of the death tax repeal, let's say you even provide some of the marriage penalty relief that was enacted in 2001 and 2003 and allow that to be restored, you still just make a small dent in the overall tax increase of $900 billion.

So what do we have? We have $180 billion basically put back, restored, to try to provide a cover or some figleaf for over $900 billion in tax increases. So what we have ended up with is a $736 billion increase as opposed to a $900 billion increase.

So the bottom line in all this is, the amendment that passed the Senate--the $180 billion in the conference report--provides some level of coverage. It provides a little cover. There is a little figleaf of coverage there. But in the end, for the American taxpayer, it is about one-fifth of the expected tax hike, and it looks pretty doubtful we will even realize that.

So let me, if I might, say--looking at the other chart on the Form 1040--even if you assume the Democratic amendment puts that $180 billion of figleaf coverage back in there and does something about the child tax credit--which was $1,000 and went down to $500, but they say it goes back to up to $1,000--you are still going to pay more taxes because you are going to lose some of your mortgage interest deduction in the area of itemized deductions.

Let's say they did something on the alternative minimum tax which they say they help correct in their $180 billion fig leaf amendment, but you still are going to pay higher taxes on line 43 because your tax rates are going up.

So the point of this whole thing is that in the Tax Code, if you look at a typical 1040 and you are a taxpayer, it is very clear what is happening here. If you are a tax-raiser in Washington, DC, obviously you come to a very different conclusion. But if you are someone who is out there and you are looking at the Tax Code and you are looking at your 1040--and let's just pop up this other chart for these purposes one last time--and you are going through this exercise and you say: OK, gee whiz, they gave us the marriage penalty relief back, well, you are still going to see, if you have dividend income, that going from the 15-percent rate up to the 39.6-percent rate. You are also going to see capital gains rates--if you have any kind of a mutual fund or anything like that which shows a capital gain, your tax rate is going to go from 15 percent up to 20 percent. You can't deny what is the reality of this whole exercise.

The other thing I will point out is that if you look at what works in terms of balancing a budget, it is pretty clear this formula isn't the one that works.

Back in 1997, I was a Member of the House of Representatives, and at that time, as we went through the process of balancing the budget, we had a Republican Congress, a Democratic President, and they agreed to a balanced budget plan that actually got the job done. In fact, the Republican budget plan President Clinton signed into law had two primary features: It had spending cuts of $263 billion, and it had $95 billion in tax cuts. So what did it do? It cut spending and it cut taxes. What was the result of that? Well, we saw the economy grow, we saw Government revenues grow, and pretty soon we were running surpluses.

This budget is very different from that one. This budget has $205 billion of new spending and, as I said earlier, $736 billion in new taxes.

So in 1997 when we had record spending cuts--$263 billion over a 5-year period, and tax cuts of $95 billion over a 5-year period--we saw a good result. We saw an economy that started to grow, we saw the Government start generating surpluses, and that is the exact opposite model of what we are talking about here today. We are talking about a budget today that increases spending by $200 billion a year, that increases taxes by $736 billion a year, and I think that ends up being a formula for higher spending, higher taxes, and a slower growing economy.

This budget is the mirror opposite of what was done in 1997 and yielded the good results that came as a result of a Republican Congress working with President Clinton at that time to get a balanced budget which actually cut taxes, which cut spending. Spending went down, taxes went down, the economy grew, we saw more Government revenue, and that is exactly what we would like to see out of this budget. But, as I said earlier, this budget is the mirror opposite of that budget. This budget increases taxes, it increases spending, and my fear is we are going to see the Government grow--which it will--and we are going to see the economy slow. I hope that doesn't happen, but I don't think, when you increase spending in Washington, DC, and grow the Government and increase and raise taxes, you are going to see the kind of effect on the economy we saw in 1997 when we cut Government spending and cut taxes.

I appreciate the opportunity to come speak to this budget resolution. I will join with many of my colleagues in opposing this because I believe it is the wrong formula for America's future. Higher spending, higher taxes, and more government is not what this economy needs, and it is not what the taxpayers of America need--the people who fill out those 1040s every single year. We ought to keep them in mind because they are the ones who are paying the bills.

BREAK IN TRANSCRIPT

Source