Baldwin Issues Statement on Treasury Secretary Snow Hearing of House Budget Committee

HEADLINE: REP. BALDWIN ISSUES STATEMENT ON TREASURY SECRETARY SNOW HEARING OF HOUSE BUDGET COMMITTEE

BYLINE: States News Service

DATELINE: WASHINGTON

BODY:

The office of Rep. Tammy Baldwin, D-Wis., issued the following statement:

Thank you Mr. Chairman and Ranking Member Spratt for having this important hearing.

Secretary Snow, I would like to say something about the Treasury Department's use of averages in describing the benefits - or more specifically the distribution of benefits - of tax relief. I raise this issue particularly because this proposed budget extends certain tax cuts, makes permanent other tax cuts, and proposes several new tax cuts.

Last year, a Treasury Department press release stated that: "91 million taxpayers will receive, on average, a tax cut of $1,126." While true, use of these averages can be very distorting. After all we're trying to talk to the American people about who benefits and who doesn't. So let's take a closer look at the average tax cut of $1,126. The average tax cut in 2003 for households in the middle of the income spectrum - the middle fifth of households - will only be $217. In fact, 83 percent of households will get less than the average amount cited by the Administration. Moreover, 53 percent of U.S. households, or 74 million total, will receive tax cuts of $100 or less. This includes 50 million households that will receive no tax cut whatsoever.

Your Department also claimed that 23 million small business owners and households with small business income will receive an average tax cut in 2003 of $2,209. A closer examination of this average reveals that nearly 83 percent of those with small business income will get less than that.

I mention these numbers because I recently had the chance to learn how this affects a family that I represent in Stoughton, Wisconsin. They own and operate a small automotive repair shop. Unfortunately, this family did not receive a tax cut even though they've worked hard to sustain their small business for over 30 years.

Now I mention all of this as a precursor to my questions on the President's new tax-favored savings proposals - the Lifetime Savings Account and Retirement Savings Account. I will try to use statistics carefully here because I want to understand who will really benefit and at what cost. Recognizing the important of increasing national and private savings, I must note that these tax initiatives will drive us deeper and deeper into debt and will disproportionately enrich the wealthy. In doing so, the tax initiatives will squeeze out any hope of doing meaningful things to address my constituents' top challenges: jobs, healthcare, and education.

According to analyses I've read, the Lifetime Savings Accounts when fully up and running would provide the top five percent of the population with 50 percent of the account's tax benefits. The top ten percent would secure two-thirds of the benefits. I also have information here that suggests the bottom 60 percent would receive just four percent of the tax benefits. And believe it or not, the Retirement Savings Accounts are supposed to be even more skewed.

It is my understanding that over the short-term these programs are affordable, however their long-term costs are not. The figures I have indicate the revenue losses would eventually be as much as $50 billion a year.

Your Treasury Department says that only four percent of those currently eligible to contribute to IRA's actually deposit the maximum amounts and only five percent of 401(k) participants actually contribute the maximum. I believe these are the only people who will be able to reap the maximum tax advantage that these proposals offer.

Secretary Snow, on this point, do you have any reason to differ with these assessments? Do your "out year" estimates of cost of these programs comport with my figure of 50 billion dollars per year? Does the Treasury Department differ with the estimate that the top five percent will receive roughly 50 percent of the account's tax benefits? And how do you justify the failure to extend the "savers credit," that truly targets lower and middle income savers?

Contact: Jerilyn Goodman, 608/258-9800, jerilyn.goodman@mail.house.gov