Service Members Home Ownership Tax Act Of 2009

Floor Speech

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Mr. CRAPO. Thank you very much, Mr. President. I appreciate the opportunity to discuss the issue of taxes and jobs today as we focus on the critical legislation in front of us.

I have proposed an amendment, actually a motion, to commit this bill back to the Finance Committee to help us honor the President's pledge on taxes. As we have discussed now for more than a week, notwithstanding all of the claims that are being made about this legislation, one of the irrefutable facts is that it grows the government dramatically. If you take the first full 10 years of spending, not counting the first 4 years that are not included in the spending--in other words, they are delayed in order to make the numbers look better--if you count the first full 10 years of implementation of this bill, it will result in $2.5 trillion of new Federal spending. It will grow the Federal Government by that much.

Repeatedly, President Obama has told the American people he will not allow them to be taxed--those whom he describes as the middle class--in order to pay for this huge new increase in Federal spending.

To use President Obama's own words:

I can make a firm pledge ..... no family making less than $250,000 will see their taxes increase ..... not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes ..... you will not see any of your taxes increase one single dime.

Yet what does this bill do? It includes $493 billion of new taxes in just the first 10 years. If you use that full 10-year timeframe--that timeframe that starts after the 4 years of spending that have been suppressed in order to change the numbers and the calculations on the bill--the total number in that 10-year window is $1.2 trillion of new taxes.

The question is, Do these taxes fall only on the wealthy or do they fall squarely on those in the middle class? The answer is the large majority of them fall on the middle class. In fact, the Joint Tax Committee has indicated that by 2019, individuals earning between $50,000 and $200,000 would, on average, see a tax increase of $595,000. Families earning between $75,000 and $200,000 would, on average, see a tax increase of $670,000.

My colleague from Montana, the chairman of the Finance Committee, has argued that there is actually a net tax cut in the bill. How do we get to those numbers? Based on a Joint Committee on Taxation report, of the $394 billion that the government will spend on what are called tax credits--that is the tax cut that my colleague is talking about--$288 billion of those $394 billion in credits will go to people who pay no taxes today.

If you think about it, how can it be a tax cut if the money is spent from the Federal Treasury and sent to--or to somebody on behalf of--a person who is not paying taxes in the first place? You can call it a subsidy. You can call it a credit if you would like. I know the words used in the bill are a ``refundable tax credit,'' but the reality is it is nothing other than pure Federal spending. In fact, the Congressional Budget Office classifies this kind of benefit as government spending.

Mr. BAUCUS. Will the Senator yield for a question?

Mr. CRAPO. I will yield on the Senator's time.

Mr. BAUCUS. That is fine.

The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.

Mr. BAUCUS. The Senator says those are people who don't pay taxes. Don't most of those people pay a lot of taxes? Don't they pay payroll taxes, most of them, who work?

Mr. CRAPO. There is a payroll tax. There is.

Mr. BAUCUS. Are there not other taxes that people pay? It could be sales tax. There are all kinds of taxes that people pay. Particularly working people, there are a lot of taxes they pay.

Mr. CRAPO. Reclaiming my time, although people do pay a lot of sales taxes--not Federal sales taxes, by the way--and although people do pay a lot of other types of taxes, they will pay penalties and fees--in fact, under this bill they will be paying a lot more taxes. The reality is I don't think that is what President Obama was talking about. When he made his pledge, I think his words were: ``You will not see any of your taxes go up.'' The bottom line is you can't say, well, if you offset this tax and you don't count the sales tax or if you add in the sales tax to counteract it--that is not what the President was talking about.

Once again, as Joint Tax has said, by 2019 individuals making between $50,000 and $200,000 on average would see a tax increase of $590,000, and families making between $75,000 and $200,000 would see a net increase on average of $670,000.

Let's go to the next chart.

I note my colleague from Tennessee is here. If he would like to step in at any time, please feel free. I just have two other charts to show, and then I will toss the floor to the Senator. I see he has, I think, a question brewing.

In the analysis that was done by the Joint Tax Committee, by 2019, these people whose taxes I have just described who are squarely in the middle class, there will be at least 73 million American households--that is not individuals, that is households--73 million American households earning below the $200,000 that will face a tax increase. Sometimes the proponents of this bill say, well, that doesn't net out the subsidies we are providing to some of them. If you net out the subsidies--and I don't think that is necessarily an argument, but if you do net out the subsidies--it is still at least 42 million American households that will see their taxes increase under this legislation.

How can that comply with the President's promise? All the motion I have brought does is say to commit this bill to the Finance Committee and make the bill fit the President's pledge. The President pledged that people in the middle class, which he defined as families making less than $250,000 or individuals making less than $200,000, would not see their taxes go up.

With that, again, I see my colleague from Tennessee is ready to join in with me, and I would ask if he has any comments or questions to raise.

Mr. ALEXANDER. I thank the Senator from Idaho. The point you are making is, if you are going to add $ 1/2 trillion--this bill as proposed is paid for by about half through Medicare cuts and about half through tax increases, and it is paid for some by sending huge new bills to State governments. But I guess the point the Senator is making basically is that we are going to add $ 1/2 trillion in taxes over 10 years or much more than that when the bill is fully implemented. Who is going to end up paying those taxes? It is not going to be insurance companies. It is not going to be medical device companies. It is going to be the people who--it is going to be us. Isn't that true? Don't you expect that most of the companies upon which the new taxes are imposed will pass those taxes along to the American people?

Mr. CRAPO. Yes. As a matter of fact, in my own mind,

I distinguish between taxes on the American people and fees that will be charged to companies and businesses in the private sector that are also being passed on to the American people. All of those will occur.

One interesting clarification or explanation with regard to this refundable tax credit that is talked about so often: it isn't actually refunded to the taxpayer, as I understand it, or to the individual who doesn't pay taxes but is receiving the credit. It is paid directly to the insurance company, as I understand it. So even though some people could be claimed to be paying less taxes by this argument, because some of those who receive the subsidy will get a greater subsidy than they will a tax increase, the fact is even they still get a tax increase and even they still pay their taxes at the higher level. It is just that some of them will get a subsidy that will help to offset that.

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Mr. CRAPO. I thank my colleague. We will see State taxes as well as Federal taxes going up.

Senator Johanns has joined us as well. Before I ask him to join in with questions and comments, I want to make one other clarification.

Again, we have the President's pledge up here on the chart. The motion I have offered simply says: Make the bill comply with the President's pledge. If there are no new taxes, the bill doesn't have to be changed if we pass this motion. If there are, it does.

Remember, I don't think that when the President made this pledge, he was saying he will not increase taxes on a net basis. In other words, I didn't hear the President say: I won't raise your taxes higher than I would cut them in some other areas. He specifically didn't say he would count subsidies being paid out to those who do not pay income taxes as an offset to any tax increases he wanted to raise somewhere else. The President didn't get into all these nuances. He said he was not going to raise taxes on the middle class. The fact is, the middle class will see huge tax increases under this bill.

Before I toss the floor to my colleague, I will say this: CBO estimates that only 7 percent of all Americans will receive any of these subsidies. Yet, specifically, out of the 282 million Americans with some type of health insurance, only 19 million of them will be eligible for the tax credit for their health insurance. The rest of the millions of Americans are going to be the ones paying those taxes. That is how it ends up. At minimum--and we are still going through the bill, and this number is growing--at least 42 million people who make less than $200,000--and, frankly, far less--are going to be paying a lot more taxes. That is the reason for the motion.

I yield to my colleague, Senator Johanns.

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Mr. CRAPO. Mr. President, I will add some statistics that I was reading while my colleagues were commenting. If you take out that CBO report, which is what actually analyzes this on a nonpartisan basis, the impact of these Medicaid expenditures, not including the proposed increase we heard about overnight, it clearly says:

CBO estimates that State spending on Medicaid would increase by about $25 billion over the 2010-2019 period as a result of the provisions affecting coverage in table 3. That estimate reflects States' flexibility to make programmatic and other budgetary changes to Medicaid and CHIP.

That is the statistic my colleague from Tennessee was looking for.

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Mr. CRAPO. Mr. President, I thank my colleagues for their comments.

How much time remains on our side?

The ACTING PRESIDENT pro tempore. Six minutes.

Mr. CRAPO. I will make a couple of other comments, and I will allow my colleagues to wrap up with their final comments. I want to raise an additional issue.

On this chart, we show what is going to happen with the IRS. Right now, the CBO estimate indicates that because the IRS is in charge of the implementation of so many of the mandates and other requirements in this bill and because of the new taxes that will be forced onto the American people, there will need to be an expansion of the IRS. The CBO says that could mean as high as an additional $10 billion at the IRS.

If there are no new taxes in this bill or no new mandates in the bill, if there is no increased role of the Federal Government in the management of the health care economy in this bill, why do we need to have the size of the IRS, which is a $12 billion institution today--why does it need to grow to almost double, up to $22 billion?

The point is, the motion I have made is very simple and straightforward. We can argue back and forth about what the President said or whether this bill has tax cuts or tax increases in it or whether, in the net result, it does one thing or another.

The bottom line is, with regard to about 157 million Americans who get their health insurance through their employer, by 2019, they are not going to be eligible for these tax credits people are talking about. They are going to be paying increased taxes.

All this motion does is protect those 42 million people we were talking about who are going to see their taxes go up; 42 million households will see their taxes go up.

If the other side is right and what we are talking about does not exist in the bill, then this motion should be harmless because all the motion says is commit the bill to the Finance Committee and tell the Finance Committee to take out the taxes that impact the middle class.

I ask if either of my colleagues from Nebraska or Tennessee would like to make any concluding remarks.

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Mr. CRAPO. I thank my friend from Oklahoma because it is frustrating sometimes to have it continuously said that there are no alternatives being put forward when we have for years promoted major and comprehensive alternatives to the kinds of issues Americans are asking us to address today.

What is it that Americans are asking? I have said this many times on the floor. Americans are asking us to find a pathway to lower health care premiums and costs and to increase access to better quality health care. Yet what is it that we are being faced with in this legislation? This bill drives up the cost of health care, not down, contrary to claims that have been made on the floor repeatedly; raises taxes by hundreds of billions of dollars; cuts Medicare by hundreds of billions of dollars; grows the government by $2.5 trillion; forces the needy uninsured--it doesn't give them a pathway toward subsidized insurance or any access to insurance but instead forces them into a failing Medicaid Program; imposes damaging unfunded mandates on the struggling States; leaves millions of Americans still uninsured; and establishes massive government controls over our health care economy. And we wonder why we cannot get engaged in a meaningful bipartisan solution here with this kind of heavy-handed approach being insisted upon.

When I talk about the fact that it raises the costs or the size of government, often the response is: No, this bill doesn't raise the size of government, it doesn't increase the size of government, it is balanced. Actually, CBO has issued a report that says it reduces the deficit. Well, the fact is it grows the size of government over a true 10-year period by $2.5 trillion. It does provide some increased taxes--a lot--and it does cut Medicare. By doing so, it does reach an equilibrium, according to CBO, with regard to its impact on the deficit. But let's not mistake this deficit with the size of the government. This bill will grow the size of the government and the reach of the government by $2.5 trillion.

With regard to the question as to whether it truly impacts the deficit, I think most Americans have already heard that there are some budget gimmicks here. You could not ever claim this bill doesn't increase the deficit unless you had all the taxes I am going to talk about in a minute and unless you had all of the Medicare cuts we have been talking about for the last week, and unless you had the budget gimmicks that are in the bill. The budget gimmicks are clearly depicted right here.

Look at the first 4 years of this bill on the spending side: very little, if any, spending. The actual implementation of the spending part of the bill doesn't happen until 2014, but all the taxes start in the first year, and all the Medicare cuts come into place in the first year, and we start seeing the offset side of the bill run for a full 10 years. It is going to be easy to say you have balanced out spending and taxing if you don't count the spending for the first 4 years. But if you look at that first true 10-year period of time, it is a growth of the government by $2.5 trillion.

What I am here today to talk about is my motion that is on the floor to do one very simple thing: to commit this bill back to the Finance Committee and have the Finance Committee make the bill comply with the President's pledge to the American people about taxes. And what was his pledge, repeated many times across this country? In the President's own words:

I can make a firm pledge ..... no family making less than $250,000 will see their taxes increase ..... not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes ..... you will not see any of your taxes increase one single dime.

That was the rhetoric. That was the pledge. What is the reality of the bill? In its first 10 years, the bill raises taxes by $495 billion. If you take that 10-year window that starts in 2014 where you are comparing spending and taxing at the same time, the total of taxes in that 10-year window is $1.2 trillion of new taxes, a huge proportion of which falls squarely on the backs of the middle class whom President Obama has defined here to be those earning less than $250,000, and that is per family. He said under $200,000 per individual.

What are some of these taxes we are talking about? First, there is the excise tax on high-cost premium plans. One might say, wait a minute, that is a tax on companies, employers who provide very high quality insurance to their employees. It is an ingenious way--it is technically written that way--but it is an ingenious way to actually increase the cost, the tax base, of the workers and not the employer. Let's see the first chart. The way this works is the government will now say to an employer: You cannot provide health insurance to your employees that is worth more than a certain amount. Most employees who get health insurance--and that is most employees in the country who get health insurance from their employer--get wages and health care as a part of their total employment package.

I picked an example of a woman who receives $50,000 in wages and let's assume a $10,000 employer-provided health care benefit. The government is now going to say wait a minute, to her employer; we are going to tax you if you provide that health care benefit on such a robust level. CBO and Joint Tax have told us that the reaction of the vast majority of all employers is going to be to reduce the health care benefit down below the level that gets taxed. They are not going to reduce the employee's overall benefit, however, their overall employment package. So let's pick a number. Let's say they reduce this $10,000 down to $7,000. They will increase the wages by $3,000 and the employee's total compensation package stays the same: $60,000, with one difference. Now that extra $3,000 is wages instead of health care, and it gets taxed. And that way the individuals in this country see their health care values go down. Their total compensation package stays the same, but then gets also reduced as it is taxed, and our Joint Tax Committee and CBO have told us that 84 percent of this $149 billion new tax is going to be borne by those with incomes under $200,000.

That is one way this bill ingeniously gets at the pocketbook of those making less money than the $200,000 or $250,000 as a family that the President talks about.

What is the next way? Medical deductions. I think everybody in America who itemizes deductions knows about the first line that says you can itemize your medical expenses, and to the extent they exceed 7.5 percent, you can deduct those medical expenses. So people who have a large proportion of their income represented by medical costs get a break in the Tax Code for that deduction. Well, that break is now going to be smaller under this bill because the level of where you are able to get it is no longer going to be 7.5 percent, it will be 10 percent. And as I indicated, that 84 percent of the excise tax is going to fall on people making less than $200,000 a year. Ninety-nine percent of the medical deduction restriction will fall on people making less than $200,000 a year; as a matter of fact, making a lot less than $200,000 per year.

Then what about the next one? The next major tax in the bill is the Medicare payroll tax. This one has been presented to the American public as a tax on rich people. It starts out primarily impacting people at the higher levels, but at the outset, it will already hit 345,000 Americans, and it is not adjusted--I think most people understand how the alternative minimum tax works today. It is not adjusted for inflation properly. So over time, the payroll tax itself is going to increasingly hit more and more people in that income category under $200,000.

There has been some analysis on these three provisions in the bill. Joint Tax has indicated that by the year 2019, at least--and I say at least because we are only talking about three provisions in this bill right now, and there are more--73 million American households--not individuals, households--73 million American households earning below $200,000 that are going to face a tax increase.

Some have responded to this by saying, Wait a minute. Our bill actually cuts taxes and you are not characterizing this fairly. The tax cuts they are talking about are primarily a $394 billion government subsidy for purchase of health insurance, a subsidy that will be administered through the Tax Code. What they don't tell you is that $288,000 of this so-called tax cut is nothing other than a direct government payment to those who don't pay any taxes today anyway. It is not reducing their tax liability; they have no tax liability. It is a direct government subsidy, and CBO says so. It is scored by CBO not as tax relief; it is scored by CBO as direct government spending. To characterize that as tax relief I believe is inaccurate.

Moreover, even if it were true tax relief, is that what the President was saying, that I won't raise your taxes more than I will lower someone else's or was he saying to the American people that he would not raise taxes on people who are making less than $200,000 a year, or $250,000 as a family? I believe it is inherently obvious what the President was saying. And to say now that we are cutting somebody else's taxes so we can raise yours does not comply with the President's pledge.

To give another couple of perspectives on this in terms of numbers, when all is said and done, 7 percent of Americans will get this so-called tax relief that is, in reality, direct Federal spending, and the rest of Americans--specifically, those who don't fall in that category--will get the tax increases. Out of 282 million Americans with some kind of health insurance today, only 19 million of them will be helped by this subsidy. The rest are going to fall into that category of those who get to share in the burden by seeing their taxes increase.

But let's say we give credit for all of these arguments and say, All right, we will let you claim that all of this spending is tax relief. What is the true story then? Even if you give that argument, which is not valid, by 2019, there will still be at least 42 million American households earning below $200,000 that will face a tax increase. This is information from the Joint Committee on Taxation.

In fact, the data there is rather interesting. Joint Tax data indicates that by 2019, individuals earning between $50,000 and $200,000 on average will see an increase in their taxes of $593. Families earning between $75,000 and $200,000 will see on average a net tax increase of $670.

So what does my amendment do? My amendment says very simply that the bill will be committed back to the Finance Committee and that the provisions in the bill that violate the President's pledge should be removed. Simply make the bill comply with the President's pledge. The President, frankly, shouldn't sign this bill unless this amendment is passed and implemented, because that is the direction we need to go.

Once again, the President's pledge is that no family making less than $250,000 is going to see their taxes increased.

There is further information available about this, though. I recently sent a letter to the Joint Tax Committee. I recently sent a letter to the Joint Tax Committee asking them about whether there were other provisions in the bill other than these three--the reason I talked about these three taxes is because those three taxes have been analyzed by Joint Tax and it is Joint Tax that is telling us what they are going to do.

In response to my letter saying are there more taxes in the bill than those you have analyzed, the answer has come back, yes, and below, they say, is a list of the provisions that they have not previously distributed and that have statutory incidence on individuals with those who fall below the income threshold which has been defined already. What are these taxes? There is a confirmed definition of medical expenses for health savings accounts. In other words, the reduction of benefits in health savings accounts will have an impact, and I believe that impact is about $1.5 billion.

The increased penalty for nonqualified health savings account distributions and limitations on flexible spending arrangements will raise almost $15 billion. Most of this--although we don't have the data yet from Joint Tax--most of this comes from families below the income tax threshold, as well as the 5 percent excise tax on cosmetic surgery and similar procedures and the individual mandate in the bill that will force all Americans to purchase insurance or the IRS will come and collect a fee from them.

I don't have the chart here that shows what will happen with the IRS, but think for a minute. The current size of the IRS is about $12 billion in terms of the appropriations we give them to perform their functions. CBO says that if this bill passes, there will be so much additional business for the IRS in monitoring health care and the new plans and programs in the bill, there will have to be at least another $5 billion and maybe a $10 billion increase in the size of the IRS just so it can implement its enforcement responsibilities under this bill.

The bottom line is that the President of the United States, Barack Obama, has made a pledge. It was that pledge, among a number of others--such as ``if you like what you have, you can keep it''--that caused us to see a strong low-confidence level by the American people, and maybe it is time for Congress to truly dig in and build a strong health care reform package. That pledge is being squarely broken by this bill.

Again, all we are asking in this amendment is to send the bill back to the Finance Committee and have the Finance Committee make the bill conform to the President's pledge. What that will mean to the American people is that in the first 10 years of the bill, just under $500 billion of new taxes will not be imposed, and over the true first 10-year period, when the spending starts kicking in, $1.2 trillion worth of taxes will not be imposed.

There are many other issues with this bill that we have seen discussed. There is the question of whether it truly increases the cost of premiums in health care. Virtually 10 out of 11 studies say that it does. The CBO report says that, clearly, for 30 percent of Americans, it does it in major ways, and for the other 60 percent, the impact is marginal, or the status quo.

As we move forward, some of these big problems with the bill need to be fixed. My motion focuses on taxes. We have debated Medicare for some time now. We need to talk about the unfunded mandates on the States. We need to talk about the impact on premiums in health care because we don't want to be passing legislation that drives up the cost of health care at a time when that is the primary purpose for people calling for health care reform.

I urge my colleagues to let us step down for a moment from the intensity of the debate, commit this bill to the Finance Committee, and let's, on a bipartisan basis, work out some of the solutions to these problems and do so in a way that does not result in such a massive growth of our Federal Government, such a massive increase in taxes, such a massive unfunded deficit on the States, and all for no control of cost or health care premiums.

With that, I yield back the remainder of the time I requested.

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