Service Members Home Ownership Tax Act Of 2009
Floor Speech
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Mr. CRAPO. Mr. President, I am going to engage in a colloquy about the pending motion on which we will vote later this afternoon or early this evening. It is a motion to commit the bill to the Finance Committee and have the Finance Committee make the bill comply with the President's pledge. Here is the pledge:
I can make a firm pledge ..... no family making less than $250,000 will see their taxes increase ..... not your income tax, not your payroll tax, not your capital gains tax, not any of your taxes.
..... you will not see any of your taxes increase one single dime.
I heard my colleague from Montana say the bill complies with this pledge. If that were true, then there would be no harm in having the Finance Committee scour through it and make sure it does and refer the bill back to make sure it doesn't tax the middle class.
The reality is, it is very clear this legislation violates this pledge of the President. As a matter of fact, there are over $493 billion of new taxes in this bill meant to offset the $2.5 trillion during the first full 10 years of implementation of spending in the bill.
If you will look at the next chart, at the graph on taxes, the first 10 years--this includes the fees also imposed that CBO and Joint Tax said will be passed right on through to the consumer. There are $704 billion of taxes and fees in the first 10 years of the bill. If you look at the 10 years of full implementation, meaning when the spending actually starts, the taxes and fees are actually $1.28 trillion.
My colleague says this is a net tax cut bill, and it complies with the President's pledge because when you take all of the refundable tax credits in the bill and offset against the tax increases, there is a net reduction in tax. In the first place, that is not true when you take into account the fees. I don't think that is what the President was talking about. He didn't mean, did he, that you will not see your taxes go up more than someone else's taxes go down? No, he told people in America they would not see their taxes go up.
Yet what this bill does, according to the Joint Tax analysis, is, by 2019, at least 73 million American households earning below $200,000 will face a tax increase.
If that is not violating the President's pledge, I don't know what is--even if you take the numbers that the majority is trying to use and claim that those are tax cuts.
Here is the next chart. What my colleague from Montana is talking about is about $400 billion of what are called refundable tax credits. He wants to offset these tax credits in the bill against the hundreds of billions of dollars of tax increases, and then say there is a net tax cut and, therefore, no problem.
First of all, that is a problem. Secondly, what is a refundable tax credit? The $288 billion, or 73 percent of the so-called tax credit--or tax cuts that my colleague from Montana is talking about--are payments by the Federal Government to individuals or families who do not have tax liability. It is a direct government subsidy. The CBO scores these payments as a Federal outlay, as spending, not as tax relief, and that is exactly what it is. I think it is a little bit less than credible to say that we have a tax cut bill when three-fourths of the so-called tax cuts don't even go to reduce tax liability for taxpayers.
Mr. ENSIGN. Will my colleague yield?
Mr. CRAPO. Yes.
Mr. ENSIGN. Would the CBO--which is nonpartisan--score a welfare payment the same as these so-called tax credits?
Mr. CRAPO. Yes, that is right. A payment of a subsidy to an individual in the United States would be scored as a Federal outlay, or spending, as is a refundable tax credit paid to an individual who has no tax liability.
Let's assume we even accept the argument that is a tax cut. Even if you offset all of that, remember the chart a minute ago that said 73 million people would pay taxes. Even if you give them credit for that argument, there are still going to be 42 million people making less than $200,000 a year who will face a net tax increase. That is a violation of the President's pledge.
All this motion does is send the bill back to the Finance Committee, which writes tax policy, to correct that. The motion helps this bill comply with the President's pledge.
The Senator from Montana also used another example, trying to say some of these people who are paying more taxes are getting higher wages. This is the game that is going on. The employer of these people the Senator was talking about today provides a salary and health care to that employee. In this example, it is $50,000 of wages and $10,000 of health care benefits. This bill will now impose a hefty 40- or 45-percent tax on this health care plan because it is too good of a health care plan.
What CBO and Joint Tax tell us is that because of that immense tax--40- to 45-percent tax--the employer is just going to cut the health care plan down to where it is not taxed anymore and provide those dollars with an increased wage. So this young lady will get maybe $53,000 in wages instead of $50,000 and only $7,000 of health insurance, and her net employment compensation will still be the same, $60,000--except she will pay taxes on an extra $3,000. So her net employment package will go down not up, and 73 million Americans like her will end up with a smaller employment package, less health care benefits, and increased Federal tax liability. That is the way the bill works.
For issue after issue, there are taxes after taxes in this bill that will be paid by the people in this country who earn less than those on the threshold the President identified. That is why we simply ask that the bill be sent to the Finance Committee to have this violation of the President's pledge, this bad policy of increasing taxes on the middle class in America to pay for a huge new government entitlement program, be removed from the bill.
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Mr. CRAPO. I thank my colleague. I will give some statistics on the point. The Joint Tax Committee analyzed just the four biggest tax provisions--not all of them--and they concluded that only 7 percent of Americans would be receiving these so-called tax cuts, which are really spending subsidies but have been characterized as a tax cut in order to argue that the bill doesn't increase taxes. Only 7 percent of Americans will receive those, which represents about 19 million people, but 157 million people--almost 8 times that amount--who get health insurance through their employer will not be eligible for these credits. They will pay, on average, somewhere between $593 to $670 a year, depending on their income categories, in new taxes that are put on their shoulders in this bill.
I notice that my colleague from Tennessee wants to say something.
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Mr. CRAPO. The Senator from Nevada is correct. The fact is, the taxes start on day one of the bill. The spending, which is what these alleged tax cuts are that my colleague from the other side was talking about, does not start until the fourth year or 2014. And that is just one of the gimmicks in the bill in order to claim it does not drive up the budget--have 10 years of tax increases and only 6 years of spending to offset against it. I think that is how they started the spending days. They figured out how long they had to delay it so they could claim it would not drive up the deficit.
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Mr. CRAPO. The Senator from Nevada is correct.
Before I toss the floor to the Senator from Texas who wants to make some comments, I point out that the point the Senator from Nevada made is statistically made by Joint Tax:
By 2019, at least 73 million American households--
That is not 73 million Americans, that is 73 million American households--
earning below $200,000 are going to face these tax increases.
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Mr. CRAPO. The Senator from Wyoming is exactly right. It is the wrong thing to do when our economy needs to be strengthened and restarted, if you will, to apply a huge amount of new taxes.
Let's take the example we talked about earlier. This young lady, under the bill in the Senate right now, will not only see her health benefits go down, but the net value of her compensation package will go down. She will get a little extra wages in order to offset the reduction of her health care benefits, but those will be taxed and her net compensation package will go down.
The point here is this--and it is a little bit ironic that today the Democratic caucus is going to be meeting with the President at the White House in yet one more closed-door meeting where they are going to be trying to redraft the bill in order to get around some of the problems, which I hope they will let the American people see to debate before they try to vote on it again.
It is ironic, as Democrats come out of that caucus, if they do not support this motion, they will be violating two of the President's pledges. One, after meeting with him, they will be violating his pledge not to tax Americans who make less than $200,000--$250,000 for a family--as well as his pledge: If you like it, you can keep it.
This young lady, if she likes her package, cannot keep it. She will not have that option. Her $10,000 health care package will be reduced at least $2,000 to the minimum new government-designed acceptable policy and probably a little more than that. She will see a 20- to 30-percent reduction in her health care package against her will. I would be willing to bet she would prefer to keep the one she has now. Most Americans like the insurance they are getting through their employers.
Mr. ENSIGN. I would like to ask the Senator from Idaho a question. These are the nine taxes we know for sure that are being raised: 40 percent Cadillac plan, a separate insurance tax, an employer tax, a drug tax, a lab tax, a medical device tax, a failure to buy insurance tax, the cosmetic surgery tax, and the increased employee Medicare tax.
In our States, people think we will pass a sales tax, and the business will just pay the sales tax. I ask the Senator from Idaho, who actually pays the sales tax? Who have the Congressional Budget Office and the Joint Committee on Taxation, which are both nonpartisan, said are going to pay these taxes?
Mr. CRAPO. The Senator was there when the Joint Tax and CBO experts were asked this question. They squarely and directly said these taxes and fees will be passed on, virtually 100 percent, to consumers, which means two things. First, the ones that are taxes will just be taxes passed on to the consumer, as shown in the example of the young lady we looked at. The ones that are fees will simply be passed on in the form of higher costs for medical services or higher premiums, which is one of the reasons why, contrary to the assertions by the other side, this bill will drive up the cost of health care and will drive up the cost of premiums, not down.
Mr. ENSIGN. The last thing I would like to point out goes along with the Senator's chart. This is what the Joint Committee on Taxation has said: 84 percent of all the taxes being paid in this bill are being paid by those making less than $200,000 a year. If this is not a direct violation of the President's promise not to raise one dime of their taxes, I don't know what is. I don't understand how the President can sign this bill and keep to the promise he made during the campaign.
Mr. CRAPO. I agree with the Senator from Nevada. It is disturbing to see the responses. First, the response that this bill actually doesn't increase taxes; it cuts taxes. That flies right in the face of the reports and analysis by Joint Tax and CBO. I encourage everybody to read this bill. It is available on my Web site and on the Republican Web site and on the C-SPAN Web site. In addition, we will put up a reference to where you can find the bill to read it if you want to parse through it to determine who is telling the truth. The bottom line is, this bill increases taxes in the first 10 years by $493 billion. When you add fees to that, it is more like $700 billion. If you counted the first full 10 years of implementation, it is over $1 trillion of new taxes. The only response to that is to try to say that the subsidies for health insurance for those who are not able to purchase their own insurance are tax cuts, even though three-fourths of them go to those who are not, at this point, at a level where they are incurring a tax liability.
Mr. THUNE. My understanding is, those premium tax credits actually go to the taxpayer. When you say this is a tax cut for people, does it end up in the pockets of the average taxpayer?
Mr. CRAPO. The Senator from South Dakota is correct. In fact, this subsidy is not paid to the individual. It is paid directly to the insurance company. Of the one-quarter of people receiving this subsidy who do actually pay income taxes, their income taxes will, in fact, stay the same. They are not actually getting a tax cut. What they are getting is a subsidy for the purchase of insurance that is managed through the Tax Code but is paid directly to the insurance company.
Mr. THUNE. That is precisely why the arguments made by the other side that somehow this is a tax cut sort of defy what I think most Americans have come to expect when they get a tax cut; that is, that they get to keep more of what they earn. What we are talking about is a payment that will be made to an insurance company, a tax credit for premium subsidies that will go to an insurance company. There will be very few Americans, as a percentage of the total population, who will actually derive any sort of benefit. My understanding is, about 10 percent of all Americans will get some benefit from the premium subsidies that will go to the insurance company, not directly to the taxpayer; is that correct?
Mr. CRAPO. It is actually 7 percent.
Mr. THUNE. So we have a very small number of Americans who will derive a benefit. But you have a whole lot of Americans who will actually be paying the freight. The Senator mentioned earlier--I saw his chart--that 73 million Americans are going to end up with higher taxes as a result. Many of the premium tax credits, if you could give credit to the taxpayers receiving this, which you can't because it goes to the insurance company, but if you could, three-quarters of that will go to people who currently have no income tax liability. It seems as if the advertising on this is very inconsistent with reality and the facts. The fact is, most Americans will see taxes and premiums go up. Very few Americans are going to get some premium tax credit to help subsidize their premium cost, and that will go directly to the insurance company. I understand the Senator from Idaho and the Senator from Nevada are both members of the Finance Committee. They have been involved with this from the beginning. That is my understanding of this, which is hard to fathom how that constitutes a tax cut.
The PRESIDING OFFICER (Mr. Bennet). The Senator from Idaho has consumed 35 minutes.
Mr. ALEXANDER. I agree with the Senator from South Dakota. People who might be watching this must be thinking: Wait a minute. Let me ask the two members of the Finance Committee: What the Democrats are trying to say is, a Medicare cut is not a Medicare cut and that a tax increase is not a tax increase and that a premium increase is not a premium increase. Isn't it true that when the bill is fully implemented, there will be nearly $1 trillion in Medicare cuts, and isn't it true that there will be nearly about $1 trillion, when fully implemented, in new taxes? Isn't it true the Congressional Budget Office has said that will all be passed on to people? Isn't it true that all the taxes start in January, if the bill passes? Isn't it also true the Congressional Budget Office has said premiums are going to continue to go up and, for people in the individual market, they will go up even more? Isn't that all true?
Mr. CRAPO. I will respond first. The Senator from Tennessee is exactly right. Again, on this chart, these are the tax increases for the first 10 years of the bill, and this chart includes the fees and penalties that are charged as well. The total there is $704 billion. If you start when the bill becomes implemented or is started to be implemented, in 2014, to compare taxes to spending, the actual taxes and fees that will be collected are almost $1.3 trillion.
Mr. ENSIGN. There is no question. I can answer the Senator's question: True, true, true, and true. The old saying, if it walks like a duck and it quacks like a duck, it is a duck. These taxes sometimes are called fees. The Supreme Court has ruled that a fee that acts like a tax is, in fact, a tax. Most of the provisions we talked about before, we call them a tax, and that is what they are. These nine new taxes are a tax. You are exactly right. The Joint Committee on Taxation and the CBO have said these are going to be passed on to the consumer. What they have also said--and I thought this was significant--is that 84 percent of all these taxes are going to be passed on to people who make less than $200,000 a year. That is what we have been saying. The other side says: We are just going to tax the rich. When 84 percent of that tax burden is paid by people making less than $200,000 a year and the vast majority is also paid by people making less than $100,000, the vast majority is being paid by people who make less than $100,000 a year, the same as sales taxes. The sales tax has been called a regressive tax. These are regressive taxes the Democrats are passing on to the American people.
Mr. CRAPO. I thank my colleagues for coming over and speaking today and discussing this issue with me. I would like to conclude by pointing out, once again, the President said he could 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. But there are hundreds of billions of dollars in tax increases in this bill that are going to fall squarely to the backs of the middle class.
Our motion simply says: Let's fix that and take it out. The bottom line is, those who are saying that is not the case are trying in the first case to say there are subsidies in the bill that almost equal the amount of these taxes and, therefore, it is a net tax cut. First, subsidies are not tax cuts. Three-quarters of them go to individuals who have no tax liability. The other one-quarter does not reduce the tax liability of the individuals who are getting the insurance subsidy. Even if you accept all of that argument, the President was not saying you will not see net taxes go up in America. The President was not saying: We will not cut or not increase your taxes by more than we will cut someone else's taxes. I don't think anybody expected that was what he was saying. The President was saying he would not raise taxes in this bill. This bill violates that pledge.
Therefore, Members should support the motion to send this bill back to the Finance Committee to fix that glaring problem.
I reserve the remainder of my time.
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