Shared Sacrifice in Resolving the Budget Deficit-Motion to Proceed

Floor Speech

Mr. WHITEHOUSE. Mr. President, I am honored to follow my distinguished colleague from Maryland in this discussion about our priorities as we address the debt limit we are approaching. I think Leader Reid was wise to choose to cancel the scheduled Fourth of July recess so we could continue to work toward an agreement to prevent defaulting by the United States on our government debt and the financial consequences that would ensue here in America and around the world.

As we negotiate an end to this debt limit standoff, we also, obviously, have to address our looming budget deficits and our looming debt, which threaten to cripple our potential for economic growth in years to come. Where we are on this, of course, is that President Clinton put our budget on course to permanent surpluses. We would be a debt-free nation right now if the predictions the nonpartisan Congressional Budget Office had put in place when President Clinton left office had been kept. In fact, there were changes. President Bush and a Republican Congress squandered away those surpluses with unnecessary tax cuts and unwise spending increases. Our multitrillion-dollar deficits have resulted. We must now fix the budget and bring it back into balance.

So where are we in this standoff? Well, we need to cut spending. Democrats and Republicans agree on that. We need to protect ordinary families who enjoy ordinary levels of income from tax increases. Democrats and Republicans agree on that. The disagreement is whether we also need to raise some revenues in other areas to help balance the budget, areas such as oil and gas and ethanol subsidies, closing corporate tax loopholes, and putting an end to high-income tax-dodge schemes.

On that front, I rise in support of Leader Reid's resolution calling for a deficit reduction package that includes a ``more meaningful contribution'' from millionaires and billionaires.

The Republicans are threatening that they would rather let this government default on its obligations than to what they call ``raise revenues'' by requiring the wealthy to pay their fair share. Just last week, Senate Republican leader Mitch McConnell called on President Obama to take any raised revenues ``off the table'' and to balance the budget solely on spending cuts that affect the middle class and lower income families. In an opinion piece on cnn.com, Senator McConnell proclaimed that ``tax hikes can't pass the Congress.''

Well, let's pull the curtain back and take a little glimpse behind it as to whom the Republicans are fighting so hard to protect.

As shown in this picture I have in the Chamber, here is a building in New York City on Park Avenue, the Helmsley Building. Because this building is large enough to have its very own ZIP Code, we know from actual IRS information--not projections, not guesses, not conclusions drawn from rates; from actual paid-in IRS information--that the wealthy and successful individuals and corporations that call this building home paid a 14.7-percent total Federal tax rate in the last year they have done the calculation, 2007. That is lower than the actual tax rate, on average, of the New York City janitor or doorman or security guard who would work in this building. It is upside down. The people who serve the occupants of this building pay a higher tax rate than the occupants of this majestic building. The tax gimmicks that let those occupants pay a lower rate than the people who take care of the doors and the cleaning and the security for them--that is what the Republicans are fighting to protect.

This problem is not just a fluke in the Helmsley Building. Each year, the Internal Revenue Service publishes a report that adds up all the taxes paid by the 400 highest income earning Americans. I spoke earlier this year--several times, actually--on last year's report, which included data from 2007, like the same year as for the Helmsley Building. In that year, these super-high-income earners, making, on average, $ 1/3 billion, approximately--billion with a ``b''--paid a lower tax rate in 2007--the 400 of them did, on average--than an average hospital orderly who is a single payer pushing a cart down the halls of a Rhode Island hospital at night.

In May, the IRS published updated data on the top 400 income earners for 2008. Let's take a look at the status of the top 400 earners in that more recent year. Well, they are down from $ 1/3 billion, on average, to over $ 1/4 billion each. Certainly we can applaud that kind of success in America. That is definitely the American dream come true. But, on average, they paid an average tax rate of 18.2 percent. That is what they actually paid. That is what they put into the IRS. Once you get through all the tax dodges, all the different schemes, all the different deductions, all the different rates, when you actually put the pen to the paper at the bottom line, it is 18.2 percent.

We spent a lot of time around here debating whether the top income tax rate should be 35 percent or 39.6 percent. Folks, that is not what they are paying. The Tax Code is so filled with special provisions that tend to exclusively or disproportionately benefit the wealthy that the highest 400 income earners, earning more than $ 1/4 billion in 1 year, paid an average tax rate of 18.2 percent.

This means that the 400 highest earning individuals in the Nation, in 2008, paid the same effective tax rate as a truckdriver in Rhode Island. According to the Bureau of Labor Statistics, on average, an ordinary truckdriver earns $40,200, which is about the place in the Tax Code, on the way up, where you first hit paying 18.2 percent of your income in taxes.

So what the Republicans are asking as part of the debt limit compromise is that we cut employment and job training support now, at a time of record joblessness, while they continue to fight to make sure that people making a quarter of a billion dollars a year pay lower Federal tax rates than average middle-class families.

Here is another building that has a little story to tell. This is a building called Ugland House. It is over in the Cayman Islands. This building does not look like much. It is pretty nondescript. But over 18,000 corporations claim to be doing business out of this building--18,000 out of that little building. Clearly what is going on is that those corporations are hiding through shell companies, phony corporate identities that they and wealthy taxpayers use to hide assets and play tax games with the IRS.

This kind of mischief down in the Cayman Islands and elsewhere through these tax dodges is estimated to cost us as much as $100 billion every year. As part of a debt limit compromise, the Republicans are asking us to cut America's investments in science, cut America's investments in technology at the same time they are fighting to protect corporations that hide in offshore tax havens so that the honest American taxpayer has to pick up the burden for them. That is what they are fighting for when you pull back the curtain.

When all is said and done, everyone, Democrat and Republican, agrees that there needs to be cuts. And everyone, Republican and Democrat, agrees there should be no tax increases on ordinary middle-class families. Those concerns are not at issue. Where is the dispute? What is the blockade? Again, pull back the curtain and you will see that the Republicans are willing to let us as a nation default for the first time in our history on our debt, which would devastate our economy, all to defend tax rates for millionaires and billionaires that are lower than those paid by regular hardworking Americans; all to defend offshore tax havens that are used to evade taxes while ordinary families are expected to pay their taxes; all to defend corporate and special interest tax loopholes, earmarks for the wealthy and well-connected. That is where they have chosen to stand their ground. That is where they have chosen to pick a fight.

As our Nation rushes toward the August 2 deadline and the agreement deadline before August 2 when we must have something in place in order to get the President's signature on a bill by August 2--as we rush toward that, as the world's economy and America's economy are imperiled by the threat of our debt limit not being lifted, what are they fighting for? That is what they are fighting for, for the superprivileged, for the super well-connected, for the tax dodges they take advantage of, and for the lower rates the superrich pay compared to the rest of all of us. Those are the interests that Republicans are protecting when they reject any revenue increases to bring down our unsustainable deficit. They say it is tax increases they are against. Well, the answer to that should be Americans asking the question back: Tax increases for who? Because if it is tax increases for the guy who is making a quarter of a billion dollars, and is paying a lower tax rate than a truckdriver, that is okay with me. That is a tax dodge we can get rid of. If it is a tax increase for a company that is going to hide in this building in the Cayman Islands to shelter its incomes so that Rhode Island corporations and Oregon corporations, American corporations have to make up the difference--American taxpayers have to make up the difference, and they cannot hide their income down there any longer, that is a tax increase I can live with. I do not think that is what ordinary Americans have in mind when they say we do not want tax increases. They mean we do not want our rates to go up. But ordinary Americans know that our Tax Code is filled, riddled with gimmicks and tricks and loopholes and deductions that have been put in it over the years by lobbyists. They are earmarks, they just happen to be earmarks in the Tax Code. They spend America's money through the Tax Code just as much as if it were an appropriation.

But what is the big difference? The big difference is it takes being a very wealthy individual or a very big corporation to be able to take advantage of those tricks, to be able to hire a lobbyist who can build that trick into the Tax Code, and to have the revenues and the resources to be able to maneuver through the Tax Code in that way. Ordinary Americans do not do that.

You can ask pretty much anybody in Rhode Island, show them the thousands of pages of the Internal Revenue Code and ask them: Who has a special provision in it for you? Nobody does. They are regular Americans. They pay regular taxes. They do things the way they are supposed to be done. The gimmicks and the tricks are all at the upper end, and it is time to clean house, particularly now when we so badly need the revenues to balance our budget.

It is simply inexcusable that our tax system permits billionaires to pay lower tax rates than truckdrivers, that it allows the wealthy to avoid taxes by hiding assets in phony offshore corporations. Even if we had no budget deficit, just being fair, honoring the principle of equality would demand that we address these inexcusable discrepancies that favor the wealthy and the well-connected. Our budget crisis, however, brings real urgency to the problem. So as we continue to work to avoid a debt default by the United States of America and to bring down our budget deficits and to reduce our crippling national debt, I hope Senator McConnell and the Republican Conference will revisit the potential to significantly cut the deficit by addressing tax loopholes, tax gimmicks and, frankly, outright injustice to the ordinary American taxpayer that they are now defending here in the Senate.

I see the distinguished Senator from Alabama arriving.

I yield the floor.

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Mr. WHITEHOUSE. Would the Senator yield for a question?

Mr. KYL. Mr. President, I would be happy to yield. I am also happy to conclude. I think we are rotating between Democrat and Republican.

Mr. WHITEHOUSE. I don't want to step on your colleagues' time.

The PRESIDING OFFICER. The Senator from Rhode Island.

Mr. WHITEHOUSE. One of the things I have been tracking is the share of wealth, income, and taxes at various percentages toward the top. The Senator was good enough to mention that the top 1 percent pays about 28 percent of the taxes, the top 5 percent pays a little over 44 percent of the taxes, and the top 10 percent pays 55.4 percent of the taxes.

But I think in order to get a complete picture, it is also important to note that the top 1 percent controls 24 percent of the income, the top 5 percent controls 39 percent of the income, and the top 10 percent controls 50 percent of the income. If you go to wealth, the top 1 percent controls 33.8 percent of the wealth, the top 5 percent controls 60.4 percent of the wealth, and the top 10 percent controls 71.5 percent of the Nation's wealth.

So if you are in the top 10 percent and you control 71.5 percent of the Nation's wealth, it doesn't seem to be unreasonable that you should be paying 55 percent of the Nation's taxes, particularly if you are taxing based on dollars and not on just number of people.

I don't know if those numbers are wrong. We got them from the Federal Reserve Board, from the IRS, and from the Congressional Budget Office. I think they are accurate. It would appear to show that at the very high end, although these individuals are paying considerable taxes toward our Nation's economy, they are paying considerably less than the amount of wealth they control and not much more than the amount of income they control. In a graduated system of progressive taxation, which we are supposed to have, that is not surprising. In fact, what is surprising is that the top 24 percent of the income only pays 28.3 of the taxes.

Mr. KYL. Mr. President, I am not sure where the question is in there. But what I would say in response is, with all due respect to my colleague, his numbers are absolutely wrong. I don't have at my fingertips the precise figures, but I can tell you this--by the way, I don't also know what you mean by ``in charge of wealth.'' In terms of who owns wealth or income, the people in the upper brackets pay far more in taxes than the percentage of wealth as a percent of the economy, and I would be happy to supply those figures to my colleague. And there is a difference between income taxes and all other taxes as well, and that chart doesn't suggest which is which.

I would be happy, though, to demonstrate to my colleague that whether you are talking about income taxes or all taxes, the upper income level pays far and away the higher percentage than those in the lower portion, and in taxes they pay more than the percentage of wealth that they create or that they earn.

The bottom line is that I think anybody making the argument that there is not shared contribution to the revenues of the country by the upper income would be making a false argument. I know that is not the argument my colleague is making, because he agrees with the progressive income tax system and has pointed out that it is progressive even by the numbers you have.

But let's do this, because I respect my colleague. I will get the numbers I rely upon, you get the numbers you think you rely upon and the sources of each, and you and I can agree to come to the floor at an appropriate time convenient to us both, and then we can both have the data at our fingertips from which we can make our respective arguments.

Mr. WHITEHOUSE. I would be delighted to do that. And I might actually throw in the data from the IRS that shows that the top 400 income earners in the country in the most recent period that they have actually gone back and done the calculation paid 18.2 percent total taxes, which is less than I think the average American, certainly the average middle-class American family pays. So there is this reversal at the high end where people actually end up paying less.

Indeed, in one building in New York, the payment for the most recent year was 14.7 percent from the occupants, whereas janitors and doormen and security guards are paying up in the 20-percent ranges. It is not progressive in that sense. It is regressive at the high ends, according to those things. So let's get the information together, and we will have that discussion.

Mr. KYL. Sure. And on that last point, it makes a larger point. When Congress tries to get the millionaires and the billionaires, those are the very people who can adjust their way of earning and of giving and of living so that they end up paying less in taxes. That is why it doesn't much matter what the rate of taxes is at the upper income. They are never going to pay more than a certain percentage, because they can afford the lawyers and the accountants to make sure that they don't pay more. It is the people in the middle income who can't do that, and they end up paying up what the IRS says they owe, and they can't adjust their way of living and giving in order to pay less in the way of taxes. Whatever deductions they get, they get, and they are going to have to live with those.

When we try to hit the upper income with higher rates, it generally doesn't work. That is another reason why we think it is an ineffective way.

Mr. WHITEHOUSE. That is why I think the loopholes need to be closed, and I thank the distinguished Senator for the colloquy.

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