Washington, DC – Today, the U.S. Senate is scheduled to vote on the Middle Class Tax Cuts Act, a proposal by Senate Democrats that would preserve low tax rates for the vast majority of Americans while asking the wealthiest individuals to pay a fair share toward deficit reduction. U.S. Senator Sheldon Whitehouse, who led the fight earlier this year to enact the Buffett Rule to ensure that multi-million-dollar earners pay a fair tax rate, gave a speech on the Senate floor yesterday evening urging his colleagues to support the proposal.
“We… have the opportunity to deliver some tax certainty to the American people by advancing the Middle Class Tax Cuts Act,” Whitehouse said in his speech. “This legislation would prevent tax rates from increasing for the vast majority of families and would preserve an important tax credit that currently helps millions of students afford the costs of a higher education. This bill is the right thing to do for the middle class, and I intend to vote for it.”
The Middle Class Tax Cuts Act would preserve current tax rates on income below $250,000, and would extend tax credits that help students afford college and help struggling families stay afloat. An alternative Republican proposal would raise taxes on 25 million lower- and middle-income Americans by ending the American Opportunity Tax Credit for college tuition, and reducing the Child Tax Credit and the Earned Income Tax Credit.
The text of Whitehouse’s speech, as prepared for delivery, is below.
Thank you, Mr./Madam President. Tomorrow, we will have the opportunity to deliver some tax certainty to the American people by advancing the Middle Class Tax Cuts Act. This legislation would prevent tax rates from increasing for the vast majority of families and would preserve an important tax credit that currently helps millions of students afford the costs of a higher education. This bill is the right thing to do for the middle class, and I intend to vote for it.
The question is, will it be filibustered? -- a tax cut for millions of hard-working Americans, filibustered, simply to protect the wealthiest Americans from paying a fair share?
It’s not a new story. In 2001, when President George W. Bush decided to spend a large portion of the surpluses he inherited from President Clinton to cut tax rates across the board, many Democrats opposed it because the tax cuts were unfairly weighted toward the highest-income Americans. As a result of this opposition, Republicans were forced to set the tax cuts to expire at the end of 2010.
As 2010 drew to a close, President Obama and many Democrats in Congress, including myself, supported extending the tax cuts for middle-class families, but letting the lower rates on income above $200,000 for an individual and $250,000 for a family revert to Clinton-era levels as scheduled. Senate Republicans filibustered our effort, refusing to allow the middle-class tax cut without a tax cut for the wealthiest among us. Not wanting tax rates to go up on middle-class families still struggling during the recovery, the President and Senate Democrats reluctantly agreed to extend all of the tax cuts through this year.
Now once again these tax rates are set to expire. I would like to keep rates low for middle-class families. Those families in Rhode Island anyway, are still struggling in the aftermath of the mortgage meltdown on Wall Street. But I agree with President Obama that, for reasons of fairness, and to begin to address our deficit, it would be wise not to extend tax cuts for high levels of income.
Bear in mind that the Middle Class Tax Cut Act would benefit even high-end taxpayers. Families making over $250,000 a year would still pay lower rates on their first $250,000. If your family makes $255,000, you’d only see an increase on the $5,000 and only to the Clinton-Era rates that were in effect during the 1990s [a family earning $255,000 would pay an extra $150], a time when our economy was thriving.
Extending the lower tax rates for income above $250,000 for one year, as the Republicans have proposed, would add over $49 billion to the deficit. Even in Washington, $49 billion is significant money – money that would have to be borrowed, adding to our deficit problem. But now, many of the same Republicans who voted in the name of deficit reduction to end Medicare as we know it would support deepening the deficit with high-end tax cuts. For most Rhode Islanders, these are exactly the wrong priorities when it comes to deficit reduction.
In addition to deficit concerns, I also believe we should let the tax cuts at the top expire for fairness reasons. Loopholes and special provisions allow many super-high income earners to pay lower tax rates than many middle class families. According to the non-partisan Congressional Research Service, 65% of individuals earning $1 million or more annually pay taxes at a lower rate than median income tax payers making $100,000 or less.
As you know, Mr./Madame President, earlier this year we voted on my Paying a Fair Share Act, legislation that would implement the so-called Buffett Rule to ensure that multi-million dollar earners pay at least a 30% effective federal tax rate. During debate on my Buffett Rule bill, I cited an IRS statistic that the top 400 taxpayers in 2008 – earning an average of $270 million each that year – paid the same 18.2% effective tax rate that’s paid by a truck driver in Providence, Rhode Island.
The single biggest factor driving this inequality is the special low rate for capital gains – 15% under the Bush tax cuts. The special capital gains rate allows hedge fund billionaires to avail themselves of the so-called “carried interest” loophole and pay taxes at lower rates than their secretaries and chauffeurs. If we let the tax cuts at the top expire, those rates revert to 20% instead of 15%: still a low rate for someone making a $100 million a year, but more like what a family making $100,000 a year pays.
Let’s be very clear about one thing. The proposal that Republicans prefer, the tax-cut bill introduced by Finance Committee Ranking Member Orrin Hatch, would raise taxes, it would raise taxes on 25 million lower- and middle-income Americans, those still struggling in these challenging economic times.
That’s right, while Republicans claim to not want to increase taxes on anyone, the Republican tax cut bill would let popular lower- and middle-income provisions expire, costing 25 million Americans an average of $1,000 each. Under the Republican bill, 12 million families would see a smaller Child Tax Credit and 6 million families would lose their Earned Income Tax Credit or see their credit reduced.
In addition, the Republican bill would end the American Opportunity Tax Credit, which would help 11 million students next year afford the cost of a higher education with a tax credit worth up to $2,500. This popular credit has already helped millions of students and their parents pay for college, along with Pell Grants.
Extending the American Opportunity Credit through 2013 would cost about $3.2 billion. Republicans believe we cannot afford a $3.2 billion investment higher education for middle-class Americans, but we can afford $49 billion in tax breaks for high-income earners. A $2,500 tax credit might seem pretty small in comparison to the $92,000 average tax break that millionaires would receive from another year of high-end tax cuts, but to a middle-class family sending a child to college, it’s a big deal.
Once again, Mr./Madame President, look at the priorities: they fought to protect the tax loophole and taxpayer subsidies for Big Oil; they fought to protect the carried interest tax loophole that lets hedge fund billionaires pay lower tax rates than their chauffeurs and doormen and they want to go after the Child Tax Credit, the Earned Income Tax Credit, and the college tuition tax credit. I hope that Republicans will join us tomorrow in voting to advance a measure that would keep taxes low for the vast majority of Americans. I also hope that Republicans will reexamine their proposal to raise taxes on 25 million low- and middle- income Americans. I thank the chair, and I yield the floor.