Hatch: Democrats’ So-Called Millionaires Surtax Pursued For Political Reasons, Adjusted to Pay for Spending Idea of the Week

WASHINGTON – In a speech on the Senate floor today, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, outlined how Senate Democrats are pursuing a so-called “millionaires” surtax for purely political reasons and adjust it to fund their spending idea of the week.

“The series of tax-and-spend proposals brought to the Senate floor during the past few months were designed for political reasons only,” said Hatch. “It remains unclear what any of this has to do with job creation.  In fact, I suspect that much of this bread and circus routine is meant to distract the attention of families and taxpayers from the President’s mediocre record on job creation and economic growth.”

Hatch went onto outline how Democrats have changed the so-called millionaires surtax to get the necessary revenue they need for their latest spending proposal.

“The pattern is clear.  Democrats roll out their stimulus spending plan of the week, find out how much it will cost, and then find out what surtax to slap on high earners, including business income recipients,” said Hatch.  “Given the past few months of tax-rate-roulette being played by the Democrats, is it any wonder that families and businesses are uncertain and pessimistic about the future? These tax rates have nothing to do with designing optimal tax policy, and everything to do with scoring political points and growing an already bloated federal government.  These tax rates have nothing to do with engineering greater wealth or income equality through the tax code.  These tax rates have nothing to do with creating a foundation for growth in jobs and the economy.  They have everything to do with paying for politically-favored, poll-tested stimulus spending.”

Below is the text of Hatch’s full speech delivered on the Senate floor this afternoon:

Mr. President, for the last few weeks, the Senate has been engaged in a familiar exercise.  The Democratic majority, urged on by the President, offers up an increase in spending to be paid for by an increase in taxes.

If anything, this familiar refrain should cement in the minds of the American people that President Obama and his congressional allies remain committed to a policy of tax-and-spend.

Let’s not mistake any of this for carefully designed stimulus spending or tax policy.

No, the series of tax-and-spend proposals brought to the Senate floor during the past few months were designed for political reasons only.

It remains unclear what any of this has to do with job creation.  In fact, I suspect that much of this bread and circus routine is meant to distract the attention of families and taxpayers from the President’s mediocre record on job creation and economic growth.
For months, the Senate has been asked to consider higher taxes, including surtaxes on the so-called rich, to pay for whatever the Democrats have settled on as their spending idea of the week.  Most of those ideas are sold as stimulus, even though they include things like an infrastructure bank, which would be a brand new GSE to gobble taxpayer resources — just like Fannie and Freddie — and which would take years just to get off the ground. 

Most of the ideas have been designed to appease Democrat constituencies — mostly unions — and to construct campaign-season talking points attacking Republicans for their failure to increase taxes on the evil rich in order to pay for the Democrat’s spending sugar highs.

The focus on politics has become such a priority for the President that he is now in the unusual position of making a raid on Social Security’s trust funds his principal policy objective.

At first, to pay for a massive new stimulus plan of the President’s, the Democrats wanted to limit deductions for people earning $200,000 or more, which in September was evidently how they defined the rich.

Next came a proposed surtax of 5.6 percent on people earning $1 million or more to pay for the President’s stimulus scheme.  We can’t be sure, but I suspect that this jump in the income threshold for the Democrats’ tax increases came when high income Democrats in high income jurisdictions like New York, California, and New Jersey, made it clear that this is where they had to part company with the President.

Next came a surtax of 0.5 percent on high income earners to give funds to States to help pay mostly union workers.

And then came a surtax of 0.7 percent on those earners to help pay for a new Fannie and Freddie called an infrastructure bank. 

This was followed by a surtax of 3.25 percent on those earners for a payroll tax expenditure.

Finally came a surtax of 1.9 percent on those earners for the payroll tax expenditure.

Mr. President, the pattern is clear.  Democrats roll out their stimulus spending plan of the week, find out how much it will cost, and then find out what surtax to slap on high earners, including business income recipients.

That is how we get tax proposals with rates of 5.6 percent, then 0.5 percent, then 0.7 percent, then 3.25 percent, and then 1.9 percent. 

Who knows what comes next?

Never mind that businesses across this country have been clear that massive uncertainty about the current administration’s policies, regulations, and tax increases is holding back hiring, job creation, and the economy.  People are uncertain about what their future health care costs will be; what their future energy costs will be; what their future regulatory environment will be; and what their future taxes will be. 

Given the past few months of tax-rate-roulette being played by the Democrats, is it any wonder that families and businesses are uncertain and pessimistic about the future?

These tax rates have nothing to do with designing optimal tax policy, and everything to do with scoring political points and growing an already bloated federal government. These tax rates have nothing to do with engineering greater wealth or income equality through the tax code.  These tax rates have nothing to do with creating a foundation for growth in jobs and the economy.

They have everything to do with paying for politically-favored, poll-tested stimulus spending. In the President’s $800 billion plus stimulus of 2009, we were told that the measures would be temporary, and we would “pivot” later to fiscal austerity.  But the promised pivot never comes.

Still today, we are told to spend more now and pivot later on.  But the promised pivots never come.  Unfortunately, unless we pivot, we will run off the budgetary cliff and face the deficit and debt crises plaguing Europe today.

These tax rates recently proposed by Democrats have nothing to do with long-term economic growth and more to do with the President’s vision of government as the benevolent allocator of people’s hard-earned income.

Not content with his average deficits being close to 25 percent of the entire size of our economy — which we have not seen since the years surrounding World War II — the President and my Democrat friends here in the Senate want to permanently enshrine a European-sized government in the American economy.

They don’t just want additional infrastructure spending.  They want a brand new government bureaucracy, free of Congress, to tax and spend.

They want an all-powerful, unchecked government czar to control the provision and costs of consumer credit cards.

They want an overzealous EPA to control allowable sources of energy, no matter the costs of their policies.

They want an activist labor department to control how workers and companies can bargain, to control where you can operate a business, and to push people into their union voting base, whether they support the union or not.

The President’s pursuits are not those of someone who thinks that in certain instances government is constitutionally authorized to act, and can occasionally do good.  His record is that of someone who is confident that in most cases government technocrats can do better things with Americans’ hard-earned incomes than Americans can do for themselves.

Mr. President, when you look at the variable menu of recent tax rates proposed by Democrats, you have to ask whether, once enshrined into law, the 5.6 percent rate, or the 0.5 percent rate, or whatever happens to be their flavor of the week, is where my friends on the other side of the aisle would leave things.

I have every reason to doubt that they would stop at those rates and every reason to believe that they will work as hard as they can to keep increasing those rates, demolishing businesses and jobs as they go.

I have every reason to believe that the current President will stick with his commitment to “spread the wealth around,” and ask the so-called rich, who can be people who earn as little as $200,000 according to Democrats, to pay “just a little bit more.”

So, where would they stop? What is the optimal tax-the-rich rate of taxation?

Economist Peter Diamond, who was nominated by the President to serve on the Federal Reserve Board, has proposed in recent writings that “tax policy needs to be socially acceptable,” and then finds it acceptable to go on to say that the so-called optimal top rate of tax could be as high 73 percent.

The current top marginal tax rate on earnings in the U.S. economy is around 42.5 percent when you combine income tax rates of 35 percent with the Medicare tax and average state taxes.  And the cutoff for the top percentile of tax filers is about $400,000 according to Diamond’s analysis.
When you consider the liberal conventional wisdom about how businesses operate, the American people should be fearful about where the Democrats’ tax hike proposals might lead.  The bottom line is that the sky’s the limit.

Consider the New York Times December 9 editorial, tucked in between advertisements for jewelry, properties, and baubles that only the truly mega-rich could afford, where the liberal press offered the following guidance on tax policy.

“The latest Democrat bill to cut the payroll tax, blocked by Republicans on Thursday, called for a 1.9 percent surtax on income over $1 million.  More important, for any savvy business owner, a surtax would have no bearing on hiring decisions.  If new workers are profitable before tax, they will be profitable after tax, even if the employer has to pay slightly more of the profit in taxes.”

This perfectly encapsulates the understanding of the economy by folks who have never run a business or tried to turn a profit.  The liberal notion is that business owners are immune to basic economics and their hiring decisions are entirely unaffected by tax rates.  With this view in mind, it is not hard to imagine proposals for taxes upward of 73 percent because those mega-rich business owners simply won’t flinch. 

The Democrats’ burning desire to raise taxes seems to confuse income and wealth.  They abhor the outsized wealth accumulation of the mega rich, even though they love the campaign contributions flowing from them.  They seem to think that massive increases in income taxes will cure the growth in inequality observed over decades in the U.S., and in many foreign economies. 

Some of our nation’s wealthiest individuals, like Bill Gates and Warren Buffett, join this chorus and call for higher taxes on others, even though they channel large portions of their wealth to private foundations, revealing their preference for resources to be allocated in the private sector rather than by government.

Even our President calls for more taxes on himself, even though he could write a check to the IRS at any moment.  He calls for a Buffett rule, even though he paid a tax rate of 26.3 percent in 2010 which, according to a recent Congressional Research Service analysis, means that the President violates his own idea of the Buffett rule by paying a lower tax rate than well over 10 million more moderate-income taxpayers.

Mr. President, the past few months have witnessed a variable menu of tax rates offered by my friends on the other side of the aisle.  They claim that these tax increases will secure equality, economic growth, job creation, and more. 

Those claims are false.  The evidence is clear that the recent proposals from Democrats have been more of the same: tax and spend; move toward a permanently larger government; and design politically-motivated bills that they know will fail in the Congress in order to hone election-year talking points.

Mr. President, we need to be clear with the American people that these proposals might be good for government, but they will do little to cure what ails our economy.

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