Statement of Senator Michael B. Enzi
on S. 2230, the Paying a Fair Share Act of 2012
April 16, 2012
Mr. President, I rise today to express my disappointment that the administration and my friends on the other side of the aisle continue to avoid making the hard decisions to address our nation’s significant debt and annual deficits. Instead they are turning the nation’s attention to a talking point, a shell, a sham, a political hoax designed to distract this country from our real financial problems and the real solutions we will need to get us out of this mess.
The Paying a Fair Share Act of 2012, dubbed the “Buffett Rule,” that they describe as restoring “tax fairness” does nothing to address the fiscal disaster we are facing. The “Buffett Rule” is by President Obama’s own admission, a gimmick. My friends, our country can no longer afford photo op governance.
The national debt has risen to over $15 trillion, or nearly $48,000 per person in the United States. And this figure keeps rising under an administration that consistently fights spending cuts of any kind. We must make spending cuts if we are going to solve our fiscal problems.
Remember the President’s debt commission, the Simpson-Bowles debt commission the President appointed then summarily ignored? Not everyone has ignored it. I continue to work with my colleagues on legislation to get the country back on track financially. I’ve introduced a bill called the “one cent solution.” It’s also known as the “penny plan” or the “1 percent solution.” My “one cent solution” bill would cut spending by one percent for seven years and achieve a balanced budget in the eighth year. Every family can imagine taking one penny out of every dollar they spend. The federal government should be able to do the same.
In February, President Obama submitted his fiscal year 2013 budget proposal to Congress. I hope it was the last budget proposal he will have the opportunity to submit. Like his budget last year in the Senate, the President’s Budget in the House this year failed to get a single vote. Even Democrats shunned it. It failed 414-0. The “Buffett Rule” is pulled from the same bag of tricks.
Despite his promises of fiscal discipline and cutting the deficit in half by the end of his first term, President Obama presented the American people with another budget that spends too much, borrows too much, and taxes too much.
It is time for a change. Congress should take the lead by passing a budget that includes strong deficit reduction provisions and sets the country on a path out of our $15 trillion debt. When you’re in a hole, you stop digging. When you’re broke, you stop spending.
Rather than crafting a bipartisan measure to deal with these issues, the administration instead has turned its attention to the “Buffett Rule.” This bill is symptomatic of a much larger problem plaguing this administration – the unwillingness to address the country’s long-term fiscal imbalance and the diversion of the nation’s attention to a provision marketed as enhancing “tax fairness” that ultimately could impact very few taxpayers and does little to address the nation’s debt and deficits. The “Buffett Rule” is estimated by the Joint Committee on Taxation to raise approximately $47 billion over 10 years under current law. Even if current tax rates are extended past their current expiration date of December 31, 2012, the bill is estimated to raise approximately $160 billion over 10 years. The nation’s debt level is now over $15 trillion, and yearly deficits are running over $1 trillion under this administration. This bill is not a significant debt and deficit reduction measure; instead, it’s simply an attempt to raise taxes on owners of capital and job creators when they can least afford it. And no, it’s not a step in the right direction because it distracts us from real solutions. It’s a political stunt.
The administration is ignoring the fact that four out of five people with incomes over $1 million and that would be hit by higher taxes as a result of the Buffett Rule or any other “millionaire” tax are business owners, and these are the people the country needs to create new jobs. A “millionaire” tax increase like the Buffett Rule means that over one-third of all business income reported on individual income tax returns would be taxed more. Particularly for those small businesses with narrow profit margins, these additional taxes would take even more money out of their businesses and make it more difficult to invest, expand, and hire.
Warren Buffett, for whom this bill is named, generated most of his $40 million in taxable income in 2010 from dividends and capital gains, which under current law is taxed at 15 percent. Taking into account his wages of approximately $100,000 that are taxed at up to 35 percent, Mr. Buffett’s effective tax rate was approximately 17.4 percent. What if Mr. Buffett and other “millionaires” who are corporate shareholders were instead taxed like most small business owners who operate flow-through business, like sole proprietorships, partnerships, and S corporations, and are taxed immediately on their business profits at ordinary income tax rates of up to 35 percent? Mr. Buffett’s tax rate would have been about 35 percent, double what he is reportedly paying now. Given that his share of the corporate profits in any year could be much greater than the dividends he currently receives, Mr. Buffett himself could be paying significantly more in taxes to the federal government. I wonder if this would cause Mr. Buffett to reconsider his position on “tax fairness.” My friends, I am concerned that under the guise of “tax fairness” this administration will continue to raise taxes in order to support its out-of-control spending binge.
This administration either fails or chooses not to recognize that the current-law alternative minimum tax, or AMT, was put in place nearly 30 years ago to do exactly what the “Buffett Rule” is intended to do – ensure that high-income taxpayers pay at least a minimum amount of U.S. tax, regardless of various tax deductions and tax credits that they might be able to claim on their tax return. In that regard, this bill simply layers on yet another complex tax provision on top of the already complex U.S. tax system rather than addressing the underlying problems of the overall tax code. The country needs and deserves comprehensive tax reform that makes the system simpler and fairer for all taxpayers. At the very least, the administration should start by focusing on fixing the current tax code before adding yet another layer of complexity to it.
Those who named this bill want you to think it is an appropriate method by which to ensure everyone pays their fair share. We need fairness; however, the manner in which that goal is achieved is just as important as the goal itself. In that regard, the “Buffett Rule” misses the mark for each of the reasons I’ve just mentioned.
This bill is yet another missed opportunity for this administration to address the most pressing issues of the day, including significant tax issues that confront us at the end of 2012. The most notable tax issues include the prevention of a massive tax hike on all taxpayers on January 1, 2013, as a result of the expiration of current income tax rates, the extension of tax provisions that expired at the end of 2011 and that are scheduled to expire at the end of 2012, providing a “patch” for the AMT for 2012 so that it does not ensnare millions of middle-income taxpayers, and reforming the estate tax to prevent a significant rate hike on January 1, 2013.
Taking all of this into account, is the President flying around the country trumpeting the “Buffett Rule” as the solution to what he perceives is a “tax fairness” problem really the best use of his and the country’s time? We have more to think about than his re-election. There is a better path forward to achieve the desired result of the “Buffett Rule.” That path includes comprehensive tax reform that results in a tax code that is simple, fair, and pro-growth. If we combine that with appropriate spending cuts our country will be able to get out from under the heavy weight of our current and escalating debt burden.
Mr. President, I yield the floor.