WASHINGTON, DC-Ways and Means Ranking Member Sander Levin (D-MI) delivered the following statement this morning at the Joint Committee on Taxation Roundtable:
“House Republicans put out their budget yesterday, and it highlights I think one of the major differences between now and 1986: the deep differences of opinion that exist between the two parties in Congress. We must address the deficit. We must not do so as a way to turn back the clock on more than half a century of progress that helped foster the American middle class. The Republican budget calls for unprecedented cuts that would lead to the unraveling of Medicare and Social Security. On tax policy, it embraces more tax cuts for the wealthiest and a higher burden for everyone else.
“If there is to be any chance of undertaking fundamental tax reform we will have to find a way to bridge those basic differences in the Ways & Means and Finance Committees to arrive at a bi-partisan set of principles. In 1986 those principles were: simplicity, efficiency and fairness.
“It is instructive to compare our situation today to the one we faced in 1986. After the 1981 tax cuts, many felt that we had gone too far, just as many of us feel today that the 2001 and 2003 tax cuts went too far. But in the years between 1981 and 1986, Congress enacted three separate deficit-reduction revenue measures so that we were on a far more sustainable fiscal path. Today, there is broad agreement on the need to address our deficits, but very little common ground on how to most responsibly achieve that goal.
“Another major difference between 1986 and today is the dramatically increased income inequality in our country. In 1986, the average income of the bottom 90% of households was $31,282 dollars. In 2008, the most recent year for which we have data, the bottom 90% averaged $31,244. In other words, the vast majority of Americans have seen essentially no gains since 1986, and are actually worse off in real terms. The top 1% on the other hand saw an average gain of almost $400,000; the top tenth of one percent saw an average gain of more than $2 million.
“As I said before, one of the principles of the 1986 Act was fairness. A great deal of work went into ensuring that one segment of our society was not funding a tax cut for another segment. But when you look at the budget proposal that came out yesterday, that is exactly what some are proposing. By assuming that the 2001 and 2003 tax cuts are all made permanent, it locks in a policy skewed to the very highest earners. Nearly 80% of the benefit of extending the upper-income tax cuts last year went to the wealthiest one-fifth of one percent of taxpayers - those with income over $1 million.
“Mr. Camp and Mr. Ryan have also set a goal of a top individual tax rate of 25%. What is not laid out is what it would take to reach that goal, or its consequences. It almost certainly would be necessary to eliminate major provisions that helped build the broad middle class of this country such as the mortgage interest deduction and the employer provided health care exclusion. Or one could eliminate vital provisions that help the working poor like the child credit and the EITC. Even if one eliminated the lower, preferential rates for capital gains and dividends, a 25% top individual rate would still require choices that would increase the tax burden on working families and reduce the progressivity of our tax system.
“In other words, the tax reform goals must not mean a tax cut for the wealthiest and a tax increase for working families whose incomes have been essentially stagnant in the years since the last tax reform.
“We need tax reform that directly encourages economic growth and job creation here in the United States, helps working families, and does not add to our deficit. I look forward to hearing our guests’ perspective on how we can get there."
