Senate Floor Statement on the Paying a Fair Share Act
Monday, April 16, 2012
Mr. President, one of the unfortunate characteristics of the American economy for the last few decades has been the rising gap between upper and middle-income Americans. Increasingly, those in the upper echelons of income and wealth have seen their fortunes rise, while the vast majority of Americans have coped with stagnant income and increasing insecurity. In recent decades, most families have had to cope with a reduced ability to afford the things middle-class Americans once took for granted – a comfortable home, college educations for the kids, and a secure retirement. At the same time, incomes have risen remarkably for those at the very top of the income scale. Today, by some measures, income inequality is greater in our country than at any time since just before the Great Depression.
This should worry us all. It should worry us because a way of life has become endangered. That way of life – one in which, if you work hard, play by the rules and plan for the future, you and your family will prosper – came to be known as the “American way.” But increasingly, the American way has been replaced by one in which the very wealthy do well while everyone else struggles. Instead of all boats rising together, it is the yachts that have risen – good economy or bad – while all the other boats have been stuck in place and taking on water.
Today we have a chance to begin the work of closing that income gap between the wealthiest Americans and the middle class. We can, by adopting this motion to proceed, begin the debate on how best to address the worrisome and growing gap. But that debate cannot begin unless our colleagues on the Republican side agree to allow it to begin. I, for one, am eager to have this debate – I believe the American people want and deserve this debate. Our Republican colleagues have very different ideas about this problem, and may even deny there is a problem. But the people we represent believe this is a problem, and we should respond to their concerns.
There are some who question whether income inequality is rising. These denials melt away in the face of enormous evidence to the contrary. To deny rising income inequality is to deny plain facts. Here are a few of those facts.
As of 2008, the richest 1 percent of Americans took home almost 24 percent of total income. This is up from 10 percent in 1980. Half of all income in the United States went to the top 10 percent of Americans. And, the vast majority of Americans, the bottom 80 percent, received less than a quarter of total income in the United States.
The nonpartisan Congressional Budget Office issued a report last year on changes in income distribution since 1979. CBO’s researchers found that over that period, after-tax income “for households at the higher end of the income scale rose much more rapidly than income for households in the middle and at the lower end of the income scale.” CBO found that for the wealthiest one percent of Americans, real after-tax income grew by 275 percent. Those in the next 19 percent – that is, the top 20 percent minus the one percent at the very top – saw after-tax income growth of 65 percent. And for the 60 percent of Americans in the middle of the income scale, between the top and bottom 20 percent, after-tax income grew by just 40 percent. So, income for the top 1 percent of Americans grew at a rate nearly seven times greater than growth in middle-class incomes.
There are two striking things about CBO’s findings. The first is that the biggest driver of growing inequality is the growing gap between those at the very top of the scale and everyone else. Even those in the top 20 percent of incomes – those doing very well by anyone’s standards – have fallen behind the top 1 percent.
The second striking finding is what CBO found about the effects of federal tax and transfer policy. In fact, CBO reported that while the rise in inequality stems from a number of factors, one significant contributor is federal policies – including the decisions we all make here in this Congress. For instance, CBO said that the rise in after-tax income for the top 1 percent may come in part from tax changes we made in 1986. Those changes lowered the top personal income tax rate below the top corporate tax rate, encouraging many wealthy Americans to reclassify corporate income as personal income to qualify for the lower rate.
More worrisome is the fact that CBO found that federal tax policy has actually made inequality worse. Inequality of after-tax income is higher than inequality of pre-tax income. In part, that is because our tax system has shifted away from income taxes – which are progressive, asking the wealthier to pay a higher rate – to payroll taxes, a burden that falls on all income-earners regardless of how wealthy. These are the kinds of changes that have led to billionaire investors and hedge-fund managers paying a lower tax rate than their secretaries.
One way that government could fight this rising gap is with transfer payments – benefits paid by government to the less wealthy to try to counteract difference in income. Some, including some of our Republican colleagues, have made the case that transfer payments are growing larger, or that government policy is making people increasingly dependent on government handouts. The CBO report answers this argument. CBO found: “The amount of government transfer payments—including federal, state, and local transfers—relative to household market income was relatively constant from 1979 through 2007, ranging between 10 percent and 12 percent with no discernible trend.” So, while there has been a rising gap in pre-tax income since 1979, and government tax policy has widened that gap, federal transfer payments have done nothing to balance it.
These facts are telling. But we should not forget that behind all these numbers, all these facts and figures, are real people – and most of those people are struggling to get by. They should be uppermost in our minds.
The rise in inequality is not the result of a single factor, and it did not happen overnight. So we will not reverse it overnight. It will take sustained effort. That effort starts with acknowledging that there is a problem, and I hope our Republican colleagues will avoid the denialism that is all too prevalent on this issue. But if we can first acknowledge the problem, we then can do something about it, beginning with this vote today.
The proposal before us simply says that those at the very top of the income ladder, those making more than $1 million a year, will, at a minimum, pay a federal income tax rate of 30 percent on their income above $1 million. Most Americans consider that simple common sense. The fact that wealthy corporate executives pay a lower tax rate than construction workers or waitresses or teachers or police officers is fundamentally unfair. And at a time when budgets are extraordinarily tight, and getting tighter, it makes no sense for government to subsidize, through tax policy, the growing income gap between the top few and ordinary Americans.
This bill will not solve all our problems. Even if it passes, there will be much more work to do – especially because this problem is, through tax policy in particular, a problem Congress has helped to create. But that work must start somewhere. The debate must begin – and it will begin, if we vote to let it begin. I hope we will begin that debate today.