A tug of war is in the making in the nation’s capital as lawmakers from both sides of the aisle stake out their positions on how best to grow the languishing U.S. economy. Even before the president officially outlined his economic growth and jobs creation plan in January, his critics were quick to define the debate in their terms. If you believed their line of rhetoric, the president’s economic proposal would throw open the U.S. Treasury and let the wealthiest Americans ransack the federal coffers. In an effort to score political points, class warfare rhetoric has reared its head to pit the haves against the have-nots.
Don’t let it fool you.
Since Teddy Roosevelt led the charge to create the estate tax in the early 20th century, a philosophical and political divide has deepened in Washington over how much to tax the rich and how much to tax everyone else. One camp would like to turn Uncle Sam into Robin Hood and use the federal tax code to redistribute wealth, as a tool to achieve economic equality. In the last century, the federal income tax code reflected the belief that the best-off Americans could afford to and ought to pay more, hence the existence of progressive tax brackets whereby each additional dollar of income earned is subject to marginal income tax rates.
For three decades after World War II, the tax code arguably was used as a means to redistribute wealth in America. Economic equality may have been the goal, but soon so-called bracket creep was hitting everyday Americans in the wallet. By 1981, the median family of four was paying 11.8 percent of its income in federal income taxes. The top marginal tax rate peaked at 70 percent in the 1980s. President Reagan’s tax cuts cut the top rate to 28 percent. President Clinton’s tax increase pushed it back up to 39.6 percent. Most recently, I steered through Congress the largest tax relief plan enacted in 20 years. The 2001 tax cuts will gradually lower the top rate to 35 percent and create a new 10 percent tax rate to especially lighten the burden of lower wage earners. Few would dispute the idea that the wealthiest Americans ought to pay more in taxes to keep the services administered by the federal government up and running. This has been the guiding principle of the U.S. tax code for the last century.
At the same time, it’s important to balance this progressive standard of taxation with principles of economics. Taxes shrink the economic pie. As the United States struggles to overcome corporate wrongdoing of the 1990s, restore consumer confidence, stabilize a jittery Wall Street, trigger business investment, jump-start the manufacturing sector and reduce unemployment, Washington has an important opportunity to enact sound fiscal policies that create the right environment for sustained economic growth and job creation.
As the 108th Congress begins its work, I look forward to leading an economic growth and jobs package through the Senate. I differ with those who believe the federal government ought to pick winners and losers among taxpaying Americans. Overtaxation is a prescription for economic disaster. We need incentives that encourage folks to work, save and invest. That’s what will get the economy moving again so there’s more for everyone.
America is known as the land of opportunity for a reason. Our Constitutional rights guarantee economic, political and religious freedom. Millions of citizens and newcomers hold sacred the promise of the American Dream. Generations of families have climbed the economic ladder, rung by rung, in the pursuit of happiness and prosperity. Many newcomers risk it all to come to America so that their children and grandchildren might have a better life. That’s why it’s so puzzling to me that some in Washington deride economic success and fixate on policies aimed at 'soaking the rich.' Washington shouldn’t be in the business of taking from one to give to the other. That has the unwelcome effect of making less for everyone. We need public policies in place that promote opportunity for all. Perhaps 'soaking the rich' make some folks feel better. They can take comfort that the top one-half of taxpayers pay 96 percent of individual income taxes. And in the year 2000, the richest one percent of Americans paid 37.4 percent of federal income taxes.
Despite the progressive standards of the federal income tax code, the naysayers will continue their efforts to grab headlines and score political points. Even before the gavel dropped to order in the new Congress, the Senate Minority Leader criticized the president’s plan as the 'wrong plan at the wrong time for the wrong people.' With all due respect, my colleague from South Dakota is dead wrong. The president’s plan takes into account both consumer spending and business investment to boost the economy and create jobs.
As the real work begins in Washington to address the faltering economy, I hope the debate will move past class warfare and concentrate on policies that will improve economic security for all Americans. For the unemployed seeking a good-paying job, for the near-retiree or senior citizen counting on a healthy stock market, and for parents with children working hard to raise a family, build their careers, pay the bills and save for the future. At least we got off to a good start. The Senate’s first order of business in January under new Republican leadership was to extend an additional 13 weeks of unemployment benefits to out-of-work Americans. More than 30,000 jobless Iowans stand to benefit.
In the first few months of the New Year, my committee will hammer out the details of an economic growth plan. It will need to pass my litmus test before getting out of committee. First, it must create the maximum number of jobs and get the most bang for the buck. Two, it must have an immediate effect on consumer spending and business activity. And three, it must have enough bipartisan support to pass a closely divided Senate.
Let’s pull the plug on class warfare and worry more about re-charging the economy’s batteries. Growing the economy creates more for everyone.