Hearing of the Senate Budget Committee - The President's Fiscal Year 2014 Budget and Revenue Proposal
Hearing
"This hearing will now come to order.
"Before we begin, I would like to take a moment to express my dismay and heartache at the tragedy that took place at the Boston Marathon yesterday. Secretary Lew, I know that you have a strong connection to Boston. I join with my colleagues here, and all Americans, in saying that my thoughts are with the athletes, spectators, families, and all those who have been impacted from around the world. And I echo President Obama, who said last night that all Americans stand with the people of Boston--and that we will bring those responsible to justice.
I'd like to thank all of my colleagues, and in particular ranking member Senator Sessions, for joining me today. And thank you to members of the public who are watching, whether in person or from home.
"We are here to continue our discussion of the President's fiscal year 2014 budget proposal, and particularly, its approach to reducing the deficit through a combination of spending cuts and new revenue from those who can most afford it.
"Secretary Lew, it is nice to welcome you back to this Committee and in your new role as Security of the Treasury. Congratulations. We thank you for appearing before us today, and for all of your important work to strengthen our economy and our middle class.
"As we all know, yesterday was Tax Day. Americans across the country sat down at the kitchen table, or at a computer, and filled out lots of complicated forms. It's a common experience, but unfortunately, one that some workers and families experience very differently than others.
"This year, for example, it will be very possible for a hedge fund manager to pay a lower tax rate on his income than a soldier, police officer or a teacher.
"Taxpayers will subsidize millionaires more, when they purchase a second home, or a yacht, than they will middle class families who are purchasing their first home. American families will continue to subsidize billions of dollars in tax incentives for companies reporting record?breaking profits.
"And the complicated forms I mentioned a lot of that complication is due to tax expenditures, which a member of President George W. Bush's Council of Economic Advisors called "spending in disguise.'
"The majority of these tax expenditures, about 70 percent of them, are structured so they are more valuable as your income increases. In 2012 middle class families received an average benefit from tax expenditures of about $3,500. But the top 1 percent of income earners received an average benefit of nearly $250,000. In other words: the less you needed, the more you got.
"Tax expenditures are estimated to cost $1.3 trillion this year. We have heard testimony in this Committee that too many of those expenditures aren't doing much to support our economy, although they have helped to drive the effective tax rates of the wealthiest Americans to historic lows.
"At a time when we are looking for savings everywhere to address our debt and deficit, finding ways to both make our tax code fairer and help reduce our deficit just makes sense. And addressing tax earmarks for special interests, like tax subsidies for the fossil fuel industry and the special tax rates applicable to hedge fund managers' income, should be at the top of our list. We should also address the tens of billions of dollars lost each year to offshore tax abuse. And the nearly $400 billion the IRS has told us we lose each year to the tax gap.
"These are the kinds of goals a bipartisan budget deal could accomplish, which is one of the reasons it's so important that we take advantage of the opportunity we have right now.
"The Senate has passed our budget, the House passed their budget, and the President weighed in with a bipartisan path forward, and now we need to do everything we can to get to a balanced and fair agreement. And an essential part of any agreement will be asking the wealthiest Americans and biggest corporations to pay their fair share.
"That is why I'm pleased that the President's proposal maintains the key principle in the Senate Budget, which is supported by bipartisan groups and the vast majority of the American people: we need to tackle our deficits and debt in a balanced way, with a mix of spending cuts and new revenue from those who can afford it most.
"If the Senate Budget was enacted, 64 percent of total deficit reduction since the original Simpson-Bowles report would come from spending cuts, 14 percent would come from rate increases on the wealthiest, and 22 percent would come from new revenue raised by closing loopholes and cutting wasteful spending in the tax code that benefit the wealthiest Americans and biggest corporations.
"The ratios under the President's compromise proposal would be slightly different, but the fact that it includes a mix of spending cuts and new revenue reflects the principles of balance and fairness that the vast majority of Americans support.
"It's disappointing that given the clear need for a fairness in our tax code and the need for a balanced approach to deficit reduction, the budget passed in the House last month represents the opposite values and principles. The House Budget doubles down on protecting tax cuts for the wealthiest Americans.
"According to the Center on Budget and Policy Priorities, to avoid increasing the deficit while achieving its tax reform goals, the House Budget would provide filers with incomes of $1 million or more an average net tax cut of $245,000, while families with children who make less than $200,000 would see their taxes increase by $3,000 on average.
"The House Budget pursues an extreme, cuts-only approach, slashing investments in education, infrastructure, and research, investments that help ensure our country can create good middle class jobs in the future. All in all, the House Budget is an extreme plan that makes it harder for the middle class, and those aiming to reach the middle class, to get ahead.
"It just won't work for American families or for our economy, and it certainly doesn't suggest the willingness to compromise, or work across the aisle, that we'll need to see from Republicans over the next few months.
"We've reached a unique point in the last two years of discussions about our country's economic and fiscal future, one that Democrats and Republicans have both pursued. We have the opportunity to go to conference through regular order, debate our very different approaches, and hopefully come to a fair, bipartisan deal.
"This process, which I would think my Republican colleagues would want to begin as soon as possible, will require tough choices on both sides. Democrats have consistently shown we are willing to do so. And now it's on Republicans to join us at the table ready to compromise.
"Secretary Lew, as you know from your history of bipartisan budget deals, including the year-end deal to avert the fiscal cliff, revenue will have to be a focal point of our debate and any solution.
"Republican leaders, who are seemingly rejecting any effort at compromise, will need to put families and our economy above partisan ideology. This should be doable, especially because some leading voices in the Republican Party have expressed a willingness to look at new revenue.
"For example, Speaker Boehner himself has proposed raising $800 billion in deficit reduction by closing special interest loopholes and deductions, likely including many of the ones I discussed a few minutes ago. In the House Budget, Chairman Ryan's tax plan implicitly assumes he can find $5.7 trillion in savings from our tax code. He of course puts every dollar of these savings to rate reduction and puts nothing toward addressing our debt and deficit.
"But the majority in the Senate has made clear that when it comes to eliminating spending in the tax code, or moving forward with tax reform, we must also identify savings to address our debt and deficit. Doing so would be consistent with the approach supported by the vast majority of Americans and with bipartisan recommendations, and would help us reach the fair, comprehensive agreement American families and businesses deserve.
"I hope our hearing today can be a productive part of this conversation. I'd like to thank all of you again for being here. Secretary Lew, I look forward to hearing more from you about the President's proposal, and why new revenue from the wealthiest must be part of any fair and responsible budget plan.
"I'll now turn it over to Senator Sessions."
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