At a hearing held by the Senate Finance Committee on Wednesday to discuss the committee’s ongoing efforts to reform the tax code, Sen. Max Baucus, D-Mont., chairman of the panel, said the lower tax rates for the nation’s wealthiest workers must expire, “rather than making major cuts to Social Security or Medicare.”
As the nation faces “a struggling economy and record deficits, we need to do something to tackle these problems, and do so in a balanced way that creates jobs in the process,” Baucus said at the hearing, Tax Reform Options: Marginal Rates on High-Income Taxpayers, Capital Gains and Dividends. But “putting the full load of deficit reduction on seniors, veterans and middle class families, for example, when the wealthiest can afford to pay a little more, simply doesn’t make sense.”
In these tough economic times, Baucus said, it makes sense to ask “some of the wealthiest in our society to contribute,” rather than to “make real changes to programs seniors depend on like Social Security and Medicare,” or “cut programs or raise taxes on veterans, servicemen and women and middle class families.”
But Sen. Orrin Hatch, R-Utah, argued at the hearing that the “American people want Washington to get its spending under control, not to tax them more.”
Those who promote tax increases, he continued, “know that they simply cannot raise enough money to pay for their spending priorities only by taxing individuals and small businesses in the top two brackets.”
Baucus went on to state some troubling statistics. Since 2007, he said, Americans’ real median household income has fallen by 6.4%. “It’s the lowest income we’ve seen since 1997,” he said.
Over the past three decades, Baucus said, the incomes of the richest 1% of Americans have risen much more rapidly than the other 99% of Americans. “That gap continues to widen both before and after taxes,” he said. “During that time period, the after-tax incomes of the top fifth of taxpayers grew nearly eight times faster than those of the bottom fifth.”
Baucus cited legislation he introduced last year to allow the current top two tax rates to expire for those with incomes above $200,000 and married couples with incomes above $250,000. This proposal, he said, “would mean that the top income tax rates of 33% and 35% would return to 36 and 39.6%, respectively.”