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Thune: Democrats’ Proposed Tax Hikes Would Hit Middle-Class Americans

“Rather than counterproductively hiking taxes to punish the successful or pay for an ever-increasing array of government programs, we should be focusing on creating an economy that gives every single American the chance for success.”

May 19, 2021

 WASHINGTON — U.S. Sen. John Thune (R-S.D.) today discussed the array of “free stuff” President Biden unveiled in his American Families Plan, from free community college to free preschool to a wide range of government subsidies. Thune noted that despite the president’s advertisement, someone has to pay for these “free” programs. The Democrats’ proposed tax hikes would not only decrease economic opportunity for the American people, but they could also lead to increased consumer costs for goods and services, limited wage growth, and fewer jobs, all of which would negatively affect middle-class Americans.

Thune’s remarks below (as prepared for delivery):

“Mr. President, a couple of weeks ago, President Biden unveiled his so-called American Families Plan – which one might summarize as ‘free stuff.’

“Free preschool.  Free community college.  Lots of government subsidies.

“It sounds great, Mr. President.

“But the problem, of course, is that none of that is really free. 

“The government may not send individuals a bill for any of those items, but that doesn’t mean that they don’t have to be paid for by someone.

“And so President Biden has proposed a raft of tax hikes to at least partially pay for his proposals.

“A hike in the capital gains tax.

“An additional new death tax, to add to the one we already have.

“A hike in the top income tax rate.

“Now, President Biden is selling these tax increases as tax hikes on wealthy Americans – whom Democrats view as a bottomless source of funding for new government programs.

“But there are two problems with that.

“In the first place, there’s no question that some middle-class Americans will be hit by President Biden’s new death tax.

“While he provides an exemption for gains of $1 million or less, the truth is that it’s possible to die with an estate whose value has increased by more than $1 million over the course of your life while never breaking out of the middle class.

“We’re not talking about individuals with a yearly income of $1 million.

“We’re talking about the lifetime gains on assets an individual has at his or her death.

“And then of course there’s a good bet that many of those individuals’ heirs – the ones whose inheritance will be diminished by this tax – are thoroughly middle class.

“Your parents might die with an estate that has gained $1 million-plus in value, but you yourself might be earning just $40,000 or $50,000 a year.

“And all this is especially true in the case of family farms and businesses.

“Farming is a cash-poor business.

“Farmers might have land that has appreciated over decades by substantially more than $1 million, even though the farmers themselves may at times struggle even to break even.

“Levying President Biden’s new tax at death could permanently destroy a family farm or business.

“Now, President Biden has suggested that he will carve out an exemption for family farms and businesses if the next generation commits to running them, but it remains to be seen what that exemption looks like, and whether it truly protects family farms.

“And he has not pledged to carve out an exemption for middle-class Americans whose inheritance will be hit by this new tax.

“Then there’s the fact that President Biden’s new income tax hike will also hit small businesses – many of whose owners pour a substantial part of their profits back into the business instead of raking in a large salary.

“But even leaving all that aside and supposing that President Biden’s new taxes will only be levied on wealthy Americans, there’s still a problem.

“Sure, if you’re in the middle class the government might not be sending you a tax bill.

“But that doesn’t mean that you won’t be negatively affected by these taxes.

“Democrats operate under the entirely false assumption that you can tax higher earners without consequences.

“That you can tax investment without consequences.

“That you can tax businesses without consequences. 

“In Democrats’ world, you can heavily tax something but no one will behave any differently.

“No one will reduce his or her investments.

“No business will flee high tax rates by moving overseas.

“No business will pass on higher tax bills to consumers in the form of higher prices – at a time when inflation is already on the rise.   

“But of course, in the real world people do respond to tax hikes.

“Businesses raise prices on their products.

“They limit wage growth and create fewer jobs. 

“In fact, studies suggest that 50 to 70 percent or more of the burden of corporate tax hikes is borne by workers in the form of lower wages and fewer job opportunities.

“Corporations also move overseas.

“Before Republicans lowered the corporate tax rate to make American businesses more competitive in the global economy, a significant number of American businesses were moving their headquarters overseas.

“Small businesses hit with big tax hikes cut jobs or limit their creation of new ones.

“They raise prices.

“They decide not to expand.

“Investors hit with major tax hikes decide not to invest as much – and since investment fuels jobs and innovation, both of those suffer as a result.

“And in every one of these cases, ordinary Americans are affected.

“Not just the rich.

“Not just millionaires.

“Ordinary, middle-class Americans.

“After all, most Americans, if they’re not self-employed or working for government, are employed by businesses.

“And if the business they work for isn’t doing well, their prospects are going to be significantly affected.

“If businesses hold down wages to deal with the impact of tax hikes, for example, ordinary Americans’ long-term earning potential will be diminished.

“These effects may not sound as concrete as being handed a tax bill.

“But they have just as real of an impact on Americans’ income and Americans’ lives.

“Mr. President, Democrats talk a lot about making the rich pay their fair share.

“We hear it constantly.

“From the way Democrats talk, you’d think rich people rarely pay any taxes.

“But that’s not even close to being the case.

“The fact of the matter is that our tax system is highly progressive.

“And the tax relief Republicans passed three years ago actually made it even more progressive.

“In 2018, individuals making over $1 million paid twice as much per dollar in taxes as individuals making between $75,000 and $100,000, and more than 10 times as much per dollar as individuals making between $20,000 and $30,000.

“It would be interesting to know what exactly Democrats consider to be a fair share.

“When financially successful Americans are paying half of their income in taxes?  75 percent of their income?  95 percent of their income?

“And when they are paying that much, what happens then?

“Well, I’ve already indicated what happens.

“Investment declines, wages stagnate, prices go up, job creation goes down, and ordinary Americans start feeling the consequences.

“But unfortunately Democrats are so used to viewing the wealthy as an inexhaustible source of money that they refuse to admit that hiking taxes on wealthier Americans will have consequences.

“And it goes even further than that.

“It’s not just that Democrats view wealthier Americans as an inexhaustible source of money, it’s that Democrats are well on their way to a kind of Marxist-style class warfare that demonizes success.

“And nowhere is that more evident than in the fact that Democrats are proposing a capital gains hike on the wealthy that will fail to maximize government revenue.

“That’s right.

“Democrats could actually get more revenue to pay for their social programs if they raised the capital gains tax less.

“Democrats are proposing a capital gains increase so substantial that it will actually return less government revenue – thanks to the resulting decrease in investment – than a lower rate hike would return.

“At the level of tax hike Democrats have proposed, the tax hike becomes less about raising government revenue and more about punishing more prosperous Americans for being successful.

“Which is a pretty un-American way of looking at things.

“Democrats like to portray the wealthy as a bunch of billionaires sitting on inherited piles of money and not doing a day’s work, but the truth is that a lot of prosperous people in this country are (a) not billionaires and (b) only wealthy because they worked hard, saved and made prudent financial decisions, and took advantage of any opportunity they were given.

“Focusing on punishing successful Americans for being successful – instead of focusing on how we can create opportunity and remove obstacles to success for everyone else – is counterproductive, because it has a negative effect on our economy.

“It fosters an atmosphere of envy instead of possibility; hostility instead of determination.

“Rather than focusing on how we can lift everybody up, the focus becomes on how we can drag part of society down.

“Mr. President, rather than counterproductively hiking taxes to punish the successful or pay for an ever-increasing array of government programs, we should be focusing on creating an economy that gives every single American the chance for success.

“That reduces the need for government programs by increasing economic opportunity for all Americans.  

“Unfortunately for the American people, Democrats’ tax hikes will have the opposite effect.

“Mr. President, I yield the floor.”