June 26,2008

Grassley: Obama, Surrogates Want to Tax Americans Who Save, Invest; Describe Their Effort as “Leisure”

Floor Statement of Senator Chuck Grassley
American “Leisure Class” Is Not
30 Million Families and Individuals
Delivered Thursday, June 26, 2008

Last week I spoke about the tax extenders bill. I also emphad the importance of passing an AMTpatch. Passing these measures is not only good policy, but it’s good government. We shouldn’t waituntil the end of the year to enact these tax bills.

But I want to take a moment to talk about other tax matters that this Congress must address veryvery soon. I’m referring to the bipartisan tax relief that this Congress passed in 2001 and 2003. Notthe BUSH TAX CUTS, as my friends on the other side of aisle would like our friends in the mediato call them. But BIPARTISAN TAX RELIEF.

I’ve actually noticed that my Democratic colleagues like the reference, “TAX RELIEF.” They haveused the reference on the campaign trail of their Presidential candidate. How ironic!! MyDemocratic friends label the BIPARTISAN TAX RELIEF the BUSH TAX CUTS, yet they call theirown tax plan TAX RELIEF. Especially when this so-called “Democratic tax relief” is merely anextension of the 2001 reductions in tax rates for certain taxpayers. Well, I’m not surprised. Afterall, it is the political season.

But I am angered. I am dismayed. I am disappointed that the poll-driven use of the terms BUSHTAX CUTS flow so easily off of the tongues of the Democratic leaders. And the media folks can’tget enough, so they continue to repeat the BUSH TAX CUTS over and over and over again. Butyou know what really disappoints me. The fact that the Democratic leadership – and theirPresidential candidate – are telling Americans who make less than $250,000 a year that their taxeswill not go up if they vote for the Democrats in November. This is intellectually dishonest and thefolks in the media should call them on this. Why?! Because my friends on the other side willincrease capital gains rates. They will also increase the tax rate on dividend income. I told this bodyand my friends in the media that Americans earning less than $250,000 HAVE capital gains eachyear. They ALSO claim dividend income. Here, I’ll remind my colleagues and the media that over24 million tax returns last year claimed dividend income. You can bet your bottom dollar that notall of them were making $250,000 or more. Also, over 9 million Americans claimed a capital gain.Here’s a chart illustrating that.

You would be correct if you guessed that not all of these Americans were making more than$250,000. I’ll bet some of them were low-income taxpayers taking advantage of a lower capitalgains rate that is now ZERO. That’s right. ZERO. Speaking of ZERO. The junior Senator fromIllinois has proposed to reduce the capital gains rate for start-up companies from 7.5% -- which isthe current rate – to zero.

I like his thinking here. But the distinguished Senator will increase the capital rates in other areasby at least 33%. That strikes me as counter-productive. That’s re-arranging the deck chairs. It’ssimply squeezing the balloon. It’s hot air. And it’s certainly not change you can believe in.Let me get back to the tax increase that Americans making less than $250,000 will see. I want totake a moment to talk about an interview conducted by Wolf Blitzer of CNN.

On his program Sunday, June 15th, Mr. Blitzer delved into the capital gains and dividend incomeissue. He asked his guest – the Chairman of the Democratic Congressional Campaign Committee(“DCCC”) – whether Senator Obama’s plan to tax dividends and capital gains would increase taxesfor Americans of every background. I’m glad Mr. Blitzer asked the question.

The most interesting point to this story is the response. The response was that Senator Obama willincrease the capital gains rates. Let me repeat that. If the distinguished Senator from Illinois iselected President, he will raise the rates on capital gains. Why?!? Apparently the junior Senatorfrom Illinois thinks investment income is quote, unquote LEISURE INCOME. He thinks that“leisure income” should NOT get the same “breaks” as income earned through labor. I would liketo submit for the record an excerpt of the transcript from the June 15 show on CNN so folks in themedia can see this. The excerpt is the full interview of the DCCC Chairman. I’ve highlighted theportion of the interview that I would like folks to pay attention to.

To quote the DCCC Chairman, “[Senator] Obama has said that you shouldn’t give a break toLEISURE over LABOR.” The DCCC Chairman expounded upon this by saying, quote, “In otherwords, people who are making money simply by investing it, rather than through their work in thelabor force, shouldn’t be getting a break over the people who are going to work every day.” TheDCCC Chairman thinks “that makes sense.”

So the Democratic Leadership – and their Presidential candidate – believe that current tax policyfavors “LEISURE over LABOR.” And that they consider that all investment income is LEISUREincome. So what they are saying is that anyone who saves and invests is a person of “leisure.”Maybe my Democratic friends have been reading the writings of Thorstein Veblen. ProfessorVeblen authored the Theory of the Leisure Class. The Theory of the Leisure Class took a satiriclook at American society and economics. The Theory of the Leisure Class characterized this“leisure class” as individuals who only benefited society in a minor or peripheral way because theydid not engage in labor-intensive jobs. Instead, the “leisure class” often prevailed over “laborincome” classes by making profits without producing goods and services.

Professor Veblen also argued that certain labor-income individuals began to mimic or emulate the“leisure class” to achieve higher status. So is the distinguished DCCC Chairman – or hisPresidential candidate – suggesting that all people who invest money are part of a “leisure class”?!A “leisure class” that is making money rather than producing goods and services?!? And as a result,they should not get any “breaks” over those who are laboring for their money?! Do they want todiscourage those who labor and produce goods and services from saving and investing?! Do theywant to discourage laborers from mimicking or emulating those profiting off of investments?! Theyseem to think that all folks who invest are higher-income people.

As an aside, if the DCCC Chairman were correct, we would not have at least 5 million Americansusing the low-income Saver’s Credit. I have a chart here. It shows the number of low-incometaxpayers on a State-by-State basis claiming the Saver’s Credit. This data is from 2003. In Iowa– for instance – there were almost 96,000 low-income families and individuals using the Saver’sCredit.

Chairman Baucus and I designed this policy in the 2001 BIPARTISAN TAX RELIEF legislation.Now, it’s permanent law. About 5.5 million low-income savers – not people of LEISURE – usedthe credit. I’d tell the DCCC Chairman and the junior Senator from Illinois that these low-incomesavers are not figments of our imagination. They are real people!! I don’t think they considerthemselves members of the “leisure class.”

I would encourage everyone to study this transcript. You’ll see that the distinguished Senator fromIllinois – according to one of his surrogates – wants to tax investments because he believes thatmaking investment income is LEISURE. He believes that hard-working Americans shouldn’t geta “break” on this type of income. He believes that taxpayers don’t work hard enough to earninvestment income. And that those who do work hard, shouldn’t be given incentives to invest.

I would like my friends on the other side to know that investments begin with a taxpayer’s hardearnedincome. So in order to invest it, they have to work hard to earn it. Also, I’d like myDemocratic friends – who agree with the DCCC Chairman – to ask any taxpayer who saves andinvests their money whether they think investing is easy. It’s hard work. You have to educateyourself and make prudent decisions. Ask them if investing their own money is “leisure.” The otherside thinks it’s like sitting on the beach.

It’s almost like the other side is reviving the “two Americas” that former Democratic Presidentialcandidate Senator John Edwards was all about. But here, my friends on the other side are sayingthat higher-income people – or folks in the “leisure” class, according to Professor Veblen – are theonly taxpayers who invest. They contend that these folks are BAD. That this “leisure class” shouldno longer have incentives to invest.

At the same time, my friends are taking away incentives for hard-working Americans to save andinvest. The implication is that if you save and invest you are BAD and if you do not save and investyou are GOOD. But this is going too far. In my opinion, it’s off the reservation. Separatingworkers who save and invest from workers who do not save and invest is new territory for theDemocratic party and should not go unchecked. The junior senator from Illinois eloquently statesthat we need to move past division and we as Americans should come together. My friend talksabout his disdain for old-style politics and emphas change. But it is interesting to hear thesurrogates of Senator Obama reaching back to the class-warfare discussions that took place in the19th Century. This is NOT CHANGE YOU CAN BELIEVE IN.

Middle- and low-income investors should be appalled. Appalled because their government believesthat their pursuit of the American dream is all LEISURE. And that the government wants toincrease their taxes. Yes, on Americans who make less than $250,000.

So following the question of Mr. Blitzer, I’d like to ask my Democratic friends whether Americansmaking less than $250,000 will see a tax increase under a Democratic Administration.I would like to know whether they agree with Senator Obama and the Democratic Leadership andbelieve that investment income is LEISURE income.

My Democratic friends may respond that the junior Senator from Illinois wants to give middleincomefolks a tax cut. But this middle-class tax cut is fiction for those middle-income taxpayerswho save and invest. I challenge my media friends to tell Americans what is really going on here.