December 10,2009

Some Taxpayers Get a Tax Increase Under the Reid Bill

Earlier today, I explained to my fellow senators – and my friends in the media – that the Reid billdoes not provide a net tax cut to Americans, contrary to the Democrats’ claims.

I pointed directly to data prepared by the Joint Committee on Taxation to show that a group ofmiddle-income taxpayers will see their taxes go up under the Reid bill. I want to build on thoseremarks. As I stated, there is clearly a group of individuals and families that benefit from thegovernment subsidy for health insurance. But this group is relatively small. Another much largergroup would see their taxes go up.

Let me take a moment to provide you with some statistics that we pulled the JCT data, lookingboth at the “winners” and the “losers” under the bill. According to JCT, out of those individualsand families affected by four major tax provisions under the Reid bill, individuals earning morethan $50,000 and families earning more than $75,000 would see, on average, their taxes go up.Only individuals with incomes below $50,000 and families with incomes below $75,000 would,on average, see some type of tax relief on account of receiving the advance-refundable tax credit.

JCT data indicates that, in 2019, individuals earning less than $50,000 would, on average,receive tax relief equal to $875. Families earning less than $75,000 would, on average, receivetax relief equal to $2,031. This so-called tax relief, however, is in the form of an advancerefundabletax credit that is delivered directly to the insurance company providing healthinsurance coverage. Signed, sealed, and delivered directly to the insurance company. Theindividual or family does not receive the tax credit. But clearly, this group is a winner under theReid bill.

The same JCT data indicates that, in 2019, individuals earning between $50,000 and $200,000would, on average, see a tax increase of $593. Families earning between $75,000 and $200,000would, on average, see a tax increase of $670. What does this mean? This means that the Reidbill does not cut taxes for ALL Americans. To the contrary, the Reid bill breaks PresidentObama’s pledge not to tax individuals making less than $200,000 and families making less than$250,000 a year.

Now, does the tax relief provided to individuals earning less than $50,000 and families less than$75,000 represent a tax cut? Generally no. Based on a JCT report, of the $394 billion thegovernment will spend on the tax credits for health insurance, $288 billion will be “refundable,”meaning individuals and families who have no tax liability will still receive the full benefit.JCT tells us that the remaining $106 billion will go toward reducing actual tax liability.

The Congressional Budget Office (CBO) classifies a benefit provided to tax filers with no taxliability as government spending. This is compared to a tax benefit that actually reduces ataxpayer’s tax liability. This means that the $288 billion of government spending through the taxcode cannot be considered true tax reduction. The Democrats count the $288 billion ingovernment spending when claiming that the Reid bill provides a tax cut. Why? Because if theDemocrats did not count this government spending, they could not hide the fact that the Reid billincreases taxes. Bottom line, the Reid bill does not provide a net tax cut. Instead, the bill raisestaxes. And it raises taxes individuals and families earning less than $250,000. Check the data.No one can dispute it. I yield the floor.