The Facts Trample All Over AAN's Bogus Attack On Murray
American Action Network's latest ad attempts to parody Washington Senator Patty Murray's persona as a "mom in tennis shoes" by portraying "Murray" — wearing tennis shoes — walking on the backs of her constituents. AAN claims that Murray is trampling over taxpayers by voting for "the largest tax increase in history" and "promising" to raise taxes on small businesses. However, the "largest tax increase" that AAN cites wasn't even close to being the largest in American history. Likewise, the "huge tax hike on small businesses" AAN claims Murray supports is actually the elimination of the Bush-era tax cuts for the wealthiest Americans, which would have no effect on 97% of the nation's small business owners.
During her 18 years in Washington, Patty Murray voted for the largest tax increase in history, and repeatedly against tax relief. But this November, Murray promises to vote for a huge tax hike on small businesses. Ever heard of helping small businesses, Patty? Tell Senator Murray "ouch!" We can't afford more tax hikes. American Action Network is responsible for the content of this advertising.
Murray Did Not Vote For The "Largest Tax Increase In History"
In a press release issued in conjunction with the release of AAN's ad, the organization cites a Heritage Foundation report which claims that President Clinton's 1993 budget proposal included the "biggest tax increase in American history." However, though the 1993 budget did include a large tax increase, it was less than both the tax increase implemented in 1982 by President Reagan and the largest — as estimated by the U.S. Treasury Department — implemented in 1942.
Clinton Tax Increases, Not The Largest In History, Amounted To 0.83 Percent Of GDP. According to the U.S. Department of Treasury, once the tax provisions associated with President Clinton's budget were fully implemented after 4 years, the tax increases in the Omnibus Budget Reconciliation Act of 1993 amounted to 0.83% of GDP. [USTreas.gov, September 2006]
Tax Increases Associated With Reagan's Tax Equity And Fiscal Responsibility Act Of 1982 Amounted To 1.23 Percent Of GDP. According to the U.S. Department of Treasury, once fully implemented after 4 years, the tax increases associated with President Reagan's Tax Equity and Fiscal Responsibility Act amounted to 1.23% of GDP. [USTreas.gov, September 2006]
Tax Increases Associated With The Revenue Act Of 1942 Accounted For 5.04 Percent Of GDP. According to a report by the U.S. Department of Treasury, the tax increases associated with the Revenue Act of 1942 amounted to 5.04% of GDP. [USTreas.gov, September 2006]
Expiration Of Bush Tax Cuts Would Affect Just 3 Percent Of Small Business Owners
PolitiFact: "Only 3 Percent" Of Taxpayers With Business Income Would Be Affected By The Democratic Proposal. According to the nonpartisan PolitiFact.com:
What impact would raising taxes on the top two income brackets have on small businesses? According to the Joint Committee on Taxation, the same source that Neugebauer cited in his blog post, "In 2011 just under 750,000 taxpayers with net positive business income...will have marginal rates of 36 or 39.6 percent under the president's proposal." That translates into only 3 percent of all taxpayers with positive business income. Yes, you read that right. Only 3 percent of all taxpayers who reported having positive business income will see their taxes go up under the proposed Democratic initiative.
We also consulted experts at the Tax Policy Center, a joint project from the liberal-to-centrist-leaning Brookings Institute and the liberal Urban Institute. James Nunns, a researcher at the Urban Institute, directed us to the center's July 2010 analysis of the distribution of business income by statutory marginal rate for the year 2011. The report assumes that Congress goes through with its plan to only increase taxes on individuals making over $200,000 and couples with over $250,000 in income. It turns out, 774,000 tax filers in the top two brackets --the only ones that will see a tax increase -- will have positive business income. Divide that by the roughly 36 million tax filers who report business income (positive or negative), and you get 2.1 percent. In other words, still assuming that having any amount of income from a small business means that you are actually a business owner (big assumption), only about 2.1 percent of businesses will face the prospect of higher taxes based on the Democratic proposal. [PolitiFact.com, 8/4/10, emphasis added]
PolitiFact: Business Income Reported On Tax Returns Often Comes From Book Royalties, Speaking Fees, And Other Non-Job-Creating Sources. According to the non-partisan PolitiFact.com:
The U.S. Treasury Department found in 2007 that many of the wealthiest tax filers report some type of non-wage income, such as income from a sole proprietorship, a partnership or an S corporation...
Does this mean that all those wealthy taxpayers were small business owners? Probably not. This kind of income could be reported from anyone who earned money from a source other than a regular job, such as consulting or public speaking. It could also be reported by those who make most of their income from partnerships, such as law firms and medical practices. And it could include investors who have little involvement in the day-to-day operations of a company. [PolitiFact.com, 7/25/10, emphasis added]
PolitiFact: 2/3 Of Tax Filers In Top Two Brackets Report Business Income As Less Than 50% Of Their Income. According to the non-partisan PolitiFact.com:
It's impossible to know how many of these high earners are what most people think of as small business owners. One indication, however, might be if these wealthy taxpayers reported that most of their income was from this business-type income. The nonpartisan Tax Policy Center analyzed IRS data in March 2009, looking to see how many wealthy tax filers could say that half of their income or more came from business income. The center found that, among the wealthiest filers -- the top 1 percent -- only 25 percent earned more than half their income from business-type income. The percentages for non-wage income were even smaller among taxpayers earning less. (Editor's note: After we initially published this item, the Tax Policy Center released a new analysis looking at business income by tax bracket. They found that in the top bracket, only 32.5 percent earned more than half their income that way.) [PolitiFact.com, 7/25/10, emphasis added, parentheses original]
Murray And Leading Democrats Favor Extending Tax Cuts For 97% Of Americans
Murray Favors Renewing Bush Tax Cuts For 98% Of Washington Families. According to the Bellingham Herald: "Murray wants to renew the tax cuts, but only for the middle class, defined as single taxpayers making no more than $200,000 and couples with a combined income of no more than $250,000. Using figures supplied by the Washington state Department of Revenue, Murray's staff estimated that under the Democratic plan 98 percent of the state's taxpayers would continue paying the lower rates." [Bellingham Herald, 9/27/10]
PolitiFact: Dems Consistently Say Only Tax Cuts For Wealthiest Will Be Allowed To Expire. According to the non-partisan PolitiFact.com, in their analysis of an allegation from Rep. Mike Pence that Democrats want all tax brackets to rise:
Do Democrats want every tax bracket to rise, as Pence suggests? In a word, no.
For many months, Democratic officials have consistently said that they intend to let only the tax cuts for the wealthiest individuals lapse. The cutoff they usually suggest is $200,000 for individuals and $250,000 for married couples filing jointly. President Obama campaigned on just such a plan, and we've logged those promises into our Obameter campaign promises database.
Pence is right that every tax bracket will go up if the law is not extended. Still, we think the claim that Democrats don't want to extend the law is inaccurate. While the legislative drafting is still in process, the Democratic majority in Congress has made clear that it plans to extend tax cuts for all but the top couple percentage points of the income distribution. So it's highly misleading for him to say that Democrats actually want to see all the bill's cuts expire. Indeed, Pence's comment verges on a scare tactic.
[PolitiFact.com, 7/22/10, emphasis original]
Reuters: "Two To Three Percent Of Americans" Are Affected By Democrats' Proposals. According to Reuters: "Lawmakers are mulling the renewal of tax cuts enacted in 2001 and 2003 under former president George W. Bush that expire at the end of this year. President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000. About two to three percent of Americans fit into the upper income categories." [Reuters, 7/21/10]
President Obama's FY2011 Budget Calls For Extending Bush Tax Cuts For Families Making Less Than $250,000 Per Year. As Market Watch reported in February: "Facing a gaping deficit but aiming to spur job creation at the same time, President Barack Obama's fiscal year 2011 budget would hit top earners, oil companies and others while giving tax breaks to small businesses to help them hire new workers... Obama wants tax breaks proposed by President George W. Bush to expire this year. His budget would eliminate tax breaks on those making more than $250,000 a year, a move almost certain to be opposed by Republicans and perhaps some Democrats as the economy crawls out of the recession. 'We extend middle-class tax cuts in this budget,' Obama said Monday at the White House, but 'we will not continue costly tax cuts for oil companies, investment fund managers, and those making over $250,000 a year. We just can't afford it.'" [Market Watch, 2/1/10]
Speaker Pelosi: High-End Tax Cuts Should End. According to The Hill: "House Speaker Nancy Pelosi (D-Calif.) on Thursday rejected extending tax cuts for the wealthiest tax bracket that are set to expire at the end of the year. Pelosi took off the table a short-term extension of those cuts floated by some lawmakers in her own party. 'No,' the speaker said at her weekly press conference when asked if the cuts for the highest bracket should be extended. 'Our position has been that we support middle-class tax cuts... I believe the high-end tax cuts did not create any jobs, increased the deficit and should be repealed,' she said." [The Hill, 7/22/10, emphasis added]
Treasury Secretary Geithner: We Will Extend Middle- And Lower-Income Provisions Of Bush Tax Cuts. According to the Wall Street Journal: "The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases. Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year. 'We believe it is appropriate to let those tax cuts that go to the most fortunate expire,' Mr. Geithner said at a breakfast with reporters." [Wall Street Journal, 7/23/10, emphasis added]
New York Times: Obama Plan Leaves Much Of The Bush Tax Cuts In Place. The New York Times prepared an infographic showing where President Obama seeks to change Bush-era tax law, and where he intends to leave it unchanged:
[New York Times, 7/25/10]
Actually, Republicans "Set The Stage" For Tax Increase By Writing Expiration Date Into Bush Tax Cuts To Hide The True Cost Of The Cuts
Time: Congress Wrote Tax Law To Expire After 2010 Because It Made Cuts Appear Cheaper. According to Time:
Topping the list of odd features is the "sunset" provision that repeals the entire bill at the end of 2010. Budget rules require Congress to include a sunset clause in all major tax legislation, but this sunset arrives a year early--after 10 years instead of the 11 years covered by the current budget resolution. That year was shaved off to keep the total cost of the bill under $1.35 trillion. By repealing the legislation in the 10th year, Congress saved billions of dollars. Without the repeal and a few other tricks, the cost of the full 11-year plan would balloon to more than $1.8 trillion by the end of 2011, far exceeding anything the Democrats would vote for. And the cost in the second decade would reach as much as $4 trillion. Even some conservatives on Capitol Hill are dismayed by the apparent dishonesty of the early sunset. After both parties agreed to a smaller tax cut, the conference committee pulled a fast one.
[Time, 6/3/01, emphasis added]
American Enterprise Institute: Reconciliation "Ploy" To Pass Bush Tax Cuts Means They Expire After 10 Years. According to Norman Ornstein, resident scholar at AEI:
It is worth repeating why we are in this particular car heading toward the cliff. When the Bush tax cuts were on the agenda at the very beginning of his presidency, Republicans in Congress and the White House made a tactical choice to avoid giving Senate Democrats the leverage that a 60-vote hurdle can provide by employing reconciliation (yes, the same tool that those who applied it then condemned roundly when it was used for health care reform this year). It was tricky to use reconciliation for tax cuts, which increased deficits when reconciliation was specifically supposed to be used for revenue-neutral or deficit-reducing programs. But the decision was made to use it for this purpose--but not to violate the proviso that the plan would increase deficits outside the budget window of 10 years.
That meant a ploy of declaring that all the tax cuts would expire entirely after 10 years, including the absurd-on-its-face provision that estate taxes would gradually decline to zero in 2010--and then be fully restored in 2011. From the day after the tax cuts were signed into law, Republicans were campaigning to extend them, in effect admitting that the policy was built around a "never mind" ruse. To be fair, there were plenty of ruses in the health care reform reconciliation, so it is not as if one party is clean--this is legislative politics. But the charges now emanating from Republicans that the Democrats are going to be responsible for a huge tax hike is, shall we say, bemusing.
[AEI.org, 7/21/10, emphasis added]
Ezra Klein: Reconciliation Maneuver Meant "Twisting A Budget Process Meant To Reduce The Deficit." According to the Washington Post's Ezra Klein:
In order to maximize the size of the cuts, Republicans had to minimize the influence of minority Democrats on the package. So they chose to run the bill through the reconciliation process. But that posed some challenges. Budget reconciliation had never been used to increase the deficit. In fact, it specifically existed to decrease the deficit. That's why one of its rules was that you couldn't use it to increase the deficit outside the budget window. Republicans realized they could take that very literally: The budget window was 10 years. So if the tax cuts expired after 10 years, they wouldn't increase the deficit outside the budget window. They'd also have the added benefit of appearing less costly in the Congressional Budget Office's estimates, as the CBO duly scored them as expiring after 10 years, which kept the long-range budget picture from exploding.
But the plan was never to have the tax cuts expire. Instead, the idea was that people would get used to the new tax rates, and no future Congress would want to allow a big tax increase, so when the time came, either Republicans in office would extend the cuts or Republicans in the minority would hammer Democrats until they extended them. And that's where we are now: Democrats control the government, so Republicans are screaming about tax increases as a way to get Democrats to extend tax cuts.
It's really hard to know where to start with this one. It's not a tax increase passed into law by Democrats. It's a reversion to old tax rates passed into law by Republicans. It's not how law is supposed to work. It's the result of twisting a budget process meant to reduce the deficit so you could use it to massively increase the deficit.
[Washington Post, 7/19/10, emphasis added]