Sen. Bond's Fifteen Minutes of Falsehoods On The Senate Floor

September 22, 2010 4:08 pm ET

Sen. Kit Bond (R-MO) took to the Senate floor this morning to criticize "job-killing tax increases," attack the stimulus and health care bills, and make misleading claims about the impact of the Bush tax cuts. Bond falsely claimed that Democrats were trying to institute the "largest tax increase in history" and would "raise taxes on seniors," "small businesses," and "our family farmers." In reality, Bond's claims are wildly exaggerated. President Obama and congressional Democrats have proposed extending the Bush tax cuts to 97% of Americans -- the vast majority of farmers, seniors, and small business owners.

CLAIM: "President Obama Is Trying To Convince Our Nation That The Largest Tax Increase In History Won't Hurt Them"

Sen. Kit Bond:

Instead of listening to the American people and even those members of his own party, President Obama is trying to convince our nation that the largest tax increase in history won't hurt them. [Bond floor speech, 9/22/10]

FACT: Eliminating Any Or All Of The Bush Tax Cuts Would Not Lead To "The Largest Tax Increase In History"

PolitiFact: Neither The Expiration Of All The Bush Tax Cuts Nor Those For High Earners Would "The Largest" Tax Hike In History. According to the non-partisan PolitiFact.com, in an analysis of similar claims made by Sarah Palin on Fox News Sunday:

There are no formal congressional proposals yet to keep the Bush tax cuts in place, so we don't have precise estimates from official sources like the nonpartisan Congressional Budget Office. Still, there's a good bit of consensus on what the tax increases would look like, both if lower rates expired only for high earners and also for all incomes. Wallace's number of $678 billion over 10 years is reasonable for high earners, and Palin's estimate of $3.8 trillion over 10 years is within a reasonable range, if you're talking about all taxpayers. (We've also seen estimates of $3.7 trillion and $3.2 trillion.)

We ran the number with some help from tax experts and found that if only the tax cuts for high earners expire, the resulting tax increases would not be the largest in history. Tax increases for high earners would be roughly 0.4 percent of GDP in the first year they take effect. That's significantly less than a 1982 tax increase signed into law by President Ronald Reagan. The tax increase resulting from the Tax Equity and Fiscal Responsibility Act of 1982 came to 1.23 percent of GDP when the tax changes were fully implemented, four years after the law's passage.

If you let all the Bush tax cuts expire, the tax increase would come to just above 2.2 percent of GDP. Clearly, that would be larger than the Reagan tax hike of 1982. But it would be smaller than one of the tax increases passed during World War II -- the Revenue Act of 1942, which is estimated at 5.04 percent of GDP."

[PolitiFact.com, 8/1/10, emphasis added]

FACT: President Obama's Proposal For Dealing With The Expiring Tax Cuts Would Only Raise Taxes On 3% Of Americans

PolitiFact: "Democratic Officials Have Consistently Said" They Plan To Extend The Vast Majority Of The Bush Tax Cuts. According to the non-partisan PolitiFact.com, in their analysis of a similar allegation from Rep. Mike Pence (R-IN) on July 20:

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." [Reuters7/21/10]

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]

CLAIM: The "Government Takeover" Of Health Care Will "Cost Even More"

Sen. Kit Bond:

Whether it's justifying their failed trillion dollar stimulus bill or a government takeover of health care which will cost even more, and now their historic tax increases, the administration is guilty of using some very fuzzy math. [Bond floor speech, 9/22/10]

FACT: There Was No "Government Takeover" Of Health Care

PolitiFact: "Obama's Plan Leaves In Place The Private Health Care System." Analyzing Sen. Tom Coburn's claim that President Obama's health care reform plan amounted to a government takeover of health care, PolitiFact.com wrote:

[H]e's wrong that Obama's plan offers government-run health care.

In fact, Obama's plan leaves in place the private health care system, but seeks to expand it to the uninsured. It increases eligibility for the poor and children to enroll in initiatives like Medicaid and the State Children's Health Insurance Program, and creates pools for individuals to buy their own cheaper insurance. It also outlines strategies to rein in costs for everyone, such as electronic medical records and preventive care.

[...]

That may be Sen. Coburn's opinion on what could happen, but it's definitely not part of Obama's plan. And Coburn was very specific in saying that "under the Obama plan, all the health care in this country is eventually going to be run by the government." That gives the incorrect impression that Obama is promoting a government-run health care system. He's not. We rate Coburn's statement False.

[PolitiFact.com, 3/4/10,emphasis added]

FACT: Health Care Reform Reduces The Deficit

CBO: Health Care Reform Package Would Reduce The Deficit By $138 Billion By 2019. According to the Congressional Budget Office: "The reconciliation proposal includes provisions related to health care and revenues, many of which would amend H.R. 3590. It also includes amendments to the Higher Education Act of 1965, which authorizes most federal programs involving postsecondary education. CBO and JCT estimate that enacting both pieces of legislation - H.R. 3590 and the reconciliation proposal - would produce a net reduction in federal deficits of $138 billion over the 2010-2019 period as result of changes in direct spending and revenue." [CBO, 3/18/10]

OMB Director: Affordable Care Act Reduces Deficits By $1.1 Trillion By 2030.  According to Office of Management and Budget Director Peter Orszag: "The bottom line remains the same: the Affordable Care Act is the largest deficit reduction package enacted in over a decade according to CBO. It will reduce deficits by more than $100 billion in the current decade and more than $1 trillion in the decade after that - and that will not change." [WhiteHouse.gov, 5/12/10, emphasis added]

CBO To GOP: Repealing Cost-Saving Provisions Of The Affordable Care Act Would Increase Deficit By $455 Billion.  In a letter to Sen. Mike Crapo (R-ID), the Congressional Budget Office wrote: "Finally, you asked what the net deficit impact would be if certain provisions of PPACA and the Reconciliation Act that were estimated to generate net savings were eliminated - specifically, those which were originally estimated to generate a net reduction in mandatory outlays of $455 billion over the 2010-2019 period. The estimate of $455 billion mentioned in your letter represents the net effects of many provisions. Some of those provisions generated savings for Medicare, Medicaid, or the Children's Health Insurance Program, and some generated costs. If those provisions were repealed, CBO estimates that there would be an increase in deficits similar to its original estimate of $455 billion in net savings over that period." [CBO, 8/24/10]

CLAIM: "Under The President's Tax Increase, Half Of All Small Business Income Would Be Affected"

Sen. Kit Bond:

Now, I don't know who the President is talking to, but I don't know any Missouri families who are working together -- two working people -- making $250,000 a year who consider themselves millionaires. In fact, these Missouri families would be surprised that the president lumps them in the same category as George Soros, Warren Buffett, and Bill Gates.

This is really a tax increase on small businesses. Under the President's tax increase, half of all small business income would be affected under the tax increase plan the president has, and that would affect up to 25% of all American workers who are employed by those small businesses, and they certainly will be affected. [Bond floor speech, 9/22/10]

FACT: Just 3 Percent Of Small Business Owners Would Be Affected By Expiration Of Bush Tax Cuts

Non-Partisan Joint Committee On Taxation Report Actually Says That 50% Of Total Business Income - Not "Small Business Income" - Will Be Taxed At Higher Rates. According to the non-partisan Joint Committee on Taxation report on President Obama's proposals: "The staff of the Joint Committee on Taxation estimates that in 2011 just under 750,000 taxpayers with net positive business income (three percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the President's proposal and that 50 percent of the approximately $1 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent. These figures for net positive business income do not imply that all of the income is from entities that might be considered 'small.' For example, in 2005, 12,862 S corporations and 6,658 partnerships had receipts of more than $50 million." [Joint Committee on Taxation report, 7/12/10, emphasis added]

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]

FACT: Sen. Bond's Definition Of "Small Business Income" Includes Book Royalties, Speaking Fees

Bloomberg: Small Business Income "Numbers Add Up Only If You Consider People Like Billionaire Investor George Soros." According to Bloomberg:

Senate Republican leader Mitch McConnell says President Barack Obama wants to subject half of all small-business income to a tax increase, a move that he says would strike a blow at the U.S. job-creation engine.

McConnell's numbers add up only if you consider people like billionaire investor George Soros, most movie stars and Obama himself small-business owners, tax experts say.

That's because the lawmaker is basing his figure on a broad definition of the term that experts say includes authors, actors and athletes who employ few if any workers. It also encompasses businesses that many people wouldn't consider small, such as Soros's hedge-fund firm and major law partnerships. [Bloomberg, 9/20/10]

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]

CLAIM: "Congress And The President Are Proposing An Historic Job-Killing Tax Increase"

Sen. Kit Bond:

At a time when we need small businesses to expand their business and to create jobs, President Obama plans on raising their taxes. Imagine that. When jobs should be our top priority, with unemployment near 10%, this Congress and the President are proposing an historic job-killing tax increase. [Bond floor speech, 9/22/10]

FACT: Small Businesses More Concerned About Weak Demand Than Higher Taxes

Study By "The Most Right Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of Weak Demand Than Taxes And Regulations. As Ezra Klein of the Washington Post reported:

The National Federation of Independent Businesses -- a small-business trade association that is considered the most right wing of the major business groups -- continually polls its members and releases the results. Here's what they say is their single most important problem:

the-problem-tax-fears-and-bad-sales.png

As you can see, sales -- that is to say, demand for their products -- dominate the chart, while fear of taxes is lower than in the '90s. The concern over sales is understandable. Not only is the economy bad. But as the next chart shows, it keeps underperforming what the businesses assume will happen.

sales-dipping-and-already-below-expectations.png

So, if anything, businesses have been too optimistic over the past few years.

[Washington Post7/22/10]

Moody's: Tax Cuts For The Wealthy Do Not Stimulate Demand. According to Bloomberg: "Hand the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it. Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody's Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell. The findings may weaken arguments by Republicans and some Democrats in Congress who say allowing the Bush-era tax cuts for the wealthiest Americans to lapse will prompt them to reduce their spending, harming the economy... The Moody's research covering couples earning more than $210,000 found that spending by the wealthy is more likely to be influenced by the ups and downs of the stock market than changes in income-tax rates." [Bloomberg, 9/13/10, emphasis added]

Tax Cuts Are "A Supply-Side Remedy For A Problem Caused By Lack Of Demand." As the New York Times reported: "But economic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand. The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest 'bang for the buck,' because wealthy Americans were more likely to save their money than spend it." [New York Times9/10/10, emphasis added]

Companies Anticipate Years Of Debt Reduction Instead Of Increased Spending. According to the Washington Post: "Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes. But here in the heartland of America, senior executives say neither side's assessment fits. They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis. Across the industrial parks and office towers of the Chicago region, in a more than a dozen interviews, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes." [Washington Post8/21/10, emphasis added]

CLAIM: The Stimulus Failed

Sen. Kit Bond:

The nearly trillion dollar stimulus plan that was supposed to create jobs immediately and keep unemployment below 8% failed, and now our children and our children's children are stuck with a bill that will be on their credit cards for a long, long time. [Bond floor speech, 9/22/10]

FACT: The Recovery Act Improved The Economy

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Was Passed.  According to economist Robert J. Shapiro:

From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]

Based on Shapiro's research, the Washington Post's Ezra Klein created the following chart showing net job losses before and after the Recovery Act was enacted:

job losses before and after obama's policies

[Washington Post8/12/10]

CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP.  According to the nonpartisan Congressional Budget Office, through the second quarter of 2010, the American Recovery and Reinvestment Act:

  • Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
  • Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
  • Increased the number of people employed by between 1.4 million and 3.3 million, and
  • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. [CBO, 8/24/10]

Reuters: The Recovery Act May Have "Prevented The Sluggish Economy From Contracting" Between April And June.  According to Reuters

The massive U.S. stimulus package put millions of people to work and boosted national output by hundreds of billions of dollars in the second quarter, the nonpartisan Congressional Budget Office said on Tuesday.

CBO's latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

CBO said President Barack Obama's stimulus boosted real GDP in the quarter by between 1.7 percent and 4.5 percent, adding at least $200 billion in economic activity.

[Reuters via ABC News, 8/24/10]

Princeton, Moody's Economists Say "Highly Effective" Government Response To Crisis Saved 8.5 Million Jobs.  According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody's Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times7/27/10, emphasis added]

CLAIM: Dividend Tax Increase Will Harm Many Seniors Who Are "By No Means Rich"

Sen. Kit Bond:

Dividends, now, are payments made to shareholders by a profitable firm. They are the owners of the firm. Many of the folks who receive dividend income are not multimillion-dollar investors, but rather many of them are seniors who rely on this as a supplement to their retirement income. We should not raise taxes on seniors who rely on this income.

Recently, I heard from a utility in my state that came in and talked about the increased dividend tax and the concern of what it would do to their shareholders. Many of their investors are senior citizens, by no means rich and who live off this income every day. They don't want to have and cannot afford to have government reach into their pockets and take more money. [Bond floor speech, 9/22/10]

FACT: Dividend Income Tax Increase Only Applies To Richest Taxpayers

CTJ: Only Seniors Among Richest Taxpayers Would Be Affected By Proposed Dividend Tax Change. According to a report from Citizens for Tax Justice:

Instead of allowing dividends to be taxed once again as ordinary income (meaning a top rate of 39.6 percent), he [President Obama] proposes to set the top rate for dividends at 20 percent, the same as the top rate for capital gains under his proposal. This is higher than the top rate of 15 percent that applies now, but far lower than the top rate of 39.6 percent that will apply to other income.

[...]

Democrats and Republicans agree, for better or worse, that the Bush tax cuts should be made permanent for the bottom 98 percent of taxpayers. This means that no matter what Congress decides, any senior who is not among the richest 2 percent will continue to enjoy the income tax cut for stock dividends. If they have dividends. The fact is that dividends account for a tiny fraction of income for seniors. ... [S]eniors rely on dividends for just 4.3 percent of their income on average, and the poorest three fifths of taxpayers rely on dividends for just 1.3 percent of their income on average. ... [E]xtending the 15 percent rate for dividends for taxpayers with AGI above the $200,000/$250,000 threshold does very little to help seniors. About 89 percent of the benefits for seniors would go to those among the richest one percent, while the rest of the benefits would go to those among the next richest 4 percent. [Citizens for Tax Justice, 7/22/10, emphasis added]

CLAIM: "The Death Tax Hurts Small Family-Owned Businesses, Especially Our Family Farmers"

Sen. Kit Bond:

Now, on the estate tax, death should not be a taxable event. There should not be taxation without respiration. The death tax hurts small family-owned businesses, especially our family farmers. According to the Farm Bureau, individuals and family partnerships or family corporations own 98% of our nation's two million farms and ranches. When faced with the death tax, farms and ranches are in an especially tough spot, with most of their assets tied up in land and buildings, livestock and equipment. [Bond floor speech, 9/22/10]

FACT: Few Family Farms Would Be Impacted By Estate Tax Proposals

TPC: "The Vast Majority Of The Tax Is Owed By Large Estates." According to the non-partisan Tax Policy Center:

"Compared with current law, the Obama proposal would cut the number of taxable estates by 87% to an estimated 6,160 taxable returns.  The average estate tax bill would be about $3 million, or 19% of total estate value.

We estimate that under the Obama proposal, 100 family farms and businesses would owe tax. (We define such estates as those where farm or business assets are valued at under $5 million and comprise the majority of estate assets.) The Lincoln-Kyl proposal would cut the number to 40. Even under current law, fewer than 2,700 family farms and businesses would owe tax.

The vast majority of the tax is owed by large estates. Almost 84% of the tax would be paid by estates larger than $10 million in 2011 under the Obama proposal. About half of the tax is paid by such large estates under current law." [Tax Policy Center, 4/8/09, emphasis added]

TPC: Obama's Proposal Has A Exemption Of $3.5 Million And A 45 Percent Tax Rate. According to the Tax Policy Center: "The Obama Administration's FY2010 budget proposes to make 2009 law ($3.5 million exemption and 45 percent rate) permanent. An alternative Senate proposal would raise the exemption to $5 million and lower the rate to 35 percent." [Tax Policy Center, accessed 9/22/10 

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