Rep. Foxx Lies About Taxes To Attack Democrats

November 30, 2010 4:17 pm ET

Earlier today, Rep. Virginia Foxx (R-NC) took to the floor of the House to criticize Democrats over taxes, claiming that Americans have not received "any tax cuts in the past four years" and lamenting the imposition of "more than $680 billion in tax increases" on the American people. However, President Obama and congressional Democrats have cut taxes for 95 percent of working families, and many of the supposed tax increases that Congress has enacted actually eliminated corporate tax loopholes. Foxx also disingenuously raised the specter of "the largest tax increase in the history of the country" while ignoring elements of Obama's proposal to extend pieces of the Bush tax cuts.

Rep. Foxx Lies About Taxes

REP. FOXX: [C]ontrary to statements repeated over and over again by our colleagues across the aisle, Americans have not enjoyed any tax cuts in the past four years since they have been in charge of this Congress. To the contrary, the House Republican Ways and Means Committee has highlighted more than $680 billion in tax increases that have been imposed on the American people since the ruling liberal Democrats took control of Washington in January of 2009. Now, because of Democrat inaction, the American people are looking at the largest tax increase in the history of the country, which would affect all married couples, all families with children, seniors, and small businesses.

CLAIM: Americans Have Not Received "Any Tax Cuts In The Past Four Years"

Rep. Virginia Foxx:

Americans have not enjoyed any tax cuts in the past four years since they have been in charge of this Congress.

FACT: Since Taking Office, President Obama & Congressional Democrats Have "Cut Taxes Across The Board For Working Families"

The Recovery Act Cut Taxes For 95% Of Working Families.  According to PolitiFact.com:

Under the stimulus bill, single workers got $400, and working couples got $800. The Internal Revenue Service issued new guidelines to reduce withholdings for income tax, so many workers saw a small increase in their checks in April 2009.

The tax cut was part of Obama's campaign promises. During the campaign, Obama said he wanted $500 for each worker and $1,000 for working couples. Since the final number was a bit less than he promised, we rated his promise a Compromise on our Obameter, where we rate Obama's campaign promises for fulfillment. 

During the campaign, the independent Tax Policy Center researched how Obama's tax proposals would affect workers. It concluded 94.3 percent of workers would receive a tax cut under Obama's plan based on the tax credit to offset payroll taxes. According to the analysis, the people who wouldn't get a tax cut are those who make more than $250,000 for couples or $200,000 for a single person. [PolitiFact.com, 1/27/10]

CBS News: "One Third Of The Recovery Act Was Made Up Of Tax Credits." According to CBS News:

One third of the Recovery Act was made up of tax credits, the White House emphasizes.

"No one I've met is looking for a handout," Mr. Obama said in his address Saturday. "And that's not what these tax cuts are. Instead, they're targeted relief to help middle class families weather the storm, to jumpstart our economy, and to bring the fundamentals of the American Dream -- making an honest living, earning an education, owning a home, and raising a family -- back within reach for millions of Americans."

The credits included:

  • An increase in the Earned Income Tax Credit
  • An expansion of the Child Tax Credit
  • For those who work, the Making Work Pay tax credit offered $400 per individual and $800 per couple
  • For those who lost their job, there was a 65 percent tax credit to help cover the cost of health care. The first $2,400 in unemployment benefits went tax-free
  • Up to $2,500 under the American Opportunity Credit for students and parents paying for college tuition
  • $8,000 for first-time home buyers
  • A deduction of state and local taxes paid on a new car
  • Up to $1,500 for home improvements to increase energy efficiency

Even conservative advocacy group Americans for Tax Reform, which advocates for a single, national flat tax rate, found some praise for the Recovery Act -- specifically for provisions allowing small businesses to write off a wider range of business expenses. [CBS News, 4/15/10]

CLAIM: Democrats Have Imposed $680 Billion In Tax Increases On The American People

Rep. Virginia Foxx:

To the contrary, the House Republican Ways and Means Committee has highlighted more than $680 billion in tax increases that have been imposed on the American people since the ruling liberal Democrats took control of Washington in January of 2009.

FACT: Many Of The So-Called "Tax Increases" Eliminate Corporate Loopholes

The claim that Congress has enacted "more than $670 billion" in tax increases comes from an April report issued by Rep. Dave Camp (R-MI). Among the "tax increases" cited by Camp are the elimination of "the deduction for expenses allocable to Medicare Part D Subsidy," eliminating a tax credit for paper producers who use "black liquor," and the repeal of "guidance allowing certain taxpayers to claim losses of an acquired corporation."

Health Care Law Eliminated Corporate Tax Advantage "That Amount[ed] To Double-Dipping." According to an editorial in the New York Times, "What is really going on? It is true that, starting in 2013, the new law eliminates a corporate tax advantage on retiree drug benefits that amounts to double-dipping. It is also true that accounting rules require that the present value of the entire additional tax that companies will have to pay over the next several decades be put on the books now. That led AT&T to declare a charge of about $1 billion in the first quarter of 2010 and Verizon to declare $970 million. Those look like staggering amounts until one understands that they don't require any immediate cash payments and that the added taxes will be paid out slowly - over perhaps 30, 40 or more years, depending on a company's retiree plan. Wall Street certainly gave a collective yawn. Stock prices for the companies that made announcements barely budged (some went up), and analysts urged investors not to overreact because the accounting change would have a negligible impact on these companies' valuation, or market capitalization." [New York Times, 4/5/10, emphasis added]

Tax Credit For "Black Liquor" Eliminated By Health Care Law Identified As "An Absolute Government Boondoggle." According to Bloomberg:

Paper companies may claim about $6.6 billion from a U.S. tax break meant to discourage use of fossil fuels, and they'll burn more diesel to get it.

The tax credit is an incentive to mix an alternative energy source with carbon-based fuel. Papermakers already generate electricity by burning a wood byproduct from pulp-making called "black liquor." To qualify for the windfall they are adding diesel fuel to the black liquor, following the letter of the law while violating its spirit, said Verle Sutton, editor of the Reel Time Report, a unit of Los Angeles-based Forestweb Inc., a provider of data on the paper industry.

"It's an absolute government boondoggle," Sutton said. "These companies were not using fossil fuels. They only started because they needed it for the tax credit to work. So there's a negative to the environment, not a positive." [Bloomberg4/17/09]

Recovery Act Repealed Change To Tax Code That Gave "American Banks A Windfall Of As Much As $140 Billion." According to a Washington Post report on the Bush-era change in tax code:

The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention.

But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion.

The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. [Washington Post11/10/08]

CLAIM: Letting The Bush Tax Cuts Expire Would Result In "The Largest Tax Increase In The History Of The Country"

Rep. Virginia Foxx:

 Now, because of Democrat inaction, the American people are looking at the largest tax increase in the history of the country, which would affect all married couples, all families with children, seniors, and small businesses.

In claiming that "all married couples" and "all families with children" would be affected by "the largest tax increase in the history of the country," Rep. Foxx is presumably referring to a reinstatement of the marriage penalty tax and a cut in the child credit tax. However, President Obama intends to permanently eliminate the marriage penalty and preserve the child tax credit at Bush-era levels.

FACT: Expiration Of Bush Tax Cuts Would NOT Be The Biggest Tax Hike In History

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

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: Republicans Wrote Tax Cuts To Expire In 2010 In Order To Hide Their True Cost

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.

[Time6/3/01, 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 Post7/19/10, emphasis added]

FACT: Democratic Leaders Favor Extending Tax Cuts For 97 Percent Of Americans

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." [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 Watch2/1/10]

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 Hill7/22/10, 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 Journal7/23/10, 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:

Description: nyttaxproposals

[New York Times7/25/10]

FACT: Obama's Proposal Maintains The Bush-Era Tax Provisions That Eliminated The "Marriage" Penalty

The "Marriage Penalty" Refers To Pre-Bush Tax Code That Sometimes Resulted In Jointly-Filing Couples Paying More Tax Than If They Had Filed As Individuals. According to the bipartisan Joint Committee on Taxation: "A married couple generally is treated as one tax unit that must pay tax on the couple's total taxable income. Although married couples may elect to file separate returns, the rate schedules and other provisions are structured so that filing separate returns usually results in a higher tax than filing a joint return. Other rate schedules apply to single persons and to single heads of households. A 'marriage penalty' exists when the combined tax liability of a married couple filing a joint return is greater than the sum of the tax liabilities of each individual computed as if they were not married." [Joint Committee on Taxation, 7/12/10, emphasis added]

President Obama's Proposal Maintains The 2001 Modifications To The Standard Deduction That Ended The "Marriage Penalty." According to the bipartisan Joint Committee on Taxation: "[The 2001 Bush tax cuts] increased the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return. The basic standard deduction for a married taxpayer filing separately continued to equal one-half of the basic standard deduction for a married couple filing jointly; thus, the basic standard deduction for unmarried individuals filing a single return and for married couples filing separately are the same... The [President's FY 2011] proposal permanently increases the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return." [Joint Committee on Taxation, 7/12/10, emphasis added]

FACT: Obama's Proposal Extends The Child Tax Credit At Bush-Era Levels

The 2001 Bush Tax Cut Law Called For The Child Tax Credit To Be Cut In Half After 2010. In the "Child Tax Credit" section of their July 2010 report, the Joint Committee on Taxation described the Child Tax Credit provisions of the 2001 Bush tax cuts: "An individual may claim a tax credit for each qualifying child under the age of 17. The maximum amount of the credit per child is $1,000 through 2010, and $500 thereafter." [Joint Committee on Taxation, 7/12/10]

President Obama's Proposal Restores The Child Tax Credit To $1,000 Per Child.  According to the bipartisan Joint Committee on Taxation: "The proposal permanently extends the $1,000 child tax credit and allows the child tax credit against the individual's regular income tax and AMT. The proposal also extends the EGTRRA repeal of a prior-law provision that reduced the refundable child credit by the amount of the AMT. The proposal permanently extends the earned income formula for determining the refundable child credit, with the earned income threshold of $3,000, and stops indexation for inflation of the $3,000 earnings threshold. Finally, the proposal permanently extends the rule that the refundable portion of the child tax credit does not constitute income and shall not be treated as resources for purposes of determining eligibility or the amount or nature of benefits or assistance under any Federal program or any State or local program financed with Federal funds... For years after 2010, this proposal doubles the child tax credit (from $500 to $1,000) to provide additional tax relief to families to help offset the costs of raising a child." [Joint Committee on Taxation, 7/12/10, emphasis added]

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