WASHINGTON - The Senate has taken an important step toward ensuring that middle-class families do not face a tax increase at the end of this year, and in the process, has dealt a blow to a failed policy that emphasized tax cuts for the wealthiest Americans as the cure for our economy.
The Senate voted to approve legislation to prevent a tax increase on taxpayers making $250,000 a year or less. Some of my Senate colleagues had opposed this legislation, saying they would prevent it from coming to a vote unless we included the wealthiest 2 percent of taxpayers, those making more than $250,000.
In the end, those senators ended their obstruction. The Senate rejected a plan that would have continued tax cuts for the wealthy and approved the bill I supported, to prevent an end-of-the-year tax increase on middle-class families.
Sen. Carl Levin
This was important, first of all, because middle-class Americans are already struggling with the after-effects of the worst recession in decades. Unemployment is still too high, workers have seen little increase in wages, housing values remain depressed. Preserving those middle-class tax cuts is important to continuing the economic recovery.
But this vote also was important because it represents the first break with what has been a rigid adherence by some of my colleagues to tax cuts for the wealthy as the supreme goal of public policy. Supporters of this policy have demonstrated a willingness to risk government shutdowns, to risk grave economic damage, and to risk rising taxes on the vast majority of Americans in pursuit of their highest of priority: lower taxes on the wealthiest 2 percent of us.
That policy has already proved a failure.
Income for the typical American family peaked in 2000 not coincidentally, just before the tax-cuts-for-the-wealthy mania reached its zenith. A June study by the Federal Reserve found that the average middle-class family's net worth had fallen by 40 percent from 2007 to 2010. And in 2010, the bottom 99 percent of income earners reaped just 7 percent of total income growth, while 93 percent of all growth flowed to the top 1 percent.
Now, perhaps this vast accumulation of wealth would arguably be acceptable if it had resulted in faster economic growth that produced new jobs and helped average Americans prosper. Indeed, since the time of President Reagan, we have been told that the rising tide lifting up the wealthy would lift all boats, that the benefits would trickle down to all Americans.
But policies that are more and more generous to the wealthiest have failed to spark economic growth or create the jobs we need. More tax cuts for the wealthy coincided with the slowest rate of job growth in recent American history. Economic growth, even before the financial crisis nearly sent our economy into depression, was woefully short of historic standards.
And, despite promises that tax cuts for the wealthy would somehow add to federal revenue, these tax cuts have raised the federal deficit by hundreds of billions of dollars. Ending them will reduce the deficit by nearly $1 trillion over 10 years.
So this policy of tax cuts for the wealthy has failed as fiscal policy, adding to our deficit. It has failed as economic policy, coinciding with weak growth in economic output and job creation. And it has failed a vital test of public policy in a democratic society it failed the fairness test, facilitating massive accumulations of wealth for a fortunate few while most Americans have struggled to tread water.
So, I'm pleased that the Senate voted to allow middle-class families to keep a few of their hard-earned dollars. Our legislation now goes to the House of Representatives, and I hope our colleagues there will soon join us in preserving middle-class tax relief.
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Carl Levin is the senior U.S. senator from Michigan.