Statements and Speeches
WASHINGTON – Today, Sen. Tom Carper (D-Del.) participated in the Finance Committee hearing, "Is the Distribution of Tax Burdens and Tax Benefits Equitable?" For more information or to watch a webcast of the hearing, please click here.
A copy of Sen. Carper's remarks, as prepared for delivery, follows:
"When considering any change to the tax code, I'm guided by four principles: Is the proposal fiscally responsible? Will the proposal encourage economic growth and provide a nurturing environment for job creation? Does the proposal provide the certainty and predictability that families and businesses need to plan and grow? And last, but certainly not least, is the proposal fair?
"Fairness can mean many different things to many people, but in the context of today's hearing, I think it's important to take a look at whether the current tax code helps to make our society more, or less, fair on the whole. To do that, we need to take account of long-run trends in the economy. And one long-run trend that stands out is growing levels of income inequality.
"I believe that it's all-but-indisputable that income disparity — both after-tax and pre-tax — is increasing. I also believe that it is not a positive trend. While it's doubtful that anyone can realistically answer the question of what the 'right' income distribution might be, I do believe that when there is too much of an imbalance between the top and bottom of the income ladder, then our economy, and our country, will be weaker in the long run.
"Our economy is just now emerging from the most severe recession in seven decades. This Great Recession, like the Great Depression before it, was brought about in large part by a massive financial crisis. And, exactly like the decade leading up the 1929 crash, the decade we just experienced was marked by a similarly dramatic increase in income inequality.
"It may be too simplistic to suggest that vastly increasing levels of income inequality somehow 'cause' those bubbles that lead to an inevitable crash — although some economists are beginning to investigate that very question, given the striking similarity these and other such crashes. However, it's reasonable to suggest that high levels of income disparity may destabilize the economy overall.
"We need to examine the sustainability of income inequality and how long can it reasonably continue. At what point does the divide between the top and bottom of the income ladder leave the distribution in the United States resembling a 'banana republic' instead of the country that many in this room grew up in?
"The testimony today touches on the tax burdens that fall on high-, middle-, and low-income taxpayers. But a great deal of the discussion outside this room tends to focus on the federal Individual Income Tax – which, considered alone, by itself, is probably the most progressive part of the tax system. Some have argued, on that basis, that it's unfair to make the Income Tax even more progressive, for example, by allowing tax rates for higher-income households to return to their pre-2001 levels.
"But when we consider the overall tax burden faced by families – including not just other Federal taxes, like payroll taxes and tariffs, but also state and local taxes, like sales taxes – the picture gets a little more complicated. The overall tax burden faced by families is notably less progressive than it looks when we focus only on Individual Income Taxes. All of this is in addition to growing long term income inequality, which needs to be addressed.
"At the same time, separately, our country faces some staggering deficits – this year, and in years to come. However much we need to stimulate the economy short-run, in the long-run — after the economy recovers — I think it's imperative that we put our country back on the path to fiscal responsibility."