Senate Finance Committee Chairman Ron Wyden, D-Ore., said on March 13 that his committee is going to focus on improving the plight of the middle class. “Today, this committee is going to begin, on a bipartisan basis, a drive to develop policies that get more Americans inside the middle-class winners’ circle,” said Wyden in his opening statement before a hearing on innovative ideas to strengthen and expand the middle class.
Wyden continued, saying, “a bedrock principle for tax reform ought to be to give the middle class—and everybody else in America—the chance to get ahead.” He pointedly charged that working taxpayers face a double standard with respect to enforcement of the tax law. “It’s more likely that people working their way out of poverty will have their Earned Income Tax Credits reviewed and denied than it is wealthy tax dodgers will have their tax shelters audited.”
Senate Finance Committee ranking member Orrin G. Hatch, R-Utah, countered that, too often, the middle class is used as a foil to make political points. “If we’re serious about helping and expanding the middle class, and I think we should be, it needs to be more than just a slogan,” said Hatch. “Sadly, I believe that, over the last five years, the talk about helping the middle class hasn’t translated into policies that would actually do the job.”
Witnesses at the hearing, however, provided feedback that indicated that the middle class is suffering economically and support for lawmakers to take meaningful action. “My suggestion is that we get back to basics first, fixing what we know is wrong before we try to overlay new “innovative” policies on the economy,” said William C. Dunkelberg, chief economist at the National Federation of Independent Business. “The basics will provide the largest payoff to policy efforts.” Dunkelberg pointed out that Washington sets the tone, saying that it controls the major prices, incentives, taxes, regulations and policies that impact decisions made in the private sector by consumers and business owners. “Meaningful changes here can do much to get the great private-sector job-generating machine back in gear,” he said.
Leonard E. Burman, Director of the Urban-Brookings Tax Policy Center, said he has concluded that the middle class has suffered from stagnant incomes for more than a generation and the trend shows no sign of abating. “The tax system has played a mixed role with respect to the middle class. On the one hand, federal tax burdens on middle-class families have moderated over time,” said Burman. “On the other hand, especially generous tax treatment of the “carried interest” earnings of takeover specialists have contributed to downward pressure on wages and have cost many workers their jobs.”
Diane Swonk, chief economist and senior managing director, Mesirow Financial, Chicago, Ill., stated that real disposable income growth has been tepid since the onset of the recovery, with gains in 2013 being particularly weak. She cited tax hikes on higher income households coupled with the expiration of the payroll tax holiday as significant factors in reducing after-tax incomes.
“The Great Recession and subpar recovery that followed both revealed and exacerbated income and wealth inequalities in the U.S.,” said Swonk. “Those shifts have had a profound effect on both the pace and composition of consumer spending and are not likely to reverse anytime soon.”
By Jeff Carlson, CCH News Staff