Press Briefing by Secretary of Treasury Lloyd Bentsen
The Briefing Room
2:18 P.M. EDT
SECRETARY BENTSEN: I think they're all working on their tax returns -- that's probably where they are. (Laughter.)
I want to talk taxes for just a few minutes. But to show you that we're user friendly, consumer friendly, over at Treasury, I brought along a bunch of Form 4868s for those of you who want to delay your tax return -- (laughter) -- and you want a temporary extension. So I'll have them up here for you.
Q: Too late. (Laughter.)
SECRETARY BENTSEN: Too late. Listen, I'm working, filling mine out right now.
If you recall, last summer when the President's deficit reduction plan was being passed through the Congress, you heard the claims that the Democrats were going to raise taxes on middle income folks, raise their income taxes. Not so. We said at the outset that we would produce a balanced and fair package with more in spending cuts than we had in taxes. And by the way, the deficit is coming down faster than we had projected; we're ahead of schedule on that one.
The package we produced had $255 billion in cuts and had just under $250 billion in higher revenues. We cut entitlements. We asked 12 percent of our Social Security recipients, the most welloff, to pay more, but not until 1994. We raised the corporate income tax slightly and we put in some help for small business, like higher investment expensing and capital gains exclusions. And we had a small gasoline tax.
The last time I filled out -- I noticed that the cost of my gasoline was even less than it was before the tax was put on it. And when it came to the individual income tax rate -- look at the chart -- we only changed the very top rate. Here it is -- on those that are making an adjusted gross income of an excess of $180,000, that rate was raised from 31 to 36; those with an adjusted gross income of over $300,000, that was raised from 31 to 39.6.
Or you're talking about 1.2 percent of filers -- 98.8 of those had no increase in income tax rate. And of all the G-7 countries -- I went back to check that one -- there was only one country that had a lower rate than the 39.6. Only one out of the seven.
I saw a story a few weeks ago in the Wall Street Journal, and I've heard talk along these lines, that as many as 40 percent of Americans believe their income taxes have gone up. For most Americans, if they're paying higher taxes this year, it's because they're well-off, or they received a big raise, or they received a bonus.
Look at the second chart. We raised the rate on the wealthiest 1.2 percent of Americans. Those are the families, again, who had an adjusted gross income of more than $180,000. That's not bad -- not bad money. So as Americans fill out their 1993 taxes -- 98.8 percent of all taxpayers, again, have no increase in the income tax rates this year.
And when we passed the deficit reduction package, we also expanded the earned income tax rate. And we did that to improve the benefits beginning, phasing it in this year. In 1994, about 15.2 percent of our taxpayers, or about 18 million Americans will benefit from a higher tax credit, which means a cut in their taxes. Now, that's a far cry from the notion about deficit reduction tax changes that some people have.
For every American whose tax rates increase because of deficit reduction, 12 more will see a cut in their taxes.
And I want to wind this up with a plug for the EITC and the advanced payment option, because a lot of people don't know about that, and hopefully you can help us get that message out to lower income people. This gives the hard-working, moderate family income -- it gives them a break. When we fully implement the expansion that's beginning this year, the effect will be to turn a $4.25 an hour job into a $6.00 an hour job for a working family with two children. That's an important step to make sure that Americans who play by the rules, who work hard, have the opportunities they deserve. Taxpayers who are qualified this year can apply for the credit on their tax forms.
Those who want the 1994 credit in advance, if they'll fill out that W-5 form, that will mean they can get about $100 a month in a paycheck, and the have 40 percent of it waiting at the end of the year for them by tax time. We have a campaign underway to try to get that message out there, to get it out to the private sector, to have those employers let their employees know about it so they can take advantage of it.
I want to close by repeating the message as we go into the home stretch of filing our income taxes. It's just plain wrong that income taxes are going up for a great many Americans -- 98.8 percent of all taxpayers this year have no changes in their income tax rates.
Thank you, and I'll take such questions as you have.
Q: Mr. Secretary, you've said and the administration maintained there was no change in income tax rates. The rates are not going up. Do you acknowledge --
SECRETARY BENTSEN: Except for 1.2 percent.
Q: Except for 1.2 percent. Do you -- how do you feel about the suggestion a lot of Americans who are filing their taxes and find themselves paying more taxes? Whether their rates have gone up or not, the check that they're writing to the IRS is apparently larger.
SECRETARY BENTSEN: The vast majority of them, it's because of increases in income that have been happening -- incomes have gone up some. But the vast majority who had the same income are paying less taxes -- or having no increase, rather, I should say.
Q: How many people are affected by the 1.2 percent? In other words, how many individuals does that apply to? And what percentage of --
SECRETARY BENTSEN: About 1.4 million.
Q: So 1.4 million will have to pay more.
SECRETARY BENTSEN: Right.
Q: Are they households or couples or --
SECRETARY BENTSEN: No, that's total returns.
Q: Returns -- 1.4 million returns. And what percentage of the GNP, what percentage of the money that the IRS collects will come from those 1.2 percent -- those 1.4 million returns?
SECRETARY BENTSEN: We'll have about $20 million -- $20 billion coming from them.
Q: So this affects $20 billion. And what percentage of that is the total money collected by the IRS?
SECRETARY BENTSEN: Do you have a number on that one? (Laughter.) We're going to have to get you the detail of some of that. We'll be happy to get you some of the detail.
Q: The point is, though, that a lot of critics have argued that that increase, while it seems, the way you phrase it, 1.2 percent negligible, will have an impact on the overall economic growth, the overall health of the economy because a big chunk of that economy, the wealthiest portion of the economy is being affected.
SECRETARY BENTSEN: Well, a small percentage of the economy is being affected, but a very major percentage of the economy is being affected by the cut in the deficit. And what you see in the reduction in long-term rates -- you've seen some increase recently -- but long-term rates in this country are still, as far as the traditional rates, are substantially lower than normal.
And that is giving you some $500 billion worth of savings, capital savings, that now becomes available to business. And that has given us a great increase in the economy, and that has given us an increase in the GDP, has created some 2 million jobs approximately in the first year, and has us well on target to the creation of 8 million jobs over the total of the four years of this term, which was the objective of the administration. So it's been an enormous stimulus to the economy. It is far outbalanced to any drag, and that's obvious.
Q: What is this $20 billion you mentioned? Is this the total amount of taxes that will be paid by this 1.2 percent or is that the increment?
SECRETARY BENTSEN: That is the total -- no, let me think about that one. That is the increment, the increase, $20 billion.
Q: That's how much more you get based on the new tax.
SECRETARY BENTSEN: That's correct.
Q: You don't know that yet, you just -- because you haven't seen the returns. You just theorize.
SECRETARY BENTSEN: No, but that's obviously a forecast in the best judgment we could make. Now, if for any reason we were off on that, it would be because we had overestimated how the economy was going to do. Actually, we have been conservative in that regard, and we underestimated how the economy would do.
Q: Mr. Secretary, do you include in your calculation that 98 percent or so Americans aren't seeing a tax increase, do you include in that Social Security and Medicare taxes? Are they going up in some way that actually does result in an increase?
SECRETARY BENTSEN: I was talking about 1993 and I was talking about income taxes. Now, in Social Security, that takes effect in '94 and is phased in over a period of time there. It goes up to income -- 85 percent of the receipts of the Social Security beneficiary for an individual over $34,000 approximately, and for a couple, $44,000.
Q: I was talking about --
SECRETARY BENTSEN: And let me also say on that then to give you further clarification, that will affect approximately one out of eight of the Social Security beneficiaries.
Q: I was talking about the payroll deduction, also. I realize you're talking about recipients, but in addition to that, are you including whether or not there's an increase in the actually payroll deduction, either the percentage formula or however it's calculated year by year -- doesn't that go up each year?
SECRETARY BENTSEN: I don't have that number. I'll get it for you. Would you get him the number for the question?
Q: Mr. Secretary, how do you account for this fact that you noted here that 40 percent of the people believe that their income taxes are going up?
SECRETARY BENTSEN: I think we've done a poor job of getting the message out there. And I think, perhaps, you do not help up to the extent we would have hoped you would of. (Laughter.) But in addition, its your job and its my job to try to get that information out there. And I think we did a good job of conveying that to the Congress, but we did not get it out to the American people as we should have.
Q: Why do they have that impression?
SECRETARY BENTSEN: Because we didn't get the message out there, and generally people are pessimistic as to what's going to happen to them insofar as taxes. But the very reason for having this now is to try to help get that message out there at taxpayer time.
Q: Do you find -- aren't state taxes going up, other taxes going up to make up for what states perceive was a shortfall in federal funds? The average person, the bottom line --
SECRETARY BENTSEN: That depends on the state, that depends on the city. I'm not prepared to try to comment on that.
Q: What do tax returns so far this year show in terms of a pattern of people claiming the EITC? Are as many more people claiming it as you expected when it was --
SECRETARY BENTSEN: No. Insofar as claiming it early on a payment month by month, it's only about one percent, as I recall. And we're trying to get that message out, because it could be $100 a month, and that's a good piece of change for people who are of moderate income, living in expensive areas.
Q: But even in terms of people claiming it after the fact for their '93 earnings, there are more people eligible for it under '93 --
SECRETARY BENTSEN: Than are claiming it, but it has gone up substantially, and we're working very hard to getting that information out there.
Q: Mr. Secretary, is it important to the administration that this trend of only a very small margin of the population having their taxes go up -- the same place into the future, and what's the President's thinking now in regards to future tax policy and the need for, or lack of it for tax cuts?
SECRETARY BENTSEN: We have no plans to raise the income tax.
Q: Mr. Secretary, at what point will you all know whether or not you have an increase in receipts, in revenues from people who have not had their tax rates changed? You've said here that 98.8 percent have no increase in rates.
SECRETARY BENTSEN: That's right.
Q: There appears to be some view out there in the public that, nevertheless, they are paying more. At what point will you have some sort of a handle on whether or not you are actually taking in more tax revenue from people whose rates haven't changed?
SECRETARY BENTSEN: Do you have an estimate on that -- when we'll be at that point in your receipts?
MR. COHEN: In April, you've got the receipts estimates coming in. Maybe in May we would have some idea of how much came in April.
Q: Mr. Secretary, near the end of the Bush administration, to give people more money, the sense of having more money in their pockets, they changed the withholding rates.
SECRETARY BENTSEN: I remember that.
Q: As a result, people got less, smaller refunds, and some people ended up paying instead of getting refunds. Do you think this contributes to the feeling on the part of Americans that they are paying more in taxes, and has the administration given any thought to going back to the old formula?
SECRETARY BENTSEN: Oh, absolutely not. No, I don't think so, and that we don't have any plans to do that.
Q: Do you support the -- do you like the new formula, have no problem with it at all?
SECRETARY BENTSEN: No. I think it's working and I think it's fair distribution of the burden of government.
Q: What are the prospects for filling the promised middle income tax cut?
SECRETARY BENTSEN: Well, I think what you've seen in this instance, what has paid off most of all, is a stimulation to the economy by the deficit cut and the creation of jobs. And I think that's what middle income appreciates most of all -- having a job. And what you're seeing in the adding of some two million in excess jobs a year is not hamburger-flipping jobs, that those service jobs, or the vast majority of them are good-paying jobs. I've had, at the Job Summit meeting that we had recently with the G-7, labor ministers and finance ministers, there was a great deal of admiration as to what we have been able to have happen in this country and the creation of jobs, and particularly that by small business.
Q: So that tax cut's not --
MR. BENTSEN: This is better than a tax cut. You've got a job.
MS. MYERS: Thank you.
MR. BENTSEN: Thank you very much.
THE PRESS: Thank you.
END 2:40 P.M. EDT
William J. Clinton, Press Briefing by Secretary of Treasury Lloyd Bentsen Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269791