senate, members of the house and grass roots groups and presidential candidates, i've committed myself to cutting spending, capping spending, and passing a balanced budget constitutional amendment as a condition for any debt limit increase. as this debate over how best to address our growing debt and annual deficits continues, i want to address a technical but critical matter in these negotiations. and i'm talking about tax expenditures. i'm working on the senate finance committee, and i know a little bit about these. over the next few days i'm going to discuss this matter of tax expenditures and debt. today i'm going to talk in general about what a tax expenditure is and what a tax expenditure is not. i will next turn to the tax policy areas implicated by current tax expenditures. homeownership is favored in our tax base with a tax expenditure. there is a deduction for home mortgage interest. a deduction for real property taxes, and an exclusion for income from home sales. the tax code, these are tax expenditures. the tax code also encourages charitable contributions. charitable deductions are available to citizens when they give to a nonprofit crisis pregnancy center, when they put money in the basket at church or give money to their alma mater, just to mention a few charitable donations. in a third speech i will attempt to shed light on a widespread misconception about tax expenditures. that misconception that tax expenditures disproportionately benefit high-income taxpayers. let's not get ahead of ourselves. my remarks today are remarks about what a tax expenditure is. unfortunately, my remarks are also largely about democrats' plans to increase taxes. president obama and his liberal allies are calling for a balanced approach on a revenue piece to deficit reduction. they want shared sacrifice. i want shared prosperity. we hear this from the press all the time. new revenues need to be a part of any deal to reduce the deficit. these are simply code words for a tax hike, and i guarantee you, if we raise taxes, my friends on the other side will spend every dime of it. that's how they kept themselves in power and claiming that they're helping the poor. whereas 51% of our households so poor that they can't participate in saving this country. it is clear that the professional left is insisting that president obama include tax increases in any negotiated agreement to raise the debt ceiling. threading this tax hike needle to an electorate resistant to giving the government more money to spend is no easy task. though his campaign team talks a big game about the popularity of tax increases, the president's own words suggest otherwise. last week in a shameful display of class warfare, the president did specifically call for some tax increases on the rich. that includes 800,000 small businesses, by the way, where 70% of the jobs come from. but that is the exception that proves the rule. by and large, the president avoids the effectual truth of his mission to get rid of tax expenditures. massive tax increases on the middle-class american families to whom he promised immunity from tax increases when he was running for president. instead he and other members of the party of tax stph-rss every day -- tax increases as spending through the tax code. how serious should we take his rhetoric? when the president said he wanted to address the nation's debt by reducing spending through the tax code, it proved too much for even john stewart. this was stewart's analysis of the president's contention that we could reduce the deficit by attacking spending through the tax code. quote -- "you manage to talk about a tax hike as a spending reduction. can we afford that and the royalty checks you're going to have to send to george orwell? that's the weirdest way of 'just say tax hike.' that's like saying i'm not going on a diet. i'm going to add calories to my excluded food intake." unquote. that was jon stewart. he hit the nail on the head. for sure it's easy to make fun but what the president is trying to do with tax expenditures is no laughing matter. liberals talk about tax expenditures as though they were just getting rid of wasteful spending. first, as a legal matter, tax expenditures are not spending. outlays are checks cut from the treasury department are defined as spending under the congressional budget act. that's what spending is. yet, most tax expenditures only lose revenue and do not include an outlay portion. tax expenditures that only lose revenue contain no spending as defined by the congressional budget act and is scored by the official scorekeepers for congress. the joint committee on taxation and the congressional budget office. and second, as a policy matter twhe comes to tax -- when it comes to tax expenditures, one person's loophole is another person's opportunity to save for college and retirement, finance a home and ties to your -- taoeugts -- tithes to your church. reducing tax expenditures is a tax increase unless a tax cut of equal, of an equal or greater amount is enacted. one crucial myth i would like to expose is tax expenditures are spending. this chart revenue loss does not equal spending. the federal government cannot spend money that it never touched and never possessed. what tax expenditures do is let taxpayers keep more of their money, of their own money. the american people are the ones that earn their money through their ideas, their risk and their labor. whether you are a successful business owner or part-time worker just starting out, the money that you earn is yours. it is your money. and only by your consent is the government permitted to take some of it in taxation to pay for certain public goods. but democrats have a different view, and it is this view, one that is fundamentally at odds with our classical liberal constitution and our founders' respect for property rights that contributes to the confusion over tax expenditures. liberals think that all of the money that you earn belongs to the government. you have no independent right to the fruit of your own labors because only by big government are you ever able to make something of yourself. this view is foreign to most americans, republicans or democrats. it is a view that alexander hamilton and benjamin franklin would take issue with. but this is the political philosophy of the modern left. so when you hear tax hike proponents come to the senate floor and say we're giving these businesses and individuals all this money in tax expenditures, they're incorrectly assuming that the government has that money to give in the first place. the government does not have this money to give. that money belongs first to the people that earned it, those businesses and individuals that are american taxpayers. there are critical differences between spending and tax expenditures. for one thing, the government never touches the money that a taxpayer keeps due to benefiting from a tax expenditure, whereas with spending, the government actually collects money from the taxpayers and then it spends it. here's a more telling difference. reducing or eliminating a tax expenditure without lowering rates enough to reach a revenue-neutral level will cause the size of the federal government to grow. while reducing or eliminating spending causes the size of the federal government to shrink. now, i am open to looking at eliminating or reducing some tax expenditures as part of comprehensive tax reform, but only if tax rates are lowered enough to reach a revenue-neutral level. alternativetively, reduction or elimination of tax expenditures could be balanced with new tax cuts that are of equal or greater value to the revenue generated by the eliminated expenditures. but if tax expenditures are reduced or eliminated without tax rates being lowered enough to reach a revenue-neutral level, that is a tax increase plain and simple. we have made clear that as a matter of law and political theory, tax expenditures are not spending. now, let's turn to an examination of what they are. fortunately, we do have the definitions available. the joint committee on taxation generally defines tax expenditures as deliberate departures from generally accepted concepts of net income, usually by way of special exemptions, deductions, credits or exclusions. therefore, tax expenditures generally arise for individual income taxes and corporate income taxes. the treasury department differs from the joint committee on taxation slightly in how it defines a tax expenditure. for example, the joint committee on taxation labels deferral as a tax expenditure but treasury does not. but whichever definition one uses, it is clear that the president and the liberal proponents of tax increases are using their own politically motivated dictionary. tax expenditures have been erroneously described as -- by many as -- quote -- "loopholes "loopholes" -- unquote. this is deliberately inaccurate. a loophole is something the congress did not intend, would generally shut down at least going forward once it learned of the loophole. tax expenditures by contrast were generally placed by congress into the tax code deliberately. for example, the largest tax expenditure is the exclusion for employer-provided health insurance and benefits. that's a tax expenditure. the second largest tax expenditure is the home mortgage interest deduction. we all know why they are there, and they are there for good reason. tax expenditures are not loopholes. we are not talking here about some fancy tax scheme that a lawyer or accountant has discovered and now promotes to his clients as a way to game the system. these are broad-based tax incentives that benefit many americans. the deduction for charitable contributions is not some loophole. it was a deliberate inclusion in the code that acknowledges the need for a religious citizen to contribute to their churches. even some of the smaller dollar tax expenditures were designed by congress to go to particular industries or types of taxpayers. for example, the tax expenditure to encourage the purchase of corporate jets that democrats included in the stimulus and that the president is now criticizing. now, whether you agree with these particular tax expenditures or not, an honest debate requires recognition that they were designed by congress with economic and social goals in mind and are not inadvertent loopholes. as a matter of law, policy and constitutional government, i fundamentally disagree with those who are pushing these tax increases as part of a deal to raise the debt limit. -- or the debt ceiling. my problem is spending that has grown out of control, not the lack of revenue. according to c.b.o.'s june, 2011, long-term budget outlook, taxes are already heading higher than they have historically been. from 1971-2010, revenues as a percentage of g.d.p. have averaged 18%. since the post-world war ii era from 1946-2010, revenues were 17.7% of g.d.p. yet c.b.o. also projects that revenues as a percentage of g.d.p. will exceed 20% by 2021. even if all the bipartisan tax relief contained in the 2001 and 2003 tax acts is extended, revenues as a percentage of g.d.p. will increase to 18.4%. so i ask the question, with taxes already going higher than where they have been historically, should we raise them even more? for me, the answer is no. i know that most utahans would agree, and i believe most people in this country would agree. i suspect that even most democrats would as well. they certainly would if president obama and the liberals who pose as advocates for the middle class came clean about just how high taxes would have to go on working families to pay for the hard-core less preferred level of government. the numbers don't lie. the deficit is a symptom of out-of-control spending that has grown dramatically in recent years and is reaching crisis levels. it is not a result of too little in taxes. democrats can close all the loopholes they want and it still won't balance the books. and the democrats who are talking about the need to close loopholes and eliminate spending through the tax code need to be asked which middle-class tax relief they want to get rid of as part of their deficit reduction plan. do they want to get rid of the charitable deduction or maybe the mortgage interest deduction? maybe they want to go after people's 401-k's or i.r.a.'s or 529's. what's it going to be? let me just say something here. i'm really concerned about where we're going. we have risen this year to 25.3% of g.d.p. in spending. last time we hit that figure was in 1945 at the height of the second world war when the government was taking over almost everything to keep us from losing that war. it's certainly over 23% right now. what's it going to be? at his press event/tantrum last week, the president answered absolutely none of these questions, none. he needs to otherwise -- he needs to get serious about cutting spending. senator from rhode island. mr. whitehouse: thank you, mr. president. i'm honored to follow my distinguished colleague from maryland into this discussion about our priorities as we address the debt limit that we're proasmght i think that the leader -- leader reid was wise to choose to cancel the scheduled 4th of july recess so we can continue to work toward an agreement to prevent defaulting by the united states on our government debt and the financial consequences that would ensue here in america and around the world. as we negotiate an end to this debt limit standoff, we also obviously have to address our looming budget deficits and our looming debt which threaten to cripple our potential for economic growth in years to come. where we are on this, of course, is that president clinton put our budget on course to permanent surpluses. we would be a debt-free nation right now if the predictions that the nonpartisan budget office had put in place when president clinton left office had been kept. but, in fact, there were changes. president bush and a republican congress squandered away those surpluses with unnecessary tax cuts and unwise spending increases, and our multitrillion-dollar deficits have resulted. we must now fix the budget and bring it back into balance. so where are we in this standoff? well, we need to cut spending. democrats and republicans agree on that. we need protect ordinary families who enjoy ordinary levels of income from tax increases. democrats and republicans agree on that. the disagreement is whether we also need to raise some revenues in other areas to help balance the budget. areas like oil and gas and ethanol subsidies, closing corporate tax loopholes, and putting an end to high-income tax dodge schemes. on that front, i rise in support of leader reid's resolution calling for a deficit-reduction package that includes a more meaningful contribution from millionaires and billionaires. the republicans are threatening that they'd rather let this government default on its obligations than to, what they call, raise revenues by requiring the wealthy to pay their fair share. just last week, senate republican leader mitch mcconnell called on president obama to take any raised revenues off the table and to balance the budget solely on spending cuts that affect the middle class and lower-income families. in an opinion piece on cnn.com, senator mcconnell proclaimed tax hikes can't pass the congress. well, let's pull the curtain back and take a little glimpse behind the curtain at who the republicans are fighting so hard to protect. here's a building in new york stow park avenue, the helmsley building. because this building is large enough to have its very own zip code, we know from actual i.r.s. information -- not projections, not guesses, not conclusions drawn from rates -- from actual paid-in i.r.s. information, that the wealthy and successful individuals and corporations that call this building home paid a 14.7% total federal tax rate in the last year that they've done the calculation, 2007. that is lower than the actual tax rate, on average, of the new york city janitor or doorman or security guard who would work in this building. it is upside-down. the people who serve the occupants of this building pay a higher tax rate than the occupants of this majestic building. the tax gimmicks that let those occupants pay a lower rate than the people who take care of the door and the cleaning and the security for them, that is what the republicans are fighting to protect. and this problem isn't just a fluke in the helmsley building. each year, the internal revenue service publishes a report that adds up all the taxes paid by the 400 highest income earning americans. i spoke earlier this year, several times actually, on last year's report, which included data from 2007, like the same year as the helmsley building. in that year, these super high-income earners, making on average a third of a billion dollars approximately -- a billion with a "b" -- they paid a lower tax rate in 2007, the 400 of them did on average, than an average hospital orderly who's a single payer pushing a cart down the halls of rhode island hospital at night. in may, the i.r.s. published updated data on the top 400 income earners for 2008. let's take a look at the status of the top 400 earners in that more recent year. well, they're down from a third of a billion dollars, on average, to over a quarter of a billion dollars each. and certainly we can applaud that kind of success in america. that's definitely the american dream come true. but, on average, they paid an average tax rate of 18.2%. that's what they actually paid. that's what they put into the i.r.s. once you get through all the tax dodges, all the different schemes, all the different deductions, all the different rates. when you actually put the pen to the paper at the bottom line, it's 18.2%. we spent a lot of time around here debating whether the top income tax rate should be 35% or 39.6%. folks, that is not what they are paying. the tax code is so filled with special provisions that tend to exclusively or disproportionately benefit the wealthy, that the highest 400 income earners paying -- earning more than of a quarter of a billion dollars in one year paid an average tax rate of 18.2%. the -- this means that the 400 highest-earning individuals in the nation in 2008 paid the same effective tax rate as a truck driver in rhode island. according to the bureau of labor statistics, on average, an ordinary truck driver earns $40,200, which is about the place in the tax code on the way up where you first hit paying 18.2% of your income in taxes. so what the republicans are asking as part of the debt limit compromise is that we cut employment and job-training support now, at a time of record joblessness, while they continue to fight to make sure that people making a quarter of a billion dollars a year pay lower federal tax rates than average middle-class families. here's another building that has a little story to tell. this is a building called ugland house. it's over in the cayman islands. this building doesn't look like much. it's pretty nontkes script but over 18,000 corporations claim to be doing business out of this building. 18,000 out of that little building. clearly what is going on is that those corporations are hiding through shell companies phony corporate identities that they and wealthy taxpayers use to hide assets and play tax games with the i.r.s. this kind of mischief down in the cayman islands and elsewhere through these tax dodges is estimateed to cost us as much as $100 billion every year. as part of a debt limit compromise, the republicans are asking us to cut america's investment in science, cut america's investments in technology. and at the same time they're fighting to protect corporations that hide in offshore tax havens so that the honest american taxpayer has to pick up the burden for them. that's what they're fighting for whe