Transcript of Van Hollen Remarks at CAP: An Action Plan to Grow the Paychecks of All, Not Just the Wealthy Few
VAN HOLLEN: Well, good morning, everybody. Thank you. Thank you, Neera. And I want to start by thanking you, Neera, Governor Strickland, Winnie and the entire team here at the Center for American Progress for the opportunity to be with you this morning, and most importantly, for the contributions that CAP makes to the great public policy debates of our time. You're a great incubator of ideas, and just as importantly, how to implement those ideas in the real world. And many of the proposals you will hear today have their roots in ideas that have been percolating here at CAP for years.
Today, I want to present an action plan to respond to what I believe is the defining economic challenge of our time, how America can lead the world in sustained economic growth in a way that provides for more broadly shared prosperity. We must ensure that all Americans who work hard and play by the rules are rewarded with a fair share of a growing economic pie.
There are, of course, competing ideas for how to do this, and as Neera said, we're going to have the budget season shortly in Congress, over the next couple months. So in the next couple months, the president, the Republicans, Democrats in Congress will put forward their budget blueprints for the nation. And while these budgets are loaded with numbers, at their core, they reflect the plans for the future direction of the country, and at their best, they should reflect the priorities and values of our nation.
So after I discuss the major economic challenge that we are facing, I want to review the highlights of the budget plans that Republicans and Democrats have put forward to date and see how they measure up against the challenge we face. And then I want to propose a new action plan for your consideration and the consideration of my colleagues, an action plan to grow the paychecks of all Americans, not just the wealth of a few.
So this is going to be the order of the presentation -- talk about the economic challenge, how current budget proposals stack up in meeting that challenge, and then an additional action plan that I think we need to better meet that challenge.
So the economic challenge we face was well captured in the jobs report released just last Friday by the Department of Labor. First, there's the good news part of the story, and it's very good news. The economy has continued to grow, and more Americans are finding jobs. Last month, our economy created 252,000 jobs, capping the best year of job growth since 1999.
The unemployment rate fell to 5.6 percent, which meant the unemployment rate fell faster last year than any year since 1984. The private sector has now added jobs for 58 consecutive months, 11.2 million jobs total. Gas prices are down, the stock market is up, and the deficits have fallen rapidly.
This is all very good news, and it would not have been possible without the tough decisions President Obama made right after he was first sworn in to stop the economic free-fall and put the nation on the path to recovery.
But I think everyone here knows there was also a sobering side to last Friday's jobs report. One economic indicator remains grounded, workers' paychecks. In fact, after a pretty solid increase in November, average hourly wages actually went down a little in December. And it was captured in The New York Times business section headline that came out the day after the jobs report, "Job growth fails to help paychecks of workers." That tells the sobering side of the story.
But what I want to emphasize today is that this is not a new story. Let me show you the first slide here. This shows what's happened in the recovery since the year 2010. The red line is the jobs increase, which you see is steady. The blue line there reflects real wages -- flat, very stagnant.
But what's even more surprising to many people is that this is not even a new story from last month or the month before, or even from 2010, which is where this particular slide starts. This is a story that's been going on for a much longer period of time.
Now, if you look at this slide right here, you will see that the dark blue line on top -- I don't know if everyone can see the chart, but that line shows productivity growth in the economy beginning in 1950. You should all have handouts, if you don't. The light blue line, which is the bottom line at the end, reflects a typical worker's compensation, wages and benefits.
And if you look at the far left of the chart, the beginning -- that's 1950 -- you will see that the productivity growth line is rising, and the typical worker's compensation is rising with it. Those lines are joined. That's the kind of economy where the pie is growing and everyone's getting a bigger slice.
But since the 1970s, you can see those two lines diverging, and there's been a troubling trend ever since. Productivity, which is that top line, continues to go up and up. The stock market has gone up and up. But paychecks and compensation for most Americans have been very flat in real terms. And as you can see, this has become a chronic problem dating back to the 1970s. There's a disconnect between the value workers are creating and what they are taking home. So it's no wonder that so many Americans feel that they're on a treadmill or falling behind.
So if those productivity gains, that top line, have not flowed into real wages and compensation for workers, where have they gone? Where have they gone? Well, this chart tells the story. The income gains from increased productivity have gone overwhelmingly to those at the very, very top of the income scale, the top 1 percent.
The after-tax real income of the top 1 percent grew by 200 percent between 1979 and 2010, five times as fast as the income for the 60 percent of people in the middle, the middle class. And these are numbers from the nonpartisan Congressional Budget Office.
Now, I think people have seen the growing body of economic evidence that shows that the lopsided distribution of income not only hurts the middle class and those working their way into the middle class, it also slows down overall economic growth. A steady stream of reports from economists at CAP, the OECD, Standard & Poor's, the IMF, and many others, show that when the rules of the game are rigged to channel all the gains to the very top, it slows down the pace of economic growth throughout the economy.
So this is not just a question of economic fairness, it's a question of economic growth. A pro-growth strategy is one that promotes broadly shared prosperity. Giving working Americans a larger share of the economic pie can make the entire pie to grow faster. And even the wealthy can be better off with a smaller slice of a more rapidly growing pie.
Henry Ford understood this principle. He doubled the pay of his auto workers, and as a result, they became customers who could afford to buy the cars that they were making on the assembly line. Higher wages resulted in Ford Motor Company selling more cars, and everyone was better off, Henry Ford and his workers.
So our challenge is to implement a strategy to rapidly grow our economy in a way that creates greater prosperity for all, not just the wealthy few at the very top.
Now, as I said, the upcoming budget debate will give the American people an opportunity to hear very different approaches to this challenge, and I look forward to that debate. So let's look at the budget plans that Republicans and Democrats have proposed to date.
There is no simple solution. We all know that. But one thing is clear. The tired Republican mantra of cutting tax rates for the very wealthy will only make this problem worse. The Democratic approach of cutting special interest tax breaks to invest in expanding economic opportunities for all provides a solid foundation for an economy that works for everyone, not just the well-connected elites.
So let's quickly take a look at each plan, starting with the Republican budget. Republicans in Congress, not necessarily around the country, but in Congress, continue to cling to the trickle-down theory of economics, right, the idea that cutting tax rates for very wealthy people will give them even more money to spend and invest, and that will trickle down to the masses and lift all economic boats.
In fact, Republicans sometimes argue that these tax cuts for the wealthy will not increase in larger -- will not result in larger deficits because they will generate so much economic activity that the lost revenue on the tax cut will be mostly recouped.
I think we all know the problem with this trickle-down theory. It has already crashed miserably in the real world. Right in the aftermath of the 2001 and 2003 tax cuts, we had a sluggish economy and stagnant incomes for most Americans. The only things that went up were the incomes of the already wealthy, who got an additional tax cut, and the deficit, which went through the roof.
But here's the thing. Our Republican colleagues in Congress remain undeterred by this real-world experience. Here are the tax highlights from their last budget proposal. They would cut the tax rate for the folks at the very top by a whopping one third. They would take it from 39 percent today down to 25 percent. You can do the math. When you give very wealthy people, when you give millionaires a big tax break, they're going to do a whole lot better. In fact, as this slide indicates, the average tax cut for millionaires is at least $200,000 a year.
And hours after the new Congress was sworn in last Tuesday, they changed the rules of the House to make it easier to disguise the deficit impact of such tax cuts for the wealthy. Since the real-world math didn't work, they want to invent a new Congressionally imposed creative math.
Far from lifting all boats, this tax cut for the wealthy will further squeeze middle class taxpayers. The well respected and nonpartisan Tax Policy Center has estimated that a similar deficit- neutral plan offered by candidates Mitt Romney and Paul Ryan would have increased average taxes on middle-class families with children by more than $2,000, right? If you cut the top rate for the folks at the top, obviously, you've got to recoup a lot of income.
If you say you're not going to do it -- you're going to do it in the deficit-neutral way and get rid of their deductions, well, you can try and do it, but there are not enough deductions to recoup all of that lost revenue, so you've got to go after deductions and tax benefits for people in the middle and down the ladder. And that's why their tax proposal mathematically increases the tax burden on middle class families, according to the nonpartisan Tax Policy Center.
So what else do they do? Well, to add insult to injury, the Republican budget dramatically reduces various tax benefits for middle class and lower-income Americans, right? It fails to extend enhancements to the child tax credit, to the Earned Income Tax Credit, and the college tax credit, called the American Opportunity Tax Credit. The Republican budget also wipes out the tax credits that are helping millions of Americans afford health care under the Affordable Care Act.
Taken together, these budget choices will cut tax benefits to millions of working Americans, from single parents earning the minimum wage to families of college students with incomes up to $180,000, all while cutting tax rates for millionaires.
Republicans have also so far refused to join us, the Democrats on the Hill, to close tax loopholes that have led a growing number of -- led to a growing number of what are called corporate conversions, a maneuver used by some corporations to move their addresses overseas, change their American identity in order to escape their tax responsibilities to American taxpayers. And by the way, when they pay less, everybody else pays more.
Meanwhile, the Republican budget plan absolutely slashes the part of the federal budget we use to make strategic national investments in education, in scientific research and innovation, and our vital national infrastructure, investments that historically have helped power our economy and build ladders of opportunity essential for a thriving middle class.
Here's the chart. Now, this shows the amount that we spend on the non-defense discretionary part of the budget, the part of the budget we use to invest in education and scientific research, as a share of the economy over time. Now, when I said "slash," I don't use the word "slash" in that part of the budget lightly. You can see that red line below the straight line across. That's what their budget does to this investment portion of our budget.
As a share of the economy, the Republican budget cuts the domestic discretionary budget almost 40 percent lower than the lowest level in the last 50 years. Take the lowest level in the last 50 years, they cut this part of the budget by 40 percent lower than that. So if you apply that proportionately, it will have an absolutely devastating effect on investments in education and scientific research and things to power the economy.
Now, I think most Americans would agree that that combination of policies -- cutting tax rates for the wealthy, increasing the tax burden on working Americans and cutting vital public investments -- will not result in sustained economic growth with more broadly shared prosperity. In fact, it will stack the economic deck even more heavily in favor of the very wealthy and very powerful.
So let me just briefly hit the highlights of the current Democratic budget proposals, which are aimed at growing the economy and growing opportunities for all Americans. So I don't know if you can read this. I'm just going to tick through them. I do think it's important to understand that this is a description of current policies that have been put forward by the president, by Democrats in Congress, which would go a long way to lifting our economy and opportunities for more Americans.
And if you look at this, you will see the infrastructure initiative the president has proposed, closing a lot of the tax breaks that perversely incentivize American corporations to move jobs and capital overseas, close those, use the savings to invest in infrastructure here at home, and establish an infrastructure bank for public-private partnerships.
We also know that investments in early childhood education are critical, and the president has a $76 billion initiative in the budget to do that, one that was adopted by Democrats in Congress. We increased our investment in scientific research, which has showed huge dividends to the country over the years. We provide sequester relief. If we're going to do on the defensive side, we should do it the non-defense side.
We make permanent a number things like the CTC, the EITC and the college tax credit. We increase that EITC for childless workers, something that Paul Ryan, to his credit, has also embraced, but it's not in their budget.
We make permanent the R&D tax credit for businesses, small business expensing, clean energy initiatives, increase the minimum wage to $10.10 an hour, equal pay for equal work, student loan relief, a number of initiatives we put forward, earned paid sick leave so people don't have to lose their means to support the family when a loved one gets sick, comprehensive immigration reform, which the Congressional Budget Office indicates will help grow the economy, and modernizing regulations to ensure fair payment of overtime work. And the administration just came forward with a proposal the other day.
So those are some of the foundations that the budgets provide right now. Now, I think those policies will absolutely help boost the economy. They will absolutely help provide for more shared prosperity. It's a strong foundation.
But I believe that in order to tackle that decades-old problem of chronic stagnant wages and very flat incomes for most Americans, we need to go further. And that's what I want to talk about today, which is an action plan to grow the paychecks of all, not just the wealth of a few. And it begins with this observation. Our tax code today is stacked in favor of people who make money off of money and against those who make money off of hard work.
First, let's take a look at the size of spending that takes place through the tax code. Take a look at this chart. This is entitled "Spending through the tax code is very high." And if you look at that red bar, that very high red bar, that's $1.4 trillion a year! That's the number that the nonpartisan Congressional Budget Office says we are spending through the tax code from tax breaks like deductions, credits and tax exemptions.
Now, I just want to briefly go over the concept of spending through the tax code. Now, economists call these tax expenditures because using these mechanisms to shelter income from a tax that is due is simply another way of delivering an economic benefit, just as you could deliver that same economic benefit through direct government spending, right? If the government provides any of you with a tax exemption worth a $1,000, it's the same economic benefit as if the government gave you $1,000.
And take a look at this chart. What it shows is more is spent on spending through the tax code through deductions and tax exemptions each year than on Social Security! That's the next bar over -- more spent through the tax code through these exemptions than on Medicare and Medicaid combined each year, more spent through tax breaks than all our defense spending and all our non-defense spending.
Now, a lot of these tax expenditures have sound public policy purposes, right, like promoting savings by excluding retirement -- promoting savings by including money we put for retirement savings, like in the business world, providing the research and development tax credit to promote investment and innovation.
On the other hand, there are some provisions in here that are only in here because powerful elites with well-paid lobbyists have succeeded in getting themselves special breaks, like the tax advantages for corporate jets or hedge fund managers. And so when you look at the distribution of these tax expenditures, who they go to on the income scale, this is what you find.
That red piece on top of that bar on the far right shows that according to the Congressional Budget Office, 17 percent of these tax expenditures go to the top 1 percent of income earners, right? The top 1 percent gets 17 percent of the tax benefits in the tax code from deductions or tax exemptions, according to the nonpartisan Congressional Budget Office. That's $150 billion in tax benefits through the code every year.
Now, why do the top 1 percent have this huge, disproportionate share of tax benefits? Well, one big reason is they have a lot of income from things like the sale of stocks, and the tax code imposes lower tax rates on that kind of unearned income than it does on much income earned through hard work. Indeed, the current system allows billions of dollars of capital gains to pass tax-free to heirs of multi-million-dollar fortunes. So not surprisingly, because the tax code favors those who make money off of money, the disparity in wealth, right, the accumulation of income and assets over time has grown even faster than the disparity in incomes.
Take a look at this chart. And again, interestingly, you see back in the 1920s huge wealth disparities, but it came down and down and down during that period of time when worker productivity was matched with wages. But again, beginning around the late 1970s, you see this wealth disparity taking off. And now the top 1 percent wealthiest households own 42 percent of the wealth of the country. That's because we have a tax code that reinforces this preference for wealth over work.
Let's just go back to those -- that early chart where we began to tell the story of that separation between worker productivity and flat wages. So the proposal that I'm making today to reform the tax code began from that premise, that we need a tax code that rewards those who earn their living through hard work and rebalance it against the fact that it's tilted today in favor of people who make money off of money.
And it attacks this chronic problem of frozen paychecks and stagnant middle class incomes from both directions, right? First, it's designed to promote bigger paychecks. And second, it lets middle class workers and those working their way into the middle class keep and save more of what they earn.
So let's start with the incentives for higher pay and growing wages. Look, my goodness, if the tax code can be used to provide preferences for corporate jets and for racehorses, surely we can use the tax code to incentivize corporations to give their employees pay raises or invest in apprenticeship programs that result in better skills and bigger paychecks.
And in the next few days, I will introduce the CEO-Employee Paycheck Fairness Act which is designed to encourage corporations to give their employees fair pay increases when their top executives are getting big bonuses. It's very simple. It says that corporations cannot continue to take unlimited tax deductions, right -- we saw those tax expenditures -- unlimited tax deductions for their CEO and executive bonuses unless they're giving their employees a pay raise that reflects worker productivity plus cost of living increases.
You saw that chart earlier. You saw that beginning in the late 1970s, productivity kept going up, worker -- average worker compensation flat. Let's see what happened to CEO and executive compensation. Here it is. This chart shows you that back in the late '70s, CEOs received 30 times the compensation of the average worker -- 30 times.
Today, CEO compensation has skyrocketed to almost 300 times compensation of the average worker, right? The average CEO compensation at the top 350 firms is over $15 million a year, and between the year 2007 and 2010, corporations claimed a total of $66 billion in deductions for CEO and other executive compensation.
Now, under the bill I'm introducing, corporations could still deduct up to $1 million for their executive salaries -- up to $1 million. But they would not get to cut their workers' pay or lay people off and then take those huge tax deductions for their multi- million-dollar bonus, right? If a corporation is doing well enough to give its executives big bonuses, it should be giving its employees a raise.
So this bill's very simple. No raise for workers, no corporate tax breaks for executive bonuses. It's a common sense step we can take today to help make sure the economy works better for everyone.
We're also looking into a variation on this incentive, linking the corporate tax deductions for executive bonuses and performance pay to the availability of similar profit-sharing plans for regular employees. As studies by CAP and others have shown, there is solid evidence that giving workers a stake and voice in the companies they work for not only benefits workers, it makes those businesses more competitive, as well.
I also believe we need to support those businesses that invest in building the employee skills that lead to higher pay. Apprenticeship programs are proven pathways to successful careers and higher incomes for workers, while making those businesses more competitive. Yet apprenticeships are underutilized here in the United States compared to our economic competitors.
Here, about 150,000 people start apprenticeships each year. As CAP has pointed out, if we launched as many apprenticeships per capita as they do in Germany, we'd have about two million more here in the United States each year. Some states, like South Carolina, offer tax credits for apprenticeships. We should adopt these successful models to incentivize more businesses to invest in apprenticeships and other proven job-training programs that allow employees to earn while they learn. And that is part of this action plan.
Now, here -- the first two elements of this plan are things I just talked about, CEO-Employee Paycheck Fairness Act and business tax credits for apprenticeships and training programs. Those are using the tax code to try and incentivize higher pay for workers and more skills that lead to higher pay.
But as I said, we have to address middle class wage and income stagnation from both sides. We need to boost wages and use the tax code to do that, but we also need to allow middle class workers and many of those working to join the middle class to keep more of what they earn. And so the next item on here begins in a very important way to address that, to try and boost the take-home pay of middle class workers and those who seek to join the middle class and allow them to save more of what they earn.
Again, as I said, the current tax code is skewed in favor of people who make money off of money. We want to make sure that the tax code works for people who make money off of hard work. And that's why I propose a paycheck bonus tax credit of $1,000 per worker or $2,000 for a two-earner couple to boost the after-tax take home pay of middle class Americans. I also intend it to be at least partially refundable, and we'll look at ways to do that. This paycheck bonus credit would be indexed to inflation and phased out at incomes of $100,000 per individual, $200,000 per working couple.
Now, as we shape the tax code to give hard-working middle class Americans more take-home pay, we should also encourage Americans to save for their future. This is another area where CAP has done much good work. Not surprisingly, Americans who are struggling to pay their bills don't have a lot of leftover income to put away for their future needs. And while the current tax code provides for such savings vehicles like 401(k) plans or Individual Retirement Accounts, this can be difficult to access or set up, some employers don't provide them, and the top 5 percent of income earners get more tax relief from these savings plans than the bottom 80 percent.
As a result, the typical worker nearing retirement age has only saved up enough in an IRA or 401(k) to provide $500 a month in retirement income. So I propose to build the savings of typical workers with a saver's bonus of $250 each year that an individual directs at least $500 of his or her paycheck bonus tax credit or Earned Income Tax Credit into a tax-preferred savings account. Studies show that even small financial incentives can encourage many more people to participate in these savings plans.
We also need to make it much easier for people without access to those plans through their employers to set up these accounts. Last year, President Obama took a major step forward by providing an easy way for employers to allow their workers to deposit some of their paychecks into designated myRA accounts that the Treasury Department will be rolling out.
As part of this action plan, I propose to allow taxpayers to use their tax returns to immediately direct their $500 contribution, which would earn the $250 saver's bonus, and do it right there, direct their funds in the matching bonus to the savings vehicle of their choice. Right there on your tax return, check off you're going to do $500 or more direct to your savings, get the $250 saver's bonus and do it right there on your tax form.
If a working couple were to each direct $750 of their paycheck bonus credit which they'll be getting, which will be new income to that household, in a sense, or someone receiving their EITC were to do that, after 40 years, they would save $300,000 under reasonable investment growth assumptions.
This plan also recognizes -- so I talked about the saver's bonus at the top of the list there, the next item relates to take-home pay for two-earner families. And this plan recognizes that the current tax code creates a disincentive for second earners in a household to join the work force because the first dollar earned by that second earner is taxed at the rate on the last dollar earned on the household member who is already in the workforce.
And this marriage penalty is especially pronounced for families with young children or elderly live-in dependents who face large child care or adult day care costs, if the second spouse chooses to enter the work force to support the family.
So to address this, we should provide these families with a 20 percent tax deduction on up to $60,000 of their income. This rewards work, reduces the marriage penalty, and makes the tax code fairer to second earners and their families.
In addition, we should modernize the child independent care tax credit. The cost of child care has increased dramatically since 2001, but the cap on eligible expenses has remained the same. It's remained stuck at $3,000 for one child -- this is eligible expenses -- and $6,000 for two or more children.
In addition, this cap on the child and dependent care tax credit is incredibly poorly designed. It phases down starting at lower income levels, meaning virtually no one can access its higher level of benefits, the way it interacts with other parts of the tax code. We should modernize this credit by significantly raising the amount of the eligible credit, indexing it to inflation so it doesn't get stuck again, and making it refundable so that millions of families that struggle the most to pay for child care will be able to benefit from this credit. And the details are in the handouts that you have.
We estimate that over the next 10 years, the elements of this plan will provide over $1.2 trillion in tax benefits that are aimed directly at boosting the take-home income of working middle class taxpayers and those working to join the middle class. More than 150 million Americans will benefit in some real way from this effort to raise flat incomes experienced by so many.
And this plan to reward work is fully paid for by changing system some of those ways that our current tax code is wired in favor of making off of money, instead of earning money from hard work. So it's paid for with a combination of two sources.
First, it curbs the tax breaks that favor portfolios over paychecks. As I discussed earlier, the top 1 percent of income households currently receive 17 percent of the benefit of major tax expenditures, the spending in the tax code, a total of about $150 billion a year or more than $1.5 trillion over a 10-year budget window. Without increasing anybody's top tax rate, we can reduce this disproportionate share of benefits and dedicate the revenues to tax relief for hard-working middle class taxpayers and those working to join them.
Second, we should adopt a high roller fee to curb financial -- excessive financial speculation. By acting in coordination with the European Union and major financial markets, the United States can reduce the kind of market gambling that creates no value for the economy by placing a tiny fee on trading in the financial markets. We already place a very tiny fee on stock transactions to fund the Securities and Exchange Commission, and many other countries, including the UK, France, Singapore and Hong Kong have some form of these financial trading market fees.
The EU is moving toward a trading fee of .1 percent, 10 basis points, on a broad range of financial market transactions. For comparison purposes, the United Kingdom already applies a fee that is five times higher than that on their stock trades, .5 percent, 50 basis points. A .1 percent financial market trading fee would be virtually imperceptible to average investors, who already bear transaction costs on every trade that some estimate to be three times higher than that.
At the same time, this fee would rein in the kind of computerized, high-speed trading that skims value from regular investors without adding value to the economy. American financiers and high rollers have claimed that such a fee would push financial trading overseas, but if we do it in concert with others, we can curb unproductive financial speculation and replace it with a source of revenue to support the action plan to grow the take-home pay of 150 million Americans, and in doing so grow the whole economy.
As I said at the outset, this proposed action plan builds on the already strong foundation of the budgets President Obama and Democrats in Congress have proposed in the past, those budgets which steadily reduce our deficits over the next 10 years, strengthen the ladder of opportunities to help Americans achieve the American dream.
This action plan, which by itself will not add a penny to the deficit, will further help us meet the economic challenge of our time, a rapidly growing economy that works for all Americans, not just those already at the top.
In closing, let me leave you with this final comparison of the tax differences between the Republican approach and this action plan, what it would mean for a family in the real world. As I indicated earlier, the trickle-down tax cuts for the wealthy in the Republican budget result in an average tax cut of over $200,000 for millionaires. And at the same time, as you saw earlier, the Tax Policy Center found that a comparable Republican plan presented by Mitt Romney and Paul Ryan would have the effect of raising taxes on middle-income families by an average of $2,000.
Now, at the outset, when Neera was making the introduction, she mentioned the fact that CAP had looked at a family with some kids at the $80,000 income level and said that over a period of time, that family had lost about $5,000 as a result of the forces I've been talking about in my speech.
Let me show you what this plan would do compared to the Republican plan for a middle class family. As I said, the Romney-Ryan plan, which is very similar to the one in the Republican budget, would increase taxes by $2,000 on a typical middle class family with kids. This plan -- and we took an $80,000 family. We did not coordinate in advance. This is a typical working family, a two-earner couple paying for child care for one child on an $80,000 income. And under this plan, they would get a $4,400 tax benefit, allowing them to keep more of what they earn to help their family.
So I look forward to this debate going forward. We need an action plan that addresses this problem from both sides, as I said. We need to encourage companies and businesses to give their employees a fair wage, and we need to allow middle income families and those families working their way into the muddle class to keep more of what they earn. And in doing so, we need to build a fairer tax code that rewards paychecks for work and not just money from making money. And I look forward to this debate going forward.
I thank you for your attention. And again, I thank CAP for all their important contributions to this debate. Many thanks.
NEERA TANDEN: Thank you so much for laying out so many critical new ideas!
I think we have time for just a few questions, so as people are thinking through their questions -- and Billy will be here to ask your -- to give you a microphone -- let me just start with one brief question.
You know, there's a debate in Washington, there seems, about fairness versus economic growth. And I just thought it'd be helpful to -- you talk a lot about how the tax system could be more fair, how we could have a more fair economic system to boost wages. How do you see that relating to economic growth?
VAN HOLLEN: Well, I think that's a great question. As I indicated in my remarks, the economic evidence indicates that our entire economy will grow faster if more people are earning the benefit of their hard work and productivity. When you have that big gap between worker productivity and income, it doesn't just hurt the middle class families with flat income, it actually slows down overall economic growth.
So if you want a growing pie for all, we need a pie where everybody can get a little bigger slice. And as I indicated earlier, even the folks at the very top can do better with a somewhat smaller slice of a larger pie. They will end up ahead of the game, just like Henry Ford was ahead of the game.
TANDEN: Great. Over here in the middle (inaudible) with the tie. Could you just identify yourself?
PETER ROSENSTEIN: Yes. Peter Rosenstein (ph) with the American Academy of Orthotists and Prosthetists. Congressman, I think the plan is great.
VAN HOLLEN: Thank you.
ROSENSTEIN: Obviously, the problem is, when Democrats controlled both houses and the presidency, we couldn't do this. We have clearly not gotten this message across because you have the largest majority you have now of Republicans. Most of this, we think, will most likely go nowhere.
How do you convince voters in very simple language that this is good for them? Because clearly, they don't understand it, by their votes. So we've just heard an hour of a discussion that's very complicated, using a lot of federal legalese. How do you put that into an ad of 30 and 60 60 seconds so that the average middle class voter understands what you're talking about and will vote for Democrats to get this done in 2016?
VAN HOLLEN: So first of all, I think the average voter out there -- the average voter is one of those voters who's feeling the squeeze we talked about, right? And that squeeze didn't begin last year or the year before. That squeeze has begun over a period of time. And as I indicated, I think that a lot of the proposals Democrats have put forward in the past will help address that issue, but I don't think they address it with the full force that is necessary to move that graph that we saw, the one with the rising productivity but flat wages. And so that's why I'm proposing this new action plan.
And I believe when you go around the country and just show, you know, working Americans what the differences in the plans will be, that the Republican plan that was put forward in the Congress last year that mirrors the Romney-Ryan tax plan will squeeze middle class taxpayers, and that this plan will provide over $4,000 worth of new income to a typical $80,000 two-earner family with a kid, that that tells them we're actually focused on things they care about, their pocketbook and the economic squeeze.
So you know, look, I see this as the start of a conversation. We want everyone to participate in this debate. But I do believe that this action plan will, you know, in time get the attention of the American people, and I look forward to the continuing discussion.
TANDEN: Over here on this side.
ROBERT SCHROEDER, MARKETWATCH: Hi Congressman, Rob Schroeder from MarketWatch. Just wanted to ask about the financial fee. What transactions in particular would this apply to? Would it just be stocks? Would it be retail investors? And can you talk about the timing? Why now? You mentioned the market's up.
VAN HOLLEN: Sure. Well, this is -- this would apply in secondary markets. It would apply to, yes, stock trades. As I indicated, we already have a very small fee on stock trades to help fund the Securities and Exchange Commission. And the UK already has a 50-basis-point fee on stock trades.
What this proposes is a fee one fifth that size, right, one fifth of what the UK has on stocks, but on a broader range of market trading, so in equities, in derivatives, which really matches the kind of approach that the European Union is looking at.
So if you take a look at what the EU is currently looking at, we intend to work with them and in concert with them and other major markets to address that issue and address, you know, the argument that if you do it unilaterally, the trades will move to another financial center.
I mean, interestingly, you know, the financial sector is pretty good. I don't blame them. They go over to the European markets. They say, Don't do this because otherwise, all the trades will flow to the United States, and then they come to the United States and say, Don't do this because all the trades will flow over to London and European markets. So that's why we need to do this together.
But in addition to the revenue, as I indicated, there are important policy reasons to be imposing this small fee, dampening excessive speculation, and as I said, dealing with this issue of computerized high-speed trading, which essentially skims value out of the economy for the high-speed traders, but doesn't do anything for everybody else except for, in fact, reduce their shares.
TANDEN: Over here. I think that's the last question.
KELSEY SNELL, POLITICO: I'm just wondering if you have a timeframe in mind for when you'll finalize the details. You said you hadn't figured out quite yet how the -- the tax break part would work. And do you know what the increase on (inaudible) dividends would look like? Because Chairman Ryan's spokesman has already dismissed this plan as a tax hike.
VAN HOLLEN: Well, first of all, as I indicated, we're going to -- we're moving forward on pieces of this right away. I'll be introducing the CEO-Employee Paycheck Fairness Act within the next 10 days. And then we'll continue to put into legislative form some of these other provisions over a period of time. But we want to kick off the debate. There's a lot of detail here, but obviously, we need to flesh it out more.
Hey, I'm not surprised by the response from Republicans on the Hill, who as I indicated earlier, have put forward a budget that cuts the top tax rate for millionaires by a full one third, which has the effect of squeezing middle class families.
You know, Republicans always say they're for smaller government and less spending. When it comes to the tax code, they're simply for spending money through the tax code on powerful elites and the already wealthy. As we saw earlier, more is spent through our tax code each year than is spent on Social Security or on Medicare or Medicaid combined.
And Republicans have done a pretty good job of steering that $1.3 trillion of tax expenditure benefits to folks at the very top, which is why you see rising wealth inequality that's absolutely staggering, right, 42 percent of households -- excuse me, 1 percent of households owning 42 percent of the wealth in the country.
So apparently, that's the Republican plan, the status quo. In fact, they want to make the status quo even worse when it comes to middle class families, as we saw here.
TANDEN: Thank you so much. Thank you for the great ideas that we look forward to debating and...
VAN HOLLEN: Thank you, all.
TANDEN: (inaudible) months ahead.
VAN HOLLEN: Look forward to the discussion.
TANDEN: Thank you.