At Press Conference, Portman Criticizes Democrats’ Latest Reckless Tax & Spending Spree
At a press conference earlier today, U.S. Senator Rob Portman (R-OH) joined his fellow Senate Finance Committee Republicans in discussing the Democrats’ new reckless tax and spend proposal – dubbed the “Inflation Reduction Act” – which will raise taxes for millions of lower and middle-income Americans amid high inflation and economic stagnation. Portman discussed his concerns with the new book tax proposed in this bill, which will place a massive burden on manufacturers all around the country – leading to a decrease in domestic business investment and job creation and an increase in prices for working families already facing skyrocketing inflation.
A transcript of his remarks can be found below and a video can be found here.
“So, the legislation we apparently are going to be asked to vote on this week is called the Inflation Reduction Act. And, in fact, it is the 'Inflation Increase Act' and we've seen here today why that is true. When you put taxes on the economy that fall to workers and fall to consumers and fall to shareholders, it increases inflationary pressures. I'll give you an easy example of this, the tax that we're talking about, and remember this is $326 billion of new taxes, about 30 percent of it is going to fall on consumers. That's based on what the University of Chicago and other analyses have shown. So, 30 percent of this is going to flow right down to consumers. Now, when consumers I represent go to the store right now, it's eye-popping.
“Whether it's food or whether it's clothing or whether it's buying an electronic, everything, costs have gone up dramatically. We're looking at the worst inflation in 40 years, so it's clearly inflationary. But, it's even more than that because the burden of this taxation, according to the nonpartisan Joint Committee on Taxation, but also other analyses that are out there, falls on workers as well. So, the very people whose wages are not keeping up with inflation, with inflation at 9 percent and wage growth well below that, people are feeling like they can't get ahead.
“And, if you're on fixed income, it's even worse, but for these folks that work in these companies, and remember half of this is going to fall on manufacturers, they're going to see their wages and benefits be reduced because of this taxation, at a time when they're having a really hard time keeping up with current inflation. So, it doesn't help with regard to inflation. I don't know where that name came from, but it's obviously the opposite.
“Now, there is a group called Penn Wharton Economic Studies and they are often cited by the Democrats when they think that their work helps them. But they've looked at this thing, on an objective basis, and said, 'Actually, in the first couple years, it increases inflation' despite everything that's being said. So, this is something that we Republicans are obviously going to block, but I hope you'll ask some tough questions too. How can you call it the 'Inflation Reduction Act?'
“We just spent a few hundred billion dollars on research and development. To help who? Manufacturers. To help ensure that America could be competitive in the global economy. This is the CHIPS Plus legislation that was just passed. So, on the one hand, we're saying to manufacturers, 'We want to help you to become more competitive.' On the other hand, we're saying to manufacturers, 'We're going to take away one of the benefits that encourages investment and economic growth.' And, by the way, we're not alone in this in this country.
“All of the other developed countries in the world also offer some kind of bonus depreciation. In fact, of the OECD countries, the top developed countries in the world, we're below the average already. We offer less than they do. So, this puts us at a competitive disadvantage with countries around the world as well. It's just the wrong thing to do at the wrong time. Here's an alternative, we all recognize inflation is a problem. Let's work together. Let's work together to do what we did at the end of 2019, 2020 when we had unemployment low, when we had inflation incredibly low, when we had 3 percent wage growth for 19 straight months, all of which was well above inflation. We know how to do that, it's pro-growth policies. It's regulatory relief. It's not increasing taxes, it's having more sensible taxes. It's ensuring that we do increase the supply in this country. We know what we have to do. This, unfortunately, goes in the wrong direction.
“I just can't help myself. I won't address directly your question about Senator Manchin. But, I will say, this is not a loophole. I mean, I mentioned earlier that every developed country in the world helps to encourage their manufacturers to make more investments. And, we just passed legislation to do that in ways we have never done before. And, here we are, less than a week later, saying 'Well, you know what, we've changed our minds.' We're going to say to manufacturers, a number of them who are, you know, larger companies.
“They employ millions of Americans, by the way, and provide millions of products, have millions of consumers, and provide products to all of us. We're going to say to these folks, 'you know, you, somehow, are the kind of manufacturers we don't want to help.' Bonus depreciation is not a loophole. It's a considered policy of the United States Congress, the House, and the Senate, to try to encourage us to have more investment in America, therefore, more economic growth and more jobs. And, again, we're not even at the halfway point in terms of what other countries do. You know, the UK does a lot more than we do. And when manufacturers are trying to decide they're going to put their next plant, they look at this.
“And, I really believe when you look back at what happened in 2017, perhaps the most effective thing that was done, and remember it lowered the rates for businesses. It said to businesses, ‘if you come here and invest, you can get an immediate write-off.’ So, expensive equipment that might go into a fab to make expensive semiconductors, isn’t that something that we want to encourage? So, it’s not a loophole; it’s a tax policy.
“If we were responsible, what we would do is not set up a whole other system of taxation, this so-called ‘book tax’ which is a new calculation that no one has ever seen before because it’s even a change from the traditional book tax, we would instead go into the tax code and say, “well, this tax preference isn’t good, but this one is” and actually do the hard work of legislating. But, not to say that we’re just going to decide that we’re going to establish a new book tax that says you can’t take loaner’s depreciation as an example.
“By the way, there are other parts of our tax code that are also affected. You guys know what ESOP is; it’s an employee-owned plan. It’s an employee owned company: employee stock ownership plan. You know that people use what are called ESOPs to encourage more participation from workers in the company. They’re affected by this as well because they lose a lot of their tax preferences under this book tax. So, they’re telling us that they’re very worried that it’s going to discourage new ESOPs and cause some existing ESOPs no longer to be effective.
“So, you know, we should like ESOPs which are good things. Democrats typically do too. Stock options, a lot of tech companies use stock options. They’re also affected by this. But the manufacturing piece is the biggest piece because so many manufacturers use this bonus depreciation. But it’s not just limited to them. It’s energy companies as well.
“So, in 1986, Congress in its wisdom decided to do this, to set up a new book tax. It was part of the ’86 Tax Act. It lasted about two and a half years, and it was repealed. Why? Because it’s incredibly complicated. Because it’s unfair. Because as the AICPA told us in their letter last week, this is the CPAs who would benefit from complexity, it doesn’t make sense to have two different tax systems and punish some businesses, therefore some workers, therefore some consumers, and not others.
“So, we actually can learn from history here. We tried this before. It didn’t work. It was ended; it was repealed because it makes no sense. That’s what is going on here. I know it’s complicated, and you get into all these tax issues. But basically, what it says is we’re going to set a new system of taxation that takes away the benefits that Congress traditionally wants to provide. Why does that make sense? It’s always bad policy, but it’s terrible policy when we’re looking at 40-year high inflation and the second quarter of negative economic growth.
“On the IRS chart, put that up again for a minute, this one, as you may know, that I have worked on a lot back in the 90’s as the co-chair of the IRS Commission. I’m actually someone who believes we should put more funding into the IRS. You know where we should put it? Into technology because they’re way behind. My constituents are affected by that because they can’t get answers, because they can’t get someone to answer the phone, because they can’t deal with our tax administration system because we are so antiquated. We work in silos, and we don’t have the latest technology.
“All of this money going to the IRS, you would think it would go towards technology first and taxpayer service second, which are related. 6.5 percent of it goes towards technology. 6.5 percent of it. Four percent goes to taxpayer service. What it’s doing is doubling the size of the IRS in terms of people who will it be auditing, the people I represent. And we talked earlier about how that’s going to affect small businesses, farmers, ranchers, and so on. Even in this area, where I would normally say helping the IRS to be more effective, that’s not a bad thing because small businesses in Ohio are negatively impacted right now by the IRS’s lack of ability to be effective in dealing with them and giving them answers to their questions. But that’s not even part of this. So, there are plenty of targets of opportunity for us to try to stop or improve this legislation. And in response to your questions earlier, we have a responsibility to do that.”