At Senate Finance Committee Hearing, Portman Highlights Strong Economy and Level Playing Field From Tax Reform
WASHINGTON, DC – Today, at a Senate Finance Committee hearing, U.S. Senator Rob Portman (R-OH) highlighted tax reform’s positive effects on the economy and global tax competitiveness. Specifically, Portman commended Treasury Secretary Steven Mnuchin for publishing strong rules to implement the new international tax system, helping to level the playing field for American companies and bring jobs and investment back home. Portman was instrumental in helping craft the final tax reform package that was signed into law in 2017.
Portman: “Thank you. Mr. Secretary thank you for being here today…great testimony today. You pointed out that tax reform is working and it certainly is, so is regulatory relief I think and some better trade agreements and that combination is improving the lives of the people we represent and it’s good to see. When we started off in this effort, President Trump and the Congress said ‘Okay, we are going to focus on tax reform because we believe that will result in more jobs, better wages and leveling the playing field for U.S. companies that are trying to compete in the global economy.’ And all of that has happened and don’t take my word for it. Here is the Congressional Budget Office in April 2018 – the nonpartisan CBO says in their analysis of the effects of tax reform, ‘These changes are expected to encourage savings, investment and work.’ CBO also estimated the bill would reduce the incentives for companies to invest overseas by $65 billion per year, so in other words encouraging investment right in the states that we represent.
“Together these positive impacts on the economy they said would result in an average GDP increase by about 0.7 percent and the CBO projections have held steady. In fact just last week, last week, CBO said again in a new blog post, ‘The tax bill’s effects on the economy have appeared consistent with our initial assessment.’ So that is CBO but the numbers are clear. They are out there. Prior to tax reform CBO said the economy would create an average of 107,000 jobs per month in 2018. We actually got an average of 193,000 jobs. They also said that in 2019 it would be 27,000 jobs per month -- so far we are six times ahead of that average at 175,000 jobs. So you know, that is great. The thing that I like best is the wage growth. We have now seen for 18 straight months wage growth of over 3 percent and as we know from the Bureau of Labor Statistics information this is primarily helping folks who are nonsupervisory, which means blue-collar workers, mid-income, low-income workers, and that is just awesome news. It is the longest period we have been able to see that kind of wage growth since before the Great Recession. So it is working.
“One thing that you will talk about a lot I know today is the international side, I have already heard you talk about it some. People are bringing money home. The old tax system encourage those companies as you know to leave their income overseas, not to bring it back and pay our taxes and the international provisions were designed to end that lockout and that is exactly what has happened. Between January 2018 and September 2019. -- last data which we have -- companies brought back over $1 trillion in overseas earnings, more than the previous six years combined. So those that say it hadn’t made any difference look at the numbers which is why, by the way, on a bipartisan basis we all agreed we had to do this change of lowering the rate and going to a territorial system. It is actually working and tax revenues are up, not down which is another thing that you have talked about a lot. I think you have done a very good job of trying to implement what was a complicated tax bill, let’s face it, particularly on the international side and I want to commend you for that. It is a difficult job. A whole new international tax system, again, one that was very bipartisan in its creation although at the end of the day we didn’t get a bipartisan vote but that part of the legislation was always something that we believed was a good idea on both sides of the aisle. In fact Senator Schumer and I co-chaired the task force that came up with an international plan that was very much along the lines of what we ended up with.
“I think you have been unfairly criticized by some who have said by making the implementation changes that you were somehow not in keeping with the tax bill. I think it is just the opposite and I must say that today I heard people pointing to the CBO baseline as a reason to say that, evidence of that and I’d just say that is not how the regulatory and budget process works. Treasury does not score tax regulations the same way it doesn’t make law. We make the laws and the Joint Committee on Taxation scores tax legislation. And so your job is to implement the law in accordance with congressional intent and I think you have done your best to do that. Second, the Joint Committee on Taxation is the one that again provides this, not the CBO. The CBO may take into account some of the same assumptions made by Joint Tax but they also incorporate hundreds if not thousands of other data points. So it is also important to note that CBO made both upward and downward revisions in terms of the overall forecast and the critics only tell you about the downward revisions, which I think is interesting. So my sense is that the CBO downward revisions also come, in large part, because companies are actually paying more in section 965 taxes, that is the repatriation taxes, in the first couple of years than they expected. And as a result, we gave companies eight years to pay it, companies paid it more quickly than that so that is not a tax cut, those are taxes already paid.
"On the GILTI, which was meant to be a guard rail in this new territorial system I know that you have again come under some criticism on the way you have handled that. This is exactly what we intended, which was that we would have the ability to bring profits home, create that incentive and trillions have come back as we talked about. But at the same time under GILTI those companies who wanted to shift to low tax jurisdictions would be penalized and that is what you have done. The number we use for the minimum tax in effect was 13.125 percent and the intent of the conference report was very, very clear on that.
“So critics continue to argue that your efforts to implement that intent provided new tax cuts. I would say not at all. Specifically they are saying that your new proposed rule that clarifies the connection between GILTI and the existing subpart F rules providing an exception for companies with foreign tax rates above 18.9 percent is a brand-new tax break. That is ridiculous. Compared to our intent to exempt companies anywhere above 13.125 percent, I would say if anything your approach has been cautious, very conservative. So I wonder if you would give us your view on that, do you believe you have taken a cautious and conservative approach to this in terms of the GILTI implementation based on the Congressional intent, the taxpayer comments, and Treasury’s regulatory authority?”
Secretary of Treasury, Steven Mnuchin: “Our job has been to implement that part of the tax code consistent with the intent and as prescribed by the law and that is what we have done.”
Portman: “Excellent. Well, again I commend you for that. I’m going to come back for a second round in a minute, give you more chance to talk about that and about what you have done to faithfully implement the tax legislation.”