On Senate Floor, Portman Criticizes Proposed Tax Hikes, Calls for Bipartisan Approach to Infrastructure
“Instead of a $2.7 trillion plan that goes way beyond any reasonable definition of infrastructure and is mostly paid for with a devastating tax hike on U.S. workers and our economy, let’s do what we know works.”
WASHINGTON, DC – Today on the Senate floor, Senator Portman discussed the recent infrastructure plan put forth by the Biden administration, as well as the tax hikes they are proposing to pay for it.
While Portman supports improving America’s aging roads, bridges, ports, and other infrastructure, he noted that more than $2 trillion of the President Biden’s proposal funds policy priorities that are a far cry from what has ever been considered infrastructure, including billions in spending on health care, child care, and other non-infrastructure policy priorities. He argued that including these provisions breaks the bipartisan consensus on infrastructure demonstrated through recent votes on infrastructure bills.
Portman went on to say that this proposal is made worse by the tax hikes the Biden administration is proposing as a means of funding most of the legislation. Portman, who played a key role in writing the 2017 tax reforms, argued that undoing those reforms will hurt American workers’ and American companies’ ability to compete in the global economy, and that it will cost more jobs and investment here in America during a time when our economy is beginning to recover.
Rather than pursue these drastic tax hikes, Portman urged Congress and the Biden administration to work together to find common-sense ways to fund infrastructure legislation.
A transcript of his remarks is below and a video can be found here:
“I’m here on the floor of the Senate this evening to talk about our shared national priorities for addressing the nation’s infrastructure needs and my concerns, really deep concerns, about the plan the Biden administration has outlined, and specifically the way they intend to pay for it.
“I don’t think there’s a single member in this chamber who does not recognize the need for us to invest in upgrading America’s aging infrastructure. Our network of roads, bridges, ports, railroads, and more have played an integral role over the decades in growing our world-class economy. Yet according to a 2019 report, the most recent one we have from the World Economic Forum, the United States now ranks only 13th in the world on infrastructure based on factors like the quality of our roads, how efficient our trains are, and access to electricity and water.
“So we can and should do more to improve our infrastructure, particularly as competitors like China make substantial investments in their own infrastructure every year. And we can do so in a bipartisan way, just as we have always done.
“In fact, last Congress the Senate Environment and Public Works Committee approved bipartisan infrastructure legislation by a unanimous vote of 21-0. That was just last Congress, 21-0. This bipartisan approach last Congress totaled $287 billion, a substantial amount, and one we had yet to figure out how to pay for. The current transportation bill that’s in place, the infrastructure bill from a few years ago, is about $305 billion.
“Yet even as we have to figure out how to fund the bipartisan $287 billion package for roads and bridges from last year, a substantial amount in its own right, the Biden administration recently introduced its own infrastructure plan that totals $2.7 trillion. Almost ten times as much. At the core of this Biden administration proposal is $620 billion in infrastructure broadly defined. It’s a generous definition of roads and bridges and other physical transportation and water components that have traditionally been considered infrastructure. So a generous definition would be that, out of the $2.7 trillion, $620 billion could be called infrastructure, based on the way Republicans and Democrats alike have always look at it. And again, that would include water, electricity, other forms of transportation, not just roads and bridges. So about 20 percent of the Biden administration infrastructure bill actually fits the bill.
“The reason the overall package costs $2.7 trillion is because they have included a broad set of liberal priorities that are a far cry from what has ever been defined as infrastructure, by either Democrats or Republicans. So I guess knowing the popularity of infrastructure -- and it is popular; people want to see their roads and bridges repaired -- the Biden administration has simply redefined the word to include hundreds of billions of dollars of spending on priorities like health care, federal office buildings and other facilities, research and development, electric vehicle manufacturers, and more. According to the Biden administration, paid leave is now infrastructure. Child care is now infrastructure. Caregiving is now infrastructure. While many are worthy causes and should be debated and voted on separately, they don’t belong in infrastructure bills.
“This approach is troubling to me and I know to many of my colleagues, some on both sides of the aisle, because it is a continuation of the raw partisanship that defined the latest COVID-19 spending package back in March. Rather than work to find good-faith negotiations with Republicans to craft a package that could gain bipartisan support, the Biden administration and Senate Democrats apparently are once again looking into potentially using reconciliation to jam Republicans. To pass another trillion dollar-plus spending bill with a simple 50-vote majority. And, like COVID-19, infrastructure has always been bipartisan. So if you can’t be bipartisan on COVID-19 and you can’t be bipartisan on infrastructure, what can you be bipartisan about?
“This partisan approach, by the way, is the opposite of what President Biden pledged on the campaign trail and in his inauguration address. In his inaugural address, he talked about the need to get back to more bipartisanship and urged unity. I agreed with that assessment and said so at the time. Unfortunately, he has apparently listened to the more strident voices in his party and has gone down the partisan path.
“As with the $1.9 trillion COVID spending package last March, the end result could be another spending bill that is far higher than it needs to be at a time of record debt and deficits, and another partisan bill that further divides us at a time when we are already too divided. In fact, about a quarter of the Biden plan is not paid for at all, taking us further into debt. But even more troubling to me is that the Democrats plan to pay for roughly $2 trillion of this plan with massive tax increases on American workers and consumers and by making us less competitive in the global economy.
“This would completely reverse the progress we had made over the past few years in making America competitive again. Thanks to the 2017 tax reforms that the Biden proposal would largely dismantle, in the couple of years before COVID-19, we saw record growth in jobs and wages, with the lowest poverty rate since the federal government started keeping track of it 60 years ago.
“In promoting the Biden tax increases, Treasury Secretary Janet Yellen claims we need to reverse the 2017 tax reforms because they encourage businesses to move jobs out of the country. The reality is just the opposite. The 2017 tax reforms stopped the so-called corporate tax inversions which caused American companies to become foreign companies and move jobs and investment out of America because of our uncompetitive tax laws. This happened to a number of companies in Ohio and in every state, practically, represented in this chamber. The 2017 reforms also stopped the lockout effect that kept foreign profits of U.S. companies overseas. They weren’t bringing the profits back. Instead, $1.6 trillion in overseas earnings has come back to the United States and was invested right here at home.
“Most importantly for working families, 70 percent of the savings from the corporate tax cuts went into workers’ wages, contributing to 19 straight months of wage growth of over 3 percent annually that we enjoyed before the pandemic. This wage growth was really welcome in my home state of Ohio, where we’d had lower wages or flat wages for more than a decade. And by the way, who benefited most from this wage increase, 19 straight months of wage increases? Lower and middle income workers. Exactly what should have been happening. Thanks to the 2017 reforms, the largest U.S. Companies also increased their domestic research and development expenditures by 25 percent, which amounts to $707 billion more R&D, and they further increased capital expenditures by 20 percent, aided by this return of foreign profits.
“All of this U.S. investment, job creation, and new R&D would be put at risk by these proposed tax hikes. Under the Biden plan, which we’ve heard is raising the corporate rate from 21 percent to 28 percent, in actuality, the combined federal and state corporate rate would go from 25.8 percent, where it is now when you include the state and federal -- other countries like China don’t have any state income tax on their corporations. They just have the federal rate. So we would be going from 25.8 percent -- by the way, which is already above the average of 23.4 percent for other developed countries, so-called OECD countries. It would go from 25.8 percent up to a staggering 32.8 percent, the highest rate in the developed world. Our tax rate would once again be higher than China’s, and higher than any country in the developed world -- Japan, Europeans. This is exactly what we got away from in 2017, and it’s what, on a bipartisan basis there was a consensus for us to do. Maybe not the exact rate but the idea was to make America competitive again.
“I co-chaired a task force with a fellow senator, a Democrat from across the aisle, Chuck Schumer, on the Finance Committee, and we came up with this idea of saying, ‘Let’s go to a territorial type tax system and let’s lower the rate so that we can be competitive around the world.’ And it’s what happened, and it’s working. And now for some reason, the Biden administration says ‘We want to reverse all that.’
“These abrupt tax hikes, which actually would be five times as large as the corresponding corporate tax cuts in 2017, would make our workers and our businesses less competitive globally at a time when our economy is just starting to recover. The Biden plan goes well beyond just making our tax rates uncompetitive again. It also doubles the tax on so-called global intangible low-taxed income, or GILTI, making it more costly for U.S. companies to operate outside the United States. More costly than any other country’s companies in the developed world. Again, it puts us at a competitive disadvantage. It unfairly punishes American workers who have their jobs here in America supporting international operations.
“In Ohio, for example, we have Procter and Gamble. It’s headquartered in my hometown. They rely on overseas production to serve foreign markets in an affordable manner. They are not going to ship diapers from here overseas because it’s not cost-competitive. So for the foreign markets, they will make diapers in those foreign countries. However, by doing so, they employ thousands of Ohioans and others around this country who support those international sales. So all the back office work, the sales work, the research and development and so on, is done here. The proposed Biden tax increases would make such companies uncompetitive overseas, resulting in us losing markets there and losing U.S. jobs.
“Remember, no other developed country in the world does this except us. No other country taxes these companies on their foreign profits. We got away from that on purpose, and we essentially established a minimum tax which, again, hardly any country in the world has, but we wanted to have some balance here. Now under this proposal from the Biden administration, that tax would be more than doubled. It’s going to hurt us.
“The Biden administration also proposes to eliminate a provision regarding what’s called foreign derived intangible income, FDII. In 2017, we put FDII in place for a very simple reason, and there seemed to be a consensus about that, which is to provide a carrot to U.S. companies to do their research and development here in America. It incentivized companies to bring that research back and to keep that research here. It worked to create high-skill and high-wage jobs. For example, Google, Cisco, Facebook brought all of their intellectual property home, all of their IP home. And we hear from other U.S. companies like Intel and Disney who say they kept their IP in the United States due to this tax law change. Why would we want that to go overseas?
“The Biden administration claims that it wants the United States to be more competitive, yet these proposed tax increases do just the opposite. It makes no sense that while China and other countries are increasing subsidies to businesses that innovate, the United States would be punishing our workers and global companies, making them less competitive.
“In what amounts to an astounding admission of how deeply flawed these proposals are, when Treasury Secretary Janet Yellen announced the proposal to increase taxes that we have just talked about, she actually went out of her way to make a plea to other countries around the world. She asked them to raise their own corporate tax rates, to increase their own taxes to ensure, as she said, a more level playing field.
“Understanding the nature of the intense global competition, our competitors are doing just the opposite. It’s naive to think that because we’re going to raise our taxes and ask them to do the same that they would do that. They want more of the jobs and investment in their country. In fact, just this past week, the Finance Minister of Ireland, when asked about this, said no, they have no interest in raising taxes. And Ireland is one of those countries that’s made themselves competitive and resulted in our tax law changes because they were taking jobs away from us. And now we were bringing this IP and these jobs back. Ireland, China, these other countries, they’re going to continue to lower barriers to attract capital and jobs. It’s wishful thinking at best to think because we’re going to raise our taxes, they are going to raise theirs.