On Senate Floor, Portman Highlights How Democrat Tax Proposals Will Make America Less Competitive and Violate Taxpayer Privacy

October 25, 2021 | Press Releases

WASHINGTON, DC Today, for the sixth consecutive week, Senator Portman came to the Senate floor to criticize Democrats’ proposals to raise taxes to fund their reckless reconciliation bill. 

Portman first highlighted how Democrats want to raise taxes on foreign earnings by U.S. companies by hiking the global intangible low-taxed income (GILTI) rate. Currently, the GILTI rate is 13.125 percent. Under Democrat proposals, this would be raised to around 17.4 percent, a dramatic hike that would cost U.S. jobs and make U.S. businesses and workers uncompetitive in the global economy. Portman criticized the Biden administration for trying to raise this rate while agreeing to a lower global minimum tax treaty with other countries that would undercut the U.S. rate. 

Portman also discussed the controversial information reporting requirement in the Democrats reconciliation bill that would require individuals and businesses to report to the IRS inflows and outflows of money totaling as little as $10,000 from an account for the first time ever. This change would represent a radical shift in the information collected by the IRS, which is unequipped to handle the massive influx of taxpayer information that would come as a result of this violation of taxpayer privacy. 

As Democrats continue to try and reach an agreement on a framework for their social spending policies that will fuel consumer demand and drive up inflation, Portman urged the House of Representatives to instead pass the bipartisan infrastructure bill he helped negotiate, which passed the Senate nearly three months ago on a bipartisan vote of 69-30. As Portman noted, this infrastructure legislation will improve competitiveness and not add to the record inflation the economy is currently experiencing. 

A transcript of his remarks can be found below and a video can be found here

“Im here on the floor again this evening to talk about the legislation thats before us. One is the bipartisan infrastructure legislation that passed this chamber with 69 votes. It’s great for America. It addresses the real problems we have in upgrading our infrastructure, but it also deals with competitiveness. My colleague from Illinois just made a good point that we are in a global competition with other countries, including China. 

“One reason we’re not doing as well as we should is that the other countries are putting a lot more of their money into infrastructure because it’s good for their economies, and we’re not. As an example, China spends a lot more as a percent of their GDP on infrastructure than we do. Much more. And so bridges and roads and railways and ports – ports, a big problem right now – all these would be improved, would make our economy, therefore, more efficient. And as the economists say, that makes us more productive as a country and allows us to be able to compete globally. Right now with these supply chain issues, whether it’s freight on the rail system or whether it’s our highway system or whether it’s our port system or our waterway system, all of which need help, it would be easier for us to deal with this transition we’re going through if we had better infrastructure.  

“This infrastructure bill, unfortunately, has gotten intertwined with another bill over in the House of Representatives. So although it passed here on its own merits, standing alone as an infrastructure bill with no new tax increases, no tax increases. When it got to the House of Representatives, the Speaker of the House wanted to combine it with another bill, which is what has been called around here, the reconciliation bill, which refers to a process here in the United States Senate, a rare process, where instead of having the normal 60 votes, a supermajority for legislation, under reconciliation, a couple of times a year you can have something that only needs to get 50 votes, assuming that you have the presidency in your party, because then the Vice President, the President of the Senate, can come and break the tie to get to 51. 

“So that is the reconciliation process that Democrats want to use for this other bill. What’s the other bill? It’s a huge tax and spend bill. Just as I believe infrastructure would be good for our country and is actually counter-inflationary based on the economists. Why? Because you’re doing long-term investments in capital assets, that’s good for pushing back against inflation. More spending on social programs, which is what’s in the reconciliation bill would add to inflation at a time when we already have a huge problem there. And also the huge amount of spending would be unprecedented. 

“We’ll talk about that in a minute, depending on how much spending is in there. But that’s one bill and the infrastructure bill is separate. So I again call on my colleagues in the House of Representatives, the leadership over there, let the infrastructure bill go. Allow it to be voted on, on the merits. Don’t tie it as a political hostage to this reconciliation bill, the tax and spend bill that Democrats have had a really hard time passing through the system. Infrastructure needs to stand on its own. The American people deserve that. It’s been almost three months, almost three months since the Senate passed it, and people are waiting, and they deserve the help.  

“And by the way, it helps on a broad range, not just on the roads and bridges and the rail and the ports and the waterways I talked about. It helps with resilience to push back against natural disasters, something all of our states are experiencing. It is something that helps with regard to our energy policy, makes us more competitive. And, yes, encourages us to use the resources we have, but to do so through carbon capture and encourage us to move to more electric vehicles. It encourages us to be more competitive on that front as well.  

“So infrastructure means also digital infrastructure. It actually, for the first time ever, provides a huge boost to having high-speed broadband spread all around the country, particularly in our rural areas like Ohio, where we have so many areas, about a third of our state that does not have access to it. People can’t do the appropriate telehealth that they want to do. They certainly can’t do the telelearning they want to do. It’s difficult to even go to school these days and do your homework if you don’t have access to the internet. And of course, it helps us back in Ohio if we have internet to be able to start businesses in these rural areas of Ohio.  

“So this is all in the infrastructure bill. That’s why, again, it got 69 votes here in the United States Senate. That’s not usual around here. Truly bipartisan. President Biden says he will sign it. Let’s pass it. If we pass it in the House, it will be signed into law. It will begin to help our country at a time when we need the help. We also could use a little bipartisanship around here, don’t you think? This is one we can agree on. Why should it be held political hostage is something that is strictly partisan and controversial, and in my view, would be dangerous to our economy right now. And why do I say that?  

“Well, this new spending that would be in the bill would be the highest level of spending that we have ever seen in the United States Congress. Remember, originally it was $3.5 trillion. I guess originally it was $6 trillion, then $3.5 trillion. Now there is discussion, I just read a report this afternoon in one of the media sources saying it may be as low as $2 trillion, $2 trillion. That’s $2,000 billion in additional spending at a time of record deficits and debt. Now people say, well, that’s a lot less than $3.5 trillion. Yes, but it would still be the largest bill ever passed by the United States Congress. Ever.  

“The $1.9 trillion that was passed in March not that long ago, that was supposed to be for COVID, but most of which is not going to COVID purposes, was the largest ever. Now this would be $2 trillion, a little larger than that. Adding up together to almost $4 trillion of new spending. Again, when the $1.9 trillion was passed, a lot of people said, including me, ‘This is a risk to our economy right now. We’re coming out of the pandemic with a growing economy, why overheat the economy right now?’ But we did. And it caused much of the inflation we’re now experiencing.  

“Secretary of the Treasury under the Obama administration, an economist in the Clinton administration, Larry Summers, a Democrat, said the same thing. And he continues to say it today that he believes that all the spending is going to add to more overheating of the economy and more inflation. 

“We don’t need that right now. We have inflation that is not transitory. It unfortunately looks like it is very much permanent in terms of this year and next year at least. And that’s a huge problem because it is lower-income, middle-income workers who are hurt the worst. It’s a tax, a hidden tax. So people who were seeing wage gains this year, those are being eaten up for the most part by inflation. The annual inflation right now based on last month is 5.4 percent. So unless your wage rate is above that, you’re in trouble.  

“Plus, everything is just more expensive. So gasoline, if you go to the pump, it’s 42 percent higher this year as compared to last year. 42 percent. Natural gas is expected to be about that range, about 40 percent higher. I did some research recently about pumpkins to see, you’re going into the holiday season here for Halloween, what does a pumpkin cost? Well, guess what it costs on average, 14.7 percent more this year as compared to last year. Groceries, clothes, your utility bills, everything is going up. So it’s not the time to pump a lot more stimulus spending into the economy, which again, people say, is going to lead to higher inflation on everything. 

“Remember before the pandemic started back in February of 2020, we had a strong economy. We had the 19th-straight month in a row of wage gains of over 3 percent every month for 19 months. Exactly what we wanted, right? Wages going up. We had the lowest poverty rate in the history of our country since we started keeping track of it back in the 1950s. We had the lowest unemployment rate ever for certain groups in our economy - Hispanics, Blacks. We had the lowest unemployment ever overall for the last 50 years. 

“So things were going pretty well. And yet now, when we look at what’s happening, we’re not seeing these wage increases. In fact, on average, when you take inflation into account, they say that during the Biden years, during the Biden administration over the last several months, wages have gone down on average 1.9 percent. Largely because, again, of this inflation.  

“The legislation also includes big tax increases. So it’s not just about more spending, it’s also about tax increases to pay for the spending. And in recent days, it’s come out that some of these tax hikes might not be supported by all Democrats, so they might not be able to include them all. And I suppose that would be better for the economy. But as the economy is coming out of the pandemic and growing, the last thing you’d want to do is to raise taxes. Back in 2017, when tax reform occurred, it had a lot of good impacts, including, again, higher wages. We talked about the poverty rate. We talked about unemployment being low.  

“Another thing that it did on the global competitiveness side, on the international side, is that it actually changed the way our economy worked. Prior to that, you had a number of companies who literally were voting with their feet and leaving the United States of America because of the tax code. It drove all of us crazy, Democrats and Republicans alike, that you had companies that were inverting, as they said. And these inversions meant a company that was a U.S. company one day became a foreign company the next day. This happened in Ohio.  

“We had companies leaving Ohio to become Irish companies, as an example, because they had a lower tax rate, and we had the highest corporate tax rate of any of the developed countries, of the countries in the OECD. That’s a terrible thing. Of course we wanted to stop that, so we put the reforms in place to say, ‘We’re going to lower our rates so our rate is competitive, we are going to change the way we tax internationally,’ and guess what? All of the inversions stopped. All of them.  

“And now, unbelievably, the administration and the Democratic leadership wants to raise those taxes once again to make us uncompetitive globally. And, again, you’ll see some companies say, when they look at the analysis from their tax experts, ‘Why are we an American company?’ You would hope no company would ever do that, but they were doing that before 2017, during the Obama administration, at the beginning of the Trump administration, they were leaving. We don’t want that to happen again. In fact, we want our workers and businesses to be competitive. I say workers because when you raise business taxes, guess who takes the hit? Ask the CBO, the Congressional Budget Office here. What CBO would tell you, which is a nonpartisan group here in the United States Congress, their analysis is that about 70 percent of the increase in corporate taxes is borne by workers, about 70 percent of the cut in taxes helped workers – higher wages, higher benefits.  

“The Tax Foundation has the same analysis. The Joint Committee on Taxation, when they look at this legislation before us, the $3.5 trillion that was introduced, they said it would raise taxes on middle-income workers, well below $400,000. A lot of that was because of this issue, because again the nonpartisan Joint Committee on Taxation up here in Congress looked at it and said, ‘Well, who is going to bear the brunt of this? It’s going to be workers.’ So workers’ wages will go down if you raise taxes on these individual companies that are global companies. So that’s what we’re facing. Again, it looks like there will be changes in the legislation. I mentioned the amount may go down some. I mentioned $2 trillion still, the largest spending bill ever. 

“I’m told on the tax front, some of the tax hikes may be taken out, some may be kept in. One they are talking about keeping in, that the administration seems adamant, in particular, about keeping in, I just don’t get, because it makes our companies less competitive globally. It is a complicated provision in the international tax code, it’s called the global intangible low-tax income, also known as GILTI.  

“What does GILTI say? Well, when we changed our tax code back in 2017, we put in place, in effect, a minimum tax for our companies that do business overseas. Competitive countries, countries like ours, developed countries, for the most part, almost all of them do not tax their companies for their foreign income. So if a company -- I mentioned Ireland earlier -- from Ireland or from Germany or whatever does business over here, their government doesn’t tax them on the income they get from the United States, they let the United States handle that. And we changed our tax code to say, ‘Well, we’re not going to do that either, but we’re going to add a minimum tax no matter what.’ And that was called the GILTI tax.  

“It was put in place in 2017 as a part of a broad and successful group of tax reforms that took bold steps to reassert our competitiveness, and it worked. They took our rate from 35 percent to 21 percent, putting it in about the middle of the developed countries. Now it is actually below the middle because other countries have gone below us again. We went to what is called a territorial type system, so it all worked. About over $1. 5 trillion was reinvested in America from overseas, so it worked in that sense too. We stopped the corporate inversions but this GILTI, or minimum tax on foreign income, was put in place to make sure that foreign income wouldn’t be shifted to low-tax jurisdictions. Right now this GILTI rate stands at 13.125 percent. So it is 13 percent roughly for American companies. Again, most of our competitors don’t have it at all, but it’s 13 percent.  

“Treasury Secretary Yellen has now worked with countries around the world to say everybody ought to have a global minimum tax and she’s made progress on that. So some of these countries that have not had a minimum tax are now looking to put one in place. The one that she wants for everyone else is 15 percent. Here we are, globally, telling countries in the world, ‘You have to have a global minimum tax of 15 percent.’ Okay. So then wouldn’t you think you would want America not to have a tax above that amount? No. They want to change the GILTI amount from 13.125 percent to an effective rate of 17.4 percent. They started off at 21 percent in the original introduced bill. But even 17.4 percent, why would you want to put American companies above, again, this global average of 15 percent? If you are going to require companies to go to 15 percent, why would you want the U.S. to be above that? But that’s what’s being proposed, believe it or not.  

“And by the way, they are saying we would go ahead and go to 17.4 percent before any other countries in the world would have to do it, two years before they do it. Whether they do it or not, that’s a question, let’s be honest. Some countries don’t want to do it, they may not do it, their legislatures may not let them do it. Let’s assume they do follow suit, we would be out there two years earlier with a higher tax rate on our workers. Remember, who bears the brunt of the tax increase? Our country would be noncompetitive, our workers would be noncompetitive, so I would hope that as my colleagues are looking at this, I know it seems easy, let’s just tax the international companies, but that they would look at what happened with 2017, the positive impacts of that, the negative if we reverse course and go back and raise our taxes above what other countries charge.  

“By the way, to do this would mean nullifying tax treaties that we have with other countries all around the world because it’s a different way of approaching it. We do not have a minimum tax in place now, so the tax treaties would have to be amended. That means, obviously to me, that you would have to have a tax treaty change here in America. In other words, you can’t change tax treaties just on one side, it’s bilateral, so we would have to change our tax treaties here. Treaties have to go through the United States Senate. As you probably know, they have to go through the United States Senate and it’s a two-thirds vote to change a treaty. There’s a reason for that. It’s part of our checks and balances to be sure that treaties, which are very serious undertakings, are something that you get strong bipartisan support for.  

“And, yet, my understanding is that the Secretary of the Treasury and others in the administration are saying they are not sure we have to get this GILTI change or these treaty changes that we have with other countries through the United States Senate. We might just do it through some other way, administratively, or through an executive legislative action. I sure hope they don’t do that. That would set a terrible precedent. That would mean that this whole constitutionally based rule that we have with regard to treaties would be very difficult to uphold in the future for anything.  

“Let me be clear. This is bad for workers, as well as bad for companies. The National Association of Manufacturers just did a recent study and they found hiking the GILTI rate in a way we just talked about could cost up to one million U.S. jobs. Again, CBO here in the Capitol, the Tax Foundation, the Joint Committee on Taxation, all of them believe this would saddle our workers with lower wages and lost jobs by making our businesses less competitive globally.  

“I am also concerned that the administration is talking about imposing a burdensome new information reporting requirement that would require far more information from taxpayers than is needed to enforce our tax laws. It would represent an unprecedented invasion of taxpayer privacy. You probably heard about this because it’s getting more and more attention. The so-called $600 limit. Now, this would mean that the IRS would receive a report from you every year or for any expenditure, think about an expense or payment going in and out of your checking account for $600 or more.  

“Recently, again, based on a report I saw today, the administration and Democratic leadership here on Capitol Hill were talking about changing it from $600 to $10,000, so it would be a higher threshold. Now, that higher threshold is something that most Americans would reach pretty quickly. Think about it, $10,000 a year in total expenditures, $830 per month is what it is. Think about it. Do you spend $830 a month on groceries, gas, clothes, essentials? If you do, then be prepared for the IRS to look through your tax records in ways they never have before.  

“Don’t get me wrong, I believe enforcing our tax laws is important. And I’m actually one of the Republicans, there may not be many of us, who believes the IRS should have resources for things like improving their computer system because it is so antiquated. I spent two years of my life studying this. Several years ago, we came up with several reforms out of a commission. We improved it. It needs to be improved again.  

“The computer systems they have, both the software and hardware, and frankly their ability to use it, is way outdated. And it’s not good for taxpayers. It is bad for small businesses, it is bad for individuals, because the right hand often doesn’t know what the left hand is doing, so I’m for that. I’m for better taxpayer service, and providing more funding for that. But I’m not for providing tons more data to the IRS that has nothing to do with income, that is unprecedented, that their systems cannot handle. There is no way that they’d be able to handle these millions and millions of new data that they would be getting from all of us.  

“Hundreds of millions of accounts with financial institutions, e-payment apps like Venmo, and cryptocurrency exchanges like Coinbase are going to be subjected to more paperwork and confusion if this happens. If you have one of the 403 million active PayPal accounts, watch out, your information may be sent to the IRS, and that is going to result in some confusion at some point. Again, if you’re one of the vast majority of Americans who spends more than $830 a month on anything, then you are going to have to report that. So there’s some people who are pretty smart about this who have looked at it and said this doesn’t make sense. One of them is Steven Rosenthal, he’s with the left-leaning Tax Policy Center. He stated this could ‘bury the agency in a sea of unproductive information.’  

“That’s how I feel about it. Again, I’d like to have the IRS be better in terms of what they can do with technology, be able to handle their job better. To be able to ensure that every taxpayer gets a fair shake, because sometimes right now, again, the left hand doesn’t know what the right hand is doing because their computer system is so antiquated, software, hardware, everything. But as he said, they can’t handle the data they have.  

“Mark Everson, who is a former IRS Commissioner, wrote a really interesting op-ed that I read yesterday. He wrote that, ‘This proposal would prove all but impossible for the IRS to handle and engulf the service in a damaging political firestorm.’ That’s from Mark Everson. 

“By the way, Mark Everson wants to give the IRS more money to improve their computer systems. He thinks there’s not enough enforcement being done with regard to partnerships right now, as an example. Or he thinks taxpayer services should be improved. So he’s not someone that says we should starve the IRS But he’s saying, ‘Don’t do this.’ Don’t do this, add this new information reporting that is not information about income, and the IRS is not going to be able to handle, and it’s an intrusion into our lives that is unnecessary. That’s in the legislation.  

“So again, I’ve come down to the floor here every week since the original introduction of this tax and spend legislation we’ve talked about today. This is the sixth-straight week that I’ve come to the floor. When we’re in session every week, I’m going to come and continue to come as long as this bill is out there, because I want the American people and my colleagues to know what’s in this legislation and why it would be so damaging to our country right now.  

“And again I distinguish the infrastructure bill – good for the economy, the right thing to do to counter inflation, something every president in modern times has tried to do, by the way, for good reason. Let it stand on its own. It should be voted on on its own merits. Don’t entangle it with this tax and spend legislation that is reckless at a time of rising inflation and higher debts and deficits. At a time when our economy is finally getting on its feet. Let’s not add job-killing tax hikes. Let’s not add this massive new spending. It’s in our national interest to move forward with regard to the infrastructure bill. And it’s in our national interest to stop the reckless tax and spend legislation.” 

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