On Senate Floor, Portman Warns Democrats’ Massive Tax Hikes Will Undermine U.S. Economy, Cost Jobs
WASHINGTON, DC – Today on the Senate floor, U.S. Senator Rob Portman (R-OH) urged his colleagues to oppose the massive tax hikes included in the Democrats’ massive $3.5 trillion spending spree. Citing data from the nonpartisan Joint Committee on Taxation, the Tax Foundation, and other policy experts, Portman detailed how this broad set of tax hikes – from corporate taxes to income taxes to estate taxes and more – would negatively impact workers, families, businesses small and large, and the economy as a whole, while undoing many of the 2017 tax reforms Portman helped to author that unleashed strong economic growth before COVID-19.
As a result, Portman argued, the cost of this $3.5 trillion tax and spending spree is not zero dollars as has been claimed by the Biden administration, but instead an enlarged deficit, lowered wages, billions of dollars in lost economic growth, and hundreds of thousands of lost jobs.
A transcript of his remarks can be found below and a video can be found here.
“Mr. President, I had planned today to talk about something else, which is the tax situation that we're facing with this new proposal from the Democrats. You probably heard about the Build Back Better legislation, also sometimes called the reconciliation bill. It's in reconciliation because that wouldn't require any Republican votes. And Democrats are proposing to take this through Congress, much as they did in March with the $1.9 trillion legislation.
“This is also called the $3.5 trillion bill, this Build Back Better. Actually, I would argue it's a lot more than $3.5 trillion when you look at the actual spending in it. But let's focus on the tax side for a moment, because that's how it's intended to be paid for. The tax hikes, which would be the largest tax increases in America in at least 50 years, systematically dismantle a lot of the pro-growth and pro-job reforms that were put in place in 2017. Why do I call them pro-growth and pro-jobs? Because they worked.
“They helped Americans keep more of their hard-earned earnings. They helped businesses to be more successful, to hire more people and increase wages. And they are a big reason that as of February of 2020, the month that we went into this pandemic, as of February 2020, we had 19 straight months in this country of wage growth of over three percent per annum. Nineteen straight months of what all of us should want, Republican, Democrat, all of us. Higher wages. And by the way, most of that wage growth went to lower and middle-income Americans. That's what we should want too, right? That was happening. In fact, as of that point, we had the lowest poverty rate in the history of America. We started keeping track of it back in the 50s. It was the lowest poverty rate ever.
“This was just a year or so ago. This is before the pandemic hit. We also had a 50-year low in unemployment and the lowest unemployment ever for certain groups, Blacks, Hispanics, disabled, others. So this is something that was an achievement that met the standards that we talk about on both sides of the aisle. More economic opportunity, closing the wage gap, giving people a chance to come off the sidelines and get a job. Things were happening and in large measure because of these 2017 reforms.
“And yet in this proposal that is now being proposed, called the Build Back Better proposal, there are tax increases that dismantle much of the reform in 2017 that caused this economic growth. U.S.-based corporations are going to have a really hard time competing now in the global economy again because it takes our tax rate back up to being the highest - depending on where they end up in terms of their rate - one of the highest or the highest rate in the entire world. The average corporate tax rate under the Ways and Means proposal will be 32 percent again, back up into the 30s, instead of an average of 21 percent, plus about five points on the state average, which is about 26 percent. So again, it puts us in a position where we're not competitive with the rest of the world. That's why we changed it back in 2017.
“In fact, according to the International Tax Competitiveness Index, the Democrats’ plan would cause the United States to drop steeply down the rankings from 21st in the world to 28th in the world among developed countries in terms of competitiveness of our tax code. Once again, has happened too often before the 2017 reforms, and by the way has not happened since then, companies will choose to say, okay, I'm out of here because of the tax code and the tax changes that they want to make. Companies will say, as they did before 2017 because of the tax laws, I can't be competitive as an American company, I'm going to go be a company of some other country. It's called inversions. Sounds bad. And it is. Nobody wanted inversions. Democrats, Republicans, we all hated them. Guess what? We stopped them. After the 2017 reforms, they stopped. Miraculous. We had companies in Ohio that chose to do that. It was terrible. They chose to actually become foreign companies because our tax code was so uncompetitive. We can't let that happen again.
“Small businesses, which make up about 99 percent of the businesses in America, account for about two-thirds of the jobs in America. And by the way, most of the job growth is in small businesses, are also hit hard by these tax increases. The vast majority of small businesses are structured as what you call pass-throughs. In other words, they don't pay taxes at the company level, the individuals who own the company pay the taxes. That's the vast majority of companies in America.
“So when you raise individual income taxes, guess what happens? You're socking it to not just the wealthy or whoever you're trying to sock it to, you're socking it to small business, because that's again, the vast majority of businesses in America, most of the employees, and that's how they are taxed down to the individual level.
“To make matters worse, the Biden administration seems intent on ending Section 199A, which is a deduction we put in place on purpose to help small businesses to kind of level the playing field between big businesses and small businesses. They're actually talking about getting rid of that deduction. So for the small businesses listening today, beware. In all, the more successful pass through companies should expect their federal tax rate to rise from about 29.6 percent today to about 46.4 percent under the Democrats new plan. 46.4 percent taxation on small businesses. How does that make sense?
“I think what's going to happen is you'll see a lot of small businesses go out of business if this happens. And certainly not be able to create the jobs and the opportunity that we saw during the 2018, 2019 time period. But it's not just larger and small businesses that are going to feel the impact of these tax hikes, American workers and families will find themselves losing more of their hard-earned cash from all sides, thanks to the across the board tax increases, whether in estate taxes, capital gains taxes, retirement account taxes, marriage tax penalties, cigarette excise taxes, the list goes on and on.
“It's no surprise then that contrary to what President Biden has repeatedly said, according to the nonpartisan Joint Committee on Taxation – they are the people up here in the Hill who tell us what the impact is of tax law changes – the Joint Committee on Taxation analyzing this tax proposal that's out there already, this is the Democrat tax proposal from the Ways and Means Committee, they say a lot of taxpayers who make less than $400,000 a year are going to see higher taxes.
“Some percentage, in fact, of taxpayers in every bracket will see tax rates go up, even folks making between $40,000 and $50,000 a year, according to the distribution tables by the Joint Committee on Taxation. More than one in three taxpayers making between $100,000 and $200,000 per year will be paying higher taxes in 2023. More than one in three. By 2031, more than three quarters of those middle class taxpayers will be paying higher taxes. This is, according to the Joint Committee. I encourage you to go on their website, Joint Committee on Taxation, JCT.gov.
“Even working class families are going into paying some of the price of the spending spree in the form of higher taxes. But all of us have to pay an additional price and damage to our economy. According to the Tax Foundation, the combined long-run effects of the tax hikes include a decline in our long run gross domestic product of .98 percent. So about a one percent decline in our GDP. Wow. A decline in the wage rate of about .68 percent and a loss of 303,000 full-time jobs.
“So this is the Tax Foundation analyzing what the effects of this would be, in addition to what I talked about in terms of the tax hikes. The Joint Committee on Taxation has looked at this and said, well, if you raise taxes on corporations, it's going to come primarily out of the pockets of the workers. And that's a lot of these middle-class families. But also it's going to reduce our economy. It's going to decline our wages and it's going to result in a loss of over 300,000 full-time jobs. That's the Tax Foundation.
“So to be honest, I'm not exactly sure where the President got the notion he's been repeating lately that the price tag on this $3.5 trillion, maybe $5 trillion. I don't know, depending on how you look at the spending, is $0. That's what he said. It's $0.
“Even by their own admission, the big tax hikes we're talking over here aren't going to cover all the spending, number one. But more importantly, billions of dollars lost in economic growth, a significant decline in wages and hundreds of thousands of jobs loss doesn't sound like zero to me. It sounds like a bad deal for the American people. So, along with my Republican colleagues, we've got to keep telling American people what's in this tax proposal and urging people to learn more about how these new taxes are going to affect them, their business, their community, and weigh in with their representatives here in Congress.
“Why would the American people support tax hikes that are going to be bad for workers? Bad for our businesses? We've got a responsibility to our constituents to ensure that does not happen.”