[Congressional Record Volume 157, Number 48 (Tuesday, April 5, 2011)]
[Senate]
[Pages S2132-S2135]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WYDEN (for himself, Mr. Coats, and Mr. Begich):
  S. 727. A bill to amend the Internal Revenue Code of 1986 to make the 
Federal income tax system simpler, fairer, and more fiscally 
responsible, and for other purposes; to the Committee on Finance.
  Mr. COATS. Mr. President, today, along with Senator Wyden, we 
introduce bipartisan tax reform legislation, a piece of legislation 
that we believe, and hopefully we can gather a consensus in this body 
to believe, is necessary to be a component of addressing the current 
fiscal situation.

[[Page S2133]]

  The Senator from South Dakota just articulated very well the plight 
we currently are facing with our current Federal deficit and 
accumulating debt. I don't think I could have said it better than he 
did. He laid out what I think most Americans are now realizing, and 
that is we have to get a grip on our current fiscal situation in this 
country if we are going to provide any kind of opportunity for the 
future--for prosperity, for opportunity for our young people to get 
good jobs, buy homes, raise a family, and send their kids to college. 
And even in a more current sense, we need to get our economy moving 
again to the point where we can get people back to work and become a 
prosperous leading nation in the world. We are gradually, and 
accelerating all the time, losing that position because of our fiscal 
situation.
  This morning, a number of us met--both Republicans and Democrats--in 
one of a series of meetings we have been having with outside experts. 
Dr. Carmen Reinhart and Ken Rogoff spoke to us this morning, both 
distinguished and respected economists, and others who have studied the 
situation, and they laid out the current status of our fiscal situation 
and the economic plight it is putting our country into. One of the 
things they said--and I think the reason I am on the floor this 
evening--is that unless we address all the aspects in dealing with our 
fiscal crisis, both in terms of excessive spending that is taking 
place, and has taken place over the last several years, as well as 
components for growth, we are not going to successfully address this.
  We not only have to look at the spending which has accelerated 
dramatically in the last few years, and the amount of deficit we are 
accumulating every year, and the amount of debt we are rolling up, but 
we also have to look at ways of addressing that by cutting spending and 
also spurring the economy to growth. The component for growth pretty 
much falls along the lines of tax reform.
  Senator Wyden had worked for 2 years with former Senator Gregg. They 
spent a great deal of time putting together a very comprehensive plan. 
Senator Gregg, as everyone here knows, retired after many years of 
distinguished service. He was recognized as one of the, if not the, 
leading proponent of budget stability, of economic growth, and of all 
the aspects that go into dealing with economic situations. He is 
greatly missed. I had the privilege of being his friend, serving with 
him, and then having him encourage me to take his place in moving this 
legislation forward.
  I have spent the last 3 months working with Senator Wyden, who is 
coauthor of that legislation, along with Senator Gregg. We have made 
some refinements to this and we are introducing it today. We will be 
doing a formal introduction of it together in the coming days, but the 
agreement and the growing consensus we hear from everyone is that 
comprehensive tax reform has to be a component of addressing our fiscal 
plight and getting us back into a period of sustained growth.
  S. 727 is the bill that will be available for people to look at--the 
Bipartisan Tax Fairness and Simplification Act of 2011. It simplifies 
our current tax system, it holds down rates for individuals and 
families, it provides tax relief to the middle class, and creates 
incentives for businesses to grow and invest in the United States.
  As we know, with any structure that is built, the first thing you do 
is build a solid foundation. What we are trying to do in our tax reform 
package is to build that foundation based on several basic principles. 
We believe that to bring forward legislation on a bipartisan basis we 
have to have a tax package that is revenue neutral, that is not 
stereotyped or characterized as a backdoor means of raising taxes or of 
cutting spending. Revenue neutrality means we can go forward knowing it 
is not used for that purpose but for the purpose of putting in place a 
tax system that will stimulate growth, provide for better 
competitiveness for our industries and businesses, and make us a more 
prosperous nation.
  Simplification is a key foundational principle, as well as protection 
for the middle class and families--fairness across the board. And as I 
said earlier, economic growth. I want to address each of those.
  First of all, achieving a revenue-neutral bill. This has been 
analyzed by the Joint Tax Committee, and basically we have information 
back that it is revenue neutral. This analysis is based on a static 
basis. As we all know, if you put in place policies that will encourage 
growth and stimulate growth, it becomes a dynamic scoring. But CBO 
doesn't do dynamic scoring, nor does the JTC--the Joint Tax Committee. 
But nevertheless, even at the static analysis of this bill, it achieves 
revenue neutrality. It is our goal to maintain that throughout, as 
adjustments might be made.
  Simplifying the Tax Code has to be one of the very first things we 
do. Today, the U.S. Tax Code is 71,684 pages in length, and it includes 
a tangled web of over 10,000 exemptions, deductions, credits, and other 
preferences. I took three tax courses in law school, and I don't begin 
to understand the 10,000-plus exemptions and deductions and preferences 
that are in there. I turn it over to an accountant, who spends every 
working hour of his week, every day of the year trying to stay up with 
the complexity of this Tax Code.
  It is no secret that Americans spend 6.1 billion hours each year 
filling out tax forms, and roughly $163 billion a year is spent on tax 
compliance. It is a great benefit for accountants and tax lawyers, but 
the average person simply cannot begin to comprehend the complexity of 
this code, and we pay a significant price for that.
  Along that line, people feel a real sense of unfairness in this. They 
are always wondering if their neighbor has a better accountant or a 
better tax attorney or has figured out a way to take advantage of a 
deduction or exclusion or a tax preference that they may not be aware 
of. You know: You are having coffee on April 16 and talking about 
filing your taxes yesterday and saying: Well, you did take the 
deduction for X, Y or Z, didn't you? Or how about that extra room in 
your house you use for business? Or did you know you can deduct the 
cost of pencils, but also driving down to pick up a latte, or whatever, 
if you are meeting somebody for business? This stuff goes on and on 
forever. And you think: Gosh, I didn't know that. He got a better deal 
than I did.

  We lose our sense of confidence in terms of the fairness of the tax 
system. So simplification is absolutely essential. And for a 71,000-
plus page Tax Code, I think it is an absolute necessity.
  We reduced the number of tax brackets for individuals, first of all, 
from six to three. We also eliminate the alternative minimum tax, which 
means you have to calculate your taxes twice, in many instances, to see 
which one is the higher and which one you pay. That doubles the amount 
of time, or it adds a lot to the amount of time.
  I want to point to this chart here on my right, the Wyden-Coats Tax 
Reform Act of 2010. This is what a simplified U.S. individual tax 
return form will look like if this bill is passed. It is one page. It 
incorporates, obviously, the information about who you are and whether 
you are married, your spouse's Social Security number and yours, et 
cetera, et cetera; whether you are head of household, these very simple 
provisions here that are on the tax form now. We can all figure out how 
to work through to here.
  Right here, you list your dependents and their relationship to you, 
and you get their Social Security numbers and then to see whether you 
qualify for a dependent's deduction, and then you check those off.
  You list your capital gains and your dividends here. Your total 
income is added together, and then you adjust that by some very simple 
retained exemptions that we have not taken out, and deductions, and tax 
credits, all still on one page. You come down to the payment, and you 
either get a refund or you owe the government a little more money. And 
that is it. Then you send it in.
  We also have a provision in there if you don't want to do this 
yourself or you have some confusion. It is basic enough. You can do it 
electronically or by telephone or whatever, and ask the IRS to do it 
for you. They will calculate it for you, send it to you, so you can 
review it and then certify that it is correct or that you have 
questions that can be answered.
  Point No. 1: Simplification is absolutely necessary. It can be done, 
and we have structured it so with three

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brackets that allow us and allow individuals to fill out their taxes on 
the basis of this simple form.
  Thirdly, after revenue neutrality and simplification, we are talking 
about how do we use this to grow the economy. Clearly, with the fiscal 
situation we are in today, we are not going to solve our problem just 
by cutting or by raising taxes. We need to have a growth component so 
we can achieve more revenue through the prosperity and growth of 
corporations and income levels of individuals and so forth. So we are 
reforming our code in a way to help us get out of this fiscal situation 
by improving the prosperity and growth of the country.
  Our current tax system places the employers and businesses at a 
disadvantage in the global marketplace. If you look at this chart on my 
left, the United States, out of the 36 most competitive countries 
competing for global business around the world, is 35th. We are 35th 
out of 36 in the highest rate of taxes paid by our corporations, and 
they are competing against countries such as Germany, France, Austria, 
Turkey, Chile, and all these that are listed here--Asian nations and so 
forth--that have much lower combined tax rates than the United States.
  We want to lower this level of payment of taxes in the United States 
by U.S. businesses to 24 percent from the current rate of 35 percent. 
If we go by a combined rate, it ends up with numbers a little different 
than that, but we want to move the United States down here into the 
competitive area where we are competitive with all those countries that 
we compete with to sell products overseas in this global economy. We do 
that and pay for it by eliminating a lot of the credits, special 
preferences, exemptions, and deductions that are available in those 
71,000 pages, resulting in 10,000 or more special exemptions. We 
eliminate a lot of those in return for a lower corporate rate.
  I talked with a number of businesses--small, large, and medium--that 
were saying if we can just get the rate down where we are competitive, 
we do not need to dig into the Tax Code to try to find all these 
special exemptions. It has been called corporate welfare. It doesn't 
always fall into that category. Some of this is legitimate, but it is 
not across the board. While it addresses problems of a specific 
industry or a specific company, it does not address it across-the-board 
in a way for their competitors to be treated in the same way.
  Under Wyden-Coats, we try to level the playing field and make 
investing in the United States more attractive to businesses of all 
sizes. We have a repatriation provision in there which at another time 
we will explain in more detail. But a number of organizations, 
including Heritage and the Manufacturers Alliance, have done studies 
and produced information that shows that a lowering of this rate is a 
job creator. It is a growth component. The Heritage Foundation found 
that the legislation could create up to 2.3 million new jobs a year, 
while cutting the Federal deficit by an average of $61 billion, just 
through the changes we have made in the corporate structure of 
taxation. The Manufacturers Alliance published a paper that concluded 
such an approach would ``create nearly 2 million jobs on a net basis 
and add an extra $500 billion to GDP by 2015.'' The alliance also 
estimated that the increase of economic activity from this legislation 
could reduce the debt by $1.2 trillion over the coming decade.

  I wish to repeat that. While CBO or the Joint Tax might score this on 
a static basis--meaning that from lowering tax rates they do not 
calculate in what the potential growth from that might be in a fluid 
way, a dynamic way--history shows us that every time taxes are lowered, 
there is an uptick in economic activity and more important an uptick in 
the hiring and a drop in the unemployment rate. Getting us more 
competitive with our competitors around the world will clearly bring a 
yet undetermined number of more revenue coming into the Government 
based on higher profits by our companies and resulting in more 
employment. That is a key component of this tax reform.
  Protecting the middle class and families is also another key 
component of our tax reform and of the Wyden-Coats plan. Today a family 
of four in Indiana making $90,000 and filing jointly would owe nearly 
$13,000 in personal income taxes. Under Wyden-Coats that family would 
keep more of their hard-earned money and save approximately $5,000 in 
personal income taxes.
  We protect and extend important tax deductions for families. We do 
not eliminate all deductions to reach our simplified Tax Code with only 
three levels of taxation. Without increases, we retain the rates. We 
don't raise any of the rates that are currently in place. We keep the 
dependent tax credit, which is set to drop to $2,400 in 2 years. Under 
the Wyden-Coats plan, we permanently set that credit at $3,000, a 
benefit to families. The child tax credit is scheduled to revert to 
$500 in 2013. Wyden-Coats eases the tax burden on families by 
permanently setting the child tax credit at $1,000.
  We promote personal saving and investment. We think it is important 
that we encourage saving and investment. Today we have three separate 
IRA or Individual Retirement Account plans for savings and investments 
available to individuals in the United States. Wyden-Coats promotes 
this by expanding tax-free saving opportunities and consolidating these 
three new accounts into one account that would allow a married couple 
to contribute up to $14,000 a year to tax-favored retirement and 
savings accounts.
  We take the three current plans in existence, we consolidate them 
into one. We increase the amount per year that can be, tax-free, 
donated to those savings and retirement accounts as another way of 
looking out for families and their need to save for the future.
  We are making the Tax Code fairer. Today our current tax system picks 
winners and losers, with hundreds of specialized tax rates that benefit 
some but not all. These credits, specialized earmarks within this Tax 
Code that we are working with today, total $1.1 trillion. We want to 
eliminate, under Wyden-Coats, a number of those exemptions and end a 
number of specialized tax breaks that favor one sector of the economy 
or special interest group over another. We want to level this out.
  I recognize and Senator Wyden also recognizes that there will be 
issues with this bill, especially from groups that benefit from these 
special exemptions, but those special exemptions and tax earmarks often 
put other companies at a disadvantage, and it is time, as I said, to 
make our system fairer and more simple. Ronald Reagan once said: To put 
it simply, our tax system is unfair, it is inequitable, it is 
counterproductive and all but incomprehensible. Reagan went on to say 
that were he living at this time, even Albert Einstein would have to 
write to the IRS to help him fill out his 1040 form each year.
  It is 25 years since we had any meaningful tax reform; 1986 was the 
last time. During that time, our Government has vastly expanded Tax 
Code reform into a complicated, tangled web of deductions and loopholes 
for tax lawyers to decipher. But if we can reform this Tax Code and 
encourage job investment here at home and, through doing this, create 
more American jobs and make our country more competitive in a global 
market, we will have taken a major step to moving forward in terms of 
addressing the fiscal plight we are currently in.
  Senator Wyden and I are open to suggestion. This is not set in 
concrete. This is not a be-all, end-all plan. We don't have all the 
answers to this complex problem. But we think this is an essential 
start to a debate that is necessary to be accompanied by other 
solutions that we have to bring to our current fiscal situation. We 
want to put this in as a starter, as a way of saying 2 years-plus of 
hard work by two people who are knowledgeable about this topic--and I 
do not begin to bring myself up to the speed Senator Wyden and Senator 
Gregg achieved in the 2-plus years of very hard effort, but I am trying 
to learn as fast as I can. We want to bring forward a bipartisan, 
Democratic-Republican plan which we think is based on principles that 
are necessary to stimulate our growth and provide fairness and 
simplification of our Tax Code. We want to provide it. We are asking 
everybody to look at it, examine it, come to us with your questions. 
There will be a lot of things to like. There will be some constituents 
who will find some things they do not like because it takes away a 
special exemption that they perhaps depended

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on. But we want to explain the basis on which we have made these 
decisions. We are open to suggestions, as long as those suggestions 
allow us to retain those basic principles and maintain us at revenue 
neutrality level and a fairness across-the-board to families and 
businesses and individuals throughout this country.
  I urge my colleagues to take a look, to work with us. The door is 
open for us to sit down and talk, whether to colleagues in the Senate 
or families or businesses across the country who want to bring their 
special input to this particular effort. We look forward to working 
with them and, over time, incorporating this in the plan to make us a 
fiscally healthier country and a country that is growing and dynamic 
and can retain its place as a place of prosperity and opportunity for 
not only those of us today but for our future generations.
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