[Congressional Record Volume 157, Number 138 (Friday, September 16, 2011)]
[Senate]
[Pages S5701-S5703]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAX REFORM
Mr. WYDEN. Mr. President, I am going to take just a little time this
morning to make some remarks with respect to the issue of tax reform
and particularly try to lay out why the naysayers, those who say tax
reform is not going to make any difference anytime soon or there has
not been a lot of groundwork laid--those are the two major arguments
they are making--I am going to try to lay out why those arguments are
wrong.
To start with, they reflect a misunderstanding about markets, about
free enterprise and about what drives the American economy. One of the
major reasons consumers are not spending and businesses are not hiring
workers is uncertainty about taxes. Enacting fundamental tax reform
that encourages the use of free enterprise and markets would start
changing consumers' behavior very quickly and business would be in a
position in West Virginia and Oregon and everywhere else to start
making judgments with respect to investment.
They cannot make judgments right now when we have these piecemeal tax
changes that might last 1 year or even less. That is not the way the
American economy works. Businesses in West Virginia and Oregon are
thinking about investments that can last 5, 10 years and even longer
and they need some certainty. I am going to spend some time talking
about permanent tax reform, enacted early next year, and making a start
at it with our supercommittee. We have the good fortune of having
Chairman Baucus on it. I serve on the Finance Committee with him.
Chairman Dave Camp, chairman of the House Ways, and Means Committee is
also on it. What I feel very strongly about--as does the cosponsor of
the tax reform legislation I have offered, Senator Coats--is they can
make a good start on tax reform in the supercommittee and I am going to
outline how that could take place and then Congress could finish it up
early next year.
Let's start by talking about how we might see people's behavior start
changing and getting consumers back into the marketplace and businesses
start making investment decisions. My own view is, if working families
knew at the end of the year or early next year they would get real tax
relief as we get underway with the tax legislation I have been part of
with Senator Coats and Senator Begich and former Senator Gregg and if
middle-class folks knew reduced tax rates were going to be in place not
just for 1 year but for the long term, they would start making the
kinds of decisions they are putting off now because they are uncertain
today and they are going to be uncertain next year and the year after
if we continue to make these changes in tax law by piecemeal.
My view is, if we saw permanent tax reform enacted early next year,
we would see consumers making the kind of purchases they have been
postponing in major appliances, new cars, and the other investments
they make when they know the economy is going to start picking up
because millions of others are going to go back into the marketplace,
just like themselves. When businesses see additional demand for their
products, they will go out and start hiring more workers.
Let's talk for just a minute about how fundamental tax reform puts
more money into the pockets of the middle class. Under the legislation
I have been a part of, with two Republicans and Senator Begich, a
typical couple making $90,000 would pay close to $5,000 less in taxes,
according to estimates by the Congressional Budget Office.
The reason that is the case is our bipartisan tax reform triples the
standard deduction for that middle-class couple. It triples the
standard deduction. Let me emphasize it is permanent. I wish to say
that again--permanent. It is not something that is going to be jerked
away in 1 year. It is something that would be locked into the Tax Code
on a permanent basis. Economists and others have repeatedly said, when
we make those kinds of changes and typical families know on a permanent
basis they will have more money in their pockets, they will go out and
make the major purchases they have put off in West Virginia and Oregon
over the last few years.
I have talked to folks at coffee shops and know the Presiding Officer
spends a lot of time getting out and talking with folks in his state.
When I go into coffee shops and I ask people, in particular, about why
they are putting off major purchases--they talk about appliances and
cars--they say: I don't know what is going to happen. I heard there was
this tax break I was going to get for 1 year, and I don't know what is
going to happen after that.
We need to make permanent changes in the tax law, give permanent tax
relief to middle-class people, and then, based on everything we know
about economics, people start changing their behavior. They are not
going to do it in a big way without permanent and predictable changes,
changes they can count on that will not be jerked away from them in
another year or so.
The same principle goes for business. Once they know there is going
to be a new tax system in place with reforms. By the way, virtually all
the reform plans take the corporate rate today, which is now the second
highest in the world, down to somewhere in the mid-twenties as a
percentage. Senator Coats and I, with Senator Begich, are at 24
percent. The Bowles-Simpson proposal is a little bit higher, but
everybody is pretty much in the same place. If we do that on a
permanent basis, businesses will be able to start planning, and they
will start planning immediately for the beneficial effects of consumers
going back into the marketplace because of permanent changes in the
individual Tax Code and because
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they know that the tax rates are going to be lower. Once a reform tax
system is signed into law, we have more certainty and we would begin to
see the spending, hiring, and investment decisions that are not being
made today in the American marketplace by the consumer and by business.
It would also be possible to further jump-start the process and
generate economic growth even more quickly. For example, as part of
permanent tax reform we could allow the consumer an advanced refund of
the reduced taxes they will be getting under tax reform. The Congress
did that a few years back. It helped a bit in terms of consumer demand
but, again, it was short term. Since it was not combined with permanent
reform of the Tax Code to provide future certainty, it didn't stimulate
as much demand either in the short term or the long term as it might
have if it were coupled with permanent reform. But it did help.
The bottom line is that enacting fundamental tax reform now would
provide immediate benefits to the economy by ending the uncertainty
that I happen to believe is strangling our prospects for real,
significant, long-term economic growth. We all understand the American
tax system is an anti-growth mess. It is riddled with loopholes and tax
dodges. I sit on the Senate Finance Committee, and for a big part of
the tax system today the language is pretty much incomprehensible
gibberish. So we do need to make these changes.
Now I wish to get into this issue of whether it is not going to be
possible to do tax reform now because the groundwork hasn't been laid.
I am sure the distinguished Senator from West Virginia has heard this
argument: Gosh, we could do it in 2013; we ought to spend more time
studying it--and all of that. I will tell my colleagues that the
uncertainty of putting it off again going to continue to harm the
economy--in fact, I predicted after the lameduck session of the
Congress in 2010 that unless we get people moving in a bipartisan way
on tax reform, we would have the same debate in the lameduck session of
the 2012 Congress--exactly the same debate--about whether we are going
to extend the Bush tax cuts on a temporary basis.
So if we aren't successful in pushing permanent tax reform onto the
agenda, that is what will happen. We will have the same debate in the
lameduck session in the 2012 Congress that we had during the lameduck
session in the 2010 Congress, which will be about, once again, trying
to patch up this dysfunctional anti-growth tax system we have in our
country.
So I wish to spend a few minutes addressing the claim that it is not
possible to do tax reform now because the groundwork hasn't been done.
That is awfully puzzling to me, given all of the tax reform proposals
that are out there now and how similar they are. For example, when
Erskine Bowles and Alan Simpson came to the Senate Budget Committee,
they said point-blank that they modeled their tax reform
recommendations after the bill that Senator Gregg and I had spent week
after week for 2 years working on. That was, of course, flattering. We
were happy about that. But the fact is, going all the way back to some
of the studies done by the Commission appointed by President George W.
Bush and then highlighted by the work done for President Obama, the
Volcker Commission, there has been an awful lot of common ground.
For example, the tax rates under all of these major proposals
involve, on the individual side of the Tax Code, taking the country
from six major brackets to three major brackets. The Bowles-Simpson
proposal comes in around 12 percent for the lowest rate, 22 percent for
the rate in the middle, and 29 percent for the rate at the top.
The proposal I have been part of with former Senator Gregg and
Senator Coats and our colleague and friend, Mark Begich, we are a bit
higher than that. That is because under our proposal we didn't make
changes with respect to the mortgage interest deduction and the
charitable deduction or the changes with respect to middle-class folks
who depend on their employer for their health care and their
retirement. So the point is, we have something we can have a real
debate on right now.
Let me highlight one other point. We touched on it yesterday when our
group of more than 30 senators got together. The Wyden-Coats-Begich
proposal has been scored by the Joint Committee on Taxation, the
committee that specifically looks at the impacts of changes in tax law.
So if the distinguished Senator from West Virginia, the Presiding
Officer of the Senate, wants to come in and make a modification in tax
law--for example, adjust the rates, say, in these three brackets one
way or another, because we have the numbers now from the Joint
Committee on Taxation, and it is the only proposal--our bill, the only
proposal--they have scored, we can give to the Senator from West
Virginia and any other Member of the Senate--the other 98 Senators not
here--we can give them the actual numbers that have been furnished by
the official scorekeeper, the Joint Committee on Taxation, so we can be
in a position to have a real debate.
There has been an enormous amount of groundwork done on this issue. I
have already mentioned the similarity and reforms on the individual
rates. The corporate rate reform proposals are similar. Repealing the
alternative minimum tax is in our bill. It is in all of the bills. We
understand what a crushing burden this alternative minimum tax is.
We have middle-class folks all over America, and the Presiding
Officer probably has somebody who, say, is on the police force in a
town in West Virginia, and perhaps that police officer's spouse is a
teacher, and they can be filling out their taxes twice with this
bureaucratic nightmare called the alternative minimum tax. It wasn't
intended for those kinds of people. It was intended for wealthier
people who had managed to get out of paying taxes altogether.
So we are in a position to move forward. What I and others have said
is that if we started in the supercommittee by laying a baseline, a
foundation--they already have an opportunity for simplicity by moving
from those six brackets to three; they already have an opportunity on
the corporate rate where essentially all of the reforms are in the
vicinity of going from 35 percent to the mid-twenties, all of the
reforms talking about abolishing the alternative minimum taxes, all of
the reforms talking about getting taxpayers, individuals, and
businesses off the roller coaster of constant tax changes--the
supercommittee could make a very significant start on major tax reform
by the end of the year, and then early next year we could have a
guaranteed legislative process.
Let me use those words specifically. We could have a guaranteed
legislative process where the Finance Committee, under the leadership
of Chairman Baucus, and the Ways and Means Committee, under the
leadership of Chairman Camp, could enact permanent tax reform by early
next year.
I have already talked about how markets work. I think if this holiday
season the American consumer can have a sense that we are going to make
a break with tax policy as we know it today--we are going to stop all
of these piecemeal, temporary changes, and we are going to make
permanent changes that are going to be built around reform principles
which are widely accepted--ever since the 1980s when Democrats and
Ronald Reagan worked together on tax reform, the fundamentals of tax
reform have been very clear. They are all about eliminating
preferences--all of these special interest tax breaks and dodges and
loopholes and preferences, eliminating them--and using those dollars to
hold down the marginal rate, the rate we pay on the last dollar we earn
while keeping progressivity, while keeping a sense of fairness.
Those principles are very clear. All the reform proposals are based
on them. It sure seems to me if middle-class people can have the
certainty of knowing that tax policy is going to change so they can
start making decisions about their economic future and have a real
sense that it isn't going to just change in a year, that it isn't just
temporary, I think we will start seeing beneficial changes in the
American marketplace very quickly. That, of course, is what tax reform
is all about. It is about getting consumers back into the marketplace
and about businesses growing again because they know they are going to
have more consumers and
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they know they are going to be in a better position to compete in tough
global markets. That means jobs.
I wish to wrap up by talking about tax reform and jobs--and,
remember, we have not had fundamental tax reform for a quarter century.
For a quarter century, this country has been making almost one tax
change a day--almost one tax change a day--thousands and thousands of
tax changes cumulatively. Talk about what that means for uncertainty
for a business and a consumer. We can make a break with that and do
what was done in 1986, which translated into a big boost for our
economy.
I wish to give the numbers specifically so folks will see what this
tax reform issue is all about. According to the Bureau of Labor
Statistics, in the 2 years after the 1986 tax reform bill our country
created 6.3 million new jobs. I said 6.3 million new jobs. That sounds
pretty good. I think that would go over pretty well at a coffee shop in
West Virginia, and it certainly does in Oregon.
I am not going to come to the floor and say every one of those jobs
is due to tax reform. There are a host of issues that go into judgments
with respect to why consumers buy those appliances and those basic
necessities and why businesses invest and hire. But I will tell my
colleagues one thing: We couldn't have generated 6.3 million new jobs
in the 2 years after the 1986 tax reform bill if we had seen a tax
reform proposal enacted that didn't make sense for the American
economy. It wouldn't have happened.
Clearly, consumers and businesses believed this was a proposal moved
by a Republican President, Ronald Reagan, and a host of very
progressive Democrats--folks such as Congressman Dick Gephardt who
later ran for President with strong backing of American labor. They
came together and created 6.3 million new jobs in 2 years with the
kinds of reforms that Senator Coats and former Senator Gregg and
Senator Begich and I advocate now, that are in line with the
fundamental thinking of the Bowles-Simpson proposal, the reforms
proposal by former President George Bush, and President Obama's own
commission directed by Paul Volcker.
We have a chance now to make fundamental changes--fundamental
changes--that will change the direction of our economy and the
psychology of the American marketplace. In this debate, we can talk,
for example, about the issues that are front and center with American
workers. I am certain that in those coffee shops in West Virginia, one
of the things that is said again and again is: Senator, make sure you
keep the jobs here. Keep them at home. We are tired of all those jobs
going offshore.
Senator Coats and I have a proposal that takes away the tax breaks
for shipping jobs overseas and uses those dollars to create jobs here
at home--red, white, and blue jobs, jobs that pay good wages here in
the United States because we change tax policy and make it more
attractive to do business in the United States.
We can talk about the various ways to do it. There is discussion
about a territorial system, there is discussion about a worldwide
taxation system for the multinational corporations. The bottom line--
again, reflected in all of the reform proposals--is that competitive
rates, which means lowering rates for small business and businesses of
all sizes doing business in the United States, will help us create more
jobs, and they will be red, white, and blue jobs. They will be jobs
here in the United States.
So I assume this weekend--whether it is in coffee shops or on talk
shows or wherever--people are going to be talking about this discussion
about taxes, and they will say: Oh, I don't know if those folks in
Washington are going to get anything done. And if they do anything, it
will probably be a temporary thing, and they will all talk about why,
if you had real tax reform, it might not do anything soon. And, well,
it will take a lot more study, and that sort of thing.
I have been convincing this morning about why I believe permanent tax
reform--permanent tax reform--will start changing the behavior of
consumers in the marketplace, get them back into the marketplace,
buying those products that fuel a consumer-driven economy. They will
start doing it quickly if they see permanent tax reform enacted. I hope
I have been able to clearly outline why a great deal of groundwork has
been done already to allow us to move forward--not do the entire tax
reform effort in the 6 or 8 weeks that the supercommittee has, but to
get a foundation, a baseline in place, a baseline that is built around
these areas of consensus, changes that are advocated, essentially, by
all the reform proposals, and then allow the Senate Finance Committee,
under the leadership of Chairman Baucus, and the House Ways and Means
Committee, under the leadership of Chairman Dave Camp, to use the first
few months of next year with their committees--the committees of
jurisdiction; the Finance Committee here in the Senate, and the Ways
and Means Committee in the other body--that they take the first 90 or
120 days to enact permanent tax reforms.
I think that will be a huge boost for the American economy. I think
it will change the behavior of American consumers and American business
because that is what markets do. They react when positive and permanent
changes are put in place.
This can be thoroughly bipartisan. It was in 1986 when a whole host
of quite progressive Democrats got together with Ronald Reagan. I have
had the pleasure, over the last few years, to work with two outstanding
Members on the other side of the aisle, former Senator Gregg and
Senator Coats, and Senator Begich of Alaska, a former small
businessperson.
This is not like health care; we have done it before. The reform
proposals are very much built around the same sort of principles which
were the fundamentals of tax reform in 1986. While I know there is
going to be considerable debate this weekend about whether tax reform
can be done, whether it is going to change anybody's behavior or change
anybody's behavior soon, I wanted to weigh in and outline why looking
at the principles of the market, I believe, is going to change consumer
behavior, change consumer and business behavior for the better, and
that there has been a lot of groundwork laid that we can build on.
There is an opportunity, an opportunity for Democrats and Republicans
in this Chamber to come together and take steps, steps that will end
this anti-growth mess of a tax system, and give our consumers and
businesses the certainty and predictability they need to grow, to come
back into the American economy.
We will talk some more about this on the floor of this great body in
the days ahead. I just want the American people to know this is an
opportunity where, if there is a will to do permanent tax reform, there
is a way to get it done.
Mr. President, with that, I yield the floor and suggest the absence
of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
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