[Congressional Record Volume 160, Number 151 (Thursday, December 11, 2014)]
[Senate]
[Pages S6630-S6631]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CARDIN:
  S. 3005. A bill to amend the Internal Revenue Code of 1986 to provide 
for a progressive consumption tax and to reform the income tax, and for 
other purposes; to the Committee on Finance.
  Mr. CARDIN. Mr. President, I am pleased to introduce the Progressive 
Consumption Tax Act of 2014.
  We need a tax code that is fair for American employers and fair for 
American families. We need a tax code that makes our U.S.-based 
businesses more competitive. Finally, we need a tax code that allows us 
to responsibly and reliably collect reasonable revenues.
  I applaud the contributions of my colleagues in both the Senate and 
the House for their efforts in also trying to achieve these goals in 
tax reform. However, I am adding this bill to the tax reform debate, 
because I think we need to seriously reconsider the framework for that 
debate.
  Today, we seem to be stuck on 1986-style tax reform--lower the income 
tax rate, and broaden the base by eliminating tax preferences.
  The 1986 reform was a tremendous effort. But, I would argue that that 
reform lasted less than one year before Congress began tinkering with 
our income taxes once again. Since then, innumerable changes have made 
our tax code more and more complicated and, for many taxpayers, less 
and less fair.
  Another issue with reform efforts focusing on our current tax system 
is this--the extent to which we rely on income taxes is very out of 
step with the rest of the world.
  Compared to other countries that are in the OECD--developed countries 
with advanced economies, countries that we want to be competitive 
with--all taxes as a percentage of GDP in the United States are low.
  But, the U.S. is not a low income tax country. Our income tax 
revenues as a percentage of GDP are higher than the OECD countries. As 
many of my colleagues have pointed out, we have some of the highest 
statutory income tax rates in the world.
  What accounts for the difference is that all OECD countries except 
the U.S. have a consumption tax. In fact, about 150 countries now have 
a consumption tax, many of which were enacted decades ago.
  Unlike the U.S., these countries can tax imports and subsidize 
exports by rebating their consumption taxes for exports--without 
violating current World Trade Organization, WTO, rules. As important, 
these countries can sustain reductions in their corporate income tax 
rates, because they have an alternative and more pro-growth revenue 
source--a consumption tax.
  The Progressive Consumption Tax Act puts this country on a level 
playing field by providing for a broad-based progressive consumption 
tax, or PCT, at a rate of 10 percent. The PCT would generate revenue by 
taxing goods and services, rather than income.
  This is not simply an add-on tax. The revenues generated by the Act 
would be used to eliminate an income tax liability for a significant 
number of households. Those who do still have an income tax liability 
would see a much simplified income tax with their marginal rates 
reduced--the top marginal individual income tax rate, applying to 
taxable income over $500,000 for joint filers, would be 28 percent. The 
current top marginal rate, applying to taxable income over 
approximately $450,000 for joint filers, is 39.6 percent.
  The act would also slice our corporate rate by more than half, to 17 
percent.
  Finally, the act would provide rebates to lower- and moderate-income 
families to counteract heir consumption tax burden and to replace 
essential support programs like the Earned Income Tax Credit and Child 
Tax Credit. Like the EITC and CTC, Individuals and families who do not 
have an income tax liability would still be able to receive these 
rebates.
  A key part of the act is progressivity. By eliminating an income tax 
liability for a significant number of households and providing rebates, 
the Act is meant to be at least as progressive as the current system.
  The act is also meant to responsibly produce reasonable revenues. I 
know that some have concerns that the act would just provide a new 
lever for the government to raise funds. That is why the act contains a 
revenue ``circuit breaker'' mechanism that returns excess PCT revenues 
to taxpayers if a certain threshold is met.
  Overall, the Progressive Consumption Tax Act has many advantages 
compared to our current reform efforts.
  First, it encourages saving. Under current law, families and 
individuals are taxed on income, which includes savings. Under the act, 
most households would be exempt from the income tax, and thus would be 
able to save tax free.
  The act enhances U.S. economic competitiveness. The U.S. corporate 
income tax rate would be lowered to 17 percent, encouraging 
multinational corporations to locate here, not abroad. OECD countries 
currently attracting U.S. multinationals often impose higher 
consumption or corporate tax rates than those envisioned by the act.
  For instance, this year, we heard of many companies that were 
considering relocating to the U.K. That country's corporate income tax 
rate is 21 percent and its general consumption tax rate is 20 percent. 
Under the Act, the U.S. corporate tax rate would become 17 percent and 
the consumption tax rate would be only 10 percent.
  In fact, if the Progressive Consumption Tax Act became law, every top 
statutory rate in the United States--our individual income tax rate, 
our corporate tax rate, our consumption tax rate--would be at least 
five percentage points lower than the OECD average.
  The act encourages economic growth. In study that examined 35 years 
of data on 21 OECD countries, consumption taxes were found to be more 
growth-friendly than both personal income taxes and corporate income 
taxes. Corporate income taxes, especially, appear to have the most 
negative effect on GDP per capita. Growth-oriented tax reform should 
move away from income tax revenues and towards consumption tax 
revenues, as the act does.
  The act also enhances U.S. trade competitiveness. Countries with 
consumption taxes can adjust their taxes at the border by rebating 
exports. That means that these countries can agree to reduced tariffs 
under trade agreements, can still tax imports with their consumption 
taxes, and can export their own goods without a full tax load. Because 
the PCT is border-adjusted, the U.S. would be able to maintain export 
and import tax parity in the same way as these other countries.
  The act reduces income tax compliance costs. Most households would 
not have an income tax liability under the act--although they would 
need to provide key pieces of information to the IRS in order to obtain 
their rebates.
  Finally, the act protects low- and middle-income families from an 
unfair tax burden. Through the income tax exemption and rebate feature, 
the Progressive Consumption Tax Act aims to ensure that this new tax 
system is at least as progressive as the current income tax system.
  When my colleagues and others talk to me about comprehensive, 
responsible, pro-growth tax reform, this to me is what we need to do.
  That's why I am pleased to introduce Progressive Consumption Tax Act 
in this Congress. The Act is meant as an opening for serious discussion 
on this type of reform. We can't just stand by, fight the same tax 
reform fights we did

[[Page S6631]]

nearly 30 years ago, and in the meantime watch American jobs move 
overseas and our income tax system become further riddled with 
loopholes. I hope we will stand for what is right in our tax code, and 
enact the type of reform that allows our country to have among the 
lowest tax rates in the industrialized world, and the fairest system 
for all Americans.

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