[Congressional Record Volume 163, Number 117 (Wednesday, July 12, 2017)]
[Senate]
[Pages S3941-S3943]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                               Tax Reform

  Mr. HATCH. Mr. President, I rise to once again discuss the ongoing 
effort to reform our Nation's Tax Code. Over the past several years, I 
have come to the floor often to make the case for tax reform by 
highlighting the many shortcomings of our current tax system and

[[Page S3942]]

discussing the benefits we could reap by making the necessary changes.
  Over the last years while I have been serving as chairman or the lead 
Republican on the Senate tax-writing committee--both as ranking member 
and as chairman--I have made tax reform my top priority, and right now, 
I believe there is more momentum in favor of tax reform than we have 
seen in decades.
  To capitalize on that momentum, reform advocates like myself need to 
continue to make the case for updating and fixing our broken tax 
system. Toward that end, I intend to come to the floor often in the 
coming weeks and months to discuss various aspects of our tax system 
and make the case for reform. In my view, we need to go back to the 
drawing board and fundamentally rethink our entire tax system. This 
includes both the individual, as well as the business side of the tax 
ledger.
  Today, I want to talk specifically about our Nation's business tax 
system, with a particular focus on the corporate tax.
  Let's get the obvious out of the way first: The United States has the 
highest statutory corporate tax rate in the industrialized world. 
Looking at the effective corporate tax rates tells an equally gloomy 
story of the lack of American competitiveness. I will have more to say 
on that in a minute.
  I know some like to rail on corporate America and claim they aren't 
paying their fair share, but the facts tell a different story. 
Companies doing business in the United States are saddled with statuary 
tax rates that are higher than any other industrialized country. This 
isn't just a Republican talking point; Members and commentators from 
both parties and across the ideological spectrum have acknowledged that 
this is the problem.
  For example, just last year, former President Bill Clinton argued for 
a reduction in corporate tax rates, noting that he had urged for the 
corporate tax to be raised to 35 percent when he was President because 
``it was precisely in the middle of OECD countries. It isn't anymore.''
  Early in his Presidency, President Obama said: ``Our current 
corporate tax system is outdated, unfair, and inefficient.'' He also 
said that our corporate tax system ``hits companies that choose to stay 
in America with one of the highest tax rates in the world.'' I might 
add, he did nothing about it, though.
  In addition, my counterpart on the Senate Finance Committee, Senator 
Wyden, has introduced legislation that would reduce corporate tax rates 
by more than 10 percent.
  In a Finance Committee report in 2015 on international tax reform, 
put out by a working group cochaired by my friends and colleagues 
Senators Portman and Schumer, it was clearly stated that ``no matter 
what jurisdiction a U.S. multinational company is competing in, it is 
at a competitive disadvantage.''
  There are plenty of other examples of prominent Democrats who 
recognized the impact of our obnoxiously high corporate tax rate.
  I want to turn back to Bill Clinton's point, though, because it is an 
important one. We must always remember that businesses are, by and 
large, rational actors, making decisions based on what will help grow 
their business and what will cause their businesses to stagnate or move 
backward. Such decisions inevitably include where a company will do 
business and where it will be incorporated.
  According to the Organization for Economic Cooperation and 
Development, or OECD, businesses contemplating investment and other 
similar matters--especially incorporation in the United States--must 
first come to terms with the largest combined corporate tax rate among 
OECD member countries, which is currently at 39.1 percent.
  Some of my friends on the other side of the aisle like to counter 
these inconvenient facts by acknowledging the difference between 
effective tax rates, which are rates after accounting for deductions 
and credits, and statutory tax rates. Of course, even when taking those 
differences into account and focusing solely on effective rates, the 
United States only falls from the highest to the fourth highest 
corporate rate among countries in the G20--and that is according to 
2012 data that doesn't yet capture recent tax reforms in the UK and 
elsewhere.
  In other words, whether we are talking about effective rates or 
statutory rates in the United States, we are talking about some of the 
highest corporate tax rates in the world, and, as the working group 
cochaired by Senators Portman and Schumer made clear, this translates 
into American companies constantly being put at a competitive 
disadvantage. It doesn't take a Ph.D. in economics to recognize that 
this has had a major, negative impact on our economy and the ability of 
the American job creators to compete on the world stage.
  As a result of the astronomically high corporate tax rates in our 
country, we have seen companies--that, keep in mind, have duties to 
their shareholders--engage in inversions, earnings stripping, and 
profit shifting, all of which erode our tax base and drive away 
American ingenuity and innovation. These types of activities ship jobs, 
economic activity, intellectual property, and capital offshore, rather 
than keeping them right here in America. The primary driver behind most 
of these practices--practices that have been decried in the harshest 
rhetoric by some of our friends here in the Senate--is the desire to 
avoid or at the very least mitigate the impact of the U.S. corporate 
tax.
  While I am no fan of inversions or foreign takeovers or aggressive 
tax-planning techniques that shift profits around the globe in search 
of low taxes, and I don't want to see any unnecessary erosion of the 
U.S. tax base, I can hardly fault any company for simply responding to 
the incentives created by our business tax system and the competitive 
actions of other countries that have been lowering their corporate tax 
rates.
  Unfortunately, instead of recognizing the perverse incentives of our 
current tax system, coupled with companies' duties to their 
shareholders, many of my Democratic friends--most notably, prominent 
officials in the previous administration--have derided the executives 
and board members making these decisions, claiming that they lack, in 
the words of our previous U.S. Treasury Secretary, ``economic 
patriotism.'' The truth is that when it comes to our business tax 
system, some of our friends have buried their heads in the sand.
  Let's take a quick stroll through recent history. In the 20 years 
between 1983 and 2003, there were just 29 corporate inversions in the 
United States. In the 11 years between 2003 and 2014--a period spanning 
both Democratic and Republican Presidencies--there were 47 tax 
inversions--nearly double the number in half the amount of time. A 
quick review of changes in other industrialized nations' tax schemes 
will show that while the United States has stubbornly maintained the 
same corporate tax rate for more than three decades, other countries 
have nimbly adapted to the growing competition in the global 
marketplace.
  I have spoken at length about inversions before, so I will not 
belabor the issue now. What I do want to say is that when I talk to 
board members and CEOs of some of the largest companies in the country, 
they tend to be unequivocal when asked why they feel pressure to 
invert. Almost uniformly, their answer is our outrageously high 
corporate tax rate.
  Personally, I think this is one of the reasons why my friends and 
colleagues who sit on committees that regularly engage in these topics 
have come to recognize the level of our corporate tax rate as the major 
problem that it is.
  When I talk to constituents in Utah and Americans across the country, 
I hear of stagnant growth in wages and income, concerns over lack of 
opportunities and jobs, and worries about whether their employers will 
continue to operate here in the United States of America.
  Of course, the problem with our corporate tax system isn't just that 
it incentivizes companies to move offshore or discourages businesses 
from forming here in the United States in the first place; the problems 
actually run much deeper.
  Since 1947, the average growth of inflation-adjusted GDP in the 
United States has been 3.2 percent. Unfortunately, in the 8 years of 
the Obama administration, the growth rate was an anemic 1.8 percent.

[[Page S3943]]

  I know that several of my colleagues would, in response to those data 
points, argue that much of that is due to the great recession that took 
place at the initial stages of President Obama's time in office; 
however, a quick review of the quarterly growth rates since 1947 will 
show that there are normally periods of growth following recessions as 
the economy rebounds and the values of assets normalize again. In the 
case of the great recession of 2008 to 2009, that normal rebound did 
not occur, and a big reason why is the downward pressure imposed by our 
outdated tax scheme. Let's remember that the recession ended in June 
2009--more than 8 years ago.
  Others still might argue that this is all academic. They might even 
be brazen enough to claim that when we talk about the corporate tax 
rate, we are talking about the problems of the rich and not the middle 
class. Again, anyone making such an argument would simply be ignoring 
the facts and could be considered an idiot. Make no mistake--the 
crippling corporate tax rate in our country has stifled growth and 
investment in American businesses. This doesn't just impact Wall Street 
investors or rich CEOs, it has a negative effect on the middle class 
and on lower income workers. That effect comes in the form of fewer 
jobs, less investment in America, and sluggish growth and productivity 
that fuels wage and income growth.
  Since 1953, real median family income in the United States--meaning 
that half of the country earned more and half of the country earned 
less--has grown at an average rate of 1.3 percent. Under the Obama 
administration, that same indicator--one of the best indicators of the 
true status of the middle class--grew at approximately half that rate, 
or 0.7 percent. The growth of the average hourly earnings of production 
and nonsupervisory workers during the Obama administration was half of 
the historic long-run average. What is more, labor force participation 
was set firmly on a downward trajectory throughout the Obama 
administration and has yet to recover.
  As you can see, there is clear evidence that the economy is not 
working well for many American workers and middle-class families. 
Anyone arguing that our current tax system is a benefit to the middle 
class is, in my view, sadly misinformed or being deliberately 
misleading.
  Over the years, I have seen many of my friends on the other side come 
to the Senate floor demanding new standards, higher wages, and 
increased protections for middle-class workers. Yet many of the tax 
policies they tend to support would have the opposite effect.
  There is almost universal agreement among economists that the 
corporate tax is the most inefficient tax in existence. In addition, a 
large percentage--some economists say as much as 75 percent--of the 
burden imposed by the corporate tax is borne by a corporation's 
employees. In other words, our high corporate tax rate isn't just a 
burden on faceless corporations or rich shareholders, the burden is 
disproportionately borne by the factory workers and scientists and even 
the janitors who work for corporations, large and small.
  A reduced corporate tax rate would allow American companies to 
compete with their international counterparts on a more level playing 
field. A reduced corporate tax rate would mean fewer businesses would 
move offshore, taking their jobs and investments elsewhere. A reduced 
corporate tax rate would incentivize more new companies to set up shop 
in the United States and lead more established companies to invest 
their capital and hire workers here rather than in lower tax 
jurisdictions found in places like Canada, the UK, Ireland, or 
elsewhere.

  Mr. President, our shared goal should be to make the United States an 
inviting place to locate a business, invest, hire workers, and create 
new ideas and products, but that will not be the case so long as we 
cling to our punitive corporate tax system.
  Now, of course, when it comes to tax reform, our focus needs to move 
beyond the corporate tax rates. We need to talk about making the 
individual tax system simpler and fairer and offer tax relief to the 
middle class and small, passthrough businesses. We need to talk more 
about fixing our international system to further improve the 
competitiveness of American job creators and prevent further erosion of 
our tax base. And we need to remove burdens on savings and investment 
that keep middle-class Americans from generating and accumulating 
wealth for the future.
  I am going to talk more about all of these topics and others in the 
coming weeks and months.
  All of the improvements that we can make on these tax issues will 
become key elements of an effective tax reform package. In addition, I 
believe they are all areas where Republicans and Democrats can find 
agreement if we are all committed to the same goal--growing our economy 
to benefit the middle class.
  As I have said here on the floor many times, tax reform does not have 
to be another partisan exercise. I hope my Democratic colleagues will 
opt to join Republicans in this effort. As they have acknowledged the 
problems with our current tax system, I sincerely hope they will want 
to work with us to find a way to fix that tax system.
  As I said, I will have more to say in the near future, but these 
issues--our outdated business tax system and profanely high corporate 
tax rate--will not simply go away. I personally am committed to fixing 
these problems and will work with anyone who is willing to join the 
effort in good faith.
  Mr. President, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The senior assistant legislative clerk proceeded to call the roll.
  Ms. CANTWELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Toomey). Without objection, it is so 
ordered.