[Congressional Record Volume 163, Number 173 (Thursday, October 26, 2017)]
[Senate]
[Pages S6829-S6832]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Tax Reform
Mr. RUBIO. Mr. President, over the next few weeks, the Senate, the
House, Congress--everybody here in Washington is going to be engaged in
what I think is one of the most important and potentially impactful
debates we have had here in a long time. For a place that has been so
criticized for not doing anything, we have a chance to actually do
something that is going to matter and help real people and help the
country. It is called tax reform.
I think the great thing about a tax reform debate is that it actually
goes to the heart and soul of our identity as a nation and who we want
to be and who we have been up to this point.
We are a nation that has embraced free enterprise. There are people
who don't believe in free enterprise. There are people who believe in
different variations of free enterprise. By and large, America has
believed in free enterprise. That basically means the government
doesn't try to control too much of the economy. People have private
property and private businesses. You have rules to make sure people
don't cheat and steal from one another or hurt people, but by and
large, we believe in a private economy. Why do we believe that? I think
the answer to that is not just a purely economic one; you look back at
our founding.
One of the unique things about this country that we have taken for
granted and do not do a good enough job of teaching young Americans is
that America was not created as a nation to bring together a common
race or a common ethnicity or a common religion. There are a lot of
nations around the world--in fact, I would argue that most of the
nations that have ever existed have been a homeland for the people who
were born and have lived in that one place--not us. We were founded on
the idea that you could bring different kinds of people from different
backgrounds and unite them as one people, despite their differences in
background and ethnicity and religion. You could unite them behind a
very powerful idea--the idea that all of us are created equal because
we were born with a God-given right to life and to liberty and to
pursue happiness.
That is not just a revolutionary idea; it has changed the world. It
has been the identity of our country. It is among everything else that
makes us unique and special. In every generation, it has been
challenged economically, socially, and culturally. We need to continue
to fight for that.
One of the core principles behind equal opportunity is the ability to
fulfill your economic potential--to grow up and be who you want to be,
do what you want to do, open a company or work for a certain industry
or career or
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stay home and raise children. Whatever your choice is, they are all
legitimate. We are a nation that believes we all have the God-given
right to pursue that, and that is something which free enterprise makes
possible.
The difference between free enterprise and people who want government
to control everything is--the best analogy I can think of is, imagine a
pie. Let's use a pie as an example. I can't bring one on the floor to
graphically detail it, but imagine one in your mind. Imagine if I said
to you: This pie will never grow. It will always be the same size.
Every single one of us gets a slice.
Well, if the pie can't grow and everyone gets a slice, then the
bigger your slice, the smaller my slice. That is what people who don't
believe in free enterprise argue. They argue that the pie really can't
grow, and so you need government to make sure that pie is sliced
equally or equal enough among everybody. The Tax Code is one of the
ways they do it.
There is another argument. It is the one I believe in. It is the one
that I think has made this country the most prosperous in human
history. It is the argument that that pie doesn't have to stay that
size. We can make it a pie that is a lot bigger and make sure it keeps
growing. Therefore, it doesn't matter how big the other person's slice
is, as long as your slice is big too. More for them doesn't mean less
for you. That is one of the unique attributes of free enterprise:
Everyone can be better off without anyone being left worse off. That is
the theory, but it doesn't always work in practice for a lot of
different reasons. That doesn't mean anarchy. We do need government. I
am not anti-regulation; I am anti-overregulation.
I fly on airplanes. Everybody here flies on a lot of airplanes. I am
sure we are all glad that airplane is inspected and the person who is
flying it is really a pilot and not just someone who stayed at Holiday
Inn Express.
I think all of us want to make sure that when you open a bottle of
medicine prescribed to you, what is in that bottle is actually the
medicine and not something fake or something different.
When we eat food, we want to make sure it is not poisonous or going
to spread disease. These are all products of regulation.
The same is true in economics. That is why we have antitrust laws.
That is why we take on anti-competitiveness, because it actually
undermines free enterprise. I am not talking about corporatism, because
there are a lot of countries around the world that claim to be free
enterprise, but they really aren't. Four or five big companies control
everything, and everybody else either works for them or is unemployed.
That is not what I am talking about.
I am talking about free enterprise--a nation and a system in which
someone can quit their job, open a business, compete with their former
employer, and put them out of business--or at least take away some of
their customers--because you are better than they are. That is free
enterprise. That is what we believe in, and the Tax Code is a part of
it.
What has challenged free enterprise in this country in the 21st
century and you sense it in people's frustrations? There are two
things.
The first is there is a lot of overcompetition. It wasn't true in the
sixties and seventies. We forget Germany and Japan. These countries
were wiped out completely during World War II. It took them decades to
rebuild. America was the only show in town for much of the fifties,
sixties, up into the seventies. But all of these other countries
watched us grow, and they started doing the things we did. They started
deregulating, and they most certainly started cutting taxes.
The result has been that over the last 20 or 25 years, most countries
in the industrialized world, the big economies, charge companies a lot
less in taxes than we do. What that does over time is make us
uncompetitive. That is why not a day goes by that you don't read about
some American company that was bought by a company in another country
and moved over there. Do you know why? Because they pay less in taxes
over there than they do here. Anyone who doesn't realize that is
missing a big part of it.
We are not the only show in town anymore. We have to compete, and
that is why our Tax Code is important. If it becomes uncompetitive, you
are basically forcing and/or inviting companies to leave the United
States for a more favorable tax treatment--and that has happened.
Do you know who has paid the price? Not the rich people. If you are a
wealthy investor, you can invest your money anywhere in the world. Even
if you make your money here, I promise you, you have the best lawyers
and the best accountants to find every creative loophole to save money.
And if that loophole doesn't exist, you will hire the best lobbyist to
make one.
In the end, the truly wealthy--the billionaires, the owners with
these extraordinary amounts of wealth--they will figure it out. Do you
know who gets hurt? The people who get paid every 2 weeks. That is who
gets hurt because when those companies leave the United States, they
take their jobs with them. The fewer of those there are and the more
people we have competing for fewer jobs, the less people get paid at a
time when everything costs more.
There is another thing that is hurting us, and it is not part of the
tax reform, but it is the way growth is now distributed. We can no
longer just assume that if the economy grows, everyone will be better
off automatically, because the truth is, in the 21st century, there are
some careers, some industries, and some jobs that pay substantially
more.
Do you want to talk about the haves and have-nots in the 21st
century? The haves and the have-nots are the people who have advanced
education and the right skills and the people who do not. We have to
close that gap. Vocational training--that is a separate topic that has
to be dealt with and is critically important in the way growth is
distributed. But you have no growth to distribute if you don't have
growth. So that is why this is so important.
When you hear all this talk about wealthy corporations getting huge
tax breaks, it is not necessarily true. It is really, really important
for people to pay attention to the details and not just the talking
points on this.
For example, let's say company X is a publicly traded company, so
they sell stock on Wall Street and the like. Next year, because we
lower taxes, that company makes $1 million more than they did this
year. What can they do with that million dollars for a publicly traded
company? There are really only four things they can do with that money,
and all four of them help working Americans.
The first thing they can do is grow the business. They can say: We
like our business a lot. We now have a million dollars more than we
thought we were going to have, but we believe so much in our future
that we are going to take that million dollars and we are going to
invest it to grow the company. We are going to open a new factory. We
are going to open more stores and hire more people as a result. We are
going to invest in more equipment, which means the people who make that
equipment have more work. That is the first thing you can do with the
money you might save on taxes.
The second thing you might have to do--maybe you don't grow your
business, but with that million dollars extra that you have from the
tax cuts, you are going to have to pay your employees more because, if
not, they are going to quit and go to work for somebody else. So all of
a sudden, you are now in a position to be able to hire good people and
retain them by paying them more and by offering better benefits to keep
them. That is the second thing you can do with the money.
The third thing you can do with the million dollars from the tax cut
that you didn't plan on having is lower prices. You can say: I am in
competition with these five other businesses to sell the same thing. We
are going to use our million dollars to lower our prices just a little
bit, just enough so that people buy it from us instead of them. Do you
know what that other company is going to have to do? They are going to
have to lower prices, too, to compete with you. Do you know who
benefits from the lowering of prices? The middle class. The people who
are going to shop are going to be paying less because of the
competition. That is the third thing that can happen.
The fourth thing that can happen and the one that gets the most
criticism is,
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well, they will just pay it to the shareholders in dividends. OK. Who
are the shareholders? The shareholders are wealthy people who trade in
Wall Street and spend all day in front of a computer and have these
brokerage accounts and people who handle their accounts. They are a
part of it.
You know who else are shareholders? Millions and millions of
Americans. If you are a firefighter or a police officer with a union
pension, you are a shareholder. You might not be aware of the companies
you have shares in, but it is in your pension, and the future of your
pension will depend on how those investments go. If you are a 401(k)
holder, you are a shareholder. Just because you are not in front of the
computer every day, checking your TD Ameritrade account to see how much
money you have in X stock and Y stock does not mean you are not a
shareholder. You are a shareholder.
Virtually every sort of investment mechanism for retirement in
America is invested in what is called equities, is invested in the
market, is invested in stocks and bonds. If, in fact, those things are
doing better, it is helping you retire.
That is why the business side of this is so important. It will help
grow the economy, but it actually will also help people because there
is nowhere else for that money to go.
The other type of small business, which is actually the majority, has
been called a passthrough, and that is what most businesses are
organized as. That is where you pay on your personal rate. If you are a
small business owner with three employees, you are an S corporation,
and at the end of the year, you pay your taxes on your personal rate.
Your rate is actually higher than the companies, the corporations,
except you can't hire the lawyers and the accountants and all the other
expertise. You are actually, in many cases, paying more than the big
companies. These small businesses need to be helped, too, and they
would be with tax reform that lowers their rate and makes them
competitive.
Beyond ensuring that people are either going to have better
retirement funds, lower prices, more pay, more jobs, and we are helping
small businesses, the vast majority of which are owned by people who
are not multimillionaires and billionaires, the other thing we can do
to help working-class people in this country is an expansion of the
child tax credit. It is an idea that Senator Lee and I have been
pushing for the better part of 2 years. It wasn't always universally
popular, but I am going to explain three reasons why it is important.
In fact, not only is it important, but it has to happen. If we don't do
this, then someone could argue that this is not a middle-class tax cut.
If we do it, it will be, perhaps, the single largest middle-class tax
cut in modern history.
The child tax credit is a credit you get per child. Obviously, it
phases out at some point--the more money you make. Why do we have it?
We have it for two reasons: No. 1, we truly believe that the family is
the most important institution in society and parenting is the most
important job you will ever have. I don't care who you are. If you are
the President, if you are a Senator, if you are a Congressman--I don't
care what you do--the most important job you will ever have, the most
influence you will ever have, the most impactful thing you will ever do
is to raise a family, so our Tax Code accounts for that. It should.
The second thing is that raising children is expensive. If you are
raising children right now or have at any time in the near past, you
know how expensive it is. I don't know where they get these numbers,
but they sound right to me. The Department of Agriculture estimates
that to raise children from the time they are born to the time they are
18 is about $235,000 per child. That is a staggering amount of money.
That doesn't even account for college, by the way.
All you have to do is spend just 10 minutes; just go out one day this
weekend and talk to the people you know who are working parents, and
ask them. They are going to tell you one of the most expensive things
they face, especially between the time their children are born and the
time they turn 4 or 5, is childcare. In over two-thirds of the States
in this country, this costs more than it does to go to college. Imagine
that you make $800 a week that you take home, but you have to spend
$400 a week on childcare for your two kids. That is half your paycheck.
I am not saying a child tax credit fixes all of that. I am saying
that is a cost that keeps going up. It is a reason why the tax credit
has lost about $300 in value from the time it was last expanded in
2003.
The other thing to add to it is, if you look at some of the changes
being proposed on the personal deduction, that is another $500 off. In
essence, at $800 per child, we are just breaking even. That is why we
have to have a child tax credit that is at least $2,000 to really have
an impact.
The other thing we have to do is make it refundable. What that means
is it has to apply against payroll tax. Medicare, Social Security
taxes--that comes from FICA; it comes immediately off your paycheck.
Everybody pays that tax.
Not everybody pays income tax. If you don't make more than a certain
amount of money, you don't have an income tax liability, but you are
paying taxes. It is called the payroll tax. If we don't deal with that,
if we don't make the child tax credit apply to that, then we are
basically not cutting taxes or not helping the vast majority of people
who need it. There has been some speculation that this would be too
expensive and cost a lot of money. It is not true.
No. 2, it is their money. You don't get it unless you owe it, and you
don't owe it unless you are working. All we are saying is let people
keep more of their money to pay for their cost of living.
By the way, they are going to have to spend that money. We know that
a large number of families in this country are living beyond what they
make. That is why credit card debt has risen over the last 20 years.
They are going to take that money, and they are going to spend it. They
are going to spend a lot of it on raising their children. They are
going to spend a lot of it on the things that we talked about.
I am not saying this alone will change it, but, hopefully, the child
tax credit, combined with a growing economy in which there are more
jobs that pay more and prices are lower, is going to truly help people,
and we have to help people in that regard. So this has to be a critical
component of tax reform.
I wanted to set the stage for that, because, unfortunately, it is a
complicated thing. Unfortunately, taxes are very complicated, more than
they really should be.
There is going to be a lot of misinformation out there about who this
actually helps and how the economy actually works. So it is really
important for us to be clear and upfront about why it is that we are
doing the things we are doing.
When I hear all this talk about helping millionaires and
billionaires--they are probably the people who care the least about
some of the tax reforms. They are going to be finding their way; they
just want to know what the rules are. They just want to know what the
rules are because they are going to figure it out one way or the other.
If their taxes are too high, they will take their money to another
country. If they are low enough, they might invest it here. Either way,
they are going to be fine.
The people we really want to help are working people and small
businesses, and the Tax Code is a part of that. It is not the only part
of that, but it is a big part of it. That is why this has to happen. It
has to happen. It has been far too long.
I want to take a step back and say that 50 years from now, when
people read about this time in American history, they are going to ask
themselves: What was wrong with those people? Did they not realize that
all these other countries were taking their jobs, and one of the ways
those jobs were leaving is that they were giving them away. They were
literally inviting people to leave by acting so arrogant about
themselves that they thought they could charge them anything they
wanted in taxes, and they would stay. That is just not true anymore. I
am not sure it ever was entirely true, but it is less true today than
it ever was before.
In the end, the people who are really being hurt by this are the
people whose jobs don't pay enough at a time when everything costs
more.
The people who are really being hurt by this are the people who wish
they
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could start their own business, but they can't because they don't think
they can make enough money to survive.
The people who are really being hurt by this are parents who are
trying to raise their children at a time when everything costs more,
but their paychecks aren't keeping pace.
The people who are really being hurt by this are the people who sit
down every month, and they write down on a piece of paper: This is our
budget for the month. And about 14 or 15 days into the month, something
comes in the mail that they didn't expect was on its way, and all of a
sudden, that whole budget gets blown out, and now they have to use a
credit card to pay for it.
The people who are being hurt by this are the people whose kids are
now 17 years old, and they say: I want them to go to college, but I
have no idea whether they are going to be able to go. Even with
financial aid, they are going to have to borrow money to go to school,
and now they are in debt. Before they even vote in their first
election, they already owe $10,000. We have to help them if we are
going to rebuild the country's economy, and tax reform is a key part of
it.
Here is my last point. There has been a lot of talk about debt--that
this is going to grow the debt. That actually doesn't have to be true.
If you lower the tax rate and businesses are hiring more people,
creating more jobs, and growing, that is going to grow your economy.
When you grow your economy, you have more taxpayers. When you have more
taxpayers, you have more revenue. Even though you didn't raise the
rate, you will still collect more money because even though you don't
have more taxes, you have more taxpayers. That is a big chunk of this.
Just a normal, not unrealistic growth rate would more than pay for
the money that people are saying we are not going to collect as a
result of this. That is part one of it.
The other thing that is interesting to me is if we stood here today
and said ``Let's take $1.7 trillion and spend it to build stuff that
the government does,'' there would be no problem with that. That would
be seen as stimulus. That is positive. That is good debt spending. But,
somehow, if we say ``Let's take money and give it back to people so
they can spend it themselves,'' that is bad debt. That is ridiculous.
The third thing I would say is that you are never going to tax your
way out of debt anyway. Even if we tax everyone in America next year--
if, for everyone in America who made $1 million next year, we
confiscated every penny of it and said ``Your tax rate this year is 100
percent,'' it would not even make a dent on the debt. That is how big
the debt is and how fast it is growing. So you can't tax your way out
of this, and you can't just cut your way out of it, either, by the way.
So the only solution to our debt long term is that you have to do two
separate things, and you have to do them both.
No. 1, you have to grow your economy. You have to. That pie has to
grow. No. 2, the debt has to be held back so it doesn't grow as big as
the economy. If you grow the economy by 4 percent and you grow the debt
by 4.5 percent, then you are not going to get there. You have to do
both. This is part one--grow the economy.
Part two is going to have to be to bring our spending on a
sustainable path so that the growth and the benefits of the growth and
the revenue from the growth aren't being taken and used to pay for even
more government.
To use a best analogy, if you owe a lot of money and you only make
$2,000, and next month you get paid $3,000 a month but you add $1,500 a
month of expenditures, then you are still owing more money. So you have
to do both. You have to generate more revenue through growth--not
through more taxes--and you have to hold the long-term line on
spending. This is step one of that two-step process. We have a chance
to do it here before the year is out. We have to do it, and I believe
we will. It will be hard. It should be hard.
I always laugh when I read these articles that say: Oh, tax reform is
divisive, and people are arguing about it. They should argue about it.
They don't have a lot of arguments about economic policy in China, by
the way, because there is not much of an opposition, but in America, we
are a republic. There are different ideas. There should be different
ideas. Tax reform should be controversial. It is important. There
should be debate, and there will be so we arrive at good public policy.
There is nothing wrong with that. It is a good thing, not a bad thing,
as long as that debate is geared toward reaching a result.
In the end, I will tell you this, if we don't do it, I actually think
it will hurt our economy, not keep it the way it is. It will actually
hurt it because a lot of businesses, a lot of employers, and a lot of
Americans assumed that this would happen, given who won the elections
in 2016. They have already made investment decisions on the assumption
that some of this was going to happen. I am telling you, if it doesn't
happen, the collapse of confidence will hurt the economy badly. Failing
to act will actually reverse whatever gains we have already made this
year on the expectation of growth and will actually shatter people's
confidence in America's future.
If you are sitting there today thinking: Where am I going to open
this big plant and hire 1,000 people, and you see tax reform collapse
in the United States, and the people in the House, in the Senate, and
in the White House are all supportive of tax reform, and you still
couldn't get it done, you are going to say to yourself: Guess what; I
am not going to invest in that place because even when the people who
are in favor of it are in charge, they still can't get it done.
Not doing tax reform will not lead to the status quo. It will
actually leave us worse off. That is why we must do it. That is why the
child tax credit has to happen, by the way, because not only can we not
pass it without it, but we can't justify it without it.
I am optimistic that we are going to get there. It will be a lot of
work, but it will be good work. It will be the reason why so many of us
are here to begin with. We come here to make a difference. We come here
because we want to contribute toward making things better--not perfect,
but better. This will make things better.
For all the people who complain that we spend years here and nothing
ever happens, this is the chance to see something happen in our time
here and be able to look back when our service here is done and say: We
made a difference while we were there.
That is what we are endeavoring to do, and I am excited about the
fact that I believe we are going to do it. It will be long, it will be
hard, but it will be fun and it will be good for our country and for
our people. If we do it right, it will be one of the most rewarding
things any of us will ever do in our time here in public service.
I yield the floor.
The PRESIDING OFFICER (Mr. Sullivan). The Senator from Minnesota.