[Congressional Record Volume 163, Number 182 (Wednesday, November 8, 2017)]
[Senate]
[Pages S7094-S7097]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Tax Reform
Mr. GARDNER. Mr. President, I rise today to talk about a historic
opportunity that will soon be before this body. It is an opportunity to
bring real relief to the American people. It is an opportunity to jolt
our economy into a higher gear and bring real, tangible benefits to
America's hard-working families.
It has been over 30 years since this country last reformed its Tax
Code. Over those 30 years, we have seen a lot of change. We have seen
the country move from Ataris to smartphones and Wi-Fi. This photo shows
a Ford LTD station wagon, which rolled off the assembly line 30 years
ago. It is a car that any of us would have been excited to drive 30
years ago. Today we have cars that drive themselves. Unfortunately, we
still have a tax code that is made for this LTD.
So while the world has changed around us and other countries have
learned to craft tax codes to entice businesses to grow, our code has
gotten more and more out of date and more and more laden with special-
interest giveaways. Our Tax Code has turned Main Street into a dead end
and our overseas growth into a one-way street.
Reforming the code is not only a way to give us an opportunity to end
those giveaways, but it can also boost our economy. I applaud our
colleagues in the House, who last week introduced and are working on a
proposal to overhaul the tax system. In the coming days the Senate
Finance Committee will introduce their own legislation.
While I will mostly focus my comments today on one aspect of tax
reform, I will note that on Friday the Tax Foundation released its
analysis of the House tax proposal. This analysis concluded that the
House proposal would create 975,000 full-time-equivalent jobs and push
GDP 3.9 percent higher than it would otherwise be. Taking into account
the economic feedback from the proposed reforms, this means taxpayers
would end up with 4.4 percent higher income. In other words, they will
make greater, higher income as a result of the bill that the House is
working on today. Indeed, the Tax Foundation concluded that the total
after-tax gain in income for a middle-class family would be nearly
$2,600.
Importantly, for my constituents in my home State of Colorado, the
gain would be over $3,000. These are serious gains that will bring
real, meaningful benefits to hard-working Americans. This is just the
starting point for our reform. This number is over $3,000 of impact to
the people of Colorado of additional income and tax relief. When a
significant segment of Americans don't even have access within 24 hours
to just a few hundred dollars, a $3,000 a year gain is a significant
amount of money.
Today I would like to focus on one part of the tax reform package,
and that is the lowering of taxes on America's job creators. Because we
have this clunky Atari-era Tax Code--this Ford LTD station wagon Tax
Code, our tax rates are no longer competitive. They encourage companies
to invest abroad rather than right here at home in the United States.
Back in 1986, when this car rolled off the assembly line, our corporate
rate was competitive. It didn't discourage companies from investing in
the United States.
Things have significantly changed since 1986. Foreign countries have
figured it out. They lowered their tax rates, and now the United States
has the highest corporate tax rate in the
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developed world--indeed, one of the highest tax rates in the world,
period. Consequently, businesses have moved abroad more and more. They
invested more abroad, and in the United States they have invested less
and less.
It is not in the Republicans' view alone. I would draw your attention
to this quote right here. President Obama noted this gradual
deterioration of the corporate tax code in his 2011 State of the Union
Address, saying:
[O]ver the years, a parade of lobbyists has rigged the tax
code to benefit particular companies and industries. Those
with accountants or lawyers to work the system can end up
paying no taxes at all. But all the rest are hit with one
of the highest corporate tax rates in the world. It makes
no sense, and it has to change.
Those are the words that President Barack Obama spoke to a joint
session of Congress in 2011 in his State of the Union Address.
The Council of Economic Advisers estimates that just moving the tax
rates on corporations from the uncompetitive 35 percent to the middle-
of-the-pack 20 percent and adding permanent full expensing of capital
investments would increase GDP from 3 percent to 5 percent above what
is currently forecasted. That increase would not just happen in a
decade or two, it would be front-loaded, meaning that we would see a
fast response from this economy, with 2.4 percent to 3.2 percent higher
GDP in the first 3 to 5 years under this proposal. That boost will not
just be to the corporate bottom line. It will increase the average
American household income by $4,000.
Let me say that again. It will increase average household income in
America by $4,000.
Since these estimates were released, since those numbers, statistics,
and analysis have been done, opponents of pro-growth tax reform have
thrown everything they can at the proposals and estimates to see what
will stick to try to bring it down. They said these numbers are too
rosy. They said that we can't possibly get a $4,000 increase in average
household income because that would mean more money would end up in
bank accounts of American households than is raised in revenue by the
corporate income tax.
They said that corporations have been ``rolling in money'' for a long
time. So if they wanted to invest in America they already would have.
Some opponents say we should tax corporations more--take the profit
that is sitting overseas and spend it as the government wishes. When
opponents of tax relief see a company with money, their reaction is to
take it--to take it like it is the Government's money. But we know that
doesn't work. Even our European friends, whose residents tend to be far
more open to socialist experiments, have rejected this notion. They
know that tax reform is about creating the environment that will cause
companies to invest in America, not attempting to seize profits from
companies that can easily move elsewhere. That is why France, Germany,
Spain, Italy, and Greece--not exactly bastions of open economic
innovation--have lower corporate tax rates than we do.
The chairman of the Council of Economic Advisers, Kevin Hassett, told
the Joint Economic Committee recently:
This is not about right wing parties throwing money at rich
corporations. It is about economically literate governments
understanding that if we want wages to be higher, than we
have to give workers capital to work with.
Let me say that again. This effort for tax relief is about
``economically literate governments understanding that if we want wages
to be higher, then we have to give workers capital to work with.''
Let's go back to the first response we heard from opponents of tax
relief: It is ``absurd'' to think the average American household will
get $4,000 more in income because that is more than the country raises
in tax revenue.
In other words, if we took every dollar raised from corporate tax and
handed it over to American families, they wouldn't get $4,000. That is
the argument opponents of tax reform are saying, but this response
simply doesn't get it.
What is the economically literate perspective?
Recall that a lot has changed over the last 30 years, but one thing
hasn't changed, and that is the U.S. corporate tax rate. As you can see
on this chart, the average OECD tax rates have dropped over time. You
see the blue OECD line, and the orange line on the chart is straight
across. The average OECD tax rates have dropped over time, but the U.S.
rate stayed right where it is. The U.S. advantages that made it the
place to invest in 1986 have slowly faded away. Other countries have
used their tax rates to become more competitive, and companies have
responded.
Business investment now is unfortunately low. Indeed, Chairman
Hassett warned that there is a crisis in our country because of the
lack of what is called capital deepening, which is just an economist's
term for the impact of capital stock--things such as equipment,
structures, and intellectual property--on worker productivity.
Worker productivity is, in turn, what drives up wages. That is what
makes wages increase. The more productive a worker is, the more the
employer is willing to pay that worker to keep him or her in the job
with rising wages.
Going to another chart, we can see the effects of that. Prior to
1990, when corporate profits were going up by 1 percent, workers' wages
went up by more than 1 percent. Since that time in the 1990s, we have
seen change. From 2008 to 2016, a 1-percent increase in business
profits corresponded with only a 0.3 percent increase in workers'
wages. One of the biggest culprits in this is the corporate tax rate.
It is what causes that disconnect between corporate profits and
workers' wages.
When a company decides whether and where to invest in new buildings,
equipment, and research, they look at the tax rate to know what return
is needed to make that investment profitable. The higher the tax, the
higher the needed return. So companies facing higher taxes either don't
invest at all or they invest in another country. That is why experts
say that workers bear 45 percent to 75 percent of the burden of
corporate taxes, because businesses invest in them less and less, the
higher the tax. It is as if the corporate tax rate casts a shadow on
the entire economy.
We can see that shadow here. This is the way economists model the
market for capital--factories, equipment, buildings, IP. The higher the
price, the less the companies demand. The lower the price, the more the
companies demand. This is a simple concept.
Suppliers of those things are the reverse. If they have to sell at a
low price, they don't make very much, but if they can sell at a high
price, they make more. These two should meet in the middle, but they
don't meet in the middle today because the government has come in and
imposed a corporate tax. So each unit of capital costs more than it
should because of this tax system. That means businesses only want this
much. The producers only get this much. The government takes the rest.
What is left? We can see right here what the government is taking. We
can see the effect that taxes have on the economy. What is left is this
dark-shaded triangle. This is what economists call deadweight loss.
That is the stuff that doesn't happen because of the tax. This is the
tax shadow--the deadweight loss. It is deadweight in our economy. In
that shadow, business activity just doesn't happen, and workers just
don't get the capital they need to be more productive.
Remember, businesses are deciding whether and where to invest that
next dollar. If the cost is too high--reflected here--they won't
invest, at least not here in the United States. They will decide not to
expand at all, or they will expand in a country that has a lower tax
rate, or they will simply shut down entirely.
I don't think the American people would be surprised by this. This is
not news to them. They lived this for a long time. They know it well.
They know businesses are not expanding here. They have seen businesses
close. They have seen a slowdown in the startup of new businesses. They
know wages haven't gone up in many years.
They understand this shadow. Businesses don't expand. Workers are
laid off. Money moves abroad. It is because of this high tax that
doesn't leave us with decreases in costs, creating a deadweight loss on
our economy. They understand it, and they know that corporations pass
that tax on to them in the form of lower wages.
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But here is the good news. Help is on the way. Lowering the corporate
tax rate lowers the rate of return needed to make investments work. It
removes the shadow that blocks the economic sunlight. Suddenly
businesses are operating here in the green.
More investment in factories, buildings, equipment, and IP means more
Americans are more productive, and that makes total sense. You get more
done when you have a new computer than when you have an old clunky one.
You produce more when you have a new machine on the line. Workers
become more productive, and the companies pay them more both because
they are bringing in more and because they want to keep those workers
to do more. That is what happens when you lift that economic shadow
that we talked about that corporate taxes impose and cast on our
economy. You create more jobs, and wage competition grows income.
This isn't just economic theory. As you can see here on this chart,
wage increases are significantly higher in countries with lower
corporate tax rates. We don't need just simple economic theory; we need
economic results, and that is what this chart shows us. High-tax
countries like the United States have weak wage growth. The United
States is down here on this chart representing the highest statutory
corporate rate countries. High-tax countries like the United States
have weak wage growth--less than 1 percent, even close to zero percent.
You can see that here. Low-tax countries--these are the lowest
statutory corporate rate countries. These are the bottom 10 lowest
rates. Low-tax-rate countries see a wage growth of 1 percent, 1.5
percent, 3.5 percent, even 4 percent, and that is because they don't
live under that economic dead weight, that tax shadow, that deadweight
loss zone of high corporate taxes.
It also matches my experience in talking with companies in Colorado.
U.S. multinational corporations doing business in Colorado have told me
that they want to expand here, but they just can't justify it when they
look at the tax rates we have here versus around the world, especially
in Europe. I have even heard from some foreign-based companies that do
business in Colorado that this sort of reform--I ask unanimous consent
to complete my remarks.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. GARDNER. Mr. President, it would entice them to invest more in
the United States. This is real, and the American people need it.
It is good television to say that it is absurd to think that American
families will get more money from lowering the corporate rate than the
tax raised in revenue, but it is wrong. It is tempting to look at a
stash of corporate profits and think that corporations just must not
want to invest here or ``let's just take that money,'' but that is
wrong too. The right move is to create the tax environment that tells
businesses that they should invest here because they can make more
money. That is why President Obama called for corporate tax reform.
That is why former Treasury Secretary--and one of President Obama's
economic advisers--Larry Summers said that reducing the corporate tax
rate and lowering the competitive disadvantage faced by American
multinationals is ``about as close to a free lunch as tax reformers
will ever get.'' That is what we do by lowering the tax rate. That is
how American families end up with $4,000 more in their pockets--and not
just one time; once this fully takes effect, that increase is
permanent.
Mr. President, we have a historic opportunity. The American people
need and deserve a new and better Tax Code, a modern one designed for
today's world, not an Atari world or a Ford LTD world.
I urge my colleagues on both sides of the aisle to join with us as we
modernize our Tax Code and deliver real results for the American
people.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. MERKLEY. Mr. President, a few moments from now, we are going to
come to this Chamber to vote on the nomination of Peter Robb to serve
as general counsel for the National Labor Relations Board.
Quite frankly, if we allow this individual to be confirmed, it will
be a severe slap in the face to American workers. This is an individual
who has made a career out of attacking the ability of American workers
to get a fair share of the wealth they create. Yet here is a proposal
to put him in a leadership position at an agency whose purpose is to
fight to make sure workers get fair treatment. How does it make sense
to take someone who has fought to undermine the ability of workers his
entire life and put that person in charge of making sure American
workers are treated fairly? Certainly, it is exactly the opposite of
the argument Candidate Trump made when he said he was going to stand up
for American workers. When push comes to shove, the President wants to
shove workers down into the ditch.
It boils down to this: The National Labor Relations Board was
established 82 years ago in the middle of the Great Depression to
protect workers by encouraging and promoting their right to collective
bargaining. Think of the power of association so that workers can have
the opportunity to have a fair share, to have a basic foundation for
their families to thrive. That ability of workers to organize has been
behind every advancement we have made as a middle class in America. Be
it the 40-hour workweek, safe working conditions, standard benefits,
each and every advance was led by workers' ability to organize. Yet
here the President wants to put in place an individual who has done
everything possible to take away that right, that ability to weigh in
for basic fundamental fairness for workers.
The responsibility of the National Labor Relations Board is more
important today than ever. We have seen the impact of policies on
behalf of the privileged and the powerful--incomes stagnating while the
wealthiest Americans see their riches grow right up to the skyline. We
have seen that anti-worker forces throughout our country have led an
assault in State after State after State against the right of workers
to organize and to secure safe working conditions and fair wages.
Here we are at a time when America's workers have seen four decades
in which their wages have been flat or declining while the rich and
powerful have stripped off the growing wealth of this Nation for
themselves. Income inequality has soared, wealth inequality is massive,
and here is one more person being nominated to accentuate that
inequality in wealth and in income.
Back in 1981, Mr. Robb was lead attorney on the case to decertify the
Professional Air Traffic Controllers Organization. The union was
striking, and Mr. Robb helped President Reagan break that strike, which
resulted in the firing of 11,000 striking workers and, as a commentator
at the time said, forever ``undermined the bargaining of American
workers and their labor unions.''
When he last worked on the team at NLRB, this nominee was present for
decisions that--and this is recounted in a book called ``Right Turn''--
``[a]ltered long-standing policy . . . narrowing the scope of
activities subject to traditional National Labor Relations Board
protections; broadening the permissible range of employer conduct in
union representation campaigns; lowering the costs to employers of
unlawful activity; and otherwise narrowing or excusing the employer to
make changes subject to bargaining without informing unions before the
change was made, or by permitting employers wider latitude to end the
bargaining process by declaring impasse.''
More recently, Mr. Robb represented Dominion Energy and successfully
defeated a union organizing drive at the Millstone Power Station,
bragging on his firm's website that he was able to delay the election
for ``more than two years after the day the petition was filed.''
As many of you know, he does not want workers to have a fair chance
to vote on organizing a union or to work to press for a first contract
or to seek fair wages. He has spent his career fighting against workers
having that fair shot and defending companies against allegations from
union members regarding unfair labor practices--all kinds of unfair
labor practices, including age and sex discrimination. Never once in
this long career has he been on the side of the American worker--not
once; therefore, he has no place
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at the head of an organization intended to support the ability of
workers to organize and to press for a fair share.
It is unthinkable that this nominee would ever even come to this
Chamber. It is certainly part of an endless stream of attacks by the
rich and powerful on working Americans that have kept their wages flat
and declining for four decades. When are we going to see an end to this
sort of oppression by the powerful class against the workers of the
United States of America?
There is one act after another by this administration--President
Trump and his team--undermining fair wages for workers in this Nation.
It is outrageous. This nomination is outrageous, and I encourage my
colleagues to vote no.
The PRESIDING OFFICER. The Senator from Wyoming.