[Congressional Record Volume 163, Number 192 (Monday, November 27, 2017)]
[Senate]
[Pages S7322-S7324]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



          Consumer Financial Protection Bureau and Tax Reform

  Mr. CORNYN. Madam President, the Senator from New York is my friend, 
and we have worked together on a number of occasions, but I must 
disagree with a number of things he said today.
  First of all, the Consumer Financial Protection Bureau was a partisan 
creation by Democrats during the Obama administration that had 
virtually no Republican support. What they did is that they created a 
modern-day emperor, somebody immune from congressional oversight and 
the appropriations process. Now that Mr. Cordray is leaving, following 
the election of a Republican President, they are taking exception to 
the fact that this President has the authority under the law to appoint 
his successor. Instead, they are insisting that somebody chosen by Mr. 
Cordray--this modern-day financial emperor--should be able to make a 
choice and foist that on this administration when, clearly, this 
administration was elected to office in part in response to the 
overreach of the previous Obama administration.
  This is a perfect example of how nimble my colleague can be with the 
facts. The fact is that he comes here and complains about the fact that 
this tax bill we will be taking up is not partisan enough for him, when 
Senate Democrats have made it clear that they don't want to do anything 
that would give any credit to this administration or the Republican 
majority.
  Rather than taking the opportunity to find common ground and govern, 
they, essentially, have taken up the resistance, leaving the results of 
the election last November basically unresolved, in their minds, at 
least, even though the American people have clearly moved on and expect 
this administration, which was elected to office, along with a 
Republican majority in the House and the Senate, to actually govern.
  I remember days and times when, after we had elections, we actually 
figured out that we needed to govern and weren't focused then on the 
next campaign. Apparently, our colleagues across the aisle have simply 
forgotten that. That is the bad news. The good news is that it is not 
too late for them to change their ways and join us and bring historic 
tax reform to the American people.
  This week, we will be considering the Senate's version--voted out of 
the Senate Finance Committee last Thursday night--of our Tax Cuts and 
Jobs Act, which is the first major overall of our Nation's Tax Code in 
more than 30 years. It cuts tax rates across the board, reducing the 
burden on American job creators and middle-class families alike.
  Under our proposal, it has been estimated that folks back in my home 
State of Texas will see more than 76,000 new jobs created. After-tax 
income for middle-class families should rise by nearly $2,600. Now, 
that may be chump change here inside the beltway; our friends across 
the aisle may turn their nose up and say: Who would want to do this for 
$2,600 additional tax savings. But I can tell you, my 28 million 
constituents in Texas don't believe that $2,600 in tax savings for a 
family of four is chump change. They think of that as ways to increase 
their take-home pay, improve their standard of living, prepare for 
retirement, and help their children go to college. That is what that 
means to them.
  This bill will also reduce the tax burden on small businesses and put 
American companies on a level playing field with their foreign 
competitors, ultimately growing our economy here at home.
  Ironically, we heard some of the same old tired rhetoric in the 
Finance Committee, where we were talking about corporate giveaways and 
things like that, only to remind our colleagues on the Senate Finance 
Committee that they themselves had proposed similar tax cuts for 
American businesses so they could get more competitive in an 
international global economy. We had to remind them, after they derided 
this idea that we would want to be more competitive in the global 
economy, that it was Barack Obama, in 2011, who called for Democrats 
and Republicans to come together to cut the corporate tax rate because 
it was the highest one in the world and it was causing businesses to 
invest abroad--indeed, to leave the United States to set up their 
headquarters abroad just to avoid the highest tax rate in the civilized 
world.
  There has been a lot of disinformation and misinformation out there, 
which I would like to take the opportunity to correct on a couple of 
accounts.
  One major reform we have included in the latest version of our tax 
reform bill is the repeal of ObamaCare's individual mandate. Make no 
mistake, the individual mandate penalty is literally a tax on low-
income Americans. It is a tax because Chief Justice Roberts and the 
U.S. Supreme Court called it a tax.
  Democrats have made two arguments: first, that repealing this mandate 
is a tax increase. Only in the parallel universe known as Washington, 
DC, would cutting the tax be called a tax increase. Second, they said 
the repeal kicks people off their insurance coverage, which is 
demonstrably not true.

  But let's start with the first argument, that the repeal somehow 
represents a tax increase on the poor. It is a pretty strange thing to 
say that eliminating a financial obligation simultaneously entails an 
additional fiscal burden; in other words, that a tax cut is really a 
tax increase. Only here in the parallel universe of Washington, DC, 
could that possibly be true. It defies all logic.
  What actually happens under our plan is that certain low-income 
individuals do get a tax cut. If they voluntarily decide not to buy 
ObamaCare coverage, they will receive an additional tax cut because 
they will no longer be penalized by their own government for failing to 
buy an insurance policy they can't afford. It is worth noting that, in 
2015, 80 percent of people paying the ObamaCare individual mandate tax 
made less than $50,000 each year. Eighty percent made less than 
$50,000.
  There were 6.7 million people in 2015 alone that paid this additional 
tax mandate because they couldn't afford to purchase the government-
mandated coverage. If the mandate is repealed, these folks would have 
more money to spend, and they will benefit from income tax rate 
reductions in addition. If our colleagues across the aisle would work 
with us, these same people would find more affordable coverage that 
suited their needs rather than have to buy a one-size-fits-all policy 
that prices them out of the market. But that is another story.
  The second ridiculous argument is one you may recall the minority 
leader saying shortly before Thanksgiving. He made the statement that 
we are kicking 13 million people off of their health insurance. But 
that is just not true, and it doesn't tell the whole story.
  First of all, no one is being kicked off of their health insurance 
coverage. Instead, people will no longer be fined by their own 
government for not buying government-approved health insurance. That is 
based on the correct view that people shouldn't be coerced by their 
very own government to buy something they may not want and can't 
afford. Like I said, in a more rational world, Democrats and 
Republicans would work together to come up with an alternative that 
would provide people with more choices at a better price.
  Democrats might say: Well, what about premiums? Will they not rise if 
the mandate is eliminated and people drop out of the market because of 
this problem? This is one of the problems created by the Affordable 
Care Act at its very beginning. But the issue of rising premiums is 
significant. A recent proposal offered by the senior Senator from 
Maine, Ms. Collins, along with Senators Alexander and Murray, would 
attempt to stabilize the health insurance marketplace. It would reduce 
the risk for insurance companies by providing funds to insurers for 
high-risk enrollees. Their bipartisan stabilization proposal would 
appropriate money for something called cost-sharing reduction 
subsidies, and these payments could provide short-term certainty to 
insurers and prevent premiums from rising. In fact, premiums would go 
down. It has been scored by

[[Page S7323]]

the Congressional Budget Office as reducing the deficit by $3.8 billion 
over the next 10 years. That is why this proposal deserves our serious 
consideration, and I hope we will turn to it following our debate and 
vote on the Senate's tax reform bill.
  Apart from the repeal of the mandate, there are other parts of the 
plan I would like to highlight. One involves another popular myth that 
certain provisions of our proposal are just disguised corporate 
welfare. I alluded a minute ago to the hypocrisy of some of our 
Democratic colleagues, claiming that this is corporate welfare or a 
giveaway, when they themselves supported a similar provision in 
previous proposals. This claim is completely and deliberately 
misleading. As the Wall Street Journal pointed out last week, the irony 
is that this bill would do more to stop corporate tax gaming than 
anything done by the Obama administration during the previous 8 years.
  First, if we cut corporate taxes, the incentive for companies to game 
the system and move capital, income, and intellectual property abroad 
is reduced. The bill institutes a territorial system that also includes 
so-called base erosion rules. These are safeguards against abuse that 
prevent companies from shifting domestic income through foreign 
affiliates to lower tax jurisdictions and then bringing the profits 
home without paying taxes.
  Our Senate bill would impose an effective 10 percent rate on 
intangible property of U.S. multinationals held overseas. That is on a 
one-time basis. In return, companies would be able to repatriate their 
future income from those places tax-free. In other words, they would be 
taxed once rather than twice. This lower rate will help to prevent the 
erosion of our corporate tax base and so will other provisions 
regarding patents and intellectual property, which will prevent the 
flight of intellectual property abroad and will entice foreign 
companies to move their patents to the United States, along with the 
associated economic activity and jobs. In sum, as I said earlier, this 
bill changes incentives, making it less likely that businesses will try 
to game the system and move capital to foreign, lower tax 
jurisdictions.
  We need to look at this proposal as a whole--not just one provision 
in isolation--because you can't judge the merit of the plan without 
considering it as a whole.
  Two days ago, we got a letter from nine world-class experts on tax 
policy and economics. They sent a letter to Treasury Secretary Steve 
Mnuchin. In that letter, they praised the plan's objectives to enhance 
the prospects of both increased economic growth and household incomes--
more take-home pay. Not only that, but they said that, based on their 
analysis, our plan is likely to achieve those objectives, too. The 
signatories include a former Treasury Secretary, as well as a former 
Director of the Congressional Budget Office and distinguished 
economists from Harvard, Columbia, and Stanford. I think that all agree 
with the bottom line, which is that the Senate bill cuts taxes for 
every income group and that it will increase economic growth and keep 
jobs and American companies here at home, all while making America more 
competitive.
  Those who argue otherwise, I think, are resigned to the status quo, 
which is a stagnant economy characterized by slow growth and wages that 
will never rise. That is what we have had for the last 11 years. Under 
no circumstances should we stand by idly and permit it to continue.
  Historically, the United States has seen growth of the economy hover 
around 3 percent since World War II, but right now it is roughly 1.9 
percent. What that slow economic growth means is fewer jobs, lower 
wages, and less competitiveness for the United States in the global 
economy. If we get back to 3 percent growth or higher, we can begin to 
solve multiple problems at once. For example, we can do something about 
our lackluster defense spending.
  It is something the chairman of the Senate Armed Services Committee, 
Senator McCain, and others--including people like me and the Presiding 
Officer--care an awful lot about. We have simply tried again and again 
to cash the peace dividend when there is no peace, when, in the words 
of Gen. James Clapper, former Director of National Intelligence, he 
said: The array of threats is more profound than he has seen in 50 
years in the intelligence service of the United States. We can't spend 
the amount of money we need to keep America safe to fight our Nation's 
wars and to defend our shores at home unless we meet that need. We 
can't do it when our economy doesn't grow. Not only will economic 
opportunities increase for Americans of all stripes, we will also have 
additional revenue to address our national debt.
  If we can get our economy growing again, we can actually pay down 
that debt, but this debt is not a product of tax cuts and defense 
spending, as some would lead you to believe. It is a symptom of our 
inability to pass entitlement reform. In other words, we have a 
spending problem; we don't have an inadequate taxing problem.
  Indeed, during the 8 years of the Obama administration, when the 
national debt doubled, I didn't hear one peep out of our colleagues 
across the aisle on the national debt. It is refreshing to hear that 
they are concerned about that, once again, but we have a partial answer 
to that, which is getting the economy growing again so the Treasury 
will increase its returns, and we can begin to pay down some of those 
deficits and debt.
  To regain our standing in the world, we need to get our financial 
house in order. The first step is to pass this tax reform package, 
which will show our seriousness and determination in jump-starting our 
economy as a way to address our fiscal challenges.
  I hope our colleagues on both sides of the aisle will join me in 
supporting the Senate's version of this bill because America's future 
prosperity partially depends on our ability to get this done. What kind 
of country do we want? Do we want one that is vibrant and dynamic and 
full of energy or do we want one that simply putters along? A lot is on 
the line this week as we debate and vote on the Senate's tax reform 
bill.
  Madam President, I ask unanimous consent to have printed in the 
Record the letter I referred to from nine prominent economists, which 
was published on November 26 in the Wall Street Journal, called: ``How 
Tax Reform Will Lift the Economy.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                  How Tax Reform Will Lift the Economy

[Editor's note: The following is a Nov. 25 letter to Treasury Secretary 
                            Steven Mnuchin]

       Dear Mr. Secretary:
       The present debate over tax reforms proposed by President 
     Trump's administration and embodied in bills that have passed 
     the House of Representatives and the Senate Finance Committee 
     has raised the basic question of whether the bills are ``pro-
     growth'': Would the proposals raise current and future 
     economic activity and generate federal tax revenue that would 
     reduce the ``static cost'' of the reforms? This letter 
     explains why we believe that the answer to these questions is 
     ``yes.''
       Economists generally think of fundamental tax reform as a 
     set of tax changes that reduces tax distortions on productive 
     activities (for example, business investment and work) and 
     broadens the tax base to reduce tax differences among 
     similarly situated businesses and individuals. Fundamental 
     tax reform should also advance the objectives of fairness and 
     simplification.
       The quest for such fundamental tax reform has been pursued 
     by policy makers and economists for decades. Examples include 
     the Tax Reform Act of 1986, proposals for reducing the double 
     taxation of corporate equity by the Treasury Department and 
     the American Law Institute (enacted in part in 2003), the 
     ``Growth and Investment Plan'' from President George W. 
     Bush's Advisory Panel on Federal Tax Reform, and arguments 
     from President Obama's administration to lower corporate tax 
     rates. The proposals emerging from the House, Senate, and 
     President Trump's administration, fall squarely within this 
     tradition.


   Reducing Corporate Tax Rates, as Proposed, Will Increase Economic 
                                Activity

       While the overall House and Senate tax plans contain 
     numerous household and business provisions, we focus on the 
     corporate tax changes, returning to other provisions before 
     concluding. A key concept in this context is the ``user cost 
     of capital,'' which essentially measures the expected cost to 
     firms of making additional investments in equipment. A 
     considerable body of economic research concludes that 
     reductions in the user cost of capital raise output in the 
     short and long run. Several of the proposals that have 
     emerged in the current debate are key to lowering the user 
     cost of capital. For example, expensing, which allows firms 
     to deduct the full cost of investment at the time it is made, 
     lowers the user cost of capital relative to depreciation over 
     time. A lower corporate tax rate also lowers the user cost of

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     capital, which not only induces U.S. firms to invest more, 
     but also makes it more attractive for both U.S. and foreign 
     multinational corporations to locate investment in the United 
     States.
       There is some uncertainty about just how much additional 
     investment is induced by reductions in the cost of capital, 
     but based on an extensive body of scholarly research, many 
     economists believe that a 10% reduction in the cost of 
     capital would lead to a 10% increase in the amount of 
     investment. Simultaneously reducing the corporate tax rate to 
     20% and moving to immediate expensing of equipment and 
     intangible investment would reduce the user cost by an 
     average of 15%, which would increase the demand for capital 
     by 15%. A conventional approach to economic modeling suggests 
     that such an increase in the capital stock would raise the 
     level of GDP in the long run by just over 4%. If achieved 
     over a decade, the associated increase in the annual rate of 
     GDP growth would be about 0.4% per year. Because the House 
     and Senate bills contemplate expensing only for five years, 
     the increase in capital accumulation would be less, and the 
     gain in the long-run level of GDP would be just over 3%, or 
     0.3% per year for a decade.
       Is this estimate of the growth effect realistic? According 
     to one leading model using an alternative framework, the 
     proposal would increase the U.S. capital stock by between 12% 
     and 19%, which would raise the level of GDP in the long run 
     by between 3% and 5%. Yet another model, this one used in the 
     analysis of the ``Growth and Investment Plan'' in the 2005 
     President's Advisory Panel on Federal Tax Reform, found that 
     a business cash-flow tax with expensing and a corporate tax 
     rate of 30% would yield a 20.4% increase in the capital stock 
     in the long run and a 4.8% increase in GDP in the long run. 
     More conservative estimates from the OECD suggest that 
     corporate tax changes alone would raise long-run GDP by 2%. 
     In short, there is a substantial body of research suggesting 
     that fundamental tax reform of the type being proposed would 
     have an important effect on long-run GDP. We view long-run 
     effects of about 3% assuming five years of full expensing, 
     and 4% assuming permanent full expensing, as reasonable 
     estimates.
       Another advantage of the corporate rate reduction embodied 
     in the House and Senate Finance bills is that it would lead 
     both U.S. and foreign firms to invest more in the United 
     States. In addition, U.S. multinational firms would face a 
     reduced incentive to shift profits abroad, which would raise 
     federal revenue, all else equal.
       In the foregoing analysis, we assumed a revenue-neutral 
     corporate tax change. Deficit financing of part of a 
     reduction in taxes increases federal debt and interest rates, 
     all else equal. For the House and Senate Finance bills, this 
     offset is likely to be modest, given that the United States 
     operates in an international capital market, which means that 
     the impact of changes in interest rates resulting from 
     greater investment demand and government borrowing are likely 
     to be relatively small.


 Lowering Individual Tax Rates Also Offers Generally Positive Economic 
                                Effects

       The House and Senate bills also contemplate a number of 
     individual tax provisions that can affect economic activity 
     and incomes. In recognition of the fact that non-corporate 
     business income is substantial in the United States, both 
     bills would reduce taxation of non-corporate business income 
     and increase the amount of capital expensing allowed. While 
     difficult to quantify, as the bills specify different 
     effective tax rates, these provisions would increase 
     investment and GDP above the level associated with the 
     corporate tax changes discussed above. Also on the individual 
     side, both the House and Senate bills reduce marginal tax 
     rates on labor income for most taxpayers, increasing the 
     reward for work. Increases in labor supply, in turn, increase 
     taxable income and tax revenues. One should note, however, 
     that some taxpayers would face increases in effective 
     marginal tax rates because of base-broadening features of the 
     bills, such as limits on the federal tax deductibility of 
     state and local income taxes. On balance, though, we believe 
     that the individual tax base broadening embodied in the 
     proposals would enhance economic efficiency by confronting 
     most households with lower marginal tax rates. In addition, 
     fairness would be served by reducing differences in the tax 
     treatment of individuals with similar incomes, and 
     simplification by reducing the number of individuals who 
     itemize for federal tax purposes.


  Confirming a Pro-Growth Objective Is Important for the Path Forward

       You have consistently stressed that the objective of tax 
     reform should be to enhance prospects for increased economic 
     growth and household incomes. We agree with this objective, 
     which is consistent with the traditional norms of public 
     finance going back to Adam Smith. We believe that the reforms 
     embodied in the House and Senate Finance bills would achieve 
     this objective. The increased growth, in turn, would lead to 
     greater taxable income and federal tax revenues, which would 
     reduce the static cost of lost federal tax revenue from the 
     reform.
       We hope these analytical points of support for the growth 
     effects of tax plans being discussed are useful to you and to 
     the Congress as you complete the important economic task of 
     fundamental tax reform. We would be happy to discuss our 
     conclusions with you at your convenience.
       Robert J. Barro, Paul M. Warburg Professor of Economics, 
     Harvard University
       Michael J. Boskin, Tully M. Friedman Professor of 
     Economics, Stanford University; Chairman of the Council of 
     Economic Advisers under President George H.W. Bush
       John Cogan, Leonard and Shirley Ely Senior Fellow, Hoover 
     Institution, Stanford University; Deputy Director of the 
     Office of Management and Budget under President Ronald Reagan
       Douglas Holtz-Eakin, President, American Action Forum, 
     former director of the Congressional Budget Office
       Glenn Hubbard, Dean and Russell L. Carson Professor of 
     Finance and Economics (Graduate School of Business) and 
     Professor of Economics (Arts and Sciences), Columbia 
     University; Chairman of the Council of Economic Advisers 
     under President George W. Bush
       Lawrence B. Lindsey, President and Chief Executive Officer, 
     The Lindsey Group; Director of the National Economic Council 
     under President George W. Bush
       Harvey S. Rosen, John L. Weinberg Professor of Economics 
     and Business Policy, Princeton University; Chairman of the 
     Council of Economic Advisers under President George W. Bush
       George P. Shultz, Thomas W. and Susan B. Ford Distinguished 
     Fellow, Hoover Institution, Stanford University; Secretary of 
     State under President Ronald Reagan, Secretary of the 
     Treasury under President Richard Nixon
       John. B. Taylor, Mary and Robert Raymond Professor of 
     Economics, Stanford University; Undersecretary of the 
     Treasury for International Affairs under President George W. 
     Bush

  Mr. CORNYN. I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.