[Congressional Record Volume 167, Number 170 (Wednesday, September 29, 2021)]
[Senate]
[Pages S6771-S6773]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                                 Taxes

  Mr. PORTMAN. Mr. President, I am here on the floor today to talk 
about the massive tax increases that are being proposed by my 
colleagues on the other side of the aisle and by the Biden 
administration and by the Democrats in the House as a way to pay for 
this big, new spending package--$3.5 trillion is what it is advertised 
as, although some say that, if you do the full 10-year calculation, it 
is more like $5 trillion. But it is a lot of money, and the way it is 
paid for is by a huge increase in taxes. It is the biggest tax 
increase, actually, we are told, in over 50 years.
  And I have been on the floor talking about this a few different 
times, and I talked about the impact on the economy, generally. I 
talked about the impact on our competitiveness internationally, which 
we finally fixed in 2017, which was really a bipartisan idea to go to a 
different kind of system, and it has worked so well.
  But today I want to talk about another sector of our economy that is 
going to be hit really hard by these taxes, and that is small 
businesses, the backbone of our economy where most people work. 
Specifically, I want to focus on how these small businesses are going 
to be hurt by the specific tax issues that are being proposed.
  Small businesses are generally defined as having 500 or fewer 
employees and make up about 99 percent of our companies in America. 
There are some really big companies, but when you look at the small 
businesses, they are, by far, the vast majority of our businesses--
about 32 million of them. They employ over half of the U.S. workforce, 
and they account for nearly two-thirds of all jobs created in the 
United States since 2000. Now, that is according to the Small Business 
Administration.
  So more than half the employees are there, but they actually are 
responsible for creating more jobs than big businesses. Think about it. 
Small businesses are more agile. It tends to be the startup businesses. 
It tends to be businesses that are hiring more people. So small 
business is really important. It is the backbone to our economy.
  I grew up in one of those small businesses. When I was a kid, my dad 
left his job as a salesman for a bigger company, where he had 
healthcare and the benefits that come with that. And he sort of put it 
all at risk to start his own business.
  He started off with five employees. My mom was the bookkeeper. They 
lost money the first few years, like a lot of small businesses do, but 
he hung in there. And my brother worked there and my sister worked 
there and I worked there. I worked on the shop's floor. I did the 
maintenance.
  It was a lift truck--forklift truck dealership, so we would grind 
down the lift trucks and paint them. And I learned how not just to work 
hard but learned how a small business can succeed. And it is not easy.
  After losing money the first few years, my dad found his niche and 
became a successful small business. My brother later took the business 
to an even higher level, but it was still a small business that 
struggled depending on what was happening in the economy, external 
factors they couldn't control, like every small business.
  It gave me a firsthand look as to how difficult it is and how 
important it is, both, to have small businesses out there. My dad was 
absolutely committed to ensuring the people who worked there felt like 
they were part of it, so he had a profit-sharing plan. It didn't work 
too well when there was no profit, but once there was profit, it worked 
pretty well. And there were guys who turned a wrench their whole 
career, lift truck technicians whom I have known my whole life, who are 
about my age, who are retiring today with a nice nest egg because of 
that profit-sharing plan and, then later, a 401(k). So I have seen what 
small businesses can do for their employees, for the local economy, for 
the broader community.
  During COVID-19, small businesses have really struggled. It has been 
tough. They have been stretched really thin. As I am sure is the case 
with every single one of my colleagues here in the U.S. Senate, I have 
heard from a lot of small business owners across my home State of Ohio 
who have told me about the issues that they faced due to shutdowns, due 
to people being sick, due to the very difficult job right now of just 
getting workers to come to the business and to stay in the business. 
Workforce problems are the No. 1 issue I now hear about back home.
  And due to the supply chain disruptions, taking longer and longer to 
get products and products having a higher and higher price due to the 
inflation that is reflected in that, it is tough right now. Despite 
these hardships, a lot of the small businesses I know have made it a 
real priority to ensure they are taking care of their people.
  We helped them do that here through the PPP program, the Paycheck 
Protection Program. I strongly support it because I have seen it work. 
I have seen employees be able to stick around through the worst of 
COVID and now be able to come back to work.
  We have got another surge going on right now in my home State and 
around the country with the Delta variant, but we are learning better 
how to keep people at work and how to ensure that folks are taken care 
of. Often these small business owners have done this out of their own 
pockets; in other words, they have lost money during the

[[Page S6772]]

COVID period in order to keep the business going. And if they can 
afford to do that, great; they can keep the doors open. Some have not 
been able to do that, and they have had to close their doors.
  So this is a time when there is a lot of uncertainty out there in the 
economy. It is a time when businesses have kind of been through the 
roller coaster of COVID. It is not the time to raise taxes on small 
businesses.
  Back in 2017, Congress had the value of these small businesses in 
mind when we wrote the historic Tax Cuts and Jobs Act reforms. Through 
provisions like lowering the individual rate of taxation and enacting 
what is called the section 199A deduction, we gave small businesses 
needed tax relief and encouraged them to invest in growing their 
operations, hiring more workers, lifting wages.
  And it worked. The success of small businesses in 2018 and 2019, 
before COVID and after the 2017 bill was put into effect, was truly 
extraordinary. In February of 2020, just before COVID hit, we had the 
19th straight month of wage increases of 3 percent or more on an annual 
basis. Nineteen straight months we had wages going up.
  Isn't that what we all wanted? That was the whole idea, to have an 
opportunity economy where people can get ahead. And wages were going up 
faster than inflation, which, unfortunately, is not the case now. In 
many instances, even when people are getting some wage gains right now, 
with 5 percent-plus inflation, it is eating it up.
  We also had a situation back then where we had not just wage growth 
but we had a reduction in poverty. We had the lowest poverty rate since 
we started keeping track of it back in the 1950s, prior to COVID. I 
think a lot of it was because those tax cuts actually worked. And, 
again, for a small business, it is really important because that is 
where most people are employed.
  We also had the lowest unemployment in 50 years in this country and 
the lowest unemployment ever for certain groups, including Blacks, 
Hispanics, the disabled. So a lot of stuff was going right. Then COVID 
hit.
  Now we are coming out of COVID. Again, the wrong time to raise taxes. 
That Tax Code we put in place in 2017 gave small business the chance to 
succeed and, therefore, gave a lot of individuals the chance to meet 
their American dream.
  The overall economy has improved some since 2020, but a lot of small 
businesses have not seen that rebound yet. COVID, particularly, has 
hurt our hospitality sector. I am in that business. My family business 
is in that business as well. It is tough.
  The travel business, entertainment business, and every small 
business, again, that I know has been hit with higher inflation for 
their input. So things are more expensive coming in, and yet it is hard 
to be able to raise your prices, so they are caught in a squeeze. 
Finding workers again has been a real change--the supply chain issues 
we have talked about.
  So why would Democrats propose billions in tax hikes on small 
businesses right now?
  We ought to be helping our small businesses instead, not making it 
harder to stay afloat. Remember, as I said, these are the biggest tax 
increases we have had in over 50 years.
  Democrats claim they are just going after large corporations, but, 
unfortunately, that is not what is happening. A lot of small businesses 
are going to be caught in the crosshairs of the income tax hikes that 
Democrats are proposing. That is primarily because about 95 percent of 
small businesses operate as what is called pass-throughs.
  The vast, vast majority of small businesses are partnerships, sole 
proprietorships, or companies that are limited liability companies with 
subchapter S companies. So the business doesn't pay the taxes directly. 
The tax is actually paid by the owners of the business, on their 1040--
individual tax return.
  What that means is that success of pass-throughs, which combine to 
employ about 58 percent of the Nation's workforce, will be taxed in 
line with whatever the income tax level is. And there are many 
reasonably successful pass-throughs that will be lumped into the top 
bracket of the Tax Code, which starts at $400,000 in income.
  These small businesses, through the owner, will end up paying a 39.6 
percent increase tax, plus a 3.8 percent surtax on small business 
income. You add to that the average State income tax of about 5 
percent, and that puts the figure for small businesses at about 48 
percent on average--and well over 50 percent in some States--48 percent 
taxes. That is tough. And it is a big tax increase for a lot of those 
businesses. Again, they are pass-through businesses, so the owners are 
the ones who pay the taxes.
  If they weren't paying the taxes, they wouldn't often get a dividend 
from the company to pay those taxes; they would be investing more in 
that business. So it hurts the businesses directly. But a pass-through 
doesn't even have to reach that level of success we talked about--the 
$400,000 income level--in order to be hit with tax increases. That is 
because, contrary to what has repeatedly been said by the Biden 
administration, according to the nonpartisan Joint Committee on 
Taxation analysis of the House Ways and Means, Democratic tax proposal, 
a lot of taxpayers making less than $400,000 are going to see higher 
taxes. Some percentage of taxpayers in every income bracket will see 
their rates go up, even folks making between 40,000 and 50,000 bucks 
per year. Check out the analysis yourself. You can go online, Joint 
Committee on Taxation, and look at it.
  In fact, according to these distribution tables by the Joint 
Committee on Taxation, more than one in three taxpayers making between 
$100,000 and $200,000 per year will be paying higher taxes in 2023. By 
2031, more than three-quarters of those middle-income taxpayers--
between 100- and 200,000 bucks a year--will be paying higher taxes.
  Remember, again, this is not just a tax on individuals; it is a tax 
on small businesses that are taxed through individuals.
  On top of that, Democrats want to cap the invaluable 20-percent 
deduction on qualified business income that was designed to help pass-
throughs compete with larger C corporations.
  Again, in 2017, not only lowered the rates to help small businesses, 
but we said: If you are a small business, you can get this deduction--
this 20 percent deduction--on qualified business income.
  And for the small businesses listening this evening: Watch out. I 
know you have enjoyed that deduction and you have needed it to be able 
to stay afloat during COVID. That is now at risk.
  And successful small businesses earning more than $5 million a year 
will be saddled with an additional 3-percent surcharge on top, 
resulting in over 50-percent average income tax. That means small 
businesses are going to have a harder time hiring workers or paying 
them competitive wages.
  In all, the average pass-throughs should expect their Federal tax 
rate to rise from about 29.6 percent--about 30 percent now--to 46.4 
percent under the Democrats' new plan.
  Folks, that is not soaking the rich. That is slamming small business 
owners all across America, as well as their employees, many of whom are 
just trying to make ends meet.
  But Democrats don't just want small businesses to give more of their 
money to the Federal Government; they want to make small businesses 
give more of their time as well in the form of burdensome new 
information requirements that would bury the IRS in a sea of useless 
information, largely, that would end up causing the most trouble for 
small businesses that don't have the lawyers or the accountants and 
other professionals to handle these burdensome new requirements.
  Under this Biden administration bank reporting proposal, individual 
and businesses would be required to report to the IRS inflows and 
outflows of money out of an account--things like expenditures and 
payments. The Biden administration proposal starts this reporting as 
low as $600.

  But even at that higher number that they are talking about now, what 
would be reportable would represent a radical shift in the information 
required to be given to the IRS, which normally just takes in 
information related to income. This wouldn't be about income. This 
would be about payments and expenditures.
  So my hope is that these information reporting requirements, which is 
an additional burden on small businesses, is

[[Page S6773]]

something my colleagues look at and say: Let's not raise taxes on small 
businesses, but also let's not increase these burdens that will, again, 
fall mostly on the smaller businesses that don't have the ability to 
handle that kind of new information and bureaucracy.
  The upshot is that the hundreds of millions of accounts with major 
financial institutions; e-payment apps, like Venmo; and cryptocurrency 
exchanges, like Coinbase, are going to be subject to more paperwork and 
confusion.
  So as an example, if you have one of the 403 million active PayPal 
accounts, your personal account information will be sent to the IRS and 
likely result in confusion at some point. Imagine trying to prove that 
the money you are pooling together for a vacation for personal use or 
for your weekly pizza night with buddies aren't business income. You 
may have to prove that now.
  These small business tax hikes and burdensome new reporting 
requirements are just one part of a set of tax overhauls that leave no 
stone unturned--from death taxes to marriage taxes, capital gains tax 
increases, retirement account tax increases, and many more.
  It is no surprise that the president of the National Federation of 
Independent Businesses wrote last week that ``small businesses aren't 
just looking at one or two tax hikes under the proposed plan. They're 
looking at a slew of tax increases that would hit them from every 
angle.''
  We all ought to be particularly concerned that Democrats want to 
overhaul so much of our Tax Code when these economic trends are so 
uncertain--high inflation, continuing COVID concerns, major supply 
chain disruptions.
  By the way, it now takes 80 days--twice as long as it did before the 
pandemic--to move goods from Asia to North America. Once goods reach 
the west coast, the wait time for containers sitting at the docks 
waiting to be moved by train or truck is the longest it has been since 
last summer, in the middle of even worse COVID conditions. This is not 
the time to make things worse for small businesses.
  And at a time when tax receipts are at or above the historical 
average, why do Democrats feel so strongly that America is undertaxed?
  The nonpartisan Congressional Budget Office--or CBO--projects 
corporate tax receipts will climb to $379 billion in 2023, or 1.5 
percent of our economy. According to the Tax Foundation, this would be 
``a record high in nominal terms and nearly matching average corporate 
tax collections as a share of GDP'' prior to the 2017 tax reforms.
  So payroll tax revenue has risen by 4 percent as well, suggesting 
that workers are taking home bigger paychecks than before. To say that 
we are undertaxed doesn't seem to be consistent with the data we are 
getting. Again, check it out. The Congressional Budget Office has its 
own website. You can learn about this. The Tax Foundation has its own 
website. You can learn about what is going on in terms of our tax 
collections.
  As a share of the GDP, those tax collections will be back up right 
where they were before the 2017 tax bill, in a couple of years, if we 
simply continue as we are.
  So the opportunity economy we talked about earlier, I think, in large 
part created by the 2017 tax reforms is on track to bring historically 
high tax revenues to the Federal Government as we get out of this COVID 
crisis.
  Really, one of the biggest factors in holding back our economy at 
this point is surging inflation that is, unfortunately, wiping out a 
lot of the income gains that we have seen.
  But inflation is driven largely by the trillions in unprecedented 
stimulus spending the Biden administration has pushed on the American 
people already.
  Remember the $1.9 trillion back in March focused--so the Democrats 
said--on COVID; but, in fact, when you looked at it, most of it was not 
about the COVID crisis, but it was a lot of new stimulation to the 
economy--a lot of stimulus.
  And at the time, people on both sides of the aisle--Republicans and 
Democrats--who were experts on the economy said this is going to be 
problematic; this is just a lot of new money to throw into the economy.
  Larry Summers, former Secretary of the Treasury under Democratic 
administrations and a Democratic economist, said this is going to lead 
to higher inflation. He was roundly criticized for that by many in the 
media and many on the other side of the aisle. Unfortunately, it turns 
out he was absolutely right. It has led to this high inflation that, as 
we learned this week from Chairman Powell of the Federal Reserve, is 
not transitory, as was said early on. Unfortunately, this current 
inflation is going to continue at least through this year and next 
year, we are told.
  So this new $3.5 trillion in social spending is going to add to 
that--more stimulus. The economists call that adding to the demand side 
of the economy. So you are adding to the supply side of the economy; it 
would be counter-inflationary. But you are adding to the demand side, 
what people want to buy--you are adding to inflation. So more money out 
there to be buy the goods; fewer goods raises the cost of everything.
  So my concern is we are going to drive inflation even higher if we go 
ahead with this $3.5 trillion social spending paid for, again, by these 
tax increases that are going to hurt small businesses.
  I can't understand why Democrats are so insistent on jamming this 
partisan tax-and-spending bill through the U.S. Congress.
  Why would you want to throw out the Tax Code that fueled that 
unprecedented opportunity economy we saw prior to the COVID pandemic?
  I know none of my Republican colleagues are going to support these 
tax hikes because they believe they would be devastating to small 
businesses and to our economy at large. And I would urge any of my 
colleagues on both sides of the aisle who care about our long-term 
economic health to take a long look at what this tax plan would 
actually do, what it would mean to our competitiveness, what it would 
mean to individuals and families, what it would mean to small 
businesses, and instead make the smart choice to reject these tax 
increases on the small businesses--the very small businesses that drive 
the economy in the United States of America.
  I yield back my time.
  The PRESIDING OFFICER (Mr. Kelly). The majority leader.
  Mr. SCHUMER. Mr. President, we are ready to move forward. We have an 
agreement on the CR, the continuing resolution, to prevent a government 
shutdown. And we should be voting on that tomorrow morning. So I am 
going to make that an order now.

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