[Congressional Record Volume 168, Number 101 (Tuesday, June 14, 2022)]
[Senate]
[Pages S2942-S2943]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Barrasso, Mr. Daines, Mr. 
        Lankford, Mr. Young, and Mr. Cassidy):
  S. 4393. A bill to amend the Internal Revenue Code of 1986 to modify 
the maximum capital gains tax rate, to modify the tax on net investment 
income, and for other purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, I come to the floor to tell my 
colleagues about a bill I am introducing today to encourage savings. To 
set the stage for the necessity of that bill, I am going to speak for a 
minute about the obstacles that this administration's economic 
policies--particularly inflation--have put in that give need for such 
legislation.
  On Friday, we learned that inflation surged to 8.6 percent, a new 40-
year high for inflation. Inflation is the No. 1 concern that I hear 
from Iowans as I do my 99-county tour throughout the State over the 
course of a year. I hear how rising prices, particularly for food and 
energy, are cutting into budgets, making it difficult to make ends 
meet.
  Moreover, I hear from Iowans who are concerned that inflation is 
eating into their savings. That gets to the purpose of the legislation 
I am going to soon talk about. This is particularly true for seniors 
who are living on fixed budgets and are dependent on their savings and 
investment income to keep their heads above water.
  Yet President Biden and congressional Democrats continue to ignore 
the damage done by their reckless tax-and-spending agenda. Sadly, their 
solution for inflation is just more of the same old Democratic tax-and-
spend agenda. We still hear rumors that there may be some version of 
Build Back Better. Just think. If that original version of Build Back 
Better had passed, we would have had another $4.5 trillion in 
additional spending feeding the fires of inflation. Thank God for 50 
Republicans and Senator Manchin that that has not happened.
  Several Democrats have argued for hiking taxes to combat inflation. 
However, their proposed tax hikes on job creators would suppress 
business investment, lowering productivity. This would be 
counterproductive at a time when consumers' demands far outpace supply. 
We need more production, not less, to combat unchecked inflation.
  Moreover, the proposed Democratic tax hikes would be passed on to the 
middle class in the form of lower wages and higher prices. These tax 
hikes would further squeeze a middle class that is already enduring the 
worst of inflation.
  I just complimented Senator Manchin for putting a stop to Build Back 
Better. When it comes to some of the original tax policies we have 
heard from the Democrats, we can thank Senator Sinema, another 
Democrat, for stepping in and bringing at least some common sense to 
tax policy, even though it wasn't a complete change of that tax policy. 
Raising taxes on job creation isn't the only misguided tax proposal. 
While many consumer products are in short supply, ill-conceived 
Democratic proposals are not.
  In addition to reckless tax hikes on businesses broadly, Democrats 
have proposed providing consumer gas rebates, forgiving student loan 
debt, imposing windfall profit taxes on oil and gas, and implementing 
price controls. None of these proposals would help tamp down inflation. 
Instead, they would only make things worse--much worse.
  Instead of providing relief, gas rebates would increase demand, 
driving prices higher. Forgiving student loans would have a similar 
effect and would be horribly counterproductive and, at the same time, 
would be very unfair to those students who have already paid off their 
student loans.
  Yet you don't have to take Chuck Grassley's word for it. Prominent 
Democratic economist Larry Summers has said that student debt 
cancelation would be ``regressive, uncertainty creating, untargeted and 
inappropriate at a time when the economy is [already] overheated.''
  Windfall profit taxes and price controls may be the worst of all of 
the proposals.
  That should have been learned from the Nixon administration when he 
froze prices and wages. It was a disaster--part of the cause of the 
great inflation of the 1970s. There were disastrous consequences then 
as a result of what happened in the 1970s. Anyone who lived through 
that time can tell you how these policies made things worse by reducing 
supply. The result was of rampant shortages, most notably with gas 
lines all around the block.
  When addressing inflation, Congress must be guided by the principle: 
First, do no harm. The Democrats' proposal has failed this principle 
miserably.
  The fact of the matter is that, once the inflation fire gets started, 
it is hard to put out. Just think: Just a few months ago, inflation was 
transitory, and then it got up to 6 percent, 7 percent, 8.3 percent. 
Then somebody said last month that it was going to cool off, but it is 
up to 8.6 percent. The Federal Reserve is best suited for reining in 
inflation given its control over the money supply.
  As Milton Friedman said:

       Inflation is always and everywhere a monetary phenomenon.

  This doesn't mean Congress is helpless when it comes to responding to 
inflation. The most important thing that Congress can do is stop 
spending like drunken sailors. Even better would be to trim the budget 
to eliminate unnecessary spending.
  Congress can also provide targeted inflation relief. However, it must 
be done in a way that won't add to our growing debt or further fuel the 
flames of inflation. One way to do this is by providing targeted 
inflation relief that incentivizes and rewards taxpayers who save 
rather than spend.
  With today's high inflation, many in the middle class could see most 
or even all of their savings and investment gains wiped out by the 
inflation that is upon us. Yet, even though middle class savers may be 
losing money in real terms, they are still taxed on all gains and 
interest income as if inflation doesn't exist. This creates a perverse 
incentive that encourages taxpayers to consume today rather than to 
save today. This can push up the demand for goods and services, forcing 
prices higher and further fueling inflation.
  To help counter the current bias in favor of consumption, I now come 
to my proposal, a proposal subjecting most middle class savings and 
investment income to zero tax.
  Now, this isn't a silver bullet in the fight against inflation. 
Ultimately, the Federal Reserve will have to do the heavy lifting. 
However, unlike counterproductive Democrat policies, my proposals would 
incentivize and reward saving. As a result, it would get relief to the 
middle class without further fueling consumer demand or reducing 
production and supply.
  The title of the bill is the ``Middle-Class Savings and Investment 
Act.'' Under that bill, taxpayers in the 22-percent individual income 
tax bracket and lower would pay zero tax on their long-term capital 
gains and dividend income. Moreover, my proposal would allow 
individuals to exclude a reasonable amount of interest income from tax. 
For 2022, the combination of those proposals means an individual with a 
taxable income of below $89,075 or a

[[Page S2943]]

married couple below $178,150 would largely be able to save tax-free.
  In addition to exempting the middle class from the tax on most of 
their savings and investment income, my proposal would enhance and 
expand the saver's credit. This provides a tax credit to low- to 
middle-income taxpayers who contribute to a tax-favored retirement 
account. My proposal would increase the maximum credit amount by $500 
for married taxpayers and expand eligibility to more taxpayers.
  Finally, my proposal would address a massive marriage penalty that is 
gradually catching ever more taxpayers by surprise thanks just simply 
to inflation. Under ObamaCare, Democrats imposed a new 3.8-percent tax 
on investment income of taxpayers earning over $200,000 single or 
$250,000 married. Congress never indexed these thresholds for 
inflation; thus, given current inflation, it is likely it won't be long 
before millions of middle-class taxpayers find themselves squarely 
within the grasp of that marriage penalty. To prevent this, I index the 
income threshold for this tax to inflation. Moreover, I eliminate the 
marriage penalty by raising the threshold for married taxpayers to 
twice that for single earners.
  Of course, any relief provided must be fully paid for to ensure that 
we aren't just adding unsustainable debt and deficits. This is why my 
proposal is fully paid for by extending the $10,000 cap on State and 
local tax deductions beyond the current scheduled expiration at the end 
of 2025.
  The SALT deduction is a highly regressive tax subsidy that primarily 
benefits high-income taxpayers. According to the nonpartisan Joint 
Committee on Taxation, more than half of the benefits from lifting the 
SALT cap would go to those making over $1 million a year. Extending the 
current cap on SALT--an otherwise highly regressive tax benefit--to 
provide immediate inflation relief to the middle class should be a no-
brainer to all of my colleagues.
  I urge Members on both sides of the aisle to support this proposal.

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