[Congressional Record (Bound Edition), Volume 158 (2012), Part 12]
[Senate]
[Pages 16554-16556]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            THE FISCAL CLIFF

  Mr. NELSON of Florida. I want to speak to the issue that is beginning 
to considerably irritate the American people, and that is they cannot 
believe that in Washington the two parties cannot get together to come 
to an agreement on avoiding the fiscal cliff. It is as if some are in 
denial that there was an election and the President won reelection, and 
that a whole bunch of us won reelection to the Senate and to the House. 
It is as if the ideological rigidity is still as rigid and doctrinaire 
and that the lessons people were telling us about bipartisanship, that 
they demand bipartisanship--it is as if the parties and their leaders 
did not understand that is what the American people were demanding.
  And here as the drumbeat grows louder, we approach December 31 and 
falling off the fiscal cliff. There is an easy fix, whatever your 
ideology and your approach. It can be hammered out next year when we 
are doing major things such as a rewrite of the IRS Tax Code, and all 
that that can portend in producing revenue, by making the Code more 
streamlined and in the process get rid of a lot of the underbrush and 
loopholes, and utilize that revenue to lower rates. But that is for 
another day after long deliberation on reforming an issue that has 
gotten so complicated it is out of control, and that is the Tax Code. 
You cannot do that in the next few days. That is what needs to be done 
in the committee process of the Congress.
  What easily can be done is recognize that the President won, produce 
revenue with the upper 2 percent paying a little more, and eliminate 
the sequestration, which is $1 trillion of cuts over the next 10 years 
that were never intended to go into effect after the original $1 
trillion which a year-and-a-half ago went into effect. This 
sequestration was intended to be the meat cleaver hanging over the 
heads of the supercommittee to get them to come to a bipartisan 
agreement.
  Of course, a year-and-a-quarter ago, they deadlocked six to six and 
thus that is why we are facing this sequestration--$\1/2\ trillion of 
cuts in defense, $\1/2\ trillion of cuts in nondefense discretionary 
spending. Most everybody thinks they should not go into effect. So let 
us, for right now, before December 31, help eliminate the 
sequestration. Let's reintroduce all of the tax cuts for 98 percent of 
the American people, and then let's prepare, in a deliberative way, to 
reform the Tax Code and go about the process of streamlining and 
cutting spending as the new Congress unfolds. That is what I wanted to 
share.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona is recognized.
  Mr. KYL. Mr. President, I want to address the same subject and I 
certainly share the views of the Senator from Florida that we have got 
to solve this so-called sequester problem because, as the Secretary of 
Defense has said, it would be disastrous for the Defense Department to 
take another $\1/2\ trillion hit to its budget after already committing 
to do so.
  We have required under our Budget Act that the Defense Department 
reduce spending by about $487 billion over the next 10 years. To add 
another \1/2\ trillion to that would, in fact, as Secretary Panetta 
said, be disastrous. So I appreciate the comments of my colleague.
  Let me speak to the President's proposal specifically that was made 
at the beginning of the so-called negotiations here. His offer would 
increase taxes by more than $1.6 trillion on individuals, on investment 
income, small businesses, under the estate tax, farms and estates, and 
American energy producers.
  As President Reagan said many years ago, if you tax something, you 
get less of it. When you have to pay more taxes to engage in certain 
activities, you tend not to engage in those activities.
  What is happening now in the market is a perfect example. A lot of 
people are of the view that capital gains taxes are going to go up, so 
they are selling their shares of stock or property now in order to pay 
the tax on the gain at the lower rate this year rather than the higher 
rate next year.
  Tax rates should not be a factor in business decisions that are made. 
At least, raising taxes, as we will see in a moment, is a very big wet 
blanket on economic activity and economic growth. When we are in a 
situation

[[Page 16555]]

where economic growth is clearly less than 2 percent, it is not the 
time to raise taxes. As the President himself said almost exactly 2 
years ago, when we decided to extend the tax policy that is currently 
in effect and had been for many years before that, to allow tax rates 
to go up would be--and this is his quotation--``a blow to the 
economy.''
  So if it was true then, it is even more true today because the GDP 
growth is less today than it was 2 years ago when he made that correct 
comment. But the result of his proposal here to raise taxes by $1.6 
trillion would, in fact, reduce the economic growth, would result in 
fewer jobs, would result in less investment and, therefore, slower 
growth in many major sectors of the economy.
  To show you how unserious his offer was, when the Republican leader 
yesterday asked unanimous consent to have a vote on it, he said, well, 
the President made his offer. I have put it into legislative language. 
Let us have a vote on it. The Democratic leader said, no, we don't want 
to do that and he objected, and it is clear why, because not only would 
it not receive Republican votes, it wouldn't receive Democratic votes.
  In particular, let us understand why. A lot of our colleagues here on 
both sides of the aisle appreciate the impact on small business from 
raising tax rates. That is why there is a lot of difference of opinion 
on the Democratic side, as well as the view on the Republican side that 
this is not the right way to raise revenues if you were going to do it. 
You don't raise it on the backs of small business. The plan the 
President has proposed would hit small businesses directly.
  Why is that the case? Because unlike corporations, which pay their 
taxes as corporations--they pay the 35-percent corporate rate--
individual rates are the basis under which most small businesses pay 
their taxes. These are so-called flowthrough entities. Most of the 
small businesses, owned by an individual and maybe a couple members of 
his family--for example, your local plumbing business or air 
conditioning business, whatever it might be--pay their taxes as 
individuals.
  When you raise the top individual rate or the second marginal rate or 
you raise capital gains rates or the estate tax rates, you are directly 
hitting those small business people. They employ millions of Americans. 
In fact, about a quarter of all workers today are employed in small 
business.
  Over half, about 53 percent exactly, of this so-called flowthrough 
income is the money these small businesses earn. So when you raise the 
top two brackets, rates, or you raise the capital gains rate, for 
example, you are directly impacting these small businesses' ability to 
capitalize their businesses to hire more workers, to buy another pickup 
truck or whatever it might be. That is why we have said if you want to 
raise more tax revenues, there is a better way to do it than by raising 
the rates that would directly apply to these small business people.
  Let me put this in perspective for you. According to the Office of 
Management and Budget figures, government spending has exceeded 24 
percent of the GDP since 2009. That is well above the historical 
average, so we are spending way more than we ever have. But, according 
to CBO, tax revenues, the money the government brings in, are projected 
by 2016 to exceed 18 percent of GDP to get to 18.6 percent of GDP by 
2022. That is above the historical average of revenues. So we are 
spending way more than our historical average. Also, in a relatively 
short period of time our revenues, because of the economy, as well as 
our tax rates, will produce more than the average revenue to the 
Federal Government.
  It is clear we are bankrupt, not because we are not going to have 
enough revenues but because we are spending too much. The question is, 
is it fair to send small businesses the bill here for this excessive 
spending?
  Even if we did believe President Obama would dedicate new revenue 
from tax increases to help pay down the deficit--and I don't believe 
that--new revenue extracted from the top two brackets would only fund 
the government for about a week, a little less than a week. So that is 
clearly not the answer.
  When the President says, well, we need to ask the wealthy to pay a 
little more, let us parse that for a second. You are not asking them to 
do it; if you pass the law, the IRS will come after you if you don't. 
This is not a pleasant request. This is the IRS saying you have to pay 
more money to the U.S. Government, and the President always likes to 
say, a little more.
  Well, it is not so little if your tax rate now goes up to almost 40 
percent. If you are a small businessman and you have to pay 40 percent 
to Uncle Sam, you are probably not going to be able to grow your 
business. You might not be able to stay in business. You certainly are 
not going to be able to hire more people. That is not little to them. 
It is little to funding the U.S. Government.
  What the President says these small businesses and others are going 
to have to pay, as I said, only funds the government for a little less 
than a week. It doesn't solve our deficit problem. It doesn't begin to 
solve our deficit problem.
  Have you heard the President talk about reducing spending? No. He 
doesn't want to talk about that. It is as if he says the whole answer 
to our problem here is to ask the wealthy to pay a little bit more.
  Well, in terms of the Federal budget, it is a little bit more. It is 
not going to help very much. Where are you going to get the rest of the 
savings? That is what we ought to be talking about here.
  Then, as I was talking about before, it is how you do it that matters 
a lot. He should stop pursuing tax rate increases, as I said, and 
revisit the comments he made a year ago. Here is what the President 
said. ``What we said was give us''--to ``give us''--that is a nice way 
of saying we are going to make you pay more in taxes. ``Us,'' I gather 
here, is the U.S. Government.

       What we said was give us $1.2 trillion in additional 
     revenues, which could be accomplished without hiking taxes, 
     tax rates, but could simply be accomplished by eliminating 
     loopholes, eliminating some deductions and engaging in a tax 
     reform process that could have lowered rates generally while 
     broadening the base.

  He is right about that. If you want to get $1.2 billion or 800 
billion, which is the offer the Speaker of the House has made, in new 
tax revenues, you can do that without touching tax rates. What you 
could do is to put a cap on the amount of money the wealthy people in 
this country receive in the way of deductions for various things that 
they do, the taxes they pay to State and local government. They have 
got a big mortgage on a second home or something such as that. You 
could limit the amount of money that can be taken in special exemptions 
and credits and deductions and receive that revenue that way rather 
than by raising rates. The President said so. He is right.
  Speaker Boehner is saying, all right, Mr. President, you won the 
election, you want more taxes, we are willing to do that. We don't want 
to do it, we think it will hurt the economy, but we are willing to do 
it.
  But to minimize the damage on the economy, at least do it through 
eliminating these loopholes, these so-called deductions, credits, and 
special provisions. Don't try to do it by raising tax rates because 
that directly hits the small businesses you are trying to help create 
jobs right now.
  Here is what small businesses care about. They spend a lot. As I say, 
you have a dad, his two sons, maybe mom does the accounting for the 
firm and so on; they have to be concerned about the estate tax. Those 
small businesses spend a lot of money trying to plan around paying the 
estate tax. On January 1, if we don't do anything, there is only $1 
million exempted. If you have a small business with a bunch of trucks 
and equipment and the like, you are going to have far more than $1 
million in assets in the business. The same thing for a farm.
  What happens is that rate goes up to 55 percent. The amount exempted 
is only $1 million. So everything above $1 million you are paying 55 
percent on.
  I can personally tell you the stories of small business people in 
Phoenix

[[Page 16556]]

who have had to sell their business because they didn't have the money 
to pay the taxes. The business, the one I am thinking of right now, a 
printing company, is out of business now. It used to employ 200 people. 
It used to make a lot of contributions to charity in our community. No 
more. They are out of business. The employees are gone. The 
contributions to charity are gone. That is what happens when you don't 
care about the estate tax rate. So we should care about that. It 
shouldn't have to go up.
  On capital gains, as I said, it is the same thing. A lot of people 
are cashing out now because they fear there is going to be a higher 
rate later. For larger businesses, we see some enormous dividends being 
paid this month. It may not be possible to pay those dividends starting 
in January when the dividend rate would skyrocket--close to 40 percent 
if we don't do anything. These are not things that help business and 
job creation.
  What I would ask my colleagues to think of, if you are not willing to 
vote on the President's plan, at least listen to what he said a year 
ago when he said we can raise this tax revenue. We don't have to raise 
tax rates. We can do it by closing some of these loopholes.
  He was right about that. If we are going to have to raise revenues, I 
would suggest that is the way to do it--at all costs avoid raising tax 
rates, which would, as he said a year ago, be a blow to our economy.
  Mr. President, I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________