[Congressional Record (Bound Edition), Volume 159 (2013), Part 3]
[Senate]
[Pages 2918-2920]
[From the U.S. Government Publishing Office, www.gpo.gov]




                               TAX REFORM

  Mr. HATCH. Mr. President, it is no secret that our Tax Code is in 
dire need of reform. Although there are differences of opinion about 
how best to fix our Tax Code, I do not think there is anyone in the 
Chamber who would argue in favor of keeping our current code as it is.
  As I have said before, I believe there is, for the first time in many 
years, real momentum to get something done on tax reform this year. The 
leaders of the tax-writing committees on both sides of the aisle have 
expressed a desire to move forward on tax reform, and there is real 
bipartisan support in both the House and the Senate.
  This is going to be difficult, there is no question about it. It is 
going to be very hard to form and maintain a coalition in favor of a 
set of reforms that will simplify the current Tax Code and promote 
economic growth. It is going to take a lot of hard work and it is going 
to take people from both parties to get it done. But I think we can 
succeed.
  However, last week it was disheartening to hear the chairperson of 
the Senate Budget Committee talk about the possibility of including 
instructions for tax reform in a budget reconciliation package. This 
news was discouraging for a number of reasons. First and foremost, 
reconciliation, by its very nature, is a partisan process. In the few 
instances in recent history when reconciliation resulted in 
legislation, there was bipartisan support at the outset. That simply is 
not the case with this proposal. If the Budget Committee goes this 
route, it will needlessly inject partisanship into a process that, if 
it is going to have any chance of success, must be bipartisan.
  There is simply no way to pass a purely partisan tax reform package 
with the current makeup of Congress. Make no mistake, if the Senate 
majority pursues this course of action, it will poison the well for tax 
reform. It will make it all but impossible.
  I would urge my colleagues on the Budget Committee to resist this 
temptation. If they really want to see tax reform succeed, they should 
let the tax-writing committees in both the House and Senate do their 
jobs.
  Another concern I have is that the statements by the Budget Committee 
chairwoman make it unclear whether she is arguing in favor of tax 
reform or simply in favor of raising taxes. My suspicion is she is 
talking about the latter. It has become more and more common for my 
friends on the other side of the aisle to argue in favor of simply 
eliminating so-called tax loopholes in order to raise revenue and then 
calling the process ``tax reform.''
  Indeed, the President used this very same tactic in the State of the 
Union. He stated his support for ``comprehensive tax reform,'' but he 
spoke almost exclusively about using the process to raise more revenue. 
Some of my colleagues have made similar arguments in the Senate.
  That is not tax reform at all. Tax reform, as it has been 
traditionally proposed and understood, is a process of eliminating 
certain preferences in order to broaden the tax base and lower the 
rates. This is how you simplify the Tax Code. This is how you make it 
more efficient and fair. Most importantly, it is how you make the Tax 
Code more conducive to economic growth.
  If you are eliminating select deductions and preferences only to 
pocket the revenue for future spending, you are not reforming the Tax 
Code, you are simply raising taxes. If the Budget Committee is about to 
report a budget which includes restrictions for tax reform, I can't 
help but assume the process will be more about raising revenues than it 
will be about actually fixing our broken tax system.
  Once again, if this is the case, the Budget Committee would be 
injecting partisanship into what has up to now been mostly a bipartisan 
effort. At the same time, they would be perpetuating the myth that our 
Tax Code is full of so-called loopholes which benefit only the rich. I 
have spoken about this at length on the Senate floor, but the message 
bears repeating.
  The term we hear most often to describe deductions and preferences in 
the Tax Code is ``tax expenditure,'' which implies that by allowing 
people to keep more of their money, the government is somehow engaging 
in spending. Indeed, the President has even gone so far as to refer to 
deductions and preferences, which reduce an individual's or business's 
tax burden, as ``spending in the tax code.''
  As I said before, when many of my Democratic friends talk about tax 
reform, they are usually talking about eliminating these provisions in 
order to raise revenue so they can spend it. Far too often they refer 
to these provisions as loopholes. For example, the Budget Committee 
chairwoman was quoted last week as saying her committee is looking at 
closing loopholes as a means of reducing the deficit.
  Let me make one thing clear: Describing tax expenditures as loopholes 
is simply and deliberately inaccurate. A loophole is something Congress 
did not intend; and, in general, we would eliminate loopholes once we 
learned they were being improperly exploited.
  Tax expenditures, by contrast, are placed by Congress into the Tax 
Code deliberately. For example, the largest tax expenditure is the 
exclusion for employer-provided health insurance and benefits. Do we 
want to do away with that?
  Another one of the largest tax expenditures is the home mortgage 
interest deduction. Some would like to do away with that and millions 
would not--especially all the home builders around the country. Whether 
these expenditures benefit someone in the middle class or one of the 
so-called rich,

[[Page 2919]]

they are not loopholes. These are not tax schemes some lawyer or 
accountant concocted to help his clients game that system. These are 
broad-based tax incentives used by many Americans.
  Favorable tax treatment of tuition expenses could be labeled spending 
through the Tax Code or a ``loophole,'' but you don't hear many people 
using those terms to explain them. Rather, my friends on the other side 
of the aisle use the term ``loophole'' to describe things they do not 
like and ``investment'' to describe things they do like. This is about 
picking winners and losers and not about tax reform.
  Even if you disagree with a particular tax expenditure, it is simply 
dishonest to refer to it as a loophole. An honest debate requires 
recognition that all of these tax expenditures were designed by 
Congress with economic or social goals in mind and are not tax escapes 
created by accident or sneaky abuses of the Tax Code.
  Furthermore, if we are talking about eliminating tax expenditures, we 
need to be clear about who benefits from them. If you look at the 
largest list of tax expenditures, you will find the ones most often 
cited by my colleagues on the other side, such as bonus depreciation on 
corporate jets or tax breaks for oil companies, are not among them.
  What you will find is a list of deductions which disproportionately 
benefit the middle class. This being the case, if my colleagues are 
serious about significantly reducing the deficit by eliminating 
deductions and so-called loopholes, they will necessarily be talking 
about raising taxes on the middle class. Indeed, if they only focus on 
those provisions which benefit the so-called rich, they will not be 
able to raise enough revenue to make a serious dent in the deficit.
  For example, let's take a look at the mortgage interest deduction. 
According to the Joint Committee on Taxation, only 35 percent of the 
benefit of the mortgage interest deduction goes to taxpayers with 
incomes over $200,000 per year. The remaining 65 percent goes to 
taxpayers who make less than $200,000. By a ratio of almost 2 to 1, the 
mortgage interest deduction benefits the middle class, not the so-
called rich.
  We may also look at the earned income tax credit, another large tax 
expenditure. This is another fully refundable tax credit, meaning 
taxpayers can receive it whether they pay income taxes or not. High-
income earners receive no benefits from the earned income tax credit.
  The story is the same with the child tax credit, which is limited to 
lower and middle-income earners. None of it goes to taxpayers with 
higher incomes. Likewise, all education credits go to taxpayers making 
less than $200,000 a year.
  The list goes on and on. Deductions for real property taxes, medical 
expenses, childcare, and student loan interest, all of them 
predominantly, if not exclusively, benefit people making less than 
$200,000 a year.
  Benefits from some other large tax expenditures are distributed 
almost proportionately between higher and middle-income earners. One 
such provision is the State and local income and sales tax deduction.
  According to the Joint Committee on Taxation data, 55 percent of the 
benefit of this deduction goes to taxpayers making more than $200,000 a 
year, and 45 percent of the benefit goes to people making less than 
$200,000 a year. This expenditure accounts for about one-half of the 
revenue loss attributable to itemized deductions. Since the benefits 
are slightly more in favor of those with higher incomes, it would 
likely be a target for a ``tax reform'' exercise designed to raise 
revenue. However, much of the burden of limiting or eliminating this 
deduction would still fall on the middle class.
  It is also interesting to note that this past December the New York 
Times editorial page, which is usually very much in sync with the 
philosophy of the Democratic Party, recommended caution when 
considering limits to this particular deduction. Yet it is one of the 
largest tax expenditures in the country.
  I ask unanimous consent to have printed in the Record the New York 
Times editorial from December 6, 2012, entitled ``Keep the State Tax 
Deduction.''

                [From the New York Times, Dec. 6, 2012]

                      Keep the State Tax Deduction

       As they continue to wrangle over the year-end fiscal 
     deadline, both Democrats and Republicans are considering caps 
     on federal income-tax deductions.
       That could be very bad news for residents of New York, New 
     Jersey and other states and cities that rely heavily on their 
     own income taxes. Such a cap would reduce the value of the 
     deduction for state and local income taxes, which has been 
     part of the federal tax code for a century (though the 
     deduction has been diluted by the alternative minimum tax). 
     That could substantially reduce middle-class disposable 
     incomes in high-tax states, which, in turn, would put 
     pressure on those states to cut taxes and the services they 
     have long chosen to provide. (A cap would also affect 
     property and sales taxes, though those are spread around more 
     evenly among all the states.)
       The theory behind the deduction was that the amount paid to 
     states in taxes is not really part of an individual's 
     disposable income, because it is obligatory and, therefore, 
     should not be taxed twice. Over time, the deduction has 
     become the equivalent of a subsidy from the federal 
     government to states that believe in a strong and active 
     government. That may infuriate conservatives in low-tax 
     states like Texas, who hate subsidizing states with different 
     views of government's role, but it's actually a good thing 
     for the country.
       The deduction is Washington's way of supporting states that 
     support their most vulnerable citizens and neediest cities. 
     The seven states that account for 90 percent of state and 
     local tax deductions (including sales and property taxes)--
     New York, New Jersey, California, Pennsylvania, Maryland, 
     Illinois and Massachusetts--generally do a better job of 
     providing for the health and welfare of their citizens, and 
     are more willing to pay for institutions that are good for 
     society as a whole.
       Rapid-transit systems in states like New York and 
     Massachusetts, subsidized with tax dollars, save energy and 
     improve the environment. Few cities can afford to operate 
     their own universities, but the City University of New York, 
     also subsidized with tax dollars, is an enormously valuable 
     institution with national benefits. Public hospital systems 
     and generous Medicaid programs have improved and extended the 
     lives of tens of millions of low-income people.
       Texas is proud not to have an income tax, but it also has 
     by far the highest percentage of uninsured people in the 
     country. It ranks last in prenatal care as well and in 
     overall federal assessment of health quality.
       In their fiscal-cliff offer, Republicans have proposed 
     raising $800 billion by capping deductions for the wealthy, 
     though their proposal would inevitably affect the middle 
     class in expensive states like New York and California. 
     President Obama would prefer to raise tax rates, but he has 
     also proposed deduction limits that would affect states that 
     have chosen to impose higher income taxes. Governors, mayors 
     and representatives of those states need to make their voices 
     heard in support of that choice.

  Once again, when my friends on the other side of the aisle talk about 
eliminating so-called loopholes for the sole purpose of raising 
revenue, they are either talking about raising taxes on the middle 
class or they are proposing changes which will have no meaningful 
impact on the deficit at all. If the goal is to construct political 
talking points and raise relatively significant amounts of revenue by 
going after politically convenient targets--jet owners, oil companies, 
private equity firms, and the like--you may do this by eliminating a 
handful of so-called loopholes.
  This isn't the stated goal of the President, nor is it what my 
colleagues on the Budget Committee talk about when they say they want 
to pursue ``tax reform'' through reconciliation. No, instead they talk 
about reducing deficits, debt, and attaining fiscal sustainability. 
They cannot do this by focusing efforts on tax provisions which only 
benefit the wealthy. The money simply isn't there. If we are not going 
to cut spending, and if our deficit reduction efforts are focused only 
on eliminating so-called tax loopholes, then the middle class happens 
to be the target.
  We need a different approach. We need tax reform which focuses on 
eliminating preferences in the Tax Code--not for the purpose of raising 
taxes but for lowering the rates and encouraging economic growth. 
Unlike the idea of tax reform advanced by some of my friends on the 
other side, this will benefit the middle class.
  This is what tax reform is all about. Anyone talking about raising 
taxes or

[[Page 2920]]

closing loopholes for the sole purpose of generating revenue is not 
talking about tax reform. For these reasons, I hope the Budget 
Committee will go a different route. I hope they will let the 
bipartisan tax reform efforts underway in both the House and Senate run 
their course.
  If they don't, if they hijack the process in order to once again 
raise taxes on the American people and to vilify Republicans as being 
the ``party of the rich,'' we will not see tax reform happen this year 
or, quite likely, any year in the near future.
  Our Nation is facing a number of challenges. In addition to mounting 
debts and deficits, our economic recovery remains on a slow and tenuous 
path. We need people who are willing to make difficult choices in order 
to solve these problems. This will mean structural reforms to our 
entitlement programs, which are the main drivers of our debts. Once 
again, that will mean real, meaningful changes to our Tax Code, which 
continues to be an obstacle to sustainable economic growth.
  As I stated, I do believe there are people on both sides of the aisle 
who recognize these needs, particularly when it comes to tax reform. 
Sadly, there are also those who would rather campaign on these 
problems, attacking anyone who proposes real solutions while offering 
only political talking points in return. That is not what the American 
people deserve.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                   Recognition of the Minority Leader

  The PRESIDING OFFICER. The Republican leader is recognized.


                               Obamacare

  Mr. McCONNELL. Mr. President, next week marks the third anniversary 
of ObamaCare, and I will remind you that leading up to its passage in 
March 2010, Republicans warned endlessly that the bill would cost too 
much and wouldn't work the way the President and other Washington 
Democrats said it would. Then-Speaker Pelosi famously said we needed to 
pass the bill to learn what was in it. Well, nearly 3 years and 
thousands of pages of regulations later, we have learned a lot about 
ObamaCare. It looks like our worst fears are coming true.
  Right down the hall, President Obama promised if Congress would only 
pass the kind of health care takeover he was after, it would slow the 
growth of health care costs for our families, our businesses, and for 
our government. Today, the facts tell a very different story.
  According to Congress's own nonpartisan budget experts, ObamaCare 
will increase Federal health spending and subsidies by nearly $600 
billion. That is only projected to get worse over time.
  Just a few weeks ago, these same nonpartisan experts told us spending 
is set to ``grow rapidly when provisions of the Affordable Care Act are 
fully implemented by mid decade.'' Their words, not mine.
  So when the President tries to convince Americans that Washington 
doesn't have a spending problem but a health spending problem, what he 
is not saying is his own health care law is actually making things 
worse, not better, and that is to say nothing of the devastating 
effects of this law for American families.
  Then-Senator Obama promised to lower premiums by as much as $2,500 
per family when he ran for President. Here are the facts: Three years 
after ObamaCare's passage, premiums for families have actually risen by 
nearly that same amount. And that is before the most expensive new 
rules, taxes, and mandates kick in. After that, the experts tell us 
premiums could increase by $2,100 per family.
  Tragically, ObamaCare will place the greatest burden on young 
Americans--those just starting to build lives of their own. This is a 
time in their lives when every dollar counts. Yet 3 years after 
ObamaCare's passage, experts say premiums for healthy young people 
could rise by 169 percent.
  Part of the reason costs are set to increase so dramatically is 
because ObamaCare levies so many new taxes and fees. But that is really 
only half the story. It is also because the law imposes so many onerous 
regulations. Just look at this stack right here. This is 1 day's worth 
of ObamaCare regulations--828 pages in 1 day. Overall, there are nearly 
20,000 pages, with many more to come. But this is 1 day's worth--828 
pages.
  This law is a disaster waiting to happen. Imagine the burden we are 
placing on a single mom who wants to open her own store or the young 
entrepreneur who wants to sell some new idea or the business owners we 
all know from back home--the folks who employ so many of our 
constituents. Instead of encouraging them to create jobs and grow the 
economy, we are hitting them with a brick of regulations.
  Last week the Federal Reserve said what many of us have been 
predicting all along: ObamaCare is also costing jobs. Recent polling 
bears this out too. One survey said that more than half of American 
small business owners are worried that health care costs and taxes will 
hurt their operating environment ``a lot.'' Another small business 
survey recently identified these issues as the top two concerns among 
eight tested.
  There are countless real-world examples of how this is hurting the 
folks we represent. Let me give you just one example. One of my 
constituents is Junior Bridgeman. He was once known for his skills on 
the basketball court. Today, Louisvillians know him as the owner of a 
successful restaurant franchise that employs a lot of Kentuckians. He 
wrote to me recently to say that ObamaCare is a serious impediment not 
only to hiring but to hiring low-income employees in particular. Here 
is what he had to say:

       [It] does not consider our ability to afford the mandate. 
     Under our current labor model . . . [it] will increase labor 
     costs whether we offer health care or pay the tax penalties. 
     . . . .This creates, in essence, a disincentive to hire low 
     income employees.

  The President's allies are worried too. We have seen the stories 
about Democrats who voted for the bill now having second thoughts about 
specific funding mechanisms for it, but now union leaders are even 
expressing fears about the law driving up costs for their own health 
care plans, making unionized workers actually less competitive.
  This is the worst time to be imposing tens of thousands of pages of 
new regulations and onerous taxes on the very families and businesses 
that can least afford them. We owe our constituents better, 
particularly those who are struggling the most.
  Look, ObamaCare is just too expensive, and it is not working the way 
Washington Democrats promised. That is why ObamaCare needs to be 
repealed. That is why I will continue to push for its repeal.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. COATS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. King). Without objection, it is so 
ordered.

                          ____________________