Source: United States Senator for Ohio Rob Portman
December 9, 2021 | Press Releases
WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH) delivered remarks on the Senate floor outlining his concerns with Democrats’ massive tax and spending proposal. Portman noted that Democrats passing another stimulus bill would represent a doubling down of the policies that created this current state of inflation by raising taxes and stimulating consumer demand. He explained that the actual cost of this legislation could be more than $4.5 trillion, rather than the $1.75 trillion figure Democrats cite.
Portman also noted that the legislation’ State and Local Tax (SALT) deduction provision would provide a massive tax break to wealthy Americans. In the House-passed reconciliation package, the $10,000 cap on SALT implemented in the 2017 tax reforms is raised to $80,000, creating a tax break that almost entirely benefits only wealthy Americans. Portman highlighted the fact that this increase will cost as much as $100 billion more than the Child Tax Credit, which Democrats claim is the cornerstone of their entire spending bill.
A transcript of his remarks can be found below and a video can be found here.
“When you think about it, right now we’re at a time of high inflation, supply chain difficulties, record levels of debt and deficit, and an uncertain economy due largely to the uncertainty regarding COVID and particularly this new variant, the Omicron. So this is not a time for us to be putting forth a massive new spending bill and a massive new tax increase on the American economy. In fact, it’s a time for us to retrench a little bit and try to help to get back to where we were before COVID-19. Remember, that was a time when after the 2017 tax reforms, we had a great economy by any measure. And it was an opportunity economy, the lowest poverty rate in the history of our country since we started keeping track in the 1950s. As of February, just before going into the COVID-19 period, February 2020, we had 19 straight months of wage gains of over 3 percent. By the way, that was over inflation because inflation was so low. So people were feeling it. They were actually getting a wage increase.
“In my state of Ohio, that was the first time in probably a decade and a half. Now it’s just the opposite. Wages are actually down when you take inflation into account and inflation is high, as everyone feared, because we’ve dumped so much on the demand side of the economy, and the supply side is restricted, in part because of what’s happening with COVID, and it creates this inflation. This was warned by not just Republicans like myself, but back in March, when President Biden and Democrats put $1.9 trillion into this economy, the most ever, the biggest bill ever, it was Larry Summers, former Secretary of the Treasury under President Clinton, NEC, National Economic Council Chair under President Obama, who said, you know, this is going to stoke inflation, it’s going to overheat the economy. It’s exactly what it did.
“So we have this high inflation, we have this record level of debt and deficit. We’re talking about extending the debt limit right now, and people think the number is going to be just to extend it for about a year, over $2 trillion, meaning that we’re spending so much more than we’re taking in. And yet there’s this discussion that somehow before Christmas, we’re going to put forward this Build Back Better legislation that we just talked about. It’s not building back America better, unfortunately.
“It’s building us worse off than we were and adding to inflation, adding to the supply chain difficulties, adding to the debt and deficits at record levels and certainly doing nothing with regard to COVID-19. So why would we do this? And certainly why would we do this now? It makes no sense.
“Well, because I guess there was a promise made that we’re going to have this massive new spending and these massive new tax increases. So what’s in there? Well, on the spending side, when you look at it, it is the largest spending bill ever put forward by the U.S. Congress. Unless you believe that it’s really only $1.7 trillion, instead of two or three times that. In that case it’s the second biggest ever. But the analysis I’ve seen from the Penn Wharton study, from the Committee for Responsible Budget, from others who’ve said, you know, there are a lot of sunsets in there. As an example, the Child Tax Credit lasts for one year. Does anybody believe it only lasts for one year? That wouldn’t be the history of this place. So it will continue. So these sunsets are not going to be effective, so that the spending will continue to increase. The tax increases don’t cover them. So there will be a big gap in terms of the deficit and the projections are more like $4.5 trillion in spending. So the largest spending increase in the history of our country by far.
“We’re talking about doing this, again, at a time when already we have record levels of debt and deficit and high inflation and driven by COVID, a lot of uncertainty in our economy. On the tax side, I could argue it’s even worse, because the tax increases are going to be hard on workers because they’re taxes on businesses. What the Joint Committee on Taxation says, which is the nonpartisan group here in Congress that advises us, what CBO says, the Congressional Budget Office says, what other outside groups say is the same thing, which is when you tax these businesses, who gets taxed? Well, it’s workers, lower wages, lower benefits. Seventy percent of the benefit of our tax cuts in 2017 went to workers. Seventy percent of this increase in taxes would be coming out of workers’ pockets. So it’s a bad idea.
“But let’s look a little deeper at what these taxes actually are. There is a 15 percent minimum tax, a new alternative minimum tax, which is always complicated for everybody to figure out what that is. But in this case, it’s called the book tax. Now, I don’t know if this was on purpose or not. I assume it wasn’t. But the book tax, as you apply it to our economy, will result in real damage to things that most people think are important, like defined benefit plans, pension plans. Democrats and Republicans alike have supported defined benefit plans. I support them. Unfortunately, there aren’t as many as there used to be, but there will be even fewer if this passes. Why? Because when you calculate your taxes under the book tax, you now have to take into account whatever your asset increase is in your pension. And if you are one of these companies caught up in this, you could well find yourself in a situation where for the first time ever, you get no deduction for your contribution to your pension. Why would we do that? And then your taxed on the asset increase, which may be caused by higher interest rates, may be caused by the market going up, but you get no benefit in your company. And your profits in your company may not be enough to pay those taxes.
“Here’s an example of this. There are some companies who have figured out this problem. By the way, there are some unions figuring it out, too, because a lot of union workers are caught up in this as well, because they have defined benefit plans typically. The company’s thinking, okay, if I make $100 million in profit and if I have a $2 billion or $1 billion dollar increase in my pension assets and you apply a 15 percent tax to that, I’m not going to have enough money to pay my taxes. So what are they going to do?
“Well, they could declare bankruptcy. They could get a loan, which again hurts workers. So I hope an inadvertent part of this, but that’s in this legislation. Why would we want to hurt defined benefit plans? I think it was an effort to say we’re going to raise taxes, but we’re going to do it in a sort of convoluted way so it doesn’t look like we’re really raising taxes, but it’s real taxes, and it’s going to hurt, again, workers in America. Another thing it would disqualify companies from doing is taking what’s called bonus depreciation. All of us I thought were kind of supportive of that. In 2017, that tax bill, this was put in place where you can immediately write off expansion of plant and equipment. Retailers love it, restaurants love it, but so do manufacturers, and they use it a lot. And those manufacturers are telling me, okay, now, under the book tax, you have to go back to the regular depreciation. So you’re not writing things off that first year as you can now under bonus depreciation. Why would you want to do that right now?
“Again, with all the economic uncertainty out there with COVID, with the inflation fears, we want to encourage people to expand plant and equipment, and there’s a lot of people hesitating. That’s in this legislation.
“Now let’s talk quickly about the SALT provisions. We already know what that is because it’s gotten a lot of play. But the state and local tax deduction means that in states like mine, Ohio, we’re subsidizing high tax states. So if you’re from Missouri, Senator Blunt is here on the floor, if you’re from Ohio, by having a deduction for your state and local taxes at the federal level, you’re not only encouraging those states to continue to have high taxes and even have further taxes because you’re being subsidized by federal taxpayers, but it’s unfair to those states that have done the responsible thing and tried to keep taxes under control.
“But in this legislation, Democrats say, ‘no we’re going to increase this cap from $10,000 to $80,000 a year.’ In other words, provide more help to the SALT beneficiaries. Guess what? There’s an analysis out this week that says almost none of that benefit goes to Americans who are not in the top 10 percent of wage earners. Almost none of that benefit that’s in this bill goes to people not in the top 10 percent. Two hundred and eighty-five billion dollars is devoted to this. One-hundred billion dollars more than is devoted to the cornerstone social safety net program, the child tax credit in this bill. Over $100 billion more for this. So how does this all shake out in terms of who it’s helping, who it’s hurting? Well, here’s what the numbers are. And this is again, the Joint Committee on Taxation, folks who are nonpartisan looking at this, almost 70 percent, almost 70 percent of people who make $1 million dollars or more a year are going to get a significant tax cut because of this legislation. Think about that. It’s about 68 percent plus are going to get a significant tax credit if you make $1 million a year. So if you’re a millionaire, you’re going to do very well.
“If you make between $500,000 and $1 million a year, 90 percent are going to get a tax cut under this legislation. But if you make $30,000 a year, only 30 percent of people who make $30,000 a year are going to get tax relief under this legislation. And that’s just in the first year. In the second year, it goes down below 30 percent to 12 percent. In the third year, 10 percent, and then it goes down to single digits. So the benefit is heavily skewed toward higher income Americans. Why would we do that? Just makes no sense. Are we worried about millionaires? But that’s in this legislation.
“So again, I would say, Build Back Better? I don’t think so. We were building pretty well when we had the lowest poverty rate in the history of our country, when we had the lowest unemployment rate ever for Blacks, Hispanics, the disabled, when we had 50-year lows in unemployment overall in our economy. When we had a situation where wages were going up, again, 19 straight months with 3 percent or more wage gains. It was real wage gains above inflation. Let’s get back to that. That’s how you grow the opportunity economy.
“That’s how you give people a chance. That’s how you help everybody. But let’s not do this massive new spending bill to cause more inflation, massive new tax increases that are going to hurt the economy and hurt workers, especially coming into the holiday season. Let’s instead do something that gives the American people a gift that they deserve.”
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