Source: United States Senator for Ohio Rob Portman
August 8, 2022 | Portman Difference
Senator Portman joined FOX Business’ Kudlow this afternoon to discuss the consequences of the Democrats’ “Inflation Reduction Act” that recently passed the Senate. Portman noted the new tax hikes that will hurt Americans in every tax bracket, kill jobs, and make inflation worse, contrary to the name of the bill. Portman criticized the Democrats’ proposed tax on book income, noting that attempting to tax companies based on their financial statements instead of their taxable income is the wrong approach that will hurt industries like manufacturing the most by discouraging investments in the equipment manufacturers need to succeed. Portman, before casting his vote in opposition to this partisan legislation, spoke on the Senate floor against this proposal.
A transcript of the interview can be found below and you can also watch the interview here.
SENATOR PORTMAN ON RECONCILIATION AND INFLATION
“Well Larry, we had some wins and a lot of losses, unfortunately, in the last 48 hours on this. One of the small wins is that we finally convinced them that you ought not to subject manufacturers who are taking advantage of the ability to write off investments in equipment, you ought not to include them under the book tax. So that was carved out but that is little solace because unfortunately, what they did was they then turned around, and not only didn’t carve out other things they should have including oil and gas industry, coal industry, including for ESOPs, employee stock ownership plans but also, they added a new tax to make up for the tax revenue lost that was going to occur relative to their initial proposal because of the manufacturing carveout. So, it’s unfortunately not much better but to your point, the last thing we want to do is discourage investment in America. This bill does that but it doesn’t do quite as badly as was initially calculated to do.
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“Larry, one thing they did was pull out Spectrum at the last minute, and that was one of the small wins we got in the last 48 hours, but there has been no process here. This is called reconciliation. That means the Democrats can do it without a single Republican vote. It has to be related to the budget, but it also means it doesn’t go through the committees. In other words, the Senate Finance Committee and the House Ways and Means Committee never looked at any of this or knows what the consequences are. So, the new excise tax, whether you pull Spectrum out or you don’t, what happens with manufacturers, all this was done at the last minute in the dark of the night. That is not how we ought to be legislating. America’s economy is the envy of the world, and there are a lot of reasons for that. One is that we have relatively low taxes, relatively low regulations- well in most areas, and we encourage people to take that risk and to create something of value for themselves in their workforce This is picking at it, just piece by piece. It is an unforced error. It’s going to make us less competitive. It’s going to hurt lower and middle-income workers, and it’s going to hurt consumers.
“When you tax these companies, who, by the way, are following the tax laws, these Byzantine tax laws, you’re actually hurting the workers in the companies and the consumers. That’s what all the economic studies show. We also know that this bill is not going to reduce inflation because we have studies, including from this organization that Democrats have used in the past to look at these tax bills, that is saying that it is going to add to inflation over the next two years. So, that’s true as well. We don’t have a bill here that helps with regard to the tax code. It makes it more complicated. It makes the economy less efficient. But it also is not going to help in terms of the biggest issue we face right now which is spiraling inflation.
“Well, you’re right, and I mentioned this study earlier, the Penn Wharton study, that said it actually adds to inflation. They also look at the economic growth here, and they come up with zero.”
SENATOR PORTMAN ON TAXING INVESTMENT
“Now what they did was, to make up for that difference, in part, they put an excise tax on stock buybacks. What does that mean? Well it’s one percent, so they say it is not going to affect it much, but by the way, you can dial up one percent pretty easily. It’s a new tax in essence. So, just as the new book tax is a new tax system for larger companies, they now have to calculate their taxes, adding a lot of complexity both in terms of the IRS income definition but now also the book tax, the new book tax income definition. But also, they’re now is a new excise tax for the first time on stock buybacks. The effect of that, in my view, is to discourage companies from helping to improve the price of the stock, which helps retirement plans and a lot of other investors at a time when they have excess cash available. It’s a relatively good place for them to invest in my view. So, there is a lot of stuff in here that discourages me, Larry, but the worst thing to me, the health care stuff, the energy stuff, what they’re doing in terms of these various tax provisions, the worst thing is they added a plot of complexity to the tax code. Not just tax credits, and other preferences on the energy side, but also this new book tax. This new book tax that just affects certain businesses and not others and then this excise tax that is new as well. So, I think it is really sad what’s happened. My hope is that with a Republican Congress and a Republican president, we can reverse all of this and get back to a simpler tax system that encourages economic growth.”
SENATOR PORTMAN ON THE NEED FOR PRO-GROWTH POLICIES
“In other words, they think there is no growth potential in this. I would argue that it actually, again, is going to hurt in terms of complexity. The other thing that is interesting is when you set up a new tax system, like the book tax, managers and companies are now going to manage towards that. In other words, taxes matter. So, it is inefficient to be managing a company, making decisions as to the allocation of capital based on a new tax system, and that is one of the things actually raised by the CPAs, the AICPA organization, American Association of CPAs, came out against all this, even though it adds to complexity which, in the end, helps them and helps the accounting firms in general because there will be more companies coming down and saying, ‘What do I do here?’ But, they said, you know, this is not smart in terms of what you’re talking about which is, making smart decisions on behalf of, you know, the Adam Smith past of our country which every little decision we make out there in the market should be towards efficiency and creating more economic opportunity for everyone.
“By the way, we were doing pretty well on that before the pandemic hit. We had 19 straight months of over wage growth. We had the lowest poverty rate in the history of the country. Things were going well. We had the lowest unemployment rate ever for Blacks and Hispanics. So, we were doing some of those right things with regard to taxes and regulations which ended up helping everybody, an opportunity economy.”
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