Providing for Consideration of H.R. Restoring Tax Fairness for States and Localities Act

Floor Speech

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Mrs. TORRES of California. Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 772 and ask for its immediate consideration.

The Clerk read the resolution, as follows: H. Res. 772

Resolved, That upon adoption of this resolution it shall be in order to consider in the House the bill (H.R. 5377) to amend the Internal Revenue Code of 1986 to modify the limitation on deduction of State and local taxes, and for other purposes. All points of order against consideration of the bill are waived. The amendment in the nature of a substitute recommended by the Committee on Ways and Means now printed in the bill shall be considered as adopted. The bill, as amended, shall be considered as read. All points of order against provisions in the bill, as amended, are waived. The previous question shall be considered as ordered on the bill, as amended, and on any further amendment thereto, to final passage without intervening motion except: (1) one hour of debate equally divided and controlled by the chair and ranking minority member of the Committee on Ways and Means; and (2) one motion to recommit with or without instructions.

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Mrs. TORRES of California. Mr. Speaker, for the purpose of debate only, I yield the customary 30 minutes to the gentleman from Oklahoma (Mr. Cole), pending which I yield myself such time as I may consume. During consideration of this resolution, all time yielded is for the purpose of debate only. General Leave
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Mrs. TORRES of California. Mr. Speaker, on Wednesday, the Rules Committee met and reported a rule, House Resolution 772, providing for consideration of H.R. 5377, the Restoring Tax Fairness for States and Localities Act, under a closed rule.

The rule provides 1 hour of debate, equally divided and controlled by the chair and the ranking minority member of the Committee on Ways and Means.

Mr. Speaker, SALT has been in law since the 16th Amendment was passed in 1913 with few minor adjustments, that is, until 2017, when Republicans passed the tax scam law.

In 2017, the Republicans gave away almost $2 trillion in tax cuts to corporations and the wealthy. They paid for this tax scam on the backs of hardworking American families. Thirty-six million middle-class families saw their taxes increase.

The average American deducted $12,500 in State and local taxes, or SALT, from their Federal taxes before 2017. However, the Republican tax bill capped SALT deductions at $10,000, therefore, not fully covering what the average American deducts in State and local taxes. This cap means that Americans are paying taxes twice on the same dollar earned.

Our tax system is based on the principle of federalism and acknowledges that the Federal Government should not do everything.

State and local taxes provide funds for critical infrastructure and services, such as ensuring quality schools for our kids, fixing our roads, and supporting our local law enforcement.

Local governments know how to meet the unique needs of their communities, and the implementation of a SALT deduction cap threatens the ability of our local governments to provide these critical services.

The SALT deduction is not a Democratic or Republican issue. Taxpayers across the country in both red and blue States benefit from the deduction.

Midwestern States like Iowa, Minnesota, and Wisconsin are known for their State and local tax contributions. In fact, Wisconsin ranks among the top five States in the country, higher than California, for the average proportion of a resident's income tax that goes toward State and local taxes.

Whether from California, Wisconsin, or New Jersey, getting rid of the SALT cap will benefit Americans across the country.

Mr. Speaker, that is why I am supporting H.R. 5377, the Restoring Tax Fairness for States and Localities Act. This legislation will raise the SALT cap for 2019 to $20,000 for married couples.

Under the Republican tax bill, the SALT cap is set at $10,000 for a household regardless if that household consists of an individual or two people filing jointly.

Mr. Speaker, I don't think taxpayers should be punished for being married.

This legislation will completely repeal the SALT cap for 2020 and 2021, ensuring that Americans are not taxed double on their hard-earned money.

Included in H.R. 5377 are investments in our teachers and law enforcement officers. I have heard from southern Californian teachers who are working two or three jobs to make ends meet, but they still buy supplies for their students: notebooks, chalk, pencils, markers, whatever they need.

Across the country, nearly all teachers report buying school supplies for their students with their own money, spending almost $500 on average.

Currently, the tax credit for out-of-pocket expenses for educators is $250. This legislation will double the tax credit to $500, matching what is actually spent, what teachers spend for their students.

It also creates a new tax deduction for law enforcement officers, firefighters, paramedics, and EMTs related to expenses for uniforms and for tuition fees for professional development training. As a former 911 dispatcher, I can testify to the importance of having well-trained first responders.

Mr. Speaker, H.R. 5377 is about restoring fair tax policies for the middle class that have been suffering under the Republican tax bill, and I am proud to stand here in support of this legislation.

Mr. Speaker, school districts across America are struggling to recruit and hire teachers. In the Fourth District of Oklahoma, for example, there are 8,680 teachers who currently receive the education expense deduction. This legislation doubles the above-the-line deduction for educators' out-of-pocket expenses to $500.

Mr. Speaker, I can imagine that these teachers would greatly appreciate being able to claim up to $500 out-of-pocket for the school supplies that they buy for their students.

I want to tell a story from Debra Deskin. Debra is a teacher in Oklahoma, and she has been a faithful public servant for 15 years. She teaches gifted students. She says: ``I literally had to choose whether to purchase items for my classroom and students or pay bills. Honestly, the bills get put on the back burner.''

These are the type of public servants who this bill is tasked to support to ensure that they are not having to choose between paying their bills or buying supplies for their students.

Mr. Speaker, the fact is that Republicans are funding their tax scam bill on the backs of hardworking Americans. The fact is that there is a race to the bottom under their cheating, gerrymandering ways.

So, now, the Democrats are in charge in the House. We will continue to work to uphold and bring up our hardworking families.

In Arizona's Eighth Congressional District, there are 9,330 teachers claiming this tax expense deduction. They should know the Democrats stand with them to ensure that they are able to pay their bills, because no one should have to live in poverty because they are standing up for a future generation.

Mr. Speaker, I want to correct, for the record, about the 2017 Republican tax scam.

We have heard today, during this debate, that these tax cuts boosted our economy, and that simply isn't the case.

I include in the Record an article from Forbes titled: ``The 2017 Tax Cuts Didn't Work, the Data Prove It.'' [From Forbes, May 30, 2019] The 2017 Tax Cuts Didn't Work, The Data Prove It (By Christian Weller)

The independent, non-partisan Congressional Research Service just released a report showing that the 2017 tax cuts for the richest Americans and corporations did not work. This confirms what anybody who has been looking at the data already knew. Investment did not boom and workers will not see the promised bump in pay. Instead, the federal government incurred massive deficits while wealth inequality increased to its highest level in three decades.

Republicans in Congress and President Trump touted the benefits of Tax Cuts and Jobs Act of 2017 as game changing. Showering the richest Americans and corporations even more money was supposed to lead to more business investments. These investments, the argument went, would translate into more productivity growth. Workers would then supposedly see an additional $4,000 per year in wages. And faster economic growth and higher wages would result in more tax revenue, thus paying mainly for itself.

These were empty promises. Businesses did not use the windfall of new cash to invest in new machines, technology, office parks and manufacturing plants. Without an acceleration in business investment, though, American workers will not see the bumps in pay promised over the longer term. The richest Americans instead got even richer while corporations used a lot of the new money to keep shareholders happy. Federal budget deficits quickly ballooned because there was no faster growth and more revenue to offset the hundreds of billions lost each year to the predictably wasteful tax cuts.

The core of the argument in favor of the tax cuts was that they would result in more investment. The main measure is business investment that goes beyond replacing obsolete equipment and buildings--so-called net non-residential fixed investment. As share of gross domestic product (GDP), net investment reached a low of 2.8% in the first quarter of 2016 (see figure below). It grew afterwards until the tax cuts were passed in late 2017 and eventually levelled off rather than accelerating in mid-2018. Consequently, net investment as share of GDP stayed below its levels in 2014. The tax cuts did not accelerate investment as promised by supply-side advocates.

But maybe the tax cuts boosted growth in other ways? In theory, the tax cuts could have created some additional demand that resulted in people spending more money, which would then have led businesses to also increase its spending. To capture this, an economic measure needs to strip out parts of the economy from GDP that are not affected by tax cuts. These parts include inventory investment-- material that is produced but sits on shelves--government consumption on salaries and supplies, and net exports--the difference between exports and imports. The resulting key measure are so-called private domestic final purchases (PDFP).

The tax cuts did not lead to faster private activity. PDFP increased by 3.3% from December 2016 to December 2017, before Congress passed the tax cuts. Afterwards, year-over-year growth remained at or below that level, actually declining since September 2018. This deceleration is yet another clear indictment of the tax cuts' ineffectiveness.

But didn't GDP growth accelerate? Not only does GDP growth capture parts of the economy that clearly were not affected by the tax cuts, the data also show no acceleration there, either. GDP growth started to get faster from low of 1.3% in June 2016 and continued to gain strength through 2018 (see Figure above). But year-over-year growth in 2018 stayed below the levels shown in early 2015.

The money from the tax cuts obviously went somewhere, just not to investments or workers' wages. Corporations just decided to use their additional cash to keep their shareholders happy. Non-financial corporations used most of their after-tax profits since the tax cuts went into effect to buy back their own shares and pay out dividends. When a firm buys back its own shares, the remaining shares become more valuable and the company's stock price goes up, increasing the wealth of shareholders, mainly people who are already very wealthy. CEOs in particular gained from buybacks since their compensation typically depends on the price of a company's stock. In 2018, corporations spent about two-thirds of their after-tax profits on buying back their own shares and paying out dividends, according to Fed data. By the fourth quarter of 2018, corporations spent 107. 7% of after- tax profits on dividends and share repurchases.

This was good news for the wealthiest few. The top one percent of wealthiest households owned a record high share of all wealth by the middle of 2018 (see figure below).

At the same time, federal budget deficits rapidly jumped. After falling precipitously in the immediate aftermath of the Great Recession, the deficits quickly grew again in 2018 (see figure below). The increase in deficits was driven heavily by a sharp drop in corporate tax revenue--not surprisingly, given the massive corporate tax cuts in the legislation.

did not accelerate, but wealth inequality grew. The American tax payers are now getting stuck with the bill, while they did not see many benefits from this trillion dollar boondoggle.

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Mrs. TORRES of California. Mr. Speaker, I include in the Record another article, and this one is from CNBC, titled: ``Trump Tax Cuts Did Little to Boost Economic Growth in 2018, Study Says.'' [From CNBC, May 29, 2019] Trump Tax Cuts Did Little To Boost Economic Growth In 2018, Study Says (By Jeff Cox)

An in-depth look by the nonpartisan Congressional Research Service indicated that not only did the rollbacks in business and personal rates have little macro impact, but they also delivered the most benefits to corporations and the rich, with little boost to wages.

In all, GDP rose 2.9% for the full calendar year, the best performance since the financial crisis. But that came in an economy already poised to move higher, economists Jane Gravelle and Donald Marples wrote.

``On the whole, the growth effects [from the cuts] tend to show a relatively small (if any) first-year effect on the economy,'' the report said. ``Although examining the growth rates cannot indicate the effects of the tax cut on GDP, it does tend to rule out very large effects in the near term.''

Trump had touted the cuts as a key step toward generating GDP growth of at least 3%. The legislation, passed in late 2017, slashed corporate tax rates from 35% to 21%, reduced the number of brackets, lowered rates for many individual payers, and doubled the standard deduction in an effort to make most income tax-exempt for the lowest earners.

Employment continued to boom in 2018 and average hourly earnings have in recent months passed 3% on a year-over-year basis for the first time since the recovery began in 2009. However, the economists said wage gains could not be tracked to the tax cuts.

``This growth is smaller than overall growth in labor compensation and indicates that ordinary workers had very little growth in wage rates,'' the economists wrote.

The study indicated that the tax changes contributed only marginally to the overall economic economic gains--maybe 0.3% of a ``feedback effect.'' The economists say that for the tax cuts to pay for themselves, as Trump has promised, GDP would have to rise by 6.7%.

``The initial effect of a demand side is likely to be reflected in increased consumption and the data indicate little growth in consumption in 2018,'' the report said. ``Much of the tax cut was directed at businesses and higher- income individuals who are less likely to spend. Fiscal stimulus is limited in an economy that is at or near full employment.''

At the same time, tax receipts from 2018 indicate that corporations got an even bigger break than expected.

While the Congressional Budget Office had forecast a $94 billion break that still would have generated $243 billion in corporate revenues, the actual total was $205 billion, or 16% lower than projected.

The effective tax for corporations, or the level they pay after taxes, was 17.2% in the year before the tax breaks took hold and plunged to 8.8% for 2018. Individuals, meanwhile, saw a drop from 9.6% as a percentage of personal income in 2017 to 9.2% last year.

Bonuses from those companies also didn't amount to much when averaged across all workers, with the $4.4 billion paid coming to just $28 per employee in the U.S.

Companies also received incentives to repatriate profits held overseas, and they did so to the tune of $664 billion. While companies bought back about $1 trillion of their own shares, ``the evidence does not suggest a surge in investment from abroad in 2018,'' the report said.

The White House did not immediately respond to a request for comment.

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Mrs. TORRES of California. Mr. Speaker, I am prepared to close also.

Mr. Speaker, I want to start by clarifying a misconception that all of these taxes are forced upon taxpayers. This last election cycle local voters voted to tax themselves to pay for affordable housing for our growing homeless population, to pay for improved roads, and to pay for better water quality. So they should not be punished for filling the gap where the Federal Government has failed to do so. This bill is paid for by raising taxes for households making over $400,000, back to the levels before Republicans passed their tax scam bill.

California pays $13 billion more in Federal taxes than it received from the Federal Government according to a 2016 IRS report. Tennessee is the third most dependent State on Federal resources. So to argue here that we should punish the people for wanting to help provide for your constituents because you failed to do that is outrageous. Oklahoma received $7.5 billion in Federal funding in 2016. This bill is not about subsidizing those who already have too much. This bill is about stopping the double taxation on the same dollar.

Mr. Speaker, we are here to try to give the middle-class families a break and undo the damage caused by the Republican tax scam. As we look forward to the new year, I want to take a minute to reflect on the work Democrats in Congress have done during this 116th Congress.

Whereas, the Republican tax law provided seven drug companies $34 billion in tax cuts in 1 year alone, last week, Democrats passed H.R. 3 to help seniors and American families afford their prescription drugs.

Whereas, last January the President caused the longest government shutdown in history by pushing to irresponsibly use taxpayer dollars for an unnecessary border wall, Democrats have fought for comprehensive funding bills that invest in our infrastructure, healthcare, national security, and to increase the Federal minimum wage.

Whereas, the Republican tax scam led to America's 400 wealthiest people paying a much lower tax rate than the working class, Democrats are here today because we believe in the middle class.

Repealing the cap on the State and local tax deductions will benefit taxpayers across our Nation. I have heard my colleagues claim that this bill is for the wealthy.

Mr. Speaker, do my colleagues remember voting on the largest tax giveaway to the rich and corporations in American history?

Obviously, they don't. But I am here to remind them that the biggest beneficiaries of the tax law that they passed were billionaires. The Joint Committee on Taxation estimated that wealthy taxpayers making $1 million or higher received a tax cut of $37 billion in 2019.

Mr. Speaker, while the Republican tax scam was a bill for the megarich, H.R. 5377 is legislation for constituents like mine, working- class Americans. The cap on SALT deductions is bad for my constituents.

The average Californian pays over $18,000 in State and local taxes, which is almost double over the SALT cap, again, to help improve the quality of life of the fifth largest economy in the world, which no other State can claim. As a result, 1 million Californians will pay $12 billion more in taxes into the SALT cap.

In 2016 my constituents deducted almost $700 million in State and local taxes from their Federal taxes.

It is time to give them a break and give them back the deductions that they once had. No one should have to pay taxes twice on the same dollar.

Mr. Speaker, I urge all my colleagues to vote for the rule and passage of H.R. 5377, Restoring Tax Fairness for States and Localities Act.

Mr. Speaker, I urge a ``yes'' vote on the rule and a ``yes'' vote on the previous question.

The material previously referred to by Mr. Cole is as follows: Amendment to House Resolution 772

At the end of the resolution, add the following:

Sec. 2. Immediately upon adoption of this resolution, the House shall proceed to the consideration in the House of the resolution (H. Res. 750) expressing the sense of the House of Representatives that individual choice in health insurance should be protected. The resolution shall be considered as read. The previous question shall be considered as ordered on the resolution and preamble to adoption without intervening motion or demand for division of the question except one hour of debate equally divided and controlled by the chair and ranking minority member of the Committee on Energy and Commerce. Clause 1(c) of rule XIX shall not apply to the consideration of House Resolution 750.
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