Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. GRASSLEY. Mr. President, I come to the floor to tell my colleagues about a bill I am introducing today to encourage savings. To set the stage for the necessity of that bill, I am going to speak for a minute about the obstacles that this administration's economic policies--particularly inflation--have put in that give need for such legislation.

On Friday, we learned that inflation surged to 8.6 percent, a new 40- year high for inflation. Inflation is the No. 1 concern that I hear from Iowans as I do my 99-county tour throughout the State over the course of a year. I hear how rising prices, particularly for food and energy, are cutting into budgets, making it difficult to make ends meet.

Moreover, I hear from Iowans who are concerned that inflation is eating into their savings. That gets to the purpose of the legislation I am going to soon talk about. This is particularly true for seniors who are living on fixed budgets and are dependent on their savings and investment income to keep their heads above water.

Yet President Biden and congressional Democrats continue to ignore the damage done by their reckless tax-and-spending agenda. Sadly, their solution for inflation is just more of the same old Democratic tax-and- spend agenda. We still hear rumors that there may be some version of Build Back Better. Just think. If that original version of Build Back Better had passed, we would have had another $4.5 trillion in additional spending feeding the fires of inflation. Thank God for 50 Republicans and Senator Manchin that that has not happened.

Several Democrats have argued for hiking taxes to combat inflation. However, their proposed tax hikes on job creators would suppress business investment, lowering productivity. This would be counterproductive at a time when consumers' demands far outpace supply. We need more production, not less, to combat unchecked inflation.

Moreover, the proposed Democratic tax hikes would be passed on to the middle class in the form of lower wages and higher prices. These tax hikes would further squeeze a middle class that is already enduring the worst of inflation.

I just complimented Senator Manchin for putting a stop to Build Back Better. When it comes to some of the original tax policies we have heard from the Democrats, we can thank Senator Sinema, another Democrat, for stepping in and bringing at least some common sense to tax policy, even though it wasn't a complete change of that tax policy. Raising taxes on job creation isn't the only misguided tax proposal. While many consumer products are in short supply, ill-conceived Democratic proposals are not.

In addition to reckless tax hikes on businesses broadly, Democrats have proposed providing consumer gas rebates, forgiving student loan debt, imposing windfall profit taxes on oil and gas, and implementing price controls. None of these proposals would help tamp down inflation. Instead, they would only make things worse--much worse.

Instead of providing relief, gas rebates would increase demand, driving prices higher. Forgiving student loans would have a similar effect and would be horribly counterproductive and, at the same time, would be very unfair to those students who have already paid off their student loans.

Yet you don't have to take Chuck Grassley's word for it. Prominent Democratic economist Larry Summers has said that student debt cancelation would be ``regressive, uncertainty creating, untargeted and inappropriate at a time when the economy is [already] overheated.''

Windfall profit taxes and price controls may be the worst of all of the proposals.

That should have been learned from the Nixon administration when he froze prices and wages. It was a disaster--part of the cause of the great inflation of the 1970s. There were disastrous consequences then as a result of what happened in the 1970s. Anyone who lived through that time can tell you how these policies made things worse by reducing supply. The result was of rampant shortages, most notably with gas lines all around the block.

When addressing inflation, Congress must be guided by the principle: First, do no harm. The Democrats' proposal has failed this principle miserably.

The fact of the matter is that, once the inflation fire gets started, it is hard to put out. Just think: Just a few months ago, inflation was transitory, and then it got up to 6 percent, 7 percent, 8.3 percent. Then somebody said last month that it was going to cool off, but it is up to 8.6 percent. The Federal Reserve is best suited for reining in inflation given its control over the money supply.

As Milton Friedman said:

Inflation is always and everywhere a monetary phenomenon.

This doesn't mean Congress is helpless when it comes to responding to inflation. The most important thing that Congress can do is stop spending like drunken sailors. Even better would be to trim the budget to eliminate unnecessary spending.

Congress can also provide targeted inflation relief. However, it must be done in a way that won't add to our growing debt or further fuel the flames of inflation. One way to do this is by providing targeted inflation relief that incentivizes and rewards taxpayers who save rather than spend.

With today's high inflation, many in the middle class could see most or even all of their savings and investment gains wiped out by the inflation that is upon us. Yet, even though middle class savers may be losing money in real terms, they are still taxed on all gains and interest income as if inflation doesn't exist. This creates a perverse incentive that encourages taxpayers to consume today rather than to save today. This can push up the demand for goods and services, forcing prices higher and further fueling inflation.

To help counter the current bias in favor of consumption, I now come to my proposal, a proposal subjecting most middle class savings and investment income to zero tax.

Now, this isn't a silver bullet in the fight against inflation. Ultimately, the Federal Reserve will have to do the heavy lifting. However, unlike counterproductive Democrat policies, my proposals would incentivize and reward saving. As a result, it would get relief to the middle class without further fueling consumer demand or reducing production and supply.

The title of the bill is the ``Middle-Class Savings and Investment Act.'' Under that bill, taxpayers in the 22-percent individual income tax bracket and lower would pay zero tax on their long-term capital gains and dividend income. Moreover, my proposal would allow individuals to exclude a reasonable amount of interest income from tax. For 2022, the combination of those proposals means an individual with a taxable income of below $89,075 or a married couple below $178,150 would largely be able to save tax-free.

In addition to exempting the middle class from the tax on most of their savings and investment income, my proposal would enhance and expand the saver's credit. This provides a tax credit to low- to middle-income taxpayers who contribute to a tax-favored retirement account. My proposal would increase the maximum credit amount by $500 for married taxpayers and expand eligibility to more taxpayers.

Finally, my proposal would address a massive marriage penalty that is gradually catching ever more taxpayers by surprise thanks just simply to inflation. Under ObamaCare, Democrats imposed a new 3.8-percent tax on investment income of taxpayers earning over $200,000 single or $250,000 married. Congress never indexed these thresholds for inflation; thus, given current inflation, it is likely it won't be long before millions of middle-class taxpayers find themselves squarely within the grasp of that marriage penalty. To prevent this, I index the income threshold for this tax to inflation. Moreover, I eliminate the marriage penalty by raising the threshold for married taxpayers to twice that for single earners.

Of course, any relief provided must be fully paid for to ensure that we aren't just adding unsustainable debt and deficits. This is why my proposal is fully paid for by extending the $10,000 cap on State and local tax deductions beyond the current scheduled expiration at the end of 2025.

The SALT deduction is a highly regressive tax subsidy that primarily benefits high-income taxpayers. According to the nonpartisan Joint Committee on Taxation, more than half of the benefits from lifting the SALT cap would go to those making over $1 million a year. Extending the current cap on SALT--an otherwise highly regressive tax benefit--to provide immediate inflation relief to the middle class should be a no- brainer to all of my colleagues.

I urge Members on both sides of the aisle to support this proposal.

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