American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - July 26, 2008)

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Mr. GRASSLEY. Mr. President, I would like to take a few minutes to highlight the tax piece of the housing bill that is before the Senate today. From the beginning, Chairman Baucus and I had a goal. We wanted to develop a bipartisan tax package that responded to the needs of Americans facing difficulty in the housing market. Up until the last stage of this journey, in terms of the process, we met that goal. Unfortunately, at the last stage of the process, when the last House amendment was developed, a bipartisan process became a Democrats-only process. That is unfortunate. It is not the way we have done business in the past. Hopefully, it won't become a pattern.

Mr. President, this bill, with one exception, complies with the Senate Republican conference principles on use of revenue raising offsets. This bill contains new tax policy. The new tax policy is offset with revenue raisers that a bipartisan majority in the Senate consider improved tax policy. The main one would put in place a reporting regime on credit card payments to merchants. It is a Treasury tax gap proposal. The other significant revenue raiser would clarify the home sale exclusion rules where second homes, usually vacation residences, are involved.

The one exception deals with a reversal of a sound international tax policy reform. Back in 2004, Congress passed and President Bush signed a major bipartisan business tax reform bill. The centerpiece proposal in the international tax reform area was a restoration of the Finance Committee position from the 1986 Tax Reform Act on the treatment of interest for the purposes of the foreign tax credit. It took us 18 years to get back to the proper treatment of interest. This reform was due to take effect a few months from now.

The proposal in the bill before us delays this important reform by 2 years. It also cleverly haircuts the reform by 70 percent in the year the reform would become effective. The House has offered this offset for several bills. It is currently in play on the House extenders bill. It is also in play on the House trade adjustment assistance, TAA, proposal. In the prior stages of this legislation, it is the only offset on which I have expressed opposition. I offered up other offsets which, in my view, represented good tax policy. They were rejected by either the House or the Senate. I respected the reservations of the House and Senate Democrats on revenue raisers they could not accept. My reservations with this policy were discarded at the final stage in the Democrats-only negotiation.

The revenue grab trumps policy in this instance. The tax increase/spending increase pay-go imperative is more important than getting the tax policy right. The revenue raised is used mostly for new spending on community block grants. So here we go again. Propose suspect tax policy to feed the insatiable appetite for new social spending.

Now, why am I so opposed to the worldwide interest revenue raiser? My opposition rests in the bad tax policy this proposal represents.

Starting in 2009, the interest allocation reform will lower the chance of double tax that arises under current law from the artificial allocation of interest expense to foreign income, even when the debt is incurred to fund domestic investment. The current rules actually penalize domestic manufacturers that compete in global markets by making it more likely they will be double-taxed on their foreign income.

Several companies have spoken to my staff about the negative ramifications this delay will have on them. These companies are just starting to grow their businesses beyond the U.S. borders. The delay of this important international reform will make it more costly for these companies to expand into these markets. If these companies cannot grow beyond the domestic economy, they will be unable to compete in the global marketplace.

It is long been said that the American dream is to own your home. Unfortunately, the subprime crisis has turned that dream into a nightmare for many Americans. The tax relief in this bill aims to restore the American dream. This package goes some distance to restore that dream, but in the journey this legislation took a wrong turn. The bill goes backward on a bipartisan international tax reform. That is a sorry development. It does not bode well for future efforts at international tax reform. How reliable are proposals from the other side if they are reversed a couple of years later when the pay-go beast growls for more revenue for more spending?

Mr President, there are a lot of good proposals in the tax policy portion of the bill. Unfortunately, in the late stages of its development, it took on a more partisan character.

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