Tax Extenders Act Of 2009

Floor Speech

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Mr. THUNE. Madam President, as we all know, our economy is suffering. We have an unemployment rate that is currently at 9.7 percent. Furthermore, we have large portions of the population that are either underemployed or have dropped out of the workforce because of limited job prospects.

There are a variety of factors that have contributed to this recession. The government's response so far has been largely ineffective, particularly with regard to employment, and I would argue that the best thing that we can do to address the issue of unemployment and having to extend unemployment benefits and COBRA and other types of benefits, all of which are considered in this underlying bill, is to get people back to work.

That is fundamentally the very best thing that we can be doing--focusing on how we create jobs, how we grow this economy, how we provide opportunities for those who have lost their jobs, who are underemployed, to get back into the workforce. That, to me, ought to be the focus of our efforts in the Senate.

The bill that was passed about a year ago, the stimulus legislation which we now know is going to cost somewhere in the neighborhood of $862 billion without interest, with interest well over $1 trillion, was all borrowed money. It is going to add $1 trillion to the national debt.

Despite that amount of spending, only $6.2 billion was spent on tax incentives for small businesses, and another $730 million was spent in funding for the Small Business Administration. So I want to think about for a moment what that means in terms of the dimensions of the bill that was passed last year. We had a $1 trillion bill. Together the

incentives for small business in that bill represented less than 1 percent of the total cost.

We all know small businesses have a much greater impact on the economy and on employment than that number represents. Small businesses employ more than half of all of the Nation's private sector employees. They create nearly two-thirds of all of the new jobs and create a disproportionate number of the patents that are issued in our Nation.

At the time we voted last year on the stimulus bill, I believe now this was one example of the priorities in that legislation that were misplaced if we are intent on and focused as a laser on creating jobs and getting this economy growing again.

I made the argument at the time, as did many of my colleagues--and we offered amendments in support of that belief--that the best way to get the economy growing again is not to focus on a lot of government spending on new government programs, but, in fact, to provide incentives for small businesses, the engines of our economy; to get out there and to start investing and to start creating jobs.

So I offered an amendment that was an alternative to the stimulus bill a year ago, which, according to the economic model developed by the President's economic adviser, would have created twice as many jobs, and it would have cost half of what this stimulus legislation is going to end up costing the taxpayers of this country--again, all of which is borrowed from future generations.

While the Senate passed a smaller jobs bill last week, Senators in the Chamber were blocked from offering amendments. I wanted to offer this amendment a week ago when we considered the other jobs bill that passed through here. That was a $15 billion jobs bill which I think is now pending action in the House of Representatives.

But I am offering this amendment now because we have this underlying tax extenders bill, and I think it is important that we discuss and debate how best we can stimulate the economy, how best we can grow the economy, get it expanding again, and how best we can create jobs to get people back to work. It seems to me, again, that ought to be the first priority on which we as a Senate get focused.

What my amendment would do is, it would, for the year 2010, extend depreciation. It would permanently increase the section 179 deductions that allow small business to expense more of the investment they make as opposed to having to depreciate those.

By lowering the cost of new capital expenditures, these provisions would encourage companies to invest in new equipment, make capital purchases, capital investments; it would increase both growth and employment. It would also eliminate capital gains taxes on small business investment.

This simple, permanent reduction in taxes was supported by the President in his State of the Union Address, and it would increase investment as well in small businesses. This amendment also would allow a 20-percent deduction for small business income. We currently have a lot of small business owners who pay their taxes at the individual level. It is called flowthrough income. They have a small business. The income flows through to their individual tax returns and so they pay at individual tax rates, and those tax rates are set to rise on small businesses beginning in 2011. In fact, a lot of our small businesses, about half, are going to be impacted by those increases in marginal income tax rates that will occur in 2011. This would help mitigate the impact of those increases on the 20 million people working in small businesses, those small businesses which would be taxed at a higher rate under the President's tax proposals.

Finally, this bill would prevent Davis-Bacon prevailing wage requirements from raising the cost for projects funded under the stimulus bill. While I understand the importance of good wages, projects that comply with Davis-Bacon restrictions see labor costs on average 22 percent higher than market rates. This stimulus bill was the first time where that requirement was inserted into this sort of a stimulus bill designed to create jobs and grow the economy. Waiving these provisions will help eliminate the confusion and stretch taxpayer dollars so we get more bang for our buck in the amount of dollars currently out there, hopefully, trying to create jobs.

My amendment would be paid for by redirecting unspent or unobligated stimulus funds from the bill passed last year. Out of that $862 billion in spending, according to what we hear from the administration's Web site, recovery.org, about 37 percent of that money has been spent as of the end of this last year. Bear in mind, a lot of that money is obligated, but we understand that the unspent, unobligated amount on the spending portion, not on the tax portion, is about $160 billion. It would seem to me that if the purpose of all our efforts is to create jobs, we ought to begin to think about who creates those jobs. Two-thirds of the jobs in our economy are created by small businesses. Why then should we not be focusing our efforts on creating incentives for small businesses to invest? Frankly, that would have been the way I would have gone about the stimulus bill.

Many of my colleagues offered amendments, and many of them supported my amendment. I think I had 37 votes for my amendment that would have focused in the stimulus bill of a year ago more on small businesses, whereas the bill that ultimately passed only spent under 1 percent of that total amount, almost $1 trillion, on small businesses which are the economic engine, the job creators in the economy.

If we can figure out ways to get small businesses some relief so they can start hiring again, we address all these other issues--9.7 percent unemployment which, incidentally, the promises made when the big stimulus bill passed last year was that if we didn't pass this stimulus bill, unemployment would go up to 8 percent. We have blown way by. That is at 9.7 percent. We were told it would create millions of jobs. We know now that since its passage last year, we have actually lost 2.7 million jobs in the economy. Clearly, the prescription put in place is not working. I argue that is largely because it was misdirected. It was directed toward creating new bureaucracies in Washington, perhaps some government jobs, but the fact is, the good-paying, permanent jobs in our economy are created in the private economy. The biggest creator of those jobs is small businesses.

Frankly, we ought to be looking at what types of policies can we put in place that will create an environment in which small businesses can go back out there, make investments, put people back to work and then we start, hopefully, bringing the unemployment rate down, get people back employed again, and a lot of these measures we are now having to take with regard to unemployment benefits hopefully would cost the taxpayers a lot less. The best thing we could do for people who are without a job is to get them back to work. The best way to do that is to get small businesses hiring again.

One final point. One of the things I hear repeatedly from small businesses in South Dakota and across the country is there is a sort of paralysis about investors looking at investing in different areas and different projects. But looking at Washington, DC, and seeing all this policy uncertainty, they see this cloud over the economy. It is creating economic anxiety. What I hear from a lot of small businesses and people who create jobs is that they are worried about the policy uncertainty in Washington, DC. Is Washington going to pass this massive new health care bill which includes an employer mandate that would raise taxes on small businesses? Is Washington going to pass a climate change bill that has punishing energy taxes, particularly on areas in the Midwest? I have a couple of power plants in my State that are on ice right now because of uncertainty about what is going to happen with regard to coal-fired power.

There is a lot of uncertainty out there swirling around about what Congress might do or, worse yet, what the EPA might do on their own. There is uncertainty about what is going to happen with taxes. Are we going to see taxes go up in 2011? In fact, for small businesses, about half who do allow their income from their small business to flow through to their individual income tax return are going to see those marginal rates increase when they go from 33 to 36 and 35 to 39.6 percent, significant tax increases, which is why I have a deduction for small business income as part of this amendment. We need to bring some certainty to small businesses in the area of taxes, certainty with regard to regulation, certainty with regard to the litigation environment. We have so much uncertainty swirling around Washington, it is creating a huge cloud.

Now we have a situation where small businesses are making decisions based upon political factors rather than economic factors. We want them making decisions based upon economic factors, not worrying what has become the new center of gravity, and that is Washington, DC. Washington cannot create permanent, good-paying jobs in our economy. Those can only be recreated in the economy as we unleash small businesses and entrepreneurs and provide incentives for them to do what they do best. That is to grow their businesses and to make capital investments and to create jobs.

I hope my colleagues will support this amendment. It is paid for. It is offset. This doesn't add anything to the debt. We don't have to borrow money. All we do is redirect unspent, unobligated stimulus moneys, moneys left over from last year's stimulus bill toward small business tax incentives which, frankly, many of us argue--and I argued at the time and I hope more people agree now--should have been a greater focus of the stimulus in the first place. If we are serious about creating jobs, we have to go to where the job creators are. The economic engine is small business. My amendment creates tax incentives for them to go out and create jobs and does it in a way that doesn't add to the deficit, doesn't add more borrowing and allows the small businesses to do what they do best.

I encourage my colleagues to support the amendment.

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