FDA Food Safety Modernization Act - Motion to Proceed - Continued

Floor Speech

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Mr. GRASSLEY. Madam President, Senator Hatch has long been a leader on a lot of these tax provisions, particularly in research and development. I thank him for his leadership.

I think Senator Hatch has clearly outlined the gravity of the economic consequences of a continuing failure to finish time-sensitive legislative tax business.

There is a chart I will put up that shows where we are on these categories of expiring tax provisions. Said another way, here are the categories of tax hikes that congressional inaction will put in place. I have used this chart before, so I think Members will be familiar. In fact, several months ago, I used it. The congressional Democratic leadership paid no attention to the seriousness of these issues then. Unfortunately, the to-do list is exactly the same today as it was several months ago.

If we go down through the chart, Members can see that we have had partisan votes on extender packages negotiated between the bicameral Democratic leadership but no effort to reach out to the Republican side to find bipartisan common ground.

On this year's alternative minimum tax patch, as Senator Hatch noted, inaction on the AMT will force a ``gotcha'' tax hike on millions of middle-income families when they start to file their tax returns 6 weeks from now.

On death tax reform, the House passed a permanent reform almost 1 year ago, but it has languished in the Senate during that period. On our side, we would like to improve that bill to protect more small businesses and farm families from the death tax.

On the 2001-2003 tax relief packages, there is no bill from the other side that would serve as a starting point on preventing this massive tax hike. On our side, if the Democratic leadership permitted us, we would like to start with Senator McConnell's bill. Senator Hatch and I are cosponsors of that legislation.

Mr. HATCH. Senator Grassley has been the ranking Republican or chairman of the Finance Committee for a long time now. We have seen times when the expiring tax provisions have been dealt with in as timely a manner as they should have been, but have we ever seen a state of affairs like we have now with the extenders? What has this meant for job creation and economic growth?

Mr. GRASSLEY. First of all, my colleagues probably know that my friend from Utah is going to advance as the incoming ranking member of the Senate Finance Committee, and I congratulate him on that. I know he is going to do a very good job.

One needs only to look to the nonpartisan Congressional Budget Office to assess the harm that could be done to the economy if we don't get this tax legislation passed. According to the Congressional Budget Office, not addressing these very time-sensitive tax issues will reduce economic growth by as much as 1.7 percent on average for the years 2011 and 2012. If Members didn't hear that, it is not some political leader saying that economic growth will be harmed by 1.7 percent; it is the nonpartisan experts in the Congressional Budget Office saying that if we don't pass these tax bills, economic growth is going to get hit 1.7 percent. Some private forecasters put that hit even higher--at 2 percent. When we consider that the last report has the economy growing at an annualized rate of 2 percent, then it is quite obvious.

We can see that this single failure to prevent these great big tax increases could wipe out what little economic growth is currently occurring. I don't know how policymakers can sleep at night, let alone be so casual when we haven't dealt with these time-sensitive tax issues at a time when coming back here we heard nothing from our constituents other than concern about the economy, about jobs, and about the legacy of debt we are leaving.

Mr. HATCH. We ought to listen to Senator Grassley. He is one of the leaders in this body and somebody we all look up to as totally honest and sensitive on these issues. He has done a wonderful job on the Finance Committee.

According to the Commissioner of Internal Revenue, perhaps the most time-sensitive problem waiting for congressional action is the so-called patch for the alternative minimum tax. I understand that if we do not take care of this very soon, we could see major delays in the tax filing season that will start on January 1. Is that the understanding of Senator Grassley?

Mr. GRASSLEY. Absolutely. We have a track record on that. Just a few years ago, it didn't get done on time, and people had to wait for their tax refunds. That is the biggest thing. But it also created a terrible bureaucratic problem for IRS to get the forms out.

My friend from Utah is correct. Fortunately, the chairs and ranking members of the tax writing committees wrote to the Commissioner of IRS last week indicating our intention to pass an AMT patch. The letter specified what the AMT patch would look like. But as helpful as the letter was, we still need to change the law. As a matter of fact, the filing season could become very complicated if we don't act. During our years in the majority, we never let the AMT patch legislation slip past May of any tax year that it applied to. That only happened once.

The death tax is another overdue tax legislative item that has been referred to. Maybe the Senator from Utah could bring up the issue of the estate tax.

Mr. HATCH. That is the third item on the to-do list. If we do not act, 6 weeks from now the reach of the death tax will greatly expand. According to the nonpartisan Joint Committee on Taxation, 10 times the number of estates will be taxable versus the number that would be taxable in the bipartisan Lincoln-Kyl compromise. In the case of farm-heavy estates, 13 times the number of those farm families would be hit by the death tax. That would be unfair because the families would have to either borrow the money or sell the farm in order to pay the death taxes. That is just crazy.

The issue of extending the expiring tax relief provisions enacted in 2001 and 2003 has been a central question all this year, but we are just now beginning to discuss this in earnest. This lack of action on this vital topic has been a major factor in the low performance of our economy.

The outcome of this debate is exceptionally important to the future of this Nation. Its implications go well beyond what many on the other side of this issue might want Americans to believe. This is not merely a question of how well the rich in our society will live if we raise their taxes.

Rather, this debate goes to the heart of the burning questions facing American families of all income levels today: Will I keep my job? How and when can I get a new or better job? Will the economy grow enough to allow my family to pay its bills and make progress toward our dreams? Can we afford to educate our children? Will America continue to prosper in the years ahead, or are we in a permanent decline?

The President and most of my colleagues on the other side of the aisle have decided that the answer to the question of fully extending the tax relief provisions that are set to expire in just about 44 days is no. While they are willing to extend them for those Americans earning less than $200,000 per year if a single individual or $250,000 per year if a family, their position is that anyone above these thresholds should get a tax increase.

However, the right answer for our country's future is that all the tax relief provisions should be extended.

The reasons the President and his allies give for their position largely boil down to the general supposition that the well-off among us can afford to see their taxes go up, and that the Nation cannot afford to forego the revenue lost to the Treasury from these taxpayers continuing to have their taxes as low as they are.

Ironically, this second point implies that we can afford the revenue loss from extending the tax relief to those making under the $200,000 and $250,000 thresholds, even though this loss is upwards of 80 percent of the total amount of lost revenue from extending the tax relief for everyone.

In other words, the President and his congressional supporters would have us believe that this debate is solely about whether the so-called wealthy among us deserve continued tax relief. They either fail to see an economic connection between the finances of those at the top of the income scale and the rest of us, or they refuse to admit that such a link exists.

This may sound somewhat counterintuitive, but it is, nonetheless, true. The essential element to this conundrum is that good permanent jobs, which are the heart and soul of the American dream, are inextricably linked to those in our economy who have wealth. When the income of the wealthy is taxed, particularly in a way that reduces the incentives for saving, investment, and entrepreneurship, that tax is not just paid by those who write the check to the government. Indeed, even those Americans who pay no income tax at all, which is now upwards of half of all adults, can be badly hurt by tax increases on the so-called rich. This is through the loss of opportunities, the lack of jobs or better jobs, and slow or nonexistent economic growth.

One vital fact that many citizens do not realize is that a high percentage of this Nation's business enterprises pay their taxes through the tax returns of their individual owners. Taxes on sole proprietorships, partnerships, S corporations, and limited liability companies are all passed through these entities and assessed on their individual owners. Higher taxes on these entities results in less money for investment and expansion, which translates into fewer jobs created and fewer opportunities for those who want to move up the economic ladder.

Tragically, especially in this time of economic stress and high unemployment, the real cost of taxation is paid by a group of unintended victims. These are the men and women and their families who do not get a chance to have a job or a higher paying job because the tax destroys the economic growth that might have provided for such an opportunity.

A study recently released by the nonpartisan Heritage Center for Data Analysis highlights these facts. This study, which utilizes an economic model owned by the leading economic forecasting firm in the country, concludes that the President's tax plan to allow the tax relief provisions to expire for the so-called well-off would have very serious consequences for millions earning far less than those targeted.

Here are just a few of the highlights of these conclusions. First, the President's tax plan would reduce economic growth for at least the next 10 years. Over the 10-year period, our gross domestic product would fall by a total of $1.1 trillion compared to where it would be otherwise if all the tax provisions were extended.

This slower economic growth would directly translate into fewer jobs created. In fact, the study projects that 238,000 fewer jobs would be created next year and as many as 876,000 lost jobs in 2016. For the 10-year period, the average would be 693,000 jobs each year that would not be created had we extended the tax relief for everyone. This projection alone should be enough to give anyone pause. In this critical time of job shortage, do we want to purposefully choose a course that would lead to even fewer jobs for Americans?

Other economic indicators would also turn negative compared to extending the tax rates as they currently stand. Business investment, personal savings, disposable income, and consumer spending would all be lower. This is exactly the wrong direction we need as the U.S. struggles to recover from this nasty recession.

My home State of Utah will not be spared, despite the fact that the downturn has been less pronounced there than in many other States. The Beehive State would lose an average of 6,200 jobs each year, and household disposable income would drop by $2,200. For a relatively small population State, this is nothing but bad news.

Another recent study highlights the effect on the economy of increases to the capital gains tax rate as is called for under the President's tax plan. This one was prepared by the respected economist Allen Sinai. In this study, Dr. Sinai concludes that increasing the capital gains tax rates to 20 percent from the current 15 percent, as is called for in the President's plan, would cut the number of jobs available by 231,000 per year. Again, this is exactly the wrong direction for a Congress that is supposed to be focused on job creation.

If we were really serious about creating jobs, we should be doing just the opposite; that is, lowering the capital gains tax rate. The Sinai study concludes that a reduction from the current 15-percent tax rate on capital gains to a 5-percent rate would increase the number of jobs by 711,000 per year. That is the kind of job growth we need right now. By lowering the rate down to zero percent, Dr. Sinai says we could turbocharge this rate of job growth to 1.3 million new jobs per year.

Of course, this capital gains tax reduction would not be free since the Treasury would lose some revenue. The Sinai study indicates that this loss would be about $23 billion per year after the effects of stronger economic growth are taken into account. While this is not an insignificant number, it works out to a cost of about $18,000 per job. I call this a bargain, particularly when it is compared with the cost per job from the so-called stimulus bill we passed last year. The Congressional Budget Office projected last year that the cost of each job saved or created from the stimulus bill would be between $414,000 and $1.3 million. And most or all of these jobs are temporary, not permanent. Last year, the CBO also projected that the net increase in the number of jobs from the stimulus bill by 2015 would be zero. In other words, we would get no permanent job increase from this gargantuan stimulus bill. I do not believe the contrast between the two approaches to job creation and economic growth could be any more striking.

Let me refer back to Senator Grassley.

Mr. GRASSLEY. Well, I say to Senator Hatch, the only thing I would add to the good work you put out there is maybe to say a little bit more about the estate tax; that is, if we do not do anything--as you see from this chart, you can see the House passed death tax reform but not the Senate. Obviously, we do not have a final bill. If we do not get a final bill by the end of this year, instead of having no estate tax like this year or a $3.5 million exemption like last year, we are going to have only a million-dollar exemption and a 55-percent tax rate. That is going to be catastrophic on small business. It is going to be catastrophic in the rural areas. So I hope that emphasizes the importance of getting something done on the estate tax ahead of time.

The only other thing I would add, because the Senator did such a good job of saying what the economic consequences are, if we let the biggest tax increase in the history of the country happen by sunset December 31, and then that means you go back to the tax rates and tax policy of the year 2000, it is going to be very destructive on job creation for small businesses and very destructive as far as bringing the certainty that businesses, particularly small businesses, need if they are going to hire people.

I had a news conference last month in my State, and I brought in some small businesspeople. One of the small businesspeople testifying for me said to the media of Iowa that they would like to hire five or six people, but as long as there is all this uncertainty about what the tax policy is, they are not going to move forward.

So what we have to do--and I say to Senator Hatch, I think you have said it several times--and particularly for small business, we have to bring certainty to the Tax Code. You cannot have this uncertainty of what is going to happen after December 31, particularly when you are certain you are going to have the biggest tax increase in the history of the country without even a vote of Congress.

So I compliment Senator Hatch. I will not have anything more to say on this subject until we get one of these pieces of legislation before the Senate. But I thank the Senator very much for his leadership.

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