Federal Aviation Administration Extension Act of 2010
Floor Speech
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Mr. THUNE. Mr. President, I think the American people, when they voted this year, were saying one thing: We want to keep the main thing, the main thing. To the American people, the main thing is getting the economy growing again and creating jobs. Almost everything that has been done here in Congress in the last couple of years has been the exact opposite of that. You have seen policies put into place that increase the cost of doing business in this country and make it more difficult for small businesses to create jobs.
So here we are today debating what evidently has become the Democratic economic theory, which is to raise taxes to create jobs. We have seen this in play throughout the last couple of years. The cap-and-trade bill was a tax on energy. It didn't get through the Senate because we were prepared to stop it, but it passed in the House of Representatives and was headed here. The health care bill raised taxes on medical device manufacturers and drug companies and health insurance plans, all of which is going to get passed on to small businesses in the form of higher insurance premiums.
Here we are debating a frontal, direct tax increase on small businesses. It is the most astounding theory on how to create jobs I have ever seen--raising taxes to create jobs. That hasn't worked in practice. The Senator from Iowa eloquently pointed out that, historically, if you go back over the past half century, not only does it not create jobs, it doesn't generate additional revenue. As he pointed out, when you raise taxes, you don't get more revenue. When you lower taxes, you get more revenue. Why? Because it affects the behavior of the American people. It affects investors, it affects the allocation of capital, and it affects people across this country when they know their tax rates are going to be low.
This seems to me to be completely off the track and off the point that the American people want us to focus on, which is keeping the main thing, the main thing--how can we expand the economy and create jobs? We do that by keeping taxes low on small businesses, which, by the way, create two-thirds of the jobs in our economy.
What will be the impact of the proposal we will vote on today in terms of small businesses and their ability to create jobs? According to the nonpartisan Joint Tax Committee, half of small business income would be subject to higher taxes. That translates into 750,000 small businesses that would be faced with higher taxes. That also, incidentally, impacts about 25 percent of the workforce in this country.
How does that translate in real terms? When these taxes go up on January 1 for people who make more than $250,000 a year, who are probably paying the 33-percent or 35-percent marginal income tax rate today, their taxes will go up to 36 percent or 39.5 percent. If they are a family of four and they have personal exemptions, these phase out. There is a cap on the number of itemized deductions they can take. When that kicks in, their top marginal income tax rate could go up to 41 percent.
If you are a small business today that is paying at the 33-percent rate and you end up paying 41 percent as a result of this increase to take effect on January 1, you are looking at roughly a 25-percent decrease in your income. That is obviously going to increase the cost of doing business. When you increase the cost of doing business, it makes it that much harder for small businesses to invest, to make that new capital investment and buy that new piece of equipment or to hire that additional person, or hopefully additional people, in the workplace.
All they are simply doing here is trying to implement a failed policy that hasn't worked in the past and isn't going to work in the future. We have all the science and history and facts to support this. It is counterintuitive to the American people. How many people think the way to create jobs is to increase the cost of doing business in this country? When small businesses create two-thirds of the jobs in our economy, it is absolutely fundamental that you don't increase their cost of doing business. You don't raise taxes if your ultimate goal is to create jobs.
The best thing we can do for the high unemployment numbers and for the debate we are having about unemployment benefits being extended is to get people back to work. This is the exact opposite way of going about that. It is completely counterintuitive. Raising taxes to create jobs is a failed economic theory, and it has failed in practice.
I think if the Democrats' tax hike goes into effect--and make no mistake about it, I hear the other side talking about tax breaks and tax cuts. These are not tax breaks or tax cuts. Taxes are going up on January 1, pure and simple. That is all there is to it. Taxes are going up on income, on capital gains, on dividends, and they are going up on estates. If action isn't taken by the Congress, we are going to see the largest tax increase in American history.
The other side says: Well, let's cushion it. Let's limit to it those making more than $250,000. Of course, that affects a lot of LLCs, a lot of partnerships and subchapter S corporations, whose incomes flow through to their individual income tax returns and who will be faced with the higher income tax rates, not to mention the higher capital gains and higher dividend rates. These are the very people we are asking to pull us out of this recession and create jobs.
So where does that leave us? Well, we are going to have an alternative. The alternative would be that we just extend the tax relief, not raise taxes or the cost of doing business, and allow our businesses to prosper and to flourish and to create more jobs for the American people so we can get that 9.8 percent unemployment rate down and reduce the amount of unemployment benefits we have to come back periodically and approve.
We have 9.8 percent unemployment. We were told a year and a half ago--a little more than that, almost 2 years ago--when the stimulus bill was being debated, if we passed a $1 trillion stimulus bill, we could keep unemployment below 8 percent. That didn't work. Obviously, we borrowed $1 trillion to do that from our children and grandchildren, and what do we have to show for it? We have a 9.8-percent unemployment rate today and no apparent prospect for the economy to pull out of this sluggishness we are in.
The best way to accomplish that, the best way to make that happen, in my view and I think the view of the American people--and I speak as one individual who is under the $250,000 threshold--is to allow the people who create the jobs in this country, the people who make more than $250,000, to continue to do well. I hope they do because the small businesses, when they can increase their top-line sales and increase their revenues and increase their bottom-line profits, are going to be in a better position to create jobs. I get that, and I think the American people get that. That is why they so consistently voice their disapproval--and particularly the best poll that was taken was the election-day poll, where they came out in big numbers and voiced their disapproval of the policies in Washington, DC, that continue to kill jobs.
So I think we should be looking at what we can do not to kill jobs but to create jobs; what we can do to incentivize businesses to create jobs, not putting more burdens on them and increasing the cost of their doing business in this country. There isn't anything, in my view, that has happened in this last year, if you are concerned about creating jobs, that has been conducive to that.
There was a group of CEOs pulled in to visit with the President sometime last summer. When the President posed the question to them: Why are you CEOs and corporations not creating jobs, I will paraphrase this, but I think the answer, very simply, was: It is your agenda, Mr. President. That is the problem. We have an agenda here that is killing jobs because it is increasing the cost of doing business in this country.
It is a very simple proposition. I don't think it takes a lot to get it. That is why I think so many people are beginning to realize either of these proposals--the Baucus proposal or the Schumer proposal--are the wrong ways in which to approach an economic down turn in this country and the wrong way to get that economy back on track and get people back to work. The latest example of that was today in the New York Times.
In the latest sign how the tax issue continues to rankle and divide Democrats, the White House said the administration opposes raising the threshold to $1 million.
So we have the $250,000 vote that is going to occur and we have the $1 million vote that is going to occur, but what I wish to point out to everyone is, under the Schumer bill--which is the $1 million threshold--according to the Joint Tax Committee, that still impacts 350,000 small businesses in this country whose income flows through to their individual tax returns. So it is a question of whom do you want to raise taxes on, 750,000 small businesses with the Baucus amendment or 350,000 small businesses with the Schumer amendment.
Obviously, one is clearly better than the other, but the point simply is this: The economic theory we are debating about raising taxes to create jobs is the wrong one. It has been proven wrong historically. It is counterintuitive to anybody who knows anything about economics, which is why 60 percent of all prominent economists in this country say--and this was quoted by the Senator from Iowa today--the best way to create jobs, to grow and expand the economy, is to extend these tax provisions that are going to expire on January 1.
That is what this debate is about. I hope we will keep the main thing for the American people and not get distracted on all these other things.
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