Flood Insurance Reform and Modernization Act--Motion to Proceed--Continued
Floor Speech
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Mr. THUNE. Madam President, I rise to express my growing concern as massive tax increases loom on the horizon, and yet the Senate has not taken a single vote to forestall what many are appropriately calling taxmageddon.
Washington tends to be a place where people speak in hyperbole, but it is hard to overstate the magnitude of the tax increases that will hit our economy starting next year if we do not act. If Congress does not vote to extend the current income-tax rates, the lower tax rates on investment income, relief from the alternative minimum tax, relief from the Federal estate tax, and other expiring tax relief measures, the result will be a tax increase of more than $470 billion on Americans in 2013 alone.
Over the next 10 years this tax increase will result in nearly $4.5 trillion in new taxes on American families and entrepreneurs. This will be the largest tax increase in our Nation's history in absolute dollars and the second largest tax increase since World War II as a percentage of our economy. This massive tax increase does not even take into account the new taxes enacted as part of ObamaCare that will also go into effect in 2013 and that will impose an additional $23 billion in higher taxes on individuals and businesses.
What will these taxes mean to the average American family? The Heritage Foundation recently published a study that estimated the increase per tax return in every State. In my State of South Dakota, Heritage estimates that the average tax increase per tax return will be $3,187 in 2013.
I would say this to my Democratic friends who generally believe in demand-driven Keynesian economics: The average family in South Dakota can do more to stimulate our economy and create new employment by keeping their $3,187 and spending it as they see fit, not as Washington sees fit to spend it on their behalf.
Taxmageddon is an apt description when we consider the impact of these tax increases not just on individual families but on our entire economy. Until recently we could speculate about the impact of these tax increases on our fragile economy, but the magnitude of the damage was not in dispute. Not anymore.
Last month, the Congressional Budget Office gave us the most definitive estimate yet of the impact of the nearly $ 1/2 trillion of tax increases in 2013 when combined with the more than $100 billion of spending cuts from the sequester.
The Congressional Budget Office projects that the combination of massive tax increases and the sequester will result in real GDP growth in calendar year 2013 of only one-half of 1 percent. The picture is even bleaker when we consider that the Congressional Budget Office also projects that the economy will actually contract by 1.3 percent in the first half of 2013. According to the CBO, such a contraction and output in the first half of 2013 would ``probably be judged to be a recession.''
So let's be clear about what ``taxmageddon'' means. We are not talking about a slight slowdown in growth of a few tenths of a percent. What we are facing is the difference between positive growth on one hand--which will mean more jobs and higher incomes--and a recession on the other hand.
How big is the difference in economic growth next year if we act to forestall the pending tax increases versus not doing anything about it? According to the Congressional Budget Office, if Congress acted to remove the tax increases and budget cuts, the growth of real GDP in 2013 would be in the range of 4.4 percent.
This sort of robust growth is a far cry from the lackluster economic performance that we have experienced of late. In fact, GDP growth for the first quarter of this year was recently revised downward to just 1.9 percent. This is hardly the magnitude of economic growth necessary to sustain a meaningful recovery that will finally bring the unemployment rate below 8 percent--something the current meager recovery has failed to accomplish.
We can, and must, do better. We can start by providing Americans some certainty as to what their taxes are going to be come next year. Fortunately, we learned recently that the House of Representatives intends to hold a vote on legislation to extend the existing tax rate next month. According to statements by House Speaker Boehner and Majority Leader Cantor, the House is likely to consider a short-term--perhaps for 1 year--extension of existing tax rates as a bridge to fundamental tax reform next year.
Some may question why we need to vote on an extension of the tax rates now because they assume these tax issues can simply be dealt with as a part of the postelection lameduck session. The answer is that we need a vote now because the delay in extending current tax policy is having a very real impact on our economy today.
In fact, the Congressional Budget Office again estimates that the mere possibility of pending tax increases and spending cuts will lower U.S. GDP by one-half of 1 percent in the second half of this year--not next year, this year. The reason for this is simple. Americans, whether they be investors, small business owners, or simply consumers, understand that they may have a larger tax bill come next year, meaning they will have less aftertax income. Faced with that possibility, we should not be surprised if Americans are choosing to consume less or put off business investments until they know what their tax situation is going to be.
Just this week there was a Bloomberg article entitled ``Fiscal Cliff Concerns Hurting Economy As Companies Hold Back.'' The article quoted a senior economist at Bank of America who said, ``You don't board up the windows when the hurricane is there. You board up the windows in anticipation.'' This economist predicted U.S. growth decelerating to 1.3 percent in the third quarter of this year and 1 percent in the fourth quarter.
The moral of the story is clear. The sooner we act to extend the current tax rates, the better off our economy will be and the better off will be the 12.7 million Americans who are currently unemployed. The sooner we act, the better off will be the 5.4 million Americans who have been unemployed long term or the 46.2 million Americans living in poverty or the record 46 million Americans who receive food stamps.
I agree with President Obama when he said in August of 2009, ``You don't raise taxes in a recession.'' End quote of President Obama in August of 2009.
If you should not raise taxes in a recession, it stands to reason you also should not raise taxes that will cause a recession. I also agree with a number of my Democratic colleagues quoted earlier this week in an article about these pending tax increases. I agree with Senator Jim Webb, who is quoted as saying, ``We shouldn't raise taxes on ordinary income.'' I agree with Senator Ben Nelson, ``My druthers is to extend the tax cuts for everybody.''
I agree with former Senator Pete Domenici and former OMB Director Alice Rivlin, who appeared before the Finance Committee earlier this week, and who both agreed we need a short-term extension of current tax law in order to get us to a place where we can consider fundamental reforms to our Tax Code and our entitlement programs.
Even former President Bill Clinton, a major surrogate for the Obama campaign, admitted the obvious when he said recently that a short-term extension of the tax cuts might be necessary.
Former President Clinton and other Democratic Members whom I mentioned have not suddenly become supply-side tax cutters. But they realize it is simply common sense that with the economy slowing, the last thing the Congress should do is slam on the brakes by allowing massive tax increases.
We were reminded earlier this week just how destructive the proposed income tax rate increases would be on the sector of our economy responsible for the bulk of new job creation, and that is our small businesses. According to an analysis by the nonpartisan Joint Committee on Taxation released on June 18, the tax increases that President Obama has proposed would hit more than half--53 percent, to be precise--of all flowthrough business income. The Joint Tax Committee estimates that 40,000 business owners would find themselves subject to higher tax rates next year.
Does anyone think, with unemployment above 8 percent for 41 straight months, that higher taxes on nearly a million business owners is the right policy? Yet that is exactly where we are headed if we do not act.
Of course, extending current tax law temporarily is only a short-term fix. What is needed is comprehensive tax reform, much like the Tax Reform Act of 1986. Real tax reform will drive economic growth higher, will lead to robust job creation, and result in more revenue to the Federal Government. But real tax reform will require Presidential leadership, something that has been unfortunately lacking over the past 3 1/2 years. Perhaps next year we will have a President truly willing to commit to tax reform, a President who is not content with simply releasing a 23-page framework for corporate tax reform. But until we get to comprehensive tax reform, the least we can do now is ensure that Americans do not face a massive new tax hike.
In conclusion, we are facing a moment of truth. We can choose to put our heads in the sand and pretend as though Taxmaggedon is not real, we can choose to accept slower economic growth for the remainder of this year and a recession in the first half of next year or we can choose to take action in a way that says, loudly and clearly to all Americans, now is not the time for a massive new tax increase.
I am hopeful we will see a bill from the House of Representatives in the coming weeks to extend the tax rates in order to avert Taxmaggedon. If the Senate majority is serious in its rhetoric of getting our economy back on track, they will allow a straight up-or-down vote on this measure. Fundamental tax reform may need to wait until the next Congress, but we can and we should act immediately to forestall the looming tax increases that we know will throw this economy back into a recession. It is not a Republican or a Democratic thing to do, it is simply common sense. I am hopeful the Democratic majority will allow for debate and vote on an extension of the current tax rates sooner rather than later. Every day we wait is another day our economy suffers unnecessarily.
I do not have to tell anybody here, if you look at all the economic data that comes in month after month, we have the weakest economic recovery in 60 years. We have 23 million unemployed or underemployed Americans. We have, as I said, 41 consecutive months now of unemployment over 8 percent, and we have anemic, sluggish growth projections next year by the Congressional Budget Office if in fact we do not take the steps necessary to avert Tax maggedon.
I hope the House of Representatives will vote. I hope the U.S. Senate will follow suit. I hope the President of the United States will join us in recognizing that we cannot afford to allow taxes to go up--the largest tax increase in American history--on January 1 of next year.
We cannot wait until a lameduck session to address it, because every single day we do, Americans, investors, small businesses are putting off decisions about hiring, about putting their capital to work and growing this economy.
I yield the floor.
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