Concurrent Resolution on the Budget for Fiscal Year 2014
Floor Speech
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Mr. GRASSLEY. Mr. President, I rise to speak about amendment No. 156. I am offering this amendment to the majority budget to ensure that tax reform is revenue neutral and the money available to do tax reform is not used for spending, as the underlying resolution proposes. I am pleased to be joined in offering this amendment by a number of my colleagues: Senator Enzi, Leader McConnell, Senator Cornyn, the finance ranking member Senator Hatch, as well as Senators BURR, ROBERTS, PORTMAN, ISAKSON, THUNE, COATS, and RUBIO.
In order to ensure tax reform does not become a tax-raising exercise, this amendment eliminates the nearly $1 trillion in new revenue and the reconciliation instructions called for in the majority's budget. It further creates a deficit-neutral reserve fund for progrowth, revenue-neutral tax reform.
The budget reconciles the Finance Committee to come up with nearly $1 trillion in revenue. I spoke last night how difficult that is to do unless you want to tax middle-income Americans. This reconciliation instruction, in addition to raising a lot of money to spend more, dashes the hopes that the Finance Committee can take a bipartisan approach to tax reform. First, it puts in place an arbitrary deadline that requires the Finance Committee to produce a bill by October 1 of this year. Tax reform will be a long and difficult process. Hopefully it will not take 3 years to produce it, as it did in 1986, the last major tax reform we had, but discussions about tax reform should not be cut short to meet an arbitrary deadline. The Finance Committee needs to be allowed to do its work.
Second, reconciliation is not a suitable way to produce tax reform that simplifies the Tax Code. This is because it prohibits any changes to the Tax Code that score as adding anything to the deficit. This requirement is incompatible with the goal of simplifying the Code, making it easier to administer. Chairman Baucus has voiced similar concerns, which is why he has concerns about including a reconciliation instruction in the budget.
While the budget does not call explicitly for tax reform to be a part of the reconciliation process, it has that effect by requiring the Finance Committee to come up with nearly $1 trillion in ``savings ..... by eliminating loopholes and cutting unfair and inefficient spending in the Tax Code.''
If such large amounts of low-hanging fruit exist in the Tax Code, you would have thought that either Chairman Baucus or I, during the period of time I was finance chairman, would have gone after some of these along with the billions of dollars of loopholes that we have worked to close already. The truth is that the majority's definition of a loophole is so broad as to be void of any real meaning, and their idea of spending in the Tax Code is popular deductions widely used by middle-class Americans such as tax deductions, mortgage interest, charitable giving, State tax deductions, and in order to raise the revenue they want to, you have to go to those areas. When you do that, you end up taxing middle-class America.
Also, referring to these tax increases as savings or as eliminating loopholes or spending in the Tax Code does not change the fact that to raise nearly $1 trillion, the middle class will see higher tax bills. The budget of course does not only assume nearly a $1 trillion in tax increases, additional reserve funds in the budget assume another $500 billion in tax hikes to pay for more spending.
The underlying premise in this budget is that the Federal taxes are too low to support much-needed Federal spending. The budget resolution has this completely backwards because until we get spending under control, we will never be able to raise enough revenue that will suffice to satisfy the spending appetite that some in Congress have.
Yesterday I had charts--I have a different one today--that lists the last five times we had a balanced budget. The last five times were the years 1969 and 1998 through the year 2001--5 years in the last 43 years. As you can see, in each of these years, spending as a percent of GDP was significantly lower than 20 percent--significantly lower than 20 percent. This line represents the spending level of these years, right here, the years when we balanced the budget. Over the next 10 years as projected by the Congressional Budget Office, under current law spending will average 22.1 percent of gross national product as CBO estimates it under current law. Actually the budget resolution would be higher than that 22 percent.
Lower on the chart I have another dotted line which represents projected revenue, right here, about 18.9 percent. That is over the next 10 years. As this chart shows, these revenues are more than enough to bring our budget into balance simply if we return to the spending levels of the late 1990s and 2000.
The larger gap where spending was and where spending is projected to be is where our problem is. In between here and here is where the problem is. Congress has exhibited an appetite in the last few years to go hog wild on spending compared to the average of the last 50 years of about 20 percent.
We all know there is clutter in the Tax Code. There has been a proliferation of tax preferences that should be reexamined. However, they should be reexamined in the context of enacting progrowth tax reform, not as a means to finance higher government spending. The goal of tax reform is to simplify the Tax Code and make it more efficient. The ultimate goal is economic growth, but true tax reform should be revenue neutral. It should not act as a way to increase taxes. Revenue raised by eliminating tax preferences should be used to lower marginal tax rates because that is where you get economic growth, you encourage entrepreneurship, and that is how you create jobs.
The assumption in the budget that business and corporate loopholes are available for revenue reduction is particularly puzzling. We currently have the highest tax rate among our major trading partners. The President has even recognized the competitive disadvantage this puts us in. That is why he has called for reducing the corporate tax rate from 35 percent down to 28 percent. That is the President of the United States who wants to do that.
At a recent hearing before the Budget Committee on tax expenditures, the Democrats' only witness, Professor Edward Kleinbard, similarly recognized the need to use revenue from eliminating business tax preferences to lower rates. It was his view that the corporate rate should be reduced to the mid-20s by eliminating corporate tax expenditures.
I want to stress this was the opinion of the majority's witness. Raising revenues by closing so-called loopholes or reducing tax expenditures is a tax increase. Unless it is used to offset true tax reform, it is a tax increase that will support more spending, and that is the purpose of it, according to the budget resolution.
Tax reform, then, should be revenue neutral and my amendment would ensure that any reduction in tax preferences is used to lower tax rates. In other words, tax reform and not finance more spending.
I yield the floor and reserve the remainder of my time.
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Mr. GRASSLEY. Madam President, this amendment strikes a $975 billion tax increase. This amendment in turn sets up a deficit-neutral reserve fund that will allow the Finance Committee to reform corporate and individual taxes in a revenue-neutral way.
The President got his $612 billion tax increase January 1. We should not raise taxes another $1 trillion with unemployment at 7.7 percent. We should not close loopholes for more spending. We won't grow the economy by raising taxes by $1 trillion as the majority wants to do. We will grow the economy with more efficient progrowth tax reform.
My amendment is progrowth, pro-small business, and pro-jobs. The Democrats' budget taxes the middle class to spend more. It is balanced and fair because they have finally come to the conclusion they cannot raise taxes just on the wealthy; they have to raise it on the middle class.
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