WASHINGTON ? In a speech on the Senate floor, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, blasted Senate Democrats? proposal to increase taxes on the American people and called on Congress to support the Hatch-McConnell proposal (S. 3413) that would stop taxes from going up on virtually every American taxpayer on January 1, 2013 and instructs the Senate Finance Committee to undertake comprehensive tax reform next year.
?It seems clear what the agenda of the Senate should be.? We should be focused like hawks on preventing Taxmageddon. We should be focused on job creation.? said Hatch. ?The American people are tired of political stunts. Every minute Democrats spend playing politics is a minute that we fail to prevent the largest tax increase in American history.?
Hatch called the Senate Democrats? tax hike bill (S. 3412) a serious threat to the already fragile economy. Specifically the Reid plan would hit families and small businesses making over $250,000 with a $50.5 billion tax increase, reinstate the death tax to levels not seen in over a decade, allow the Alternative Minimum Tax (AMT) to hit more than 30 million middle-class families with a $100.7 billion tax hike, and includes an additional $27.2 billion in continued stimulus spending through the tax code. Hatch further criticized the President?s tax hike plan for threatening every single American taxpayer with a tax hike.
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?The President?s proposal is the policy equivalent of Thelma and Louise intentionally driving their convertible off a cliff,? said Hatch. ?The difference is that there is at least some ambiguity left about the fate of Thelma and Louise. If the President gets his way and either raises taxes on small businesses or denies relief to all American taxpayers, there will be no ambiguity about who to hold responsible when our economy crashes.?
Hatch called on his colleagues to support S.3413 the Hatch-McConnell Tax Hike Prevention Act of 2012. The Hatch plan would extend the expiring individual tax rates, family tax relief, death tax relief, and a patch to stop the AMT from hitting millions of American middle-class families in 2012 and 2013. It would also direct the Finance Committee to undertake a comprehensive overhaul the U.S. tax code during 2013.
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?Taxmageddon is coming.? The only good news is that Congress can prevent this historic tax increase from happening,? said Hatch. ?I hope that my colleagues will join me in preventing this looming tax increase from being imposed on the American people. Forty of my colleagues on the other side of the aisle voted to temporarily extend this tax relief in 2010.? They should do so again.?
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Below is the text of Hatch?s full speech delivered on the Senate floor today:
Mr. President, today we are debating the proposal of the Senate Democratic Leadership to raise taxes on the American people. Pursuit of this tax hike strategy is clearly being instigated by the President?s reelection efforts.
I suspect that many of my friends on the other side of the aisle are very uncomfortable with this strategy. I can think of a number of Senate Democrats whose constituents would be surprised to learn their Senator supports tax increases on small businesses, an increase in the AMT, and hikes in the death tax.
With the economy still on the ropes, I think they would be surprised to learn their Senators supported a tax hike strategy that might win some votes but at the risk of sparking a recession.
That is what the President wants. We will see if that is what he gets. He has pitched his tax hike plan as a way to be fiscally responsible. That could not be further from the truth.
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One need only look at my friends on the other side?s treatment of the House budget.
That budget received more votes than any other budget considered by the Senate, including the phantom budget advanced by the Senate Democratic Caucus. The House budget provided $180 billion more in deficit reduction than the President?s budget for 2013.
The House budget?s extra deficit reduction of $180 billion exceeds the differences in deficit impact between the proposal I introduced with my friend and colleague, the Republican Leader, and the proposal advanced by my Democratic friends.?
And that?s true, even if you apply the other side?s distorted and misleading accounting of the differences between the two proposals.?? More on that in a moment.
So when we hear our friends on the other side say that they must risk going off the fiscal cliff for deficit reduction, consider this.? They rejected, out-of-hand, spending restraints that provided more deficit reduction than is at stake here today.?
Not only are the deficit reduction numbers phony, but the President and his Democratic allies in the Senate have repeatedly suggested that they are willing to intentionally drive our economy off what Fed Chairman Ben Bernanke has called the fiscal cliff in order to make a political argument about the top marginal tax rates.?
The President thinks he has struck political gold with this argument. He will be able to run for reelection on a platform of raising taxes and under the mantle of deficit reduction. This might be politically advantageous. I doubt it.
But I do know that from a fiscal and economic perspective the President?s signature proposal threatens serious damage to our already fragile economy. The President?s tax increases on those he deems the rich in fact represent a massive tax hike on the small businesses that are necessary to economic and job growth.
Moreover, until he gets his way on raising taxes on these small businesses, he is threatening every single American taxpayer with a tax hike. Like a petulant child, he is insisting that it is his way or the highway.
He will get his way on raising taxes on the small businessmen and entrepreneurs ? who find no shelter in today?s Democratic coalition of unions, lawyers, and government employees ? or he will let the current tax relief expire, raising taxes on all Americans. This is the antithesis of statesmanship at a time when our economy requires serious direction. It is the political equivalent of a temper tantrum.
And I expect that American voters will have about as much patience for this as they would a similar fit from their children. The American people want a grown-up in the White House, but on tax policy we appear to be dealing with adolescents.
I have said before that the President?s proposal is the policy equivalent of Thelma and Louise intentionally driving their convertible off a cliff.? The difference is that there is at least some ambiguity left about the fate of Thelma and Louise.
If the President gets his way and either raises taxes on small businesses or denies relief to all American taxpayers, there will be no ambiguity about who to hold responsible when our economy crashes.
When a liberal Democratic President has lost the New York Times, he has lost America.
And even the Times understands what is coming if the President continues to put the pedal to the floor and drive us over the fiscal cliff.
The Times wrote that [w]ith the economy having slowed in recent weeks, business leaders and policy makers are growing concerned that the tax increases and government spending cuts set to take effect at year?s end have already begun to cause companies to hold back on hiring and investments.
That is 100 percent right. The election is not for another three months. And already the President?s lack of direction, and the threats emanating from Democratic leadership about letting the tax relief expire, are leading businesses to slow down.?
How can businesses plan for next year ? how can they make hiring or investment decisions ? when they have no idea what their tax rates will be? They can?t. And the President and Senate Democratic leadership, with their delay and confusion about how to extend this tax relief, are doing nothing to inspire confidence in these job creators.
Rather than address the expiration of the 2001 and 2003 bipartisan tax relief, we have been debating campaign commercials masquerading as serious legislation.?? Last week, the Senate wasted its time on yet another piece of legislation that had no chance of becoming law, and zero prospects for creating jobs.
It is worth comparing the puny impact of the bill considered last week to the size of the coming tax hikes ? tax hikes so large that the Washington Post has referred to their impending arrival as Taxmageddon.
Make no mistake, our small businesses and our economy face an existential threat at the end of 2012.? Yet, the Majority schedules votes that generate campaign fodder rather than jobs or lasting economic growth.
Facing a fragile recovery and a weak jobs market, President Obama seems content to sit idly by and allow this scheduled $4.5 trillion tax hike to occur just to make a populist political argument about the need for the so-called rich to pay what he thinks is their fair share.?? Mr. President, Congress needs to act now in order to prevent this tax hike on America?s families, individuals, and job creators.
It is critically important for our economy and the American people that we act now to extend the bipartisan tax relief originally signed into law by President Bush and extended by President Obama.
This is the most crucial piece of legislation Congress can address this year.? If we allow this tax relief to expire as scheduled, almost every federal income tax payer in America will see an increase in their rates.? Some will see a rate increase of 9 percent.? Others will see a rate increase of as much as 87 percent.?
Because the vast majority of small businesses are flow-through business entities, any increase in tax rates for individuals necessarily means that those small businesses will get hit with a tax increase.? This tax increase lands on these small business owners even if they do not take one penny out of their business.
Our economy simply cannot afford to take on such a fiscal shock. Economists estimate that if these current tax rates are allowed to expire, the economy could contract by approximately 3 percentage points.? Considering that first quarter GDP growth was 1.9 percent, and that expectations are even lower for the second quarter growth that will be reported this Friday, going over the fiscal cliff would almost certainly throw us into a recession.?
We could even slip into recession in the second half of this year, given business? reluctance to hire and invest due to fiscal uncertainty. For the President, and others, who argue that we should raise the top two tax rates in the name of fiscal responsibility, I would like to point out a few things.
The Senate Majority leader introduced his tax bill ? one that largely mirrors the President?s proposal ? under the auspices of deficit reduction.? It closely adheres to the Democratic talking point that the only thing standing between our deficits and fiscal stability is the current top marginal tax rates.?
We have heard this argument for a year and a half, with the President and his Democratic allies insisting that it is not their out of control spending that got us in this mess, but the Republicans? refusal to allow for tax hikes on the so-called rich.? This argument sounds nice but is belied by the actual facts.?
According to the Joint Committee on Taxation, an apples to apples comparison of the Democrats? tax proposal, and the proposal I introduced with my friend the Republican Leader, shows a difference of $54.5 billion.
The Democrats? bill, which raises the top rates and expands the death tax, while patching the AMT for one year, is scored at $249.7 billion.?? And the score of my bill, without the 2013 AMT patch, is $304.2 billion. So we have a debt that is fast approaching $16 trillion. Taxes are set to go up by $4.5 trillion.
And Senate Democrats are crowing about their fiscal responsibility, threatening to drive the country off the cliff, over $54.5 billion of tax relief. I believe this is called missing the forest for the trees. In order to satisfy their urge to redistribute $54 billion of taxpayer dollars, they are willing to risk a recession and see taxes go up by $4.5 trillion.
The President recently claimed that we need to raise the top two tax rates because quote it?s a major driver of our deficits?. The numbers show that this is nonsense. The real difference between the Democratic and Republican plans is only $54.5 billion, or about five percent of the deficit.
That represents .34 percent of our national debt. To put it another way, the Democrats? tax hike proposal would only provide enough additional revenue to pay for 5 days of federal government spending.
It is also worth noting what exactly the Democrats? refusal to provide two years of AMT relief means for their constituents.? If Senate Democrats do not patch the AMT in 2013, their AMT will take away over 40 percent of the tax relief they claim to be providing with their bill.?
This is their prerogative, but I hope that the hometown papers in Northern Virginia, New Jersey, New York, Florida, and Colorado are paying close attention to what a lack of AMT relief will mean for middle income families in those states.
These tax proposals in the end have nothing to do with sound tax policy that maximizes economic growth.? And they have nothing to do with deficit reduction. They have everything to do with pursuing an antique economic philosophy that is principally concerned with running down the economy?s job creators and entrepreneurs.
And the explicit tax policy is only the half of it. We learned yesterday from the Congressional Budget Office that the true tax bill for Obamacare is over $1 trillion. All of the new Obamacare regulations will cost McDonalds? franchisees alone more than $400 million in health care costs.
The President might think that Ray Kroc did not build McDonalds. But this is delusional.
He might view the small businessmen who took a chance and opened those franchises as not especially smart ? not responsible for their own success. But this is a view that could only be embraced by an academic and activist who has no experience in the private sector.
The Joint Committee on Taxation tells us that 53 percent of all flow-through business income in the United States would be subject to the President?s proposed tax hikes.? The President?s proposal would take the marginal tax rate on small businesses from 33 percent and 35 percent to 39.6 percent and 41 percent respectively.
This is an increase of 17 to 24 percent on the marginal tax rates for small businesses.?
Ernst and Young recently released a study showing that these proposed tax hikes ? on top of Obamacare?s 3.8 percent tax increase on dividends, interest, and capital gains ? would reduce our economic output by 1.3 percent.? The Ernst and Young study also found that real after-tax wages would fall by 1.8 percent as a result of President Obama?s policies.?
Not surprisingly, the study noted that 54 percent of the entire private sector workforce is employed by flow-through businesses, such as S Corporations and partnerships, the majority of which would see their taxes go up under the President?s plan.?
The truth is, many of the people targeted by Democrats as wealthy are in fact middle-income small business owners who spend their whole lives building a business and then sell it, getting thrown into a top bracket for just the year of sale.?
Consider a real-life example provided by the Associated Builders and Contractors.? A husband and wife from Pennsylvania, who retired to Florida, owned an S Corporation.? In 2009, the couple paid no federal income tax because they did not have enough taxable income to owe any tax.? In 2010, when they sold the business, their adjusted gross income was about $780,000, and they paid $170,000 in taxes.? If they had not sold their business in 2010, they would have paid no taxes.? So the one-time sale of a business built up over many years caused these small business owners to be in one of the two top brackets for just one year.?
Yet, the President would have the American people believe that this couple was part of some rich elite that is refusing to pay its fair share.? And that?s not all. Or as Ron Popeil would say, But wait, there?s more!
Last week, before the ink was even dry on the Democratic leader?s small business tax hike legislation, the bill was changed to substantially increase the death tax. It might be hard to believe, but this proposal is even worse than President Obama?s.
The proposal by the Democratic leader would impose the death tax on 15 times the number of estates than under current tax policy, according to JCT. It would increase the number of estates hit by the death tax from 3,600 to 55,200. According to JCT, 24 times more farming estates would be hit by the Democrats? death tax proposal.
And the number of small businesses hit by this death tax spike would grow by 13 times.
This proposal would subject 2,400 percent more farms and 1,300 percent more small businesses to the death tax. I would like to be a fly on the wall when some members of this body go home and attempt to defend their support for a proposal effectively designed to hobble small businesses and family farms. The President might think it is no big deal.
After all, according to him those farmers and businessmen really were not responsible for their success anyway.? They?re not so smart, in the President?s view. They really owe it all to the bureaucrats stationed at the Departments of Agriculture and Labor, and their helpful investment-creating regulations.
The sweat and tears and sacrifice of the families and individuals who create and run small businesses have nothing on the hard work and commitment of the mid-level bureaucrats who make their success possible. But my guess is that some members of this body have a slightly more nuanced understanding of the importance of these farms and businesses to their communities.
Mr. President, it seems clear what the agenda of the Senate should be.? We should be focused like hawks on preventing Taxmageddon. We should be focused on job creation. Yet instead of addressing these important matters, President Obama and his Democrat allies are spinning their wheels trying to raise taxes on politically unpopular groups.
Even the Democrats? treasured Keynesian economics says that you do not raise taxes in a weak economy if you want more jobs. The President is devoting his entire reelection campaign toward tax hiking in the name of fairness.?
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We have voted twice on proposals to raise taxes on oil and gas companies, for no other reason than that Democratic pollsters found that the President?s base does not like oil and gas companies. Then a few months ago we voted on the silly Buffett Rule.
This was not serious tax policy.? It was a statutory talking point, and not a very good one at that. And then there was last week?s bill on overseas investment that was little more than a campaign advertisement with cosponsors.?
The American people are tired of these political stunts. Every minute Democrats spend playing politics is a minute that we fail to prevent the largest tax increase in American history.
But instead of working to prevent this massive tax hike on small business, the President and the Congressional Democratic leadership have doubled down on their tax hike strategy.?
Believe it or not, while doubling down on their tax hike strategy, our friends on the other side are pushing the canard that the Hatch-McConnell proposal is a tax hike.? Yesterday, one of our colleagues who I won?t name though he named me, said the following and I quote: Republicans claim not to want to raise taxes, but the republican tax bill would let very popular lower and middle-class provisions expire that would cost 25 million Americans an average of $1,000 each. Under the Republican bill, 12 million families would see an end to the ? a smaller child tax credit. Six million families would lose their earned income tax credit and 11 million families would lose their American opportunity tax credit.
A little over eleven years ago, one-fourth of the Democratic Caucus supported the bipartisan 2001 relief plan which is the foundation of the policy underlying the Hatch-McConnell bill.? At that time, the Joint Committee on Taxation showed that the bill distributed as an across-the-board tax cut which made the tax code more progressive.? The 2003 bill was passed on a narrower bipartisan basis and extended on a broader bipartisan basis in 2004 and 2006.? Joint Committee on Taxation data show that, against current law, the fiscal cliff position my friends are threatening, is not surprisingly, basically the same as it was 2001, 2003, and 2006.?
In other words, the Hatch-McConnell proposal provides across-the-board tax relief benefitting virtually every income taxpayer, yielding a tax system that is more progressive than what we would face if we went over the fiscal cliff.? JCT analysis indicates a similar result today.
To be sure, if you count continuous stimulus checks issued by the government to folks that do not pay income tax as tax cuts, the Democrats? proposal does more of that than the Hatch-McConnell proposal.?
Under federal budget law, those continuous stimulus checks are counted, in the main, as spending.? I would say to the colleague I referred to a moment ago that if the Democrats want to use that talking point ? one at odds with conventional budget accounting ? it is a free country.? But if Democrats are going to make that strained and tortured charge, then they should also answer for the failure of their bill to patch the AMT for the year they claim to be delivering middle income tax relief.?
Their plan exposes 28 million middle income families to a tax stealth tax increase of over $3,500 per family.? So while they claim that our bill raises taxes by cutting stimulus spending, they are mum on the massive tax increase on 28 million American families implied in their own bill.
I think we might have a case here of folks in glass houses throwing stones. Make no mistake, Mr. President, Taxmageddon is coming.? The only good news is that Congress can prevent this historic tax increase from happening.? As I mentioned, I have a bill that I have introduced with Senator McConnell ? S. 3413, the Tax Hike Prevention Act of 2012 ? that will prevent this historic tax increase and will pave the way for tax reform in 2013.???
That is where my focus will be until Taxmageddon is averted, and I hope that my colleagues will join me in preventing this looming tax increase from being imposed on the American people. Forty of my colleagues on the other side of the aisle voted to temporarily extend this tax relief in 2010.?? They should do so again.
At that time, President Obama said that it would be foolish to raise taxes during an economic downturn, and he acted accordingly. Our economy remains weak today.? In fact, it?s weaker in terms of growth in GDP than it was at the end of 2010, and incoming data clearly point to even more slowing in the economy as uncertainty from the fiscal cliff has begun to strangle hiring and investment.?
The only thing that appears to have changed is that President Obama has apparently chosen the path of class warfare and is pursuing a politics-driven tax agenda. My hope is that my colleagues who have supported this tax relief in the past will put the President?s short-sighted and self-interested partisanship aside and vote on behalf of their constituents in favor S. 3413 to extend this tax relief to America?s families and small businesses.
For the sake of the more-than 12.7 unemployed Americans, my hope is that we act to prevent the President?s campaign drive to malign small businesses and raise their taxes does not get in the way of sound tax policy and job creation. Mr. President, I yield the floor.?
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