Reclaiming Individual Liberty Act

Mr. Speaker, I yield myself such time as I may consume.

(Mr. CAMP asked and was given permission to revise and extend his remarks.)

Mr. Speaker, this bill contains many positive features but also some negative ones, and thus, I reluctantly plan to oppose it.

Like my friend on the other side of the aisle, I'm pleased to see that it does include some tax relief, albeit limited, for small businesses, including provisions championed by both Republicans and Democrats. I'm also pleased, unlike earlier versions of this legislation, the most objectionable revenue raiser, a provision that could provoke retaliation by other countries and that even the Obama administration officials warned would violate our international treaty obligations, has been dropped from this bill. But despite those positive features, I will be voting against this bill for several important reasons.

First, while the tax relief in here is welcome, it's not enough and won't actually help small businesses create the jobs we need to reduce our stubbornly high unemployment rate. While I would certainly support further lowering taxes on small businesses, the last thing they need is higher taxes, which is exactly what they are facing from this Congress.

Just last month, the majority pushed through an $11.2 billion tax hike on certain small businesses that would subject their profits to employment taxes, and at the end of 2010, all individual income tax rates, as well as taxes on dividends and capital gains, are scheduled to rise dramatically. Because so many small businesses pay taxes at the individual level, the fear of these increases is chilling expansion and hiring and, therefore, job creation. So the majority's record on tax policy affecting small businesses is spotty at best.

Second, this bill, like others before it, provides a stark reminder of the majority's view of the Ways and Means Committee as an ATM machine to fund other spending. Here, the majority is seeking to generate $7.1 billion in additional tax revenue but would only provide $3.6 billion in tax relief over the next decade. The rest of the money raised will be used to offset the cost of another bill, H.R. 4297, which was reported by the Financial Services Committee, that creates another TARP-like program. Some might call it TARP III.

While I'm glad the majority found offsets that are less economically damaging than some that have previously passed the House, the practice of using permanent changes in tax receipts to fund temporary spending is disappointing and portends further and larger tax hikes in the future, perhaps as soon as the end of this month when the majority hopes to complete action on a financial system reform bill.

Mr. Speaker, especially with the unemployment rate continuing to hover near 10 percent, our small businesses, the engine of economic growth and job creation, need help, but this bill isn't enough, and it takes us further down the dangerous road of higher spending our Nation cannot afford.

I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I just want to respond to my friend from Michigan, the chairman, and say it's really about the reality of this legislation, not just the rhetoric. And while excluding capital gains on the sale of small business stock is a great provision, the problem is this is drafted so narrowly that the small businesses have to be C corporations. And as we know, only a fraction of small businesses will be considered qualified small businesses to take advantage of this provision. This is the largest piece of this so-called ``small business relief'' bill. And while it's great to talk about, the reality of it is going to be very limited.

As I said in my statement, there are some positive things in this bill. Obviously, closing the Black Liquor 3 loophole is something I support, but on balance, because the bill isn't really going to do anything to create jobs, A, and, B, because there are, again, going to be temporary provisions that are paid for with permanent tax increases, and, third, the revenue raiser on the estate tax area on the Grantor Retained Annuity Trust is really one that ought to be reserved for when we have to deal with estate tax reform. As you know, the law has expired. There are bills moving through the Congress to reinstate the estate tax. This really is appropriate to that area.

I think it is absolutely unconscionable that we've gone all this time with no estate tax, with everyone understanding that the majority is going to create a retroactive death tax bill that's going to try to come back through the beginning of the year. This is where that provision should be.

So, again, I reluctantly oppose this bill. I think there are some good things

in it; unfortunately, they don't go far enough.

I now yield 2 minutes to the distinguished member of the Ways and Means Committee, the gentleman from Illinois (Mr. Roskam).

Mr. Speaker, I yield myself such time as I may consume.

This bill is going to spend taxpayers' money. I believe we have an obligation, if we're going to spend taxpayers' money, that we do it effectively. On Friday night, the Treasury released a report that in 2015 our debt will exceed the gross domestic product of this country. We've had expert testimony before the Debt Commission that said when your debt gets to 90 percent of GDP, you lose 1 percent off economic growth, which translates into 1 million jobs.

This bill, because of how narrowly focused it is, how narrowly drafted it is, virtually no small businesses will take advantage of the exclusion of capital gains because they have to be C corporations. And if there is one trend we've seen, it's that businesses are being organized as passed-through entities now. That's how America, particularly small business America, is being organized. So while this is great rhetoric, this bill isn't going to be effective in doing anything.

And let me just say, I heard the former chairman say that Republicans just say no. On the health care bill, we had a viable alternative. In fact, I will say the vote on the health care bill was bipartisan opposition, only majority partisanship support for that legislation. Whether it's been stimulus or health care or energy, we have had viable alternatives on the floor that we have brought forward. On this particular bill, I think that better work could have been done, more effective work could have been done. And, frankly, in this era of the highest debt ever this country has seen, I think we have an obligation that if we're going to spend taxpayers' dollars, it's done in an effective way and a way that gets results, and this bill falls short.

I reserve the balance of my time.

At this time, I yield the customary 1 minute to the distinguished minority leader, the gentleman from Ohio (Mr. Boehner).

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I continue to reserve the balance of my time.

I yield myself such time as I may consume, Mr. Speaker.

I agree with much of what some of the speakers have said today about the importance of small business and the job creation that small business has been responsible for. You can see statistics where 80 percent of the job creation in recent years has been because of small business. Certainly, if we're going to recover as an economy, small business will lead the way, and needs to recover. And we've seen over the past few years the way small business has been organized. Increasingly,

they're pass-through entities. The vast majority of small businesses are pass-through entities.

So what does the majority do? They pass a small business bill that doesn't apply to the majority of small businesses. This provision here, which is the bulk of the bill that excludes capital gains on the sale of certain small business stocks, only applies to qualified small businesses. Well, what is a qualified small business? A C corporation. That's how most large businesses are organized. So this bill won't do anything.

Again, while we have record debt, the largest in the history of this country, well over $13 trillion and an estimate from the Treasury Department that, in 2015, the debt will exceed the size of the entire economy of the United States for the first time in history--before we spend taxpayer dollars, we ought to do it in a way that's effective.

There are things that we could do for small business. I will say the majority has made this bill better than it was the first time by dropping some of the controversial provisions that would have potentially caused our trading partners to retaliate against us. Obviously, closing the black liquor provision is something that I think every Republican supports as well. That's a good thing. But the fact that this legislation is not where it should be doesn't mean that we should just look the other way and pass it, because it doesn't meet the standard that this Congress should be meeting in this difficult economic time.

I yield 1 minute to the gentleman from New Jersey (Mr. Garrett).

I thank the gentleman for those comments. He makes a very important point.

In closing, I just want to say that we look at the costs that the individual mandate particularly is going to hit hard on small businesses and how difficult that's going to make it for them to continue to be able to expand and hire workers. And we know that the small business health care tax credit is virtually a fraud; that 90 percent of small businesses won't be able to qualify for that because, again, that's so narrowly drafted that there's the rhetoric of being able to say, Aren't we doing all these great things? But the reality is there's nothing there.

Let me just say that at the end of 2010, when all the individual income tax rates increase, as well as on dividends and capital gains, that's going to hit small business particularly hard because most small businesses file as individuals. And that's going to make it much more difficult for them to expand. It's going to make it much more difficult for them to hire and much more difficult for job creation to occur.

Also, I would say that another difficult problem is that this bill, while it generates $7 billion in tax revenue, it only provides about $3.5 billion in tax relief. So, again, taxes are being raised permanently for temporary spending in other parts of our economy, and it's my understanding that most of that extra revenue will be used to help pay for another TARP-like program--TARP III as some call it-- that's going to be coming our way.

So, again, with our unemployment rate continuing to be at a lingering 10 percent, the difficulty our small business, the engines of economic growth and job creation are facing, the help they need, this bill is not enough. Again, it takes us down a road of higher spending that our Nation cannot afford at this time.

With that, I yield back the balance of my time.

Mr. Speaker, pursuant to H. Res. 1436, I call up the bill (H.R. 5486) to amend the Internal Revenue Code of 1986 to provide tax incentives for small business job creation, and for other purposes, and ask for its immediate consideration.

Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days to revise and extend their remarks and insert extraneous material in the Record.

I yield myself such time as I may consume.

This bill, H.R. 5486, the Small Business Jobs Tax Relief Act of 2010, is, in a few words, a continuation of our work to spur job creation and to really improve the quality of life in all of our communities. Since the beginning of this year, our economy has created 982,000 jobs. That is a reversal of 22 straight months of job losses, a very long stretch indeed. But we all know that far too many people today are out of work and the unemployment rate remains at a very unacceptably high 9.7 percent. So something considerable has been done, but we have to do more.

According to the SBA--and I think we all know this--small firms created 64 percent of the net new jobs between 1993 and the third quarter of 2008. So small businesses help lead job creation in a recovery, but today, small firms are having difficulty accessing capital.

So what does this bill do? It provides a total of $3.588 billion in tax cuts to help American small businesses. It is part of the partnership between the public and the private sector, relying on the private sector to do the job creation. And I want to emphasize, this bill does not add a dime to our deficit. It doesn't even add a penny to our deficit.

So let me explain the provisions in H.R. 5486. First of all, relating to business stock, small business stock, and capital gains, presently there's an exclusion of 75 percent because of the Recovery Act, and I emphasize that. This would increase the exclusion to 100 percent. It provides relief for small businesses from tax penalties when that is indeed appropriate. It also increases the deduction for startup costs for expenses not related to capital or equipment. It increases it from $5,000 to $20,000. So these are important stimuli for small business to help them create more jobs.

As I said earlier, this is offset. It will not add a dime or, indeed, a penny to the Federal deficit. It includes two provisions that have already passed this House. One relates to what is sometimes called a grandchild of black liquor. It relates to essentially a byproduct. What this does, building on the work that we did in earlier bills, is to prevent people from receiving a windfall from unintended application of renewable fuel credits.

The second part relates to what are called grantor retained annuity trusts, and I want to just say a quick word about this. This is clearly a loophole. This is clearly an abuse. Here's what happens, to try to put it in the simplest terms: A short-term trust usually is created by someone for a child. Then the person who created the trust takes back the value, let's say, in a few annual payments. So there's no gift tax for the grantor. The way it works today, all of the increase in the value of the stock is also outside of the gift tax.

So, essentially, what is happening here is a paper transaction that leads to escape of taxation, and this provides in our bill that there has to be a 10-year term for the trust to be sure that the trust has actual substance. This change raises $5.297 billion over 10 years. So what this means, breaking it down in simple terms, is that about $500 million per year from taxpayers is lost today through paper transactions, and we close the loophole. So, again, because of this, there is not any added cost.

We also, if I might say so and will be discussing this I guess tomorrow, it provides money for the small business lending package, H.R. 5297. So that is also budget neutral, and that provides some additional important small business loan help so badly needed. It's

hard to understand why people would vote against this. Plus, a provision that is $2 billion worth, and it goes to States and local governments, and they have written us, urging that we provide some assistance so that they can increase the flow of loans to small businesses in their States.

So, in a word, we have a bill that is essentially a two-fer. It provides needed assistance for job creation by small business, and it's paid for. So I urge very much that somehow the other side can cross the bridge and join together instead of creating obstacles and vote for this bill and then its partner bill tomorrow.

I reserve the balance of my time.

Before I yield, I just want to say to Mr. Camp, I listened intently, and I can't understand your opposition. You like the provisions. You don't like what we once passed. If you don't like what we passed before--and I disagree with you--it's even more of a reason to vote for this bill.

You complain about permanent changes. We're closing a loophole permanently. You want us to close it temporarily? And we're preventing a provision coming into effect that should never come into effect.

So I just urge people to listen to the quality of this discussion, and I think, so far, it all points to everybody on both sides of the aisle voting for this bill. It helps small business. That's been acknowledged, and you don't challenge the tax cuts in terms of their merits. You talk about another tax cut in another bill you didn't like. I think you find it hard to find anything you like.

I now yield 2 minutes to another member of our committee, our distinguished colleague from Massachusetts (Mr. Neal).

You say do better; you won't vote for anything.

I yield 2 minutes to the distinguished gentleman from New York (Mr. Rangel) to explain why this is more than de minimus, a bill that needs to be voted on on a bipartisan basis.

(Mr. RANGEL asked and was given permission to revise and extend his remarks.)

I yield the gentleman 1 additional minute.

I yield 2 minutes to the distinguished gentleman from Oregon (Mr. Blumenauer), member of the Ways and Means Committee.

I yield the gentleman an additional 2 minutes.

Mr. Speaker, I yield 2 minutes to a member of our committee, the gentleman from New Jersey (Mr. Pascrell).

I yield an additional 1 minute to the distinguished gentleman.

I yield 2 minutes to the distinguished gentlewoman from Pennsylvania, Allyson Schwartz.

Mr. Speaker, I yield 2 minutes to the very distinguished Member from New Jersey (Mr. Andrews).

(Mr. ANDREWS asked and was given permission to revise and extend his remarks.)

I yield the gentleman an additional minute.

I yield 2 minutes to the gentlewoman from Texas (Ms. Jackson Lee).

I think anybody who has listened to this debate, if they're at all objective, will be completely puzzled by the arguments of the minority. They say this bill won't do anything. But then they say there are tax increases to pay for it that are permanent. That's worse than a lame argument. It's completely without merit and is vacuous. The bill is scored for small business in terms of the exclusion from capital gains tax over 10 years at almost $2 billion. That's nothing. It provides relief from penalties. Over $175 million to small business. That's nothing. It provides an increased deduction for startup expenditures that provides over half a billion dollars, as scored. That's nothing.

Now what's nothing are your arguments. And so you come here, I think, afraid to vote ``yes'' because it will blur your political message. You say you agree with these provisions, but then you're going to vote ``no.'' You just don't apparently want to be caught being bipartisan. It's going to blur a political message.

I don't understand your argument that the tax provisions are permanent. You don't argue these aren't loopholes. They're loopholes. And you criticize us for closing a loophole permanently, and then you say it's for spending, but you don't really challenge the validity of the spending. We do pay for some moneys for the second bill that's coming up because it provides loans to small businesses, and it also provides States that have written us supporting this bill, including your State, Mr. Camp, saying that they will use this money well to help collateral support for small businesses.

So it's worse than puzzling. I think it's a pathetic effort to find an excuse to vote ``no.'' So then you come up with the argument you have a motion to recommit.

Announcement by the Speaker Pro Tempore

I'll be glad to do that, Mr. Speaker.

So then there's a motion to recommit to repeal an individual mandate. All I can say is that the individual mandate was the basis of the Republican health care proposal in 1993 and 1994. And now you come up and say you want to eliminate it. This is another entangled position of yours. You're tying yourselves into knots trying to oppose a bill that will provide help for small business. Maybe it's useless to appeal for bipartisanship to the other side.

I close asking for support.

Mr. Speaker, in conjunction with today's consideration in the U.S. House of Representatives of H.R. 5486, the ``Small Business Jobs Tax Relief Act of 2010,'' I have asked the nonpartisan Joint Committee on Taxation to make available to the public a technical explanation of the provisions included H.R. 5486. This technical explanation reflects the Ways and Means Committee's understanding and legislative intent behind those provisions. It is available on the Joint Committee on Taxation website at www.jct.gov and is listed under document number JCX-31-10.

I yield back the balance of my time.

Mr. Speaker, this legislation is personal for me. We've watched our country come back from the brink in the fall of 2008. In my State of Oregon, helped by Recovery Act funds of about $6 billion, we've been able to stabilize and make some progress. Is it enough? Absolutely not. But I've had a steady parade of people coming to my office thanking me for the investment that was made in terms of infrastructure, in terms of health care, in terms of making sure that we didn't have layoffs of public employees.

Now we have a provision here that is an opportunity to focus on small business. It is a package, as the chairman mentioned, with two pieces. It's ironic that our friends are telling us that it's just not enough. These are small pieces, yet they were saying, on the other hand, the legislation we had that CBO has scored over 1.2 million jobs to as much as 2.8 million saved or created was too big. Well, we ought to be chipping away as we can on this. Having $30 billion for a small business lending fund, being able to provide a couple billion dollars of tax exclusion for small

business capital formation are positive items.

You know, one of the things that strikes me as ironic is that our friends on the other side of the aisle ignore the fact that the Recovery Act legislation that we had previously, 42 percent of it, was for tax cuts and for preventing the impact of the alternative minimum tax from hitting middle and upper middle-income families. Every family in America which made under $250,000 a year got tax cuts last year, and they are getting tax cuts this year. We have tried tax cuts to help move things forward. Now, this is small business lending.

This is part of an ongoing effort which is making a difference. The job losses peaked the month that President Obama took office--not his fault. They had been building for 22 months. Now we are making some progress. Is it enough? All of us agree that it is not, but I would suggest that dismissing this because they think it doesn't solve everything would be, I'm afraid, disingenuous. I don't think it's helpful.

I strongly urge the support of this legislation and then for us to continue with the task of rebuilding and renewing America, of reforming the Tax Code, and of coaxing the most out of these investments.

Mr. Speaker, I rise today in support of H.R. 5486, the Small Business Jobs Tax Relief Act and H.R. 5297, the Small Business Lending Fund Act of 2010. These bills will help small businesses grow, create wealth in our communities, and create new jobs. As we often hear, small businesses drive our economy and create the most jobs.

I have heard from businesses across my district that have had trouble accessing capital to expand their businesses, to weather this economic storm that Oregon faces, and to add to their workforces. Thousands of jobs have been lost, millions of dollars of savings have evaporated, and dreams have been cast aside or deferred for far too many Oregon families.

The legislation that we will pass today will ease these challenges. The legislation establishes a $30 billion fund to boost lending to small businesses by community banks. To ensure that the additional funding is deployed, the recipient community banks will owe the US Treasury a variable dividend. The more they lend to small businesses, the less they will owe to the Treasury. If they fail to lend, then the dividend obligation increases.

The legislation also makes important tax changes that will benefit the small business community.

The legislation reduces capital gains taxes on the small business community. Under the Recovery Act, Congress excluded seventy-five percent of capital gains tax on the sale of small business stock during 2009 and 2010. This legislation continues and expands that policy by increasing the exclusion to one hundred percent for 2010 to 2012.

The legislation also improves the ability of small businesses to deduct start up costs. Under current law, a start up may deduct $5,000 of start up costs; this legislation will expand that deduction to $20,000. These costs include market surveys, initial advertisements, training costs and other costs associated with starting up a business.

Oregon is still struggling with a near record unemployment rate of 10.6 percent, a percentage point above the national average. In April 2010, over two hundred thousand Oregonians remained unemployed. It is imperative that we do all that we can to improve the economy and to put Oregonians back to work.

I thank the gentleman for his leadership, and I thank the full Committee on Ways and Means for being a lifeline for small businesses. And I ask my colleagues on the floor of the House to join them.

Without this effort, small business doors across America will close. And, frankly, I believe it is important. As my colleague just said, let us walk the walk and talk the talk. For it is now time to invest in small businesses, which, in actuality, create the backbone of the economy of America and provide for employment in our rural and urban areas across this Nation. In fact, I think it is important to note this bill is paid for. By closing the black liquor loophole and the gift loophole, it will create $8 billion to ensure that we can do the right thing for our small businesses.

I come from an area that is now being impacted by a major oil spill. I visit businesses whose doors are closing for lack of assistance. And I'm glad that we have a President who realizes who is important and is ready to sign this bill.

Small businesses are in need. And so what we have here is an opportunity for banks to refocus their lending policies and give startup credit and access to dollars to help build these small businesses.

Many of us heard of the redirection of the moneys that we lent to big banks in order to help them help America. Well, unfortunately, they couldn't find the doors of small businesses, many of my constituents. And so I am eager to have this legislation passed that's paid for to provide startup costs for small businesses that always have had a major impediment in getting in the door of these banks. Therefore, any relief for small startups is a plus by increasing the amount allowed to be deducted from the bottom line. And the capital gains issues as well that will be very important.

I believe, finally, we need to hold these banks accountable by asking them to provide a plan to ensure that they are providing lending to these businesses. I ask for support of this legislation.

I rise in support of the Small Business Jobs Tax Relief Act of 2010, H.R. 5486. I also want to thank Chairman Sandy Levin and the members of the Committee on Ways and Means for their hard work on this legislation. The bill amends the Internal Revenue Code of 1986 to provide tax incentives for small business job creation, and for other purposes.

This bill provides targeted relief for the Nation's small businesses. Without this relief, many small businesses will close, adding to the U.S. unemployment rate, still historically high at 9.7 percent. The tax relief in this bill will begin to address a number of issues confronting the owners of small businesses:

(1) Start-up costs for small businesses have always been a major impediment to their success. Therefore, any relief for small businesses start-ups is a plus. By increasing the amount allowed to be deducted from the bottom line, a small business can then use the additional resources to grow and to expand his or her business. The bill would increase the deductible amount for start-up costs from the current $5000.00 to $20,000.00 for 2010 and 2011.

(2) The bill also eases restrictions on real estate holdings where qualified Small Business Investment Company (SBIC) loans are involved.

(3) This bill will increase, from 50 percent to 100 percent, the exclusion from gross income of the gain from the sale or exchange of qualified small business stock acquired after March 15, 2010, and before January 1, 2012. By reducing the tax liability related to gains on the sale of small business stock, this will free resources to be used for other business purposes in this tight economy.

(4) Another important provision in the bill will exclude from gross income any amount paid under the small business borrower assistance program. Again, tax relief in any shape or form for small businesses is critical to sustained economic growth and economic recovery.

In addition to these tax reliefs, the bill also requires the Commissioner of the Internal Revenue to provide annual reports to Congress on penalties relating to tax shelters and other transactions. Any additional measure designed to promote transparency and accountability must be supported. Again, this bill is a timely measure that will grant relief to a major segment of the Nation's business sector, suffering from the lasting effects of the worst recession in our history. I urge my colleagues to support H.R. 5486.

Mr. Speaker, sometimes when life gets rough for me, I try to put myself in the shoes of the other guy. What a rough time to be in the minority. We have so many people whose hopes and dreams have been shattered, they're out of work, they're angry, the economy has been blown wide open, and we find that the order of the day with the opposition is that they just have to say no. It must be awkward to say what I would do if this bill was defeated. It must be terrible to talk about the past things that haven't worked when someone has just lost their home or can't pay their rent or put food on the table or get clothes for their kids.

It's a rough time for all Americans, and anybody who believes that Democrats always get it right, well, it's difficult to do, but for crying out loud, we have to do something. The $787 billion we voted on trying to get us out of this economic mess, and all the money just floated on the top for the big banks. Now we're trying to see what really works. Listening to the calls of small business people, trying to make certain they have capital to get the inventory, to provide the goods and services, to hire people, and as everyone admits, this is where the major jobs come.

For crying out loud, sometimes the late John Kennedy said, The party just asks too much of you. These people are out of work. They're not Democrats and Republicans; they're American people. They work hard for their dignity. They're the ones that supported our country during good times. And now that times are rough, they've got to listen to debates between Republicans and Democrats as to, gee, this is what I would do if I was in charge? I don't think that's fair. And I really believe that the voters are not going to believe that all we can do is come up with ideas, have them ridiculed, and then just say no.

Thank you so much, Mr. Chairman.

I know from time to time when my party asked me to carry too much weight that morally I don't believe I can do it, that somehow there are people on our side of the aisle that take the risk and being able to say I did it not because my party asked me to do it, I did it not to be opposed, I did it because it's the right thing to do.

Now you have to find the issue; if it's not health care, if it's not education, if it's not national security, how about the opportunity to work, to make a living, to have the dignity, to have the pride, to raise your family, and indeed to pay taxes?

This is going to be our last opportunity for this year. Maybe next year there will be a change in the philosophy--if you want to call it that--of the minority and they will work together; but I do hope this idea that on everything we come up with to improve the quality of life for the people of this great Nation, that the opposition can come up with something except ``just say no.''