Mr. President, today we begin debate on a bill called the Small Business Jobs and Tax Relief Act. There are some positive elements to this legislation, but I remain amazed that the Democratic…
Mr. President, today we begin debate on a bill called the Small Business Jobs and Tax Relief Act. There are some positive elements to this legislation, but I remain amazed that the Democratic majority has decided to pursue this bill to support small businesses when looming tax increases threaten to crush these very same small businesses.
Rather than address the expiration of the 2001 and 2003 tax relief, which is denying certainty to small businesses and holding back hiring and economic development, we are discussing this legislation. The President and his allies who are pursuing this legislation are patting themselves on the back for supporting small businesses, but puffing their chest as the saviors of America's job creators while doing nothing to address the coming fiscal cliff is like a person asking for the keys to the city after throwing a water balloon at a house fire.
Our small businesses and our economy face an existential threat with the coming tax hikes. Not only have Senate Democrats done nothing to bring some certainty to this situation, but President Obama actively undermined these businesses with his White House campaign event yesterday, during which he expressed his commitment to raising taxes on these small businesses.
So as we debate this bill, we need to keep that backdrop in mind. As the President proposes with this bill to give with one hand to small businesses, with the other hand he is prepared to sock those same people in the jaw. Small businesses are just one facet of our economy that will be hit with the largest tax increase in history if Congress and the President fail to act before January 1, 2013. But given that small businesses are the engine of job creation in our economy, the impact of these tax increases will reach far and wide, undermining economic growth and hampering innovation and job creation. Taxpayers are on the edge of a fiscal cliff. Yet instead of leading them to safety, the President's campaign is telling us to march forward.
The consequences will crush American taxpayers. In February, the Washington Post referred to this $4.5 trillion tax hike as ``taxmageddon.'' Federal Reserve Chairman Ben Bernanke described it as a ``massive fiscal cliff'' when testifying before Congress. If
these tax hikes are allowed to occur, it will raise taxes on virtually all flowthrough business income in the United States come January 1, 2013.
This is especially harmful to small businesses because the vast majority of small businesses are organized as flowthrough business entities such as partnerships, S corporations, limited liability companies, and sole proprietorships.
So unless the Congress acts to prevent these massive tax increases, the vast majority of small businesses in the United States will be hit with a massive tax increase next year. It is hard to conceive of a greater impediment to job creation. All of these tax increases and the economic uncertainty they cause are going into the investment and hiring decisions of business men and women today.
Even President Obama agrees that two-thirds of the new jobs in our economy are created by small businesses. I do not know anybody who disagrees with that. With unemployment stuck at an unacceptably high level of 8.2 percent, we must not allow this tax increase to happen. America is slowly recovering from one of the greatest recessions in modern history. The Vice President rightly said that for millions of Americans it feels as if they are living through a depression. Paul Krugman recently stated we are in a depression.
I just finished reading Robert Caro's recent book on Lyndon Johnson. He discusses in that book the tax cuts of President Kennedy and how important they were and how Lyndon Johnson handled it after the horrific death of our President.
(Mr. FRANKEN assumed the chair.)
Those tax cuts solved a lot of problems. One of the things, if I recall it correctly, President Johnson said was that without them we would not have been able to pull out of the difficulties we were in.
Yet with 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.
I believe Congress needs to act now in order to prevent this tax hike on America's families and job creators.
As we can see on this chart, we have the tax legislation to-do list. It is critically important for our economy and the American people that we act now to extend the tax relief signed into law by President Bush and extended by President Obama.
Notice we did have hearings on tax extenders and we did have hearings on the fourth item on the chart to prevent the 2013 tax hikes, but we have had neither a markup or a floor presentation on any of those four--tax extenders, the AMT patch, death tax reform, and preventing the 2013 tax hikes.
The 2013 tax hikes is the most crucial piece of legislation Congress must address this year, if not during the entire 112th Congress. If we allow this tax relief to expire as scheduled at the end of the year, almost every Federal income taxpayer in America will see an increase in their rates. Some will see a rate increase of 9 percent, while others will see a rate increase of 87 percent.
Because the vast majority of small businesses are flowthrough business entities, such as partnerships, the income from these businesses flows through the business directly onto the small business owners' individual tax returns. Therefore, any increase in individuals' tax rates means those small businesses 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. Thus, even if a small business reinvests all its income from the business to hire more workers, pay the workers they already have or purchase equipment, they would still get hit with this looming tax hike.
Our economy simply cannot afford to take on such a fiscal shock. President Obama promised that if we would just pass his $800 billion stimulus bill, unemployment would not go above 8 percent. It has now been 40 months in a row since the stimulus passed that unemployment has been above 8 percent.
Looking at this problem more broadly, economists estimate that if these current tax policies are allowed to expire, the economy could contract by approximately 3 percentage points. That would be a large hit to an economy that is still weak and recovering from the fiscal crisis of 2008. Adding another fiscal crisis by neglecting to extend these tax policies may cause even further damage. For those on the other side of the aisle, including the President, who argue we should raise the top two tax rates because it is the fiscally responsible thing to do, I will point out a few things.
First, according to the Congressional Budget Office, 80 percent of the revenue lost from extending the 2001 and 2003 tax relief provisions is found among those making less than $200,000 per year if single and $250,000 if married.
Second, the nonpartisan official scorekeeper for Congress on tax issues, the Joint Committee on Taxation, tells us that 53 percent of all flowthrough business income would be subject to the President's proposed tax hikes. Because the vast majority of small businesses are organized as flowthrough business entities, as I mentioned above, this is especially harmful to small businesses. Given the agreed-upon importance of small businesses to our economic recovery, it is a mystery to me why the President and his Democratic allies would pursue tax increases on these very job creators. We simply cannot afford to raise taxes on over half this business income.
This would take the marginal tax rate on small businesses from 33 percent and 35 percent to 39.6 percent and 41 percent, respectively.
Look at this particular chart and the increase in small business top marginal rates. Here, the blue line starts to go up in 2012. As we can see, the marginal rates will go to 40 percent and up to 41 percent.
It seems clear what the agenda of the Senate should be. We should be focused like hawks on moving us back from the fiscal cliff and preventing ``taxmageddon.'' Yet at a time when we should be working to prevent a massive tax increase, President Obama and his Democratic allies are spinning their wheels trying to raise taxes on politically unpopular groups.
These tax hikes are already scheduled to go into effect. Congress doesn't have to do anything, and everyone will pay more in taxes come 2013. That is not a good sign, given that some people have called this a do-nothing Senate.
Let me refer to the Senate Democratic leadership's tax legislation to-do list.
I am sure some people are tired of the mantra among conservatives that Democrats want to raise taxes and Republicans don't, but we say it because it is true. At liberal think tanks, their employees go to work every morning and think about how they can raise taxes.
My friends on the other side of the aisle, knowing their constituents already feel overtaxed, spend countless hours devising ways to raise taxes in a way that only hits politically unpopular groups or, in the case of ObamaCare, they worked tirelessly to hide the nature of the individual mandate tax and the true impact of the law's over $500 billion in taxes.
The President is now devoting his entire reelection campaign toward tax hiking in the name of fairness. In the Senate, we have already voted twice on the proposal of my colleague from New Jersey, Senator Menendez, to raise taxes on oil and gas companies. We voted twice on it.
First, we had hearings in the Senate Finance Committee last year. As I said then, that was nothing more than a dog and pony show. Everybody knew it. Then the leadership brought the bill directly to the floor, skipping the process of a markup.
A few months ago, we voted on the silly Buffet tax--the Buffet rule tax hike bill--without hearings and without a markup. This is not serious tax policy. The Buffet tax is a statutory talking point and not a very good one at that.
First, the President said it was about deficit reduction. We pointed out to him it raised only $47 billion in revenue over 10 years, a drop in the bucket given the President's trillions in deficit spending. We pointed out that implementing the Buffet tax the way President Obama suggested in his most recent budget would lose nearly $1 trillion over the first 10 years alone. Specifically, President Obama proposed replacing the AMT with the Buffet tax.
So the White House shifted gears. Now the Buffet tax was about fairness. But when we pointed out that his
redistributionist scheme, if redirected to a lower tax bracket, would only yield an $11-per-family tax rebate, he criticized Republicans for demonizing him as a class warrior.
The President needs to come clean about what the Buffet tax is. It is nothing less than a second and even more damaging alternative minimum tax, one that would force many small business owners and job creators to pay a minimum of 30 percent of their income in tax.
As the Wall Street Journal said on April 10:
The U.S. already has a Buffett rule. The Alternative
Minimum Tax that first became law in 1969 . . . . The surest
prediction in politics is that any tax that starts by hitting
the rich ends up hitting the middle class because that is
where the real money is.
What is rich about the Buffett rule is that Mr. Buffet would be able to avoid his own Buffett tax. What is the President doing? Why, with ``taxmageddon'' around the corner, are President Obama and his liberal allies dithering with these harmful tax increases?
The answer is pure and simple: politics.
Let's not forget that every minute Democrats spend playing politics is a minute we don't spend preventing the largest tax increase in American history.
It is time for the Senate Democratic leadership to get serious and to focus on preventing this massive tax hike.
Instead of focusing on preventing this massive tax hike on small business, however, the President and the congressional Democratic leadership have doubled down on their small business tax hike strategy. The President's speech yesterday was simply a rehash of the same old ineffective arguments about why we should raise taxes on small businesses. His claims that it is necessary to rein in the debt and deficit are not credible at all, considering he has added trillions of dollars to the debt since he has been in office. The Senate Democratic leadership will not even present a budget proposal of their own for the Senate to vote on.
``Taxmageddon'' is coming. The only good news is that Congress can prevent this historic tax increase. I have an amendment to this bill that will prevent this historic tax increase and will pave the way for significant tax reform in 2013.
That is where my focus will be until this tax hike is prevented, and I hope my colleagues will join me in preventing this looming tax increase 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.
President Obama once said it would be foolish to raise taxes during an economic downturn, and he acted accordingly. I compliment him for doing so.
Our economy remains weak today. The only thing that appears to have changed is that President Obama has apparently determined that his path is class warfare.
My hope is my colleagues who have supported this tax relief in the past will put the President's shortsighted and self-interested partisanship aside and vote on behalf of their constituents to extend tax relief to America's families and small businesses.
I finished reading this book about Lyndon Johnson and about his ascension to the Presidency of United States of America. For most of the time before President Kennedy's unfortunate death, Lyndon Johnson was kind of a fish out of water. He didn't know what to do. He wasn't utilized very well. He was totally loyal to the President. But once the murder of our President occurred, he was very sensitive to the feelings of the Kennedy family, the Kennedy widow and the Kennedy children. He was sensitive to the President's brothers. He didn't move into the White House until after everything was taken care of. But he decided he was going to make sure the President's tax cuts went through. Naturally, there was serious involvement with the civil rights bill at that time, something many of our southern Senators--most all Democrats--did not want to pass. He knew if they brought that up first, the tax bill would never pass. It is an extremely interesting book by Robert Caro as to how the President was able to get the tax cuts through ahead of bringing up the civil rights bill and then bringing up the civil rights bill and putting pressure on Republicans and Democrats to do what should have been done many years before.
I pay tribute to President Johnson, who, of course, in the eyes of many Democrats and Republicans, had a mixed record, but he was a master in helping President Kennedy's tax bill go through. And because of that, we had a period of decent expansion.
I don't think I will ever fully understand why my colleagues on the other side of the aisle don't seem to understand the importance of cutting taxes during a time when we are in real difficulty. They still want to spend more by increasing taxes, which they never seem to use to pay down any deficits. We use them to spend more than ever before. They could take a page out of Lyndon Johnson's book and really out of the book of President John F. Kennedy, who was smart enough to know, intelligent enough to know, and caring enough to know that during times of great difficulty tax rate reductions are very important.
Mr. President, I wish we could work together a little bit better. I wish both Democrats and Republicans would get off their high horses and start to band together and work on what is wrong with our country instead of what is wanted as far as political advantage goes. Taxing 940,000 small businesses--which is what our bipartisan leaders in the Senate have said--is like asking to go into a deeper depression. It is like saying we don't care.
What is really interesting is that a lot of these taxes are going to be socked onto the people who earn less than $120,000 a year through the health care bill. And further, with regard to the health care bill, which is now considered a tax, the bottom 10 percent of all wage earners or of all people in our society are going to pay a pretty whopping percentage of the taxes that are going to be assessed. They are the ones who are going to get hit harder than anybody else.
I think our colleagues on the other side ought to really study this and figure it out. And the points I am making are from many bodies who are supposed to be nonpartisan. We simply cannot allow tax Armageddon to occur. And by using this ploy, the President is just playing politics instead of doing what really ought to be done. I think more of him than that, and I hope that I am right and that he will get off his high horse, quit playing the class warfare game, and start doing what is right for America. He would be better off if he did, I guarantee that.
Mr. President, I suggest the absence of a quorum.