Mr. Speaker, an interesting week out ahead. As we begin this week, as we look at the budget for the United States of America, as we look and prepare to deal with the tax cut issue, we really ought to start that discussion with a clear…
Mr. Speaker, an interesting week out ahead. As we begin this week, as we look at the budget for the United States of America, as we look and prepare to deal with the tax cut issue, we really ought to start that discussion with a clear understanding of what our goal is.
I often use this when I talk here on the floor because it is foundational. It is foundational to what I believe we should use to test the various pieces of legislation that come before us. This
would certainly be applicable as we look at the question of the Republican budget, which will be on the floor in the next couple of days, perhaps as early as tomorrow, and, of course, the tax cuts beyond.
Here it is. This is from Franklin Delano Roosevelt--FDR. This is actually etched into the marble at the memorial for Franklin Delano Roosevelt. I came across it one day, and I think it is a very good criteria to judge.
Franklin Delano Roosevelt said: ``The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.''
Using this as the criteria to judge the Republican budget and the upcoming tax reform or tax cuts, we would have to judge both as a miserable failure. We are looking at a situation in which somewhere between $2.5 trillion to $5 trillion of revenue will be removed from the Federal Government. That is about somewhere between $250 billion a year to $500 billion of revenue.
It doesn't mean a thing until you translate that into real programs. Keep in mind that to reduce the revenue of the Federal Government somewhere around $500 billion a year, you would have to remove 80 percent of the total money spent by the Department of Defense in all of the wars and all of the programs that they do in order to make up for that lost revenue.
Alternatively, you would have to reduce almost all of the other discretionary funding. No, we wouldn't build a wall. In fact, we would have to fire all of the immigration authorities. The TSA would no longer be in our airports. There would no longer be any educational programs. There would be no programs dealing with all of the Coast Guard. There would be no programs for the Department of Homeland Security or the Department of Transportation.
$500 billion of reduced revenue is possible as a result of both the budget, as well as the tax proposals that are coming before the House and the Senate in the days ahead. It may be just half that so we don't have to reduce all of those programs.
This is a monumental, critical issue upon which, if we were to use this as the criteria to judge it, we would say: Wait a minute. What about national defense?
Or we would say: Wait a minute. What about all of those programs that are necessary for our children, like the School Lunch Program?
It is critical that we analyze this carefully.
What does it do for the wealthy?
Well, let's take a look at that.
Now, given that the proposals are not yet defined down to the line and the text--but we do know from a general outline of our Speaker's previous proposals when he ran the budget here in the House and when he was the chairman of the Ways and Means Committee; and we have also President Trump's proposal--if it is the Ryan-McConnell-Trump proposal--it is the billionaires-first tax plan. It cuts the taxes for th wealthy. Eighty percent of the $2\1/2\ trillion to $5 trillion reduction winds up in the hands of the top 1 percent of Americans. Incredible.
At the same time, what does it do for the rest of the public?
Well, if you take a look at the detail in the budget that did pass this House and will be up for a vote in the very near future, it reduces Medicare and Medicaid by as much as $2 trillion. So you have got a reduction in revenue to be made up by a $2 trillion cut in Medicaid and Medicare.
Who receives Medicaid?
Across the United States, it is the working poor, and 60 percent of the total Medicaid budget is for seniors in nursing homes.
So what we have here is a tax policy that cuts the taxes for the wealthiest of America's, the great 1 percent. They get 80 percent of the tax reductions. The rest of the public, 99 percent, will somehow share in the remaining 20 percent of reductions.
Sounds like a bad deal?
It certainly is, if you are to compare that against what Franklin Delano Roosevelt said should be our criteria for judging legislation.
Now, it will be argued that the middle class will receive a tax cut. Well, some, perhaps, but not many. The majority of the middle class will actually receive a tax increase.
How does that happen?
The elimination of the deductions, State and local taxes, and other gimmicks that they have in it. So a family of four making somewhere around $50,000 could see their tax bill increase by as much as 380 percent.
Whoa. Wait a minute. Wait a minute. What are we talking about here?
We are talking about a tax plan that does not even come close to meeting this criteria of judgment.
Does it do more for the wealthy?
Oh, yes. Oh, yes. We are talking about trillions of dollars of tax reductions for the corporations and the superwealthy.
And what does the rest of the country get for those who have little?
They get even less.
So what we have here, when you consider that they are proposing as much as a $2 trillion reduction in Medicare--we are talking about the healthcare system for seniors--and Medicaid--the healthcare system for, again, seniors in nursing homes--about 60 percent of that money goes to those seniors. The remaining 40 percent goes to the working poor and the poor.
That alone, together with this transfer of the tax reductions for the superwealthy, amount to the largest transfer of wealth ever in any legislation that has been proposed, and hopefully will not pass, but has been proposed in this House. It is even a greater transfer of wealth than we saw in the effort to repeal and replace the Affordable Care Act.
Beware, America. Be wary. The hucksters are promising something that they are only going to deliver to the superwealthy and to American corporations.
One more point I would like to make here is that often you will hear the argument that cutting corporate taxes will somehow lead to more jobs and that the employees will receive more benefits. Well, it turns out that a cut in corporate tax rates actually comes back to the top 1 percent. They will receive about 34 percent of the tax reductions that go to corporations.
I have heard this argued by our Treasury Secretary, that if we are somehow to cut corporate tax rates, we will see the corporations investing in their workers.
Wow. Wouldn't that be great?
So we cut the corporate tax rate from some 35 percent down to 10 percent, or maybe 15 percent, as our President has suggested. All of those reduced taxes will flow to the corporation's bottom line after tax profits will increase, and, wow, they will create jobs, they will pay higher wages.
What are the facts? What are the facts here?
Well, first of all, most of it will not wind up in the pockets of the workers. It will wind up in the top 20 percent of taxpayers, of which 34 percent of that will be the top 1 percent. So, once again, if you look at the corporate tax reductions, it is going to wind up benefiting the wealthy, not the workers.
There is another fact out there. In the 1970s, American corporations would invest about 50 percent--maybe slightly more than 50 percent--in capital improvements, building new factories, expanding the work floor, expanding the workers, workers' wages, benefits, and research and development. It is right there.
If you take a look at the Fortune 500 in the 1970s, well over 50 percent was reinvested in American jobs, American workers, expanding the factory floor, expanding the business, expanding research and development, and growing the corporation.
A remarkable and extremely important thing happened beginning in the 1980s, at about the time of the Reagan tax cuts, and continuing on, and is in place today. That has shifted.
Today, American corporations do not invest in America, they don't invest in new capital, and they don't invest in R&D. Ninety percent of the after-tax profits in the Fortune 500--most of the Fortune 500, or many of them--wind up in stock buybacks and executive salaries or overseas, not in American jobs.
If you are wondering why the American middle class has seen a flat and actually declining share of the GDP, it is because American corporations have shifted from investing in American jobs, American planting equipment, research and development; and they have shifted into manipulating their stock
price by buying back their own stock, using the after-tax profits, some 90 percent of it, for executive salaries and for stock buyback.
If you have got 100 stocks out there and they are valued at $10 apiece, you buy back 50 percent of the stock, guess what. You have doubled the stock price. By creating more jobs? By creating more profit. By increasing wages? By R&D? No. By manipulating your stock price by buying back that stock.
Now, maybe there is somebody who would like to debate this point. Come on down. Let's debate it.
The reality is just as I said. It is laid out there.
Oh, there is another fact. One of America's largest corporations, the CEO said: Not to worry. You reduce my company's tax rate, and I will invest in our workers. I will invest in new plant and equipment.
Interesting. In the last 8 years, the tax rate for AT&T is about 8 percent--not 35 percent, not 20 percent, not 15 percent, but 8 percent--and yet during that period of time, AT&T laid off 80,000 workers.
So you are going to tell me lowering a major American corporation's tax rate is somehow going to lead to more employment, more jobs? Then tell me why AT&T, that has an effective tax rate of 8 percent over a 7- , 8-year period of time, laid off 80,000 people. So let's argue this point. Let's see what is going on here.
We have before the House of Representatives and the Senate a fundamental question: Are we going to transfer even more wealth to the superwealthy by reducing their taxes and pushing off to the working men and women of America, the middle class, a higher burden?
Along with that, we either increase the deficit by $2.5 trillion or $5 trillion, depending upon how this finalizes--that is the tax reduction; that is the lost revenue to the Federal Government--or are we going to make massive cuts?
I am telling you what our Republican colleagues are promising us. Massive tax cuts for the superwealthy. The top 1 percent will get 80 percent of the tax reduction benefits, the remaining 99 percent of Americans will have to figure out how to share the small remaining 20 percent.
The probability associated with those tax cuts, a significant reduction in programs that serve seniors--Medicaid, in nursing homes, the working poor, the Medicaid expansion program wiped out, Medicare reductions, all of these things--and quite possibly reductions in children's health programs, school programs, school lunch programs, environmental support programs, clean water programs, transportation programs, all the rest. So a tax cut for the wealthy is going to be a burden on American workers.
Once again, if it happens, it will be the largest transfer of wealth from the working men and women of America to the superwealthy, as if we already do not have income inequality in America. It can be calculated that the income inequality in America today is the greatest it has been in any country for the last 500 years, dating back to when Spain was ripping off the Western Hemisphere taking all the gold, all the silver, anything else they could find, and transferring it to the Spanish Government, to the King and the Queen and their favorite folks. Income inequality is real.
There are many, many pieces of this puzzle that we need to understand. One of them is the way in which certain States that have heavy burdens because they are urbanized States will be particularly impacted by the proposals that we have seen.
Joining me tonight is the Representative from one of those States, New Jersey.
Mr. Payne, would you like to comment on this extraordinary transfer once again that is in this piece of legislation, the way it harms your State and my State?
Mr. Payne, thank you so very much. You made a very, very important point, and it is one I know your State and Representatives from your State are very aware of, and we are in California.
You said that for New Jersey here, you pay $1 in taxes to the Federal Government and you get back 77 cents. It turns out that California is in the same situation. We pay $1. I think we get back somewhere around the same, 70 percent back from the Federal Government.
Similarly, the other States, upper Midwest, this area, Nebraska, Colorado, Minnesota, these States also wind up paying more. Then over here, Illinois and New York, Massachusetts, it looks like, and New Jersey down here, Connecticut, also, these States wind up paying more.
It turns out that the program proposed by the Republicans is to further harm these particular States by taking away--these are high cost States. They have big populations, and they have expenses that are associated with those large populations.
They, the Republicans, want to eliminate the State and local tax deduction, which, as you said, not only burdens the individuals, but it is going
to be seriously harming these particular States. Already, these States are paying more.
If they are successful, they, the Republicans, are successful in eliminating the State and local taxes, the tax burden on these particular States, the big States, is going to go up, and the benefit will continue to flow to the States with lower populations. And you can see that on this map, because the rest of the Nation is red, meaning they receive more money than they pay in taxes.
So this is a particular problem. I am not going to say this is the only problem because you raised the issue, also, of the top 1 percent getting 80 percent of the tax break, but this is a very interesting map that is really not understood by our colleagues here.
Down here in Alabama and Mississippi, Louisiana, Florida, and so forth, relatively low tax States, they are actually subsidized by the high tax States; and so the elimination of State and local taxes increases the taxes on the high cost States already, who are already paying more than they are getting back from the Federal Government, so their burden is further increased.
We have got a fight on our hands.
So we are ready.
Well, exactly so. This proposal that is going to be before the House very soon will simply make this inequality between the States even worse.
Now, in Texas, this horrible problem down here in Houston, terrible-- similarly, with Florida--there will be even greater money flowing to those States that have seen these natural disasters, and so this is probably going to get even more so. If they are successful in doing away with the State and local tax deduction, this will become even more onerous for people in my State.
Frankly, I cannot understand how my Republican colleagues from California could possibly support something that would substantially increase their constituents' taxes. So we will see.
It is an interesting map. I came across it not too long ago, and I think I will use it even more.
I appreciate and thank Mr. Payne for joining us tonight. I am going to keep putting this back up here.
What are we here for?
The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have little.
I am going to toss another thing up here. Included in this Republican program is the elimination of the estate tax.
If you want the wealthy to get even wealthier, then you move forward with the proposal that would shift the tax burden to the working men and women and away from those who are superwealthy. It has been said in an article in The New York Times that our President, under these proposals that he has put forward together with Mr. Ryan and Senator McConnell, that he would receive a billion-dollar reduction in taxes.
We don't have his tax returns so it is hard to say that that is the case, but based upon past tax returns, it appears as though, yeah, one of the beneficiaries of all of this tax reduction is the President and his Cabinet. His Cabinet is made up of some of the wealthiest people in America, and they are not only going to receive a huge tax cut if it were to go forward and as proposed today, the 400 highest income taxpayers whose incomes average more than $300 million a year--and I think that is probably most of the Cabinet, and certainly the President has been in that if he is not there today--that range of income would get an average tax cut of at least $15 million. That is enough for a few rounds of golf.
There is another piece of this puzzle, and I want to put this one up here. We are going to hear a lot of discussion about the estate tax and how somehow the estate tax harms American families, particularly American farmers.
Now, I represent a very large agricultural district, and I said let's do some research and see across the broad breadth of America. Is it the American farmers that are harmed by the estate tax?
It turns out that, yeah, there are some American farmers that are going to have to pay estate tax. There are 50 of them. There are 50 American farm families that would now be burdened by the current estate tax. Thousands upon thousands, millions of small farmers out there that the estate tax will never even come close to touching. It is $5.6 million of estate value for one, the spouse--another 5,000--so you have got $11.2 million for the family. It turns out it affects, perhaps, 50 families across America. The estate tax itself really only affects 5,200 families.
When you hear all this talk about the death tax or the estate tax, as it is really called, ask the question: Who does that affect?
Well, it certainly affects at least the President, Mr. Speaker. It affects the President and many members of his Cabinet. I can think of four right off who would be burdened by having to pay the estate tax. It is about $20 billion a year that is involved here.
So you have got 2.7 million estates of which just two-tenths of 1 percent would actually be affected by the estate tax. So don't get all excited, America, about eliminating the death tax, unless you want to see the programs on which you depend: education, childcare, children school lunch programs--if you are worried about the border, you are worried about the Homeland Security agency and their ability to provide those men and women. So it is about $20 billion a year that would be eliminated from the Federal tax base if the estate tax were to disappear.
If you care at all about income inequality, then you better keep the estate tax. Eliminate the estate tax, then the rich will get richer and the poor will get poorer, and we will see even greater income inequality in the years ahead. So we have got some very heavy lifting to do here over the next couple of weeks.
Before I come back and end this with Franklin Delano Roosevelt, I would just say that the Democrats in this House and in the Senate really want to have tax reform. We want to reform the tax system. We know that the corporate tax rate of 35 percent is the highest in the world, or at least the industrialized world, and it does need to be reduced.
We also know that there are very few corporations that actually pay the 35 percent. They are clearly burdened by a higher tax rate. We want to lower that tax rate. We want to do it in a way that encourages investment in the United States; that we go back to those days in the 1970s and early 1980s, when American corporations actually invested in expanding their business in the United States; that they would invest in capital formation, in plant and equipment, and hiring workers and paying higher wages, and engaging in research and development. There are ways we can do this in corporate tax reform.
For example, we could provide a faster write-off depreciation for investment in American research and development, in American factories, in plant and equipment. We might even structure it in such a way that we would provide an immediate 1-year or 2-year write-off depreciation of capital equipment placed in American factories that was made in America. If you want to buy Chinese equipment for your factory, well, you are going to have to depreciate that over 15 years.
There are ways in which--some very simple ways in which we can encourage corporations to invest in America by modifying the depreciation schedules. If it is an American-made piece of equipment, a Caterpillar tractor that is
manufactured in America, write it off in 1 year.
You want to buy a Kubota manufactured in Japan?
Okay. You can write that off in 10 years.
In other words, a positive encouragement for American-made equipment is just one of many examples. As we bring down the corporate tax rate, we build into it very specific things to build the American economy. There are other things, and certainly the wages are part of this, R&D, and all of the other elements. We Democrats want to engage with our Republican colleagues in that kind of tax reform.
On the personal income tax side, yes, we are willing to talk about the tax rates, but we don't want to see the tax cut benefit go to the superwealthy that are already doing extraordinarily well. We want that benefit to go to the working men and women of America. We can expand their deductibles, and the Republicans are talking about that, but it is done in a limited way. And when you add back into it the elimination of State and local income tax and other things that they are talking about doing, it turns out that a very limited number of middle-income and low-income taxpayers are going to benefit, and many will find their taxes go up. We think that is wrong.
As we look at this on the personal income tax side, we want to make sure that we are able to structure those personal income tax changes in such a way as to simplify, absolutely, and eliminate a lot of scurrilous deductions that only benefit the rich and the wealthy, and come to a program that is simpler, more straightforward, and really benefits the great American middle class, or as the President likes to say, let's make the middle class great again. We can do that through tax policy. That is what we want to do.
I am telling you where we are headed today. We are headed today in a program in which our Republican colleagues are going to ignore our Democratic participation in this democracy, and they are going to ram through their own version of tax reform, which is simply a monumental tax decrease for American corporations, many of which are offshoring jobs. I can come back to that in a moment, and the high-income Americans as their taxes are reduced and their estate tax is eliminated. We think that is wrong, but they are not asking us how we can work together. They are not asking us to work with them.
They have structured it through the budget deal that they can do it with 51 votes in the Senate, totally ignoring the Democratic Senators, and here in the House of Representatives, following a tradition that has been underway for several years now of simply writing a tax bill on their own, writing a repeal on their own, and ignoring the Democrats who we believe have a better deal for Americans.
We believe that there is a better deal, that we can increase American pay by writing a corporate Tax Code that encourages investment in America, that encourages investment in workers, in worker training, worker preparation, and all the technical skills that a modern American economy needs. Yes, we do know there is a better way in writing the Tax Code. We also know that we can write a Tax Code that would lower the cost for those American corporations, businesses, and farmers who are investing in America. I have given some of those ideas already here a moment ago.
Finally, we know that there is a better deal for Americans when we provide the tools for the 21st century, and this has to do with those tools of training and retraining so that the American workers are prepared to take the jobs that are out there.
How do you repair that robot that has replaced you on the manufacturing floor? How do you repair it? How do you program it?
That is a skill set that Americans are going to need.
In my area, we have pharmaceutical companies that are technologically driven. Their laboratories need to be staffed by American workers who understand the intricacies of biology and the biotechnical industry, which is emerging in my district and in California. That is a skill set.
We know that there is a better deal for Americans. We know that there is a better way for tax reform. We know that there is a necessity in America to build the infrastructure, the foundation of economic growth. But we also know that if our Republican friends are successful in reducing Federal revenues by somewhere between $2.5 trillion to $5 trillion, this is their proposal, revenues reduced by that, we will not have money for training American workers. We will not have money for the infrastructure investments, which are necessary to repair our bridges, build our roads, our airports and the like so that we have a foundation upon which the economy will grow. We know that.
We have to persuade our Republican colleagues, so we are going to have to rely on the American people, just as we relied upon you when the repeal and replace legislation was before the House of Representatives and the Senate.
The American public said: Whoa, whoa, wait a minute. This is a bad deal, not a better deal, but a bad deal for Americans.
So the tax reform or the tax cuts that are before us in the next weeks--the next 4 weeks--are a bad deal for Americans, and we are going to have to rely upon the American public becoming aware of what is going on here in Washington, and then speaking out and saying: No, no. Time out, folks. You are not going to screw us again. You are not going to do that again. We don't want the wealthy to get wealthier while we get poorer.
So the American public, I would expect, will say, ``No, no way,'' just as they did when the great repeal and replace legislation was before Congress just a month ago.
Mr. Speaker, I have covered the issue for the night, but I want us all to remember that the test of our progress is not whether we add more to the abundance of those who have much; it is, rather, whether we provide enough for those who have too little. It is etched in the monument and the marble of the FDR Memorial, and it is a pretty good test of our progress here.
Mr. Speaker, I yield back the balance of my time.