Madam President, I rise today to express my deep concern about the tax increases--both explicit and hidden--in President Obama's budget and in the Democratic budget resolution before us today. Erwin Griswold, the former Solicitor General…
Madam President, I rise today to express my deep concern about the tax increases--both explicit and hidden--in President Obama's budget and in the Democratic budget resolution before us today.
Erwin Griswold, the former Solicitor General under President Lyndon Baines Johnson, and also President Richard M. Nixon, once said:
We have long had death and taxes as the two standards of
inevitability. But there are those who believe that death is
the preferable of the two. At least, as one man said, there's
one advantage about death; it doesn't get worse every time
Congress meets.
Unfortunately, this budget would lead to taxes getting worse. In fact, they would get much worse, and not just for the so-called well- off and well-connected, as the budget refers to those who are targeted for explicit tax increases.
The title of President Obama's budget is ``An Era of Responsibility-- Renewing America's Promise.'' However, this budget is irresponsible as to its implications for the next generations.
As I have mentioned before many times on this floor, I have 6 children, 23 grandchildren, and 3 great-grandchildren, and I am very concerned about their future and the future of all of our families throughout America, just as all of our colleagues are concerned about their posterity as well.
When I think about responsibility and the promise of America, I think about these next generations, both in my family and in the families of my constituents, and others, of course. This is why I am so concerned about this budget, and especially the tax burden this budget would place on the next generations of my fellow Utahans and all Americans.
This budget includes a number of tax increases, but I want to focus on just three of the major ones that would particularly affect these next generations.
Now, the Obama ``tax-orama:'' There will be a tax hike on America's industrial output and energy, a tax hike on America's job creation, and a tax hike on America's competitiveness.
During his address to Congress last month, President Obama promised:
[I]f your family earns less than $250,000 a year, you will
not see your taxes increased a single dime. I repeat: not one
single dime.
That is what he said. We have heard this promise before. However, from his first days in office, the President has proposed raising taxes and the cost of living on lower income wage earners, as well as on all Americans.
Now, how? Through the trillion-dollar-plus cap-and-trade climate change legislation that President Obama is proposing. This proposal, if enacted, would force energy and industrial companies throughout America to either pass these gargantuan costs on to their customers and employees or go out of business.
This tax on America's industrial output and energy is not even called a tax in the President's budget. Instead, it is referred to as ``climate revenues.'' However, we should not let that fool us. As the old saying goes: If it walks like a duck and quacks like a duck, it is a duck. This tax, estimated to total between $1.2 trillion and $1.9 trillion over the next 10 years, would be by far the largest tax increase in the history of the world.
It is true these new taxes might not be paid directly to the IRS or be withheld from workers' paychecks. Instead, they would be much more insidious. They would show up in the form of higher utility bills, higher costs for consumer goods, lost jobs, and a lower standard of living for everyone.
This tax hike on America's industrial output and energy--just think about it, called cap and trade--they refer to as ``climate revenues.'' Potentially, it is a $1.9 trillion tax on energy costs and an increase in the cost of living.
Well, the nasty thing about them is the American family may not even know how much they are paying--just that their standard of living has gone down.
The administration tries to tell us lower income Americans will be held harmless because the revenues from this new tax will be used to compensate them. Now, we have seen this type of compensation already from this administration, particularly in the stimulus bill.
If you look back to last year, before a Senate Finance Committee hearing, Peter Orszag, then CBO Director and now President Obama's Director of the Office of Management and Budget, admitted:
Under a cap-and-trade program, firms would not ultimately
bear most of the costs of the allowances but instead would
pass them along to their customers in the form of higher
prices.
That was before the Senate Finance Committee on which I sit, on April 28, 2008. That is what OMB Director Orszag said about cap and trade.
Well, passing these costs on to consumers is bad enough and will cause a
great deal of hardship to families and to the economy, but my question is, what happens if the firms are not able to pass these costs on to their customers? The answer is, they will go out of business and jobs will be lost. Either way the American family loses under this proposal.
As I mentioned, the President's budget says Americans will be compensated for these higher prices. However, I think a better word for the kind of compensation this budget has in mind is ``income redistribution:'' Let's take from those who have and give to those who have not. It is the same philosophy that brought us tax cuts for people who do not pay taxes.
Well, I suggest in the name of responsibility that if we want to raise taxes on Americans, let's do it in a straightforward way, where it is visible and does less damage. Raising taxes on anyone at this time of extreme economic vulnerability is a mistake, but this proposal does exactly what the President promised never to do and then excuses it by saying this is not a tax. Now, that is a bunch of hooey.
This new tax on America's industrial output and energy would be a colossal error and could cripple the ability of the next generations to reach, let alone exceed, the standard of living we now enjoy. This would be a tragedy because seeing our children and grandchildren do better than we have done is the real promise of America.
If this new tax on our industrial output and energy were the extent of the tax increases the President's budget proposes, it would be bad enough. Unfortunately, there is more bad news. The budget goes so far as to undermine and weaken the so-called stimulus bill enacted in February by calling for an increase in taxes that will affect job creation.
As we all know, the goal of all of our colleagues is to save or create millions of jobs. The explicit tax increases called for in the budget, however, would take away the very means for the private sector to perform this job creation. It would do this through increases in taxes on capital gains taxes, dividends, carried interest, and by raising the top individual rates where most small business income is taxed.
Just ask any small business owner who reports his or her business income on their own tax returns, as most do, and they will tell you if you increase taxes for the top two rates, then they will be forced to either reduce salaries or put a freeze on new hires. With nearly 200,000 small businesses in Utah, I do not think Utah can generate substantial job growth if small businesses face these tax increases. The same is true for other States. Two-thirds of jobs and small businesses are in firms with employees numbering between 20 and 499. These small businesses are the ones owned by individuals and taxed as individuals who would be targeted by President Obama's tax increases. The Small Business Administration tells us that 70 percent of new jobs each year are created by small businesses. Why in the world would we want to harm the ability of America's job-creation engine--small businesses--to help us create or save the jobs we so badly need right now? This is sheer folly.
Time and time again, research has shown that decreasing taxes on small businesses increases employment and raises wages. On the other hand, increasing taxes on small businesses hinders investment, including employment. Research by the Tax Foundation shows that raising the marginal tax rate by 5 percentage points reduces the percentage of entrepreneurs who invest by 10.4 percent and lowers their average investment by 9.9 percent. Reducing the tax rate from 39.6 percent to 33.2 percent increases the likelihood of hiring by 12 percent and raises the median wage for those hired employees by 3.2 percent.
These tax increases, which target the so-called wealthy, will miss the mark and hurt everyone, particularly those who lose their jobs or who do not get the job that might have been. The tax hike on America's job creation: two-thirds of small business jobs are targeted by President Obama's tax increases. Seventy percent of all new jobs each year are created by small businesses. These tax increases are going to hinder job growth.
Tragically, there is even more in this budget that would attack our ability to create jobs. The third leg of this assault is on America's competitiveness in a global economy. Beyond strengthening job growth for small businesses, we must also create an environment that encourages companies to invest in the United States as well as to expand worldwide to meet growing opportunities. Academic scholarship has shown that domestic companies that invest overseas strengthen their employment at home.
Unfortunately, we are moving in the wrong direction already. According to last year's listings of the world's largest companies, the so-called Global 500, only 8 of the top 25 corporations in the world were headquartered in the United States. Forty years ago, almost all of the top 25 were headquartered in America and were American firms.
This trend has a significant impact on jobs and the economy in the United States. Just this past month, several energy companies have announced plans to move to Switzerland because of that country's low corporate tax. To be frank, after looking at President Obama's budget proposal, I do not blame them. Such a move could become a matter of corporate survival if we are not careful. In fact, our system of worldwide taxation, coupled with one of the highest tax rates in the world, is enough to cause any firm to think twice about locating its worldwide headquarters here. And this is before the changes included in the Obama budget, which make the business landscape far less friendly.
How are we supposed to be globally competitive when we have the second highest corporate tax rate in the world? Our corporate tax rate is currently at 35 percent, second only to Japan's, with the average global corporate tax rate around 26 percent. It is no wonder that many companies in the United States are looking elsewhere. These are tax hikes on America's global competitiveness. Think about that. Domestic companies that invest overseas strengthen their employment at home. The United States is one of the few major nations to tax companies on worldwide income. The average global corporate tax rate here is 35 percent. We are the second highest in the world, second only to Japan.
The President believes our Tax Code includes incentives for U.S. businesses to ship jobs overseas, and the budget includes vaguely defined proposals that would supposedly put an end to this practice. However, the evidence shows that our tax laws do not lead to U.S. job loss but to increases in U.S. employment when companies invest overseas.
In summary, the Obama budget for fiscal year 2010, along with the budget resolution before us today, is a three-pronged assault on American job creation through new taxes on America's industrial output and energy, tax increases on America's job creation for small businesses, and tax increases on America's competitiveness. This assault is a huge contradiction to the stated goals of the President to create or save 4 million jobs. I know he is sincere and believes he can do that, but not with this budget. While it is true that most of these tax increases will not hit until 2011, this is likely to be just as dangerous a time for these job-killing tax hikes as 2009 would be. Most economists believe that if we are lucky, we will just be beginning to recover from this ugly recession in 2011. Instead of these antigrowth policies, we should be enacting policies of support, investment, and growth.
The great American satirist Ambrose Bierce once described responsibility as:
A detachable burden easily shifted to the shoulders of God,
Fate, Fortune, Luck, or one's neighbor. In the days of
astrology it was customary to unload responsibility upon a
star.
In President Obama's budget titled the ``Era of Responsibility,'' President Obama is attempting to unload responsibility on future generations. This is the wrong way to go. I hope we can make some changes to the budget this week that will help us grow the economy instead of growing the size of the Government. A stronger economy is the best legacy we can leave to the next generation.
I yield the floor.
Madam President, if the Senator will yield on that.
I understand the nominal rate argument. The problem is that we are talking about taxing the corporate profits that are earned overseas. No other major industrialized nation in the world does that. If they do that, they make us globally uncompetitive.
In just the last couple of weeks, I have been trying to raise money for the National Republican Senatorial Committee. As I have called around, it is amazing to me how many corporate executives have said to me: We love this country. We want our companies to grow in this country. We want to be able to stay here.
Some of them are second-generation folks. But I have had a number of them say that if we do some of the corporate tax changes and some of the tax expenses that are assessed in this bill, they will move. One in particular said: I am going to have to move my company to Switzerland because we will not be competitive if that particular budget passes.
Now, I believe we can make arguments that the nominal rate may be something that must be considered, and I think it should, but I don't think you can argue against the fact that we are doing some very stupid things in this budget. Frankly, in the end, we might wind up having a lot more difficulty and we may lose even more of our major businesses because to be competitive they will move, and a lot of them have already moved.
So let's wake up around here and let's realize that--look, I respect the distinguished Senator from North Dakota. He has one of the tougher jobs--he and our colleague, the Senator from New Hampshire, Judd Gregg, have one of the tougher jobs in the history of the country. Doing these budgets is very difficult with some of the problems we have. But I have listed three things that are going to sock corporate America like you can't believe. Frankly, one of them is the third point on the prong, and that is taxing corporate profits overseas. It is just a matter of reality that if we do this, we are going to reap the whirlwind. It is just that simple.