Tax Reform

Floor Speech

BREAK IN TRANSCRIPT

Mr. WYDEN. Mr. President, The Senate has come back to a full-throated debate about the comparative benefits of the tax policies of George W. Bush and Barack Obama. We turn on our cable TV these days and hour after hour there is a great deal of analysis of which approach is better on one factor or another. I want to take a few minutes today to point out that I think that debate misses the point because either of those tax approaches--of George W. Bush or President Obama--in my view would anchor our country to an insanely complicated, job-killing, thoroughly discredited tax system. I think what is important is that the Senate begin work moving toward a tax system that can create, as I put up here and will walk the Senate through, at least 2 million new jobs per year.

The fact is, in this discussion comparing the George W. Bush policies and
the policies of President Obama, one side may end up winning, the other side goes away unhappy, but under either approach the taxpayers of this country will lose, will continue to lose as a consequence of this flawed and discredited tax system. For example, under either approach--under policy advanced by President Obama or the ideas George W. Bush saw enacted into law--we would still have 3.8 million people working the equivalent of full time, trying to comply with our tax law. Under either of those approaches, that of President Bush or President Obama, we would still have Americans spending 7.6 billion hours complying with tax law at the cost of $200 billion a year. That is why I say the taxpayer loses under either of those approaches.

How can you make the case to the American people, whether they are in Illinois or Oregon or anywhere else, that you want to anchor them to a system that is not doing enough to create jobs, certainly will not give us the opportunity to create 2 million new jobs, and on top of it will force 3.8 million people to work the equivalent of full time to comply, racking up 7.6 billion hours and the expense of $200 billion annually, simply to comply?

The question is, is there a better choice? I submit this afternoon that there is a far better choice and it has bipartisan roots. The better choice is to pick up on the work that Democrats and the late President Reagan did in the 1980s when they came together. A Chicagoan, you will recall, was very involved, the late Dan Rostenkowski, and he said the enemy is not the other party. The challenge is to go after the scores and scores of special interest tax breaks that are tax expenditures, really tax earmarks as I would call them, that consume hundreds of billions of dollars and keep us lowering the rates for the middle class and small businesses and those who manufacture in the United States.

I think the relevant comparison is not George W. Bush against Barack Obama. The more relevant measure is what happened when Democrats and Ronald Reagan worked together in the 1980s, as opposed to what happened between 2001 and 2008 when tax policy was partisan. Let me lay out for the Senate those specific numbers.

When Democrats and Ronald Reagan worked together to reform the Tax Code in the 1980s, payrolls expanded by 17.6 percent and the economy grew by 16 million jobs. By contrast, when tax policy was partisan, between 2001 and 2008, there was 2.3 percent payroll expansion, 3 million new jobs, and real median income fell by 5 percent. So why in the world would it make sense to go back to the tax policies where, when you look at the numbers in terms of payroll expansion, new jobs and real median income, growth was not what the people of Illinois and the people of Oregon and the people across our land ought to expect.

I am of the view, now that the people of this country have spoken that they want to see this Senate create more real good-paying jobs and fix problems, the first thing we ought to do is look at what worked. We especially ought to look at it when it has bipartisan roots, as we saw in the 1980s with Democrats and Ronald Reagan. I believe that Congress can now, picking up on what they did during that time--clean the clutter from the Code, broaden the tax base and lower tax rates to give the people of this country a simpler and fairer tax.

Also, in the 1980s, by cutting marginal income tax rates--and again this was Democrats, some of the most stalwart Democrats in the history of our party: Dan Rostenkowski, Dick Gephardt--stalwarts of the Democratic Party worked with Ronald Reagan to cut marginal income tax rates to create more jobs and more investment, rather than handing out tax preferences to special interest groups. A quarter century later we find ourselves, today, with a tax system that you can only describe as a mess, a dysfunctional mess where even specialists in business in and IRS regional offices have trouble sorting out the implications of what one provision or another would mean.

Given the fact that since the last time Congress moved in to drain the tax swamp--given the fact it has been a quarter century, Senator Gregg and I--he, of course, is the ranking Republican on the Budget Committee--spent more than 2 years, and our staffs week after week, seeing if we could come together and put forth a bipartisan tax reform bill. We have done that. I am very pleased to be able to report this afternoon that the two chairs of the Deficit Reduction Commission, Erskine Bowles and Alan Simpson, said that a version of what we proposed--certainly not all the things we would agree with but a version of our proposal--should be one of the options considered by the commission and considered for the country to debate.

Given that, I want to take a few minutes and outline some of the key provisions we pursued in our bill. It is S. 3018. We all know that anybody having any trouble sleeping at night can wade into a tax bill and you can conk pretty quickly, but S. 3018 is an attempt to pick up on some of the most important policy work done, in my view, by the Senate led by Democrats and Ronald Reagan in the 1980s. What Senator Gregg and I do is end scores of preferences so as to be able to give tax breaks to the vast majority of working families instead of handing them out to a small number of narrow special interests who have incredibly talented lobbyists who can spend their day outside the Senate Finance Committee room. We take away those breaks and use that money to give real tax relief to millions of working class families.

We take a special initiative to focus on job creation that will make us more competitive in tough global markets. I want to take a minute to describe exactly how this works. I am sure that when the Presiding Officer of the Senate goes to a supermarket in Illinois, as I have in Oregon, one of the first things somebody will say, when you start visiting about the work of Congress, is take away those tax breaks for the businesses that are going offshore. Go get rid of those. They will say that to the distinguished Senator from Illinois and myself and everybody else. You hear it every single day in any coffee shop, any grocery store, where people are talking about government and politics.

Then of course we go out and visit with our companies and the companies say: We have to have those tax breaks because America has the second highest rate in the world. If we do not have those tax breaks for doing business overseas, we are going to lose out on jobs here in the United States because some of that work our firm does overseas helps create jobs here in America.

We know from those conversations we have had in Illinois and Oregon that our blue collar people don't buy that; they don't buy that for a second. They want to have the tax breaks for shipping jobs overseas wiped out. What Senator Gregg and I did--and this lasted many months--is we said to the companies: How can we work with you to take away the tax breaks for doing business overseas so you can use those very same dollars to lower the tax rates for small businesses and manufacturers that operate in the United States and have dollars for tax relief for the middle class.

As a result of that, we arrived at a policy that takes away the tax breaks for doing business overseas but we lower the tax rate dramatically for manufacturers and small businesses that operate in the United States.

Our big businesses are called C corporations. Most businesses of course pay taxes as individuals or partnerships or limited liability firms, but for our biggest companies when they manufacture in Illinois or Oregon or anywhere else in the country, in the United States, we lower their taxes from 35 percent to 24 percent, creating a dramatic new incentive for manufacturing and business in the United States that can let our companies be more competitive in these tough global markets.

We all understand that a firm in Illinois or Oregon is not just competing against another State a few hundred miles away, we are competing against China and India. I think this provision that Senator Gregg and I have laid out in our proposal--a modified version of that has been recommended by Mr. Bowles and Mr. Simpson--is one that can bring our country together, bring our parties together. Senator Gregg, a Republican; myself, a Democrat, worked for several years on this with business folks, with labor folks.

When I talk to labor folks--and I have at length--about taking away the tax breaks for doing business overseas and using that so we can have a rebirth of American manufacturing, they say that is the kind of tax cut for business I can be for. We have to bring back manufacturing. Manufacturing is not just a basic industry, it is a national security priority. I think the approach Senator Gregg and I have proposed, a version of which the deficit commission has picked up on, is the path to use.

The Heritage Foundation--and I will confess that I do not quote the Heritage Foundation every single day here on the floor of the Senate, although I have a great deal of respect for their professionalism--said the approach that Senator Gregg and I have produced will create 2 million new jobs per year. In fact, they said it would create 2.3 million new jobs per year, increase disposable income for a family of four by $4,000 per year, and boost the real gross domestic product by an average of $298 billion per year.

So the point is, at a time when we have been through a heated and certainly contentious election, I think there is an opportunity to move forward, and particularly on what has been a central concern of the American people, which is creating more jobs, having an economic system that lets us compete in these tough global markets, and helping our people to get ahead, helping all of our people to get ahead.

If there is one theme in what Democrats and Ronald Reagan did in the 1980s and what Senator Gregg and I seek to do now, it is let us have a tax policy that gives everybody a chance to get ahead. If you are somebody in Illinois and Oregon, and you did not have much in the beginning of your life, we want policies that will give you a chance to get ahead. If you have been fortunate enough through your hard work to be successful, we want policies that will make that possible as well.

That was done when Democrats and Ronald Reagan cooperated in the 1980s. And, boy, what an unlikely group of people, President Reagan, a rancher, a star in the movies, working with Senator Bill Bradley of New Jersey. He has a lot better jump shot than me, but I also know the value of teamwork. So there is another tall Democrat on the Senate Finance Committee who would like to work on bipartisan tax reform.

We have an excellent chairman, Chairman Baucus, and Senator Grassley. They have already had one hearing on this issue. There is a lot to work with on this tax reform issue. By the way, there is another group in addition to Erskine Bowles and Alan Simpson who have weighed in essentially behind the ideas Senator Gregg and I are talking about.

President Obama had a tax reform commission that recently came in--it was chaired by the distinguished Paul Volcker--that made a very substantial case for simplifying the Tax Code to ease the burden on workers and families and businesses.

Senator Gregg and I looked at the Volcker Commission proposals, ending the alternative minimum tax, increasing the standard deduction, consolidating incentives for savings and retirement, allowing taxpayers to ask the IRS to fill out their tax forms for them. Those were all recommendations by President Obama's commission, the Volcker Commission, that are part of the proposal that Senator Gregg and I have put together, now 318: get rid of loopholes, get rid of the giveaways to special interests, and you can keep down rates and provide tax relief to the vast majority of workers and families and businesses.

In closing, there is a recipe for economic growth that is available to the Senate, a recipe for economic growth that has already been shown to work. What Democrats and Ronald Reagan did in the eighties proved that bipartisanship can create economic growth, help stimulate the creation of badly needed jobs, and rein in the deficit.

So why in the world would we want to pass up the opportunity on a bipartisan basis to drain the tax swamp? Why would we pass up the opportunity to clean the tax house? Do we want to say this--and this is true. This is key to the discussion we are going to have all through this session if we go with either the approach of George W. Bush or Barack Obama. We will continue to see the full-time work of 3.8 million people doing 7.6 billion hours to comply with the tax law at a cost of $200 billion a year.

Would not the people of Illinois--I know they certainly feel this way in Oregon--rather see $200 billion devoted to real progress in this country, improving our roads and bridges and our transportation system, and creating a public education system that is going to let us get those high-value, high-wage jobs and compete in these tough global markets? And you will have money left over to reduce the deficit which, of course, is why all of this was attractive to Erskine Bowles and Alan Simpson because they head up something called the Deficit Commission. Obviously, there is another big cost to all of this, this tax mess; that is, to the morale of our citizens and their sense of fairness.

Because this tax system is so insanely complicated, ordinary taxpayers make mistakes, they overpay their taxes, they underpay their taxes, they get audited. But they are very much aware that the sophisticated taxpayer can go out and employ a legion of lawyers and accountants, and if that does not work, they will get lobbyists to kind of play around with their loophole and avoid taxes. That is not fair, and the ordinary taxpayer knows it.

Even with their savings and home equity tapped out, we know hard-working middle-income folks will pay their fair share. But they sure resent the tax system that rewards elaborate tricks. I am of the view the message from this election is for Democrats and Republicans to get down to work, and the Tax Code is a good place to start.

I said to folks in Oregon during the campaign, I do not believe either party has a monopoly on good ideas. I am prepared to work with anybody in the Senate with a good idea for moving us forward, especially when we can create 2 million new jobs per year.

One of the reasons I wanted to begin this special postelection session this way is that I think on this tax issue, what is especially striking when we are having this intensely partisan debate about how to go about keeping a discredited tax system, there is something out there that will produce more good-paying jobs and could be bipartisan. So the real work on taxes for this special session seems to me to create a bridge to real tax reform, a bridge to tax reform that works. The Tax Code is so complicated today that the typical person cannot even use the relief that is given to them.

Each Spring the Internal Revenue Service publishes something called the annual ``oops list.'' This is the list of the 10 most common mistakes that taxpayers make when they are filing. That ``oops list'' released in March included President Obama's Making Work Pay tax credit which was created to boost the economy and give working Americans a credit worth up to $400 for individuals and $800 for couples. Yet this year's ``oops list'' reported that many of the people who worked in 2009 could not figure out how to claim the Making Work Pay credit on their 1040 EZ form. That is not easy enough. In fact, if you and I walked the streets of Illinois and Oregon and asked anybody about the stimulus legislation, virtually no one would think that there were hundreds of billions of dollars' worth of tax relief in that bill.

They would say to the distinguished President of the Senate, as they have said to me, that was a spending deal. It is called the stimulus. There was not any tax relief in it. The system was so complicated that even with hundreds of billions of dollars' worth of tax relief in it, people could not sign up for it, people could not figure it out, and it makes the ``oops list'' for the Internal Revenue Service.

The Chair has been patient, this afternoon. I close simply by saying, I believe it is time to clean house as the Congress did in the 1980s working with President Reagan, purge this spider's web of tax breaks, kill the special interest goodies, and hold down the rates so that everybody can get ahead.

Let the small businesses, as Senator Gregg and I advocated, expense all of their equipment and inventory costs in a single year, freeing up capital so they can expand and create jobs. Let's limit the dead weight cost of taxes as the Heritage Foundation said in their report, indicating our bill would create 2 million new jobs.

Our 1040 form is 27 lines long--27 lines long. Back when we started this push, one of the financial magazines, one of the best known magazines, had some of their people, for a typical taxpayer, fill out their taxes with a form that was like ours. It took them 40 minutes.

Think what that is going to do to change Americans' springtime when everybody is filing their returns in April. Talk about family values. We could actually get people a little more time with their families rather than filling out all of these forms and Turbo Tax and everything else.

This is going to be an important session that begins today, and nobody is sure exactly how long it is going to last. But what we know is that there is going to be an extensive discussion about taxes, and I just hope our colleagues will zero in on the fact that under either of these approaches that are being discussed, that of George W. Bush or that of Barack Obama, either of them will anchor this country to a grotesquely complicated, job-killing, discredited tax system.

We can do better. We know we can do better because in the 1980s, with leadership from a Republican President and Democrats in Congress, we did better. It created millions of new jobs. We can do it again.

I yield the floor.

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