(202) 224-4515 Katie Niederee, Julia Lawless
Hatch: Tax Reform Means More Investment in America
WASHINGTON – In a speech at the American Enterprise Institute (AEI) today, Senate Finance Committee Chairman Orrin Hatch (R-Utah) emphasized the benefits of the new tax law, pointing to Americans receiving bigger paychecks and businesses increasing investment in the United States. Hatch delivered the remarks at the AEI’s “Assessing the Impact of Tax Reform” event.
“For too long, American job creators, both large and small, were forced to operate under the weight of a burdensome and arcane tax code. In working on tax reform, fixing that problem was another one of our chief goals. And, on that count, I believe we were successful,” Hatch said during his remarks. “Foremost among the many business tax reforms we enacted is the reduction of the corporate tax rate from 35 percent – which was the highest in the industrialized world – down to 21 percent, which puts us roughly on par with most of our international trading partners. “
Hatch continued, “We also finally did away with the individual mandate tax established under Obamacare. This was one of the most regressive taxes in the tax code, with lower-income families paying most of the freight…By zeroing out the individual mandate tax, the new tax law took a major step forward in the ongoing effort to fully repeal and replace Obamacare.”
Hatch’s full remarks can be found below:
I am grateful for the opportunity to be here today and to participate in this event. The folks here at AEI do some great work. We depend on them quite bit on the hill to provide information, background, and context on a number of key issues. They also work to educate the public on the right policies that will help our economy and our people to prosper.
Today we’re here to talk about some important issues, particularly the impact of the new tax law and what all of it means for our country going forward. It took quite a bit of work to finally get our tax reform legislation over the finish line. And, as we’ve seen in recent months, the country is already starting to benefit from it.
But, seriously, I think it’s fair to say that the new tax law is paying off much earlier than most of us thought it would, which is a good thing. I’d like to talk for a moment about some of the specific things we were able to do in tax reform, because much of it bears repeating.
From the outset of last year’s efforts – between both chambers of Congress and the administration – one of our chief goals was to provide significant tax relief for the middle class. And, by enacting reforms to both the individual and business tax systems, we were successful in that effort.
On the individual side, we were able to lower rates across the board, with taxpayers in the middle class getting the largest proportional benefit of the tax cuts. Opponents of tax reform conveniently overlook that fact by focusing ONLY on the total benefits enjoyed by specific tax cohorts. But, if you look at the system-wide distributional effects of the new law, you’ll see significant benefits for middle-income families.
The analysis by the Joint Committee on Taxation concluded that, as a percentage of taxpayer income, the largest tax cuts go to those in the middle- and lower-income brackets. Post-reform, those at the high-end of the income spectrum will actually see their overall share of the tax burden go up slightly.
In addition to lowering rates, we significantly increased the standard deduction and expanded the child tax credit, which provided additional targeted relief to the middle class. Also, for tens of millions of American families, filling out tax returns will be a much simpler matter, thanks to the new tax law. With the dramatic increase in the standard deduction, we ensured that the vast majority of U.S. taxpayers – more than nine out of 10 – will be able to file a simple return without going through the previous maze of deductions and credits.
That’s something that has also been overlooked. But, as people continue to evaluate the impact of tax reform, I think they’ll see significant savings in both time and money on the part of middle-class taxpayers because of this simplification.
Now, let’s move to the business side.
America has always had an innate entrepreneurial spirit encoded in its DNA. And, for most of our nation’s history, our government has tried to foster that spirit, encouraging our people to think and dream big and then to put in the work to make those big thoughts and dreams a reality. But, in recent decades, our government seemed to have a different focus.
For too long, American job creators, both large and small, were forced to operate under the weight of a burdensome and arcane tax code. In working on tax reform, fixing that problem was another one of our chief goals. And, on that count, I believe we were successful.
Foremost among the many business tax reforms we enacted is the reduction of the corporate tax rate from 35 percent – which was the highest in the industrialized world – down to 21 percent, which puts us roughly on par with most of our international trading partners.
Prior to the passage of our tax bill, members from both parties worked for years to accomplish this important goal.
In fact, Presidents Obama and Clinton, Senate Minority Leader Schumer, Finance Committee Ranking Member Wyden, as well former Finance Chairman Baucus, all supported lowering the corporate tax rate.
I just mention these names – and there are many others – to illustrate that the idea of reducing our corporate tax rate wasn’t just something Republicans dreamed up. It was THE major focus of business tax reform for people on both sides. In fact, prior to last year, there were very few people outside a Bernie Sanders rally who would honestly argue that our corporate tax rate should not come down.
Yet, the truth is that lowering the corporate rate was always about helping the middle class. That was true when it was a bipartisan goal, and it was true at the end of last year when Republicans were finally able to make good on years of promises to make that idea a reality.
Allow me to demonstrate why that is the case.
According to JCT, workers bear 25 percent of the corporate tax burden. Some place that number much higher. Moreover, in just the last 20 years or so, we’ve seen a massive expansion of pension and retirement assets, much of which are invested in corporate stocks. Perhaps surprisingly nearly four out of every ten dollars invested in stock ownership is currently held in retirement plan accounts. That is the largest owner category of overall stock ownership in the United States.
While corporate profits have climbed steadily over the last two decades, the retirement plans of middle-class America have expanded as well. In fact, the success of our nation’s retirement system has been the largest accumulator of middle-class wealth in history. We’re talking about trillions of dollars in pension assets owned by households and nonprofit organizations. And, the total amount has gone up by almost 200 percent over the last 20 years.
That is a direct connection between the success of American corporations and the growth of Americans’ retirement assets. So, when you hear some of my colleagues argue that the gains for middle-class workers are mere “crumbs,” and the real money is going to stock buybacks, remember that, as companies increase the value of their stock holdings, the biggest group of beneficiaries are those people with pensions, IRAs, and 401(k)s.
And, the benefits of the lower corporate rate don’t end there. Almost every day, we hear news stories about how companies are responding to the lower rates. Thanks to the new tax law, companies can manufacture, store, transfer, build, research, innovate, create, paint, draw, exercise, plant, till, mow, lathe, carve, and keep the lights on for less than they paid before. This increased activity means more jobs for workers and increased benefits for current employees.
This isn’t theoretical, it’s happening before our very eyes as more and more companies announce wage hikes, bonuses, and expanded benefits for workers and increased investment in the American economy.
We’ve seen utility companies announce that they are lowering rates on energy bills for customers across the board.
We’ve seen companies like Cigna Corporation, which has raised its base wage to $16 an hour and improved its employer 401(k) matches.
U-Haul recently announced that all of its full-time employees would be getting $1,200 in bonuses, with part-time employees getting $500. All told, more than 28,000 U-Haul employees will be receiving bonuses, providing them with around $23 million in benefits.
Tyson Foods announced a few weeks back that 100,000 full- and part-time employees would be getting bonuses of $1,000 and $500.
Aflac is making a one-time contribution of $500 to every employee’s 401(k), plus, they are doubling their current match from 50 percent to 100 percent on the first four percent of compensation.
And one of my personal favorites for creativity, Hostess Brands will be giving their employees free snacks for a year, plus $750 in cash bonuses and another $500 in 401(k) contributions.
All told, the total number of companies that have made these types of announcements numbers in the hundreds. The number of workers who are receiving these benefits is in the millions.
For a middle-class family, $1,000 is three or four car payments, a couple months’ worth of groceries, or a rent or mortgage payment.
And, as the economy continues to expand, American workers will CONTINUE to benefit, as will the companies that employ them.
During the tax reform debate, one of my colleagues on the other side came to the floor several times and repeated the same slogan: “The proof is in the paycheck.”
She was right.
And, for millions of workers, the proof is already there. For millions more, proof will show up this week as the new withholding amounts start to take effect and the vast majority of Americans will see an increase in their take-home pay.
Of course, the success of the corporate tax reform goes beyond benefits for new employees. We’re also seeing American multi-national companies returning foreign earnings for reinvestment in the United States. Let me give you just a short list of companies that are reinvesting in the American economy:
• The Kraft Heinz Company, $800 million
• AT&T, $1 billion
• FedEx, $1.5 billion
• Apple, $30 billion
Ladies and gentlemen, we’re not even through the first quarter of 2018. Yet, we’re already seeing tens of billions of announced re-investment in the American economy, which will mean more work for suppliers, builders, contractors, researchers, technicians, manufacturers, and many, many others who want to do business here in the United States.
And, the funny thing is, while some of us may be a little surprised that this happening so quickly, these benefits of tax reform were what we predicted when we drafted the bill and moved it through Congress.
With that last of list of companies – the ones bringing earnings back to the U.S. – there is more going on than just a lower corporate tax rate. The reforms to our international system have had something to do with that as well.
With the new tax law, we finally did away with the overly complex and draconian worldwide tax system and replaced it with a much more competitive territorial system. And we did so in ways that are in accord with our international commitments and obligations. Simply stated, under the new law, companies and investors will pay taxes—for the most part—only on earnings accrued here in the United States. Gone are the days where complex transfer pricing, foreign tax credits, and competing patent-box regimes led companies to move their investments and activities offshore in search of more favorable tax conditions.
Much of the pressure for companies to invert or be taken over or to otherwise move investments offshore has been relieved. And, many of the disincentives for companies to invest and grow businesses here in the United States have been eliminated. As a result, America is now a place where more companies will want to set up their headquarters, create jobs, and add to our economy.
These moves to bring our tax code into the 21st Century and bring us more in line with our international competitors aren’t the only businesses reforms included in the new tax law. We also enacted some very significant reforms for smaller businesses.
For example, thanks to the work of many of our members, we were able to craft a pass-through deduction regime that provides virtual equivalence to the corporate rate. Now companies can choose whether they want to have a partnership, corporation, LLC, or sole-proprietorship based on the merits and structural benefits of those organizational types instead of thinking purely about reducing their tax liability.
We also finally did away with the individual mandate tax established under Obamacare. This was one of the most regressive taxes in the tax code, with lower-income families paying most of the freight. The individual mandate represented one of the great ironies of Obamacare: The law forced people to buy health insurance or pay a tax while also making health insurance less affordable. By zeroing out the individual mandate tax, the new tax law took a major step forward in the ongoing effort to fully repeal and replace Obamacare.
All told, the new tax reform law – on both the individual and business sides – has already started providing greater benefits and security for Americans across the board.
It is giving relief to low-income families.
It is simplifying the lives of millions of people in the middle class and increasing the size of their paychecks.
It is resulting in higher wages and expanded benefits for workers in a number of different industries.
And, it is making the United States a better destination for investment and job creation.
These are all good things. And, they are exactly what we intended when we crafted our legislation and worked to get it to the president’s desk.
I want to thank those here today who played a role and helped us get to where we are now, with a reformed, pro-growth tax system.
And, of course, I want to thank you all for being here this morning to listen.
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