Hatch Outlines Importance of Preventing Tax Hikes on Americans
Utah Senator Offers Amendment Extending Expiring Tax Policy through December 31, 2013; Instructs Senate Finance Committee to Undertake Comprehensive Tax Reform
WASHINGTON – After the Senate moved to consider the Small Business Jobs and Tax Relief Act, U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, outlined the importance of preventing taxes from going up on virtually all Americans and said that the President’s plan to raise taxes on small businesses would threaten America’s economy. Hatch offered an amendment that would extend current tax policy through the end of 2013 during which time the Senate Finance Committee would undertake comprehensive tax reform.
“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 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,” Hatch said in a speech on the Senate floor today. “The President and his allies who are pursuing this legislation are patting themselves on the back for supporting small business. But puffing their chests as the saviors of America’s job creators, while doing nothing to address the coming fiscal cliff, is a like a person asking for the keys to the city after throwing a water balloon at a house fire.”
Discussing his amendment to extend expiring tax policy thereby preventing a massive end-of-year tax hike on nearly every, Hatch went on to say, “I have an amendment to this bill that will prevent this historic tax increase, and will pave the way for tax reform in 2013. That is where my focus will be until this tax hike is prevented, and I hope that 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 that it would be foolish to raise taxes during an economic downturn, and he acted accordingly. 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 that my colleagues who have supported this tax relief in the past, put the President’s short-sighted and self-interested partisanship aside, and vote on behalf of their constituents to extend this tax relief to America’s families and small businesses.”
Below are Hatch’s full remarks delivered on the Senate floor this afternoon:
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 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 business. But puffing their chests as the saviors of America’s job creators, while doing nothing to address the coming fiscal cliff, is a 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 business is 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 flow-through 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 flow-through business entities, such as partnerships, S-corporations, limited liability companies, and sole proprietorships.
So, unless Congress acts to prevent this massive tax increase, 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 that they cause, are going into the investment and hiring decisions of businessmen today.
Even President Obama agrees that two-thirds of the new jobs in our economy are created by small businesses. 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 has rightly said that for millions of Americans it feels like we are living through a depression. And Paul Krugman recently stated that we ARE in a depression.
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.
Congress needs to act now in order to prevent this tax hike on America’s families and job creators.
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.
This 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 tax payer 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 flow-through 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 of 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, that unemployment would not go above 8 percent. It has now been 40 months in a row since the stimulus bill passed that unemployment has been above 8 percent.
Looking at this problem more broadly, economists estimate that if these current 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 further damage.
And for those on the other side of the aisle, including the President, that argue that we should raise the top two tax rates because it is the fiscally responsible thing to do, I would like to point out a few things.
First, according to CBO, 80 percent of the revenue loss 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 flow-through business income would be subject to the President’s proposed tax hikes. Because the vast majority of small businesses are organized as flow-through 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 Democrat allies would pursue tax increases on these job creators. We simply cannot afford to raise taxes on over half of 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.
So, Mr. President, 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 Democrat allies are spinning their wheels trying to RAISE taxes on politically unpopular groups.
These tax hikes are ALREADY scheduled to go into effect. Congress does not 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.
I am sure that some people are tired of the mantra among conservatives that Democrats want to raise your taxes and Republicans do not.
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 that 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.
Here in the Senate, we have already voted twice on my colleague from New Jersey’s proposal to raise taxes on oil and gas companies.
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. Then leadership brought the bill directly to the floor skipping the process of a markup.
A few months ago we voted on the silly Buffett Tax.
This is not serious tax policy. The Buffett 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 that it raised only $47 billion in revenue over 10-years, a drop in the bucket given the President’s trillions in deficit spending. And we pointed out that implementing the Buffett Tax the way President Obama suggested in his most recent budget would lose nearly a trillion dollars over the first 10 years alone. Specifically, President Obama proposed replacing the AMT with the Buffett Tax.
So the White House shifted gears.
Now the Buffett 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 Buffett tax really is.
It is nothing less than a second and even more damaging AMT, 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.”
And what is really rich about the Buffett rule, is that Mr. Buffett would be able to avoid his own Buffett tax.
So 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 politics.
Let’s not forget that every minute Democrats spend playing politics is a minute that we do not spend preventing the largest tax increase in American history.
It is time for the Senate Democrat 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 business. His claims that it is necessary to reign in the debt and deficit are not credible at all considering that he has added trillions 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 tax reform in 2013.
That is where my focus will be until this tax hike is prevented, and I hope that 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 that it would be foolish to raise taxes during an economic downturn, and he acted accordingly.
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 that my colleagues who have supported this tax relief in the past, put the President’s short-sighted and self-interested partisanship aside, and vote on behalf of their constituents to extend this tax relief to America’s families and small businesses.
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