Wyden Statement on Senate Floor on the Republican Budget, Tax Cuts for the Wealthy

As Prepared for Delivery

Later this morning the Senate will vote on amendment I’m putting forward to strike what’s known as the “reconciliation instructions” from this budget proposal. The fact is, reconciliation is an on-ramp to the most partisan process around, but the history of successful tax reform is working in a bipartisan way. That's, for example, what the late President Reagan worked to do in 1986 with a host of Democrats. They came up with a lot of very important, bold, progressive ideas. For example, they chose to actually treat income from a wage the same as income from investments.

What that did was send a message that working people would get a fair shake – that their labor and their hard-earned pay wasn’t worth any less than somebody else’s.

The two sides, working together in 1986, weren't talking about massive tax handouts to big corporations and the wealthy. They were talking about the fact that in our country, economic success is built around a thriving middle class, a middle class that can buy homes and cars, educate their kids, and drive our economy forward.

What troubles me so much about these reconciliation instructions, which would allow for a $1.5 trillion net tax cut slanted overwhelmingly toward the very top, is it's just the opposite of the kind of approach Ronald Reagan and Democrats used in 1986. It's going to polarize us rather than bring us together.

I attended a meeting at the White House yesterday with several of colleagues from both sides of the Finance Committee. At that meeting, Democrats made it very clear to the president that we believe the tax code is broken. That is a bipartisan sentiment. Our tax system is a broken, dysfunctional mess. We described the letter we sent laying out our principles for tax reform – focusing on the middle class, not the one percent, and not savaging our safety net programs. What was striking about the discussion is the President said, “I agree with you on all those things.” He said tax cuts shouldn't go to people like him. He said he wants help for the middle class and doesn't want to cut Medicare or Social Security. I made the point that unfortunately there's a big gap between the administration's rhetoric on these issues and the reality of what is on paper. And that's why it's so important that we strike these reconciliation instructions and make it clear from the get-go that we're going to get tax reform right.

I want to take a few minutes to lay out exactly why those instructions need to come out, starting with the facts about the tax cut plan the White House and Republicans have put forward. And then I want to react to some comments made by the Treasury Secretary that, in my view, illustrate why it’s time to pump the brakes on this partisan process.

First, the Trump tax plan creates a massive new loophole -- the Grand Canyon of loopholes -- by twisting and abusing what’s known as passthrough status. That status is supposed to be about making life easier for small businesses -- the corner stores, restaurants and garages that fill communities in Oregon and across the country -- businesses that absolutely should get a boost in tax reform.

By using this new loophole in the Trump plan, tax cheats would get to “self-declare” as passthroughs, rake in income and pay a much lower tax rate. It’s a tax change that’s deeply slanted towards those at the very top. Eighty eight percent of the benefits of a passthrough rate cut would go to the top one percent of earners, according to a recent analysis. And it opens the door for tax cheats to dodge paying into Social Security and Medicare like every hard-working wage earner in America. That would leave those programs a lot worse off than they are today.

Next there’s the abolition of the estate tax. And let’s be clear about who’s affected by this debate over the estate tax. Today this tax only touches estates worth more than 11 million dollars or five and a half million for a single individual. It’s a tiny fraction of all the estates in the country -- the people at the very top. Eliminating the estate tax is not a policy change that has anything to do with helping the middle class. It’s entirely about the mega-wealthy, like the Trumps and much of the Trump cabinet.

The Finance Committee Democratic staff put out a report last week that looked at some of the worst schemes and tactics used today by the mega-wealthy to avoid paying the estate tax. It shed light on the cottage industry of crafty lawyers and accountants who’ve made careers out of gutting the estate tax by engineering billion-dollar tax shelters for the one percent. So the estate tax is already full of loopholes, but the Trump team isn’t interested in closing them. Instead, they want to eliminate the estate tax outright.

So there’s a common thread in these proposals. The Republican plan doesn’t close the most egregious loopholes, it enshrines them as permanent fixtures in our tax code. And that’s not a recipe for tax reform focused on the middle class.

One of the people out in front of the cameras selling the Trump tax plan to the public is Treasury Secretary Mnuchin. A few weeks ago, Secretary Mnuchin doubled down on the failed experiment -- that tax cuts pay for themselves. Forget the fact that history shows this simply isn’t true. Secretary Mnuchin claimed that the Trump tax cuts won’t just pay for themselves -- they’ll raise an additional trillion dollars in revenue on top of their own cost.

Colleagues, there’s no magical growth fairy that’s going to spring to life if this tax cut plan becomes law. So Secretary Mnuchin has invented unicorn and rainbow economics. Even conservative economists agree that tax cuts do not pay for themselves -- including the Republican-appointed director of the Congressional Budget Office and Republican-chosen witnesses at a recent Finance Committee hearing.

But that wasn’t the only time that Secretary Mnuchin dropped a whopper about the Republican tax plan. I want to read a quote from yesterday. Secretary Mnuchin said that, quote, “...it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class.”

Let me repeat that first part, which is a real stunner -- “...it’s very hard not to give tax cuts to the wealthy.”

And in that same interview, he delivered what sounds an awful lot like an ultimatum. He said that if the Congress doesn’t pass the Trump tax cut bill, it would be tough times on Wall Street.

You have to appreciate his eye-popping honesty, but the ideas behind what Secretary Mnuchin is saying about tax reform leave my jaw on the floor. If that’s where the administration has trained its focus in tax reform, then the middle class is in trouble. In my judgement, it’s yet another reason why the Senate ought to reject the partisan reconciliation process.

Congress has never used reconciliation to write a comprehensive tax reform bill. There’s a template for comprehensive tax reform that is proven to work-- it’s Reagan-style reform. When President Reagan signed the Tax Reform Act of 1986 into law, it was the culmination of years of bipartisan work. The parties brought their best ideas forward and worked together. The bill was considered under regular order, was debated in the Finance Committee and on the Senate floor for months, was open to unlimited amendments, and passed the Senate by a vote of 97-3.

That kind of bipartisan process is the key to lasting legislation that gives everybody a chance to get ahead. And that’s what the Congress ought to repeat this time around. I urge my colleagues to support the Wyden amendment to strip the reconciliation instructions from this budget proposal.

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