Sen. Portman Opposes Democrats’ Reckless Tax & Spending Bill

WASHINGTON, D.C. – 8/7/22 – Tonight on the Senate floor, U.S. Senator Rob Portman (R-OH) spoke in opposition to the Democrats’ “Inflation Reduction Act” and highlighted the fact that it will actually make inflation worse and increase taxes on small businesses and working Americans. Senator Portman has long said adding more stimulus to the economy is a bad idea during record inflation and will only increase costs for businesses and customers while killing over 200,000 jobs. As a member of the Senate Finance Committee, and Republican leader on the Senate Committee for Homeland Security and Governmental Affairs, Senator Portman also discussed several amendments to the legislation he may offer that would let Americans keep more of their hard-earned money in their retirement accounts, provide $500 million to the U.S. Customs and Border Patrol to help combat drug cartels and traffickers at our southern border, and ensure new Postal Service electric vehicles are made in America.

A transcript of Senator Portman’s remarks can be found below, and a video can be found here.

“Mr. President, I come to the floor this evening to talk about the partisan reconciliation legislation that is before us tonight. It’s named the Inflation Reduction Act, but that’s misnamed because, unfortunately, it does not reduce inflation, it actually makes things worse. So, when you’re at the gas pump or grocery store or buying something anywhere today, you’re feeling the sticker shock, and yet, this legislation is going to make it even worse. It adds $700 billion more in spending and over $300 billion more in new taxes at the worst possible time, increasing costs to consumers and actually making inflation worse. 

“The nonpartisan Penn Wharton Budget Model that a lot of us have used over the years to look at various legislation, predicts it will increase inflation over the next two years. While over time it says it may even out, it won’t decrease inflation as the name suggests and the bill sponsors claim. Why? Well, primarily because when you put $300 billion plus of new taxes on the economy it actually hurts workers and hurts consumers. Yes, they’re saying it’s going to go to companies, but what happens then? Companies pass it along, and at a time when we have the worst inflation in over 40 years that’s bad for the economy. 

“The nonpartisan Joint Committee on Taxation that we have to rely on here in Congress, not a partisan group, nonpartisan, says this will hurt Americans in nearly every tax bracket. They say more than half of the burden of the over $300 billion in new taxes will fall on folks making less than $400,000 a year. Well, that directly contradicts promises made not to increase taxes on Americans at that level. I’m glad the blow of manufacturers has been somewhat softened in the last 24 hours with the latest version of the bill. What the Democrats did was essentially exchange one bad tax, the book tax on manufacturers, for another bad tax, a tax that will actually tax stock buybacks. That’s going to hurt particularly Americans who are trying to save for retirement. Let me start with the with book tax. This is a proposed tax that is very different from the existing cooperate income tax, which is based on income that businesses report to the IRS when they file their taxes. That IRS income, by the way, is defined by the U.S. Congress. 

“Here in the Senate, we debate that all the time. Is it good to have a particular incentive or another tax incentive? That is not in the book tax. The book tax instead looks at a company’s financial statement and that’s what this new bill does. In fact, it comes up with a whole other definition of tax called the adjustment financial statement income. This is broader than the IRS income. It’s not fair. It’s way too complicated and it’s going to hurt employees and consumers. Taxable income owed to the IRS is meant to raise revenue and again includes these incentives or disincentives for certain activities like being able to immediately deduct the cost of new equipment if you’re a manufacturer. 

“We want to encourage that, particularly in periods of high inflation, so we allow them to do that. The financial statement income is not determined by us, not determined by elected representatives at all. In fact, Congress does not have anything to do with it. It’s actually determined by something called the Financial Accounting Standards Board, which is a private nonprofit recognized by the U.S. Securities and Exchange Commission as the accounting standard setting for private companies. That may work fine for determining accounting standards, but this change effectively puts these people in control of what the corporate tax base is even though they’re not elected to anything. That doesn’t make sense. 

“Let’s not set up a whole new tax system for some companies. Let’s learn from the past. Back in 1986, when we passed a big tax reform bill, they put a book tax in place. And it was repealed less than three years later. Why? Because it was viewed as unfair, way too complicated and actually they thought that you shouldn’t have nonelected officials deciding what the taxes ought to be. They said it was bad for the economy too because companies were managing to the book tax rather than the IRS tax. So let’s learn from the past. Why would we want to do that again? Set up a whole another tax system, tax the American economy, tax consumers, tax workers and do so through something that in 1986 we looked at and decided this is not working. 

“So Democrats will say tonight, ‘Well this new complicated tax system is just going to affect big companies.’ That’s true, but you know what big companies employ a lot of people and a lot of people are going to be hurt. They sell is to a lot of consumers, all of us will be hurt. Last year there were over 200 companies listed on the Fortune 500 as meeting criteria that is set out in this legislation. They employ over 18 million Americans. It’s those employees and those who are customers who will bear the brunt of tax increases as it’s passed to them in the form of lower wages, lower benefits and higher prices for goods and services. The Joint Committee on Taxation, nonpartisan group, just last year said they expect that 25 percent of these corporate taxes to fall on workers. 

“Again, this means lower wages. The nonpartisan Congressional Budget Office says that employees and workers bear more like 70 percent of the burden of income taxes. So, there’s a long list of analyses in between. Twenty five percent and 70 percent of these taxes are going to fall on workers in the form of lower pay and lower benefits. At a time when wages are not keeping up with inflation, it’s getting higher and higher. 

“By the way, it’s not just wages we’re talking about. Families will now face even higher prices as the cost of corporate taxes get passed along to them. In a study last year performed by the business schools at the University of Chicago and Northwestern, they found 31 percent of cooperate taxes fall on consumers through higher retail taxes. Aren’t prices high enough? Democrats added another new tax in the past 24 hours. Democrats now say we’re going to have this complicated tax called an excise tax on stock buybacks. This is instead of some of the tax they had in the other new tax they put forward called the book tax. Now, Democrats, tonight will talk about how taxing buybacks is good because it somehow hurts Wall Street fat cats. 

“Here’s the truth. It increases the price of stocks to allow buybacks and by taking away that incentive by putting a tax on it, there will be less of it. So, the reality is this is a tax on working families including those trying to save for retirement when they are already dealing with the struggling portfolios due to the recent economic contraction and record inflation we’re experiencing. Fifty eight percent of Americans own stock, and 60 million investors invest in an individual retirement account or a 401(k). 

“We want people to save for retirement. It’s a good thing. We want them to have healthy retirements. So, when Democrats say they worry about tax prices going up, I have to ask why are they worried about people having a healthy retirement account? Again, when companies buy back stocks it generally causes that stocks to go up which means it makes Americans’ retirement accounts that much larger. Why is that a problem? The Tax Foundation says retirement accounts own 37 percent of all corporate stock. That’s about $8.5 trillion in retirement funds. $8.5 trillion of retirement funds earn corporate stock. Americans lost about $2 trillion of I.R.As in the COVID crisis, let’s not encourage them to lose anymore.

“Some will say, ‘Gosh, this is just one percent.’ Well, we know that once a tax is initiated it tends to increase. This is the camel’s nose under the tent. The first income tax in 1913, by the way, was one percent and just on top earners. I think a lot of middle-income earners right now would be happy to have a tax rate that low. This type of proposal will impact families and their retirement. For that reason we should not even go down this path. Democrats will also tax employee stock ownership programs, or ESOPs, in this package.

“I think some of my colleagues maybe surprised to hear that. ESPOs are plans that give employees ownership of their own companies with tax incentives for the dividends to go to retirement savings. They’re really popular. ESOPs work, they’re great. They enjoy bipartisan support in the Congress. Employers have this ownership stake and because of that companies tend to do better. Employees are happier, they’re more profitable, they’re more productive, the companies benefit from it. I don’t understand why Democrats want to punish this ownership structure. Doing so will once again discourage investment and hard work and it could not come at a worse time. That’s why I’ll introduce an amendment that will exempt ESOPs from the minimum book tax. 

“This is a common sense amendment. Nothing complicated about it. It will encourage savings in investment. It’s good for the country and I encourage my colleagues on both sides of the aisle who support ESOPs to support the amendment. I also plan to offer an amendment that will increase funding for Customs and Border Patrol by $500 million that will be used for new technology to detect fentanyl and other dangerous drugs that are unfortunately flooding across our southern border. Over 100,000 Americans died of drug overdoses last year. The worst year on record.

“Unfortunately, more and more people are dying of overdoses and they’re dying from this synthetic opioid called fentanyl. About two thirds of those overdose deaths were due to fentanyl. At a time when deadly fentanyl is flooding across the border, only two percent of cars and 16 percent of commercial vehicles are being screened. Now, these drugs come across the ports of entry where only two percent of cars and 16 percent of trucks are being screened. They also come between the ports of entry. At a minimum we should be able to do screening of these vehicles and trucks. 

“It’s a gaping hole in border security and got to be fixed. This amendment will simply ensure the new funds in this bill for the Department of Homeland Security bureaucracy for an office called Readiness, $500 million will be assigned to a higher priority to have customs and border protection be able to detect and stop deadly fentanyl that is being smuggled into this country at record levels. So, this money would stay at the Department of Homeland Security. 

“It will instead be used for more urgent priority. Let’s be serious about our national security and this drug crisis we face and let’s give the Border Patrol what they need to counter the drug cartels and traffickers. Tonight, I also plan to offer an amendment to ensure that the new postal electric vehicles are actually made in the United States of America. In this bill there is a $3 billion appropriation to the Postal Service. We just went through postal reform as some of you know. We provided them additional funding they needed. This is an additional three-billion-dollar appropriation to buy electric vehicles and charging infrastructure. 

“However, there is no requirement that these vehicles be made in America. With U.S. batteries and other components. In other words, the bill uses taxpayer funds to buy electric vehicles that can be made with Chinese batteries and Chinese critical minerals. We know that this is counter to everything we’re trying to do around here. We just passed legislation to make us more competitive with China. Again, we just passed legislation to provide the Post Office with funds for new vehicles including electric vehicles.

“The Postmaster General made a decision to go from 10 percent electric to 20 percent to 50 percent. That’s already happening. But in that case there are requirements. In this case there are not. We know that Democrats believe that when we’re expanding electric vehicles that we ought to ensure that these vehicles are being made in America. How do we know that? Because in another part of the bill, which is the expansion of the electric vehicle tax credit, Democrats included new requirements that the tax credit reward EVs made in the United States with American components. 

“My amendment would simply imply that these identical requirements to these new electric postal delivery vehicles. Both involve taxpayer subsidies. What’s good for the American driver should be good for the Postal Service. My hope is that this misnamed Inflation Reduction Act can be stopped before it makes things worse but at least I urge my colleagues on both sides of the aisle to look at these commonsense amendments and accept some of these amendments. Some I’ve laid out, some others have talked about tonight to improve a flawed bill. With that hope, I yield the floor.”

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