Business & Economy
Grassley: Tax Increases Don’t Reduce Deficits PDF Print E-mail
News Releases - Business & Economy
Written by Grassley Press   
Wednesday, 13 July 2011 14:43
WASHINGTON – Sen. Chuck Grassley of Iowa today gave a statement on the Senate floor explaining that tax increases historically have not reduced budget deficits, only fueled more federal spending.

Video of his speech and the speech text follow here.

Prepared Remarks of U.S. Senator Chuck Grassley

Senate Floor Debate on S. 1323, the Millionaires Tax Resolution

Tuesday, July 12, 2011

As the President and Congressional leaders continue to debate how best to reduce the deficit, it seems that my friends on the other side of the aisle continue to demand tax increases as part of any deal. For sure, any discussion on reducing the deficit should include a discussion on tax reform.

However, what is being discussed currently is tax increases on targeted groups supposedly because they can afford it. This is not tax reform.

Professor Vedder of Ohio University has studied tax increases and spending for more than two decades.

In the late 1980s, he co-authored, with Lowell Galloway also of Ohio University, a research paper for the congressional Joint Economic Committee that found that every new dollar of new taxes led to more than one dollar of new spending by Congress.  Working with Stephen Moore of the Wall Street Journal, Professor Vedder updated that research last year and came to the same result. 

Specifically, they found, and I quote, that "Over the entire post World War II era through 2009, each dollar of new tax revenue was associated with $1.17 in new spending."

So history proves tax increases result in spending increases and so we know that increasing taxes is not going to reduce the deficit.

History also shows that tax increases don’t increase revenues. This chart here shows that revenue as a percentage of gross domestic product hovered around 20 percent as far back as the post-World War II years.  This chart also shows the highest statutory tax rates for those same years.

During the last years of World War II we had a 94-percent top rate. From 1950 through 1963, the rate hovered around 90 percent.

Then, President Kennedy reduced it to about 70 percent.

It stayed around 70 percent until President Reagan brought it down to 50 percent. As a part of tax reform in 1986, it went down to approximately 30 percent.

Then, the first President Bush reneged on his promise to not raise taxes and the marginal rate went back up to almost 40 percent.  It stayed there until the tax relief enacted under the second President Bush.

During all of these tax increases and decreases, the amount of revenue as a percentage of gross domestic product stayed the same.

So, everybody thinks that if you raise the marginal tax rates, you will bring in more revenue. But the taxpayers, workers, and investors of this country are smarter than we are. We’ve had a 93-percent marginal tax rate -- then 70 percent, 50 percent, 30 percent, 40 percent and now a 35-percent marginal tax rate. But, regardless of the rate, we get the same amount of revenue.  Higher tax rates just provide incentives for taxpayers to invest and earn money in ways that result in the least amount of taxes paid.

In other words, taxpayers have decided they are going to give us politicians in Washington just so much of their money to spend.

And, it works out to be about 18 percent of gross domestic product.

We ought to have some principles of taxation that we abide by. I abide by the principle that 18 percent of the gross domestic product of this country is good enough for the government to collect and spend. That leaves 82 percent in the pockets of the taxpayers for them to decide how to spend.

This benchmark of 18 percent of gross domestic product is good and it has been consistent throughout recent history. It is a principle we should keep in mind while we debate tax code changes.

There is another principle we should keep in mind.  That is the purpose of the tax laws. Those who support resolutions like the one we are currently debating assume that a key objective of the federal government, through the federal income tax laws, should be to ensure that income is distributed equally throughout the country.  In other words, these folks believe that the federal government is the best judge of how income should be spent.  

Resolutions, like the one we are considering today, assume that the 535 members of Congress know how to best spend the resources of this country.  

It assumes that government creates wealth and should therefore spread it around like they do in Europe.  

In fact, government doesn't create wealth – it consumes it. Only workers and investors and people who invent and people who create, create wealth.  

Yet, as history shows, there is evidence that tax increases lead to more spending and that revenues as a percentage of gross domestic product pretty much stay the same - even when the marginal tax rate is high.  


It would be one thing for me to vote for a tax increase if it went to the bottom line.  

It is another thing to vote for a tax increase that just allows more spending and raises the deficit instead of getting the deficit down.  

The Resolution before us now in the Senate requires us to concede “that any agreement to reduce the deficit should require that those earning more than a $1,000,000 or more per year make a meaningful contribution to the deficit reduction effort.” The Resolution does not state that such a “meaningful contribution” would be accomplished through tax increases. But how else would these folks make such a contribution?  

Let me make clear that I do not support this resolution and will vote No on its adoption.  However, I believe it is high time we’ve had a debate about this issue.   

It is clear that those who support this resolution believe that those earning more than $1,000,000 or more per year are not paying their fair share.  Note, however, that just last year, they believed that a single person who earned $200,000, or a married couple that earned $250,000, wasn’t paying their fair share.  

In evaluating whether people are paying their fair share, experts frequently look at whether a proposal retains or improves the progressivity of our tax system.  

Critics of lower tax rates continue to attempt to use distribution tables to show that tax relief proposals disproportionately benefit upper income taxpayers.  We keep hearing that the rich are getting richer while the poor are getting poorer.  This is not an intellectually honest statement as it implies that those who were poor stay poor and those who are rich stay rich.  

In 2007, the Department of Treasury published a report titled “Income Mobility in the U.S. from 1996 to 2005.”  The key findings of this study include, and I quote:  

  •  ·          There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.  
  •  ·          Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.  
  •  ·          Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.  
  •  ·          The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).  
  •  ·          Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.  

Therefore, whoever is saying that once rich, Americans stay rich, and once poor, they stay poor, is purely mistaken. Internal Revenue Service data supports this analysis.  A study of the 400 tax returns with highest income reported over 14 years - from 1992 through 2006 - shows that in any given year, on average, about 40 percent of the returns that were filed were not in the top 400 in any of the other 14 years  

The so-called “shared sacrifice” resolution before us now does not acknowledge these trends.   

It presupposes that anyone making over a $1,000,000 should be contributing more to reduce a deficit that they likely did not create.  The resolution assumes that the folks in this income category have always made more than a $1,000,000, that they haven’t paid their dues on their way up the ladder of success and, as a result, should pay a penalty for their current success.  The resolution also assumes that these folks will continue earning what they are earning now.  

As I just noted, however, the Treasury report and IRS tax return data contradict this position. I welcome this data on this important matter for one simple reason: it sheds light on what America really is all about -- vast opportunities and economic mobility.  

Built by people from all over the world, our country truly provides unique opportunities for everyone.  

These opportunities include better education, health care services, and financial security. But most importantly, our country provides people with the freedom to obtain the necessary skills to climb the economic ladder and live better lives.  

We are a free nation. We are a mobile nation. We are a nation of hard-working, innovative, skilled and resilient people who like to take risks when necessary in order to succeed.  

We have an obligation as lawmakers to incorporate these fundamental principles into our tax system.  

During this deficit reduction debate, we have also heard much about “closing loopholes.”  Let me just say that if there are, in fact, loopholes to be closed, I would support closing them.   

During my tenure as Chairman and then Ranking Member of the Finance Committee, I worked with colleagues from both sides of the aisle to cut off tax cheats at the pass. 

The American Jobs Creation Act signed into law in October 2004 included a sweeping package to end tax avoidance abuses such as corporations claiming tax deductions for taxpayer-funded infrastructure such as subways, sewers, and bridge leases, corporate and individual expatriation to escape taxes, and Enron-generated tax evasion schemes.     

One of the tax avoidance provisions that the Jobs bill shut down was so-called corporate inversions.  Average workers in America can’t pull up stakes and move to Bermuda or set up a fancy tax shelter to avoid paying taxes. Companies that do this make suckers out of workers and companies that stay in the United States and pay their fair share of taxes.  

We also closed loopholes used by individual taxpayers.  The Jobs bill contained a provision that restricted the deduction for donations of used vehicles to actual sales price.  

Prior to that fix, individuals could claim inflated fair market values.  

Then, in the Pension Protection Act, which was signed into law in August 2006, I championed reforms to deductions for gifts of fractional interests in art as well as donations to charities that were controlled by donors.  In both cases, individuals were taking huge deductions for donations without providing equivalent benefits to the charities to which they donated.   

In addition to ensuring that income and deductions are properly reported, I also supported giving the Internal Revenue Service more tools to go after tax cheats.   

The Jobs bill contained provisions that required taxpayers to disclose to the IRS their participation in tax shelters and increased penalties for participating in such tax shelters as well as not disclosing such participation to the IRS.  

I also authored the updates to the tax whistleblower provisions that were included in the Tax Relief and Health Care Act, which was signed into law in December 2006.  There was a whistleblower statute before 2006. But, because of the low dollar thresholds, it encouraged neighbors to blow the whistle on their neighbors.   

The 2006 changes I championed increased the awards for those blowing the whistle on the big fish – individuals and businesses engaged in large-dollar tax cheating through complex financial transactions. The first pay-out under this new provision was made in April of this year and recovered $20 million for the taxpayers that otherwise would have been lost to fraud.  

These are just a few examples of my support for provisions to stop abuses of the tax code to make sure everyone pays their fair share.  If and when we get around to considering comprehensive tax reform, I would look forward to shutting down any other abuses that might still exist.  But first we need to be clear on what a loophole is.  

Itemized deductions may be tax expenditures but they are not loopholes.  Similarly, deductions and tax credits that enable a corporation to zero out its tax liability are not loopholes.  The question of whether deductions and credits should be limited is a question that should be answered in the context of comprehensive tax reform.  Eliminating deductions and credits for certain taxpayers should be subject to extensive review and debate.  And taxpayers shouldn’t be targeted for tax increases for political sport, as the Resolution before us does.   

Let me finish by restating my three key points.  First, tax increases don’t reduce deficits and they don’t increase revenue as a percentage of gross domestic product.  Second, we ought to have some principles of taxation that we abide by.  Limiting revenues to the historical average of 18 percent of gross domestic product should be one while ensuring income equality should not be one.  And last, but not least, it is right to consider tax reform when discussing deficit reduction.  However, the proposals put forth so far, including the current resolution, are political proposals -- not reform proposals.  Tax reform requires Presidential leadership and we have not seen that yet.  

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Governor Quinn Signs Legislation to Help Businesses Grow In Illinois PDF Print E-mail
News Releases - Business & Economy
Written by Laurel White   
Tuesday, 12 July 2011 12:02

New Law Simplifies and Streamlines Environmental Permit

Process to Help Illinois’ Employers Create More Jobs

CHICAGO – July 12, 2011. As part of his aggressive business agenda, Governor Pat Quinn today signed legislation that will make it easier to open and expand a business in Illinois. House Bill 1297 will help employers create more jobs by streamlining the environmental permitting process in Illinois, establish a plan for long-term funding, and make the Illinois Environmental Protection Agency (IEPA) more efficient.

“Simplifying and speeding up the review process for environmental permits will help Illinois companies begin hiring, investing and producing more quickly,” said Governor Quinn. “This law is a great example of my administration’s commitment to reducing the burden on Illinois’ businesses – both large and small – so they can grow and create more jobs.”

Like the recent worker’s compensation reform law, HB 1297 was pushed by Governor Quinn to strengthen Illinois’ business climate. Sponsored by former Rep. Dan Reitz (D-Steeleville) and Sen. James F. Clayborne, Jr. (D-East St. Louis), House Bill 1297requires the Illinois Environmental Protection Agency (IEPA) to speed up and streamline the permitting process.

Under the new law, IEPA will begin to use more efficient techniques such as online permitting, processing and tracking to make the permitting process easier to navigate for businesses. The new law also allows for expedited permitting, general permitting and permitting by rule for certain classes of facilities. 

“These changes will improve the agency’s operations and make it more efficient, while ensuring that environmental standards are never compromised,” said IEPA Interim Director Lisa Bonnett.

“For too long, Illinois’ environmental regulatory process has hindered economic development and made it more difficult for businesses to compete,” said Greg Baise, president and CEO of the Illinois Manufacturers’ Association. “We applaud Governor Quinn’s support of this new law that modernizes and streamlines the process, allowing businesses to save time and money. It balances environmental and economic interests.”

In addition to making the permitting process easier for businesses, the new law also creates an online portal to assist with the permitting process. As a result, companies can begin production and other projects more quickly. The new law also allows the IEPA to create a new, logical funding source based on revenue from products used to lower emissions. By establishing a Registration of Smaller Sources (ROSS) program for smaller entities, a significant number of low-polluting small businesses will be able to register with the agency instead of obtaining a more extensive air permit. This will reduce the burden on small businesses by lowering the fee for emissions, eliminating the need to hire permit consultants and speeding up the approval process.

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Governor Quinn Announces Efforts to Boost Development of South Suburban Cook County PDF Print E-mail
News Releases - Business & Economy
Written by Laurel White   
Tuesday, 12 July 2011 11:55

Announces $6.6 Million “IKE” Funding to Revitalize Communities Throughout South Cook; Signs Laws to Support Economy

TINLEY PARK – July 11, 2011. Governor Pat Quinn today announced $6.6 million in federal funding to increase affordable housing, stabilize communities and make infrastructure improvements in six south suburban Cook County communities. Awarded through the “IKE” Disaster Recovery Program, the funding will be used to purchase and rehab or demolish vacant or abandoned homes and to upgrade water-sewer lines and roads in the vicinity of the targeted housing projects. 

“This funding will help revitalize the economy with much needed improvements for several suburban cook county communities,” said Governor Quinn. “With this assistance, we’re helping to ensure the expansion of affordable housing and improvement of the infrastructure needed to prevent future damage.”

The recovery program is named for Hurricane Ike, the 2008 disaster that was one of the costliest hurricanes ever to make landfall in the United States. Illinois received a total of $169 million in federal disaster funds under the IKE to assist communities within 41 Illinois counties recover from devastating floods and storms in 2008 and minimize the impact of future disasters.

Last month, Governor Quinn announced $48 million in public infrastructure investments that were awarded in 85 Illinois communities, including six awards in south suburban Chicago totaling nearly $3.7 million. The awards will support long term recovery by upgrading core public infrastructure severely damaged by the 2008 storms and subsequent flooding throughout the Midwest. Projects range from levee improvements and culvert restoration to upgrades to water and sewer systems, pump stations and replacement of emergency power generators.

Governor Quinn announced the housing and public infrastructure grant awards on behalf of communities in south suburban Chicago during the July meeting of the Southland Chamber of Commerce. A complete list of projects is attached.

During the meeting, Governor Quinn also signed legislation that will help support economic growth in south suburban Chicago. House Bill 1730 sponsored by Rep. Al Riley (D-Hazel Crest) and Sen. Toi Hutchinson (D-Chicago Heights) helps municipalities appropriate funding dedicated to economic development. The Governor also signed House Bill 1215 sponsored by Rep. Riley and Sen. Maggie Crotty (D-Oak Forest) extends the deadline for the city of Markham to complete a redevelopment project in that TIF district.

For additional information on the IKE Disaster Recovery Program, visit www.ildceo.net/disasterrecovery.

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Weekly Video Address: Exports Help Generate Jobs PDF Print E-mail
News Releases - Business & Economy
Written by Grassley Press   
Monday, 11 July 2011 13:31

Advisory for Iowa Reporters and Editors

Friday, July 8, 2011

During his weekly video address, Senator Chuck Grassley discusses three international trade agreements that can help generate jobs for workers in the United States.

Click here for audio.

The text of the address is available below.  

   

Grassley Weekly Video Address:

Exports Help Generate Jobs

This week the Senate Finance Committee turned to three international trade agreements that have been ready for action by Congress for four years.  It was a big mistake to let these agreements get sidelined.  Jobs supported by exports pay 15 percent more than the national average.  Manufacturers, farmers, and the service sector need new markets for their products.  So, it’s a matter of retaining and creating jobs.  And final approval of these agreements needs to be part of America’s economic recovery effort.

Getting to a congressional vote has been a frustrating process.  A year and a-half ago, President Obama said he wanted to double exports within the next five years.  Still, he let the three trade agreements languish.  This spring, the United States Trade Representative said the trade agreements were ready, but then the administration changed the terms and is insisting that the Trade Adjustment Assistance program be passed with the trade agreements.

The Trade Adjustment Assistance program should be voted on separately, rather than used to bog down job-generating trade agreements.  The focus needs to stay on helping to spur manufacturing, services and agriculture-related jobs in the United States.  The opportunities are significant.  Today, U.S.-Colombia trade is a one-way street.  None of our ag products have duty-free access to the Colombian market, but more than 99 percent of Colombian ag exports enter the U.S. market duty-free.  With a trade agreement, Korea is expected to absorb five percent of total U.S. pork production.  The insurance and financial services industry in the United States, including Iowa, says Korea represents the largest insurance market yet in a free-trade agreement and presents enormous opportunities for domestic job growth.  Panama has tariffs on U.S. beef and corn that would go to zero under a trade agreement.

I talked with an Iowa cattleman who took a trip to Korea less than three weeks ago.  He had a tremendous trip promoting U.S. beef.  But one of his takeaways was that all of Asia is watching how the United States handles these trade deals.  And want to know if the United Sates wants to be in a leadership role for international trade.  They want to know if we are people of action, or just words.  They want to know if we will follow through with these agreements or will we let them languish even longer.  This cattleman came away with the message loud and clear.  Either we get this done, or our trading partners will be looking at other places for the trading terms that they desire.

For the sake of U.S. exports, these trade agreements need to be implemented without delay. 

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Commentary -- Washington's Wonderland PDF Print E-mail
News Releases - Business & Economy
Written by Grassley Press   
Monday, 11 July 2011 13:29

by U.S. Senator Chuck Grassley  

   

As Americans celebrated the 235th birthday of the United States with hometown fireworks and backyard barbeques, a divided government in Washington wrestled over taxes and spending needed to reach a long overdue budget agreement.  

   

It’s been 800 days since the Democratic majority in the U.S. Senate has passed a federal budget. Without an enforceable rudder to rein in spending, Washington has been sailing along the high seas of deficit-spending as far as the eye can see.  

   

The budget-free zone has resulted in a reckless spending pattern in Washington. Federal expenditures have accelerated to an unprecedented 25 percent of gross domestic product. The federal debt has soared above $14 trillion. The shovel-ready stimulus package was not as shovel-ready as the Obama administration advertised. Pumping tax dollars into the economy has not triggered job creation. Unemployment has been at 9 percent, or higher, for all but two months since early 2009.  Persistent joblessness sinks already wilted consumer confidence.  

   

And yet, lawmakers and the White House are having trouble seeing eye-to-eye on ways to trim the deficit and stop adding to the debt. If an Iowa household noticed its monthly bills were higher than its income month after month, the obvious solution would be to cut spending, not continue an unsustainable pattern of borrowing. But Washington chooses to jump down the rabbit hole time after time, continuing an unsustainable spending binge and deferring fiscal sanity for another day.  

   

Washington’s wonderland needs a reality check. Phantom budgets and pixie-dust economics aren’t working.  

   

During the last two years, spending by Washington has increased 22 percent, not even counting the stimulus program.  Sooner rather than later, the surge of retiring baby boomers will overwhelm the nation’s public entitlement programs, especially if reasonable reforms to save and strengthen the programs are ignored or killed by partisan demagoguery.  

   

It’s been said that this White House considers it a shame to waste a crisis. What’s shameful is the absence of leadership needed to secure economic growth and prosperity for generations to come. Instead of championing spending cuts and entitlement reform, the president has urged Congress to increase the debt limit by $2.4 trillion. It’s time to cancel Washington’s blank checks, not continue writing them.  

   

Instead of drawing lines in the sand and fanning the flames of class warfare, the big spenders need to accept that higher tax rates will not curb deficit spending. Since World War II, for every $1 raised in new taxes, Washington spends $1.17. Raising taxes has been a license for Washington to spend more and borrow more.  

   

What’s more, each dollar earmarked for the Federal Treasury shrinks the take-home pay for consumers. It limits their ability to save, spend and invest. Raising the tax burden on investors, innovators and entrepreneurs limits their potential to drive economic growth and create jobs on Main Street.  

   

It’s time for the big spenders to pluck their heads out of the sand and realize Washington cannot tax and spend our way to prosperity.  

   

Washington clearly needs help to curb its excessive appetite for spending. The federal government has run trillion dollar deficits for the last three years.  

   

How can Washington dig itself out of this rabbit hole and get American back on the right track?  

   

In the short-term, Washington needs to enact spending cuts and tax reforms that will help fuel economic growth. Voters hired lawmakers last November who campaigned for less federal spending, not more. For the long-term, let’s rally behind a balanced budget amendment to the U.S. Constitution. It would create a permanent, non-negotiable benchmark to enforce fiscal discipline.  

   

Let’s honor the vision of our nation’s Founders whose service and sacrifice more than two centuries ago helped secure freedom and independence for future generations of Americans. Today’s leaders in Washington can restore America’s promise of prosperity and opportunity. Let’s erase the legacy of debt and return to a legacy of hope. By living within our means, we can help our children and grandchildren achieve higher standards of living in the future.  

Friday, July 8, 2011

 
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