Restoring Tax Fairness for States and Localities Act

Floor Speech

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Mr. SMITH of Nebraska. Madam Speaker, I yield myself as much time as I may consume.

I must admit, I am a bit puzzled today as to why we are here for this bill. Our work in the House is almost done for the year.

We have funded the Federal Government and extended expiring programs like flood insurance. We are about to pass USMCA with a record vote. Our Democratic colleagues can go home and celebrate that they voted to make history in impeaching the President.

But apparently, before we go home for Christmas, we also need to give Ebenezer Scrooge a tax cut, even though we know the Senate won't take up the bill.

Before we get into the problems with today's bill, we should review the positives of the Tax Cuts and Jobs Act, which this bill seeks to undermine.

The Tax Cuts and Jobs Act lowered tax rates for all Americans and increased the child tax credit.

We doubled the standard deduction from $6,000 for individuals and $12,000 for married couples to $12,000 for individuals and $24,000 for couples.

And to help ensure Federal tax policy doesn't reward States and cities for raising their taxes sky high, we instituted a $10,000, very thoughtful, cap on State and local tax deductions to ensure Americans in low-tax States don't pay an unfair share of Federal taxes.

Thanks to the combination of lower rates, larger child tax credit, and higher standard deduction under TCJA, for example, a single mom with two kids doesn't pay a penny in Federal income tax until her income exceeds $53,000.

In other words, we ensure that that mom doesn't owe Federal income tax until her income exceeds not just $15 an hour, but $25 per hour.

For Americans who do pay income tax, the higher standard deduction means 29 million more households had their tax returns simplified because they could take the standard deduction instead of itemizing.

How does the majority propose to improve our tax code today? Not by simplifying the code or ensuring our tax code is more equitable, but by passing a temporary--emphasis on ``temporary''--tax cut, which largely benefits people with incomes between-- please, listen--$200,000 and $1 million per year--perhaps a new definition of the middle class--paid for by permanently increasing taxes on small businesses.

Let me say that again. If you make between $0 and $75,000, this bill does not give you tax relief, or a tax cut.

If you make between $75,000 and $200,000, there is a small chance you could get a small tax cut.

If you make between $200,000 per year and $1 million per year, you have the best chance of getting a tax cut.

Madam Speaker, we should continue working together to find ways to improve the tax code for all Americans.

This bill makes the code both more complex and less progressive.

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Mr. SMITH of Nebraska. Madam Speaker, I include in the Record a series of statements in opposition to H.R. 5377 from Americans for Tax Reform, Americans for Prosperity, National Taxpayers Union, Heritage Action, and Parity for Main Street Employers.

Key Vote: ATR Urges No Vote on H.R. 5377, a Pledge Violation Posted by Alex Hendrie on Wednesday, December 18th, 2019, 3:00 PM PERMALINK

The House of Representatives is set to vote on H.R. 5377, the ``Restoring Tax Fairness for States and Localities Act.''

ATR urges a ``NO'' vote.

This legislation is a violation of the Taxpayer Protection Pledge, a commitment made by 218 members in the House and Senate to oppose any and all net tax increases.

If passed into law, it will raise taxes on individuals and small businesses that file through the individual income tax system. This bill trades a temporary rollback of the SALT cap for a permanent rate hike.

This legislation is a net tax increase of $2.4 billion over the ten-year budget window, according to the Congressional Budget Office.

H.R. 5377 also rolls back the Tax Cuts and Jobs Act, passed by Republicans and signed into law by President Trump.

``The Trump tax cuts reduced taxes across the board. This legislation is step one toward abolishing the entire Trump tax cuts and increasing taxes on the middle class, a key goal of every Democrat presidential candidate,'' said Grover Norquist, President of Americans for Tax Reform.

The legislation raises the cap on the state and local tax deduction from $10,000 to $20,000 for 2019 and removes the cap entirely for 2020 and 2021.

The legislation also raises the top rate from 37 to 39.6% and lowers the threshold that this top rate kicks in for all filing statuses.

Under current law, the 37 percent bracket kicks in for a single filer at $518,400 in income. Under the legislation, the new top rate is increased to 39.6 percent and the threshold is lowered to $441,475 of income.

Similarly, a family taking the married filing jointly status currently hits the 37 percent bracket at $622,050 in income. Under the legislation, this family will hit the 39.6 bracket at $496,000 in income. Repealing or rolling back the SALT cap is regressive

94 percent of the benefits from repealing the SALT cap would go to taxpayers making more than $200,000 a year.

The left leaning Center for Budget and Policy Priorities has stated that this proposal would be ``regressive and costly.''

The Center for American Progress has stated that repeal of the SALT cap ``should not be a top priority'' as it would ``overwhelmingly benefit the wealthy, not the middle class.''

Senator Michael Bennet (D-CO) recently criticized efforts to repeal the SALT cap noting that it runs counter to Democrat ideals: ``We can say we're for a progressive tax bill and for fighting inequality, or we can support the SALT deduction, but it's really hard to do both of those things.''

Repealing or rolling back the SALT cap is also unnecessary

While Democrats claim the SALT cap raised taxes, this is overstated and misleading.

The TCJA reduced taxes for roughly 90 percent of Americans and for taxpayers at every income level through lower rates, the expanded standard deduction, and the doubling of the child tax credit.

Furthermore, repeal of the Alternative Minimum Tax meant that 4.5 million families were able to claim $10,000 in SALT deductions, as the AMT disallowed this deduction.

The SALT deduction subsidizes high tax, big government states. This deduction is rarely used by middle class families as they take the standard deduction instead of itemizing. Capping this deduction has meant that the federal government is no longer providing a benefit to upper income earners in blue states.

ATR urges a NO vote on this regressive legislation that violates the Taxpayer Protection Pledge. ____ AFP Key Vote Alert: Vote No on H.R. 5377, the Restoring Tax Fairness for States and Localities Act December 16, 2019

Dear Representatives: On behalf of Americans for Prosperity activists across America, I urge you to vote NO on H.R. 5377, the Restoring Tax Fairness for States and Localities Act.

This vote may be recorded in our 2019 session legislative scorecard.

H.R. 5377 would temporarily undo some of the many benefits of the Tax Cuts and Jobs Act. Temporarily increasing the cap on the SALT deduction (from $10,000 to $20,000) would make the tax code less fair and more complex, but also increase bad incentives for state and local governments to raise taxes. The benefits of lifting the SALT cap would go to states with higher tax levels. Meanwhile, states with lower tax levels, like Florida and Texas, will be once again forced to subsidize the federal tax tab for states like New York, California, and New Jersey.

Moreover, H.R. 5377 would temporarily raise the top tax rate on the highest earners and increase the number of taxpayers paying that rate--one of the very groups that will benefit from lifting the SALT cap. This makes no sense.

For these reasons, we urge you to vote NO on H.R. 5377. Sincerely, Brent Gardner, Chief Government Affairs Officer, Americans for Prosperity. ____ [From the National Taxpayers Union, Dec. 19, 2019]

National Taxpayers Union urges all Representatives to vote ``NO'' on H.R. 5377, the ``Restoring Tax Fairness for States and Localities Act.'' This legislation would undo some of the many benefits of the Tax Cuts and Jobs Act (TCJA), raise taxes on small businesses across the country, and add to the complexity of the federal tax code.

Enacted in 2017, the TCJA made several important changes to the individual side of the federal tax code. By significantly reducing income tax rates and increasing the standard deduction, the tax code is fairer and simpler than before. TCJA rightly reformed many deductions and credits to reduce the complexity of the tax code, notably by capping the State and Local Tax (SALT) deduction. Prior to tax reform, the tax code allowed taxpayers to deduct an unlimited amount of state and income and property taxes from their federal tax liability. As a result, many low-tax states were forced to subsidize the choices of high tax states.

This legislation, however, would reverse these positive alterations to the tax code by increasing the top marginal tax rate, lowering the threshold for which this rate kicks in, and scrapping the cap on the SALT deduction. Most concerningly, the effects of uncapping SALT would disproportionately benefit the wealthiest of our society. According to IRS data from tax year 2015, over 84 percent of the benefit of the SALT deduction went towards those with incomes above $100,000. A mere 3.5 percent went to those with income levels below $50,000. While some middle class taxpayers would see benefit from this change, nearly all the benefit would be for those at the very top of the income scale.

Ensuring all taxpayers keep more of their hard earned dollars was a priority of the TCJA, which is why only one percent of taxpayers paid more in tax under the reformed tax system. However, giving a tax break to the wealthiest among us, paid for by an increase in the tax liability of small businesses, is not a good use of taxpayer dollars. Many states have adopted pro-taxpayer reforms due to TCJA and the SALT cap, so we should not reverse course now.

Roll call votes on H.R. 5377 will be significantly-weighted in NTU's annual Rating of Congress and a ``NO'' vote will be considered the pro-taxpayer position. ____ [From Heritage Action for America, Dec. 18, 2019] Congress Should Reject Handouts for High-Tax State

Washington.--Heritage Action released the following statement from Executive Director Tim Chapman:

The tax bill House Democrats have put on the schedule this week claims to promote fairness in the tax code, but it really promotes the interest of liberal states. It is anything but fair. It will only benefit a minority of Americans at the expense of those who have chosen to live in states with smaller tax burdens. SALT deductions are nothing more than a federal subsidy for high state and local taxes, which in turn makes individuals in lowtax states responsible for subsidizing more expensive governments elsewhere.

With the backdrop of partisan impeachment, House Democratic leadership is desperate to hand legislative ``wins'' to their members who represent purple districts. House Republicans should not give them any cover on this bill. It is nothing but a subsidy to the most liberal states at the expense of the rest of the country. Americans should be treated equally. ____ Parity for Main Street Employers, December 10, 2019. Hon. Richie Neal, Chairman, Committee on Ways & Means, House of Representatives, Washington DC.

Dear Chairman Neal: The Parity for Main Street Employers coalition has serious concerns with the ``Restoring Tax Fairness for States and Localities Act'' to be considered by the House Ways and Means Committee tomorrow.

Individually and family owned businesses organized as S corporations, partnerships and sole proprietorships are the heart of the American economy. They employ the majority of workers, and they contribute the most to our national income. They also pay the majority of business taxes. A recent study by EY found that pass-through businesses pay 51 percent of all business income taxes.

The legislation introduced today would raise these taxes by 1) increasing the top rate passthrough businesses pay from the current 37 percent to 39.6 percent and 2) lowering the income threshold of the top rate from $622,050 to $496,600 (Joint) for the years 2020 through 2025, after which the 37 percent rate is scheduled to expire under current law.

This rate hike would be used to offset relief from the SALT deduction cap, including one year of marriage penalty relief (2020) and two years of full relief from the cap (2021 and 2022). While this SALT relief will benefit some pass-through businesses, those savings will be reserved only for businesses residing in certain states, while the tax hike will apply to businesses in all fifty states.

It would also undo a critical balance achieved in tax reform. The lower individual income tax rates coupled with the 20-percent pass-through deduction was designed to maintain tax parity for passthrough businesses and the new 21-percent corporate rate. EY recently reported that tax reform largely succeeded in this balancing act, but only if the deduction and the lower individual tax rates stay in place.

The Parity for Main Street Employers coalition represents millions of individually and family owned businesses employing tens of millions of private sector workers in every community and every industry, including contractors, engineers, retailers, wholesaler-distributors, manufacturers and more. On behalf of these employers, we ask that you reconsider this legislation.

Sincerely,

American Council of Engineering Companies, Associated Builders and Contractors, Associated General Contractors of America, Independent Community Bankers of America, National Association of Wholesaler-Distributors, National Beer Wholesalers Association, National Electrical Contractors Association, National Federation of Independent Business, National Roofing Contractors Association, S Corporation Association, Wine and Spirits Wholesalers of America.

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Mr. SMITH of Nebraska. Madam Speaker, I yield 6 minutes to the gentleman from South Carolina (Mr. Rice), an expert on tax policy.

Mr. RICE of South Carolina. Madam Speaker, today, I rise in strong opposition to this partisan bill that would give millionaires and billionaires a tax cut and do nothing to help the middle class.

The Tax Cuts and Jobs Act brought prosperity throughout the Nation and to people of every demographic and every income level.

Unemployment is at 50-year lows, all-time lows for African Americans and Hispanics. American economic growth remains the envy of the world.

After years of stagnation under the Obama administration, middle- class wages are growing at rates not seen in over a decade. Opportunity has been restored in this land of opportunity.

How did the Tax Cuts and Jobs Act accomplish all this? Primarily, it cut tax rates for businesses to make them more competitive in the world, especially small businesses that employ two-thirds of American workers.

H.R. 5377 eliminates the $10,000 cap on the deductibility of State and local taxes, referred to as the SALT deduction, and pays for it by raising the top rate from 37 percent to 39.6 percent. This, however, is the rate paid by many of the small business owners that employ all of those Americans and restored our prosperity. This would absolutely make those businesses less competitive in the world and would dampen America's renewed prosperity.

Madam Speaker, even worse, the $10,000 cap on deductibility of the SALT deduction is more than sufficient for over 90 percent of Americans. Lifting this $10,000 cap is a plain tax cut for the rich.

The Democrats' constant complaint about the Tax Cuts and Jobs Act is that it was a tax cut for the rich, which is simply untrue. But today, they propose to fix it by giving an even bigger, massive tax cut to the rich. That is correct, and let me repeat it. They complain that the Tax Cuts and Jobs Act was a tax cut for the rich, and they want to fix it by giving an even bigger tax cut to the rich.

Fifty-two percent of the benefit of repealing the SALT cap goes to income earners making more than $1 million a year, 52 percent. Ninety- four percent of the benefit goes to income earners in the top 10 percent of wage earners.

Madam Speaker, the Democrats should stop trying to convince America that they care about the middle class. There is an old proverb: I can't hear what you are saying because your actions speak so loudly.

This legislation would be particularly bad for poor and rural areas in States with low taxes, like Florida and Texas, which have no State income taxes. The average SALT deduction in my home county is $1,800, well below the $10,000 cap.

We had a hearing where we invited mayors of affluent townships around D.C. and in New York State. Their complaint was that, without the SALT deduction, they would have difficulty in raising taxes on their residents.

Madam Speaker, the D.C. suburbs have the highest household income in the country. The median household income is over $100,000. I represent Marion County, South Carolina, one of the poorest in the State. Fifty- seven percent of its residents are African American. The median household income is around $30,000, less than a third of that in the Washington suburbs.

If this SALT cap is lifted, the income taxes that the poor residents of Marion County pay, a portion of those will go to subsidize the housing and the services of the well-paid bureaucrats in the suburbs of D.C.

Their taxes are already used to pay the salaries of these folks, but now you would have the poor rural residents across America, not just Marion County, subsidize their taxes, as well.

Madam Speaker, yesterday, those across the aisle voted to impeach President Trump, who has done more to rebuild the middle class than anyone since Ronald Reagan. The figures don't lie. Today, they introduce a bill that would give a massive tax break to the highest wage earners.

This bill would make our tax code more regressive. It would provide a huge tax benefit to the 1 percent. This benefit would increase income inequality. The Democrats' actions, Madam Speaker, betray their loyalties, and those loyalties are not to the American middle class.

Madam Speaker, I encourage all of my colleagues to think of American workers and vote ``no'' on this legislation that will hurt the middle class.

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Mr. SMITH of Nebraska. Madam Speaker, I might add that Nebraska, the State that I represent, actually is considered to be a donor State, as well, and there is great support for the SALT cap in Nebraska.

Madam Speaker, I yield 3 minutes to the gentleman from Arizona (Mr. Schweikert).

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I continue to reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.
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Mr. SMITH of Nebraska. Madam Speaker, I would just add that there will be a chance here in a few moments to answer the concerns that the prior speaker had, and

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Mr. SMITH of Nebraska. Madam Speaker, in the interest of accuracy in this debate, I would like to reiterate that we doubled the standard deduction for all Americans--not just selective groups, but all Americans. We doubled that standard deduction, therefore, helping the middle class, and

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Mr. SMITH of Nebraska. Madam Speaker, I yield 1 minute to the gentleman from Texas (Mr. Arrington).

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Mr. SMITH of Nebraska. Madam Speaker, I yield the gentleman from Texas an additional 30 seconds.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I yield 2 minutes to the gentleman from New York (Mr. Zeldin).

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Mr. SMITH of Nebraska. Madam Speaker, I yield the gentleman from New York an additional 30 seconds.

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Mr. SMITH of Nebraska. Madam Speaker, I would remind my colleague who just spoke that the average family of four in his district received a benefit through the Tax Cuts and Jobs Act of about $5,000 per year.

Madam Speaker, I yield 1 minute to the gentleman from California (Mr. LaMalfa).

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Mr. SMITH of Nebraska. Madam Speaker, I yield 2 minutes to the gentleman from New York (Mr. Zeldin).

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Mr. SMITH of Nebraska. Madam Speaker, I am prepared to close, if there are no other speakers on the other side, and I reserve the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I yield myself such time as I may consume. Madam Speaker, in the interest of spreading holiday cheer, I will be brief.

I believe the bill we are about to vote on is bad policy. If you look at the SALT cap, it is good policy.

A State that has lower taxes should not be forced to pay more to subsidize a State that has higher taxes. There are generally reasons that a State is a higher tax State, and that was generated locally or at that State level.

But I think it is bad policy, as Mr. Zeldin was pointing out, to have a permanent tax increase to pay for a temporary tax benefit. That is bad policy.

Madam Speaker, I yield back the balance of my time.

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Mr. SMITH of Nebraska. Madam Speaker, I demand a recorded vote.

A recorded vote was ordered.

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