Federal Aviation Administration Extension Act of 2010

Floor Speech

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Mr. GRASSLEY. Mr. President, this bill is about stopping the biggest tax increase in the history of the country that will happen if we do not pass something between now and the end of the year. That happens because the 2001 tax law, the present tax policy, was only good for 10 years, and it sunsets. So you go back to the big tax policy we had, the high tax policy we had in the year 2000.

We are passing this now because of a simple rule of economics: you should not increase taxes during an economic recession. With nearly 10 percent unemployment, we are still, obviously, in a recession.

Some on the other side supported the President's earlier proposal when he wanted to maintain the existing tax policy just for those below a $200,000-a-year income. The Senate did not support that proposal, and it is clear that proposal could not pass. I know that can be a difficult thing. Over the years I have seen proposals I thought were good and just and that I cared passionately about defeated in the Senate. But you just move on, so that is what our President has done. He has moved on in a pragmatic spirit. He has put forward another proposal to prevent the biggest tax increase in the history of the country from happening. He doesn't view it as ideal, and few on my side of the aisle do as well.

For all of us, it is a balancing act. We want to stay true to our ideals. We also want to deliver practical results to our constituents.

I submit this bill does not increase taxes, it does not cut anybody's taxes, and that happens to be the right balance for the vast majority of us. But it also happens to be what is right for the economy now that we are in a recession.

Just 10 days ago, the unemployment rate ticked up to 9.8 percent. In July it was at 9.5 percent. The trend is in the wrong direction. We are in a fragile situation. The economy is clearly telling Congress: handle with extreme care. The majority of the economists surveyed by CNN Money says preventing the 2011 tax hikes is the No. 1 thing that Congress can do right now to help the economy. The survey results are on a chart, showing that 60 percent of the economists said preventing tax hikes on every American was the best course of action to take at this particular time; that the economy is in a fragile situation.

We have the nonpartisan Congressional Budget Office saying GDP growth will be far less if we let the biggest tax increase in the history of the country happen without Congress intervening. If the tax relief doesn't maintain at the present level, the economy would grow .3 percent less than if we do it the way the President originally wanted to do it, just for those people under $200,000 a year income.

In other words, the economy will grow at 1.4 percent if we leave the tax policy of the last 10 years in place as opposed to taxing people who make over $200,000 a year at a higher level. Then the economy would only grow at 1.1 percent.

Given the recession, given the high unemployment rate, given business's reluctance to invest and grow, we need to be especially sensitive to GDP growth. If it were just a matter of either the government got the money or the private sector, that would be one thing, as the government does have a deficit problem. But in this case it is a matter of money simply not being there because of the hit to the gross domestic product. We are talking about dead-weight loss.

For those who think taxing people more will bring in more revenue, I would put up a chart that expresses tax policy and the result of it over the last 50 years. We can see the red line that says there is an average of about 18.2 percent of all the wealth. We can see the red line shows for a 50-year average, about 18.2 percent of the gross national product has come to the Congress to spend, regardless of what the high marginal tax rates were--going back to 1993 and the Eisenhower administration, going down to 70 in the Kennedy administration, going down to 50 in the Reagan administration, going down to 26 in the Reagan administration, back up 40--almost 40 percent in H.W. Bush's administration, and then down to 35 percent where they are now. They could go back up to 40 percent if we do not intervene right now.

What this ought to tell everybody is, marginal tax rates do not make a difference, a big difference, in how much money comes into the Federal Treasury. The people of this country decided about how much they are going to give to us in Congress to spend out of the entire national income. It is about 18.2 percent regardless of where the marginal tax rates are.

It tells me that people, if they do not want to work, if they do not want to earn or if they want to hire people to legally avoid taxes, are going to do it, and we are only going to get so much.

Here is what the nonpartisan Joint Committee on Taxation says about this:

We anticipate that taxpayers would respond to the increased marginal rate by utilizing tax-planning and tax-avoidance strategies that will decrease the amount of income subject to taxation.

That chart proves exactly what the nonpartisan Joint Committee on Taxes has said.

We have known about these looming tax hikes for a decade now. We should have acted many years ago. Now we have only 19 days to go before the tax hikes take effect. We are down to the wire, and we need to act. We need to act because it is what it takes to turn this economy around. The time to dither is over. The National Federation of Independent Business, the voice of small business, had this to say recently. Because of no action on expiring tax rates there is a ``cloud of uncertainty, larger and darker. In response, consumer sentiment fell and owner optimism remained anchored solidly in recession territory. Thus, spending stayed in `maintenance mode,' deterioration of jobs continues, and capital spending remains at historically low rates. Owners won't make spending commitments when sales prospects remain weak and important decisions such as tax rates and labor costs remain so uncertain.''

That is the end of the quote from small business.

Uncertainty is the issue we have to deal with here. Passing this bill so the biggest tax hike in the history of the country will not happen is one thing that will bring some certainty, and maybe more certainty than anything else, to our economy.

The bottom line, as evidenced by this chart, is stop the tax hikes. It is time to leave the tax policy of the last 10 years in place so at least for the next 2 years people know they can hire and expand this economy and expand theirs.

I reserve the remainder of my time.

How many minutes do I have?

The ACTING PRESIDENT pro tempore. The Senator has 2 1/2 minutes.

Mr. GRASSLEY. I think, Mr. President, I am going to take 2 1/2 minutes to address what the Senator from Arizona said about some of the provisions in this bill. We keep having ethanol referred to as a subsidy.

Let me tell you about some of the subsidies that are in this bill because you might think that ethanol is the only one. Think in terms of the research and development tax credit. That is subsidy for big business that has been around for 30 years. Think about the Indian employment tax credit, the subsidy for new market tax credits, the subsidy for railroad track maintenance credit, mine rescue team training credit, the subsidy for employer wage credit for employees who are on Active Duty in the uniformed services, the subsidy for 15-year straight line cost recovery for qualified leaseholder improvements, the subsidy for the 7-year recovery period for motor sports entertainment complexes.

I don't quite understand, when there are 72 provisions in this bill that expired on December 31, 2009, and they are just being continued as some of them have been for 30 years, how somebody today is going to say that is bad tax policy and they did not say it over the last 30 years, particularly when it comes to a time when we know we need a balanced alternative energy program--balanced for whatever can be alternative energy because God only made so much fossil fuel. Obviously, we ought to be using petroleum. But should we import more petroleum from the 10 percent of the fuel used in motor vehicles coming from ethanol? Do you believe we ought to have a good national security program that is less based upon the requirements of imported oil?

I think we ought to look at this balanced program as being one of fossil fuel, one of alternative energy, and one of conservation and ethanol and biodiesel and wind and solar and all that is part of a balanced program, and they all have tax incentives.

I yield the floor.

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