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Democrats May Soon Be Eating Their Words On Tax Reform

- September 5, 2017

In The Past, Many Democrats Have Supported The Tax Reform Goals President Trump Put Forward

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TOP TAKEAWAYS

  • President Trump wants to make the tax code simple, fair, and easy to understand.
  • The president's plan would cut the corporate tax rate, making American business competitive worldwide.
  • A competitive corporate tax rate would bring back profits companies have shifted overseas to nations with lower tax rates, injecting money back into the American economy and causing greater job creation at home.
  • Most importantly, President Trump wants to lower tax rates and provide tax relieve to hardworking middle-class Americans.
  • In the past, Democrats in the past have spoken out in favor of all of these proposals.

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PRESIDENT TRUMP HAS PUT FORTH A TAX REFORM PROPOSAL THAT WILL REVITALIZE THE AMERICAN ECONOMY

The Four Pillars Of President Trump's Tax Plan Aim To Make America Competitive Again

On August 30th, President Trump Presented His Goals For Tax Reform Aimed At Helping Lower And Middle-Class Americans. "President Donald Trump on Wednesday delivered his opening pitch on tax reform, framing the effort in populist terms saying Republican plans to overhaul the tax code would be a boon for lower- and middle-class Americans." (Jeremy Diamond, "Trump Pitches Tax Reform To 'Bring Back Main Street,'" CNN , 8/31/17)

In His Speech, President Trump Laid Out His Four Objectives. "After a long preamble thanking dignitaries and addressing the response to Hurricane Harvey, Trump outlined broad bullet points for his tax reform." (Gregory Korte, "Trump Pitches Tax Reform To Main Street, Twists Democratic Arms," USA Today , 8/30/17)

  • The First Is To Make The Tax Code "Fair And Easy To Understand." "Making the tax code 'simple, fair and easy to understand.' Trump said the average taxpayer shouldn't need professional help to file a tax return and should be able to file their taxes on a single page." (Gregory Korte, "Trump Pitches Tax Reform To Main Street, Twists Democratic Arms," USA Today , 8/30/17)
  • The Second Is To Reduce The Corporate Tax Rate, Making American Companies More Competitive, And Raising Wages. "Reducing the corporate tax rate. Cutting the top corporate tax rate from 35% to 15% is perhaps the toughest sell for Democrats, but Trump said a that provision would amount to a pay raise for American workers. How? Reducing taxes will make American companies more competitive, leading them to hire more workers and put pressure on wages, Trump argued." (Gregory Korte, "Trump Pitches Tax Reform To Main Street, Twists Democratic Arms," USA Today , 8/30/17)
  • The Third Is To Bring Back Overseas Profits By Lowering The Rate On These Profits, Enticing Companies To Bring That Money Back To The U.S. And Recapture Some Of The $3 Trillion Currently Held Offshore By U.S. Companies. "Bring back overseas corporate profits. This proposal, known as tax repatriation, would lower the rate on profits made overseas in order to encourage companies to bring that money back to the United States. Trump says his proposal would recapture a portion of the more than $3 trillion in such profits now held by U.S. companies offshore." (Gregory Korte, "Trump Pitches Tax Reform To Main Street, Twists Democratic Arms," USA Today , 8/30/17)
  • The Final Proposal Is To Provide Tax Relief To Middle-Class Americans. "Middle class tax relief. Trump was actually less specific on this provision than he was in April, when he proposed cutting the top tax rate from 39.6% to 35% and reducing the number of brackets from seven to three." (Gregory Korte, "Trump Pitches Tax Reform To Main Street, Twists Democratic Arms," USA Today , 8/30/17)

MAKING THE TAX CODE SIMPLER, FAIRER, AND EASIER FOR EVERYDAY AMERICANS TO UNDERSTAND IS CENTRAL TO PRESIDENT TRUMP'S PROPOSAL

The Unnecessarily Complicated And Confusing Tax Code Is A Burden For Everyday Americans

In A 2016 Report To Congress, The Internal Revenue Service Stated That Simplifying The Tax Code Was Necessary To Move The IRS Into The 21 st Century. "The National Taxpayer Advocate has attempted to identify and make recommendations to address the challenges the IRS faces to become a 21st century, taxpayer-centric tax administrator. The first and most obvious is the compelling need for tax reform. In our first legislative recommendation, Simplify the Internal Revenue Code Now, we describe in detail the burdens the current, hideously complex Code imposes on taxpayers and the IRS alike." ("The National Taxpayer Advocate's Vision For A Taxpayer-Centric 21st Century Tax Administration," Internal Revenue Service , Accessed 8/29/17, p. 2)

The IRS Currently Publishes 199 Tax Forms Related To The Individual Income Tax." "The IRS currently publishes 199 tax reforms related to the individual income tax." (Demian Brady, "Tax Complexity 2017: As The Burden Grows, Taxpayers' Patience Shrinks," National Taxpayers Union , 4/13/17)

American Taxpayers Spend A Total Of Six Billion Hours Each Year Filing Taxes. "In our first legislative recommendation, Simplify the Internal Revenue Code Now, we describe in detail the burdens the current, hideously complex Code imposes on taxpayers and the IRS alike. But suffice it to say here that a Code consisting of four million words and requiring six billion hours of taxpayer time when meeting their filing requirements is simply too complex to administer well."("Annual Report To Congress," National Taxpayer Advocate , 1/01/17)

It Costs The "Median" Taxpayer More Than $250 A Year To Comply With The Tax Code. "The monetary compliance burden for the median taxpayer (as measured by income) comes to more than $250 a year." ("Introduction: Legislative Recommendations," Internal Revenue Service , Accessed 8/29/17)

Democrats Have Repeatedly Identified Complexity As A Problem With The U.S. Tax Code That Needs To Be Addressed

In His 2011 State Of The Union Address, President Obama Said "He Would Like To Join Members Of Congress In Their Efforts To Simplify The Tax Code For Individuals." "Obama made only a passing reference in his speech to reforming individual income taxes, saying he would like to join members of Congress in their efforts to simplify the tax code for individuals. Gleckman said Obama would have to take a much more active role in getting any tax reform package through Congress." (Stephen Ohlemacher, "Obama: Lower Corporate Tax Rates, Close Loopholes," The Associated Press , 1/26/11)

Senator Jon Tester (D-MT) Said In 2011, "I Think We Can Simplify The Tax Code." SEN. JON TESTER (D-MT): "You know, I will tell you I think tax reform needs to be part of the equation. And I think we can simplify the tax code. I think the debt commission pointed that out." (CNBC's "Dow Jones Business Video," 4/11/11)

Senator Elizabeth Warren (D-MA) Introduced Legislation To Simplify The Tax Code And Reduce The Stress And Cost Of The Filing Process. "United States Senator Elizabeth Warren (D-Mass.), along with ten other senators, today announced plans to reintroduce the Tax Filing Simplification Act of 2017 to simplify and decrease the costs of the tax filing process for millions of American taxpayers. This year, taxpayers will spend an average of 13 hours preparing and filing their returns, and will pay $200 for tax preparation services - a cost equal to almost 10 percent of the average federal tax refund." (Press Release, "As Tax Day Approaches, Senators Will Introduce Bill To Simplify Tax Filing," Sen. Elizabeth Warren , 4/12/17)

  • Senator Bernie Sanders (I-VT) Supported This Legislation Saying, "We Must Make Tax Filing As Easy As Possible, Not Direct Profits To Private Companies At The Expense Of Working Families." "'Tax Day has become an opportunity for corporations to profit off of confusion over our complicated tax code. That is wrong. The Tax Filing Simplification Act would end the absurdity of Americans having to pay private companies hundreds of dollars to pay their taxes. We must make tax filing as easy as possible, not direct profits to private companies at the expense of working families,' Senator Bernie Sanders said." (Press Release, "As Tax Day Approaches, Senators Will Introduce Bill To Simplify Tax Filing," Sen. Elizabeth Warren , 4/12/17)
  • Senator Tammy Baldwin (D-WI) Supported Warren's Bill Saying, " If Washington Would Finally Act On Commonsense Reforms At The IRS, We Can Simplify Tax Filing And Make It Less Expensive For Taxpayers." "'American taxpayers are forced to spend too much time and money filing taxes when it doesn't have to be that way,' said Senator Tammy Baldwin. 'If Washington would finally act on commonsense reforms at the IRS, we can simplify tax filing and make it less expensive for taxpayers.'" (Press Release, "As Tax Day Approaches, Senators Will Introduce Bill To Simplify Tax Filing," Sen. Elizabeth Warren , 4/12/17)

Democratic Rep Tim Ryan (D-OH) Said "I Think We Need To Simplify The Tax Code." REP TIM RYAN (D-OH): "While we can be for a progressive tax code, we can be for an increase in dividends and corporate - you know, other kind of business taxes, I think we need to simplify the tax code." (MSNBC's "Morning Joe," 8/24/17)

PRESIDENT TRUMP'S TAX REFORM EFFORTS AIM TO CREATE JOBS AND REVITALIZE AMERICAN BUSINESS BY CUTTING CORPORATE TAX RATES

The U.S. Corporate Tax Rate Is Among The Highest In The World, Encouraging Companies To Shift Profits Offshore To Avoid High Tax Rates

The Statutory U.S. Corporate Tax Rate For Most Major Companies Is 34 To 35 Percent . "34 percent of so much of the taxable income as exceeds $75,000 but does not exceed $10,000,000, and (D) 35 percent of so much of the taxable income as exceeds $10,000,000." (26 U.S.C. § 11)

The U.S. Corporate Tax Rate Is 16.4 Percent Higher Than The Worldwide Average. "The U.S. tax rate is 16.4 percentage points higher than the worldwide average of 22.5 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.5 percent. Over the past ten years, the average worldwide tax rate has been declining, pushing the United States farther from the norm." (Kyle Pomerlau, "Corporate Income Tax Rates Around The World, 2016," Tax Foundation , 08/18/16)

The U.S. Has The Highest Statutory Corporate Income Tax Rate Among G20 Countries As Of 2012. ("International Comparisons Of Corporate Income Tax Rates," Congressional Budget Office , 3/01/17, p. 2)

In The Past, Democrats Have Supported Lowering Corporate Tax Rates

In 2008, Nancy Pelosi (D-CA) Was In Favor Of Reducing The Corporate Tax Rate Saying, " Reducing The Corporate Tax Rate Would Help Keep Our Companies Competitive Internationally." "America has one of the highest corporate tax rates among industrialized nations and Secretary Paulson has repeatedly spoken of the need to eliminate unfair tax preferences in the code to allow for a reduction in the corporate tax rate from 35 percent to 30.5 percent or below. Reducing the corporate tax rate would help keep our companies competitive internationally." ("On Tax Reform," Rep. Nancy Pelosi , 1/28/08)

In His 2011 State Of The Union Address, President Obama Lamented The High Corporate Tax Rate And Said, "It Makes No Sense. It Has To Change." "'Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries.' Obama said in his speech Tuesday night. 'Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense. It has to change.'" (Stephen Ohlemacher, "Obama: Lower Corporate Tax Rates, Close Loopholes," The Associated Press , 1/26/11)

Senator Manchin Was "Pleased" With President Obama's Proposal To Lower The U.S. Corporate Tax Rate Which "Moves Us In The Right Direction." "U.S. Senator Joe Manchin (D-W.Va.) issued the following statement about President Obamas proposal to overhaul the corporate tax system by dropping the tax rate from 35 percent to 28 percent, reducing incentives to move jobs overseas, and expanding deductions for American manufacturing. While I will take the next several days to fully evaluate the Presidents corporate tax overhaul proposal, I am pleased to see that he is laying out goals that could move us in the right direction toward important priorities, like bringing more American dollars and jobs back onto our soil and encouraging investment in the United States." (Press Release, "Manchin Says Corporate Tax Reform Proposal 'Moves Us In The Right Direction," Sen. Joe Manchin , 02/22/12)

In 2014, Senator Claire McCaskill (D-MO) Said, "I Think We All Want To Lower Corporate Tax Rates." "I mean, I think we all want to lower corporate tax rates, but we want to quit letting certain people get goodies so they don't have to pay any taxes. We just want to level the playing field. And if we leveled the playing field we could actually realize some additional revenue without taxes going up for the vast majority of people, just the few people that aren't paying any right now, um, and, and get to a more fair tax system that could more fully support our military." (Michael Bersin, "Sen. Claire McCaskill (D): On Robbing Social Programs To Pay For ISIS," Show Me Progress , 10/14)

Democratic Rep. Tim Ryan Said, "I Think We Need To Lower The Corporate Tax Rate. We Can't Just Be The Party Of Redistribution Of Wealth. We've Got To Be The Party Of Creation Of Wealth." REP TIM RYAN (D-OH): "But let me be clear, I don't think we can be hostile to business. I think, you know, while we can be for a progressive tax code, we can be for an increase in dividends and corporate - you know, other kind of business taxes, I think we need to simplify the tax code. I think we need to lower the corporate tax rate. We can't just be the party of redistribution of wealth. We've got to be the party of creation of wealth. And not just in Silicon Valley and Wall Street. In Youngstown, in the south, we've got to create new wealth in this new economy." (MSNBC's "Morning Joe," 8/24/17)

TRUMP'S PLAN TO CUT THE CORPORATE TAX RATE WILL HELP PREVENT COMPANIES FROM SHIFTING PROFITS TO LOW TAX NATIONS INSTEAD OF THE UNITED STATES

U.S. Companies Have Shifted Trillions Of Dollars Offshore To Avoid Domestic Taxes, Costing The United States Billions In Tax Revenue

The High Corporate Tax Rate Incentivizes Corporations To Shift Profits Overseas In Order To Avoid High Domestic Taxes. "Lawmakers say the current tax code incentivizes profit shifting overseas because of the high 35 percent U.S. corporate income tax rate and rules that allow companies to hold profits abroad tax free until returned to U.S. soil." (David Morgan, "Republicans Debating Remedies For Corporate Tax Avoidance," Reuters , 6/18/17)

Corporations Shift Assets Abroad To Countries With Lower Tax Rates. "Many schemes seek lower corporate tax bills through 'transfer pricing' - using transactions between business units to shift income abroad. The shift often coincides with the transfer of intangible assets such as intellectual property to low-tax nations where companies can expect single-digit tax rates." (David Morgan, "Republicans Debating Remedies For Corporate Tax Avoidance," Reuters , 6/18/17)

According To Capital Economics, U.S. Firms Shifted $2.5 Trillion Overseas In 2015 Due To "The Substantial Tax Bill Most Firms Would Face" If They Brought The Money To The U.S. "The cash held overseas by US firms has continued to grow at a rapid pace, rising to almost $2.5tn in 2015. The substantial tax bill most firms would face if they attempted to bring this cash home, however, means that it is still very unlikely to ever be repatriated under the current system." (Paul Ashworth, Michael Pearce, and Andrew Hunter, "Firms Continue To Hoard Cash Overseas," Capital Economics , 09/19/16)

According To Independent Analysis, The Government Misses Out On $100 Billion In Tax Revenue A Year, Roughly One Third Of Annual Corporate Tax Income As A Result Of Corporations Using "Tax Reduction Maneuvers." "Independent analysts estimate the federal government misses out on more than $100 billion a year in corporate tax revenues as a result of tax reduction maneuvers. That is equal to one-third of the $300 billion in annual corporate tax revenues." (David Morgan, "Republicans Debating Remedies For Corporate Tax Avoidance," Reuters , 6/18/17)

Corporate Inversion Has Been Identified As A Problem By Democrats, Some Even Introducing Legislation To Address The Issue

Senator Bernie Sanders (I-VT) Has Introduced Legislation To Stop Corporations From Sheltering Income In Tax Havens In Place Like The Cayman Islands. "Sen. Bernie Sanders on Thursday introduced a bill to stop profitable corporations from sheltering income in the Cayman Islands and other tax havens." (Press Release, "End Offshore Tax Havens," Sen. Bernie Sanders , 02/07/13)

In 2013, Senator Sherrod Brown (D-OH) Said That The U.S. Must Close Down Tax Havens, Lower The Corporate Tax Rate, And Reduce The Incentive For American Companies To Shift Job And Profits Overseas. "'Corporate tax reform is necessary to ensure the American economy is the most desirable place in the world for U.S. based companies to invest,' Brown said. 'We can do that by closing down tax havens that cost our country revenue and cost American workers jobs. Lowering the corporate tax rate would put companies on a level playing field with foreign competitors and reduce the incentive for them to shift jobs and profits overseas.'" (Press Release, "Sen. Brown Announces Plan To Overhaul Corporate Tax Code To Spur Domestic Investment, Create High-Skilled Jobs," Sen. Sherrod Brown , 07/31/13)

In 2014, Senator Tim Kaine (D-VA) And 13 Other Senators Proposed A Bill To Stop Corporate Inversion. "In an effort to tighten rules on corporate tax avoidance through 'inversions,' U.S. Senator Tim Kaine joined a group of 13 Senators today to introduce The Stop Corporate Inversions Act of 2014, legislation to address the practice of reincorporating offshore to avoid paying U.S. taxes." ("Kaine Joins 13 U.S. Senators To Introduce Bill To Clamp Down On 'Inversions' Tax Loophole," Sen. Tim Kaine , Accessed 8/16/17)

  • Senator Kaine Called Corporate Inversion A "Flagrant Abuse" Of The Tax System And "Unacceptable." "'This is about leveling the playing field and rooting out flagrant tax abuse in our system that could lead to billions of dollars of lost revenue,' said Sen. Tim Kaine, D-Va. 'In order to fully restore budget certainty, we need to look at abuses in the tax code as much as spending. The fact that companies can change their tax liability to low-tax jurisdictions on paper while maintaining operations and ownership in the U.S. is unacceptable and I'm pleased to join my colleagues to introduce this important fix.'" ("Kaine Joins 13 U.S. Senators To Introduce Bill To Clamp Down On 'Inversions' Tax Loophole," Sen. Tim Kaine , Accessed 8/16/17)

The Bring Jobs Home Act, Led By Senator Debbie Stabenow (D-MI), Created A 20 Percent Tax Credit For Moving Expenses For Companies Who Shift Operations Back To The United States From Abroad. " The Bring Jobs Home Act, led by Michigan Senator Debbie Stabenow, creates a special 20 percent tax credit for the moving expenses of companies who shift operations back to the U.S. from abroad." ("Bringing Overseas Jobs Back To U.S. Is Focus Of McCaskill-Backed Bill," Sen. Claire McCaskill , Accessed 8/17/17)

  • Voicing Her Support Of The Bill Senator McCaskill Said, "We Should Be Incentivizing Companies That Bring Jobs Back To The United States Instead Of Giving Tax Breaks To Companies Sending Those Jobs Overseas." "'The best way to strengthen America's economy is to support the creation of good-paying jobs-and to that end, we should be incentivizing companies that bring jobs back to the United States instead of giving tax breaks to companies sending those jobs overseas,' McCaskill said. 'We should be doing everything in our power to support companies creating jobs in Missouri and across the country, boosting our economy here at home.'" ("Bringing Overseas Jobs Back To U.S. Is Focus Of McCaskill-Backed Bill," Sen. Claire McCaskill , Accessed 8/17/17)

PRESIDENT TRUMP IS COMMITTED TO REDUCING THE TAX BURDEN ON MIDDLE-CLASS AMERICANS

President Trump Is Committed To Reforming The Tax Code So That It Serves Hardworking Americans And Not Special Interests

By Eliminating "Dozens Of Loopholes, [And] Special Interest Carve-Outs" President Trump Will Reform The Tax Code To Make It "Pro-Growth, Pro-Jobs, Pro-Worker, And Pro-American." "Noting the elimination of 'dozens of loopholes,' special interest carve-outs, and the reduction of brackets and rates that Congress achieved three decades ago, Trump said, 'the foundation of our job creation agenda is to fundamentally reform our tax code for the first time in more than 30 years. I want to work with Congress, Republicans and Democrats alike, on a plan that is pro-growth, pro-jobs, pro-worker -- and pro-American.'" (Clyde Wayne Crews Jr., Op-Ed, "Trump's Tax Reform Plan Targets Middle-Class Tax Complexity," Forbes , 8/30/17)

Democrats Have Been In Favor Of Eliminating Special Interest Loopholes

In 2013, Then-Chairwoman Of The Senate Budget Committee, Sen. Patty Murray (D-WA), Called For Closing Tax Loopholes Saying, "It Would Be Unfair, And Unacceptable, To Ignore Every Last Loophole And Special Interest Carve-Out Yet." "The U.S. tax code clearly benefits the wealthy and well-connected. It would be unfair, and unacceptable, to ignore every last loophole and special interest carve-out yet ask seniors and families to bear the burden of deficit reduction alone." (Sen. Patty Murray, Op-Ed, "Closing Tax Loopholes Should Be Part Of The Budget Conference," The Washington Post , 11/8/13)

House Minority Leader Rep. Nancy Pelosi Called For Reforms In The Tax Code Including The Elimination Of "Special Interest Tax Expenditures That Increase The Deficit, Closing Special Interest Loopholes." "Rep. Pelosi also called for 'big, bold commitments' in four areas: research and innovation; education; infrastructure; and investments in working families through the tax code. On the latter, she called for the elimination of 'special interest tax expenditures that increase the deficit,' closing 'special interest loopholes' that would reduce the corporate rate and produce more revenue, and pursue 'tax reform that ensures that all Americans pay their fair share.'" (Fred Dews, "Rep. Nancy Pelosi: Strong Middle Class Is The Bedrock Of Our Prosperity," Brookings Institute , 2/3/15)

In 2013, Rep. Chris Van Hollen (D-MD) Said, We Need To "[Close] Special Interest Loopholes." With child care expenses eating up large portions of family budgets, we need to provide meaningful relief to all families, through direct help that reaches more of those eligible and expansion of the Child and Dependent Care Tax Credit. And we can do these in a responsible manner by closing special interest loopholes and by no longer favoring wealth over work in our tax code." (Press Release, "Van Hollen Statement On The President's Plan To Help Middle-Class And Working Families Get Ahead," Rep. Chris Van Hollen , 4/13/15)

Ahead Of President Trump's Visit To North Dakota, Senator Heidi Heitcamp (D-ND) Said She Was Pushing Both Sides "To Work Together In Congress Toward Permanent, Comprehensive Solutions That Will Do Away With Loopholes And Handouts For Special Interests." "And it's why I've been pushing for both sides of the aisle to work together in Congress toward permanent, comprehensive solutions that will do away with loopholes and handouts for special interests and instead promote our small businesses, farm economy and energy industries with the fiscally responsible reforms they need to grow and expand." ("Heitkamp Statement On President Trump Visit To North Dakota," Sen. Heidi Heitkamp , 9/1/17)


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