On Bloomberg TV, Sen. Portman Says Tax Reform Will Create Jobs, Increase Wages, Boost Middle Class

WASHINGTON, Sept. 14 -- The office of Sen. Rob Portman, R-Ohio, issued the following news release:

"There is nothing that would have a bigger bang for the buck than the right kind of tax reform," said Portman during an interview this morning on Bloomberg Television. That's why Senator Portman is urging his colleagues in Congress to act on pro-growth tax reform that will help boost wages and bring back jobs and investments lost to overseas competitors. Portman, who has recently hosted tax reform roundtables with local business leaders in Columbus, Dayton, Cleveland and Cincinnati, has been a leader in efforts to reform the tax code and protect taxpayer rights.

Excerpts of the interview can be found below and a video can be found here (https://youtu.be/rYhH0MQbI-g).

Host: "Thank you for being with us, Senator Portman. Give us an answer, give us some sense. There seems to be a bipartisan possibility now, at least in Washington. Is that going to make tax reform easier to do or harder to do from your point of view?"

Portman: "I think these conversations are always helpful, and I think it is important that we try to bring Democrats into the mix. I think Democrats, with regard to tax reform, have to decide on a fundamental question: do they think that tax reform that would lower rates and make a more efficient tax code, including on the international side, would improve the economy? I truly believe that, as do other Republicans, therefore we are willing to do pro-growth tax reform and not be too constrained by what folks call a static score of that tax reform. I think that's going to be the big issue. I think Democrats as a rule will be favorable toward tax reform because it will be improving the prospects for middle-class families in Ohio and around the country to get ahead because there will be some middle class tax cuts in there. And on the international side, I think everyone agrees that having the highest business rate in the world doesn't make sense, and the kind of way we tax international companies doesn't make sense because it keeps money offshore rather than coming back. I think the fundamentals are something we can see bipartisan agreement on, but the question is how would you score that, how would you look at that, and would you insist that it be done on a static basis, meaning that the tax cuts really wouldn't be in effect, or would you be willing to have some tax relief, in addition to tax reform, knowing that that will grow the economy, and in the end result in more revenue."

Host: "In your answer you illustrated two of the issues, one of them is how much the middle-class families will benefit from tax reform, which tends to be something that Democrats have talked a lot about, on the other hand corporate tax relief, which is something that Republicans by and large have tended to talk more about. Can we do both of those without breaking the budget? You know the budget."

Portman: "Absolutely. I think our system is so broken, frankly, the tax code is so inefficient and so antiquated, that those kinds of things will help. One of the things people miss sometimes is that it's not just about middle-class tax relief, it's about wages. All the analysis I have seen of the kind of tax reform we are talking about will create more jobs, more demand for labor, and therefore higher wages. That is really our big challenge in the economy today. We have flat wages, we have higher expenses, a lot of people are feeling the middle class squeeze. The best way to get at the wage growth side is tax reform. Other things are important too--regulatory reform and other issues--but there is nothing that would have a bigger bang for the buck than the right kind of tax reform."

Host: "We have heard from various people that growth is the solution to a lot of the problem's here, and that will take care of some of the deficit spending that's involved. But how much deficit can we afford to take on, at least in the short or medium term, to get to that growth from your point of view?"

Portman: "We should be responsible about it, and I think we have some guideposts. One is that the Joint Committee on Taxation does a macroeconomic score, also sometimes called a dynamic score, simply meaning that it takes into account what the behavioral changes will be from things like reducing taxes on capital. The capital gains tax as an example, the last time we did any significant tax reform was very important to getting it to a balanced budget. Back in the year 2000 we actually got to the balanced budget a couple of years earlier because of the changes on the capital gains tax rate. Lowering the rate brought more revenue into the federal coffers. That is an example of it, but the same would hold true for simply getting our business rate down so it is competitive, so that jobs won't be going overseas and investment will come back here--a repatriation where you're actually bringing money back--and then encouraging people who are in small businesses to invest more in their plant and equipment and people. I met with a bunch of small business owners yesterday from Ohio. We talked about the basic outline of the tax reform proposal. They like it because they're pass-through entities, they aren't big companies, they aren't C corporations, but they are companies that will benefit from the kind of tax relief we are talking about. And what they would do with that money is invest in businesses and create more jobs."

Host: "Senator, we spoke with Mick Mulvaney yesterday, who said that everything was on the table. Our take away from that was essentially if everything is on the table, then there isn't really a plan right now. Is that true?"

Portman: "I think everything is on the table in the sense that everybody is listening to one another, and that is positive and I think that's important to build consensus, but I do think that there is a growing sense among Republicans that lowering the rate, broadening the base, meaning getting rid of some of the tax preferences, some of the underbrush of the tax code, is simplifying the code, making it more pro-growth. On the international side, I think there is a consensus among Democrats and Republicans alike that the rate is too high."

Host: "We expect to hear that it will be pro-growth, etc., but the thing I want to draw down on, is the President of the United States mentioned offhand yesterday that the wealthy could pay more and if they have to it's not such a bad thing. Is that not such a bad thing? And could we see taxes rise on the wealthy in the United States?"

Portman: "I think what he's talking about is at the individual rate. We currently have a tax rate of 39.6 percent, but really for people at the top end it is higher because of the additional almost 4 percent from the Affordable Care Act. What he is talking about is that it's a relatively high rate, and the progressivity of the tax code would continue under Republican or Democrat proposals. The question is, who pays that tax? I think you want it to not fall on the small businesses, the so-called pass-throughs, the companies that pay their taxes at the individual level. Those are a lot of the folks who are driving our economy right now. You want the economic growth to not be 1.8 percent or two percent, you want it to be 2.8 percent or three percent or more. If you can do that, it does solve a lot of problems, and that is the opportunity here. You do have people who are small business owners who pay high taxes because their business is making money, but they reinvest all that back in their business and they have to pay a big tax. The idea is to bifurcate that from wealthy individuals who are not in small businesses. The idea on the C corporation side is to make us competitive globally, so you are bringing jobs and investment back here. Specifically repatriation of profits that would come back to this country to be reinvested in jobs and plant and equipment. This is an opportunity for us across the board in my view."

Host: "Finally, in talking with Director Mulvaney yesterday, he admitted that we can't just get there through growth. We will also have to make tough choices on eliminating some deductions, some exclusions. You referred to them briefly. You've had the experience at OMB. As a practical matter, can we do what we need to do without taking out something really controversial, something like mortgage deductions, interest deductions for corporations, taxes on local and state levels? Do we have to make some decisions and what would you recommend?"

Portman: "I think it's a great question, and I do think that if you have a low enough rate, if you can show people that yes you will lose your specific preference that for your industry is important, but you're going to have a lower tax rate overall and the economy is going to improve, so your customers, the people who are going to help you to be successful are going to better as well, I think that is how we will get it done. I do think it is very possible. In talking to people yesterday from Ohio who are business people, they're willing to see some of these preferences change, in some cases eliminated altogether. But certainly the interest deduction is one that has gotten a lot of attention on Bloomberg I'm sure, and so the question is how low will the rate be and net what will the effect be."