It's no wonder public opinion towards the federal government is sinking to historic lows. Consider the disingenuous public relations strategy undertaken by General Motors (GM) and the Treasury Department. With great fanfare, the U.S. automaker boasted that it was paying back billions of tax dollars to Uncle Sam thanks to an upswing in car sales.

Upon closer review, however, the repayment announcement is overshadowed by the fact that the Treasury Department allowed GM to dip into another taxpayer-financed pot of money to repay $7 billion of its taxpayer-backed government loan.

It's obvious why the car company and Treasury Department would be eager to claim tax dollars were being paid back "in full" and earlier than scheduled.  However, it's regrettable the very public announcement essentially misled the American public by glossing over very relevant details.

Taxpayers still own 61 percent (paid for with $41 billion tax dollars) of General Motors' common stock. It's highly likely the taxpaying public won't rejoice in an estimate by the nonpartisan Congressional Budget Office. It says taxpayers stand to lose around $30 billion on the General Motors bailout when it's all said and done.

The idea that Washington can solve every problem with a government program is rooted in a misguided borrow-and-spend mentality.

Holding the federal government accountable, tracking tax dollars and keeping the people's business open and accessible to public scrutiny are central to my congressional oversight.  As Chairman or Ranking Member of the tax-writing Senate Finance Committee, I've led efforts to shut down offshore corporate tax loopholes; investigate the eligibility and compliance of non-profit organizations relative to their tax-exempt status; disclose financial relationships between the pharmaceutical industry and researchers who provide expertise that influences health decisions; and, most recently, scrutinize the trillions of tax dollars that Washington has pumped into the private sector.

As Congress debates financial regulatory reform, I worked to advance bipartisan legislation that would bring more transparency and accountability to the Federal Reserve. The Fed controls the supply of money in the U.S. economy. Last year the Federal Reserve took unprecedented action to stabilize banks at risk of failing. The American public has a right to know who has taken the money and how it has been spent. Allowing the independent investigative arm of Congress, the Government Accountability Office, to audit the Federal Reserve's emergency lending program would give lawmakers and taxpayers another tool to protect tax dollars.  I also cosponsored legislation to reform the way credit-rating agency evaluations are handled in order to help bring about the independent assessment investors deserve.  It's a matter of market integrity.

In these times of economic uncertainty, the American public is facing an even bigger burden of public debt. Washington is marching towards an all-time-high spending benchmark, reaching 25 percent of the nation's gross domestic product. Now, the nonpartisan Congressional Budget Office, or CBO, said health care reform will cost $115 billion more than projected.  That makes the deficit reduction that was promised impossible.  Despite the President's promise that health care reform would not add one dime to the deficit, when costs for Social Security and the new long-term care CLASS Act program in the bill are factored in, the real result is that the bill signed into law adds $90 billion to the deficit.

A bigger government has a bigger appetite for more and more taxes. Without a major shift, the current path of reckless deficit spending and unsustainable public entitlements will keep future generations of Americans working longer than ever before just to fulfill their tax obligations let alone maintain a certain standard of living.

Friday, May 14, 2010

I want to make crystal clear that taxpayers should be paid back every penny of TARP losses.  The statute that created TARP said that the President is supposed to propose a plan in 2013 to repay taxpayers for any losses from TARP.  However, earlier this year, three years before he was supposed to under the statute, the President proposed what he called a Financial Crisis Responsibility Fee.

Obviously, in 2013 we will have a much better estimate of projected TARP losses than we have now in 2010.  The President said that one of the purposes of the TARP tax is to repay taxpayers for any losses from TARP.  I want to make sure this actually happens, and that it's not just empty rhetoric.  Any losses that result from TARP will increase the deficit, which has ballooned under President Obama.  Therefore, to pay back taxpayers for any TARP losses, any money raised from the TARP tax would have to be used to pay down the deficit.  If a TARP tax is imposed and the money is simply spent, that doesn't repay taxpayers one cent for any TARP losses.  It's like getting a raise and saying you're going to pay down your credit card with the extra money, but then choosing to spend the money instead of paying down the credit card.

It shouldn't be any surprise to learn that your credit card balance didn't go down.  Saying you're going to pay down your credit card -- in this case, the deficit -- doesn't do any good.  You have to actually do it.  I've heard that some of my friends on the other side of the aisle are already looking to use the money raised from a TARP tax to spend it under their arbitrary pay-go rules.

When I tried to get a commitment from Secretary Geithner on this point, he wouldn't give me one.  That's disappointing.  However, I was encouraged that it sounds like the Chairman of the Ways and Means Committee and I see the TARP tax the same way.  Martin Vaughan wrote a May 5 Dow Jones Newswires column titled, "House Panel Chairman: Bank Tax Plan Not Ready For Prime Time."  The column states, "Levin signaled he doesn't favor pairing the bank tax with legislation already pending in Congress, such as the financial overhaul bill or a separate bill to extend expired tax breaks.  First, he said, the tax should be used for deficit reduction and not to pay for new spending.  'At this point, I don't think the bank tax is ready to be a pay-for,' Levin said."

In looking at the President's TARP tax proposal, which I understand the President has already felt the need to change, it's interesting that GM and Chrysler, which are responsible for about 30 billion of projected losses in TARP, are not subject to the President's proposed tax.  Secretary Geithner said that GM and Chrysler were simply victims of the financial crisis, and therefore shouldn't be subject to the President's tax.  However, Ford didn't take any TARP money and survived just fine.  In addition, with GM and Chrysler responsible for such large amounts of TARP losses, it seems only fair that they should be subject to the TARP tax to pay back some of those losses.  GM and Chrysler were both invited by Chairman Baucus and me to testify at this hearing and make their case regarding why they shouldn't be subject to the tax, and both declined.  Their silence is deafening.

Also, Fannie and Freddie are not subject to the tax.  We'll explore whether that makes sense at today's hearing.  And hedge funds are not subject to the President's proposed tax. Meanwhile, companies that did not take any TARP money are subject to the proposed tax.

The President's proposed tax is so lacking in details that members of Congress that are being asked to support it are having a very difficult time figuring out how it would apply and who is subject to the tax.   When I asked CBO to tell me who would bear the burden of the TARP tax, they said that one of the groups that would bear the burden of the tax would be consumers.  CBO stated in their letter to me that the President's tax will reduce small business lending.  Under the new version of the tax proposed by the President, small business loans would be considered the riskiest assets held by the banks, and therefore subject to the highest taxes.  Considering the 9.9 percent unemployment rate, the trouble small businesses are having getting credit, and the proposed tax hikes on small business, I am very concerned with that aspect of the proposal.

One of the purposes for the tax stated by the President is to reduce risky behavior by financial institutions.  However, CBO stated in their letter to me that the TARP tax, quote, "would not have a significant impact on the stability of financial institutions or significantly alter the risk that government outlays will be needed to cover future losses."  That's not just me saying it, that's the nonpartisan CBO saying it. If the United States imposes a TARP tax and other countries don't, it will make our financial institutions less competitive than their foreign competitors.  Of the G-20 countries, Australia, Canada, Japan, Russia, and Brazil are opposed to a bank tax, and South Africa doesn't want its banks taxed.  I look forward to hearing the testimony from the witnesses today.

WASHINGTON -- Sen. Chuck Grassley of Iowa just received the Small Business Council of America's Special Congressional Appreciation Award, which has been given only a handful of times over the last 26 years.  Grassley received the award for his "outstanding leadership and efforts on behalf of small businesses in the country," according to the organization.

"I'm grateful to receive this award," Grassley said.  "It's a no-brainer to work to strengthen small businesses.  They create 70 percent of jobs.  Their innovation and services are felt every day. Economic recovery and success depend on the ability of small businesses to preserve and create employment opportunities."

As ranking member or chairman of the Committee on Finance over the last 10 years, Grassley has been in a position to oversee tax and health care policy with an eye toward small business growth and preservation. The Small Business Council of America describes itself as a national nonprofit organization that represents more than 20,000 small businesses in the retail, manufacturing, and service industries on federal tax, health care, and employee benefit matters.

The group said it singled out Grassley for special recognition for his dedication to small businesses, his understanding of the health care and estate tax challenges facing such businesses, and especially his efforts to correct the disproportionate penalties placed on small businesses under a tax shelter crackdown meant to capture large corporations.

For months last year, through the end of the congressional session, Grassley protested the IRS' placement of liens on small businesses that unknowingly invested in prohibited tax shelters. Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction.  Grassley, joined by colleagues, fought to persuade the IRS to provide temporary relief to small businesses facing these penalties until Congress could enact bipartisan, bicameral legislation to fix the penalty structure. Last December, Grassley announced he would hold up all Treasury nominees until the IRS agreed to suspend its enforcement actions.  The IRS agreed to suspend collection enforcement action, and legislation making a permanent fix is advancing through Congress.

Grassley acted out of concern that the Treasury Department gave favorable tax treatment to government bailout participants, including Citigroup, while placing liens on small businesses contrary to congressional intent.

Similarly, the $800 billion stimulus bill was enacted hurriedly in February 2009 with less than one-half of one percent of the bill as tax relief for small businesses.  Grassley protested the lack of consideration for small business.  Last year, he introduced S. 1381, the Small Business Tax Relief Act of 2009.  "This legislation contains a number of provisions that will leave more money in the hands of small businesses so that they can hire more workers, continue to pay the salaries of their current employees, and make additional investments in their business," Grassley said.

Several provisions in Grassley's bill are under consideration for inclusion in a small business tax relief bill under development in the Senate.  The National Federation of Independent Business strongly supports the Grassley bill, writing, "To get the small business economy moving again, small businesses need the tools and incentives to expand and grow their business.  S. 1381 provides the kinds of tools and incentives that small businesses need." 

In addition to his legislative efforts, Grassley has worked and continues to work to educate Congress and the public about the impact of various policy proposals on small businesses.  For example, the President and Democrats in Congress have proposed increasing the top two marginal tax rates from 33 and 35 percent to 36 and 39.6 percent, respectively; increasing the tax rates on capital gains and dividends to 20 percent; fully reinstating the personal exemption phase-out, known as PEP, for those making over $200,000; and fully reinstating the limitation on itemized deductions, which is known as Pease, for those making over $200,000.

Proponents say those increases would hit only "wealthy" individuals and only a small percentage of small businesses.  Grassley has explained in numerous speeches on the Senate floor and elsewhere that according to the Joint Committee on Taxation, 47 percent of all flow-through business income would be subject to the tax rate hikes.  This hits small businesses especially hard, because most small businesses are flow-through entities, which are S corporations, partnerships, limited liability companies and sole proprietorships. Grassley frequently uses data from the Joint Committee on Taxation and the Congressional Budget Office, the nonpartisan, official scorekeepers, to underpin his analysis. 

Similarly, during the health care reform debate, Grassley highlighted the cost of various proposals on small businesses, both in terms of their ability to provide health care to their employees and the regulatory burden imposed on them by the new health care regime.

"Just this week, the Treasury Department said hiring by small and mid-size businesses remains stagnant even though large firms have seen an uptick in employment over the last six months," Grassley said.  "If we don't look out for small businesses, we'll be shooting ourselves in the foot and letting down the scores of people who work hard and deserve secure employment."

The Small Business Council of America said it gave the award to Grassley this year "in appreciation and recognition of ongoing, outspoken, and effective legislative efforts on behalf of Small Business in connection with federal tax matters as well as sustained and consistent support of America's private enterprise system."