Success of the Tax Cuts and Jobs Act

Floor Speech

Date: June 19, 2018
Location: Washington, DC
Issues: Taxes


Mr. LEWIS of Minnesota. Mr. Speaker, I am here today to bring good news. Good news that often in this 24/7 media cycle goes unnoticed, unremarked.

It is the good news of legislation that works. It is the good news that creates a growing and rising tide of economic prosperity for all families, including, most importantly, the children of families who rely on their parents' income in a growing economy.

I am here tonight to talk about the unheralded success of something called the Tax Cuts and Jobs Act. Rarely has one piece of legislation been so successful so quickly, and rarely have so many, at least on one side of the aisle, predicted its success with so much accuracy.

We are now, according to a number of analysts, including the Atlanta Federal Reserve, set to grow at over 4 percent the next quarter. Consider that over the last decade, if not longer, we have barely been able to scratch the surface at 2 percent GDP growth.

Now, after the Tax Cuts and Jobs Act, after more investment in America, after more repatriation of profits coming home to invest, after labor and capital coming together because our Tax Code now incentivizes labor and capital to come together, we are seeing wages going up.

We are seeing more capital investment. We are seeing bigger paychecks. We are seeing economic growth over 4 percent. We are seeing utility companies offer rebates under the Tax Cuts and Jobs Act because they have to pass through the savings they got from tax reform to customers.

It is remarkable how so many of our friends in the fourth estate seem to have forgotten all the warnings about tax reform and tax relief. Oh, I remember it well, Mr. Speaker. Last fall, last winter: This is going to be crumbs. It is going to be Armageddon. It is going to be a disaster if we pass the greatest tax reform in over 3 decades.

Now, some of us on the other side of the aisle, the Republican side of the aisle, said: ``Wait a minute.'' Secretary of the Treasury Andrew Mellon under Calvin Coolidge in the 1920s first embarked on increasing the return for labor for capital investment, for economic growth. What happened in the Roaring Twenties? It led to a balanced budget. Then, of course, in the 1960s--and this is what my colleagues on the other side of the aisle seem to forget--old-school Democrats like John F. Kennedy went to The Economic Club of New York in 1962 and said:

What this economy needs in 1962 to break out of the doldrums is a tax cut.

JFK said in that famous speech: ``Our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy, or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve, I believe--and I believe this can be done--a budget surplus. The first type of deficit,'' Kennedy warned, ``is the sign of waste and weakness. The second reflects an investment in the future.''

Well, Mr. Speaker, if there ever was an investment in the future, it is the Tax Cuts and Jobs Act. So JFK got his tax cut enacted after his tragic death, and what happened in the 1960s? We had lower rates, but we had more revenue. Now, how is that possible?

Our critics of our tax reform say: Oh, you can't cut rates and have more revenue.

It is amazing how many people know so little about modern business. If you are sitting in your local hardware store, if you have unwanted inventory, what is the first thing you do to move product? You lower the price. Why? Because you lower the price to sell more goods and services, albeit at a lower price, but a volume increase for more revenue.

It happened during the 1978 capital gains tax cut, the Steiger amendment, when we cut capital gains rates and, actually, revenue went up. Every single time we have cut tax rates in the modern era, the ``revenue loss'' has been nowhere near the predictions.

So in the 1960s, what happened? We had lower rates, and we had a balanced budget by 1969. Higher revenues grew.

Fast forward to the 1980s. We had the doldrums of the Carter-malaise era when we were told that the era of prosperity was over. We had to put on our cardigan sweaters, button them up, and turn down the thermostat because the good times were not coming back. Get used to it.

Ronald Reagan comes on board. He is pushed by the supply side movement of 1970s and 1980s, and the Kemp-Roth tax cut. And he enacts in 1981--in those days, a Democratic Congress when Democrats realized that economic growth was actually a good thing and you want to celebrate it, they enact Kemp-Roth, bringing the top rate down from 70 to 50 percent.

Now, there was a delay in 1982, you might recall, but then the tax cuts finally kicked in, in 1983. By 1984, it was morning in America again.

Revenues when Ronald Reagan took office were about $580 billion. By the time the 1980s were over, Federal revenues were almost $1 trillion. How could it be? How could it be that you cut tax rates and you almost double revenue?

This is an amazing phenomenon that our critics of tax reform just won't heed. They won't understand. They don't want to see it. They don't want to hear it. But it is ironic. What is the first thing that folks who say they want to reduce teenage smoking advocate? Mr. Speaker, they advocate raising the taxes on cigarettes. Why? Because when you raise taxes on something, you get less of it. You get less activity.

Why is it that if you buy a bond, a 30-year bond or a bond in the open market that is taxable, you demand a higher interest rate, but if you buy a tax-exempt bond you will take a lower rate? Because people do not work for pretax income. They work for after-tax income. And when you lower the marginal tax rates and you increase after-tax income, more people work. More people invest.

It happened in the 1920s. It happened in the 1960s. It happened in the 1980s. And guess what? It is happening right now.

We have a 4.8 percent growth, 4.5 percent growth. Who knows, it may just be 4 percent growth, but considering that we have been at 1.9 percent growth for so long, this is the miracle that keeps on giving and yet won't be acknowledged.

Mr. Speaker, I will tell you why it won't be acknowledged by the other side, because not one of them voted for it. Imagine, a tax bill that doubles the childcare tax credit; a tax bill that lowers the tax rates for mom-and-pop pass-through businesses by letting them deduct the first 20 percent of income; a tax bill that says you don't have to itemize any more to get a bigger deduction, and we are going to double your standard deduction; a tax bill that puts America's corporations in line with the rest of the world, not penalizing America's corporations compared to the rest of the world.

Now we have foreign profits coming back. We have more mom-and-pop businesses expanding. And we have a rising tide of economic growth, a rising tide that lifts all boats.

I thought that is what this body was here to do. We are not here to pick out groups, pick out winners and losers, to have some sort of industrial policy where a command-and-control central government decides who wins and who doesn't. You only gain if you are a political entrepreneur.

The folks out in the real world, businesses and capitalists, they invest for an economic return. But government all too often invests for a political return. We have seen that form of crony capitalism, and it gave us 1.9 percent economic growth. Now, instead of carve-outs and loopholes, instead of favoring some States that like to tax their citizens over States that don't, we have lower rates, broader but lower rates for everyone, and loopholes for fewer, which means economic growth is going to be determined by an economic return.

I don't know how else to describe this. It is an amazing success story in the 115th Congress. Yet you would never know it listening to the other side, listening to our friends in the fourth estate. It is the story they don't want you to know.

But I am here to give you good news. The economic growth that is occurring will keep occurring because people now have confidence. The green shoots are back. The animal spirits are back. People are excited to be in America. They feel good about their country. They feel this is a place where they can fly as high as their wings can take them without being hindered by the strong arm of the state.

That is what the American Dream is about. That is what the Tax Cuts and Jobs Act is about. And that is what believing in America is about.

I am proud to have played a part in it, however small, and I am proud of Congress for passing the Tax Cuts and Jobs Act.