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Q: How did the Trump tax cuts grow the economy?

A: The Constitution gives Congress the power of the purse strings. The people’s branch decides how to raise revenue and how to spend it. There’s a rule of thumb tax writers must appreciate before legislation gets enacted into law. When something is taxed, you get less of it. Lawmakers use the tax code to shape spending, saving and investing and set fiscal policy to help prime the economic pump. For example, tax incentives help families save for college, secure home ownership, strengthen retirement security, foster economic development, and boost renewable energy, among other policy initiatives. Punitive taxes influence consumer behavior, such as making it more expensive to use tobacco and alcohol products. By definition, taxing wages and investment income means less take-home pay for American workers. Every dollar that’s collected by the government means one less dollar for Americans to save, spend, donate and invest in their families, businesses, and communities.

Q: Would tax increases put the economic recovery at risk?

A: Yes. Any proposal that calls for rolling back the Trump tax cuts and raising taxes is a bad idea, especially right now. It goes against the grain of tax policy 101. When you tax something, you get less of it. Raising taxes on businesses would damage our economic recovery and put the brakes on job creation, start-ups and wage growth. Raising taxes on American businesses ignores the progress we made to target abuse in the Tax Cuts and Jobs Act. Let’s not forget under the Obama-Biden administration, U.S. tax laws allowed companies to defer their foreign earnings unless and until they were brought back to the United States. As a senior member of the tax-writing Senate Finance Committee, I targeted this off-shore loophole. We enacted a minimum tax on what’s known as global intangible low-taxed income (GILTI). I also worked to prevent abusive use of deductions made to foreign affiliates and imposed limits on the deductibility of interest. Our changes to the tax law cracked down on these abuses, expanded the tax base, encouraged on-shore investment and grew the economy. Unraveling these reforms would propel U.S. companies to shift and shelter profits overseas. That’s bad for American jobs and deprives revenue from our military, public health programs and public services. Raising taxes on U.S. businesses fails to understand how our global supply chains work. During my county meetings in Iowa, I heard from manufacturers who’re struggling from disruptions due to the pandemic. For example, slapping on a 10-percent penalty on goods and services imported by U.S. companies from foreign affiliates would boomerang into a foreign tax on U.S. goods and services exported from America. As the adage goes, the only certainties in life are death and taxes. Increasing taxes now would sound the death knell to the employment gains and surge in economic opportunity among communities of color unleashed by the Tax Cuts and Jobs Act. According to the Joint Committee on Taxation and Congressional Budget Office, at least one-quarter of the corporate tax is borne by the workforce. So, raising taxes on businesses means they would be shouldered by working men and women across the country through fewer jobs, reduced wages and less benefits. Policymakers who glibly say wealthy Americans and big corporations must pay their “fair share” are misleading or ignoring how tax laws work. Even President Obama understood the risk of raising taxes during an economic recovery, “The last thing you want to do is raise taxes in the middle of a recession.” As far as I’m concerned, that is doubly true as America navigates a post-pandemic recovery.

Written by

U.S. Senator. Family farmer. Lifetime resident of New Hartford, IA. Also follow @GrassleyPress for news releases.

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